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Operator: Good morning, ladies and gentlemen, and welcome to the Currency Exchange International Q4 Year-end 2025 Financial Results. [Operator Instructions] Also note that this call is being recorded on Thursday, January 22, 2026. And I would like to turn the conference over to Bill Mitoulas, Investor Relations. Please go ahead, sir. Bill Mitoulas: Thank you, Sylvie. Good morning, everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the fourth quarter and 2025 fiscal year. Thanks for joining us. With us today are President and CEO, Randolph Pinna; and Group CFO, Gerhard Barnard. Gerhard will provide an overview of CXI's financial results, his latest perspective on the company's operations and Randolph will then provide his commentary on CXI's strategic initiatives, sales efforts and business activities, after which we'll open it up for your questions. Today's conference call is open to shareholders, prospective shareholders, members of the investment community, including the media. For those of you who may happen to leave the call before its conclusion, please be advised that this conference call will be recorded and then uploaded to CXI's Investor Relations website page, along with financial statements and the MD&A. Please note that this conference call will include forward-looking information, which is based on a number of assumptions, and actual results could differ materially. Please refer to our financial statements and MD&A reports for more information about the factors that could cause these different results and the assumptions that we have made. With that, I'll turn the call over to Gerhard. Gerhard, please go ahead. Gerhard Barnard: Good morning, Bill, and thank you, everyone, for joining today's call. My overview of the company's performance, CXI will also include the results of the discontinued operations of Exchange Bank of Canada, or EBC. These results are presented in U.S. dollars. As a reminder, on February 18, 2025, the group announced its decision to discontinue the operations of it's wholly owned subsidiary, Exchange Bank of Canada. Now EBC ceased operations as of October 31, 2025. And on December 19, EBC issued its year-end audited financial statements to its regulators. EBC has formally applied to OSFI to recommend approval from the Minister of Finance for the discontinuance from the Bank Act. Following final regulatory approval, management and the directors will liquidate the remaining assets and liabilities and distribute EBC's net assets to CXI, its sole shareholder. Management anticipates that all required regulatory approvals for discontinuance will be granted during the second quarter -- second fiscal quarter of 2026. Now starting the second quarter of 2025 and following the Board's decision to discontinue the bank's operations, the group updated its financial statements presentation to present continuing and discontinuing operations separately in accordance with IFRS accounting standards. Therefore, included in the group's financial statements are the results of the U.S. or United States operations, that's CXI, which is under continuing operations and the results of Exchange Bank of Canada, EBC under discontinued operations. Before we go into the detail of the various results, I'd like to note that the group measures and evaluates its performance using several financial metrics and measures, some of which do not have standardized meanings under general accepted accounting principles or GAAP and may not be comparable to other companies. We call these measures non-GAAP financial measures and/or adjusted results. Management believes that these measures are more reflective of its operating results and provide a better understanding of management's perspective on the performance of the company. These measures enhance the comparability of our financial performance for the current period with the corresponding period in 2024. Management included a full reconciliation of the key performance and non-GAAP financial measures in the MD&A. I think it's Page 24, 25. When we refer to reported results, we refer to results as reported in the financial statement based on IFRS, the audited results. Whether we refer to adjusted results such as adjusted net income, we refer to performance non-GAAP measures. Now the group reported net income of $10.3 million for the year ended October 31, 2025, an increase of $7.8 million or 317% over the prior year with yearly revenue growth of 5%. This 2025 reported net income reflected $14 million of net income from continuing operations at CXI and a net loss of roughly $3.7 million from discontinued operations, Exchange Bank of Canada. Reported unadjusted results for the continuing operations included nonrecurring items restructuring charges, roughly $300,000, $400,000 related to the closure of CXI's Miami vault and about $200,000 related to the discontinued operations in Canada. Now it is important to note that the reported results of the prior year 2024 included nonrecurring items related to the discontinued operations and represented impairment losses, regulatory compliance charges, other tax items, and that totaled $7.7 million. Now excluding restructuring and nonrecurring charges, adjusted net income from continuing operations increased to $14.5 million, a 10% increase, and the group's adjusted net income increased to $10.8 million, an increase of 6% -- the group's adjusted diluted earnings per share increased to $1.77 or $1.77, which is a 14% increase over the prior year. Now certain operating expenses and personnel costs previously shared with EDC were fully assumed by CXI during the year. The annualized estimate of these costs, we call the stranded costs, was initially approximately $3 million after tax. However, it is now expected that the actual figure will be closer to 90% of this original estimate once the full 12-month period has been completed. With that, here is a summary of our current fourth quarter's results compared to the same quarter in 2024. Revenue grew to $19.8 million, up by $1.4 million or 8%. Operating expenses increased to roughly $13 million, up by $743,000 or 6%. So revenue up 8%, expenses up 6%. Reported EBITDA grew to $6.4 million, roughly 4% and adjusted EBITDA grew to $6.8 million by close to $0.75 million or 10% over last year. Adjusted group net income grew to $3.3 million or by close to $0.5 million or 19% as a result of restructuring charges related to the closure of the Miami vault and charges related to EBC discontinued, which were partially offset by a recovery related to the judgment by the Federal Court of Canada, which reduced EBC's administrative monetary penalty by $1 million or CAD 1.4 million as agreed by both parties. Revenue growth was driven by 31% growth in the payments product line, 17% of CXI's total revenue is now from payments and a 4% growth -- in the banknotes revenue, 83% of CSI's total revenue is in the banknotes product line, primarily through direct-to-consumer channels. Now payments grew $800,000 or 31% of -- and it's roughly 17% of the total revenue. This growth was supported by a 40% increase in business trading volume and almost $2.1 billion due to the increased activity from existing financial institution customers and the onboarding of new customers. So that trading volume literally up 40% in this quarter. Wholesale banknotes revenue remained fairly flat year-over-year, presented roughly 40% of our revenue. Trading volumes declined slightly due to the impact of the U.S. federal government shutdown in October 2025, impacting several airports across the nation as well as a slowdown in inbound international travelers, especially from Canada. This slowdown of inbound international travelers has been substantially offset by an increase in outbound travel by U.S. citizens to Europe and Asia. Now let's look at direct-to-consumer banknotes revenue growth of roughly $600,000 or 8% and DTC represents 43% of our total revenue, with growth mainly in the online FX platform due to the increased demand for exotic foreign currencies. During the current quarter, CXI added South Carolina to the states in which CXI's online FX platform operates. Added more than 51 new non-airport agents in several locations and opened a new company-owned branch in New York. Now the following is a highlight of the operating expenses from continuing operations for the fourth quarter of 2025 compared to the prior year's fourth quarter. As I mentioned, CXI's operating expenses increased by roughly $0.75 million or 6%. Variable cost, postage shipping, bank charges, sales commission and incentive compensation totaled $3.4 million, an 8% increase, mostly attributable to shipping costs and bank service charges, partially offset by a decrease in variable compensation costs. Salaries and benefits remained fairly flat compared to the previous quarter, primarily due to general inflationary adjustments. This increase was partially offset by a reduction in headcount resulting from the closure of the Miami vault. Now bank service charges are related to processing payments and banknote transactions with the majority arising from the payments product line, where we realized 40% increase in volume. During the current quarter, CXI fully transitioned its check clearing and payment processing activities away from EBC, eliminating the use of EBC's correspondent bank for such transactions. As a result, 100% of CXI's bank fees for the current quarter were reported in continuing operations. Now in the same period last year, bank charges incurred through EBC's correspondent banking relations were reported under discontinued operations. So you can see a bit of a change there and where we reported it. This transition accounted for roughly $150,000 of the variance reported above, and you'll see the variance in the financial statements and the growth in that cost. The remaining difference was primarily attributed to the 40% significant increase in payment transaction volume and the associated processing costs compared to the prior year. Marketing and publicity efforts grew mainly, and there, we spend a lot of money on growing this marketing and publicity mainly because of CXI's strategic emphasis on target marketing initiatives, comprehensive campaigns, retail investments and the development of our customer referral programs. To align with our corporate objectives, partially supporting the growth of the direct-to-consumer business line. Online FX, DTC marketing campaigns were on Instagram, and social media, really making sure we get the word out. Restructuring impairment charges represented the closure of CXI's Miami vault, and that was roughly $400,000 and impairment charges of assets related to some of our company-owned branches of close to $270,000. Now interest revenue generated from excess cash holdings is noteworthy at the end of October 31, 2025. CXI maintained nearly $25 million in AAA-rated money market funds compared to 0 in the prior year. This was supplemented by interest earned on other investment-bearing bank accounts in the ordinary course of business. The increase in interest income reflects a substantial rise in available excess cash attributable to the decreased working capital requirements as a result of EBC's discontinuance and a well-executed exit plan. Income tax expense in the current quarter reflected an effective tax rate of roughly 18%, where the majority of the decrease below the statutory rate was reflected -- related to the tax benefit from a large amount of stock options exercised during the current quarter and accounted for roughly 9% of this effective tax rate. Now let's look at the year. Summarizing the results of the group for the year 12 months ended October 31, 2025, compared to 2024. Revenue grew to $72.5 million, up by about $3.5 million or 5% and expenses only grew by 3% or $1.2 million to a total of $48.5 million. That gave us net income from continuing operations that grew to $14 million or close to $1 million, $800,000 or 6%. Now reported EBITDA grew to $23.3 million, up $1.6million or 7% and adjusted EBITDA grew 10% to $24 million compared to the previous year, up by $2.2 million. Now it's important to note that adjusted reported group net income, as I said, grew to $10.8 million. That's an increase of $600,000 or 6% as CXI's restructuring charges related to the closure of Miami as well as some legal and advisory fees were adjusted as nonrecurring items. This is for the year now. Now looking at the group's results, EDC's adjusted adjustments almost netted out with recovery from the Canadian Federal Court's judgment reducing EDC's administrative monetary penalty, resulting in a benefit of USD 1 million, together with a net gain related to the lease terminations of roughly $360,000. These benefits were partially offset by severance costs, nonrecurring legal and advisory charges of $650,000 as reported in net discontinued operation results. Now let's look at continued operations consolidated performance for the year compared to the prior year. For the year, the revenue growth was driven by 19% growth in payments product line and a 3% growth in banknotes revenue, primarily through, as mentioned, for the quarter as well, the DTC channels that we have. Now payments revenue grew an impressive 19% or $2 million. As I mentioned, it's now 17% of our total revenue. The growth was supported on a yearly basis by a 31% increase in trading volumes. For the quarter, that was 40%. For the year, we're at 31% increase in trading volumes, primarily from new customers and a slight increase in volume from existing customers to almost $6.7 billion, up from $5.1 billion a year ago. Very proud of the team there. Wholesale banknotes revenue maintained relatively flat year-over-year, representing 42% of the total yearly revenue. Revenue growth came from both existing and new domestic financial institution customers with declining volume from monetary services businesses and international financial institutions. Our international travel levels were generally lower than last year, offset by an increase, as mentioned in the outbound U.S. travel to popular destinations in Europe, Asia and Mexico. Consumer demand for euros and Mexican pesos drove growth, while the Canadian dollar volumes remained lower. DTC direct-to-consumer banknotes revenue grew by $1.1 million or 4%, and that represents 41% of our yearly revenue with growth mainly from our online FX platform due to the increased demand for exotic currencies and the addition of 3 new states during the year. At October 31, 2025, CXI had 39 company-owned branch locations and operated in 50 airport agents, 3 more locations compared to last year, and we had 468 non-airport agent locations, almost 245 more locations than the prior year. The following is a highlight of our operating expenses for the continuing operations for the year. CXI operating expenses increased by $1.2 million or 3% year-over-year. Now that's an important number because variable costs posted shipping, bank charges, sales commission and incentive compensation totaled $11.8 million, only a 1% decrease due to a slight decline in variable compensation cost. The ratio comparing total operating expenses to revenue for the current year improved to 67% compared to 69% last year. Now stock-based compensation declined due to a 5% decline in share price throughout the year in comparison to last year where the share price grew roughly 25%, which in turn reflected the increase in debt expense last year. Foreign exchange gains for the current year were primarily driven by the U.S. dollars depreciation against major currencies during the second quarter and the first half of the third quarter. The euro and British pound strengthened notably against the dollar, while the Mexican peso recovered from early year weakness, contributing to the favorable revaluation of banknotes holdings. Gains on euro and a basket of unhedged currencies exceeded losses on Mexican peso inventory for the year. Foreign exchange losses in the same period in the prior year were largely driven by the weakening of the Mexican peso against the U.S. dollar compounded by higher overall hedging costs. Now let's look at discontinued operations related to Exchange Bank of Canada, where the bank had a net loss of $1.1 million in the fourth quarter of 2025 compared to a loss of roughly $6.1 million in the same period last year. For the year, the bank added a net loss -- the bank had a net loss of $3.7 million compared to a net loss of $10.7 million for the same period in the prior year. That's where all those adjustments and write-offs happens. Diluted loss per share from discontinued operations was a loss of $0.18 for the fourth quarter and a loss of $0.61 for the year compared to $0.97 and $1.70 for the same 3- and 12-month periods in the prior year. Once final regulatory approval has been obtained, the Board of Directors, as I said, plan to liquidate the remaining assets and liabilities of EBC and distribute those net assets to CXI, its sole shareholder. As of October 31, the net assets directly associated with the disposal group, EBC, were approximately USD 5 million. Now let's review the balance sheet at year-end. Due to the company's business being subjected to seasonality, CXI uses a 12-month trailing net income amount to calculate ROE, which has been relatively consistent at 13% over the last 12 months and includes the discontinued operations results. CXI had net working capital of $73 million and a total equity of $85 million and 100% available unused line of credit amounting to $40 million. As indicated on Page 22 of the year-end financial statements, CXI reported a cash balance of $95.5 million. Additionally, approximately $5 million, as I mentioned, is held in EBC, resulting in a total cash position slightly exceeding $100 million. Now it is important to note that cash serves as CXI's primary product. It is our widgets, primarily used for transactional activities within the banknote segment. CXI had $53.2 million cash held in the form of banknote inventory in transit in vaults, tolls and on consignment locations at year-end. CXI maintains cyclical banknote inventories with optimal levels ranging from $50 million to $70 million, depending on the travel season. Now cash deposited in bank accounts totaled $42.2 million. This total $42.2 million includes the $25 million of excess cash designated for investment purposes. So that's the $25 million that we had at the end of the year in AAA-rated money market funds. The remaining balance of this $42 million is comprised of minimum cash reserves maintained by CXI in bank accounts with select banking partners to support our banknote settlement operations as well as operating cash balances corresponding with customer holding accounts. Maximizing shareholder returns through share buybacks under the normal course issuer bid, NCIB or share buyback continues to be a primary objective. Over the past year, CXI acquired or acquired and canceled 312,300 common shares at prevailing market prices on the TSX totaling $4.75 million. On November 26, 2025, the TSX accepted CXI's notice of intention to make another NCIB and an automatic share purchase plan to purchase for cancellation, a maximum of 360,000 common shares, representing 10% of the company's public float as of November 18, 2025. As of yesterday, CXI purchased for cancellation approximately 170,000 common shares. Now at this time, I will turn the call over to Randolph Pinna, our CEO, to provide his perspective. Thank you, Randolph. Randolph Pinna: Thank you, Gerhard, for the detailed review. And thank you, everybody, for joining, especially those out West since I know it's quite early there. To give you guys time to ask questions, I'm going to try to keep this as short as possible, but I do want to highlight the main things from my perspective, please. So to begin with, as usual and top of mind is Exchange Bank of Canada's discontinuance. As you know, we executed on a discontinuance plan to the point where we are now, which is we have closed all operations last fiscal year. We took care of all the employees. So there -- most of them have all found new homes. All of our customers have been referred to the 2 referral relationships we have and the feedback has been good that the customers have switched and they are trading with those new providers. So therefore, in layman's term, I would say we're pretty much done. and we're just now waiting on the paperwork final process. But all dealings with regulators, employees, customers has all been satisfied, and it is just now in the final approval process for full discontinuance and our complete exit from Canada, which is expected in this second quarter that we're now just starting. Turning and my focus has been now 100% on CXI. And by the way, on Exchange Bank, I do want to just do a hats off to Katie Davis, our CFO of the bank and our Group Treasurer, who led the execution of that detailed discontinuance plan to a key. And I want to thank all of the parties, both regulators, employees, legal advisers, everyone involved for their contribution to sticking to the plan so that we can discontinue as expected. So back to CXI. The main business, as we all know, is banknotes. And I will address that at a high level after I just covered the consumer unit and the wholesale unit and what we're doing. The consumer unit is what has shown continued growth primarily because of our e-commerce channel. We now have the ability to deliver currency to homes or businesses in 46 states, representing over 93% of the entire U.S. population. We see tremendous growth in this. In fact, we've done a survey -- a qualified survey confirming that there is a huge upside potential to continue to be able to sell currencies across America, and this will remain a focus. We are also continuing to have brick-and-mortar stores. Some of our stores are very good, and we've identified new stores like in New York, Carolina and others to be announced. We will continue to invest in our direct-to-consumer business by adding agent locations. As you saw and Gerhard pointed out, we've grown our agents -- non-airport agents from 225 to 468, and we see a tremendous amount of opportunity going to existing retailers across the country and adding a significant value service like currency exchange to complement their current offerings. So we do see upside potential in all of the consumer area. While the wholesale banknote business was flat, this was primarily due to a reduction of a few customers and overall inbound travel being affected. We see upside potential in wholesale because our pipeline is full. We do have other financial institutions in the pipeline, both credit unions as well as banks, and we do have a renewed focus on banknote sales as a company. Before I go to payments, I do just want to talk about what some have called the melting iceberg. Reality is, if you look around the whole world, 5 of the major countries, America, Canada, Australia, Germany and England have all shown for the last 3 years that cash usage is slightly going up. Looking at cash providers such as the ATMs, Euronet, the largest operator of ATMs in the world continues to show growth in ATM output, cash output. So cash will be still king. Just as I'm looking at my notes on paper, people thought we would be paperless by now. Cash is here to stay. Central banks wanted to have digital currency. The U.S. abandoned its digital dollar project that was being led by the Federal Reserve and realized that cash is king. On a marketing front, I had verbal commitment from many of our customers as well as even competitors, banks, currency exchanges in Europe, Canada and America, including CXI, have already all verbally committed to putting marketing dollars towards educating younger consumers about cash as well as pushing for legal legislation to ban the stores that are going cashless. Not only are the currency exchanges and select banks willing to participate, there's been good support from the armored car companies who move this cash around the world as well as the manufacturers of note acceptance machines and cash processing machines. So there will be a unification soon of all of these -- a coalition, if you will, of all of these people that have a pro cash interest. And we feel that you will see an improvement in cash usage, and we will be a part of that trying to drive the cash is king movement because cash is freedom. So moving over to payments. We will continue to diversify our revenue sources in payments. You can see that our focus in the last few years in growing our payments business is compounding. We are continuing to see incredible demand for our payment offerings. While our investment with Jack Henry and Fiserv and the other core bank software providers is working well. We will continue to grow those relationships doing our service of international payments as well as U.S. dollar payments internationally and even potentially domestically. We will continue to invest into this business. We are now, as you know, EDC closed, so we gave up our Swift membership there. CXI is now fully a Swift member using the full services of Swift and that capabilities integrated with our technology has enhanced banks and credit unions' ability to offer international payments to their clients. We are also current with the new stablecoin movement. We have -- are in the final stages of onboarding with a major stablecoin operator to test a USDC capability for moving domestic dollars in America. So our focus is going to continue to invest into payments. And we are -- as I said, our pipeline is full, and we will continue to quickly grow this business as we focus our overall growth efforts for financial institutions credit unions and nonbank customers. Well, that turns us to the M&A area. We have a lot of cash. We are looking to do a strategic accretive type of transaction in the payment spaces, the prices are too high. We will not overpay for an asset, but that looking for strategic opportunities is a main focus of myself, the management team as well as the Board of Directors. Lastly, I just want to remind everyone in March is our Annual Shareholder Meeting since we're no longer really in Canada, even though we're on the TSX for now, we will be having our Annual Shareholder Meeting at our head office, our headquarters in Orlando. And so we really hope you can come in person. We are working on the technology capability so that you can video in should you not be able to physically attend, but I look forward to seeing you in person ideally in March. So I'll end it there and open it up for questions. Thank you. Operator: [Operator Instructions] And your first question will be from Robin Cornwell at Catalyst Research. Robin Cornwell: It's nice to see these results are perking up very well. My first question is with Gerhard. Gerhard, the $3 million expenses that we're talking about, are they now kind of fully reflected in the expenses? Gerhard Barnard: Robert, a lot of them are in there. Obviously, as we exited EBC, it moved from discontinued operations into continued operations. Bank charges are fully there in the fourth quarter, salaries and wages for the people that transferred are fully incorporated in the fourth quarter, not on the yearly numbers. As you know, we exited EBC during the 2025 financial year. But in our Q1 '26, it will be fully incorporated. Robin Cornwell: Okay. And Randolph, when you were looking for your future -- discussing your future growth, what about the software for as a service? I think I've asked this before, but where do you see that now because you've sort of got a new lease on life here going forward. And that's a very important part of your structure, your software. What are your thoughts on that? Randolph Pinna: We -- before we roll out nationally, we have done a pilot with 4 financial institutions in the U.S. utilizing our relationship with the Federal Reserve, part of what's called the Fed Direct program. And so we do have a direct connection to the Federal Reserve, and we are receiving monthly fee income for the usage of our software. Again, the domestic processing in America is not CXI actually touching the U.S. dollar moving from, let's say, a Florida bank to a California bank. We are actually using the connection, which is our software that is often in these 4 cases, we're already in the bank because they use us for either international wires and cash services. And they will -- it connects that bank to their own account at the Federal Reserve by using this one platform and us as the one provider. And so we do see that revenue from Software as a Service for this service will grow. At this point, it is not a material item to have a separate line item on it, but that is another way of growing our payments business. So we do, as I said, see that these growth rates in payments is sustainable this year and hopefully even larger based on the success of our previous investments and integrations that we've done. Does that answer your question, Robin? Robin Cornwell: Yes. Thank you. And the payments to grow that payments business, are you continually adding more people to drive that? Randolph Pinna: Well, we have been conservative on our hiring. We -- controlling our costs is critical, especially in this last year where there's been a lot of layoffs. We are, again, just using the existing integrations we have. So if you're familiar with how that works is the software providers that provide core banking systems have a whole variety of banks and credit unions using their software, and we have continued to grow that. So it's just a matter of working these lists, and we have a sales team of about 10, and we feel that's sufficient. We are adding one more person dedicated for banknote sales. But as far as payment sales, we are -- our pipeline is good, and we are executing on adding new clients every week doing new payments. And so therefore, I'm comfortable with the current team and our marketing to the existing customers we have that haven't switched to the wires to us yet or the new clients that are on these lists because of the integrations with these core software providers. Operator: [Operator Instructions] The next question will be from Jim Byrne at Acumen Capital. Jim Byrne: Randolph, maybe just on the online FX and direct-to-consumer, just thinking you're pretty much in all 50 states now. You mentioned some agency adds and some new stores as well. But I mean, when you go into a new state, can you talk about kind of the ramp-up of revenue and profitability on a new state versus something that's been operating for a couple of years? I mean is it -- you kind of see an immediate impact and then profitability grows after a certain level of revenue? Maybe just talk about that ramp up. Randolph Pinna: Yes. I'm not -- at least in my connection, your question was a bit faint. So hopefully, I got it. Basically, I think it is what do we expect when we go into a new state that we didn't have a license in. And so I've required that we have a business case to support why we're going to get a license in a certain state. For example, to take an extreme one, we don't have yet the business case to support having a license in Alaska. There are several states that we are still applying to because we do have a business case, and that is driven not just by the online home delivery service. So a business case that supports a new state license