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Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Donnelley Financial Solutions Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mike Zhao, Head of Investor Relations. Please go ahead. Michael Zhao: Thank you. Good morning, everyone, and thank you for joining Donnelley Financial Solutions' Fourth Quarter and Full Year 2025 Results Conference Call. This morning, we released our earnings report, including a set of supplemental trending schedules of historical results. copies of which can be found in the Investors section of our website at dfinsolutions.com. During this call, we'll refer to forward-looking statements that are subject to risks and uncertainties. For a complete discussion, please refer to the cautionary statements included in our earnings release and further detailed in our most recent annual report on Form 10-K and other filings with the SEC. Further, we will discuss certain non-GAAP financial information, such as adjusted EBITDA and adjusted EBITDA margin. We believe the presentation of non-GAAP financial information provides you with useful supplementary information concerning the company's ongoing operations and is an appropriate way for you to evaluate the company's performance. They are, however, provided for informational purposes only. Please refer to the earnings release and related tables for GAAP financial information and reconciliations of GAAP to non-GAAP financial information. I am joined this morning by Dan Leib, Dave Gardella and other members of management. I will now turn the call over to Dan. Daniel Leib: Thank you, Mike, and good morning, everyone. We finished 2025 by delivering strong fourth quarter results, highlighted by 10.4% consolidated net sales growth, year-over-year growth in adjusted EBITDA and strong adjusted EBITDA margin. Double-digit growth in both our software solutions and event-driven transactional offerings were key components of our strong top and bottom line performance. In addition, given our stock trading levels, strong balance sheet and perspective on long-term value, we accelerated our share buyback during the fourth quarter and repurchased approximately 1.3 million shares, bringing the 2025 total share repurchase to approximately 3.6 million shares or approximately 12% of the company's outstanding shares from the beginning of the year at an average price of $48.36 per share. As a result of focused execution, we grew consolidated adjusted EBITDA by $14.1 million or approximately 44% year-over-year and delivered an adjusted EBITDA margin of 26.6% in the quarter, an increase of approximately 630 basis points from last year's fourth quarter. Our fourth quarter performance is a further validation of our strategy. Reflecting on the full year of 2025 against the backdrop of continued economic volatility, we delivered strong full year results, including Software Solutions net sales growth of 8.7%, growth in adjusted EBITDA, record adjusted EBITDA margin and higher free cash flow compared to full year 2024. While 2025 marked another year of decline in our transactional revenue, the fourth consecutive year of decline, our strong execution enabled us to deliver consolidated adjusted EBITDA of $239.8 million, an increase of $22.5 million or 10.4% year-over-year and consolidated adjusted EBITDA margin of 31.3%, approximately 350 basis points higher than 2024. For context, our 2025 full year adjusted EBITDA margin exceeded the previous record, which was 29.7% despite this year's significantly lower overall and transactional revenues compared to that year. Our long-term focused execution to improve our sales mix and manage our cost structure has resulted in DFIN becoming structurally more profitable, creating the financial flexibility to balance investment in our transformation with smart capital deployment. While transformational implementation continues, 2025 also marks the end of Chapter 2 or the fundamental transformation chapter of our journey as an independent company, a phase that started in 2020. Specifically, during Chapter 2, we transformed many areas of the company, simplified and improved our business processes, installed more robust tooling across the organization and increased development velocity to bring new solutions to market more efficiently, all aimed at creating significantly improved client experience while increasing value for our clients, employees and shareholders. Our performance in 2025 demonstrates much of our progress within Chapter 2. Let me highlight a few of those examples. First, one of the fundamental aspects of our strategy has been the continued transformation of sales mix by increasing the adoption of our software solutions while continuing to serve the market where desired by clients with our tech-enabled services and print and distribution offerings. Our 2025 performance further demonstrated the progress of that strategy. For full year 2025, we delivered record Software Solutions net sales of $358.4 million, an increase of 8.7% from 2024, resulting in Software Solutions comprising approximately 47% of our total full year net sales. Since our 2016 spin-off, we've grown our annual Software Solutions net sales by approximately $222 million from $136 million to $358 million, representing an annualized growth rate of approximately 11%. At the same time, we've maintained a strong tech-enabled services offering and successfully managed the decline in print and distribution net sales, a decline driven by regulatory change, our proactive decision to exit certain low-margin work and the secular decline in the demand for printed materials. Our progress keeps us on the right path toward achieving our long-term financial goals. Let me share a few highlights that underpin the growth in our software solutions in 2025. First, we are encouraged by the sales growth in our recurring compliance products, ActiveDisclosure and Arc Suite, which increased by approximately 13% in aggregate. For ActiveDisclosure, sales increased by 17% for the full year, our highest annual growth rate since 2021. Since completing the product transition in 2023, we've realized sequential improvements in ActiveDisclosure's operating performance, including growth in net client count as well as higher value per client. This improved growth trajectory demonstrates that the upgrades we have made across the offering, including technology, services and support, combined with strong sales execution are delivering positive results. With a strong foundation and ongoing momentum, we expect ActiveDisclosure to continue to deliver solid growth in 2026. Arc Suite, our market-leading compliance software offering to mutual funds and other regulated investment companies delivered solid full year net sales growth of approximately 11%, in part due to the tailored shareholder reports regulation. Given the midyear 2024 effective date, the TSR regulation primarily benefited our first half sales growth in 2025, while the second half growth in aggregate was more modest as we overlap the impact of both TSR and a large client contract renewal. As I have stated previously, we expect the growth profile of Arc Suite to be more modest during periods outside of regulatory changes, while over the longer term, still exhibiting the double-digit growth we have delivered historically based in part on a dynamic and evolving regulatory environment. We are optimistic about the opportunities created by future regulatory change and believe Arc Suite is well positioned to capture additional demand from new regulations to further accelerate recurring software revenue growth. In addition to regulatory changes, Arc Suite is also well positioned to capture additional market-driven demand in areas such as private investments. We expect increased reporting and disclosure needs by private investment institutions, including hedge funds, private equity and business development companies. Our newly launched financial and regulatory reporting offering, ArcFlex, positions DFIN well to capture incremental opportunities in the private investment space. The initial release of ArcFlex has received positive response in the marketplace, and we expect to ramp up in ArcFlex revenue starting in 2027. Turning now to Venue. As expected, the growth rate in 2025 was more modest compared to the approximately 26% growth we achieved in 2024. which was aided by several large projects. On a full year basis, Venue delivered approximately $142 million in net sales and grew approximately 3% versus full year of 2024. Importantly, Venue's year-over-year growth rate improved sequentially each quarter throughout the year, and we ended the year with positive momentum, having delivered approximately 20% growth in the fourth quarter. In addition, the rollout of new Venue, which was launched in the third quarter, continues to gain traction in the marketplace. We are pleased with the ongoing commercial adoption of Venue and expect the upgraded product to contribute to Venue's overall growth in 2026. Next, 2025 was an important milestone in our product development efforts. Having introduced several new solutions to market, including the new Venue Virtual Data Room, ArcFlex, our offering for alternative investments; and Active Intelligence, a suite of artificial intelligence capabilities within ActiveDisclosure designed to streamline compliance and reporting for companies. These new products introduced in 2025 are the latest in a series of new software introductions over the last several years, which also include new AD and within Arc Suite, Total Compliance Management and the tailored shareholder report solutions and are the result of our efforts to accelerate the modernization, innovation and growth of our software portfolio. Over the past several years, these investments have enabled us to launch or modernize the majority of our software products. Our investments have enabled us to increase development velocity, bring new solutions to market more efficiently by leveraging the platform capabilities of our single compliance platform and empower our clients to adapt quickly to an evolving regulatory environment, all while incorporating the most modern technology. Finally, in a business landscape that has become increasingly shaped by the adoption of artificial intelligence, DFIN is deploying AI across both our product offerings as well as our internal operations. As we continue to enhance our compliance platform, we are building an AI framework architecture designed to deliver increased value to our clients through improved efficiency and increased productivity. The AI capabilities embedded in the Active Intelligence are a good example of the higher value we provide to clients. Specifically, during the initial rollout, select ActiveDisclosure clients have access to AI-enhanced capabilities for streamlining the research, comparison and analysis of draft SEC filings against their own prior filings and those of selected peers. This capability will help to reduce risk and expedite the preparation of quarterly and annual reports, proxy statements and IPO filings. As active intelligence and other AI features expand more broadly across the DFIN software platform, we expect more clients will benefit from increased efficiency and actionable insights. This enhancement is part of our end-to-end offering, ensuring clients benefit from both advanced technology and the human expertise required for mission-critical compliance. At the center of our approach is an unwavering commitment to security, privacy and responsible data governance. For example, we never use client data to train large language models, and we architect our systems to ensure sensitive information is protected at every step. Internally, our investments in AI enable us to modernize our business operations by applying automation and AI-driven tools, including commercial AI solutions and our own Agentic AI development to streamline workflows, improve productivity and support profitable growth. One area where we are realizing meaningful benefits from AI is in product development, where improved processes and increased development velocity are enabling us to bring new solutions to market more quickly. These internal gains enhance the speed and quality of the solutions we deliver, allowing us to respond quickly to evolving regulatory, compliance and client needs. As AI strengthens and expands our capabilities, the value DFIN provides a unique combination of deep regulatory expertise and excellent service model and advanced technology becomes more evident. We remain a responsible innovator and a trusted partner dedicated to delivering secure, dependable and insight-driven solutions for clients' most important regulatory and compliance needs. Before turning it over to Dave, I wanted to provide a quick update on our operating priorities for 2026. In 2026, we will transition to Chapter 3 or the sustained growth chapter of our transformation. During Chapter 3, we will continue to realize benefits from our revenue mix shift and historical investments that have resulted in a strong foundation for continued innovation and growth. With revenue from recurring and reoccurring offerings approaching 80% of our full year total revenue and the remaining approximately 20% being event-driven, we expect the evolution of our revenue profile towards a higher mix of predictable revenue to continue going forward as we accelerate the growth in our recurring and reoccurring offerings while benefiting from but being less dependent on event-driven revenues. These dynamics result in sustained profitable revenue growth. We look forward to driving value creation by delivering predictable, consistent organic top line growth, continued strong profitability and ongoing robust cash flow generation. Specific to 2026, our primary focus remains on accelerating our business mix shift by continuing to grow our recurring SaaS revenue base while maintaining share in our core traditional businesses, including transactions. We are encouraged by the momentum in capital markets transactional activity so far in the year and remain well positioned to capture an uptick in deal activity. In addition, we expect print and distribution to continue to decline as a result of the long-term secular reduction in the demand for printed products, though at approximately 14% of our 2025 total net sales, the magnitude of the reduction will be more than offset by the growth in Software Solutions net sales. Further, as it relates to regulatory change, we do not expect major SEC rule changes for 2026. That said, our historic and ongoing investments in our regulatory and compliance software platform positions us well to capture the demand from future regulations and non-SEC use cases. In addition, we will continue to aggressively manage our costs and drive operational efficiencies, part of which will be enabled by the increased adoption of artificial intelligence productivity tools. Finally, we will maintain our disciplined approach to investments and capital allocation in our pursuit of profitable growth opportunities to maximize financial return and create long-term value. I'm confident with our continued focus on executing our strategy, we will create increased value for our clients, employees and shareholders. Before I share a few closing remarks, I would like to turn the call over to Dave to provide more details on our fourth quarter financial results and outlook for the first quarter of 2026. Dave? David Gardella: Thank you, Dan, and good morning, everyone. As Dan noted, we delivered strong fourth quarter results in an uncertain operating environment, including double-digit consolidated year-over-year net sales growth, higher adjusted EBITDA, adjusted EBITDA margin expansion and an increase in both operating cash flow and free cash flow from last year's fourth quarter. We continue to deliver solid growth in our software solutions offering during the quarter, which grew 11.4% year-over-year. In addition, we experienced an increase in the level of capital markets transactions compared to last year's fourth quarter, which resulted in higher-than-expected event-driven revenue in the quarter. The fourth quarter capped off a solid full year performance, demonstrated by our evolution toward a more favorable sales mix, strong adjusted EBITDA margin expansion and disciplined capital allocation. On a consolidated basis, total net sales for the fourth quarter of 2025 were $172.5 million, an increase of $16.2 million or 10.4% from the fourth quarter of 2024. Net sales exceeded the high end of our guidance range, aided in part by higher capital markets transactional revenue. The 11.4% growth in Software Solutions net sales, combined with higher capital markets transactional revenue more than offset a year-over-year decrease in capital markets and investment companies traditional compliance revenue with the majority of the reduction related to the secular decline in print and distribution volume, consistent with recent trends. Fourth quarter adjusted non-GAAP gross margin was 63.5%, approximately 360 basis points higher than the fourth quarter of 2024, primarily driven by higher net sales and a favorable sales mix, the impact of cost control initiatives and price uplifts. Adjusted non-GAAP SG&A expense in the quarter was $63.8 million, a $1.7 million increase from the fourth quarter of 2024. As a percentage of net sales, adjusted non-GAAP SG&A was 37%, a decrease of approximately 270 basis points from the fourth quarter of 2024 as a result of operating leverage on higher net sales. The increase in adjusted non-GAAP SG&A was primarily driven by an increase in selling expense as a result of higher sales volume and higher incentive compensation expense relative to last year's fourth quarter, though full year incentive compensation expense was less than last year, partially offset by the impact of ongoing cost control initiatives. Our fourth quarter adjusted EBITDA was $45.8 million, an increase of $14.1 million from the fourth quarter of 2024. Fourth quarter adjusted EBITDA margin was 26.6%, an increase of approximately 630 basis points from the fourth quarter of 2024. The increases in adjusted EBITDA and adjusted EBITDA margin were primarily due to higher net sales, a favorable sales mix and cost control initiatives, partially offset by higher incentive compensation expense and higher selling expense as a result of the increase in sales volume. Turning now to our fourth quarter segment results. Net sales in our Capital Markets Software Solutions segment were $60 million, an increase of 20% from the fourth quarter of last year, with each offering within the segment, Venue and ActiveDisclosure, growing approximately 20% year-over-year. Specifically, Venue sales were up $6.2 million from last year's fourth quarter, while also increasing sequentially from the third quarter. Venue sales growth accelerated in the fourth quarter, driven by increases in activity across both the United States and Europe. In addition, we benefited from several large projects in this year's fourth quarter, which combined to account for approximately half of Venue's year-over-year sales growth. As Dan noted earlier, we are encouraged by the in-market performance of new venue and believe we are well positioned to capture additional share going forward. As it relates to ActiveDisclosure, we posted another quarter of strong sales growth, increasing by $3.8 million or 20.2% compared to the fourth quarter of 2024 and a continuation of the stronger growth rate we delivered in the third quarter. Total subscription revenue increased by approximately 12%, an acceleration compared to recent trend, primarily driven by the continued growth in client count. In addition, we continue to make progress in the migration of certain activities historically performed on our traditional services platform to ActiveDisclosure, including the use case for IPOs. During the fourth quarter, we experienced higher usage of ActiveDisclosure in the drafting and filing of S-1 documents for certain IPO transactions. We remain encouraged by ActiveDisclosure's solid foundation for future revenue growth, part of which will be influenced by the amount of event-driven transactional activity taking place on the platform. The combination of ActiveDisclosure, our strong service offering and the related domain expertise remains a strategic differentiator for DFIN. Adjusted EBITDA margin for the segment was 30.2%, an increase of approximately 360 basis points from the fourth quarter of 2024, primarily due to higher net sales and cost control initiatives, partially offset by higher selling expenses as a result of increased net sales. Net sales in our Capital Markets, Compliance and Communications Management segment were $61.6 million, an increase of $8.3 million or 15.6% from the fourth quarter of 2024, driven by higher event-driven transactional revenue. During the fourth quarter, we recorded $48.6 million in transactional revenue, which exceeded the high end of our expectations and was up approximately $11 million or 29% from the fourth quarter of 2024. While the U.S. government shutdown temporarily paused certain transactions from being completed, once the shutdown ended in mid-November, we experienced a quick resumption of deal completions driven by both the backlog of delayed deals as well as from increased market activity. Overall, the positive momentum in the equity deal environment, which had been building throughout 2025, continued in the fourth quarter, resulting in increases in the number of regular way IPO transactions that raised over $100 million and completed public company M&A deals in the U.S. compared to the fourth quarter of 2024. Consistent with our historical track record, we continue to maintain high market share for large, high-quality IPO and M&A transactions completed in the quarter. DFIN remains very well positioned to capture future demand for transaction-related products and services as market activity normalizes. Capital Markets compliance revenue was down $2.4 million or 15.5% year-over-year, driven by a lower volume of compliance work, including the related print and distribution, consistent with the trend from the first 3 quarters of the year. Adjusted EBITDA margin for the segment was 33.6%, an increase of approximately 810 basis points from the fourth quarter of 2024. The increase in adjusted EBITDA margin was primarily due to higher transactional revenue and cost control initiatives, partially offset by lower compliance volume. Net sales in our Investment Company Software Solutions segment were $30.9 million, a decrease of $0.7 million or 2.2% versus the fourth quarter of 2024. As expected, during the fourth quarter, ArcSuite faced tough comparisons as we overlapped a very strong fourth quarter of 2024, during which sales increased approximately 23% year-over-year. The robust fourth quarter 2024 sales growth was aided by an increase in revenue associated with onboarding clients to the tailored shareholder report solution as well as the favorable impact related to the renewal of a large customer contract. As such, we overlapped both impacts during this year's fourth quarter, resulting in a modest decline in services revenue, while subscription revenue was flat year-over-year. On a full year basis, total Arc Suite delivered approximately $128 million in revenue and grew 10.6% year-over-year, driven by growth in subscription revenue. As Dan noted earlier, with demand normalizing following the adoption of tailored shareholder reports, we expect a more modest growth related to this offering in 2026, while ArcFlex, our alternative investment solution, is expected to drive incremental revenue starting in 2027. Adjusted EBITDA margin for the segment was 37.9%, an increase of approximately 90 basis points from the fourth quarter of 2024. The increase in adjusted EBITDA margin was primarily due to price uplifts and cost control initiatives, partially offset by the impact of lower sales volume. Net sales in our Investment Companies Compliance and Communications Management segment were $20 million, a decrease of $1.4 million from the fourth quarter of 2024, driven primarily by lower print and distribution revenue. The reduction in print and distribution revenue is a result of the secular decline in the demand for printed materials, a trend we expect to continue going forward. Adjusted EBITDA margin for the segment was 26.5%, an increase of approximately 410 basis points from the fourth quarter of 2024. The increase in adjusted EBITDA margin was primarily due to cost control initiatives, partially offset by the impact of lower sales volume. Non-GAAP unallocated corporate expenses were $10 million in the quarter, a decrease of $1.7 million from the fourth quarter of 2024, primarily driven by lower health care expense and cost control initiatives, partially offset by higher incentive compensation expense. Free cash flow in the fourth quarter was $47.9 million, and full year free cash flow was $107.8 million, an increase of $2.6 million over full year 2024. The improvement in full year free cash flow was primarily due to the flow-through of higher adjusted EBITDA, lower cash tax payments and lower capital expenditures, partially offset by working capital and the onetime cash contribution related to the pension plan settlement, which occurred during the third quarter. We ended the year with $171.3 million of total debt and $146.8 million of non-GAAP net debt. At year-end 2025, we had $61 million of outstanding borrowings under our revolver and had $24.5 million of cash on hand. As of December 31, 2025, our non-GAAP net leverage ratio was 0.6x. Regarding capital deployment, we repurchased approximately 1,255,000 shares of common stock during the fourth quarter for $60.7 million at an average price of $48.38 per share. For full year 2025, we repurchased approximately 3,563,000 shares for $172.3 million at an average price of $48.36 per share. As of December 31, 2025, we had $53.8 million remaining on our current $150 million stock repurchase authorization. Going forward, we will continue to take a balanced approach to our capital deployment. As it relates to our outlook for the first quarter of 2026, we are encouraged by both the level of transactional activity as well as the pipeline so far in the first quarter, though overall deal volume still remains below the historical average. In addition, we expect a continued decline in print and distribution sales, which will impact our traditional compliance offerings consistent with the recent trend. Given the first and second quarters are the peak periods for compliance activities, such as corporate proxies and annual reports and the associated printing and distribution, the rate of decline in print and distribution sales is expected to be greater during the first half of the year compared to the second half. Further, we expect continued solid growth in Venue and ActiveDisclosure, while Arc Suite will overlap the stronger growth we delivered in last year's first quarter. With that as the backdrop, we expect consolidated first quarter net sales in the range of $200 million to $210 million and consolidated adjusted EBITDA margin in the range of 33% to 35%. Compared to the first quarter of last year, the midpoint of our consolidated revenue guidance, $205 million, implies an increase of approximately 2% as the decline in print and distribution volume will be more than offset by software solutions sales growth. I'll also provide a bit more color on our assumptions for the capital markets transactional sale. We assume first quarter transactional sales in the range of $45 million to $50 million, the midpoint of which is approximately flat compared to the first quarter of 2025 as well as flat on a sequential basis. While we remain very encouraged by the ongoing improvement in underlying market activity, recent market volatility has the potential to impact the timing of certain transactions between quarters. As it relates to the full year, our 2026 operating plan reflects the continued execution of our strategy and associated investments aimed toward accelerating our transformation. Our capital spending, which is predominantly related to development in our software products and the underlying technology to support them, is projected to be between $55 million and $60 million, approximately flat from the $57.1 million that we spent in 2025. With that, I'll now pass it back to Dan. Daniel Leib: Thanks, Dave. Our performance in 2025 serves as a further proof point that our strategic transformation is enabling DFIN to become more profitable and resilient. We executed well in a challenging market environment, delivering strong financial results while also continuing to invest in and execute our strategic transformation. The combination of our market position, cost structure and financial flexibility create a solid foundation as we progress in Chapter 3 of our transformation journey. Before we open it up for Q&A, I'd like to thank the DFIN employees around the world. Now with that, operator, we're ready for questions. Operator: [Operator Instructions] Our first question will come from the line of Charlie Strauzer with CJS Securities. Charles Strauzer: A couple of quick questions for you guys. sorry. How much of the outperformance in Q4 was kind of volume versus price? And any more color behind the outperformance that would be great. David Gardella: Yes, Charlie, it's Dave. I'll take that one. I would say price was not significant. I'd say a modest driver. Really, when we think about the outperformance, much of it was on the capital markets transactional revenue and then I think both Venue and AD showed that 20% growth, which was a little bit better than we expected. So predominantly volume. And I would say, as it relates specifically to the capital markets transactional activity, we had the government shutdown for the first half of the quarter, mid-November. The recovery was quicker than we had expected. And then you combine that with the strong underlying activity level in transaction made for a nice quarter in terms of the top and bottom line relative to our guidance. Charles Strauzer: Great. And then your margins were very strong, obviously, in Q4 and for the year. Any more color on the drivers behind the outperformance on that side as well? David Gardella: Yes. I would say more of the same of what we've seen over the long term. I think when you look at how the mix of sales is changing, what we're doing with the cost structure and then certainly the growth, especially on the software sales and then in particular, this quarter with a nice growth in transactional, that operating leverage, right? So the incremental margin on the sales growth has really pushed margin higher. And again, I'd say in line with what we've talked about in terms of going forward, certainly in line with the trajectory that we've seen. Our long-term guidance is for margins north of 30%. We're probably, frankly, ahead of what we had projected. And so feel really good about the direction where we're going with profitability. Charles Strauzer: Great. Dan, just a quick one for you. Just when you look at the -- or think about capital allocation, valuation multiples have contracted across a number of technology stocks. When you look at the potential opportunity in your kind of purview, are you seeing anything more interesting that you would have seen maybe a couple of months ago? Daniel Leib: Yes, it's a great question. I think expectations probably haven't followed as quickly. And as we see the disruption even over the past week or 2, it will take a bit of time. Obviously, for public companies, everyone's had a bit of a re-rate. And -- but I think most folks are thinking or hoping it's not permanent. So I don't think the expectation side of it yet has adjusted. But if valuations persist at a lower level with the AI overhang, then I think they will. And folks are sitting on assets for a fairly long amount of time and looking for liquidity in some cases. So it will take longer, but something that we continue to watch. Operator: Our next question will come from the line of Pete Heckmann with D.A. Davidson. Peter Heckmann: As regards to ArcFlex, the platform designed for alternative investment managers, is that -- can you talk a little bit about kind of how you think about the relative TAM for ArcFlex relative to Arc Suite? And are those 2 solutions designed to be sold together to investment managers that do both? Or is ArcFlex -- can ArcFlex be a stand-alone product sold to purely alternative managers? Daniel Leib: Yes. Thank you, Pete. It can definitely be sold as stand-alone. We do see synergy with existing relationships, certainly on the TPA side. And it is a good example of an offering that we were able to build much more quickly, efficiently given the platform that we've been developing and talked about for a few years. But we see the market and we see the interest being really high as assets continue to grow in the private space, people need more robust solutions in the market. And so getting a lot of interest in discussions. There is not as much of a regulatory framework around that. But even without that, we are seeing some firms transact and purchase ArcFlex. And Eric, I don't know if you wanted to add to that. Eric Johnson: Yes. Thanks, Dan. Pete, it's Eric Johnson. The -- just the data that we have from the SEC shows that the private fund numbers, so number of private funds, so early 2025 was over 54,000, up 15% from the prior period 2023 for same time frame. So there's a significant increase in the number of funds. But what's really happening is this retail access is driving an expansion in the number of investors, which is really pushing the industry to meet efficient production at scale. And with the introduction of ArcFlex, we can handle the alternative investment reporting requirements. At the same time, with the horsepower of Arc reporting, we can help these clients manage the scale that's required to manage this influx of reporting activity due to the increased demand and especially driven from the retail side of the market. Peter Heckmann: Okay. That's really helpful. And then just in terms of the IPO activity in the quarter, it looked like DFIN's share of traditional IPOs was very, very strong. And I guess, would you characterize that as anything beyond just a good mix towards the kind of the larger and more complex IPOs versus smaller deals? Craig Clay: It's Craig Clay. Thank you for the question. I think as you saw in Q4, there were 41 companies that price, 17 raised over $100 million. Our share of that over $100 million was 65%, which is certainly on the higher side. I think what's awesome is Q4's volume was up 70% year-over-year in the $100 million category. So these 17 companies raised a total of $13 billion. Health care dominated across a number of deals. Medline raised $6 billion, and that was a DFIN supported deal. There was one other $1 billion-plus deal, Beta Technologies that we also supported. I think to your question, we certainly play to the larger deals in the full year 2025, there were 10 offerings greater than $1 billion, and we had 70% share of that. So certainly, we are prepared and ready to work the way that our clients want to work. You saw in the prepared remarks how we are supporting IPOs on ActiveDisclosure, which is really a terrific opportunity for us to move into that space. We look at that hybrid solution as a way for our companies to work across the boundaries of having access to our customer service and having access to our regulatory experts. And I think just an opportunity to touch on Active Intelligence. It demonstrates, as Dan said, we're delivering a higher value to our clients across this. So our success with implementing that into ActiveDisclosure, which has Ks, Qs, proxies, IPOs also validates us as a core member of our clients' team, which is embedded at the moment they need accuracy and speed and regulatory confidence. So thank you for the question. Operator: And our next question comes from the line of Ross Cole with Needham & Company. Unknown Analyst: Congratulations on a strong quarter. I was wondering If you could dive in a little deeper in terms of the double-digit software growth you're seeing for 2026? And maybe how do you see that broken up between product or maybe between capital markets versus investment companies, especially given the dynamic of fewer regulatory changes in the year and possibly a slower IPO market? David Gardella: Yes. Ross, just to be clear, on 2026, I think what we said was we expect continued strong growth from ActiveDisclosure and Venue heading into '26 and certainly have that momentum coming out of Q4 here. And then exactly to your point, as it relates to Arc Suite, we've seen the growth in Arc Suite really be more lumpy, I guess, over the course of time. And a lot of that tied to new regulation, whether it be tailored shareholder reports and the total compliance management solution that we launched a few years ago and then more recently with -- sorry, the prior one was 30e-3 with total compliance management and then more recently, tailored shareholder reports those regulations. And so we would say that it will continue to be lumpy going forward, the outsized growth the coming years with new regulatory changes. And then to the earlier question as it relates to private markets, continue to view that as an opportunity and more to come as it relates to ArcFlex and serving the private market side. Daniel Leib: Yes. And just to build on that to the 2026 specifically to Dave's point and then on ArcFlex, our comments where we expect benefit in '27, it's possible it's tail end or some benefit in '26, but it will be very tail end or -- but definitely more predominant in 2027. Operator: [Operator Instructions] And that will conclude our question-and-answer session. I'll turn the call back over to Dan Leib for closing comments. Daniel Leib: Thank you very much, and thank you, everyone, for joining us, and we will look forward to seeing you very soon. Thank you. Operator: This concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, everyone, and welcome to Goosehead Insurance Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Capital Markets, Dan Farrell. Please go ahead. Dan Farrell: Thank you, and good afternoon. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on expectations, estimates and projections of management as of today. Forward-looking statements in our discussions are subject to various assumptions, risks, uncertainties that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We refer all of you to our recent SEC filings for a more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of Goosehead. We disclaim any intention or obligation to update or revise any forward-looking statements, except to the extent required by applicable law. I would also like to point out that during this call, we will discuss certain financial measures that are not prepared in accordance with GAAP. Management uses these non-GAAP financial measures when planning, monitoring and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons period-to-period, by including potential differences caused by variations in capital structure, tax position, depreciation, amortization and certain other items that we believe are not representative of our core business. For more information regarding the use of non-GAAP financial measures, including reconciliations of these measures to the most recent comparable GAAP financial measures, we refer you to today's earnings release. In addition, this call is being webcast and archived version will be available shortly after the call ends on the Investor Relations portion of the company's website at goosehead.com. Now I'd like to turn the call over to our President and CEO, Mark Miller. Mark Miller: Thanks, Dan, and good afternoon, everyone. Thank you for joining our fourth quarter and full year 2025 earnings call. Before I get into the numbers, I want to take a step back and frame where we are, not just this quarter, but as a business since Goosehead is a company that rewards long-term thinking. Personal Lines insurance distribution is not a get-rich-quick business. As our founder, Mark Jones has said, it's a get rich over time and stay rich business and the work we do compounds when it's done correctly. For the full year 2025, we grew total revenue 16%, adjusted EBITDA of 14% and delivered an adjusted EBITDA margin of 31%. These results didn't come from one-off wins that came from disciplined execution of our strategy and structural improvements across the organization. Several of our most important KPIs simultaneously moved up in to the right. For example, client retention continued to improve. We moved from 84% in the second quarter to 85% in the third quarter and we exited the year with continued upward momentum. As we have said before, retention is the flywheel in this business. When retention improves, everything else gets easier; growth becomes more efficient, margins expand and client lifetime value increases. We also saw accelerating growth in policies in force, ending the year up 14%, increasing from 13% in the third quarter. At the same time, we have seen strong productivity across all 3 distribution networks: corporate, franchise and enterprise sales. Now let's talk about the insurance market itself. Our industry operates in well-documented cycles, moving between hard markets, driven by elevated loss ratios, capital constraints and tightening underwriting and soft markets where loss ratios normalize, capital returns and carriers compete for growth. We're currently coming out of a sustained hard market where we saw carriers raising rates, tightening underwriting guidelines and reducing capacity, actions that were difficult in the short term but necessary to restore profitability. Today, pricing has largely caught up with loss ratios, underwriting profitability has been restored and carriers are once again in a position where they want to grow. This is the environment where Goosehead performs best. A healthier product market means more choice for our agents, better outcomes for clients, lighter service loads, more stable underwriting and carrier partners that want to grow alongside us. The added variable of AI impacting the personal line space is beginning to take hold as well. When implemented strategically in the right portion of the value chain, AI has the ability to improve outcomes for all parties. For us in the distribution portion of the value chain, maximizing efficiency with our existing clients and matching carrier risk appetite with client demand represents the largest value creation application. However, there is significant opportunity costs associated with chasing the wrong implementation of AI. Ultimately, the tool set will be broadly available, but the secret is the data behind the tool. Because we have built such a diversified book of business across 50 states, and with hundreds of carriers, we have access to proprietary data that we believe is highly differentiated. Tools in the market today act as quasi lead aggregator technology, providing generic information about insurance broadly in your area. From what we have seen, these tools have no choice model transacting ability and in some instances, point users to contact their local Goosehead agent. Mark Jones Jr will go into more detail about our specific plans for implementing AI in our business, we're being incredibly thoughtful about investing only where it drives real value. While we're encouraged by the product market and the technology advancements, I'm extremely proud of what this organization accomplished over the last 3 years without those tailwinds. Across our franchise network, we made a deliberate decision to prioritize quality over quantity. This has resulted in meaningful productivity gains, stronger economics for franchise owners and healthier system overall. Gross payments per franchise are up 29% year-over-year. This meaningful increase in cash flow enables our owners to reinvest in people and ultimately grow more rapidly. We expanded total producer count while reducing the number of operating agencies, exactly what we would expect to see in a system getting stronger. Producers per franchise increased from 1.9 at the start of the year to 2.1 by year-end, which is 1 of the longest and most powerful levers in our model. This momentum was further evidenced by an increase in book acquisitions within the network, going from 38 in Q3 to 64 in Q4. Typically, the buyer is one of our strongest and fastest-growing agencies. So these consolidations make the entire community stronger, more resilient and positioned for growth. On the corporate side, we did what we said we would do and fundamentally reset the corporate agent footprint. We expanded to new geographies like Tempe, Arizona and Nashville, Tennessee, and reduced concentration in well-established markets. So far in 2026, we have 3 new offices fully launched, with a fourth slated in April. A portion of our corporate agents outside of Texas increased from 30% in 2022 to 52% in 2025. Since 2022, the corporate team has produced 61 new franchises through our corporate to franchise ownership path, many of which now sit in the top 5% of new business production across the entire network. Corporate new business growth also reaccelerated in 2025, reaching its fastest pace since 2021. This year, we also gained traction on our newest distribution on the enterprise sales and partnership network. This network is incremental, efficient and strategically important. It allows us to access portions of the market that traditional agency models simply cannot reach. In 2025, enterprise sales almost doubled new business production and partners on our platform now address millions of mortgages serviced across the country. At scale, this channel is a growth driver and margin accretive. To summarize, the fundamentals in almost every area of our business remains sound, but we acknowledge the future of insurance distribution may look different over time as technology evolves. That is why we have been investing heavily in our technology roadmap for the past several years. Technology remains one of our deepest competitive advantages, and we have exponentially increased the size of the tech organization in the past 3 years, adding skill sets not commonly found in our industry. Over the past several years, we've invested in both agent-facing tools and core infrastructure required to support a much larger organization. To that end, Goosehead has now delivered the United States' first end-to-end choice buying experience. Our Digital Agent 2.0 platform is now live in Texas with multiple auto carriers and multiple home insurance carriers and active implementation. During 2025, we made massive strides in the hardest challenges in digital binding, and we are now set to rapidly expand our product and geographic coverage. These capabilities can only exist with deep relationships and trust with the carriers, complex integration with underwriting back-end systems, and high-scale service organization that can handle the complexity of hundreds of carriers and multiple product lines. This is not just another lead aggregation tool with an AI wrapper. This is a true frictionless digital distribution platform. We want to give our clients the purchasing option they want, whether it is all digital, partially digital or completely human. By leveraging our proprietary data, we can deliver that shopping experience in a way that provides carriers with high-quality and retentive clients. We have also made significant strides to enhance our client experience with technology innovation. We launched our mobile app, giving clients the ability to manage policies across multiple carriers in 1 place. Introduced Lily, our AI-powered virtual phone assistant. Lily has already handled hundreds of thousands of client interactions, streamlining the client experience and reduce the number of calls requiring agent involvement. As these tools mature, we expect continued improvement in the client experience, alongside lower servicing costs. It is an exciting time to be in the property and casualty insurance industry, especially for Goosehead. We have hardened our model, widened our competitive moat, improved productivity and profitability and laid the foundation for what we believe will become the leading digital insurance distribution platform in the United States. Looking ahead to 2026, our priorities remain clear and unchanged: accelerating growth within existing agencies, placing agencies in the right geographies, expanding our corporate sales organization, scaling enterprise and partnership channels, continuing to invest in technology, particularly strengthening our proprietary AI applications and building a winning culture. What excites me most is that we're entering the next phase with improving market conditions. When the product market is healthy, everything in our system works better. Agents close more business, clients are better served, carriers lean into growth, and retention improves naturally. We finished 2025 in a position of strength, and our focus in 2026 is on continuing to execute against the opportunity in front of us. I said before that we believe Goosehead has the ability to operate at a Rule of 60 model over time with a combination of revenue growth and EBITDA margin exceeds 60% on a sustained basis. As our core KPIs continue to improve, and newer initiatives like partnerships and Digital Agent 2.0 scale, we see a clear path to progressing toward that objective. I'm proud of the progress we've made this year, and I'm even more confident in the position we've built as we continue to work towards our long-term objective of becoming the largest distributor of personal lines insurance in our founder's lifetime. Thank you to our clients, our teammates, our carriers and our partners. With that, I'll turn the call over to our CFO and COO, Mark Jones, Jr. Mark Jones Jr.: Thanks, Mark, and good afternoon to everyone on the call. Mark Miller just walked through the broader story of the business, the progress we've made, the environment we've operated in, and why we believe Goosehead is well positioned for what comes next. I want to build on that by talking about how that strategy translates into execution and economics. What has allowed us to deliver consistent organic growth and strong profitability through a very challenging product and housing environment is not simply the result of what we did this year or last year. It is the result of maintaining a long-term mindset, staying focused on first principles and making decisions that compound over time. Many of the initiatives you hear us discuss today were set in motion years ago with a clear view towards durability rather than short-term optimization. Our business is built around multiple growth engines that are designed to work together. At the core is our franchise network. Our focus here continues to be on productivity, quality and long-term economics. We are seeing continued consolidation within the network where our strongest agencies are reinvesting cash flow to hire additional producers and acquire smaller agencies in their markets. This is a healthy dynamic and raising the bar across the system, improves client outcomes and increases the lifetime value of the book. While this has impacted our revenue growth over the past couple of years, this consolidation is value creating. The acquiring agencies are significantly more productive and better positioned to grow the acquired books through cross-sell, referrals and improved service. You should expect to see this continue in 2026, resulting in less operating agencies but higher total producer count as that cash flow is reinvested by our agency partners. You can see this already as producer count has grown from 2,092 to 2,113, while shrinking our operating franchises from 1,103 to 1,009 over the last year. The health of our franchise network can be seen in our strong same-store sales growing 19% in the fourth quarter. Our corporate sales organization plays a critical role in feeding the franchise system. This is where our agents are trained in the Goosehead operating model, develop deep carrier expertise and build the habits required to run a high-performing agency. Over time, this group has proven to be the highest quality source of new franchise launches in the company. That is not accidental. It is the result of years of investment in training, leadership and culture, and remains a structural advantage that is difficult for competitors to replicate. Traditional corporate sales agents were 374 at year-end, growing 6% over the prior year. As we expand our corporate sales footprint during 2026, that allows us to reach new geographies with the highest quality talent pool. We have also continued to expand our enterprise sales and partnerships business, which allows us to access pools of potential clients that our traditional go-to-market strategy does not naturally reach. This channel is scaling quickly, growing nearly 100% in headcount, up to 115 as of year-end and is strategically important because it provides embedded lead flow, strong client trust and highly efficient client acquisition. From an economic standpoint, these partnerships are incremental to the core business and increasingly attractive as they scale. What ties all this together is technology. From a capital allocation standpoint, our technology team is now the single largest portion of our P&L and rapidly making progress towards our growth and efficiency initiatives. Our digital agent platform is now live with multiple auto carriers in Texas with true end-to-end binding capability, and we've already seen policies bound with no human involvement. We know of no other company with a choice product offering and the ability to actually bind policies digitally. Our platform is now live, and we plan to rapidly expand product and market coverage. Many of these transactions are coming from existing clients, allowing agents to add policies to their books with effectively no incremental effort. We're also in active implementation with multiple of our top home carriers right now. In the second half of 2026, we plan to host a webcast at Investor Day to demonstrate what a true frictionless shopping experience looks like. While some clients will choose to transact directly through Goosehead owned digital channels, we believe the larger opportunity is integrating deeply with our partners. While we are early in our journey here, the upside of deep penetration into our partners is substantial. These integrations allow us to reduce friction for their clients, solve real operational pain points and deliver high-quality risk to our carriers at scale. Our partners today now represent a total of 2.3 million potential clients across mortgage origination, servicing and other financial services and the pipeline of potential partners continues to grow. The majority of that partnership base is still in the implementation phase, meaning the benefits from those arrangements are not yet felt in our financial results. We believe our national footprint, broad product access and highly differentiated service offering position us as the most logical partner of choice for those looking to add a choice model personal lines insurance offering into their business. Ultimately, we expect the partnership business in tandem with the digital agent platform to have the potential to be the single largest growth driver in our company's history. As Mark Miller mentioned, we're being very thoughtful in deploying AI into the areas that actually deliver a strategic advantage and profitable growth. There are many shiny objects in the world of AI, and we are focused on only the areas that drive a real tangible value. First, we are injecting AI into our service function to reduce friction for our clients and improve our service cost efficiency. As Mark mentioned earlier, we launched Lily, our AI-powered virtual phone assistant. Lily is already having a positive impact, as Mark Miller mentioned, handling hundreds of thousands of client interactions, and it is part of a broader set of tools we've implemented to intelligently route work, reduce complexity for our teams and create a foundation for further automation. Second, utilizing our data and our carrier relationships to be intelligent about matching carrier risk appetite with client demand. The reality is, unlike a normal retail operation, an underwriter is not trying to sell an insurance policy to every homeowner in the country. Each has a specific risk appetite and to successfully maximize value, you must be able to segment clients appropriately and align them with the right underwriter. As these efforts enhance the economics across the value chain, we take part of that upside through proprietary product access and compensation plans. And third, we expect to drive new business generation through targeted marketing campaigns to drive client retention, client referrals and cross-sells. As the product market ebbs and flows, being in front of the right clients at the right times should fuel new policy generation and existing policy retention. We have made strong headway incorporating AI into our business where it makes the most sense and are steadily moving towards a model where selling and servicing can occur with far less manual intervention. That evolution is only possible because of the infrastructure, carrier relationships and operational discipline we built over more than 2 decades. This is not a departure from who we are. It's a continuation of it. Turning now to our fourth quarter and full year results. Total revenue for the quarter was $105.3 million, up 12% over the previous year quarter and $365.3 million for the full year, growing 16%. Core revenues for the quarter grew 15% to $78.2 million and grew 16% to $317.9 million for the full year as a result of continued improvement in client retention and growth in new business production from all 3 sales networks. Looking into 2026, we expect low double-digit core revenue growth for the first half of the year as year-over-year pricing dynamics impact the renewal book. Additionally, the consolidation of single producer franchises results in a short-term revenue impact. However, this effort dramatically improves the efficiency and productivity of the overall franchise network and therefore, our future growth and profitability. We expect acceleration in the second half of 2026 as year-over-year pricing changes are more consistent, client retention improvements continue, and the benefits of our recent partnerships and Digital Agent 2.0 investments take hold. Ancillary revenues, which is largely comprised of contingent commissions, was $25.3 million for the fourth quarter, bringing the full year to $41.1 million. Contingent commissions in 2025 represented 86 basis points of total written premiums, which outperformed our expectations throughout the year. During 2026, our initial expectation for contingent commissions is between 60 and 85 basis points of total written premium. Cost recovery revenues for the quarter was $1.8 million. As a reminder, revenues from franchise fees are recognized over the 10-year life of the agreement. When an agency exits the system, any unamortized revenue is then accelerated. We expect cost recovery revenue to be flat to down with normalized levels of franchise exits as further consolidation accrues within the network. Total written premiums for the quarter were $1.1 billion, growing 13% over the prior year and were $4.4 billion for the full year 2025, up 17% over 2024. The quarter included franchise premiums of $896 million, up 15% and corporate premiums of $194 million, up 4%. Policies in force grew 14% to $1.9 million, which accelerated off of the 13% growth rate in the third quarter of 2025. We expect continued acceleration of the policies in force growth rate for the full year 2026 as client retention continues to improve, our franchises onboard new producers and expansion of our partnerships in enterprise sales business. Adjusted EBITDA for the quarter grew 5% to $39.2 million, up from $37.4 million in the year ago period. This includes $2.9 million of incremental strategic investments in the quarter that we believe will drive long-term shareholder value. For the full year, adjusted EBITDA was $113.6 million, growing 14% over the prior year and producing an adjusted EBITDA margin of 31%. Looking into 2026, we expect margins to be modestly down as we invest in broadening our application of AI, as I discussed, and our Digital Agent 2.0 and partnerships platform. We expect these investments to deliver incremental long-term growth and margin at scale. We ended the year with $34.4 million of cash and cash equivalents and total debt outstanding of $298.5 million. Cash flow from operations for the year was $91.8 million, up 28% from the prior year. As we mentioned, we maintain a long-term focus for our business, and you can see that in our capital allocation. During the fourth quarter, we repurchased and retired 323,000 shares of our Class A stock, representing $22.5 million. For the full year 2025, we acquired $81.7 million of our Class A shares and combined with 2024, nearly $145 million and over 2 million shares, representing approximately 8% of our total Class A share count as of the beginning of 2024. Given the current market volatility, today, our Board of Directors authorized an additional $180 million share repurchase authorization and we plan to continue to be opportunistic when there's a market dislocation. As we look into the future, many things about how our business operates will adjust based on changes in technology and adaptations to market conditions. However, some critical things will not change. We remain committed to delivering our clients the best possible value with our sales and service functions. Our clients have a choice of who they do business with, and we want to make that decision as obvious as possible. We remain focused on the personal line section of the P&C market as this is the area where we have durable competitive advantage and specific expertise. We remain committed to organic growth as the first and foremost driver of our business as that is the most sustainable and profitable way for us to operate, and we are committed to delivering our current and future agents with the best value proposition for distribution through technology, product access and back-office support. As we look into 2026, our guidance for the full year is as follows: Total revenues are expected to grow organically between 10% and 19%. Total written premiums are expected to grow organically between 12% and 20%. As Mark Miller said earlier, I want to echo my appreciation for the Goosehead team. Strong financial performance is never the result of a single initiative or a single quarter. It is the result of consistent execution across the organization. I'm proud of what we accomplished in 2025 and confident in the foundation we have built through the years ahead. Thank you to our shareholders for your continued support and to our teammates for the work they do every day to make these results possible. With that, let's open the line up for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Andrew Andersen with Jefferies. Andrew Andersen: Just in terms of the guidance for next year, how are you thinking with regards to home closing transactions? And how are you thinking about the insurance pricing environment? Mark Jones Jr.: Andrew, yes, this is Mark Jones. So in terms of home closings, I think you saw some interesting data come in, in December, a strong December, followed by what looked like a relatively weak January. As we've talked about for the last couple of years, housing construction, while certainly not a tailwind for us hasn't necessarily been a big headwind. Our agents have done a really good job continuing to go get lead flow. And through our strategic partnerships, we just continue to decouple our business from the ebbs and flows of the housing market. So we're not counting on any improvements in housing in terms of our guidance throughout 2026. I think that would be potentially upside. And then pricing, you could probably assume the bottom end of the guidance range includes pricing that's generally down in the top end of the guidance range, you'd have moderate increases in homeowners pricing. I think that's pretty consistent with what we're seeing in the market right now. Andrew Andersen: And then as some states consider measures like profitability caps or just tighter constraints on insurance pricing, how would those types of regulatory changes impact your business model, I guess, specifically carrier appetite, maybe commission economics and your ability to maintain growth in these geographies? Mark Jones Jr.: Yes. I mean it will be interesting to see how that plays out. I'm not sure that, that is likely actually to happen. I know I've seen a couple of articles about that across a few different states. I don't necessarily believe that is a good thing for the whole market. But what you'll probably see is the excess and surplus lines market, that can be a little bit more nimble, probably be more durable in those areas. But we'll just have to see how that plays out. Operator: It comes from the line of Brian Meredith with UBS. Brian Meredith: A couple of big picture questions. First, thanks for all the color on kind of how you're using AI, but maybe you can talk a little bit about why you don't think agents will be disintermediated through the use of AI? Clearly, that was a big topic last week. Mark Miller: Yes, Brian, this is Mark Miller. I'll take that one. So clearly, none of us have a crystal ball, but I'll give you my perspectives on it. Auto generally becomes more commoditized, I think, over time. It's a more standard commodity type of product. Home remains complex and often is the largest asset for our clients. And I think they're going to be particular about how they buy that product. And selling home in general, is just a much trickier sale. It requires a lot more detail, a lot more knowledge. So I think it's going to be difficult to disintermediate the clients. And carriers when you think about them, what they want is they don't want to sell as much product as possible, what they want to sell is the highest product to the highest quality clients, and that's what we're doing with our agents. And the majority of our clients still want some human guidance interaction in the process. And we lead with the home and cross-sell with the auto so I think it makes it even harder for us to get disintermediated in this process. I see a world where it can be a combination of fully automated, maybe in a sale of an auto product, a hybrid sort of a product or a fully human distribution. But digital, in my opinion, just over time, increases the productivity of our agents rather than disintermediates them. One last point is just it's really, really challenging to disintermediate when the service function is such a big component of it. And what's makes Goosehead so unique is the size and capability of our service function compared to anybody else. Mark Jones Jr.: Yes. Brian, I would just add, I think people really underestimate the complexity of being able to distribute in a choice model directly to consumers. There's not really a ton of underwriting demand for that, especially on the home side. B, it's 50 different state regulators. There is a ton of different product out there and the product market ebbs and flows. And then I would just call out, there's only from what we know of 1 business that can actually today bind policies end-to-end without human intervention, and that's us. Everybody else out there is lead aggregation. Brian Meredith: Makes sense. And then I guess my second question, back to the digital agent, maybe you can dive in a little bit more on kind of what exactly that's doing because I guess the concern I have on it, is it going to actually cause customer retentions to actually start to decline here if it's easier and easier for customers to switch something like what's going on in the U.K. Mark Jones Jr.: So Brian, we've seen so far -- and granted, it's not like we've sold tens of thousands of policies so far. We've sold some. And largely what it has been so far as existing clients who are monoline home bought an auto policy directly from goosehead.com. That actually improves client retention because it rounds out their total account helps us capture full share of wallet better. And I think if you interact with one specific platform like we're trying to drive the industry to be Goosehead as really the place you need to purchase your insurance through. You don't have to leave Goosehead in order to get that full complete shopping experience. Mark Miller: And Brian, I think we're going to use it is pretty unique. Right now, you could go to goosehead.com for the state of Texas, and you can see auto carriers live that you can bind on. But when we think about how we use it over the medium term to long term, we're using it through our partner network that we've talked about that we've been adding. So we'll go straight at like mortgage service clients, if you will, cross-sell them auto, help them with their auto -- home products in the initial loan origination process, loan closing process and as their service books come up for renewal -- renewing their mortgages -- or lowering their mortgage insurance. Mark Jones Jr.: Yes. And ultimately, the service function is what really locks in client retention for the longer term. And the service function that we've built today does what we believe is the best job in the industry of fully licensed U.S.-based service agents who can handle the complexity of hundreds of different carriers in 50 different states. Operator: Our next question comes from the line of Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: First question, along the same topic here. How did the majority of consumers that are serviced by Digital Agent 2.0 find their way to Goosehead? Is it through top-of-funnel search engines, through corporate partners? And to go further, do you think Goosehead needs to go integrate with the LLM such as ChatGPT, if that's where consumer eyeballs are going? Mark Jones Jr.: Yes. So Tommy, we'll certainly look at that. But we're not necessarily trying to drive a whole bunch of monoline auto business. It may be a way to generate a bunch of short-term premium, but it doesn't actually generate long-term enterprise value because that's not the most retentive business, it's not the highest quality business. And when there's a market downturn, it's typically the channel that gets shut off first. Our distribution point with the digital agent largely going through the partnership base, gets us access to a preferred set of clients, one where we can solve pain points for the partners and give the carriers, the type of clients that they want at scale and at speed. We're not going to go into a giant advertising campaign to try and drive eyeballs at goosehead.com, but just the economics don't work in that world. And the advertising space and personal lines is so competitive. I mean you can't watch TV for 10 minutes without seeing 4 different insurance ads. So that's not an area where that's going to be a good use of capital. Mark Miller: And as we've gone around and talk to the big home carriers, that's not what they're looking for. They just don't want massive volume of low-quality leads. They want very select customer bases, and that's what we're going to deliver to them. Thomas Mcjoynt-Griffith: Got it. That all makes sense. And then switching over to buybacks. You saw the announcement of the sort of increased authorization here. Can you talk about your appetite and capacity for buybacks as we go through the year, given where the stock is now, what's the cadence of your guys cash flow generation typically throughout the year that should unlock perhaps more front-loaded buybacks through this year? Mark Jones Jr.: Yes. So I would point you to 2025, we used 80% of the full authorization that we were pretty aggressive because we thought the stock was undervalued. Looking at the valuation of where it is today, I think it's probably safe to say we think we're undervalued, hence, the repurchase authorization. We generate a really strong amount of cash. First quarter typically has the contingent commission bonuses that actually get paid. So it may not be the biggest EBITDA quarter, but it's a big cash flow quarter. And then we've got strong flexibility in our balance sheet because we've been conservative over the long term and being diligent and not over levering. We have a revolving credit facility of $75 million, that's got same-day liquidity. So we have a lot of options, but we want to be aggressive and deploy capital in the way that's going to drive long-term shareholder value. Operator: Our next question comes from the line of Mark Hughes with Truist Securities. Mark Hughes: Yes. What is the latest number, and I apologize if you gave this earlier in the call, but the investment spending, kind of elevated investment spending in 2026? Mark Jones Jr.: Yes. The 2026 number is still the same that we talked about in the third quarter call. That's $25 million to $35 million of total cash, $8 million to $11 million of that, that hits the P&L. And just for your context, fourth quarter 2025 there was $2.9 million that hit the P&L in the Q4 related to the Digital Agent. Mark Hughes: Yes. And you had mentioned, I think, 2.3 million potential mortgages available to you with the enterprise sales and other partners, but you're still ramping up. How many of that -- or how much of that potential is active as we sit here today? And what's the cadence for bringing the rest of that online? Mark Jones Jr.: Yes. A pretty small percentage of that is actually live so far today through either enterprise sales lead flow type arrangements or through embedded franchises. The embedded franchises that we have live so far today are performing really well. I think the story that having inbound lead flow already built inside your business is going to result in productivity is certainly holding true. But I get really bullish on that channel when I just look at what the potential pipeline looks like and how much we already have under contract and how the implementations are going. So I would not say the majority of that 2.3 million is already kind of fully sending lead flow through. And then there's always going to be tweaks that we make as we learn on how to best engage with one specific audience. Is there a different marketing collateral that needs to be sent, do we need to adjust how we interact with them to drive conversion. Mark Hughes: Understood. And then on the new business royalty fees up 6%, I think, this quarter. You talked about consolidation of the franchises that maybe impact productivity in the short term. You think that will be good for the long term. Anything else? That category has been a little volatile up 9% in the second quarter, but up 18% and then up 6% and maybe some of that is just underlying mortgage activity. But anything else that you would highlight around the productivity in the franchise channel? Mark Jones Jr.: Yes. I mean we feel actually really good about the health of the agency community. I mean same-store sales was up 19% in the fourth quarter. As Mark Miller mentioned in his prepared remarks, gross payments to agencies was up 29%. So the franchise community is healthier than what it has been in a long time. We feel really good about that. I think a really good leading indicator is our agency staffing program. The demand for that is really, really high, almost higher than what we can actually fulfill. So we've got to put some more resources against that. But our top agencies kind of that top 200 bucket is growing really, really nicely. And they're kind of more like 25% to 35% same-store sales growth. So I feel really good about the direction of the franchise community. Obviously, there can be quarter-to-quarter fluctuations in the overall growth rate of new business royalties, but we're expecting that to accelerate throughout 2026. You can see it in the higher new plans from our franchises. Mark Hughes: And if I could, one more, the corporate sales headcount, how do you think that will trend in 2026? Mark Jones Jr.: Yes. I would expect it to trend up. I mean enterprise sales should grow pretty strong just as we've got to onboard these partners, we want to make sure we have lots on seats to fulfill the lead flow. Traditional corporate sales team, we've seen nice improvements in the agent retention. We've made some changes to the recruiting profile that do not get off of college campuses, but add additional talent pools of experienced sellers that we traditionally have not necessarily gone after. And then as we've expanded geographically, and we've got 3 new offices here in February. We've got 1 more coming in the second quarter. I feel good about the direction of the corporate sales team and expect the head count to grow, and I don't expect it to double in 2026, but expect it to grow. Mark Miller: But I think the opening of the new office speaks to how we feel about the product market and our ability to grow the corporate staff. Mark Jones Jr.: Yes. And the corporate sales team is super strategic to the long-term vision of the organization. I mean we talked about the franchises that we've launched in the last year, many of them are already in the -- not even just the top 5%, some of them are in the top 5 of the agency community already. So we really are able to grow what I believe is the best insurance professionals in the industry in-house. Operator: Our next question comes from the line of Mike Zaremski with Bank of Montreal. Michael Zaremski: Back to the producer trend lines. Could you comment on franchise producers. It's been a bit volatile decline just a bit sequentially. I know it's better than expected last quarter. I think we heard you loud and clear about the franchise consolidation. But how about -- do you expect producers at the franchise to increase at a more meaningful rate as the market opens up? Mark Jones Jr.: Yes. Our agencies are really looking forward to hiring in the fourth quarter, you typically have your lowest recruiting of new producers, just seasonally, you don't necessarily start people going into Thanksgiving going into Christmas. But the demand for new hires is really strong, and I want to continue to push that producers per franchise number. So it was up to 2.1 here in the fourth quarter. I still believe 5 is a good kind of medium-term guidepost, continue to drive that up. And I think our largest agency is just about at 50 now, and we've got multiple that are over 20, some in the 30s. So the producer count is growing nicely. It's harder for you guys to see it just as the consolidation happens, but I'm feeling really good about the direction of that. Mark Miller: The larger the franchises, the more easily they can hire and onboard people and ramp them up. And that's what we're seeing is this consolidation is allowing the bigger ones to get bigger and have more staff. But it's just -- it's kind of blurred a bit because if you've got consolidation of the really small ones. But most of those small ones are just rolling up in the big ones that are more powerful. Michael Zaremski: Just directionally, will this consolidation dynamic kind of just work itself out of the system in '26? Or it's more of a kind of ongoing pruning and will be probably may be talking about this in '27 as well? Mark Jones Jr.: Yes. We talked about in the third quarter, probably the next 12 to 18 months. So you might see that a little bit into 2027. It's hard to say exactly because some of this is driven by those franchises themselves, whether they want to continue to operate as a sole proprietor or whether they'd like to join a bigger force. But ultimately, I expect probably the number to start to slow down, but it's still going to be slightly elevated in 2026. Michael Zaremski: Got it. And lastly, moving to -- you mentioned, obviously, the importance of retention. You can see the -- I think the sequential improvement this quarter. Maybe you can talk about kind of what's embedded in the guidance range you gave in terms of are you assuming retention kind of continues glide pathing up a little bit or a lot or not at all? Mark Jones Jr.: Yes. So we're continuing to see client retention improve basically on a daily basis. We look at it down to 2 decimal points. It's the first thing I look at every single morning. It's the most important piece of the business. So it's nice to see the trend continue up. You could probably assume the top end of the guidance range contemplates continued improvements in client retention, honestly, acceleration in the second half of the year. The bottom end of the guidance range would probably imply less improvements to potentially stalling in the client retention numbers. We think the market is going to continue to improve. Pricing is going to likely slow down, which should naturally improve client retention. And then we've put so much effort into our client-facing tools and the service function, we believe we should be able to drive it up. Operator: Our next question comes from the line of Katie Sakys with Autonomous Research. Katie Sakys: I wanted to circle back to the Net Promoter Score for the quarter. And normally, I wouldn't focus on this metric so much. But if I think, the lowest that we've seen in quite a while. And I just wanted to, a, ask for a little bit more color on perhaps what impact about this quarter? And b, circle back to the discussion of the impact of the rollout on the Digital Agent 2.0 platform, and how that has sort of impacted your clients view of interacting with Goosehead and really how you foresee the further rollout of the Digital Agent 2.0 platform competing with other similar platforms from your competitors? Mark Miller: Sure. Let me take this one, Katie. And I'll just start by saying just a reminder, the NPS score is a trailing 12-month metric. So it still reflects a lot of the price increases that you saw early last year, and they started to taper off like third quarter of last year, but people were in shopping mode at that point and very dissatisfied with the general broader market of insurance in general, just when we get the type of price increases they saw. So I would say it's a general affordability kind of sentiment sort of measure. We also started working in internally a CSAT score, which instead of measuring how they felt about, would they recommend Goosehead to a friend, that's the NPS score. We're starting with the CSAT score, which is how is your interaction with your Goosehead agent that you just had. That score has been on a 5-point scale, about 4.2 since we started it and holding steady. So I don't think there's been a change there. And the other thing that we look at is just retention. And retention has consistently moved slightly up every single quarter what I think is another measure of how people are feeling about our service levels. So overall, I feel very good about it. And when you think about the tools that we've put in place with our new mobile app is probably the first thing in our Lily, our AI automated agent. I think those 2 things right there have really helped client service overall. Katie Sakys: Got it. Okay. I appreciate that color. And then I guess thinking about the year ahead and your expectations for productivity growth. Can you kind of delve into more color on those additional pools of talent that you guys are reaching into to further support your recruiting efforts and how much additional tailwinds to productivity, those more seasoned producers might be able to provide relative to like the typical profile of a traditional Goosehead new hire? Mark Jones Jr.: Yes. So as we go after people who have a little bit more sales experience, what I anticipate is going to happen on that is, a, the retention of those agents should be better because they're not learning whether they want to be in sales or not on our dime. They already understand if that's what the career path that they want is. I don't necessarily think there's a magic bullet between hiring somebody that's off of a college campus versus hiring somebody that's got some experience as long as you're picking the right person who knows that they want to be in sales. And we've made a lot of investments in the training program and the management infrastructure over the last 6 to 8 months to help improve agent productivity in the corporate sales force. You can see that in the less than 1-year corporate agent productivity. And then as you look into 2026 in the third quarter call, we talked about smoothing out the hiring time frame, which is a little bit different than what we've done in the past. That should also aid both in productivity as well as in retention of those agents because you're not launching so many of them at one time where a manager has the potential to get overloaded. Operator: Our next question comes from the line of Andrew Kligerman with TD Cowen. Andrew Kligerman: Okay. Just some quick follow-ups on the earlier questions. On the one with regard to the guidance, of low double to high single digits or 10% to 19%. And you touched on retention being the key variable there. What's kind of your bias thinking? Do you think retention is... Mark Jones Jr.: Yes. I think retention builds up. We're seeing that already. I don't have a crystal ball for what happens in the second half of 2026, but my baseline assumption would be retention continues to go up. Mark Miller: It's highly correlated with pricing, and we're starting to see pricing stabilize. So that would lead that and we've put a lot of extra efforts into improving retention, just better service. Andrew Kligerman: Got it. And with respect to the AI questions earlier, and I completely appreciate your points about the complexity of products and how you need people to do that. But I think the market's concern is around 5 years from now and 10 years from now. So does your thesis still hold 5 and 10 years from now, where do you see that disruption coming? Mark Jones Jr.: Yes. So Andrew, I think if you're looking out 5 or 10 years from now, the company that is best positioned to leverage AI, I believe is us, because we've got access to proprietary data that we've built over 20 years that is not only just the generic publicly available data that you may have from just doing advanced Google searching on, hey, your ZIP code generally has replacement cost of X. Now we've got almost 2 million policies across all 50 states, across a broad set of carriers that we're building the infrastructure right now to leverage that to be able to make the best possible decisions on behalf of clients. So if you're rolling this for 10 years from now and say, AI is going to be the main distribution platform, which that may or may not be true, even if it is, that should be through us. I think we're the ones best positioned to capture that by far. Mark Miller: Andrew, I just say -- the carriers don't give access to binding authority to just anybody. And that trust that we've built up over this time makes us very, very unique and well positioned even over the long term. Operator: Our next question comes from the line of Paul Newsome with Piper Sandler. Jon Paul Newsome: Also a little bit of a follow-up. I apologize if you already hit this or maybe you could just expand upon it. The guidance or at least you're thinking for the next year or so, does that have any view on product availability changing over the time? I know that was at 1 point an issue with sales. And maybe just some general thoughts on the -- are we at the point where everyone is open. It's just not an issue? Or is there some sort of expectation that maybe it continues to get even better? Mark Miller: Paul, it's Mark. I would say on the auto side, it's been wide open for a bit now. The home probably 50% open towards the end of the year, pretty wide open right now. There's not a market that we operate in that we're having a significant product availability issue, carrier appetite is returning. There might be slight restrictions on some of the carriers where you have to bundle the product or something like that. But generally speaking, we've got product in every market right now. Mark Jones Jr.: Yes. So as you're thinking about guidance, there's not -- it doesn't really contemplate on either end of it, changes in the product environment. I don't necessarily see that coming in 2026. Operator: [Operator Instructions] Our next question comes from the line Ryan Tunis with Cantor. Ryan Tunis: First question, I want to make sure I heard this correctly. It sounded like in your discussion of '26 objectives that you're assuming a slightly lower take rate on the contingents. So that's question one. And if that's right, I was wondering if your margin guidance, excluding contingent commissions allows for any improvement. Mark Jones Jr.: Yes. Ryan, generally, we've had really strong contingent commission years the last 2 years in a row, 2024 and 2025. That's probably the base case assumption going into 2026, just given how that can impact both revenue and earnings in 1 year given that it is currently February. There's plenty of things that can still happen in the year that can swing that one direction or another. I don't think it would be prudent to just assume it's going to be 85 or more basis points. So internally, that's what we're kind of planning towards that 60 to 85. We've talked about forever that long-term average is 80 to 85 basis points and then we've shown that a couple of years in a row. But I want to make sure we give ourselves enough degrees of freedom in the event that there is some kind of catastrophic events, if there's a bad hurricane season, if there's wildfires, things like that. Ryan Tunis: So any comments on the -- any chance the margins can expand like if we exclude those? And I'm just wondering how much the decel and contingent is weighing on that margin guide. Mark Jones Jr.: Yes. No, the margin guide is really more around the core investments that we're making into the Digital Agent platform, into the partnership space. And just as you think about the cadence and pacing of that throughout the year, there's a couple of factors I want to make sure we bring up. One, and we talked about the year-over-year comparison on changes in pricing, impacting the first half of the year more than it does in the second half of the year. And so that's flowing through the renewal block can impact profitability as well as the revenue growth rate. And remember, we talked about hiring corporate sales agents more evenly throughout the year, which would mean that gets floated a little bit into the P&L. But generally expecting as the renewal block continues to grow and retention improves at the second half of the year, you get better year-over-year margin. But I think if you look at it ex contingents, you're probably still expecting margin compression because of these investments that we think are going to drive long-term growth and shareholder value. It help us drive towards a real industry leadership. Ryan Tunis: I guess just trying to frame these investments even going on for a little bit of time. Are you guys confident that looking out in the '27, '28, this morphs into a real margin expansion story. Or is it still kind of wait and see in terms of what you might have to invest in? Mark Jones Jr.: Ryan, we're pretty confident that long term and at scale, this is very accretive to the margin profile. I want to be clear, this isn't kind of infinite money pit that you see a lot of AI investments in. This is very thoughtful about what we're investing in the specific teams, what we anticipate the return profile to be. So we feel really confident this is an investment that is most likely to pay off. And it is a defined time period, it's not an infinite kind of black hole of investment. Yes. So at scale, it's going to be able to drive significant growth and significant margin opportunity. Ryan Tunis: And then just last one. I think just looking at the franchise commission rate that's come off over a point since 2023. I guess, first like how focused are you on trying to get those commission rates back up here in 2026? Or is that going to be somewhat sticky? Mark Jones Jr.: No, that's a big area of focus for us, and now is absolutely the right time to be having those conversations. If you look at the last couple of years, I mean, we always want to be a good partner and back our partners play, and we expect our partners to keep the same. So the last few years has been a challenging time to be an underwriter. That's not necessarily the case right now. And so as you look at ways to drive the most profitable growth for a carrier, investing in your distribution channel, that's been a good long-term partner for you is a good way to do that. And if you think about the franchise business specifically, there's a lot in California, there's a lot in Florida. So over the last couple of years, that's been a lot of business to, a, California FAIR plan, and b, Citizens, both of which have much lower average commission rates in the market because they're not necessarily trying to incentivize you to write business on them. And then we've seen the uptick in the excess and surplus lines market over the last several years. And I don't necessarily think that's going away. I think the growth rate probably starts to trend down. But from a positive perspective in our book, you're seeing E&S markets start to behave a lot more like the admitted market, both from an agent kind of access from a client understanding and importantly, from a compensation perspective. Operator: One moment for our next question. It comes from the line of Pablo Singzon with JPMorgan. Pablo Singzon: So first question, you've framed the high end and low end of guidance in terms of drivers such as pricing and retention. So should we take your comments about the first half core revenue growth being in low double digits as a representative of the midpoint? Because yes, it seems like a steep trajectory in the second half to get the midteens for the full year. So just wondering if you could comment on that point. Mark Jones Jr.: Yes. I mean we're expecting acceleration in the second half of the year through head count growth and really all 3 distribution channels, more partnership efforts coming online and continued improvements in client retention. Pablo Singzon: Okay. But double digits for the first half in your view that sort a realistic midpoint level for guidance, right? In other words, you're not being too conservative in setting that expectation for the first half? Mark Jones Jr.: Yes. I mean, remember, our philosophy that we've reiterated a lot of times is we try to be as honest as possible in our guidance and guide you to what we actually believe is going to happen. Pablo Singzon: Okay. And then next question, just on the Digital Agent 2.0. I guess is the plan to roll it out nationally ex partnerships. And I'm curious if you're actually able to measure the business you're getting from it, if it's different or incremental from business that your agents would have generated anyway? Mark Jones Jr.: Yes. I mean the policies we bound so far are monoline home clients who have -- many of them, at least our monoline home clients who have gone and bound an additional auto policy. So an agent was -- basically had no incremental effort, and now has grown their individual book of business and really received full compensation on that. I want agents engaged and excited about the digital agent, and we will be rolling this out more broadly across additional geographies as we continue to go take share in other markets. Now it's probably not going to be something that's at least all 50 states [ in a ] blitz, right? We're not going to try and sprint to South Dakota. It's obviously, in order of prioritization to make sure that we can cover the right geographies where, a, both our carriers want us to be and there is significant demand in the market, and there's good overlap with our partner client base. Mark Miller: Right now, Pablo, as I said earlier, we're focused on getting auto carriers on in Texas, which we've been successful in doing that. We've got a little bit more work to do there. At the same time, we're building out the connections to the home carriers for Texas, and we'll test and pilot the product in Texas and then a quick follow-on to other states where we can just replicate what we've built. Operator: And our last question will come from Mike Zaremski with a follow-up with Bank of Montreal. Michael Zaremski: Just a quick one. On premiums coming out of Texas, I think last update, that was at very high 30s. And just curious if that's -- do you expect that to stabilize and go back up? Or are we still kind of mixing out of Texas a bit? Mark Jones Jr.: Yes. We're continuing to diversify outside of Texas. For the full year, Texas was 40% of the premium for the fourth quarter. Texas was 38% of the premium. So that's been a really concerted effort by us. Just reduced dependency on the Texas market. If you think about the last several years, that was probably the area where there was the most product construction. So I just want to make sure we've got appropriate coverage in the right geographies where carriers want to be, where agents can be successful. So you should probably expect to see the Texas proportion of total written premium continued to decline as the rest of the country grows. Operator: And I don't see any further questions in the queue. I will pass it back for any final comments. Mark Miller: Sure. I just want to thank everybody for taking the time to join the call today. As you can see, it's an exciting time to be in the personal lines brokerage business, and we look forward to talking to everybody again in April with our first quarter results. Operator: And this concludes our conference. