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Monique Mols: Good morning, everyone, good afternoon, depending on where you are, maybe even good night. Welcome to the Q4 full year 2025 financial results press conference. You may not see that when you're dialing in online and you're watching us online, but we are actually in a different location than we were last year. Today, we host the press conference in our training center in the ASML Academy, and that is located at the Brainport Industries campus in Eindhoven. And this is actually the place where we plan our expansion in the Netherlands. So we thought it would be a good idea to invite everyone here in the room to see what our new location is going to look like. There's nothing there to see yet, but this is where we are planning our expansion. And Christophe will talk more about that later in the presentation. My name is Monique Mols, I'm Head of Media Relations. So welcome to you all. I'm really happy to see that there are people in the room and people online. For those online, if you have a question later on, you can fill out the form on the website and we will take your question from here. If you're in the room, my colleague, Mark will walk around with a microphone and pick up your question. Sorry. So this is our annual results. Forward-looking statements for those who like it. So again, we are here at the Academy. We have several of those training centers all around the world. Here, we have quite a big center where, on average, 400 employees come here every day to get a training. So they actually work on the machines that our customers have in their fabs. And every year, we have about 26,500 people coming here to train. So this is a very important location for us. And we're very happy that we can host a press conference here today. With that, I'm not the only one who's going to talk to you today, of course, I have Christophe Fouquet; and our CFO, Roger Dassen, and they will talk you through the numbers, through the developments and everything that's happening at ASML. So I would like to invite on stage, Christophe Fouquet. Christophe Fouquet: Thank you very much, Monique. So Roger will be the one doing the good numbers later on. As you have noticed, we finished the year very, very, very strong with a record quarter record year, record booking. And this is basically a sign of the direction this industry is taking. We are very happy, of course, with the walk, the ASML team has done, being able to execute on such a big quarter in Q4 and also prepare us basically for 2026. So a lot of good news today. And again, Roger will get into the number. I'd like to say that we welcome also that clarification. In the course of 2025, you have seen that sometimes the business was still a bit uncertain. The last 3 months have really clarified basically at least the horizon for 2026 and most probably a bit beyond that. So before we go into the numbers, I'd like to provide you some context about what's happening in the industry, what is driving basically this type of news today. And of course, the very first thing is AI. You have been hearing about AI already for a couple of years. You have heard major, major announcement about AI infrastructure. I think from the very beginning in ASML, we have been a believer that AI will be a big thing. And this is true because as with semi before, any major application moving forward will not only use semiconductor, but it will also use AI. And I put a few examples of those applications on this slide. It's pretty much everything you can think about when it comes to technology, when it comes to the future of society, this will all rely on AI. If you look at the opportunity, this has been said also before, this will drive basically advanced technology, advanced logic, advanced DRAM. This will also basically drive the entire data infrastructure. And the effect AI can have on the overall GDP is pretty big. In fact, if you look at the U.S., even in 2025, AI was counting for a very large part of the growth, and we expect that basically to be applied to the entire worldwide GDP. So the opportunity is there. What was a bit, I would say, frustrating for us for a while is that where we heard all those news, we heard about all those investments, but basically, this was not yet translating into capacity addition at our customer. I think what the last 3 months have done is change that. We have seen our customer basically moving forward. They start to really believe in the sustainability of the AI demand. That's true for memory, that's true for logic. And as a result, they started to invest. They started to plan for capacity. And of course, this will drive demand for our product at ASML. And when you look at the demand for our product, what's interesting with AI is that this basically touch on all products. Of course, AI is going to require very advanced chips, and this is going to drive EUV, for example. So this year will be a big year for EUV, Roger will talk about that. It's going to drive advanced inspection tool. But at the same time, AI needs a lot of data generation, a lot of sensor, and this will be still created by the use of more mature technology such as DUV. So AI will have also this effect basically to really drive our entire product portfolio in the coming years. This is a bit of a summary of what our customers have told us. So I talked already about the fact that they are more confident that AI is here to last, and therefore, they are going to invest. I think, in fact, for a lot of our customers in 2026, capacity will mean market share. So we will see them very eager to get the capacity as quickly as possible. There's a few more good news when it comes to AI, AI also drive very advanced technology. This drive an increased use of EUV. And one of the things we've been talking in 2025 quite a bit is the fact basically that we have seen the number of layers of EUV increasing basically at our key customer. And this means practically that the overall litho intensity is going up, which means basically more use of our advanced lithography tool. 2026, we expect, as you understand, as the number will show an improvement of the business, a significant growth especially on the advanced tool, EUV as said before, will be a big year. And again, on the midterm, we expect that to continue. Long term, we stick basically to what we have told the market already several times, which is what we share basically at our Capital Market Day in November 2024. We still expect for 2030 revenue between EUR 44 billion and EUR 60 billion with a gross margin of 56% to 60%. Going a bit now to the effect of AI in the market. So this graph is showing a bit what AI will do. What you see here basically is the growth of the different segment of semiconductor. At the bottom, you see the historical growth of memory logic, which is about 6%, 7% year-on-year. 6%, 7% year-on-year is pretty great already. There are many, many industries that will wish to see this kind of number. But what you see with AI is that when we look at advanced logic, when we looked at advanced memory the growth on those segments is going to be more than 20% year-on-year for the foreseeable future. And this is really what is going to drive basically more demand on lithography. Why is that? So we've talked in the past a lot about Moore's low, of course. And Moore's Law is law that say that every couple of years, we need to double the number of transistors per chips. And that law has been true for many, many years for PC for mobile application. Now when you look at AI and this started to happen in 2010, the curve is far more aggressive. When you look at the most advanced AI product today, NVIDIA products, for example, the request is not to grow 2x every 2 years, but in the last few years to grow 16x every 2 years. So you see a major acceleration basically of the need for silicon. And of course, we provide that in 2 different ways. We provide that with scaling by making transistors small. We can put more transistor per chips. And this has been a good way basically to provide more transistor and follow Moore's law for many, many years, but that's not enough anymore. And if you cannot put enough transistor per unit of area per chips, then the only option will be to make more wafers. And that's a bit what we see happening with AI. So the most advanced AI application are going to drive up volume. And this is why when we look at DRAM customer today, when we look at logic customer today, they are building mega fabs. Some of them are talking about hyper-cycle because they have to be able basically to also provide this volume to the market. So just to illustrate that, I pick one example, and I picked it from NVIDIA because all of you are, of course, very much aware of what's happening there. Today, on the black wall system, you need about 2.5 wafers to create the product. If you look at 2027 on the revenue product, this number will go up to 10 wafers. So to provide the same product to their customer, NVIDIA will need 4x more wafer than today. And this is one of the reason why, again, we will see capacity extension driven again by this type of application. That's what you see here. And this is again, I would say, a bit of a new dynamic we have in our market AI by this acceleration of the need for performance of power reduction is going to drive both volume and technology a lot harder than any technology before. So what does it mean for technology, EUV is key. 2026 is going to be a good year for EUV. We are looking at more shipments. And this, despite the fact that we have increased the productivity of our tool by more than 40%. So we're going to ship a lot of capacity for EUV this year. If you look at it historically, we have already been having quite a bit of capacity. So the capacity headed of EUV in the last few years have been in average 25% year-on-year growth, which is quite significant. So we have seen all our customers basically already adopting this, it was logic first, then DRAM, but we expect basically to see that even more moving forward. Then we have High NA, and High NA, of course, is not going to be the tool that provide the capacity of EUV in 2026, '27, but that's the tool that will enable our customers to shift to even more advanced technology around '28-'29, that's important for DRAM. That's important for logic. And that's important for AI because as I said before, AI is going to be looking for more advanced chips with low power consumption and High NA is going to play into that very strongly. So good progress on High NA in the last few months. Our customers are still qualifying the tools. This takes a bit of time. The results are good. This year is going to be used to prepare a bit for insertion. And again, if we look at 2027, '28, we are going to see the first product being manufactured using some High NA system. Deep UV remains very important. As I said, it's not all about advanced semiconductor. As you know, a lot of technology still require Deep UV. So we continue to drive the road map both on Immersion, where we have launched our 2150, which basically give us sub-nanometer accuracy and more than 300 wafer per hour. Productivity is important. Productivity, of course, a way to get capacity. So we continue to drive that on immersion, I think the example of the NXT:870B, which is a KrF system is even more spectacular because there we have been capable to achieve more than 400 wafer per hour. And that tool today is creating a lot of interest at our customer because productivity, again, is capacity. We talked also last quarter about us starting to help our customer with what we call 3D integration. So I told you, when you cannot put all the transistor in one ship, you just make more chips and bring them together with 3D integration. We have our first system, the TWINSCAN XT:260 that was shipped last quarter, lot of interest from our customer. For us, this is the first product looking at this new market opportunity, and we will continue to work with our customers basically to define more product moving forward to support them also on that segment. A few words on metrology and inspection. So we don't talk always about metrology inspection. But when you drive technology, yield become very, very important, and yield can be improved by doing more maturity and more inspection. So in 2025, we have seen our metrology inspection business growing up by almost 30%, which is a major growth number. It has to with need for more metrology in spectrum, it has also do with the quality of our product in optical metrology for overlay, but also in e-beam. And one of the products where we have seen quite some progress in 2025 is multi-beam. Multi-beam is going to provide e-beam inspection at higher speed and most probably in the next, I would say, a couple of years really enable our customer to move this technology to high-volume manufacturing. So a lot of good progress there as well. You all heard about Mistral, I say back in the end of the summer when we announced our collaboration but also our investment in Mistral. The rationale there was to get AI in ASML and to get the very best people, the very best competence in ASML in order to be able to first strengthen our core competencies, read putting AI in our product, support the connected market, to offer some of those capability to our customers and also create new opportunity basically moving forward. That's a project we are going to talk more about in '26, in '27. We are making great progress with Mistral, our partner. Our teams are working very, very closely together to basically execute on each one of those points. Going a bit into some of the other things we are very, very proud of at ASML. This is our engagement in the community. We have been spending, I would say, both the time, talent, money in order to work together with the community on a few very important topics. The first one is mobility. Well, we are here today. As you know, this is also close to our next campus, which I will explain in a minute. We plan to have a groundbreaking this year in a few months. We want to continue basically to work with the Brainport community to improve the infrastructure because we are very much aware also that as we grow, we can sometimes create more headache, and it's very important to address that. So we have major investment there also, of course, through the Beethoven program. Affordable housing, there's been quite some press in 2025 about some of the progress we have done there. This is ongoing now for a few years. This remains very, very important, and we will continue to invest. You see the number there. I don't need to stress it to basically create more housing. We also understand that this is a broader challenge across the Netherlands, and we definitely want to do our part helping the community here. Culture. So we are very proud to be one of the, I would say, initial partner for the future Rijksmuseum here in Eindhoven. We love the city of Eindhoven. We love this place. But sometimes we feel that if we can bring a bit more culture, a bit more activity, I think this will help people to enjoy it even more to attract even more people moving forward. That's why we stay very committed to the PSV Football Club, as you know. But this we thought was a very, very nice initiative from the city of Eindhoven and we really wanted to be there. Finally, education, you know that we have a long-standing relationship with the TU University here in Eindhoven that could extend that to many other university across the Netherlands. This is key. We want to develop tenant that will be able to work in semiconductor moving forward, and we will continue to do that, of course, very strongly. One last word. We need to continue to grow. I will come back to some of the other announcement we had today about our focus on innovation and engineering. At the same time, we see more demand for our product. And therefore, our footprint needs to continue to grow because we need to invest in customer service. We need to invest in manufacturing. We need to invest in space. So last year, we opened 2 major sites, one in Korea, one in the U.S., and that intends to support basically our activity here. The big event in 2026 will be the groundbreaking of the big campus, which is our second big campus in the community. We'll do that mostly in May, June, and I'm sure you will be invited to join us with the idea that we can already start moving people as early as in 2028. So this will be very good for our people. It will be very good also to debottleneck a bit the campus in Eindhoven, of course. And this is a project, as you know, that is very, very important for ASML. This is my update. I will come back in a bit to talk a bit about the action we are taking on our engineering team to strengthen our innovation. In the meantime, I'll give a chance to Roger to give us those very nice numbers. Thank you. R.J.M. Dassen: Thank you, Christophe. And good morning, good afternoon, everyone. So indeed, I will present the financials for '25 and the outlook. Christophe said it, clearly, Q4 2025, a record quarter by any standard. It was a record quarter in terms of sales. It was a record quarter in terms of order intake. It was a record quarter in terms of cash flow generation. On the back of all the good developments that Christophe just shared with you. So I won't call them out here, but just looking at the quarter, it's pretty clear that it was indeed a very strong quarter. If we look at 2025, and if we look at the total business for ASML, we ended the year with EUR 32.7 billion in net revenue, 52.8% gross margin. And you see the key elements in here, a net income of EUR 9.6 billion and an EPS earnings per share of close to EUR 25 per ordinary share. All in all, a very, very strong year in which we also paid back and returned quite some money to our shareholders. And also, we're able to do the participation in Mistral that Christophe just alluded to. Very clearly, EUV was the main driver behind it. And you will see it in the pie chart that I will share with you in a moment. It will clarify that it is particularly the leading technology that really contributed to the growth. So both immersion, but first and foremost, also EUV. So EUV grew 39% in comparison to -- in comparison to last year to 2024, a mix of both more tools, significantly higher sales price of the tools because most of the tools that we sold, most of the low NA tools that we sold in 2025 were 3,800 tools, which, as you know, saw an increase in productivity from 160 wafers per hour to 220 wafers per hour and of course, a commensurate increase in the sales price. And obviously, we also had the recognition of a number of EXE tools, High NA tools. So it's in that combination that really EUV was the big driver of growth for us this year. Big moment indeed, and Christophe showed it as well, the revenue recognition of the first 5200B really big moment for us because that is the high-volume manufacturing tool on High NA and the fact that we were able to not just chip it but also get it installed and get accepted by the customer and the customer and really looking at putting that tool into high-volume manufacturing for its leading nodes is a very significant moment for the company. Deep UV went down a bit, decreased 6%. If you look at the geographies, you would see that most of the decline would come from -- would actually come from China. So that's where most of the decline on Deep UV was immersion is still quite strong, particularly on the dry side, it was lower than it was in 2024. But there, the step into the 3D integration market with the introduction of the 260, obviously was another big moment, application very strong. Christophe alluded to it a 20% increase right there with the need for more process control for our customers at the leading nodes. And finally, very, very strong 26% increase in our installed base business, both on the back of service, our installed base and EUV is obviously growing. Therefore, you see a continuous step up of our service revenue from EUV, but also increased appetite in EUV in upgrades. I'll come back to that later. This gives you some breakdowns and I won't call them out at all. But I think if you look at technology, it's interesting to see that the leading technologies, so both EUV and immersion combined give you 90% of our systems revenue. And I think that really talks volumes, I think, about the shift that Christophe is also talking about the shift to more and more leading nodes, clearly represented here in the share of technology. In terms of end use, you see -- we see memory at 34%, logic at 66%. You see memory actually declining a little bit in terms of percentage. We actually see that flip in 2026. So in 2026, you will see that memory becomes more and more important. In terms of regions, a lot to be said there, but I think China is still very, very big, but smaller than it was last time, both in terms of percentage of system sales and also in absolute numbers, you see a bit of a decline in the China market. We expect that decline to continue. As we said, we expect the China business for this year to be around 20% of our total sales. So here it was 33% of total -- of system sales was 29% in terms of total sales, we expect the 29 percentage number to go down to approximately 20% this year. This gives you the net sales by end use over the years. I won't spend too much time on it. Just one fun fact. If you look at the installed base business at EUR 8.2 billion, that comes pretty close to the total revenue for ASML in 2017. That just tells you how unbelievably rapidly the company grew. And the fact that we have such a big number in terms of installed base business, obviously, also provides a lot of resilience for the company. So therefore, it's an important number for us to focus on and to continue to increase. This gives you the business over the years. So if you just -- if you take the 4 year -- so the 4-year increase from 2021 to 2025, you would see that the company has grown 75% at the top line. You also see that R&D increases from 2.5 to 4.7, which, of course, was absolutely critical in getting us prepared for all the beautiful products that we're currently shipping to our customers. But I think it's also fair to acknowledge that this increase in R&D number has also driven some organizational complexity that Christophe will talk about after my contribution. So this gives you the overview. And as you see earnings per share an interesting number, round it 25, 25 by 25 is something that you might easily recall on a go-forward basis. In terms of return to shareholders, if we look at dividend, the total dividend that we proposed to the AGM for the year EUR 7.50, this quarter, we'll do EUR 1.60 per ordinary share as an interim dividend in Q1. And therefore, if the AGM accepts our proposal, we would have a final dividend of EUR 2.70, and that's a significant increase over last year. In terms of share buyback, we did not complete the full program of share buyback. As you see here, EUR 7.6 billion out of the total program of EUR 12 billion. We did announce a new program, EUR 12 billion over a 3-year period. In terms of outlook for the quarter, we expect net revenue between EUR 8.2 billion and EUR 8.9 billion with a gross margin between 51% and 53%. Look again at the installed base management sales, 2.4. So last quarter, 2.1 goes up to 2.4. What it really tells you is that the appetite from customers when it comes to upgrades is very, very high, because in the client that Christophe was describing, but customers really have a lot of appetite to increase their capacity as quickly as they can. Of course, on the one hand, they will try and complete their fab billing as soon as they can, such that they can new tools in. But in the meantime, once these fabs are still in construction, the fastest way to get extra capacity is really to make sure that the tools are squeezed to the maximum and therefore, to put as much upgrades on the tool as possible. And that's -- that's what you see here, and that really contributes to very, very strong installed base sales going up again this quarter. So the gross margin, 51% to 53% R&D and SG&A costs nicely under troll. For the full year, EUR 34 billion to EUR 39 billion, really on the back of all the developments that Christophe talked about. So the real steam engine behind this growth is once again EUV. So we once again expect the EUV business to go up significantly this year. We also expect the installed base business to go up this year, and it will go a little bit at the detriment of the non-EUV business. We expect that to be about flattish. So non-EUV business is expected to flattish from '25 to '26. With us moving parts for the leading nodes, so for the big customers, both in memory and advanced logic, we actually expect the Deep UV business to go up a bit. As I mentioned, in China, we expect the China business will go down. Metrology and inspection, we expect to be quite strong. So those are more or less the moving parts within the non-EUV business. Again, for the full year, EUR 34 billion to EUR 39 billion, which at the midpoint after a growth of 16% in '25. At the midpoint, you would be looking at a 12% increase in this year with good potential as the bandwidth also suggests gross margin 51% to 53% and annualized effective tax rate of 17%. And that concludes my presentation. And as I mentioned, Christophe has a part for you on the streamlining of our engineering and innovation function. Christophe Fouquet: Thank you, Roger. Good. Yes, I have one slide I want to share with you on the action we are taking basically to strengthen our innovation and engineering team. So I think that the net results of that, which is 1,700 people leaving the company, I think, has been picked up pretty clearly already this morning. What I want to do is to give you some background. And of course, you understand listening to our outlook, listening to the numbers. We are not doing that in any case because we are in trouble because we need to save money, et cetera, et cetera. Now the reason we are doing that is that we have been growing very fast. And this is also true for a technology team or innovation engine, and as you know, the technology team, the innovation engine of ASML has been the reason for our success. It's been true for many, many years, and this is still going to be true for many, many years to come. And as we have said in 2025, we want to continue to innovate more. This is why we engage in AI. This is why we engage in 3D integration. This is why we have a long road map on e-beam, and we believe that innovation will for many, many years to come, define our success. But when we listen to the feedback of many of our stakeholders, they have told us in the last few years that we're not very agile in fact. And we are not, I would say, responsive enough. So our customer are pointing to the need for us on technology to be able to respond much faster to work on quality to work on new product. A very important feedback we got is from our whole engineers who told us Well, a lot of the time we spend in ASML is not anymore on innovation, right? Because the organization has become so complex. We have so many people steering us in different direction that we have to spend a bigger part of our time just dealing with that. And this has been a very, very strong, and I would say, loud message from our people, and we felt the need basically to address that. Our supplier, if you talk to them, they also tell us the same, and therefore, we felt the need to move. So you heard about the number 1,700. I'd like to give you a bit more color to this number. If you look at our technology organization today, we have about 4,500 leaders, which is quite a bit. When we look at a future organization where we simplify our processes, where we reduce the number of steering access towards our engineers, we believe basically that we need about 1,500 leader to run this organization. So it's a 3,000 less leaders needed if we are successful in simplifying. So out of the 3,000 people that we don't need basically to lead the team, we are going to create 1,400 engineering positions. So we're going to add, in fact, some engineering bandwidth to work on existing product to work on future products. We want to, in fact, have out of this action, more engineers and less, I will say, leadership so that engineers can be fully enable to do their job. And as a result of that, if you do the math, we have 1,600 people out of the technology team that will not have a job in ASML anymore. Now the difference between the 1,600 and 1,700 is 100 people coming out of IT when we have a similar situation, similar feedback and where there, we believe that about 100 leading position are not needed. So this is a bit the math, we want to really boost again our engineering capability, our innovation engine. We want to improve, I would say, the satisfaction of our engineers, our customer, our supplier. And of course, this come at the cost of a very difficult decision we had to make. We explained our employees this morning. This is most probably the most difficult decision the management team ever had to make in ASML. But we do it because we truly believe that this is the right thing to do for the company for our stakeholders, starting with our employees and to basically continue to be this great company moving forward. So that's a bit more background. And with that, I think we'd like to take some questions from you. Thank you very much. Monique Mols: Okay. Thank you. So we have some questions online, and we have some people here in the room and because you all came here, I think you should go first. So let's ask some questions in the room first. Please state your name and your publication first, so everyone knows. Sarah Jacob: I'm Sarah Jacob. I'm from Bloomberg News. Regarding the job cuts that you announced today, what kind of restructuring costs or charges can we expect from this? R.J.M. Dassen: That's obviously subject to the discussions that we're having with the Work Council and first and foremost, union. So I cannot talk about that, but these costs in the grand scheme of ASML would not be considered material. Well, the finalization of number is very much subject to discussion, but not materially in our numbers. Sarah Jacob: I got a question about -- there's a lot of talk about capacity expansion from your customers. We've seen a lot of announcements. But how much of those announcements or is related to real capacity expansion? And what part is CapEx inflation, so to speak, because the cost of a wafer is increasing. How sustainable is that? Can you elaborate a little bit on that? Christophe Fouquet: Well, I think so, I talked about short and midterm. So I think that visibility we get from ASML is mostly for the next couple of years. And when we talk about capacity expansion, we talk about new systems. So that's why we said that if we look at 2026, we expect ship quite a few more EUV tool. It's also true with metrology with inspection. I think Roger was rightfully stressing the progress of our installed base business, which also include upgrades, and we will see also a lot of that. So I would say when you hear our customer talking about capacity expansion, this translate directly into need for more tools. And for a long time, we heard our customer' customer, sometimes our customer, customer, customer talking about expansion, and this was still a bit far away from us. In the last 3 months, if you have listened to TSMC, Samsung, Micron. Micron has been announcing groundbreaking almost every week for the last few weeks. There, you have a direct translation basically into shipment for us. And we have not said that in our talk, but also build up of capacity. So of course, a lot of that will affect positively, not only ASML, but the entire supply chain here in the region. Monique Mols: Okay. Let's turn to an online question and get back to you then. So a question from Financial Times. Please can you talk a bit more about how the AI memory shortage is driving your business? And to what extent those customers are being more aggressive in their capacity expansion than logic? Christophe Fouquet: I will start. I think that it's difficult to say if logic or DRAM is the bottleneck for AI today. I will still pick mostly memory at this point of time. And the reason for that is that it comes to memory, the demand for high bandwidth memory, which is the AI memory is extremely high. But the demand for DDR memory, which is for mobile PC is also very high. And as a result, we have seen basically the price of DRAM going up significantly in the last few weeks. Therefore, there's a need for capacity. And our memory customers are moving very aggressively. I mentioned a few examples. And the reason for that is when you have such a demand for capacity, capacity is also market share. And if we look at 2026, we know that the memory demand will be very, very tight because our customers are saying that publicly. So there is a huge appetite and it started most probably end of last year for our DRAM customer to really build up capacity as quickly as possible. And that's the dynamic we are in which, of course, has a major positive benefit for ASML. Monique Mols: Okay. Thank you. Mark, in the room, I see some hands. Unknown Analyst: So [indiscernible]. How does the stabilizing AI market influence the perspective of the amount of jobs you're about growing in Eindhoven? Christophe Fouquet: Well, so if you look at the big picture, so I mentioned again our long-term forecast as we establish it in November 2024, where we still see us going towards EUR 44 billion to EUR 60 billion revenue, which means that we see still need for more capacity. Even as we speak, this year, we will be adding jobs in manufacturing and customer service in order to support basically the need. So I will say the long-term trajectory is still a trajectory of growth. we take today a very specific action on a very, very focused part of the organization, which is the technology team and in fact, even focused specifically on the leadership of the technology team. But it doesn't change fundamentally our growth trajectory and therefore, our commitment to people, but also as I've shown to footprint, et cetera, et cetera, the supply chain I could add to that. And I think it's very important to understand that even as a company grow and is very successful, there's still a need once a while to make sure that some of the key elements of the company and for us, that's the technology. Technology is really our heart. We have to make sure that we keep the heart in the best possible shape. And the action we are taking today is difficult, is painful. But the intention is to make sure that, that innovation engine keeps going so that as the market grow, we keep our very strong leadership position in the market. Unknown Analyst: Mark [ NSA ]. I have 2 questions. One relating to the reorganization and the other one is to being prepared to this huge demand in new machines. First of all, the reorganization we refer to the technology team, does it mean that something changes within the internal structure as well regarding D&E or R&D? And the other question is when it comes to being prepared for this new up cycle, is your supply chain also prepared. So did you do some stockpiling there? Or is every -- does everybody have to expand? Christophe Fouquet: I'll take the first one and leave you the second one. So I think the short answer to your first question is yes. I think that the transformation, the change in the organization will be mostly around D&E, not only but mostly around D&E. The leadership I was referring to is mostly within D&E. That's also why Marco, our CTO, together with Jose are taking the lead also on that activity. But since innovation is the heart of the company, everything else is connected to that. And by improving the organization, the D&E organization, we also improve the interfaces with operation. We improve the interfaces with our customer, and we improve the interfaces with our supplier, right? So all the people who told us basically, you've got to do something better should benefit from that. So a lot of the work will be focused on D&E. In fact, what we talk about today, I would say, practically doesn't concern the very large majority of the team ASML, but the impact, I think, will go beyond D&E. R.J.M. Dassen: Mark, on the capacity, what we've done, as you know, in the past couple of years is to put in what we call the long lead time items, which means that everything that takes, let's say, longer than 12, 18 months to realize is in place in order to get to a much higher volume. So that means factory space, et cetera, et cetera. We've done that, and we've worked with our supply chain for them to do that as well. So what we're doing now based on the very strong signals that we're getting from our customers and also them indicating that they believe this development is sustainable. We're now making sure that every quarter, we increase our move rate because as you will appreciate, you cannot move from 44 units in 2025 to 80 units in 2026 doesn't work that way. So you gradually need to crank up your move rate, and that's exactly what we're doing right now. We're doing that. We have a very solid understanding also with our supply chain. They're doing the same thing, and that will lead to a very, very meaningful increase in our capacity this year, but also moving forward. Monique Mols: I'm going to go to one online and then get back to you. Could you share how ASML's R&D spending is currently divided between EUV-related development and non-EUV technologies. This is a question from the Chemical Daily in Tokyo and we have a lot of people from Japan online watching us. So that's really nice. R.J.M. Dassen: The lion's share of the R&D expense really is an EUV, right? Because on EUV, we have both High NA, we have the Low NA platform that where we still see a lot of potential to develop that. And we're also working on what we call the high perform platform. So we have 3 very significant work streams in the D&E organization to focus on EUV. So without a doubt, EUV is the lion's share of the development. But that said, we do have road maps for the other products as well. You heard us talk about the 260. You might have heard about the 870, which is a platform that really significantly increases the output capability in the drive business. So we're working there as well. Lion's share is really focused on EUV. Unknown Analyst: Folks, I had a question about the China business, which is going down quite dramatically. I'm wondering whether it's also going down in absolute numbers? And if that's the case, what's driving that? Where it just still a backlog thing or whether something else is going on as well? R.J.M. Dassen: Well, it is going down in absolute numbers as well, right? So if you do the math on the system sales, if you take the chart, you take the percentage and you apply it to the total system sales, you would see that actually it goes down in system sales, I think, something like EUR 850 million. But you can do the math yourself and verify whether I -- whether my memory serves me well here, but it's clearly going down from 24 to 25 and also at the 20% number that we indicated for this year, it will go down further. What's going on there? Well, first of all, it's normalizing, right? Because I think the reality is we should ask ourselves a question what was going on in previous years. What was going on in previous years is that over the COVID period, we build up a huge backlog because we -- and in fact, we underserve the Chinese market during the COVID days. As a result of that, a huge backlog has been built, and we have been executing on that backlog in the past couple of years. So at a certain point in time, we expect -- we already expected China to normalize. Frankly, the very strong China sales still in 2025 surprised us a bit. But given all the dynamics that we're looking at right now, we think 20% is probably the right number, which, by the way, still gives you at the midpoint close to EUR 7.5 billion of sales. So it's not in any way falling off a cliff, right? But it is reduced in comparison to what it was last year. So it's more normalization than that anything very spectacular is going on there. Monique Mols: So a lot of interest in the room. So let's go back to the room. Dan? Unknown Analyst: Dan from [indiscernible]. I have 2 questions. The first one is you mentioned that the EUV business will grow quite rapidly this year. I was wondering what share of that will be High NA. I think you mentioned this is really a preparation year for the coming years for insertion. Just wondering how many machines do you plan to ship this year? And the second one is, do you have a progress update on Hypernet the year you'll make a firm decision on it? And maybe on platform as well. R.J.M. Dassen: I'll take the first one, you take the second one. So on the -- the other way around. So the vast share of the growth will clearly be in low NA, right? So because it all goes into high-volume manufacturing because there is such a big need for customers to grow there. So that's where the lion's share goes High-NA will just continue to go along the lines of what Christophe has described earlier on, which is the 3 phases, and we're not yet in the high-volume manufacturing phase though as we did point out, the fact that one customer has accepted, signed off on the 5200B, our first high-volume manufacturing tool, of course, is an important step in that direction. But the lion's share of the growth this year will be low NA. Christophe Fouquet: Yes. On the Hyper NA before I go there, I need to take a bit of a step back. So we talk about low NA, we talk about High NA I think we talked about Hyper NA because we see that in the future, there may be a need for even a more advanced litho system. And we could end up in a war, I'm talking 10 years from now where the customer use basically each one of those 3 systems. Now this being said, when you look 10 years ahead, it's very difficult to know exactly when this will happen. And in order to not have to answer that question today, what we did is develop a program, which we call high productivity platform. So Roger mentioned it as one of the key program in EUV, and that program basically consists in defining an EUV platform that will come to the market early next decade, and that will be able to support Low NA, this major productivity improvement. We look at more than 400 wafer per hour. High NA, also with major improvement and potentially Hyper NA. So we're designing a platform basically that we'll be able to receive ultimately Low NA optic, High NA optic, hyper NA optic. This give us basically the full flexibility over time to decide exactly when and how we should introduce hyper NA. So the team has done a lot of work. So if you talk to our engineers, they tell you we could do it more, but there's no need for it tomorrow. So what we will do is, again, just continue to prepare for it. If you follow a technical conference, there will be a presentation on that a SPA in a few weeks from now, so you get a bit more. But the key is to is to be prepared basically to serve the whole market with EUV and the high productivity platform program we have put in place and we're executing on allow us to do that exactly. Monique Mols: I have a question from online, and then I'll ask to you, Toby. Maybe can do this quickly, but I think it's a question that a lot of people ask themselves. This is from [indiscernible] Novel in France, you're going to cut 1,700 jobs, but you say you want more engineers. Are you planning to hire in 2026 and beyond? And if so, do you have a figure? Will this offset the 1,700 job cuts? Or will ASML's workforce ultimately decrease? Christophe Fouquet: Yes. So I think 2 steps. So first, as I explained, we free practically about 3,000 people out of the action we take on the leadership in the technology team. And out of those 3,000 people, we already create 1,400 position. So that's the first thing. The second thing I've said is that a lot of that is done to enable, I would say, the full potential of engineers. So our engineers tell us today, well, maybe we spend 20%, 30% of our time not doing engineering, but doing meetings, talking to many different managers, et cetera, et cetera. Well, if we take that away from them, we give them also more bandwidth for development. So we also expect basically that our engineering workforce will be able to create more moving forward for the same amount of people. So it means that as we go through this transformation, we get 1,400 more people, and we get a lot more of everyone else in the organization. How this will really play out. We don't know, but we believe that this could fuel quite a few of our programs basically moving forward. So we will continue to hire people based on our need, and we do that today on operation. We'll do that if we need to on D&E because we can afford it or so, let's be honest. But we also expect that at least the next couple of years, the gain we could make by enabling our engineers to the full extent, will create a lot more bandwidth for us to develop. Toby Sterling: This is Toby from Reuters, Toby Sterling. Ballpark question. The only thing that did better than ASML's price in the past year is gold and silver. So I'm wondering if you guys can maybe say maybe not so much ASML, but how is this going to affect your industry? The rise in price for gold and precious metals? Christophe Fouquet: Gold and Silver, I would say, our industry over whole I think it's very small. I think it's very, very small. I think from all the things we worry about -- I tell you something, we worry a lot more about energy cost than gold or silver, because energy is, as we've discussed in the past, most probably, we love AI, we love the opportunity. I think Elon Musk say that also last week in Denver, but energy is most probably the one thing to watch to make sure that this industry keeps going. And now the good news for us is one way to reduce energy consumption is to move to more advanced chips because they reduce basically power consumption. . So that's also an opportunity. But I think if there's one thing this industry has to worry about as a whole is energy, cost and I would even say availability. Gold, silver, I say okay. Toby Sterling: Paul here from [indiscernible]. Do you expect to max out on capacity this year? And if so, what will be the bottleneck? R.J.M. Dassen: The question is not necessarily just for us whether we're going to be maxed out. I mean, it will be a very busy year. That's for sure. But I think in everyone trying to drive up capability, we also need to look at our customers. So I think everyone will be scrambling to get more capacity. . It starts with our customers because we can ship tools, but our customers also need to be in a position to receive them, and therefore, they need the fabs to be done. So I think that's what's going on. We will work extremely hard to get as much out as we can and as our customers are asking for it. But I think important factor will be when will our customers have their fabs ready to really receive those tools. Monique Mols: We have 4 minutes left. So let's go back to the room again. Unknown Analyst: San Hilson of Dutch Publicans. About the reorganization, I was wondering if you could share some insight on how did you end up in the situation in the first place, why did you create so many leadership roles in the past months or years? And can you give us a time frame on when the reorganization will be executed? Christophe Fouquet: Yes. It's always a good question. And if you look at the growth of the company, I think at any point of time, you try to make the best decision for the company. And I think this has been down. But as any large company, you tend to have a side job over time with the belief that they really help, and I think to some extent, they do at the beginning because you strengthen certain axis, right? You strengthen, I don't know, quality, you strengthen maybe the execution of part of the company. But there is a point of time where you add -- if you had too many of different axes, then people get confused. And we started to get that signal, I would say, already for 2, 3 years. We spent quite some time because the next question could be, how do you know now that the next things would be better than the previous one, which is another very good question. We didn't want to rush in that, and we spend more than 12 months designing not in the board of management, but designing with the people that are working day after day in technology, but also in the sector because of the connection I talked about. So we spent more than 12 months working with those people to try to drive an organization that they believe will fit better what they need. And I think we need to make sure over time that we keep on scanning the organization so that if we made maybe some non-optimized move in the past, we can correct it. So I think it's very normal in the company. What is not right is not to correct things if you feel they're not helping you anymore. R.J.M. Dassen: I think if you look in any rapidly growing organization, where do organizations grow? They grow because the number of competencies grow or products become far more complex. As a result of that, also the competencies that are necessary to get it done become more complex. 15 years ago, software, for instance, was not as important as it is today, just to call out one. So you see an expansion of capability and you need to see an expansion of a road map, many, many more products on the road map than we ever had before. The answer to something like that, that any rapidly growing organization does is a matrix organization where the competencies and the products meet each other. So that's your answer. And that gives you scalability for a while. But there is a point in time where a matrix organization, any matrix organization becomes so complex that you got to act. And I think that's the journey that we've been on. That's the thing that we've now concluded and hence the action that Christophe calls out. And I think the worst thing you can do is not recognize the issue and just continue to go on as you did before. In terms of timing, because that was your other question. I mean that completely depends on the negotiations that are currently going on with the unions, with the workers' council, et cetera, but this will definitely be a number of months. From our vantage point, as soon as possible because we want to be able to provide clarity to everyone in the organization and get rid of the uncertainty at the personal level. So that's why we would like to push as soon as we can in the interest of the people that are affected. Monique Mols: Okay. Our time is up. Thank you very much for coming. Thank you, everyone, online for watching. You can still send us your question. The media team is available for you. And for those in the room, nice you're here. There's coffee and we have some chats with some of you, and we look forward to seeing you next year. Thank you very much. Christophe Fouquet: Thank you. R.J.M. Dassen: Thank you.
Operator: Welcome to Avnet's Second Quarter Fiscal Year 2026 Earnings Call. I would now like to turn the floor over to Lisa Mueller, Director of Investor Relations for Avnet. Please go ahead. Lisa Mueller: Thank you, operator. I'd like to welcome everyone to Avnet's Second Quarter Fiscal Year 2026 Earnings Conference Call. This morning, Avnet released financial results for the second quarter of fiscal year 2026, and the release is available on the Investor Relations section of Avnet's website, along with a slide presentation which you may access at your convenience. As a reminder, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10-Q and 10-K and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issued today as well as in the appendix slides of today's presentation and posted on the Investor Relations website. Today's call will be led by Phil Gallagher, Avnet's CEO; and Ken Jacobson, Avnet's CFO. With that, let me turn the call over to Phil Gallagher. Phil? Philip Gallagher: Thank you, Lisa, and thank you, everyone, for joining us on our second quarter fiscal year 2026 earnings call. I'm pleased to share that we delivered another quarter of financial results that exceeded the high end of our sales and EPS guidance. In the second quarter, we achieved sales of $6.3 billion, driving a 3.2% operating margin in our Electronic Components business and a 4.7% operating margin in our Farnell business. We also generated over $200 million of cash flow from operations in the quarter and reduced inventory dollars and days as projected. Our double-digit year-on-year sales growth was led by record revenues in Asia along with better than typical seasonal growth in the Americas, Europe and Farnell. I want to thank our team for delivering this performance while remaining focused on the areas we can control. In the quarter, we made solid strides in expanding operating margins, optimizing inventory and generating cash flow while continuing to make necessary investments to best support future growth. From a demand perspective, sales increased sequentially in most of the verticals we serve and not surprisingly, were led by strong demand in compute and aerospace and defense. Year-over-year, we also saw a broad-based improvement across most verticals. Now turning to today's market. Demand signals continue to reset globally, resulting in lead times trending higher across most product categories. This trend is still largely driven by the data center, artificial intelligence, but is also broadening as projected growth rates at all segments we track continue to improve. We're also seeing an increasing number of customer orders being placed within lead times, along with higher instances of deliveries beyond lead times. These factors are driving a mismatch, if you will, between customer request dates and supplier delivery dates. This creates opportunity for us to deliver our supply chain value to our customers by addressing those misalignments. The pricing environment remained stable during the quarter, but we have seen spot price increases with a few suppliers and commodities. The supply dynamics suggest there may be upward pricing pressure across many technologies going forward. We exited the quarter with robust book-to-bills in every region, led by Asia and EMEA. As momentum builds, we are coordinating closely with customers to effectively validate and manage our backlog while continuing to encourage customers to provide us extended visibility that we can share with our supplier partners. The more visibility we can give to our supplier partners, the more supply chain expertise we can bring to bear to solve for the complexities in the market. With that, let me turn to our highlights for our businesses. At the top line, our Electronic Components business drove year-over-year growth and sequential sales growth across all regions. In Asia, sales reached a record high of over $3 billion. This marks our sixth consecutive quarter of year-on-year sales growth in the region. Demand increased across most of the verticals and geographies we serve for both the year-on-year and sequential compares. In EMEA, we're seeing clear signs of recovery, with sales growing both sequentially and year-on-year. Most end markets showed year-on-year growth, including industrial, while compute, consumer and transportation were the strongest end markets quarter-over-quarter. We are encouraged with the improving outlook in the region, especially given the continued market uncertainty. I'm confident that EMEA's new leader, Gille Petron, will continue to drive profitable growth in the region. In the Americas, sales grew both sequentially and year-over-year, marking our second consecutive quarter of year-on-year growth. Most end markets showed sequential growth led by Aerospace and Defense, while Industrial, Communications and Compute were the strongest end markets year-over-year. Our EC team is focused on several growth and margin expansion opportunities, including demand creation supply chain services, embedded solution and our Interconnect Passive and Electromechanical business or IP&E. Demand creation revenues increased sequentially by 7% as our field application engineers continue to drive the funnel for converting design wins into revenues. Our design registrations and wins also increased sequentially, which is a positive indicator for future revenues. We continue to develop and invest in both digital tools and hardware solutions that will allow our design engineers to better support our customers' design requirements. We are also pleased with the growth in our IP&E business, which had double-digit growth year-on-year. As a reminder, IP&E products carry higher gross margins, and there are many cross-selling opportunities with IP&E components that are complementary to our semiconductor business, including through our demand creation efforts. Now turning to Farnell. Sales grew sequentially and year-on-year. Farnell's Continued improvement reflects recovery across all three regions. We believe this is a sign engineers are working on developing new products, which we view as another indicator of the upturn in demand for electronic components. Operating margins improved sequentially in line with our expectations. We also continue to gain traction growing Farnell sales, which leverages the best of Avnet Core on the board components through our Power of One initiatives and Farnell digital platforms. Although we are seeing improvement in sales of higher margin on board components, Farnell continues to have a higher relative sales mix of test and measurement, maintenance and repair, and single board computers. As the recovery of demand for the onboard components continues, especially in Europe, we expect Farnell's gross and operating margins to continue to improve. So here at the center of technology supply chain, as we look forward, there are many reasons why I am optimistic about Avnet's future and our position in the marketplace. We have in areas of need. To conclude, we are pleased with the momentum we are seeing moving into the new calendar year. For those of you who attended CES this year, there was a lot of excitement at the show. We had the opportunity to meet with leadership of many of our supplier partners and customers, and we continue to be encouraged that 2026 will be a year of growth and margin expansion and improved returns for Avnet. With that, I will turn it over to Ken to dive deeper into our second quarter results. Ken? Kenneth A. Jacobson: Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet and for joining our second quarter earnings call. Our sales for the second quarter were approximately $6.3 billion, above the high end of our guidance range, and up 12% year over year. On a sequential basis, sales were higher by 7%. Regionally, on a year over year basis, sales increased 17% in Asia, 8% in Europe, and 5% in The Americas. During the second quarter, sales from Asia grew to over 50% of total sales compared to approximately 48% of sales last quarter. From an operating group perspective, electronic component sales increased 11% year over year and increased 7% sequentially. Constant currency, electronic component sales increased 9% year over year. Farnell sales increased 24% year over year and 7% sequentially. In constant currency, Farnell sales increased 20% year over year. For the second quarter, gross margin of 10.5% was flattish year over year and up slightly sequentially. EC gross margins are still being impacted by the Asia region growing than the West. From a regional perspective, EC gross margins were stable by region with gross margin improvement in Europe compared to last quarter. From a Farnell perspective, gross margins were up over 100 basis points year over year and were down 25 basis points sequentially. As Phil mentioned, we anticipate improvement in Farnell gross margins as we see more growth in on the board components relative to other product categories. As a reminder, Farnell's Europe region has the highest regional mix of on the board components and has been the slowest to recover. Gross margins at the product category level for Farnell continue to be stable. Turning to operating expenses. SG and A expenses were $492 million in the quarter, up $55 million year over year and $27 million sequentially. The sequential increase in SG and A cost is primarily from a combination of higher sales volumes and increases in stock based compensation expense. As a percentage of gross profit dollars, SG and A expenses were lower sequentially at 74% compared to 76% last quarter. We anticipate that our operating expense to gross profit ratio will continue to improve as we grow our gross profit dollars. Turning to expenses below operating income. Second quarter interest expense was $61 million and our adjusted effective income tax rate was 23%, both consistent with expectations. Adjusted diluted earnings per share of $1.05 exceeded the high end of our guidance for the quarter. Adjusted diluted earnings per share grew nearly 4x sales compared to last quarter. Turning to the balance sheet and liquidity. During the quarter, working capital decreased by $42 million sequentially. Working capital days decreased seven days quarter over quarter to 88 days. From an inventory perspective, we reduced inventory by $126 million or 2.3% sequentially. At the end of the quarter, our EC business received approximately $150 million of high demand inventory related to memory and storage products, which partially offset some of the broader inventory reductions that took place across EC this quarter. Substantially, all of the memory and storage products received at the end of the quarter have already been shipped to customers in January. We ended the quarter with 86 days of inventory as we continue to make progress on reducing total Avnet inventory days to below 80. As a reminder, the inventory turns models are different between the EC business and Farnell. Our EC business typically runs between four to six turns per year, whereas Farnell typically runs between 1.5 to two turns per year. Farnell's high service value proposition requires a breadth of on the board, test and measurement, and maintenance and repair product inventories. For further context on these inventory model differences, at the end of the second quarter, our EC business had less than 80 days of inventory and our Farnell business had less than 230 days of inventory. Even with the overall inventory improvement, our team remains focused on reducing. We still anticipate reducing our leverage to approximately three times over the next year. We continue to deploy cash in a manner that generates the greatest long term return on investments for our shareholders. In the second quarter, we paid our quarterly dividend of $0.35 per share or $28 million. Turning to guidance. For 2026, we are guiding sales in the range of $6.2 billion to $6.5 billion, with diluted earnings per share in the range of $1.20 to $1.30. Our third quarter guidance assumes current market conditions persist and implies a sequential sales increase of approximately 1% at the midpoint. The sales guidance implies sales growth in The Americas and EMEA, and a less than seasonal sales decline in Asia due to the Lunar New Year. Our third quarter guidance also implies further recovery in our higher margin Western regions, which accelerates the operating leverage in our business model. This guidance also assumes similar interest expense compared to the second quarter, an effective tax rate of between 21% and 25%, and 83 million shares outstanding on a diluted basis. In closing, I want to thank our team for delivering a solid quarter of improved financial results with a third quarter guidance giving us further confidence in the overall recovery of our business. 2026 should provide several opportunities for Avnet to help our customers and suppliers adapt to continually changing market conditions, and will serve us well as we continue to create value for our stakeholders. With that, I will turn it over to the operator to open it up for questions. Operator? Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from William Stein with Truist Securities. Please proceed. William Stein: Hey, thanks for taking my question. I guess I would like to squeeze in two, if I can. First, could you talk to us about the linearity of orders during the quarter? Anything unusual or noteworthy there? I think, typically, new orders tend to fade as you go into December. Maybe I have that wrong, but whether right or wrong, maybe comment on that trend. And also, the duration of your backlog as it stands now? Do you have a bit more visibility? Are you seeing customers place it longer at a longer sort of time to request? Thank you. Philip R. Gallagher: Yeah. Thanks, Will. I appreciate you joining the call. So I guess that was the two questions. Right? So I will go first, Ken wants a heads up. On the linearity, the December quarter is always an interesting one, right, because you know, your billings continued through the quarter. But your bookings do tail off near the end of the, you know, the December, let's say, give or take a few days. So, it is definitely a stronger booking on in this case, October, November, pretty good through December till that midway, then that booking start to trail off, you know, the billings continue because even if there are shutdowns, through the holiday, manufacturing starts up when they get back. So, you know, you do go out some a bit more in bookings. But even that said, the book to bills were positive on top of a pretty good billing quarter. So that is it. It is improving. Will, the suppliers in part of them are on this call. They are banging us for backlog. They want to know what to build and we are banging the customers for more visibility into the future longer term bookings, if you will, or forecast. We are starting to see that increase. Still probably not at the level we would like to see it. But, yeah, we are starting to get a bit more visibility into the future, which any customers on the call, and we will see a lot of them next week here in Arizona, that is the message. Still we still want that visibility and pipeline. So we can pipeline appropriately for them. But it is improving, not where it needs to be quite yet. Operator: Okay. Answered your question. Our next question is from Joseph Michael Quatrochi with Wells Fargo. Please proceed. Joseph Michael Quatrochi: Hey, thanks for taking the question. These storage controllers, certain capacitors in the IPD space, we are starting to see some pricing inflation. And a lot of that is driven obviously by the activity around data center, increase in hyperscalers, but it is really a lot of our industrial customers are increasing demand based on their exposure to the data center, if you know what I mean. So overall, it is not across the board over pretty much from Q2 is stable. But we are starting to see some increases. And I think that will continue as we move forward. Kenneth A. Jacobson: And Joe, maybe just a point of clarity that we have seen the increases announced and we know they are coming. Right? But the actual quarterly results did not have a lot of impact from actual price increases in the quarter. So just to kind of clarify the timing of some of those things. Joseph Michael Quatrochi: Okay. That is helpful. And then just as I guess as I am thinking about the just the guidance on the revenue, you talked about Americas and EMEA up. And then Asia maybe a bit better than seasonal in terms of, like, the rate of decline. How do I think about just, like, Americas and EMEA relative to seasonality? Like, what is your expectation for the March? Philip R. Gallagher: Yeah. So the March, I would Ken jump in. Typically, Joe, the West bounces back in the quarter over December, a lot of that is a math equation with just more days and whatnot. But last year, it was an anomaly, you might recall, where the West did not increase over December. That was kind of the first time that saw that and ever, I think. So this year, it is back to more, you know, typical seasonality. Where the West will be up, which is positive. And outside our higher margin regions as you know. And Asia, you know, it is going to have a, you know, typical well, maybe not too well. Lunar New Year, Chinese New Year going to have an impact but not as significant as we have seen in the past. Right? So that is also positive. So our regional mix shift is in our favor this quarter as we get into March, which is good news. Ken, anyone add that? Yeah. I think I think steady, you know, high single digit is how I think about it in terms of the growth in the West, which is kind of as expected. Impacted by mix. Joseph Michael Quatrochi: That is really helpful. I appreciate all the color. Thanks. Philip R. Gallagher: Glad, Joe. Thank you. Operator: Our next question is from Ruplu Bhattacharya. And do you think the seasonality in the March quarter being different than the past couple of years impacts the seasonality going forward for the rest of the quarter? So how are you thinking about as you go through the year, you think you will see more than seasonal growth either in revenues or year over year growth in margins? Kenneth A. Jacobson: So, Ruplu, let me take the last part first. And I think, you know, there is no reason to believe seasonality would change. And how we think about seasonality is simply just the number of shipping days. And if you had a traditional Lunar New Year, with, you know, let us say, you know, seven to ten days depending on the country of shutdowns. You know, you have less shipping days that you know, we are still, you know, roughly 20 to 25% off the top line. In The Americas and probably 30 to 35% of the top line in Europe relative. Three thirty one to 90, 91 to one eighty, etcetera, and one eighty and above days it is encouraging. That is the word I am using with the team. It is very the signs are all very encouraging but as you know, we do not guide out beyond the quarter. But we are encouraged and optimistic about the next several quarters. Ruplu Bhattacharya: Okay. That is helpful. Can I ask a follow-up question on the pricing comment you made? Can you remind us how like, if suppliers are raising prices, how does that impact Avnet's revenues and margins in the near term as well as in the more medium term? And, Phil, I missed this if I might have missed this, but did you specify which product categories or areas you are seeing spot prices increases? Philip R. Gallagher: Yeah. Thanks, Ruplu. So pricing really affects the average selling price, right? So we have kind of our business is under contract and some of it is not. You know, where it is not, and it is, let us call it spot buys, if you will, customers come in, you know, time, place, utility, we can increase margins there, the price and the margins. Particularly the products, you know, tough to get. We are not breaking pillaging or anything, but, you know, just to kind of get a little bit of fair margin on that, which is positive for us. In the contracted customers, you know, it is the price gets passed on, so it does not have as much effect on the margin percent. But it does it can affect the revenue dollars and margin dollars. That makes sense. And similar to what we saw in the last tightness in the market, and then we do not the customers are you know, we cannot absorb it. That is for sure. But we are definitely starting to see that particularly in certain areas, memory storage, storage takes memory. So anything around memory storage we are starting to see some more in the controllers, some of the high high end products in networking, and are selected parts like antenna, capacitors, things on those lines we are starting to see some price increase. So some are modest right now, others a little bit more than modest based, particularly in the memory space. Ruplu Bhattacharya: Okay. Thanks for that. If I can sneak one more in. As Europe is recovering, right, I think you said for Farnell, maybe 50 basis points improvement every quarter. But as the region itself improves, do you think that can accelerate and you can see a faster recovery in Farnell margins? I mean how just help us level set our expectations for where this can go from a margin standpoint by the end of the year. Thank you. Philip R. Gallagher: Yeah. Thanks, Ruplu. Yeah. So, you know, specific to Farnell, typically their largest region and most profitable is Europe. Okay? And that is not been the case here the last several quarters based on Europe's softness. Still doing well, but actually The Americas, which is a higher like we also pointed out a higher mix in The Americas of test and measurement which is really good business, just runs at a different margin level than the onboard components being semiconductors and the IP and E. So any additional lift in Europe will further drive the drop through as for now it could. Possibly accelerate that you are right that 50 bps points of margin that we are looking to see them improve on quarter on quarter. That is the message of the leadership team as far now with who I know are on this call. You know, we need to see them and expect them to continue to show incremental improvement in operating margin that could be accelerated. To your point, with higher revenues in the right mix. And although we may not be projecting that, certainly we will really like to see them accelerate that and beyond 50 to 100 bps. So that is our commitment at this point in time. While they continue to manage their expense line. Right? So there are still other things they are doing. We are all doing. We are always doing as a company. And for now, specifically as well, you know, driving out, more efficiencies, taking out costs where we need to take out costs, while making investments where we need to make investments, i.e., in digital, e-commerce, AI, etcetera. So that answers your question. But we do see it as a continuing tailwind for us as we move forward. And we will look to accelerate getting to that double digit operating margin. Ruplu Bhattacharya: Okay. Thanks for the details. Philip R. Gallagher: Yep. You got it, Ruplu. Operator: Gentlemen, there are no more questions at this time. I would like to turn the conference back over to Phil Gallagher for closing remarks. Philip R. Gallagher: Okay. Thank you very much. And I want to thank everyone for attending today's earnings call. We look forward to speaking to you at upcoming conferences and at our third quarter fiscal year 2026 earnings report in April. Okay? Have a great day. Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good morning, and welcome to the Prosperity Bancshares Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Charlotte Rasche, Executive Vice President and General Counsel. Please go ahead. Charlotte Rasche: Thank you. Good morning, ladies and gentlemen. And welcome to Prosperity Bancshares' Fourth Quarter 2025 Earnings Conference Call. This call is being broadcast live on our website and will be available for replay for the next few weeks. I'm Charlotte Rasche, General Counsel of Prosperity Bancshares, and here with me today is David Zalman, Senior Chairman and Chief Executive Officer; H. E. Tim Tamanis Junior, Chairman; Asylbek Osmonov, Chief Financial Officer; Eddie Safady, Vice Chairman; Kevin Hanigan, President and Chief Operating Officer; Mays Davenport, Director of Corporate Strategy; and Bob Dowdell, Executive Vice President. Randy Hester, our Chief Lending Officer, is unable to be here today. Also joining us this morning are Bob Franklin, Chief Executive Officer of Stellar Bancorp; Ray Vatuli, President of Stellar Bancorp; and Paul Eggie, Chief Financial Officer of Stellar Bancorp. David Zalman will lead off with a review of the highlights for the recent quarter. He will be followed by Asylbek Osmonov, who will review some of our recent financial statistics, and Tim Timanus, who will discuss our lending activities, including asset quality. Finally, we will open the call for questions. Before we begin, let me make the usual disclaimers. Certain of the matters discussed in this presentation may constitute forward-looking statements for purposes of the federal securities laws, and as such may involve known and unknown risks, uncertainties, and other factors which may cause the actual results or performance of Prosperity Bancshares to be materially different from future results or performance expressed or implied by such forward-looking statements. Additional information concerning factors that could cause actual results to be materially different than those in the forward-looking statements can be found in Prosperity Bancshares' filings with the Securities and Exchange Commission, including Forms 10-Q and 10-Ks and other reports and statements we have filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Now let me turn the call over to David Zalman. David Zalman: Thank you, Charlotte. We had a stellar quarter listening to our Fourth Quarter 2025 Conference Call. For the year ended 12/31/2025, we had net income of $543 million compared with $480 million for the same period in 2024, an increase of $63 million or 13.2%. Our net income per diluted common share was $5.72 for the year ending 12/31/2025, compared with $5.05 for the same period in 2024, an increase of 13.3%. The net income was $139.9 million for three months ending 12/31/2025 compared with $130 million for the same period in 2024, an increase of $9.8 million or 7.6%. Our annualized return on average assets and average tangible common equity for the three months ending 12/31/2025 was 1.49% on assets and 13.61% on tangible equity. Prosperity's efficiency ratio, excluding the net gains and losses on the sale, write-down, or write-up of assets and securities, was 43.6% for the three months ending 12/31/2025. As mentioned, since 2024, we expect that our net interest margin to increase, and it has. Net interest margin on a tax-equivalent basis was 3.3% for the three months ending 12/31/2025 compared with 3.05% for the same period in 2024 and compared with 3.24% for the three months ending 09/30/2025. During the year ending 12/31/2025, stock we purchased program. Prosperity Bancshares repurchased approximately $157 million or 2,340,000 shares of its common stock at an average weighted price of $67.04. Our loans excluding warehouse purchase program loans were $20.5 billion at 12/31/2025, compared with $20.7 billion at 09/30/2025, a decrease of $249 million. We continue to see good demand for loans. However, we are not willing to compete with the terms and conditions being offered sometimes by out-of-state competitors on some of the larger deals. Our overall loans have been impacted by efforts to outsource some less desired loans acquired in previous transactions also. Deposits, as mentioned in our last quarter, we expected deposits to increase due to seasonality. But the increase exceeded our expectations. Deposits were $28.4 billion at 12/31/2025, an increase of $700 million from $27.7 billion at 09/30/2025. Our nonperforming assets totaled $150 million or 46 basis points of quarterly average interest-earning assets at 12/31/2025 compared with $119 million or 36 basis points of quarterly average interest-earning assets at 09/30/2025. The increase in nonperforming assets during the year was primarily comprised of two loans made in our middle market lending group and one well-collateralized real estate loan acquired in one of our recent acquisitions. All of which Kevin will be able to answer and address in the Q&A. The allowance for credit losses on loans was $333 million and the allowance for credit losses on loans and off-balance sheet exposure was $371 million as of December 2025. Our allowance for credit losses on loans still stands strong at 2.21 times of our nonperforming assets. I'm excited to announce that on 01/01/2026, Prosperity completed the merger with our new partner, American and a totally owned subsidiary, American Bank headquartered in Corpus Christi, Texas. In connection with that transaction, we are pleased that Pat Wallace, the daughter of one of the founding families of the bank, and Steve Raphael, the CEO of American Bank, have joined our bank board of directors. We have also received all the regulatory and shareholder approvals for the merger with Southwest Bankshares, the parent company of Texas Partners Bank, and expect the transaction will be effective on 02/01/2026. We are pleased that Jean Dawson, in connection with the Southwest deal, interim chairman of Southwest Bancshares, and chairman of the nationally recognized Pate Dawson Engineering Firm, will be joining our bank board of directors. To further add to our San Antonio presence, Charlie Amato has joined our bank board of directors. In addition to his successful business, Charlie previously served as a board member of the Federal Reserve Board of Dallas, San Antonio branch, and region of the Texas State University System, and is an investor in the San Antonio Spurs. There's much more, but it would be too much more to go over with what all he's into. When Prosperity went public in 1998, we were a small community bank in rural Texas with less than $500 million in assets. For twenty-seven years, we have remained disciplined and focused on the same strategy delivering shareholder value by prioritizing low-cost core deposits, operational efficiency, and growth via opportunistic M&A. This morning's announcement that Prosperity is acquiring Stellar Bancorp is consistent with that strategy. And this transaction marks an important milestone for the company. Our combined Houston bank deposit rank goes from number nine to number five, making us the largest Texas-based bank in the market and second largest bank by deposits in the state. Importantly, Stellar is a well-run bank with similar credit discipline and an envious non-interest-bearing deposit mix. As a result, we view the transaction as a low-risk combination that significantly enhances our Texas footprint. I would like to thank all our customers, associates, directors, and shareholders for helping build such a successful bank. Thanks again for your support of our company. Let me turn over our discussion to Asylbek Osmonov, our Chief Financial Officer, to discuss some of the specific financials. Asylbek Osmonov: Thank you, Mr. Zalman. Good morning, everyone. Net interest income before provision for credit losses for three months ended 12/31/2025 was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024, an increase of $1.5 million compared to $273.4 million for the quarter ended 09/30/2025. The net interest margin on a tax-equivalent basis was 3.3% for the three months ended 12/31/2025. An increase of 25 basis points compared to 3.05% for the same period in 2024. An increase of six basis points compared to 3.24% for the quarter ended 09/30/2025. Excluding purchase accounting adjustments, the net interest margin for the three months ended 12/31/2025 was 3.26% compared to 3% for the same period in 2024 and 3.21% for the quarter ended 09/30/2025. Fair value loan income for the fourth quarter 2025 was $3.19 million for the third quarter 2025. The fair value loan income for the first quarter 2026 is expected to be in the range of $3 million to $4 million. Noninterest income was $42.8 million for the three months ended 12/31/2025, compared to $41.2 million for the quarter ended 09/30/2025 and $39.8 million for the same period in 2024. Noninterest expense was $138.7 million for the three months ended 12/31/2025, compared to $138.6 million for the three months ended 09/30/2025 and $141.5 million for the same period in 2024. For the first quarter 2026, we expect noninterest expense to be in the range of $172 million to $176 million. This projection includes three months of American Bank expenses and two months of Texas Partners Bank expenses. In addition to this, first quarter guidance we will also have about $30 million to $33 million in one-time merger-related charges for those two acquisitions. We expect to realize most of the previously announced cost savings related to American Bank and Texas Bank after Partners Bank after the system conversions, which are scheduled later this year. The efficiency ratio was 43.7% for the three months ended 12/31/2025 compared to 44.1% for the quarter ended September '25 and 46.1% for the same period in 2024. The bond portfolio metric at 12/31/2025 have a modified duration of 3.7 and projected annual cash flows of approximately $1.9 billion. And with that, let me turn over the presentation to Tim Timanus for some details on loan and asset quality. Tim Timanus: Thank you, Asylbek. Our nonperforming assets at quarter end 12/31/2025 totaled $150,842,000 or 69 basis points of loans and other real estate, compared to $119,563,000 or 54 basis points at 09/30/2025. This is an increase of $31,279,000. Since 12/31/2025, $6,631,000 of nonperforming assets have been removed or put under contract for sale. The 12/31/2025 nonperforming asset total was made up of $137,534,000 in loans, $12,000 in repossessed assets, and $13,296,000 in other real estate. Net charge-offs for the three months ended 12/31/2025 were $5,884,000 compared to net charge-offs of $6,458,000 for the quarter ended 06/30/2025. This is a decrease of $574,000 on a linked quarter basis. There was no addition to the allowance for credit losses during the quarter ended 12/31/2025. In addition, no dollars were taken into income from the allowance during the quarter ended 12/31/2025. The average monthly new loan production for the quarter ended 12/31/2025 was $314 million compared to $356 million for the quarter ended 09/30/2025. Loans outstanding at 12/31/2025 were approximately $21.805 billion compared to $22.028 billion for 09/30/2025. The 12/31/2025 loan total is made up of 35% fixed rate loans, 35% floating rate loans, and 30% variable rate loans. I will now turn it over to Charlotte Rasche. Charlotte Rasche: Thank you, Tim. At this time, we are prepared to answer your questions. Our call operator, Gary, will assist us with questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. The first question is from Catherine Mealor with KBW. Please go ahead. Catherine Mealor: Thanks. Good morning. David Zalman: Good morning. Good morning. Catherine Mealor: Wanted to start just on the Stellar acquisition. Congratulations on that. Noticed in the slide deck, you're using a different estimate for Stellar versus Consensus. Looks like it's about a $2.20 number versus $2 for Consensus roughly. Just curious what's driving that difference in your confidence in that level of earnings coming over from Stellar. Thanks. David Zalman: Catherine, you probably saw their fourth quarter earnings come out. That's really going to influence that. But Paul is here with us today from Stellar, I'll let him go over it with you. Paul Eggie: Absolutely. Thanks, Catherine. Hey, Paul. We've been thrilled with our growing momentum in 2025 and what that portends for 2026. We've been able to grow our earning assets in the back half of the year pretty meaningfully, all while maintaining and growing our core NIM. And that paints a great picture for 2026. We actually feel great about the momentum we're taking from a growth perspective into 2026 as well. So if you were to take 2024 just or pardon me, the fourth quarter just to be simplistic, and put a kinda more normalized provision onto it and annualize it, you'd be talking about $50.55 cent per share EPS run rate, which would annualize $2.20. Now we enter 2026 with about a $100 million more interest-earning assets than our average for 2025. That's gonna help assist us, and then we'll have the first kinda full quarter benefits of the rate changes the Fed rate cuts that occurred in the fourth quarter. So all that paints a really good picture for us to maintain and actually upside to the go-forward earnings run rate. Then I think the last point I'd note is we assume a more normalized consensus level of net charge-off. And both us and Prosperity have a great track record of delivering meaningfully lower net charge-offs, which would mean which would drive lower levels of credit costs and potential beats to the numbers we put forth. Catherine Mealor: Okay. Very helpful. Thank you. And then as we think through growth moving forward, so it looks like part of that is assuming better growth at Stellar, which is great. You typically shrink a little bit, and that's from Prosperity, what we've seen with past deals is, you know, you do an acquisition, then you been part of the headwinds that we've seen at growth at Prosperity recently. So why is this acquisition different and what kind of forecast for growth in '26 should we expect for Prosperity? Thanks. David Zalman: I think this is different. Bob and I have known each other for probably wrote romance for ten years plus, and again, we're across the street so we can throw rocks at each other. So to me, takes a lot of risk out of a transaction like this. I think we've talked about doing this for a lot of years. It makes a lot of sense. There's a I think there'll be efficiencies through this, and I would say far as growth going forward in 2026, I would say that our plate is pretty full with the transactions that we have. I think that we're gonna primarily focus on the three banks that we have. So the integration and having said that also, I think Stellar Bank is very much like our bank. So with some of the banks that we buy, we know that either their deposits are extremely high or their loans are something else wrong, we have to get rid of them. I don't see that in the Stellar acquisition. I think that they're very similar to us. So feel good about that. But, again, I think our focus is really gonna be taking care of our customers, taking care of our associates, and actually putting all these three deals together this year. That'll be our main focus. Catherine Mealor: Understood. Thank you. Operator: Our next question is from Manan Gosalia with Morgan Stanley. Please go ahead. Manan Gosalia: Hi. Good morning, David, maybe can you help us think about the price of the acquisition? You know, 18 times one year forward does feel a little high. But, you know, I know you mentioned the higher level of NIB and the synergies. Maybe if you can help us appreciate, you know, all the synergies and growth prospects that the combined banks have. And so the unback period, four and a half years unback is a little bit higher than what you've done recently. Yeah. David Zalman: Know, I could start off and say, and I think this I don't know if this is a good analogy or not, but I think banks are a lot like cars. You know? I can drive a Ford Pinto or I can drive a Range Rover. The Pinto will probably get me wherever I need to go. And I can probably throw it away and not lose a bunch of money when it's gone. Or I can really enjoy and have a Range Rover that's gonna really be something in have a good resale value. This you know, there's a big difference in the price of things, and I wish I think some people have a harder time doing that. A bank that's good deserves a premium price. These guys it's just it's a premium bank. And so the thing that we really look at is, you know, we say the price, but I look at it and I say, okay. In 2027, our combination will be earning $7.34 a share once we get all of this put together. And so there so it's $7.34. If we trade just at 13 times earnings, our you know, our stock value would be $95.42. If we traded at 15 times earnings, and then somebody may say, well, that's high. Well, I would just tell you the first bank in Colorado went for that much. You saw these other banks, and I can tell you I could call up any one of the midsized banks underneath Bank of America or JPMorgan, the guys underneath them. And they would offer us 15 times earnings probably in a New York minute, which would indicate a price a value of our bank at least at $110 a share. So there we paid a lot for it, but I would tell you too that should be easy for anybody to see that the franchise value, not only not only does it accretive, but the franchise by us being one of the largest banks in the Houston market. So I think the combination of the earnings, the enhancement of the franchise value, and that's what sometimes I know what kind how do you put a price on the enhanced franchise? That I can tell you is significant. I think that any anybody would want to probably acquire us as being one of the bigger banks in the state of Texas. And the franchise that we have. And so that's that's kind of the rationale behind it. It also know, we it takes us from being a these all three of these deals, takes us from having a 13% return on tangible capital. I mean, we're looking at a 17% on return on average tangible capital in the year 2027. So not only did I like it, not only is it pretty, the metrics make sense for all of these deals. So that's kind of the rationale. Manan Gosalia: Got it. That's helpful. So maybe as you think about the capital deployment strategy from here, I mean, I guess you're now integrating three deals together. Is that you know, is that it for now? Like, do you would you focus on the integration for the coming months and, you know, just given where the stock price is? Is there more of a focus on buybacks? You know, I know you guys upped the authorization yesterday, so maybe just help us think through, capital deployment plans from here. David Zalman: Well, let's say we're do any more deals. They've got me handcuffed in this room, so I can't get out. But you know, if you can look at the projections going forward in the year 2027, I think we're projected to make around $880 million. And so we have about 120 million shares outstanding, and you can do the math. We're paying $2.40 a share in dividends. That's $288 million or so I think that's right. So you subtract that 288 from $6.80 we have about $600 million, so we have a not only do we have we have just like a strong capital to begin with, a I mean, like a printing press. You know, if something doesn't go wrong, which 100 million, we can do a lot of we can do a lot with that. We can buy a lot of stock back. We can increase dividends. And we can buy more banks. It's a high-class problem. Manan Gosalia: But any I guess, any immediate priorities there? Like, would you tilt more towards buybacks in the near future? David Zalman: I think that we would when it's opportunistic, we certainly would look at buybacks for sure. We just as I'm with this last year, stock went down in the sixties, the low sixties, and I think you saw what we spent $157 million on buybacks this last year. And I think we have another 5% approved for this year, so you're talking was at 300 and something million dollars that we can buy back this year as well. And that's been approved ready by the Fed. Manan Gosalia: Got it. I appreciate it. Thanks so much. Operator: The next question is from Stephen Scouten with Piper Sandler. Please go ahead. Mr. Scouten, your line is open on our end. Perhaps it's muted on yours. Moving on, the next question is from David Chiaverini with Jefferies. Please go ahead. David Chiaverini: Hi, thanks for taking the question. So you mentioned about, you know, you've got multiple bank integrations occurring simultaneously. Can you talk about ways you'll be able to juggle these at the same time and not get distracted from the core operations? David Zalman: Well, again, they're all plans. And somebody may wanna talk about the which ones we have in order. But, I mean, we've done 40 of these transactions, so I don't think this is gonna be there may be three of these. But again, we're doing our own operational integration here probably in the next few weeks or so. Yep. And then right after that, we're going in American Bank dated what? Also back in So I think, specific to address the question, we have designated teams who does that. So it's not like our people who is out on the field doing the you know, organic growth. They'll be focused on this. We'll have specific team focusing on integration. So we'll have a plan to convert these banks with those two bank, American Bank and Partners Bank this year in the sense of integration. And in the process, so far, it's going well, and we started in advance. So it's not like we're starting now. Overall, we are scheduled to do convert later this year, and it's working as we planned. David Zalman: I we feel confident where we're at. It's not to say that you won't ever have any glitches. On anything that you do. There there always may be something like that, but for the most part, we have a well-seasoned team that's done many of these things, and they feel very comfortable where we're at. David Chiaverini: Great. Thanks for that. And can you talk a little bit about the cultural fit? How did the deal come together? And why now? With the deal? David Zalman: In the previous administration, I think we did a Well, the time seems to be right. I mean, if you look we were trying to do some bank deals and even much smaller deals. Think the last bank we took I may be wrong, but it took us almost a year to get completed. I think that from a regulatory standpoint, that the that the the regulatory the regulatory things are in place to make this happen. The timing is right. And you know, it it was right I think it was right for us. I think it's right for them. It it just seemed to be the right time. David Chiaverini: And can you talk about the cultural fit and how the deal came together? David Zalman: Yeah. I mentioned earlier, Bob and I have known each other for twenty years or more. I mean, I would say I said this in our meeting the other day. I said if I got killed and ran over tomorrow, and Bob took my place, I don't think that I don't think that that our bank would change, our combined bank would change at all. I think that if anything, I think they may be even more conservative than we are on the loan side, and it's hard to believe. And so I we feel we did our due diligence, and we feel really good. We feel the same way about things. You know, again, we've dated in romance for probably ten or twenty years, and it's not like know, we just saw this pretty girl across the street, fell in love, got married in a month. You know? This is something that we really thought about and have thought about and talked about with each other for years and years. And the timing just seemed to be right right now, and we did it. David Chiaverini: Thanks very much. Operator: The next question is from Dave Rochester with Cantor. Please go ahead. Dave Rochester: Hey, good morning guys. Good morning. I just wanna go back to the capital discussion real quick. I noticed the shares are trading below the average price for the buybacks this past quarter. So I just curious if you see that buyback opportunity is occurring now And then I know there are blackout periods related to the outstanding deals. If you could just talk about when you'd be actually able to buy back stock if you saw that opportunity in the near term, and if you had a, 10 b five dash one plan. Thanks. David Zalman: Yeah. I don't know what the 75 would what plan is he talking about? The 10 b five one plan. We can talk Charlotte Rasche: yeah. We don't have a 10 b five one plan. David Zalman: Yeah. And, David, I would say on the others, you know, basically, I get I I'd probably stick to our statement that you've seen us buy in the past that's been off to opportunistic, and we'll do that again. Dave Rochester: Okay. Any sense for blackouts when those pop up, when those ends, that kind of thing? Charlotte Rasche: Oh, we're in a blackout today for our David Zalman: So Right. We we formal earnings blackout and things, and there's some blackouts around the the merger transaction, of course, around shareholder votes and things like that. When you should start soliciting the Stellar shareholders. Dave Rochester: Okay. This before you do that, sorry. Go ahead. Asylbek Osmonov: I say at this price and then when it's available for us to buy back, we'll do buybacks. Yeah. Dave Rochester: Sounds good. I wanted to get your thoughts on the trajectory for NII and the margin through 26 just given the three deals you got coming in? Just assuming you closed Stellar June 30, can you just help us understand what you see as that path through the year? Thanks. Asylbek Osmonov: Yeah. If you look at Prosperity I'm just gonna talk about Prosperity and with two smaller acquisition on projection. We definitely see the improvement in the margin as for 2026 and beyond. And it's because, the margin on the smaller banks were higher than ours as stand alone. So that's have accretion there. But if you look at our balance sheet, with the, you know, repricing our bond portfolio, as we mentioned as I mentioned that we have a $1.9 billion cash flowing from that So we'll be repricing that our our yield on the bonds of two fifteen to pricing. Then we can get around four fifty right now. So 200 basis points there. If you look at our fixed, loans, that's getting repriced as well. So, putting altogether, our kinda projection for 2026 stand alone showing about around three fifty margin for 2026. But, if you add the Stellar Bank together, I think you the margin is still about more 4.22%, so that will be very accretive too. So combined together, you can do the math. It will be looking very, very good for 2026, and David Zalman: A minimum of three and a half. Yeah. That's Minimum of three and a half. Three and half without Stella. Yeah. Without Stella. Yes. So that's looking really good. And it comes a long way. It you know, it goes back to where two years ago Somebody said, well, you know, the bank in your peer group you know, you didn't perform as good as your peer group over the last couple of years. Well, the truth of the matter is we didn't. I mean, our bank has never tried to call rates one way or another, and we bought in every market. In fact, we should be buying more, but I think we're still scared from what happened last time. But so so for the most part, we said, you know, if every we we try to buy and have a three point seven, three point eight year duration. And we said two years ago, we got caught in that. And as this thing turns, we would turn it around. We went from a two point seven five two point seven five net interest margin to three and a half today. So we did everything we said and, candidly, we have very, very strong tailwinds in back of us. And I think that not only looking at 26, 27, without anything, we have some very, very strong tailwinds going at the same time. Asylbek Osmonov: Yeah. And, want to add to that. I think we have a year or two ago that we wanna reduce our borrowing levels. You know, we were almost at $3.9 billion borrowing two years ago, and we have conscious program that we're gonna reduce it to level that we are right now. So now we have we believe that, borrowing level is what we expected within 1.5 to $2 billion, and now we're gonna be you know, with growth in deposits and additional of the two banks, we're gonna start growing our average earning assets while past two years we were shrinking because we David Zalman: wanna I think it was just a matter of the time that somebody could make an argument in this email the Sharp email that I got this morning made that argument. I can make an argument that you could go back Anybody can pick the year and time that they want to. But if you go back in for the last since 2000 till today, and you compare us to the S and P five hundred and you compare us to the Nasdaq Bank Index, our bank has returned 1447% compared to the National Bank Index of about I'm thinking, 181% and it's compared to the s and p five hundred, 665%. So I think if you're a long term player, you need to jump in and buy this stock because I did the math for you all ago. What what this what this thing should trade for And so it just I think it's one of the greatest opportunities, and you you will benefit if you're a long term investor right now. Dave Rochester: Alright. Great. Appreciate all color. Maybe just one last one on the, the cost save estimate. I know historically, you guys have been pretty conservative or have outperformed your cost save expectations. I'm just wondering how you feel about about this level here that you've you've talked about and if there are any branch closures that, you'll have to take care of as a result of the higher concentration of branches in Houston. Thanks. Asylbek Osmonov: Regarding the cost, I would feel very comfortable with the 35% cost there that we printed, and it's combination of the combining two banks that have the same footprint. So, of course, there'll be some consolidation of branches. Also, there's, you know, as you know, the system conversion gonna help. So we took deep dive and feel very comfortable with the cost base. Dave Rochester: Great. Thanks, guys. Operator: The next question is from Janet Leigh with TD Cowen. Please go ahead. Janet Leigh: Good afternoon. David Zalman: Good afternoon, Janet. Janet Leigh: Back to M&A. If I were to ask it in a different way. So if I look at your Performa one, it will be about 13 and a half. Which is slightly above peers, but definitely more normalized. And in the past or at least over the five years, you've you've had CT one running above peers. Just given the size of the deal, which was more meaningful than the recent ones and the Performa CT one post the stellar deal. Does this change your appetite for M&A, whether it's your appetite for M&A itself or the type of deals that you might be potentially looking at in the future? Asylbek Osmonov: No. Even like I mentioned a while ago, we're David Zalman: when these things are combined, you're gonna have over $600 million a year just in excess cash flow. We had excess capital, and everybody was asking what we were gonna do this time. Again, we didn't have it wasn't a requirement that we pay 30% in cash down. We did to try to utilize our capital to get a better return on our average tangible capital. I think probably just just in earnings over a couple of years, if you've done the ratios telling to see where what we we're back up within a year or two, we? On on how, excuse me, on how fast we build our capital back? Yeah. We'll be back in a couple of years at minimum. Minimum, a couple of years, we'll be back to exactly where we're at. Janet Leigh: Got it. That's fair. For loan growth, so it seems like the potential acquired portfolio run offs from loans or deposits from the Stellar deal would not be material or meaningful. So in terms of 2026, I believe you were hoping for that low single digits or low to mid single digits kind of growth on balance sheet. Is that the fair way to assume? Or I don't want to put words in your mouth, but how should we be thinking about the overall trajectory there? Kevin Hanigan: Yeah, think that's a good assumption. This is Kevin. Low single digits is good. You know, Stellar has been growing faster than that. And we don't see any reason that that would change. I think American Bank had been growing faster than that as well. And we talked about the quality of the Stellar portfolio. Say the same about the American Bank portfolio. They they were we talked about seller maybe being cleaner than us. I think American Bank was cleaner than us. Right. Right. So so in terms of the quality of the assets we've purchased here, between American and Stellar, they are Stellar. Janet Leigh: Great. Thank you. Operator: The next question is from Peter Winter with D. A. Please go ahead. Peter Winter: Good morning. Thank you. Can you just talk a little bit you mentioned the increase in nonperforming assets. If you could give a little bit more detail Last quarter, you highlighted the like $35 million SNC credit. Just wondering if that was part of the increase in nonperforming assets. And just how you're thinking about credit quality. Going forward. Kevin Hanigan: As we said, I would reiterate what we said last quarter. We said portfolio is very clean. We had our eye on one particular asset, which we had downgraded to substandard. In third quarter to $35 million shared national credit that that we're not the agent on. That credit was downgraded further in the fourth quarter to nonperforming, so it's still substandard but now nonaccrual. As I said, on the call, in the third quarter, if if that became more problematic, and at this stage, it has become more problematic and we haven't worked things out. Although it is I will tell you it is a well-known, very large private equity firm who has a history of backing their deals. That doesn't mean they're backing this one, but they have a history of doing so. It's just that the resolution conversations have been challenging. Or were challenging in the fourth quarter and continue to be challenging. We don't see a need on this or the other credit we talked about last quarter, which is in the buy here, pay here space. We don't see the need at this stage or if something went further wrong with these credits. That we need to post reserve. As a result of it. David Zalman: I'd add it to the other large Posted a provision, I should say. We have reserves up against both. Okay. And I'd say the other large credit is a is a participation for one of the banks that we bought. Actually, we originated and sold the majority of it to another bank. From the Lone Star deal. And, basically, it's well secured with real estate. In fact, there should be excess equity in that. There shouldn't be any loss in that. Peter Winter: Got it. And with the Stellar deal, what what is the purchase accounting accretion? Going to the run rate You gave it for the first quarter. Also back, but I'm just wondering what it is after Stella. Asylbek Osmonov: So the guidance that I provided on purchase accounting payroll loan income, that's for American Bank and Texas Partners Bank. If you look at just Stellar, I think on the page 16, we disclose what the loan marks and AOCI mark that are pretax, and we have about $73 million net of tax and AOC. So I think on the loan mark, we're having about $31 million on loan marks. So for our modeling purpose, we use sum of year digits calculation. 