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Operator: Good morning, and welcome to Quad's Fourth Quarter and Full Year 2025 Conference Call. During today's call, all participants will be in listen-only mode. [Operator Instructions] A slide presentation accompanies today's webcast and participants are invited to follow along, advancing the slides themselves. [Operator Instructions] Please note this event is being recorded. I will now turn the conference over to Julie Fraundorf, Quad's Executive Director of Corporate Development and Investor Relations. Julie, please go ahead. Unknown Executive: Thank you, operator, and good morning, everyone. With me today are Joel Quadracci, Quad's Chairman and Chief Executive Officer; and Tony Staniak, Quad's Chief Financial Officer and Treasurer. Joel will lead today's call with a business update, and Tony will follow with a summary of Quad's fourth quarter and full year 2025 financial results followed by Q&A. I would like to remind everyone that this call is being webcast, and forward-looking statements are subject to safe harbor provisions as outlined in our quarterly news release and in today's slide presentation on Slide 2. Quad's financial results are prepared in accordance with generally accepted accounting principles. However, this presentation also contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, free cash flow, net debt and net debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. Finally, a replay of the call will be available on the Investors section of quad.com shortly after our call concludes today. I will now hand over the call to Joel. J. Joel Quadracci: Thank you, Julie, and good morning, everyone. I'll begin with key highlights shown on Slide 3. In 2025, we achieved our full year financial guidance. Despite a planned reduction in reported sales, we generated strong cash flow, enabling us to make targeted investments that support long-term growth, reduce debt and provide strong shareholder returns. We also made meaningful progress advancing our revenue diversification strategy, targeted print categories, including packaging, in-store marketing, experienced net sales growth and direct mail performed well above our 2025 expectations, primarily due to higher volumes and strong operational efficiencies. Our Betty Creative and Rise Media agencies also produced highly visible work for leading brands like Aldi, Natural, CLR and Gallo. Our 2026 financial guidance, which Tony will walk through reflects this continued progress and remains consistent with our expectation to return to net sales growth by 2028. I'm also pleased that Quad's strong balance sheet and disciplined approach to managing the business have enabled the company to increase its quarterly dividend by 33% to $0.10 per share or $0.40 per share on an annualized basis, underscoring our focus on creating long-term shareholder value. Moving to Slide 4. Quad's integrated marketing platform encompasses all the resources brands and marketers need to strategize, plan, create, deploy measure and optimize their marketing efforts across all media channels from household to in-store to online. We do this through our MX solution suite, which seamlessly integrates creative production and media solutions across physical and digital channels. Supported by data-driven intelligence and state-of-the-art technology, these scalable solutions are tailored to eliminate friction at any point along the marketing journey. While our products and services are organized into distinct solution suites, they are intentionally designed to function together. This integration is a significant competitive advantage for Quad as it creates a unified ecosystem that improves marketing performance for clients. One area where this integration is delivering results is direct mail, a critical tactic under the broader umbrella of direct marketing. On Slide 5, we highlight our direct marketing agency, which we formalized in 2025. The agency provides an improved marketing experience for mailers by combining strategy and planning, audience identification and activation, creative, production and measurement services. Our DM agency leverages Quad's proprietary data stack, which we use to generate targeted highly responsive audiences. Clients also benefited from premarket testing services that validate content and designs before a single piece is printed or campaign is deployed. Uniting these often siloed services with our robust manufacturing platform enables Quad to scale personalized direct mail building on the strong DM sales momentum we gained in 2025. On Slide 6, we highlight our work with Heartland Dental, one of the largest dental support organizations in the U.S. as an example of how we are helping clients modernize the direct mail channel. Heartland Dental relies on printed direct mail as a proven growth driver and is working to improve efficiency and effectiveness by moving from broad geography-based mailings to more targeted outreach aligned with our high-value patient segments. Since winning the business in the fourth quarter of 2025, Quad has partnered closely with Heartland Dental to establish the foundation for long-term success. The team is focused on understanding objectives, assessing creative and performance and delivering postal optimization. We are developing a structured test and learn strategy designed to improve return on investment per mail piece rather than just simply minimizing cost per piece. Using our accelerated marketing insights, premarket testing, we are optimizing legacy creative while utilizing Quad's market-leading personalization platform to generate new one-to-one dynamic content. As the partnership matures, Quad plans to introduce more advanced household level targeting using our proprietary data stack. This will enable the client to shift spend toward higher-value growth audiences in key geographies and -- in parallel, Heartland Dental is using Quad's at-home Connect platform to run automated trigger-based direct mail. On the production side, Quad is looking to deliver a 7-figure postal savings for the client in the first year of our partnership by leveraging USPS' promotions and our postal optimization services creating capacity for reinvestment into Heartland Dental's growth strategy. Turning to Slide 7. We continue to invest in scaling creative and media capabilities through our Betty and Rise agencies. To support increasing client demand, we recently announced new offices in Austin, Texas and Mexico City, Mexico. The Austin office is a full-service studio, while our Mexico City office opening later this quarter, will bring Rise media experts and Betty creatives together to support clients with strength in retail, grocery and packaging design. As our agency footprint grows, so does our ability to win larger integrated assignments demonstrated by recent wins with premier brands like Scandinavia designs and Valvoline Instant Oil Change. On Slide 7, we highlight our newest integrated agency client, the Gorilla Glue Company, a leading manufacturer of tough adhesives and adhesive products. Last year, Gorilla Glue hired Betty to develop a scalable creative platform for use across the brand's broad product portfolio. The resulting campaign, which launched last month, combines real actors and product demonstrations with a hyper realistic brand character created with advanced generative AI and CGI technology. This blended approach demonstrates how Betty applies AI to unlock new creative possibilities while remaining authentic and relatable. While Betty developed the campaign, the Gorilla Glue Company worked with industry analysts from Excel Partners Group to search for a new media agency. As a result, the client named Rise as its media agency of record for both Gorilla Glue and [indiscernible] skincare brand. Rise now leads the brand's integrated media strategy, planning, buying and measurement across all digital and traditional channels. Morgan Roberts, VP of Brand Management at the Gorilla Glue Company said, -- in Betty, we see just not an agency, but a creative ally that can help us bring bold ideas to life in a way that feels authentic to the brand while helping move it forward. Rise should offer its ability to bring rigor accountability and clear measurement to our media approach, helping us connect more effectively with DI wires, professionals and everyone in between. Looking ahead, future campaigns for this client's brands will be empowered by Quad's proprietary data stack to identify and activate the highest-value audiences for its products. With creative and media working in close coordination, Rise's audience insights and experiential media planning will inform Betty's creative strategy. This consolidated partnership streamlines execution, reduces handoffs for the client and reinforces Quad's integrated model for delivering scalable, high-performing marketing programs. Transitioning to Slide 8. Quad is increasingly applying its integrated solutions to support emerging consumer packaged goods brands looking to scale their presence across big box retailers. Our extensive manufacturing and structural design capabilities enable us to execute rapid market entry while offering a wide array of displays that capture consumers' attention and educate them on product benefits. With decades of experience serving some of the biggest U.S. retailers, we know how to adjust an in-store deploys designed to meet a particular chain's distinct environments and merchandising requirements. This helps CPG brands scale quickly by introducing modified and adaptive displays to new retailers. We provide an example of this execution on Slide 9 with [ Pura, ] a fast-growing smart home fragrance company, which engaged Quad to support the brand's largest in-store retail promotion to date. Quad was involved from the outset providing integrated support across concept development, structural engineering, print production and distribution. This early integrated involvement enabled a cohesive solution rather than a series of disconnected offerings. To translate [ Pura's ] premium sensory brand into a high-traffic retail setting Quad designed a custom end cap that elevated a standard retail fixture into a home-inspired brand moment. The display featured a custom engineered diffuser that allow shoppers to experience Pure's fragrances, while maintaining display integrity and product security. After the retailer awarded Pure more shelf space, Quad designed an additional side cap display with complementary look and feel. We continue to partner in all the brands in aisle displays as well as new end cap opportunities with that retailer, and we have since deployed similar Pure displays across multiple national and regional retailers. Turning to Slide 10. In support of Quad's ongoing evolution as a company that solves marketing complexity at scale, I am pleased to share that we have expanded Dave Honan's role promoting him to President in addition to his ongoing responsibilities as Chief Operating Officer. Since joining Quad in 2009, Dave has been instrumental in strengthening our operations, margins and performance discipline. The Board and I have deep confidence in his ability to continue to drive day-to-day execution across the company. Dave and I have worked closely together for 17 years, developing a trusted, highly effective partnership grounded in a shared vision and strategy for Quad. We remain committed to continuing to build our Quad's 55-year legacy of excellence. As CEO for the past 4 years, Dave has done an excellent job overseeing operational leadership for our manufacturing platform. In his expanded role, he now extends its operational focus to the entire company. This leadership structure allows me as Chairman and CEO, to remain deeply focused on long-term strategy, innovation, partnerships and stakeholder relationships. I look forward to leading Quad flat for many years to come, and I'm extremely optimistic about what we are all building together, a company that helps brands connect with people and smarter more meaningful ways rooted into a values-driven culture that is focused on creating a better way and acting with a soul every day. Alongside this evolution, our executive leadership structure, we've taken additional steps to reinforce alignment deeper within the business. As shown on Slide 11, we have strategically aligned our marketing and sales functions under 1 leader, Executive Vice President and Chief Revenue Officer, Julie Currie. This new structure creates an even stronger connection between the company's marketing efforts and business growth priorities, helping ensure our brand demand and go-to-market activities are tightly linked to prioritize revenue generation. We want to take a moment to thank Josh Golden, Quad's former Chief Marketing Officer and wish him well as he pursues a new career opportunity. Since he joined Quad in 2021, Josh played an essential role in elevating our brand identity as a marketing experience company and in building a strong marketing organization that will contribute to our growth into the future. We appreciate Josh's many contributions to Quad. Turning to Slide 12. Quad continues to make targeted investments in artificial intelligence to drive both cost efficiency and revenue generation. Internally, AI-powered automation is improving productivity across recurring labor-intensive workflows and like scheduling, job ticket creation and automated planning for machine maintenance. Externally, Quad has infused AI across our MX solution suite to drive clients' marketing efficiency and effectiveness. For example, we continue to scale usage of AI capabilities within our audience Builder platform, underpinned by our proprietary data stack to accelerate the creation of faster, more precise audiences for clients. Rise has adopted a new agency operating system that uses AI-powered optimization and agentic AI tools to provide automated reporting with advanced measurement and insights. In addition to Betty's use of AI and creative campaigns, Betty Studios is blending synthetic and traditional photography to produce high volumes of creative assets faster and more cost effectively for clients. Moving to Slide 13. In Q4, we completed the integration of [ Andrews ] co-mail volume and high-density capabilities. Our postal optimization platform now has significantly expanded mail pool sizes and improve sortation levels, generating greater savings for our clients with postage remaining mailer single largest cost to manufacture and deliver printed marketing materials representing up to 70% of costs Quad's ability to maximize postage savings is critical to maintaining print's value in the marketing mix. As such, we remain focused on adding volume into our co-mail pools by growing our third-party co-mail partnerships. In April, Quad will hold its 25th postal conference. This one-of-a-kind industry often will feature discussions with quad postal experts, clients and USPS leadership, including Postmaster General and CEO, David Steiner. I look forward to using this opportunity to share more about our postal optimization solutions with clients while collaborating on how to best address ongoing challenges in the postal landscape. Transitioning to Slide 14. I would like to recognize our employees and thank them for their continued commitment to work. Their innovation and collaboration have created a unique company culture at Quad, which was recently recognized by 2 high-profile media outlets. Forbes named Quad to its inaugural list of Best Employers for company culture. And [ Digit A ] named Betty Agency, the best hybrid work environment as part of its work life awards. These honors reinforce Quad's ability to attract and retain top talent, which is critical to our long-term growth. Before I turn the call over to Tony, I would like to recognize a really important transition in our manufacturing network. After more than 35 years in Upson County, our plant outside Thomaston, Georgia is wrapping up production and will close in early March. I want to express our deep, deep appreciation to the employees there. Their dedication, craftsmanship and pride in their work have been central to our success for decades. I also want to thank the Upson County community for its long-standing partnership and support. As we close this chapter, we do so with gratitude for everything we accomplished together and for the legacy that remains. With that, I'll turn the call over to Tony. Anthony Staniak: Thanks, Joel, and good morning, everyone. On Slide 15, we show our diverse revenue mix Net sales were $631 million in the fourth quarter of 2025, a decrease of 5.7% compared to the fourth quarter of 2024, when excluding the divestiture of our European operations. For the full year, we achieved our public guidance range with net sales of $2.4 billion in 2025, a 4.8% decline in 2025 compared to 2024, excluding the European divestiture. The decline in our full year net sales was due to lower paper sales, lower print volumes and lower logistics and agency sales including the loss of a large grocery client in 2024, which annualized at the beginning of March 2025. Comparing our net sales breakdown between 2024 and 2025, and our revenue mix as a percentage of total net sales increased in our targeted print offerings of direct mail, packaging and in-store as well as in our QuadMed employer sponsored health care business. These increases were offset by expected declines in the print product lines of magazines and catalogs and also logistics, which is correlated with print volume declines. Slide 16 provides a snapshot of our fourth quarter and full year 2025 financial results. Adjusted EBITDA was $55 million in the fourth quarter of 2025 as compared to $63 million in the fourth quarter of 2024. And on a full year basis, adjusted EBITDA was $196 million in 2025 and compared to $224 million in 2024. The decrease in adjusted EBITDA in both periods was primarily due to the impact of lower net sales, increased investments in innovative offerings to drive future revenue growth and the divestiture of our European operations, partially offset by lower selling, general and administrative expenses and benefits from improved manufacturing productivity. Adjusted diluted earnings per share was $0.36 in the fourth quarter of 2025 and which was consistent with the fourth quarter of 2024. And full year 2025 adjusted diluted earnings per share was $1.01 and an increase of $0.16 or 19% from 2024 due to higher adjusted net earnings and the beneficial impact of a lower share count due to stock buybacks. Beginning in 2022, we have repurchased 7.4 million quad shares at an average price of $4.11 representing approximately 13% of our total outstanding common stock as of that time. This includes 1.5 million shares at an average price of $5.40 for $8 million during 2025. Quad's Board of Directors authorized a share repurchase program of up to $100 million of our outstanding Class A common stock in 2018. As of December 31, 2025, and there was $69.5 million of authorized repurchases remaining under the program. We expect to continue to be opportunistic in terms of our future share repurchases. Free cash flow was $51 million in 2025 as compared to $56 million in 2024. The $5 million decline in free cash flow was primarily due to a $17 million decrease in net cash provided by operating activities, mainly driven by timing of working capital partially offset by a $12 million decrease in capital expenditures. As we have previously shared, we will continue to generate proceeds from asset sales in addition to the strong free cash flow generated by our large printing operations, as shown on Slide 17. We generated over $870 million of free cash flow and proceeds from asset sales from 2020 to 2025, including $88 million during 2025. These asset sales include divestitures of certain noncore portions of our business as well as sales of property, plant and equipment from closed facilities. During 2025, we completed the sale of our European operations to QuadMed and we also sold 5 buildings, including the Greenville, Michigan production facility and an ancillary building in Sussex, Wisconsin during the fourth quarter of 2025. We will generate future cash proceeds from buildings we currently have for sale in Waukee, Iowa and Thomaston, Georgia. This strong cash generation fuels our balanced capital allocation strategy as shown on Slide 18. We while maintaining low net debt leverage of 1.57x as of December 31, 2025, we deepened our postal optimization offering through the April 2025 acquisition of the [indiscernible] and invested $45 million, representing approximately 2% of our net sales in capital expenditures for growth, automation and maintenance of our offerings. We also provided $22 million of shareholder returns in 2025, including $14 million of cash dividends and the earlier mentioned $8 million of share repurchases. In the first quarter of 2025, we increased dividends by 50% to $0.075 per share quarterly -- and as announced last week, our Board of Directors approved increasing dividends by another 33% to $0.10 per share paid quarterly or $0.40 per share on an annual basis. The 2026 dividend approval represents a sustainable $5 million increase in expected cash dividend payments in 2026 compared to 2025. We are pleased to return capital to shareholders through the quarterly dividend and opportunistic share repurchases. We show the results of our multiyear debt reduction strategy on Slide 19. During 2025, we reduced net debt by $42 million and from 2020 to 2025, we used our strong cash generation to reduce debt by $726 million, a 70% reduction from over $1 billion of debt on January 1, 2020. The Slide 20 includes a summary of our debt capital structure. During 2025, we were pleased to add Flagstar Bank, 1 of the largest regional lenders in the country to our bank group of 12 premier institutions. At the end of 2025, our debt had a blended interest rate of 7.0% and our total available liquidity, including cash on hand, under our most restrictive debt covenant was $299 million. Our next significant maturity of $205 million is not due until October of 2029. Given uncertainty regarding interest rates, we hold 4 interest rate swaps with notional value of $130 million and 1 interest rate collar agreement with notional value of $75 million. Including all interest rate derivatives, we have 58% of our interest rate exposure caps and with the interest rate collar, we would pay lower interest expense on approximately 62% of our debt if interest rates decline. During the fourth quarter of 2025, we completed an annuitization of a portion of the defined benefit single employer pension plan as shown on Slide 21. We annuitized $96 million of pension liability, representing 32% of the single employer pension obligation as of the time of annuitization with a $94 million distribution from the pension plan assets. This represented the pension obligations to 6,200 or 65% of the pension plan participants. We incurred a noncash settlement charge of $13 million with the annuitization. As a reminder, we acquired the single employer pension plan along with 2 multi-employer pension plans and other post-retirement obligations as part of the acquisition of World Color Press in 2010, totaling $533 million of net obligations as of the acquisition date. Since the acquisition, we have made cash contributions to these plans and taken other actions, such as the pension annuitization to reduce the net obligations by $491 million and improve the funded status of the qualified pension plan to 91% funded. As of December 31, 2025, only $42 million of net pension liability remains. We share our 2026 guidance as shown on Slide 22, and I'm pleased that our 2026 guidance represents another step on our way to our 2028 outlook for revenue growth. We expect 2026 net sales to decline 1% to 5% compared to 2025, excluding $23 million of 2025 net sales from the divestiture of our European operations. The 3% decline at the midpoint of the 2026 guidance range represents continued sequential improvement from year-over-year net sales declines of 9.7% in 2024 and 4.8% in 2025 and when excluding the impact of the European divestiture. With our typical seasonality, net sales are expected to be lower in the first half of 2026, followed by higher net sales in the second half of the year during our seasonal production peak. Full year 2026 adjusted EBITDA is expected to be between $175 million and $215 million with $195 million at the midpoint of that range being essentially equal with the 2025 adjusted EBITDA of $196 million. We expect adjusted EBITDA to follow the same seasonal pattern as net sales. Our adjusted EBITDA margin is expected to increase by 30 basis points from 8.1% in 2025 to 8.4% in 2026 due to continued disciplined cost management and changes in revenue mix. We expect 2026 free cash flow to be in the range of $40 million to $60 million with $50 million at the midpoint of that range also essentially equal with the 2025 free cash flow of $51 million. we expect increased net cash from operating activities due to higher cash earnings and timing of working capital to be offset by higher capital expenditures. In 2026, free cash flow was expected to be weakest in the first quarter due to the timing of investments in our people in the form of annual bonuses and 401(k) matching payments as well as the timing of working capital. As a reminder, the company historically generates the majority of its free cash flow in the fourth quarter of the year. With the expectation for strong cash generation, we plan to increase our growth investments while maintaining low debt leverage. Capital expenditures are expected to be in the range of $55 million to $65 million, approximately $15 million higher than 2025 at the midpoint of our 2026 guidance range, as we continue to invest in growth and automation, both in our print platform as well as in our service lines, including in-store Connect by Quad. In addition, our net debt leverage ratio is expected to decrease from 1.7x at the end of 2025 to approximately 1.5x by the end of 2026 and achieving the low end of our long-term targeted net debt leverage range of 1.5x to 2.0x. As a reminder, we may operate above this range at certain times of the year due to the seasonality of our business. We are closely monitoring the potential impacts of tariffs and inflationary pressures on our clients in addition to postal rate increases, which could affect print and marketing spend. We will remain nimble and adapt to the changing demand environment while following our disciplined approach to how we manage all aspects of our business, including treating all costs variable, optimizing capacity utilization and maintaining strong labor management. As part of these actions, we announced the closure of our Thomaston Georgia print plant in the fourth quarter of 2025 and anticipate operations ceased by the end of the first quarter. Slide 23 includes a summary of our 2028 financial outlook and long-term financial goals as we continue to build our momentum as a marketing experience company. We continue to expect the rate of net sales decline to improve as it has since 2024 and then reach an inflection point of net sales growth in 2028. We are strategically investing for the future as we expect growth in our integrated solutions and targeted print offerings to outpace organic decline in our large-scale print product lines. Excluding the large-scale print product lines of retail inserts, magazines and directories, we anticipate the business to grow at a 3% CAGR through 2028. In addition, by 2028, we expect to improve adjusted EBITDA margin to 9.4% and are planning to achieve progress towards that goal in 2026 by improving the adjusted EBITDA margin 30 basis points. We then anticipate reaching low double-digit adjusted EBITDA margins in the long term as our net sales mix of higher-margin services and products increases while continuing to improve manufacturing productivity and reduce costs. Regarding free cash flow, we expect to improve our free cash flow conversion as a percentage of adjusted EBITDA from approximately 26% based on our 2026 guidance to 35% by 2028, and and the 40% in the long term, primarily due to lower interest payments on decreasing debt balances and lower restructuring payments. Finally, we continue to expect to maintain our current long-term targeted net debt leverage ratio in the range of 1.5x to 2.0x as part of our balanced capital allocation strategy. We believe that Quad is a compelling long-term investment and we remain focused on achieving our financial goals and providing strong shareholder returns, including the recently increased quarterly dividend of $0.10 per share payable on March 13, 2026, to shareholders of record as of February 27, 2026. With that, I'd like to turn the call back to our operator for questions. Operator: [Operator Instructions] The first question comes from Kevin Steinke with Barrington Research. Kevin Steinke: I wanted to start off by asking about direct mail, you mentioned that direct mail outperformed your expectations in 2025, I believe. And you talked about the strong momentum in that targeted print category, your direct marketing agency. So -- maybe any more commentary on growth trends and kind of how you see that momentum carrying into perhaps 2026 and beyond. J. Joel Quadracci: Yes. I think it's also a chance for you to clarify the difference between DM, meaning direct mail, the product and DMAOR, the agency. So DM direct mail is sort of the letter shop kind of letter-based mail that you'll get -- and predominantly, over the course of time, a lot of it has been very generic direct mail where it's the same thing to everyone where Quad really likes to play is becoming much more personalized, driving data to increase responsiveness. And so the difference between sort of a generic letter piece and a very data-driven letter piece means a much, much higher response rate and in a relatively great response rate to the rest of the media world when you think about mix across all channels. And so that's something that people sort of sometimes don't realize that this is a very responsive channel, and we're also getting people like [indiscernible] to reenter the direct mail space because of the responsiveness. And so as the -- when we think about the DM ALR, the agency around direct mail that's the ability to tap into all the stuff that we talk about generally in our agency solutions, which is the data stack to help find that audience and become much more targeted. And because it's very household centric, the data stack is with the personalities of the household, that becomes a really powerful combination with direct mail, the product that goes into the mailbox. And so as we think forward, the more we kind of help people as an agency for DM creating innovation and taking the use of direct mail to a whole different level. we think that there'll be plenty of other combinations that make sense such as linking those efforts with things like in-store connect for advertisers or other types of marketing. And so that approach is really helping drive people towards us, but also creating direct mail where there was in direct mail and so we're excited about the approach that Scott and his team have taken and really excited about the actual sort of learnings that are happening real time and resulting in real numbers. Kevin Steinke: Yes. Okay. That's good to hear. I wanted to also ask about just the postal service had put off the postal rate increase that normally would have gone in, in January on certain categories, which I believe included catalogs -- and I think it sounds like longer-term catalog could be a really integral part of a client's marketing outreach. So have you seen any greater uptake in terms of catalogs or other channels due to the delayed postal rate increase, acknowledging the fact that rates are still up significantly over the last several years. J. Joel Quadracci: Look, I'll answer that specifically, but also more generally as it relates to what's going on with the post office because I think you know that it's 1 of my sort of favorite things to [indiscernible]. As a reminder, Postal is about 70% of the direct mailers spend. And when we talk about co-mail and all that stuff, that's our ability to work share with the post office to create much more efficiency for them which then results in great significant savings for our clients because they offer discounts if you make it more efficient. Until 2021 for over a decade, the post office was required to stick to the change in CPI as their rate increase every year. And so that created not only predictable models but really stayed in tune with how the rest of the world works because inflation is, in fact, kind of a measurement of what goes on in the pricing world for products and services. And so what they did the previous Postmaster General in 2021 post the pandemic, they were given the authority to go above that to try and fix some of the problems they have. And so what they proceeded to do was aggressively use that authority. They started increasing twice a year, once at the beginning of the year and once in the mid-time part of the year, averaging over 35% greater than inflation. Now in any industry, if you're going to significantly increase your biggest cost by 35% over inflation over a period of years, everyone would see an increase in decline. And so what's happened here, catalog has always been a very responsive mechanism. There's a whole industry around it. And there is people who are specific to catalogs and then there's a whole lot of marketers who use catalogs as a part of the media mix. We have seen accelerated decline during that period. Now the new Postmaster General, everything that we see and hear is that he'd like to change the philosophy to more of a growth philosophy. -- because raising rates, by the way, in those time period did create more revenue and they claim success with that, but that's not true growth. That's pricing used to increase revenue, which then in the following year, creates a significant decline in the volume. And then you have to raise revenue again or rates again to try and keep that revenue flat. It's kind of a spiral. And the new Postmaster General indicates that he would like to kind of think differently about the post office writ large with the growth mentality. And the evidence of that was that he did forgo an allowed increase in January. That being said, they're still on target for an increase in the second half of the year. And specific to catalogs, they did implement a test period, which allowed them to offset last year's midyear increase, but that's set to lapse. And it won't prove to be successful in driving volume because that 35% average over the rate of inflation over a period of many years, created the cost baseline that is so far ahead of where it should be, that it hasn't been able to instigate growth like we would like. And the biggest part of catalog that's been impacted would be in prospecting mailing where they're using the catalog to try and gain new customers. That's where you're not already having a transactional relationship with someone. Therefore, the responsive rate versus the customers' catalog that you said would be significantly lower. But it's still effective in driving volume. But if your cost is so far above where the baseline should be people, that's where you see a lot of the volume hit catalogs. So specific to your question, we haven't seen growth in catalogs. We've seen further decline because that baseline is so outpaced inflation but we've done a significant job of helping offset that, though, this past year with the [ Andrew ] acquisition. So we've had over a 50% increase in our multi-mall volumes, which means that much more mail gets exposed to potential discounts. We've had a 3x improvement in enhancing carrier route density levels, which is -- speaks to discounts. And we've had over a $0.075 plus postal savings per piece for enhanced carrier routes. So all in all, what that means is we've at least been able to try and offset the damage they've done. What I'm looking for what I'm hoping for is a realization that they have to spur growth through creating a more significant discount opportunity specifically for prospective mailing and hold off on trying to kill the category with significant increases. I know that's a very long-winded answer -- but I think it's really important for all constituents on the phone to understand that part of what's going on. Kevin Steinke: That's great. Absolutely. I appreciate all the insight there. I just want to ask you also about any updates on in-store connect in terms of the pipeline there or further store deployments in the works? And maybe where you stand at in terms of how much you've rolled that out currently? . J. Joel Quadracci: Yes. We've learned a lot in the last year of trying a whole new category, which, as you know, is a bet we're making that in-store media that everyone in the specifically grocery space, but retail in general, talk about activating -- and the challenge is it affects every part of a retailer's business, whether it's merchandising media selling, how the experience is through the store. So it involves every part of a company's organization which, for us, was a learning that it's going to -- it takes longer for people to be able to execute and make a decision on this. That being said, we've seen an acceleration in conversations as well as opportunities and increases in accounts that we're going to be doing and some new exciting opportunities that we'll be turning on in the near future. So I'd say that -- there continues to be what we believe is there there in in-store media as a new medium to be activated. And it's again about getting to as many eyeballs as you can so that CPGs want to make it a regular part of their budget. And so we're sort of full steam ahead here. Again, we've learned a lot that it takes a little bit longer for organizations to navigate it, but it hasn't changed for the interest that we're seeing out there. . Anthony Staniak: And Kevin, I'll just add, we've reserved capital in our CapEx guidance for 2026 for growth here in [ ICQ. ] So it's 1 of the primary drivers behind the increase in CapEx between years. . Kevin Steinke: Okay. That's helpful. Yes, go ahead. Anthony Staniak: And speaking to CapEx, in addition to that, we have money reserved for some other growth initiatives that were in the planning process of but not ready to talk about. -- but we think we'll be worth the spend. Kevin Steinke: Okay. Great. Just a couple more here on the financial side of things. When we look at the guidance ranges provided for 2026, as you noted, the midpoint implies a continued improvement in the sales trend over the previous 2 years. Just kind of curious, as you think about those ranges for sales and adjusted EBITDA. What are the factors you're thinking about in terms of maybe higher end versus lower end of those ranges as 2026 progresses? . J. Joel Quadracci: Yes, I'd say that, again, the -- on the sales side, I'll cover that, which is a little bit to what I talked about is to what degree does some of the decline that we plan for and know how to manage to what degree does Postal impact that, that could either create a higher opportunity or a little bit lower in that category. -- but then to the degree at which we continue to see momentum of direct mail in store as well as packaging, which have all been feeling good and looking good. . Anthony Staniak: Yes. I think those targeted print categories, we've said this since our Investor Day in '24. They're at a higher margin profile than our large-scale print offerings. So as the mix continues to evolve towards targeted print that will help lift our margins, which is what we're seeing this year. And then we're going to continue to watch, obviously, the cost side closely and have demonstrated actions towards that effect. Kevin Steinke: Okay. Great. And then just lastly, maybe a question about capital allocation. You continue to be at or near the low end of your targeted leverage ratio range, and it's really nice to see the significant dividend increase you announced? Should we just think about capital allocation going forward, continuing to be pretty balanced. You mentioned share repurchases. Are you still looking for maybe tuck-in acquisition opportunities or any other things you'd want to touch on, obviously, organic growth investments as well. But . Anthony Staniak: Yes, Ken. I think overall, the message for 2026 is similar to 2025. We'll look at -- if a tuck-in acquisition fits and meets our parameters, that is possible. CapEx remains important. Joel talked about not only ICQ but other growth that we could put money towards -- we do believe in providing a strong return to shareholders. We are proving out, getting towards that 2028 flip. And in the meantime, we want to reward our shareholders for being long term and part of this. So that's where the stock buybacks and the dividend come in. And then maintaining low debt leverage, we still think is is very prudent in this cycle to make sure we can weather any storms but also be available for -- have cash available for any opportunities that present themselves. So I would expect a similar type of mix and what we did in 2025. Operator: Our next question comes from Barton Crockett with Rosenblatt Securities. Barton Crockett: Let me see, just stepping back to the environment. You've given your guidance range for the year. Can you give us some sense of how we're starting in the first quarter relative to your metrics that you put out there, particularly revenue? Anthony Staniak: Yes. I mean first quarter, as we said in our prepared remarks, that's a lower volume quarter for us, especially compared to the back half of the year. I think we've started out on track with what we expected and seeing decent volumes here in February so far as well. So I feel like we're on track. . J. Joel Quadracci: And I'd add that sort of some of the noise of past year with things like tariffs and all that stuff. You sort of feel like people are a little more confident in their decisions. which is a good thing. And so we're seeing some reinvestment. Barton Crockett: Which is interesting because some of the commentary out there, particularly Pinterest was talking about marketing pullback by large retailers. You guys aren't seeing anything like that is what you're telling us. Is that correct? J. Joel Quadracci: Well, it's again, as I said last year, it's situational. But no, we -- I can say that so far, we haven't seen like significant pullback. And again, I think that in our media channel, it's been a tried and true channel for them that they know very well for many, many years. and some of the pullbacks that they've done, like 1 of the areas that got pulled back over time, and we've said this would happen is retail inserts, that a lot of the big box guys are already sort of kind of pared that back significantly, where it remains actually relatively strong is in things like grocery. And so some of the shifts that have happened in our media channels have already kind of -- some of them have played out a little more than maybe some of the stuff that's kind of rejiggering around in the bigger media mix. So at this point, again, situationally some are better, some are worse. But again, I think that because of the channels we're in, if anything, we're seeing people want to get more help in some of the ways to market and how to use audience better linking our channels to other channels and interest in things like ISC Q because part of the challenge in digital, too is, overall, people are seeing a lot of I guess, crowded nature of the channel. And in some cases, you start to see lower responsiveness. So people are always jiggering around how do they get more responsiveness. So I think certainly, with things like AI you're probably able to analyze it even better of what's working and what's not these days. and that's the quest that people are on. So will we see some other stuff as we get to the seasonally busy part of the year. Typically, at this point, we wouldn't see that from the clients. Barton Crockett: Okay. Now 1 of the things also you touched on postal, I want to make sure I understand what you have visibility into and what's still unknown. So you have visibility into January postage but is this still unknown what's going to happen midyear? . J. Joel Quadracci: Works -- I think the industry is basically accepting or expecting an increase of somewhere in the 6% to 8% range mid-year which, again, 1 of the things that happened a couple of years ago is when they surprised everybody outside of the budgeting process. The good news is that at least people have been expecting this again, aspirationally, they prefer further incentives to try and increase mail. But I think that, that 1 is kind of built in. Barton Crockett: Okay. So is it your view that it's unknown what the longer-term trajectory is? Or does it feel likely to you that we're kind of stay somewhere in this 0% to 8% kind of range. J. Joel Quadracci: That's the big question, right? You have a new regime in and there's a lot of pressure on the post office to fix itself. You'll probably see the Postmaster General. My understanding is we'll be up in front of Congress pretty soon to talk about operational issues, but he's also trying to implement sort of continuation of some of the old strategy but trying to pivot them to growth. And you can't do that unless you sort of tackle the ability for customers to pivot to growth, i.e., pricing. And so that's the part I'm really watching closely, but we don't have full visibility to at this point. Barton Crockett: Okay. All right. And then just 1 other category. I was kind of curious about the question, which is -- there's been tremendous kind of uptake among performance marketers in some of the end-to-end kind of digital Performance Max kind of black box give you an outcome online digitally solutions that are driven by scale by people like Google tied into their search and [ U2 ] properties. That seems to be an area of increased focus for performance marketers. I'm just wondering if that's creating some competitive pressures for you guys in rise and then your push into your kind of angle on performance. . J. Joel Quadracci: Yes. Well, look, we're using all of the channels for it. And within digital, we're using Google. We're using YouTube. We're using all those different services to place ads. I think that the challenge people are trying to tackle is the integration of how does it all work together. So I always talk about integration, I talk about all channels, but even within digital, people are trying to understand when I spend on Pinterest versus Facebook, what happens. I've heard varying accounts depending on the category of like how responsive really is Facebook in our advertising spend. I've heard opposite. So it's like the biggest issue people are trying to drive to is understanding when I spend in digital, where should it be and what is the true measurement. And that's what we're trying to provide them. And that, for us, has been opportunity. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to the management for closing remarks. . J. Joel Quadracci: Thank you, operator, for joining -- and everyone, for joining the call. I want to close by reiterating that Quad remains committed to our strategic vision, leveraging our integrated marketing platform to drive diversified growth improved print and marketing efficiencies and create meaningful value for all stakeholders. With that, thank you again, and have a good day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to Sabre Corporation’s Full Year and Fourth Quarter 2025 Earnings Conference Call. My name is Olivia, and I will be your operator. As a reminder, please note today’s call is being recorded. I will now turn the call over to Senior Vice President, Finance, Roushan Zenooz. Please go ahead, sir. Roushan Zenooz: Good morning, and welcome to our full year and fourth quarter 2025 earnings call. This morning, we issued an earnings press release, which is available on our website at investors.sabre.com. A slide presentation, which accompanies today’s prepared remarks, is also available during this call on the Sabre Investor Relations webpage. A replay of today’s call will be available on our website later this morning. We advise you that our comments contain forward-looking statements that represent our beliefs or expectations about future events, including results of our growth strategies, our AI offerings, and AI-related developments in the transactions and bookings growth, commercial and strategic arrangements, our financial guidance, outlook and expectations, pro forma financial information, free cash flow, net leverage, and liquidity, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today’s conference call. More information on these risks and uncertainties is contained in our earnings release issued this morning and our SEC filings, including our Form 10-Ks for the year ended 12/31/2025. Throughout today’s call, we will also be presenting certain non-GAAP financial measures. References during today’s call to adjusted EBITDA, adjusted EBITDA margin, normalized adjusted EBITDA, and normalized adjusted EBITDA margin have been adjusted to exclude certain items. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on our website at investors.sabre.com. Normalized amounts have been adjusted for estimated costs historically allocated to our Hospitality Solutions business, which was sold on 07/03/2025. We are also presenting certain financial information on a pro forma basis to give effect to the sale of the Hospitality Solutions business. We have removed the impact of the $227,000,000 payment-in-kind interest that was recorded in conjunction with the refinancing activity in 2025 from pro forma free cash flow. Unless otherwise noted, results presented are based on continuing operations. Participating with me are Kurt J. Ekert, President and CEO; Michael O. Randolfi, CFO; and Gary Wiseman, President, Product and Engineering. With that, I will turn the call over to Kurt. Kurt J. Ekert: Thanks, Roushan. Roushan Zenooz: Hello, everyone, and thank you for joining us. 2025 was a challenging and dynamic year Kurt J. Ekert: in which exogenous events impacted our operational results. Despite these challenges, we remained focused on execution and met or exceeded our financial guidance in the fourth quarter and ended the year with positive momentum. Moving forward, I believe we are well positioned for strong, sustained performance. Our growth outlook today is driven by several key catalysts: continued distribution share gains, the expansion of our multi-source content platform, solid growth in both hotel distribution and our payments business, as well as improving performance in our airline technology business. As I have discussed previously, our industry is evolving rapidly, and Sabre is evolving with it. We are in the midst of a fundamental transition, moving Sabre from a GDS-focused company to an AI-native technology leader. Before reviewing 2025 performance, I have some thoughts on recent market sentiment around AI disintermediation risk—the concern that AI bots could bypass our marketplace and connect directly to suppliers. We strongly disagree. AI needs what Sabre has already built. Operator: Vast, constantly evolving data, Kurt J. Ekert: integrated content, and complex logic purpose built to solve travel’s uniquely challenging workflows. We provide the foundational transaction layer AI uses to shop, Operator: price, book, Kurt J. Ekert: and service travel. We expect this shift makes us more essential, not less. We believe Agentic AI will reshape the technology landscape, and we are positioning Sabre to lead in this next phase. As AI-native companies enter the travel ecosystem, they need Sabre’s strong foundation, which provides breadth of content, modern cloud-native platform, and AI-native APIs, which we believe positions us as the platform of choice. While we are in the early stages of sizing the AI opportunity and have not included any of the potential significant upside in our forward outlook, we are taking deliberate actions to align our talent and investments with the strategy and position Sabre for long-term growth and value creation. As part of these actions, today, we announced a series of executive leadership changes, effective tomorrow. Gary Wiseman is promoted to President, Product and Engineering, with his agreement expanded to include leadership of innovation and Agentic AI. Sean Williams is appointed Chief Operating Officer and will lead Sabre’s revenue and commercial operations functions. Andy Finkelstein steps into the role of Chief Commercial Officer, Travel Marketplace, and Dave Medrano is promoted to Chief People Officer. Separately, Roushan Mendez, who has been a superb leader during his many years with Sabre, most recently as Chief Commercial Officer, has decided to pursue another opportunity. Roushan will transition to Senior Adviser before departing the company in May. We deeply appreciate his contributions and wish him continued success. On today’s call, I have invited Gary to share our progress on delivering Agentic AI solutions to drive long-term growth and why that makes us a critical part of the evolving AI ecosystem. Now turning to slide four, for the year, we recorded double-digit year-on-year growth in normalized adjusted EBITDA and generated positive pro forma free cash flow. A key focus for us is further strengthening our balance sheet, and we made significant progress this year by paying off over $1,000,000,000 in debt, which, when combined with growth in pro forma adjusted EBITDA, reduced our pro forma net leverage by approximately 25% compared to year-end 2024. We continue to be proactive in managing our long-term capital structure. Through two successful refinancings in 2025, we have no large maturities until 2029, and over 90% of our debt now matures in 2029 or later. We also ended the year with a strong cash balance of $910,000,000, which includes $98,000,000 of restricted cash for debt repayments in 2026. While we have more work to do to reach our long-term leverage goals, these actions provide us with significant room to continue to invest and further grow our business. On the right side of the slide, our technology investments are driving positive, measurable results. AI has been a core systemic part of the Sabre technology stack for years, and we continue to lean into that advantage. In 2025, we seized the first-mover position in our industry with our introduction of Agentic APIs and a proprietary MCP server designed for the travel industry. These Agentic solutions help AI agents better understand and operate within the complexity of travel content and workflows. We also launched several industry-first AI solutions and partnerships, which Gary will touch on shortly. Sabre Payments was one of our fastest growing businesses in 2025, with gross spend on the platform increasing more than 35% year on year and producing strong revenue growth. Our travel marketplace continues to deliver multisource travel content on an unprecedented scale and drove agency wins and expansions during the year. In the fourth quarter, air distribution bookings grew 4%, which included the direct and indirect impacts from the U.S. government shutdown, and we ended the year with air bookings growth of 7% in December. Finally, we extended our leadership position in NDC by adding 15 live integrations during the year, bringing our total to 42, and we are seeing adoption ramp. We exited 2025 with NDC representing approximately 4% of total air distribution bookings, and we expect our rate of NDC bookings to accelerate throughout 2026. Moving to slide five and details on full-year 2025 results. Overall results were positive across the board. Total distribution bookings grew 1% year on year, and full-year air distribution bookings were also positive. Within airline technology, passengers boarded grew 2% year on year. Hotel distribution bookings increased 5% year on year to 42,000,000, and the attachment rate to air bookings increased over 130 basis points year on year. Gross hotel booking value transacted through the platform now exceeds $20,000,000,000 annually. These positive results drove full-year revenue growth and, combined with ongoing expense management, normalized adjusted EBITDA grew 10%. Normalized adjusted EBITDA margin improved over 160 basis points to 19%. Moving to slide six. Our cloud-native technology foundation is driving growth across our portfolio. Within airline technology, we are delivering a growing suite of modular, AI-driven solutions ranging from new tools that optimize revenue in real time to a growing suite of GenAI chat and servicing capabilities. As airlines transition to modular, offer-order-based systems, we believe Sabre is well positioned to be the vendor of choice for their transformation. With our Sabre Mosaic airline technology gaining momentum, we expect to drive positive IT Solutions revenue growth for 2026. Our travel marketplace provides a single connection to what we believe is the widest breadth of travel content in the industry. Air Expansion is the combination of our distribution expansion and multi-source platform growth strategies. Despite a challenging 2025, we ended the year with strong momentum, driven by continued share gains, growth in NDC bookings, and our new LCC solution, which is now fully launched, as well as continued growth from the Sabre Mosaic Marketplace. We expect to see a meaningful year-on-year acceleration in air bookings growth. Overall, we expect annual volume growth for both 2026 and 2027 to be in the mid-single digits. Importantly, now six weeks into the quarter, the strength we saw in December has continued and is broad-based across all regions and also within corporate travel. Lodging expansion continues to scale, delivering over $350,000,000 in annual LGS revenue in 2025, and we expect continued solid revenue growth in 2026. Finally, we believe that PaymentSuite, our integrated fintech hub, is well positioned for sustained growth. It remains one of the fastest growing areas within Sabre with strong demand for our solutions that simplify operations, increase payment flexibility, and automate risk and fraud management. I will now hand the call over to Gary, who will discuss AI and Sabre’s AI strategy in greater detail. Gary Wiseman: Thank you, Kurt. Kurt J. Ekert: Moving to slide seven. AI needs us to power results. Gary Wiseman: And we believe it is a huge opportunity for us. Let me explain why from a technology perspective. We sit on over 50 petabytes of curated travel data, and we have the greatest depth and breadth of content in the travel space. We process 14,000 transactions per second and 11,000,000,000 shopping centers per month. These unparalleled demand signals do not exist anywhere in public today. However, we enable pure-play AI companies to participate in a complex space with a simple connection to these insights. We believe we are also critical in an AI-first world because of our proprietary and constantly evolving logic. Travel is extraordinarily complex. We house over fifty years of servicing workflows, travel policies, and compliance logic across 200-plus countries and thousands of supplier-specific fare rules and partner network agreements, all built through billions of real transactions. In short, we believe we have solved for almost every single edge case that has ever existed in travel, anywhere in the world. This logic is proprietary and cannot be scraped from the web or reverse engineered. AI engines cannot independently obtain and orchestrate this logic. While chatbots can generate itineraries, they cannot book or service them reliably at scale. For example, we aggregate and normalize real-time flight results in subseconds across hundreds of sources. This is a huge technical hurdle for most AI players today. And this is why Virgin Australia, PayPal, and a growing pipeline are building on us, not around us. And finally, we have a first-mover advantage in the industry. We launched the first agentic APIs and MCP server for travel almost six months ago. This was purpose built for LLM consumption, at enterprise scale. It is in production now, while competitors have yet to unveil their agentic API. Our open, modular platform plugs into wherever travel gets sold and wherever consumers go next, which we believe is conversational commerce. In summary, we own the foundational layer AI needs to transact travel. We believe the shift to Agentic makes us more essential than ever. Moving to slide eight. I will discuss our three recent strategic partnerships, which serve to demonstrate our leadership position within AI infrastructure. We believe Sabre is becoming the essential AI infrastructure for travel, serving both established companies modernizing their stack and AI-native startups building next-generation experiences. Our three recent partnerships confirm this. PayPal and MindTrip are building with us a next-generation agentic experience unifying discovery, planning, payment, and servicing in one conversational interface. Booking, MindTrip brings the consumer platform, PayPal brings flexible payments, and agentic commerce, and Sabre brings an enterprise travel platform and agentic AI expertise. The product launch is targeted for 2026. Kurt J. Ekert: Bistrep, a Silicon Valley-based AI-native TMC, Gary Wiseman: is combining our agentic capabilities with their AI assistance to build corporate travel functionality handling complex bookings, real-time itinerary management, and intelligent policy automation through natural language interfaces. They are leveraging our travel marketplace, agentic APIs, and global network. Virgin Australia is the first airline deploying our ConcourseWare IQ solution. It handles layered questions, delivers accurate, bookable results, and goes beyond booking to managing rebooking, miles redemption, refunds, and backtracking. Virgin Australia is seeing improved experience and higher satisfaction with Concourse IQ. Additionally, we are exposing this functionality via a new Chat Manager Vita plugin for Virgin Australia. This Chatty Bitty plug-in solution is available for all of our travel supply partners. Our AI solutions help our customers compete and win in the emerging AI ecosystem. Kurt J. Ekert: Further, Gary Wiseman: we believe we are well positioned to win in the new channel of conversational travel commerce by providing comprehensive shopping, booking, and servicing capabilities to any company that is developing an agentic travel experience. Thank you. Now over to you, Mike. Thanks, Gary, and good morning, everyone. Please turn to slide 10. Kurt J. Ekert: Fourth quarter financial results were solid and generally met the expectations we shared on our third quarter call. These results reflect the continued improvement in operating trends we saw at the end of the third quarter, partially offset by impacts related to the government shutdown during the quarter. In the fourth quarter, total revenue grew by 3% year on year, consistent with our guidance of low single-digit year-on-year growth. Distribution revenue grew $27,000,000, an increase of 5%, primarily due to an increase in air and hotel distribution bookings, favorable rate impacts, and an increase in other revenue. Air distribution bookings grew 4% year on year, below the guidance of 6% to 8% we provided on our third quarter earnings call. While our previous outlook accounted for the government and military travel reductions known at Michael O. Randolfi: the time, the impacts were broader than expected due to lower inbound U.S. traffic and an increase in flight cancellations. As Kurt mentioned, we ended the year with strong momentum, achieving 7% air distribution bookings growth in December, and we anticipate mid-single-digit air distribution bookings growth in the first quarter. IT Solutions revenue of $140,000,000 was within the range of expectations we shared on our third quarter call. Gross margin of 58% was also in line with our expectations. The year-on-year decrease in gross margin was primarily due to revenue mix and FX impact of a weaker U.S. dollar. Fourth quarter 2025 normalized adjusted EBITDA of $119,000,000 increased 10% year on year, with normalized adjusted EBITDA margin expanding by 107 basis points to 18%. Normalized adjusted EBITDA growth was driven by higher revenue and continued expense management. Pro forma free cash flow was $116,000,000 for the fourth quarter, a year-on-year increase of $45,000,000. And recall, our quarterly pro forma free cash flow includes the negative impact of $19,000,000 of disbursements related to refinancing fees and interest paid earlier than previously expected. Moving to slide 11 and full-year 2025 results. For the full year, Sabre reported revenue of $2,800,000,000, up 1% year on year, driven primarily by growth in distribution revenue. Gross margin for the year was 57.2%, within our expectations. Full-year 2025 normalized adjusted EBITDA of $536,000,000 increased 10% year on year, with normalized adjusted EBITDA margin expanding by 166 basis points to 19%. Pro forma free cash flow was $57,000,000. We ended the year with a strong cash balance of $910,000,000, which includes $98,000,000 of restricted cash for debt payments in 2026. Moving to slide 12. Full-year results were largely in line with the expectations we outlined on our third quarter earnings call. Revenue growth of 1% met our guidance for flat year-on-year growth. Normalized adjusted EBITDA of $536,000,000 was above our guidance of approximately $530,000,000, driven by continued cost management. Operator: Pro forma Michael O. Randolfi: free cash flow of $57,000,000 includes $19,000,000 of disbursements related to refinancing fees and interest paid earlier than previously expected due to the refinancing activity in 2025. Turning to slide 13. In 2025, we made significant progress on our capital structure, lowering overall debt and extending our maturities. We paid off over $1,000,000,000 of debt using cash on the balance sheet and proceeds from the sale of Hospitality Solutions. Importantly, we have also extended our debt maturity profile. Following two successful refinancings in 2025, we have no large debt maturities until 2029, and over 90% of our debt matures in 2029 or later. Through growth in pro forma adjusted EBITDA and the reduction of debt, combined with our strong year-end cash balance, we have reduced our pro forma net leverage ratio by approximately 25% versus year-end 2024. We remain focused on further delevering, and I am proud of the work we have done this year. Moving to slide 14 and our outlook for 2026, including a walk from 2026 pro forma adjusted EBITDA to free cash flow. Consistent with our strategy, we are providing 2026 guidance as well as commentary on 2027 to demonstrate that we believe we are well positioned to generate sustainable, positive free cash flow over the long term. Our outlook excludes the potential upside from agentic AI initiatives, which we believe could be meaningful, but it is too early to quantify. For full-year 2026, we expect mid-single-digit volume growth, driven by continued share gains, growth of NDC bookings, and our recently launched LCC solution. We expect the growth in volumes will lead to year-on-year revenue growth of mid-single digits. We also expect IT Solutions revenue to grow in the mid-single digits for the year and to be in the range of $140 to $150,000,000 per quarter, with growth coming primarily in the back half of the year. As mentioned, we do expect that a portion of 2026 revenue growth will be driven by increasing NDC and LCC volumes, which drive incremental gross profit at a slightly lower margin. In addition to the impact of these accelerating volumes, some additional expected changes in mix as well as FX pressure, we anticipate 2026 pro forma gross margin to be in the range of 56% to 57%. We are targeting to keep pro forma adjusted technology and pro forma adjusted SG&A lines relatively flat over the next two to three years through an inflation offset program. The goal of this program is to offset normal inflationary pressures over the next two to three years. We anticipate the pro forma adjusted technology line will reflect a low-single-digit percent increase due to increased technology cost from higher volumes. We expect pro forma adjusted SG&A will decrease by a low single-digit amount for the full year 2026. Through keeping costs relatively flat, we expect strong flow-through from revenue growth to pro forma adjusted EBITDA, which is expected to be approximately $585,000,000 in 2026. We do not expect any significant change in our annual CapEx spend of approximately $80,000,000. Annual cash interest in 2026 is expected to be approximately $470,000,000. This represents a year-on-year increase of approximately $140,000,000. The increase is primarily due to Sabre no longer receiving the cash benefit from the paid-in-kind instrument Sabre had in place from June 2023 through May 2025, which provided us with the option to defer cash interest. As part of our inflation offset program, we estimate total restructuring costs will be around $65,000,000. In 2025, we recorded a $51,000,000 charge related to this program. We expect approximately $60,000,000 of cash outflows related to the program in 2026. One item to note before discussing our free cash flow guidance: going forward, we will not be utilizing the pro forma free cash flow metric as there are no further adjustments to be made to free cash flow for the sale of Hospitality Solutions. We expect 2026 free cash flow to be negative $70,000,000, driven primarily by the impact of the $60,000,000 in restructuring cost associated with our previously discussed inflation offset program. Excluding the restructuring charge, free cash flow for 2026 would be near breakeven. Looking beyond 2026, with the continued execution of our growth strategies, we anticipate the positive growth trends we have guided to in 2026 will extend into 2027. Our current expectation is also for mid-single-digit revenue growth in 2027. Driven by continued revenue growth and ongoing cost discipline, we expect sustained year-on-year adjusted EBITDA growth and, importantly, positive free cash flow in 2027. Looking at slide 15 and our expectations for the first quarter. We expect solid growth in the first quarter with volume and revenue growth in the mid-single digits. We anticipate our first-quarter revenue growth will result in higher year-on-year gross income. We expect first-quarter pro forma gross margin to be at the lower end of our expected annual range of 56% to 57%, primarily due to revenue mix and FX impacts of a weaker dollar. We expect gross margins for the remaining 2026 to be higher versus the first quarter due to the impact of higher-margin sales including media, as well as payments. Additionally, in the first quarter, we expect pro forma adjusted technology expense will be higher on a year-on-year basis, primarily due to volume growth and typical wage inflation. Moving to pro forma adjusted SG&A. We expect a year-on-year increase due to a combination of typical wage inflation and the impact of a sales tax refund benefit of $7,000,000 in the prior year that is not expected to recur. For the remainder of 2026, we expect that costs will generally trend down due to the impacts of our inflation offset program. Overall, we expect first-quarter pro forma adjusted EBITDA to be approximately $130,000,000. We expect quarterly free cash flow to follow historical seasonality and expect the first and third quarters to reflect the majority of the full-year increase to cash interest expense. For additional details, we have included a schedule of expected quarterly cash interest within our website financials, available on our Investor Relations website. Our strategy remains focused on generating free cash flow and delevering our balance sheet and driving sustainable growth through innovation. We made significant progress against these priorities in 2025. Building on the momentum we exited 2025 with, we are excited for the year ahead, and we are optimistic that Sabre is positioned to transition to a period of higher revenue growth going forward. And with that, operator, please open the line for questions. Operator: Thank you. To ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press 1-1 again. Our first question is coming from the line of Dan Wasiolek with Morningstar. Your line is now open. Kurt J. Ekert: Hey, guys. Good morning. Nice quarter. Probably a question here for Gary. You have obviously been hard at work with your AI tool development. I can see how that strengthens your network ecosystem. I am just wondering what still needs to be done in your view on the AI front. What should we be looking for? And then in the prepared comments, you mentioned upside Unknown Analyst: opportunities from AI. I am just wondering if you maybe could provide some more color on what those might be. Thank you. Gary Wiseman: Yeah. Hey. Good morning. Thank you very much, and Kurt J. Ekert: Go ahead, Gary. Just jump right in. Gary Wiseman: So I think on the AI front relative to the travel use cases, for me, really, what is going to be the next stage here is to generally show the end-to-end experience of conversational commerce in travel. And so that is what we are doing with the partnership that you have seen with MindTrip and with PayPal, where through the MindTrip app itself, you can have a great experience in terms of building an itinerary that is personalized, that is highly relevant to your needs as you try and plan your next trip. We then come in in terms of making sure that we provide you the greatest offers in terms of how to get there, where to stay, and then, obviously, with PayPal, they then are able to help in terms of the payment, whether it is a single payment or payment over time through installments to make sure that you can actually afford that particular trip. So that has been one of the things for me that has been missing when it came to AI and a travel experience, that no one has really done that end to end yet—from the discovery, the planning, the booking, the payments, and the servicing. So that is what I am super excited to see as we go into the 2026. Go ahead, Kurt. Kurt J. Ekert: Yeah. I was just going to add. One of the interesting things that is unique about Sabre, as Gary alluded to in the prepared remarks, is we already have the full breadth of data content, intelligent shopping, servicing capabilities. Putting the front end, the agentic layer on there, as Gary would articulate, is actually not that technically complex. It is just a matter of extending our capabilities into it as a new ecosystem of agentic travel. Operator: And Unknown Analyst: thank you. And then, anything you are willing to remark on, like, opportunities that might evolve from AI in the years to come? Kurt J. Ekert: Yeah. I think the best way to think about this in my eyes is if you think back, if you are as old as I am, 30 years ago, you saw the emergence of online travel agents as a fundamentally new channel, and that had the impact of taking share away from both supplier direct and indirect channels at the time. I think what you are going to see with agentic travel—these are the agentic players as well as tech platforms—is that is going to emerge similar to the way OTAs emerged as a fundamentally new channel, probably happen even more rapidly than what you saw with the emergence of OTAs. When you think about which channels are at risk, I think it is those that are subject to an Internet or electronic experience today. So less impacted should be corporate travel and brick-and-mortar travel agencies. More impacted would be supplier direct where you have non-loyal travelers, metasearch, which is not an end-to-end experience because you are being linked off, then third would be OTAs. Obviously, OTAs are going to play in this very differently. So we think the offensive opportunity for Sabre is very substantial. Again, very hard to articulate how large that agentic sector is going to be and the pace at which it is going to play. But we believe we have a distinct market advantage in terms of speed to market today. We are looking to plant flags very aggressively. Unknown Analyst: Okay. Great. Thank you. Operator: Thank you. Our next question is coming from the line of Joshua Phillip Baer with Morgan Stanley. Your line is now open. Unknown Analyst: Thanks for the question. I think you did a great job addressing the Michael O. Randolfi: topic of agentic and AI bots. I was hoping you could do the same with just direct connects generally. One of the challenges of airlines or, and OTAs, other travel buyers, just building direct connects is the huge cost burden in establishing and also maintaining and supporting those connections. From an R&D and a developer and infrastructure perspective, does the introduction of GenAI change that economic equation at all, just thinking about lower cost of coding Josh Baer: increasing productivity of a developer? Yeah. If you could weigh in there on that topic. Thanks. Kurt J. Ekert: This is Kurt. Let me have Gary jump in first on the, what I will call, the physics of Direct Connect and how that will emerge in an agentic world, and then I will comment on the industry structure a bit. Gary Wiseman: Yes. Thank you. Thank you, Josh. So, really, this comes down to what makes us a great partner for an AI company or anything to work with rather than an attempt to really replicate what we do. We have a highly scalable marketplace, obviously, with that vast selection of travel content that we have both the contractual rights to aggregate, normalize, and display at a speed that an AI agent could not do in a real-time fashion, which is due to our volumes, which means that we can predictably cache content in such a way that individual suppliers cannot, and hence, we can cope with that look-to-book ratio that is a severe tax on suppliers’ infrastructure costs. So this is something, again, that, whether it is in a general web search or any type of shopping scenario that could be AI or not, is something that we excel at in terms of responding in subsecond times compared to what is today taking, you know, eight to nine seconds connecting directly to a supplier and shopping on their APIs independently. Operator: Okay. Kurt J. Ekert: Yeah. Thank you, Gary. And so about Direct Connect generally. For folks who enable a Direct Connect—and Sabre is an amalgam of 500 airline direct connects and thousands of hotel direct connects, for example—when you have look-to-book coming inbound and you have massive complexity, that creates challenges both for the supplier who is dealing with this inbound traffic, number two is for the person doing the Direct Connect. Very difficult to manage that environment. We have spoken previously about the opportunity for a reintermediation of some of the direct traffic. I think you will see that in some of our results going forward. With agentic AI, that problem is going to be exacerbated for both the suppliers with inbound traffic and response times, and two, for folks who may have those direct connects in place like OTAs. So I actually think the utility that we provide tomorrow in an agentic world is going to be even more important than it was yesterday. Josh Baer: Okay. That is helpful. And then I was just hoping you could unpack this inflation offset program a little bit further. What exactly is inflating? Is that just wages? Is it other costs? And what exactly is offsetting? Thanks. Michael O. Randolfi: Yeah. You know, as part of any cost, over time you have some inflation, primarily wage inflation, but then you also have contractual inflation. Technology costs tend to go up. One of our goals is to keep our key line items of technology cost and SG&A roughly flat except for some volume-related hosting costs. So we have embarked on a program basically to drive efficiency and effectiveness through our organization, with the goal of, over the next two to three years, keeping those cost items Kurt J. Ekert: relatively flat, relatively flat, such that as we grow Michael O. Randolfi: bookings and revenue, we see strong flow-through to EBITDA and EBITDA margin accretion and ultimately greater free cash flow. Josh Baer: Okay. So that is layoffs and future restructurings? Michael O. Randolfi: The way I would think about it is I would put it in three categories. One is leveraging best-in-class geographical location. Second, working with third parties who have a certain expertise and efficiencies to a greater degree, and then further embedding AI into our workforce and greater enabling our teams to be as productive as possible. And that is the focus. Kurt J. Ekert: Yeah. And I would just say, in doing this, we hold two things relatively sacrosanct. One is operational delivery for our customers, and then two is research and development. And just anecdotally, we will have more engineers working on Sabre a year from now than we do today. We are going to be ramping engineers through the year and doing that effectively through this program. Josh Baer: Okay. Thank you. Operator: Thank you. Our next question is coming from the line of Jack Halpert with Cantor Fitzgerald. Your line is now open. Gary Wiseman: Hey. Thanks for taking the question, guys. Michael O. Randolfi: Just another on the agentic AI stuff. So you have a relationship with Google for other parts of the business. Do you see any opportunity to deepen your relationship with Gemini on the agentic AI front? Are you having any conversations with other leading AI labs, Brian Evans: OpenAI, etcetera? Michael O. Randolfi: And then just secondly, on capital allocation, I know you made a lot of progress in the debt pay down this year. Moving forward, Kurt J. Ekert: you talk about Jack Halpert: how you are thinking about capital allocation for 2026 and beyond? Is the debt profile still the number one priority? Or do you feel like you are at a good level to start shifting investment more towards growth initiatives? Thanks. Kurt J. Ekert: Thanks, Jack. I will take the first question and then ask Mike to speak about capital allocation. We have a great relationship with Google. Our AI infrastructure is effectively built on Google’s Vertex and now Gemini AI capabilities. I would say what you have seen is the tip of the iceberg in terms of relationships and partnerships that are going to come in the market. We are in conversations with effectively all the meaningful large players out there, which is why we believe this is such a significant opportunity for Sabre. Let me turn it to Mike to speak about capital allocation. Yeah. First, I would start with the back part of your Michael O. Randolfi: question first. And I would say we prioritize our investment in our growth initiatives, our growth strategies, and our agentic AI push forward. So that is a priority. That has always been a priority. With regards to capital structure, we have been thoughtful with regards to our capital structure. We will continue to do so. But I think we are actually in a pretty good place today. We ended the year with $910,000,000 of cash on the balance sheet. Now, $98,000,000 of that is in escrow for some debt paydowns in March of 2026. So, really, the usable cash is $812,000,000. We expect to ultimately be generating positive free cash flow over the long run. And if you look at our maturity ladder, I think we put ourselves in a pretty good place. We have no large up until June 2029, and we have done that pretty efficiently in terms of cost. So we think we are in a pretty good place at the moment. Jack Halpert: Great. Thank you, guys. Operator: Thank you. As a reminder, to ask a question, please press 1-1. Our next question in queue is coming from the line of Victor Chang with Bank of America. Your line is now open. Roushan Zenooz: Hi, thanks for taking my questions, and good slides on the agentic AI initiatives. Maybe on the volume growth for this year, Unknown Analyst: can you walk us through maybe the cadence of it? Obviously, you are guiding mid-single-digit Roushan Zenooz: on a full year. Kurt J. Ekert: I think earlier this year, you still annualized in some of the share gains that you have. Roushan Zenooz: So what is sustaining growth in H2? Is that related to the multi-source low-cost carrier initiative? How is that working? Kurt J. Ekert: And then secondly, on NDC, you talked about that going up 4%. Can you talk a bit about where you are seeing that growth coming from? Are TMCs finally getting on board? Unknown Analyst: And maybe by region as well? Thank you. And I will have a quick follow-up. Kurt J. Ekert: Okay, Victor, thank you. Multipart question, of course, as usual. Number one is with respect to distribution volume growth for this calendar year. As we indicated, we expect to see mid-single-digit distribution volume growth for 2026 and, again, for 2027. As we indicated, in December, we saw 7% air distribution volume growth. We have seen a similar trend year to date so far. That is broad-based across all regions. It includes corporate travel, which we had indicated was actually negative last year. So much healthier market environment today. When we look at Josh Baer: this Kurt J. Ekert: in a componentized fashion, first of all, we expect that—our assumption is—the GDS market is largely flat from 2025 to 2026. So the growth that we are indicating is largely organic performance by Sabre. Number one, we expect to continue to take share. That will be the realization of share takeaways that we implemented last year. We have other things that are being implemented, and we expect to continue to win at pace. Two is NDC, which reached 4% adoption at the end of last year. We expect that to continue to scale, and I will speak about that further in a second. And then three is, we spoke last year about integration of additional low-cost carrier inventory and the launch of our multisource platform in new low-cost carrier. That is all fully in production today. It is one of the key reasons we are winning, and we expect to pick up incremental bookings from those carriers as well. With NDC more specifically, we are seeing it pretty broad based in terms of adoption by OTA and TMC. And I would say it varies by region, but it is very specific to carrier. So, for example, you might have a large carrier in South America, which has brought in NDC adoption, and if that is a top tier-three carrier, that will drive adoption for the region in total. But I would say, generally, you are at a point now where, as we indicated, we have 42 carriers live within our NDC solution. We have done a significant amount of work on functionality to basically normalize workflow differences between Edifact and NDC for the travel agent, and that is mitigating any productivity or user experience impacts that they may have had previously. So, again, we expect that to scale at pace as we go forward. Thank you. That makes sense. And maybe a quick follow-up on the restructuring. Should we expect the inflation offset program to continue, and any Unknown Analyst: cash flow impact for 2027 as well potentially? Michael O. Randolfi: Sure. So we believe the total quantum of the restructuring will be around $65,000,000. As we talked about, we had a $51,000,000 charge in 2025. The bulk of the cash flow impact will be during this year in 2026, and that is the $60,000,000 you see in our guidance slide. So in 2027, any cash flow impacts we expect would be de—could be some, but I would expect it to be de minimis. Kurt J. Ekert: Okay. Thank you. Operator: Thank you. The last question will come from the line of Jed Kelly with Oppenheimer. Your line is now open. Kurt J. Ekert: Hey. Great. Thanks for taking my questions. Unknown Analyst: Just on the free cash flow guidance, Kurt J. Ekert: can you give us an update on how your discussion is going Jed Kelly: with your debt holders and, you know, free cash flow being flat? Would love to hear an update there. Thanks. Michael O. Randolfi: Yeah. I mean, well, Jed, as you know, we just completed a significant refinancing of $1,800,000,000. That refinancing went very, very well. We did that at an interest cost of 11 and 1/8%. And the free cash flow profile today is the same as when we conducted that refinancing. So, overall, we are focused on generating positive free cash flow. We expect to generate positive free cash flow in 2027, and we have a strong cash balance. Kurt J. Ekert: Yeah. And, Jed, just keep in mind, as Mike indicated during the prepared remarks, free cash flow projection for this year includes the $60,000,000 of impact restructuring. Yeah. About a $130,000,000 year-on-year difference from the PIK moving to cash. So there is no more PIK debt that we hold today. Jed Kelly: And then I would love to hear your—I guess, because I am last, I will ask a couple. You said corporate travel is holding up pretty well. That is good to hear. Is that kind of a comp issue, or what is going on there, and where are you seeing the strength? Is it coming more from the traditional travel agencies, or is it coming from some of these new self-service players that we hear about? Kurt J. Ekert: I would say corporate travel and TMC traffic, which was trailing the market last year, we are seeing positive signs in the first part of this year. That is fairly broad, both with traditional or existing players as well as some of the new entrants. So we have good exposure to both parties. Jed Kelly: Got it. And then I guess just my final one. I appreciate all the commentary around AI. I know you have been in the travel industry for a while. When you hear all these direct connections, and you can see the market is pretty excited about it if you just look at the relative outperformance between Marriott and, like, a Booking or any third-party travel agent. I am just wondering, as we kind of see this evolve, Kurt J. Ekert: how does this differ than search, where Jed Kelly: I assume these direct connections were available for a while, but the suppliers never took advantage of search. And I guess what makes this different? Because I have to assume Google is not going to give away their search advertising business, and OpenAI is going to need a pretty big auction advertising business to pay for all their compute requirements. So just wondering how you see this evolving. Operator: Thanks. Kurt J. Ekert: Yeah. So what is interesting—what is very different about, let me compare this to metasearch—is Google Flight Search or KAYAK, for example, Michael O. Randolfi: where Kurt J. Ekert: you get to compare as a consumer many different price points and then you get launched into a different ecosystem to consummate your booking, into the supplier direct or into the OTA, for example. What we have heard from effectively every agentic player and large tech platform that we have spoken to in recent months is they want to have an integrated end-to-end experience to include changes, servicing, etcetera, which does not sound like a metasearch experience whatsoever. It sounds more like an agency experience. And so, as Gary indicated, we think we are very well positioned to enable that. When you think about this on a channel basis—and I talked earlier about supplier direct, let us say non-loyal customers, and metasearch—we have a de minimis or almost no share impact from either of those two channels today. So as an intermediary, to the extent that those channels are impacted, that will have no adverse effect on Sabre. If OTAs are adversely impacted, that is between 20–25% of our intermediary trading volumes. But we think the OTAs, especially folks like Priceline or Expedia, are very well positioned to compete there. So we look at this and say, agentic and us backing the agentic is an offensive new opportunity. To the extent there is downside risk, the downside risk to us given our ecosystem is relatively small. Jed Kelly: Got it. And then nice announcement with MindTrip and PayPal. I know the MindTrip people, pretty interesting platform they are building. Can you just expound on that? I know you said it in prepared remarks, but any additional color you can add to people on the call? Kurt J. Ekert: Yeah. Gary has been the architect of that, so I will ask him to step right in. Gary Wiseman: Yeah. So as I mentioned earlier, in terms of the way we are working together here is that MindTrip is that front-end experience, where they are using agentic capabilities in order to really allow discovery and trip planning. So let us say you want to go to Japan, you have two teenagers, one is into manga. You can tell it that, and it will start to suggest an outline of places to go, things to go and see. And then, combined with that, it will start calling us for hotel information as it is planning the itinerary to map out what a good hotel would be near a particular attraction that might interest you. And, eventually, it will start to Jack Halpert: all those Gary Wiseman: as it builds the full itinerary. And then from that point onwards, as you decide, okay, this is the trip I actually want to go for, that is where PayPal comes into the mix. So PayPal, as I said earlier, they have the instant payment option, of course, but then also they provide installment payments. As you know, travel these days, particularly international travel, can get quite expensive. So the ability to pay in installments is also, I think, a very critical part of this particular experience. And then after that, we provide the booking and the servicing capabilities. So if, during the trip, you run into issues, you need to reschedule things, rebook, etcetera, you can come back to the MindTrip app and simply tell it that you would like to change your flight. So it is really an end-to-end experience for consumers as they look to discover, plan, book, and then be serviced throughout the travel experience. Great. Jed Kelly: Very helpful, and appreciate you answering all the questions. Jack Halpert: Of course. Thank you. Operator: This concludes the Q&A portion of the call. I will now turn the call back over to Kurt J. Ekert, CEO, for any closing remarks. Kurt J. Ekert: Thank you, everybody, for the interest today. We are extremely optimistic and excited for the year and the years ahead, and look forward to sharing results with you in the next quarter and quarters ahead. Unknown Analyst: Take care. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, and welcome to FirstEnergy Corp. Fourth Quarter 2025 Earnings Call. A reminder, this conference is being recorded. It is now my pleasure to turn the call over to Karen Sagot, Vice President of Investor Relations. Please go ahead, Karen. Thank you. Karen Sagot: Morning, everyone, and welcome to FirstEnergy Corp. year end 2025 earnings review. Our earnings release, presentation slides, and related financial information are available on our website at firstenergycorp.com/ir. Today’s discussion will include the use of non-GAAP financial measures and forward-looking statements, which are subject to risks and uncertainties. Factors discussed in our earnings news release, during today’s conference call, and in our SEC filings could cause our actual results to differ materially from these forward-looking statements. The appendix of today’s presentation includes supplemental information, along with the reconciliation of non-GAAP financial measures. Please read our cautionary statement and discussion of non-GAAP financial measures on Slides 2 and 3 of the presentation. Our Chairman, President, and Chief Executive Officer, Brian Tierney, will lead our call today. He is joined by K. Jon Taylor, our Senior Vice President and Chief Financial Officer. Now it is my pleasure to turn the call over to Brian. Brian Tierney: Thank you, Karen. Good morning, everyone. Thank you for joining us today and for your interest in FirstEnergy Corp. 2025 was a transformative year for our company. We executed on our plan, achieved several important milestones, and positioned FirstEnergy Corp. for long-term success in one of the most dynamic periods in our industry’s history. We delivered strong financial results across all of our key metrics. We advanced key regulatory strategies in Ohio, and we reinforced our foundation for sustainable financial growth, resulting in a positive ratings action at S&P. In addition, we are announcing a $36,000,000,000 five-year capital investment program focused on improving customer reliability and grid resiliency. K. Jon Taylor: This positions the company to deliver a core earnings per share compounded annual growth rate near the top end of 6% to 8% from 2026 to 2030. We are also pursuing significant incremental investment opportunities over the planning horizon. These include new generation investments that will provide meaningful benefits to customers in West Virginia and additional regional transmission investments that are critical to maintaining grid stability. Today, we are reporting 2025 GAAP earnings of $1.77 per share compared to $1.70 per share in 2024. Core earnings were $2.55 per share, at the top end of our revised and increased guidance range for the year, and an increase of 7.6% compared to 2024. We deployed $5,600,000,000 in customer-focused capital investments in 2025, an increase of nearly 25% versus last year and approximately 12% higher than our original plan for the year. Our distribution reliability metrics improved 10% across the system compared to 2024. Notably, this includes significant year-over-year improvement in our New Jersey and Pennsylvania service territories, where we have commission-approved investment programs. Brian Tierney: Finally, K. Jon Taylor: we declared quarterly dividends totaling $1.78 per share, a 5% increase from 2024. This growth is consistent with our plan of providing a solid dividend yield and an attractive total shareholder return. Are pleased with our performance in 2025, and we are committed to building on the success as we deliver on our long-term financial plan. Our $36,000,000,000 capital program represents a nearly 30% increase from our previous five-year plan. It requires only modest amounts of equity to fund growth, which John will talk about later. This capital program was designed through a coordinated approach that aligns enterprise strategy with insights from our five business units. It addresses state-mandated policies and local needs, and it reflects our commitment to affordability while meeting customer expectations for reliable service. The updated plan includes $19,000,000,000 of total transmission investments across our stand-alone transmission and integrated segments, a 35% increase from our previous plan. Companywide, expect our updated investment plan to translate into 10% rate base growth over the planning period. Our strategy, focused on prioritizing investments for our customers and supported by constructive regulatory jurisdictions, positions us well to deliver a core earnings CAGR near the top end of 6% to 8%, through 2030. Turning to Slide 7. We see opportunities for incremental investments that will further support our customers in the region. This includes our planned generation investment in West Virginia. Last week, we filed our request for the 1.2 gigawatt combined cycle natural gas generating facility, which will be located in Maysville, West Virginia. We ran the build-own-transfer RFP and considered that option against our self-build engineering, procurement, and construction plan. From that analysis, we determined using an EPC approach is the most prudent and cost-effective solution for our West Virginia customers. We anticipate receiving approval in the second half of the year, and we expect the new facility to be operational in 2031. Once approved by the West Virginia Public Service Commission, we will include this $2,500,000,000 investment in our financial plan. This will increase our consolidated rate base CAGR from 10% to 11%. When we announced this investment last November, Governor Morrissey challenged us to do more. Brian Tierney: I accept that challenge. K. Jon Taylor: And with approval of this project, we will seek to add additional generation in the state to support growing data center activity. Moving to Slide 8, we also see incremental opportunities in our transmission business. Our transmission operations are among the largest in PJM and encompass critical interconnections with strategic high voltage corridors and will require ongoing investment to support load growth. Began our transmission investment program in 2014. Over the last twelve years, we have deployed $17,000,000,000 to replace aging equipment and upgrade the health of the system. This work has addressed about one third of our transmission lines and major substation assets. Substantial investment will be required as approximately 70% of the lines and 30% of substation assets are expected to reach end of life over the next decade. Additionally, we have an ongoing opportunity for growth associated with the regulatory required projects, such as investments awarded to FirstEnergy Corp., as part of the most recent PJM open window process. Since 2022, our stand-alone transmission and integrated segments have been awarded approximately $5,000,000,000 in competitive transmission projects. Our ideally situated transmission system and our transmission planning expertise position us to continue our success with the competitive open window process. We expect the upcoming 2026 open window solicitation will be similar in scope and scale to what we have seen in the past years. We expect the PJM board to vote and approve the next round of projects in the 2027. At that time, we will update our investment plan to include any awards. Turning to Slide 9. We make the necessary investments in a reliable and resilient grid that drives economic growth for our communities, we are actively addressing affordability. On average, we control just 32% of the total customer electric bill in our deregulated states. The generation component represents about 60% of the total bill. Across these states, our customer bills are approximately 20% below the in-state peer average and remain at or below 2.5% of our customers’ share of wallet. In fact, with our capital plan, by the time we get to 2030, our bills are expected to remain below the current rates of our in-state peers. We are proud of the value we provide, and affordability is top of mind. We are committed to doing what we can to manage customer bill impacts. This includes continued discipline, controllable costs, which is reflected in our baseline O&M savings of 15% or over $200,000,000 since 2022. We are also working with state regulators and leaders to identify opportunities to mitigate bill increases. We are advocating for initiatives to ensure generation supply better aligns with customer demand, and we are reviewing all programs that can provide relief to customers. In Ohio, a recent legislative change reduces property tax assessments for our utilities by about $100,000,000 in 2027, which will have a positive impact on customer bills in our upcoming three-year rate plan. As we make critical investments to provide reliable and resilient service, we are committed to ensuring our rates remain affordable. I am confident in our plan, our management team, and our ability to deliver on our commitment. Our execution in 2025 was strong, and we are focused on continuing that momentum. Now turn the call over to John. Thanks, Brian, and good morning, everyone. Today, I will review our financial accomplishments and results for 2025 and plan regulatory proceedings for 2026. Brian Tierney: But spend most of my time reviewing the expectations and key assumptions in our five-year plan. As Brian mentioned, 2025 was a very important and successful year for FirstEnergy Corp. K. Jon Taylor: We delivered on key financial metrics, including core EPS, Brian Tierney: base O&M, K. Jon Taylor: capital investments, Brian Tierney: and cash from operations. Can review more details about our results, including reconciliations for core earnings and business segment drivers, the strategic and financial highlights presentation that was posted to our IR website yesterday afternoon. Core earnings for the year came in at $2.55 per share, which is close to 8% above our 2024 results, and 2% above our original guidance midpoint of $2.50 per share. This was largely driven by new base rates K. Jon Taylor: and formula rate investments. Brian Tierney: Residential customer demand that was 3% above 2024 levels, and strong financial discipline in our operating expenses that allowed us to execute on significant additional maintenance work that was originally scheduled for future years. On a consolidated basis, our return on equity in 2025 was 9.8% on rate base of $27,800,000,000. K. Jon Taylor: Versus 9.4% on $25,600,000,000 in 2024. Investments were $5,600,000,000 for the year, which are 25% above 2024 levels, and 12% above plan. Brian Tierney: These include nearly 75% in formula rate investments, with 50% in FERC-regulated transmission investments where total FEO and transmission rate base increased 11% year over year. K. Jon Taylor: Our financing plan included cash from operations of $3,700,000,000 was more than $800,000,000 above 2024 levels, Brian Tierney: subsidiary debt issuances of $3,400,000,000, a $2,500,000,000 convertible debt transaction in the second quarter. In November, we received constructive regulatory outcomes in Ohio, including in our 2024 base rate case, which paved the way for an upgrade from S&P to BBB flat at FE Corp on a senior unsecured basis. 