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to the Medifast Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steven Zenker, Vice President, Investor Relations. Thank you. You may begin. Steven Zenker: Good afternoon, and welcome to Medifast's Fourth Quarter 2025 Earnings Conference Call. On the call with me today are Dan Chard, Chairman and Chief Executive Officer; Nick Johnson, President; and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the fourth quarter ended December 31, 2025, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast's website at www.medifastinc.com. This call is being webcast, and a replay will also be available on the company's website. Before we begin, we would like to remind everyone that today's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statements. All of the forward-looking statements contained herein speak only as of the date of this call. Medifast assumes no obligation to update any forward-looking statements that may be made in today's release or call. Now I would like to turn the call over to Medifast's Chairman and Chief Executive Officer, Dan Chard. Daniel Chard: Thank you, Steve, and good afternoon, everyone. We appreciate you joining us today as we discuss our fourth quarter and full year 2025 results and as we share an update on the progress we're making building the next chapter of Medifast. Before I get into performance and strategy, I do want to briefly acknowledge a leadership update we communicated in January. I recently informed the Board that I plan to step down as Chief Executive Officer, effective June 1, 2026. I've led this company for close to 10 years now, and it's no exaggeration to say that it has been one of the great privileges of my career. This decision was made thoughtfully and deliberately as part of a planned transition that I have been talking to the Board about over recent months. I will continue to serve as Chairman following the transition and will be fully engaged as CEO through the end of May as we execute against our priorities and support a smooth intentional handoff. As part of the transition, the Board appointed Nick Johnson as President of Medifast with the expectation that he will assume the CEO role following my departure. Nick has been a central leader in the work we've done over the past several years, strengthening our coach-led model, helping reposition the company around metabolic health and working in tandem with our independent coaches to build the operational discipline required to sustain change. He has been with us on recent earnings calls, and you'll have the opportunity to hear from him today about the progress we're seeing with the field and how that's translating into early and measurable progress. What made my decision easier is my absolute conviction in the direction that Medifast is heading, the strength of our leadership team and the path we are on as a metabolic health company. Over the past 2 years, Medifast has been in a period of transformation. We've navigated fundamental disruption in the weight loss industry, driven by rapid adoption of GLP-1 medications and shifting consumer expectations. During the second half of 2025, we made a series of intentional choices to reposition the company, not to abandon weight loss as a concept, but to put it in the right context under the broader umbrella of metabolic health. At a fundamental level, many of the health challenges people struggle with today stem from poor metabolic health, often referred to as metabolic dysfunction. That dysfunction often shows up downstream as a whole set of symptoms. Weight gain is certainly one of the most visible of those, but it's far from the only health challenge. The problem is if we only focus on the symptoms, we are not fixing what's driving them. Improvement requires restoring metabolic health itself. At the center of our work in this space is a scientific approach we refer to as metabolic synchronization. Rather than just helping people with short-term weight loss, the science behind our clinically supported system works with the body to help reset key metabolic processes that have fallen out of balance over time. That approach allows us to reverse metabolic dysfunction and help create conditions for improvement in body composition, energy and overall health. To better understand how Americans view metabolic health, we partnered with KRC Research on a national survey that found that nearly 94% of American adults expressed concern about at least one aspect of metabolic health. Importantly, 85% of respondents believe metabolic dysfunction can be reversed and 84% view it as central to overall health and well-being. That combination of widespread concern and belief in reversibility highlights a large underserved market and reinforces our view on why a clinically proven coach-led approach is well positioned to meet it. Clinical results show that our metabolic synchronization approach reverses metabolic dysfunction and can deliver a targeted metabolic reset of key metabolic processes that improves body composition in meaningful ways. Specifically, during a 16-week clinical study, participants using our 5-in-1 metabolic plan reduced harmful visceral fat by 14% while retaining 98% of lean mass and experienced clinically significant weight loss. These outcomes impact metabolic health going beyond just weight loss. We're actively leveraging our metabolic synchronization science platform to develop a new product line designed to further support reduction of bad visceral fat and improve body composition, metabolic efficiency and overall health. These products will utilize a proprietary formula of clinically studied ingredients and are designed to support metabolic health. In parallel, we are simplifying how we support clients across every phase of their metabolic health journey. While most clients will begin in a targeted reset phase, the science of metabolic synchronization now provides a clear road map to guide and support them through additional phases that aid in achieving optimal metabolic health. We'll share more as we move through the year, but this innovation is a direct extension of the foundation we've built. Rebuilding our core offer has taken time. But today, we believe that process is largely complete. That does not mean that our work is finished, but we believe the foundational elements we needed to move forward are now in place. We have a clear science-driven strategy that is supported by clinical research. We have strengthened our clinical and scientific foundation, and we've positioned the company to expand our claims over time. We have revitalized and simplified key parts of our commercial model and leadership systems in the coach-driven field structure. And we have taken disciplined steps to align our cost structure and operations with the realities of the market while preserving the resources we need to invest in growth. So as we enter 2026, we are moving from transformation to execution. And in the fourth quarter, we started to see early evidence that our strategy is impacting key metrics. This includes the emergence of a green shoot in coach productivity, along with bright spots developing across the business. While these early performance metrics are yet to have appreciable impact on our revenue, we believe they are nonetheless early signs of the improving performance of our coaches in support of our efforts to get back to growth and profitability. This quarter marks the first time since mid-2022 that quarterly coach productivity turned positive on a year-over-year basis, up 6% in the fourth quarter over the prior year. That's a meaningful milestone because productivity performance like this has historically been a leading indicator of broader improvement in client acquisition and coach growth. We are seeing a sharp increase in coach-led product and business opportunity meetings with activity in January showing a significant rise compared to the same period last year. This is a clear sign of the energy and excitement that our coach base is bringing into 2026. We've talked about the importance of coach productivity and the associated positive metrics like these in previous earnings calls and the role that they could play in future growth. Their emergence now is consistent with the idea that the foundational work of the past 2 years is translating into measurable progress against our transformation objectives. While we continue to expect a decline in the overall active earning coach count through most of the current year, another positive early trend that we expect to see soon is a more favorable mix in coach tenure as a higher proportion of new coaches come in and longer tenured, less productive coaches transition off as part of the coach life cycle. This should create a younger tenured coach base, which is a sweet spot for productivity and the sponsoring of new coaches. We saw this in prior cycles, including in 2016 and 2017, and we are expecting to see some shift in the current year. Importantly, in this current environment, productivity is not being driven by price or business promotions, but by the new positioning of our coach-led program as a metabolic health solution, complemented with new tools and behavior changes inside our coach base as they focus on the new business opportunity around the large and growing metabolic health market. Nick is now going to share more detail on what we're seeing from coaches and how programs, including Premier+, EDGE and our client referral activity are set up to drive coach productivity and engagement and how the metabolic health story is energizing our coach base in a way we have not seen in some time. Nicholas Johnson: Thank you, Dan, and good afternoon, everyone. I'm grateful for the opportunity to continue working closely with Dan and the Board throughout this transition. I joined the company in 2018, and I've been deeply involved in the work to reposition the company over the last several years. My focus now is on executing this transition to a metabolic health company, particularly in the field where our strategy becomes real. Our coach-led model remains Medifast's greatest strength, and the data reinforces that belief. By working with a coach, clients are capable of achieving significantly better metabolic health outcomes, losing up to 10x more weight and 17x more fat on our flagship 5 & 1 metabolic health plan compared to those attempting to lose weight on their own. That difference underscores why we continue to invest in the coach experience and why we believe our model provides us with a real structural advantage in a crowded market. In a world where many solutions are increasingly virtual or transactional, our model is built on human connection, accountability and community, and we believe that matters now more than ever. As Dan referenced, we're seeing early signs of improved productivity, and we're pairing that with targeted actions designed to make productivity sustainable. Premier+ and EDGE are both central to our work here. Premier+ has enabled us to simplify our offer, and we expect it to strengthen client acquisition and retention, making it easier for clients to start our program, understand the value and stay engaged in their metabolic transformation beyond month 1. EDGE is a program that incentivizes the duplication of highly productive coaches by rewarding the behaviors that drive client acquisition, coach sponsoring and leadership development. In the fourth quarter, we achieved a double-digit percentage of active earning coaches reaching the important coach business leadership rank of Executive Director, the highest percentage since mid-2023. And the retention rate of those coaches hitting that rank for the following 2 months was the highest since 2022. This matters because duplication of this core rank is what ultimately grows their businesses. The more we can find ways to help new coaches reach this important rank, the more we expect we will be able to stabilize then scale the business. In addition, building on that, we're seeing higher engagement and activity levels in the field. As Dan mentioned earlier, coach-led opportunity meetings and training activity have increased significantly across the nation. Our optimal metabolic health story and the science behind it is giving coaches a sharper focus and stronger confidence in delivering meaningful value to their clients. We've invested in equipping them to share our breakthrough metabolic synchronization science responsibly and consistently through efforts like our annual scientific symposium as well as continuing education for our coaches. All of that is translating into more frequent and effective conversations, better follow-through and a larger investment in in-person events across the country. We're also seeing signals that the word-of-mouth engine is strengthening. We've introduced an expanded referral-oriented activity, and we're seeing indications that a higher share of clients are recommending the program to prospective clients. There are also indicators that sponsoring is improving. And when you combine that with a younger tenured coach mix, it can create a flywheel of momentum. Historically, when productivity improvement was sustained, we have typically seen active earning coach trends improve within the following 6 to 9 months. Delivering on that is what we are focused on for 2026. With that, I'll turn it back to Dan. Daniel Chard: Thanks, Nick. Before I hand over to Jim, I want to emphasize 2 points. First, we are staying consistent. We are not pivoting our strategy. We are executing on what we've been building, moving upstream to address metabolic dysfunction with a clinically proven system built on science and a coach-led model that differentiates us. Second, we are focused on disciplined execution on retaining profitability. We are deepening our leadership in metabolic health through ongoing research and a new product line being developed with our metabolic science at the center. And both Nick and I will share more at the appropriate time as we move through the year. We will continue strengthening and simplifying the coach and client experience and we will maintain cost discipline and protect our financial flexibility so we can invest in the areas that matter most. Our balance sheet remains strong, and our operating model is tightly aligned to the market realities we're operating in today. We have more work to do, but we're encouraged by the early indicators we're seeing. And as a result, we're confident in the direction we're headed. Now I'll turn it over to Jim to review the financials and our outlook. James Maloney: Thank you, Dan. Good afternoon, everyone. Fourth quarter 2025 revenue was within our guidance range with revenue per active earning coach showing year-over-year growth for the first time since Q2 of 2022 and reaching its highest level since Q3 of 2024. Our fourth quarter loss per share was $1.65. The loss per share is impacted by a $12.1 million noncash valuation allowance we recorded against our deferred tax assets in the current quarter, which on a per share basis represented $1.10 of the $1.65 loss. The loss per share before the noncash deferred tax valuation allowance was $0.55, which was better than the guidance range we provided. Revenue for the fourth quarter was $75.1 million, a decrease of 36.9% versus the year earlier period, primarily driven by a decrease in the number of active earning coaches. We ended the quarter with approximately 16,100 active earning coaches, a decrease of 40.6% from the fourth quarter of 2024. This decline was driven in part by the rapid adoption of GLP-1 medications, which continues to impact the traditional weight loss category. It's also reflective of the work we have been doing to build a new coach leadership structure comprised of the most productive executive director organizations described by Nick. Accelerating the exit of less productive and less profitable coaches contributed to average revenue per active earning coach for the fourth quarter reaching $4,664, a year-over-year increase of 6.2%. This represents a much anticipated green shoot during the current quarter with coach productivity turning positive both year-over-year and sequentially. As we have discussed previously, we view increases in revenue per active earning coach as an early indicator for future coach growth, which we believe will in turn lead to revenue growth. As a reminder, revenue growth is expected to take several quarters to materialize and productivity per coach needs to sustain in order for revenue growth to occur. Gross profit for Q4 2025 decreased 40.9% year-over-year to $52.1 million, driven by lower sales volumes. Gross profit margin decreased 470 basis points to 69.4%, primarily driven by the loss of leverage on fixed costs of 420 basis points and a onetime restructuring charge of 40 basis points. SG&A expense for Q4 2025 was down 31.5% year-over-year to $59.9 million, primarily due to an $18.6 million decrease in coach compensation, a $5.8 million decrease in company-led marketing-related expenses and a $4.2 million decrease resulting from the realignment of the employee base to lower revenue levels, partially offset by a $1.9 million increase due to a onetime restructuring charge and a $1.6 million increase in coach event costs. Q4 2025 SG&A as a percentage of revenue increased 630 basis points from last year, primarily reflecting 370 basis points of loss of leverage on fixed costs, a 300 basis point increase for higher coach event costs and a 250 basis point increase due to a onetime restructuring charge, partially offset by 440 basis points of reduced company-led marketing-related expenses. During Q4 2025, we executed a restructuring across all of our business functions and further scaled back our marketing spend with targeted future savings of over $30 million. These restructured costs, along with other initiatives, are incorporated in our 2026 guidance. Loss from operations was $7.8 million in the fourth quarter of 2025 compared to income from operations of $0.7 million for the year earlier period, driven by lower gross profit, partially offset by lower SG&A. As a percentage of revenue, loss from operations was 10.4% in the fourth quarter compared to income from operations of 0.6% for the year earlier period. Other income increased 151.1% year-over-year to $1.4 million, primarily due to unrealized losses on our investment in LifeMD common stock in Q4 2024 that did not recur in the fourth quarter of 2025. Income tax expense was $11.7 million for the fourth quarter, an effective tax rate of negative 183.9% as compared to $0.5 million, an effective tax rate of 37.3% recorded in the prior year's fourth quarter. As I alluded to earlier, we recorded a $12.1 million noncash valuation allowance against our deferred assets in the current quarter, which was equal to our ending deferred tax asset balance. We assess deferred tax assets for realizability on a quarterly basis and the current quarter's analysis warranted the establishment of the valuation allowance. Net loss in the fourth quarter of 2025 was $18.1 million or $1.65 per diluted share compared to net income of $0.8 million or $0.07 per diluted share in the year earlier period. The $12.1 million valuation allowance represents $1.10 of the loss on a per share basis. The loss per share before the noncash deferred tax valuation allowance was $0.55. With respect to our balance sheet, we ended the year with $167.3 million in cash, cash equivalents and investment securities and no debt. Additionally, our working capital, defined as current assets less current liabilities, was $158.7 million as of December 31, 2025. Now I'll turn to guidance. We are expecting our first quarter revenue to range from $65 million to $80 million and our loss per share for the quarter to range from $0.15 to $0.70 per share. We expect to see continued coach productivity growth during the quarter, up both year-over-year and sequentially. With our confidence level up regarding visibility for the entire upcoming year as we focus on metabolic health, we are reinstituting annual guidance. For the full year 2026, we expect to make significant headway on our efforts to get back to profitability with revenue of $270 million to $300 million and loss per share between $1.55 and $2.75. Also included in our guidance is that we believe improvements to get back to profitability will start in Q4 2026, following the launch of our new product line, and we will be targeting improvements in earnings to continue into 2027 and beyond. Finally, we believe our working capital will be more than $140 million at December 31, 2026. With that, let me turn the call back to the operator for questions. Operator: [Operator Instructions] The first question is from Jim Salera from Stephens Inc. James Salera: I want to start off by asking about the coach productivity and how we should think about the sequencing of that into 2026. Particularly, can you give us any detail around the guests or the consumers that are matched up with these coaches? You mentioned you noticed a younger composition of coach, but does that also apply to the consumers that are tethered to the coach? Can you offer any insight in how we see that progressing through '26? Daniel Chard: Sure, Jim. Thanks for the question. This is Dan. Yes, you're focused on the right area. This is one of the big changes from where we've been in the last few years. As we indicated in our prepared remarks, this is the first time since mid-2022 that we've seen a year-over-year improvement in productivity, and it's an improvement over where we've been over the last several quarters as well. So it's reflective of our coaches -- actually 2 things happening. Our coach is telling a new story focused on metabolic health, which is resonating in an environment where weight loss has been largely a story that's changed to focus -- be focused on GLP-1 weight loss. So as we've said, metabolic health goes beyond just weight loss. So we're seeing a new type of customer coming in who's looking for a different kind of health benefit. And we've seen that new client be tied to this -- as we said, this new story. This is largely a function of our coaches now being largely retrained and able to tell this metabolic health story, and we're seeing that expected improvement. And we anticipate that, that as we get the story continues to build and we introduce new products in the back half of this year, that productivity level should be -- or we expect that to be sustained and even improve. The other thing that is a big part of this new quarter that we're reporting on is some very significant improvements on our cost structure. As Jim said, we were able to restructure the business to be more reflective of where we are as a company and pulled approximately $30 million out, which we anticipate to be reflected both a little bit in the fourth quarter of last year and moving into this current year. James Salera: If I think about the sequencing of the top line, particularly against the backdrop of the $270 million to $300 million that you gave for the full year. If my math is correct, at the midpoint, 1Q is down like 37%, but the midpoint for the full year is only down around 27%. So that would imply improving generally throughout the year. Is it possible that we can get to a point where revenues are flat or maybe even modestly positive by 4Q? Or is it more of kind of a gradual improvement, but we should still exit the year with productivity positive, but absolute top line year-over-year still negative? Nicholas Johnson: Yes. I mean we're not -- obviously, Jim, we're not giving quarterly guidance. When you think back in 2022, we took away full year guidance at that point because we were disrupted by the introduction of GLP-1 medications, and we needed the flexibility as a company to invest in certain areas to make sure we were getting to the path forward the company needed to. Now that we landed on metabolic health, and we're past, I'll call it, the transformation stage and more on the execution, we're able to provide longer-term guidance. So we're happy to share the annual guidance as we did today. And you should think of that as that we're more confident in the movement into metabolic health. With the information that we have provided investors, you would think of the way you're thinking of it. So it's not unreasonable to think that when you look at a top line basis of our company, that things are going to stabilize, and that would be the anticipation. James Salera: If you look at the customers that have used GLP-1 either in the past or maybe currently actively using it, can you just offer any thoughts around how the new lineup and some of the new product innovation that you talked about and it sounds like coming this year as well is going to match up with kind of that change in the composition of the consumer base? And also, any thoughts you can offer around the fill format rolling out this year and anything that you've kind of modeled into impacts from that? Daniel Chard: Yes, I'll take the first part of this question, and then I'll have Nick Johnson, who's also here with us, comment on what they're seeing in the field. But what we're seeing now is this -- what we refer to as the off-ramp or people who are coming off GLP-1 drugs is getting significantly larger because that's -- because I think there's a recent study that showed after 2 years, roughly 2/3 of GLP-1 patients transition off for a variety of reasons. It also shows that they regain the weight and in some cases, gain more than what they -- where they started back after being on GLP-1 drugs. So we're seeing that large inflow of clients inside of the group that our coaches are now able to attract. I think we have roughly 1/4 of our patients either have or are on GLP-1 drugs. But I'll let Nick comment on where our coaches are having success in attracting both those who have never used as well as those who have used or are current users or who have used in the past. Nicholas Johnson: Thanks, Dan. Jim, as Dan was mentioning, the story in the field around metabolic health and specifically about what's to come. I think it's important for us to talk about some of those foundational pillars of our proprietary science metabolic synchronization, which focuses on a 14% reduction in visceral fat and 98% preservation of lean mass and then protecting healthy muscle. And when you think about that off-ramp group, and you think about the body composition, specifically around the type of weight that's being lost and you think about a healthy portion of that weight loss coming from lean mass, lean muscle, it's on consumers' minds. So when you think about what's coming with new plan, new program and system in the back half of the year, you can be thinking about solving for some of those outages, which are on people's minds today. And just to further articulate the point, our field are very excited about what's to come because they understand it's the quality of the weight that's coming off, where it's coming off, the type of dangerous visceral fat that's coming off as opposed to the type of weight that you want to maintain, specifically lean mass. Operator: There are no further questions at this time. I would like to turn the floor back over to Dan Chard for closing comments. Daniel Chard: I'd like to thank you all for joining the call today. We appreciate your continued interest in Medifast and the thoughtful dialogue that we've had this afternoon. We remain focused, as Jim said, on executing the transition to a more differentiated metabolic health company. We feel like we're well on our way to doing that and to strengthening our coach community and positioning the business for sustainable long-term performance. We look forward to updating you on our progress in the quarters ahead, and we thank you again for being with us today. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to the Vicat 2025 Full Year Results Presentation. [Operator Instructions] Now I will hand the conference over to Guy Sidos, Chairman and Group CEO; Hugues Chomel, Deputy CEO and Group CFO; and Pierre Pedrosa, Head of Investor Relations. Please, sir, go ahead. Guy Sidos: Thank you. Good afternoon, ladies and gentlemen. Welcome to Vicat's 2025 Results Presentation. I'm Guy Sidos, Chairman and CEO of the Vicat Group. Alongside me, I have Mr. Hugues Chomel, Deputy CEO and CFO; as well as Pierre Pedrosa, Head of Investor Relations. On Slide 2, as a preliminary remark, I would like to draw your attention to the fact that the forward-looking information presented here reflects our current assessment of expected trends across the group's various markets and should not be regarded as forecast. On Slide 3, 2025 is part of a solid and sustainable performance trajectory, illustrating the strength and resilience of Vicat's business model. Consolidated revenue amounted to EUR 3.85 billion in 2025, reflecting an average annual growth rate of nearly 7% over the past 5 years. EBITDA reached EUR 771 million which representing average growth of close to 7% over the same period. ROCE remained stable at 8.1% [indiscernible]. Lastly, the group's leverage ratio continued to decrease, reaching 1.49x in '25 [indiscernible] Vicat's financial structure. These results once again demonstrate Vicat's ability to consistently combine operational performance with financial discipline in a demanding environment. Let's move to Slide 4. As a reminder, Vicat's business model is built on several key pillars that underpin its resilience. First, a family shareholding structure and a long-term vision grounded in continuity, which enable us to pursue a consistent and sustainable industrial strategy. We are a cement-focused business and benefit from [indiscernible] high-performing industrial asset base vertically integrated across the value chain. We have [indiscernible] decentralized organization which [indiscernible] needs of a markets. [indiscernible] long standing collection of innovation [indiscernible] capabilities [indiscernible] invention of [indiscernible] in [ 1817 ] today is low-carbon cements such as [indiscernible] we're positioned as a key player of our industry in decarbonization. Firstly we benefit from geographically diversified portfolio across both developed and emerging markets. This [indiscernible] and provide a foundation for [indiscernible] model fully aligned with the ongoing [ confirmation ] of our sector. Slide 5 provides an analysis of the group's investment cycle over the past 10 years and how we have balanced our strategic priorities with financial discipline. Following an initial phase between 2015 and 2018 during which investment levels remain stable, we made the decision from 2019 onwards to accelerate capital expenditure at a time when funding conditions were [indiscernible]. Since 2023 in a context of [indiscernible] we've been to capitalize on discuss [indiscernible] [ eye catch flows ] [indiscernible] deliver of investment consistent [ reach over ] initial goals. Turning now to the key highlights of 2025 on Slide 6 in a complex international environment is a group delivered solid results. Organic revenue growth came in at 3.3%, accelerating to 8.1% in the first quarter. EBITDA reached EUR 771 million, representing organic growth of 3.7% compared to a record year in 2024. However, foreign exchange headwinds had a significant impact in a slight EBITDA decline on a reported basis. For the third consecutive year, the group generated strong free cash flow amounting to EUR 324 million in '25 and continued to reduce its net debt. [Firstly] we made further progress on decarbonization reached an important milestone in securing the financial of VAIA of flagship carbon capture project in France with the award of 2 subsidies at both the Europe and France levels. Altogether, these elements once again illustrate the strength of Vicat's model, which is able combine operational performance and [indiscernible] decarbonization. In France, as shown on Slide 7, the residential market has gone through an unprecedented slowdown and is now at the lowest level in 25 years. As far as we are concerned, we have lost [ 600, 000 tons ] of cement over the past 3 years, representing nearly 20% of our production. Despite this [indiscernible] France showed remarkable resilience in 2025. After 6 consecutive quarters of decline, volumes stabilized in the second half of 2025 at a low level with a slight rebound in the fourth quarter. While visibility remains limited, notably due to the political concept and the upcoming municipal elections in France, this development is encouraging in the context of reduced interest rates. Let me remind you that residential need in France aiming very [indiscernible] is specifically intended to address this situation [indiscernible]. As a result [indiscernible] aligning for [ moderate ] and progressive recovery from 2026 onwards. [indiscernible] long standing roots in France which represents 31% [indiscernible] revenue. A very [ bad ] capacity Vicat is very well positioned to benefit from [indiscernible]. As soon as [indiscernible] France as shown on Slide 8 it's a TELT project [indiscernible]. So this project [indiscernible] [ mature ] to [ agility ] in 2025. It is [indiscernible] largest civil engineering project and construction year ago. [indiscernible] which is commissioning of the [indiscernible] boring machines is expected to [indiscernible] cement construction in 2026. And develop [indiscernible] from '27 onwards. Overall we've [indiscernible] secured more than 1.3 million tonnes of cement. As well as around 4 million tonnes of [indiscernible] like to come into the project. I will show [indiscernible] which a [ cage ] name CO11 which we won jointly Vinci. Just [indiscernible] treatment of [indiscernible] material into [indiscernible] 24 million tons of material will be sorted with the objective of recycling of [indiscernible] and we have [indiscernible]. And today is a 10th project for [indiscernible] operation in France, it will provide [indiscernible] support to our volumes over the next 7 to 8 years. More broadly, the outlook for the infrastructure segment in France is [ promising ] with good visibility over the coming years. The launch of the French access work for TELT which is in addition to the main [indiscernible] probably near over [indiscernible] plant. [indiscernible] it's a new generation of [indiscernible] in France in [indiscernible] this are a few jump [indiscernible] activity in [indiscernible] U.S. In Brazil now on Slide 9 [indiscernible] performance in 2025 [indiscernible] market momentum and sustained [ commercial ] development in [indiscernible] and the state of Goias. In 2025 we completed acquisition of Realmix a readymade concrete [indiscernible] this [ construction ] [indiscernible] ocean and 2 additional cement and [indiscernible] use. Also you get [indiscernible] 1st of September of 2025 [indiscernible]. Realmix made with the [ automation ] [indiscernible]. In Brazil we generated EBITDA EUR 63 million in 2025. Even by your market growth. A strong performance of [indiscernible]. The contribution of [indiscernible]. It was noted on [indiscernible] on Slide 10. [indiscernible] strongly in 2025 [indiscernible] EBITDA inching EUR 58 million up by nearly [35%]. A [indiscernible] wide across [indiscernible] increased by 19% in 2025. The construction market in this region [indiscernible] demographic trends which population we are getting from [indiscernible] 2023 of stretch towards [indiscernible] . [indiscernible] in 2025 [indiscernible] project [indiscernible]. We are also seeing some production capacity being directed towards export markets, which favors domestic players such as [indiscernible]. And in the current inflation on environment who have been able to adjust of [indiscernible] protective market. On Slide 11 in Egypt, the remarkable turnaround of our performance continued in 2025. EBITDA once again increased sharply, reaching EUR 61 million, up by nearly 79%, sorry, with margin rising to 37.3%. Export volumes remain sustained and the rebound of the domestic market was confirmed in the second half of the year [indiscernible] launch of [indiscernible] projects [indiscernible] continues to [indiscernible] for the group up to [indiscernible] who potential of [indiscernible]. At this finally turned to Senegal on Slide 12. Where we are made a major adjustment over the first few years. That it was started in June 2025, [ '26 ] as continue to run [indiscernible]. Delivering first [indiscernible] financial confirmation [indiscernible]. As a reminder of [indiscernible]. high performance facility is intended to replace in 3 and 4 and to [indiscernible] and will generate cost saving of EUR 20 per ton of cement in the coming years. The ramp-up of [indiscernible] will continue this year and will be a key driver of the group's performance in Africa in '26 and '27. I will now hand over to Hugues Chomel for a more detailed review of our financial statement. Hugues Chomel: Thank you, Mr. Sidos, and good afternoon, ladies and gentlemen. I will start with the main highlights of the group consolidated income statement on Slide 13. Revenue amounted to EUR 3.854 million, representing an organic growth of 3.3%, but remaining broadly stable on a reported basis due to a negative foreign exchange impact of EUR 242 million. EBITDA reached EUR 771 million, up organically by 3.7%, in line with the plus 2% to plus 3% target communicated last July. The EBITDA margin, therefore, stood at 20%, consistent with our medium-term priority. Net income group share increased by 6% at constant scope and exchange rates, reaching EUR 275 million. Despite a particularly negative foreign exchange impact in 2025, the quality of the group results demonstrate once again our ability to deliver solid operational and financial performance in a challenging economic environment. On Slide 14, you can see the evolution of the revenue by region in 2025 compared with 2024. At constant scope and exchange rates, the solid organic growth delivered across the group reflect contrasting trends from one region to another. France recorded a slight increase on a reported basis, supported by the gradual stabilization of the cement business in the second half of the year, as mentioned by Mr. Sidos, and by the positive contribution of the integration of Cermix since Jan 1, 2025. The Europe region grew by 7.9% on a reported basis, benefiting beyond the appreciation of the Swiss Franc from the recovery of the market in Switzerland, VGA's exposure to major infrastructure projects as well as the commercial success of our low-carbon offering. Americas posted a decrease, mainly reflecting the slowdown in United States. This decrease was, however, partly offset by the strong performance in Brazil. In U.S., interest rate remained high throughout the year, penalizing the housing sector. Uncertainty resulting from the tax and tariff changes created a climate of instability, which impacted the non-residential markets. In this environment, the group performance was contrasted across regions with growth in the Southeast and a sharp decline in California. In Asia, revenue recorded a slight organic decline of 1.5% Activity in India remained volatile due to a highly competitive environment, particularly in the south of the country, which put pressure on pricing despite an improvement in the second half of the year. The Mediterranean region stood out, delivering organic growth of more than 30%. Lastly, Africa posted a slight decrease of 2.9% despite the strong performance in Senegal, notably driven by an acceleration in aggregate sales following the restart of major public infrastructure projects. As you can see on the chart on the right of the slide, the group organic growth accelerated throughout the year, reaching plus 8.1% in the fourth quarter. Now turning to Slide 15 to the evolution of EBITDA, whose main drivers are illustrated on this chart. The increase at constant scope and exchange rates is mainly explained by a positive volume effect in cement, concrete and aggregates. Overall pricing developments allowed to offset cost increases, which were notably driven by wage inflation. Industrial performance also contributed positively, notably in Senegal. Foreign exchange had a negative impact of EUR 46 million. This reflects the depreciation of all currencies in which the group operates against the euro with a notable exception of the Swiss Franc. Let me remind you that 59% of the group revenues is exposed to non-euro currencies. Overall, EBITDA recorded a moderate decrease of 1.6% compared to 2024, which was a record year for the group. Therefore, this can be considered a very solid performance given the environment we faced in 2025. Moving to Slide 16. 2025 was also characterized by a strong cash generation. We maintained strict investment discipline. Net CapEx amounted to EUR 299 million, down compared to 2024. CapEx was split more or less evenly between maintenance CapEx and strategic CapEx, including the cash outflows related to Kiln 6 in Senegal. This discipline will be maintained in 2026 with expected CapEx of around EUR 290 million. For the third consecutive year, the Vicat Group generated strong free cash flow amounting to EUR 324 million in 2025 and illustrating the highly cash generative nature of our business model. As shown on Slide 17, this free cash flow of EUR 324 million notably reflects a further reduction in working capital requirement and as I just mentioned, control over CapEx. The cash conversion rate stood at 42% in 2025 On basis and taking into account the group's market capitalization at the end of January. Vicat free cash flow yield is around 9%, one of the highest in the industry. This highlights both the strength of our cash generation and the rerating potential that remains significant despite the share price increase over the past year. This cash generation enabled us to continue our deleveraging trajectory. As shown on Slide 18, the group net debt decreased by EUR 85 million in 2025 to reach EUR 1.151 million. The leverage ratio stood at 1.49x EBITDA, marking a further reduction in line with our priorities. On Slide 19, you can see a detailed breakdown of the group net debt at the end of 2025. It is characterized by a well-balanced maturity profile with an average maturity close to 5 years. Average interest rate was 3.86% before hedging in 2025, down significantly year-on-year. Gross cash at EUR 528 million and EUR 877 million of available undrawn credit lines, the group benefits from strong liquidity and the resources needed to continue pursuing its development. Thank you for your attention. I will now hand it back to Mr. Sidos. Guy Sidos: Thank you, Hugues. Let me now briefly comment on Vicat's climate performance in 2025 on Slide 20. We made further progress towards our 2030 targets across all key indicators, particularly in Europe. In France, we continue to pursue a particularly ambitious trajectory [indiscernible] below 80%. [indiscernible] an increase in the alternative fuel rate to more than 70% of 5 percentage points year-on-year. This made us [ concrete ] machine [indiscernible] of their old performance. In 2026 the [indiscernible] in France focused on [indiscernible ] as well as [indiscernible] with regard to alternative fuels should accelerate the reduction of our emissions. [ Auctions ] were to extent renovation you can see 2 examples on the left-hand side of this slide. [ Product ] innovation with Progresso that makes the first concrete of Switzerland with emissions of less than 100 kilograms of CO2 [attribute] better. [indiscernible] innovation [indiscernible] catch for climate which will be [indiscernible] and aim to facilitate CO2 capture while reducing the [ costs]. You can see on Slide 21 that at the group level, low-carbon cements accounted for nearly 1/4 of total sales volume in 2025. This indicator which we are presenting for the first time today is calculated in accordance with the methodology defined by the International Energy Agency and adopted by France Ciment. In France, the commercial success of [indiscernible] continues. In Switzerland nearly 100% of [indiscernible] classified as low-carbon [indiscernible] products such as Progresso which I mentioned earlier and which is also remarkable commercial success. We're also a leading player in low-carbon cement in California and Brazil. The carbon footprint of our products continues to improve in line with our climate road map. This road map is supported by initial investments and by acceleration of low-carbon innovations. Turning to Slide 22 now. Regarding VAIA of carbon capture project in France, we reached a major of a new milestone with the award of 2 subsidies at both the European and French levels. These awards demonstrate the credibility of our approach and our commitment. I remind you that the VAIA project aims to capture and sequester 1.2 million tons of CO2 per year at the Montalieu-Vercieu cement plant largest facility in France. The captured CO2 will be transported by pipeline to Fos-sur-Mer which should then be liquefied before being shipped to its storage site in the [indiscernible] at each stage I mean [indiscernible] shipping and storage. The subsidies awarded to us for this project amount to [ EUR 340 million ] combining French [indiscernible] and the European Innovation Fund grant. [indiscernible] expected to be [indiscernible] contractual agreements of as coming months. As a reminder the estimate in investment for the [indiscernible] VAIA project alone amongst to EUR 700 million [indiscernible]. [indiscernible] essential connection for the project [indiscernible] of making the final investment decision by Jan of 2027. Slide 23 illustrates[alludes] important performance [indiscernible] walking on for many years Artificial Intelligence. Which we have to bring as an [ occasional ] tool to support our businesses. Artificial Intelligence initiatives are led by Digital Factory 1817 at the year of invention of [indiscernible] cement. [indiscernible] 22 people also works for external clients. We the [indiscernible] twofold. First, at the service of industrial performance across all cement plants. Also [indiscernible] time optimizer solution [indiscernible] productivity gains in our facilities it improves quality and enhances [indiscernible] installation. This tool as already been deployed at several pilot sites [indiscernible] in Switzerland and Kalburgi in India. And we intend to accelerate its rollout. We are targeting productivity gains of at least 5% this is a near beginning. At [indiscernible] level this tool [indiscernible] capacity by around [indiscernible] this represents [indiscernible] fund additional cement position line with a very, very [ limit ] investment. [indiscernible] AI as a powerful tool for [indiscernible] there are many potential uses cases and [indiscernible] improving concrete formulations optimizing concrete and aggregate logistics [indiscernible] for sites and those of our customers and [indiscernible] our processes. Artificial Intelligence is [indiscernible]. Turning now to 2026 on Slide 24. Growth momentum is set to continue despite persistent macroeconomic and geopolitical uncertainties and foreign exchange rates are likely to remain volatile and unfavorable. In this context, we remain confident in the group's ability to continue delivering robust performance supported by its strong operational fundamentals in 2026 at this early stage of the year we [ socially ] expect slight growth in sales on a like-for-like basis, slight growth in EBITDA on a like-for-like basis and net CapEx of around EUR 290 million. [indiscernible] capital allocation in the Slide 25 [indiscernible] free cash flow generation and consistent financial [indiscernible]. This [indiscernible] built on 3 pillars. The first pillar preservation of a solid financial [indiscernible] of strong liquidity. [indiscernible] to investment we intent to maintain the figures discipline while investing consistently [indiscernible]. Finally this [indiscernible]. dividend aim to maintain an attractive description [indiscernible] earnings information. [indiscernible] investing safety [indiscernible]. attractive return to our shareholders. So let's now move naturally to the dividend on Slide 26. Based on this 2025 results I'm confident in the group's ability to keep delivering profitable growth, the Board of Directors has decided to propose to shareholders the distribution of a dividend of EUR 2 per share, which stands out for its stable and highly predictable distribution policy. I will remind you that the dividend has never been reduced in the past few years. Let us switch to Slide 27. Vicat is proceeding consistent growth trajectory as [indiscernible] 3 mid-term [indiscernible] priorities which we are confirming to first maintain an EBITDA margin of at least 20% over the [ '25, '27 ] period. [indiscernible] continue over deleveraging. Finally [indiscernible] with strong omissions to [indiscernible]. This [indiscernible] priorities under [indiscernible] growth. On Slide 28 to conclude [indiscernible] goes in coming years we'll be super [indiscernible] drivers, several of which are already underway today. First, in 6 in Senegal, as [ Hugues ] already mentioned it is a major lever of competitiveness. That we have [ material ] impact on [indiscernible] how performance in the [indiscernible]. So once it's [indiscernible] project it's confirmation to a cement and you'll get a sales already visible and it is expected to intensify supporting our activity in France over the coming years. Also in France [indiscernible] residential market is [indiscernible] to look on which was significant [indiscernible] potential in more than 30% of [indiscernible] France. The [indiscernible] is very well positioned to benefit for this upturn when it materialize. Similarly in the US residential construction is going [indiscernible] potential of [indiscernible]. Finally the [indiscernible] significant mid-term [indiscernible] potential reconstruction needs that [indiscernible] confidence in [indiscernible] mission to pursue disciplined, sustainable and value-creating growth. Operator: [Operator Instructions] The next question comes from Tom Zhang from Barclays. Tom Zhang: So 3 questions from me, if I may. The first one, you've talked about significant price hike announcements in France this year. I know it's early in the year. We don't know enough about how this will develop. But I wanted to ask in your guidance for slightly higher sales and EBITDA, what kind of realized pricing are you assuming in Europe? Would that be sort of low, mid, high single digit? Some color there would be interesting. The second question, just on the U.S. You talked about price absorbing the impact of cost inflation. Could you please elaborate a bit? Should we expect positive price cost in the U.S.? And can you differentiate between the Southeast and the West Coast? And then the last one, just on CapEx. So you guide for EUR 290 million, even though we have Senegal rolling off, which I think was about EUR 50 million of CapEx. Can you just give some color on the projects that you're now investing in that means the CapEx is fairly stable? Is that mostly growth CapEx, climate CapEx, maintenance catch-up? Guy Sidos: I will leave you Chomel. Hugues Chomel: Tom, thank you for your questions. Indeed, we -- as you know, the French market has some specific cost drivers, the evolution of electricity cost and the start of the implementation of CBAM that push us to announce high single-digit to low double-digit price increases in the market. As you mentioned in your question, it is early in the year to tell where we stand. I would say, to mid- high single digit would be a good realization probably, and that would translate in a positive price cost differential. Regarding U.S., it is even earlier in the year to give you a solid answer. We did announce price increases in both regions, substantial. But as usual, they do apply on April 1. And our ability to get them through and to have them stick will heavily depend on market context when they roll out. And that's a little bit early for me to give you a projection on that. We assumed in our guidance, I would say, a neutral price cost differential. If they would fully materialize, that would be an upside. Regarding CapEx, indeed, we did guide to EUR 290 million, a new reduction compared to last year. This has always is including about half of maintenance CapEx, still last amount regarding Senegal with the last milestones of the contract and first acceleration in decarbonization spend to secure our 2030 objectives. Tom Zhang: That's clear. Sorry, could I just follow-up just on the European pricing. So you very hopefully said for the U.S., you're assuming in the guidance a neutral price cost differential. And then you said mid or high. Hugues Chomel: You talk about France, Tom, not Europe. Tom Zhang: That was for France. Okay. So a neutral price cost differential is in your guidance for France? Hugues Chomel: Slightly positive. And I didn't mention the Europe, which has a slightly different cost base, specifically on electricity, where we do expect a positive price environment. Operator: The next question comes from Ebrahim Homani from CIC. Ebrahim Homani: I have 3, if I may. The first one is on France. In France, the operating leverage is huge. In case of a 1% increase in volume, what could be the impact on the EBITDA? My second question is on Senegal. Do you confirm that the EBITDA contribution will be higher in 2026 than it was in 2025? And my last question is on CapEx. Could you give us the part of maintenance CapEx? And what's your level of flexibility to reach your 2027 leverage targets, please. Hugues Chomel: Yes. You are right in France, we do have a high leverage -- operational leverage in cement. We as well have a large share of our activities. You will understand that this is quite sensible information. We do not disclose as is, but you can observe from the volume impact from the past years, the tremendous impact of volume fluctuation. In Senegal, indeed, as mentioned by Mr. Sidos earlier, the initial startup of the kiln was in June. It did ramp up very gradually and start to regularize a little bit in Q4. So the initial contribution comes out of Q4 only. So we do expect it to contribute more heavily and to have gradually improve both energy efficiency and alternative fuel increase. I remind you that as mentioned by Mr. Sidos during the presentation, the midterm saving objective is EUR 20 per tonne of cement sold by the facility. On CapEx, I believe I just gave the information to Tom, but indeed, we do expect about half of our CapEx to be maintenance. So roughly EUR 140 million to EUR 150 million. Operator: [Operator Instructions] Unknown Executive: We have 2 written questions from Investment Research. So first question on the guidance. With price increase in France, savings from the new king in Senegal, strong Egyptian exports and improving condition in Turkey, it seems organic EBITDA growth in those regions will be more than slides. [indiscernible] guidance suggest a sharp EBITDA drop in the U.S. and India? Or is it simply [indiscernible] earlier in the year with room to upgrade. I will hand it over to management for the answer. Guy Sidos: Yes. The answer is in the question. Everything you said there is a momentum where you said, but we are very cautious at this time of year. And guidance could be disappointed, but I would like to share a few comments guidance growth of sales and EBITDA on a like-for-like basis which is expression for cautious optimism of a positive orientation of our main markets with an acceleration in H2. In France, you see after stabilizing in H2 '25, residential market is expected to continue with soft landing with a gradual recovery from '26 onward. We'll have unforgettable base of [indiscernible] each one and municipal elections for the [indiscernible] for construction. Material or quicker recovery will constitute an upside, and we expect a positive price environment. You were talking about markets believe that [indiscernible] industry market should remain well oriented [indiscernible] Senegal will benefit from the ramp-up of 6 kiln for year and India is [indiscernible] to remain volatile in a growing market so at this time of the year, we [indiscernible] opportunities this year to be more precise [indiscernible] upend actually. Unknown Executive: Second question, how do you interpret the recent political comments in France and Germany around potentially lower CO2 prices and the ETS adjustment? What will lower CO2 price mean for your carbon capture strategy and long-term cash generation in France and Switzerland. Guy Sidos: Well, there was remorse in fact, the [ nothing ] is changing on a short-term basis and [ nothing ] is changing on a long-term basis. Things could change on a midterm basis changed in the past. And basically it could be positive for industry to decrease the rate of -- to lower the rate of free quotas decrease. It will mean we've little bit more [ means ] to fine tune of strategy as you know this we've some of this [indiscernible] to reduce it's carbon footprint [indiscernible] of equipments [indiscernible] we place [ coal ] by [ waste ]. And then [indiscernible] and these 3 levers brings money. It's a [indiscernible] then it's last deliver is CCS or CCU [indiscernible] main project as a [indiscernible] decision will be taken at the end of '27. So we have time to fine tune [indiscernible] what's happening now about [indiscernible] this I would say, a regular adjustment of the European policy. And I feel it's positive for industry if it's like [indiscernible]. Operator: The next question comes from Tom Zhang from Barclays. Tom Zhang: The first one was just a follow-up actually to that point on EU ETS. I hear what you're saying that perhaps not much is changing and this is, as you say, a regular adjustment of policy, but ultimately, the CO2 price has declined by 25% in the last month. How has not change in EUA prices affected your via CCS decision-making? And then the second question was just, could you speak a little bit about what you've seen in January and February so far, the run rate that we've had in Q1, how does that match against your pricing and volume assumptions, especially in France? Hugues Chomel: Yes, thank you for your question. For the VAIA project, first of all, it's probably first reminder, our CO2 reduction objective for 2030 are based only on the 3 first layers that Mr. Sidos, presented, the traditional levels that have their own paybacks. We have said for a long time that CCS will contribute in a second step in a longer run, notably because of weaker economic model. Indeed, if carbon price comes down, that will probably lead to review the space of those projects, but we still are fully committed that both technology will be needed to reach the 2050 ambition. It's not just a matter of time, which may create opportunities in terms of technologies as well. So that's the first point. Second point regarding current trends that's very early in the year to give you comments on where we stand on pricing. I mean, we have announced them. We are, of course, getting them through, but January is never a month you can extrapolate to the full year. So I will stay away from any comment. Operator: There are no more questions at this time. So I hand the conference back to the speakers for the closing comments. Guy Sidos: Hello ladies and gentlemen, thank you for joining us today. We look forward to seeing you at our Annual General Meeting on the 10th of April in [indiscernible], the beautiful department of [indiscernible]. Thank you very much. Thank you. Have a nice day. Bye-bye.
Operator: Good morning, everyone, and welcome to today's conference call with Portland General Electric. Today is Tuesday, February 17, 2026. This call is being recorded. [Operator Instructions] For opening remarks, I will turn the conference call over to Portland General Electric's Manager of Investor Relations, Nick White. Please go ahead, sir. Nick White: Thank you, Daniel, and good morning, everyone, and thank you for joining us today on short notice. Before we begin, I would like to remind you that we issued a press release this morning and have prepared a presentation to supplement our discussion, which we will be referencing throughout the call. The press release and slides are available on our website at investors.portlandgeneral.com. Referring to Slide 2, some of our remarks this morning will constitute forward-looking statements. We caution you that such statements involve inherent risks and uncertainties, and actual results may differ materially from our expectations. For a description of some of the factors that could cause actual results to differ materially, please refer to our press release and our most recent periodic reports on Forms 10-K and 10-Q, which are available on our website. Turning to Slide 3. Leading our discussion today are Maria Pope, President and CEO; and Joe Trpik, Senior Vice President of Finance and CFO. Following their prepared remarks, we will open the line for your questions. Now I'll turn things over to Maria. Maria Pope: Thank you, Nick. Good morning, and thank you all for joining us very early today to discuss our expansion into Washington State and the proposed acquisition of PacifiCorp's utility assets. We will begin by covering this exciting news as well as RFP results, guidance for 2026 and our 2025 financial results. I'll start with Slide 4. Earlier today, we announced a definitive agreement to acquire the Washington electric utility business from PacifiCorp for $1.9 billion. This includes select generation, transmission, distribution and other utility assets in Washington State. We are partnering with Manulife Investment Management and its affiliate, John Hancock, an insurance and investment company who will be a 49% minority partner in the Washington business. Manulife brings broad financial expertise and energy infrastructure and has owned and invested in agriculture, timberland and other businesses in both Oregon and Washington for over 2 decades. This transaction represents a key step in our strategy and complements the work that Portland General team does every day, prioritizing safe, reliable, increasingly clean electricity to serve customers at the lowest possible cost, enabling economic development and strengthening energy infrastructure across the Pacific Northwest and creating value for customers, communities and shareholders. In this time of unprecedented electricity demand, PGE's commitment to the Pacific Northwest and our excellent service and energy infrastructure will benefit Central and Southeastern Washington. Our overall portfolio will grow by approximately 18%, and the acquired operations will continue to operate as a Washington-regulated utility, serving 140,000 Washington customers. These additions bring benefits of scale and operational expertise to both Oregon and Washington service areas. We look forward to working together with the 140 dedicated employees who will continue to serve Washington customers. This transaction is forecast to be accretive in the first year, while diversifying and broadening our growth opportunities, underscoring long-term EPS and dividend growth of 5% to 7%. The acquisition will be subject to industry standard regulatory approvals, including from Washington, Oregon and other jurisdictions, which we will expect will take approximately 12 months after regulatory filings are submitted. This is a unique opportunity during a pivotal moment for our region and industry. We are excited to bring PGE's operational expertise, customer focus and reliable energy delivery to Washington. Before Joe and I go further into the details of the transaction, we will cover our 2025 earnings results, 2026 guidance and highlights from the year. Turning to Slide 6. For the full year, we reported GAAP net income of $306 million or $2.77 per diluted share and non-GAAP net income of $336 million or $3.05 per share. Our 2025 results were impacted by unprecedented warm weather in November and December as seen elsewhere across the West. We saw the warmest temperatures on record since we started recording 85 years ago. In total, this abnormal fourth quarter weather reduced earnings by $0.17. Despite these conditions, our teams worked throughout the year to execute, advancing our cost management programs, achieving multiple constructive regulatory outcomes and accelerating clean energy procurement to maximize federal tax benefits for customers. Importantly, we continue to see strong growth in our service area. Total weather-adjusted load growth was about 5%. Large customers, including high-tech manufacturers and especially data centers ramp their energy usage throughout the year, driving industrial growth of 14% compared to 2024. This combination of operating performance and strong fundamentals in our service area underpins our 2026 earnings guidance of $3.33 to $3.53 per share. We are also reaffirming our long-term earnings and dividend growth guidance of 5% to 7%. Turning to Slide 7. Our 5 strategic priorities. First, our team advanced multiple key regulatory proceedings in 2025. We received approval of the Seaside battery project and reached constructive stipulation for the distributed system plan. We are making continued progress on data center tariff updates that support residential and small business customer affordability, which I'll cover shortly. Discussions are ongoing regarding our holding company and transmission company proposals. We will be meeting with parties at settlement conferences later this week and in early March as we work towards resolution of the process around the end of June. Second, we're focused on O&M and capital cost management. In 2025, we work to realize efficiencies and improve productivity in delivering safe, reliable service at the lowest possible cost. Net of transformation costs, our teams exceeded targets for the -- and reduced PGE's overall cost structure by about $25 million. Third, as I noted, customer growth continues to accelerate in our service area. In the fourth quarter and early 2026, we executed 5 additional contracts with data center customers totaling 430 megawatts. These contracts further strengthen our pipeline of large load customers who are invested in the region, constructing facilities and energizing their operations. Our large customer group is forecast to grow energy usage by about 10% compounded annually through '23 (sic) [ '30 ] Enabling this growth is transmission capital investment and extensive work to unlock capacity through the use of AI analytics, data -- excuse me, dynamic line ratings and other grid-enhancing technologies. Alongside this work and in conjunction with Oregon's recent data center legislation, the POWER Act, our proposed large load tariff, UM 2377 is tracking towards completion in the second quarter of this year. This includes the creation of separate data center customer class, sharpening the cost allocation framework and enabling contracting flexibility. Our tariff proposal includes a 25% price increase for data center customers, which in turn would reduce residential and small business customer prices. Fourth, today, we are announcing 4 new energy projects and executed agreements. We have signed build transfer agreements to construct a combined 125-megawatt solar and 125-megawatt battery storage facility at Biglow. We also signed a build transfer agreement to construct a combined 240-megawatt solar and 125-megawatt battery facility as part of the Wheatridge Expansion project. PGE will own 175 megawatts and procure the remaining 190 megawatts via a PPA. Both projects are slated to come online by the end of 2027 and are eligible for federal investment tax credit between 30% and 40%, enabling additional clean energy at significant lower cost to customers. In addition, we are procuring 400 megawatts of battery capacity through 2 capacity storage agreements. We are also taking steps forward in the 2025 RFP and hope to have announcements later this next year. And fifth, we continue our year-round data center wildfire risk mitigation approach, hardening and modernizing the grid and reducing risk through strong operational performance. With that, I'll turn it over to Joe to cover 2025 results and 2026 guidance in more detail before we return to discuss our acquisition. Joe? Joseph Trpik: Thank you, Maria, and thank you, everyone, for joining us to hear about today's important developments. Turning to Slide 8. 2025 was another year of strong energy demand in our service area. This significant growth again was led by the diverse and growing data center and high-tech customers that Maria highlighted earlier. From 2020 to 2025, PGE's industrial customers have grown at 10% compounded annually. This same group is expected to continue at this pace through 2030, highlighting the strength of our large customer pipeline. These trends speak to the attractiveness of our service area and our team's ability to serve growing customer needs, invest in critical assets and enable benefits for the entire system. In 2025, total load increased 3.8% overall and 4.7% weather-adjusted compared to 2024. Industrial load increased 14%, residential load decreased 1.8% year-over-year but increased 0.4% weather adjusted. Residential customer count increased by 1.3% and commercial load remained largely flat. Turning to Slide 9, where I'll quickly cover year-over-year earnings drivers. Overall, our full year 2025 results reflect meaningful industrial demand growth, improved recovery of assets serving our customers, differing power cost conditions as compared to 2024, our team's strong execution of cost management programs, ongoing rate base investment and financing, other items and business transformation and optimization costs as we work towards reducing our cost structure. These drivers bring us to GAAP EPS of $2.77 per diluted share. After adjusting for business transformation and optimization expenses, we reached our 2025 non-GAAP EPS of $3.05 per diluted share. As Maria mentioned, our full year results were impacted by the unprecedented warm weather conditions in the last quarter of the year. December alone accounted for $0.14 of the $0.17 EPS impact in Q4 as it was the warmest December on record for our region with 24% fewer heating degree days than average. Turning to Slide 10 for an overview of the executed 2023 RFP projects, the Biglow Optimization and Wheatridge Expansion, which will widen our generation capabilities to meet the needs of our customers. Both projects will be in construction this year and are expected to be serving customers by the end of 2027. We are also advancing our 2025 RFP, and we'll be submitting the final shortlist to the OPUC this week. The shortlist includes a variety of renewable and non-emitting capacity projects totaling approximately 5 gigawatts. As we proceed to negotiations, we will prioritize projects that include renewable generation, close earlier in the eligibility period and maximize tax credits. We expect the final selection to be a blend of build transfer agreements and PPAs that total approximately 2,500 megawatts. On to Slide 11 for our 5-year capital forecast, which now includes 2026 and 2027 spend for the incoming RFP projects. I will note that this view does not contemplate CapEx from the Washington utility business from the transaction we announced today. On to Slide 12 for our liquidity and financing summary. Total liquidity at the end of the year was $954 million. Our investment-grade credit ratings remain unchanged. Our outlook from Moody's has improved from negative to stable. We continue to maintain strong cash flow metrics with estimated 2025 CFO to debt metrics above 19%. As we look ahead to 2026, we continue to expect a base equity need of $300 million as we work towards our authorized capital structure. Our plan considers the constructive regulatory outcomes in 2025 and continued robust operating cash flows in 2026. These factors will enable solid progress in our equity ratio and ultimately arrival at our target capital structure earlier than anticipated. As such, we expect base needs to taper to approximately $50 million in 2027. We anticipate financing the 2023 RFP projects in line with our 50-50 cap structure, net of tax credit monetization, resulting in $350 million of total equity needs in 2026 and 2027. I will note these financing expectations do not contemplate the potential holding company for investment in the Washington utility. In recent years, we've effectively utilized our at-the-market program to opportunistically fund accretive rate base investments. We continue to see value of this tool and the strategy, and we are refreshing our ATM, which we've upsized to $500 million in support of our diverse and robust CapEx plan. This facility enables issuances over multiple years and like our previous programs, will include a forward component. We also expect debt issuances throughout 2026 of up to $350 million, focused on funding our capital expenditures. Turning to Slide 13 for an overview of our 2026 guidance. Overall, our focus on managing cost structure, robust load growth and rate base investment catalysts underpin our expectations for 2026 and the years ahead, including 2026 earnings guidance of $3.33 to $3.53 per share, 2026 weather-adjusted load growth guidance of 2.5% to 3.5%, long-term load growth guidance of 3% through 2030 and reaffirming our long-term EPS and dividend growth guidance of 5% to 7%. Now let me turn it back to Maria for continued discussion on this morning's announcement. Maria Pope: Thank you, Joe. Turning to Slide 15. We will be adding 140,000 customers across 2,700 square mile service area anchored around Yakima, Walla Walla, and other Washington communities. The portfolio of generation assets in this transaction is a valuable mix of natural gas and wind resources that provide safe, reliable and affordable power. These assets will complement PGE's 1.8 gigawatts of natural gas generation over 1 gigawatt of wind assets, including PGE's Tucannon River Wind project located midway between the Marengo and Goodnoe Hills wind farms. On to Slide 16. This acquisition is a great fit. First, an excellent opportunity to expand our service to Washington State and acquire generation, transmission and distribution assets we know very well. The Washington Utility and Transportation Commission will continue regulatory oversight of the Washington utility operations. Washington's regulatory jurisdiction includes many positive components, including multiyear rate plans, competitive ROEs, constructive fuel mechanisms and frameworks for clean energy investment. We look forward to working with Washington regulators and stakeholders in enabling economic development and advancing clean energy policy goals. Second, enhanced scale and reach, and operational capabilities will position us for rate base and customer growth. Central and Southeast Washington are home to dynamic communities and industry, including agriculture, manufacturing and technology businesses that serve regional and global markets. We will have the opportunity to support economic growth in these regions and bring further investment for grid modernization and renewable energy acquisition to serve growing customer demand. Third, we anticipate meaningful customer upside. Portland General Electric brings a track record of effective operational performance, including strong plant availability, first quartile safety, commitment to wildfire and other risk mitigation, top 10 customer service and programs and first quartile reliability. The expertise of Washington employees who are deeply familiar with Washington customers and assets will be supported by PGE's administrative, finance, energy management and other system-level expertise. We also expect that the increased scale will deliver benefits from shared corporate functions, enhanced purchasing power and efficient financing for system investments. And fourth, clear shareholder value that will sustain further customer-focused investment. PGE expects EPS accretion in the first full year, while enhancing PGE's long-term EPS and dividend growth of 5% to 7%, supporting strong investment-grade credit ratings. Manulife's partnership is a key element in the acquisition's strength. They bring significant expertise in this region and in our sector. Turning to Slide 17. The broadening of our service area footprint represents an exciting moment for our company and shareholders. As I noted, our overall portfolio increases by 18%, a 22% increase in generation and transmission, a 14% increase in distribution and a 15% increase in the number of customers. This transaction fortifies our key strengths, broadens opportunities for growth and delivers benefits for all customers and communities we serve. With that, I'll turn it back to Joe. Thank you. Joseph Trpik: Thank you, Maria. As you can see from this view, PGE's acquisition of PacifiCorp's Washington operations presents a structured, executable transaction with clear advantages for our customers and stakeholders. The key upsides include additional scale, diversification into a constructive jurisdiction and enhanced capacity for system improvements to serve customers. Overall, we expect both operational synergies and incremental rate base growth opportunities. Notably, we will now step into the Washington RFP process to pursue varied ownership structures that deliver least cost, least risk options, drive towards the state's goals and support customers' energy and capacity needs. Moving to Slide 18 for a summary of the transaction structure. The acquisition is structured as a sale of certain assets serving customers in PacifiCorp's Washington service area. Due to PacifiCorp's existing structure, we expect customary regulatory approvals in each of their jurisdictions as well as from FERC. I will note that due to the asset purchase nature of the acquisition and PacifiCorp's multistate structure, we will be assuming relatively few liabilities as part of this transaction. Upon closing, which is expected 12 months after regulatory filing submission, PGE and Manulife will form a joint venture to own the regulated utility in Washington, which PGE will operate. While our ongoing corporate structure update, including the creation of a holding company and a transmission company are not prerequisites for this transaction to close, we see the holding company structure as supported by this scenario. In the coming months, we will submit regulatory filings in both Washington and Oregon for approval of the transaction. We look forward to engaging stakeholders during the approval process, and we'll provide status updates as part of our typical disclosure. Turning now to Slide 19 for our planned financing approach for the transaction. First, concurrent with the agreement signing, PGE obtained commitments for the full $1.9 billion purchase price, including bridge financing from Barclays and JPMorgan and commitments from Manulife. For our permanent financing plan, we expect to utilize a combination of $600 million equity contribution from Manulife, $700 million secured debt at the Washington utility and $600 million raised at the proposed holdco. This approach strikes the right balance across financing channels. It strengthens accretion, manages risk and supports investment-grade credit ratings, which are expected across all entities. On to Slide 20 for an overview of the Manulife Investment Management and the partnership agreement. Manulife IM and its affiliate, John Hancock, is a leading direct investor in U.S. infrastructure. Their presence in the Pacific Northwest is notable, having invested in infrastructure, agriculture and timberland in our region for over 2 decades. Beyond these important local ties, this partnership structure brings value both during the transaction window and after closing, particularly reducing overall capital markets exposure and equity needs, introduction of another cost-efficient source of capital, preservation of PGE's strong balance sheet and strong support for further investment and growth opportunities at the Washington utility. Overall, the partnership is structured as a traditional arrangement with familiar features for our sector. PGE will manage and operate the Washington business and will also be a 51% owner with Manulife owning the remaining 49%. PGE will also hold the majority of seats on the 5-person Board. Moving on to Slide 21 for our operational track record and approach to business integration that supports this acquisition. PGE has captured significant organic growth within Oregon service area over the last 2 decades, adding over 180,000 customers and expanding the generation portfolio by 2.4 gigawatts of utility-owned generation. As Maria mentioned earlier, we are excited to welcome the highly skilled Washington employees who will be an important part of the integration and go-forward operation. Our growth and ability to serve robust customer demand have been supported by the company's investment in integrated operations. These encompass several critical functions that enable low-cost access to market power, renewable energy integration and reliability. PGE has recently implemented and enhanced several technologies that enable the smooth addition of business units and are expected to help streamline the technical integration of the Washington service area. I'll also highlight the experience of our leadership team. Many of our officers bring expertise from large organizations, including multi-jurisdictional utilities and have executed many transaction integrations. We will draw upon this experience to deliver a seamless transition for our customers. Now let me turn things over to Maria to close. Maria Pope: Thank you, Joe. We've covered a lot of ground today, both what we've accomplished and what lies ahead for Portland General Electric. Let me close today's discussion on Slide 22. The strength of our existing approach and the opportunities in Washington are all rooted in PGE's 5 strategic priorities. We are deeply committed to the Pacific Northwest region and continued investment, which will expand to include assets and operations in Washington State. We remain focused on delivering safe, reliable power at the lowest possible cost, efficient and effective operations, realizing economies of scale and regulatory frameworks that support customer affordability. We are advancing critical infrastructure investments that support economic development and builds upon a base of growing data center and high-tech customers. We are integrating clean energy resources to satisfy customer and policy-driven goals, executing RFPs and reducing customer price impacts by maximizing federal tax credits. And we are deploying our mature data-driven wildfire risk mitigation programs, modernizing the grid and reducing risk through strong operational execution. We are excited for the road ahead. We are affirming our trajectory of strong financial results and look forward to delivering for customers, communities in both Oregon and Washington for years to come. And now, operator, we're ready for questions. Operator: [Operator Instructions] Our first question comes from Shar Pourreza with Wells Fargo Securities. Shahriar Pourreza: Congrats on the deal. It's definitely interesting, really good transaction here, so unexpected. So Maria, just let me ask you. So the deal is done at 1.4x, and you expect the deal to sort of be accretive in year 1. Can you just touch a bit on the accretion drivers and maybe frame the sensitivities to items like regulatory timing, financing, transaction, transition costs, et cetera, so we can kind of better understand upside, downsides around the numbers. Maria Pope: Sure. First of all, there are several key areas. The first is our permanent financing plans that we laid out today. We also are expecting our cost management plans to continue to be executed and integration of this new company will really help our cost structure. And then we will be bringing data center and other customers to the area and development. It's a great operational opportunity and fit for us as we expect first year accretion. Shahriar Pourreza: And then just on the language, Maria and Joe, around just the enhancements to the EPS growth rate. I guess, can you define maybe a little bit on what you mean by enhancement in this context? Is it sort of a step-up in the growth rate, a higher midpoint within the existing range, a lengthen and extend scenario? I guess, can you just be a little bit more specific on the accretion? Maria Pope: Sure. So we have a combination of factors that give us confidence to be squarely above the midpoint of our guidance range of 5% to 7%. Shahriar Pourreza: Big congrats... Maria Pope: Thank you. Shahriar Pourreza: On the deal. Operator: Our next question comes from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: Maybe just a few different questions here, more housekeeping than anything else. But just at the outset, how do you think about earned ROEs? What's the ability? What do you think the opportunities over time here as you think about extracting the full extent of the value from this transaction? What's the normalized ROE to think of over time? And then maybe a couple of credit ones just to chime in on here. How do you think about new metrics from the rating agencies given the diversification that this offers? How the agency is thinking about maybe some of the benefits from a wildfire diversification perspective? Yes, I'll leave it there. Joseph Trpik: Julien, as it relates to ROE, their -- from their last general rate case, they have an imputed allowed ROE of 9.5%. We do believe that over time, as we work into the organization as it relates to our cost management programs, our cost structure as well as the regulatory filings, we would expect it to perform in a -- work towards a gap similar to what we're seeing performance-wise over time here. I mean it will take a little bit of a time period as we integrate them in, but that is the expectation that we can we can work them into a relative level of efficiency to ours or a little better. As it relates to the credit metrics, we have had preliminary conversations with the rating agencies. We've been very clear with the rating agencies about our desire to have investment-grade credit ratings and quality credit metrics across the organization. We'll continue to have discussions with them as this matures, but it is fully our intent to have a structure of these organizations to have relatively high credit metrics. Julien Dumoulin-Smith: Got it. And just to come back to you real quickly here. Earned -- where have earned returns been of late? And how do you think about what that -- how long it would take to get to that 50 plus, call it, 50-ish basis points lag or wherever you're exactly pinning that down? And then if I can just quickly also clarify on the -- are there break fees in the event that you don't get approval here? I mean -- and how does this fit into the process you have underway already regarding the HoldCo Transco? Just if you can elaborate a little bit around that. Joseph Trpik: Sure. So I'll start with your earned returns. This company has a portion of the subsidiary, obviously, not a bunch out there to show in detail, but they have had -- their earned returns have been a little off mainly due to the cost recovery on the power cost side of the equation, understanding that, that power cost recovery was part of the allocated structure that they had as opposed to what we'll see as a very specific plant and contract-based cost recovery method. As it relates to break fees, yes, there are break fees that go on both sides of this transaction that we've included in some of the disclosures. There are break fees for certain reasons that the transaction does not close as if there is not FERC or regulatory approval, there are break fees that are out there as well as if the rate base that is approved by the regulator is not equal to what is -- which is agreed to within the contract. And there's a few other nuanced break fees out there, relatively symmetrical and again, all generally valued at $35 million to the extent there's a break fee. Operator: Our next question comes from Chris Ellinghaus with Siebert Williams Shank. Christopher Ellinghaus: What do you expect the filing cadence to look like? Maria Pope: We expect the filings to take place in the next 30 to 60 days. The regulatory process should take about 11 months to 12 months. Christopher Ellinghaus: With the new proposed data center tariff, can you give us any kind of metric on how that helps on the residential side as an offset? Maria Pope: Sure. Chris, the data center tariff, which you mentioned is UM 2377, and it follows the POWER Act that we put in place with parties through the legislature in 2025. We've had several passes at it. And overall, the increase in data centers, which today is about 6% of our customer load and about 4% of our peak directly benefits residential and small business customers. Initially, it's about a 2% reduction, and that should grow over time as the data centers continue to grow in the area. It also allows for direct contracting and something that we call in the filings, the Peak Growth Modifier. So we are fortunate to be able to work with parties as well as with all of our data center customers to ensure this works with everyone across the state of Oregon. And we hope to take some of our -- this kind of work around customer relationships, regulatory and economic development to the new Washington area. Christopher Ellinghaus: The $25 million cost reduction that I think Joe quoted, can you give us any kind of sense of how that sort of prorated over time to get a sense of when that's effective essentially? Joseph Trpik: Sure. So the $25 million cost savings in 2025, it was a program that started in 2025. So we expect that to grow. So when you do the run rate on that as a general rule, probably more of like use a half year convention since a lot of these cost programs were put in sort of the second to the third quarter. The key to our cost management program here is a cumulative approach. So the savings that we had in '25 that we will do two things. They will become full year savings as they come into '26 and they are permanent. And then we will be building upon those savings as we've been doing a rollout plan here as we plan to manage our costs for the next several years. So we will be introducing a new set of cost management for different portions of the organization that will do that same thing again. We'll have programs that are implemented in '26 that will have benefits in '26 that then grow to full year in '27 as we have this thoughtful rollout to drive this efficiency and be able to manage inflation over a multiyear period. To date, the program has been very successful. As we noted, we exceeded our targets. And if you normalize our O&M for 2026, we even did a little better just on not spending money in places, maybe not per se aligned to the efficiency program. But pretty excited about the execution and would say that the program for '26 is more mature than '25 because in '25, we were developing as we were going in '26 has an established plan in place already for the year. Christopher Ellinghaus: Great. That helps, Joe. Maria, lastly, can you just sort of talk about how you see the Washington acquisition aiding or providing an opportunity for additional large load growth? Maria Pope: Yes. So Eastern Washington is focused on economic development. We also hope to leverage our existing relationships. As you can see, we have quite a broad and diverse set of high-tech and data center customers, and we'll work closely with them in the area of Washington as we have throughout our service area in Oregon. Operator: Our next question comes from Anthony Crowdell with Mizuho. Anthony Crowdell: Congrats on the transaction. If I could just squeeze hopefully, 3 quick questions. If you could help us out, when I look at Slide 19, the $600 million raised at the HoldCo, is that all debt, all equity structure, like 50-50 of a utility? How should we think of that $600 million financing? Joseph Trpik: Sure. So as it relates to that $600 million, think of it as a balanced mix of the investment, be it at the HoldCo or other structure, but it will be a balanced mix of debt, equity, potentially hybrid or other securities that align to the capital structure that we'll be focused towards. Anthony Crowdell: Got it. And then you've given out an EPS CAGR of 5% to 7% for a number of years. The thought was the holding company that you're going to create was going to provide efficient financing for the Oregon utility. Now you're potentially adding in already taken some of the debt capacity based on the $600 million. Could you tell us maybe in '27 and '28, how much debt do you forecast being held at the holding company now? Joseph Trpik: So for right now, I don't want to front run the holding company regulatory approval process, which will itself potentially have stipulations. But I'll take the -- to the comment in tying this to the earnings growth trajectory that we have, be it the Washington transaction that we're talking about right now or the holding company, either both taken in a vacuum together, each one is an enhancement to that earnings growth rate. And as each of them mature here, we will continue to -- we will reevaluate how that -- do they just enhance the growth rate or do they put upward pressure on that. But we want to give them both a little time to settle. There is -- obviously, within the regulatory approval process, there could be items which impact one way or the other. And so as these items come more into clarity, we will reevaluate. But I do acknowledge that each one individually does have a level of enhancement to the earnings growth. Anthony Crowdell: And just lastly, I thought my view was like 2026 talking with investors, you guys had the holding company structure going. You had such great tailwinds with -- coming from the RFPs. It was like a transformative year for Portland now to jump into a transaction. Just the timing of why now, I guess, because I was looking at 2026 as a very transformative year for Portland on that holding company structure, more financing, you had these RFP wins. And now it's like a 12-month freeze. Maria Pope: Actually, I -- the transformational 2026 is exactly correct. I wouldn't call it a freeze at all. Joe talked about the operational work we're doing across the company. We have tremendous opportunities with regards to customer growth, and we have some RFP wins. We also continue to work with regulators on a number of topics that are constructive. And we look forward to being able to close on this transaction in mid-2027, and it gives us a unique opportunity to continue our growth trajectory. Operator: Our next question comes from Andrew Levi with Hite Hedge. Andrew Levi: Can you hear me? Maria Pope: We can. Andrew Levi: So a couple of questions. So just on the holding company, so you have settlement talks next week. Is that correct? Maria Pope: We do. We have them this week. Andrew Levi: This week... Joseph Trpik: As well as in March. These discussions will probably go on through to the summer. Andrew Levi: Okay. So I guess my question was this transaction, does this enhance the possibility of getting the holding company approved? Joseph Trpik: Yes, I mean, we believe that this transaction both supports the logic that was laid out in the holding company, but it also is the cleanest vehicle here to allow for the benefits of this transaction, which to the Oregon or to the Washington customers to be clearly identified and work through the process. I mean we just see the holding company as just a natural way to clearly make this work. It is not required. It is not a prerequisite for this transaction, but we do think that it is very clean. It makes for a very different way... Andrew Levi: That wasn't my question. My question was, does this enhance the possibility of settling your HoldCo case by having this acquisition? Joseph Trpik: Obviously, the regulators will work through the process. Do we think that this provides further validation and clarity to this? Yes. Do we believe it enhances the view of why a holding company makes sense for Portland? Yes. And we look forward to discussing these in detail at these settlement conferences. Andrew Levi: Okay. And then why -- just based on Maria's comment, why are we -- why does it bleed into the summer? Why wouldn't you be able to potentially settle next week? What's kind of the sticking points? And then I have a few other questions. Joseph Trpik: Sure. I mean, Andy, I'll just do it. As it relates to timing, there are 2 scheduled settlement conferences that are out there. And in all honesty, to Maria's comment that there are scheduled settlement conferences to the extent that we're having constructive dialogue and those settlement conferences do not yield a result, we -- there can be discussions that will continue up until once we get into the procedural part of a case and filing with an ultimate resolution required here at the end of June. I mean there's nothing to say, I mean what the sticking points in all honesty, as we've gone through on the holding company, which got a little clear in this last round of testimony are about what are the benefits for the customers. And I think this, again, back to what I said before, is just another validating point that we had a compelling case before. This does nothing more that we believe and puts more weight on the scale because this transaction is about -- also about benefits to Oregon. Andrew Levi: Okay. And then on the Hancock partnership, so how should we think about that longer term? So obviously, I understand the partnership within Washington. But you get this holding company approved. Do you envision Hancock possibly doing a similar type of investment in Oregon? And is that kind of the longer-term goal in part of this transaction and having Hancock involved? Joseph Trpik: Having a partner involved, this partner is focused on Washington. But having a partner involved to support growth while continuing to manage our balance sheet strength, our credit quality, that's really what the focus is. So the idea of the partner here is to give us an efficient form of capital, allows us to support this growth. So we will continue to evaluate our financing options and flexibility going forward. But the key to the partner here was about continuing to have the right balance sheet strength. Andrew Levi: And then just a couple of questions on the Oregon business. So on the '23 RFP, I guess, the primary -- the bigger investment is solar/batteries. Is that correct? Maria Pope: Yes. Andrew Levi: That's the $400 million and whatever million, right? So once that goes COD, right, that goes right into rates because since it's a combined asset, right? Is that right? Maria Pope: Correct, Andy. Both had... Andrew Levi: So, that's... Maria Pope: There's 2 projects. One is Wheatridge and one at Biglow, and both will use the renewable adjustment mechanism. Andrew Levi: So does that -- obviously, you got this distribution rate increase. Does this help continue to postpone a base rate increase or base -- not base rate increase, but a general rate case, I should say? Speaker. Maria Pope: So we will be evaluating where we are with the general rate case. As you may remember, we have a stay out until about mid-summer. But the last time we brought in energy, we actually had customer prices go down. And so that was the Clearwater project in Montana. On the regulatory side, we're also working through a multiyear framework, and we'll evaluate that also in conjunction with whether we do a rate case this summer. Andrew Levi: And one -- my last question is just around hyperscalers. So I guess in the handout, you talked about 430 megawatts, I think it was with incremental load, something like that, right? Is that the number? Maria Pope: Yes. Andrew Levi: There you inked in the -- was that in the quarter you inked or was that for the year? Maria Pope: So those are 5 contracts. The names of the different companies are highlighted in the deck of the materials. This is in the fourth quarter and then in the very first part of 2026. Andrew Levi: And then you have -- there's up to another 1,200 megawatts of talks going on, I guess, is that my understanding not correct or... Maria Pope: Yes. And we have people in our queue, and it's actually 1.7 gigawatts, Andy, and we have comps... Andrew Levi: 1.7 gigawatts, I'm sorry... Maria Pope: Yes, some of those are with existing customers and some of those are with new customers. Andrew Levi: So how should we think about that incremental load? Obviously, it's under the new tariff rules. How should we think about that as far as your 5% to 7% forecast and whether that's actually included or whether that gets you to the high end of your forecast or above your long-term growth rate? Maria Pope: So as I mentioned before, this supports continued growth within that 5% to 7%. And it also -- the data centers create additional margin that supports the capital investment needed to support them as well as ensures affordability for residential and small commercial businesses. Andrew Levi: Does the Washington acquisition get you -- maybe not in the first year, but as you get out to '28 and '29, also see a big step-up in CapEx in Washington, especially in the outer years, does that get you to the high end of your forecast? Maria Pope: Yes, that keeps on moving us through our forecast range, supporting accretion in the first year and underlying our growth trajectory long-term of 5% to 7%. Joseph Trpik: Andy, I'll just add to you, as I mentioned before, right, take this individually, each one of these items has enhancements within the growth trajectory. And as the dust settles a little bit here and as the HoldCo works, how Washington matures itself to approval, we will reassess what these individual enhancements mean to the long-term trajectory as there are several items that we've spoken here today that all have individually positive pressure on the upward side of our earnings guidance. Andrew Levi: And then I'm sorry, I just have one last question, and I'll let somebody else go. But if for some reason, the HoldCo doesn't get approved, should we just assume hybrids at that point? Or how should we think about it? Joseph Trpik: I do think if the HoldCo is not approved... Andrew Levi: That $600 million -- you know, the $600 million you talked about. Joseph Trpik: That's right. I mean I think we will do a -- what makes sense is a combined set of financing. We will look at -- if we don't have the HoldCo, based on what structure we have and where we finance, we will look to what are the right instruments and the right mix at that time that still allows us to realize the value that we see in this transaction. Operator: Our next question comes from Steve Fleishman with Wolfe Research. Steven Fleishman: What are the -- remind me what the approval requirements are in Oregon and Washington. Are they no harm to customers? Are they net benefits? About standards... Joseph Trpik: So in -- in Oregon is a no harm standard and think of that as both a qualitative and quantitative no harm standard with about an 11-month approval process for Oregon. In Washington, it is a net benefit standard, that same approach of qualitative and quantitative net benefits with an 11-month approval process with the ability under circumstances to get a 4-month extension. Steven Fleishman: Okay. And then just -- how did you get kind of comfortable on wildfire risk in the Washington territory? Just any color on kind of the nature of that territory and the like? Maria Pope: Sure. So as you know, we spend a lot of time on managing wildfire risk from prevention and mitigation to early detection and working closely with first responders and have as mature a process and program as any utility. PacifiCorp also has done quite a bit of work. We calibrate with them, both in Oregon as well as work with Washington regulators. They have a wildfire approved plan for years 2024 through 2027. We will pick up that plan, but also bring our expertise as well as collaboration with Washington regulators and stakeholders as we work in both states to improve the risk framework and investability of utility businesses in both states. Operator: Our next question comes from Matt Davis with North Rock. Unknown Analyst: Sorry, my questions have been asked and answered. Operator: Our next question is a follow-up from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: Sorry, coming right back here real quickly. Just want to make sure I heard you right. How are you thinking about that $600 million in equity financing at HoldCo? What are the gating factors here? How do you think about like FFO to debt from the rating agencies? What do they want to see thus far in terms of limiting parameters here? Any comments or statements, any pro forma targets that they're at least initially giving you? Any reason that you couldn't imagine doing a fully debt financed HoldCo transaction, for instance? Joseph Trpik: Julien. So a couple of things. So our discussions with the rating agencies have been preliminary, right? Our -- and our focus with them has been about investment grade across each of the utilities and the proposed holding company. To the specific financing plan at what would be the proposed holding company, there is -- we will evaluate what is the right mix. To your question of how you finance at the holding company, we don't want to front run the regulatory process, which may have certain requirements for reporting. But what we're committed to do is to effectively use the holding company to allow for what is a good financing structure for the company consistent with other utilities, but we would like to make sure we're aligned with our regulators and their approach. But the holding company, if you take it to its fundamental, just like you laid out, it should give us the flexibility for the choices for what are the right instruments for us where right now without a holding company, we do have somewhat of a limited choices as we try to manage our balance sheet, manage our credit metrics. Operator: And our final question comes from Paul Fremont with Ladenburg Thalmann & Co. Paul Fremont: Does the diversification of state regulatory risk play a role in your decision to acquire the Berkshire properties in Washington? Maria Pope: Yes. Not only are we gaining important economies of scale, but having 2 different jurisdictions to operate in is very beneficial. Paul Fremont: And then sort of following up on Andy Levi's question. Obviously, you haven't determined the mix of debt and equity. But should we look at the establishment of the holding company as potentially driving the mix? In other words, might there be less equity issued if you were granted approval to establish a holding company? Joseph Trpik: Paul, so I agree, right? The holding company itself is this variable to flexibility. So yes, there are opportunities at the holding company, if approved in the structure that you could get a differing cap structure. And all honestly, if even not for the holding company, considering what structure we'll choose, we'll have a varying amount of instruments. But we do find the holding company to be really attractive because it comes back to -- it supports the deal. It supports driving the benefits clearly to the customers, and it gives us the flexibility to have these choices like we're talking about here of choosing what are the right instruments for the situation. I mean obviously, because the holding company is a proposed item right now and not approved, we don't want to front run the process, and we just -- we will evaluate and appreciate the flexibility that we expect that it will afford us. Paul Fremont: And then after the Washington utility is acquired, would you expect to use consolidated accounting or equity accounting? Joseph Trpik: Our current expectation, obviously, we will finalize and haven't done the reporting is that based on the partnership structure and our operations that we would be consolidating the utility. Paul Fremont: Got it. And then can you tell us what was the most recent PacifiCorp Washington rate base? Maria Pope: It's $1.4 billion. Paul Fremont: And that would be as of -- is that at the end of '25, the end of '24? Maria Pope: End of 2025. Joseph Trpik: I believe you'll find that -- that rate base was included in a fuel type filing, an energy filing is where it was last presented. And I believe it's called their -- and do not ask me for to spell that, it's called their [indiscernible] They have been -- as they've disclosed, which they've talked in their release, they have been attempting to sort of restructure their multistate setup here. And this was a movement in the multistate to start to realign what assets they are serving, what parts of the -- of their set of companies, not completely, at least partially address that. Paul Fremont: And then... Operator: Last question from -- sorry. Joseph Trpik: I was just going to say we look forward to in Washington, we believe they've been pretty constructive on the regulatory front, have the opportunity for a multiyear plan and think that their mechanisms are somewhat helpful to the fuel recovery. So I just want to finish that thought. Paul Fremont: Great. And then I think in the past, you've given us sort of a sense of what percent of properties in Oregon are high risk relative to wildfire. Is there a similar percent that you can share with us in the Washington properties? Maria Pope: You know, as we move forward, we will do the same sort of disclosure that we have. Overall, it's pretty similar to Oregon, where it's actually quite low, maybe about 2% or so. It's about 20 distribution miles. Much of the area that you can see on higher fire risk maps is actually non -- not in hazard by individuals that's forest service or tribal land. Operator: This concludes the question-and-answer session. I would now like to turn it back to Maria Pope for closing remarks. Maria Pope: Thank you very much for joining us today. We remain focused on delivering efficient, effective operations, realizing economies of scale and regulatory frameworks that support customer affordability as we move forward with this exciting opportunity. We're advancing critical infrastructure investments that will support economic development, both in Oregon and in Washington and builds on a base of growing data center and high-tech customers. The Washington opportunity and acquisition of PacifiCorp's assets represent a strong operational fit. They're accretive in the first year and enhances our long-term EPS and dividend growth guidance of 5% to 7% as well as credit supportive. We look forward to moving through the process with stakeholders and regulators on a number of fronts and speaking with you next quarter and probably meeting with many of you at investor conferences in the months and weeks to come. Thank you very much for joining us. Operator: Thank you. This concludes today's conference call. Thanks for participating. You may now disconnect.