is usually a combination of the online home delivery, so the population of that state, but also the opportunity for agents. As you know, we are probably the primary provider to the largest automobile club in America, AAA. And they have what they call their AAA clubs in each of these states. And so that between the home delivery and the agent possibilities support us going in through the state. As far as the dollars and cents, each state is different, and Gerhard is probably closer to the numbers to answer it fuller if you need that. But basically, we do enter a state based on the projected expectation we see in a state, which will cover your administrative costs, the fees and all of that to do it. So did that answer your question, Jim? Jim Byrne: Yes. Sorry about that. I was kind of just thinking, as I said, you're kind of maxing out the number of states you're going to penetrate here. You still expect growth on the online platform as newer states kind of ramp up? Like have you got mature states that have kind of plateaued in terms of growth rates? Randolph Pinna: No. So that's -- okay. And one, I hear you much better now. Thank you. The online is where we see the most growth in the consumer unit. New stores will add growth as well. But the online, we spent a pretty penny doing a qualified survey of well over -- I think, over 1,000 proven international travelers -- and it shows that there's still about a 50% increase in capability of our home delivery, and we are refining our group marketing plan. The Cash and King campaign is a piece of that. But yes, we do see that there is still upside in every state we're in, and there's still 1 or 2 states that we are applying to now to have that. Eventually, we will probably be licensed in all 50 states. But again, I won't approve a new state approach until we have enough reason, financial incentive to do so. But I think overall, the consumer unit as well as the wholesale unit will show increased growth this year. And that's contrary to this perception of a melting iceberg. Gerhard Barnard: Nevada right now has allowed us an exemption. So we are operating in Nevada. Tennessee requires GAAP financial statements, which means we're reporting under IFRS. So that one will have to sit out until we get the approval to send them IFRS statements. And as Randolph said, Alaska and North Dakota, we are currently deferring just due to that, we call it that management case of determining what the return would be. And as Randolph mentioned, online FX is the scalability of that product is significant. If you think of we've doubled our marketing spend in the last year on driving that revenue growth. And in our planning, that is a very important product line, online FX payments. Jim Byrne: Okay. That's great. And then maybe just lastly, you mentioned the NCIB and the capital allocation priorities through M&A. You are sitting on quite a bit of cash and potentially more cash coming in the door here with the EBC closure. Any thoughts on maybe an SIB or a special distribution or anything like that? Randolph Pinna: Yes, that is a topic that has to be considered every quarter by the Board. Again, we have some -- our eyes set on 1 or 2 opportunities strategic, but because the owners of that business are incredibly large, that process is a very long and slow process. We've even got a focused team to help us try to carve out an asset. However, I can't say it's imminent. Nothing has been signed. As soon as it is, we would tell you, but we are continuing to look for the best use. And right now, the best use is to acquire our stock and retire it. There are restrictions. So an SIB is a next step of that. But as of this quarter, we have not chosen to do that. We do feel that cash -- capital allocation is critical and dividend or an SIB is definitely a good use of cash as well. However, the best use will be to continue to grow our payment and banknote business. But I do not have anything that I can announce today. Operator: The next question will be from Robin Cornwell at Catalyst Research. Robin Cornwell: I just have one quick follow-up. And have you considered changing your year-end back to December 31? Randolph Pinna: That's a good one, Robin. We have discussed that among the accounting team, we would really like to just finish this year-end at October. And then we'll revisit that because we've also, as you'll understand, just want to get through the discontinued operations, make sure we get our focus on the operating entity, CXI. And yes, that's a good point. I'm laughing because it came up in the last week in one of our discussions and say it would allow us to have a better Christmas than dealing with auditors. Operator: Next question will be from Peter Rabover of Artko Capital. Peter Rabover: Congratulations on a nice quarter. Randolph, I wouldn't be doing my job if I didn't ask you on the little thing that I caught when you were describing your listing on the Toronto Stock Exchange as for now. Any comment that you would like to share on your future listing plans? Randolph Pinna: We have been happy with the Toronto Stock Exchange and the Ontario Securities Commission. However, our exit from Canada does invite us to consider NASDAQ. Ironically, one of our employees that worked for me for several years is working there. So we have been in talks with them in sizing up that move. But as Gerhard just said, our focus right now is to really fully exit Canada, get -- which we are 100% focused on America and get some nice clean quarters going forward. But in like a '27, you could see a potential move of our listing from the TSX to NASDAQ. But as of right now, we are not -- just like the SIB, these are all topics that the Board do discuss each quarter, but we have not chosen to hurry up to do that. We don't think anything is on fire. And therefore, running our business as efficiently as we can, generating the highest return for our shareholders and having that cash in our business and growing the value of our business is our #1 priority. Peter Rabover: Great. I appreciate the color. And maybe my second follow-up is on the color for the payments business. I know you guys had a great quarter, 31% and I know it's now 17% of the business because you've exited Canada. Any I guess, how should we think about that 31% in terms of run rate? Is there -- I know you added a state and et cetera. But what do you think the natural growth rate of the market is and what your share is in that market? Maybe that's the way to ask that without asking for future growth guidance. Randolph Pinna: Thank you, Peter. And I do want to highlight which another shareholder told me that the foreign exchange market is probably one of the largest markets in the world because automotive, Toyota, there's a lot of foreign exchange, et cetera. So the payment business as well as cash the foreign exchange market is the largest market. And as I told you, our pipeline for the payments business is tremendous. And there was a good question from Jim saying, or Robin, whoever asked about, am I hiring more people? Right now, we have a sufficient team. We have improved our internal automation and onboarding. Our -- what we call our implementation team is geared up and ready to continue to add customers each week. And so while the new state helps us, it's really a matter of just getting through contract approval with the financial institution, training them, doing the testing and then going rollout, and that is underway. So that 31%, I'm confident to say is sustainable, if not even increasing because now that we're getting bigger, we have more reputation in the payment industry, and we can get even larger financial institutions than what we currently have. And so I feel that our payment business will continue to grow nicely each quarter. And our banknote business will continue -- will get back to growing like it used to do as we did just recently sign a very large financial institution for wholesale banknotes, which is going to be onboarded hopefully in this current quarter and start trading soon thereafter. So we are really doubling down on our sales and implementation of new clients across the United States. Peter Rabover: That's great. So maybe I'll sneak in one more. I know you mentioned Jack Henry and the Fiserv relationship. Any color out of that 31% or I guess maybe as part of your business. How big is that part of the distribution channel, I guess, or part of the growth and as part of the business? Randolph Pinna: So to broaden it than those 2, I named, we have about 5 or 6 integrations and the integrated relationship is well over the 50% mark for sure. So that is the significant component to our payments because, again, we do one provider, one product where we provide all the foreign exchange. And therefore, that allows a bank to use its platform that the tellers are already on and get all the benefits of our enhancements using the common denominator, their core banking system as we've integrated into it. So all the bells and whistles, the Swift lookup, the IBAN validation tool, all the functions that our -- the SWIFT gpi, all of the bells and whistles, if you want to use that term, are available to banks that are already using a core from a Jack Henry or Fiserv as an example. And therefore, that's where that pipeline is and the list of banks that say, yes, I'm already using them. And luckily, a lot of our -- some of these banks are using us for currency. So they're already familiar with us. So yes, that will continue to drive our payment growth. And then as Robin brought up that we soon will be having new opportunities with domestic payments as well, enabling the bank to use our software to do their own wires with the Fed. So we don't have the compliance cost of moving and touching the actual dollars. They will just use it and pay for the service by each login that they have, and that will generate new fee income to the business that's not dependent on international. And so that is an exciting expansion of our payment business this year. Peter Rabover: That's great. And then maybe -- sorry, I'll keep on. So what percent of the business -- or sorry, of your, I guess, distributor business, what you call the Jack Henry and the Fiserv relationships, what percent of that is penetrated relative to what's available? Randolph Pinna: What's available, every bank uses a core. So the entire market upside is there. We are still a very small provider. As you know, there's several large fintechs that have been acquiring other payment businesses and so forth. And so they're there. But the natural competitor are the 3 or 4 mega money banks up in New York example type that are correspondents for the smaller banks, and we are trying to pick those off because those banks are using a software like Jack Henry, and we are needing to convince them to switch to us as a boutique provider as opposed to being just using 1 of the 3 or 4 top largest banks in the country. So there's tremendous upside. And yes, to reiterate, it is because of that integration into these core software providers. Peter Rabover: Okay. Great. And I just want to say thanks for providing the really good color on the excess cash and the return on capital really good to see that as a shareholder. And have a great day. Gerhard Barnard: Thank you for always asking us to do a better job of that. As you see, we listen to our shareholders. Peter Rabover: Not unnoticed. Operator: Thank you. And at this time, gentlemen, it appears we have no other questions registered. Please proceed. Randolph Pinna: Okay. Thank you again for your support, for all the questions. We feel this year we just closed is a successful year. We're continuing to be strongly profitable as a business, all while executing on our strategic vision to focus on America and grow our core of banknotes as well as our payments business. So thank you for your support, and I look forward to hopefully seeing you at our Annual Shareholder Meeting in March. Operator: Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.
Olof Svensson: Good morning, everyone, and welcome to the presentation of EQT's full year results. We have a lot to cover today. Per will start off by reflecting on our strategic positioning and today's announcement that we're entering the fast-growing secondaries market by joining forces with Coller Capital. Teaming up with Coller strengthens our ability to serve clients globally and it unlock growth opportunities for both firms. The transaction is accretive to our fee-related earnings. It accelerates our growth outlook and it will further diversify our platform. Before handing over to Per to share more details, let me share a few highlights on 2025. First, it was our most active exit year ever with fund exits and realizations for co-investors of EUR 34 billion. We invested EUR 16 billion across our strategies globally while providing a co-invest ratio for our clients of close to 1:1. It was a pivotal year for EQT's expansion into evergreens and open-ended strategies across the globe with new product launches and accelerating inflows. We continued to deliver on our fundraising agenda, more than doubling gross inflows to EUR 26 billion. All our key funds continue to develop on or above plan, and our more recent vintages in particular performed strongly. EQT delivered total revenue growth of 16%, while keeping head count largely flat year-over-year. So with those remarks, let me hand over to Per to go through things in more detail. Next slide, please. Per Franzén: Thank you, Olof. Good morning, everyone, from Davos. We have very exciting news to share this morning, and we'll come back to Coller shortly. I'll start by saying a few words about the private markets industry and our strategic positioning. EQT remains well positioned to navigate a fast-changing world and to capture the growth opportunity ahead. There are a number of forces shaping our industry. The geopolitical backdrop remains volatile. We continue to see private market investors wanting to rebalance their portfolios as they are looking to achieve a better global diversification. At EQT, we are well positioned to navigate this environment and to help our clients achieve their strategic portfolio objectives. We want to be the most attractive global provider of international alpha. Through our global sector teams, we engage with our clients to align on their pipeline priorities. And with the help of our local teams in more than 25 countries, we can move quickly in times of market dislocation to unlock attractive thematic opportunities. The combination of our global sector teams with our strong local presence helps us deliver structural uncorrelated alpha as often the sources of alpha across those various countries and regions are uncorrelated. A good example of the investments that we've made into our global platform and how it's paying off is Japan. We built our local presence in Tokyo over many years. And in 2025, we were able to reap the benefits of those investments. In our private capital strategies, we created 2 attractive public to private opportunities, and we continue to have a very attractive pipeline in Japan going forward. The second force, AI that I'd like to touch upon, that will have an impact on most sectors and businesses that we invest into, including, of course, also our own industry and how we run our business at EQT. At EQT, we keep on investing in our AI capabilities. On the investment side, we continue to back AI-driven tailwinds in our early-stage strategies. We make investments into native AI companies. Harvey and Lovable are 2 good recent examples. In our infrastructure platform, we keep on investing into globally leading data center platforms. One of our companies, EdgeConnex is a good example of that, but also into fiber assets and into energy platforms. We're also driving AI adoption across our organization, deploying advanced solutions that enable better decision-making and help us realize synergies across our platform. Over time, we believe that this will help us run our business in a better way, but also in a more efficient way. Private wealth and insurance remain 2 attractive growth opportunities where we see new capital pools emerging. We're making the necessary investments to build our capabilities in those areas, and we expect to see significant capital inflows in this part of our business. Coller will be a catalyst for the insurance segment as we will get access to their capabilities within structured solutions. The rise of secondaries continues, and this part of the market will also going forward, outgrow the rest of the industry. There's a number of structural forces driving that growth. Private markets have grown in size and in relevance. And in some regards, they've become more complex, and we also see public and private markets converging. Clients want to be able to ride the winners, and they want to stay invested in compounding open-ended structures. On the other hand, there's also been a lack of distributions in our industry post pandemic, we saw a slowdown in dealmaking. And as a result, many firms are not able to raise new funds, and that has created more and more zombie funds in our industry. And all of this drives a need for clients to be able to restructure their private market portfolios and to find good liquidity solutions. And in this context, Coller will be an important enabler and really further strengthen our ability to be that strategic partner for our clients. Finally, we see the consolidation of the industry accelerating. Not everyone in the private markets will be able to navigate this environment. We'll be able to make the necessary investments to capture that growth opportunity ahead. So size and reach matter more than ever when it comes to creating real alpha and when it comes to serving clients in the best possible way. And our global platform, our size, being the largest private markets firm in the world outside of the U.S., will continue to be a true differentiator for us. Next slide, please. At EQT, we remain committed to our long-term strategic ambition to keep on building the most attractive scaled private markets firm, delivering industry-leading performance and solutions for clients. By continuing to be that client-centric firm focused on delivering attractive risk-adjusted returns for investors, real alpha, we will also be able to attract the best talent in our industry to our organization and to our portfolio companies. And really that way, creating that virtuous circle that will give us the license to keep on scaling our firm and as a result, over time, also delivering attractive sustainable value creation for shareholders. Next slide, please. In 2025, we made good progress on our strategic ambitions, and we executed well in a volatile environment. We took the opportunity to simplify our organization to ensure that we can remain that entrepreneurial, fast-paced, high-performing organization. We successfully completed a number of leadership transitions. We streamlined our organizational structures and reinforced our focus on accountability, performance and efficiency across the platform. We also integrated our client relations, capital raising and capital markets teams, creating one unified platform well set up to deliver a seamless experience for institutional clients and private wealth distribution partners. And all of this makes us also well prepared to add Coller now as a new business line to the EQT platform. In 2025, we stayed disciplined in our investment pacing, producing a record year for co-investments. We facilitated EUR 14 billion of co-investment opportunities for our clients. That is up from EUR 12 billion in 2024. And we want to -- this is an important tool for us to also going forward, create those deep strategic relationships with the institutional investors. And we want to -- we remain committed to continue to produce that most attractive co-invest to fund commitment ratio in our industry. We did a superb job really in driving realizations in a tricky exit environment. 2025 was actually our most active exit year ever with EUR 34 billion in total of realizations, and that includes EUR 14 billion of realizations out of co-investments that were done together with our clients. And that is just massive outperformance compared to the wider private markets industry in terms of those realizations. A good example is our equity strategy, which is our oldest strategy at EQT. In that part of our business, we sent back close to 30% of NAV, which is approximately 3x the industry average. And notably, we set a new record for distributions and capital gains from a single investment. So in Galderma, in 2025 alone, we realized more than EUR 9 billion of proceeds for fund investors and for our co-investors. And this actually excludes the stake sale that we have announced to L'Oreal that is yet to close. And this investment has generated more than $20 billion so far in capital gains for investors. As a result of that strong performance, we saw a good fundraising momentum. We more than doubled gross inflows to EUR 26 billion. Our evergreen offerings targeting the private wealth segment saw inflows of approximately EUR 2 billion. And we also introduced our first open-ended institutional product, which is exciting. This is the second generation of our active core infrastructure strategy. And the portfolio in Fund I is performing very nicely, and we really see a strong client interest for this fund. Next slide, please. As you've heard me say, I think, many times before, we have actively been looking to establish a presence in the secondaries market for some time now, actually. And this is one of the fastest-growing parts of our industry and building our capabilities in this area is really critical so that we can become an even more stronger and attractive strategic partner for our clients. And so today, I'm just very, very pleased to announce that we have reached an agreement to join forces with Coller Capital. This is really a highly strategic and complementary combination. By joining forces with Jeremy and his team, we want to build a market-leading secondaries platform together. We really have a very high bar for any M&A that we do at EQT and the fit must be just very, very strong. And in this case, from a strategic, performance, culture perspective, Coller checks all the boxes. The strategic fit between our 2 firms is simply excellent. It's highly complementary. And most importantly, the cultural fit, the values fit is very strong. Similar to EQT, Coller is a performance-driven and entrepreneurial organization focused on delivering consistent long-term solutions and returns for investors. And just like EQT, Coller also has that constant improvement mindset and that relentless drive to continue to drive innovation and stay ahead of the curve. At EQT, we like to say everything can always be improved everywhere at all times. Coller's version of this is better never stops. I'm very excited to welcome Jeremy and the entire Coller team to our firm. And I really look forward to working closely with Jeremy as part of the executive leadership team. And together, we will be just incredibly well placed to deliver the most attractive solutions and the most attractive performance for private market investors and to really fully capture that growth opportunity ahead that we see in secondaries. I'll now hand it over to Gustav, who will cover the highlights from our 2025 results together with Olof and Kim, and I believe starting with fundraising. So next slide, please. Gustav Segerberg: Thank you, Per, and good morning, everyone. In 2025, we executed strongly on fundraising across the platform and more than doubled inflows versus last year. Starting with the key funds. Fundraising for BPEA IX continued with strong momentum, having raised $14 billion as of today. We expect to close at the $14.5 billion hard cap in the first quarter. Fundraising for EQT XI continues to be off to a strong start, further helped by the strong exit pace during 2025. Note that in our reporting fee-paying AUM, it does not include EQT XI until activation. And later this year, we expect to launch fundraising for Infrastructure VII. So moving over to our other closed-ended strategies. We are advancing our Healthcare Growth and transition infrastructure fundraisings, having raised approximately EUR 3 billion combined, and we expect to conclude fundraising for Healthcare Growth momentarily. In the fourth quarter, we activated our latest European real estate logistics fund. The fund is expected to close in Q1, and our reporting fee-paying AUM includes almost EUR 3 billion of commitments versus the size of the last fund at EUR 2.1 billion. And then finally, on evergreens and open-ended institutional strategies. In 2025, EQT launched 3 new evergreens, Nexus Infrastructure and Nexus ELTIF Private Equity distributed in Europe and APAC, and a U.S. domiciled private equity vehicle. Hence, our evergreen offering consisted of 5 vehicles at the end of 2025, and we raised close to EUR 2 billion in 2025, while reaching an NAV of around EUR 3.5 billion by year-end. And just last week, we launched a U.S.-domiciled evergreen structure for infrastructure. During the year, we've also introduced our first open-ended structure for institutional clients, as Per mentioned, with our active core infrastructure strategy. This fund is yet to be activated and is not in our fee-generating AUM number as of year-end. However, we continue to be very excited about the prospects of scaling this strategy in the coming years. We've also decided to pursue our first continuation vehicle based on EdgeConneX. This will be an open-ended structure that will allow us to continuously support EdgeConneX's long-term growth opportunity. And with that, I will hand over to Olof to cover investments and realizations. Next slide, please. Olof Svensson: Great. Thank you, Gustav. So looking at the investment activity in 2025, I'd say it reflects our global sourcing machine and our thematic focus. 45% of the EUR 16 billion of fund investments were invested in Europe, about 1/3 in North America and the remaining 20-ish percent across APAC. We invested in a number of high-quality businesses throughout the year, be it the cloud-based software companies such as Fortnox or NEOGOV; industrial tech businesses like Fujitec in Japan or as Per mentioned, AI native investments such as Lovable and Harvey. In real estate, we continue to see attractive risk/reward dynamics. And in our flagship and transition strategy, we invested in areas such as energy, grids, AI infrastructure and transportation companies. And on that note, please do make sure to take the Arlanda Express when you next come and visit us in Stockholm. In total, we provided a further EUR 14 billion of co-invest for our clients, a co-invest ratio of close to 1:1. EQT X and Infrastructure VI are now about 60% to 65% invested, while BPEA IX is 5% to 10% invested. We expect to activate EQT XI around midyear 2026 and Infra VII around year-end. Next slide, please. Turning to exits. It was a breakthrough year in 2025 for exits. Volumes in the EQT funds amounted to more than EUR 19 billion or 70% higher than last year's volumes. Around 2/3 of the fund exits were from funds in carry mode. In addition, we realized EUR 14 billion for our co-investors. The strong activity means that we reached the ambition communicated at the start of the year to execute more than 30 exit events across our key funds. Key fund exits were made at an average gross MOIC of 2.6x above our target return levels. Roughly 40% of the fund exits were minority sales and secondary buyouts. Early in the year, we announced a minority sale in IFS at a gross MOIC of 7x. This is an example of how we actively work with portfolio construction, sending back EUR 3 billion to fund investors while continuing to own an asset that is expected to have an outsized impact on the fund returns for EQT IX. 1/3 of the exits were equity capital markets transactions. And as a result, EQT retained its position as the most active private markets firm across global equity capital markets for the second year in a row. Looking ahead, we believe that fund exits in 2025 is a relevant proxy for '26 if markets continue to be favorable. Our gross pipeline for 2026 is, in other words, similar to 2025 when we had gross realizations of close to EUR 20 billion. And with that, I'll hand over to Kim. Kim Henriksson: Thank you. Thank you, Olof, and good morning, everyone. All of our key funds continue to perform on or above plan. And during the year, key fund valuations increased by 8% on an FX-neutral basis, but let's look at performance by vintage. 