2027, I think the mark accretion is about $30 million combined, $3,031,000,000 combined. Peter Winter: Okay. Thanks for taking the questions. Operator: The next question is from Michael Rose with Raymond James. Please go ahead. Michael Rose: Hey, good morning guys. Thanks for taking my questions. Anything to do once the deal is either leading up to or once the deal closed just on the on the bond book? I know most of Legacy Prosperity's book is is HTM, but Stellar's is AFS wanted to see if there's an opportunity for a potential restructuring that may be not included in the pro forma's here? David Zalman: You know, it's it's not. We could everybody asked, why don't you just do financial engineering? Sell your deal, sell your portfolio, If you you can do the math on $10 billion, you make an extra 2%. You know, 2% a year is another $200 million income a year. So you take your loss after tax, 600, and you get it back in three years. But I just again, I just feel like that's just financial engineering. We could do it. It would make us look good, make us look like well, you do $200 million. After taxes, see what we have extra in income between us. I mean, we'd be making a whole lot of money, but again, I think that's just financial engineering. And, again, we've always said that we're not trying to call rates one way or play the market. Just trying to be in every market and buy with the three point eight year duration. And so sometimes it'll be real good, and sometimes it'd be low. But I don't see any change in that. And, again, we will mark to market the the the pop portfolio from Stellar for sure. Into the asset liability sensitivity? Asylbek Osmonov: I think they are a little bit of asset sensitive on that. I think what we're gonna do if we mean, there will be some security that we're gonna sell and kinda buy back in a mortgage backed security like we do. So I think from the standpoint, it's gonna be maybe the same as a flight asset sensitive. We'll we'll try to buy ahead so that not so asset sensitive. We'll try to get back to neutral. If we can. Michael Rose: Understood. And then maybe just finally, if there's any stellar guys in the room, I think Paul was in there. I guess just given how robust the NII forecasts are versus where consensus is. I guess the question is from your point of view, why sell now if the outlook is is or or merger, you know, merge with Prosperity now if the outlook's so good? Thanks. Paul Eggie: Well, I think it's rare to get the to find somebody that kinda looks like you and thinks about the world the same way that you do. We've always concentrated on a real quality deposit base. I think that's what Prosperity has always done. We're really sensitive around the way we fund ourselves. To get our high-quality deposit base, low cost, of funds so that we can control that part of the deal. It's hard to find people to partner with. But I think the expanded balance sheet, the ability to continue to do that look like that. Kind of where the momentum started back in the third quarter, into the fourth quarter, and we can see it in the first quarter. It's starting to have a real good momentum. And because we look so similar and we do similar loans, similar types of deals, it's not a heavy lift to understand that we could continue to do those kind of things. So we think we're gonna continue to drive that momentum. And we feel good about what the future looks like over the certainly over the next twelve months because I think we're on a good path. Michael Rose: Makes sense. Thanks for taking my questions, everyone. Operator: The next question is Jared Shaw with Barclays Capital. Please go ahead. Jared Shaw: Hey, good afternoon. Maybe just going back to the original comment just about how your internal expectation for Stellar is better. When we look at their pipeline, are they David, do you feel like they're able to get the pricing in terms that you said if so, would that cause you to to reallocate more you're not able to get in other markets? And internal Prosperity resources to those markets to take advantage of that, you know, maybe disruption or relative difference between their markets and the rest of yours? What you're doing in the state? David Zalman: I would like to say to tell you that it it would be great. We just use our loan team, and they'll they'll make higher rate loans. But what usually happens is we usually banks that we join together Usually, the the the return actually comes down. I mean, the net interest margin, it's it's more they're getting they're probably you know, there there's a what is it? 4.2, you said? And ours is Margins. Yeah. But and ours is six 0.5 a part of that margin is because don't have as big of a bond portfolio. So their march is better because the they have a better loan to deposit ratio too. But but even having said that, even as we start merging together, it seems like their pricing from the banks that join us comes down a little bit. But I just think the number of people, though, that Stellar has on the ground and even with American Bank that had their they had a loan production office here in the Houston too together. We should really be able to inundate the market. This is such a big market. I mean, I don't know that people realize how many people move in, what the GDP is, if the Texas. It's just it's really phenomenal. So I think the opportunities are just unlimited, especially we get get momentum, put our groups put our guys together, guys and girls, I think the momentum is really gonna be good for everybody. And I think that we'll they maybe even had a better better than us where we a lot of our our payment or pay to lenders is maybe more discretionary. We do look at the actual production. They were more on a formula driven formula driven deal. And so that I think that helps them too. So we'll probably look you know, every bank that we join with, it looks like we take the we try to do the best. We take the best from them. And bring it to us. And so I think they should be able to help us with some of this stuff too. And, hopefully, hopefully, they won't lower their rates that they're charging. Let's say that. David, let's let me, if I can, tag on to you on that. I'll be real simple. I think the margin differential is threefold, and then and Bob or somebody from Stellar could comment whether they agree with this or not. The obvious differences are we we've got $10.5 billion in securities earning 2.17%. That's a drag. The second big item on our balance sheet that's a drag is $8.3 billion of single family mortgages. That were originated in times where rates were pretty low. And that portfolio is a drag. So those are the two biggies. But the one that doesn't jump out at you all that we see and we saw throughout due diligence is on the loan side of the bank, the basic commercial lending side of the bank. Not forget single family mortgages. Some of the other stuff. Just the basic commercial lending. Have a way more granular portfolio. And the granularity of that portfolio basically means it's smaller deals for the most part. They still do some big deals, but if it's just on average, smaller deals for the most part, tend to get higher pricing. Right. So it's those three factors that really drive their relative to ours. And I'd I see ours ours improving as those low rate assets run off. Bob Franklin: Yeah. I agree, Kevin. I mean, it I've we do have a granular portfolio. I think there's there's getting to be more and more balance to that over time. But it certainly started off that way when we combine the two banks together. But pricing's competitive. We're in Houston, Texas, and price is competitive. So no not one's not gonna be better pricing than the other. You guys are just as good as us with pricing loans. So but for the most part, it is granular, and we do get a little bit higher pricing on the smaller. Stuff. So yeah, I would agree with that. Jared Shaw: Okay. Thanks. And then just as a follow-up, comes with cheap deposits. Yeah. Right. Which is why your noninterest bearing deposits are generally a bit higher than ours. So I just a little additional inside baseball. Jared Shaw: Great. Thanks. And I guess just as a follow-up, what are some of the assumptions on customer retention as this will be I guess, an additional name change over the past few years for Stellar. Do you think that there's what what do you think the risk is of retention? David Zalman: I'll answer first. Or, Bob, you wanna go first? Mean I was just gonna say, I mean, we're think we're doing a good job of retaining our guys. I think that's that's the big key. Is to is to make sure that we we keep our our customer facing folks out there that our customers see every day and not changing that. So Bob Franklin: Yeah. I mean, we entered into fifth about 15 non compete agreements in about 70 letter of retention agreements. So we I think the team's the team's on board. It's it doesn't mean you won't lose somebody. Go I think for the most part, know, we'll be able to retain the customers, and it's not like it's not like another bank is coming out from another state that's jumping in. They they know who we are. We've advertised here. We've you know it it's not somebody that they that they're not familiar with. So I think the retention is good here. I think and, again, they don't have a lot of high yield time deposits or something that's gonna run off like that. So I mean, this is really a great combination, guys. It's truly it's it's a marriage made in heaven. And the other piece, David, I think is the credit cultures are very similar. Right. We've always thought about the world the same. And I so I don't think you see that drastic change that you do in some combinations where people say, oh gosh. You know, this maybe this is too conservative or whatever they might might think. Well, you're you're a lot like needed. Analysts. They wanna say, okay. You gotta have, like, double digit loan growth. Gotta do this. Gotta have 6%, 10%. Every year. Well, and your deposits are growing 3%. What do you do when you run out of money? So I think we we have a lot of the same logics that, you know, we're we're used to around the 80% loan to deposit ratio. Again, we bring in new deposits. We'll make more, but we have a lot of liquidity, I think. If if there's ever a run on our bank, for example, I think we have, like, $16 billion that we can draw in a minute. So we have a lot of liquidity. Y'all have a lot of liquidity. So the combined earnings of these two banks, the of these two banks, they're so similar I think it's a good deal. Thank you. Operator: The next question is from John Arfstrom with RBC Capital Markets. Please go ahead. John Arfstrom: Hey. Hello, everybody. David Zalman: Hey, John. Uh-huh. John Arfstrom: David, for you, just a couple on the numbers. What's your level of estimate for 2027? I don't think you have any revenue synergies in there, so it seems like it's just cost saves, but, you know, consensus six eighty is you talk about the accretion. How confident are you in the seven thirty four? David Zalman: Colin just handed me the seven thirty four. So if he's wrong, we'll shoot him. But I we feel very confident and I think we do have some we do have some triggers that I think that above beyond expenses. I mean, right now, they don't charge NSF the charges. I'm not saying one way or another, we'll go the other way. Their cost of money is a little bit higher than ours. So we do have some other triggers, but I feel very confident in the $7.34. Know, once we get everything combined, I think that's a really real number. And that's why I can't believe trading where we are trading if we're gonna make $7.34. I mean, again, we should have a 95 to a $100 price target really. Even you, John. John Arfstrom: I hear you. David Zalman: That's 75 stuff or 78. John Arfstrom: Well, okay. This begs the next question then. You kind of opened the door to it. It's gonna be with your well, with your with your 15 times acquisition, multiple math, that you shared earlier. You know, the question is, I'm not saying you should do it, but do the larger regionals call on you frequently? And is there a bid if you want it? Again, I'm not saying you should, but I'm just I'm curious on that. David Zalman: You know, I was I was on the I was on the Federal Reserve Advisory Board in Washington in it every bank that you can imagine that size was on there. I mean, you had a PNC Truist Regions. The answer to your question is they would all love us a lot. They would love us. And I would tell you that I wouldn't even accept 15 times because I think we could even do better. And anybody that really wants to break into a market like Texas, you can't do it. I mean, if you really wanna break into Texas and wanna be the largest bank in Texas, it's gonna cost you something. And that's the difference in the price of cars. One's a four Pinto and one's a Jaguar. I mean, it's just there's just a big difference. And, again, I'm not saying we are selling or not. I'm just telling that we are truly, truly undervalued in a takeout. John Arfstrom: Okay. Yeah. I think it adds a lot of franchise value. Despite today. So okay. Thank you very much. Operator: This concludes our question and answer session. I would like to turn the conference back over to Charlotte Rasche for any closing remarks. Charlotte Rasche: Thank you. Thank you, ladies and gentlemen, for taking the time to participate in our call today. We appreciate your support of our company, and we will continue to work on building shareholder value. Operator: Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome to the Teva Pharmaceuticals Industries Limited Q4 2025 Earnings Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Chris Stevo, SVP, Investor Relations. Please go ahead. Christopher Stevo: Thank you, Alex. Good morning, and good afternoon, everyone. Thank you for joining us on our fourth quarter call. Before I turn it over to our CEO, Richard Francis, I just want to remind everyone that we will be making forward-looking statements on this call. Any statements we make are only as of today, and we undertake no obligation to update those statements subsequently. And if you have any questions about our forward-looking statements, feel free to see the appropriate sections in our SEC Forms 10-K and 10-Q. With that, Richard Francis. Richard Francis: Thank you, Chris. Good morning, good afternoon, everybody. Great to have you on the call. Also on the call with me today will be Dr. Eric Hughes, Head of R&D and Chief Medical Officer, who will be walking you through some exciting developments in our pipeline. And then Eli Kalif, my CFO, who will go through the Q4 and the full year results. So starting with, as I always do, the Pivot to Growth strategy and the progress we've made over the last 3 years. As you know, the foundation is the 4 pillars: deliver on our growth engines, I think you'll see in the results that we continue to have great momentum around our innovative portfolio of AUSTEDO, UZEDY and AJOVY and some great progress on our innovation, so step-up innovation. You'll see that we filed olanzapine last year, completed the recruitment of the DARI study, dual-action rescue inhaler and started our Phase III study for duvakitug in UC and CD. And then sustained generics powerhouse, good progress. Our aim is to get this business back to stability, and we have done that. And now we see some exciting growth emerging from our biosimilars portfolio, and I'll talk a bit about that. And then focus the business. This is all about making sure we allocate capital to the correct areas to give the best return. And we'll walk you through a bit of the progress we've had on our transformation program, which is the aim is to have $700 million of net savings by 2027. We made excellent progress in '25, and we're on track to hit the 2/3 by the end of this year 2026. So now moving on to the actual results. So I'm pleased with these results. Now just to orientate you on this slide, the numbers on the left include the Sanofi milestones and the numbers on the right do not. So starting with the revenues. So a 5% increase in revenues at $17.3 billion. EBITDA grew 12% up to $5.3 billion. EPS grew 19% to $2.93 and free cash flow was up 16% to $2.4 billion. And our net debt to EBITDA is now at 2.5x, which is, as you know, our goal for 2027 is to 2x. So we're well on our way to do that. Now a slide that I've shown over the last 12 quarters actually, to show that our return to growth, which was our strategy, part of the Pivot to Growth strategy when we launched it in 2023. And as you see, we've consecutively done this. And we did that in Q4, where the growth was up 11%. Now that did include the milestone from Sanofi. If you take that away, we were slightly down at 1%. But let's look at it over a 3-year period. So over a 3-year period, these are impressive results, once again, reminding you that we had multiple years of sales decline. And so in 2023, we actually grew the business 4%, in '24, 11% and then last year, 2%. So we're well on track for our CAGR of mid-single digit, as you can see from the slide there. Now let's get into a bit of detail as to what's driving these good results. So on the next slide, you'll see the innovative performance is one of the key areas of growth for us. And AUSTEDO, UZEDY and AJOVY hit $3.1 billion for the year. This is up about 35%. So excellent results there. And I'm really pleased to tell you that in Q4, we surpassed $1 billion for our innovative portfolio that you see on the screen here. But in a bit more detail, AUSTEDO grew at 34% at $2.26 billion. UZEDY was up 63% at $191 million, and AJOVY continues to perform, was up 30% at $673 million. Our generics business was flat, worth noting this excludes Japan from these numbers. Now I've talked a lot about moving from a pure-play generics company to a biopharma company. I think these results show we clearly have done that. And now it's a question of just how much we can keep driving this innovative portfolio and the pipeline that comes through. Now moving on to a bit more detail. I wanted to talk to you a bit about AUSTEDO. So AUSTEDO had a really strong quarter in quarter 4, as you can see, $725 million, up 40% for the quarter. And for the full year, $2.2 billion, up 35%. And this was delivered with good underlying growth. As you can see, TRx is 10%, and there's a 19% rise in milligram volume. This is driven by both new patients and better adherence. It's worth noting that AUSTEDO XR now accounts for 60% of new patients. Now -- very impressive results here. Now we did have in Q4, these numbers did reflect some year-end inventory stocking and some favorable gross to net. And Eli will talk a bit more detail about that. But if you actually take that out, then we still grew at 20% in Q4. So once again, the underlying growth of this product is very strong. And because of that, we're giving the guidance of $2.4 billion to $2.55 billion for 2025 (sic) [ 2026 ]. I think it's worth noting that if we do hit the upper end of that, then that means we've hit the $2.5 billion a year ahead of schedule. But we'll talk in a bit more detail of the puts and takes to that range. Now moving on to UZEDY. UZEDY also had another strong quarter, $55 million, up 28% and for the full year, up an impressive 63% to $191 million. TRx volume grew an impressive 123% year-over-year. And it's worth noting that more than 83% of the NBRx generated -- was generated by patients transitioning from oral therapies or treatment naive, which confirms that UZEDY is expanding the long-acting injectable market, not just taking share. Now another impressive fact on UZEDY is it's the fastest-growing long-acting injectable in its category. And because of this momentum, our guidance reflects this. And as you see, we have a guidance of $250 million to $280 million for 2026. Now moving on to AJOVY. AJOVY had a strong quarter as well, up 43% year-on-year at $211 million. And for the full year, it's $673 million, up 30%. So once again, for a product that's fairly mature, really strong growth. AJOVY continues to be #1 preventative anti-CGRP injectable in the top U.S. headache centers, and it leads in 30 markets across Europe and international. And this continued growth is driven by, I think, our commercial excellence, our ability to continue to take market share to manage the pricing and the payer environment in the U.S. and to continue to expand in new geographies. And because of this strength, we're giving a guidance of $750 million to $790 million. Now moving on to the pipeline. So we talked about the products we have in the market and the excellent progress we made on those, but the pipeline is really exciting here. And I do want to mention this, even though I know Eric will talk a bit about it. The things I always remind people about this slide is every product we're going to launch has a potential of over $1 billion. The size of the markets we're entering into are significant and our entry points into these markets are in the short term. And if you look at the total, the total of the portfolio can be over $10 billion of peak sales. There's an addition to this slide that some of you may not have seen, which is we will be announcing 2 new indications for duvakitug later this year, once again, highlighting that is a pipeline in a product. Now moving on to our generics business. Our generics business, our aim was to get this back to stability, and we've done that. And the generics business was flat in 2025 versus 2024. Now one of the things that I do always highlight is you need to look at the generics business over a multiyear period because of the fact that some years, you have more launches than others. That's just part of the business. And as you see here, our 2-year CAGR is 6%. But for 2025, the U.S. grew at 2%, international markets, 1% and Europe declined 2%. Now we continue to see good performance from our biosimilars business, and I think I'll move on to that now to talk you through that. And where we started with biosimilars over the last 3 years, we've made tremendous progress. It's worth noting that we now have 10 assets in the market globally, and we're going to launch 6 additional between now and the end of 2027. Then we have another 10 assets that are going to start launching from '28 and beyond. So some impressive numbers here. So the aim was to build a world-leading portfolio, and we've done that. In fact, I think we have the second largest portfolio of biosimilars now in the industry, and we've launched the most biosimilars since 2020. And because of this, we're well on track to grow our biosimilars business by $400 million by 2027. Now to close out, as you've seen by some of the numbers we've talked about, we're well on track to hit our 2027 guidance. The CAGR, I talked about, we currently stand at 6%. The operating margin will go into a bit more detail, but with the success of our innovative portfolio, we're very confident about 30%. Net debt to EBITDA at 2x, we're already at 2.5x and cash to earnings is 80%, Eli will walk you through a bit more detail on that. But with that, I'll hand you over to Eric to talk about our exciting pipeline. Eric Hughes: Thank you, Richard. Starting with the slide that Richard went over briefly. One of the things about this pipeline is there's 3 Phase III programs and 2 burgeoning Phase II programs. And the market potential is big, like Richard mentioned. But more importantly, it's the unmet medical need that we take pride in and what we're potentially going to address. And finally, I'd like to say that we planned over 5 years for submissions. So we're very proud of the fact that we've turned around this innovative pipeline and moved it forward so quickly. But I first want to highlight olanzapine LAI. We got the submission in on December 9, and we're looking forward to the EU submission in the second quarter of this year. We've shown that this olanzapine LAI that can address an unmet medical need in schizophrenia has great safety and efficacy, and we want to discuss that with the health authorities and hopefully get that approval at the end of this year. So something very exciting to look forward to. Next, on our DARI program, our dual-action rescue inhaler, we're very proud of the fact that we finished the targeted enrollment of this study at the end of 2025. And in fact, we're going to continue enrolling it to accelerate the back end of the study. And the most important thing about that enrollment, one of the things that's most difficult is the fact it has pediatrics, adolescents and adult patients. So I think that the opportunity here for a differentiated product of a dry powder inhaler and the fact that we have the potential to have adolescents and pediatrics in the label is a true differentiator for this program, addressing a large unmet medical need in asthma. And then moving on to duvakitug, a very exciting brand-new biologic class that's in development. A year ago, we showed really exciting Phase II data in both ulcerative colitis and Crohn's disease, posting very good numbers in both with a nice dose response. But now we're excited to be looking forward to the maintenance data in the first half of this year. And the important thing about the maintenance data is that we will show hopefully the durability of response. And that's really what people need in ulcerative colitis and Crohn's disease. These are chronic diseases that people frequently fail on their advanced therapies and need more. So durability in the long term is most important. And just a review, this represents 58 weeks of exposure, looking at 2 different doses given subcutaneously every 4 weeks. And Richard also mentioned that we started our Phase III programs with our partner, Sanofi, the SUNSCAPE and STARSCAPE, started right on time, and we're accelerating those programs and executing very well, and we'll be looking forward to new indications this year. And then moving on to anti-IL-15. We had a very exciting announcement at JPMorgan that Royalty Pharma provided funding for our program in vitiligo for a Phase II/III program. This is really great external validation of our program, what we will -- what we believe is a very differentiated product to address a number of unmet medical needs. First, in vitiligo, this is something that systemic therapies are needed for, and that results will be available in the first half of this year. But also celiac disease, we're running our second proof-of-concept study with a biopsy endpoint that will be available in the second half of this year. But in addition to that, alopecia areata, atopic dermatitis and eosinophilic esophagitis are all possible targets for this very important cytokine. And then on to emrusolmin. One of the things I've been very impressed with is the rate at which we've been enrolling this study. This is a Phase II study looking at critical endpoints of an important unmet medical need. I always like to remind people the mean survival in this disease after diagnosis is 6 to 10 years. So this is a very important unmet medical need. We are working hard to make sure that this study not only enrolls quickly, but we will over-enroll to make sure that this Phase II program is as pristine as powerful as possible, really potentially capitalizing on the ability to accelerate this approval. And before I get on to my last slide, I just wanted to do a shout out for the AJOVY team at Teva. They've done a great job in generating data in migraine, and it's very satisfying to see our innovation is recognized by the New England Journal of Medicine with a publication this month. This is great work by the team and really got that sort of the approval for the only and first CGRP antagonist to be approved for pediatrics with episodic migraine. So very proud and great work and kudos to the team. But finally, I just want to go over something that we take with great pride. We have a very exciting 2026 coming up with many different milestones in the R&D organization. The duvakitug data, as I mentioned, will come out in the first half. For anti-IL-15, vitiligo data in the first half and celiac data in the second half of 2026. We'll be looking for that final event in the asthma exacerbation study of DARI by the end of the year, which would be completing the Phase III study. The emrusolmin will be targeting a futility analysis at the end of this year, even in the face of accelerating and increasing the enrollment in that Phase II study. And obviously, we're looking for the anticipated approval of olanzapine LAI at the end of the year, and we'll be talking about our first human data for our anti-PD-1 IL-2. So a really exciting year full of catalysts. We're looking forward to all these milestones. And with that, I'm going to pass it off to Eli Kalif. Eliyahu Kalif: Thank you, Eric, and good morning and good afternoon to everyone. I will review our 2025 financial results, focusing on our fourth quarter performance, followed by our outlook for 2026. I would like to start with the following key messages that highlight our consistent execution throughout 2025. First, we delivered solid Q4 and full year results, driven once again by our fast-growing innovative portfolio, which is also driving a meaningful shift in our margin profile. This was our third consecutive year of growth since we launched our Pivot to Growth strategy. Second, we continue to strengthen our balance sheet with a net debt reduced to approximately $13 billion and a net debt-to-EBITDA ratio of 2.5x, well on track to achieve our target of 2x and our journey to investment-grade ratings. Third, we made significant progress on our transformation programs, achieving $70 million of our planned savings in 2025, staying on track to deliver approximately $700 million savings by 2027, achieving our 30% non-GAAP operating margin targets. And lastly, with our performance in 2025 and outlook for 2026, we are well positioned to achieve our long-term financial targets for 2030. Now moving to Slide 28. Before I start with the results, I would like to remind everyone that in the fourth quarter of 2025, Teva initiated a Phase III of UC and Crohn's indication for our duvakitug program. As per the collaboration agreement with Sanofi, we received $500 million in Q4 of 2025 for this development milestone. This payment positively contributed $500 million to both our revenue and free cash flow and had a positive contribution to our adjusted EBITDA of approximately $410 million. During this presentation, I will be discussing our results for the quarter and for the full year of 2025, excluding the impact of these milestone payments. In addition to these payments, I will also be excluding any contribution from the Japan business venture, which we divested on March 31, 2025, to help to provide you with a like-to-like comparison of our financial results. Now starting with our Q4 GAAP performance. Our Q4 revenue were approximately $4.2 billion, up 2% in U.S. dollars or down 1% in local currency year-over-year. Our key innovative products, AUSTEDO, AJOVY and UZEDY continued strong momentum, all meeting or exceeding our guidance for the full year. This strong growth in our innovative portfolio and stable generics was offset by lower proceeds from the sale of certain product rights compared to Q4 2024. GAAP net income and EPS were $480 million and $0.41, respectively, including the payments for the development milestones. Now looking to our non-GAAP performance. Our non-GAAP gross margin increased by 80 basis points year-over-year to 56.2% and resulted in our full year gross margin at 54.7%, well above the top end of our guidance range. This increase was mainly driven by a stronger-than-expected growth in our key innovative products, mainly AUSTEDO. Non-GAAP operating margin decreased by approximately 120 basis points year-over-year to 26.7%, mainly because of the higher planned investment in OpEx to support our innovative growth. Overall, we ended the quarter with a non-GAAP earnings per share of $0.68 compared to $0.70 in Q4 2024. Total non-GAAP adjustments in Q4 were $649 million. This included impairment charge of $77.3 million, mainly related to a manufacturing facility in Europe. Our free cash flow in Q4 was approximately $800 million and $1.9 billion for the full year, coming at the higher end of our guidance range, excluding the development milestones related to duvakitug. Moving to Slide 29. We are making significant progress in our Teva transformation programs to deliver targeted savings of approximately $700 million by 2027 through a well-defined and planned efforts. During 2025, we achieved $70 million of initial savings, demonstrating solid momentum and execution and continue to expect roughly 2/3 of our total savings target to be realized by the end of 2026. These transformation efforts, along with the ongoing portfolio shift towards high-growth and high-margin innovative products provide a clear path to achieving our 30% operating margin target by 2027, even as we continue to invest in our business for long-term growth. Now let me turn to our 2026 outlook. As I mentioned earlier, 2025 was a year of a strong progress on our Pivot to Growth strategy. We delivered revenue growth, expanded profits and margin, invested in our innovative products and pipeline and made significant progress towards our journey to investment-grade ratings. In 2026, we remain focused on continuing this momentum and executing on accelerate growth path to our strategy. Starting with our revenue guidance for 2026. We expect full year revenue of $16.4 billion to $16.8 billion. This represents a range of approximately 1% growth to 2% decline compared to 2025 on a normal base, excluding the $500 million development milestone payments and $75 million contribution in 2025 for the Japan business venture. This revenue guidance is consistent with our previous communication and reflects continued strong momentum in our innovative portfolio, including AUSTEDO, AJOVY and UZEDY combined with a low single-digit growth in global generics business. It's expected to largely offset revenue headwinds of approximately $1.1 billion from generic Revlimid in 2026. We expect non-GAAP gross margin in 2026 to be in the range of 54.5% to 55.5%, showing a further improvement over a strong 2025, driven again by the ongoing positive shift in our portfolio mix and the cost savings from our ongoing transformation programs. As a result, and as previously communicated, we expected our non-GAAP operating income and adjusted EBITDA to both growth in absolute dollars and as a percentage of revenue compared to 2025. Our operating expenses are expected to be in the range of 27% to 28% of revenue with a higher impact of the transformation program cost savings in the second half of the year. We expect finance expenses to be approximately $800 million in 2026, lower than 2025, reflecting the reduced debt levels and ongoing deleveraging. Our non-GAAP tax rate is expected to be in the range of 16% to 19%, slightly higher than 2025, which benefited partially from IP-related integration plans and the recognition of certain U.S. tax attributes. This brings us to expected non-GAAP earnings per share range of $2.57 to $2.77. Our 2026 free cash flow is expected to be in the range of $2 billion to $2.4 billion, representing a strong ongoing improvement in our cash conversion profile and consistent with our long-term targets. Now lastly, let me provide you with some directions on how we think about quarterly progression in 2026. We expect revenue to gradually increase over the course of the year with the revenue in the second half of 2026 slightly higher than the first half. Q1 is expected to be light, mainly due to the following: First, a year-over-year decline in our U.S. generics revenue, mainly because of approximately $300 million in generic Revlimid revenue from Q1 of 2025 that is going away. Second, on AUSTEDO, during Q4 of 2025, on top of AUSTEDO's strong underlying performance, we had the benefit of a year-end inventory build and a onetime gross to net of approximately $100 million. While we expect a strong year-over-year growth for AUSTEDO in Q1 2026, we expect Q1 revenue to reflect the sequential impact of these onetime benefits. We also expect AUSTEDO revenue in Q4 '26 to be potentially down year-over-year due to a different purchasing patterns and pricing environment ahead of the IRA implementation in January 2027. Our non-GAAP margins are also expected to be gradually ramped up over the course of the year, in line with the revenue trajectory as well as savings from the ongoing transformation programs. The onetime revenue dynamics that I just talked about will also impact gross margin in Q1 beyond the normal seasonality we see going from Q4 to Q1. Free cash flow is also expected to ramp up over the course of the year. Now on the next slide, I would like to highlight the strong free cash flow trajectory that we are on. There are 3 main elements that are going to continue to drive incremental free cash flow, going from approximately $1.9 billion in 2025, excluding duvakitug milestone payments to more than $3.5 billion by 2030. First, our innovative portfolio is uniquely positioned to continue to grow strongly, driving higher margins and free cash flow. In addition, we are on track to achieve $700 million savings from transformation programs by 2027. We don't stop here, and we'll continue to drive modernization of Teva beyond 2027. Second, we continue to strengthen our balance sheet through working capital and CapEx optimization. And lastly, we continue to deleverage, reduction in our debt expected to result in lower finance expenses by approximately 50% by 2030, and we expect to see a reduction in our legal payments over time. Now turning to the next slide on capital allocation. Our capital allocation strategy is focused on driving our Pivot to Growth strategy. This means keep investing in our key growth drivers and our world-class innovative pipeline. We are also making significant progress towards our target of 2x net debt-to-EBITDA and an investment-grade credit ratings. This progress is recognized consistently by the major credit rating agencies, including the recent upgrade by S&P and an improved outlook by Moody's. With the progress we have been making, I expect to see us achieving these goals in not-too-distant future, which also position us very well to thoughtfully evaluate additional ways of returning capital to our shareholders. Finally, before I conclude my review of our 2025 performance, I would like to reiterate our long-term targets. We are clearly on the journey to be a leading innovative biopharma company. With our growing innovative mix, a number of key pipeline developments this year and our free cash flow trajectory, we are confident about the directions we are on to achieve our 2027 and 2030 financial targets. With that, I will now hand it back to Richard for his closing remarks. Richard Francis: Thank you, Eli, and thank you, Eric. So the next slide I'm going to go on to here is the one Eric showed, but I think it's one that's worthy of being repeated. A really exciting year here for Teva with regards to milestones on our innovative portfolio. We have 7 milestones here on this slide. So very proud of that, very proud of what the team has achieved. Obviously, we have some exciting data around vitiligo and anti-IL-15 and celiac disease. We have the olanzapine launch later this year. We have the duvakitug maintenance data, the futility analysis, which could accelerate our ability to get to market with emrusolmin treating this very serious disease. So lots of opportunity here to continue this transition to a world-class biopharma company. Congratulations once again to the R&D team for moving this through so quickly. In just 3 years, we progressed this pipeline at record speed. Now it's because of this pipeline, it's because of the continued strong performance we have in our innovative portfolio that I mentioned earlier and Eli also mentioned, is why we're confident about the opportunity to continue to grow Teva top and bottom line and why we think it's an attractive investment opportunity. Because as you can see here, not only do we have significant headroom for AUSTEDO, AJOVY, we have the LAI franchise with UZEDY performing well, but olanzapine about to join it this year. I highlighted the amount of biosimilars that will be launched over the next few years. And then as we look forward, that pipeline, the readouts I just mentioned will start to come to fruition. So we'll be able to continue this momentum going forward. To move on to my final slide, just to conclude. Our growth journey continues. We have 3 years of consecutive growth. We have a 6% CAGR. Our innovative brands are growing at double digit, and they have headroom to keep growing. We have near-term milestone readouts, 7 in '26. And we have a stable outlook for our generics business, and we continue to focus on accelerating our Pivot to Growth journey. And with that, I'll open the floor to questions. Thank you. Christopher Stevo: Thanks, Richard. Alex, before you line up the question queue, I just want to remind callers, please limit yourself to one question and one follow-up. And if time permits, we will be more than happy to answer additional questions from you if you get back in the queue. Thank you. Operator: [Operator Instructions] Our first question for today comes from David Amsellem of Piper Sandler. David Amsellem: So I have one question on AUSTEDO and one on UZEDY. So helpful color on the guide, but I wanted to dig more deeply into the various pushes and pulls regarding AUSTEDO in 2026. Can you talk about net pricing dynamics and what's baked into your assumptions ex the gross to net favorability in 4Q and ex stocking? How should we be thinking about what your assumptions are regarding net pricing as we move through the year? And then how should we be thinking about what your assumptions are regarding volume growth, particularly on a per milligram basis. So that's number one. And on UZEDY, kind of a similar question. There's a lot of volume growth, obviously, but there's obviously significant government exposure, particularly Medicaid. So how should we be thinking about net pricing there? And what kind of assumptions you baked into your UZEDY guidance? Richard Francis: David, thanks for the questions. So let me start with AUSTEDO. I think the main point to highlight first here is we're really pleased with the momentum we have with the TRx growth we have, with the adoption of XR and the continued growth of the milligrams, as you saw there at 19%. So the fundamentals are really strong. We see a huge opportunity to continue to grow this from a TRx point of view with the amount of patients who are still untreated. So that fundamental is really strong. I think when it comes to the pricing, I think as we communicated last year, our aim has always been to make sure we get value and access. And so we've been very diligent about that for this year. And so obviously, it has got more competitive, but we've taken a very disciplined approach to that. And so I think we've maintained that value and access. So I don't think you could think of that as anything that's -- anything of any significance there. And I think the thing to think about with AUSTEDO is what we've finished 2025 with some really strong growth, both on our top line as well as on our milligrams and TRx. And as I said, if you back out that inventory build and the gross to net is still very strong performance. And so if you look at how we're performing across this range, I think we have a very strong range here. It does take into account some expectation that there may be some destocking in Q4 in 2026, but we'll see how that plays out. But probably the final thing I'll say on AUSTEDO, just to help give some clarity. If you do look at the range we've got and you back out the inventory build that we had in Q4, the growth of the brand is about -- the range is from 11% to 18%. So very strong growth on what is a lot bigger base. So I think that helps answer your question on AUSTEDO. On UZEDY, then as you've seen, very strong growth on UZEDY, really strong growth on TRx and continued really good change in the dynamics of this market that shows the quality of the product. But to your question, I think it's always important to understand that we have Medicaid and Medicare. And so we have that mix. And obviously, we know one is more profitable than the other. And how that mix plays out we've taken into account with our guidance and our range. But we see this product continued momentum, particularly as you look at the TRx being so high. So I think this product, we have a lot of enthusiasm around, but that's the fundamentals around the pricing. We factored them in, and it really comes down to those 2 channels. Thanks for the question, David. Operator: Our next question comes from Louise Chen of Scotiabank. Louise Chen: Congrats on the quarter. So my first question was, I wanted to ask you where you see the greatest disconnect between what you're excited about in your pipeline and what the Street is really missing on those products? And then second one, just a follow-up on AUSTEDO, I wanted to ask you how we should think about modeling 2027 in light of IRA and any other pushes and pulls you see here? Richard Francis: Okay. Thanks for the questions there. So the pipeline, I'll probably tag team this a bit with Eric. What -- look, I'll never say anybody is missing anything because everybody is very experienced in this business. I do think that our pipeline has come along very fast, think of fast side, maybe that's caught people unaware. But I think the quality of our antibodies, the quality of anti-TL1, the quality of duvakitug, I think, will show out in the data. So I think probably what's going to happen, I'd anticipate is as we turn over these cards and we see the data, then I think Teva will get recognized for what is a world-class pipeline. But it's probably a bit surprising for people to see just the quality of the pipeline that's emerged in such a short space of time. But maybe I'll hand it to Eric to give his view on that. Eric Hughes: Yes. Thank you, Richard, and thank you, Louise, for the question. I would emphasize something Richard said. I think the speed at which we turn around the innovative portfolio is quite honestly caught people by surprise. We've turned on a brand-new biologic for duvakitug, which is probably the best-in-class product for TL1A. We've launched or we will launch, hopefully, olanzapine LAI this year. But don't take our word for it. We've had external validation on 4 of these 5 programs. Olanzapine LAI got Royalty Pharma funding. Duvakitug was partnered with Sanofi, who saw the value. The DARI program was acknowledged by Abingworth. The anti-IL-15 program was recently acknowledged again by Royalty Pharma. And even emrusolmin, we've received Fast Track designation and an orphan designation. So across the entire innovative pipeline, we've accelerated them, I think, a little bit to the surprise of investors. But just look at the external validation that we've had in the pipeline and take that into consideration of your valuation. Richard Francis: Thank you, Eric. And then moving on to your final question about -- I think it was sort of asking for guidance on AUSTEDO in 2027, which I'm not going to give. Obviously, we've said we're going to do $2.5 billion for AUSTEDO in 2027. We remain very committed to that. As you see in our range that we have announced today, there's a potential that we will hit $2.5 billion in 2026. So we'll have to see how this plays out. I think the most important thing for AUSTEDO is to keep reminding everybody that 85% of people who suffer from tardive dyskinesia are still not treated. And so the opportunity to keep helping these patients to bring these patients in and give them therapy, I think, is a significant growth driver for AUSTEDO. So we also have the work we're doing on making sure that people can benefit from AUSTEDO XR. And as you can see there, 60% of new patients go on to AUSTEDO XR, and we know that helps with compliance and adherence, which obviously also in turn increases value. So I think we have a lot of value drivers for AUSTEDO, but I really don't want to get drawn into 2027 guidance at this moment. I think what I'm hoping people would see is what we have great momentum from '25. We're carrying that into '26, and we'll talk about '27 maybe this time next year. Operator: Our next question comes from Ash Verma of UBS. Ashwani Verma: Congrats on all the progress. So maybe just first one, how are you thinking about funding the R&D? So increasingly seeing more royalties and/or profit share. Just when you think about it strategically, how do you balance not giving away attractive economics to your partner versus seeing a meaningful increase in your internal R&D spend as you fund the growing pipeline? And then secondly, on the TL1A upcoming maintenance data, we've seen some competitors that the maintenance data versus the induction sort of went up on efficacy measures by high single digit to mid-teens in terms of percentage points. Is that a fair expectation to have as you look towards your upcoming results? Richard Francis: Ash, thanks for the question. I'll tag team this with Eric again. But on the R&D funding, I think the question was, how are you going to fund this? Are you going to be giving away value if you keep doing these partnerships? So I think the way we think about it is we have a big late-stage pipeline. We have a lot of opportunities to drive significant value creation. And when you have a good pipeline, in my experience and my belief is it's about moving it faster to the market to have patients benefit from it and to get revenue. And so we're moving a big pipeline really quickly here. Now how does it impact the economics? It really doesn't impact the economics in any meaningful way for a couple of reasons. One is these -- all these brands will be above $1 billion. Some of them will be multiple billion brands. The second thing is, which is an interesting fact that I think people miss on Teva is we're starting with a company with a very different gross margin than many other biopharma companies. So every time we launch an innovative product, it transforms our gross margin, which transforms our ability to drive EBITDA to drive EPS and cash flow. So as I said, the fact that these are not in any way giving away value in the broadest sense. But even with regard to Teva, they don't because of where we actually start this journey. The other thing I'd also like to highlight on this, we are launching so many products over such a short period of time that, that is the focus we're on. And we're going to have a potential to launch 4 products in 5 years, and we're going to actually announce more and more indications. So I think the pipeline is about making sure we move it quickly to the market. But in no way are we giving away value. I'd say we're accelerating value because of the speed we're moving. And then with regard to the key to the TL1A maintenance data, what are our expectations? I'll hand it over to Eric to answer, and then I'll conclude. Eric Hughes: Sure. Yes. Thanks, Ash, for the question regarding what we anticipate from the maintenance data of TL1A. So I'd start off by saying what's the history we've been telling with regard to duvakitug at Teva. We started by saying that we found in our in vitro work that we had the most potent antibody, the most selective antibody and the one that probably has the lowest antidrug antibodies. I think it's about 3% to 5% we saw in our Phase II study. So with that, we went into our Phase II program that we executed very well at speed. And then we came up with the highest reported numbers for both ulcerative colitis in Crohn's disease in 2 very well-controlled and run studies. So the in vitro translated into a very good result in Phase II. So if you translate that into what we anticipate in the maintenance, if you think that we have the most potent, the most selective, the lowest antidrug antibodies and that we can execute the study well, I would hope that when we lock the database, we see great results. So I'm bullish on it. Hopefully, that comes true, but we'll see what the data shows. Richard Francis: Thanks, Eric. We stand by the fact that we have and we believe we have the best TL1A. Operator: Our next question comes from Jason Gerberry of Bank of America. Jason Gerberry: One for Eli, just I didn't catch this, but can you talk about in 2026 guide, sort of what's the gross margin outlook versus the OpEx spend ratio? I think the latter would be in that 27% to 28% range you guys have talked about historically, but I just wanted to make sure that, that was confirmed from a modeling perspective. And then just for my follow-up, on vitiligo, I was trying to maybe understand kind of what we're going to get with this upcoming Phase Ib. Will we get VASI75 scores through the full evaluable period? Are you expecting most of these 30-plus patients to make it through the full evaluable period? Just kind of wondering how robust that data will be. Richard Francis: Thanks, Jason. Thanks for the question. So over to you, Eli, on the gross margin. Eliyahu Kalif: Jason, thanks for the question. So on gross margin, we end up the year, if we exclude the 2 milestone payments at a 54.7% gross margin. We are looking to be in the range of 54.5% to 55.5% in 2026. In terms of the OpEx, there are kind of mainly 2 dynamics there. First of all, -- and as I mentioned in my prepared remarks, we're going to see a bit higher OpEx, still in the range between 27% to 28% in the first half versus the second half just because of the revenue dynamics during the year. But there is also another element inside the OpEx, we're going to see more reduction in our G&A and actually shifting that reduction in between R&D and sales and marketing and able to stabilize it at the range of 27% to 28%. So this one didn't change versus our prior communication. Richard Francis: Yes. And the thing I'd add on to that, Jason, is gross margin is a really exciting story for us because as you see, as we continue to grow our innovative portfolio, we continue to launch products, that gross margin will just keep going up. It's just going to be a question of how much, but it will keep going up because of the fact that we're changing our portfolio so dramatically. Now with regard to the vitiligo data, I'll hand over to Eric. Eric Hughes: Yes. Thank you, Jason, for the question. So the data that we're going to be presenting in the first half of 2026 is a single-arm study for patients with vitiligo. It's about 38 patients in total. It will have the traditional and known endpoints for this field, which is facial VASI and total VASI. So it will be easily comparable to other treatments out there. And that reminds me the important thing here is that there are limited treatments for vitiligo today. There's one approved, which is a topical that only covers 10% of your body. And ones that are in development are the ones that what we need, things that are systemic in treatment, not only the face, but the entire body, more than just 10%. So one of the exciting things we think about when we talk about our anti-IL-15 program in vitiligo is this has the potential to be a once subcutaneous shot every 3 months. So a quarterly shot potentially to treat a systemic disease. So we're looking forward to that. You'll -- I think you'll get data that we'll be able to compare it to other treatments out there in development and approved. Operator: Our next question comes from Chris Schott of JPMorgan. Christopher Schott: Just sticking on IL-15. On the development time lines in vitiligo, can you just elaborate what exactly you need for that 2031 pathway versus '34? And I guess, is there a similar opportunity in celiac there as well? And if I can just do a really quick one, just coming back to AUSTEDO. I think you were talking about roughly $100 million benefit in 4Q, and it sounds like that's between rebate and inventory. Just when we think about destocking in 1Q, can you just clarify how much of that was inventory and how much was kind of this reversal of rebates? Richard Francis: Thanks for the question, Chris. Eric, do you want to start with the anti-IL-15, vitiligo and celiac? Eric Hughes: Sure. So thank you for the question on IL-15. So just to start off with IL-15 is it's a key cytokine in a number of different indications I mentioned before. We're working on vitiligo and celiac. I'm excited by both the potential for alopecia areata, atopic dermatitis or eosinophilic esophagitis. They're all interesting and important for this cytokine. For vitiligo, we're particularly excited because this is a program that we can move quickly. It has precedents for the regulatory endpoint. It's an endpoint that you can easily measure. You see the results. So that makes it a little bit more easy. And there's an unmet medical need here. We need systemic therapies, as I mentioned before. So we're thinking out of the box at Teva, we are accelerating this program in a clever pathway of a Phase II and Phase III study that we can work very quickly with the regulators. So the potential for a once quarterly dose subcutaneous shot is very exciting for us. Richard Francis: Thanks, Eric. And then on the AUSTEDO question, Chris, the way to think about that $100 million is the vast majority, the vast majority pretty much was the inventory. So that's why, obviously, we have a lot of confidence about 2026 in our numbers. So hopefully, that helps, Chris. Operator: Our next question comes from Umer Raffat of Evercore ISI . Umer Raffat: If I look at the delta versus consensus this quarter, it looks like it's driven by sales and marketing when I take out the one-timer impact of the milestone. And coincidentally, I feel like this is probably the highest sales and marketing spend quarter we've seen in the last 3 years or so. So I'm curious why that is, especially because it's happening in the middle of the transformation that's underway, number one. Secondly, for '26 guidance, is it fair to say that the Royalty Pharma $75 million payment for Phase IIb is embedded within the EBITDA? And is there any other milestones that are baked into the EBITDA guidance as well from TL1A or anything else? And then finally, on vitiligo, OPZELURA obviously has not necessarily done too well, but as Eric pointed out, has limited coverage. But is it fair to say that on the scores like OPZELURA showing about 30% facial VASI75 score, you would want to be tracking meaningfully north considering Royalty Pharma is all excited and they're not funding celiac only doing vitiligo. I'm just curious about your overall take on expectations. Richard Francis: Umer, thanks for the questions. You got a few into that one question there. So thanks for that. On the sales and marketing and the OpEx, I'll hand that to Eli to talk about. Eliyahu Kalif: Okay. Umer. So first of all, about the question about Royalty Pharma, out of the $75 million, the way that we're viewing, it's actually going to spread over '26 and '27 with 1/3 out of the $75 million going to happen in '26. It's more kind of backloaded for '26 year. And that's the only thing that's embedded there. We don't have any other, I would say, assumptions in our EBITDA related to TL1A milestones or anything like that. As far as related to the sales and marketing, if you actually back out the higher revenue due to the milestone, you get to kind of a 15.4% on sales and marketing. But going forward, next year, we're going to see that one actually 16%, and why? Because we are keeping investing in our growth engine, which is AUSTEDO and actually heading to next year, building kind of investment into our olanzapine launch. So we're going to see that one increasing. But all in all, the whole bucket going to be, from a dollar perspective, really kind of flat, but also from a percentage perspective due to the fact that you will see our transformation program going to impact the G&A, as I mentioned to Jason, and that's kind of a reduction in G&A going to split in between the R&D investment and into the sales and marketing. Richard Francis: Thanks, Eli. And look, one thing I'll just add on to the back of that before I hand it over to Eric. If you think about the guidance for this year, the EBITDA range, I think, is showing the value of the programs we put in place, the value of driving our innovative portfolio, the fact that when we talk about our transformation program, it was $700 million of net savings after investing in our growth drivers. And so we've allowed ourselves to make sure that we can drive this innovative portfolio, which helps drive that EBITDA, but at the same time, our efficiency programs help also drive the EBITDA. So I think we're very pleased and proud of the fact that our EBITDA starts with a 5 in front of it, which I think is important. But we're very mindful of how we spend our money and where we allocate our capital. When it comes to vitiligo, I'll hand that over to Eric. Eric Hughes: Thank you, Umer, for the question. So when it comes to what data we've seen with the topical out there today and what's in development, I always want to be competitive on any endpoint what you talk about. So hopefully, when we lock the database and get that results, we can show that we're competitive against what's available. But again, let's focus again what patients need. They need systemic therapy that's conveniently given. So it's almost inappropriate to compare it to a topical on 10% of your body. But certainly, we hope to be competitive. Operator: Our next question comes from Les Sulewski of Truist. Leszek Sulewski: Congrats on the progress. I just wanted to focus on the biosimilars side. So what's the launch cadence and expected profitability profile, particularly given the U.S. channel and PBM dynamics? And then what are the prerequisites for targeting the 10 new products beyond 2028? And you've previously evaluated or mentioned reevaluating BD within the space. So what type of, whether it's in-licensing, co-development or tuck-ins fits your leverage and margin profile today? And has that bar changed given the latest policy dynamics? Richard Francis: Thanks for the questions. So talking about biosimilars, yes, it's an exciting time. And I think the fact that we built the second largest portfolio and continue to add to it in such a short space of time is a testament to the prioritization we put behind it. But to sort of give you a bit of specifics and -- when we talk about -- we have 10 in the market now, we have 6 to launch between now and '27. Those 6 -- majority of those will be across both U.S. and Europe, which is important because we haven't actually had a presence in Europe of any significance. And we know that market is a market with quicker uptake, more predictability and some very clear returns. So excited about that. And to name just a few, we have biosimilar Prolia, biosimilar Xgeva, biosimilar Simponi, biosimilar Eylea and biosimilar Xolair. So we have a lot coming through of those markets and most of those are in both. I think it's Simponi that's just in the U.S. Now you highlighted the 10. And you sort of -- in your question, it sounded like we had targeted 10. No, we have 10. They are in our pipeline. But we're just going to add to that. So we have 10, which is why I said we can start launching '28 onwards, but we are continually adding to that. And the final part of your question is doing this through partnerships, how does that work out in gross margin. So we are going to continue doing it through partnerships, and it still is attractive from a gross margin point of view with the right partnership. It's still accretive to our business, our generics business significantly. So that's how we do it. And you'll probably start to see some deals coming through already in the first half of this year as we already build out this portfolio beyond the '26. So -- and then the final thing I'll add on that, this biosimilar portfolio is coming through thick and fast, and that's going to really help us drive the generics business going forward, both in Europe and in the U.S. But thanks for your question. Christopher Stevo: Les, could you repeat your BD question, please? Leszek Sulewski: Essentially, I just wanted to get a sense of if there's a potential for you to kind of dive a little bit deeper via BD within the space, if there's anything available out there via partnerships that you've previously had and essentially what's your strategy for that space? Christopher Stevo: Sorry, are you asking about biosimilars? Richard Francis: Yes. So that's what I thought. So that's -- I think I answered that question, Les. We'll continue to do the partnerships. Some of those we already have good, big partnerships with companies that we think we can have the potential to expand those, whether that's mAbxience, whether that's Samsung. So I think we're looking at expanding. But also we have other companies that have approached us to be their partner because obviously, the performance we've had in the U.S. has been impressive. We have the fastest-growing biosimilar Humira. We have a very fast-growing business now in the U.S. So I think people are seeing that. But yes, it will be through partnerships, the majority of it. Operator: Our next question comes from Dennis Ding of Jefferies. Yuchen Ding: I had 2, if I may. Number one, sort of a big picture question on R&D. What is your R&D philosophy at Teva? And I guess how much derisking do you think we'll get around the R&D platform from the data readouts this year? I'm also curious what else could be planned for 2027 as you advance some of these newer drugs forward? And then number two, just a question around BD. I'm curious as you transition to a novel biopharma company, if your BD philosophy has changed at all and if Teva might be interested in doing acquisitions in, let's say, the classic biotech space rather than what's historically been spec pharma. Richard Francis: Thanks, Dennis. Thanks for the question. I'll tag team that with Eric and maybe start on the philosophy of R&D or maybe we call it the strategy. Eric Hughes: Yes. No, thank you for the question, Dennis. And this is a very important question. And I think that the philosophy in the way that we operate at Teva is we are ruthlessly driven by data. We have, first and foremost, a pipeline in Phase III and Phase II that's relatively derisked. I think emrusolmin is probably the lowest on the probability of success. But when you think about our programs, we use known science, we combine it in a way that will execute well and quickly with regulatory approvals. And that's based and driven solely on data. One of the things I've noticed and been able to achieve here at Teva is when we see data, we pivot and we move forward with it. That's something I hadn't been able to do in my career in other places. So speed and execution driven by data with this philosophy of known science and derisked assets is how we will move forward. I think that's baked into every one of our programs at this point. Richard Francis: Thanks, Eric. And then to move on to your next question, you said what about BD and as we pivot into a biopharma company. So firstly, thank you for the recognition that we are pivoting. And I think we pivoted. But anyway, we'll keep showing that with the pipeline as it comes out. But yes, we are actively looking at BD. We think we have a commercial powerhouse of the team. I think you've seen that with the results of AUSTEDO, UZEDY and AJOVY. And so we want to add to that team. Now that said, we have, as Eric highlighted, a really exciting pipeline. So the organic growth we have coming through is impressive. So we're not desperate to do BD. We don't have to. At the same time, it fits into our TA areas of CNS neurology and immunology, then I think it's very synergistic, and it makes a lot of sense. So we are very active in that. What is interesting, I think, within the last year to 18 months, the amount of approaches we've had has significantly increased. And I think that's because they see Teva as a partner both from an R&D perspective, the speed which we move things through the clinic is exciting, but also primarily because of the commercial capability and muscle we have and the focus we give assets when we have an asset, whether it's in development, we focus and we move it quickly, whether it's in the market, we focus and we actually drive sales. So I think we'll hopefully be able to talk about some things going forward, but we are very disciplined in our capital allocation, and we think it's the right asset at the right time at the right price, we'll definitely do it. But because of the pipeline we have that's coming through, we can stick to that in a very disciplined way, and we will because going back to that fourth pillar of the Pivot to Growth strategy, it's about focused capital allocation, making sure we give a good return on that in the short, medium and long term and create value for shareholders. So thanks for your question, Dennis. And I think with that, I think that is the final question. We went over a bit, but I think we did start a couple of minutes late. So thank you for your questions and your interest in Teva, and I look forward to following this up later with our Q1 results. Thank you. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Alex Ng: Good afternoon, and welcome to Stolt-Nielsen's earnings call for the final quarter of 2025. As always, the earnings release and related materials are available on our website. We'll be recording this session and playback will be available on our website from tomorrow. Included in this presentation are various forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, and we refer you to our latest annual report for further details. I'm Alex Ng, Vice President of Corporate Development and Strategy. Joining me today are Udo Lange, our CEO, and Jens Gruner-Hegge, our CFO. At the end of our presentation, there will be a Q&A session where we'll be taking questions in the room and online. [Operator Instructions] Thank you, and over to you, Udo. Udo Lange: Yes. Thank you so much, Alex, and welcome, everyone, here in London and of course, on the call as well, and thanks for joining us today for our fourth quarter results. The presentation will follow the usual format. I will begin with an overview of the group's results for the quarter and the full year, and then Jens will cover the financials before handing back to me to run through the performance of our divisions, our view of the market outlook and a few concluding remarks. In an unpredictable and challenging market context, I'm really pleased that overall, Stolt-Nielsen has delivered a solid finish to 2025, achieving EBITDA of $186 million for Q4. This completes the year with $776 million in EBITDA, which was at the upper end of our guidance and the second highest EBITDA result achieved in our history. We continue to communicate that Stolt-Nielsen is not a shipping company, but a logistics business. Non-Stolt Tanker operations account for 57% of our asset base and 45% of our EBITDA. We are building our non-tankers earnings base through our capital investment program to continue to grow long-term sustainable cash flow for our shareholders. For this quarter, while Stolt Tankers EBITDA fell 18% from the same quarter last year, the resilience of the other areas of our business resulted in a 13% drop for the group overall. Optimizing value creation from our portfolio is the driver of our M&A activities. In the period, we acquired 100% of Suttons, a U.K.-based ISO tank operator through which we can leverage the scale and flexibility of Stolt Tank Containers' global platform to expand our service offering for our customers. Aligned to our strategy to grow Avenir whilst preserving balance sheet flexibility, we have also very recently announced that we are in discussions to sell down a portion of our equity in Avenir. We also issued a new Norwegian bond. It was one of the tightest spreads for a logistics company achieved in the Norwegian bond market, showing our good access to markets and the credit investors appreciate our portfolio, and the master of the bond is in the room, Julian, thanks for the outstanding work there. You'll remember that last year, we evolved how we communicate our earnings potential, aligning our EBITDA guidance with our business model for the full year. In 2025, we came in towards the top of our range, and we hope you find our transparency in this regard helpful, and we are committed to continuing with this approach. Based on what we know today, we expect that our 2026 EBITDA will be in a range of $600 million to $750 million. Jens will elaborate on this more a bit later, but I wanted to flag a couple of key points here. We are excited about integrating Suttons into our core business. However, there will be some integration costs this year and positive EBITDA impact from the Suttons business is not expected until 2027. This also assumes that the de-consolidation of EMEA is completed in line with our announcement on Monday, and that is, of course, relevant for the like-for-like year-over-year comparison. And we expect to be able to refine this range as the year progresses. Let's now turn the page to review our financial highlights. I'm really pleased with the results achieved in the quarter in a complex market backdrop. Operating revenue was down 4% or $29 million year-on-year, which is predominantly on account of weaker freight rates in Stolt Tankers. EBITDA before the adjustment for fair value came in at $186 million, down $27 million on last year due to lower rates in Stolt Tanker and in Tank Containers, partially offset by performance in our Gas operations. Operating profit was down year-over-year by $35 million, mainly due to the performance in Tankers and Tank Containers, plus additional depreciation from the consolidation of the Hassel Shipping 4 and Avenir. Net profit was also down, driven by the same factors as well as higher interest expenses. Free cash flow was down EUR 38 million year-over-year, driven by higher CapEx, including from the acquisition of Suttons International and new building deposits in our NST joint venture. Net debt-to-EBITDA has increased to 3.12x as a result of the investments we have made over the year. I will talk more about how we are investing for long-term growth a bit more later. Over the page, we look at some of the key drivers of performance. Looking at the snapshot of the whole year, we have delivered a solid performance with the second highest EBITDA result in the company's history despite demand headwinds from a weak global chemical market as well as geopolitical uncertainty and tariffs impacting sentiment. We have remained focused on our strategy and on supporting our businesses to maintain their leading market positions. Stolt Tankers earnings were impacted by ongoing geopolitical uncertainty with lower freight rates weighing on performance whilst volumes remained stable. Over the last 18 months at Stolthaven, we are focused on optimizing for higher-margin business. This strategy has delivered success in certain markets, and we end the year with average utilization for the year up slightly, a positive outcome in a difficult market. Tank Containers have also been navigating a highly competitive market and performance here has been impacted mainly by lower transport margins. For the year overall, the mix of EBITDA generated outside of Stolt Tankers increased to 43% from 35% last year. This is $40 million more than last year as investments across our portfolio, help diversify our earnings. Our global teams are doing a fantastic job of working together to help our customers keep their supply chains moving in a safe and reliable way. And I want to thank all our people for their dedication across the year. They truly live our purpose of moving today's products for tomorrow's possibilities. In November, we announced the acquisition of Suttons International, a U.K.-based ISO tank operator. I wanted to give you a bit of additional color on the rationale for the acquisition and how it supports the Tank-Container strategy. We acquired Suttons in November, adding over 11,000 ISO tank containers to the fleet, growing our fleet by around 20%. The acquisition is aligned with our corporate strategy to accelerate growth in one of our asset-light businesses, leveraging Stolt Tank Containers' global platform to support customers with efficiency, reliability and flexibility across their supply chains. We have been investing in creating a scalable global platform for Stolt Tank Containers, driven by a strong focus on digitalization and efficiency, and we aim to drive sustainable growth, operational consistency and improve customer outcomes by leveraging this platform to successfully embed Suttons within our business. Suttons not only brings tank capacity, but also enhances our customer offering as we bring in specific expertise in gas distribution, domestic short sea and China domestic services. With an expanded fleet, global reach, a more comprehensive service offering and an improved digital experience, customers will benefit from our scale, efficiency and global network. As we talked about it on our Capital Markets Day, the ISO tank container market is highly fragmented. As you can see here on the chart, this transaction cements Stolt Tank Containers' position as a leading ISO tank operator and gives us potential for further profit margin growth. As well in this market, we see low levels of new tank production and ongoing capacity rationalization, which we expect to lay the foundation for an eventual market recovery and Stolt Tank Containers will be well positioned to take advantage of a potential upturn. Our strategy puts our three most important stakeholders at the heart of everything we do, our shareholders, our customers and our people. We focus on developing our people to continuously improve our customer experience and on value creation for shareholders through our unique market leadership across liquid logistics and other business investments. We paid an interim dividend of $1 per share in December, which takes shareholder distributions since 2005 to over $1.4 billion. Our commitment to balancing distributions, conservative balance sheet and investing into our business is key to delivering long-term shareholder returns. Our unique position in liquid logistics benefits customers as they build and optimize robust supply chains in uncertain and demanding markets. 70% of our top 50 customers use more than one of our service, and we continue to outperform industry norms with respect to Net Promoter Scores. This year, the average Net Promoter Score of our Logistics businesses was 52, up from 40 in 2024. Our people are the beating heart of our business and their passion and commitment drive our success. This year, employee engagement remains strong. Our employee engagement survey showed a sustainable engagement score of 86%, outperforming industry's peers in all benchmark categories with also a record response rate of 91%. We have created a workplace where our people want to stay and the average tenure for Stolt-Nielsen employee is over 9 years. To support our strategy, we have been making targeted investments to position our business for long-term growth and to ensure our Liquids Logistics Solutions remain compelling for the future. We spent approximately $500 million in 2025 and increased our asset base to $5.8 billion. In 2026, we have plans to extend this further by around $380 million investments. We strengthened our market position and customer value proposition in all 3 logistics businesses. In Stolt Tank Containers, we continue to invest in assets to maintain our network, acquiring the remaining 50% in the Hassel Shipping 4 joint venture and ordering 2 additional modern fuel-efficient 38,000 deadweight new-builds with our joint venture partner, NYK. At Stolthaven terminals, we started construction of a new terminal in Turkey, while our terminal in Taiwan advanced towards operational status. And we invested to expand capacity in the U.S., Korea and New Zealand. I touched upon the rationale for the Suttons acquisition and that investment sits in the FY '25 Tank Container figures in addition to new tanks in our core business. We also acquired the remaining shares of Avenir in 2025, reflecting our excitement in continuing to capitalize on the growing need for LNG bunkering as announced this week. We are now exploring a partial sell-down of this holding for an additional value creation opportunity while still having commitment to grow Avenir's fleet in the future. Based on project approved to-date, we will reduce our CapEx spend by around $130 million year-on-year while both sustaining our current operations and driving future growth opportunities and innovations. We will see the full impact of these investments over the coming months and years. And I'll now pass on to Jens for the financials. Jens Grüner-Hegge: Thank you, Udo. And great to see everyone. Good morning to those of you calling in from the United States, and good afternoon to everyone here. As Udo did, I will compare fourth quarter of '25 with fourth quarter of 2024. And just as a reminder, our fourth quarter runs from September 1 through November 30, every year. To reiterate what Udo has talked about, the company's performance is resilient in a challenging environment. But let's dive into the numbers. Now we talked about a lot of transactions that happened in the last 12 months. So since I'm comparing fourth quarter of '24 with fourth quarter '25, we have added a column here to take out the impact or to normalize the impact of the three major transactions, which was the acquisition of 100% of Hassel Shipping 4, 100% of Avenir and now lately also the Suttons acquisition. So comparing those to the normalized with the current -- with the last quarter last year, the drop in revenue was driven by Tankers, reflecting the lower freight rates, which were partly offset by a 6.9% increase in volume following additions to the fleet over the last 12 months. Terminals revenue was flat and STCs was down by about $5 million, excluding the Suttons impact, while Stolt Sea Farms revenue was marginally up. The reduction in operating expenses partly offset the reduction in revenue and was driven by lower TCE hire costs and lower owning costs in tankers. Excluding the impact of Hassel Shipping 4 and Avenir, depreciation expense was only marginally up, and that was reflecting really additional leases that we've taken on and additional terminal capacity that has been delivered and become operational. The equity income from our joint ventures was up substantially, and that was driven by a prior year impairment that we took at HIGAS of about $5 million and past operating losses at Avenir that has since now seen a significant improvement in the operations in the last quarter. A&G expense was up compared to last year, mostly reflecting annual inflation adjustments as well as a consequence of the weaker U.S. dollar because a lot of our A&G expenses are in non-dollar, Euros, Pounds and Asian currencies. Also, last year, we reversed an over accrual for profit sharing in the fourth quarter of last year, which had a negative impact of about $11 million. So you normalize for that, the increase is more normal. Adjusted operating profit for the quarter was, therefore, $88.5 million. That's down from $130.4 million in the fourth quarter last year. And as you can see from the difference between the reported numbers and the adjusted numbers, the acquisition that we talked about contributed about $7 million to that operating profit. And as you can also see, about 40% of the increase in the reported net interest expense was due to an increase in the net debt related to the acquisitions and other capital expenditures that we had during the year. While the rest was due to lower interest income as we reduced the holding of cash on hand compared to last year, and you will see that on the subsequent slide. Other relates to dividends from our equity instruments, so dividends that we have received on investments. And income tax was down, reflecting an insurance-related tax provision taken in the fourth quarter of '24 as well as prior year tax adjustment at terminals, offset by higher taxes at corporate due to improved profitability that we've seen at Avenir and Stolt Sea Farm. And consequently, the net profit for the quarter ended up at $59.6 million, as Udo said, with EBITDA of $186 million. Let's take a look at the cash flow. So cash from operations was down this last quarter, predominantly reflecting the weaker earnings, but still at healthy levels. If you compare to previous years, still a very strong cash-generating quarter. Dividends from JVs were down, but this was offset by positive working capital from the prior year and cash spent -- if we move to capital expenditure, cash spent on capital expenditure was substantially up, reflecting the acquisition of Suttons as well as increased progress payments on our new buildings and as well terminal capital expenditures for the ongoing expansions that we have. Offsetting this was the net cash receipts for repayments of advances from our joint ventures, as you can see. There was a lot of debt activity -- funding activity, and Julian has done a tremendous job in keeping the company with a very strong liquidity position. During the fourth quarter, we raised $297 million in new debt, and that was to refinance expiring facilities and as well to fund the capital expenditures that we have ongoing. And I'm tremendously grateful both to Julian and his team, to the rest of the company has been working hard on making this possible as well as to all our banks and financiers. After adjusting for FX, we had a reduction in cash of $16.1 million, and we ended the quarter with cash and cash equivalents of $144.6 million. If you look at the bottom right of this slide, you see our total liquidity position, which at the end of the fourth quarter was $477 million, that includes revolving credit lines of $332 million, committed lines that is and slightly up from last quarter. I mentioned the significant reduction in cash on hand last -- of the fourth quarter of '24, we had $335 million in cash, which, of course, generated a lot of interest income, and that's why you see that sort of half of the interest expense increase that we saw in the last 12 months. Talking about capital expenditures. During the quarter, it totaled $138 million. That was of course, led by the STC acquisition of Suttons also the ongoing terminal expansions and as well progress payments that we have ongoing on the new-buildings that we have. And therefore, overall, for '25, we spent $511 million on CapEx, slightly below what we had indicated at the previous quarterly earnings release as some of it has been pushed out to 2026. For this year, we expect to spend $383 million with the focus being on tanker new-buildings, terminal expansions, Avenir new-buildings and Stolt Sea Farm expansions. Now expect this to probably change somewhat as the year progresses as it normally does as we commit to new projects, but this should be a good indication of what we expect to spend. And it's slightly down from last year, but we're also coming out of 2 years, '24 and '25, where we had significant capital expenditures. And whereas we intend to continue to invest strategically in our businesses, we also need to focus on integrating our added capacity into our operations for maximized long-term benefit, not only for our shareholders, but also for our customers. Moving over to our debt profile. It here reflects the refinanced debt that is mentioned in the bullet at the bottom right. So there was about $86 million that we have repaid since the end of the fourth quarter. So our current balance for 2026 remains at $351 million. As part of this financing, we also -- since quarter end, since what I showed here in the financials, we also added $145 million in additional liquidity, which is available for further debt reductions, progress payments and other capital expenditures. So we continue having a very strong liquidity position going forward. You see the two orange blocks. Those are the 2 bonds that we have, one maturing in '28 and $150 million, the one that we just did in September maturing in 2030. And if you look at the bottom left of this slide, you can see the increase in gross debt in the first quarter reflects the consolidation of Hassel Shipping 4 and Avenir and then again, a slight increase in the fourth quarter of '25, reflecting the Suttons acquisition, and on average, our interest rates have come slightly down from 5.6% in the previous quarter to 5.39% in this quarter, reflecting general interest movements as well as tightening of margins that we have achieved on new financing. The continued steady performance of the company supports our covenants and covenant compliance. The increase in debt and therefore, net debt to tangible net worth as well as a net debt to EBITDA seen in the first quarter was really -- in the fourth quarter was really due to Hassel Shipping 4 sorry, in the first quarter was due to the Hassel Shipping 4 acquisition, and Avenir. And in the fourth quarter, you can see that same impact from the Sutton's acquisition. Debt to tangible net worth is now at 1.04x. That's well below our covenant limit, which is 2.25x. So we have plenty of headroom, slightly up from the prior quarter where we were at 1.01x. I mean with the lower EBITDA that we have seen in this last quarter compared to previous quarters, the EBITDA fell slightly to $788 million, and with that, we have seen the EBITDA to interest expense go slightly up to 5.6x and the net debt to EBITDA increased from 2.94x to 3.12x, as you can see at the bottom left graph here. So overall, we're in a very comfortable position relative to our covenants, a good liquidity position, a good balance sheet position. So the company is well prepared for what lies ahead. We gave today guidance of $600 million to $750 million and wanted to talk a little bit more about what that entails. So why are we doing this? Firstly, we want to offer insight into our outlook for the year, what we see ahead. We believe it is aligned to the nature of our businesses and our business model to promote a longer-term view of the company, not a short-term quarter-to-quarter, but really give you the longer-term view that we work towards. We also want to facilitate fair pricing of the company as a diverse logistics business rather than as a shipping company. So taking into account everything that we know today, what we believe will happen over the next 12 months, we expect EBITDA for the full year 2026 to be within a range of $600 million to $750 million. Now this guidance is underpinned by a number of key assumptions. As you can see some of them here on the slide, relating both to global macroeconomic picture generally and specific factors affecting the liquid logistics market. And particularly, that there are no substantial geopolitical changes versus what we see today. So we are expecting this to continue. More specifically, the guidance is before fair value of the biological assets, before any gains or losses on sales of assets and other onetime noncash items. And it also excludes any 2026 EBITDA contribution from Avenir LNG. We've taken that out because of the announcement that we made earlier in the week and the consequential de-consolidation that, that will have. So I just want to make sure that everybody understands the basis for our guidance. It does include, however, the potential Suttons integration costs that will be incurred during '26. As such, the guidance is provided -- that we have provided is subject to some uncertainty beyond our control due to the current operating environment that we're in. And with that, I would like to hand it over to Udo, and he will cover the segment highlights as well as the market outlook. Many thanks. Udo Lange: Let's first start with Stolt Tankers. The chemical tanker markets have continued to soften this quarter as the market uncertainty around geopolitics and tariffs continues unabated. Demand is there and spot volumes, in particular, are elevated, but freight rates are weaker than the prior year. Operating revenue declined by 14% as the rate decline was only partially offset by a 4% increase in operating days due to additions to the fleet. COA renewal rates were down in line with our expectation. And we expect to see the COA ratio increase over the coming quarters. Operating profit was likewise down, predominantly driven by the decline in spot freight rates for regional and Deep Sea, which was largely offset by lower trading expenses and lower time charter expense. However, further impacting the operating profit was higher owning expenses and depreciation and lower joint venture equity income. Maren and her team continue to work hard to navigate this highly complex and unpredictable macro environment with a laser focus on delivering for our customers, and I really want to thank them for all their efforts. Looking more closely at Tanker rates. We are seeing some early signs of rates beginning to stabilize. While the TCE for the quarter was around $24,500 per operating day, showing a decline of 19% year-over-year, on a quarterly basis, the gradient of decline has flattened and TCE was just 1% down versus Q3. As things stand today, we are seeing the usual winter strengthening in crude and product tanker markets, which could be supportive for spot rates within the chemical segments as well. However, at the risk of being repetitive, we are not just a chemical tanker business. We encourage the market to consider our performance across all the areas of our diversified portfolio. And I want to remind you that we have moved to full year EBITDA guidance for the business as a whole. Thanks to Guy and the Stolthaven team who have maintained steady utilization and kept operating revenue stable year-on-year in an uncertain market. EBITDA saw a modest decline of 4% with operating profit down 8% with these declines driven by investments in IT alongside some inflationary impacts and slightly less equity income from our joint ventures. Looking ahead, we expect the storage markets to remain stable, notwithstanding some caution and delayed decision-making on tank rental commitments from our customers. And so Stolthaven Terminals will continue to focus on optimizing margins and utilization. In response to the challenging demand drivers for storage, we are actively adopting our approach to specific market dynamics to better adapt to local conditions, and our investments in additional capacity at existing sites in the U.S. will start to come into play towards the end of the year. We expect to benefit from additional capacity in Houston and New Orleans coming online in a staggered fashion during Q3 ramping up and reaching full effect in 2027. The tank container market continues to be challenging. And in this context, Hans and his team have done a great job to drive revenue at Stolt Tank Containers up $5 million or 3%. This result has been driven by stronger shipment volumes, which offset the impact of lower ocean carrier freight rates. EBITDA and operating profit declined due to lower transportation margins and cost inflation. I now want to cover our view of the market and concluding remarks before we open for Q&A. This time last year, we spoke about the impact of geopolitical events on global trade flows. We highlighted a number of areas of macro uncertainty and discussed how these might play out through 2025. Today, the list of macro factors driving global uncertainty remains similar with the addition of two factors affecting our underlying markets. Geopolitical risk has not abated. Whilst we see some international players starting to selectively transit the Red Sea, there appears to be no clear resolution on events in the area, and we see new risks in international relations, especially in the Middle East. Risks and opportunities related to global tariffs and sanctions remain with trade policy changes impacting customer sentiment. The shadow fleet continues to impact around the edges of our markets and fluctuations in the crude oil market continue. We also continue to face a subdued global chemical market, which is struggling from production-underutilization. The timing of new build deliveries will also have a supply side impact over the next 2 to 3 years. In the face of these risks, we are well positioned to continue to deliver our value proposition for our customers across the supply chain. We are laser-focused on this, planning strategically and operationally so that we can be flexible and react with agility to macro events. We have strong relationships with our customers, and we are working closely with them to navigate these challenges and keep liquid chemicals moving around the world. Despite these market risks, supply and demand fundamentals are currently supported by a tight MR market. GDP growth is expected to be around 3%. Seaborne trade growth is expected to be muted this year with a return to growth expected in 2027. We are watching developments carefully with some caution, but we expect volumes to remain relatively stable year-on-year. MR rates have been trending gently upwards through 2025 and are predicted to remain at a high level, which has typically kept them operating in the CPP market, limiting the potential for swing tonnage in our market. As mentioned previously, we do expect some new-builds to enter the market in 2026 and 2027, and this creates some uncertainty on the supply side. However, the aging global fleet means that there remains high potential for retirements of vessels to manage global supply if necessary, with around 30% of tankers aged 20 years and older by 2027. To wrap up, we are focused on leveraging our diversified logistics businesses to steer them through global supply chain complexity and delight our customers by executing our liquid logistics strategy. To support both our core liquid logistics businesses and explore new opportunities and innovations, we are positioning ourselves for long-term growth through targeted strategic investments. We invested strategically through 2025 and will continue to do so through 2026. This disciplined capital allocation strategy translates into balance sheet flexibility and headroom to meet all our obligations. Our investments will convert into EBITDA-generating assets given time. And despite the market turmoil continuing, we expect the full year EBITDA to fall within a range of $600 million to $750 million. As we look to the year ahead and beyond, our strong strategic foundations position us well to navigate future challenges and opportunities. Our people, clear purpose and diverse portfolio provides the resilience and quality required to deliver long-term value for our shareholders, customers and other stakeholders. Thank you for your attention, and I will now pass you back to Alex for Q&A. Alex Ng: Thank you very much, Jo. So we will start Q&A with questions in the room. [Operator Instructions]. Thank you very much. And then we'll take questions from the Internet as well. Please? Unknown Attendee: Just on the guidance, you did mention on the '25 results, the split between tankers, non-tankers. You have a bit of a range in your '26 guidance. Can you give some color on your expected split and also perhaps on the sort of which segment is going to cause that variance in the range? Jens Grüner-Hegge: Okay. So if you look at the other businesses, the non-tanker businesses, they tend to be more stable. We know that there's a cyclicality in the tanker markets. Now looking at the performance that we've seen so far through the year, the third and the fourth quarter of 2025, we saw that was pretty stable from quarter-to-quarter. The reduction was really early in the year. Going forward, we mentioned also that we see that there is a certain short-term floor because we've seen the strengthening in the MR markets recently, which is lending some support. But I think it's worthwhile noting that as we get into the second half of 2026, you will see more of that order book that we showed being delivered. So we see more of a risk in the tanker market as you get into the second half than in the first half. And we know that these new-buildings will be delivered sort of second half '26 into first half of '27. So if you take that into consideration of what we saw in the fourth quarter, I would expect for the next few quarters that mix to be relatively stable with the exception of capital expenditures becoming operational. And that will be gradual. Again, I think most of that we expect to happen also towards the second half of the year when we're looking at the terminals business. So you'll probably start seeing more of a non-tanker growth in EBITDA in the second half of the year and potential challenges for the Tanker segment in the second half of the year. So you will start seeing that balance shifting towards more non-tanker business. Did that answer your question? Unknown Attendee: Yes, that's really good color. Also on the Red Sea, sort of -- this is a tricky one, but at what point do you expect to return? I mean there's a lot of talks about Maersk now entering the Red Sea again. What's sort of your point of action on entering the Red Sea? Udo Lange: Yes. So I can take that. So of course, chemical tankers is among the most risky vessel-type that you can navigate through the Red Sea, because a drone attack on that hitting the wrong tank has a significant bigger impact than when you have a conventional ship. So we are really very, very cautious, and we monitor that. So of course, it's good to see that Maersk is taking that effort, but we normally look really more towards the tail-end. And of course, what's currently going on in the Middle East and the U.S. fleet coming in. So we don't expect this to happen anytime soon. Alex Ng: Any additional questions in the room? Okay. Then we will move to the questions coming from those online. There's a couple of themes that maybe we can club together. I think the first one really goes to our liquid logistics strategy. So maybe one for you, Udo. How successful has the liquid logistics strategy been so far with customers? Udo Lange: Yes, I would say I'm really excited about how it latches more and more on. And that, of course, has to do with the increasing complexity globally. So if I take the amount of strategy sessions that we have now with customers versus 2 years ago, it's a complete different ballpark. But it has also to do with the capability that we are building in our own team. So of course, this -- remember, we come from very strong three divisions and now they need to collaborate more together, more and more people need to understand how do I really position all of Stolt-Nielsen in front of the customer. And that is really remarkable to see how deep that actually goes. So we have now not only sessions where we look at large customers, we also look at sessions that we have with medium, with small customers, and we do this around the whole world. So it's pretty exciting. The development is really exciting. And we are getting better and better at it and the customers appreciate it actually more and more. And we see most important, of course, it's not the activity, and we see business out of it. So we have met a customer that didn't have Tank Container business with us before talked about the whole portfolio, and we got Tank Container business. Met another customer we were very small on the tank container side. So the beauty is because we are market leading really in all 3 segments, each of the businesses is actually strong also with different customers. Sometimes it's the same, sometimes it's different ones. And it allows us to take our strong relationship and then introduce the other businesses as well. And don't forget what is also unique is, we are the only player who has end-to-end shipping where we have a deep sea fleet, we have regional fleets and we have barging fleets. And then we have terminals and then we have tank containers. And now the Suttons, we even have gas and short sea and China domestic. So that's just really beautiful because you just we have one page now where we put this all together and you sit in front of sea level. And they, of course, not necessarily know Stolt-Nielsen, but then they are like, "oh, that's really interesting. You're building a terminal right now in Taiwan, and we need to talk about our Southeast Asia logistics strategy". Maybe how can that all come into a hub-and-spoke system. And so that's really nice how the capability that we have, A, add value for the customer, gives us more business, but also how our organization is more and more capable to position this. Alex Ng: Questions for you, Jens, related to how we triangulated the EBITDA guidance. And the first one was, can you share any information from what the EBITDA contribution was from Avenir in 2025? Jens Grüner-Hegge: Yes. If you look at -- it's related to the guidance, it might be more relevant to us what we're expecting there. But '25 was a transition year for Avenir. As you will have seen in the comparison with '24 was that it was a -- 2024 was a drag. We've seen that turn into an improvement, a positive contribution. For '26, you're looking at about mid-$20 million EBITDA contribution that would be expected. And with this separation out, we are actually looking to be able to grow that faster than what possibly could have done on our own. So it is a -- it's about mid- $20 million in 2026 in the number if you want to have that in the back of your mind when you look at the guidance. Alex Ng: Thank you, Jens. And then another question related to guidance. You mentioned that Sutton won't contribute EBITDA until 2027. But do you expect it to be EBITDA-negative during '26 or just close to breakeven? Jens Grüner-Hegge: If we look at the year overall, our expectation is it won't be a drag. It will -- the benefit that we get from the additional volume, the additional tanks, there will be some integration costs as we -- as there always is with an M&A. But we expect a neutral impact in '26, and then we should see that really start taking off in '27. Udo Lange: Yes. I think on the base business, but of course, the integration cost year-over-year, it is a drag. Jens Grüner-Hegge: The cost is there, so yes. Alex Ng: A question related to strategy. Avenir is you announced the partial sale of that asset. Can there be any read across to whether Stolt Sea Farm will be on the table in order to clarify the strategy around liquid logistics? Udo Lange: No, these are completely two different strategic conversations. So you know we are since more than 50 years in agriculture. We are the market leader in the premium segment. And the business is developing quite nicely. We are investing. We are super happy with the returns that we are seeing. What is different on Avenir, remember, we had a joint venture and -- but we also realized that while we believe in the strong future of that market, that the other partners were -- for them, it was less strategic. So we then remember, we acquired 100% for Avenir, but well knowing that, that, of course, would have a significant capital expenditure exposure for us. So -- but we felt we believe we can grow in this market. But then at the same time, of course, we also looked at, well, now let's look for strategic partners where we then really can join forces and actually stronger lean into that market without actually dragging down our balance sheet too much. And so one of the key reasons, of course, you see also that our CapEx goes down year-over-year by $130 million is, well, we will benefit from the growth in the LNG market, but we are not as heavy exposed anymore in this segment. So two very, very different strategies. So Sea Farm is core to us and Avenir is an opportunity for us to capture a nice market together with a strategic partner. Alex Ng: And then the final questions we have on the -- for now relate to the CapEx that you talked about and the expansions, Udo. First question is related to Stolthaven. How should we quantify the investments in terminals in relation to added capacity and how it evolves over the year? Udo Lange: Jens, why don't you take the Stolthaven? Jens Grüner-Hegge: Yes. So we talked a bit about the different investments that we have ongoing in Stolthaven. We have the terminal in Taiwan, which is about to become operational, and that will have a positive impact as we go into 2026. We have the expansions that are ongoing in Houston and New Orleans, where we're adding about 170,000 cubic meters combined, and that will start coming on as we get into the third and fourth quarter of 2026. So you probably won't see much of an impact in this year, but it will come and be fully operational and have a full impact as we get into 2027. The other projects that we have sort of like the Turkey project, that's a long-term investment that will come in later years. It's a joint venture structure. So you will see that not necessarily in consolidated fashion, but more in an equity income from a joint venture in future years. Alex Ng: Thank you, Jens. And then the final question is, if we could share the delivery schedule for the new-builds in Tankers. Maybe I can just add a comment there. So we expect the first vessel to be delivered towards the end of this year. It's kind of on the edge of this year or next year, but it gives you an idea on that delivery. And then during the course of 2027, there will be a further additional 9 ships. And then in '28, there will be approximately 3 ships, and then the final one is due for delivery in 2029. So hopefully, good for your models. That concludes all of the questions. So thank you very much. We'll post a recording of this call on the website tomorrow. Udo, back to you. Udo Lange: Thank you very much for joining us today, and I look forward to talking to you again when we present our results in the first quarter of 2026 in April. We continue to be very excited about the business. We launched our strategy 2.5 years ago. We are executing nicely on the strategy. And I think you can see the benefits for our shareholders, our customers and our people as well. So thanks for all your support, and wish you a nice day.