Unknown Executive: Good morning, everyone, and thank you for joining us today for MFG's interim results briefing for the 6 months to 31 December 2025. My name is Emma Pringle, and I am MFG's Head of Investor Relations and Sustainability. Before we begin, I would like to acknowledge the traditional owners of the land on which we meet, the Gadigal people of the Eora Nation, and pay my respects to Elders past and present. Turning to today's agenda. Speaking first will be CEO and Managing Director, Sophia Rahmani, who will provide an overview of MFG's first half performance, including the key achievements of the period. Dean McGuire, MFG's Chief Financial Officer, will then provide detail on the Group's interim financial results before Sophia returns to cover our investment management business and strategic partners, as well as second half priorities for the business. We will then open to Q&A from the phones and online. Today's presentation is being recorded, and a replay will be available on our website. I will now hand over to Sophia. Sophia Rahmani: Thank you, Emma, and thank you to everyone online for joining us this morning. The headline for MFG's interim result is straightforward. We have continued to execute our strategy, strengthen the diversity and quality of earnings, and maintained disciplined capital management. The first half delivered solid financial results, with operating EPS of $0.486 per share, up 5% on the prior corresponding period. MFG has declared an interim dividend of $0.395 per share, fully franked, reflecting a payout ratio of 80% of Operating Profit, in line with our newly stated policy. The dividend is up 50% on the same time last year. Our balance sheet position remains strong, with over $500 million in liquid capital as at 31 December, providing strategic optionality for the Group. MFG's earnings are becoming structurally more resilient and less dependent on a single line of business. As highlighted on this slide, over the first 6 months of the year, we have delivered increasing operating EPS. Strategic partnership income of $25.7 million, more than doubling year-on-year. And we closed the half with assets under management of $39.9 billion. This half, we returned $105 million to shareholders through dividends and our on-market buyback, with the repurchase of $38 million in shares contributing to growth in earnings per share. During the half, we also made important progress in positioning the business for long-term value creation. We successfully completed our brand refresh, which sees MFG as our parent company and Magellan Investment Partners as our outward facing distribution brand. We have recently finalized the last step in this process, being the name change of our U.S. entity. And we are pleased to now have the full breadth of our distribution business unified under a single brand. We held our next adviser -- national adviser roadshow, reaching more than 500 advisers across 5 cities and reinforcing the importance of active management in increasingly disrupted markets. We continued our product review, which has seen MFG simplify our offering where it has made sense and bring to the market contemporary products to meet evolving client needs. And we achieved strong product and client validation through ratings, mandate wins and renewals across each of our investment boutiques, with a robust institutional pipeline in play. We also continued to invest in systems and people, strengthening our leadership bench and embedding operating disciplines to support the growth of strategic partnerships. On the governance front, which remains a key enabler of our business success, we are pleased to have Peeyush Gupta AM join the Board as an Independent Non-Executive Director in November, and we completed a governance review which enhanced Board processes, committee structures, and risk frameworks. These are foundational initiatives designed to support long-term growth. Overall, the half reflects steady strategy execution, operational progress, and improving earnings quality. This slide encapsulates how we now think about MFG. I have spoken before about MFG's evolution to become a focused financial group spanning investment management and specialist financial services. Magellan investment partners is our outward facing distribution brand, bringing to the market investment solutions managed by MFG's teams: Magellan Global Equities, Magellan Global Listed Infrastructure, and Airlie Funds Management, and that of our Strategic Partner, Vinva Investment Management. Our other strategic partners, Barrenjoey and FinClear, round out the Group. This structure is deliberate. It reflects our belief that in today's environment, the strongest asset managers will be those that combine investment management capability with distribution strength, and diversify earnings across complementary, high quality financial services businesses. Supporting our whole business is an institutional grade platform spanning client service, distribution, finance, HR, operations, product, risk, compliance, legal and technology. This platform is increasingly becoming a competitive advantage both for our own investment teams and for the partners we work with. I will now hand over to Dean to cover MFG's interim financial results. Unknown Executive: Thank you, Sophia, and good morning, everyone. I will turn to Slide 9, which shows the details on our financial results for the half. Operating profit was flat for the period, primarily driven by strong growth from our strategic partners being offset by lower investment management revenue. Distributions from fund investments grew 14% over the period, with interest revenue falling as a result of capital deployment into the buyback. On a per share basis, operating profit is up 5%, inclusive of the accretive impact of the buyback throughout the year. Statutory profit is down 27% on the prior period, primarily reflecting mark to market movements on fund investments. Moving now to Slide 10, our investment management result. Management fees were down 8% as a result of a 13% reduction in the average fee rate, partially offset by a 6% increase in average AUM. Base management fees averaged 55 basis points over the period, down 8 basis points on first half 2025. The reduction in the level of base management fees is primarily a consequence of compositional changes in our AUM, with outflows in higher margin products in Global Equities. Our average run rate management fee at 30 June is 54 basis points. Sub-advisory fees were $4.8 million for the half across the $2.2 billion in AUM within the Vinva funds on Magellan's platform. Turning now to Slide 11 on our partnerships and fund investments result. Our strategic partnerships continued to deliver strong growth in the period, with MFG's share of profit up 109% to $25.7 million, comprising 31% of operating profit for the half. Barrenjoey delivered growth across all business lines, with revenue up 45% on the prior corresponding period, driving significant profit growth. We received a fully franked dividend from Barrenjoey of $8 million during the half, double the level of the prior year. The Vinva business continues to deliver, with excellent investment performance and business outcomes. MFG's share of income grew over the period, with increases in AUM over the last 12 months driving an increase in base management fees. Vinva paid a fully franked dividend of $9.8 million during the period. Fund investment income grew 14% over the period, with cash distributions of taxable gains remaining at elevated levels within a number of underlying funds. This line will continue to be volatile. Moving to Slide 12. This half represents the first period of operation of the revised dividend policy announced in August 2025. The Group has declared a fully franked interim dividend of $0.395 per share, representing a payout of 80% of operating profit. The buyback continued to be active during the half, with $38.4 million of shares repurchased utilizing cash reserves. The buyback program remains on foot, with liquid capital of approximately $500 million providing strategic optionality for the Group. We continue to carefully assess uses of capital to grow and diversify the business, consistent with our strategy and the aim of creating long-term shareholder value. Thank you. I will now hand back to Sophia. Sophia Rahmani: Thank you, Dean. I will now turn to investment management and discuss AUM, flows, performance, and how we are positioning the business. Starting with assets under management. As at 31 December 2025, our AUM was $39.9 billion, representing net growth of 3.4% year-on-year and roughly flat since 30 June 2025. The underlying drivers are important. We saw positive institutional flows into Airlie Australian Equities and Global Listed Infrastructure, as well as retail inflows into MFG's Vinva Systematic Equity funds. These inflows were partially offset by continued outflows in Global Equities, particularly from retail channels. Our clients remain diversified across region and channel, with the balanced mix supporting greater earnings stability over time. This next slide shows indexed AUM growth by strategy over the last 2 years. Airlie Australian Equity and Vinva equity funds have experienced steady AUM growth due to positive net flows. Global Listed Infrastructure AUM has remained largely flat, as limited retail outflows were offset by offshore institutional wins during the first half of '26. Global Equities has remained in net outflow over the past 2 years. However, institutional outflows have materially reduced, averaging $100 million per quarter since the last quarter of FY '24, with retail outflows having stabilized at an average of $500 million per quarter since that period, excluding the MGF conversion in early FY '25. As you can see on the chart, inflows have increasingly been directed towards lower margin strategies, which has been a key contributor to the margin compression Dean spoke to earlier. Across our investment teams, fund performance was mixed. Our newer solutions, which are increasingly aligned to current client demand and include the Magellan Global Opportunities Fund and the Vinva Systematic funds, have delivered strong performance and remain top quartile since their respective inception dates. That said, we recognize that performance is not where we would like it to be elsewhere across our product set, and this remains a key priority for our teams. The Magellan Global Fund, which is designed to deliver 9% per annum net of fees through a cycle of 5 to 7 years while reducing the risk of permanent capital loss, has achieved these objectives since inception and across longer term time frames. However, over the last year, this low volatility, quality focused investment philosophy has seen the fund lag behind the MSCI World Index in a market that has been heavily driven by growth and momentum. Importantly, many of our holdings have continued to demonstrate strong fundamentals and improving earnings expectations despite weaker share price performance, and we remain confident in the long-term evidence supporting quality investing. Our portfolio managers remain disciplined and continue to manage the fund in line with our investment philosophy, rather than chasing short-term market momentum. In Global Listed Infrastructure, returns in the first half were supported by strong demand for high quality defensive assets amid ongoing policy uncertainty, geopolitical risk, and moderating real interest rates, which provided a tailwind for longer duration infrastructure assets. While 6-month performance was modestly behind the benchmark, both strategies remain ahead on a gross basis over 12 months and continue to align with our long-term objective of CPI plus 5%. Importantly, we retained a major sovereign wealth mandate during the half and expanded another large institutional relationship, with both strategies maintaining strong research house support. In Australian Equities, where the market environment has been marked by elevated volatility, Airlie's performance has been impacted by an underweight allocation to lower quality, highly leveraged companies and resource stocks, particularly gold. This is to be expected given Airlie's long-term focus on quality and valuation discipline, which is well understood by clients. The experienced team led by Matt Williams and Emma Fisher has recently been strengthened with the addition of experienced investors in Ray David and David Meehan, and remains committed to its proven investment process. This next slide captures a critical point: the quality and reach of our distribution capability is one of MFG's core strengths. Magellan investment partners provides the scale and expertise to meet client needs in a world of evolving market dynamics. We have deep global relationships and a trusted experienced distribution team. We believe this platform is a real differentiator, and it is increasingly valuable in supporting both organic growth and strategic partnerships. We have continued to invest in the platform over the half, with new appointments supporting clients and relationships in Australia and Asia Pacific, and have been rewarded with a strong client response. Momentum has been particularly pleasing in the U.S., where the team has secured new institutional wins for our Global Listed Infrastructure strategy. I will now turn to our strategic partnerships, which have become an increasingly important driver of earnings diversification and long-term value creation. Barrenjoey. Barrenjoey has maintained its strong momentum to cement its place as one of Australia's highest quality financial services franchises. It is now 5 years old, employs around 450 staff across 5 offices, including Abu Dhabi and Hong Kong, and has market leading franchises across corporate advisory, equities, fixed income, and private capital. For the half, Barrenjoey more than doubled its NPAT to $54 million, with revenue up 45% to $295.3 million and strong growth across every business line. We continue to view Barrenjoey as a high-quality strategic holding, with meaningful long-term optionality and strong operating leverage as the business continues to mature. Our partnership with Vinva, a high performing systematic equities investor with a long heritage and a strong performance track record, is now 18 months old and gaining real traction in the market. The 4 Vinva funds offered by MFG are each now approved on at least one key ratings house, in place across all major platforms, and we are seeing increased support and adoption from asset consultants and dealer groups. We closed the half with $2.2 billion in AUM across these funds and strong momentum, now that key building blocks are in place. We have been pleased to see the partnership's mutual value reinforced with additional institutional mandates jointly secured for Vinva, including a second CFS mandate and a new overseas client for a Global Equity mandate, won in December and funded last week. This is in addition to the strong growth we have seen in the first CFS mandate. Importantly, this progress represents only one component of Vinva's broader growth trajectory, with total AUM having more than doubled since the strategic partnership was established, driven primarily by growth in Vinva's Global Equities strategy and strong traction across a diversified client base. This is an excellent example of our distribution strength combining with Vinva's unique investment capability to increase access to markets and clients, and an indicator of the partnership model we are looking to replicate over time. FinClear continues to improve underlying financial performance as the business gathers momentum and market share across its core businesses. Revenue increased 20% year-on-year, supported by growth in trade execution, FX revenues, and the FCX platform. Its cash and FX platform is now fully operational, and FCX is ramping up following its launch, including its first major transaction during the half. FinClear remains a strategic investment for MFG, with improving fundamentals and meaningful long-term potential as private market transaction infrastructure evolves. I will now conclude with a review of progress and our priorities for the second half. First, the review. In first half '26, we made progress across each of our strategic priorities. We strengthened our distribution platform with a unified global brand and senior hires and saw validation in the form of client wins and the strong pipeline that is building. We have continued to evolve and focus our product set in-line with client needs and maintained momentum in our newer funds, with investment performance, ratings, and platform approval supporting new client flows. Our strategic partnerships contributed strongly to earnings during the half, more than doubling on the prior period, reflecting strong momentum at both Barrenjoey and Vinva. This is exactly the earnings diversification we outlined when articulating our strategy to evolve into a broader financial services group. The partnership model is delivering both capability expansion and more resilient earnings. Our people are what sets us apart, and we have continued to focus on embedding a high performing culture. This quality of our teams was evident early this year with MFG's inaugural innovation month, an internal initiative that saw teams from across the business come together to ideate on ways to meaningfully improve how we serve clients, operate our business, and build for the future. MFG has always been known for its innovation, and continued innovation is critical to our long-term success, especially in the face of ever evolving markets and an increasingly competitive landscape. We were delighted with the energy and innovative thinking at play and look forward to progressing several of the submissions to the next phase. We have also continued to invest in systems and leadership capability to support a scalable operating model and maintain strength of governance during the period, including enhancements to our risk management framework, board processes, and committee structures. Importantly, these are not short-term initiatives. They are building blocks for long-term value creation which will support MFG in our next phase of growth. Looking ahead to the second half of the year, our strategy and priorities remain clear and consistent. First, we will further utilize and strengthen our global distribution platform to win new clients and deepen existing relationships, while keeping long-term investment performance at the center of our focus. Second, we will broaden our client offering through a combination of strategic partnerships and organic capability development, ensuring our solutions remain aligned with evolving market demand. Third, we will continue to actively assess strategic partnership opportunities across investment management and complementary financial services. Fourth, we will continue to cultivate a high-performance culture to attract and retain talent and align our people around delivering consistently strong outcomes for clients and shareholders. And finally, we will remain focused on ensuring we have strong operating core to support efficiency and excellence across our business. To close, the first half results reflect continued strategic progress and strengthening earnings quality. Despite ongoing headwinds across active management, we have delivered earnings growth per share, stable AUM, increased strategic partnership contributions, disciplined cost management, and a strong capital return to shareholders. We remain cash generative, capital disciplined and well positioned to continue executing our strategy and creating long-term value. Dean and I will now be happy to take your questions. Thank you very much. Unknown Executive: Thank you, Sophia and Dean. We will now move to questions. [Operator Instructions] But we might first move to any questions from the phone lines. Operator, over to you. Operator: The first question comes from Julian Braganza at Goldman Sachs. Julian Braganza: Just the first question on expense growth. Looks like first half '26 was quite positive, with only 1% growth over the half. Just maybe how you are thinking about expenses over the second half and into the medium-term just given some of the investments that you are flagging on the expense side, and in particular the second half. Unknown Executive: Yes, thank you for the question. The expense growth in the first half reflects our ongoing focus on operational efficiency. And so I think that is a focus for the group that will continue both in the second half but also into the medium-term. In relation to the view on the full year, we had previously stated that expenses would grow at or about the level of inflation. I think we will do better than that across the full year. I do expect there to be growth in expenses in the second half as we look to invest in technology and other areas to improve the efficiency and the effectiveness of our business. But overall, we are looking to balance those investments with operational efficiency opportunities in the balance of the business. So overall, no change to the medium-term outlook. Julian Braganza: Okay. Got it. And that is super clear. And then just in terms of fee margin for the business, just interested in expectations from here. Exit around 54 basis points, average over the period 55 basis points, suggests that a level of bottoming out given the deterioration we saw half -- over the half. Just be interested in how you are seeing that play out. Or alternatively, where are we bottoming out on that fee margin line? Unknown Executive: The trend in the fee margin is largely a consequence of the increase in the institutional component of the AUM. We are now 60% institutional, 40% retail. And so depending upon the relative flows over the next 12 to 18 months, that will determine where that average fee rate ends. Clearly, we are still very focused on growing in the retail market, and that's a key strategic objective of the business, but in terms of where that fee rate goes, it will be primarily driven by the compositional elements. Julian Braganza: Okay. But just to be clear, was it stabilizing towards the end of the period, just given the average and the exit are quite closely aligned? Is there a little bit of stabilization there, or? Unknown Executive: So it was a fairly linear trend over the period. So 54 at period end, we did have the conversion of the high conviction fund to Global Ops during the period, which is the kind of the 2 bips drop we note in the in the pricing. That won't repeat going forward. But throughout the period, the run rate was fairly linear. Julian Braganza: Okay. Got it. That is good. Just the last question for me in terms of Barrenjoey. Obviously very strong revenue growth, very strong NPAT growth. Just how should we be thinking about this from here? Any one-offs that sort of normalizing in the second half, or is this sort of a continued level of underlying trends that we should be expecting? Just some color around that. Unknown Executive: Sure. Barrenjoey is now quite a diversified business both within its business lines and across them. So our view is that, even with a strong result in the first half, we think the outlook there is quite positive. So we're not seeing an outlook where we will get an enormous skew between different periods. Given the nature of that business though, there is always timing elements that are at play in relation to transactions. But overall, we think the outlook for that business is quite positive. Operator: The next question is from Elizabeth Miliatis from Macquarie. Elizabeth Miliatis: First one just on Barrenjoey, just to circle back on that. I think we at 100%, we generated $54 million profit for the half. Last full year was $59 million, so you have almost doubled the run rate of previous halves. I mean, how do we think about this going forward to sort of circling back on it, because it is really difficult to forecast this given the lack of disclosures? Unknown Executive: One of the dynamics we see now at play in Barrenjoey is the increasing contribution of -- from the operating leverage of the business. So in the investments in that business over the last 5 years to get it to this point have now resulted in a revenue growth, we talked about 45% for this period, but driving over a doubling of net profit. And so we see that being a key enabler of profit growth for that business as we go forward. The different business lines are all contributing positively. So each of those have growth opportunities. That management team is very focused on growing that business, and we are a very supportive shareholder. But in particular, the growth in this period has been aided by that historical investment now really yielding returns from an operating leverage perspective. Elizabeth Miliatis: Okay. And was there anything -- any sort of big one-offs supporting the result, or is this just more BAU strength? Unknown Executive: Given the nature of the business there is always elements that are specific to a particular period. What I would call out is that we are seeing the diversity of that business, the maturation of each of those business lines, meaning that as we look between periods, there's more natural offsets and complementarity between those businesses. And so we are seeing a far more resilient earnings profile as we go forward. Elizabeth Miliatis: Okay. Got it. And then just on Vinva, I am not sure that you have disclosed the FUM at the total business level anywhere. Are you able to give us that number at 31 December and then maybe where we're at the moment? Sophia Rahmani: Sure, Liz, and thank you for your questions. Vinva closed the period with around $43 billion under management. They have had some subsequent inflows already this half and continue to have a strong pipeline. Definitely from an institutional perspective, which they look after as a business and they've done really well there, but we have also on the retail fund side had some wins and have a decent looking pipeline there as well. Elizabeth Miliatis: Yes. Okay, got it. And maybe just final one, and then I will go back to the end of the queue. Just given the significance that the associates are now as a sort of part of the business, so 31% of earnings this half. Are you perhaps starting to rethink about the levels of disclosures there? Obviously you are -- they are just associates, but it is just challenging to forecast these without too much color and it seeming to have a big swing factor to the results going forward. Unknown Executive: Yes, thank you for the question. It is something we're focused on, and we continue to work with our partners on how we can give more disclosure and more color to the market on the businesses. So we take that feedback and we appreciate it. It is a growth component of the business, and as we get to the full year, we will be reviewing what levels of disclosure we can give. Noting, of course, that these are private businesses, founder led, and that is part of the strategy, but we acknowledge the feedback and the perspective. Operator: There are no further questions from the phone at this time. Unknown Executive: Thank you, operator. We will move to questions submitted via the webcast. The first question is: Given the volatility in the performance of active managers in Australia, would you look to diversify your domestic product offering in areas such as fixed income, where there will be a growing need for yield focused products as hybrids roll off? Sophia Rahmani: Thank you for the question. We, absolutely, are looking to continue to diversify our product offering, both for domestic clients as well as our offshore clients. A core plank to the strategy, and hopefully you can see that strategy in action with the early success and momentum we have built around our partnership with Vinva. Would we look specifically at fixed income in Australia? Absolutely we have, and we continue to be open minded about how we diversify our business, definitely with a focus on client needs and how we can solution for our clients and be very relevant to them, in this evolving market and as things change, so we definitely are focused on all of that. Unknown Executive: The next question is: How actively are you reviewing strategic partnership opportunities? Do you expect to announce any new strategic partnership opportunities in H2 '26? Sophia Rahmani: Thank you for that question. I would say we are very actively reviewing strategic partnership opportunities. Again, consistent with our strategy, we are fortunate enough to have the capital on our balance sheet to have that optionality, so yes, we do dedicate time to that. We have initially certainly through calendar year last year, been very focused on doing a very good job of embedding the partnership with Vinva. But as the year ticked on, we did certainly progress a couple more discussions with strategic partnerships and have a couple of live discussions right now. I certainly can't make any commitments on when they will be announced, and certainly what gets to that point where we do announce a transaction and enter into a partnership, but I can say we continue to stick to our strategy, and again, this result shows the benefits of that for our shareholders. Unknown Executive: The next question online is: There appears to be a high realization on profits in fund investments while the unrealized loss part is carried away. How should we think about this trend on realization of profits going forward as it appears at some point this would need to converge? Unknown Executive: Thank you. In relation to the profits that sit within the operating profit line, they are not necessarily realized gains on sale; they are distributions from our fund investments. They are cash backed and they go to all investors, including MFG. What I would say though is, is that line continues to be elevated versus historical levels, and that is a consequence of the taxable gain position in the underlying portfolios. That element will be volatile period to period as we have called out. In relation to the unrealized loss in the statutory result, we focus primarily on the long-term performance of those investments, and the total returns over time have been quite positive. In this period, the total return was about $6 million and net of the distributions, with the unrealized component being just unit price movement over the the half. Unknown Executive: The next question is: Is there a medium-term plan with Barrenjoey to list or otherwise realize the value of the investment? At some point will the employees want a way to realize the value of their share of ownership? Sophia Rahmani: Thank you for the question. Look, I mean, I think with the Barrenjoey success that we are seeing, I am sure that there is a lot of happy shareholders like ourselves in the success that we are seeing in that business. Probably much of this is a matter for the Barrenjoey management team, and they will be discussing that internally on employees, but we still do have a long time to run with those employee share plans, and certainly as a shareholder in the Barrenjoey business, like we are in the Vinva business, we are incredibly pleased with the performance of those underlying businesses. Unknown Executive: The next question online is: How is the search for a new Global Head of Equities going? Sophia Rahmani: Thank you for that question. I will say we don't actually have an open search for a new Head of Global Equities underway. As we have talked about in other forums with Arvid's departure, we were very pleased to have the strong bench strength with Al Pullen and Casey McLean there already co-PMs of the global fund and ready to step in as interim co-heads of that business. So for now, we are very pleased with how that has gone, and we continue to monitor overall resourcing of that team. Unknown Executive: The next question online. Across the underlying businesses, performance fees have declined substantially over 1H '26 versus 1H '27. I think that should be 1H '25 versus 1H '26. Has this contributed to any loss of morale across analysts and portfolio managers behind these products? Sophia Rahmani: Thank you. I am happy to answer that question. I would say if we look at the last the 12 months prior to this period, we had performance fees coming from our High Conviction Fund predominantly, and then the second period we had performance fees coming from our Infrastructure Funds. As part of the changes we made to High Conviction in August last year, we removed the performance fees as we converted that strategy to the Global Opportunities strategy; we completely changed the fee structure for that. I would say that is a great example which was very well received by the Global Equity team and the distribution team to have, a 75 basis point flat fee in the market which hopefully is well received by our clients as well, and again we are seeing some early attraction to that. So I would say from a -- any kind of loss of morale from a performance fee perspective, which I don't think we saw, has actually been offset by us seeing a contemporary product with a strong performance like Global Opportunities with some sharp pricing made available to our clients. Unknown Executive: Can you explain what sort of investments in AI you are looking to make? How do you see this investment improving the overall MFG business? Is this expected to drive a material increase in expense growth? Unknown Executive: Thank you for the question. Our investments in AI are in 2 primary areas. The first is in relation to our investment teams and putting into production tools which improve the effectiveness of the investment process and the capabilities of the research function. And that goal is primarily aimed at improving performance, also being able to expand the universe in which the team covers and to be able to be more efficient in the way in which they allocate their time and energy. On the second element, we are looking at operational efficiency and productivity improvements across the entire business. And those will be ongoing over the remainder of this year and into next year as well. And those will be primarily in the areas of productivity, both in back of house but also in client reporting and client experience. From an expense perspective, we are focused on funding that from our existing cost base. So as I have mentioned previously, I don't expect that to drive an increase in expense growth at the group. It is an -- a reallocation of our resources and our energy towards those areas. Unknown Executive: There are no more questions online. Operator, can we check if there are any more questions on the phone, please? Operator: [Operator Instructions] There are no questions from the phone at this time. Unknown Executive: Thank you. Given there are no more questions, that will be the conclusion of today's interim results update. Thank you all for joining us.
Operator: Good afternoon. My name is Alexandra, and I will be your conference operator today. At this time, I would like to welcome everyone to Halozyme's Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. [Operator Instructions] Please note this event is being recorded. I will now turn the call over to Tram Bui, Halozyme's Vice President of Investor Relations and Corporate Communications. Tram Bui: Thank you, operator. Good afternoon, and welcome to our fourth quarter and full year 2025 financial and operating results conference call. In addition to the press release issued today after the market close, you can find a supplementary slide presentation that will be referenced during today's call in the Investor Relations section of our website. Leading the call will be Dr. Helen Torley, Halozyme's President and Chief Executive Officer, who will provide an update on our business; and Nicole LaBrosse, our Chief Financial Officer, will review our financial results as well as our outlook. On today's call, we will be making forward-looking statements as outlined on Slide 2. I would also refer you to our SEC filings for a full list of risks and uncertainties. During the call, both GAAP and non-GAAP financial measures will be discussed. Certain non-GAAP or adjusted financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and slide presentation. I will now turn the call over to Dr. Helen Torley. Helen Torley: Thank you, Tram, and good afternoon, everyone. As I look back in the past year, it is clear that 2025 was one of the most significant and value-creating years in Halozyme's history. We showcased our ability to execute across every dimension, strategically, operationally and financially. This level of execution has created a clear value inflection for Halozyme, unlocking multiple drivers of long-term durable and profitable revenue. I'm incredibly energized by the pace of progress and excited with the opportunities that are ahead of us. And today, I'm pleased to welcome Chris Wahl, our Chief Scientific Officer, to the call. Chris will be reviewing the new potential opportunity that is emerging on the uses of ENHANZE with antibody drug conjugates. Let me begin with the corporate highlights from the fourth quarter, beginning on Slide 3. As you can see, it was a busy and successful fourth quarter. We expanded our portfolio from 2 to 4 subcutaneous drug delivery technologies with 2 acquisitions. The first being Elektrofi's Hypercon technology and the second being Surf Bio's hyperconcentration technology, both with long-duration IP into the mid-2040s. These acquisitions significantly broaden our drug delivery capabilities and meaningfully expand our opportunities to collaborate across a wide range of targets, modalities and therapeutic areas, both exclusively and nonexclusively. Together, ENHANZE our auto-injectors, Hypercon and Surf Bio position Halozyme as the one-stop shop for the biopharma industry for subcutaneous drug delivery. In the fourth quarter and more recently, our partners also continue to add and advance their ENHANZE subcutaneous new approvals, expanding our near- and long-term royalty opportunity. DARZALEX FASPRO was approved in the United States for smoldering multiple myeloma. In addition, Johnson & Johnson recently announced another approval for newly diagnosed multiple myeloma patients, marking the fifth indication for newly diagnosed patients and the 12th indication overall. Johnson & Johnson's RYBREVANT subcutaneous with ENHANZE achieved regulatory approvals in the U.S., Japan and China. This resulted in there now being 10 ENHANZE-enabled global blockbuster opportunities. Roche nominated 1 new ENHANZE target, which sustains a steady cadence of target additions from our current partners, argenx expanded its ARGX-121 Phase I study with ENHANZE, representing another example of partners moving earlier-stage assets into subcutaneous development. And importantly, in the final month of the year, we signed 3 new ENHANZE collaboration and licensing agreements, further expanding our reach beyond oncology into obesity and inflammatory bowel disease with clinical planning already underway for all 3 products. We were also pleased to have signed a commercial licensing and supply agreement with Viatris for our small volume auto-injector. And we continue to make progress with the 2 auto-injector development agreements we signed in 2025 with current partners. Our achievements throughout 2025 supported another year of strong financial performance as we delivered total revenue growth of 38%, reaching a record $1.4 billion, including royalty revenue increasing 52% to $868 million for the full year 2025. The increase in our royalty revenue reflects the continued strength of our ENHANZE-enabled products and in particular, DARZALEX subcutaneous, PHESGO and VYVGART Hytrulo. Moving to Slide 4, I'll provide some performance details for these products. Let me begin with DARZALEX subcutaneous, which continues to be a standout example of how ENHANZE enables sustained blockbuster performance. Johnson & Johnson reported total DARZALEX sales grew 22% operationally in 2025, reaching $14.4 billion for the year. This makes DARZALEX not only the largest medicine in their pharmaceutical portfolio but also reinforces its role as a foundational gold standard therapy in multiple myeloma. This performance resulted in $483 million in royalty revenues to Halozyme, representing 29% year-over-year growth. And looking ahead, DARZALEX is expected to continue this strong trajectory with sales projected to exceed $18 billion in 2028. This continued strong growth will be driven by DARZALEX subcutaneous with ENHANZE, which today represents 97% share of sales in the United States. I'll move now to PHESGO. PHESGO also delivered meaningful growth for Roche in 2025, increasing 48% year-over-year to CHF 2.4 billion or approximately USD 3 billion, reflecting its position as a durable global blockbuster. This resulted in $105.6 million in royalty revenue to Halozyme, representing 51% year-over-year growth. Analysts project that PHESGO will reach $3.6 billion in 2028. As Roche's #1 growth driver for the fourth quarter in a row, PHESGO conversion from IV Perjeta increased to 54% in the quarter, and Roche increased its global conversion goal to 60% after surpassing their initial 50% target. Key milestones in 2025 included continued geographic expansion and important reimbursement progress, most notably in large international markets, driving further conversion to subcutaneous PHESGO with ENHANZE. Moving now to VYVGART. VYVGART and VYVGART Hytrulo with ENHANZE grew 90% year-over-year to $4.15 billion. This performance resulted in royalty revenues of $157.2 million for Halozyme, representing 444% year-over-year growth. Throughout the year, adoption and use of VYVGART Hytrulo with ENHANZE for gMG and CIDP patients continued to expand. The launch and uptake of the prefilled syringe for both indications with ENHANZE represented a major milestone, enabling both at-home and in-clinic administration, argenx has commented that the prefilled syringe has expanded the prescriber base, increased patient reach and accelerated adoption earlier in the treatment paradigm. And this is really just the beginning for VYVGART Hytrulo with multiple studies exploring expanded and new indications supporting the long-term growth of this important blockbuster product. Let me now move to our most recently launched products, which include subcutaneous formulations of OCREVUS, OPDIVO, RYBREVANT and TECENTRIQ with ENHANZE. Each of these products represents blockbuster opportunity for subcutaneous use, collectively representing an approximately $30 billion total IV and subcu opportunity in 2028 based on analyst estimates. Some recent exciting highlights that have been reported by our partners include Roche reporting that there are now 17,500 patients on OCREVUS ZUNOVO, the subcutaneous formulation with ENHANZE, a 5,000 patient increase from the third quarter. Importantly, 50% of patients in the U.S. and many other early launch countries are naive to OCREVUS, emphasizing that ZUNOVO is expanding the addressable market through enabling use in community practices. This is demonstrating that ZUNOVO can help overcome intravenous infusion capacity constraints, allowing more access to treatment. Roche recently increased sales expectations for the OCREVUS franchise to CHF 9 billion or approximately USD 11.5 billion. Moving now to OPDIVO Qvantig. BMS reported $133 million in sales of the subcutaneous product with ENHANZE in the fourth quarter, noting continued growth and accounts adopting Qvantig following issuance of the permanent J-code in July of 2025. BMS noted that uses across tumor types and in both monotherapy and combination settings, further adding that they are on track to achieve their target 30% to 40% conversion by their loss of exclusivity, which many project will be in 2028. And during the fourth quarter of 2025, Johnson & Johnson's RYBREVANT subcutaneous with ENHANZE achieved regulatory approvals in the U.S., Japan and China. RYBREVANT subcutaneous offers a strong value proposition with meaningfully shorter administration time and a significantly lower rate of infusion-related reactions. Johnson & Johnson has commented that this subcutaneous is key to achieving their multibillion-dollar opportunity they project that RYBREVANT will become. All of these products are benefiting from the same ENHANZE-driven advantages that patients, health care providers and our partners have come to expect from our pioneering technology. This includes shorter administration times, reduced treatment burden and improved site of care flexibility. It is these factors that are driving and forces for continued strong adoption and conversion over time. With those 2025 operational highlights, let me now hand the call over to Nicole, who will review our strong 2025 financial performance, following which we will discuss the key drivers of 2026 and beyond revenue and our 2026 guidance. Nicole? Nicole LaBrosse: Thank you, Helen. Let me start on Slide 5. 2025 marked a year of disciplined execution and financial strength for Halozyme, highlighted by robust top line growth, solid profitability and a strengthened balance sheet that positions us firmly to advance our long-term strategy. I'll begin with the full year 2025 results. Total revenue grew 38% to $1.4 billion, reflecting sustained ENHANZE momentum. The principal growth drivers continue to be our royalty stream. Total royalty revenue increased 52% to $867.8 million, driven by continued uptake of ENHANZE-enabled products, most notably DARZALEX SC, VYVGART Hytrulo and PHESGO. Product sales also contributed to the year-over-year total revenue growth. Cost of sales was $228.8 million compared to $159.4 million in 2024, primarily reflecting higher product volumes. Amortization of intangibles was $76.7 million, up from $71 million in 2024 due to the Elektrofi acquisition completed in November. R&D expense was $81.5 million compared to $79 million in 2024, reflecting the stub portion related to the Elektrofi acquisition, partially offset by lower compensation from resource optimization and the timing of planned enhanced investments, especially as we advanced our high yield rHuPH20 manufacturing process. SG&A was $207.1 million compared to $154.3 million in 2024. with the increase driven by litigation expenses, consulting and professional services and transaction-related costs for Elektrofi and Surf Bio as well as higher compensation due to annual merit increases. Net income for the full year was $316.9 million, which includes $285 million of acquired IPR&D expense related to the Surf Bio acquisition recognized in the fourth quarter. This compares with $444.1 million reported in 2024. Adjusted EBITDA was $657.6 million, also including the impact of $285 million for acquired IPR&D expense. This compares with $632.2 million in 2024. GAAP diluted EPS was $2.50 (sic) [ $2.56 ] compared with $3.43 in 2024, and non-GAAP diluted EPS was $4.15 compared with $4.23 in 2024. Both 2025 GAAP and non-GAAP diluted EPS included the unfavorable impact of approximately $2.30 per share from the Surf Bio acquired IPR&D expense. Absent the IPR&D charge, our business continued to strengthen in the year, yielding a $2.22 non-GAAP EPS improvement over 2024, representing 52% growth, exceeding our revenue growth of 38%. I'll just briefly highlight our strong fourth quarter results. Total revenue increased 52% to $451.8 million, with royalty revenue contributing $258 million, representing a 51% year-over-year increase. Also seen here are the fourth quarter bottom line results, which were also impacted by the acquired IPR&D charge of $285 million. Moving to our balance sheet. In 2025, we meaningfully enhanced our capital structure. We issued $750 million of 2031 and $750 million of 2032 convertible notes used a portion of proceeds to repurchase portions of our 2027 and 2028 notes and upsized our revolving credit facility to $750 million. Actions that extended maturities, reduced near-term refinancing risk, increased liquidity and improved strategic flexibility. Our asset-light model continues to generate significant cash, and we ended the year at 2.1x net debt to EBITDA as calculated per our credit agreement, which excludes acquired IPR&D, even after acquiring 2 long-duration IP subcutaneous delivery technologies. We expect to de-lever to below 1x by the end of 2026. I'll now turn the call back over to Helen to walk through how we are converting this financial strength into durable long-term revenue. Helen Torley: Thank you, Nicole. Let's move now to Slide 6. As we look ahead, I could not be more energized by the momentum we have built and more confident in the long-term trajectory of the company. We have multiple levers and drivers of revenue that will position Halozyme for royalty revenue durability and exceptional value creation well into the 2040s. At the foundation of this growth engine is ENHANZE with now 10 global approvals. Our 3 blockbuster franchises, DARZALEX subcutaneous, PHESGO and VYVGART Hytrulo, all launched between 2020 and 2023 are delivering extraordinary performance today and for years to come. Building upon these 3 blockbusters are 4 additional blockbuster products that were launched in 2024 and 2025 as subcutaneous products with ENHANZE. The subcutaneous versions of OCREVUS, OPDIVO, RYBREVANT and TECENTRIQ are still early in their SC growth trajectories with a lot of revenue growth and contributions to come. And adding on top of this, we have an exciting and expanding ENHANZE pipeline. In 2026, we project 6 new ENHANZE programs will enter Phase I, bringing our development portfolio to 15 products, 13 of which are with ENHANZE. And with development time lines that could shorten to 3 to 4 years in select cases, we have line of sight to accelerating royalty contributions from this pipeline portfolio beginning in 2029. Now let me answer a question I get occasionally, what is next for ENHANZE? After signing 3 new licensing agreements last year, we expect to add between 1 and 3 more ENHANZE agreements in 2026. Interest for ENHANZE has never been higher from pharma and biotech for the use of ENHANZE with monoclonal antibodies where ENHANZE is clearly recognized as the gold standard. And in addition, and a potential new growth opportunity, in response to data we've generated to demonstrate the potential value SC delivery with ENHANZE can bring for companies developing antibody drug conjugates and nucleic acids, we are also engaged in multiple discussions on the use of ENHANZE with these 2 modalities. Chris Wahl, our Chief Scientific Officer, will provide more details on this in just a moment. Let me move now to our second powerful growth engine, Hypercon. Hypercon is a natural evolution of our strategy designed to meet the growing demand for lower volume auto-injector-ready at-home or in HCP office therapies. With 3 partnerships with leading biopharma companies today, we expect to advance 2 exciting programs into Phase I testing by the end of 2026, with first approvals projected in the 2030-to-2031-time frame. Recall that these 2 assets are mechanisms of action that are already blockbusters today. Furthermore, we project that as a result of current agreements and the potential of between 1 and 2 new agreements in 2026 that there will be 3 to 5 additional Hypercon launches by the mid-2030s. We are projecting that taken together, these launches will result in approximately $1 billion in Hypercon royalty revenue within 5 years of the first launches for this new technology in the mid-2030s. Hypercon also creates a compelling strategic path for our ENHANZE partners, offering them the ability to evolve towards smaller volume injections, which is another way that will extend our royalty streams into the 2040s. We were also excited in the fourth quarter to complete the acquisition of Surf Bio, obtaining a second differentiated hyperconcentration technology with long IP to the mid-2040s. Our focus here is to advance the development and enable clinical readiness in late 2027 or 2028. Importantly, by 2028, we expect our combined commercial and development portfolio with ENHANZE, Hypercon and Surf Bio to nearly double from 19 products today to 36, unlocking a powerful new wave of royalty revenue. And we're not stopping there. We will continue to deploy our strong cash flow towards strategic M&A. We're continuing to evaluate additional drug delivery technologies that can expand our offering and opportunity. And we're also evaluating assets with strong revenue and margin opportunity that will drive near-term and long-term growth. As we continue to make acquisitions, we will maintain financial discipline while investing in long-term value creation. With that, let me now turn the call over to Chris to highlight the exciting new expanded opportunity that we have with ENHANZE. Christopher Wahl: Thank you, Helen. I will begin on Slide 7. We recognize the potential for ENHANZE to improve the clinical profile and deliver convenience of 2 emerging and rapidly growing classes of drugs, antibody drug conjugates and nucleic acids. We initiated a series of internal experiments and collaborations with leading companies to generate data to evaluate and demonstrate the benefits of ENHANZE. Today, I will focus on the use of ENHANZE with antibody drug conjugates and share some of the data that is creating strong interest from potential partners. As you may know, ADCs comprise an antibody, a linker and a cytotoxic payload. As demonstrated with our ENHANZE-enabled products, subcutaneous delivery can improve the patient experience, but conversion of ADCs to subcu has been limited by concerns over injection site toxicity. In addition, given the toxic nature of delivered payloads, there are also significant adverse events that can be dose limiting, some of which are associated with peak blood concentration or Cmax, such as interstitial lung disease and cardiac toxicities. Hypotheses we tested in our experiments were: firstly, would subcutaneous delivery of ADCs with ENHANZE result in good local injection site tolerability. Secondly, as we have demonstrated with monoclonal antibodies, would subcutaneous delivery of ADCs with ENHANZE result in a lower Cmax or peak concentration than IV. And thirdly, could subcutaneous delivery of ADCs with ENHANZE result in a similar or higher overall exposure compared to IV. Achievement of all 3 would suggest the potential for improved benefit risk profile with subcutaneous delivery with ENHANZE. To answer these questions, we tested 2 approved ADCs in separate preclinical studies. We compared equivalent doses of the ADC, either IV subcu with ENHANZE or subcu without ENHANZE, measuring key PK parameters at the injection site and in serum. On Slide 8, I'm showing the injection site data for each of the 2 ADCs comparing subcu delivery with ENHANZE to subcu delivery without. Our data supports that subcutaneous delivery with ENHANZE can result in more rapid absorption and uptake, resulting in low levels of ADC and payload at the injection site within hours. This is a situation where lower is better. In fact, at 24 hours, the reduction was 87% for ADC1 and over 50% for ADC2 with ENHANZE compared to subcu alone. I will add that in these and additional experiments, skin biopsies reviewed by experienced pathologists were reported to be normal, supporting strong subcutaneous tolerability of the ADCs we tested. Let me now move on to the serum PK data on Slide 9. I'm showing the data for each of the 2 ADCs comparing IV to subcu delivery with ENHANZE and subcu delivery without. Our data shows that as we see with antibodies, Cmax or peak blood concentration has significantly decreased with subcutaneous administration compared to IV. Cmax was 75% lower for ADC1 and 61% lower for ADC2. Moving now to Slide 10. Using PK modeling, we can predict that a higher dose of the ADCs we tested could be administered subcutaneously with ENHANZE, and that would result in equivalent or higher overall exposure with a still lower peak concentration than IV. Moving to Slide 11. In summary, the preclinical data supports that subcutaneous delivery with ENHANZE could improve the benefit risk profile for ADCs. Good local injection site tolerability was demonstrated for the ADCs tested and the same or higher overall exposure could be achieved supporting efficacy with lower peak blood concentration supporting the potential for fewer related adverse events. Throughout the second half of 2025 and into this year, I've had the opportunity to present and discuss this data with multiple pharma and biotech companies advancing antibody drug conjugates. The feedback I get consistently is the data supports not only the ability to deliver ADC subcutaneously, but the potential for improvements in the benefit/risk profile. With that, let me now hand the call back over to Helen. Helen Torley: Thank you, Chris. Let's move now to Slide 12 and review our goals for 2026. We project supporting 6 new ENHANZE programs and 2 new Hypercon programs entering Phase I clinical studies, bringing our total development portfolio to 15 products. Building on this momentum, our existing partners expect to deliver multiple Phase II and Phase III data readouts, further expanding the commercial opportunity for ENHANZE. In 2026, we plan to deliver at least 3 new licensing agreements, including between 1 and 3 new ENHANZE collaborations and between 1 and 2 new Hypercon collaborations. And we will pursue strategic acquisitions that further strengthen our drug delivery portfolio and focus also on adding assets with strong revenue and margin opportunity that will drive near-term and long-term growth. Let me now turn the call back to Nicole. Nicole LaBrosse: As we look ahead, we are pleased to reiterate our 2026 financial guidance shown here on Slide 13. We continue to expect total revenue of $1.71 billion to $1.81 billion, representing year-over-year growth of 22% to 30%, driven by royalty revenue and product sales from API. Royalty revenues of $1.13 billion to $1.17 billion, representing year-over-year growth of 30% to 35%. We continue to expect DARZALEX SC, PHESGO and VYVGART Hytrulo to drive the strong expectations. We expect adjusted EBITDA of between $1.125 billion and $1.205 billion, including new Hypercon and Surf Bio investment of approximately $60 million and non-GAAP diluted EPS of $7.75 to $8.25, which also reflects the new Hypercon and Surf Bio investment and does not consider the impact of potential future share repurchases. Let me also take the opportunity to highlight how to think about the quarterly cadence for your modeling. We expect first quarter royalty revenues to be less than the fourth quarter of 2025 by approximately 5% to 10% due to annual contractual rate resets with quarterly sequential growth thereafter. We project total revenue to decrease sequentially from the fourth quarter of 2025 to the first quarter of 2026 as no milestones are planned in the first quarter, with milestones expected to be weighted in the second half of the year. I'll now turn the call back over to Helen. Helen Torley: Thank you, Nicole. Let me conclude with these final remarks. Across ENHANZE, our auto-injectors, Hypercon and now Surf Bio, our strategy is clear, our priorities are aligned, and our execution is disciplined. We are building a future that's defined by innovation, durability and high-margin royalty that extends throughout the next 2 decades. These priorities position Halozyme not just for another strong year, but for a new era of durable long-term revenue. We have the portfolio, we have the technologies, and we have the strong cash generation. And most importantly, we have a clear, confident and compelling path forward. Operator, you can now open the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Mohit Bansal with Wells Fargo. Mohit Bansal: Royalties for the first time. Really appreciate it. I have a question regarding the mechanics of DARZALEX collaboration with J&J. I know you -- last time in late January, you talked about potential to expand the deal with J&J on DARZALEX. Can you just elaborate this further? Is this related to ENHANZE? Or do you think that there is a potential expansion with Hypercon here? And the related question is that what happens after the expiry of ENHANZE collaboration with J&J? Would J&J has to manufacture hyaluronidase on their own and then sell DARZALEX FASPRO on their own? I mean how does the mechanics work? Helen Torley: Thanks, Mohit. Yes, we're very proud to partner with Johnson & Johnson on creating such an important brand for patients with multiple myeloma with $14.4 billion with the majority of that being powered by subcu with ENHANZE because as you know, it really is enabling a lot of that early frontline durable patient treatment. Now our terms of our licensing agreement end with J&J in 2032. But given the importance of this brand to J&J, given how we are the core to helping get into this frontline session, we absolutely expect to enter into discussions with Johnson & Johnson closer to the time because we're obviously many years out from that today to extend our agreement and our supply of them of API. So we do not expect J&J to take the risk of going to get another source of API. We expect them to want to continue to work with us with the strong reliability and the great safety track record that we have generated together on the use of DARZALEX as subcu. So Mohit, my comments were specifically about continuing to work with J&J on ENHANZE when we made them on the last call. Operator: Your next question comes from the line of Jason Butler with Citizens. Jason Butler: I had 2 questions on the ADC strategy. I guess the first one is one thing that is really increasing clarity and confidence is regulatory path with ENHANZE. Can you give any thoughts on if you're going to be essentially improving product profiles of approved therapies, how you think about regulatory path there versus regulatory path for not yet approved molecules? And then just secondly, on the kind of improvements that you're seeing -- can you give us -- sorry, just give us some context on the kind of treatment paradigms today for the approved ADCs. And obviously, there's the preference for not IV infusion, but what are these patients doing anyway? Are they in the IV center anyway? Or can they truly free up time by not having to go to the IV center? Helen Torley: Yes. Let me ask Chris to address both of those. And Chris, the first one was what we believe the regulatory pathway would be. Obviously, today, we are basing on PK non-inferiority. Will that be the path? And the second one was with regard to the treatment paradigm. Is this going to be one where it might be a short injection in the infusion suite as opposed to subcu? Or can it be given at home? Christopher Wahl: And thank you for the question, Jason. So regarding the regulatory path, as per those companies that wish to convert from IV to subcu, as we've seen with our traditional monoclonal antibody products, we'd expect a traditional approach that we've seen with PK non-inferiority studies. To your point, to the extent that those partners are developing products that aren't approved are seeking additional benefits related to efficacy and safety, those benefits would need to be proven through appropriate phase trials beyond PK non-inferiority that include both efficacy and safety endpoints. In terms of the approved ADCs and the benefit that we can provide, as you likely know, a lot of ADCs were developed not as monotherapy, but as combo therapy. So there is the benefit there to reduce the infusion center time that those patients spend in those infusion centers. But we are seeing more movement of ADCs to first-line therapy. So to the extent that they aren't administered in combination therapy, there would be the potential for IV-free regimens. And also note that many of the ADCs are being used in combination with products that are subcu or going subcu in large part enabled by ENHANZE in Halozyme. So you will see a spectrum of treatment modalities. But I think as more and more drugs go subcu, you will see a significant reduction in those patients needing to go to infusion centers. Operator: Your next question comes from the line of Michael DiFiore with Evercore ISI. Michael DiFiore: Congrats on all the continued progress. Two questions for me. One regarding the IPR filed against Alteogen back in December. How might the outcome of this influence the outcome of the Merck District Court litigation? And then separately, with regards to Merus' petosemtamab, a new trial was listed on ct.gov back in January. It was a first-line non-small cell lung cancer study. I guess my question is, as development extends beyond head and neck, how should we think about the potential incremental ENHANZE royalty opportunity from additional indications here? Like does the long-term commercial strategy for petosemtamab hinge primarily on the IV or the subcu ENHANZE formulation? Helen Torley: All right. Thank you. Mike, with regard to the IPR filed against Alteogen, I would think about it very separately from our infringement case that is being brought against Merck, where we have identified that Merck is infringing multiple of Halozyme's already filed patent. So it's a very different part of our IP strategy. Now with regard to the district court case, we're still awaiting a scheduling order from the judge for that. The judge has allowed for certain discovery for Halozyme, including access to the Merck Alteogen agreement and also access to KEYTRUDA SC to continue testing of that. And we do expect that both parties will appear before the District Court in June following the output of the PTAB to receive further information and instructions. But the PGR and Alteogen, very separate and distinct from the District Court case. With regard to Merus' terrific drug, as we looked at that and we looked at the potential, obviously, I think it's just at the beginning of its potential utility based on its mechanism of action. It's currently used in regimens including KEYTRUDA. And I do believe that it is possible that there are going to be an extensive number of indications explored over time where this mechanism is going to be relevant. For patients, and I think this is where we really enjoyed working with the Merus team with regard to the fact that they're recognizing that the PD-1s go subcutaneously, the benefit of having an all subcu regimen is going to be terrific for patients. And so I think that's where the puck is going and in terms of how treatment is going to be delivered. And we're excited to see additional work being done to expand the indications over time for the subcu version. Operator: Your next question comes from the line of Corinne Johnson with Goldman Sachs. Corinne Jenkins: Maybe you could provide just a quick update on the progress you're making towards the clinic with the Hypercon products and kind of what remains to be done before you can start testing that technology in patients? And on a related note, what should we anticipate with respect to any update on the products and the progress they're making in terms of Phase I study, et cetera? Helen Torley: I'm sorry, Corinne, I caught most of that. But towards the end, you just -- unfortunately, I couldn't hear you. I got the progress for the Hypercon clinical testing and the second part to the question? Corinne Jenkins: Is that better? Helen Torley: That's much better. Corinne Jenkins: Okay. The second part was just what should we anticipate with respect to updates through the year as you kind of get those drugs into the clinic? And should we anticipate getting a better understanding of what the products are and the development strategy once they're in Phase I? Helen Torley: Yes. Thank you. So we are continuing with the Hypercon team to support 2 partners in advancing to Phase I clinical testing in 2026. And as a reminder, these are already approved blockbuster MOAs. The additional steps that are happening include completion of the clinical scale-up batches as an example. And then the companies will also be moving forward to file their IND packages, or protocols with the regulatory authorities, et cetera. But everything as of today is very much on track for these 2 clinical starts in the fourth quarter and before the end of the year. This is partner confidential information, Corinne, in terms of what updates will be available. So it will be very much driven by the partners. I will say if these clinical studies are being done in patient populations, it is very likely that they will be posted on clinicaltrials.gov as the studies are about to start. And I think that might be the first indication publicly of what the partners are and certainly a visibility into the design of the Phase I studies. I don't believe there'll be a lot of information available at that time with regard to the full development pathway. But I will say that from our perspective, the development pathway will be very familiar to you if you're familiar with ENHANZE. We anticipate Phase I studies to identify a dose and then Phase III studies on non-inferiority in this instance. Operator: Your next question comes from the line of Sean Laaman with Morgan Stanley. Sean Laaman: Helen, just to double-click on the last question, just to clarify, the 2 Phase I starts with Hypercon, are they existing ENHANZE products? That's the first question. The second is how many of the ENHANZE products do you envisage could be transitioned across to Hypercon over time? And then while we well understand the move from IV to subcut and the clinical benefits there, what are you hoping to show in the clinical benefits when you can compare existing products on Hypercon compared to existing products with ENHANZE. Helen Torley: Thanks, Sean. We -- because the targets are confidential for the partners, we really can't make any further comments other than to say that these are established blockbuster drugs with the approved mechanisms of action. So I'm afraid we're limited to talk about that. If we think about our ENHANZE portfolio, we are seeing very much with our partners, both in biotech and pharma, there is a real push towards getting treatment moved in a simple, short, small injection in the doctor's office or in the patient's home for certain conditions, including autoimmune diseases, neurology, nephrology. And so as you think in our portfolio about anything that has the potential to be moved into a smaller volume and drugs that perhaps today are given in the doctor's office, moving them into the patient's home or in the doctor's office to allow for higher throughput of patients, those are the types of opportunities you'd be thinking about with the potential for a 3 to 4x increase in concentration in most of our drugs, so a 3 to 4x reduction in volume. And so you can see from what I'm saying that the value proposition here is very much the patient getting more charge of their disease, being able to do it at home or be able to do it in a very short trip to their doctor's office and really putting the power back into the patient in terms of when and how and where they're getting their treatment. That is what is exciting, companies as they are thinking about how best to meet the needs of patients with certain conditions where the patients really are overall quite well, want to get back to work, want to be able to go on trips, all of those conditions. So it's, I think, a very logical evolution of subcu treatment and putting the patient at the center and the next evolution for certain conditions. Operator: [Operator Instructions] Your next question comes from the line of Brendan Smith with TD Cowen. Brendan Smith: Congrats on all the great progress. I actually wanted to ask about the auto-injector part of the business a bit. I'm wondering what your expectations for new partnerships there look like and if we should expect maybe any overlap in the new ENHANZE and Hypercon deals you plan to announce this year with some of those auto-injectors? And maybe on a related note, can you just remind us how you plan to report sales on auto-injectors? Is it going to be -- should we think about it similarly to ENHANZE like with product sales to partners during development and then adding royalties on top for commercial sales? Or are there any kind of notable differences there? Helen Torley: All right. Thanks for that question. Yes. For everybody, we -- I'll start with the high-volume auto-injector, which we've continued to advance readiness for clinical testing for our partners. As you know, we've got a development agreement that is advancing with one of our current partners. And our high-volume auto-injector, which is able to inject between 3 and 10 mL with 10 mL going in, in just 30 seconds. We are seeing interest in it from current partners. We're seeing interest in it from new potential partners who are coming to evaluate the opportunity of ENHANZE and Hypercon and even to a degree, Surf Bio, even although that is earlier. So Brendan, I do anticipate we're going to see some progress with the high-volume auto-injector this year. And again, it's a beautiful part of the story towards imagine for the patient being able to do their own delivery of a 3 mL, a 5 mL, a 6 mL, a 10 mL injection at home, putting the power into the patient's hands for when, how and where they have their treatment. So look for updates on that as the year progresses. I'll have Nicole talk about how we'll report the sales. Nicole LaBrosse: Yes, Brendan. So from a revenue perspective, we do recognize product sales from selling the devices. So you can think about that as similar to the way we recognize revenue from the sale of API. And when there are associated royalties, then we would recognize those as royalty revenues. So think about a situation where we having a high-volume auto-injector that is licensed with our ENHANZE technology, that would -- our expectation is that would drive royalties, and you would see royalties recognized with that product. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Greetings, and welcome to the ReposiTrak's Fiscal Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Jeff Stanlis with FNK IR. Please go ahead, sir. Jeff Stanlis: Thank you, operator, and good afternoon, everyone. Thank you for joining us today for the ReposiTrak'sFiscal Second Quarter 2026 Conference Call. Hosting the call today are Randy Fields, ReposiTrak's Chairman and CEO; and John Merrill, ReposiTrak's CFO. Before we begin, I would like to remind everyone that this call could contain forward-looking statements about ReposiTrak within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based upon current beliefs and expectations. ReposiTrak's remarks are subject to risks and uncertainties, and actual results may differ materially. Such risks are fully discussed in the company's filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks. ReposiTrak does not assume any obligation to update information contained in this conference call. Shortly after the market closed today, the company issued a press release overviewing the financial results that we will discuss on today's call. Investors can visit the Investor Relations section of the company's website at repositrak.com to access this press release. With all that said, I would now like to turn the call over to John Merrill. John, the call is yours. John Merrill: Thanks, Jeff, and good afternoon, everyone. As we reached the midpoint of fiscal 2026, it's important to reiterate our long-term strategy and provide performance metrics against those milestones. First, our goal was to convert all revenue streams largely to SaaS recurring revenue. Since 2020, we have converted over $7 million in onetime revenue to a recurring SaaS and increased our recurring revenue from 62% of total revenue to over 98%. We have done this, while simultaneously overcoming $2 million in the elimination of high-touch low-margin opportunities in order to make way for traceability. Next, pay down debt, keep expenses in check and increase contribution margin. Since 2020, we have paid off over $6 million in bank debt and reduced annual operating expenses from roughly $19 million to $16 million. Meanwhile, we have grown our net margin from 8% to north of 30% during the same period. Third, drive cash and return capital to shareholders. Since 2020, we have increased net cash by a 16% compounded annual growth rate. Net cash means total cash on the balance sheet, less bank debt and leases. We've grown net cash from $13.7 million in 2020 to almost $29 million in 2025. Simultaneously, we have bought back over 2.2 million shares of common stock, redeemed 640,000 shares of preferred stock and increased the common stock dividend now 3x by 10% each time over the previous 3 years. Finally, given our strong cash flow generation, we have invested heavily in our business. This quarter, the investments in our business involve 3 key initiatives: First, we continue to invest in our products, responding to customer pain points with new solutions. We are confident that these solutions will improve tracking accuracy and will reduce operating costs for any customer with a warehouse. Touchless Traceability fits perfectly with our ReposiTrak Traceability Network Solution, creating a comprehensive method for delivering end-to-end Traceability; second, we filed for 2 patents in the last few weeks, one for Touchless Traceability and a second for an innovative method for identifying and automatically correcting errors in the data we integrate for customers. ReposiTrak has not been shy about patenting our innovations. We have a portfolio of 9 U.S. patents, and we are confident we will ultimately secure both these patents that are now in process. These patents serve as yet another moat around our business. Randy will add more color on Touchless Traceability and the patents in his section. The inventions involved in these 2 patents, and our innovation in general, continues to revolutionize the industry. We have carefully observed what others in the space envision to address issues like Traceability, and we know what has worked and what doesn't. We are confident that as our competitors recognize the optimal path forward, they will discover that we have patented the process and systems that make the correct approach possible; third, we continue to invest in our systems and core software stack, adding artificial intelligence and modernized features and setting us up for improved operational efficiency. Randy talked about this last quarter, and we do not anticipate a meaningful increase in our cash expenses or capital expenditures related to this initiative. Let's get to the numbers. Second fiscal quarter revenue increased 7% from $5.5 million to $5.9 million. Total operating expenses for the quarter were down 2%, inclusive of investment in RTN, including Wizard onboarding tools, more cybersecurity costs, database license fees and other direct costs associated with development. We've reached a point where an incremental revenue does not require significant incremental expenses to support our growth. SG&A costs for the quarter were up 5% due to higher commissions and direct costs associated with higher revenues, increased insurance premiums and increases in employee benefit costs. Income from operations was up 34% to $1.8 million versus $1.4 million. GAAP net income for the second fiscal quarter of 2026 was $1.7 million, up 9% versus $1.6 million last year. As previously communicated, the company is at the end of the benefit period from utilized and expiring net operating losses for both federal and state income tax. Accordingly, it is reasonable to assume a 20% effective tax rate going forward. GAAP net income to common shareholders increased 13% to $1.6 million from $1.5 million. Earnings per share for the quarter was $0.09 basic and diluted, this is based on 18.2 million basic shares outstanding and 19.1 million shares diluted, resulting in a year-over-year EPS growth of 13% when factoring in higher income taxes. Total cash increased to $28.7 million from $28.6 million at June 30, and the company continues to have a 0 bank debt. Fiscal 2026 year-to-date total revenue increased 8% from $10.9 million to $11.8 million. Total operating expenses for the fiscal year-to-date were $8.1 million versus $8.1 million for the same period last year, essentially flat. Income from operations was up 31% for the fiscal year-to-date, $3.7 million versus $2.8 million. GAAP net income increased 9% from $3.2 million to $3.5 million. GAAP net income to common shareholders increased 13% from $3 million in fiscal 2025 to $3.4 million in the year-to-date period in fiscal 2026. Fiscal 2026 year-to-date earnings per share was $0.19 basic and $0.18 diluted. This is a 13% increase when compared to $0.17 basic and $0.16 diluted for the same period last year. We are experiencing growth in all lines of business, while traditional sales of one service to solve one problem is growing, our cross-sell initiatives are delivering continued momentum. Again, our strategy has not changed. First and foremost, take exceptional care of the customer and execute flawlessly. Next, grow recurring revenue, increased profitability even faster, use cash to buy back common stock, redeem the preferred and do it with no bank debt. At the same time, return capital to shareholders through a growing cash dividend. Finally, we have and we'll continue to build cash on the balance sheet, close to $29 million as of December 31, 2025. Continuing to bolster our balance sheet maintains our customers' confidence in our ability to be a durable partner in otherwise uncertain economic time. Common stock buyback. During the second quarter of fiscal 2026, the company repurchased roughly 80,000 common shares for a total of $1.1 million, an average of $13.75 per share. This inception, the company has repurchased and canceled 2.22 million common shares for $14.5 million at an average price of $6.52 per common share. The company has approximately $6.7 million remaining of the $21 million total common share buyback authorization as approved by the Board of Directors and shareholders as of December 31, 2025. The company holds no treasury stock, common shares are repurchased and simultaneously canceled. Preferred stock redemption. During the second quarter of fiscal 2026, the company also redeemed 70,000 preferred shares at the stated redemption price of $10.70 per share for a total of $750,000. Since inception, the company has redeemed approximately 642,000 shares of preferred stock at the stated redemption price of $10.70 per share for a total of $6.9 million. We have 196,000 preferred shares left to redeem for a total of $2.1 million. At the current rate of redemption of $750,000 a quarter, I maintain our goal to redeem all the remaining preferred shares issued and outstanding on or before December of 2026, if not earlier. The quarterly dividend. On December 19, 2025, the Board declared a quarterly dividend of $0.02 per share to shareholders of record as of December 31, 2025, payable on or about February 14, 2026. This represents the third 10% increase in the company's dividend since the dividend was established in September of 2022. Subsequent dividends will be paid within 45 days of each fiscal quarter end, from time to time, the Board will evaluate our capital allocation strategy, making appropriate adjustments based on the approach most beneficial to all shareholders at that time. Our goal is to continue to return 50% of annual cash from operations to shareholders and putting the other half in the bank. That's all I have today. Thanks, everyone, for your time. At this point, I'll pass the call over to Randy. Randy? Randall Fields: Thanks, John. ReposiTrak had an eventful quarter. Some of that shows in our numbers, but much of what we accomplished was behind the scenes. While we're delivering profitable growth from each of our solutions, we continue to add to the moat around our business, specifically the Traceability business. The ReposiTrak Traceability Network, or RTN, is already the industry leader. The queue to join our network is much larger than our current installed base and each new supplier, distributor retailer adds to the network effect of our RTN solution. It's fair to say, and we've said it before, that Traceability for most suppliers is much more difficult than anyone has imagined. The difficulty affect suppliers and, therefore, ultimately impacts everyone upstream, downstream in the supply chain. It currently takes longer than we'd hoped to work with suppliers to get them up to speed and consistently able to provide the information they need to be able to do Traceability. I'll elaborate on this in just a minute. Remember that no one has ever done Traceability before. It's a new thing. It's a new activity, and it's one that requires complex process changes for everyone involved in the supply chain, end to end. As I mentioned, the primary issue with Traceability continues to be the consistent accuracy of supplier data. The error rate and data we initially received from suppliers, especially small suppliers, is somewhere between 50% and 70%. In case it isn't obvious if a supplier has inaccurate data, that data propagates through the supply chain. The grower's bad data becomes the distributor's bad data, which becomes the wholesaler's bad data, which becomes the retailer's bad data. That bad data becomes even worse if additional errors are introduced on another link in the supply chain, making the information even less reliable, if not completely unusable. So now the question is, how do you fix an error? Since the errors ripple through many, many systems, it's more difficult than you can imagine. Each company will have to manually fix its records, conceivably hundreds or thousands of error fixes every day. This is ultimately the Achilles heel of track and trace bad data. Imagine the challenge this presents for a small family grower, most of whom don't even have an IT department. Now imagine the challenge for a large distributor, taking in thousands of shipments daily each with a high error rate. Now imagine how a large retailer think about this if they need to hire dozens of employees just to trace down all of these different errors. It's just not going to happen. It would be cost prohibitive. Here's what's even stranger. Most people who are trying to think about Traceability have no idea that this error problem even exists. The errors are not obvious and require knowledge and skill to detect much less to correct. For the most part, people who think about Traceability are simply relying on something that's called Electronic Data Interchange or EDI to gather their data and they're making the assumption that the data they're getting from suppliers is valid. Any approach that relies on EDI alone to track data through the system is not detecting or validating for erroneous data. We've invested heavily over the years. And remember, this is not our first rodeo with supplier data, and we know that the data quality is poor at best. But you have to be able to detect the errors to know that. Bad data is the disease that's difficult to detect, but actually is way at the core of Traceability. Our competitors approach to Traceability has to go one of two ways. The first way is to trust the data, believing that EDI gives you accurate data. We've already said that it doesn't. All EDI does is to check the format and structure of data, but does not validate the accuracy. It doesn't even check. EDI is just the envelope. It's sort of like the post office. It only deals with the outside of the envelope, the size? Does it have the right postage? Does it have a ZIP code? Not the contents of the envelope. We, on the other hand, deal with the content inside the envelope, which is a fundamentally different idea and the old new one that ultimately leads to good data. Alternatively, the second approach expects the retailer or distribute or to scan each and every case and have electronic data. In addition, when something comes into the warehouse or goes out of the warehouse, that's a nonstarter economically. ReposiTrak has developed what might well be the only inexpensive and accurate way to do Traceability. We use our artificial intelligence tools to do this. It's extraordinarily robust and has the advantage that not only identifies the errors, but it's able to correct them without bothering the supplier that created the data in the first place. This process is self-learning. And as a result, we're getting better and better all the time at finding the errors. We have over 500 air detection algorithms in our arsenal, and we're growing the detection parameters day by day. Even more importantly, we can then correct most of them automatically and in near real time. This detect and correct process saves the grower money and the wholesaler sees a similar benefit in the distribution center. And by the time the shipments in the data reach the retailer, the data is much, much, much, much cleaner. This error detection and correction process is a major time and money saver for our customers and produces an enormously more accurate data flow. We enable compliance with the FDA regulations and simultaneously reduce costs for our customers, keeping food safe from the farm to the table. Nobody else can say that. We recently filed through two critical patents to secure our approach in what we call Touchless Traceability. We're confident these patents will create another wide and durable moat around the business. We needed to begin the patent protection process before we initiated sales, and that's been a bit of a short-term headwind. But our Touchless Traceability creates the most comprehensive end-to-end solution for Traceability in the industry. Keep in mind that by year-end, the FDA deadline will be getting very close. So we expect acceleration of onboarding and interest in our solution. We're ready and our patents position as well. But we're not just a Traceability company. We continue to grow our industry-leading compliance and supply chain offerings even as we expand our RTN. Our focus over the past few quarters on cross-selling is now generating significant traction, especially in our supply chain business. Success with one solution opens the door to adding another solution and so on and so forth. Since our software is built on a common platform and the process of gathering data is similar across all the different functions, adding additional solutions is efficient for both our customers and for us. All of this ties back to why we remain confident in the future even as AI impacts the SaaS industry. Companies that offer software but don't have proprietary data or proprietary process improvements or at risk from AI. That's obvious. If a problem is just an IT problem solved by software. Well, then theoretically, businesses create their own software using AI, but ReposiTrak is much, much more than just software. Software is just a delivery vehicle and only a part of the solution. In the short term, the AI craze may serve as a modest headwind for our business. Yes, AI will give the false impression to some companies that they can do it on their own. The long-term AI cannot solve the problems that we solve for customers and the value we provide will become even clearer. This trend also aligns well with our recent focus on smaller customers as well as our IP strategy. The hubris of thinking you can develop all of your own software is primarily a big company obsession, not a small company obsession. Defending the inventions we've created around processes and data cleaning will further benefit our business in the long term. As I mentioned, the looming deadline from the FDA will be only 18 months away by the calendar year-end, and that will naturally accelerate the need for Traceability implementations. That said, while we're investing in our business in the form of code refreshes, cross-selling initiatives, development and patent work for our Touchless Traceability, we're also reducing our operating expenses, that we were able to lower our operating expenses, while increasing revenue is a testament to the industry-leading revenue per employee that we maintain. Efficiency is a key selling point of what we provide to our customers, and we mirrored this focus on our own internal operations. Moreover, our transition to a SaaS model has reached the point where we no longer need to aggressively invest in our own infrastructure to support our scale. Incremental revenue is disproportionately falling to the bottom line, and our contribution margin continues to increase. It's all part of the model. So with that, I'd like to now open the call for questions. Operator? Operator: [Operator Instructions] And we'll take a question from Thomas Forte with Maxim Group. Thomas Forte: Great. So John and Randy, congrats on the quarter. I have four, but as always, depending on your answers to these, I might have more. Randy, I have one warm-up question and then I have 3 real humdingers. So the boring warm-up question, John, I think you said, or it was Randy, that in fiscal '25, Traceability was only 8% of total revenue. Is there a more recent data point on how much total revenue is coming from Traceability? John Merrill: Who are you aiming that at? I mean I would say it's between 8% and 10%, but it's hard because there's cross-selling. Thomas Forte: Okay. All right. So and then, Randy, I'll take the bait. Can AI improve the accuracy of Traceability data? Randall Fields: Well, the way we use AI and have for a long time, it's really been part of what we do for many years. It absolutely does. The concept of LLMs, however, which is the current range with AI is a bit misleading. In other words, you have to detect what's wrong and how it got wrong to be able to fix it. I didn't -- there's 3 steps. I'm sorry, and let me back up and see if I can make this clearer than I have. Most people who will try and do Traceability will not even see that they have errors. It's not detectable by looking at it. You actually have to have a deep database to check every field in every record and determine whether or not in the context of that record is it a correct reference. So it's a little bit, as I mentioned earlier, it's a little bit like the post office. You could have a note, let's say, you sent a note to me, and that note said Randy, I now believe that the earth is flat, okay. Now you take that little note, you put it in an envelope, you look it, put a stamp on it and take it to the post office. That's like EDI. Here's what the post office does, though. The post office looks at the size of the envelope and says, okay, that's a legal-sized envelope. It has enough postage, it weighs it and checks the postage and then it says it's got a ZIP code, good to go. That's what EDI does. It's just the transport mechanism. Meanwhile, inside your envelope is an untrue statement. The earth is not flat. And therefore, it's not detectable in the context of EDI. We detect it. We've tested hundreds and hundreds, actually since we have 2 million records now. We've tested about every combination and permutation of type of error that you can imagine. So step one is can you see the errors and AI can help us with that. But here's where we've gone because we realized what a problem, the errors themselves are. If every day you are a supplier and you send out 1,000 files and as we found half of those are erroneous, half of them are erroneous. And we sent you a message and said, here's the 500 files that are wrong, fix them, you would have to hire an army. Everybody would hire everyone they could find to check for errors and fix it. So we've developed a way, again with AI, to not just detect the errors, but in essence, autocorrect them. So we're a little bit like spellcheck and auto correction. And that's an enormous difference. And our system is AI-based, but doesn't, in any way, rely on what today's people people would call a large language model. It's a different -- it's AI for sure, but it's not large language Model. Sorry, long-winded answer, but hopefully it was complete. Thomas Forte: I appreciate the EDI in the post office comparison. All right. So then this is one of those -- all right. So is there any impact to ReposiTrak from MAHA. Randall Fields: Well, in a way, yes, longer term, especially. Let's talk about what MAHA is. MAHA and organic are really a similar idea. Organic is an idea that lays on top of food safety where people think if they eat organic food, it is healthier for them. MAHA sits on top of all of that and says, in general, you should eat food that is healthy, whatever that would be, Whole Foods, not foods that have been ultra processed without food colorings, et cetera. All of that lays on top of a looming problem, which is -- according to Gallup, there's been a long-term decline in the U.S. in terms of the public's belief in food safety. So almost every year, people are believing less and less about the safety of food. So in a sense, what happens is MAHA, organic, et cetera, are causing people to worry more and more about the safety of what they eat. All of that awareness around safety is good for us because it means that the economic cost, the brand equity cost to a retailer who makes a mistake is tremendous. So MAHA impacts us by virtue of increasing people's awareness of the issue of safety of food. It's really that simple. Thomas Forte: Right. So this should be my most related question to that one. So you've talked in the last couple of quarters about Traceability on a buy ingredients basis. So if I go to Stew Leonard's and I buy prepared foods, can you -- any update on thoughts there? Randall Fields: Well, we actually are capable of doing that. In other words, companies can sign up with us and determine, if you will, at a shipment level, at a product level that they have issues, but they can also use our system for specifications around ingredients. So within our system, you could say, wait a minute, if red dye #3 is a problem, let me search all of the items that I sell that have red dye #3 in it. And that's an interesting problem because Traceability, and the reason I'll come back to it in a minute, the FDA has designated certain products like products that contain nut butters, as being on their food traceability list, but you have to think about that for a moment. There's not a retail chain in the country that can tell you the products it has on the shelf that contain a nut butter, have no idea, literally, no idea because retailers don't maintain a list of ingredients, and they just can't track them, strangely enough within our system. We have the capability of doing that. So over time, what we suspect happens is people move from being oriented toward the product. And from the product, they'll drop down to the ingredient. We're fully capable of doing that today. Thomas Forte: All right. And then this is one of those questions where I have no idea what your answer is. So these are fun ones. All right. Does food inflation have a direct or indirect impact on your business? And I have 3 specific examples. Cocoa, coffee and beef. Randall Fields: The answer is, indirectly they do. To the extent that we are in a period where increasing costs to the supermarket, the inputs, can't be passed on to the consumer. Inevitably, supermarkets and everybody in that space has a margin squeeze. In which case, every element of cost, potentially including us, is something that they will look at. So inflation without the ability to pass it on is problematic in general and it's certainly something that we think about. We haven't seen anything over the very short term, but that doesn't mean that it couldn't be something that pops itself up in the future. Thomas Forte: Excellent. Two more. This one I'll direct towards John. So John, you talked about investment spending, but I'm trying to understand how that showed up in your results because you've talked about how it seems that you reduced the amount of OpEx required. So where does the investment spending, where do I see that in the P&L? John Merrill: So you would spend more in development, less in sales and marketing, but some of those things cover in both categories. So because we spent less in marketing, but some of those people were utilized in development. You have to look at the totality of the expenses. We can't look at necessarily the line items. So in aggregate, our spending is less. It's just more targeted resource spending, as we said before, as Traceability becomes more top of mind, our laser focus is to spread the word on the marketing side. But obviously, we've done a lot as far as the marketing and the messaging and we've now shifted it towards the development. And you're not going to see it in line -- you're not going to see it in necessarily the line item. You have to look at the totality of expenses. Thomas Forte: Are you capitalizing any of those costs? John Merrill: There's some costs that -- with the patent now, but it's a de minimis number. Thomas Forte: Okay. And then last question, unless you answer in a way that inspires me to ask one more. Current thoughts on strategic M&A? John Merrill: I mean, look, Randy and I see things every month, but we have so much on our plate right now. It's a distraction. Reemphasizing our stack and our code base and Traceability, remember what Randy said, while it may seem like it's 2 years out, at the end of this year, Traceability is going to be right around the corner. We've got plenty on our plate to keep us busy. But of course, if the right opportunity came around, yes, we're acquisitive, but we have plenty on our plate at this moment. Unless Randy, you've got a different opinion. Randall Fields: Yes, John, let me add something to that. As we take a look at the next 12 months, it is extremely likely that there will be, again, a flood of need and interest, et cetera, around Traceability, why? We think it takes a full 2-plus years to get your entire supplier base Traceability ready and capable. We know that because we've been doing it. But as I said, we already have nearly 2 million records and -- as far as I know, we are the only firm that is actually -- can -- you can come look at it, doing end-to-end Traceability. We are tracking products going from a supplier, into a distribution center, into a retail store, and we create all of those records. We're doing it. It's the real deal. It's pretty amazing. We haven't tooted our own horn very much about that, but we will. But here's the issue, as people think about Traceability, what they're going to be realizing very quickly was that they've now used up the runway that the FDA gave people when they gave them 30 months. It's now closer than it was. And by the end of this year, you'll be at what we think is the, my God, you're at a cliff, the 18-month mark. We don't think anybody that has hundreds of suppliers can be ready in 18 months. We think it takes a full 2 years. But people will shorten that and imagine that 18 months is the magic number. So as this year progresses, and I'd guess sometime in the summer or early fall. The world will once again wake up and go, yes, Traceability whoops, we need to get going. So we're really more in the mood of preparing for that than we are thinking about being acquisitive at the current moment. Operator: Thank you. That will conclude the question-and-answer session. I would now like to turn the floor back to Randy Fields for closing remarks. Randall Fields: Okay. Well, we appreciate everybody taking the time this afternoon. Not much more to say. Have a good one. Talk to you soon. Take care. Operator: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