4 out of 5 funds raised in 2019 or before are performing above plan, and most of these funds are in exit mode and already derisked. Funds raised 2020 to 2021, which are still in value creation mode, performed predominantly well with value creation of 10% plus on an FX-neutral basis. We did face some headwinds related to idiosyncratic events in a few individual portfolio companies. But with 350 portfolio companies globally, we will always have certain underperforming assets. Risk-taking is part of our model. As a reminder, historically, about 10% to 15% of our investments have returned less than 1x gross MOIC, while the total portfolios have still delivered on or above target returns. In 2025, we also realized some assets with subpar performance, enabling us to refocus on the part of the portfolio where we can create more value. Overall, underlying operational performance was solid across the portfolio and particularly so in our latest generation of key funds, which increased by 15%, excluding FX. 1/3 of our investments in these funds are already performing ahead of plan. Next slide, please. In 2025, carried interest and investment income increased to EUR 448 million on the back of the strong exit activity in funds in carry mode. Looking into 2026, we expect that carried interest will continue to be paced by the key funds already in carry mode. And please note that the figures on this page are based on a simplified and illustrative on-plan scenario. To date, the 4 funds in carry mode have recognized EUR 1.3 billion of carried interest and roughly EUR 600 million remains, and we continue to expect the remaining carry from these funds to be recognized over a multiyear period. The next 2 funds expected to enter carry mode, Infra IV and EQT IX are currently executing on their value creation and realization plans. And we do not expect these funds to enter carry mode in 2026, in line with our previous communication. The final bucket includes the most recent key fund vintages, which are still in value creation mode. In total, the remaining illustrative carry potential in the key funds activated as of today is approximately EUR 9 billion. This is a simplified round number based on a number of assumptions, which are outlined in the appendix. Next slide, please. Let's now look at the financials in a bit more detail. In 2025, we grew fee-related revenues by 9% and delivered a fee-related EBITDA margin of 52%, reflecting also the continued investments we make in our business, for example, the build-out of the evergreen offering. As you know, we initiated and completed a number of efficiency measures during the second half of 2025. And as a result, the number of FTEs was broadly flat year-over-year. We expect to see the full year cost effects of this in 2026 and therefore, expect mid-single-digit total OpEx growth this year. Run rate savings from the efficiencies will, to a degree, be reinvested to support future growth in our priority growth areas, including focused geographies such as Asia and the U.S., focus areas such as AI capabilities, private wealth and of course, the build-out of our new secondaries business. We're ramping up marketing and brand spend, which will remain at meaningfully higher levels going forward. We remain committed to reaching a 55% plus fee-related EBITDA margin at completion of the current fundraising cycle. And we're highly focused on efficiency, scaling and automating parts of our work, including through increased AI adoption. We will continue to keep you posted on this progress and how we see the OpEx outlook beyond 2026. Let me also come back later in the presentation on how the combination with Coller impacts our financials. The Board has proposed a dividend of SEK 5 per share for 2025, representing a growth rate of 16%. And during 2025, we distributed approximately EUR 460 million in dividends to shareholders. And in addition, we repurchased shares for around EUR 300 million. Let me also spend a brief moment on our new revenue disclosures. We have, in our income statement, introduced the concept of fee-related revenues, which consists of the underlying management fees, fee-related performance revenues and transaction, advisory and other fees. Fee-related performance revenues are revenues from our evergreen products that are measured and received on a recurring basis and do not require the realization of underlying assets to materialize. Transaction, advisory and other fees include fees from, for example, debt and equity underwriting and other capital markets activities. With that, I will hand over to Per to cover the Coller combination. Next 2 slides, please. Per Franzén: Thank you, Kim. As I mentioned earlier, secondaries and solutions is becoming an increasingly important part of the private markets ecosystem. GPs are looking for ways to hold on to their best assets for longer, driving the growth of continuation vehicles or GP-led secondaries and LPs are seeking strategic liquidity tools and the ability to actively rebalance their portfolios where LP-led secondaries are a key enabler. And secondaries have now become one of the fastest-growing parts of our industry, and that the market actually grew by more than 40% in 2025 and is expected to more than double from now until 2030. And continuation vehicles are today driving close to 20% of global exit volumes. Next slide, please. With Coller, we're really happy that we found the right partner to enter this segment at scale. Coller shares our values-driven culture, a strong performance mindset and that drive to constantly innovate for clients with an entrepreneurial approach. As a pure-play dedicated secondaries firm, Coller is 100% complementary and a perfect match for us. I'll now hand it over to Gustav to tell you more about Coller's track record, Coller's offering and its client base. Next slide, please. Gustav Segerberg: Thank you, Per. As a pioneer in secondaries, Coller has led many of the first in the industry, such as leading the first ever GP-led transaction almost 30 years ago and continuing to innovate across product categories and client channels. Coller has 35 years of proprietary data from more than 25,000 companies has incorporated AI-enabled underwriting into its investment process. This enables faster and more precise investment decisions, aligning very well with EQT's data-driven investment approach and leading AI capabilities. Their strong investment track record and ability to innovate has allowed them to expand from a single flagship fund in 2021 to today having a multiproduct and multichannel offering investing across both private equity and private credit secondaries. The private equity secondary strategy recently held a successful final close of Fund IX at USD 10.2 billion of fee-generating commitments, up more than 35% compared to the last generation. Since launching the private credit secondary strategy in 2021, Coller has already been able to raise 3 funds with a total of close to USD 5 billion in fee-generating commitments. Next slide, please. The team also shares our strategic commitment to the private wealth opportunity, and their journey closely resembles ours. They -- like us, they have a very deliberate and disciplined focused on product development to launch and ramp up products across asset classes and geographies. Since 2024, Coller has launched 4 evergreen products in total with the current combined NAV of more than USD 4 billion. And expansion continues to show great momentum and inflows are around USD 200 million per month. Coller also recently announced a strategic partnership with State Street along with State Street's investment in Coller. Their partnership gives a unique opportunity to go after the 401(k) market in the U.S. We look forward to exploring what we can do together to strengthen the global distribution of the combined evergreen platform. Next slide, please. Insurance is 1 of the most interesting capital pools in private markets. However, insurance companies operate in a highly regulated environment with strict requirements around capital charges, duration matching, liquidity, ratings and asset-liability management. To participate at scale credit exposure, secondaries and strong structure capabilities are required. This is an area where EQT on a stand-alone basis has been limited on a structural basis, and where Coller today is the clear market leader. Coller is the preferred partner to insurance clients with deep relationships and in-house structuring expertise. They have reached over USD 5 billion in structured products in the last 2 years, including the largest CFO backed by secondaries at USD 3.4 billion. This is a significant growth opportunity for the combined platform and where EQT's scale will be a key enabler. Next slide, please. We believe that this combination and more diversified secondaries platform by bringing together complementary strengths, we can accelerate innovation, deepen client relationships across both institutional and private wealth clients. Together, EQT and Coller are very well positioned to accelerate insurance-related product -- and to Per. Next 2 slides, please. Per Franzén: Thank you, Gustav. In 2025, we took the opportunity to simplify our organization and to clarify our governance to put us in the best possible position to be able to accelerate our strategic M&A agenda. So today, we are very well prepared to add Coller to EQT and to support Jeremy and the team to accelerate their growth independent investment committee. Next slide, please. The Coller team has demonstrated strong fundraising momentum, most recently with the successful close of Fund IX and has earned the strong client trust to expand into new strategies such as credit secondaries over recent years. Today, Coller has around 600 clients and more than half of those will represent new client relationships for EQT. At the same time, EQT brings a base of around 1,400 institutional clients, of which more than 900 clients are not currently invested with Coller, representing a significant opportunity to accelerate growth across the combined platform. The client bases are also complementary. EQT has a strong footprint with sovereign wealth funds, while Coller is more heavily weighted towards private wealth and insurance. So together, we will be able to offer clients a broader and more flexible range of solutions from primary investments to tailored liquidity solutions within one global platform with a real focus on generating alpha and performance. I'll now hand it over to Olof to comment on the transaction structure. Next slide, please. Olof Svensson: Thank you very much, Per. So let me talk about how we have structured this to ensure alignment of interest and this growth orientation. The transaction entails 100% of Coller and EQT will be entitled to 35% of carried interest in all the future funds in line with the EQT setup. We are also acquiring 10% of the carried interest in Private Equity Fund IX that Per just referred to. The deal construct includes a base consideration of $3.2 billion with a growth-oriented contingent consideration in 2029 of up to $500 million. The contingent consideration is structured to incentivize strong growth in the business with full consideration dependent on delivering high 20s, almost 30% fee-related revenue growth until 2029. The base consideration of $3.2 billion will be funded in newly issued EQT AB shares, creating a strong alignment to drive value. At closing, the shareholders of Coller will own approximately 6.5% of EQT, where Jeremy is the main shareholder of Coller's business today. Closing of the transaction is expected in the third quarter of '26. And with that, I'll hand over to Gustav to give us the combined fundraising outlook. Next slide, please. Gustav Segerberg: Thanks, Olof. I'll start on the evergreen side, where the joint offering will compromise more than 10 vehicles distributed across U.S., Europe and Asia. In terms of inflows, Coller increases the H2 2025 annual run rate to around EUR 4 billion. As only 7 out of the 10 plus evergreens where operational during that time frame, we hence expect 2026 to be significantly higher than the H2 2025 annual run rate. We believe that there are significant revenue synergies for the evergreens through the strengthened combined private wealth organization. By leveraging EQT's banking relationships to further accelerate Coller's distribution reach and by jointly tapping into EQT's brand and marketing capabilities. For reference 100% of Coller's evergreen inflows are incremental to fee-generating AUM. Next slide, please. So we are now a bit more than 1 year into our current of that EUR 100 billion based on the funds activated. 2026 is set up to be a very active fundraising year for EQT with 3 flagship funds, a number of other closed-ended strategies and of course EUR 25 billion to EUR 30 billion to the total amount effectively increasing it to roughly EUR 125 billion to EUR 130 billion. And with that, I will hand over to Kim. Next slide, please. Kim Henriksson: Thanks, Gustav. First, a few words on the latest flagship fund, the introduction of credit secondaries and the expansion into private wealth evergreens and structured products. Fee-related revenues were approximately $330 million, nearly all of which were management fees. This number includes catch-up fees as Fund IX was activated in July 2023 and closed on 31st of December 2025. However, it does not reflect the run rate management fees from evergreens due to fee holidays for some products in 2025. From 2026 onwards, all private wealth evergreens will be charging full fees. Across funds, the average fee rate is about 1% and in general, charged on committed capital. It's worth noting, though, that the private wealth evergreens in general charge somewhat higher fee rates with NAV as the fee base and that we see this channel growing faster than the closed-ended funds. Expect Coller to generate fee-related revenue of between $350 million to $375 million. Adjusting for catch-up fees, fee-related revenue is expected to grow in the range mentioned, the 2029 contingent consideration is based on growth in the high 20s. On costs, Coller has a similar profile to EQT, where the majority of operating expenses are salaries and other personnel-related costs. Then fee-related EBITDA margin at around 50%. Next slide, please. So what does the above then mean for the combined platform? We expect Coller to accelerate our fee-related revenue growth from day 1. In terms of carry, the acquisition will not impact our outlook for a number of years since the first fund where EQT has right to carry is a 2024 vintage. As I mentioned, today, Coller has a somewhat lower fee-related EBITDA margin than EQT. But in the near to midterm, however, we expect Coller to be in line with EQT's margin and to grow fee-related expenses. As a result, we maintain our ambition to reach a 55% fee-related EBITDA margin at completion of the current fundraising cycle. I'll now hand over to Per for some concluding remarks. Per Franzén: Adding Coller to EQT is a significant milestone in the development of our firm. Secondaries represents one of the fastest-growing parts of the private markets industry. We're confident that Coller is the best possible platform to build a market-leading secondaries franchise being a pioneer in the space with more than 3 decades of track record and experience. Next slide, please. The combination really means a step change for EQT in terms of scale, growth and revenue profile. Coller will add approximately EUR 28 billion of fee-paying assets under management and EUR 42 billion of total AUM. We will have a combined AUM of approximately EUR 312 billion. And to our business, we also significantly diversify our fee-related assets under management. Secondaries will represent about 15% initially of that fee-related fee-based assets under management, but it is expected to represent a significantly larger share over time. The acquisition will enhance our growth profile, and we aim to double Coller's fee-generating assets under management in less than 4 years. This means that 5 years from now, the mix of EQT's business will be much more well balanced across our business lines, private capital, infrastructure, real estate and secondaries. And we also see a very attractive opportunity to accelerate growth and scale of our real estate platform in the years ahead. Finally, we now manage strategies that, to some extent, are somewhat also countercyclical, if you will, creating an even more resilient and well-diversified revenue profile. As we look ahead with this transaction, we have created a platform that is even better positioned to attract and retain the best people in our industry and to continue to serve our clients, a more attractive, resilient and higher growing platform. With that, I open up for questions. Operator, please. Operator: [Operator Instructions] Olof Svensson: Operator, can I say a few words before we have the first question? Operator: Yes, please proceed. Olof Svensson: Thank you. So as you can imagine, Per is on a tight schedule in Davos today. So our suggestion is that we keep the Q&A open for about 45 minutes. And to make sure that everybody has time to ask questions, I would very humbly and politely suggest that you keep it to 2 questions each. And as always, we're, of course, available for any follow-ups after the call today. So let us aim for that and really looking forward to the Q&A session. Operator: And now we're going to take our first question, and it comes from the line of Oliver Carruthers from Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. Two questions on Coller, please. So I guess you're acquiring a revenue fee stream in a growing asset class that's accretive to EQT, but you've also acquired this knowledge base in wealth. So can you talk to how you think this might help as you build out your existing wealth and evergreen business? And do you think this will accelerate the uptake of your existing Nexus products? So that's the first question. And the second question on this transaction. I may be wrong, but I don't think Coller has a dedicated infra secondary strategy. And so my guess would be that EQT is one of the largest global value-add infra managers, could add value here? And is this a kind of white space that you could go after? Because it feels like the use case for GP-led secondaries in infra could be even higher than it is in private equity over time because you have these platform build-outs like EdgeConneX that are very long-term assets that need capital and maybe don't fully belong in drawdown funds. So any thoughts there would be helpful as well. Per Franzén: Good questions, Oliver. I think the answer is that in both of those areas, on the private wealth side, evergreen side as well as on the infrastructure side, we see attractive growth opportunities ahead and are both good examples of why we're stronger together. But Gustav maybe you want to elaborate? Gustav Segerberg: Yes, happy to do that. And just echoing what you said, Per, so to speak. I think on the evergreen side, of course, this -- what this enables us, we get 2 strong evergreen organizations, both from a sales perspective, from a product development perspective, where we get to a completely different scale on a combined basis. So I think there's a lot of opportunity there, including joint products going forward in at least a midterm perspective. I think same on the infra side. This is, of course, one of the key areas where we see that there are complementary capabilities in terms of that Coller is very, very strong on the secondary side. We are very, very strong on the infra side and as well on the real estate side. So going forward, we see that this is, of course, a very interesting growth opportunity for us to attack on a joint basis and where we combined will have a very good right to win in that aspect. Operator: Now we're going to take our next question. And the question comes from the line of Arnaud Giblat from BNP Paribas. Arnaud Giblat: I've got 2 questions, one on Coller and one on your infra business. On Coller, could you -- when I step back and just look at who are the largest GP-led secondary fund, typically, there are quite a few, including Coller before the acquisition, being independent and not having a very large direct business. So I'm just wondering how you're thinking about that? Do you see a need to operate a bit at arm's length? How is that going to be pitched to investors? I'm just wondering if there's any risks around that and how you intend to put that to investors. My second question is -- thanks for the update on -- in terms of what you intend to do with EdgeConneX and wrapping that into a longer-term structure. I'm just wondering if you could give us a bit more detail in terms of the mechanics, how much of enterprise value would EdgeConneX come into this continuation or long-term fund? And how you're thinking about fundraising around that? Per Franzén: Good questions. I'll let Gustav talk about EdgeConneX and provide more details on that transaction. In terms of the combination with Coller. As I mentioned in my presentation, right, I mean, we've really organized ourselves in a way so that it's very easy to add on a platform such as Coller and also to have that platform continue to be run in a very independent way so that the Coller team can serve clients and its stakeholders in the right way and in the best possible way going forward. And that's the intention also with the combination. That's how we'll organize ourselves. As I said, Coller will have an independent investment committee going forward and will be a separate business segment of EQT, where we will, of course, collaborate as was mentioned earlier, is in the areas around branding, marketing, also on the client relations side, where we can leverage the strong combined sales force that we have, both on the institutional side and on the private wealth side, right? And that's also how previous transactions have been structured and done in this space in the past, and that's what we intend to do also here when it comes to the combination between EQT and Coller. And Gustav, why don't you address the question on EdgeConneX? Gustav Segerberg: Absolutely. So due to where we are in the process, I can't go into, let's say, details about the size or the terms at this point in time. So we'll come back to you on that at the right time. I think what we can say in general is, so to speak, that we're super excited about this opportunity because, of course, it allows us to really continue to support the company for the long term as there is a very, very significant growth opportunity here in the data center area, so to speak. And therefore, it was also important for us to create this into an open-ended structure. Operator: Now we're going to take our next question and it comes from the line of Hubert Lam from Bank of America. Hubert Lam: I've got 2 of them. Firstly, I just wanted to check your expectations for exits in 2026. I think you said you expect it to be similar to 2025. Just wondering why not better? And also, does this mean that we should expect a similar carried interest as in 2025? The second question is on Coller. Can you talk about the opportunity you see with State Street and the partnership there? And do you see this as a way to enter the U.S. target date funds and maybe the outlook for this partnership going forward? Per Franzén: Thank you for those questions. I'll start by addressing the first one, then I'll hand over to Kim to provide more details, and Gustav can talk about the partnership opportunity with State Street going forward. So when it comes to exit volumes, right, I mean, it's important to keep in mind that 2025 was a record year in the history of EQT for us, right? I mean we sent back EUR 34 billion of proceeds to clients, 3x industry average in our equity strategy. So the beauty, of course, the benefits of having a truly global diversified platform the way we have it at EQT is that in certain years, there will be higher amounts of distributions in relation to NAV in certain strategies. And then in other years, there will be a step-up in other parts of the business. And so that's what you should expect in 2026, right? In 2026, we do expect a pickup in distributions coming out of our infrastructure platform, for instance. And yes, I just wanted to provide a little bit of that background and color as to the outlook for 2026. And Kim, maybe you want to elaborate a little bit on the details and carried interest. Kim Henriksson: Yes. And what Per just said, how that sort of translates into carried interest really then goes into the framework I talked about earlier, where the carry will predominantly come from the funds that are in 2019 vintages or before. And you saw yourself that there's about EUR 600 million of carry left in those funds to be recognized, whereas the 2 flagship funds not -- next to come into carry mode are not expected to -- with the current exit plans it being carry mode still in 2026. So that's the guidance we can give you at this point in time. Gustav Segerberg: And maybe I'll touch upon the State Street partnership. I think, first of all, we're super excited about having State Street as a shareholder in EQT and the partnership that they already have in place with Coller. Of course, there is a lot happening in the private market side connected to private individuals and in the U.S., especially the target date funds and the 401(k) opportunity. We think that there is tremendous opportunities here, both in the form of over time broadening the partnership with State Street, and that's something that we look forward to having a positive dialogue with them around. But also when you think about how the target date funds operate and what's required to be able to win in that channel, it's very clear that secondaries is going to be a very attractive and key component of that solution, also given the need to trade on a daily basis which when you think about it from a primary versus secondary perspective, would just make it easier. So I think all in all, we're very excited about it. As we've talked about, we think that the 401(k) opportunity is very significant, but then it will also take time. And this, of course, is an important step for us in that journey to really create products that fit into that type of client base. Operator: Now we're going to take our next question. And it comes from the line of Ermin Keric from DNB Carnegie. Ermin Keric: Do you hear me now? Per Franzén: Yes, we can hear you. Ermin Keric: Maybe just you mentioned that you expect an increase in evergreen flows in 2026. Could you quantify that? And sorry, then the second question would be on branding. You're saying that you're increasing your spending on that. Could you give us any more kind of details on how much you expect to spend on branding and put it in context to what you spent before and also how the success of those efforts are measured? Per Franzén: Good questions. I'll leave both of them to Gustav and Kim. Gustav Segerberg: Yes. Maybe I'll start with the first one. I'm not going to quantify it into a number. I think that if you think about -- if I were you, I would think about it in 2 aspects. First of all, as I talked about, during that time frame, 7 out of the 10 or 10-plus were operational. So that kind of gives you, I think, a first piece of the puzzle of seeing how that could then be in the 2026 flow. I think the second piece of it is -- it's really that out of the 7 and of course, the remaining 3, 4 products, we still see an acceleration of the flows as we're ramping it up, so to speak. So I think what we're saying is that we expect that number to be significantly above the EUR 4 billion in 2026. Kim Henriksson: On the brand and marketing topic, in order to have a successful spend of brand and marketing, you first need to build a sort of organization and have the processes, et cetera, in place. And that is what we have been doing over the last few years, and we now have that foundation, which allows us to spend money efficiently externally on marketing campaigns and on brand events and branding more generally. The -- we're not going to go into the specific numbers here on a line-by-line basis, but it's -- the amount we will spend is a multiple of what we have done historically, but from a fairly low base to start with, I would say. Then it is a science of its own in terms of how this money will be measured, and it's quite different from a directed marketing campaign where you can sort of measure the exact clicks, et cetera, where from a more branding campaign where it's more about brand awareness, et cetera, in the market. But we have a great team focused on that with very specific sort of follow-up processes that are going to be in place. Operator: And the question comes from the line of Isobel Hettrick from Autonomous Research. Isobel Hettrick: Isobel Hettrick from Autonomous Research. So in your presentation, you touched on the significant number of new LP relationships the transaction opens up for both you and Coller. Can you provide some color on how you're thinking about the cross-selling opportunity from both ways, so existing EQT clients investing in new secondary funds and vice versa over time. So perhaps with reference to BPEA, how have you seen cross-selling develop since you acquired that manager? And what can we read across to Coller? Per Franzén: Good question. I'd say it's not only that we have a track record in terms of achieving cross-selling synergies on the institutional side from the merger with Barings. And we, of course, also acquired Exeter before making the Baring's transaction. And I think we have good data points and evidence from both of those transactions in terms of the synergies that we can generate. Gustav can provide more details. And then, of course, what's different also this time around is that the private wealth opportunity has developed further. And here, we really see an opportunity for us to leverage all of the investments that we've been making into our capabilities, into our brand, into our marketing in those areas, right? So -- but Gustav, why don't you elaborate? Gustav Segerberg: Yes. No. But I think as you say, Per, there, we have experienced from it both from Exeter and BPEA. Of course, BPEA is not fully closed yet, but what you will see in the appendix is that around 25% of the capital in BPEA IX is from, let's say, original EQT clients. I think the equivalent number for Exeter on the latest U.S. fundraise there is about 15%. So we -- I think we have good track record of showing that there is significant cross-selling opportunities in these transactions, of course, going both ways in it. And in this specific transaction, as Per points out, the private wealth opportunity, there is significant cross-selling opportunities there. And then, of course, we also have the insurance side where over time, there can also be, let's say, some joint opportunities going forward. Operator: Now we're going to take our next question, and the question comes from the line of Magnus Andersson from ABG Sundal Collier. Magnus Andersson: Just first of all, on the transaction, if you could, in any way, quantify potential income and cost synergies and any potential structural charges related to this transaction in 2026? And secondly, just on your fundraising, there seems to be very strong demand for infrastructure according to market data. So I was just wondering whether we eventually should expect your flagship infra funds to become larger than your traditional key funds and if we could see that already in the generations that will be on the fundraising in 2026? Per Franzén: Yes. Good questions. I think we're incredibly -- I think as we've mentioned in the past, we're incredibly excited and optimistic about the growth potential across our infrastructure strategies, and we see very good momentum here in the ongoing fundraises that we have. I'm not sure we're going to comment on or give guidance in terms of the sizes for the next generation of these funds. But I leave that to Gustav to comment on further. And then on Coller and the income and cost synergies in '26, maybe, Kim, you want to take that question? Kim Henriksson: Yes. Well, first of all, on Coller, as you heard, we gave the guidance that we intend to more than double the business in the next 4 years. That's really the income guidance we can give you. And that is based on all of the strengths that we just talked about of the combined business. And this is not a transaction that is done because of cost synergies. Having said that, as I mentioned, there's a number of, let's say, costs that are of a nature where you can spread them out over a larger base, and that will become more efficient. Then there are some areas of overlap on the back end that we will work together to solve in the most efficient ways, but that's not the reason for the transaction. There's likely to be some transaction costs associated with it, of course, but they are not in the big scheme of things of a magnitude that will move any needle. Gustav Segerberg: And then maybe on the infra side, I think we fully agree with you on the infra opportunity in general terms, so to speak. And that's also why we, in the last couple of years, have been very focused on broadening the infra offering which you've seen both with the Active Core, especially now going open-ended. You've seen it with Transition Infra. We talked today about the EdgeConneX opportunity on the [ CV ] side. So I think you should think about it that -- and I'm not going to comment specifically on Infra VII, so to speak. But we probably think that the large opportunity here is continuing to broaden the infra scope and scaling those things in a way that we can really be a market leader across from, let's say, more infra growth opportunities all the way to core plus. Operator: Now we're going to take our next question and the question comes from the line of Jacob Hesslevik from SEB. Jacob Hesslevik: So my first question is on the culture fit. When you acquired both BPEA and Exeter, you talked a fair bit about the strong culture and how EQT and the related partner