2025 was a pivotal year for FirstEnergy Corp. in terms of delivering on our plan, K. Jon Taylor: and we remain focused on meeting our commitments to investors going forward. Brian Tierney: Turning to our regulatory strategy. Plan to file traditional base rate cases later this year in both Maryland and West Virginia. In West Virginia, we plan to file in the second quarter to reflect a $1,000,000,000 increase in rate base since 2022. Our current rates are based on a rate base of $3,200,000,000, K. Jon Taylor: an equity layer of 50% and an allowed ROE of 9.8%. Brian Tierney: In Maryland, we plan to file in the second half of the year to reflect investments we have made since 2022, K. Jon Taylor: Our current rates include rate base of nearly $700,000,000 with an equity layer of 53% and allowed return of 9.5%. In Ohio, we expect to file our three-year rate plan early in the second quarter, Brian Tierney: While we appreciate getting to a conclusion in our 2024 base rate case, are looking forward to filing under the three-year rate plan with four test years to ensure timely recovery of critical investments we need to make on behalf of our customers. All three of these cases, we anticipate requested rate increases at or below annual inflation as compared to the current residential bill, where on average, our monthly bills are approximately 20% below the in-state peer average. Lastly, in West Virginia, our pro proposed cost recovery for the generation investment consists of two phases. First, during the construction phase, we are proposing a generation surcharge based on precedent in the state designed to recover our total financing cost with a requested equity return at our current authorized return of 9.8%. Then after the power plant is placed in service, we would look to transition the recovery from a surcharge to base rates at a future base rate case. As part of the financing plan for this investment, we filed an application with the U.S. Department of Energy, seeking a low-interest loan under the Energy Dominance Financing Program. Expect approval before the end of the year, which would save customers more than $200,000,000 over the thirty-year life of the loan versus traditional financing. K. Jon Taylor: Based on our forecast, once in service, this investment is expected to have minimal impact to customer bills. Brian Tierney: Moving to our five-year plan. Our $36,000,000,000 capital investment plan is an increase of $8,000,000,000 or nearly 30% from our prior five-year plan. As Brian discussed, this program results in expected rate base growth of 10% through 2030, led by transmission investments totaling $19,000,000,000, customer-focused distribution investments to strengthen and modernize the grid. 100% of our capital plan is focused on improving customer reliability and resiliency of the system, and only consists of awarded, approved, and contracted projects. We increased transmission investments by $5,000,000,000 or 35 from our previous five-year plan. This includes transmission investments in both our stand-alone transmission and integrated segments. The plan also includes regional transmission projects from the 2025 and prior PGM open windows totaling $4,000,000,000. Total distribution investments in our distribution and integrated segments are increasing 25% or $3,000,000,000 from the prior plan. K. Jon Taylor: This largely reflects increases for reliability investments and core infrastructure upgrades, Brian Tierney: the largest increase in Pennsylvania, where we are accelerating investments under the LTIP program, and are recovered through the existing distribution system improvement surcharge. This investment plan includes targeted customer benefits both on the transmission and distribution systems and excludes the significant incremental investments we are planning in West Virginia and additional upside in transmission. Moving to core earnings, we are well positioned to deliver compounded annual earnings growth near the top end of our 6% to 8% growth rate from 2026 to 2030. K. Jon Taylor: This sustainable long-term growth starts with our $36,000,000,000 capital investment plan, Brian Tierney: with 75% in formula rate programs, and 10% rate based growth. Targeting a consolidated ROE of 9.5% to 10% through the planning period. Our load forecast includes active and contracted customers, resulting in 2% customer demand growth, which is largely driven by a 5% increase from industrials, that typically are on a demand-based not volume-based charge. As our data center pipeline becomes contracted, this will be incremental to this forecast both from a customer demand and capital investment perspective. As we have demonstrated in the past, our plan includes financial discipline with our base O&M expenses, K. Jon Taylor: with modest increases of 1% to 1.5% per year. Brian Tierney: Operating expenses will continue to be a focus of the management team, as we look to deploy technology, artificial intelligence, and continuous improvement initiatives to further help offset planned increases. Finally, our financing plan targets strong investment-grade credit metrics K. Jon Taylor: through cash from operations, Brian Tierney: long-term debt issuances, and modest levels of equity or equity-like securities. That we have discussed previously. Our cash from operation funds 65% of our total investment plan and includes a modest impact K. Jon Taylor: from expected deductions from tax repairs on the corporate alternative minimum tax. Brian Tierney: Because of our tax position, including existing AMT deductions, the expected impact of tax repairs on cash flow is less than 2% and does not change our overall plan. Our debt financing plan includes $16,000,000,000 in new long-term debt issuances with FE Corp debt as a percentage of total debt at 20% versus 25% at the end of last year. And our equity needs are up to $2,000,000,000, which includes a $100,000,000 annual DRIP program, which has historically been in place. K. Jon Taylor: We will explore all options to fund our equity needs, including hybrid instruments, Brian Tierney: and anticipate any annual common equity issuances K. Jon Taylor: including for the DRIP Brian Tierney: to be approximately 1% of current market cap K. Jon Taylor: on average through the forecast period. Brian Tierney: In closing, we believe we have a compelling story and value proposition. Our plan is strong, focused on critical investments with significant incremental opportunities. We have a proven track record of executing on regulatory strategies that are focused on the customer and provide solid returns to our investors. And we have demonstrated our ability to be disciplined with our cost structure not only to minimize regulatory lag, but to provide benefits to customers. We believe we provide a compelling low-risk value proposition to investors, with a total shareholder return opportunity of approximately 12% with upside potential. We are committed to meeting our commitments for our customers, our communities, and our investors and are excited about the future. Thank you for your time. Now let us open the call to Q&A. Thank you. We will now be conducting a question and answer session. May I ask you please limit yourself to one question and one follow-up to allow as many as possible to ask questions? If you like to ask a question at this time, you may press star 1 on your telephone keypad. A confirmation tone indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. And our first question comes from the line of Nick Campanella with Barclays. Please proceed with your questions. Nick Campanella: Hey. Good morning. Thanks for all the updates. K. Jon Taylor: Good morning, Nick. Brian Tierney: Hey. Morning. Nick Campanella: So appreciate, the disclosure, six to eight at the high end now. You David Keith Arcaro: West Virginia could be another $1,200,000,000.0 incremental to the plan and that would bring your wrap CAGR to 11%. Just what is the incremental financing that would be associated with that? Given my understanding is there is kind of a proposal for, cash CWIP. And would this kinda put you comfortably above the 6% to 8% range? You know, say by 2029, or how should we kinda think about that? Thanks. Yeah. Nick, this is John. I will take the financing piece of that. So K. Jon Taylor: you know, obviously, the cash recovery will help. Pretty significantly. So I expect that to be 15% of the total investment. We will target 50% of the total investment with the Department of Energy loan with the rest likely being new equity to fund the investment. K. Jon Taylor: And and then on the growth Nick, as as we get these incremental investment opportunities coming in, whether it is generation or transmission, we will be updating, what growth looks like, as we put those in the plan. Nicholas Joseph Campanella: Okay. Okay. So I will take 15% of that CapEx. Thank you for that. And then maybe just I guess there is just been a bigger focus on Pennsylvania from investors given the various comments out of Governor Shapiro. And I know the distribution plan across the company is up. Pennsylvania, I think you are doing $6,700,000,000.0. I also understand your rates are below average there. But just how is the increase CapEx impacting your earned returns in the state? Just relative to that 10 that you show on the slides? And do you think you are going to be going back in for a case there? K. Jon Taylor: Thanks. Brian Tierney: Yes. K. Jon Taylor: So, Nick, it is not that long that we have come out of a rate case there. And, and and the big part of that rate case was investment in the distribution system. And so the increases that we got were to fund that investment, and we are actively doing that. We have a very targeted long-term investment program there. That has been approved as well. So the focus for us in Pennsylvania has been incremental investment Nick Campanella: in K. Jon Taylor: the distribution system to drive improvements and reliability. And that is what we are seeing in the plan. So, that that is the the what our focus has been. We are going to go in when we need to again. To to reflect that increased rate base that we have been adding to since the last rate case. But the focus in both Pennsylvania and New Jersey has always been we want to see the investment coming from the company in those states to drive reliability, and that is what we are doing. And that does leave us in a position where we have to keep going in for rate cases, to update the rate base and and our cost structure as well. But you know, in whether it is in Pennsylvania, New Jersey, all of our states, we are keenly focused on affordability, and that has us focused on things like our own O&M and then other bills charges. We mentioned tax in Ohio coming down that are flowing through the rates, but you know, investment and affordability are the things that are top of mind for us in Pennsylvania. And our other states. K. Jon Taylor: Yeah. Nick, and I would just add on that roughly 45% of the that we are making in Pennsylvania is under the LTIP program. Which is recovered through the DISC surcharge. So that provides for know, interim recovery of our investments and really helps us kinda with base rate case planning and that type of thing. Brian Tierney: Thanks for all the thoughts. K. Jon Taylor: Thanks, Nick. Brian Tierney: The next question comes from the line of Shar Pourreza with Wells Fargo. Please proceed with your question. K. Jon Taylor: Hey, guys. Good morning. Morning, Shar. Morning. Brian, I just want to make sure we we have the numbers correct here. So the CapEx numbers were obviously healthy. The rate base growth is likely K. Jon Taylor: little bit closer to 10.4%, right? Just as you are adding West Virginia remind us, does that sort of get you to closer Ross Allen Fowler: to 11.4%? Because I know we are getting quoted on 11%. But I think West Virginia is probably a 100 basis points accretive to that. And then how do we sort of think about the delta between 11.4% when you add West Virginia in it and your EPS growth where you are already at the higher end. So I guess another way to ask it is, what is the amount of lag between rate based growth and the newly guided let us just say, 11.4% rate based growth when you add West Virginia in there. K. Jon Taylor: Yeah. So, Nick, as we are looking at this, you know, we are trying to give transparency and insight into what is in the plan today and then what are the things that could be added to the plan and what that those additions would look like. Your math is about right on the 10.4 to eleven point four. And we have always said we will update the CapEx plan. We will update earnings as things like and incremental transmission comes in. But what what we are not going to do is put things in there that are speculative and not approved yet and then have to take them out of the plan. So our idea is what the plan is today. What the incremental could be. And if we need to change what the earnings growth rate is, as we add things to the plan. We will do that at that time. Ross Allen Fowler: Got it. Okay. Thanks for clarifying that because I know Ross Allen Fowler: Brian, there is a lot of confusion out there with 10% versus 10.4%. There is a big difference between 10% and 10.4 And then just lastly on West Virginia, can you just expand on the incremental opportunities post the current project? So what is the potential timing there, the turbine supplies, where the DC conversations etcetera. Thanks. K. Jon Taylor: Yeah. Thanks for that, Shar. So as we look at our state K. Jon Taylor: and we look at states that are wanting us to invest in regulated generation, West Virginia stands at the top of that. I mentioned the governor’s challenge to us. To do more. He has a 50 gigawatts by 2050 goal that he is, searching for. And if we get Ross Allen Fowler: know, constructive regulatory approval here, K. Jon Taylor: we are going to be going back into West Virginia and looking at ways that we can add another 1,200 megawatts, hopefully dedicate that to data center load talking with hyperscalers, with developers about doing that. And the relationships that we are beginning now with suppliers like Siemens on the turbine side, in terms of what we are doing with the first EPC that we are going forward. We will leverage those relationships, going forward for the incremental build. But when we look at our universe of opportunity to invest in generation, West Virginia said to us, we are open for business. Want you to invest here. And as a regulated, fully integrated utility there, looking to drive economic development we want to be a key part of that for our customers and and the state of West Virginia. Ross Allen Fowler: Got it. Appreciate it. Thank you, guys. K. Jon Taylor: Thanks, John. Operator: Our next question comes from the line of David Arcaro with Morgan Stanley. Operator: Please proceed with your question. Brian Tierney: Hey. Thanks so much. Good morning. K. Jon Taylor: Good morning, David. Brian Tierney: Wondering if you could touch on New Jersey and the backdrop there, kind of expectations, you know, for, timing of your next rate case and just overall your perspective following the executive orders and some of the changes we could see ahead in the regulatory backdrop? K. Jon Taylor: Yes. So, obviously, affordability is front and center for, Governor Sherrill. We have been working with her and her staff to look at ways that we can address affordability in the states, what are items on the bill that we can either reduce or eliminate, but, again, when we were in our last rate case there, the the real focus of that was the worst performing circuits that we had and the big point of that rate case was, are we going to make the incremental investment to drive increased reliability in those circuits? We have been doing that since the last rate case, and we are seeing related improvement in reliability there, which is what New Jersey wanted from that case. So we are going to continue with that activity. We are going to work constructively with the governor and and her staff with the BPU and others to address affordability. But, ultimately, we will have to go back in for another rate case to keep that investment coming. Our rates in New Jersey are significantly below our in-state peers, and even with the investment that we have planned there, we anticipate to still be below K. Jon Taylor: our in-state peers. K. Jon Taylor: But we have to improve reliability. We are singularly focused on that. And affordability at the same time. So we are going to work constructively with everyone to time a next rate case, and and try and maintain that affordability as well. Brian Tierney: Got it. Okay. Thanks. That is helpful. And then could you touch on the outlook that is embedded in your plan for ROEs? I guess, looks like you are you are assuming, you know, basically flattish, kinda holding ROEs steady throughout the plan. I wanted to confirm that if you are around a 9.8 now and you are you are planning on just holding that essentially between 9.5 and 10 going forward. I guess, could you touch on kind of the key levers there, key moving pieces, as you are, the out the outlook for earned ROEs? K. Jon Taylor: Yes. So thank you for that, David. We are we are continuing to be in that target in that 9.5% to 10% range. Our goal is to be as close to our authorized returns as possible. Given the amount that we are investing, we are going to be going in regularly for rate cases, because of the magnitude and the investment that we are making to drive reliability. But we are confident that we will be able to stay in that nine and a half to 10% range with the flight of rate cases that we have and the investment that we are making today. Brian Tierney: Okay. Great. Thanks so much. K. Jon Taylor: Thank you, David. Operator: Our next question is from the line of Ryan Levine with Citi. Please proceed with your question. David Keith Arcaro: Was hoping you would be able to give some color around the execution ability of your $36,000,000,000 CapEx plan. To sufficient internal engineering and project management capability to deliver on the K. Jon Taylor: step up of CapEx, especially in transmission. Brian Tierney: Given labor tightness? And how are you seeing in house versus contractor labor relations to be able to deliver on this? K. Jon Taylor: Yeah. So thank you for the question, Ryan. K. Jon Taylor: We are very confident in our ability to deliver against the plan especially the transmission, side of it. We are we are having considerable growth. We have been investing in that side of the business significantly since 2014. We have the relationships with contractors, labor, suppliers, to allow us to do that. And we are ramping up those relationships as our, investment is ramping up. But project management, discipline, supplier relationships, all those things are key to us executing against our plan. And Mark Marzynski and his team on the transmission side are laser-like focused on our ability to deliver, and, and things are going according to plan there. So, it is a heavy lift, no doubt. But, we have the expertise and relationships, to deliver. So we are very confident in our ability to make it happen. Brian Tierney: On that front, are there certain to ask aspects that you are most constrained on? And are there any external Michael P. Sullivan: external markers that we could track the progress around the execution? K. Jon Taylor: I do not think so. I mean, we are starting this see on the distribution side, we are starting to see the tightness in the supplier market is starting to ease. Suppliers are looking for people that they will view as strategic partners that they can look to be, you know, delivering significant volumes of demand to them going forward. And we are obviously going to be one of those players. We have we have done things like made orders out in time, things that are no regrets. On the transmission and distribution side. And then we have Chris Beam who is working very hard on the generation side, fostering relationships with Siemens as our OEM on the key component of the generation that we have. So it is tight out there. It is not as tight as it was during COVID. But, but we believe we have the the relationships, to get us through, what we need to do to drive the growth that we have planned. Michael P. Sullivan: Okay. And then one last unrelated question. How are you assessing the potential impacts from the Maryland Lower Bills Act? And the worse, similar affordability driven legislation in that state? Ross Allen Fowler: Yeah. So K. Jon Taylor: you know, we are seeing this across our system where people are very, very focused on affordability, and we are engaging all of our jurisdictions and legislatures in that discussion. We are well positioned relative to our peers on that. We talked about on the call that Ross Allen Fowler: you know, our part of the bill in our deregulated states, it is only about K. Jon Taylor: 32% of the bill with generation being about 60%. So there are some obvious places to focus on where the increases in the bill have come on, which is why we are supportive of K. Jon Taylor: extending the, the capacity auction caps Ross Allen Fowler: I think it would be beneficial to our customers to even lower K. Jon Taylor: those caps for existing generation, and we have been supportive of things like a second auction that would that would bring new generation, to the fore, which is what is needed. So K. Jon Taylor: we have been focused on affordability on our cost structure. K. Jon Taylor: And looking for ways to engage with all stakeholders to make sure that electricity is affordable, to our customers going forward. Ross Allen Fowler: Thank you. K. Jon Taylor: Thank you, Ryan. Ross Allen Fowler: The next question is from the line of Steve Fleishman with Wolfe Research. Operator: Please proceed with your questions. K. Jon Taylor: Hey. Good morning. Thanks for the update. K. Jon Taylor: Morning, Steve. K. Jon Taylor: So just to follow-up on the West Virginia maybe just a little more specifics on what what do they actually need to approve? In this order? Ross Allen Fowler: Just just K. Jon Taylor: that the plan is needed and K. Jon Taylor: the cost levels and and, I guess, the CWIP rate making? Are those the key items that need approval? Yeah. So it is a certificate the exact timing. Michael P. Sullivan: The exact timing to, like, any rough sense of when in the second half? Ross Allen Fowler: Yeah. So K. Jon Taylor: what they are going to approve is is a certificate of need in public necessity. We are asking for the interim financing, in the plan. Where we get AFUDC, CWIP we have asked for. So what that will be during the plan, and we have also proposed what our financing plan will be for the plan both on an interim basis and and a long-term basis. And so that is why we are moving forward with the DOE approval there. I think the commission has up to, a year to act on this. We have heard that they are interested in acting much quicker than that. To get the plant online even sooner. And so we do anticipate that it will be again, I cannot be more specific than the second half, K. Jon Taylor: and we are expecting a procedural schedule on the, filing within the next month. So, they are K. Jon Taylor: I would say West Virginia is fast tracking the investment because they know how important it is to the economic development in the state. And I think you are seeing that everywhere from the governor’s interest in making sure that the investment is made right down to the commission. I think they are going to do things right, I think they are going to make sure it is it is it is needed and dot their i’s and cross their t’s, but I think they are going to be moving with dispatch. Michael P. Sullivan: Okay. Great. That is helpful. Brian Tierney: Then one other question just on the equity plans. K. Jon Taylor: Could any color on Brian Tierney: the $2,000,000,000 up to $2,000,000,000 kind of the the timing Ross Allen Fowler: of that. K. Jon Taylor: Is it kind of ratable over the period? Roughly Brian Tierney: Any color on that? K. Jon Taylor: Yeah, Steve. It is it is it is pretty much ratable over the over the five-year period. Beginning in 2026 with about 1% of our total market cap with with and that includes the the DRIP program that has been in place historically. But I I would plan on pretty ratable issuances over the five-year planning period. And, again, you know, that $2,000,000,000 includes potential equity-like securities. Know? So we will look at hybrids to kinda know, reduce the common equity issuance need. And we will look at that over this year. Brian Tierney: Okay. Great. Thank you. Ross Allen Fowler: Thanks, Steve. Operator: Our next question comes from the line of Carly S. Davenport with Goldman Sachs. Please proceed with your questions. Carly S. Davenport: Hey. Good morning. Thanks for taking the questions. Morning, Carly. Just on the, transmission CapEx piece of the plan. Can you just talk a little bit about what portion of the near-term spend, so say 2026 to 2028, is is tied to projects with right of way or siting and permitting that are in advanced stages versus still in earlier stages? K. Jon Taylor: Yeah. So everything that we have that is K. Jon Taylor: in the plan, Carly, is either approved by a commission, does not need approval, or we have clear line of sight to permitting to getting it done. So if it is in the plan, there is very high confidence that all of the approvals necessary are either received or in flight, and we anticipate getting them in the near term. So if there is a a long putt on something or or we do not have line of sight to that being in service and the dates that we are talking about it, it is not in the plan. And we have a big enough portfolio of projects. So if something happens on one project in particular, we can advance another and and do the like and have that flexibility over the planning period. But we are extremely confident in what is in the near-term part of that plan. And, if we are still awaiting approvals or the like, what we talk about with the PJM open windows, then it is not in the plan yet. Carly S. Davenport: Great. Okay. That is clear. Thank you. And then just a follow-up on on the affordability questions. I know in the slide you had mentioned that you expect bills to remain below in-state peers throughout the planning period. Is there anything specific that you can provide on a sort of percent bill inflation target that you would expect over the plan period? K. Jon Taylor: Yeah. We we anticipate it to be below inflation. So we anticipate that the share of wallet and the like will stay the same. K. Jon Taylor: But, you know, our our affordability Ross Allen Fowler: position is really one of our strengths. K. Jon Taylor: And and it is something we are going to focus on. Peep people are always concerned about oh, my bill is going up x percent. We are focused on making that as small as possible and keeping a very modest share of our customer’s wallet. As we go forward, and that that ranges significantly from places where we have you know, K. Jon Taylor: wealthier customers to K. Jon Taylor: places where we have customers closer to or the mean average income but we are very sensitive to that affordability and doing everything we can on our cost structure side. And on the build components that we are working with the various commissions on to make sure that, the impact to customers is is as low as possible. And certainly trying to keep that below inflation. Carly S. Davenport: Got it. Okay. Thank you so much for the color. K. Jon Taylor: Thanks, Carly. Operator: The next questions are from the line of Jeremy Bryan Tonet with JPMorgan. Please proceed with your questions. Michael P. Sullivan: Hi. Good morning. K. Jon Taylor: Good morning, Jeremy. Ross Allen Fowler: I just want to, sorry, clarify real quick on the CCGT financing. Michael P. Sullivan: As far as the components there. There is 50% DOE loan and then remaining 50% what what are the components there? K. Jon Taylor: Yeah. So so you are right. The the loan, we would target 50% of the total investment value. And then if we get the approval of cash recovery during the construction phase, that would fund about 15% of the overall investment, and then the rest which would be about 35%, would be new equity needs. That we would have to put into the plan. Michael P. Sullivan: Got it. Thank you for that. Ross Allen Fowler: Then just want to David Keith Arcaro: pivot towards earned ROEs at this point. I am just wondering, I guess, where you see the biggest gap versus allowed in, I guess, key focus going forward, which which jurisdictions have, you know, the earn returns? Brian Tierney: Earn returns so low, Ross Allen Fowler: authorized. K. Jon Taylor: So it is all all things you would expect Jeremy. The places where you see us going in for rate cases, are the places where our investment has driven down the earned ROE, and that is why you know, clearly why we are going in. John talked about that in his remarks. And then we have also talked about the timing for when we might go in ultimately for New Jersey. But it it is the places where we are making the incremental investments, Michael P. Sullivan: where we K. Jon Taylor: lag a little bit to the incremental investment that we are making, and we just have to refresh that by going in for for K. Jon Taylor: new rate cases. Yeah. The other thing I would say, Jeremy, if you look at our overall plan, I mean, we we are in jurisdictions that have formula rate recovery mechanisms. So 75% of our total investments are in formula rate programs. So if you think about the impact on growth risk with respect to that those programs. It it drives a healthy amount of of the growth in the plan with base rate cases being you know, less of a contributor the overall scheme of things. So, really, most of the growth in the plan is driven by the formula rate investment programs. With a lesser extent from from base rate cases. David Keith Arcaro: Got it. Thank you for that. And just a last quick one, if I Michael P. Sullivan: could. You know, the David Keith Arcaro: obviously continues to be a lot of focus on the PJM auction. Michael P. Sullivan: And how this might evolve in the future. Just wondering any thoughts you might share there in Epi’s potential role if a regular generation or otherwise you know, might, you know, become a something that Effie would look at more in the future. K. Jon Taylor: So, Jeremy, it is still early days in the stakeholder process. I think it just began, yesterday or the day before, continuing today. You know, the stakeholder process in PJM is a really, really difficult one. But the key things that we are going to be focusing on is affordability for our customers. And so as you look at the key things that are going to play out, K. Jon Taylor: in the stakeholder process, it is going to be K. Jon Taylor: how much generation are they looking for, what the timing is going to be, how it is going to be paid for, and who is going to bear the cost. Like, all the basic things that you would look for. So we are involved in the stakeholder process. We are going to continue to be involved. And and first and foremost, we are going to be looking out for affordability Ross Allen Fowler: for our customers as we work our way through that. In terms of FirstEnergy Corp. and our interest in in, K. Jon Taylor: in regulated generation. You you know, look at our states, and you have states where, Ohio just passed legislation saying that the utility cannot own regulated generation. And then I think it would be difficult for us to in places like New Jersey and Maryland. So that really leaves us then with West Virginia where we have told you what our plans are. We want to get this one approved, and then if West Virginia would like, we are interested in investing incrementally more in that state, and that leaves you with Pennsylvania. And, and, again, we do not have a path to seeing regulated generation in that state yet. But if if they would like us to consider it, we we would be willing to look at it. But our clearest path to helping with that issue is Ross Allen Fowler: one, what we are doing in West Virginia, and then, two, what we are doing in the stakeholder process at PJM. Brian Tierney: Got it. That is helpful. I will leave it there. Thanks. Ross Allen Fowler: Thanks, Jeremy. Operator: The next question is from the line of Paul Patterson with Glenrock Associates. Please proceed with your questions. Michael P. Sullivan: Hey. Good morning. K. Jon Taylor: Morning, Paul. Michael P. Sullivan: Just on the K. Jon Taylor: on the transmission, when I look at Slide 7, Michael P. Sullivan: is K. Jon Taylor: how much of this, I guess, is demand driven I mean, is that part of the 20%? Or is this Ross Allen Fowler: really pretty much just K. Jon Taylor: just you know, replacing the aging issue, the the the serve the reliability issue. And also just in respect to New Jersey is is the offshore wind thing still going on there? Is that still part of the plan that that tri collector K. Jon Taylor: project and stuff or K. Jon Taylor: should we think of that? Let me let me start with that last part. We are we are working with New Jersey and PJM to modify what portions of that plan are no regrets and will be beneficial to New Jersey and PJM even without the offshore wind component of that. So we are working to make those modifications that are agreeable to both New Jersey and PJM to make sure that, we are investing in what they want us to invest in, and it is no regrets regardless of K. Jon Taylor: the offshore wind. So that is that is in process, as we speak. K. Jon Taylor: If you look at the rest of the transmission, a lot of it is demand driven, but a lot of it is aging infrastructure as well. So if you look at the $5,000,000,000 that we have gotten from the open window process, since 2022, I I would say that is all demand driven. And so that is what are data centers doing what is happening with just demand across the PJM system. And they are responding to that. And that is, you know, clearly $5,000,000,000 of of what is in the plan that we have been awarded. And then if you look at the the rest of what we are doing, you know, we have made significant investments since 2014, but have only addressed about 30% of the system. And about you know, 60% to 70% of the system is going to have the end of its useful life in the next ten years. And so that is a huge amount of what we are spending on the, on the transmission investment. And those are things that we have to do for reliability. We have to do for economic development, and do not require a lot of incremental approvals for us to make those investments. K. Jon Taylor: Yeah. Paul, the other thing I would add is if you if you look at our data center pipeline, if you look at the 13 gigawatts that we have in the pipeline through 2035, obviously, that is not in our plan today. But each gigawatt that is added to you know, the the contracted or or or active demand would probably drive know, $250,000,000 or so of incremental capital investments on the transmission system. K. Jon Taylor: Okay. And and just in terms of the cost allocation, when it and that, I guess, that is determined by basically by by retail jurisdictions. Should we think of a lot of this CapEx being being absorbed by the new demand by the new data center demand growth or should we think about the breakdown of roughly speaking, obviously, it is kind of early, but you follow what I am saying in terms of how how people should sort of think about that Michael P. Sullivan: that that that K. Jon Taylor: I I do, Paul. So anything that is directly for that specific customer is being borne by the customer. The regional upgrades are being handled the way PJM, handled those, with, generally, the region that is benefiting from the investment is paying for the investment. So it is a traditional PJM user pays the benefit owner pays most of the cost of what is happening on a regional basis. Michael P. Sullivan: Okay. K. Jon Taylor: And then just in terms of the generation proposals that you guys have been making, K. Jon Taylor: a couple years now. K. Jon Taylor: How would you characterize the overall reception K. Jon Taylor: because, you know, it is it is changing how things are currently. This auction and what have you. Mean, you K. Jon Taylor: do you get a feeling that there is some momentum here in terms of your discussions with K. Jon Taylor: with regulators in the in the service territories about about, you know, just opening this thing up and just not relying completely on the capacity auction and K. Jon Taylor: And when do you think we might see some action some tangible action in terms of maybe making some moves on this, which would lower rates. Potentially, not your rate. You know, not not what you technically control, but would lower the wholesale price of power potentially. K. Jon Taylor: Yeah. So K. Jon Taylor: let me talk about that in regards to West Virginia in particular. I I have been doing this a long time, Ross Allen Fowler: and I have never had in my career K. Jon Taylor: a a meeting or an announcement like what we had in November in West Virginia. The overall reception was overwhelmingly positive from the governor to legislators to employees to unions, to executive members of the executive branch in in West Virginia. Just overwhelmingly positive. And so I I would just say that in the five states that we are in in terms of addressing resource adequacy, and the generation issues West Virginia is given their integrated nature, is very, very well positioned to address it from an economic standpoint and very welcoming to the investment. And that is why when we look at how we can help Michael P. Sullivan: with K. Jon Taylor: economic development and resource adequacy, West Virginia is the place where first and foremost, we have an opportunity to do that, and that is why we have filed for the first unit that we are talking about putting in there. And that is why we would strongly, consider and look forward to applying for a second unit and maybe a third and maybe a fourth if if, things continue the way they are in West Virginia. Okay. But the other areas? Michael P. Sullivan: You it is still up in here? K. Jon Taylor: I I mean, we you know the issues, Paul. I I mean Okay. States are deregulated. They thought the market would provide for it. The market is not providing for it. It is really it is tough, and that is why we find ourselves in this difficult PJM stakeholder process. But the issues are going to come down to how much do you want, when do you want it, and who is going to pay for it. And and our main interest there is making sure there is enough generation so the lights stay on, and making sure it is a affordable to our customers. Okay. Great. Thanks so much. Thanks, Paul. Operator: Our next question is from the line of Anthony Christopher Crowdell with Mizuho Securities. Please proceed with your questions. David Keith Arcaro: Hey. Just two quick housecleaning items One is to Shar’s question earlier on the the spread or the difference between Ross Allen Fowler: rate base growth and earnings growth, your CAGRs. Just what would cause that to maybe contract or expand as we move out to the forecast period? Or it is very unlikely, whether it is 240 bps or more what would cause that to change throughout the forecast period? K. Jon Taylor: I think the things have that we talked about, and it is, you know, kind of the basic things that you would think of. How much incremental investment can we have and then, how quickly can we get that recovered in rates? And it is just that it is just that simple, Anthony. And so that is why we are showing you what is in the plan. We are showing you what we think could be incremental, how big it is, when we think we might get approvals for that. And on the recovery side, you are seeing us regularly go in for rate recovery when it is not already in the 75% that is covered in formula rates the way John talked about. David Keith Arcaro: Great. And then just a follow-up to David’s question. I just missed it. Ross Allen Fowler: Did you guys state when you plan on filing your next New Jersey case? K. Jon Taylor: We we have not said, and we are we are not being cagey about that. We just have not decided. And, obviously, we will be in discussions with K. Jon Taylor: the governor’s office and the BPU about K. Jon Taylor: when is the right time for us to go in. David Keith Arcaro: Great. That is all I had. Thanks for taking my questions. Ross Allen Fowler: Thanks, Anthony. Operator: Thank you. Our last question comes from the line of Andrew Marc Weisel with Scotiabank. Michael P. Sullivan: Hey. Good morning, everyone. Ross Allen Fowler: Good morning, Anthony. This is Gillette. K. Jon Taylor: Cannot believe it is the last question, but I want to ask about two topics Brian Tierney: that received very little airtime today, data centers and Ohio regulations. First on the data centers, I see more additions to the K. Jon Taylor: contracted demand and pipeline disclosure. I appreciate the table with the detailed by Brian Tierney: state. I could be wrong. I think that is in the disclosure. Very helpful. My question is relative to the latest updates and and the recent trends, where are you seeing the most activity in which state? K. Jon Taylor: Are the latest additions going to be within this five-year plan, or are those most Michael P. Sullivan: going to be more like the early 2030s by the time they ramp up? K. Jon Taylor: Yeah. So we are seeing a lot of activity currently in in our Maryland service territory associated with the data center out outside of, out Frederick and outside of Frederick, Maryland. And then after that, we are seeing significant activity in both Pennsylvania and Ohio. Ross Allen Fowler: And you are seeing that K. Jon Taylor: sort of, you know, significant amount of activity between now and, in 2030, 2031. But then a huge amount of activity in terms of load and contracted load by that 2035 time frame, so between 2031 and 2035. So, that is those are the locations. Those are the places where we are seeing most of that data center activity. K. Jon Taylor: Great. Thank you. Brian Tierney: In Ohio, obviously, 2025 was a super busy year for you, and the K. Jon Taylor: company got through a lot of important proceedings and dockets. Looking forward, what are the priorities for 2026 in the next few years, whether that is on the regulatory side or execution, And should we expect conference calls to go almost nearly the whole time with barely any talk about Ohio for a while, should it be quiet. In that in that state? You know, the so thank you for that question. K. Jon Taylor: The one thing that we were monitoring in Ohio was the the the commission told us, since I started here, that the business as usual cases gonna go business as usual. And the legacy issues cases would be separate and and not mingled with the business as usual case. Cases. The commission held very much true to that. And so we were thrilled to be able to get what we think was a constructive order in the base rate case In the punishment phases, there was a significant K. Jon Taylor: penalty that was paid there, and and we are happy to K. Jon Taylor: settle that and get all forms of appeal of that behind us and just move on from that. So what we see is business as usual going forward, in Ohio with the legacy issues behind us. We will be going in in the near term for a three-year rate case to get that moving forward and get us firmly footed in that new regulatory regime that the new legislation has. And, you know, Ohio’s always been K. Jon Taylor: very supportive of K. Jon Taylor: wires’ investment in the state. That drive economic development and improved reliability. And we anticipate that that will continue, going forward. So it was a pivotal year for us, 2025. And, and we will be right back in for the three-year rate case and anticipate constructive dialogue with with the commission and interveners and hope to be able to settle some issues going forward but it it is nice to have, Ohio firmly focused on the future Ross Allen Fowler: and and the new regulatory regime and and, K. Jon Taylor: being a constructive standpoint that has been demonstrated with the company. And we hope Torrence and his team will keep that moving forward with the commission staff and all interveners. Thank you for the question, Andrew. Michael P. Sullivan: Okay. Good stuff. Thank you for the commentary. Thank you. K. Jon Taylor: Okay. That was the last question. I would like to thank everyone for joining us today. We strengthened FirstEnergy Corp. in 2025 operationally, Ross Allen Fowler: financially, and strategically. K. Jon Taylor: We entered 2026 with momentum, a clear business model, and a disciplined plan to work safely, improve reliability, maintain affordability, and deliver sustainable growth. We look forward to updating you on our progress as we go forward throughout the year. Thank you, everyone, and have a good day. Michael P. Sullivan: Ladies and gentlemen, thank you for your participation. Operator: This does conclude today’s teleconference. May now disconnect your lines at this time, and have a wonderful day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Fourth Quarter 2025 Operating and Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference call over to Graeme Jennings, Investor Relations for IAMGOLD. Please go ahead, Mr. Jennings. Graeme Jennings: Thank you, operator, and welcome, everyone, to our conference call this morning. Joining us on the call are Renaud Adams, President and Chief Executive Officer; Maarten Theunissen, Chief Financial Officer; Bruno Lemelin, Chief Operating Officer; Annie Torkia Lagace, Chief Legal and Strategy Officer; and Dorena Quinn, Chief People Officer. We are calling today from IAMGOLD Toronto office, which is located on Treaty 13 territory on the traditional lands of many nations, including the Mississaugas of the Credit, Anishinaabe, the Chippewa, Haudenosaunee and the Wendat Peoples. At IAMGOLD, we believe respecting and upholding indigenous rates is founded upon relationships that foster trust, transparency and mutual respect. Please note that our remarks on this call will include forward-looking statements and refer to non-IFRS measures. We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures included in the presentation and the reconciliations of these measures in our most recent MD&A, each under the heading non-GAAP financial measures. With respect to the technical information to be discussed, please refer to the information in the presentation under the heading Qualified Person and Technical Information. The slides referenced on this call can be viewed on our website. I will now turn the call over to our President and CEO, Renaud Adams. Renaud Adams: Thank you, Graeme, and good morning, everyone, and thank you for joining us today. Last year was a monumental year for IAMGOLD. It is a year in which the company reported record revenues of nearly $3 billion enjoying gross margin of over 40% and generating operating cash flow of over $1 billion, which is notable $702 million generated in the fourth quarter alone. Now everyone on this call is aware that this is a historic time in the gold market, as the gold price increased nearly $1,700 per ounce over 2025 and exiting the year at just over $4,300 an ounce, which is still more than $600 an ounce lower than where we are today. So while we're not along in realizing the gold market, we believe IAMGOLD is particularly well positioned to capitalize on this market for the benefit of our shareholders, stakeholders and partners. In 2025, IAMGOLD achieved significant milestones, including record quarterly productions across all sites. The first full year of production at Côté Gold, the establishment of a framework at Essakane that enables cash movements to be made at any time of the year, and the consolidation of assets in Chibougamau-Chapais, Quebec, to position the Nelligan mining complex as among the largest preproductions asset in Canada. On the financial side, we closed out the legacy gold prepaid obligation midyear, deliver the balance sheet through the repayment of the $400 million high cost term loan and established a share buyback program that pursuit $50 million in IAMGOLD shares in December and an additional $50 million so far in 2026, and we will continue to do so, driving up our per share valuations, all things being equal. This is a company that is taking a leadership position in the industry. IAMGOLD is a modern gold mining company that is proudly Canadian with strong cash flow and significant long-term growth opportunities ahead. We mine with the mining redefined purpose in mind, putting safety responsibility and people first. We hold ourselves accountable and embrace change, and drive innovations at every level from smarter systems to better ways of working. Now there are many highlights to discuss for IAMGOLD today. So let's get into it. Looking at the highlights from the year and the fourth quarter, we start with our safety record. Over the course of the year, our total recordable injury rates was 0.60, which was down from the year prior. We are focused on advancing our critical risk management program, including an important integration of contractor into the IAMGOLD way of safety management with a goal to reduce high potential incidents. On production, IAMGOLD closed out the year with a very strong fourth quarter in which all our mines reported record gold production. On a consolidated basis, attributable gold production for the fourth quarter was 242,400 ounces, a 28% improvement quarter-over-quarter, driving total production for the year to 765,900 ounces achieving the midpoint of the company's 2025 production guidance. The strong fourth quarter operating results helped to drive down costs on a per ounce basis. All-in sustaining cost per ounce sold was $1,750 for the fourth quarter and $1,900 for the year within the guidance range of $1,830 to $1,930. As discussed last year, last quarter, costs this year have faced upward pressure due to the record gold prices directly translating to higher royalties. The impact of these royalties on cash costs continue to increase through the year to where they accounted for an average of approximately $330 per ounce or 24% of cash cost in the fourth quarter 2025. As we look ahead through this year where we will uncover opportunities to grow the value of our asset, we will stay diligent on our commitment to operational excellence and discipline. While we will not be able to control the gold price, we can control our cost structure and ensure that cost improvement opportunity come down with our production product. At Côté, we will continue to fine-tune our mining, milling and maintenance practices to position the project well for the upcoming expansion phase. With that, I will pass the call over to our CFO, to walk us through our financial highlights. Maarten? Marthinus Theunissen: Thank you, Renaud, and good morning, everyone. It was indeed a transformational year for IAMGOLD, as our solid operating results, coupled with record gold prices helped to fast track our strategy to unwind the financial leverage put in place to both Côté and allowed us to also start returning capital to shareholders in December. In the fourth quarter, the company generated record mine-site free cash flow of $626.6 million, bringing the year total to $1.2 billion. On an asset basis, in the fourth quarter, Essakane contributed $340.4 million and Cote contributed $197.0 million of attributable mine-site free cash flow. The record mine-site free cash flow was used to improve our financial position as the company's net debt was reduced by $468.8 million to $344.4 million at the end of the year, while also returning $50 million to shareholders. On the balance sheet, we completed the repayment of the $400 million term loan and also paid $50 million on our credit facility, reducing the balance to $200 million as at the end of December. IAMGOLD at $422 million in cash and cash equivalents at the end of the year and approximately $446 million available on the credit facility, resulting in total liquidity at the end of the fourth quarter of approximately $868 million. Excess cash at this account is repatriated through dividend and shareholder account payments, of which the company receives its share on its ownership net of withholding taxes. The shareholder account structure was introduced in 2025 and functions like an intercompany loan and allows for the company's portion of the dividend to repay partly using cash generated in excess of working capital requirements. The new structure allowed for cash flow in the fourth quarter, resulting from strong operating results and record gold prices to be repatriated in record time, and IAMGOLD received $291 million of payments from Essakane through the fourth quarter. Approximately $197.5 million of our consolidated cash balance was out by Essakane at the end of the year. And subsequent to year-end, these funds, combined with free cash flow generated in January was used to make further payments against the shareholder account can, and IAMGOLD received $171 million so far this year. The other notable event was the establishment of the share buyback program. In December, the company repurchased and canaled approximately 3 million shares for approximately $43 million at an average price of $16.87 per share through a share buyback program subsequent to quarter end, up to the timing of our results release, IAMGOLD has purchased an additional 2.6 million shares for $50 million. For the remainder of the year, we are planning to use the cash repatriated from Essakane in 2026 to fund our buyback program. And at a gold price of $4,000 per ounce, we estimate that this could be between $400 million, $500 million during the year. The NCIB lies with a purchase of approximately 10% of IAMGOLD's public float that was outstanding as of November 2025. All common shares purchased under the NCIB will be either canceled or placed under trust to satisfy its future obligations under the company's share incentive plan. This initiative reflects management's confidence in the company's long-term value and its commitment to disciplined capital allocation. We believe the alignment of strong cash flow generation from this account and our share buyback program represents a clear value accretive opportunity for the company and our shareholders. The company intends to use the free cash flow generated by Essakane as a base level to repurchase shares under the share buyback program as the gas is generated and repatriated over the course of 2026. Naturally, the actual amount of common shares that may be purchased if any, and the timing of such purchases will be determined by the company based on a number of factors, including the gold price, the company's financial performance, the availability of cash flows and the consideration of other uses of cash, including capital investment opportunities, returned to stakeholders and debt reduction. Turning to our financial results. On a full year basis, revenues from operations totaled $2.9 billion from sale of 817,800 ounces on a 100% basis at an average realized price of $3,549 per ounce excluding the impact of the gold prepay arrangement. The strong operating results and record gold price resulted in adjusted EBITDA of approximately $1.6 billion in 2025, compared to $780.6 million in 2024 and $338.5 million in 2023. At the bottom line, adjusted earnings per share for the year totaled $1.23 up from $0.55 the prior year. Looking at the cash flow reconciliation for the year. It is a good visualization of the major drivers of our financial position to end 2025. The significant operating cash flow are large for the delivery and conclusion of the occupy arrangements midyear, funding all capital programs at operations, significant delevering of the balance sheet, payment of a record dividend of Burkina Faso that allowed us to set up the shareholder count that we used to repatriate funds into Canada and the start of the NCIB program in December. As we look into this year, our priorities from a financial and capital allocation perspective are to deploy funds to areas where we see the most value add to our company, which includes the continuation of the share buyback program, utilizing cash flows, becoming net cash positive following the repayment of the remaining balance of the credit facility, fund our operations as outlined in our guidance to ensure they are positioned well exiting the year and ensuring that we have the financial capacity to support opportunities to improve our business. And with that, I will pass the call to Bruno Lemelin, our Chief Operating Officer, to discuss our operating results. Bruno? Bruno Lemelin: Thank you, Maarten. Starting with Cote Gold, as Renaud noted, it was a very strong end to the year for Cote with fourth quarter attributable gold production of 87,200 ounces of 124,600 ounces on a 100% basis. The success of Cote goes beyond just the fourth quarter. In its first full year of operation, Cote produced 399,800 ounces on a 100% basis, achieving the top end of our guidance estimates. . During the year, our Cote teams achieved success after success every day on many fronts, offering a stability, maintenance, environmental monitoring or workforce engagement. Cote Gold completed the ramp-up and demonstrate that nameplate throughput of 36,000 tonnes per day over a period of 30 consecutive days ahead of schedule in June. It was a very strong 2025 with Cote now adding strong 3 consecutive quarter in a row of the mine hitting its target in its trial. Focusing back to the quarter, mining activity totaled 11.1 million tonnes, 4 tonnes mined were a record of 4.5 million tonnes in the quarter with a strip ratio of 1.5:1. Mill throughput in Q4 totaled 2.9 million tonnes. Head grade for the fourth quarter was a record of 1.44 grams per tonne as a result of the combination of higher grade direct feed ore, a low strip ratio over the quarter and stockpiling of lower grade ore. The installation of the additional secondary crusher was completed in November and commissioned in December with both compressor tested and operating in parallel. As we discussed later, last quarter, we elected earlier in the year to bring in a temporary contractor aggregate crusher to supplement protest crushing capacity to improve the arability of the secondary crushing circuit. They allow the plan to achieve its throughput milestone but at a higher cost as well -- as we will discuss on the next slide. With the 2 secondary cone crushers now operating the company plans to phase out the temporary crushing circuit over the first half of 2026. Looking at costs, Cote reported fourth quarter cash cost of $1,265 per ounce and all-in sustaining cost of $1,688 per ounce. We continue to see mining and processing unit costs above where we would like them to be. A major driver of cost this year has been associated with the temporary crusher. The decision to move ahead nameplate by 5, 6 months, allowing for maximizing funds versus waiting for the installation and ramp-up of the second corn crusher in an important time for the project in the market. Looking at mining costs on an annual basis, they averaged $4.20 per tonne in 2025. We expect to see cost improvement through 2026 as further operational improvements are made, including the elimination of the contracted aggregate plan and a reduction of contractors. Mining unit costs on an annual basis averaged $3 per tonne. There is a direct relationship with the amount of ore crushed with the temporary crusher in our processing costs. We expect that the removal of the aggregate plant will reduce processing costs by $4 to $5 per tonne. Additional savings are expected as we improve the life cycle of the HPGR rollers and fine-tune our maintenance cycles. Looking ahead, 2026 is the year in which our operations team is focusing on fine-tuning Cote at 36,000 tonnes per day. This year, the operations team will be focusing on unit cost improvement to stable and efficient mining and mining practices. It is important for our team to be able to operate Cote with an expected specification before we expand the operation further. On cost, all-in sustaining costs are expected to be in the range of $1,725 to $1,925 per ounce sold which reflects an additional $50 million or about $185 an ounce of nonrecurring sustaining capital investments to improve the operating efficiency, and the long-term operating cost structure, these include the implementation of our repeat system for the course of our done, additional maintenance facilities and improved dust mitigation measures. Expansion capital this year is estimated at $85 million for IAMGOLD. As we look to grow Cote, it is clear we can accelerate basic expansion projects. This includes a strategic push back that will provide both operational flexibility in the near term and optionality for the expansion as well as the acceleration of certain expansion related improvements to the processing plant, including an additional burden in early 2027. This leads us to what is next for Cote, the Cote Gosselin expansion mine plan. In the fourth quarter of this year, we will release the details of the updated mine plan that envision a near-term expansion of the Cote plan, targeting a significantly larger or based from both Cote and Gosselin. Alongside our financial results last night, IAMGOLD announces update on mineral resources and reserves estimates. In the estimate, we saw a significant upgrading of ounces from inferred to measured and indicated at Gosselin, which now is estimated to have 6.9 million ounces of indicated ounces and 1 million ounces of inferred sources. Combining Cote and Gosselin, the Cote Gold project currently is estimated to have M&I resources inclusive of mineral reserves and on a 100% basis of 18.2 million ounces and additional mineral resources 2.2 million ounces. Work will be ongoing this year to incorporate the end-of-year drilling and then combine their minimum resources estimate and big shelves into a single model. As currently designed, Cote has the mining capacity to average an annual or mining rate of 50,000 tonnes per day versus our current main trade processing rate of 36,000 tonne per day. As part of the 2026 technical report, we will look to find the right balance between an increased processing rate with mining rates targeting the combined Cote and Gosselin. Turning to Quebec. In the fourth quarter, we saw Westwood produced a record 37,900 ounces since mine restart as the underground return high grades coupled with strong throughput in the plant. Underground mining activities in the fourth quarter average 1,129 tonnes per day, translating to 105,000 tonnes in the quarter, a record volume from underground since the mine start with an average underground mine grade of 9.87 grams per tonne. During the first 3 quarters of the year, mining activities on the ground operated to lower-grade stow and adjust blasting technique. In the fourth quarter, Westwood refined stow design, sequencing and blasting while returning to higher grade stocks as per mining plans. Mining of the [indiscernible] open pit consoled in the quarter with 134,000 tonnes of mine with a head grade from the open pit averaging 1.19 grams per tonne. The open pit life has been extended into 2027. We expect Grand Duc to contribute a similar amount of ore to the plan this year with at a slightly lower grade of between 1.1 to 1.2 grams per tonne. Mill throughput in the third quarter was 299,000 tonnes at an average grade of 4.21 grams per tonne and average recoveries of 93%. Plant utilization was 92% in the quarter, up from 35% in Q3 and in line with the average expected for 2026. As a result of the strong fourth quarter, first, on a per ounce basis declined notably. Cash costs in the fourth quarter averaged $1,288 per ounce and all-in sustained costs averaged $1,719 per ounce, well below the average of the year of around $2,100 per ounce. The cost improvement was also assisted by lower unit costs while with mining costs, mining unit cost declining due to the high volume of ore mine mill. Looking ahead, to this year, Westwood production is expected to be in the range of 107,000 to 113,000 ounces. Mill throughput is expected to average 1.2 million tonnes in 2026 with blended head grade expected to average 3.44 grams per tonne over the course of the year with a fairly flat production profile quarter-over-quarter to the year. Cash costs at Westwood are expected to be in the range of $1,500 to $1,650 per ounce sold an all-in sustained cost in the range of $1,950 to $2,100 per ounce sold. Sustaining capital expenditures guidance is $55 million primarily consisting of underground development, renewal of the mobile fleet, upgrades in the mill and general maintenance. Expansion capital is expected to increase this year to $30 million which is primarily associated with development works and risk to support the study of options to extend the mine in the eastern parts of Westwood underground that could potentially be amenable to both mining. Looking at our mineral resources and reserve update, Westwood more than replaced the vision over 2025, with 1.1 million ounces of mineral reserves to date. Further, M&I resources inclusive of mineral reserves increased by 682,000 ounces or 40% to 2.4 million ounces as of December 31, 2025, with an additional 1.5 million ounces of inferred ounces. We are looking forward to conducting additional drilling underground at Westwood this year as we believe there is still significant potential assets to the east and west of our current underground operation. Turning to Essakane and considering with the Q4, the mine reported record production of 138,100 ounces on a 100% basis equating to 117,300 ounces on our 85% mining interest. Mining in the fourth quarter totaled 9.4 million tonnes, an increase from the prior quarter with higher ore terms, mine of 4.1 million tonnes for a strip ratio of 1.3:1 in the quarter. The average grade of mine ore in the fourth quarter was the highest grade mine in the year as the mine sequence deeper into Phase 7. The mill reported strong throughput in the fourth quarter of 3.2 million tonnes at an average head grade of 1.5 grams per tonne considering the quarter-over-quarter step-up we have seen this year. The plant achieved recoveries of 88% in the quarter, which was below the 90% average for the year as the second typically sees higher graphitic carbon in the higher-grade zones, though this is mitigated with blending. Similar to Westwood, Essakane saw an improvement in cost per ounce and unit cost per tonne on the higher volumes. For the fourth quarter, Essakane reported cash cost of $1,471 per ounce and all-in sustained cost of $1,674 per ounce. As Renaud noted in his earlier remarks, royalties in the current gold market are having a measured impact on industry cost structure. And this is even more pronounced in Burkina Faso, where the new realty decree was implemented in 2025 with royalties now uncapped and tied to gold price. In the fourth quarter, royalties accounted for $460 per ounce or approximately 36% of Essakane's cash cost. Accordingly, when we look at this year, we have guided to cash costs, excluding royalties and cash costs, including royalties at the gold price assumption of $4,000 per ounce. Cash costs, excluding royalties are expected to be in the range of $1,150 to $1,300 per ounce sold and including royalties in the range of $1,600 to $1,750 million. All-in sustaining cost is expected to be in a range of $2,000 to $2,150 per ounce sold. So on the traction side, this account attributable production is expected to be in the range of 340,000 to 380,000 ounces or 400,000 to 440,000 ounces on a 100% basis, similar to production in 2025. With a production profile expected to be fairly flat quarter-over-quarter this year, mining activity will target Phase 6 and 7 and the level that is adjacent to the second main zone. Our Mineral Resources and Reserves Essakane reserves decreased by 640,000 ounces due to depletion in geology model adjustment for a total of 1.7 million ounces. However, measured and indicated mineral resources reported a 50% increase in funds, offsetting a 26% decrease in grades for a total of 4.4 million ounces in measured and indicated, an additional 853,000 ounces of inferred. We are currently studying the Block 3 project, which would add an additional 5 years of life of mine expanding Essakane until at least 2032. With that, I will pass it back to Renaud. Renaud Adams: Thank you, Bruno. I just want to take a moment to highlight the exciting development from the fourth quarter in which IAMGOLD acquired at Northern Superior and Mines d’Or Orbec consolidating their assets and properties with our assets in the Chibougamau-Chapais region of Quebec to form the Nelligan mining complex, which is now composed of the following deposit and high-value target. Nelligan, Monster Lake, Philibert, Chevrier Lac Surprise, Croteau Est. The Nelligan Mining Complex already has a significant mineral inventory of over 4.3 million measure-indicated ounces and 7.5 million inferred ounces, positioning the project among the largest preproduction stage gold project in Canada. . The close proximity of the primary deposit to each other supports a conceptual vision of the central processing facility being fed from multiple ore sources within the 17-kilometer radius. This year, we are substantially increasing our budget to allow for a comprehensive exploration program, which will look to expand and mineralized footprint of both Nelligan and Philibert while testing months lake at depth. In addition to a regional exploration program or high priority targets to further grow the potential of the project. Our teams are very excited for this project, and we will be putting the pedal to the middle to have a preliminary economic assessment on the Nelligan complex in 2027. With that, I want to thank our shareholders for your great support. We truly believe it will be an exciting year for IAMGOLD with significant value growth opportunities ahead and many catalysts ahead. And now I would like to pass the call back to the operator for the Q&A. Operator? Operator: [Operator Instructions] And our first question today comes from Mohamed Sidibe from National Bank. Mohamed Sidibe: Maybe I'll start with Essakane and with the M&I increased year-over-year and the potential extension of the mine life of that asset. How should we think about Essakane within your broader portfolio? And specifically, has the license is potentially expiring into 2029, please. Bruno Lemelin: I'll give some first comment, and I'll ask Bruno to complete more on the potential we have here. But -- we've been going really on the step by step. I thought we had a wonderful '24-'25, the team is working hard. You've seen the increase in the resources. We see more and more possibility of extension. The most important thing is what I would call the acceptance of all of it, right? So we understand the geographic and geopolitic and so forth. But the reality is we've been operating this mine pretty steady state, no interruptions for nearly 3 years now. We found and -- congrats Maarten and his team and Renaud found a very creative way to allow for cash flow. At those prices, we see a good opportunity of using this cash flow to reward our shareholders. So I think over the next few quarters, we just need to continue to be the drama and execute on our plans and continue to repatriate and reward our shareholders. And as we advance in '26, Renaud and his teams will complete some work. We definitely see an extension potential, which we need to continue to work and improve. But we're not there yet, but I think we've come a long way to make a kind of a very strategic element of our portfolio. Renaud, if you want to add any... Renaud Adams: Yes. So thank you, Mohamed, for your questions. I've been at that again, like I started with IAMGOLD second in 2014, since then, the life of mine has not stopped getting extended. So should not come too much of a surprise. What is really good is we were able to find those additional resources within the fence north of Phase 7. So we have now Phase 8 and Phase 9 and 10 north of where we are currently mining. And South, we have the low pit that is also getting -- we're seeing an extension of the current level pit that also tried to connect south of the second main zone. So there's a saddle zone and now we believe those 2 connects together. So it gives us confidence that we could be targeting at another 5 years of life of mine. That's what we're going to be coming with when we're going to start engaging with the government. It shouldn't be like too much of a problem when we first met with the off the shows in terms of having the license to be extended by another 5 years, which would bring us closer to [ 2030, 2030 ]. So we're not, again, decision to be made probably later as we advance in a year in preparations for '27 plan. But meanwhile, we expect another great year and maximum free cash flow out of the asset repatriated and apply towards the shareholder program, share buyback. So more to come. Mohamed Sidibe: Maybe I'll switch to Cote specifically on the unit cost. I think, Bruno, you touched on the milling cost potentially improving $4 to $5 by the second half 2026, could you give us a little bit more color on mining costs and where you expect to exit maybe 2026 and what we should be thinking in terms of modeling there for Cote Gold? Bruno Lemelin: Yes. So the mining costs for 2026, we are making adjustments. Some adjustments are taking time. So now we're implementing any one or some plan, there will be some testing. We should be at the year at around $370, $380 a tonne as we are getting. We brought new equipment, new drills. We are also doing the pushback, Mohamed. And by doing this pushback, there's several infrastructure that needs to be relocated like the towers for the and everything. So there's a lot of activities surrounding the mining activity, that's the reason why we see a diminishment and unit costs. However, it's going to take some time to see the long-term mining costs, not for this year. Renaud Adams: So what I could add to this is like at the early stage, we've seen some -- yes, we've seen some deficiencies, some areas that need some improvement. We put more capital this year addressing on like Bruno just mentioned, if you want to optimize your mining costs, well, you need to optimize your OE, your overall performance. To do that, you need a larger pit. You need like maintaining -- this has all been taken into account. It may not be all achieved in '26, as Bruno mentioned. But as we file and as we present our long-term plan, we will, if needed, integrate some additional improvement in '27, '28. But the objective is over the next -- with a big chunk in '26, but over the next 2 to 3 years. We really see a path forward with the possibility of reducing the cost and bringing Cote into one of the best unit costs for this large-scale Canadian. And then when you combine with the average grade and the possibility to uplift that we've seen the grade this year and the low strip ratio of Cote everything is in place at Cote as we optimize the cost to make it a very attractive overall all-in sustaining costs. We've discussed the royalty -- there's not much we could do more than we do have a provision of buyback, which we would really pay attention to as we unlock our full potential of this scenario. So we're in a good position. We appreciate that there's a lot of work to do. Bruno and his team this year, but we feel very confident that we have a path forward and we'll try to make it as much as possible this year, but it may extend a bit in '28. Operator: Our next question comes from Sathish Kasinathan from Bank of America. Sathish Kasinathan: My first question is on Cote. On Slide 11, you mentioned that the mine plan for Cote is likely to include stage capital. Can you maybe provide a bit more color on what it means? Are you still targeting the 50,000 tonnes per day run rate or maybe even more? How should we think about it? Renaud Adams: I think that the reference to the stage capital here is to being capable to focus from expansion to tailings down the road, to opening Gosselin. So what we're saying is that there is nothing need to do everything on a day 1 to make an expansion at Côté Gold. As a matter of fact, you -- the Cote itself is enough to justify the expansions and eventually Gossan. So when we say stages, we see now [indiscernible], Bruno and his team is accelerating some aspect in the pit and opening the pit and so forth. So that's going to be in place by the time. And we say '29 is a focus on the expansion, '29, '30 and we have enough tailings capacity in place. So there would be a stage in fact. So we just want to clarify that. It's not like you need to build everything and have everything in based on day 1. The capital will be aged capable to be fully funded through the free cash flow of the asset. Sathish Kasinathan: Okay. That is clear. Maybe one question on Essakane. So you received $171 million of cash this year at the start of the year, of which $50 million was spent was already use of buybacks. And you still have $219 million left from the last year's dividend declaration. So for the full year, is it fair to assume like a minimum of $390 million of share buybacks could be achieved in 2026 and depending on how much dividend is declared for this year, we could see potential upside to the number? Marthinus Theunissen: So we had $408 million of the shareholder accounts outstanding at the beginning of the year. And as you mentioned, we already received $171 million, again that back. We expect that remaining balance to be repaid by the end of the second quarter, during the third quarter. But then when we get into that period, we will be declaring the 2025 dividend where the shareholder account will be related again. So based on our projection, there would be more than enough shareholder accounts available this year to continue with the program where we can move money out of Burkina Faso every month as the asset generates free cash flow above its excess working capital. And then -- so the free cash flow attributable to IAMGOLD this year should -- you should be able to match that to buy back shares in the program. Sathish Kasinathan: Okay. Congrats on the strong quarter. Operator: Our next question comes from Anita Soni from CIBC. Anita Soni: Congratulation on strong quarter and strong year. I just wanted to ask a little bit more about Côté and Gosselin. I think you noted in the MD&A that there would be an update on the reserve -- another update on the reserves and resources for Gosselin in Q2. And my apologies if you addressed it in the opening comments, I would comment -- but... Renaud Adams: Thank you for asking, Anita on this. So it's cutting here. So sorry about that. So go ahead. Anita Soni: I was just going to say, what were you expecting to provide with the Q2 update? Renaud Adams: The -- thank you for asking this. As Bruno showed in his portion, Bruno talking about the mineral reserve and our resources. So not a surprise on the research side. It was just inflation as you know, like the big consolidating both Gosselin and Cote through. On the resources side, we've come quite a bit a long way and have delineated some but this is kind of an ongoing work. So to your point, we expect to complete probably late Q1 and maybe like we're talking about Q2 potentially, but the target is by the end of Q1, somewhere there. We would complete the resource update, if you call it, the final one that would serve for the plan. We're comfortably sitting in more than $18 million, but there is more drilling to be incorporated. There is a merge of the block models as well. We're still discussing the final price to be used and so forth, but we had this objective of the Saddle zone as well as Renaud just pointing out to me. So as you combine the block model, so you create that saddle zone that would drill as well. So it's not the final not to look at the resource update at Cote has the final word about our objective of $20 million, and we're still planning to discuss those results late Q1, early Q2. Anita Soni: Okay. And how much more drilling would that have incorporated versus what you just did? I think you converted 2 out of the 3 million ounces of inferred into M&I category. But how much more would that bring on stream. If you could just tell me like as a percentage of the drilling update? If you want to tell me they have the number of ounces that would be great to. Bruno Lemelin: We still have 29 -- 25 holes to be included. And we have also the campaign on the saddle zone that needs to be included as well. Renaud Adams: So enough -- and again, like the merge of the block model as well, like technically should also create some. So we feel very, very strong, Anita, if without giving a final number because we haven't seen it, but we feel very comfortable towards objective of $20 million. Anita Soni: Yes. And then I just want to follow up on the reserves and resources as well. I noticed the grade decline. Does that -- have you -- I'm just -- I guess, you've had positive grade reconciliation at the assets. How are you basically calculating your depletion at the asset? I'm just -- like are you just basically saying, okay, well, we -- we ended up -- we thought this ore body would be 1.2 and that being 1.5. So we're expecting the 1.5 off of the average. Is that the way you're doing it? Or did you include the positive grade reconciliation in the calculations. . Bruno Lemelin: Yes. So the -- we changed the block model and the block model that we'll be using this year has taken -- we had to do some adjustments. But moving forward, the block model is going to be Côté Gold a little bit more conservative. Therefore, that's the reason why you see that we are going down. It does not exclude the potency that we will see faster reconciliation specifically when you get those higher grades on like we were doing in Phase 7. What we're trying to cap a bit in a positive reconciliation in our future resources estimate. So we have something more about then comes over. Operator: Our next question comes from [indiscernible] from Scotiabank. . Tanya Jakusconek: Hello. Can you hear me? Renaud Adams: Yes. Tanya Jakusconek: It's Tanya. Yes. Just first of all, just at our time getting on and hearing the little beat so that my question is in queue. I have a few questions, if I could. I just wanted to follow up on Anita's question on the reserves and resources that's coming out on Cote and in Q2. So just so that I understand, so we're still targeting that $20 million out overall number. What the reserves and resources and other will show is just more of a conversion or an upgrade into the M&I and reserve category with those additional 25 holes. Is that a proper way to think about it? Renaud Adams: The way to look about it is we feel strong that when the exercise is done, we will achieve our objective of $20 million of MI and from which Bruno and the team will put the mine plan to it and convert as much as we can within an economic plan to reserve. So obviously, the reserve that we have release at the end of the year is only reflecting the all plan depleted. So we're moving from this to the new plant consolidated from which new economics might plan. So we're definitely going to see and expect a significant increase in reserve. We just need to complete the work. But the starting point will be hopefully a $20 million-plus MI resource base, and we feel very strong about the economics of those pits. So more to come, but we feel strong about a significant increase in reserves. Tanya Jakusconek: Okay. Okay. And then how should I be thinking about this capital because you talked about a lot of this capital now being spent with $85 million or thereabout at Cote this year. How should I be thinking of the study? And I think at one point, we were thinking of $100 million to $200 million in capital. How should I be thinking about the capital for all of this? . Renaud Adams: I guess if I would have all the detail, Tanya, we would have probably been a little more because we're still in trade-off. So the way to look at it is I think the growth capital that we're going to be deploying over the next few years should normally bring the pit to a point of expanded capable to provide for the -- now the mill itself, which will be the main capital of '29, '30, we're still in the trade-off and so forth. No, I do not believe you build an expansion today for $100 million to $200 million total capital but we believe that it could probably be achieved below the $500 million, but we still have to do the work. Tanya Jakusconek: Okay. I'll take a look further in depth. Just on 2 other things. Bruno, I think you gave some guidance for how the year is panning out for us quarter-on-quarter stable for both Essakane and Westwood. What about Cote? Bruno Lemelin: Okay. Fair question. Cote is going to be lower for the first half of the year because we have the maintenance plan for the HPGR change in March or April. That's going to be a 5-day shutdown. We will have supplement, find or material to feed the mill, but we're going to be running at a slower pace. We also have -- we did a very good end of the year 2025, and we took advantage of Q1 to take a lot of other maintenance. So overall, we need to expect Q1 and Q2 to be lower than Q3 and Q4. And generally, summertime at Cote is very good, like last year, Q2, Q3, Q4, we produced 36,000 tonnes per day, almost like 36,000 ounces a month in average. So that gives you a bit like the kind of seasonality that we have, like we have a seasonality due to winter conditions in Q1. In Q2, we do some planned maintenance on the HPGR, and after that, like, we are rolling until the end of the year. Tanya Jakusconek: Okay. So should I be thinking like a 45-55 or is that? Renaud Adams: Yes. I guess, anywhere between like the zone of around 40, 45, as you say. Definitely, H2 will be much stronger, season-wise, second crusher fully up and running HPGR and plus any other optimization that's going to come. So yes, I think it's fair to think that our second half could be at the 55% of the year. Tanya Jakusconek: Okay. And Renaud, I have you on for my one final question. Dividend, I mean we had talked on one of the previous conference calls that you were potentially thinking that once all this is done, the dividend plan could be implemented. Where are you on that? . Renaud Adams: I think we feel very strong that on the step by step. I mean, as Maarten discussed, I think the first thing first is on the share buyback. There is no doubt that let's call the Canadian platform would most likely be an excess cash as well in those prices, something we're going to revisit after with our Board at the end of Q2. I see how the share buyback goes. Is there an opportunity to increase the share buyback using a bit of the Canadian excess? Do we start in operating dividend. So I think we're going to have this conversation post Q2 for the second half as we realize the free cash flow on the Canadian side as well. So we feel very strong that is I can should only go towards share buyback. The question is after what is the next in a row. And I think we're going to postpone the decision for the second half of the year. Operator: And this will conclude today's question-and-answer session. At this time, I'd like to turn the floor back over to Graeme Jennings for closing remarks. Graeme Jennings: Thank you very much, operator, and thanks to everyone for joining us this morning. As always, should you have any additional questions, please reach out to Renaud and myself. Thank you all. Be safe, and have a great day. Operator: This brings to a close of today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Hello, everyone, and thank you for joining us today for the LCI Industries Fourth Quarter 2025 Earnings Call. My name is Lucy, and I will be coordinating your call today. Before we begin, I would like to remind that certain statements made on today's conference call regarding LCI Industries and its operations may be considered forward-looking statements under the securities laws and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors are discussed in the company's earnings release, Form 10-Ks, and in other filings with the SEC. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements are made, except as required by law. In addition, during today's conference call, management will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the company's earnings release and investor presentation, which have been posted on the Investor Relations section of the company's website and are also available on Form 8-K filed this morning with the SEC. On the call from management today are Jason Lippert, President and Chief Executive Officer, Lillian Etzkorn, Chief Financial Officer, and Kim Emmenheiser, VP of Finance and Treasurer. Later in the call, we will conduct a question and answer session, at which point you can register to ask a question by pressing star one, and you may withdraw from the question queue by pressing star two. With that, it is my pleasure to turn the call over to Jason Lippert. Thank you, and welcome, everyone, to our Q4 2025 earnings call. Jason Lippert: We are pleased with the company's strong results as our team continues to execute effectively, delivering a 15% year-over-year top-line growth along with further margin expansion in the fourth quarter. By leveraging our diverse competitive strengths, we capitalized on opportunities across our RV, aftermarket, transportation, marine, and housing end markets. At the same time, our relentless focus on our operational efficiencies drove enhanced profitability, with fourth quarter operating margin more than doubling, expanding 180 basis points compared to Q4 of the prior year. Starting with our OEM segment, net sales increased 18% to $737,000,000 in the fourth quarter. RV OEM revenue rose 17%, driven by market share gains, increased sales of newer products, and a favorable mix shift toward higher-content units. Our other OEM end markets—transportation, marine, housing—delivered 21% year-over-year net sales growth to $297,000,000, or 8% on an organic basis. This growth was primarily driven by market share gains and content growth in North American utility trailer, bus, and marine OEM customers. Bus-related content contributed $31,000,000 of year-over-year growth in the quarter, reflecting the recent acquisitions of Friedman Seating and TransAir, for which integration efforts and synergies are ahead of plan. Looking ahead, we expect to expand market share across all four of our OEM markets. As we move into 2026, we expect RV wholesale shipments to range between 335,000–350,000 units, while we expect the boat industry to remain flat to up low single digits. Despite a potential flatter industry backdrop, we have multiple growth strategies in place that we believe will drive OEM expansion in excess of overall end-market volumes. Central to this strategy is our relentless focus on innovation. Since 2020, new products and market share gains have driven a 67% increase in total content. These innovations include new slide-out designs, Chill Cube air conditioners, advanced window designs, anti-lock braking systems, touring coil suspensions, bed lift and bed tilt mechanisms, larger and more robust fifth wheel chassis, electric biminis, and our new ladder system for boats, among others. In many of these categories, we offer either the leading product or, in fact, the only product available, further expanding our addressable market, margins, and long-term growth opportunities. In the fourth quarter, our total content per unit increased 11% year over year, reaching $5,670 and representing our largest year-over-year content growth in the past five years. To highlight our innovation momentum, our five most recently launched products are now generating an annualized revenue run rate of approximately $225,000,000. For example, our air conditioner unit shipments increased from 50,000 units in 2023 to more than 200,000 units last year, partially driven by strong consumer adoption of our Chill Q air conditioner platform. In addition, following the launch of our patented Sun Deck in 2025, we are scheduled to build over 4,500 of these patio systems this year, contributing over $4,000 in revenue per unit. These examples underscore our ability to create and scale high-value, innovative content to the entire RV customer base quickly. At a high level, LCI Industries’ competitive moat, built on our scale, technology, deep industry expertise, and people, positions us to consistently outgrow the market. Our broad product portfolio, structurally efficient operating model, and strong customer relationships enable us to rapidly scale new product launches and seamlessly integrate acquired companies. Our competitive advantage is reinforced by highly differentiated, sophisticated manufacturing technologies that enable us to produce complex, mission-critical components through flexible and increasingly automated processes. Equally as important, our people are the best in the industry, leading in innovation, cultivating deep customer partnerships, and sustaining the collaborative culture that is foundational to our long-term success. The same competitive moat that drives our OEM business also provides significant advantages in the aftermarket, where we grew net sales 8% year over year in the fourth quarter to $196,000,000. This continued success is directly driven by the strength of our OEM sales platform, which expands content with key customers. When one of our OEM components requires repair or replacement in the field, it almost always must be replaced with our proprietary parts or fully integrated assemblies, creating natural, durable, and high-margin aftermarket revenue streams. Taking a step back, we have come a long way. Just twelve years ago, we had virtually no presence in the RV aftermarket. Over the past decade, we have organically built our RV aftermarket organization to 400 team members with a singular focus on delivering the best customer experience across more than 2,000,000 annual interactions with dealers and RV consumers who acquire our parts and service. The primary catalyst for growth in our aftermarket engine is simple. We have embedded more than $20,000,000,000 of replaceable content into the RVs through our OEM partners over the last decade. These RVs eventually all come into the aftermarket service and repair cycle. At the moment, approximately 1,500,000 RVs are entering the repair and replacement cycle in the next one to three years, each one requiring our parts and service solutions. Our components reach nearly every RV consumer because our parts are literally on almost every RV on the road. Because we manufacture a broad portfolio of mission-critical products, dealers and consumers rely on us for service and replacement across virtually every major RV system—from slide-outs and leveling systems to doors and awnings, chassis and suspension systems, windows and appliances, mattresses and furniture, and much more. This breadth positions LCI Industries as a trusted partner throughout the entire RV ownership life cycle, supporting every customer channel from dealers and distributors to OEM, direct-to-consumer, and leading e-commerce platforms. We have a uniquely strong right to win in the aftermarket, something that no other supplier can credibly match. To further accelerate service-related aftermarket growth and strengthen dealer relationships, we continue to invest in our service infrastructure. In 2025, dealer service personnel completed approximately 50,000 of our technical training courses, and our online technical resources generated nearly 2,000,000 visits, as dealers and consumers increasingly rely on our service videos to resolve issues in the field. These efforts are driving higher-quality service outcomes and stronger dealer partnerships, reinforcing Lippert as the go-to partner in RV aftercare. In addition, we expanded our service footprint in 2025 with the opening of three new service facilities and the doubling of our mobile technician workforce. These investments have already resulted in a double-digit increase in service completions, improving speed, convenience, and customer satisfaction while allowing us to schedule and complete significantly more service projects than a year ago. Our goal is to simply reach more consumers seeking a better service experience, including faster turnaround, higher-quality care, and the opportunity to upgrade their RVs with our newest and most talked about products. This year, we are partnering with dealers to launch the Lippert Upgrade Experience, a new program that enables our dealers to offer upgrades such as TCS, ABS, and other advanced systems not currently offered by dealers. Several of the largest dealers in the country have already expressed strong interest in rolling this program out later this year. Turning to our auto aftermarket business, there have been several important developments worth highlighting. As many of you are aware, First Brands, which owns our largest competitor in the hitch and towing space, has experienced significant operational challenges as a result of a complex bankruptcy process. As a result, both automotive OEMs and aftermarket customers are actively seeking new, stable, long-term partners. Against that backdrop, we are already seeing meaningful opportunities emerge, and we are in the process of capturing substantial incremental business as a result. Although it is still early, we currently estimate the potential opportunity here at approximately $50,000,000 annually. We expect to share more of these developments as things progress. We have the existing capacity to support this incremental volume without the need for new facilities or additional shifts in most cases, allowing us to efficiently absorb this anticipated growth. We are also continuing to strengthen our auto aftermarket infrastructure. We recently transitioned into a state-of-the-art 600,000 square foot distribution center in South Bend, Indiana, consolidating operations from a couple of smaller, less efficient distribution facilities. In addition, we are preparing to open a new manufacturing facility in Seguin, Texas later this year, which will serve as the home for our Ranch Hand truck accessory business, a brand that has seen growing consumer awareness and demand, including increased visibility through popular shows like Yellowstone and Landman. Turning to our profitability initiatives, we delivered a full-year operating margin of 6.8%, an improvement of 100 basis points year over year, driven by cost improvements, market share gains, and enhanced operating efficiencies. Given the challenging environment that persisted in 2025, we are pleased with the result we delivered and are excited about the goals for 2026 that position us well for continued progress. We believe these strategies can drive an additional 70 to 120 basis points of operating margin improvement over the last year, while also providing a clear and disciplined path toward our objective of achieving double-digit operating margins. These gains will be supported by continued market share growth and improving product mix, and further reductions in overhead and G&A where we made meaningful progress in 2025. To build on last year's progress in 2026, we plan to complete eight to ten facility consolidations on top of the five we executed last year. We also continue to evaluate the divestiture of select lower margin businesses while accelerating automation, operational efficiencies, and fixed cost reductions throughout the year. I will wrap up my remarks with an update on our balance sheet and capital allocation strategy. Despite a challenging operating environment last year, we have made significant progress in strengthening our financial profile. Since 2023, we have increased ROIC from 5.3% to 13.5% as of 2025, reflecting improved returns and disciplined capital deployment. We ended 2025 with a net debt to adjusted EBITDA ratio of 1.8 times, supported by strong cash generation. Earlier in the year, we also completed a successful refinancing that both extended and staggered our debt maturities, further enhancing our financial flexibility. Liquidity remains robust, with over $200,000,000 in cash and equivalents, along with full availability under our revolving credit facility of $595,000,000. As we enter 2026, we will remain disciplined in our capital allocation, with a continued focus on investing in the business to support innovation and ongoing product development. Our M&A pipeline remains active, and smaller tuck-in acquisitions continue to be a core competency for LCI Industries, completing 77 strategic acquisitions since 2001. We will continue to evaluate opportunities within our existing markets and expect to remain active on the M&A front, building on the success we have achieved in 2025 with successful acquisitions like Friedman and TransAir. Returning capital to shareholders also remains a priority, as we continue to pay an attractive dividend currently yielding about 3%. During 2025, we returned $243,000,000 to shareholders, including $114,000,000 in dividends and $129,000,000 through share repurchases. In closing, our entire team is energized by the opportunities ahead, and we are confident in our strategy to leverage our many strengths to drive continued growth, margin expansion, and shareholder value creation. Having had the privilege of leading this company for more than twenty-five years, I have never been more excited about the opportunities in front of us than I am today. We have a tested, focused, and highly capable team ready to execute on the plan, and I am incredibly proud of the accomplishments of more than 12,000 men and women at LCI Industries, whose perseverance and commitment continue to be the driving force behind our success. Because of their efforts, we enter 2026 in one of the most competitive positions in our company's seventy-year history. With that, I will turn it over to Lillian, who will walk you through our financial results in more detail. Lillian Etzkorn: Thank you, Jason. We ended the year on a strong note with fourth quarter results that included double-digit top-line growth and meaningful margin expansion. These results cap a year of progress, which the hardworking men and women of LCI Industries executed our strategic initiatives, demonstrating the potential of the LCI platform, and we enter 2026 well positioned to generate even stronger results in the new year. For the fourth quarter, consolidated net sales were $933,000,000, up 16% year over year. OEM net sales grew an even stronger 18%, including 17% growth for RV, primarily driven by sales price increases due to higher material costs, a favorable mix shift towards higher-content fifth wheel units, and LCI's ongoing market share gains. We also generated 21% top-line growth across our other OEM end markets, with transportation and marine expanding year over year, partially offset by a modest decline in housing. Primary drivers included sales from acquired businesses and higher sales to North American utility trailer OEMs. Our content per towable RV unit increased 11% over the prior year to $5,670, and content per motorized unit was up 7% to $3,993. Total RV organic content grew significantly, up 3% year over year, driven by the continued success of our recent product launches. Content levels also benefited from the continued strength of higher-content fifth wheel units. We also expanded motorhome RV content per unit by 7% to nearly $4,000. Turning to aftermarket, our net sales expanded 8% versus the prior-year quarter to $196,000,000, primarily driven by product innovation and increased demand for our upgrade and service parts, as more units enter the upgrade and repair cycle to which Jason referred. Our consolidated operating profit during the fourth quarter was $35,000,000, reflecting 180 basis points margin expansion to 3.8%. Our margin growth benefited from our continued focus on driving operating efficiency and cost reduction along with the increased North American RV sales volume related to an increased sales mix of higher-content fifth wheel units and market share gains. Partially offsetting this progress was $3,900,000 of restructuring costs related to the closure of our glass operations in Ireland. Breaking down further our margin performance, our fourth quarter OEM-related operating profit margin was up significantly to 3.7% versus 0.3% in the same period the prior year. This operating profit expansion was driven by the increased selling prices for targeted products primarily related to increased material costs as well as reduced costs from our material sourcing strategies and better fixed cost absorption. For aftermarket, our operating profit margin was 4.3% in the fourth quarter, as compared to 7.9% a year earlier. This operating profit margin change was primarily driven by higher material costs related to tariffs, and higher steel, aluminum, and freight costs, increases in sales mix towards lower margin products, and investments in capacity, distribution, and logistics technology to support the growth of the aftermarket segment. The margin was positively impacted by increases in selling prices for targeted products primarily related to increased material costs, and reduced cost from material sourcing strategies. Turning to adjusted EBITDA, we generated robust annual growth of approximately 53% to $70,000,000, reflecting a 7.5% margin, 180 basis points above the 5.7% margin in 2024. Our GAAP net income came in at $19,000,000, or $0.77 per diluted share, more than doubling over the prior-year quarter's $0.37. On an adjusted basis, excluding restructuring costs, net of tax effect, net income of $22,000,000 equated to $0.89 per diluted share, which also more than doubled. Turning to the balance sheet, we continue to operate from a position of strength, ending the year with cash and cash equivalents of $223,000,000, which was up from $166,000,000 to start the year. The increase benefited from cash provided by operating activities of $331,000,000 and also reflects $147,000,000 of investment-related cash outlay, which included $53,000,000 in capital expenditures and $113,000,000 worth of acquisitions during the year. As of December 31, we had outstanding net debt of $723,000,000, reflecting a net debt to EBITDA ratio of 1.8 times, which is within our targeted range. In terms of our balanced approach to capital allocation, in addition to strategic investments in the business and the pursuit of select accretive acquisition opportunities, we continue to execute on the $300,000,000 share repurchase program announced last year. During the fourth quarter, we returned $28,000,000 to shareholders through a quarterly dividend of $1.15 per share. For the full year, we repurchased $129,000,000 worth of shares and paid $114,000,000 in dividends, as the return of capital to shareholders remains a key component of our commitment to creating long-term shareholder value. Turning to our outlook, as Jason mentioned, we expect to see industry RV wholesale shipments of 335,000 to 350,000 in 2026, and we look for the marine industry to be flat to up low single digits. For the transportation market, we expect the market to be flat; we will have the benefit of increased sales from acquisitions of Friedman Seating and TransAir, which we completed in 2025. We also expect that the housing industry growth will be in the low single digits, aided by our growth of residential window products. For the aftermarket, we are estimating mid-single-digit growth, supported by the significant numbers of RVs entering the repair and replacement cycle in the next few years. Lippert should also see lift in automotive aftermarket sales as the result of the key competitor's bankruptcy. I would also like to note that we have started the year strong, with January net sales of approximately $343,000,000, up 4% from prior year. With this backdrop, we expect consolidated 2026 revenue of $4.2 to $4.3 billion, an operating margin in the range of 7.5% to 8%, and adjusted diluted EPS of $8.25 to $9.25. Helping to drive the bottom line results, we plan to consolidate eight to ten facilities during the year on top of the five that we completed in 2025, while also continuing to focus on additional efficiency initiatives. In addition, we expect our continued penetration of newer end markets to support margin expansion, and we will also continue to seek divestiture opportunities related to lower margin noncore products. For capital allocation in the new year, we expect $60 to $80,000,000 of capital expenditures, mainly for business investment and innovation. We also look to return additional capital to shareholders through both our dividend and share repurchases while maintaining our target leverage ratio of 1.5 to 2.0 times net debt to EBITDA. In summary, while we ended 2025 on a strong note, we are even more excited about the opportunities ahead for LCI Industries and are determined to create additional long-term shareholder value through adherence to our strategic initiatives, with a focus on diversified growth opportunities and disciplined cost management. I will now turn the call back to the operator to open the lines for questions. Operator: Thank you, Lillian. When preparing to ask your question, please ensure your device is unmuted locally. We will now open for questions. The first question today comes from Bret Jordan of Jefferies. Your line is now open. Please go ahead. Patrick Buckley: Hey, good morning, guys. This is Patrick Buckley on for Bret. Thanks for taking our questions. Focusing on the 2026 outlook, you know, I guess, how sensitive is that range to potential rate cuts? Do three or four rate cuts drive the high end or potentially higher? Or, I guess, what other metrics, you know, drive that range there? Jason Lippert: I would just say we are not factoring the rate cuts into the range. I think it is kind of steady state as we are right now. Certainly, if we get some rate cuts, that would be helpful. I mean, a lot of our growth that we are planning on the top line is going to be predicated on market share gains and some of the other things we have talked about in the call. So is that helpful? Patrick Buckley: Yeah. Yeah. Thank you. And I guess staying on the ’26 guide here, can you help us bridge the difference between 2026 and what may be a potential, quote unquote, normal run rate looks like, I guess, between the COVID highs and the post-COVID lows? You know, where do you expect to settle in during a more normal cycle? Jason Lippert: Yeah. I think, you know, when you look at the past cycles, I mean, we are kind of—it is as I say to a lot of people, we, you know, we went up to such a monster high that when we came down to, you know, half of the 600 down to 300, you know, things broke into a lot of pieces. So I think we are going to be picking those pieces up for a while. It has been three years. I think it is going to be, you know, a slow out of the cycle. So, you know, obviously, if you look at our forecast for 2026 with units, you know, at a midpoint of, you know, 345 or 344, whatever the midpoint is of our range, it is, you know, we feel like we are coming out slow, and,you know, pick up more momentum next year as we get through more of this. But I think, you know, we would say that the midpoint is probably 375 to 415, somewhere in that range, in terms of what is more normalized for the near term. But, you know, as we have said on past calls over the years, and we feel like this is a 500,000 plus industry, but we have got to get healthy before we get back to that. Patrick Buckley: Great. That is all for us. Thanks, guys. Jason Lippert: Thanks. Operator: Thank you. Next question comes from Scott Stember of ROTH Capital. Your line is now open. Please go ahead. Scott Stember: Good morning, and thanks for taking my questions as well. You know, early in the year, we are hearing of trade-up activity, mix shift towards higher-priced units, and obviously, we are seeing that in your results already. What are you hearing through your various touch points at retail trying to get a sense if that narrative is continuing as we enter the selling season. Jason Lippert: Yeah. Yeah. I think, you know, there is a lot going on out there on the retail side of things. I would say that there—you know, I have been and sat with and talked to a handful of the larger dealers lately. The larger dealers seem to be doing decent. But I think that there is a lot of small and mid-sized dealers that are struggling. I think everybody is struggling on the margin side. But I think, you know, everybody is being very disciplined. We had some weather. I had heard that Camping World had, as well as some other stores had, you know, 45 to 60 stores that were down for a couple days because of weather. So, you know, we have that kind of thing going on this time of year, but I think the big guys are doing okay. The—some of the smaller guys and mid-size guys are struggling. And I think that is what, you know, gets us to our forecast of that, you know, 335 to 350. It just feels like things are moving slowly, and, hopefully, we get some, you know, some stronger retail numbers as we get into the selling season this year. Scott Stember: Got it. And then looking at the aftermarket, you called out the RV side, I guess, doing better. And that was—if you look at the profit for aftermarket as well, it looked like it was a little bit lower. Maybe just talk about on the aftermarket, RV versus the automotive side, maybe talk about your different brands. Jason Lippert: Go ahead. You go—yeah. Go ahead. Sorry. I was just going to say that some of the headwinds on the aftermarket side related to the pricing on the auto aftermarket side. So, you know, we have pricing cycles typically January and April. So when you look at fourth quarter, some of our numbers on the profitability side were held up a little bit there. But all those, you know, all those increases due to, you know, the tariffs and all the other related inflation that we had last year will come, you know, in the next couple quarters. But our—but all in all, like we said, our aftermarket side of our business is doing well. We have got new products, new market share. We are continuing to gain steam on the RV side. And then as we said, we have got some really big opportunities on the automotive aftermarket side with a bankruptcy of announcement of First Brands and what they are going through. A lot of pieces to pick up there for us. Scott Stember: Got it. And then just last question on guidance cadence. Anything we should know about modeling down to the bottom line for the first quarter? Lillian Etzkorn: Yes. So, Scott, as you think about the first quarter, I think January is pretty indicative of what we are thinking that we are going to see from a year-over-year perspective. So we started off with an improvement over last year, but it is only 4%. I think we are expecting that that is going to trend fairly consistently as we look at the quarter. And when we think about the margin cadence going through the year, we are not going to start at 7.5% to 8% operating margin. We will step into that as we go through the year. Scott Stember: Gotcha. Yeah. Very helpful. Thank you so much. Operator: Thank you. The next question comes from Daniel Moore of CJS Securities. Your line is now open. Please go ahead. Daniel Moore: Thank you. Good morning, Jason. Good morning, Lillian. Jason Lippert: Good morning. Daniel Moore: Maybe go back to the first question a little bit. Guidance kind of low to mid single digit growth for ’26. Just talk about puts and takes. One, kind of price versus volume. Two, expectations for content gains. And then, you know, how much revenue are you contemplating being kinda coming out of the bucket, either deemphasized or discontinued, either from consolidating facilities or kind of shedding low margin business? Lillian Etzkorn: Yeah. Good morning, Dan. Definitely a lot of puts and takes as we are looking at, you know, that potential range going into this year. From an organic growth perspective, we have talked before around that 3% organic growth. I would expect that we continue to see that as we move through 2026. Excuse me. Probably less so from a pricing perspective and more so from that market share expansion. I think we shared previously in the third quarter call that we are looking at maybe $75,000,000 of potential divestitures of that lower margin product. So that is going to be one of the takes from the growth. And then, you know, modest expansion across the markets, flat to modest expansion as highlighted in the prepared remarks. So definitely puts and takes but feeling good as we are starting the year. Jason Lippert: And then I would just add that, you know, our expectation of continued content growth. Obviously, had a nice content growth year this past year. But, you know, I look at—you know, last year was a tough market. We, you know, we grew $380,000,000 in that market, some through M&A, and through organic growth and market share gains. You know, we expanded our margin during that time. We consolidated facilities, to the tune of five facilities, which helped. We have got that momentum carrying on into this year with another eight to ten facilities. Well, we again expect a little bit of growth—flat to a little bit of growth in all of our markets, maybe a little bit more in aftermarket, given some of the things going on there. But I think when you look at, you know, the growth that we had last year, significant growth in a really tough market, and we are continuing that this year with even some more ability to improve our cost structure. I think it is a really, really good position we are entering ’26 in. Daniel Moore: Really helpful. Maybe just following up on the last question. Looking at Q1, the full-year guide implies 70 to 120 bps of operating margin expansion. I think last year was around 7%, or 7.8%, if I am not mistaken, adjusted operating income. Just how are we thinking about kind of year-over-year growth as far as, you know, up margin for the first quarter given weather and some of the other issues? Lillian Etzkorn: Yeah. I would say probably less of a year-over-year growth from an operating margin perspective, more as we get into the latter part of the year to get us to that 7.5% to 8% margin. Jason Lippert: Yeah. So, I mean, I think first quarter is going to look very similar to the operating margins that you saw in the—1,000,000 units coming into the age of repair in the next one to three years. Daniel Moore: How do you think about kind of that aftermarket business? You gave color for this year. How do you think about that ramping, you know, over the next two to three years? And what are your kinda near-term and longer-term operating margin goals in that business? Thanks again for the color. Jason Lippert: Yes. I think when it comes to those units coming into the repair and replacement cycle, again, a lot of those parts on those units coming into repair and replacement are proprietary. They need to use our parts. So, you know, all we know is we are getting closer and closer to when those units start to really flow into the dealers for service. So, you know, we have seen a little bit of that over the last couple of years, but we expect it to grow. Like I said, there is a lot of units out there that will need to come back into the repair and replacement cycle. And again, on the aftermarket side for automotive, we just have a lot of opportunity on just share gains through the First Brands issue. Lots of hitching and towing electrical business that is just going to be sitting out there, all forbid, and we are, you know, we are the likely candidate there for that business, just because there has really only been two strong players in that market over the last decade. And it is a high barrier to entry business. I mean, you have got to have, you know, significant engineering design built up to cover automobiles and trucks that go back thirty years for fit and finish on the hitch and towing aspects. And then, obviously, when we get to a like this, we get a little bit more margin opportunity and control than what we would have if there were, you know, more players. So, I think our aftermarket margins will stay pretty steady. Lillian, I do not know if you have any other color there. Lillian Etzkorn: Yes. The only other thing I would add to that, Dan, is keep in mind, we have been doing investment into the aftermarket business really to support the future expansion. So the margins have been pressured from that. And in the near term, you are going to still see some of that pressure as we are investing in the facility in Texas, as we are continuing to support the investment into the distribution aspects for aftermarket. But I think longer term, clearly, expect nice solid returns with the aftermarket business, just a little bit of near-term continued headwinds. Daniel Moore: Perfect. And I will circle back with any follow-ups. Thanks. Operator: Thank you. The next question comes from Joseph Altobello of Raymond James. Your line is now open. Please go ahead. Joseph Altobello: I guess first question, Jason. Your industry outlook for wholesale shipments on the RV side is a little bit softer than what we talked about in late October. I am just curious what you have seen over the last three and a half months or so that makes you a little bit less sanguine on the industry this year. Jason Lippert: Yeah. Like I said, I think there is just still a lot of pieces to pick up. There is still a lot—the biggest answer to your question there is just there is a lot of mid and small-sized dealers still out there. A lot of those dealers are going through the question of do they want to stick around? Do they want to sell to somebody bigger? I think the bigger guys have put the brakes on a little bit in terms of acquisition of some of these smaller dealerships. So it just feels like there is a little bit of a logjam up until some of that gets sorted out. But, you know, we are taking a conservative approach. I mean, again, we feel that the industry can be a lot better. Some of it is we just need some of the macro factors to, you know, come back and improve a little bit. But all in all, you know, we are certainly coming off the bottom. We dropped to 300, 315, to 335, to 342 this year. So, you know, we are already seeing, you know, the beginning portion of coming off the cycle. It is just a matter of how quickly it is going to ramp up. And that depends on retail and, you know, the overall dealer environment out there. Joseph Altobello: Got it. Helpful. And maybe just in terms of the first quarter outlook, I think you mentioned similar to what you saw in January, call it, plus 4%. It is obviously a slowdown from 4Q plus 16%. Is that just a tougher compare? Or are you seeing other dynamics playing out here early in the first quarter? Jason Lippert: I think it is just a lot of dealer and OEM discipline at this point in time. I mean, they are being as good as I have ever seen in terms of just, you know, pumping the brakes and making sure that we are not getting ahead of ourselves and putting inventory out there that is just going to—so, you know, dealers and OEMs are ordering and building right inventory, I feel, better than I have ever seen. And I think they are just waiting for the retail numbers to pop up. Shows have been good. Traffic has been decent. There is no signs out there that would point otherwise that it would be going the other way. So we do think it is, you know, we should be, you know, up a little bit this year. But those are some of the early indicators. Joseph Altobello: Got it. Okay. Thank you. Operator: Thank you. The next question comes from Tristan Thomas-Martin of BMO. Your line is now open. Please go ahead. Tristan Thomas-Martin: Hey, good morning. Lillian Etzkorn: Good morning. Tristan Thomas-Martin: Works out well. I want to follow up on Joe's questions. So up a little bit of retail for the RV industry year over year. Is that right? Jason Lippert: I think retail and wholesale stay pretty aligned this year. We would love to see retail up again. I think some of it is just going to depend on, you know, how the macro factors play out over the next months, you know? Tristan Thomas-Martin: Okay. Jason Lippert: Tariffs will—the tariff environment not being here this year will help significantly, you know, because pricing is a little bit more consistent. We can rely upon, at the moment, where we are at with things. Tristan Thomas-Martin: Okay. And then just kind of on the change to your shipment, I am—look, I just want to summarize to make sure I am understanding correctly. So it just sounds like dealers are just continuing to be maybe a little bit more hesitant, and you still have to take on new inventory. Jason Lippert: I think they are just being—I just think they are being cautious right now. And again, we had some, you know, we had some significant weather. I mean, we always have weather in the North during this time of year, but the weather was kind of spread out all over the place. Again, you know, some of the numbers I heard, some of the bigger dealers where they had multiple days of shutdowns and, you know, 50 to 60 stores across the country. Some of them—I mean, that is a big—that is a—I mean, nobody can go in and buy RVs when, you know, that many dealerships are shut down. So I think that played a little bit of a role. But ultimately, you know, we still feel optimistic that this year can be better than last year. Tristan Thomas-Martin: Okay. And then just one more question. Can you maybe remind everybody what the kind of typical RV trade-up cycle is from a consumer standpoint? And then maybe could it be maybe a little bit quicker this time just because there has been a lot of really cheap, smaller, kind of low-content RVs that have been sold in the last couple of years. Jason Lippert: Yeah. Yeah. I think to your point, on the more entry level stuff, especially the single axle product, you are going to see quicker trade cycles than you would on, you know, a bigger motorhome or larger fifth wheel. We typically say that the trade-in cycle is three to five years. And a lot of that just will depend on the buyer and the type of unit that they have. So, you know, obviously, we built a—the industry built a lot of those single trailers over the last, you know, five years. So, you know, we think that will bode well for the industry as people start to think about continuing camping in a bigger unit. But we have seen some of that improvement already with some of our content gains in the last few months. Tristan Thomas-Martin: Okay. Great. Thank you. Lillian Etzkorn: Thanks, Tristan. Operator: The next question comes from Brandon Rollé of Loop Capital. Your line is now open. Please go ahead. Brandon Rollé: Good morning. Thank you for taking my questions. Just first on affordability, could you just talk about maybe affordability in the RV industry entering 2026 versus maybe where we were last year and how that might overall have an impact on the industry's recovery. I think this is the first year pricing has started to come back up again, but, you know, rate relief has not really been significant, at least on the consumer side. So any comments there and how that might impact your pricing? Thank you. Jason Lippert: Yeah. I think there is a lot of—there is always a lot of pricing discussions going on. There is—I think there is two big factors that usually weigh into how ASPs are going to end in any given year. And I think that the OEMs right now are really focused on driving those ASPs down through, you know, a lot of content realignment. So there has been a lot of that going on since model change to try to stay focused on bringing prices down. The only negative we have right now is just aluminum. Costs in general are up. So that is kind of a headwind for the industry. But, you know, it is at a near the five- or seven-year high there. So, but that will come back down. Right now, it is a little bit of a headwind. There is a lot of aluminum in a lot of these RVs that are built. But, you know, we are working with our customers like we always do on good-better-best philosophies. And, you know, maybe a good is good enough instead of them buying a best type of product or a better type of product component for their RV to help bring pricing into better alignment for the consumer. And then you have got, you know, you have got the third lever, which is a lot of, you know, OEM discounting and dealers discounting to try to move product and keep product moving so it does not get stale there. And I think that our industry does a better job than most industries at managing those factors. You look at the boat industry and, you know, they are kind of strapped by engine prices. The engine prices really have not come down much since COVID, and boat prices are really high, and there is not a lot the boat manufacturers can do because it is the largest ticket item for components that they buy for the boat. So I think RV is in better shape. Brandon Rollé: Okay. Great. Thank you. Operator: Thank you. The next question comes from Kevin Condon of Baird. Your line is now open. Please go ahead. Kevin Condon: Good morning, everyone. This is Kevin on for Craig at Baird. Hoping to understand and unpack the margin guide a bit better. Just thinking the 70 to 120 basis points of improvement, wondering if you could comment on or rank order some of the largest drivers of that, you know, being operating leverage on the top-line growth. Do you expect favorable mix impact and maybe the net incremental impact of tariffs? Just how you are thinking about some of those buckets contributing to that 70 to 120 basis points increase? Jason Lippert: Yeah. Well, I will start and let Lillian chime in after. But I think, you know, one of the biggest things that I mentioned earlier that we have going for us is just some of the consolidation efforts we have and restructuring we have that we started early last year on. You know, if you look at last year, like I said, we increased $380,000,000 in our top line. You know, through our acquisitions, I think we acquired 1,000 team members. We ended the year 400 team members up over the beginning of last year. So when you consider that we grew $400,000,000, added 1,000 team members, and ended only 400 from where we started, I think that shows, you know, the power of some of the consolidation efforts that we are making around G&A and overhead. So that would probably be one of the bigger levers. And obviously, that continues, you know, in just as dramatic a fashion as last year because we are going to double—you know, we are going to nearly double the amount of consolidations we are doing this year that we did last year. Lillian Etzkorn: Yep. Thanks for that, Jason. And, Kevin, building on that, so clearly, the consolidations are going to continue to benefit us. When we think about, you know, kind of the range that we have out there, part of what is still to be determined, you know, as we go through the calendar is the timing of those consolidations of those incremental eight to ten. So we have the full-year benefit of the five that we consolidated last year, which will benefit us throughout the year. And then as we cadence in the eight to ten, which will not all happen, obviously, February 1 or March 1, it will cadence over the full year. That will also drive efficiencies for 2026. Additionally, as we have the incremental revenue coming in, we have typically guided and will continue to guide that incremental margins, whether 25% are fair assumptions as you are modeling. So there is a benefit there. And really, as Jason was saying, we will continue to drive overall operating efficiencies. So, you know, as we are able to get more volume and more units through our manufacturing facilities, you have better efficiencies just in your fixed cost absorption as well. So it really is a multitude of factors there that contribute to us being able to deliver that margin expansion and, frankly, continuing us on that progression to double-digit margin, which is what we have been talking about reaching. So continued steady progress towards that goal. Kevin Condon: Understood. Thanks. And then on the—I think in the past, you have disclosed a single axle mix of shipments. Was that a metric that you offered for Q4? And I just wonder your expectations for 2026, if that is still a tailwind for the full-year outlook? Lillian Etzkorn: So for the fourth quarter, we are providing it. It is in the presentation deck in the very back of the appendix. But the fourth quarter came in at about 21%, so a little bit up from the third quarter. I think we are kind of bouncing around that 19% to 21%. Fifth wheels were definitely still strong as we reported. Jason Lippert: I think it is yet to be determined for the full year for 2026, but that 19% to 21% feels kind of like an ambient level at this point. And just to give you a little bit more color, just for January, for example, single axles were a little down over last year January. Fifth wheels were up a little bit. So that is, you know, we are seeing that content move the right way for us. And we will see how the rest of the year goes. That is just, you know, just a one-month look. But— Kevin Condon: Gotcha. Thanks so much for taking my question. Jason Lippert: Yeah. Thanks. Thank you. Operator: The next question comes from Mike Albanese of Benchmark. Your line is now open. Please go ahead. Mike Albanese: Yes. Hey, good morning, guys. Thanks for taking my question. Just kind of a quick follow-up on really the last question. If you could just comment again on RV product mix expectations. Obviously, some momentum in the fifth wheels here. I mean, do you see that more as, you know, dealers kind of rightsizing or level setting inventory? Or is this more consumer-driven momentum that, you know, could continue. Jason Lippert: Well, I mean, we hope that the mix rightsizes back more toward not just fifth wheels, but higher-contented trailers. It is just healthier for the industry. And again, we have put so much of that single axle product into the industry over the last five years that, you know, eventually that part of the market will get saturated and people will start trading up, and that mix shift will happen hopefully a little bit more dramatically. But like I said, all I can tell you is January right now and kind of what we see in the very, very near term, which we have seen single axles drop a little bit over last year same period, fifth wheels increase a little bit over last year same period in January. Talk at the shows, that the high-end buyer is there and, you know, not as impacted as some of the entry-level buyers, a little bit more willing to spend money. So, you know, that is where we are at right now. Mike Albanese: Okay. Thanks, guys. Operator: Thank you. We have no further questions at this time, so I would like to hand back to Jason for closing remarks. Jason Lippert: Yes. Again, thanks, everybody, for joining the call. And again, against a really tough act, our performance, we feel, has been very, very strong. We have got lots of good things happening this year. Again, even if the industry is flat to a little bit up, we feel like we will perform similar to last year and continue to make some of these consolidation efforts pay off on the bottom line. So thanks for joining the call. We will talk to you next quarter. Thanks. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your line.