Operator: Thank you for standing by, and welcome to the Spark New Zealand H1 '26 results. [Operator Instructions] I would now like to hand the conference over to Ms. Jolie Hodson, CEO. Please go ahead. Jolie Hodson: Thank you. [Foreign Language] Good morning, and thank you for joining us today for Spark's half year results for the period ending 31 December 2025. This morning, I'll provide an overview of our performance and progress we've made under our new SPK-30 strategy. I'll then hand over to our CFO, Stewart Taylor, who will take you through the financials in more detail before we open for questions. Before turning to the results, a brief word on the broader operating environment. Through the first half, the New Zealand economy showed signs of finding its footings, while conditions are still -- were still mixed. Consumer activity improved, and there was a growing sense of stability as the period progressed. That backdrop supports the progress we're seeing in our business, particularly in consumer and gives us confidence as we move into the second half. With that context, I'll now turn to Slides 3 and 4 to summarize our financial performance. So in terms of the difference between our reported and adjusted results, adjusted revenue and EBITDAI include the data center business for both H1 FY '26 and H1 FY '25. Adjusted EBITDAI excludes $9 million of DC sale transaction costs in H1 '26, which will form part of the gain on sale calculation to be reported in FY '26 and the SPK-30 transformation costs incurred in half 1 FY '25. I'm now going to speak to our adjusted numbers as these provide the best like-for-like year-on-year performance comparison. In a mixed demand environment, Spark delivered a clear step-up in profitability in the first half. Adjusted revenue of $1.917 billion was down 1.1% or $22 million Around half or $10 million of this decline was driven by the divestment of Digital Island in FY '25, the remaining decline driven by muted business project spending and service management and legacy voice. This was more than offset by improving mobile service revenue and disciplined execution of our cost-out program, delivering a 5.1% increase in adjusted EBITDAI to $471 million. Adjusted NPAT of $73 million was up 30.4% driven mainly by higher EBITDAI. Free cash flow strengthened to $107 million, up 84%, reflecting the operating leverage in the business as performance improved driven by higher EBITDAI and the reduction of cash tax payments. Stewart will provide more detail on the free cash flow for the half and full year shortly. Capital expenditure for the half was $271 million, including $54 million of strategic CapEx used to secure the data center land, in line with guidance. BAU CapEx of $217 million was down 8.8% on the prior year as our 5G rollout matured. The Board has declared an interim dividend of $0.08 per share, 50% imputed. Turning now to mobile on Slides 5 to 7. Spark's total mobile service revenue grew 1.6% as performance continued to improve, and we saw positive momentum across the key underlying drivers of value. In consumer and SME pay monthly, connections were broadly flat, while ARPU grew 5% driven by product innovation, plan refreshes and increased competitiveness of high-value brands and improved mix. We also saw a 15% uplift in pay monthly mobile acquisitions with interest repayments, consistent with attracting high-value customers and supporting stronger retention. In consumer prepaid, connections stabilized in our highest value segment of New Zealand packs, which accounts for around 90% of our revenue, following recent plan refreshes and targeted promotional activity. Prepaid ARPU was down slightly, reflecting the competitive dynamics of this segment. However, with the stabilizing base, we have a strong platform to grow ARPU over time, both through cross and upsell as further products and offers are launched. The Skinny prepaid New Zealand base grew 2%, driven by a strong uptake of long-term plans launched during the half. In enterprise and government, connections and ARPU further stabilized since the close of FY '25. We won more business than we lost during the half with a small connection decline driven by fleet shrinkage and the 3G shutdown. Pressure on ARPU remains. However, the rate of decline continued to moderate with H1 FY '26 ARPU down 7.8% year-on-year compared to a 13.4% decline at the end of FY '25. In the context of the broader market, Spark's mobile service revenue grew at a slower rate than the market, resulting in a small contraction of 0.5 percentage point of share. The highest growth during the 6 months was in the MVNO segment, of which Spark accounts for around 40% of connections. Our revenue growth in this segment was consistent with the MVNO market growth. Overall, we remain market leader by some distance, and our focus is on growing this leadership ahead. On that note, as we look ahead to the second half, we have a strong pipeline of activity that will support continued momentum in mobile, and that's outlined on Slide 8. A few notable examples include the rollout of text and data satellite to mobile capability in H2, including calling over satellite-enabled apps like WhatsApp; a refreshed international roaming product set designed to compete more effectively in an increasingly competitive Eastern market and deliver better experiences for our customers; and a new MySpark app experience to further cement our CX leadership with clearer usage information, easier self-service and enhanced support. If I move now to Slide 9 across our broader connectivity and IT portfolio, performance reflected a tough market alongside areas of resilience and progress. While broadband connections were down in a competitive market, revenues remained stable at $303 million as increasing fiber costs were passed through. Wireless broadband remains a clear opportunity as 5G continues to mature and we explore bundling with mobile. Voice revenue was down 16.7%, and that's consistent with the long-term decline of this legacy product. Other connectivity products was down 10.4%. About 1/3 of this reduction was driven by the divestment of Digital Island and the balance primarily driven by managed data and networks as customers continue to transition away from legacy products to lower ARPU alternatives. In IT, cloud revenue grew 1.7%, reflecting the continued customer migration from private cloud and expansion by existing public cloud customers. Service management remained challenging, with revenue declining 19.7% as businesses continue to defer or scale back larger projects. Our cost program continued to deliver material benefits in the first half as outlined on Slide 10. The program underpinned the improvement we saw in EBITDAI and free cash flow during the half. New network and technology partnerships have been effectively embedded into our operations during the half and are on track to achieve their forecast benefits. Overall, we achieved $51 million in net cost savings, reflecting $55 million of net labor cost reductions from the changes made in calendar 2025; $12 million in product cost reductions, which were originally envisioned to fall in other OpEx, partially offset by a $16 million net increase in other OpEx, primarily driven by $11 million of increased marketing spend to support business growth and costs associated with our new technology delivery model. So looking to the second half, the mix of savings shifted the majority of FY '25. Labor reductions have now been realized, while product cost savings continue and we absorbed the full year impact of our technology delivery model and inflationary cost pressures. Overall, we remain on track to deliver the multiyear productivity benefits previously outlined with the FY '26 cost-out target narrowed to $40 million to $50 million supporting EBITDAI growth and enabling reinvestment in network and customer experience. As outlined on Slide 7, our network and customer experiences are a strategic priority in line with the SPK-30 strategy. During the half, we extended our 4G coverage leadership position to also include 5G as independently rated by Opensignal. This was supported by more than 100 site builds and upgrades and the transition of network traffic to our 5G stand-alone core, delivering improvements in peak speeds of around 75%. We also introduced new network safety features, including automated blocking of malicious websites while working with Aduna to explore further use cases in the space for the future. Our measure of customer satisfaction, iNPS, rose 5 points year-on-year, driven by simplified journeys, faster support and improved digital experiences within our app. Our AI program is accelerating our network in CX ambitions, delivering improved network efficiency, faster speed to market for new products and quicker resolution of complex challenges for our customers. Sustainability remains embedded in the way we operate, and we continue to make progress towards our ambitions as outlined in Slide 12. Our Scope 1 and 2 emissions are 32% lower than the path required in H1 to meet our 2030 emissions reduction target, and that reflects the benefits of our solar energy partnership and the improved grid mix. Our focus on ethical supply chain management continued to mature, and digital inclusion remains a priority with Skinny Jump now supporting more than 34,500 households nationwide. Shortly after the close of the half, we completed our data center transaction, which is summarized on Slide 13. As you'll be aware, Spark has retained a 25% stake in the new stand-alone entity, now named TenPeaks Data Centres. This provides Spark with ongoing exposure to significant long-term growth opportunities in the market with strong structural tailwinds. Spark received initial cash proceeds of approximately $453 million, with up to $98 million in deferred proceeds contingent on performance milestones through 2027. The proceeds strengthen our balance sheet and provide additional financial flexibility as we execute our strategy. Slide 14, we provided an update on how we're tracking against our FY '30 ambitions. At the half year, our SPK-30 ambitions remain on track. Financially, we delivered growth in EBITDAI, NPAT and free cash flow, supported by cost discipline and improving mobile performance. Looking at nonfinancial ambitions, we strengthened the foundations of long-term value, including network coverage leadership, a 5 point lift in iNPS, rising employee engagement and continued progress on our sustainability commitments. I'm now going to hand over to Stewart to speak to the financial results in more detail. Stewart Taylor: Thanks very much, Jolie, and good morning, everyone. I'm going to start with Slide 16 and 17, which summarize the result, probably focusing more on Slide 16. We've got our reported results on the left-hand side of Slide 16. Now this excludes our data center business from the headline EBITDAI and top line P&L numbers; the net earnings contribution booked as a one-liner and that discontinuing operation line, which you'll see there called out as a separate line, just above total net earnings after tax expense. So for the adjusted results, the data center contribution is actually included in the applicable P&L lines rather than being classified as a discontinued operation, hence, why you don't see any numbers in that line for the adjusted numbers. So looking at growth rates, reported EBITDAI was up 10% in H1 '26 versus H1 '25, the equivalent growth rate of 5% for adjusted EBITDAI growth over the same period here, the difference here largely due to the lower H1 '25 reported earnings base given the data center adjustments and the transformation costs, which were booked in H1 of '25. Just for clarity, so the discontinued earnings of $10 million showed a significant increase on the previous comparable period. This was because the data assets held for sale were no longer being depreciated in H1 '26. I'll now move over to Slide 18, and I'll talk to capital expenditure. So you'll see in H1 '26, on the right-hand side there, so the right-hand column there, total CapEx was $271 million, and that excludes spend on spectrum. This was $19 million or 8% higher than the prior comparable period. And the key driver of that increase has been the $54 million in strategic CapEx associated with the data center business. This is something we outlined in our guidance at the beginning of this year. So if I exclude that strategic CapEx, Spark's BAU CapEx was 9% or $21 million lower than in H1 '25. Now this reflects lower network spend, so our 5G rollouts matured. We've had been through a period of accelerated spend there, and our spend on IT systems, fixed networks and international cable capacity has been broadly consistent with that in 1H '25. Now in the first half of this year, we've also reported $7 million spend on new spectrum. This is the net present value of 18-year rights we acquired from Tu Atea for 20 megahertz of 5G spectrum. Now looking forward, with the exception of $1 million spent on the data center business in January before that transaction completed, we are not expecting any further strategic CapEx going into H2. So looking forward to H2, the focus of capital expenditure and beyond will be on projects that align with our SPK-30 strategy and drive our core connectivity business. We'll also be taking the discipline we've employed in H1 forward, and we remain on track to deliver to FY '26 BAU CapEx within our guidance range of $380 million to $410 million. So this implies that H2 '26 BAU CapEx will be in the range of $163 million to $193 million. So moving to the free cash flow page, this is Slide 19. Again, we remain focused on the conversions of earnings to free cash flow given the importance this plays in determining our dividend. So overall free cash flow in H1 '26 was $107 million. This was 84% higher than H1 '25. And this was impacted predominantly by 2 lines in the table that you can see on the right-hand side there. The first is the 10% increase in reported EBITDAI between periods. The second is a significant reduction in cash tax paid, which is largely related to timing and would normalize in the second half of the year. Just running through this note that, year-on-year, there was an increase in cash paid on leases. This is because the H1 '25 payment was lower than we'd have expected due to a one-off cash benefit from the corporate office move to 50 Albert Street at the end of calendar '24. Now near the end of December, we announced the sale of our interest-free payments or our IFP receivable book for $240 million. The positive impact of the sale has been adjusted from the free cash flow number, and this has been done net of growth in the IFP book since the start of the year, which was around $27 million. And having entered into a finance agreement with Challenger on the IFP book, we will undertake regular sales of that book going forward, which means we can continue to grow this book without impacting our working capital balance. Again, importantly, remain on track to meet our FY '26 free cash flow guidance of $290 million to $330 million. And this does imply in H2 weighting of free cash flow, which will be driven by our EBITDAI profile in the second half, lower CapEx in the second half, an improvement to our working capital balance, and this will be partially offset in the second half by higher cash tax payments. So if I go to Slide 20, debt and dividends, what we've seen is an overall reduction -- a further reduction in the overall level of net debt in the last 6 months. This has been supported by the sale of the IFP book and offset in part by higher strategic CapEx. So if I exclude leases, net debt now sits at $1.39 billion, 5% lower than at 30 June '25. The net debt-to-EBITDAI ratio's steady at 2.2. This isn't materially impacted by the sale of the IFP book. Now you'll see in the chart on this slide that we've put a bar over on the far right there, indicating what we consider to be our pro forma debt position as at the end of January 2026 based on the completion of the data center transaction. Now as a result of that, net debt ex leases reduces by $453 million to around $940 million. But more importantly, our net debt-to-EBITDAI ratio would be reduced to around that 1.7 level, which is consistent with that required for our targeted credit rating. The final point to note here is our interim dividend of $0.08 per share, and this is based off our full year free cash flow guidance. The interim dividend has been imputed at 50% as we seek to bring that imputation credit balance back to a sustainable level and manage our balance sheet as efficiently as possible. Slide 21, we've outlined our key debt metrics. I'll note 2 things briefly here. Firstly, the absolute amount of debt we carry forward will lead to lower interest costs. However, some of this benefit will be moderated by our residual debt profile. And secondly, interest cover based on our EBITDAI over financing cost remains very healthy at 8x. Now finally from me, the Slide 22, which is reaffirming our FY '26 guidance and given the completion of the data center transaction, we've obviously focused our guidance on excluding DC earnings from the last 5 months of the financial year. In all cases, the guidance has not changed since we supplied it to the market in August last year. One thing we have done is we've updated the strategic CapEx to $55 million, having completed the sale of DCs. Again, this reflects the $54 million we spent in H1 '26 and an extra $1 million we spent in the month of January. Importantly, we retain our EBITDAI guidance of $1,010 million to $1,070 million, which is -- which, if I took the midpoint at $1,040 million, would imply a more normal first half to second half earnings split of 45%, 55%. On that, I will hand back to Jolie to provide a final summary. Jolie Hodson: Thanks, Stewart. So to summarize, despite soft market conditions persisting in parts of the portfolio, Spark delivered a clear step-up in performance during the half. Our strategic focus on core connectivity is gaining traction. Mobile showed clear signs of momentum with ARPU strengthening and connection stabilizing. While broadband remains -- revenue remains stable. Our cost reduction program delivered material benefits and when combined with mobile, supported a return to EBITDAI, NPAT and free cash flow growth. The drivers of our market competitors, our network and customer experiences continue to strengthen and differentiate Spark. And the completion of our data center transaction in January has reduced net debt back to targeted levels for H2. There's more work to do, but this progress reinforces our confidence in the strategic direction we set under SPK-30 strategy. And Spark's becoming a more focused, efficient and resilient business, well positioned for the second half and beyond. We're now going to open the floor to questions. So I'll hand back to the operator. Operator: [Operator Instructions] Your first question comes from Entcho Raykovski with E&P. Entcho Raykovski: My first question is just around the cost out target for the full year. I guess, given that you've effectively delivered the cost out target in the first half but the top end of the full year cost out guidance is unchanged, can you talk about the expected uplift in other OpEx in the second half, which offsets any further cost savings? And if you can sort of -- as part of that question, if you can talk to whether that then trends into FY '27 because I presume that there will be some carryover. Jolie Hodson: Okay. Thanks, Entcho. Maybe I'll kick off and then if Stewart's got anything he wants to add. So if you look at the overall savings reductions you saw in the first half, we obviously saw a number of labor changes in the back half of FY '25. So we had the benefits flow through in '26. While there's still some simplification work, we also have costs like severances and other things that will sit within our existing cost for this year. So what we've done is delivered upfront the labor savings, the product cost savings and other OpEx. So if you look forward then, what are some of the things that are impacting the second half, we've cycled, as I said, quite a bit of that labor savings. We had a lower H2 last year off the back of that. Our new network technology delivery model, that always had reduction in labor but increase in some of the other OpEx costs and then like every business has some inflationary costs within it. So really what we're saying is, over the year, we'd expect to deliver in that $40 million to $50 million range around our cost program. We have achieved most of that in that first half. Yes. Sorry, the other thing I just would call out is marketing would normalize in the second half as well. So we had an upweighted investment of around $11 million in the first half, but we'd already lifted that in the second half of '25. So we don't have that same flow-through in the second half of '26. And if I think -- maybe just to the second part around '27, like any business, we'll continue to have simplification that we will be looking at that looks at both use of technology, what we're doing around both our product and our business overall. So that doesn't sort of indicate that we've run out of cost to focus on. It's really more, if we think about what's happened in the year, we've already delivered most of the costs that we needed to within that. Entcho Raykovski: Okay. Great. And my second question is just around wireless broadband. Subs were marginally down in the half -- half-on-half. I guess, is that a reflection of the fixed wireless market as a whole? Or are you perhaps seeing some share losses in wireless broadband? And I think you've talked about a plan refresh in the second half. Are you able to give us any more color around what you're planning? Jolie Hodson: Yes. So I think if you look at the overall position of wireless broadband, we do have very strong, way above our ambient share of our market share, so -- and it's a competitive marketplace. So as others look to compete in that space, we would expect that you would see potentially some movement on that. With the plans, we have looked at refreshing both price and the products that we bundle that with as well. So that's what we would expect to see in the second half. The other thing also, of course, is as 5G rollout continues, you have a broader addressable market to consider within that and therefore, the ability to lift up those wireless broadband connections as well within that. Entcho Raykovski: Okay. And my final question is around mobile. The recovery you're reporting, particularly in consumer and SME, are you seeing some of the competitive intensity coming out of the mobile market? Or is it perhaps driven by that economy stabilizing that you've talked about? I suppose if you can sort of expand on what you're seeing on the competitive front from the other operators. Jolie Hodson: I think if you think about the broader economy, obviously, as that stabilizes and starts to improve, that has a flow on a peak. There's a range of things from that -- that impact that. If we think about competition, I don't think we're in any less competitive marketplace. But what we have seen with some of the plan changes we've done, the overall value offering we've got, we've seen people stepping up in terms of -- and the plans, the mix over $65 plans growing within that reporting period. We also saw quite a strong IFP sale. And the work we've done around our IFP as well in terms of -- sorry, when I say IFP sale, the Apple launch, the new handset launch and linked to that, the step-up in IFP within that. We're seeing customers generally just looking for more value but also the opportunity to spend around that. So that's where the improvement has been in SME and consumer. I think in enterprise, what we have seen probably is while it's still a competitive market, much of that change that particularly was ARPU led has been reflected in the base during 2025. And then we have seen -- we did expect to see some in '26, and we have done, but that is stabilizing as well and connections have within that. Operator: Your next question comes from Phil Campbell with UBS. Philip Campbell: Just 3 quick questions for me. I just wanted to maybe ask a question, Jolie, just kind of standing back a little bit. Obviously, there's been quite a lot of change going on in Spark in the last kind of 12 to 18 months, a lot of head count reduction and obviously the new focus on connectivity and the new rebranding. And just kind of from your perspective, like, how are you feeling internally like in terms of the morale of the business? You're feeling as though you're getting some momentum back after that period of kind of change and disruption? Jolie Hodson: Yes. I mean we have come through a period of significant change, both in the marketplace but in our organization. The new strategy, I think, has given us a very clear focus on core connectivity, which is really at the heart of what we're doing within that mobile. I think people's excitement around the opportunity to continue to invest and see that grow and we're seeing it in those early results within that, is lifting both engagement and the overall, I guess, feeling within the organization, you can see that, too, and some of the nonfinancial metrics that we put up in terms of increase we've had in engagement over the last half. So yes, we feel like we are focused on the right things. We are seeing progress in marketplace and our people who engage with that. Philip Campbell: Okay. Awesome. Just a quick question for Stewart just on the data center final payment. Obviously, that was about $33 million lower than what was announced in middle of last year. I'm assuming that was due to the fact that the CapEx was a bit slower. But then when I look at the CapEx numbers being reported today, it doesn't really feel as though the CapEx was much lower. So I just wanted to get an explanation as to what's driving -- what am I missing there in terms of that $33 million difference in the proceeds? Stewart Taylor: Yes. No, I think broadly, Phil, you're spot on. So we -- I think when we guided in August, we guided to a range on that CapEx, and so the initial purchase price was based at the -- based on the top end of that strategic CapEx range. And those were -- I mean much of that money was spent on always commitments that we've made on land purchases, so form part of that transaction perimeter. I mean there will be other small adjustments there in terms of various working capital balances, employee liabilities and other things as we sort of work our way through what that final -- I guess what that final price is and what the final asset base is that gets transferred. Philip Campbell: So just so I think the original guidance was CapEx of $50 million to $70 million. You're obviously coming in at like $55 million. So is the kind of balance for that $33 million, is that just working capital and other stuff that's... Stewart Taylor: Yes. I mean there will be a series of other purchase price adjustments that we make in there as well, and you've also -- we probably need to consider the fact that we also have transaction costs as well. Philip Campbell: Right. Got you. Just the last question for me is just wanted to get a sense, when I speak to industry context within IT services, what they're saying to me at the moment is you are seeing a number of New Zealand corporates really kind of starting to get on the AI train and starting to wanting to deploy AI workloads and stuff like that. And then also, I think following that, Manage My Health cyber incident, there seems to be a number of customers increasingly concerned about cyber, and that was potentially generating some work. I just wondered if you guys are seeing any of that in the market kind of the side of Christmas. Jolie Hodson: I think prior -- there is more business activity than there was. But if you think about some of the bigger programs and those sorts of things, we have not seen as much prevalence of it. As we look to the second half, I think some of that activity starts to come through because also when you think about the larger sort of IT projects or things we might be involved in, there's a reasonable amount of time to contracting to then delivery to -- and that's really wherein, say, service management, we're seeing the most impact of some project work, not the annuity type of work that we have within that place. So I think there are some green shoots, but we are way off being back anywhere close to where it was previously. Operator: Next question comes from Arie Dekker with Jarden. Arie Dekker: First question just in relation to a couple of areas of guidance in terms of what's possible in 2027, particularly given 100% payout of free cash flow for the dividend this year means that the sustainability of it, there is a bit of a tightrope. So the first one, I guess, is you've sort of signaled that the 5G rollout is maturing. Can you give a bit of color as to how much of the FY '26 BAU CapEx can be removed in FY '27 associated with that 5G spend coming off and any other areas? Jolie Hodson: I think if you think about it maturing, Arie, in the 2 years prior, we invested heavily ahead of that. We'd accelerated that. So we'd put quite a lot more capital investment into both building a stand-alone core, which we now have stood up and then also acceleration. So as we look at '26, we've already bought that back from where it was, and so both '25 and '24. And I think that broadly reflects what I'd say as an ongoing normal level of mobile investment. We'll still have work to do, and I touched on, we've got about 100 more sites that we will upgrade or build out in the second half, and that will continue in '27. So I don't think mobile will be a significant reduction ahead. All we're saying is that, in this year, it has slowed a bit from where it was because we'd over -- we'd upweighted that investment. Arie Dekker: Any other areas then? Jolie Hodson: I think across other areas, we'll continue to manage. We've set out the 10% to 12% is really a focus for us in terms of the CapEx to revenue, and there's nothing that we're stepping off in relation to that. And I guess, in any given year, you can be at one end or the other of that. But given we're not out yet providing sort of '27 guidance yet, I think probably more that just focus of -- on '26 of delivering within what we have set out. Arie Dekker: And then in terms of the process for Meta, which is well underway, I mean I don't know if you want to give an update on that, sort of talked to it in the materials. But in terms of the cash burn there, have you set a drop-dead date, for example, at the end of FY '26 where you'll commit to just closing it down if you can't bring in a party to sort of help fund that going forward? Jolie Hodson: I think what we've shared is that we have a process underway. We are focused on it. We will have an update at August to provide on that. I don't have a drop-dead date for that, but clearly, we will be considering all areas of investment we make in the business, and we'll make an informed decision. Arie Dekker: Okay. Just moving to the reorganization of the revenue segments and security and high tech ex health moving into other connectivity. I mean can I read into that, that sort of further refining what sits in and out of the perimeter of core versus noncore business and then, I guess, ask if you are progressing towards a strategic review of the noncore IT businesses comprising, I guess, what's left, cloud security and procurement? Stewart Taylor: I think, Arie, Stewart here. I think probably it's more just me looking to simplify some of the disclosures. So in particular, those areas where we'd probably get, we see less questions on and less significant in the total picture. So I wouldn't read much more into it than that. Arie Dekker: Perhaps to you, Jolie, like is there a consideration being given to strategic review of the IT businesses? Jolie Hodson: I think we indicated when we did the strategy at the end of last year, our first focus is really on simplification of those businesses. We've already made quite a lot of adjustment to operating models that support those, particularly in the labor cost, which you can see flowing through. We will always continue to review all parts of our portfolio to determine whether we are the best owner at any point in time, and that will continue to be the case, whether it's IT services or another component. Arie Dekker: Yes, just a quick one. Just announced in mid-September that a COO was to be appointed, obviously, sort of 5 months on from there. Can you just give any update on the status as to that vacancy, which is obviously quite an important one [ in the process ]. Stewart Taylor: We are in the process of that recruitment. We have very competent acting COO at the moment within the business. And when I have something more to share on the process, I'll -- we'll, no doubt, update the market. Arie Dekker: And then last one for me, just returning to broadband. Just interested in what you see happening in urban versus rural with regards, I guess, churn and also in particular, fixed wireless. So I guess one of the questions I have is what are you seeing happening on the conversion of your copper disconnections and rural to fixed wireless over customers going to Starlink. And for fixed wireless, is it more competitive now in rural than it is in urban for you because of satellite's growing penetration? Jolie Hodson: I think it would be reasonable to assume that there is more competition as satellite, particularly on that copper removal process or the loss of copper connections within that, and therefore, satellite plays a role in solving it. So yes, there's definitely some component of that, that is more competitive in that space. Overall churn rates for wireless are pretty consistent, and they're consistent with our fiber as well. So it's not that we've got a load of customers coming off that. And sequentially, if you look, we -- broadly kind of the base has been stable. There's still opportunity out there. But I think as we've talked about, that's linked to further rollout of the 5G. We are looking at some plan changes within that as well, and we have already made some at the higher end of that around pricing as well. So we will look to continue to compete in that area, but there is no doubt that in rural, there would be a little bit more competition than there has been historically. Operator: Your next question comes from Wade Gardiner with Craigs Investment Partners. Wade Gardiner: I've got a couple of questions. I'll start with the guidance, small print on Slide 22. You say that the data centers were accounted for as an associate for the remainder of FY '26. But what about for the first half? Does this guidance include the data centers in there for the first half in EBITDAI? Because my understanding was the old guidance before this guidance that you gave back in August excluded the data centers. Stewart Taylor: The -- so the guidance we provided, so the -- so adjusted EBITDAI includes the first 7 months of the data center business on a consolidated basis. And then going forward, as we're a 25% owner of that, we'll obviously account for it based on our share of associate earnings. Now we provide -- the guidance we provided at -- in August had -- we had an excluding data centers set of guidance there and what that did, Wade, is that included 6 months' worth of the results, i.e. fully consolidated and based on the fact that we were then going to deconsolidate for the remaining 6 months. So it's pretty much on a like-for-like basis to that. Wade Gardiner: Right, by the 1 month. Stewart Taylor: Correct. Yes, which in the big scheme of things, we don't consider to be material. Wade Gardiner: Okay. No, no. So my understanding was that the guidance in August excludes the data centers, but... Stewart Taylor: Exclude, yes. Jolie Hodson: We provided both, so you can see, excluding and including, but the numbers are consistent to what we provided folks leading -- yes. Wade Gardiner: What about asset sale gains, which were $24 million in the half? And previously, they've sort of run -- I mean I know they jump around a bit, but I'd say, typically, they run an annual rate of sort of 25 to 30. So what have you gotten there in the guidance for those sale gains this year? Stewart Taylor: Yes. So on the full year guidance, so the other gains, and this excludes any gain on the data -- on the sale of the data center business, we'd expect that to run at about $30 million this year as well, Wade. So that's what -- that has been more heavily weighted towards 1H. Jolie Hodson: As it was last year. So you had $23 million last year. You got $24 million this year. There's no real change and neither is near around the end point of about $30 million. It's very consistent. Wade Gardiner: Okay. The enterprise and government connections, can you just sort of -- you talked about you've added 7 with some losses in the half. What should we assume that happens to ARPU as a result of that? Jolie Hodson: So ARPU doesn't really change that much as a result of that because, basically, we see the losses as more so from low connection, a bit of 3G closure and a little bit of fleet shrinkage. So where we've won new customers, they've come on, that's sort of been reflected in our overall forecast of where we thought those ARPU declines would be. So they have -- so if you think about the end of FY '25, that ARPU decline was sitting at around 13%. Now it's about 7.8%. So it's moderating because a lot of -- our book has already experienced some of that change, and we continue to win new customers in marketplace as well. Wade Gardiner: Okay. So another way to put it. I mean, you went from sort of 13% to 7.8%. What -- are you willing to put a number around or a range around what we were likely to see in the second half for ARPU in the segment? Jolie Hodson: One thing, you'll still have customers that will renew under new rates over that time. I think keeping it at around about a rate of that sort of 7% across the year is probably about right because we think about it. Contracts last for multiyears, so they don't all come up at the same time. But we feel like a large component, the government shift happened last year, not this year. Wade Gardiner: Okay. And just on Slide 8, you talked about strong pipeline of market activity. How much of that would you argue is chargeable where we should see a positive ARPU impact versus the impact really and retentions and connections rather than ARPU? Jolie Hodson: Well, I think in terms of -- well, from an ARPU perspective, we've taken pricing. We've seen mix improvements. And I think if you think about what some of this helps support, it does help support the higher value plans. You've got more to offer in there if you think about satellite, for example. In terms of stand-alone capabilities, you're looking more at new forms of enterprise charging for in relation to those private networks because they're generally around distribution-type businesses or where logistics are involved. Roaming, again, that's about making sure we remain -- we're competitive in the marketplace and things like the customer experience. So there'll be a range that will be -- attract new customers and allow you to support a shift up into higher plans. And there will be a range of things that is about just maintaining that sort of retention of customers, which when you think about our base and we've got -- we're about 6% -- up to about 5% to 6% market share higher than our sort of competitor set, then that's a really important part of what we do as well in terms of retaining the customers we already have. Operator: Your next question comes from Ben Crozier with Forsyth Barr. Ben Crozier: Just a quick question on guidance. If we look at rolling 12-month, EBITDAI is sort of sitting at $1.08 billion. And there's no DC contribution of that EBITDAI line in that second half. But if we look at what the guidance is implying for the second half. At the midpoint, I get sort of minus 5% year-on-year if we take out DCs. Can you just sort of step through what are the moving parts in the second half, sort of costs and gross profit and maybe in a few of the key revenue items? Stewart Taylor: I think -- so I mean, the way I look at it, Ben, is that we're going to deliver about 45% of our EBITDAI at 1H and about 55% in 2H. So if I look at some of the drivers -- I mean, if I look at some of the drivers of that, so some of that will be the benefit of the momentum we've got in the mobile business. There'll also be ongoing -- so half-on-half, we consider we'd continue to see ongoing reductions in labor costs. So we've got the run rate benefit of the [ RIF, FTE ] reduction in the first half. That flows through to the second half if I look on a half-on-half basis. We will have a lower OpEx base in the second half, and we'll also work -- we also have to see significant reductions in our product costs as well. So we're looking to offset some -- we're looking to book some benefits there as well. So those are broad brush where you'd see that sort of step-up half-on-half. Ben Crozier: You're still talking like labor cost savings, lower OpEx, but EBITDAI year-on-year is down. Like I assume gross profit then, your budgeting is down year-on-year. Is that fair to assume? Stewart Taylor: That's -- I think year-on-year, we'd end up pretty flat yet, adjusting for data centers. Ben Crozier: Yes. And then just on the sort of legacy business lines, other connectivity. So if you call out this migration of legacy products to modern lower ARPU solutions, sort of how far through that migration do you think you are? Are we sort of at the start of it? Are we nearing the end? Are we somewhere in -- halfway in between? Jolie Hodson: I think it depends on the different products that you're talking about. In service management, we are a reasonable way through as the customers move across into that. We've been doing that for a period of time. If you look at some of the other areas, like managed data, that will continue to happen as you see the shift from legacy WAN to SD-WAN. So probably, you still got a reasonable, I think, maybe a 30%, 40% done and still 60% to 70% to go across that because when you think about enterprise products, particularly, they're long -- you've got customers on longer-term contracts. Those changes happen as they renew or move off, but with them, often comes a lower cost of supply as well. Ben Crozier: And maybe just last one on marketing cost. Obviously, you stepped up quite a bit of the new brand campaign out there. Is this sort of the level we should expect going forward? Or do you think it will revert back to where it was a couple of years ago? Jolie Hodson: I think we -- it's important to continue to support investment in our brand and business growth. As I sort of flagged, you shouldn't replicate the first half and the second half because we've already -- we stepped that up in the prior year. But if you were to look at a kind of total year investment being the step-up you've seen in half 1 plus sort of taking H2 '25, that would give you a good sense of the kind of level. Operator: There are no further questions at this time. I'll now hand back to Ms. Jolie Hodson for closing remarks. Jolie Hodson: Okay. Thank you, everyone, for joining the call and for your ongoing support.
Operator: Good day, and thank you for standing by. Welcome to the Carrefour Full Year 2025 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Bompard, Chairman and CEO. Please go ahead. Alexandre Bompard: [Foreign Language] Good evening, everyone. Thank you for joining us for the presentation of our 2025 results. As you know, we look forward to welcoming you tomorrow morning in Massy for the presentation of our new strategic plan. Today's call will mostly focus on 2025 achievements. On a strategic note, we accelerated our portfolio reshaping, taking full control of Carrefour Brazil, disposing of Carrefour Italy and signing an exclusivity agreement last week regarding Carrefour Romania. If I come to operations, we pushed our transformation on our investments forward in our 3 key countries, and we released today financial results that show steady delivery. In a nutshell, our performance was solid, with good commercial dynamics in France and Spain, a growing recurring operating income, excluding Cora and strong cash flow generation. If we deep dive on our 3 main countries. Carrefour France core delivered another outstanding year. We continued to invest in our commercial model and in price, narrowing the price gap with the market. These efforts were recognized by customers with satisfaction continuing to improve year-on-year on NPS up by 3 points in Q4. In parallel, we opened a record 456 new convenience stores, driven by a record number of new partners joining Carrefour. We also continued the conversion of hypermarkets and supermarkets to franchise and lease management models. As a result, our group's market share increased over the year, with a clear acceleration towards year-end, reaching 22%, its highest point since 2015. This performance was achieved while maintaining strict cost control and capturing purchasing synergies, enabling Carrefour core operating margin to reach the 3% milestone. Coming to Cora & Match integration. In 2025, the group rolled out its commercial model by implementing significant price cuts in the former Cora hypermarket, substantially increasing the share of Carrefour-branded products in the assortment, underlining the promotional policy with the denser promotional intensity of Carrefour stores. On one hand, these initiatives had a temporary impact on France operating result with a negative effect of EUR 120 million over the year. On the other hand, these initiatives helped revive Cora & Match with growing traffic and market share momentum towards the end of the year. Overall, we confirm our synergies target at EUR 130 million for 2027. To finish, in Q4, Carrefour France sales were slightly up in the market, marked by consumer trade-downs on festive products. In January 2026 public data confirmed that the environment was back to a positive trend. Let's move to Spain. In Spain, we benefit from a solid momentum in a dynamic market. Food sales showed strong growth, up 2.3% in 2025, driven by fresh products. Nonfood sales are also positive. We continue to strengthen our price leadership, and we have reached our best position in the market since 2022 while further expanding our convenience store network. As a result, profitability increased by 13.5% in 2025, driven by both retail and financial services with an improvement of 45 bps in profit margin. Let's move to Brazil, our third key country. After a strong 2024, the Brazilian market is facing a challenging environment, marked by record high interest rates and negative volumes, particularly in the Cash & Carry segment. In this context, our strict cost discipline helped protect margins. In Q4, inflation was lower and led to purchasing power games. As a result, volumes were more resilient from mid-single-digit negative in Q3 to low single-digit negative in Q4. The ongoing volume improvement in January seems to indicate that the cycle trough is now behind us. In total, our group continued to execute on its transformation road map. We strengthened our price competitiveness on customer satisfaction and delivered solid progress across all our key operational priorities, particularly in private label and e-commerce. At the same time, our cost savings plan remains fully on track, delivering EUR 1.1 billion, excluding Italy in annual savings as planned. As a result, recurring operating income increased by 2.2%, excluding Cora & Match. EBITDA was stable and net free cash flow amounted to EUR 1.5 billion, excluding Carrefour Italy. Beyond financial performance, we also delivered strong results on our social and environmental commitments. We achieved a CSR Index score of 113%. In particular, our Top 100 Suppliers program continues to deliver progress. 87 of our industrial partners are now fully aligned with [ 1.5% degree ] trajectory. Reflecting this solid performance, we will propose to increase the ordinary dividend to EUR 0.97 per share, in line with our guidance of 5% increase. Following the disposal of Romania and subject to the completion of the transaction, the payment of a special dividend of EUR 150 million will be proposed. To conclude, building on our financial performance and commercial achievements in 2025, we approach 2026 with confidence in both the underlying market dynamics and our model's ability to capture consumption momentum. I now leave the floor to Matthieu for more details on our financial results. Matthieu Malige: Thank you, Alexandre, and good afternoon to everyone. It's a pleasure to be with you to cover our 2025 financial results in detail. Let's start on Slide 8 of the presentation with the details of our Q4 sales. Total sales for the quarter reached EUR 24.3 billion. Like-for-like sales were up 1.6% over the quarter. Expansion and M&A had a negative contribution of minus 0.7% over the quarter, which includes perimeter adjustments in Brazil, notably after the divestment of Nacional and Bompre o stores. ForEx had an unfavorable impact on total sales growth of minus 2.3% over the quarter, essentially reflecting the depreciation of the Argentine peso and the Brazilian real versus the euro. Moving to Slide 9. Recurring operating income for the group amounted to EUR 2.158 billion or 2.6% of net sales. As you can see, this full year recurring operating income is penalized by 2 effects. First, a negative ForEx effect of minus EUR 102 million. And then the effect of the consolidation and integration of Cora & Match, which posted a recurring operating income of minus EUR 120 million over the year. This figure includes EUR 95 million of nonrecurring integration costs as planned and guided. We stated from these 2effects, recurring operating income shows growth in absolute terms and as a percentage of sales. Let's turn to Slide 10 with more details on the performance of France. At 0.4% like-for-like slowdown in Q4 in France compared to Q3. This is due to the market slowing down with consumers trading down on festive products during the Christmas campaign. This was a surprising trend that did not continue in January as evidenced by Circana data. Circana indicates that volumes in the market were down 0.4% in November and down 0.7% in December, and turned back to positive in January at plus 1.2%. Cora & Match still weighted on like-for-like with a decrease in the average product price following price investments. Excluding Cora & Match, like-for-like sales grew by 0.8%, supported by food sales up 1.3% with an encouraging trend in hypermarkets, where food sales increased by 0.8% in Q4. The convenience format continued to post a solid performance. In parallel, we continue to expand with 107 new convenience stores opened in the fourth quarter. Over the quarter, Carrefour maintained a stable market share and managed to further grow NPS by 3 points. Excluding Cora & Match, recurring operating income for the historical perimeter grew by a strong 11.3% in 2025 with a margin expansion of 31 basis points reaching 3% of sales. Let's move on to Slide 11 with more details on Cora & Match. First, as we shared last October, the integration process for Cora & Match has been completed in Q3. Total integration costs are slightly below initial targets, a sign that the integration process has been well controlled. Integration OpEx totaled EUR 145 million versus EUR 150 million expected. And integration CapEx amounted to EUR 85 million versus EUR 100 million expected. Recurring operating income was a negative EUR 120 million for Cora & Match in 2025, including EUR 95 million of nonrecurring integration costs. Excluding these costs, recurring operating income would have been minus EUR 25 million in 2025. This figure has suffered from a decline in gross margin rate versus historicals. As you know, we deployed Carrefour's commercial model within the ex-Cora stores over the summer of 2025. We aligned prices with Carrefour's, which were 6% to 7% lower. We rolled out Carrefour private labels, leading to a 10-point increase in private label's penetration. And finally, we deployed Carrefour's more intense promotional model. We have buying synergies to compensate for a great part of this investment. But overall, this new commercial model weighs on gross margin of Cora & Match. While this is a short-term headwind on our financial performance, we are already seeing a positive reaction from our customers with number of tickets up 2.9% in Q4 and market share gains since December and an improvement of 20 points in the Net Promoter Score following the integration. With this trend, we are confident in the dynamic for 2026. With this trend and cost synergies progressing well, we confirm the objective of EUR 130 million of synergies by 2027. Moving on to Slide 12. You can see the evolution of recurring operating income in France for our legacy perimeter. We have consistently increased recurring operating income booked in absolute terms and in terms of operating margin since 2018. In 2025, we have reached the 3% mark, up 31 basis points. On this long-awaited milestone is a confirmation that all the initiatives implemented in the frame of Carrefour '26, mainly on private labels, e-commerce, cost and franchise are making their way to the bottom line while allowing for further price competitiveness. Let's now turn to our European operations outside of France on Slide 13, where we have delivered a solid set of results, characterized by improving profitability and resilient top line growth. Like-for-like sales in the fourth quarter grew by 0.9%, closing a full year of positive momentum with full year like-for-like up 1.2%. This was achieved despite a contracting landscape across the region. Performance was led by Spain posting 2% like-for-like growth in Q4 on the back of a solid market showing both positive inflation and volume growth. Carrefour Spain maintained a strong momentum on the back of commercial initiatives that are resonating well with customers. In Belgium, the environment remained challenging yet our operations have shown resilience. We ended Q4 at a slight positive of 0.2% like-for-like, securing full year growth of 0.8% like-for-like despite persistent competitive intensity. Romania also remained in positive territory with plus 0.5% like-for-like in Q4 and 1.5% for the full year. Finally, regarding Poland, the market remained highly competitive and was marked by a slowdown in volumes. Looking at recurring operating income. Europe grew by 3.7% to EUR 481 million, up from EUR 464 million in 2024. This translates into a margin expansion of 9 basis points to 2.4%. The improvement was primarily driven by a strong increase in profitability in Spain, which combined with a sound execution in Belgium, more than offset the headwinds we faced in Poland and Romania. Let's move to Slide 14 with a focus on Spain, where we continue to see a positive and dynamic market, driven by both positive volumes and prices. Spain delivered a strong performance this year, confirming its role as a key growth engine for the group. We continued to invest in price over the second half, reaching our best positioning since 2022 and reinforcing our price leadership in the country. We maintained solid commercial dynamics underpinned by a sustained price leadership. Food sales grew by 2.3% on a like-for-like basis. This was powered by a strong performance in fresh products where our focus on quality and availability is clearly paying up. Carrefour Spain also posted positive growth in nonfood, up 0.7% like-for-like. The strong commercial activity has translated into material improvements in our financial results. Recurring operating income increased by 13.5% to EUR 463 million, with operating margin up 45 basis points to reach 4.2%. Moving on to Latin America on Slide 15. We faced a challenging environment last year characterized by volatile macroeconomic conditions and currency headwinds. In Brazil, our like-for-like performance was broadly flat in Q4. This primarily reflects the slowdown in inflation and a difficult backdrop as record high interest rates have continued to penalize the market and particularly the Cash & Carry segment. However, we have seen encouraging signs in the underlying trends as food volumes sequentially improved from mid-single-digit negative in Q3 to low single-digit negative in Q4. There was sharp deflation on certain commodities in Q4, helping partially restore household purchasing power. The retail segment showed again more resilience with food sales growing by 4.3% like-for-like, with positive volumes, notably driven by our commercial strategy towards B2B customers. In the meantime, we stabilized sales at Sam's Club, and we continue to grow our e-commerce business by 41% in Q4. In Argentina, Carrefour delivered 24% like-for-like growth in an environment that remains marked by pressure on consumption. We have successfully strengthened our leadership. We achieved steady market share gains throughout the year in both value and volume. In terms of recurring operating income, our performance in Latin America remained stable year-over-year at constant exchange rate. The decline in the reported figure is entirely attributable to a negative currency impact of minus EUR 101 million in the region. Brazil delivered a recurring operating income of EUR 709 million and 4% of margin. Margin was down 7 basis points on the back of negative volumes and price investments compensated by cost savings. Argentina contributed EUR 70 million to the group recurring operating income compared to EUR 115 million in 2024. All in all, while the context in Latin America remains demanding, our market leadership allows us to navigate these cycles with resilience. Coming to our global P&L on Slide 16. Our gross margin rate came down 22 basis points, reflecting our continued investment in prices and the structural shift of our business model towards more franchise-operated stores, which naturally impacts the gross margin rate but is accretive to recurring operating income. Our strict financial discipline continued to yield results. SG&A expenses stood at 14.4% of sales, an improvement of 16 basis points compared to last year. As mentioned previously, the integration of Cora & Match had a short-term dilutive effect on the operating margin. If we exclude the scope to look at the core performance, Carrefours' recurring operating margin actually expanded by 13 basis points to reach 2.9% for the year, meaning that our core profitability improved, demonstrating the structural dynamic of our model. Turning to Slide 17. Let's walk through the P&L items below the operating line. Nonrecurring expenses decreased to EUR 62 million, reflecting lower restructuring costs this year. Cost of debt remained stable. Other financial income and expenses normalized this year after 2024 was impacted by ForEx volatility and costs related to dividend payments in Argentina. The tax charge amounted to EUR 516 million compared to EUR 302 million in 2024. The increase compared to last year is driven by 3 main factors, the increase in our pretax income, the temporary extra corporate tax for large companies in France and certain nondeductible expenses in 2025. Net income from discontinued operations was minus EUR 657 million mainly corresponding to the exit of Italy. So bottom line, adjusted net income group share reached EUR 1.090 billion. This translates to an adjusted EPS of EUR 1.60 for the full year '25. Now let's move to the net free cash flow on Slide 18. We generated EUR 1.565 billion in 2025, excluding the impact of Italy, which was a negative cash flow of EUR 260 million. That number for Italy is higher than the EUR 180 million negative for 2024, mainly due to the closing date of the sale. Indeed, as we closed at the end of November, we did not capture the traditional positive cash generation of December. This was compensated by a lower cash contribution to the disposal, as I will detail in the net bridge in a minute. Besides, the cash flow profile for the year was driven by the following elements: first, a normalization of our financial results after being impacted by the negative effects in Argentina in 2024. Second, lower restructuring cash-outs, which decreased to EUR 189 million. Regarding working capital, the contribution also normalized at EUR 263 million. As anticipated, this is much lower than the exceptional inflow we recorded in 2024. We are now back in the EUR 100 million to EUR 300 million range of annual contribution to cash flow, as guided. Regarding inventories, the level decreased by 1.2 days in total. Finally, CapEx was reduced to EUR 1.523 billion in '25 on the back of lower investments in noncore countries as we post on a number of projects during the strategic review. Net free cash flow, excluding real estate CapEx and disposals is provided on Slide 19. Carrefour generated net real estate proceeds of EUR 264 million in '25, slightly up from EUR 227 million in 2024. Disposals were actually slightly down at EUR 517 million. Real estate CapEx were reduced in 2025 on the back of a slowdown in expansion in Brazil. Excluding real estate, net free cash flow totaled a bit more than EUR 1 billion in 2025. On Slide 20, we look back at our initial assumptions for full year cash flow as shared with you in July. As you can see, most parameters came exactly in line with our expectations. As already commented, EBITDA was only stable when we expected growth. Cora & Match and weaker markets in Q4 in France and Brazil explain most of the gap. Reversely, our capital expenditures came below initial outlook as we decided to slow down our investments in perimeters under a strategic review. Moving on to total net debt on Slide 21. Net debt amounts to close to EUR 4 billion on December 31, 2025. Net free cash flow over the last 12 months amounted to EUR 1.3 billion and covered dividend payments and tax paid on 2024 share buyback for a total of EUR 866 million. M&A was an outflow of EUR 106 million, including the acquisition of minority interest in Brazil. Finally, the sale of Carrefour Italy impacted net debt by EUR 181 million, a lower amount than the planned EUR 240 million cash injection due to the closing debt and working capital variation. Let me now detail a few numbers relating to the disposal of Carrefour Romania on Slide 22. This transaction is based on an enterprise value of EUR 823 million. This implies a valuation multiple of 4.8x 2025 EBITDA, which we believe is an attractive valuation of the asset. You will note that operating margin was 1% in '25 and net free cash flow was a negative EUR 53 million. The closing of the transaction is subject to customary regulatory approvals and is expected to take place in the second half of 2026. A quick word now on capital allocation on Slide 23. Carrefour continues to follow its disciplined capital allocation strategy, ensuring strong shareholder returns and maintaining a strong balance sheet. At the upcoming AGM in May, we will propose an ordinary cash dividend of EUR 0.97 per share, reflecting a 5.4% increase compared to last year. In addition, subject to the closing of the disposal of Carrefour Romania, we will propose a special dividend of EUR 150 million. This EUR 150 million represent roughly 30% of the enterprise value, excluding IFRS 16. This EUR 150 million represent EUR 0.21 per share, bringing the total dividend to EUR 1.18 per share. This represents a cash yield of approximately 8.3% on the basis of the share price as of December 31, 2025. This concludes my presentation. I thank you for your attention. Alexandre and I are now available to take your questions. Operator: [Operator Instructions] And our first question today comes from the line of Sreedhar Mahamkali from UBS. Sreedhar Mahamkali: If I can maybe just get you to help us with 3 things. In terms of the outlook, you made some qualitative comments but there is consensus expectations out there for EUR 2.4 million of ROI. Is that consistent with what you see in your qualitative comments? So that's the first question. Secondly, Spain, if you could just explain a little bit more, there as a big step-up in the second half performance, it looks like. I think Spain was up 9% in the first half, and now it's up 13%, 14%. Was there anything to do with the base, i.e., provisioning in the financial services a year ago being higher and not as high this year. If you could just explain what else drove that really strong commercial performance in Spain? And thirdly, just very quickly on France, you've talked about improving position, underlying market share so seems to be grinding rather than firmly moving forward. Clearly, externally, also your price position has improved over the past 18 months. Is this enough? Or do you need to do something materially different in France to move back to firmly gaining market share. Alexandre Bompard: Thank you for the series of question. Maybe a few words on 2026 even if the main points will be developed tomorrow morning. But just to answer your question, we are confident in 2026 for a number of reasons coming from good market outlook, solid underlying business dynamics at Carrefour and supportive technical swings. So if I jump to the business outlook for our key markets, we do think that France has delivered a very solid performance when analyzed without Cora & Match based on our own strategy, but also on a solid French market that turned positive to volumes since Q2. We have positive volumes in the French market since. Q2. It remains extremely rational as we had expected, and we anticipate the same type of market trends for 2026. And the initial hampers for January reinforce our confidence. The public data shows that volumes are positive in January while it was negative in December because of trade-offs on festive products. So that's for France. Spanish market was solid -- very solid last year, probably the best in Continental Europe. We had a very, very good level of competitiveness. We are a price leader and we reinforce our price leadership. We see no reasons for a change in business trends there, but very solid macro drivers. And we see no reason why we wouldn't continue to reinforce our leadership in price. So we are very positive in Spain. Last, Brazil. So the conviction we have is that we probably turned the corner in Brazil with the macro. Volumes were better oriented in Q4, low single-digit negative, while mid-single-digit negative in Q3. As Matthieu said, we saw a decrease in commodity prices, which are an important part of our sales. It has strengthened our customers' purchasing power. And I would say, besides we know by experience that election years often mean government support to consumption, which should also help. So we really think we have turned the corner in Brazil with macro, and we have good prospects for 2026. And of course, it is reinforced by our price leadership, by the cost -- also by the cost-saving plans we have developed throughout the year. So the outlook of the market and the good business dynamics of Carrefour convince us that the 2026 year would be positive. Besides, we have a bunch of positive technical. The integration cost of Cora & Match are now behind us and they are complete. Since the end of the year, we see that the stores are ramping up, better ticket, better market share, better like-for-like as well as the synergies. And we do think that the year will be positive in terms of recurring operating income for Cora. Last one, the reduction -- the additional EUR 75 million reduction in cost of debt, thanks to the restructuring of the Brazilian debt last year. So all in all, you see that we have a good level of confidence with the market on our own business dynamic, reinforced by technical swings. So that's for the outlook. For Spain, you're right, the trend was very positive in the second part of the year. To be honest, we see this trend for a few quarters now. The team has made a very good job to reinforce the price positioning. The market was positive in Q4. Same thing in January. So we have a good level of comfort about our situation in Spain. And financial service contributes to the improvement of the recurring operating income also. When I come to your last question about France, we won't change what is working and the conviction we have is that we invested the right amount to stabilize our market share including Cora & Match in Q4. We plan to continue to invest in prices to drive more customers back to our stores and to retain them. We can finance that through our cost savings dynamics and our buying alliance, Concordis, and we will talk more about this tomorrow morning. Sreedhar Mahamkali: Got it. Just really to follow up. I'm trying to understand if that confidence equals to or is consistent with the expectations out there for 2026 operating profit? Or do you think it's a bit too early to talk to a consensus number in the year? Matthieu Malige: Let's keep it for tomorrow, Sreedhar. There will be much more granularity given including on '26. And so let's keep it. Operator: And your next question comes from the line of [ Fabien Lemoine ] from Bank of America Securities. Unknown Analyst: Two, if I may. First one, can you give a bit more color on the 30 bps margin improvement you see in France. So what was really the operating leverage that you've seen? Is it about volumes, cost savings, certainly combination of 2. But can you potentially explain a bit more -- give a bit more granularity on this 30 bps margin improvement in France, excluding, of course, Cora & Match? Second thing, we heard in the press that you would be potentially considering the disposal of some of the Cora stores. So any comment there? Are you happy with the 60 hypermarket that you've got there? And the last comment -- question is, can you give us the amount of synergies that you had for Cora in 2025 because it was positive, but how big was that? Alexandre Bompard: Thank you for the question. So you're right. In France, it's a very important milestone for us to reach 3% profitability. We have doubled this number in a few years. And that's the result, I would say, and this year also a very constant strategy. This year, we have delivered a high level of cost savings in France. It has enabled us to have a good dynamic in terms of market share in volume. The market was positive in volumes in 2025, and it will be in 2026. We have a good dynamic on e-commerce. We have a good dynamic also on convenience store with record number of opening this year. All in all, it has enabled us to reach this very important milestone, which is the result of a very solid, steady and constant strategy we are leading. Matthieu Malige: On Cora stores, so there's been rumors that there were discussions on a very small number of stores where we are thinking about the perimeter, which is, again, just a full maximum of stores, which is quite typical when you have made an acquisition. We are just checking if the stores will create most value in our network or in another network. But it's just high level thoughts, no decision taken. Can you exactly repeat your third question? Unknown Analyst: Yes. It was just about the synergy with Cora in 2025. You saw a chart when you obviously benefited already from some of the synergies in 2025, just to guesstimate what the amount was. Matthieu Malige: So as you saw on the graph, there is no specific amount. What's interesting is -- so it's a relatively small number so far, which -- to make it more interesting, which is a mix of, in fact, quite good cost synergies and the work has been done very, very well there. But this is compensated by negative so far commercial synergies, as you saw on the recurring operating income. So the net amount is relatively small so far. But as far as 2026 is concerned, we're quite comfortable because, again, the commercial dynamic is improving very, very quickly. And the cost dynamic is here and it's just going to be reinforced. So that's why we have quite good level of confidence and even visibility on the ramp up of the synergies for '26 and good level of confidence for '27 because we see that the underlying trend is here. It's gaining traction and customers are clearly accelerating their visit and even sales despite price decrease, even sales at [ tax costs ]. Operator: Your next question today comes from the line of Francois Digard from Kepler Cheuvreux. François Digard: First, on the convenience stores like-for-like in Q4, it's a bit weaker than it used to be. Is there any trend? Anything to comment on that? That's the first question. Then could you highlight the moving parts of your cost of debt with minority buyout financing on one hand, but the refinancing in Brazil starting to contribute on the other hand? And what should we expect in terms of level of financial cost next year? And third, if I may, it was quite surprising to see the CapEx going down. Could you help us to understand what is underlying in the amount? What is there to stay -- what -- how do you consider that in percentage of sales, for instance, to what do we have to keep in mind for the future, whatever the perimeter is going to be? Alexandre Bompard: I would take very quickly the first. No, nothing new on the dynamic of convenience. I would say maybe only the fact that they have probably suffered a little bit also by the trade-off on festive product at the end of the year. But the dynamic of the year has been very, very good under the number of new stores, the commercial dynamics, the implementation of the new concept that we have tested this year is very positive also. So everything is positive with the convenience and nothing special on the commercial dynamics in Q4. Matthieu Malige: On your second question, Francois, regarding financial expenses, so indeed, the -- so we're expecting as planned, an additional EUR 75 million of contribution to net free cash flow, which is a post-tax number for '26. We already had EUR 25 million captured in the 2025 cash flow. So the net cost of debt really that sub line for 2026 is planned to decrease quite significantly with that number, gross of tax impacting the line. Then CapEx. So a number of arbitrage have been made during the year. So first, expansion in Brazil has slowed down. It has slowed down in the market on the back of the environment that we described. It has also slowed down at Carrefour, and we know that this expansion at Atacadao is quite costly as there are some real estate involved. We have also cut a number of projects and development on the CapEx of the smallest countries. As part of the strategic review, we said that it was meaningful to make sure we have just the right and minimum level of CapEx in these markets given the review undergoing. And then in France, we increased the CapEx. You will see that in the detailed numbers, we increased the CapEx. As Alexandre announced at the beginning of the year, we want to invest more on 2 main topics. First one was in the transformation of the stores and development of some commercial concepts, and we talk more about that tomorrow. So we have invested more on that. And we have also invested more on our logistics, which was also part of the plan to ensure smooth efficiency of our operations and also reduce our logistics costs. Operator: And your next question comes from the line of Geoffroy Michalet from ODDO BHF. Geoffroy Michalet: I have 2 questions. First one is on capital allocation. What was the driver that led you not do a new share buyback? I mean how do you intend to use the Romanian proceeds since you will spend only, let's say, 30% of the proceeds in exceptional dividend. And the second question is on the relation with the unhappy franchisee in France. We've seen reports in the press. And my question was, how is your feeling or thought as of now with the latest development. Matthieu Malige: Thank you very much, Geoffroy. So indeed no share buyback. We still -- we know that we have this tax in France, which impacts us significantly. Then it's relatively small amount this EUR 150 million. So like we did last year, we have elected for special dividend. Then Romania, so we wanted to have a portion of the proceeds to come back to shareholders as the valuation was quite a good one. The rest remains on the balance sheet -- will remain on the balance sheet for flexibility and a number of opportunities. And so that will be discussed also tomorrow as part of the capital allocation section of the strategic plan. Alexandre Bompard: On your second question, you know the main numbers. So we opened almost 500 new stores this year. We have 6,000 candidates to new franchise stores. We are not far from 6,000 stores in France. So the convenience stores for the franchise is working extremely well. We have this agreement with a slight number of franchisees. I request that as we already told, the door is always open to discuss and to find a definitive agreement. And I'm sure that in the future, we will manage to do that. Operator: We will now take our final question for today. And our final question today comes from the line of Rob Joyce from BNP Paribas. Robert Joyce: Three from me as well. So the first one, just to understand the base and how we think about profit growth in France. So I think originally, Cora was going to be EUR 75 million of recurring costs in ROI. Is this now EUR 145 million, just to confirm? And then do any of these reverse next year? And should we be thinking of Cora? Do we have any more costs to incur in '26? Or is it growing profits from here? And second one is just thinking about that free cash flow target, I think you had at EUR 1.7 billion for 2026. Just want to understand if that's still one you're confident in achieving. And then the final one, potentially related, just in the main release, there seems to be quite a lot more disclosure on factoring of receivables, now mentioning France as well as Brazil on a total balance of around EUR 1.4 billion in factored receivables. Can you talk us through what you're doing in terms of factoring receivables and how this impacted the working capital in 2025? Matthieu Malige: Thank you, Rob. So first question on one-offs. So I mentioned -- so I refer to Page 11 of the presentation. So I think that there's 2 elements. So first, the total amount of integration OpEx accounts recorded on H2 '24 and full year '25 indeed amounted to EUR 145 million. That compares to an initial guidance of EUR 150 million. So as I said in my speech, we have very well controlled that amount. Now looking just at 2025, the extraordinary OpEx are just EUR 95 million, which are accounted in the recurring operating income of minus EUR 120 million. So let's be clear, integration is complete. There will be no more integration costs, OpEx, nor CapEx next year. This is done. So now Cora & Match is really a normal and going concern business. So that's why I flagged the minus EUR 25 million for the euro ex one-offs. I think this is the base. I have explained that we have some pressure from all the commercial investments that have been made, but the commercial dynamics, which was by construction, quite slow at the beginning is ramping up. So we have much more positive prospects for 2026. Now on free cash flow. So you're right, we have this EUR 1.7 billion target. So 2025 is at EUR 1.565 billion. There's a number of exceptionals in this number that I'd like to flag and which obviously will disappear. So for next year, obviously, the Cora & Match integration cost of EUR 95 million that I just mentioned will not be present. They have also weighed on the net free cash flow. Then we will benefit from EUR 75 million from the refinancing of Brazilian debt. And you may remember, I'm sure you remember, that in H1, we had a negative EUR 80 million working cap impact at Cora. That was the first time that we consolidated Cora on an H1, which is typically a negative net free cash flow semester due to the seasonality. Obviously, that would be part of the historicals in 2026. And so we won't have that benefit. So this is all in roughly EUR 250 million. So you see that the EUR 1.7 billion is at sight for 2026. We will come back in more detail on the outlook for '26, as I said to Sreedhar, tomorrow. Final question is on receivables. So we started, as you flagged, to disclose the number of receivables, which is sold. This is mainly -- and I think we already commented on that in the past. This is mainly the credit card receivables that we have in Brazil. As you know, we have a few years ago, started to accept credit cards. Then we used historically to accept only cash payments. Credit cards, you get the money after 30 days. So you have a receivables that is created. And we expanded the facility through 3x installments, which for our consumers, which is appreciated in the current environment. And so it means that we get the money after 30, 60 and 90 days, 1/3 each, obviously, creating more receivables. And so these receivables are sold not entirely, but that's a way to finance the increase of receivables. We don't even sell all receivables, so we finance a little bit of through our EBITDA generation, but that's the financial resources that we use, and that is disclosed in our financials. Robert Joyce: And what's happening in France, sorry, Matthieu, in terms of the receivables? Matthieu Malige: We have some receivables relating to franchisees. So the bulk is in Brazil. Then we have some receivables from franchisees, something we developed our activity with franchisees with an increase of receivables. And so again, a portion of the receivables is sold to financial institutions to limit the negative impact on the working cap. Robert Joyce: And the year-over-year impact, just to round out the question? You have the year-over-year impact overall? Matthieu Malige: So overall, selling receivables, it's neutral year-on-year. And so it means that the increase in activity and increase in receivables is somehow negative on the net free cash flow of the year. Operator: Thank you. That was our final question for today. I will now hand the call back to the room for closing remarks. Alexandre Bompard: Many thanks to all of you. See you tomorrow to discover what's next. Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Fletcher Building Fiscal Year '26 Half Year Results Briefing. [Operator Instructions]. I would now like to hand the conference over to Mr. Andrew Reding, Managing Director and Group Chief Executive Officer. Please go ahead. Andrew Reding: Good morning, everyone, and thank you for joining us for Fletcher Building's half year results for the 6 months ended 31st of December 2025. Turning to the agenda on Slide 3. I will begin with an overview of the first half of financial year '26 and the key themes for the half and then step through our operating performance across the divisions. Will Wright, our CFO, will follow with a detailed review of the financial results, and I will then return to discuss our outlook for the remainder of the year. Turning to Slide 5. Overall, conditions remain tough, particularly in New Zealand. And whilst we have some earlier operation -- early operational and efficiency improvements from the implementation of our strategic plan, we still have a long way to go. There are 5 key messages from the half. Firstly, our performance was mixed across the period with quarter 2 volume improvements unable to fully offset quarter 1 weakness. Secondly, our core businesses demonstrated resilience despite subdued markets. Thirdly, we continue to exhibit disciplined capital allocation. Fourthly, further cost-out initiatives were implemented, and these will increasingly benefit the second half. And finally, we made significant progress on portfolio simplification, including the divestment of Construction. Slide 6 shows the tangible progress we continue to make on our turnaround plan. Starting on the left-hand side, over recent months, some of the key initiatives we've executed on are the Australian and Steel divisional restructure, the first phase of corporate restructuring, reduced forward capital commitments and implementation of the decentralization restructure. In the middle column, our short-term focus continues to be on key strategic priorities that simplify our business and ensure that we have a more robust balance sheet going forward. We'll now focus on 3 key strategic priorities, in particular, completing the construction divestment, completing the sale of Felix Street and progressing the residential and development strategic review. Finally, over the medium term, we are going to continue to embed the new operating model, simplify the portfolio further and reset the dividend policy once we move into the lower half of our net debt target range. Turning to the Construction divestment on Slide 7. You'll already be familiar with the terms of the deal announced last month. This is a major step in simplifying our portfolio and strengthening our capital structure. The headline sale price is $315.6 million, and there is a potential increase subject to contract outcomes of up to $18.5 million. After adjustments and transaction costs, we expect net proceeds of around $300 million to $315 million, and all of this will be applied to debt reduction. Regulatory approvals are underway, and our current best estimate of completion is during the first quarter financial year '27. VINCI knows Fletcher Construction well and has a deep commitment to New Zealand and the country's infrastructure pipeline. That makes VINCI an excellent long-term owner for the business and its people, customers and partners. On Slide 8, we have a brief overview of the group financials for the half. Overall, you will notice our performance was broadly consistent year-on-year. This is a creditable performance given the continuing weakness in the New Zealand and Australian building sector, particularly during the first quarter. Revenue was broadly in line with the prior period at $2.9 billion, down just 0.5%. Continuing operations EBIT was $145 million, nearly flat year-on-year. On a like-for-like basis, including discontinued operations, it was $151 million compared to $167 million in the first half financial year '25. Net profit from continuing operations was positive at $45 million, and this is the first positive result since June 2023. These results are supported by cost-out initiatives and market share gains in key businesses. Net debt increased to $1.16 billion. This is below our internal expectations and reflects disciplined working capital management and capital allocation decisions, partially offsetting historical residential land purchase commitments of $151 million. Cash flows from operating activities improved materially to $156 million compared to $87 million in the prior period. Overall, the core businesses delivered stable performance despite challenging trading conditions in the first quarter. Moving to Slide 9. Despite the market environment, operational execution across the group remains strong. Firth opened its new flagship batching plant in Auckland. Golden Bay delivered a resilient result and lifted coal substitution. Humes added 3 new branches, enabling a market share growth initiative and Winston Aggregates advanced recycling initiatives and established a quarry joint venture. Winston Wallboards successfully trialed up to 10% recycled content in plasterboard production, and Laminex Australia delivered $14 million of cost out whilst Fletcher Insulation commissioned its new acoustic panel plant. These actions help demonstrate the underlying operational momentum we're building. I'll now turn to operating performance. Over the next few slides, I'll step through divisional performance and the demand backdrop across New Zealand and Australia. Slide 11 provides a snapshot of performance across the 5 divisions. Overall, a mixed bag. Light Building Products grew EBIT despite the environment. Heavy Building Materials experienced some margin pressure, reflecting softer volumes and cost inflation. Distribution remained challenged with further margin weakness. However, we have seen early signs of stabilization nearing the calendar year-end, and we continue to monitor that closely. Residential and development volumes were materially lower, owing to phasing of key developments, while product mix changes due to bulk section sales also impacted on earnings performance. Construction now discontinued, experienced reduced activity as key projects completed and pipeline phasing moved out. On Slide 12, we can see that New Zealand demand has remained subdued, especially in the first quarter. Wallboard volumes were broadly flat, and we're seeing very gradual improvement in daily sales. Aggregates volumes were down more than 13%, owing to weak roading activity and further major project delays. Golden Bay volumes were flat year-on-year, but up 4% versus the second half of financial year '25. PlaceMakers frame and truss volumes continued to recover with a strong December. However, intense competition again means margins are challenging. Humes was materially impacted by civil and subdivision markets, which have remained extremely weak over the last 2 years. In general, competitive intensity remains high across many categories, keeping margins under pressure. In comparison, Slide 13 shows how Australian volumes were more positive. Laminex Australia achieved 6.6% growth, supported by increased activity in residential renovation and competitor supply constraints. Fletcher Insulation volumes improved owing to the shift towards higher density products under updated building codes and Iplex Australia volumes varied by segment, being strong in Electrical and Plumbing, but softer in Civil. Stramit volumes were below the prior corresponding period on a 12-month rolling basis, but when compared on a 6-month basis, have started to show improvement. Overall, we're seeing a more balanced environment than New Zealand. Also, our ongoing cost-out efforts have positioned the Australian businesses well for operating leverage as volumes recover. Turning to Slide 14. Residential and development volumes were 27% lower than the prior corresponding period with 223 units taken to profit. You'll see in the chart at the right, this was the second lowest half since financial year 2020. Bulk land sales formed a higher proportion of the mix, so margins were lower and thus it's difficult to compare to prior years. Weekly net sign-ups averaged around 10 per week compared to 16 last year, reflecting cautious buyer behavior. I will now ask Will to address the financial results in detail. William Wright: Thank you, Andrew, and good morning, everyone. At a high level, this is a result that clearly reflects a challenging operating environment, particularly during the first quarter. While volumes across a number of end markets remain subdued, particularly in residential and distribution, we are seeing meaningful progress on cost reduction, cash generation and transitioning to a more resilient balance sheet. Moving to Slide 16, the income statement. Revenue for the half was $2.9 billion, broadly flat year-on-year. However, the headline number masks some quite different underlying trends. On the positive side, we saw volume and share gains in businesses exposed to renovation-driven demand, such as Winstone Wallboards and Laminex. These gains were offset by lower residential settlements, weak infrastructure demand and compressed margins in our distribution businesses. Warehouse and distribution and SG&A expenses have seen an annualized decrease in structural costs of $63 million with approximately $31 million of benefit in the first half. Like-for-like EBIT, including discontinued operations was $151 million in the half compared to $167 million in the prior corresponding period due primarily to lower construction earnings. EBIT from continuing operations was $145 million, down just $2 million year-on-year. This is despite significant volume headwinds and reflects disciplined cost management. Turning now to discontinued operations, which relates primarily to the Construction division. For the half, discontinued operations recorded revenue of $519 million and a net loss after tax of $56 million. EBIT was modestly positive at $6 million, but this was more than offset by $81 million of significant items made up of additional provisions for legacy vertical projects, closure and wind-down costs in the South Pacific operations and legal costs associated with legacy construction claims. The transaction materially simplifies the group, reduces risks and improves the quality and predictability of earnings and cash flows going forward. Any cash flow and cost-out benefits from the divestment are expected to be realized from FY '27 onwards. Slide 18 illustrates the key drivers of year-on-year movement in EBIT. The most significant headwinds were lower volumes, particularly in residential and development and distribution as well as in infrastructure-exposed businesses, alongside ongoing cost inflation in areas such as energy, labor and leases. These impacts were largely offset by a combination of cost-out initiatives, market share gains in core products and improved operating discipline across the group. Cost out has been broad-based, spanning manufacturing efficiencies, procurement, overhead reduction and simplification of organizational structures. We have more work to do on underperforming businesses with 8 business units losing money in the first half with a total negative EBIT contribution of $12.9 million. Turning to the balance sheet. Invested capital is $5.9 billion, down from $6.3 billion at December '24, reflecting portfolio simplification, asset impairments taken in prior periods and disciplined capital deployment. Working capital is well controlled with inventory and debtors both lower than the prior year, reflecting a more balanced and less volatile approach to managing trading cash flow. Residential and development invested capital increased during the half, driven primarily by $151 million of land purchases. We expect a further $65 million of purchases in the second half with additional commitments of $100 million in FY '27 and circa $35 million in FY '28. Overall, the balance sheet is in a stronger position than 12 months ago, and we remain focused on further simplification, lease reduction and disciplined capital allocation. Turning to Slide 20. Net cash flow from operating activities was $156 million, up from $87 million in the prior period despite a challenging trading environment and significant residential working capital investment as a result of land purchase commitments made several years ago. This reflects strong EBITDA conversion, disciplined capital management of working capital and legacy construction cash inflows. Investing cash outflows primarily relate to growth projects, which have been in flight for a number of periods, including Taupo OSB plant, new frame and truss capacity and the Auckland first batching plant. Moving to Slide 21. Central costs reduced materially year-on-year, reflecting the actions taken to simplify the organization and decentralized decision-making. Group technology costs reduced following the restructuring and rationalization of digital projects. Corporate overhead costs also reduced, reflecting a smaller head office, lower insurance costs and lower short-term incentive accruals aligned to first half performance. As the portfolio continues to simplify, particularly following the construction divestment, we expect further opportunities to rightsize central functions. Turning to Slide 23. Working capital volatility has been a key focus area for the group. Over the past 2 years, volatility in trading cash flows has required the group to maintain elevated levels of debt headroom. As you can see on the chart, in the chart on the left, whilst we have more work to do, the actions taken to improve discipline are now delivering more stable outcomes with movements returning closer to long-run averages. As you can see on the chart right, portfolio simplification, including the exit of construction and potential changes in the residential division are expected to materially reduce working capital volatility over time. This will support a more efficient capital structure and reduce reliance on excess liquidity buffers. Capital allocation remains tightly controlled with a focus on improving ROIC. CapEx and investments totaled $161 million in the half, broadly flat year-on-year. As you can see in the chart, spend was prioritized towards in-flight projects, including continued investment in Taupo -- in the Taupo OSB plant, frame and truss capacity and concrete manufacturing assets. The divestment of construction will result in a meaningful reduction in future CapEx requirements, particularly around asphalt plant renewals previously planned for FY '27 and FY '28. Excluding OSB, stay-in business and growth CapEx was down $17 million versus the prior corresponding period. We remain committed to disciplined capital deployment and expect overall CapEx to moderate as the portfolio simplifies. We now expect full year CapEx to be approximately $290 million to $310 million, down from the previous guidance of $320 million to $340 million. Moving to Slide 24. Lease management is an important lever in improving ROIC and balance sheet resilience. Continuing operations lease liabilities reduced by $172 million, driven by a reassessment of our lease renewal assumptions and site exits. Construction divestment is expected to reduce lease liabilities by a further $76 million, materially lowering group exposure. The inclusion of right-of-use assets into ROIC calculations has helped to ensure lease impacts are fully reflected in performance assessment. Turning to funding and liquidity. The group continues to make progress in transitioning to a simpler, lower cost, more resilient cap structure. The USPP debt was fully repaid and canceled during the period with associated break and make-whole costs recognized in funding expenses. The decision to exit the USPP market simplifies the funding mix and covenant package and lowers the effective interest rate. We also established a new $200 million 2-year liquidity facility and extended our $325 million tranche of the syndicated facility to FY '30. At period end, we had $750 million of undrawn facilities, providing good liquidity headroom for our business. Average debt maturity is 2.3 years. And whilst FY '28 maturities are elevated, this is a reflection of the transition of our capital structure, and we are already working on refinancing options. Pleasingly, Moody's reaffirmed our rating, and we remain committed to maintaining investment-grade credit metrics. Finally, net debt on Slide 26. Net debt increased to $1.16 billion compared to $999 million at June '25. The primary driver of the increase was residential working capital investment, particularly the $151 million of land purchases during the half. Importantly, excluding construction proceeds, we expect full year FY '26 net debt to be broadly flat compared to FY '25, reflecting stronger -- expected stronger operating cash flows in the second half. Net debt reduction remains a clear priority and underpins our longer-term objective of returning to a more resilient capital structure. I will now hand back to Andrew to conclude on broader outlook. Andrew Reding: Thank you, Will. I'll now turn to the outlook on Slide 28. In New Zealand, we think volumes will remain soft and meaningful improvement is not expected until calendar 2027. In Australia, early volume trends in Laminex and [ Setra ] insulation are encouraging, although conditions remain mixed. Margin compression will persist, but our cost-out program will help offset these pressures. As well as the recently announced sale of Felix Street, we also have other sale processes underway for industrial sites that have the potential to generate EBIT. If achieved, this should offset some of the weakness in residential and development and allow for some further modest improvements to the balance sheet. Portfolio simplification remains on track with the construction divestment currently estimated to complete in the first quarter FY '27, while the residential and development strategic review is ongoing. Please note, we won't be making any comments about the strategic review today in order to preserve the confidentiality of the process. Concurrently to this portfolio simplification, our capital structure simplification has also continued at pace. Overall, we are confident that the changes currently taking place will make Fletcher Building more simple, more resilient and more profitable throughout the economic cycle. With that, we will close the formal presentation and take your questions. Operator: [Operator Instructions]. Our first question comes from Kieran Carling with Craigs Investment Partners. Kieran Carling: Just thinking about the balance of the year, you've obviously been fairly clear with your messaging around subdued market activity and margin compression, but you've called out some benefit -- some further benefits to come with cost out in the second half. From what I can tell, consensus EBIT stripping out construction, is it about $350 million for the year, which implies a 10% growth rate in the second half. Do you think cost out will be enough to get you there? And can you maybe just touch on what benefit you expect from further land sales and how that will play into the resi division? Andrew Reding: So I'll take the second part first. Look, we have a number of opportunities to maximize the -- or optimize our footprint, both here and in Australia. But we don't have much control over the timing of those and neither do we want to turn around and start putting information into the marketplace that might impact on our ability to negotiate. So we're not going to be saying a lot of those going forward. In terms of cost out, we have, as you know, talked about cost out for quite a long period of time now. When we did the cap raise, we talked about having an annualized total of $200 million of cost out. And of that, we think structurally, there was about $17 million, and we'd expect about $8.5 million of that to come through in the first half of FY '26. In May '25, we talked about a further GBP 15 million out, which is all structural and there's probably about GBP 7.5 million of that comes through in the first half of '26. And on the Investor Day, we announced another GBP 30 million of structural out, which again would probably equate to about GBP 15 million out in the first half. So in the first half, we've got GBP 45 million of cost out, GBP 31 million of which is structural. We've also announced at the ASM that we were looking at a further GBP 100 million cost out with a run rate of around about GBP 50 million. So I think reasonably, we can expect some of that to come through. But my hesitation on saying it's exactly going to be GBP 50 million is that we are seeing changes in market conditions. And obviously, we will turn around and move or change the nature of our cost out according to what we see in terms of the market activity. And the best example here, I think, is one, for example, like ready-mix concrete where we would be cutting our nose off to spice our face if we were making ready-mix concrete truck drivers redundant when we're actually seeing a lift in some of the volumes there. So it's slightly indetermined exactly how much we'll be taking up in the second half. Operator: The next question comes from Ramoun Lazar with Jefferies. It appears that Ramoun has dropped off the line. The next question is from Rohan Koreman-Smit with Forsyth Barr. Rohan Koreman-Smit: Just on the volumes, it looks like you've done a pretty good job taking market share to offset the cycle, and there's been a bit of a I guess, strategic direction that you've taken. You're talking to some signs of volume improvement in the underlying market now. When do you switch from market share focus to margin focus? Andrew Reding: It's a very good question. And I think the trouble is it's very dependent on which business you're talking about. I mean there will be a point in time where if you're using margin to drive market share, you'd want to swap to a higher margin rather than. So it's very business unit dependent. Rohan Koreman-Smit: Do you think you're at the point when you'll soon be switching some business units to more of a margin focus than a market share focus given that you do have some signs of underlying activity picking up? Andrew Reding: The answer is yes. But again, it's so much dependent on which business unit. If you take Golden Bay Cement, for example, if we see increases in volumes in cement demand across the market, I would expect to see selling prices rise. In aggregates, if aggregates started to pick up to where our expectations were, one would expect to see average selling price rising. So it is very much dependent on which activity you're talking about. Operator: The next question comes from the line of Brook Campbell-Crawford with Barrenjoey. Brook Campbell-Crawford: Just keen to hear your views around the distribution business. Obviously, had a pretty tough period. But if you look at a couple of years to mid-cycle, how do you think the earnings power of that business now should look like given your position and sort of what's happening across the various players? I guess what I'm trying to understand is sort of EBITDA averaged about EUR 100 million over the last decade. Do you think get back to those sorts of levels? Or has the market changed such that we should think about perhaps a lower level of earnings? Andrew Reding: Yes. Look, I'm not really going to comment on what we think those earnings might be in the mid-cycle. What I will comment on is the fact that we've carried out a very deliberate turnaround strategy at our distribution division. So we know that if you get your frame and trust volumes that the value of the balance of house is somewhere in the order of $4 to $1, depending on the precise projects you're looking at. And we know that there is stickiness. So if you've done the frame and trust, you will tend to end up with the balance of house. So we've carried out a very deliberate strategy of being competitive on frame and trust, which is why there's been some margin pressure there. But we would expect as the balance of house comes through for the mix to margin that's being demonstrated to rise. And that's also been a focus on increasing its market share. So look, we think we have a very strong distribution business, and we think the actions that we've taken will start to come through in the not-too-distant future. Operator: The next question comes from Lee Power with JPMorgan. Lee Power: Andrew and Will. Andrew, just following on from Rohan's question. Like if I look at your Frame and Truss comments, I guess that the backdrop is not amazing, but improving volumes in December estimation, volumes got positive momentum. You talked about positivity in concrete. Like your share comments notwithstanding, like how much do you think of what you're seeing is share versus early stages of a market recovery? Because I would have thought some of these things would be a decent indicator for resi generally. Andrew Reding: Look, because we have such a broad spread of activities here, it's very difficult to turn around and give you a blanket answer across all. So we do know, for example, we've seen residential consent start to pick up towards the end of last year. But we also know that when you get a consent come up, it's 9 months to a year before you see the slab being put down and there being meaningful activity from it. We have seen a bit of an increase in some of the commercial inquiries coming out, and we do have a forward workload of commercial concrete, which is slightly ahead of where we were last year. But each of these activities, you have to look up very much on their own merits. So it is very difficult to turn around and give you a single answer that covers everything. Lee Power: And then just a follow-up. William Wright: I was just going to say, quite pleasingly, in most businesses, we have stopped losing market share, which is really positive. And it is starting to lift in a number of areas. And so when you do see lifting volumes, it tends to be improving market share rather than a broad-based recovery. Lee Power: And then just a follow-up. You were talking about the -- I think it was $151 million just around continuing to purchase land and development business. Is there any way or ability to change? I guess there's options around that land, but is there any ability that you have to change or flex that spend profile given obviously the business settlements as we see now are not obviously looking amazing. William Wright: No, unfortunately not. These are commitments that were signed up to, in some cases, many years ago. And that $151 million is after we have pulled all levers and flex what we can. And so just to sort of reiterate, there's a further $65 million in the second half of this year as well, as well as about $100 million in '27 and $35 million in '28. What we can do about these forward commitments all forms part of the strategic review and process that we're going through on the residential business at the moment. Operator: The next question comes from the line of Grant Swanepoel with Jarden. Grant Swanepoel: On house sales, have you seen a trend pick up? I know you've got some presales on the 10 per week that you were saying to us to try and get some sort of model done for the second half of the year. And then on your ROIC, have any businesses start to line up as not achieving those ROICs you said you would adhere to, to keep businesses or get rid of them? Andrew Reding: So I think what you were asking about was residential volumes grow? Grant Swanepoel: Yes, please. Andrew Reding: Yes. So -- we are not seeing buoyant residential volumes at the moment. We think that that's partly due to probably some developments which aren't in the optimum places to be like our South Auckland operations. And we may not be putting the right typology in there. So this is probably limited to the number of units that we're selling at the moment, but that is under review, obviously. I think your second question was on ROIC. I didn't quite catch all of it. Will did --. William Wright: So Grant, look, as I said in my speaking notes, I don't know if you picked up on it, 8 businesses lost money in the first half. And so that's a good place to start in terms of businesses that we're not happy with the ROIC that they're generating at the moment, and they are certainly under review. And we want to see a clear path to those businesses returning to achieving ROIC. And where businesses can achieve ROIC, I think we've been pretty decisive as you saw with like the closure of the panelization plant, for example, the closure of Laminex MADE. And so we're certainly being pretty disciplined about that ROIC target for businesses. Andrew Reding: But obviously, when we have identified the businesses that are underperforming, what you need to do then is to work out what the improvement plan that you could apply to it would result in and then turn around and strategically decide whether that end result is something that is adequate or not. Operator: The next question comes from Stephen Hudson with Macquarie Securities. Stephen Hudson: I know you no longer report on this basis, but I just wondered if you can talk through your Aussie dollar sales and EBIT PCP and why they moved as they did in the half? William Wright: Yes. We do still report on that basis, Stephen, in segment reporting. So I just refer you to the annual report on Page 17 has our Aussie -- our geographical segments. So EBIT from our Australian businesses before significant items was $53 million. Stephen Hudson: That -- it was obviously down quite a way and sales were down quite a way. I just wondered if you can comment on what's going on there, which businesses were moving. William Wright: Well, obviously, I'm not sure what numbers you're looking at for your comparator. But obviously, Tradelink has come out of the Australian business, which was a significant portion of revenue. I think Andrew gave some good color around what we're seeing in terms of the wider market in Australia. So Australia is obviously a more resilient economy. It's much larger and demand is more broad-based, although we do see state-by-state markets. And so I think broadly consistent with what everyone else is seeing. We're seeing a reasonably strong market in Queensland and in Western Australia and a slightly more subdued market in New South Wales and Victoria. But what I would say is probably Victoria has surprised us a little bit to the upside, and that's probably more to do with our customer segments rather than the wider market. So we're well positioned with a number of the large volume homebuilders in Victoria. They've recently had ownership changes and those new owners are really swinging into care in terms of ramping up development. So that's been positive for our Victorian business. Andrew Reding: And then there's been an increase in the A&A market of the alteration amendments market, which we managed to tap into very effectively through Laminex. Operator: The next question comes from the line of Sam Seow Citi. Samuel Seow: Just wanted to lean into that market share question a little bit further. I think on Page 18, you're flagging $15 million in EBIT offsetting market declines. Given that's an EBIT slide, maybe give us some more color about where specifically you're seeing that profitable share growth or maybe how that number is made up or [indiscernible] ? Andrew Reding: Just looking through the presentation, [indiscernible] Slide you're referring to. William Wright: Yes, absolutely. It's predominantly, the share gains have been in the light building products and in the heavy Building Materials segment. So I think what we're seeing is we are a domestic manufacturer coming up against imported product. We're seeing significant benefit to domestic manufacturing at the moment and seeing share gains in those businesses. And also in product categories where there's a competitor that is struggling financially as well, we're seeing significant share gains. So I think if we're talking in our heavy building materials distribution -- heavy building materials division, Firth in particular, has seen very good market share gains. And in our Light Building Materials segment, we're seeing good share gains across Winstone Wallboards, Laminex in Australia and New Zealand and Iplex [indiscernible] picked up market share quite significantly as well. Samuel Seow: Okay. That's really good and really helpful. And maybe just on distribution. You've called out some competitive pressures. But actually, revenue and gross margin look okay and looks to be more of an overhead inflation issue. Just wondering if there's something there you can kind of change in the second half to get that business profitable again. Andrew Reding: There's a couple of aspects to that. Firstly, PlaceMakers have very high lease liabilities. So we've obviously suffered CPI increases on those leases, which we need to understand better as we go forward as to whether we can change that. But the other side of it was I think I've made reference earlier on to there being a deliberate strategy to turn around and capture the frame and trust side of things. What we've done now, I think everybody is aware, we've got the Cavendish Drive Frame and Truss plant, which should be operational come May. But what we've been doing is taking on board significant extra resource around the manufacturing of our Frame and Truss so that we can make sure we can make it as competitively as possible. So that's where a lot of the increase in cost has been. Operator: The next question comes from the line of Harry Saunders with E&P. Harry Saunders: Firstly, I know we talked about the second half already. Wondering if we could just think about the bridge from the first half to the second, any benefits or headwinds you anticipate sequentially versus the EBIT you reported, including, I guess, the $11 million gain on the sale of Felix Street or any other likely property sales and what you think the incremental net cost out could be and what seasonality benefit we could see, please? William Wright: Yes, that's a very broad question. Look, what we're trying to do is trying to be as open and transparent with the market in terms of what we see today as to how our individual businesses are performing. So look, we'll continue to provide quarterly volume updates that will give you an insight as to how the individual businesses are tracking into the second half. There is generally a second half weighting, but that has historically actually been driven by -- more by our residential and construction businesses and less so by our core light building products and heavy building materials. The other thing to bear in mind is the cost-out benefit moving into the second half. So we estimate up to $50 million of cost out from the $100 million will benefit will flow into the second half. But as Andrew said, we're just having a bit of a watch on that. What we don't want to do is take cost out and then have to put it in a few weeks later because demand has picked up. And so we're just constantly monitoring where that sort of tipping point in forward orders is that we want to hold on to that cost. In terms of site sales, we'll continually keep the market informed, just like we did when Felix Street was announced last week. And so if any more happen to fall in the second half, we'll certainly keep the market informed. Harry Saunders: Also just wondering if you could give a sense of any mid-cycle margin targets you have across the new operating divisions given we've got a new reporting structure, please? William Wright: Yes. Look, we're trying to stay away from this sort of mid-cycle target piece. Fletcher has probably got a pretty long track record of holding out EBIT margin targets and not hitting them or being creative in the way in which they've hit them. So we're firmly focused on ROIC. And our first step on the ROIC journey is to make WACC because on our estimation, it's been a very long time since Fletcher Building has made WACC. Operator: The next question comes from the line of Ramoun Lazar with Jefferies. Ramoun Lazar: Just one on -- if you can comment on the roading market and those project delays. Have you seen any sort of indication of a pickup or change in the market environment there into the second half? Andrew Reding: Yes. So what we think happened in the first half was in New Zealand, they have what they call the IDCs and the -- all the roading contracts are under an IDC and they turned down and retendered all of New Zealand all at the same time. And we think that whilst the evaluation of those IDC tenders was underway, they choked back on previous road maintenance work. So we saw a significant drop off in our aggregates volumes up to Christmas, and that was 13-odd percent. There have been some indications that the aggregates is picking up as we come into the new year. And certainly, those IDCs are expected to be awarded in the very near future, but it seems to be a bit of a moving piece because they want to turn around and do a grand review and name them all at the same time. But certainly, we'd expect in the next few weeks that the IDCs will be announced and that will actually then lead to the roading activity continuing. William Wright: I would say, and as much as we don't like to mention the weather, February has been a particularly unhelpfully wet month. And so we would expect when the drier weather comes that we see a bit of an uplift in roading maintenance activity. Ramoun Lazar: Okay. Great. And just one for Will. Thanks for the color around CapEx and how to think about debt into the back end of the year. What -- any sort of changes in the sort of provision cash expense into the second half? And perhaps if you can give us some guide into '27. And maybe if you can include sort of an idea of CapEx into '27 as well, help us just to frame up the cash and the balance sheet. William Wright: Yes. There's no sort of acceleration of legacy cash flows into the second half. So the sorts of things we're talking about are a little bit difficult to forecast. But it will continue at a similar run rate as to what we saw in the first half. In terms of CapEx moving into '27, it's probably a little bit too early for us to issue any sort of guidance. But what I'd say is like we're firmly focused on lowering the forecast CapEx number across the go-forward period across multiple years. And so what we were trying to indicate in that chart in the results presentation is if you actually take out the OSV CapEx that we've actually had a half of pretty low levels of CapEx across the remainder of the business. And actually, within the $18 million of growth CapEx, there's a number of projects that were committed to many years ago as well. And so going forward, we do expect a lower level of overall CapEx. Operator: The next question comes from the line of Keith Chau with MST Marquee. Keith Chau: First question, actually a follow-up on Lee's question earlier about residential investment. So maybe another way for us to ask a question is, as you sell through the residential units, albeit the numbers are lower at the moment, with the release of inventory and working capital from unit sales be enough to offset the costs associated with the pre-committed land purchases such that capital employed declines? Or is the way to think about capital employed in that business still that it is rising from here on a net basis? William Wright: No. So you're correct that we will look to release capital employed from that business as we work through the developments. And so it is a little bit hard to forecast in terms of the second half given the uncertain nature of the residential property market at the moment, but we would hope to see an unwind in that funds employed in the second half of this year. Keith Chau: Okay. And then the follow-up to that is outside of residential units, just the potential EBIT from land sales and perhaps, Will, if you can comment on the payables balance as well. It just seemed a bit high to us and it looked like it was high relative -- sorry, it was a bit low relative to our expectations and low relative to consensus as well. So just trying to understand where that payables balance should go in the periods ahead, if possible. William Wright: Yes, sure. Sorry, what was the first part to that question? Payables, second part... Keith Chau: First one was land sales. William Wright: Land sales. So I think we're obviously working through as part of the residential strategic review, also looking at our whole wider property portfolio. So we have a number of processes going on at the moment. The level of earnings from those is uncertain as is the timing of those. So sort of the best we can do is kind of keep the market informed at regular intervals as we go through the year if and when any of those happen to look like they're going to fall in the second half. In terms of payables, what we're really trying to do is move -- and I think Slide 22 sort of demonstrates this is just to a more consistent working capital cycle. And so when you look at historical comparators, there is a lot of noise in those comparators. And so what we're trying to do is move to a more normal cycle where it's a lot smoother throughout the year. So I think this is probably -- December was really probably the first period end where we haven't seen sort of movement in payment timings to try and improve the working capital number. Operator: The next question comes from Daniel Kang with CLSA. Daniel Kang: Just with all the announced divestments and you're flagging for more to come, your net debt should comfortably fall back to the target range of $400 million to $900 million. Just wondering how the Board would be thinking with regards to reinstatement of dividends or capital returns? Andrew Reding: Well, I mean, that absolutely is up to the Board to decide. What we've already said is that we will consider dividend policy once we get to the lower end of that $400 million to $900 million range. So let's wait for the event to happen. William Wright: I'll just probably add to that. Look, free cash flows in the first half wouldn't support any sort of dividend either. So we can't get ahead of ourselves. We've still got a lot of work to do. And what we won't be doing is paying a dividend out of debt going forward. Daniel Kang: Yes, makes sense. And just with regards to WA pipes, I know there's a slide there, and good to see that there's no change to provisions. Can you just provide any color on how the whole process is progressing? Any potential for resolution with BGC? Andrew Reding: So we think it's progressing well in the sense that we've got over 50 builders now signed up into the industry response. As you know, what we're trying to do is to limit the overall exposure caused by any like peak -- pipe leaks. So we now have -- I think it's 4,188 leak detection units installed. And they are quite a clever little artificial intelligence valves that will turn around and track how your normal pressures flow in the house. And if anything happens outside that normal, it just cuts off the water to the property, so it prevents any of the damage happening. The reason that's important is because although we've made little progress with BGC in coming in to join the industry response, they are cooperating wholeheartedly on getting LDUs installed into all the houses that they built. So what they are recognizing is that even though they don't -- they haven't yet wish to participate in the IR, they are trying to participate in that mitigation of damage that might be caused by pipes. And then furthermore, we've carried out, I think it's 1,176 ceiling pipe replacement. And one of the interesting consequences we're seeing of that is that once we've replaced the ceiling pipes, it actually removes pressure from the rest of the system. So as we do a ceiling pipe replacement, it looks as though a full house replacement number is dropping. So all in all, we've got a very good process in place in Western Australia. It's fully staffed. We're in control of understanding the costs and being able to turn around and kick off when people apply for a replacement. And I think all the modeling we're doing at the moment says that the original provision is still comfortably enveloping what we're seeing in practice. Operator: There are no further questions at this time. I'll now hand back to Mr. Reding for closing remarks. Andrew Reding: All I'd like to say is thank you all very much indeed for coming along today and listening to us, and we look forward to probably touching base with most of you personally over the next couple of weeks. Thank you very much indeed. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good afternoon. Thank you for joining us today for 5E Advanced Materials Fiscal Second Quarter Conference Call. During this call, management will be referencing our Form 10-Q that can be found in the Investor Relations section of our website. For a copy of our Form 10-Q, you may contact PRA Communications at team@pracommunications.com or go to our Investor Relations page on our website. As a reminder, the remarks made on today's conference call will contain forward-looking statements, including our expectation of future results, costs, production capacity, market dynamics, liquidity, cash spending, financing, objectives, and options, and other items. Our actual results may differ materially and adversely from those projected or discussed in these forward-looking statements. Additional information concerning factors that could cause the results to differ materially and adversely from these forward-looking statements are contained in our disclosures in our public filings with the SEC. The company is under no obligation to update forward-looking statements. Today's call may also include a discussion of non-GAAP financial measures, as that term is defined in Regulation G, non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. This afternoon's conference call is hosted by 5E's Chief Executive Officer, Paul Weibel. Management will first lead off the call. By making some prepared comments, after which we will open the call to your questions. I'll now turn the call over to Paul. Paul Weibel: Good afternoon, everyone, and thank you for joining us today. The second fiscal quarter of 2026 marked another step forward in a transformational year for 5E Advanced Materials and for boron in the United States. Q2 was defined by execution, validation and advancement turning the strategic momentum we discussed last quarter into tangible progress across financing, customer engagement, critical minerals awareness, resource expansion and project readiness. Last quarter, we spoke about alignment, alignment between market fundamentals, U.S. industrial policy the 5E's position as the most advanced domestic foreign development assets. This quarter, that alignment was translated into measurable progress. Before diving into the details, let me briefly summarize this quarter's key highlights. First, we continue to advance federal financing engagement building on boron's designation as a critical mineral and deepening discussions across multiple agencies aligned with critical minerals, supply chain security and advanced manufacturing. Second, we made further progress on customer validation, expanding to successfully complete a full-scale glass trial, which has progressed commercial discussions with future customers following our initial large-scale shipment and successful trial. Third, we advanced engineering and pre-FID work streams, maintaining alignment with our objective of reaching a final investment decision. And finally, we continued strengthening the long-term foundation of the Fort Cady Project, including mineral tenure, substantial increase in our mineral resource estimate, technical differentiation as we filed an omnibus patent that covers our in-situ leaching mining process and strategic positioning as a next-generation boron producer. Altogether, these milestones reinforce that 5E is moving decisively from development towards execution. I want to start again with the market backdrop because it continues to underpin the fundamental economic opportunity in front of us. The global borates market remained structurally tight with Turkey, controlling approximately 70% of global reserves and approximately 65% of global production. Turkey is to boron what China is to rare earths. The U.S. legacy supply continues to face rising costs, declining grades and limited flexibility, while demand for boron-based materials continues to expand across energy transition technologies, advanced manufacturing, national defense and to high-performance glass and ceramics. What has become increasingly clear through customer discussions and trials is that security of supply, jurisdiction diversification and reliability now matter as much as price, which all play directly to Fort Cady strikes. Fort Cady is a long-life, scalable U.S.-based asset that aligns with national supply chain priorities. Since boron's conclusion on the USGS Critical Minerals list, engagement with strategic stakeholders has increased. The designation has moved boron and Fort Cady from a niche industrial mineral conversation into a broader national supply chain discussion. That is an important shift and one that continues to open doors. Building on what we outlined last quarter, we made additional progress across federal financing pathways. We remain engaged with the U.S. export Import Bank under the make -- more in America framework, where 5E holds a previously issued letter of interest. During the quarter, we further advanced discussions about how Fort Cady aligns with U.S. export competitiveness, downstream manufacturing and supply chain resilience. We also progressed work related to the XM engineering multiplier program, which is designed to support advanced engineering activities on a non-dilutive basis. This effort was slightly delayed given the fall of 2025 government shutdown, but we will formally kick off with XM underwriting team next week. As a reminder, this program has the potential to fund a significant portion of our FEED activities and further derisk the project ahead of FID. In parallel, we continue to evaluate opportunities across the Department of Energy's loan programs office, the Office of Strategic Capital and the U.S. Development Finance Corporation. Each of these frameworks are now directly accessible as a result of boron's critical mineral designation. As part of our federal engagement, we submitted a detailed application to the Department of Energy's mines of the future, NOFO, which provides non-dilutive funding for projects, piloting advanced mining and processing technologies. Fort Cady aligns with eight of the nine DOE focus areas in this NOFO, demonstrating that we are not just a boron development project, but a technology forward next-generation critical minerals platform. The DOE is expected to announce winners next month. While the program is highly competitive, Fort Cady's technical sophistication, strategic partners and alignment with U.S. priorities makes 5E a compelling candidate. With the DOE expected to announce winners next month, our objectives remain clear. To construct a capital-efficient financing strategy that strengthens the balance sheet and supports long-term shareholder value. Operationally, the Fort Cady project continues to progress in line with our development road map. As discussed previously, our pre-feasibility study confirmed a strong economic foundation, including a nearly 40-year mine life based only on our proven and probable mineral reserves and compelling project economics based solely on Phase 1 of the development cycle. That foundation continues to guide our engineering and our execution strategy. During Q2, our team continued advancing fee-related work streams. Refining process design, infrastructure planning and execution sequencing. These efforts are focused on ensuring that Fort Cady is construction ready, not just permitted or engineered on paper. In parallel, we advanced initiatives to strengthen long-term mineral tenure to find and expand our mineral resources and began laying the groundwork for a portfolio of intellectual property related to our proprietary in-situ recovering and processing approaches. As the largest chlorate producer in the U.S. undergoes strategic review, we believe the IP for our recovery and processing technology can play a pivotal role in expanding the resource life and improving economics at this producer. While the Omnibus patent was a strategic move with the anticipation that our IP can be accretive to the strategic review process. These efforts are designed to protect competitive advantages and support scalable long-term growth. On the commercial front, Q2 represented continued momentum following the successful shipment and trial for the glass trial, we expanded engagement with additional customers across multiple applications. And this now includes specialty applications such as Ferroboron, a critical component and permanent magnet manufacturing. Importantly, commercial discussions for boric acid are now increasingly centered on commercial structures and long-term supply relationships rather than just technical qualifications. Each successful trial, shipment and validation milestone brings us closer to offtakes. As we look toward the remainder of fiscal 2026, our priorities remain focused. First, we'll progress customer engagement towards commercial discussions, converting validation and discussion into structured offtake agreements. Second, we'll execute our pre-FID and FEED work streams with discipline, ensuring 4K is the next long term borate producer in the United States. Third, we will continue advancing non-dilutive federal financing pathways, leveraging the critical minerals designation to access larger and more strategic pools of capital. Layered on these three objectives will be the specialty boron work stream where Ferroboron has become a priority with the goal of providing magnet-grade Ferroboron to potential customers for testing in late spring. We remain committed to moving methodically, derisking each stage of development and building a project that is durable, scalable and strategically aligned with U.S. priorities. In closing, Q2 reinforced that 5E is moving decisively from development towards execution. We operate in a market that values a secure fully integrated domestic supply chain, and we are aligned with U.S. policy priorities. With these tailwinds, 5E is positioned to become the next major U.S. boron producer creating long-term value for shareholders. Thank you to our employees, partners and shareholders for your continued support. We look forward to updating you again as we continue advancing towards construction and commercial production. With that, we are ready to open up the line to any questions. Operator: [Operator Instructions] Okay. There are currently no questions in the queue. I'd like to turn the floor back over to Paul for any closing remarks. Paul Weibel: Thank you, everyone, for joining us today. We believe 5E has a rare opportunity to become the next major boron producer globally and the leading domestic supplier in the United States. Fort Cady is a long-life asset with a clear development path, and we remain focused on executing responsibly and creating long-term value. We appreciate your continued interest and support, and we look forward to speaking with you again. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to Glaukos' Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Chris Lewis, Vice President of Investor Relations and Corporate Affairs. Chris, please go ahead. Christopher Lewis: Thank you, and good afternoon. Joining me today are Glaukos Chairman and CEO, Tom Burns; President and COO, Joe Gilliam; and CFO, Alex Thurman. Similar to prior quarters, the company has posted a document on its Investor Relations website under the Financials and Filings Quarterly Results section titled Quarterly Summary. This document is designed to be read by investors before the regularly scheduled quarterly conference call. [Operator Instructions] Please note that all statements other than statements of historical facts made on this call that address activities, events or developments we expect, believe or anticipate will or may occur in the future are forward-looking statements. These include statements about our plans, objectives, strategies and prospects regarding, among other things, our sales, products, pipeline technologies and clinical trials, U.S. and international commercialization, market development efforts, product approvals, the efficacy of our current and future products, competitive market position, regulatory strategies and reimbursement for our products, financial condition and results of operations as well as the expected impact of general macroeconomic conditions, including foreign currency fluctuations on our business and operations. These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our actual results to differ materially from those expressed or implied by forward-looking statements. Please review today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the Investors section of our website at www.glaukos.com. Finally, please note that during today's call, we will also discuss certain non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Glaukos' ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the tables in our earnings press release available on the Investor Relations section of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I will turn the call over to Glaukos Chairman and CEO, Tom Burns. Thomas Burns: Okay. Thanks, Chris. Good afternoon, and thank you all for joining us. Today, Glaukos reported record fourth quarter consolidated net sales of $143.1 million, consistent with our pre-announcement last month, and up 36% on a reported basis and 34% on a constant currency basis versus the year ago quarter. For the full year 2025, consolidated record net sales of $507.4 million grew 32% versus 2024. We are also reaffirming our full year 2026 net sales guidance range of $600 million to $620 million, which implies continued strong year-over-year growth of more than 20% at the midpoint. Our record fourth quarter and full year results reflect a highly successful year of global execution across our key commercial and development initiatives, and underscore the dedication of our global teams, strength of our differentiated technology platforms and our evolution into a more diversified ophthalmic leader. From a corporate perspective, 2025 was a milestone year. In addition to surpassing $0.5 billion in annual sales, we celebrated our tenth anniversary of our 2015 IPO, surpassed 1,000 employees worldwide and broke ground on a new facility in Huntsville, Alabama. As we enter into 2026, we are well positioned to sustain our strong growth momentum, led by 2 transformational growth drivers, including the continued advancement of the interventional glaucoma treatment paradigm with iDose TR, along with the launch of Epioxa, opening up a new paradigm in interventional keratoconus and rare diseases. These 2 highly differentiated and durable market opportunities underpin our confidence to deliver a best-in-class growth profile extending well into the next decade as we continue to invest in and advance a robust industry-leading pipeline while remaining disciplined in capital allocation, focusing on ROI-driven investments and cash flow. Our record fourth quarter results are a testament to the progress we continue to make in advancing our mission to transform vision therapies for the benefits of patients worldwide. Within our U.S. glaucoma franchise, we delivered record fourth quarter net sales of $86.4 million on strong year-over-year growth of 53%, driven by growing contributions from iDose TR, which generated sales of approximately $45 million in the fourth quarter. iDose TR's positive clinical outcomes continue to generate momentum with sales of approximately $136 million in 2025, reflecting strong physician adoption, reaffirming the compelling patient impact of this game changing therapy. Operationally, our teams continue to execute well on all of our plans focused on growing training surgeons and accounts, increasing utilization, broadening market access, expanding the clinical evidence and accelerating targeted marketing investments. We believe iDose TR remains early in its overall adoption curve with significant value yet to be unlocked as we expand market access and build on the progress in 2026 and beyond. Last month, we were pleased to announce that the U.S. FDA approved our NDA labeling supplement allowing for unlimited re-administration of iDose TR in patients who maintain a healthy cornea. We welcome this important labeling enhancement and believe it should help expand access for patients who may benefit from a repeat treatment and provide physicians with greater flexibility in managing their glaucoma patients over time. With iDose TR as the foundation, our goal to advance and improve glaucoma treatment by driving earlier intervention continues to gain steam as we educate surgeons and thought leaders globally to organically drive this broader evolution in the standard of care for the benefits of patients. While we remain in the early stages of these interventional glaucoma efforts, we are encouraged with the increasing levels of clinical interest for this paradigm-changing evolution. Moving on, our international glaucoma franchise delivered net sales of $32.8 million on year-over-year growth of 18% on a reported basis and 13% on a constant currency basis. This strong growth was once again broad-based as we continue to scale our international infrastructure and execute our plans to drive MIGS forward as the standard of care in each region and major market in the world. As previously discussed, we continue to expect new competitive product trialing headwinds in some of our major international markets as we progress through 2026, partially offset by growing contributions from iStent infinite, following its EU MDR certification and associated European commercial launch late last year. And finally, our corneal health franchise delivered net sales of $24 million on year-over-year growth of 12%, including Photrexa net sales of $21.4 million. As you know, during the fourth quarter, we were delighted to announce the FDA approval of Epioxa, a novel groundbreaking advancement in corneal cross-linking for the treatment of keratoconus, a rare sight-threatening disease that is currently far too often undiagnosed and untreated. Interest from the physician community following approval has been very encouraging and reinforces our view that with Epioxa, we are ushering in a new standard of care for keratoconus patients and practitioners with the first and only FDA-approved topical drug therapy that does not require removal of the corneal epithelium, the outermost layer of the front of the eye. As a reminder, Epioxa utilizes a proprietary combination of an oxygen-enriched novel therapeutic that is bioactivated by UV light in an incision-free procedure. It is the result of more than a decade of research focused on slowing or halting the progression of keratoconus while significantly improving patient comfort and minimizing recovery time to provide a new way forward for patients afflicted with this sight-threatening rare disease. As we've discussed, the FDA approval of Epioxa has allowed us to reset and redefine our go-to-market approach to better address this sight-threatening disease and truly expand patient care and access. Immediately following approval, our cross-functional teams commenced execution of our detailed methodical initial commercial launch plans ahead of Epioxa drug availability expected later this quarter. Importantly, with this launch, we plan to substantially increase our investments in patient awareness, education and access while addressing the long-standing challenges of under-diagnosis and under-treatment that have affected this rare disease community. Our efforts are designed to support patients and families at every stage from awareness and diagnosis through ongoing treatment, taking the entire journey as seamless, efficient and patient-friendly as possible over time. As with all pharmaceutical launches, initial patient access will be gated by our site of care network deployment and typical payer adoption headwinds and hurdles, but we're investing in the infrastructure, teams and processes necessary to get Epioxa to as many patients as soon as possible in 2026 and beyond. We've been encouraged by the progress we've made in short order following approval. First, I'm proud to report we are ahead of schedule in establishing our Epioxa sites of care network. Our early [ Wave 1 ] efforts are yielding results with acquired O2n Systems already actively deployed in locations covering nearly 50% of the U.S. population and a broader pipeline of systems moving through the approval processes that would expand our treatment center of reach closer to 90%. Looking ahead, we will continue evolving this network to bring treatment access closer to patients as reimbursement and drug acquisition pathways become further established and streamlined. Next, on the market access front, we have completed our initial payer communications and updated key payer databases with the details associated with the Epioxa launch. Our payer team is already actively engaged today with insurers, representing approximately 50% of commercially covered lives in the United States, including 4 of the top 5 commercial payers. As a result, we have seen several early positive coverage determinations spanning across the Medicaid and commercial payer landscape. We successfully submitted for the permanent J-code and expect it to become effective in July of 2026. Based on the CMS' cycle for J-codes, until then, we anticipate Epioxa will be commercially available under a new technology miscellaneous J-code and anticipate measured adoption over this initial period until the permanent J-code is in place. In addition, we've also rolled out various new patient services and support programs led by our patient access liaison teams designed to streamline care coordination, demystify the insurance approval process and advance coverage decisions where possible. Our teams are also deploying new marketing and DTC campaigns designed to significantly enhance awareness, education and detection, driven by increased engagement with the optometric community, the development of a handheld KC screening device and expanded advocacy partnerships alongside new patient education efforts to identify and reach patients earlier. Finally, as we've discussed with the launch of Epioxa, a critical focus of ours is to improve patient access to the sight-saving keratoconus treatment. On that front, we have successfully deployed a new financial co-pay assistance program for eligible patients and operationalize a comprehensive specialty pharma option available for our customers at launch. As you can see, we are very excited by the significant potential Epioxa offers to patients living with keratoconus and believe it will deliver an exceptional value to patients, providers in the health care system. This enthusiasm was on full display during our recent national sales meeting, where anticipation for Epioxa's availability later this quarter was palpable. We're probably in the way once again in forging a new path to drive expanded patient access and enhanced treatment standards. Beyond Epioxa, we continue to advance a broad and differentiated clinical pipeline across our 5 novel therapeutic platforms with several noble milestones. Within our iStent surgical glaucoma platform, we completed patient enrollment in a PMA pivotal trial for iStent infinite in mild to moderate glaucoma patients during the fourth quarter and continue to advance a 510(k) pivotal study for the PRESERFLO MicroShunt. Within our iDose platform, patient enrollment is well underway in the Phase IIb/III clinical program for iDose TREX, our next-generation iDose therapy, with initial results of our Phase IIa clinical trial demonstrating substantial IOP reductions of 8.6 to 10.8 millimeters of mercury through 3 months. In addition, we recently commenced a Phase IIIb study for iDose TRIO and continue to advance several Phase IV studies. Within our iLink platform, we plan to bring a KC screening tool to market later this year and initiate a Phase III program for our third-gen iLink therapy next year. Within our ILution platform, we commenced a Phase II study for ILution Demodex blepharitis in the fourth quarter. And finally, within our retinal platform, we recently completed enrollment in a first-in-human clinical development program for GLK-401, our intravitreal multi-kinase inhibitor retinal program in patients with wet AMD. Despite being a relatively young company, Glaukos has invested over $1 billion in R&D since inception to develop a robust pipeline focused on chronic and rare ophthalmic diseases. Our continued investment in R&D remains best-in-class, underscoring our commitment to growing first and advancing the standard of care for ophthalmic patients worldwide into the future. In conclusion, at Glaukos, we're in the business of pioneering entirely new marketplaces within ophthalmology. Innovation is at the core of everything we do as we advance our mission to transform vision therapies that can meaningfully advance the standard of care and improve outcomes for patients suffering from sight-threatening chronic eye diseases. Our mantra of We'll Go First embodies our commitment and determination to take chances, push the limits of science and disrupt the legacy of treatment paradigms in glaucoma, rare disease and retinal diseases through our pursuit of game-changing innovation. Our record fourth quarter and full year 2025 highlights the strength of our strategy and execution as we continue evolving into a diversified ophthalmic leader with multiple transformational growth drivers in iDose TR and Epioxa and advance our mission to transform vision therapies for the benefit of patients worldwide. So with that, I'll open the call for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Tom Stephan with Stifel. Thomas Stephan: First one on Epioxa. Tom, you mentioned early positive coverage determinations from commercials and Medicaid, I believe you said. Can you elaborate on kind of the key highlights here a bit? And then just broadly, to what extent has there been any payer pushback on pricing of Epioxa and/or the Photrexa discontinuation? Joseph Gilliam: Tom, it's Joe. I'll start off there. If Tom wants to add comments, he certainly can. So from a payer standpoint, it's important to remember that really you start to get a lot more of the coverage policies in place once you've got drug in channel and you're actually adjudicating the claims. In the early days, it's all about the clinical education associated with the product, make sure those payers understand what Epioxa is, what it means for patients and how that's differentiated from Photrexa that they've obviously known for several years now. So when he said that there's a positive development in terms of early policies, it's really because it's even a bit surprising in the context of a normal drug launch here in this case in pre-drug and channel, you're getting positive outcomes with a handful of Medicaid societies as well as with one of the larger blue plans out there. And so all of the conversations so far have been much more clinical in nature. We've not heard any formal or informal pushback from payers on the pricing dynamics associated with Epioxa. And so we continue to move forward and look forward to obviously to getting the drug officially launched, if you will, and engaging on a claim-by-claim basis with these payers and ultimately getting into a place where many more have the positive coverage determinations that we expect. Thomas Stephan: Got it. That's great. And then my second question on iDose. Joe, maybe to stick with you. Can you talk a bit about kind of the key factors that drove the sequential deceleration in revenue in 4Q now that there's been some time to digest. And maybe more importantly, what's your level of confidence in continued sequential growth year in the first quarter, maybe you can speak about how to think about, I guess, iDose growth directionally in 1Q as well as throughout '26? Joseph Gilliam: Yes. Sure, Tom. I think from an iDose perspective in the fourth quarter, and we talked a little bit of this in a recent conference. We did see a couple of factors. Obviously, we did continue to grow sequentially and grow nicely. I think it was north of 10% sequentially. But underlying that were a couple of dynamics we're calling out. But the first is that in the fourth quarter, and this is learning a little bit for us in the context of iDose, the mix shifts a little bit towards Medicare Advantage. There's a lot more volume done in the fourth quarter typically than ophthalmology. But because a lot of those benefits and I'll call it the patient out-of-pocket dynamics and related, you tend to see a little bit more on the Medicare Advantage side relative to the fee-for-service patient population. And then second was just some specific things to Glaukos and I'll call it our rep incentive that in looking back, we saw probably a little bit of pull into Q3 and a little bit of pullout into Q4 but on the margin, I think, also impacted that. If you think about translating that moving forward, I think what I would say is, we do expect continued progress sequentially into the first quarter with iDose despite it being a seasonally low quarter from procedure volumes. And as the overall year, which we can talk more about throughout your matter, we expect there are going to be continued sequential improvement each quarter throughout the 2026 time period. Operator: Your next question comes from the line of Adam Maeder with Piper Sandler. Adam Maeder: Congrats on all the progress. Maybe picking up, Joe, a little bit where we just left off. I wanted to ask about top line guidance for FY '26, the $600 million to $620 million. And really just hoping you can kind of pull apart some of the different components, whether it's iDose contribution, how you're thinking about the U.S. stent business and corneal health with Epioxa. Any quantitative color would be fantastic, but even just broad qualitative strokes such as we expect this business to grow or not grow would be really helpful. And then I had a follow-up. Joseph Gilliam: Yes. Happy to do that, Adam, and maybe I'll start off. And obviously, if you have follow-up questions or others, we can dive a little bit deeper. But if you think about the guidance that we've set and kind of affirmed here today, which is normally the time when we set it for first time, as many of you know. There's no question 2026 is another pivotal year for us as our efforts, as you heard Tom say, to transform the standard of care and interventional glaucoma with iDose and iStent infinite are kind of now finally joined by what I'll call a complete reset and expansion of our investments, the launch of Epioxa. And so we were pleased to be able to establish an initial guidance range of $600 million to $620 million, which at the midpoint, represents more than $100 million of growth in this year. If you think about it by franchise, I think it's probably the easiest way to start. On the international glaucoma side, we expect high single-digit growth internationally for the year as competitive launch headwinds really play themselves out in several of the key markets as we've talked about for a couple of quarters now and they're somewhat offset by the iStent infinite launches and the broader individual glaucoma and market access initiatives that we have going on worldwide. I think in the early part of the year, that will be a little bit higher than that. And then as some of the currency tailwinds wear off, we would certainly expect that to come in a little bit in the back half of the year. On the U.S. glaucoma side, we expect embedded in the guidance is growth in the 30% range year-over-year, driven entirely by iDose TR. I think as we've said in prior calls, I think it's safe to start off this 2026, assuming that the non-iDose business is flat on a year-over-year basis. And so the entirety of that growth, I'm talking about is really being driven by iDose. And that leaves corneal health. And while there are a fair number of, I'll call it, moving parts associated with the launch of Epioxa and the transition from Photrexa, I think we can confidently say we continue to expect that the franchise will grow modestly year-over-year, but with a fair amount of volatility, particularly in Q2 and as we enter into Q3 as Epioxa becomes available and that permanent J-code is established, you'll see the warehousing effect that we've been thinking about and the sort of delay as those patients are working their way through the approval process and ultimately getting approval and treatment as we kind of make our way through Q3 and certainly into Q4, where we think that the strongest results will be for that business. Adam Maeder: That's really helpful, Joe. I appreciate all the color. And maybe just for the follow-up. I guess another modeling question, and I just wanted to ask for a little bit more color on cadence quarterly realizing you just gave a little bit there. But for Q1, I had the Street modeling, I think, $132 million, $133 million of revenue, which is down sequentially quarter-over-quarter. Just curious if you have any reaction to that figure. And obviously, Epioxa transition versus Photrexa is a little bit, I think, tough to pin down. So any more color you can kind of give us on how you're thinking about sequencing would be appreciated. Joseph Gilliam: Yes, Adam, it obviously is a bit tricky on the cornea side, but I'll zoom out for a second. I think for 2026 we'll probably deviate a little bit from those historical norms that you've been around the story for a while, you know that ophthalmic procedures tend to see seasonality of, call it, 22%, 23% in the first quarter and 24%, 25% in Q2 and Q3, and then 28% plus or minus in Q4. When you look at what's driving it for us, it's really based on the 2 primary factors you might expect. With the iDose launch, as I mentioned earlier in the call, we continue to expect sequential growth quarterly throughout 2026 that will lead obviously to incrementally a more back half-weighted iDose contribution in U.S. glaucoma number. And then from a corneal health perspective, I alluded to in your first question, but we expect to see modest growth in the first quarter as folks continue to do Photrexa procedures in advance of Epioxa being available. I think we'll see a fairly material dip in Q2 as we really are in the heart, I'll call it, of the transition from Photrexa to Epioxa. Those patients are being entered in for the approvals and prior authorizations, but perhaps not treated the clip that we'll start to see with the J-code as we make our way through Q3. I think Q3 will probably be a bit more of a flattish year-over-year quarter as the J-code comes online, you see some of the patients moving out of the funnel and into treatment towards the latter part of that quarter. And then obviously, we would imply that as a pretty strong exit in the fourth quarter as the J-code comes online and we start to see a little bit more normalized treatment patterns as we're exiting the year and heading into next. And if you think about that in the first quarter and the way you said that, I think the U.S. glaucoma business will probably be somewhat flat to Q4 as the non-iDose seasonality headwinds are offset by iDose itself expansion. Cornea, as I mentioned earlier, will probably be modest growth on a year-over-year basis and interventional -- not inventional, international glaucoma will see -- it's more normalized. So I think we'll see the same high single digit to maybe low double-digit growth on a year-over-year basis. Operator: Your next question comes from the line of Ryan Zimmerman with BTIG. Ryan Zimmerman: I'm going to try and do a little lightning round here and see if I can squeeze a few in and they should be easy to answer. But the first one is just around the -- how you think about the interplay between the re-administration of existing iDose and TREX and just how to think -- how you think about whether there's a cannibalistic effect there? And then just for clarity, you called out 50% coverage on Epioxa, but I just want to make sure you don't have 50% covered lives, you're just in dialog with those payers right now. And I'll just leave it there for now. Joseph Gilliam: Okay. Well, I'll start with the second part of your question, and if Tom can jump on re-administration, he can. So as it relates to the Epioxa coverage, now remember, in rare disease and unmanaged categories, it's quite common that you won't have any formal coverage policy. You're monitoring actual prior authorizations and approvals to therapy over time to determine that you've actually got access. That access may come in the form of formal coverage policies and it may come in informal ways just through simple adjudication patterns and be able to have the confidence that patients who seek that therapy are able to get it if they qualify. So we're ahead of that time. And I think what Tom was saying in the prepared remarks that we've engaged in a meaningful way and clinical conversations with payers that represent over 50% of those covered lives. And as a result, we've even got some early positive policy wins. It's important to remember that cross-linking as the standard of care, we're -- that's not new, right? We've obviously been at that for some time with Photrexa and Epioxa procedure. And so as we move forward here, we certainly expect them to continue to recognize that and provide the access that these patients deserve on a clearly superior therapy in the form of Epioxa. As it relates to re-administration and the interplay between that and TREX, I think -- if you're thinking about that, the question was meant to go from a long-term kind of modeling standpoint, Ryan, clearly, the goal has always been to provide patients and surgeons with as many options as possible. And depending upon the disease severity and where things are at clinically, we certainly expect different surgeons have different algorithms around whether they choose to re-administer a patient with iDose TR or TREX based upon the clinical profile that exists with TREX when we ultimately get it through the FDA process that is there. And when I think about it from a modeling standpoint, Ryan, part of that is to think about, obviously, there's a trade-off there potentially on duration. We have to prove that through the clinical trials, and there's the pricing considerations around a longer-acting therapy as well. And ultimately, I think where we land is most importantly, we've now or hopefully with approval of TREX would have multiple options for patients that remain on sustained pharmaceutical therapies for the duration of their life, if you will, with the disease, which the average patient from diagnosis to no longer need the therapy will be in a glaucoma surgeon's care for over 20 years. So multiple shots to continue to treat these patients, whether it's with TREX or TR. Ryan Zimmerman: And Joe, just a follow-up. Are you going to let Alex just spend uncontrollably for this Epioxa launch? And I'm wondering if that's a subtle way of asking, Alex, kind of what your thoughts are on operating expense spend in '26 as you prepare for this Epioxa launch. Certainly, it's going to, I think, be a question around margins and operating profit and so forth, which, frankly, I do have you start to show some profitability in late '26 despite your ability to kind of spend aggressively here? Alex Thurman: Well, let me step in before Joe speaks for me, Ryan, and address the 3 questions you asked. So let's talk about OpEx first and foremost. Our philosophy as a corporation still hasn't changed from what we experienced in 2025, which is we're going to continue to balance our capital investments against our revenues such that we're driving towards cash flow breakeven and potentially some cash flow generation over the course of 2026. And with that in mind, you would expect to see our operating expenses have growth next in 2026. If you think about what does that growth look like? What I would tell you today or what I would guide you to is somewhere in kind of a mid-teens year-over-year growth percentage off our base of [ 42 ] in 2025. That should put you in the neighborhood of operating expenses around [ 555 to 560 ] in 2026. Now that is still going to show operating leverage in 2026, which is another of our goals as we continue to march forward within the business and what we're trying to achieve. So that's kind of where we're thinking. And again, those are the key things that even though we're doing this, we have these 2 really key growth drivers that we're investing in, in Joe's organization between the iDose launch and the Epioxa launch in that. And then we have what we believe is a best-in-class R&D pipeline that we have to invest in well. And all those things are driving our decisions around our capital allocation. Joseph Gilliam: And I think there's no question for all of us, Ryan, that with the Epioxa launch in the recent month when it comes to significant investment in patient access and whether that's on the hub with the specialty pharmacy, with the DTC investments or all the various things are designed to drive awareness, diagnosis, detection and ultimately, the pull-through of these patients in as fast as time as possible, we're prepared to make those investments, obviously, within the framework that Alex alluded to. Operator: Your next question comes from the line of Larry Biegelsen with Wells Fargo. Larry Biegelsen: One on iDose, one on Epioxa. So on the iDose on the repeat label -- excuse me, how do you think about the percent of de novo patients who will get a second iDose? And how do you think about the potential halo effect of this repeat dosing label to new iDose starts? And I had one follow-up. Joseph Gilliam: Well, I think, Larry, from a re-administration, we're going to have to watch that, right, in terms of those patients. I mean certainly, we've been actually already seen our first re-administration happen in the OR and it's driven by the things that you would hope to hear, which is that the patients themselves was seeking that an early patient who was getting into the area where they would potentially benefit from an incremental administration, and they were seeking it because they didn't want to go back on drops. They appreciate the value, if you will, of having the iDose working for them. And so I think over time, we'll have to continue to monitor that. But clearly, if you go back to what I said earlier, if the average patient is in the care of a glaucoma specialist or a comprehensive doctor for a little over 20 years with the disease, we expect there to be considerable opportunity for multiple re-administrations within the same patients over time. And I think that can certainly be a significant part of, I'll call it, the overall mix, if you will, relative to first-time therapy, certainly, as we get further and further out into the planning period. And I do think that there's an incremental halo effect because at a baseline, surgeons can confidently have the conversation with patients about interventional glaucoma knowing that they've got tools and solutions, including the repeat administration of iDose with those patients to manage their disease that way for hopefully their lifetime. Larry Biegelsen: That's helpful. Joe, on Epioxa, can you talk a little bit about how quickly you expect to upgrade accounts to the new capital equipment? And can you put a finer point on when Photrexa is expected to be completely phased out? Joseph Gilliam: Yes. As you heard in the prepared remarks, we're already well down that path of at least installing the capital equipment required to administer Epioxa and we would expect that journey to continue. I think as Tom mentioned in the remarks, we've already installed or are installing capital equipment at locations that would cover over 50% of the lives in the United States. And we've got various levels of approval at various systems and providers where we'll be north of 90% as we make our way through here into the launch. So I think we feel really good about where we're at in terms of establishing that foundation, if you will, as we move forward. As it relates to Photrexa and the transition, it makes sense, Larry, without getting too specific on dates that with a July 1 J-code, we want to make sure that Photrexa certainly remains available to physicians through that period. And then as we make our way into and through the third quarter, we'd expect to transition that more fulsomely over to Epioxa. Operator: Your next question comes from the line of Allen Gong with JPMorgan. K. Gong: I just want to start with a quick one on iDose. We're roughly halfway through the quarter, and you talked about sequential growth throughout the year and starting in first quarter as well. But I guess, fourth quarter had a little bit of onetime dynamic. So it was a little bit weaker than expected. So when we think about sequential growth, how -- like what's the right baseline, I suppose, to be using in fourth quarter to then grow off of the first quarter? Or is that not the right way to think about it? Joseph Gilliam: Well, I think, Allen, I certainly understand the question. I think that may be getting a little too precise for what we'll cover on a call like this. I think from our standpoint, overall, we gave the guidance that we gave, I gave the color on the first quarter dynamics and that expectation around iDose. I think we've been really pleased with the trending that we've seen so far in the quarter with iDose and the continued expansion thereof. And as you may know and may recall, March tends to be a pretty important month in the first quarter. And so we still got that in front of us, but very pleased with what we've seen so far as it relates to iDose. K. Gong: Got it. And then I suppose your installed base, I think we've already gotten a few questions on this, but your installed base of Epioxa in H2 is already -- it feels like coming a little bit faster than expected. So -- and there's clearly a lot of excitement and even more durability in Photrexa than I think us on the Street were expecting. So how -- like why wouldn't you be able to convert cases over fairly quickly, like just converting the cases you were doing on Photrexa over to Epioxa fairly quickly once you have that J-code? Joseph Gilliam: Yes. I think this is a great question, Allen. So I can confirm that our team has done a terrific job of getting ahead of even what our initial planning was around the I'll call it the installation and the procurement process associated with the O2n System and really establishing the foundation, if you will, from which we can make that happen. The reason why we talk about the guidance in the context of Q2 and Q3 and the various things that are there, you got to take a step back. First, in the first half, you'll have a miscellaneous code. That comes with its own set of unique challenges associated with patient access and working your way through. The approval processes can be a bit elongated at times when you're using the miscellaneous code. And then once you have the J-code established, there's the various -- you can imagine, payer notifications and things that go alongside of that. The combination of those things alongside of just the early days of the approval process in any rare disease, let alone in this case, Epioxa, means that you're going to have a fair amount of patient conversation that translates into, I'll call it, warehousing. It's not really warehousing. But as they're going into the approval processes, we certainly expect those approval processes to be much more elongated as they're trying to go through that because of the miscellaneous code, because of the conversion of J-code, because of what you expect in terms of the initial technical denials and then having to overcome those through appeals and peer to peers and all the things that go alongside of that. It just means that you'll probably have a bit of a gap, if you will, from when those initial patient conversations happen to where you start to see, hopefully, a more normalized patient pull-through dynamic in the treated Epioxa eyes. Operator: Your next question comes from the line of David Roman with Goldman Sachs. David Roman: I was hoping maybe we could dive in a little bit more on iDose utilization. I know you've talked about strategically prioritizing iDose stand-alone cases. But maybe can you give us some flavor on how the different categories of utilization here evolve through the course of 2025? What your expectations are for '26 and any considerations coming out of the November CAC meeting that are either reflected in your outlook or that may be percolating behind the scenes? Joseph Gilliam: Yes, David, you covered a fair amount of ground in that question. So maybe I'll start a little bit in reverse as it relates to the CAC meeting and what we do or don't expect there. I mean I think from -- so far, this process is really -- it's really aligned with kind of our expectations as the MACs somewhat understandably want to understand the iDose TR better and a goal that hopefully was achieved during the CAC meeting they had late last year. We've not really seen any signs of an LCD. I know there's considerations around that and continue to believe it will be premature at this stage of the launch. Of course, these things can be unpredictable and sometimes opaque. So it certainly remains possible even if it's not probable at this point. And the guidance that we've given has multiple different directions we can ultimately achieve that. As it relates to kind of where we saw the trending from 2025 and going into 2026, from a handful of different spots, starting with kind of the MACs. As you can imagine, we continue to see more growth from the MACs where we have established professional fees. So in that sense, Novitas, Noridian, First Coast. We were pleased to see the addition of NGS to that mix in the latter part of last year, and that certainly contributed as we made our way from the third quarter into the fourth and continuing into the early part of this year, we see NGS added benefits. We have continued to see a relative percentage of procedures done where physicians are treating glaucoma at the same time as a cataract procedure increasing, that was expected, given we've already changed the standard of care for those patients over a prolonged period of time. And as we enter into 2026, I think the expectations should be kind of going back to those same things that we knock down the remaining MACs. I think at this point, I can confidently say that we're the closest with Palmetto. I think we're on the doorstep there and hope to see that in the coming days, if not weeks. And we certainly are making a lot of progress since the beginning of the year with them as well as with WPS and CGS. And then I think I've mentioned this before, but the other big initiative for us in 2026 is really focused on driving increasing utilization in that broader patient population that's also represented by commercially covered lives as well as Medicare Advantage. David Roman: That's very helpful. And then maybe just a follow-up as you kind of think about the shape of '26. I know a few others have asked this, but you went down the path of introducing '26 guidance earlier than you normally do in November. And I think that was probably in anticipation of how we might perceive the pricing impact in Epioxa and trying to keep numbers at a reasonable place. But maybe you could -- just help us think about when you introduce that guidance to now and as you kind of sit here a few months later, what, if anything has changed? And where do you have more confidence or where do you see risks that you want to make sure we reflect in the outlook? Joseph Gilliam: Yes. I think it's a great question. I mean first, when we introduced it, you're correct. I mean with the pronounced change and how we thought about both the pricing dynamics as well as all the considerations around the market access element of the transition from Photrexa to Epioxa, we did want to make sure that folks didn't mistranslate that and get ahead of us in the context of the way we think it will actually play out on the ground as we make our way through 2026. I think since that time, pretty much across the board, things have probably played out somewhat favorably. But as you can imagine, even inherent in the question, a lot of the things that we're talking about are later in 2026. And so whether it's the continued sequential growth and getting a feel for how that continues to play out in iDose TR or as we've talked a fair amount about the Epioxa dynamics, which are really largely weighted towards the second half and even the fourth quarter, it was premature despite, call it, the positive underlying fundamentals of the site of care network for Epioxa or the payer progress or even the trends that we've been seeing with iDose, I think to make any adjustments to our guidance at this early stage. Operator: Your next question comes from the line of Richard Newitter with Truist. Richard Newitter: Two for me. I'm just curious, are you factoring in re-administration at all in the sequential improvement and the color that you gave on U.S. glaucoma and we can all back into the iDose number. It sounds like you're pretty comfortable with where the consensus is based on your comments. So that's the first question. What, if anything, for re-administration is even factored in there? And I'll just ask my second one. When you talk about co-pay assistance or market access programs that you're investing in, can you elaborate a little bit more on what exactly you're doing with the specialty pharmacy access to make adoption more fluid for payers and patients or providers and patients? And are you also talking about your ability to move things through the denial process? Does that denial process go away once you have the J-code in place, now it's a drug? Joseph Gilliam: Sure. Richard, I think I took all that down. But if I did miss something, you could circle back. I think it's fair to say that re-administration was not a material consideration as we thought about the guidance. Certainly, as we set it back in November and then as we've affirmed it here, we -- sitting here today, given my earlier comments, we would expect there to be some re-administration as we make our way through the year. And some of those very early patients get into the window where re-administration becomes a viable option. I think re-administration becomes a much more material contributor to how we think about the business in 2027, 2028 and beyond than it is something that we're thinking about in 2026. And inherent in your question then from an iDose standpoint, I'll say it again, there are multiple different directions for us to try to achieve the numbers we put out. And in the context of both the existing MACs that we've got professional fees established today, the incremental professional fees that we expect to have on schedule, if you will, from the remaining 3 MACs that represent another 30% of the covered lives out there or our initiatives that we're certainly investing a lot more in on the commercial and Medicare Advantage side. Each of those, I think, drive the confidence in the commentary, both around the overall guidance as well as the sequential improvement that we expect. Now on Epioxa, and I'll call it the investments we're making both to drive or optimize patient access as well as turnaround time, I guess the best way you could say it on some of the support elements is there are always, from a service provider standpoint, good, better, best type programs. And when you launch a rare disease, you clearly have to invest in the "best." The best from a hub standpoint, the best level of service from a specialty pharmacy standpoint, incentivize maximizing access and driving the most experienced professionals within those organizations and the turnaround times associated with them. I think we've been on record of saying from a co-pay assistant that we'll have a $0 co-pay program for commercially covered lives that you hope that in the vast majority of cases, patients can qualify for that to make sure that that's not an impediment to access. And again, really all of these things as well as our broader efforts that we'll have on DTC, provider and patient education are all meant to be a substantial increase in the investment we're making to drive the awareness and the detection and then ultimately, the treatment turnaround time for those patients who are afflicted with this disease. Operator: Your next question comes from the line of Mason Carrico with Stephens. Mason Carrico: Could you quantify the number of sites that have received the equipment to perform Epioxa procedures or the numbers that they have committed to it? I know that you called out the O2 System had been deployed to locations covering something like 40% of the population. But -- should we be interpreting that as a single Epioxa site now covering a much larger geographic area than the average Photrexa site? Joseph Gilliam: Yes. Mason, I think I'll probably start short of giving the specific numbers around the site and the various things and simply say that when you look at it, to your example, if you have a site within the Atlanta metro area, for example, that's designed to cover that patient population. And again, that's not uncommon. So when you think about the launch, you want to make sure that you've got the providers who are the best at going through the process we're about to that are committed to the