would fit together. But you have said very limited today with the acquisition of Coller. So what are the key culture and operational integration priorities over the next 12 to 18 months? And how will you maintain both EQT and Coller's entrepreneurial culture while achieving the synergies? That's the first question. The second one is you highlighted a particularly strong pipeline for Japan for 2026. What makes Japan distinctive from other Asian markets in the upcoming year? And do you need to change your approach to capture the market potential? Per Franzén: Yes. I'll start with the second one. On Japan, the reason why we are particularly excited about the pipeline that we see in Japan right now is because of some of those corporate governance reforms that have been implemented in Japan and that just enable us to pursue opportunities where we can really unlock value creation opportunities. And it allows us to create sources of alpha that are uncorrelated to the type of value creation opportunities that we see elsewhere in Asia. So for instance, in India, there's a lot of tailwind from demographics, capital markets-related tailwinds, whereas in Japan, the alpha-generating opportunities really around unlocking that value creation opportunity, thanks to some of those corporate governance reforms. And of course, we are very well positioned to capture that. Why? Because we have a best-in-class value creation toolbox that we've developed over 30 years. We have best-in-class sector-based strategies and value creation playbooks that we can apply. And then, of course, in Japan, our brand resonates very well. We've been present in the country for 20 years, thanks to the Wallenberg connection. We were also seen as a very credible long-term player, which is particularly important in a market such as Japan. So for all of those reasons, we're very excited about the opportunity ahead in that country. When it comes to Coller and the cultural values fit, right, it is as strong as we have seen in previous combinations. We've spent -- Jeremy and I have spent a lot of time together to get to know each other. I'm sure we're going to have an excellent partnership. And we've also spent significant of time together at the next generation of the leadership team between Coller and EQT, exactly like we did it in the combination with Barings and also in the transaction with Exeter, right? So that's a good way to get to know each other, and that's why we can with confidence say that this fit from a values perspective, culture perspective, the entrepreneurial, the innovation drive, the performance drive, all of that is exactly similar as it is in EQT. And the way, of course, we maintain and retain that culture, that's how we run our business, right? And that's why it was so important that we took those steps in 2025 to simplify our organizational setup. What I spoke about in my presentation and what I've also talked about in previous instances. So today, we have organized ourselves around a number of highly accountable high-performing business lines. And then we have simplified our governance, our structure in a way so that we have one combined capital markets client relations team on the institutional side that will be very well positioned to serve all of these business lines going forward, including Coller EQT. And then finally, of course, we have a clear governance around how we run our backbone, our business on the operations side. And those would also then be areas where we can achieve synergies together, right? And so by having those highly accountable business lines, that's also how you can ensure that you retain that entrepreneurial performance-driven culture. Kim and Gustav, anything else you want to say on the synergies? Gustav Segerberg: No, I think maybe one more point, and that's we just had a partner meeting earlier this week where, of course, the real estate and the Asia team was there. And I think it's so clear to see how well those integrations have gone, how much they feel like part of EQT in a real way. There is only one company. And I think it also shows that the model works, and also that we're ready to do the next one. So I think from all of those perspectives, this timing is also a good one, I would say. Operator: And now we'll go and take our last question for today. And it comes from the line of Nicholas Herman from Citi. Nicholas Herman: Congrats on the deal. Two questions from me, please. One on accretion and synergies and one on cash. On the accretion and synergies, you referred to a doubling of fee-paying AUM in Coller over 4 years. Is that the time frame for the mid-single-digit FRE accretion? Or is the accretion time frame shorter? And related to that, what synergies are in that guidance? And how should we think about the sequencing of adjacencies and synergies. And then a quick one on cash. I guess given this transaction is almost entirely equity, should investors now have greater confidence that you will announce share buybacks over time? And I guess for avoidance of doubt, I'm assuming you have no ambition for further deals or especially larger deals for now at least? Per Franzén: Thank you. Olof and Kim, do you want to take those questions? Olof Svensson: Yes. Do you want to go ahead? So I mean, if you think about the accretion, we're buying, first of all, 100% management fees, right, over the next several years. And as we talked about before, the earn-out mechanics is based on a fee-related growth of close to 30% or high 20s, right? And to Kim's earlier comments on the margins, that means that you're going to have a very rapid top line growth, and that means that our margins are going to scale quite meaningfully over the next several years in this business. So if you think about this from a fee-related EBITDA multiple, it's based on the guidance that we gave, it's about 16 to 18x multiple that we're paying in '26, but that's not then capturing this significant ramp-up that you have in '27 and '28, right? So to your question, if you think about this transaction in, say, a couple of years' perspective, I'd argue it's high single-digit accretive to our earnings. And that means that this mid-single-digit guidance, that's an average over the next few years. Kim Henriksson: And in terms of cash and buybacks, yes, you're absolutely right. This is an all-share transaction and will, if anything, strengthen our balance sheet further over time. There's -- last year already, we did about EUR 300 million of share buybacks in 2025. So it's not that we haven't been doing share buybacks already. And what we have said in terms of guidance is that we will use share buybacks or extraordinary dividends for that matter as a tool if we, at any point, become overcapitalized, for example, if cash carry comes in at scale, but I can't give you any specifics around that in terms of timing or how that's going to look. But right now, we have a solid balance sheet, but we're not overcapitalized given the opportunities we have, both organic and inorganic going forward. Nicholas Herman: That's really helpful, guys. If I could quickly follow up on the synergies. Just what synergies, as you said, are in that guidance? And how should we think about the sequencing there from, I guess, from a -- presuming is it wealth first, then insurance then Asia, I mean how should we think about the way you're going to be tackling those -- the numerous opportunities there? Gustav Segerberg: Yes. And I think we're not going to go into specifics of it. Of course, as always in this, it's going to be evolving development in it. And there are a number of opportunities. But I think we also feel that we're very well equipped, both from a Coller perspective and from an EQT perspective in order to capture many of this. I think you should think about the guidance on, let's say, doubling the business on -- in less than 4 years that, that does not include a very significant new initiatives in that. It's, of course, a development of the business. It's continuing to scale of the PE and credit side. On the institutional side, it's maybe 1 or 2 new initiatives on the institutional side. And then, of course, it's a development of the evergreen as well as the insurance side. But it's a base case that we feel and the Coller team feels comfortable, which I think is good. Operator: Dear speakers, there are no further questions for today. I would now like to hand the conference over to management for any closing remarks. Olof Svensson: Okay. Well, everybody, thank you very much for great questions and for the discussion. As you can hear, we're extremely excited about this combination with Coller, and we are very pleased with the results that we delivered for 2025. As always, you know where to find us, we're available for any follow-up questions. So thank you very much. Kim Henriksson: Thank you all. Gustav Segerberg: Thank you. Olof Svensson: Thank you.
Sandra Åberg: Good morning, and welcome to Essity's presentation of the Q4 and full year 2025 results. Here to take us through the highlights, we have our CEO, Ulrika Kolsrud; and our CFO, Fredrik Rystedt. After the presentation, we will open up for your questions. [Operator Instructions]. With that, let's get started. I'll leave over to our CEO, Ulrika. The floor is yours. Ulrika Kolsrud: Thank you, Sandra. And also from my side, welcome to this webcast. The final quarter of 2025 confirms that we are standing strong in a continued challenging market environment. We continue to grow in our strategic segments, such as Incontinence Care, Wound Care and premium products in Professional Hygiene, and we strengthened market shares across our different branded categories. We're also strengthening our profit margins. Actually, we are strengthening our profit margins in all 3 business areas in the quarter, and we delivered a stronger result than last year's same quarter. When it comes to volumes, sequentially, we have a stronger volume, so stronger volume in Q4 versus Q3. Looking at quarter over last year's quarter, however, there was a flat volume growth. And that, together with the fact that we are then lowering prices in order to compensate for lower input costs is resulting in that we are reporting a negative organic sales growth. And that underpins the importance of the initiatives that we took last quarter to accelerate profitable growth. We are now operating in the new organizational setup with decentralized decision-making with end-to-end accountability and with even sharper focus on our most attractive categories and segments. And we are starting to implement our cost-saving program. In the quarter, we also strengthened our position for profitable growth by acquiring the Edgewell Feminine Care business in North America. And now with the brands Carefree, Stayfree and Playtex in our bag, we are more than doubling our Personal Care sales in the U.S., in line with our focus on high-yielding categories in attractive geographies. Another key highlight of the quarter is that we again got recognized for our strong sustainability performance. So we were awarded for the EcoVadis Platinum Medal, recognizing our sustainability performance, placing us among the top 1% companies worldwide that they are assessing when it comes to sustainability performance. And also, we have been placed on the CDP prestigious A list. I would say sustainability performance is important in all of our business areas, but not the least in the health care sector. Many of our customers in the health care sectors have high ambitions when it comes to sustainability. One good example of that is one of our biggest customers, NHS, in the U.K. They continue to pursue ambitious sustainability agenda even if there is financial pressure, with increasing demand for health care and funding under pressure. And speaking about funding under pressure, we talked already last quarter about that we see in some selected markets that there are some cuts in funding, and we continue to see that, for example, in Indonesia. That does not, however, prevent us from growing. Quite the contrary, we have a positive organic sales growth in Health & Medical, and we grow volumes both in incontinence Care as well as in Medical Solutions. If we double-click on the Medical business, this is the 19th consecutive quarter that we grow the Medical business, and we grow in all 3 therapy areas. A critical success factor behind this good performance in Health & Medical is, of course, our strong and unique offers that we have. And we continue to strengthen those offers. In the quarter, we upgraded one of our flagship products in the TENA assortment, the belted TENA Flex product. This product is specifically easy and ergonomic for caregivers to use on bedridden patients. And in this quarter, then we upgraded it with an even better comfy stretch belt. The elasticity is better, so it adapts easier to different body types and thereby, you can use this product for more patients. Also in the quarter, we relaunched one of our unique offers in the Advanced Wound Care assortment, the Cutimed Siltec Sorbact product. And in connection with that, we kicked off a new brand campaign for Cutimed on the theme of imagine a world where wounds would heal faster. And in this campaign, we showcase how our unique offers are helping health care to improve patient outcomes and reduce health care costs, thereby improving health economic -- or bringing health economic benefits. And it's, of course, leveraging these unique advanced solutions that is helping us and contributing to our performance in Wound Care and allowing us to gradually strengthen our positions in this category. Strengthened positions is also the theme if we go to consumer goods. In the quarter, we strengthened our branded market shares in 65% -- more than 65% of our business. And this is not only attributed to one of the categories, but it's actually contributing from all different -- all 4 categories. Looking at Incontinence Care, there, we strengthened our market shares, and also it's a fast-growing category. So as a result of that, we saw very good growth in Incontinence Care. In Feminine Care, we were impacted by a one-off, but underlying, we continue to perform very nicely also in this category, and that is demonstrated through the market share development that we see. In fact, in feminine, we grew our market shares in 80% of our business. And we had also some good records that we saw in the quarter. One very exciting of those is that we now in Mexico have 62% market share in Feminine Care. And as you know, Mexico is one of our most important markets for Feminine. Another exciting development in the quarter in Feminine was that we now are back to growth in Knix washable absorbent underwear. And that is thanks to new retail listings, higher prices, as well as product launches. Then if we move to Baby Care and Consumer Tissue, here, we saw an organic net sales decline. And this is for the same reasons that we have talked about previous quarters. So in Baby, we are impacted by the lower birth rates and also the fierce competition that we see, and consumers being more price sensitive than what we have seen before. And in Consumer Tissue, it's the weak consumer sentiment that makes the growth happening mostly in the mid- and low-tier segments, and we also lost some private label contracts due to pricing. Then it's very encouraging to see that we are growing our branded business, both in Baby as well as in Consumer Tissue. And that's a testament to the effect of our launches and our marketing activities. They are really paying off. And we continue to have a very high activity level in Consumer Goods. As you can see here on the slide, there are many different launches to talk about in the quarter. But in the interest of time, I have to choose one of them. And I choose to talk about the upgrade of our thin assortment, our thin towels in feminine care in Latin America. So having thin feminine pads is, of course, more discrete and comfortable than using thick pads when you have menstruation. But even so, many women actually choose thick pads because they don't fully trust the leakage security of the thinner ones. Now with this upgrade, we are introducing a new core technology that we call SmartPROTECT that manage even sudden gushes and thereby increased leakage security. And for that benefit, we have 2 -- actually 2 benefits of that. One is, of course, that we strengthen our superiority even further in this ultra-thin segment in the market, but also that we move consumers from the thicker pads to the thinner pads, which is a benefit because we normally have higher profitability in this segment. Now the activity level was also very high in Professional Hygiene in the quarter. Here, market growth continues to be depressed following the weak consumer sentiment, and we see that as impacting our sales. But we are responding to that by continuing to have selective price adjustments, continuing to work with joint sales plans together with our distributors, and also adapting our assortment. In this situation, it's super important to be competitive in all different price tiers. And in the quarter, we launched some what we call volume fighter specifications to make sure that we are at the right price point for the customer. We expect this to pay off in the coming quarters, but what has already paid off is really our push in the premium segments. So we continue to see strong growth in our premium segments in Professional Hygiene like Tork skincare and Tork PeakServe. We also continue to develop these products even further. So in the quarter, we launched an automated sensor-based dispenser for PeakServe in addition to the manual one that we have already. And that will broaden the relevance of this premium solution in the market. We are also broadening the relevance of our center feed dispenser solutions. The center feed dispenser solution allows you to take one sheet at a time, which is more hygienic and it also controls consumption. So it's cost efficient for our customers. Now in some segments, it's more important with design than in others. A good example of that is in restaurants that have an open kitchen. Then, of course, you are very dependent on a good-looking dispenser. And if you see on this picture, the black stylish dispenser here is what we launched in the quarter, and that is really a very strong fit into these type of environments. I would even call it decoration. It's really nice. Also, we launched a new refill paper with natural color that also has a lower price point. And that is then an excellent choice for those customers who are either very price sensitive and/or want to work with their sustainability image. Now all of these innovations that I'm talking about, they have 2 purposes. I mean, one is to expand the relevance of the product, but also, of course, to drive product superiority. And with product superiority, we mean that it's the preferred choice by customers and consumers. And looking across categories in 2025, we reached a record level when it comes to product superiority. And that, of course, makes us very well equipped to continue on that positive market share growth that we have seen in the fourth quarter of 2025. And now after all of these talk about products and innovations, I'm sure you guys want to hear a bit about the figures behind this. So over to you, Fredrik. Fredrik Rystedt: Thank you, Ulrika, and I will put a few numbers to what you have been talking about here. And as you can see, and you've already mentioned it, we actually had, in terms of organic sales, a negative development during Q4. And this is basically driven by price decline and a slight volume decline. It's maybe worth noting or perhaps repeating what you said, Ulrika, we are taking market share. So this is very much a market issue. And if we actually look at the sequential development of volume, it's always a little bit of seasonality. But nevertheless, you can see that we actually grew our volume sequentially between Q3 and Q4 with just under 2%. So it's a good momentum despite the fact that we have a decline versus Q4 of 2024. I mean, some of you will actually remember that Q4 of '24 was very strong. So we also have a bit of difficult comparable. Now as before, the volume decline is very much driven by Baby, or same as in Q3, our Baby business, our Consumer Tissue business and also Professional Hygiene, and these all are leading to the group decline of volumes of minus 0.2%. So just really brief, Health & Medical, you've said it, Ulrika, we had a good volume development in Inco Health Care and Medical. And if you look at the Medical area, actually all therapy areas and especially Wound Care, so that story you will remember. And if you talk about price and mix, largely flat in Health & Medical. Consumer Goods, Inco really, really doing very well in terms of volume, Inco Retail. Feminine is as well. It's a little bit -- it's positive volumes, just under 1% of positive volumes. And that is actually despite a fairly weak market in Europe. So overall, you can say we are growing, but the European market is a bit challenging. Ulrika talked about a onetime issue in Feminine, and that is related to an adjustment that we have made of customer rebates in Latin America. So we've increased those, and that has actually impacted sales and the pricing components, and this is why you see a negative organic sales growth for Feminine. And this is temporary for the quarter. It will go back to normal in the next quarter. And if you actually adjust for that, we have stated that the underlying growth is good. And so what we mean by that is that growth would have been -- organic sales growth would have been low single digits, to give you a little bit of perspective. When it comes to Baby, again, we are gaining in our branded business in the Nordics, but we are continuing to lose in the rest of the retail branded business in Europe. And overall, volumes are down with approximately about 4%. That's also for the market as a whole. So it's not just us, but it is a very competitive market in Europe. And this is also why we are losing volumes. And finally, Consumer Tissue, we're struggling a bit with volume there, minus 2%. And this is all actually related to private label. We have talked about this before. So there is no news here. We have lost a few contracts on the back of pricing. And of course, we have always prioritized margin over volume. But of course, we don't want to lose volume. So we have selectively actually reduced prices in Consumer Tissue. And hopefully, that will pay off as we go forward. HoReCa, we've talked about Professional Hygiene, and this is, of course, still leading to a slight volume loss of about 0.5%. And there are signs here of at least stabilization of the HoReCa markets. So here, we're hoping for better conditions going forward, but there time will tell. And to summarize maybe for the group, minus 0.2% in terms of volume, minus 0.9% in terms of price and mix is actually flat. So that sums it up a bit. Then if I go to the margin, you can see that we've actually -- we've improved our margins, both if you compare between Q4 of '24 and Q4 of '25 and sequentially. And it's not only for the group, it's actually for all the business areas. Gross profit, as you can see, increasing by 180 basis points, and this is on the back of lower COGS as we flagged when we talked to you last or after Q3. So that actually happened. And we've maintained a very good price management in the quarter, all of that leading to that very good improvement of the gross profit margin. The COGS reduction is all about, I should say, raw material energy, but we actually -- and this is a little bit of -- we're proud of that. We managed under tough conditions to reach also our COGS savings of just above SEK 500 million. So you will know our target for the year was SEK 500 million to SEK 1 billion, and we said we were struggling to reach that range, but in the end, we actually managed to do that, and that contributed to that margin enhancement. As you can see, and we've said that, we want to fuel our growth. We want to fuel our innovations that we put on the market. So we are spending more in terms of A&P, and that's both percentage of sales-wise and as an absolute number. When it comes to SG&A here, you see that it's actually favorable. So we have reduced in terms of absolute. Also in constant currency, we have reduced our spending in terms of SG&A. And this is due to, of course, a tight cost control. That's not surprising to you. We've reduced our travel, as an example, with more than 30%. We have a bit of lower bonus accruals. And there is also a bit of onetime here that is positive. So it's not as good as you see here. There is a bit of onetime. But if you look at the overall group, there is also positive and negative onetime impacts in the result. So overall, all the onetime impacts are balancing off for the group as a whole. But all in all, we're quite proud of our SG&A performance. So let me then just talk a little bit about the SG&A program, the cost saving program that we have launched previously. And as you know, we're aiming for a run rate saving of SEK 1 billion towards the end of '26. Now we are actually aspiring to reach quite part of this saving already throughout this year, but that will be more towards the latter part. So you can expect more of the savings. So far, we have realized very, very little, and we've also put fairly little in terms of restructuring charges. We expect the cost of this program to be a bit over SEK 1 billion, so approximately SEK 1.1 billion in restructuring charges. Let me end this part with a little bit of guidance for Q1, as we normally do. We expect actually COGS to be slightly lower, partly from savings, but also a little bit from currency or positive currency impact in raw materials. So slightly lower COGS, that is what we expect. And we are expecting a slightly higher SG&A. And please remember, I'm now giving you guidance Q1 of '26 versus Q1 of '25. So we are expecting slightly higher SG&A, and this is primarily driven by higher A&P in line with our ambition to fuel growth. And customary, and you know that, we also give you a little bit of guidance for the full year, and we expect CapEx, to start with that, between SEK 8 billion to SEK 8.5 billion, a bit higher than we had in '25. And this is actually partly phasing and just ambitions to grow as we go forward. We expect other cost or the corporate cost, if you will, to be approximately SEK 1.3 billion, so very similar to this year -- or to 2025. The structural tax rate to be between 25% to 26%. And then finally, on the COGS savings, we remain with our estimated range of SEK 500 million to SEK 1 billion. So let me move on then to the cash flow side. We're quite pleased with the cash flow here in Q4. This is driven by obviously a good cash surplus. The margin was good. So this was a good operating cash surplus, but we also had good working capital management. So inventory days came down a little bit, continue to do that. And we had unchanged credit days, both in receivables and payables. So all fine in terms of working capital. And net cash flow was also quite strong. And this cash flow has driven a continued strengthening, of course, of our balance sheet. So net debt-to-EBITDA is approximately 1.0 here, as you can see at the end of the year. We've continued to repurchase shares in line with our program that we launched with SEK 3 billion. And so far, we have purchased 9.2 million shares or totally SEK 2.4 billion. So we are roughly about 80% through this year's program. So let me then finalize with a little bit of overview of 2025. In many aspects, this was a good year. We had an organic sales growth of 0.9%, and this is despite challenging market conditions. We actually had growth in all our business areas. We maintained our volumes and price management remained strong for the entire year. In terms of margin, we've already talked about that, but it was a very good year in terms of margin. In fact, if you look at that operating margin of 14.1%, it's the second highest we've ever had. It's second only to the artificially high margin during the pandemic that was caused by all the panic buying, for those of you who remember. So this is, from a historic perspective, a very attractive margin. And then turning a little bit to what does that imply? And some of you may have seen from the report that our EPS growth was, if you look at it, between 2024 and 2025 in nominal terms, roughly about 1% growth. Now of course, the Swedish krona has strengthened a lot. So if you actually look at the EPS growth in comparable currencies, you will see a growth of roughly about 8%. And this is quite consistent with the long-term growth of about 6% if we start with the birth of Essity as the first year. So continued good performance. And this is, of course, on the back of good margins, the growth we've had and of course, also a shrinking finance net as our net debt has reduced. Finally, then the Board has -- or will propose to the AGM a dividend increase of SEK 0.50 to SEK 8.75. This represents an increase of about 6%. And if you look at, once again, from the birth of Essity, you can say this is consistent with the growth that we've had, roughly about 6% or a total growth of 52%. So with those words, leaving over to you, Ulrika. Ulrika Kolsrud: Yes. Thank you, Fredrik. And with that, we are leaving a solid 2025 behind us. We finished the year with stronger market shares with continued growth in our strategic segments and not the least with strengthened profit margins. It's been, from an external perspective, a quite turbulent year with a lot of geopolitical uncertainty and the weak economy. And that has, of course, impacted also our industry. And we see that the resilience that we have shown during this is really a sign of strength. As Fredrik has shared, we have grown organically during the year. We have strengthened our profit margins, and we have now the strongest profit margin in 5 years, and we have delivered a solid result. So we are proud over this, but we're also determined to accelerate our profitable volume growth and to speed up our progress towards our financial targets. And therefore, the initiatives that we've launched earlier than in 2025, with the reorganization with the cost saving program and with the acquisition of the Edgewell Feminine Care business in North America. And we bring those initiatives with us together with then the very strong financial position we have into 2026, where we remain fully committed to our strategy to drive profitable volume growth. And we will do that by, first and foremost, making sure that we have the customer and consumer at the center in everything we do. We will also do that by continuing on the path to strengthen our market shares and our product superiority. We will, of course, integrate the Edgewell acquisition to strengthen our Personal Care position in North America. And we will implement our cost save programs, both the COGS cost save program that Fredrik was talking about as well as then the SG&A cost save program, where we have the ambition to reinvest the majority of that into fueling profitable growth. And also, we will fully leverage our new organizational setup with end-to-end accountability with more decentralized decision-making and also with even sharper focus on our most attractive parts of our business, so that we can unleash