Operator: Good morning. My name is Gigi, and I'll be your conference operator today. At this time, I would like to welcome everyone to CT REIT's Q4 2025 Earnings Conference Call. [Operator Instructions] The speakers on the call today are Kevin Salsberg, President and Chief Executive Officer of CT REIT; Jodi Shpigel, Senior Vice President, Real Estate; and Lesley Gibson, Chief Financial Officer. Today's discussions may include forward-looking statements. Such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see CT REIT's public filings for a discussion of these risk factors, which are included in their Q4 2025 management's discussion and analysis and 2025 Annual Information Form, which can be found on CT REIT's website and on SEDAR+. I will now turn the call over to Kevin Salsberg, President and Chief Executive Officer of CT REIT. Kevin? Kevin Salsberg: Thank you, Gigi, and good morning, everyone. We were very pleased to report that 2025 shaped up to be a great year for CT REIT. In the face of continued geopolitical uncertainty and macroeconomic disruption, CT REIT once again delivered on its value proposition to unitholders. CT REIT's goal is to provide its investors with strong returns, growing distributions and stability. We manage our business with these hallmarks in mind, focusing on growth opportunities that leverage our strategic relationship with Canadian Tire, optimizing our existing asset base and maintaining a balance sheet that provides us with a resilient foundation. In 2025, we successfully deployed approximately $235 million and added nearly 900,000 square feet of new retail to our portfolio, with approximately 400,000 square feet of that being added in the fourth quarter alone. Although we were very pleased with the quantum and quality of the new space that we brought on this past year, as I discussed on our conference call last quarter, we were even happier with how we delivered these results. Across 13 discrete investments, our team found new opportunities to acquire assets from third parties to redevelop and improve existing CT REIT properties and to build new locations, both for Canadian Tire and for other third-party tenants. As we look to the future, we will lean into these growth levers and the core competencies that we have built in order to continue to create value for our unitholders and to improve our portfolio. This portfolio growth, coupled with our foundation of contractual rent escalations and our successful lease renewals, contributed to our strong financial performance in 2025. As we have seen across our peer group, demand for retail space continues to outpace supply and the fundamentals for retail real estate are currently very strong. Jodi will provide a little more color on this momentarily, but we continue to leverage this dynamic to drive organic growth and seek out new opportunities. Our successes over the course of the last year led to solid growth in our bottom line. In the fourth quarter, net operating income grew by 4.9% and adjusted funds from operations per unit grew by 2.9%. For the full year, growth in net operating income came in at 4.6% and adjusted funds from operations per unit grew by 2.8% and we achieved this growth while maintaining our payout ratio in the low 70% range and further reducing our indebtedness ratio by approximately 130 basis points relative to the end of 2024. We are also pleased that construction began at the Canada Square property related to Canadian Tire's new long-term head office lease in Q4. This project will substantially refurbish the existing 640,000-square-foot office complex with completion anticipated towards the end of 2028. With the improvements that we will be making to the property and the new Eglinton LRT line now operational, the future for this asset looks bright. I want to take a moment to recognize the CT REIT team for their hard work and dedication over the past year. In addition to our financial and operational achievements, we made a difference in our communities in 2025 through our fundraising efforts, the way we managed our assets and through our various sustainability-related initiatives. I'm very proud of the efforts of our entire team, and I'm optimistic about what 2026 will bring for CT REIT as we continue to advance our business. And with that, I will pass it over to Jodi for her comments on our investment, development and leasing activity. Jodi? Jodi Shpigel: Thanks, Kevin, and good morning, everyone. As highlighted in our press release yesterday, we were pleased to have completed several previously announced projects in the fourth quarter. These included 6 intensification projects, 5 of which represented expansions of existing Canadian Tire stores that are located in Victoria, British Columbia; Winnipeg, Manitoba; Fergus and Brampton, Ontario; and Donnacona, Quebec. The last intensification project related to the development of a third-party pad at an existing Canadian Tire-anchored property in Fort Frances, Ontario. In Q4, we also completed the development of a new 172,000-square-foot Canadian Tire store in Kelowna, British Columbia and the redevelopment of a former -- of a vacant former Canadian Tire store in Lloydminster, Alberta. This building was successfully backfilled with a national grocer, furniture store and a footwear retailer. Finally, as previously announced, we also acquired the freehold interest underlying an existing Canadian Tire ground lease as well as a multi-tenant commercial retail building in Fort Saskatchewan, Alberta. As Kevin noted, this is a very productive quarter for growth. In total, projects completed in the fourth quarter represented $116 million of investment and added more than 400,000 square feet of incremental GLA to the portfolio. They are also strong examples of how we collaborate with our principal tenant, Canadian Tire, to unlock additional value for our unitholders. Looking ahead, our development pipeline remains healthy. We currently have 11 projects at various stages of progress with 4 expected to be completed in 2026 and the remainder in 2027 and beyond. These developments, including the Canada Square office retrofit project in Toronto, represent a committed investment of approximately $329 million, of which $102 million (sic) [ $112 million ] has been spent to date. We expect to invest roughly $78 million over the next 12 months to advance these projects. Once completed, they will add just over 600,000 square feet of new GLA to the portfolio, approximately 95% of which is already pre-leased. Turning to leasing. During the fourth quarter, CT REIT completed a little over 1 million square feet of lease extensions, primarily comprised of 14 Canadian Tire store lease renewals. For the full year, we completed 30 Canadian Tire store lease extensions and overall, renewed retail leases representing over 2 million square feet of GLA. For the full year, these renewals were completed at a weighted average first year rental uplift of approximately 10.4%. As of year-end, we maintained a long weighted average lease term for the portfolio at 7.2 years, and our occupancy rate remained robust at 99.5%, up 10 basis points from a year ago. I will now turn it over to Lesley to discuss our financial results. Lesley? Lesley Gibson: Thanks, Jodi, and good morning, everyone. As Kevin mentioned, we are very pleased with the REIT's financial performance in the fourth quarter and full-year 2025. Once again, our results demonstrated the steady growth and resilience of our portfolio. Same-property NOI, which includes the impact of intensifications, grew 2% in the quarter compared to Q4 2024. For the full year, same-property NOI increased 2.2%. These increases reflect the contractual rent escalations of approximately 1.5% per year in many of our Canadian Tire leases as well as the contributions from intensification projects completed in 2024 and '25 of $1.2 million and $3.3 million for the quarter and year, respectively. Overall, net operating income for the quarter grew 4.9% year-over-year, representing an increase of about $5.7 million. For the full-year of 2025, NOI grew 4.6% or over $21 million. This strong performance was supported by the same-property NOI growth that I just spoke to and the impacts of acquisition and development activity over the relevant period. In the fourth quarter, general administrative expenses as a percentage of property revenue were 2.8% compared to 2% in the same period last year. The increase was mainly due to the timing of noncash fair value adjustments on unit-based compensation in Q4 2025. Excluding these fair value adjustments, G&A as a percentage of property revenue decreased 20 basis points to 2.7%. On a full-year basis, G&A expense represented approximately 3.1% of revenue or roughly 2.8% after normalizing for unit-based compensation fair value changes, slightly better than the 2.9% in 2024. The fair value adjustment of our investment properties was $110.4 million in the fourth quarter compared to $54.8 million in the prior year. This sizable gain was driven primarily by increases to underlying cash flows due to updates made to market leasing assumptions, strong leasing and renewal activity completed during the period, the impact of numerous development project completions mentioned by Jodi earlier and the compression of terminal capitalization and discount rates for certain retail properties within the portfolio. These factors more than offset the expansion of terminal capitalization discount rates applied to the valuation of our industrial properties, a change that was made to reflect current market conditions. For the full year, fair value adjustments totaled $195.4 million, up from $119.1 million in 2024. In the fourth quarter, AFFO per diluted unit was $0.317, up 2.9% compared to the fourth quarter last year and the full year. AFFO per unit diluted was up 2.8% year-over-year. FFO on a diluted basis was $0.339 per unit, up 1.5% compared to Q4 2024 and up 2% on a full-year basis. Growth in FFO and AFFO primarily reflects increases in NOI, partially offset by higher interest expense. Cash distributions paid in the quarter increased 2.5% compared to Q4 2024 to $0.237 per unit, reflecting the higher monthly distribution rate that became effective in July '25. This continued growth is further evidence of our strong track record of increasing distributions every year since our IPO in 2013, reflecting the cumulative growth of 45.9% that unitholders have enjoyed since that time. With AFFO per unit growing faster than distributions, our payout ratio improved slightly. The AFFO payout ratio for Q4 was 74.8% compared to 75% a year ago. On a full year basis, the AFFO payout ratio remained stable at 73.5%. Turning to the balance sheet. Our interest coverage ratio for the fourth quarter was 3.34x compared to 3.52x in Q4 2024. This decrease reflects the higher interest costs arising from the reset of interest rates on several series of our Class C LP units effective June 1, 2025, and increased utilization of our credit facilities to fund acquisitions and developments and the issuance of $200 million of Series J unsecured debentures in June '25. Even with these financing activities, our total indebtedness to EBIT fair value improved to 6.77x in 2025 from 6.81x a year ago as earning growth outpaced the increase in debt. Our indebtedness ratio at the year-end also improved relative to the end of 2024 at 39.8%, down from 41.1%. This improvement reflects the continued increase in the fair value of our investment properties and the growth in total assets from acquisitions and developments, partially offset by draws on our credit facilities. The strength in our balance sheet and these industry-leading debt metrics provide us with ample financial flexibility to fund our future growth initiatives. With respect to liquidity, we ended Q4 with approximately $4 million of cash on hand. Our committed $300 million bank credit facility was essentially undrawn at year-end, and we also maintained our $300 million uncommitted credit facility with CTC with roughly $104 million available on this line at year-end. Altogether, we continue to have adequate liquidity and balance sheet capacity to fund ongoing investments and to pursue new opportunities. And with that, I'll turn the call back to the operator for any questions. Operator: [Operator Instructions] Our first question comes from the line of Brad Sturges from Raymond James. Bradley Sturges: Congrats on the good quarter and obviously, a lot of success on a number of fronts on the growth side. Just curious on the -- I guess, as you think about the expansion intensification opportunity, you completed a number of projects in the quarter. Like how do you think about new opportunities to be added to the pipeline this year? Kind of what do you see in terms of new opportunities right now? Kevin Salsberg: Thanks, Brad. Yes, super happy about the completions in Q4. I think that was a big quarter for us. Obviously, looking to reload the pipeline just in terms of new opportunities and continue to work with Canadian Tire. I think the cost environment is still somewhat challenging on the new development side. As you know, we have several growth levers that we can pull, whether it be store intensifications, new store development, acquiring assets from other third-party landlords or even vend-ins, which we haven't done in some time. So we're obviously looking to the opportunities and availability of each of those types of transactions. And I'm pretty optimistic that we'll be able to find some that fit our strategy and our financial parameters and 2026 will shape up similarly to the way we were able to deliver in 2025. Bradley Sturges: Okay. So you think pipeline across all those buckets could be pretty similar year-over-year? Kevin Salsberg: Yes. I mean it's always opportunity based. So it's hard to say exactly. But certainly, we're out there. We're looking at some things that are on market, some things that are off market. We're having discussions with Canadian Tire. So I guess the best I would say is I'm optimistic, but time will tell. Bradley Sturges: Okay. And just what got completed or delivered in the quarter? Can you just comment, generally speaking, ongoing in yield on cost? Kevin Salsberg: Probably a mixed bag. I mean, obviously, we had some different project types, one ground-up development for a third party, some of the store intensifications, an acquisition. So on a blended basis, I would probably say mid- to high 6s, but that's without really spending a lot of time thinking about the math in my head. So I think that's probably a good rough guide. Operator: Our next question comes from the line of Giuliano Thornhill from National Bank. Giuliano Thornhill: Just had one question on the kind of vend-in opportunity. How large is that? And do you think kind of CT is mostly fleshed out on the industrial distribution side? Kevin Salsberg: On the supply chain side, yes, I think they're pretty set. They had a major swell in COVID when their inventory positions increased, and we helped them with that as we built a new DC for them in Calgary, I would say, looking back at the last couple of quarters, I think they've normalized that to a certain extent. So I don't see any huge opportunities with CTC necessarily on the supply chain side, although we do always look at synergies with respect to our existing holdings and if there's anything in terms of adjacent sites or opportunities in the nodes that we operate in to consolidate space. So that continues to be a strategy for us. In terms of your first question, in terms of the vend-in opportunities, there's roughly 10 to 15 Canadian Tire stores that we believe meet our investment criteria. The last couple of years, our unit price hasn't been exactly where we want to be in terms of issuing equity in exchange for assets, which is part of the formula we've used in the past when acquiring assets from Canadian Tire. I think today, we feel a little better about that. And certainly, with the development pipeline a little bit smaller than it was at this time last year, that is something we will be looking at. Giuliano Thornhill: And just with leverage kind of declining at all-time lows really, is there maybe the possibility to pursue larger distribution increases or possibly buying back stock at these levels? I'm just wondering kind of how you would utilize like that low leverage level for unitholders. Kevin Salsberg: Yes. I mean we've said before, while being below 40% is not necessarily a target for us, we certainly feel comfortable where we are. We also believe it provides some dry powder as you're sort of intimating. We prefer to use that dry powder to acquire or develop sites at the unit price levels that we're currently experiencing. I'm not sure we'd be users of our NCIB. That was something we were a little bit more active on when we were trading kind of in the low to mid- $13 range. Today, we're in the high 16s. So I think primarily, we would like to use it for growth initiatives at the portfolio level. Operator: Our next question comes from the line of Tal Woolley from CIBC Capital Markets. Tal Woolley: Apologies if I missed some earlier commentary, I had to jump on late. Just with Canada Square, now that the Eglinton LRT is done, can you just talk a little bit about -- I know this was one of the hitches sort of in getting things moving on that site. Can you talk a little bit more about just progress there? Kevin Salsberg: Sure. So very happy that the Crosstown LRT is finally open. In terms of hitches, there's kind of 2 components of that. One was the actual usability of the new line. The other is the 2 acres at the, I guess, northwest corner of our site are being controlled by Crosslinx, the consortium that built the LRT. And the first phase of development cannot begin on those lands until such time as they relinquish control. We don't have a specific time line as to when that will happen. I would imagine it would be sooner than later, but we have no notice yet at this point. Having said that, although the benefits of the LRT still accrue to the existing commercial complex and its users, the connectivity that it brings and access to the employee base here, we're really focused on the commercial refurbishment, the retrofit of the office space that we'll be undertaking with Oxford between now and the end of 2028. So I think while we will continue to advance the master plan and the zoning efforts, we're not really turning our minds quite yet to incremental density on the site in terms of the desire to proceed with that part of the project. Tal Woolley: And does that sort of -- does the ongoing like question about when you will sort of maybe start that piece, is that sort of factoring into why the pipeline is sort of where it's at right now that you wanted when you're thinking about this a few years ago, you want to have capital available to pursue that and so took on less? Or is it a function of just there are fewer projects to do at Canadian Tire? Kevin Salsberg: I think it's mostly the latter where there's fewer projects. Certainly having that dry powder to allocate as we feel is appropriate is a nice-to-have. So if in a couple of years, the market has improved, the density is realized and it's something we want to pursue, having the balance sheet capacity to do that is obviously great. But in the current circumstances, I think it's more of the cost environment that's impeding our ability to continue to add to the store intensification and new store development pipeline. Tal Woolley: Okay. And then just lastly, I guess this would be for Lesley. You have the, I believe, a $200 million debenture maturing in June. Would we expect you to move earlier on that. And I'm assuming you'd be looking to refinance the -- whatever you have left on your credit facilities too, in addition to the $200 million? Lesley Gibson: Tal, definitely, we're watching markets. And I think the public debt market, which is sort of our continued preferred avenue for sort of financing, is very constructive right now and it has been -- and it's quite active. So definitely looking to refinance the existing maturities, that $200 million and likely some upside to that. We'll just see where you are drawn on the line and where our use for the rest of the year is in terms of how much new offering could be. But yes, definitely in the next sort of 3 months, we'll be watching the markets to find an opportune time. Operator: Our next question comes from the line of Sam Damiani from TD Cowen. Sam Damiani: I just jumped on a little late. So -- but I think the question was asked about the former Canadian Tire store in Kelowna that has been backfilled. Has it been like 100% backfilled? And I wonder if you could comment on the rents versus the pre-existing rents on that space. Jodi Shpigel: Sam, it's Jodi. Just to clarify, it was a former Canadian Tire store in Lloydminster, Alberta that we backfilled. We completed a new store in Kelowna as well in this quarter, but the backfill was in Lloydminster. And so that's the tenants that were the grocer, the footwear retailer and furniture store. Sam Damiani: Okay. Okay. But there is an empty former Canadian Tire store in Kelowna, too. Is that not, right? Jodi Shpigel: That is correct. Canadian Tire still occupies it and has lease terms. So we're determining what comes next for that asset. Sam Damiani: I see. Okay. Thank you for the clarification. And I appreciate the new disclosure on rent increases, on renewal rent increases. That's very helpful. You showed both an uptick in the fourth quarter versus sort of first 9 months, both on the Canadian Tire and third-party tenants. Was there anything unusual in the Q4 stats there? Or would you say that's indicative of kind of just a market trend? Kevin Salsberg: I don't think there's anything unusual. I think certainly we're seeing an improved leasing and renewal market as we kind of commented on earlier. We've substantially dealt now with our 2026 maturities. So in the next couple of months, we'll be turning our eyes to the first few that come up in 2027. But yes, I think there's certainly an opportunity to replicate these kinds of results across the portfolio. I mean every batch of renewals that we deal with is slightly different in terms of where they're located, the size of the market, where the rents are relative to market rents. So there certainly could be some fluctuation up and down amongst the output, but we do think there is upside for us as we continue to get at these renewals, and that will start kicking in more and more as time goes on as we get further into our lease expiries. I think in 2027, I think there's about 6%, 7% -- 6% of CTR leases come up for renewal, 2028, almost 9%. So that number will continue to grow in prominence, and we'll continue to hopefully follow the trends that we're seeing more broadly in the retail leasing market. Sam Damiani: I appreciate that, Kevin. And the sort of 10.5%, 11% on the Canadian Tire store lease renewals, just to clarify, those are 5-year fixed renewals. Is that correct? Kevin Salsberg: Yes, that's correct, Sam. Sam Damiani: Yes. And so the average sort of annual increase is a snick above 2%. So if I'm not mistaken, that is higher than previous years, which I seem to recall was more in the 1.5% annual -- sort of average annual increase. Is that right? Kevin Salsberg: That's correct, Sam. Sam Damiani: Okay. And is that any reason, anything different with the 2025 renewals that would sort of justify that? Or is it purely just a reflection of overall markets, the mix geographically isn't meaningfully different year-to-year? Kevin Salsberg: I think it's a combination of the improved retail leasing market as well as the mix of those leases that we were dealing with. Operator: [Operator Instructions] As there are no further questions at this time, I will now turn the call over to Kevin Salsberg, President and CEO, for closing remarks. Kevin Salsberg: Thank you, Gigi, and thank you all for joining us today. We look forward to speaking with you again in May after we release our Q1 results. Thank you. Operator: This concludes today's call. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Straumann Group Full Year 2025 Results Conference Call and Live Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead, sir. Guillaume Daniellot: Thank you, and good morning or afternoon to all of you. Thank you for attending this conference call on the Straumann Group's Full Year 2025 results. Please take note of the disclaimer in our media release and on Slide 2. During this conference call, we are going to refer to the presentation slides that were published on our website this morning. As usual, the discussion will include some forward-looking statements. As shown on Slide 3, I will start with the 2025 performance overview. Isabelle will then cover the financial details. And afterwards, I will share strategic updates and our outlook. We will be happy to answer your questions at the end of the presentation. And let's move directly to Slide 5. Thanks to a strong full year performance, I would like to start by highlighting that we have created more than 7.3 million smiles in 2025. In other words, together with dental professionals, we've supported around 10% more people improving their oral health and confidence than in the previous year to keep delivering on our purpose, unlocking the potential of people's lives. Now let me share how we have progressed in 2025 by moving to Slide 6. 2025 has been a very dynamic year, and I'm very pleased with the results we delivered. We achieved a strong growth with revenue reaching CHF 2.6 billion, representing an organic growth of 8.9%, supported by a very strong fourth quarter despite the uncertainties around the VBP in China. On a reported basis, growth in Swiss francs was 4.1%, which represents a translation impact of around CHF 100 million of revenue. Despite these currency and tariff headwinds, we intensified our focus on efficiency, generating gains that supported our improved profitability. Our core EBIT margin, excluding currency headwinds, increased year-on-year to 26.5%, which corresponds to 25.2%, including currency effects. These results clearly demonstrate the resilience of our business model and the disciplined execution across the group. On the innovation side, 2025 was a year of record launches. Starting with the Premium Implants segment, innovation remains the primary growth driver. It is the foundation on how we outperform the market and gain share. In 2025, these strategies translated in a record year of new product launches, reflecting both the depth and speed also of our innovation pipeline, iEXCEL is an excellent example. We have already sold more than 1 million iEXCEL implants, making it the most successful implant launch in our history. This performance demonstrates not only strong market adoption, but also the relevance of our innovation for clinicians worldwide. In parallel, we have seen a strong momentum of our SIRIOS X3 intraoral scanner since its launch in October 2025, significantly expanding the clinician base being connected to our Straumann Group digital ecosystem. On the transformation side, the partial transition of the ClearCorrect manufacturing to Smartee is well on track, boosting our value proposition and supporting scalable and profitable growth in orthodontics. Overall, those very promising progress gives us confidence as we enter 2026. Looking ahead, we expect another successful year with continued market share gains and high single-digit organic revenue growth, along with further profitability expansion of 30 to 60 basis points in the core EBIT margin at constant 2025 currency rates. Now let's have a look at the regional performance on Slide 7. Thanks to our large geographical presence, we delivered strong growth across the year and in the fourth quarter, especially looking at the strong comparison basis of 2024. Let's start with EMEA, both our largest region and biggest growth contributor for the group. EMEA performed particularly strong in the fourth quarter, leading to a full year organic growth of above 11%. This was achieved across premium and challenger implantology, digital solutions and orthodontics, which supported our continued market share gains across all markets. In North America, performance improved through the year, reaching a strong organic growth of 6.8% in the fourth quarter. This sequential acceleration is particularly significant as North America remains a strategic market for the Straumann Group. This progress reflects the impact of a strengthened leadership team, sharper execution and the contribution of recent product innovations, all of which are driving more consistent performance and stronger market traction. Growth in the fourth quarter was supported by implantology, digital solutions alongside continued momentum in the DSO segment, underscoring improved operational focus and disciplined execution. Moving to Asia Pacific. The region delivered solid underlying organic growth of around 7% for the full year, driven by strong momentum outside China, where we achieved a growth of more than 10%. Countries such as India, Japan and Southeast Asia continued to perform well, supported by challenger brands, digital workflow adoption and strengthened education activities. In China, performance during the second half of the year was significantly impacted by a softer patient flow and distributor destocking behavior, particularly linked to the upcoming VBP process. Despite the seasonal VBP impact, we believe that the underlying fundamentals of China remain intact. With the ongoing ramp-up of our Shanghai manufacturing campus, we are strengthening local production capabilities and supply chain resilience, positioning us very well for the next VBP ramp. Latin America once again delivered very strong performances with a high double-digit organic revenue growth of around 18% for the year, driven by Neodent, continued market expansion of our Straumann premium brand and fast adoption of our new digital equipment SIRIOS. Growth was strong both in the full year and in the fourth quarter and the region contributing 17% of the group's total organic growth. With this, I will now hand over to Isabelle, who will take you through the financials in more detail. Isabelle Adelt: Thank you, Guillaume, and good morning also from my side. It is a great pleasure to walk you through our financial highlights of 2025. Let me start on Slide 9 with how we translated our strong growth in 2025 into solid cash generation. We delivered revenues of CHF 2.6 billion, which translated into a core gross profit margin of 70.1%. This is a strong result in a year marked by elevated investments and external headwinds and driven by our productivity improvements and the favorable product mix. The strong gross profit flowed through to profitability. As Guillaume mentioned, we achieved a core EBIT margin of 25.2%, including currency effects or 26.5% at constant 2024 exchange rates. This was driven by disciplined execution, targeted OpEx measures and operating leverage and demonstrates our ability to protect and improve margins despite FX headwinds and tariff-related pressure. At the bottom line, our core net results reached CHF 478 million, corresponding to a net margin of 18.3%, supported by the quality of earnings and effective cost management across the entire group. Importantly, the strong operating performance translated into cash. We generated a free cash flow of CHF 290 million, representing 11.1% of net revenue and influenced by tactical working capital management decisions as well as one of the highest investment years in our history. This also marks the ending of a large manufacturing investment cycle for future growth. Overall, this clearly shows that we not only delivered strong growth in 2025, but also successfully converted this growth into profitability and cash generation, fully in line with our guidance. With this overview, let us now look at the individual line items in more detail, starting with gross profit on Slide 10. Compared to the prior year, the margin was only slightly lower with 70.1%. This development was mainly driven by 2 factors: Firstly, the impact from U.S. tariffs; and secondly, the ramp-up of production at our Shanghai campus, which weighed on margins during the year. These effects were partly offset by our strong product mix and productivity improvements across the group. Overall, the gross margin development reflects the strength of our portfolio mix and our ability to further automate our production while maintaining a high and resilient margin profile. With this, let me now turn to Slide 11 and discuss EBIT in more detail. Foreign exchange effects had a visible impact on our profitability. While revenue growth differed by around 480 basis points between local currencies and Swiss francs, only around 130 basis points of FX impact flowed through to the EBIT line. This reflects the effectiveness of our local-for-local production strategy and the structural improvements we have implemented across our supply chain, which significantly reduced the sensitivity of margins to currency movements. In addition, cost saving and efficiency measures contributed around 120 basis points to the EBIT margin improvement. These measures were implemented across the organization and focused on operating discipline, prioritization and productivity while continuing to invest in our strategic priorities. Overall, EBIT development shows that we were able to translate strong growth into improved profitability, even in an environment characterized by currency volatility, tariffs and cost pressure. Looking ahead, it is important to note that the ClearCorrect Smartee partnership was only announced in October and, therefore, has not yet had a meaningful impact on EBIT margin in 2025. As part of the production transition during 2026, we expect to see positive effects on margin, especially in the second half of this year. Against this backdrop, let me now take you to the net results on Slide 12. The financial result was slightly lower compared to the prior year. This was mainly driven by the effects of currency hedging, reflecting the volatility in foreign exchange markets. Taxes were somewhat higher as a larger share of profits was generated outside of Switzerland, which is also a consequence of our local-for-local production strategy. As in previous years, we present core results in addition to IFRS results to facilitate a like-for-like comparison. In 2025, noncore items amounted to around CHF 120 million after tax. A significant part of these noncore items related to restructuring measures, which are directly linked to strategic decisions we have taken to strengthen our operational setup. We transferred implant volumes for the Chinese market from Switzerland to our new manufacturing campus in Shanghai. And furthermore, restructuring costs were incurred in connection with the transformation of the orthodontic business. In addition, noncore items include acquisition-related amortization and special items, legal costs as well as impairments related to the planned relocation of the group's headquarters to our new campus in [indiscernible]. From here, I will move on to the cash flow and investments on Slide 13. In 2025, we generated a free cash flow of CHF 290 million. This is particularly noteworthy given the very high level of investments during the year. Capital expenditure amounted to CHF 223 million, an increase of CHF 56 million compared to the previous year, making 2025 one of the strongest investment years in the group's history. These investments were focused on clearly defined strategic priorities. They include the expansion of production capacity, most notably the ramp-up of our Shanghai manufacturing campus, Medentika and the new third production site in Curitiba as well as continued investments in innovation, digital infrastructure and operational efficiency. Despite this elevated CapEx level, cash conversion remains solid. This reflects strong operating performance and working capital management across the group. Overall, this combination of high investments and strong free cash flow demonstrates our ability to invest for future growth while maintaining financial flexibility and balance sheet strength. With this, I will now move to Slide 14 and the proposed dividend. Based on our strong performance and solid cash generation, the Board of Directors proposes a dividend of CHF 1 per share, which is subject to approval at this year's Annual General Meeting. This represents an increase of 5% compared to the prior year and corresponds to a core payout ratio of around 33%. This is in line with our capital allocation priorities to maintain and increase dividends with earnings. With this, let me now briefly touch on our efforts and progress in sustainability on Slide 15. Before I turn to the details, let me briefly highlight that the annual report published today includes our sustainability report prepared in line with CSRD requirements for the first time. This reflects our commitment to transparency and regulatory alignment. In 2025, we continue to make progress across our key sustainability priorities, closely linked to our strategy and operations. As part of our long-term growth strategy, education remains a central pillar for the group. During the year, we trained more than 370,000 dental professionals worldwide with around 42% of all education activities taking place in low- and middle-income countries. This shows our continued efforts to broaden access to care and enables the adoption of modern efficient treatment approaches across regions. On climate, we continue to move towards our net zero ambition. We further reduced our Scope 1 and 2 CO2 emissions by around 17% compared to 2021 and 98.5% of our electricity consumption now comes from renewable sources. This reflects the fact that renewable electricity is increasingly embedded as an operational standard rather than an aspiration. In addition, our local-for-local manufacturing strategy contributes not only to resilience and efficiency, but also to sustainability by reducing transportation needs and strengthening regional supply chains. Overall, sustainability at Straumann Group is closely integrated into how we operate the business and supports long-term value creation for patients, customers and society. With this, I will now hand back to Guillaume for the strategy update and outlook. Guillaume Daniellot: Thank you, Isabelle. Let me now focus on our strategy update, starting with highlighting the massive market opportunity we are facing on Slide 17. First, within our total addressable market of more than CHF 20 billion, we have gained market share across key segments, increasing our total share from 12.5% to 14% within the last 12 months. While we have once again outperformed, this total addressable market still offers us a very significant opportunity to grow in the short and midterm future. Our growth playbook has 2 major dimensions. First, we want to continue to strongly perform in our core market segments, Implants and Regenerative through innovation, digitalization and education. Secondly, we are focusing on transforming our business in key market segments to capture the huge growth opportunities. Then let me start on the left-hand side with the performed dimension. In implantology, our core segments, we are continuing to strengthen our leading position. The market size is around CHF 6.1 billion, and our market share increased to above 35%. This reflects consistent outperformance of the market driven by innovation, digital workflows and strong execution in a still underpenetrated market segment. Regenerative is closely linked to implant surgery with a market size of around CHF 1.3 billion and a market share of around 13%. This is another area where we continue to expand our positions, supported by our strong clinical heritage and portfolio breadth. These segments represent our core strength. This is where we have strong brands, deep clinical relationships and a proven innovation pipeline. Now on the right-hand side, the focus is on transformation. In clear aligners, the market is sizable at around CHF 4.9 billion, but our market share remains below 5%. This clearly highlights the upside potential. With the ongoing large transformation of our orthodontics business, supported by our technology partners such as Smartee, we are very confident in the future of our business repositioning to grow and scale efficiently. Secondly, digital equipment such as SIRIOS scanner and 3D printers represent another attractive segment with a market size of around CHF 1.8 billion. In this area, we have made excellent progress in 2025, achieving strong growth and a market share of above 10% now, and we see further acceleration ahead driven by a very differentiated and competitive equipment and workflows. Finally, CAD/CAM prosthetics is a large market of around CHF 5.7 billion, where our market share is still below 5%. Here, we see an interesting opportunity to accelerate growth by disrupting workflows through chairside solutions. We are very confident that this perform and transform strategic playbook, combining our core strength together with new technologies, which are radically changing our competitiveness in key new segments, will deliver consistent short- and midterm growth opportunity. With this, let me now turn to Slide 18 and walk you through how we execute against this playbook. Our strategy is focused around 3 strategic priorities, each addressing a specific growth engine of the group. First, we aim to expand our leadership in implantology by driving further penetration in an underpenetrated market through innovation, digitalization and education supported by our strong premium and challenger brands. Secondly, we are transforming our orthodontics business, building a stronger value proposition in a more scalable, digitally enabled model that allows us to grow efficiently and profitably together with strong partners. Third, to unlock the market potential of digital equipment and the CAD/CAM prosthetic market, we are working to disrupt chairside prosthetics by simplifying and accelerating workflows, leveraging our SprintRay strategic partnership and our open cloud-based digital ecosystem. What connects these 3 priorities is a common execution logic. Across all of them, innovation definitely supports our value proposition differentiation. Digitalization delivers the expected efficiency and education enables adoption and opening up wider the market segments. Let's now move to Slide 19. Before we go into the details of each pillar, let me highlight the clear principle differentiating our solutions. We are leveraging our cloud-based ecosystem to combine the best products with the best workflows to deliver practice efficiency and superior clinician experience. In today's dental market, product performance alone is no longer sufficient. Clinicians expect not only innovation at the implant or aligner level, but also complete, efficient and integrated workflows that support them from planning to treatment and case follow-up. This combination is what enables us to differentiate and consequently gain market share across segments. With this foundation in mind, let us now go into the first pillar of more detail, starting with implantology on Slide 21. I would like to highlight once again the fact that the implantology market remains yet significantly underpenetrated, offering a vast growth potential. Spain, with its large number of surgically trained dentists and a dynamic DSO presence driving increased affordability, serves as a valuable benchmark for evaluating average implant treatment penetration. Using Spain as a reference, we see significant potential for growth in both developed markets such as Italy, France, Germany, but also especially U.S. as well as in emerging markets like India. We are very confident that market penetration will continue to rise. This development is driven by increasing patient awareness of dental implant treatments and constant growing number of surgically trained dentists who can place implants in all geographies and more affordable treatment costs. With this context, let me now go into the first growth driver, starting with innovation on Slide 22. In implantology, innovation is the key driver to expand penetration and gain market share. In 2025, we launched iEXCEL, our next-generation implant system. Since its launch at IDS in Cologne, we have already sold more than 1 million iEXCEL implants, making this the most successful product launch in our history. IEXCEL combines unique features such as our premium surface SLActive and our Roxolid material with a simplified system architecture. One connection, one prosthetic diameter and one single surgical instrument set enabled to treat a wide range of indications with easier handling. In parallel to excellent clinical outcome, this simplicity is critical. It reduces complexity for clinicians such as inventory management, improves efficiency in daily practice and supports the adoption of more advanced treatments such as immediate loading and full-up solutions. Importantly, iEXCEL is not only driving growth within our existing customer base, it is especially a strong conversion tool, driving new customer acquisition. Premium competitors implant users on the one side, but even more importantly, it is now also a strong tool to switch clinicians using value systems. With this, let me now turn to our leading global challenger brand, Neodent on Slide 23. Neodent continues to be a strong growth engine driven by innovation and geographical expansion. In 2025, we sold around 5 million Grand Morse implants, underlining the strong acceptance of this platform across markets. Grand Morse is a very powerful system. It combines a modern implant design with a broad indication range and is also available in ceramic materials. Neodent is now established as a leading global challenger brand and continues its dynamic expansion into new geographies and growing market share in the Challenger segment. A key milestone ahead will be the registration of Neodent in China, which we expect to be done by 2027, opening up a significant additional growth opportunity. Overall, Neodent plays a critical role in complementing our premium portfolio and driving global expansion in implantology. Let's now turn to Slide 24. Embedded in our innovation process, digitalization is what turns products into a comprehensive and efficient customer experience. With Straumann AXS, we have built a successful open cloud-based platform that connects implantology workflow end-to-end across planning, surgery and restoration. The adoption of Straumann AXS has scaled up very rapidly. Within 18 months, the platform has grown from 0 to more than 15,000 active users, clearly demonstrating strong acceptance and relevance in daily clinical practice. What drives this adoption is the integration of complex workflow. Solutions such as co-diagnostic surgical planning and Smile in a Box are fully embedded into AXS, enabling faster, standardized and predictable implant treatments. Importantly, Straumann AXS also strengthened customer engagement. The platform drives a recurring usage and creates a continuous interactions between clinicians well beyond a single product transaction. Let me show you a concrete example how digitalization amplifies innovation and turns it into a differentiated customer experience on Slide 25. By combining intraoral scanner, the iEXCEL implant and a specifically designed anatomic healing abutment for the digital Straumann AXS platform, we created a fully connected workflow that significantly improves efficiency and accelerates treatment, and the impact is measurable. With the Fast Molar workflow, patient treatment time can be reduced by up to 26 weeks, clinical churn time by around 50 minutes and the number of appointments can be reduced from 5 to 2, enabled by the fully integrated digital nature of the solution. Importantly, it also strengthens the economics. By accelerating treatment and standardizing workflow, we increased the pull-through of original abutments and restorative components, driving higher recurring revenue per case. For clinicians, this means higher productivity and predictable results. For patients, fewer visits and faster restoration. And for Straumann, stronger consumables growth and scalable value creation. Moving up to Slide 26. To drive access to care, education is critical to make our solutions accessible to more clinicians and patients. In 2025, we delivered more than 10,700 education programs worldwide and trained over 370,000 dental professionals covering implantology, digital workflows and advanced indications such as pull out procedures. Education plays a critical role in increasing penetration. It enables more clinicians, particularly general practitioners to adopt implant treatments and to use digital workflow in a predictable and efficient way. With this, let me now move to the second pillar of our playbook for growth, the transformation of our orthodontics business on Slide 28. Through the Smartee and DentalMonitoring strategic partnership announced last quarter, we are transforming our Clear Aligner value proposition and accelerating our growth capabilities. On the product side, it means the launch of a scalloped trimline option in May 2026, together with mandibular repositioning devices later in the year, allowing us to address a broader range of orthodontic indications and more complex treatment needs. Equally important is the transformation of our production setup. As planned, EMEA and Asia Pacific aligner production is now transitioning to Smartee manufacturing, enabling constant quality, faster turnaround time and lower cost of goods. The first customer feedback on quality and service levels has been very positive so far. Together, these innovations and production capabilities are strengthening our ability to compete and our potential to scale and win market share in the Clear Aligner segment looks very promising. Moving to Slide 29. Digitalization is also here a critical enabler to scale orthodontics and broaden access to treatment, particularly for general practitioners, which is the focused growth segment for us. Through ClearCorrect remote care powered by DentalMonitoring, we enable remote treatment monitoring. This reduces the need for in-office visits and supports a simpler and more efficient patient journey while building the confidence of general practitioners to achieve consistent quality clinical outcomes. Digital workflows also support case conversion for general practitioners, which is one of the most important aspects of market growth. Tools such as before and after simulations make treatment outcomes more tangible, helping clinicians explain cases more clearly and increasing patient acceptance. In addition, the integration of CBCT data simplify treatment planning and enables more comprehensive diagnostics, especially for more advanced cases. This further expands the range of orthodontic treatments that can be addressed digitally by general practitioners. Overall, the digital capabilities simplify workflows, improve efficiency and create a faster and more compliant patient journey, supporting clinical success and scalable growth in orthodontics. And to ensure broad adoption of these workflows, education plays also here a critical role, which I would like to comment on Slide 30. Lowering barriers for general practitioners is critical to accelerate adoption and enable scalable case growth. Digital workflows and advanced aligner technologies only create value if clinicians are confident in using them in daily practice. With the ClearCorrect orthodontics, we provide structure and modular education tailored to different experience levels and treatment needs. This allows clinicians to progress step by step and build clinical skills over time. In addition, we complement education with ongoing online and clinical treatment support, ensuring that clinicians are supported beyond the initial training and through to the treatment process. With this, let me now move to the third pillar of our playbook for growth, disrupting chairside prosthetics on Slide 32. Digital equipment is an attractive and growing market in its own right and at the same time, a strategic enabler across our entire portfolio. Across implantology, orthodontics and prosthetic, there is always the same starting point. It all begins with an intraoral scan. Intraoral scanners are the entry point into our digital Straumann AXS platform. They capture the data that connects treatment workflows and platform across all segments. And this is why the intraoral scanner is strategically important for us. With our iOS portfolio, we cover the full market spectrum. We offer premium solution through our partnership with FreeShape, mid-range solutions with our SIRIOS X3 and entry solution with SIRIOS. This breadth allow us to address all customer segments and significantly expand access to digital workflows. This strategy has delivered very strong results in 2025, and we are confident to continue this momentum in 2026. We are seeing strong market share gains in intraoral scanners, allowing us to outgrow the digital equipment market. Each scanner placed increases adoption of Straumann AXS, our open cloud-based platform. And this expands our active user base, strengthen engagement and drives recurring usage across implantology, orthodontics and prosthetic. Let me now show you how this applies to prosthetic on Slide 33. What you see on this slide is a clear example on how we translate digital integration into speed, efficiency and recurring revenue while transforming the chairside prosthetics segment. With the Straumann Signature Midas 3D printer fully integrated into Straumann AXS, we enable automated crown design and production directly at the chairside. Clinicians can produce crowns, inlays or onlays in less than 10 minutes, significantly accelerating treatment and reducing dependency on external lab processes. This workflow is supported by our innovative chairside resin portfolio developed by our partner, SprintRay, delivered in patented capsule format. This format simplifies handling, improved consistency and ensures predictable clinical outcomes. Importantly, this is not only about speed, it fundamentally changes the economics. For clinicians, this means faster turnaround time, higher productivity and more control. For patients, it means especially fewer appointments and same-day restoration. And for Straumann, it means recurring revenue streams embedded in the workflow and the Straumann AXS ecosystem. For us, the integration of scanning, design, production and material into one seamless workflow creates a recurring revenue model driven by ongoing resin and consumable usage linked to every printed case. Finally, moving to Slide 35 to unlock those many opportunities and execute flawlessly on our growth playbook, the player learner culture is a key asset. We operate in a world that is increasingly volatile, uncertain and complex. In this environment, speed, agility and learning capability are decisive. At Straumann, our high-performance player-learner culture brings this all together. It encourages entrepreneurial thinking, accountability and continuous improvement, while at the same time, fostering collaboration and learning across functions and regions. This culture enables us to innovate closer to customers, take faster decisions and execute our strategy consistently across markets. And importantly, this is not an aspiration, it is measurable. Our employee engagement score of 80 reflects the high level of commitment and energy across our organization and represents the top score amongst globally leading companies. This is a major robust competitive advantage and allows us to turn strategy into execution and execution into results. With this, let me now turn to our outlook for 2026 on Slide 37. We entered 2026 with solid momentum, supported by our strong market position in a total addressable market of more than CHF 20 billion. While market conditions are expected to remain volatile with ongoing macroeconomic and regulatory uncertainties, we're expecting positive impact from our new key strategic initiatives, especially in the second half of the year. In China, the impact from the VBP process is expected to support growth momentum as the year progresses. And in orthodontics, the ClearCorrect transition to Smartee is advancing as planned and will contribute positively over the course of the year. With this timing effect, we are very confident in our outlook. For 2026, we expect to deliver high single-digit organic revenue growth alongside a core EBIT margin improvement of 30 to 60 basis points at constant 2025 exchange rates. With this, we are happy to move to the Q&A session to answer your questions. As usual, we kindly ask you to limit the number of your questions to 2 in order to give other participants a chance to post their questions within the available time. Chorus Call, can we have the first question, please? Operator: The first question comes from Doyle, Graham from UBS. Graham Doyle: Maybe, Guillaume, just firstly, on sales phasing for the year, I know it's early in the year, it's a bit hard to fully describe it given what's going on in China. But it does look like the way EMEA and the U.S. finished that maybe those regions are a little bit more H1 weighted. So is it reasonable to think that this is a relatively balanced year in terms of group growth for organic? And then secondly, just on free cash flow, should we expect a good step-up from H1 just as some of that inventory unwinds and maybe the restructuring charges fall as well? Guillaume Daniellot: Yes, Graham, for the top line, we will have obviously some different effect also from a regional basis. But when you look at Asia Pacific, where China is obviously a major impact, for the time being, assumption is that VBP will take place in the second quarter. That's an assumption as there is not yet any official statement by the China authorities, but the latest information that are coming up seems to demonstrate that it will be rescheduled around this time frame. As we have a very strong comparative base in 2025 in the first half and the low in the second half, I would say 2026 is going to be the reverse of 2025. We are going to have obviously still a weaker first half in China and Asia Pacific for the first half and a much stronger one in the second half when we look at the start of the year. When it comes to North America, we expect progress to continue, and we expect in our guidance, let's say, we have tabled a stable macro environment where we believe that our execution is going to continue to produce positive results, then that's the way we are seeing that our growth rate for 2026 will be more weighted on the second half than the first half. Isabelle Adelt: Let me take your question on cash flow, Graham, a very easy answer to that. Yes. What are the big building blocks when we look at it? It's CapEx, it's net working capital and it's the noncore items we're looking at. So CapEx, as outlined earlier, we said we are coming out of one of the biggest CapEx cycles we've had in the history of the group. By end of this year, we will have doubled our capacity in terms of how many implants we can produce this year. So the last big project to be finished is our third factory in Curitiba during this year, but you can already expect a significantly lower CapEx level for 2026 compared to prior year. Same holds for working capital. As you might recall, we did a couple of tactical decisions to increase our inventories to mitigate for the U.S. tariffs last year, and this is likely to unwind. So we will see structurally a little bit lower working capital in 2026. And last but not least, I think last year, we have seen a lot of effort we put into putting the right structures for our future growth. so namely preparing the orthodontics transition as well as enabling the China campus and making sure volumes can be produced where they are needed. And this is why we expect to see significantly lower noncore items in 2026 as well. Operator: Next question comes from Hugo Solvet from BNP Paribas. Hugo Solvet: Just Guillaume, maybe for you on North America and the U.S. in particular. Can you help us understand the balance between volumes and price mix in Q4? And just a word on current trading. Do you continue to see that sequential improvement in the U.S. as we start 2026? And maybe on a follow-up to Graham's question on the phasing, but more on margin this time, maybe for you, Isabelle. Can you quantify how much of margin pressure should we expect in H1? I think historically, you were more 55%-45% H1, H2 EBIT weight and that was more 50-50 in 2025. So would 2025 be a better proxy? Or would it be even more skewed towards H2? Guillaume Daniellot: Hugo, when it comes to U.S. volume price, it has been mainly volume growth. We had some price impact, but really small. Then I would say 80% to 90% of our development came from volume and share gain. When it comes to what we start to see in Q1, we see the trend still being positive with our iEXCEL still being very appreciated and helping us to gain share. Actually, something which is important, I tried to allude that in the script, not only on premium users, but also on value system users based on the efficiency gains delivered by the digital workflow and the digital equipment. Our DSO development is also positive. We have seen the DSO starting to reinvest on the marketing activities in order to keep then the patient flow at the same level. While it's still not very dynamic, at least we have seen a really good stability over the past month. That's why we believe that at least the beginning of the year should also see North America being able to keep delivering this kind of performance. Isabelle Adelt: And regarding your question for the margin distribution, Hugo, so I think this follows a little bit the same pattern Guillaume already elaborated on for the sales phasing. Just to help you think about how the margin distribution could look like, for me, there are 3 big building blocks. On the one hand side, of course, it's the China business and the VBP. There's still a little bit of uncertainty regarding the timing. But what Guillaume already explained that last year, we had a super strong first half year in China and a little bit weaker second half of the year, this will look the other way around this year. The second big building block definitely, the ortho transformation. As we speak, we are in the process of transferring production volumes to Smartee for the EMEA and APAC region and winding down our own production line in Germany, which, of course, means the benefit will be bigger in the second half of the year that the first, where we have transition costs and the wind-down costs included. There's still a little bit of double cost. And last but not least, which we shouldn't forget is the phasing of the tariffs. From all we know to date, the amount we expect to see is a little bit the same we had last year. But last year, it was more biased towards the second half of the year since it was only announced in April, and we didn't see a big effect in the first half. And this year, the amount will not differ significantly for the full year, but will be a little bit more biased towards the first half year since we will have a more continuous flow of tariffs from what we know today. Operator: The next question comes from David Adlington from JPMorgan. Mr. Adlington removed his question. Let's take the next one from Susannah Ludwig from Bernstein. Susannah Ludwig: I have two, please. I guess, first, could you just give a bit more color in terms of the strength of the EMEA performance in Q4 and maybe what you're seeing in Q1 so far? How sustainable are you thinking about sort of the acceleration in performance there? And then second, on prosthetics, that's a business that historically, the dental labs have controlled and dental offices have very strong relationships with their labs. So what do you see as the catalyst for sort of the disruption of that relationship? Dentists often tend to be a creature that have a bit of inertia. What do you see as sort of driving the shift to chairside? And what role will the DSOs play here? Guillaume Daniellot: Yes, Susannah. Then on those two questions. EMEA is obviously a very, very solid trend. We had an exceptional Q4 first, because I think we have very underlying capability to continue gaining share, and we are leveraging all the innovation that we have at our fingertips. And I think the EMEA team is doing very well on all the different franchises, and this has to be highlighted. I think in premium, in challenger, also digital and orthodontics is really driving then the very solid performance. Now -- the fourth quarter has been also boosted by some January '26 price increase announcement that has been done, and we know that there have been some also high digital equipment orders that have boosted performance. And I would say we have always said that the EMEA regular high performance is going to be between high single digit to low double digit. And I think this is what we expect to see also in 2026. And it will be balanced between the different quarters, saying that potentially the first quarter will be a little bit lower based on the strong finish. But all in all, it's going to be just a balance in all the different quarters that will still see us delivering strong contribution of EMEA with regard to our total 2026. When it comes to prosthetics, you have a very good point that the lab relationship with the dental practitioner is very strong. And why do we believe that such chairside 3D printed crown can have some disruption capabilities in the future for one very good reason, we believe, is patient expectation. If you can say to a patient that you are going to solve his decay or his crown issue in one appointment, there will be a lot of benefits on the patient side and obviously, a lot also on the clinician side because it will save significant number of appointments. Will it be a fast disruption? No, because we all know that dentistry is rather conservative. But as soon as practitioner will have experienced this same-day dentistry being able to gain significant efficiency in posterior crown restoration like this, we do believe that the share of the business will not go to the lab anymore. Obviously, DSO will be able to push those workflow because of the efficiency and profitability gain that they can generate. But it will be all across the market based on the significant appointment savings that could be generated. Then to be seen step by step, but I think all the elements are here now to be able to allow the same-day dentistry that will, I personally think, going to take significant share in the future. Operator: The next question comes from David Adlington from JPMorgan. David Adlington: Yes, just -- I may have missed it, sorry if you addressed it. But just in terms of your margin guidance, just wondering if I could check what you're assuming in terms of savings from Smartee or whether you're looking to reinvest those? And then secondly, again, I think you may have touched this and I just missed it, but in terms of the tariff impact in the second half, I just wondered if you could quantify that and how you see that evolving through 2026? Isabelle Adelt: Sure to take that. So I think -- I mean, margin guidance for Smartee. So David, I think what we explained a little bit before, we have a very clear plan how we want to turn the orthodontics business profitable over the next 2 years. And I think the first big step will be this year really working on our COGS position, working on our profitability position by transferring the big production volumes we have in EMEA and in APAC to Smartee. But how will this look like? So on the one hand side, we're currently closing down our own production site in Germany to be finished by end of Q1. So you will potentially still have the COGS in Q1, but then at the same time, transfer to Smartee at a much lower cost per liner than we had before internally. And this will ramp up over Q2, so we can see the full effect in Q3 and in Q4. And then I think in addition to that, obviously, we expect to see a little bit higher growth rates for the ortho business as well, being a positive impact to the margin in the second half because we are planning, as Guillaume said, to launch the scalloped shape trimline during Q2, which will substantially complement our portfolio. And this is why we will, for sure, already see a step-up in terms of margin in the first half, but the bigger impact we would see in the second half of the year once the cost for our own production is out and Smartee is fully ramped up for those 2 regions. And then for tariffs, I think to give you an indication, we expect the total amount from all we know today, so assuming tariffs will stay where they are to be at a similar level as 2025, where we saw a total hit of around about CHF 20 million in our P&L in the COGS line. We expect that number to be pretty similar, maybe a little bit higher in 2026. But saying this, it was very biased towards the second half of the year in 2025, especially in July when we did all the shipments, but then in the second half of the year when we had the high tariffs, whereas in this year, you can rather think about it as distributed half and half, so half in the first half of the year, half in the second half of the year. Operator: Next question comes from Hassan Al-Wakeel from Barclays. Hassan Al-Wakeel: I have two, please. So [indiscernible] up on the margin guidance and why this isn't higher given your commentary on Smartee halving the loss, [indiscernible] loss in '26? And is the guidance is that of the uncertainty that you still see in China? Or is there anything else to highlight in terms of the margin building blocks? And then secondly, on China, is the second half realistic? And what do you have in your guidance from the potential continuation of destocking beyond this quarter and the [indiscernible] can also ask what the margin headwind that you're baking China VBP in 2026? Guillaume Daniellot: We are going to try to answer, but you have been breaking up on your questions. And let me try to summarize your questions and try to answer that, and you will let us know if this is in line. First question is, what are the different building blocks we are seeing on our margin. I think as Isabelle explained and what we discussed already quite a lot is, on the one side, we have that negative impact of tariffs. That will be almost the same, a little bit more than potentially 2025, but that will be then having an effect more in the first year -- in the first half than the second half because of the fact that it has been, in 2025, impacting our second half mainly. The second side that we said is about Smartee, where as our manufacturing now is for Asia Pacific and EMEA translating to Smartee, we will see the effect over the year starting from March because we are going to finally close our German plant, as just Isabelle said, there in the end of the first quarter. and something also to express on Smartee, there are 2 effects for our margin. The first one is the immediate COGS effect that will be obviously direct. And the second one will be the operational leverage that will come over the next 18 months, where we really are expecting significant growth that will help us to drive then significantly improvement in profitability as well with regard to all our SG&A costs that are going to be absorbed in a much higher way with the double-digit growth that we're expecting and that we are seeing at this point. But we are having also additional elements in our building blocks that we are counting and that are going to have positive effect on our profitability. The first one is obviously the manufacturing of the Shanghai campus, where we are allowing to have all our China volume being manufactured at a lower COGS that have been obviously planned in our guidance. We have also another one, which is in part looking at the growth of our digital equipment, where we are transitioning some significant part of our volume from third-party products to our own SIRIOS intraoral scanners, meaning that we can also benefit from a higher profitability. And last but not least, we are continuing to do operational leverage in the overall organization, thanks to the growth that we are delivering. Then that's where our improvement from a profitability standpoint is coming from many parts that are allowing us to be pretty confident about delivering then the improvement that we have been presenting. To the second side, I think if I understood well, you were talking about or you were asking about what is baked in our guidance somewhat with the current VBP being in Q2 and the destocking -- potentially further destocking of distributor. What we believe is that the destocking of the distributor is going to be less important than the second half of 2025 because they are -- it seems from our information in between 1.5 to 1.8 months of stock right now than at a pretty minimum level to operate. Then while it's going to be still slow from a patient standpoint, we don't believe that the destocking will be massive anymore. Now obviously, we are going to be still against a very strong comparison base. What you have to remember is our first half in China has been in the 20-plus percent growth. And we are going obviously to see much more than the weak market than what we have seen in the first half. Then it's much more this challenging comparison base that are going to provide, I would say, China still in the negative territories from our perspective that will strongly be reversed for the second half. Then we have baked more or less this dynamic in our guidance for our high single-digit growth for 2026. Operator: The next question comes from Daniel Jelovcan from ZKB. Daniel Jelovcan: The first one is also on Clear Aligners. Can you elaborate a bit on the geographical growth? It was probably double digit in all areas, but I'm not sure, that's why I'm asking. First question. Guillaume Daniellot: Yes. Daniel, Clear Aligner has been very dynamic, and we had double digit in 2025 again. Significantly in Latin America and EMEA, rather flattish in the North America, which we expect this to change with a better consumer sentiment. And we have been, since the partnership with Smartee, also seeing some interesting uptick in Asia Pacific and especially in the 2 markets where I think we will be able to drive interesting volume in the future, which are Japan and Australia. And that's why we are pretty confident to get on track with our Clear Aligner also operational leverage in the future, looking at the current growth trend that we're having on this business segment. Daniel Jelovcan: Okay. Great. And the second -- last question is the development in Spain. As you elaborated, you mentioned a lot in the past, DSO is pushing penetration up because of the low price and so on. I would wonder if you can add a bit more details. So what implants do the Spanish use? I mean, is it Neodent or is it premium or both? I'm talking about the DSOs. And also when you look at your penetration chart, is the DSOs, you see evidence that the DSOs are also pushing growth in other underpenetrated countries. I mean, have in mind the DSOs are not allowed in Germany, for instance, or maybe there is a change coming up. So yes, that's the question. Guillaume Daniellot: Yes. Spain has been a very good example on how DSO has grown the market through opening up a segment of patients that was not thinking that they could afford implant treatment. And with rather aggressive marketing activities, presenting, of course, implant treatment at a lower level, but especially pushing the patients to go through the door to get presented with the diagnostic, actually, it's a question of spending prioritization. Then if you do an implant, then you might not buy the latest, I don't know, computer or iPhone or whatever. And that's a little bit what we have seen for countries where most of the oral care or dental care are full copayment by the patient, which is the case in Spain. Then this has been one of the significant effect DSOs have had on those patient group that was not going to a dentist anymore, but are suddenly going to DSO because they feel that it's actually more affordable than they were thinking about. Then those DSOs are mainly using challenger brands and our Neodent system, but some are still using premium as well, especially because of the efficiency driven by the digital workflow that are not fully yet available on the challenger brands. We are expecting this to continue developing in other geographies. And one of the good reasons why we have also seen China developing so strongly after VBPs has been because DSOs have been able to invest and scale clinician education and also doing investments in equipment to be able to place more implants. Then DSOs are a very strong partner for us for continuing to open the market and expand the market in most geographies because they are also the ones that are investing in technology that are allowing efficiency and then potentially more affordable pricing, that's what we see the future. And that's one of the reasons also why we are working in co-creation with a lot of DSOs to develop specific solutions that are adapted to the strategy they would like to pursue. Daniel Jelovcan: That's great. And also congrats for this achievement in '25 in these challenging times. Operator: The next question comes from Julien Ouaddour from Bank of America. Julien Ouaddour: I have only one. But I just want to understand the level of maybe [indiscernible] conservatism that you have in the margin guide this year. Just to explain myself. So I mean, usually in a given year, you have some operating leverage that you expect to grow high single digits. You should have some -- I think you mentioned strong growth in EMEA, like North America also probably improving, which should help you on the mix side. In the call, you mentioned digital and Shanghai production to be a tailwind as well. So it seems the swing factors are the savings from ClearCorrect and like the VBP. Have you changed your expectation in terms of the VBP? I think in the past, Isabelle said China is expected to have roughly a flat margin. So is there, I mean, any different assumptions in the guidance? And in terms of savings, do you still expect the losses from ClearCorrect to have in '26, which should clearly give you a nice boost. So just trying to understand really the 30 to 60 bps of margin expansion. It's pretty -- I mean, it's pretty good already, but I wanted to check if there is any level of prudence there. Guillaume Daniellot: I can start with answering. Again, on the ClearCorrect, as we expressed, it has been a large transformation we started in August. And honestly, we are really pleased on where we are right now. We have made a very strong progress being able to connect manufacturing for 2 major regions with no hiccup, having really strong already feedback from customers from turnaround time, from quality levels and still using, again, all the ClearCorrect specific technology. That means we are using all our ClearCorrect portal. We are using all our specific ClearCorrect material. We are having still a very clear differentiated branding by leveraging the technology of Smartee. From a manufacturing standpoint, we are well on track, being able to -- we have started to transfer this manufacturing, meaning that with operational leverage, the plan that we have for end of 2027 to be breakeven of ClearCorrect should be really achieved. At least for the time being, we are pretty positive about this midterm perspective that we have. Then looking at regions like North America doing better and being able to deliver the stronger growth than the 4% we had in 2025 and backing for higher growth rate for 2026 will also deliver then higher profitability, thanks to the higher pricing that we have there versus the other regions. Solid EMEA will also contribute well that we can generate operational leverage from those geographies. Then I think we already expressed manufacturing in China, the fact that we have our digital equipment that are going to be more in-house than third party and the fact that we are also going to have the latest for us high CapEx year because we have been investing a lot into profitability -- into capacity, sorry, in the past years. I think it is making us, yes, I would say, confident about our capability to deliver higher gross margin and higher EBIT moving forward in 2026, but also having a profile keeping improving over 2027, which is really something that we are looking at from a midterm standpoint. Operator: The next question comes from Julien Dormois from Jefferies. Julien Dormois: I have two. The first one relates to the iOS business. I think you have mentioned during your presentation that you have experienced significant share gains, obviously, related to the comprehensiveness of your portfolio. So I was wondering whether you could help us size this market on a global basis and whether your current market share is maybe above or below the 10% you have highlighted for the broader digital equipment market. So just to understand where you sit on that side. And what do you think could be a realistic target for Straumann maybe by the end of the decade or in the next 5 to 10 years? That would be quite interesting. And the second one is very much a housekeeping question, and sorry if I missed that, but it's probably more for Isabelle. But at the current FX rates, I'm just curious whether it is fair to assume more than 500 basis points of adverse impact on top line and maybe a new round of headwinds to margin, probably to the tune of 150 bps if I compare to the 130 bps you had in 2025. Guillaume Daniellot: Yes, I will. I think -- thanks for the question, Julien. It's not so easy to assess the real full market total value of iOS. But if we look at what we call modern technology that our iOS and 3D printer, that's where we are assessing this market to be a bit shy of CHF 2 billion. And when we see our development, we are seeing, yes, our shares being double digit now. We have been, I would say, more on the 5% to 6%. We think that we have significantly increased this, this year, thanks to this new technology coming from our AlliedStar acquisition that we have made in September 2023. And we believe that this is going to continue to grow as together with our FreeShape partner, we are on the sweet spot to be able to deliver a really advanced technology with FreeShape for surgeons and orthodontists that really want to leverage the latest technology also in terms of diagnostic and having advanced capabilities. But as we are now entering a lot into the GP segment with orthodontics, but also implant treatments and now prosthetics, very often, they like a good technology that does not need to have all the latest one at a more affordable price. And what we have seen in this market penetration, we are now in the middle of the S curve, and we are well positioning to take a fair share of the volume of our intraoral scanner in the next 3 years. And we see that significant growth in the next 3 years. Afterwards, we expect the total market penetration to move from -- it is around 35% to, I would say, 35% globally today. It will double in the next 3 years from my perspective because we are having the sweet spot in terms of quality to price ratio on digital equipment. And this is where we believe strong growth will still be achieved on our side. This being said, I want to express once again the fact that we consider intraoral scanner as an enabler. What we want to do is really connect as many clinicians as possible into our open cloud-based AXS platform, where clinicians have then the efficiency, the access to consumables and solutions that are really creating a difference in their practice. That's where they can go to the Fast Molar workflow from Straumann, they can go to the clear aligner, then ClearCorrect solutions. They can go to the SprintRay. And every new technology that will come will be able to be connected through that AXS platform, meaning that we will be open to any innovation in-house or externally, thanks to that customer base connected with our intraoral scanner and that ecosystem. That's really the strategy that we have been pursuing and that we are very pleased into the progress of it right now. Isabelle, do you want to comment on the... Isabelle Adelt: The FX impact, yes. Julien, you didn't miss it. I think you're actually the first one to ask it, which I think is a little surprising. But I think -- I mean, FX impact, as you all know, I mean, we're operating in a very volatile environment. And I think you gave a very good range already when you said that. So from what we currently see and looking at -- basically looking at what we say we are doing at January spot rates, we are looking at a very similar impact we had last year once again. But having said this, to give a clear guidance at this point in time is very difficult. Because in January alone, we saw movement of over 50 bps up and down just by the volatility of the U.S. dollar. So I think for the time being, if you look at a very similar impact to what we had last year. So to remind you, in terms of top line, 480 bps; in terms of bottom line, 130 bps for the time being, the estimation is not too wrong. And we will keep you updated as the year evolves given of what the currencies will do throughout the course of the year. Operator: Next question comes from Richard Felton from Goldman Sachs. Richard Felton: Just two questions for me, please, both on orthodontics. So the first one, on the product side, like how important are some of the product innovations that you've referenced in your presentation? And for instance, the scalloped trim products, how important is that in filling a gap in your portfolio? And what percentage of cases are you now able to address? And then secondly, also on orthodontics, are there any changes to your commercial organization that you are making? Just trying to get a sense of what is driving the acceleration in liners that you expect over the next couple of years. Guillaume Daniellot: Yes. Thanks a lot for the question on orthodontics. And yes, I think happy to be able to explain this. When we are commercializing ClearCorrect, we had a significant differentiation, which is a specific high trimline, which is helping to place a little bit more force to the teeth in order to move them a bit faster and to do some different movements. This is something which has been appreciated by some clinicians, but a lot of others are used to scalloped trimline, which is what has been proposed by most of the players in the market. Then when we have been willing to switch some of the GPs that were using a lot of competitor products, they were asking us to have also the scalloped trimline option because they are so used to this that they don't want to change any of their protocols or their experience so far by moving to ClearCorrect. Then it has been a pretty strong obstacle to some of the switches that we were wanting to do because of asking the clinicians to change the way they were treating patients. And obviously, then a lot of the clinicians like to continue doing what they are used to and what they are confident with. And it's a very different way of manufacturing product. We have also to look at how to redefine protocols with a different trimline. And that's why for us, it's also a major addition to our portfolio because we will be able to offer those different trimline capabilities, either the high or low trimline that are existing to ClearCorrect and the additional scalloped auction that will be also a lot of wishes by a lot of general practitioners that we have been meeting over time. The second aspect on the commercialization side and what we have done is we have also to generate operational leverage decided to focus on the key growth market. And what we are doing is making sure that our customer experience, clinician support and commercial go-to-market investments are going to be done in the 14 major countries where we are seeing actually those double-digit growth. And as much as we are seeing growth, we will then continue doing specific go-to-market investments in order to support growth as we are seeing it happening. Operator: The next question comes from Sibylle Bischofberger from Vontobel. Sibylle Bischofberger: I have only two questions left. First of all, the gap between the reported EBIT and the core EBIT was quite strong in 2025. Could you give us a hint how will be the delta between your reported and core in 2026? And secondly, CapEx will clearly come down, as you said, only Curitiba 3 will be spent. And then in 2027, it will be even lower. Could you tell us how much it will be in 2026 and what to expect for '27? Isabelle Adelt: Yes. No, happy to take those two questions. I think this is what we discussed a little bit as influencing factors to our free cash flow performance already, right? So just to remind you, 2025, we had a lot of extraordinary impacts in there. So we provided quite some detail in our annual report what they were. And I think it wouldn't be too wrong to assume that everything regarding restructuring when it comes to the ortho business, when it comes to the transfer of our factory from Villeret to Shanghai is something that will not occur again this year. Although having said this, of course, costs related to M&A and so on will remain. So if you look at those categories, we provide quite a lot of detail. I think it's a fair assumption to say that 2026 will be a little bit more of the same as in previous years, but not in 2025, where we did all of those projects I just talked through. And then I think CapEx, I think it's important to understand that in the last 4 years, we invested over CHF 1 billion into our manufacturing capacity. Having said this, with the finishing Curitiba 3, we will have doubled our capacity for implants. And this means for the rest of the cycle, we will step down significantly in terms of CapEx intensity, so meaning CapEx over revenues. So you can already expect the first step down more towards the level of 2024, 2023, a mix of that in this year with the Curitiba finishing and then a further step down in 2027. Operator: The last question for today's call comes from Falko Friedrichs from Deutsche Bank. Falko Friedrichs: My first question is whether you expect China to see similar sales declines in H1 as it was in the fourth quarter? And my second question is, do you foresee a return to high single-digit growth in North America in 2026? Guillaume Daniellot: Sorry, the first one. Could you say again the first one on China, Falko, please? Falko Friedrichs: Do you expect the first half of 2026 to see similar sales declines in China compared to what you saw in the fourth quarter? Guillaume Daniellot: First half. No, not to the same extent. We don't think so because we believe that some of the destocking has already happened on the distributor side. But again, it will still be then quite lower than 2025 first half because of the fact that the growth was very significant. But we don't feel we will see the same trough that we have seen in Q4 than 2025. And when it comes to North America, we are not doing specific guidance per region, but I think we expect in between the high end of mid-single-digit growth to high single-digit growth being potentially possible, depending on what will be also the macro around there. But it's -- if we see the labor -- the latest news about the labor market that was rather positive. The inflation that has been just been presented at 2.4% and being also on the right side, that could help, of course, adding a little bit additional pressure on the Fed lowering their interest rate. We believe that we can have a rather positive development of the macro situation in North America that could support then a really good outcome for North America. It's still too early to say to see consumer confidence, but I think there are options for having a healthy growth for North America in 2026. Well, thank you for joining us today and for your continued interest in the Straumann Group. We look forward to seeing you again soon, and we wish you a nice day and a warm goodbye from Basel. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Ladies and gentlemen, welcome to the Straumann Group Full Year 2025 Results Conference Call and Live Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Guillaume Daniellot, CEO. Please go ahead, sir. Guillaume Daniellot: Thank you, and good morning or afternoon to all of you. Thank you for attending this conference call on the Straumann Group's Full Year 2025 results. Please take note of the disclaimer in our media release and on Slide 2. During this conference call, we are going to refer to the presentation slides that were published on our website this morning. As usual, the discussion will include some forward-looking statements. As shown on Slide 3, I will start with the 2025 performance overview. Isabelle will then cover the financial details. And afterwards, I will share strategic updates and our outlook. We will be happy to answer your questions at the end of the presentation. And let's move directly to Slide 5. Thanks to a strong full year performance, I would like to start by highlighting that we have created more than 7.3 million smiles in 2025. In other words, together with dental professionals, we've supported around 10% more people improving their oral health and confidence than in the previous year to keep delivering on our purpose, unlocking the potential of people's lives. Now let me share how we have progressed in 2025 by moving to Slide 6. 2025 has been a very dynamic year, and I'm very pleased with the results we delivered. We achieved a strong growth with revenue reaching CHF 2.6 billion, representing an organic growth of 8.9%, supported by a very strong fourth quarter despite the uncertainties around the VBP in China. On a reported basis, growth in Swiss francs was 4.1%, which represents a translation impact of around CHF 100 million of revenue. Despite these currency and tariff headwinds, we intensified our focus on efficiency, generating gains that supported our improved profitability. Our core EBIT margin, excluding currency headwinds, increased year-on-year to 26.5%, which corresponds to 25.2%, including currency effects. These results clearly demonstrate the resilience of our business model and the disciplined execution across the group. On the innovation side, 2025 was a year of record launches. Starting with the Premium Implants segment, innovation remains the primary growth driver. It is the foundation on how we outperform the market and gain share. In 2025, these strategies translated in a record year of new product launches, reflecting both the depth and speed also of our innovation pipeline, iEXCEL is an excellent example. We have already sold more than 1 million iEXCEL implants, making it the most successful implant launch in our history. This performance demonstrates not only strong market adoption, but also the relevance of our innovation for clinicians worldwide. In parallel, we have seen a strong momentum of our SIRIOS X3 intraoral scanner since its launch in October 2025, significantly expanding the clinician base being connected to our Straumann Group digital ecosystem. On the transformation side, the partial transition of the ClearCorrect manufacturing to Smartee is well on track, boosting our value proposition and supporting scalable and profitable growth in orthodontics. Overall, those very promising progress gives us confidence as we enter 2026. Looking ahead, we expect another successful year with continued market share gains and high single-digit organic revenue growth, along with further profitability expansion of 30 to 60 basis points in the core EBIT margin at constant 2025 currency rates. Now let's have a look at the regional performance on Slide 7. Thanks to our large geographical presence, we delivered strong growth across the year and in the fourth quarter, especially looking at the strong comparison basis of 2024. Let's start with EMEA, both our largest region and biggest growth contributor for the group. EMEA performed particularly strong in the fourth quarter, leading to a full year organic growth of above 11%. This was achieved across premium and challenger implantology, digital solutions and orthodontics, which supported our continued market share gains across all markets. In North America, performance improved through the year, reaching a strong organic growth of 6.8% in the fourth quarter. This sequential acceleration is particularly significant as North America remains a strategic market for the Straumann Group. This progress reflects the impact of a strengthened leadership team, sharper execution and the contribution of recent product innovations, all of which are driving more consistent performance and stronger market traction. Growth in the fourth quarter was supported by implantology, digital solutions alongside continued momentum in the DSO segment, underscoring improved operational focus and disciplined execution. Moving to Asia Pacific. The region delivered solid underlying organic growth of around 7% for the full year, driven by strong momentum outside China, where we achieved a growth of more than 10%. Countries such as India, Japan and Southeast Asia continued to perform well, supported by challenger brands, digital workflow adoption and strengthened education activities. In China, performance during the second half of the year was significantly impacted by a softer patient flow and distributor destocking behavior, particularly linked to the upcoming VBP process. Despite the seasonal VBP impact, we believe that the underlying fundamentals of China remain intact. With the ongoing ramp-up of our Shanghai manufacturing campus, we are strengthening local production capabilities and supply chain resilience, positioning us very well for the next VBP ramp. Latin America once again delivered very strong performances with a high double-digit organic revenue growth of around 18% for the year, driven by Neodent, continued market expansion of our Straumann premium brand and fast adoption of our new digital equipment SIRIOS. Growth was strong both in the full year and in the fourth quarter and the region contributing 17% of the group's total organic growth. With this, I will now hand over to Isabelle, who will take you through the financials in more detail. Isabelle Adelt: Thank you, Guillaume, and good morning also from my side. It is a great pleasure to walk you through our financial highlights of 2025. Let me start on Slide 9 with how we translated our strong growth in 2025 into solid cash generation. We delivered revenues of CHF 2.6 billion, which translated into a core gross profit margin of 70.1%. This is a strong result in a year marked by elevated investments and external headwinds and driven by our productivity improvements and the favorable product mix. The strong gross profit flowed through to profitability. As Guillaume mentioned, we achieved a core EBIT margin of 25.2%, including currency effects or 26.5% at constant 2024 exchange rates. This was driven by disciplined execution, targeted OpEx measures and operating leverage and demonstrates our ability to protect and improve margins despite FX headwinds and tariff-related pressure. At the bottom line, our core net results reached CHF 478 million, corresponding to a net margin of 18.3%, supported by the quality of earnings and effective cost management across the entire group. Importantly, the strong operating performance translated into cash. We generated a free cash flow of CHF 290 million, representing 11.1% of net revenue and influenced by tactical working capital management decisions as well as one of the highest investment years in our history. This also marks the ending of a large manufacturing investment cycle for future growth. Overall, this clearly shows that we not only delivered strong growth in 2025, but also successfully converted this growth into profitability and cash generation, fully in line with our guidance. With this overview, let us now look at the individual line items in more detail, starting with gross profit on Slide 10. Compared to the prior year, the margin was only slightly lower with 70.1%. This development was mainly driven by 2 factors: Firstly, the impact from U.S. tariffs; and secondly, the ramp-up of production at our Shanghai campus, which weighed on margins during the year. These effects were partly offset by our strong product mix and productivity improvements across the group. Overall, the gross margin development reflects the strength of our portfolio mix and our ability to further automate our production while maintaining a high and resilient margin profile. With this, let me now turn to Slide 11 and discuss EBIT in more detail. Foreign exchange effects had a visible impact on our profitability. While revenue growth differed by around 480 basis points between local currencies and Swiss francs, only around 130 basis points of FX impact flowed through to the EBIT line. This reflects the effectiveness of our local-for-local production strategy and the structural improvements we have implemented across our supply chain, which significantly reduced the sensitivity of margins to currency movements. In addition, cost saving and efficiency measures contributed around 120 basis points to the EBIT margin improvement. These measures were implemented across the organization and focused on operating discipline, prioritization and productivity while continuing to invest in our strategic priorities. Overall, EBIT development shows that we were able to translate strong growth into improved profitability, even in an environment characterized by currency volatility, tariffs and cost pressure. Looking ahead, it is important to note that the ClearCorrect Smartee partnership was only announced in October and, therefore, has not yet had a meaningful impact on EBIT margin in 2025. As part of the production transition during 2026, we expect to see positive effects on margin, especially in the second half of this year. Against this backdrop, let me now take you to the net results on Slide 12. The financial result was slightly lower compared to the prior year. This was mainly driven by the effects of currency hedging, reflecting the volatility in foreign exchange markets. Taxes were somewhat higher as a larger share of profits was generated outside of Switzerland, which is also a consequence of our local-for-local production strategy. As in previous years, we present core results in addition to IFRS results to facilitate a like-for-like comparison. In 2025, noncore items amounted to around CHF 120 million after tax. A significant part of these noncore items related to restructuring measures, which are directly linked to strategic decisions we have taken to strengthen our operational setup. We transferred implant volumes for the Chinese market from Switzerland to our new manufacturing campus in Shanghai. And furthermore, restructuring costs were incurred in connection with the transformation of the orthodontic business. In addition, noncore items include acquisition-related amortization and special items, legal costs as well as impairments related to the planned relocation of the group's headquarters to our new campus in [indiscernible]. From here, I will move on to the cash flow and investments on Slide 13. In 2025, we generated a free cash flow of CHF 290 million. This is particularly noteworthy given the very high level of investments during the year. Capital expenditure amounted to CHF 223 million, an increase of CHF 56 million compared to the previous year, making 2025 one of the strongest investment years in the group's history. These investments were focused on clearly defined strategic priorities. They include the expansion of production capacity, most notably the ramp-up of our Shanghai manufacturing campus, Medentika and the new third production site in Curitiba as well as continued investments in innovation, digital infrastructure and operational efficiency. Despite this elevated CapEx level, cash conversion remains solid. This reflects strong operating performance and working capital management across the group. Overall, this combination of high investments and strong free cash flow demonstrates our ability to invest for future growth while maintaining financial flexibility and balance sheet strength. With this, I will now move to Slide 14 and the proposed dividend. Based on our strong performance and solid cash generation, the Board of Directors proposes a dividend of CHF 1 per share, which is subject to approval at this year's Annual General Meeting. This represents an increase of 5% compared to the prior year and corresponds to a core payout ratio of around 33%. This is in line with our capital allocation priorities to maintain and increase dividends with earnings. With this, let me now briefly touch on our efforts and progress in sustainability on Slide 15. Before I turn to the details, let me briefly highlight that the annual report published today includes our sustainability report prepared in line with CSRD requirements for the first time. This reflects our commitment to transparency and regulatory alignment. In 2025, we continue to make progress across our key sustainability priorities, closely linked to our strategy and operations. As part of our long-term growth strategy, education remains a central pillar for the group. During the year, we trained more than 370,000 dental professionals worldwide with around 42% of all education activities taking place in low- and middle-income countries. This shows our continued efforts to broaden access to care and enables the adoption of modern efficient treatment approaches across regions. On climate, we continue to move towards our net zero ambition. We further reduced our Scope 1 and 2 CO2 emissions by around 17% compared to 2021 and 98.5% of our electricity consumption now comes from renewable sources. This reflects the fact that renewable electricity is increasingly embedded as an operational standard rather than an aspiration. In addition, our local-for-local manufacturing strategy contributes not only to resilience and efficiency, but also to sustainability by reducing transportation needs and strengthening regional supply chains. Overall, sustainability at Straumann Group is closely integrated into how we operate the business and supports long-term value creation for patients, customers and society. With this, I will now hand back to Guillaume for the strategy update and outlook. Guillaume Daniellot: Thank you, Isabelle. Let me now focus on our strategy update, starting with highlighting the massive market opportunity we are facing on Slide 17. First, within our total addressable market of more than CHF 20 billion, we have gained market share across key segments, increasing our total share from 12.5% to 14% within the last 12 months. While we have once again outperformed, this total addressable market still offers us a very significant opportunity to grow in the short and midterm future. Our growth playbook has 2 major dimensions. First, we want to continue to strongly perform in our core market segments, Implants and Regenerative through innovation, digitalization and education. Secondly, we are focusing on transforming our business in key market segments to capture the huge growth opportunities. Then let me start on the left-hand side with the performed dimension. In implantology, our core segments, we are continuing to strengthen our leading position. The market size is around CHF 6.1 billion, and our market share increased to above 35%. This reflects consistent outperformance of the market driven by innovation, digital workflows and strong execution in a still underpenetrated market segment. Regenerative is closely linked to implant surgery with a market size of around CHF 1.3 billion and a market share of around 13%. This is another area where we continue to expand our positions, supported by our strong clinical heritage and portfolio breadth. These segments represent our core strength. This is where we have strong brands, deep clinical relationships and a proven innovation pipeline. Now on the right-hand side, the focus is on transformation. In clear aligners, the market is sizable at around CHF 4.9 billion, but our market share remains below 5%. This clearly highlights the upside potential. With the ongoing large transformation of our orthodontics business, supported by our technology partners such as Smartee, we are very confident in the future of our business repositioning to grow and scale efficiently. Secondly, digital equipment such as SIRIOS scanner and 3D printers represent another attractive segment with a market size of around CHF 1.8 billion. In this area, we have made excellent progress in 2025, achieving strong growth and a market share of above 10% now, and we see further acceleration ahead driven by a very differentiated and competitive equipment and workflows. Finally, CAD/CAM prosthetics is a large market of around CHF 5.7 billion, where our market share is still below 5%. Here, we see an interesting opportunity to accelerate growth by disrupting workflows through chairside solutions. We are very confident that this perform and transform strategic playbook, combining our core strength together with new technologies, which are radically changing our competitiveness in key new segments, will deliver consistent short- and midterm growth opportunity. With this, let me now turn to Slide 18 and walk you through how we execute against this playbook. Our strategy is focused around 3 strategic priorities, each addressing a specific growth engine of the group. First, we aim to expand our leadership in implantology by driving further penetration in an underpenetrated market through innovation, digitalization and education supported by our strong premium and challenger brands. Secondly, we are transforming our orthodontics business, building a stronger value proposition in a more scalable, digitally enabled model that allows us to grow efficiently and profitably together with strong partners. Third, to unlock the market potential of digital equipment and the CAD/CAM prosthetic market, we are working to disrupt chairside prosthetics by simplifying and accelerating workflows, leveraging our SprintRay strategic partnership and our open cloud-based digital ecosystem. What connects these 3 priorities is a common execution logic. Across all of them, innovation definitely supports our value proposition differentiation. Digitalization delivers the expected efficiency and education enables adoption and opening up wider the market segments. Let's now move to Slide 19. Before we go into the details of each pillar, let me highlight the clear principle differentiating our solutions. We are leveraging our cloud-based ecosystem to combine the best products with the best workflows to deliver practice efficiency and superior clinician experience. In today's dental market, product performance alone is no longer sufficient. Clinicians expect not only innovation at the implant or aligner level, but also complete, efficient and integrated workflows that support them from planning to treatment and case follow-up. This combination is what enables us to differentiate and consequently gain market share across segments. With this foundation in mind, let us now go into the first pillar of more detail, starting with implantology on Slide 21. I would like to highlight once again the fact that the implantology market remains yet significantly underpenetrated, offering a vast growth potential. Spain, with its large number of surgically trained dentists and a dynamic DSO presence driving increased affordability, serves as a valuable benchmark for evaluating average implant treatment penetration. Using Spain as a reference, we see significant potential for growth in both developed markets such as Italy, France, Germany, but also especially U.S. as well as in emerging markets like India. We are very confident that market penetration will continue to rise. This development is driven by increasing patient awareness of dental implant treatments and constant growing number of surgically trained dentists who can place implants in all geographies and more affordable treatment costs. With this context, let me now go into the first growth driver, starting with innovation on Slide 22. In implantology, innovation is the key driver to expand penetration and gain market share. In 2025, we launched iEXCEL, our next-generation implant system. Since its launch at IDS in Cologne, we have already sold more than 1 million iEXCEL implants, making this the most successful product launch in our history. IEXCEL combines unique features such as our premium surface SLActive and our Roxolid material with a simplified system architecture. One connection, one prosthetic diameter and one single surgical instrument set enabled to treat a wide range of indications with easier handling. In parallel to excellent clinical outcome, this simplicity is critical. It reduces complexity for clinicians such as inventory management, improves efficiency in daily practice and supports the adoption of more advanced treatments such as immediate loading and full-up solutions. Importantly, iEXCEL is not only driving growth within our existing customer base, it is especially a strong conversion tool, driving new customer acquisition. Premium competitors implant users on the one side, but even more importantly, it is now also a strong tool to switch clinicians using value systems. With this, let me now turn to our leading global challenger brand, Neodent on Slide 23. Neodent continues to be a strong growth engine driven by innovation and geographical expansion. In 2025, we sold around 5 million Grand Morse implants, underlining the strong acceptance of this platform across markets. Grand Morse is a very powerful system. It combines a modern implant design with a broad indication range and is also available in ceramic materials. Neodent is now established as a leading global challenger brand and continues its dynamic expansion into new geographies and growing market share in the Challenger segment. A key milestone ahead will be the registration of Neodent in China, which we expect to be done by 2027, opening up a significant additional growth opportunity. Overall, Neodent plays a critical role in complementing our premium portfolio and driving global expansion in implantology. Let's now turn to Slide 24. Embedded in our innovation process, digitalization is what turns products into a comprehensive and efficient customer experience. With Straumann AXS, we have built a successful open cloud-based platform that connects implantology workflow end-to-end across planning, surgery and restoration. The adoption of Straumann AXS has scaled up very rapidly. Within 18 months, the platform has grown from 0 to more than 15,000 active users, clearly demonstrating strong acceptance and relevance in daily clinical practice. What drives this adoption is the integration of complex workflow. Solutions such as co-diagnostic surgical planning and Smile in a Box are fully embedded into AXS, enabling faster, standardized and predictable implant treatments. Importantly, Straumann AXS also strengthened customer engagement. The platform drives a recurring usage and creates a continuous interactions between clinicians well beyond a single product transaction. Let me show you a concrete example how digitalization amplifies innovation and turns it into a differentiated customer experience on Slide 25. By combining intraoral scanner, the iEXCEL implant and a specifically designed anatomic healing abutment for the digital Straumann AXS platform, we created a fully connected workflow that significantly improves efficiency and accelerates treatment, and the impact is measurable. With the Fast Molar workflow, patient treatment time can be reduced by up to 26 weeks, clinical churn time by around 50 minutes and the number of appointments can be reduced from 5 to 2, enabled by the fully integrated digital nature of the solution. Importantly, it also strengthens the economics. By accelerating treatment and standardizing workflow, we increased the pull-through of original abutments and restorative components, driving higher recurring revenue per case. For clinicians, this means higher productivity and predictable results. For patients, fewer visits and faster restoration. And for Straumann, stronger consumables growth and scalable value creation. Moving up to Slide 26. To drive access to care, education is critical to make our solutions accessible to more clinicians and patients. In 2025, we delivered more than 10,700 education programs worldwide and trained over 370,000 dental professionals covering implantology, digital workflows and advanced indications such as pull out procedures. Education plays a critical role in increasing penetration. It enables more clinicians, particularly general practitioners to adopt implant treatments and to use digital workflow in a predictable and efficient way. With this, let me now move to the second pillar of our playbook for growth, the transformation of our orthodontics business on Slide 28. Through the Smartee and DentalMonitoring strategic partnership announced last quarter, we are transforming our Clear Aligner value proposition and accelerating our growth capabilities. On the product side, it means the launch of a scalloped trimline option in May 2026, together with mandibular repositioning devices later in the year, allowing us to address a broader range of orthodontic indications and more complex treatment needs. Equally important is the transformation of our production setup. As planned, EMEA and Asia Pacific aligner production is now transitioning to Smartee manufacturing, enabling constant quality, faster turnaround time and lower cost of goods. The first customer feedback on quality and service levels has been very positive so far. Together, these innovations and production capabilities are strengthening our ability to compete and our potential to scale and win market share in the Clear Aligner segment looks very promising. Moving to Slide 29. Digitalization is also here a critical enabler to scale orthodontics and broaden access to treatment, particularly for general practitioners, which is the focused growth segment for us. Through ClearCorrect remote care powered by DentalMonitoring, we enable remote treatment monitoring. This reduces the need for in-office visits and supports a simpler and more efficient patient journey while building the confidence of general practitioners to achieve consistent quality clinical outcomes. Digital workflows also support case conversion for general practitioners, which is one of the most important aspects of market growth. Tools such as before and after simulations make treatment outcomes more tangible, helping clinicians explain cases more clearly and increasing patient acceptance. In addition, the integration of CBCT data simplify treatment planning and enables more comprehensive diagnostics, especially for more advanced cases. This further expands the range of orthodontic treatments that can be addressed digitally by general practitioners. Overall, the digital capabilities simplify workflows, improve efficiency and create a faster and more compliant patient journey, supporting clinical success and scalable growth in orthodontics. And to ensure broad adoption of these workflows, education plays also here a critical role, which I would like to comment on Slide 30. Lowering barriers for general practitioners is critical to accelerate adoption and enable scalable case growth. Digital workflows and advanced aligner technologies only create value if clinicians are confident in using them in daily practice. With the ClearCorrect orthodontics, we provide structure and modular education tailored to different experience levels and treatment needs. This allows clinicians to progress step by step and build clinical skills over time. In addition, we complement education with ongoing online and clinical treatment support, ensuring that clinicians are supported beyond the initial training and through to the treatment process. With this, let me now move to the third pillar of our playbook for growth, disrupting chairside prosthetics on Slide 32. Digital equipment is an attractive and growing market in its own right and at the same time, a strategic enabler across our entire portfolio. Across implantology, orthodontics and prosthetic, there is always the same starting point. It all begins with an intraoral scan. Intraoral scanners are the entry point into our digital Straumann AXS platform. They capture the data that connects treatment workflows and platform across all segments. And this is why the intraoral scanner is strategically important for us. With our iOS portfolio, we cover the full market spectrum. We offer premium solution through our partnership with FreeShape, mid-range solutions with our SIRIOS X3 and entry solution with SIRIOS. This breadth allow us to address all customer segments and significantly expand access to digital workflows. This strategy has delivered very strong results in 2025, and we are confident to continue this momentum in 2026. We are seeing strong market share gains in intraoral scanners, allowing us to outgrow the digital equipment market. Each scanner placed increases adoption of Straumann AXS, our open cloud-based platform. And this expands our active user base, strengthen engagement and drives recurring usage across implantology, orthodontics and prosthetic. Let me now show you how this applies to prosthetic on Slide 33. What you see on this slide is a clear example on how we translate digital integration into speed, efficiency and recurring revenue while transforming the chairside prosthetics segment. With the Straumann Signature Midas 3D printer fully integrated into Straumann AXS, we enable automated crown design and production directly at the chairside. Clinicians can produce crowns, inlays or onlays in less than 10 minutes, significantly accelerating treatment and reducing dependency on external lab processes. This workflow is supported by our innovative chairside resin portfolio developed by our partner, SprintRay, delivered in patented capsule format. This format simplifies handling, improved consistency and ensures predictable clinical outcomes. Importantly, this is not only about speed, it fundamentally changes the economics. For clinicians, this means faster turnaround time, higher productivity and more control. For patients, it means especially fewer appointments and same-day restoration. And for Straumann, it means recurring revenue streams embedded in the workflow and the Straumann AXS ecosystem. For us, the integration of scanning, design, production and material into one seamless workflow creates a recurring revenue model driven by ongoing resin and consumable usage linked to every printed case. Finally, moving to Slide 35 to unlock those many opportunities and execute flawlessly on our growth playbook, the player learner culture is a key asset. We operate in a world that is increasingly volatile, uncertain and complex. In this environment, speed, agility and learning capability are decisive. At Straumann, our high-performance player-learner culture brings this all together. It encourages entrepreneurial thinking, accountability and continuous improvement, while at the same time, fostering collaboration and learning across functions and regions. This culture enables us to innovate closer to customers, take faster decisions and execute our strategy consistently across markets. And importantly, this is not an aspiration, it is measurable. Our employee engagement score of 80 reflects the high level of commitment and energy across our organization and represents the top score amongst globally leading companies. This is a major robust competitive advantage and allows us to turn strategy into execution and execution into results. With this, let me now turn to our outlook for 2026 on Slide 37. We entered 2026 with solid momentum, supported by our strong market position in a total addressable market of more than CHF 20 billion. While market conditions are expected to remain volatile with ongoing macroeconomic and regulatory uncertainties, we're expecting positive impact from our new key strategic initiatives, especially in the second half of the year. In China, the impact from the VBP process is expected to support growth momentum as the year progresses. And in orthodontics, the ClearCorrect transition to Smartee is advancing as planned and will contribute positively over the course of the year. With this timing effect, we are very confident in our outlook. For 2026, we expect to deliver high single-digit organic revenue growth alongside a core EBIT margin improvement of 30 to 60 basis points at constant 2025 exchange rates. With this, we are happy to move to the Q&A session to answer your questions. As usual, we kindly ask you to limit the number of your questions to 2 in order to give other participants a chance to post their questions within the available time. Chorus Call, can we have the first question, please? Operator: The first question comes from Doyle, Graham from UBS. Graham Doyle: Maybe, Guillaume, just firstly, on sales phasing for the year, I know it's early in the year, it's a bit hard to fully describe it given what's going on in China. But it does look like the way EMEA and the U.S. finished that maybe those regions are a little bit more H1 weighted. So is it reasonable to think that this is a relatively balanced year in terms of group growth for organic? And then secondly, just on free cash flow, should we expect a good step-up from H1 just as some of that inventory unwinds and maybe the restructuring charges fall as well? Guillaume Daniellot: Yes, Graham, for the top line, we will have obviously some different effect also from a regional basis. But when you look at Asia Pacific, where China is obviously a major impact, for the time being, assumption is that VBP will take place in the second quarter. That's an assumption as there is not yet any official statement by the China authorities, but the latest information that are coming up seems to demonstrate that it will be rescheduled around this time frame. As we have a very strong comparative base in 2025 in the first half and the low in the second half, I would say 2026 is going to be the reverse of 2025. We are going to have obviously still a weaker first half in China and Asia Pacific for the first half and a much stronger one in the second half when we look at the start of the year. When it comes to North America, we expect progress to continue, and we expect in our guidance, let's say, we have tabled a stable macro environment where we believe that our execution is going to continue to produce positive results, then that's the way we are seeing that our growth rate for 2026 will be more weighted on the second half than the first half. Isabelle Adelt: Let me take your question on cash flow, Graham, a very easy answer to that. Yes. What are the big building blocks when we look at it? It's CapEx, it's net working capital and it's the noncore items we're looking at. So CapEx, as outlined earlier, we said we are coming out of one of the biggest CapEx cycles we've had in the history of the group. By end of this year, we will have doubled our capacity in terms of how many implants we can produce this year. So the last big project to be finished is our third factory in Curitiba during this year, but you can already expect a significantly lower CapEx level for 2026 compared to prior year. Same holds for working capital. As you might recall, we did a couple of tactical decisions to increase our inventories to mitigate for the U.S. tariffs last year, and this is likely to unwind. So we will see structurally a little bit lower working capital in 2026. And last but not least, I think last year, we have seen a lot of effort we put into putting the right structures for our future growth. so namely preparing the orthodontics transition as well as enabling the China campus and making sure volumes can be produced where they are needed. And this is why we expect to see significantly lower noncore items in 2026 as well. Operator: Next question comes from Hugo Solvet from BNP Paribas. Hugo Solvet: Just Guillaume, maybe for you on North America and the U.S. in particular. Can you help us understand the balance between volumes and price mix in Q4? And just a word on current trading. Do you continue to see that sequential improvement in the U.S. as we start 2026? And maybe on a follow-up to Graham's question on the phasing, but more on margin this time, maybe for you, Isabelle. Can you quantify how much of margin pressure should we expect in H1? I think historically, you were more 55%-45% H1, H2 EBIT weight and that was more 50-50 in 2025. So would 2025 be a better proxy? Or would it be even more skewed towards H2? Guillaume Daniellot: Hugo, when it comes to U.S. volume price, it has been mainly volume growth. We had some price impact, but really small. Then I would say 80% to 90% of our development came from volume and share gain. When it comes to what we start to see in Q1, we see the trend still being positive with our iEXCEL still being very appreciated and helping us to gain share. Actually, something which is important, I tried to allude that in the script, not only on premium users, but also on value system users based on the efficiency gains delivered by the digital workflow and the digital equipment. Our DSO development is also positive. We have seen the DSO starting to reinvest on the marketing activities in order to keep then the patient flow at the same level. While it's still not very dynamic, at least we have seen a really good stability over the past month. That's why we believe that at least the beginning of the year should also see North America being able to keep delivering this kind of performance. Isabelle Adelt: And regarding your question for the margin distribution, Hugo, so I think this follows a little bit the same pattern Guillaume already elaborated on for the sales phasing. Just to help you think about how the margin distribution could look like, for me, there are 3 big building blocks. On the one hand side, of course, it's the China business and the VBP. There's still a little bit of uncertainty regarding the timing. But what Guillaume already explained that last year, we