care and are willing to go through the payer hurdles, if you will, and make sure that they're being properly educated. So you focus your efforts on those while trying to make sure that you've got the geographic reach that you need. And then over time, you start to supplement that to make sure, again, that patients don't have to wait an unnecessarily long period of time to get access to care. And so I would expect -- and we're happy with where we're at for the initial launch. The Wave 1 customers, you heard Tom reference earlier are Wave 1 for a reason. And then ultimately, over the coming months, quarters and years, we'll continue to expand that network out and be offering more and more sites within a particular geography to make sure that we're getting the access to those patients. Mason Carrico: Got it. And then on the coverage front, I think you said you're in conversations with 4 of the 5 top commercial payers. Do you believe that you could realistically have a positive coverage decision from one or more of those in 2026? Do you guys have an internal target for the number of covered lives that you could have by year-end? Joseph Gilliam: Mason, I think I would take a step back to what I was saying earlier, we'll see whether or not we have a positive coverage determinations like policy and a variety of other things that helped expedite patient access in 2026 whether it's with those top payers or others that are out there. The thing that we're watching most closely as we launch, is that patients are able to work their way through the approval process, the prior authorization process with each of these payers and the broader network of payers that are out there, such that we're able to confidently believe that we've got access a pathway for the vast, vast majority of patients. That's the initial goal. From there, you start to focus more and more on optimization, whether or not they're getting that access through the pharmacy benefit or the medical benefit, whether they're getting that through on the initial prior authorization or through the appeal process and ultimately whether or not they're achieving that access through an established positive policy that provides the cleanest and clearest pathway for them to get access to the drug. Operator: Your next question comes from the line of David Saxon with Needham. David Saxon: Maybe 2 on the glaucoma business. First, on iDose. You talked about commercial cases. So what are you hearing in terms of doctors starting to really get into that patient population? I mean is it kind of more of a trickle? Or are you seeing that build? And then the second question is just on the iStent franchise. You talked about flat growth expectations for the year. I think it was -- I mean is that just because of how you're incentivizing the reps, obviously, iDose is the focus right now. But what's the view there? Is that more of a market dynamic or anything around competitive dynamics? Joseph Gilliam: Yes, David, I think -- so first, as it relates to the commercial, and I lump them in with Medicare Advantage because obviously, those are shepherded by commercial carriers. It's very provider specific. So in those geographies where we've obviously had the proper Medicare fee-for-service coverage for a while, we're starting to see providers turn on where they're offering it to a wider swath of patients. And for those that are good at it, we're seeing them do that in a more fulsome way. Our efforts in 2026 are to really try to expand that in a much more significant and profound way as we make our way through the year. I think about in kind of 3, call it, key pillars. We've been talking a fair amount about payer access on the Epioxa side. It's obviously relevant on the iDose side as well. The good news is the foundation here is pretty strong. We've seen successful authorization for therapy and the payment of both the J and the T code from payers that cover the majority of patient lives including 4 of the 5 in that case as well, largest payers on the Medicare Advantage side. So I think we've got a pretty solid foundation on which to expand in terms of the payer side. The second is process optimization. It's going to get sound fairly familiar when we're talking about Epioxa but it's been driving the entire ecosystem from our iDose Hub, our iDose SP providers to the payers and the accounts themselves to reduce the barriers and increase the patient access and optimize the time treatment for patients on that side of the house. And then the last thing, which we talked about, not in a while, but the patient economics. Similarly, we have established programs to support commercially insured patients where most of them should pay as little as $0 out of pocket. And then for MA patients, I think from the very early days of the launch, we've said that the data suggests that about 20% of those patients have no--to-low out-of-pockets in terms of plan designs and then access tends to increase from there throughout the year as patients meet those out-of-pocket requirements on other procedures. So I think we're still in the early innings, but we are seeing obviously encouraging signs on a provider-by-provider basis that we hope to expand as we make our way through 2026. As it relates to the iStent franchise, so it's interesting. Obviously, implied when you go back and have done the work on the fourth quarter results, you'll probably see or have seen that we actually were back into the growth equation for our non-iDose portion of our U.S. glaucoma business. And we talked about the trend heading this direction before. And so we were encouraged by the third quarter in that regard. But I think it's a little too early to call it a trend. And really, it is a large part about, I think, the first part of how you asked the question, which is there's a lot of rep incentive and focus and company incentive and focus around interventional glaucoma and iDose in particular. And so we'll have to see a couple of more quarters to determine whether what we saw in the fourth quarter was a trend or an anomaly as it relates to that. And as a result, I think we've said for a little while now, it's safer to just assume that the iStent or broader non-iDose franchise remains flat on a year-over-year basis when assessing our 2026 guidance. Operator: Your next question comes from the line of Danielle Antalffy with UBS. Danielle Antalffy: Sorry about that. Forgot how to use the mute button. Just a follow-up on some of the questions around iDose and stand-alone use. I'm just curious, if you look at the business as a whole, so iDose plus iStent infinite, what are you seeing there as far as the shift to stand-alone use? And at a higher level, maybe talk about some of the market development lift that's necessary to really build that market and what you're seeing? I know it's early days, but I was at AAO and I felt like there was a big focus on this. So I'm just curious what you can say there. Joseph Gilliam: Yes. Thanks, Danielle. I'm glad you were able to witness that. And I think you'll continue to see more and more of that, whether it's at the upcoming AGS meeting here later this week or ASCRS, a short while later. And I'll probably start in reverse that it is a significant investment. We've been at this since the approval of iDose really in making that happen. It's not our first time going through transforming a marketplace. Obviously, we did it successfully over the course of the last decade for those patients that were faced with the disease in combination with cataract surgery. And it really is a combination of incentive for your sales force alongside of the marketing efforts that we're making, the medical affairs efforts that we're making, the publications and the like. And when you put all that together and really build upon, I think, the enthusiasm that surgeons have out there for a disease that they know is interventional, is asymptomatic and slowly progressing. And there's a really large patient population in need for a variety of reasons. It's about being on that journey on a consistent basis at industry conferences and all of the moments in between that we engage with those surgeons and really changing the actual practice dynamics and shifting towards the stand-alone treatment of these patients and aligning both the behaviors at the practice level with the clinical belief that exists in the vast majority of the physicians that I'm sure you're speaking to or have spoken with in the past. And when we put all that together, we continue to see substantial growth from stand-alone procedures, whether that be iDose or iStent infinite. And it's not a big surprise given everything I've mentioned as well as the fact that you have a market that's 20 billion eyes, 12 million of which are actively diagnosed and treated. And so you've probably heard us say and certainly, Tom say at other conferences and the like that over time, we expect that a number of glaucoma procedures done in the United States will exceed the number of cataract surgery patients that are treated. It will take time, but that's ultimately our focus and the reason why we're making such a substantial investment to the benefit of those patients. Operator: Your next question comes from the line of Joanne Wuensch with Citibank. Joanne Wuensch: I have some money in no order, are you seeing physicians creating a wait list for Epioxa? Would that imply a stronger second half once the J-code is supplied or put it into place versus the first half. Could you see 2027 greater than 2026? And if I do my math correctly, iDose guidance is $225 million for the year. What makes that the right number? Joseph Gilliam: Do you mind repeating that? You cut out a little bit on the 2027 versus 2026 part of your question? Joanne Wuensch: Do you think revenue in 2027 growth rate will be faster than 2026, given the momentum of Epioxa? Joseph Gilliam: Okay. So I'll try to go through those in the word that you asked them. So from an Epioxa perspective, we are starting to see -- I'll give you an example. We certainly were seeing patients be enrolled in our hub for approval to Epioxa. So inherently in that means that a waitlist is being created. I don't know that it's enough to "impact" our first quarter. I think there'll still be enough of Photrexa there, as I said earlier, to drive year-over-year growth. But we do expect that wait listing dynamic, if you will, to be much more material in the second quarter to the detriment of that for the cornea business and probably the benefit of the latter part of the year. Certainly, the fourth quarter perhaps in the tail end of the third quarter as those patients start to get approvals and access the therapy and ultimately treated. So we absolutely expect the second half to be the key contributor to those results. And as we learn more about that, we'll obviously dial in our expectations in a much more meaningful way. As we think about 2027 versus 2026, yes, I probably will stop short of giving at this 2027 guidance implied by the comment. But clearly, you've heard from us that the combination, the 1:2, if you will, continued acceleration with iDose alongside of what we hope will be a meaningful acceleration with Epioxa makes not just 2026 an attractive year, but 2027 and beyond as we look out and think about what it could do in terms of driving our business and the top line associated with it. I think your last comment was the implied and we didn't give the exact number. But as you get into the numbers, I think there'll be a range of estimates that come in, in that general ZIP code and what makes it the right number. Look, we're always looking at a bell curve of scenarios, the various puts and takes within these and trying to establish guidance both on a macro level as well as on a more micro level that we think is achievable for us. And in this case, as I've said previously, I think we've got multiple pathways to both grow and continue to grow sequentially as well as achieve that. And as we make our way through the year, we'll continue obviously to update those views and provide them as we go forward here. Operator: Your next question comes from the line of Steve Lichtman with William Blair. Steven Lichtman: A question on iDose. Can you give us a sense of how many surgeons you trained last year and to date or even qualitatively, can you talk about where you are in that process? Still early to mid-innings? Any color on that would be helpful. Joseph Gilliam: Yes, Steve , welcome to William Blair. And I think from a surgeon training perspective, it's not really been a focus for us in terms of what we communicated Street, and that's my intention that, that's really not the, I'll call it, gating or limiting item for us. Our surgeon training activities have been as strong as they've ever been. The vast, vast majority of the surgeons have already been angle trained over the course of the last 10 years of utilizing MIGS technologies. So from a sustained pharmaceutical standpoint, we're good there. And it's really not been, I'll call it, the step function that's driving where we're at. I think broader office administrative related considerations, reimbursement, confidence, professional fee. And then as we move forward here, bringing commercial Medicare Advantage online are much more key drivers to where we're at and where we're going. But so far, we've been extremely pleased with the pace and the overall ability for our sales force to train these doctors in the OR and get them comfortable with the iDose procedure. Steven Lichtman: That makes sense. And then just secondly, I wanted to actually ask about international glaucoma. It came in above initial expectations last year despite competitive dynamics you flagged going into '25. Do you think there was a delay in some of the competitive headwinds that we could see this year? And that's what's embedded in your '26 thoughts or just staying on the conservative side? Because it would seem like infinite could be a nice catalyst there. Joseph Gilliam: Yes. And I think it is a balance, and we'll see how it plays out over the course of 2026. You have competitive entrants, in particular, in some of our larger markets. In 2025, it did go a little bit more slowly than maybe we anticipated or certainly built into our forecast. And that's the credit to our teams that operate in those markets and the relationships they've built and I think the differentiated positioning of our technologies. As we move forward, we do expect those efforts to continue to accelerate. But to your point, they're also balanced against our launch and launching of iStent infinite throughout the European region, some of the affiliated markets that follow European approvals or clearances as well as continued sort of blocking and tackling that we have around opening up markets or markets within markets and that journey never stops. So I think as we make our way through here, it will be that interplay, you're right. And coming off of constant currency growth in the fourth quarter of 13%, and as you heard me say earlier, we expect sort of high single digit to low double digit in the first part of the year, ultimately abating to something a little bit slower in the second half to be in the high single-digit range for the year, I think, is a good place for us to start off the year as it relates to our guidance for that part of our business. Operator: That concludes our question-and-answer session. I will now turn the call back over to the company for closing remarks. Thomas Burns: Okay. I want to thank you all for your time and attention today. And thanks again for your continued interest and support of Glaukos. Goodbye. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
John Dolan: Good afternoon, everyone. Thank you for joining us today to discuss our results for our Third Quarter and First 9 months of Fiscal 2026 ended December 31, 2025. Hosting our call today is our Chief Executive Officer, John Lai; and our Chief Financial Officer, Garry Lowenthal; as well as myself, John Dolan, PetVivo's Chief Business Development Officer and General Counsel. Following our remarks, we'll open the call to your questions. Then before we conclude today's call, I will provide some important cautions regarding the forward-looking statements made during the call. Before we begin, I'd like to remind everyone that the call is being recorded in order to make it available for replay later today. The replay link will be available in our Investor Relations section at our website at petvivo.com. Now turning to our results. Our third fiscal quarter represented another period of rapid transformation and platform advancement as we continue to intensify our focus and apply our limited resources on the greatest opportunities ahead of us. Many of these new opportunities were introduced over the course of the past year, therefore, requiring extraordinary attention and focus to ensure their successful launch. Our primary objective has always been to create for our stakeholders the greatest opportunities for rapid growth and market expansion, including strong reoccurring revenues and to support the highest potential value for our company for the benefit of our stakeholders. The clinical validation and broad market adoption of our flagship product, Spryng, with OsteoCushion technology has brought us far along. And now over the course of the last year, it has set the stage for the launch of technology and products that promise to exceed even Spryng's greatest potential. Toward this goal, we have made tremendous progress with new strategic alliances and collaborations with several key partners. This includes Digital Landia, a leading pioneer in Agentic AI solutions. As you know, we signed an exclusive 10-year white label licensing agreement with Digital Landia for its breakthrough next-generation AgenticPet AI technology. AgenticPet's highly valuable and innovative technology features 10 specialized diagnostic AI agents that are protected by proprietary IP and 5 patent-pending innovations. Among this technology's many capabilities, the solution addresses the critical challenges facing today's veterinary industry. This includes skyrocketing client acquisition costs and the difficulty in capturing the fastest-growing demographic of Gen Z pet parents. Following the signing with Digital Landia, we are moving quickly to publicly launch our new PetVivo AI veterinary practice platform that is exclusively powered by this AgenticPet AI technology. PetVivo AI is a new AI-powered Software-as-a-Service platform for veterinarians, which we believe is the first of its kind on the market, providing us what we believe to be a strong first-mover advantage. We engaged an initial select group of veterinarians practices under a beta stage program for PetVivo AI who have been providing us tremendous positive feedback. PetVivo AI has demonstrated in this beta testing to deliver a remarkable 50% to 90% reduction in veterinary customer acquisition costs, lowering it from about $80 to $400 typically spent per new customer targets down to less than $43 per target customer. PetVivo AI then employs automated AI-powered engagement that intelligently converts the leads it generates into paying veterinary customers. This AI-powered solution greatly complements our existing medical device offerings, which we market to our existing network of thousands of veterinary clinics across North America and Europe. Perhaps most importantly, PetVivo AI has created a new reoccurring revenue stream, which has high 80% to 90% gross margins, combined with low CapEx scalability. Interested veterinarians are able to request a free demo of this amazing solution on our newly launched PetVivo AI website where they can experience for themselves the power of this new platform that can transform their practice. In support of the launch of PetVivo AI during the quarter, Digital Landia published a comprehensive technical white paper documenting the AgenticPet AI framework that powers this technology. The paper validates the technical foundation underlying our new B2B platform. It provides veterinary professionals, investors and industry stakeholders with detailed visibility into the multi-agent artificial intelligence architecture that enables transformative clinical and economic benefits for their practice. Given the strength of this report, we expect our PetVivo AI solution to rival mainstream AI applications in terms of adoption rates. We also expect it to create tremendous visibility for our brands, particularly Spryng with OsteoCushion technology and PrecisePRP and eventually, the other new solutions in our product pipeline. The white paper is available to download from Digital Landia's website at digitallandia.com. For our part, during the quarter, we launched an online video explainer that walks you through the 2-part ecosystem of PetVivo AI. It shows how PetVivo AI intelligently connects pet parents with veterinary practices looking for new clients. The professionally produced video explains all 10 specialized AI agents from behavioral scientists to radiologists and demonstrates the complete user journey for both pet parents and vets. If you haven't yet watched it, we very much encourage you to do so as then you will understand why we are so excited about this new offering. Regarding other key new partners during the quarter, we joined forces with Austin, Texas-based Veterinary Growth Partners. As a management services organization, VGP supports veterinary practices with management and marketing tools, consulting and vendor relationships designed to improve their efficiency and profitability. VGP has committed to actively promote our Spryng with OsteoCushion technology and PrecisePRP products to its expansive member network of more than 7,300 veterinary clinic members across the United States. Product training of these veterinarians in their network is currently underway, and we're planning to introduce our new PetVivo AI practice management platform to VGP's clinic membership following this training period for Spryng and PrecisePRP. Also during the quarter, we substantially completed Stage B of our strategic partnership with PiezoBioMembrane, a spin-off from the University of Connecticut, who offers advanced biocompatible piezoelectric materials for implantable and regenerative applications. This important partnership with PBM is furthering the R&D of revolutionary functional biomaterials that can promote regeneration, restoration and/or remodeling of damaged or injured tissue and bone in animals as well as in humans. Stage A of the 3-stage R&D project successfully determined that materials of our respective products can be combined into a single offering and demonstrated its piezoelectric activity, which can potentially provide therapeutic benefits to animals and humans. Stage B has now determined that the combined product can be mass produced at scale and with preliminary indication for safety and administration in animals. Stage C, which is expected to begin in the second quarter of 2026, is anticipated to demonstrate definitive safety and efficacy of this functional biomaterial in animals. Upon successful completion of Stage C, we are also planning to initiate the process for FDA clearance for human applications. We anticipate that these products, these new functional biomaterials may be available for commercialization by the end of this year, 2026 or the beginning of next year, 2027. We have also continued to advance commercial launch of PrecisePRP, a proprietary and revolutionary allogenic platelet-rich plasma, PRP, regenerative product for horses and dogs that highly complements our Spryng product offering. Sold under an exclusive licensing and supply agreement with our strategic partner, VetStem, this product has been receiving favorable reports from veterinarians, especially regarding its ease of use. Part of our commercialization efforts have been to exhibit and research backed benefits of PrecisePRP along with Spryng at various major industry conferences. This includes the American Association of Equine Practitioners Conference held in December that was attended by leading veterinarian, sports medicine and rehabilitation experts. Such events help drive the greater adoption of Spryng and PrecisePRP by expanding awareness among key decision-makers of its effectiveness in the management of osteoarthritis in animals. We also continued to advance our strategic collaboration with Commonwealth Markets, the syndicated ownership group behind the 2023 Kentucky Derby winner. Commonwealth has now integrated Spryng and PrecisePRP into the care protocols of its top-tier thoroughbred stables. These 2 products are now being used as a management solution to promote joint health, extend performance longevity and support recovery in high-impact training and racing environments. This adoption by Commonwealth represents a tremendous validation of the effectiveness of Spryng and PrecisePRP, which we believe will open the door to greater opportunities. During the quarter, we also further developed our entrance of the European marketplace after our engagement of Nupsala Group in the previous quarter. For those unfamiliar with Nupsala, Nupsala is a leading U.K.-based veterinary group that operates as both a veterinary wholesaler and referral provider. Their specialization is musculoskeletal health, orthobiologics, a regenerative medicine for companion animals and horses. Nupsala has begun to inventory, market and offer Spryng throughout the U.K. An initial order has already been shipped and the official education and training of Nupsala's sales force is scheduled to begin before the end of this current calendar quarter. This new international engagement follows our previously announced first entrance into the international market with the signing of Eq Especialidades to distribute products in the Mexico marketplace. We see Mexico as a very attractive market for animal health solutions, especially since the country's veterinary healthcare market is projected to grow at a compounded annual growth rate or CAGR of 11% and reach more than $2.4 billion within the next several years. Personal horse ownership is deeply intertwined with Mexican culture and tradition, which also makes Mexican marketplace an exceptionally ideal one. The European animal health market is also a large opportunity, estimated at more than $16.6 billion today. This market is projected to more than double to $34.8 billion by 2033, growing at a CAGR of 8.6%, which is remarkable for an already large market. On the R&D front, we completed the accumulation of data from the earlier announced canine elbow pilot study conducted by Orthobiologic Innovations, a leader in R&D for regenerative and sports medicine. The study was led by 2 prominent veterinarians, Sherman and Debra Canapp. They are currently working in cooperation with our technical service veterinarians to incorporate the results into a white paper in preparation for submission to industry journals for potential publication. In terms of enhancing our corporate governance during the quarter, we were expected -- we were excited to announce the appointment of Josh Ruben to our Board of Directors. He has brought to us a wealth of experience in healthcare and life sciences finance, capital markets and corporate strategy, along with a proven track record in the execution of multimillion-dollar M&A and capital transactions. Josh currently serves as a Managing Director of Life Sciences at Trinity Capital, which is focused on venture lending to healthcare companies. He previously served in financial director roles with RBC Capital Markets and Wells Fargo Securities. We expect Josh's deep understanding of the life sciences industry and strategic insights into growth stage companies like PetVivo to prove invaluable as we continue to expand our market presence. Now before we get into more of the other exciting recent developments and our outlook for the rest of the year, I would like to turn the call over to our CFO, Garry Lowenthal, who will take us through the financial details for the quarter. Garry? Garry Lowenthal: Thank you, John. Good afternoon, everyone. Thank you for joining us today to discuss our results for the first 9 months of fiscal year 2026. For this reporting period, we'd like to focus on the results for the 9-month period as a better reflection of our progress, particularly given the change in sales mix during the period resulting from new product introductions. Revenues for the 9 months ended December 31, 2025, totaled $887,000, decreasing only 2% from the same year ago period. Revenues for period consist of sales of our Spryng products totaling $400,800 and PrecisePRP products totaling $486,000. This compared to the same year ago period where sales consist entirely of Spryng. The slight decrease in our revenues for the period was primarily due to a decrease in Spryng product sales, offset by increase in sales of PrecisePRP. In the year ago period, we had a special promotion with our distributors and vet clinics at the Annual American Association of Practitioners Conference held in December. In the fiscal third quarter that was not repeated in the fiscal third quarter of 2026 that just ended in December. This contributed to the lower sales of Spryng in this most recent period. Going forward, though, we plan to reimplement special promotions to incentivize our distributors and veterinary clinics whereby improving sales of our Spryng product. We believe the decrease in Spryng sales was also due to customers opting to use PrecisePRP alone in that conjunction with Spryng. However, we believe the best outcomes would be created by using these 2 products together. We believe renewed efforts to better educate our customers on the benefits of using both products together will help drive greater sales of Spryng in the future quarters. Gross profit in the first 9 months totaled $551,500 or 62.2% of revenues, which was a decrease of $812,000 or 89% of revenues in the same period a year ago due to the lower gross margins of the PrecisePRP product line. We were able to maintain our high gross margin despite increased purchases of lower-margin PrecisePRP finished goods associated with the exclusive license agreement with VetStem, Incorporated and the consequent greater proportion of this lower-margin product in our sales mix. We are exploring ways to improve our gross margin with the PrecisePRP product as well as improve our product mix to include a higher Spryng gross margin. Total operating expenses decreased 2% to $6.7 million compared to the same year-ago period. The improvement was due to reduced general and administrative costs and research and development costs, with this reflecting the strategic cost reduction and restructuring program we implemented last year. Likewise, operating loss increased 2% to $6.1 million from $6 million in the same year ago same period. The increase was primarily due to the increase in sales and marketing expenses related to the rollout of our new PrecisePRP product line, which has been well received by veterinarians in our network. Net loss for the first 9 months was $7.5 million or $0.27 per share as compared to a net loss of $6 million or $0.30 a share for the same year ago period. The increase in net loss was primarily due to unrealized loss on change in derivative liabilities, loss on disposal of certain assets, amortization of debt discount and interest expense on our convertible notes. Net cash used in operating activities during the 9 months totaled $5.3 million. This cash used in operating activities were primarily attributed to our decrease of accounts payables and accrued expenses of $840,000 and the increase in PrecisePRP production and inventory purchases as we ramped up the market demand for this new product line. Now let's turn to the balance sheet. Our current assets totaled $1.4 million at the end of the period ended December 31, '25. In comparison, our current liabilities were significantly reduced to only $980,000 from the same period last year of $4.2 million. And as of December 31, our working capital as of December 31 totaled $395,000. Subsequent to the end of the period, since January 1 of this year, we raised additional capital from exercise of warrants and the sale of equity securities, bringing in an additional $477,500 of additional proceeds. Also notably, our total liabilities decreased to $1 million at December 31, down from $5.1 million on just March 31 in this 9-month period. The substantial 81% decrease in total liabilities in just 9 months was primarily due to the conversion of all convertible notes into common stock extinguishment of our derivative liabilities related to these convertible notes as well as a major reduction in accounts payables due to the settlement of vendors and trade vendors, the reduction of accrued expenses and the termination of a 10-year lease obligation. In fact, our accounts payable decreased 53% from $821,000 just March of this past year, at the end of our fiscal year, last fiscal year to less than $386,000 by the end of December. This highlights our strongest balance sheet in many years. Now this completes our financial review for the period. John? John Dolan: Thank you, Garry. As I mentioned earlier, the combination of Spryng with PrecisePRP has been receiving very favorable reports from veterinarians, especially regarding their ease of use and effectiveness in the management of osteoarthritis in horses and companion animals. Our successful results led to Health Canada recently acknowledging Spryng with OsteoCushion technology as a veterinary medical device for use in Canada. Canada has recognized how this veterinarian administered intra-articular injection device can support joint health and aid in the management of lameness and other joint-related afflictions in animals. This action represents a major milestone in our global commercialization strategy as the first such recognition by an international regulatory body. As such, it has opened up a large new international market opportunity. The Canadian animal healthcare market is reportedly growing at 6.8% CAGR to exceed $4.4 billion by 2031. The official acknowledgment by Health Canada paves the way for commercial launch in the country. Preparations are underway, and we're currently planning for the official launch at the beginning of the third calendar quarter of 2026. Meanwhile, we will continue to expand the awareness of the benefits of both of these innovative products among key decision leaders, including presenting them at a number of major conferences. As previously mentioned, we exhibited at the American Association of Equine Practitioners Conference in December. Then just last week, we exhibited at the Florida Veterinary Medical Association, Ocala Equine Conference held at the World Equestrian Center in Ocala, Florida. And currently, we are exhibiting at the Western Veterinary Conference in Las Vegas, Nevada. At these events, we demonstrated the research-backed benefits of Spryng and PrecisePRP to veterinarians, including leading surgeons, sports medicine and rehabilitation experts in the veterinary industry. We are planning to exhibit at 2 more major conferences this spring, which are typically significant drivers of product adoption and new sales. The conferences also present the opportunity to share recent studies like our canine elbow study as well as other completed and well-published studies that we have done. We currently have additional canine and equine studies for tolerance and efficacy of Spryng and PrecisePRP in the initial stages of development. We also continue to advance our pipeline of new products. This includes new functional biomaterial and bone mimicking biomaterials that may be used to enhance the delivery of pharmacological agents and/or promote the regeneration, restoration and/or remodeling of damaged or injured tissue and bone in animals and humans. I want to reemphasize another exciting event that occurred in the current quarter, that being Digital Landia's launch of their public access beta to its B2C agentic pet solutions for pet owners. The launch includes access to all of its 10 specialized AI agents, veterinarian, behavioral scientists, nutritionists, geneticists, vaccination specialists, trainer, blood analysis, radiologists, urinalysis and fecal analysis. The launch targets Gen Z pet owners who represent 20% of U.S. pet households and where pet ownership is growing at more than 43% annually. The B2B AgenticPet has the capability to intake animal medical data such as physician medical records, medical imaging and lab results and then assist veterinarians in diagnosing afflictions and diseases and then suggest treatment options. Given how AgenticPet accomplishes this with an amazing 97% accuracy, this technology represents a paradigm shift in how we address the physical health of companion animals. Digital Landia recently reported that the launch of the B2C AgenticPet crushed expectations with the onboarding of 1,000 active beta users in less than 72 hours. They believe this rapid onboarding validates the massive pent-up demand for AI-driven preventive pet healthcare. The fast adoption confirms the market thesis that pet owners are desperately seeking proactive solutions that catch health issues before symptoms emerge rather than relying upon outdated reactive care models. The success of the beta program also strengthens the value proposition of the B2B PetVivo AI solution for thousands of veterinarian clinics in the PetVivo nationwide network. Altogether, our technologies have created an exciting future for PetVivo that is transformative to not only the veterinarians and the patients they serve, but potentially for humans as well. Looking ahead, we expect to see continued sales momentum and market penetration for the duration of fiscal 2026 and beyond. In fact, we have never been in a better position to accelerate our growth and expand across high-growth U.S. and international markets. The U.S. animal health market alone is expected to double to $11.3 billion by 2030. Such massive growth is rare for such an already large industry and provides us strong tailwinds. To better tap the market opportunity, we are in advanced discussions with an outside sales and marketing firm that specializes in our industry and brings our experienced sales team and established distribution network. They would complement our own in-house sales team. We hope to provide additional details on this soon. As we continue to grow and expand over the coming quarters, we will remain committed to advancing the best in pet health solutions and ensure our products reach more veterinary professionals and pet owners with our success in these efforts driving greater value for our stakeholders. Now, I would like to turn the call over to our CEO, John Lai, to provide some insights into some of the recent developments and answer any questions from our listeners. John? John Lai: Thank you, John. I would like to now open it up to our Q&A session formally. And operator, could you please provide the necessary instructions for our participants to be able to ask questions. Operator: [Operator Instructions] John Lai: So I do see a question on there that says updates on getting on the NASDAQ listings. So the plan was not for NASDAQ, but more New York Amex, and we're working towards that. And a function of that is stock price and the life science microcap market is kind of going through a more correctional phase, but we anticipate as future events occur that we will get the necessary pricing that we would like to be able to uplist on to the New York Amex. Operator: We have a raise hands for the number ending with 619. [Operator Instructions] Number ending with 619. Unknown Analyst: John, can you talk a little bit about your -- the previous guidance you gave on the last conference call and how you see that guidance in light of this quarter's results? John Lai: I'm going to let Garry answer that question because I can't recall what guidance we gave. I don't think we gave a guidance. Garry? Unknown Analyst: I believe it was around -- yes, I believe it was $2 million to $2.5 million for fiscal year. Garry Lowenthal: I don't recall the guidance you're referring to. Is that in a previous call or a press release? Unknown Analyst: Last quarter's conference call? Garry Lowenthal: Okay. Well, we just explained in our half hour conversation of why the revenues were down for the last 90 days. And we have a brand-new product. And like we had said that some of the veterinarians were ordering either Spryng or the PrecisePRP. And now our job is to show through studies that we've already done that having both products work together has better results. We've also got involved in some acquisitions through the Digital Landia as well, and that revenue won't actually kick into the first quarter of our next fiscal year being April 1. And then we have some whole new product pipeline that's actually going to monetize into the middle of the year. Unknown Analyst: So are you pushing out the uptick in sales? Should we expect the previous guidance that was given to be reflected on the next conference call? How should we think about that? Garry Lowenthal: I wouldn't look at something that happened 90 days ago. What we did is we -- in the past, we've had big promotions that we had our salespeople have in December of every year. This past December, we didn't do that. We changed the model. It turned out it didn't really work. We have -- we rely on our revenue with the largest distributor in the entire industry. And in the past, we loaded them up in December. So that's why our December and our third quarter numbers were unusually high. And that's what we decided to spread it out more evenly into the fourth quarter and then the first quarter coming up. And the other thing we're doing is we're actually outsourcing to a third-party organization that does -- outsource inside sales, and they specialize and work with all distributors, not just a handful. And so we're enhancing our entire sales organization as well. Unknown Analyst: One more question. Can you talk a little bit about the CapEx that's going to be required to roll out the education of the veterinarian system in terms of its -- of the Digital Landia platform? Garry Lowenthal: I'm going to let John Lai answer that. Unknown Analyst: And who's going to be responsible for that rollout? John Lai: So there are multiple aspects to that. So one of the things that has occurred is the accreditation organization race. We have 4 different webinars now that have continued education credits to give into the veterinary doctors, and we started onboarding the VGP Group, which is the Veterinary Growth Practices, which has over 7,300 clinics. So that just started to occur on the Digital Landia side, from the standpoint of PetVivo.ai. The onboarding will be part of our current clinics to put them into the system, so they're able to use it to see how efficient it is for them because the open architecture platform allows them to load the app and the app will go on any existing system that the vet is using to gather the data for the vet. So the onboarding time is greatly reduced. So the vet doesn't have to go into this application, go into that application to pull x-rays, go into that one to pull urology or urine analysis. This does it all for the vet. So they're able to do actual vet work in looking at the diagnosis. Also, when you're allowing -- so that's why it takes time to allow them to build out the B2C side. So each vet that comes in, they say, I want to look for potential new customers within a 5-mile radius that may have osteoarthritis issues with their dog or cat, it would automatically provide them with a very good detailed list of potential customers, and then they're able to reach out to those customers and offer them specials on vaccine or Spryng product that may fit their current situation. So a lot of it is going to be influencer-driven as the model indicates that influencers will get a residual commission on the B2C side as they bring people into the B2C. So it's a dual ecosystem, one feeds on the other. So that's being built up right now. They're probably at over 30-some thousand that have signed up to get the system. And I don't have the count on their side exactly how many are using the system, but they've been limited to 100 users a day by giving access codes where they can get in and get the full functioning system for the B2C. But we're not far away from launching our B2B. Unknown Analyst: And PetVivo is going to recognize revenues from the implementation from the vets implementing. John Lai: Yes. Yes, correct. Yes, because we're able to show the vets, they're saving significant costs. So it's a true SaaS model that has the economics, financials and convenience for the vet that we believe we're changing the ecosystem for them and the clinic ownership's revenue source or potential earnings source is greatly enhanced using the PetVivo.ai system. Unknown Analyst: So does that -- just so I understand, that needs to sign up download the PetVivo Agentic AI system, reap the benefits of that sign-up through new customers, graded information from those customers, correct? John Lai: Correct. Correct. That and chances are because we have these partnerships and their Spryng users, we'll probably do some early promotional to get them on board. And so once they -- we feel once they try the system, the conversion rate into a paying customer is going to be pretty high. Unknown Analyst: I guess my question is who's going to support that ecosystem? John Lai: That's all part of Digital Landia's contract. They provide continued updates. They're providing the functional system. And so they would be doing that. Our CapEx is very minimal from that standpoint. So we would be -- our expenditure in that area would be more soft dollars of promoting to veterinary clinic groups that may have a big influence on a large group of clinics. Unknown Analyst: Do you have expectations for revenues and P&L a year or 2 year about? John Lai: No, no, not on the pet side because we have a general idea, but we're not giving any guidance yet. Garry Lowenthal: And by the way, that revenue it's a recurring revenue model. So it's monthly recurring revenue when it kicks in. So that's -- those that convert to the fee paying. You go from freemium to what's called premium model. And again, the important point that John Lai talked about was it's very little CapEx cost for us. That's Digital Landia. That's their responsibility. John Lai: Well, but it also will help reduce our cost to reach out to customers being the veterinary doctors of Spryng and PrecisePRP and other products that we'll be introducing into the network as well as using the B2C component where we will be able to push ads towards people that have osteoarthritis issues or lameness issues or potential rehab issues. Unknown Analyst: Okay. So you view Digital Landia or PetVivo's AI as a direct-to-consumer marketing. John Lai: No, that's one. It's more veterinary doctors focused, but because it's a dual ecosystem, we're able to do both. So we're able to -- as the vet goes, okay, I want to see who in my 10-mile radius may have severe case of osteoarthritis. They can search that network within the 10-mile radius, still have a list of potential customers that aren't customers of theirs. They can offer them a special promotion to come in for the exam. They may say the exam is going to be $10. So VCA has been launching a model like that, where they open a new clinic, the first visit is free, just to get people in the door to develop a lifetime customer. Well, our app will create a much better experience for the pet owner as well as the veterinary doctor where they're more inclusive into the health of the animal because they're working together on doing the diagnostics and the pet owner now has a good understanding of what the vet is telling them in terms of what needs to be done. So it's really -- you're building the trust between the vet and the pet owner. Unknown Analyst: At the beginning of the call, you mentioned -- I believe you mentioned that Digital Landia's PetVivo.ai platform should have the same adoption rate as the current AI platforms. Are you talking about the large language model platforms like ChatGPT or what platforms are you referring to? John Lai: So subscription model platforms is generally around 20-some percent that actually end up paying for the system, like Sofie, which is a veterinary system. I think they have like 25% of the people that try the system will convert into a full-time regular customer. Unknown Analyst: Okay. So it's not based around AI models, it's based around subscription models. Correct? John Lai: Yes, it's a SaaS model, but it's based on AI where we're giving a much better outcomes and platform and operating efficiency, but it's still you're selling a service. Is there any more questions? Operator: [Operator Instructions] John Lai: So if there's no more questions, operator, I would like to conclude the Q&A session. And then I would like to thank everyone for joining us on today's call and look forward to updating everyone again in the fourth quarter and full year results. As always, take care, and thank you for joining us. But before everybody goes, John Dolan, will you please go ahead and wrap up the call and give all the necessary disclosures. John Dolan: Thank you, John. Now before we conclude today's call, I would like to provide the company's safe harbor statement that includes cautions regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the company's future revenue, future plans, objectives, expectations and events, assumptions and estimates. Forward-looking statements can be identified by the use of words or phrases usually containing the words believe, estimate, project, intend, expect, should, will, or similar expressions. Statements that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts and projections for its business and the industry and markets related to its business. Any forward-looking statements made during this conference call are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Factors that would cause or contribute to such differences include, but not limited to, various risks as detailed in the company's periodic report filings with the U.S. Securities and Exchange Commission. For more information about risks and uncertainties associated with the company's business, please refer to the Management's Discussion and Analysis of Financial Conditions and Results of Operations and Risk Factors sections of the company's SEC filings, including, but not limited to, our Annual Report on the Form 10-K and quarterly reports on the Form 10-Q. Any forward-looking statements made during the conference call speaks as of today's date. The company expressly disclaims any obligations or undertaking to update or revise any forward-looking statements made during the conference call to reflect any changes in its expectations with regard thereto or any changes in its events, conditions or circumstances of which any forward-looking statement is based, except as required by law. I would like to remind everyone that this call will be available for replay starting tomorrow. Please refer to today's earnings release for dial-in replay instructions available via the company's website at www.petvivo.com. Thank you for attending today's presentation. This concludes the conference call.
Operator: Good afternoon, and welcome to the Republic Services Fourth Quarter and Full Year 2025 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations. Please go ahead. Aaron Evans: Good afternoon. I would like to welcome everyone to Republic Services Fourth Quarter and Full Year 2025 Conference Call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance. I'd like to remind everyone that some information discussed on today's call contains forward-looking statements, including forward-looking financial information, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time sensitive. If in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is February 17, 2026. Please note that this call is property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Republic Services is strictly prohibited. Our SEC filings, earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on our website at republicservices.com. In addition, Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times and presentations are posted on our investor website. With that, I'd like to turn the call over to Jon. Jon Vander Ark: Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. The Republic team delivered another strong year of performance, reflecting the resilience of our business model and the power of our differentiating capabilities. We maintained high levels of customer loyalty by consistently delivering premium products and services while effectively managing costs across the business, all while navigating a dynamic macroeconomic backdrop. Our solid earnings growth and meaningful margin expansion reflect our strategy in action and the dedication of our team to create long-term value for our customers and shareholders. During 2025, we achieved revenue growth of 3.5%, generated adjusted EBITDA growth of nearly 7%, expanded adjusted EBITDA margin by 90 basis points, delivered adjusted earnings per share of $7.02, produced $2.43 billion of adjusted free cash flow and increased adjusted free cash flow conversion by 200 basis points to 45.8%. We remain well positioned to secure new growth opportunities by delivering our differentiated capabilities, customer zeal, digital and sustainability. With respect to customer zeal, our customer retention rate remained strong at 94%. Our Net Promoter Score continued to improve throughout 2025. This reflects our team's commitment to delivering exceptional customer value. Fourth quarter organic revenue growth was driven by solid pricing across the business. Average yield on total revenue was 3.7% and average yield on related revenue was 4.5%. Organic volume declined during the quarter, reducing total revenue by 1% and related revenue by 1.2%. Volume declines were concentrated to construction and manufacturing end markets as well as a continued shedding of underperforming residential business. Organic revenue in the Environmental Solutions business decreased total revenue by 2% in the fourth quarter. More than half of this decrease in the Environmental Solutions business related to an emergency response job in 2024 that did not repeat. Turning to digital. We continue to make investments in new technologies and AI-enabled tools that strengthen our competitive position and create measurable value. These capabilities extend across our organization and are expected to unlock incremental growth, enhance profitability and drive sustained operating leverage. For example, we are deploying advanced analytics to optimize pricing based on specific attributes and local market dynamics. Over time, we expect this will strengthen price retention and reduce customer churn. We are upgrading our RISE digital platform, beginning with our large container business. By applying AI and algorithmic-based routing, we see meaningful opportunities to improve safety, enhance service delivery and increase route-level productivity, benefits that translate directly into cost efficiency and a better customer experience. Additionally, our digital tools are helping us optimize nearly all 11 million customer calls we receive each year. In fact, in 2025 alone, we delivered more than 70 million proactive service notifications, addressing our most common customer inquiries such as holiday service schedules and weather-related delays. Within sustainability, we made great progress during the year in the development of our polymer center network and Blue Polymers joint venture facilities. In July, we commenced commercial production at our Indianapolis polymer center. This facility is co-located with a Blue Polymers production facility. Commercial production began in the Indianapolis Blue Polymers facility during the fourth quarter. We continue to advance renewable natural gas projects with our partners. Three projects came online during the fourth quarter. In total, we commenced operations at 9 RNG projects in 2025. We expect 4 more RNG projects to be in operations in 2026. We continue to execute against our industry-leading commitment to fleet electrification. We had more than 180 electric collection vehicles in operations, supported by 32 commercial-scale EV charging facilities at the end of 2025. We expect to add another 150 EV collection trucks to our fleet this year to support the continued growth of this differentiated service offering. As part of our commitment to sustainability, we strive to be the employer where the best people want to work. In 2025, our employee engagement score, which consistently exceeds national benchmarks, improved to 87 and our turnover rate was our best performance on record. Regarding capital allocation, in 2025, we invested $1.1 billion in value-creating acquisitions and returned $1.6 billion to shareholders, including $854 million of share repurchases. Our results clearly demonstrate our ability to create sustainable long-term value even while managing through a dynamic market environment. We expect to deliver another year of profitable growth in 2026. More specifically, we expect full range revenue in a range of $17.05 billion to $17.15 billion. Adjusted EBITDA is expected to be in the range of $5.475 billion to $5.525 billion. We expect to deliver adjusted earnings per share in a range of $7.20 to $7.28. And we expect to generate adjusted free cash flow in a range of $2.52 billion to $2.56 billion. Our acquisition pipeline remains strong and supportive of continued activity in both recycling and waste and environmental solutions. We expect to invest approximately $1 billion in value-creating acquisitions in 2026. We are already off to a strong start this year with over $400 million of investment and acquisitions to date. Our guidance includes the financial contributions from these acquisitions. At the midpoint, our outlook for 2026 represents revenue growth of 3.1%, adjusted EBITDA growth of 3.6%, adjusted earnings per share growth of 3.1% and adjusted free cash flow growth of 4.4%. As we have highlighted previously, our 2025 results benefited from landfill volumes related to wildfire and hurricane cleanup efforts. Absent difficult prior year comparisons created by these nonrecurring projects, the midpoint of our 2026 guidance would indicate nearly a 4% top line growth, more than 5% growth in adjusted EBITDA, 50 basis points of EBITDA margin expansion, approximately 6% growth in adjusted earnings per share and 7% growth in adjusted free cash flow. This level of performance aligns with our long-term growth algorithm even as we continue to operate in an uncertain macroeconomic backdrop. I will now turn the call over to Brian, who will provide additional details on the quarter and the year. Brian Delghiaccio: Thanks, Jon. Core price on total revenue was 5.8% in the fourth quarter. Core price on related revenue was 7.1%, which included open market pricing of 8.7% and restricted pricing of 4.6%. The components of core price on related revenue included small container of 8.8%, large container of 7.4% and residential of 6.7%. Average yield on total revenue was 3.7% and average yield on related revenue was 4.5%. In 2026, we expect average yield on related revenue in a range of 4% to 4.5%, which equates to average yield on total revenue in a range of 3.2% to 3.7%. Fourth quarter volume decreased total revenue by 1% and decreased related revenue by 1.2%. Volume results on related revenue included a decrease in large container of 3.8%, primarily related to continued softness in construction-related activity and manufacturing end markets and a decrease in residential of 3% due to shedding underperforming contracts. In 2026, we expect organic volume will decrease total revenue by approximately 1%. Keep in mind that landfill volumes from wildfire and hurricane cleanup efforts in 2025 creates a 60 basis point headwind to organic volume growth in 2026. Moving on to recycling. Commodity prices were $112 per ton during the fourth quarter. This compared to $153 per ton in the prior year. Recycling processing and commodity sales were flat compared to the prior year. Increased volumes at our polymer centers and reopening a recycling center on the West Coast offset the revenue impact of lower recycled commodity prices. Full year 2025 commodity prices were $135 per ton. This compared to $164 per ton in the prior year. Current commodity prices are approximately $115 per ton, which is the baseline used in our 2026 guidance. Fourth quarter total company adjusted EBITDA margin expanded 30 basis points to 31.3%. Margin performance during the quarter included margin expansion in the underlying business of 80 basis points, which was partially offset by a 10 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices and a 20 basis point decrease from acquisitions. Our full year total company adjusted EBITDA margin was 32%, which represents margin expansion of 90 basis points compared to the prior year. This improvement was driven by margin expansion in the underlying business. The 30 basis point increase to margin from wildfire and hurricane landfill volumes was completely offset by the impact of net fuel, recycled commodity prices and acquisitions. With respect to Environmental Solutions. Fourth quarter revenue decreased $60 million compared to the prior year. Approximately $50 million of this decrease related to an emergency response project in 2024 that did not repeat. Adjusted EBITDA margin in the Environmental Solutions business was 20.1% in the fourth quarter. This level of performance was relatively consistent with our third quarter results. Total company depreciation, amortization and accretion was 11.6% of revenue in 2025 and is expected to be approximately 11.6% of revenue in 2026. Full year 2025 adjusted free cash flow was $2.43 billion, an increase of more than 11% compared to the prior year. This was driven by EBITDA growth in the business and cash tax benefits resulting from recently enacted federal tax law. Total debt at the end of the year was $13.7 billion and total liquidity was $2 billion. Our leverage ratio at the end of the year was approximately 2.6x. Based on current interest rates, we expect net interest expense in a range of $575 million to $585 million in 2026. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 16.2% during the fourth quarter and 21.9% for the full year. The favorable tax rate in the fourth quarter was driven by the timing of tax credits related to equity investments in renewable energy. We expect an equivalent tax impact of approximately 24% in 2026, made up of an adjusted effective tax rate of 19% and approximately $190 million of noncash charges from equity investments in renewable energy. With that, operator, I would like to open the call to questions. Operator: [Operator Instructions] The first question is from Tyler Brown with Raymond James. Patrick Brown: Jon, I appreciate the comments on the M&A pipeline, but I'm just curious if you can talk a little bit about what you purchased with the $400 million year-to-date? And then what types of assets are in the other $600 million? And then, Brian, I assume the $400 million in acquisitions is in the guide, but the $600 million is not. I'm assuming that's the way it will be. And then just can you provide what the acquisition contribution will be in '26 implied in the guide? Sorry, I know that was a lot. Jon Vander Ark: Yes, no problem. Yes, we typically don't comment on individual deals, but it was published. So we bought a company called Hamm on the west side of Kansas City. Great disposal infrastructure, great opportunity for us to use that as a basis for further growth. So that was the anchor tenant of the $400 million. And of the $600 million in additional that we hit directionally, we don't know -- again, we know some of the things that are likely in there. We don't know exactly what's in there because we haven't closed any of that stuff. So we'll update you on future quarters, but feel really good about that mix. It's predominantly recycling and waste, but we've got a number of attractive ES opportunities that we're looking at as well. And I'll let Del talk about the mechanics of the contribution. Brian Delghiaccio: Yes. Tyler, you're correct. So we've included the contribution from that, which is already closed, which includes the $400 million. And then were other deals besides just Hamm that we closed. With respect to the contribution, so rollover together with those deals, it's adding 70 basis points to 2026 growth. Patrick Brown: Okay. Perfect. And then, Brian, if we can talk a little bit about margins because I think the margin guide is, call it, 32.2% based on the midpoint, which I think is 20 basis points up. But there's quite a bit going on. So can we talk about at the core level because we have commodities, we've got the landfill comps, we've got M&A? And then I don't want to get really near-term focus, but can you help us shape Q1 and Q2? Because I surmise, again, there's a lot going on. The majority of the landfill comp will be earlier in the year. So will margins actually move backwards in the first half. But again, sorry, I know there's a lot there. Brian Delghiaccio: Yes. Let me just start with the components because you're right, there are quite a few moving pieces. So 20 basis points at the midpoint there, call it, 60 to 70 basis points of that expansion in the underlying business. With what we've guided to from $115 per ton, commodity prices would be a 10 basis point drag on margin. Acquisitions, another 10 basis points of drag. And then to your point on those higher-margin landfill volumes, that's a 30 basis point drag on margin. So add all that up, that's the 20 basis points at the midpoint, but quite strong when you look at the underlying business in that 60 to 70 basis point ZIP code. When you think about the timing, so what I would just say -- and more of this is having to do with what happened in the prior year. So think slightly positive in Q1, Q2 and Q3 flat to slightly negative just because we're comping those landfill volumes during those 2 quarters and then most of the margin expansion happening in the fourth quarter. Operator: The next question is from Jerry Revich with Wells Fargo. Jerry Revich: I'm wondering if we could just talk about the polymer center performance. So nice to hear about the projects being on budget. Can you, Jon, just please provide us an update on how you're thinking about future polymer projects? What's the demand curve look like and overall performance as you folks ramp? Jon Vander Ark: Yes. We're happy with the progress on Las Vegas. Again, we talked about that having some learning curve in terms of the start-up, and that's moving up the curve very nicely. Indianapolis learned from a lot of that benefit and then Allentown. Steel is up in the air in our third polymer center. There certainly could be a fourth polymer center over time. As you know, right now, plastics is a pretty challenged broadly. What has been nice is the spread between the bale we're taking on the front end and the PET we're selling on the back end has been really stable in part because we're producing a very premium product that's meeting our customers' needs on that front. So we're going to see how that market evolves. I don't think we'll announce any fourth polymer center in the very near term. I think that is more likely than not over time, just testing again how the market evolves. There's some macro factors, obviously, with China on both virgin and recycled PET that are putting downward pressure on pricing that I'm hoping those trends are arrested here in the next 12 to 18 months, and I think we'll see some upward pressure on plastics. Brian Delghiaccio: And Jerry, to your question just on performance. When you think about next year, we're expecting about a $30 million revenue uplift from the polymer centers and with that about $10 million of incremental EBITDA. Jerry Revich: Super. And can I ask separately on the RNG side, nice to hear about the projects coming online. Can you just provide an update on performance from a royalty standpoint and operating efficiency? We're hearing in the industry projects are generally having a harder time getting to the targeted profitability numbers. I'm wondering how your projects are tracking in that regard, both from a royalty standpoint as well as equity income, if you don't mind sharing? Brian Delghiaccio: Yes. There was certainly a delay, which kind of pushed everything a little bit to the right. But now as you heard in our prepared remarks, 9 projects coming online in 2025. We expect another 4 in 2026. So now that we're seeing those projects coming online, we're seeing the financial contribution that we would expect from those projects. So next year, again, just the way the timing works when you think about incremental revenue and EBITDA about $10 million each of both incremental revenue and EBITDA from those projects, with that accelerating then as we move '27 and beyond towards the end of the decade. Jerry Revich: It's good to hear that the profitability is as planned as you're ramping. Okay. Operator: The next question is from Noah Kaye with Oppenheimer & Company. Noah Kaye: I want to ask about the organic growth outlook broadly, both the volume component and the yield component. I know apples-to-apples is always a little bit tricky in this space, but it does look like a relatively conservative initial outlook just comparing to some of the peers. Is there anything that you would call out either on sort of the yield side or what you're seeing in the environment on volumes leading you to take a relatively more conservative tack? Jon Vander Ark: Yes. I'd say from a macro economy standpoint, I think the macro economy I'd characterize as stable. Now moving pieces underneath that, manufacturing and construction have been weaker, which is leading to -- we're into 3 years, approaching 4 years of negative demand in recycling and waste. So that's been a challenging volume environment. I think in the context of that, the pricing environment has been broadly fairly positive. Now there are spots where you see people around national accounts or some landfill maybe getting a little aggressive on volume. But on balance, I think the industry has performed well over an extended period of really challenging demand. And in terms of our own outlook, we're going to be pretty conservative until we see some momentum. Now there are some positive signs around special waste and certainly in January, the west side of the country will outperform the east side. Some of that is weather. So we're cautiously optimistic in terms of the early signs. But in terms of a guide, we're going to wait till we get through the normal seasonality that we see into Q2 before we would take a more optimistic approach to the guidance. Noah Kaye: Yes. I guess the follow-up to that, and that makes sense, it's just 40 bps underlying volume decline, right, at the midpoint when you back out the landfill volumes. Maybe just help us understand how much of that is kind of further controlled shedding in resi versus anything else? And just if you're seeing, in general, your commercial service increases outpacing decreases. Brian Delghiaccio: Yes. I mean to your point, we do expect residential to be negative in each of the quarters and for the full year in 2026, okay? So that is certainly a headwind when you think about that 40 bps that you talked about, excluding the landfill volumes, whereas we do expect some better performance with respect to volume in the other lines of business. And so again, when you just take the average of those that's where you get to that negative 40 basis points for the year. Now remember, there is some timing things that you have to take into consideration. So because of rollover as well as the in-year impact, we would expect to start the year negative, right? So we're guiding to that negative 1% for the year. We would expect to be negative in Q1, a little bit more than that 1%. Same thing for the second and third quarter just because you're comping those landfill volumes in Q2 and 3 and then to be somewhat flattish by the time that we exit the year. Noah Kaye: That's great color. And that plays finely into my last question around ES. Just we obviously had the tough comp here from the ER revenues in 4Q. I know we've got a little bit left, right, $15 million or so in 1Q, so that makes a tough comp. But just help us understand what have you assumed for that business in terms of total growth in '26? And how would you see that shaping? Brian Delghiaccio: Yes. So for the year, we're relatively flat as far as growth. And to your point, some of that starting negative in the first half of the year because of some of those tougher comps and then growth in the second half of the year. And on balance, call it, relatively flat on a full year basis. Jon Vander Ark: And Noah, broadly across both businesses, we're going to pursue volume for sure and pricing. But when forced to choose, we are going to take price, right? We need to get a return on the work that we do, and we're going to continue to put upward pressure on pricing in both of those businesses over time. And so that's -- some of the implication of that would again be in national accounts, be in residential, be in landfill. We're going to take that disciplined approach and again, broadly happy with how we performed in the context of a pretty tough macro environment over the last couple of years. Operator: The next question is from Bryan Burgmeier with Citi. Bryan Burgmeier: I think you said you're looking for about 60 to 70 basis points of underlying margin expansion this year. Just wondering if maybe just from a high level, you could touch on your sort of inflation expectations across some of the major buckets, labor, maintenance, repair, that would be pretty helpful. Brian Delghiaccio: Yes. Overall, we're expecting an inflationary environment around 3.5%. So again, when you think about that yield on related revenue of 4% to 4.5%, you're getting that 50 to 100 basis points of price in excess of cost inflation. And by bucket, I would sit there and say they're relatively close to the average. Some might be a little bit above, some a little bit but below, but on average, call it, in that 3.5% range. Bryan Burgmeier: Okay. Got it. Got it, and that's really helpful. And then maybe just following up on Noah's question, hopefully not too redundant is just getting you a sense of ES kind of progressing from 4Q into the first half. I think you talked about kind of rebuilding the pipeline and maybe some sequential improvement from like August to October. Obviously, the macro is not our friend right now, but just kind of trying to gauge that sequential recovery maybe into '26. Jon Vander Ark: Yes, I feel really good about the team's actions and discipline. Keep in mind, a lot of this can be a longer sales cycle business, whether it's recurring revenues or event-based work because of the compliance nature of the business. So jobs that we are working on now or winning now may not show up until Q3, Q4 or even into Q1 of next year, which plays into what Del talked about the first half having a pretty conservative posture and seeing more momentum in the second half of the business. And keep in mind, like emergency response has always been part of the business. It was a historically low emergency response year last year, right? We've seen little yet, but those things can emerge, and those are always nice tailwinds to the business. Again, they typically happen in not huge chunks, but in chunks. But last year across the industry, it was just a very low year. So we get a little momentum there, and we could certainly run past the guide. Operator: The next question is from Kevin Chiang with CIBC. Kevin Chiang: Maybe if I could just follow on ES there. Look, you still held the margins pretty well, low 20% despite some of the revenue pressures you mentioned. Just as we think of that revenue recovering, just how do you think about incremental margins? Do they come back maybe a little bit better than you expected? It seems like you're holding costs pretty nicely here in some of this tougher macro. Jon Vander Ark: Yes. I'd say they'll be strong. So we're holding costs, and we're holding -- we've done a good job of cost control, but we're also holding people. Again, we have to have -- be ready to serve our customers. And so our labor utilization is lower than we would expect over the last couple of quarters. And we've done some fine-tuning in places, but have certainly not optimized for the short term because we know there'll be momentum and growth coming back in the business. And so I think you will see very attractive margins on the increment as we continue to grow in the second half of next year or this year, really. Kevin Chiang: That's helpful. And then just you spoke of some of the opportunities you're seeing on the technology side, on the RISE platform using AI. Total cost of operations below 58% for '25. Just wondering, as you think about the -- I guess, over the longer term and you're utilizing this technology, so maybe where you think that can go from a cost efficiency perspective? Jon Vander Ark: Yes. We'll do a little more work here and give you specific numbers, but these are going to -- over time, this is going to be cost improvements measured in 9 figures for sure. I mean there is a lot of efficiency that we can drive through and 1 minute across our system a year of routing efficiency on our routing side is worth $4 million to $5 million. So you can see how that can accrue as you get optimized traffic patterns and optimize disposal optimization on our routes, and there's a lot of variables today. We do a very good job with the set of tools we have today. AI is a game changer of taking a lot of complexity and designing routes in a more efficient fashion. You'll see some of this on the back office side, and we've talked about call centers in the prepared remarks and just being able to service customers digitally in the way they want, getting them an answer and saving the cost of having people answering the phone. And then pricing is going to be a third big lever for us, which is getting very surgical in how we price. Again, we do a great job today with our current set of tools. But as we're now deploying AI, we're getting far more scientific and really understanding customer lifetime value as we price these customers to get a great price today, but also a price that incents them to stay with us for a long period of time. Operator: The next question is from Adam Bubes with Goldman Sachs. Adam Bubes: Just wondering if you could parse out the high-level organic growth performance in Environmental Solutions across the different business lines because there's a lot going on under the hood and understand the $50 million impact from lapping the nonrecurring emergency response project, but hoping to get some color on how the landfill business is performing there, Industrial Services. You also have E&P. So just trying to get the moving pieces right. Brian Delghiaccio: Yes, Adam. So all 3 of those things you mentioned were down on a year-over-year basis. What I would tell you is the concentration to the landfill and the E&P volumes being down is where you're seeing that fall through at a very high decremental margin. So that's what's having the largest impact on margin performance. So -- but all 3 of those businesses being down on a year-over-year basis, but as Jon mentioned, we're well positioned that as those units return into the system, we'll capture those units, and we'll capture that at a similar margin that they're falling out that you're seeing in our performance right now. Adam Bubes: And then one more on landfill gas. I think you mentioned $10 million incremental EBITDA in 2026. But can you just mark-to-market us on where we are on your realization of the $100 million run rate EBITDA for landfill gas? Is that still the right number to think about? And how you think about timing and the base that we're at today? Brian Delghiaccio: Yes. By the time we get done with 2026, we'd be at about $40 million of that $120 million that we expect an incremental EBITDA contribution. If you recall, right, the EBITDA exceeds the revenue contribution because of our equity pickup in those projects where we have a joint venture. So full run rate revenue, $100 million, $120 million of EBITDA. Operator: The next question is from Trevor Romeo with William Blair. Trevor Romeo: I just had a couple of quick ones, I think, on the ES business. One is just your PFAS remediation business, love if you could maybe talk about what kind of revenue you're expecting for that business maybe this year and the forward outlook based on what you're hearing from both the regulatory side and the customer demand side, just over the long-term opportunity there? Jon Vander Ark: Yes. I'd say this year, we'll probably be in the $50 million to $75 million range, really good ongoing recurring projects with customers where we're going site to site to remediate some of their PFAS. And then in terms of regulatory environment, again, we're believers that this is going to be a big growth opportunity over time. I think it's going to develop more slowly than it would have under a different administration. And we're working through the regulations, and we're on both sides of this, obviously. It's a big opportunity for us on the Environmental Solutions side and a growth opportunity for us on the landfill side in recycling and waste. Also could be a headwind depending on the regulatory framework on the recycling and waste side, and we feel, I'd say, incrementally positive there in terms of a set of regulations that make sense and that we're not going to be penalized as a passive receiver. Trevor Romeo: Okay. And then maybe just sticking with another sort of long-term potential opportunity for the ES business, I guess, reshoring as well as maybe infrastructure funding and things like that as a medium-term, long-term tailwind. What are customers saying about that? How meaningful do you think any of those benefits could be at this point? Jon Vander Ark: Yes. I think that will be very real. You think about the cheap energy supply we have here and you think about the policy of reshoring manufacturing, I think what we've seen in the very short term is as tariffs have gotten in place and uncertainty around trade policy, there's been a paralysis in terms of investments. People are waiting for the rules to shake out in terms of making bigger capital decisions about where to locate production and their broader supply chains. We're very optimistic that the rules will get settled here over a period of time and that there will be a tailwind from a demand standpoint. Whether that happens here in the next 3 months or that takes a little bit longer, I think that's TBD. But we remain very optimistic about that as a demand driver for ES and then our -- also the manufacturing portion of our recycling and waste business as well. Operator: The next question is from Toni Kaplan with Morgan Stanley. Yehuda Silverman: This is Yehuda Silverman on for Tony. Just had a quick question about the landfill focus within the M&A strategy. So like recent acquisitions in Kansas and then late in 2025 in Montana, like the industry has been sort of trending towards like a net landfill closure compared to openings or more pressed landfill airspace over -- expected over the next couple of decades. Can you talk to us a little bit about how the environment has been to get landfill expansions improved or opening of new landfills? And has that shifted the M&A strategy towards perhaps acquiring maybe more landfill assets? Jon Vander Ark: We've always been interested in acquiring post-collection infrastructure, recycling centers, landfills, transfer stations, and they're hard to come by. But when we see those opportunities, we'll certainly compete for those. And then in terms of landfill expansion, I think it's 2 very different stories. Citing a brand-new landfill extremely challenging and difficult, not impossible, but very challenging. Expanding current landfills is very geography-dependent. But on balance, we feel very comfortable around our capacity on air space that we have across our network of 200-plus landfills. And part of that will be over the coming decades, you're going to see more waste moved by rail. We've got 30-plus years of experience moving waste by rail, and that will be a bigger part of the equation, but we feel really good about our capacity to operate in that environment. Yehuda Silverman: Got it. And then just a quick follow-up on price/cost spread. Just wanted to hear some of the levers that have been made on the cost side to make it a bit more manageable as pricing continues to moderately step down? Jon Vander Ark: One is just the macro inflation. I think what people sometimes lose the story, the rate of our price increasing is coming down from the peak of inflation in 2022. But our cost is also coming down, right? The wage increase, the price we pay for parts, the price we pay to expand landfills, improve recycling centers, all of those expenses are also coming down. So we are maintaining the spread between that price and cost, and that is the predominant driver. Now there's other things we do around productivity like RISE, we've talked about and the efficiencies with AI and other things we do to drive our underlying cost structure and afford us the opportunity to invest in new things like the polymer centers electrification. So we've compressed certain parts of our cost structure, right? And we've expanded other ones, which we view as investment in future growth opportunities. Operator: The next question is from Seth Weber with BNP Paribas. Seth Weber: Just a quick one on the ES space. Can you just talk about how the Shamrock integration is going? I mean, do you need to pick up in industrial activity to really get that thing -- to get that moving? Or can you just talk to how the early progress has gone with that, the integration? Jon Vander Ark: Yes. The iteration progress is going well. We're really happy about that business. A reminder, we bought that because we were already in the business. We were taking industrial water and liquids from our customers, and Shamrock was one of our suppliers. We were also using them for some leachate as well. So we were familiar with that. We had a lot of that material in our back. So we like to be vertically integrated, really had a lot of respect for Shamrock and what they built. And we'll see future growth opportunities in that space, right? They're predominantly a Southeast-based company, so we'll look for other opportunities because we see the same value creation opportunity in other regions. Seth Weber: Got it. And then just the first quarter volume outlook, does that -- are you haircutting that for weather? Like, have you seen a big impact related to the winter storms. I think you referenced the East Coast was relatively rough. Is that kind of baked into your guidance at this plant? Brian Delghiaccio: It is baked into the guidance. And yes, we have seen a pretty significant impact from that. So just in the month of January alone, we're estimating about a $25 million impact from weather and the first week of February experienced weather as well. So that could be a $30 million, $35 million number in the first quarter, but that is embedded in the guide itself. But to your point, from a timing perspective, then Q1 volume will look less because of that, that will be incorporated into our Q1 performance. Operator: The next question is from David Manthey with Baird. David Manthey: First question on the emergency response. I think in addition to the lack of jobs that are out there, I think you said last year that you thought maybe there was a gap between the jobs you thought you should win and those that you were winning. Could you just talk about that situation? And have you addressed the main sources of the growth gap as you see it? Jon Vander Ark: Yes. I don't think that was limited, just a response. I think that was true for all event-based work and even recurring work. I think we're just getting the price volume equation right. We have put a lot of upward pressure on price and deservedly so because we want to get paid for the value we deliver. At the same time, the market had moved in terms of the volume situation and people were getting more aggressive on price. So the team had to adjust. I think the team has done a great job of that. We feel really good about the pipeline. As I mentioned earlier, there's a longer sales cycle business. And so we'll see the fruits of that labor surface more in the second half of next year -- of this year and then certainly into next year. David Manthey: Okay. And then from a cost standpoint, I guess the maintenance and repair expenses have been trending well based on refreshing the fleet. But I was also wondering on transportation and subcontractor costs. They basically flatlined over the past 3 years. I was just wondering if you could outline what's been the cause of that? Brian Delghiaccio: Yes. I think some of that's just a -- when you think about renegotiating some of those contracts, I think our procurement department has done a really good job of renegotiating those at favorable rates. Some of that -- there was a reset a couple of years back coming off the pandemic where you did see a pretty big increase, and now we've modulated into more normal year-over-year increases. Operator: The next question is from Stephanie Moore with Jefferies. Stephanie Benjamin Moore: Great. I wanted to go back on maybe what you're seeing from an underlying environment. I mean I think we all saw some of the industrial data points, notably ISM manufacturing PMI kind of inflecting to expansionary for the first time in January for some time. I think the hope is maybe that's a leading indicator for a bit of a recovery here. So curious if you saw or more so maybe had some conversations with any of your customers that would suggest that we're maybe warming up a little bit on that side of the business. So any insight there would be helpful. Jon Vander Ark: I think there's certainly positive signs. I mentioned the west half of the U.S., you're starting to see certainly pick up in economic activity. That be said, there's other signs where people are still waiting, and they're still on the sideline waiting for stability of policy around capital investment. We're seeing still -- we're winning in terms of share on the manufacturing side, but that output in terms of units per facility is still pretty flat. So we're waiting some upside there. Same thing with construction. Now construction given the seasonality of it, we're not going to get a great read for that for another 3 to 4 months. Based on the macro picture of the United States needing more housing, you'd certainly feel good about that and some movement on interest rates, all of that would be a positive sign. Whether that unlocks growth yet. We've been waiting a while and cautiously optimistic we could see some momentum there as well. Stephanie Benjamin Moore: Got it. Yes. No, that's super clear. And then I apologize if you said this, but did you give what your underlying kind of inflation expectations were for 2026? Brian Delghiaccio: Yes, it's approximately 3.5%. Operator: The next question is from Shlomo Rosenbaum with Stifel. Shlomo Rosenbaum: I want to talk a little bit about what's going on in the C&D with the yield spiking up like 6.5%, it's the largest we've seen in a couple of years now. And what are you seeing in the service intervals, small container versus large container quarter-over-quarter? And then kind of contrasting that with the volume being down so much, was that the comp last year on some of the emergency stuff? Maybe you can talk about that, please. Brian Delghiaccio: Yes. The -- let's start with the volume on the C&D. Some of that's just comping, some onetime event jobs that we had in the prior year. I would say when you take a look at that 6.5% and mind you, this is off of a really small base. So small numbers can actually look a little bit larger than they are, but it's probably a little bit more mix related than anything else. If you look at the trend of what we've seen on C&D yield in that circa 4% range, I think that's probably a pretty good indication of where we've been and where we would expect to be here over the next several quarters. Shlomo Rosenbaum: Okay. And service intervals? Brian Delghiaccio: Yes, service intervals, if you take a look at that, they've continued to outpace service decreases on that front. There's a little bit of seasonality that we typically see coming into the fourth quarter, but the trend for the full year as we've seen more service level increases than decreases. Shlomo Rosenbaum: Okay. And then just following, what was -- can you talk a little bit about the contribution also from the polymer centers in '25? And what you -- is assumed in the outlook? You talked a little bit about RNG, but if it was polymer centers, I must have missed that. Brian Delghiaccio: Yes. Polymer center in '25 added about $45 million worth of revenue and about $10 million of incremental EBITDA. Shlomo Rosenbaum: Okay. And expectation for '26? Brian Delghiaccio: Would be $30 million of incremental revenue and $10 million of incremental EBITDA. Operator: The next question is from Tobey Sommer with Truist Securities. Tobey Sommer: Curious what you're seeing in terms of the health care vertical, hospitals and kind of health care activity seems to be running relatively hot. And just curious to the extent you've got visibility in that industry that you could share with us, that would be helpful. Jon Vander Ark: Yes. We compete there on the margin. We don't have a dedicated medical waste business, a small one in Las Vegas. And outside of that, we're out in that space. We certainly service hospitals and other health care providers with recycling and waste and that's been a nice growth driver as we've seen the broader health care spend go up over time, but not a meaningful growth driver for us. Tobey Sommer: Okay. If we look at the spread in the margin expansion that you're able achieve and kind of put the pricing and revenue volume to one side and really focus on the expense side. To what extent do you think you've got opportunities to invest more in tech, extract some savings and efficiencies through AI and other means to like restrain your level of expense growth even further and contribute to a greater spread expansion? Jon Vander Ark: Yes. I mentioned earlier, right, we're spending a lot of money on technology because we see the return clearly. Some of that is AI. Some of that is just modernizing our existing systems and updating that. And I mentioned we think there's 9 figures of opportunity over time on productivity and how we route. We see real opportunities on pricing but that's on the cost side, but that will be another growth driver. And then every element of our support, including how we answer calls, how we process orders and invoices, everywhere around the chain, we're challenging how work gets done and AI is going to be a very powerful tool that is going to show up in terms of compressing our inflation over time. Operator: At this time, there appear to be no further questions. Mr. Vander Ark, I'll turn the call back over to you for closing remarks. Jon Vander Ark: Thank you, Gary. I want to thank the Republic Services team for their great work in 2025. Their focus on safety, sustainability and exceeding customer expectations led to another year of great results and positions us well for continued success. Have a good evening and be safe. Operator: Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.