the full power of our fantastic Essity teams, and also to make the boat go faster. Speaking about our fantastic Essity teams, you have the opportunity to meet some of them if you join us in our Capital Market Day on the 7th of May. We will host that in our Mölndal office in Sweden, which is our largest office. And you don't want to miss the opportunity of hearing more about our strategy to drive profitable growth and to be able to see some of our R&D laboratories in this facility as well as production facility in the neighborhood. So I really hope to see all of you there. Sandra Åberg: Thank you, Ulrika, and thank you, Fredrik, for that walk through. Now we are ready to take your questions. [Operator Instructions]. Ulrika and Fredrik, are you ready to open up for questions? Ulrika Kolsrud: Yes. Sandra Åberg: Perfect. We have the first question from Niklas Ekman, DNB Carnegie. Niklas Ekman: Can I start asking about kind of your priorities for '26 here? Obviously, volumes have been weak now for some time. And now you have a couple of quarters with a pretty strong margin expansion. How do you view that now in '26? Are you willing to sacrifice some of that margin in order to restore volume growth? Or are you more optimistic maybe about the market now having had some kind of cyclical headwinds, that they might turn to some tailwinds in '26? Or you're thinking there on the mix between organic volume growth and margins and what your priorities are? Ulrika Kolsrud: Well, as we have talked about previous quarters as well as in this quarter, we are doing selective price adjustments in order to fuel volume growth. And also, we have the intention to increase our A&P investments. We have seen that the investments that we do in A&P is paying off very nicely, as you saw in the market share development. So that we will do. And then the volume growth will give us operating leverage and thereby also securing the profit margins. And since we talk about this and how to drive volume growth, I want to mention one thing that we're also very proud of in 2025 that will support volume growth in '26, and that is our innovation delivery in the year. We increased our share of sales that is generated through innovations and also the superiority record that I talked about earlier. That shows that we are strengthening our offers to consumers and customers, and that is the base for driving volume growth. And then, of course, we need to make sure we have the right price positioning and that we support those fantastic offers with A&P investments. Niklas Ekman: Very good. But do you see any risk of margins? Or are you looking at maybe sacrificing some of these strong margins now to accelerate growth? Or do you think that you can do both? Ulrika Kolsrud: Our ambition is to do both. I mean, in some areas, of course, when we have selected price adjustments, that will have an impact on margin short term. But in other areas, we have opportunities to go in the other direction. So that is a continuous work that we do to optimize this. Fredrik Rystedt: Maybe to add, if I may, Niklas, as you are aware of, and we communicated last quarter that the cost saving program will generate fairly significant savings. And of course, we are aiming to use those funds to actually do what Ulrika was talking about here in terms of fueling growth, both in terms of selective price decline, but also A&P spend. So this is a way to make sure that we can do both, just to emphasize. Sandra Åberg: Next up is Charles Eden from UBS. Charles Eden: You mentioned the lower volumes and prices in Consumer Tissue private label. Are you able to quantify the organic sales decline for that business in Q4? And can I ask whether the continued challenges of this unit makes you reconsider whether this asset is indeed core to Essity going forward as you concluded at the most recent strategic review of this asset? And then if I can sneak a clarification question, it's the usual one for me, Fredrik, on the group EBITA bridge. Of the SEK 749 million cost of goods sold tailwind in the quarter, can you help break that down between raw mats and energy distribution? I've got the SEK 190 million benefit from COGS savings in Q4 from the press release. Ulrika Kolsrud: If we start with the second question, maybe there with the reconsidering, I mean, we are continuously looking at our portfolio in evaluating and optimizing our portfolio. Then Fredrik, maybe you can help on the details of private label... Fredrik Rystedt: COGS... Ulrika Kolsrud: Yes, and the private label part. Fredrik Rystedt: Yes. Charles, we are not giving the details specifically as to the individual components. So I'm not going to say that. But of course, we already alluded to that the majority of the decline in volumes of the 2% or just under 2% is coming from there. But it's worth noting that the performance or actually EBITA is really, really good with Consumer Tissue private label. And we always have a bit of volume volatility in Consumer Tissue private label. So I don't think you can draw the conclusion that it's a bad business. In fact, it actually is generating quite a healthy margin and good profit. It's just that for the time being, volume is actually low. Should I answer also -- you were asking for the breakdown of COGS, right? Was that your question there? Charles Eden: Yes. Fredrik Rystedt: So the majority was related to raw materials. So that was about 2/3, give and take. And then we had energy, how should I say, more or less the rest. And then if you look at the other COGS, which was basically volume decline or less absorption plus new lines, et cetera, that was about the same as the cost saving program, so to give you a little bit of indication. Does that answer your question, Charles? Charles Eden: Yes, it does. Thanks, Fredrik. Sandra Åberg: Then let's move to the next question. Warren Ackerman from Barclays. Warren Ackerman: Warren Ackerman here at Barclays. Could you maybe sort of dive a little bit deeper on the A&P spend? You're talking about the increase to help drive the volume. I get it's going to be funded from the savings. But are you able to say -- I think it's around 5% of sales at the moment. But how much do you want to increase that by? And what is your current A&P mix in terms of online digital, and how do you measure the returns on that investment? What kind of tools do you have to sort of figure out where and how you allocate that spend? It sounds like it's going to be a big part of the story for this year. So just keen to understand a bit more on the details. Ulrika Kolsrud: And I can answer to some extent today, but I would also then invite you to the Capital Markets Day and talk more about this in detail. But of course, we are eager to measure the return of our marketing investments. So we do that on a regular basis. And it's by doing research on what we produce as well as following up that the activation is having the effect that we expect, both when it comes to purchase intent, when it comes to awareness and, at the end of the day, that it's generating the sales and the repurchase that we are expecting. So that we do on a continuous basis to make sure that we allocate the investments to where they do the best job for our brands. That was one question. The other question was more about how much we intend to increase A&P. Fredrik Rystedt: Yes, we haven't specified that. And of course, it's connected also to the innovation that we put on the market, because that always has an impact on the A&P spend. But generally speaking, we are, of course, convinced and, Ulrika, you gave a couple of examples here that A&P in general is fueling growth and is also profitable. You were asking there, Warren, about how we actually track profitability, return on market investments that we do. We believe we are reasonably good at it. Of course, as you always know, it's really very difficult to exactly have a scientific way of measuring. But we think we are pretty okay with measuring return of market investment. So to allocate where to put it, I think we are doing it reasonably okay. So we can't give you exact answers to your question as to how much or exactly how much the return is. It varies a lot. But generally speaking, we will increase, and we think we know where to increase. Warren Ackerman: And maybe just to clarify quickly, Fredrik. I guess I'm going to press you a little bit from a modeling point of view, I mean another way to ask it is, of that SEK 1 billion savings, how much of that will be sort of allocated to reinvestment? Or maybe another way to ask it is that 5%, how does that benchmark against peers? I mean, from a modeling point of view, do we stick in 6%? Or I mean, because it's sort of like it's quite a big swing factor. So any kind of help would be useful. Fredrik Rystedt: Yes. It's a great question. And of course, we got this question last quarter that is this going to impact in the end the EBIT margin or EBIT line. And we said, yes, it will, indirectly. So it's not so that we are putting the savings to our income statement or to the EBIT line immediately. We are investing it. And through that return on market investment, we believe that over time, we will both get operating leverage for growth and then, of course, margin enhancement. And it's not all about A&P, it is also about a combination of selective price increases that we partly have already done, but will do and A&P increases. So it's actually both. It's very difficult to give you specific details on exactly where, it's many different combinations. But over time, we think it will be profitable. Your final question as to how do we compare. Quite difficult to answer that. We are making a lot of benchmarking and trying to kind of adjust for the differences in structures and categories. But I think overall, there is an upside for us to do this. Sandra Åberg: Let's continue then with a question from Johannes Grunselius from SB1 Markets. Johannes Grunselius: I have a question on COGS again, if you can dive in a bit more there. Because Fredrik, you mentioned here, you will have slightly lower COGS year-over-year in Q1. In Q4, you obviously had a tailwind year-over-year of SEK 749 million. It's such a huge COGS base. So maybe you can provide a range or something on the year-over-year tailwind in Q1, that would be very appreciated, if you can give any indications, please. Fredrik Rystedt: Yes, we can. So thanks, Johannes, for the question. And we have chosen to guide only on COGS as a totality, because understanding all the ins and outs doesn't make things easier to actually grasp. So we are typically reasonably accurate when it comes to the estimate of the entire COGS number, and this is why we are giving it to you. But as I said, raw material is largely -- they're a bit in and out there, or positive and negative, but it's largely going to be a bit positive as energy as well, perhaps, if we compare then Q1 versus Q1. We're going to continue to have a little bit of unfavorable volume comparisons. We're going to have a bit of new -- or cost for new lines that we will have -- we're putting in place in Q1, and then we'll have a bit of cost savings. So all in all, this will give a slightly lower cost. The main driver actually still being raw material. And if you think about the main driver of raw material, it's actually mainly favorable FX actually. Johannes Grunselius: Okay. Okay. Can I put it the question in this way, if we look at COGS sequentially, are you thinking about more stable COGS? Or are COGS perhaps up a bit Q1 over Q4? Fredrik Rystedt: It's mainly stable. Mainly stable, you can say. Sandra Åberg: So let's move to the next question. Aron Adamski from Goldman Sachs. Aron Adamski: First, I had a follow-up on growth expectations for 2026. I mean, against the backdrop of lower input cost environment that you highlighted, would you expect price to be negative for the entirety of '26? And given that context, would you expect to achieve a better organic sales growth in '26 than you have done in '25? And then second, a quick follow-up on the A&P discussion. Can you please give us a sense of how the advertising step-up is going to be phased through 2026? Is it going to be more front-loaded? And therefore, could we expect the margin delivery to be relatively weaker in the first half of the year, given everything you said on volume, price adjustments and the cost savings delivery? Ulrika Kolsrud: I almost forgot the first question after the third question. What was the first question again? Sorry. Aron Adamski: Sorry, just on pricing expectations for '26. Ulrika Kolsrud: Yes, it was pricing and volume expectation, that's true. So I mean, we need to be agile and want to be agile when it comes to pricing because it's, of course, dependent on what happens in the market environment. So we are adapting to both, of course, what happens with input costs, but also what happens when it comes to demand and need to adapt to that situation as well as being fully equipped to capture the market growth when the wind is turning. So therefore, of course, there are scenario planning and so on, but to be agile is most important. When it comes to organic growth, yes, our ambition is clearly to move towards our financial target with 3% organic growth. So our ambition is to accelerate our growth. But again, we are in a volatile environment. So it's so important for us, and that's why it's so great to see that we are strengthening market shares in this quarter, because when the market is as volatile as it is, what we can focus on a lot is to win the relative game. And what we see in the quarter is that we're doing exactly that. And what's also important for us is that we win where it matters the most, and that is to drive our strategic segments. So that was an answer to say that we need to stay agile and see what happens in the market and then adapt to that. Sandra Åberg: Perfect. Aron, does that answer your question? Aron Adamski: Yes. Just on the second question on the phasing of margins, I suppose, for 2026, maybe if you could give us a bit more color on how the step-up in A&P is going to be phased and how is that going to impact the margin phasing through the year? Fredrik Rystedt: Maybe I can -- we don't give those kind of detailed guidance, as you've seen, Aron, but just maybe as a little bit of still a hint or 2, maybe even. First of all, you can see that Q4, as we have just reported, was higher than Q4 of '24. So that step-up has already actually happened. And if you remember, I mentioned -- maybe you weren't participating, but I actually mentioned that we do expect higher SG&A cost in Q1 on the back of higher A&P. So this gives you a little bit of hint. So we believe that the higher A&P cost will be there immediately -- actually already is there, higher, if you see the numbers. Sandra Åberg: Now let's move to Tom Sykes, Deutsche Bank. Tom Sykes: Would you be able to say how the A&P to sales for you differs by category? And just what are the categories which would have the greatest elasticity to increased A&P spend, please? And maybe just in addition is, what's happening to your trade retail spend? And how big is that in the COGS costs presumably? Ulrika Kolsrud: Well, if we look at A&P to sales, it's the categories that you find in Personal Care that has the consumer brands that has the biggest A&P spend in relation to sales, or I should say A&P investment rather in share of sales. Then if you look at a category like Wound Care, for example, you have a much lower A&P in relation to sales. There, it's much more about the sales force and equipping the sales force with the right products and support. And you find that fueling growth is through the sales force. And then we have everything in between there. Tom Sykes: Okay. And in terms of sort of the elasticity, where do you think the best place to allocate incremental A&P is? Was it just across the board? Ulrika Kolsrud: Yes. This is more about where we have our most attractive segments and categories. We want to invest the most where we have the highest potential for profitable growth and the strongest reason to win. So I think what you've seen here also now is that we have had good effect of investing, for example, in Feminine Care as well as in Incontinence Care. But we do want to fuel growth across our categories, but that should give you an indication. Fredrik Rystedt: And I guess, Tom, your question on trade spend, are you referring then to promotional activity there, I guess, right? Tom Sykes: Yes. I guess it's yes. That's spend with retailers. Fredrik Rystedt: Yes. And that is by far Consumer Tissue traditionally. So the promotional -- the percentage of all products sold under promotion is by far highest in Consumer Tissue. Tom Sykes: Okay. So that's just sitting in reduction of your revenues? Is it... Fredrik Rystedt: It's a pricing issue. It's a way -- you can say the pricing activity, they're strategic, so kind of headline pricing, and then you've got tactical pricing. And so promotion is a tactical -- it's what you do on a more temporary basis. So it's not list price adjustment. Tom Sykes: I get some of it. Sorry. Is there not spends that you would do on the websites of major retailers to get up the ladder of people searching for particular categories? I mean, that wouldn't -- or do you just include that in pricing? Ulrika Kolsrud: No, there is also brand communication and marketing that we do through the retailers or in connection with the retailers. So that is one element. But to Fredrik's point, when it comes to price campaigns, that you see in the sales. Tom Sykes: Okay. But just to clarify, does all your, if you like, A&P type spend, setting aside any promotion and price reductions, does all of that sit in the A&P line? Or does some of it sit also in the COGS line, because it's trade spend that goes on? Fredrik Rystedt: Not in COGS. It's not in COGS. It's either sales or A&P. So in this case, what you're referring to is A&P. So it's not COGS. I'm not sure how that could be possible. But we can talk about that offline, but it's not in COGS. Promotion is in sales and marketing in A&P. Sandra Åberg: Perfect. Next question comes from Karel Zoete from Kepler. Karel Zoete: I have 2 questions, if I may. The first one is in relation to M&A. You've done last year, one acquisition, but the market is difficult certainly in places such as Latin America. What's hindering you from doing more M&A? Or why haven't we seen more acquisitions over the last 18 months given the difficult markets? And then the second question is more in relation to Asia. I think there's still an agreement within that they can use some of your brands. What's the status of this? Is this going to be renegotiated in the coming year? Or do you have plans to build operations yourself selectively to capture some of the growth in the Asian market? Ulrika Kolsrud: If I start with the M&A question, maybe you can answer to Asia later. We continue to work actively with M&A, identifying potential targets and assessing potential targets. As you know, it's part of our strategy to grow both organically, but also inorganically. So we clearly have the ambition to do value-creating M&As. But we are, to that point, very disciplined to make sure that they are value creating. So that is, of course, always what we're doing in the screening to make sure that, that is the case, and always judging what is the most value creating, is it organic growth or inorganic growth. And you could argue, of course, when it comes to valuation, that in order to bridge the potential valuation gap, we need to find quite a lot of synergies then to secure that value creation. So the short answer is that we have the ambition to drive more M&As and are working on that actively. Fredrik Rystedt: So Karel, when it comes to Asia, the story isn't really different there. When we divested Vinda in 2024, there was a license agreement for these brands, and that expires in 2027. Now as we sold the company, we also granted an option for the buyer to continue licensing these brands also in the future against, of course, a license fee. And that option has not yet been translated into an agreement. And of course, we remain unsure of whether that will actually happen. So there are 2 possibilities here. One is that we continue with the license agreement subject to the buyer actually exercising on that option, or if they don't, then, of course, we get those brands back in Asia. So we cannot give you an answer at this point of time as we actually don't know. Sandra Åberg: Let's move then to Misha Omanadze, BNP Paribas. Mikheil Omanadze: I just wanted to zoom in a bit more on your end market dynamics where you already provided some helpful color. And overall, it seems that the markets remain challenging. If you were to look at your biggest category geography exposures, where would you say you saw the biggest sequential change from the previous quarter in both positive and negative direction in terms of end market trends and consumer environment? Ulrika Kolsrud: I wouldn't say that we've seen any big movements between quarter 4 and quarter 3. It's been quite stable when it comes to market environment. Sandra Åberg: Next question comes from Henrik Bartnes from ABG. Henrik Bartnes: One question for me, please. You have historically talked about seasonally lower volumes in Q1 compared to Q4. And if we look at Q1 sequentially, how should we think about volumes this year? Are there any indications that this year won't show any seasonally lower volumes? Fredrik Rystedt: I can maybe answer. First of all, we don't give volume estimates. We can only report what has historically been the case in terms of seasonality. So as you rightly say, seasonality would suggest that volumes in Q1 are lower than Q4. It's not actually one and the same for all our business areas or categories. Some don't have that. But in general, if you look at the group as a whole, clearly, volumes are typically, I should say, lower in Q1 versus Q4, but we are not giving an estimate for '26 specifically. Sandra Åberg: Let's now move on to Celine Pannuti from JPMorgan. Celine Pannuti: So my question is coming back on the Consumer Goods performance with price/mix negative. I think you mentioned that you had to roll back some pricing in order to keep some of your customers. I think it was in private label. Does that mean that going forward, we still have to annualize that, and so we'll have continuous negative pricing. I also said you mentioned there was a one-off impact from Latin America. So if you could give us a bit of an idea on that go forward. [indiscernible]. Sandra Åberg: Sorry, your sound is not working really. So we can't really hear your question. Maybe we can just start with the 2 questions you had now, because then we have to move on. Is that okay? Celine Pannuti: Perfect. Sandra Åberg: Good. Fredrik Rystedt: Yes. I think I got the question whether the price/mix -- the negative price/mix in consumer goods would flow into Q1 or Q2? Was that the question, Celine? Celine Pannuti: Yes. I mean, I would presume it annualizes if you have made some pricing concessions. And then the question, is there any other price negotiation that you are going through now in retail? Fredrik Rystedt: Yes, right. No, again, we can't comment on, obviously, price negotiations. That's more commercially related, I can't do that. But of course, as we have lower prices now in Q3 and Q4 and especially here in Q4. So there has been a price decline in Consumer Tissue. That will, of course, obviously continue into Q2. So in short, we'll see those price impacts coming or continuing in Q1 and Q2 potentially. Celine Pannuti: And just how material is the Latin America impact that you mentioned? Fredrik Rystedt: Yes, we are not actually giving you the exact number there, Celine, and this is for commercial reasons basically. But if you actually look at -- I gave you a little bit of guidance. It's always interesting when you say you're not going to give a number and then you almost do it anyway. But I'll do it because if you look at the minus 0.6% in terms of organic sales growth for Feminine in the quarter. And then we also stated that without that sales, organic sales growth would have been low single digit. That gives you a little bit of indication as to the size. So this is a bit -- of course, for the group, not a lot, but for Feminine, it is a bit, and it comes out as pricing. So that's temporary. That will not be there in the next quarter. Sandra Åberg: Perfect. Thanks for your question, Celine. Now we will move to our final question, and that question is from Oskar Lindstrom, Danske Bank. Oskar Lindström: Just a slightly different question from me. Following the Edgewell acquisition and an acquisition by another company, you're not going to be sharing, I understand, the brands Stayfree and Carefree between you. Who owns those brands? And who is paying royalties or fees to whom? Ulrika Kolsrud: Well, we own the brands in the geographies that we are operating the brands with. So in those geographies, it's our -- we can actually then do what we think is commercially right to do with those brands. Fredrik Rystedt: So in short, no royalties paid to anyone. Oskar Lindström: Wonderful. That's all the questions I had. Ulrika Kolsrud: That's what you wanted to know. Thank you for that interpretation. Sandra Åberg: Thank you, Oskar, for that question. And now it's time to wrap up. But before we end, I would like to hand over to you, Ulrika, again, for final remarks. Ulrika Kolsrud: Yes. Well, thank you, Sandra. Thank you for joining us today. We are leaving, as I said, a solid 2025 behind us, where I think our resilience has really been a critical success factor. And it's especially great to go into 2026 with this good market share momentum that we have talked about today. And finally, I look forward to see you all on the 7th of May in Mölndal, Sweden. Sandra Åberg: Yes. Thank you for that, Ulrika, and thanks to you for joining. If you have any further questions, just reach out. We will be road showing in Stockholm today virtually next week, and we will also be in London next week. So see you there. And take care, and have a good rest of the day. Bye for now.
Matthew Korn: Hello? And welcome to the CSX Corporation Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Matthew Korn, Head of Investor Relations. Please go ahead. Thank you, Sarah. Good afternoon, everyone. We are very pleased to have you join our fourth quarter earnings call. Joining me from the CSX leadership team are Steve Angel, President and Chief Executive Officer, Mike Cory, EVP and Chief Operating Officer, Kevin Boone, EVP and Chief Financial Officer, and Mary Claire Kenny, SVP and Chief Commercial Officer. In the presentation that accompanies this call, which is available on our website, you will find slides with our forward-looking and non-GAAP disclosures. We encourage you to review them. And with that, I am very happy to turn the call over to Mr. Steve Angel. Steve Angel: Good afternoon. And thank you for joining our fourth quarter call. This has been a challenging year for CSX Corporation and for our industry overall, with subdued demand and limited growth opportunities persisting across many of our key markets. Against this backdrop, our service levels remain positive in the fourth quarter, and we delivered modest total volume growth. However, reported operating income, operating margin, and earnings per share were all lower year over year. As noted in our press release, these results included approximately $50 million in expenses related to important actions we have taken to adjust our cost structure, deliver better financial results, and position the railroad to succeed. We are committed to delivering stronger performance into 2026 as we build on our key accomplishments. We have renewed the leadership team, putting the best people into the best positions to drive value. And we are aligned in driving greater fiscal responsibility and disciplined execution across the company. We have stabilized service on our network at high levels, delivering consistency and reliability for our customers while realizing clear productivity gains. We have capitalized on the strength of our service to win business, and we will be ready and able to respond when demand increases. As we move forward, you will continue to see us take thoughtful actions to drive greater profitability and cash flow and build momentum into the year ahead. And now I will turn it over to Mike. Mike Cory: Thank you, Steve. So let's take a quick look at our safety and operational metrics on Slide five. Our operations team is improving safety performance through focused execution of our safety plan. The left portion of this slide highlights meaningful full-year declines in both FRA injury and accident rates, with the fourth quarter posting the year's best metrics. We know that an outstanding safety record is a clear indicator of effective management at every level. And we are taking solid steps towards our goal of reaching best-in-class performance for the industry. The right portion of the slide shows strong year-end fluidity and customer service performance. Velocity, CarsOnline, Dwell, and Tripland compliance all showed substantial improvement from Q1 to Q4. These are encouraging trends as we enter 2026. Running a cost-effective, efficient network while delivering consistent, reliable service is essential to our success. We are maintaining this balance and preserving our operational momentum while ensuring CSX Corporation has the capacity available when the industrial cycle turns. Kevin will now review our quarterly results in more detail. Kevin Boone: Thank you, Mike, and good afternoon. I am excited to be back in the CFO role and have an opportunity to work with this team. As Steve mentioned, over the last couple of months, we have taken steps to align our cost structure to the current business environment. The team is fully engaged, and I am encouraged by the momentum we are building with opportunities to drive efficiencies in nearly every part of our business as we enter 2026. Now let's move to the fourth quarter results. Volume increased 1% with revenue down 1% driven by business mix headwinds in coal pricing. Fourth quarter operating income and earnings per share fell by 97%, respectively, against adjusted prior year figures. These results included approximately $50 million or $0.02 of charges for actions taken during the fourth quarter to optimize our workforce and technology portfolio. Now let's turn to the next slide for a closer look at the expense line. Fourth quarter expenses increased by $73 million or 3% excluding the 2024 goodwill impairment. As mentioned, the quarter included approximately $50 million of charges comprised of $31 million of separation costs in the labor line and $21 million of technology impairments in PS and O. We continue to see opportunities to drive efficiency in our labor costs as we prioritize safety, customer service, and profitable growth. Ending real headcount finished the quarter down over 3% as we continue to align to the current business environment. Additionally, overtime remains a focus for Mike's team as we look for ways to provide better visibility and tools to manage these costs. We have identified meaningful opportunities to reduce non-labor spending with well over 100 diverse savings initiatives across the company, including cutting outside and