had a super strong first half year in China and a little bit weaker second half of the year, this will look the other way around this year. The second big building block definitely, the ortho transformation. As we speak, we are in the process of transferring production volumes to Smartee for the EMEA and APAC region and winding down our own production line in Germany, which, of course, means the benefit will be bigger in the second half of the year that the first, where we have transition costs and the wind-down costs included. There's still a little bit of double cost. And last but not least, which we shouldn't forget is the phasing of the tariffs. From all we know to date, the amount we expect to see is a little bit the same we had last year. But last year, it was more biased towards the second half of the year since it was only announced in April, and we didn't see a big effect in the first half. And this year, the amount will not differ significantly for the full year, but will be a little bit more biased towards the first half year since we will have a more continuous flow of tariffs from what we know today. Operator: The next question comes from David Adlington from JPMorgan. Mr. Adlington removed his question. Let's take the next one from Susannah Ludwig from Bernstein. Susannah Ludwig: I have two, please. I guess, first, could you just give a bit more color in terms of the strength of the EMEA performance in Q4 and maybe what you're seeing in Q1 so far? How sustainable are you thinking about sort of the acceleration in performance there? And then second, on prosthetics, that's a business that historically, the dental labs have controlled and dental offices have very strong relationships with their labs. So what do you see as the catalyst for sort of the disruption of that relationship? Dentists often tend to be a creature that have a bit of inertia. What do you see as sort of driving the shift to chairside? And what role will the DSOs play here? Guillaume Daniellot: Yes, Susannah. Then on those two questions. EMEA is obviously a very, very solid trend. We had an exceptional Q4 first, because I think we have very underlying capability to continue gaining share, and we are leveraging all the innovation that we have at our fingertips. And I think the EMEA team is doing very well on all the different franchises, and this has to be highlighted. I think in premium, in challenger, also digital and orthodontics is really driving then the very solid performance. Now -- the fourth quarter has been also boosted by some January '26 price increase announcement that has been done, and we know that there have been some also high digital equipment orders that have boosted performance. And I would say we have always said that the EMEA regular high performance is going to be between high single digit to low double digit. And I think this is what we expect to see also in 2026. And it will be balanced between the different quarters, saying that potentially the first quarter will be a little bit lower based on the strong finish. But all in all, it's going to be just a balance in all the different quarters that will still see us delivering strong contribution of EMEA with regard to our total 2026. When it comes to prosthetics, you have a very good point that the lab relationship with the dental practitioner is very strong. And why do we believe that such chairside 3D printed crown can have some disruption capabilities in the future for one very good reason, we believe, is patient expectation. If you can say to a patient that you are going to solve his decay or his crown issue in one appointment, there will be a lot of benefits on the patient side and obviously, a lot also on the clinician side because it will save significant number of appointments. Will it be a fast disruption? No, because we all know that dentistry is rather conservative. But as soon as practitioner will have experienced this same-day dentistry being able to gain significant efficiency in posterior crown restoration like this, we do believe that the share of the business will not go to the lab anymore. Obviously, DSO will be able to push those workflow because of the efficiency and profitability gain that they can generate. But it will be all across the market based on the significant appointment savings that could be generated. Then to be seen step by step, but I think all the elements are here now to be able to allow the same-day dentistry that will, I personally think, going to take significant share in the future. Operator: The next question comes from David Adlington from JPMorgan. David Adlington: Yes, just -- I may have missed it, sorry if you addressed it. But just in terms of your margin guidance, just wondering if I could check what you're assuming in terms of savings from Smartee or whether you're looking to reinvest those? And then secondly, again, I think you may have touched this and I just missed it, but in terms of the tariff impact in the second half, I just wondered if you could quantify that and how you see that evolving through 2026? Isabelle Adelt: Sure to take that. So I think -- I mean, margin guidance for Smartee. So David, I think what we explained a little bit before, we have a very clear plan how we want to turn the orthodontics business profitable over the next 2 years. And I think the first big step will be this year really working on our COGS position, working on our profitability position by transferring the big production volumes we have in EMEA and in APAC to Smartee. But how will this look like? So on the one hand side, we're currently closing down our own production site in Germany to be finished by end of Q1. So you will potentially still have the COGS in Q1, but then at the same time, transfer to Smartee at a much lower cost per liner than we had before internally. And this will ramp up over Q2, so we can see the full effect in Q3 and in Q4. And then I think in addition to that, obviously, we expect to see a little bit higher growth rates for the ortho business as well, being a positive impact to the margin in the second half because we are planning, as Guillaume said, to launch the scalloped shape trimline during Q2, which will substantially complement our portfolio. And this is why we will, for sure, already see a step-up in terms of margin in the first half, but the bigger impact we would see in the second half of the year once the cost for our own production is out and Smartee is fully ramped up for those 2 regions. And then for tariffs, I think to give you an indication, we expect the total amount from all we know today, so assuming tariffs will stay where they are to be at a similar level as 2025, where we saw a total hit of around about CHF 20 million in our P&L in the COGS line. We expect that number to be pretty similar, maybe a little bit higher in 2026. But saying this, it was very biased towards the second half of the year in 2025, especially in July when we did all the shipments, but then in the second half of the year when we had the high tariffs, whereas in this year, you can rather think about it as distributed half and half, so half in the first half of the year, half in the second half of the year. Operator: Next question comes from Hassan Al-Wakeel from Barclays. Hassan Al-Wakeel: I have two, please. So [indiscernible] up on the margin guidance and why this isn't higher given your commentary on Smartee halving the loss, [indiscernible] loss in '26? And is the guidance is that of the uncertainty that you still see in China? Or is there anything else to highlight in terms of the margin building blocks? And then secondly, on China, is the second half realistic? And what do you have in your guidance from the potential continuation of destocking beyond this quarter and the [indiscernible] can also ask what the margin headwind that you're baking China VBP in 2026? Guillaume Daniellot: We are going to try to answer, but you have been breaking up on your questions. And let me try to summarize your questions and try to answer that, and you will let us know if this is in line. First question is, what are the different building blocks we are seeing on our margin. I think as Isabelle explained and what we discussed already quite a lot is, on the one side, we have that negative impact of tariffs. That will be almost the same, a little bit more than potentially 2025, but that will be then having an effect more in the first year -- in the first half than the second half because of the fact that it has been, in 2025, impacting our second half mainly. The second side that we said is about Smartee, where as our manufacturing now is for Asia Pacific and EMEA translating to Smartee, we will see the effect over the year starting from March because we are going to finally close our German plant, as just Isabelle said, there in the end of the first quarter. and something also to express on Smartee, there are 2 effects for our margin. The first one is the immediate COGS effect that will be obviously direct. And the second one will be the operational leverage that will come over the next 18 months, where we really are expecting significant growth that will help us to drive then significantly improvement in profitability as well with regard to all our SG&A costs that are going to be absorbed in a much higher way with the double-digit growth that we're expecting and that we are seeing at this point. But we are having also additional elements in our building blocks that we are counting and that are going to have positive effect on our profitability. The first one is obviously the manufacturing of the Shanghai campus, where we are allowing to have all our China volume being manufactured at a lower COGS that have been obviously planned in our guidance. We have also another one, which is in part looking at the growth of our digital equipment, where we are transitioning some significant part of our volume from third-party products to our own SIRIOS intraoral scanners, meaning that we can also benefit from a higher profitability. And last but not least, we are continuing to do operational leverage in the overall organization, thanks to the growth that we are delivering. Then that's where our improvement from a profitability standpoint is coming from many parts that are allowing us to be pretty confident about delivering then the improvement that we have been presenting. To the second side, I think if I understood well, you were talking about or you were asking about what is baked in our guidance somewhat with the current VBP being in Q2 and the destocking -- potentially further destocking of distributor. What we believe is that the destocking of the distributor is going to be less important than the second half of 2025 because they are -- it seems from our information in between 1.5 to 1.8 months of stock right now than at a pretty minimum level to operate. Then while it's going to be still slow from a patient standpoint, we don't believe that the destocking will be massive anymore. Now obviously, we are going to be still against a very strong comparison base. What you have to remember is our first half in China has been in the 20-plus percent growth. And we are going obviously to see much more than the weak market than what we have seen in the first half. Then it's much more this challenging comparison base that are going to provide, I would say, China still in the negative territories from our perspective that will strongly be reversed for the second half. Then we have baked more or less this dynamic in our guidance for our high single-digit growth for 2026. Operator: The next question comes from Daniel Jelovcan from ZKB. Daniel Jelovcan: The first one is also on Clear Aligners. Can you elaborate a bit on the geographical growth? It was probably double digit in all areas, but I'm not sure, that's why I'm asking. First question. Guillaume Daniellot: Yes. Daniel, Clear Aligner has been very dynamic, and we had double digit in 2025 again. Significantly in Latin America and EMEA, rather flattish in the North America, which we expect this to change with a better consumer sentiment. And we have been, since the partnership with Smartee, also seeing some interesting uptick in Asia Pacific and especially in the 2 markets where I think we will be able to drive interesting volume in the future, which are Japan and Australia. And that's why we are pretty confident to get on track with our Clear Aligner also operational leverage in the future, looking at the current growth trend that we're having on this business segment. Daniel Jelovcan: Okay. Great. And the second -- last question is the development in Spain. As you elaborated, you mentioned a lot in the past, DSO is pushing penetration up because of the low price and so on. I would wonder if you can add a bit more details. So what implants do the Spanish use? I mean, is it Neodent or is it premium or both? I'm talking about the DSOs. And also when you look at your penetration chart, is the DSOs, you see evidence that the DSOs are also pushing growth in other underpenetrated countries. I mean, have in mind the DSOs are not allowed in Germany, for instance, or maybe there is a change coming up. So yes, that's the question. Guillaume Daniellot: Yes. Spain has been a very good example on how DSO has grown the market through opening up a segment of patients that was not thinking that they could afford implant treatment. And with rather aggressive marketing activities, presenting, of course, implant treatment at a lower level, but especially pushing the patients to go through the door to get presented with the diagnostic, actually, it's a question of spending prioritization. Then if you do an implant, then you might not buy the latest, I don't know, computer or iPhone or whatever. And that's a little bit what we have seen for countries where most of the oral care or dental care are full copayment by the patient, which is the case in Spain. Then this has been one of the significant effect DSOs have had on those patient group that was not going to a dentist anymore, but are suddenly going to DSO because they feel that it's actually more affordable than they were thinking about. Then those DSOs are mainly using challenger brands and our Neodent system, but some are still using premium as well, especially because of the efficiency driven by the digital workflow that are not fully yet available on the challenger brands. We are expecting this to continue developing in other geographies. And one of the good reasons why we have also seen China developing so strongly after VBPs has been because DSOs have been able to invest and scale clinician education and also doing investments in equipment to be able to place more implants. Then DSOs are a very strong partner for us for continuing to open the market and expand the market in most geographies because they are also the ones that are investing in technology that are allowing efficiency and then potentially more affordable pricing, that's what we see the future. And that's one of the reasons also why we are working in co-creation with a lot of DSOs to develop specific solutions that are adapted to the strategy they would like to pursue. Daniel Jelovcan: That's great. And also congrats for this achievement in '25 in these challenging times. Operator: The next question comes from Julien Ouaddour from Bank of America. Julien Ouaddour: I have only one. But I just want to understand the level of maybe [indiscernible] conservatism that you have in the margin guide this year. Just to explain myself. So I mean, usually in a given year, you have some operating leverage that you expect to grow high single digits. You should have some -- I think you mentioned strong growth in EMEA, like North America also probably improving, which should help you on the mix side. In the call, you mentioned digital and Shanghai production to be a tailwind as well. So it seems the swing factors are the savings from ClearCorrect and like the VBP. Have you changed your expectation in terms of the VBP? I think in the past, Isabelle said China is expected to have roughly a flat margin. So is there, I mean, any different assumptions in the guidance? And in terms of savings, do you still expect the losses from ClearCorrect to have in '26, which should clearly give you a nice boost. So just trying to understand really the 30 to 60 bps of margin expansion. It's pretty -- I mean, it's pretty good already, but I wanted to check if there is any level of prudence there. Guillaume Daniellot: I can start with answering. Again, on the ClearCorrect, as we expressed, it has been a large transformation we started in August. And honestly, we are really pleased on where we are right now. We have made a very strong progress being able to connect manufacturing for 2 major regions with no hiccup, having really strong already feedback from customers from turnaround time, from quality levels and still using, again, all the ClearCorrect specific technology. That means we are using all our ClearCorrect portal. We are using all our specific ClearCorrect material. We are having still a very clear differentiated branding by leveraging the technology of Smartee. From a manufacturing standpoint, we are well on track, being able to -- we have started to transfer this manufacturing, meaning that with operational leverage, the plan that we have for end of 2027 to be breakeven of ClearCorrect should be really achieved. At least for the time being, we are pretty positive about this midterm perspective that we have. Then looking at regions like North America doing better and being able to deliver the stronger growth than the 4% we had in 2025 and backing for higher growth rate for 2026 will also deliver then higher profitability, thanks to the higher pricing that we have there versus the other regions. Solid EMEA will also contribute well that we can generate operational leverage from those geographies. Then I think we already expressed manufacturing in China, the fact that we have our digital equipment that are going to be more in-house than third party and the fact that we are also going to have the latest for us high CapEx year because we have been investing a lot into profitability -- into capacity, sorry, in the past years. I think it is making us, yes, I would say, confident about our capability to deliver higher gross margin and higher EBIT moving forward in 2026, but also having a profile keeping improving over 2027, which is really something that we are looking at from a midterm standpoint. Operator: The next question comes from Julien Dormois from Jefferies. Julien Dormois: I have two. The first one relates to the iOS business. I think you have mentioned during your presentation that you have experienced significant share gains, obviously, related to the comprehensiveness of your portfolio. So I was wondering whether you could help us size this market on a global basis and whether your current market share is maybe above or below the 10% you have highlighted for the broader digital equipment market. So just to understand where you sit on that side. And what do you think could be a realistic target for Straumann maybe by the end of the decade or in the next 5 to 10 years? That would be quite interesting. And the second one is very much a housekeeping question, and sorry if I missed that, but it's probably more for Isabelle. But at the current FX rates, I'm just curious whether it is fair to assume more than 500 basis points of adverse impact on top line and maybe a new round of headwinds to margin, probably to the tune of 150 bps if I compare to the 130 bps you had in 2025. Guillaume Daniellot: Yes, I will. I think -- thanks for the question, Julien. It's not so easy to assess the real full market total value of iOS. But if we look at what we call modern technology that our iOS and 3D printer, that's where we are assessing this market to be a bit shy of CHF 2 billion. And when we see our development, we are seeing, yes, our shares being double digit now. We have been, I would say, more on the 5% to 6%. We think that we have significantly increased this, this year, thanks to this new technology coming from our AlliedStar acquisition that we have made in September 2023. And we believe that this is going to continue to grow as together with our FreeShape partner, we are on the sweet spot to be able to deliver a really advanced technology with FreeShape for surgeons and orthodontists that really want to leverage the latest technology also in terms of diagnostic and having advanced capabilities. But as we are now entering a lot into the GP segment with orthodontics, but also implant treatments and now prosthetics, very often, they like a good technology that does not need to have all the latest one at a more affordable price. And what we have seen in this market penetration, we are now in the middle of the S curve, and we are well positioning to take a fair share of the volume of our intraoral scanner in the next 3 years. And we see that significant growth in the next 3 years. Afterwards, we expect the total market penetration to move from -- it is around 35% to, I would say, 35% globally today. It will double in the next 3 years from my perspective because we are having the sweet spot in terms of quality to price ratio on digital equipment. And this is where we believe strong growth will still be achieved on our side. This being said, I want to express once again the fact that we consider intraoral scanner as an enabler. What we want to do is really connect as many clinicians as possible into our open cloud-based AXS platform, where clinicians have then the efficiency, the access to consumables and solutions that are really creating a difference in their practice. That's where they can go to the Fast Molar workflow from Straumann, they can go to the clear aligner, then ClearCorrect solutions. They can go to the SprintRay. And every new technology that will come will be able to be connected through that AXS platform, meaning that we will be open to any innovation in-house or externally, thanks to that customer base connected with our intraoral scanner and that ecosystem. That's really the strategy that we have been pursuing and that we are very pleased into the progress of it right now. Isabelle, do you want to comment on the... Isabelle Adelt: The FX impact, yes. Julien, you didn't miss it. I think you're actually the first one to ask it, which I think is a little surprising. But I think -- I mean, FX impact, as you all know, I mean, we're operating in a very volatile environment. And I think you gave a very good range already when you said that. So from what we currently see and looking at -- basically looking at what we say we are doing at January spot rates, we are looking at a very similar impact we had last year once again. But having said this, to give a clear guidance at this point in time is very difficult. Because in January alone, we saw movement of over 50 bps up and down just by the volatility of the U.S. dollar. So I think for the time being, if you look at a very similar impact to what we had last year. So to remind you, in terms of top line, 480 bps; in terms of bottom line, 130 bps for the time being, the estimation is not too wrong. And we will keep you updated as the year evolves given of what the currencies will do throughout the course of the year. Operator: Next question comes from Richard Felton from Goldman Sachs. Richard Felton: Just two questions for me, please, both on orthodontics. So the first one, on the product side, like how important are some of the product innovations that you've referenced in your presentation? And for instance, the scalloped trim products, how important is that in filling a gap in your portfolio? And what percentage of cases are you now able to address? And then secondly, also on orthodontics, are there any changes to your commercial organization that you are making? Just trying to get a sense of what is driving the acceleration in liners that you expect over the next couple of years. Guillaume Daniellot: Yes. Thanks a lot for the question on orthodontics. And yes, I think happy to be able to explain this. When we are commercializing ClearCorrect, we had a significant differentiation, which is a specific high trimline, which is helping to place a little bit more force to the teeth in order to move them a bit faster and to do some different movements. This is something which has been appreciated by some clinicians, but a lot of others are used to scalloped trimline, which is what has been proposed by most of the players in the market. Then when we have been willing to switch some of the GPs that were using a lot of competitor products, they were asking us to have also the scalloped trimline option because they are so used to this that they don't want to change any of their protocols or their experience so far by moving to ClearCorrect. Then it has been a pretty strong obstacle to some of the switches that we were wanting to do because of asking the clinicians to change the way they were treating patients. And obviously, then a lot of the clinicians like to continue doing what they are used to and what they are confident with. And it's a very different way of manufacturing product. We have also to look at how to redefine protocols with a different trimline. And that's why for us, it's also a major addition to our portfolio because we will be able to offer those different trimline capabilities, either the high or low trimline that are existing to ClearCorrect and the additional scalloped auction that will be also a lot of wishes by a lot of general practitioners that we have been meeting over time. The second aspect on the commercialization side and what we have done is we have also to generate operational leverage decided to focus on the key growth market. And what we are doing is making sure that our customer experience, clinician support and commercial go-to-market investments are going to be done in the 14 major countries where we are seeing actually those double-digit growth. And as much as we are seeing growth, we will then continue doing specific go-to-market investments in order to support growth as we are seeing it happening. Operator: The next question comes from Sibylle Bischofberger from Vontobel. Sibylle Bischofberger: I have only two questions left. First of all, the gap between the reported EBIT and the core EBIT was quite strong in 2025. Could you give us a hint how will be the delta between your reported and core in 2026? And secondly, CapEx will clearly come down, as you said, only Curitiba 3 will be spent. And then in 2027, it will be even lower. Could you tell us how much it will be in 2026 and what to expect for '27? Isabelle Adelt: Yes. No, happy to take those two questions. I think this is what we discussed a little bit as influencing factors to our free cash flow performance already, right? So just to remind you, 2025, we had a lot of extraordinary impacts in there. So we provided quite some detail in our annual report what they were. And I think it wouldn't be too wrong to assume that everything regarding restructuring when it comes to the ortho business, when it comes to the transfer of our factory from Villeret to Shanghai is something that will not occur again this year. Although having said this, of course, costs related to M&A and so on will remain. So if you look at those categories, we provide quite a lot of detail. I think it's a fair assumption to say that 2026 will be a little bit more of the same as in previous years, but not in 2025, where we did all of those projects I just talked through. And then I think CapEx, I think it's important to understand that in the last 4 years, we invested over CHF 1 billion into our manufacturing capacity. Having said this, with the finishing Curitiba 3, we will have doubled our capacity for implants. And this means for the rest of the cycle, we will step down significantly in terms of CapEx intensity, so meaning CapEx over revenues. So you can already expect the first step down more towards the level of 2024, 2023, a mix of that in this year with the Curitiba finishing and then a further step down in 2027. Operator: The last question for today's call comes from Falko Friedrichs from Deutsche Bank. Falko Friedrichs: My first question is whether you expect China to see similar sales declines in H1 as it was in the fourth quarter? And my second question is, do you foresee a return to high single-digit growth in North America in 2026? Guillaume Daniellot: Sorry, the first one. Could you say again the first one on China, Falko, please? Falko Friedrichs: Do you expect the first half of 2026 to see similar sales declines in China compared to what you saw in the fourth quarter? Guillaume Daniellot: First half. No, not to the same extent. We don't think so because we believe that some of the destocking has already happened on the distributor side. But again, it will still be then quite lower than 2025 first half because of the fact that the growth was very significant. But we don't feel we will see the same trough that we have seen in Q4 than 2025. And when it comes to North America, we are not doing specific guidance per region, but I think we expect in between the high end of mid-single-digit growth to high single-digit growth being potentially possible, depending on what will be also the macro around there. But it's -- if we see the labor -- the latest news about the labor market that was rather positive. The inflation that has been just been presented at 2.4% and being also on the right side, that could help, of course, adding a little bit additional pressure on the Fed lowering their interest rate. We believe that we can have a rather positive development of the macro situation in North America that could support then a really good outcome for North America. It's still too early to say to see consumer confidence, but I think there are options for having a healthy growth for North America in 2026. Well, thank you for joining us today and for your continued interest in the Straumann Group. We look forward to seeing you again soon, and we wish you a nice day and a warm goodbye from Basel. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2025 Pitney Bowes Earnings Conference Call. Joining us today are Chief Executive Officer, Kurt Wolf; Chief Financial Officer, Paul Evans; and Director, Investor Relations, Alex Brown. [Operator Instructions] Please be advised that today's conference is being recorded. It is my pleasure to turn the call over to Alex Brown, Director, Investor Relations. Please go ahead. Alex Brown: Good morning, and thank you for joining us. Included in today's presentation are forward-looking statements about our future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections. More information about these items can be found in our earnings press release, our Form 10-K and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on Investor Relations. Please keep in mind that we do not undertake any obligation to update forward-looking statements as a result of any new information or developments. Also included in today's presentation are non-GAAP measures. Specifically, EBIT, EBITDA, EPS and free cash flow are all on an adjusted basis. You can find a reconciliation for these items to the appropriate GAAP measure in the tables attached to our press release. We have also provided a slide presentation and a spreadsheet with historical segment information on our website. With that, I'd like to turn the call over to Kurt. Kurt Wolf: Good morning, and thank you for joining us. I trust that everyone has had a chance to read our earnings release and my quarterly letter. As such, I will keep my comments brief. First, I'd like to welcome our recently announced executive hires. It's exciting to see the level of talent we are now able to attract to Pitney Bowes. I'm particularly pleased to have Steve Fischer join the company. Steve is an accomplished bank leader, something that stood out during the recruiting process. I look forward to working closely with him to maximize the value of Pitney Bowes Bank. Moving to the fourth quarter. Our results demonstrate the progress we're making in transforming Pitney Bowes. While we did have some tailwinds, our financials were strong absent those benefits and reflect the growing strength of our business. In closing, we are rapidly progressing through our transformation. In 2025, we significantly strengthened the foundation of our business, taking meaningful steps in upgrading leadership, simplifying our structure, streamlining processes and eliminating costs. All of this is putting us on strong footing as we pivot to a focus on profitable growth and beginning our external review with qualified advisers during the second quarter. With that, let's open the call for questions. Operator: [Operator Instructions] And our first question will come from Aaron Kimson with Citizens. Aaron Kimson: Kurt, can you expand on the additional market uncertainty and geopolitical challenges you mentioned in your letter as reasons for the wider guidance range? Kurt Wolf: Yes. Aaron, thanks for the question, and thanks for joining the call. Yes, some of the things that we -- I guess, I would point to, one is, as we've seen in the past, there's been issues with government shutdowns. I think there's no guarantee that doesn't happen again. As we talked about during our Q3 call, that certainly affects some of our performance in the SendTech space. More broadly, obviously, there's questions about a change at the Fed, other -- there's some uncertainty about where the direction of the economy is going. We're a pretty noncyclical business. However, I would really point to our marketing mail aspect of the Presort business. which is more economically sensitive. So while we don't expect anything major, we are cognizant that there could be potential headwinds related to both of them, but not necessarily expect them. Aaron Kimson: Okay. That makes sense. And then I wanted to ask on the Presort business as well. You mentioned new business wins and no churn since June of 2025. I think you had a nice win in the state of Pennsylvania that was well publicized in 4Q. Are boomerang customers and new wins generally reflected in Presort volumes immediately? Or is there a ramp time where Debbie and her team get agreements, but the volumes come at the end of a pre-existing contract with another vendor and you have some visibility into the ramp? Kurt Wolf: Usually, they come in pretty quickly. But what I would point to is there's definitely a sales cycle that can be pretty long. So we got more aggressive starting in June of last year, and it's taken time to fill that pipeline. And I think at this point, the pipeline is pretty full start to finish. And one thing I'd point to is the customer wins that we had in Q4, we've essentially met that level of wins this half the way into Q1 of this year. So you can see as that pipeline is filled that we're getting more and more wins on a more rapid basis. And then finally, in terms of flow-through to the financials, it does take a little bit of time. We have to add multiple customers. We have a lot of major losses from the first half of last year that we're trying to eclipse. So it's just going to be a process over the next few months and quarters. Operator: And our next question is going to come from Anthony Lebiedzinski with Sidoti. Anthony Lebiedzinski: So just a quick follow-up. Kurt, you said that the government shutdown had some impact in the quarter. Any way you guys could quantify what that impact may have been? Paul Evans: Anthony, it's Paul Evans. Yes. Look, we were impacted on that. That was hardware purchases. It sort of pushed it into the subsequent quarters. So we saw most of it in Q3 last year. I'm not sure we go down to that level of granularity to give that. But I mean we are susceptible to government shutdowns. Anthony Lebiedzinski: Understood. Okay. So Kurt, in your shareholder letter, you mentioned being more aggressive with pricing on Presort. So just wondering if you could further expand on that as far as how perhaps aggressive you would be with pricing to win back clients? And what type of EBIT margins should we think about as we look at the Presort business going forward? Kurt Wolf: Yes. I'll let Paul speak to the EBIT margins. But just broadly speaking, what I'd highlight on that, I know there's been questions about what's going on in Presort. To be quite honest, I think we got caught flat footed early last year. Industry margins went up, and pretty much everybody in the space did what you would expect, which is to go out and be aggressive to try to win new customers with the higher margin levels. We unfortunately were not in the same boat. So we did face a lot of headwinds in terms of customer losses and having to give concessions to our customers, but we weren't necessarily aggressive going after customers in the space. And that's really what's happening now. So -- when I -- when we talk about being aggressive on pricing, a lot of it is trying to pull in new business. We've already made the required concessions to our existing customer base. So it's really about winning new customers. Paul Evans: And Anthony, to add to that, I think if you sort of target low to mid-20% range for EBIT margins and -- but it's also important to note that we are the low-cost provider. So we can sustain that. So when we come out and say we're going to get more aggressive on our pricing strategy, and we can certainly afford to do that. Anthony Lebiedzinski: Got you. Okay. And then my last question before I pass it on to others. So as we look at the free cash flow guidance, you guys add back restructuring payments to your definition of free cash flow. So how much restructuring payments are you guys assuming in 2026? Paul Evans: It is true, yes, we do add it back. And the reason we add it back is it's not really representative of our business going forward. I'm just trying to think if we've offered that level of detail in the past on that. Maybe I'll circle back to that payment. I'm not sure we've offered that level of detail. Operator: Our next question is going to come from George Tong with Goldman Sachs. Keen Fai Tong: Going back to the Presort business, in terms of winning back customers and being more competitive on pricing, given the comps ease pretty materially in the second half of this year, would you expect that by then you would return to positive growth in Presort? Paul Evans: I think we'll see -- it will be an easier comp year-over-year on growth, but we've got to get past Q1, Q2, which are going to be tougher comps for us. But again, as we said before, we stopped the decline mid last year. We've Kurt sort of empower Debbie Pfeiffer to be more aggressive on pricing. And as Kurt also mentioned, there is a sales cycle to this. So we're certainly getting some traction. But I think second half of the year will be a better comp for us. Keen Fai Tong: Okay. Makes sense. And then in the SendTech business, how do you envision the revenue performance over the course of the year? If there's any bifurcation of performance in the first half of the year, for example, versus the second half, would you expect the second half to be stronger within the SendTech business? Paul Evans: Let's start, first for the year, we expect a top line decline in the business. But if you -- to split apart the year, we believe second half of the year will be stronger than the front part of the year. Kurt Wolf: Yes. And George, just look at sequential year-over-year throughout 2025, you can see there's a trend that is essentially getting more positive every quarter, and that ties back to what we've spoken about in the past with the IMI migration. And again, we expect that to continue. So we can't guarantee that each year-over-year comparison is going to get better quarter by quarter, but that should -- we expect to be somewhat the trend on a go-forward basis, at least through 2026. Operator: And the next question will come from Jasper Bibb with Truist. Jasper Bibb: I was just curious how you're thinking about the underlying mix in SendTech in '26. I think the letter mentioned you didn't get the growth rate you wanted in the shipping technology piece. Could you maybe frame for us how you're thinking about the growth rates in the shipping technology business in '26 versus, I guess, maybe the core hardware business and everything that's associated with the mailing meters, et cetera. Kurt Wolf: Yes. And we can essentially cut it into 3 pieces. We have the mailing meter business. We have the shipping business -- shipping software business. And then we have the bank, which currently is reported as a part of SendTech. So with respect to the mailing meters, again, the IMI migration certainly created some serious headwinds in 2025. We expect that to slowly ease. In addition to that, we've had a bias in the past of always focusing on growing markets, which does not apply to the mailing meter business. So one of the things that Todd has really identified since joining the company is we probably aren't doing as much as we could to slow that rate of decline. So I think there's a lot of efforts going to be put into slowing the rate of decline. So that's what I'd say about the mail meter business. With respect to shipping software, Todd has done some great work there. We have a vast array of product offerings, and we're trying to get more focused on how we do that. And then also we're trying to figure out where do we have the best competitive advantage so we can better hone our go-to-market strategy. I think it's going to take some time to fully identify exactly what that looks like. But I will say that we're not cautious or slow in how we go about this. Todd is aggressively already testing some concepts in the market. So we'll have more in future quarters on that. And then with respect to the bank, as you saw with the hiring of Steve, that's really unlocking the opportunity for us to focus on growth in the bank. So too early to say just yet, but that's an area we're really excited about, but we will obviously show caution given the risks associated with the lending space. So hopefully, that gives you some good color. Jasper Bibb: No, that's very helpful. Maybe just one on capital return. So pretty aggressive pace of buybacks in the fourth quarter. It seems like that maybe slowed a little bit in the first, call it, 1.5 months of '26. Just wanted to get an update on how you're thinking about the balance of share repurchase and the dividend and other priorities in '26? Paul Evans: Yes. So Jasper, this is Paul. Look, I think the keyword on share buybacks and debt buybacks is opportunistic. I mean, we're very opportunistic in Q4. We're just -- we're very disciplined on how we look at this. I think I'll say it on here. I mean, we're committed to a net debt of EBITDA of around 3x. But we definitely see that our stock continues to be undervalued, and so we will continue to buy our stock. Again, relative to dividends, that's a quarter-by-quarter decision. This quarter, we decided the best use of our capital is to continue to look at debt buybacks and share buybacks. Operator: And our next question will come from Curtis Nagle with Bank of America. Curtis Nagle: Just wanted to follow up quickly on the free cash flow guide. It came in nicely above where the Street was. In terms of the components, yes, maybe we can return to that restructuring point later. But are you including the net investments in the loan receivables from the cash from investing line? Because I think the sort of comparable or the component of that in cash from ops is in there. So just wondering kind of how all that rounds out and is that in the guide? Paul Evans: A little bit on free cash flow. A big component of free cash flow is Presort prepayments. We don't control the timing of that per se, but we had a very strong Q4 on that despite not fully controlling it. So that's definitely a larger component for us when we look at that. And as far as the detail on the amount of restructuring in there, I'm just not sure that that's a number that we've given out in the past. Operator: And the next question comes from Dillon Bandi with Northcoast Research. Dillon Bandi: Looking at that target of 3x net debt, is that a 2026 target? Or are you guys kind of looking more into 2027 or longer term for that? Paul Evans: I think on how we define net debt, we actually came in end of the year slightly below 3x net debt to adjusted EBITDA. I think it's just a good overall target to be. There might be times we were slightly above it on the quarter or slightly below it. But I think for this business going forward, that's the right place to be. Kurt Wolf: Yes. And Dillon, just to add to that, Paul has highlighted we're going to be opportunistic in our capital allocation. And we've said on previous calls, we're cognizant of how the market views us and what levels of debt they think we can manage. So we believe we could have a higher ratio than that. But as long as the market doesn't believe it, we're going to follow the market's lead on that. So what I would say is by being opportunistic in the capital markets, we may go above, we may go below, but that's sort of our -- the mean or the point we want to keep returning to over time. So we may go above for a bit, return back or go below for a bit and then return back. Dillon Bandi: Got you. That's really helpful. And then, Kurt, in your letter, you talked about SendTech exiting its low point of the product cycle. Has there been any fundamental change in that business, whether that's renewal rates or price competition? Or do you guys just overall feel confident about that? Kurt Wolf: Yes. No, I would just say, overall, we feel confident we have -- we believe we have the best products in the market. I think the market agrees with that in terms of buying habits. We're doing increasingly well in the federal space and the government space. And again, it's just -- it really is -- there was a low point tied to the IMI migration recovering from it. We are recovering from it. And there's fundamentally nothing that's really changed as far as we can see in terms of the rate of decline that we've historically seen should change going forward. Operator: [Operator Instructions] And our next question comes from Justin Dopierala with Domo Capital Management. Justin Dopierala: So do the new hires you've announced signal that you're no longer looking to sell the business as part of the strategic review? Kurt Wolf: No, no, not at all. Again, what I'd highlight is with these additions, and I hope everybody recognizes the level of talent we brought in here. it's going to be important no matter what the future of the business is. These are great executives bring a lot to the table. No matter where this company goes, they're going to be a great asset going forward. So that is in no way a comment on the future path of the company. Justin Dopierala: Got it. I know you touched a little bit on restructuring. In Q4, it was a lot larger than I was expecting. I would assume in 2026 that these costs drop closer to 0. I don't know if you can say what was the largest restructuring cost in Q4? Paul Evans: Just headcount reductions. Justin Dopierala: Okay. So that was essentially onetime cost? Paul Evans: In '26. But most of it will -- it's already captured in the '25 number. Justin Dopierala: Perfect. Also, it appears that your dominance in the Presort space has contributed to a much lower price for Presort customers. I was just wondering how does the USPS view this with respect to workshare discounts? And wouldn't the post office also benefit considerably if they simply privatize the entire Presort function to companies like Pitney Bowes in the future? Kurt Wolf: Yes. I don't think we're going to comment on postal relations. All I'd say is we have an amazingly constructive relationship with the post office. With respect to workshare discounts, the whole rationale for those being introduced is -- and it's common throughout the government, whether you look at Medicare -- with Medicare Part C there's always an interest in figuring out private public partnerships, and that's exactly what these workshare discounts are. And then in terms of -- I think you were asking about pricing. Yes, I completely agree. In the end of the day, one of the big benefits of the workshare discounts is not only does it save money for the post office, but a lot of those discounts end up getting passed on to customers. So it creates a lower cost for the end user of postal services, which helps keep volume going through the postal system due to lower costs. So I think it's a win-win for the post office, but I can't speak on their behalf. Justin Dopierala: Absolutely. Got it. And I think you briefly touched on this. But looking ahead over that maybe the next few years, what do you think are the top growth opportunities that you're seeing? Paul Evans: I think I'd say in Presort, obviously, given that we're the low-cost provider in the market, our pricing strategy, we should see growth there, but that will take a little time. We're seeing more inbounds on acquisition opportunities. So we will definitely look at that. The renewed focus back on mail and investment where we have to, to slow the decline, that, in a sense, is a form of growth. And then shipping, I mean, the team that Kurt and Todd's assembled there, we like our chances on how to evolve. And then finally, with Steve coming on to run the bank, I think there will be definitely opportunities there for us. Justin Dopierala: Okay. And just, I guess, lastly, analyst coverage from yesterday seems to amplify that there's still a huge opportunity to educate people on the fundamentals of the Pitney Bowes business. Are you planning to have an Investor Day in 2026? Kurt Wolf: Yes. Yes, we are. And I certainly agree with you on the education level. But as Paul said, we're incredibly opportunistic in the -- in our allocation of capital. I think when we sit here and look at it, I think we're trading on a levered basis of 4x free cash flow. So -- and I think our -- we did have a decline in revenue that was larger than typical last year, which I think maybe creates some concern from shareholders. But again, a lot of that is tied to customer losses in Presort that was entirely preventable and shouldn't recur going forward. And then in SendTech, it was tied to the IMI migration. But to quote Warren Buffett, when the price -- if you buy hamburgers and the price of hamburgers goes down, you should be happy. So we're not worried about short-term price movements. We just are opportunistic about how we handle them. Our belief is in the long-term outcome for the company. Operator: And at this time, I'm showing no further questions in the queue. I would now like to turn the call back to Kurt for closing remarks. Kurt Wolf: Yes. Thank you, everybody, for joining us. I appreciate your continued investment in our company. Hopefully, everybody has seen the results of Q4 show some of the progress we're making. I know everybody is eager to understand and see when we get to growth. But what we hope people appreciate and I think the right investors will appreciate. We're doing everything we can to build a strong foundation. And as that foundation is built, it's going to be -- we're going to be much more successful in our pursuit of growth going forward. So thank you for your continued investment, your continued faith in us. And we will do our best to continue to deliver strong results for you. So thank you all. Operator: Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to the Amrize Q4 2025 Earnings Conference Call. [Operator Instructions] Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now turn the call over to Aroon Amarnani, Vice President of Investor Relations. Aroon Amarnani: Great. Thank you so much, and good morning, everyone. Welcome to Amrize's Fourth Quarter 2025 Earnings Conference Call. We released our fourth quarter and full year financial results yesterday after the market closed. You can find both our earnings release and presentation for today's call in the Investor Relations section of our website at investors.amrize.com. On the call with me today are Jan Jenisch, our Chairman and CEO; and Ian Johnston, our CFO. Jan will open today's call with highlights from the full year and the fourth quarter as well as the growth investments we're making in our business. Ian will then review our financial performance for the quarter before turning the call back to Jan to discuss our outlook for 2026. We will then take your questions. Before we begin, during the call and in our slide presentation, we reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures to U.S. GAAP in our earnings release and slide presentation. As a reminder, today's call is being webcast live and recorded. A transcript and recording of this conference call will be posted to our website. Any statements made about the future results and performance, plans and expectations and objections -- objectives are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those presented during the call to various factors, including, but not limited to, those discussed in our Form 10 filings and in other reports filed with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements. With that, I will now turn the call over to Jan. Jan Jenisch: Thank you, Aroon, and thanks to everyone for joining us today. 2025 was a very important year for Amrize as we did our successful spin-off and launch in June of the company. I have focused my time at our operations and projects across North America to see our work in action, meet with customers and hear from our people. What I see is the market-leading footprint and a performance-driven change. Together, we are delivering for our customers as the partner of choice for their most important building projects. For the full year 2025, we increased revenues by 0.9% to $11.8 billion, with $3 billion in adjusted EBITDA. We generated a strong cash flow of $1.5 billion, and our cash conversion rate was 49%. Overall, we completed the year with a net leverage ratio of 1.1x. Our strong cash conversion and balance sheet [ for right ] flexibility and firepower to fuel our growth and return cash to our shareholders. Increased our investments to $788 million during 2025 to expand production, improve efficiencies and best serve our customers in the most attractive markets. Last month, we were excited to announce our agreement to acquire PB Materials, the aggregates leader in West Texas, significantly expanding our position in this high-growth region. Delivering shareholder return. The Board has approved a $1 billion share repurchase program and is proposing a special onetime dividend of $0.44 per share payable following the Annual General Meeting. The Board is also proposing an annual ordinary dividend of $0.44 per share to be paid in further reinstallments. These dividends will be paid out of legal capital reserves from tax capital contributions, and are not subject to Swiss withholding tax. The dividend and share program are subject to customary shareholder approvals at our AGM in April. Looking to the future, we are well positioned in our $200 billion addressable market, and we have set our 2026 guidance, reflecting accelerating customer demand and profitable growth. This includes 4% to 6% growth in revenues and 8% to 11% growth in adjusted EBITDA. Let us look at some of the highlights of the fourth quarter. We saw growth -- continued growth in Building Materials. The segment's revenues grew 3.9%, and more important, we expanded our adjusted EBITDA margins by 60 basis points. Both cement and aggregates volumes were up, and we have strong aggregates pricing growth, in addition to production efficiency gains and first savings from our ASPIRE program. Within our Building Envelope business, our results were affected by soft residential roofing volumes, and we expect residential demand to gradually return in this year. Our commercial roofing margins were up, driven by resilient [indiscernible] and refurbishment. At the total company level, revenues were slightly lower, 0.4% in the fourth quarter. Let us look at some of the market trends at Amrize. We see continued infrastructure demand and an improving commercial landscape. In the commercial market, which makes up half of our business, demand is improving led by new data centers. Data construction has been and continues to be a significant bright spot as hyperscalers rapidly build out the infrastructure that will power the AI economy. This is the largest infrastructure expansion in recent history, and the United States is at the center. In fact, over 40% of global data center infrastructure investment is expected to be spent in the United States through 2030. Speed, efficiency, innovation and reliability are key in this market, making it a space where Amrize building solutions and unparalleled footprint offers strong competitive advantages. In 2025 alone, we supported and supplied more than 30 data center projects, and we will see that work accelerating into this year. For us, you have just as much opportunity to supply the data centers as we do to support the infrastructure surrounding them. In 2026, we expect the commercial market to pick up as interest rates continue to move lower, and as customers accelerate the investments in advanced manufacturing, warehousing and logistics. In infrastructure, demand continues to be steady, with federal, state and local authorities privatizing modernization projects. We see increasingly domestic focused agendas of our customers in both the United States and Canada. Each country is prioritizing national investments to build strong futures. Within residential, new construction remains soft. We expect demand to gradually return later this year as the U.S. continues to have a significant housing shortage that will drive longer-term growth. As interest rates continue to decline, we expect pent-up demand to unwind and construction activity to accelerate across all sectors. If we turn to Slide 7, you can see our strong pipeline of key projects into 2026, which are directly aligned to these growth trends. We are supplying advanced building materials, the new data center campuses like in Louisiana, we're supplying water infrastructure projects like in Dallas, airport modernizations like Colorado and a new Amazon distribution facility in New York City. We are seeing increasing demand for our high-performance Elevate MAX PVC roofing systems and are supporting a new industrial warehouse in Ontario and a significant data center project in North Dakota. We see increasing data center demand for the MAX PVC roofing system going forward. These are just a few of our project highlights, and they reflect the megatrends underpinning long-term growth in the North American market. As we move into 2026, we have a big pipe of projects, and new ones are kicking off every month. We move to Slide 8. You can see some of our important expansion projects. Our -- we completed our Ste. Gen plant expansion to support growing demand and increase our efficiency. In December, we commissioned the production expansion of our flagship cement plant in Missouri, adding 660,000 tons of production capacity per year, increasing the plant's total capacity to 5.5 million tons annually. Our Ste. Gen plant is North America's largest market-leading plant, setting the standard for high performance. If you turn to Slide 9, you can see that we are on track with key organic growth projects for this year and beyond. We're building on the success of our Ste. Gen plant expansion, we are on track with key growth projects for 2026 and beyond. To serve the booming Texas region, we are investing in our Midlothian cement plant to expand production capacity by 100,000 tons, modernize logistics and increase operational efficiency at the same time. In Alberta, Canada, we are investing in our Exshaw cement plant to add 50,000 tons of cement production capacity, supporting the growing Calgary market. In Quebec, we are investing to expand our St. Constant cement plant by 300,000 tons, and further strengthening our position in Canada and increasing efficiency of these specialties. If we turn to Slide 10 now, we see more growth projects. In Virginia, we are progressing with our new Fly Ash facility to enable the use of recycled landfill as a high-quality supplementary material. We are progressing our Greenfield Aggregates quarry in Oklahoma, adding about 200 million tons of reserves to serve the fast-growing Dallas-Fort Worth market. On the Building Envelope side, we are progressing with our new state-of-the-art Malarkey Shingles plant to expand our market share to the attractive Midwest and Eastern markets. We expect this plan to be commissioned at the end of 2026, putting us in a strong position to deliver more volumes for when residential demand picks up. If you move to Slide 11, let me talk about our latest acquisition, PB Materials, which strengthens our aggregates footprint in West Texas. We announced the acquisition earlier this year. This will strengthen our aggregates business at over $180 million in annual revenue, adding 50 years of aggregates reserves and 26 operational sites in West Texas to serve long-term demand as infrastructure, data centers and commercial investments drive construction growth. This acquisition will be EPS and cash accretive already this year. We just received antitrust clearance from the Federal Trade Commission, and now expect this acquisition to close in the first quarter of 2026. Looking beyond PB Materials, we have a strong M&A pipeline and plan to continue making smart deals to accelerate our profitable growth. Now let's move to Slide 12, our ASPIRE program, which is on track to drive value through scale and focus. We made good progress here in the fourth quarter. We have now onboarded over 450 new logistics and service providers to optimize third-party spend, and we launched more than 400 projects to leverage our scale and drive synergies across raw materials, services, logistics and equipment. We started realizing savings in the fourth quarter last year, and we are now targeting a 70 basis points of margin expansion in 2026 and $250 million of full surgeries by 2028. Let us talk about allocating capital. On Slide 13, you see our priorities, increasing investments and returning cash to shareholders. We are committed to a capital allocation strategy that invests for growth and delivers value to our shareholders. We raised our CapEx investments last year by 23%. And this year, we plan to increase our investments further to $900 million. We are on track with our M&A strategy, and we have a strong pipeline of targets, led by aggregates and with additional opportunities in [indiscernible]. Our strong cash conversion and balance sheet allows us to also return cash to our shareholders. The Board has just approved a $1 billion share repurchase and is proposing a special onetime dividend of $0.44 per share, payable following the AGM in April. The Board also proposing an annual ordinary dividend of $0.44 per share to be paid in quarterly in stores. Both dividends will be paid out of legal capital reserves and are not subject to Swiss withholding tax. I'm very pleased to have established a strong balance sheet and platform for growth that enables us to return value to our shareholders while further increasing our growth investments through CapEx and M&A. Before discussing our guidance for this year in more detail, I turn over to Ian, and he gives us more details on our financial results. Ian Johnston: Thank you, Jan. I'll begin on Slide 15 with our results by segment, starting with Building Materials. For strong volume and revenue performance in Q3, we saw continued momentum and margin expansion in our Building Materials segment during the fourth quarter as new infrastructure and data centers and [ commercial ] projects program. Revenues were approximately $2.2 billion in the quarter, an increase of 3.9%, driven primarily by higher volumes across both our cement and aggregates businesses, compliance with continued aggregates pricing growth. Cement volumes increased 3.6% and aggregates grew 3%. We continue to see steady support on federal, state and local infrastructure spending as well as growth in select commercial markets, particularly in data centers and warehousing and logistics, which we expect to continue in 2026. Net pricing for the quarter was down 0.8%, while full year 2025 was up 30 basis points on a constant currency basis. As we mentioned last quarter, we have announced price increases in 2026 [indiscernible] in our markets, driven by the positive volume trend we have seen across our cement business over the last 2 quarters and into the new year. Pricing has been phasing in since the start of the year, with full run rate in place assumed by April 1. As a reminder, our markets are driven by local demand, varying by geographic region. That said, we continue to see favorable pricing dynamics across our network, supported by our inland positions and higher growth in proactive markets. Meanwhile, aggregates pricing on a freight adjusted constant currency basis increased 3.8% in the quarter. Including freight, pricing was up 7.3%. We continue to see how the aggregates pricing, supported by strong local market fundamentals and ongoing infrastructure demand. Building Materials adjusted EBITDA was $705 million in the fourth quarter, up 4.9% compared to the prior year, while adjusted EBITDA margin was 32.6%, 60 basis points. The increase in adjusted EBITDA was primarily due to volume growth, aggregates pricing, production efficiency and early ASPIRE sales. Moving forward, we expect cement pricing to be up low single digits and aggregates pricing to be up mid-single digits on a freight-adjusted basis in 2026. Given the positive customer demand we see across these businesses, we expect volumes for both cement and aggregates to be positive this year. Before we move to Building Envelope results, it's worth noting that the first quarter is typically a seasonally slower quarter for Building Materials as we perform annual maintenance and build inventory ahead of the peak selling season. Moving to Slide 16. Turning to the Building Envelope. Fourth quarter results were $678 million, a decrease of 11.8% compared to the prior year. The decline was largely driven by softer residential roofing demands. That said, when we look across our business, commercial regrouping activity remained strong with revenues up during the quarter, as this type of spend is often nondiscretionary on discretionary for our customers. In commercial new construction, we continue to see robust data center demand. As Jan mentioned earlier, our MAX PVC product line and Elevate is addressing the higher performance specifications that many of our data center customers require. So far, we've been pleased with the traction, and expect this product will continue driving growth for us in the future. Meanwhile, we have also started to see a recovery in warehousing, distribution and logistics end markets. As interest rates and the cost of capital move lower, we expect further improvements from commercial new construction. Building Envelope adjusted EBITDA was down year-over-year, largely due to softer residential roofing demand and an $8 million increase in warranty provisions to reflect claims activity in our residential roofing business. We continue to see pressure on residential demand from higher interest rates and affordability concerns. These headwinds were partially offset by an increase in commercial roofing margins driven by resilient repair and refurbishment demand. Moving into 2026, we are focused on what we can control. We launched ASPIRE to improve our third-party cost base, a significant progress, and expect additional savings to materialize in 2026. While residential demand remains soft, we expect strong demand in commercial R&R, to continue and lower interest rates to support a broader recovery across new commercial roofing [indiscernible]. As a result, we expect low single-digit volume growth in commercial roofing. In residential, we expect flat volumes for the year, the second half being better than the first half. So far, Q1 customer demand has improved compared to Q4. Looking out further, we continue to see a long tailwind of growth in commercial R&R activity, driven by an aging commercial roofing stock that needs to be replaced. We are also encouraged by recent policy developments that aim to address affordability, which can support new construction and help bridge the housing. And as I mentioned earlier, our focus is on operations and efficiently running the business through different economic environments. We continue to see a path towards best-in-class EBITDA margins. Moving to Slide 17. We had a strong cash flow performance during the year. We generated approximately $1.5 billion, representing a 49% cash conversion rate on adjusted EBITDA. This is in line with our historical average cap conversion of approximately 50%. 2025 free cash flow was lower due to net income and increased organic CapEx growth. Cash flow is a key performance indicator for all of the P&L leaders across our business. Our free cash flow performance in 2025 demonstrates the strength of our working capital management and resilient underlying cash generation of our business. Turning to Slide 18. We are very pleased with the progress we made post-spin to further strengthen our financial position during our first year as Amrize. At the end of the year, our net leverage ratio was 1.1x, delivering on our commitment of less than 1.5x on a year. Net debt at the end of the year was approximately $3.3 billion, down over $1.5 billion from the end of the third quarter as we generated strong cash flow at the end of the year. Turning to Slide 19. In 2025, we established a solid foundation to deliver growth and return capital to shareholders in 2026. As of December 31, we had $5.3 billion in senior notes, nearly $6 billion of available liquidity and a low leverage ratio, providing us with ample firepower to accelerate growth this year. We are also effectively managing our interest expense and expect run rate to come down in 2026 compared to 2025 as we continue to optimize our capital structure. We expect our effective tax rate to stabilize in the range of 21% to 23% in 2026. Corporate costs are expected to be approximately $200 million this year, a modest step down from 2025. This sufficient capital structure and operating model allows us to continue generating significant cash in 2026 and drive profitability. This model also lays the foundation for our capital allocation strategy, putting us in an excellent position to announce our shareholder return plan while continuing to invest in organic growth projects and value and pursue value-accretive M&A. This speaks to our financial power, firepower and our business and flexibility of our balance sheet. With that said, I will pass it back to Jan to cover our 2026 outlook. Jan Jenisch: Thank you, Ian. When we look at the guidance of 2026, I'm confident that this will be the year of accelerating demand from our customers. The commercial market will continue its improving trends as lower interest rates support new products, adding to already strong demand for data centers, but also for other projects in logistics and manufacturing facilities where we have a lot of sideline projects. We have a good demand here, which will unfold throughout this year. In infrastructure, the demand will continue to be strong as governments prioritize modernization. Only in the residential market we will remain soft, with improvements rather towards the end of the year. We expect pricing and volumes in Building Materials to be key growth contributors in 2026. Cement pricing is expected to increase low single-digit percentage range, while aggregates pricing is expected to increase mid-single-digit percentage range. The market trends and increasing customer demand will drive volume growth both cement and aggregates. Building Envelope, we expect low single-digit growth in commercial roofing volumes, while we see flat volumes in residential roofing, with demand improving in the second half of the year. Very important for us, the ASPIRE program is a key priority and will deliver significant results in 2026. We are now targeting a margin expansion of 70 basis points and are on track with our goal of $250 million in synergies through 2028. Based on this momentum from our customers to all the programs under our control, we have set our 2026 guidelines or guidance with 4% to 6% revenue growth and 8% to 11% EBITDA growth. Both numbers include the contribution from our recent PB Materials acquisition. With that, I'll now pass back to Aroon and to open up our question-and-answer session. Aroon Amarnani: Thank you, Jan. Operator, we're now ready to begin the question-and-answer session. Operator: [Operator Instructions] Our first question is from Adrian Huerta from JPMorgan. Adrian Huerta: Can you hear me? Unknown Executive: We can hear you. Adrian Huerta: Ian, Jan and Aroon, congrats on the results. My question has to do with the cement prices. I want to understand a little bit better why this confidence on getting a low single-digit price increase for the year? I mean just from comments from other companies, it seems like a traction on price increases at the beginning of the year is not going as expected. What are you seeing on your own markets and where you see better pricing traction? And where do you think it might be a bit more difficult to get the increases that you're looking for? Jan Jenisch: Look, we are confident and we're going to see a price increase for our Amrize products this year. I think we made good progress in this. And we have -- I have nothing negative really to report here. Adrian Huerta: And if I may ask just a follow-up question. On the ASPIRE program, good to see a larger target on savings this year than the run rate of 50 basis points, now with a target of 70 basis points. Any more color on where are these savings, which should be somewhere around $100 million between SG&A or by segment within Envelope or Materials? Where most of the savings coming? Jan Jenisch: No. Great. Good question. Look, I mean, I'm very excited. As you know, we have over $7 billion of cost to third party, and we haven't done really the synergies. So we have doubled the company just in the past few years from $6 billion to $12 billion, and we have not really run that synergy program. So very exciting now to have savings. Of course, we have it in logistics. We have it in raw materials. And we have a lot of services, which are provided to us for maintenance, for equipment and other things. So we made great progress. You can see already in the fourth quarter results in Building Materials that we had quite a significant impact from the ASPIRE program. And this is just the start. So we are very confident to see a significant contribution this year from ASPIRE, and that's why I also guide this to be fully margin accretive. Operator: Our next question is from Anthony Pettinari from Citigroup. Unknown Analyst: This is [ Asher Stone ] on for Anthony. And just in terms of compare and contrasting the way you're looking at 2026 versus maybe how you're thinking 3 months ago, what are you seeing in terms of project backlog, cancellations, et cetera? And then on top of that, your positive volume growth outlook for '26, how does that break out between your different end markets between commercial, infrastructure and residential? Jan Jenisch: Look, I'm very happy how things are accelerating with all our customers. You have to see that the strongest market segment in last year was infrastructure, where we have this program is running and we are very happy to supply a lot of those projects. However, at Amrize, we do 50% of sales. We do have our commercial customers, and that's really key, and that market has really picked up from mid last year. And then you can see it from some indexes like [indiscernible], where we have increasing -- the number of standing projects, and we can literally see it with our customers. They have a backlog of projects, not only for data centers but for logistics, for infrastructure, around logistics centers for manufacturing facilities, and this will unfold. We have no canceled projects, a lot sideline and -- slowed down. And now we see that coming. The 2 cuts in interest rates has helped a lot. Many people -- most people always speak about the mortgage rates and the interest cuts. But actually, for us, the interest rate is more important for our commercial customers. And this is why I'm very excited for this year, and I -- we will see an accelerating demand and number of projects from our commercial customers. Operator: Our next question is from Trey Grooms from Stephens. [Operator Instructions] Trey Grooms: Got it. Can you hear me now? Operator: Please go ahead. Trey Grooms: Okay. Sorry for that. Just on the acquisition, maybe if we could touch on that. PB Materials, aggregates-led business with some ready mix. It's included -- I believe it's included in the full year guide. It's doing $180 million in annual revenue. Any other details maybe you could give us there around PB? The -- I understand it's in West Texas and geographically where it stands. But anything around the -- maybe the production or tonnage or how much it's adding to the overall volume being positive this year in aggregate? Any other details that maybe you could give us? Jan Jenisch: No, no, thank you. Great question. And look, we have a great slide on Slide 11. And I think what's key here for me is, first of all, the size of the acquisition, over $180 million. We're going to close that very soon now in Q1. So very excited now when the season really starts that we have this business with us. It's already a very well margin product business which has now significant synergies. I like that -- we bought a little map there where you can see how well that fits with our footprint in Texas, especially also our cement terminals and our [indiscernible] service all those sites. We have about 26 sites -- operating sites and 13 are quarries and another 13 are ready-mix sites. So it's a well-balanced business, and the other market leader around 30% of market share. So I'm very happy we can onboard now then with our very successful business in Texas. Operator: Our next question is from Bryan Blair from Oppenheimer. Bryan Blair: Ian, you had offered pretty good color on the visibility in commercial and infrastructure project outlook. I was hoping we could drill down a little bit on the residential side. And we know that there's weakness anticipated and [ understandably ]. So over the near term, looking to the back half, there's some degree of recovery against relatively weak comps. If we look at the low versus high end of your guidance, are you willing to quantify what is baked in specific to residential market activity through the back [indiscernible]? Jan Jenisch: No, I wish I could share with you, but I think what's exciting about residential, while it's only around 20% of our business, 50% of that is repair and refurbishment. And this gives us this resilient demand from the residential customers. And that was slowed down last year. We had much less storm impacts like we had in years before, but this has really slowed us down, especially in Q4, but we believe this will normalize this year again. So to the question, I'm quite confident that within refurbishment, we will see significant growth for us in 2026. New residential, that needs to be seen if that sees a recovery towards the end of the year or let's say, a start of recovery. But in our numbers, we are not planning for any growth in new construction residential. But very confident about repair and refurbishment. Operator: Our next question comes from Pujarini Ghosh from Bernstein. Pujarini Ghosh: One follow-up on the guidance. Please, can you confirm that you have not baked in any future potential acquisitions in the revenue and EBITDA growth guidance for 2026? And could you give some color around the CapEx spend that you are going to do in 2026? And how much new capacity addition in terms of the overall portfolio does these new projects bring in? Jan Jenisch: Thank you for the question. So the guidance of 4% to 6% revenue growth and 8% to 11% EBITDA growth is organic, including the PB Materials acquisition. We are very confident about these numbers. You have to see we have now this accelerating demand from our customers and our order books, which are on a good level. And then we have a lot of self-help. So -- and we see the pricing this year. We have the ASPIRE program, and we have the first impact from our new growth CapEx programs. So very excited to start to run our flagship cement plant in St. Louis at higher volumes and then the other CapEx will come. I think at this point, we don't give a break, which is maintenance CapEx and growth CapEx. But you can see, as we come somewhere from below $600 million to $900 million this year, you see already that we are more than doubling our growth CapEx. And this is a good thing. We have a lot of low-hanging fruits to debottleneck, to expand in new markets. This is a new plan of Malarkey to enter the Eastern markets or is it new terminals to distribute our cement and aggregates. And of course, we are excited to debottleneck some of our best-performing cement plants to increase the volumes, but also to further improve the efficiencies. Operator: Our next question is from Yassine Touahri from On Field Research. Yassine Touahri: Just one question regarding your Building Envelope business. We see that QXO has acquired Beacon and is aiming to substantially increase its margin and also double its EBITDA. And I think one of the lever is to work on changing the relationship with roofing product suppliers, including MIs. Could you give us some color on what has happened over the past year in terms of your relationship? And what has been the impact of these developments so far on your commercial strategy and potentially even your overall strategy as a group? Jan Jenisch: Look, we are partnering with the distributors in roofing, and they are very good companies. A company you mentioned, there are another 2 big nationwide, the roofing distributors. And then there are many local business in roofing distribution. I think what is important for us is that we are not focusing on a distributor itself. We are focusing on the end customer. So we have the ambition to build the best roofs. So all what we do is we focus on innovation, providing the best systems brand, everything. We are offering the training for the roofing contractor, we're offering the warranty, we're offering the roofing inspection. So when you look at our business, the distributor has an important function to make sure our product is on time on the construction side. But beyond that, we just focus on the best roof, the best service, the best warranty for the end customer. And we do -- I think we do about 30% of the roofing business is direct, about 70% goes through distribution. So I have nothing to report here. I know -- there are some distributors they like to talk a lot about their future. But I can just tell you, we partner with all of them. And we make decisions who is our partner in certain geographic markets. So I think we're in a very good spot here to further increase our market share and expand our systems for roofing. Operator: Our next question is from Arnaud Lehmann from Bank of America. Arnaud Lehmann: My question is regarding your Q4 free cash flow generation, very impressive, around $1.7 billion, I believe. Is it the normal inflow, in your view, considering seasonality? Or was there any specific effect related to the merger or to accounting that we need to consider? Jan Jenisch: No, I think it's nothing special, Arnaud. I think we have -- I mean our cash flow conversion from EBITDA is around 50%. This is what we're also targeting for the future. So I'm very happy. In this first year of Amrize, we just started the company in June last year. So we're very happy to -- that we were able to deliver, also considering our significant increase in CapEx spend, very happy to, nevertheless, deliver such strong cash flow so you, I think, should expect from us that this will continue in the years to come. Operator: Our next question is from Julian Radlinger from UBS. Julian Radlinger: Jan, Ian, Aroon, any color you can give investors on building Envelope earnings in 2026? I know you're guiding to overall positive volumes, commercial up a little bit; resi, more flat. But what about margins? If resi roofing volumes are as you expect in commercial as well, should we expect Building Envelope EBITDA to be up as well in 2026? Jan Jenisch: Yes. I mean, look, when you look at our guidance that we want to grow the EBITDA, 8% to 11% this year, you can imagine that this is true for both segments, for Building Materials and for Building Envelope. And we have strong programs in place, also with ASPIRE to increase our efficiencies in Building Envelope as well. We have pricing in place. And our target is to increase price over cost in Building Envelope in 2026. Operator: Our next question is from Tom Zhang from Barclays. Tom Zhang: Yes. Could you maybe just elaborate a little bit on the volume and materials? I think you said volume will be a growth contributor for the Materials business, both cement and aggregates. Is that a sort of low single-digit, mid-single-digit number? And is that predominantly driven by the self-help and organic growth that you have as you ramp Ste. Gen? Or do you think that's more a sort of market growth number? And I guess maybe just you link to that, can you talk a little bit about how you plan to approach the Ste. Gen ramp up? Obviously, it sounds like commercial and infra demand is okay, resi a little bit weaker, but it's still a decent amount of capacity to try and bring to the market. If you can just talk about the strategy of how you'll introduce those volumes? Jan Jenisch: I think it's important if you run Amrize and you guide the year and you give the targets to your sales force, to all the people responsible. I very much like to focus on ourselves. I don't make a big market prediction. So like the Ste. Gen expansion is based on our customers demanding the product. And this is how we work. And this is why we come up that we believe our volumes will increase in '26. And this is all I can say at this point. We make this all for the customers and we have good order books and again, nothing negative to report here. Operator: [Operator Instructions] Our next question is from Carlos Caburrasi from Kepler Cheuvreux. Carlos Caburrasi: Just wondering on CapEx, if you could give us some color regarding the expected investments during the rest of decade? I'm just wondering if we should expect a further acceleration from the $900 million in 2026? Or is it going to be kind of flat or a front-loaded performance that will normalize as we get closer to 2030? Jan Jenisch: I'm very happy to invest in the business. So I was happy that we have the opportunity. There are a lot of low-hanging fruits on the CapEx side, and we are doing all the good projects. So that adds up to around $900 million CapEx spend this year. I think this is already a significant increase, especially when you focus on the growth CapEx, this means we more than double the growth CapEx this year. And I think this is in a good spot. And then we will take it from here. Those projects we also introduced here, I think we have 2 slides on like 6 of the most important projects for us. And that also keeps us busy because you not only have to execute this and commission the plan or whatever the CapEx is about, you also have to commercialize the volumes into the market. So I think we are on a great track to fully support our growth ambition for 2026, and then we will see later this year what the CapEx is for the years to come. But I think $900 million is a good number for us. Operator: Our next question is from Keith Hughes from Truist. Keith Hughes: Can you hear me now? Operator: We've got you. Keith Hughes: There we go. A question on pricing on the roofing markets. Can you talk about in the fourth quarter, what pricing was like in residential and commercial and what you're expecting in your guidance for calendar '26 on pricing? Jan Jenisch: And for us in roofing is a bid to an aggregate cement, we like to talk straightforward about price. In roofing, it's a bit different. We like to talk about price of cost and as we shared a bit in the presentation, we were very satisfied with the commercial roofing margins. They increased. So we had a positive price over cost in commercial roofing. And we had quite a disruption in the residential market, which I think will be fully stabilized already in the first month of this year. But nevertheless, there was quite a big disruption you saw in the fourth quarter and also maybe a bit softer pricing. I think that pricing even will come back now fast already this year. So for the full year, I mentioned this before, we are targeting a positive price over cost growth in the Building Envelope side. Operator: We have no further questions at this time. I will now turn the call back over to Aroon Amarnani for closing remarks. Aroon Amarnani: Thank you, operator. Thank you all for joining us for our fourth quarter and full year '25 earnings call. We look forward to speaking with you after we report our first quarter '26 results in the coming months. Thanks, everybody. Operator: This concludes the Amrize Q4 2025 earnings conference call. You may now disconnect.
Abel Arbat: Good morning, everyone, and thank you for joining our full year 2025 results presentation. This is Abel Arbat speaking from the Capital Markets team at Naturgy. Next to me sits our Executive Chairman, Mr. Francisco Reynes; the General Counsel to the Board, Manuel Garcia Cobaleda; the Global Head of Financial Markets and Corporate Development, Mr. Steven Fernandez; and the Global Head of Control and Energy Planning, Ms. Rita Ruiz de Alda. Today's presentation is a bit longer than usual as we aim to cover the results, but also to address some of the key themes and opportunities for 2026. As usual, we will start the presentation and then move to the Q&A session at the end of the call. Please, as usual, submit your questions through the webcast platform. And with that, let me hand it over to Steven Fernandez to kick off the presentation. Steven Fernández: Thank you, Abel, and good morning to everyone. Thank you for joining our webcast to discuss the full year numbers for 2025 and the outlook for 2026. So before moving into the detailed review, I would like to highlight some of the key messages for the year. As you have seen in the results presentation, 2025 was a strong year for Naturgy, where we met our guidance, once again, reinforcing our track record of consistent delivery. The successful execution of our 2018 to 2025 transformation has underpinned the value creation of the company, and, we hope, our credibility. Now looking ahead, our 2026 guidance is well supported by business fundamentals, a very proactive risk management, as you will see throughout the presentation. We remain fully committed to the energy transition with gas increasingly recognized as essential. Also, our strengthened balance sheet provides strategic flexibility. And on the capital markets front, the tender offer on our own shares and subsequent placements have also led to a significant increase in the free float and stock liquidity, resulting in the return to major indices like the MSCI. Finally, the governance of the company has been adapted to align with the long-term objectives and ambitions of Naturgy. Now we move over to the consolidated results. Starting with the evolution of the energy markets, as you can see on Page 6 of the presentation, gas benchmark softened during the second half of the year with TTF declining by 23%, the Henry Hub by 6% and JKM by 14% compared to the first half of the previous year -- of 2025, sorry. Brent prices were also lower, both in the second half of the year and year-on-year, averaging $66 per barrel in the second half of 2025 versus $77 in the same period of 2024. Iberian pool prices for its part increased from EUR 62 per megawatt hour in the first half of the year to EUR 69 in the second half of the same year, owing mainly to the usual seasonal patterns with lower renewal generation in the second half of the year. If we move over to Slide 7, in terms of FX, we saw a broad-based depreciation across most of our operating currencies versus the euro. The U.S. dollar weakened meaningfully, particularly in the second half of the year, and it's continued to do so in 2026 so far, with LatAm currencies, including the Brazilian real, Mexican peso and Chilean peso also depreciating. Now we turn over to the full year 2025 results. We have a quick snapshot of some of the key metrics of these figures. EBITDA reached EUR 5.3 billion. This is a record level for the company. Net income reached EUR 2 billion. CapEx in the year amounted to EUR 2.1 billion, in line with the estimates that we had for our strategic plan. And net debt ended the year at EUR 12.3 billion. In this period, we've almost paid around EUR 1.3 billion in taxes and levies. So overall, the company has met its guidance despite a year of challenging environment, and these robust results reinforce our track record of consistent delivery. The year's performance was also supported by continued improvements in operational efficiency and very strong risk management, which have translated into higher profitability and visibility. At the same time, the strong cash flow generation and our capital discipline have allowed us to reduce our net debt levels below our 2025 guidance. So as a result, we end the year 2025 with a strengthened balance sheet that provides the company with strategic flexibility. If we move on to the income statement, EBITDA remained in line with last year, again, as a reminder, at record levels, with net income slightly above, in part due to higher minorities in 2024 for the reversal of TGN provisions in Chile. These earnings, we believe, show strong resilience and are supported by a balanced mix of activities, risks and currencies, as you can see on the right-hand side of the page. If we move over to Slide 10, which is the capital allocation, the cash flow from operations amounted to EUR 4.5 billion, which have allowed us to, one, fund EUR 2.1 billion investments, as I mentioned before, distribute close to EUR 1.7 billion in dividends and execute the tender offer of our own shares, which, for the most part, has already been placed in the market. The investments remain focused on networks and renewables with EUR 1 billion allocated to networks and around EUR 800 million to renewal generation, allowing us to reach 8.1 gigawatts of installed capacity at year-end 2025. So we take all this together, these figures, we think, clearly demonstrate the strength of our cash flow generation and, of course, of our disciplined approach to capital allocation. In fact, if we move over to Slide 11 in terms of cash flow and net debt evolution, you can see that free cash flow after minorities stood at around EUR 2.2 billion, EUR 800 million above 2024. That's 58% above. Net debt for the year closed at EUR 12.3 billion, which is broadly stable versus the figures from last year, 2024, correct, with net debt to EBITDA at around 2.3x. And of course, this includes approximately EUR 1.7 billion in dividends, as previously stated, and the EUR 941 million of shares repurchased net of the subsequent placements that we executed. The average cost of debt stands at 3.9%, in line with 2024 levels with around 66% of the debt locked at fixed rates. And the FFO-to-net debt stands at around 27%, which is comfortably above the threshold required for a BBB rating. During the year, it's worthwhile highlighting that we completed around EUR 11 billion of financing operations, reinforcing our liquidity and extending maturities. So all in all, our balance sheet remains solid and again, provides the company with strategic flexibility. If we think about shareholder remuneration on Slide 12, for fiscal year '25, we are proposing a total dividend of EUR 1.77 per share, representing an almost 11% year-on-year growth and above the DPS floor of EUR 1.7 per share committed for the year. This includes two interim dividends of EUR 0.60 per share each and a final dividend, which we are announcing today of EUR 0.57 per share, which will be payable the next 31st of March, subject to the AGM approval. The final dividend per share has been increased to account for treasury shares as these shares do not receive dividends and its corresponding amount is redistributed among the outstanding shares. So all in all, when we think about 2025, we've delivered on our company's guidance across basically all metrics. EBITDA reached EUR 5.3 billion, slightly above our guidance. Net income was above EUR 2 billion, also above the EUR 2 billion guidance. The net debt closed at EUR 12.3 billion, which is below our guidance of around EUR 13 billion, and the DPS amounted to EUR 1.77 per share, which is above our minimum commitment of EUR 1.7 per share. So all in all, this consistent track record of delivery once again reflects the company's commitment and delivery. So now I'll hand over to Rita, who will take you through the operational business performance in each of our businesses in greater detail. Rita de Alda Iparraguirre: Thanks, Steven, and good morning, everyone. Starting with Networks on Page 15. Networks reported a total EBITDA of EUR 2,735 million in 2025, representing a 5% decline when compared to 2024. This decrease was primarily driven by a one-off positive impact in Chile last year and the depreciation of several Latin American currencies, most notably the Argentine peso, but also Brazilian and Mexican currencies. In Spain, gas networks experienced remuneration adjustments foreseen in the current regulatory framework as well as increased demand in the residential segment due to temperature effects. In electricity, EBITDA increased driven by a higher regulated asset base and increased contribution rates. On December 23, the new regulatory framework for the 2026-2031 was finally approved, introducing an OpEx remuneration model with a regulatory rate of 6.58% compared to the 5.58% in the previous period. In Mexico, results mainly impacted by negative foreign exchange effects compensated by tariff updates in July. And in Brazil, results were also affected by currency depreciation. In Argentina, a substantial tariff increase was implemented in 2024 and 2025 to offset inflation. In fact, the new regulatory review approved for 2025-2030 period provides visibility and also includes mostly inflation adjustment that allowed to compensate for FX devaluation during the year. In Chile, performance declined when compared to last year due to an extraordinary effect in 2024 related to TGN conflict, which is now officially closed. In Panama, results were negatively affected by lower demand due to temperature effects and increased operating expenses from higher maintenance activity to improve quality standards. In summary, comparison is affected by an extraordinary impact in 2024, currency depreciation in LatAm, and I will also highlight the publication of the distribution model for electricity distribution in Spain. Now turning to Energy Management on Page 16. EBITDA reached EUR 815 million, which shows an increase versus 2024 of an 8%, mainly due to higher margins on hedge sales. The group benefited from effective hedging in a context of high volatility and uncertainty. It is important to highlight that we have reached a price agreement with our gas suppliers, Sonatrach, for the period 2025, 2027, which strengthens the good relationship between both parties and provide us with visibility in the context of energy price volatility. Finally, last October, Naturgy signed a purchase agreement of 1 million tonnes of LNG with a U.S. gas supplier starting in 2030. This agreement strengthens the group's positioning and its commitment to a diversified LNG portfolio as a key enabler of the energy transition. Overall, the period benefited from effective hedging and diversified procurement portfolio. And furthermore, the group is building new capabilities that reduce risk and enhance optionality. Continuing with Thermal Generation, EBITDA reached EUR 837 million in 2025, 39% over 2024 levels due to higher activity in Spain, partially offset by lower revenues in Latin America. In Spain, the increase in results was supported by higher demand for ancillary services from our combined cycle fleet. Naturgy holds the largest CCGT fleet in Spain with 7.4 gigawatt acting as a backbone to energy security of supply. Furthermore, the group obtained a favorable court ruling confirming the reimbursement of the hydrocarbons tax related to the 2014-2018 period. In Mexico, production and margins remained stable. However, revenues from availability markets and prices declined, mainly due to an exceptionally high revenue base in 2024. Overall, CCGTs remain essential for ensuring system stability with an extraordinary contribution in 2025 following the positive ruling. Let's turn now to Renewable Generation on Page 18. Renewable generation reached an EBITDA of EUR 586 million during the period, slightly above 2024 levels. In Spain, renewable production was 7% lower when compared to 2024, mainly due to lower wind and hydro generation given the exceptionally high levels of hydro production in 2024. This negative impact was partially offset by the commissioning of new installed capacity. In the United States, results are higher when compared to 2024, mainly due to higher production and higher energy prices as the completion of the construction of its second solar plant in Texas. In LatAm, activity continues with impacts due to currency devaluation in both Mexico and Brazil. And finally, in Australia, performance was supported by increased production, more than 100%, driven by the additional installed capacity implemented during the final months of 2024. Investment includes 1.2 gigawatt of power under construction that will come into operation in 2026. All in all, higher results in Renewable Generation due to commissioning of new capacity that reinforces vertical integration and selective growth. Last, moving to Supply. EBITDA has been EUR 535 million, 17% lower when compared to 2024. It is important to remember that in 2024, we had an extraordinary impact due to the positive ruling in favor of Naturgy regarding tariff subsidies. Gas margins have shown resiliency, but negatively affected by regulated tariffs with legal process for recovery underway. In terms of electricity, the group has expanded its client portfolio in a higher competitive environment. However, it was impacted negatively by increasing costs. Finally, our AI-enabled digital commercial platform drives efficiency and improves client service through a significant simplification of product and processes. Overall, stable volumes and margins pressure partially offset by integrated position and operational efficiency. I will now hand it over to our Executive Chairman. Thank you. Francisco Reynés Massanet: Hello. Good morning to everyone. Thank you for joining. And thank you, Steven and Rita, for this wrap-up on 2025 results. I wanted just to spend a few minutes talking about the overview of the transformation we have conducted since 2018, which demonstrates that the company has been focused, as you will see later, in delivering or even exceeding our commitments that were placed in two strategic plans that were already ended. The six key messages I wanted to share with you are about our decision in 2018 to get strongly involved in the energy transition. Our important target to move Naturgy into a more reliable, efficient and derisked company. All this transformation being done under the umbrella or clear financial discipline. As a conclusion of these targets, achieving a much stronger balance sheet, which demonstrates that our commitments are firmly achieved by the hard work of all the team. Finally, as you will see, the conclusions of all this work is that we have improved in the main metrics as return on capital employed, return on equity and total shareholders return. In Page 22, you have it in your hands, and I will not go in big details, but the most important thing is that back to 2018, we have decided to change the face of our portfolio generation, betting on more renewable generation, maintaining the flexibility that our gas turbines are providing to the system and moving ahead in a transformation that has brought us to a very important share of the non-emission technologies. On Page 23, one of our key mantras during the last 7 years has been around making the company more efficient. We really believe that a company will survive as more efficient it is. And the efficiency is shown in this page as an important change from a 36% OpEx over margin to a level of 25% of it. It's important that this work has been done streamlining by all the different business units and in particular, as a demonstration of three pillars that has been driven this efficiency to an end is a portfolio simplification that started back in 2019, OneGrid as a philosophy to extend the best practices across all the business units in the company and leveraging on genAI, in particular, on the commercial field to improve not only our cost, but also our client service. On the other side, and with the aim to make the company more reliable and less volatile, we have been focused every year to secure the level of pricing by hedging our LNG portfolio, we did change it from 30% -- around 30% of volume hedged at the beginning of the period to 100% volume hedged in the last year we closed. In parallel, as a business decision, we have decided that a way to self-hedge our fixed price sales contracts of electricity with clients could only be supported by our inframarginal base of electricity generation. In this period, we have been generating around EUR 40 billion of cash flow -- EUR 41 billion of cash flow. And the solid use of these sources has been divided between three major destinies. One is investment. The second one is shareholders' remuneration and the third one is back to society through taxes and levies. As you can see, this equilibrium has been maintained, in particular, to create a much more solid company for the future with a high degree of investments. The conclusion of this work is that we have been able to reduce our leverage, we're reinforcing the balance sheet and as a result, it provides us a strategic flexibility for the future. The level of rating has been able to be maintained as a BBB from Standard & Poor's. And today's liquidity is already around EUR 10 billion. If you look backwards to 2018 and 2021, there have been two strategic plans in place that were shared with the market in June 2018 and at the end of 2021. Each of it had four important indicators as a target. As you can see in the slide, in all these different targets, the company and the team has been able to meet or exceed the expectations provided to the market with a consistent delivery through the years. In conclusion, the company has created value for its shareholders. If we look at from the ratio point of view, we have clearly increased our efficiency in ratios like return on investment capital and return on equity. As you can see, we were at the time, clearly below our peers. And today, in comparable terms, our metrics are clearly above peers' average. If we will go back to the market and despite of all the different turmoils that may have around the equity markets, the total shareholders return for our shareholders could be clearly above 10%. This is what we have done in this period of work, 2018 and 2025. The company has not stopped. This has been the case since 183 years of existence. And now I think that we want to tackle the most important issues that we have for the year 2026, which hopefully, Steven will clarify to all of you. Steven? Steven Fernández: So thank you, Paco, and I'm super happy to be able to discuss this part of the presentation with you because when we look at some of the questions that are coming in as we discuss this presentation, we think we address a lot of those in this particular area. So we focused on some of the key themes for 2026 that we know the market is looking at. And I would like to start off perhaps with the first one, in no particular order, but on Page 29, a word about the rising value of flexible generation. So we are seeing a structural shift in the Spanish system where CCGTs are playing an increasingly important role. It's worth highlighting that just a few years back, having CCGTs in your fleet was seen as something potentially negative. We kept on defending their relevance, and we are seeing that play out today. So we do see an increase in the value of flexible generation. In Spain, it's worthwhile highlighting that our thermal installed capacity of 7.4 gigas of combined cycles and 600 megas of nuclear, and the CCGTs located in key areas provide grid support and operational flexibility, making the company a best-in-class operator. Potential capacity payments are only assumed from 2027, so not included in the 2026 guidance. In LatAm, as you know, we also have a relevant fleet, specifically in Mexico, where we are engaging in discussions for the extensions of the PPAs. However, we do expect lower margins and lower availability in the excess capacity market for those combined cycles. So all in all, when it comes to the rising value of flexible generation, we see that the fleet's reliability, our flexibility and the fleet's efficiency are one of the key elements of the company's competitive advantages in this business. Another area that I would like to touch on has to do with supply. So we are getting a lot of questions on supply, and we'd be happy to answer most of them. But before we go on to them, hopefully, this slide clears some of the elements. So we continue to focus on competitiveness and operational excellence. So some of the key drivers for 2026 include a stable market share and volumes to preserve margins. So we're not engaging in a battle here to gain market share at all. We rather preserve margins. And this is in the context of a highly competitive environment. We have a well-balanced and vertically integrated position, which is also something worth highlighting. And we are experiencing and focusing clearly on excellence in client service and efficiency, which is supported by the new digital commercial platform the company launched, what we commonly know as NewCo. Some key elements about this. So when we think about NewCo and the impact of this new digital commercial platform, we've seen a simplification and reduction of the number of energy plans offered to our clients from 634 previously to about half of that, 342 in 2025. So there's simplification easier to understand by our clients. We also have improved significantly the first call resolution from 80% in 2024 to 94% in 2025. And this has resulted in an increase in the customer satisfaction levels from 9.4% in '24 to around 9.6% in 2025. We also have more margin visibility into 2026 based on the high percentage of already contracted sales. So for example, if you look at electricity, around 65% and 75% of -- is contracted for industrial and retail segments, respectively. And if you look at it in terms of gas, the numbers are 75% and 80% contracted for industrial and retail segments, respectively. We also have a limited exposure to lower margin regulated tariffs in the sales mix. As you can see, overall, we can say that margin pressure during the year should be contained by our integrated position and high percentage of contracted sales for 2026 and together with what we think are the right ingredients for client retention and attraction. If we move over to another interesting part of the business, which is energy management, we will continue to reduce our gas risk profile. I think the group has been very vocal about this, and we've been able to show very clear successful results. All this while maintaining the security of supply and optionality. So some of the key drivers for this area include an agreement with Sonatrach on the price until 2027, which increases our commercial visibility. And obviously, this is subject to the customary commercial -- the customary authorizations. Moreover, our total gas exposure for 2026 is negligible, thanks primarily to our hedging efforts with risk significantly reduced through 2028. This is made both with U.S. volume hedging and residual positions offset by short sales. In addition, the hedge volumes are closed above current market levels, preserving the company's potential. Our long-term procurement strategy is also focused in prioritizing security of supply and disciplined risk management. So we have made progress on the following areas. We have executed a long-term U.S.