Operator: Hello, and welcome to the Teva Pharmaceuticals Industries Limited Q4 2025 Earnings Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Chris Stevo, SVP, Investor Relations. Please go ahead. Christopher Stevo: Thank you, Alex. Good morning, and good afternoon, everyone. Thank you for joining us on our fourth quarter call. Before I turn it over to our CEO, Richard Francis, I just want to remind everyone that we will be making forward-looking statements on this call. Any statements we make are only as of today, and we undertake no obligation to update those statements subsequently. And if you have any questions about our forward-looking statements, feel free to see the appropriate sections in our SEC Forms 10-K and 10-Q. With that, Richard Francis. Richard Francis: Thank you, Chris. Good morning, good afternoon, everybody. Great to have you on the call. Also on the call with me today will be Dr. Eric Hughes, Head of R&D and Chief Medical Officer, who will be walking you through some exciting developments in our pipeline. And then Eli Kalif, my CFO, who will go through the Q4 and the full year results. So starting with, as I always do, the Pivot to Growth strategy and the progress we've made over the last 3 years. As you know, the foundation is the 4 pillars: deliver on our growth engines, I think you'll see in the results that we continue to have great momentum around our innovative portfolio of AUSTEDO, UZEDY and AJOVY and some great progress on our innovation, so step-up innovation. You'll see that we filed olanzapine last year, completed the recruitment of the DARI study, dual-action rescue inhaler and started our Phase III study for duvakitug in UC and CD. And then sustained generics powerhouse, good progress. Our aim is to get this business back to stability, and we have done that. And now we see some exciting growth emerging from our biosimilars portfolio, and I'll talk a bit about that. And then focus the business. This is all about making sure we allocate capital to the correct areas to give the best return. And we'll walk you through a bit of the progress we've had on our transformation program, which is the aim is to have $700 million of net savings by 2027. We made excellent progress in '25, and we're on track to hit the 2/3 by the end of this year 2026. So now moving on to the actual results. So I'm pleased with these results. Now just to orientate you on this slide, the numbers on the left include the Sanofi milestones and the numbers on the right do not. So starting with the revenues. So a 5% increase in revenues at $17.3 billion. EBITDA grew 12% up to $5.3 billion. EPS grew 19% to $2.93 and free cash flow was up 16% to $2.4 billion. And our net debt to EBITDA is now at 2.5x, which is, as you know, our goal for 2027 is to 2x. So we're well on our way to do that. Now a slide that I've shown over the last 12 quarters actually, to show that our return to growth, which was our strategy, part of the Pivot to Growth strategy when we launched it in 2023. And as you see, we've consecutively done this. And we did that in Q4, where the growth was up 11%. Now that did include the milestone from Sanofi. If you take that away, we were slightly down at 1%. But let's look at it over a 3-year period. So over a 3-year period, these are impressive results, once again, reminding you that we had multiple years of sales decline. And so in 2023, we actually grew the business 4%, in '24, 11% and then last year, 2%. So we're well on track for our CAGR of mid-single digit, as you can see from the slide there. Now let's get into a bit of detail as to what's driving these good results. So on the next slide, you'll see the innovative performance is one of the key areas of growth for us. And AUSTEDO, UZEDY and AJOVY hit $3.1 billion for the year. This is up about 35%. So excellent results there. And I'm really pleased to tell you that in Q4, we surpassed $1 billion for our innovative portfolio that you see on the screen here. But in a bit more detail, AUSTEDO grew at 34% at $2.26 billion. UZEDY was up 63% at $191 million, and AJOVY continues to perform, was up 30% at $673 million. Our generics business was flat, worth noting this excludes Japan from these numbers. Now I've talked a lot about moving from a pure-play generics company to a biopharma company. I think these results show we clearly have done that. And now it's a question of just how much we can keep driving this innovative portfolio and the pipeline that comes through. Now moving on to a bit more detail. I wanted to talk to you a bit about AUSTEDO. So AUSTEDO had a really strong quarter in quarter 4, as you can see, $725 million, up 40% for the quarter. And for the full year, $2.2 billion, up 35%. And this was delivered with good underlying growth. As you can see, TRx is 10%, and there's a 19% rise in milligram volume. This is driven by both new patients and better adherence. It's worth noting that AUSTEDO XR now accounts for 60% of new patients. Now -- very impressive results here. Now we did have in Q4, these numbers did reflect some year-end inventory stocking and some favorable gross to net. And Eli will talk a bit more detail about that. But if you actually take that out, then we still grew at 20% in Q4. So once again, the underlying growth of this product is very strong. And because of that, we're giving the guidance of $2.4 billion to $2.55 billion for 2025 (sic) [ 2026 ]. I think it's worth noting that if we do hit the upper end of that, then that means we've hit the $2.5 billion a year ahead of schedule. But we'll talk in a bit more detail of the puts and takes to that range. Now moving on to UZEDY. UZEDY also had another strong quarter, $55 million, up 28% and for the full year, up an impressive 63% to $191 million. TRx volume grew an impressive 123% year-over-year. And it's worth noting that more than 83% of the NBRx generated -- was generated by patients transitioning from oral therapies or treatment naive, which confirms that UZEDY is expanding the long-acting injectable market, not just taking share. Now another impressive fact on UZEDY is it's the fastest-growing long-acting injectable in its category. And because of this momentum, our guidance reflects this. And as you see, we have a guidance of $250 million to $280 million for 2026. Now moving on to AJOVY. AJOVY had a strong quarter as well, up 43% year-on-year at $211 million. And for the full year, it's $673 million, up 30%. So once again, for a product that's fairly mature, really strong growth. AJOVY continues to be #1 preventative anti-CGRP injectable in the top U.S. headache centers, and it leads in 30 markets across Europe and international. And this continued growth is driven by, I think, our commercial excellence, our ability to continue to take market share to manage the pricing and the payer environment in the U.S. and to continue to expand in new geographies. And because of this strength, we're giving a guidance of $750 million to $790 million. Now moving on to the pipeline. So we talked about the products we have in the market and the excellent progress we made on those, but the pipeline is really exciting here. And I do want to mention this, even though I know Eric will talk a bit about it. The things I always remind people about this slide is every product we're going to launch has a potential of over $1 billion. The size of the markets we're entering into are significant and our entry points into these markets are in the short term. And if you look at the total, the total of the portfolio can be over $10 billion of peak sales. There's an addition to this slide that some of you may not have seen, which is we will be announcing 2 new indications for duvakitug later this year, once again, highlighting that is a pipeline in a product. Now moving on to our generics business. Our generics business, our aim was to get this back to stability, and we've done that. And the generics business was flat in 2025 versus 2024. Now one of the things that I do always highlight is you need to look at the generics business over a multiyear period because of the fact that some years, you have more launches than others. That's just part of the business. And as you see here, our 2-year CAGR is 6%. But for 2025, the U.S. grew at 2%, international markets, 1% and Europe declined 2%. Now we continue to see good performance from our biosimilars business, and I think I'll move on to that now to talk you through that. And where we started with biosimilars over the last 3 years, we've made tremendous progress. It's worth noting that we now have 10 assets in the market globally, and we're going to launch 6 additional between now and the end of 2027. Then we have another 10 assets that are going to start launching from '28 and beyond. So some impressive numbers here. So the aim was to build a world-leading portfolio, and we've done that. In fact, I think we have the second largest portfolio of biosimilars now in the industry, and we've launched the most biosimilars since 2020. And because of this, we're well on track to grow our biosimilars business by $400 million by 2027. Now to close out, as you've seen by some of the numbers we've talked about, we're well on track to hit our 2027 guidance. The CAGR, I talked about, we currently stand at 6%. The operating margin will go into a bit more detail, but with the success of our innovative portfolio, we're very confident about 30%. Net debt to EBITDA at 2x, we're already at 2.5x and cash to earnings is 80%, Eli will walk you through a bit more detail on that. But with that, I'll hand you over to Eric to talk about our exciting pipeline. Eric Hughes: Thank you, Richard. Starting with the slide that Richard went over briefly. One of the things about this pipeline is there's 3 Phase III programs and 2 burgeoning Phase II programs. And the market potential is big, like Richard mentioned. But more importantly, it's the unmet medical need that we take pride in and what we're potentially going to address. And finally, I'd like to say that we planned over 5 years for submissions. So we're very proud of the fact that we've turned around this innovative pipeline and moved it forward so quickly. But I first want to highlight olanzapine LAI. We got the submission in on December 9, and we're looking forward to the EU submission in the second quarter of this year. We've shown that this olanzapine LAI that can address an unmet medical need in schizophrenia has great safety and efficacy, and we want to discuss that with the health authorities and hopefully get that approval at the end of this year. So something very exciting to look forward to. Next, on our DARI program, our dual-action rescue inhaler, we're very proud of the fact that we finished the targeted enrollment of this study at the end of 2025. And in fact, we're going to continue enrolling it to accelerate the back end of the study. And the most important thing about that enrollment, one of the things that's most difficult is the fact it has pediatrics, adolescents and adult patients. So I think that the opportunity here for a differentiated product of a dry powder inhaler and the fact that we have the potential to have adolescents and pediatrics in the label is a true differentiator for this program, addressing a large unmet medical need in asthma. And then moving on to duvakitug, a very exciting brand-new biologic class that's in development. A year ago, we showed really exciting Phase II data in both ulcerative colitis and Crohn's disease, posting very good numbers in both with a nice dose response. But now we're excited to be looking forward to the maintenance data in the first half of this year. And the important thing about the maintenance data is that we will show hopefully the durability of response. And that's really what people need in ulcerative colitis and Crohn's disease. These are chronic diseases that people frequently fail on their advanced therapies and need more. So durability in the long term is most important. And just a review, this represents 58 weeks of exposure, looking at 2 different doses given subcutaneously every 4 weeks. And Richard also mentioned that we started our Phase III programs with our partner, Sanofi, the SUNSCAPE and STARSCAPE, started right on time, and we're accelerating those programs and executing very well, and we'll be looking forward to new indications this year. And then moving on to anti-IL-15. We had a very exciting announcement at JPMorgan that Royalty Pharma provided funding for our program in vitiligo for a Phase II/III program. This is really great external validation of our program, what we will -- what we believe is a very differentiated product to address a number of unmet medical needs. First, in vitiligo, this is something that systemic therapies are needed for, and that results will be available in the first half of this year. But also celiac disease, we're running our second proof-of-concept study with a biopsy endpoint that will be available in the second half of this year. But in addition to that, alopecia areata, atopic dermatitis and eosinophilic esophagitis are all possible targets for this very important cytokine. And then on to emrusolmin. One of the things I've been very impressed with is the rate at which we've been enrolling this study. This is a Phase II study looking at critical endpoints of an important unmet medical need. I always like to remind people the mean survival in this disease after diagnosis is 6 to 10 years. So this is a very important unmet medical need. We are working hard to make sure that this study not only enrolls quickly, but we will over-enroll to make sure that this Phase II program is as pristine as powerful as possible, really potentially capitalizing on the ability to accelerate this approval. And before I get on to my last slide, I just wanted to do a shout out for the AJOVY team at Teva. They've done a great job in generating data in migraine, and it's very satisfying to see our innovation is recognized by the New England Journal of Medicine with a publication this month. This is great work by the team and really got that sort of the approval for the only and first CGRP antagonist to be approved for pediatrics with episodic migraine. So very proud and great work and kudos to the team. But finally, I just want to go over something that we take with great pride. We have a very exciting 2026 coming up with many different milestones in the R&D organization. The duvakitug data, as I mentioned, will come out in the first half. For anti-IL-15, vitiligo data in the first half and celiac data in the second half of 2026. We'll be looking for that final event in the asthma exacerbation study of DARI by the end of the year, which would be completing the Phase III study. The emrusolmin will be targeting a futility analysis at the end of this year, even in the face of accelerating and increasing the enrollment in that Phase II study. And obviously, we're looking for the anticipated approval of olanzapine LAI at the end of the year, and we'll be talking about our first human data for our anti-PD-1 IL-2. So a really exciting year full of catalysts. We're looking forward to all these milestones. And with that, I'm going to pass it off to Eli Kalif. Eliyahu Kalif: Thank you, Eric, and good morning and good afternoon to everyone. I will review our 2025 financial results, focusing on our fourth quarter performance, followed by our outlook for 2026. I would like to start with the following key messages that highlight our consistent execution throughout 2025. First, we delivered solid Q4 and full year results, driven once again by our fast-growing innovative portfolio, which is also driving a meaningful shift in our margin profile. This was our third consecutive year of growth since we launched our Pivot to Growth strategy. Second, we continue to strengthen our balance sheet with a net debt reduced to approximately $13 billion and a net debt-to-EBITDA ratio of 2.5x, well on track to achieve our target of 2x and our journey to investment-grade ratings. Third, we made significant progress on our transformation programs, achieving $70 million of our planned savings in 2025, staying on track to deliver approximately $700 million savings by 2027, achieving our 30% non-GAAP operating margin targets. And lastly, with our performance in 2025 and outlook for 2026, we are well positioned to achieve our long-term financial targets for 2030. Now moving to Slide 28. Before I start with the results, I would like to remind everyone that in the fourth quarter of 2025, Teva initiated a Phase III of UC and Crohn's indication for our duvakitug program. As per the collaboration agreement with Sanofi, we received $500 million in Q4 of 2025 for this development milestone. This payment positively contributed $500 million to both our revenue and free cash flow and had a positive contribution to our adjusted EBITDA of approximately $410 million. During this presentation, I will be discussing our results for the quarter and for the full year of 2025, excluding the impact of these milestone payments. In addition to these payments, I will also be excluding any contribution from the Japan business venture, which we divested on March 31, 2025, to help to provide you with a like-to-like comparison of our financial results. Now starting with our Q4 GAAP performance. Our Q4 revenue were approximately $4.2 billion, up 2% in U.S. dollars or down 1% in local currency year-over-year. Our key innovative products, AUSTEDO, AJOVY and UZEDY continued strong momentum, all meeting or exceeding our guidance for the full year. This strong growth in our innovative portfolio and stable generics was offset by lower proceeds from the sale of certain product rights compared to Q4 2024. GAAP net income and EPS were $480 million and $0.41, respectively, including the payments for the development milestones. Now looking to our non-GAAP performance. Our non-GAAP gross margin increased by 80 basis points year-over-year to 56.2% and resulted in our full year gross margin at 54.7%, well above the top end of our guidance range. This increase was mainly driven by a stronger-than-expected growth in our key innovative products, mainly AUSTEDO. Non-GAAP operating margin decreased by approximately 120 basis points year-over-year to 26.7%, mainly because of the higher planned investment in OpEx to support our innovative growth. Overall, we ended the quarter with a non-GAAP earnings per share of $0.68 compared to $0.70 in Q4 2024. Total non-GAAP adjustments in Q4 were $649 million. This included impairment charge of $77.3 million, mainly related to a manufacturing facility in Europe. Our free cash flow in Q4 was approximately $800 million and $1.9 billion for the full year, coming at the higher end of our guidance range, excluding the development milestones related to duvakitug. Moving to Slide 29. We are making significant progress in our Teva transformation programs to deliver targeted savings of approximately $700 million by 2027 through a well-defined and planned efforts. During 2025, we achieved $70 million of initial savings, demonstrating solid momentum and execution and continue to expect roughly 2/3 of our total savings target to be realized by the end of 2026. These transformation efforts, along with the ongoing portfolio shift towards high-growth and high-margin innovative products provide a clear path to achieving our 30% operating margin target by 2027, even as we continue to invest in our business for long-term growth. Now let me turn to our 2026 outlook. As I mentioned earlier, 2025 was a year of a strong progress on our Pivot to Growth strategy. We delivered revenue growth, expanded profits and margin, invested in our innovative products and pipeline and made significant progress towards our journey to investment-grade ratings. In 2026, we remain focused on continuing this momentum and executing on accelerate growth path to our strategy. Starting with our revenue guidance for 2026. We expect full year revenue of $16.4 billion to $16.8 billion. This represents a range of approximately 1% growth to 2% decline compared to 2025 on a normal base, excluding the $500 million development milestone payments and $75 million contribution in 2025 for the Japan business venture. This revenue guidance is consistent with our previous communication and reflects continued strong momentum in our innovative portfolio, including AUSTEDO, AJOVY and UZEDY combined with a low single-digit growth in global generics business. It's expected to largely offset revenue headwinds of approximately $1.1 billion from generic Revlimid in 2026. We expect non-GAAP gross margin in 2026 to be in the range of 54.5% to 55.5%, showing a further improvement over a strong 2025, driven again by the ongoing positive shift in our portfolio mix and the cost savings from our ongoing transformation programs. As a result, and as previously communicated, we expected our non-GAAP operating income and adjusted EBITDA to both growth in absolute dollars and as a percentage of revenue compared to 2025. Our operating expenses are expected to be in the range of 27% to 28% of revenue with a higher impact of the transformation program cost savings in the second half of the year. We expect finance expenses to be approximately $800 million in 2026, lower than 2025, reflecting the reduced debt levels and ongoing deleveraging. Our non-GAAP tax rate is expected to be in the range of 16% to 19%, slightly higher than 2025, which benefited partially from IP-related integration plans and the recognition of certain U.S. tax attributes. This brings us to expected non-GAAP earnings per share range of $2.57 to $2.77. Our 2026 free cash flow is expected to be in the range of $2 billion to $2.4 billion, representing a strong ongoing improvement in our cash conversion profile and consistent with our long-term targets. Now lastly, let me provide you with some directions on how we think about quarterly progression in 2026. We expect revenue to gradually increase over the course of the year with the revenue in the second half of 2026 slightly higher than the first half. Q1 is expected to be light, mainly due to the following: First, a year-over-year decline in our U.S. generics revenue, mainly because of approximately $300 million in generic Revlimid revenue from Q1 of 2025 that is going away. Second, on AUSTEDO, during Q4 of 2025, on top of AUSTEDO's strong underlying performance, we had the benefit of a year-end inventory build and a onetime gross to net of approximately $100 million. While we expect a strong year-over-year growth for AUSTEDO in Q1 2026, we expect Q1 revenue to reflect the sequential impact of these onetime benefits. We also expect AUSTEDO revenue in Q4 '26 to be potentially down year-over-year due to a different purchasing patterns and pricing environment ahead of the IRA implementation in January 2027. Our non-GAAP margins are also expected to be gradually ramped up over the course of the year, in line with the revenue trajectory as well as savings from the ongoing transformation programs. The onetime revenue dynamics that I just talked about will also impact gross margin in Q1 beyond the normal seasonality we see going from Q4 to Q1. Free cash flow is also expected to ramp up over the course of the year. Now on the next slide, I would like to highlight the strong free cash flow trajectory that we are on. There are 3 main elements that are going to continue to drive incremental free cash flow, going from approximately $1.9 billion in 2025, excluding duvakitug milestone payments to more than $3.5 billion by 2030. First, our innovative portfolio is uniquely positioned to continue to grow strongly, driving higher margins and free cash flow. In addition, we are on track to achieve $700 million savings from transformation programs by 2027. We don't stop here, and we'll continue to drive modernization of Teva beyond 2027. Second, we continue to strengthen our balance sheet through working capital and CapEx optimization. And lastly, we continue to deleverage, reduction in our debt expected to result in lower finance expenses by approximately 50% by 2030, and we expect to see a reduction in our legal payments over time. Now turning to the next slide on capital allocation. Our capital allocation strategy is focused on driving our Pivot to Growth strategy. This means keep investing in our key growth drivers and our world-class innovative pipeline. We are also making significant progress towards our target of 2x net debt-to-EBITDA and an investment-grade credit ratings. This progress is recognized consistently by the major credit rating agencies, including the recent upgrade by S&P and an improved outlook by Moody's. With the progress we have been making, I expect to see us achieving these goals in not-too-distant future, which also position us very well to thoughtfully evaluate additional ways of returning capital to our shareholders. Finally, before I conclude my review of our 2025 performance, I would like to reiterate our long-term targets. We are clearly on the journey to be a leading innovative biopharma company. With our growing innovative mix, a number of key pipeline developments this year and our free cash flow trajectory, we are confident about the directions we are on to achieve our 2027 and 2030 financial targets. With that, I will now hand it back to Richard for his closing remarks. Richard Francis: Thank you, Eli, and thank you, Eric. So the next slide I'm going to go on to here is the one Eric showed, but I think it's one that's worthy of being repeated. A really exciting year here for Teva with regards to milestones on our innovative portfolio. We have 7 milestones here on this slide. So very proud of that, very proud of what the team has achieved. Obviously, we have some exciting data around vitiligo and anti-IL-15 and celiac disease. We have the olanzapine launch later this year. We have the duvakitug maintenance data, the futility analysis, which could accelerate our ability to get to market with emrusolmin treating this very serious disease. So lots of opportunity here to continue this transition to a world-class biopharma company. Congratulations once again to the R&D team for moving this through so quickly. In just 3 years, we progressed this pipeline at record speed. Now it's because of this pipeline, it's because of the continued strong performance we have in our innovative portfolio that I mentioned earlier and Eli also mentioned, is why we're confident about the opportunity to continue to grow Teva top and bottom line and why we think it's an attractive investment opportunity. Because as you can see here, not only do we have significant headroom for AUSTEDO, AJOVY, we have the LAI franchise with UZEDY performing well, but olanzapine about to join it this year. I highlighted the amount of biosimilars that will be launched over the next few years. And then as we look forward, that pipeline, the readouts I just mentioned will start to come to fruition. So we'll be able to continue this momentum going forward. To move on to my final slide, just to conclude. Our growth journey continues. We have 3 years of consecutive growth. We have a 6% CAGR. Our innovative brands are growing at double digit, and they have headroom to keep growing. We have near-term milestone readouts, 7 in '26. And we have a stable outlook for our generics business, and we continue to focus on accelerating our Pivot to Growth journey. And with that, I'll open the floor to questions. Thank you. Christopher Stevo: Thanks, Richard. Alex, before you line up the question queue, I just want to remind callers, please limit yourself to one question and one follow-up. And if time permits, we will be more than happy to answer additional questions from you if you get back in the queue. Thank you. Operator: [Operator Instructions] Our first question for today comes from David Amsellem of Piper Sandler. David Amsellem: So I have one question on AUSTEDO and one on UZEDY. So helpful color on the guide, but I wanted to dig more deeply into the various pushes and pulls regarding AUSTEDO in 2026. Can you talk about net pricing dynamics and what's baked into your assumptions ex the gross to net favorability in 4Q and ex stocking? How should we be thinking about what your assumptions are regarding net pricing as we move through the year? And then how should we be thinking about what your assumptions are regarding volume growth, particularly on a per milligram basis. So that's number one. And on UZEDY, kind of a similar question. There's a lot of volume growth, obviously, but there's obviously significant government exposure, particularly Medicaid. So how should we be thinking about net pricing there? And what kind of assumptions you baked into your UZEDY guidance? Richard Francis: David, thanks for the questions. So let me start with AUSTEDO. I think the main point to highlight first here is we're really pleased with the momentum we have with the TRx growth we have, with the adoption of XR and the continued growth of the milligrams, as you saw there at 19%. So the fundamentals are really strong. We see a huge opportunity to continue to grow this from a TRx point of view with the amount of patients who are still untreated. So that fundamental is really strong. I think when it comes to the pricing, I think as we communicated last year, our aim has always been to make sure we get value and access. And so we've been very diligent about that for this year. And so obviously, it has got more competitive, but we've taken a very disciplined approach to that. And so I think we've maintained that value and access. So I don't think you could think of that as anything that's -- anything of any significance there. And I think the thing to think about with AUSTEDO is what we've finished 2025 with some really strong growth, both on our top line as well as on our milligrams and TRx. And as I said, if you back out that inventory build and the gross to net is still very strong performance. And so if you look at how we're performing across this range, I think we have a very strong range here. It does take into account some expectation that there may be some destocking in Q4 in 2026, but we'll see how that plays out. But probably the final thing I'll say on AUSTEDO, just to help give some clarity. If you do look at the range we've got and you back out the inventory build that we had in Q4, the growth of the brand is about -- the range is from 11% to 18%. So very strong growth on what is a lot bigger base. So I think that helps answer your question on AUSTEDO. On UZEDY, then as you've seen, very strong growth on UZEDY, really strong growth on TRx and continued really good change in the dynamics of this market that shows the quality of the product. But to your question, I think it's always important to understand that we have Medicaid and Medicare. And so we have that mix. And obviously, we know one is more profitable than the other. And how that mix plays out we've taken into account with our guidance and our range. But we see this product continued momentum, particularly as you look at the TRx being so high. So I think this product, we have a lot of enthusiasm around, but that's the fundamentals around the pricing. We factored them in, and it really comes down to those 2 channels. Thanks for the question, David. Operator: Our next question comes from Louise Chen of Scotiabank. Louise Chen: Congrats on the quarter. So my first question was, I wanted to ask you where you see the greatest disconnect between what you're excited about in your pipeline and what the Street is really missing on those products? And then second one, just a follow-up on AUSTEDO, I wanted to ask you how we should think about modeling 2027 in light of IRA and any other pushes and pulls you see here? Richard Francis: Okay. Thanks for the questions there. So the pipeline, I'll probably tag team this a bit with Eric. What -- look, I'll never say anybody is missing anything because everybody is very experienced in this business. I do think that our pipeline has come along very fast, think of fast side, maybe that's caught people unaware. But I think the quality of our antibodies, the quality of anti-TL1, the quality of duvakitug, I think, will show out in the data. So I think probably what's going to happen, I'd anticipate is as we turn over these cards and we see the data, then I think Teva will get recognized for what is a world-class pipeline. But it's probably a bit surprising for people to see just the quality of the pipeline that's emerged in such a short space of time. But maybe I'll hand it to Eric to give his view on that. Eric Hughes: Yes. Thank you, Richard, and thank you, Louise, for the question. I would emphasize something Richard said. I think the speed at which we turn around the innovative portfolio is quite honestly caught people by surprise. We've turned on a brand-new biologic for duvakitug, which is probably the best-in-class product for TL1A. We've launched or we will launch, hopefully, olanzapine LAI this year. But don't take our word for it. We've had external validation on 4 of these 5 programs. Olanzapine LAI got Royalty Pharma funding. Duvakitug was partnered with Sanofi, who saw the value. The DARI program was acknowledged by Abingworth. The anti-IL-15 program was recently acknowledged again by Royalty Pharma. And even emrusolmin, we've received Fast Track designation and an orphan designation. So across the entire innovative pipeline, we've accelerated them, I think, a little bit to the surprise of investors. But just look at the external validation that we've had in the pipeline and take that into consideration of your valuation. Richard Francis: Thank you, Eric. And then moving on to your final question about -- I think it was sort of asking for guidance on AUSTEDO in 2027, which I'm not going to give. Obviously, we've said we're going to do $2.5 billion for AUSTEDO in 2027. We remain very committed to that. As you see in our range that we have announced today, there's a potential that we will hit $2.5 billion in 2026. So we'll have to see how this plays out. I think the most important thing for AUSTEDO is to keep reminding everybody that 85% of people who suffer from tardive dyskinesia are still not treated. And so the opportunity to keep helping these patients to bring these patients in and give them therapy, I think, is a significant growth driver for AUSTEDO. So we also have the work we're doing on making sure that people can benefit from AUSTEDO XR. And as you can see there, 60% of new patients go on to AUSTEDO XR, and we know that helps with compliance and adherence, which obviously also in turn increases value. So I think we have a lot of value drivers for AUSTEDO, but I really don't want to get drawn into 2027 guidance at this moment. I think what I'm hoping people would see is what we have great momentum from '25. We're carrying that into '26, and we'll talk about '27 maybe this time next year. Operator: Our next question comes from Ash Verma of UBS. Ashwani Verma: Congrats on all the progress. So maybe just first one, how are you thinking about funding the R&D? So increasingly seeing more royalties and/or profit share. Just when you think about it strategically, how do you balance not giving away attractive economics to your partner versus seeing a meaningful increase in your internal R&D spend as you fund the growing pipeline? And then secondly, on the TL1A upcoming maintenance data, we've seen some competitors that the maintenance data versus the induction sort of went up on efficacy measures by high single digit to mid-teens in terms of percentage points. Is that a fair expectation to have as you look towards your upcoming results? Richard Francis: Ash, thanks for the question. I'll tag team this with Eric again. But on the R&D funding, I think the question was, how are you going to fund this? Are you going to be giving away value if you keep doing these partnerships? So I think the way we think about it is we have a big late-stage pipeline. We have a lot of opportunities to drive significant value creation. And when you have a good pipeline, in my experience and my belief is it's about moving it faster to the market to have patients benefit from it and to get revenue. And so we're moving a big pipeline really quickly here. Now how does it impact the economics? It really doesn't impact the economics in any meaningful way for a couple of reasons. One is these -- all these brands will be above $1 billion. Some of them will be multiple billion brands. The second thing is, which is an interesting fact that I think people miss on Teva is we're starting with a company with a very different gross margin than many other biopharma companies. So every time we launch an innovative product, it transforms our gross margin, which transforms our ability to drive EBITDA to drive EPS and cash flow. So as I said, the fact that these are not in any way giving away value in the broadest sense. But even with regard to Teva, they don't because of where we actually start this journey. The other thing I'd also like to highlight on this, we are launching so many products over such a short period of time that, that is the focus we're on. And we're going to have a potential to launch 4 products in 5 years, and we're going to actually announce more and more indications. So I think the pipeline is about making sure we move it quickly to the market. But in no way are we giving away value. I'd say we're accelerating value because of the speed we're moving. And then with regard to the key to the TL1A maintenance data, what are our expectations? I'll hand it over to Eric to answer, and then I'll conclude. Eric Hughes: Sure. Yes. Thanks, Ash, for the question regarding what we anticipate from the maintenance data of TL1A. So I'd start off by saying what's the history we've been telling with regard to duvakitug at Teva. We started by saying that we found in our in vitro work that we had the most potent antibody, the most selective antibody and the one that probably has the lowest antidrug antibodies. I think it's about 3% to 5% we saw in our Phase II study. So with that, we went into our Phase II program that we executed very well at speed. And then we came up with the highest reported numbers for both ulcerative colitis in Crohn's disease in 2 very well-controlled and run studies. So the in vitro translated into a very good result in Phase II. So if you translate that into what we anticipate in the maintenance, if you think that we have the most potent, the most selective, the lowest antidrug antibodies and that we can execute the study well, I would hope that when we lock the database, we see great results. So I'm bullish on it. Hopefully, that comes true, but we'll see what the data shows. Richard Francis: Thanks, Eric. We stand by the fact that we have and we believe we have the best TL1A. Operator: Our next question comes from Jason Gerberry of Bank of America. Jason Gerberry: One for Eli, just I didn't catch this, but can you talk about in 2026 guide, sort of what's the gross margin outlook versus the OpEx spend ratio? I think the latter would be in that 27% to 28% range you guys have talked about historically, but I just wanted to make sure that, that was confirmed from a modeling perspective. And then just for my follow-up, on vitiligo, I was trying to maybe understand kind of what we're going to get with this upcoming Phase Ib. Will we get VASI75 scores through the full evaluable period? Are you expecting most of these 30-plus patients to make it through the full evaluable period? Just kind of wondering how robust that data will be. Richard Francis: Thanks, Jason. Thanks for the question. So over to you, Eli, on the gross margin. Eliyahu Kalif: Jason, thanks for the question. So on gross margin, we end up the year, if we exclude the 2 milestone payments at a 54.7% gross margin. We are looking to be in the range of 54.5% to 55.5% in 2026. In terms of the OpEx, there are kind of mainly 2 dynamics there. First of all, -- and as I mentioned in my prepared remarks, we're going to see a bit higher OpEx, still in the range between 27% to 28% in the first half versus the second half just because of the revenue dynamics during the year. But there is also another element inside the OpEx, we're going to see more reduction in our G&A and actually shifting that reduction in between R&D and sales and marketing and able to stabilize it at the range of 27% to 28%. So this one didn't change versus our prior communication. Richard Francis: Yes. And the thing I'd add on to that, Jason, is gross margin is a really exciting story for us because as you see, as we continue to grow our innovative portfolio, we continue to launch products, that gross margin will just keep going up. It's just going to be a question of how much, but it will keep going up because of the fact that we're changing our portfolio so dramatically. Now with regard to the vitiligo data, I'll hand over to Eric. Eric Hughes: Yes. Thank you, Jason, for the question. So the data that we're going to be presenting in the first half of 2026 is a single-arm study for patients with vitiligo. It's about 38 patients in total. It will have the traditional and known endpoints for this field, which is facial VASI and total VASI. So it will be easily comparable to other treatments out there. And that reminds me the important thing here is that there are limited treatments for vitiligo today. There's one approved, which is a topical that only covers 10% of your body. And ones that are in development are the ones that what we need, things that are systemic in treatment, not only the face, but the entire body, more than just 10%. So one of the exciting things we think about when we talk about our anti-IL-15 program in vitiligo is this has the potential to be a once subcutaneous shot every 3 months. So a quarterly shot potentially to treat a systemic disease. So we're looking forward to that. You'll -- I think you'll get data that we'll be able to compare it to other treatments out there in development and approved. Operator: Our next question comes from Chris Schott of JPMorgan. Christopher Schott: Just sticking on IL-15. On the development time lines in vitiligo, can you just elaborate what exactly you need for that 2031 pathway versus '34? And I guess, is there a similar opportunity in celiac there as well? And if I can just do a really quick one, just coming back to AUSTEDO. I think you were talking about roughly $100 million benefit in 4Q, and it sounds like that's between rebate and inventory. Just when we think about destocking in 1Q, can you just clarify how much of that was inventory and how much was kind of this reversal of rebates? Richard Francis: Thanks for the question, Chris. Eric, do you want to start with the anti-IL-15, vitiligo and celiac? Eric Hughes: Sure. So thank you for the question on IL-15. So just to start off with IL-15 is it's a key cytokine in a number of different indications I mentioned before. We're working on vitiligo and celiac. I'm excited by both the potential for alopecia areata, atopic dermatitis or eosinophilic esophagitis. They're all interesting and important for this cytokine. For vitiligo, we're particularly excited because this is a program that we can move quickly. It has precedents for the regulatory endpoint. It's an endpoint that you can easily measure. You see the results. So that makes it a little bit more easy. And there's an unmet medical need here. We need systemic therapies, as I mentioned before. So we're thinking out of the box at Teva, we are accelerating this program in a clever pathway of a Phase II and Phase III study that we can work very quickly with the regulators. So the potential for a once quarterly dose subcutaneous shot is very exciting for us. Richard Francis: Thanks, Eric. And then on the AUSTEDO question, Chris, the way to think about that $100 million is the vast majority, the vast majority pretty much was the inventory. So that's why, obviously, we have a lot of confidence about 2026 in our numbers. So hopefully, that helps, Chris. Operator: Our next question comes from Umer Raffat of Evercore ISI . Umer Raffat: If I look at the delta versus consensus this quarter, it looks like it's driven by sales and marketing when I take out the one-timer impact of the milestone. And coincidentally, I feel like this is probably the highest sales and marketing spend quarter we've seen in the last 3 years or so. So I'm curious why that is, especially because it's happening in the middle of the transformation that's underway, number one. Secondly, for '26 guidance, is it fair to say that the Royalty Pharma $75 million payment for Phase IIb is embedded within the EBITDA? And is there any other milestones that are baked into the EBITDA guidance as well from TL1A or anything else? And then finally, on vitiligo, OPZELURA obviously has not necessarily done too well, but as Eric pointed out, has limited coverage. But is it fair to say that on the scores like OPZELURA showing about 30% facial VASI75 score, you would want to be tracking meaningfully north considering Royalty Pharma is all excited and they're not funding celiac only doing vitiligo. I'm just curious about your overall take on expectations. Richard Francis: Umer, thanks for the questions. You got a few into that one question there. So thanks for that. On the sales and marketing and the OpEx, I'll hand that to Eli to talk about. Eliyahu Kalif: Okay. Umer. So first of all, about the question about Royalty Pharma, out of the $75 million, the way that we're viewing, it's actually going to spread over '26 and '27 with 1/3 out of the $75 million going to happen in '26. It's more kind of backloaded for '26 year. And that's the only thing that's embedded there. We don't have any other, I would say, assumptions in our EBITDA related to TL1A milestones or anything like that. As far as related to the sales and marketing, if you actually back out the higher revenue due to the milestone, you get to kind of a 15.4% on sales and marketing. But going forward, next year, we're going to see that one actually 16%, and why? Because we are keeping investing in our growth engine, which is AUSTEDO and actually heading to next year, building kind of investment into our olanzapine launch. So we're going to see that one increasing. But all in all, the whole bucket going to be, from a dollar perspective, really kind of flat, but also from a percentage perspective due to the fact that you will see our transformation program going to impact the G&A, as I mentioned to Jason, and that's kind of a reduction in G&A going to split in between the R&D investment and into the sales and marketing. Richard Francis: Thanks, Eli. And look, one thing I'll just add on to the back of that before I hand it over to Eric. If you think about the guidance for this year, the EBITDA range, I think, is showing the value of the programs we put in place, the value of driving our innovative portfolio, the fact that when we talk about our transformation program, it was $700 million of net savings after investing in our growth drivers. And so we've allowed ourselves to make sure that we can drive this innovative portfolio, which helps drive that EBITDA, but at the same time, our efficiency programs help also drive the EBITDA. So I think we're very pleased and proud of the fact that our EBITDA starts with a 5 in front of it, which I think is important. But we're very mindful of how we spend our money and where we allocate our capital. When it comes to vitiligo, I'll hand that over to Eric. Eric Hughes: Thank you, Umer, for the question. So when it comes to what data we've seen with the topical out there today and what's in development, I always want to be competitive on any endpoint what you talk about. So hopefully, when we lock the database and get that results, we can show that we're competitive against what's available. But again, let's focus again what patients need. They need systemic therapy that's conveniently given. So it's almost inappropriate to compare it to a topical on 10% of your body. But certainly, we hope to be competitive. Operator: Our next question comes from Les Sulewski of Truist. Leszek Sulewski: Congrats on the progress. I just wanted to focus on the biosimilars side. So what's the launch cadence and expected profitability profile, particularly given the U.S. channel and PBM dynamics? And then what are the prerequisites for targeting the 10 new products beyond 2028? And you've previously evaluated or mentioned reevaluating BD within the space. So what type of, whether it's in-licensing, co-development or tuck-ins fits your leverage and margin profile today? And has that bar changed given the latest policy dynamics? Richard Francis: Thanks for the questions. So talking about biosimilars, yes, it's an exciting time. And I think the fact that we built the second largest portfolio and continue to add to it in such a short space of time is a testament to the prioritization we put behind it. But to sort of give you a bit of specifics and -- when we talk about -- we have 10 in the market now, we have 6 to launch between now and '27. Those 6 -- majority of those will be across both U.S. and Europe, which is important because we haven't actually had a presence in Europe of any significance. And we know that market is a market with quicker uptake, more predictability and some very clear returns. So excited about that. And to name just a few, we have biosimilar Prolia, biosimilar Xgeva, biosimilar Simponi, biosimilar Eylea and biosimilar Xolair. So we have a lot coming through of those markets and most of those are in both. I think it's Simponi that's just in the U.S. Now you highlighted the 10. And you sort of -- in your question, it sounded like we had targeted 10. No, we have 10. They are in our pipeline. But we're just going to add to that. So we have 10, which is why I said we can start launching '28 onwards, but we are continually adding to that. And the final part of your question is doing this through partnerships, how does that work out in gross margin. So we are going to continue doing it through partnerships, and it still is attractive from a gross margin point of view with the right partnership. It's still accretive to our business, our generics business significantly. So that's how we do it. And you'll probably start to see some deals coming through already in the first half of this year as we already build out this portfolio beyond the '26. So -- and then the final thing I'll add on that, this biosimilar portfolio is coming through thick and fast, and that's going to really help us drive the generics business going forward, both in Europe and in the U.S. But thanks for your question. Christopher Stevo: Les, could you repeat your BD question, please? Leszek Sulewski: Essentially, I just wanted to get a sense of if there's a potential for you to kind of dive a little bit deeper via BD within the space, if there's anything available out there via partnerships that you've previously had and essentially what's your strategy for that space? Christopher Stevo: Sorry, are you asking about biosimilars? Richard Francis: Yes. So that's what I thought. So that's -- I think I answered that question, Les. We'll continue to do the partnerships. Some of those we already have good, big partnerships with companies that we think we can have the potential to expand those, whether that's mAbxience, whether that's Samsung. So I think we're looking at expanding. But also we have other companies that have approached us to be their partner because obviously, the performance we've had in the U.S. has been impressive. We have the fastest-growing biosimilar Humira. We have a very fast-growing business now in the U.S. So I think people are seeing that. But yes, it will be through partnerships, the majority of it. Operator: Our next question comes from Dennis Ding of Jefferies. Yuchen Ding: I had 2, if I may. Number one, sort of a big picture question on R&D. What is your R&D philosophy at Teva? And I guess how much derisking do you think we'll get around the R&D platform from the data readouts this year? I'm also curious what else could be planned for 2027 as you advance some of these newer drugs forward? And then number two, just a question around BD. I'm curious as you transition to a novel biopharma company, if your BD philosophy has changed at all and if Teva might be interested in doing acquisitions in, let's say, the classic biotech space rather than what's historically been spec pharma. Richard Francis: Thanks, Dennis. Thanks for the question. I'll tag team that with Eric and maybe start on the philosophy of R&D or maybe we call it the strategy. Eric Hughes: Yes. No, thank you for the question, Dennis. And this is a very important question. And I think that the philosophy in the way that we operate at Teva is we are ruthlessly driven by data. We have, first and foremost, a pipeline in Phase III and Phase II that's relatively derisked. I think emrusolmin is probably the lowest on the probability of success. But when you think about our programs, we use known science, we combine it in a way that will execute well and quickly with regulatory approvals. And that's based and driven solely on data. One of the things I've noticed and been able to achieve here at Teva is when we see data, we pivot and we move forward with it. That's something I hadn't been able to do in my career in other places. So speed and execution driven by data with this philosophy of known science and derisked assets is how we will move forward. I think that's baked into every one of our programs at this point. Richard Francis: Thanks, Eric. And then to move on to your next question, you said what about BD and as we pivot into a biopharma company. So firstly, thank you for the recognition that we are pivoting. And I think we pivoted. But anyway, we'll keep showing that with the pipeline as it comes out. But yes, we are actively looking at BD. We think we have a commercial powerhouse of the team. I think you've seen that with the results of AUSTEDO, UZEDY and AJOVY. And so we want to add to that team. Now that said, we have, as Eric highlighted, a really exciting pipeline. So the organic growth we have coming through is impressive. So we're not desperate to do BD. We don't have to. At the same time, it fits into our TA areas of CNS neurology and immunology, then I think it's very synergistic, and it makes a lot of sense. So we are very active in that. What is interesting, I think, within the last year to 18 months, the amount of approaches we've had has significantly increased. And I think that's because they see Teva as a partner both from an R&D perspective, the speed which we move things through the clinic is exciting, but also primarily because of the commercial capability and muscle we have and the focus we give assets when we have an asset, whether it's in development, we focus and we move it quickly, whether it's in the market, we focus and we actually drive sales. So I think we'll hopefully be able to talk about some things going forward, but we are very disciplined in our capital allocation, and we think it's the right asset at the right time at the right price, we'll definitely do it. But because of the pipeline we have that's coming through, we can stick to that in a very disciplined way, and we will because going back to that fourth pillar of the Pivot to Growth strategy, it's about focused capital allocation, making sure we give a good return on that in the short, medium and long term and create value for shareholders. So thanks for your question, Dennis. And I think with that, I think that is the final question. We went over a bit, but I think we did start a couple of minutes late. So thank you for your questions and your interest in Teva, and I look forward to following this up later with our Q1 results. Thank you. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Operator: Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Provident Financial Services Fourth Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Adriano Duarte, Investor Relations. Adriano Duarte: Good morning, everyone, and thank you for joining us for our fourth quarter earnings call. Today's presenters are President and CEO, Tony Labozzetta; and Senior Executive Vice President and Chief Financial Officer, Tom Lyons. Before beginning the review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today's call. Our full disclaimer is contained in last evening's earnings release, which has been posted to the Investor Relations page on our website, provident.bank. Now it's my pleasure to introduce Tony Labozzetta, who will offer his perspective on the fourth quarter. Tony? Anthony Labozzetta: Thank you, Adriano, and welcome, everyone, to the Provident Financial Services Fourth Quarter Earnings Call. The Provident team delivered another strong quarter, driven by record revenues, favorable credit metrics and expanding core profitability. Throughout 2025, we built organic growth momentum on both sides of the balance sheet, which combined with positive operating leverage resulted in notable improvement in our financial performance. Accordingly, in the fourth quarter, we reported net earnings of $83 million or $0.64 per share. Our annualized return on average assets was 1.34%, and our adjusted return on average tangible common equity was 17.6%. Pre-provision net revenue was a record $111 million or an ROA of 1.78%. Since closing the Lakeland transaction, we have grown core pre-provision net revenue every quarter. Turning to our balance sheet. Our commercial loan team generated total new loan production of $3.2 billion in 2025. Elevated loan payoffs of $1.3 billion, which were primarily in our CRE portfolio, partially offset our strong production, resulting in net commercial loan growth of 5.5% for the year. We remain focused on generating high-quality diversified loan growth. At year-end, our pipeline remained solid at $2.7 billion with a weighted average rate of 6.22%. Our loan pipeline has consistently been north of $2.5 billion for the last 4 quarters, and more importantly, our originations have grown every quarter in 2025, peaking at over $1 billion in the fourth quarter. On the funding side, core deposits grew $260 million or 6.6% annualized compared to the linked quarter. Favorable trends in our commercial and consumer segments contributed to growth in our average noninterest-bearing deposits of 2% annualized. The deposit market remains competitive, but we continue to invest in our capabilities to drive meaningful growth in our core funding. Provident's commitment to managing credit risk and generating top quartile risk-adjusted returns has remained unchanged. During the quarter, we successfully resolved $22 million of nonperforming loans while experiencing just $1.3 million in associated net charge-offs. As a result, nonperforming assets improved 9 basis points to a favorable 0.32%. The business environment in our market continues to be healthy. And as a reminder, our exposure to rent-stabilized multifamily properties in New York City is less than 1% of total loans, all of which are performing. Growing our noninterest income remains a strategic priority. We generated record fee revenue of $28.3 million in the quarter. I want to take a minute to highlight the momentum and diversity of our noninterest income. Provident Protection Plus continues to drive consistent growth in our insurance agency income. New business and over 90% customer retention helped grow pretax income 13% year-over-year. Provident Protection Plus has a strong pipeline at the start of 2026, and I'm encouraged by the increased collaboration with both the bank and Beacon Trust, which should strengthen further in 2026. Beacon Trust saw revenue growth again in the fourth quarter, increasing to $7.6 million on approximately $4.2 billion of AUM. Beacon remains focused on both growth and retention, and we continue to make investments in talent to help achieve these goals. We also continue to invest in our SBA capabilities, which have been a more significant contributor to noninterest income in 2025, generating $946,000 of gains on sale in the fourth quarter. For the full year, we have generated $2.8 million of SBA gains on sale, which is up from $905,000 in 2024. While total assets grew nearly $1 billion in 2025, our strong profitability helped further build Provident's capital position, which comfortably exceeds well-capitalized levels. As such, earlier this week, we announced a new share repurchase authorization that will allow us to buy back an additional 2 million shares. I'd like to conclude my remarks by discussing our strategic priorities for 2026. We expect to continue investing in revenue-producing talent across our middle market banking, treasury management, SBA, wealth management and insurance platforms. We expect recent balance sheet growth momentum to be sustained and that loan payoff activity will normalize when compared to 2025. Finally, we are preparing for a core system conversion in the fall of 2026, an important investment that will enhance scalability and our digital capabilities. I'm confident in our team's ability to successfully complete this conversion, particularly given how seamlessly we integrated Lakeland Bank in 2024. I'm incredibly proud of the efforts and production of our employees. We are pleased with our organic growth momentum and improved profitability, and we continue to target sustained top quartile performance. Now I'd like to turn the call over to Tom for his comments on our financial performance and to discuss our 2026 guidance. Tom? Thomas M. Lyons: Thank you, Tony, and good morning, everyone. As Tony noted, we reported net income of $83 million or $0.64 per share for the quarter with a return on average assets of 1.34%. Adjusting for the amortization of intangibles, our core return on average tangible equity was 17.58%. Pre-provision net revenue increased 2% over the trailing quarter to a record $111 million or an annualized 1.78% of average assets. Revenue increased to a record for a third consecutive quarter at $226 million, driven by record net interest income of $197 million and record noninterest income of $28.3 million. Average earning assets increased by $307 million or an annualized 5.4% versus the trailing quarter, with the average yield on assets decreasing 10 basis points to 5.66%. This reduction in asset yield was more than offset by a 13 basis point decrease in the cost of interest-bearing liabilities to 2.83%. While a reduction in net purchase accounting accretion limited our reported net interest margin expansion to 1 basis point versus the trailing quarter at 3.44%, our core net interest margin increased by 7 basis points to 3.01%. The company continues to maintain a largely neutral interest rate risk position, but anticipates future benefit to the core margin from recent Fed rate cuts and expected steepening of the yield curve. The core margin for the month of December continued to trend upward at 3.05%. We currently project continued core NIM expansion of 3 to 5 basis points for the next 2 quarters with reported NIM estimated in the 3.4% to 3.5% range for 2026. Period-end loans held for investment increased $218 million or an annualized 4.5% for the quarter, driven by growth in multifamily, commercial mortgage and commercial loans, partially offset by reductions in construction and residential mortgage loans. Total commercial loans grew by an annualized 5.4% for the quarter. Our pull-through adjusted loan pipeline at quarter end was $1.5 billion. The pipeline rate of 6.22% is accretive relative to our current portfolio yield of 5.98%. Period-end deposits increased $182 million for the quarter or an annualized 3.8%, while average deposits increased $786 million or an annualized 16.5% versus the trailing quarter. The average cost of total deposits decreased 4 basis points to 2.1% this quarter, while the total cost of funds decreased 10 basis points to 2.34%. Asset quality remains strong with nonperforming assets declining $22 million or 22% to 32 basis points of total assets. Net charge-offs were $4.2 million or an annualized 9 basis points of average loans this quarter, while full year 2025 net charge-offs were just 7 basis points of average loans. Current quarter charge-offs reflected the disposition of several nonperforming and underperforming loans and the write-off of related specific reserves. We recorded a net negative provision for credit losses of $1.2 million for the quarter as year-end loan closings drove a decrease in approved commitments pending closing, asset quality improved, and there was modest improvement in our CECL economic forecast. This brought our allowance coverage ratio down 2 basis points from the trailing quarter to 95 basis points of loans at December 31. Noninterest income increased to $28.3 million this quarter with gains realized on calls of corporate securities and solid performance from our wealth management and insurance divisions as well as gains on SBA loan sales and increased core banking fees. Noninterest expense increased to $114.7 million this quarter as strong operating results drove increased performance-based incentive accruals, while expenses to average assets and the efficiency ratio were consistent with the trailing quarter at 1.84% and 51%, respectively. Excluding the amortization of intangibles and the related average balance, these ratios were 1.76% and 48.15%, respectively. We project quarterly core operating expenses of approximately $118 million to $120 million for 2026, with the second half of the year run rate being slightly higher than the first half. In addition to normal expenses, as Tony mentioned, we will be upgrading our core systems in Q3 of 2026 and expect additional nonrecurring charges of approximately $5 million in connection with this investment, largely to be recognized in the third and fourth quarter. Our sound financial performance supported earning asset growth and drove strong capital formation. Tangible book value per share increased $0.57 or 3.8% this quarter to $15.70, and our tangible common equity ratio increased to 8.48% from 8.22% last quarter. We realized a $3.4 million benefit to our income tax expense from the purchase of energy production tax credits for the 2025 tax year. We are exploring opportunities to purchase additional similar tax credits for the 2026 year and open carryback years. Excluding the discrete benefit of any tax credit carrybacks, we currently project an effective tax rate of approximately 29% for 2026. Regarding additional 2026 guidance, we are expecting loans and deposits to grow in the 4% to 6% range, noninterest income to average $28.5 million per quarter and are targeting a core return on average assets in the 120% to 130% range with a mid-teens return on average tangible common equity. That concludes our prepared remarks. We'd be happy to respond to questions. Operator: [Operator Instructions] Your first question comes from the line of Mark Fitzgibbon of Piper Sandler. Mark Fitzgibbon: Tom, first question for you. I heard your comments on the effective tax rate being 29% for 2026. I guess I'm curious, those tax credit investments that you announced you made, I think it was $54 million. How does that flow through to the effective rate or when does it flow through? Thomas M. Lyons: So that was in the Q4. Those are 2025 tax year benefits. So that was reflected in the $3.4 million we saw in reduction in income tax expense. Next year's purchases, the 2026 year will be realized in 2026 as a reduction. That's why we're dropping from close to 30% down to about 29% in our estimate of what the effective rate will be. Anthony Labozzetta: It's spread out throughout the year. So it's not a onetime like we did in 2025. Thomas M. Lyons: That's correct. We did them at the end of the year. So it should be spread through 3 quarters of the year in 2026. Mark Fitzgibbon: Okay. Great. And then secondly, I saw the buyback announcement. I guess you have a little bit of excess capital. Could you help us think about how you'd rank your priorities for deployment of excess capital today? Thomas M. Lyons: Yes, I don't think they've changed. Still profitable balance sheet growth is our primary objective. We think that's the longest-term value creator. But we wanted to add additional flexibility to our capital deployment options, which is why we refreshed the stock buyback plan. Anthony Labozzetta: I think that's spot on. Organic growth is our primary focus. The second half of the year, we might look at our dividend as our productivity continues. Obviously, there's always the additional uses of capital we want to invest deeper into our insurance and wealth platforms. And then there's always in the background, the thoughts of mergers, but our primary #1 focus is organic growth. Thomas M. Lyons: Yes. Our capital levels, we're comfortable with where they are now, and we're confident in our capital formation projections for the rest of the year. So again, that was another trigger, as Tony said, to both give some consideration in the remainder of the year to the dividend rate as well as to reintroduce some buyback options. Mark Fitzgibbon: Okay. And I hear what you're saying, Tony, on M&A being sort of back of the list, so to speak. But if you were to look at bank deals, what kinds of things would you be looking for in a potential target? Anthony Labozzetta: Well, I think, as I mentioned in the past, I think, the primary, I would start by saying this team is a pretty outstanding team, and we put together a pretty good engine. Everybody is meshing well. We got a good dynamic group from Board on down. And #1 thing is that the cultures have to be compatible so that we don't create a tremendous amount of hiccups in what we've been building here already that's producing value. So that being said, we would also love to see some additional talent acquisition and then also perhaps new line of business or a market that we're not in, complementary things, adding to the wealth side or the deepening our insurance penetration is certainly something of value, but we do recognize that you can't get all those boxes checked off in any situation. So you have to pick up how many boxes do you want checked off in order to get the deal done, but a lot of good -- still a lot of good franchises out there that we think we could be good partners with. However, I did just cover what we thought was a value of verge. Operator: Your next question comes from the line of Tim Switzer of KBW. Timothy Switzer: I also want to congrats to Tom on his pending retirement. Thomas M. Lyons: Thank you, Tim. Appreciate it. Timothy Switzer: The first question I have is there's been a good amount of talk on conference calls this quarter about rising deposit competition in some of your core markets, particularly on pricing and -- what have you guys seen in the market? Where is the highest level of competition right now in terms of like category or geography? And does that maybe impact your NIM outlook or liquidity management at all? Anthony Labozzetta: Well, I kind of want to say competition is heightening a little bit, but I see the competition for deposits in our market as being universal. It's always been there as long as I've been in this space. It kind of moves here and there in different segments. I would argue that everybody is in a fight for interest -- noninterest-bearing demand and low-cost money, and then that's part of your model. I think from our perspective, we're doing a good job with our core model. If you look this quarter, we had 16.5% growth on average balances. You're seeing, we produced nearly $479 million of commercial deposits this year that are -- tend to be your lower costing deposits. Funding about 24% of our loan production. So those are all good things. So the competition is there. But if you go to market with the right talent and with the right approach, I think you can win your share. I would say a safe answer would be that if everybody has designs to grow high single digits, there's just not enough new money for the -- for everybody's needs. So that's what creates the competition. It's like what -- it's just not enough to cover everybody's growth needs. Timothy Switzer: Got you. Yes, that makes sense. And then can you remind us on -- I think you have close to $5 billion to $6 billion of fixed rate loans repricing in your back book over the next year. Can you repress us on what that number is and maybe the gap on new origination yields versus what's rolling off? Thomas M. Lyons: Yes. The total repricing over the next 4 quarters, this is on the adjustable side, it's about $5.7 billion. Looking for. Okay, back book repricing, cash flows, both amortization and prepays, we're looking at another $4.7 billion over the next 12 months as well. So the pickup in rate is about 30, 40 basis points. I think it adds about 4 basis points to the NIM. Timothy Switzer: Got you. Okay. And then the last question I have is just on the CRE market trends. It seems like it's becoming a little bit healthier, volumes are improving, pricing holding up to rising. Trying to get -- like are you guys seeing the same thing there? And then I believe there's also -- due to some M&A in your market, there's a competitor looking to sell potentially some CRE portfolios in the New York market. Is that anything with your guys' capital levels you'd be interested in? Or just focused on organic? Anthony Labozzetta: Yes. I mean, there's a couple of questions in there. I'll try to tackle them all. I'll start with the last 1 first. There's probably little to no desire for us to acquire anyone's portfolio since our productivity is quite high, and being able to allocate that capital to our clients is more important, right? So the relationship banking that we do, we would view that book acquisition as a filler and it's just not necessary for us in the way we approach our business. When you look at the CRE market overall, I do see a healthier CRE market. Our CRE book has held up incredibly well throughout any of these perceived cycles. You're starting to see other banks that may have stepped a little bit back on the CRE space stepping back in. And certainly, the agencies, if you look at half of our prepayments that I mentioned in the call, 50% of them were with the agencies that basically are offering terms that we just don't do, which is high level of prepayments of IO is rather long-term IOs and high leverage and rates that are just not balanced with the risk reward. So again, I think that the market is healthy, and you're always going to have spotty situations like right now, the big thought process is what's happening on the rent controlled, rent stabilized in New York with the new administration. We're attentive to it. We don't see anything even in our small portfolio that is alarming to us at this point. So knock on wood, everything appears to be healthy going into the 2026 year. Operator: Your next question comes from the line of Feddie Strickland of Hovde Group. Feddie Strickland: I wanted to touch back on loan yields a little bit. And Tom, I think you mentioned this a little bit in your opening comments, but is there the potential for yields to move up a bit as we move into early '26, just given the increase in the pipeline yield of 12/31 versus 9/30? And what you just talked about back book repricing? Thomas M. Lyons: I think so stable to slight improvement overall. Anthony Labozzetta: Yes, that makes sense. We had a little bit of a lift in the 5-year from the prior quarter of about 20 basis points, and that's where the yield improvement came from, where the rate improvement came from. Feddie Strickland: Got it. And then just switching over to fees. I noticed the wealth AUM was down a little bit from last quarter despite what I'd imagine is positive market move impacts, but it still sounds like you're pretty bullish on '26. Can you talk a little bit about what drove AUM maybe a little lower in the fourth quarter? Thomas M. Lyons: It was down a little bit on a spot basis, up on average, though, by about $80 million. We did have some net outflows for the quarter, but we did have some good strong business production during the period as well. So overall client count is pretty stable. Anthony Labozzetta: Yes. I would add, it's a little bit more exciting of what we expect for 2026, right? So we've added some more talent to Beacon to augment the growth and retention strategies that are there. We brought in some teams along with that to help. Pretty exciting early indications. Obviously, it's way too early for any real huge material numbers to change, but we're seeing the engagement. We're seeing new-to-bank clients coming in. We're seeing a group that can deeper penetrate -- deeply penetrate both Provident and work with Provident Protection Plus and the bank to deepen those client relationships. So I'm pretty excited about the prospects for '26 when it comes to Beacon. I'm expecting some pretty good things there. Feddie Strickland: Got it. And just one last one for me. Just is there any desire or opportunity to expand the footprint a little bit more in adjacent geographies? More organically is what I'm talking about. I mean, maybe areas like Long Island, given some of the disruption there, maybe a little further south in the Philly suburbs? Or are you pretty happy with where you are today? Anthony Labozzetta: Well, people that know me, I'm never really happy. So I would say that. Yes, all of the above. I mean, we're already out on Long Island in Manhasset, and we have an office in Astoria. So continuing to penetrate there is obviously intelligent. We like the Westchester, Rockland markets. We do like the mainline around Philly. All of those areas are where we already have teams down there. We don't have physical locations in that -- around that Philly market, but we already have lending teams down there, same as in Westchester and New York. And so seeing us expand geographically in those areas is not something that should surprise anyone on this call. Feddie Strickland: Congrats, Tom, on the retirement. Thomas M. Lyons: Thank you very much. Really appreciate. Operator: Your next question comes from the line of Steve Moss of Raymond James. Stephen Moss: Tom, congrats on your retirement. Maybe just starting back on the accretion numbers here. Just kind of curious, Tom, what you're thinking for total purchase accounting accretion for 2026? Thomas M. Lyons: On the loan book, it's about $60 million for the full year. Stephen Moss: Okay. Got it. Thomas M. Lyons: The volatility there on prepayments, but that's our kind of base case model. Stephen Moss: Right. Okay. So then a lot of the adjustable rate loans you're referring to that are repricing carry rate marks at the current time, just looking to convert those to kind of like a core margin, kind of how to think about that benefit? Anthony Labozzetta: Not all. Some, not all, Steve, just because there's a blend -- a healthy blend of legacy Provident loans and leases. Stephen Moss: Got it. And -- but it is about 3 to 4 basis points or 4 basis points to the margin just from the back book repricing, if I heard that correctly. Anthony Labozzetta: That's correct, yes. Stephen Moss: Okay. Perfect. And then my other question here is just kind of, Tony, in your prepared remarks, you mentioned the hirings planned for 2026. You kind of alluded to it a little bit in some of your earlier commentary. Just kind of looking for any specific niches, maybe you're looking to add how many people you're looking to hire in the upcoming year? Anthony Labozzetta: Yes. As I mentioned the area, I think one of the biggest areas of focus, when we look at hiring the people, it's augmenting some of the things we're doing already, like in the insurance space and in our wealth space, you should expect to see a lot more on the production side and the retention side. I think the -- one of the greatest areas of investments for us this year is going to be in the middle market space. That range of $75 million to $0.5 billion in client size, we think that is an area that we haven't really penetrated deeply yet, comes with all the attributes that we like, strong deposits, strong relationships. We're able to use our wealth group in those segments as well as our insurance. It meets not that our other clients don't, but this is an area that we think is very suitable for us in the scale that we're at. So there's going to be some good -- I wouldn't be surprised in there if you add another 3 to 5 additional complements in this year. Obviously, all of that is timed in the expense guidance we've given, and we were paying -- we are very attentive to positive operating leverage. So it's not -- we're not going to race ahead of ourselves. Also, the other area that you could expect to see some growth, it is in our treasury management capabilities, particularly on the outbound deposit-only categories like deposit gathering functions. We want to deepen that investment as we move into -- deeper into '26. So great -- I mean, it's a great thing because we keep investing in our future and that it's exciting because we're having the growth, and we just want to make sure that we can continue to deliver the growth in '26 and '27. So hiring these productive individuals is going to be critical for us. Stephen Moss: Okay. Got you. That's helpful. And then one last one for me on credit here. Just with the reserve has come down a fair amount over the course of the year. Curious what the potential is for maybe incremental reserve bleed here? Or is there just -- is there less give on that number here going forward? Thomas M. Lyons: Yes. It's largely a model-driven exercise at this point. The macroeconomic variables drive the provision requirements. That said, it feels like we're at a base here, but we've been very consistent in our approach and our methodology throughout the year, and it really has been warranted as you could see, with 7 basis points in net charge-offs over the year. Good strong credit metrics, 32 basis points in NPAs, I think it's 40 basis points NPLs to loans. So the credit quality and the strong underwriting and the low leverage lending we do have all supported the lower allowance coverage ratio. Operator: Your last question comes from the line of Dave Storms of Stonegate Capital Partners. David Storms: Just wanted to start with -- you mentioned in the prepared remarks, a decrease in deposit costs. Just curious as to how you see the room to run here and if there's any specific initiatives that we should keep in mind as you continue to try to bring those costs down? Thomas M. Lyons: I'm sorry, Dave, I had trouble hearing that. Could you just try to speak a little louder, please? David Storms: Apologies, yes. Just around decrease in deposit costs. How much more room do you think there is to run here? And if there's any specific initiatives that we should keep an eye on as you're working through these costs? Thomas M. Lyons: So we are still repricing downward. We didn't get the full benefit of the last cut reflected, which is one of the reasons we wanted to bring to everybody's attention that the margin for the last month of the quarter, December was 3.05% on a core basis. So we'll see the full benefit of that I think every 25 basis point cut that we may get gives us another 2 to 3 basis points in the core margin in terms of improvement. Overall, I'd say our betas are going to continue to run in the 25% to 30% range relative to the Fed rate cuts. David Storms: That's great. And then just one more for me. You mentioned the core systems conversion. Is there anything more you can tell us about maybe the time line for that? And maybe any other tech investments or initiatives that you have on the horizon? Anthony Labozzetta: I think that's the major initiative on the near-term horizon. The conversion is scheduled for Labor Day weekend of 2026. It's the IBS platform of FIS. It's a very commercial-oriented, very proven system commercial-oriented. -- we'll meet the needs -- our needs as we move into the future from a digital perspective or product perspective, everything that we need. It's comparable to a lot of banks between $25 billion and $150 billion are on it. And we talk to them, and the system works very well for them. So I think it's something that we need to do to position our bank for the growth that we're experiencing in our future. Thomas M. Lyons: We expect to realize additional efficiencies in our processes as a result and enhancements that will help our product set and delivery to our customers. Operator: This concludes our Q&A session. I will now turn the conference back over to Anthony Labozzetta for closing remarks. Anthony Labozzetta: Well, thank you, everyone, for your questions and for joining the call. We hope everyone had a good start to the new year, and we look forward to speaking with you very soon. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and welcome to the Renasant Corporation 2025 Fourth Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kelly Hutcheson. Please go ahead. Kelly Hutcheson: Good morning, and thank you for joining us for Renasant Corporation's Quarterly Webcast and Conference Call. Participating in the call today are members of Renasant's executive management team. Before we begin, please note that many of our comments during this call will be forward-looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Such factors include, but are not limited to, changes in the mix and cost of our funding sources, interest rate fluctuation, regulatory changes, portfolio performance and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site, www.renasant.com at the Press Releases link under the News and Market Data tab. We undertake no obligation, and we specifically disclaim any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. And now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman. Kevin Chapman: Thank you, Kelly, and good morning. 2025 was a transformative year for Renasant, marked by considerable improvement in our profitability and strong balance sheet growth on the heels of the completion of the largest merger in the company's history. As we discussed during our October call, systems conversion took place in the third quarter of this year, and we continue to build on the successful integration progress that has already occurred. Throughout the year, we have been intentional about maintaining and frankly, accelerating the momentum in the company and believe our financial results reflect that focus. Our goal is to create a high-performing company that leverages the opportunities presented by our presence in many of the country's best economies. We strive to deliver excellent customer service led by an exceptionally talented team. This was evidenced by the organic loan and deposit growth we achieved in 2025. Renasant's core profitability showed significant improvement this year, fueled by the benefits of the merger with The First, along with ongoing efforts to improve efficiency at legacy Renasant. Adjusted earnings per share for the year were $3.06, representing an 11% increase year-over-year. For the year, adjusted ROA grew 94 basis points in 2024 to 110 basis points in 2025. Likewise, the adjusted efficiency ratio saw an approximate 900 basis point improvement year-over-year to 57.46%, and the adjusted return on tangible equity grew from 11.5% in 2024 to 13.79% in 2025. I'm extremely proud of what our team has accomplished this year and excited about how we are positioned to grow on this success in 2026. I will now turn the call over to Jim. James Mabry: Thank you, Kevin, and good morning. I will now highlight financial results for the quarter. The company's net income was $78.9 million or $0.83 per diluted share. Adjusted earnings, excluding merger charges, were $86.9 million or $0.91 per diluted share. Our adjusted return on average assets of 1.29% for the quarter grew 20 basis points from the third quarter, and our adjusted return on tangible common equity of 16.18% for the quarter is an improvement of 196 basis points. Loans were up $21.5 million on a linked-quarter basis or 0.4% annualized. During the fourth quarter, the company sold approximately $117 million of loans acquired from the first which were not considered to be core to Renasant's business. Deposits were up $48.5 million from the third quarter or 0.9% annualized. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We recorded a credit loss provision on loans of $10.9 million comprised of $5.5 million for funded loans and $5.4 million for unfunded commitments. Net charge-offs were $9.1 million, which includes $2.5 million recognized in connection with the aforementioned sale of the acquired $117 million loan portfolio. The ACL as a percentage of total loans declined 2 basis points quarter-over-quarter to 1.54%. Turning to the income statement. Our adjusted pre-provision net revenue was $118.3 million. Net interest income increased $3.9 million quarter-over-quarter. Reported net interest margin increased 4 basis points to 3.89%, while adjusted margin was flat at 3.62% on a linked-quarter basis. Our adjusted total cost of deposits decreased by 11 basis points to 1.97%, while our adjusted loan yields decreased 12 basis points to 6.11%. Noninterest income was $51.1 million in the fourth quarter, a linked quarter increase of $5.1 million. This increase includes $2 million in income associated with the exit of certain low-income housing tax credit partnerships during the fourth quarter. Noninterest expense was $170.8 million for the fourth quarter. Excluding merger and conversion expenses of $10.6 million, noninterest expense was $160.2 million for the quarter, a linked quarter decrease of $6.2 million. This decrease includes an offset of $2.1 million in gains connected with branch consolidations during the fourth quarter. We are encouraged by the results of the fourth quarter and the positive momentum going into 2026. I will now turn the call back over to Kevin. Kevin Chapman: Thank you, Jim. As you have heard, Renasant is well positioned for 2026. We have a talented and motivated team, a strong balance sheet and an enhanced profitability profile. The banking industry continues to undergo significant change, and we are optimistic about our ability to take advantage of the opportunities. We appreciate your interest in Renasant and look forward to sharing our results. I will now turn the call over to the operator. Operator: [Operator Instructions] And the first question today will come from Michael Rose with Raymond James. Michael Rose: Just wanted to start on expenses. Really nice step down, Kevin here on the systems conversion. I know this is kind of a long process, extending back to the previous administration to not only get this to the finish line, but also get the conversion done maybe a little bit later than I think you and we all would have hoped. But this was a nice, obviously, quarter of progress. Can you just walk us through kind of the puts and takes of how we should think about expenses through the year? Clearly, there's been a lot of M&A in and around your markets and other deal announced in Texas today. Can you just talk about what's still left to go in terms of cost savings from the first? And then from an opportunistic standpoint, how do you see the hiring playing out? And then I guess, maybe for Jim to wrap up, how should we think about kind of the level of expenses over the next quarter or 2? James Mabry: Michael, this is Jim. And actually, I'll do that in reverse direction from the way you asked it, but I appreciate the question. And I will say, too, apologies upfront if we're not as smooth and filling the questions as maybe we usually are because we're each in a different location this morning due to the storm. And so we'll do our best. And actually speaking of that, we're definitely thinking of folks that have been impacting our marketplace. We're still feeling the impacts of the storm. We've still got lots of people without power. And like other companies, we've had a lot of people at the company working to make sure we get branches open and get people to where they need to be to help serve our customers. So it's been a grind, but hopefully, we're nearing the end of that. With that said, Michael, I'll start and then let Kevin sort of clean it up. But I think in Q3, we talked about roughly $2 million to $3 million we hope to see in Q4 and then in Q1 in terms of sort of core expense reduction, if you will. And I use that word core because I think it ties into, I think, what you're probably alluding to as we go forward in expenses and how we might think about that. So we still feel good about looking at Q1 and having that core number come down again in that $2 million to $3 million range. Salaries as we've seen -- that's the line item that probably shows the most significant impact, and that was down a couple of million dollars in Q4, and we expect a similar result in Q1. So I think our overall guidance in terms of core NIE, if you will, from what we said on the Q3 call remains unchanged. And -- but I do think it's important to talk about how '26 may unfold, and Kevin I would ask you to do that. Kevin Chapman: Yes. Thank you, Jim. And Michael, you're right. I mean, it feels like this quarter has been a long time coming. We announced the merger with the first back in July of '24 and really tried to put eyes on Q4 because we felt it'd be a good look as to how the company's performance was -- would look as we enter '26, and you start to see some of the benefits and the rationale of what we launched 18 months ago. And a lot of that is just cost saves from the merger, but also using it as an opportunity to unlock some of the potential at Renasant, legacy Renasant. And I think you saw this in Q3 that as we went through a conversion, that was the largest conversion that both companies ever contemplated we still grew. We grew in Q4, and we're doing it with less resources. We're doing it with less people. And I think Jim summed up where our expense trajectory as well. I'll just add to that, maybe a little bit of esoteric information about where our focus has been. If you go back and you look at our FTEs, us and the first back in June of '24, Q2 of '24, that was a little over 3,400 employees. I think at the end of this year, we're going to be a little bit above 3,000 employees. So we've eliminated 400 positions. That all hasn't been the first, by the way, and it all hasn't been by way of the merger. But as we stand right now, that number is sub 3,000. And so we are still working towards goals and efficiencies of improving our profitability and again, doing more with less. But also just to emphasize what Jim alluded to and what you mentioned, Michael, is we're seeing real opportunity and disruption, and we're not going to shy away from that. But we're going to continue to make investments in talent that will meaningfully improve our position, our customer service, our customer reach and ultimately improve our profitability. And so there'll be a little bit of a mixed message. We're still going to continue to focus on improving profitability and our expenses at Renasant. We're also going to continue to be very focused in making investments for future growth and future profitability. But like where we are, like our position, like the momentum in the company, like the focus from all of our teammates to improve the metrics that we think are important, but also be willing to be opportunistic and invest in future talent. Michael Rose: Very helpful. Jim, if I can ask a clarifying question. So the $2 million to $3 million, I think, reduction you said in the first quarter, I think that's what you said. So correct me if I'm wrong. But what base is that off of? Is that off of the core ex the merger charges? Or does it also incorporate the add-back from the gain that you guys booked, the $2.1 million gain. So I'm just trying to get a sense for what the base is. James Mabry: Yes. It does incorporate that gain, Michael. So as you said, sort of take the -- I guess, it was roughly $170 million of back out, call it, I think it was $10 million approximately in merger expenses, and then we had that offset of $2 million and change. I don't remember the exact number, but right around $2 million. And that's the number I'm sort of jumping off from for Q1. Michael Rose: Okay. So the $162.3 million roughly versus just ex the merger charge would be $160.2 million, right? James Mabry: Correct. Michael Rose: Okay. Perfect. Maybe just switching to loan growth. If I back out the loan -- or if I add back the loan sale gains this quarter, it looks like the growth was about 3% annualized. Can you just walk us through some of the puts and takes and maybe dovetailing with my prior question just on opportunities, not only for hires, but also for market share gains, just given some of the dislocation. What should we think -- is there any change to what you guys laid out last quarter, which I think is kind of a mid-single-digit growth outlook? Or could it potentially be better just given some of that dislocation and some of the hires that you guys have and plan to make? James Mabry: Kevin? Kevin Chapman: Yes. Thank you, Jim. Thank you, Michael. Yes, as we look at loan growth, really no change to our guidance. We're still targeting for the year mid-single digits. And look, I think '26 can be similar to '25, where there might be some lumpiness in the quarters. I can't project with precision what it will be in Q1, but would just say over a longer time horizon, we're definitely positioned for that mid-single digit. And there is the opportunity for upside as market disruption occurs. But if you break down kind of what led to that 3% annualized in Q4, the production was good. The production was there, and our pipeline is still holding as we look at that. All of '25, we predicted payoffs, and we were wrong for 11 months or 10 months, but they finally materialized in late Q4. And so payoffs were elevated, and that's going to be a wildcard, Michael, as much as market share gain or taking -- being opportunistic with disruption, the payoffs is still going to be a little bit of a wildcard to that net loan growth, maybe on a quarter-by-quarter basis, I don't think it changes our guidance for mid-single digits year-to-date. But when we look at -- again, when we look at how we're operating fully integrated with the first, production coming from all markets through all channels continues to remain good. And so the production is there. The wildcard is just going to be the payoffs. But I think we're well positioned in what we're currently doing. And again, there is upside as market dislocation may present some additional opportunities throughout the year. Operator: The next question will come from Stephen Scouten with Piper Sandler. Stephen Scouten: Kevin, you kind of spoke to maybe the push-pull between investing in growth and trying to manage expenses and profitability. I mean, I guess how can we think about that? I mean, could there be like an overarching efficiency initiative, coupled with a hiring plan? Is it you're adding production people, but trying to normalize maybe back office? Or just kind of how can we think about that push-pull dynamic around those 2 concepts? Kevin Chapman: Yes. So it's really -- it's all of the above. So let me just give you an example. If we just take production hires and terminations throughout the quarter, we eliminated 12 producers, not tied to the merger, not tied to -- there's more accountability measures is what drove that, but we added 6. And so it's that type of push/pull that we've been doing now for the last couple of years where accountability and an expectation of higher performance, not only of producers, but as a company as a whole. That is going to be our focus. With some of the talent that may be out there, Stephen, we may make an investment in back office that gives us scalability to a larger asset size than where we currently are today. And so it's hard to say that we're going to hire these many people and when we're going to hire them just given the opportunity for the disruption. What I'd tell you is, and I think this is consistent with what you've heard from us, our goal is to be high performing, not high performing, excluding all the bad stuff, but high performing. And so as we work to achieve that, A lot of the hiring we're doing, whether it's the investment or whether it is the additions to staff in the back office, that has to be paid for through higher levels of performance. And again, it's really hard to quantify and lay out where that will occur. I would just ask that you look over the last year, maybe the last 18 months, what we've been doing, and it's what's showing up in the numbers is that ROA, that ROE is going up to the right. The efficiency is down into the right. And that will continue to be our plan and our focus as we find ourselves in a really unique position with all the disruption, but also knowing Renasant has to continue to improve its profitability line. Stephen Scouten: Yes. No, that's great context. I appreciate that. And then maybe thinking about kind of capital usage from here. You've obviously got a fairly sizable repurchase plan. Kind of wondering how you're thinking about that given the stock still appears to be undervalued relative to peers and kind of how you'd stack rank that relative to obviously using for organic growth. And if M&A would even be on the table, I would think it'd be low down the priority list for you guys today, but just kind of curious how you think about that capital deployment. James Mabry: Stephen, this is Jim. I'll start and then ask Kevin to add on. But -- so as you know, we -- Q2 was the first sort of combined quarter, and we felt -- after the merger, we felt good about where everything sort of shook out. And we -- I think we still wanted the added comfort of seeing Q3 be on time and on schedule. And with that, we felt more confident in sort of flexing our muscle, if you will, a little bit as it relates to capital uses other than organic growth. So organic growth is still #1, and we're hopeful we'll have a strong year in terms of growth. But I would say in terms of those capital levers, at least near term, the most attractive one to us would be buybacks. And of course, we had some activity in Q4 and would anticipate that activity continues into '26. Kevin, do you want to comment on M&A? Kevin Chapman: Yes. I'll add to that. And look, as we look at our capital plan and capital deployment, Jim laid out many of what's on the table. I'll also add, and I think we did this in the Q4, also redemption of debt. So we've got our full capital plan playbook open right now. And Stephen, that does include M&A. And it's something that we'll continue to look at. It's just got to meet our metrics. It's got to be that right partner. And again, it's a little bit backdropped against all the other opportunities we have, but M&A is still part of our plan. And again, it's something that we're fully ready to deploy if we find that opportunity or when we find that right opportunity. Operator: The next question will come from David Bishop with Hovde Group. David Bishop: Jim, I was wondering maybe some thoughts here. How should we think about the NIM outlook here? It looks like the Fed could be on the sidelines near term. Just curious maybe expectations for the margin here into the first half of the year and throughout. James Mabry: Sure. So we -- coming into -- actually, I'll take a step back. The first, as you know, really helped our asset sensitivity position and lessened our asset sensitivity. And that played out in -- it's played out the last couple of quarters, but certainly in Q4 because we were -- I think, in talking with on the Q3 call and with investors post that, we were guiding to some slight degradation in the margin in Q4, we didn't see that, as you saw, and it behaved really well. Our outlook for '26 on margin. And I think we've got 2 cuts in sort of our outlook of, I think, March and September roughly of 25 bps each. Even with that, we expect the margin to behave relatively stable. We don't see much movement as we sit here today, plus or minus. And so with growth in balance sheet, net interest income should follow that. In other words, should grow as we've got balance sheet growth with a stable margin outlook, we should see some modest growth in those dollars. We're starting our year a little below where we thought we would in terms of loan balance given the loan sale and the payoff activity we had in Q4. But margin outlook, I would say, is stable, and we should have improving NII dollars as we go through the year. David Bishop: Got it. And then maybe as a follow-up, any commentary in terms of the specifics of the loan pipeline, how that broke down at the end of the year relative to the end of last quarter? James Mabry: Kevin? Kevin Chapman: Yes. So yes, Dave, just what -- so it's in line, it's consistent with what we've seen over the past couple of quarters kind of fully baked in with the first. And really, contributions, again, from all areas, no different than where we're seeing the production where all areas are providing. Likewise, we see that in the pipeline. Again, just good activity, good production potential. And again, that's across all segments, whether it's geographic, again, in the states we operate, Tennessee, Alabama, Georgia, the coastal area or even Mississippi or whether we look at it through our channels, the size of the loans, whether some of our small business, our middle market or even our larger corporate and our specialty lines. So just a good pipeline that really covers all the areas of the company. We continue to see that. And that's -- again, that's what we've seen for the last couple of quarters, and that's where we want to position the company. It's just not any one group driving all the growth, but a good contribution from everybody. And Dave, what I may add is that on the consumer side, we've seen a little bit of a pullback on the consumer side. If there is an area that's pulled back a little bit, it's more on the consumer side. But I would say that's probably more by choice than it is consumer behavior. Operator: The next question will come from Jordan Ghent with Stephens. Jordan Ghent: I just wanted to ask about the loan sale and then maybe if you could give any additional color on the types of loans. And then going forward, if we should expect to see any more loan sales? James Mabry: Jordan, this is Jim. So the loan sale involved a portfolio of loans secured by cash surrender value of life insurance policies. And it was a good performing portfolio, high-quality portfolio. And the first had picked it up through an acquisition, a previous deal that they had done. And I think they had sort of looked at that and said it's not really core to our business long term because there was no ancillary business with these loans, and they were not -- they were in and out of the footprint. So they had flagged this and we'd flagged it during diligence. And once we got systems conversion behind us and so forth, we started down that process and sold that book. There aren't any other portfolios or loans or categories at the first that we would see selling or divesting or slowing down. We felt like it was a good match. And David Meredith can add to this, but I think our initial read was we really like what they did. They had good client selection, and we like their book. So we don't really see anything else in the portfolio. But David, you may want to add to that? David Meredith: Jim, thank you. The only thing I would reiterate exactly what you said, it was a solid performing book of business for the first when we went through due diligence, they viewed it as noncore. We viewed it as noncore. And it was with the ability to obtain probably full relationships out of those things, we've chosen to better focus our capital and our attention on those were better in market opportunities for growth, be it other loan opportunities, other deposit opportunities. Jordan Ghent: Okay. And then maybe just one follow-up. I wanted to ask what you're kind of seeing on the loan and deposit competition side, if you're seeing loan yields kind of come down significantly and as well as any irrational behavior? James Mabry: So I would say, Jordan, generally, what we're seeing on both sides of the balance sheet in terms of competition is -- I'll embellish on it, but it's really unchanged. I mean, from what we've said the last couple of quarters, it's very competitive on both sides. I would say probably a little more competitive incrementally on the deposit side. And so our outlook for '26, we hope there is some relief on that front. We're not counting on it in our numbers. And so I think if somebody would say, okay, what's the vulnerability in our margin outlook, it would be maybe in the funding side, but I think we've accounted for it in terms of the way we're thinking about '26 and our margin. But it's definitely on the deposit side more than the loan side. We -- our 5-month special, the rate on that hasn't changed in probably 18 months, and it's sort of stuck at that 4% number, and we'd love to lower it. And hopefully, we'll get some relief on that in '26. But generally unchanged in terms of the competitive landscape on loans and deposits on the pricing front. Operator: The next question will come from Catherine Mealor with KBW. Catherine Mealor: I wanted to follow up on your commentary on buybacks, Jim. You said that you expect the activity to continue into '26. Is it fair to assume that we should see a higher level that we saw in the fourth quarter? You've got a big authorization, but the activity we saw this quarter was pretty light relative to the authorization. Just trying to kind of frame kind of the level of buybacks that's safe to assume in our modeling for '26. James Mabry: Sure. So with all the standard caveats in terms of how much organic growth we see and market conditions, I would frame it this way, Catherine, that I think we're roughly at 11.25% or thereabouts on CET1 at year-end. And I think we want to -- we would not want to -- I think we'd want to end up at year-end '26 something close to that or be willing to end up something close to that, I guess, I would say. And so again, we'll see what the environment holds in terms of other possible levers and so forth. But I would sort of frame it that way. We like where CET1 is. It's going to -- I think we're going to grow roughly 60 basis points, 50 to 60 basis points in that ratio. And so we'd like to end the year at roughly where we started the year. Catherine Mealor: That's fair. That's great. And then maybe one follow-up just on the margin. You added a great new slide, Slide 19 to your deck, which just shows some of the detail around loan repricing and maturity. As I look at that slide and I see fixed rate loans today are at around kind of 5.5% and then variable rate loans are about 6.3%. Where those 2 buckets, as you see those loans reprice and new originations replace it, where are you seeing new loan originations come on kind of relative to those rates? James Mabry: So new and renewed, I'd say, is if we looked at -- I don't remember the December quarter, but probably, call it, right around 6%, upper 5s, low 6s, somewhere in that range. And I think we've got roughly $1.3 billion, if you look at the math on that table that you're referring to, roughly $1.3 billion in fixed rate loans that will reprice and those loans are at, call it, 5.25%. So maybe that helps frame the opportunity there in terms of repricing. Operator: [Operator Instructions] And the next question will come from Janet Lee with TD Cowen. Sun Young Lee: So if I look at the fourth quarter profitability metrics, whether I look at ROA or ROTCE or efficiency ratio, you guys kind of achieved the levels that you wanted to achieve from the first acquisition, the slide deck that you filed a while ago, which was impacted in '25 given the changes in purchase accounting, et cetera. But -- so we're there. So is there any updated thoughts on where you want your profitability metrics to go from here? Or are we are we at the level that you guys wanted to achieve and it's more about scaling from here? James Mabry: Janet, this is Jim. So maybe I'll start with that, but Kevin should add on. So again, I think you summed it up well. We feel -- we're pleased with the fact that we -- except for a couple of assumptions, we're pretty much on pace to achieve what we set out 18 months ago with respect to the merger and the economic benefits of it. So I feel really good about that. And we had sort of pointed all along to Q1 '26 as being -- hopefully being a clean quarter and showing distinctly the benefits that came out of that merger. And the other thing I should have mentioned is in expenses. We don't anticipate any M&A expenses in Q1. We think -- I mean, there could be something that dribbles in, but I think we've incurred the last of those in Q4. So I think you framed it well. We feel like we're very much on pace in '26 to attain largely what we outlined 18 months ago. And I think to sort of go from that to all right, where do we -- how do we think about future profitability and incorporate all the things going on in the industry and around us, I'll turn it over to Kevin. Kevin Chapman: Yes. Great question, Janet. It's just got me reflecting because I think to your point, we're right on top of what we projected 18 months ago. But 18 months ago, that would have put us in the top quartile of our peer group, right, based on what we knew at that time. Well, today, we're not in that top quartile. The peer has moved. I think we find ourselves right in the middle, which isn't where we want to be. Our goal is to be a top-performing company in all areas, including our financial metrics. So no, we're not there yet. One, because we didn't plan to land here 18 months ago and then be satisfied with that. We plan to continue to improve. But what's exciting about what's happened with our peer groups with the peers moving is it's forced us to continue to set our sights on higher goals. And what I see in the company, what I feel in the company is real momentum and real buy into that. And in some cases, opting out of it. But that's okay because that opt out is what will help us achieve our higher performing status. But what I see by and large is most people embracing that and actually relishing in it. And so our goal is to continue to improve from here and chase a moving target with the ultimate goal of being high performing. And I just -- I was somewhat reflecting on just this past year and this morning. And if you look at our results for the year, particularly as we leave Q4, really don't know what we projected as far as pretax pre-provision revenue back in '18. I can't remember what that was, but I suspect it's probably appreciably higher today than what we projected. And what I mean by that is that one thing that we did this year is we maintained our allowance just as we saw some migration in credit. We're not seeing any massive breakout. We don't have any significant concern. But we've also maintained allowance, and that has weighed on ROA a little bit, all things being equal. We're probably a little bit ahead of where we thought provision would be for '25 actual results compared to where we thought it would be in '24. And if you normalize for that, maybe we are a little bit closer to that top-performing peer group. But again, I just out of a mindfulness of caution, we've maintained some reserves. But I think if you look at -- if you look through that and look at the operating results, we're probably doing a little bit better than what we projected. -- but still aren't ready to drop a mission accomplished banner yet. The peer has moved. And frankly, that's what's exciting about this is we're relevant. We're in the game. We're in the middle of the pack rather than the bottom of the pack as it relates to our performance. And the difference between top performing and where we are is a few basis points. And so our execution, the strategies we have, our execution is what will make the difference against the peer group. And that -- to me, that's what's exciting and fun about this. It's not discouraging. You could easily say, well, we did all this work and we ended up in the middle, not the top. That's not really what I feel in the company. What I feel is an excitement that our plan and our team and our execution I feel confident that we'll continue to move up the rankings as we just perform. And we just need a little bit more time to perform. And that will continue to allow us to improve financial performance and ultimately achieve our goal of getting to that top performing or high-performing status. Sun Young Lee: That's great to hear. And just my last follow-up on loan growth. In terms of -- you reiterated that mid-single-digit guide for 2026, you cited strong pipelines. I understand you really don't have a lot of line of sight into payoffs. But what's giving you that confidence that -- are you seeing signs that payoffs are -- have moderated versus the fourth quarter level? And what gives you that confidence? Kevin Chapman: Yes. So I would just say the confidence probably is a little bit more of a longer period of time. So let's extend this out 12 months. It gives me confidence that over the course of the year, things will normalize. It may be abnormal quarter-to-quarter. But over the course of a longer period of time, I think we're well positioned to grow at that mid-single run rate. And that's not only loans, but also funding that appropriately on the liability side with deposits. But payoffs just early on, I mean, we're early on into the quarter. So it's really hard to gauge what payoffs will be for Q1. We're just kind of projecting that it's going to be a similar level of payoffs that we had in Q4, which were elevated compared to previous quarters. But that really isn't necessarily based on what we've seen in the first 20-something days of the quarter. It's really just a concern that these are lumpy. They show up sometimes unexpected or the first 20-something days really aren't in a good indication of what will happen and play out throughout the course of 90 days. But I just -- when I look at our production, when I hear -- when I talk to our teams and hear the opportunities that they see or they're having, the conversations they're having, that's what -- that gives me confidence that we're -- over the course of the year, mid-single digits is the appropriate run rate for us. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Kevin Chapman for any closing remarks. Kevin Chapman: Thank you, Nick. And thank you to everybody that listened this morning, and we appreciate your interest in Renasant. We also look forward to meeting with investors throughout the quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Wolfgang Wienand: Also a warm welcome from my side to all the ladies and gentlemen here in the room, of course, also to the ladies and gentlemen joining us online to our full year 2025 conference. And before we actually dive into the presentation, please take a look at our safe harbor statement, take note and feel bound to it. Quickly, we prepared a rich agenda for you today. And Philippe, myself, I guess, are very much looking forward to present this strong set of numbers to you and later on in the Q&A, discuss with you about what 2025 was to us at One Lonza and actually what 2026 in the future will bring. So One Lonza full year 2025 performance, kind of diving a little bit deeper into the business platforms, then the outlook 2026 and afterwards, you shooting questions at us and us providing useful answers. So my 5 key messages for you today. First of all, the One Lonza team delivered strong profitable growth in 2024, top line growth in constant exchange rates of above 21% and an expanding margin to 31.6%, plus 1.4 percentage points ahead of our upgraded CDMO outlook of July 2025. This business, of course, was driven by Vacaville, but not only. The underlying business actually expanded very nicely as well and at low teens constant exchange rate sales and also in line with our CDMO organic growth model. We successfully launched our new operating model 1st of April to introduce new ways of working in a new way, how we actually present ourselves to the outside world, to our customers and increase elevate the customer experience within One Lonza across all technologies and all business platforms. We actually saw and continue to see strong underlying business momentum. And considering the things that actually happened last year in terms of how the future supply chains in the pharmaceutical industry will look like, we, at Lonza actually are very well positioned to also support our clients on that journey, and I'll speak to that later in much more detail. Then the outlook for 2026. We expect our top line to grow at 11% to 12% in constant exchange rates and the CORE EBITDA margin to further expand, reaching a level well above 32%, which means actually that we, in 2026, will already enter the corridor of 32% to 34% that 2 years ago was given to you as a midterm guidance for 2028. Briefly on the CHI business, which developed well as planned and has shown growth, again, in line with the outlook that we provided to you a year ago and will from now on, considering that we intend to exit that business be accounted for as a discontinued operation. The exit process is advancing as planned. And with that, briefly, as a reminder for you our vision, which kind of states our ambition, which is we are the pioneer and the world leader in the CDMO industry with cutting-edge science, smart technology and lean manufacturing. In short, what it says actually Lonza is in a position to outgrow the underlying market and create outstanding value. What does it take to create outstanding value? First of all, an attractive underlying market. That is the case in the pharmaceutical industry. It takes a strong business model, the CDMO business model. But in order to outgrow and create superior value, we need something special, which actually is what we introduced to you a year ago, a little bit more than a year ago in December 2024, our unique One Lonza Engine, consisting of 5 elements, high-performance teams, leading scientific, technological and digital ecosystem, unparalleled customer partnerships, end-to-end execution excellence and plug-and-play investment and integration capabilities. While these are broad claims, highly abstract, I actually decided and want to share a number of evidence and proof points for our claims. First of all, high-performance teams. We continuously try to hold ourselves true in terms of that what is in my mind as a CEO and in the minds of the executive leadership teams actually is in line with reality for which we actually do voice of employee surveys every 6 months. And among the top 200 leaders of Lonza, 95% of them strongly support the new mission and purpose of Lonza. In terms of engagement index, also above 80%, which is really an outstanding value. So full support of high-performing teams. In terms of scientific support to our clients, Lonza and its GS system supported more than 100 commercial products. It is the leading cell line in the industry, unparalleled customer partnerships with a new operating model and creating an elevated customer experience, we actually have been able from an already industry-leading level in 2024 to further increase Net Promoter Scores, I mean, twice, 100% for big pharma and 50% for small biotech within just 12 months. Our integrated offering is gaining momentum, significantly increasing in terms of us offering Drug Substances and Drug Product services. And last but not least, in terms of our ability to continuously add people, technologies and acquisitions. Synaffix is a great example, acquired in 2023 and integration already done in the first quarter of 2024 and more notably, the integration of Vacaville mid of 2025. I'll speak to that in much more detail later. So in terms of, I mean, outgrowing our market, I mean, what are the components, which in the end lead to our ability as proven in the past 2025 and as we expect it to continue over the next year and years to come. First of all, it's the underlying market growth, 6% to 7% available to everyone. Then there is the increase of outsourcing. So pharmaceutical companies deciding not to manufacture everything in-house, but rather go to trusted partners like Lonza and have their products developed and manufactured. They are adding 1% to 2% growth increment. Then there is active market selection. So us deciding where to play, which are the high-growth, high-value market segments in the underlying pharmaceutical market, adding another 1% to 2%, leading to an underlying, I mean, selected market growth of 8% to 10%. And then there is the Lonza Engine. What makes us special, which is why people come to us, which provides for an additional upside, 2% to 3%. So overall yielding an underlying growth potential for Lonza of low teens, 10% to 13%. So I talked about market and us taking conscious decisions in terms of where to play, where not to play. Let's briefly break it down. The overall underlying pharma market is probably USD 1.2 trillion, growing at 7%. clinical pipeline, more than 7,000 molecules. Based on the technologies that we have chosen for ourselves, and based on the positioning in the value chain, in the product life cycle from early phase development down to commercial manufacturing, we at Lonza are able and operate within a USD 100 billion market growing at 8% to 10%. And we, in terms of future potential, are able to cover more than 90% of the innovative pharmaceutical pipeline to fuel future growth. Quickly on outsourcing because there was a lot of discussion in the last year in terms of, I mean, will the world change? And if so, how? And what does that change? Would that change mean for the CDMO business model? First of all, and we should never forget that the CDMO business model is a beautiful business model. It's a sustainable business model because it adds tangible value and creates efficient global pharmaceutical supply. This has been true over the last 15 years and will be true in the next 15 years to come as well. But let's be more specific with all the big numbers and the big headlines out there about large pharmaceutical companies investing in the U.S., we kind of just took from actually historic figures and also Bloomberg consensus forecast what actually the world and the pharmaceutical companies themselves expect going forward in terms of their own CapEx behavior. And the outcome actually is in absolute terms, CapEx of the top 20 large pharma companies between 2015 and 2025 grew at a CAGR of 3%, and it's expected to grow at a same CAGR between 2025 and 2030. So no change. Kind of normalizing it for CapEx -- sorry, for sales, same outcome. We will not leave the corridor of 4.5%, maybe 5% of revenues. So no real change in terms of the CapEx behavior of large pharmaceutical companies. What will most likely change though, is where that CapEx will be spent. And it's just likely that more of it, which would have otherwise been spent 1 or 2 years ago around the world might rather go to the [ S ] to a larger extent. So no change when it comes to large pharmaceutical customers. I mean for small and midsized biotechs, actually, there has not been the option anyway to spend a lot of money into own captive manufacturing. They shouldn't, they can't and they won't. And those small and midsized biotech companies are actually gaining traction. And we shared here for 2015, the share of innovation, so new clinical assets becoming available for small pharma, 60% versus 40% of large pharma. This increasing to 75% in 2025 and 25% for large pharma. So those companies will spend every dollar they have on the true value driver of their business, which is innovation. They will continue to rely on reliable partners like Lonza to make their products happen to turn their breakthrough innovation into viable therapies and true products. However, regionalization is most likely to stay with us and to further evolve going forward. And here, Lonza as the one global CDMO being able and having a track record to build and operate all around the world is very well positioned to support our clients on that journey as well. So here is some evidence what it specifically means when I speak about the largest global manufacturing network in the whole industry. First of all, demand is kind of distributed 1/3, 1/3, 1/3 across the U.S., Europe and Asia, rest of world. And we actually have significant presence, significant capacities in all those key regions in the U.S., 5 sites and in Europe, 6 sites, 2 in Asia. Looking back in terms of how we have built that global manufacturing network from 2020 to 2025, we as Lonza spent CHF 10 billion in terms of CapEx, out of which CHF 3 billion went into U.S. capacities. With Vacaville and all those investments in the past, we have created the largest mammalian CDMO business in the U.S., very well positioned like no one else to actually help our clients for U.S. supply for U.S. demand. And all that leads to an active business portfolio of more than 1,000 molecules at a certain -- at a given point in time, approximately 10% of our revenue is related to early phase business, so preclinical Phase I, 20% Phase II and the remaining 70% for Phase III on commercial assets, which leads to strong revenue visibility. We have a very low concentration in terms of risk and us being exposed to individual products, and we have a high level of diversification by technology, indication and company type. And with that, I actually continue with sharing what we believe have been the business highlights in 2025. Three topics. First of all, a robust sales momentum across all our key modalities, technologies, so mammalian, small molecule, bioconjugates, drug product and also the Bioscience technology platform had significant growth again in 2025, driven by mammalian small-scale assets and maturing growth projects across different technologies. We actually saw sustained high commercial contracting, again, across technologies and sites, altogether, well above CHF 10 billion signed in 2025, of course, materializing over the years to come, including a fifth significant long-term contract for Vacaville with further contracts, sorry, for Vacaville being in late-stage negotiations. So thirdly, on CHI, we saw as planned, as predicted, the recovery of the business returning back to growth, almost 4% and the margin expanding as planned. The exit process is also advancing as planned. And as I said before, we will actually report CHI as a discontinued operations as we should for a business that we will not keep within our portfolio. So this is actually what we are currently doing to not only deliver the business as promised today, but to also prepare the company for future growth. Currently, the teams are managing 23 CapEx -- growth CapEx projects around the world. Again, no other CDMO actually can do it, has proven to be able to do it. Lonza can do it. Currently, 23 large CapEx growth projects worth CHF 7 billion. 90% of it for commercial and mixed assets, so highly profitable and 100% in Europe and the U.S. A few examples to point at. In Visp, a large-samammalian started GMP production in 2025 and will be ramped up with a tilt towards the second half 2026. Going forward, a large important project for Lonza and for our clients. Commercial bioconjugation, it's a medium-sized CapEx project will actually start stepwise from 2029 and then reach peak sales in the mid-2030s, large-scale fill/finish and Stein ongoing, start expected for '27 peak sales also in the early 2030s. Type 1 diabetes cell therapy, cool technology science, CRISPR/Cas together with Vertex in Portsmouth, start expected in 2027 and peak sales around 2030. And Vacaville, I mean, I thought about the headline, make it as crisp and as clear as possible. A great fit to Lonza coming at a great point in time, creating the largest CDMO mammalian network in the U.S. in one go. So remember, we paid in 2024, CHF 1.1 billion for that asset. Closing was 1st of October, and we expect the site to fully deliver to its full potential in the early 2030s. Some evidence why we are so happy and so confident and so optimistic for what we will be doing with that site and already start to do with that site. First of all, a very stable and strong team. I've been there after JPMorgan, doing town halls, taking investors there and also talking to people. We have attrition rate of 99 -- I mean, actually retention rate of 99-point something, so essentially 100%. Great people willing to work for us and embracing the opportunity that Lonza actually gives to them. It's a high-quality asset, as you can expect from Roche and the investment that we have started to do of up to CHF 500 million is into the flexibility of the site so that we can even further increase operational efficiency. Customer interest is very high, remains high, as evidenced by now altogether 5 large commercial contracts for the site, which will, by the way, be able to already now kind of substitute the Roche volumes going out by 2028 and will make the site deliver at the stable level that we have seen today, plus/minus. So very good outcome also in terms of the commercial development and the selling of that capacity. Also important, the first U.S. FDA inspection under the new ownership in Q4 last year was a very strong outcome, only minor observations, which could be resolved almost immediately. First successful tech transfer. So a site which actually didn't receive so many products over the past years had to prove that. And we have been able to execute that tech transfer in a seamless way, and the team actually lived up to the challenge of now operating within a CDMO business model, and I actually included a quote of the responsible external manufacturing head of that large pharmaceutical company, "A truly seamless tech transfer into Vacaville execution at a level I have rarely experienced in my career." And I can tell you, this gentleman is not 21 years old. He has seen a lot. right? Last but not least, post-merger integration finalized successfully mid of 2025. So what we can actually say now and announce to you today is that this site is now a regular part of our global manufacturing network and will be managed as such and will start to contribute and continue to contribute over the next years. As a heads up, now that we actually can tell you that already with those 5 contracts in our business portfolio, we can actually substitute the Roche business and deliver stable revenue plus/minus at the current level until 2028. We will not further comment and report on individual contracts for that site as we don't do it for any other site in our overall manufacturing network. And with that, I hand over to Philippe, who will take you through our financial figures for 2025. Philippe Deecke: Thanks, Wolfgang. Good afternoon, and good morning to people joining from the U.S. also from my side. Before I start, let me just give you 1 or 2 disclaimers. All numbers that I will present are for the Lonza continuing business, which means that they all exclude our CHI business. The CHI business, as was mentioned by Wolfgang, is now reported as discontinued operation according to the definition in IFRS 5. Further, as usual, our sales growth rates are in constant currencies. All other growth rates are in actual currencies. With that, let me go to the key financials. I need to click myself. So first of all, the Lonza business delivered CHF 6.5 billion in 2025. This is CHF 1 billion more sales than we did back in 2024. So CHF 1 billion growth, 21.7% of constant currency growth. This is ahead of the upgraded guidance of 20% to 21% that we communicated back in July last year. This includes roughly CHF 0.6 billion of sales from our Vacaville site, so slightly at the upper end of the CHF 0.5 billion that we had forecasted. We're very pleased, obviously, operationally, Wolfgang mentioned that we're very pleased with the site operationally. We are also very pleased financially with the contribution of Vacaville. Organically, the organic business, excluding Vacaville, contributed or grow at low teens, which is fully aligned with our CDMO organic growth model. Going to the margin. We delivered a margin of 31.6%, up 1.4 percentage points, also very pleased about that. And this as well is ahead of the guided range of 30% to 31%. Three main contributors to the margin. One is, of course, operating leverage. When you grow the top line at that rate, of course, we are not growing our cost at the same rate. So administration costs, sales and marketing costs, research costs are growing at a much lower rate, providing leverage. Second, the maturing of our growth projects. Some of our projects are now getting close to higher utilization and therefore, increasing their margin. And number three, several targeted productivity initiatives across the organization. One word on FX. You see that we had an FX impact of roughly 2.5 points on both the top line and the bottom line. This is coming mainly from the weakening of the U.S. dollar back in the early part of 2025. Luckily, we have a very strong natural hedge. We are selling and having costs in roughly the same currencies. We're helping that as well with additional financial hedging program to protect our margins. With that, let's go to the sales evolution. As you can see on this page, we had good performance from 2 of our large platforms. Let me start with the exceptional performance of our ADS business, Advanced Synthesis, with very strong contribution from both bioconjugates as well as small molecule assets, the platform growing 22% organically. We had very -- we had several assets in both platforms growing and ramping up simultaneously and growing at a fast pace. On the I&B, in Integrated Biologics, you see a growth of 32%, a large chunk of that obviously coming from the Vacaville side, but also the other organic assets ramping up nicely. Going to Specialized Modalities. This was probably or is the soft point of our performance in 2025. We had discussed that in the first half last year and in Q3. We saw soft operational performance from the Cell & Gene business that actually continued during the year, but we're looking forward to a much better year in 2026. And then on the microbial side, where we experienced a phasing towards the end of 2025 into 2026. Also here, a better '26 is expected. The platform ended up with a small decline of minus 3%. Moving on to our CORE EBITDA performance. Here, again, very pleased with the progress, reaching 31.6%, close to the 32%, but we'll do that in 2026 and beyond. So the 3 key reasons why we grew our margin. I mentioned that before, but maybe a little bit more detail, again, operating leverage where we have very strong cost discipline across the organization now, both at headquarters level, but as well in the different sites. We have several maturing assets, especially in mammalian bioconjugates and small molecules that are allowing us to offset the dilution from the newer assets. And last but not least, operational excellence and high utilization in our commercial sites allow us to offset a slightly negative mix versus 2024. Maybe a few words to the platforms. I'll start with ADS, again, an exceptional margin improvement of 5 points, reaching margins of 42%. This is even slightly above the margins that we delivered in the first half of 2025. So here as well, again, very pleased. However, this is an exceptional year, and we will probably look at the normalization into '26. Looking at Integrated Biologics, a slight margin decline here of 0.9%, mainly due to unfavorable product mix and as well some new assets that have been coming online and growing in 2025. And then this is also the platform where we have the highest U.S. dollar exposure. And so while we have hedging, there is some impact from the weaker dollar. On SPM, I think very pleased that the platform could almost hold their margin at 17%, only down 0.5% despite the lower performance. This is due to some profitable mix and as well some very high cost discipline across the platform. Moving over to our CapEx details. You see here that we spent roughly CHF 1.3 billion in our CDMO business. Again, CapEx is a key enabler for Lonza's future growth and also a key focus for the organization now and going forward. The CHF 1.3 billion was spent most of it on gross assets, 60% of the spend was for growth. This includes a diversified portfolio of the 23 projects that Wolfgang mentioned earlier. You see as well that the peak of CapEx is behind us. This was in the past year. You see in the middle of the page that we are on a slope to actually normalize our CapEx spend. This -- in 2025, we reached 19.6% of CapEx, slightly below the guided range of low 20s, mainly due to some higher sales and some more discipline in maintenance spend. We're looking at high teens for 2026. And then over the midterm, normalizing in what we call our CDMO organic growth model for CapEx in the mid- to high teens. The normalizing CapEx also allow us to do great progress on our free cash flow. You see for this year that for our continuing business, we delivered CHF 0.5 billion of free cash flow, CHF 545 million, almost double the amount we delivered back in 2024. One of the key reasons, obviously, CapEx, which has been stable while the business has been growing, but also actually very strong management of inventories and trade working capital in general. You see that our trade working capital grew CHF 200 million. This is much less than what obviously our business has been growing in '25. And so you see that our trade working capital in percent of sales has actually declined by almost 5 points. Our inventories -- inventory coverage is also declining almost by a week, and this is something that we will focus a lot more to continuously drive down inventories to the right amount for our business. Moving from cash to our capital allocation framework. This is not new. We have not changed anything on that slide. This is more of a reminder for you, obviously, because a lot of people are asking us the questions about what will we do with the CHI proceeds. Well, first of all, it's not sure that there will be CHI proceeds depending on the exit route that will actually happen. But let me take you through our priorities in terms of capital allocation. Priority #1 is the investment into maintenance, infrastructure and systems. Why? Because we need to make sure that our base assets and our growing base assets are future-proof and are well maintained and will contribute to the future growth of the company. Priority #2, our progressive dividend policy, very important to us as well, and I'll get to that on the next page, which lead us to our discretionary cash. This is the cash that is available for investment into growth. This discretionary cash may be increased by proceeds from the CHI exit, should it be leading to proceeds. These proceeds as well will flow into what we call discretionary cash, will be invested into organic or inorganic bolt-on M&A investments. Now rest assured that we will be very disciplined in the way we allocate this capital. You know that for internal organic CapEx projects, we use very strict financial thresholds, 15%, 1-5 of internal rate of return and a ROIC at peak of 30%. This is for the organic investments. For bolt-on and M&A, it's not that easy to put a formal threshold, but we will remain very disciplined and basically look at 2 things: one, attractive returns; and second, is there a strategic fit with our Lonza Engine. And if you look back at the last 2 acquisitions being Synaffix and Vacaville that Wolfgang also shared with you, you can see that these were very disciplined and very attractive acquisitions. Looking at our dividend. As you can see, this dividend policy fully in line with our capital allocation framework. The Board of Lonza is actually proposing to increase the dividend by 25% to an amount of CHF 5 per share. This reflects obviously the strong earnings performance and will let shareholders benefit directly from our growth of earnings. Our progressive dividend, just to be very clear, means that we will maintain or grow our dividend per share on a year-by-year basis. And you can see on the chart that we have proven this over the last 10 years. Now let me finish with a quick update on our ESG performance before handing back to Wolfgang. We've made strong progress in 2025 on our ESG agenda. I'd like to drive your attention to the top 2 pie charts. One is the greenhouse gas emission intensity and on the right, the waste intensity. Both of these targets have actually been met in 2025, 5 years ahead of schedule. We are planning to have the intensity by 2030, and we have achieved that already in 2025. We are, therefore, deciding to rebase and to now looking at cutting by 50% the 2021 base, which is in line with the Science Based Target initiative. So great progress on greenhouse gas and on waste intensity. Also great progress on actually renewable energy. As of January 2026, all our electricity in the U.S., in Europe and in China will be renewable sources. Our progress is also well recognized externally, and we've been, for the first time, awarded the EcoVadis Gold rating and have been named again by Ethisphere as one of the world's most ethical companies. So again, great internal progress and great external progress. And with that, I'd like to hand back to Wolfgang, who will take you through the business platform performance and our outlook for 2026. Thank you very much. Wolfgang Wienand: Thank you, Philippe. And indeed, let's take a brief look at the 3 business platforms before then turning our heads towards the future. So Integrated Biologics, robust sales and margins driven by strong demand and operational execution. Here, Vacaville, as discussed before, kind of contributed more than we expected at the beginning of last year. We also saw a margin accretion from strong operational execution, however, was kind of more than offset by growth project dilution and unfavorable portfolio mix, as already mentioned before by Philippe. And also here, it's kind of clear. I mean, the significant amount of contracted business of above CHF 10 billion, a major part of it comes from our Integrated Biologics business platform. So ADS, our Advanced Synthesis business, an exceptional year in terms of sales growth driven by rapid and at the same time, occurring ramp-up of growth assets, which was great to see and actually great to see how well the teams in small molecules and also bioconjugates actually made it work and delivered according to the expectation of our clients, outstanding profitability above 40%, which is probably plus/minus what we can expect going forward from that business in terms of profitability. Our Specialized Modalities business, which is in terms of strategic importance, relevance to us, and an area from which we expect significant future growth over the next years to come and also significant contributions to our profitability. However, it's still suffering from this whole universe being small and limited. And as a consequence of that, also our own business portfolio being much smaller than for the other modalities and as a consequence of that, also more volatile. However, we are one of the very few CDMOs actually having 5 commercial assets in our network. And essentially, each of our manufacturing sites now has one commercial asset. So Bioscience briefly on that, which is our media business plus some other smaller businesses also returned on a very attractive growth trajectory, which supported that business platform. And with that, I actually turn our heads towards the future outlook 2026. What can you expect from us? What do we expect from us in 2026. First of all, continued high demand for the services of One Lonza. So stronger in constant exchange rates, stronger relative growth in the second half as compared to -- sorry, in the first half as compared to the second half. However, in absolute terms, the year will be balanced, and it's more a baseline effect how 2025 look like. Regionalization of supply chains will be with us also going forward. However, will not apply to existing businesses, to existing products in existing assets because typically, no one actually changes a winning team and changes an existing well-functioning supply chain. It's more about where will we allocate new business going forward. And this will be in line with the expectation and the desires and preferences of our clients, probably much more supporting regional demand by regional supply, which will then, in turn, also help -- further help our already strong natural hedge. CORE EBITDA margin expanding from maturing growth projects, productivity, a topic which is very close to my heart, cost discipline and obviously, operating leverage. I mean key priorities for myself, for the whole One Lonza team, of course, continue to elevate the One Lonza customer experience already evidenced by the significant increase in Net Promoter Score, but the journey goes on. A base business, execute with rigor and deliver constant -- I mean, through grinding of our business, our assets, constant margin expansion. Cash, it's going to be important this year or last year actually was an important step forward. We will continue on that journey, and we know how. In terms of growth, execute this 23 growth projects and of course, kick off new ones and also on top of that, being agnostic to doing it organically or inorganically, driving our M&A agenda. Group Functions are elevated in their role and their impact on the businesses, which is around standardization and also making us work in a more consistent way. CHI is going to be an important topic in 2026, driving the exit process and executing it at the appropriate time in the best interest of our shareholders and stakeholders. And with that, I want to close with actually reminding all of us of the financial model that we are applying here at Lonza. Based on our Lonza Engine, there's an underlying market opportunity in terms of growth of low teens every year on average over time. In order to translate those opportunities into tangible business, we need to continue to add capacity, invest. And these investments as long as the growth opportunities on average over time are in the range of low teens, this CapEx requirement will be around mid- to high teens of sales going forward. This then delivers our CDMO organic growth model, which is a constant exchange rate sales growth of low teens percentages on average over time and the CORE EBITDA margin growing ahead of -- so CORE EBITDA growing ahead of sales growth. Specifically for 2026, it means our constant exchange rate at sales growth is expected to be between 11% and 12% and a further CORE EBITDA margin expansion to a level above 32%. So already entering the corridor that was 2 years ago predicted to be achieved only in 2028. So what have been the key messages that I, we shared with you today. First of all, Lonza has delivered in 2025 and is well prepared for the ongoing journey of transformation and growth in 2026 and beyond. We have made progress as promised and are set up for success in terms of consistently delivering our business and also the project in Vacaville and further evolve as the global One Lonza team. We expect, again, significant profitable growth and we'll continue on that journey. And for the longer term, we are having -- we actually defined a clear strategy and the capital allocation framework to deliver in line with our CDMO organic growth model. We are One Lonza, the pioneer global CDMO market leader, manufacturing the medicines of tomorrow for our customers and their patients worldwide. I thank you for your attention and look forward to your questions. David Carter: Many thanks, Wolfgang. I'm David Carter. I'm the Global Head of Communications, and I'm going to be hosting the Q&A session. I'm going to ask my 2 colleagues here to just slightly rearrange the setup for us so that our leaders can relax. Philippe is back on the stage. And I'm going to ask anyone who's got questions in the room, we're going to start with you. If you could say your name, your institution and ask, I know it's ambitious, but if it's at all possible, no more than 2 questions. We will also, for people that are online, flick over to you at a certain point and make sure that you have a chance to ask questions, too. But first and foremost, are there any questions in the room? Let's start over here. Daniel Jelovcan: Daniel Jelovcan, ZKB. So two, the CHF 70 million hedging gain, which is booked in the top line, I'm not an auditor, but shouldn't an hedge can be booked somewhere in the financial expense or below the EBIT. I don't understand the mechanism if you can clarify. And then I ask the second question. Philippe Deecke: Yes. No, this is fully in line with hedge accounting. So this is normal. We've been doing this all along. It's just this year, this -- or last year, 2025, given the volatility in exchange rates, it has been higher than in previous year. But this has always been booked at the same place. Now to be clear as well, this is not accounted for in our constant exchange rate growth. So we remove it from that. Daniel Jelovcan: Okay. And the second question, when I do my calculation in Integrated Biologics, excluding Vacaville, you must have had an organic growth of 8% in the second half, quite a slowdown from the first half which was 17%. Why was that? Was that maybe some batches which were not booked in December, but in January, that's why you're guiding for a strong first half '26. Just to understand the picture. Philippe Deecke: Yes. No special reason. I think there's always volatility between the halves. We've seen that in the past. So I think it's more of a mix rather than kind of batches that would have been blocked in December. So nothing special to notice. It's the different phasing of assets coming online and mix. Nothing different. David Carter: Are there any more questions in the room? We have a quiet house today. We're usually more challenging that. Do we have any more questions online at the moment? We're going to hand over to Sandra online in that case, Sandra, if I could ask you to host the online question session, that would be great. Operator: The first question comes from Ebrahim Zain from JPMorgan. Zain Ebrahim: Zain Ebrahim, JPMorgan. My first question is on the Advanced Synthesis business, and growth momentum sounds -- was really strong in 2025 at [ 22 ] growth momentum going forward in '25 benefited from 2 growth projects that seems and you'll have further growth project contribution in 2026. Margins sound like 40% plus/minus, as you said. So any further commentary there would be helpful. And my second question is just on the Cell & Gene therapy business where you've indicated you expect an improvement in 2026. And just the question is what underpins that confidence? Wolfgang Wienand: Thank you for the question. I'll take the first one, I propose. Philippe Deecke: If you understood the first one, I will pick the second one. So I'm happy to take this. Wolfgang Wienand: Yes. I actually didn't understand the second one, so pass it on. But either way, on ADS, indeed, in terms of profitability, it probably will hover around the 40%. And that's what we expect going forward in 2026 in the years to come. The growth obviously was kind of exceptional in 2025 due to, I mean, many positive events coinciding. But it will be a growth engine going forward as well, but in 2026 and not at the level that we have seen in 2025. And maybe Philippe has made up his mind in terms of the second question in the meantime. Philippe Deecke: No. Second question, I think -- thank you, Zain, it's Philippe. So I think we're confident in terms of the growth rate for Cell & Gene in '26 versus '25. As we mentioned, I think, in the first half, we had some operational challenges in Cell & Gene in one of our sites during '25. This is being resolved. And so the business will kind of continue in a more normal fashion in '26. So from that point of view, yes, we are confident. On top of that, actually, we keep on ramping up commercial products in all of our sites. So all the Cell & Gene sites in the world for Lonza have a commercial product, which is, of course, helping to stabilize somehow the utilization of these sites. So yes, we are much more confident for '26 than what you've seen in '25. Wolfgang Wienand: Before we move on to next question if I could just ask anybody who's joining online to speak as slowly and clearly as possible. The line is not quite so clear at this end. So the slower and clear you are, the more easily we can understand you. So Sandra, I'll hand back to you for the next question. Operator: The next question comes from Charles Pitman-King from Barclays. Charles Pitman: Firstly, just on Vacaville, you're targeting stable CHF 0.6 billion sales now for FY '26 versus prior CHF 0.5 billion. Can you just confirm that this is going to remain stable around CHF 0.6 billion to '28 now. And with these 5 contracts in place derisking that target, can you confirm you're still targeting 30% utilization? Provide a little bit more detail around the predicted phasing of the contract and just confirm whether they all need to be fully ramped by '28 to offset that -- those lost contracts. Then just secondly -- sorry, just secondly, could you confirm what the current Form 483s are currently outstanding for Lonza facilities? And what advised rectifications are required and how this is expected to impact any ongoing operations and just confirm there were no impacts in FY '25. Wolfgang Wienand: Yes. Let me indeed start with the second question. Thank you, Charles. This 483, and there has been rumors around that and around other topics as well on which I will briefly comment in a bit. This 483 actually was a huge success. Not that it wouldn't have been even better to have a clean sheet, but a 483 with only 3, I believe, minor observations, which could either be immediately in the short term, close out or a few weeks later, actually is a very good outcome and receiving 483 is more the standard outcome that essentially across the pharmaceutical industry is yielded. It is not to be also clear around that. It has nothing to do in this case with the warning letter. The sequence from the process of the U.S. FDA is, I mean, a bad 483 with major observations, official action indicated can turn into a warning letter, but it's actually typically not the case, but what typically is the case that you get this form with your observations. And in this case of Vacaville, it actually was a very good outcome with only 3 minor observations which have been immediately being addressed and closed and are all addressed and closed right now. There was no impact, nothing on the ongoing operations and actually nothing of concern. I think that's important to say. There are, of course, also, I mean, at least you're telling us that, because it's not brought to us ourselves, other rumors around Vacaville not being a high-quality asset, not being capable of being run in an efficient way as a CDMO asset and all that, obviously, coming from other market participants. I actually won't comment on that in detail, but I would like to let the evidence that we shared with you speak for itself. Just 2 thoughts, maybe. First of all, and that is kind of my take of it as long as our competition continues to speak about us, and can't help itself to speak about us. I take it as reconfirmation of Lonza being the market leader in the space, first thought. Second thought on Vacaville. And I don't know, but one way of looking at it, of course, is that people might be concerned from a competitive standpoint, what great things we, at Lonza can do with great assets over the next years. But I would like to leave it there, but I wanted to address that because I think it's important. What you should take with me is what I shared with you today, a great asset, a great acquisition at a great point in time with a business secured until 2028 and beyond to keep, actually to substitute the Roche volumes going out and to keep the revenue at the level of where we are today, plus/minus CHF 50 million maybe over time. And that actually leads to the first question of you, Charles, which is on, first of all, phasing and ramping up. First of all, now having 5 contracts, of course, we will continue to sign contracts, right? We don't stop even though we will stop talking about it and reporting it because we don't do it for individual sites, which in the end are run as an integral part of the global network. So we will continue to add business because interest is very, very high. Those 5 contracts, which are large. I mean, they will only come to full fruition after 2028 because that's the time you need to actually tech transfer and ramp it up. So this is already feeding growth beyond 2028 and the other business that we actually will win over the next days, maybe even weeks and months will then take us further for this site to, I mean, come to its full potential, come to full fruition in the early 2030s. I think what is still open from your question, Charles, is the utilization. Yes, it's plus/minus that because the Roche business going out, new business coming in, keeping us stable at around where we are today, plus/minus. And us having the time invest into the flexibility, into the operational efficiency of the asset to them from 2028 onwards, be able to actually run at full steam and make it CHF 1 billion revenue and way beyond CHF 1 billion revenue side within the global network of One Lonza. I hope that answers. Charles Pitman: Can I please just double check on the [indiscernible] 483 as well? Wolfgang Wienand: I actually don't have the details to the degree as I had them for Vacaville, but same here. I mean what I heard, and that's actually the feedback from quality is that this has been actually a successful inspection and all observations have been minor only and have been closed out in the meantime. So also nothing which would worry me or anyone within Lonza and nothing that should worry anyone outside Lonza or anyone holding Lonza shares. Operator: The next question comes from Charles Weston from RBC Europe. Charles Weston: So my first is back on Cell & Gene therapy. You've indicated that perhaps you could have grown faster should there have been no operational issues. So I just wanted to get a sense of how much those issues may have held you back and what the state is of the relationship with any of the customers where they may have wanted more product? And my second is on the EBITDA margin. As you highlighted, you've already hit or you intend to already hit the low end of your 2028 guide 2 years early. Can you help us understand whether there's anything to prevent margins even excluding Vacaville, continuing to grow at similar rates, particularly given there was some negative mix in Integrated Biologics in 2025 that perhaps gives you a nice start. Wolfgang Wienand: Yes. Thank you, Charles. Maybe Philippe starts, and I take the second question. Philippe Deecke: Which is on Cell & Gene? Wolfgang Wienand: Yes. Philippe Deecke: yes, I think I'm not going to quantify, but let me make sure and reassure that there was no customer issues related to that. Of course, this is our first concern when something doesn't go as planned. But then we work very closely with the customer. So on this one, there was no impact on customer and the issues are resolved, and we just need the time to restart everything at the regular run rate. So from that point of view, I think things are fixed, and we're looking forward to return to normal operations in '26. Wolfgang Wienand: Yes, and Charles, on margin expansion, that's our commitment to grow EBIT -- core EBITDA ahead of sales. And our organic growth model, our commitment what we want to do with this company to constantly expand margin, right? And you will see that already this year, and that's how we guided, and you will continue to see that over the next years to come through different measures. Of course, it's expansion of our gross profit margin through pricing, through efficiency when it comes to productivity, again, very close to my heart, cost discipline. It's also about keeping SG&A costs growing at a much lower pace. So operating leverage and a number of growth projects maturing and then contributing rather than diluting our profitability. That's what you can expect from us going forward. And that is our commitment. Charles Weston: I guess I just wanted to ask, is your confidence on hitting the upper end of that now increased given the strong performance you've had in '25? Wolfgang Wienand: Yes. Charles, I would like to leave it there because, I mean, while this margin, of course -- sorry, this guidance has been put out before me joining Lonza, it is, of course, rightfully so still in your hands, which is why I actually used it and kind of went back to it, to tell you that actually, what we are doing is in line with what has been promised to you before, but we're not going to guide again specific margins for specific years, but thought that actually the organic growth model is a much more useful framework for you because it's not guiding for a specific point in time, but rather providing for a trajectory in terms of both top line growth, our margin will evolve and what it takes to make that happen in terms of CapEx. So I actually would like to leave it there, but hope that I've been able -- we have been able to create confidence that this is a serious ambition that we will make happen. Operator: The next question comes from James Vane-Tempest from Jefferies. James Vane-Tempest: Just one on free cash flow, please. Very helpful to have what the business is now and obviously comparing to what that looked like in 2024, at a group level, including the CHI. So last year, you disclosed net working capital was 13.7% of revenues. I guess now we have trade working capital of 34%, showing a reduction. But from memory, in 2024, working capital went up, I think, by around CHF 45 million with Vacaville inventories and receivables into year-end. So my question really is underlying free cash flow for this year because if it's CHF 545 million with this new definition you've got, is CHF 500 million more like the right number on an underlying basis to how to think about for this year, just so we can figure out you understand what the underlying improvements have actually been. Wolfgang Wienand: You start Philippe, I'll take the end. Philippe Deecke: I'll probably finish. James, there is no change in definition in our free cash flow definition. So the comparators to last year is fully comparable to what we do this year. The only thing we have changed is to give you a much more precise view on what our trade working capital, which we believe is a number that we should all track and also be aware. To remind everybody, trade working capital for us is inventory, AR and AP. And so in the past, in net working capital, you had a lot of other things, which included early payments, also discounting liabilities, et cetera, which were partially also even noncash, which is correcting from the EBITDA line. So no change in free cash flow definition. So the improvement that you see in free cash flow versus '24 is the true underlying free cash flow improvement of the business -- of the CDMO business. You'll find in our reporting as well the cash flow from the entire group, including discontinued operation, which top of my head is CHF 674 million, I think, if I remember well. So that's the full group. But in terms of CDMO, this is true underlying performance. Wolfgang Wienand: And adding to that, I mean, the financial engine, if you would like to call it like that. So top line growth profitably, expanding margins and decreasing CapEx as shared by Philippe through not because we would build less capacity, we need the capacity. Otherwise, we wouldn't go. But more discipline in terms of how we execute CapEx, I mean, has the ultimate goal of delivering ever more cash year-over-year. So that's what we are committing to with that CDMO organic growth model. James Vane-Tempest: Sorry to come back, I guess maybe just to ask a question in a slightly different way. I mean in '24, it was highlighted that there was much stronger Vacaville inventories, which contributed to the free cash flow decline. So my question is looking at the growth, is it a clean number, the CHF 545 million? Or does it kind of benefit from perhaps some working capital, which was pulled forward into Q4 '24 rather than actually seeing that in 2025? Philippe Deecke: Yes. I think it's usually the case that our trade working capital is higher in the fourth quarter. I think this is nothing new. So from that point of view, I don't think that the number is anywhere significantly or materially influenced by what you're describing. But please, if you're not satisfied with the answer, it's maybe something you can pick up with Daniel. So we make sure you fully get the answer. Operator: The next question comes from James Quigley from Goldman Sachs. James Quigley: I have two, please. So the first is on the contract signing. So you said well above CHF 10 billion in contract signings in 2025 that follows CHF 10 billion in '24 and CHF 13 billion the year before. Does well above mean between CHF 10.5 billion? Or does it mean between CHF 10 billion and CHF 13 billion. And how do you use this figure? You said before, it could be quite volatile. How are you thinking about it in terms of targeting and signing -- future signing contracts and driving future growth? That's question one. And question two, you gave some good details on the shift in number of molecules in development by pharma and biotech. But how do you think about M&A impacting that commentary around outsourcing and outsourcing trends as it stands as we look at the pharma industry, it looks like there was quite a big need for M&A. We've seen a pickup in M&A recently. So what happens when that shifts over time? And what have you seen when your customers, your biotech customers or even your larger pharma customers have been acquired in the past? Wolfgang Wienand: Thank you, James. To start with the contract signing value. It's not even a KPI. It shouldn't be a KPI because what is it really? It is an addition of value based on signed contracts, which might distribute over 3, 5, 7, 10, 15 years, right? And you just don't know. I mean our recommendation -- first of all, we will not make it a KPI. We will share it from time to time, but we don't believe that it's actually a meaningful KPI for which you should create or can create in a meaningful way, a time [ series ], which will actually tell you anything. On the other hand, it's also clear that, I mean, high contracting will translate into future business, which is why we shared it as a qualitative information, right? So I would, while being relevant, useful, providing confidence reassurance it's actually, I wouldn't even call it a KPI, which is kind of also already the answer of. Let's not talk about, I mean, digits after the comma because it's actually not a precise signs around that. And maybe one further thought, while signing with a certain customer, a 10-year contract, which might even be in the interest of that customer as opposed to signing a 5-year contract. The 5-year contract, even though the value in terms of contracted value, of course, is lower because just 5 years instead of 10 years, it might be commercially more attractive because it offers opportunity to speak about pricing after 5 years rather than being locked in for 10 years, just as an additional thought how to think about that figure not being a useful KPI. In terms of M&A and pharmaceutical assets being acquired by large pharma through M&A takeover of small biotechs, actually, we have seen it all. We actually have seen the molecule just staying where it was with Lonza and the new owner of that asset being super happy, having a robust, proven global supply chain for this acquired asset. We actually have seen also the case where Lonza wasn't involved. But for example, when that pharmaceutical assets came from China, it was important for the Western acquirer to build a robust Western supply chain, calling us and Lonza creating that robust supply chain. And there have been cases and will probably always be cases where if there is capacity and technology and capability available for that asset within the acquirer that this asset might actually be in-sourced or partially in-sourced. So it's kind of business as usual and nothing where we would actually see any trend or any shift in behavior. Operator: We take now the last question for today's call from Odysseas Manesiotis from BNP Paribas. Odysseas Manesiotis: Firstly, on the Visp, large-scale mammalian ramp, your 2030 peak sales assumption seems a bit pushed compared to earlier comments. Could you explain why that is? Was there some movement with contracts from Vacaville so on? And did you manage to deliver commercial batches within 2025 from that facility. And last one quick one on the FX, given the moves you're seeing today. Can I confirm with you that the 2 percentage point headwind you're assuming for the guide takes into account January average rates rather than something closer to spot and would and around 4 percentage point impact be reasonable if we take into assumption today's moves. Wolfgang Wienand: Philippe, do you want to start with the last question, I'll take the 2 first questions. Philippe Deecke: Odysseas, thank you for the FX question. So obviously, I think if you read the small print, our forecast of 2% impact was based on mid-January rates. So I think if you take into account what happened on Friday, Monday, I think the number is probably closer to 2.5%, with probably the rate if you were to use that. So I think 4% is probably too high, but we'll provide you an update in Q1 and in half year again. So I think rates are more volatile nowadays than they were in the past. Rest assured that our financial hedging and natural hedging works to stabilize margin, but we'll provide you an update as rates evolve. Wolfgang Wienand: Yes. And thank you for the 2 first questions. I mean my main assumptions are not lower, to be clear, so now, unchanged. And in 2025, that large-scale assets in Visp actually started GMP production with, let's say, commercial ramp-up starting in 2026 and especially towards the second half of 2026. Operator: I would now like to turn the conference back over to David Carter, if you have more questions in the room. David Carter: Any more questions in the room. We have one just over here. I'm aware that we are slightly running over time, but I'd like to give the room a chance to have a few questions if we can. Unknown Analyst: [indiscernible] I have a question about the CapEx 2025. You had 38% maintenance CapEx. I expected it to be a little less. Could you give us any advice about the next years, will this be the same level? Or will it come down a little? Philippe Deecke: Yes, if you look at our CDMO growth model, it actually tells you roughly how much we want to invest in growth, which is roughly low teens in terms of growth, the rest being mid- to high single digit actually in system infrastructure and maintenance. So that gives you the ratio. I think the ratio this year is probably normal. I think the majority of our investment go into growth. This will be the case also going forward. But this is -- this changes year-over-year depending on the different assets that are planned. But I think the CDMO growth model gives you a fair way to kind of value the amount of capital that would go into maintenance system and infrastructure. Unknown Analyst: And the second question is about one facility you moved from small molecules to the capsules business to be divested. Could you explain what kind of business it is and why you moved it. Philippe Deecke: Yes. This is a small site in Florida. They actually do fill/finish for clinical and very small batch sizes. This is a business that actually came with Capsugel at the time that we moved into small molecules because there were some synergies in what was being filled. I think we feel that this is a better fit with the CHI business overall and in terms of providing growth opportunity for CHI and synergistic. So we moved it back into the CHI parameter. Wolfgang Wienand: For clarification, when Philippe said fill/finish, it's not aseptic sterile manufacturing, it's OSD. So oral solid dosage forms. And especially in the case of Tampa, it's filling and that is where the fill/finish probably comes from of capsules, which actually is a nice fit as a kind of a business extension of the Capsules business itself. And again, came with Capsugel and we thought it makes sense to go with Capsugel because it's not going to be a strategic focus to do OSD for Lonza. Talking about that and kind of as a reminder, what CHI is today is not the same that CHI was when acquired in 2017. So certain businesses, which are strategic for Lonza will actually stay within Lonza, for example, Bend in Oregon where we actually do really high tech around particle design and spray drying. So it's not going to be the same scope that we acquired at the time that we are actually exiting in 2026. David Carter: Any further questions in the room? One just here. Laura Pfeifer-Rossi: Laura Pfeifer, Octavian. I'm just wondering if you could talk a little bit about the Vacaville profitability in '25 and also maybe the outlook for '26 given that you will have new products being transferred there so a little bit of puts and takes, please? Philippe Deecke: Yes. I think profitability for '25 was better than we said. I think it was operationally dilutive as expected. And I think going forward, again, probably 2025 was still an easy year. That's why we called it for Vacaville because I think they produce the same products. Now we are starting to introduce new products. We will have also shutdowns for construction work that we also explained in the past. So I think the margin will improve over time. I think it's not a linear path that will be getting better every year in the same increments. But I think we can confirm that by 2028, the site will be in line with the group at that point in time and therefore, neither dilutive nor accretive at that time, but it's not a straight line, but I think we were happier in '25 than we had expected. Wolfgang Wienand: So while it's adding in a relevant way already until 2028, I mean the rocket we will actually start in 2028 in terms of being ready, having done our CapEx into operational efficiency, new products at attractive pricing, then creating true volume, and that's actually where we will see the full benefit of the site and then reaching peak probably in the early 2030s. David Carter: Very good. We are over time now. So thank you all for your engagement both in the room and online, and I will pass back to Wolfgang to share some final words. Wolfgang Wienand: Yes. Thank you, David, and thank you all here in the room, ladies and gentlemen. And also those joining virtually for spending the time together with us, listening to actually a strong performance of the global One Lonza team delivering and even overdelivering on our promises and also listening to the commitments that we actually made for 2026 and listening to how we think about a great future for One Lonza, which should include, first and foremost, our customers and their patients will include our shareholders and, of course, ourselves as members of the global One Lonza team. So thank you for coming, all the best and looking forward to stay in touch with you the latest for the half year in July. Thank you so much, and have a great day.