professional service spend, improving asset utilization, and maintenance efficiencies, as well as enhancing controls around all sources of discretionary spend. Twenty twenty-six expenses will see year-over-year benefit from cycling network disruption costs, third and fourth quarter separation costs, and fourth quarter technology impairments. Depreciation expense will be relatively stable year over year as normal increases to the asset base are offset by favorable results from an equipment life study, asset retirements, and targeted reductions to technology and aviation assets. We are encouraged by the cost improvements identified as we move through the quarter. Similar to our focus on cost, capital spend and driving free cash flow remains a significant area of opportunity. Working with Mike and his team, we are developing improved oversight to ensure every dollar of capital is spent efficiently and aligns to our strategic priorities, including safety, customer service, and driving profitable growth. With that, I will turn it over to Mary Claire to review our revenue results. Mary Claire Kenny: Thank you, Kevin. I am happy to be here and excited to have the opportunity to lead the commercial organization. The railroad is running well, and we have many opportunities ahead. That said, as you have heard from Steve, we continue to navigate the challenges of a mixed industrial demand environment. The strength of our relationships is critical when uncertainty is elevated, and our voice of the customer surveys show that our team has been doing an excellent job at staying close to our customers and being responsive as conditions change. Turning to slide 10. Let's cover fourth quarter volume and revenue performance. Overall, total volume was up 1% in the quarter, but revenue was down 1%. As negative mix and weaker export coal prices led to a 2% decline in total revenue per unit. Our merchandise franchise, where volume and revenue were both down 2%, continues to face market-driven headwinds. Revenue per unit was modestly higher and was also affected by mix, as growth was strongest in low RPU areas such as minerals and fertilizers. We continue to see softness in chemicals and forest products, where volume was down 6% and 11%, respectively. The industrial chemicals market remains weak, and many of our customers are carefully controlling freight spend as they manage through inflation and tariff pressures. In forest products, we continue to see the effects of plant closures, particularly with pulp and container board, that occurred up until the start of the fourth quarter. Despite these headwinds, our team has had success at winning incremental business and we anticipate benefits from new facilities ramping up in 2026. Automotive volume was down 5% year over year. While we saw some manufacturers gain momentum through the quarter, supply constraints with chips and metals limited output at other facilities. That said, we have been encouraged by the continued strength in fertilizers and mineral shipments. Fertilizer volume was up 7%, on improved phosphate rock production, and business wins in the nitrogen market. Minerals volume remains supported by demand for aggregates and cement for infrastructure projects. Our intermodal franchise really drove our growth this quarter, with revenue up 7% year over year, on a 5% increase in volume. We have been winning new domestic and international business as we brought faster transit times and more connectivity to our customers. Finally, our coal business grew modestly in the quarter, with volume up 1% year over year. Domestic tonnage increased by 6% driven by a substantial increase in domestic utility volume supported by growing power demand and higher natural gas prices. Export tonnage declined 3% in the quarter, with the derailment in late October impacting shipments for a short time. Revenue was down 5% on a 6% decline in RPU, primarily due to a decline in met coal benchmark pricing. Notably, the discount for East Coast met coal indices widened versus Australian pricing this quarter, which impacted our yield. Now let's turn to Slide 11 and talk about the key components of our market expectations in 2026. Starting with merchandise, we are positioned to benefit from consistent strength in infrastructure project activity in key regions served by CSX Corporation that's driving demand for materials such as cement, aggregate, plate, and scrap metal. More uncertain are conditions in the housing and automotive markets, which affect many commodity markets. Consensus forecasts call for modest decline in housing starts this next year, and affordability and overall demand levels continue to impact the prospects for North American light vehicle production. Our merchandise volumes will also reflect cycling of facility closures, largely in the forest products and metals areas, that occurred through 2025. We have been encouraged by the success we have had in intermodal, where the team won new business in 2025 as we expanded our network reach through new operational agreements and our strong service has allowed us to provide a faster service product. At Howard Street, the first of two bridges being raised to support double stack capability is now complete, and our customers are excited about the opportunities coming later this spring. They are bidding on business now for volume to start moving double stack through the tunnel in Q2. Still, the markets reflect the reality of a still soft trucking market, where we are watching the supply-driven increase in truck rates carefully. We also need to be aware of the risk of a slowdown in imports after the pull forward of activity that occurred through 2025. For coal, we are pleased to have two important mines on our network back open after extended outages. These mines provide good quality met coal for the export market, so global steel markets and benchmark prices remain subdued. Domestically, many utilities continue to buy more thermal coal given increasing power demand. We do have coal plants on our network scheduled to retire this year, but we have seen some closures get delayed. Overall, we see good potential in 2026, but we expect the best results will come from our own specific initiatives. Our visibility is limited, but from what we can see and hear from our customers today, there is no short-term catalyst on the horizon to lift the major industrial market. Our team will work hard to make the most of every profitable opportunity and we will be ready to respond when macro conditions improve. Now I will hand it back to Steve to talk through our outlook. Steve Angel: Thank you, Mary Claire. Now we will review our guidance for 2026 on Slide 13. We have a well-running railroad and a good pipeline of growth initiatives. However, as Mary Claire discussed, the near-term outlook across many key markets remains soft. As we plan for 2026, we do not anticipate any meaningful improvement in macroeconomic conditions. So we are assuming low single-digit revenue growth for the year, based on flat industrial production, modest GDP growth, and fuel and benchmark coal prices consistent with current levels. We expect to deliver year-over-year operating margin expansion in the range of 200 to 300 basis points. This is from a combination of workforce optimization, tighter management of discretionary expenses, our drive for efficiency, and the benefits of a more stable fluid railroad. With our Blue Ridge project complete and focused efforts on capital discipline in place, we plan for 2026 CapEx below $2.4 billion, a substantial reduction from last year. Our CapEx priorities are unchanged: invest in our infrastructure for safety and reliability, and invest in growth and productivity projects that pass our financial criteria. For free cash flow, higher earnings, a more normalized cash tax rate, and lower capital outlays should drive growth of at least 50% compared to 2025. Finally, let me address the multiyear targets that were offered at the company's 2024 Investor Day. The opportunities ahead for CSX Corporation are strong. When we execute on the core fundamentals of service, cost discipline, operating efficiency, and prudent capital deployment, we will create shareholder value over the long term. That said, the macroeconomic environment and the industry dynamics were meaningfully different than compared to today. I am replacing our 2025-2027 targets with the guidance we have given for 2026 only. I will continue to evaluate our outlook as we make progress toward our goal to be the best performing railroad in North America. With that, Matthew, we will open it up for questions. Matthew Korn: Thank you, Steve. We will now proceed with the question and answer session. Now to ensure that we maximize everyone's opportunity to participate, we ask that you please limit yourselves to only one question. Sarah, with that, we are ready to begin. Operator: Thank you. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Tom Wadewitz with UBS. Your line is open. Tom Wadewitz: Great. Good afternoon. Just I guess, one fine point on the OR improvement, if you could tell us what the base OR is in 2025, kind of just like what's included. But I guess the real question, if you will, how do you think about pricing and price cost spread? I think, Steve, focus on price and productivity kind of two hallmarks of your approach. How do you think about the opportunity to Steve Angel: Yeah. On Tom, the on the base the starting point for 2025 is obviously excluding the charge that we took on goodwill. So that's the starting point that we have in the adjusted number, that we disclosed. And on your questions on price and productivity, so, you know, as we think about price, I mean, certainly, you would like to be able to cover you know, the cost of inflation in any given year and actually do better than that. In terms of kinda where we are in the pricing initiatives, Mary Claire is taking the ball on that and has already put some new structures in place that I think are definitely gonna help in terms of our price yield. As we look at you know, what we have in the plan for 2026 versus 2025, price yield will be in 2026 over 2025 than it was in 2025 over 2024. So we are making progress I think, on the pricing front. It will be a bit slow going, but I think we will continue to make progress as we work harder on the whole price management equation. And in terms of know, these contracts have they roll off in certain time frames. It would probably take until about this time next year before we had a chance to touch every contract and stress test, if you will, in terms of what the right price is versus the value we are bringing to that customer. Operator: The next question comes from Brian Ossenbeck with JPMorgan. Your line is open. Brian Ossenbeck: Hey. Good afternoon. Thanks for taking the question. So maybe one for Kevin. In the 200 to 300 basis point guidance for improvement, can you give us some qualification how much of that you think is already baked in based on some of the the onetime items or the things you know are rolling off? And sort of what do you expect for inflation within that guide? Because if you look at the ALIF index, for example, and that's starting to pick up a bit here. So it didn't give us a little bit more color in terms of the building block there and sort of what's already spoken for and what are the assumptions underlying the rest of it? Thanks. Kevin Boone: Yeah. No. When you look at some of the unique charges, that occurred in 2025, between the severance, the technology write-off that we disclosed as well as you know, some of the costs related to the Blue Ridge and the Howard Street Tunnel, you know, you can roughly assume those are about $150 million. What we are doing, what our guidance implies, is a much greater initiative around productivity and a big focus across the organization to drive that. And so you will see our productivity numbers if you do the back if you do the math, have a fairly significant increase in step up. When we think about what's happening on the inflation side, on our labor side, that's pretty self-explanatory on the union side. You know, the industry has obviously embedded labor inflation. Next year, you will see another wage increase in the 3.75% range. We are also experiencing a little bit of more health care inflation going into '26 versus '25. So I would say on the labor side, that's pretty consistent with what we saw last year, maybe a little bit higher than last year. And then on the non-labor side, a lot of efforts by the procurement team and others to drive that a little bit lower. So expect a little bit lower inflation on the non-labor side. So, overall, you know, I would look at inflation probably being in that three to three and a half percent range. Operator: The next question comes from Scott Group with Wolfe Research. Your line is open. Scott Group: Hey. Thanks. Afternoon. The low single-digit revenue growth for the year any just sort of rough thoughts on volume versus yield in that? And then maybe, Steve, just bigger picture, like the guide this year I guess, implies, like, a 64 to 65 OR. Now that you have been here a few months, do you have a feel for, like, what you think the longer-term operating ratio should be? Do you should this be a sub 60 OR railroad in the next few years? Or not is that a I don't know. How do you how should we think about that? Thank you. Mary Claire Kenny: Hi, Scott. This is Mary Claire. I'll take the first part. So I think as we think about next year, we are looking at modest volume growth going into the year. I covered some of the macro environment that we are seeing out there, and you know, while we are optimistic about certain areas and we see growth opportunities in places intermodal, places where you see infrastructure investment, like our minerals markets, and I think, you know, there's some potential on the domestic utility side when you think about the need for power generation as well as natural gas prices are. Those are kind of more positives for us. But then as I talked about when you look at more of the industrial economy, we still see a lot of headwinds out there. So at this point, we would say really modest volume growth next year. Steve Angel: Yeah. And on the I'll just talk in terms of operating margin percent. You know, look. We want to expand it every year. And if we are doing the right things on price management and productivity, we will be able to do that. And you know, I have confidence in this team. I have confidence in our ability to build solid productivity programs to be able to grow operating margin in certain percent every year. And I could give you a number now, but I think I'll wait and talk about that later. But, you know, the objective is best-in-class performance. And you know, you know what that is with respect to operating margin. I know what that is. I have confidence we can get there. The question is, you know, over what time frame. We will make progress every year. What I would like to do I mean, we have a very solid plan as Kevin described, and we put a ton of time into building this plan for the environment, that we are facing and to make sure we could deliver an outcome that we would be proud of. So that's where we are. But what I would like to see over the course of time is how well we can execute to those plans. You know, I have confidence we can. But I'd like to you know, experience that a few quarters, if you will. Just so I can get grounded and confident in our ability to build I'll call it, sustainable productivity over time. And I think we can do that, but, you know, give me a little time to get more confident in our ability to do that. Operator: The next question comes from Ari Rosa with Citigroup. Your line is open. Ariel Luis Rosa: Hi. Thanks for taking the question, and good afternoon. So we are looking at I apologize because this is a little bit short term. But, we are looking at potentially a pretty nasty storm coming up. You know, not too long ago, we saw CSX Corporation's network face a pretty big setback given some storms. I'm curious, maybe Mike is the best one to answer this question. Just how are you preparing for the storm? And how do we get confidence? Maybe it's an opportunity to talk about kind of how you are running the network differently now versus, say, twelve to eighteen months ago. But what are the risks that these types of events could present setbacks, and how do we get comfortable that this isn't going to be a big obstacle in Q1? Mike Cory: Sure. Thanks for the question, Ari. As we've said, like, the network is going into this in much better condition than we than last year when we started facing storms. So just to give you, you know, just a view of what we see, we are gonna see ice on our southern portion of our network basically going, you know, from Nashville right across, through Alabama, through Georgia. And then in the middle section of our network, we are gonna experience or we see right now from the weather report we are gonna experience heavy snow right from Indiana through Kentucky, right across PA, Western Maryland, Virginia, all the way up the I-95. In terms of precautions, you know, here's some real detail. I mean, we are gonna have senior coverage right around the clock in all of our key areas, including our network center. We've gone over from snow clearing to tree clearing, generators, everything that we need in each location, each facility that we see the storm coming through. We've modified our operating plan, working with our customers, notifying them because they are gonna have the same conditions that really assets for us right now are gonna be most crucial thing that we protect. We at the same time, you know, we expect to see power outages, highway closures. We are gonna see cold right after that. So I do not see us coming out of this probably for a few days. If we get it Sunday, you know, we are looking at midweek to recover, but I'm very confident, especially with the condition that we are going in. That we will come through this with no issues. This is not gonna lead us into four months of trouble like it did the year before. Even if there is some consecutiveness to it, we have everything in place. And what we learned last year, we are putting into effect, throughout the beginning and right through this storm. Operator: The next question comes from Brandon Oglenski with Barclays. Brandon Oglenski: Hey, everyone. Thanks for taking the question. And I guess, Mike, it's not shocking that it snows in January. So I'd ask maybe more importantly, like, how are you approaching the operations differently this year especially, you know, with, like, new leadership concepts at the company. How do you get back to those best-in-class metrics that the railroad had, you know, three or four years ago? Mike Cory: Yeah. No. Thanks for the question. I think you can see by the metrics we have now, we are running as good as we have three or four years ago. But, really, I mean, it's a focus on asset utilization, it's a focus on oversight and, you know, to the key measures that we look at every day. Really, that's what we've done. What we learned through that exercise was to make sure that we take action as soon as we can on the issues that are preventing us from being fluid. And that's, you know, from making sure that we don't bring equipment in when we shouldn't. It's making sure we have our excess equipment in places to be able to respond to issues we have. That's generally what we did to come out of the second quarter issue first and second quarter issues we've had. But I don't see I don't see us really, you know, failing on this storm coming up. I appreciate your concern, but we are ready for it. And I again, I see us coming through it very well. Operator: The next question comes from Ken Hoexter with Bank of America. Your line is open. Kenneth Scott Hoexter: Hey, great. Good afternoon. So Kevin, sounds like a lot of programs. I think you mentioned 100 different ones. Just so we don't get lost in kind of minutiae, can you maybe talk dollar amounts for buckets so we can, I don't know, track something? Is there workforce optimization or a headcount target? Anything from Mike Cory on the op savings? And Kevin, you mentioned non-labor spending. Maybe you could just maybe parse that out a little bit. So because if we've got very low volume growth, very low pricing growth, you know, how do we get that 200 to 300 margin basis points? I guess, you take out maybe one basis points or so from the $100 million that you spent this year. If you can bucketize some of that stuff to help us walk through and what to expect. Kevin Boone: Yeah. You know, when you look at the majority of you know, the productivity, that you obviously can solve for after the $150 million that I pointed out that that naturally just comes out. That won't repeat in 2026. It's very, very highly focused on the labor line and the PS and O line. And so a lot of activity in those two areas. I would say, largely equally divided. You'll probably see on an absolute basis absolute dollar basis, more come out of the PS and O line because you are gonna have less inflation core inflation in that line versus the labor, which I talked about a little bit earlier given, obviously, our union labor contracts and what we are seeing on the medical side, on that area. But those are the areas, we are certainly focused on driving cost improvement across the line items. Depreciation, more or less, will be in the flat range. As we pointed out. And then know, certainly some areas of improvement. I you know, Mike will always tell you the fuel side, we are looking for every opportunity to continue to get more fuel efficient. And then on the rent side, there's some opportunity as we run better. Certainly, from a car hire and other areas that we expect to drive. Improvement there, too. So the good news is that diversified portfolio of opportunities. I guess the bad news on that side is we've got, you know, we've gotta stay very, very focused across all these areas to make sure that we are capitalizing on those. And my full expectation as we move into, later into this month in February, we are gonna come up with an additional list, that'll obviously hopefully, drive further improvement in the back half of the year and then, create some opportunities as we move into 2027. Operator: The next question comes from Stephanie Moore with Jefferies. Your line is open. Stephanie Moore: Great. Good afternoon. Thank you. You know, I think I would be a bit remiss not to ask at least about the major merger that is underway for this industry. If you could you know, maybe talk about how you are positioning the company in the wake of what could be a, you know, a pretty transformational deal. So, you know, in the near term, while it's under review, what are the opportunities that all can take advantage of? And then, of course, I'm sure you are also having to somewhat scenario analyze what would be like if the deal is approved. And in that way, you know, what is strategy for CSX Corporation as kind of the full East Coast merger? East Coast Rail. Steve Angel: And and made a call it took three years before the final restriction was lifted. So for three years, we were kinda in deal purgatory. And what you have to do is make sure that, you know, you are running the business to best your every day, and that that's kind of the key in this process. You know, I don't know what conditions are gonna be required for approval. That remains to be seen. I think this is a long process, and we'll find out you know, what that is. And then when you get to the end of that, you know, the if the merger is approved, you know, you still have to execute. So I think it's a long process, as I said. You know, there are gonna be, you know, opportunities we can take advantage of. We see some today that we are taking advantage of. Whatever risks are out there, we'll certainly manage those. We'll mitigate those. We'll have plans for those. As the time comes forward for us to you know, make our case to the appropriate authorities, we'll certainly be prepared to do that. And then the focus is just making sure that we can be as competitive as we can be. You know? But at the end of the day, you know, we can create value by running CSX Corporation better every day. So you can set the merger aside, we are gonna manage that. We are gonna work through that. We are gonna have many, many quarters to talk about that probably. But what we know we can do now is run this company better every day, and we feel really good about our ability to do that. Operator: The next question comes from Jonathan Chappell with Evercore ISI. Your line is open. Jonathan Chappell: Thank you. Good afternoon. Kevin, maybe Mary Claire, can you just help us a little bit with coal RPU? Feels like the way that we are calculating it now is a little bit different than the last several years. And, you know, what are you thinking about as baked into that revenue growth? Do we see and then this is from both a 1Q and a full year perspective. Is it kind of stabilized from this 4Q exit rate? Or is there some improvement baked into what's very important yield line item? Mary Claire Kenny: Yeah. So it's very clear. I'd say as we think about RPU going forward, there's always a mix element that comes into our business. And so I think about going into 2026, talked about some of the markets that we feel a little bit better about as well as ones that, you know, we see more risk. And so intermodal, we feel good about. When you think about some of our merchandise side of the business, we see some impacts there of probably stronger growth in some of our lower RPU business, like minerals and fertilizers. And more softness in some of our higher RPU business when you think about our forest products business or our chemicals business. Talk a little bit more about next year. We've got overlap. That we saw closures in over the course of 2025. Quite a few of that in our forest products line of business. We see auto down next year from a North American like vehicle production perspective. And we also have a large plant on our network that will be down over the course of next year. So that will certainly impact where we see volume growth versus decline, and comes into play. I would tell you, Steve, you spoke earlier about how we are thinking about pricing. We've had a lot of conversations there. We've looked at our processes and controls, and you know, Mike's delivering a really good service product right now, and customers value that. And so we are gonna take that into account as we think about going forward. And you also know there's, you know, there's a portion of our business that we can touch every year. So that'll impact from a timing perspective. Kevin Boone: Yeah. I'll just add on on the coal on the coal RPU just as a headline. We went through a year where we are lapping some pretty difficult comps, and that'll be largely we'll be through that by the first quarter. On that side. So, you know, we'll see a lot more stable, maybe slightly down, but, again, that to Mary Claire's point, it's a lot about mix. And, obviously, with a stronger southern utility demand, that's that is helpful as well. Given the length of haul. Operator: The next question comes from Chris Wetherbee with Wells Fargo. Your line is open. Christian F. Wetherbee: Yeah. Hey. Thanks. Good afternoon, guys. Maybe wanted to come back to a question I was asked earlier in the call and maybe think about a little bit differently. I guess, Steve, you talked about best in class. And when you think about it from a margin perspective, we kinda know where the benchmarks are. CSX Corporation was there probably five or six years ago for a few years, and I know things are different, makes it different. You know, there are some other dynamics in the market relative to them. But I guess as you've been there for three plus months now and had a chance to kind of think about the business, is there anything meaningful that you see that would sort of prevent the ability to get back to those levels whether you think about sort of the different customer mix, how things are changing, if there's any kind of a perspective we should be thinking about? I get the productivity, and you have to kind of get some reps in before you feel comfortable with how that can be sustainable. But anything sort of, you know, maybe insurmountable that you see right off the get off the bat? Steve Angel: I mean, in an answer, no. I don't see anything insurmountable in and it's not like I'm sitting here, you know, thinking, that we are gonna go back to the heydays of coal, and that's how we are gonna accomplish it. That's not what I'm thinking. I'm thinking about, you know, basically take the mix we got, and you know, through some of the strong initiatives that Mary Claire talked about earlier, you know, finding some growth through our own actions, obviously, anytime you get a little help from the economy, that would certainly help a great deal towards, you know, moving those operating margins up faster. But I really don't sit here and think, you know, I need to have a lot of help from the economy. I think our own growth initiatives do a better job on price management. And working the productivity equation very hard. And both Mike and Kevin have talked about certain actions that they've taken. But, you know, I can lay out something that says, you know, we should be able to get there? But, again, I want to see the kind of proof in the pudding and I think that'll happen. But, you know, that's kinda how I think about it. Operator: The next question comes from Jason Seidl with TD Cowen. Your line is open. Jason H. Seidl: Thank you, Arthur, Steve and team. Hello. Mary Claire, I guess this is gonna be one for you. It we are gonna go back to the coal side, but I want a clarification first. I think you said it was you know, you were calling for muted growth, and then you said next year. I'm assuming you were talking '26 and not '27. Mary Claire Kenny: Yes. '26. Sorry. Jason H. Seidl: Oh, okay. No. Not a problem. I've done that a bunch of times already this year. Wanted to just ask a question, you know, given this storm and some of the impacts that we've seen at least over the last two days with natural gas futures. Just how long do natural gas prices have to stay elevated until we see a flow through on the volume side? And what's sort of the best way to monitor that? Mary Claire Kenny: Yeah. Thanks, Jason. I would say, as I think about the coal side, you know, both with greater power demand that we are seeing here and the increase in the natural gas prices, certainly, supported recently about this upcoming storm. We feel good about the volume demand on the domestic utility side. I would say, you know, one of the things that we are watching here, though, is there were some plan closures that were supposed to start happening this year. We expect those will get delayed, but how long, that's a little bit uncertain. I think there's gonna be more demand. And more opportunity for us think the piece we'll have to watch is, you know, how much can actually be supported by the producers going forward. Operator: The next question comes from Ravi Shanker with Morgan Stanley. Your line is open. Ravi Shanker: Steve, it's understandable that you pulled the long-term guidance given our macros done the last couple of years. But is that still the right template to think about earnings growth