-sourced LNG gas procurement agreement with Venture Global starting in 2030, which is public. And we have up to two 2 new bcms under long-term SPAs with additional procurement opportunities under evaluation. So we are actively engaging the market. We also have a proactive management of the upcoming EU ban on the Russian gas imports effective 2027. So all in all, the company keeps reducing the gas risk profile, increasing the visibility while obviously maintaining the focus on security of supply and our optionality. In terms of networks, in Spain, in electricity distribution, the new regulatory framework increases the financial remuneration, as you know, to 6.58%, although with a strong adjustment to OpEx remuneration. Our investment plan in this strategic plan, which I remind you is around between EUR 300 million and EUR 350 million a year, is subject to the approval of the government network planning, which we're still awaiting. So we expect in 2026 to have a one-off recognition of remuneration also from previous years. In gas distribution, we should have the new regulatory framework from October 2026, and that covers a time span of '27 to '32. We expect the current parametric formula to be maintained with some adjustments to remuneration parameters. And we should also see an acceleration in biomethane production and distribution. So Nedgia in that sense, distributed last year 170 gigawatt hours of biomethane, which represents a 53% increase versus 2024. Finally, in gas distribution, we also expect a gradual rollout of smart meters. So in essence, when you look at both areas, both electricity and gas in networks in Spain, we believe that visibility has improved, and we expect stability in gas. If we move over then to renewables, it's worth highlighting that our development remains disciplined and return-focused with 1.2 gigas under construction that will come into operation throughout the year 2026. In Spain, in particular, we'll continue benefiting from our low-risk and flexible portfolio, which is focusing on repowering and battery hybridization. Execution will focus on high-return projects, as you can imagine, and the opportunity to capture value from unique assets, suitable specifically for data centers and pumped-storage solutions. On top of that, 640 megawatts of additional capacity and 115 megawatts of repowering will be fully operational by Q4 '26. In Australia, we will have some additional capacity, around 360 megas, with supply contracts supported via long-term PPAs. And lastly, in the United States, we will see additional capacity to the tune of around 125 megas coming operational in 2026, with supply contracts supported via long-term PPAs of between 10 to 15 years. In addition, in the U.S., we will see asset rotation, and we will seek asset rotation opportunities to projects under development. So overall, I think renewable growth remains focused on profitable and selective investments. This goes to our mantra of value over size. And this will continue to contribute, of course, to our vertically integrated position in Spain. Moving on to biomethane. Biomethane, we believe, in Spain presents significant long-term potential of around 160 terawatt hours because it's an efficient solution to decarbonize the transport, the residential, the industrial sectors as gas networks are already ready to distribute the gas, the biomethane with no modifications. In this sense, Spain's biomethane plants have doubled from 12 to 24 in 2025. Nedgia or the gas distribution business, biomethane distribution has also seen a material increase, as I just previously mentioned. And the forthcoming Spanish policy package should provide regulatory tailwinds from 2026, accelerating biomethane production and the use for decarbonization. So we continue progressing in the development of our portfolio with more than 75 projects, that's equivalent to more than 5.5 terawatt hours despite the investment plan being delayed due to slow administrative processes. So it's worth highlighting that we're admittedly not going as fast as we'd like. And this is shown by the 20 environmental authorizations in Spain versus 140 under review, of which 40 belong to Naturgy. So we continue to become the leading energy player in biomethane in Spain. We continue to push for the right regulation, and we are ready to accelerate our CapEx plan once visibility on this front improves. I'd also like to take this opportunity to discuss data centers a little bit, right? And when we talk about data centers, we work and we deliver results as opposed to deliver expectations with no results. So let's talk about the data center opportunity here. Spain is one of the fastest-growing data center markets. It is supported by competitive costs and a strategic geographic position, which make the country an attractive hub for international data traffic. We believe the company is very well positioned to benefit from this. So we combine 8 gigawatts of thermal capacity with 5.7 gigas of renewables, which, together with our multi-energy focus provide us with the flexibility, and this is very important, to adapt to the clients' energy needs. So in addition, we also offer integrated solutions, combining grid access, energy and network resilience and redundancy. So in this context, Naturgy's business model is evaluating opportunities to monetize suitable power land and provide long-term PPAs and energy services, while the investor retains control of the data center assets. That is our model. We hold close to 3 gigas of locations with suitable access or potential for obtaining access to power consumption, of which around 500 megas in renewables, 400 megawatts in combined cycles and a conservative 2 gigawatt pipeline. So in conclusion, we see this as an opportunity to unlock value with very limited capital deployment. We are working in this area, and we are optimistic in our ability to deliver. We recognize that the process won't happen overnight, that capturing value from DC expansion may take a few years, but we also recognize the unique position the company is in to capture some of this growth. Finally, if I move over to LatAm. This year, we'll see relevant tariff reviews across businesses and the preparation for concession extensions. In Panama, the main drivers will be the 2026 to 2030 tariff review, which should include both inflation and higher losses recognition. And we are also seeing higher demand and the continuation of the ongoing quality upgrade plan. In Mexico, the '26-'30 tariff review will also reflect inflation recognition. And additionally, we expect industrial demand to recover from '25 levels. In Chile, the '26-'29 tariff review will come with full asset value recognition. And in supply, we're seeing a slight margin contraction due to the expected energy scenario. In Brazil, the focus is on the preparation for the concession retender in 2027. So we have a lot of questions about this. The reality is that the government has the ability to retender the concession. We'll look at the tender conditions when and if they are published, and we'll make the decision on whether or not to go ahead. But suffice it to say, the company is uniquely positioned to continue operating these assets. In Argentina, the gas review for '25-'29 was approved in April. And while the electricity tariff review for '26-'30 was approved in February 2026. So both reviews, very importantly, incorporated the inflation recognition. So in summary, we do expect ordinary tariff reviews across businesses in LatAm with demand continued to grow and with the company ramping up and getting ready for the retender of the concession in Rio. And with that, I hand over to our Chairman for the last remarks. Francisco Reynés Massanet: Thank you, Steven. And again, thank you for listening to me. Two important messages for 2026. If you remember, one of the key topics of the strategic plan 2025, '27 was to be a truly listed company again. And that was translated in one word, increasing liquidity. Increasing liquidity has been the aim of what it was behind all our plans during this year, and we have been able to achieve our targets even 2 years earlier than the finish of the strategic plan '27. In terms of liquidity and after the BTO that we launched in June 2025 and after the placement of the shareholder GIP of 7% of its stake by December '25, this is the new configuration of our shareholding base. It's important to remark that now the free float is above 23%. And one demonstration that the company is becoming more liquid is that if you compare the ADTV of shares in January '25 with January '26, the volume of shares traded has been multiplied by 5x. On the governance side, I want to highlight first a very important message. Naturgy's Board is a solid and peaceful room. All the plans that we have submitted to the market for your consideration has been approved by unanimity and all the changes that were going to happen have been also approved by unanimity of its members. Therefore, for many things that has been written, we have the privilege to have a very committed and devoted Board that works for the benefit of all shareholders, large and/or small. What we have done is to adapt the new equilibrium of shareholders to the new circumstances of the bylaws of the company, including a respect of the proportional representation for the stakes of every shareholder. In this regard and after the placement of GIP, the Board unanimously have decided to change one board seat from GIP to IFM. These numbers, which are not only pure mathematics, would also like to reflect the long-term commitment of the shareholders in the company. If we go back -- if we go ahead on 2026 forecast, we want to share with you how we see this year, which has started very bumpy. And as we see a scenario in both energy prices and exchange rates, very challenging. We see a market that is again deteriorating a little versus the last half of 2025. And in particular, in what it reflects to the price of electricity, we are seeing more depressed electricity prices in the first half of '26 compared to last year. When we go to the exchange rates, there are also some visions based on the forwards of last 11th of February that we are seeing a certain stable evolution in Chile, Brazil, probably a little decline in the U.S. dollar and a continuous, now less, decline on the Argentinian peso. With all into account, what we can provide to you today is a vision of our figures in 2026 which, as you will see, may think less affected than this challenging scenario, in particular, because of the proactive hedging policy of our volatile business and our proactive regulatory management of our infra business. We can tell today that we see EBITDA for this year at a level of 2025. Net income slightly below than 2025, but clearly above EUR 1,800 million with an investment around the same level than last year. That will provide us room enough to continue delivering the messages of our commitments and in particular, a dividend that was established as a floor for this year '26 on EUR 1.8 per share. As you know, we regularly pay our dividends in three steps: one after the first half results, the second after the third quarter results and the third at the time of the AGM. If you allow me to close this first introduction after going to your Q&A session, just to remember which are our key fundamental messages for the investment community. One is about 2025 results, strong as committed. Second, about the transformation 2018-'25, a clear transformation from different points of view, operationally, financially and shareholder base. Third, on the guidance 2026, supported by our aim to maintain risk management in our core. Firm commitment to energy transition by investing with financial discipline. A balance sheet that give us this strategic flexibility. Increased free float as part of our key fundamentals. And governance adapted and aligned with long-term objectives and ambitions. Thank you very much for your time. I give the floor to Abel, who will manage the part of the Q&A session. Abel Arbat: Thank you. Thank you, Mr. Chairman, and thank you, everyone, for submitting your questions. In the meantime, we have the pleasure of having some of our business heads joining the discussion and helping us to address the more spicy questions with Pedro Larrea from Networks, Carlos Vecino from the Supply business, Jorge Barredo from Renewables Activity and Jon Ganuza from Energy Management. But before we get into the specific business questions, let's address the more -- the questions more related to the group and business strategy. So starting with guidance 2026. There's a question around underlying assumptions for guidance 2026 and how it compares to the former strategic plan and whether we are comfortable -- still comfortable with the 2027 targets and what offsets the more challenging scenario? Rita de Alda Iparraguirre: Thank you, Abel. So I think we've mentioned during the presentation that we expect increased investment in Networks and also tariff reviews in LatAm, that will bring higher results in the following months. Also, we've mentioned that we have a 1.2 gigawatt under construction of new renewable capacity that will also enter into operation during 2026 and 2027. Third, we still see the thermal generation will remain strong in the following months. And also, I think it is also mentioned during the presentation that there is one positive retroactive impact in electricity distribution in Spain expected in 2026. So I think that all these impacts will compensate for the margin decline expected under energy scenario. Abel Arbat: Thank you, Rita. Now questions on net debt. Some analysts recognize that net debt came better than expected in 2025. And wonder if we can elaborate on the drivers of the increase in net debt to 2026 of EUR 13.5 billion. Rita de Alda Iparraguirre: Okay. So we are expecting to pay some liabilities in 2026 regarding supply contract agreements and also some payments to the CNMC, for example, the one regarding electricity price caps from 2023 that we provisioned, but we have to pay. So therefore, we expect some debt increase in 2026, in line with the guidance. However, operational cash flow will remain solid in 2026. Abel Arbat: Thank you, Rita. In line with the lower-than-expected net debt delivery in 2025, there are some questions around balance sheet capacity. And recognizing that balance sheet capacity, where do we see organic growth opportunities? And also, are we contemplating any inorganic opportunities? And what would be the criteria of these potential inorganic opportunities? Steven Fernández: So thank you, Abel. We recognize that we have balance sheet headroom and flexibility. I think to answer the question, the first thing that we need to remember is that we have a very clear commitment to a BBB rating. So that is fundamental as a starting point of any discussion. To keep that rating right now, we have to meet a number of metrics to focus on one in particular, FFO to net debt has to be above 18%. We're running right now at a level of around 27%. So you can do the math on how much additional leverage capacity the group has. It doesn't mean that we're going to be using it. So we don't want to stress the balance sheet, but it means that we have the ability to deploy or to put our balance sheet to work. When we think about investments, you also have to think about our mantra, which is very clear as well, which is value over size. And we've been following that since 2018. We will continue following that. So by no means are we going to be jumping into the market doing crazy things. We're very rational and very disciplined as a company. So when we divide between inorganic and organic, organic, I think the company has provided you with guidance for year 2026 of around EUR 2.1 billion. In terms of inorganic growth, as you can imagine, we're constantly monitoring the market for attractive opportunities that make sense for the company, that create value for our shareholders, that do not stress us. We're looking for opportunities that are not dilutive, that are accretive from the beginning. We're looking at opportunities where we can actually export our know-how. I think you've seen in the presentation, the track record the company has from '18 to '25. We've been able to develop best-in-class expertise in certain areas. And these are areas that we would look to be able to leverage on when thinking about acquisitions. Do we have anything on the table today? The answer is no. But we do have a very good team that spends a lot of their time looking at opportunities. And when and if one of those fits what we're looking for, then we'll bring it to the Board and decide whether or not we want to go ahead with them. Francisco Reynés Massanet: If you allow me, Steven, just to remark on a very important fact that reinforces Steven's words. Since 2018 until now, that has been more than 7 years, there have been a lot of rumors about different potential projects that the company may get involved. And as you have seen, we haven't lost the financial discipline and our commitment to firmly stay on the words that Steven has said, and I would like to remark, value over size. This is going to continue. And this is the main reason why we are not obsessed about inorganic growth. We are obsessed about value creation. Abel Arbat: Thank you, Steven. And Mr. Chairman. There is a question on the upper end of a net debt-to-EBITDA range, but I think that Steven already answered that by stating our commitment -- our firm commitment to a BBB rating. And as a result, there's not an upper end of net debt to EBITDA, but rather a commitment to a BBB rating. We're more guided around the FFO-to-net debt criteria. There's another question around cash flow and in particular, on working capital. What are the key moving parts of the change in working capital during 2025? Rita de Alda Iparraguirre: Okay. So the evolution of working capital is significantly influenced by seasonal demand patterns, fluctuations in energy prices and also with the negotiation of gas contracts with our suppliers. And this has been the case in 2025. Abel Arbat: Thank you, Rita. There is also a lot of interest around the data center theme. I think that Steven covered very well the topic and our positioning on the matter. But I guess it's worth clarifying a few of the questions. So let's go with them. Are we contemplating any kind of partnerships, and how imminent a deal could be? Also, a deal on power land could be expected already this year. And also, what exactly is the self-consumption capacity for data centers? Steven Fernández: So partnerships, we don't envisage -- our model for development in data centers or to capture the opportunity presented by data centers does not envision any partnership per se. In other words, we're not going to be getting involved in the construction of the data center. We're not going to be getting involved in the running of the data center. We're going to be getting involved in the procurement of energy. We're going to be getting involved in the procurement of permits, and we're going to be getting involved in the selling of electricity and selling of the power land. So that's our business model, right? We do think we have a unique position to capture part of this growth because of the locations where we operate, which are, by the way, generating quite a bit of interest from a number of parties. As to whether or not we should expect any deal this year, all we can say is that the company is working to make this potential a reality. And when we have any news to share, we'll obviously be happy to do so with the market, but we're not going to anticipate things ahead of time. And I think the other question had to do with self-consumption. There's two different alternatives that you can do as a data center, connect directly to the network or do self-consumption, which has its own advantages. The majority of developers are looking for self-consumption. So that's one of the -- that's the area that we're focusing on. Abel Arbat: Thank you, Steven. So we can now move on to the specific questions around the various business units. So let's start with electricity distribution in Spain. And the first question relates to how the new regulatory framework for electricity distribution in Spain affects us in terms of our investment plans or strategic ambition? Rita de Alda Iparraguirre: Okay. Thank you. So as you all know, the CNMC has already published a definitive resolution for the new regulatory framework covering the 2026-2031 period. The published proposal introduces a shift to an OpEx-based remuneration model with an increase in the contribution rate to 6.58%. This new model finally defines investment cap in 0.13% of gross domestic products. The group considers that this new regulatory model creates value and provides the distributor with a solid growth path for the coming years that is consistent with our strategic plan estimates. Abel Arbat: Thank you, Rita. Another question also related to the new framework, and it relates to our views around the new OpEx standard and the new incentive mechanism, if we could share our views on the new regulatory changes. Rita de Alda Iparraguirre: So we think that the new model fails a little bit in order to incentive -- to be more efficient in the future. That's our perspective. Abel Arbat: Okay. Also, during the presentation, we mentioned the retroactive one-off recognition from previous years. Can we clarify the concept behind this recognition, this one-off recognition? Rita de Alda Iparraguirre: So this is mainly contribution related to maintenance activity from previous periods in the past that depends on court rulings that are currently being published. Abel Arbat: Okay. Thank you very much, Rita. Let's now move on to questions around our gas distribution activities in Spain. And there are a number of questions around our expectation for the new regulatory framework in gas distribution for the period 2027 to 2032. Rita de Alda Iparraguirre: Okay. So regarding timing, we are expecting a first draft of the remuneration methodology should be ready probably the next month in 2026 as the final distribution model should be expected by the end of the year. From our point of view, continuing with the parametric model will be a desirable option to provide both stability and predictability to the sector. I want to highlight that the current model has proven to be efficient. It has provided system stability and the remuneration has fallen significantly in the recent years as a result of the drop in demand. However, parameters should be -- should reflect exceptional inflation of the current period. Furthermore, we foresee this new regulation as the opportunity to incentive renewable gases, smart metering and the decarbonization of the gas networks. Pedro Larrea: Maybe just highlight that we have been arguing and I think everybody is now acknowledging that gas networks are a strategic asset for energy in the country. Gas networks actually distribute 1.5x the amount of energy that electricity networks do, and they are around 6x more efficient than electricity networks. So -- and by the way, gas demand has been increasing consistently for the past 20 years. So everybody, I think, today is acknowledging the long-term strategic value of gas networks in Spain. Abel Arbat: Thank you very much, Pedro. So moving now on to networks in Latin America. The first question is around the retender process for the Rio de Janeiro concession, and if we can share any updates or views on the matter. Unknown Executive: Well, a public process for extending concessions is the base case. In this case, there was an opportunity, at least the [ regulator threw it ] like this, that it could have been more efficient to make a renewal with the current concession holder, but just the politics timing in the Rio de Janeiro state haven't made this possible. So we are now back to the base case of renewing within an ordinary process. Pedro Larrea: And maybe two comments on my side. One is we have been in the past 2 years, having a very candid and open relation both with government and regulator, and we have been successful in unlocking a number of discussions we have been having like tariff reviews, asset values, et cetera. And we plan to continue to do so. So we will continue to be openly having open conversations with both regulator and government. Second is that there is no questioning of our management of the concession of our management of the assets. So there's no negative valuation of our performance as a concession holder so far. And we will continue again to have this open relationship with the government and see what comes out of the retendering. And there is a number of regulatory discussions that are open and that we are having just as normal course of business. Abel Arbat: Thank you very much, Pedro. One last question on regulatory networks in LatAm, and it mainly relates to the key drivers coming into 2026 and 2027. Rita de Alda Iparraguirre: Okay. So regulatory management continues to be a key priority in Latin America as we aim to obtain tariff reviews in most of our distributors in LatAm and updates which compensate for ongoing inflation and FX depreciation as well as tariff updates that reflect investment plans in those geographies. I think it's important to highlight that in the case of Argentina gas, the new tariff review published this year includes monthly adjustments for inflation, which is a very important milestone regarding high inflation rates in this country. Abel Arbat: Thank you, Rita. And a final question on not networks, but on Latin America. And it's related to the reclassification of our Chilean renewable assets that are now reclassified as held for sale. So why is that a decision? Is there any read-across for other renewable assets in Latin America? Steven Fernández: So thank you, Abel. No, there is absolutely no read-across for any assets in LatAm or anywhere else. The reason why those assets are held for sale quite simply is because they did not meet or are not meeting our return requirements. Abel Arbat: So let's now move on to the energy management questions. So starting with the more generic questions. So what is the -- our views on the gas outlook and the expected performance of the energy management division in 2026 and 2027 compared to the strategic plan? Rita de Alda Iparraguirre: Okay. So regarding energy scenario forecast for the next months indicate a moderate gas price level environment in Europe, mainly driven by increasing exports from the U.S. However, we are nearly fully hedged this year, and we have margin visibility throughout the next months. Regarding contracted volumes, we anticipated already in the strategic plan that we will have lower contracted volumes in 2026 due to contract expirations. And these effects will be mitigated through our diversified gas portfolio and our ability to access to market volumes. Overall, while we foresee a more challenging environment in the next few years, due to rising global LNG exports that we actually anticipated this in our strategic plan, we rely on LNG as a key enabler of the energy transition in the future. That's why we signed a new contract with U.S. gas suppliers starting in 2030. Abel Arbat: Thank you, Rita. Tons of questions around the levels of hedging and exposure and sensitivity to moves in the TTF, Brent and Henry Hub. I think that throughout the presentation, we clarified and guided towards the very limited sensitivity and the high levels of hedging. But if there are any comments that we can add, please? Jon Ganuza de Arroyabe: No, I mean, basically -- thank you, Abel. If we are hedged for 2026, that means that we are -- we have no impact or negligible impact associated to any variation on the TTF or Henry Hub or even power prices. So I think that for 2026, we are fully hedged. And for 2027, we are mostly hedged and the same could also be said for 2028. Abel Arbat: Thank you very much, Jon. Also, a question on the Sonatrach price review. And if we can comment on the main elements of that review and why it's helpful to the group. Jon Ganuza de Arroyabe: Of course, we cannot disclose any of the commercial details, but I think that the most important thing is that it allows us to have a 3-year outlook of how the prices are going to evolve. That helps on our supply business, it also helps in our overall cash position. But especially, I think that it strengthens the relationship, the long-term relationship partnership that we have with Sonatrach, and it reflects that we can work even in a challenging condition or environment like the one that we've seen in the past few months and the past few years. Abel Arbat: Thank you very much, Jon. A few questions as well on the European ban to importing gas from Russia. What is the current status? And what are the sort of alternatives that we are considering in line of the current situation? Jon Ganuza de Arroyabe: So I think that we always talk about the ban, but actually, there are two overlapping measures that have different scope and different time line. On the one hand, we have a sanction that is a full ban on Russian LNG. So it not only covers that we could not import LNG to Europe, but we could not do anything with the LNG. But the time line of that sanction is until July 31 of this year. And if it doesn't review, it will die off. And then there is the second measure that is the ruling that was approved by the European Parliament in February. And the scope there is more limited. The scope of that ruling, it limits itself to the import of Russian LNG to Europe, but it would allow eventually diversions to other markets or other countries. So I think that the first thing that we have to look out is whether the sanction will be renewed on July 31 or not, and that would mean a different scenario for a company like ours. Abel Arbat: And finally, on this business unit also a few questions related to acknowledging that we signed a new contract with Venture, are we looking for other alternatives to replace or to top up our current gas procurement volumes? Jon Ganuza de Arroyabe: So I think the security of supply in energy is a bit like the saying that you have in English that you fix the roof only when it rains, and we don't like to work that way. We think that we have to work in advance. And that's why we are always looking to different procurement solutions that would increase the security of supply and would increase our diversification. We are having talks with the different parties. And if we find something that makes sense and is sensible for both parties and it strengthens our supply procurement portfolio, of course, we will move ahead with that. Abel Arbat: Thank you, Jon. So now moving on to the thermal generation, particularly a number of questions in Spain. So what's our view on the outlook for 2026 and beyond on the role of CCGTs and its contribution by ancillary services? How sustainable do we think this is? Rita de Alda Iparraguirre: Okay. So as we mentioned during the presentation, we don't expect capacity payments in 2026. We expect them to be published for 2027. And what we see is that CCGTs will continue to play a key role in this -- in the current environment, and we don't expect this to change in the near and the medium term. This translates into higher demand and production in ancillary services market that guarantee the system stability and the security of supply. We are nevertheless taking a more conservative assumption in CCGT's production for 2026. And also, it's important to understand that probably the launch of new voltage control markets, the entry of new batteries or the development of new infrastructure will obviously influence some restriction in the future, but we insist that CCGTs will remain essential as a backup technology. Abel Arbat: Thank you, Rita. Moving on to a few questions on the renewable businesses. And the first one relates to renewables in Spain. We continue to invest in renewables in Spain. There is around EUR 430 million of growth CapEx in 2025. Do we still find returns are reasonable? What kind of -- what's our focus in Spain and our competitive advantage? Rita de Alda Iparraguirre: Okay. So regarding renewables in Spain, we are conscious that they face significant challenge, for example, delays in permitting and also limited profitability due to negative prices. However, for this reason, we are focusing our investment during the next months in repos of existing wind plants and also in batteries and finishing the projects that we have under construction. As we always defend, we seek a multi-technology and balanced position that allows us to meet the demand of our customers. And we are, therefore, committed to renewals, but always under selective growth that guarantees profitability. Abel Arbat: Thank you, Rita. There is also a related question around our views about curtailments and how we see the curtailments evolving this year and in the current dynamics, I guess. Rita de Alda Iparraguirre: Okay. So curtailments of renewable energy have increased significantly in the recent months. We expect them to decrease with the entry of new storage capacity in the next months and years. Abel Arbat: Thank you, Rita. There is a question about the amount of hydro, nuclear and renewable terawatts in Spain that we have hedged already. I think I guess it's worth highlighting our positioning between how we manage our power generation and supply. Rita de Alda Iparraguirre: So I think we have several times mentioned that we have an integrated position. So we sell at a fixed price, the energy that we produce. So in this sense, we have a hedged position between production and sales. Abel Arbat: Thank you, Rita. So we can now move on. There's a question around biomethane. And so what's our latest views on the current state of administrative authorizations and the potential of this activity? Rita de Alda Iparraguirre: Okay. So we are expecting a policy package to be published in 2026 that will accelerate biomethane production and its use for decarbonization. In this sense, the group has, during the last years, made a strong progress in the development of biomethane portfolio with more than 75 projects in pipeline and 40 of these projects are already waiting for permitting. However, our investment plan has been delayed by a slow administrative process. We expect administrations to collaborate in order to achieve these objectives. But however, this means that 2027 investment plan will be partially delayed. Abel Arbat: Thank you, Rita. So moving now to the last part in the Supply business. So our Supply EBITDA performance has dropped versus last year. How could we describe the competitive landscape in Spain between electricity and gas? Rita de Alda Iparraguirre: Okay. So generally, the sector is experiencing high levels of competition and churn ratios, especially in electricity, and we expect them to remain both in retail gas and electricity. Even in this context, the group has expanded its client electricity portfolio. On the other hand, a substantial portion of the customer portfolio for 2026, more or less 70% or 80% of our sales have already been contracted. This provides us a strong visibility into next year margins, which remain solid. Finally, the group is focusing on excellence in client service and efficiency, supported by our new digital platform that we call NewCo. Abel Arbat: Thank you, Rita. Okay. So -- and also a question on Supply around the evolution of our Supply margins and whether or not we are maintaining market shares in both gas and electricity segments. Rita de Alda Iparraguirre: Yes, we expect volumes to remain solid, as I've already mentioned, we've already -- we have most of our customer portfolio already contracted, and we see continuity in this sense. Abel Arbat: All right. Many thanks, Rita, and this finishes the questions that we've received through the webcast. So thank you, everyone, for joining the presentation. The Capital Markets team remains available for any further questions you may have. And the management team is going to be on the road for the coming weeks in London, Continental Europe and the U.S. So we hope to see as many of you as possible. And many thanks again. Thanks, everyone, for joining.
Operator: Good day, and thank you for standing by. Welcome to the BAE Systems 2025 Preliminary Results Conference Call and Webcast. [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, Paul Checketts. Please go ahead. Paul Checketts: Welcome to BAE Systems 2025 Full Year Results. I'm Paul Checketts, Director of Investor Relations. And with me, I have Charles Woodburn, our Group Chief Executive; Tom Arseneault, Chief Executive Officer of BAE Systems, Inc.; and Brad Greve, our Chief Financial Officer. Charles, over to you. Charles Woodburn: Hello, everyone, and thank you for joining us this morning. Before we begin, I want to thank our employees, trade unions and supply chain partners for the tireless work they do to ensure we deliver on our commitments to our customers. Delivering reliably on our mission to protect those who protect us is vitally important given the increased threats to security around the world. There are 3 key messages I'd like to leave you with today. First, 2025 was another year of strong performance. We delivered solid growth in revenue, profit, earnings per share and order intake and once again, cash flow was high. Second, the breadth of our business across air, land, sea, cyber and space and across multiple geographies puts us in an exceptionally strong position for both current and future opportunities in defense. And third, we are confident in the future growth we can deliver and the duration of that growth. We delivered strong outcomes in 2025. Sales and EBIT both grew at double-digit rates. Cash generation was high, and we secured GBP 37 billion of new order intake, demonstrating strong demand for our products. Our order backlog increased to a new record of GBP 84 billion, around 3x our annual sales. At the same time as focusing on delivery today, we're preparing for our future. Part of this is investing in research and development and CapEx. Our collective spending on these in 2025 was our highest ever. These results extend the track record we've built over multiple years of strong financial and operational performance and demonstrate our value compounding model in action. If we step back and look at our performance over the last 5 years, the story is compelling. At constant currency, our sales are up more than 50%. That's around 8% compound growth each year. We've also steadily expanded our margins, adding around 100 basis points or roughly 20 basis points a year. And because of that, our EBIT has grown even faster than sales, up by more than 60%. Earnings per share have been even stronger, increasing by over 70%, which equates to a 12% compound growth rate. Importantly, we continue to convert earnings into cash at a very high level. Across these 5 years, we've generated more than GBP 11 billion of free cash flow. And that cash gives us real strategic flexibility. It's allowed us to reinvest in the business to support further organic growth and to make targeted value-enhancing acquisitions. It's also supported increasing shareholder returns with dividends per share growth at around 9% a year. So overall, we're delivering strongly and consistently across the key financial metrics, and we see a very clear path for further progress. Our business has an outstanding geographic footprint. We have established positions in some of the largest defense markets in the world. This gives us an excellent breadth of opportunity and reduces the risk and volatility that comes with being more concentrated. Across all our key regions, defense spending is increasing because of the growing threats to national security. In each of our markets, the work we've done to invest in and position our business means our existing proven portfolio of capabilities aligns well to customer priorities. We'll look at Europe and the U.S. in more depth shortly. Here in the U.K., the government has committed to the largest sustained increase in defense spending since the end of the cold war. The U.K. Strategic Defense Review set out its vision for defense to move to greater warfighting readiness and to act as an engine of U.K. economic growth. It committed to invest in both our long-term programs and new disruptive technologies. We formed a new joint venture with industrial partners in Japan and Italy to design and develop the next-generation combat aircraft under the Global Combat Air Program, or GCAP. More broadly, Japan is on a path to double its defense spending by 2027, and we're exploring how we can support the country in other areas of defense capability. Australia is also increasing its defense spending. We're already the largest defense contractor in Australia and through the Hunter class frigate program and SSN-AUKUS, where we'll deliver state-of-the-art nuclear-powered submarines, we expect strong long-term growth. The geopolitical situation in the Middle East is likely to drive higher defense spending in the region. The largest defense market there is the Kingdom of Saudi Arabia, where we have a 60-year track record of partnership. Their 2026 military budget is expected to increase by 5% and areas of long-term focus include combat aircraft, missile defense systems, naval vessels and further increasing the localization of defense spend. Across the globe, our growth opportunities are significant, and we're focused on consistently executing our long-term strategy to deliver strong top line growth, margin expansion and cash generation. Over the past 12 months, there have been 3 consistent themes that have come up in our discussions with investors. First is our exposure to Europe, considering the rising threat posed by Russia, which is now driving increased defense expenditures in the region. The second is our shareholding in MBDA, given the growing significance of this business as Europe's preeminent manufacturer of missile systems. The third is the evolution of modern warfare and why we feel so confident in the continued and indeed increasing relevance of our portfolio, particularly in the light of new opportunities such as Golden Dome. As a result, we wanted to spend a few minutes focusing on each of these areas in turn, bringing Tom in to cover our U.S. business. The last year has seen a profound change in Europe security situation with the continent facing an acute and growing threat. In response, most countries are now significantly increasing the amount they spend on defense, underpinned by their commitment to meet NATO's target by 2035 of 3.5% of GDP being spent annually on core defense requirements and 5% in total. We're one of the leading defense companies in Europe, and our business is going from strength to strength. When you look across the continent, our equipment and services are integral to the defense of more than 25 countries. We have great capabilities across multiple areas, including combat air, land vehicles and missile systems. Growth for us in Europe is higher than the overall group. And at the same time, our order backlog has increased materially, now representing 32% of our total compared with 11% of our current annual sales in this region. To support our customers as they look to rebuild defense readiness, we're investing to support increased capacity, efficiencies and enhanced capabilities. An excellent example of our critical role in the defense of Europe, both today and in the future, is MBDA. As a reminder, MBDA provides sovereign capabilities to Europe and is a shining example of European defense collaboration. It's a joint venture between BAE Systems, Airbus and Leonardo with our shareholding totaling 37.5%. MBDA is a world leader in missile systems and the #1 player in Europe. Their portfolio has excellent breadth with products in service with more than 90 armed forces around the world. When you look at the critical areas where Europe and its allies are looking to rapidly improve defense readiness, MBDA has proven products. Areas of strength include air dominance since MBDA provides weapons for more than 10 different combat aircraft, including Typhoon, Rafale, Gripen and KF21. In air defense, they have capabilities across land and sea, including counterdrone, short-range air defense and medium range, including antiballistic missile threats. For longer ranges, they have a complete array of deep strike precision products, all of which makes MBDA extremely well positioned to benefit from increased defense spending as European and other nations focus on growing their weapons capabilities and inventories. You can see the high demand for MBDA's products and their momentum since 2021. Since Russia invaded Ukraine, order intake has stepped up from a cadence of around EUR 4 billion per year to EUR 13 billion. The order backlog has increased by 150% to EUR 44 billion or 7.5x annual revenue. And over that 4-year period, revenue has increased by 37%, a compound average growth of 8% to EUR 5.8 billion with improving momentum in recent years. MBDA is investing to fulfill orders and support customers' urgent needs. Significant funds are already committed over the medium term. They're renewing sites, accelerating digitalization, significantly increasing production capacity, investing in their supply chain and developing new products and technology. The combination of investing in the business, the high order backlog and the alignment of the portfolio with customer needs mean MBDA is positioned for continued strong revenue growth in the coming years. I'll now hand over to Tom, who will explain why we are confident about the outlook for our business in the U.S. Tom Arseneault: Thank you, Charles. Across the U.S. business, our strong performance in 2025 reflects our continuing efforts to align our portfolio strategy with evolving U.S. government defense and intelligence priorities. This enables us to support a broad range of programs and deliver for our customers with speed and at scale. We remain well positioned in areas the U.S. administration is clearly focused on. National security space and missile defense capabilities will play critical roles in the Golden Dome architecture, and we support a number of the key mission solutions, which underpin it. For example, as a result of emerging demand for the Terminal High Altitude Area Defense or THAAD interceptor, we expect a fourfold increase in production of our THAAD Seeker over the life of the 7-year contract. Our critical electronics and sophisticated apertures will also factor into the production ramps of other key munitions such as the long-range anti-ship missile or LRASM. Production of these additional key munitions will at least double in the coming years. Our teams are also rapidly developing and delivering cost-effective counter-UAS capabilities. Last year, we were awarded a new 5-year IDIQ contract worth up to $1.7 billion from the U.S. Navy to produce additional APKWS kits. This precision munition is combat proven for both surface-to-air and air-to-air engagements against hostile drones. And our platforms and services team has expanded its maritime business, allowing us to apply our highly skilled workforce and industrial capacity to contribute to the U.S. submarine and surface ship industrial base in addition to ongoing ship repair and modernization support for the U.S. Navy and commercial customers. While we have been investing in capacity and innovation for many years, the current market environment and long-term demand signals present additional opportunity. Since 2020, the businesses across our U.S. portfolio have invested more than $4 billion to expand production capacity and advance our research and development to deliver growth. To further support that growth, our workforce has increased by nearly 14%, and we've expanded our footprint by more than 2 million square feet. While there has been considerable focus on supporting the record production rates associated with key munitions demand, we have also been leveraging investments in a number of other important areas. In our Electronic Systems business, we have been investing to modernize and expand our microelectronics center to triple our production capacity for critical electronic components, supporting electronic warfare and other applications. Our Space and Mission Systems team has invested to develop Elevation, a new series of cost-effective modular spacecraft that will deliver world-class reliability and performance. An Elevation spacecraft has already been selected for the $1.2 billion resilient missile warning and tracking program we won last year. Supported by previous investments in combat vehicle manufacturing and robotic welding, we anticipate more than doubling our vehicle production compared to 2024 levels. In the maritime domain, our new state-of-the-art Shiplift in Jacksonville, Florida is now operational and will increase the capacity of that shipyard threefold. These are but a few examples of our investments in capacity and key technologies to support growth and ensure we deliver to our customers at speed and at scale. With that, Charles, I'll hand it back over to you. Charles Woodburn: Thanks, Tom. Technology and innovation sit right at the heart of our strategy and have done for many years. In 2025, we took that commitment further, increasing our self-funded research and development to a new record level. Let's look at how we develop the next generation of defense capabilities and our competitive advantages in technology. Areas of the defense market are developing at a rapid pace. Technology is being embraced and a number of companies are competing, including new entrants who often don't come from a purely defense background. This includes in drones, counter-drone systems and autonomy more generally. While it's a competitive market, solving the complex problems involved in producing equipment that works in a warfighting domain is extremely difficult. We bring together an understanding of our customers' operational needs with an understanding of the operating environment, agile software capability, differentiated hardware and an ability to successfully integrate the various elements rapidly and crucially the capability to scale up production quickly. I'll give you some examples to bring this to life. First, our platforms and products are deployed on the battlefield today, which gives us firsthand understanding of our customers' operating environments in real time. For example, our Callen-Lenz drones have proven themselves to be resilient and capable in extremely contested electronic warfare environments, and we take all these learnings into other products across our portfolio. A second highlight is our agile software capability. We are actively using generative AI to allow drones to understand the commander's intent and then configure their own software to best deliver that mission need. And we wrap these capabilities within well-understood assurance methodologies, which means the drones are only able to operate within the parameters set by their human operators. This enables rapid introduction of new behavior models and allows the drone to perform missions that were not originally envisaged. Next, consider our differentiated hardware. While software can define the optimal tactics for deploying artillery, being able to implement these tactics still requires a platform. Our mobile artillery system, ARCHER, can deploy fire 4 rounds and leave the location before the first round has reached its target. Now to integration. Bringing together the APKWS precision guiding munition from our U.S. business, heavy lift quadcopter technology from our Malloy acquisition and expertise in weapons integration from FalconWorks, a major step was achieved when we successfully used the drone to shoot down another drone. In just 4 months, we moved from concept to successful live firing trials. Finally, our APKWS technology more generally is a great example of how we can scale up quickly. It has brought down the cost of counter drone technology by so much that it's similar to the cost of the drones it targets. We've now produced over 100,000 units in total. And by the end of this year, we anticipate more than doubling our production rate compared to 2024. Our combination of established multi-domain expertise, decades of delivery and agile software capability gives us an advantage that many of our competitors simply can't match. It provides our customers trusted, differentiated solutions that have proven to work on the battlefield, and these provide us with a competitive advantage. And now over to Brad for the financials. Bradley Greve: Thanks, Charles. It's been a really strong year for the business. We delivered a record year in sales for the group with a 10% increase while building our backlog to an all-time high of GBP 84 billion. Our focus on efficient delivery contributed to a 12% increase in underlying EBIT, and we posted a double-digit increase as well in earnings per share. Free cash flow at GBP 2.2 billion was above our guidance with the benefit of strong delivery and material customer advances. This free cash was after double-digit increases in R&D and continued high levels of capital expenditure. And after all of these increased internal investments, we returned GBP 1.5 billion to shareholders, in line with our disciplined capital allocation policy. All of these numbers highlight the health and effectiveness of our value compounding model. I'll now break these results down in more detail. And as usual, when comparing results to prior periods, I will use a constant currency basis. With orders of GBP 37 billion, the book-to-bill was 1.2 and reflected the continued relevance of our broad technical and geographical reach. Key orders in the year featured close to GBP 9 billion in electronic systems orders. This included GBP 2 billion from our space business, featuring the missile warning and tracking satellite systems for the U.S. Space Force. GBP 6 billion in our P&S business, including significant orders in Europe for Hägglunds and Bofors and over GBP 2 billion for U.S. combat vehicles. The air sector recorded GBP 15 billion, including the Typhoon win in Turkey and GBP 4.2 billion in MBDA. Our Maritime business recorded GBP 5 billion of orders, including increased funding for submarines. And finally, the Cyber and Intelligence sector recorded a further GBP 2.7 billion. Our record backlog, together with the pipeline of incumbencies sets us up well for continued growth over the medium term. We grew sales by 10% to reach GBP 30.7 billion with growth across all sectors. Organic growth was 9%. Platforms & Services led the group with a 17% increase, hitting GBP 5 billion for the year. European growth in Hägglunds and Bofors was over 30%, while our U.S. combat vehicle business grew by 15%. Maritime continued to grow in double digits, up 11% to GBP 6.8 billion, with strong growth in design work for the SSN-AUKUS submarine and double-digit growth in Australia. The air sector rose by 9% to reach GBP 9.3 billion with 17% growth in MBDA, GCAP ramp and continued growth in drone sales and FalconWorks. Electronic Systems sales rose by 8%, paced by double-digit gains in EW sales, strong contributions from our precision strike and sensing activities and the full year contribution from the space business. Finally, Cyber and Intelligence was up 2%, predominantly on gains in counter-drone sales. Group EBIT of GBP 3.3 billion was up 12%, and our margin of 10.8% represented 20 basis points of expansion. This means over the last 5 years, we have delivered 100 basis points of expansion. The largest gain in EBIT came from P&S with 30% growth to reach GBP 576 million. Margin climbed to 110 basis points to 11.4%, with accretion on higher full rate production volumes from AMPV and growth in our European businesses. Electronic Systems EBIT rose by 12%, with margins growing by 50 basis points to 15.4%, including a strong contribution from SMS. The air sector EBIT grew by 10% with margins of 11.9% at the high end of our guidance range. Maritime margins reflected the early-stage maturity of the portfolio with several first-in-class programs trading at relatively low margins. We expect margins to improve in 2026 and beyond as these programs mature and as key milestones are achieved, allowing for risk release. Cyber and Intelligence EBIT was up 15% with a full year of Kirintec included. Organic growth for the sector was 10%. The group delivered operating cash flow of GBP 2.8 billion, significantly higher than our expectations as large customer advances were received very late in the year. With close to GBP 1 billion of CapEx, we once again invested at levels substantially higher than depreciation with capacity expansion and efficiency investments across the portfolio. There was a reduction in net advanced inflows in 2025 compared with 2024 in P&S and Air, which is the primary driver for the reduction in operating cash flow. Our free cash flow after netting tax and finance costs was GBP 2.2 billion. The strong performance contributed to a 22% reduction in net debt, which landed at GBP 3.8 billion. Excluding lease liabilities, the net debt to EBITDA was 0.9x. Our strong balance sheet provides excellent optionality to support our growth ambitions, and it was good to see this month's rating upgrade from Moody's, taking us up to A3. Turning now to guidance. We anticipate another strong year of sales with a 7% to 9% growth range, supported by the record backlog. Strong sales in air and continued growth in Europe for P&S should drive both sectors up in the 9% to 11% range, while growth in space and EW should drive growth in ES in the 6% to 8% range. Growth in maritime and cyber are expected to be in mid-single digits. EBIT should grow above sales with more margin expansion expected. Our guidance is for a 9% to 11% growth in profitability across the group. Earnings per share should grow in line with EBIT at 9% to 11% despite a higher tax rate anticipated in 2026. Regarding free cash, we do not include material advance receipts in our guidance. As you have seen in 2025, this can result in large positive variances. But given the difficulty in predicting these, we exclude them from guidance. We do include the anticipated unwind of existing advances. For 2026, we expect free cash flow to exceed GBP 1.3 billion, reflecting advanced unwinds and continued high levels of CapEx investment planned. So with the strong 2025 delivered, our guidance for 2026 demonstrates our confidence in the continued high performance of our business across all key measures. I'd like to discuss the 3-year cash delivery in a little bit more detail. Our consistency in hitting our 3-year guides continued in 2025, where we recorded GBP 7.3 billion over these last 3 years. For the next 3-year period covering '26 to '28, the target we are setting today is to exceed GBP 6 billion, including an assumed unwind of advances and high levels of investment to support growth. I'll end my section of the presentation with a quick reminder of our consistent value-creating capital allocation model. The first rung on our ladder is investing in the business, specifically in our people, facilities and technology. From the skills academies we opened to our commitment to early careers programs and a constant focus on building strong teams and leaders, investment in our people is essential to delivering our strategy. We have invested over GBP 1 billion since 2020 on education and skills. Our investments in CapEx to increase the efficiency in how we deliver to our customers as well as expanding the capacity of what we deliver continues to be maintained at very high levels, helping us to drive growth. Our investments in CapEx are over GBP 4 billion since 2020 and are now averaging close to GBP 1 billion a year. And our higher investments in self-funded R&D help to increase differentiation and open new revenue streams. These investments have increased by 70% since 2020 and programs like the APKWS illustrate how these convert to value. The second rung of the ladder is our dividend, which is covered approximately 2x by underlying earnings. Our dividends have increased for 22 consecutive years. And today, we have announced a 10% increase for our full year 2025 dividend. While maintaining our strong balance sheet with a focus on preserving investment grading, we have strong optionality to use M&A to grow the portfolio as we have done successfully over the last several years with over GBP 6 billion invested since 2020. And finally, when there is surplus cash after all of these allocations, buying back our shares has proven to be another important way we return cash to our shareholders, and we have retired 9% of our ordinary share count since the program started in the summer of 2021. So handing over to Charles with a final comment that our value compounding model has led to a high compound annual growth rate in both sales and underlying EBIT over the last several years, significantly enabled by this consistent approach in the allocation of capital. Over this time, we have also converted cash at very high levels. With our record backlog and pipeline, we are very well positioned for continued strong delivery across the medium term. Over to you, Charles. Charles Woodburn: Thanks, Brad. Looking ahead, we're well positioned to keep building on our momentum. A key strength of BAE Systems is not just our near-term growth, but the visibility we have over the long term. Our order backlog and incumbent program positions total around GBP 260 billion, nearly 9x our annual sales. This includes both shorter-cycle products such as drones, counter-drones and munitions, where we're currently experiencing high growth but also critical multi-decade programs such as frigates and submarines with long-term embedded value. Some of our biggest programs like the Global Combat Air program and SSN-AUKUS submarines don't come into full production until the mid-2030s and beyond. The combination of our order backlog, incumbent positions and a strong new business opportunity pipeline due to rising defense spending gives us the visibility and confidence that we can deliver strong growth for an extended period. Bringing this all together, what should it mean for investors? The combination of our exceptional breadth of world-class defense products and capabilities, strong positions in some of the largest defense markets in the world, a continued focus on execution while increasing our investments in technology and innovation and a large backlog of long-term work with significant new business opportunities means we're confident we can deliver strong revenue growth that is both visible and sustainable over multiple years with higher margins and strong cash generation, all of which will be amplified by our disciplined capital allocation, giving us enhanced visibility on our value compounding model. Many thanks. And with that, we're ready for your questions. Operator: [Operator Instructions] And now we'll go and take our first question and it comes from the line of Ross Law from Morgan Stanley. Ross Law: The first is just on the U.S. budget and the potential upside there for fiscal '27. Are you actually planning for a GBP 1.5 trillion (sic) GBP 1.5 billion scenario? And when would this increase flow through to your P&L? Second question, just on Europe. You highlighted that it's 11% of sales, but 32% of the backlog. And what do you expect the mix of European sales contribution to trend to midterm, please? And then lastly, just on MBDA, how should I think for the growth outlook there in terms of CAGR? Charles Woodburn: The first one, U.S. budget upside. Tom, do you want to take that one? Tom Arseneault: Yes, sure. I think we're very encouraged by the trajectory of the budget. I mean how that -- how the 2027 top line ends up remains to be seen, but it certainly is heading in the right direction. It is not part of our current guidance. And so we do see upside in there. And to the extent we've worked to align ourselves well with the National Defense strategy and various priorities that fall out of that, I think we are well positioned. The Golden Dome, for example, we talk about the recent wins in the base layer and our involvement in the interceptors, FAD and others. And so I think you'll see some of the budget applied there as well as shipbuilding. We've recently pivoted some of our maritime solutions to be the better part, as I mentioned earlier, of the shipbuilding, the submarine and surface ship industrial base. And so I think we are well positioned to the extent that budget heads in that direction, we're all encouraged by that. Charles Woodburn: So on the European composition, I mean, clearly, it's going to grow quite significantly with that 11% European ex U.K. in our current sales and 32% in the order backlog. Quite what the final number ends up being, I think it's a bit hard to tell a lot depends back on things like U.S. budgets as to the rate at which they grow, the relative rate of other areas. So I think it's a bit hard to judge, but we are looking at significant growth over the next 5 years as we build out that backlog. On MBDA, Brad I mean we've had already a pretty rapid growth. I think it was 17% year-on-year growth last year to the year before. But do you want to comment a little bit on the outlook for that business? Bradley Greve: Yes, I'll just echo too, on Europe. We -- GBP 3.6 billion of sales in Europe in 2025. That is against GBP 2.8 billion in 2024. So you can already see how our European revenue growth is really accelerating. And actually, our European business is bigger than our KSA business now. So I think that's worth reflecting on and positioned for continued growth. I think MBDA has been a really strong 2025 with over 17% growth. And Charles laid out some of that backlog that they've got. So sometimes revenue there can be a bit choppy because it's point on delivery revenue recognition. So some of that revenue growth may not be even. But with that backlog they've got, we expect really continued high levels of growth for a long time to come here. And also, Charles mentioned the production capacity investments that they're making, that will allow us to accelerate growth over the medium term once those get online. So I think all of this points to a really strong outlook for MBDA on the back of what's already on a pretty strong run for that business. Operator: And the question comes from the line of Robert Stallard from Vertical Research. Robert Stallard: I've got a couple for you this morning. First of all, this might be for Tom and Charles. Given the broader industry trends, are you expecting much higher CapEx in your U.S. business going forward? And in relation to that, are there any limits you potentially see on your flexibility on returning cash to shareholders? And then secondly, you highlighted the growth potential in MBDA and the rapid growth you've seen already. We've seen one of your peers in the U.S. announcing plans to spin a minority stake in its missile business. Is there any chance of a similar move for MBDA? Charles Woodburn: I think on the MBDA, I think we're very happy with the business. We don't see any particular need to change the structure or the holding system at the moment. We're just pleased to see the performance and keep supporting it. On CapEx, I'll maybe leave that to both of you, Brad and Tom to say a couple of words on it. But I would come back to the fact that we have because of the good performance of the business, ample capacity to invest as we have been at record levels. If we needed to increase, we can still do it and still maintain our very disciplined capital allocation strategy. But if you want to just say a couple of words on U.S. in particular CapEx growth, maybe... Tom Arseneault: Rob. So in the U.S., I mean, clearly, we're focused on -- and as we've all been encouraged by the executive order to make sure we are positioning and applying our capital resources in a way to help grow capacity and focus in areas of technology investments, some of which I mentioned earlier. We are on the verge. We're part of the FAD program. We do the -- we make the interceptor. We anticipate signing our own head of agreement with the Department of War here in the coming weeks in order to secure that quadrupling of demand over the 7-year multiyear program. As part of that, we would look to invest appropriately and it's quite a bit easier to close the business case on a multiyear demand like that, but to ensure that we can produce at that level. So that's just one very near-term example. But we continue to focus and make sure we're applying our resources to the benefit of the Department of War and their priorities. CapEx will generally impact to you. Bradley Greve: Yes. At a higher level, Rob, we -- as we've laid out in the scripts in the prepared remarks today, you've seen us talk about a lot more investment. And over the last 3 years, we've been averaging sort of GBP 1 billion a year. I would expect in the next 3, it's likely to go up as we see this increasing growth environment that we're in. And a lot of that, as Tom has laid out, is in the U.S. But overall, this is embedded in our 3-year cash guide where we said we're going to have 6 -- over GBP 6 billion in the next 3 years of free cash. That is reflective of higher CapEx investments. Operator: And now we're going to take our next question from the line of David Perry from JPMorgan. David Perry: Two questions. First one, just an update on AUKUS, please. I think the last few days, there's been quite a lot of press reporting out of Australia that the government there is about to commit AUD 30 billion to a new production facility. So just any info you have on that? And then secondly for Tom, I think one of the surprises for me in the results was U.S. land vehicles, where both sales and margin were better than expected, because that's a business that you've been less bullish on recently. Have you changed your view on that? And any thoughts on the outlook? I mean, could there be more margin upside from where you are at the moment? Charles Woodburn: Thanks, David. So on AUKUS, I think as you already alluded to, there was some announcements over the weekend about infrastructure investments in the Osborne precinct around for the long-term build of SSN AUKUS, which I think is excellent progress and just underlines the strength of the program longer term. From a U.K. perspective as well has been continued investments in the design work that's going on the SSN AUKUS submarine. So I think whilst we've always said this is a long-cycle program, much of it doesn't really bear fruit until well into the 2030s. These are early days, laying the -- literally the foundations for the success of the program. And I think we're making good progress on that. On U.S. land vehicles, I think Tom, as you said, is best place to answer that one. Tom Arseneault: Yes. Thank you, Charles. And David, yes, no, thank you for pointing that out. I mean I think the team and Platforms & Services has done an excellent job playing out the backlog that we've been reporting in recent years. And programs like the amphibious combat vehicle, for example, which is a Marine Corps program, factors well into the Pacific deterrent dimension of the National Defense Strategy an important vehicle for Marine Corps as well as the armored multipurpose vehicle, AMPV, which is the highest volume vehicle running through the factories there. Some of the -- and the margin improvement, excellent performance, coupled with some of the investments we've made in recent years, robotic welding, et cetera, that helped drive a little bit of automation, allowing for better throughput in some of those higher markets. And so we continue to focus on delivering for our customer and ensuring that we can return to the shareholders at the same time. I won't point out, I mean, we do -- our combat vehicle portfolio also includes the business in Hägglunds in Sweden, and that business is growing quite strongly. We are -- it was in the press late last year, working on a 6 nation agreement for CV90s. That will likely result in orders for additional vehicles in the hundreds. The 6 nations, Finland, Sweden, Norway, the Netherlands, Lithuania and Estonia, and the team is working with all 6 nations now in order to hammer out an agreement for a common vehicle platform across those nations. I hope that's helpful. Charles Woodburn: Which I might say is a great example of European partnership. Operator: Now we're going to take our next question and it comes in of Christophe Menard from Deutsche Bank. Christophe Menard: I had 3. The first one is still on the U.S. Can you comment on the drive for affordability in the U.S.? How -- and does it impact you? Is it in technology programs or in -- for instance, I don't know, the Radford rebid that's coming up? Second question is on capital allocation, share buyback. The GBP 1.5 trillion (sic) [GBP 1.5 billion] is coming to an end, I think, around June. What are the clients plans beyond? And the last one is on order intake. I'm still -- I'm always surprised -- I mean, always very positively surprised by your order intake. Any guidance for 2026 of book-to-bill or any key orders we should be watching in terms of influencing the order intake in '26? Charles Woodburn: Well, Christophe. So drive for affordability, I will let Tom say a few words on that, but we are fully supportive of the intent of the executive order to improve production rates and make sure that we deliver on the programs. Capital allocation, I may correct you there, is GBP 1.5 billion, not GBP 1.5 trillion. And -- but I'll hand over to Brad to do that one. And then order intake guidance, as you know, we don't guide on order intake. They tend to be quite lumpy. But if Brad, as you're answering capital allocation, do you want to expand on that by all means do. So maybe, Tom, over to you on the drive for affordability. Tom Arseneault: Yes. No, that's a great question. Thank you, Christophe. We -- the focus on affordability is highly enabled by volume production, right? And so some of these investments in capacity, I mentioned robotic welding a little bit earlier, brings automation to bear, drives for the economies of scale and economies of labor and automation that allow us to create a more affordable situation. Investments in technology around how we're driving, for example, as I mentioned earlier, the microelectronics position, right? As the microelectronics get denser and denser, we're able to get more capability into smaller space, drive down the material -- the builds of material on some of these items and again, helps with affordability. So we're looking at it in every dimension from the way we work all the way through to the technology we apply. I hope that's helpful. Charles Woodburn: Brad, do you want to talk about capital allocation? Bradley Greve: Yes. I think it's healthy just going to look back to our capital allocation hierarchy again. And the first rung in that ladder, as we said, was investment in the business. And so this takes the shape and investment in our people, the GBP 1 billion that we spent over the last several years on skills academies and early careers programs, self-funded R&D. We've been making meaningful increases in those investments and CapEx. We've talked a lot in this presentation about how much we're increasing our investments there in CapEx. And all of this, I think, is very much aligned to a growing business and a growing backdrop. And our customers all want capability faster and our investments are designed to do that. So that is our very first priority, and that's completely aligned with our customers' view on this. And after that, of course, we have a dividend policy that's very established and clear covered 2x by underlying earnings. And we've then looked at M&A as sort of another wrong and using a strong balance sheet to increase and enhance our portfolio. And finally, if there's cash left over after all of this, that's when the buyback program kicks in. And we're in a situation with the business that across all these increases of internal investments and dividends and the M&A we've been doing, we still have had cash left over. And so I think that's been a useful tool to deploy that surplus cash. Charles Woodburn: Then on order intake guidance, as I said, we don't give guidance, but Tom alluded to, for example, more CV90 potential orders translating. The Type 26 selection by the Norwegians is not yet in order backlog. We've got a number of additional opportunities for Eurofighter, both support and new aircraft sales. Electronic systems, there's opportunities with Compass Call. I mean there's a wide hopper of opportunities. But as you always know, the -- some of these big programs, quite what year they fall from an order intake perspective can be a little hard to predict, which is why we are cautious around giving specific guidance on that. Christophe Menard: And yes, indeed it was GBP 1.5 billion. Charles Woodburn: I was joking to be honest, Christophe, I knew you have -- anyway, thank you, Christophe. Operator: The question comes from the line of Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: I have 3, at least one of which is quite quick. Firstly, on the free cash flow. So your free cash flow guidance 2025, '27 implies GBP 2 billion of free cash flow in 2027, which is a decline on what we've seen recently. Like can you talk about why that's the case beyond -- and obviously, I hear what you're saying on the advanced payments, but anything else beyond that, we should be considering? Secondly, could you talk about the outlook for tax rates? I think your communication there has changed? And thirdly, on the Eurofighter, can you talk about the long-term production rate plans there given some of the recent demand we've seen coming in? And related to that, could you talk about progress on FCAS and when you now think that will be ready for use for our customers? Charles Woodburn: So maybe the first couple for you there, Brad, free cash flow and... Bradley Greve: Free cash flow, really the story on the variability is not a new story. It's just really down to how advances move and how we guide on the basis of a conservative outlook on advances where we always model the burn of advances. And in 2026, we expect to have a circa GBP 600 million burn down of advances. We haven't guided to any material advanced receipts. So to the extent those come in, that would be upside to what we've guided. And that also is true of the forward guidance ranges in those 3-year increments that we've outlined. So none of those include material receipts for new advances, but all of those new ranges looking ahead include burn down. So that -- I think that's really the simple explanation of your question on that one. And on tax rates, we did see an increase, we're expecting to increase rather in 2026, and that's mainly coming from '25. We did have some prior year releases from some retired tax issues. Those obviously don't recur in '26. And the France tax regime has carried forward what was meant to be a 1-year surplus and tax rates. They've now taken those into a second year. So the France tax rate is 36% compared to what we expect it to be sort of in the mid-20s. So I think I really explains the tax movements and a 22% guidance for ETR for '26, that's probably a range that's likely to endure for a little bit longer. Charles Woodburn: Thanks, Brad. On Eurofighter, I mean, we've talked before about sort of the pathway to doubling production rates, and I think we're well on that. Having secured Turkey and there are other opportunities. I mean, obviously, some European buys that you're well aware of. We'll look to adjust that. But I think that we said at the time at the Capital Markets Day last year that it was sort of a couple of year trajectory to get to the new production rates, and we're well on that journey. And we will adjust, if needed, upwards if we are successful in securing further orders. And of course, the good news is that we now have production requirements all the way through to when we start doing final assembly of a GCAP capability, which is important. And I think to your final question, GCAP is making really good progress. We have a really strong team, moving well and are delighted with the partnership that we have and moving at pace. Operator: And now we're going to take our next question. And the question comes from the line of Olivier Brochet from Rothschild & Co. Olivier Brochet: I would have a couple of things to ask. The first one is on the operating cash flow in H2, it doubled in electronic system. Do you have any areas that you would like to point to explain the move? On the same vein, did you have any cash payment catch-up on the F-35 after the release from inventory aircraft last year? And the second question would be on the space exposure. Can you maybe size how big it is across the group, maybe in terms of backlog and sales as you very hopefully did for the European business? Charles Woodburn: On cash OCF, do you want to do that, Brad, and then maybe over to you for space, Tom? Bradley Greve: I'll simply say, Olivier, we tend to have a very back weighted cash flow profile. So '25 is no exception to that. We did see some advances come through in our space business from SMS into the ES cash flow. So that was a contributing factor in that. But we always have a very H2-weighted cash profile, and that continued into 2025. Tom? Tom Arseneault: Yes. I think I mean backlogs in the former Ball Aerospace, now our Space & Mission Systems business are at record levels. I mean, after some delay in the early part of the year as the administration was settling in and working through its priorities, there were some pivots on their part early in the year. Although as we moved to the half and beyond, we spoke at the half, and I mentioned earlier, the big win on missile warning and tracking. We won a ground systems award called FORGE C2 that will -- is a ground systems for this missile warning and tracking kind of mission in our national and military space businesses grew and won a number of other programs. And so record levels. I think Brad, just check me if I'm wrong, GBP 8-ish billion for SMS. And so a really good performance there, and 1 that will play out through sales growth here. We're projecting double-digit sales growth in 2026. Operator: We're going to take our next question and it comes from the line of Alessandro Pozzi from Mediobanca. Alessandro Pozzi: The first one is referring to your opening remarks about the outlook, very strong pipeline as well. I was wondering, can we have any color on the medium-term growth? A lot of your peers have given 2030 targets. We don't guide to 2030. But I was wondering, is it the right time maybe to factor in an acceleration in top line and maybe growth of double digit rather than high single digit, also in line of defense spending in the U.S. going up? And the second question on the GCAP. There's a lot of speculation that Germany and France may not go ahead with the FCAS any longer. Would you be able to accommodate Airbus as a new partner in the GCAP and what the implication could have for the program? And maybe a last one. Any update on the Eurofighter potential opportunity in Saudi Arabia? And any thoughts on that? Charles Woodburn: So outlook, thanks for the question, Alessandro. We don't, as you know, give medium-term outlook, but we've been on a strong temper of growth, and we do see that continuing. As you probably are aware, everyone on this call much debate around the U.K., for example, and the defense investment plan and will there be more funding around that. And I don't know any more to add to that other than has been in the press already. But none of that is in a sense, assumptions around that further upside would be in our guidance and indeed -- but it would affect our medium-term outlook, but we just have to wait and see how that plays through. So there is further upside, we think, to the medium-term outlook, depending on how things play through. And indeed, as Tom alluded to already, with the U.S. budgets as we see how that plays through, but that's not a '26 impact. That would be a '27, '28 and beyond impact. On GCAP, I mean, really the decisions around expanding the partnership are entirely down to the 3 governments of Italy, Japan and the U.K. that are partners already. So there's not really not much more I can comment on that apart from the fact that we have a really strong partnership that is making great progress and moving at pace. And on Eurofighter, again, there's a little I can really add apart from we have a large portfolio of additional opportunities for the Eurofighter platform. It's a superb fighter aircraft. And with the latest missile systems from MBDA has extremely good capabilities. So we do see a range of additional opportunities, both from existing customers and new customers as we see with like Turkey coming into the Eurofighter family. That's really all I can say at this point. Operator: And the question comes from the line of Sam Burgess from Goldman Sachs. Samuel Burgess: Three, if I may. Firstly, just back on Europe. If there is movement in the rules on U.K. company participation in future European defense funds, just in big picture terms, how material could this be for BAE Systems? Secondly, can you give us just any directional indication of the expected magnitude of advanced payments expected in 2026 relative to '25? I mean given quite a lot fell in Q4 '25, might we assume it's a slightly slower year in terms of prepayments? And then thirdly, maybe one for Tom. Just following on from Ross' question about potential U.S. budget increases. I know there's been a lot of kind of CapEx going in for Jacksonville and Louisville, but that was obviously in advance of some of the latest messaging from the U.S. President on budget. So what's your sense on the areas that incremental budget spend may be directed? And might you need to accelerate CapEx to capture some of that demand if it's not in your base case? Charles Woodburn: Thanks. Good set of questions. On Europe, I would just come back to -- we already have -- we're well positioned within Europe. So our position with MBDA, Eurofighter, our Swedish businesses mean that we are very well positioned, and we can happily partner with companies like PGZ in Poland, who are recipients. So for example, say funding we can work with them. So we see, as you've already seen in our order outlook, we're expecting significant growth in Europe, and it's a combination of selling in from our U.K. business, but very importantly, strongly enhanced by our footprint already within the Europe and specifically EU. So -- and then in terms of advanced payments, I mean, we don't guide around that. It's very hard to predict, which is why we specifically exclude them from our cash guidance. And I think that's probably the prudent place to be. And I think we're very clear around our position there. Tom areas for CapEx -- in the U.S., do you want to say a little bit about that? Tom Arseneault: Yes. I'm happy to it. Thank you for the question, Sam. I mean if I had to point to one area and again, as I mentioned earlier, we're very encouraged by the administration's move toward multiyear contracts, particularly in and around munitions. So if you look at the 2026 National Defense Authorization Act, the budget has outlined, particularly Section 804, that really outlined these multiyear procurements where they create effectively 7 years of demand for some of these munitions. Our 8-ish munitions sort of called out there as key munitions. We play a role on 6 of those. FAD I mentioned earlier has one. And so as we look to the sorts of volume increases associated with those anywhere from doubling in production to quadrupling there will definitely be some CapEx expected in those areas across the portfolio. By the way, that's both ES and SMS, those 2 businesses will contribute. So I'd call that out as probably the dominant area, although there would be others. Operator: We're going to take our next question comes the line of Chloe Lemarie from Jefferies. Chloe Lemarie: I have a first question, please, on the 2026 to '28 cash outlook. You helpfully said the GBP 600 million advances burn in '26. Could you maybe share how much over the total period you're factoring in for this? The second question is on P&S. Obviously, quite a strong performance in '25. We touched on the U.S. platform performance. But I think a 30% growth in both for Hägglunds was mentioned. So could you maybe touch on capacity utilization now in those businesses and the expansion phasing going forward? Charles Woodburn: Over to you, Brad, for cash guidance and then, Tom, for the excellent performance in P&S. Bradley Greve: Yes. I think the GBP 600 million burn down is probably a fair average to use across the medium term. So the '26 to '28 cash guide. Again, we don't assume any advances coming in, so any prepayments coming in. We do have a slightly higher CapEx across the next 3 years and then there's the normal working capital movements, but we will have higher profits, which will fall to cash. So all that weighted in is kind of what colors in that GBP 6 billion -- greater than GBP 6 billion cash guide over the next 3 years. I mean it's going to be timing on programs that will dictate the cash burn on advances. It may not be evenly distributed GBP 600 million each year. But I wouldn't be surprised if it's a number like that over the next 3. Tom Arseneault: Yes. And then on Adrien (sic) [Chloe], on vehicle performance and production. I mean P&S, again, thank you for highlighting that a really excellent performance on the part of that business. Remember, P&S includes both the U.S. portfolio as well as Hägglunds and Bofors in Sweden. We expect that we would focus -- again, we don't see additional capacity necessary in the U.S., for example, we are -- we have built that up over the course of the last 5 or 6 years. And so now we're sort of running at rate, focusing on good performance there and that you can see in the bottom line in that business. So over in Hägglunds, I mentioned earlier, the 6-nation opportunity that would likely require some additional CapEx in Sweden, but we do, as we've reported in the past, spread that capacity work out into the countries to which those vehicles would be delivered and in industrial cooperation. And so a modest investment there, we expect. But here's a business that was maybe 50 vehicles a year, only a handful of years ago, now looking at maybe somewhere between 200, 300 vehicles a year. So really good opportunity there, and business has done well to scale. I hope that is helpful. Operator: We'll go and take our next question and it comes from the line of Adrien Rabier from Bernstein. Adrien Rabier: I also have 2, please. Sorry to ask again about the U.S. budget, but if you don't ask -- if you don't mind me asking in a more basic manner, if we have anywhere near 50% growth in U.S. budget in 2027, what would that mean for you? How much you expect to participate? And how long will it take to flow into your P&L? And the second question on your 2026 guidance, please. Your sales growth target implies some sequential slowdown from 2025. But as you said, budgets are growing in your key regions and backlog is great and you've been expanding capacity. So should we see this as a reasonable caution? Or is there a reason to actually expect a slowdown this year? Charles Woodburn: Well, on the second one, the answer is no. But do you want to explain that a little bit guidance? You're saying it's slowing down compared to this year. But Bradley Greve: On top line? Charles Woodburn: Yes, on top line. Bradley Greve: Yes. The growth that we printed for 2025, the 10% included a full year of SMS, our space business, former Ball Aerospace. So that compares to a partial year in 2024. If you look at our organic growth rate in 2025, it was 9%. So again, if you put that in the context of our go-forward guidance, where we're saying 7% to 9% for 2026, we're continuing to grow at these very high levels on a higher 2025 base. So hopefully, that helps you understand a little bit that we're continuing to grow in pretty high levels here. Charles Woodburn: Yes, we still see strong momentum in the business. And maybe over to you, Tom, on U.S. budgets. Tom Arseneault: So there is so much that has to play out here before we understand where the top line for 2027 will settle. I mean it's -- again, we're very encouraged by the directionality of the discussions around the budget. You'd have to imagine that the way that would translate into portfolios would be sort of relative to how well aligned we are around the demand signals. And we feel very well aligned, as I mentioned earlier. And so we would hope we would get a reasonably proportionate share. The focus on the national defense strategy, deterrence in the Pacific, our electronic warfare, our space portfolio, the work we're doing to help with the submarine and shipbuilding industrial base. When it comes to defend the Homeland, we spoke about Golden Dome, Clearly, the space and the munitions side of that, Counter-UAS, with our APKWS solution. So we've worked to align as best as we can with the national defense strategy. I think that's paying dividends for us, and we would hope to earn our fair share of that budget when it settles out. Charles Woodburn: But this would really play out in '28, '29. Tom Arseneault: Right. It will be some time before we know exactly where that is, but the directionality is clearly encouraging. Operator: And the next question comes from the line of George Mcwhirter from Berenberg. George Mcwhirter: Maybe on R&D, going back to the comments that Charles you made about self-funded R&D reaching a record high this year. Do you expect self-funded R&D to continue to account for the minority of R&D? Or could you see that the self-funded share grows a bit faster than customer funded as government shift to a greater company, that innovation to reduce the time it takes for products to come to market? That's the first question. Charles Woodburn: Okay. Is that the only question? Or do you want to ask... George Mcwhirter: Sure, I can ask the second one. Maybe on margins. You talked about 20 basis points of margin expansion a year for the past 5 years. Do you think this is a reasonable level that you can achieve in the next 5 years? Charles Woodburn: So on margins, I'll let you answer that one, Brad. On R&D, I mean, as you said, we have been increasing self-funded R&D. The most intensive area of self-funded R&D is the electronic systems portfolio in the U.S., and that's been really good investments, things like APKWS is -- was a self-funded R&D program that is now doing extremely well and a huge commercial success for us. So we are encouraged to keep investing in R&D. The balance between that and customer-funded R&D, I mean, it largely depends as well as to the amount that we get through customer funding on R&D programs. So I'm not sure it's going to change dramatically, but we will keep investing in self-funded R&D. We've had some great success there. The other area that we've invested and continue to invest heavily in self-funded R&D is in the U.K. air sector, specifically around drones, counter drones some of those capabilities is making sure that we really build out that what is already a market-leading portfolio and develop that further. On margins and the margin progression, do you want to say a bit about that, Brad? Bradley Greve: Yes. Last several years, our mantra here has been top line growth, margin expansion and cash conversion. And we were pleased to generate those 100 basis points of expansion over the last 5 years. And when we look forward, we'll continue to focus on these things. And where we have opportunity for more improvement is really everywhere. Operational efficiency is a key lever of expansion. The extent that we deliver our programs and retire risk to the bottom line rather than consume it. That's a really important part of how we're going to grow margins from here. We'll have some operating leverage with top line growth, where we can keep indirect costs flat. That's another key lever. And our supply chain function continues to make size our scale advantage so we can get procurement volumes to drop down into bottom line margin expansion. I mean across the entire business, we look at these margin levers to really drive improved delivery, and we've seen that over the last several years. Now looking at where we're going to go from here and where you're going to expect more margins. Obviously, the maritime sector is one that is below the range that we expect from that sector. And so I would look at that sector as being the one that will drive the biggest gains over the next 3 years. But we're already pretty top range and a lot of our delivery across the sector. We look at ES at 15.4% and P&S at 11.4%. There's still room to go on those. So I wouldn't just extrapolate a 20 basis point a year over the next 5 years to come, but we certainly are focused on it. And we continue to think that we can drive margins up from already these high levels in 2025. Operator: And the next question comes from the line of Nick Cunningham from Agency Partners. Nick Cunningham: Yes, so the -- a few details on the U.S... Charles Woodburn: Yes, we can hear you, Nick. Nick Cunningham: Can you hear me? Charles Woodburn: We hear you loud and clear. We are hearing you. Nick Cunningham: So the administration is Good. So the U.S. administration is not very happy about NOAA and NASA budget. And it's obviously engaged in a big fight with Congress. But in the meantime, it's been holding out signing checks. And is that an issue for BAE? Or are you assuming that those delayed payments will get caught up later in the year? And also, of course, will it be more than offset by the growth in military space anyway? Secondly, on the P&S shipbuilding move, is this into something new like building modules? Or is it more of the surface ships fit out that you did in earlier years? And how big could it get? And then a final high-level question for Brad. Debt reduction wasn't mentioned as an option in capital allocation. Some of your U.S. peers are looking at retiring debt instead of buybacks. And in that context, what is the right level of debt? Charles Woodburn: Okay. So Tom, I mean, you already alluded to the pivot early in the year from civil space to military and where you think that's going. So I think you maybe say a bit on that and also the shipbuilding and maybe the pivot to submarines. Tom Arseneault: All right, Nick. What was the first one again? Charles Woodburn: The question was about civil space -- [ NASA ]. Tom Arseneault: Yes. No, you're right. And that has played out a bit in the press of late. -- our current trajectory is depending only on the contracts that we have in hand. There is potential upside in this debate around NASA NOAA priorities. But you are exactly right, and that is our -- the growth we've seen has really been driven by military and national space. And that backlog I mentioned earlier, was built around that. And so to the extent the NASA NOAA debate settles in the direction we would like and that is to reinstitute some of the capability in like the GeoXO that program, for example, that would be beneficial to us. But our focus has been on ensuring we're well positioned to deliver on that military and national space. And then second question around shipbuilding. And here, let me be very clear. We are not intending to build full ships, and we had gotten ourselves in trouble in the middle of the last decade or so off on a commercial shipbuilding venture. That is not our intent here. We are contributing components and working to earn our way in to be a reliable supplier. We do the Virginia payload module, for example, for the Virginia class submarines today. We're looking to expand on some of that work. But we are just trying to be a good, healthy and reliable supplier in this submarine and shipbuilding industrial base but in the supply chain. I hope that's clear. Charles Woodburn: Would you, Brad, on the sort of debt reduction and debt levels? Bradley Greve: Yes. We're not looking at doing any accelerated reductions in our debt. We're already at 0.9x net debt to EBITDA. So pretty healthy balance sheet. And I do believe that constructive debt can help grow the business. And that's what we've done with the acquisitions of Ball Aerospace. And I'm really comfortable with where we are with the balance sheet, and that gives us really strong optionality, which really is what you want as a business. So we don't have any plans to accelerate any early maturities of debt. Charles Woodburn: Thanks very much, Nick. So I think over to you, Ben, for the last question. Operator: And now we're going to take our last question for today. And it comes from the line of Benjamin Heelan from Bank of America. Benjamin Heelan: Thank you for holding it for me. So the first question I had was on M&A, Charles, can you talk about the M&A pipeline? It feels as though buyback has been somewhat kind of deemphasized the potential to kind of grow that medium term, a lot of focus on CapEx, a lot of focus on self-funded R&D. But how are you seeing M&A within that? And if you could talk about the pipeline, how are you thinking about where you want to deploy capital geographically technology-wise, over the next couple of years? That would be great. And then the second question, I guess one for Tom. If I look at Electronic Solutions, I would have -- I would have assumed it would have grown a little bit better organically in '25 than the 5%. And when I look at the guide, the '26, the 6% to 8%, I kind of feel it would be more towards the top end and high single digit given the program mix that you have there. So first question on that, is there anything in there that is slower that we need to that we need to be thinking about? And then you've had a lot of questions on the budget in the U.S. I mean, obviously, we don't know what is going to happen. But I guess one way to ask it is, if you do see the budget moving to the kind of GBP 1.2 trillion to GBP 1.3 trillion range over the next couple of years, do you think the U.S. exposure that the BAE has will be able to outgrow that budget over the medium term? Is that what we should be thinking about? Charles Woodburn: M&A I'll take first. I mean really, it's much of similar focus areas as before, bolt-on opportunities adding to our Electronic Systems portfolio has been a good hunting ground for us in the past, and we'd continue if we found the right opportunities to look at that. Europe is presenting more opportunities given the growth rates there, although being careful and prudent with our valuations and making sure that we're not paying for opportunities -- we just announced our intention to move forward with an acquisition of a relatively small business in Sweden, which supplies barrels and castings to our Swedish businesses. I think will be a great addition to the portfolio. I've identified before Nordics as being an area that we'd be looking at. And then you'll have seen, and again, very much in the bolt-on category over the last couple of years, we've done some very interesting acquisitions in the drone and counterdrone space, things like Malloy, Callen-Lenz, Kirintec capabilities. And again, we'd look for those kind of opportunities to add to the portfolio. So very much in the bolt-on space and in the kind of areas that we've looked at in the past. ES growth, do you want to say a little bit more on that Tom? Tom Arseneault: Yes. Sure. So ES, as you know, it includes SMS, the Space & Mission Systems business. And as we were discussing a little bit earlier, we saw a slowing of growth in the Space & Missions Systems over what we had originally expected in 2025 driven by some of this uncertainty, some of the delays in the -- again, as the administration settled in and they work through their various priorities, we saw some decisions and awards being delayed through the year. And so that resulted in a little bit of lower ES growth overall at the reporting segment level. As mentioned earlier though, the wins that eventually came here in the latter part of 2025, position us for double-digit growth here in 2026 that backlog translates. And so really good growth that will recover in the coming year. And then the other question around budget growth. And again, here we are with our crystal ball trying to get a sense of whether what that trajectory, what the slope of that budget growth will be. Our strategy all along as we -- as we've said, is we are working to pivot and align our portfolio as accurately as we can with the demand signals of the Department of are where is that budget likely to be spent? It's in the areas we've mentioned munitions the Secretary that maybe came out the other day saying that with the higher budget, they could potentially double the shipbuilding budget for the Navy. Marine Corps and ACV, so an additional award there. So we've done quite a bit to get that alignment right. And so again, we would hope to earn our way into a proportional benefit from that growth when it comes. Thank you for the question, Ben. Charles Woodburn: I think that actually brings us to an end now on the questions. But thank you all for joining. I think I'll see many of you out on the road over the next couple of weeks and beyond. But thanks for joining and -- thanks for joining. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Abel Arbat: Good morning, everyone, and thank you for joining our full year 2025 results presentation. This is Abel Arbat speaking from the Capital Markets team at Naturgy. Next to me sits our Executive Chairman, Mr. Francisco Reynes; the General Counsel to the Board, Manuel Garcia Cobaleda; the Global Head of Financial Markets and Corporate Development, Mr. Steven Fernandez; and the Global Head of Control and Energy Planning, Ms. Rita Ruiz de Alda. Today's presentation is a bit longer than usual as we aim to cover the results, but also to address some of the key themes and opportunities for 2026. As usual, we will start the presentation and then move to the Q&A session at the end of the call. Please, as usual, submit your questions through the webcast platform. And with that, let me hand it over to Steven Fernandez to kick off the presentation. Steven Fernández: Thank you, Abel, and good morning to everyone. Thank you for joining our webcast to discuss the full year numbers for 2025 and the outlook for 2026. So before moving into the detailed review, I would like to highlight some of the key messages for the year. As you have seen in the results presentation, 2025 was a strong year for Naturgy, where we met our guidance, once again, reinforcing our track record of consistent delivery. The successful execution of our 2018 to 2025 transformation has underpinned the value creation of the company, and, we hope, our credibility. Now looking ahead, our 2026 guidance is well supported by business fundamentals, a very proactive risk management, as you will see throughout the presentation. We remain fully committed to the energy transition with gas increasingly recognized as essential. Also, our strengthened balance sheet provides strategic flexibility. And on the capital markets front, the tender offer on our own shares and subsequent placements have also led to a significant increase in the free float and stock liquidity, resulting in the return to major indices like the MSCI. Finally, the governance of the company has been adapted to align with the long-term objectives and ambitions of Naturgy. Now we move over to the consolidated results. Starting with the evolution of the energy markets, as you can see on Page 6 of the presentation, gas benchmark softened during the second half of the year with TTF declining by 23%, the Henry Hub by 6% and JKM by 14% compared to the first half of the previous year -- of 2025, sorry. Brent prices were also lower, both in the second half of the year and year-on-year, averaging $66 per barrel in the second half of 2025 versus $77 in the same period of 2024. Iberian pool prices for its part increased from EUR 62 per megawatt hour in the first half of the year to EUR 69 in the second half of the same year, owing mainly to the usual seasonal patterns with lower renewal generation in the second half of the year. If we move over to Slide 7, in terms of FX, we saw a broad-based depreciation across most of our operating currencies versus the euro. The U.S. dollar weakened meaningfully, particularly in the second half of the year, and it's continued to do so in 2026 so far, with LatAm currencies, including the Brazilian real, Mexican peso and Chilean peso also depreciating. Now we turn over to the full year 2025 results. We have a quick snapshot of some of the key metrics of these figures. EBITDA reached EUR 5.3 billion. This is a record level for the company. Net income reached EUR 2 billion. CapEx in the year amounted to EUR 2.1 billion, in line with the estimates that we had for our strategic plan. And net debt ended the year at EUR 12.3 billion. In this period, we've almost paid around EUR 1.3 billion in taxes and levies. So overall, the company has met its guidance despite a year of challenging environment, and these robust results reinforce our track record of consistent delivery. The year's performance was also supported by continued improvements in operational efficiency and very strong risk management, which have translated into higher profitability and visibility. At the same time, the strong cash flow generation and our capital discipline have allowed us to reduce our net debt levels below our 2025 guidance. So as a result, we end the year 2025 with a strengthened balance sheet that provides the company with strategic flexibility. If we move on to the income statement, EBITDA remained in line with last year, again, as a reminder, at record levels, with net income slightly above, in part due to higher minorities in 2024 for the reversal of TGN provisions in Chile. These earnings, we believe, show strong resilience and are supported by a balanced mix of activities, risks and currencies, as you can see on the right-hand side of the page. If we move over to Slide 10, which is the capital allocation, the cash flow from operations amounted to EUR 4.5 billion, which have allowed us to, one, fund EUR 2.1 billion investments, as I mentioned before, distribute close to EUR 1.7 billion in dividends and execute the tender offer of our own shares, which, for the most part, has already been placed in the market. The investments remain focused on networks and renewables with EUR 1 billion allocated to networks and around EUR 800 million to renewal generation, allowing us to reach 8.1 gigawatts of installed capacity at year-end 2025. So we take all this together, these figures, we think, clearly demonstrate the strength of our cash flow generation and, of course, of our disciplined approach to capital allocation. In fact, if we move over to Slide 11 in terms of cash flow and net debt evolution, you can see that free cash flow after minorities stood at around EUR 2.2 billion, EUR 800 million above 2024. That's 58% above. Net debt for the year closed at EUR 12.3 billion, which is broadly stable versus the figures from last year, 2024, correct, with net debt to EBITDA at around 2.3x. And of course, this includes approximately EUR 1.7 billion in dividends, as previously stated, and the EUR 941 million of shares repurchased net of the subsequent placements that we executed. The average cost of debt stands at 3.9%, in line with 2024 levels with around 66% of the debt locked at fixed rates. And the FFO-to-net debt stands at around 27%, which is comfortably above the threshold required for a BBB rating. During the year, it's worthwhile highlighting that we completed around EUR 11 billion of financing operations, reinforcing our liquidity and extending maturities. So all in all, our balance sheet remains solid and again, provides the company with strategic flexibility. If we think about shareholder remuneration on Slide 12, for fiscal year '25, we are proposing a total dividend of EUR 1.77 per share, representing an almost 11% year-on-year growth and above the DPS floor of EUR 1.7 per share committed for the year. This includes two interim dividends of EUR 0.60 per share each and a final dividend, which we are announcing today of EUR 0.57 per share, which will be payable the next 31st of March, subject to the AGM approval. The final dividend per share has been increased to account for treasury shares as these shares do not receive dividends and its corresponding amount is redistributed among the outstanding shares. So all in all, when we think about 2025, we've delivered on our company's guidance across basically all metrics. EBITDA reached EUR 5.3 billion, slightly above our guidance. Net income was above EUR 2 billion, also above the EUR 2 billion guidance. The net debt closed at EUR 12.3 billion, which is below our guidance of around EUR 13 billion, and the DPS amounted to EUR 1.77 per share, which is above our minimum commitment of EUR 1.7 per share. So all in all, this consistent track record of delivery once again reflects the company's commitment and delivery. So now I'll hand over to Rita, who will take you through the operational business performance in each of our businesses in greater detail. Rita de Alda Iparraguirre: Thanks, Steven, and good morning, everyone. Starting with Networks on Page 15. Networks reported a total EBITDA of EUR 2,735 million in 2025, representing a 5% decline when compared to 2024. This decrease was primarily driven by a one-off positive impact in Chile last year and the depreciation of several Latin American currencies, most notably the Argentine peso, but also Brazilian and Mexican currencies. In Spain, gas networks experienced remuneration adjustments foreseen in the current regulatory framework as well as increased demand in the residential segment due to temperature effects. In electricity, EBITDA increased driven by a higher regulated asset base and increased contribution rates. On December 23, the new regulatory framework for the 2026-2031 was finally approved, introducing an OpEx remuneration model with a regulatory rate of 6.58% compared to the 5.58% in the previous period. In Mexico, results mainly impacted by negative foreign exchange effects compensated by tariff updates in July. And in Brazil, results were also affected by currency depreciation. In Argentina, a substantial tariff increase was implemented in 2024 and 2025 to offset inflation. In fact, the new regulatory review approved for 2025-2030 period provides visibility and also includes mostly inflation adjustment that allowed to compensate for FX devaluation during the year. In Chile, performance declined when compared to last year due to an extraordinary effect in 2024 related to TGN conflict, which is now officially closed. In Panama, results were negatively affected by lower demand due to temperature effects and increased operating expenses from higher maintenance activity to improve quality standards. In summary, comparison is affected by an extraordinary impact in 2024, currency depreciation in LatAm, and I will also highlight the publication of the distribution model for electricity distribution in Spain. Now turning to Energy Management on Page 16. EBITDA reached EUR 815 million, which shows an increase versus 2024 of an 8%, mainly due to higher margins on hedge sales. The group benefited from effective hedging in a context of high volatility and uncertainty. It is important to highlight that we have reached a price agreement with our gas suppliers, Sonatrach, for the period 2025, 2027, which strengthens the good relationship between both parties and provide us with visibility in the context of energy price volatility. Finally, last October, Naturgy signed a purchase agreement of 1 million tonnes of LNG with a U.S. gas supplier starting in 2030. This agreement strengthens the group's positioning and its commitment to a diversified LNG portfolio as a key enabler of the energy transition. Overall, the period benefited from effective hedging and diversified procurement portfolio. And furthermore, the group is building new capabilities that reduce risk and enhance optionality. Continuing with Thermal Generation, EBITDA reached EUR 837 million in 2025, 39% over 2024 levels due to higher activity in Spain, partially offset by lower revenues in Latin America. In Spain, the increase in results was supported by higher demand for ancillary services from our combined cycle fleet. Naturgy holds the largest CCGT fleet in Spain with 7.4 gigawatt acting as a backbone to energy security of supply. Furthermore, the group obtained a favorable court ruling confirming the reimbursement of the hydrocarbons tax related to the 2014-2018 period. In Mexico, production and margins remained stable. However, revenues from availability markets and prices declined, mainly due to an exceptionally high revenue base in 2024. Overall, CCGTs remain essential for ensuring system stability with an extraordinary contribution in 2025 following the positive ruling. Let's turn now to Renewable Generation on Page 18. Renewable generation reached an EBITDA of EUR 586 million during the period, slightly above 2024 levels. In Spain, renewable production was 7% lower when compared to 2024, mainly due to lower wind and hydro generation given the exceptionally high levels of hydro production in 2024. This negative impact was partially offset by the commissioning of new installed capacity. In the United States, results are higher when compared to 2024, mainly due to higher production and higher energy prices as the completion of the construction of its second solar plant in Texas. In LatAm, activity continues with impacts due to currency devaluation in both Mexico and Brazil. And finally, in Australia, performance was supported by increased production, more than 100%, driven by the additional installed capacity implemented during the final months of 2024. Investment includes 1.2 gigawatt of power under construction that will come into operation in 2026. All in all, higher results in Renewable Generation due to commissioning of new capacity that reinforces vertical integration and selective growth. Last, moving to Supply. EBITDA has been EUR 535 million, 17% lower when compared to 2024. It is important to remember that in 2024, we had an extraordinary impact due to the positive ruling in favor of Naturgy regarding tariff subsidies. Gas margins have shown resiliency, but negatively affected by regulated tariffs with legal process for recovery underway. In terms of electricity, the group has expanded its client portfolio in a higher competitive environment. However, it was impacted negatively by increasing costs. Finally, our AI-enabled digital commercial platform drives efficiency and improves client service through a significant simplification of product and processes. Overall, stable volumes and margins pressure partially offset by integrated position and operational efficiency. I will now hand it over to our Executive Chairman. Thank you. Francisco Reynés Massanet: Hello. Good morning to everyone. Thank you for joining. And thank you, Steven and Rita, for this wrap-up on 2025 results. I wanted just to spend a few minutes talking about the overview of the transformation we have conducted since 2018, which demonstrates that the company has been focused, as you will see later, in delivering or even exceeding our commitments that were placed in two strategic plans that were already ended. The six key messages I wanted to share with you are about our decision in 2018 to get strongly involved in the energy transition. Our important target to move Naturgy into a more reliable, efficient and derisked company. All this transformation being done under the umbrella or clear financial discipline. As a conclusion of these targets, achieving a much stronger balance sheet, which demonstrates that our commitments are firmly achieved by the hard work of all the team. Finally, as you will see, the conclusions of all this work is that we have improved in the main metrics as return on capital employed, return on equity and total shareholders return. In Page 22, you have it in your hands, and I will not go in big details, but the most important thing is that back to 2018, we have decided to change the face of our portfolio generation, betting on more renewable generation, maintaining the flexibility that our gas turbines are providing to the system and moving ahead in a transformation that has brought us to a very important share of the non-emission technologies. On Page 23, one of our key mantras during the last 7 years has been around making the company more efficient. We really believe that a company will survive as more efficient it is. And the efficiency is shown in this page as an important change from a 36% OpEx over margin to a level of 25% of it. It's important that this work has been done streamlining by all the different business units and in particular, as a demonstration of three pillars that has been driven this efficiency to an end is a portfolio simplification that started back in 2019, OneGrid as a philosophy to extend the best practices across all the business units in the company and leveraging on genAI, in particular, on the commercial field to improve not only our cost, but also our client service. On the other side, and with the aim to make the company more reliable and less volatile, we have been focused every year to secure the level of pricing by hedging our LNG portfolio, we did change it from 30% -- around 30% of volume hedged at the beginning of the period to 100% volume hedged in the last year we closed. In parallel, as a business decision, we have decided that a way to self-hedge our fixed price sales contracts of electricity with clients could only be supported by our inframarginal base of electricity generation. In this period, we have been generating around EUR 40 billion of cash flow -- EUR 41 billion of cash flow. And the solid use of these sources has been divided between three major destinies. One is investment. The second one is shareholders' remuneration and the third one is back to society through taxes and levies. As you can see, this equilibrium has been maintained, in particular, to create a much more solid company for the future with a high degree of investments. The conclusion of this work is that we have been able to reduce our leverage, we're reinforcing the balance sheet and as a result, it provides us a strategic flexibility for the future. The level of rating has been able to be maintained as a BBB from Standard & Poor's. And today's liquidity is already around EUR 10 billion. If you look backwards to 2018 and 2021, there have been two strategic plans in place that were shared with the market in June 2018 and at the end of 2021. Each of it had four important indicators as a target. As you can see in the slide, in all these different targets, the company and the team has been able to meet or exceed the expectations provided to the market with a consistent delivery through the years. In conclusion, the company has created value for its shareholders. If we look at from the ratio point of view, we have clearly increased our efficiency in ratios like return on investment capital and return on equity. As you can see, we were at the time, clearly below our peers. And today, in comparable terms, our metrics are clearly above peers' average. If we will go back to the market and despite of all the different turmoils that may have around the equity markets, the total shareholders return for our shareholders could be clearly above 10%. This is what we have done in this period of work, 2018 and 2025. The company has not stopped. This has been the case since 183 years of existence. And now I think that we want to tackle the most important issues that we have for the year 2026, which hopefully, Steven will clarify to all of you. Steven? Steven Fernández: So thank you, Paco, and I'm super happy to be able to discuss this part of the presentation with you because when we look at some of the questions that are coming in as we discuss this presentation, we think we address a lot of those in this particular area. So we focused on some of the key themes for 2026 that we know the market is looking at. And I would like to start off perhaps with the first one, in no particular order, but on Page 29, a word about the rising value of flexible generation. So we are seeing a structural shift in the Spanish system where CCGTs are playing an increasingly important role. It's worth highlighting that just a few years back, having CCGTs in your fleet was seen as something potentially negative. We kept on defending their relevance, and we are seeing that play out today. So we do see an increase in the value of flexible generation. In Spain, it's worthwhile highlighting that our thermal installed capacity of 7.4 gigas of combined cycles and 600 megas of nuclear, and the CCGTs located in key areas provide grid support and operational flexibility, making the company a best-in-class operator. Potential capacity payments are only assumed from 2027, so not included in the 2026 guidance. In LatAm, as you know, we also have a relevant fleet, specifically in Mexico, where we are engaging in discussions for the extensions of the PPAs. However, we do expect lower margins and lower availability in the excess capacity market for those combined cycles. So all in all, when it comes to the rising value of flexible generation, we see that the fleet's reliability, our flexibility and the fleet's efficiency are one of the key elements of the company's competitive advantages in this business. Another area that I would like to touch on has to do with supply. So we are getting a lot of questions on supply, and we'd be happy to answer most of them. But before we go on to them, hopefully, this slide clears some of the elements. So we continue to focus on competitiveness and operational excellence. So some of the key drivers for 2026 include a stable market share and volumes to preserve margins. So we're not engaging in a battle here to gain market share at all. We rather preserve margins. And this is in the context of a highly competitive environment. We have a well-balanced and vertically integrated position, which is also something worth highlighting. And we are experiencing and focusing clearly on excellence in client service and efficiency, which is supported by the new digital commercial platform the company launched, what we commonly know as NewCo. Some key elements about this. So when we think about NewCo and the impact of this new digital commercial platform, we've seen a simplification and reduction of the number of energy plans offered to our clients from 634 previously to about half of that, 342 in 2025. So there's simplification easier to understand by our clients. We also have improved significantly the first call resolution from 80% in 2024 to 94% in 2025. And this has resulted in an increase in the customer satisfaction levels from 9.4% in '24 to around 9.6% in 2025. We also have more margin visibility into 2026 based on the high percentage of already contracted sales. So for example, if you look at electricity, around 65% and 75% of -- is contracted for industrial and retail segments, respectively. And if you look at it in terms of gas, the numbers are 75% and 80% contracted for industrial and retail segments, respectively. We also have a limited exposure to lower margin regulated tariffs in the sales mix. As you can see, overall, we can say that margin pressure during the year should be contained by our integrated position and high percentage of contracted sales for 2026 and together with what we think are the right ingredients for client retention and attraction. If we move over to another interesting part of the business, which is energy management, we will continue to reduce our gas risk profile. I think the group has been very vocal about this, and we've been able to show very clear successful results. All this while maintaining the security of supply and optionality. So some of the key drivers for this area include an agreement with Sonatrach on the price until 2027, which increases our commercial visibility. And obviously, this is subject to the customary commercial -- the customary authorizations. Moreover, our total gas exposure for 2026 is negligible, thanks primarily to our hedging efforts with risk significantly reduced through 2028. This is made both with U.S. volume hedging and residual positions offset by short sales. In addition, the hedge volumes are closed above current market levels, preserving the company's potential. Our long-term procurement strategy is also focused in prioritizing security of supply and disciplined risk management. So we have made progress on the following areas. We have executed a long-term U.S.