Wolfgang Wienand: Also a warm welcome from my side to all the ladies and gentlemen here in the room, of course, also to the ladies and gentlemen joining us online to our full year 2025 conference. And before we actually dive into the presentation, please take a look at our safe harbor statement, take note and feel bound to it. Quickly, we prepared a rich agenda for you today. And Philippe, myself, I guess, are very much looking forward to present this strong set of numbers to you and later on in the Q&A, discuss with you about what 2025 was to us at One Lonza and actually what 2026 in the future will bring. So One Lonza full year 2025 performance, kind of diving a little bit deeper into the business platforms, then the outlook 2026 and afterwards, you shooting questions at us and us providing useful answers. So my 5 key messages for you today. First of all, the One Lonza team delivered strong profitable growth in 2024, top line growth in constant exchange rates of above 21% and an expanding margin to 31.6%, plus 1.4 percentage points ahead of our upgraded CDMO outlook of July 2025. This business, of course, was driven by Vacaville, but not only. The underlying business actually expanded very nicely as well and at low teens constant exchange rate sales and also in line with our CDMO organic growth model. We successfully launched our new operating model 1st of April to introduce new ways of working in a new way, how we actually present ourselves to the outside world, to our customers and increase elevate the customer experience within One Lonza across all technologies and all business platforms. We actually saw and continue to see strong underlying business momentum. And considering the things that actually happened last year in terms of how the future supply chains in the pharmaceutical industry will look like, we, at Lonza actually are very well positioned to also support our clients on that journey, and I'll speak to that later in much more detail. Then the outlook for 2026. We expect our top line to grow at 11% to 12% in constant exchange rates and the CORE EBITDA margin to further expand, reaching a level well above 32%, which means actually that we, in 2026, will already enter the corridor of 32% to 34% that 2 years ago was given to you as a midterm guidance for 2028. Briefly on the CHI business, which developed well as planned and has shown growth, again, in line with the outlook that we provided to you a year ago and will from now on, considering that we intend to exit that business be accounted for as a discontinued operation. The exit process is advancing as planned. And with that, briefly, as a reminder for you our vision, which kind of states our ambition, which is we are the pioneer and the world leader in the CDMO industry with cutting-edge science, smart technology and lean manufacturing. In short, what it says actually Lonza is in a position to outgrow the underlying market and create outstanding value. What does it take to create outstanding value? First of all, an attractive underlying market. That is the case in the pharmaceutical industry. It takes a strong business model, the CDMO business model. But in order to outgrow and create superior value, we need something special, which actually is what we introduced to you a year ago, a little bit more than a year ago in December 2024, our unique One Lonza Engine, consisting of 5 elements, high-performance teams, leading scientific, technological and digital ecosystem, unparalleled customer partnerships, end-to-end execution excellence and plug-and-play investment and integration capabilities. While these are broad claims, highly abstract, I actually decided and want to share a number of evidence and proof points for our claims. First of all, high-performance teams. We continuously try to hold ourselves true in terms of that what is in my mind as a CEO and in the minds of the executive leadership teams actually is in line with reality for which we actually do voice of employee surveys every 6 months. And among the top 200 leaders of Lonza, 95% of them strongly support the new mission and purpose of Lonza. In terms of engagement index, also above 80%, which is really an outstanding value. So full support of high-performing teams. In terms of scientific support to our clients, Lonza and its GS system supported more than 100 commercial products. It is the leading cell line in the industry, unparalleled customer partnerships with a new operating model and creating an elevated customer experience, we actually have been able from an already industry-leading level in 2024 to further increase Net Promoter Scores, I mean, twice, 100% for big pharma and 50% for small biotech within just 12 months. Our integrated offering is gaining momentum, significantly increasing in terms of us offering Drug Substances and Drug Product services. And last but not least, in terms of our ability to continuously add people, technologies and acquisitions. Synaffix is a great example, acquired in 2023 and integration already done in the first quarter of 2024 and more notably, the integration of Vacaville mid of 2025. I'll speak to that in much more detail later. So in terms of, I mean, outgrowing our market, I mean, what are the components, which in the end lead to our ability as proven in the past 2025 and as we expect it to continue over the next year and years to come. First of all, it's the underlying market growth, 6% to 7% available to everyone. Then there is the increase of outsourcing. So pharmaceutical companies deciding not to manufacture everything in-house, but rather go to trusted partners like Lonza and have their products developed and manufactured. They are adding 1% to 2% growth increment. Then there is active market selection. So us deciding where to play, which are the high-growth, high-value market segments in the underlying pharmaceutical market, adding another 1% to 2%, leading to an underlying, I mean, selected market growth of 8% to 10%. And then there is the Lonza Engine. What makes us special, which is why people come to us, which provides for an additional upside, 2% to 3%. So overall yielding an underlying growth potential for Lonza of low teens, 10% to 13%. So I talked about market and us taking conscious decisions in terms of where to play, where not to play. Let's briefly break it down. The overall underlying pharma market is probably USD 1.2 trillion, growing at 7%. clinical pipeline, more than 7,000 molecules. Based on the technologies that we have chosen for ourselves, and based on the positioning in the value chain, in the product life cycle from early phase development down to commercial manufacturing, we at Lonza are able and operate within a USD 100 billion market growing at 8% to 10%. And we, in terms of future potential, are able to cover more than 90% of the innovative pharmaceutical pipeline to fuel future growth. Quickly on outsourcing because there was a lot of discussion in the last year in terms of, I mean, will the world change? And if so, how? And what does that change? Would that change mean for the CDMO business model? First of all, and we should never forget that the CDMO business model is a beautiful business model. It's a sustainable business model because it adds tangible value and creates efficient global pharmaceutical supply. This has been true over the last 15 years and will be true in the next 15 years to come as well. But let's be more specific with all the big numbers and the big headlines out there about large pharmaceutical companies investing in the U.S., we kind of just took from actually historic figures and also Bloomberg consensus forecast what actually the world and the pharmaceutical companies themselves expect going forward in terms of their own CapEx behavior. And the outcome actually is in absolute terms, CapEx of the top 20 large pharma companies between 2015 and 2025 grew at a CAGR of 3%, and it's expected to grow at a same CAGR between 2025 and 2030. So no change. Kind of normalizing it for CapEx -- sorry, for sales, same outcome. We will not leave the corridor of 4.5%, maybe 5% of revenues. So no real change in terms of the CapEx behavior of large pharmaceutical companies. What will most likely change though, is where that CapEx will be spent. And it's just likely that more of it, which would have otherwise been spent 1 or 2 years ago around the world might rather go to the [ S ] to a larger extent. So no change when it comes to large pharmaceutical customers. I mean for small and midsized biotechs, actually, there has not been the option anyway to spend a lot of money into own captive manufacturing. They shouldn't, they can't and they won't. And those small and midsized biotech companies are actually gaining traction. And we shared here for 2015, the share of innovation, so new clinical assets becoming available for small pharma, 60% versus 40% of large pharma. This increasing to 75% in 2025 and 25% for large pharma. So those companies will spend every dollar they have on the true value driver of their business, which is innovation. They will continue to rely on reliable partners like Lonza to make their products happen to turn their breakthrough innovation into viable therapies and true products. However, regionalization is most likely to stay with us and to further evolve going forward. And here, Lonza as the one global CDMO being able and having a track record to build and operate all around the world is very well positioned to support our clients on that journey as well. So here is some evidence what it specifically means when I speak about the largest global manufacturing network in the whole industry. First of all, demand is kind of distributed 1/3, 1/3, 1/3 across the U.S., Europe and Asia, rest of world. And we actually have significant presence, significant capacities in all those key regions in the U.S., 5 sites and in Europe, 6 sites, 2 in Asia. Looking back in terms of how we have built that global manufacturing network from 2020 to 2025, we as Lonza spent CHF 10 billion in terms of CapEx, out of which CHF 3 billion went into U.S. capacities. With Vacaville and all those investments in the past, we have created the largest mammalian CDMO business in the U.S., very well positioned like no one else to actually help our clients for U.S. supply for U.S. demand. And all that leads to an active business portfolio of more than 1,000 molecules at a certain -- at a given point in time, approximately 10% of our revenue is related to early phase business, so preclinical Phase I, 20% Phase II and the remaining 70% for Phase III on commercial assets, which leads to strong revenue visibility. We have a very low concentration in terms of risk and us being exposed to individual products, and we have a high level of diversification by technology, indication and company type. And with that, I actually continue with sharing what we believe have been the business highlights in 2025. Three topics. First of all, a robust sales momentum across all our key modalities, technologies, so mammalian, small molecule, bioconjugates, drug product and also the Bioscience technology platform had significant growth again in 2025, driven by mammalian small-scale assets and maturing growth projects across different technologies. We actually saw sustained high commercial contracting, again, across technologies and sites, altogether, well above CHF 10 billion signed in 2025, of course, materializing over the years to come, including a fifth significant long-term contract for Vacaville with further contracts, sorry, for Vacaville being in late-stage negotiations. So thirdly, on CHI, we saw as planned, as predicted, the recovery of the business returning back to growth, almost 4% and the margin expanding as planned. The exit process is also advancing as planned. And as I said before, we will actually report CHI as a discontinued operations as we should for a business that we will not keep within our portfolio. So this is actually what we are currently doing to not only deliver the business as promised today, but to also prepare the company for future growth. Currently, the teams are managing 23 CapEx -- growth CapEx projects around the world. Again, no other CDMO actually can do it, has proven to be able to do it. Lonza can do it. Currently, 23 large CapEx growth projects worth CHF 7 billion. 90% of it for commercial and mixed assets, so highly profitable and 100% in Europe and the U.S. A few examples to point at. In Visp, a large-samammalian started GMP production in 2025 and will be ramped up with a tilt towards the second half 2026. Going forward, a large important project for Lonza and for our clients. Commercial bioconjugation, it's a medium-sized CapEx project will actually start stepwise from 2029 and then reach peak sales in the mid-2030s, large-scale fill/finish and Stein ongoing, start expected for '27 peak sales also in the early 2030s. Type 1 diabetes cell therapy, cool technology science, CRISPR/Cas together with Vertex in Portsmouth, start expected in 2027 and peak sales around 2030. And Vacaville, I mean, I thought about the headline, make it as crisp and as clear as possible. A great fit to Lonza coming at a great point in time, creating the largest CDMO mammalian network in the U.S. in one go. So remember, we paid in 2024, CHF 1.1 billion for that asset. Closing was 1st of October, and we expect the site to fully deliver to its full potential in the early 2030s. Some evidence why we are so happy and so confident and so optimistic for what we will be doing with that site and already start to do with that site. First of all, a very stable and strong team. I've been there after JPMorgan, doing town halls, taking investors there and also talking to people. We have attrition rate of 99 -- I mean, actually retention rate of 99-point something, so essentially 100%. Great people willing to work for us and embracing the opportunity that Lonza actually gives to them. It's a high-quality asset, as you can expect from Roche and the investment that we have started to do of up to CHF 500 million is into the flexibility of the site so that we can even further increase operational efficiency. Customer interest is very high, remains high, as evidenced by now altogether 5 large commercial contracts for the site, which will, by the way, be able to already now kind of substitute the Roche volumes going out by 2028 and will make the site deliver at the stable level that we have seen today, plus/minus. So very good outcome also in terms of the commercial development and the selling of that capacity. Also important, the first U.S. FDA inspection under the new ownership in Q4 last year was a very strong outcome, only minor observations, which could be resolved almost immediately. First successful tech transfer. So a site which actually didn't receive so many products over the past years had to prove that. And we have been able to execute that tech transfer in a seamless way, and the team actually lived up to the challenge of now operating within a CDMO business model, and I actually included a quote of the responsible external manufacturing head of that large pharmaceutical company, "A truly seamless tech transfer into Vacaville execution at a level I have rarely experienced in my career." And I can tell you, this gentleman is not 21 years old. He has seen a lot. right? Last but not least, post-merger integration finalized successfully mid of 2025. So what we can actually say now and announce to you today is that this site is now a regular part of our global manufacturing network and will be managed as such and will start to contribute and continue to contribute over the next years. As a heads up, now that we actually can tell you that already with those 5 contracts in our business portfolio, we can actually substitute the Roche business and deliver stable revenue plus/minus at the current level until 2028. We will not further comment and report on individual contracts for that site as we don't do it for any other site in our overall manufacturing network. And with that, I hand over to Philippe, who will take you through our financial figures for 2025. Philippe Deecke: Thanks, Wolfgang. Good afternoon, and good morning to people joining from the U.S. also from my side. Before I start, let me just give you 1 or 2 disclaimers. All numbers that I will present are for the Lonza continuing business, which means that they all exclude our CHI business. The CHI business, as was mentioned by Wolfgang, is now reported as discontinued operation according to the definition in IFRS 5. Further, as usual, our sales growth rates are in constant currencies. All other growth rates are in actual currencies. With that, let me go to the key financials. I need to click myself. So first of all, the Lonza business delivered CHF 6.5 billion in 2025. This is CHF 1 billion more sales than we did back in 2024. So CHF 1 billion growth, 21.7% of constant currency growth. This is ahead of the upgraded guidance of 20% to 21% that we communicated back in July last year. This includes roughly CHF 0.6 billion of sales from our Vacaville site, so slightly at the upper end of the CHF 0.5 billion that we had forecasted. We're very pleased, obviously, operationally, Wolfgang mentioned that we're very pleased with the site operationally. We are also very pleased financially with the contribution of Vacaville. Organically, the organic business, excluding Vacaville, contributed or grow at low teens, which is fully aligned with our CDMO organic growth model. Going to the margin. We delivered a margin of 31.6%, up 1.4 percentage points, also very pleased about that. And this as well is ahead of the guided range of 30% to 31%. Three main contributors to the margin. One is, of course, operating leverage. When you grow the top line at that rate, of course, we are not growing our cost at the same rate. So administration costs, sales and marketing costs, research costs are growing at a much lower rate, providing leverage. Second, the maturing of our growth projects. Some of our projects are now getting close to higher utilization and therefore, increasing their margin. And number three, several targeted productivity initiatives across the organization. One word on FX. You see that we had an FX impact of roughly 2.5 points on both the top line and the bottom line. This is coming mainly from the weakening of the U.S. dollar back in the early part of 2025. Luckily, we have a very strong natural hedge. We are selling and having costs in roughly the same currencies. We're helping that as well with additional financial hedging program to protect our margins. With that, let's go to the sales evolution. As you can see on this page, we had good performance from 2 of our large platforms. Let me start with the exceptional performance of our ADS business, Advanced Synthesis, with very strong contribution from both bioconjugates as well as small molecule assets, the platform growing 22% organically. We had very -- we had several assets in both platforms growing and ramping up simultaneously and growing at a fast pace. On the I&B, in Integrated Biologics, you see a growth of 32%, a large chunk of that obviously coming from the Vacaville side, but also the other organic assets ramping up nicely. Going to Specialized Modalities. This was probably or is the soft point of our performance in 2025. We had discussed that in the first half last year and in Q3. We saw soft operational performance from the Cell & Gene business that actually continued during the year, but we're looking forward to a much better year in 2026. And then on the microbial side, where we experienced a phasing towards the end of 2025 into 2026. Also here, a better '26 is expected. The platform ended up with a small decline of minus 3%. Moving on to our CORE EBITDA performance. Here, again, very pleased with the progress, reaching 31.6%, close to the 32%, but we'll do that in 2026 and beyond. So the 3 key reasons why we grew our margin. I mentioned that before, but maybe a little bit more detail, again, operating leverage where we have very strong cost discipline across the organization now, both at headquarters level, but as well in the different sites. We have several maturing assets, especially in mammalian bioconjugates and small molecules that are allowing us to offset the dilution from the newer assets. And last but not least, operational excellence and high utilization in our commercial sites allow us to offset a slightly negative mix versus 2024. Maybe a few words to the platforms. I'll start with ADS, again, an exceptional margin improvement of 5 points, reaching margins of 42%. This is even slightly above the margins that we delivered in the first half of 2025. So here as well, again, very pleased. However, this is an exceptional year, and we will probably look at the normalization into '26. Looking at Integrated Biologics, a slight margin decline here of 0.9%, mainly due to unfavorable product mix and as well some new assets that have been coming online and growing in 2025. And then this is also the platform where we have the highest U.S. dollar exposure. And so while we have hedging, there is some impact from the weaker dollar. On SPM, I think very pleased that the platform could almost hold their margin at 17%, only down 0.5% despite the lower performance. This is due to some profitable mix and as well some very high cost discipline across the platform. Moving over to our CapEx details. You see here that we spent roughly CHF 1.3 billion in our CDMO business. Again, CapEx is a key enabler for Lonza's future growth and also a key focus for the organization now and going forward. The CHF 1.3 billion was spent most of it on gross assets, 60% of the spend was for growth. This includes a diversified portfolio of the 23 projects that Wolfgang mentioned earlier. You see as well that the peak of CapEx is behind us. This was in the past year. You see in the middle of the page that we are on a slope to actually normalize our CapEx spend. This -- in 2025, we reached 19.6% of CapEx, slightly below the guided range of low 20s, mainly due to some higher sales and some more discipline in maintenance spend. We're looking at high teens for 2026. And then over the midterm, normalizing in what we call our CDMO organic growth model for CapEx in the mid- to high teens. The normalizing CapEx also allow us to do great progress on our free cash flow. You see for this year that for our continuing business, we delivered CHF 0.5 billion of free cash flow, CHF 545 million, almost double the amount we delivered back in 2024. One of the key reasons, obviously, CapEx, which has been stable while the business has been growing, but also actually very strong management of inventories and trade working capital in general. You see that our trade working capital grew CHF 200 million. This is much less than what obviously our business has been growing in '25. And so you see that our trade working capital in percent of sales has actually declined by almost 5 points. Our inventories -- inventory coverage is also declining almost by a week, and this is something that we will focus a lot more to continuously drive down inventories to the right amount for our business. Moving from cash to our capital allocation framework. This is not new. We have not changed anything on that slide. This is more of a reminder for you, obviously, because a lot of people are asking us the questions about what will we do with the CHI proceeds. Well, first of all, it's not sure that there will be CHI proceeds depending on the exit route that will actually happen. But let me take you through our priorities in terms of capital allocation. Priority #1 is the investment into maintenance, infrastructure and systems. Why? Because we need to make sure that our base assets and our growing base assets are future-proof and are well maintained and will contribute to the future growth of the company. Priority #2, our progressive dividend policy, very important to us as well, and I'll get to that on the next page, which lead us to our discretionary cash. This is the cash that is available for investment into growth. This discretionary cash may be increased by proceeds from the CHI exit, should it be leading to proceeds. These proceeds as well will flow into what we call discretionary cash, will be invested into organic or inorganic bolt-on M&A investments. Now rest assured that we will be very disciplined in the way we allocate this capital. You know that for internal organic CapEx projects, we use very strict financial thresholds, 15%, 1-5 of internal rate of return and a ROIC at peak of 30%. This is for the organic investments. For bolt-on and M&A, it's not that easy to put a formal threshold, but we will remain very disciplined and basically look at 2 things: one, attractive returns; and second, is there a strategic fit with our Lonza Engine. And if you look back at the last 2 acquisitions being Synaffix and Vacaville that Wolfgang also shared with you, you can see that these were very disciplined and very attractive acquisitions. Looking at our dividend. As you can see, this dividend policy fully in line with our capital allocation framework. The Board of Lonza is actually proposing to increase the dividend by 25% to an amount of CHF 5 per share. This reflects obviously the strong earnings performance and will let shareholders benefit directly from our growth of earnings. Our progressive dividend, just to be very clear, means that we will maintain or grow our dividend per share on a year-by-year basis. And you can see on the chart that we have proven this over the last 10 years. Now let me finish with a quick update on our ESG performance before handing back to Wolfgang. We've made strong progress in 2025 on our ESG agenda. I'd like to drive your attention to the top 2 pie charts. One is the greenhouse gas emission intensity and on the right, the waste intensity. Both of these targets have actually been met in 2025, 5 years ahead of schedule. We are planning to have the intensity by 2030, and we have achieved that already in 2025. We are, therefore, deciding to rebase and to now looking at cutting by 50% the 2021 base, which is in line with the Science Based Target initiative. So great progress on greenhouse gas and on waste intensity. Also great progress on actually renewable energy. As of January 2026, all our electricity in the U.S., in Europe and in China will be renewable sources. Our progress is also well recognized externally, and we've been, for the first time, awarded the EcoVadis Gold rating and have been named again by Ethisphere as one of the world's most ethical companies. So again, great internal progress and great external progress. And with that, I'd like to hand back to Wolfgang, who will take you through the business platform performance and our outlook for 2026. Thank you very much. Wolfgang Wienand: Thank you, Philippe. And indeed, let's take a brief look at the 3 business platforms before then turning our heads towards the future. So Integrated Biologics, robust sales and margins driven by strong demand and operational execution. Here, Vacaville, as discussed before, kind of contributed more than we expected at the beginning of last year. We also saw a margin accretion from strong operational execution, however, was kind of more than offset by growth project dilution and unfavorable portfolio mix, as already mentioned before by Philippe. And also here, it's kind of clear. I mean, the significant amount of contracted business of above CHF 10 billion, a major part of it comes from our Integrated Biologics business platform. So ADS, our Advanced Synthesis business, an exceptional year in terms of sales growth driven by rapid and at the same time, occurring ramp-up of growth assets, which was great to see and actually great to see how well the teams in small molecules and also bioconjugates actually made it work and delivered according to the expectation of our clients, outstanding profitability above 40%, which is probably plus/minus what we can expect going forward from that business in terms of profitability. Our Specialized Modalities business, which is in terms of strategic importance, relevance to us, and an area from which we expect significant future growth over the next years to come and also significant contributions to our profitability. However, it's still suffering from this whole universe being small and limited. And as a consequence of that, also our own business portfolio being much smaller than for the other modalities and as a consequence of that, also more volatile. However, we are one of the very few CDMOs actually having 5 commercial assets in our network. And essentially, each of our manufacturing sites now has one commercial asset. So Bioscience briefly on that, which is our media business plus some other smaller businesses also returned on a very attractive growth trajectory, which supported that business platform. And with that, I actually turn our heads towards the future outlook 2026. What can you expect from us? What do we expect from us in 2026. First of all, continued high demand for the services of One Lonza. So stronger in constant exchange rates, stronger relative growth in the second half as compared to -- sorry, in the first half as compared to the second half. However, in absolute terms, the year will be balanced, and it's more a baseline effect how 2025 look like. Regionalization of supply chains will be with us also going forward. However, will not apply to existing businesses, to existing products in existing assets because typically, no one actually changes a winning team and changes an existing well-functioning supply chain. It's more about where will we allocate new business going forward. And this will be in line with the expectation and the desires and preferences of our clients, probably much more supporting regional demand by regional supply, which will then, in turn, also help -- further help our already strong natural hedge. CORE EBITDA margin expanding from maturing growth projects, productivity, a topic which is very close to my heart, cost discipline and obviously, operating leverage. I mean key priorities for myself, for the whole One Lonza team, of course, continue to elevate the One Lonza customer experience already evidenced by the significant increase in Net Promoter Score, but the journey goes on. A base business, execute with rigor and deliver constant -- I mean, through grinding of our business, our assets, constant margin expansion. Cash, it's going to be important this year or last year actually was an important step forward. We will continue on that journey, and we know how. In terms of growth, execute this 23 growth projects and of course, kick off new ones and also on top of that, being agnostic to doing it organically or inorganically, driving our M&A agenda. Group Functions are elevated in their role and their impact on the businesses, which is around standardization and also making us work in a more consistent way. CHI is going to be an important topic in 2026, driving the exit process and executing it at the appropriate time in the best interest of our shareholders and stakeholders. And with that, I want to close with actually reminding all of us of the financial model that we are applying here at Lonza. Based on our Lonza Engine, there's an underlying market opportunity in terms of growth of low teens every year on average over time. In order to translate those opportunities into tangible business, we need to continue to add capacity, invest. And these investments as long as the growth opportunities on average over time are in the range of low teens, this CapEx requirement will be around mid- to high teens of sales going forward. This then delivers our CDMO organic growth model, which is a constant exchange rate sales growth of low teens percentages on average over time and the CORE EBITDA margin growing ahead of -- so CORE EBITDA growing ahead of sales growth. Specifically for 2026, it means our constant exchange rate at sales growth is expected to be between 11% and 12% and a further CORE EBITDA margin expansion to a level above 32%. So already entering the corridor that was 2 years ago predicted to be achieved only in 2028. So what have been the key messages that I, we shared with you today. First of all, Lonza has delivered in 2025 and is well prepared for the ongoing journey of transformation and growth in 2026 and beyond. We have made progress as promised and are set up for success in terms of consistently delivering our business and also the project in Vacaville and further evolve as the global One Lonza team. We expect, again, significant profitable growth and we'll continue on that journey. And for the longer term, we are having -- we actually defined a clear strategy and the capital allocation framework to deliver in line with our CDMO organic growth model. We are One Lonza, the pioneer global CDMO market leader, manufacturing the medicines of tomorrow for our customers and their patients worldwide. I thank you for your attention and look forward to your questions. David Carter: Many thanks, Wolfgang. I'm David Carter. I'm the Global Head of Communications, and I'm going to be hosting the Q&A session. I'm going to ask my 2 colleagues here to just slightly rearrange the setup for us so that our leaders can relax. Philippe is back on the stage. And I'm going to ask anyone who's got questions in the room, we're going to start with you. If you could say your name, your institution and ask, I know it's ambitious, but if it's at all possible, no more than 2 questions. We will also, for people that are online, flick over to you at a certain point and make sure that you have a chance to ask questions, too. But first and foremost, are there any questions in the room? Let's start over here. Daniel Jelovcan: Daniel Jelovcan, ZKB. So two, the CHF 70 million hedging gain, which is booked in the top line, I'm not an auditor, but shouldn't an hedge can be booked somewhere in the financial expense or below the EBIT. I don't understand the mechanism if you can clarify. And then I ask the second question. Philippe Deecke: Yes. No, this is fully in line with hedge accounting. So this is normal. We've been doing this all along. It's just this year, this -- or last year, 2025, given the volatility in exchange rates, it has been higher than in previous year. But this has always been booked at the same place. Now to be clear as well, this is not accounted for in our constant exchange rate growth. So we remove it from that. Daniel Jelovcan: Okay. And the second question, when I do my calculation in Integrated Biologics, excluding Vacaville, you must have had an organic growth of 8% in the second half, quite a slowdown from the first half which was 17%. Why was that? Was that maybe some batches which were not booked in December, but in January, that's why you're guiding for a strong first half '26. Just to understand the picture. Philippe Deecke: Yes. No special reason. I think there's always volatility between the halves. We've seen that in the past. So I think it's more of a mix rather than kind of batches that would have been blocked in December. So nothing special to notice. It's the different phasing of assets coming online and mix. Nothing different. David Carter: Are there any more questions in the room? We have a quiet house today. We're usually more challenging that. Do we have any more questions online at the moment? We're going to hand over to Sandra online in that case, Sandra, if I could ask you to host the online question session, that would be great. Operator: The first question comes from Ebrahim Zain from JPMorgan. Zain Ebrahim: Zain Ebrahim, JPMorgan. My first question is on the Advanced Synthesis business, and growth momentum sounds -- was really strong in 2025 at [ 22 ] growth momentum going forward in '25 benefited from 2 growth projects that seems and you'll have further growth project contribution in 2026. Margins sound like 40% plus/minus, as you said. So any further commentary there would be helpful. And my second question is just on the Cell & Gene therapy business where you've indicated you expect an improvement in 2026. And just the question is what underpins that confidence? Wolfgang Wienand: Thank you for the question. I'll take the first one, I propose. Philippe Deecke: If you understood the first one, I will pick the second one. So I'm happy to take this. Wolfgang Wienand: Yes. I actually didn't understand the second one, so pass it on. But either way, on ADS, indeed, in terms of profitability, it probably will hover around the 40%. And that's what we expect going forward in 2026 in the years to come. The growth obviously was kind of exceptional in 2025 due to, I mean, many positive events coinciding. But it will be a growth engine going forward as well, but in 2026 and not at the level that we have seen in 2025. And maybe Philippe has made up his mind in terms of the second question in the meantime. Philippe Deecke: No. Second question, I think -- thank you, Zain, it's Philippe. So I think we're confident in terms of the growth rate for Cell & Gene in '26 versus '25. As we mentioned, I think, in the first half, we had some operational challenges in Cell & Gene in one of our sites during '25. This is being resolved. And so the business will kind of continue in a more normal fashion in '26. So from that point of view, yes, we are confident. On top of that, actually, we keep on ramping up commercial products in all of our sites. So all the Cell & Gene sites in the world for Lonza have a commercial product, which is, of course, helping to stabilize somehow the utilization of these sites. So yes, we are much more confident for '26 than what you've seen in '25. Wolfgang Wienand: Before we move on to next question if I could just ask anybody who's joining online to speak as slowly and clearly as possible. The line is not quite so clear at this end. So the slower and clear you are, the more easily we can understand you. So Sandra, I'll hand back to you for the next question. Operator: The next question comes from Charles Pitman-King from Barclays. Charles Pitman: Firstly, just on Vacaville, you're targeting stable CHF 0.6 billion sales now for FY '26 versus prior CHF 0.5 billion. Can you just confirm that this is going to remain stable around CHF 0.6 billion to '28 now. And with these 5 contracts in place derisking that target, can you confirm you're still targeting 30% utilization? Provide a little bit more detail around the predicted phasing of the contract and just confirm whether they all need to be fully ramped by '28 to offset that -- those lost contracts. Then just secondly -- sorry, just secondly, could you confirm what the current Form 483s are currently outstanding for Lonza facilities? And what advised rectifications are required and how this is expected to impact any ongoing operations and just confirm there were no impacts in FY '25. Wolfgang Wienand: Yes. Let me indeed start with the second question. Thank you, Charles. This 483, and there has been rumors around that and around other topics as well on which I will briefly comment in a bit. This 483 actually was a huge success. Not that it wouldn't have been even better to have a clean sheet, but a 483 with only 3, I believe, minor observations, which could either be immediately in the short term, close out or a few weeks later, actually is a very good outcome and receiving 483 is more the standard outcome that essentially across the pharmaceutical industry is yielded. It is not to be also clear around that. It has nothing to do in this case with the warning letter. The sequence from the process of the U.S. FDA is, I mean, a bad 483 with major observations, official action indicated can turn into a warning letter, but it's actually typically not the case, but what typically is the case that you get this form with your observations. And in this case of Vacaville, it actually was a very good outcome with only 3 minor observations which have been immediately being addressed and closed and are all addressed and closed right now. There was no impact, nothing on the ongoing operations and actually nothing of concern. I think that's important to say. There are, of course, also, I mean, at least you're telling us that, because it's not brought to us ourselves, other rumors around Vacaville not being a high-quality asset, not being capable of being run in an efficient way as a CDMO asset and all that, obviously, coming from other market participants. I actually won't comment on that in detail, but I would like to let the evidence that we shared with you speak for itself. Just 2 thoughts, maybe. First of all, and that is kind of my take of it as long as our competition continues to speak about us, and can't help itself to speak about us. I take it as reconfirmation of Lonza being the market leader in the space, first thought. Second thought on Vacaville. And I don't know, but one way of looking at it, of course, is that people might be concerned from a competitive standpoint, what great things we, at Lonza can do with great assets over the next years. But I would like to leave it there, but I wanted to address that because I think it's important. What you should take with me is what I shared with you today, a great asset, a great acquisition at a great point in time with a business secured until 2028 and beyond to keep, actually to substitute the Roche volumes going out and to keep the revenue at the level of where we are today, plus/minus CHF 50 million maybe over time. And that actually leads to the first question of you, Charles, which is on, first of all, phasing and ramping up. First of all, now having 5 contracts, of course, we will continue to sign contracts, right? We don't stop even though we will stop talking about it and reporting it because we don't do it for individual sites, which in the end are run as an integral part of the global network. So we will continue to add business because interest is very, very high. Those 5 contracts, which are large. I mean, they will only come to full fruition after 2028 because that's the time you need to actually tech transfer and ramp it up. So this is already feeding growth beyond 2028 and the other business that we actually will win over the next days, maybe even weeks and months will then take us further for this site to, I mean, come to its full potential, come to full fruition in the early 2030s. I think what is still open from your question, Charles, is the utilization. Yes, it's plus/minus that because the Roche business going out, new business coming in, keeping us stable at around where we are today, plus/minus. And us having the time invest into the flexibility, into the operational efficiency of the asset to them from 2028 onwards, be able to actually run at full steam and make it CHF 1 billion revenue and way beyond CHF 1 billion revenue side within the global network of One Lonza. I hope that answers. Charles Pitman: Can I please just double check on the [indiscernible] 483 as well? Wolfgang Wienand: I actually don't have the details to the degree as I had them for Vacaville, but same here. I mean what I heard, and that's actually the feedback from quality is that this has been actually a successful inspection and all observations have been minor only and have been closed out in the meantime. So also nothing which would worry me or anyone within Lonza and nothing that should worry anyone outside Lonza or anyone holding Lonza shares. Operator: The next question comes from Charles Weston from RBC Europe. Charles Weston: So my first is back on Cell & Gene therapy. You've indicated that perhaps you could have grown faster should there have been no operational issues. So I just wanted to get a sense of how much those issues may have held you back and what the state is of the relationship with any of the customers where they may have wanted more product? And my second is on the EBITDA margin. As you highlighted, you've already hit or you intend to already hit the low end of your 2028 guide 2 years early. Can you help us understand whether there's anything to prevent margins even excluding Vacaville, continuing to grow at similar rates, particularly given there was some negative mix in Integrated Biologics in 2025 that perhaps gives you a nice start. Wolfgang Wienand: Yes. Thank you, Charles. Maybe Philippe starts, and I take the second question. Philippe Deecke: Which is on Cell & Gene? Wolfgang Wienand: Yes. Philippe Deecke: yes, I think I'm not going to quantify, but let me make sure and reassure that there was no customer issues related to that. Of course, this is our first concern when something doesn't go as planned. But then we work very closely with the customer. So on this one, there was no impact on customer and the issues are resolved, and we just need the time to restart everything at the regular run rate. So from that point of view, I think things are fixed, and we're looking forward to return to normal operations in '26. Wolfgang Wienand: Yes, and Charles, on margin expansion, that's our commitment to grow EBIT -- core EBITDA ahead of sales. And our organic growth model, our commitment what we want to do with this company to constantly expand margin, right? And you will see that already this year, and that's how we guided, and you will continue to see that over the next years to come through different measures. Of course, it's expansion of our gross profit margin through pricing, through efficiency when it comes to productivity, again, very close to my heart, cost discipline. It's also about keeping SG&A costs growing at a much lower pace. So operating leverage and a number of growth projects maturing and then contributing rather than diluting our profitability. That's what you can expect from us going forward. And that is our commitment. Charles Weston: I guess I just wanted to ask, is your confidence on hitting the upper end of that now increased given the strong performance you've had in '25? Wolfgang Wienand: Yes. Charles, I would like to leave it there because, I mean, while this margin, of course -- sorry, this guidance has been put out before me joining Lonza, it is, of course, rightfully so still in your hands, which is why I actually used it and kind of went back to it, to tell you that actually, what we are doing is in line with what has been promised to you before, but we're not going to guide again specific margins for specific years, but thought that actually the organic growth model is a much more useful framework for you because it's not guiding for a specific point in time, but rather providing for a trajectory in terms of both top line growth, our margin will evolve and what it takes to make that happen in terms of CapEx. So I actually would like to leave it there, but hope that I've been able -- we have been able to create confidence that this is a serious ambition that we will make happen. Operator: The next question comes from James Vane-Tempest from Jefferies. James Vane-Tempest: Just one on free cash flow, please. Very helpful to have what the business is now and obviously comparing to what that looked like in 2024, at a group level, including the CHI. So last year, you disclosed net working capital was 13.7% of revenues. I guess now we have trade working capital of 34%, showing a reduction. But from memory, in 2024, working capital went up, I think, by around CHF 45 million with Vacaville inventories and receivables into year-end. So my question really is underlying free cash flow for this year because if it's CHF 545 million with this new definition you've got, is CHF 500 million more like the right number on an underlying basis to how to think about for this year, just so we can figure out you understand what the underlying improvements have actually been. Wolfgang Wienand: You start Philippe, I'll take the end. Philippe Deecke: I'll probably finish. James, there is no change in definition in our free cash flow definition. So the comparators to last year is fully comparable to what we do this year. The only thing we have changed is to give you a much more precise view on what our trade working capital, which we believe is a number that we should all track and also be aware. To remind everybody, trade working capital for us is inventory, AR and AP. And so in the past, in net working capital, you had a lot of other things, which included early payments, also discounting liabilities, et cetera, which were partially also even noncash, which is correcting from the EBITDA line. So no change in free cash flow definition. So the improvement that you see in free cash flow versus '24 is the true underlying free cash flow improvement of the business -- of the CDMO business. You'll find in our reporting as well the cash flow from the entire group, including discontinued operation, which top of my head is CHF 674 million, I think, if I remember well. So that's the full group. But in terms of CDMO, this is true underlying performance. Wolfgang Wienand: And adding to that, I mean, the financial engine, if you would like to call it like that. So top line growth profitably, expanding margins and decreasing CapEx as shared by Philippe through not because we would build less capacity, we need the capacity. Otherwise, we wouldn't go. But more discipline in terms of how we execute CapEx, I mean, has the ultimate goal of delivering ever more cash year-over-year. So that's what we are committing to with that CDMO organic growth model. James Vane-Tempest: Sorry to come back, I guess maybe just to ask a question in a slightly different way. I mean in '24, it was highlighted that there was much stronger Vacaville inventories, which contributed to the free cash flow decline. So my question is looking at the growth, is it a clean number, the CHF 545 million? Or does it kind of benefit from perhaps some working capital, which was pulled forward into Q4 '24 rather than actually seeing that in 2025? Philippe Deecke: Yes. I think it's usually the case that our trade working capital is higher in the fourth quarter. I think this is nothing new. So from that point of view, I don't think that the number is anywhere significantly or materially influenced by what you're describing. But please, if you're not satisfied with the answer, it's maybe something you can pick up with Daniel. So we make sure you fully get the answer. Operator: The next question comes from James Quigley from Goldman Sachs. James Quigley: I have two, please. So the first is on the contract signing. So you said well above CHF 10 billion in contract signings in 2025 that follows CHF 10 billion in '24 and CHF 13 billion the year before. Does well above mean between CHF 10.5 billion? Or does it mean between CHF 10 billion and CHF 13 billion. And how do you use this figure? You said before, it could be quite volatile. How are you thinking about it in terms of targeting and signing -- future signing contracts and driving future growth? That's question one. And question two, you gave some good details on the shift in number of molecules in development by pharma and biotech. But how do you think about M&A impacting that commentary around outsourcing and outsourcing trends as it stands as we look at the pharma industry, it looks like there was quite a big need for M&A. We've seen a pickup in M&A recently. So what happens when that shifts over time? And what have you seen when your customers, your biotech customers or even your larger pharma customers have been acquired in the past? Wolfgang Wienand: Thank you, James. To start with the contract signing value. It's not even a KPI. It shouldn't be a KPI because what is it really? It is an addition of value based on signed contracts, which might distribute over 3, 5, 7, 10, 15 years, right? And you just don't know. I mean our recommendation -- first of all, we will not make it a KPI. We will share it from time to time, but we don't believe that it's actually a meaningful KPI for which you should create or can create in a meaningful way, a time [ series ], which will actually tell you anything. On the other hand, it's also clear that, I mean, high contracting will translate into future business, which is why we shared it as a qualitative information, right? So I would, while being relevant, useful, providing confidence reassurance it's actually, I wouldn't even call it a KPI, which is kind of also already the answer of. Let's not talk about, I mean, digits after the comma because it's actually not a precise signs around that. And maybe one further thought, while signing with a certain customer, a 10-year contract, which might even be in the interest of that customer as opposed to signing a 5-year contract. The 5-year contract, even though the value in terms of contracted value, of course, is lower because just 5 years instead of 10 years, it might be commercially more attractive because it offers opportunity to speak about pricing after 5 years rather than being locked in for 10 years, just as an additional thought how to think about that figure not being a useful KPI. In terms of M&A and pharmaceutical assets being acquired by large pharma through M&A takeover of small biotechs, actually, we have seen it all. We actually have seen the molecule just staying where it was with Lonza and the new owner of that asset being super happy, having a robust, proven global supply chain for this acquired asset. We actually have seen also the case where Lonza wasn't involved. But for example, when that pharmaceutical assets came from China, it was important for the Western acquirer to build a robust Western supply chain, calling us and Lonza creating that robust supply chain. And there have been cases and will probably always be cases where if there is capacity and technology and capability available for that asset within the acquirer that this asset might actually be in-sourced or partially in-sourced. So it's kind of business as usual and nothing where we would actually see any trend or any shift in behavior. Operator: We take now the last question for today's call from Odysseas Manesiotis from BNP Paribas. Odysseas Manesiotis: Firstly, on the Visp, large-scale mammalian ramp, your 2030 peak sales assumption seems a bit pushed compared to earlier comments. Could you explain why that is? Was there some movement with contracts from Vacaville so on? And did you manage to deliver commercial batches within 2025 from that facility. And last one quick one on the FX, given the moves you're seeing today. Can I confirm with you that the 2 percentage point headwind you're assuming for the guide takes into account January average rates rather than something closer to spot and would and around 4 percentage point impact be reasonable if we take into assumption today's moves. Wolfgang Wienand: Philippe, do you want to start with the last question, I'll take the 2 first questions. Philippe Deecke: Odysseas, thank you for the FX question. So obviously, I think if you read the small print, our forecast of 2% impact was based on mid-January rates. So I think if you take into account what happened on Friday, Monday, I think the number is probably closer to 2.5%, with probably the rate if you were to use that. So I think 4% is probably too high, but we'll provide you an update in Q1 and in half year again. So I think rates are more volatile nowadays than they were in the past. Rest assured that our financial hedging and natural hedging works to stabilize margin, but we'll provide you an update as rates evolve. Wolfgang Wienand: Yes. And thank you for the 2 first questions. I mean my main assumptions are not lower, to be clear, so now, unchanged. And in 2025, that large-scale assets in Visp actually started GMP production with, let's say, commercial ramp-up starting in 2026 and especially towards the second half of 2026. Operator: I would now like to turn the conference back over to David Carter, if you have more questions in the room. David Carter: Any more questions in the room. We have one just over here. I'm aware that we are slightly running over time, but I'd like to give the room a chance to have a few questions if we can. Unknown Analyst: [indiscernible] I have a question about the CapEx 2025. You had 38% maintenance CapEx. I expected it to be a little less. Could you give us any advice about the next years, will this be the same level? Or will it come down a little? Philippe Deecke: Yes, if you look at our CDMO growth model, it actually tells you roughly how much we want to invest in growth, which is roughly low teens in terms of growth, the rest being mid- to high single digit actually in system infrastructure and maintenance. So that gives you the ratio. I think the ratio this year is probably normal. I think the majority of our investment go into growth. This will be the case also going forward. But this is -- this changes year-over-year depending on the different assets that are planned. But I think the CDMO growth model gives you a fair way to kind of value the amount of capital that would go into maintenance system and infrastructure. Unknown Analyst: And the second question is about one facility you moved from small molecules to the capsules business to be divested. Could you explain what kind of business it is and why you moved it. Philippe Deecke: Yes. This is a small site in Florida. They actually do fill/finish for clinical and very small batch sizes. This is a business that actually came with Capsugel at the time that we moved into small molecules because there were some synergies in what was being filled. I think we feel that this is a better fit with the CHI business overall and in terms of providing growth opportunity for CHI and synergistic. So we moved it back into the CHI parameter. Wolfgang Wienand: For clarification, when Philippe said fill/finish, it's not aseptic sterile manufacturing, it's OSD. So oral solid dosage forms. And especially in the case of Tampa, it's filling and that is where the fill/finish probably comes from of capsules, which actually is a nice fit as a kind of a business extension of the Capsules business itself. And again, came with Capsugel and we thought it makes sense to go with Capsugel because it's not going to be a strategic focus to do OSD for Lonza. Talking about that and kind of as a reminder, what CHI is today is not the same that CHI was when acquired in 2017. So certain businesses, which are strategic for Lonza will actually stay within Lonza, for example, Bend in Oregon where we actually do really high tech around particle design and spray drying. So it's not going to be the same scope that we acquired at the time that we are actually exiting in 2026. David Carter: Any further questions in the room? One just here. Laura Pfeifer-Rossi: Laura Pfeifer, Octavian. I'm just wondering if you could talk a little bit about the Vacaville profitability in '25 and also maybe the outlook for '26 given that you will have new products being transferred there so a little bit of puts and takes, please? Philippe Deecke: Yes. I think profitability for '25 was better than we said. I think it was operationally dilutive as expected. And I think going forward, again, probably 2025 was still an easy year. That's why we called it for Vacaville because I think they produce the same products. Now we are starting to introduce new products. We will have also shutdowns for construction work that we also explained in the past. So I think the margin will improve over time. I think it's not a linear path that will be getting better every year in the same increments. But I think we can confirm that by 2028, the site will be in line with the group at that point in time and therefore, neither dilutive nor accretive at that time, but it's not a straight line, but I think we were happier in '25 than we had expected. Wolfgang Wienand: So while it's adding in a relevant way already until 2028, I mean the rocket we will actually start in 2028 in terms of being ready, having done our CapEx into operational efficiency, new products at attractive pricing, then creating true volume, and that's actually where we will see the full benefit of the site and then reaching peak probably in the early 2030s. David Carter: Very good. We are over time now. So thank you all for your engagement both in the room and online, and I will pass back to Wolfgang to share some final words. Wolfgang Wienand: Yes. Thank you, David, and thank you all here in the room, ladies and gentlemen. And also those joining virtually for spending the time together with us, listening to actually a strong performance of the global One Lonza team delivering and even overdelivering on our promises and also listening to the commitments that we actually made for 2026 and listening to how we think about a great future for One Lonza, which should include, first and foremost, our customers and their patients will include our shareholders and, of course, ourselves as members of the global One Lonza team. So thank you for coming, all the best and looking forward to stay in touch with you the latest for the half year in July. Thank you so much, and have a great day.
Operator: Greetings, and welcome to the GCC Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Sahory Ogushi, Head of Investor Relations. Please go ahead. Sahory Ogushi: Good morning, everyone, and thank you for joining. With me today are Enrique Escalante, our Chief Executive Officer; and Maik Strecker, Chief Financial Officer. The earnings release detailing this quarter's results was released yesterday after market close and is available on GCC's IR website. This conference call is also being broadcast live within the Investors section at gcc.com, and both the webcast replay of the call and transcript will be available on the same site approximately 1 hour after the end of today's call. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in yesterday's press release and in our quarterly report filed with the Mexican Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. With that, let me now turn the call over to Enrique. Hector Enrique Escalante Ochoa: Thank you, Sahory, and good morning, everyone. At GCC, we manage the company with a long-term view. Our markets are cyclical and can move quarter-to-quarter, but our strategy is firm and gives us flexibility to adapt to short-term conditions without changing our mid- and long-term view. We focus on disciplined execution, operational reliability and capital allocation across cycles. And this approach guided our decisions throughout the year. During 2025, we operated in an environment where external conditions influenced the pace and timing of customer decisions. As conditions evolve, we revised our expectations in the summer. From that point forward, our focus sharpened with an increased emphasis on cost management and operational discipline, and we delivered record sales for the full year of USD 1.4 billion, reflecting the strength of our operational model, disciplined execution across the network and particularly strong performance in the U.S. These results demonstrate the resilience and demand across our markets. From an earnings standpoint, it is also important to keep perspective. 2024 set a record benchmark for margins and returns, and that level remains the reference point for where we expect the business to operate over the cycle. While we did not replicate those record levels in 2025, we came very close, and we continue to position the company to move closer over time as efficiencies, cost actions, commercial initiatives and network investments take us to near records. The fourth quarter did not introduce new dynamics. Instead, it confirmed the trajectory we have outlined earlier in the year. Our operations were reliable, customer [indiscernible] the same mix and activity dynamics we managed through 2025 with improved execution translating into record quarterly results. Our people strategy remain a constant source of strength in 2025. We continue to invest in safety, training and leadership development, reinforcing a culture of operational discipline and accountability. Safety performance improved again in the fourth quarter and full year results reflected continued progress across key indicators with recordable incidents, including lost time incidents declining 10.5% year-over-year. Our continued recognition as a Great Place to Work further reflects the strength of our culture and employee engagement and the consistency with which we have integrated these values across the organization. Training is embedded across the company with structured programs aligned to specific plant and functional needs. Through the GCC Training Institute, we delivered more than 15,000 hours of training during the year. This investment supports reliability today and prepares our teams for the ramp-up of Odessa and the next phase of growth. Progress on our planet strategy continued steadily. In 2025, we increased blended cement production, expanded the share of alternative fuel in our fuel mix and continue to reduce our clinker factor. These actions support cost efficiency and operational resiliency while contributing to incremental progress in environmental performance. In addition, our Pueblo and Rapid City plants once again received ENERGY STAR certification, placing them among the top 25% of cement facilities nationwide for electricity efficiency. As we move into 2026, our focus remains on executing these initiatives pragmatically, prioritizing efficiency, reliability and long-term value creation. Turning now to our growth strategy. Our focus on execution and network strength is reflected in how the business performs across our key markets. In the United States, ready-mix was the primary driver of growth in 2025, supported by strong project activity. This project-led demand generated consistent downstream pull for cement and reinforce the strength of our integrated operational model. Ready-mix volumes reached record levels in 2025, increasing 31.5%, while cement volumes increased 2.6% during the year. As a result, we outperformed the U.S. cement market in 2025, driven by disciplined project execution and commercial management. Operationally, this translated into high utilization across our operations, supported by investments in mobile capacity and execution capabilities. Energy-related projects, including wind farm and associated transmission continue to provide volume support throughout the year. Infrastructure activity remained stable through the quarter and continues to provide visibility into 2026, supported by multiyear funding programs and ongoing execution at the state and local level. As we enter the new year, we remain proactive and focused in identifying project opportunities, reinforcing the depth and visibility of our commercial pipeline. Residential construction remain under pressure. Mortgage rates have not sustainably broken below 6% since September 2022. As a result, we do not expect a meaningful improvement in residential activity during the first half of 2026. Oil and gas activity softened during the year and continued to soften in the fourth quarter, reflecting the current oil price environment. This segment is expected to soften further in the near term before improving. While this affects mix, it does not alter our long-term positioning within the network as we rely on the flexibility of our plants to ship different types of cement and adapt to market demand. Throughout the year, our commercial focus remains on protecting margins and returns. While market conditions limited pricing momentum during 2025, the pricing increases announced entering 2026 reinforce our focus on offsetting cost inflation and improving profitability over time. In Mexico, fourth quarter performance was in line with our expectations. Residential demand and bagged cement continues to provide stability, supporting margins. The federal housing initiative is beginning to take shape in certain regions. And as projects move into execution, we expect to be able to quickly increase shipments as its impact materializes during the first quarter of 2026. Infrastructure in Mexico, it's an area of growing optimism. Historically, the first year following election is complex. But during the quarter, we saw projects advance with a more meaningful contribution expected in 2026 as execution accelerates. In addition, mining-related comparisons normalized in November, removing a headwind that affected volumes last year. We expect the segment to perform broadly in line with 2025 levels going forward. Industrial customers remain cautious, advancing projects gradually and using this period to prepare to move more decisively as visibility improves. We're cautiously optimistic about the industrial activity improving in the second half of 2026 as trade discussions become clearer. Capital allocation in 2025 remain consistent with our long-term priorities. We continue to focus on ensuring that recent investments in cement distribution and aggregate operations across our network reach their full potential, allowing us to ship product to more destinations, easing the pressure to rely on single markets with a larger volume. In parallel, the Odessa expansion continues to progress on schedule and within budget. Our M&A posture remains unchanged. We continue to evaluate opportunities that strengthen the existing network and meet our strategic and financial criteria while maintaining balance sheet strength and flexibility. As we look ahead, 2026 will be a pivotal year for GCC. With Odessa completing construction and entering ramp-up, the company moves into a new phase focused on integrating capacity, optimizing logistics and strengthening earnings power across the network. With that, let me turn the call over to Maik for a review of the financial results. Maik Strecker: Thank you, Enrique, and good morning to everyone. For the full year 2025, we delivered record consolidated sales of USD 1.4 billion, an increase of 3% year-over-year, driven primarily by volume growth in the United States. Fourth quarter sales totaled $360 million, up 7% year-over-year, consistent with the operating trends discussed earlier. During the year, the depreciation of the Mexican peso created some headwinds, which reduced consolidated sales by approximately $80 million on a reported basis. In the United States, ready-mix volumes increased by 31% for the full year and 27% in the fourth quarter, driven by strong activities tied to wind farm and infrastructure-related projects. Cement volumes increased 2.6% for the full year and 1.4% in the fourth quarter, supported by strong ready-mix activity and contributions from infrastructure and commercial projects across our network. Average cement pricing in the U.S. decreased by 1.2% during the year, reflecting product, project and geography mix dynamics. The aggregate business performed well and delivered the results we expected when we acquired the assets, contributing positively to our EBITDA generation and reinforcing the strategic rationale for advancing our aggregates growth strategy. In Mexico, cement volumes decreased 3% for the full year, however, increased 11% in the fourth quarter, supported by normalized demand in the mining segment and early execution of infrastructure and housing projects. On the cost side, full year cost of sales as a percentage of sales increased by 2.5 percentage points, reflecting factors discussed earlier in the year, including the absence of the natural gas liability benefit we recognized in 2024, higher fuel and power costs, a lower contribution from the [indiscernible] segment and increased transfer freight as we ship products to new terminals. In addition, during the year, we incurred higher freight costs as product was supplied from the Pueblo cement plant to support customers during the period in which the Rapid City cement plant was offline. While this resulted in higher transfer costs, it allowed us to meet customer commitments, preserve volumes and demonstrate the flexibility and competitive advantage of our distribution network. In the fourth quarter, cost performance benefited from disciplined inventory management, which offset the unfavorable inventory impact we recorded during the first 9 months of the year. SG&A expenses declined modestly as a percentage of sales for the full year, reflecting a reduction in consulting services as part of our cost and expense optimization initiatives, partially offset by higher operating expenses. As we move into 2026, we're placing renewed emphasis on cost discipline, particularly third-party spend, fixed cost and staffing optimization while maintaining our standards for reliability and safety. As a result, full-year EBITDA totaled $492 million with an EBITDA margin of 34.9%. Importantly, the fourth quarter delivered record EBITDA margins of 39.6%, up 3.4 basis points with EBITDA increasing to $142 million, reflecting improved operating execution as the year progressed. The depreciation of the Mexican peso reduced EBITDA by approximately $6 million on a reported basis during the year. Free cash flow for the full year totaled $349 million, representing a conversion of 71% of EBITDA with a strong fourth quarter contribution of $156 million, driven primarily by higher EBITDA generation. On capital allocation, we returned $45 million to shareholders through a combination of share buybacks and dividends. During the fourth quarter, we deployed $7 million in buybacks. We remain disciplined and opportunistic in balancing shareholder returns with investments for growth and keeping our financial flexibility. Strategic capital expenditures totaled $309 million in 2025, reflecting continued investment in our Odessa project and logistics across our network. As of year-end, we have invested approximately $600 million in the Odessa project and associated logistics capabilities with the remaining $150 million planned for 2026. We ended the year with a strong balance sheet with cash and equivalents of $969 million and a net debt-to-EBITDA ratio of negative 0.7x, preserving flexibility as we prepare for the next phase of growth and the ability to act decisively on future opportunities. In summary, 2025 reflects a year in which we delivered record sales, observed mix and one-off impacts, maintained strong operating discipline and continued to invest in strengthening our network. With that, I will turn the call back to Enrique. Hector Enrique Escalante Ochoa: Thank you, Maik. As we look ahead, our guidance reflects a year focused on stabilization and execution, consistent with our strategy. We are entering 2026 with a clear operating backdrop, a stronger network and defined levers within our control. In the United States, we expect cement volumes to grow at a high single-digit rate, driven primarily by the contribution from new markets and the initial ramp-up of Odessa. Cement pricing is expected to be flat, reflecting product, project and geography mix dynamics. In ready-mix concrete, volumes are expected to decline at a high single-digit rate, reflecting a high comparison base in 2025, while pricing is expected to be flat, reflecting product mix and the broader distribution of volumes across new markets. In Mexico, cement and concrete volumes are expected to grow at a low single-digit rate, supported by increased infrastructure and residential activity. Pricing for both products is also expected to increase at a low single-digit rate. At the consolidated level, EBITDA is expected to grow at a mid-single-digit rate, driven primarily by higher sales volumes. During the year, the one-off incremental logistics costs associated with the ramp-up will continue to weigh on margins, while cost discipline and efficiency initiatives will help manage the transition. Turning to capital allocation. Capital expenditures in 2026 are expected to be $270 million as the Odessa expansion nears completion, and we will continue with logistics investments across the network. Free cash flow conversion is expected to remain strong and consistent with historical levels. In closing, we remain focused on restoring margins towards the levels achieved in 2024, executing the Odessa ramp-up in a controlled manner and maintaining financial flexibility. While the pace of improvement will vary by segment and geography, we believe the actions we are taking position GCC to deliver resilient and improving performance through the cycle. Thank you for your continued support. We will now open the call for your questions. Operator: [Operator Instructions] Our first question today is coming from Alejandra Obregon from Morgan Stanley. Alejandra Obregon: Perhaps the first one is for you, Enrique. So you mentioned 2026 will be a pivotal year for GCC. And of course, Odessa plays a big role, and if you've provided a little bit of color on that. But just wondering if you can walk us through the different milestones that you think that will make 2026 a pivotal year? Is it kind of like a new distribution setup, savings, energy growth? Anything that you think we will be seeing throughout the next quarters? And so that's the first question. And the second one is perhaps for you, Maik, on CapEx. So you mentioned $150 million of strategic CapEx for, if I understood correctly, new investments on distribution. Just wondering if I got that right and if you can be a little bit more granular on where you think those $150 million are going in 2026. Hector Enrique Escalante Ochoa: Number one, in your question about 2026 pivotal comment. Of course, I mean, bringing a new cement line online in a challenging market is in itself a challenge, right? But we have a strong experience from what we did exactly under even worse conditions when we started up the Pueblo plant during the Great Recession. So we have to obviously manage initially, I mean, a good start-up of the plant. It's a challenging business. It's always -- there are always things in those big equipment that we need to be in control of, and we expect to do that successfully. So that's the first part of this pivotal change. And of course, as we ramp up, we need to have a very good coordination of how we start returning volume that Samalayuca is shipping into the region back as we start, I mean, switching customers, I mean, to the cement produced in the new country. And this, of course, also has to have a good coordination with the series of terminals that we're setting up in several cities and towns to precisely have a more controlled entry into the market, I mean, cautiously, slowly, but with a firm mid strategy of how we will position that increased capacity over time in different markets. So there's a lot of moving parts at the same time as we introduce the new Odessa line during the year. Maik Strecker: Very good. Alejandra, thanks for your question regarding the CapEx. So the $150 million, that is really primarily driven by the project, Odessa, and that's the heavy lift there. However, there's also some additional logistics capabilities that we're building out, starting at the plant level with rail and truck capabilities really to be able to ship that incremental volume and distribute that. That was always part of the scope, and it's now just the time to execute on that. And then what Enrique just said, right, we're looking at several markets where we plan to distribute the volume. And for that, we need some logistics capabilities as well, smaller terminals, access again to rail and so on. So that's kind of the scope of that $150 million for Odessa. In addition, as you saw, we guided for some additional growth CapEx as well. The total is $200 million, which is related to energy-related alternative fuels, continue to invest in the aggregates business to unlock potential there and so on. Operator: Your next question today is coming from Garrett Greenblatt from JPMorgan. Garrett Samuel Greenblatt: I was wondering if you could give a little more color on the regional demand drivers, specifically around U.S. cement volumes up high single digits as opposed to pricing flat. I guess just wondering how those dynamics play out and then for Mexico as well. Hector Enrique Escalante Ochoa: Garrett, yes, as I mentioned, I mean, in my answer to Alejandra, it's a challenging year with a lot of different market or segment performance, right? I mean we are relying on the infrastructure segment more than anything to offset further decreases in short-term in the Oil Well cement market as that industry, I mean, gets more stability and more visibility going forward. So that's one offset. That's why one is growing and the other one is decreasing and one is offsetting each other, right? Residential, as we mentioned, it's weak. It's continued at the same level, I mean, for us this year. There are some other segments like, I mean, obviously, everything that is commodities in the agricultural, I areas where we participate are having, I mean, a strong -- normal to strong, I mean, performance. So that's good for us that we have this mix of segments all the time. So we think that overall, I mean, there is going to be, of course, compensation from some segments with others. And that's why I mean we're basically projecting I mean a flat volume for the year. Mexico, on the contrary, we're seeing some increases overall, pretty much, I mean, driven by housing. The federal government initiative, it's taking off now. I mean it seems like there is clear, I mean, funding and direction to build, I mean, the houses on that federal program. And we're already experiencing projects in several of our locations in Mexico. And we're already shipping volume specifically for that segment. And as we mentioned, the mining segment, I mean, it's stable now. I mean we already stimulated. I mean, the volume loss from the couple of mines that ended operations, I mean, last year. So the conversion is, of course, it's going to be better. And at the local level, I mean, municipal projects, especially some state projects are taking off now. And obviously, I mean, with some growth over last year, it's also going to help, I mean, the improvement in the Mexican market. Garrett Samuel Greenblatt: Great. And maybe just a quick follow-up just on what you're expecting in terms of pricing in the U.S. Have you sent out any letters? Or do you plan to do midyear increases as demand trends progress through the year? Hector Enrique Escalante Ochoa: We are always, I mean, committed to recover at least our cost inflation through pricing in every market where we operate. We're very disciplined in that respect and very consistent. We announced an $8 price increase in the U.S. for January. There are always, I mean, conversations with the different individual customers about, I mean, their ability to take on, I mean, the price at this moment or delays a couple of months and then obviously, one-on-one conversations about, I mean, the total amount, I mean, to increase. Everything I will say, so far, it's going well in those conversations, pretty normal, and we expect, obviously, to execute the majority of that price increase in the first quarter of this year. So that's a very good news. Now in our case, specifically, I mean, we're not in our guidance reflecting directly that price increase that we're going to execute because of several factors that we alluded to during our comments here. Of course, we have a big -- I mean, mix effect here with, again, more cement going to construction segments and less to Oil Well cement, which obviously command different prices. And so that mix doesn't help in terms of the increase. We also have a lot of project work related to infrastructure mean that we mentioned. And in some cases, that project work also has, I mean, a lower pricing than the regular ready-mix precast, I mean markets that are usually very stable. And of course, I mean, there's one third, I mean, factor here that is geography, right? With the start-up of Odessa, and as I mentioned, we're going to do this, I mean, slowly and cautiously. Dispersing more cement to further away locations in smaller volumes, that commands higher freight, of course, and somehow that is reflected on a lesser, I mean, net price because one has to compensate on that incremental freight to be competitive in distant markets. So that's the third factor, I mean, that we have there. And finally, I think that we had, some one-offs in last year that affected in our pricing strength with some segments and some markets derived from things that we disclosed, I mean, last year with some problems in the Rapid Plant during the winter of last year to start up on time because of an accident with there and then an issue with the ball mill that were in the Odessa plant that also delayed us a little bit. So we needed to make some adjustments, I mean, to recover market share that we lost during those incidents. And we did that successfully, I mean, last year. That's why, obviously, we're running much better than the industry as a whole in terms of cement growth. And also comparing our own region, we accomplished that recovery of market share, and we got back basically to our normal levels of share. We're going to, I mean, now run constant there. I mean we don't see any more need to continue, I mean, pressing on prices because of that reason. That's already behind us. So with all that said, with all those -- a combination of all those 4 factors, that's why we're seeing a flat price in our guidance. I see -- I personally see this as a very positive, I mean, ironically because, I mean, I think that it takes us back to a very good solid platform, and it's only building up from this, what I call one-off because of all these reasons at the start of the first 6 months of 2026. So we're very -- I mean, pleased and confident that this is the right strategy for GCC and it's going to be successful for us. Operator: Next question today is coming from Carlos Peyrelongue from Bank of America. Carlos Peyrelongue: I joined a bit late, so I apologize if you have answered this already, but I just wanted to get a bit more color on the status for demand for cement from oil -- from the Texas, in particular, from Oil Well cement. If you could comment a bit on that would be helpful. Hector Enrique Escalante Ochoa: Yes, Carlos, thank you for the question. Yes, we already comment on that, as you were pointing out. I mean, obviously, we're seeing still more pressure in the Permian Basin on demand for Oil Well cement. I mean, given the uncertainty and lack of clarity of where, I mean, the oil price -- international oil prices and the segment is going to end this year. We believe, of course, it's transitory and cyclical as has demonstrated throughout history. And that's why we feel very confident that we really prepare a good, I mean, expansion of Odessa, taking those cycles into account and being able to capitalize on construction cement when the Oil Well demand is slow. So having said that, that's why we're shifting more to, I mean, infrastructure projects. That's where we're concentrating, I mean, for the rest of this year, I mean, as our driver for demand in the U.S. So it's work project, infrastructure, I mean, everything, I mean, related to that segment. And that's how we plan to set the decrease in Oil Well demand. Carlos Peyrelongue: Understood. And have you given some guidance as to your expectation to utilize the new capacity that you build in Odessa in terms of what's the expectation for this year or next year to get to higher utilization rates on that new capacity? Hector Enrique Escalante Ochoa: Yes. Definitely, we lower our expectations compared to what we planned when we were, I mean, planning I mean the construction of the plant. The market conditions are totally different. If you remember at that time, I mean, all U.S. markets were basically sold out and so the conditions were very different. And so that's why we're adjusting our ramp-up of the plant to a much more slower and careful introduction of the plant. The line is going to run at full capacity itself, the new line. So we capture there the decreases in variable cost compared to the current, I mean, [indiscernible] in Odessa. And of course, the line run at full capacity will substitute all that Oil Well cement that is produced currently in that plant, plus the imports that we're bringing from Samalayuca into the area. So that's a way of optimizing, I mean, our cost structure and our network. Where we're going to feel the pain, of course, of this slowdown is going to be in the Samalayuca plant that it's going to have to slow down its shipments to West Texas. And so we're, again, going slowly in the introduction based on those factors. But I think that's the best strategy for us at the moment. Operator: Next question is coming from Marcelo Furlan from Itaú BBA. Marcelo Palhares: My question is related now to capital allocation going forward. So you guys are guiding now for this $270 million of total CapEx for this year. So I'd like to understand if we could expect this level of CapEx, let's say, below the $300 million levels as the new normal for the company at least for the medium term. And my next question regarding to capital allocation is regarding M&A. You guys have provided some color that the likelihood of guys likely seeking M&As in the aggregates business in the U.S. and so on and so forth would be likely to be the main driver. So I'd like to understand if this strategy continues in terms of pursuing this type of M&As. And if you guys could give a little bit more color on potential size if you guys are expecting only small bolt-on acquisitions or if you guys could likely reach to larger M&A activities after due completion. So these are my questions. Maik Strecker: Yes. Thanks for the question. Regarding capital allocation, as I already mentioned, out of the $200 million growth CapEx, $150 million is really allocated to finishing Odessa and the related logistics capabilities. Then the remaining $50 million also already mentioned, but we have some very high-return projects around fuel and energy that we want to execute. Again, and that's in the context really to optimize these very important input costs for the company. A third element here is aggregates, right? We have the first year of the new aggregates business under our belt. We see some opportunities to optimize, to grow, to expand that will require some level of CapEx. And we have some, again, very high return quick projects to execute on. So that kind of comprises the $200 million in growth. And then the $70 million in maintenance, it's in line with our previous years to really keep the cement plants, the network in new light conditions to really perform well for the market that's in front of us. So that's on CapEx. Regarding M&A, yes, we are very active. We have a pipeline of more smaller midsized opportunities. I would call them bolt-ons to, again, the existing aggregates network that we now have within the cement network that we're operating. Again, those are small and midsized acquisitions similar to what we have done in 2024. And again, now that we know pretty well how these markets perform and where the opportunities sit, you will see us throughout the year '26 being very active and focused on that. That's kind of the most actionable part. Nevertheless, as we always stated, we remain very focused also on cement, looking at options for cement to grow the network across the United States, and that remains to be part of the focus as well. Operator: Next question is coming from Emilio Fuentes from GBM. Emilio Fuentes De Leon: First of all, congratulations on the results. I have 2 questions, if I may. First of all, on CapEx during the quarter, is it correct to assume that the downtick on CapEx is related to a postponement on the ramp-up of the Odessa plant given the current market situation? And second, is -- are the extraordinary weather events seen during the beginning of first quarter 2026 in the U.S. already reflected on the guidance? Or is there any downside risk to the guidance given the rough start to the year given related to weather? Hector Enrique Escalante Ochoa: This is Enrique. I will take your second question first and then turn it to Mike for the CapEx. I think that the weather, even though it's been very severe in the U.S., it's not abnormal for us. So no, it does not affect our guidance at all. I mean, for us, I mean, this is, again, in the regions where we participate, pretty normal, I mean, weather pattern. So we'll be fine in terms of our shipments for the quarter. Maik Strecker: Yes. Enrique, regarding the CapEx for the quarter, it's a little bit of timing. The reason we came in lower than kind of what we had expected and also the Q4 of 2024 was purely timing. We're -- from an Odessa perspective, we're in execution phase and everything is towards the defined time line to be completed kind of Q2 of this year. So you saw a little bit of timing effect there on the strategic CapEx in the quarter. Operator: Next question is coming from [ Azeem Tori ] from Anfield Investment Research. Unknown Analyst: Maybe first a question on the ramp-up of Odessa. So you're adding a lot of capacity in the local market. Is it fair to assume that you will try to address some of the big urban centers of Texas like the Dallas Urban Center or the San Antonio Urban Center? And if you -- when you're talking about like new distribution or new terminal center, is it new terminal that you would develop to support the commercial strategy of this Odessa cement plant? That would be my first question. And then second question on the price increase that you've announced of $8. Is it $8 price increase that you have announced in every single state, including Texas? And a last question around the cost inflation that you're expecting in your cement business. I think we see a lot of data center being built around the United States. They are consuming a lot of electricity. Do you see a risk of electricity prices going up in the coming years in the U.S. that could potentially impact your margin? Maik Strecker: Yes. Let me start with the question around the network and the additional volume from Odessa. As Enrique already kind of walked us through, the plan really is to distribute through several markets, small and bigger. North Texas is a market that we see a lot of growth. And yes, we plan to participate in that growth. But we also see good levels of growth for Odessa closer to home. In that part of the country, there are some very interesting data centers planned. So we'll participate in that. And then as mentioned, we're looking at kind of small and midsized markets to establish distribution points agile with some level of CapEx, but not heavy CapEx load. And I think through that distribution, the goal is to have that very focused and measured introduction of the Odessa capacity. So that's on that. Regarding cost of inflation, as mentioned also, we're taking some proactive steps. We're investing in capabilities around power with solar projects. We're investing in some additional capabilities utilizing more natural gas, pipeline infrastructure and burning capabilities. So all of those, we see as kind of a proactive step to manage the future cost dynamics around fuels. So that's key for us. And I think with that, we should be able to manage accordingly what's ahead to come. Unknown Analyst: And the price increase... the $8 price increase, is it everywhere in every state? Or is there a difference from one state to another? Hector Enrique Escalante Ochoa: The price increase was announced in all the regions where we participate, including Texas. Unknown Analyst: And so far, the discussion is encouraging and you would expect to get part of this during the first quarter. Hector Enrique Escalante Ochoa: We will. I mean that's evolving dynamic and fluid, and we expect to get the majority of that announcement. Operator: Our next question is coming from Enrique Soho from Fundamental Capital. Unknown Analyst: Could you give us some insights into your and the Board's thoughts into potential corporate action or financial engineering to further unlock value and decrease the valuation gap between you and peers? Maik Strecker: Yes. Thanks for the question. I think, first off, our goal is really operationally to perform and to unlock the value by improving our margins. Again, our benchmark is 2024, the 36.6% and to get back to that level and to show that we get back to those very attractive margin levels, number one. Number two, when you look at our kind of cash flow conversion, we maintain a very high level and push that hard, again, to show the value. And then as you have seen, we're looking at kind of the overall shareholder returns with buyback program. We're more proactive on that. You've seen the dividends continuously to be increased over the years. So all those are elements, how we demonstrate the value of GCC and where we push for further investments from shareholders. And yes, strategically, we get the question. We're looking at what long term from a corporate structure, we should consider to further enhance kind of the value of the company and the value to all shareholders. That is a conversation that we have on a regular basis with the Board, with the team. And these topics are, for us, very long term and it's part of the tools and the portfolio of how do we increase the shareholder value for all participants. Operator: Your next question today is coming from Alejandro Azar from GBM. Alejandro Azar Wabi: Just a quick follow-up and to clarify something on my end. Regarding the Odessa plant, the start of the plant remains second and third quarter of this year. What you are delaying is just the ramp-up or you are delaying the start of the plant? And can you give us more color on delaying the ramp-up for you guys, what that meant before? Were you planning to reach full capacity in '28, '27, and that's where you're delaying? That would be my question. Hector Enrique Escalante Ochoa: I think that, I mean, the -- I mean, it's not delay the start-up of the plant. The plant is going to start up on time. We continue to run the project on schedule. So we should be, I mean, ramping up in the third quarter basically of. We're testing many of the equipment for commissioning, I mean, a good portion of the plant already. So things are progressing well there. So I think that what we are referring to here is entering at a slower pace, not delaying it on time, but entering at a slower pace overall for GCC. And I'd like to reemphasize overall because for us, it's managing the whole network through the start-up of the Odessa new line. Again, I mean, I mentioned we plan to, I mean, as quickly as we can run the line at full capacity. That means probably shutting down both of the other [indiscernible] today at the plant in order to favor, I mean, running the more modern and efficient plant. And the effect of that because we cannot put all that cement in the market today, the effect of that is a slowdown in other parts of the network in GCC, more specifically the Samalayuca plant. So again, I mean, where we're going to feel the pain or take the burden of the start-up of the line in Odessa is going to be in Mexico and part of the shipment that, that plant was doing in West Texas and other markets. Alejandro Azar Wabi: That's very clear. Just another clarification on my end, and that's implicitly in the 5% growth in the guidance, right? Hector Enrique Escalante Ochoa: Yes, sir. Operator: Our next question today is coming from [ Matias Ostrowicz ] from Citibank. Unknown Analyst: I joined a bit late, so I apologize if you have already replied to this. But I'm just wondering about your price guidance in the U.S. market. Was your guidance relatively flattish considering your volumes are in the high single digits. Is it a mix situation? Or is it just softness in the market? Hector Enrique Escalante Ochoa: Well, I would say derived from the softness in the market, I mean -- and there are many factors that I already mentioned, Matias, of why we are going to experience a mix effect between segments. Again, I mean, more construction cement and less Oil Well cement that affects negatively the average price. And geography, with more shipments to further markets precisely of that new, I mean, production in Odessa going to further different markets in every direction. So we keep it a smaller impact in dispersed market. So that's, again, another factor that is affecting obviously our price, our average mix price to be competitive in longer destinations or further away destinations. And again, I already talked about, I mean, other effects, but it's basically, again, a mix and geography effect that it's putting pressure or that it's compensating the price increase that we're doing in every U.S. market. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over to Ms. Ogushi for any further or closing comments. Sahory Ogushi: Thank you again for your time and continued interest in GCC. We look forward to speaking with you again soon. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the BMI Q4 and Full Year 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to Barbara Noverini, Head of Investor Relations. Barbara, please go ahead. Barbara Noverini: Thank you for joining the Badger Meter Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm here today with Ken Bockhorst, our Chairman, President and Chief Executive Officer; Bob Wrocklage, our new Executive Vice President of North America Municipal Utility; and Dan Weltzien, our recently appointed Chief Financial Officer. This morning, we made the earnings release and related slide presentation available on our website at investors.badgermeter.com. As a reminder, any forward-looking statements made on this call are subject to various risks and uncertainties, the most important of which are outlined in our news release and SEC filings. On today's call, we will refer to certain non-GAAP financial metrics, including certain base metrics. Use of the term base for these purposes is intended to refer to certain financial metrics, excluding the SmartCover acquisition. Our earnings presentation provides a reconciliation between the most directly comparable GAAP measure and any non-GAAP or base financial measures discussed. With that, I'll turn the call over to Ken. Kenneth Bockhorst: Thanks, Barb, and thank you all for joining our call. Turning to Slide 3. We delivered solid financial results in the fourth quarter, capping off another full year of record sales, profitability and cash flow. We continue to see robust demand for our industry-leading cellular AMI solution and the recent addition of SmartCover to our BlueEdge suite of smart water management solutions positions us well for long-term growth across the water cycle. I'm thankful for the dedication and perseverance demonstrated by the entire Badger Meter team during a year marked by global trade uncertainty and exciting acquisition integration and many ongoing AMI projects in various stages of deployment. I'll be back to provide a recap of the year and discuss our outlook later in the call. But for now, I'll introduce you to Dan Weltzien. As announced in December, Dan became our new CFO on January 1, 2026, following 7 years as Vice President and Controller. Dan, welcome to the earnings call. Bob Wrocklage is also here today in his new capacity as Executive Vice President, North America Municipal Utility. Bob will join me later in the call to provide more detail about the significant AMI project for PRASA that we mentioned in today's press release. With that, I'd like to turn the call over to Dan to cover the numbers. Daniel Weltzien: Thank you, Ken. I'm truly honored to serve as Badger Meter's Chief Financial Officer. I've benefited personally and professionally from the strong relationships I've had with both Ken and Bob for many years, and remain excited by the opportunity we have ahead of us to build upon our long track record of market leadership and success. So let's go ahead and start by reviewing another quarter of solid financial performance. Turning to Slide 4. Total sales of $221 million in the fourth quarter of 2025 represented an increase of 8% year-over-year or 2% base sales growth. Total utility water product line sales increased year-over-year by 9% or 2%, excluding SmartCover. As expected, fewer operating days in the fourth quarter and previously communicated project pacing effects resulted in a 6% sequential decline in utility water sales versus the third quarter of 2025. The term project pacing is intended to describe typical variation in activity driven by periodic changes in our active customer base and whether or not we act as prime contractor in what we refer to as turnkey projects. Simply put, the sequential quarterly sales decline between the third and fourth quarters of 2025 has everything to do with the calendar and quarter-specific customer and project mix and very little to do with other influences such as underlying market conditions, customer demand trends, utility budgets or the broader funding environment. On the last point, though not all that relevant to metering, recent congressional actions support funding of state revolving funds consistent with historic levels. This should allay some broader water industry funding reduction concerns. Sales for the flow instrumentation product line were flat year-over-year with modest growth in water-focused end markets, offsetting declines across the array of deemphasized applications. Turning to profitability. We were very pleased with the year-over-year operating earnings growth of 10%, which outpaced revenue growth. Operating profit margins increased 40 basis points from 19.1% to 19.5%. Base operating earnings increased 9% year-over-year, expanding base operating profit margins by 140 basis points to 20.5%. Gross margins expanded 180 basis points to 42.1% in the fourth quarter from 40.3% in the prior year quarter. Gross margin continued to benefit from structural mix driven by ultrasonic meters, cellular AMI, water quality and SmartCover sales, which were all above line average profitability. It's also important to mention that the same project pacing effects that impacted utility water sales also benefited margins in the fourth quarter. This is because when we act as prime contractor during certain turnkey projects, sales often include pass-through activities such as outsourced meter installation labor and ancillary meter pit supplies, which tend to have a lower margin profile. Separately, while we now have largely reached price cost parity on 2025 tariff and trade-related cost impacts and related price mitigation actions, we do expect global tariff and trade conditions to remain fluid in 2026. In addition, we expect elevated prices of copper and certain other components of our Bi-alloy ingot material cost to be a gross margin headwind in 2026. We factor all of these components, along with other puts and takes into our normalized gross margin range of 39% to 42% and into ongoing and routine price mitigation actions. SEA expenses in the fourth quarter were $49.9 million, with the $6.4 million year-over-year increase driven primarily by the SmartCover acquisition. When excluding SmartCover-related expenses, including $1.6 million of intangible asset amortization, base SEA expenses increased $1.3 million or 2.9% year-over-year. The year-over-year increase in base SEA expense was mainly driven by higher personnel costs to support normal course growth of the business. The income tax provision in the fourth quarter of 2025 was 24.8% versus the prior year's 27.1%. Consolidated EPS was $1.14 versus $1.04 in the prior year quarter, representing a 10% year-over-year increase. Primary working capital as a percentage of sales at December 31, 2025, was 20.9%, largely consistent with the comparable prior year period. Record quarterly free cash flow of $50.8 million increased by approximately $3.4 million year-over-year. With that, I'll turn the call back over to Ken. Kenneth Bockhorst: Thanks, Dan. For those of you who followed our story and interacted with Bob over the years, you've certainly experienced the passion and knowledge he has for our business, extending well beyond the traditional CFO focus. Badger Meter will benefit greatly from Bob's business acumen, customer focus and growth mindset as the leader of our largest line of business. I'm now going to hand it over to Bob, so he can talk specifically about the Puerto Rico Sewer Aqueduct Authority (sic) [ Puerto Rico Aqueduct and Sewer Authority ] or PRASA AMI project. Robert Wrocklage: Thanks, Ken. From the CFO's chair, it's been gratifying to be part of more than doubling our top line revenue over the past 7 years. In my new role, I'm excited about further expanding our market leadership as cellular AMI technology continues to increasingly be adopted by North American water utilities as the industry standard for AMI. Consistent with our Choice Matters BlueEdge portfolio, we continue to enable our customers to walk up the technology curve at a pace that's right for them. Our blueprint for growth begins with cellular AMI as the foundation to real-time insights and analytics and expands through the BlueEdge suite of smart water management solutions, enabling visibility and efficiency throughout the entire water cycle. A very recent example of our success with cellular AMI is the announced award for the PRASA AMI project, which will be one of the largest deployments in the world. An overview of the project is provided on Slide 5. This transformative multiyear project will include E-Series ultrasonic meters, ORION Cellular AMI radios and BEACON SaaS across the island of Puerto Rico, representing approximately 1.6 million service connections. Badger Meter's role in the project will be supply only, and we will not assume any prime contractor or installation or ancillary product supply responsibilities. Those activities will be handled by others. We will be utilizing our Racine, Wisconsin facility for production. Over the past year, investors have understandably focused on assessing the installed base of AMI and the remaining AMI adoption potential in North America, along with the underlying customer demand drivers and typical time horizons for AMI projects. To provide color on these factors, let's use the PRASA award as an example of a large project. PRASA's planning for the project began over 5 years ago. That planning materialized into a technology pilot and RFP, which Badger Meter, along with its partners, first participated in beginning in 2021. The pilot deployment began in 2023 and the project award occurred in 2025. We expect the PRASA project to translate into product shipments in 2026 with an initial ramp earlier in the year and more meaningful revenue contributions in the second half of 2026 when project deployment begins -- is expected to begin in earnest. To be clear, project awards of this nature, PRASA or otherwise, underpin our long-term high single-digit outlook over the next 5 years, and the PRASA project specifically is not additive to that either in a single year or over the long-term horizon. While we don't regularly share customer-specific wins and project awards, we're highlighting PRASA due to its scope and scale, to illustrate the drivers behind the uneven project nature of our business and to acknowledge that even today, there are many PRASA project variables known and unknown that will influence near-term 2026 revenue contributions, the year-to-year project pacing thereafter and the duration of the project deployment. Explicitly stated, for these reasons, we will not be sizing the revenue impact of this project on 2026 or more broadly. On that note, I'll pass it over to Ken for his closing remarks. Kenneth Bockhorst: Thanks, Bob. I'd like to take a moment to review our full year 2025 performance against the 5-year trend line. Please turn to Slide 6. In 2025, we delivered 11% sales growth, surpassing $900 million in revenue. This reflects a 17% compounded annual growth rate over the past 5 years. Our software revenue, which includes SmartCover, now exceeds $74 million and represents 8% of sales. Software revenues, largely driven by cellular AMI have grown at a 28% compounded annual growth rate over the past 5 years. In 2025, operating profit margins expanded 90 basis points to 20% despite the initially dilutive impact of the SmartCover acquisition. Base operating profit margins increased 200 basis points year-over-year. Over the last 5 years, both gross margin improvement and SEA leverage contributed to 470 basis points of operating margin expansion. And finally, we continue to manage our working capital intensity and again generated free cash flow in excess of 100% of net earnings. Our clean balance sheet with more than $225 million of cash on hand continues to provide significant financial flexibility to reinvest in our business, both organically and inorganically. In the third quarter, we increased our dividend for the 33rd consecutive year. And in the fourth quarter, we opportunistically repurchased $15 million in shares when the market price implied an attractive long-term return on capital. Turning to Slide 7. I'm proud of what we accomplished in just 11 short months as we integrated SmartCover into the Badger Meter organization. SmartCover delivered $40 million of sales in 2025 or 25% on an annualized basis. Over this time, SmartCover's profitability improved, driven by both higher sales volumes and focused cost management. We successfully transferred SmartCover's manufacturing operations to our facility in Racine, Wisconsin, and we're on track for earnings accretion in 2026 as expected. And finally, I'll conclude with some thoughts on both our near-term and long-term outlook. As we mentioned in our press release this morning, the second half of 2025 included a concentrated mix of concluding AMI turnkey projects, resulting in base revenue growth of 6%, which was lower than our 5-year forward outlook. We expect this project pacing dynamic to extend throughout the first half of 2026 until several awarded projects, including PRASA, begin multiyear turnkey deployments. We'd like to remind investors that it is not unusual to experience certain quarters or even whole years that are above or below our expectation of high single-digit sales growth over a 5-year forward period. Quarter-to-quarter variation in project pacing is typical in our industry and attempting to precisely time it can cause those who follow us to miss the big picture. Our products and solutions support critical elements of the water infrastructure and the long-term secular trends impacting the water industry will continue to influence our customers to plan for better resiliency. We are actively involved in enabling that change. For example, we created the market for cellular AMI against an incumbent technology and have since demonstrated success at gaining share. Via acquisition and internal development, we've expanded our opportunity set to include solutions across the entire water cycle. Long enduring secular trends support demand for smart water management solutions. When speaking directly with our customers, we have not seen meaningful evidence that real or perceived federal funding constraints will impact our ability to generate high single-digit sales growth, operating profit margin expansion and free cash flow conversion in excess of earnings over a 5-year forward time horizon. In summary, I'm proud of our performance in 2025, look forward to what's ahead in 2026 and see great opportunity for the execution of our long-term strategy to compound value for both our customers and shareholders. With that, operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Robert Mason with Baird. Robert Mason: Congratulations, Bob and Dan, on your new roles. Ken, just to touch on the topic around the timing of projects, understandable that it's not going to be always an even flow there. But I'm just curious, did we see the full impact of the conclusion of those projects in 4Q? Just trying to think about maybe we normally see a sequential rise in the number of operating days in the first quarter, how that dynamic may play into the first part of 2026. Kenneth Bockhorst: Yes. So first off, Rob, there are several projects that can be at play at any given time, some large, some medium, some small. So it's hard to really nail down exactly that point. But if I could take just a little look back to some of the earlier calls, if you recall, in Q2 of the year, we talked about project pacing and timing and some of those issues that we thought we might see in the second half. And then additionally, we talked about the fewer working days that you start to see in Q4. So it isn't unexpected to us that the second half of the year was a lower growth than the first half. So nothing specific on any individual project, but just the nature of the business that can be uneven from time to time. Robert Mason: But -- Okay. Fair enough. I guess just did we -- I guess, did more of those conclude in the third quarter versus the fourth quarter or if we're looking at another step down as those have now fully concluded? Kenneth Bockhorst: Yes. So what I would think about, if you look at 2025 and how it played out in 2026 and how we see it happening, the first half started out with a higher growth rate, the second half of the year with a lower growth rate. I think the way we see '26 is a lower growth rate in the first half and a higher growth rate in the second half. And that's something that is driven by the confidence that we have in projects that are in flight, awarded projects that haven't yet started. So we have visibility to some of those projects, and we do see how they're layering out in the year. Operator: Your next question comes from the line of Nathan Jones with Stifel. Nathan Jones: I guess I'll start. I know you don't want to talk about the size of this Puerto Rico project. So maybe I'll ask another question that you have answered previously. I think, Ken, you've said over the years that the size of the U.S. market is about 6 million meters per year and Badger's share is roughly about 30%. Are those numbers still accurate for what the size of the overall U.S. market is? Kenneth Bockhorst: Yes, give or take, 85% of the market every year is replacement, and it's roughly in that space, yes. Nathan Jones: Okay. So Badger ships give or take 2 million meters a year. So Badger ships about, give or take, 2 million meters a year is the rough way that would break down for what the overall U.S. market is. Robert Wrocklage: Yes. I mean it's not far off. Again, the indicated general volume that you alluded to flexes year-to-year. It's probably a little bit higher than 6 million. That reference figure is dated. But at the same time, the share element that you mentioned is still relevant. Nathan Jones: Got it. I'm just trying to give people a general sense for how big a project 1.6 million connections is for Badger Meter even over a 3- to 5-year period. Again... Kenneth Bockhorst: And Nathan, one thing is the reason we mentioned PRASA is because, as you know, we don't get into the habit of announcing projects because there's so many. But obviously, this one is pretty meaningful in size, as you point out. And to just give it some reference and the reason we're talking about it more publicly, is we never announced the win in the project that we did recently complete in Orlando. So everyone is aware, Orlando is a pretty large city. To put it in scope and scale, the PRASA award is the equivalent to 8 Orlandos. Nathan Jones: That's extremely helpful. My next question is going to be around gross margins. Obviously, gross margins very strong. There's probably a few headwinds as we go through the year. I mean second half of '26, you're talking about some more turnkey projects, which will be headwinds to gross margins. You've obviously seen a big spike in copper prices that will come through your business on a delay. But the first half is, as you said, is going to have an absence of some of these turnkey projects, which is a tailwind for margins. Any help you can give us with how we should think about first half versus second half gross margins in terms of that mix or how we should think about the full year for gross margins given you're at the very high end of the gross margin target range in 2025? Daniel Weltzien: Yes, Nathan, this is Dan. I think a couple of things to point out. I think as we think about it quarter-to-quarter, there's nothing that we would specifically point to say there's going to be variability from quarter-to-quarter. But I think you're thinking about the right topics being we continue to see structural mix impacting margins in a positive way in 2026. And I think you highlighted a couple of the areas that we're continuing to watch, which are the commodity input costs into our ingot recipe. And then certainly, tariffs is something that we continue to monitor. We've gotten to price cost parity on tariffs in 2025, and we'll continue to manage whatever comes our way in 2026 from that perspective. Operator: Your next question comes from the line of Jeff Reive with RBC Capital Markets. Jeffrey Reive: I had another one on the Puerto Rico project. I mean this is a really sizable win. Can you walk us through the typical timing and phasing of a large AMI project like this? How do the deployments ramp? Are they smoother, chunky? How much is in year 1, 2 versus 3, 4, 5 just over the life? Kenneth Bockhorst: Andrew, that's a fantastic question. And I would say you're a straight man for why we don't provide guidance from quarter-to-quarter. The project ramp-ups, oftentimes, there's a plan. There's so much that goes into an AMI project in terms of going through all the budget cycling and then having to align all the resources because you need people out on the street doing installations. And then you might have weather factors from quarter-to-quarter. So it's not as smooth as people might think that it would be to do a large deployment, whether that's something the size of Puerto Rico or something the size of a medium town anywhere in the United States. So typically, people look at these things and they expect them to be done over a 5-year period. If everything goes really smoothly, it could potentially go faster. If you have issues, it could go longer. But there's no real blueprint, but generally, we're thinking of this over a 5-year horizon for PRASA. Jeffrey Reive: Got it. And I think you said in the prepared remarks, the meters are being manufactured in Racine, not your Mexico facility. Is there a margin differential happening there? Robert Wrocklage: Yes. I mean I think you can just -- you can imply just from labor cost differential, there'd be a potential margin impact. Of course, that was all contemplated in the contracting stage. And so ultimately, the location of manufacture is being driven by U.S.