Operator: Greetings, and welcome to the TechPrecision Corporation Fiscal 2026 Third Quarter Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Brett Maas, Managing Director of Hayden IR. Thank you, sir. You may begin. Brett Maas: Thank you. On the call today is Alex Shen, Chief Executive Officer; and Phil Podgorski, Chief Financial Officer. Before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of risks and uncertainties in the company's financial filings with the SEC. In addition, projections as to the company's future performance represent management's estimates as of today, February 17, 2026. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex? Alexander Shen: Thank you, Brett. Good afternoon to everyone, and thank you for joining us. For the third quarter, Stadco revenue decreased and operating losses increased. This was due to four factors: one, delay in receiving customer furnished materials, which delays revenue and dropped revenue; two, unfavorable project mix; three, higher provisions for projected contract losses; and four, some, not a lot, but some equipment downtime. Third quarter revenue at Stadco was $2.9 million with an operating loss of $1.2 million. Compared to the same period a year ago, Stadco losses were higher by $0.6 million. Overall, fiscal 2026 third quarter consolidated revenue was $7.1 million or 7% lower when compared to $7.6 million in the fiscal 2025 third quarter. Consolidated gross profit totaled $0.4 million or $0.6 million lower when compared to the third quarter of fiscal 2025. Fiscal 2026 third quarter Ranor revenue was $4.4 million with an operating profit of $1.5 million, in line with the prior year third quarter results. We remain highly focused on aggressive daily cash management, a critical piece of risk mitigation. We continue to manage and control expenses, capital expenditures, customer advances, progress billings, and final invoicing at shipment. Our tactical execution focus and success enable us to continuously resecure strategic customer confidence at both segments. Our Ranor segment was very recently awarded a new grant of just over $3.2 million. This brings the total of completely funded grant money to over $24 million from our U.S. Navy submarine programs-related customers. Ranor continues to execute a cadence of sustained procurement, delivery, and installation of new equipment, which enables a reliable, robust, and resilient manufacturing capacity dedicated to submarine programs. This over $24 million represents more than 50% of TechPrecision's market cap of $45.5 million. Customer confidence remains high. At both Stadco and Ranor, our customers have expressed their strong confidence as we continue to maintain on-time delivery of quality components. This delivery performance is leading both Stadco and Ranor to new quoting opportunities in air defense and submarine defense sectors with the same customers that already know and trust our capabilities. Both subsidiaries are continuing to experience meaningful new capture of business awards from these same customers, adding to our strong $46 million backlog. This backlog only includes the funded portions of customer purchase orders. We expect to deliver this $46 million backlog over the course of the next one to three fiscal years with gross margin expansion. And now I will turn the call over to our Chief Financial Officer, Phil Podgorski, to continue with the review of our third quarter and nine months ended fiscal 2026 results. Phil? Phillip Podgorski: Thank you, Alex. As Alex just mentioned, for our fiscal 2026 third quarter, consolidated revenues decreased by 7% to $7.1 million compared to $7.6 million in the same period a year ago as revenue fell short at Stadco. And Alex had pointed out what those four factors were. Consolidated cost of revenue increased by 1% or less than $1 million -- I mean, $1.1 million. Consolidated gross profit decreased by $0.6 million in Q3 fiscal 2026 to $400,000 due to lower revenue and higher loss provisions at Stadco. Consolidated SG&A increased by 3% to $1.7 million as an increase in stock-based compensation more than offset a decrease in outside professional services. Fiscal 2026 third quarter interest expense was lower as interest costs decreased for term loans and for borrowing under our revolver. Net loss was $1.5 million for the third quarter or $0.15 per share on a basic and fully diluted basis. For the nine months ended December 31, 2025, consolidated revenue was $23.6 million or 4% lower when compared to the same period a year ago. Consolidated cost of revenue was $19.7 million or $2.6 million lower than the same period a year ago due to favorable customer mix and achieved productivity gains at both Ranor and Stadco. As noted, the favorable customer mix and achieved productivity gains increased gross profit by $1.6 million or 7 percentage points. SG&A decreased for the nine months ending December 31 by 1% as lower office costs more than offset higher corporate unallocated expenses. Consolidated operating loss for the nine months ended December 31, 2025, was $0.9 million and decreased year-over-year by 65% or $1.6 million, primarily due to improved margin drop-through. Interest costs decreased by 2%, primarily on lower interest expense under the term loans. And net loss was $1.2 million or $0.13 per share on a basic and fully diluted basis. Now moving on to our financial position. We continue to actively manage our cash flow, as Alex had mentioned earlier. Net cash provided by operating and investing activities totaled $0.6 million for the nine months ended December 31, 2025. Net cash used in financing activities totaled $0.8 million primarily to pay down principal under our revolving loan and term loans. Our total debt was $6.7 million on December 31, 2025, compared to $7.4 million on March 31, 2025. Cash balance as of December 31, 2025, was $50,000 compared to $195,000 on March 31, 2025. Now let's take a little deeper dive into the segments for fiscal 2026 Q3. For Ranor, third quarter revenue was up year-over-year by 1% and overall strong margin growth was evident across all projects, resulting in improved margin drop-through, which contributed $1.5 million in gross profit for the quarter. Stadco Q3, as Alex had mentioned, revenue decreased by $0.3 million compared to the same period last year, primarily due to delay in receiving customer furnished materials, unfavorable project mix, and some equipment downtime. Stadco additionally experienced Q3 year-over-year gross margin decline as gross profit decreased by $0.6 million due to lower revenue and higher provision for contract losses as the company continues to face headwinds in finishing out unfavorable legacy contracts, underpriced onetime contracts, and specific first article part numbers. As Alex noted, we continue to actively work with our customers on these contracts to recovery and new pricing. With that, I will turn it back over to Alex. Alexander Shen: Thank you, Phil. In closing, for those on the call who may not be very familiar with our company, TechPrecision is a custom manufacturer of precision large-scale fabricated components and precision large-scale machined metal structural components. The components that we manufacture are customer designed. We sell to customers in two main industry sectors, defense and precision industrial markets, predominantly defense. We do most of our work in industries that are highly sensitive to confidentiality, which preclude us from speaking publicly about many things that a company not operating in TechPrecision's specific environment might discuss. Please understand there are real limits as to what I can discuss and sometimes those limits do change. Tech Precision is proud and honored to serve the United States defense industry, specifically naval submarine manufacturing through our Ranor subsidiary and military aircraft manufacturing through our Stadco subsidiary. We aim to secure and maintain enduring partnerships with our customers. As noted earlier, the total of completed funded grant money of more than $24 million from our U.S. Navy submarine programs related customers reflects this strong partnership. This commitment represents more than 50% of TechPrecision's market cap of $45.5 million. Overall, at both the Ranor and the Stadco subsidiaries, we continue to see meaningful opportunities in our defense sectors as evidenced by the strength of our backlog. And at Ranor, this is also further evidenced by the strength of our completely funded grant money. We are encouraged by the prospects of growing our revenue and increasing profitability in future quarters. We are showing progress. We have more work to do with our Stadco subsidiary to get it into the black. We are targeting to build and sustain a trend. Operator, please open the line for Q&A. Operator: [Operator Instructions] Your first question is coming from Ross Taylor. Ross Taylor: Alex, can you guys address how much more in the way of bad contracts, first items or whatever we have left to work through, particularly at Stadco to get to where we can see the benefits and fruits of these contracts, which appear to have some significant value, but have yet to really generate much in the way or quite honestly, anything in the way of earnings? Alexander Shen: Well, let me parse that question and answer it in two chunks. So we have the same concerns. How much more is left on these legacy contracts that are legacy repeating part number contracts or the legacy onetime underpriced contracts? How much more is left? That answer comes back in the form of working through both the operation sales as well as finance as one team to make sure that we capture all that in the expected contract losses. So Phil and I, with our people collaborate to identify that to the best of our ability and forecast that to make sure that we understand how much loss is left. So that's one piece of the answer, right? Ross? Ross Taylor: Well, I'm trying to get an idea of -- we keep thinking we're getting through this. We keep thinking we're getting to the promise land and yet we keep falling back into it. It reminds me a little bit like we got a NASCAR problem. We're just constantly turning left here and left is into continued problems generating profits out of Stadco. I mean you've owned Stadco for a long time. These contracts have been around for a long time. I'm just trying to get a handle of do you have a couple of million dollars left? Do you have $5 million left? What is it? And when do we see breaking through getting past the bad contracts to where we get to contracts that are going to allow us to make money, perhaps more reflective of the current operating environment, operating costs and the like. Alexander Shen: I don't think I'm able to exactly quantify that because there's also a time element, right? So when we're waiting for certain decisions to be made, and this is not entirely in our control, we need to work with the customers for that time element to come true as to when. The -- I think the key is whatever the number may be, we are attempting to capture the whole impact of these numbers. So we want to capture all the losses. So when we're taking a loss reserve on projected contract losses, that encapsulates up to the point of shipping and being done with these, right? Phil? Phillip Podgorski: Yes, I agree. And Ross, I'll help with a little bit of the answer here to give you a little bit more clarity on some of the quarter and what we experienced in the quarter. So two of our contracts, our customers with items that are going back quite some time. We were looking to see if we could get the customer to agree to accept, and we had very strong indications as we are working with these customers over quite some time. And unfortunately, they surprised us with a no, you need to do some additional rework on these items, and these are legacy items. So we had the hopes that we are putting it to bed, and we then had to rebuild into the estimated contract, again, fixed price contract, the additional hours that we're estimating to rework that, right? So relative to those contracts, we're hoping that the estimates that are built into the loss provisions that are built into the quarter will cover that. We are a very -- these parts are very, very specific and from a tolerance perspective require exact precise measurements. So can I guarantee that they're completely behind us? No. But I think we've reserved right now to the level that we feel comfortable with for these particular ones. We're whittling them down one at a time, and we're getting closer. I'll just leave it at that. Hopefully, that helps answer your question. Ross Taylor: Not really. What are doing -- yes, I mean, it's just getting back to the idea of generally the concept of the business is to make money doing what it does. Obviously, these are contracts that are bad contracts. You don't have the same -- it doesn't appear you have the same relationship in Stadco that you have in Ranor with your customers because they're not extending you any of the -- any of the kind of, let's say, the professional courtesy of allowing you to make a profit, which is problematic. What are you doing -- I mean there's got to be a growth plan here beyond just kind of taking what's out there in the current kind of backlog and in the current part numbers and the like. What are you doing to drive revenue? We're stuck in the $7 million to $9 million a quarter range. It's not enough to break out profitability-wise. It's pretty clear, I think, at least myself, I'm confident to others who followed the company for a while. You really need to break that top line out and start to print numbers that are several million higher than you saw perhaps last quarter so we can start to actually produce some pretty meaningful free cash flow that would let you pay down debt, let you repair the balance sheet, all that stuff. What's the plan? I can't believe that the Board is kind of sitting there happy to see this kind of wallowing in the same $7 million to $9 million a quarter, lose $0.15, make $0.10 kind of, but usually lose or make a few pennies. There's got to be some strategy you guys have to drive more through the facility. I can't believe that you're fully -- that if one walks through the plant floor that at any given time that we're seeing everyone working at full rate all the time. So what's being done to kind of find new business that honestly can be priced better? Alexander Shen: We have found new business, and we are filling the backlog with new business that is priced better. This business has already started shipping on certain part numbers that are new to Stadco. That's one piece. The other piece is on our legacy customers. Our largest one, as everyone knows, is Sikorsky. Sikorsky, as you alluded to, certain customers give the professional courtesy to vendors to let them be profitable. Sikorsky is playing ball with us, and that's the plan. That's the biggest piece of the plan since Sikorsky is the biggest piece and the majority over 50% of our volume. So the combination of working with our biggest legacy customers to be profitable and new customers with new part numbers that we already have proven ourselves on first articles and second articles, third articles and ongoing potentially decades-long programs of record. That is the plan forward. We cannot do -- go ahead. Ross Taylor: When do we see the benefits of this? As I said, I mean, we've been stuck in the $7 million, $9 million; $7 million, $9 million kind of range. When do you see us breaking out of that $7 million to $9 million a quarter revenue run rate range? Alexander Shen: That's a good question. I hesitate to answer because this quarter has been unexpectedly bad and worse -- much worse than our expectation. And we were surprised by, like Phil was saying, a couple of customers that didn't play ball. That was a surprise. I don't think we're going to have that similar type of surprise this next quarter ending March 31. Ross Taylor: Okay. So we get -- but that could -- quite honestly, that could allow us to get back to the high end of the $7 million to $9 million range, probably fairly easily given that I think you probably -- I won't ask you how short you were, but my guess is that if you add back what you were short to kind of the middle of that range, you get to the high end. When can we see -- when do you expect that we're going to kind of set -- move to a new low level? When can we get past, so we get rid of the 7s and the like? It seems like if we can get revenues $9 million, $10 million, $12 million, you can make pretty good money. In fact, you can make really good money. But when do we get to that level where our slow quarters are at the $9 million range and our better quarters are double digits? Alexander Shen: We're working on that. I'm pretty sure whatever answer I try to give is not going to be great. I don't know. But I know that what I am... Ross Taylor: Not going be informative. Alexander Shen: Well, informative or not informative, the goal is to first get us into 9 plus and 10 would be good. When would I do that? And can I please have a trend established. And that's really the question we're both wanting to get answers from me and Phil, and we're wanting to get these answers from ourselves as well to do the right things when nobody is looking or questioning. Our results are not showing that yet. Nobody is happy. And I'm ready to cook myself. But that does not stop me from doing the right things and moving things forward. Our plan is solid. We need to eliminate the risks that bite us. We'll continue to do so. And we are working together with our customers that we want to be partnered with for the foreseeable future decades. Ross Taylor: Okay. I mean I think it's very clear, shareholders are out kind of an imperative. If you take what the Navy has given you and you add back the -- what Stadco has cost you, it's probably equal to the market cap of the company. So there's not a lot of value been added over the last few years. It would be nice to see you guys over these coming quarters this year, get back to where we can add some value and really push this thing on to the next level. I'll let some others ask questions. Operator: Your next question is coming from [ John Brandberg ]. Unknown Analyst: I'm assuming that the product mix issue is isolated to Stadco, but I don't want to assume anything. So can you expand about the problems with product mix? And given the fact that your -- you work with customer design products, how much of that is customer controlled or customer related? And how much of that is management related? Alexander Shen: Go ahead, Phil. You go first. Phillip Podgorski: Yes. So thank you, John. So the -- I think to answer your question directly, Stadco related for sure. We are, again, reliant heavily on customer furnished materials, and we did experience a lot of delay in the quarter receiving those. And it does unfortunately affect the utilization in the facility. We moved certainly individuals on to other contracts as we adjust. Some of those contracts are not as profitable as Alex had mentioned, some of the newer ones, particularly Sikorsky and whatnot. So we did experience a shift from more profitable to less profitable business and projects during the quarter. So that's -- it's unfortunate. It was certainly customer furnished materials that drove that. And the resulting factor was a stronger sales and revenue related to those weaker performing contracts. Alexander Shen: I'll add to that a little bit more and just say that we are custom and precision fabrication and custom and precision machining. So that means we don't have a mass production line. We make things by hand one at a time. So with each piece, the situation is you make it one piece at a time. There are certain factors that go into it that may affect that one piece that could be mitigated at the second piece. It's not a mass production line. There's deviations between the two. They might be the same part number. They might be the same operators or they might not be. There are certain factors that change. But since it's not a production line, there's more factors for change than there are in a production factory that just makes one part number. Unknown Analyst: Are you doing anything in your contracts? I mean I find it kind of unusual to say that Sikorsky allows you -- maybe poorly paraphrasing it, but the gist of it is Sikorsky is kind of allowing you to make a profit. I just find that to be a very unworkable, untenable, you should be able to make a [indiscernible] profit. And now I understand that Sikorsky has been characterized as a better customer or a good customer or someone that is working with you more closely. So that begs the question, the other 50% of revenue that's non-Sikorsky, I mean, you have to somehow because of your -- the concentration on high-precision manufacturing, if some customer doesn't work with you, it's not as if you can switch from A to B easily. I mean you have to somehow either contractually or through customers -- you selecting customers decide you got to maybe eliminate some of these people and start focusing on people that "allow you to make a profit." I mean it just seems as you're trying to turn this company around, you have to be in an environment where either contractually, you have more control or you make better decisions on the other 50% of your customers. Alexander Shen: That's exactly right. We have to choose our customers and choose the ones that we can work with better to get better results for our shareholders. Exactly. Unknown Analyst: I mean you have something unique to offer. And no, I understand "the customer is always right." Well, maybe not. I mean I think you're offering a very limited skill to affect the total development of certain key defense products, end products. And not everyone can do what Stadco does. And so I'm just underlining the fact that I would be very demanding on contracts to protect yourself. I mean if your customer is not giving you product on time, they should be penalized or you should be given some type of fee adjustment. There should be mechanisms in your contract that protect you. Do you have those now? Do you have any type of -- I'm using the term, I don't need to know the specifics. I just need to know, are there protection? I'll use the term protection mechanisms that backstop you when these occasions occur because they're beyond your control. Alexander Shen: It's going to be difficult for me to answer because so much of it is very particular and specific. The answer is not 0. We cannot survive with 0 contractual protections. We agree and those contracts -- new contracts coming up, we cannot accept them if they are detrimental and harmful to Stadco or to Ranor. We need to function both the same and not harm the companies because the customer wants it to be so. And you are correct. The customer is not always correct. The customer is not always right. There are certain protections in place? Yes. Should we strengthen them going forward? Yes. And should we deselect some areas and not go into them? Well, that depends on how much a chosen customer wants to play ball. If they don't, we do walk and we have walked. And that's a choice that we need to make. Unknown Analyst: I hear the talk from Mr. Taylor about revenue. And of course, everyone wants to see people -- see the company get out of a so-called rut in terms of the $7 million revenue. By virtue of what you do in both companies, Stadco and Ranor, high precision, one at a time, how do you address -- how do you get scalability? I mean it's not like you can put more tomatoes in the pot and feed more people. I mean -- I don't see the scalability issue because, obviously, you want to get the top line up. But because of the virtue of what you do and the cost of both in terms of talent and machining, I mean, what is your operating capacity? Are you at 50%, 70%? Do you have room for that top line to be there if the customers are there? So I just have a problem with trying to see how you scale things with -- by intrinsically by what the degree of your whole process is so specialized. Alexander Shen: So there's a process that's specialized and it's specialized for each part number, right? So then the key is going to be for that part number that we specialize in to keep repeating. So we make this part number again and again and to have a number of these repeating part numbers and to really eliminate the onetimes because that's the thing that takes a lot of time is the first time or the first article. If there are no follow-on articles, that's the kind of business that we need to really get away from, so we can have some kind of scalability. So that when we do repeat a part, we've already learned the process, and now it's going to be the next tranche of the same part number. We're refining the process that we already established first article protocols on and that we passed first article inspections by the customer on. And then now we're into follow-on orders and into programs of record that are going to exist for not just years but perhaps decades. There are some programs that we are leading ourselves into and cross utilizing the members between Stadco and Ranor to gain a foothold to let Stadco also gain a foothold through that cross-pollination between the two companies. That is -- so eliminating onetime projects and going towards repeating part numbers that have longer legs. That is one very big key strategy. It's not a big secret, but it takes a while. We need partnerships with customers that have the long legs on programs of record. So that's the ones that we are choosing carefully, and that's the ones that also are willing to choose us, both at Ranor and at Stadco. And that's what makes sense to us. We're so small. We can only do what we can do and do the best we can at it and add more to it and scale up. And the scale-up isn't going to be 10x. The scale-up is going to be a gradual scale up. But as we all wish to achieve, we want this -- the lowest water level to rise beyond what we have today. I am not very happy at all with our performance today. Operator: Thank you. That concludes our Q&A session. I will now hand the conference back to Alex Shen for closing remarks. Please go ahead. Alexander Shen: Thank you, everyone. Have a great day.
Operator: Good afternoon. My name is Kevin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Rogers Corporation Fourth Quarter 2025 Earnings Conference Call. I will now turn the call over to Mr. Stephen Haymore, Director of Investor Relations. Mr. Haymore, you may begin. Stephen Haymore: Good afternoon, and welcome to the Rogers Corporation Fourth Quarter 2025 Earnings Conference Call. The slides for today's call can be found in the Investors section of our website, along with the news release that was issued earlier today. Please turn to Slide 2. Before we begin, I would like to note that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to the many uncertainties that exist in Rogers' operations and environment. These uncertainties include economic conditions, market demands and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement made today. Please turn to Slide 3. The discussions during this conference call will also reference certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today's call. With me today are Ali El-Haj, Interim President and CEO; and Laura Russell, Senior Vice President and CFO. I will now turn the call over to Ali. Ali El-Haj: Thanks, Steve, and thank you, everyone, for joining us this afternoon. I'll begin on Slide 4. We finished 2025 with another quarter of solid performance. Q4 sales of $202 million approached the high end of the guidance. Adjusted EPS of $0.89 per share and adjusted EBITDA margins of 17.1%, both exceeded the top end of guidance. Compared to the fourth quarter of 2024, sales improved 5% and adjusted EBITDA margins increased 500 basis points. We also generated significant free cash flow in the fourth quarter and continued to return capital to shareholders with $14 million in share repurchase. The stronger finish to 2025 resulted from gradual end market improvements and implementing critical structural changes. With a simplified operating model and a leaner cost profile, Rogers is in a stronger position entering the new year. In 2026, the priority will remain on improving Rogers multiyear growth outlook and continue to drive profitability initiatives. The organization has a clear understanding of the critical objectives for this year, and we have the right team and capabilities to deliver. Our Q1 guidance incorporates significant year-over-year improvements with sales growth of 5% and a 530 basis point increase in adjusted EBITDA margins. Laura will cover both the fourth quarter results and Q1 outlook in greater detail. Slide 5. Total sales increased by 5% versus the fourth quarter of 2024, led by higher industrial, ADAS and renewable energy end markets. Industrial sales remain our largest segment and ended the year at 27% of total revenue. Q4 industrial sales increased at a high single-digit rate year-over-year, driven by market recovery and winning additional business from traditional customers. For the full year, sales improved at a mid-single-digit rate. Aerospace and defense sales were 16% of revenue despite a slight decline in Q4 compared to the same period last year. For the full year, the segment grew at a high single-digit rate. The growth for the year was driven by both strong defense and commercial aerospace demand. EV/HEV sales remained at 14% of revenue. Q4 sales were lower year-over-year as decline in EMS sales more than offset growth in the ADAS segment. The decrease in EMS sales resulted from a higher concentration of customers in regions where EV demand has been challenging. Total full year sales ended well below the prior year with decline in both business units. We are continuing our efforts to grow in this market with our ceramic China expansion and the ongoing strategy to adapt to changes in the EV battery market and technology. ADAS sales increased year-over-year and for the full year grew at a double-digit rate. Sales continue to benefit from increasing adoption of ADAS solution and higher level of vehicle autonomy. Lastly, portable electronics sales were lower both in Q4 year-over-year and for the full year, primarily as a result of a product in AES business reaching end of life. Turning to Slide 6. We are already seeing results from the structural and organizational changes implemented during the second half of 2025 with enhanced customer relationships and improved service levels. We have revised our KPIs, targets and objectives to ensure organizational alignment, focus on growth and customer service. These changes have brought on an increased intensity in new product development efforts and will accelerate new product introductions, enabling design wins. We are confident that our talented team will continue to drive significant improvements in innovation and growth. In addition, we are seeing the results of actions taken to improve profitability. We realized $25 million in cost and operating expenses improvement in 2025 with another $20 million of annualized savings expected to be complete by the end of 2026. This included an 8% reduction in full year operating expenses compared to the prior year. Lastly, through cost containment efforts and working capital management, we generated $71 million of free cash flow, repurchased shares totaling $52 million and ended the year with $197 million of net cash. Next, on Slide 7 and turning our attention to 2026. Returning to top line growth is Rogers' highest priority this year. To achieve this objective, we remain committed to fully leveraging our global footprint to increase our competitiveness and grow share in all regions. With our customer-centric organization, we are intensely focused on securing design wins to drive growth and further diversify our end markets. Our design win efforts are targeting both new and existing market segments. We have identified data centers as a significant potential new market for Rogers and secured some initial design wins in the EMS business during the fourth quarter. While these wins are an important start, we are pursuing much larger opportunities by leveraging our strength in thermal management and signal integrity technologies. We believe that our technical solutions in these areas are unique and provide compelling value for our customers. We expect at least one of these design awards decisions to be made later this year. Prioritizing and accelerating the pace of new product introduction in new and adjacent markets will be a critical enabler for our growth. Improving profitability will remain a key objective in 2026 with the restructuring of the ceramic Germany operations on track. We plan to keep 2026 adjusted operating expenses in line with 2025. As we execute on these priorities, we expect to grow full year adjusted EBITDA compared to 2025. Lastly, we will maintain a disciplined capital allocation strategy as we focus on improving returns to our shareholders. Capital expenditures are expected to be comparable to 2025 as we continue to invest in our facilities and operating structure. M&A will be an area of increased emphasis in 2026 with any potential targets requiring the right strategic fit and financial profile. The level of share repurchase activity will be subject to these other investment priorities. I will now turn it over to Laura to discuss our Q4 financial performance and Q1 '26 outlook. Laura Russell: Thank you, Ali. Starting on Slide 8, I'll begin with a summary of our fourth quarter financials. Q4 sales and gross margin were near the high end of our guidance for the quarter and adjusted earnings exceeded the top end of our range. Fourth quarter sales increased 5% compared to the prior year period. AES Q4 revenues increased by 14.6% versus Q4 2024 from higher sales in the EV/HEV, ADAS, renewable energy and industrial markets. EMS sales declined by 6.7% over the same period due to lower EV/HEV sales, which were concentrated in regions experiencing demand challenges. The decline was partially offset by higher industrial sales. Adjusted earnings per share of $0.89 in Q4 were nearly double the prior year period due to higher sales and significant improvements in operating expenses. Turning to Slide 9. Q4 adjusted EBITDA was $34.4 million compared to $23.3 million in Q4 2024. Adjusted EBITDA margin of 17.1% improved 500 basis points year-over-year. The improvement in EBITDA was a result of higher sales, improved product mix and the benefits realized from our profitability improvement initiatives over the past year. In particular, adjusted operating expense, excluding stock-based compensation, decreased by $6.3 million over this time frame. Offsetting these improvements was a $1.7 million increase in underutilization costs, which is primarily related to the start of production for our ceramic China facility. Continuing to Slide 10, I'll discuss cash utilization for the quarter. Cash at the end of Q4 was $197 million, an increase of $29.2 million from the end of the third quarter. Cash provided by operations was $46.9 million, an increase from the prior quarter due to improved working capital management, particularly from a continued focus on managing inventories. Uses of cash in the quarter included share repurchases of $14.3 million and capital expenditures of $4.7 million. For the full year, capital expenditures were $30 million and at the low end of our guided range. As Ali discussed, we expect 2026 capital expenditures to be in a comparable range to last year. We are guiding $30 million to $40 million for the full year 2026. Returning capital to shareholders will continue in 2026 with a level of buybacks subject to other capital needs, including potential M&A transactions. Following our purchases in Q4, we have approximately $52 million remaining on our existing share repurchase program. Next, on Slide 11, I'll review our guidance for the first quarter. Overall, we anticipate significant year-over-year improvement in Q1 2026 sales, margin and profitability, underscoring the impact of last year's initiatives. Beginning with sales, we expect Q1 revenues to be between $193 million and $208 million. The midpoint of the range is a 5% increase in sales year-over-year. The guidance reflects similar market conditions to the fourth quarter with expected year-over-year improvement mainly in industrial sales. We are guiding gross margin in the range of 30.5% to 32.5%. The midpoint of the range is 160 basis points higher than the prior year due to higher volumes and cost structure improvements. We expect adjusted operating expenses to decrease more than 5% compared to the first quarter of 2025 and increase slightly from fourth quarter levels, primarily as certain compensation costs reset in the new fiscal year. Adjusted EBITDA is anticipated to range from $27 million to $35 million. This equates to a 15.5% EBITDA margin at the midpoint of the range, which would be 530 basis points improvement versus the first quarter of 2025. Adjusted EPS is forecasted to range from $0.45 to $0.85. The $0.65 midpoint compares to adjusted EPS of $0.27 in Q1 of 2025. Excluded from adjusted EPS are restructuring costs related to the ceramic actions in Germany. At the end of 2025, we incurred $5.4 million of associated restructuring charges relative to our total estimated range of $12 million to $20 million. The remaining restructuring costs associated with this action will be incurred from Q1 to Q3 of 2026. The program is still anticipated to deliver $13 million of annual run rate savings. Lastly, we project our non-GAAP full year tax rate to be approximately 32%. The higher expected tax rate is mainly due to certain loss jurisdictions where no tax benefits can be realized. I will now turn the call back over to Ali. Ali El-Haj: Thanks, Laura. In summary, we had another quarter of solid execution. We delivered Q4 results that were above the midpoint of guidance for the quarter and generated significant free cash flow. We entered 2026 with a clear objective to achieve top line growth, further improve profitability and deploy capital effectively. That concludes our prepared remarks. I will now turn the call back to the operator for questions. Operator: [Operator Instructions] Our first question today is coming from Daniel Moore from CJS Securities. Dan Moore: Congrats on a solid end to the year. Maybe start with the guidance, Q1 pointing to mid-single-digit growth. I think you said that's kind of more of the same versus trends in Q4, improvement in industrial. Just your outlook near term for ADAS, any improvement in renewables and/or defense. And I know you don't give full year guide, but mid-single-digit growth kind of the reasonable thought process kind of for the near to midterm? Ali El-Haj: Yes. Thanks for the question. Again, our expectation for Q1, we still see a stronger and continued growth in the industrial section -- the industrial sector of the business. However, we see some softness still remain and uncertainty on the automotive side, on the EV side. And as you know, portable electronics tend to be a little softer in Q1 than we experienced in the last 2 quarters. So that's probably what's keeping the guidance the way it is for now. And as I mentioned prior to this, Q1, Q2 and '26, we expected to see some uncertainty here due to macroeconomics in general in those 2 sectors, the auto sector, specifically the EV and the portable electronics. But other than that, everything else, we really see some growth from high single digits to mid-single digits in Q1. Dan Moore: Got it. Very helpful, Ali. And then as a follow-up, you talked about data centers. Just elaborate on key applications there, presumably managing heat. And you mentioned, I think, one new opportunity potentially in 2026. Can you give a little bit more color there? That would be really helpful. Ali El-Haj: Yes. As mentioned in the earlier remarks, this became our focus over the last, I would say, 2 to 3 quarters, and we're going to continue this effort. We believe we have a very strong opportunity coming up in the thermal management side. Also on the signal integrity technology, we're working on some opportunities there. Both of these, we really see strong momentum. We're working with brand name OEMs. We cannot, unfortunately, give you more details on this, except to say larger brand name OEMs actively qualifying these technologies. And we anticipate to be able to share more information and more details, hopefully later on in 2026 with revenue impact sometimes in '27, maybe even late '26. Laura Russell: I think the other thing we could add to that, Dan, is there is some smaller revenue for other applications in that segment in that space. I think Ali may have previously mentioned that we already captured a design more on the EMS side from a technology perspective that sells directly into data centers from an application perspective. Ali El-Haj: Yes, that's growing. That's really growing nicely. Revenue-wise, it's still a smaller piece of the pie, but we -- again, I think it's not as much -- the impact of the newer technologies will be a lot more significant than the current business in this industry. Operator: Next question is coming from Craig Ellis from B. Riley Securities. Craig Ellis: Ali and Laura, congratulations on getting nice COGS and cost and working capital execution in the business. Nice to see. I wanted to follow up with some of Daniel's questions regarding your #1 priority for this year, Ali, improving multiyear growth. So data center makes a lot of sense given the capabilities the company has and the way voltages are rocketing higher there. And so it would seem that you'd have a lot you could do. My question is broader than data center and looking at what your ambitions are beyond that sleeve of industrial with the portfolio this year. Could you just talk about any specific initiatives that have been in play the last few quarters that you would expect to convert either to new design wins this year, new opportunities this year? And beyond data center, when would we see the revenue benefit of those initiatives? Ali El-Haj: That's a lot of questions. We'll try to answer it as much as we can to the extent of our ability here. I think the growth target is really across the board for all business segments. It's not just data center or one technology versus the other. we have initiated here certain targets, identified certain opportunities in certain end markets where we're going after, both in the EMS and the ADAS side of the businesses. We've realized some wins in -- with existing customers. So we're expanding some market share there, especially on the EMS side. Some of the businesses with the current technologies will grow as the end markets continue to grow, whether it's automotive in the ADAS sector, for example, the adoption of some of those applications will continue to grow that business. But we also started sometime last year development in the newer technologies that's really not a me-too type product for applications like the newer battery technology for EV and renewables, which will help us generate not just additional revenue, but really penetrating the market in applications we're not there today that will help us grow that business in the double-digit rate type. So on the automotive side, we're also trying to go directly engage with the OEMs. So we're designing ourselves in with some of these products directly with the OEMs. Obviously, working with our partners, the PCs, the converters and some of the module makers to make sure we're designed in, in conjunction with them. We think this type of approach to the market is going to help us expand and grow the top line a lot faster rate than we have done in the past. Craig Ellis: That sounds good. My follow-up question was on another 2026 priority and the ambition for profitability improvement. And the question is, with significant momentum in this area, given what I think was $30 million in initiatives that's largely been executed and then the $13 million, I believe, of ceramic-related initiatives in 2026 with -- I think that's starting to benefit gross margin in the back half of the year. Are there new additional initiatives that you're planning for '26? Or is it executing on those 2 objectives and realizing and holding those gains? Laura Russell: So let me start with that, Craig. So you're largely correct in saying the initiatives we've already announced are already in flight and much of those savings are already seeing the fall through to the P&L. Where we're not fully concluded is as you correctly stated, with the ceramic restructuring activity, specific to our operations in Germany as we respond to the demand that we're seeing for that business. We will see the benefit of that in the second half of 2026. And as I said in my prepared comments, the benefits we still anticipate to be in the range of $13 million annually and the cost of that program is still forecast in the range of what we committed as part of the restructuring. Now what I would say is, if I think about the business and the opportunity to optimize our financial performance, We've undertaken substantial restructuring to position ourselves positively. But really what's going to drive a substantial transition and shift is what Ali is talking about with regards to our top line expansions and the innovation and the technologies that are really going to allow us to differentiate ourselves from a market perspective and continue to command pricing in accordance to that. But what will complement that will be our continued management of the business, which is supported by the operating structure that's been implemented and the monthly reviews to ensure that we're very nimble in responding to current demand and capacity requirements and investing in accordance to that. I think just finally to round that out, we did mention the restructuring, the impact that had on our operating expense. You saw that, that dropped from about $210 million in 2024, about $193 million, $194 million in '25. That restructuring, we're largely through, but we'll continue to monitor our levels of investment in accordance with the opportunities as we see them present themselves. Craig Ellis: That's really helpful, Laura. And if I can sneak in one related follow-up. Ali, is there anything you can share with us on how significantly you'll be able to load up the new ceramic facility in China as it gets going in the back half of the year? Ali El-Haj: Yes. I mean, Craig, we're still, to be honest, disappointed that it's going slower than we expected it to. But it is moving. I think the customers are still there and they're interested in buying from the China facility and move some of the products or source the China facility. What we're trying to do here balance between aggressively going after the market and therefore, we don't want to play the price game, let's put it this way. So we're trying to be diligent and be careful about not participating in a price erosion type for the market. We still anticipate the plans to be there. So our plans did not change. It just shifted from a time perspective. So we still see growth in that facility in Q2, Q3, Q4. But again, really slower than we expected it. We expected to see better situation we're in, in Q1. We're not there yet. Operator: Our next question is coming from David Silver from Freedom Capital Markets. David Silver: I'm going to go back, and I'm hoping you can just level set me on the pace and the total of the cost savings. So my belief was, I guess, at the end of this year, you were expecting a run rate of $32 million. And then there was the $13 million additional that was cited related to Germany. And then I believe you're using a number of $30 million. And I'm just trying to kind of separate what was mentioned last quarter versus what might be additional as of December 31. Laura Russell: No problem. Let me start, David, and see if I can address your question. So you're right in so far as saying $25 million was the run rate for the initiatives that we had announced previously. What you're also right in saying is the full year benefit of those initiatives is $32 million. But the difference in that $25 million and the $32 million is the full year benefit, some of which we haven't yet seen realized in 2025. So I've got an incremental $7 million that will hit the P&L in 2026 for those initiatives that deliver $25 million of savings in '25. In addition to that, the ceramic restructuring in Germany that we announced in the middle of last year hasn't yet delivered savings to the P&L. We're in the middle of that process. And as a result of that, we won't see the savings materialize into the financials for that until the second half of '26. So that $13 million we've not yet seen. And in addition, we've got another $7 million that hasn't yet hit the P&L. But $25 million is there, and I would share with you that about 70% of the $25 million we did realize in 2025. The savings for that is in the expense category with the residual being in our gross margin and our COGS. David Silver: Okay. appreciated. So then my next question, which one did I want to ask here? Sorry. I wanted to go back to the press release and in particular, Ali, you quoted as saying you have an enhanced innovation strategy. So you have talked quite a bit about different business opportunities and qualification processes. But I'm just kind of scratching my head and I'm wondering when you say an enhanced innovation strategy, does that refer to an enlarged selling effort? Does that refer to increased R&D? I mean what qualitatively, what's included in your comment about an enhanced innovation strategy in service of improving long-term growth prospects? Ali El-Haj: I think it's both. It's really enhanced selling process, but more importantly, it's -- we've identified and the team is working on distinct 3 different projects that we will differentiate to the business. There really be differentiation from what the market today has, what's available on the market today. And those products, we believe they are unique that will solve problems that exist today and for future issues that's facing whether it's in data center applications or in communication applications or EV battery applications, and new technologies. So we've identified those areas, and we're developing products as we speak. Some of these products are in qualification process, as mentioned. For these applications, these applications, as you know, they're very high-growth applications. And for us today, in some cases, we're not really participating in any material type way. We think those will be differentiators to the business going forward, will allow us to have the growth rate that we want to do within Rogers. That's what I meant by enhanced. It is very specific, targeted on -- for certain applications and also differentiated. It's not a me type technology, me type product and within our capabilities and our expertise. David Silver: Okay. And then last one for me. This is kind of a question related to tariffs, I guess, but more second or third order effects. So in other words, last April, your company had to respond in short order to one wave of tariff announcements. This time, it's seemingly from our administration here, it's more targeted. But on the other hand, we're also hearing stories about offshore partners deciding to trade with each other as opposed to maybe a U.S.-based supplier that might encounter some incremental difficulties. From your perspective, has there been any signs that your key OEM customers in offshore locations or headquartered in offshore locations? Is there any change in the way you're doing business with them? Or are they diversifying away or adding non-U.S.-based suppliers in certain cases? In other words, how is the environment for doing business now with the lingering or more targeted tariff-related announcements? How does that affect your day-to-day strategies and your ability to pursue new business? Ali El-Haj: I think that the fact that Rogers is a global company and having manufacturing facilities globally really kind of neutralize that issue completely. So we're able to respond to our customers, whether they're in Asia or North America or Europe because we're local manufacturing -- we're locally manufacturing all their needs or in most cases, all their needs. We have seen some OEMs who are trying to shift again to buy locally. And that for us actually has been a benefit, and we anticipate that to continue to be beneficial for us because we'll be able to respond to these needs, again, just because of the way we are today, we've got the global capabilities, local capabilities on a global basis. So we can supply Asia from Asia. We can supply North America from North America. And in Europe, we can supply most of the products from within Europe. And we're looking to enhance our capability in additional manufacturing in the European continent within the next 12 months or so. Operator: [Operator Instructions] Ladies and gentlemen, we reached the end of our question-and-answer session, and that does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Ladies and gentlemen, thank you for standing by, and I would like to welcome you to Sisecam Investor and Analyst Call for 2025 Results Call on the 17th of February 2026. [Operator Instructions] Without further ado, I would like to pass the line to the CEO of Sisecam, Mr. Can Yucel. Please go ahead, sir. Can Yucel: Thank you very much. Good afternoon, ladies and gentlemen, and welcome to our 2025 full year earnings results webcast. I'm very happy to meet you all again to share our full year-end results. And today, I'm together with our CFO, Mr. Gokhan Guralp; and our Investor Relations Director, Ms. Hande Özbörçek. Now I would like to hand over to our CFO, Mr. Guralp, for the presentation and the review of our year-end consolidated financial results. Mr. Guralp? Gökhan Güralp: Thank you very much, Mr. Yucel. Good afternoon, ladies and gentlemen, and welcome to our 2025 full year earnings results webcast. I hope that everyone is safe since we last spoke. And I would like to thank you all for joining us today. We will commence today's webcast by presenting our financial and operational results for the full year 2025 with particular focus on performance of individual business lines. Subsequently, we will detail our cash position and capital allocation. Following the operational and financial review, we will conclude today's presentation by providing updates on recent developments in our company's sustainability initiatives. As always, we will pleased to take your questions at the end of the presentation. Please be reminded that the presentation and Q&A session may contain some forward-looking statements. Our assumptions and projections are based on the current environment and may therefore be subject to change. Before we start presenting our company's 2025 financial results review, it is necessary to remind you that pursuant to the Capital Markets Board decision, Turkish corporates, including our company are subject to IAS 29 inflationary accounting provisions since the end of 2023. 2025 full year financials and comparative 2024 results that will be present in today's call contain the financial information prepared and audited in accordance with Turkish financial reporting standards for the application of IAS 29 inflation accounting provisions and are finally expressed in terms of purchasing power to Turkish lira as of December 31, 2025. At the end of the operational and financial review section, you may also see a display of our key financial report based on IAS 29 standards and which are basically the set of info provided to our main shareholders as financial institutions are exempted from the implementation of IAS 29 standards. We concluded the year with a consolidated revenue of TRY 225 million, down by 8% year-on-year. The decline in revenue was largely due to performance differences from an individual business line perspective. Negative contribution of the mismatch between Turkey's annual inflation rate of 31% and the depreciation of the reporting currency by 29% to the top line performance was quite limited as it has tightened given the downward trend of the former. For glass business line sales volume performance was stable, thanks to positive architectural glass sales volume accompanied by flat to slightly growing volume in glass packaging and industrial glass operations, offsetting the impact of weaker glassware activities. Chemicals business line experienced a modest decline in annual sales volume due to global oversupply conditions. Product pricing improvements were visible in all glass businesses and across all geographies, while pricing in our chemicals operations underperformed the prior year in hard currency terms. Our EBITDA recorded at TRY 24 billion was up by 32% and translates into a margin of 11% compared to 7% in 2024. Despite tough market conditions, the increase was primarily a result of the management's focus on efficiency improvements and the operational optimization. Efforts to enhance productivity, prioritize value-added product offerings and strengthen capacity management practices contributed to margin expansion. Higher production efficiency helped reduce operational costs while better resource utilization supports overall profitability. Profitability improvement was also triggered by upward price revisions in our glass operations worldwide. Profit before tax almost tripled year-on-year. Parent Only net income soared by 50% and amounted to TRY 9.9 billion. Parent Only net income margin stood at 4.4%, up by 170 bps. Monetary gains recorded in the full year inched up by 13% to TRY 23 billion. During this period, we recorded a deferred tax expense of TRY 1.2 billion in contrast to a deferred tax income of TRY 3.5 billion in the previous year. This shift from income to expense arose from improved operational performance, which led to a decrease in deferred tax income. Additionally, the change in accounting methodology to exclude inflation accounting in statutory accounts in Turkey and revalue the books based on a rate lower than the annual inflation contributed to the deferred tax expense. Next slide. On this slide, we would like to demonstrate the underlying performance of our company, excluding the impact of inflation accounting. For this, we are using adjusted EBITDA figure that is defined as EBITDA adjusted for inflation accounting effect through the elimination of monetary gain loss impact on relevant P&L items. Please be reminded that we have been providing the breakdown of net monetary position in the notes section to our financial statements since 2024 year-end. And going forward, we will be presenting both EBITDA and adjusted EBITDA for the monetary gain and loss in our leverage calculation. With this graph, we addressed the negative impact exerted by the inflationary accounting framework on our company's reported performance. As can be seen, the sum of inflationary accounting impact of the relevant P&L lines was close to TRY 20 billion, more than 90% of it being related to the cost of goods sold account in 2025. With majority of industrial capacities concentrated in Turkey amidst a high inflation environment, the impact on cost is inevitable. This is seen by increased direct labor expenses and elevated production overheads. Inflationary accounting practices lead to inflated inventory values, thereby defying the inflationary impact on costs. inventory turnover inherent in the nature of the business further elevates the cost of goods sold. Accordingly, adjusted EBITDA calculation indicated a consolidated profitability figure amounted to TRY 43.7 billion. Adjusted EBITDA margin moved up by circa 250 bps to 20%. Moving on to Slide 6. We will review the segmental breakdown of our consolidated top line and EBITDA. Once again in 2025 [indiscernible] maintained a well-balanced structure with glass operations composing 2/3 of our revenue. Our largest glass operation with 4.6 million tonnes per annum flat glass gross production capacity composed of 15 active production lines in Turkey, Bulgaria, Italy, India and Russia as well as 1 line in Egypt in partnership with Saint-Gobain, architectural glass contributed 24% to our consolidated revenue. Notably, it ranked as the top EBITDA generator with 49% share in our consolidated EBITDA, thanks to improved pricing environment, growing demand with regulations favoring higher energy efficiency millings, which is introduced last year in Turkey and set to limit the energy consumed by the heating and cooling systems and the enhancements gained through the efficiency management program initiatives. The commissioning of a brand new pattern glass line as well as energy glass processing capacities in Tarsus greenfield facility in September last year has further supported the business line with higher concentration on value-added products in our sales mix. Based on our primary goal to position Sisecam as a global leader in glass producer investing in the future of glass while increasing its presence and market share, we aim to leverage our capacity to capitalize on the growing demand across regions. This demand is increasingly shifting from commodity products to value-added solutions, particularly those enhancing energy efficiency in buildings and enabling feasible energy generation. In line with this principle, we have prioritized the introduction of specific capacities dedicated to these types of products. As we announced in our last meeting, the commissioning of a new flat glass furnace and a coated glass line investment in Turkey will take place this year in addition to 2 coated glass lines taken online in the first quarter in Bulgaria and Italy. Our 3.3 million tonnes per annum glass packaging business line with its 25 online furnaces at 9 production facilities and in 3 countries was ranked as the second largest contributor, accounting for 23% of our consolidated revenue and 33% of our EBITDA. Please be reminded that very recently, we commissioned our Hungary greenfield investment with the aim to start the ignition of 1 furnace, which will increase the business line gross installed capacity by 6% to 3.5 million tonnes per annum. Our chemicals operations stood as the third highest performer in terms of contributions to both revenue and EBITDA with 21% in the former and 25% in the latter. Industrial glass business line, which accounted for 12% of our consolidated revenue had a positive impact on our EBITDA generation capacity with 8% share in our consolidated figure after an extended period. This improvement followed the implementation of operational efficiency measures, including but not limited to the consolidation of the encapsulation operations at a single facility in Slovakia. From our glassware operations with 9 furnaces in 5 facilities, 2 of which located in Turkey and the rest in Bulgaria, Russia and Egypt, we generated 12% of our consolidated revenue. However, the business line had a dilutive impact on our EBITDA given negative EBITDA profitability due to unfavorable demand dynamics, leading to higher days of inventory outstanding and amplified exposure to high inflation. Please be reminded that the relocation of handmade glassware production from Denizli facility to our automotive glassware manufacturing facility in Kirklareli was completed in close to December and as planned. We anticipate achieving cost improvements in our glassware operations by 2026 following this strategic move targeting to enhance the economic value of our nearly century of glassware tradition. Energy segment's performance resulting from our electricity trading operations came in with 6% share in total revenue and neutral impact on our operating profit. On Slide 7 and 8, we aim to present the key takeaways regarding the full year performance of our core business lines on an individual basis to provide you with a concise summary of our glass and chemical unit performance in comparison with the prior year from both operational and financial perspectives. Our sectoral glass business was resilient despite challenging market conditions. We announced that we advanced the cold repair process at our North Italy facility, and this helped us to maintain our output levels consistent with the previous year with higher capacity utilization rate. This recalibration of production levels enabled us to sustain operations without product shortages while benefiting from lower per unit production cost, thanks to 600 basis points higher capacity utilization rate year-on-year. Consolidated sales volume was moderate with 2% increase year-on-year. Looking at the region-wise performances in Turkey, from business line sold 64% of the full year volume. Domestic sales rose by 6%, thanks to reurbanization and renovation projects. Incremental flat demand of industrial clients for export purposes to the surrounding regions after processing has further supported the sales. Combined with the performance in direct export plant as a balancing component of the production and sales schedules majority of time, Turkish facilities overall sales volume moved by 3% year-on-year. Europe-based facilities sales grew by 3% in tonnes, driven by demand for value-added, particularly coated glass in the region. Europe emerged as the second largest contributor to the architectural glass segment consolidated sales volume with 22% share. India business performance was slightly up, while lower ton sales were experienced in Russia compared to 2024 due to ongoing market pressures. Strategic pricing actions in Turkey and Europe supported the revenue performance with euro-denominated product prices growing by an average of 6% year-on-year across all regions. Meanwhile, cost of sales declined by 12% in TRY terms, reflecting optimized production planning and improved cost efficiency resulting from higher capacity utilization. Consequently, architectural glass operations outperformed the inflation rate with 1% year-on-year increase in net external sales to TRY 54 billion. Segmental EBITDA margin widened from 11% to 21%. Industrial glass business line under which we report our automotive glass, encapsulation and glass fiber operations overperformed inflation by generating TRY 28 billion in net external revenue, up by 4% year-on-year. The Automotive glass and encapsulation division continued to be the major component of divisional revenue. And as a well-known Tier 1 auto glass and encapsulation suppliers, we have kept leveraging our production capacity and capabilities to get new nominations and operate with a sizable project pipeline. Consequently, the business line ended the year with 4% higher sales volume year-on-year on a ton basis driven by the scheduled deliveries to OEM clients, the automotive glass and encapsulation division. Auto replacement glass channel maintained its strategic importance, contributing 14% to the revenue stream. Average prices per ton in USD terms increased by 14% in this reporting period. In glass fiber operations, against weaker export sales due to pricing pressure of low-cost regions, domestic sales grew 4% year-on-year, primarily driven by strategic responses to demand conditions through benefiting from spot market opportunities. This led to limit consolidated sales volume decline to 14% year-on-year. As a result of enhancements attained through the efficiency management program, the business line recorded an impressive improvement in profitability, achieving a 7% EBITDA margin in 2025 compared to negative 9% in the prior year. Glassware business sales volume declined by 18% year-on-year, primarily due to weak consumer sentiment and a focus on essential spending amidst low risk appetite across key customer channels. Domestically, the market faced challenges from high inventory levels and the influx of low-cost imports. This weakness affected several sales channels, including retail wholesalers and national chain stores, which account for 84% of domestic sales. International sales also underperformed compared to the previous year for similar reasons. The overall average price per ton in US has increased by more than 15% year-on-year. However, the TRY 26 billion external revenue recorded in 2025 with 14% decline year-on-year fell short of keeping pace the domestic market inflation. EBITDA margin was delivered at minus 3%. Glass Packaging business line encountered a dynamic market landscape throughout the year. Segment production grew by 2% year-on-year with consolidated output supported by 96% capacity utilization rate average. Consolidated sales volume remained stable year-on-year, thanks to exports from Turkey, which accounted for 13% of consolidated sales and rose by 9% year-on-year. This growth was largely driven by expanded operations with our European customer base before the start of operations at our Hungary glass packaging facility scheduled to be ignited in quarter 1 '26. Sales initiatives, sales activities aimed at further penetrating the Americas have also contributed to the export channels performance. Meanwhile, domestic sales were modest, backed by positive contribution of the nonalcoholic beverage category. Sales volume in regions outside Turkey declined primarily due to weak consumer sentiment and a sluggish easing pace in the [ CIS ] regions. This was compounded by the ecological tax increase from 25% to 55% at the beginning of 2025, leading to higher retail prices for end products. The implementation of consistent pricing strategies addressing inflationary pressures and cost variations resulted in a 17% year-on-year increase in average prices per ton in USD. Consequently, glass packaging business line, net external revenue came in at TRY 52 billion revenue, up by 4% year-on-year. Material improvements were visible from a profitability perspective, thanks to pricing and cost improvement projects. EBITDA margin recorded at 16% was circa 550 bps higher year-on-year. Lastly, our chemicals operations. The global soda ash market showed mixed dynamics in 2025, largely due to ongoing oversupply pressures in the key APAC region. Additionally, cautious procurement and inventory management strategies among buyers restrained demand and hindered price growth. Our consolidated sales moved south by 5% year-on-year. Meanwhile, thanks to strategic new client acquisitions, our net sales per ton decreased by only 2% in USD. The chromium chemicals market was subdued globally, influenced by macroeconomic pressures and high inventories along with tariff-related tensions and lead up to 13% drop in sales volume. However, per ton average USD prices moved north by 4% during the period, thanks to shifts in our sales mix. Resultantly, the Chemicals business line reported TRY 48 billion net external revenue, a decrease of 15% year-on-year and 12% EBITDA margin. Moving on to Slide 9. With our production facilities located in 13 countries in the majority of 2025, diversified operations portfolio and a wide range of products, we continue to cater to our clients across the globe. Despite the significant challenges posed by the disparity between Turkish lira inflation and the reporting currency depreciation, we successfully maintained 59% share of international sales in our consolidated top line. Export revenue, 55% of which was generated from sales to Europe stood at USD 938 million. Including revenue generation of Sisecam facilities located in the region, Europe accounted for 29% of our top line. U.S. market exposure through sales from U.S. natural soda ash operations as well as exports stood at 11%. Accordingly, our developed markets exposure came in at 40%. On Slide 10, you may see the details on our liquidity position. We ended the year with USD 962 million cash and cash equivalents, including USD 72 million financial assets, of which USD 68 million Eurobond investment maturing in 2026. Gross debt stood at USD 3.8 billion with a term structure of 61% long term and 39% short term. 85% of the gross debt was denominated in hard currency and 94% of the remaining balance was in Turkish lira. The interest rate structure comprised of 70% fixed and 30% variable. The hard currency share of cash and cash equivalents, excluding financial investments stood at 36%. Resultantly, our net debt position amounted to USD 2.8 billion. We are pleased to announce that in line with our managerial targets and our forecast, thanks to efficiency management program initiatives, our company's EBITDA generation capacity has a decent improvement. Concurrently, we have reduced our indebtedness through stringent controls and refinancing transactions, enabling us to benefit from improving funding costs and extending our debt profile. As a result, our net leverage ratio has been moving in a downward trend and came in at 5x compared to 7.7x calculated in quarter 1 2025. Moreover, monetary gain loss adjusted EBITDA figure indicated a net leverage ratio of 2.8x, which is below the covenant determined by recently issued Sisecam 2023 notes. We had a net short FX position of TRY 12 billion, TRY 99 million short in US and TRY 189 million short in euro. Moving on to Slide 11. Our CapEx recorded at TRY 36 billion remained below the cash outflow in relation to investments in the prior year. The distribution of CapEx across business lines was as follows: 47% of total CapEx was attributable to architectural glass segment, mainly in relation with the cash outflows on the ongoing greenfield flat glass facility, furnace and coated glass projects investments in Turkey Tarsus, the new glass furnace and energy generation glass processing plants that were taken online at the same location in quarter 3 '25 as well as the new coated lines introduced in Bulgaria and Italy this year. Capital expenditures with regards to the greenfield glass packaging investment in Hungary, the commissioning of which we announced this month and payments made in relation with the coated [ glass ] processes in Turkey and Georgia corresponded to 28% of the total. Chemicals segment accounted for 10% of consolidated CapEx figure with payments mainly with regard to operational efficiency and maintenance investments in Mersin and Wyoming plants. The remaining balance was related to industrial glassware, energy and other segment maintenance and cold repair expenses. We ended the reporting period with a cash inflow from operating activities of TRY 40 billion compared to TRY 41 billion in the prior year. Including the monetary loss on cash and cash equivalents, we recorded a negative free cash flow of close to TRY 32 billion versus TRY 40 billion in the prior year, thanks to controlled management of investments. On Slide 12, you may see our key financials without the impact of IAS 29 as provided to our main shareholders for the consolidation purposes and as announced on the public disclosure platform or information symmetry. In the following section, we will update you with some key developments in our sustainability agenda. In line with the Turkey sustainability reporting standard TCRS issued by the Public oversight Accounting and Auditing Standards Authority, we published Sisecam's first TCRS aligned sustainability report on August 1. For the past 12 years, we have been voluntarily reporting our social and environmental impacts, including climate change, demonstrating that ESG considerations have become an integral part of our business strategy. With this new regulation, we have taken this approach as a step further, adopting a more comprehensive and advanced structure under the TCRS framework. In our TCRS report, we provide detailed information on our sustainability governance, our resilience to climate change, our risk and opportunity management practices and the role of our product portfolio in managing climate-related impacts. The full report is available in both Turkish and English on our website. In addition, we shared our long-standing voluntary sustainability report with a continued focus on transparency and accountability. In our 2024 report, we recorded notable progress across the teams of protecting the planet, empowering the society and transforming life. Under the Protective planet pillar, we launched the solar decarbonization road map as the second phase of our low-carbon production road map aligned with our 2050 carbon neutral target. Our certified renewable energy procurement reached 184,000 megawatts and our water withdrawal per unit of production decreased by 27.7% compared to 2020, reaching 3.4 cubic meter per ton. Within the empower society pillar, we participated in the Women Empowerment Principles in [indiscernible] pilot program to support gender equality. We provide a total 474,000 hours of training to our employees in Turkey and delivered approximately 200,000 person-hours of occupational health and safety training. Under the transform life pillar, we assessed 81 critical suppliers in our project focused on monitoring sustainability performance in the supply chain. Through our RPA Hackathons, we implemented 70 digital automation projects, achieving a time saving equivalent to 31 FTEs. We allocate 70% of our R&D expenditures to sustainability-related projects and recorded 41 patent applications, 18 patent registrations, 5 international patent applications and 492 design registration applications. Additionally, in 2025, we revised our responsible supply chain policy, which enables us to engage with our suppliers and business partners within the framework of universal ethical principles. In parallel with a EUR 200 million investment, we commissioned the flat glass furnace and energy glass lines in Tarsus, bringing significant additional capacity to Turkey's production landscape. Built with modern technology and offering an annual production capacity of 47 million square meters, this new line will produce high-quality glass with high transmittance performance, specifically designed for photovoltaic panel manufacturers. In addition, we proactively manage our ESG performance and continue to work towards strengthening our results each year. In this context, in the 2025 Carbon Disclosure Project assessment, our scores for both climate and water were at the B level. We sustained our strong performance with an A- rating in the Refinitiv sustainability score and maintained our place in the BIST 25 Sustainability Index. We achieved a score of 63 on Ecovadis. We continue to be listed in the MSCI Global Sustainability Index with BBB rating. Our S&P Global Corporate Sustainability Assessment score 2024 was announced at 47. According to Sustainalytics, we are positioned in the medium ESG risk category. At the World Soda Ash Conference, where we participated as a strategic sponsor, we brought together key industry representatives. During the event held in Spain, we had the opportunity to highlight our sustainability strategy, our approach to low-carbon soda production and our innovation-driven investments. In the previous years, we took part in numerous national and international events this year as well, sharing our sustainable strategy and vision with broad audiences. Through the Sisecam International Glass Conference we organized in Munich, we underscored the importance of collaboration and innovation in shaping the future of glass. Throughout the event, we hosted variable discussions on topics such as decarbonization, energy efficiency and material science, critical areas that will guide the future of industry. As part of our 90th anniversary celebration, we had the Global Supplier Summit, bringing together our international business partners. At the summit, we discussed key themes shaping today's business landscape, including sustainability, digital information and operational design. We also presented sustainability awareness awards to suppliers who stood up with the innovative and impactful practices. In addition to -- in addition, we participated in the TCRS assessment conference held during the year, where we contributed to sector-wide awareness by sharing our compliance journey approach and practices related to the new standards. At the Sustainability Development Association Turkey member meeting, we exchanged insights on our environmental strategies and cross-sector sustainability practices. Furthermore, within the scope of the ITU Glass Technologies Engineering certificate program, we engaged with university students through all our areas of expertise shaping the future of glass. We shared our knowledge and experience across a wide range of topics from Sisecam's production processes and investment strategies to our sustainability approach, communication activities, R&D and product development, sales and marketing operations, career development and Sisecam Academic programs. This was the end of the presentation. Now we can move to the Q&A section. Operator: [Operator Instructions] Our first question comes from Evgeniya Bystrova from Barclays. Evgeniya Bystrova: Congrats on results. I would like to ask you about profitability and margins. If we look at Q4 in more detail, I guess, quarter-on-quarter, there is like a slightly weaker margins on EBITDA side also on gross margin side. So I was just wondering if this is -- if this relates to seasonality or there was some impact on the OpEx side affecting Q4 margins compared to Q3? And also, if you could please comment on your outlook for EBITDA margin for 2026. Should we expect improvements on the glass side in terms of profitability, but weakness in chemicals given the market environment, that would be very helpful. And if you could also please touch on your CapEx outlook for this year, that would be also very helpful. Can Yucel: Thank you very much for the questions. This is Can Yucel. I'd like to answer the first part of your question about decreasing the margins in the last quarter of the year. This is something we've been anticipating. There is a level of seasonality as well, but the main reason is, especially on the chemical side, stemming from the margins on the solar business. As we are all aware, the oversupply in that market is clearly pressuring the margins on that business, and this is what we experienced in line with other players in the market. We will see positive improvements on that side in the following year. And our expectations on the overall margins for the following year, as we explained in our announcement and in this presentation. The main thing is the level of pricing, especially in Turkey and Europe is improving starting from 2025, and we're expecting to see the improvement continue in the following year or this year as well. But the most important opportunity for us is the value-added products. Till now, we've been serving the coated flat glass market with the existing capacities. And as we announced in the first month of this year, we've been introducing additional coated line capacities in the market, mainly focusing on the European market. Those 2 will be Bulgarian and Italian lines, which we introduced how will they perform and how much they will contribute will based on the pricing levels, but the positive EBITDA margin or improvement in the margin will come from that side. And maybe the last part of the question is the CapEx that we will undertake this year. Gokhan will comment more detail on that one. But one thing is very critical. 2025 is a very important or critical year for us because we've completed our major CapEx in this year. The openings or the ignition of the furnaces is starting from the first quarter of this year. We will see the contribution -- EBITDA contribution after the ramp-up period. Therefore, we will not be having any major CapEx in 2026. Our soda CapEx, which constitutes a major amount in the CapEx plan for Sisecam is currently being reassessed. I mean we've been following the pricing levels in the market and updating our forecast. So we are revising the plan on this side. We will see how much we will be investing in that CapEx in the middle of this year, and we will be announcing it correspondingly. Apart from that, the total CapEx we are expecting for this year is around USD 500 million, and it is mainly coming from the payments of the CapEx that's been realized in 2025, and these are the parts which will be paid in 2026. The remaining part is our usual maintenance CapEx. Gokhan, if you have anything? Gökhan Güralp: Yes. Can may explain in more details also to sum up, the level of the capital expenditures will not exceed [ 25 million ] in 2026. And by the way, we are almost commissioning most of the investments. And starting with the first quarter, we already ignited the furnace -- first furnace for glass pack in Hungary. And also we already ignited the coated glass investments in Bulgaria and also in Italy. By the way, in the rest of the year, we hope to also start productive in the remaining investments. So '26 will be the finalization of the investments. But by the way, of course, the payments for the remaining part of these investments will continue during '26. That's why we can conclude that the level of the CapEx will not exceed '25 levels, and that's why it will be around USD 500 million to USD 600 million during this year. Operator: We are now moving to the next question from [indiscernible], individual investor. Unknown Attendee: Congratulations for the results. Following your remarks, Can Bey, investments and efficiency were the highlights of the release. In this regard, I have a follow-up question. It is on the outlook of debt burden. Gokhan Bey has already briefly mentioned, but as cost repays and have investments left behind and can we assume still declines in that level and improvement in multiples? And if we have a time, I have a brief second question, actually, as a follow-up. Now my question is on share buybacks. Last time in earnings release, you have said it is finalized and over. program is over. As far as I know, there was no development in this team since then. Do you plan to sell these shares now or cancellation of the treasury shares? Is that also an option? Gökhan Güralp: Just maybe I can start with the share buyback program. Just as you mentioned, we announced that we already ended the share buyback program as of June 30, 2025. And after that, we didn't announce any new share buyback program. And nowadays, it is not in our agenda. Of course, about the treasury shares, the management is reassessing how to conclude it. By the way, we are following the markets. And accordingly, we will decide, but it is not decided yet. Unknown Attendee: It was on the debt burden. I think my question on investments is complete or have investments left behind? Gökhan Güralp: Yes, yes. Just I checked my notes in order to remember your first question, follow-up question. Of course, the level of the CapEx will be at the same level almost with 2025. Our main aim is, of course, to decrease the net debt level. But by the way, first of all, with the generation of additional EBITDA from the new online productive investments, of course, the level of the net debt will be decreased. But '26 will be just having -- starting to have the performance from the new investments. And our main aim is, yes, to keep the net debt level at least at the same level. By the way, yes, you can see our -- if you look at our free cash flow, CapEx is the main negative cash flow item -- cash outflow item. That's why we will try to keep the net debt level at the same level of '25. But with the generation of EBITDA, of course, the leverage will be decreased in '26. Can Yucel: In additional comment, delevering company is the main role of our team, and it is either through getting additional EBITDA from the new investments, which are finalized and which are expected to be more valued. And the second thing is we have in operative assets in our portfolio. These are our old assets that we used for production, but not available for production for the moment. We will be going through a sale process. And hopefully, we will realize the value soon and delever the company through that way as well. Operator: [Operator Instructions] Our next voice question comes from Gustavo Campos from Jefferies. Unknown Analyst: A few questions from my side. First of all, we see -- I was wondering if you could elaborate on your expected pricing dynamic in architectural glass in 2026. We saw a significant increase, especially in the fourth quarter. So pricing dynamic is increasing and accelerating. Do you expect double-digit pricing growth to persist into 2026? Or do you expect some kind of moderation from here? I was also wondering if you could please touch on your initiatives on idle real estate assets as well as your management of your precious metals portfolio. Are you indicating that you are looking to monetize more assets in 2026? If you could please give us some guidance on how much assets are you planning to monetize? And what are the expected use of proceeds from these assets that would be much appreciated. Those are my 2 questions. Can Yucel: Okay. Thank you very much for the questions. Again, let's start with the last one. For the overall value of assets, disposable assets for the moment is you can assume it to be around USD 500 million. And what we've done in 2025 is we realized or monetized part of it. We've done a sale, which is around USD 50 million, and it was accompanied by a sale of a portion of our precious metals portfolio. It was around USD 10 million as well. So we will be continuing that strategy. The important thing is how much of the value of the assets we can realize for the moment. And for the moment, we are able to attract some meaningful offers. And in the meantime, I hope you will see the results very soon. Going back to your pricing strategy question. Actually, our pricing strategy for the following -- for this year is we are changing the product portfolio in many ways. For the architectural glass, as we mentioned, we will be more active in the market through the coated glass lines, and we will be trying to attract the additional margin there. But the overall rule of cost pass-through will be available for this year as well. We started the same strategy in the Turkish market by the beginning of this year, and we will continue as much as we can for the following part of the year too. do you have another comment? Gökhan Güralp: Yes. Just to explain about the assets, yes, maybe our investors can follow the balance sheet, we already accounted most of the assets as investment property on hand. We are reassessing the sale of these assets in order to generate additional cash and accordingly, of course, in order to decrease the leverage. Unknown Analyst: Understood. So if I may clarify the amount of proceeds that you already monetized in 2025 and the expected amount of proceeds that you are planning to monetize in 2026. I know that it may not be certain yet, but did I understand it was something around $500 million expected like a targeted amount for 2026. Is that correct? Gökhan Güralp: Yes. Appraisal values of these assets are around USD 500 million. Can Yucel: This is not a targeted amount because the targeted amount depends on the market conditions. This is the total value of the portfolio. This is the appraisal value of the portfolio. And in any case, we find meaningful offerings or realized prices, then we will go through the sales process one by one. We cannot comment on how much of it we can realize for the moment because these are valuable assets and they are, I mean, high value per asset. So we will see how the market will react. But I can see -- you will see the improvements soon in the following months. Unknown Analyst: Understood. And you are still expecting to be free cash flow negative in 2026 even with these proceeds. Is that a correct assumption? Gökhan Güralp: Even with these proceeds, we cannot comment directly. But without taking into consideration of the proceeds, we -- based on -- because of the CapEx size that we mentioned around USD 500 million to USD 600 million, we are waiting for negative free cash flow. But with this additional cash generation from the asset sales, of course, we hope to decrease the level of the negative free cash flow. Operator: We'll now move to the next question from Matthias from BlueBay Asset Management. Unknown Analyst: My questions have been asked and answered. Operator: Our next question comes from [indiscernible] from Azimut Group. Unknown Analyst: I don't know if this was asked and answered, but you mentioned that you ignited the furnaces in the glass segment that were in 2025. Does this mean that your volumes are expected to be higher this year and margins will be better given that -- given the demand environment. And again, on the leverage, do you think -- I mean, as far as I understand, your net debt to EBITDA will be higher in 2026 compared to 2025. Is this correct? Can Yucel: The commission lines are basically aimed at high value-added products we quoted last time. So we will be increasing our capacity on that business. And the purpose of those investments are to achieve the higher-margin products, and we will see improvements in the margin, which will affect our financial position accordingly. Operator: Our next question comes from Erica Ive from MetLife. Unknown Analyst: The first one would be on EBITDA. I remember it was mentioned before that EBITDA from new investments -- commissioning of new investments would have been this year between USD 150 million to USD 200 million. Is it still the case considering what has been commented just before about margins and so on? Can Yucel: These are the non-I figures that you're expecting. These are still... Unknown Analyst: Yes. And in terms of -- it was mentioned as well in one of the recent updates that you would have used, yes, asset monetization, but possibly also factoring receivable discounting and supply chain facility. Could you give us an update of how much do you think to use basically to draw this year? Gökhan Güralp: Yes. By the way, yes, just Erica, we are following, of course, the opportunities in working capital financing activities. At the year-end in 2025, -- we didn't use factoring for receivables just we follow the market and accordingly, we didn't realize any factoring activity. But for the coming current year '26, of course, we will follow the market conditions and in order to have better working capital results, of course, we will continue to follow such kind of opportunities, of course. And in trade finance, in also factoring in additional tools, we are always following the market. If we see opportunities with good rates, of course, we will perform. Unknown Analyst: That's very helpful. And then if I may squeeze another question is that in all honesty, I was a bit surprised about the fact that in the final quarter of the year, you generated negative free cash flow because I remember you said it that you would have expected positive to breakeven free cash flow in the second half of the year in total. So -- and in fact, leverage went to 5x, where I think before we were saying below 5x. Is there a particular reason why you kept a very high level of CapEx bar just because you feel comfortable that ultimately you can deleverage where you are targeting? Or yes, can you just give me a bit of insight why is it that you took a decision to still burn some cash? Gökhan Güralp: Yes, Erica, just I can summarize quickly. In '25 and '26, as we mentioned, we do not expect any positive cash flow because of the size of the CapEx. And in the last quarter, especially '25 in order to accelerate the of the furnace in order to be productive starting with the first quarter of '26, we accelerate the CapEx in order to start to generate EBITDA as soon as possible and in order to decrease the level of the net debt, of course, and keep the net debt level at least at the same level of end of '25. So '25 and '26 almost will be the same will have the same free cash flow structure, negative free cash flow. And after ending these investments and starting to generate additional EBITDA, as you also asked with the additional USD 150 million to USD 200 million, we will start, of course, to generate most probably without any new CapEx, positive cash flow starting with '27. Acceleration of CapEx created, of course, the same level of the negative free cash flow in the last quarter. Operator: We are going to move to the last question of the call for today from Gokhan [indiscernible] from Istanbul Portfolio. Okay. Since we are unable to connect with Gokhan, I will pass the line back to the management team for their concluding remarks. Can Yucel: Thank you very much for your time and joining our presentation. We would like to thank you very much for the questions as well. I hope we answered all the questions. See you. Thank you very much. Bye. Operator: Thank you, everyone. We are now closing all the lines.