in the long term when macro is normal? Do you think something has changed with the business where it could be better or worse than that initial guidance? Steve Angel: No. I don't think anything's changed in the business where you know, we can't come back and lay out a longer-term, you know, guidance, or a longer-term algorithm. You know, I don't see anything that's fundamentally changed the business that would prevent us from doing that. It's just, you know, caution on my part that I want to make sure that we can you know, that we can execute the plans in front of us before we start talking about a longer-term picture. But I'm not sitting here thinking that you know, we need to get away from that any kind of longer-term guidance because there's something fundamentally wrong in the business. I don't see that. Operator: The next question comes from Jordan Alliger with Goldman Sachs. Your line is open. Jordan Alliger: Yeah. Hi. Just sort of curious, can you maybe talk a little bit more about the double stack opportunity, perhaps sort of update if anything on the sizing? And I know you said people are putting bids out for the second quarter. Any additional sense for how we should think about the timing of how that could ramp into your business in order of magnitude? Thanks. Mary Claire Kenny: Yeah. Thank you. So I tell you, we are really excited about Howard Street Tunnel. I've been here fourteen years and excited to see it come to fruition. And, you know, there's a couple opportunities there. One, we are adding new Conic from the Southeast up into the Northeast, and so we've announced new lanes of service. But it's also gonna improve our service product from Chicago to and from Baltimore. It's also enabled us to allow efficient double stack service from the West Coast all the way through to Baltimore, versus having to do a rubber tire crosstown in Chicago. So we are excited about the opportunities that are there. We are talking to our customers today, both channel partners and shippers. But what I would tell you is based on past experience, it typically takes a couple of bid cycles to really customers to kind of see the opportunity and convert more business. So we expect to see growth this year and going into the future. I would say, both on our domestic and in the future on the international side of the business as well. Operator: The next question comes from Walter Spracklin with RBC Capital. Your line is open. Walter Noel Spracklin: Yeah. Thanks very much, operator. Good afternoon, everyone. I wanted to come back to the revenue growth profile of low single digit. I know whenever I know, I think about pricing in the rail industry, I kinda consider it in the three and a half percent area, and then you do assume some volume growth it would seem. So just curious, is there a mix effect at play here where we should we should build in some negative mix? Or are we seeing that core pricing number that's typically north of three, below three, I know, Mary Claire, you you you flagged truck pricing. Don't know if that's I mean, truck pricing is catching a bit here. So I'm just curious as to how the how the decompose the revenue growth versus what you would have seen typically in the past? Mary Claire Kenny: Yeah. What I would say is, you know, mix is always gonna play a role. Right? And so as I talked about this year and what we are seeing, we expect some of the stronger growth to be in our lower RPU segments. And so that is gonna absolutely have an impact on us. You know, on the intermodal side, that's lower RPU. Minerals and fertilizer is a little bit lower RPU for us. We are when you think about chemicals, when you think about forest products, when you think about automotive, there's headwinds out there. I mean, we are gonna go after opportunities that we see and make sure they are accretive to the business, but mix is certainly gonna impact where we see the growth come in 2026, and that will have an overall impact on the business. You know, Kevin touched a little bit on the coal side earlier. I just you know, mentioned on that. I do think that not only is there, you know, domestic utility opportunity, this year, provided these closures that are scheduled get pushed back, but I would also say on the export side, last year, we saw the numbers, the benchmarks come down pretty significantly over the course of the year. Think what we've seen is some pretty recent stabilization there. I guess I would call out that, you know, PLV has jumped up a bit. But I think it's important to note that when you think about our business, we are more heavily indexed to high vol. And I would say that's been more stable as opposed to seeing any significant increase at this point. Operator: The next question comes from Bascome Majors with Susquehanna. Your line is open. Bascome Majors: Steve, last quarter, you gave us some thoughts early on in your tenure about your compensation philosophy and how it kind of applied to the rail model. You know, now that you've gotten through a few more months, you're in planning. Can you talk a little bit more tactically about how you and the board have talked about changing the incentives for senior management, both on an annual basis and a go-forward long-term basis? You know, how are they different today than they were, you know, the last few years? Thank you. Steve Angel: Well, you know, we are basically in the process of rolling out the new metric you know, kinda as we speak. But if you to your point about what I discussed last time about most important, and it's really inherent in our guidance. Right? I talked about operating margins as being very important in terms of you know, demonstrating that we can continue to improve the quality of the business. And so that's an obvious metric. You know, operating income dollars that's what translates into you know, net income and earnings per share. So that's obvious that will always be an important metric. Safety will always be part of the mix. And if I had to pick three metrics that are most important to us sitting here at this time, it'd be those three, including safety. That's really on a year-to-year basis. And as you look into you know, the longer term, you know, which we call, you know, kinda three years. So you've heard me say, and those of you who've heard me say, this for many years, some of you, you know, return on capital, I think, is the truth serum you know, for any capital-intensive business. So return on capital is very important. And, you know, it's total shareholder return. You know? How well are we doing compared to the S&P 500 industrials? I think that's you know, important to all of us. So you know, kind of in a nutshell, those are the metrics that are most important. You know? And I you know, I've always liked to focus the organization on a handful of really important metrics as opposed to having you know, eight, 10, 12 as I've seen other companies do over time. And I think that's know, if you want to motivate the organization, if you want to incent the you need to have metrics that are that are very meaningful and reinforce that every day. Operator: The next question comes from David Vernon with Bernstein. Your line is open. David Scott Vernon: So Steve, if you could maybe kind of the cadence of OR improvement we are expected as we get through this year. Should we expect in kind of year over year across the board? Or is it going to be a little bit more back or front-end weighted? And then if you could put a hard number around what the benefit, the run rate benefit you are expecting from the cost actions you've taken to date I think that would help us kind of better understand the bridge for kind of what's organic or volume dependent and what's already kind of in the bag. Thank you. Kevin Boone: Yeah. When you know, certainly, are comparisons, when you think about what occurred in, 2025. And, you know, I would obviously, highlight first quarter given some of the storm activity and other things that occurred to us as a quarter where we should have good year-over-year performance probably above the average for the year. This is the continual process. As we move through the year, we continue to expect to get better and drive more cost out of the business. And we'll see if the what the revenue story is. We are obviously not assuming a whole lot, but there's a lot of activity around that as well. You know, the framework that I would use, from a margin perspective is the $150 million that I certainly highlighted as, not gonna reoccur, next year. I highlighted, three to three and a half percent inflation, in our business, and you will see that more pronounced, on the labor side versus the non-labor side. And I think you can effectively back into know, what we are assuming from a productivity standpoint from there. Operator: The next question comes from Diane McKinney with Deutsche Bank. Your line is open. Diane McKinney: There. This is Megan. Thanks for taking my question. Kind of sticking with the OR progression, I think it was really encouraging to hear about the over 100 diverse savings initiatives that the team identified, but it also sounds like there's potential for more. But as it relates to the full-year outlook, of the 200 to 300 basis points of the OR improvement, can you help us bridge from 2025? Like, are these cost savings considered? How much is dependent on the market versus what's within CSX Corporation's control? Any color there would be really helpful. Kevin Boone: We are not depending on the market. This is a plan that based on the things that we can control, which is encouraging for us in the at this team, we are gonna focus on those items. And you know, we haven't talked about, you know, the potential for some of these markets to improve, but what we are really focused on is you know, creating the operating leverage when the markets improve. To, quite frankly, deliver higher incremental margins than what we've done in the past. And I'm fully confident given all of the things that we are doing that every incremental dollar of revenue that Mary Claire and her team are able to deliver that will come in at a very, very high, incremental margin. Given all the cost things that we are focused on. You know, going back to the 100, you know, different opportunities, that's really across everything, from vehicle spend to overtime, you know, focused on rental equipment, travel. Mike and his team Doug, Casey, Terry, all of them, have brought ideas to the table. And now it's building the process, the on a monthly basis to hold our teams accountable to delivering it. I'm very confident that we can do that and providing better tools, quite frankly, to the operating team and every team across this organization so they have visibility to where the costs are. And I'm feeling better and better about that every day. I know Mike and I collaborate on that every day. I'm sure there's things that we don't know about today that we'll continue to identify. And so our goal is to you know, build the momentum through the year. And, when that volume comes back, we are gonna have a network that can handle the volume most importantly and really deliver the incremental margins. Operator: This concludes the question and answer session. And will conclude today's conference call. We thank you for joining. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Resolute Mining Fourth Quarter 2025 Activities and 2026 guidance. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to the Chief Executive Officer, Chris Eger, to open the presentation. Please go ahead. Christopher Eger: Good afternoon, and good morning to all. Welcome to Resolute Mining's Q4 2025 Activity Report in addition to providing some color on our 2025 annual results as well as our guidance for 2026. Today, I'm joined on our call by Gavin Harris, our Chief Operating Officer, who's actually sitting at our Syama operations in Mali as well as our CFO, Dave Jackson, in addition to our Head of Corporate Development and Investor Relations, Matty O'Toole-Howes. So let's dive into it. When looking at our Q4 performance across the business, I'm very proud to say that we achieved all of our targets and have very much stabilized the operations, setting up a very strong foundation for 2026. But when looking at the details, our gold produced was 66,000 ounces, an increase of 6,000 ounces over our Q3 results. A lot of this additional work came from our activities in both Senegal and Mali. Specifically in Mali, we have stabilized the supply chain issues that we talked about at the beginning of last year and throughout 2025, whereby now we've now stabilized our explosive situations and are hitting our targets through the end of the year and into 2026. Mako continues to perform extremely well, and we had a very strong quarter in the last quarter of the year. As a result of the good production across the business, our all-in sustaining costs came in at $1,877, again, a decrease versus our Q3 AISC of just about $2,200. So the difference between the 2 AISCs really results in the fact that we are really managing our costs across the business as extremely and efficiently as possible, but most importantly, with the increase in the production levels. Very also positively, we reduced our TRIFR to 1.87x versus 1.95x in the previous quarter. CapEx came in line at $18 million. But ultimately, what we're most proud of is the fact that we generated close to $86 million of operating cash flows in Q4 relative to $70 million in Q3. So what does this mean from a net cash position for the year is that we ended the year at $209 million of net cash, which is roughly $140 million increase in cash from the beginning of the year. But Q4 was also very exciting for us and the fact that we had some significant developments in Côte d'Ivoire. Specifically, on December 15, we provided an update of the Doropo DFS to the market, which shows the incredible robustness of this project, whereby the NP of the project at $4,000 is just about $2.5 billion. We'll go into more details on the specific activities for Doropo in the upcoming slides, but I'm very pleased to say that this project remains on track, on budget for construction in the first half of this year. In addition, we continue to progress across the portfolio in our exploration assets. And most notably, we introduced a Le Debo MRE at 643,000 ounces at 1.14 grams per tonne. In addition, we started really drilling at the ABC deposit in Western Côte d'Ivoire, achieving very strong exploration results, which I'll go into detail in the coming slides. Across the business, we also are continuing to execute our other strategic projects, most notably in Mali, we're very much on track and on budget with our SSCP project, again, which we'll talk about in the upcoming slides, and we continue to progress in Senegal on the life extension projects. 2025 was an incredibly pivotal year for Resolute as well as a very transformational year for the business. I'm very proud to say that we were able to achieve gold production in line with our guidance of 275,000 ounces to 285,000 ounces with final gold forward of 277,000 ounces. So very much on track to guidance, on production, also on all-in sustaining costs, whereby we ended the year at an all-in sustaining cost of $1,843, which is in line with our revised guidance. Additionally, CapEx came in on guidance at $118 million, and we achieved very strong operational and financial results with EBITDA coming in at $383 million. It is worth noting though that at the end of the year, we finished with quite a lot of gold bullion that we did not sell. So we roughly had 31,000 ounces of gold in inventory that we sold in January, which impacted the EBITDA profile for 2025. With regards to cash flow generation and as it relates to the previous slide, we ended the year with $209 million of net cash, but our overall available liquidity was just over $320 million between our gross cash and access to working capital facilities. So when looking at the business from a qualitative perspective, we're very pleased with all the activities that occurred in 2025 to position the business for continued success in 2026. Most notably, in 2025, we substantially augmented the skill sets of the executive team. We brought new people into the business, specifically a project team in Côte d'Ivoire for the construction of the Doropo project. We also restructured a lot of the principal activities in Mali as a result to some of the challenges that we encountered in 2024. We spent quite a bit of time with different government bodies across the business, and we've been augmenting the relationships that we have with the people in all the different jurisdictions that we operate. We also completed the acquisition of the Doropo and ABC projects in Côte d'Ivoire in May of 2025. This acquisition has set the business up for continued success by becoming a multi-producer West African gold company. We also made significant achievements in continuing the projects that we have in both Mali and Senegal as it relates to the SSCP and [indiscernible] programs, which we'll go into more detail. The other key activity for the business in 2025 was continued focus on exploration as I see this as a pivotal leg to creating shareholder value in the long term. But I'll spend a bit more time in the exploration section as it relates to some of the key activities that we see in 2026. Here's a recap of the organic growth profile for the next coming years. As you can see, in 2025, we achieved 277,000 ounces but as you look to the future, we'll be achieving between 250,000 to 275,000 ounces for the next couple of years as we continue our stockpile processing at Mako, where we start the construction of the Doropo project. So I'm very confident by 2028, we will be on a run rate to achieve 500,000 ounces for the foreseeable future across the business. And beyond that, with the work that we're doing on exploration, I'm very confident that we'll be able to grow the production profile organically through some of the success that we're seeing in the exploration side of the business. So as you can see on the page, we're guiding gold production from 250,000 to 275,000 ounces across the group. That's split between Syama and Mako of 195,000 to 210,000 ounces of gold production out of Syama and 55,000 to 65,000 ounces of gold production out of Mako. Mako is quite straightforward as we're continuing to process stockpiles all through '26 and into '27. However, at Syama, Syama is going to have an interesting year as we will be commissioning the SSCP program, whereby we are going to start processing the majority of the ores to be sulfides as opposed to in the past, a split between sulfides and oxides. But Gavin will go into very specific details about how this transition will occur in 2026. As a result of the high gold price environment, we are seeing our all-in sustaining costs increasing. And so we are guiding our all-in sustaining costs across the group between $2,000 to $2,200, but a significant reason for the increase from 2025 is due to the fact that the royalty expense at today's gold price environment at $4,000-plus is adding quite a bit of expense to our all-in sustaining costs. Capital expenditure for 2026 is substantially higher versus 2025. And as you can see on the page, is between $310 million to $360. Going through the different line items, we will provide some context to the increase in CapEx. So let's start with Syama. Syama is being guided between $110 million to $125 million. But of this number, approximately $40 million relates to the finalization of the SSCP program relative to 2025. In addition, waste stripping is also about $40 million, which is an increase versus 2025 of about $20 million. And that additional waste stripping capital is required in order to further develop the Syama North deposit in order to access higher-grade zones for the future. At Mako, we anticipate that the CapEx will be between $15 million to $20 million with the vast majority of that capital being spent on capital projects at the Tombo and Bantaco projects. Doropo is projected to be between $170 million to $190 million, subject to permitting an FID approval. And most of that CapEx is scheduled to be spent in the second half of the year. But again, we'll go into more detail how we see Doropo being built and expensed in the upcoming slides. And finally, we continue to spend quite a bit of money on exploration as this is a key value driver for the business. And so we expect to spend at least $15 million to $25 million on exploration, predominantly in Côte d'Ivoire, but we are looking to expand our activities in both Guinea and also in Senegal. So with that, let me turn it over to Gavin Harris to walk you through the specifics of each of our assets and our activities in 2026. Gavin Harris: Okay. Thanks, Chris, and good morning and good afternoon to everybody on the call. Starting in Ivory Coast. We've made major progress on Doropo and ABC projects, which we acquired in May last year from AngloGold Ashanti. Doropo is a transformational project for Resolute, one that I was already familiar with as it was originally developed during my time with Centamin. Throughout the second half of 2025, we built out the project team, appointing key positions; the Project Director, the Project Manager and the Project Services Manager. The Project Director, Rob Cicchini, leads this team, which has nearly 100 years of experience building projects in West Africa, Asia and Australia, predominantly with Lycopodium in the past. The long list of projects this team have worked on in West Africa include Ity, Agbaou and Sissingué in Côte d'Ivoire; Houndé, Bissa and Bouly in Burkina Faso; Fekola in Mali, Obotan and Nzema in Ghana and of course, our very Mako mine in Senegal. Moving on to key achievements for Doropo last year. These include the updated mineral resource estimate, which increased by 28%. The release of the updated definitive feasibility study, or DFS, that outlined a larger and longer life operation than the previous DFS by Centamin in 2024. The appointment of Lycopodium Engineering to complete the front-end engineering design or FEED and the issuance of the tender for engineering, procurement, construction management or EPCM, with site visits taking place next week. Progression of permitting saw increased governmental interactions, including multiple visits from the Resolute executive team and a meeting with the Prime Minister. We are waiting for approval for the mining permit. At the end of last year, the permitting process slowed due to elections. With these now over and ministers being appointed this week, we expect the last 2 stages of permitting to progress over the coming months. These stages are, firstly, approval in the Interministerial Commission followed by signature of the presidential decree. The updated DFS released on the 15th of December outlines a significantly larger project compared to the previous version of the DFS with a 55% increase in gold reserves and an extension of the mine life. An updated gold price of $1,950 per ounce has increased total life of mine gold production to 2.2 million ounces over 13 years. Current spot gold price is significantly higher than this, but to manage the time line and permitting, which was submitted using $2,000 pit shells, the updated DFS remains within these confines. Further gold production is anticipated at higher gold prices, which underpins the confidence that the Doropo life of mine could be extended beyond 13 years. We believe additional exploration targets between the main Souwa hub and Kilosegui could add even further mine life. [indiscernible] front capital costs have increased to an estimated $516 million, which reflects updated pricing with a significant inflationary aspect compared to the previous version completed during the first half of 2024. A 25% increase in processing capacity, future-proofing the project, which allows for further modular expansion, an 80% increase to the water storage capacity, a 55% increase in the capacity of the tailings storage facility to meet the additional process tonnages, increased land and livelihood restoration and resettlement costs and the inclusion of some previously admitted items. Financial highlights from the updated DFS at a base case gold price of $3,000 an ounce include all-in sustaining cash cost of $1,406 an ounce, a post-tax net present value of $1.46 billion at a 5% discount rate and internal rate of return of 49%. A payback period of 1.7 years, the payback drops to under a year of $4,000 gold price, and obviously, the gold price is much higher than that right now. Very strong free cash flows averaging over $260 million per year over the first 5 years of production. As I mentioned a moment ago, we see a lot of upside potential at Doropo, and I believe it's going to be one of those mines that simply keeps producing well beyond initial expectations. So the key work streams for Doropo in 2026, which are already underway are focused on maintaining project time lines whilst permitting and the final investment decision or FID takes place. FEED work undertaken by Lycopodium will mean equipment and construction tender packages can be prepared and issued in the first half of 2026. This work will enable procurement of key long lead items to start as soon as FID is approved. EPCM tenders have been issued with a site visit taking place next week. We initiated a competitive bid process with strong interest from world-class engineering firms with proven track records building gold mines in West Africa. The EPCM submission and adjudication will continue throughout the early part of the year, and we plan to award this towards the end of Q2. Site earthworks will start before the wet season to establish access roads and advance the early stages of the water storage and water harvesting tasks, which are key to retaining and providing water during the project construction phase. To facilitate the early work schedule, work will start on the construction of the camp and permanent village to provide messing and accommodation for the construction teams. If we assume that FID is completed by the end of Q1, the project time line has construction starting from midway through Q2 of 2026 with commissioning starting early 2028. The first gold pool is expected to be towards the end of the first half of 2028. Again, assuming the FID is reached by the end of Q1, capital expenditure on the project in 2026 is expected to be between $170 million to $190 million with approximately 75% or $135 million of expenditure during the second half of the year. Expenditure in the first half of the year will include land acquisition and crop compensation for the villages affected by the project. So now we'll move across over to Mali and the Syama operation. Syama delivered 47.2 kilo ounces during Q4, the momentum shift after 2 successive lower quarters, largely due to supply chain issues encountered from the end of Q1. The strong quarter resulted in Syama achieving the lower end of guidance with 176.3 kilo ounces of gold produced at $2,008 all-in sustaining cost, again, within the guidance range. Of note during Q4 was a new ore production record from the underground mine, achieving over 250,000 tonnes of ore in a single month. This underpinned the strong quarter as we use alternative explosive products and supplies to address issues encountered over the previous 9 months. On joining Resolute, I traveled to Mali on the evening of my first day with the company. During this visit, which lasted 3 weeks, it was clear the team on site needed strategic leadership to help with decision-making of the complex operation. We made great progress in this area, and we see further areas of improvement in 2026. Additionally, I spent considerable time reviewing contractor and supplier arrangements to make sure we're receiving the most competitive rates. To address some of the challenges, I carried out a restructuring of the management team in the second half of 2025. This started with the General Manager of the operation. While this restructure took place, I spent 3 months on site at Syama overseeing the operation and implementing a reset to remove historical inefficiencies, also whilst taking advantage of many opportunities that were immediately visible. The team at Syama were bolstered with experienced and seasoned professionals bringing first-hand experience of turning around distressed assets. We conducted an operational review starting during Q3, focused on optimization of the underground assets and cost reduction programs across the whole site. It resulted in a significant drop quarter-on-quarter as these benefits began to hit the bottom line in Q4. You can see this reflected in the all-in sustaining cost of $1,779 an ounce. This review continues today with the new leadership team and with even more opportunities under evaluation that are expected to deliver shareholder value throughout 2026 and into the future. These ongoing measures as a minimum are expected to assist in offsetting inflationary pressures. Full year capital expenditure was just below the guidance range, largely due to the Syama Sulphide Conversion Project or SSCP as we call it, deferring some $5 million of costs with the revised schedule for sulphide processing. This was while we were completing Tabakoroni oxide reserves in Q4. The key supply chain issues revolved around transport of products internally through Mali. The largest effects were on explosive products and fuel that needed government escorts. Currently, fuel levels are stable and to combat the explosive transportation issues we faced, we followed our in-country peers and will construct an explosive manufacturing plant at Syama in 2026. This is expected to increase operational stability and explosive availability across the operation. Whilst I've been on site as Syama stabilized in the operations. Chris, the CEO has been busy working to improve dialogue and build a relationship with the government leasing with the value in Prime Minister [indiscernible] during Q4. During Q4, we completed oxide mining at the Tabakoroni deposit, which lies about 40 kilometers southeast of the Syama processing plant. With nearly all economic high-grade oxide deposits local to Syama exhausted, open pit ore production will focus on the Syama North 821 district for fresh sulphide ore over the coming years. Syama today has a processing capacity of 4 million tonnes per annum. This is split between 2 processing plants. First of which is the 2.4 million tonne per annum sulphide plant which treats the underground sulphide ore. The second, the 1.6 million tonne per annum oxide plant processes open pit oxide ore. The Syama sulphide conversion project started in 2023 as key infrastructure to allow sulphide ore to be processed through the existing oxide plant. The project includes the installation of a secondary crusher after the primary crusher to reduce the harder sulphide which material and transitional or prior to feeding the existing SAG mill, a pebble crusher to deal with scats, which is the oversight of discharges from the existing SAG, a close circuit secondary ball mill to treat cyclone rejects and deliver the correct grind size of flotation. The column flotation cells to recover the sulphide material prior to roasting, 2 additional CIL tanks and a roaster upgrade with a new electrostatic precipitator or ESP, which will increase concentrate throughput by over 