-made manufacturing requirements. So that's part of the reason why we made an investment in that facility and continue to invest there. That's what dictates where it's made, and we understand that cost footprint, and we're able to engage and embed that, if you will, into the RFP process. Kenneth Bockhorst: Yes. And I'm sure I'm jumping the route here on anticipating the margin question on the project, which, of course, which we won't disclose. But since we're not -- since it's not full turnkey and there's a whole lot of different factors in here, but this is one where I think we've struck a really good value proposition where PRASA sees the value in what we're offering and they're happy to buy it, and we're happy to sell it at the margin it's going for. Operator: Your next question comes from the line of Andrew Krill with Deutsche Bank. Andrew Krill: I want to go back to the outlook for sales. One of your competitors yesterday suggested their revenue could be slightly to modestly down year-over-year. I think you used the word growth rate for this year. So I just wanted to confirm, I think that would -- do you feel pretty confident sales should grow this year even if they're below that high single-digit through the cycle target? Kenneth Bockhorst: Yes. So real quick, I know people really enjoy the read-throughs and trying to do the comparisons and see how things will work. First of all, there could be inherent unevenness in their business that's different than the mix of customers that we have that is hard to do just to begin with industry-wide. Secondly, the particular competitor you're talking about, I think we have several differences that have been built over the last several years. We have an industry-leading AMI offering that has several in-flight projects and awarded not started projects informing our view. We've got a really exciting software business at 8% of our revenue now that's 100% recurring. We're really excited about what's happening with sewer line monitoring and water quality monitoring and network monitoring. And these are things that I believe the competitor you're talking about doesn't have. So the read-through that people are getting, I would say, isn't the same. So when we look at all those factors that we're talking about, again, I would think you should view '26 as the inverse effect of '25 like I talked about before. But we feel confident given what we're seeing. Our conviction on high single digits through the 5-year horizon is as strong today as it was yesterday as it was 3 months, 6 months or 12 months ago based on all the same factors we use to think about that 5-year horizon. But some years -- and one thing, not to follow it all up here on this question, but everyone who's talked to us before, we've never pegged and said every single year is going to be 8%. We've said some years might be 12%, some years might be 5%. We just came off of 6% that I'm pretty proud of. And I think this next year is going to be exciting, and our 5-year conviction is as strong as it's ever been. Andrew Krill: Great. Very helpful. And then a quick one on pricing, and I know you don't disclose that exactly. But just can you remind us, has it been primarily or all list price increases thus far to deal with tariffs mostly? Or have you been using surcharges as well? And in the event tariffs were ruled illegal, like do you expect you can hold on to this price looking forward? And any conversations with customers looking for kind of some discounts at this point? Kenneth Bockhorst: Yes. So in our pricing, keeping in mind, 75% of our revenue is sold direct. And so when we're in a constant state of doing project pricing based on real-time output, so that helps us in some ways. Two, yes, we do list price increases. What we didn't do was temporary tariff add-ons or tariff issues that could be challenged in court or could be reversed once a customer says tariffs are gone or could be demanded back because tariffs have been rolled back. So ours is pretty clean, I think, compared to how other people have handled the pricing aspects of tariffs. Operator: Your next question comes from the line of James Ko with Jefferies. Jae Hyun Ko: I guess I wanted to kind of follow up on the project pacing dynamic here. So was this like dynamic kind of extending into first half 2026 expected? Or is this something new kind of developed? And kind of how much confidence do you have in kind of project converting into revenue in second half 2026? Kenneth Bockhorst: Yes, there can always be some variability. So in full disclosure, some of the projects that are starting in the second half, we thought would have started in the first half. So things can slide sometimes from a quarter or 2 out. And this is why we talk so much about the 5-year horizon. I'm absolutely confident all those things are going to happen within the 5-year. I'm confident what's going to happen in the year, but trying to peg it from quarter-to-quarter can be difficult. Daniel Weltzien: I just want to clarify, too, that when Ken says project slides to the right, for example, it's not related to funding. Each one of these projects is different. Every customer is different. There's contracting phases. There's initial deployment areas. There's full rollout. So there's multiple steps to these projects and everyone is different, and that's the largest impact to the timing of them. Kenneth Bockhorst: I think the point that I would like to maybe emphasize here is that these aren't hoping for backlog increases. These aren't hoping for things to happen. These are known awarded, not started projects that even if they have some variability in where they move, they're in our pocket. Jae Hyun Ko: Got it. And I guess similar questions, you kind of reiterated high single-digit kind of organic growth over the 4- to 5-year horizon. So like how much of that outlook is kind of supported by awarded but not executed projects versus kind of broader just few new opportunities? Kenneth Bockhorst: Well, so it's a great question. I mean this is how we -- when we think about our 5-year view and what we've talked about in several meetings is we're looking at several segmentations of how many people are looking -- working with consultants and working on budget, which are items that turn into revenue 3, 4 and 5 years out. We've got the whole bucket of things that are in RFP today that become revenue in the next year to 2. Then we've got in-flight projects. We've got awarded, not started projects. So it's this whole funnel of activity that we look at. And -- but what underpins it all that's really helpful for us is we're confident that no matter what happens with these project cycles, 85% of what we're going to take orders and ship for every year are replacement by nature in terms of meters and radios. So the project stuff is all very interesting, but the bottom line is very strong. And then, of course, the software continues to grow the last 5 years at a 28% CAGR. So it's a multivariable equation and one that we feel good about how those come together. Operator: Your next question comes from the line of Bobby Zolper with Raymond James. Robert Zolper: It looks like there's about $1 billion of metering projects in the ARPA data, which all needs to be spent by the end of 2026. How have you reflected that in your 2026 commentary? Kenneth Bockhorst: So we haven't. I mean, so when we sit here and we talk about what's fueled our growth for the last 5 or 6 years, it's really informed by the buckets I just walked you through. And when we look at who's planning for projects, who's actually doing RFPs for projects, what we have in known projects, there's so many ways that funding is done, especially around the AMI side, whether that be SRFs, WIFIA loans, rate base increases, municipal bonds. That is one factor, you're right, but it certainly is not an outsized consideration for us at all when we think about our forecast. Robert Wrocklage: I'd also be cautious about taking something that's listed in an ARPA database with reference to the word metering and assuming that, that whole total of money is related to metering. It's oftentimes considerably larger than the actual metering spend. So a headline grabbing number or a question like that is not necessarily indicative of the true metering content on those line items. Robert Zolper: All right. I appreciate it. And then I have a 2-part question on the PRASA project. I guess, one, how is PRASA funding that project? And then secondarily, what is the legal status of that project? Robert Wrocklage: The first part of that question shouldn't surprise anyone. Part of the project purpose and intent is in response to Hurricane Maria, which took place in 2017, so over 8 years ago. And so the funding of that project in part is coming from FEMA dollars. And so that is a FEMA-funded project, which ultimately drives the Buy American requirement, I mentioned earlier, which then drives our location of manufacture. In our -- to the second part of your question, in our -- first of all, we don't comment certainly on litigation of ourselves or and/or the legal status, if you will, of even our customers or potential customers. But in the direct sense in our commentary, we mentioned there's a lot of variables related to this project. And certainly, those variables could impact the pace at which that project gets deployed, whether it be here in the immediate term of 2026 or thereafter. And so I'm not making that statement generally, not specific to your legal question. But ultimately, there are a lot of variables at play. But what is known is the award and our participation in that award. Operator: Your next question comes from the line of Scott Graham with Seaport Research Partners. Scott Graham: I want to understand a little bit more, Ken, about some of your statements in the press release and then followed up on the call here about first half versus second half. It seemed in the press release to suggest that your second half growth was slower than your high single-digit long term and that, that decrement was either because of the roll-off projects, as you've discussed and the days in the fourth quarter, and that the first half of this year will essentially be the same, the roll-off of the projects. Does that suggest, Ken, that the organic growth that you're expecting in the first half of the year will be the same amount lower on a percent basis as the second half was versus the high single? Kenneth Bockhorst: So Scott, as you, I'm sure, expect, we're not going to get that granular with you. But when I had mentioned previously that I think you'll see 2026 play out in a similar fashion, except the inverse of how 2025 did. I would just expect a lower growth rate in the first half of the year and a higher growth rate in the second half of the year. Scott Graham: I had to try. Okay. So the stock is obviously, seems to not be reflecting what you're saying in this call. And I'm just wondering, you've been buying back some stock last couple of quarters. Is the plan here with that the stock where it is, is there an opportunity to maybe restrain some costs in the first half of the year to boost earnings? Or will we continue to see share repurchases to boost earnings or both? Kenneth Bockhorst: Yes. So a couple of things. So first off, obviously, with our great balance sheet, we still feel 100% positive about our capital allocation priorities. So we're going to continue to invest organically and inorganically in the business. So what that means is we'll do the right things to continue to drive long-term strategy and growth. So we would never do any shortsighted cost-cutting type things to try to short circuit a result. So we're going to continue to invest in the business. Two, returning cash to shareholders. That's traditionally for us been 33rd consecutive year of increased dividends. We did buy some shares back in Q4, as we talked about. And certainly, we have the authorization to purchase more. And if we thought it was attractive in Q4, I'm not forecasting anything for you, but I would think you'd think -- we think it's attractive now, too, to repurchase shares. And then on the M&A funnel, we're really, really thrilled with the deals that we've done over the last 5 years, and we continue to have a really exciting funnel. So the capital allocation priorities are still going to be aligned to support growth, return value to shareholders and do more M&A. Operator: Your next question comes from the line of Michael Fairbanks with JPMorgan. Michael Fairbanks: My first question is on SmartCover. So it was up 25% annualized and profitable in 4Q. I guess now that the integration is 12 months in, can you just give us an update on what you now see as the potential in that business? And how we should think about the growth algorithm there going forward? Kenneth Bockhorst: Yes. You cut out there a little bit, but I think what you asked was we saw a 25% growth in SmartCover and you're asking how we see the future of sewer line monitoring growth rate. So the thing that we were excited about SmartCover to begin with is that before we acquired it, it was growing at a 20% CAGR for multiple years. So that's the first point. Second point is we're still so early in adoption of sewer line monitoring that there's still so much more room to grow, which is why we really want to get into that space. And acquiring a known brand like SmartCover, the leader in North America was really important to us. So we fully, fully expect to continue to grow our sewer line monitoring at a higher rate than average. Michael Fairbanks: Great. And then on PRASA, can you maybe just talk about how you could use potentially an AMI deployment like that to expand the reach of the other offerings in the portfolio, just in the BlueEdge portfolio broadly? Robert Wrocklage: Yes. In fact, the answer doesn't even need to be PRASA specific. I think we have multiple examples where AMI adoption by a utility ultimately serves as the catalyst to the extension of other beyond the meter technologies. Essentially, AMI becomes an implementation that, in many cases, a utility grows into having data availability and the insights and analytics to influence how they run primarily their meter billing operations, but then having cascading effects into the remainder of the utility. And once that kind of capability or core discipline is in place, it then becomes very clear that marrying up that meter and flow data with other pressure management and/or water quality data becomes a very valuable value proposition, if you will. And so whether it's PRASA or any other AMI customers of ours, that's oftentimes the foundation or the springboard to the broader beyond the meter technologies. We often talk about Galveston. We've talked about Galveston historically over time. But that is the exact scenario that played out there. AMI was the first technology adoption and then other use cases followed in short order as data and analytics became a primary point of emphasis with the utility. Operator: There are no further questions at this time. I will now pass the call back to Barbara for closing remarks. Barbara Noverini: Thank you, operator. Badger Meter's First Quarter 2026 earnings release is tentatively scheduled for April 16, 2026. In addition, please save the date for Badger Meter's inaugural Investor Day, which will be held on May 21 in New York City. During the event, we will provide greater color and tangible examples of the evolution of our BlueEdge portfolio, along with the discussion of the key drivers enabling growth of our comprehensive suite of smart water management solutions. Information about how to attend and what more to expect will be available in early March. Thanks for your interest in Badger Meter, and have a great day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin. Craig Lampo: Great. Thank you so much. Afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. I would like to wish everyone a Happy New Year and welcome you to our 2025 conference call. Our fourth quarter 2025 results were released this morning. I'll provide some financial commentary, and then Adam will give an overview of the business and current market trends. Then we will take your questions. As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements. Please refer to the relevant disclosures in our press release for further information. The company closed 2025 with record sales of $6.4 billion and GAAP and adjusted diluted EPS of $0.97 and $0.93, respectively. 48% local currencies, The fourth quarter sales were up 49% in US dollars, and 37% organically compared to 2024. Sequentially, sales were up 4% in US dollars and in local currencies, and up 3% organically. Adam will comment further on trends by market in a few minutes. For the full year 2025, sales were approximately $23.1 billion, up 52% in US dollars, 51% in local currencies, and 38% organically compared to 2024. We are very encouraged by our orders in the quarter, which were a record $8.4 billion, up a strong 68% compared to 2024 and up 38% sequentially, resulting in a very strong book-to-bill ratio of 1.31 to one. This impressive book-to-bill in the quarter was primarily driven by robust bookings in the IT datacom market related to AI applications. We have seen customers open their order window a bit in certain cases, which helped to drive these strong bookings. For the full year, orders were $25.4 billion, up 51% compared to 2024, resulting in a book-to-bill ratio of 1.1 to one. GAAP operating income was $1.7 billion in the quarter, and GAAP operating margin was 26.8%. GAAP operating margin included $47 million of acquisition-related costs, primarily for external transaction costs and the amortization of acquired backlog. Excluding acquisition-related costs, adjusted operating margin and adjusted operating income was 27.5% and $1.8 billion, respectively. On an adjusted basis, operating margin increased by a strong 510 basis points from the prior year quarter and was flat sequentially. The year-over-year increase in adjusted operating margin was primarily driven by robust operating leverage on the significantly higher sales volumes, which was only modestly offset by the dilutive impact of acquisitions. For the full year 2025, GAAP operating income was $5.9 billion and included $181 million of acquisition-related costs. Excluding these costs, adjusted operating income was $6.1 billion in 2025. For the full year, GAAP operating margin and adjusted operating margin reached annual records of 25.4% and 26.2%, respectively. On an adjusted basis, operating margin increased 450 points compared to 2024, primarily driven by strong operational performance on the significantly higher sales volumes, which again was only modestly offset by the dilutive impact of acquisitions. I'm extremely proud of the company's operating margin performance in the fourth quarter and for the full year 2025, both of which reflect continued strong execution by the team. Breaking down fourth quarter results by segment. Compared to 2024, Sales and Communication Solutions segment were $3.4 billion and increased by 78% in US dollars and 60% organically. Segment operating margin was 32.5%. Sales in a Harsh Environment Solutions segment were $1.7 billion and increased by 31% in US dollars and 21% organically. And segment operating margin was 27.6%. Sales in Interconnect and Sensor Systems segment were $1.4 billion, increased by 21% in US dollars and 16% organically. And segment operating margin was 20.1%. Bringing down full year results by segment compared to 2024, sales in the Communication Solutions segment were $12.1 billion, an increase by 91% in US dollars and 71% organically. And segment operating margin was 31.1%. Sales in the Harsh Environment Solutions segment were $5.9 billion, increased by 33% in US dollars and 17% organically. And segment operating margin was 26.2%. And sales in the Interconnect and Sensor Systems segment were $5.2 billion and increased by 15% US dollars and 13% organic. The segment operating margin was 19.5%. For the fourth quarter, the company's GAAP effective tax rate was 26.9%, which compared to 17.4% in the '4. And full year 'twenty five GAAP effective tax rate was 23.1%, which compared to 18.9% at 2024. On an adjusted basis, the effective tax rate of 25.5% both for the fourth quarter and full year, which compared to 24% in the prior year periods. As we discussed last quarter, the increase in our adjusted effective tax rate in '25 was due to some shift in income mix to higher tax jurisdictions. For modeling purposes, you should assume that this higher tax rate of 25 and a half percent continues into 2026. As our typical practice, our adjusted our adjusted tax rate percent compared to the 55¢ in the 2024. This was an outstanding result. For the full year, GAAP and adjusted diluted EPS were both a record 3034¢, an increase of 7477%, respectively. Operating cash flow in the fourth quarter was $1.7 billion or 144% of net income. And free cash flow was $1.5 billion or 123% of income. And for the full year of 2025, operating cash flow was a record $5.4 billion, 126% of net income, and free cash flow was a record $4.4 billion or a 103% of net income. Considering the high growth rates we experienced this year, this is a very strong result. From a working capital standpoint, inventory days, days sales outstanding, and payable days are all within our normal range. During the quarter, the company repurchased 1.3 million shares of common stock at an average price of approximately $134. When combined with our normal quarterly dividend, total capital return to shareholders in 2025 was approximately $373 million and was nearly $1.5 billion for the full year of 2025. Total debt at December 31 was $15.5 billion, and net debt was $4.1 billion, which included $7.5 billion from the US Bond offering we completed in October and in anticipation of the closing of the CCS acquisition. Total liquidity at the end of the fourth quarter was $17.5 billion, which included cash and short-term investments on hand of $11.4 billion plus availability under our existing credit facilities. And $3.1 billion of term loan facilities put in place in anticipation of the CCS acquisition. In early January, the company closed the CCS acquisition, which was funded with cash on hand primarily resulting from the October 2025 bond deal as well as the $3.1 billion of term loan facilities. As a result of the acquisition of CCS, we expect 2026 quarterly interest expense, net of interest income from cash on hand, to be approximately $200 million, which is reflected in our first quarter 2026 guidance. Adjusting for the impact of the CCS acquisition, our net debt at year-end would have been $14.7 billion, and our liquidity would have been $6.9 billion, which includes pro forma cash and short-term investments on hand of $3.9 billion. Fourth quarter 2025 EBITDA was $2 billion, and our net leverage ratio was 0.6 times at the end of the quarter. Pro forma net leverage at the 2025, including the CCS acquisition, would have been approximately 1.8 times. As of December 31, the company had no outstanding borrowings under its revolving credit facility or its commercial paper programs. I will now turn the call over to Adam, who will provide some commentary on current market trends. Well, thank you very much, Craig, and I also would like to offer my best New Year's wishes to all of you here. Craig and I are here in the winter wonderland of Wallingford, Connecticut, and it's a real pleasure to talk to you about our fourth quarter and full year achievements. I'll highlight some of those achievements, and then as Craig mentioned, I'm going to discuss the trends across our served markets. We'll make some comments on the outlook for the first quarter, and then, of course, we'll have time for questions. Turning to the fourth quarter, there's no doubt that Amphenol had a strong finish to a very successful 2025. With sales and adjusted diluted earnings per share in the fourth quarter both exceeding the high end of our guidance. Sales grew by 49% in US dollars and 48% in local currencies, reaching a new record of $6.439 billion. And on an organic basis, our sales increased by 37%, with robust growth across nearly all of our served markets. As Craig mentioned, we booked a record $8.4 billion of orders in the fourth quarter, which represented a very strong book-to-bill of $1.31 to one. These orders grew by 68% from the prior year and were up 38% sequentially. And while orders were strong across the board, there's no doubt that these robust orders were driven primarily by data center demand related in particular to artificial intelligence investments being planned by a number of our large customers. We're also pleased in the quarter to have delivered adjusted operating margins of 27.5% in the quarter, which matched our record-setting margins in the third quarter and which represented an increase of 510 basis points from the prior year. This superior profitability is a direct result of the outstanding execution of the Amphenol team around the world. Our adjusted diluted EPS in the quarter grew by 76% from the prior year, reaching a new record of 97¢. Finally, the company generated record operating and free cash flow in the fourth quarter, $1.7 billion and $1.5 billion, respectively. Both clear reflections of the quality of the company's earnings. I just can't express enough my pride in our team here in the fourth quarter. These results once again reaffirm the value of the discipline and agility of our entrepreneurial organization. As we continue to perform well amidst a very dynamic environment. We're also very excited in the quarter that we closed on the previously announced acquisition of Trexon. With operations in the US and Europe and with annual sales of $290 million, Trexon's a leading provider of high-reliability interconnect and cable assemblies primarily for the defense market. We're particularly excited that Trexon further expands our value-add interconnect offering for the defense market. Enabling us to offer our customers in this important area a complete solution of high-technology interconnect products, really the broadest in the industry. We look forward to the Trexon team flourishing as part of the Amphenol family. In addition, just here in January, we're excited to have closed on the acquisition of the CCS business from CommScope a bit earlier than we had anticipated. This business, which will be known going forward as CommScope, an Amphenol company, represents a significant expansion of our interconnect capabilities across three of our important end markets. As we discussed last year, CommScope had significant fiber optic interconnect capabilities, for the IT datacom and communications networks markets as well as a diverse range of industrial interconnect products for the building connectivity market, which will be included in our industrial segment. We look forward to working closely with the CommScope team as they embrace the Amphenol uprooting culture. And are really excited about the potential that this significant acquisition can bring to our company. As previously disclosed, we expect CommScope to generate full year 2020 sales of $4.1 billion and to add 15¢ to Amphenol 2026 adjusted earnings per share. As we welcome the outstanding CommScope and Trexxon teams to the Amphenol family, we remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute upon acquisitions and then to successfully bring these companies into Amphenol remains a core competitive advantage. And there's no doubt that as our organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all sizes. Now turning to the full year 2025, 2025 was a uniquely successful year for Amphenol. We expanded our position in the overall market. Growing our sales by 52% in US dollars, 51% in local currency, and 38% organically, reaching a new sales record of $23 billion or $23.1 billion. As we cross $23 billion in sales in 2025, we're very proud to have more than doubled Amphenol's revenues in the past four years. A great reflection of our organization's ability to navigate market dynamics while capitalizing on the broad array of opportunities arising across the electronics industry. Our full year 2025 adjusted operating margin reached a record 26.2%, and that was a robust increase of 450 basis points from the prior year. And this strong level of profitability enabled us to achieve record adjusted diluted EPS of $3.34, an increase of 77% from the 2024 levels. As Craig mentioned, we generated record operating cash flow of $5.4 billion and free cash flow of $4.4 billion. Clear confirmations of the company's superior execution and disciplined balance sheet management. Very proud that our acquisition program again created great value this year. We completed five acquisitions in 2025. Including Andrew, our largest acquisition at the time, together with the acquisitions of Trexon, Nardemitek, LifeSync, and Rochester Sensors. Collectively, these acquisitions have added to Amphenol annualized sales of nearly $2 billion. In addition, as I just mentioned and as we announced earlier this month, we also closed on our largest ever acquisition now, which is the CommScope acquisition. What is in common across all these acquisitions? Is that they enhance our position across a broad array of end markets, and deep enabling technologies. All while bringing outstanding and talented individuals into the Amphenol family. We also returned substantial cash to shareholders in 2025, buying back nearly 7.5 million shares under our share repurchase program and increasing our quarterly dividend by 52%. This represented a total return of capital to shareholders of nearly $1.5 billion. As we enter 2026, remain excited about the opportunities ahead of us for Amphenol. Our agile entrepreneurial organization has created a new position of strength for the company. From which we can continue to drive superior long-term performance. Now turning to our served markets. Once again, I'm very pleased that the company's end market exposure remains diversified, balanced, and broad. And there's no doubt that presence that we have across all these end markets creates great value for the company. As we're allowed to participate across all areas of the global electronics industry, wherever there may be new revolutions arising, all while not being disproportionately exposed to the of any given application or market. Turning first to the defense market. That market represented 10% of our sales in the fourth quarter and 9% of our sales for the full year 2025. Sales in the fourth quarter grew strongly from the prior year. Increasing by 44% in US dollars and 43% in local currencies. On an organic basis, sales increased by 29% with broad-based growth across virtually all defense applications. Including in particular radar, space, communications, avionics, and unmanned aerial vehicles. Sequentially, sales increased by 16% well ahead of our expectations for mid-single-digit growth. For the full year 2025, our sales grew by 30% in US dollars in local currency, and by 21% organically. Reflecting our superior operational execution as well as growth across all segments of the defense market. In addition, we're very pleased that our growth in '25 was really broad-based geographically. Reflecting our leading position across the many countries for increasing their defense spending. Looking ahead, we expect sales in the first quarter to increase slightly largely driven by the benefit of the Trexon acquisition. And we remain encouraged by the company's leading position in the defense interconnect market. Where we continue to offer the industry's widest range of high-technology products. Amidst the current dynamic geopolitical environment, countries around the world are further expanding their investment into both current and next-generation defense technologies. With our existing offerings, as well as the exciting and complementary capabilities from Trexon, we are positioned better than ever to capitalize on this long-term demand trend. The commercial air market represented 5% of our sales in the quarter and for the full year 2025. In the fourth quarter, our sales grew by 21% in US dollars, and 20% in local currencies. On an organic basis, sales increased by 19% from the prior year driven by broad-based strength with virtually all commercial aircraft manufacturers. Sequentially, our sales grew by 10% from the third quarter well above our expectations coming in ninety days ago. For the full year 2025, sales in the commercial air market increased by 39% in US dollars and 38% in local currency. As we benefited from accelerating demand across aircraft platforms as well as from acquisitions. Organically, our sales increased by 13% from the prior year, reflecting our robust design in positions on a broad array of jetliners. Looking into the first quarter, we expect sales to moderate seasonally by approximately 10% on a sequential basis. I'm truly proud of our team working in the commercial air market. With the ongoing growth and demand for aircraft, our efforts to expand our product offering both organically and through our successful acquisition program continued to pay real dividends. In particular, I just want to note that we're very pleased. With the progress of the CIT team who have truly embraced being part of Amphenol and have driven outstanding results. We look forward to further capitalizing on our expanded range of product solutions for the commercial air market. Long into the future. The industrial market represented 18% of our sales in the quarter and 19% of our sales for the full year 2025. Our sales grew by 20% in US dollars and 18% in local currencies from the prior year. And on an organic basis, we were pleased that sales grew by 10%, driven by relatively broad-based growth across the industrial end markets. In particular medical, alternative energy, e-mobility, heavy equipment, industrial instrumentation applications. We also grew again in all of our major geographic regions. On a sequential basis, sales grew by 2%, better than our expectations. For the full year 2025, sales grew by 21% in US dollars and 20% in local currency. As we benefited from relatively broad-based growth as well as from acquisitions. Organically, sales grew by a strong 10%, from the prior year. Looking into the first quarter, we expect our sales to increase approximately 20% from these fourth quarter levels driven by the addition of CommScope's building connectivity business. We remain encouraged by the company's strength across the many diversified segments of this important market. Over the long term, I'm confident in our strategy to expand our high-technology interconnect antenna and sensor offering both organically and through complementary acquisitions. This strategy has enabled Amphenol to capitalize on the many revolutions that continue to occur across the diversified industrial market. And thereby create further opportunities for the outstanding team working in this important market. The automotive market represented 14% of our sales in the fourth quarter and 15% of our sales for the full year. Sales in the fourth quarter grew by 12% in US dollars and 9% in local currencies and organic. And that was driven by relatively broad-based growth across automotive applications. In addition, we are pleased that once again, we realized growth in all three regions. Sequentially, our automotive sales were flat, but this was better than our expectations coming into the quarter. For the full year 2025, our sales increased by 8% in US dollars and 7% in local currency and organic. With growth in all three regions. As we look into the first quarter, we do expect a seasonal moderation in sales from this quarter's levels of approximately 10%. I remain very proud of our team working in the important automotive market. And while there are always areas of uncertainty in the global automotive market, our organization continues to be focused on driving new design wins with customers. Who are implementing a wide array of new technologies into their vehicles. We look forward to benefiting from our strengthened position in the automotive market for many years to come. Communications networks market represented 9% of our sales in the fourth quarter and 10% of our sales for the full year 2025. Sales in this market grew from the prior year by 120% in US dollars and 119% in local currency, as we benefited from the Andrew acquisition completed earlier last year. Organically, our sales were flat from the prior year. On a sequential basis, sales declined as expected by 13% from the third quarter. And for the full year 2025, our sales to communications networks increased by 134% in US dollars in local currency and by 13% organically as we benefited from the addition of Andrew as well as growth in our products sold into the mobile network operators and wireless equipment manufacturers. As we look towards the first quarter, we do expect a significant nearly 50% increase in sales as we benefit from the addition of the CommScope business which more than offsets the typical seasonal sales declines that we would see here. With our expanded range of technology offerings, following the acquisitions of both CommScope and Andrew, We are well positioned with service provider and OEM customers across the global communications networks market. Our deep and broad range of products, coupled with an expansive manufacturing footprint, have positioned us to support these customers wherever they may be. And as customers in this market continue to drive their systems and networks to higher levels of performance, We look forward to enabling them for many years to come. The mobile devices market represented 6% of our sales in the quarter and also for the full year, and in the fourth quarter, our sales moderated by 4% in US dollar local currency local currency and organic, as growth in tablets, wearables, and accessories was more than by some moderation in sales related to smartphones. On a sequential basis, our sales increased by 6% which was a bit better than our expectations coming into the quarter. And for the full year 2025, sales in the mobile devices increased by 5% in US dollar and organic, and that was really driven by growth across virtually all mobile device applications. As is typical in the first quarter, we do anticipate a seasonal decline of some magnitude roughly in the 30% range as we look into the first quarter. But, nevertheless, I'm very proud of our team working in the always dynamic mobile device market. As their agility and reactivity have once again enabled us to capture incremental sales in the quarter. I'm confident that with our leading array of antennas, interconnect product, and mechanisms, designed in across a broad range of next-generation mobile devices. We're well positioned for the long term. Finally, the IT datacom market represented 38% of our sales in the fourth quarter and 36% of our sales for the full year. Sales in the fourth quarter grew by a very strong 110% in US dollar and organic driven by continued strong demand for our products used in AI applications together with ongoing growth in our base IT datacom business. On a sequential basis, our sales increased by 8% from the third quarter which was substantially better than our expectations ninety days ago. This sequential increase was essentially driven by growth in AI-related applications. For the full year 2025, our sales in the IT datacom market grew by a very strong 124% in US dollars and organic. As we benefited from strong demand for AI-related applications as well as accelerated growth in our non-AI IT data business. As we look ahead, we expect a low double-digit sequential sales increase in the first quarter driven by the addition of CommScope. And on an organic basis, we're very pleased to anticipate that we will remain at these very levels in the fourth quarter. We are more encouraged than ever by the company's position in the global IT datacom market. I just can't emphasize enough what an outstanding job our team has done, not only in securing future business, on these next-generation IT systems, with a really broad array of customers, but in executing upon that demand here in 2025. It's no doubt that the revolution in AI continues to create a unique opportunity for Amphenol. Given our leading high-speed and power interconnect products. With now the addition of CommScope, we have the broadest range of high-speed power and fiber optic interconnect products all of which are critical components in these next-generation systems. This creates a continued long-term growth opportunity for Amphenol. Turning to our outlook and of course, assuming the continuation of current market conditions as well as constant exchange rates, For the first quarter, we expect sales in the range of $6.9 billion to $7 billion and adjusted diluted EPS in the range of $0.91 to $0.93. This would represent significant sales growth from the prior year of 43% to 45% and adjusted diluted EPS growth of 44% to 48%. I would note that our Q1 guidance includes $900 million in sales and $0.02 of adjusted EPS accretion from the CommScope acquisition. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges present in the current environment. While continuing to grow Amphenol's market position all while driving sustainable and strong profitability over the long term. Finally, I'd like to take this opportunity to first thank our customers for the trust that they put in us and also to thank the entire global team of Amphenolians for their truly outstanding efforts here in the fourth quarter and in the full year 2025. And with that, operator, we'd be happy to take any questions. Operator: Thank you, Mr. Norwitt. Question and answer period will now begin. Please limit to one question per caller. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We have a question from William Stein from Truist Securities. Please go ahead. William Stein: Great. Thanks for taking my question. Congrats on the very strong results and outlook. First, I'd like to ask about the bookings, which was very strong. I think you highlighted a 1.31 book-to-bill. Adam, that I imagine, must have in it some extended duration orders in the backlog. And I wonder whether that's entirely concentrated or mostly concentrated in IT datacom. And also, if you can talk about what gives rise to that level of orders? Is it based on sort of a need for them to place this in order to get in line, from a sort of a lead time perspective? Or is this based, perhaps on sort of minimum order requirement in order to meet CapEx requirements that you have? Any color on that would be really helpful. Thank you. Adam Norwitt: Well, thank you very much, Will. Look. No doubt. We were very encouraged by the bookings as we came out of the year in 2025, and you know, I'll say a couple of things. I mentioned earlier that, in fact, our bookings were really broadly strong across all of our end markets with maybe I think, only one exception our book-to-bill was at or above one. And then in a few cases, significantly above one. And there was certainly the IT datacom market specifically related to AI investment was a primary driver of this 1.31 book-to-bill and record orders, you know, for the company. To achieve orders of more than $8 billion in the quarter was certainly a milestone for all of us. Look. I think that as I mentioned, and I think Craig alluded to, that we have seen customers open up their order window for in particular related to significant plans that they have of investments related to AI. This is not because of kind of getting in line so to speak. I mean, I think our team's done a fabulous job of ramping up, I mean, as evidenced by the extraordinary growth that we achieved last year, a 120% year-over-year growth. For the full year in IT datacom, there's no doubt that our team has done an amazing job of ramping up to our customers' needs. But at the same time, and we've talked about this in the past, you know, because of the technology involved in a lot of these next-generation products, really pushing the limits of these systems and pushing the limits of the products. You know, these products do require, in certain cases, more automation, which fortunately, we do the vast majority of that in-house, which has been an amazing competitive advantage for Amphenol through this time period. And so we've worked with customers because of these, you know, sometimes outsized investment requirements, and they're outsized plans that they provide to us, to somehow share the risk of those investments and we do that in a variety of ways. Those ways can include customers actually sharing some of the spending, contributing to the spending, and, otherwise, you know, giving us commitments that are solid commitments that give us the comfort to make those investments and drive the ramp-ups that ultimately meet those customers' demands. And so I think it's more not and you use the word minimum order. I wouldn't call it minimum order. But rather it's giving us the comfort through their own commitments to Amphenol that we should then make the commitments in capital and using Amphenol's hard-earned cash and the time of our team, to make those investments. And I think it's a great sign. It's a sign, number one, of our customers' intention and their plans, which are very robust. It's a sign number two of our customer's commitment and confidence. In the Amphenol organization. And so no doubt about it. I think it's a positive. And, you know, we look forward to continuing to drive great success in that market in the future. Thank you. Our next question comes from Amit Daryanani from Evercore ISI. Amit Daryanani: Please go ahead. Adam Norwitt: Yep. Thanks a lot. Good afternoon, everyone. Thanks for taking my question. Adam, post the CCS deal, can you just talk about the breadth of your offerings when it comes to serving these AI infrastructure customers? You folks have done really well on a stand-alone basis, but know, there's this view, I think, out there that Amphenol is driven more by And as we move more to optics and fiber, there's a risk here. So maybe hoping you can spend some time to help us appreciate the range of offerings you're gonna have post-CCS. And how do you see these offerings that you get from CCS really being complementary to what Amphenol has today? Thank you. Adam Norwitt: Yeah. That's it. Well, thank you very much, Amit. Look. There's no doubt about it that we have worked for a long time, and it's kind of ironic. Know, we just celebrated the twentieth anniversary of another foundational acquisition for Amphenol, which was the acquisition of the Chariton Connection Systems business twenty years ago which really catapulted Amphenol into a leadership position in high-speed copper interconnect products. I will tell you that at that time, you know, high-speed meant five gigabits. Maybe 10 on the outside. And over those twenty years, we've continued to double down on the excellent capabilities that TCS brought us the people most of whom are still with our team today, you know, there to celebrate that same twentieth anniversary. And that has put us in a real leadership position as our customers drive their systems to higher and higher speed. Now we have always been a player in fiber optics. I mean, going all the way back to, you know, the early foundations of what a fiber optic connector was you know, half a century ago or more. But there's no question that with CCS, just like at the time with CCS twenty years ago, CCS vaults us into a position of breadth and depth in the technology around fiber optic interconnect that is a real expansion. Of our capabilities. And so when we go to customers data center applications or when we go to communications networks, customers and talk about their next-generation network planning, We can now have that conversation across the entirety of the Internet of the interconnect spectrum. As they think about the various trade-offs that a customer goes through every time they think about their specific system architecture, You know, do they want to use a high-speed copper interconnect here? What's the power situation? How do they bring power? Into their system, into the rack, into a data center? Into a network? And then how did they use fiber optics, you know, which have, of course, fabulous traits in particular around high bandwidth, long-distance communications. And customers are making these trade-offs every day, And now with the CCS acquisition, what I'm so excited about is the unique position it puts Amphenol in as a company to be able to go in and talk to that entire spectrum. Of interconnect. Our customers just want to get a signal from a place to a place. And it's up to us to work with them to figure out the best way to do that. Whether they're getting a signal from a GPU to a GPU or from a central office home somewhere or anything in between. And I think now we were able to come to them with a total solution of leading interconnect products that ultimately allow us to have a seat at the table as a partner with those customers for many, many years and many generations to come. Thank you. Operator: Our next question comes from Luke Junk from Baird. Please go ahead. Luke Junk: Adam, maybe to bridge on the comments you just made, I'd just wondering if you could maybe speak to integration first steps at CommScope. And, you know, like you mentioned, the deal got closed a little sooner than you had expected. Just how important is that in terms of bringing this new fuller, broader portfolio to bear in data center, especially given how quickly this market's moving right now? Thank you. Adam Norwitt: Well, thanks very much, Luke. I'll answer the second question. I mean, know, you get one of these deals done. You gotta get a lot of approvals in a lot of different places. And I think our team did a great job of working with the various authorities to get those approvals a bit faster. And I'm really grateful also to the folks who sold us this company, and, you know, they've renamed their company now, and I wish them all the best. It was really a great experience, I think, for all sides, and we work really well together. To bring this deal to fruition quite a bit faster than, you know, we thought it was gonna be at the time that we originally announced the deal. I would say so the speed I don't think the fact that we closed it early in the quarter versus end of the quarter, that doesn't change our position in the marketplace. Obviously, as soon as we announce the deal, you can imagine that our customers around the world wanted to talk to us about what that meant for the long term. And so we've been having those conversations for quite some time already. In terms of the integration, I mean, you know, that word integration is not a word in the Amphenol lexicon. You know, there are two words we don't use, integration and synergy. And but what we do talk about is letting them evolve into the Amphenol family letting them be who they were because it's a fabulous organization. I mean, the leadership of the company is still the same leadership. The people are still the same people. We're not parachuting people in. We're not merging and morphing things into one or another, synergizing and restructuring. We're actually working with the team on day one to say what are the opportunities that now that you're part of Amphenol, you could hope to achieve that you maybe couldn't have done part of your former company. I was so happy, you know, on the first day of the acquisition that right after we announced it, I went really one of the nerve centers of the company. As you know, you know, the CommScope, we've talked about this. In many ways, it is a collection of extraordinary iconic businesses in its own right. The CommScope business that was founded nearly fifty years ago by Frank Drendel as a supplier into the broadband networks market. The Systemax business, which is an amazing iconic business selling into building connectivity. And the ADC Communications, which was a long legacy leader in fiber optic interconnect. And so I was really happy to go to Shakopee, Minnesota, which is really the nerve center of the fiber optic capability of this company. And meet with these engineers and the product managers and the folks leading that business. And I can tell you they're so excited to be part of Amphenol. And we broadcast a welcome around the world. And the just a kind of a almost a universal excitement to be part of this company called Amphenol, to become Amphenolians as they all now know that word. And so you know, the first steps is, you know, meet the people, get excited, find opportunities to go accelerate the business, and that's all well underway today. Luke Junk: Thank you. Operator: Our next question comes from Wamsi Mohan from Bank of America. Please go ahead. Wamsi Mohan: Yes. Thank you so much. Adam, I was hoping you could maybe parse the January IT datacom guide of flattish organically excluding CCS. Should within that, should we be expecting the traditional sort of you know, enterprise-centric market, double-digit and the AI workloads to grow. Is that the right way to think about it? And within the AI context, is that more programs for you, more units in existing programs? Any color you can share around, so what you're hearing from your larger AI customers in terms of just trajectory given especially your comments about very strong orders? Adam Norwitt: Yeah. Thanks very much, Wamsi. Look. I mean, it's hard for me to give too much of a parse of what that flat organic means. I mean, you're correct. Traditionally, the base IT datacom cycle would be down in the first quarter. So I think probably there's some of that here as well. But look, in terms of our ongoing growth in AI, I mean, I want to emphasize one thing, which is just the breadth of that business. You know, we have an enormous position with a lot of different customers up and down the stack of AI, you know, from the folks who are making the investments the big web scale folks, and otherwise, including, like, you know, the cloud, the Neo cloud, whatever you guys all call these folks. The equipment manufacturers, all the way down to, of course, significant companies who are designing the chips and the architecture around those chips. I mean, I will say that, you know, as we come out of 2025, that breadth is reflected in the fact that we didn't have any 10% customers in 2025. You know, we have significant customers, but we have also a lot of breadth around that business. And so as our customers think about the forward potential, of AI I mean, I think there's a few factors. Number one is their investment plans are all going up. There's no doubt that there continues to be a very robust plan of continuing to drive accelerated computing at a very strong level. And there's upgrades of the technology embedded in those data centers which requires a higher technology, more complex, higher content degree of interconnect. We're also very excited that not only are we participating, you know, as we have traditionally bringing the power in, power to the racks and the like, the data communication within racks, within adjacent racks, but also now with CommScope participating in the broader fiber optic opportunity, associated with those data centers. And, you know, there's no doubt that that also creates a strong opportunity for the company going forward. Wamsi Mohan: Thank you. Operator: Our next question comes from Samik Chatterjee from JPMorgan. Please go ahead. Samik Chatterjee: Oh, hi. Thanks for taking my question, and Happy New Year. Adam, I'm wondering when you mentioned the sort of opening up their order books a bit when it pertains to your IT datacom business. Are you seeing anything similar for the CC business the reason I ask is we saw what what are the competitors in the space currently announced agreement with Meta Securing Supply. So are you seeing hyperscalers customers on that front come to you to sort of engage in those discussions to secure supply and what that what that would mean for your investment proof, sort of support for this business. Thank you. Adam Norwitt: Yeah. Well, thank you very much, Samik. Yeah. Look. No doubt. We had very strong orders, and I would tell you that the CommScope business, as we call it now, we're not calling it anymore CCS, It has also had very strong orders. And for sure, I mean, there have been plenty of announcements and, you know, by really wonderful companies out there, and, you know, we're really proud to be considered in the same breath as some of these amazing companies that have also been in the public eye late. And there's no doubt that the CCS is participating. I mean, we've talked about the fact that their exposure into the data center, their strong growth that they've seen in that area. You know, I would also just point out, you know, at the time we acquired we announced the acquisition then of CCS, we talked about acquiring a company of roughly $3.6 billion in sales at a 26% EBITDA margin, and that, you know, implied a of just over 11 times that we paid for it. By the time we closed, we're now talking about a business of more than $4 billion in annualized sales. That is a great momentum, strong orders, positive book-to-bill, and all of that. And, obviously, implies as well that, you know, on a at least on a current year basis here in 2026, we're we the this is a great deal for Amphenol and really the high single digits in terms of an EBITDA multiple. So I think it's a great company with a great prospects and, yes, does see those those same trends. In terms of investments, I mean, look. I we don't see any, you know, significant abnormal kind of things vis a vis investments with CTS. But I will say this, and that's something we've talked about in the past. It's a different thing for CCS to be a part of a company that, you know, for very obvious reasons was somewhat balance sheet constrained. And now they're part of Amphenol where we're more than willing to help them stimulate the virtuous cycle that so many of our companies are on by making prudent investments that allow great returns and allow them to capitalize upon the opportunities in the marketplace. And so it's not that we're just going to give them all blank checks here. But you can imagine that it's a different environment for CCS in terms of their ability to grow into the upper opportunities as part of Amphenol than maybe it would have been in the past. Samik Chatterjee: Thank you. Operator: Our next question comes from the line of Andrew Buscaglia from BNP Paribas. Please go ahead. Andrew Buscaglia: Hey. Good morning, everyone. Adam Norwitt: Good morning. Andrew Buscaglia: Or good afternoon. Adam Norwitt: How are you? Good aft Andrew Buscaglia: Yeah. Maybe shifting away from the AI and IT datacom story per minute. I think another underlying trend this quarter or a positive thing we're seeing is the momentum in, you know, a lot of other areas in your in your markets are pretty beat up. And I'm thinking, like, industrial, automotive, mobile devices, specifically. Just seem to start the markets seem to be turning a corner. Where are you say that's most pronounced? Maybe what surprised you in the quarter, if anything? Where do you see some of these sort of battered end markets going in 2026? Adam Norwitt: Yeah. Well, thanks very much, Andrew. I mean, there's no doubt. I mean, we saw really broad-based strength as we through the year and as we finish the year. And I mentioned in my prepared remarks that we're especially encouraged in if you take automotive and industrial as two pretty broad global markets, that we saw growth organically in both of those markets across all of the territories that they operate in. And I would highlight there, in particular, Europe. I mean, you know, the world has been so down on Europe for so long. And I think we've started to see in our company, especially in the second half of the year, that our teams in Europe who have held their heads high through this whole kind of malaise, if you will, have continued to pursue opportunities to gain market share, to enable our customers who are doing really amazing things you know, driving now, you know, robust organic growth in Europe in automotive and in industrial for the full year. And I would even say that in the fourth quarter, amazingly, our strongest organic growth in automotive was in Europe. So, you know, that's definitely a different thing than we've been talking about and that the world's been talking about for some time. And I think we're excited about our continued position there. And mobile devices, you know, it's a different thing. I wouldn't call that as much of a regional market, but there's just a lot of innovation. Look. I always start the year at the Consumer Electronics Show in Las Vegas, and I think I even had the chance to run across a couple of you guys who are on the call here today. In the lobbies of the Venetian or wherever. And I go to that show always because I find it so inspirational. To see what folks are doing. And what I find so interesting is everybody is talking about AI, and the build-out of the networks of AI. And the capability. But what I find long term maybe even more exciting or at least equally exciting, is what's gonna come from that. What's it gonna mean that we're gonna have this ubiquitous Star Wars as we come to the almost fifty-year anniversary. Will we each have our own C-3PO that'll have great AI capabilities? Who knows? I mean, these kind of things are possible. And I think the places like in automotive with autonomous driving, in industrial where you see so many different things happening on the edge where things get smart, robotics, the like, and mobile devices. You know, those three markets that you mentioned, think each of those stands to have a fundamental step function in their capabilities and their potential because of what's happening today in the build-out of this AI network. And I think long term, that's something that I'm really excited about. And I think back on the other revolutions, the microprocessor, the Internet, the mobile Internet, and the like, And each of those had later on a carry-on benefit to those markets. Automotive, industrial, mobile devices, and the like. And know, I'd be surprised if we don't see something like that in many years to come. Thank you. Operator: Our next question comes from Steven Fox from Fox Advisors. Please go ahead. Steven Fox: Hi. Excuse me. Afternoon. I guess I just was curious, big picture, Adam. You've obviously just completed a really strong growth year and generate cash flows. But with the orders now that you're looking at, can you just sort of talk about sort of the management challenges? You mentioned adding more automation. And I'm wondering about, like, higher metals prices, supply chain constraints. How do you look at this in terms of new challenges, especially as your demand is broadening out? Thanks. Adam Norwitt: Yeah. Well, thanks very much, Steve. Sorry. I didn't save my Star Wars reference, for you. Look. This is not an easy thing to do to grow a company by 38% organically. Let alone those operations within the company who have grown by so much more than that. I mean, you can imagine we've got folks who more than doubled the size of their individual operations. But what sets us apart and what has always been the core of why we are able to do hard things. Is that unique operating culture of Amphenol. The fact that we rely on what is now a 145 or so general managers 16 operating groups. You know? The CommScope, we talked earlier about the quote integration. Well, there's not an integration. The CommScope team is you know, the person who ran it is now a general manager of Amphenol, and he's running his team as he ran it before. So the quote the management challenges and, you know, you list a couple of things, supply chain, the cost of metals, which are extraordinary. Know, there the geopolitics, you know, whatever, shipping. I mean, there's so many things. And I think we don't fixate on one or another of those things. What I fixate on is making sure that if you're a general manager in Amphenol, you've got all the authority to deal with whatever comes your way. And that empowerment and enablement of people to go figure it out. And, yes, if they need some help, we're here. We've got this amazing organization driving collaboration. Communication, across the company. But the end of the day, the buck stops in a 145 desks. And if that means doubling the size of your business figuring out how to set up factories in four different countries, doing things with technology that have never been done before, ramping up automation machines that we've never built before but now can build extraordinarily probably one of the world's best automation companies that exist. They make it happen. They make it happen. And so I think when I think about growing the company as we have, doubling the size of Amphenol really in the last four years, for me, the biggest singular focus is how do we do that while still preserving that entrepreneurial culture. And I'm so proud that we've done it. If you think about a big change in the company four years ago, which I'm not gonna say is the thing that created that doubling, but it certainly enabled it. Was when we moved to three divisions with three division presidents when we expanded the number of operating groups in the company, all with the goal of securing, strengthening, and scaling that unique entrepreneurial culture of Amphenol. And I don't think it's a coincidence. That we took that step four years ago, and now here we are four years hence celebrating doubling the size of Amphenol. And so I do believe that the management challenges which are countless, on every day, thousands of challenges that our people face, they're equipped to deal with them no matter what they are. And that gives me not only a confidence for the future, but enthusiasm for the future. Because whatever comes along, we know for sure the world is not predictable. But what I can predict is that Amphenolians will be there, and we'll make it happen regardless. Thank you. Operator: Our next question comes from Mark Delaney from Goldman Sachs. Please go ahead. Mark Delaney: Yes, good afternoon. Thank you very much for taking the question and Happy New Year to all of you as well. I was hoping you could speak a bit more on the margin outlook. The company sustained a record high EBIT margin again in the fourth quarter at 27.5%. There's a number of factors as you go into 2026. You have some big deals, like CommScope. You also alluded to, but metals are up quite a bit, but then the company is growing quite fast. So any color you can share on how to think about incremental margins this year and some of the key puts and takes? Thanks. Craig Lampo: Yes. Thanks, Mark. Appreciate the question. Yes. I mean, I'll start off by just really quickening quickly addressing metals. I mean, Adam just mentioned kind of a bit about it. But from a margin perspective, I mean, certainly, we're working hard. I mean, metals are certainly something that we have as part of our cost of sales not a significant cost that when you kind of take into account the significant value we create within the facility, but certainly, it certainly has an impact. I mean, it's like any other cost you know, that we work through, and the general managers do a great job of working through kind of offsets to those cost increases, through anything from design of products to things in the factory to working with vendors to a whole host of different things. So I wouldn't say that, at least as of now, we see having any significant impact on kind of our margin outlook as we're moving into '26 and certainly hasn't had any evident impact, certainly with these record, you know, operating margins that we've seen here in the fourth quarter and for the full year. You know, as we move into the first quarter, I mean, the main puts and takes here, I mean, organically, we have a slight sequential decrease in our sales, which is normal seasonality that we typically see know, during the first quarter. And we're converting kind of in the mid-thirties. Even the lower mid-thirties in, you know, in regards to that organic change. And that's typical given our profitability levels and kind of where I would expect. So the company is really doing a great job managing, you know, a seasonal sequential decrease. And, you know, the bigger impact on our margins in the first quarter really is just the impact of CCS. We talked about CCS being in the high teens for the full year, and from an operating margin base to kind of where we expect. I would tell you in the first quarter, because of the seasonality of their sales and their lower sales in the first quarter, that their operating margins are just a bit under kind of that high teens rate. So they're having you know, a bit over a 100 basis point impact on our margins in the first quarter. You know, as we progress throughout the year, we're not guiding in '26, but certainly, we expect normal kind of, you know, operating margins. We expect that kind of 30% you know, kind of targeted conversion margins that we target on incremental sales. getting up to over time. As we grow. And, you know, with CCS, again, we target that up to the company average, and certainly, that will be an adder over time to our operating margin potential. So I'm really, you know, happy with you know, our operating margins that we've achieved in '25 and certainly very optimistic to where we are in '26. Operator: Thank you. Our next question comes from Asiya Merchant from Citigroup. Please go ahead. Asiya Merchant: Oh, great. Thank you very much. Just know, given the strong order book momentum and, you know, the AI momentum that you guys also talked about. Just if you could just talk about CapEx and how we should thinking about investments into 2026? As a result of that? Sorry if I missed that earlier. Craig Lampo: No. No. Thanks for the question. No. We didn't talk about specifically earlier. Yeah. No. From a capital perspective and as we talk about in 2025, we were certainly spending at a bit higher level. But, honestly, with the growth we have seen, we kind of ended the year just a bit over 4%, which, you know, three to 4% we say is our historic range. We ended the year just a bit over that 4%. You know? And I would say as we go into '26 and we continue to see you know, certainly opportunities for growth, and certainly we've had strong orders here we talked about in the fourth quarter. We expect that capital spending to still be certainly at that upper end of that 4% range. And certainly, we have quarters that certainly exceed that 4% for capital spending into the, you know, into '26. So I think that, you know, the fact that we're still spending kind of in our you know, historic range and roughly there is really just a testament to the just the discipline of the organization, the ability to, you know, to spend wisely and really support the growth, the significant growth that we're seeing. Still with, you know, pretty reasonable spending, I think. So and then I think I would expect you know, more of the same in '26. And as we continue to grow, I think that three to 4% range will continue to be that. And I think as we these growth rates are a little higher, I would say that will be probably that towards the upper end of that 4% and, you know, give or take in the quarter. Operator: Thank you. Operator: Our next question comes from Joe Spak from UBS. Please go ahead. Joe Spak: Just a quick one for me. Relating to circling back to CommScope and that business. I know it's still early days in being the official owners, but any sense of how large their order book looks here? Going forward? Adam Norwitt: Yeah. Thanks very much, Joe. I mean, I think I mentioned earlier that CommScope's also had a nicely positive book-to-bill. Over the recent quarters. And so I think it has a positive order book from that perspective. Operator: Thank you. Our next question comes from Guy Hardwick. From Barclays. Please go ahead. Guy Hardwick: Hi. Good afternoon. Just a quick one on the order book. Obviously, it's fantastic result. $8.4 billion. Just how do we square that with the Q1 revenue guidance of $7 billion which obviously, the Q4 order book didn't include CCS, but I assume it assumed Trexxon. Is it the orders, the window that you talked about? And is that 8.4% really kind of a sustainable number over the next few quarters? Adam Norwitt: Thanks very much, Guy. Mean, look, I think I talked about the fact that we have seen customers extend their order window. Craig mentioned that as well. And in addition, as we continue to ramp up for our customers' new programs, particularly related to AI, there is that kind of confidence that we like to get before making investments. That our customers can give us in a variety of ways, including through orders. I'm not gonna guide to what our orders are going to be in a given quarter. I mean, can imagine our sales folks are out there trying to pursue every order. Possible. But these are really outstanding orders, and they will carry through longer than just here in the first quarter. Operator: Thank you. Operator: Our next question comes from Scott Graham from Research Partners. Please go ahead. Scott Graham: Hey. Good afternoon. Congratulations on the print. My question is about defense. Obviously, the current administration's thinking is that some point we need to push the budget up to $1.5 trillion. Is there any part of your defense sales that are maybe not subject to, you know, whether it's just an upgrade, next-gen technologies, the golden dome. I don't know how much how closely you've looked at some of the you know, some of the articles that have come out on this, but is there anything that you see that, you know, maybe doesn't give you maybe full dibs or most dibs on that? And then on the other side of it, are you concerned at all about the administration's you know, sort of negative rhetoric around with the with NATO? And what that might do to some of your international sales. In defense. Thanks. Adam Norwitt: Well, thanks very much, Scott. Look. I think as the leader in defense interconnect, I wouldn't tell you that we take that for granted. But do we have dibs on this market? We got dibs on this market. I mean and we have that because of a broad array of technologies. And deep investments that we have made I mean, the one thing that I think sets us apart in particular related here to we'll talk about The US and then we'll talk global. Is that we have continued to double down, number one, on technology innovation, and number two, on scaling our capacity to enable the defense industry to continue to meet the levels that they need to. And so whether that means, you know, today's budget or higher budgets in the future, I can tell you that the breadth of our offering coupled with the depth of our capacity and capability is something that puts us in a really strong position across really all programs. And, you know, you mentioned a few programs. Our folks deep into every program that is involved. I will also add to that. With the acquisition of Trexon, while only, you know, just under $300 million in sales, But it really does expand the prominence of our value-add interconnect capabilities which is an enormous additional opportunity and additional growth potential for the company long term. We've always been a leader in the discrete connector solution well, broad array of them. I mean, you cannot imagine how broad that array is. But now being able to support the value-add products across programs, across applications, land, sea, air, and everything in between. I think Trexxon really rounds out our position and expands the potential what we can do to support this growth. Now relative to your question around NATO and international, our approach as a company has always been not to be a sort of US flag in the front of our factory kind of an operation when we operate around the world. We operate you know, 350 factories across more than 40 countries around the world. And we don't have expats. Period. We operate our company as a local company. So when we're in France, we're a local French company. When we're in The UK, we're a local UK company. In Denmark, in Germany, in Italy, or wherever that may be. And that focus on being a local provider in the defense market. And, you know, our defense position in Europe is very, very strong. We've had really outperformance in Europe here for a number of years. In terms of the strength of our business. You know, I'm never gonna say that you're insulated from anything. But the way that we've structured our company, the culture around our company, how we interact with our customers. Is as a local partner in those places. And we do that in all of our That's just how we run the company. But I will tell you that in a geopolitically interesting world, that we are in today. The way that we've always operated, is a pretty good way to operate in today's world. And I think that will, in many ways, protect us from any politics that could inject themselves into this. Our customers, at the end of the day, want the best product, and they want it at the time that they need it. And if we can focus on continuing to do that and do it locally, I think our defense business has a great future. Operator: Thank you. Operator: Our last question comes from Joe Giordano from TD Cowen. Please go ahead. Joe Giordano: Hey. Thanks for getting me in, guys. Appreciate it. Adam, you've mentioned CES, and I think one of the things coming out of there was an ultimate move at some point towards, like, 800-volt power for data centers. And, you know, there's major implications on what that means for copper and what that means for the ability to do things at different dimension at different diameters. Just curious as your portfolio broadens out and you have these fiber capabilities, what does, like, the know, if you think through the potential positives and negatives for such a dynamic, like, how do you do you think that nets out for you guys? Adam Norwitt: Yeah. Look. I think what we care about, Joe, is that there's more of everything. And so as folks make changes, they go to different voltages. They go to different speeds. Of transmission. They go to more nodes. They go to more tokens. They go to more density, whatever it is. The ultimate what comes out of that is more complexity. And so for us, you know, whether it's one type or another, I talked earlier about the fact that we today, especially with the CommScope acquisition, have the broadest offering in the industry and the broadest ability to enable our customers as they face these really challenging technological trade-offs. And so I think we're in a really great position to be able to do that and even stronger than we were before pre the CommScope acquisition. And, you know, whether it's different voltages or different speeds or different densities or all the various things that our customers are looking at, I think we're gonna have a great seat at the table working with them to enable these exciting next-generation systems. Operator: Thank you. Currently have no further questions, so I'll hand it back to Mr. Norwitt for closing remarks. Adam Norwitt: Well, thank you very much. And again, I'd like to offer my gratitude to everybody here for taking the time with us today. And we look forward to seeing you in ninety days. And I hope you all, at least those of you who are not far from us here in Connecticut, hope you're able to stay warm. Thanks. Craig Lampo: Thanks, everybody. Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.
Operator: Greetings, and welcome to the GCC Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Sahory Ogushi, Head of Investor Relations. Please go ahead. Sahory Ogushi: Good morning, everyone, and thank you for joining. With me today are Enrique Escalante, our Chief Executive Officer; and Maik Strecker, Chief Financial Officer. The earnings release detailing this quarter's results was released yesterday after market close and is available on GCC's IR website. This conference call is also being broadcast live within the Investors section at gcc.com, and both the webcast replay of the call and transcript will be available on the same site approximately 1 hour after the end of today's call. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in yesterday's press release and in our quarterly report filed with the Mexican Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. With that, let me now turn the call over to Enrique. Hector Enrique Escalante Ochoa: Thank you, Sahory, and good morning, everyone. At GCC, we manage the company with a long-term view. Our markets are cyclical and can move quarter-to-quarter, but our strategy is firm and gives us flexibility to adapt to short-term conditions without changing our mid- and long-term view. We focus on disciplined execution, operational reliability and capital allocation across cycles. And this approach guided our decisions throughout the year. During 2025, we operated in an environment where external conditions influenced the pace and timing of customer decisions. As conditions evolve, we revised our expectations in the summer. From that point forward, our focus sharpened with an increased emphasis on cost management and operational discipline, and we delivered record sales for the full year of USD 1.4 billion, reflecting the strength of our operational model, disciplined execution across the network and particularly strong performance in the U.S. These results demonstrate the resilience and demand across our markets. From an earnings standpoint, it is also important to keep perspective. 2024 set a record benchmark for margins and returns, and that level remains the reference point for where we expect the business to operate over the cycle. While we did not replicate those record levels in 2025, we came very close, and we continue to position the company to move closer over time as efficiencies, cost actions, commercial initiatives and network investments take us to near records. The fourth quarter did not introduce new dynamics. Instead, it confirmed the trajectory we have outlined earlier in the year. Our operations were reliable, customer [indiscernible] the same mix and activity dynamics we managed through 2025 with improved execution translating into record quarterly results. Our people strategy remain a constant source of strength in 2025. We continue to invest in safety, training and leadership development, reinforcing a culture of operational discipline and accountability. Safety performance improved again in the fourth quarter and full year results reflected continued progress across key indicators with recordable incidents, including lost time incidents declining 10.5% year-over-year. Our continued recognition as a Great Place to Work further reflects the strength of our culture and employee engagement and the consistency with which we have integrated these values across the organization. Training is embedded across the company with structured programs aligned to specific plant and functional needs. Through the GCC Training Institute, we delivered more than 15,000 hours of training during the year. This investment supports reliability today and prepares our teams for the ramp-up of Odessa and the next phase of growth. Progress on our planet strategy continued steadily. In 2025, we increased blended cement production, expanded the share of alternative fuel in our fuel mix and continue to reduce our clinker factor. These actions support cost efficiency and operational resiliency while contributing to incremental progress in environmental performance. In addition, our Pueblo and Rapid City plants once again received ENERGY STAR certification, placing them among the top 25% of cement facilities nationwide for electricity efficiency. As we move into 2026, our focus remains on executing these initiatives pragmatically, prioritizing efficiency, reliability and long-term value creation. Turning now to our growth strategy. Our focus on execution and network strength is reflected in how the business performs across our key markets. In the United States, ready-mix was the primary driver of growth in 2025, supported by strong project activity. This project-led demand generated consistent downstream pull for cement and reinforce the strength of our integrated operational model. Ready-mix volumes reached record levels in 2025, increasing 31.5%, while cement volumes increased 2.6% during the year. As a result, we outperformed the U.S. cement market in 2025, driven by disciplined project execution and commercial management. Operationally, this translated into high utilization across our operations, supported by investments in mobile capacity and execution capabilities. Energy-related projects, including wind farm and associated transmission continue to provide volume support throughout the year. Infrastructure activity remained stable through the quarter and continues to provide visibility into 2026, supported by multiyear funding programs and ongoing execution at the state and local level. As we enter the new year, we remain proactive and focused in identifying project opportunities, reinforcing the depth and visibility of our commercial pipeline. Residential construction remain under pressure. Mortgage rates have not sustainably broken below 6% since September 2022. As a result, we do not expect a meaningful improvement in residential activity during the first half of 2026. Oil and gas activity softened during the year and continued to soften in the fourth quarter, reflecting the current oil price environment. This segment is expected to soften further in the near term before improving. While this affects mix, it does not alter our long-term positioning within the network as we rely on the flexibility of our plants to ship different types of cement and adapt to market demand. Throughout the year, our commercial focus remains on protecting margins and returns. While market conditions limited pricing momentum during 2025, the pricing increases announced entering 2026 reinforce our focus on offsetting cost inflation and improving profitability over time. In Mexico, fourth quarter performance was in line with our expectations. Residential demand and bagged cement continues to provide stability, supporting margins. The federal housing initiative is beginning to take shape in certain regions. And as projects move into execution, we expect to be able to quickly increase shipments as its impact materializes during the first quarter of 2026. Infrastructure in Mexico, it's an area of growing optimism. Historically, the first year following election is complex. But during the quarter, we saw projects advance with a more meaningful contribution expected in 2026 as execution accelerates. In addition, mining-related comparisons normalized in November, removing a headwind that affected volumes last year. We expect the segment to perform broadly in line with 2025 levels going forward. Industrial customers remain cautious, advancing projects gradually and using this period to prepare to move more decisively as visibility improves. We're cautiously optimistic about the industrial activity improving in the second half of 2026 as trade discussions become clearer. Capital allocation in 2025 remain consistent with our long-term priorities. We continue to focus on ensuring that recent investments in cement distribution and aggregate operations across our network reach their full potential, allowing us to ship product to more destinations, easing the pressure to rely on single markets with a larger volume. In parallel, the Odessa expansion continues to progress on schedule and within budget. Our M&A posture remains unchanged. We continue to evaluate opportunities that strengthen the existing network and meet our strategic and financial criteria while maintaining balance sheet strength and flexibility. As we look ahead, 2026 will be a pivotal year for GCC. With Odessa completing construction and entering ramp-up, the company moves into a new phase focused on integrating capacity, optimizing logistics and strengthening earnings power across the network. With that, let me turn the call over to Maik for a review of the financial results. Maik Strecker: Thank you, Enrique, and good morning to everyone. For the full year 2025, we delivered record consolidated sales of USD 1.4 billion, an increase of 3% year-over-year, driven primarily by volume growth in the United States. Fourth quarter sales totaled $360 million, up 7% year-over-year, consistent with the operating trends discussed earlier. During the year, the depreciation of the Mexican peso created some headwinds, which reduced consolidated sales by approximately $80 million on a reported basis. In the United States, ready-mix volumes increased by 31% for the full year and 27% in the fourth quarter, driven by strong activities tied to wind farm and infrastructure-related projects. Cement volumes increased 2.6% for the full year and 1.4% in the fourth quarter, supported by strong ready-mix activity and contributions from infrastructure and commercial projects across our network. Average cement pricing in the U.S. decreased by 1.2% during the year, reflecting product, project and geography mix dynamics. The aggregate business performed well and delivered the results we expected when we acquired the assets, contributing positively to our EBITDA generation and reinforcing the strategic rationale for advancing our aggregates growth strategy. In Mexico, cement volumes decreased 3% for the full year, however, increased 11% in the fourth quarter, supported by normalized demand in the mining segment and early execution of infrastructure and housing projects. On the cost side, full year cost of sales as a percentage of sales increased by 2.5 percentage points, reflecting factors discussed earlier in the year, including the absence of the natural gas liability benefit we recognized in 2024, higher fuel and power costs, a lower contribution from the [indiscernible] segment and increased transfer freight as we ship products to new terminals. In addition, during the year, we incurred higher freight costs as product was supplied from the Pueblo cement plant to support customers during the period in which the Rapid City cement plant was offline. While this resulted in higher transfer costs, it allowed us to meet customer commitments, preserve volumes and demonstrate the flexibility and competitive advantage of our distribution network. In the fourth quarter, cost performance benefited from disciplined inventory management, which offset the unfavorable inventory impact we recorded during the first 9 months of the year. SG&A expenses declined modestly as a percentage of sales for the full year, reflecting a reduction in consulting services as part of our cost and expense optimization initiatives, partially offset by higher operating expenses. As we move into 2026, we're placing renewed emphasis on cost discipline, particularly third-party spend, fixed cost and staffing optimization while maintaining our standards for reliability and safety. As a result, full-year EBITDA totaled $492 million with an EBITDA margin of 34.9%. Importantly, the fourth quarter delivered record EBITDA margins of 39.6%, up 3.4 basis points with EBITDA increasing to $142 million, reflecting improved operating execution as the year progressed. The depreciation of the Mexican peso reduced EBITDA by approximately $6 million on a reported basis during the year. Free cash flow for the full year totaled $349 million, representing a conversion of 71% of EBITDA with a strong fourth quarter contribution of $156 million, driven primarily by higher EBITDA generation. On capital allocation, we returned $45 million to shareholders through a combination of share buybacks and dividends. During the fourth quarter, we deployed $7 million in buybacks. We remain disciplined and opportunistic in balancing shareholder returns with investments for growth and keeping our financial flexibility. Strategic capital expenditures totaled $309 million in 2025, reflecting continued investment in our Odessa project and logistics across our network. As of year-end, we have invested approximately $600 million in the Odessa project and associated logistics capabilities with the remaining $150 million planned for 2026. We ended the year with a strong balance sheet with cash and equivalents of $969 million and a net debt-to-EBITDA ratio of negative 0.7x, preserving flexibility as we prepare for the next phase of growth and the ability to act decisively on future opportunities. In summary, 2025 reflects a year in which we delivered record sales, observed mix and one-off impacts, maintained strong operating discipline and continued to invest in strengthening our network. With that, I will turn the call back to Enrique. Hector Enrique Escalante Ochoa: Thank you, Maik. As we look ahead, our guidance reflects a year focused on stabilization and execution, consistent with our strategy. We are entering 2026 with a clear operating backdrop, a stronger network and defined levers within our control. In the United States, we expect cement volumes to grow at a high single-digit rate, driven primarily by the contribution from new markets and the initial ramp-up of Odessa. Cement pricing is expected to be flat, reflecting product, project and geography mix dynamics. In ready-mix concrete, volumes are expected to decline at a high single-digit rate, reflecting a high comparison base in 2025, while pricing is expected to be flat, reflecting product mix and the broader distribution of volumes across new markets. In Mexico, cement and concrete volumes are expected to grow at a low single-digit rate, supported by increased infrastructure and residential activity. Pricing for both products is also expected to increase at a low single-digit rate. At the consolidated level, EBITDA is expected to grow at a mid-single-digit rate, driven primarily by higher sales volumes. During the year, the one-off incremental logistics costs associated with the ramp-up will continue to weigh on margins, while cost discipline and efficiency initiatives will help manage the transition. Turning to capital allocation. Capital expenditures in 2026 are expected to be $270 million as the Odessa expansion nears completion, and we will continue with logistics investments across the network. Free cash flow conversion is expected to remain strong and consistent with historical levels. In closing, we remain focused on restoring margins towards the levels achieved in 2024, executing the Odessa ramp-up in a controlled manner and maintaining financial flexibility. While the pace of improvement will vary by segment and geography, we believe the actions we are taking position GCC to deliver resilient and improving performance through the cycle. Thank you for your continued support. We will now open the call for your questions. Operator: [Operator Instructions] Our first question today is coming from Alejandra Obregon from Morgan Stanley. Alejandra Obregon: Perhaps the first one is for you, Enrique. So you mentioned 2026 will be a pivotal year for GCC. And of course, Odessa plays a big role, and if you've provided a little bit of color on that. But just wondering if you can walk us through the different milestones that you think that will make 2026 a pivotal year? Is it kind of like a new distribution setup, savings, energy growth? Anything that you think we will be seeing throughout the next quarters? And so that's the first question. And the second one is perhaps for you, Maik, on CapEx. So you mentioned $150 million of strategic CapEx for, if I understood correctly, new investments on distribution. Just wondering if I got that right and if you can be a little bit more granular on where you think those $150 million are going in 2026. Hector Enrique Escalante Ochoa: Number one, in your question about 2026 pivotal comment. Of course, I mean, bringing a new cement line online in a challenging market is in itself a challenge, right? But we have a strong experience from what we did exactly under even worse conditions when we started up the Pueblo plant during the Great Recession. So we have to obviously manage initially, I mean, a good start-up of the plant. It's a challenging business. It's always -- there are always things in those big equipment that we need to be in control of, and we expect to do that successfully. So that's the first part of this pivotal change. And of course, as we ramp up, we need to have a very good coordination of how we start returning volume that Samalayuca is shipping into the region back as we start, I mean, switching customers, I mean, to the cement produced in the new country. And this, of course, also has to have a good coordination with the series of terminals that we're setting up in several cities and towns to precisely have a more controlled entry into the market, I mean, cautiously, slowly, but with a firm mid strategy of how we will position that increased capacity over time in different markets. So there's a lot of moving parts at the same time as we introduce the new Odessa line during the year. Maik Strecker: Very good. Alejandra, thanks for your question regarding the CapEx. So the $150 million, that is really primarily driven by the project, Odessa, and that's the heavy lift there. However, there's also some additional logistics capabilities that we're building out, starting at the plant level with rail and truck capabilities really to be able to ship that incremental volume and distribute that. That was always part of the scope, and it's now just the time to execute on that. And then what Enrique just said, right, we're looking at several markets where we plan to distribute the volume. And for that, we need some logistics capabilities as well, smaller terminals, access again to rail and so on. So that's kind of the scope of that $150 million for Odessa. In addition, as you saw, we guided for some additional growth CapEx as well. The total is $200 million, which is related to energy-related alternative fuels, continue to invest in the aggregates business to unlock potential there and so on. Operator: Your next question today is coming from Garrett Greenblatt from JPMorgan. Garrett Samuel Greenblatt: I was wondering if you could give a little more color on the regional demand drivers, specifically around U.S. cement volumes up high single digits as opposed to pricing flat. I guess just wondering how those dynamics play out and then for Mexico as well. Hector Enrique Escalante Ochoa: Garrett, yes, as I mentioned, I mean, in my answer to Alejandra, it's a challenging year with a lot of different market or segment performance, right? I mean we are relying on the infrastructure segment more than anything to offset further decreases in short-term in the Oil Well cement market as that industry, I mean, gets more stability and more visibility going forward. So that's one offset. That's why one is growing and the other one is decreasing and one is offsetting each other, right? Residential, as we mentioned, it's weak. It's continued at the same level, I mean, for us this year. There are some other segments like, I mean, obviously, everything that is commodities in the agricultural, I areas where we participate are having, I mean, a strong -- normal to strong, I mean, performance. So that's good for us that we have this mix of segments all the time. So we think that overall, I mean, there is going to be, of course, compensation from some segments with others. And that's why I mean we're basically projecting I mean a flat volume for the year. Mexico, on the contrary, we're seeing some increases overall, pretty much, I mean, driven by housing. The federal government initiative, it's taking off now. I mean it seems like there is clear, I mean, funding and direction to build, I mean, the houses on that federal program. And we're already experiencing projects in several of our locations in Mexico. And we're already shipping volume specifically for that segment. And as we mentioned, the mining segment, I mean, it's stable now. I mean we already stimulated. I mean, the volume loss from the couple of mines that ended operations, I mean, last year. So the conversion is, of course, it's going to be better. And at the local level, I mean, municipal projects, especially some state projects are taking off now. And obviously, I mean, with some growth over last year, it's also going to help, I mean, the improvement in the Mexican market. Garrett Samuel Greenblatt: Great. And maybe just a quick follow-up just on what you're expecting in terms of pricing in the U.S. Have you sent out any letters? Or do you plan to do midyear increases as demand trends progress through the year? Hector Enrique Escalante Ochoa: We are always, I mean, committed to recover at least our cost inflation through pricing in every market where we operate. We're very disciplined in that respect and very consistent. We announced an $8 price increase in the U.S. for January. There are always, I mean, conversations with the different individual customers about, I mean, their ability to take on, I mean, the price at this moment or delays a couple of months and then obviously, one-on-one conversations about, I mean, the total amount, I mean, to increase. Everything I will say, so far, it's going well in those conversations, pretty normal, and we expect, obviously, to execute the majority of that price increase in the first quarter of this year. So that's a very good news. Now in our case, specifically, I mean, we're not in our guidance reflecting directly that price increase that we're going to execute because of several factors that we alluded to during our comments here. Of course, we have a big -- I mean, mix effect here with, again, more cement going to construction segments and less to Oil Well cement, which obviously command different prices. And so that mix doesn't help in terms of the increase. We also have a lot of project work related to infrastructure mean that we mentioned. And in some cases, that project work also has, I mean, a lower pricing than the regular ready-mix precast, I mean markets that are usually very stable. And of course, I mean, there's one third, I mean, factor here that is geography, right? With the start-up of Odessa, and as I mentioned, we're going to do this, I mean, slowly and cautiously. Dispersing more cement to further away locations in smaller volumes, that commands higher freight, of course, and somehow that is reflected on a lesser, I mean, net price because one has to compensate on that incremental freight to be competitive in distant markets. So that's the third factor, I mean, that we have there. And finally, I think that we had, some one-offs in last year that affected in our pricing strength with some segments and some markets derived from things that we disclosed, I mean, last year with some problems in the Rapid Plant during the winter of last year to start up on time because of an accident with there and then an issue with the ball mill that were in the Odessa plant that also delayed us a little bit. So we needed to make some adjustments, I mean, to recover market share that we lost during those incidents. And we did that successfully, I mean, last year. That's why, obviously, we're running much better than the industry as a whole in terms of cement growth. And also comparing our own region, we accomplished that recovery of market share, and we got back basically to our normal levels of share. We're going to, I mean, now run constant there. I mean we don't see any more need to continue, I mean, pressing on prices because of that reason. That's already behind us. So with all that said, with all those -- a combination of all those 4 factors, that's why we're seeing a flat price in our guidance. I see -- I personally see this as a very positive, I mean, ironically because, I mean, I think that it takes us back to a very good solid platform, and it's only building up from this, what I call one-off because of all these reasons at the start of the first 6 months of 2026. So we're very -- I mean, pleased and confident that this is the right strategy for GCC and it's going to be successful for us. Operator: Next question today is coming from Carlos Peyrelongue from Bank of America. Carlos Peyrelongue: I joined a bit late, so I apologize if you have answered this already, but I just wanted to get a bit more color on the status for demand for cement from oil -- from the Texas, in particular, from Oil Well cement. If you could comment a bit on that would be helpful. Hector Enrique Escalante Ochoa: Yes, Carlos, thank you for the question. Yes, we already comment on that, as you were pointing out. I mean, obviously, we're seeing still more pressure in the Permian Basin on demand for Oil Well cement. I mean, given the uncertainty and lack of clarity of where, I mean, the oil price -- international oil prices and the segment is going to end this year. We believe, of course, it's transitory and cyclical as has demonstrated throughout history. And that's why we feel very confident that we really prepare a good, I mean, expansion of Odessa, taking those cycles into account and being able to capitalize on construction cement when the Oil Well demand is slow. So having said that, that's why we're shifting more to, I mean, infrastructure projects. That's where we're concentrating, I mean, for the rest of this year, I mean, as our driver for demand in the U.S. So it's work project, infrastructure, I mean, everything, I mean, related to that segment. And that's how we plan to set the decrease in Oil Well demand. Carlos Peyrelongue: Understood. And have you given some guidance as to your expectation to utilize the new capacity that you build in Odessa in terms of what's the expectation for this year or next year to get to higher utilization rates on that new capacity? Hector Enrique Escalante Ochoa: Yes. Definitely, we lower our expectations compared to what we planned when we were, I mean, planning I mean the construction of the plant. The market conditions are totally different. If you remember at that time, I mean, all U.S. markets were basically sold out and so the conditions were very different. And so that's why we're adjusting our ramp-up of the plant to a much more slower and careful introduction of the plant. The line is going to run at full capacity itself, the new line. So we capture there the decreases in variable cost compared to the current, I mean, [indiscernible] in Odessa. And of course, the line run at full capacity will substitute all that Oil Well cement that is produced currently in that plant, plus the imports that we're bringing from Samalayuca into the area. So that's a way of optimizing, I mean, our cost structure and our network. Where we're going to feel the pain, of course, of this slowdown is going to be in the Samalayuca plant that it's going to have to slow down its shipments to West Texas. And so we're, again, going slowly in the introduction based on those factors. But I think that's the best strategy for us at the moment. Operator: Next question is coming from Marcelo Furlan from Itaú BBA. Marcelo Palhares: My question is related now to capital allocation going forward. So you guys are guiding now for this $270 million of total CapEx for this year. So I'd like to understand if we could expect this level of CapEx, let's say, below the $300 million levels as the new normal for the company at least for the medium term. And my next question regarding to capital allocation is regarding M&A. You guys have provided some color that the likelihood of guys likely seeking M&As in the aggregates business in the U.S. and so on and so forth would be likely to be the main driver. So I'd like to understand if this strategy continues in terms of pursuing this type of M&As. And if you guys could give a little bit more color on potential size if you guys are expecting only small bolt-on acquisitions or if you guys could likely reach to larger M&A activities after due completion. So these are my questions. Maik Strecker: Yes. Thanks for the question. Regarding capital allocation, as I already mentioned, out of the $200 million growth CapEx, $150 million is really allocated to finishing Odessa and the related logistics capabilities. Then the remaining $50 million also already mentioned, but we have some very high-return projects around fuel and energy that we want to execute. Again, and that's in the context really to optimize these very important input costs for the company. A third element here is aggregates, right? We have the first year of the new aggregates business under our belt. We see some opportunities to optimize, to grow, to expand that will require some level of CapEx. And we have some, again, very high return quick projects to execute on. So that kind of comprises the $200 million in growth. And then the $70 million in maintenance, it's in line with our previous years to really keep the cement plants, the network in new light conditions to really perform well for the market that's in front of us. So that's on CapEx. Regarding M&A, yes, we are very active. We have a pipeline of more smaller midsized opportunities. I would call them bolt-ons to, again, the existing aggregates network that we now have within the cement network that we're operating. Again, those are small and midsized acquisitions similar to what we have done in 2024. And again, now that we know pretty well how these markets perform and where the opportunities sit, you will see us throughout the year '26 being very active and focused on that. That's kind of the most actionable part. Nevertheless, as we always stated, we remain very focused also on cement, looking at options for cement to grow the network across the United States, and that remains to be part of the focus as well. Operator: Next question is coming from Emilio Fuentes from GBM. Emilio Fuentes De Leon: First of all, congratulations on the results. I have 2 questions, if I may. First of all, on CapEx during the quarter, is it correct to assume that the downtick on CapEx is related to a postponement on the ramp-up of the Odessa plant given the current market situation? And second, is -- are the extraordinary weather events seen during the beginning of first quarter 2026 in the U.S. already reflected on the guidance? Or is there any downside risk to the guidance given the rough start to the year given related to weather? Hector Enrique Escalante Ochoa: This is Enrique. I will take your second question first and then turn it to Mike for the CapEx. I think that the weather, even though it's been very severe in the U.S., it's not abnormal for us. So no, it does not affect our guidance at all. I mean, for us, I mean, this is, again, in the regions where we participate, pretty normal, I mean, weather pattern. So we'll be fine in terms of our shipments for the quarter. Maik Strecker: Yes. Enrique, regarding the CapEx for the quarter, it's a little bit of timing. The reason we came in lower than kind of what we had expected and also the Q4 of 2024 was purely timing. We're -- from an Odessa perspective, we're in execution phase and everything is towards the defined time line to be completed kind of Q2 of this year. So you saw a little bit of timing effect there on the strategic CapEx in the quarter. Operator: Next question is coming from [ Azeem Tori ] from Anfield Investment Research. Unknown Analyst: Maybe first a question on the ramp-up of Odessa. So you're adding a lot of capacity in the local market. Is it fair to assume that you will try to address some of the big urban centers of Texas like the Dallas Urban Center or the San Antonio Urban Center? And if you -- when you're talking about like new distribution or new terminal center, is it new terminal that you would develop to support the commercial strategy of this Odessa cement plant? That would be my first question. And then second question on the price increase that you've announced of $8. Is it $8 price increase that you have announced in every single state, including Texas? And a last question around the cost inflation that you're expecting in your cement business. I think we see a lot of data center being built around the United States. They are consuming a lot of electricity. Do you see a risk of electricity prices going up in the coming years in the U.S. that could potentially impact your margin? Maik Strecker: Yes. Let me start with the question around the network and the additional volume from Odessa. As Enrique already kind of walked us through, the plan really is to distribute through several markets, small and bigger. North Texas is a market that we see a lot of growth. And yes, we plan to participate in that growth. But we also see good levels of growth for Odessa closer to home. In that part of the country, there are some very interesting data centers planned. So we'll participate in that. And then as mentioned, we're looking at kind of small and midsized markets to establish distribution points agile with some level of CapEx, but not heavy CapEx load. And I think through that distribution, the goal is to have that very focused and measured introduction of the Odessa capacity. So that's on that. Regarding cost of inflation, as mentioned also, we're taking some proactive steps. We're investing in capabilities around power with solar projects. We're investing in some additional capabilities utilizing more natural gas, pipeline infrastructure and burning capabilities. So all of those, we see as kind of a proactive step to manage the future cost dynamics around fuels. So that's key for us. And I think with that, we should be able to manage accordingly what's ahead to come. Unknown Analyst: And the price increase... the $8 price increase, is it everywhere in every state? Or is there a difference from one state to another? Hector Enrique Escalante Ochoa: The price increase was announced in all the regions where we participate, including Texas. Unknown Analyst: And so far, the discussion is encouraging and you would expect to get part of this during the first quarter. Hector Enrique Escalante Ochoa: We will. I mean that's evolving dynamic and fluid, and we expect to get the majority of that announcement. Operator: Our next question is coming from Enrique Soho from Fundamental Capital. Unknown Analyst: Could you give us some insights into your and the Board's thoughts into potential corporate action or financial engineering to further unlock value and decrease the valuation gap between you and peers? Maik Strecker: Yes. Thanks for the question. I think, first off, our goal is really operationally to perform and to unlock the value by improving our margins. Again, our benchmark is 2024, the 36.6% and to get back to that level and to show that we get back to those very attractive margin levels, number one. Number two, when you look at our kind of cash flow conversion, we maintain a very high level and push that hard, again, to show the value. And then as you have seen, we're looking at kind of the overall shareholder returns with buyback program. We're more proactive on that. You've seen the dividends continuously to be increased over the years. So all those are elements, how we demonstrate the value of GCC and where we push for further investments from shareholders. And yes, strategically, we get the question. We're looking at what long term from a corporate structure, we should consider to further enhance kind of the value of the company and the value to all shareholders. That is a conversation that we have on a regular basis with the Board, with the team. And these topics are, for us, very long term and it's part of the tools and the portfolio of how do we increase the shareholder value for all participants. Operator: Your next question today is coming from Alejandro Azar from GBM. Alejandro Azar Wabi: Just a quick follow-up and to clarify something on my end. Regarding the Odessa plant, the start of the plant remains second and third quarter of this year. What you are delaying is just the ramp-up or you are delaying the start of the plant? And can you give us more color on delaying the ramp-up for you guys, what that meant before? Were you planning to reach full capacity in '28, '27, and that's where you're delaying? That would be my question. Hector Enrique Escalante Ochoa: I think that, I mean, the -- I mean, it's not delay the start-up of the plant. The plant is going to start up on time. We continue to run the project on schedule. So we should be, I mean, ramping up in the third quarter basically of. We're testing many of the equipment for commissioning, I mean, a good portion of the plant already. So things are progressing well there. So I think that what we are referring to here is entering at a slower pace, not delaying it on time, but entering at a slower pace overall for GCC. And I'd like to reemphasize overall because for us, it's managing the whole network through the start-up of the Odessa new line. Again, I mean, I mentioned we plan to, I mean, as quickly as we can run the line at full capacity. That means probably shutting down both of the other [indiscernible] today at the plant in order to favor, I mean, running the more modern and efficient plant. And the effect of that because we cannot put all that cement in the market today, the effect of that is a slowdown in other parts of the network in GCC, more specifically the Samalayuca plant. So again, I mean, where we're going to feel the pain or take the burden of the start-up of the line in Odessa is going to be in Mexico and part of the shipment that, that plant was doing in West Texas and other markets. Alejandro Azar Wabi: That's very clear. Just another clarification on my end, and that's implicitly in the 5% growth in the guidance, right? Hector Enrique Escalante Ochoa: Yes, sir. Operator: Our next question today is coming from [ Matias Ostrowicz ] from Citibank. Unknown Analyst: I joined a bit late, so I apologize if you have already replied to this. But I'm just wondering about your price guidance in the U.S. market. Was your guidance relatively flattish considering your volumes are in the high single digits. Is it a mix situation? Or is it just softness in the market? Hector Enrique Escalante Ochoa: Well, I would say derived from the softness in the market, I mean -- and there are many factors that I already mentioned, Matias, of why we are going to experience a mix effect between segments. Again, I mean, more construction cement and less Oil Well cement that affects negatively the average price. And geography, with more shipments to further markets precisely of that new, I mean, production in Odessa going to further different markets in every direction. So we keep it a smaller impact in dispersed market. So that's, again, another factor that is affecting obviously our price, our average mix price to be competitive in longer destinations or further away destinations. And again, I already talked about, I mean, other effects, but it's basically, again, a mix and geography effect that it's putting pressure or that it's compensating the price increase that we're doing in every U.S. market. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over to Ms. Ogushi for any further or closing comments. Sahory Ogushi: Thank you again for your time and continued interest in GCC. We look forward to speaking with you again soon. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Welcome, everyone, to UMC's 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 2 hours after the conference has finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin. Jinhong Lin: Thank you, and welcome to UMC's conference call for the fourth quarter of 2025. I'm joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the fourth quarter financial results followed by our President's key message to address UMC's focus and the first quarter 2026 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's fourth quarter 2025 financial results. Chi-Tung Liu: Thank you, Michael. I'd like to go through the 4Q '25 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4, the fourth quarter of 2025. Consolidated revenue was TWD 61.81 billion, with a gross margin around 30.7%. The net income attributable to the stockholder of the parent was TWD 10.06 billion and the earnings per ordinary shares were TWD 0.81. Utilization rate in the fourth quarter is stayed the same as the previous one, around 78%. For the sequential comparison, revenue grow 4.5% quarter-over-quarter to TWD 61.8 billion. Gross margin improved to over 30% to now 30.7% or gross margin of TWD 18.95 billion. And the non-operating income remained similar to that of last quarter. And the net income overall contributed to shareholder of the parent is around TWD 10.05 billion or EPS of TWD 0.81 in Q4 of 2025. For year-over-year comparison, on Page 6, revenue grew by 2.3% to reach TWD 237.5 billion for the whole year of 2025. Gross margin rate is around 29% or TWD 68.9 billion. And for the net income attributable to the shareholder of the parent for year 2025, is around TWD 41.7 billion or 17.6% net income rate. EPS for 2025 was TWD 3.34, which is a decline compared to that of TWD 3.8 in 2024. On Page 7, our balance sheet at the end of 2025. Cash amounts still more than TWD 110 billion, with total equity of the company is now TWD 379.8 billion at the end of 2025. For ASP on Page 8, you can tell for the last three quarters or four quarters, it pretty much remained similar level for our blended ASP for throughout the 2025. For revenue breakdown on Page 9. For quarterly comparison, the change is mainly showing in the increase in Asia and Europe with now North America represents about 21% in Q4 of last year. For the full year breakdown on Page 10, the change is similar. We see North America dropped from 25% in 2024 to 22% in 2025. For Page 11, IDM for Q4 revenue still represent about 20%, almost no change. But for the full year number on Page 12, IDM account for 19%, increased by 3 percentage points to 19% in 2025. For quarterly revenue breakdown by application, it remains almost similar quarter-over-quarter on Page 13. For the annual performance on the application breakdown on Page 4 (sic) [ Page 14 ] consumer increased by 3 percentage points to 31% from 28% in the previous year. And we continue to see 22-nanometer to be our key driver of growth for the recent quarters and also forward-looking as well. So 22 and 28 nanometers revenue in Q4 '25 now represent 36% of the total revenue pool. On Page 16. For the full year, the increase of 22 and 28 nanometers revenue is 3 percentage points, and we also show about 2 percentage point increase in 14-nanometer on a year-over-year comparison. Capacity remained flat on a quarter-over-quarter comparison base, but it will decline by roughly 1% due to the annual maintenance schedule. On Page 18, our latest forecast for 2026 CapEx plan is around USD 1.5 billion, which is slightly declined from USD 1.6 billion in the year of 2025. The above is a summary of UMC's results for Q4 2025. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang. Jason Wang: Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's fourth quarter results. In the fourth quarter, our results were in line with the guidance with a flattish wafer shipments amid mild demand across most of the markets. The 4.5% revenue increase during the quarter was supported by favorable foreign exchange movements as well as a sequential growth in our 22- and 28-nanometer business, which continues to improve our product mix. With the 22- and 28-nanometer segment, 22-nanometer's revenue increased 31% quarter-on-quarter to a record high, accounting for more than 13% of total fourth quarter revenue. Looking at the full year, UMC delivered solid performance in 2025 with shipment increasing 12.3% and revenue in U.S. dollar up 5.3% year-on-year. Going into the first quarter of 2026, we expect wafer demand to remain firm. UMC is confident that 2026 will be another growth year as a tape-out on our 22-nanometer platform accelerate, and other new solutions continue to gain business traction. We have been working hard to lay the foundation for our next phase of growth, investing for the future in both capacity and technology. In 2025, we completed the new Phase III facility at our Singapore Fab 12i, which is already playing a central role in supporting customers to diversify supply chain. At the same time, we are striving to expand our footprint in the U.S. through an innovative yet cost-effective modes of partnership, such as our 12-nanometer collaboration with Intel and the recently announced MoU with the Polar Semiconductor. The leadership UMC has built over the past few years across specialty technologies, including embedded High Voltage, Non-Volatile Memory, and BCD, has and will continue to sustain stable business growth. Looking ahead to 2026 and beyond, we expect advanced packaging and silicon photonics to serve as a new growth catalysts, positioning UMC to address the evolving needs of a high performance of applications across AI, networking, consumer, automotive and more. Now let's move on to first quarter 2026 guidance. Our wafer shipment will remain flat. ASP in U.S. dollar will remain firm. Gross margin will be approximately in the high 20% range. Capacity utilization rate will be in the mid-70% range. Our 2026 cash-based CapEx budget will be USD 1.5 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions. Operator: Yes. Thank you, President Wang. [Operator Instructions] Now first question will be coming from Sunny Lin, UBS. Sunny Lin: So, I have a few questions. Number one, Jason, may we have your thoughts on overall market outlook for 2026. And then for semi versus foundry? And if UMC can continue to outgrow your adjustable market for this year? Jason Wang: Sure. Well for 2026, we expect AI-related segment remains as the primary growth driver in semi-industry. And furthermore, with the continuous commercial deployment of Edge AI applications, demand for chip using a general purpose server is also expected to rise. In contracts, the adverse effect of the memory supply imbalance could put some pressure on specific consumer electronics. But overall, the semiconductor industry is projected to grow by mid-teens in 2026. The question for foundry market, we believe that AI demand will remain strong and is the main contributor behind the low 20% growth projection in the foundry market this year. On the other hand, although the memory pricing may impact demand of the foundry market, at this time, we -- at UMC, we estimate that our addressable market will grow by low single-digit percentage. And UMC's growth was expected to outperform the average growth of our addressable market. Sunny Lin: Got it. So, then my second question is on pricing. Lots of discussions and obviously, Chinese peers are raising pricing. So how should we think about the pricing outlook for mature foundry and for UMC through 2026? Would UMC be able to start to reflect better value? And if yes, which product categories should we expect more upside from here? Jason Wang: Okay. Well, we do anticipate a more favorable ASP environment in 2026 versus 2025. This outlook really reflects our disciplined pricing strategy and the positive impact from multiple reasons, product mix optimization, loading improvement and reduced exposure to more commoditized market segment. As you're referring to China players, we expect the strong growth momentum in our 22-nanometer demand to support our product mix in 2026 as well. Overall, our pricing strategy remains consistent and is anchored to the value where we deliver technology differentiation and manufacturing excellence. So, we do think the 2026 pricing environment is more favorable now. Now the question about which product, and I mean, we don't comment pricing on specific product or any specific node. But in general, we do see the environment is more favorable now. Sunny Lin: No probolem. That's very helpful. And then a follow-up would be on the overall industry supply versus demand for the coming few years. TSMC on the recent earnings conference talked about the plan to optimize capacity for mature nodes to better support cloud AI demand in coming few years. So from your perspective, how should we think about the opportunity here? Are you starting to see more client engagement for new products in the coming few years? Jason Wang: We're always excited to see more customer engagement. So -- but more importantly is we need to prepare ourselves to cope with the market dynamics, and we welcome any opportunity to support our customers. So, we view this landscape shift as an opportunity to further optimize our product mix and gradually improve ASP and margin as well. Sunny Lin: No, got it. Got it. And then maybe lastly, just on your Singapore expansion. How quickly are you planning to ramp capacity in 2026 and in 2027? And how should we think about the differentiation of products that you have for Singapore versus the Taiwan capacities for 22- and 28-nanometer? And then with that, how should we forecast the depreciation in 2026 and 2027? Jason Wang: Well, first of all, for the year of 2026, the capacity increase will be around 1.2% year-over-year for us. And for our Singapore facility, the expansion will start in the second half of 2026. And with capacity deployment ramp from second half of 2026 will continue into the 2027. In terms of the node available in our Singapore facility, it's our strategy that we have a geographically diverse manufacturing booking between Taiwan, Singapore, Japan, U.S. and from a technology, no coverage standpoint, we would like to coverage most of the nodes. So the customer has a benefit of passing different sets of forecast. Chi-Tung Liu: As for the depreciation forecast, we are looking for some like low teen annual increase in the full year depreciation expenses. As for next year, we don't have the exact number here, but it's very likely to be the similar amount for 2026. So in a way, we will see the depreciation curve to peak either this year or next year with a very similar numbers. Operator: Next one, Haas Liu, Bank of America. Haas Liu: Congrats on the results. I would actually like to follow-up on the pricing. If we look at the like-for-like pricing environment, based on your current mid- to high 70 percentage of the utilization, if we strip out any of the consideration of the product mix improvement, are you able to improve or just to pass on your higher manufacturing costs or material costs to your customers at this stage? Or you still receive a meaningful pushback from your customers? Jason Wang: Well, I mean, the pricing discussion is always ongoing. The overall pricing strategy remains consistent, as I mentioned earlier. In 2026, we do see some market dynamic changes, so forth. Certain customers we do have some adjusted pricing upward. And so -- and for a certain customer, we still have some of the pricing -- I mean, the onetime pricing adjustment at the beginning of the year to support their market share expansion, as well as the competitiveness. So net-net, within the environment more favorable now in 2026. Haas Liu: Okay. Yes. So, when you talk about you are supporting your customers to gain market share by strengthening their cost structure. Do you mean you are actually adjusting down your pricing for those customers? Or is it actually up for this year? Jason Wang: We have a mix of that. For certain customers, we have adjusted pricing upward. And for certain customers, we will apply the onetime price adjustment downward, yes. Haas Liu: Okay. Got it. And then just on the near term, a couple of your Fabless customers recently talked about earlier and also stronger inventory restocking because of the memory price hike. I was just wondering what impacts your first quarter outlook here, if your customers are seeing stronger inventory pulling in the traditional low season. Why is your shipment for first quarter is still relatively flat? And then, what's your puts and takes for the first quarter overall business outlook? Just wondering whether -- which part of the business is actually relatively stronger and weak? Jason Wang: For Q1, by segment, we are actually in line with our addressable market seasonality. We didn't see a significant changes due to the inventory restocking. But if you're looking into by applications, we expect the revenue contribution from consumer segment to increase driven by the WiFi and DTV and set-up box, while the revenue from the communication and automotive will decline due to a softer demand of ISP and DDI products. Haas Liu: Okay. That's pretty clear. And then since you just mentioned about seasonality, are you expecting this year's seasonality to look pretty similar to the previous few years that first quarter could be relatively light and second quarter and third quarter, you will be able to see a relative strength into the year? Jason Wang: I can have -- probably provide you with this. If we look at the whole year, with the new project of a multiple specialty technology across the embedded high-voltage, non-volatile memory, power management, IC, RF SOI, it supports the end markets in communication, consumer, automotive and AI servers which will ramp in second half 2026. So, we're more looking at this year that our second half will outperform the first year -- first half, I'm sorry, the second half will be better than the first half. So that may be the deviate from the traditional seasonality. But as far as for us, we think the overall shipment for the year will be a growth year and as well as second half will be better than the first half. Haas Liu: Okay. Yes. And last question before I jump back in the queue is that, just based on the comment you had just now, what is the underlying market unit demand assumption you have right now? Is it smartphone -- is it the overall smartphone market will actually grow or decline based on your current base case scenario that second half will be better? Or it is actually already factoring a relatively more conservative expectation that smartphone TV, PC, this kind of consumer markets will actually see a unit decline? Jason Wang: Always with the current forecast from our customers. I mean, we do see gains on product segments, all applications. We do see some share gains on those applications. So right now, the forecast does show us that's more of a share gain in the market -- end market demand associated. Operator: Next one, Felix Pan, KGI. Junhong Pan: I just have a couple of questions about the future growth driver, particularly in the remarks, you mentioned about the advanced packaging and silicon photonics. So my first question will be besides the Interposer, what else we might have, some engagement for advanced packaging? And for Interposer, what's the capacity expansion plan for 2026? And my second question will be the silicon photonics, particularly in the Singapore fab, a lot of rumor about your potential customer. Is there any color, any client engagement or any contribution can generate from this segment? Any color will be grateful. Thanks. Jason Wang: Okay. A big question. So, let me see if I can cover -- cover that. And well, if I look back, I mean, I understand you asked for 2026. But let me look back this. We have delivered a very solid 2025 performance with a 12.3% shipment growth and 5.3% revenue growth, which outperformed our addressable market. This result is supported by our differentiated 22-nanometer technology and other specialty offering across both 12-inch and 8-inch amid a world-class market, a broad-based market demand recovery. And building on the 2025, we do view 2026 as a year of both continuity and evolution. We believe the UMC will once again taking shares and outperform its addressable market, and we will also see several positive inflation. First of all, as our guidance suggests, we are seeing a more favorable pricing environment. This will result of tighter supply globally as well as our differentiated technology and geographical footprint, which will drive our growth for the next few years. We are on track with our 12-nanometer cooperation with Intel, which should start see tape-out in 2027. Now that's the existing one. And your question about silicon photonics and advanced packaging. Secondly, we see 2026 as a pivotal year for those high performance, high potential opportunities such like the silicon photonics and advanced packaging. And we are making those deliberate choice, working with INEX to invest and scale them into a significant driver for our future. If you ask specifically about the advanced packaging. And there are two distinct opportunities for advanced packaging. One, we call enablers, the other we call 10 extenders. Major to explain this. I know it's long, but bear with me. So the fourth enabler, we are seeing the 2.5D and 3D packaging as well as the chiplet move well beyond just the data center and ultra high-end chip and start to spread across the broader market. Over time, we expect that advanced packaging to be adopted even on mature nodes. A good example is RF SOI. We have mentioned many times where we're already in production. In addition to the RF SOI, we are also exploring other applications with leading partners and believe we are at least 2 to 3 years ahead of our competition. What this really means for customers is better power efficiency, small form factor, and differentiated products. And for UMC, it is a strategic win-win. We believe our leadership in advanced packaging will enable us to capture more shares, sustain our higher ASC and drive better margin in many of our already established business in the long run. On the 10 extenders, we also believe that advanced packaging will help UMC address new opportunities. For example, customers are coming to us for AI-related applications. This is not necessarily just the XPU related, but we are adding value by stacking memory with the logic, adding DTC to the stack or selling the discrete DTC. We are also working with our partners to enable a total solution. Meanwhile, we are working with more than 10 customers in advanced packaging currently and expand more than 20 new tape-outs in 2026. We foresee revenue in 2027 will be a significant year for us. And the capacity question you have that capacity plan will be aligned with the customer ramp plan and market outlook. You also asked about silicon photonics. For silicon photonics, we are developing solutions, which includes ASIC, OIO, OCS, and CPO. Our collaboration with INEX allow us to deliver industry standard PDK to our customers in 2027. In addition to platform preparation, we also work with the customer on captive technology of 12-inch PIC aiming for possible product, which is expected to ramp this year. We will also combine our advanced packaging know-how with the silicon photonics as many of the applications require the integration and different substrates, process, technology and materials. Looking ahead to achieve 1.6T bandwidth and beyond, we're working with both customers and vendors for the test finding on heterogeneous material such as the TFLM. Those technologies could also be used in additional applications such as quantum computing. Again, we hope to integrate the new material the advanced packaging technology as well. So those are all integrated altogether. That's why I gave you a bit of a longer answer. I hope that explains it. Junhong Pan: Yes. Okay. But just -- let me just a quick follow up and rephrase my question. So for silicon photonics, what's the earliest timetable we can see the revenue contribution, like most likely? Jason Wang: For the 12-inch PIC, for the pluggable product, we'll be expecting to ramp this year. Junhong Pan: Okay. And about the -- because as I know about the Interposer, currently is the -- Interposer is also the bottleneck for our partner to expand their capacity. So, is there any color we can give -- how much capacity growth for the Interposer, like how much year-on-year growth or something like that? Jason Wang: Well, right now, the capacity planning will be aligned with the customer for the 2027 ramp. So, we will probably provide you some clarity when that comes. Right now, in 2026, we will focus on the tape-out. Operator: Next one, Gokul Hariharan, JPMorgan. Gokul Hariharan: Could you go a little bit deeper into that advanced packaging comment that you made? What is the involvement level of UMC in some of these advanced packaging solutions? Are you doing full stack? Or is it basically like previously where you were largely focused on the Interposer side of the equation? And in terms of the tape-outs that you have, what are the nature of these tape-outs? Are these mostly data center ASIC-related products? Or is this a much wider array of products other than just data center ASIC? Jason Wang: Sure. Well, first of all, we have reported in our advanced packaging space. We have building up some of the capability from wafer-to-wafer stacking and TSC as well as Interposer, the 2.5D and the many different capabilities. And then the way we see it, like I explained, for the enabler is we can apply those to many of the current products that we currently serve. And then -- and one example I mentioned is the RF SOI. So we have wafer-to-wafer hybrid bonding with the RF SOI solution for the mobile space already. And then, some of the capability can be built for the DTC for the stacking as well as some of the customers looking at discrete DTC already. And we are combining some of the capability into segments, the logic and the memory. Of course, we do not provide memory ourselves. So the customer will have to provide memory wafer to us. And so then we can provide wafer-to-wafer hybrid bonding on those. So on one hand, the way we see it is advanced packing is a capability per se, and it implies to the product and then we call it enabler and also expander. And the -- meanwhile, the product coverage is all the way from the mobile space, power management discussion, the AI-related -- AI-related product and also for the BCD application as well. So they were -- it's our belief is for a better reason or for the higher performance reason, and many different applications will start adapting the advanced packaging. So we think this is going to be a broad success on the advanced packaging space. Gokul Hariharan: Got it. And any plans to further expand your Interposer capacity? I think we had expanded, I think up to 6,000 and then kind of stopped it there. Now some of that demand seems to be kind of coming back for some of -- one of your customers in China. So, is there any plans to expand the capacity further? Jason Wang: There are discussions around that. Right now, if you look at the technology itself, we have some common tools in place already, which that we can leverage of our 40-nanometer capacity, of our 65-nanometer capacity. From those common tool space, we're already allocating to this area. Now for the unique tools, then we will put in the plan for the future expansion and for the customer ramp profile. And we believe that will probably happen in 2027. Gokul Hariharan: Got it. Understood. That's clear. Another question I had is on the -- just your expectations for the communication, consumer segment which is north of 70% of revenue, given all these concerns about smartphone, PC. How are you budgeting for this? Are your customers telling you that they are really concerned about this memory cost inflation? Or right now, you still don't really hear that from the customers that that's going to be a big issue from a unit perspective going through the year? Jason Wang: Well, we're also cautious about that topic. As of today, we have not observed any demand impact on our customers' forecast for the year, despite the recent surge in that price. And our technology predominantly supported customers addressing the higher end of the market segment, where the demand tends to be more resilient in the past and in the period of memory tightness. So, because the supply usually typically prioritize in such high-end higher-value device. While we remain attentive to the potential impact on the memory market and our current assessment is that any potential headwinds are probably manageable, and we will continue monitoring the situation properly with our customers together. Gokul Hariharan: Got it. My last question is on the geographic split of revenues. I think, could you talk a little bit about the Intel 12-nanometer progress? And any color on how you will be booking revenues or profits from this partnership given the fabless, Intel fab, while you are essentially the provider of customers and some degree of IP as well into it? And secondly, on the Xiamen's fab, what's the strategy for the Xiamen's fab medium to long term, given many of your semiconductor peers in Taiwan have kind of progressively exited capacity in Mainland China? Jason Wang: Well, for the 12-nanometer project with Intel, overall, the 12-nanometer cooperation project with Intel continues to advance smoothly. We remain on schedule to deliver the PDK and associated IP to customer in 2026. Furthermore, we anticipate the product tape-out will commence in 2027, making the significant step towards to commercialized deployment and future revenue growth. Right now, UMC and Intel are working closely to ensure successful tape-outs and an efficient ramp up for the mass production. As the project advance, it is expected to further strengthen USD position in the U.S., right, for customer as well for us. Because the geo diversification manufacturing. Right now, the application on the 12-nanometer cooperation, including products on digital TV, WiFi connectivity and high-speed interface products. In terms of the business model, and it's probably not available for us to comment. But it is a win-win strategy that we see and will be very synergetic for both parties as well as for our customers. And we have very high confidence this will be a win-win model. Gokul Hariharan: Okay. And any thoughts for the Xiamen capacity? Jason Wang: Yes. For the Xiamen, I kind of touched that earlier as well. I look at Xiamen, not just Xiamen itself, our core part of our competitive advantage is our geographically diverse manufacturing footprint. And the Xiamen play one of the important space for us and particularly for the local customer. So -- and at this point, the fab is actually at a full capacity. We are running at a full utilization as well. And we see -- we continue seeing many different engagements coming to this and we will across regionally optimize it from the customer engagement and product loading standpoint. Gokul Hariharan: Okay. Just one more on blended ASP. I think, Jason, you mentioned that the ASP environment is more favorable this year. But overall utilization is still in the mid-70s as of Q1, right? So do you expect that this year, we could see a scenario that we could see blended ASPs moving up meaningfully like 5% to 10% or something like that, like we have had in the past or that requires a much higher level of utilization that is probably not happening this year, given your low single-digit foundry growth expectation? Jason Wang: Sure. I mean, the high utilization is one of the important factors, but that's not the only factor. We want to make sure the pricing strategy is enabled not only ourselves and our customers to be competitive as well. So -- but we do see the pricing environment is getting more favorable to foundry because of the loading reason. And so -- but the magnitude of that, we probably have to continue to manage it. And if we have a clarity, we will share that with you. Operator: Next one Alex Chang, BNP. Alex Chang: I just have a very quick one. I just saw the company announced that they started the mass production of SuperFlash Generation 4. So just wonder how much revenue contribution from the non-volatile memory business in the past quarter or maybe past year? And also how much revenue is contributed by the power management ICs for the server-related applications? Jason Wang: I mean, we don't have a breakdown to provide. And the way that we break it down is based on specialty technology that includes the high-voltage and non-volatile memory and the PCB space. Right now, the specialty revenue representing about 50% of our overall revenue. And I can let you know the high voltage is about 30% of that. And the rest of that, I would say, is a combination of the non-volatile memory as well as the DCB. Operator: Next one is Laura Chen from Citi. Chia Yi Chen: I just want to follow up on the deterioration rate and also the gross margin outlook. Jason, you mentioned that the pricing environment seems to be improving more favorable. And together with firm shipment and better product mix as well as the utilization rate, so how should we think about the gross margin trend? You guided that will be high 20% for Q1. But with these favorable factors, how should we think about the margins throughout the year? That's my first question. Chi-Tung Liu: Yes. Gross margin can be highly dependent upon utilization rate, ASP, product mix, depreciation and foreign exchange rate. So there's a lot of variables. So beyond this quarter, it's difficult for us to give a firm outlook. For the first quarter guidance, which is high 20s, is mainly due to the higher cost, especially the higher depreciation expenses. As I mentioned, it will grow by low teens in the full year of 2026. As for 2026, we will continue to cope with higher depreciation expenses as well as the other inflationary pressure for our production, raw material and other costs. To mitigate and cope with the headwinds, we will continue with our cost reduction efforts and also all the activities to improve our productivity and drive operation efficiency. And these measures hopefully will help UMC to deliver a stable EBITDA margin and ensure our long-term financial resilience to remain intact. As a matter of fact, our 2025 EBITDA margin is actually a good improvement compared to that of 2024. Chia Yi Chen: Yes, sure. And also, I think for the advanced packaging and as well as the silicon photonics is one of the key things that UMC may have a great opportunity. We know that UMC has already working on advanced packaging, previously on Interposer, probably now we'll see more various different design. So could you share with us what's about the revenue contribution of your advanced packaging right now? And how would that look like in 2, 3 years? Jason Wang: Currently, the Interposer was exposed to very limited customer base and also narrow application. While we have engaged with more than 10 customers and expecting more than 20 new tape-outs in 2026, we do foresee that revenue of packaging -- advanced packaging growth in 2027 will be significant. Chia Yi Chen: So, significantly means that, could that be like 5%, 10% or higher? Jason Wang: I am expecting more than that. But I mean, if you're referring to the overall revenue contribution, we'll probably give you more guidance later. But if you're looking at the packaging itself, it's going to be significantly larger than what we're shipping today. Operator: Next, we'll have Bruce Lu, Goldman Sachs for questions. Zheng Lu: I want to go a little bit deeper for the silicon photonics. I mean, as you might know that your peers like GlobalFoundries, Taiwan Semi, pretty vocal about that. Can you tell us how big do you think the addressable market for silicon photonics for you guys in 2 years? And how do you win market? What is the competitive advantage for you in this business? I mean, other than working with INEX? Jason Wang: Well, I mean, the Singapore facility is not going to only serving the silicon photonics. Singapore facility is one of our important manufacturing site, they serve our worldwide customers, all different applications. And so it's part of our geographical diverse manufacturing strategy. So... Zheng Lu: No, no, no, my question is for silicon photonics, our business strategy? Jason Wang: The silicon photonics strategy in Singapore. Okay. Zheng Lu: No, no, no, no. I'm sorry, let me rephrase my question. So the growth driver for UMC, one of it is the CPO, I'm assuming having more business in the silicon photonics. In -- for your peers like GlobalFoundries or Taiwan Semi, they are pretty vocal about the silicon photonics and have meaningful revenue contribution already. For UMC perspective, what is your competitive advantage for UMC to win this business? And how much business you can win or how big is the addressable market for you in 2 years? Jason Wang: Got it. So, for the silicon photonics, our strategy is simple. Our cooperation with INEX allowed us to deliver the industry standard PDK to our customer in 2027, particularly in 12-inch. So many of our competitors is today at 8-inch and we are focused on this in 12-inch. And as we believe the 12-inch will have that advantage. And right now, we already have certain products that have proven that performance is a better and a pluggable product, and which we will expect to ramp this year. And meanwhile, we're also combining the silicon photonics with our advanced packaging know-how, so for many different type of applications then we can integrate that. So by doing that, we think we will be even providing even more value from advanced packaging combining with silicon photonics at 12-inch. I think that's where we believe we are competitive. Zheng Lu: But that's mostly for plug-in, right? Because if you don't have the EIC, the pure CPO product might not be your key growth driver? Jason Wang: You're correct. We're not looking at a completely CPO package. We're looking at particularly in the PIC and OIO and OCS. Zheng Lu: I see. I understand. That's very clear. Next one is -- and we see that the progress for the Intel project for 12 nanometers is pretty smooth. I just want to know what is the next step? I mean, when we can see a further collaboration in 10, 7 nanometers and beyond? I mean, obviously, whatever you said, the advantage at 12-inch, you can also use the same argument for 7-nanometer. What's stopping you to do that? Jason Wang: Well, you're also right on that. And our focus right now is on delivering the 12-nanometer platform to customers. In the future, should it make sense for both UMC and Intel as well as our customers, we will surely consider expanding our collaboration to other derivatives as well as the technologies. Yes. Zheng Lu: But what is stopping now? What is the show stopper now? Jason Wang: It's not -- I won't call it stopping. I think the focus is a focus on 12-nanometer. We have to deliver a 12-nanometer today, and make sure that we deliver that program. We execute it well. And I think anything that makes sense on that, unlike you said, I think there will be a discussion, yes. Zheng Lu: I see. Because we already assumed that you can deliver something in '27. So given that working for 7 nanometers, maybe you need 2, 3 years, we want to see the project kickoff as soon as possible. Operator: [Operator Instructions] Now we'll have our last question, [ Sappho ] Neuberger Berman. Unknown Analyst: It's been a while. And congrats on the progress you've made throughout this couple of years. I just have a few questions. The first one is, on the market dynamics, I think previously, Sunny has asked about the TSMC is shrinking or defocusing on this mature foundry process. And it looks like not just TSMC, but also the other foundries are -- seems to be doing some leading-edge logic foundry seems to be doing the same thing. And also Powerchip recently just reached agreement with Micron as well as Intel fab, which means they're trying to streamline and re-org some of the foundry process, too. So it seems like there's a lot of supply is kind of being taken away because of the rolling out effects from the AI and crowding out some of these older nodes. On the supply side, it seems to be that actually decreasing. And on the demand side, if you look at, I think, TI just to report overnight. I think it seems like that there's been more obvious recovery on the analog MCU space. So on demand side, that's also improving. But the supply side, that's actually decreasing. So it looks like supply-demand dynamics is moving to a more favorable situation. I think that's the point why you were mentioning the pricing dynamics favorable this year. So I'm just curious about your view, if we try to compare the current like the mature foundries dynamic situation right now versus, I mean, back in 2021 when there is a severe shortage back then. How would you compare this time around versus last cycle? Jason Wang: I mean, that's a really good question. I mean, we saw on the market movement, the changes. And we also deep dive on this demand and supply outlook. And we think whether this is short term or long term. If you look at the driver behind us, we see -- you mentioned this is truly more of the AI phenomenon ripple effect. And so we see that AI remains to be very strong, at least in the foreseeable future. And I think this momentum will continue driving the overall demand. And meanwhile, in many of this -- the capability -- AI capability we portfoliating to even the other end market devices in the Edge AI as well. So as in this will continue. And from an economic standpoint, building any of the mature facility is not justifiable. So we do think that this could last longer compared to the over time. And I think the situation could be more of a structure going forward. And -- but again, this is at a very early stage of this market movement. So we'll pay attention to it, and we'll continue monitoring the progress. Meanwhile, like I said earlier, I think it is more a favorable pricing environment. But more importantly is we need to prepare ourselves to cope with this market dynamic. So we are welcoming all the opportunity that for us to engage in supporting the customer. And -- but the important focus today is we have to get ourselves ready to capture those opportunities. Unknown Analyst: Got it. Another question I have is your earlier comments on the pricing. I think the -- you offer some of the annual -- maybe some discount to some of our strategic clients for their share again, but also net-net wise, also seems to be pricing is going up for a majority of the clients. So net-net, it's going to still be the -- ASP still be positive. But I'm just curious about, for those clients that you're offering some discount at the beginning of the year, when it down the road is, if the next few months or quarter situation has become tighter -- and would you be able to reprice with these customers? Jason Wang: Those discussions will be ongoing. We're always working with our customers to reflect the market dynamics as well as the cost increases. So I'm sure, and I believe this conversation will surely happen. It happened in the past, it will happen now and will happen in the future. So the pricing discussion will continue. And I think customers understand that. And we just have to continue monitoring the market dynamic and maintain our competitiveness on both the customer and ourselves. Unknown Analyst: Yes. Well, a thought on that because of some of the pricing that started to affect it on the January 1 this year, this was actually negotiated already in fourth quarter last year, right? Jason Wang: That's -- some alignment on that on both volume and the pricing. So if volume has changed, of course, that's a different topic. So, there are some volume dynamic in that as well. Unknown Analyst: Yes. My question is actually is that because a lot of the pricing that's effective on January 1, beginning of the year, it was actually communicated 1 or 2 months ago before that, toward the end of last year when the time that the supply demand dynamics haven't been really that tight as compared to some of the changes that happened in the just past couple of weeks. Am I getting that right? Jason Wang: Yes, you're right. Yes. But those also is on certain conditions. So given the condition has changed, the some of the pricing are dynamic. Unknown Analyst: Yes. Yes. Exactly, that is what I'm trying to discuss with you. Because we also saw a lot of the other different components, different subsectors within the tech or semi supply chain that such as memory, I think the pricing were still down in July, August, but all of a sudden, September prices going up. So I'm just curious about that because when you negotiate some of this discount months ago, the supply-demand dynamics was not the same as today. So things remain fluid, dynamic and it still continue to be flexible and it's going to be dynamic and open for changes down the road, if things are moving more favorably. Jason Wang: I think the core of the pricing strategy is that it has to be consistent, and it has to anchor with the value that we deliver and also the customers' competitiveness. That is the core. Then usually, that is how we're centering about the pricing discussion. So that core is not compromised. Now if the condition has changed, yes, they always have some flexibility to it. So, one is called pricing strategy and position, another is core pricing negotiation. So there will be some flexibility, yes. Unknown Analyst: Yes. And the condition has started to change now. Jason Wang: Yes. So we do think the pricing discussion will be more favorable now, yes. Operator: Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. I'll turn things over to UMC Head of IR for closing remarks. Thank you. Jinhong Lin: Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact ir@umc.com. Have a good day. Operator: Thank you. And ladies and gentlemen, that concludes our conference for fourth quarter 2025. Thank you for your participation in UMC's conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you, again. Goodbye.
Operator: Welcome, everyone, to UMC's 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 2 hours after the conference has finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin. Jinhong Lin: Thank you, and welcome to UMC's conference call for the fourth quarter of 2025. I'm joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the fourth quarter financial results followed by our President's key message to address UMC's focus and the first quarter 2026 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's fourth quarter 2025 financial results. Chi-Tung Liu: Thank you, Michael. I'd like to go through the 4Q '25 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4, the fourth quarter of 2025. Consolidated revenue was TWD 61.81 billion, with a gross margin around 30.7%. The net income attributable to the stockholder of the parent was TWD 10.06 billion and the earnings per ordinary shares were TWD 0.81. Utilization rate in the fourth quarter is stayed the same as the previous one, around 78%. For the sequential comparison, revenue grow 4.5% quarter-over-quarter to TWD 61.8 billion. Gross margin improved to over 30% to now 30.7% or gross margin of TWD 18.95 billion. And the non-operating income remained similar to that of last quarter. And the net income overall contributed to shareholder of the parent is around TWD 10.05 billion or EPS of TWD 0.81 in Q4 of 2025. For year-over-year comparison, on Page 6, revenue grew by 2.3% to reach TWD 237.5 billion for the whole year of 2025. Gross margin rate is around 29% or TWD 68.9 billion. And for the net income attributable to the shareholder of the parent for year 2025, is around TWD 41.7 billion or 17.6% net income rate. EPS for 2025 was TWD 3.34, which is a decline compared to that of TWD 3.8 in 2024. On Page 7, our balance sheet at the end of 2025. Cash amounts still more than TWD 110 billion, with total equity of the company is now TWD 379.8 billion at the end of 2025. For ASP on Page 8, you can tell for the last three quarters or four quarters, it pretty much remained similar level for our blended ASP for throughout the 2025. For revenue breakdown on Page 9. For quarterly comparison, the change is mainly showing in the increase in Asia and Europe with now North America represents about 21% in Q4 of last year. For the full year breakdown on Page 10, the change is similar. We see North America dropped from 25% in 2024 to 22% in 2025. For Page 11, IDM for Q4 revenue still represent about 20%, almost no change. But for the full year number on Page 12, IDM account for 19%, increased by 3 percentage points to 19% in 2025. For quarterly revenue breakdown by application, it remains almost similar quarter-over-quarter on Page 13. For the annual performance on the application breakdown on Page 4 (sic) [ Page 14 ] consumer increased by 3 percentage points to 31% from 28% in the previous year. And we continue to see 22-nanometer to be our key driver of growth for the recent quarters and also forward-looking as well. So 22 and 28 nanometers revenue in Q4 '25 now represent 36% of the total revenue pool. On Page 16. For the full year, the increase of 22 and 28 nanometers revenue is 3 percentage points, and we also show about 2 percentage point increase in 14-nanometer on a year-over-year comparison. Capacity remained flat on a quarter-over-quarter comparison base, but it will decline by roughly 1% due to the annual maintenance schedule. On Page 18, our latest forecast for 2026 CapEx plan is around USD 1.5 billion, which is slightly declined from USD 1.6 billion in the year of 2025. The above is a summary of UMC's results for Q4 2025. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang. Jason Wang: Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's fourth quarter results. In the fourth quarter, our results were in line with the guidance with a flattish wafer shipments amid mild demand across most of the markets. The 4.5% revenue increase during the quarter was supported by favorable foreign exchange movements as well as a sequential growth in our 22- and 28-nanometer business, which continues to improve our product mix. With the 22- and 28-nanometer segment, 22-nanometer's revenue increased 31% quarter-on-quarter to a record high, accounting for more than 13% of total fourth quarter revenue. Looking at the full year, UMC delivered solid performance in 2025 with shipment increasing 12.3% and revenue in U.S. dollar up 5.3% year-on-year. Going into the first quarter of 2026, we expect wafer demand to remain firm. UMC is confident that 2026 will be another growth year as a tape-out on our 22-nanometer platform accelerate, and other new solutions continue to gain business traction. We have been working hard to lay the foundation for our next phase of growth, investing for the future in both capacity and technology. In 2025, we completed the new Phase III facility at our Singapore Fab 12i, which is already playing a central role in supporting customers to diversify supply chain. At the same time, we are striving to expand our footprint in the U.S. through an innovative yet cost-effective modes of partnership, such as our 12-nanometer collaboration with Intel and the recently announced MoU with the Polar Semiconductor. The leadership UMC has built over the past few years across specialty technologies, including embedded High Voltage, Non-Volatile Memory, and BCD, has and will continue to sustain stable business growth. Looking ahead to 2026 and beyond, we expect advanced packaging and silicon photonics to serve as a new growth catalysts, positioning UMC to address the evolving needs of a high performance of applications across AI, networking, consumer, automotive and more. Now let's move on to first quarter 2026 guidance. Our wafer shipment will remain flat. ASP in U.S. dollar will remain firm. Gross margin will be approximately in the high 20% range. Capacity utilization rate will be in the mid-70% range. Our 2026 cash-based CapEx budget will be USD 1.5 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions. Operator: Yes. Thank you, President Wang. [Operator Instructions] Now first question will be coming from Sunny Lin, UBS. Sunny Lin: So, I have a few questions. Number one, Jason, may we have your thoughts on overall market outlook for 2026. And then for semi versus foundry? And if UMC can continue to outgrow your adjustable market for this year? Jason Wang: Sure. Well for 2026, we expect AI-related segment remains as the primary growth driver in semi-industry. And furthermore, with the continuous commercial deployment of Edge AI applications, demand for chip using a general purpose server is also expected to rise. In contracts, the adverse effect of the memory supply imbalance could put some pressure on specific consumer electronics. But overall, the semiconductor industry is projected to grow by mid-teens in 2026. The question for foundry market, we believe that AI demand will remain strong and is the main contributor behind the low 20% growth projection in the foundry market this year. On the other hand, although the memory pricing may impact demand of the foundry market, at this time, we -- at UMC, we estimate that our addressable market will grow by low single-digit percentage. And UMC's growth was expected to outperform the average growth of our addressable market. Sunny Lin: Got it. So, then my second question is on pricing. Lots of discussions and obviously, Chinese peers are raising pricing. So how should we think about the pricing outlook for mature foundry and for UMC through 2026? Would UMC be able to start to reflect better value? And if yes, which product categories should we expect more upside from here? Jason Wang: Okay. Well, we do anticipate a more favorable ASP environment in 2026 versus 2025. This outlook really reflects our disciplined pricing strategy and the positive impact from multiple reasons, product mix optimization, loading improvement and reduced exposure to more commoditized market segment. As you're referring to China players, we expect the strong growth momentum in our 22-nanometer demand to support our product mix in 2026 as well. Overall, our pricing strategy remains consistent and is anchored to the value where we deliver technology differentiation and manufacturing excellence. So, we do think the 2026 pricing environment is more favorable now. Now the question about which product, and I mean, we don't comment pricing on specific product or any specific node. But in general, we do see the environment is more favorable now. Sunny Lin: No probolem. That's very helpful. And then a follow-up would be on the overall industry supply versus demand for the coming few years. TSMC on the recent earnings conference talked about the plan to optimize capacity for mature nodes to better support cloud AI demand in coming few years. So from your perspective, how should we think about the opportunity here? Are you starting to see more client engagement for new products in the coming few years? Jason Wang: We're always excited to see more customer engagement. So -- but more importantly is we need to prepare ourselves to cope with the market dynamics, and we welcome any opportunity to support our customers. So, we view this landscape shift as an opportunity to further optimize our product mix and gradually improve ASP and margin as well. Sunny Lin: No, got it. Got it. And then maybe lastly, just on your Singapore expansion. How quickly are you planning to ramp capacity in 2026 and in 2027? And how should we think about the differentiation of products that you have for Singapore versus the Taiwan capacities for 22- and 28-nanometer? And then with that, how should we forecast the depreciation in 2026 and 2027? Jason Wang: Well, first of all, for the year of 2026, the capacity increase will be around 1.2% year-over-year for us. And for our Singapore facility, the expansion will start in the second half of 2026. And with capacity deployment ramp from second half of 2026 will continue into the 2027. In terms of the node available in our Singapore facility, it's our strategy that we have a geographically diverse manufacturing booking between Taiwan, Singapore, Japan, U.S. and from a technology, no coverage standpoint, we would like to coverage most of the nodes. So the customer has a benefit of passing different sets of forecast. Chi-Tung Liu: As for the depreciation forecast, we are looking for some like low teen annual increase in the full year depreciation expenses. As for next year, we don't have the exact number here, but it's very likely to be the similar amount for 2026. So in a way, we will see the depreciation curve to peak either this year or next year with a very similar numbers. Operator: Next one, Haas Liu, Bank of America. Haas Liu: Congrats on the results. I would actually like to follow-up on the pricing. If we look at the like-for-like pricing environment, based on your current mid- to high 70 percentage of the utilization, if we strip out any of the consideration of the product mix improvement, are you able to improve or just to pass on your higher manufacturing costs or material costs to your customers at this stage? Or you still receive a meaningful pushback from your customers? Jason Wang: Well, I mean, the pricing discussion is always ongoing. The overall pricing strategy remains consistent, as I mentioned earlier. In 2026, we do see some market dynamic changes, so forth. Certain customers we do have some adjusted pricing upward. And so -- and for a certain customer, we still have some of the pricing -- I mean, the onetime pricing adjustment at the beginning of the year to support their market share expansion, as well as the competitiveness. So net-net, within the environment more favorable now in 2026. Haas Liu: Okay. Yes. So, when you talk about you are supporting your customers to gain market share by strengthening their cost structure. Do you mean you are actually adjusting down your pricing for those customers? Or is it actually up for this year? Jason Wang: We have a mix of that. For certain customers, we have adjusted pricing upward. And for certain customers, we will apply the onetime price adjustment downward, yes. Haas Liu: Okay. Got it. And then just on the near term, a couple of your Fabless customers recently talked about earlier and also stronger inventory restocking because of the memory price hike. I was just wondering what impacts your first quarter outlook here, if your customers are seeing stronger inventory pulling in the traditional low season. Why is your shipment for first quarter is still relatively flat? And then, what's your puts and takes for the first quarter overall business outlook? Just wondering whether -- which part of the business is actually relatively stronger and weak? Jason Wang: For Q1, by segment, we are actually in line with our addressable market seasonality. We didn't see a significant changes due to the inventory restocking. But if you're looking into by applications, we expect the revenue contribution from consumer segment to increase driven by the WiFi and DTV and set-up box, while the revenue from the communication and automotive will decline due to a softer demand of ISP and DDI products. Haas Liu: Okay. That's pretty clear. And then since you just mentioned about seasonality, are you expecting this year's seasonality to look pretty similar to the previous few years that first quarter could be relatively light and second quarter and third quarter, you will be able to see a relative strength into the year? Jason Wang: I can have -- probably provide you with this. If we look at the whole year, with the new project of a multiple specialty technology across the embedded high-voltage, non-volatile memory, power management, IC, RF SOI, it supports the end markets in communication, consumer, automotive and AI servers which will ramp in second half 2026. So, we're more looking at this year that our second half will outperform the first year -- first half, I'm sorry, the second half will be better than the first half. So that may be the deviate from the traditional seasonality. But as far as for us, we think the overall shipment for the year will be a growth year and as well as second half will be better than the first half. Haas Liu: Okay. Yes. And last question before I jump back in the queue is that, just based on the comment you had just now, what is the underlying market unit demand assumption you have right now? Is it smartphone -- is it the overall smartphone market will actually grow or decline based on your current base case scenario that second half will be better? Or it is actually already factoring a relatively more conservative expectation that smartphone TV, PC, this kind of consumer markets will actually see a unit decline? Jason Wang: Always with the current forecast from our customers. I mean, we do see gains on product segments, all applications. We do see some share gains on those applications. So right now, the forecast does show us that's more of a share gain in the market -- end market demand associated. Operator: Next one, Felix Pan, KGI. Junhong Pan: I just have a couple of questions about the future growth driver, particularly in the remarks, you mentioned about the advanced packaging and silicon photonics. So my first question will be besides the Interposer, what else we might have, some engagement for advanced packaging? And for Interposer, what's the capacity expansion plan for 2026? And my second question will be the silicon photonics, particularly in the Singapore fab, a lot of rumor about your potential customer. Is there any color, any client engagement or any contribution can generate from this segment? Any color will be grateful. Thanks. Jason Wang: Okay. A big question. So, let me see if I can cover -- cover that. And well, if I look back, I mean, I understand you asked for 2026. But let me look back this. We have delivered a very solid 2025 performance with a 12.3% shipment growth and 5.3% revenue growth, which outperformed our addressable market. This result is supported by our differentiated 22-nanometer technology and other specialty offering across both 12-inch and 8-inch amid a world-class market, a broad-based market demand recovery. And building on the 2025, we do view 2026 as a year of both continuity and evolution. We believe the UMC will once again taking shares and outperform its addressable market, and we will also see several positive inflation. First of all, as our guidance suggests, we are seeing a more favorable pricing environment. This will result of tighter supply globally as well as our differentiated technology and geographical footprint, which will drive our growth for the next few years. We are on track with our 12-nanometer cooperation with Intel, which should start see tape-out in 2027. Now that's the existing one. And your question about silicon photonics and advanced packaging. Secondly, we see 2026 as a pivotal year for those high performance, high potential opportunities such like the silicon photonics and advanced packaging. And we are making those deliberate choice, working with INEX to invest and scale them into a significant driver for our future. If you ask specifically about the advanced packaging. And there are two distinct opportunities for advanced packaging. One, we call enablers, the other we call 10 extenders. Major to explain this. I know it's long, but bear with me. So the fourth enabler, we are seeing the 2.5D and 3D packaging as well as the chiplet move well beyond just the data center and ultra high-end chip and start to spread across the broader market. Over time, we expect that advanced packaging to be adopted even on mature nodes. A good example is RF SOI. We have mentioned many times where we're already in production. In addition to the RF SOI, we are also exploring other applications with leading partners and believe we are at least 2 to 3 years ahead of our competition. What this really means for customers is better power efficiency, small form factor, and differentiated products. And for UMC, it is a strategic win-win. We believe our leadership in advanced packaging will enable us to capture more shares, sustain our higher ASC and drive better margin in many of our already established business in the long run. On the 10 extenders, we also believe that advanced packaging will help UMC address new opportunities. For example, customers are coming to us for AI-related applications. This is not necessarily just the XPU related, but we are adding value by stacking memory with the logic, adding DTC to the stack or selling the discrete DTC. We are also working with our partners to enable a total solution. Meanwhile, we are working with more than 10 customers in advanced packaging currently and expand more than 20 new tape-outs in 2026. We foresee revenue in 2027 will be a significant year for us. And the capacity question you have that capacity plan will be aligned with the customer ramp plan and market outlook. You also asked about silicon photonics. For silicon photonics, we are developing solutions, which includes ASIC, OIO, OCS, and CPO. Our collaboration with INEX allow us to deliver industry standard PDK to our customers in 2027. In addition to platform preparation, we also work with the customer on captive technology of 12-inch PIC aiming for possible product, which is expected to ramp this year. We will also combine our advanced packaging know-how with the silicon photonics as many of the applications require the integration and different substrates, process, technology and materials. Looking ahead to achieve 1.6T bandwidth and beyond, we're working with both customers and vendors for the test finding on heterogeneous material such as the TFLM. Those technologies could also be used in additional applications such as quantum computing. Again, we hope to integrate the new material the advanced packaging technology as well. So those are all integrated altogether. That's why I gave you a bit of a longer answer. I hope that explains it. Junhong Pan: Yes. Okay. But just -- let me just a quick follow up and rephrase my question. So for silicon photonics, what's the earliest timetable we can see the revenue contribution, like most likely? Jason Wang: For the 12-inch PIC, for the pluggable product, we'll be expecting to ramp this year. Junhong Pan: Okay. And about the -- because as I know about the Interposer, currently is the -- Interposer is also the bottleneck for our partner to expand their capacity. So, is there any color we can give -- how much capacity growth for the Interposer, like how much year-on-year growth or something like that? Jason Wang: Well, right now, the capacity planning will be aligned with the customer for the 2027 ramp. So, we will probably provide you some clarity when that comes. Right now, in 2026, we will focus on the tape-out. Operator: Next one, Gokul Hariharan, JPMorgan. Gokul Hariharan: Could you go a little bit deeper into that advanced packaging comment that you made? What is the involvement level of UMC in some of these advanced packaging solutions? Are you doing full stack? Or is it basically like previously where you were largely focused on the Interposer side of the equation? And in terms of the tape-outs that you have, what are the nature of these tape-outs? Are these mostly data center ASIC-related products? Or is this a much wider array of products other than just data center ASIC? Jason Wang: Sure. Well, first of all, we have reported in our advanced packaging space. We have building up some of the capability from wafer-to-wafer stacking and TSC as well as Interposer, the 2.5D and the many different capabilities. And then the way we see it, like I explained, for the enabler is we can apply those to many of the current products that we currently serve. And then -- and one example I mentioned is the RF SOI. So we have wafer-to-wafer hybrid bonding with the RF SOI solution for the mobile space already. And then, some of the capability can be built for the DTC for the stacking as well as some of the customers looking at discrete DTC already. And we are combining some of the capability into segments, the logic and the memory. Of course, we do not provide memory ourselves. So the customer will have to provide memory wafer to us. And so then we can provide wafer-to-wafer hybrid bonding on those. So on one hand, the way we see it is advanced packing is a capability per se, and it implies to the product and then we call it enabler and also expander. And the -- meanwhile, the product coverage is all the way from the mobile space, power management discussion, the AI-related -- AI-related product and also for the BCD application as well. So they were -- it's our belief is for a better reason or for the higher performance reason, and many different applications will start adapting the advanced packaging. So we think this is going to be a broad success on the advanced packaging space. Gokul Hariharan: Got it. And any plans to further expand your Interposer capacity? I think we had expanded, I think up to 6,000 and then kind of stopped it there. Now some of that demand seems to be kind of coming back for some of -- one of your customers in China. So, is there any plans to expand the capacity further? Jason Wang: There are discussions around that. Right now, if you look at the technology itself, we have some common tools in place already, which that we can leverage of our 40-nanometer capacity, of our 65-nanometer capacity. From those common tool space, we're already allocating to this area. Now for the unique tools, then we will put in the plan for the future expansion and for the customer ramp profile. And we believe that will probably happen in 2027. Gokul Hariharan: Got it. Understood. That's clear. Another question I had is on the -- just your expectations for the communication, consumer segment which is north of 70% of revenue, given all these concerns about smartphone, PC. How are you budgeting for this? Are your customers telling you that they are really concerned about this memory cost inflation? Or right now, you still don't really hear that from the customers that that's going to be a big issue from a unit perspective going through the year? Jason Wang: Well, we're also cautious about that topic. As of today, we have not observed any demand impact on our customers' forecast for the year, despite the recent surge in that price. And our technology predominantly supported customers addressing the higher end of the market segment, where the demand tends to be more resilient in the past and in the period of memory tightness. So, because the supply usually typically prioritize in such high-end higher-value device. While we remain attentive to the potential impact on the memory market and our current assessment is that any potential headwinds are probably manageable, and we will continue monitoring the situation properly with our customers together. Gokul Hariharan: Got it. My last question is on the geographic split of revenues. I think, could you talk a little bit about the Intel 12-nanometer progress? And any color on how you will be booking revenues or profits from this partnership given the fabless, Intel fab, while you are essentially the provider of customers and some degree of IP as well into it? And secondly, on the Xiamen's fab, what's the strategy for the Xiamen's fab medium to long term, given many of your semiconductor peers in Taiwan have kind of progressively exited capacity in Mainland China? Jason Wang: Well, for the 12-nanometer project with Intel, overall, the 12-nanometer cooperation project with Intel continues to advance smoothly. We remain on schedule to deliver the PDK and associated IP to customer in 2026. Furthermore, we anticipate the product tape-out will commence in 2027, making the significant step towards to commercialized deployment and future revenue growth. Right now, UMC and Intel are working closely to ensure successful tape-outs and an efficient ramp up for the mass production. As the project advance, it is expected to further strengthen USD position in the U.S., right, for customer as well for us. Because the geo diversification manufacturing. Right now, the application on the 12-nanometer cooperation, including products on digital TV, WiFi connectivity and high-speed interface products. In terms of the business model, and it's probably not available for us to comment. But it is a win-win strategy that we see and will be very synergetic for both parties as well as for our customers. And we have very high confidence this will be a win-win model. Gokul Hariharan: Okay. And any thoughts for the Xiamen capacity? Jason Wang: Yes. For the Xiamen, I kind of touched that earlier as well. I look at Xiamen, not just Xiamen itself, our core part of our competitive advantage is our geographically diverse manufacturing footprint. And the Xiamen play one of the important space for us and particularly for the local customer. So -- and at this point, the fab is actually at a full capacity. We are running at a full utilization as well. And we see -- we continue seeing many different engagements coming to this and we will across regionally optimize it from the customer engagement and product loading standpoint. Gokul Hariharan: Okay. Just one more on blended ASP. I think, Jason, you mentioned that the ASP environment is more favorable this year. But overall utilization is still in the mid-70s as of Q1, right? So do you expect that this year, we could see a scenario that we could see blended ASPs moving up meaningfully like 5% to 10% or something like that, like we have had in the past or that requires a much higher level of utilization that is probably not happening this year, given your low single-digit foundry growth expectation? Jason Wang: Sure. I mean, the high utilization is one of the important factors, but that's not the only factor. We want to make sure the pricing strategy is enabled not only ourselves and our customers to be competitive as well. So -- but we do see the pricing environment is getting more favorable to foundry because of the loading reason. And so -- but the magnitude of that, we probably have to continue to manage it. And if we have a clarity, we will share that with you. Operator: Next one Alex Chang, BNP. Alex Chang: I just have a very quick one. I just saw the company announced that they started the mass production of SuperFlash Generation 4. So just wonder how much revenue contribution from the non-volatile memory business in the past quarter or maybe past year? And also how much revenue is contributed by the power management ICs for the server-related applications? Jason Wang: I mean, we don't have a breakdown to provide. And the way that we break it down is based on specialty technology that includes the high-voltage and non-volatile memory and the PCB space. Right now, the specialty revenue representing about 50% of our overall revenue. And I can let you know the high voltage is about 30% of that. And the rest of that, I would say, is a combination of the non-volatile memory as well as the DCB. Operator: Next one is Laura Chen from Citi. Chia Yi Chen: I just want to follow up on the deterioration rate and also the gross margin outlook. Jason, you mentioned that the pricing environment seems to be improving more favorable. And together with firm shipment and better product mix as well as the utilization rate, so how should we think about the gross margin trend? You guided that will be high 20% for Q1. But with these favorable factors, how should we think about the margins throughout the year? That's my first question. Chi-Tung Liu: Yes. Gross margin can be highly dependent upon utilization rate, ASP, product mix, depreciation and foreign exchange rate. So there's a lot of variables. So beyond this quarter, it's difficult for us to give a firm outlook. For the first quarter guidance, which is high 20s, is mainly due to the higher cost, especially the higher depreciation expenses. As I mentioned, it will grow by low teens in the full year of 2026. As for 2026, we will continue to cope with higher depreciation expenses as well as the other inflationary pressure for our production, raw material and other costs. To mitigate and cope with the headwinds, we will continue with our cost reduction efforts and also all the activities to improve our productivity and drive operation efficiency. And these measures hopefully will help UMC to deliver a stable EBITDA margin and ensure our long-term financial resilience to remain intact. As a matter of fact, our 2025 EBITDA margin is actually a good improvement compared to that of 2024. Chia Yi Chen: Yes, sure. And also, I think for the advanced packaging and as well as the silicon photonics is one of the key things that UMC may have a great opportunity. We know that UMC has already working on advanced packaging, previously on Interposer, probably now we'll see more various different design. So could you share with us what's about the revenue contribution of your advanced packaging right now? And how would that look like in 2, 3 years? Jason Wang: Currently, the Interposer was exposed to very limited customer base and also narrow application. While we have engaged with more than 10 customers and expecting more than 20 new tape-outs in 2026, we do foresee that revenue of packaging -- advanced packaging growth in 2027 will be significant. Chia Yi Chen: So, significantly means that, could that be like 5%, 10% or higher? Jason Wang: I am expecting more than that. But I mean, if you're referring to the overall revenue contribution, we'll probably give you more guidance later. But if you're looking at the packaging itself, it's going to be significantly larger than what we're shipping today. Operator: Next, we'll have Bruce Lu, Goldman Sachs for questions. Zheng Lu: I want to go a little bit deeper for the silicon photonics. I mean, as you might know that your peers like GlobalFoundries, Taiwan Semi, pretty vocal about that. Can you tell us how big do you think the addressable market for silicon photonics for you guys in 2 years? And how do you win market? What is the competitive advantage for you in this business? I mean, other than working with INEX? Jason Wang: Well, I mean, the Singapore facility is not going to only serving the silicon photonics. Singapore facility is one of our important manufacturing site, they serve our worldwide customers, all different applications. And so it's part of our geographical diverse manufacturing strategy. So... Zheng Lu: No, no, no, my question is for silicon photonics, our business strategy? Jason Wang: The silicon photonics strategy in Singapore. Okay. Zheng Lu: No, no, no, no. I'm sorry, let me rephrase my question. So the growth driver for UMC, one of it is the CPO, I'm assuming having more business in the silicon photonics. In -- for your peers like GlobalFoundries or Taiwan Semi, they are pretty vocal about the silicon photonics and have meaningful revenue contribution already. For UMC perspective, what is your competitive advantage for UMC to win this business? And how much business you can win or how big is the addressable market for you in 2 years? Jason Wang: Got it. So, for the silicon photonics, our strategy is simple. Our cooperation with INEX allowed us to deliver the industry standard PDK to our customer in 2027, particularly in 12-inch. So many of our competitors is today at 8-inch and we are focused on this in 12-inch. And as we believe the 12-inch will have that advantage. And right now, we already have certain products that have proven that performance is a better and a pluggable product, and which we will expect to ramp this year. And meanwhile, we're also combining the silicon photonics with our advanced packaging know-how, so for many different type of applications then we can integrate that. So by doing that, we think we will be even providing even more value from advanced packaging combining with silicon photonics at 12-inch. I think that's where we believe we are competitive. Zheng Lu: But that's mostly for plug-in, right? Because if you don't have the EIC, the pure CPO product might not be your key growth driver? Jason Wang: You're correct. We're not looking at a completely CPO package. We're looking at particularly in the PIC and OIO and OCS. Zheng Lu: I see. I understand. That's very clear. Next one is -- and we see that the progress for the Intel project for 12 nanometers is pretty smooth. I just want to know what is the next step? I mean, when we can see a further collaboration in 10, 7 nanometers and beyond? I mean, obviously, whatever you said, the advantage at 12-inch, you can also use the same argument for 7-nanometer. What's stopping you to do that? Jason Wang: Well, you're also right on that. And our focus right now is on delivering the 12-nanometer platform to customers. In the future, should it make sense for both UMC and Intel as well as our customers, we will surely consider expanding our collaboration to other derivatives as well as the technologies. Yes. Zheng Lu: But what is stopping now? What is the show stopper now? Jason Wang: It's not -- I won't call it stopping. I think the focus is a focus on 12-nanometer. We have to deliver a 12-nanometer today, and make sure that we deliver that program. We execute it well. And I think anything that makes sense on that, unlike you said, I think there will be a discussion, yes. Zheng Lu: I see. Because we already assumed that you can deliver something in '27. So given that working for 7 nanometers, maybe you need 2, 3 years, we want to see the project kickoff as soon as possible. Operator: [Operator Instructions] Now we'll have our last question, [ Sappho ] Neuberger Berman. Unknown Analyst: It's been a while. And congrats on the progress you've made throughout this couple of years. I just have a few questions. The first one is, on the market dynamics, I think previously, Sunny has asked about the TSMC is shrinking or defocusing on this mature foundry process. And it looks like not just TSMC, but also the other foundries are -- seems to be doing some leading-edge logic foundry seems to be doing the same thing. And also Powerchip recently just reached agreement with Micron as well as Intel fab, which means they're trying to streamline and re-org some of the foundry process, too. So it seems like there's a lot of supply is kind of being taken away because of the rolling out effects from the AI and crowding out some of these older nodes. On the supply side, it seems to be that actually decreasing. And on the demand side, if you look at, I think, TI just to report overnight. I think it seems like that there's been more obvious recovery on the analog MCU space. So on demand side, that's also improving. But the supply side, that's actually decreasing. So it looks like supply-demand dynamics is moving to a more favorable situation. I think that's the point why you were mentioning the pricing dynamics favorable this year. So I'm just curious about your view, if we try to compare the current like the mature foundries dynamic situation right now versus, I mean, back in 2021 when there is a severe shortage back then. How would you compare this time around versus last cycle? Jason Wang: I mean, that's a really good question. I mean, we saw on the market movement, the changes. And we also deep dive on this demand and supply outlook. And we think whether this is short term or long term. If you look at the driver behind us, we see -- you mentioned this is truly more of the AI phenomenon ripple effect. And so we see that AI remains to be very strong, at least in the foreseeable future. And I think this momentum will continue driving the overall demand. And meanwhile, in many of this -- the capability -- AI capability we portfoliating to even the other end market devices in the Edge AI as well. So as in this will continue. And from an economic standpoint, building any of the mature facility is not justifiable. So we do think that this could last longer compared to the over time. And I think the situation could be more of a structure going forward. And -- but again, this is at a very early stage of this market movement. So we'll pay attention to it, and we'll continue monitoring the progress. Meanwhile, like I said earlier, I think it is more a favorable pricing environment. But more importantly is we need to prepare ourselves to cope with this market dynamic. So we are welcoming all the opportunity that for us to engage in supporting the customer. And -- but the important focus today is we have to get ourselves ready to capture those opportunities. Unknown Analyst: Got it. Another question I have is your earlier comments on the pricing. I think the -- you offer some of the annual -- maybe some discount to some of our strategic clients for their share again, but also net-net wise, also seems to be pricing is going up for a majority of the clients. So net-net, it's going to still be the -- ASP still be positive. But I'm just curious about, for those clients that you're offering some discount at the beginning of the year, when it down the road is, if the next few months or quarter situation has become tighter -- and would you be able to reprice with these customers? Jason Wang: Those discussions will be ongoing. We're always working with our customers to reflect the market dynamics as well as the cost increases. So I'm sure, and I believe this conversation will surely happen. It happened in the past, it will happen now and will happen in the future. So the pricing discussion will continue. And I think customers understand that. And we just have to continue monitoring the market dynamic and maintain our competitiveness on both the customer and ourselves. Unknown Analyst: Yes. Well, a thought on that because of some of the pricing that started to affect it on the January 1 this year, this was actually negotiated already in fourth quarter last year, right? Jason Wang: That's -- some alignment on that on both volume and the pricing. So if volume has changed, of course, that's a different topic. So, there are some volume dynamic in that as well. Unknown Analyst: Yes. My question is actually is that because a lot of the pricing that's effective on January 1, beginning of the year, it was actually communicated 1 or 2 months ago before that, toward the end of last year when the time that the supply demand dynamics haven't been really that tight as compared to some of the changes that happened in the just past couple of weeks. Am I getting that right? Jason Wang: Yes, you're right. Yes. But those also is on certain conditions. So given the condition has changed, the some of the pricing are dynamic. Unknown Analyst: Yes. Yes. Exactly, that is what I'm trying to discuss with you. Because we also saw a lot of the other different components, different subsectors within the tech or semi supply chain that such as memory, I think the pricing were still down in July, August, but all of a sudden, September prices going up. So I'm just curious about that because when you negotiate some of this discount months ago, the supply-demand dynamics was not the same as today. So things remain fluid, dynamic and it still continue to be flexible and it's going to be dynamic and open for changes down the road, if things are moving more favorably. Jason Wang: I think the core of the pricing strategy is that it has to be consistent, and it has to anchor with the value that we deliver and also the customers' competitiveness. That is the core. Then usually, that is how we're centering about the pricing discussion. So that core is not compromised. Now if the condition has changed, yes, they always have some flexibility to it. So, one is called pricing strategy and position, another is core pricing negotiation. So there will be some flexibility, yes. Unknown Analyst: Yes. And the condition has started to change now. Jason Wang: Yes. So we do think the pricing discussion will be more favorable now, yes. Operator: Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. I'll turn things over to UMC Head of IR for closing remarks. Thank you. Jinhong Lin: Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact ir@umc.com. Have a good day. Operator: Thank you. And ladies and gentlemen, that concludes our conference for fourth quarter 2025. Thank you for your participation in UMC's conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you, again. Goodbye.
Operator: Good morning, everyone, and welcome to the National Bank Holdings Corporation 2025 Fourth Quarter Earnings Call. My name is Rachel, and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now turn the call over to Emily Gooden, Chief Accounting Officer and Director of Investor Relations. Emily Gooden: Thank you, Rachel, and good morning. We will begin today's call with prepared remarks, followed by a question-and-answer session. I would like to remind you that this conference call will contain forward-looking statements, including, but not limited to, statements regarding the company's strategy, loans, deposits, capital, net interest income, noninterest income, margins, allowance, taxes and noninterest expense. Actual results could differ materially from those discussed today. These forward-looking statements are subject to risks, uncertainties and other factors which are disclosed in more detail in the company's most recent filings with the U.S. Securities and Exchange Commission. These statements speak only as of the date of this call, and National Bank Holdings Corporation undertakes no obligation to update or revise these statements. In addition, the call today will reference certain non-GAAP measures which National Bank Holdings Corporation believes provides useful information for investors. Reconciliations of these non-GAAP financial measures to the GAAP measures are provided in the news release posted on the Investor Relations section of www.nationalbankholdings.com. It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman and CEO, Mr. Tim Laney. Tim Laney: Well, thank you, Emily. Good morning, and thank you for joining us as we discuss National Bank Holdings' Fourth Quarter and Full Year 2025 financial performance. I'm joined by John Steinmetz, our Executive Vice Chair and Executive Managing Director of Strategic Initiatives; our President, Aldis Birkans; John Finn, our Chief Enterprise Technology Officer; and of course, our Chief Financial Officer, Nicole Van Denabeele. I'll begin this morning by extending a very warm welcome to our new Vista teammates who joined the NBH family earlier this month. Turning to the fourth quarter and full year 2025. While the fourth quarter was noisy, we ended the year having grown tangible book per share by 10%, and we grew our CET1 capital ratio to 14.89%. I'm pleased with our swift closure of the Vista Bank acquisition and believe our combined organization will produce powerful results, results that Nicole will guide us through when she presents. It was a noisy fourth quarter with onetime acquisition costs, the strategic sale of securities and a move to put any lingering problem loans behind us. Our goal was to enter 2026 with a clean slate and with a focus on profitable growth. I'll touch on 2UniFi later in the call, but share for now that we're pleased to have completed Phase 1 of the 2UniFi build. And we're joined by John Finn, who co-leads 2UniFi, and he'll cover our progress in detail in just a bit. Before I hand off to Nicole, I also want to complement our bankers on their deposit and loan pricing discipline, which led us to close out the year with a net interest income margin of 3.97%. I believe we are set up for a beautiful 2026. Nicole? Nicole Van Denabeele: Thank you, Tim, and good morning. Today, I'll review the fourth quarter and full year 2025 financial highlights and provide guidance for 2026. Our guidance reflects the combined organization, and consistent with past practice, excludes the impact of any future Fed rate decisions. In 2025, we executed on key strategic priorities. We announced and have now closed the Vista acquisition within 4 months, grew tangible book value by 10% and delivered a full year net interest margin of 3.94%. Fourth quarter's results were impacted by elevated provision expense and onetime items, including $4.1 million in after-tax acquisition costs and a $2.6 million after-tax loss on the strategic sale of investment securities to remain below $10 billion in assets at year-end. As a reminder, this action will preserve approximately $10 million in interchange income for 1 more year. Excluding onetime items, fourth quarter net income totaled $22.7 million or $0.60 of earnings per diluted share. As Tim shared, we addressed the specific set of problem loans during the quarter. This resulted in $9.1 million of provision expense related to charge-offs and specific reserves. For the full year 2025 on an adjusted basis, net income totaled $117.6 million or $3.06 of earnings per diluted share. Return on tangible assets was 1.3%, and return on tangible common equity was 12.2%. During 2025, we maintained a top quartile full year net interest margin of 3.94%, generated $1.6 billion of new loan originations, executed share buybacks and added to our robust capital base. We are pleased to have added a number of experienced bankers to our team through the Vista acquisition. We kick off the year with a combined loan portfolio of approximately $9.4 billion and are projecting 2026 loan growth to be approximately 10%. At acquisition closing, we added approximately $2.4 billion of earning assets from Vista to our balance sheet. As we optimize the total cash and investment portfolio mix, we project the combined bank to generate earning asset growth of 7% to 10% during 2026. Our goal is to hold approximately 15% of total assets in cash and investments and maintain a loan-to-deposit ratio of approximately 90%. Fully taxable equivalent net interest margin for the fourth quarter was 3.89% and was impacted by variable rate loans repricing well ahead of Fed rate cuts. However, we cut deposit rates in tandem with the Fed, creating a lag effect in our cost of deposits. Most of this has now worked its way through our balance sheet, and December's margin returned to a strong 3.97%. Similarly, Vista's December margin was 4%. As a result, we project 2026 fully taxable equivalent net interest margin to remain right around 4%, excluding the impact of future rate moves. Turning to credit. Our nonperforming asset ratio improved 11 basis points during 2025 to end the year at a low 36 basis points of total loans. The criticized loan ratio improved 73 basis points during the year. Net charge-offs were 34 basis points of loans for the year, and the allowance to total loans ratio ended the year at 1.18%, consistent with the prior quarter. We continue to hold $16.8 million of marks against our acquired loan portfolio as of December 31, providing an additional 23 basis points of loan loss coverage if applied across the NBH legacy loan book. We will be adding marks from Vista's loans during the first quarter of this year. We project the provision expense in 2026 to cover net charge-offs and new loan growth at a rate consistent with the current 1.2% allowance to total loans ratio. Fourth quarter noninterest income was $14.4 million and included $3.3 million in pretax securities losses. For 2026, we project total noninterest income to be in the range of $75 million to $80 million. Fourth quarter noninterest expense totaled $72.4 million, including $5.4 million of acquisition costs. Also included in the fourth quarter's expense were investments made in bankers in our resort markets. Full year noninterest expense was $265 million, including $7.2 million in acquisition costs and $22 million related to 2UniFi. For 2026, we project noninterest expense of $320 million to $330 million, reflecting a full year of Vista expenses. We project expenses during the first half of the year in the range of $165 million to $170 million. This means lower expenses in the back half of the year, reflecting cost savings from operational efficiencies generated by the combined organization following the completion of system integration. During 2026, we expect to incur onetime expenses associated with the acquisition and rebranding. In addition, we may recognize CECL day 1 provision expense depending on our final purchase accounting approach. As Tim shared, we are pleased to have completed the initial phase of 2UniFi in 2025 with the launch of our fully automated SBA loan offering last quarter. With the core technology infrastructure now in place, we expect a substantial reduction in capital expenditures for 2UniFi in 2026. This shift positions us to begin realizing operating leverage from the platform. For 2026, we expect $2 million to $4 million in 2UniFi revenue contribution, which is included in my fee income guidance. Importantly, we expect to maintain flat year-over-year 2UniFi expense, even with 2026 reflecting a full year of capitalized asset depreciation, which is approximately half of 2UniFi's 2026 expense. This means significantly lower cash spend in 2026. Turning to income taxes. The 2025 effective tax rate was 18%. With the integration of Vista and the resulting shift in the mix of taxable versus nontaxable income, we expect our effective tax rate to be approximately 20% for 2026. Capital levels remain strong, and we continue to grow our excess capital. We ended the year with a TCE ratio of 11%, Tier 1 leverage ratio of 11.6% and a strong common equity Tier 1 ratio of 14.9%. We project a 2026 share count of 45.8 million shares, reflecting the Vista-related share issuance. On a final note, bringing this all together, we believe we are well positioned to deliver earnings in excess of $1 per share in the fourth quarter of 2026, which sets the stage for full year earnings exceeding $4 per share in 2027. With that, I'll turn the call over to John Steinmetz. John Steinmetz: Thank you, Nicole, and good morning. On behalf of the Vista team, our state and our NBH family, I am pleased to have successfully merged our organization with National Bank Holdings Corporation and honored to be joining you on today's call. As the newest member of National Bank Holdings, I am fired up about the future of our combined companies. We have partnered with a dynamic, high-performing team and platform, and I believe there is a tremendous potential for our combined organization. It hasn't taken long to have my instincts confirmed that our companies are ideal partners for our shareholders and team members alike. With its strong leadership, consistent discipline around credit, and a vision to create one of the most respected and profitable financial institutions in the country, NBH has built a platform that is uniquely positions our company for strong continued organic and strategic growth. As a part of the NBH family, we are excited to have the opportunity to offer expanded services, such as wealth management and trust services and enhanced treasury management offering, added mortgage products, and a bigger balance sheet to support the growth of our valued clients. This broader product set will strengthen our relationships, deepen wallet share and enable our exceptional bankers company-wide to better serve our clients through their financial life cycle. We are also honored that Tim and the Board made the decision to adopt the Vista name as the go-forward brand in our diversified markets. It provides our combined teams a unified front and is a name that works well in both English and Spanish, further enforcing our commitment to taking the long view of better serving our clients in the future. With $2.7 trillion GDP, Texas is one of the fastest-growing economies, larger than most countries and consistently outperforming national averages. Texas' diversified high-growth economy provides unlimited opportunities for our combined organizations. That said, I'm also equally excited about the growth opportunities in the various resort markets we serve currently, such as Jackson Hole, Aspen, Vail, Telluride, and Palm Beach, Florida. Since the transaction, we have already added 3 presidents with over 45 years combined experience at their previous banks prior to joining NBH. These communities, once seen as primarily secondary home destinations, are now primary residents for wealthy baby boomers. This shift presents an opportunity to offer our white glove concierge private client and wealth management services, further setting our bank apart in a very crowded industry. Additionally, I am pleased to share with you that we are already seeing early momentum in our combined pipeline, fueled by the energy of our seasoned team members and enhanced capabilities, creating a clear path to value creation through relationship-driven profits. Equally significant is the cultural fit between our two organizations. Over the past several months, the Vista Bank and NBH teams have united around a shared velocity, putting people first, a focus on the value of teamwork and meritocracy, all while delivering exceptional results and building long-term relationships. These value drive results and further increase shareholder value. The legacy Vista team has been together for nearly 2 decades, and I -- and my commitment remains unwavering: To finance the American dream for those entrepreneurs brave enough to pursue it. We invest in our communities, and we compete to win and while striving to create the best place for our associates to call work. Having deep respect for Tim, Aldis and the entire NBH team have built, we couldn't be prouder to join the NBH family. I truly believe the best is yet to come. All that said, we are confident that our contributions will enhance NBH's growth profile, strengthen its market presence and further expand shareholder value. I'll close my remarks by thanking you for your trust and support. And now I'll hand off the call to my friend, Aldis. Aldis Birkans: All right. Thanks, John, and good morning. I'll begin by highlighting what was a strong loan production quarter. We originated $591 million in total loans, the second highest loan production quarter in our company's history. I believe that performance is a direct reflection of our franchise strength and capability of our bankers. What I'm most proud of is the composition of that production. $429 million of that came from commercial loan originations, a new record for us. This drove our commercial loan portfolio growth to nearly 8% annualized. This is high-quality, relationship-driven business that proves we are winning in our core markets. During the fourth quarter, we continued to see pressure on our commercial real estate loan balances. This decline was mostly driven by accelerated payoffs as clients move toward alternative funding like private credit, REITs and life insurance companies. As a result, we improved our nonowner-occupied CRE to capital ratio to a low 127%. And when we factor in the Vista balance sheet, we are starting the year comfortably below the 200% threshold, which gives us meaningful runway for growth moving forward. From a credit perspective, Tim and Nicole have already walked you through the actions we took during the fourth quarter, so I'll just simply add this. My expectation is that our asset quality metrics will continue their positive trends, returning to top quartile performance in 2026. I'm also very pleased to be working alongside John Steinmetz as we expand our footprint in Texas and key resort markets. And together, we expect to deliver our 2026 targets, driven by profitable and prudent growth. When you combine the Vista merger with our planned organic growth across all markets and recognize that we have reached our turning point for 2UniFi, the stage is set for a very compelling 2026. With that, I will turn it back to Tim. Tim Laney: Thank you, Aldis. I'll share a few thoughts on 2UniFi before handing off to John Finn. First, I want to congratulate the 2UniFi team on completing the Phase 1 build. Second, make no mistake. During 2026, there will be an intense focus on new client activation and growing revenue. And finally, our goal is before year-end to have entered into a partnership that will meaningfully reduce NBH's 2UniFi investment run rate. With that said, I'll turn the call over to John Finn. John? John Finn: Thank you, Tim. Today, I'm pleased to share more about the journey of 2UniFi as we unlock the future of small business banking. Last quarter, we reached a significant milestone with the launch of our SBA working capital loan, integrated seamlessly into our platform alongside our innovative business suite deposit account. This achievement is a key moment in Phase 1 of our multiyear strategy. Imagine a world where a small business owner can log in once and see their entire financial landscape, accounts, cash balances and lending options, all in 1 unified view. We are revolutionizing the client experience well beyond traditional online banking, creating a seamless platform that helps a small business owner manage financial products and services across multiple banks and fintechs. With our integrated digital passport, we have transformed the application and onboarding process. Clients can provide their information once and eliminate the need to reenter it for additional products, whether opening an interest-bearing account or applying for a loan. Our innovative passport will ultimately enable business owners to effectively shop for financial services across a broad set of financial service providers. Now that our foundational infrastructure is in place, we are shifting gears from constructing systems to activating services. We're launching with 2 essential capabilities that small business owners need, beginning with a convenient access to SBA working capital loans, as well as an automated nightly suite that earns interest on excess deposits, which is functionality typically reserved for larger mid-market clients. Our custom middleware and microservices architectures enables us to deliver advanced features like real-time event notifications and tailored communications. Clients receive faster decisions with clear and concise updates, saving time and reducing stress for business owners. Our vision has always been clear: To build an integrated and seamless technology platform, not just another digital bank. Operating with a full-service banking charter, our scalable and secure architecture is supported by industry leaders like [ Finxact ], [ Savana ], Visa and [ Marqeta ]. This ensures we have the best tools at our disposal to serve our clients effectively. Leveraging our technology with Snowflake and Microsoft Azure positions us to enable enterprise-grade data insights in upcoming releases. Our data architecture will support AI-driven, customizable data sets, enabling 2UniFi to provide valuable cash flow insights and proactive product recommendations based on clients' activity. This architecture also creates opportunities to develop new insight-based products and analytics-enabled services based on aggregated, anonymized data alongside deeper client analytics. As Tim has shared, we are optimistic about the formation of a partnership in 2026 that will accelerate our distribution and scale. Our full-service banking charter provides the partner with access to a tech forward platform, including the ability to offer FDIC and shared deposit solutions nationwide. As we move forward beyond Phase 1, our investment in 2UniFi will become more targeted with a step down in our capital expenditure run rate as the build phase gives way to more efficient operating profile. Importantly, we're scaling 2UniFi deliberately. We will onboard clients responsibly and optimize our controls, which we believe will translate into quality conversions and more durable relationships over time. We are prioritizing a high-quality onboarding experience with robust fraud mitigation because, as you know, building trust is foundational to long-term value creation. With a more efficient cost profile and a growing set of capabilities, we remain committed to building 2UniFi into a marketplace that we believe will compound value for small business owners and our shareholders alike. I appreciate the opportunity to provide this update on 2UniFi. I will now turn it back to Tim. Tim Laney: All right. Well, thank you, John. We've covered a lot of ground this morning. So Rachel, I'll go ahead and ask you to open up the call for questions. Operator: [Operator Instructions] Our first question comes from Jeff Rulis with D.A. Davidson. Jeff Rulis: Nicole, that was a whirlwind of updates. If I could just rattle through a couple. Just to confirm, you said 10% loan growth in '26 off the combined $9.4 billion balance, a margin for the full year near 4%, earnings over $1 in the fourth quarter and over $4 in '27. Is that right? Nicole Van Denabeele: That is correct. Jeff Rulis: Okay. And on the 2UniFi front, I think you said $2 million to $4 million in revenue this year. What was the cost again for '26? Nicole Van Denabeele: Yes. So that's correct, $2 million to $4 million 2UniFi revenue projection for 2026, and we will be holding 2UniFi expense flat in 2026, consistent with 2025, which was $22 million. Jeff Rulis: Got it. And then it sounds like the partnership developing to sort of reduce those investment costs. I guess the leverage of the model into '27 is a little bit TBD, but I guess the focus is as you scale it up, that's more of a breakeven-type climate in '27. Just -- I know that were -- all this is developing, but trying to get a sense for what the '27 economics look like? Tim Laney: Look, I think what we should share with you is that right now, we are incredibly focused on Phase 1 product activation with clients and driving revenue and really testing the market with those services. Number two, as I shared, we are very focused on working to establish a partnership that frankly could have the effect, amongst other options, of moving this off the NBH financials altogether, where we would remain a meaningful investor as shareholders, but it would be treated in a very different fashion financially. But I'll come back to the first point, which is our focus today is on client activation and scaling this business, and we'll come back to you. It's just too early to come back to you with any kind of definitive targets on '27. Jeff Rulis: Yes. No, that's helpful, Tim. Just the range of options, including moving the -- off the financials of the bank entirely, we'll stay tuned. Maybe the -- just to pivot on to the credit side, the 3 loans that made up the bulk of the net charge-offs. Could you kind of identify the sort of category and why that group? Any systemic -- it sounds as if you expect credit metrics to further improve in '26. Just trying to get a sense for what was charged off. Tim Laney: If you'll recall, at the beginning of '25, we literally were dealing with less than a handful of relationships that had emerged as problems. We really were in the belief that over the course of '25, they would work their way through the judicial process, and we would have them resolved, and that simply wasn't the case. The decision -- we believe a prudent decision was to address these as aggressively as we could in '25 and have a clean runway for '26. We're just not believers in letting problems like this linger. And the Board and I felt like this was the correct and prudent action to take, even though it obviously was painful to take here in the fourth quarter of last year, but it feels good -- very good to put it behind us. Operator: And we will take our next question from Kelly Motta with KBW. Kelly Motta: Maybe to kick it off with growth. I know we talked about 2025 year being -- working through some credits and impacted by some payoffs and refinancings, but it sounds like the outlook for '26 is really strong in part with your Vista partnership that you just brought on. As you look to, I think it was 10% loan growth, can you speak to the drivers of that growth, if that's significantly Texas and other markets where you're seeing opportunities just given the acceleration from what we've seen in the past several quarters? Aldis Birkans: Yes, this is Aldis. I'll kick off, and then I'll have John chime in. But yes, it's a combination of all the markets and certainly, the continuation of the strong production we saw in the fourth quarter. As I mentioned, it was our second highest loan production quarter for NBH stand-alone basis. In our company's history, we did really well on originating commercial loans. If you look at the C&I in the table, that grew north of 10% annualized. So we do see a very good momentum going into this year. And certainly, adding markets like Texas and the expertise and teammates that we are adding through this acquisition is great. And John, maybe you can add on that front as well as touch on the resort markets. John Steinmetz: Sure. Thanks, Aldis. And yes, Kelly, we're really excited about the future growth potential, not only in Texas, but the resort markets, in all the markets, candidly. I'm looking forward to getting to know the team members throughout all of the NBH markets. And we believe in Texas that this platform that was built at NBH provides us not only the balance sheet that we need to continue to grow with our valued clients, but support our exceptional bankers. And to Aldis' point, we also have always believed that NBH has an incredible opportunity in the resort markets. Resort markets that, again, were once seen as second homes, but are now becoming primary residents in places where people want to have their local bank. And I hope at this time next quarter, you'll see some performance-driven metrics and increase shareholder value around that. But the platform that we have at NBH as a team is going to provide -- not only allow us to support the continued 20-plus percent CAGR on deposits and loan growth that we've historically had, but it's also going to allow us to overcome a lot of the lack of fee income which Vista Bank has historically struggled with. Kelly Motta: Got it. That's really helpful. Maybe bouncing to a question on the margin. It was down this quarter a bit more than I had expected. With the loan yields, were there any interest reversals given what you had with credit? And I appreciate the guide in the mid-3.90s too is ex rate cuts, but just -- if you could refresh us on -- clearly, I think there was some initial asset sensitivity, so how we should be thinking through that? Nicole Van Denabeele: Yes. Kelly, this is Nicole. Yes, I'll just reiterate. So our December margin did come in at a strong 3.97%. We have managed, in our view, very well through 75 basis points of rate cuts in 2025. We experienced -- we drove 9 basis points of margin expansion even with those rate cuts this year. There wasn't any interest reversals in the fourth quarter, and the loans that we worked through were already on nonaccrual. But I will just -- just to reiterate, we've done a nice job with our deposit pricing for prior rate cuts. We cut deposit price -- we cut our deposit rates ahead of the Fed. This time, we held and we waited until we knew exactly what the Fed was going to do. And so that did cause that lag and drag effect, but we have overcome that and finished the year with a strong margin of 3.97%. Kelly Motta: Great. Last one, if I could slip in just one more. On the 2UniFi guide, the expense guide that -- flat at $22 million. I just wanted to confirm because you alluded to a potential partnership that could change the economics here, that, that didn't bake in any potential impacts of maybe offloading some of those expenses, one? And then two, with it flat, I imagine getting -- increasing the user base is an important part of driving those revenues higher. And so I'm surprised it's flat. So I guess, if you could kind of speak to how you guys are thinking about that line item, given that we're not really seeing a change from last year? Nicole Van Denabeele: Yes. I appreciate you asking that question. I think it's important to note, we see 2026 as a turning point for 2UniFi. And as I shared, we are seeing operating leverage from 2025 from 2UniFi in 2026. So the revenue guide is an increase from last year. So $2 million to $4 million revenue guide, positive impact from 2025. And then holding expenses flat, it's actually very significant that we're holding expenses flat because we will have a full year of capitalized asset depreciation in 2026. And so that expense flat includes that uptick in depreciation, which is half of the 2026 expenses. And then to your point on the partnership. So no potential -- the partnership really from a financial perspective is all upside, and none of that has been included in our guidance for 2026. Operator: And we will take our next question from Andrew Terrell with Stephens. Andrew Terrell: First one, just to clarify, Nicole. On the margin, was the 3.97% -- was that spot at the end of the year or 3.97% for the full month of December? Nicole Van Denabeele: 3.97% was for the full month of December. Andrew Terrell: Okay. And then do you have the -- it sounds like there was a lag here where assets reprice quite a bit quicker than deposits. Do you have where deposits, either spot or interest-bearing -- I mean, either total or interest-bearing were either in the month of December or on a spot basis at the end of the quarter? Aldis Birkans: Yes. This is Aldis. It was [ 182 ] is the spot deposit cost at the end of December for NBH. But I recall now starting in Q1 or starting now, obviously, we're incorporating all of the Vista deposit base as well. So it will change into Q2. But I think what you're getting at is how spot margin is around 4% if you incorporate all of the benefit from deposit bleed through in December. Andrew Terrell: Yes. Yes. Got it. Okay. If I could ask just around the 2UniFi, specifically the partnership. If I go back to October, Tim, when we talked about on the call, it sounded like you were maybe pretty close on announcing something from a partnership standpoint. It sounds like now, that's still likely but maybe delayed a bit. I guess I'm curious what's kind of causing a delay here or if there is a delay in your mind? Tim Laney: I may have made a mistake in sharing as much as I did at that point candidly. It perhaps even reflected too much optimism, and I could kick myself for that. I believe we were further along in consummating a partnership there. But frankly, when you're involving 2 parties, you can have different needs, expectations on either side that may not come together in the time frame that you expected. So what you need to hear from me today is that we are intensely focused on bringing the right partnership together and moving 2UniFi ahead. And frankly, we are proud to be targeting a $4 run rate in our earnings in '27. But imagine what that looks like if we're pulling those expenses of 2UniFi in all or in part off of our income statement. So we're highly motivated to see something happen there. Andrew Terrell: Yes. Got it. And last for me, was there any -- I appreciate that 2UniFi guide, but was there any revenue in the fourth quarter realized? And then just on the buyback that you guys announced, maybe Tim, if you could speak to kind of the appetite there? Nicole Van Denabeele: Yes. I can touch on the 2UniFi revenue question. So we did have some revenue related to 2UniFi in the fourth quarter, but it wasn't meaningful. And then the second part was the appetite for share buyback. Tim Laney: We have a strong interest in share buybacks. I believe, you know, we literally just announced a $100 million buyback authorization. And we have a -- frankly, we would consider it a priority at this point. Operator: And we will take our next question from Brett Rabatin with Hovde Group. Brett Rabatin: Wanted to -- I joined a little bit late, Tim, but I wanted just to go back to -- you guys have had really strong loan originations, particularly here lately. But again, obviously, the net growth has been limited due to payoffs. Can you talk maybe a little bit about what you've experienced -- or what you experienced during 4Q in terms of payoff activity and how that played out? And then just your confidence for '26, if I heard correct, 10% loan growth. Is there a net and gross assumption there? Or any thoughts on confidence on payoffs diminishing relative to what you experienced the past few quarters in particular? Tim Laney: Aldis did touch on what we were seeing with insurance competition in the private debt market. But let's be candid. All banks -- or most banks would be facing that competition. I'll tell you, there were just a number of situations where the kind of structures that were being put together and the pricing related to those deals just simply did not fit within our risk management framework. And so we're more than willing to let that business move along. But I think the broader context is the whole year, where we entered 2025 with, frankly, a risk-off mindset, having concerns about tariffs, having concerns about where the economy would land. And I would tell you that, that risk off position that we took was somewhat pervasive throughout the year to a point where when it was time to really turn things back on, I'm proud of the team's production, but I would tell you it was being done in a very, very conservative atmosphere. We come into '26 really with the combined forces of form a Vista and NBH. And as we lay out these growth plans that we shared for you, Aldis and John have expressed nothing but very high confidence that we will meet, if not beat them. So with that, I'll open it up first. Maybe you, Aldis, just for more detail on the fourth quarter. But then in terms of growth here in '26, John, Aldis, feel free to jump in on that as well. Aldis Birkans: Yes. Brett, what I would add is, looking ahead in 2026, one thing that is a bit different in addition to what Tim was mentioning in terms of, again, like transportation or trucking is a segment we definitely exited, and that was a headwind. We are where we want to be. So that's not going to be a headwind in 2026. The other thing I'll say is -- and again, this is on NBH's legacy book side, but we have approximately $0.25 billion to almost $300 million of less scheduled maturities this year than it was last year. So that's less of a, call it, headwind return that we have to overcome to again, grow even with the same production results. So John, anything that you'd add on from legacy Vista side? John Steinmetz: Sure. Well, Brett, thanks for the question. And let me say, I'm optimistic and very excited about '26. We have consistently put up a 23% CAGR in loan growth without the balance sheet that NBH provides us. And so we think that this was the perfect partnership. We see tremendous opportunities in these resort markets. But I am very confident and have always believed that the reason people first matters is because the best clients follow the best bankers, and we are committed to continuing to not only augment and support our exceptional team members at Vista and the entire NBH family, but also recruit and retain through the disruption that we see not only today, but throughout Texas. This was a merger of two incredible teams, and I'm incredibly optimistic and expect to win. And with respect to a question that was asked earlier, I believe, by Jeff with D.A. Davidson, I want you all to know that we take great pride in our credit quality. And for, I hope, our credit team that is listening today at Vista -- legacy Vista, I'm still getting used to this -- they know how much pride we take in pricing with credit quality second to none, and I have an extraordinary amount of confidence in Rick, Danny and the credit team at NBH. We did our reverse diligence and examined NBH's because I assure you, they did theirs on us, much like a proctology exam. And I am very proud to be partnering with this excellent credit quality minded organization because I don't think they kick the can down the road, and I'm fired up about '26. Brett Rabatin: That's really helpful. I'm sorry? John Steinmetz: I was just saying as a shareholder and team member. Brett Rabatin: Yes. Okay. That's all really helpful. And I think most investors are going to give you guys credit for the credit situation as being truly one-off. So I don't think anybody is concerned about that. The other question I wanted to ask you, John, was just I think you're kind of known as a recruiter and you got this deal with NBH, but there's been significant disruption in a lot of the markets of the core operating pro forma company. Just wanted to hear if you had offers out or if there was a hiring effort pro forma, or if it's too early, and you're just still trying to combine everything before you maybe go too much on offense with market share opportunities related to disruption? And just any thoughts on how you see that playing out? John Steinmetz: And Brett, I appreciate that question. And I'll tell you, this is my first public earnings call, and Tim told me not to make promises I can't keep, but I'll tell you this. We are actively recruiting, but I'll tell you, we are actively retaining. Like I said, most of our team members have been together for 20 years, and I take so much joy in knowing that we have the best bankers providing these. The opportunities and the inbound calls that we're receiving, not from recruiters, but from bankers at the organizations in Texas and beyond to be a part of a culture that puts their people first is something like I've never seen. And I'm excited for my friends in Texas that announced the deal today, but I can assure you, I am recruiting. And I think we all should be in this incredibly crowded industry, where we all eat out of each other's dog bowl. So I think that '26 could be a really good year if we're willing to dig in. And I'm excited about digging in with the team that we've had in the past, and more importantly, getting out and getting to know the NBH team that I have had a deep level of respect. This merger took place over 5 years of getting to know Tim, Aldis and the entire NBH team. And for -- if you would, Brett, just allow me to thank the team at Vista for their patience as we explore various opportunities. But we think this is a perfect partnership because of the way that they manage credit, much like we do. Operator: Thank you. And I am showing we have no further questions at this time. I will now turn the call back to Mr. Laney for his closing remarks. Tim Laney: I'll just simply say thank you for your time today. And if you have any follow-up questions, do not hesitate to reach out directly. Have a good day. Operator: And this concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available in approximately 24 hours, and the link will be on the company's website on the Investor Relations page. Thank you very much, and have a great day. You may now disconnect.