Operator: Good day, and thank you for standing by. Welcome to the Carrefour Full Year 2025 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Bompard, Chairman and CEO. Please go ahead. Alexandre Bompard: [Foreign Language] Good evening, everyone. Thank you for joining us for the presentation of our 2025 results. As you know, we look forward to welcoming you tomorrow morning in Massy for the presentation of our new strategic plan. Today's call will mostly focus on 2025 achievements. On a strategic note, we accelerated our portfolio reshaping, taking full control of Carrefour Brazil, disposing of Carrefour Italy and signing an exclusivity agreement last week regarding Carrefour Romania. If I come to operations, we pushed our transformation on our investments forward in our 3 key countries, and we released today financial results that show steady delivery. In a nutshell, our performance was solid, with good commercial dynamics in France and Spain, a growing recurring operating income, excluding Cora and strong cash flow generation. If we deep dive on our 3 main countries. Carrefour France core delivered another outstanding year. We continued to invest in our commercial model and in price, narrowing the price gap with the market. These efforts were recognized by customers with satisfaction continuing to improve year-on-year on NPS up by 3 points in Q4. In parallel, we opened a record 456 new convenience stores, driven by a record number of new partners joining Carrefour. We also continued the conversion of hypermarkets and supermarkets to franchise and lease management models. As a result, our group's market share increased over the year, with a clear acceleration towards year-end, reaching 22%, its highest point since 2015. This performance was achieved while maintaining strict cost control and capturing purchasing synergies, enabling Carrefour core operating margin to reach the 3% milestone. Coming to Cora & Match integration. In 2025, the group rolled out its commercial model by implementing significant price cuts in the former Cora hypermarket, substantially increasing the share of Carrefour-branded products in the assortment, underlining the promotional policy with the denser promotional intensity of Carrefour stores. On one hand, these initiatives had a temporary impact on France operating result with a negative effect of EUR 120 million over the year. On the other hand, these initiatives helped revive Cora & Match with growing traffic and market share momentum towards the end of the year. Overall, we confirm our synergies target at EUR 130 million for 2027. To finish, in Q4, Carrefour France sales were slightly up in the market, marked by consumer trade-downs on festive products. In January 2026 public data confirmed that the environment was back to a positive trend. Let's move to Spain. In Spain, we benefit from a solid momentum in a dynamic market. Food sales showed strong growth, up 2.3% in 2025, driven by fresh products. Nonfood sales are also positive. We continue to strengthen our price leadership, and we have reached our best position in the market since 2022 while further expanding our convenience store network. As a result, profitability increased by 13.5% in 2025, driven by both retail and financial services with an improvement of 45 bps in profit margin. Let's move to Brazil, our third key country. After a strong 2024, the Brazilian market is facing a challenging environment, marked by record high interest rates and negative volumes, particularly in the Cash & Carry segment. In this context, our strict cost discipline helped protect margins. In Q4, inflation was lower and led to purchasing power games. As a result, volumes were more resilient from mid-single-digit negative in Q3 to low single-digit negative in Q4. The ongoing volume improvement in January seems to indicate that the cycle trough is now behind us. In total, our group continued to execute on its transformation road map. We strengthened our price competitiveness on customer satisfaction and delivered solid progress across all our key operational priorities, particularly in private label and e-commerce. At the same time, our cost savings plan remains fully on track, delivering EUR 1.1 billion, excluding Italy in annual savings as planned. As a result, recurring operating income increased by 2.2%, excluding Cora & Match. EBITDA was stable and net free cash flow amounted to EUR 1.5 billion, excluding Carrefour Italy. Beyond financial performance, we also delivered strong results on our social and environmental commitments. We achieved a CSR Index score of 113%. In particular, our Top 100 Suppliers program continues to deliver progress. 87 of our industrial partners are now fully aligned with [ 1.5% degree ] trajectory. Reflecting this solid performance, we will propose to increase the ordinary dividend to EUR 0.97 per share, in line with our guidance of 5% increase. Following the disposal of Romania and subject to the completion of the transaction, the payment of a special dividend of EUR 150 million will be proposed. To conclude, building on our financial performance and commercial achievements in 2025, we approach 2026 with confidence in both the underlying market dynamics and our model's ability to capture consumption momentum. I now leave the floor to Matthieu for more details on our financial results. Matthieu Malige: Thank you, Alexandre, and good afternoon to everyone. It's a pleasure to be with you to cover our 2025 financial results in detail. Let's start on Slide 8 of the presentation with the details of our Q4 sales. Total sales for the quarter reached EUR 24.3 billion. Like-for-like sales were up 1.6% over the quarter. Expansion and M&A had a negative contribution of minus 0.7% over the quarter, which includes perimeter adjustments in Brazil, notably after the divestment of Nacional and Bompre o stores. ForEx had an unfavorable impact on total sales growth of minus 2.3% over the quarter, essentially reflecting the depreciation of the Argentine peso and the Brazilian real versus the euro. Moving to Slide 9. Recurring operating income for the group amounted to EUR 2.158 billion or 2.6% of net sales. As you can see, this full year recurring operating income is penalized by 2 effects. First, a negative ForEx effect of minus EUR 102 million. And then the effect of the consolidation and integration of Cora & Match, which posted a recurring operating income of minus EUR 120 million over the year. This figure includes EUR 95 million of nonrecurring integration costs as planned and guided. We stated from these 2effects, recurring operating income shows growth in absolute terms and as a percentage of sales. Let's turn to Slide 10 with more details on the performance of France. At 0.4% like-for-like slowdown in Q4 in France compared to Q3. This is due to the market slowing down with consumers trading down on festive products during the Christmas campaign. This was a surprising trend that did not continue in January as evidenced by Circana data. Circana indicates that volumes in the market were down 0.4% in November and down 0.7% in December, and turned back to positive in January at plus 1.2%. Cora & Match still weighted on like-for-like with a decrease in the average product price following price investments. Excluding Cora & Match, like-for-like sales grew by 0.8%, supported by food sales up 1.3% with an encouraging trend in hypermarkets, where food sales increased by 0.8% in Q4. The convenience format continued to post a solid performance. In parallel, we continue to expand with 107 new convenience stores opened in the fourth quarter. Over the quarter, Carrefour maintained a stable market share and managed to further grow NPS by 3 points. Excluding Cora & Match, recurring operating income for the historical perimeter grew by a strong 11.3% in 2025 with a margin expansion of 31 basis points reaching 3% of sales. Let's move on to Slide 11 with more details on Cora & Match. First, as we shared last October, the integration process for Cora & Match has been completed in Q3. Total integration costs are slightly below initial targets, a sign that the integration process has been well controlled. Integration OpEx totaled EUR 145 million versus EUR 150 million expected. And integration CapEx amounted to EUR 85 million versus EUR 100 million expected. Recurring operating income was a negative EUR 120 million for Cora & Match in 2025, including EUR 95 million of nonrecurring integration costs. Excluding these costs, recurring operating income would have been minus EUR 25 million in 2025. This figure has suffered from a decline in gross margin rate versus historicals. As you know, we deployed Carrefour's commercial model within the ex-Cora stores over the summer of 2025. We aligned prices with Carrefour's, which were 6% to 7% lower. We rolled out Carrefour private labels, leading to a 10-point increase in private label's penetration. And finally, we deployed Carrefour's more intense promotional model. We have buying synergies to compensate for a great part of this investment. But overall, this new commercial model weighs on gross margin of Cora & Match. While this is a short-term headwind on our financial performance, we are already seeing a positive reaction from our customers with number of tickets up 2.9% in Q4 and market share gains since December and an improvement of 20 points in the Net Promoter Score following the integration. With this trend, we are confident in the dynamic for 2026. With this trend and cost synergies progressing well, we confirm the objective of EUR 130 million of synergies by 2027. Moving on to Slide 12. You can see the evolution of recurring operating income in France for our legacy perimeter. We have consistently increased recurring operating income booked in absolute terms and in terms of operating margin since 2018. In 2025, we have reached the 3% mark, up 31 basis points. On this long-awaited milestone is a confirmation that all the initiatives implemented in the frame of Carrefour '26, mainly on private labels, e-commerce, cost and franchise are making their way to the bottom line while allowing for further price competitiveness. Let's now turn to our European operations outside of France on Slide 13, where we have delivered a solid set of results, characterized by improving profitability and resilient top line growth. Like-for-like sales in the fourth quarter grew by 0.9%, closing a full year of positive momentum with full year like-for-like up 1.2%. This was achieved despite a contracting landscape across the region. Performance was led by Spain posting 2% like-for-like growth in Q4 on the back of a solid market showing both positive inflation and volume growth. Carrefour Spain maintained a strong momentum on the back of commercial initiatives that are resonating well with customers. In Belgium, the environment remained challenging yet our operations have shown resilience. We ended Q4 at a slight positive of 0.2% like-for-like, securing full year growth of 0.8% like-for-like despite persistent competitive intensity. Romania also remained in positive territory with plus 0.5% like-for-like in Q4 and 1.5% for the full year. Finally, regarding Poland, the market remained highly competitive and was marked by a slowdown in volumes. Looking at recurring operating income. Europe grew by 3.7% to EUR 481 million, up from EUR 464 million in 2024. This translates into a margin expansion of 9 basis points to 2.4%. The improvement was primarily driven by a strong increase in profitability in Spain, which combined with a sound execution in Belgium, more than offset the headwinds we faced in Poland and Romania. Let's move to Slide 14 with a focus on Spain, where we continue to see a positive and dynamic market, driven by both positive volumes and prices. Spain delivered a strong performance this year, confirming its role as a key growth engine for the group. We continued to invest in price over the second half, reaching our best positioning since 2022 and reinforcing our price leadership in the country. We maintained solid commercial dynamics underpinned by a sustained price leadership. Food sales grew by 2.3% on a like-for-like basis. This was powered by a strong performance in fresh products where our focus on quality and availability is clearly paying up. Carrefour Spain also posted positive growth in nonfood, up 0.7% like-for-like. The strong commercial activity has translated into material improvements in our financial results. Recurring operating income increased by 13.5% to EUR 463 million, with operating margin up 45 basis points to reach 4.2%. Moving on to Latin America on Slide 15. We faced a challenging environment last year characterized by volatile macroeconomic conditions and currency headwinds. In Brazil, our like-for-like performance was broadly flat in Q4. This primarily reflects the slowdown in inflation and a difficult backdrop as record high interest rates have continued to penalize the market and particularly the Cash & Carry segment. However, we have seen encouraging signs in the underlying trends as food volumes sequentially improved from mid-single-digit negative in Q3 to low single-digit negative in Q4. There was sharp deflation on certain commodities in Q4, helping partially restore household purchasing power. The retail segment showed again more resilience with food sales growing by 4.3% like-for-like, with positive volumes, notably driven by our commercial strategy towards B2B customers. In the meantime, we stabilized sales at Sam's Club, and we continue to grow our e-commerce business by 41% in Q4. In Argentina, Carrefour delivered 24% like-for-like growth in an environment that remains marked by pressure on consumption. We have successfully strengthened our leadership. We achieved steady market share gains throughout the year in both value and volume. In terms of recurring operating income, our performance in Latin America remained stable year-over-year at constant exchange rate. The decline in the reported figure is entirely attributable to a negative currency impact of minus EUR 101 million in the region. Brazil delivered a recurring operating income of EUR 709 million and 4% of margin. Margin was down 7 basis points on the back of negative volumes and price investments compensated by cost savings. Argentina contributed EUR 70 million to the group recurring operating income compared to EUR 115 million in 2024. All in all, while the context in Latin America remains demanding, our market leadership allows us to navigate these cycles with resilience. Coming to our global P&L on Slide 16. Our gross margin rate came down 22 basis points, reflecting our continued investment in prices and the structural shift of our business model towards more franchise-operated stores, which naturally impacts the gross margin rate but is accretive to recurring operating income. Our strict financial discipline continued to yield results. SG&A expenses stood at 14.4% of sales, an improvement of 16 basis points compared to last year. As mentioned previously, the integration of Cora & Match had a short-term dilutive effect on the operating margin. If we exclude the scope to look at the core performance, Carrefours' recurring operating margin actually expanded by 13 basis points to reach 2.9% for the year, meaning that our core profitability improved, demonstrating the structural dynamic of our model. Turning to Slide 17. Let's walk through the P&L items below the operating line. Nonrecurring expenses decreased to EUR 62 million, reflecting lower restructuring costs this year. Cost of debt remained stable. Other financial income and expenses normalized this year after 2024 was impacted by ForEx volatility and costs related to dividend payments in Argentina. The tax charge amounted to EUR 516 million compared to EUR 302 million in 2024. The increase compared to last year is driven by 3 main factors, the increase in our pretax income, the temporary extra corporate tax for large companies in France and certain nondeductible expenses in 2025. Net income from discontinued operations was minus EUR 657 million mainly corresponding to the exit of Italy. So bottom line, adjusted net income group share reached EUR 1.090 billion. This translates to an adjusted EPS of EUR 1.60 for the full year '25. Now let's move to the net free cash flow on Slide 18. We generated EUR 1.565 billion in 2025, excluding the impact of Italy, which was a negative cash flow of EUR 260 million. That number for Italy is higher than the EUR 180 million negative for 2024, mainly due to the closing date of the sale. Indeed, as we closed at the end of November, we did not capture the traditional positive cash generation of December. This was compensated by a lower cash contribution to the disposal, as I will detail in the net bridge in a minute. Besides, the cash flow profile for the year was driven by the following elements: first, a normalization of our financial results after being impacted by the negative effects in Argentina in 2024. Second, lower restructuring cash-outs, which decreased to EUR 189 million. Regarding working capital, the contribution also normalized at EUR 263 million. As anticipated, this is much lower than the exceptional inflow we recorded in 2024. We are now back in the EUR 100 million to EUR 300 million range of annual contribution to cash flow, as guided. Regarding inventories, the level decreased by 1.2 days in total. Finally, CapEx was reduced to EUR 1.523 billion in '25 on the back of lower investments in noncore countries as we post on a number of projects during the strategic review. Net free cash flow, excluding real estate CapEx and disposals is provided on Slide 19. Carrefour generated net real estate proceeds of EUR 264 million in '25, slightly up from EUR 227 million in 2024. Disposals were actually slightly down at EUR 517 million. Real estate CapEx were reduced in 2025 on the back of a slowdown in expansion in Brazil. Excluding real estate, net free cash flow totaled a bit more than EUR 1 billion in 2025. On Slide 20, we look back at our initial assumptions for full year cash flow as shared with you in July. As you can see, most parameters came exactly in line with our expectations. As already commented, EBITDA was only stable when we expected growth. Cora & Match and weaker markets in Q4 in France and Brazil explain most of the gap. Reversely, our capital expenditures came below initial outlook as we decided to slow down our investments in perimeters under a strategic review. Moving on to total net debt on Slide 21. Net debt amounts to close to EUR 4 billion on December 31, 2025. Net free cash flow over the last 12 months amounted to EUR 1.3 billion and covered dividend payments and tax paid on 2024 share buyback for a total of EUR 866 million. M&A was an outflow of EUR 106 million, including the acquisition of minority interest in Brazil. Finally, the sale of Carrefour Italy impacted net debt by EUR 181 million, a lower amount than the planned EUR 240 million cash injection due to the closing debt and working capital variation. Let me now detail a few numbers relating to the disposal of Carrefour Romania on Slide 22. This transaction is based on an enterprise value of EUR 823 million. This implies a valuation multiple of 4.8x 2025 EBITDA, which we believe is an attractive valuation of the asset. You will note that operating margin was 1% in '25 and net free cash flow was a negative EUR 53 million. The closing of the transaction is subject to customary regulatory approvals and is expected to take place in the second half of 2026. A quick word now on capital allocation on Slide 23. Carrefour continues to follow its disciplined capital allocation strategy, ensuring strong shareholder returns and maintaining a strong balance sheet. At the upcoming AGM in May, we will propose an ordinary cash dividend of EUR 0.97 per share, reflecting a 5.4% increase compared to last year. In addition, subject to the closing of the disposal of Carrefour Romania, we will propose a special dividend of EUR 150 million. This EUR 150 million represent roughly 30% of the enterprise value, excluding IFRS 16. This EUR 150 million represent EUR 0.21 per share, bringing the total dividend to EUR 1.18 per share. This represents a cash yield of approximately 8.3% on the basis of the share price as of December 31, 2025. This concludes my presentation. I thank you for your attention. Alexandre and I are now available to take your questions. Operator: [Operator Instructions] And our first question today comes from the line of Sreedhar Mahamkali from UBS. Sreedhar Mahamkali: If I can maybe just get you to help us with 3 things. In terms of the outlook, you made some qualitative comments but there is consensus expectations out there for EUR 2.4 million of ROI. Is that consistent with what you see in your qualitative comments? So that's the first question. Secondly, Spain, if you could just explain a little bit more, there as a big step-up in the second half performance, it looks like. I think Spain was up 9% in the first half, and now it's up 13%, 14%. Was there anything to do with the base, i.e., provisioning in the financial services a year ago being higher and not as high this year. If you could just explain what else drove that really strong commercial performance in Spain? And thirdly, just very quickly on France, you've talked about improving position, underlying market share so seems to be grinding rather than firmly moving forward. Clearly, externally, also your price position has improved over the past 18 months. Is this enough? Or do you need to do something materially different in France to move back to firmly gaining market share. Alexandre Bompard: Thank you for the series of question. Maybe a few words on 2026 even if the main points will be developed tomorrow morning. But just to answer your question, we are confident in 2026 for a number of reasons coming from good market outlook, solid underlying business dynamics at Carrefour and supportive technical swings. So if I jump to the business outlook for our key markets, we do think that France has delivered a very solid performance when analyzed without Cora & Match based on our own strategy, but also on a solid French market that turned positive to volumes since Q2. We have positive volumes in the French market since. Q2. It remains extremely rational as we had expected, and we anticipate the same type of market trends for 2026. And the initial hampers for January reinforce our confidence. The public data shows that volumes are positive in January while it was negative in December because of trade-offs on festive products. So that's for France. Spanish market was solid -- very solid last year, probably the best in Continental Europe. We had a very, very good level of competitiveness. We are a price leader and we reinforce our price leadership. We see no reasons for a change in business trends there, but very solid macro drivers. And we see no reason why we wouldn't continue to reinforce our leadership in price. So we are very positive in Spain. Last, Brazil. So the conviction we have is that we probably turned the corner in Brazil with the macro. Volumes were better oriented in Q4, low single-digit negative, while mid-single-digit negative in Q3. As Matthieu said, we saw a decrease in commodity prices, which are an important part of our sales. It has strengthened our customers' purchasing power. And I would say, besides we know by experience that election years often mean government support to consumption, which should also help. So we really think we have turned the corner in Brazil with macro, and we have good prospects for 2026. And of course, it is reinforced by our price leadership, by the cost -- also by the cost-saving plans we have developed throughout the year. So the outlook of the market and the good business dynamics of Carrefour convince us that the 2026 year would be positive. Besides, we have a bunch of positive technical. The integration cost of Cora & Match are now behind us and they are complete. Since the end of the year, we see that the stores are ramping up, better ticket, better market share, better like-for-like as well as the synergies. And we do think that the year will be positive in terms of recurring operating income for Cora. Last one, the reduction -- the additional EUR 75 million reduction in cost of debt, thanks to the restructuring of the Brazilian debt last year. So all in all, you see that we have a good level of confidence with the market on our own business dynamic, reinforced by technical swings. So that's for the outlook. For Spain, you're right, the trend was very positive in the second part of the year. To be honest, we see this trend for a few quarters now. The team has made a very good job to reinforce the price positioning. The market was positive in Q4. Same thing in January. So we have a good level of comfort about our situation in Spain. And financial service contributes to the improvement of the recurring operating income also. When I come to your last question about France, we won't change what is working and the conviction we have is that we invested the right amount to stabilize our market share including Cora & Match in Q4. We plan to continue to invest in prices to drive more customers back to our stores and to retain them. We can finance that through our cost savings dynamics and our buying alliance, Concordis, and we will talk more about this tomorrow morning. Sreedhar Mahamkali: Got it. Just really to follow up. I'm trying to understand if that confidence equals to or is consistent with the expectations out there for 2026 operating profit? Or do you think it's a bit too early to talk to a consensus number in the year? Matthieu Malige: Let's keep it for tomorrow, Sreedhar. There will be much more granularity given including on '26. And so let's keep it. Operator: And your next question comes from the line of [ Fabien Lemoine ] from Bank of America Securities. Unknown Analyst: Two, if I may. First one, can you give a bit more color on the 30 bps margin improvement you see in France. So what was really the operating leverage that you've seen? Is it about volumes, cost savings, certainly combination of 2. But can you potentially explain a bit more -- give a bit more granularity on this 30 bps margin improvement in France, excluding, of course, Cora & Match? Second thing, we heard in the press that you would be potentially considering the disposal of some of the Cora stores. So any comment there? Are you happy with the 60 hypermarket that you've got there? And the last comment -- question is, can you give us the amount of synergies that you had for Cora in 2025 because it was positive, but how big was that? Alexandre Bompard: Thank you for the question. So you're right. In France, it's a very important milestone for us to reach 3% profitability. We have doubled this number in a few years. And that's the result, I would say, and this year also a very constant strategy. This year, we have delivered a high level of cost savings in France. It has enabled us to have a good dynamic in terms of market share in volume. The market was positive in volumes in 2025, and it will be in 2026. We have a good dynamic on e-commerce. We have a good dynamic also on convenience store with record number of opening this year. All in all, it has enabled us to reach this very important milestone, which is the result of a very solid, steady and constant strategy we are leading. Matthieu Malige: On Cora stores, so there's been rumors that there were discussions on a very small number of stores where we are thinking about the perimeter, which is, again, just a full maximum of stores, which is quite typical when you have made an acquisition. We are just checking if the stores will create most value in our network or in another network. But it's just high level thoughts, no decision taken. Can you exactly repeat your third question? Unknown Analyst: Yes. It was just about the synergy with Cora in 2025. You saw a chart when you obviously benefited already from some of the synergies in 2025, just to guesstimate what the amount was. Matthieu Malige: So as you saw on the graph, there is no specific amount. What's interesting is -- so it's a relatively small number so far, which -- to make it more interesting, which is a mix of, in fact, quite good cost synergies and the work has been done very, very well there. But this is compensated by negative so far commercial synergies, as you saw on the recurring operating income. So the net amount is relatively small so far. But as far as 2026 is concerned, we're quite comfortable because, again, the commercial dynamic is improving very, very quickly. And the cost dynamic is here and it's just going to be reinforced. So that's why we have quite good level of confidence and even visibility on the ramp up of the synergies for '26 and good level of confidence for '27 because we see that the underlying trend is here. It's gaining traction and customers are clearly accelerating their visit and even sales despite price decrease, even sales at [ tax costs ]. Operator: Your next question today comes from the line of Francois Digard from Kepler Cheuvreux. François Digard: First, on the convenience stores like-for-like in Q4, it's a bit weaker than it used to be. Is there any trend? Anything to comment on that? That's the first question. Then could you highlight the moving parts of your cost of debt with minority buyout financing on one hand, but the refinancing in Brazil starting to contribute on the other hand? And what should we expect in terms of level of financial cost next year? And third, if I may, it was quite surprising to see the CapEx going down. Could you help us to understand what is underlying in the amount? What is there to stay -- what -- how do you consider that in percentage of sales, for instance, to what do we have to keep in mind for the future, whatever the perimeter is going to be? Alexandre Bompard: I would take very quickly the first. No, nothing new on the dynamic of convenience. I would say maybe only the fact that they have probably suffered a little bit also by the trade-off on festive product at the end of the year. But the dynamic of the year has been very, very good under the number of new stores, the commercial dynamics, the implementation of the new concept that we have tested this year is very positive also. So everything is positive with the convenience and nothing special on the commercial dynamics in Q4. Matthieu Malige: On your second question, Francois, regarding financial expenses, so indeed, the -- so we're expecting as planned, an additional EUR 75 million of contribution to net free cash flow, which is a post-tax number for '26. We already had EUR 25 million captured in the 2025 cash flow. So the net cost of debt really that sub line for 2026 is planned to decrease quite significantly with that number, gross of tax impacting the line. Then CapEx. So a number of arbitrage have been made during the year. So first, expansion in Brazil has slowed down. It has slowed down in the market on the back of the environment that we described. It has also slowed down at Carrefour, and we know that this expansion at Atacadao is quite costly as there are some real estate involved. We have also cut a number of projects and development on the CapEx of the smallest countries. As part of the strategic review, we said that it was meaningful to make sure we have just the right and minimum level of CapEx in these markets given the review undergoing. And then in France, we increased the CapEx. You will see that in the detailed numbers, we increased the CapEx. As Alexandre announced at the beginning of the year, we want to invest more on 2 main topics. First one was in the transformation of the stores and development of some commercial concepts, and we talk more about that tomorrow. So we have invested more on that. And we have also invested more on our logistics, which was also part of the plan to ensure smooth efficiency of our operations and also reduce our logistics costs. Operator: And your next question comes from the line of Geoffroy Michalet from ODDO BHF. Geoffroy Michalet: I have 2 questions. First one is on capital allocation. What was the driver that led you not do a new share buyback? I mean how do you intend to use the Romanian proceeds since you will spend only, let's say, 30% of the proceeds in exceptional dividend. And the second question is on the relation with the unhappy franchisee in France. We've seen reports in the press. And my question was, how is your feeling or thought as of now with the latest development. Matthieu Malige: Thank you very much, Geoffroy. So indeed no share buyback. We still -- we know that we have this tax in France, which impacts us significantly. Then it's relatively small amount this EUR 150 million. So like we did last year, we have elected for special dividend. Then Romania, so we wanted to have a portion of the proceeds to come back to shareholders as the valuation was quite a good one. The rest remains on the balance sheet -- will remain on the balance sheet for flexibility and a number of opportunities. And so that will be discussed also tomorrow as part of the capital allocation section of the strategic plan. Alexandre Bompard: On your second question, you know the main numbers. So we opened almost 500 new stores this year. We have 6,000 candidates to new franchise stores. We are not far from 6,000 stores in France. So the convenience stores for the franchise is working extremely well. We have this agreement with a slight number of franchisees. I request that as we already told, the door is always open to discuss and to find a definitive agreement. And I'm sure that in the future, we will manage to do that. Operator: We will now take our final question for today. And our final question today comes from the line of Rob Joyce from BNP Paribas. Robert Joyce: Three from me as well. So the first one, just to understand the base and how we think about profit growth in France. So I think originally, Cora was going to be EUR 75 million of recurring costs in ROI. Is this now EUR 145 million, just to confirm? And then do any of these reverse next year? And should we be thinking of Cora? Do we have any more costs to incur in '26? Or is it growing profits from here? And second one is just thinking about that free cash flow target, I think you had at EUR 1.7 billion for 2026. Just want to understand if that's still one you're confident in achieving. And then the final one, potentially related, just in the main release, there seems to be quite a lot more disclosure on factoring of receivables, now mentioning France as well as Brazil on a total balance of around EUR 1.4 billion in factored receivables. Can you talk us through what you're doing in terms of factoring receivables and how this impacted the working capital in 2025? Matthieu Malige: Thank you, Rob. So first question on one-offs. So I mentioned -- so I refer to Page 11 of the presentation. So I think that there's 2 elements. So first, the total amount of integration OpEx accounts recorded on H2 '24 and full year '25 indeed amounted to EUR 145 million. That compares to an initial guidance of EUR 150 million. So as I said in my speech, we have very well controlled that amount. Now looking just at 2025, the extraordinary OpEx are just EUR 95 million, which are accounted in the recurring operating income of minus EUR 120 million. So let's be clear, integration is complete. There will be no more integration costs, OpEx, nor CapEx next year. This is done. So now Cora & Match is really a normal and going concern business. So that's why I flagged the minus EUR 25 million for the euro ex one-offs. I think this is the base. I have explained that we have some pressure from all the commercial investments that have been made, but the commercial dynamics, which was by construction, quite slow at the beginning is ramping up. So we have much more positive prospects for 2026. Now on free cash flow. So you're right, we have this EUR 1.7 billion target. So 2025 is at EUR 1.565 billion. There's a number of exceptionals in this number that I'd like to flag and which obviously will disappear. So for next year, obviously, the Cora & Match integration cost of EUR 95 million that I just mentioned will not be present. They have also weighed on the net free cash flow. Then we will benefit from EUR 75 million from the refinancing of Brazilian debt. And you may remember, I'm sure you remember, that in H1, we had a negative EUR 80 million working cap impact at Cora. That was the first time that we consolidated Cora on an H1, which is typically a negative net free cash flow semester due to the seasonality. Obviously, that would be part of the historicals in 2026. And so we won't have that benefit. So this is all in roughly EUR 250 million. So you see that the EUR 1.7 billion is at sight for 2026. We will come back in more detail on the outlook for '26, as I said to Sreedhar, tomorrow. Final question is on receivables. So we started, as you flagged, to disclose the number of receivables, which is sold. This is mainly -- and I think we already commented on that in the past. This is mainly the credit card receivables that we have in Brazil. As you know, we have a few years ago, started to accept credit cards. Then we used historically to accept only cash payments. Credit cards, you get the money after 30 days. So you have a receivables that is created. And we expanded the facility through 3x installments, which for our consumers, which is appreciated in the current environment. And so it means that we get the money after 30, 60 and 90 days, 1/3 each, obviously, creating more receivables. And so these receivables are sold not entirely, but that's a way to finance the increase of receivables. We don't even sell all receivables, so we finance a little bit of through our EBITDA generation, but that's the financial resources that we use, and that is disclosed in our financials. Robert Joyce: And what's happening in France, sorry, Matthieu, in terms of the receivables? Matthieu Malige: We have some receivables relating to franchisees. So the bulk is in Brazil. Then we have some receivables from franchisees, something we developed our activity with franchisees with an increase of receivables. And so again, a portion of the receivables is sold to financial institutions to limit the negative impact on the working cap. Robert Joyce: And the year-over-year impact, just to round out the question? You have the year-over-year impact overall? Matthieu Malige: So overall, selling receivables, it's neutral year-on-year. And so it means that the increase in activity and increase in receivables is somehow negative on the net free cash flow of the year. Operator: Thank you. That was our final question for today. I will now hand the call back to the room for closing remarks. Alexandre Bompard: Many thanks to all of you. See you tomorrow to discover what's next. Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the DEXUS HY '26 Results Briefing. [Operator Instructions] There will be a presentation followed by a question-and-answer session. I would now like to hand the conference over to Ross Du Vernet, Group CEO and Managing Director. Please go ahead. Ross Du Vernet: Well, good morning, everyone, and thanks for joining us for our half year 2026 results presentation. I'd like to begin today by acknowledging the traditional custodians of the lands and waterways upon which we operate and pay our respects to elders past and present. Today, you'll hear from Keir on the financials, Andy on office, Chris on Industrial and Michael on Funds Management. Concluding the presentation, I'll provide a summary and open up to any questions that you may have. DEXUS is a unique investment proposition in the Australasian real asset market. Today, we manage $51 billion of assets across our platform with third-party funds under management at 2.4x our investment portfolio. We have scale and diversity across the real asset spectrum, $20 billion in office and around $10 billion in each industrial, retail and growth markets, which includes infrastructure, health care and alternatives. This scale is underpinned by our multidisciplinary team with deep expertise across each sector. Importantly, we have access to diverse pools of equity capital, which positions us well to capitalize on opportunities through the cycle. Our strategy is unchanged and our vision to be globally recognized as Australasia's leading real asset manager continues to guide our decisions. The strategy targets large growing markets, leveraging our multi-sector strengths in transacting, managing and developing across each. Our high-quality balance sheet portfolio, together with a large diversified funds management business continues to differentiate us. Today, the investment portfolio is anchored by prime office exposure across Australia's major CBDs. Over time, the investment portfolio will continue to become more diversified by investing alongside capital partners into a diverse range of opportunities. Our culture, the quality and scale of the portfolio and projects we have underway, coupled with our approach to people, enable us to attract, retain and develop leading talent to ultimately create value for customers, clients and you, our investors. Turning to our results. We delivered AFFO of $253 million and distributions per security of $0.193. This was the second consecutive six-month period of positive property portfolio valuations, which supported the delivery of a statutory net profit and an increase in NTA to $8.95 per security. Our office leasing volumes were almost double that of levels achieved in the prior corresponding half, including further progress at Waterfront in Brisbane, which is now 71% pre-leased and will deliver a premium product in the strong Brisbane office market. Our industrial portfolio, as we expected, delivered strong like-for-like growth and re-leasing spreads. We undertook $800 million of divestments for the balance sheet, including the recently agreed divestment of 100 Mount Street in North Sydney. If we turn to the funds business, we continue to work through some fund-specific matters while positioning the business for long-term success. Our flagship funds continue to outperform, DWPF outperforming its benchmark across all time periods, while DWSF, the Shopping Center Fund has outperformed since joining the platform. We raised over $950 million of equity, comprised $640 million of new equity commitments and the facilitation of more than $280 million in secondary unit transactions. We established a new fund series. We closed DREP2 above its initial target, and we continue to rationalize subscale funds to simplify the platform. In August, I outlined our action items for FY '26, aligned to our three strategic priority areas of transitioning the balance sheet, maximizing the contribution of the funds business and unlocking our deep sector expertise. In addition to the progress I mentioned on the previous slide, key development milestones were achieved at Waterfront in Brisbane. The DEXUS office and industrial portfolios delivered positive total returns over the 12-month period. And DEXUS has now secured $1.4 billion of divestments since 30 June 2024, progressing well towards our $2 billion target. We invested $170 million of seed capital into DSIT1, a new fund series, which we aim to reduce to $50 million during the year. We've reduced the real estate redemption queue by $1 billion. And post the APAC court date scheduled for April this year, we expect to make more progress on solving infrastructure redemptions. Overall, we've made solid progress and remain focused on the priorities that will position the business for long-term success. Our sustainability strategy focuses on three priority areas where we can make the greatest impact across climate action, customer prosperity and enhancing communities. Sustainability remains core to how we operate, and we continue to receive global recognition for our performance. Thank you, and I'll now pass you over to Keir. Keir Barnes: Thanks, Ross, and good morning, everyone. Turning to the results in detail. In line with expectations, total AFFO was $253 million, with a distribution of $0.193 per security, reflecting a payout ratio of 82%. Office FFO reduced primarily due to divestments and lower average occupancy, partly offset by contracted rent increases. Industrial portfolio income increased due to higher occupancy, development completions and contracted rent increases, partly offset by divestments. FFO from management operations decreased due to lower FUM as a result of divestments and slightly lower performance fees, with $19 million realized in the first half and $16 million secured for the second half. Finance costs were broadly flat with a higher cost of debt offset by higher interest income. As expected, trading profits were higher with the sale of Brookhollow, Chester Hill and continuing construction at Prestons, securing FY '26 guidance. Maintenance and leasing CapEx is skewed to the first half of the year, mainly due to the impact of incentives on deals secured in prior periods as well as the timing of maintenance CapEx. Looking ahead to FY '27, performance fees and trading profits are expected to be materially lower than FY '26. It has been positive to see the second six-month period of valuation growth across the office and industrial portfolios. Overall, for the six months to 31 December, the portfolio increased by 1%. Capitalization rates have stabilized with the valuation movement predominantly driven by rental growth. Our office portfolio, which is 77% weighted to core CBD markets increased by 0.7% and our industrial portfolio, which is 90% weighted to core industrial estates and distribution centers increased by 1.6%. Pleasingly, these outcomes demonstrate the quality of the portfolio. Moving to capital management. Our balance sheet remains solid with look-through gearing towards the lower end of the 30% to 40% target range, providing capacity to fund committed expenditure. During the half, we issued $500 million of subordinated notes at attractive rates and diversifying our funding sources. We have been active with refinancing, resulting in a weighted average debt maturity of 4.6 years, $2.5 billion of headroom and manageable near-term debt maturities. 95% of our debt was hedged during the half at an average rate of 2.9%, providing material interest rate protection. Looking forward, there's $1.2 billion of remaining spend on the committed development pipeline over the next four years, with $360 million expected to be incurred in the second half of FY '26. Thank you, and I'll now hand over to Andy. Andy Collins: Thanks, Keir, and good morning, everyone. I'll now take you through the performance of our office portfolio. We continue to own and manage the best office portfolio in Australia. Over the past five years, we have enhanced the quality and resilience of our portfolio. And as a consequence, we are well positioned to benefit from the market recovery that is now underway. Location remains a key differentiator, demonstrated by our portfolio occupancy of 92.2%, which remains well above the market average. Our average incentives of 29% are below market, reflecting the quality of our portfolio and notably, leasing deals done in Perth, Brisbane and North Sydney, where market incentives remain elevated. The effective like-for-like income decline of 2.3% primarily reflects downtime on select vacancies, including 80 Collins Street and 30 Hickson Road, and we expect this to improve into the full year. Our leasing activity was strong this half with leasing volumes of over 95,000 square meters, almost double the volumes achieved in the prior corresponding period. The portfolio delivered a one-year total return of 5.7% at December, reflecting the improved market conditions. Looking at our expiry profile, we aim to have no more than 13% of the portfolio expire in any single year. FY '27 expiries have improved to 12.3% following the recent divestment of 100 Mount Street with key expiries remaining in Australia Square and 385 Bourke Street. We remain focused on addressing the more challenging vacancies at 80 Collins Street in Melbourne, which represents 2.2% of portfolio income and 30 Hickson Road in Sydney's Western Corridor at 1.5% of income. While there is no conclusive answer regarding the potential impact of AI on office markets, we believe different parts of the workforce are likely to be affected unevenly. Our view is that high-value professional work, the kind concentrated in premium CBD buildings, reflecting the majority of our portfolio will be the most resilient to AI replacement risk and may even benefit and grow. We frequently monitor our customer base, which is well diversified with an average tenancy size of 1,000 square meters and our top 10 customers account for just 20% of our total property portfolio income. The staggered expiry profile, combined with our diversified tenant base, supports resilient income streams across the portfolio. Our development pipeline provides the opportunity to further enhance portfolio quality. Construction is progressing at Atlassian Central in Sydney with completion on schedule for late 2026. This development is 100% pre-leased on a 15-year lease with 4% per annum fixed increases in what is now an improving Sydney market. At Waterfront Brisbane, we have achieved an important development milestone with the Riverwalk opening earlier this month and the vertical structure coming out of the ground. The Brisbane market continues to strengthen with a positive outlook over the medium term. Pleasingly, Waterfront is now 71% pre-leased with the recent leasing deal reflecting a 40% improvement in net effective rent compared to the previous Waterfront deal struck two years ago. In aggregate, 83% of the committed development book is pre-leased with contracted 3.7% average fixed increases per annum, providing a secure income stream once complete. We have fixed price contracts in place with Tier 1 contractors with material collateral and security arrangements to protect against construction risk. A very high threshold applies to projects in our uncommitted development pipeline and Central Place Sydney has moved out of our uncommitted pipeline as the scheme is reconsidered. Turning to the office outlook. The evidence continues to suggest that we have passed the bottom of the cycle and are now in the early stages of a recovery. Office demand continues to gain momentum, driven by employment growth, return to work mandates and centralization trends. Net absorption has been positive across all four major CBDs with the strongest absorption in premium grade assets, which is exactly where our portfolio is positioned. Sublease space has continued to reduce and is now close to average levels. Importantly, upcoming office supply is low relative to long-term averages. This provides scope for vacancy rates to fall and rents to grow. Within our own portfolio, we are seeing examples of 15% net effective rent growth on comparable lease deals struck 12 months apart. Looking at our rental growth expectations over the next three years, we expect strong growth across all major markets with Brisbane and Sydney Premium leading the way, followed by solid growth in Sydney A-grade, Melbourne Premium and Perth. The Sydney CBD core is now 95% occupied with DEXUS at 98%. With the seven-year delay in new supply, there is meaningful upside to the Sydney premium forecast. DEXUS is well positioned to capture this upswing given our portfolio quality and location in core precincts of the major CBDs. Thank you. I'll now hand you over to Chris. Chris Mackenzie: Thanks, Andy, and good morning, everyone. Our industrial portfolio has delivered a strong result, including a one-year total return of 8.8%. Occupancy by income increased to 97% following leasing success across Sydney, Melbourne and Perth, which also resulted in like-for-like income strengthening to 8.7% as expected. Occupancy by area of 97.5% remains above the national average. We achieved strong re-leasing spreads of 33% across the stabilized portfolio. Average incentives increased to 21.5%, primarily driven by lease-up of key expiries in Melbourne's West and Sydney's Outer West. The portfolio is 8.9% under-rented and 20% is set to access rental reversion upon expiry by FY '27. On developments, we completed 102,000 square meters during the period, with construction continuing across a further 110,000 square meters. We leased 63,000 square meters across 10 development deals and 68% of our committed development book is now pre-leased with contracted annual increases of around 3%. Moving to our expiry profile. We have leased 24% of the portfolio over the past 18 months, derisking the expiry profile and capturing strong re-leasing spreads. We remain focused on leasing key vacancies at Matraville, which has now been repositioned along with Gillman. And we are in active discussions with potential tenants on both of these properties. The vacancies we have experienced over the past 18 months have been in older stock in New South Wales and Victoria. And pleasingly, we have achieved strong re-leasing results. Looking forward, 80% of our FY '27 expiries are represented by younger prime assets and provide the opportunity for positive reversion. Turning to the outlook. Supply under construction has moderated and remains at or below historic average take-up in all markets, while the picture for demand remains supported by strong Australian population growth, enhanced by e-commerce growth. Our portfolio with its focus on core industrial estates in strategic locations is well positioned to benefit from these trends. Thank you. I'll now hand over to Michael. Michael Sheffield: Thanks, Chris, and good morning, everyone. Our funds business manages $36 billion in third-party capital across a diverse range of real asset strategies for more than 150 institutional clients with retail and wholesale investors. We've maintained prudent capital structures across our pooled funds with average gearing remaining conservative at around 32%. We have both returned capital and raised equity in existing and new products, but the near-term revenue impact of providing liquidity is still working its way through. While there is more to do, we are positioning ourselves to capture the strong expected growth in pension capital over the medium term. Last year, we launched a new investment series focused on high-quality assets for long-term value creation, with the first fund in the series securing a 25% interest in Westfield Chermside. Offshore capital, particularly from Asia, is increasingly interested in Australian real estate with the office sector also seeing renewed interest. In the six months to December, we've reduced the real estate redemption queue by around $1 billion, and we continue to rationalize subscale funds. We expect to make further progress on infrastructure redemptions post the APAC court case scheduled for April 2026 with mediation to occur in March '26. We raised over $950 million in third-party equity, including facilitating more than $280 million in secondary unit transactions. DWPF continues to outperform its benchmark across all time periods, outperforming by circa 200 basis points for the 12 months to 31 December. This highlights the quality of the underlying portfolio and our active management approach. And the shops fund has also outperformed its benchmark since joining the DEXUS platform. And while operating -- while the operating environment remains challenging with some continued pressure in the near term, we are steadily repositioning the business for long-term scalability and growth. Thank you, and I'll now hand you back to Ross. Ross Du Vernet: Thanks, Michael. Underlying real estate markets continue to improve, supported by positive business confidence, constrained supply pipelines, stabilization in asset prices and improvement in transaction volumes. Barring unforeseen circumstances for the 12 months ending 30 June 2026, we reaffirm our expectations for AFFO of $0.445 to $0.455 per security and distributions of $0.37 per security. With valuations turning positive, transaction and fundraising markets recovering, our confidence in the long-term fundamentals of the business have strengthened. We are actively exploring opportunities to enhance returns and capital efficiency by increasing third-party capital participation in the $13 billion property portfolio. This would release capital in addition to the $2 billion divestment target. With the sustained disconnect between our equity market valuation and that of our underlying assets and businesses, we have activated an on-market securities buyback of up to 10% of DEXUS securities. We will execute the buyback at a pace consistent with maintaining balance sheet discipline as we progress asset sales and other initiatives to release capital. Thank you. That ends the formal part of today's presentation. I'll now take any questions that you may have. Operator: [Operator Instructions] The first question today comes from Adam West from JPMorgan. Adam West: I guess my first question today is just on the Atlassian development. I'm just wondering if you progressed any plans for a partial sell-down -- full sell-down of that asset? Ross Du Vernet: Adam, thanks for your question. This is certainly an asset that we have flagged that we'll be looking to introduce third-party capital into. I think we've been pretty consistent with the market that we think the best time for that is closer to practical completion. That is slated for the end of the year. We think it's a great investment product, 15-year lease fixed 4% increases. And so yes, that's one of the assets that we will be bringing third-party capital in over the course of the year. It might not happen before practical completion, but it will be towards the end of the year. Adam West: And I guess just my second question on the office portfolio. In terms of the core Sydney CBD portfolio in particular, I'm just wondering if you could talk to how much under-renting would potentially be in that segment. Ross Du Vernet: Andy, that's one for you. Andy Collins: Yes. No problem. Adam. So look, re-leasing spreads were positive in all of the CBDs, including Sydney CBD. And so re-leasing spreads obviously impact the extent to which the portfolio is over and under-rented. We're seeing a pattern of better effective re-leasing spreads driving or reducing the extent to which the portfolio is over-rented on an effective basis. And so the portfolio generally is around 7.5% over-rented on an effective basis. That's come in from 12.5% 12 months ago. And it's about 4.5% under-rented on a face basis, which is pretty stable with 12 months ago. Operator: The next question comes from Cody Shield from UBS. Cody Shield: Just firstly, on the buyback. My understanding was that you need to do more than $2 billion of divestments to get the buyback away. Is that still the case? Or are you sticking with that $2 billion target? Ross Du Vernet: I think we're very resolved around the $2 billion target. And I think what we're flagging is we see real value in the security price where it's trading. We instituted a pretty disciplined capital allocation framework when I stepped into the chair. Dare I say that has regard to the return on the investments we already have and also marginal uses of capital. So we are definitely resolved we're going to get through that $2 billion target. And as I have shared in my concluding remarks, we are actively looking at bringing third-party capital into the $13 billion investment portfolio. That has the potential to release a significant amount of capital. And certainly, given where we're trading today, the buyback would be a really good use of that. Cody Shield: Okay. That's clear. And then just turning to the leasing at Waterfront, looks like a good outcome. Just wondering whether there's some flex in that 5% to 6% yield on cost that you're targeting? Ross Du Vernet: I think I've been pretty clear. I always kind of think we're going to be at the higher end of that range, and there's always scope for us to outperform. We're really pleased. We have great belief in that product. I think that is validated and the strategy of the team to be kind of patient and wait for the market to come to us on the leasing there. So I think that's a tremendous validation of the product and the leasing strategy from Andy and the team. I would also kind of just flag that even at that yield on cost, we're going to be materially under-rented in that asset just given how much the market has moved. So I think there's going to be a great ultimate return for our security holders and DWPF, which is our co-investor there. And yes, I would like to kind of see the team surprise on the upside. Operator: The next question comes from Simon Chan from Morgan Stanley. Simon Chan: My first question relates to the buyback. guys. How much of the buyback do you think you'll actually do in the second half of fiscal year '26? And if you are genuine about kicking off the buyback in the second half of fiscal year '26, I would have thought there's scope for you to change your earnings guidance for the year because you're buying back stock at essentially 10% earnings yield and your cost of debt is 5%. Ross Du Vernet: So maybe I'll take the question in two parts. Are we serious about the buyback? The short answer is yes. I think it's not just a statement of intent, but we see real value in the company where it's trading. We see a disconnect. We have a very high-quality portfolio. Valuations have troughed. We see valuations moving north from here. And I think the market is fixated on maybe EPS growth and some noise in the business, be that developments or litigation, those sorts of things. So we see good value at the current level. We need to make sure that as we're executing that buyback, we're doing it in a disciplined way that we have regard to the balance sheet strength, which is really important to us. But I think I am getting more confident around the transaction market. It is improving. And certainly, I think bringing third-party capital into the platform and the confidence we have in doing that, there is scope for us to release a lot of capital. And as I said in previous responses, I think the buyback is a really good use of capital at current levels. So I can't predict where the stock price is going to be in three months' time, and we're not going to put that into guidance. But certainly, at current -- trading at current levels, if we can be more active on capital recycling, I think you're going to see us being very active. Simon Chan: Okay. Fair enough. My second question, in Slide 17, and I think Andy Collins might have touched on this. That's that last bullet point, high threshold to commence new development projects. I think he referred to that after talking about scrapping central place. What's your new threshold now? Like are you going to have a -- have you guys done the review and have settled on a high yield on cost hurdle before you kick anything off? Can you talk to that, please? Ross Du Vernet: I would say coming back to our capital allocation framework, this is something that is constantly assessed. And when we kind of look at alternative uses of capital, including things like a buyback, which we've announced today, there is a very high threshold for us to start new projects. So that's not to say that we're not going to do it, but where we do it, it needs to be capital efficient. We need positive economics from the management enterprise, and we need to believe that the underlying projects are going to deliver really good risk-adjusted returns. So -- that's how we... Simon Chan: I get that Ross. But previously, Central Place was -- you were guiding to, I think, 5% to 6% yield on cost and you've now scrapped it. So can I assume that 5% to 6% no longer custom? Ross Du Vernet: I think that's probably fair to say 5% to 6% yield on cost kind of depending on where cap rates are is a pretty skinny development margin. So that's not a good use of shareholder capital, and we won't be committing projects on that basis. Operator: The next question comes from Andrew Dodds from Jefferies. Andrew Dodds: In the remarks, you noted that $1 billion of real estate redemptions were satisfied in the period. I'd just be interested to hear where that redemption backlog is sitting today. I think it was around $3 billion back in the August results. Michael Sheffield: Andrew. Yes, redemptions are around about $2 billion. We satisfied about $1.5 billion during the half year period. And they're now around evenly spread between real estate and the infrastructure exposures. And infrastructure will obviously be dealt with in line with the APAC court case resolution, which isn't too far away. So our expectation is that the current redemptions will likely be dealt with within 12 months. Andrew Dodds: All right. That's a good outcome. And then just secondly, on trading profits, the expectation this year was for $40 million post tax. It looks like you have done that alone in the first half. So I guess just the expectations for the second half. And also just in FY '27, the slide on Page 59 in the presentation sort of shows pretty minimal opportunities for trading profits. So I mean, is it pretty safe to assume that there won't be any contribution in '27? Ross Du Vernet: Look, I might take the comment on '27 and Keir can talk to '26. I think what we're providing is in guidance that as we sit here today, the realization of meaningful trading profits and they have been a meaningful contributor in '26, the likelihood of that recurring in '27 at this point in time seems lower probability, and we're flagging that to the market. What I would say on trading profits is I am confident in the value creation that sits in projects that we currently have under our control and development in the trading book. I think it is just a matter of timing and the decisions that we're going to make in terms of the realization of those profits. So I think that's how I'm thinking about '27. But Keir, do you want to comment on '26? Keir Barnes: Sure. Thanks, Ross. So you are correct. The vast majority of trading profits have been realized in the first half. There will be a very immaterial amount coming through in the second half. So I wouldn't factor too much into your forecast. We're still expecting circa $41 million for the full year. Operator: The next question comes from Adam Calvetti from Bank of America. Adam Calvetti: Just on Atlassian, I mean, there's $610 million to spend, it's well above the current run rate that you've been spending CapEx at. I mean is there any financial implications if this was to be delayed? Andy Collins: Yes. So, Adam, it's Andy. So under the contract, it's a fixed price contract. We have the protections in the event of a delay. So from that respect, it's typical for a development like that. Are you -- is there more to your question from a financing perspective? Adam Calvetti: No, just any financial implications for DEXUS and then whether it's with the actual tenant, if that was to be delayed, it sounds like there's not. Andy Collins: Yes, that's correct. Adam Calvetti: Okay. And then just on office, I mean, of that 80-odd or 90,000 that you did over the half, I mean, how many tenants are expanding versus contracting in size? Andy Collins: Yes. Good question, Adam. So just like the breakdown of that leasing volume, about 20% is tenants upgrading. That's the first thing to note. About half of the tenants by area reflect renewals. That's the second thing to note. And in terms of growth, there are some great examples of tenants within the portfolio growing going from one tenant. One example is in 25 Martin Place, a financial services tenant going from one floor to two. And there are others with smaller tenants coming out of incubators, small suites moving up the curve into larger suites. And so that's about 25%. Adam Calvetti: But just to clarify that, so 20% upgrading, half are renewing and 30% are contracting? Andy Collins: I didn't say contracting, sorry, Adam. So you need to look at those proportions independently of one another. To answer your question directly, about 25% of tenants we dealt with grew. Operator: The next question comes from Ben Brayshaw from Barrenjoey. Benjamin Brayshaw: Could you just talk about the rationale for the issuance of the subordinated notes during the period, the $500 million? And could you also clarify the margin achieved on that new debt, please? Keir Barnes: Sure. Thanks for your question, Ben. So the issue of the sub-notes, I'd say that was a very prudent and opportunistic capital management initiative. It provides us with enhanced financial flexibility to pursue investment initiatives, certainly those with pretty attractive risk-adjusted returns whilst our planned capital recycling is ongoing. In terms of spreads, I mean, you'll have seen DCM spreads have narrowed and the sub-senior spread is now at historically tight margins. So the 5.25-year notes were issued at 1.75% over three-month BBSW and the 8.25 were swapped back to floating, and they reflected an initial margin of 1.85% over three-month BBSW. Benjamin Brayshaw: And will you receive equity credit from your rating agencies for those notes? Keir Barnes: That's right. We will. 50% equity credit. Benjamin Brayshaw: Terrific. And just in relation to your comments, Ross, on becoming more capital efficient to build the balance sheet portfolio. Do you have a target interest in mind in so far as ownership that you would like to maintain across the assets that you bring in capital partners for? Ross Du Vernet: Look, that's -- it's going to be considered on a case-by-case basis. I think the reality is we have a really high-quality portfolio. There's lots of options for us. We have existing JVs, which are 50-50, which we can bring third-party capital into. And we have existing assets that we own and control that we can establish new strategies around. So I think it's going to kind of depend on what clients want. And ultimately, we're going to run a bunch of options concurrently and choose those which are best for DEXUS security holders. I wouldn't see a scenario where if these are high-quality assets, which they are, we don't want to -- we want to have a meaningful aligned interest with our clients. So that's, call it, in the range of 10% to 20% would be kind of at the bottom end. Benjamin Brayshaw: Okay. And would Waterfront Place and Atlassian potentially form part of those capital and partnering transactions? Ross Du Vernet: I'm not going to be specific on assets, but I would say, as a general principle, we are open to looking at every asset in the platform and we'll be, as I say, running options concurrently to assess what is the best outcome for DEXUS security holders having regard to, to be frank, what we sell, but also the redeployment and what's left afterwards. Operator: The next question comes from Tom Bodor from Jarden. Tom Bodor: I just was interested in the passing yield on the circa $800 million of divestments. Ross Du Vernet: I don't know that we have that one to hand. We might come back to you on that. Tom Bodor: Okay. But I mean if I take something like 100 Mount Street, is it fair to assume that it's relatively high passing yield? Keir Barnes: There's a reasonable passing yield. I would say that asset has got a reasonable amount of CapEx coming in the next few years. So we think divesting at these levels is an attractive decision at this point in time. Tom Bodor: Okay. And then on the Waterfront project, just would be interested, can you confirm that you've allocated 100% of the podium costs to the first tower? Or have you pro rata it based on the square meters of the towers above or some other formula? Keir Barnes: So when we look at the total project costs that are quoted in the appendix, the cost of the podium is in the Stage 1 cost. In terms of the yield on cost, we strip that out, and we can go into a little bit more detail later today, if you'd like, around the methodology. But we take that out in terms of calculating the yield on cost for Stage 1, but it is included in the yield on cost that we quote for Stage 2. Tom Bodor: Okay. And then I guess just following on from that, in light of the positive momentum you've had on leasing there in that first tower, how do you think about the potential to get the second tower going in the next couple of years? Or is it really too early at this point to consider that? Ross Du Vernet: Look, I think that's a quality problem to have given the opportunities that we have in the portfolio. But I refer to Andy's earlier comments as a high threshold to commence. New development projects will be somewhat guided on that project as well by our partner there, which is the wholesale fund, DWPF. I think as there is increasing flow and interest from capital, that might be something that we reassess over the next 12 months, and there's certainly going to be some synergies in keeping continuity of contractor on site. So it's not really a decision for today. I'll just kind of make the point that for DXS, it's marginal capital, it's going to be a high threshold. So that is going to be a gating issue for us. Operator: The next question comes from David Pobucky from Macquarie Group. David Pobucky: Just a follow-up on the buyback and how you're thinking about balancing the buyback development and growth initiatives. I mean, DEXUS reset its target payout ratio, I think, almost a couple of years ago now to retain more capital for growth. So perhaps if you could talk a bit more about some of those growth initiatives you're working on, please? Ross Du Vernet: Look, I would certainly like to be growing the business more. And I think the market is increasingly conducive to where we kind of see the cycle and we see flow of capital from clients. But the reality is, given where we're trading is DEXUS security prices are really compelling proposition. So to be frank, new projects and opportunities are going to compete with that. So as long as we're trading at these levels, that's a pretty high bar. I would like to think -- and if I kind of take a step back, we have a significant balance sheet. And so the scope for us to undertake considerable capital recycling and releasing a lot of capital by bringing third parties into that investment portfolio actually, I think, gives us scope to do both. But obviously, we'll be assessing all those opportunities on a case-by-case basis at that point in time. So I can't predict where the share price is going to be. All I can say is as I sit here today, it looks very attractive from a marginal use of capital. David Pobucky: Just second question on Office. You saw a modest improvement in incentives in the period. Would you say FY '26 is the peak year for incentives? And what's the expectation around when that starts flowing through to earnings? Andy Collins: Well, David, just in terms of market incentives, so we've seen vacancy peak in Sydney and in Brisbane and in Perth. Vacancy is expected to peak in Melbourne shortly, next 12 months. And so that should flow through to market incentives. And of course, our incentives, we try to manage them lower than that market number. Keir Barnes: I think if we're thinking about just the pure dollar spend in terms of incentives. So I would expect this year, CapEx will be sort of probably a little bit below what it was in '25, but is expected to be higher in '27 off the back of the strong leasing that the team has been doing. Operator: The next question comes from Howard Penny from Citi. Howard Penny: I just wanted to ask about the equity raising. So they raised -- you guys raised $640 million in third-party equity commitments and $280 million secondary unit transactions. Could you describe where the equity interest is coming from domestic, international? And maybe just as far as possible, give us some background as to where these equity inflows are coming from? Michael Sheffield: Sure, Howard. We've seen a wide variety of interest from -- we've got a diversified platform with different channels of capital, and it's safe to say there's a wide variety of interest that, that attracts. So we've seen increasing interest from offshore investors, particularly in the pooled funds. And then from a domestic investor perspective, what they're increasingly looking to do is partner with us in some of our initiatives. So the DDIT trust, which was launched is the first in a series, and we've seen very, very pleasing demand from investors to essentially come into a club. That's been largely domestic, but I would say we've got a wide variety of interest from a wide variety of areas at the moment. Howard Penny: And my second question is just on cost of debt and where you see that potentially peaking over the next 2 years and refinancing risk on that? Keir Barnes: Thanks, Howard. I'll take that one. So the cost of debt, you'll have seen has increased. It went from 4.2% up to 4.7% for this half. I expect for the full year, we'll be sitting at the high 4s next year, sort of 5-ish. So we are pretty close to market at this point. In terms of refinancing risk, very minimal expiries coming up. We have been very proactive with refinancing. We just did more than $1 billion on average at about 15 basis points, tighter rates and an increase in tenor. So we will continue to take a proactive stance with our refinancings. Operator: The next question comes from James Druce from CLSA. James Druce: I was hoping you could comment just on the bucket of performance fees that you might have. I noticed you have the second half secured. I was just trying to get a sense of what's left after that. Ross Du Vernet: Is that -- sorry, in relation to '26? Or what's the longer-term outlook for performance fees, just to clarify? James Druce: Yes. You've got the second half secured. So I'm just wondering how you're looking for '27 and '28. Are there things behind that, that can come through? Or is this sort of a strong year for performance fees... Ross Du Vernet: So, the significant contributions in, to be frank, '25 and '26 was there was an infrastructure performance fee on a mandate that was crystallized on the sale, and there was a significant outperformance in the industrial strategy, the DALT portfolio, which was realized over a couple of periods. So I would say they were at the kind of the larger end of the scale. We are trying to introduce performance fees into new strategies and initiatives. They're not going to be straight line. They are going to be a little bit lumpy. And I think what we're kind of flagging is as we look towards '27, that level of kind of contribution is unlikely at this point in time. James Druce: Yes. Okay. That's helpful. And just interested in your Slide 18, just looking at the net effective rent forecast. I was sort of wondering, have you incorporated any AI impact into those forecasts? And how do you think about the sort of the uncertainty or dispersion that could create over the next 3 years? Ross Du Vernet: I just generally in relation to dispersion, we've kind of been calling this for a while we see increased dispersion in performance in assets across, I would say, both real estate and infrastructure. And to be frank, the better assets we think are going to do better and there will be assets that potentially get stranded or left behind. I think the good thing for us is whether it be in the balance sheet portfolio or our funds, we generally have those high-quality assets in those premium locations. So I'd say at a group level, we feel well positioned. And these are difficult things to predict. But Andy, I know you've got some views on this. Andy Collins: Yes. So I think difficult to predict is right. So in terms of how AI lands, no one really knows right now, but we -- what we're seeing in our portfolio through engagement with our customers is that it is resulting in some of our customers growing. And so I'll use an example where a law firm following implementation of an AI augmentation program actually leased more space because they could adjust their ratio of lawyers to non-lawyers. And so they needed more space. That's one anecdote. You can't apply that to the whole portfolio or to the market. But I think it's not as simple as drawing a straight line between AI implementation and like a blanket adjustment to office demand. Ross Du Vernet: And I would say, thematically, we do kind of see that the nature of work that is more likely to be impacted by AI is typically going to be middle or back office functions. And those -- that work is typically going to be in the suburban markets. And that is not a space that we are particularly exposed to. Operator: The next question comes from Yingqi Tan from Morningstar. Yingqi Tan: My first question is in regards to that $1 billion redemptions. Just wondering if you are able to quantify how much of these are secondary transactions and how much is of this funding actually left the platform? Michael Sheffield: So during the half, about $1.5 billion was set aside. Most of that was in -- there was also a special redemption in the shops fund. And then as we said, about $280 million of that was through secondary transactions, so obviously stayed on the platform and the rest were units being redeemed. So those units disappear. Yingqi Tan: And with the money that has been redeemed, could you also share whether it's sold to any external parties? Or is it I guess, within DEXUS other platform? Michael Sheffield: Essentially, the process is we free up cash to meet redemptions. So we'll sell assets or use debt. So by virtue of the fact that there's assets being sold, that would be off the platform. And to the extent it's debt, well, it's just an increase in debt in the fund. Yingqi Tan: That's clear. And my second question is to Andy. Would you be able to share what the office leasing spreads were in the past six months for the deals that you have achieved? Andy Collins: Yes, no problem. So face spreads were positive across all markets. For our portfolio, the face spread was up 9%. The effective spread trajectory has come in from 16% or negative 16% to negative 10% to now negative 5%. So just to clarify, the effective spread on the leasing that we've done in the first half is negative 5%, which is a material improvement. So in terms of the submarkets, in Brisbane, we achieved positive 10% effective spreads. Operator: The next question is a follow-up from Adam Calvetti from Bank of America. Adam Calvetti: Ross, I just wanted to follow up on your comments made to Simon earlier on the 5% to 6% yield on cost guidance, essentially not cutting the mustard, I think, is the term. I mean I'm looking at the uncommitted developments, we're still quoting 5% to 6% for Waterfront, 80 Collins and Pitt and Bridge. Does that mean to get revised going forward? Ross Du Vernet: We're not committing those projects yet, I think that's a question for when we're committing those. Adam Calvetti: Is that a target range? Or I mean why is that in there? Ross Du Vernet: I think we'll assess those when we're kind of close to the start line. Things like Pitt and Bridge Street are still years away. And the reality is they are income-producing assets. So it's not a decision for today. I think what we're -- the yield on cost is and we think about development margins, we have to have regard to where we think stabilized cap rates are. Again, that's an assessment that we kind of think we need to make at the time of starting those projects. So rest assured, if we're deploying capital into development projects, we're going to need to be compensated for the risk and it's going to meet our internal hurdles. Operator: At this time, we're showing no further questions. I'll hand the conference back to Ross for any closing remarks. Ross Du Vernet: Thanks, everyone. Enjoy the day, and we'll catch up with you over the next few weeks.