-sourced LNG gas procurement agreement with Venture Global starting in 2030, which is public. And we have up to two 2 new bcms under long-term SPAs with additional procurement opportunities under evaluation. So we are actively engaging the market. We also have a proactive management of the upcoming EU ban on the Russian gas imports effective 2027. So all in all, the company keeps reducing the gas risk profile, increasing the visibility while obviously maintaining the focus on security of supply and our optionality. In terms of networks, in Spain, in electricity distribution, the new regulatory framework increases the financial remuneration, as you know, to 6.58%, although with a strong adjustment to OpEx remuneration. Our investment plan in this strategic plan, which I remind you is around between EUR 300 million and EUR 350 million a year, is subject to the approval of the government network planning, which we're still awaiting. So we expect in 2026 to have a one-off recognition of remuneration also from previous years. In gas distribution, we should have the new regulatory framework from October 2026, and that covers a time span of '27 to '32. We expect the current parametric formula to be maintained with some adjustments to remuneration parameters. And we should also see an acceleration in biomethane production and distribution. So Nedgia in that sense, distributed last year 170 gigawatt hours of biomethane, which represents a 53% increase versus 2024. Finally, in gas distribution, we also expect a gradual rollout of smart meters. So in essence, when you look at both areas, both electricity and gas in networks in Spain, we believe that visibility has improved, and we expect stability in gas. If we move over then to renewables, it's worth highlighting that our development remains disciplined and return-focused with 1.2 gigas under construction that will come into operation throughout the year 2026. In Spain, in particular, we'll continue benefiting from our low-risk and flexible portfolio, which is focusing on repowering and battery hybridization. Execution will focus on high-return projects, as you can imagine, and the opportunity to capture value from unique assets, suitable specifically for data centers and pumped-storage solutions. On top of that, 640 megawatts of additional capacity and 115 megawatts of repowering will be fully operational by Q4 '26. In Australia, we will have some additional capacity, around 360 megas, with supply contracts supported via long-term PPAs. And lastly, in the United States, we will see additional capacity to the tune of around 125 megas coming operational in 2026, with supply contracts supported via long-term PPAs of between 10 to 15 years. In addition, in the U.S., we will see asset rotation, and we will seek asset rotation opportunities to projects under development. So overall, I think renewable growth remains focused on profitable and selective investments. This goes to our mantra of value over size. And this will continue to contribute, of course, to our vertically integrated position in Spain. Moving on to biomethane. Biomethane, we believe, in Spain presents significant long-term potential of around 160 terawatt hours because it's an efficient solution to decarbonize the transport, the residential, the industrial sectors as gas networks are already ready to distribute the gas, the biomethane with no modifications. In this sense, Spain's biomethane plants have doubled from 12 to 24 in 2025. Nedgia or the gas distribution business, biomethane distribution has also seen a material increase, as I just previously mentioned. And the forthcoming Spanish policy package should provide regulatory tailwinds from 2026, accelerating biomethane production and the use for decarbonization. So we continue progressing in the development of our portfolio with more than 75 projects, that's equivalent to more than 5.5 terawatt hours despite the investment plan being delayed due to slow administrative processes. So it's worth highlighting that we're admittedly not going as fast as we'd like. And this is shown by the 20 environmental authorizations in Spain versus 140 under review, of which 40 belong to Naturgy. So we continue to become the leading energy player in biomethane in Spain. We continue to push for the right regulation, and we are ready to accelerate our CapEx plan once visibility on this front improves. I'd also like to take this opportunity to discuss data centers a little bit, right? And when we talk about data centers, we work and we deliver results as opposed to deliver expectations with no results. So let's talk about the data center opportunity here. Spain is one of the fastest-growing data center markets. It is supported by competitive costs and a strategic geographic position, which make the country an attractive hub for international data traffic. We believe the company is very well positioned to benefit from this. So we combine 8 gigawatts of thermal capacity with 5.7 gigas of renewables, which, together with our multi-energy focus provide us with the flexibility, and this is very important, to adapt to the clients' energy needs. So in addition, we also offer integrated solutions, combining grid access, energy and network resilience and redundancy. So in this context, Naturgy's business model is evaluating opportunities to monetize suitable power land and provide long-term PPAs and energy services, while the investor retains control of the data center assets. That is our model. We hold close to 3 gigas of locations with suitable access or potential for obtaining access to power consumption, of which around 500 megas in renewables, 400 megawatts in combined cycles and a conservative 2 gigawatt pipeline. So in conclusion, we see this as an opportunity to unlock value with very limited capital deployment. We are working in this area, and we are optimistic in our ability to deliver. We recognize that the process won't happen overnight, that capturing value from DC expansion may take a few years, but we also recognize the unique position the company is in to capture some of this growth. Finally, if I move over to LatAm. This year, we'll see relevant tariff reviews across businesses and the preparation for concession extensions. In Panama, the main drivers will be the 2026 to 2030 tariff review, which should include both inflation and higher losses recognition. And we are also seeing higher demand and the continuation of the ongoing quality upgrade plan. In Mexico, the '26-'30 tariff review will also reflect inflation recognition. And additionally, we expect industrial demand to recover from '25 levels. In Chile, the '26-'29 tariff review will come with full asset value recognition. And in supply, we're seeing a slight margin contraction due to the expected energy scenario. In Brazil, the focus is on the preparation for the concession retender in 2027. So we have a lot of questions about this. The reality is that the government has the ability to retender the concession. We'll look at the tender conditions when and if they are published, and we'll make the decision on whether or not to go ahead. But suffice it to say, the company is uniquely positioned to continue operating these assets. In Argentina, the gas review for '25-'29 was approved in April. And while the electricity tariff review for '26-'30 was approved in February 2026. So both reviews, very importantly, incorporated the inflation recognition. So in summary, we do expect ordinary tariff reviews across businesses in LatAm with demand continued to grow and with the company ramping up and getting ready for the retender of the concession in Rio. And with that, I hand over to our Chairman for the last remarks. Francisco Reynés Massanet: Thank you, Steven. And again, thank you for listening to me. Two important messages for 2026. If you remember, one of the key topics of the strategic plan 2025, '27 was to be a truly listed company again. And that was translated in one word, increasing liquidity. Increasing liquidity has been the aim of what it was behind all our plans during this year, and we have been able to achieve our targets even 2 years earlier than the finish of the strategic plan '27. In terms of liquidity and after the BTO that we launched in June 2025 and after the placement of the shareholder GIP of 7% of its stake by December '25, this is the new configuration of our shareholding base. It's important to remark that now the free float is above 23%. And one demonstration that the company is becoming more liquid is that if you compare the ADTV of shares in January '25 with January '26, the volume of shares traded has been multiplied by 5x. On the governance side, I want to highlight first a very important message. Naturgy's Board is a solid and peaceful room. All the plans that we have submitted to the market for your consideration has been approved by unanimity and all the changes that were going to happen have been also approved by unanimity of its members. Therefore, for many things that has been written, we have the privilege to have a very committed and devoted Board that works for the benefit of all shareholders, large and/or small. What we have done is to adapt the new equilibrium of shareholders to the new circumstances of the bylaws of the company, including a respect of the proportional representation for the stakes of every shareholder. In this regard and after the placement of GIP, the Board unanimously have decided to change one board seat from GIP to IFM. These numbers, which are not only pure mathematics, would also like to reflect the long-term commitment of the shareholders in the company. If we go back -- if we go ahead on 2026 forecast, we want to share with you how we see this year, which has started very bumpy. And as we see a scenario in both energy prices and exchange rates, very challenging. We see a market that is again deteriorating a little versus the last half of 2025. And in particular, in what it reflects to the price of electricity, we are seeing more depressed electricity prices in the first half of '26 compared to last year. When we go to the exchange rates, there are also some visions based on the forwards of last 11th of February that we are seeing a certain stable evolution in Chile, Brazil, probably a little decline in the U.S. dollar and a continuous, now less, decline on the Argentinian peso. With all into account, what we can provide to you today is a vision of our figures in 2026 which, as you will see, may think less affected than this challenging scenario, in particular, because of the proactive hedging policy of our volatile business and our proactive regulatory management of our infra business. We can tell today that we see EBITDA for this year at a level of 2025. Net income slightly below than 2025, but clearly above EUR 1,800 million with an investment around the same level than last year. That will provide us room enough to continue delivering the messages of our commitments and in particular, a dividend that was established as a floor for this year '26 on EUR 1.8 per share. As you know, we regularly pay our dividends in three steps: one after the first half results, the second after the third quarter results and the third at the time of the AGM. If you allow me to close this first introduction after going to your Q&A session, just to remember which are our key fundamental messages for the investment community. One is about 2025 results, strong as committed. Second, about the transformation 2018-'25, a clear transformation from different points of view, operationally, financially and shareholder base. Third, on the guidance 2026, supported by our aim to maintain risk management in our core. Firm commitment to energy transition by investing with financial discipline. A balance sheet that give us this strategic flexibility. Increased free float as part of our key fundamentals. And governance adapted and aligned with long-term objectives and ambitions. Thank you very much for your time. I give the floor to Abel, who will manage the part of the Q&A session. Abel Arbat: Thank you. Thank you, Mr. Chairman, and thank you, everyone, for submitting your questions. In the meantime, we have the pleasure of having some of our business heads joining the discussion and helping us to address the more spicy questions with Pedro Larrea from Networks, Carlos Vecino from the Supply business, Jorge Barredo from Renewables Activity and Jon Ganuza from Energy Management. But before we get into the specific business questions, let's address the more -- the questions more related to the group and business strategy. So starting with guidance 2026. There's a question around underlying assumptions for guidance 2026 and how it compares to the former strategic plan and whether we are comfortable -- still comfortable with the 2027 targets and what offsets the more challenging scenario? Rita de Alda Iparraguirre: Thank you, Abel. So I think we've mentioned during the presentation that we expect increased investment in Networks and also tariff reviews in LatAm, that will bring higher results in the following months. Also, we've mentioned that we have a 1.2 gigawatt under construction of new renewable capacity that will also enter into operation during 2026 and 2027. Third, we still see the thermal generation will remain strong in the following months. And also, I think it is also mentioned during the presentation that there is one positive retroactive impact in electricity distribution in Spain expected in 2026. So I think that all these impacts will compensate for the margin decline expected under energy scenario. Abel Arbat: Thank you, Rita. Now questions on net debt. Some analysts recognize that net debt came better than expected in 2025. And wonder if we can elaborate on the drivers of the increase in net debt to 2026 of EUR 13.5 billion. Rita de Alda Iparraguirre: Okay. So we are expecting to pay some liabilities in 2026 regarding supply contract agreements and also some payments to the CNMC, for example, the one regarding electricity price caps from 2023 that we provisioned, but we have to pay. So therefore, we expect some debt increase in 2026, in line with the guidance. However, operational cash flow will remain solid in 2026. Abel Arbat: Thank you, Rita. In line with the lower-than-expected net debt delivery in 2025, there are some questions around balance sheet capacity. And recognizing that balance sheet capacity, where do we see organic growth opportunities? And also, are we contemplating any inorganic opportunities? And what would be the criteria of these potential inorganic opportunities? Steven Fernández: So thank you, Abel. We recognize that we have balance sheet headroom and flexibility. I think to answer the question, the first thing that we need to remember is that we have a very clear commitment to a BBB rating. So that is fundamental as a starting point of any discussion. To keep that rating right now, we have to meet a number of metrics to focus on one in particular, FFO to net debt has to be above 18%. We're running right now at a level of around 27%. So you can do the math on how much additional leverage capacity the group has. It doesn't mean that we're going to be using it. So we don't want to stress the balance sheet, but it means that we have the ability to deploy or to put our balance sheet to work. When we think about investments, you also have to think about our mantra, which is very clear as well, which is value over size. And we've been following that since 2018. We will continue following that. So by no means are we going to be jumping into the market doing crazy things. We're very rational and very disciplined as a company. So when we divide between inorganic and organic, organic, I think the company has provided you with guidance for year 2026 of around EUR 2.1 billion. In terms of inorganic growth, as you can imagine, we're constantly monitoring the market for attractive opportunities that make sense for the company, that create value for our shareholders, that do not stress us. We're looking for opportunities that are not dilutive, that are accretive from the beginning. We're looking at opportunities where we can actually export our know-how. I think you've seen in the presentation, the track record the company has from '18 to '25. We've been able to develop best-in-class expertise in certain areas. And these are areas that we would look to be able to leverage on when thinking about acquisitions. Do we have anything on the table today? The answer is no. But we do have a very good team that spends a lot of their time looking at opportunities. And when and if one of those fits what we're looking for, then we'll bring it to the Board and decide whether or not we want to go ahead with them. Francisco Reynés Massanet: If you allow me, Steven, just to remark on a very important fact that reinforces Steven's words. Since 2018 until now, that has been more than 7 years, there have been a lot of rumors about different potential projects that the company may get involved. And as you have seen, we haven't lost the financial discipline and our commitment to firmly stay on the words that Steven has said, and I would like to remark, value over size. This is going to continue. And this is the main reason why we are not obsessed about inorganic growth. We are obsessed about value creation. Abel Arbat: Thank you, Steven. And Mr. Chairman. There is a question on the upper end of a net debt-to-EBITDA range, but I think that Steven already answered that by stating our commitment -- our firm commitment to a BBB rating. And as a result, there's not an upper end of net debt to EBITDA, but rather a commitment to a BBB rating. We're more guided around the FFO-to-net debt criteria. There's another question around cash flow and in particular, on working capital. What are the key moving parts of the change in working capital during 2025? Rita de Alda Iparraguirre: Okay. So the evolution of working capital is significantly influenced by seasonal demand patterns, fluctuations in energy prices and also with the negotiation of gas contracts with our suppliers. And this has been the case in 2025. Abel Arbat: Thank you, Rita. There is also a lot of interest around the data center theme. I think that Steven covered very well the topic and our positioning on the matter. But I guess it's worth clarifying a few of the questions. So let's go with them. Are we contemplating any kind of partnerships, and how imminent a deal could be? Also, a deal on power land could be expected already this year. And also, what exactly is the self-consumption capacity for data centers? Steven Fernández: So partnerships, we don't envisage -- our model for development in data centers or to capture the opportunity presented by data centers does not envision any partnership per se. In other words, we're not going to be getting involved in the construction of the data center. We're not going to be getting involved in the running of the data center. We're going to be getting involved in the procurement of energy. We're going to be getting involved in the procurement of permits, and we're going to be getting involved in the selling of electricity and selling of the power land. So that's our business model, right? We do think we have a unique position to capture part of this growth because of the locations where we operate, which are, by the way, generating quite a bit of interest from a number of parties. As to whether or not we should expect any deal this year, all we can say is that the company is working to make this potential a reality. And when we have any news to share, we'll obviously be happy to do so with the market, but we're not going to anticipate things ahead of time. And I think the other question had to do with self-consumption. There's two different alternatives that you can do as a data center, connect directly to the network or do self-consumption, which has its own advantages. The majority of developers are looking for self-consumption. So that's one of the -- that's the area that we're focusing on. Abel Arbat: Thank you, Steven. So we can now move on to the specific questions around the various business units. So let's start with electricity distribution in Spain. And the first question relates to how the new regulatory framework for electricity distribution in Spain affects us in terms of our investment plans or strategic ambition? Rita de Alda Iparraguirre: Okay. Thank you. So as you all know, the CNMC has already published a definitive resolution for the new regulatory framework covering the 2026-2031 period. The published proposal introduces a shift to an OpEx-based remuneration model with an increase in the contribution rate to 6.58%. This new model finally defines investment cap in 0.13% of gross domestic products. The group considers that this new regulatory model creates value and provides the distributor with a solid growth path for the coming years that is consistent with our strategic plan estimates. Abel Arbat: Thank you, Rita. Another question also related to the new framework, and it relates to our views around the new OpEx standard and the new incentive mechanism, if we could share our views on the new regulatory changes. Rita de Alda Iparraguirre: So we think that the new model fails a little bit in order to incentive -- to be more efficient in the future. That's our perspective. Abel Arbat: Okay. Also, during the presentation, we mentioned the retroactive one-off recognition from previous years. Can we clarify the concept behind this recognition, this one-off recognition? Rita de Alda Iparraguirre: So this is mainly contribution related to maintenance activity from previous periods in the past that depends on court rulings that are currently being published. Abel Arbat: Okay. Thank you very much, Rita. Let's now move on to questions around our gas distribution activities in Spain. And there are a number of questions around our expectation for the new regulatory framework in gas distribution for the period 2027 to 2032. Rita de Alda Iparraguirre: Okay. So regarding timing, we are expecting a first draft of the remuneration methodology should be ready probably the next month in 2026 as the final distribution model should be expected by the end of the year. From our point of view, continuing with the parametric model will be a desirable option to provide both stability and predictability to the sector. I want to highlight that the current model has proven to be efficient. It has provided system stability and the remuneration has fallen significantly in the recent years as a result of the drop in demand. However, parameters should be -- should reflect exceptional inflation of the current period. Furthermore, we foresee this new regulation as the opportunity to incentive renewable gases, smart metering and the decarbonization of the gas networks. Pedro Larrea: Maybe just highlight that we have been arguing and I think everybody is now acknowledging that gas networks are a strategic asset for energy in the country. Gas networks actually distribute 1.5x the amount of energy that electricity networks do, and they are around 6x more efficient than electricity networks. So -- and by the way, gas demand has been increasing consistently for the past 20 years. So everybody, I think, today is acknowledging the long-term strategic value of gas networks in Spain. Abel Arbat: Thank you very much, Pedro. So moving now on to networks in Latin America. The first question is around the retender process for the Rio de Janeiro concession, and if we can share any updates or views on the matter. Unknown Executive: Well, a public process for extending concessions is the base case. In this case, there was an opportunity, at least the [ regulator threw it ] like this, that it could have been more efficient to make a renewal with the current concession holder, but just the politics timing in the Rio de Janeiro state haven't made this possible. So we are now back to the base case of renewing within an ordinary process. Pedro Larrea: And maybe two comments on my side. One is we have been in the past 2 years, having a very candid and open relation both with government and regulator, and we have been successful in unlocking a number of discussions we have been having like tariff reviews, asset values, et cetera. And we plan to continue to do so. So we will continue to be openly having open conversations with both regulator and government. Second is that there is no questioning of our management of the concession of our management of the assets. So there's no negative valuation of our performance as a concession holder so far. And we will continue again to have this open relationship with the government and see what comes out of the retendering. And there is a number of regulatory discussions that are open and that we are having just as normal course of business. Abel Arbat: Thank you very much, Pedro. One last question on regulatory networks in LatAm, and it mainly relates to the key drivers coming into 2026 and 2027. Rita de Alda Iparraguirre: Okay. So regulatory management continues to be a key priority in Latin America as we aim to obtain tariff reviews in most of our distributors in LatAm and updates which compensate for ongoing inflation and FX depreciation as well as tariff updates that reflect investment plans in those geographies. I think it's important to highlight that in the case of Argentina gas, the new tariff review published this year includes monthly adjustments for inflation, which is a very important milestone regarding high inflation rates in this country. Abel Arbat: Thank you, Rita. And a final question on not networks, but on Latin America. And it's related to the reclassification of our Chilean renewable assets that are now reclassified as held for sale. So why is that a decision? Is there any read-across for other renewable assets in Latin America? Steven Fernández: So thank you, Abel. No, there is absolutely no read-across for any assets in LatAm or anywhere else. The reason why those assets are held for sale quite simply is because they did not meet or are not meeting our return requirements. Abel Arbat: So let's now move on to the energy management questions. So starting with the more generic questions. So what is the -- our views on the gas outlook and the expected performance of the energy management division in 2026 and 2027 compared to the strategic plan? Rita de Alda Iparraguirre: Okay. So regarding energy scenario forecast for the next months indicate a moderate gas price level environment in Europe, mainly driven by increasing exports from the U.S. However, we are nearly fully hedged this year, and we have margin visibility throughout the next months. Regarding contracted volumes, we anticipated already in the strategic plan that we will have lower contracted volumes in 2026 due to contract expirations. And these effects will be mitigated through our diversified gas portfolio and our ability to access to market volumes. Overall, while we foresee a more challenging environment in the next few years, due to rising global LNG exports that we actually anticipated this in our strategic plan, we rely on LNG as a key enabler of the energy transition in the future. That's why we signed a new contract with U.S. gas suppliers starting in 2030. Abel Arbat: Thank you, Rita. Tons of questions around the levels of hedging and exposure and sensitivity to moves in the TTF, Brent and Henry Hub. I think that throughout the presentation, we clarified and guided towards the very limited sensitivity and the high levels of hedging. But if there are any comments that we can add, please? Jon Ganuza de Arroyabe: No, I mean, basically -- thank you, Abel. If we are hedged for 2026, that means that we are -- we have no impact or negligible impact associated to any variation on the TTF or Henry Hub or even power prices. So I think that for 2026, we are fully hedged. And for 2027, we are mostly hedged and the same could also be said for 2028. Abel Arbat: Thank you very much, Jon. Also, a question on the Sonatrach price review. And if we can comment on the main elements of that review and why it's helpful to the group. Jon Ganuza de Arroyabe: Of course, we cannot disclose any of the commercial details, but I think that the most important thing is that it allows us to have a 3-year outlook of how the prices are going to evolve. That helps on our supply business, it also helps in our overall cash position. But especially, I think that it strengthens the relationship, the long-term relationship partnership that we have with Sonatrach, and it reflects that we can work even in a challenging condition or environment like the one that we've seen in the past few months and the past few years. Abel Arbat: Thank you very much, Jon. A few questions as well on the European ban to importing gas from Russia. What is the current status? And what are the sort of alternatives that we are considering in line of the current situation? Jon Ganuza de Arroyabe: So I think that we always talk about the ban, but actually, there are two overlapping measures that have different scope and different time line. On the one hand, we have a sanction that is a full ban on Russian LNG. So it not only covers that we could not import LNG to Europe, but we could not do anything with the LNG. But the time line of that sanction is until July 31 of this year. And if it doesn't review, it will die off. And then there is the second measure that is the ruling that was approved by the European Parliament in February. And the scope there is more limited. The scope of that ruling, it limits itself to the import of Russian LNG to Europe, but it would allow eventually diversions to other markets or other countries. So I think that the first thing that we have to look out is whether the sanction will be renewed on July 31 or not, and that would mean a different scenario for a company like ours. Abel Arbat: And finally, on this business unit also a few questions related to acknowledging that we signed a new contract with Venture, are we looking for other alternatives to replace or to top up our current gas procurement volumes? Jon Ganuza de Arroyabe: So I think the security of supply in energy is a bit like the saying that you have in English that you fix the roof only when it rains, and we don't like to work that way. We think that we have to work in advance. And that's why we are always looking to different procurement solutions that would increase the security of supply and would increase our diversification. We are having talks with the different parties. And if we find something that makes sense and is sensible for both parties and it strengthens our supply procurement portfolio, of course, we will move ahead with that. Abel Arbat: Thank you, Jon. So now moving on to the thermal generation, particularly a number of questions in Spain. So what's our view on the outlook for 2026 and beyond on the role of CCGTs and its contribution by ancillary services? How sustainable do we think this is? Rita de Alda Iparraguirre: Okay. So as we mentioned during the presentation, we don't expect capacity payments in 2026. We expect them to be published for 2027. And what we see is that CCGTs will continue to play a key role in this -- in the current environment, and we don't expect this to change in the near and the medium term. This translates into higher demand and production in ancillary services market that guarantee the system stability and the security of supply. We are nevertheless taking a more conservative assumption in CCGT's production for 2026. And also, it's important to understand that probably the launch of new voltage control markets, the entry of new batteries or the development of new infrastructure will obviously influence some restriction in the future, but we insist that CCGTs will remain essential as a backup technology. Abel Arbat: Thank you, Rita. Moving on to a few questions on the renewable businesses. And the first one relates to renewables in Spain. We continue to invest in renewables in Spain. There is around EUR 430 million of growth CapEx in 2025. Do we still find returns are reasonable? What kind of -- what's our focus in Spain and our competitive advantage? Rita de Alda Iparraguirre: Okay. So regarding renewables in Spain, we are conscious that they face significant challenge, for example, delays in permitting and also limited profitability due to negative prices. However, for this reason, we are focusing our investment during the next months in repos of existing wind plants and also in batteries and finishing the projects that we have under construction. As we always defend, we seek a multi-technology and balanced position that allows us to meet the demand of our customers. And we are, therefore, committed to renewals, but always under selective growth that guarantees profitability. Abel Arbat: Thank you, Rita. There is also a related question around our views about curtailments and how we see the curtailments evolving this year and in the current dynamics, I guess. Rita de Alda Iparraguirre: Okay. So curtailments of renewable energy have increased significantly in the recent months. We expect them to decrease with the entry of new storage capacity in the next months and years. Abel Arbat: Thank you, Rita. There is a question about the amount of hydro, nuclear and renewable terawatts in Spain that we have hedged already. I think I guess it's worth highlighting our positioning between how we manage our power generation and supply. Rita de Alda Iparraguirre: So I think we have several times mentioned that we have an integrated position. So we sell at a fixed price, the energy that we produce. So in this sense, we have a hedged position between production and sales. Abel Arbat: Thank you, Rita. So we can now move on. There's a question around biomethane. And so what's our latest views on the current state of administrative authorizations and the potential of this activity? Rita de Alda Iparraguirre: Okay. So we are expecting a policy package to be published in 2026 that will accelerate biomethane production and its use for decarbonization. In this sense, the group has, during the last years, made a strong progress in the development of biomethane portfolio with more than 75 projects in pipeline and 40 of these projects are already waiting for permitting. However, our investment plan has been delayed by a slow administrative process. We expect administrations to collaborate in order to achieve these objectives. But however, this means that 2027 investment plan will be partially delayed. Abel Arbat: Thank you, Rita. So moving now to the last part in the Supply business. So our Supply EBITDA performance has dropped versus last year. How could we describe the competitive landscape in Spain between electricity and gas? Rita de Alda Iparraguirre: Okay. So generally, the sector is experiencing high levels of competition and churn ratios, especially in electricity, and we expect them to remain both in retail gas and electricity. Even in this context, the group has expanded its client electricity portfolio. On the other hand, a substantial portion of the customer portfolio for 2026, more or less 70% or 80% of our sales have already been contracted. This provides us a strong visibility into next year margins, which remain solid. Finally, the group is focusing on excellence in client service and efficiency, supported by our new digital platform that we call NewCo. Abel Arbat: Thank you, Rita. Okay. So -- and also a question on Supply around the evolution of our Supply margins and whether or not we are maintaining market shares in both gas and electricity segments. Rita de Alda Iparraguirre: Yes, we expect volumes to remain solid, as I've already mentioned, we've already -- we have most of our customer portfolio already contracted, and we see continuity in this sense. Abel Arbat: All right. Many thanks, Rita, and this finishes the questions that we've received through the webcast. So thank you, everyone, for joining the presentation. The Capital Markets team remains available for any further questions you may have. And the management team is going to be on the road for the coming weeks in London, Continental Europe and the U.S. So we hope to see as many of you as possible. And many thanks again. Thanks, everyone, for joining.
Operator: Good day, and thank you for standing by. Welcome to the BAE Systems 2025 Preliminary Results Conference Call and Webcast. [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, Paul Checketts. Please go ahead. Paul Checketts: Welcome to BAE Systems 2025 Full Year Results. I'm Paul Checketts, Director of Investor Relations. And with me, I have Charles Woodburn, our Group Chief Executive; Tom Arseneault, Chief Executive Officer of BAE Systems, Inc.; and Brad Greve, our Chief Financial Officer. Charles, over to you. Charles Woodburn: Hello, everyone, and thank you for joining us this morning. Before we begin, I want to thank our employees, trade unions and supply chain partners for the tireless work they do to ensure we deliver on our commitments to our customers. Delivering reliably on our mission to protect those who protect us is vitally important given the increased threats to security around the world. There are 3 key messages I'd like to leave you with today. First, 2025 was another year of strong performance. We delivered solid growth in revenue, profit, earnings per share and order intake and once again, cash flow was high. Second, the breadth of our business across air, land, sea, cyber and space and across multiple geographies puts us in an exceptionally strong position for both current and future opportunities in defense. And third, we are confident in the future growth we can deliver and the duration of that growth. We delivered strong outcomes in 2025. Sales and EBIT both grew at double-digit rates. Cash generation was high, and we secured GBP 37 billion of new order intake, demonstrating strong demand for our products. Our order backlog increased to a new record of GBP 84 billion, around 3x our annual sales. At the same time as focusing on delivery today, we're preparing for our future. Part of this is investing in research and development and CapEx. Our collective spending on these in 2025 was our highest ever. These results extend the track record we've built over multiple years of strong financial and operational performance and demonstrate our value compounding model in action. If we step back and look at our performance over the last 5 years, the story is compelling. At constant currency, our sales are up more than 50%. That's around 8% compound growth each year. We've also steadily expanded our margins, adding around 100 basis points or roughly 20 basis points a year. And because of that, our EBIT has grown even faster than sales, up by more than 60%. Earnings per share have been even stronger, increasing by over 70%, which equates to a 12% compound growth rate. Importantly, we continue to convert earnings into cash at a very high level. Across these 5 years, we've generated more than GBP 11 billion of free cash flow. And that cash gives us real strategic flexibility. It's allowed us to reinvest in the business to support further organic growth and to make targeted value-enhancing acquisitions. It's also supported increasing shareholder returns with dividends per share growth at around 9% a year. So overall, we're delivering strongly and consistently across the key financial metrics, and we see a very clear path for further progress. Our business has an outstanding geographic footprint. We have established positions in some of the largest defense markets in the world. This gives us an excellent breadth of opportunity and reduces the risk and volatility that comes with being more concentrated. Across all our key regions, defense spending is increasing because of the growing threats to national security. In each of our markets, the work we've done to invest in and position our business means our existing proven portfolio of capabilities aligns well to customer priorities. We'll look at Europe and the U.S. in more depth shortly. Here in the U.K., the government has committed to the largest sustained increase in defense spending since the end of the cold war. The U.K. Strategic Defense Review set out its vision for defense to move to greater warfighting readiness and to act as an engine of U.K. economic growth. It committed to invest in both our long-term programs and new disruptive technologies. We formed a new joint venture with industrial partners in Japan and Italy to design and develop the next-generation combat aircraft under the Global Combat Air Program, or GCAP. More broadly, Japan is on a path to double its defense spending by 2027, and we're exploring how we can support the country in other areas of defense capability. Australia is also increasing its defense spending. We're already the largest defense contractor in Australia and through the Hunter class frigate program and SSN-AUKUS, where we'll deliver state-of-the-art nuclear-powered submarines, we expect strong long-term growth. The geopolitical situation in the Middle East is likely to drive higher defense spending in the region. The largest defense market there is the Kingdom of Saudi Arabia, where we have a 60-year track record of partnership. Their 2026 military budget is expected to increase by 5% and areas of long-term focus include combat aircraft, missile defense systems, naval vessels and further increasing the localization of defense spend. Across the globe, our growth opportunities are significant, and we're focused on consistently executing our long-term strategy to deliver strong top line growth, margin expansion and cash generation. Over the past 12 months, there have been 3 consistent themes that have come up in our discussions with investors. First is our exposure to Europe, considering the rising threat posed by Russia, which is now driving increased defense expenditures in the region. The second is our shareholding in MBDA, given the growing significance of this business as Europe's preeminent manufacturer of missile systems. The third is the evolution of modern warfare and why we feel so confident in the continued and indeed increasing relevance of our portfolio, particularly in the light of new opportunities such as Golden Dome. As a result, we wanted to spend a few minutes focusing on each of these areas in turn, bringing Tom in to cover our U.S. business. The last year has seen a profound change in Europe security situation with the continent facing an acute and growing threat. In response, most countries are now significantly increasing the amount they spend on defense, underpinned by their commitment to meet NATO's target by 2035 of 3.5% of GDP being spent annually on core defense requirements and 5% in total. We're one of the leading defense companies in Europe, and our business is going from strength to strength. When you look across the continent, our equipment and services are integral to the defense of more than 25 countries. We have great capabilities across multiple areas, including combat air, land vehicles and missile systems. Growth for us in Europe is higher than the overall group. And at the same time, our order backlog has increased materially, now representing 32% of our total compared with 11% of our current annual sales in this region. To support our customers as they look to rebuild defense readiness, we're investing to support increased capacity, efficiencies and enhanced capabilities. An excellent example of our critical role in the defense of Europe, both today and in the future, is MBDA. As a reminder, MBDA provides sovereign capabilities to Europe and is a shining example of European defense collaboration. It's a joint venture between BAE Systems, Airbus and Leonardo with our shareholding totaling 37.5%. MBDA is a world leader in missile systems and the #1 player in Europe. Their portfolio has excellent breadth with products in service with more than 90 armed forces around the world. When you look at the critical areas where Europe and its allies are looking to rapidly improve defense readiness, MBDA has proven products. Areas of strength include air dominance since MBDA provides weapons for more than 10 different combat aircraft, including Typhoon, Rafale, Gripen and KF21. In air defense, they have capabilities across land and sea, including counterdrone, short-range air defense and medium range, including antiballistic missile threats. For longer ranges, they have a complete array of deep strike precision products, all of which makes MBDA extremely well positioned to benefit from increased defense spending as European and other nations focus on growing their weapons capabilities and inventories. You can see the high demand for MBDA's products and their momentum since 2021. Since Russia invaded Ukraine, order intake has stepped up from a cadence of around EUR 4 billion per year to EUR 13 billion. The order backlog has increased by 150% to EUR 44 billion or 7.5x annual revenue. And over that 4-year period, revenue has increased by 37%, a compound average growth of 8% to EUR 5.8 billion with improving momentum in recent years. MBDA is investing to fulfill orders and support customers' urgent needs. Significant funds are already committed over the medium term. They're renewing sites, accelerating digitalization, significantly increasing production capacity, investing in their supply chain and developing new products and technology. The combination of investing in the business, the high order backlog and the alignment of the portfolio with customer needs mean MBDA is positioned for continued strong revenue growth in the coming years. I'll now hand over to Tom, who will explain why we are confident about the outlook for our business in the U.S. Tom Arseneault: Thank you, Charles. Across the U.S. business, our strong performance in 2025 reflects our continuing efforts to align our portfolio strategy with evolving U.S. government defense and intelligence priorities. This enables us to support a broad range of programs and deliver for our customers with speed and at scale. We remain well positioned in areas the U.S. administration is clearly focused on. National security space and missile defense capabilities will play critical roles in the Golden Dome architecture, and we support a number of the key mission solutions, which underpin it. For example, as a result of emerging demand for the Terminal High Altitude Area Defense or THAAD interceptor, we expect a fourfold increase in production of our THAAD Seeker over the life of the 7-year contract. Our critical electronics and sophisticated apertures will also factor into the production ramps of other key munitions such as the long-range anti-ship missile or LRASM. Production of these additional key munitions will at least double in the coming years. Our teams are also rapidly developing and delivering cost-effective counter-UAS capabilities. Last year, we were awarded a new 5-year IDIQ contract worth up to $1.7 billion from the U.S. Navy to produce additional APKWS kits. This precision munition is combat proven for both surface-to-air and air-to-air engagements against hostile drones. And our platforms and services team has expanded its maritime business, allowing us to apply our highly skilled workforce and industrial capacity to contribute to the U.S. submarine and surface ship industrial base in addition to ongoing ship repair and modernization support for the U.S. Navy and commercial customers. While we have been investing in capacity and innovation for many years, the current market environment and long-term demand signals present additional opportunity. Since 2020, the businesses across our U.S. portfolio have invested more than $4 billion to expand production capacity and advance our research and development to deliver growth. To further support that growth, our workforce has increased by nearly 14%, and we've expanded our footprint by more than 2 million square feet. While there has been considerable focus on supporting the record production rates associated with key munitions demand, we have also been leveraging investments in a number of other important areas. In our Electronic Systems business, we have been investing to modernize and expand our microelectronics center to triple our production capacity for critical electronic components, supporting electronic warfare and other applications. Our Space and Mission Systems team has invested to develop Elevation, a new series of cost-effective modular spacecraft that will deliver world-class reliability and performance. An Elevation spacecraft has already been selected for the $1.2 billion resilient missile warning and tracking program we won last year. Supported by previous investments in combat vehicle manufacturing and robotic welding, we anticipate more than doubling our vehicle production compared to 2024 levels. In the maritime domain, our new state-of-the-art Shiplift in Jacksonville, Florida is now operational and will increase the capacity of that shipyard threefold. These are but a few examples of our investments in capacity and key technologies to support growth and ensure we deliver to our customers at speed and at scale. With that, Charles, I'll hand it back over to you. Charles Woodburn: Thanks, Tom. Technology and innovation sit right at the heart of our strategy and have done for many years. In 2025, we took that commitment further, increasing our self-funded research and development to a new record level. Let's look at how we develop the next generation of defense capabilities and our competitive advantages in technology. Areas of the defense market are developing at a rapid pace. Technology is being embraced and a number of companies are competing, including new entrants who often don't come from a purely defense background. This includes in drones, counter-drone systems and autonomy more generally. While it's a competitive market, solving the complex problems involved in producing equipment that works in a warfighting domain is extremely difficult. We bring together an understanding of our customers' operational needs with an understanding of the operating environment, agile software capability, differentiated hardware and an ability to successfully integrate the various elements rapidly and crucially the capability to scale up production quickly. I'll give you some examples to bring this to life. First, our platforms and products are deployed on the battlefield today, which gives us firsthand understanding of our customers' operating environments in real time. For example, our Callen-Lenz drones have proven themselves to be resilient and capable in extremely contested electronic warfare environments, and we take all these learnings into other products across our portfolio. A second highlight is our agile software capability. We are actively using generative AI to allow drones to understand the commander's intent and then configure their own software to best deliver that mission need. And we wrap these capabilities within well-understood assurance methodologies, which means the drones are only able to operate within the parameters set by their human operators. This enables rapid introduction of new behavior models and allows the drone to perform missions that were not originally envisaged. Next, consider our differentiated hardware. While software can define the optimal tactics for deploying artillery, being able to implement these tactics still requires a platform. Our mobile artillery system, ARCHER, can deploy fire 4 rounds and leave the location before the first round has reached its target. Now to integration. Bringing together the APKWS precision guiding munition from our U.S. business, heavy lift quadcopter technology from our Malloy acquisition and expertise in weapons integration from FalconWorks, a major step was achieved when we successfully used the drone to shoot down another drone. In just 4 months, we moved from concept to successful live firing trials. Finally, our APKWS technology more generally is a great example of how we can scale up quickly. It has brought down the cost of counter drone technology by so much that it's similar to the cost of the drones it targets. We've now produced over 100,000 units in total. And by the end of this year, we anticipate more than doubling our production rate compared to 2024. Our combination of established multi-domain expertise, decades of delivery and agile software capability gives us an advantage that many of our competitors simply can't match. It provides our customers trusted, differentiated solutions that have proven to work on the battlefield, and these provide us with a competitive advantage. And now over to Brad for the financials. Bradley Greve: Thanks, Charles. It's been a really strong year for the business. We delivered a record year in sales for the group with a 10% increase while building our backlog to an all-time high of GBP 84 billion. Our focus on efficient delivery contributed to a 12% increase in underlying EBIT, and we posted a double-digit increase as well in earnings per share. Free cash flow at GBP 2.2 billion was above our guidance with the benefit of strong delivery and material customer advances. This free cash was after double-digit increases in R&D and continued high levels of capital expenditure. And after all of these increased internal investments, we returned GBP 1.5 billion to shareholders, in line with our disciplined capital allocation policy. All of these numbers highlight the health and effectiveness of our value compounding model. I'll now break these results down in more detail. And as usual, when comparing results to prior periods, I will use a constant currency basis. With orders of GBP 37 billion, the book-to-bill was 1.2 and reflected the continued relevance of our broad technical and geographical reach. Key orders in the year featured close to GBP 9 billion in electronic systems orders. This included GBP 2 billion from our space business, featuring the missile warning and tracking satellite systems for the U.S. Space Force. GBP 6 billion in our P&S business, including significant orders in Europe for Hägglunds and Bofors and over GBP 2 billion for U.S. combat vehicles. The air sector recorded GBP 15 billion, including the Typhoon win in Turkey and GBP 4.2 billion in MBDA. Our Maritime business recorded GBP 5 billion of orders, including increased funding for submarines. And finally, the Cyber and Intelligence sector recorded a further GBP 2.7 billion. Our record backlog, together with the pipeline of incumbencies sets us up well for continued growth over the medium term. We grew sales by 10% to reach GBP 30.7 billion with growth across all sectors. Organic growth was 9%. Platforms & Services led the group with a 17% increase, hitting GBP 5 billion for the year. European growth in Hägglunds and Bofors was over 30%, while our U.S. combat vehicle business grew by 15%. Maritime continued to grow in double digits, up 11% to GBP 6.8 billion, with strong growth in design work for the SSN-AUKUS submarine and double-digit growth in Australia. The air sector rose by 9% to reach GBP 9.3 billion with 17% growth in MBDA, GCAP ramp and continued growth in drone sales and FalconWorks. Electronic Systems sales rose by 8%, paced by double-digit gains in EW sales, strong contributions from our precision strike and sensing activities and the full year contribution from the space business. Finally, Cyber and Intelligence was up 2%, predominantly on gains in counter-drone sales. Group EBIT of GBP 3.3 billion was up 12%, and our margin of 10.8% represented 20 basis points of expansion. This means over the last 5 years, we have delivered 100 basis points of expansion. The largest gain in EBIT came from P&S with 30% growth to reach GBP 576 million. Margin climbed to 110 basis points to 11.4%, with accretion on higher full rate production volumes from AMPV and growth in our European businesses. Electronic Systems EBIT rose by 12%, with margins growing by 50 basis points to 15.4%, including a strong contribution from SMS. The air sector EBIT grew by 10% with margins of 11.9% at the high end of our guidance range. Maritime margins reflected the early-stage maturity of the portfolio with several first-in-class programs trading at relatively low margins. We expect margins to improve in 2026 and beyond as these programs mature and as key milestones are achieved, allowing for risk release. Cyber and Intelligence EBIT was up 15% with a full year of Kirintec included. Organic growth for the sector was 10%. The group delivered operating cash flow of GBP 2.8 billion, significantly higher than our expectations as large customer advances were received very late in the year. With close to GBP 1 billion of CapEx, we once again invested at levels substantially higher than depreciation with capacity expansion and efficiency investments across the portfolio. There was a reduction in net advanced inflows in 2025 compared with 2024 in P&S and Air, which is the primary driver for the reduction in operating cash flow. Our free cash flow after netting tax and finance costs was GBP 2.2 billion. The strong performance contributed to a 22% reduction in net debt, which landed at GBP 3.8 billion. Excluding lease liabilities, the net debt to EBITDA was 0.9x. Our strong balance sheet provides excellent optionality to support our growth ambitions, and it was good to see this month's rating upgrade from Moody's, taking us up to A3. Turning now to guidance. We anticipate another strong year of sales with a 7% to 9% growth range, supported by the record backlog. Strong sales in air and continued growth in Europe for P&S should drive both sectors up in the 9% to 11% range, while growth in space and EW should drive growth in ES in the 6% to 8% range. Growth in maritime and cyber are expected to be in mid-single digits. EBIT should grow above sales with more margin expansion expected. Our guidance is for a 9% to 11% growth in profitability across the group. Earnings per share should grow in line with EBIT at 9% to 11% despite a higher tax rate anticipated in 2026. Regarding free cash, we do not include material advance receipts in our guidance. As you have seen in 2025, this can result in large positive variances. But given the difficulty in predicting these, we exclude them from guidance. We do include the anticipated unwind of existing advances. For 2026, we expect free cash flow to exceed GBP 1.3 billion, reflecting advanced unwinds and continued high levels of CapEx investment planned. So with the strong 2025 delivered, our guidance for 2026 demonstrates our confidence in the continued high performance of our business across all key measures. I'd like to discuss the 3-year cash delivery in a little bit more detail. Our consistency in hitting our 3-year guides continued in 2025, where we recorded GBP 7.3 billion over these last 3 years. For the next 3-year period covering '26 to '28, the target we are setting today is to exceed GBP 6 billion, including an assumed unwind of advances and high levels of investment to support growth. I'll end my section of the presentation with a quick reminder of our consistent value-creating capital allocation model. The first rung on our ladder is investing in the business, specifically in our people, facilities and technology. From the skills academies we opened to our commitment to early careers programs and a constant focus on building strong teams and leaders, investment in our people is essential to delivering our strategy. We have invested over GBP 1 billion since 2020 on education and skills. Our investments in CapEx to increase the efficiency in how we deliver to our customers as well as expanding the capacity of what we deliver continues to be maintained at very high levels, helping us to drive growth. Our investments in CapEx are over GBP 4 billion since 2020 and are now averaging close to GBP 1 billion a year. And our higher investments in self-funded R&D help to increase differentiation and open new revenue streams. These investments have increased by 70% since 2020 and programs like the APKWS illustrate how these convert to value. The second rung of the ladder is our dividend, which is covered approximately 2x by underlying earnings. Our dividends have increased for 22 consecutive years. And today, we have announced a 10% increase for our full year 2025 dividend. While maintaining our strong balance sheet with a focus on preserving investment grading, we have strong optionality to use M&A to grow the portfolio as we have done successfully over the last several years with over GBP 6 billion invested since 2020. And finally, when there is surplus cash after all of these allocations, buying back our shares has proven to be another important way we return cash to our shareholders, and we have retired 9% of our ordinary share count since the program started in the summer of 2021. So handing over to Charles with a final comment that our value compounding model has led to a high compound annual growth rate in both sales and underlying EBIT over the last several years, significantly enabled by this consistent approach in the allocation of capital. Over this time, we have also converted cash at very high levels. With our record backlog and pipeline, we are very well positioned for continued strong delivery across the medium term. Over to you, Charles. Charles Woodburn: Thanks, Brad. Looking ahead, we're well positioned to keep building on our momentum. A key strength of BAE Systems is not just our near-term growth, but the visibility we have over the long term. Our order backlog and incumbent program positions total around GBP 260 billion, nearly 9x our annual sales. This includes both shorter-cycle products such as drones, counter-drones and munitions, where we're currently experiencing high growth but also critical multi-decade programs such as frigates and submarines with long-term embedded value. Some of our biggest programs like the Global Combat Air program and SSN-AUKUS submarines don't come into full production until the mid-2030s and beyond. The combination of our order backlog, incumbent positions and a strong new business opportunity pipeline due to rising defense spending gives us the visibility and confidence that we can deliver strong growth for an extended period. Bringing this all together, what should it mean for investors? The combination of our exceptional breadth of world-class defense products and capabilities, strong positions in some of the largest defense markets in the world, a continued focus on execution while increasing our investments in technology and innovation and a large backlog of long-term work with significant new business opportunities means we're confident we can deliver strong revenue growth that is both visible and sustainable over multiple years with higher margins and strong cash generation, all of which will be amplified by our disciplined capital allocation, giving us enhanced visibility on our value compounding model. Many thanks. And with that, we're ready for your questions. Operator: [Operator Instructions] And now we'll go and take our first question and it comes from the line of Ross Law from Morgan Stanley. Ross Law: The first is just on the U.S. budget and the potential upside there for fiscal '27. Are you actually planning for a GBP 1.5 trillion (sic) GBP 1.5 billion scenario? And when would this increase flow through to your P&L? Second question, just on Europe. You highlighted that it's 11% of sales, but 32% of the backlog. And what do you expect the mix of European sales contribution to trend to midterm, please? And then lastly, just on MBDA, how should I think for the growth outlook there in terms of CAGR? Charles Woodburn: The first one, U.S. budget upside. Tom, do you want to take that one? Tom Arseneault: Yes, sure. I think we're very encouraged by the trajectory of the budget. I mean how that -- how the 2027 top line ends up remains to be seen, but it certainly is heading in the right direction. It is not part of our current guidance. And so we do see upside in there. And to the extent we've worked to align ourselves well with the National Defense strategy and various priorities that fall out of that, I think we are well positioned. The Golden Dome, for example, we talk about the recent wins in the base layer and our involvement in the interceptors, FAD and others. And so I think you'll see some of the budget applied there as well as shipbuilding. We've recently pivoted some of our maritime solutions to be the better part, as I mentioned earlier, of the shipbuilding, the submarine and surface ship industrial base. And so I think we are well positioned to the extent that budget heads in that direction, we're all encouraged by that. Charles Woodburn: So on the European composition, I mean, clearly, it's going to grow quite significantly with that 11% European ex U.K. in our current sales and 32% in the order backlog. Quite what the final number ends up being, I think it's a bit hard to tell a lot depends back on things like U.S. budgets as to the rate at which they grow, the relative rate of other areas. So I think it's a bit hard to judge, but we are looking at significant growth over the next 5 years as we build out that backlog. On MBDA, Brad I mean we've had already a pretty rapid growth. I think it was 17% year-on-year growth last year to the year before. But do you want to comment a little bit on the outlook for that business? Bradley Greve: Yes, I'll just echo too, on Europe. We -- GBP 3.6 billion of sales in Europe in 2025. That is against GBP 2.8 billion in 2024. So you can already see how our European revenue growth is really accelerating. And actually, our European business is bigger than our KSA business now. So I think that's worth reflecting on and positioned for continued growth. I think MBDA has been a really strong 2025 with over 17% growth. And Charles laid out some of that backlog that they've got. So sometimes revenue there can be a bit choppy because it's point on delivery revenue recognition. So some of that revenue growth may not be even. But with that backlog they've got, we expect really continued high levels of growth for a long time to come here. And also, Charles mentioned the production capacity investments that they're making, that will allow us to accelerate growth over the medium term once those get online. So I think all of this points to a really strong outlook for MBDA on the back of what's already on a pretty strong run for that business. Operator: And the question comes from the line of Robert Stallard from Vertical Research. Robert Stallard: I've got a couple for you this morning. First of all, this might be for Tom and Charles. Given the broader industry trends, are you expecting much higher CapEx in your U.S. business going forward? And in relation to that, are there any limits you potentially see on your flexibility on returning cash to shareholders? And then secondly, you highlighted the growth potential in MBDA and the rapid growth you've seen already. We've seen one of your peers in the U.S. announcing plans to spin a minority stake in its missile business. Is there any chance of a similar move for MBDA? Charles Woodburn: I think on the MBDA, I think we're very happy with the business. We don't see any particular need to change the structure or the holding system at the moment. We're just pleased to see the performance and keep supporting it. On CapEx, I'll maybe leave that to both of you, Brad and Tom to say a couple of words on it. But I would come back to the fact that we have because of the good performance of the business, ample capacity to invest as we have been at record levels. If we needed to increase, we can still do it and still maintain our very disciplined capital allocation strategy. But if you want to just say a couple of words on U.S. in particular CapEx growth, maybe... Tom Arseneault: Rob. So in the U.S., I mean, clearly, we're focused on -- and as we've all been encouraged by the executive order to make sure we are positioning and applying our capital resources in a way to help grow capacity and focus in areas of technology investments, some of which I mentioned earlier. We are on the verge. We're part of the FAD program. We do the -- we make the interceptor. We anticipate signing our own head of agreement with the Department of War here in the coming weeks in order to secure that quadrupling of demand over the 7-year multiyear program. As part of that, we would look to invest appropriately and it's quite a bit easier to close the business case on a multiyear demand like that, but to ensure that we can produce at that level. So that's just one very near-term example. But we continue to focus and make sure we're applying our resources to the benefit of the Department of War and their priorities. CapEx will generally impact to you. Bradley Greve: Yes. At a higher level, Rob, we -- as we've laid out in the scripts in the prepared remarks today, you've seen us talk about a lot more investment. And over the last 3 years, we've been averaging sort of GBP 1 billion a year. I would expect in the next 3, it's likely to go up as we see this increasing growth environment that we're in. And a lot of that, as Tom has laid out, is in the U.S. But overall, this is embedded in our 3-year cash guide where we said we're going to have 6 -- over GBP 6 billion in the next 3 years of free cash. That is reflective of higher CapEx investments. Operator: And now we're going to take our next question from the line of David Perry from JPMorgan. David Perry: Two questions. First one, just an update on AUKUS, please. I think the last few days, there's been quite a lot of press reporting out of Australia that the government there is about to commit AUD 30 billion to a new production facility. So just any info you have on that? And then secondly for Tom, I think one of the surprises for me in the results was U.S. land vehicles, where both sales and margin were better than expected, because that's a business that you've been less bullish on recently. Have you changed your view on that? And any thoughts on the outlook? I mean, could there be more margin upside from where you are at the moment? Charles Woodburn: Thanks, David. So on AUKUS, I think as you already alluded to, there was some announcements over the weekend about infrastructure investments in the Osborne precinct around for the long-term build of SSN AUKUS, which I think is excellent progress and just underlines the strength of the program longer term. From a U.K. perspective as well has been continued investments in the design work that's going on the SSN AUKUS submarine. So I think whilst we've always said this is a long-cycle program, much of it doesn't really bear fruit until well into the 2030s. These are early days, laying the -- literally the foundations for the success of the program. And I think we're making good progress on that. On U.S. land vehicles, I think Tom, as you said, is best place to answer that one. Tom Arseneault: Yes. Thank you, Charles. And David, yes, no, thank you for pointing that out. I mean I think the team and Platforms & Services has done an excellent job playing out the backlog that we've been reporting in recent years. And programs like the amphibious combat vehicle, for example, which is a Marine Corps program, factors well into the Pacific deterrent dimension of the National Defense Strategy an important vehicle for Marine Corps as well as the armored multipurpose vehicle, AMPV, which is the highest volume vehicle running through the factories there. Some of the -- and the margin improvement, excellent performance, coupled with some of the investments we've made in recent years, robotic welding, et cetera, that helped drive a little bit of automation, allowing for better throughput in some of those higher markets. And so we continue to focus on delivering for our customer and ensuring that we can return to the shareholders at the same time. I won't point out, I mean, we do -- our combat vehicle portfolio also includes the business in Hägglunds in Sweden, and that business is growing quite strongly. We are -- it was in the press late last year, working on a 6 nation agreement for CV90s. That will likely result in orders for additional vehicles in the hundreds. The 6 nations, Finland, Sweden, Norway, the Netherlands, Lithuania and Estonia, and the team is working with all 6 nations now in order to hammer out an agreement for a common vehicle platform across those nations. I hope that's helpful. Charles Woodburn: Which I might say is a great example of European partnership. Operator: Now we're going to take our next question and it comes in of Christophe Menard from Deutsche Bank. Christophe Menard: I had 3. The first one is still on the U.S. Can you comment on the drive for affordability in the U.S.? How -- and does it impact you? Is it in technology programs or in -- for instance, I don't know, the Radford rebid that's coming up? Second question is on capital allocation, share buyback. The GBP 1.5 trillion (sic) [GBP 1.5 billion] is coming to an end, I think, around June. What are the clients plans beyond? And the last one is on order intake. I'm still -- I'm always surprised -- I mean, always very positively surprised by your order intake. Any guidance for 2026 of book-to-bill or any key orders we should be watching in terms of influencing the order intake in '26? Charles Woodburn: Well, Christophe. So drive for affordability, I will let Tom say a few words on that, but we are fully supportive of the intent of the executive order to improve production rates and make sure that we deliver on the programs. Capital allocation, I may correct you there, is GBP 1.5 billion, not GBP 1.5 trillion. And -- but I'll hand over to Brad to do that one. And then order intake guidance, as you know, we don't guide on order intake. They tend to be quite lumpy. But if Brad, as you're answering capital allocation, do you want to expand on that by all means do. So maybe, Tom, over to you on the drive for affordability. Tom Arseneault: Yes. No, that's a great question. Thank you, Christophe. We -- the focus on affordability is highly enabled by volume production, right? And so some of these investments in capacity, I mentioned robotic welding a little bit earlier, brings automation to bear, drives for the economies of scale and economies of labor and automation that allow us to create a more affordable situation. Investments in technology around how we're driving, for example, as I mentioned earlier, the microelectronics position, right? As the microelectronics get denser and denser, we're able to get more capability into smaller space, drive down the material -- the builds of material on some of these items and again, helps with affordability. So we're looking at it in every dimension from the way we work all the way through to the technology we apply. I hope that's helpful. Charles Woodburn: Brad, do you want to talk about capital allocation? Bradley Greve: Yes. I think it's healthy just going to look back to our capital allocation hierarchy again. And the first rung in that ladder, as we said, was investment in the business. And so this takes the shape and investment in our people, the GBP 1 billion that we spent over the last several years on skills academies and early careers programs, self-funded R&D. We've been making meaningful increases in those investments and CapEx. We've talked a lot in this presentation about how much we're increasing our investments there in CapEx. And all of this, I think, is very much aligned to a growing business and a growing backdrop. And our customers all want capability faster and our investments are designed to do that. So that is our very first priority, and that's completely aligned with our customers' view on this. And after that, of course, we have a dividend policy that's very established and clear covered 2x by underlying earnings. And we've then looked at M&A as sort of another wrong and using a strong balance sheet to increase and enhance our portfolio. And finally, if there's cash left over after all of this, that's when the buyback program kicks in. And we're in a situation with the business that across all these increases of internal investments and dividends and the M&A we've been doing, we still have had cash left over. And so I think that's been a useful tool to deploy that surplus cash. Charles Woodburn: Then on order intake guidance, as I said, we don't give guidance, but Tom alluded to, for example, more CV90 potential orders translating. The Type 26 selection by the Norwegians is not yet in order backlog. We've got a number of additional opportunities for Eurofighter, both support and new aircraft sales. Electronic systems, there's opportunities with Compass Call. I mean there's a wide hopper of opportunities. But as you always know, the -- some of these big programs, quite what year they fall from an order intake perspective can be a little hard to predict, which is why we are cautious around giving specific guidance on that. Christophe Menard: And yes, indeed it was GBP 1.5 billion. Charles Woodburn: I was joking to be honest, Christophe, I knew you have -- anyway, thank you, Christophe. Operator: The question comes from the line of Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: I have 3, at least one of which is quite quick. Firstly, on the free cash flow. So your free cash flow guidance 2025, '27 implies GBP 2 billion of free cash flow in 2027, which is a decline on what we've seen recently. Like can you talk about why that's the case beyond -- and obviously, I hear what you're saying on the advanced payments, but anything else beyond that, we should be considering? Secondly, could you talk about the outlook for tax rates? I think your communication there has changed? And thirdly, on the Eurofighter, can you talk about the long-term production rate plans there given some of the recent demand we've seen coming in? And related to that, could you talk about progress on FCAS and when you now think that will be ready for use for our customers? Charles Woodburn: So maybe the first couple for you there, Brad, free cash flow and... Bradley Greve: Free cash flow, really the story on the variability is not a new story. It's just really down to how advances move and how we guide on the basis of a conservative outlook on advances where we always model the burn of advances. And in 2026, we expect to have a circa GBP 600 million burn down of advances. We haven't guided to any material advanced receipts. So to the extent those come in, that would be upside to what we've guided. And that also is true of the forward guidance ranges in those 3-year increments that we've outlined. So none of those include material receipts for new advances, but all of those new ranges looking ahead include burn down. So that -- I think that's really the simple explanation of your question on that one. And on tax rates, we did see an increase, we're expecting to increase rather in 2026, and that's mainly coming from '25. We did have some prior year releases from some retired tax issues. Those obviously don't recur in '26. And the France tax regime has carried forward what was meant to be a 1-year surplus and tax rates. They've now taken those into a second year. So the France tax rate is 36% compared to what we expect it to be sort of in the mid-20s. So I think I really explains the tax movements and a 22% guidance for ETR for '26, that's probably a range that's likely to endure for a little bit longer. Charles Woodburn: Thanks, Brad. On Eurofighter, I mean, we've talked before about sort of the pathway to doubling production rates, and I think we're well on that. Having secured Turkey and there are other opportunities. I mean, obviously, some European buys that you're well aware of. We'll look to adjust that. But I think that we said at the time at the Capital Markets Day last year that it was sort of a couple of year trajectory to get to the new production rates, and we're well on that journey. And we will adjust, if needed, upwards if we are successful in securing further orders. And of course, the good news is that we now have production requirements all the way through to when we start doing final assembly of a GCAP capability, which is important. And I think to your final question, GCAP is making really good progress. We have a really strong team, moving well and are delighted with the partnership that we have and moving at pace. Operator: And now we're going to take our next question. And the question comes from the line of Olivier Brochet from Rothschild & Co. Olivier Brochet: I would have a couple of things to ask. The first one is on the operating cash flow in H2, it doubled in electronic system. Do you have any areas that you would like to point to explain the move? On the same vein, did you have any cash payment catch-up on the F-35 after the release from inventory aircraft last year? And the second question would be on the space exposure. Can you maybe size how big it is across the group, maybe in terms of backlog and sales as you very hopefully did for the European business? Charles Woodburn: On cash OCF, do you want to do that, Brad, and then maybe over to you for space, Tom? Bradley Greve: I'll simply say, Olivier, we tend to have a very back weighted cash flow profile. So '25 is no exception to that. We did see some advances come through in our space business from SMS into the ES cash flow. So that was a contributing factor in that. But we always have a very H2-weighted cash profile, and that continued into 2025. Tom? Tom Arseneault: Yes. I think I mean backlogs in the former Ball Aerospace, now our Space & Mission Systems business are at record levels. I mean, after some delay in the early part of the year as the administration was settling in and working through its priorities, there were some pivots on their part early in the year. Although as we moved to the half and beyond, we spoke at the half, and I mentioned earlier, the big win on missile warning and tracking. We won a ground systems award called FORGE C2 that will -- is a ground systems for this missile warning and tracking kind of mission in our national and military space businesses grew and won a number of other programs. And so record levels. I think Brad, just check me if I'm wrong, GBP 8-ish billion for SMS. And so a really good performance there, and 1 that will play out through sales growth here. We're projecting double-digit sales growth in 2026. Operator: We're going to take our next question and it comes from the line of Alessandro Pozzi from Mediobanca. Alessandro Pozzi: The first one is referring to your opening remarks about the outlook, very strong pipeline as well. I was wondering, can we have any color on the medium-term growth? A lot of your peers have given 2030 targets. We don't guide to 2030. But I was wondering, is it the right time maybe to factor in an acceleration in top line and maybe growth of double digit rather than high single digit, also in line of defense spending in the U.S. going up? And the second question on the GCAP. There's a lot of speculation that Germany and France may not go ahead with the FCAS any longer. Would you be able to accommodate Airbus as a new partner in the GCAP and what the implication could have for the program? And maybe a last one. Any update on the Eurofighter potential opportunity in Saudi Arabia? And any thoughts on that? Charles Woodburn: So outlook, thanks for the question, Alessandro. We don't, as you know, give medium-term outlook, but we've been on a strong temper of growth, and we do see that continuing. As you probably are aware, everyone on this call much debate around the U.K., for example, and the defense investment plan and will there be more funding around that. And I don't know any more to add to that other than has been in the press already. But none of that is in a sense, assumptions around that further upside would be in our guidance and indeed -- but it would affect our medium-term outlook, but we just have to wait and see how that plays through. So there is further upside, we think, to the medium-term outlook, depending on how things play through. And indeed, as Tom alluded to already, with the U.S. budgets as we see how that plays through, but that's not a '26 impact. That would be a '27, '28 and beyond impact. On GCAP, I mean, really the decisions around expanding the partnership are entirely down to the 3 governments of Italy, Japan and the U.K. that are partners already. So there's not really not much more I can comment on that apart from the fact that we have a really strong partnership that is making great progress and moving at pace. And on Eurofighter, again, there's a little I can really add apart from we have a large portfolio of additional opportunities for the Eurofighter platform. It's a superb fighter aircraft. And with the latest missile systems from MBDA has extremely good capabilities. So we do see a range of additional opportunities, both from existing customers and new customers as we see with like Turkey coming into the Eurofighter family. That's really all I can say at this point. Operator: And the question comes from the line of Sam Burgess from Goldman Sachs. Samuel Burgess: Three, if I may. Firstly, just back on Europe. If there is movement in the rules on U.K. company participation in future European defense funds, just in big picture terms, how material could this be for BAE Systems? Secondly, can you give us just any directional indication of the expected magnitude of advanced payments expected in 2026 relative to '25? I mean given quite a lot fell in Q4 '25, might we assume it's a slightly slower year in terms of prepayments? And then thirdly, maybe one for Tom. Just following on from Ross' question about potential U.S. budget increases. I know there's been a lot of kind of CapEx going in for Jacksonville and Louisville, but that was obviously in advance of some of the latest messaging from the U.S. President on budget. So what's your sense on the areas that incremental budget spend may be directed? And might you need to accelerate CapEx to capture some of that demand if it's not in your base case? Charles Woodburn: Thanks. Good set of questions. On Europe, I would just come back to -- we already have -- we're well positioned within Europe. So our position with MBDA, Eurofighter, our Swedish businesses mean that we are very well positioned, and we can happily partner with companies like PGZ in Poland, who are recipients. So for example, say funding we can work with them. So we see, as you've already seen in our order outlook, we're expecting significant growth in Europe, and it's a combination of selling in from our U.K. business, but very importantly, strongly enhanced by our footprint already within the Europe and specifically EU. So -- and then in terms of advanced payments, I mean, we don't guide around that. It's very hard to predict, which is why we specifically exclude them from our cash guidance. And I think that's probably the prudent place to be. And I think we're very clear around our position there. Tom areas for CapEx -- in the U.S., do you want to say a little bit about that? Tom Arseneault: Yes. I'm happy to it. Thank you for the question, Sam. I mean if I had to point to one area and again, as I mentioned earlier, we're very encouraged by the administration's move toward multiyear contracts, particularly in and around munitions. So if you look at the 2026 National Defense Authorization Act, the budget has outlined, particularly Section 804, that really outlined these multiyear procurements where they create effectively 7 years of demand for some of these munitions. Our 8-ish munitions sort of called out there as key munitions. We play a role on 6 of those. FAD I mentioned earlier has one. And so as we look to the sorts of volume increases associated with those anywhere from doubling in production to quadrupling there will definitely be some CapEx expected in those areas across the portfolio. By the way, that's both ES and SMS, those 2 businesses will contribute. So I'd call that out as probably the dominant area, although there would be others. Operator: We're going to take our next question comes the line of Chloe Lemarie from Jefferies. Chloe Lemarie: I have a first question, please, on the 2026 to '28 cash outlook. You helpfully said the GBP 600 million advances burn in '26. Could you maybe share how much over the total period you're factoring in for this? The second question is on P&S. Obviously, quite a strong performance in '25. We touched on the U.S. platform performance. But I think a 30% growth in both for Hägglunds was mentioned. So could you maybe touch on capacity utilization now in those businesses and the expansion phasing going forward? Charles Woodburn: Over to you, Brad, for cash guidance and then, Tom, for the excellent performance in P&S. Bradley Greve: Yes. I think the GBP 600 million burn down is probably a fair average to use across the medium term. So the '26 to '28 cash guide. Again, we don't assume any advances coming in, so any prepayments coming in. We do have a slightly higher CapEx across the next 3 years and then there's the normal working capital movements, but we will have higher profits, which will fall to cash. So all that weighted in is kind of what colors in that GBP 6 billion -- greater than GBP 6 billion cash guide over the next 3 years. I mean it's going to be timing on programs that will dictate the cash burn on advances. It may not be evenly distributed GBP 600 million each year. But I wouldn't be surprised if it's a number like that over the next 3. Tom Arseneault: Yes. And then on Adrien (sic) [Chloe], on vehicle performance and production. I mean P&S, again, thank you for highlighting that a really excellent performance on the part of that business. Remember, P&S includes both the U.S. portfolio as well as Hägglunds and Bofors in Sweden. We expect that we would focus -- again, we don't see additional capacity necessary in the U.S., for example, we are -- we have built that up over the course of the last 5 or 6 years. And so now we're sort of running at rate, focusing on good performance there and that you can see in the bottom line in that business. So over in Hägglunds, I mentioned earlier, the 6-nation opportunity that would likely require some additional CapEx in Sweden, but we do, as we've reported in the past, spread that capacity work out into the countries to which those vehicles would be delivered and in industrial cooperation. And so a modest investment there, we expect. But here's a business that was maybe 50 vehicles a year, only a handful of years ago, now looking at maybe somewhere between 200, 300 vehicles a year. So really good opportunity there, and business has done well to scale. I hope that is helpful. Operator: We'll go and take our next question and it comes from the line of Adrien Rabier from Bernstein. Adrien Rabier: I also have 2, please. Sorry to ask again about the U.S. budget, but if you don't ask -- if you don't mind me asking in a more basic manner, if we have anywhere near 50% growth in U.S. budget in 2027, what would that mean for you? How much you expect to participate? And how long will it take to flow into your P&L? And the second question on your 2026 guidance, please. Your sales growth target implies some sequential slowdown from 2025. But as you said, budgets are growing in your key regions and backlog is great and you've been expanding capacity. So should we see this as a reasonable caution? Or is there a reason to actually expect a slowdown this year? Charles Woodburn: Well, on the second one, the answer is no. But do you want to explain that a little bit guidance? You're saying it's slowing down compared to this year. But Bradley Greve: On top line? Charles Woodburn: Yes, on top line. Bradley Greve: Yes. The growth that we printed for 2025, the 10% included a full year of SMS, our space business, former Ball Aerospace. So that compares to a partial year in 2024. If you look at our organic growth rate in 2025, it was 9%. So again, if you put that in the context of our go-forward guidance, where we're saying 7% to 9% for 2026, we're continuing to grow at these very high levels on a higher 2025 base. So hopefully, that helps you understand a little bit that we're continuing to grow in pretty high levels here. Charles Woodburn: Yes, we still see strong momentum in the business. And maybe over to you, Tom, on U.S. budgets. Tom Arseneault: So there is so much that has to play out here before we understand where the top line for 2027 will settle. I mean it's -- again, we're very encouraged by the directionality of the discussions around the budget. You'd have to imagine that the way that would translate into portfolios would be sort of relative to how well aligned we are around the demand signals. And we feel very well aligned, as I mentioned earlier. And so we would hope we would get a reasonably proportionate share. The focus on the national defense strategy, deterrence in the Pacific, our electronic warfare, our space portfolio, the work we're doing to help with the submarine and shipbuilding industrial base. When it comes to defend the Homeland, we spoke about Golden Dome, Clearly, the space and the munitions side of that, Counter-UAS, with our APKWS solution. So we've worked to align as best as we can with the national defense strategy. I think that's paying dividends for us, and we would hope to earn our fair share of that budget when it settles out. Charles Woodburn: But this would really play out in '28, '29. Tom Arseneault: Right. It will be some time before we know exactly where that is, but the directionality is clearly encouraging. Operator: And the next question comes from the line of George Mcwhirter from Berenberg. George Mcwhirter: Maybe on R&D, going back to the comments that Charles you made about self-funded R&D reaching a record high this year. Do you expect self-funded R&D to continue to account for the minority of R&D? Or could you see that the self-funded share grows a bit faster than customer funded as government shift to a greater company, that innovation to reduce the time it takes for products to come to market? That's the first question. Charles Woodburn: Okay. Is that the only question? Or do you want to ask... George Mcwhirter: Sure, I can ask the second one. Maybe on margins. You talked about 20 basis points of margin expansion a year for the past 5 years. Do you think this is a reasonable level that you can achieve in the next 5 years? Charles Woodburn: So on margins, I'll let you answer that one, Brad. On R&D, I mean, as you said, we have been increasing self-funded R&D. The most intensive area of self-funded R&D is the electronic systems portfolio in the U.S., and that's been really good investments, things like APKWS is -- was a self-funded R&D program that is now doing extremely well and a huge commercial success for us. So we are encouraged to keep investing in R&D. The balance between that and customer-funded R&D, I mean, it largely depends as well as to the amount that we get through customer funding on R&D programs. So I'm not sure it's going to change dramatically, but we will keep investing in self-funded R&D. We've had some great success there. The other area that we've invested and continue to invest heavily in self-funded R&D is in the U.K. air sector, specifically around drones, counter drones some of those capabilities is making sure that we really build out that what is already a market-leading portfolio and develop that further. On margins and the margin progression, do you want to say a bit about that, Brad? Bradley Greve: Yes. Last several years, our mantra here has been top line growth, margin expansion and cash conversion. And we were pleased to generate those 100 basis points of expansion over the last 5 years. And when we look forward, we'll continue to focus on these things. And where we have opportunity for more improvement is really everywhere. Operational efficiency is a key lever of expansion. The extent that we deliver our programs and retire risk to the bottom line rather than consume it. That's a really important part of how we're going to grow margins from here. We'll have some operating leverage with top line growth, where we can keep indirect costs flat. That's another key lever. And our supply chain function continues to make size our scale advantage so we can get procurement volumes to drop down into bottom line margin expansion. I mean across the entire business, we look at these margin levers to really drive improved delivery, and we've seen that over the last several years. Now looking at where we're going to go from here and where you're going to expect more margins. Obviously, the maritime sector is one that is below the range that we expect from that sector. And so I would look at that sector as being the one that will drive the biggest gains over the next 3 years. But we're already pretty top range and a lot of our delivery across the sector. We look at ES at 15.4% and P&S at 11.4%. There's still room to go on those. So I wouldn't just extrapolate a 20 basis point a year over the next 5 years to come, but we certainly are focused on it. And we continue to think that we can drive margins up from already these high levels in 2025. Operator: And the next question comes from the line of Nick Cunningham from Agency Partners. Nick Cunningham: Yes, so the -- a few details on the U.S... Charles Woodburn: Yes, we can hear you, Nick. Nick Cunningham: Can you hear me? Charles Woodburn: We hear you loud and clear. We are hearing you. Nick Cunningham: So the administration is Good. So the U.S. administration is not very happy about NOAA and NASA budget. And it's obviously engaged in a big fight with Congress. But in the meantime, it's been holding out signing checks. And is that an issue for BAE? Or are you assuming that those delayed payments will get caught up later in the year? And also, of course, will it be more than offset by the growth in military space anyway? Secondly, on the P&S shipbuilding move, is this into something new like building modules? Or is it more of the surface ships fit out that you did in earlier years? And how big could it get? And then a final high-level question for Brad. Debt reduction wasn't mentioned as an option in capital allocation. Some of your U.S. peers are looking at retiring debt instead of buybacks. And in that context, what is the right level of debt? Charles Woodburn: Okay. So Tom, I mean, you already alluded to the pivot early in the year from civil space to military and where you think that's going. So I think you maybe say a bit on that and also the shipbuilding and maybe the pivot to submarines. Tom Arseneault: All right, Nick. What was the first one again? Charles Woodburn: The question was about civil space -- [ NASA ]. Tom Arseneault: Yes. No, you're right. And that has played out a bit in the press of late. -- our current trajectory is depending only on the contracts that we have in hand. There is potential upside in this debate around NASA NOAA priorities. But you are exactly right, and that is our -- the growth we've seen has really been driven by military and national space. And that backlog I mentioned earlier, was built around that. And so to the extent the NASA NOAA debate settles in the direction we would like and that is to reinstitute some of the capability in like the GeoXO that program, for example, that would be beneficial to us. But our focus has been on ensuring we're well positioned to deliver on that military and national space. And then second question around shipbuilding. And here, let me be very clear. We are not intending to build full ships, and we had gotten ourselves in trouble in the middle of the last decade or so off on a commercial shipbuilding venture. That is not our intent here. We are contributing components and working to earn our way in to be a reliable supplier. We do the Virginia payload module, for example, for the Virginia class submarines today. We're looking to expand on some of that work. But we are just trying to be a good, healthy and reliable supplier in this submarine and shipbuilding industrial base but in the supply chain. I hope that's clear. Charles Woodburn: Would you, Brad, on the sort of debt reduction and debt levels? Bradley Greve: Yes. We're not looking at doing any accelerated reductions in our debt. We're already at 0.9x net debt to EBITDA. So pretty healthy balance sheet. And I do believe that constructive debt can help grow the business. And that's what we've done with the acquisitions of Ball Aerospace. And I'm really comfortable with where we are with the balance sheet, and that gives us really strong optionality, which really is what you want as a business. So we don't have any plans to accelerate any early maturities of debt. Charles Woodburn: Thanks very much, Nick. So I think over to you, Ben, for the last question. Operator: And now we're going to take our last question for today. And it comes from the line of Benjamin Heelan from Bank of America. Benjamin Heelan: Thank you for holding it for me. So the first question I had was on M&A, Charles, can you talk about the M&A pipeline? It feels as though buyback has been somewhat kind of deemphasized the potential to kind of grow that medium term, a lot of focus on CapEx, a lot of focus on self-funded R&D. But how are you seeing M&A within that? And if you could talk about the pipeline, how are you thinking about where you want to deploy capital geographically technology-wise, over the next couple of years? That would be great. And then the second question, I guess one for Tom. If I look at Electronic Solutions, I would have -- I would have assumed it would have grown a little bit better organically in '25 than the 5%. And when I look at the guide, the '26, the 6% to 8%, I kind of feel it would be more towards the top end and high single digit given the program mix that you have there. So first question on that, is there anything in there that is slower that we need to that we need to be thinking about? And then you've had a lot of questions on the budget in the U.S. I mean, obviously, we don't know what is going to happen. But I guess one way to ask it is, if you do see the budget moving to the kind of GBP 1.2 trillion to GBP 1.3 trillion range over the next couple of years, do you think the U.S. exposure that the BAE has will be able to outgrow that budget over the medium term? Is that what we should be thinking about? Charles Woodburn: M&A I'll take first. I mean really, it's much of similar focus areas as before, bolt-on opportunities adding to our Electronic Systems portfolio has been a good hunting ground for us in the past, and we'd continue if we found the right opportunities to look at that. Europe is presenting more opportunities given the growth rates there, although being careful and prudent with our valuations and making sure that we're not paying for opportunities -- we just announced our intention to move forward with an acquisition of a relatively small business in Sweden, which supplies barrels and castings to our Swedish businesses. I think will be a great addition to the portfolio. I've identified before Nordics as being an area that we'd be looking at. And then you'll have seen, and again, very much in the bolt-on category over the last couple of years, we've done some very interesting acquisitions in the drone and counterdrone space, things like Malloy, Callen-Lenz, Kirintec capabilities. And again, we'd look for those kind of opportunities to add to the portfolio. So very much in the bolt-on space and in the kind of areas that we've looked at in the past. ES growth, do you want to say a little bit more on that Tom? Tom Arseneault: Yes. Sure. So ES, as you know, it includes SMS, the Space & Mission Systems business. And as we were discussing a little bit earlier, we saw a slowing of growth in the Space & Missions Systems over what we had originally expected in 2025 driven by some of this uncertainty, some of the delays in the -- again, as the administration settled in and they work through their various priorities, we saw some decisions and awards being delayed through the year. And so that resulted in a little bit of lower ES growth overall at the reporting segment level. As mentioned earlier though, the wins that eventually came here in the latter part of 2025, position us for double-digit growth here in 2026 that backlog translates. And so really good growth that will recover in the coming year. And then the other question around budget growth. And again, here we are with our crystal ball trying to get a sense of whether what that trajectory, what the slope of that budget growth will be. Our strategy all along as we -- as we've said, is we are working to pivot and align our portfolio as accurately as we can with the demand signals of the Department of are where is that budget likely to be spent? It's in the areas we've mentioned munitions the Secretary that maybe came out the other day saying that with the higher budget, they could potentially double the shipbuilding budget for the Navy. Marine Corps and ACV, so an additional award there. So we've done quite a bit to get that alignment right. And so again, we would hope to earn our way into a proportional benefit from that growth when it comes. Thank you for the question, Ben. Charles Woodburn: I think that actually brings us to an end now on the questions. But thank you all for joining. I think I'll see many of you out on the road over the next couple of weeks and beyond. But thanks for joining and -- thanks for joining. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to TFI International's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that this conference call may contain statements that are forward-looking in nature and is subject to a number of risks and uncertainties that could cause actual results to differ materially. I would also like to remind everyone that this conference call is being recorded on February 18, 2026. Joining us on the call today are Alain Bedard, Chairman, President and Chief Executive Officer; and David Saperstein, Chief Financial Officer. I would now like to turn the call over to Mr. Alain Bedard. Thank you. Please go ahead, sir. Alain Bedard: Well, thank you, operator, for the kind introduction, and thanks, everyone, for joining us on today's call. Last evening, we reported our quarterly results showing robust free cash flow driven by international initiatives and the hard work of our team. With overall freight dynamics showing modest signs of stabilization, the men and women of TFI are busy preparing for a potential industry rebound and controlling the controllables. . And another focus of ours, which you've heard me in emphasis many times is producing strong free cash flow regardless of the cycle. I'm pleased to say that we generated more than $10 per share of free cash flow in 2025 or $832 million for the year and notably, our fourth quarter free cash flow was 25% higher than the year ago figure. At TFI, we view this free cash flow as very important given our strong track record of strategic capital allocation. We intelligently invest for the long term, even during down markets, and whenever possible, return our excess capital to shareholders. As you may recall, during the fourth quarter, our Board again raised our dividend. And over the course of 2025, we continue our track record of opportunistic repurchase buying back over $225 million of common shares. Now let's turn to the other aspect of our fourth quarter results, total revenue before fuel surcharge of $1.7 billion compares to $1.8 billion a year earlier, and we generated $127 million of operating income, reflecting a margin of 7.6. Our net cash from operating activities improved meaningfully to $282 million, which was up 8% over the prior year quarter. And our free cash flow from the quarter was $259 million, reflecting a 25% year-over-year increase, as I mentioned. Taking a more granular look at our business segment. Let's begin with LTL, which represent 39% of our segmented revenue before fuel surcharge. At $661 million, this was down 10% compared to a year earlier. However, we're able to improve our adjusted OR slightly more than expected to 89.9% relative to 90.3% in the year ago period. Our total LTL operating income was $62 million compared to $70 million a year earlier. We also generated for LTL a return on invested capital of 12.2%. Next up is Truckload, which was 40% of a segmented revenue before fuel surcharge at $674 million for the fourth quarter as compared to $693 million in the prior year. While tariff and the general economic uncertainty still affect freight volumes and excess capacity has been an industry-wide concern. We continue to seek growth opportunity that our network and our infrastructure are particularly well suited for. This includes both data center and the broader economic grid -- electric grid to market in which we've demonstrated recent successes. Our Truckload operating income of $48 million compares to $60 million a year earlier and our OR of 93.2% compared to 91.5%. So wrapping up on Truckload, our return on invested capital came in at 5.8%. Lastly, in our segment discussion, Logistics was 21% of segmented revenue at $358 million relative to $410 million in the fourth quarter of 2025. Operating income was $31 million versus $43 million last year, and this represents a margin of 8.7% versus the 10.5%. I'll note that despite slightly lower logistics revenue sequentially we were able to expand our operating margin by 30 basis points over the third quarter. And finally, our Logistic return on invested capital was 11.8. Shifting gears, our balance sheet is a pillar of our strength supported by the $830 million of free cash flow we produced during 2025, including more than $250 million during the fourth quarter alone. Both figures up year-over-year. We ended the year with a 2.5x debt-to-EBITDA ratio. And given this financial foundation, we continue to be an attractive dividend and repurchase more than $225 million worth of common shares during 2025, as I mentioned previously. We also continue to seek accretive bolt-on acquisition opportunities. And I'll conclude with our outlook as we entered the new year. For the first quarter, we look for adjusted diluted EPS to be in the range of $0.50 to $0.60. And for the full year 2026, we initially expect net CapEx, excluding real estate, to be in the range of $225 million to $250 million. As I mentioned in the past, our outlook assumes no significant change, either positive or negative in the operating environment. So before we open up the Q&A, you may also have seen our press release yesterday about the latest change to our Board of Directors. So I want, again -- I want to again express my gratitude to my friend Andre Berard for his more than 2 decades of service as a Director of TFI International, most recently as our Lead Director. His impact on our Board since 2003 has been enormously beneficial to the firm, and we all wish him all the very best to his upcoming retirement. I would also like to congratulate Diane Giard on their nomination as our new Lead Director. And now operator, if you could please open the lines for both David and myself, we'll be happy to take questions. Operator: [Operator Instructions] And your first question comes from the line of Ravi Shanker from Morgan Stanley. Unknown Analyst: This is Nancy on for Ravi. I was wondering if you could help give some guidelines around the fiscal year guide and potential scenarios to get there and how you're thinking about 2026 as a whole would be great. Alain Bedard: Yes. Well, that's a very good question. So this is why we came out with our Q1, okay, with $0.50 to $0.60. I mean this is down year-over-year versus 2025 because we're still in a transition environment. The freight recession that we've seen since 2023, 2024 and 2025 is still persistent as we look at Q1. We're starting to see some very early signs in our Truckload sector that maybe things will start to get better, okay, during '26. This is very early. The change in the U.S. with the CDL and not renewing some permits as drivers, et cetera, et cetera okay? That may help the Truckload industry in general. On the Canadian side, the fact that now every owner operator or not an employee, but let's say, a Driver Inc. now has to -- will be issued a T4A, which is a kind of like a W-2 in the U.S. as an employee. So now he's got to report his income and pay taxes. So we're starting to see some people disappearing okay, in '26. But this is the very early days in the Truckload sector. On the LTL side, I mean, we're still in a very difficult environment, and we anticipate that it's still going to be the case for probably 2026 as a whole. On the Logistics side, though, I mean we feel really good that, okay, yes, our Q4 2025 was not as good as the previous year. But in terms of one of our divisions that moves trucks for the most important manufacturer in the U.S. Packard and Freightliner. We think that this is going to start improving by probably Q3 and Q4 going back to normal. So on the logistics side, we have a more clear path of the major improvement that we could see during the course of '26. Truckload early signs that things will probably get better, although nothing is sure, it's very early in 2026. We're just in February. On the LTL side, U.S., still very soft market. On the Canadian side, very soft market, too, but we do way better in Canada than we do in the U.S. because if you look at our revenue per shipment, number of shipments are down, okay, in Canada, the same as the U.S. But we're able to maintain an operating ratio very close to what we were doing, let's say, a year ago. So we have a better control on our costs still in Canada. If you look at our claim ratio, for example, which is like unbelievable. Were close to 0 in Q4 on the Canadian LTL side. And we're still at 0.9% of revenue on the U.S. side, which is an area that we definitely have to improve during the course of '26. I mean we had some better quarters on that in that regard on the claims side, and we need to focus more on that, and this is a big area of focus in terms of improving our service on the U.S. LTL side with our customers. So you don't want to break the customers' freight or lose it, right? Unknown Analyst: Got it. That's very helpful. I guess touching on that a bit more. Do you guys feel ready for the up cycle that comes within U.S. LTL with the idiosyncratic changes you have made? Or is there a lot more work within 2026. Alain Bedard: No, we're ready -- I mean, we are really ready. I mean in terms of the management tools that we have today versus, let's say, just 2, 3 years ago, I mean we are very well equipped. We have financial information by terminal now. We've implemented Optym on our line all. We have Optym also implemented, which is a software on our delivery side, okay, now we're going to Phase 2, which is going to be also implemented for the pickup side. So I mean, we're ready. We have the tools. We are improving our team on the commercial side. I mean, we have way more stability in our sales force than ever, okay. So our friend, Mr. Traikos has done a fantastic job of creating some stable environment in the sales team, understanding the focus of what these guys need to do. And I think that probably for the first time, it's still early in the game, but in Q1, we're probably for the first time in a long time, show that our shipment count is about equal to the one of the previous year. Very early still, okay? But if you look at Q4, we were down 10%. We're down 6%, 7% in Canada, but down close to 10% in the U.S. So it would be quite an accomplishment as a first step, okay, to be able to at least maintain the volume that we had in Q1 '25. Operator: And your next question comes from the line of Jordan Alliger from Goldman Sachs. Jordan Alliger: Yes, I hear your thoughts around the demand environment. I'm just sort of curious as we roll into the -- or through the first quarter. Is there a way you could give some additional color as to perhaps the segment margin-related drivers behind the $0.50 to $0.60 EPS guide, again, realizing that you're not assuming much change in the operating environment, but maybe give some sense for shape of those margins as we move forward seasonally . Alain Bedard: Well, that's a very good question, Jordan. And so this is why I'll pass it on to David, which is our CFO. David Saperstein: Jordan. So we're looking at probably around 250 basis points of sequential margin deterioration in the U.S. LTL. And I just want to qualify that by saying that Q1 is unique in the year and that it's very back-end weighted to March. And so it's very difficult to get a sense for the trends based on January and the first half of February. And this year, particularly so, because we lost at least 100 basis points related to weather, which caused us to have a lot of overtime expense, et cetera. So we anticipate around 250 basis point sequential deterioration, but it's heavily weighted towards March, which, of course, hasn't occurred yet, and we don't have perfect visibility into. In terms of Canadian LTL about the same in terms of the sequential move, P&C is 1,000 basis point down and 15% revenue down sequentially, which is normal seasonality for us, Q4 being a peak season in the P&C. Specialty Truckload, like Mr. Bedard was saying, we are seeing some early signs of positive things in the Truckload. And so we expect to be flat sequentially from Q4 to Q1 in the Specialty Truckload. Canadian Truckload, a little bit of erosion, maybe 100 basis points margin deterioration sequentially and then Logistics are around 150 basis points. Jordan Alliger: All right. Great. And just out of curiosity, I know the weather has had an impact. Are you able to share a little bit more color around, I know March is so important, how's January, February volumes? And is it possible? I know you alluded to it a little bit, can you still make that up in March on the tonnage side for LTL? David Saperstein: Well, listen, the January was very, very difficult, both from a volume perspective and from a cost perspective, because of the costs associated with the weather and the disruptions and the inefficiencies that, that caused. February, we saw volumes tick up, and that's why Mr. Bedard is making a reference to potentially being flat year-over-year in volumes. We'll see how the pricing follows as it relates to that. But we can see that the volumes are -- did tick up in Feb. Operator: And your next question comes from the line of Walter Spracklin from RBC Capital Markets. Walter Spracklin: Good morning, everyone. So you mentioned some of the improvement that you're seeing, and David just mentioned it as well in the fundamentals of trucking attributed to some of the CDL and [indiscernible] previously testing. Are you seeing that now build into your pricing, your contract pricing. We see pricing move on the spot side. But are you seeing at all any improvement in pricing on a contracted basis, particularly in U.S. LTL or if it is differentiated by segment or region, if you could touch on that. Alain Bedard: Yes. That's a very good question also, Walter, because spot moves first. And when the shippers start to see a movement upward in the spot, they try to get into a long-term agreement with you with those low rates, right? So to answer your question, yes, spot are up. On the van side, I mean we're starting to -- it's also inflation for us on the line haul for our LTL, because some of our LTL is moved by third parties, okay? And we saw price moving up in Q1 so far. But on the contract rate, it takes more time. It takes more time Walter, so that shippers are going after you, commit to long-term pricing at these low rates. And as a trucker, what you normally say is let's wait, let's wait and see. So for now, no, on the long-term rates, it's still not as good as the spot rate, but we believe that the fact that the it's always an offer and demand balance. So the offer is starting to reduce, okay? The demand is still not great, okay? This is the issue we have for the last few years is that the offer has always been growing because of the '21, '22 COVID area where we added so much capacity, okay, that now we're stuck with overcapacity. And now the offer is starting to reduce a little bit and the demand is still not very strong, but we anticipate that if the demand starts to go upward and the offer is also being reduced. So this is why as 3PL they're starting to see some pressure, because the trucker are asking for more money and they can't get that kind of money from the shipper yet. So a little bit of pressure on rates for our, let's say, our 3PL organization. But long term, medium term, for sure, the contract rates will start to go up. If this trend of reducing the offer and a little bit of increase in the demand continues in '26. Walter Spracklin: Okay. That's fantastic. I'd like to go back to your guide now and just reflecting some of the inbounds I'm getting in the sense that you delivered much better than your guide had -- your guide for Q4 had been set at 80 to 90, you came in it with [indiscernible]. Can you talk a bit about the different. What we could see what we had been forecasting relative to what you came in with, but really internally, where was the area of outperformance? And is that area of outperformance now built into your guide for Q1 as well? Alain Bedard: Well, you know what, Walter, like David was saying, the problem that we face is that we are giving guidance on Q1 based on horrible month of January, right? And a very early, okay, signs of improvement in February. So this is why we're cautious. I mean, -- this is what we believe it could be delivered by our operation, okay? Hopefully, we do better than that like we did in Q4. But then again, the other problem we have Walter until we have a deal between U.S., Canada and Mexico, which is supposed to come, let's say, in the summer of '26 even if the market -- there is a reduction in the offer, the demand is still not very strong. So this is why we have to be very careful until such time that we have a new agreement between the 3 countries where our customers knows what's going to happen in the future, then we're going to feel way better, okay, in terms of being able to forecast what can the company deliver in terms of our profitability. Operator: And your next question comes from the line of Brian Ossenbeck from JPMorgan. Brian Ossenbeck: I just wanted to hear a little bit more about the Specialty Truckload business, obviously, heavy industrial there. So assuming not seeing too much of an uptick yet, but we've seen a little bit of life in the PMI, but I also want to hear a little bit more about the data centers, the electrical grid, the things that probably have maybe a little bit more longer tail to them, but I'm not sure how big they are and how fast they're growing at this point. So maybe some more details on the industrial side with those 2 in focus. Alain Bedard: Yes. Yes. You know what? This is something new for us, right? And this is coming right now, okay. It's our Lone Star operation out of Texas that is really the one being involved in wind, although wind is going to be quite active in '26 and moving some equipment for the data center. One of our latest acquisition is also bidding on some job up north in Michigan in those northern states in the U.S. So that could be a positive for us if these guys were able to win these adventures. So I mean, we are an industrial carriers in our Truckload. We're not a retail guy, okay? We are industrial. And for sure, let's say, on building we start moving in the right direction in that regard. Okay, that's going to help. Whereas in the meantime, this is why we created this job of Chief Commercial Officer for all of our U.S. Truckload with [ Mr. Huppi ] that is now in charge of working, okay, all of our network participants in that sector. So we are deeply focused on what is moving now. And what is moving now is where the major investments are in the energy sector and wind, solar and the data center. So that's our area of focus right now. But hopefully, the other sector, okay, of the industrial, which is construction material and all that starts to move in '26. Now like I said, with this latest acquisition that we've done late in '25, these guys are very good. Hopefully, they're successful in those bids, and we'll see, because this could be a very interesting win for us. So we'll see if these guys are able to get the ball moving on that. So all in all, we started, okay, like we said, we're just seeing a little bit of the early sign of some industrial activity, which is our world. I mean we're not a van carrier that moves retail freight, right, for, let's say, a Walmart or Amazon. I mean us, we move steel, we move aluminum, we move building material, et cetera, et cetera. So that's our core, okay. Same in Canada, too, right? So hopefully, this starts to move. And like you said, there's some movement on PMI. Hopefully, those major investments starts to increase. Under the new administration, we're hopeful that this is -- this will happen. Brian Ossenbeck: All right. Maybe just a follow-up on the TFF, TForce side of things, for shipment looks like it's stabilizing a bit here. Talking about getting back to maybe flat tonnage growth here in the quarter and maybe improving from there. Is that service and network dependent? Or is that more of a -- all of the economy, I would assume it's more of the former, but just wanted to see how far along you are with that -- with those improvements to the point where you could maybe grow a little bit faster than what the market is giving you. Alain Bedard: Yes. See, our focus to us is if you look at what we do in Canada in terms of our weight per shipment is way higher than what we do in the U.S. Why is that? Because you have to understand that TForce rate used to be UPS freight. And their focus was retail, like UPS per se. And as we're saying, forget about retail as much as you can move away from retail and let's move freight, that is based on the industrial base. So this is why our weight per shipment since we bought the company, it went from about 10.75 to 12 something now, 12.25, 12.50. Right? And the push is to continue to move into that sector of industrial LTL versus retail LTL. We understand that a lot of the retail stuff more and more, okay, will be controlled by the gig economy, by the Amazon and all that. So this is why we're saying to our guys in the U.S., let's focus on the industrial sector of the economy versus the retail sector of the economy. Now the problem, like I just said earlier, is that the industrial economy is slow, it's very soft, right? But this is why it may be a little bit more difficult to do this transition. But that's the focus of ours is to move away as much as fast as we can, okay, from the retail economy, because we're seeing what's happening, okay, with the gig economy with the Amazon and all the others one. So guys, that's changed, okay, the focus. We've been quite successful so far, okay, doing that, but we need to improve more. We have to be closer to 1,400, 1,500 pound shipments, because don't forget, you're paid -- normally, you're paid by the weight. And the cost is not based on the weight. The cost is based on the movement, right? So you move a pallet that's a 1,000 pounds or move a pallet that's 1,500 pound. The cost is about the same. May be different on the line haul. But line haul the issue is always [ queued ] before weight. David Saperstein: Yes. And the service point continues to be very important for us, Brian, and that's how we're looking to grow and move. I mean it's true that we took a step back on the claims ratio. But the other service metrics are moving in the right direction. I can tell you that in Q4, the miss pickups were 1.5%, down from 3.3% a year ago, reschedules at 8%, down from 12% a year ago. On time is flat, around 91%. And then we've continued to increase our small, medium-sized shippers as a percent of total, it's around 28% of total revenue, that's up from 25% a year ago. Operator: And your next question comes from the line of Jason Seidl from TD Cowen. Jason Seidl: I wanted to touch base a little bit on the data center comments and I think you called it out in the previous release, and you guys typically don't do that. Maybe you could dig a little bit deeper and let us know sort of how big you think this can get for TFI. Alain Bedard: Well, you know what, Jason, like I said, I mean, right now, before this acquisition that we did late '25, I mean we were only servicing the data center world, okay, through our Texas operation at Lone Star. Okay? And this is something new for those guys. It's like it's something new for the industry in general. So -- because these guys used to be big with wind and energy in Texas. So now we're saying, okay, this is great, but how about data center. So let's -- so we are kind of very close to what's this builder Bechtel, okay? So we're trying to work very closely with those guys. But now with this new acquisition that we just made late in the year, those guys that are operating more like in the Michigan area. Those guys are also very close to a builder there that's been awarded to data center. One for Meta, one for Google. And hopefully, we could continue to work for this builder okay, to support them in those two data centers. So this is -- could be a win for us. If ever, our team is successful out there. So this is what we're trying to do is build some kind of a recipe partnering with the builder of those centers, like the Lone Star guys are with Bechtel and our guys up north are with a different builder. So this is what we're trying to do. And then once this is -- this data center has been completely built, they will need servicing, right? So that's also something that we're trying to get into and to grow that business. We have lots of experience in Texas with Lone Star and moving very expensive -- like we did a move for one of the energy company, ConocoPhillips that was valued at about just doing the move, if I remember correctly, it was like close to $1 million just to move this kind of equipment, right? So these guys are really good at what they're doing. And it's just like, okay, guys, so good for wind, good for energy, for the oil sector and all that. But data center is the new thing. So let's get up and running on that. David Saperstein: And the approach is to approach -- the approach is to approach this as a consolidated group, right? And we have one of the larger flatbed fleets in the U.S. over $1 billion of U.S. Flatbed revenue. And we are going to market for the large customers as one so that they're in the area able to get that nationwide service. And so it's around the energy, it's around the construction. It's also around the high-value A lot of the materials or high value need to be on time. And so we have that skill set with the DoD top secret work that we do high-value freight as well. Jason Seidl: That makes sense, David. And my follow-up, Alain, you touched on continuing to do acquisitions. There's been a lot of articles out that 2026 could be a big M&A year for the logistics group in general. Maybe talk a little bit more about that? I mean, are you still targeting a larger acquisition this year? Or is that going to be something that's more of a '27, '28 event? Alain Bedard: Jason, in order to do a deal of large-size you got to be patient. And like I've always said, you make your money in the buying, never in the selling. So the price has to make sense and all that. So for sure, I mean, we could do something of size, the end of '26 into '27. But there, again, I'm looking at what's going on with everything that's going on in the market right now with -- on the parcel side and even on the LTL side. So you'll probably see us do some in '26, do some kind of smaller deals, okay, like the one we just did late in Q4. We just did one small deals in Minnesota to add to our Transport America division, okay, that makes a lot of sense. We may be doing some smaller deals in the LTL world in the U.S. So large deals takes time, right? And we have to be very careful. And like I said earlier, until we have a deal between the 3 countries, okay, in NAFTA kind of deal, right? Until we have that, it's very difficult to do a deal of size because you don't know what the rule is going to be. So this is why I'm saying it's impossible to do something now may be possible by the end of '26 but probably more like '27. And in the meantime, because of our free cash flow generation, we'll keep continuing to do smaller deals, okay, where the risk is different, okay? Now because of too much unknown on the deal between the 3 major partners in the world, which is U.S., Canada and Mexico. Jason Seidl: Yes. Makes sense. Alain, you mentioned smaller deals on the LTL side. Will this be like buying cartage agents. Alain Bedard: No, I would say it's probably -- I'll give you an example. You buy a small Texas regional guy as an example, okay? -- or you buy a regional guy in the Northeast, which is close to Ontario, Quebec, right? So that's what I'm saying by smaller deals. So it's not a national carrier. It could be a strong regional guy that covers one state like Texas or cover two or three states in the Northeast. This is more okay, what we are trying to do right now because a large deal in the U.S. LTL for us, it's not possible right now. Operator: And your next question comes from the line of Tom Wadewitz from UBS. Thomas Wadewitz: I wanted to try to drill down a little bit on the non-domiciled CDL impact and how to look at that in your business, right? So Truckloads is an extremely large market. where we expect the supply side benefit, but the benefit might be different in dry van versus specialty in flatbed. So do you have a sense of kind of how much non-domiciled CDL has impacted specialty flatbed, you were mentioning some of the skill sets are a little more unique in specialty. And I'm just trying to get a sense of like, well, is this really going to cause capacity to come out in dry van and then there's maybe less pricing impact to you. I know they're somewhat fungible, but just trying to get a little more sense of kind of how you would see the driver impact and whether you think there is a lot of activity in supply and specialty that's actually non-domiciled? Alain Bedard: That's -- you know what -- this is a really good question, because so far, okay, we see way more, okay, on the van side than on the specialty truckload side, because what you just said I mean in the specialty, let's say, on a flatbed or on a tanker operation, there's more than just driving the truck. Right? Whereas the van, you just pick up a trailer and you drive it, right? So it's much easier than to tarp a load on a flatbed, right? So I don't know that, Tom, so far. It's very hard to put a finger on what the effect of that is going to be. But one thing is for sure is that we'll probably not see as much benefit as the van because it's probably less of an issue for our world, but it's a little bit like a domino effect, right? So once the spot moves okay, on the van, it starts to move on the reefer, we see also some movement on the price on the flatbed side year-over-year. It's starting to move. So I don't know if exactly -- is it because the supply is constrained or is it the demand that's more? My feeling would be more like not the demand because the demand in my mind, is still very soft and weak excluding the data center thing there or the energy sector. But I think it's an issue of the supply that's starting to constrain because our revenue per mile, although we still have some of our divisions that are not doing well on a revenue per mile basis because of market condition. But overall, okay, our revenue per mile is improving. I mean in Q1, okay, I think we're going to start to see those improvements, because we did not improve in Q4. That's for sure. I mean we -- I've never seen a Specialty Truckload OR at 93%, which is worse than my van 91 OR in Canada. This is not acceptable, absolutely not. But there's market condition to that. So that should -- we should see some improvement there. And is it because of the demand? Or is it because of the supply, I think it's a little bit the supply demand will probably improve over the course of '26 and '27 and CDL, is that helping us as much in the specialty world versus specialty Truckload world and than the van world, I think that probably it's a huge more benefit to the van world versus the specialty, but we're still getting I think improvement, because our revenue per mile is improving year-over-year as of now. Thomas Wadewitz: Okay. That's great. And then a quick one for David or one or two for David. Just I want to make sure I understand your comments on U.S. LTL in 1Q. So if you see flat year-over-year shipments, then that would imply, I want to say, like 3% to 4% growth in shipments per day 1Q versus 4Q. So that would be kind of a meaningful improvement. So I don't know if you were saying kind of flat shipments sequential or year-over-year and if you're saying flat year-over-year, what might be driving the kind of the improvement in activity. David Saperstein: Well, what's -- so it would be potentially flat year-over-year. Again, hard to say what's going to happen in March. But that was -- but it was -- the comment was with regard to year-over-year. What's driving the improvement is the sales team, the service and all of the things that we've been working on over the course of the past year. Now the revenue per shipment may not be positive, right? And that's the -- that's why we're looking at -- we'll see where the revenue per shipment is relative to year-over-year. But, but there is pricing pressure out there. And so that's going to be the offset to what could be strong volumes or stronger volumes as it relates to the profitability contribution. Thomas Wadewitz: And 100 basis point comment on weather impact, that's a full quarter impact in U.S. LTL? David Saperstein: Yes, we're estimating that we've lost like $5 million to $6 million already on the weather. Just through extra over time and just inefficiencies and cleaning up the dock and all that cost . Alain Bedard: Yes, versus a normal environment, because some -- see the issue of the weather, we always have weather in Q1. So this is not something that we normally talk about. But this year, it's special, because it affected our big market, which is Northeast, Midwest and Texas, right? So if the weather is an issue in Idaho or in Utah, but not too big for us, right? But when it affects Chicago, when it affects Dallas, when it affects New York. I mean this is really, really difficult because Dallas, we were shut down for 3 days because of the ice. So what David is talking about $5 million, $6 million, this is over and above what we consider to be a normal environment of weather. I mean, this is -- we're not saying because we had -- no, no, this is exceptional for this year, because weather was really bad in our major sector, okay, for TForce Freight . Operator: And your next question comes from the line of Konark Gupta from Scotiabank. Konark Gupta: Maybe just a first one on the earnings side of things. I mean, as we kind of look into the back end of 2026, hopefully, conditions improve. But is Q4 going to face a tough comp from like the [ $1.19 ] EPS you reported for Q4 of 2025. I mean if I'm looking sequentially, you have like effectively a drop of 50% in EPS from Q4 to Q1 as guided, and that's a little bit wider than what you typically see, right? So I'm just trying to make sure, we're not missing anything when we are comping or lapping the Q4 2025 and Q4 '26. Alain Bedard: Okay. So I think, Konark, that Q4, okay, 2025 versus '26 I think that we're going to be in a different position, okay, versus this year versus '25, reason being that I believe that our logistics will do way better in 4 '26 versus 4 '25 because our customers will be busier talking about the OEMs, the truck manufacturers, okay? And also the fact that we've had as an acquisition late in Q4 '25, a great company in our Logistics sector. So this is why on the logistics side, I think that we're going to do way better, okay, Q4 versus '25, '26. On the Truckload side, it's still -- I'm convinced that we're going to do better because I've never seen 93 OR. And we're taking some action, okay? I'll give you an example. One of our division on the West Coast which we are doing really well, okay, with certain accounts like the aerospace. So we have Boeing as a customer over there. We have Bombardier as a customer too. So we're doing really, really well with those guys, but we're doing so poorly with some other customers. So we took the bull by the horn, and we said, guys, no, no more of that, right? We have also another division that's from Daseke that is doing really well with one sector of their business, but they're doing really poorly with another sector. So there, again, we're going to take action there. So this is why, to me, I think that Steve and his team understand that we can run a Specialty Truckload with a 93 OR. This is completely unacceptable. And we're taking action over and above what we think that we're seeing some early signs of market improving. On the LTL side, like David was saying, I mean a big focus of Kal and the team there is really to improve our service, okay? And we are. We are improving our service. So as an example, we move way more freight on the road versus the rail. So the rail miles within TForce rates are down to about 20%. When we bought UPS rate, these guys were 38% to 40% on the rail. So for sure, when you move freight on the rail. You don't know, you don't control the service, because this is the rail, whereas if you do it yourself on the road, well, it's under your control. So we are improving our service as an example, just moving rail to road. Now like I said earlier, because we move that on a van and the van, okay, world's rate per mile is moving up, like we were talking about this environment is changing. It's also a little bit of pressure on our costs because where we used to pay, let's say, 220 miles. Now, okay, you could be start paying 250 to 270 or 280 a mile depending on the lane, right? So a little bit of pressure on that for us. But for sure, with better service, I believe that our commercial team with Chris and the rest of the boys there will help us grow for the first time organically in '26 year-over-year, right? So this is why you look at what we're saying about Q1, I think it's exceptional what we're seeing because it's still a very tough environment. Our customers don't know what's going to happen in the future because until we have a deal, like I said earlier, between U.S., Canada and Mexico, a lot of guys are sitting on the fence because don't forget, I mean, TFI is a U.S. carrier for about 75% of our revenue, but 25% to 30% of our revenue is Canadian, right? So a lot of our Canadian customers, they don't know what the future is. And also some of our U.S. customers are facing a tough time selling to Canada right now. So all of that being said, when we come up with $0.50 in Q1, it looks really bad versus $1 in Q4, but it's a special environment, okay? And we're cautious. Konark Gupta: That's great clearly. And if I can follow up maybe on logistics. I think you mentioned that sequentially speaking, at least logistics margin expanded from Q3, don't be surprised to see that. So any color you can share in terms of what's driving this improvement? I mean, is it early days? Or is it the mix? Or is there something else? Like how should we extrapolate this performance at logistics into '26. Alain Bedard: Yes. I think, Konark, that you see us improving during the course of '26. Like I said, because of this acquisition, okay, that we did because of our -- one of our large customers, the OEMs are also going to be busier. Our Canadian logistics is doing pretty good. We have a great business there. Our U.S. logistics is under a little bit of pressure with what's going on in the truckload sector in the U.S. where the rates are starting to move up on the spot. So you try to get a truck. It's a little bit more money, and you're stuck with contracted rates with customers, and these guys want to extend those contracts and we're saying, no, because the market is changing. So on the U.S. side, a little bit more pressure, okay, on our profitability there, maybe for the next few months. But all in all, I feel really good about where we're heading with our logistics. Logistics for us, with this new acquisition and a few things that we're working on should do better in '26 than in '25, Absolutely. The other thing also that's worth mentioning is that if you look at our Truckload brokerage operation in the U.S., I mean the revenue is up, okay, and it will continue to grow. So this is one area of focus of Steve and his team is to grow more of this asset-light operation versus asset-heavy operation and get a better mix like we have in Canada. In Canada, we won a hybrid model where we have our own assets, okay? But we also generate a lot of revenue without any assets. When we bought Daseke, they were doing some of that, but not a lot. So the goal doing in '25, '26 and '27 is to grow the share of the asset-light operation share of revenue, okay, versus the total revenue of the company. So you're way better positioned to improve your return on invested capital, because when you don't buy steel, your capital cost goes down, if the profitability or the revenue remains the same, your return on invested capital improved. And this is when we talk to the Truckload team say, we can't run a single-digit retail investor capital, guys. I mean if you do that, the future is bleak. So we got to do something. The market will help us, yes, but we need to help ourselves too. Operator: And your next question comes from the line of Bruce Chan from Stifel. J. Bruce Chan: You made some helpful comments around the road to rail shift in LTL. I think that makes a lot of sense for service. Maybe you could also remind us of what percentage of linehaul miles are currently outsourced on the LTL side, whether that's the truck or rail. And then given your fleet investments, do you have any plans to bring that number down this year? . Alain Bedard: Yes. So what we do is about 20% on the rail, 20%, 22% on the rail. And then we have owner up, okay, and we have third party. So the third party and owner up probably our own guys do, if I remember correctly, David, tell me -- correct me if I'm wrong. David Saperstein: Yes, our own guys are doing around 55%. Yes. So it's 45% outsourced. Alain Bedard: And of the 45% outsourced, 20% of that is rail. So 25% is third party, owner up and third party. J. Bruce Chan: Okay. Great. And then just maybe broad plans, if you're comfortable with that number as far as its use your model or whether you plan to bring that down over time? Alain Bedard: Listen, I mean, for sure, okay, if you hold your average length of all is 1,000 and more, you have to have some rail, right? So I cannot answer is 20% the right number? I would say we're getting close to the right number if the average length of haul stays above 1,000 miles. Now one thing is for sure is the 55%, like David was mentioning with our own guys that could grow probably closer to 60%, okay? Over time, yes, because you have better control when it's your own people. But the rail at 20%, we're probably close. If we remain over 1,000 miles. We're probably close to the best that we could do. Now again, this is going back to the average weight per shipment that we went from $10.75 to $12 something -- the average length of haul is down a bit, but the discussion I'm having with Kal and the rest of the team is over time, okay, we need to change our approach to the market and reduce over time the average length of haul so that we don't touch the product 3 or 4 times. We touched the product less. So in order to touch the product less, you have to do less miles, less on the average length of haul, right? it's an evolution, okay, that's going to take place over time. But there, again, what I'm saying, if you run over 1,000 miles, you need the rail. Operator: And your next question comes from the line of Ken Hoexter from Bank of America. Ken Hoexter: So Alain, maybe just a bit of a contrasting message, so maybe some clarity. You noted a weak environment, but 1Q should be flat after a down 7% ton and down 11% shipment quarter. So maybe clarity on what's driving that near 50% EPS downtick in the first quarter. And then you throw in, "Hey, it's conservative, we could do better." So is it just the weather that's stepping you back? Are there gains in the fourth quarter or any impacts from the fourth quarter acquisitions in there? Maybe just some clarity on it. . Alain Bedard: Yes. So David, do you want to give some clarity to Ken on that? . David Saperstein: Yes, sure. I mean, look, in terms of gains or anything special in the fourth quarter, the only thing special in the fourth quarter was tax for about $5 million. Other than that, it's -- there is nothing onetime in nature. The -- in terms of what's driving is the trend of volumes up. It's the work that the team is doing. What may still weigh on the profitability though is the revenue per shipment and -- and so that's why the growth in volume may not be as profitable as otherwise would be. We'll just have to see how that plays out. And then more broadly, it's very, very difficult to, especially at TForce Freight to forecast the first quarter because all the money is made in March. That's just the nature of this business. And so when we're looking at a Jan and Feb that we're very difficult with or at least January, very difficult with the dynamics that we've talked about. There's a lot that's unknown. And so we've done the best that we can, and we are being conservative about what March might be when we put together that guidance. Ken Hoexter: That was flat on shipments or on tonnage. I think you said both... David Saperstein: The shipments year-over-year potentially on shipments. Yes. Ken Hoexter: And then you previously noted, I think, 200 to 300 basis points of margin improvement at LTL in a flattish environment. I think you mentioned, if we're starting out flattish in 1Q, does that mean you're looking flattish for the year? And -- does that -- or is too big a whole? And so that 200, 300 basis points for the full year is too big? Or is that still achievable Alain, in your outlook? And how about EPS, are you then looking for it to be at least up on a year-over-year basis? . Alain Bedard: Yes. So in terms of the volume, like I said, Ken, I think for the first time '26 in our U.S. LTL we should see a little bit of organic growth, okay, on the shipment count, right? On the weight, we believe that it's going to be about flat or up a bit. On the revenue per shipment, like David was saying, okay, right now, what we're seeing is a little bit of pressure on the revenue per shipment when we look at Q1 so far. But the team is working to correct that, okay? It's not like we accept that. No, no, no, no, no, no. We cannot live with $5 less of shipment and whatever it is. I mean don't forget, our GRI, which is small, okay? It's a small number of shipments, right? But we didn't do any, but we're doing one in mid-March, okay? Most of our peers have done, there's earlier than us. And us, we waited, okay? We waited because we want to continue to improve our service. So there's no this issue with customer when you talk to them about asking for more money. So this is why we're doing that mid-March. Okay. Fine. So if we go back to the year in terms of globally TFI, my mind is, for sure, our plan is we will deliver better OE or EPS in '26 versus '25 without a doubt. That's our plan. Because our -- like I said our logistics will definitely improve that. We have visibility. We know okay, where the OEMs are going, because we talk to them, okay? We know that it's going to be weak for the first 6 months year-over-year in '26 versus '25. But the latter part of the year, we're going to do way better in Q3 and in Q4 versus '25. Okay. So we are suffering a little bit in that business in Q1 and in Q2 year-over-year. In our Truckload, we've talked a lot about that. I mean I'm convinced that we're not going to deliver a 93 OR, okay, in Q1. We are improving our year-over-year basis in Q1 and during the course of the year. And on the LTL side, I mean, we're taking some actions there, okay, improving our service, organic growth small. I think that we'll do a better job in '26 as we've done. Now we've said it clearly, and this is why our guidance is only $0.50 to $0.60 is that we had a difficult start of the year, okay, not just in U.S. LTL, in truckload as well and logistics because some of our customers are not that busy. So this is why this is what we believe is achievable, okay? And hopefully, we do better than that. David Saperstein: Yes. And the other thing I would point out on the full year is that in Truckload, we've done a lot of work in 2025 to reduce the capital intensity of Truckload, because we had way too much equipment. And so depreciation expense will be lower in the Truckload in '26 than it was in '25. And you can actually already see that if you look at the DNA of Truckload just in Q4 is $3 million lower than it was the year prior and lower as a percentage of revenue as well, right? So there's real efficiency as it relates to the capital there. And that's going to continue into '26 and the impact would probably be higher in '26 than $3 million a quarter. Alain Bedard: Yes. Because if I may add, guys, our revenue, if I remember correctly, our revenue per truck in Q4 is better even with rates per mile that are not that better. So velocity is more. Operator: And your last question comes from the line of Cameron Doerksen from National Bank. Cameron Doerksen: I just wanted to, I guess, follow up on M&A. You mentioned a few times the acquisition you closed in Q4, I guess, the Hearn industrial. I mean, obviously not huge, but you cited it a couple of times here as a really great fit. Can you just talk a little bit about that business? Because it looks like in your disclosures that not a huge from revenue point of view, but a pretty good margin profile for that business. Alain Bedard: Well, you see -- I mean those guys are doing a great job. I mean they are entrepreneur. And I think that what these guys are doing today is great. And I think that the potential for being part of the TFI family is going to help us -- help them and us, okay, do even better in the future. So this is something new for them. I'll give you an example. They don't touch freight. I mean, they do a lot of work for the -- in the automotive business, but they don't touch freight, but they have a certain degree in the freight. So that's something new for them, right? So for sure, they are in touch with our GHG division, okay? Because these guys have a lot of capacity that could be used to deliver freight for those guys. So there's going to be some great synergies, I think, between members of the family, with the Truckload sectors and all that. And for sure, these guys are lean and mean operators, very successful guys. And yes, I think it's going to be a great acquisition in our logistics sector, a little bit like the [ GHG ] and the other ones that we've done in the logistics sector. Cameron Doerksen: Okay. No, that's helpful. Maybe just a bigger picture capital allocation question. I mean you mentioned that you continue to be active with the tuck-in acquisitions. Just wondering if you've got kind of a target for leverage at year-end? I mean, you still pretty comfortable here, great free cash flow still expected in 2026. But just any guess targets there as far as leverage and is the capital allocation priorities? Alain Bedard: Yes. So capital is always the same thing. If we don't do anything of size we're going to do probably, I would say, '26 in 2026, $200 million to $300 million of M&A in terms of tuck-in, probably $200 million minimum, maybe up to $300 million, and then we get the dividend. And the rest, okay, we'll just use the cash to pay down debt or depending on the stock valuation do some buyback. I mean we have the possibility of buying back all the way up to 7 million shares that we are approved to do. Now again, $2.5 million leverage, it's okay, but we would prefer to bring that down to $2 million over time. So let's say that we do about the same free cash as we did last year. We got the dividend, we've got the M&A -- so then for sure, we'll be reducing our leverage if we don't do any stock buyback. So leverage I don't remember the plan, David. So where do we end up, we're closer to $2 million than $2.5 million. David Saperstein: Yes, no doubt. And the other thing we'll point out and we actually added this into the MD&A were just under the table where we show the leverage ratio. That leverage ratio is calculated according to the way that our banking covenants are calculated and it includes two things that some investors may not consider leverage. One is letters of credit. And the second is the book value of earn-outs, right, which are subject, of course, to the future performance target companies. So those numbers are a little bigger than they have been in the past. And so that's why we set them out in the table. And so you can see that and you can work out by backing those out, what, let's say, the real economic leverage of the company is, which is a little lower than as presented in the banking syndicate. Alain Bedard: Yes. With these numbers, David, I think we're at $2.2 million, right? . Operator: There are no further questions at this time. I will now hand the call back to Alain Bedard for any closing remarks. . Alain Bedard: Thank you. So all right then. Thank you very much, operator, and thank you, everyone, for being on today's call. We appreciate your interest in TFI International. And we're both confident in our position and enthusiastic about what 2026 will bring. As always, please reach out if you have any additional questions. I look forward to seeing many of you on this year's conference circuit. Enjoy the day, and we'll be in touch. Thank you. . Operator: This concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the ICL Fourth Quarter 2025 Earnings International Conference Call. [Operator Instructions] I would now like to turn the conference call over to Peggy Reilly Tharp, Vice President of Global Investor Relations. Please go ahead. Peggy Tharp: Thank you. Hello, everyone. I'm Peggy Reilly Tharp, Vice President of Global Investor Relations for ICL Group. And I'd like to welcome you, and thank you for joining us today for our earnings conference call. This event is being webcast live on our website at icl-group.com and there will be a replay available a few hours after the live call and a transcript will be available shortly thereafter. Earlier today, we filed our presentation with the securities authorities and the stock exchanges in both Israel and the United States. Those reports as well as the press release and our presentation are also available on our website. Please be sure to review the disclaimer on Slide 2 of the presentation. Our comments today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. The company undertakes no obligation to update any information discussed on this call at any time. We will begin with a presentation by our CEO, Mr. Elad Aharonson, followed by Mr. Aviram Lahav, our CFO. After the presentation, we'll open the line for a Q&A session. I would now like to turn the call over to Elad. Elad Aharonson: Thank you, Peggy, and welcome, everyone, to review our fourth quarter 2025 earnings. We delivered a solid finish to the year and achieved our annual guidance target with $1 billion of specialty-driven EBITDA. In the fourth quarter, we also made significant progress towards our new strategic principles, which you can see on Slide 3. This includes the acquisition of Bartek Ingredients, the global leader in food-grade malic and fumaric acids. Bartek serves hundreds of customers and distributors in the food, beverages and other end markets and distributes its products to more than 40 countries worldwide. This acquisition allows us to expand our portfolio deeper into specialty food solutions. It also helps to position us for further growth as we leverage our existing global food presence to expand into other food ingredient segments. It further advances our recently refined strategy, which focuses on the significant growth engines of specialty crop nutrition and specialty food solutions, 2 areas where we already have deep experience and broad exposure. We will continue to seek additional nonorganic growth opportunities in these 2 markets driven by a commitment to creating long-term value and sustainable growth for our shareholders. At the same time, we will stay focused on our mission to maximize our core business segments, and this includes our potash resources. As you know, we signed an MOU with the State of Israel regarding the Dead Sea concession assets in November of last year. In January of this year, we signed a binding agreement based on the principles agreed upon in the MOU. We secured compensation for our assets at the Dead Sea and established certainty on the timing of this payment. It also included the insurance of bromine supply through at least 2035. Additionally, as part of our strategic efforts, we have been conducting a review of our capital allocation priorities and reevaluating less synergetic and low potential activities. As a result, in the fourth quarter, we made several adjustments with the majority related to advancing our new strategic principles. These were essential in moving ICL forward and designed to help fund our 2 profitable growth engines. These shifts in our priorities will help us to redirect our resources to where better aligned opportunities. Adjustments included the discontinuation of ICL's LFP battery material projects in St. Louis and in Spain, the closure of a minor R&D facility in Israel and the initiation of a sale process for our operations in the U.K. We expect to share updates on our strategic efforts throughout 2026 and look forward to strengthening and growing ICL for the long term. Now if you will please turn to Slide 4 for a brief overview of the quarter. Sales were $1.701 billion, up 6% year-over-year with all 4 segments delivering sales growth. For our Industrial Products, Phosphate Solutions and Growing Solutions segment, sales of $1.281 billion were up 4%. We remain committed to growing our leadership position in these 3 segments. Consolidated adjusted EBITDA was $380 million in the fourth quarter, and this amount improved 10% year-over-year. For the quarter, EBITDA for our Industrial Products, Phosphate Solutions and Growing Solutions segments was $249 million. In the fourth quarter, adjusted diluted earnings per share were $0.09 and up 13% versus last year. Operating cash flow of $340 million, improved 2% on a sequential basis. In general, the quarter was in line with expectations with year-over-year growth in key adjusted financial metrics. Prices continued to increase for bromine, potash and phosphate fertilizers in the fourth quarter. And similar to the previous 3 quarters, overall performance remained varied across the wide array of end markets and regions we serve. Turning to Slide 5 and the review of annual results. Consolidated sales for 2025 were $7.153 billion and up 5% versus 2024. Sales for Industrial Products, Phosphate Solutions and growing Solutions were $5.650 billion in 2025, also up 5%. Full year EBITDA of $1.488 billion was up slightly, while EBITDA for Industrial Products, Phosphate Solutions and Growing Solutions came in at $1.021 billion. Adjusted diluted EPS was $0.36 for 2025, and we delivered operating cash flow of $1.056 billion. During the course of 2025, we faced shifting macro forces and industry issues while simultaneously achieving our goals. From an ICL perspective, we gained significant clarity regarding the value of the Dead Sea assets, which I just discussed. Also, as previously mentioned, we completed a comprehensive review of the company and identified 2 strategic growth engines, specialty crop nutrition and specialty food solutions. We intend to expand in these 2 areas while continuing to benefit from our distinctive global presence and regionally diversified operations. Now let's review our divisions and begin with our Industrial Products business on Slide 6. For the full year, sales of $1.254 billion were up slightly year-over-year with EBITDA of $280 million. For the fourth quarter, sales of $296 million were up 6% with EBITDA of $68 million, so a solid end to a good year. In the fourth quarter, bromine prices maintained their upward trajectory even as some end markets such as building and construction remained soft. For flame retardants, sales of both our brominated and phosphorus-based solutions were flat versus the prior year. For bromine-based products, higher prices were offset by lower volumes due to continued soft demand. For sales of phosphorus-based products, higher volumes and prices in the U.S. were unable to fully offset lower volumes in other regions, mainly in Europe. Sales of clear brine fluids, which are used by the oil and gas industry during well completion remained solid and were driven by increased demand in South America and Europe. Specialty minerals sales increased on strong pre-season demand for magnesium chloride after an early snowfall in the fourth quarter in the U.S. This was followed by a massive winter storm in North America in January. Turning to our Potash division on Slide 7. For the full year, sales of $1.714 billion were up 4% with EBITDA of $552 million, up 12%. In the fourth quarter, Potash sales of $473 million were also up 12% year-over-year, while EBITDA of $150 million increased 15%. Our average potash price for the fourth quarter was $348 CIF per tonne. This amount was up more than 20% year-over-year. Potash sales volume of 1.2 million metric tons in the fourth quarter were up roughly 15% on an annual basis. This marks a strong finish to 2025 as we successfully addressed operational issues in the Dead Sea related to the war. For our Spanish operations, our focus on debottlenecking and optimizing helped us to improve reliability and advance our production goals. These efforts also helped us to deliver a quarterly production record in Spain in the fourth quarter. In the fourth quarter, we also signed a contract with our Chinese customers for supply at $348 per metric ton, which is in line with other recent industry contract settlements. Finally, potash affordability remained attractive in the fourth quarter, and we continue to maximize the profitability of our potash resources. Whenever possible, we prioritize potash supply to the best global markets. Now turning to a review of the Phosphate Solutions division on Slide 8. For 2025, sales of $2.333 billion were up 5%. However, EBITDA of $528 million was impacted by higher sulfur costs. In the fourth quarter, sales increased 2% to $518 million, while EBITDA came in at $121 million. Food specialties sales increased slightly in the fourth quarter versus the previous year and reflected growing volumes in North America and Asia as we leverage our regional expansion strategy. In the fourth quarter, our overall food business gained additional sales and also expanded its new product pipeline for dairy in the U.S. and EMEA. We also saw an increase in global processed meat sales across the U.S. and EU. In China, our food sales increased 15% in the fourth quarter, our best quarter of the year. For 2025, sales were up 12% as our business expansion in this region has been successful since its debut. In total, we expanded our food project pipeline with nearly 40 new solutions since mid-2025. While we are committed to growing this business organically, you can also expect us to continue to evaluate M&A opportunities. As I mentioned earlier, in January, we completed our acquisition of approximately 50% of Bartek Ingredients. And for 2026, we are targeting a wide array of growth options. This includes expansion into emulsifiers along with other R&D efforts such as the development of a high-protein drink stabilization system for GLP-1 users. We expect additional growth to come from portfolio expansion in seafood and soy protein and as the segment looks to deliver more localized food solutions to emerging markets. In China, our YPH joint venture benefited from both higher prices and volumes and an increase in demand for battery materials in the fourth quarter. We also celebrated the 10th anniversary of our Chinese partnership in January of this year. Overall, Phosphate specialties performance continued into the fourth quarter as expected with most regions remaining stable. However, market softness was maintained in Europe, a trend that lingered as anticipated. Higher cost of raw materials and specialty sulfur persisted in the fourth quarter and show no signs of abating in 2026. This brings us to our Growing Solutions business division on Slide 9. Sales for 2025 were $2.063 billion and improved 6% year-over-year, while EBITDA of $213 million increased 5%. This growth was due to our continued strategic focus on global specialty solutions, which have been customized for our customers on a regional basis. For the fourth quarter, Growing Solutions sales increased 6% to $467 million, while EBITDA of $60 million was up 18% versus the prior year. In the fourth quarter, we saw profit improvement in both North America and Europe. In North America, higher prices helped drive an increase in profit. In Europe, we continue to benefit from our successful product mix strategy, which is focused on our higher-margin products. Sales in Asia also improved in the fourth quarter, but rising raw material costs impacted profits as expected. In Brazil, the overall market remained under pressure as farmers faced affordability issues and distributors shift their buying behavior. Although this did impact our profitability, sales performance remained solid, and we were able to expand our specialty market share. I would ask you to now turn to Slide 10 and some key takeaways. We have already made progress in advancing our strategic principles, which we announced in the third quarter. We added Bartek Ingredients to our specialty food solutions portfolio, and you can expect to see more acquisitions in the coming year. We also took a comprehensive look at our existing portfolio and elected to discontinue our downstream LFP battery materials expansion, which we announced in the third quarter. In the fourth quarter, we initiated a sale process for our Boulby operations in the U.K. in the hope of getting this facility into the best hands for the future. During 2025, we also worked diligently to provide clarity around the 2030 Dead Sea concession process, which I discussed earlier. We continue to believe that ICL is the most suitable candidate to be awarded the future concession. We currently intend to participate in this process once it begins, assuming, of course, that the terms are economically viable, and we will ensure stable regulatory environment. I would now like to look outside of ICL towards the markets where we operate. Across our minerals, which include potash, phosphate and bromine, we see prices are stable to improving, and these trends are expected to continue into the first quarter of 2026. For our specialty phosphate, we are seeing pressure related to both competitive forces and higher raw material costs, and we are actively monitoring and reacting to these dynamics. While some cost inputs are rising, the sulfur market is experiencing exceptional volatility on a global basis. Prices have surged to multiyear highs, driven by supply and geopolitical issues. These increases are causing issues across several of our businesses and significantly impacting other agriculture and chemical manufacturers. At ICL, we are actively working to mitigate higher costs, including sulfur, and we will keep you up to date on our efforts as the year progresses. We are also experiencing pressure as the shekel continues to strengthen versus the U.S. dollar. This makes it more costly for us to do business in Israel as a dollar-denominated company. However, we are using hedging techniques to help eliminate some but not all of this exposure. Now before turning the call to Aviram, I would ask you to turn to Slide 11 and a review of our guidance for 2026. For this year, we expect consolidated EBITDA comprising all 4 of our business segments to be between $1.4 billion to $1.6 billion. As the price of potash has stabilized over the past few years, we believe providing consolidated guidance is now more relevant. For potash sales volumes, we expect this amount to be between 4.5 million and 4.7 million metric tons as we continue to benefit from the operational improvements made at the Dead Sea and in Spain in 2025. Finally, we expect our annual adjusted tax rate to be approximately 30% in 2026. And with that, I would like to turn the call over to Aviram for a brief financial overview. Aviram Lahav: Thank you, Elad, and to all of you for joining us today. Let us get started on Slide 13 with a quick look at quarterly changes in key market metrics. On a macro basis, average global inflation rate improved versus the prior quarter with the exception of the U.S., which was flat and China, which swung positive. Interest rates were a bit more mixed. While rates in most regions were relatively stable, rates in the U.S. improved by nearly 40 basis points. For Brazil, while the Central Bank held its target rate unchanged at 15%, rates remain elevated on a year-over-year basis. Looking to exchange rates, the shekel has strengthened versus the U.S. dollar when compared to long-term historical rates. Wrapping up our macro metrics, you can see that U.S. housing starts trended up slightly by the end of the fourth quarter. For fertilizers metrics, the picture was more mixed. The grain price index declined on a quarterly basis with rice showing a significant reduction. On the positive side, corn and soybeans both improved in the quarter and on an annual basis with soy showing solid mid- to high single-digit growth for both periods. While farmer sentiment improved by the end of the fourth quarter, those gains were reversed in January. When asked specifically about soybeans, 21% of U.S. producers said they expect soybean exports to abate over the next 5 years with increasing competition from Brazil weighing on their minds. In the fourth quarter, potash prices moderated slightly, mainly due to sentiment and seasonality, while P2O5 prices trended higher in 2025. This is not expected to continue in perpetuity. Over the same time frame, there was a significant reduction in ocean freight rates of nearly 25%. Beyond agricultural indicators, we also track other indicators relevant to our Phosphate Solutions and Industrial Product segments. Our Phosphate Specialty Solutions are an important part of the food and beverage end markets. This is an area we are targeting for growth, both organically and via M&A. In the U.S., retail trade and food services improved both through November and year-over-year. For our Industrial Products segment, the price of bromine in China is an important metric, and these prices continue to improve in the fourth quarter. Durable goods are another indicator for Industrial Products, and they picked up slightly through November. For remodeling activity, which is a good metric for both Industrial Products and Phosphate Solutions, growth was up approximately 1% on a sequential basis and 2% year-over-year. If you now turn to Slide 14 for a look at our fourth quarter sales bridges, on a year-over-year basis, sales were up $100 million or 6% with all 4 segments demonstrating growth. Turning to the right side of the slide, you can see a $98 million benefit from higher prices this quarter, which was partially offset by a reduction in volumes. Exchange rates also had a positive impact. On Slide 15, you can see our fourth quarter adjusted EBITDA, which improved approximately 10% versus the prior year. Similar to sales, we saw higher prices and reduced volumes. There was also an impact from exchange rate fluctuations, and you should expect to see this continue in 2026 if the shekel continues to strengthen versus the dollar. We also saw a significant increase in raw material costs, especially sulfur. This trend is continued into 2026, and it is becoming more difficult to pass this increase along. Additionally, as we shared publicly last December, the Israeli Supreme Court ruled that ICL is obligated to pay fees for water extracted from wells in the Dead Sea concession area. This equaled $14 million for 2025, and this entire amount was recorded in the fourth quarter. As Elad mentioned earlier, we had a number of adjustments this quarter, so I want to spend just a few moments on Slide 16. Here, you can see a representation for these items. I would like to point out that the majority of these items are related to advancing our new strategy. These adjustments are essential in moving ICL forward as we look to fund our profitable growth engines, specialty crop nutrition and specialty food solutions and as we focus on extracting value from our core businesses. These changes will help us redirect our resources towards better aligned opportunities. First, as you know, we announced the discontinuation of our LFP battery material project in St. Louis and in Spain on our third quarter call. And in the fourth quarter, we took an adjustment of approximately $61 million. In the fourth quarter, we also closed a minor R&D facility in Israel, and this adjustment was approximately $6 million. As Elad mentioned, we also recorded an impairment of our Boulby assets in the U.K. related to our shifting strategy, and this amount is approximately $50 million. We also recently initiated a sale process for these operations. Additionally, we made a $19 million provision for early retirement programs at several other sites. Turning to the ruling related to fees for water extracted from wells in the Dead Sea concession area. While this ruling was the opposite of the legal opinion issued by the Israeli Ministry of Justice, we, nonetheless, recognized approximately $80 million in the fourth quarter of this year for prior periods. Now if you will turn to Slide 17 for a quick review of our full year sales bridges for 2025. All 4 of our segments contributed to the 5% year-over-year growth we delivered. While we experienced a reduction in volumes, we benefited from generally improving prices across our businesses. On Slide 18, you can see a breakout of our adjusted EBITDA, both by segment and inputs. Once again, we benefited from higher pricings. However, a reduction in volumes, exchange rate fluctuation and higher raw material and energy costs tempered our EBITDA growth. Before I turn the call back to the operator, I would like to quickly share a few fourth quarter financial highlights on Slide 19. Our balance sheet remains strong with available resources of $1.6 billion. Our net debt to adjusted EBITDA rate is at a stable 1.3x. And we delivered operating cash flow of $314 million. Once again, we are distributing 50% of adjusted net income to our shareholders. This translates to a total dividend of $224 million in 2025 and results in a trailing 12-month dividend yield of 3.1%. And with that, I would like to turn the call back over to the operator for the Q&A. Operator: [Operator Instructions] Your first question is from Ben Theurer from Barclays. Benjamin Theurer: Two quick ones. So first of all, thanks for the guidance. And obviously, it kind of like at the midpoint looks more or less like a similar year 2026 than what was 2025. Maybe can you help us frame the upside risks to the higher end and the downside risks to the lower end as you look into 2026 across the different segments? Like what are the drivers to get it to the upper end? And what would be issues that you may face that could drive you more towards the lower end? That would be my first question. Elad Aharonson: Okay. Thank you, Ben. So I think for the upside, I think we'll see higher potash quantities for production and sales. And maybe there will be an upside on the price per tonne of the potash. Also on the bromine, we see increase in bromine prices. We'll see what happen after the Chinese New Year. China is the biggest market for bromine and there could be upside there as well. Also, we need to see the demand. So that's about upside. And on downside, so the 2 headwinds that we have right now, one is the cost of sulfur, which went up from around $140, $150 1.5 years ago to more than $500. And the sulfur is the most dominant raw material for the phosphate portfolio. So this is a headache for us. So we mitigate it, but still it's an issue. And the second one is the exchange rate of shekel versus dollar. Our functional currency is dollar, while we have expenses in shekel here in Israel. And as the shekel continues to strengthen versus the dollar, that would be a challenge for us. Aviram Lahav: Ben, I would add one thing specifically. It applies to basically most things that Elad described, but the cost of sulfur specifically, it's also the timing in the year when it will happen. I mean basically, we are not sitting on significant inventories of sulfur, which means that when it goes up, we pretty much quickly absorb it in the cost of manufacturing. But when it will eventually go down, then we will be rid of expensive sulfur pretty quickly. Now the guidance is for the year. We are giving it in February. So basically, everybody can do the math. It depends not only the extent to which it will happen, but the timing when it will happen. I think that's quite important to mention that. Elad Aharonson: And also maybe it's worth mentioning the Brazilian market. The last season in Brazil in general, not only for ICL, was a difficult one for the agri business. I think we performed better than the average, but still it wasn't a great year in the agri business in Brazil. If next year or this year, 2026 will be a normal one or even higher than normal, then there could be an upside related to that. Benjamin Theurer: Yes. Actually, I wanted to follow up on the Growing Solutions side and what you're seeing. I mean, obviously, this is -- there's a lot of like different pieces. And you talked about the market share gains in specialty, but with the farmer affordability issues, so probably is what you wanted to comment on. So what are you seeing like on the ground in terms of like demand within the Brazilian farmers, because given that the interest rate environment is still high, we've talked about this over the last couple of quarters as that being an issue? But it feels like it could potentially get better into 2026 with maybe rates coming down, it's an election year. So there's a lot of potential. So I wanted to understand how you feel about ICL's position in Brazil, in particular, within Growing Solutions. Elad Aharonson: So I'll say the following. All in all, I'm encouraged by the progress that we are making on Growing Solutions, and you can see the nice development on EBITDA for Q4 for Growing Solutions. Having said that, Brazil, which is give or take 1/3 of Growing Solutions business, it was a difficult year in Brazil because of the reasons that you mentioned, interest and so on. We like to believe that the interest rate will go down. I don't think it will go dramatically down, but it will go a bit down. And then we'll see what happen in the next elections. We adapted our cost structure in Brazil. And I do believe that next year -- or this year, 2026, will be better for us. Talking about Growing Solutions in general, we are changing our mix of product portfolio in Europe. Europe is also around 1/3 of the business for Growing solutions and our portfolio there has to be adapted, and we started doing it in 2025. I believe we'll see the results in 2026 and onwards. Still, we'll see what happen in general in Europe. And the last comment is about the Far East, China and the region where we see a nice progress. Here, the issue is more about the cost of raw materials, and that comes back to the comment about sulfur and some other raw materials. Do you want to add, Aviram? Aviram Lahav: Yes. Maybe to say something further. Thank you, Elad. Say something further about Brazil, I think it will resonate with you guys. It's -- credit is tricky. There's the rate of credit, there is the availability of credit. So what's happening on the ground in Brazil that, Ben, you're totally correct, the rate is extremely high. The real rate is probably around 10%, if not more than that. The nominal is about 15%, inflation is scaled at below 5%. That's exactly, by the way, why the Brazilian Central Bank is keeping rates so high. But that's only part of the story. Second thing is that commercial banks are not giving credit to -- not fully, of course, to the industry, which means that the farmers and the agriculture industry is using the suppliers as banks. And therefore, the issue of availability of credit is something that we obviously have to take into account, reckon with and decide how much exposure are we willing to take. Now notoriously, companies that have given too much credit in the Brazilian market have been beaten. It happens time after time, and we are very careful with our location, which means that we'll keep an open eye. Notwithstanding that, we can very well have a better year in '26, but this remains to be seen. So -- and by the way, during this process, you can see the pressure that exists and what's happening in the distribution companies. Distribution companies in Brazil are basically squashed between the suppliers and the -- actually the farmers. And that's a place that you really do not want to be. Okay. That's about that and that's continue. Operator: Your next question is from Joel Jackson from BMO Capital Markets. Joel Jackson: I'm going to follow up a little bit on some of this. I'm sort of surprised about the -- like, I think you've laid out the opportunities and challenges in '26. But I'm trying to figure out which businesses are up and down in '26 in your guidance. So potash volume higher, that's clear. Prices are higher, like if you just compare '25 versus '26 expectations, so potash should be up. And does that mean that you've got the other businesses like Growing Solutions and IP growing a little bit and phosphates down to get to a flattish midpoint? Aviram Lahav: No. I think the following. First of all, potash, indeed, as you said, quantities should be in a better place. Prices should be in a better place. But there is a but, the shekel is in a worse place, which means that all the -- and this is one particular division with heavy, heavy expenses. Obviously, on the shekel side, you can imagine by the size of the facilities in Israel. All of them obviously being paid for in shekel, which means that if we look at '26 and we benchmark it to '25, it should be better, but less so that was -- that it could have been if the shekel would have been at a better place. That's about the potash side. When you look at the bromine side, I would tend to say that we should be pretty much around the same ballpark that we were this year. When you look at the Phosphate Solutions side, then to an extent on the EBITDA, it makes sense that it will come somewhat lower, and this is due to the sulfur price with the caveat that we previously discussed. We don't know for how long this will prevail. And the last but not least is the Growing Solutions. It's one division that actually is not -- is actually gaining a little bit even from the currencies because it is less dependent on the shekel side, and it obviously sells around the world than most currencies vis-a-vis the dollar. The phenomenon of the weak dollar is not only vis-a-vis the shekel, it is vis-a-vis the euro, vis-a-vis the pound, et cetera, et cetera. I guess you all know that. And actually, we can find ourselves in a somewhat better position in Growing Solutions than in '26 versus '25. And all in, when you bake it all in and you look at what we are seeing for next year, we should see a very similar picture. Again, some gaining a bit, like all in, as I said about the potash, some remaining the same and some weakening to a degree. But these are not that dramatic. So if I had to take a guess, I would say that all in it's very near with a little bit going more toward the potash, a little bit less vis-a-vis the phosphate. I hope that answers your question, Joel. Joel Jackson: Very helpful. Could you remind us your sensitivity to the shekel how in U.S.? Aviram Lahav: Yes, yes, yes. Well, generally, we are above $1 billion short shekel. Obviously, it fluctuates, but you can make the math. So basically, every 1 percentage point is about $10 million. That is -- we are not actually when we -- our financials are driven by the hedged shekel. It's not the naked shekel that is the representative rate every day. So basically, we have got quite a significant amount of our exposure hedged. And therefore, our -- when rates go -- when the shekel strengthens against the dollar, it effectively strengthens less against our hedges. However, in the longer term, obviously, it takes an effect. So if this continues for a very long, and again, we do not know, the shekel at this stage is quite abnormally high for many reasons, nothing to do with our industry. The question is how long it will prevail. But generally, the yardstick every about 1%, it was about $10 million. Joel Jackson: Okay. Finally, just following up on that. What is your -- in your guidance for this year '26, what is your U.S. dollar shekel assumption? And how much of that is hedged right now? Aviram Lahav: Yes. So the naked, absolute naked, we would have taken somewhat around $310 million. But hedged, it is over $320 million, that's our assumption. It will be -- and it -- by the way, I saw quite a lot of guidance coming from companies, Israeli exporters in different fields. And I would say that anywhere from $315 million to $320 million plus is -- would be a common yardstick for where we see the market going. However, it can be... Joel Jackson: I'm sorry, how much of the billion are you hedged? I'm sorry. Aviram Lahav: Sorry, how much percentage do we hedge? Joel Jackson: How much of the billion are you hedged right now? Aviram Lahav: Yes. Around 50% at that time. Normally, we hedge around 60%, but when the rates go down, our analysis says that we can allow us to be a little bit more exposed because there's a limit to how much it can go down. Operator: [Operator Instructions] And your next question is from Laurence Alexander from Jefferies. Daniel Rizzo: This is Dan Rizzo on for Laurence. If we could just go back to Brazil for half a sec. Have we seen this before? And how long has it lasted with suppliers basically acting as the main creditors for their customers in Brazil? What happened last -- I mean and again, how long does it last? Aviram Lahav: Yes, Dan, it's -- I've been following and working in the Brazilian market about 15 years now, probably going on 20 and it waves. It is -- it has a lot of waves. I mean, basically, you're able to cope with it. If you work in a smart way -- I mean, the Brazilian market in agriculture is the #1 agricultural market in the world. If you're not in Brazil, you're actually not playing in agriculture, end of story. I mean we are active, by the way, in Brazil and other divisions as well. But predominantly, I would say, it's in agriculture. Now the Brazilian agricultural economy is obviously very, very important, especially around soy. You know the story there. And if you play it carefully, you can get very good results. Now you have to be aware at certain points of time, again, I'm trying to recollect from my past -- by the way, you can see it reflected in the currency. I've seen the real at 4. I've seen it at 160. I've seen it at 6. And now it is at 520 or something around that. It toggles. I mean, I believe that it will prevail. They will sort it out. I think that this -- the last year has seen probably a shift to a new reality. This year should be stable. Why am I saying this? Because what happens normally when things start to get tougher, it takes time for people to acclimate. I believe they have acclimated. And I believe that what we're seeing and we're seeing it in our performance, we are doing not great, but we're doing okay. Our level of doubtful debt does not grow. We are able to collect. We could have sold much more, but it would have taken a significant amount of more risk. So we are playing the game. I think we've got the experience, the knowledge how to play the game. And I do not believe that there is any particularly, let's say, bad news that should come there. I would gather that the next stage will be somewhat better than we've seen in the past year, but it remains to be seen, of course. Does that answer your question? Daniel Rizzo: That does. No, it does, it does because it sounds like we're at the trough for... Aviram Lahav: I believe so. Yes, I believe so. Yes, yes, yes. Daniel Rizzo: Okay. And then -- so with the moves you made with your portfolio with kind of deemphasizing or stopping the big battery project, how should we think about batteries going forward? Is this a temporary pause waiting for the market? Or are you just kind of moving away from this end market is not really relevant anymore? Aviram Lahav: Yes. That's a very good question. I think that something very fundamental has happened in the market. I mean, ultimately, when you look at the horizon, electricity, electric cars, electric other systems are here to stay. There's no question about that. The question is the pace and the question is who will be the winners and losers in this industry. Now if you look at the U.S. country to what was the -- what was, let's say, the aspirations and the thoughts, 1.5 years ago, they are very different at this stage for many things. It's the infrastructure, it's the support the government gives direct and indirect. And it is a situation where it will be a much, much more rockier road. You can see this by the way that Ford are reacting. You are seeing that by the way that GM are reacting. GM are not reacting the same way, but notwithstanding that, they took a significant hit and it's probably going to take a lot longer. And for somebody in novice starting to play the game, we came to a definitive conclusion that was not our game. We should have gotten a lot of support from the government. That support is off the table. Many factors were baked in. In Europe, the question -- the issue is quite different. The result is very similar, but different, different things. First of all, in Europe, there is an issue with the level of adoption -- of theoretical adoption is higher than the state. However, the propensity to consume is hampered. The real wages in Europe are not going up, and there was always the notion that the car needs to be cheap enough in order to play in this game. And of course, the Chinese are much freer to work in Europe than they are in the U.S. And the situation came, which culminated in the announcement -- dramatic announcement that Stellantis came about 2 weeks ago. They dropped a very significant amount of their project. Share was down 25% that day. It's quite dramatic. Ford pulled out of Germany, there are many stories here. So when we look at it in the global market, we obviously have got an extremely successful operation in China supplying to the best players in the market. We continue that. But our dreams of going downstream to become a full-fledged LFP producer or, let's say, the cathode side, that has been put off. And I may say, you have the CEO of the group with me. He's the one that makes the calls, but I don't think we're going to come there anytime soon, if at all. Elad Aharonson: No, no. But the bottom line is that the industry of LFP cathode material remains in China and only in China. Aviram explained about the U.S. and Europe. And we don't have any competitive advantage in moving forward in the supply chain in the -- for the cathode material. So we will remain a supplier of raw material of MEP chemical grade to others in China, which is a great market for us. We are doing great there, but we don't have to continue with the projects in Spain and in the U.S. I think it was a very good decision, if I may. Aviram Lahav: And for us, just to finally close, we said all along, if you remember, time after time that we're investing in the qualification side, we're investing in technology. But we are not going to go to continue and to set up facilities until we have all the stars aligned. I think it was a very, very smart decision. And you can see that ultimately, when things indeed didn't turn out as we would have hoped to us is relatively minor. It could have been completely different magnitude if we've gone downstream and go to manufacturing sites. So that's, I believe, the story on that one. Operator: There are no further questions at this time. I will now hand the call back over to Elad Aharonson for the closing remarks. Elad Aharonson: Okay. So thank you, everyone, for participating today. Look, we said the strategy -- new strategy in the third quarter. And as you can see, we are moving forward by executing this strategy. So on one hand, we acquired Lavie Bio for Growing Solutions. Recently, we acquired Bartek for the food business. And you can expect some more M&As along the year. As for maximizing the core, we signed this definitive agreement with the State of Israel, which is very important for us to secure the future and we are very happy with this agreement. At the same time, we improved the production rate of the potash, both in the Dead Sea and in Spain towards the end of the year, and we will continue like that in 2026, as you can see in the guidance. And as for efficiency and optimization, so we took decision to stop the LFP project, and we just explained why. Also, we put on the shelf Boulby because we are very disciplined with the capital allocation, and we want to direct the capital of the company in those areas where we see most of the potential and which are more synergistic. And probably next week -- next quarter, sorry, we'll talk about cost transformation program as we need to take care of this as well. So we are pushing and making investment on the 3 pillars of the strategy. It's a bit like transformation phase. It will take some time, not a lot, but I guess we'll all see the results soon. Again, thank you very much, and probably we'll be in touch in different forums. Thank you. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. I am Maria, your Chorus Call operator. Welcome, and thank you for joining the TAV Airports Investor Day live webcast to present and discuss the 2025 full year financial results. [Operator Instructions] The conference is being recorded. At this time, I would like to turn the conference over to Mr. Serkan Kaptan, CEO; and Mr. Karim Ben Salem, CFO. Mr. Kaptan, you may now proceed. Vehbi Kaptan: Thank you, Maria. Hello, and welcome to all. Thank you for joining our 2025 full year webcast presentation. I would like to start by giving you the highlights of the year's traffic first. The year was unfortunately marked by many geopolitical developments. These, of course, have affected especially the Middle Eastern traffic negatively. We have lost about 3% of our international traffic due to the geopolitical developments during the year. Strong lira was also a headwind during the year because it makes the Turkish holiday more expensive in euros or dollars. Bodrum, especially Bodrum, felt these affects the most during the year. Antalya, however, is more dominated by all-inclusive package tourism, coupled with competitive ticket prices, this makes the destination more affordable. A shorter and milder winter season also supported the traffic in Antalya. So the international traffic still managed to grow slightly at 1%. You may recall that at the beginning of the year, we have a shifted season where we had cold spring days and were suffering from a decreased traffic. And in summertime, due to the unexpected Iran-Israel clash, we suffered some traffic, but because of the milder winter season and late winter season, we managed to increase the traffic in September, October and till mid-November and managed to grow slightly around 1% for Antalya. In Izmir, which has mostly outbound Turkish traffic or visiting diaspora traffic, we see a strong lira working in our favor. The same goes for Ankara. Ankara is also being supported by the growth of AJet, which has recently based 2 new aircraft in Ankara, where we will realize strong growth in Ankara for 2026. Ajet is growing in Ankara as part of its hubbing strategy. As you know, they are based in Sabiha Gokcen in Istanbul, the secondary airport, but established their second base in Ankara, connecting almost all central Anatolian traffic via Ankara to international destinations. This strategy is working well. We have seen the output last year in 2025 with 14% international growth. And this year, we see that this growth continues very robust. The fleet growth of the other two low-cost carriers, the Turkish low-cost carriers such as Pegasus and SunExpress is also supporting both Ankara and Izmir. SunExpress mainly grows in Izmir and Pegasus continue growing in Ankara. Almaty international traffic also grew by 7%. This is because of the grounded A321neos in the airport. They continued suffering the Pratt & Whitney engine failure for the A321 and growth was limited to 7%. Normally, we would expect it to grow much more than the 7%. This is because of the high GDP per capita of the country compared to the size of the aviation sector. This year, we believe that we will realize much higher percentages on international growth in Almaty. Georgia, Georgia is also very popular with Turkish, Israeli and Russian tourists and their traffic has increased a lot this year. In 2025, in Georgia, we had a growth of 16%, and we believe that this robust growth will continue in 2026 as well. We see a boom in Georgia, both in terms of tourism and also becoming a regional gateway to other destinations. We have high single-digit growth for the rest of the portfolio, which is a great performance compared to the peer airports as well. So when we look at the January results of 2026, we see that the traffic came in very strong in most of our assets. All international assets grew very high percentages. We see the effects we talked for 2025 in the Turkish airports. The strong Turkish lira is affecting Antalya and Bodrum negatively and Izmir and Ankara positively. We have a strong winter, I would say, for Antalya. That's why the demand was low in January, but we hope the recovery to be very quick soon. And the growth of low-cost airlines is also affecting Izmir and Ankara in a positive way. Almaty made a strong start to the year with domestic aircraft diverted to international routes. The 15% international growth is closer to the real potential of the airport. Because of, again, the engine problems of A320 in Almaty, Air Astana and the other local carriers diverted their flights more to international. You will see a decreasing trend in domestic, whereas we have an increasing traffic trend in international. That's how we made the 15% growth in January. There is also a very strong travel demand between China and Almaty, which doubled when we compare the traffic to the last year and became the largest source market for the airport in January. So Chinese traffic is coming. Georgia's spectacular growth continued in January, too. In Georgia, in January, we had a growth of 19%. We believe that we will have this continued trend as well. We had 31% growth in Macedonia because as we reported last year, we were missing almost half of Wizz Air's fleet due to the neo engines. And now we have new 320 -- 321s based in the airport as of November, which has a 30% higher seat capacity because the 320s are replaced by 321neos, which brings this 30% higher seat capacity. All in all, 12% international growth was for January is a strong start for the year. But of course, January is a low month. It's a low season. These are off-season numbers and do not carry a lot of weight when we compare the 12 months. We have a more conservative passenger guidance than the numbers on this table, which we'll talk about on our guidance slide as well. So when we looked at the growth of source market slide, it shows how our passenger mix has shifted over time, especially since the pandemic. One big difference is the drop in visitors coming from Russia and Ukraine. With the sanctions in place, Russians have to fly in Russian aircraft to Turkey. Earlier, you may recall that mostly Western aircrafts were used for Russian aircraft flying to Turkey. But due to their lack of aircraft, they also started -- they decreased their flights to Turkiye, and we have lost 3.7 million Russian passengers due to the sanction. On the Ukrainian side, we had 2.7 million passengers before the tragic war, but because of the war, there is no civil aviation in Ukraine presently. We don't have any flights between Ukraine and Turkiye, but we have, of course, some Ukrainian passengers flying via Poland. We believe that we have made up for some of the loss in Ukrainian traffic with Polish traffic, which has increased significantly. You can see the growth of Poland on the chart, which also includes Ukrainian travelers flying through Poland, as I stated before. Russians used to be the #1 source market for our airports. So if the sanctions are lifted, Russians could again become #1. Bear in mind that in our forecast, in our guidance, we didn't include any sanction to be lifted. It is the status quo continuing on as per our disclosures. Compared to the last year, the best performing markets were Turkiye and North Cyprus due mostly to the strong lira. UAE, Netherlands and Kazakhstan underperformed the most, unfortunately, again, mostly due to the same reason and due to the geopolitical development. With that, I will now hand over the presentation to Karim to go over our financials. Karim Salem: Thank you, Serkan. Coming to the financials in euros and starting with revenue. It continued to be above traffic growth for the full year, and it is the continuation of the trend in previous quarters. One of the reasons for that is that, as you may know, we do not consolidate Antalya. The consequence of it is that it is in our passenger numbers. And actually, it pulls traffic growth downwards, but it is not in our reported consolidated revenue. We only consolidate the net income after purchase price amortization. So when it comes to commenting the main highlights by category and starting with catering, we had significant growth in catering revenue this year related to BTA new Antalya operations. So BTA Antalya operations also boosted the area allocation revenue, which contributed to revenue growth being above passenger. Coming to ground handling, where 73% roughly of our revenue is in Turkish lira. Our OpEx continues to increase with TL inflation. And thanks to the great management team that we have at Havas, we have been able to reflect this cost to our prices. Ground handling as a segment was also strong in our foreign airports. So ground handling was overall another factor in revenue surpassing the passenger growth. The new concession in Ankara was also strong with an additional EUR 19 million in terms of year-over-year revenue growth. In 2025, we have 2 quarters of Ankara operations under the new concession terms, but we will operate the full year 2026 under the new concession, which brings an even better perspective for 2026 regarding Ankara, sorry. The nonfuel aviation revenue growth was in low teens. The jet fuel business is also in aviation revenue that was affected by fuel market volatility and a weak U.S. dollar. Lounges continue to grow, especially in the U.S. and in Kazakhstan. And despite the closure of some unprofitable Spanish lounges, which we discussed earlier this year, we had strong growth there as well. Looking at the like-for-like duty-free spend per pax, excluding Antalya and Almaty, it is up 9% from last year. Almaty kicked off right before Q3 last year. So we are feeling the full year impact kicking in for 2025. And all in all, our duty-free revenue went up by a solid 17% for year 2025. Finally, we have car park revenue that didn't grow this year because we shut down the Oman parking operations. And one last point regarding Havas related to bus operations, Havas closed down the Adana station this year, which is the reason why you are seeing a small dip in the bus services revenue. Coming to OpEx, if we look into the operating expenses before EBITDA, these expenses continue to stay below revenue, and we continued to expand our EBITDA margin. We had a drop in jet fuel costs and a flat cost of services renders. Maintenance and utility expense growth was muted, and we had flat other operating expenses. Operationally, BTA's New Antalya operations and the new Ankara concession supported margin expansion. And just as in the third quarter, in the fourth quarter, too, a lot of assets delivered strong operating leverage. If we adjust for the impairment expenses made in the last quarter of 2024, we had higher depreciation expenses compared to last year which was due to the first full year of the new terminal in Almaty, sorry, and the end of the old concession in Ankara as well as Ankara's rent expenses for the new concession, BTA Antalya's rent expenses and TAV Operation Services lounge rent expenses in New York. In equity accounted investments, the cash picture is much better than what the numbers in equity accounted investments suggests. From Antalya One, we got a dividend of EUR 72 million this year versus a dividend of EUR 68 million last year. So in terms of free cash flow, the performance is actually better than last year. The combined EBITDA of Antalya One and new Antalya is EUR 135 million this year. It has to be compared to an EBITDA of EUR 127 million last year. Nevertheless, due to the amortization of the purchase price in Antalya One, higher deferred taxes in both and higher depreciation and finance expenses in New Antalya due to the opening of the new terminal, we were not able to show it this year under the equity accounted investment line. Coming to ATU, it had higher EBITDA this year, mostly because of Antalya, but it made a lot of investments, so its finance expenses increased. And for TGS, we see the effect of less third-party sales and the end of the pandemic compensation that we already evoked in the past. Getting down the P&L and reaching the net income line at the end, we continue to have overall strong EBITDA growth with margin expansion in the fourth quarter as well. So we had higher D&A, which we discussed earlier. Equity accounted investments had EUR 54 million more deferred tax losses compared to last year and EUR 12 million more of purchase price amortization in Antalya. The operations in Antalya, as we discussed, they are actually very strong. We have EUR 36 million more FX losses this year, which are mostly due to the appreciation of the euro and which are noncash. And with the canceling of inflation accounting in tax accounts, we accrued deferred tax losses due to the appreciation of euro versus Turkish lira. Most of this effect was actually in New Antalya and in Ankara due to the new investments made in these 2 assets. The canceling of inflation accounting increased the tax loss carryforward of these 2 assets, which had a somewhat neutralizing positive effect on deferred tax. And we used the legal revaluation right in Ankara, which was a benefit of EUR 11 million. So pretty sophisticated technical topics. But all in all, for the year, we had EUR 119 million of total noncash effect on the bottom line. If you adjust for the increase in negative noncash one-offs, the net income for 2025 becomes even EUR 170 million, which is only 7% below last year. We can see this large clearly in our free cash flow, which is standing at EUR 223 million for 2025 with a strong 44% growth over 2024. There are many moving parts in our financials, but definitely, free cash flow is the number which shows the clearest picture. We are generating a significant amount of cash for the year 2025. Coming to debt. You know that this has been an indicator that we have definitely been following over the past couple of years and especially in 2025 in connection with our guidances. With very strong cash generation throughout the year, we reached our long-term net debt-to-EBITDA guidance with an amount that finally comes out at 2.89x EBITDA for year 2025. In the fourth quarter, we had the currency-protected deposits mature and turn into cash. We had working capital improvements in many assets and the revaluation of the Almaty put, which was before standing at EUR 54 million and which is now coming out at EUR 91 million. All in all, our consolidated net debt dropped versus both last year and the last quarter. Normally, the fourth quarter is and should be seasonally weak. So the net debt drop over the previous quarter is quite a strong performance from our side. Coming to the next page. On dividend, the main highlight there is that as we have guided the market in 2025, we are restarting the distribution of dividends this year. We are planning to distribute TRY 1.3 billion, which corresponds to 50% of our IFRS net income converted to Turkish lira amount as of yesterday's exchange rate. We have invested heavily this year, and we will continue to invest at the service of our growth and our development next year as well. Against this backdrop, the decreasing of net debt and the resumption of dividend shows the strength of our balance sheet and our high capacity for cash generation. So I switch to Page #10. As many of you have followed, we were able to extend our Tbilisi concession until the end of 2031 in January. We pay fees to the state. We eliminate this and we pay a flat 30% of our passenger fees as the new lease for that 5 years period. The airport grew with a passenger CAGR of 13% during the last 20 years and EBITDA CAGR was 21%. It's a very high-growth market and a very robust operation. We are very happy to continue to serve Georgia with Tbilisi Airport for another 5 years beyond 2027. So if I go to Slide 11, Ankara Esenboga Airport. We were always guiding you that Ankara's profitability will jump with the new concession and its EBITDA would reach to EUR 45 million. On 24th of May 2025, last year, this -- the new concession of Ankara started, where we have enriched passenger fees and no cap in the collection of the international passenger fees. This is the first year of the new concession, and we have reached EUR 45 million of EBITDA with a 67% growth over the last year. This made with only a 14% year-on-year international passenger growth due to the new concession, which is much more profitable compared to the first concession. We have only seen the half year effect this year because of the new concession. As I said, it started as of 24th of May 2025. In 2026, we will see the full year effect. In the beginning of the call, I also talked about AJet's two new aircraft to be based in Ankara, which grew January traffic by 30%. So everything is looking good for Ankara for 2026. On the next slide, this is related to ATU. ATU is in Antalya now. Antalya, as you know, is a 40 million passenger airport involved with 32 million international passengers. You see the effects of ATU's Antalya operations. ATU operation also started end of April. The full operation with all terminals started mid-September. So we don't have the full year effect of ATU. It started end of first quarter. There is very high revenue growth versus next year, which is mostly due to Antalya. Year-over-year EBITDA growth was also very strong in the third quarter. EBITDA growth was not as strong in the fourth quarter because of some start-up costs and continued ramp-up. As I said, we took over late September, the existing facility, and we didn't have the chance to furnish and redo the shops or change the look or bring in new merchandise for the stores. But this year in 2026, it will be a full year effect. You will see this. Opening of the new stores and the refurbishment of existing spaces will continue until the summer. It started, but it takes time. So next year's offering, 2026 offering, both in terms of area and the number of products offered will be better than 2025. The spend per passenger in Antalya increased from EUR 6.5 per passenger to EUR 7.9 throughout the year as we continue to open more and more shops throughout 2025, and this will continue in 2026 as well. On the chart to the right, you see the spend per passenger over there. Almaty's first full year of operations and addition Antalya decreased our overall spend per pax. For Antalya, you see that per pax spending increased. But when we add up Almaty full year effect and so, if you look at the overall one, the spend per pax seems to decrease because in Almaty, we have departures and arrivals, duty-free, but at arrivals, we have limited sales that tracks the overall spend per pax to a lower amount. But if we had not added these new operations to the calculation, the like-for-like SPP would actually be EUR 10.3. So we can say that the duty-free spend per pax of the existing operations grew by 13% in 2025. You can see this growth also in our consolidated duty-free commission revenues, which grew by 17% in '25. So I would like to talk about the guidance, the realization of 2025 guidance and the expectation for the guidance. Karim discussed already about our financial results in detail. Here, you can see the results against the guidance that we had provided in the beginning of 2025. I won't go over the items one by one, but we can say that in all items, except for the CapEx, we were able to achieve our guidance targets. In CapEx items, we are slightly below our guidance, which is good, which resulted in less cash outflow from the company. In Almaty, due to the harsh winter conditions, we were behind schedule in terms of investments, in terms of CapEx. for the second phase. And due to the market conditions, we postponed some investments of Havas to '26 and '27. So it again makes us very happy to have achieved our targets for another year. For 2026, in this table, you also see our new guidance. We are looking for another great year. Growth will continue. Our base case is for the passenger traffic to be in between 116 million to 123 million passengers, whereas we expect international traffic to be between 78 million to 83 million passengers. So revenue in accordance with the traffic numbers should be between 180 to -- sorry, EUR 1.888 billion to EUR 1.988 billion. EBITDA should be between EUR 590 million to EUR 650 million. And in 2026, we will be the second year of Almaty second phase investment and the first year of Georgia expansion investment. Due to the heavy CapEx, the second phase of Almaty and the new investment for Georgia, we estimate that the CapEx to be spent will be maximum of EUR 330 million or less for 2026. I think that's all for the presentation. Operator: [Operator Instructions] Karim Salem: So I will start with the first questions received, and I'm starting with questions received from [ Melis Pojarr ] from Oyak Securities. The question being, first question being regarding guidance 2026 CapEx, could you please briefly quantify on an airport basis? Well, on that question, if the question is about, let's say, breakdown of CapEx by activity airports, what I can say is that we can say that roughly 30% of the CapEx is allotted for the second phase of investments in Almaty. Then you have another 20% to 25%, let's say, of the CapEx, which should correspond to the investments in Georgia and as part of the extension of the concession as was evoked, presented, I mean, in mid-January and reevoked a couple of minutes ago by Serkan. And then for the rest of the CapEx, we are planning solar panel investments for Ankara. We should have growth CapEx for BTA, but also for other service companies, and the rest should be maintenance CapEx. I have another question, still from [ Melis Pojarr ]. What is the reason behind 25% year-on-year decline in cost of services rendered in Q4 2025? And for that question related to the specific line of cost of services rendered, I can say that the decline is related to, I would say, several topics. Main one is corresponding to TAV IT projects. Actually, they classify some of their costs here in the cost of services renders and it has decreased. We also have an effect of the closing of Spanish lounges here as well, and it was already there earlier in the year. And we also have decreases in other companies, too, with different reasons for each company. I mean we have -- I mean, apart from TAV IT projects and Spanish lounges, we have many reasons, actually, it's very split. Vehbi Kaptan: So again, a question from [ Melis Pojarr ], Oyak Securities. What are the tenders in your radar right now? Will you attend alone? And what are the airports current and targeted KPIs? We are always looking for growth opportunities in our core geography, as we always say. Our main criteria are growth prospects and sound legal infrastructure when selecting the opportunities. You know that we were prequalified for Montenegrin airports, but we did not bid in the tender, although it was a project that we looked at extensively. The preferred bidders in the tender were announced, but the results were contested. So we are following further developments there. Egypt has started its privatization. And the first project on the privatization pipeline is Hurghada touristic Airport. in the range of 10 million passengers. And this project started with prequalification process. We are submitting our prequalification. And naturally, we are evaluating the pros and cons of this project as well. Of course, there are many other projects that we are evaluating, but the business development pipeline in our business sometimes takes years. So it's best not to put too much weight on possible new tenders unless we officially disclose that we are participating in a certain tender. Karim Salem: I'm moving with a question from Julius Nickelsen from Bank of America. Thank you, Julius. The question is the following. Could you please provide any indication on where net income should go in 2026? And should we assume that the EUR 120 million of noncash one-offs to reverse during 2026? Well, that is, I mean, one of the most important questions, of course, for 2026, and we cannot provide net income guidance because, I mean, first of all, this is the very bottom line of the P&L, and therefore, it includes, let's say, the most important level of volatility. It includes every flows, everything that flows in our P&L. And on top of this, there are many moving parts, generally speaking, below EBITDA. And I can also add that the legislative framework also shifts very quickly, especially in connection with our Turkish activities. Having said that, I think that I can quickly elaborate on the fundamentals of this movement would be useful, but I'll be very quick about two fundamentals that could make things move on one side or the other in 2026 regarding our net income. First one is inflation accounting measures and second one is FX variations. Inflation accounting measure related to the fact of taking into account, let's say, Turkish lira inflation in the way our balance sheet is revaluated and FX variation related to the way we operate in various currencies and mainly in euro, USD and TL versus the way we report, so in euros. So for these two fundamentals, we are definitely lacking long-term visibility, but just like many institutions, I would say, and for 2026 as well, even though I would say that the situation is improving, especially from the outlooks in terms of inflation for the full year of 2026. But it is still hard to give, let's say, guidance on this topic for 2026. Then another question from Julius. Any reason why EBITDA from Almaty was down 35% in Q4 2025? Is there any impact from the investments? Well, this topic has been addressed in a way during the presentation. One of the main reasons actually why it was down was the movement in FX, in euro-USD FX because you know that the main currency in which Almaty operates is USD, and it went up 10% year-on-year, meaning that when you are comparing Q4 2025 to Q4 2024, there was an appreciation of euro by 10%. And the other reason is volatility, generally speaking, in the fuel market, again, on a year-on-year basis, Q4 2025 compared to Q4 2024, and it led to lower volumes. We identified the matter Q4 2025. But I mean, going beyond this topic, we had disclosed previously that we will be shifting the revenue and EBITDA mix of the Almaty airport from fuel to aviation through tariff increases over the next couple of years. And this process is going as planned. And of course, I mean, this downward trend, we have followed it again. But the most important is that we are having a path forward with moving from a fuel-centric airport to an aviation-centric airport. Vehbi Kaptan: Thank you. So another question from Julius Nickelsen, Bank of America. How should we think about the relatively wide range of your guidance? What scenario represents the lower end of the guide on traffic and EBITDA? What needs to happen for the upper end of the guidance? So we are located in a fast-growing region, but this growth unfortunately comes with risks as well. The main of these risks being geopolitical developments. As everybody has followed, there were numerous geopolitical events throughout the year, and we lost 3% of our international passengers at 2025 due to these developments. We are still being affected by the grounded A321s with the Pratt & Whitney engines, especially in Almaty. The guidance were provided -- we provided balances our base case for strong uninterrupted growth with these kind of numerous exogenous risks in the region. And I switch to the questions of Cenk Orcan from HSBC. The traffic outlook within your 75 to 83 international passenger guidance, 4% to 11% year-on-year growth. How do you expect your Turkish airports and Antalya in particular, to perform? What is your Turkish tourism, the foreign visitors outlook this year? We talked about these a bit during the presentation. Last year, we had several factors affecting traffic, one of which was the real value of the Turkish lira. This especially affected Bodrum and Gazipasa the most and Antalya, the less. Strong TL and the growth of low-cost carriers had positive effect on Izmir and Ankara, and Ankara was especially strong with the growth of AJet. Most of these trends have not changed in 2026, but we hear of some renewed low-cost interest in Bodrum. So Bodrum could have a better 2026 compared to 2025. The foreign airports would probably continue to outperform Turkish airports in 2026 as well. And North Macedonia could be outperformer because there are new A321s base with 30% higher capacity versus the previous A320s. The second question is also about the traffic outlook. 2025 was strong domestic passenger growth at key airports in Turkey and your traffic guidance implies 0 to 5% growth in 2026. Any specific factors for normalization this year? For the domestic passenger figures, they improved due to higher ticket price caps implemented in 2025 and the increase appeared substantial because of the base year effect and the cost increase in 2026, the price cap loses its attraction for the airlines. For this reason, our base case is for domestic traffic not to be as strong as last year in 2026. Of course, material increase in price caps could change that picture. What we try to mean is that in Turkiye, as you know, we have a price cap for domestic fares. When it is low, the airline's tendency is to utilize the aircraft more in international routes or lease the aircraft outside. If the price cap is favorable to the airline, if it's higher, they rather use it in domestic routes because there is a demand, and we have an immediate effect in the growth of the domestic passengers. Karim Salem: One more question about Almaty tariffs. So the question is the following. 2025 presentation shows a lower blended average international pax fee than the 2024 presentation, $10.7 versus $13.8 for non-Kazakh airlines. Is that because $10.7 for 2025 now includes local airlines? Well, this question connects to previous presentations, and we only have provided back then the tariff for non-Kazakh airlines. And indeed, it was $13.8, as you correctly noted. However, now starting from 2025 to make a more comprehensive picture, let's say, we have now included local airlines in the calculation, thereby presenting a blended passenger fee for both Kazakh and non-Kazakh carriers. And this is the number that can be used with the departing international passenger numbers. So it's a much more useful number for everybody actually. As you can see, it increased from [ $10.3 ] in 9 months to $10.7 in full year. So it's getting along with the tariff increases that we are getting. We also got security fees, which are $5.41 for non-Kazakh and KZT 2.815 for Kazakh international passengers as part of our tariff increase process, which is, as I said previously, continuing. So now I have a question from Ashish Khetan from Citi. It relates to Ankara, sorry. Ankara EBITDA has increased significantly in 2025. Do we expect further improvement in 2026 or the full benefit of increased fee and end of guarantee structure has been materialized in 2025? Well, the answer is yes. We only have the effect of the new concession for 2 quarters in 2025. So definitely in 2026, we will have it for the full year, what we call the full year effect, and this will definitely be a boost to our profitability, the profitability of the Ankara Airport. Another point is that the AJet airline, formerly AnadoluJet is continuing to grow in the airport and providing a very important traffic growth driver at international level, especially. So all in all, we have -- we feel very good tailwinds at Ankara level, and it should continue for the full year of 2026. Other question from Ashish regarding personnel costs. How do you see personnel costs increasing in 2026 with inflation easing out? Well, I guess the question mainly relates to Turkish staff costs for 2026 since we are talking about inflation. For staff costs in Turkiye, the main moving parts will definitely be in 2026. First of all, the Turkish minimum wage rate increased rates. And then we will have a second factor, which is the average number of employees. Vehbi Kaptan: Okay. Question from Gorkem Goker, Yapi Kredi Yatirim. In what ways and how any potential end of Russia-Ukraine war would impact your operations on aggregate in light of last couple of years' realizations? Due to the sanctions imposed on Russia and the ongoing war in Ukraine, our airports are experiencing a loss of 27% of Russian traffic and 100% of Ukrainian traffic compared to 2019. Any potential resolution in this situation, coupled with the lifting of the sanctions would be beneficial for passenger numbers across all our airports, particularly in Antalya. If Ukrainian civil aviation comes back, that would also be a positive, but that could take more time. In Antalya, the proportion of Russian passengers is a key driver of overall spend per passenger as Russians are among the highest standards within the non-Turkish passenger mix. Additionally, our ground handling company, Havas, used to serve a higher number of Russian charter flights, which carry higher service charges compared to the scheduled flights by nature. The absence of these charter flights has affected Hava's EBITDA margin. Therefore, any potential end to the Russian-Ukrainian war would also positively impact Havas margins. I think that concludes our Q&A session, too. Thank you for joining us. Thank you all for our webcast, and we hope to see you in events or in Istanbul physically soon. Bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant evening.
Jens Brückner: Good morning, ladies and gentlemen. A very warm welcome to the full year 2025 results presentation of EFG International. As usual, we will be presenting our results with speeches from the management team. We have today with us our CEO, Giorgio Pradelli; and obviously, our CFO and Deputy CEO, Dimitris Politis. And after the presentations, we have enough time, obviously, for your questions. We will start with questions in the room first and then move to potential questions from the call. Otherwise, as usually, I point out the disclaimer in the presentation. And without holding up further, I hand over to Giorgio. Thank you. Piergiorgio Pradelli: Thank you, Jens, and good morning. Also from my side, a warm welcome to everyone who is here in the room with us in Zurich and to everyone who will follow the presentation via webcast. Today, I'm very pleased to be here with Dimitris to present to you the full year 2025 presentation. I think 2025 has been a very strong year for EFG. It has been a year of strong progress. The operating business is firing on all cylinders, and it has been basically a record year. We have been able to grow very strongly from organic growth. Today, or actually in a few days is 10 years from the acquisition of BSI, and we are very pleased that we have started a new series of acquisitions. We have done 3 acquisitions in the last 12 months, and we were able to report the highest ever level of assets under management. We were able to translate this growth in record revenues, and we were able to -- despite the fact that actually we had to mitigate declining interest rates and a weak dollar that, as you know, there have been for us, headwinds in 2025 and most probably will remain headwinds in 2026, but this record operating income was translated in record operating profitability. And also, we made a lot of progress in dealing with our legacy matters, and we delivered a record IFRS net profit, and we are in a position to propose a record dividend per share to our shareholders. Let us now move to Page 4 and just to give you some of the highlights of our results for 2025. As I said, it has been a year of strong organic growth, strong NNA complemented by M&A. The NNA has been CHF 11.3 billion. This is 6.8% growth year-on-year. And this is actually the second highest level of NNA growth, the highest since the global financial crisis. And I'm very pleased because we have had an acceleration in the fourth quarter. As I mentioned earlier, we were able to do 3 acquisitions in the last 12 months. Two acquisitions are already in the numbers. They amount to CHF 12 billion, and they basically are equivalent to 1-year NNA, if you wish. As I mentioned earlier, our strong growth in terms of organic has been complemented by M&A, has been translated in the highest level ever of assets under management, CHF 185 billion. This growth has been translated in an impressive, I would say, operating performance, it's almost CHF 500 million, CHF 493 million. This is 26% year-on-year. And as I said, this strong operating growth has allowed us to absorb also dealing with some of the legacy matters that we know we have to derisk. All in all, at the end, as you know, we had a positive element in the first half of the year was CHF 45 million due to insurance recovery from a legacy matter that we closed in 2022. In the second half, we had a provision of CHF 59 million for another litigation that dates back to 15, 20 years back. All in all, it's CHF 14 million. We had also another legacy topic is about insurance. Insurance, there is some volatility. Dimitris will go in more detail. But again, we have absorbed also this volatile topic, and we are able to deliver CHF 325 million IFRS net profit, which is the highest in record. And this will allow us to deliver or to propose the highest dividend ever, CHF 0.65 per share. What I think is remarkable is that this is the fifth consecutive increase in our dividend, and this obviously shows how strong our operating profit is. Moving to the next slide. On Slide 6, we can see that 2025 has been a very strong year, but this is also the conclusion of our last cycle, the cycle 2023 to 2025. And what is remarkable here, we already discussed at length 3 months ago in this room during our Investors Day, is that we were able to deliver a consistent, sustainable and profitable growth over the last cycle, but also you can go back to 2019, and you see that this has been a continuous improvement of the operating performance. Now with this, I would like to give the floor to Dimitris, our CFO and Deputy CEO. Dimitrios Politis: Good morning from me, and thank you for attending the full year 2025 results presentation. I would like to start with, as usual, with the view of the performance of EFG over the cycle. Here on Page 8, you see the performance on the profits starting from 2019 up to 2025. It is fair to say that we are concluding this cycle, the '23-'25 business cycle, which is the last one, with record profits. The profits are at CHF 325 million. We are also posting the highest ever EPS with CHF 1.03 per share, and our return on tangible equity is above 18%. One element to highlight, you'll see on the top right, is the fact that in this business cycle, what was really marked as very positive performance has been revenue performance. In the last 3 years, we've managed to increase our revenues by 31%. In contrast, in the previous cycle, the growth was only 8%. So our strategy of building volume, building AUM and defending or expanding the margin has been very successful through the cycle. At the same time, you will see that efficiency has improved. Back in 2019, the cost-to-income ratio was about 84% or even higher. Now we are below 70%. And clearly, this has led to the expansion of EPS. We started with CHF 0.30 per share. Now we are above CHF 1, which allows also what Giorgio mentioned, which is the fifth consecutive increase in dividend per share in the last 5 years. Now the next page is a bit more focusing simply on 2025, and these are the key highlights for this year. Clearly, our strong operating performance continues in 2025. Business development, 6.8% growth in net new assets. The revenue margin was at 98 basis points compared to 96 last year, and we hired or signed 79 CROs. I think what is very important is the figure at the bottom of the page, the AUM have now grown to CHF 185 billion, which is a very good starting point for this business cycle. In terms of profitability, revenue growth was 11% in the year, or 8% excluding the exceptionals. Cost-to-income ratio improved compared to last year. The cost-to-income that we post as a headline is 69.8%. And the bottom line profit, again, is at a record CHF 325 million, or CHF 339 million if we were to exclude the exceptionals. Finally, in terms of the soundness of the balance sheet, core Tier 1 is at 14%. We had a fantastic capital generation of over 500 basis points during the course of the year. LCR is very strong at 270%, and the dividend is at CHF 0.65 per share. Now zooming a bit even closer to the last 2 months, because we gave you a trading update in November, which included 10-month results. If you look at the chart, what we mentioned in November is the first bar, which is about CHF 320 million in the first 10 months. If you look at the performance in the last 2 months, we added more than CHF 60 million of bottom line in 2 months. The run rate of over CHF 30 million per month is the highest level in terms of run rate. So both in terms of profitability run rate and also in terms of revenue margin run rates, the figures are higher than what we communicated back in November of 2025. As Giorgio said, we also have 2 exceptionals in the year. On a net basis, they create a drag of CHF 14 million net in the P&L. So if we were to exclude the exceptionals, our bottom line number would have been CHF 339 million, which is a 6% increase year-on-year. In terms of other elements in the profitability, I would say that we also had limited contribution from life insurance, which brings me to the next page, Page 11. And this page is important because on this page, we try to strip out the noise and make sure that we give you a clear indication of how the core private banking business is evolving. So what you see here in the chart is operating profit. It's simply revenues less costs, and we have indicated separately the contribution from life insurance. What you will notice is that in 2025, the core private banking business delivered CHF 425 million of operating profit, which is an increase of 18% compared to the last year. This is the highest increase in core banking operating profit that we've seen in the last business cycle. What does that mean? That means that the investments that we made in the first part of this business cycle, and I remind you that there were investments that had to do with hiring in 2023 and 2024, also investment in technology that were made in that period. So all these investments are now paying off, and we're seeing the impact in P&L of those investments which were made 1 or 2 years ago. In terms of the metrics that you would follow in order to figure out whether these investments are going well or not, what I can report is that -- and you see it also in the figures is we've seen consistent strong business development. The last 2 years, the NNA growth has been above the 4% to 6% range that we actually communicated as our target. And also what we've been managing to do is turning this growth into increased profits. In terms of how you do that is clearly we need revenues and the revenue margin to be resilient. I'll come back to that later. And you also need cost discipline, and I'll also come back to that later with specific pages on it, because we've also seen that on the cost side, our saving targets have been exceeding the initial targets that we have communicated. Just to note that, as you know, we have concluded 2 acquisitions in 2025. These acquisitions had a small negative impact in P&L in 2025, simply because the acquisition costs were higher and they were only included in the P&L for a couple of months. Finally, life insurance, or the contribution from life insurance has been a lot more muted in 2025. This comes because we have also derisked our position. As you know, we have taken action already in previous years, but also in 2025 to reduce our exposure. And we also expect that going forward, the contribution from life insurance is going to be a lot lower than it used to be in previous years. The next 2 pages are the summary of the financials, so I'll skip those 2. I'll go to Page 14. So Page 14 is the usual set of numbers that matches our financial targets. These are the financial targets for '23 to '25. As mentioned earlier, we had a 4% to 6% growth range for NNA. We've been beating that the last couple of years. The revenue margin has been very resilient against our target of 85 basis points. The cost-to-income ratio has been consistently coming down. The target was 69%, and the return on tangible equity in the last 3 years now has been above the 15% to 18% target that we have set ourselves back in 2022. Finally, in terms of the targets, and this is probably the last time that we'll be seeing this page on this presentation. This is the conclusion of the '23 to '25. You will see that the performance against the targets has been very strong. I think one element that we also communicated was that we were targeting a 15% growth in profits on average during the period every year. The actual delivery has been 19%. So in terms of bottom line, which is clearly what we're aiming for, we have been doing better than what we have promised. Now going a bit more into the growth on Page 16. The growth in AUM is 12%. So we went from CHF 165.5 billion to CHF 185 billion in 2025. More importantly, the net new asset growth was CHF 11.3 billion with pretty much all cylinders firing at very good rates, which is on the next page. CHF 11.3 billion is the highest nominal amount of NNA that we've had at EFG since the great financial crisis. So in the last 15 years or almost 20 years now, this is the highest NNA of CHF 11.3 billion that we have published. Markets were favorable. As we all know, currencies were completely against us with the dollar weakening significantly. And we also added CHF 11.7 billion coming from 2 acquisitions, Cite Gestion and ISG. And in January 2026, we also announced a third one, the acquisition of Quilvest, which will add another CHF 4 billion once it is concluded. What really pleases me is the figures on the right. We've had a couple of periods where new CROs have been, call it, the sole almost contributors to NNA growth. In 2025, we've seen a reversal to a composition which looks more like what we've seen in previous years, so before 2023, about 65% of our NNA is coming from new CROs and about 35% of NNA is coming from existing CROs. In terms of the geographical split of the business development, this is on the next page, Page 17. You'll see that every single region is posting a growth which is above 4%. So every single region is at least within the 4% to 6%. And we have 2 with Asia Pacific and the Americas, which are above the 6% growth range. So in reality, overall, it's a very good performance. It's all the regions firing at very good levels, and this is a testament to our diversified business model in terms of how we deliver growth. We have also delivered growth by hiring CROs, and this is on the next page, on Page 18. Our total number of CROs at the end of 2025 was 763. This comes with 238 CROs in Shaw and Partners in Australia. And we also have 67 new CROs that joined through acquisitions in 2025. If you see in the middle, our hiring patterns, clearly, in 2023, the numbers were very high, and this came from a dislocation with Credit Suisse-UBS. Although we just hired about 1/4 of the people in that year from Credit Suisse. All the rest came from about 20 other banks. The numbers have gone down in '24 and '25. They are reverting pretty much to the levels that we have set out as our target gross hiring numbers of 50 to 70 CROs. So in 2025, we actually hired 51 CROs, and we also extended offers to sign to another 28 for a total of 79 CROs that have been hired or have been signed to hire. In terms of the AUM to CRO, this is on the right-hand side. Why is this important? This is important because it's a very good measure of efficiency. And the more you can have a higher AUM per CRO, the more efficient we become. As you see, we've been growing throughout the years. On a like-for-like basis, we were at CHF 363 million per CRO at the end of 2025. If you were to include the acquisitions, you are at CHF 342 million, simply because the acquisitions come with smaller-sized CROs given the nature. At the same time, one of the reasons that we've managed to increase this is that we've been effective in performance managing our CROs, and you see that both on the load and also on the number of CROs. Now moving a bit more to the P&L. As I mentioned earlier, we have a very specific strategy, which is about building scale, and it's also about defending or even expanding our margin. What does that mean? What is the result of that? That means that our top line has been growing, has been growing significantly throughout the last 3 years, but also our revenue mix is becoming of a high quality. If you look at what has happened in 2025, you'll notice that our commission income, which is our bread and butter, this is the highest quality revenue that we have, our commission income grew by 17%, and this is on the back of, firstly, AUMs expanding, but also us gaining 3 percentage points year-on-year on the commission margin. So we've been managing to expanding the margin on top of growing the volume. On the other hand, we've discussed many times that interest income or interest-related income can be a source of vulnerability, because the rates have been going down. Actually, what we see in 2025 is that in the second half of 2025, interest-related income is marginally up compared to the first half, which probably means that we have reached close to the bottom of that phase of absorbing rate drops throughout the last couple of years. At the same time, we've seen a lot of client activity in currencies and metals. Of course, this is linked to the increased volatility, both in currencies and metals in the last couple of years. And this has helped net other income. And clearly, we've had a more limited contribution from life insurance in the net other income as well. In terms of going back to our strategy of how we intend to grow going forward, clearly, we will have to defend margin. I'll come back to why we believe that our margin is resilient on the next page. But one thing to note is that in terms of the growth element, so the AUM, the starting point in 2026 is CHF 185 billion of AUM. The average AUM in 2025 were CHF 170 billion. So we have a 10% head start in nominal AUM as we start the year in 2026. Next page, Page 20. It's about resilient revenue margin. You will see that the revenue margin that we have in the second half of the year is at 93 basis points. When we had the Investor Day in November of last year, that figure was 92 basis points. So we have actually seen an expansion of the revenue margin in the last 2 months of the year. In terms of our expectations going forward, look, the 2 key topics are interest rates and also can we continue expanding commission margin. On the interest rates, you see the sensitivity that we show on the top right. The sensitivity is CHF 36 million of drop in revenues if all 4 major currencies lose 100 basis points in the rates. Clearly, that scenario is not realistic at least for 2026, given the information that we have. So our expectation is that the sensitivity to interest rates is now a lot more muted. Maybe we lose a basis point in 2026, but clearly, it is marginal compared to our overall level of 93 basis points of revenue margin, which is way ahead of the 85 basis points, which is the average for the last 10 years. At the bottom, you'll also see the fact and the efforts we have been making to expand our commission margin. Firstly, you see mandate penetration. It has reached 67% at the end of the year. This is against our target of 65% to 70% that we had for this business cycle. And also, you'll see that the breakdown between recurring commissions and nonrecurring commissions is also moving in the right direction. And we have now a 46% -- 46 basis point commission margin for the full year 2025. Moving on to costs on Page 21. You'll see that we have operating expenses up 6%. This is the nominal growth. But this growth also masks the fact that we've done 2 acquisitions. These 2 acquisitions account for about 2.5% of that growth. So if you were to strip that out, the real growth is 3.7%. What is more important is that the FTEs in comparable terms have been going down. So we closed the year 2024 with 3,114. On a like-for-like basis, the year 2025 closed at 3,037. So we are about 80 FTEs down. Clearly, we have added more because we've done 2 acquisitions. And the salary costs have been going down at the same time. There is growth in the personnel side because of variable compensation, and this is something that is expected. Actually, in my view, the only cost that I can accept going up is variable compensation, because it means that we're making probably 5x that revenue when it comes to revenues. So the operating leverage is very high. We had stable other expenses. So general and admin expenses were pretty much flat compared to last year, and we still carry some legal and litigation fees. Now moving to the next page, which is Page 22. This is a page on how we think about cost management. And several people in the room or on the phone call this self-help. We call it finding or creating room, so that we can grow our business. And you will see that because if you look at the chart in terms of the last bar of the chart where it's under cost management actions, you'll see that, again, in 2025, we've managed to reduce our cost by about 3% during the course of the year, and that created exactly the room to invest in hiring and other investments, which is the first bar in that chart. Actually, even the numbers like the investment is CHF 36 million and the cost saving is CHF 38 million. So that matches very well in terms of our strategy in cost and efficiency management. The only 2 reasons costs have gone up are variable compensation, the CHF 28 million that you see in the second bar. And in the fourth bar, it's also the costs that come from the acquisition of Cite Gestion and ISG. Furthermore, at the bottom right, you'll see that as also communicated in November, we have exceeded our efficiency and cost management targets under the Simplicity project. The initial target was CHF 40 million. That target was up to CHF 60 million and the actual conclusion is CHF 66 million. There have been a number of actions included in this program. It's about rationalization. It's about automation. It's about reviewing processes end-to-end. And we already have a new program, which is running for the '26 to '28 cycle with a scope of CHF 70 million to CHF 80 million of efficiency and cost savings. Moving on to the balance sheet. In terms of the balance sheet on the left, no big movements. We still have about CHF 18 billion or more than CHF 18 billion of very liquid assets on the balance sheet. Core capital ratio, CET1 capital ratio at 14%, total capital ratio of 17.3%. The loan-to-deposit ratio is at 58%, and both liquidity ratios are at very good levels, at where they were last year or even better. And finally, we bought 11.8 million of treasury shares throughout 2025. And there is a new action on the buyback. The Board decided that the buyback continues in '26 and '27 for a total of up to 9 million shares