Alex Ng: Good afternoon, and welcome to Stolt-Nielsen's earnings call for the final quarter of 2025. As always, the earnings release and related materials are available on our website. We'll be recording this session and playback will be available on our website from tomorrow. Included in this presentation are various forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, and we refer you to our latest annual report for further details. I'm Alex Ng, Vice President of Corporate Development and Strategy. Joining me today are Udo Lange, our CEO, and Jens Gruner-Hegge, our CFO. At the end of our presentation, there will be a Q&A session where we'll be taking questions in the room and online. [Operator Instructions] Thank you, and over to you, Udo. Udo Lange: Yes. Thank you so much, Alex, and welcome, everyone, here in London and of course, on the call as well, and thanks for joining us today for our fourth quarter results. The presentation will follow the usual format. I will begin with an overview of the group's results for the quarter and the full year, and then Jens will cover the financials before handing back to me to run through the performance of our divisions, our view of the market outlook and a few concluding remarks. In an unpredictable and challenging market context, I'm really pleased that overall, Stolt-Nielsen has delivered a solid finish to 2025, achieving EBITDA of $186 million for Q4. This completes the year with $776 million in EBITDA, which was at the upper end of our guidance and the second highest EBITDA result achieved in our history. We continue to communicate that Stolt-Nielsen is not a shipping company, but a logistics business. Non-Stolt Tanker operations account for 57% of our asset base and 45% of our EBITDA. We are building our non-tankers earnings base through our capital investment program to continue to grow long-term sustainable cash flow for our shareholders. For this quarter, while Stolt Tankers EBITDA fell 18% from the same quarter last year, the resilience of the other areas of our business resulted in a 13% drop for the group overall. Optimizing value creation from our portfolio is the driver of our M&A activities. In the period, we acquired 100% of Suttons, a U.K.-based ISO tank operator through which we can leverage the scale and flexibility of Stolt Tank Containers' global platform to expand our service offering for our customers. Aligned to our strategy to grow Avenir whilst preserving balance sheet flexibility, we have also very recently announced that we are in discussions to sell down a portion of our equity in Avenir. We also issued a new Norwegian bond. It was one of the tightest spreads for a logistics company achieved in the Norwegian bond market, showing our good access to markets and the credit investors appreciate our portfolio, and the master of the bond is in the room, Julian, thanks for the outstanding work there. You'll remember that last year, we evolved how we communicate our earnings potential, aligning our EBITDA guidance with our business model for the full year. In 2025, we came in towards the top of our range, and we hope you find our transparency in this regard helpful, and we are committed to continuing with this approach. Based on what we know today, we expect that our 2026 EBITDA will be in a range of $600 million to $750 million. Jens will elaborate on this more a bit later, but I wanted to flag a couple of key points here. We are excited about integrating Suttons into our core business. However, there will be some integration costs this year and positive EBITDA impact from the Suttons business is not expected until 2027. This also assumes that the de-consolidation of EMEA is completed in line with our announcement on Monday, and that is, of course, relevant for the like-for-like year-over-year comparison. And we expect to be able to refine this range as the year progresses. Let's now turn the page to review our financial highlights. I'm really pleased with the results achieved in the quarter in a complex market backdrop. Operating revenue was down 4% or $29 million year-on-year, which is predominantly on account of weaker freight rates in Stolt Tankers. EBITDA before the adjustment for fair value came in at $186 million, down $27 million on last year due to lower rates in Stolt Tanker and in Tank Containers, partially offset by performance in our Gas operations. Operating profit was down year-over-year by $35 million, mainly due to the performance in Tankers and Tank Containers, plus additional depreciation from the consolidation of the Hassel Shipping 4 and Avenir. Net profit was also down, driven by the same factors as well as higher interest expenses. Free cash flow was down EUR 38 million year-over-year, driven by higher CapEx, including from the acquisition of Suttons International and new building deposits in our NST joint venture. Net debt-to-EBITDA has increased to 3.12x as a result of the investments we have made over the year. I will talk more about how we are investing for long-term growth a bit more later. Over the page, we look at some of the key drivers of performance. Looking at the snapshot of the whole year, we have delivered a solid performance with the second highest EBITDA result in the company's history despite demand headwinds from a weak global chemical market as well as geopolitical uncertainty and tariffs impacting sentiment. We have remained focused on our strategy and on supporting our businesses to maintain their leading market positions. Stolt Tankers earnings were impacted by ongoing geopolitical uncertainty with lower freight rates weighing on performance whilst volumes remained stable. Over the last 18 months at Stolthaven, we are focused on optimizing for higher-margin business. This strategy has delivered success in certain markets, and we end the year with average utilization for the year up slightly, a positive outcome in a difficult market. Tank Containers have also been navigating a highly competitive market and performance here has been impacted mainly by lower transport margins. For the year overall, the mix of EBITDA generated outside of Stolt Tankers increased to 43% from 35% last year. This is $40 million more than last year as investments across our portfolio, help diversify our earnings. Our global teams are doing a fantastic job of working together to help our customers keep their supply chains moving in a safe and reliable way. And I want to thank all our people for their dedication across the year. They truly live our purpose of moving today's products for tomorrow's possibilities. In November, we announced the acquisition of Suttons International, a U.K.-based ISO tank operator. I wanted to give you a bit of additional color on the rationale for the acquisition and how it supports the Tank-Container strategy. We acquired Suttons in November, adding over 11,000 ISO tank containers to the fleet, growing our fleet by around 20%. The acquisition is aligned with our corporate strategy to accelerate growth in one of our asset-light businesses, leveraging Stolt Tank Containers' global platform to support customers with efficiency, reliability and flexibility across their supply chains. We have been investing in creating a scalable global platform for Stolt Tank Containers, driven by a strong focus on digitalization and efficiency, and we aim to drive sustainable growth, operational consistency and improve customer outcomes by leveraging this platform to successfully embed Suttons within our business. Suttons not only brings tank capacity, but also enhances our customer offering as we bring in specific expertise in gas distribution, domestic short sea and China domestic services. With an expanded fleet, global reach, a more comprehensive service offering and an improved digital experience, customers will benefit from our scale, efficiency and global network. As we talked about it on our Capital Markets Day, the ISO tank container market is highly fragmented. As you can see here on the chart, this transaction cements Stolt Tank Containers' position as a leading ISO tank operator and gives us potential for further profit margin growth. As well in this market, we see low levels of new tank production and ongoing capacity rationalization, which we expect to lay the foundation for an eventual market recovery and Stolt Tank Containers will be well positioned to take advantage of a potential upturn. Our strategy puts our three most important stakeholders at the heart of everything we do, our shareholders, our customers and our people. We focus on developing our people to continuously improve our customer experience and on value creation for shareholders through our unique market leadership across liquid logistics and other business investments. We paid an interim dividend of $1 per share in December, which takes shareholder distributions since 2005 to over $1.4 billion. Our commitment to balancing distributions, conservative balance sheet and investing into our business is key to delivering long-term shareholder returns. Our unique position in liquid logistics benefits customers as they build and optimize robust supply chains in uncertain and demanding markets. 70% of our top 50 customers use more than one of our service, and we continue to outperform industry norms with respect to Net Promoter Scores. This year, the average Net Promoter Score of our Logistics businesses was 52, up from 40 in 2024. Our people are the beating heart of our business and their passion and commitment drive our success. This year, employee engagement remains strong. Our employee engagement survey showed a sustainable engagement score of 86%, outperforming industry's peers in all benchmark categories with also a record response rate of 91%. We have created a workplace where our people want to stay and the average tenure for Stolt-Nielsen employee is over 9 years. To support our strategy, we have been making targeted investments to position our business for long-term growth and to ensure our Liquids Logistics Solutions remain compelling for the future. We spent approximately $500 million in 2025 and increased our asset base to $5.8 billion. In 2026, we have plans to extend this further by around $380 million investments. We strengthened our market position and customer value proposition in all 3 logistics businesses. In Stolt Tank Containers, we continue to invest in assets to maintain our network, acquiring the remaining 50% in the Hassel Shipping 4 joint venture and ordering 2 additional modern fuel-efficient 38,000 deadweight new-builds with our joint venture partner, NYK. At Stolthaven terminals, we started construction of a new terminal in Turkey, while our terminal in Taiwan advanced towards operational status. And we invested to expand capacity in the U.S., Korea and New Zealand. I touched upon the rationale for the Suttons acquisition and that investment sits in the FY '25 Tank Container figures in addition to new tanks in our core business. We also acquired the remaining shares of Avenir in 2025, reflecting our excitement in continuing to capitalize on the growing need for LNG bunkering as announced this week. We are now exploring a partial sell-down of this holding for an additional value creation opportunity while still having commitment to grow Avenir's fleet in the future. Based on project approved to-date, we will reduce our CapEx spend by around $130 million year-on-year while both sustaining our current operations and driving future growth opportunities and innovations. We will see the full impact of these investments over the coming months and years. And I'll now pass on to Jens for the financials. Jens Grüner-Hegge: Thank you, Udo. And great to see everyone. Good morning to those of you calling in from the United States, and good afternoon to everyone here. As Udo did, I will compare fourth quarter of '25 with fourth quarter of 2024. And just as a reminder, our fourth quarter runs from September 1 through November 30, every year. To reiterate what Udo has talked about, the company's performance is resilient in a challenging environment. But let's dive into the numbers. Now we talked about a lot of transactions that happened in the last 12 months. So since I'm comparing fourth quarter of '24 with fourth quarter '25, we have added a column here to take out the impact or to normalize the impact of the three major transactions, which was the acquisition of 100% of Hassel Shipping 4, 100% of Avenir and now lately also the Suttons acquisition. So comparing those to the normalized with the current -- with the last quarter last year, the drop in revenue was driven by Tankers, reflecting the lower freight rates, which were partly offset by a 6.9% increase in volume following additions to the fleet over the last 12 months. Terminals revenue was flat and STCs was down by about $5 million, excluding the Suttons impact, while Stolt Sea Farms revenue was marginally up. The reduction in operating expenses partly offset the reduction in revenue and was driven by lower TCE hire costs and lower owning costs in tankers. Excluding the impact of Hassel Shipping 4 and Avenir, depreciation expense was only marginally up, and that was reflecting really additional leases that we've taken on and additional terminal capacity that has been delivered and become operational. The equity income from our joint ventures was up substantially, and that was driven by a prior year impairment that we took at HIGAS of about $5 million and past operating losses at Avenir that has since now seen a significant improvement in the operations in the last quarter. A&G expense was up compared to last year, mostly reflecting annual inflation adjustments as well as a consequence of the weaker U.S. dollar because a lot of our A&G expenses are in non-dollar, Euros, Pounds and Asian currencies. Also, last year, we reversed an over accrual for profit sharing in the fourth quarter of last year, which had a negative impact of about $11 million. So you normalize for that, the increase is more normal. Adjusted operating profit for the quarter was, therefore, $88.5 million. That's down from $130.4 million in the fourth quarter last year. And as you can see from the difference between the reported numbers and the adjusted numbers, the acquisition that we talked about contributed about $7 million to that operating profit. And as you can also see, about 40% of the increase in the reported net interest expense was due to an increase in the net debt related to the acquisitions and other capital expenditures that we had during the year. While the rest was due to lower interest income as we reduced the holding of cash on hand compared to last year, and you will see that on the subsequent slide. Other relates to dividends from our equity instruments, so dividends that we have received on investments. And income tax was down, reflecting an insurance-related tax provision taken in the fourth quarter of '24 as well as prior year tax adjustment at terminals, offset by higher taxes at corporate due to improved profitability that we've seen at Avenir and Stolt Sea Farm. And consequently, the net profit for the quarter ended up at $59.6 million, as Udo said, with EBITDA of $186 million. Let's take a look at the cash flow. So cash from operations was down this last quarter, predominantly reflecting the weaker earnings, but still at healthy levels. If you compare to previous years, still a very strong cash-generating quarter. Dividends from JVs were down, but this was offset by positive working capital from the prior year and cash spent -- if we move to capital expenditure, cash spent on capital expenditure was substantially up, reflecting the acquisition of Suttons as well as increased progress payments on our new buildings and as well terminal capital expenditures for the ongoing expansions that we have. Offsetting this was the net cash receipts for repayments of advances from our joint ventures, as you can see. There was a lot of debt activity -- funding activity, and Julian has done a tremendous job in keeping the company with a very strong liquidity position. During the fourth quarter, we raised $297 million in new debt, and that was to refinance expiring facilities and as well to fund the capital expenditures that we have ongoing. And I'm tremendously grateful both to Julian and his team, to the rest of the company has been working hard on making this possible as well as to all our banks and financiers. After adjusting for FX, we had a reduction in cash of $16.1 million, and we ended the quarter with cash and cash equivalents of $144.6 million. If you look at the bottom right of this slide, you see our total liquidity position, which at the end of the fourth quarter was $477 million, that includes revolving credit lines of $332 million, committed lines that is and slightly up from last quarter. I mentioned the significant reduction in cash on hand last -- of the fourth quarter of '24, we had $335 million in cash, which, of course, generated a lot of interest income, and that's why you see that sort of half of the interest expense increase that we saw in the last 12 months. Talking about capital expenditures. During the quarter, it totaled $138 million. That was of course, led by the STC acquisition of Suttons also the ongoing terminal expansions and as well progress payments that we have ongoing on the new-buildings that we have. And therefore, overall, for '25, we spent $511 million on CapEx, slightly below what we had indicated at the previous quarterly earnings release as some of it has been pushed out to 2026. For this year, we expect to spend $383 million with the focus being on tanker new-buildings, terminal expansions, Avenir new-buildings and Stolt Sea Farm expansions. Now expect this to probably change somewhat as the year progresses as it normally does as we commit to new projects, but this should be a good indication of what we expect to spend. And it's slightly down from last year, but we're also coming out of 2 years, '24 and '25, where we had significant capital expenditures. And whereas we intend to continue to invest strategically in our businesses, we also need to focus on integrating our added capacity into our operations for maximized long-term benefit, not only for our shareholders, but also for our customers. Moving over to our debt profile. It here reflects the refinanced debt that is mentioned in the bullet at the bottom right. So there was about $86 million that we have repaid since the end of the fourth quarter. So our current balance for 2026 remains at $351 million. As part of this financing, we also -- since quarter end, since what I showed here in the financials, we also added $145 million in additional liquidity, which is available for further debt reductions, progress payments and other capital expenditures. So we continue having a very strong liquidity position going forward. You see the two orange blocks. Those are the 2 bonds that we have, one maturing in '28 and $150 million, the one that we just did in September maturing in 2030. And if you look at the bottom left of this slide, you can see the increase in gross debt in the first quarter reflects the consolidation of Hassel Shipping 4 and Avenir and then again, a slight increase in the fourth quarter of '25, reflecting the Suttons acquisition, and on average, our interest rates have come slightly down from 5.6% in the previous quarter to 5.39% in this quarter, reflecting general interest movements as well as tightening of margins that we have achieved on new financing. The continued steady performance of the company supports our covenants and covenant compliance. The increase in debt and therefore, net debt to tangible net worth as well as a net debt to EBITDA seen in the first quarter was really -- in the fourth quarter was really due to Hassel Shipping 4 sorry, in the first quarter was due to the Hassel Shipping 4 acquisition, and Avenir. And in the fourth quarter, you can see that same impact from the Sutton's acquisition. Debt to tangible net worth is now at 1.04x. That's well below our covenant limit, which is 2.25x. So we have plenty of headroom, slightly up from the prior quarter where we were at 1.01x. I mean with the lower EBITDA that we have seen in this last quarter compared to previous quarters, the EBITDA fell slightly to $788 million, and with that, we have seen the EBITDA to interest expense go slightly up to 5.6x and the net debt to EBITDA increased from 2.94x to 3.12x, as you can see at the bottom left graph here. So overall, we're in a very comfortable position relative to our covenants, a good liquidity position, a good balance sheet position. So the company is well prepared for what lies ahead. We gave today guidance of $600 million to $750 million and wanted to talk a little bit more about what that entails. So why are we doing this? Firstly, we want to offer insight into our outlook for the year, what we see ahead. We believe it is aligned to the nature of our businesses and our business model to promote a longer-term view of the company, not a short-term quarter-to-quarter, but really give you the longer-term view that we work towards. We also want to facilitate fair pricing of the company as a diverse logistics business rather than as a shipping company. So taking into account everything that we know today, what we believe will happen over the next 12 months, we expect EBITDA for the full year 2026 to be within a range of $600 million to $750 million. Now this guidance is underpinned by a number of key assumptions. As you can see some of them here on the slide, relating both to global macroeconomic picture generally and specific factors affecting the liquid logistics market. And particularly, that there are no substantial geopolitical changes versus what we see today. So we are expecting this to continue. More specifically, the guidance is before fair value of the biological assets, before any gains or losses on sales of assets and other onetime noncash items. And it also excludes any 2026 EBITDA contribution from Avenir LNG. We've taken that out because of the announcement that we made earlier in the week and the consequential de-consolidation that, that will have. So I just want to make sure that everybody understands the basis for our guidance. It does include, however, the potential Suttons integration costs that will be incurred during '26. As such, the guidance is provided -- that we have provided is subject to some uncertainty beyond our control due to the current operating environment that we're in. And with that, I would like to hand it over to Udo, and he will cover the segment highlights as well as the market outlook. Many thanks. Udo Lange: Let's first start with Stolt Tankers. The chemical tanker markets have continued to soften this quarter as the market uncertainty around geopolitics and tariffs continues unabated. Demand is there and spot volumes, in particular, are elevated, but freight rates are weaker than the prior year. Operating revenue declined by 14% as the rate decline was only partially offset by a 4% increase in operating days due to additions to the fleet. COA renewal rates were down in line with our expectation. And we expect to see the COA ratio increase over the coming quarters. Operating profit was likewise down, predominantly driven by the decline in spot freight rates for regional and Deep Sea, which was largely offset by lower trading expenses and lower time charter expense. However, further impacting the operating profit was higher owning expenses and depreciation and lower joint venture equity income. Maren and her team continue to work hard to navigate this highly complex and unpredictable macro environment with a laser focus on delivering for our customers, and I really want to thank them for all their efforts. Looking more closely at Tanker rates. We are seeing some early signs of rates beginning to stabilize. While the TCE for the quarter was around $24,500 per operating day, showing a decline of 19% year-over-year, on a quarterly basis, the gradient of decline has flattened and TCE was just 1% down versus Q3. As things stand today, we are seeing the usual winter strengthening in crude and product tanker markets, which could be supportive for spot rates within the chemical segments as well. However, at the risk of being repetitive, we are not just a chemical tanker business. We encourage the market to consider our performance across all the areas of our diversified portfolio. And I want to remind you that we have moved to full year EBITDA guidance for the business as a whole. Thanks to Guy and the Stolthaven team who have maintained steady utilization and kept operating revenue stable year-on-year in an uncertain market. EBITDA saw a modest decline of 4% with operating profit down 8% with these declines driven by investments in IT alongside some inflationary impacts and slightly less equity income from our joint ventures. Looking ahead, we expect the storage markets to remain stable, notwithstanding some caution and delayed decision-making on tank rental commitments from our customers. And so Stolthaven Terminals will continue to focus on optimizing margins and utilization. In response to the challenging demand drivers for storage, we are actively adopting our approach to specific market dynamics to better adapt to local conditions, and our investments in additional capacity at existing sites in the U.S. will start to come into play towards the end of the year. We expect to benefit from additional capacity in Houston and New Orleans coming online in a staggered fashion during Q3 ramping up and reaching full effect in 2027. The tank container market continues to be challenging. And in this context, Hans and his team have done a great job to drive revenue at Stolt Tank Containers up $5 million or 3%. This result has been driven by stronger shipment volumes, which offset the impact of lower ocean carrier freight rates. EBITDA and operating profit declined due to lower transportation margins and cost inflation. I now want to cover our view of the market and concluding remarks before we open for Q&A. This time last year, we spoke about the impact of geopolitical events on global trade flows. We highlighted a number of areas of macro uncertainty and discussed how these might play out through 2025. Today, the list of macro factors driving global uncertainty remains similar with the addition of two factors affecting our underlying markets. Geopolitical risk has not abated. Whilst we see some international players starting to selectively transit the Red Sea, there appears to be no clear resolution on events in the area, and we see new risks in international relations, especially in the Middle East. Risks and opportunities related to global tariffs and sanctions remain with trade policy changes impacting customer sentiment. The shadow fleet continues to impact around the edges of our markets and fluctuations in the crude oil market continue. We also continue to face a subdued global chemical market, which is struggling from production-underutilization. The timing of new build deliveries will also have a supply side impact over the next 2 to 3 years. In the face of these risks, we are well positioned to continue to deliver our value proposition for our customers across the supply chain. We are laser-focused on this, planning strategically and operationally so that we can be flexible and react with agility to macro events. We have strong relationships with our customers, and we are working closely with them to navigate these challenges and keep liquid chemicals moving around the world. Despite these market risks, supply and demand fundamentals are currently supported by a tight MR market. GDP growth is expected to be around 3%. Seaborne trade growth is expected to be muted this year with a return to growth expected in 2027. We are watching developments carefully with some caution, but we expect volumes to remain relatively stable year-on-year. MR rates have been trending gently upwards through 2025 and are predicted to remain at a high level, which has typically kept them operating in the CPP market, limiting the potential for swing tonnage in our market. As mentioned previously, we do expect some new-builds to enter the market in 2026 and 2027, and this creates some uncertainty on the supply side. However, the aging global fleet means that there remains high potential for retirements of vessels to manage global supply if necessary, with around 30% of tankers aged 20 years and older by 2027. To wrap up, we are focused on leveraging our diversified logistics businesses to steer them through global supply chain complexity and delight our customers by executing our liquid logistics strategy. To support both our core liquid logistics businesses and explore new opportunities and innovations, we are positioning ourselves for long-term growth through targeted strategic investments. We invested strategically through 2025 and will continue to do so through 2026. This disciplined capital allocation strategy translates into balance sheet flexibility and headroom to meet all our obligations. Our investments will convert into EBITDA-generating assets given time. And despite the market turmoil continuing, we expect the full year EBITDA to fall within a range of $600 million to $750 million. As we look to the year ahead and beyond, our strong strategic foundations position us well to navigate future challenges and opportunities. Our people, clear purpose and diverse portfolio provides the resilience and quality required to deliver long-term value for our shareholders, customers and other stakeholders. Thank you for your attention, and I will now pass you back to Alex for Q&A. Alex Ng: Thank you very much, Jo. So we will start Q&A with questions in the room. [Operator Instructions]. Thank you very much. And then we'll take questions from the Internet as well. Please? Unknown Attendee: Just on the guidance, you did mention on the '25 results, the split between tankers, non-tankers. You have a bit of a range in your '26 guidance. Can you give some color on your expected split and also perhaps on the sort of which segment is going to cause that variance in the range? Jens Grüner-Hegge: Okay. So if you look at the other businesses, the non-tanker businesses, they tend to be more stable. We know that there's a cyclicality in the tanker markets. Now looking at the performance that we've seen so far through the year, the third and the fourth quarter of 2025, we saw that was pretty stable from quarter-to-quarter. The reduction was really early in the year. Going forward, we mentioned also that we see that there is a certain short-term floor because we've seen the strengthening in the MR markets recently, which is lending some support. But I think it's worthwhile noting that as we get into the second half of 2026, you will see more of that order book that we showed being delivered. So we see more of a risk in the tanker market as you get into the second half than in the first half. And we know that these new-buildings will be delivered sort of second half '26 into first half of '27. So if you take that into consideration of what we saw in the fourth quarter, I would expect for the next few quarters that mix to be relatively stable with the exception of capital expenditures becoming operational. And that will be gradual. Again, I think most of that we expect to happen also towards the second half of the year when we're looking at the terminals business. So you'll probably start seeing more of a non-tanker growth in EBITDA in the second half of the year and potential challenges for the Tanker segment in the second half of the year. So you will start seeing that balance shifting towards more non-tanker business. Did that answer your question? Unknown Attendee: Yes, that's really good color. Also on the Red Sea, sort of -- this is a tricky one, but at what point do you expect to return? I mean there's a lot of talks about Maersk now entering the Red Sea again. What's sort of your point of action on entering the Red Sea? Udo Lange: Yes. So I can take that. So of course, chemical tankers is among the most risky vessel-type that you can navigate through the Red Sea, because a drone attack on that hitting the wrong tank has a significant bigger impact than when you have a conventional ship. So we are really very, very cautious, and we monitor that. So of course, it's good to see that Maersk is taking that effort, but we normally look really more towards the tail-end. And of course, what's currently going on in the Middle East and the U.S. fleet coming in. So we don't expect this to happen anytime soon. Alex Ng: Any additional questions in the room? Okay. Then we will move to the questions coming from those online. There's a couple of themes that maybe we can club together. I think the first one really goes to our liquid logistics strategy. So maybe one for you, Udo. How successful has the liquid logistics strategy been so far with customers? Udo Lange: Yes, I would say I'm really excited about how it latches more and more on. And that, of course, has to do with the increasing complexity globally. So if I take the amount of strategy sessions that we have now with customers versus 2 years ago, it's a complete different ballpark. But it has also to do with the capability that we are building in our own team. So of course, this -- remember, we come from very strong three divisions and now they need to collaborate more together, more and more people need to understand how do I really position all of Stolt-Nielsen in front of the customer. And that is really remarkable to see how deep that actually goes. So we have now not only sessions where we look at large customers, we also look at sessions that we have with medium, with small customers, and we do this around the whole world. So it's pretty exciting. The development is really exciting. And we are getting better and better at it and the customers appreciate it actually more and more. And we see most important, of course, it's not the activity, and we see business out of it. So we have met a customer that didn't have Tank Container business with us before talked about the whole portfolio, and we got Tank Container business. Met another customer we were very small on the tank container side. So the beauty is because we are market leading really in all 3 segments, each of the businesses is actually strong also with different customers. Sometimes it's the same, sometimes it's different ones. And it allows us to take our strong relationship and then introduce the other businesses as well. And don't forget what is also unique is, we are the only player who has end-to-end shipping where we have a deep sea fleet, we have regional fleets and we have barging fleets. And then we have terminals and then we have tank containers. And now the Suttons, we even have gas and short sea and China domestic. So that's just really beautiful because you just we have one page now where we put this all together and you sit in front of sea level. And they, of course, not necessarily know Stolt-Nielsen, but then they are like, "oh, that's really interesting. You're building a terminal right now in Taiwan, and we need to talk about our Southeast Asia logistics strategy". Maybe how can that all come into a hub-and-spoke system. And so that's really nice how the capability that we have, A, add value for the customer, gives us more business, but also how our organization is more and more capable to position this. Alex Ng: Questions for you, Jens, related to how we triangulated the EBITDA guidance. And the first one was, can you share any information from what the EBITDA contribution was from Avenir in 2025? Jens Grüner-Hegge: Yes. If you look at -- it's related to the guidance, it might be more relevant to us what we're expecting there. But '25 was a transition year for Avenir. As you will have seen in the comparison with '24 was that it was a -- 2024 was a drag. We've seen that turn into an improvement, a positive contribution. For '26, you're looking at about mid-$20 million EBITDA contribution that would be expected. And with this separation out, we are actually looking to be able to grow that faster than what possibly could have done on our own. So it is a -- it's about mid- $20 million in 2026 in the number if you want to have that in the back of your mind when you look at the guidance. Alex Ng: Thank you, Jens. And then another question related to guidance. You mentioned that Sutton won't contribute EBITDA until 2027. But do you expect it to be EBITDA-negative during '26 or just close to breakeven? Jens Grüner-Hegge: If we look at the year overall, our expectation is it won't be a drag. It will -- the benefit that we get from the additional volume, the additional tanks, there will be some integration costs as we -- as there always is with an M&A. But we expect a neutral impact in '26, and then we should see that really start taking off in '27. Udo Lange: Yes. I think on the base business, but of course, the integration cost year-over-year, it is a drag. Jens Grüner-Hegge: The cost is there, so yes. Alex Ng: A question related to strategy. Avenir is you announced the partial sale of that asset. Can there be any read across to whether Stolt Sea Farm will be on the table in order to clarify the strategy around liquid logistics? Udo Lange: No, these are completely two different strategic conversations. So you know we are since more than 50 years in agriculture. We are the market leader in the premium segment. And the business is developing quite nicely. We are investing. We are super happy with the returns that we are seeing. What is different on Avenir, remember, we had a joint venture and -- but we also realized that while we believe in the strong future of that market, that the other partners were -- for them, it was less strategic. So we then remember, we acquired 100% for Avenir, but well knowing that, that, of course, would have a significant capital expenditure exposure for us. So -- but we felt we believe we can grow in this market. But then at the same time, of course, we also looked at, well, now let's look for strategic partners where we then really can join forces and actually stronger lean into that market without actually dragging down our balance sheet too much. And so one of the key reasons, of course, you see also that our CapEx goes down year-over-year by $130 million is, well, we will benefit from the growth in the LNG market, but we are not as heavy exposed anymore in this segment. So two very, very different strategies. So Sea Farm is core to us and Avenir is an opportunity for us to capture a nice market together with a strategic partner. Alex Ng: And then the final questions we have on the -- for now relate to the CapEx that you talked about and the expansions, Udo. First question is related to Stolthaven. How should we quantify the investments in terminals in relation to added capacity and how it evolves over the year? Udo Lange: Jens, why don't you take the Stolthaven? Jens Grüner-Hegge: Yes. So we talked a bit about the different investments that we have ongoing in Stolthaven. We have the terminal in Taiwan, which is about to become operational, and that will have a positive impact as we go into 2026. We have the expansions that are ongoing in Houston and New Orleans, where we're adding about 170,000 cubic meters combined, and that will start coming on as we get into the third and fourth quarter of 2026. So you probably won't see much of an impact in this year, but it will come and be fully operational and have a full impact as we get into 2027. The other projects that we have sort of like the Turkey project, that's a long-term investment that will come in later years. It's a joint venture structure. So you will see that not necessarily in consolidated fashion, but more in an equity income from a joint venture in future years. Alex Ng: Thank you, Jens. And then the final question is, if we could share the delivery schedule for the new-builds in Tankers. Maybe I can just add a comment there. So we expect the first vessel to be delivered towards the end of this year. It's kind of on the edge of this year or next year, but it gives you an idea on that delivery. And then during the course of 2027, there will be a further additional 9 ships. And then in '28, there will be approximately 3 ships, and then the final one is due for delivery in 2029. So hopefully, good for your models. That concludes all of the questions. So thank you very much. We'll post a recording of this call on the website tomorrow. Udo, back to you. Udo Lange: Thank you very much for joining us today, and I look forward to talking to you again when we present our results in the first quarter of 2026 in April. We continue to be very excited about the business. We launched our strategy 2.5 years ago. We are executing nicely on the strategy. And I think you can see the benefits for our shareholders, our customers and our people as well. So thanks for all your support, and wish you a nice day.
Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I'd like to welcome you to the Provident Financial Holdings' Second Quarter of Fiscal 2026 Earnings Call. [Operator Instructions] I will now turn the call over to Donavon Ternes, President and CEO. You may begin. Donavon Ternes: Thank you, Colby. Good morning. This is Donavon Ternes, President and CEO of Provident Financial Holdings. And on the call with me is Peter Fan, our Senior Vice President and Chief Financial Officer. Before we begin, I have a brief administrative item to address. Our presentation today discusses the company's business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives or goals for future operations, products or services, forecasts of financial or other performance measures and statements about the company's general outlook for interest rates, economic and business conditions. We also may make forward-looking statements during the question-and-answer period following management's presentation. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ from any forward-looking statement is available from the earnings release that was distributed yesterday, from the annual report on Form 10-K for the year ended June 30, 2025, and from the Form 10-Qs and other SEC filings that are filed subsequent to the Form 10-K. Forward-looking statements are effective only as of the date that they are made, and the company assumes no obligation to update this information. To begin with, thank you for participating in our call. I hope that each of you has had an opportunity to review our earnings release that we distributed yesterday, which describes our second quarter fiscal 2026 results. In the most recent quarter, we originated $42.1 million of loans held for investment, a 42% increase from the $29.6 million that were originated in the prior sequential quarter. During the most recent quarter, we also had $46.7 million of loan principal payments and payoffs, which is an increase of 35% from the $34.5 million in the September 2025 quarter. Lower mortgage rates have driven stronger loan origination activity but also has led to higher prepayment activity. We are continuing to make prudent adjustments to our underwriting requirements within certain loan segments to promote disciplined, sustainable growth in origination volume. Our loan pipelines are moderately higher than last quarter, suggesting our loan origination volume in the March 2026 quarter will be within the range of recent quarters which has been between $28 million and $42 million. For the 3 months ended December 31, 2025, loans held for investment decreased by approximately $4.1 million with a decline in multifamily, commercial business and commercial real estate loans, partly offset by an increase in single-family and construction loans. Current credit quality continues to hold up very well. And you will note that nonperforming assets were just $990,000 or 8 basis points of total assets at December 31, 2025, a decrease from $1.9 million at September 30, 2025. Additionally, there were no loans in the early stages of delinquency at December 31, 2025, indicating an absence of emerging credit issues. We continue to monitor commercial real estate loans, particularly loans secured by office buildings, but are confident that based on the underwriting characteristics of our borrowers and collateral that these loans will continue to perform well. We have outlined these characteristics on Slide 13 of our quarterly investor presentation, which shows that our exposure to loans secured by various types of office buildings is $36.7 million or 3.5% of loans held for investment. You should also note that we have just six CRE loans, that total $2.8 million, maturing in the remainder of fiscal 2026. We recorded a $158,000 recovery of credit losses in the December 2025 quarter. The recovery recorded in the second quarter of fiscal 2026 was primarily attributable to a decline in the expected life of the loan portfolio due to lower mortgage interest rates. The allowance for credit losses to gross loans held for investment was 55 basis points at December 31, 2025, a slight decrease from 56 basis points at September 30, 2025. Our net interest margin increased 3 basis points to 3.03% for the quarter ended December 31, 2025, compared to the 3% for the sequential quarter ended September 30, 2025, the net result of a 5 basis point decrease in the cost of total interest-bearing liabilities net of a 2 basis point decrease in the yield of total interest-earning assets. Our average cost of deposits decreased to 1.32%, down 2 basis points for the quarter ended December 31, 2025, while our cost of borrowing decreased 20 basis points to 4.39% in December 2025 quarter compared to the September 2025 quarter. The net deferred loan cost amortization associated with loan payoffs in the December 2025 quarter compared to the average of the previous 5 quarters negatively impacted the net interest margin by approximately 5 basis points in contrast to no impact in the September 2025 quarter. New loan production is being originated at higher mortgage interest rates than the weighted average rate of the existing loan portfolio. The weighted average rate of loans originated in the December 2025 quarter was 6.15% compared to the weighted average rate of 5.22% for loans held for investment as of December 31, 2025. In the March 2026 quarter, our adjustable rate loans are repricing at interest rates that are slightly lower than their current interest rates. We have approximately $112.2 million of loans repricing in the March 2026 quarter to an interest rate that we currently believe will be 14 basis points lower to a weighted average interest rate of 6.85% from the current interest rate of 6.99%. However, in the June 2026 quarter, we have approximately $125.2 million of loans repricing to an interest rate that we currently believe will be 38 basis points higher to a weighted average interest rate of 6.49% from 6.11%. Many of these loans are already in their adjustable phase of the loan term with rate resets every 6 months. I would also point out that there is an opportunity to reprice maturing wholesale funding downward as a result of current market conditions, where interest rates have moved lower across all terms. Excluding overnight borrowings, we have approximately $109 million of Federal Home Loan Bank advances, brokered certificates of deposit and government certificate of deposit maturing in the March 2026 quarter at a weighted average interest rate of 4.12%. Additionally, we have approximately $79.5 million of Federal Home Loan Bank advances, brokered certificates of deposit and government certificates of deposit maturing in the June 2026 quarter at a weighted average interest rate of 4.15%. Given the current interest rate outlook, we would expect to reprice these maturities to a lower weighted average cost of funds. All of this currently suggests that there continues to be an opportunity for net interest margin expansion in the March 2026 quarter. Our FTE count at December 31, 2025, was 163 compared to 162 1 year ago. We continue to look for operating efficiencies throughout the company to lower operating expenses. Operating expenses were $7.9 million in the December 2025 quarter, an increase from $7.6 million in the September 2025 quarter. Operating expenses for the December 2025 quarter included a $214,000 pre-litigation voluntary mediation settlement expense related to an employment matter. For the remainder of fiscal 2026, we expect a run rate of approximately $7.6 million to $7.7 million per quarter. Our short-term strategy focuses on disciplined balance sheet growth by expanding our loan portfolio. We believe this approach is well suited to the stable economic environment and the ongoing normalization of the yield curve. During the December 2025 quarter, we were partly successful in the execution of this strategy with higher loan origination volume, but higher loan prepayments more than offset that growth. As a result, the overall composition of our interest-earning assets and interest-bearing liabilities were essentially consistent with the prior quarter. We exceed well-capitalized capital ratios by a significant margin, allowing us to execute on our business plan and capital management goals without complications. We continue -- we believe that maintaining our cash dividend is very important. We also recognize that prudent capital returns to shareholders through stock buyback programs is a responsible capital management tool and we repurchased approximately $96,000 of common stock in the December 2025 quarter. For the second quarter of our fiscal year, we distributed $906,000 of cash dividends to shareholders and repurchased approximately $1.5 million worth of common stock. Accordingly, our capital management activities represent a 170% distribution of the December 2025 quarter's net income. We encourage everyone to review our December 31 investor presentation that has been posted on our website. You will find that we included slides regarding financial metrics, asset quality and capital management, which we believe will provide additional insight on our solid financial foundation supporting the future growth of the company. Colby, we will now entertain any questions that others may have regarding our financial results. Operator: [Operator Instructions] Your first question comes from the line of Timothy Coffey with Janney. Timothy Coffey: Given the puts and takes that you just described on the loan portfolio, what is the probability that your portfolio is flat with -- the next 4 quarters? Donavon Ternes: Well, it's kind of a loaded question that I could answer if I knew what loan payoffs looked like for the next few quarters. What we've been focusing on is increasing our origination volume each and every quarter. We've been able to do so essentially for the last 5 quarters or so. We have pipelines that are built that suggest the March 2026 quarter will also be a higher origination-volume quarter, but it's very difficult to discern what loan payoffs look like, which will ultimately then drive what the loan balances look like at the end of the quarter and whether or not we grew those balances or essentially were somewhat flat. Timothy Coffey: Do you see the loans repricing in the June quarter as a potential headwind to loan growth? Donavon Ternes: Not necessarily, Tim. When we think about where those loans are repricing, and we compare to current market conditions with respect to new loan production, it looks like they're a bit higher than new loan production, but they're not substantially higher from where new loan production is coming in. So that could have an impact, there could be implications with respect to that. But ultimately, if they are not repricing substantially higher than current market conditions, I would not expect that driver alone to be the driver of accelerated loan payoffs. The other thing to think about, Tim, with respect to accelerated loan payoffs, it's kind of a double-edged sword. On the one hand, we obviously have trouble growing the loan portfolio to a large degree if those payoffs are higher or those payoff volumes are higher. But secondarily, those payoffs generally carry net deferred loan costs that get accelerated in as a debit or a decline to net interest income over the quarter. And the most recent quarter, those payoffs essentially impacted our net interest margin by a negative 5 basis points, in contrast to no implications or no impact in the September quarter, if we look at those net deferred loan costs on average for the prior 5 quarters. So the implications of loan payoffs are twofold, difficulty in growing loan portfolio and secondarily, there are implications to our net interest margin. Timothy Coffey: Right. Okay. And then the government -- federal government has recently discussed -- [ floated ] ideas on how to make housing more affordable. If some of those plans come through, would that be a net positive for your business? Donavon Ternes: Well, I think ultimately, if you look at -- particularly in California, where we lend, if you look at housing stock or available inventory, you find that there is much more demand than available inventory over time. And I think that has exhausted many would-be purchasers particularly as it relates to affordability. And what that housing stock pricing has done, even though pricing has slowed, it is still advancing a bit in the state of California, not at the rate that it was advancing, nonetheless, it's still advancing. Interest rates are a bit favorable with respect to affordability. As those rates come down, affordability goes up. But ultimately, in the state of California, available housing is far outstripped by demand. And so anything that is done, I guess, by local, state or federal governments that would expand available housing, lowering new construction costs and the like would be helpful. And that would ultimately drive more buyers, I believe. Operator: [Operator Instructions] And with no further questions in queue, I'd like to turn the conference back over to Donavon for closing remarks. Donavon Ternes: Thank you, Colby, and thank you, everyone, for attending our second quarter earnings call, and I look forward to the next call for -- with our third quarter earnings. Have a good day. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and welcome to the WesBanco Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Iannone, Senior Vice President of Investor Relations. Please go ahead. John H. Iannone: Good day, and welcome to the WesBanco Fourth Quarter 2025 Earnings Conference Call. Leading the call today are Jeff Jackson, President and Chief Executive Officer and Dan Weiss, Senior Executive Vice President and Chief Financial Officer. Today's call, an archive of which will be available on our website for 1 year, contains forward-looking information. Cautionary statements about this information and reconciliations of non-GAAP measures are included in our earnings-related materials issued yesterday afternoon as well as our other SEC filings and investor materials. These materials are available on the Investor Relations section of our website, wesbanco.com. All statements speak only as of January 28, 2026, and WesBanco undertakes no obligation to update them. I would now like to turn the call over to Jeff. Jeff? Jeffrey Jackson: Thanks, John, and good morning. On today's call, we will provide an overview on fourth quarter performance and provide our initial outlook for 2026. Key takeaways from the call today are: successful execution on our growth-oriented business model, while maintaining strong credit quality measures. Full year pretax provision earnings growth of 105% year-over-year and full year earnings per share of 45% to $3.40 when excluding merger-related charges. Loan growth fully funded by deposit growth, both year-over-year and quarter-over-quarter, helping to drive our fourth quarter net interest margin to $3.61. Continued focus on operational efficiencies and cost control, as demonstrated by our fourth quarter efficiency ratio of 52%. 2025 was another strong year for WesBanco and a clear demonstration that our growth-oriented business model continues to deliver results while maintaining disciplined credit and expense management. For the full year, we generated pretax pre-provision earnings growth of more than 100% year-over-year and earnings per share growth of 45% to $3.40 when excluding merger-related charges. Importantly, that performance was driven not by onetime actions, but by core strategic execution, including loan growth, fully funded by deposit growth, expanded net interest margin and continued efficiency gains. For the fourth quarter ending December 31, 2025, we reported net income, excluding merger and restructuring expenses available to common shareholders of $81 million and diluted earnings per share of $0.84, which increased 18% year-over-year. On a similar basis and excluding day 1 provision for credit losses, we reported full year net income of $309 million and diluted earnings per share of $3.40. Furthermore, the strength of our 2025 financial performance was reflected in our fourth quarter return on tangible common equity of 16%. Nonperforming assets to total assets of 0.33%. Our capital position remains solid with a CET1 ratio of 10.3%, giving us flexibility to support growth and navigate the operating environment ahead. We also achieved several strategic milestones in 2025. Chief among those was a successful acquisition and integration of Premier Financial, transforming WesBanco into a $28 billion asset regional financial services partner. With this historic acquisition, we now rank among the top 50 publicly traded U.S. financial institutions based on assets. At the same time, we continue to invest in organic growth. expanding into new markets through the opening of loan production offices in Northern Virginia and Knoxville, launching our new health care vertical and optimizing our financial center network and digital banking capabilities, to support evolving customer preferences, and we will soon be celebrating the opening of a new financial center in Chattanooga, our first in Tennessee. Underlying all of this is the consistent focus on relationship banking that sets us apart from others. That approach drove record treasury management revenue of $6 million and a record total wealth management assets under management of $10.4 billion. Turning to operational topics. Disciplined execution remains the theme. Our dedicated teams, supported by continued strong customer satisfaction drove deposit growth that fully funded loan growth both year-over-year and quarter-over-quarter. Our third quarter deposit campaign delivered strong second half results with total deposits increasing 5% annualized or more than 6% for core deposit categories as we strategically allowed higher cost certificates of deposits to run off. We have continued to see a significant pickup in commercial real estate project payoffs, which totaled $415 million during the fourth quarter and over $900 million for the year, $100 million more than we had anticipated last quarter as developers continue to take advantage of the current operating environment for permanent financing or sale of properties. This increase in payoffs created a 4% headwind to loan growth for both the year-over-year and quarter-over-quarter comparisons. Despite these elevated payoffs, we delivered solid fourth quarter organic loan growth as total loans increased 6% annualized from the third quarter and 5% year-over-year, driven by our commercial teams converting pipeline opportunities. Since year-end 2021, we have achieved a strong compound annual loan growth rate of 9% without sacrificing credit quality as our key measures have remained consistent the last several years and favorable to the average of all banks with assets between $20 billion and $50 billion. As of both year-end and mid-January, our commercial loan pipeline stood at over $1.2 billion, with more than 40% tied to new markets and loan production offices. Despite anticipated elevated CRE payoffs through the at least first half of the year, we continue to expect mid-single-digit year-over-year loan growth during 2026, given the current loan pipeline and the strength of our markets. During the fourth quarter, our new health care vertical team refinanced a major skilled nursing provider in Virginia, serving as the lead bank in the syndication and sole lender for the working capital line of credit. This new relationship includes all operating reserve and payroll accounts for their properties as well as a 6-figure treasury management fee relationship. This win highlights the momentum of our health care vertical and the cross-team collaboration that helps us deepen relationships and deliver exceptional service. Before turning the call over to Dan to walk through the financials and outlook, I want to recognize our team members for their exceptional execution throughout the year. Their efforts were reflected not only in our results, but also in national recognition we continue to receive for soundless stability workplace culture and trust. Dan, I'll turn it over to you. Daniel Weiss: Yes. Thanks, Jeff, and good morning. For the fourth quarter, we reported GAAP net income available to common shareholders of $78 million or $0.81 per share. And when excluding restructuring and merger-related expenses, fourth quarter net income was $81 million or $0.84 per share. On a similar basis, when excluding the day 1 provision for credit losses on acquired loans, we reported $3.40 per share for the year as compared to $2.34 last year, representing an increase of 111% from the prior year. To highlight a few of the fourth quarter accomplishments, we generated strong year-over-year pretax pre-provision core earnings growth of 90%. We funded strong loan growth with deposits, improved the net interest margin to 3.61% and reduce the efficiency ratio to just under 52%. Our balance sheet reflects the benefits of both the premier acquired balance sheet and organic growth. Total assets of $27.7 billion increased 48% year-over-year and included total portfolio loans of $19.2 billion and total securities of $4.5 billion. Total portfolio loans increased 52% year-over-year due to the acquired PFC loans of $5.9 billion and organic growth of more than $650 million, driven by commercial teams across our footprint. Commercial real estate payoffs increased more than anticipated during the fourth quarter and totaled $905 million for the year, roughly $100 million more than we anticipated on our third quarter earnings call and 2.5x last year's level. Despite this headwind, though, we delivered solid organic loan growth for both the quarter and the year. We anticipate CRE payoffs to remain elevated during 2026 and currently estimate them to be between $600 million and $800 million for the year, but weighted more towards the first half. Deposits increased 53% year-over-year to $21.7 billion due to acquired PFC deposits of $6.9 billion and organic growth of $662 million which fully funded our loan growth. On a sequential quarter basis, total deposits increased $385 million due to the efforts of our consumer and business teams during the recent deposit campaign which more than offset the intentional runoff of $55 million of higher cost certificates of deposit and the pay down of $50 million in broker deposits. Turning to capital. Credit quality continues to remain stable as key metrics have remained low from a historical perspective and within a consistent range throughout the last 5 years. As expected, our criticized and classified loans continued to decrease during the fourth quarter to 3.15% and net charge-offs declined to just 6 basis points of total loans. The allowance for credit losses to total portfolio loans was 1.14% of total loans or $219 million consistent with the third quarter as increases related to loan growth were mostly offset by macroeconomic factors and reductions in qualitative factors. The fourth quarter margin of 3.61% improved 58 basis points on a year-over-year basis through a combination of higher loan and security yields and lower funding costs. The margin increased 8 basis points from the third quarter, which was above last quarter's guide of 3 to 5 basis points of improvement, primarily due to exceptional deposit growth which allowed us to replace higher-cost Federal Home Loan Bank borrowings with lower cost core deposits. Total deposit funding costs, including noninterest-bearing deposits declined 13 basis points year-over-year and 8 basis points quarter-over-quarter to 184 basis points. For the fourth quarter, noninterest income of $43.3 million increased 19% year-over-year due primarily to the acquisition of Premier and for the year, we reported record noninterest income of $167 million, once again, due to the acquisition of Premier and organic growth, including strong treasury management revenue. We again saw a nice improvement in gross swap fees, which increased $2.1 million year-over-year to $3.4 million in the fourth quarter and doubled to $10 million for the full year reflecting both the interest rate environment and traction within our newest markets. Trust fees were also at record levels for both the fourth quarter and the year. Noninterest expense, excluding restructuring and merger-related costs for the fourth quarter of 2025 was $144.4 million, an increase of 44% year-over-year due to the addition of Premier's expense base, higher core deposit intangible asset amortization that was created from the acquisition and higher FDIC insurance expense due to our larger asset size. On a similar basis, operating expenses were down slightly from the third quarter reflecting our focus on managing discretionary expenses. As I mentioned, our fourth quarter efficiency ratio came in just below 52%. I'd like to highlight here that we have updated our methodology for calculating our efficiency ratio to exclude both net security gains or losses from the denominator and amortization of intangibles from the numerator. This update makes our ratio more consistent with how our peers and other organizations calculate efficiency ratio and the ratios for all periods reported in our fourth quarter earnings release reflect this change and a reconciliation can be found in the non-GAAP measures section of the release. Turning to capital. During the fourth quarter, we redeemed $150 million of our outstanding Series A preferred stock on November 15 and $50 million of sub debt acquired from Premier on December 30, using the proceeds from our Series B preferred stock offering. As noted in yesterday's earnings release, preferred dividends reduced earnings available to common shareholders by $13 million, which represented the overlapping quarterly dividends on both the Series A and Series B preferred stock as well as the Series A redemption premium. Our CET1 ratio as of December 31 improved 24 basis points to 10.34% and we anticipated to build 15 to 20 basis points per quarter on a go-forward basis. Turning to our outlook for 2026. We are currently modeling two 25 basis point Fed rate cuts in April and July. Reflecting our exceptional fourth quarter deposit growth, which accelerated margin expansion, we anticipate our first quarter net interest margin to be roughly consistent with our fourth quarter margin of 3.61% and then increase 3 to 5 basis points in the second quarter and then modestly grow into the high 3.60% range in the back half of the year. This assumes, among other things, that loan growth is fully funded by deposits and a slightly steeper yield curve. Generally speaking, we modeled first quarter fee income overall to be consistent with the fourth quarter. Trust fees should benefit modestly from organic growth and influenced by equity and fixed income market trends. And as a reminder, first quarter trust fees are seasonally higher due to tax preparation fees. Securities brokerage revenue is anticipated to grow slightly from the range of the last few quarters due to modest organic growth. Mortgage banking should grow modestly over 2025 beginning in the spring, driven by improved market conditions and recent hiring initiatives and total treasury management revenues should see increases from 2025 as the compounding effect of our services continue to expand. Gross commercial swap fee income, excluding market adjustments, should be in the $7 million to $10 million range. Fully debt benefit income added $700,000 to the fourth quarter, which is not expected to repeat during 2026. And similarly, the fourth quarter loss on the sale of assets is not expected to repeat. We remain focused on delivering disciplined expense management to drive positive operating leverage and we will continue our efforts throughout 2026. As previously disclosed, we successfully closed 27 financial centers on January 23rd and the anticipated annual savings of approximately $6 million will begin to be realized midway through the first quarter of 2026 hoping to offset the impact of inflation. Occupancy expense should be flat to slightly down as compared to 2025 due to branch optimization efforts, while equipment and software expenses are expected to increase somewhat as compared to $25 million as we continue to invest in products, services and technology to improve the customer experience and drive revenue growth. Marketing is expected to increase approximately $800,000 per quarter due to targeting new customers, general campaigns to increase brand awareness in our newer markets and deepen relationships with existing customers with a focus on deposit gathering campaigns. Based on what we know today, we expect our expense run rate during the first quarter to be roughly consistent with the fourth quarter increase in the second quarter from midyear merit increases, revenue-producing hires and marketing initiatives and then grow modestly in the back half of the year from the full effect of annual merit increases and investment initiatives in revenue-enhancing technology. The provision for credit losses will depend upon changes to the macroeconomic forecast and qualitative factors as well as various credit quality metrics, including potential charge-offs, criticized and classified loan balances delinquencies, changes in prepayment speeds and future loan growth. Beginning with the first quarter of 2026, the dividends on our Series B preferred stock will be $4.24 million per quarter. And lastly, we currently anticipate our full year effective tax rate to be between 20.5% and 21.5%, which is slightly higher than 2025 due to a lower percentage of tax-exempt income to total income. And so overall, we were pleased with our growth during 2025 and excited about the opportunities in 2026 as we continue to execute growth initiatives to deliver shareholder value. Operator, we're now ready to take the questions. Would you please review the instructions? Operator: [Operator Instructions] Our first question comes from Daniel Tamayo with Raymond James. Daniel Tamayo: Yes. Maybe just to start off, Jeff, on the loan growth expectation and the payoffs expectation embedded in that. I guess if you're thinking about the -- I think you said $600 million to $800 million in '26 weighted to the first half of the year. I'm assuming that implies kind of a step down from the fourth quarter number, which was really elevated to $415 million. But maybe just walk us through how you're thinking about the pace of payoffs through the year? And what's driving that assumption in your modeling? Jeffrey Jackson: Yes, sure. So obviously, we had a tremendous amount of payoffs last year. We do think some of that will continue, especially in the first half of the year. What we've been seeing, as we've mentioned, is large CRE payoffs, whether they're selling or whether they're refinancing to the permanent market. The pipelines continue to remain really strong. So I think that will be an offset to the payoffs. But if you think about looking back when people refinanced projects when rates were much lower prior to rates getting elevated. Normally, we would do a construction loan and then it would become stabilized and then it would typically roll off our and all banks' balance sheets. I think what you had was because rates elevated and went up so quickly, these loans stayed on ours and other banks' balance sheets for a lot longer period of time. Now that you've seen rates slightly come down and permanent marketing is really opening up we've seen these elevated payoffs. We're no different than, I think, many other banks who do a lot of CRE. But as far as this year, we do believe, just based on our current forecast and talking to customers that it should slowed down, especially compared to fourth quarter. And with putting that together along with our pipelines continuing to remain incredibly strong on top of just the other opportunities we have, with the LPOs and health care, and I can get into that more later. But that's why we feel like loan growth should be in the mid single digits. And depending on how the back half of the year goes, could be even better. Daniel Tamayo: That's great. And you actually took my next question or you started to, which is perfect. Maybe you can give us some more details on that health care vertical. Jeffrey Jackson: Yes. Yes. It was a tremendous lift for us last year. The team, I believe, did around $500 million in new loans. We had a tremendous amount of deposits and fees. I believe they accounted for about $3 million of the swap fees that we did last year as well. So we feel like that will be one of the main growth engines of us for this year and feel like that is a great offset to many of the CRE payoffs that we should see in the first quarter even. Also kind of following up with the LPOs, those are really going well. Also, Chattanooga, Knoxville, Northern Virginia has really started to take off. And we're really continuing to look at other cities. I've mentioned Richmond before, but also looking at Atlanta and maybe even other southeastern cities as we move forward. We really kind of feel like we perfected the LPO strategy. And we're seeing it in our results, we're seeing it in our pipelines, and we're going to continue doing that, I would say, the rest of this year. Operator: Our next question comes from Russell Gunther with Stephens. Russell Elliott Gunther: I wanted to start on the expense guide. I appreciate the color there. It sounds like you're going to be flat in 1Q, step up a bit in 2Q. We had the branch closures kind of early in the quarter. So fair to say that that's all captured in this guide, the full savings from that. And then you guys tend to evaluate the branch network on an annual basis, typically in the back half of the year. Is that something that you would look to do again this year? And is any of that reflected in your 2026 commentary, Dan? Jeffrey Jackson: Yes, I'll take the branch piece. Absolutely. So as you know, we always evaluate the branch network, just throwing out that since 2019, we've closed about 93 branches. So I would anticipate us to continue to evaluate that. It is not in any of these numbers, just to be clear. But yes, I think it's safe to say we will definitely evaluate it, and that would be potential addition to reduce our expenses at some point in time this year. Russell Elliott Gunther: Okay. Excellent. And then just a follow-up question or second question for me, switching gears to the margin outlook. Maybe, Dan, if you could just address the puts and takes behind the cadence of the NIM, flat in the coming quarter, a nice step up 2Q and then the moderation. What's sort of underpinning your expectations for that glide path? Daniel Weiss: Yes. Sure, Russell. I think first, what I would say is if you think about the guidance that we've been providing 3 to 5 basis points of margin improvement per quarter. What we really saw here, and I mentioned this in the prepared commentary, in the fourth quarter was just extraordinary growth in deposits, particularly noninterest-bearing. And that deposit growth occurred pretty early in the fourth quarter and was at time $500 million plus intra-quarter. And so we were able to pay down Federal Home Loan Bank borrowings during a good maturity of the quarter, which kind of provided a really nice lift to margin. So that's how we kind of picked up 8 basis points of margin improvement or expansion over the third quarter versus kind of that 3% to 5% that we were projecting. But what I would say is we really kind of effectively pulled forward, I would say, the next 3 to 5 basis points that would have otherwise been projected for the first quarter into the fourth quarter, and that's how we get kind of a flatter margin just on a linked quarter basis when we look towards the first quarter. I would also tell you, typically, we see deposit flows like outflows in the early half or the first half, really the first quarter. And we've seen those. And so that's another like kind of what we see as like a headwind, something that normally would -- if it's very normal from history. But at the same time, whenever you've got as much deposit growth as we had intra-quarter throughout the fourth quarter and then kind of some of those deposits pulling back some for the first half of the first quarter, that also kind of -- you're borrowing for the Federal Home Loan Bank at 4% instead of holding noninterest-bearing assets or liabilities that are funding at 2%. So I think that's really what is driving for the most part, that flattish margin compared to the first quarter. But then whenever we look forward into the second quarter, kind of 3 to 5 basis points is what we're guiding to, recognizing once again kind of the benefit -- of the continued benefit and the grind of loan and security repricing, loan growth, et cetera. We continue to see and expect to see reduction in cost of funds. We'll continue to see quick kind of downward repricing of our short-term Federal Home Loan Bank borrowings. Of our $1.2 billion, $1.1 billion is kind of 6 weeks or less. And so that -- all of this kind of will help drive that margin improvement. It's happening in the background in the first quarter as well. It's just not as apparent. The other piece I would just say is that the CD book will continue to reprice, particularly it becomes more evident in the second quarter. We have about $2.1 billion in CDs that are going to be repricing here in the next 2 quarters. About $1 billion is repricing here in the first quarter from kind of 3.75% downward 25 to 50 basis points and then another $1.1 billion in the second quarter. And really, the repricing of CDs here in the first quarter from that 3.75% down into the, say, 3.25% range is where we also see some nice lift in terms of margin as we're going to continue to see funding cost accelerate downward relative to the reduction in loan yields. So I think that's kind of how we look at it. And then again, that continued grind into the back half of the year gets us as we model today, somewhere in the high 360s. Operator: Our next question comes from Manuel Navas with Piper Sandler. Could you just speak to. Manuel Navas: Could you just speak to within the NIM, if there's a little bit of back book repricing that is helping on the loan yields? I know that the floating rates will come down a bit. And also, what are kind of new loan yields coming in at? Just trying to get some more on the asset side dynamics in the NIM... Daniel Weiss: Yes, sure. So we do have about $400 million of loans -- fixed rate loans that will be repricing over the next 12 months off of -- with a weighted average rate of about 4.5%. And so I would anticipate those to be replaced or refinanced, et cetera, somewhere in that like low 6%, high 5% range. I would tell you that if you look at within the presentation, you can see that the weighted average yield on new loans originated in the fourth quarter was right around 6.15%. I would tell you the spot rate for the month of December was just above 6% to kind of 6.01%, 6.02%. So that's kind of where we're at and what we're projecting more or less here for the first quarter. The other thing I'll mention is just if we think about margin benefit longer term is the securities book continues to reprice as well. So we've got about $250 million of cash flows kicking off of that securities portfolio. Those yields are about 3.3%. And right now, we're investing at about 4.7% roughly. So picking up between 125 and 150 basis points in yield on $250 million of cash flows coming in. Manuel Navas: Is that $250 million per quarter? Daniel Weiss: Per quarter. Manuel Navas: Yes. Okay. And then shifting over to capital for a moment. I appreciate the commentary. Just shifting over to capital. As you build and TCE has gotten over 8%, CET1 is at 10.3%. Can you discuss your kind of capital deployment priorities, growth, but also just kind of where would M&A or buybacks fit in? Jeffrey Jackson: Yes, sure. First, we'd start with the dividends, obviously committed to the dividend. Then we would go to loan growth and making sure we can obviously fund the loan growth with our strong capital levels. Then I would put in buybacks. We've talked about our targets being 10.5% to 11% CET1 around those ranges, we would look to buy back. And then I would put M&A at distant fourth. Right now, there -- we don't see that happening this year. We're really focused on the first 3. And specifically, when it looks at growth, obviously, we have a lot of opportunities, but we are also seeing really tremendous opportunities to acquire bankers and talented individuals to come on our team. But those would be the capital priorities. Glad to dig into any of the 4. But once again, dividends, growth, buybacks and then fare distant M&A. Daniel Weiss: Yes. And I would just add on to that, that we're growing CET1 right now at about 15 to 20 basis points a quarter. So the print that we had for the fourth quarter, 10.34% CET1, that pretty comfortably gets us over that 10.5% by the end of the second quarter. And so that does offer, as Jeff said, some flexibility there as we think about where organic growth is relative to, say, maybe beginning to explore buyback to the extent that growth opportunities are slower. Operator: Our next question comes from Catherine Mealor with KBW. Catherine Mealor: One follow-up on the margin, and I apologize if I missed this, but any indication on just what you're expecting for the cadence of fair value accretion over 2026? Daniel Weiss: Yes. So I would say, I believe we had about 27 basis points of accretion here in the fourth quarter. And we were modeling about 25 basis points for the first quarter. And then as I've said in the past, it kind of -- it's a basis point or 2 per quarter, and it runs off over the next 6 years. Catherine Mealor: Okay. Great. That's helpful. And then the reduction in borrowings was great to see this quarter. How should we kind of think about the size of the balance sheet outside of loans and deposits kind of maybe growth in the bond book relative to what we should see from your borrowing base over the course of '26? Daniel Weiss: Sure, yes. So we're going to keep that bond book right around that, call it, 15% to 17% of total assets, it's 16% and we -- that's kind of where we feel is the sweet spot to maintain a nice level of liquidity, but also make sure that we're generating as much return on equity as possible through the higher-yielding loan book. Catherine Mealor: Okay. Great. And then maybe if I could slip one more in on just kind of big picture profitability. It feels like we've got some nice operating leverage coming into '26 6 with the revenue growth the NIM expansion and then growth in fees and your balance sheet, which kind of feels like more -- of a more stable expense base. Are there any kind of profitability target that you would look to as we move through '26? Daniel Weiss: Yes. I mean I would say at a high level, what we've continued to talk about is kind of that ROA being right around that [ 130% ] mark, average tangible common equity somewhere in the high teens. And so that's kind of what I would tell you, what we expect and what we're modeling. Operator: Our next question comes from Karl Shepard with RBC Capital Markets. Karl Shepard: My line cut out a little bit, so I apologize if you covered this. But just on the margin again, so the 3 to 5 basis points, are you saying that sort of burns out as we get later in the year and then maybe that high 3.60% range is kind of appropriate way to think about longer term without giving guidance for '27 or anything like that? Daniel Weiss: Yes, Karl. I would say '27 is a long way away, and it's probably -- it could be difficult to even project the back half of '26. But what we can see, and like I said, in the nearer term, is that continued 3 to 5 basis points of benefit in 2Q. Where it goes in the back half of the year is really going to be dependent on a number of things, including loan pricing, loan competition, deposit pricing, deposit competition, how well we're able to fund our loan growth with deposits and what the cost of those deposits are. So I think all of those things kind of play into the calculus here. So what we can -- we do -- we can see though that the back book, the assets are repricing upward, and that grind continues -- will continue to benefit margin. And like I said, we feel pretty comfortable based on everything we know today that we can get into that high 360s in that back half of the year. Karl Shepard: Okay. That's helpful. And then, I guess, maybe more of a strategic question. So the LPO strategy has been out there for a few years now. You're adding a financial center in Chattanooga. Can you just maybe talk about how these things mature and get to where you want to be and then just opportunity to continue to do new LPOs or, I guess, strengthen some of those markets with additional talent? Just kind of big picture, how you're thinking about that, Jeff? Jeffrey Jackson: Yes, sure. Very excited about the LPOs. So Chattanooga, we should open the first branch in Tennessee. We're anticipating in April. That group has done in over $0.5 billion in loans and has done really great job with full relationships, just to be clear, some deposits and different things, treasury fees, swap fees, et cetera. So what we typically look at is depends on the mass of the team we bring on, the size of the assets and those things. So my goal would be to continue to grow Knoxville in that similar range, add a branch there. Nashville, we're looking to add to that team, but we'll also be looking to add a branch once they get around that $0.5 billion. And then as it relates to future LPOs, once again, that is what we're really focused on this year. We are seeing a tremendous amount of opportunity based on the other M&A going on or leadership changes, et cetera. And so I think that's what you'll be seeing us do this year, expanding in other markets. But most likely, we would start with the LPO offices get a little bit of a loan balances, fee businesses going and then look to at a branch. Obviously, if we took on a much larger team potentially, then we would depending on where it would be, we could add a branch immediately. Obviously, funding for these LPOs is really critical. And having a single branch in those markets, we feel like it gives us a great advantage to add more funding when we start up these LPOs. But once again, I can't tell you what tremendous opportunities we have in some of these markets in the Southeast. And I think you'll be hearing more about that from us in future quarters. Operator: Our next question comes from Dave Bishop with Hovde Group. David Bishop: Jeff, you noted the loan pipeline holding up pretty nicely here. Now you're getting traction from the new production offices and the LTOs. Just curious, and you may not have this number here, but Jeff, any line of sight maybe into the deposit pipeline into the first half of the year, first quarter of the year and maybe what spot deposit costs were exiting the quarter? Jeffrey Jackson: Yes, I'll comment on the pipe and I'll let Dan talk about the cost. But yes, they're still pretty strong. Once again, as Dan mentioned, we kind of go back and look over the last several years. Seasonally, January usually is a down month for us in deposits, but then February builds back up. And usually, we finished with some nice growth at the end of March. So I would say the deposit pipeline still is very good. And for us, we're always looking to bring in full relationships and then our retail employees are doing a great job driving home those deposits as well. So I would imagine that we should still show pretty good growth this year in deposits based on everything I'm seeing. Daniel Weiss: I would just add spot deposit rates at least for the month of December relative to the full quarter's average. Full quarter average is right around 2.45%, December 2.38%, so down about 7 basis points relatively speaking. David Bishop: Got it. Appreciate that color. Then Jeff, maybe a follow-up. You talked about -- I appreciate the color on the new loan offices, especially in Tennessee and Northern Virginia. Are the types of loans you're seeing in those markets different than some of your core legacy markets, size, types of borrowers and such, especially in Northern Virginia, which is a big GovCon market. Just maybe speak to maybe the types of loans you're doing and size relative to the legacy market? Jeffrey Jackson: Yes, sure. Great question. They're pretty similar, to be honest. Once again, we have not changed our credit culture, any policies at all. So we're seeing some CRE, a lot of C&I, some health care. We did a big health care deal in Virginia. But yes, GovCon is part of Northern Virginia and D.C. area, but I can't really say we've done almost none of that. It's really been more CRE, C&I, health care, just similar things that we're doing in all our markets. The great thing that really helps our LPO strategy is we take our existing kind of credit culture and just get great talented bankers in all these markets that can operate within what we like to do, and it's working extremely well. Operator: Our final question today comes from Manuel Navas with Piper Sandler. Manuel Navas: I just wanted to follow up on the fee initiatives and the commercial lending team. You brought up the $6 million in treasury management. Swaps are doing well. And just kind of go into those in a little bit more detail in terms of what could be the growth next year? And what is the uptake in the Premier team using your fee products as well? Jeffrey Jackson: Yes. No, we're very excited about that. So I can tell you that 1.5 years ago, just starting with our treasury management fees, let me take you back a couple of years ago. So I believe in '23, we did about $2 million in treasury management fees. 2024, we did about $4 million. And then last year, we topped $6 million. I think that can continue to grow double digits this year. from a percentage perspective, if you just look at our purchase card, we basically had 5 customers back in, I believe, March of last year. Today, I believe we've got over about 130 customers with about another 45 in the pipeline. We've gone from, call it, $100,000 a month in spend to I believe we've topped $7 million a month in spend, and we think we can get it up to $10 million plus this year, as it relates to the purchase card -- commercial purchase card, multi-card. Then as it relates to swaps, I do believe we were around $9 million in just gross production last year. I think that could easily grow a good amount this year as well to be above $10 million plus depending on how the year goes and what interest rates do. So I think there is some tailwinds in both those fee businesses along with our wealth business, too. We just topped over $10 billion in assets under management when you combine our trust and securities business. So we feel like that's really going to be another driver for our profitability this year, and we could see some tremendous growth. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Jackson for any closing remarks. Jeffrey Jackson: Thank you. 2025 was another year of disciplined growth and strong execution for WesBanco. We strengthened our financial metrics, advanced our strategic priorities and position the company well to continue delivering value for our customers and our shareholders. Thank you for joining us today, and we look forward to speaking with you at one of our upcoming investor events. Have a great week. Operator: Thank you for attending today's presentation. The conference has now concluded. You may now disconnect.