to be acquired until July 2027. In terms of the impact from acquisitions, the acquisitions cost 130 basis points on the core Tier 1 ratio. Now as Giorgio mentioned, clearly, our primary focus is on expanding the core business. At the same time, we need to make sure that we successfully derisk the balance sheet from the legacy positions that come from pretty much 20 years ago. On the left-hand side, you see the actions that we have taken on the life insurance space. We've been quite active in 2025. Two major actions. One was to dispose of the entire synthetic portfolio and the second one was to unload about 1/4 of our physical holdings in life insurance policies. I'm very pleased to say that the carrying value of that portfolio now is about CHF 260 million as at the end of 2025. It was CHF 360 million at the end of 2024, and it was over CHF 500 million when we started this business cycle. So there's been continuous derisking and the numbers are going down. Hence, I expect some volatility coming from it. But overall, I don't expect big numbers to be coming through the P&L going forward. On the right-hand side, we have the legacy litigation cases. Some are in the life insurance space. We've resolved 3 there. There's one more pending, probably end of 2026 or early 2027. And then you have the 2 exceptionals that also Giorgio described earlier. The positive one is the first one, which is the recovery from an insurance on an old matter. And the second one is the provision on a litigation case, which we took in December. On a combined basis, these 2 created a CHF 14 million drag on our reported P&L. In terms of capital, which is on the next page, Page 25, we had one of the strongest capital generations in the last few years. In terms of gross levels, we were over 5 percentage points of capital generation. On a net basis, after risk-weighted assets and dividends, the net capital generation was 1.6% for the 12 months. This is part of the capital-light model, and we do expect that we'll be running at very strong organic capital generation going forward. What you see after that is the buyback which, combined with the dividend, enhances the returns that we offer to our shareholder. And then quite a few one-off items. So the acquisitions cost 130 basis points. The provision for the litigation case was 100. And we have 2 currency impacts. One is, call it, the normal currency. And then the second one refers simply to the Tier 1 instrument that we hold. The reason we show it separately is that if we decide to call that instrument, that will come back. So although you see that the core Tier 1 ratio that we report at year-end is at 14%, effectively, if we were to call that instrument, it would have been 14.4% after we unwind. With 14% or 14.4%, we are clearly very comfortably within our 12% to 15% capital ratio that we communicated back in November. And with the combination of the strong capital generation, we look forward to discussing even more M&A activity if it fits the plans and conditions that we hold. Which brings me nicely to Quilvest. This is the last M&A that we announced back in January. You see some of the figures here. I will not spend too much time on it. The only thing I'd like to say is that it looks small. It's CHF 4 billion AUM. But the beauty of Quilvest is the very high quality of its clients. And given the fact that it has been a small bank for many years, we believe that we can expand dramatically the offering to these clients. So it is an acquisition where we are looking to make sure that 1 plus 1 makes 3 and make sure that we create value for all the stakeholders. And to close, and this is on Page 27. I think that we are at the juncture where we are officially closing '23 to '25, and we are officially opening '26 to '28. We are definitely closing 2025 on a very high note, record growth, record profitability, record momentum in the profitability that we are posting. So I think we have all the ingredients to feel very comfortable about the next cycle. The priorities for '26, unfortunately, in our business just remain pretty much the same. It's not that we're changing priorities. So it's going to be about business development. It's going to be about making sure that we maintain the high growth in the top line, preserve margin. And at the same time, that we maintain our cost discipline while we're doing all these things. And the last part is, clearly, we did 2 acquisitions in 2025. Now we need to make sure we put them to work. These acquisitions, as I said earlier, had a negative impact in 2025. They have already started having a positive impact in 2026. But it's a matter of making sure that we exploit our investments to the full potential to make sure that we further expand profitability in 2026 and beyond. In terms of the next cycle, these are the financial targets that you see on the right. And just to repeat, 4% to 6% growth in terms of net new assets, revenue margin in excess of 85 basis points, cost-to-income ratio of 68%, and a return on tangible equity of 20%. On that note, I'd like to thank you very much, and I pass it back to Giorgio for priorities and outlook. Thank you. Piergiorgio Pradelli: Thank you, Dimitris. And let us now focus on the outlook, what we can see for 2026 and beyond and what are our priorities for 2026 to 2028. I would like to start with this page. You have seen this page during the Investors Day. This is our strategic framework. And 3 months ago, we basically said that we want to continue to build on our strength. We want to continue to focus on our clients. When I think about clients, I always think about net new assets, because if we do a good job with our clients, we can increase the share of wallet and we can attract new clients. Obviously, we want to deliver the best possible content to our clients in order to increase the level of engagement and ultimately, the level of margin and operating income. And finally, we need to translate all this into a growing profitability via Simplicity and operating leverage. At the same time, we have identified 3 new areas for growth, opportunities of growth. And we spoke about branding and client experience. We spoke about commercial excellence, and we spoke about tech-enabled services and processes when we introduced the concept of the augmented CROs. Again, it's early days. We just started the new cycle and only 3 months past from the Investors Day, but we believe that we have done already quite good progress in all these 3 areas, and we would like to give you a quick update. First of all, about branding, we stated in November 2025 that brand is important for us, it's important for our clients, and we wanted to strengthen our brand. Our ambition was to become or is to become one of the top 3 Swiss private banking brands by 2028. And in terms of brand finance, we have a ranking among the top 250 brands globally. We are very pleased because the brand finance report will come out at the beginning of March, I think the 4th of March, but we are allowed to present a preview of our results, and we are very pleased because the brand value has increased in excess of 50% to CHF 629 million. And what is also very important, we have gained more than 50 places, 50 positions, and we are now 262 in the ranking, which is obviously very close to the 250 that was our original objective for 2028. So I think this progress reflects our investments in an enhanced client experience and a higher brand recognition across markets where we invested quite a lot in the last few years. Now the second area is about the technology and is about launching the augmented CRO. Obviously, these days, I'm very pleased that we brought this concept 3 months ago, because, as you know, these days, everybody talks about AI basically substituting asset managers. And in the U.S., there was also a debate whether AI will substitute players like Charles Schwab and others. We always said, and we said it 3 months ago, and we continue to believe that is that AI and technology and the human factor are complementary. And obviously, we believe that our client relationship officers are among the best in the industry, but we believe that we can improve further if we are able to give them not only great teams around them in the areas of investment solutions, wealth solutions, credit solutions and global markets, but also the best possible digital solutions. We have announced 3 months ago that we have started a cooperation with BlackRock for the Aladdin system. We are pleased to report now that this has been rolled out in Switzerland, which is our biggest region, and our client relationship officers are very pleased. We have also launched the CRO Atlas, which is basically a tool that allows the CRO to have clear insights about their clients, the portfolio, the businesses, and we expect an increased ability for our client relationship officer to increase the share of wallet and the client engagement. And again, we started to do our first steps regarding AI. We have rolled out Ally, which is our in-house AI platform to all the new locations, and we have seen that the adoption has been incredible, which obviously shows how people are interested in this tool. So we continue to go forward in this direction. It's a journey. But again, the progress in the first 3 months is very encouraging and the new CRO team, again, is very committed to make us one of the best firms also in this area. The third point is about commercial excellence, and we start seeing some improvements in terms of client engagement and share of wallet. Dimitris already mentioned that our existing CROs are improving in terms of gathering assets, which is obviously a function of attracting new clients, but also a function of improving the share of wallet. And as I mentioned earlier, content for us is very important. Obviously, we have great teams in our investment and wealth solutions that provide solutions to our clients. But clearly, it is also important to create an ecosystem with top players in the market, and we have announced yesterday a cooperation, a partnership with Capital Group, one of the biggest active asset manager in the world. And we have been cooperating already for a long time, but we have decided to deepen our partnership, and I think this is a mean in a way to further enhance our personalized offering and impartial advice to our clients, which ultimately will support basically our business. Now 3 months ago, at the end of November, we presented to you our operating model. Our operating model continues to deliver. In essence, we continue to focus on growth, translating both organic and via acquisition. We translate this growth in growing profitability. We use part of the profitability that we generate in investing in order to transform the bank for the better, and this generates attractive returns. As you have seen in 2025, we were able to deliver very attractive returns to our shareholders indeed. Now looking at 2026, I must say that the year started as 2025 ended. This situation where there is a lot of volatility and uncertainty driven from geopolitics to financial markets, and we can debate for hours about the situation. But this volatility, coupled with the attitude of our investors, which is actually quite risk-on, is quite constructive and positive for our clients, because we see that the level of engagement and the level of transactions that our clients are doing with our CROs and with our dealing floors is at very high level. And we expect this to continue as long as the overall attitude is risk-on. If we are going to have another risk-off situation like in April last year, then we will have to see and obviously react. But for the time being, the year started very, very well. And for us, the priorities, as Dimitris said, do not change quarter after quarter, but I would like to emphasize them again. Number one obviously is about maintaining our growth momentum. So net new assets and client engagement remains our top priority. Second, after NNA, we have now M&A. M&A is important. As mentioned already, we have done 3 acquisitions in the last 12 months. This is CHF 16 billion, not dollars. I think maybe earlier, I mentioned dollars. No, no, we continue to report in Swiss francs. And obviously, it is important that these acquisitions start basically being integrated and start delivering in terms of profit contribution starting in 2026. The third priority after NNA and M&A remains to defend our margin. Margin resilience is very, very important. And again, we have managed very well, I believe, in 2025 to mitigate the headwinds in terms of declining interest rates and a weaker U.S. dollar. As Dimitris says, I think that by now, the declining interest rate is like when you sail, the wind is becoming softer. So it's not really an issue anymore. I think we will be able to absorb the 1 basis point that Dimitris has indicated. The weaker dollar, this is a bit more complicated, because as we see these days, it's very difficult to predict the direction. I think there was, at the end of the year and beginning of this year, some wishful thinking by many market participants that we could see a rebound. We have not seen that yet. And so we will have to continue to focus on what we can control. And what we can control is, for sure, the net commission income and all the advisory activity in terms of investment solutions, wealth solutions, credit solutions and global markets. Next priority remains obviously to generate operating leverage. We discussed 3 months ago about the golden rule to try to grow revenues at a double rate of cost. Last year, depending on how you look at it, we were very, very close to that. I think we will continue this year and technology, for sure, will allow us to improve productivity and efficiency. And finally, we are obviously very committed to deliver for 2026, and we are very confident to meet the 2028 financial targets. Now we are entering a new cycle. We are closing, I think, today -- well, we have still the general assembly in a month. But after that, we will close the 2023, 2025 cycle once and for all. But again, it has been a fantastic ride, and we are starting the new cycle in a position of strength. And so all the initiatives -- just to be very clear, all the initiatives that I was mentioning before at the end of the day are geared in ensuring that we deliver a consistent performance, and we unlock the power of compounding, as you can see on the right-hand side of Slide 34. And again, our objective at the end of the day is to generate a double-digit net profit growth at around 15% and to achieve a return on tangible equity of 20%. So in closing and looking ahead, first of all, I would like to mention that our aspiration, our vision is to be the private bank of choice for generations of clients. I think that the momentum of the last years shows that we are already, for many clients, the private banking of choice for generations of clients. Obviously, we want to become for a bigger number of clients and to be really recognized for delivering fully personalized service and impartial advice. To close, I would like to say that 2025 has shown that we are closing the cycle with a strong momentum. And as I said, we were able to translate this in record profit and very attractive returns for our shareholders. We also made 3 acquisitions in our key markets in the last 12 months. And this, in my view, is important to be emphasized how we can successfully complement organic growth with strategic M&A acquisitions. So overall, our business model is not only, I would say, resilient, but is also geared towards profitable and sustainable growth. And this is the case today and will remain the case in the next cycle. Obviously, as a management team and all our teams at EFG that I thank here for the commitment and the dedication to EFG are fully focused on the execution of the budget, first of all, for 2026, and the 2028 strategic plan. And clearly, we are very confident to deliver value for all our shareholders. And with this, I thank you for your attention. I close here the formal presentation and hand over back to Jens to open the Q&A session. Jens, the floor is yours. Jens Brückner: Thank you, Giorgio. Thank you, Dimitris, for your presentations. As just said, we're starting the Q&A session in the room. So if we have a question, please let's start with Máté over there, so first question. Mate Nemes: Máté Nemes from UBS. I have a couple of questions. The first one would be on your comments that run rates in a number of areas were better versus what you expected at the time of the CMD that relates to the last 2 months of the year. Could you talk about what surprised positively? What are the areas that perhaps you are more positive about versus the November CMD? That's the first question. The next one would be on the litigation provision that you booked in December. Could you share more details around this? What led to this provision? What triggered this? And how do you see the case unfold from here? And the last question would be on capital and the FX impact specifically. Can you talk about your capital hedging approach? Does the 60 basis point negative impact mean that you're not applying FX hedges and there's a considerable mismatch between CET1 capital and RWAs? Dimitrios Politis: Let me start with the run rate. So I think there are two points on the run rate. The one is the actual bottom, bottom line, and we tried to show this on Page -- hold on a second. This is on Page 9 of the presentation, where you see that in the period between July and October 2025, we actually had CHF 100 million for those 4 months. And then that number went close to CHF 165 million for the 6 months. So clearly, the last 2 months have been very strong in terms of profit generation. So this is, for us, very positive. And as Giorgio said, we also see continued strength in the delivery of the profits also in the month of January of 2026. Now the second point is on the revenue margin, which is described on Page 19 of the presentation. For the second half of the year, we were at 93 basis points. Back in November, we reported that for the 10 months, we were -- or for the 4 months, which were the last 4 months at the time, we were at 92. So there, we also see an uptick, which makes us feel more positive. In terms of why things are better than what we're expecting, there are three reasons. One is the mandate penetration effort continues, and we see that translating into commission income and commission margin. The second one is that we had good client activity in the last 2 months and in January of 2026. And the third one is the pressure on interest-related income seems to be coming down. So a combination of all three is what helps us feel more comfortable and more confident that, okay, maybe we do not stay at 93 going forward, we -- it is certain that we'll have some erosion from the 93, but the starting point is a very solid starting point from which to work on. Piergiorgio Pradelli: And clearly, as you mentioned, the fact that our AUM is now 10% higher than the average of previous year is another element of support to our business. Dimitrios Politis: Now the second question was about the litigation and bear with me because there is -- I am somewhat limited in terms of the information I can disclose on that, as you can understand. Just to remind everybody, this is legacy litigation. It pertains to events that happened approximately 20 years ago and it was first disclosed in the financial statements back in 2019 in the contingent liability section. It is a complicated case. It is a case, which is now the trial is happening in London in the U.K. The plaintiff is PIFSS, which is the Kuwait state pension fund. And we have about 30 defendants in that case, including EFG and some other banks. Now in terms of more specifically about where we are in the case, the court proceedings, the court hearings started in March 2025, and they are still running. So we are in month 11 of court hearings. We do expect that the court hearing will last probably another couple of months. And we expect the verdict to come out in around the summer of 2026. Clearly, we continue to defend the case. We have very strong defenses, and we will continue arguing our case over the next 2 months still. But given the fact that we've gone through 11 months of trial means that we have gathered more information about the possible outcomes of the case. And we have now reached the stage where under the IFRS accounting rules, we can reliably estimate, and this is the reason why we posted -- we recorded this provision in our P&L and in our balance sheet in December 2025. Again, timing-wise, verdict is expected at the -- somewhere around summer of this year. And Máté, you had a question about capital, the capital impact and the currency. The way we work on currencies is that we try to match the composition of our equity with our composition of risk-weighted assets, which is a bit of a natural hedge, if you wish, which means that if currencies are moving one way, than I would expect -- so if you have an adverse effect in your equity, I expect that you get a positive effect in your risk-weighted assets and you try to match the two. So you're not managing the equity as a number, you're not managing risk-weighted assets as a number, you're managing core Tier 1 ratio as a number. This is how we think of it. But clearly, we disclosed the movement in the currency translation adjustment here because in 2025, it's a more significant number. And on the other element, which pertains to the Tier 1, it's a bit of a nod way that IFRS deals with it. Although the impact is only on the Tier 1 instrument, you cannot change that, the holding value of that instrument, you need to impact core Tier 1. That's the reason we're saying that if it gets called, that 40 basis points gets released. So our effective core Tier 1 ratio is now 14.4%, the way we think about it. Sorry for the detailed explanation. Jens Brückner: Great. And we have here the next question, please. Daniel Regli: This is Daniel Regli from Zürcher KB. I have two follow-up questions. One is on the gross margins and the development there, particularly, obviously, in H2, we saw kind of an uptick in the recurring commission margin. If you can just maybe reiterate a bit your explanations there and how far this is sustainable into the next years? And then secondly, obviously, again, on the net interest margin or the margin outlook on interest income. Just maybe help me understand a bit more how you exactly come to, let's say, 1 basis point pressure? What do you do? I think markets still expect some rate cuts in U.S. dollars as well. And then lastly, on the net new assets development, obviously, congratulations to the strong net new assets development, particularly Asia Pacific and Americas, but obviously also in Continental Europe. Can you maybe elaborate a bit more what drove the strong asset flows? And maybe also explain a bit what extent was driven by maybe some releveraging, particularly in Asia? Dimitrios Politis: So let me start with the margin question. I'll start with the interest margin or interest-related margin, and I'll point you to Page 19 of the presentation. So on Page 19 of the presentation, we show the sensitivity to rates. And what you see at the top right part of the page is that if we lose 100 basis points on all 4 key currencies, the net impact for us is a reduction in revenue by CHF 36 million. Clearly, the majority is coming from the dollar. Clearly, we don't expect that all 4 currencies will lose 100 basis points in 2026. By the way, CHF 36 million is 2 basis points. So we don't expect to lose on all currencies and even on the dollar, maybe the 4 cuts is a bit too aggressive. So we estimate that, roughly speaking, it's not going to be a 2 basis point hit but a 1 basis hit in terms of the interest-related margin in 2026. Now to your other question about commission margin, the 2 reasons why the commission margin has increased is mandate penetration, which you see at the bottom right, going to 67%. And the second part is client activity. And so we are -- we have an even higher target for mandate penetration for the next business cycle, so the one that we currently just started, '26 to '28. And we see client activity continuing. Now again, if client activity pulls back, then especially in the nonrecurring side, you will see a drop, while the recurring side should be a lot more resilient going forward. Giorgio, if you want to take the growth? Piergiorgio Pradelli: Yes. In terms of NNA, as you know, first of all, this has been our 14th consecutive semester of NNA growth. So basically, this is 7 consecutive years. And clearly, we have a methodology and a focus on growing our business, which goes beyond 2025 and will continue in the next cycle. As you have seen on Page 16, I think that what is remarkable is that the growth has been basically very strong across regions. If you see basically all the regions are within our targets. Even more mature markets like Switzerland and the U.K. are within our margin. It is a combination, as Dimitris was saying, between new CROs, but also existing CROs, existing CROs have improved their performance. It is correct what you say in the sense that we did not have, like in previous years, deleveraging. We have seen back leveraging coming in. Obviously, we believe that the fact that interest rates are coming down at the short end and the curve is steepening. This allows clients to play the carry trade and obviously, they engage much more in terms of Lombard lending. But -- and this is on Page 40 and 41. If you look at our dynamics, basically our total NNA has been CHF 11.3 billion. The increase in lending is CHF 1.5 billion. This is about 13% of the total AUM. And if you go to the following page, on Page 41, you see that at the level of the stock, if you can go on Page 41, please, you see that the level of the stock is 11%. So the growth in lending is clearly 13% of the total NNA and is in line with our normal lending penetration. So I would say, yes, we are pleased that the deleveraging has stopped. But our growth is not lending-led. Asia has been -- just to make the points of Asia and the Americas, obviously, Asia Pacific is in excess of our margin, 8.5%. And we have had growth also in terms of hiring CROs. They've been all very successful and they're doing extremely well. And the Americas also there has been a growth in all the areas. We have opened in Panama. We have focused on Brazil. So it has been across the region. Jens Brückner: Great. Do we have another question in the room at this stage? Nothing -- the gentleman there, please? Unknown Analyst: [indiscernible]. You see the strong negative reaction on the stock market today with minus 9% due to your litigation case in the U.K. You had 36% of growth in the net benefit in the first half year 2025. Now you announced only 1% of growth. Why the benefits slowed down so much? You spoke about the litigation case in the U.K., which cost you CHF 60 million, but combined to the other positive litigation case in Korea, it only was CHF 40 million? So are there other reasons for the slowing down of the net benefit? And why did you communicate only now and not in December about this litigation case? And second question about the U.S. dollar exposure in your assets. I think you have 60% of exposure in assets. Is there any trend at your clients that they want to reduce that U.S. dollar exposure due to geopolitical reasons? Piergiorgio Pradelli: Maybe I can start on the stock price. And it's the first time I hear how the stock is doing because we have, the 3 of us, a pact that before going to the presentation, we never look at the stock price. So I was not aware, but let me tell you that our job is to manage the operating business of the company. And we have been told very young, not to focus on the stock price. And if the operating company and the operating performance of the company works very well, then the stock price will follow. I cannot comment -- I will not comment about today's stock price. Clearly, as you said, the overall drag for the exceptional is CHF 14 million. It is unfortunate that the positive was in the first half and the negative in the second half, but these are one-offs and have no impact, as we discussed on the operating performance of the company. You want to mention about the timing? Dimitrios Politis: Well, the timing comes with the ability to reliably estimate and that ability and the full estimate came very recently. So the appropriate timing to release that was with the full year results today. Piergiorgio Pradelli: Maybe the other element why this exception was CHF 14 million and the fact that the net profit if you look -- I think that the question was about the difference between the operating profit and the net profit is also due to the volatility of life insurance that it was mentioned on Page 10, I think. Page 10. If you go to Page 10. You can see here the difference in terms of performance of the life insurance that in 2024 was quite strong at CHF 32 million. And obviously, in 2025 was positive, but much less strong. And clearly, again, here, these are legacy matters. We cannot influence them directly with management actions. So the combination of the drag due to the exceptionals and the fact that life insurance was lower than the previous year, this is one of the explanations. Otherwise, the operating profit, as we said, is at record level, almost at CHF 500 million. Jens Brückner: Second question about the U.S. dollar. Piergiorgio Pradelli: U.S. dollar. Dimitrios Politis: Question on the U.S. dollar. Look, we see some clients that are moving away from the U.S. dollar. So we see some clients that now are also considering other currencies. If you look at the composition of our AUM, which is at the back of the presentation, clearly, this has not moved substantially. I'm trying to get the page. Piergiorgio Pradelli: Page 41. Dimitrios Politis: Page 41. So like the U.S. dollar was 47% last year. It's still 47% of currency this year. So it is more anecdotal than actually us seeing a significant trend in terms of the currencies that our clients wish to use. Jens Brückner: Okay. If we have no follow-up, then we move to the question on the phone, please. Operator: The first question from the phone comes from the line of Hannah Leivdal from Citi. Hannah Leivdal: I have two, please, if I may. So the first one is on your balance sheet and capital position is strong. But equally, your annual report outlines the number of legal cases outstanding. So what gives you confidence that you won't have to take more provisions for those? And how do you think about the amount of capital you're keeping aside feeding into this versus what is available for M&A and other growth initiatives? And my second question is on the... Jens Brückner: Sorry to interrupt. We have a hard time understanding you. Maybe can you move your microphone a bit? Hannah Leivdal: Is that better? Jens Brückner: No, that's worse. Hannah Leivdal: Oh, it's worse. How about now? Is this any better? Or this is worse? Jens Brückner: A bit, yes, better. Hannah Leivdal: A bit better? Jens Brückner: Yes, let's try. Hannah Leivdal: I'll try again and then interrupt me. So I was asking on the balance sheet and capital position being very strong, but equally your annual report outlines a number of legal cases outstanding. So I was wanting to ask what gives you confidence that you won't have to take more provisions for those? And how do you think about the amount of capital you're keeping aside paving into this versus what is available for M&A and other growth initiatives? Dimitrios Politis: So I think I heard the question. So I'll try to answer to the best that I can. So the -- as you say, our current CET1 position is effectively 14.4%. And I guide you to Page 24 of the presentation because through the latest provision that we took, we have derisked the largest single risk item we had in our -- on our balance sheet. It was the -- it is the largest contingent liability that we actually have on the balance sheet. So in terms of risk profile, now I believe that we are a lot sounder than we were before. At 14.4% of core Tier 1, we have about CHF 260 million of excess capital from our own management floor of 12%. And even more importantly, I would guide you to the capital generation that we have every year. So this year, it was over 5 percentage points of gross and 1.6% on net capital, which is the result of a capital-light model, clearly for a private bank like us. So I think that given where we are, we are very comfortable with our capital position. We are generating capital which we can use for new acquisitions. And we do have also a capital buffer of CHF 260 million, which we can also use for other acquisition if we wish to do so. By the way, if you want to discuss acquisitions, it is not that the acquisitions are simply done in cash. There's always -- or usually, there is a share element included in the acquisitions that gives us even more firepower. Hopefully, I've answered the question because I could not hear you very, very well. Hannah Leivdal: Yes, that's very clear. I have another one, but I don't know if you can hear me. If it's any better? Dimitrios Politis: Just go ahead. Hannah Leivdal: Okay. Yes. So on the treasury swap margin, I just wanted to ask why did this increase in the second half despite narrowing spreads versus Swiss rates? And what was the swap volume in 2025, please? Dimitrios Politis: The reason that the treasury swap activities, the revenues from that increased in the second half is because the volume of our swaps increased. As you say -- as you rightly say, maybe the margin between the 2 currencies has not moved that much or even has narrowed a bit in the period, but it was through higher volumes of currency swaps that, that increased. And clearly, what also happened is that the NII element decreased because it's the other side of the same equation. Jens Brückner: Thank you for your question. I think we have another question on the phone, can we get that one, please? Operator: Next question from the phone comes from the line of Andreas Venditti from Vontobel. Andreas Venditti: I hope you can hear me better than my colleague just now. On M&A, you mentioned the negative profit... Jens Brückner: We can't understand you. That is even worse than before. Can we try to get the sound regulator or try again? Andreas Venditti: Can you hear me? Jens Brückner: No, not really. Andreas Venditti: Okay. Never mind. I'll come back to you, Jens. Jens Brückner: Now it's good. Now it's better. Andreas Venditti: It's better. Okay. I don't move, so I hope it's better. On M&A, you mentioned a negative impact on profits from the two small acquisitions. I guess it's a small number, but still to ask on this. Can you maybe quantify the negative impact, I guess, on the cost side, mainly from this on 2025 numbers? Dimitrios Politis: As you expect, Andreas, the overall contribution is a small single-digit negative number. And the reason it is negative is that we included the profits of Cite Gestion and ISG for a few months, like Cite Gestion was 2, 3 months. And we had some acquisition costs, which are the one-off part of doing M&A. And the balance of those 2 was negative. Clearly, both companies were profitable with actually profits growing significantly compared to the last year in 2025. It's just the timing of the acquisition and the amount of the M&A-related one-off costs that get us to this small negative result in 2025. Jens Brückner: Okay, does that answer the question? Do you have another one or it's good? I think we lost him. Is there another question in the room or not at this moment. Máté has another follow-up. Okay, let's take that one. Mate Nemes: Yes. Just one question. I wanted to ask you about the Lia AI platform that you rolled out in 2025. Could you talk about the capabilities and the exact use cases of that platform? Piergiorgio Pradelli: Yes, thank you. I think there are several use cases that we are using, in particular in the Investment Solutions area. Then there is the general, let's say, use cases that you have with a normal ChatGPT like chatbox. And clearly, the areas where we are trying to develop much more is everything related to compliance and risk. I've always been saying that right tech for us is more important at times than fintech. But these are the key areas where we are expanding. And the next level, but we are not there yet, will be how to improve the client experience because all the use cases I mentioned were more about efficiency on the backstage, and that will be the next area where we're going to focus on. Jens Brückner: Okay. I think there's no further questions on the phone. If there's nothing in the room, then I hand that back to Giorgio for the final remarks. Piergiorgio Pradelli: No. First of all, thank you for attending. Again, I would like to reiterate that 2025 has been a very strong year where we have achieved a record AUM, record profitability and record top line. Clearly, it's also a year where we have done progress in dealing with the legacy matters, and we closed successfully our 2023 and 2025 strategic cycle, and we are very confident starting in a position of strength, the 2026-2028 cycle. And as a management team, we are committed in executing our sustainable and profitable growth strategy as we have done in the previous period. With this, thank you very much for your attention.
Operator: Good morning, and welcome to Bausch + Lomb's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to George Gadkowski, Vice President of Investor Relations and Business Insights. Please go ahead. George Gadkowski: Thank you. Good morning, everyone, and welcome to our fourth quarter 2025 financial results conference call. Participating on today's call are Chairman and Chief Executive Officer, Mr. Brent Saunders; Chief Financial Officer, Mr. Sam Eldessouky; and President of Global Pharmaceuticals and International Consumer, Mr. Andrew Stewart. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section. Before we begin, I would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial measures and ratios. For more information about these measures and ratios, please refer to Slide 1 of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website. The financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter unless required by law and not to update or affirm guidance other than through broadly disseminated public disclosure. With that, it's my pleasure to turn the call over to Brent. Brenton L. Saunders: Thank you, George, and good morning. I'm going to start by highlighting Q4 and full year results, which show we don't just talk about strategy, we execute it. Sam will put more context around our performance and provide 2026 guidance, and Andrew will cover opportunities to expand our leadership in dry eye. I'll close with a look at why we continue to be so excited about 2026 and beyond. When you hear me talk about execution today, this is exactly what I mean. In the fourth quarter, we didn't just grow. We grew smarter and faster than the market. When you see 7% constant currency revenue growth and 27% adjusted EBITDA growth, that's real operating leverage and a clear sign of our commitment to financial excellence. The discipline we built into the organization is paying off. This isn't a onetime exercise. It's the direct result of teams making better decisions, a fundamental shift in our cost structure and executing consistently across our businesses. We plan to harness that momentum to deliver on our 3-year plan. Results don't come from slides or strategy decks. They come from people who believe in what they're doing, take ownership and execute every day. That mindset across our company is what made our record performance in the fourth quarter possible, and it's a privilege to lead a global team committed to winning together. I highlighted fourth quarter growth on the previous slide, but would note that both $1.4 billion in revenue and $330 million adjusted EBITDA are a high watermark for our company that's been around for quite some time. While it's important to remember that there is seasonality to our business, which is especially true as our Pharmaceutical segment becomes more prominent, we did what we said we would do in the quarter. Our ongoing focus on selling excellence is best illustrated by our continuously expanding dry eye portfolio with Miebo generating $112 million in the fourth quarter revenue. We continue to be impressed by Miebo's trajectory and turn towards profitability as we exit the launch phase. The latest demonstration of our commitment to operational excellence and staying nimble to drive sustained, profitable growth comes from our Surgical business, where we made several strategic fourth quarter moves to position us for margin improvement. Finally, as I shared at Investor Day, our pipeline isn't theatrical. It's active in delivering. From the imminent launches to active recruitment for forthcoming trials, we're translating R&D into revenue and impact. That's what builds confidence in future growth. If there are any skeptics of our 3-year plan coming out of Investor Day, this slide is for you. We didn't overpromise in 2025, we executed, and the outcomes speak for themselves, 6% constant currency revenue growth, excluding the enVista recall, was faster than the market and at the midpoint of our planned CAGR through 2028. Adjusted EBITDA margin came in at 17.5%, with an impressive 23.5% in the fourth quarter. Importantly, margin expansion steadily increased throughout the year, putting us on a path to achieve margin targets in 2026 and beyond. You've heard me and Sam reference say-do mentality before. Here it is on paper. Financial discipline is no longer a onetime effort or a cost savings program. We've built the muscle around planning, prioritization and accountability, which puts us in a much stronger position to drive sustained margin improvement over time. People hear pipeline and think long term. What they should think is momentum because something meaningful is happening across our portfolio at all times. PreserVision AREDS3 started to ship on February 2, and Blink Triple Care preservative-free is expected to ship on March 1. CE mark submission for seeLYRA, our next-generation femtosecond laser is expected to take place next week with anticipated approval in the second half of the year. All trial recruitment is on schedule, and we recently received top line data from our first external study for our new bioactive contact lens material. We're pleased to report the study met our expectations and heightens our probability of success. Our in-house R&D team has started its analysis, which will allow us to make improvements to the lens, and we remain on track for our second external study and plan 2028 launch. When it comes to our pipeline, the future isn't waiting, it's already underway. This 2025 performance summary highlights the breadth of our offerings and shows why diversification is a competitive advantage. We've built a company that covers eye health end-to-end, and today, every part of the business is contributing. That's what durable growth looks like. The spotlight products drive that point home. They can be found behind the pharmacy counter, in the operating room or a few clicks away. Some, like Artelac, have demonstrated strong growth in important markets outside the U.S., as we implement our strategy to focus on core formulations. Others, like LUMIFY, are prime for additional exposure and opportunity as next-generation offerings are introduced. I'll now turn it over to Sam for a deeper dive on Q4 and full year financial metrics including cash flow figures that I know he is particularly proud of. He'll also provide 2026 guidance, which is aligned with our 3-year growth plan. Sam? Osama Eldessouky: Thank you, Brent, and good morning, everyone. Before we begin, please note that all of my comments today will be focused on growth expressed on a constant currency basis, unless specifically indicated otherwise. In addition, all of my references to adjusted EBITDA will exclude acquired IPR&D. As Brent mentioned, Q4 was a record quarter. We delivered the highest revenue and the highest adjusted EBITDA in the history of Bausch + Lomb. We also delivered an adjusted EBITDA margin of 23.5%, which is the highest level we have achieved as a stand-alone company since our IPO. In the quarter, we drove meaningful operating leverage with adjusted EBITDA growth of 27% on a year-over-year basis. Building on our strong third quarter performance, in Q4, we continued to deliver on the commitments we outlined at Investor Day and showed how our relentless execution will set us up to achieve the 3-year targets we outlined in November. Turning now to our financial results on Slides 9 and 10. Total company revenue for the quarter was $1.405 billion, up 7%. Full year revenue was $5.101 billion, up 5% and up 6% excluding the enVista recall. We saw revenue growth across all our segments, both in the quarter and the full year. Currency was a tailwind to revenue of approximately $37 million in the fourth quarter and approximately $58 million for the full year. Now, let's dive into each of our segments in more detail. Vision Care fourth quarter revenue of $778 million increased by 5%, driven by growth in both consumer and contact lenses. Full year Vision Care revenue was $2.923 billion, up 6%. Let me go over a few highlights. Following double-digit growth in Q4 in the prior year, the Consumer business delivered 3% growth in the quarter. For the full year, the Consumer business grew 5%. LUMIFY generated $63 million of revenue, up 24% in Q4, and $221 million of revenue for the full year, up 16%. The Consumer dry eye portfolio delivered $116 million of revenue in the fourth quarter, up 6%. The growth was led by Blink, which grew 33%. Full year Consumer dry eye revenue was $436 million, up 14%. Eye vitamins, PreserVision and Ocuvite grew by 2% in the fourth quarter and 2% for the full year. Contact Lens revenue growth was 8% in the fourth quarter and 7% for the full year. The growth was again led by DD SiHy, which was up 17% in the fourth quarter and 28% for the full year. Additionally, Ultra was up 16% in the fourth quarter and 9% for the full year. In Q4, our Contact Lens business saw growth in both the U.S. and international markets. The U.S. was up 11% and international was up 6% in the quarter. For the full year, the U.S. was up 9%, and international was up 5%. In China, Contact Lenses continued to perform well and grew by 7% in the quarter and 8% for the full year. Moving now to the Surgical segment. Fourth quarter revenue was $249 million, an increase of 3%. Excluding the impact of the enVista recall, Q4 revenue growth was 6%. For the full year, Surgical revenue was $894 million, up 4% and up 10% excluding the recall. In Q4, Implantables were up 5% and 24% sequentially. For the full year, Implantables were up 4%. Premium IOLs were up 20% for Q4 and 26% for the full year. Consumables were up 4% in the fourth quarter and 5% for the full year. Finally, Equipment was up 2% in Q4 and 3% for the full year. Revenue in the Pharma segment was $378 million in Q4, which is an increase of 14%. For the full year, Pharma revenue was $1.284 billion, up 6%. Our U.S. Branded Rx business was up 21% in the quarter and 13% for the full year. Strong Miebo execution once again led the growth. Miebo delivered $112 million of revenue in Q4, an increase of 111% year-over-year and 33% sequentially. For the full year, Miebo revenue was $316 million, which represents impressive growth of 84%. Xiidra continues to track in line with our expectations, and our team is executing our strategy. In the quarter, Xiidra revenue was $95 million and $331 million for the full year. Our International Pharma business was up 5% in the quarter and 6% for the full year. Finally, we are seeing meaningful progress in our U.S. Generics business, where we saw growth sequentially and on a year-over-year basis. In the fourth quarter, U.S. Generics was up 4% on a year-over-year basis and 24% sequentially. Now, let me walk through some of the key non-GAAP line items on Slides 11 and 12. Adjusted gross margin for the fourth quarter was 62.1%. This absorbs an impact of approximately 80 basis points related to tariffs. For the full year, adjusted gross margin was 61%. In Q4, we invested $94 million in adjusted R&D, in line with Q4 2024. Full year adjusted R&D was $371 million, up 8%. Fourth quarter adjusted EBITDA was $330 million, up 27% on a reported basis. The adjusted EBITDA margin was 23.5% in Q4, which represents year-over-year expansion of 330 basis points. As I previewed at Investor Day, we are continuing to focus on efficiencies in SG&A, and we are seeing the benefits in operating leverage. Full year adjusted EBITDA was $891 million. We are pleased with the work we've done on cash flow optimization. Adjusted cash flow from operations was $152 million in the quarter and $381 million for the full year. Adjusted free cash flow for the quarter was approximately $76 million and $32 million for the full year. CapEx for the full year was $349 million, which includes approximately $30 million of capitalized interest. Net interest expense was $95 million for the quarter and $376 million for the full year excluding a $33 million charge related to refinancing fees. The full year 2025 adjusted tax rate was 10%, which is lower than our previous guidance of approximately 15%. The lower tax rate was mainly driven by the impact of the enVista recall and other onetime adjustments. Adjusted EPS, excluding Acquired IPR&D was $0.32 for the quarter and $0.51 for the full year. Adjusted EPS in Q4 includes a onetime noncash charge of $0.08 related to a revaluation of stock-based compensation to reflect our strong performance and favorable long-term outlook for the company. Excluding this charge, EPS for the quarter was $0.40 and $0.59 for the full year. Now, turning to our 2026 guidance on Slide 16. For 2026, we expect to build on the results we have delivered in 2025 and to continue to execute to achieve our 3-year financial targets outlined at Investor Day. The fundamentals of our business and the eye care market remains strong. We expect our revenue to once again grow faster than the market, and we expect each of our segments to deliver growth in 2026. We expect full year revenue to be in the range of $5.375 billion to $5.475 billion, which represents constant currency growth of 5% to 7%. Based on current exchange rates, for the full year 2026, we estimate currency tailwinds of approximately $30 million to revenue. We expect to continue to execute our margin expansion strategy. We are setting our adjusted EBITDA guidance in the range of $1 billion to $1.050 billion. This reflects a margin of approximately 19% at the midpoint of the guidance range and adjusted EBITDA growth of approximately 15% on a year-over-year basis. We expect to drive meaningful operating leverage in 2026, with adjusted EBITDA growing at a rate of nearly 3x that of revenue. In terms of the other key assumptions underlying our guidance, we expect adjusted gross margin to be approximately 62%, and we expect investments in R&D to be in the range of 7.5% to 8% of revenue. Throughout 2025, we've taken steps to address our debt maturities and cost of debt. We expect interest expense to be approximately $365 million. We expect our adjusted tax rate to be approximately 19%, and we expect our full year CapEx to be approximately $285 million. In terms of our quarterly phasing, we continue to expect the natural seasonality of our business with the first quarter being the lowest and the fourth quarter being the highest. This seasonality is expected to become more pronounced as the dry eye franchise continues to grow. To conclude, we have laid the foundation for revenue growth and margin expansion. We started seeing early results in Q3 2025 and delivered a record quarter in Q4. This gives us a clear signal that the strategy is working. The business is proving to be on a solid path to delivering our long-term targets, and our focus for 2026 will remain on execution. And now, I'll turn the call back to Brent. Brenton L. Saunders: Thanks, Sam. I'm now going to turn it over to Andrew Stewart for a look at Miebo and Xiidra performance and an overview of the immense opportunity in dry eye. Andrew Stewart: Thanks, Brent. Miebo performance in 2025 was exceptional, with 113% year-over-year prescription growth that generated $316 million in revenue. We hit a significant milestone on January 2, crossing the 2 million prescription mark. Going forward, we expect a steady increase in prescription growth and profitability as more patients experience the therapeutic benefit of Miebo and our level of investment stabilizes. With broad market access and natural progression in the medication's life cycle, we anticipate normal seasonality from Miebo prescriptions, similar to what we see for Xiidra and other branded medications in the category. We previously shared that Miebo peak sales could reach $500 million. Based on its success, less than 3 years since launch, we now believe peak sales could exceed $600 million. I'm going to pick up on Brent's theme around execution. When describing Xiidra's 2025 performance, we said we would drive prescription growth, and that's exactly what we did. Total prescriptions grew 6% year-over-year in the fourth quarter, marking the highest quarterly total since launch. In 2026, we anticipate revenue growth and higher profitability, as we evolve our market access strategy. Xiidra and Miebo continue to have best-in-class commercial and Medicare coverage with 4 out of 5 patients covered. Ultimately, we expect both of our flagship dry eye medications to be even bigger contributors to the bottom line in 2026. Dry eye disease is one of the largest and most underpenetrated categories in eye health. Today, approximately 1 in 10 patients are actively treated with prescription therapy, leaving substantial runway for increased adoption. The global market is expected to nearly double in the next 4 years, and much of the recent prescription growth can be attributed to Miebo. For the past 2 years, eye care professionals have been able to more effectively treat patients with the first therapeutic product that can manage evaporative dry eye. This has helped lead to a 5x increase in year-over-year average weekly dry eye prescribers. The overall dry eye market continues to expand due to several factors, most notably an aging population, environmental factors and a dramatic increase in screen time. From over-the-counter products that provide symptomatic relief, prescription therapies that treat both signs and symptoms and diagnostic tools that help eye care professionals better serve their patients, our comprehensive portfolio of dry eye products is second to none and positions Bausch + Lomb to be the biggest beneficiary as more consumers and patients seek treatment. We're not just participating in dry eye, we're leading it. We have the broadest portfolio, the deepest expertise and the strongest presence in the category and in one of the fastest-growing areas of eye health. That's exactly where you want to be. Brenton L. Saunders: Thanks, Andrew. Earlier, I mentioned 2 imminent consumer launches, which tell very different but equally powerful stories. One is about evolution, taking a proven product and unlocking a much larger opportunity. The other is about acceleration, a brand we brought back to life that's now growing faster than ever. Two distinct paths, both driving meaningful upside. Let's start with PreserVision, the #1 eye vitamin brand. We partnered with the National Eye Institute for decades to help reduce the risk of progression in moderate-to-advanced AMD, which has led to continuous evolution of the product. The latest and most advanced iteration is AREDS3, which incorporates B vitamin Science. This new formulation allows us to engage patients earlier when the population is significantly larger and the opportunity is greatest. It transforms our role from treating progression to supporting the full continuum of care. Blink is a great example of what focused execution can do. We revitalized the franchise and built real momentum with 38% constant currency revenue growth in 2025, but we're not standing still. We're building on that success with an advanced preservative-free lipid-based formulation of Triple Care to reach even more consumers as demand continues to rise. These launches show how we create growth from strength, science and momentum. Our Contact Lens business has outperformed the global market for 2 straight years with 9% average constant currency revenue growth over 2024 and 2025 compared to mid-single-digit growth for the industry. Where others have faced significant headwinds, the impact for Bausch + Lomb has been less pronounced. China is a prime example. While there is some consumer softness, our lens business there grew 7% on a constant currency basis in the fourth quarter. Our consistency comes from disciplined execution and a steady, deliberate global rollout of innovation. Activity in the first half of this year drives that point home. In January alone, we launched Daily SiHy multifocal lenses in several European countries with an anticipated April launch in France. The same offering launched in Korea and New Zealand this month. In Surgical, I'm happy to report that this will be the last time we proactively referenced the voluntary enVista recall at earnings, and here's why. When we returned to market in late April, we said our plan was to reach Q1 2025 levels by Q1 2026. We met that goal in the fourth quarter, well ahead of schedule, and the strong uptake we're seeing is the result of great execution, trust and offering a product surgeons genuinely prefer. What did that mean for our Premium IOL portfolio last quarter? It helped drive 20% constant currency revenue growth, contributing to 5% constant currency revenue growth in our Implantables business. The fact that Implantables grew despite the recall is particularly noteworthy and speaks to the potential in this category. We expect to build on that momentum in 2026 and beyond as our existing premium offerings become further entrenched and new options are introduced around the world. As made clear by fourth quarter and full year 2025 results, we're not just talking about execution, we're proving it. We said what we were going to do, and then, we went out and did it product by product, milestone by milestone, business by business. The results are real and measurable. We view our progress to date as a foundation, not a finish line. The most important chapters of this story are yet to be written, but our commitment to execution makes us confident in what comes next. Our pipeline is the envy of the industry and puts Bausch + Lomb firmly on the path to sustained growth and long-term success. Let's take your questions. Operator? Operator: [Operator Instructions] Your first question for today is from Patrick Wood with Morgan Stanley. Patrick Wood: Perfect. I guess the first one, just big picture, when we're looking forward into '26 and the growth guide that we have, how are you guys thinking about the composition of that? Brent, from your perspective, what are the key areas to execute on to make that happen? And should we look at the strong momentum as we exited '25 by product line as a good inference for like where we should be hitting in terms of growth by category for '26? Brenton L. Saunders: Yes. Thanks, Patrick. Look, you heard me in the presentation using the word execution. You heard me probably mention the word execution at least a dozen times throughout the prepared remarks. And let me just try to take a step back and then come at your question. Look, as you just heard, in Q4 '25, we delivered 7% growth and the highest revenue and highest EBITDA in the history of our company, right, 172-plus years. More importantly, we delivered 27% EBITDA growth and 23.5% EBITDA margin. Yes, Q4 is seasonally our strongest quarter, but seasonality alone, right, doesn't produce that level of operating leverage. What you're actually seeing is real structural improvement in the P&L. The quarter reflects the impact of Vision 27, our program that we put in place at the beginning of the year, and we're shifting mix towards higher-margin products, improving pricing discipline, driving productivity across the organization and operating with a more fixed cost infrastructure. That means growth now drops through at a higher rate. So when we grow, we see it in the bottom line. Remember, we're only 1 year into the 3-year program that -- of Vision 27. So what Q4 shows is what disciplined execution can do. It's not a one-off result. It really is evidence of the foundational change we now have in how we run this company. Execution really isn't a slogan. It's really about the daily work of aligning the organization around clear priorities, making trade-offs and following through. It's focusing on the few things that matter and doing them consistently well. And over time, that builds consistency, and it builds credibility, both internally and externally, with all you and our shareholders. Look, I get it, trust is earned quarter-by-quarter. When we say we'll improve margins, we're going to improve margins. When we commit to advancing the R&D pipeline, we hit those milestones. And so that steady drumbeat of delivery is how we change perceptions, and most importantly, create long-term value. So as we continue to progress the pipeline, where we're making strong scientific and clinical progress, really the financial model becomes more compelling if you take a step back and think about it. We now have a platform in Bausch + Lomb that can absorb the innovation and scale it efficiently. So I think, Patrick, when you look at it, Q4 really demonstrates what strong, good execution looks like, and it shows our culture is changing, our model is improving and our leverage in the P&L is real. And most importantly, we're really early in the journey. I really do believe our best days are ahead because of the foundation we have built is stronger than it's ever been. And so look, as I think about '26, Q4 showed a lot of momentum, and we're going to ride that momentum into this year. Patrick Wood: Super clear. And then just as a quick follow-up. Miebo, now potentially $600 million, everyone was bullish about this when it first came into the market. But I would guess it's come in quite a bit ahead of certainly where we expected, probably where you guys expected, too. Are there any like key lessons for that when you're thinking about your pipeline going forward, the surprise of how well Miebo has done? What do you put that down to? And what are the kind of lessons associated with that, that you then can use for the rest of the pipeline? Brenton L. Saunders: Yes. I'll take a shot at it, and then, maybe Andrew wants to add a few thoughts as well since we have him on the call for the first time. Look, when I arrived, Miebo was finishing its what was being filed and waiting approval. And you're right, the organization had good plans for it, but nothing -- its peak sales were lower than current sales are today, right? And what we did is we upgraded the team, right? Talent matters across the whole organization, including the field force, most importantly. . We made some big investments, which some investors were skeptical of, right, because it did impact the P&L. But we said, look, we have a really good medicine here. We have a great category that's untapped. And we think that we can do something special with this Miebo because of its benefit-risk profile is so positive. And we made very strategic smart, thoughtful investment. And now, it's time to harness that. And keep in mind, Patrick, the $600 million is not $600 million. It exceeds $600 million, right? We're not satisfied at $600 million, right? That's just our latest, I guess, elevation of peak sales. But I think this thing can keep going from there. And so we have what we need. The table is set, right? We have our fixed -- as I mentioned in the previous answer, we have a fixed cost infrastructure. It's now getting leverage through that. And so don't take away from this that we're not investing in Miebo. What we are is we're holding our investments steady, so the benefit of all the growth flows through the P&L to the bottom line. But Andrew, anything else you'd add? Andrew Stewart: Yes. Look, 2 things, Brent. I think, one, when you take a great medicine, as you mentioned, something that has a phenomenal safety profile with an extremely fast, rapid onset in terms of efficacy for patients and you marry that to great execution, best-in-class field force execution and a marketing approach that I think has been second to none in the dry eye space, you put those 2 ingredients together and you have great success. And I think when we look at our pipeline for the future, taking those types of execution successes forward will be a key to how we move forward with the company. Operator: Your next question is from Young Li with Jefferies. Young Li: I guess, first one, maybe a follow-up on Miebo, really strong results and you upped the peak rev. It sounded like you're sort of holding the investment on that side relatively steady. Can you maybe comment a little bit more about the -- how that impacts the growth trajectory of Miebo? Hard to comment on steady growth, but would love to hear a little bit more about that. Brenton L. Saunders: Yes. So I mean, I think what you're going to see is continued strong growth of Miebo. I would -- Sam and I both said in the prepared remarks, I think as you think about particularly modeling 2026 or any -- frankly, any year on a go-forward basis, you have to think about the seasonality, right? Just the way copays and deductibles work in the prescription market make Q1 the softest and Q4 the strongest. And so where in the past, when you're in launch mode, you see kind of quarter-by-quarter continuous improvement, you're going to see more seasonality on a go-forward basis there. But if you look at Miebo for the year, we have big expectations for growth in Miebo and profitability. I don't know, Sam or Andrew, if you want to add anything? Osama Eldessouky: Yes. That's exactly right. And I think Young, one of the key things we talked about at Investor Day, and hopefully, you guys have seen it in our results in Q3, and then, also you've seen in Q4 is that we said we're going to be focused with more targeted investments. We built the infrastructure around the dry eye franchise and really shifting from what we refer to as the launch phase to the growth phase, which is really continuing to invest behind the franchise as a whole and making sure we're targeted with this investment to continue to drive the top line growth. Andrew Stewart: Look, I think another key theme for 2026 is as we think about our access and affordability strategy. We're coming to a point of steady state. We're comfortable with the access that we have. We're nearly 4 out of 5 patients for both commercial and Medicare have access to Miebo. And so that puts us in a great position to continuing to support patients and physicians, as they get more experience with the product and add more patients to Miebo's as we go through the year. Brenton L. Saunders: Young, did you have a second question? Young Li: Yes. That was very helpful. Yes, it would be great if I can ask a second one. I wanted to get your thoughts on sort of the state of the market as well as the competitive dynamics. Your portfolio right now has improved significantly since the IPO. You've got a really robust pipeline of products. But for this year, there's players that's coming with more supply on the contact lens side. There's new entrants on U.S. IOLs, recent launches that's ramping for Premium IOLs, capital, dry eye drugs. So just wanted to hear your thoughts on how that can impact '26? And maybe which segment faces the toughest competitive challenges? Brenton L. Saunders: Yes. So look, I think we take all competition seriously. I think if we break it down into kind of 3 -- the 3 markets you just discussed, I think pharma, while we have a real competitor there from a very strong company, I think we feel very good about our position, right? We have the #1 and #2 brand. Andrew mentioned we have very strong access for patients, and we have a lot of momentum. And we have frankly, for evaporative, inflammatory dry eye, which are the largest 2 components of the market, we have the best medicines for patients. And so I think we're established very well there in competition. If you take contact lens second, I think when you look at the state of the market in '25, the market probably grew -- data is not perfect in contact lens. It's a little harder to put together, but our numbers suggest that the market grew somewhere around 4% in 2025. For the full year, we grew 7% and 8% in the fourth quarter. So fourth quarter almost doubled market growth. A lot of that is based off of 2 things. It's our Daily SiHy putting up incredible growth, right, 17% in the quarter, 28% for the year, I believe, in the numbers. And that's driven by continued launch of modalities. And in the prepared remarks, I mentioned we're still -- the only market that has the 3 main modalities is the U.S. The rest of the world is still in launch mode. And so you're going to see a continuous speed over the next year or 2 of launching those modalities and driving growth. But Ultra was still up in the fourth quarter, 16%. So we're not creating a leaky bucket. We're doing what we need to do. And where the industry saw some weakness in Asia and China, as an example, we grew lens 7% in China in Q4 and 8% for the year. So our DTC model, we're direct with a fully integrated direct-to-consumer model in China, gives us a lot of flexibility to meet the consumer where they need to be and where they're purchasing. Southeast Asia still remains a little flat. But I suspect the market is going to grow a little better and improve overall in '26, maybe 4.5% or better. And so I think we're in a strong position. And then, of course, we're moving full steam ahead with new product launches in 2028 that we're pretty excited about. So I think our cycle of growth and in the competitive state in the lens -- contact lens market is -- I think we're in a strong position. Surgical, probably the most competitive market of the 3. But again, I look at our execution and the quality of the products we have. I mean, 4% implantable growth in 2025 is pretty damn impressive when you consider we had a significant recall of our entire enVista platform in the year, right? And so I'm not excluding anything to get the 4%. That is the actual growth. And when you look at what happened in the quarter, you have 20% premium IOL growth and 26% full year premium growth. And so that -- what I mentioned in the prepared remarks, this move to higher-margin mix products is happening in surgical. We know that surgeons do like the enVista platform and really do like our trifocal Envy. We're also launching Lux products outside the U.S., premium brands. And of course, enVista Beyond is completing its clinical trial. So we have a steady cycle of new launches and continued execution there. And I feel pretty good we can grow faster than market in all 3 businesses. And that's why we're putting up top line numbers that are faster than the market. Operator: Your next question for today is from Joanne Wuensch with Citibank. Joanne Wuensch: You gave us a little, I think they're called, Easter eggs, but I'm going to call it a nugget as that would be early, like that I'm seasonally moving forward. About the clinical data that you saw for the new material for the contact lenses, could you expand on that a little bit? And what did you see that increased your confidence? Brenton L. Saunders: Yes, Joanne, thank you. I'm going to turn it over to Yehia in a second, but I'm going to steal that Easter egg thing that, that I feel like I'm playing a video game. So that's awesome. No, look, we got the top line. The team just got it right before earlier, I think late last week or thereabout. So we're still going through the data. It's quite an immense amount of data, but we're pleased. And I'll just say this, and then, turn it over to Yehia, getting the way you develop contact lenses are different than a lot of other products. And I think we told you at Investor Day, we plan to do one external clinical study to get data to iterate. We'll do a second external study, and then, we'll do the registration and claim studies for a 2028 launch. So we're exactly where we need to be. But every time you pass one of these thresholds, your confidence about the fact you have a real product that can make a difference increases. And that's why I'm so excited about where we are right now. But let me turn it over to Yehia. Yehia Hashad: Yes. Thank you, Brent, and good morning, Joanne. Yes, we are really pleased to share the early highlights from the first clinical evaluation of our Halo daily disposable contact lens. Actually, this study was designed to assess the overall clinical performance, safety and tolerability in a controlled setting. The study enrolled about 130 participants, all of whom have completed the study. And importantly, there were no adverse events or device deficiencies have been reported. But the most important thing, this is the first time we actually apply our optical system to this, and all participants, the majority -- the vast majority of them experienced very good visual acuity. Based on the investigators even, they agreed that the lens has delivered a clear vision in almost 98.5% of subjects. So currently, we are -- as Brent mentioned, we are -- actually just got the results, and it's even ahead of schedule. And we are digging deeper doing deeper analysis to inform further optimization and also the lens design for the next external study. As Brent mentioned, we remain on track with our development timeline and targeting 2028 launch, and actually, this study increased our confidence in the platform as we are moving forward. Brenton L. Saunders: Yes. I think, Joanne, our probability of success that this is real and a real product is significantly higher than it was at Investor Day, which is why we're excited. Joanne Wuensch: Excellent. I'll ask my second question, which is you're making progress on pulling the financial levers for EBITDA expansion? As you look throughout 2026, and we think about setting up our models, is there anything we should think about the progression throughout the 4 quarters? Brenton L. Saunders: Yes, absolutely. I'll turn it over to Sam. But I said it in the prepared remarks, I think as you look at phasing, right, we've always had seasonality as long as I've been here since the IPO of Q1 being the weakest, Q4 being the highest. But I think you're going to see that be more pronounced now as a lot of that seasonality is driven by the prescription dry eye business. And as we continue to have great success with Miebo and Xiidra, they become a bigger part of our overall sales and profitability. And so that will have a larger impact on seasonality than we've seen in years past. But Sam, why don't you? Osama Eldessouky: Yes. Thank you, Brent. And Joanne, I -- let me give you a little bit more details on the phasing. But it's just important to highlight the point that Brent made, which is the whole aspect of Q1 being the lowest, Q4 as being the highest, that's the natural business. And again, as we see the progress that we're making in dry eye franchise, that's going to be even more pronounced as we go forward. So that's a very important framework as we think about phasing. But what's important here with all the work that we've done in the second -- especially in the second half of 2025, setting up our, I'll call it, building blocks for our leverage, operating leverage as we go forward, both in Q3 and Q4, and we're seeing that work. We expect that sort of to carry forward with us in 2026. So when you think about from a revenue perspective, we usually start our first quarter achievement on revenue roughly about 22% of the midpoint of the guidance. That probably remains a good starting point for 2026. On EBITDA, we -- if you look at last year achievement, midpoint was about 14%. We expect this year with all the work that will be about 18% achievement of the midpoint of the guide. So we're seeing a nice improvement because when you step back and reflect on the guidance, we're growing our -- the guidance that we provided this morning, midpoint of that is about 6% of the top line, but it's about 15% growth on EBITDA at the midpoint. So we're seeing that really leverage pull through throughout the next 2026, especially in the first half of the year. Brenton L. Saunders: Yes. I mean, I think one of the things I'm most proud about what we're starting to do is that leverage in the first slide in the deck, right -- in the quarter, right, 7% top line and 27% bottom line; guidance, midpoint of 16% -- 6% on the top line and 15% on the bottom, right? So you're seeing like 3x leverage or better in the P&L. And that's financial excellence in action, right? And so we said we're going to focus on financial excellence, and now, we're going to deliver it. Operator: Your next question is from Larry Biegelsen with Wells Fargo. Lei Huang: This is Lei calling in for Larry. Can you hear me okay? Brenton L. Saunders: Yes, we hear you, Lei. Yes. Lei Huang: My first question is on Xiidra. It looks like 2025 played out as you expected. There was some volume growth, but you had headwinds like IRA and such. How should we think about Xiidra performance in '26? You had the recent payer change at the start of the year, can we think about maybe -- but you also expect net price to be better in '26, so can we think something along the lines of maybe mid-single-digit sales growth? Is price improvement offset by volume decline? And then, I have a follow-up. Brenton L. Saunders: Yes. So, Lei, I think I'll ask Andrew to make a comment here, too. But I think you're exactly right. 2025 for Xiidra was setting a new base between a onetime payment for managed care in the IRA, right? We kind of set that new base. And now, it's important to grow off that base. And I think we will. I think that mid-single digit is exactly how we're thinking about it. But Andrew, do you want to add some comments on Xiidra '26? Andrew Stewart: Yes. Look, Brent, I think you covered the operational aspects of '25 versus what our expectations are in '26 exactly right. When we think about the totality of coverage, we're very happy there with the rates that we're able to achieve across all of our different commercial and Medicare stakeholders. Look, when you think about CVS, specifically when we're talking about coverage, they're a really important customer. We'll continue to find ways to partner with them as we do in our Consumer portfolio, as they manage a large number of Medicare lives today. And when it comes to the commercial book of business, we're eager to find ways that we can continue to work together. And right now, we have to always balance the affordability of the asset versus our ability to invest long term for the stakeholders of B&L. Brenton L. Saunders: But I think it's fair to say you'll see slower TRx growth as a result of that, but higher revenue growth. Andrew Stewart: That's correct. Brenton L. Saunders: Yes. Osama Eldessouky: And, Lei, maybe just I'll add a couple of data points to what Andrew and Brent said and just to help you as you think about your modeling and how you guys think about Xiidra. So as a starting point, it did play out exactly as we expected in 2025. But what's more important is we knew that as we start jumping into 2026, the net revenue for Xiidra will grow. So we're expecting that growth -- to see that growth. How that growth will come through is, as Brent said, it will be an element where we see a slower TRxs, but we'll see a much better net pricing. We usually talk about our, call it, gross to net roughly about the mid-70s. We start seeing that to step down to closer to the low 70s. So that net benefit you'll start seeing into how Xiidra will play out between '25 and '26. Lei Huang: That's very helpful. And then just 1 follow-up is your -- is on EBITDA margin. So at Investor Day, you talked about roughly 600 basis points of EBITDA margin through '28 to get to roughly 23% margin. That's roughly 200 basis points a year. So you guided to roughly 19% for this year. Can you just talk about your confidence for -- through 2028 on the margin? And how we think about maybe just the next couple of years, if we should think about fairly equal steps of margin improvement? Brenton L. Saunders: Yes. So I think we feel very confident about what we presented the 3-year plan at Investor Day. In fact, I would say sitting here almost, what, 8 weeks later, I feel more confident than I did. And the reason being is you saw execution improvement in the fourth quarter. Now, there's some seasonality, as I mentioned, but still you're seeing that foundational change in the P&L and the leverage that it can drive as we continue. So I think that's right. We've got a running start, right? We thought we'd end the year at around 17%. We got to 17.5%. And so we're going into the year with a running start. And there's nothing better than momentum. But I would say this. When I think about my 13,000 colleagues in Bausch + Lomb around the world, they all know our goal on this one, and everyone is focused on it. We have very disciplined project teams, many of them, lots of people working on margin improvement from commercial teams to supply chain. This is a full court press with a lot of focus inside the company. We are going to do everything we can to make sure we not only meet but potentially exceed those margin goals. Operator: [Operator Instructions] Your next question for today is from Matt Miksic with Barclays. Matthew Miksic: Congrats on a strong quarter here. I had 1 question on IOLs. So bounced back pretty nicely from the recall. It seems like 20% growth in AT-IOLs, and the feedback we get from clinicians is positive on the enVista line. Maybe if you could talk about any puts and takes that you're still kind of working through with respect to the recall? And what we should expect in terms of folks kind of getting back on board with that launch that had pretty strong momentum into the end of '24 and early '25, but kind of obviously got stopped there for several months in the middle of last year? Brenton L. Saunders: Yes, a great question. So if you really dig into it and look at what happened as a result of the recall. And as I said in the prepared remarks, hopefully, this is the last time we talk about the voluntary recall. The fact that we got back to the market the way we did, the way we communicated with customers and surgeons so openly and transparently, I think really created a bond of trust with our customers. But the reality of the market is those patients were implanted with different IOLs during the period we were out of the market, right? You don't get those patients back. You have to earn each implant back one by one, doctor by doctor. And so what happens in this market, as you may know, is for the premium IOLs, you have a much more instant sales cycle, right? A lot of surgeons can buy whatever premium IOL they want. But for monofocal, they tend to contract. And so the bounce back came faster for Envy and Aspire to some degree. But for the base monofocal lens, we still have some work to do because when we were out a lot of ASCs and practices signed contracts for monofocals that we have to wait until they expire to get that business back. And so there is still a little bit of a hangover in the monofocal portion of the market, but we'll earn that back this year. And so I think we feel very confident that it's clearly in the rearview mirror, and now, it's back on our front foot and winning trust with doctors and patients day by day. Operator: Your next question is from David Roman with Goldman Sachs. David Roman: I want to just actually maybe to focus a little bit on the consumer business. If you kind of look across the different product families there, we do see kind of a divergence in trends across a number of the different categories. Can you maybe help us think about just the direction of travel in the consumer franchise? And what we should -- how we should expect some of these different LUMIFY driving growth? Or how we should think about some of the different factors in '26 in that franchise? Brenton L. Saunders: Yes. So for the full year, we grew about 5%. There was probably about 100 basis points of destocking, remember, throughout the year. It started with -- as a kind of impact of tariffs, right, as retailers made room for -- in their warehouses for products that were tariff impacted. They destocked roughly about 2 weeks across the board and virtually across all customer classes. And so we absorbed that in the year. And so consumption in '25 was higher than sales, which is obviously a sign of destocking. I think when you look at the hero brands, LUMIFY, obviously, up 16% for the year. We launched preservative-free. And of course, we're getting ready to file LUMIFY Lux for a launch next year. So we have a nice continuous innovation stream there. Blink, a brand that we brought back to life, was up about 14% for the year, right? I think that's the number, Sam, right? So really good growth. We're launching the preservative-free for Triple Care in the second quarter or late this quarter. So again, innovation helps drive growth. But I think the area where we saw kind of a little bit more flatness is in our largest product line, PreserVision or vitamins, which were only up 2% in the quarter and in the year. And to be fair, when you think about PreserVision, right, it's a very large category. We have roughly 90-plus percent market share, so we kind of are the category. There's been no innovation there for 13 years. And the way to get growth back into that category, and I hope, significant growth over time, is through innovation. So AREDS3, which started to ship to retailers within the last week or 2, and you'll start to see really launching throughout this quarter and next, is really going to revive that market and bring it back to growth again. And I think you'll see that really play out in the back half of the year, as we build the foundation with ECPs first and then turn on consumer. And the fact that we're expanding the market, almost tripling the size of the market of who should be recommended PreserVision, I think, gives us a lot of optimism that, that category can grow again, meaningfully. Operator: Our final question is coming from Robbie Marcus with JPMorgan. Lilia-Celine Lozada: This is Lily on for Robbie. I want to circle back to the EBITDA guidance. Can you help give a bit more color and bridge us to the 19% EBITDA margin this year and walk through some of the pieces on operating expenses, especially that get you there? When I look at the fourth quarter, gross margin was a bit softer than what we were thinking. You have R&D increasing as a percentage of sales this year. And so what's driving all that SG&A leverage this year? And what gives you the confidence and visibility in that improvement? Brenton L. Saunders: Yes. Well, I think Sam is probably best to answer this. Sam? Osama Eldessouky: Sure. So, Lily, when you think about the components of how we think about the leverage and expansion in the EBITDA margin, it's really the building blocks for this is a couple of areas. One is we talked about the SG&A and the leverage that we talked in terms around -- the efficiency around our fixed cost structure and how we're bringing the fixed cost structure down. And we saw that play out very nice for us in Q4. Starting Q2, we saw that in Q4. That will continue with us as we think about '26. We also talked about the operating leverage within sort of shifting from the growth -- from the launch to the growth mode, and you're seeing that with the targeted investments that we're doing around selling in A&P. So as you think about where -- as we end 2025, just keep in mind, we -- you mentioned gross margin is soft. It does absorb roughly about 80 basis points of tariffs that we're seeing. So when you look at that on a comparable basis to '24, you have to factor that in. But now, pivoting and looking forward to 2026, we're projecting roughly about 200 basis points improvement coming -- 100 basis points coming from the gross margin moving from about 61% to 62%. Also, the SG&A will probably yield another 100 basis points of improvement. Offsetting that would be about 50 basis points of increasing our R&D investment, moving up from about 7% to roughly more towards the 7.5%. So you'll see that movement in sort of taking and that gives you the -- really the 150 basis points that we'll see jumping from our 17.5% EBITDA in 2025 to about 19% EBITDA in 2026 margin. Brenton L. Saunders: The other thing I would say, Lily, is as you think about the fourth quarter, delivering 7% top line and 27% EBITDA growth, what -- if you really peel that onion one more step, what makes me so proud that we could deliver those results as we did it with about 500 fewer colleagues than we had in the same quarter of the year before. And so you're really seeing a change in the foundational structure of our company being more efficient and really focusing on driving that leverage in the P&L to get that margin improvement. Lilia-Celine Lozada: Great. That's helpful. And then, just as a quick follow-up, can you talk about how you're thinking about reported free cash flow this year on a reported basis in 2025? I think that was about $66 million. So how should we be thinking about that trending in 2026? And what are some of the puts and takes we should be keeping in mind? Osama Eldessouky: Yes. So we're very pleased with the work that we've done throughout '25 on the cash flow in general. And I'll tell you, when we -- how we think about sort of cash flow where we ended the year roughly about 42% conversion. And you keep in mind that the business has been growing throughout 2025. And with that growth that we've seen in the business, we've taken roughly about 12 days out of working capital in terms of operationally throughout 2025. So that's really helped us with driving both on the cash flow from operation that I referenced in my prepared remarks, $152 million in the quarter, that's $381 million for the full year, and also being a positive from a free cash flow this year. So as we look forward to 2026, that progress will continue. So I expect we're going to be progressing towards the -- about 45% or so of conversion. Keep in mind, we targeted 50-plus conversion by 2028. So we're really making nice strides and nice progress towards that target. And more importantly, our CapEx is also stepping down as we communicated at Investor Day. So roughly -- in '25, our CapEx was roughly about anywhere between 6% to 7% of revenue. As we look into 2026, we expected that to be about 5% to 6%. So you're seeing that step down in CapEx spend, which provides even more support around the free cash flow. So it's really a lot of great work that's been done by the team here, and we're very proud of it, and it's a nice progress in the right direction. Brenton L. Saunders: One more question, operator. Operator: Your final question for today is from Douglas Miehm with RBC. Douglas Miehm: Brent, this is a question that has more to do -- I believe that you're going to have a strong 3 years ahead of you. Margins are going to continue to increase, et cetera, et cetera. But as we think about valuation and the multiple that should be assigned to this company over time, especially given the strength in the operations, the various businesses, your execution, et cetera, et cetera, 1 thing that's going to likely hold the company back in terms of that multiple expansion is the float. And is there anything that you can speak to us today about how you're hoping to resolve that situation? Because it looks like you're going to have a lot of good news on the operational front. But I'm just thinking from a market perspective, how you'd like to guide us. Brenton L. Saunders: Yes. So look, I agree with you. And I think one point I'll make, and then, I'll answer the question. As I said in the -- I think it was in the first question from Patrick, what's really exciting about the R&D pipeline that really starts to kick in meaningfully in '28 and beyond is that we actually have the structure or platform that allows us to absorb that innovation and scale, right, and flow through to the bottom line much more rapidly than it would have otherwise, right? The pipeline was built to enhance our existing markets and selling infrastructure. And so that really is strategically important for us as we think about launching those products in the future. But you're right, I think obviously, we hear from investors about the float. I fully agree with you. It's something that has to be resolved in time. Unfortunately, as I've mentioned many times, it's not within our control. It's a BHC issue. But if you listen to their commentary at JPMorgan earlier in January, they do plan to sell shares in time. I just don't have a timeline to provide and maybe you want to get on their call tomorrow or today end of day -- end of day today. It feels like that's a day away. But at the end of the day today and ask them as well because it's really their decision. But I do expect it to happen. I just can't give a timeline. All right. So operator, I'll just make a quick closing remark, thank everyone for joining us. Most importantly, I'd like to thank my colleagues from Bausch & Lomb around the world for their great execution in 2025, and we look forward to watching them execute and build our company in 2026. But look, as I mentioned at the beginning, I think Q4 really is another proof point in what good execution looks like. And it shows that we are immensely focused on execution. It is really part of our culture now. And we have all the building blocks we need in our bag today to deliver on our 3-year plan, and we are immensely focused on getting it right and delivering. So we look forward to keeping you updated, and we will obviously always be available to answer any questions if you need us. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the JELD-WEN's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to James Armstrong, Vice President of Investor Relations. James, please go ahead. James Armstrong: Thank you, and good morning. We issued our fourth quarter and full year 2025 earnings release last night and posted a slide presentation to the Investor Relations portion of our website, which can be found at investors.jeld-wen.com. We will be referencing this presentation during our call. Today, I am joined by Bill Christensen, Chief Executive Officer; and Samantha Stoddard, Chief Financial Officer. Before I turn it over to Bill, I would like to remind everyone that during this call, we will make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a variety of risks and uncertainties, including those set forth in our earnings release and provided in our Forms 10-K and 10-Q filed with the SEC. JELD-WEN does not undertake any duty to update forward-looking statements, including the guidance we are providing with respect to certain expectations for future results. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to their most directly comparable financial measures calculated under GAAP can be found in our earnings release and in the appendix of our earnings presentation. With that, I would like to now turn the call over to Bill. William Christensen: Thank you, James, and good morning, everyone. Before turning to results, I want to thank the teams across JELD-WEN. The fourth quarter remains challenging and the progress we made required sustained effort in an environment that continued to put volume pressure on the business. Our employees stayed focused on customers, operated with discipline and worked through the realities of the market. I'm grateful for their commitment and their work continues to strengthen the foundation of the company as we move forward. The macro environment remained very soft during the fourth quarter, consistent with what we expected coming into the period. End markets did not improve meaningfully and demand across both new construction and repair and remodel continue to be under pressure. Despite those market challenges, we delivered results at the high end of our expectations. That outcome reflects disciplined execution and sustained effort across the organization to manage through a difficult environment. As seen on Slide 4, we delivered the high end of the sales and adjusted EBITDA range we forecasted through a combination of top line performance and cost actions. Sales came in stronger than we expected, driven by the hard work of our sales team, combined with improving operational execution, including continued progress with on-time in full delivery. At the same time, we took deliberate labor and cost actions to better align the business with market conditions, consistent with what we outlined in November, including reducing full-time positions by approximately 14% or about 2,300 people in full year 2025. These actions were structural and reflected our view that demand is unlikely to improve meaningfully in the near term. While cost actions played an important role, we remain focused on serving customers and securing the long-term health of the business. Adjusted EBITDA also came in better than we expected. The quarter included a few million dollars of in-period items that were timing related and are not expected to recur. However, excluding those items, underlying adjusted EBITDA would have been above our guidance range. Cash performance followed that improvement. Free cash flow came in approximately $20 million ahead of our expectations, even with higher capital spending due to carryover projects, reflecting tighter working capital management and the benefits of the cost actions we have taken. Additionally, we completed the sale leaseback of our Coral Springs, Florida facility in the fourth quarter, giving us net proceeds of roughly $38 million, increasing our liquidity position. However, as the macro environment remains soft, volumes and margins continue to face pressure. And while operational performance is improving, there is more work to be done. For the full year, we delivered sales of $3.2 billion and adjusted EBITDA of $120 million. While that result was at the high end of the guidance we provided after the third quarter, it is well below where we expected to finish the year when we began. The macro environment remained difficult throughout the year, particularly in retail and lower-priced new housing and demand did not recover as we had originally anticipated. At the same time, we experienced more disruption from service challenges earlier in the year than we expected as we work to rightsize the business, reposition our operations and implement more standard ways of working across our manufacturing landscape. That said, the business exits the year in a more stable position than it entered it. Over the second half of the year, we made meaningful progress improving service levels as production transitions from consolidations were completed both in North America and Europe, backlogs worked down and operations stabilized. Our on-time and full performance has improved as equipment ramped and processes have become more consistent, particularly late in the third quarter and into the fourth. We are also implementing a common manufacturing operating system across the North American network, which is allowing us to identify issues faster and balance operations more effectively than we could earlier in the year. While we still have a lot of work to do, service performance is moving in the right direction. As we look ahead, our focus remains on controlling what we can control. Customers continue to tell us that service matters most and where service has improved, we are seeing opportunities to regain volume. We have taken structural actions to align costs with current market realities while being careful not to undermine service. Market conditions remain soft, and we are not counting on a near-term recovery, but we are improving execution and putting in place operating practices that position the business to perform better when demand eventually improves. In addition, we continue to work through the strategic review of our European business. While the process is ongoing and we have nothing to announce at this time, we believe this review or other potential actions could provide meaningful liquidity and help further strengthen the balance sheet. We are evaluating alternatives thoughtfully and deliberately with a focus on improving financial flexibility while preserving long-term value. In addition to the European review, we continue to evaluate other actions, including smaller noncore assets and selective sale-leaseback opportunities as seen with the Coral Springs transaction. Our liquidity position remains strong. At the end of the year, we had approximately $136 million of cash and about $350 million of availability on our revolver. We have no debt maturities until December of 2027. And while those maturities are not imminent, we expect to address them before they become current. Importantly, our only relevant covenant requires a minimum of approximately $40 million in total liquidity, which is well below our current position. Over the past year, we have increasingly focused the business on execution and decisions within our control. We have taken meaningful steps to improve service, simplify operations, align cost with demand and secure our financial position. These actions are beginning to show up in more stable performance and better control of the business. As market conditions eventually improve, we believe JELD-WEN will be operating from a stronger position with better service, greater discipline and a more resilient foundation. With that, I'll hand it over to Samantha to review our financial results in greater detail. Samantha Stoddard: Thank you, Bill. Turning to the financial results on Slide 6. Fourth quarter net revenue was $802 million, down 10% year-over-year from $896 million in the prior year. Core revenue declined 8%, driven primarily by lower volume. Mix was stable year-over-year following the shift towards lower-cost products we saw in 2024, and pricing was a slight positive. Overall, the revenue performance reflects continued pressure from soft end markets rather than changes in customer mix or pricing discipline. Adjusted EBITDA for the quarter was $15 million or 1.8% of sales compared to $40 million or 4.5% of sales in the fourth quarter of last year. The decline was driven primarily by lower volumes, resulting in unfavorable operating leverage as well as ongoing price and cost pressure. These headwinds were partially offset by continued productivity improvements and lower SG&A costs. The fourth quarter is also seasonally weaker from a margin perspective and adjusted EBITDA was also impacted by approximately $7 million of timing-related items that are not expected to recur. Excluding those items, underlying adjusted EBITDA performance would have been higher. From a cash flow perspective, we were roughly free cash flow neutral in the quarter. Operating cash flow was largely offset by capital spending, and we benefited from a $55 million reduction in net working capital, driven primarily by lower accounts receivable and inventory levels, consistent with normal fourth quarter seasonality. As Bill mentioned, we also completed a sale leaseback of our Coral Springs facility during the quarter, generating approximately $38 million in net proceeds. Overall, our focus during the quarter was on disciplined cash usage and managing liquidity carefully in a very challenging macro environment. As a result of lower EBITDA, net debt leverage increased to 8.6x at year-end. Importantly, this increase was driven by earnings pressure rather than incremental borrowing. We did not add debt or draw on our revolver during the fourth quarter. Reducing leverage remains a priority, and we continue to manage the business with a disciplined focus on cash, cost and balance sheet flexibility. Turning to Slide 7. The year-over-year change in revenue was driven primarily by lower volumes. Fourth quarter sales were $802 million compared to $896 million in the prior year. Core revenue declined 8%, reflecting a $77 million headwind from volume mix, with the impact overwhelmingly volume related. Pricing contributed a modest $2 million benefit in the quarter. The year-over-year comparison also reflects a $41 million reduction related to the court order divestiture of the Towanda operation. Foreign exchange provided a $22 million tailwind driven by the weaker U.S. dollar. Taken together, these factors explain the revenue decline in the quarter and are consistent with the market conditions and operational dynamics we discussed earlier. Turning to Slide 8. Adjusted EBITDA for the quarter was $15 million or 1.8% of sales compared to $40 million in the prior year. The year-over-year decline reflects a combination of volume-related pressure and ongoing price/cost headwinds, partially offset by productivity improvements and lower SG&A. Lower volumes were a meaningful headwind, reducing adjusted EBITDA by approximately $21 million. In addition, price/cost dynamics contributed to an additional $21 million headwind as cost inflation, particularly due to tariffs, glass and metals continued to outpace pricing recovery. The year-over-year comparison also includes a $7 million reduction related to the court order divestiture of the Towanda operation. These headwinds were partially offset by improved execution across the business. Productivity contributed a $12 million benefit in the quarter, reflecting continued operational improvements, although that benefit was muted by lower production volumes. SG&A was also $12 million lower year-over-year, driven by the cost actions we have taken throughout the year and into the fourth quarter to better align the organization with current market conditions. Turning to Slide 9 and our segment results. In North America, fourth quarter revenue was $522 million compared to $640 million in the prior year. The year-over-year decline was driven primarily by lower volumes, along with the impact of the court order divestiture of the Towanda operation. Adjusted EBITDA for North America was $14 million compared to $42 million last year, with adjusted EBITDA margin declining to 2.6% from 6.6%. The reduction in profitability reflects volume-related pressure and continued price/cost headwinds, partially offset by productivity actions taken during the year. In Europe, revenue was $280 million, up from $256 million in the prior year, primarily reflecting the benefit of a weaker U.S. dollar. On a constant currency basis, volumes and mix were lower year-over-year, consistent with continued soft demand across key markets. FX translation accounted for all of the 900 basis point year-over-year improvement in sales. Adjusted EBITDA for Europe was $12 million compared to $17 million last year, with adjusted EBITDA margin of 4.1% versus 6.5% in the prior year. Productivity was slightly positive, but those benefits were more than offset by lower volume mix, along with higher SG&A costs. With that, I'll turn it back over to Bill to discuss our updated market outlook and how we're positioning JELD-WEN for the path ahead. William Christensen: Thanks, Samantha. Turning to Slide 11. I want to provide our market outlook for 2026 and the assumptions that underpin our guidance. We continue to see a challenging and uncertain environment, and our outlook reflects disciplined actions rather than any expectation of a meaningful near-term recovery. In North America, we expect the overall market for windows and doors to be down low to mid-single digits. Within that, we anticipate new single-family construction to be down low single digits with repair and remodel activity down mid-single digits. Multifamily activity in the U.S. is expected to be relatively stable, while Canada remains under pressure. We continue to expect high single-digit declines in the Canadian market, reflecting the ongoing economic slowdown and weaker housing activity. In Europe, we are seeing signs of stabilization. We expect volumes to be broadly flat year-over-year with no material improvements, but also no further deterioration from current levels. Demand remains subdued, but year-over-year conditions appear to be more stable than what we have experienced earlier in the current cycle. Importantly, our company volume expectations are more conservative than the underlying market. As we move through the last year, we have taken pricing actions to cover cost inflation. As a result, we do expect to lose some volume and are prioritizing pricing discipline. That share pressure is intentional and reflected in our guidance. While we are seeing improving service levels and have actions in place to regain share over time, we are not assuming any benefit from service-driven volume recovery in our outlook. Taken together, this framework reflects a cautious view of the market and a disciplined approach as to how we are managing the business. Our guidance is built on our view of current demand levels with pricing actions largely already implemented and a focus on protecting margins while improving execution rather than relying on external market volume improvement. Turning to Slide 12. I'll walk through our full year 2026 guidance. Our outlook reflects continued uncertainty in the market and disciplined assumptions around demand, pricing and execution. For the year, we expect net revenue in the range of $2.95 billion to $3.1 billion. Core revenue is expected to decline between 5% and 10%, driven by a combination of macroeconomic pressure and a continued competitive market as we work towards a more neutral price/cost position. While pricing remains slightly negative relative to cost inflation, much of our pricing action has already been implemented and our guidance assumes continued pricing discipline, consistent with how we have managed the business historically. We expect adjusted EBITDA to be in the range of $100 million to $150 million. The range is driven primarily by volume uncertainty rather than execution risk. Our outlook reflects current demand levels and does not assume a material improvement in the market over the course of the year. On cash flow, we expect operating cash flow of approximately $40 million and capital expenditures of approximately $100 million, resulting in a free cash flow use of approximately $60 million for the year. Capital spending at this level is largely maintenance in nature. Cash usage is expected to be weighted toward the first quarter, which is typically our seasonally highest period for working capital. Restructuring cash outflows are not likely to be of similar magnitude compared to prior year, and we would expect working capital to improve as the year progresses. Our guidance assumes no portfolio changes and reflects Europe continuing to operate as part of the company. At the same time, we continue to evaluate a range of strategic options, including our ongoing review of the European business, as well as additional actions to improve liquidity, such as selective sale-leaseback opportunities and reviews of other select parts of the portfolio. Finally, we expect to use our revolver during the first quarter due to normal seasonal working capital needs and would expect to pay down much of that usage by year-end. Overall, our guidance reflects a cautious view of the market, disciplined pricing and cost management and a continued focus on executing through uncertainty. Turning to Slide 13. This chart bridges our 2025 adjusted EBITDA of $120 million to the midpoint of our 2026 guidance of $125 million. Moving from left to right, the first headwind reflects market volume and mix, which we expect to reduce EBITDA by approximately $25 million, consistent with the continued pressure we see across our end markets. We also expect a $60 million headwind from share loss driven by a combination of pricing discipline and the lingering impact of prior service challenges. As we discussed earlier, we have taken pricing actions to address ongoing cost inflation. And at the same time, we are continuing to work through the residual effects of poor service performance earlier in the cycle. This share impact is assumed to persist through the year and is reflected in our guidance. Price and costs represent an additional $10 million headwind as cost inflation, particularly in tariffs, glass and metals continues to modestly outpace pricing. Much of our pricing action has already been implemented, and this assumption reflects a more normalized price/cost relationship than we have seen in recent years. These headwinds are more than offset by actions within our control. We expect approximately $75 million of benefits from rightsizing the business and improving base productivity, reflecting actions that are largely already executed and fully realized over the course of the year. In addition, we expect about $35 million of carryover benefit from our multiyear transformation program. This carryover reflects automation, footprint changes and system improvements and represents a transition from a discrete program to a more steady-state operating model. The remaining items include approximately $10 million of headwind from compensation and other timing-related items, reflecting a more normal incentive compensation environment and reversal adjustments from prior periods, partially offset by foreign exchange and other items. Taken together, these factors bridge us to the midpoint of our 2026 adjusted EBITDA guidance. This bridge reflects both the reality of the continued market pressure and the impact of disciplined actions we have taken to adapt the business. As we noted earlier, the range around our guidance is driven primarily by volume sensitivity rather than execution risk. Before we close, I want to step back and talk about how we are improving execution and building greater consistency into the business. In the past, we operated under what we call the JELD-WEN Excellence Model, or JEM. While that framework brought structure, it was largely a one-size-fits-all approach. It relied heavily on top-down driven metrics and did not consistently trigger structured problem solving tied to local daily management routines. As a result, issues were often identified but not always addressed with the speed, rigor and accountability required to sustain improvement. We have now moved to a more disciplined A3 operating system across our manufacturing network. This is a practical management system designed to improve how we define problems, identify root causes and execute countermeasures. Unlike the prior model, it adapts to the specific needs of each site. It uses multiple KPIs across safety, quality, delivery, cost and growth and connects hourly, daily and longer-term work streams into a single layered operating rhythm. This structure creates clearer ownership and faster escalation when performance drifts. Slide 14 shows what this looks like in practice at our Kissimmee, Florida facility, which was one of the first three plants to implement the new operating model. In 2024, our on-time in full right first-time performance at that facility was approximately 55%. Through 2025, that improved steadily. And by year-end, the plant was consistently operating above 95%. Importantly, that improvement has been sustained. The system allowed teams to identify disruptions early and correct them before they materially impacted customers. The same discipline is reflected in past due performance and inventory control. We entered 2025 with more than $5 million of past due orders at the facility. And by December, that had been reduced to approximately $200,000. Inventory accuracy and material flow have also improved, supporting more stable production and better day-to-day execution. While Kissimmee is one example, this is not isolated. We have rolled out or are in the process of rolling out this operating model across North America, and we are seeing similar improvements as it takes hold. Our customers are beginning to see the impact of service becomes more consistent and reliable. Moving to Slide 15. I want to close by stepping back and putting the quarter and the year into perspective. In the fourth quarter, we performed at the high end of our expectations even as conditions remain challenging and demand did not materially improve. That performance did not come from a change in the environment. It came from tighter execution across the business. As we look ahead, our focus is on continuing what we've already put in motion. We are sizing the business to current market realities, not to a recovery that may take time to materialize. We are managing the company with a high degree of discipline, particularly around cost and cash, recognizing the importance of preserving flexibility in a soft and uncertain macro environment. These are not short-term measures. They reflect how we intend to run the business going forward. At the same time, we are continuing to drive improvements in customer service and reliability. As you heard about the operating system example and the work underway at Kissimmee, we are deploying systems that improve consistency and allow us to respond more quickly when performance drifts. Our goal is to rebuild trust and position JELD-WEN as the door and window supplier of choice by being dependable, responsive and disciplined every day. We are encouraged by the early signs that customers are beginning to see the difference, but we know this must be proven over time. I want to briefly recognize the work of our teams across the organization. The progress we are making is the result of focused execution and a willingness to address difficult issues. There is more to do, and we are clear-eyed about that. We remain committed to running this company with consistency, accountability and discipline. The environment may remain challenging, but we are taking responsibility for the outcomes we can influence and continuing to strengthen how JELD-WEN operates. With that, I will turn the call over to James for questions. James Armstrong: Thanks, Bill. Operator, we are now ready to begin Q&A. Operator: [Operator Instructions] Your first question comes from Susan Maklari with Goldman Sachs. Susan Maklari: My first question is around that price versus volume dynamic that you spoke to in your prepared remarks. Can you talk a bit more about how we should think of the amount that price may decelerate as we move through the year? And how much of that you're willing to give up in relation to volume as you continue to face some of those cost headwinds that you mentioned? William Christensen: Yes. Thanks for the question, Susan. So as we signaled in the prepared remarks, our pricing actions are more or less into the market. So there was a lot of negotiation and work with our customers through the last number of months to get ourselves ready for 2026. So as you can see on the bridge and where we're showing the look forward in 2026, we still expect headwind from a price/cost standpoint, mainly due to some tail inflation and some of the input cost increases that we're seeing on glass. But we believe that, that brings us back into a reasonable pocket, which clearly we have not been in through the last few years. So we feel fairly good headed into this year about where we are and the partnerships with our customers to drive performance and make sure we're delivering what we need to for our customers. Samantha Stoddard: So, just on that, Susan, from a phasing standpoint on price. So with price being implemented and being put in already, we're expecting that to be fully into our financials in Q2. So we do expect Q1 to be down year-over-year with slightly positive EBITDA, and that's really because of the price dynamic that I just spoke about, which you'll see that pick back up in Q2. In addition, the year-over-year headwinds from Towanda being included in the majority of January 2025 and not in '26 and then some of the winter storms. So I just wanted to give you kind of that pricing phasing as well. Susan Maklari: Yes. No, that's very helpful, Samantha. My second question is moving to the slide that you walked us through outlining the efforts at the Kissimmee facility. It sounds as if there's been some very basic blocking and tackling that's happened across your operations. And can you talk a bit about where you are in terms of implementing this across the business? And how we think about that freeing you up to then tackle some of the larger productivity and efficiency projects that are sitting out there and also that ability to eventually regain share? William Christensen: Yes. So thanks for the question. That's exactly why we wanted to share this progression, Susan, to make it very clear that we are making progress. And of course, in a down market environment, it's challenging because, obviously, the volume reductions have eroded a lot of the efforts that we are making behind the scenes. So the first message is we have a system that is working and is being implemented. I'd probably say we're 85% of the way there through 2025, meaning spreading it across to all of our sites, really having the leadership and the layered audit structure and an ownership at site level on controlling their own destiny and serving the customer. So great progress there, and we're very happy with that. I think the second fact is it still remains a challenging environment, but we are controlling what we can control. And a lot of the things that we're doing here are to shop floor-based improvement activities and layered structuring of problem solving and less requiring large capital expenditures to drive scale improvement. Of course, we think we'll get there when the volume returns. But again, this is more us focused on controlling what we can control. And I think the third lever is productivity. There's also a lot of opportunity on productivity. Clearly, if the volume does recover, it's a lot easier for us to gain productivity benefit across our North American and European network. And right now, that's one of the biggest challenges that we have, the scaling up of the volume is not allowing that productivity drop through. Samantha Stoddard: So, Susan, your comment is spot on about the blocking and tackling. And I think Bill highlighting and showing some of that improvement will give color into some of the guidance bridge that you see. And that's the slide that we have in 13, it's the 2026 guidance. So the two large green bars add up to about $110 million. 50% or just more than 50% of that is structural cost actions that we executed. So that is in the bag that were done in '25, especially in Q4 that then carries over into '26. You have about 25% of it that are executed actions that need to be scaled full year. This is exactly what Bill is talking about when it comes to the operating model and scaling that from a full year standpoint. And then the remaining 25% is productivity projects that are identified and are in progress using this simple model that is really driving root cause and solving some of the challenges even despite the operating headwinds of lower volumes. Operator: And that concludes our question-and-answer session. I will now turn the conference back over to James Armstrong for closing comments. James Armstrong: Thank you for joining our call today. If you have any follow-ups, please reach out, and I would be happy to answer any questions. This ends our call, and please have a great day. Operator: This concludes today's call. Thank you for your participation, and you may now disconnect.