15%. All of this will allow for the plant to process sulphide feed whilst maintaining flexibility to still be able to process oxide ore. The SSCP is currently on time and on budget. Stage 1, the oversized pebble crusher and sulphide flotation plant scheduled to be commissioned in Q2 2026. The SSCP will then be able to run at 50% capacity, approximately 110 tonnes per hour during Stage 1. As we move to Stage 2, this focuses on the secondary crusher, ball mill construction and the roaster upgrade. This is scheduled to be commissioned and fully operational in Q3. Once fully commissioned, the throughput capacity is expected to increase to 215 tonnes per hour. Syama production will increase in 2026 compared to 2025, and will deliver between 195,000 to 210,000 ounces of gold at an all-in sustaining cost of between $1,950 to $2,150 per ounce. The gold production is weighted heavily towards the second half of the year, with H1 and H2 representing 42% and 58% of gold produced, respectively. This split is due to the ongoing review and optimization of open pit mining, which will conclude during Q1. As such, mining will be limited to the Syama North A21 waste stripping with the existing appointed contractor. During this time, existing oxide stockpiles will be processed and sulphide ore will be stockpiled ready for SSCP commissioning in Q2. The Syama North A21 open pit is expected to mine 1 million tonnes of sulphide ore averaging 2.3 grams per tonne. H1 will be focused on waste and low-grade oxide stripping before ramping into full-scale sulphide ore production in H2. The underground operation is expected to build on the optimization work completed in the second half of 2025 and deliver over 2.6 million tonnes of ore to the surface. The underground production includes 300,000 tonnes of development ore with total development increasing by 74% compared to 2025 and 8.2 kilometers of underground development plan. The highest grades from the underground will be processed, resulting in an average head grade of 2.4 grams per tonne. The lower grade material will be stockpiled, rebuilding the stockpiles that we've depleted during 2025. On completion of the open pit optimization review, oxide mining will take place during Q2 at the [indiscernible] open pit, completing the oxide high-grade reserves of this ore body ahead of the rainy season. This oxide will be stockpiled whilst SSCP Stage 1 commissioning takes place and will be processed later in the year. The second and third quarters focused solely on sulphide processing and the ramp-up of SSCP during Stage 2. By the middle of Q4, sulphide concentrate stocks will be sufficient to meet the process throughput. And as such, any further sulphide processing in the SSCP will defer ounces to be poured in 2027. As a result, there's an excess capacity on the SSCP to revert back to oxide and add additional ounces while stockpiled concentrate feeds the roaster. Hence, the heavy weighting of ounces in H2 with 12,000 ounces of oxide gold production expected during Q4. The current sulphide plant, which receives ore from the underground mine will process over 2.2 million tonnes in 2026, slightly down from 2025 as a 3-week essential maintenance work program takes place in the second quarter on the primary ball mills and the roaster. Once fully commissioned, the SSCP is expected to lift overall gold production by 5% to 10% from 2026 levels. As oxide resources deplete, oxide production is expected to decrease over the next 2 years with operations transitioning to 100% sulphide processing from 2028. CapEx at Syama this year is expected to be in the region of $120 million. And this is split into 3 main areas: approximately $40 million to complete the SSCP and roaster upgrades, another $40 million of waste stripping in Syama North A21 pit and the underground development and around $40 million comprising of equipment replacements and maintenance within the processing plant and the underground mine and additional tailings storage facility studies and construction. A full life of mine review commissioned in H2 2025 is progressing to increase production in subsequent years. We'll report on this in H2 of this year. So we move across to Senegal now on our Mako operations. The Mako operation in Senegal delivered an outstanding 2025, achieving an upward revised guidance target of 123 kilo ounces at a lower all-in sustaining cost of $1,270 per ounce. The fourth quarter gold production of 18,755 ounces was enhanced by higher than forecast stockpile grades. This strong performance was achieved despite open pit mining activities ending in H1 and transitioning to stockpile material in H2. Naturally, the cessation of mining and processing of stockpiles has seen the overall feed grade decrease over the second half of the year. Processing throughput of 604 kilo tonnes has improved year-on-year, but also quarter-on-quarter with continuous improvement. This means that recovery above 91% is maintained despite a reduction of feed grade to 1.04 grams per tonne and higher throughput rates. This has been achieved primarily by metallurgical testing on course grind sizes and optimization of the gravity gold circuit. All-in sustaining costs have increased in the second half of the year with Q4 all-in sustaining cost of $1,666 per ounce as overall gold production reduces with no higher grade run of mine ore to process, increased royalty payments and noncash stockpile movements of approximately $143 per ounce. Capital expenditure was limited to $0.3 million in the fourth quarter and a total of $2.9 million for the full year. As part of our ongoing commitment to build strong relationships with the governments of the countries in which we operate, Chris also met with the President of Senegal in Q4. The Mako Life Extension Project or MLEP, has the potential to extend the current Mako mine life up to 10 years. The MLEP encompasses 2 main areas, the Tomboronkoto and Bantaco deposits. The exciting discovery of the Tomboronkoto deposit, approximately 20,000 from the Mako mine has a current resource of 377 kilo ounces with average grade of 1.7 grams per tonne. The Tomboronkoto ESIA has been pre-validated by the Senegalese technical agencies and is pending ministerial approval. Importantly, this has been supported and approved by the Tomboronkoto village and surrounding communities. The resettlement action plan or RAP and the DFS is nearing completion and the cutoff date, the point at which no further compensation can be claimed, has passed. A full survey of the affected houses and livelihoods has been completed and is now crystallized for the purposes of this project. The overall process has been completed with detailed approach to stakeholder engagement, underscoring our commitment to regulatory compliance, transparent community consultation and responsible project execution. The application for the Tomboronkoto mining permit will follow the issuance of the environmental permit with all permitting anticipated to be received by the end of 2026, assuming no major revisions are required. When we receive the mining permit, we will have the authority we need to implement the RAP and initiate the village relocation work. We expect detailed engineering to start during Q2 with long lead items procured before the end of 2026. That means mining at Tomboronkoto is scheduled to start in the second quarter of 2028. Two additional deposits are currently being explored at Bantaco. The Bantaco South and Bantaco West deposits have recently published resources totaling 266,000 ounces at 1.1 gram per tonne. During 2025, infill drilling, technical studies and metallurgical analysis work streams were progressed with $4.1 million of capital expenditure on this part of the project. This included progressing the ESIA submission and community engagement activities, which are far less onerous than at Tomboronkoto. 2026 work streams for Bantaco are related to technical studies, additional infill drilling is required and progressing the permitting process. Subject to full economic analysis, Bantaco ore delivery is scheduled to commence in Q4 2027 to bridge the gap between the completion of Mako stockpile processing and the start of ore delivery from Tomboronkoto. Total capital expenditure on the MLEP is expected to be between $10 million to $15 million during 2026. Mako production will decrease compared to 2025 as stockpile material is processed in 2026 and deliver a guidance of between 55,000 and 65,000 ounces of gold at an all-in sustaining cost of between $1,600 to $1,800 per ounce. The all-in sustaining cost increase is a reflection of the lower stockpile grades processed within an inflationary environment, including higher royalties due to the higher average gold prices expected in 2026 and compared to H2 2025. Gold production is slightly weighted to the first half of the year with H1 and H2 representing 52% and 48% of gold production, respectively, although it's important to note that the potential variability when processing stockpiles. 2.2 million tonnes of ore to be processed at an average grade of 0.9 grams per tonne with gold recoveries above 90%. Mako currently has sufficient stockpile low-grade ore to continue processing to the end of 2027, albeit grades will decrease as processing moves through low grade to mineralized waste stockpile. And with that, I'll hand you back to Chris to talk through the exploration activities. Christopher Eger: Thank you, Gavin. And now let's move to talking about exploration. Exploration continues to be very important to the business strategic priorities moving forward. As you can see on Slide 21, in 2025, we spent just shy of $25 million on exploration activities with considerable success. Of that $25 million, roughly $15 million was spent in Senegal, $5 million in Côte d'Ivoire and $5 million in Mali. Some of the key achievements in 2025 was an initial MRE at Bantaco as well as continued exploration activities at La Debo and Doropo. But however, when we look at 2026, we will plan to continue to spend around the same amount of money but to focus more on Côte d'Ivoire versus Senegal as the bulk of the drilling in Senegal has been completed. We will continue, though, in Senegal to spend some money at Bantaco and Tombo with regards to infill exploration drilling, like I said, the bulk of the cash expenditures for this year is going to be focused at Côte d'Ivoire because we see real value at the ABC and La Debo projects. But I'll go to that in more detail in the upcoming slides. The other key area of focus for the business, which has been forgotten about is in Guinea. We do have a number of permits in Guinea, but we have been looking to apply for new permits, and I will be very proud to say that we did receive first reconnaissance authorizations for a number of permits in the Siguiri Basin, which we'll start spending time and effort in 2026. So when I look at the triangle on the right side of the page, this shows that we are developing a proper pipeline to developing the fourth asset within the Resolute business. So again, exploration is core to our success, and we are spending quite a bit of time and effort in developing additional projects within the portfolio. Moving to Page 22. I want to spend a bit more time on our ABC exploration project in the West side of Côte d'Ivoire. When you look at the map, ABC actually is comprised of 4 key deposits. There is a Farako-Nafana permit, which you can see in the very north part of the deposit; the Kona permit, the Windou permit and most recently, the Gbemanzo permit. The bulk of this initial resource is all situated on Kona. That's where you see the $2.2 million of inferred ounces at 0.9 grams per tonne. In Q4 of 2025, we started an excessive drill program across all 4 of those deposits, where we're seeing very exciting results. So the Farako-Nafana permit, which is in the north part, we've got some very exciting drill results support by we saw 1 hole at 31 meters at 2.4 grams per tonne from 13 meters from surface. We also started drilling in Kona to expand that deposits with very strong drill results and this year, the focus will be to drill at least 20,000 meters across the 4 different areas in order to expand this footprint. We are, though, looking to put economics on this project, and we've commissioned a scoping study which we hope will be released towards the end of H1 2026, but possibly to H2 of 2026. So once those numbers are completed, we'll release those to the market. Similar to the ABC project in Côte d'Ivoire, we're also very excited about the La Debo project in Côte d'Ivoire. This is a project that's about 400 kilometers into the northwest of Abidjan, which we acquired in 2024. So we spent quite a bit of time and effort in 2025 drilling out this deposit, and we had a very successful MRE of about 643,000 ounces at 1.14 grams per tonne that was issued in Q4, and that was after 16,000 meters of drilling completed in 2025. When you look at the map on the right side, the resource is focused on the Northeast area of the deposit in the G3S and in G3N zones. Those zones show gold that continue at depth and at strike. And so in 2026, we will start doing a bit more drilling to prove out the size of that deposit and continue to expand. We also see some interesting anomalies at the G1 area, which is kind of in the middle. And so we're going to be spending time drilling that deposit out as well. So the goal is to try and make us to at least 1 million ounces but also is very similar to ABC, we will be looking to implement a scoping study report towards the end of H1 2026, possibly into H2, which will demonstrate the economics of this asset. So look, in summary, I do believe that between Le Debo and ABC, we have been making for a fourth asset -- fourth producing asset, I should say, within the Resolute portfolio. So with that, I'll turn it over to Dave Jackson to go through the financial summary. Dave Jackson: Thanks, Chris. Today, I will walk you through the Q4 and full year headline financial results highlighted in the key performance metrics. Overall, we ended the year strong, and our Q4 metrics were in line with expectations. We continue to strengthen our balance sheet and build cash in the business. Looking at the financial highlights. Our year-to-date EBITDA was an impressive $383 million, which was a substantial increase from the $319 million reported in 2024. This performance was underpinned by revenue of $863 million generated from the sale of 259,000 ounces of gold at an average realized price of $3,338 per ounce. As previously noted, Resolute remains fully unhedged and continues to sell all of its gold at spot prices. At quarter end, net cash stood at $209 million, marking a $72 million increase from Q3. Included in the net cash figure is $135 million of unsold bullion, representing nearly 31,000 ounces of gold that were sold shortly after the quarter closed. We had $57 million drawn on overdraft facilities at quarter end. These facilities continue to be used locally to optimize working capital. Currently, the group has in-country overdraft facilities of approximately $113 million available as we continue to maintain financial flexibility for the group. The group all-in sustaining cost for Q4 was $1,877 per ounce, which represents a $328 per ounce decrease from Q3. This decrease was primarily driven by the expected increase in gold production at Syama. At Syama, specifically, the all-in sustaining cost was lower than Q3 due to higher production and lower sustaining capital expenditure. As already mentioned, we have successfully navigated the supply chain disruptions in Mali, which resulted in Q4 being Syama's second strongest production quarter in 2025. Let me now walk you through the key components of our cash flow summary that led to the net cash position of $209 million at the end of Q4 on our next slide. We generated a solid $86 million operating cash flow during the quarter and $314 million for the full year. This was a substantial increase from the comparable periods in 2024 and is mainly attributed to the increase in gold price throughout the year. CapEx totaled $118 million for year-to-date. This includes $24 million spent on exploration, $70 million in project capital across Syama and Mako and $24 million spent on the SSCP. Overall, CapEx and exploration spend were within guidance. As previously noted, we made the initial $25 million payment for the acquisition of the Doropo and ABC projects during Q2. These projects represent exciting growth opportunities for the company and are expected to deliver meaningful long-term value for our stakeholders. VAT outflows in 2025 totaled $66 million across Mali and Senegal. We are pleased to say we obtained $34 million of VAT mandates in Senegal in 2025, which were used to offset government payables However, VAT remains a source of cash leakage in Mali, and we continue to engage actively with the local government to recover these amounts. Our recent discussions have been positive, and we remain encouraged by the progress being made. Moving to working capital. We recorded a $29 million inflow for the year-to-date. This was driven by a $6 million reduction in consumable inventory across the group, a $10 million reduction in stockpile balances at both Syama and Mako and a $13 million change in supplier payments, which are settled in the normal course of business. Our ending cash in bullion was $266 million and marks a $165 million increase from the beginning of the year. This leaves us with ample available liquidity of over $322 million at the end of December. As noted on our last call, we have a stake in Loncor gold worth approximately $31 million, which is currently being sold. We expect to receive these funds in Q1 this year, and we expect no tax impact on the proceeds once received. Supported by a strong cash position and ample liquidity, the company is well placed to fully fund its 2026 capital expenditure requirements, including Doropo, through existing cash balances and the anticipated strong cash flows in 2026. We are currently in discussion with debt providers to secure additional capital for the Doropo project, which we are expecting to be finalized in 2026. The timing to secure any financing will not impact the Doropo time line as we expect to begin construction as soon as the permits and FID are obtained. In summary, we're in a very solid financial position and are excited about the growth potential of the business. With that, I'll hand it back to Chris. Christopher Eger: Thanks, Dave. And look, just a couple of more slides to wrap up the story. First, let's start on Page 28, which has qualitatively highlights some of the key milestones we're expecting in the next few years. Let me just focus on 2026. So going first and starting in Cote d'Ivoire, the most important is we expect to get the mining permits and FID for the Doropo projects in the coming months. And that will then obviously formalize and kick off the construction period for Doropo. But I think as provided by Gavin, we're not slowing this down, and we believe we have the financial resources to execute the construction of the project without missing a beat and initiating full construction and initial commissioning in the beginning of 2028. In addition, we're going to provide economic studies on both Doropo and at ABC. Moving to Mali, we will be commissioning the SSCP and transitioning to almost 100% sulfide production and completing an optimization study. And then when looking at Senegal, the key activities revolve around permitting of both Bantaco and Tombo projects. So we anticipate that we'll kick off those permitting applications in 2026, and we'll keep the market updated. So we have a lot on our place. We're very excited about what we're doing. We also see tremendous opportunities to continue to drive cost reductions across the business and continue to develop and build our relationships with the governments where we operate. So in summary, again, very proud of what the business achieved in 2025. We achieved our production guidance. We managed our costs across the business. We generate a substantial amount of cash flow in the business although with the support of the rising gold price environment. But most importantly, we executed our strategy of becoming a geographically diversified producer through the acquisition of the Doropo project in Cote d'Ivoire. We also made substantial improvements in exploration by focusing this as a key strategic priority for the business. I made a number of executive changes and augmented the skill set of people within the business, which is incredibly important to any mining operation. So with all the pieces that we put in place, I'm very confident that we'll have a very successful 2026. But most importantly, we're well on track to becoming a 0.5 million ounce producer from 2028. So with that, I will turn over to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Justin Chan with SCP. Justin Chan: My first one is just maybe just clarifying the explosive situation in Mali. I read that you're planning to put it in an emulsion plant and that the explosives are no longer an issue. And I was just wondering, I mean, a bit more detail. Do you have a stockpile now? And then what's the timing on the plants? And can you just give us a bit more color on that situation and I guess, how it evolves through the year? Christopher Eger: Thanks for the question. Maybe just easier, I'll just turn over to Gavin, and he can probably give a bit more color than I would. Gavin Harris: Yes. Thanks for the question. So basically, our strategy at the moment is the explosives that are coming into site has to be escorted in by the Mali and government forces, obviously, given the security situation in Mali. What's been happening is the government have been in talks with our team in country to effectively set up a grade to support the mining operations. So we're seeing a lot -- we're getting a lot more exports into the site now. So currently, the stocks on site are good enough for us to continue production and obviously be a little bit more relaxed in terms of the issues that we have had previously. But further to that, we have been in discussion with different suppliers to effectively build their own plants on site to be able to produce the products we need going forward. So we have had a successful discussion with two suppliers on that, and we're waiting for final proposals to come in ahead of building these, but we expect these to be constructed within 2026. And obviously, bringing in raw materials that are precursors to explosives will not be subject to the scores from the government, which makes things a lot easier. So that really should solve that issue that we've had with explosives throughout 2025. Justin Chan: Got you. So perhaps to paraphrase, so the near-term issue is resolved because you have these convoys that are more frequent and the supply frequencies increased and then the emotion plant is more of a longer-term solution, but timing on that in 2026 is to be determined. Gavin Harris: Yes, exactly. That's a good summary. Justin Chan: Okay. Perfect. And then maybe just on Mali more broadly, I mean, there's been a couple of major developments, the Barrick coming to an agreement with the government on Loulo-Gounkoto. And then I mean, there was a lot of press on the fuel blockades, et cetera, around November last year. It seems like that situation has improved quite a lot. It sounds like. And I'm curious on the situation with Barrick coming to an agreement with the government. I think four companies are having a hard time implementing their already agreed terms just because the government was preoccupied. Maybe could you give us an update on what you're seeing in the country on both those fronts? Christopher Eger: Yes. So Justin, I think, look, what we see is similar to the others that the mood has changed dramatically versus 2024 and a lot more positive and constructive. We do believe the situation with Bayer coming to resolution is good for the industry and good for Mali. I think the government understands what has happened and why and are trying to work with the remaining operators to try and keep it more stabilized. There was obviously a bit more noise on security at the beginning of Q4 that we've seen kind of reverse. So it's -- unfortunately, it's a bit more of the same. We are continuing open dialogue and constructive dialogue with the government and trying to educate them on how we can work together for future investments. That's why we're doing the Phase II studies that we work with the government. Demonstrate that I know if we can work together, we think that there's growth in our business. But unfortunately, a bit similar to 2025, I'm still cautiously optimistic. We're still very cautious that we need to see a bit more signs of reversals. One of the key activities that we have not been receiving or VAT refunds back. And I think that's a key milestone that needs to be achieved for future investments. But generally, the mood is much more positive and continues to head in that direction, but it's still delicate. So look, I would say, just a summary, security is probably in good shape. And as fuel hasn't been an issue because we're working very closely again with the government to get the convoys and for our mines to be fed, which has been not impacted, but it's still delicate. Justin Chan: Got you. I appreciate that. That's really helpful color. And just one last one, I'll free up the line. Just clarifying with regards to the CapEx and exploration at Mako this year. So the $10 million to $15 million quoted in CapEx, that's for studies and that's independent of the exploration budget for Mako this year? Christopher Eger: That's correct. The bulk of that is study work. We will do, like I said, a bit more drilling on Bantaco, less on Tombo because we've pretty much completed that. And look, we'll spend more -- if we find more areas to explore and to expand on. But the key is to get the studies completed so that we can file for mining applications. And then depending on how we see our cash needs in '27 and '28, we may open up a bit. We're going to also look -- we have two other deposits in Senegal, Sangola and Laminia, and we're going to do some work there. But with the resources we have, we're going to focus more in Cote d'Ivoire. Justin Chan: Okay. Got you. And that will be primarily studies, it's not for, say, early site works or relocation. Christopher Eger: There is some capital towards the back end of this year, depending on the timing of -- if we receive the mining applications towards the end of the year, we'll start doing some, we'll call it, early site works and mostly it's around the wrap the relocation process at Tombo. So there's probably about $3 million to $4 million anticipated in Q4 assuming we get exploitation permits coming in as expected, but that may change and get pushed into '27. Operator: Our next question comes from the line of Casper [indiscernible] from Berenberg. Unknown Analyst: I just had two quick questions. At on the CapEx at Syama this year. I just wanted to ask how we should think about that CapEx going forward after this year's $170 million to $190 million spend? Christopher Eger: Yes. So it's a good question because I know it's higher this year because we have decided to put a bit more capital into effectively into the plant because look, the plan is 30-plus years, and obviously, we need to do a new TSF. So that's why there's additional, call it, $40 million of what we call capital projects that is probably more of a one-off. I would say next year, 2027 will be probably closer to $30 million. And then look, we have, like I said, more than $40 million this year on waste stripping with a lot of that, half of it being new stripping at the 21 Syama North Zone. So I'd say, look, moving forward, the run rate CapEx is closer to $30 million to $50 million. So probably a bit on the higher end for '27 and then it will start to stabilize in that $30 million to $40 million thereafter. Unknown Analyst: Okay. Great. And just as a follow-up, why -- I just wanted to ask why sales at Syama lagged production volumes in Q4? And did they get sold in early Q1? Christopher Eger: Again. So look, in summary, we had just about 30,000 ounces of gold volume, 31,000 to be specific at the end of the year. It has to do with the fact that the 31st of December was on Wednesday, and we tend to ship our gold on Fridays. And so we have built up stock around 2 weeks' worth of stock. So all of that gold was then shipped effectively in the first 10 days of January. So look, we'll have -- that was a key impact to the lower EBITDA versus overall guidance. It's just that some of those gold sales were pushed into January, which will impact the '26 numbers. Operator: Our next question comes from the line of William Jones with Canaccord Genuity. William Jones: And congratulations on a pretty good quarter. Most of my questions have been answered. But maybe just one on trying to understand the grades going through the plant at Syama post '26. So I know you quote sort of a 5% to 10% step-up. I gather that is grades are going to be impacted just by oxide feed. So just if you could provide some color on those -- the grade of those oxide stocks going into the plant over the 2 years and if that will step up towards the reserve grades once those stockpiles are used, probably firstly. And then secondly, just a bit of the strategy around utilizing those stockpiles. Christopher Eger: Thanks. Maybe, Gavin, over to you on that one. just obviously as we're reviewing the mine plans... Gavin Harris: Yes. Thanks for the questions. Look, on the Syama grades, obviously, the sulfides that we're seeing are reasonably good grades coming out of that Syama North A21 district, and we expect those to improve as we go forward. They're sitting around sort of 2.3 at the moment for this year. There will be ups and downs in that as we go through the mine life, but we think reasonably around 2 grams per tonne is acceptable for what we'd be looking at, at the moment. And then the underground, realistically, the grades will drop off towards the end of the mine life. But certainly, over the next few years, they're sitting around that sort of 2.4 gram per tonne as we go forward. William Jones: Okay. And then just interested on -- look, I appreciate how much you can say on this, but how you're thinking about the funding or capital stack for Doropo? And is there any target leverage perhaps that you're thinking of? Christopher Eger: No, it's a good question, and it's an evolving question, to be honest, because of the cash flow generation that we're generating in the business. So as you saw from Dave, we have today over $300 million of liquidity. At today's gold price environment, we're generating anywhere from $30 million to $50 million of fresh cash every quarter. So that puts us in a very strong position to actually fund the bulk of the CapEx with our own resources. But we think it's prudent to put in some debt and because we will need some cash in the future for the MLEP program. I would say we're looking at kind of a 50-50 target split between equity and debt, but it may be a bit more equity depending when I say equity or cash versus debt. It all comes down to the cost of capital net debt. But what's really important to us because of the cash flow generation of the business, and we're not a developer is that we put in a debt facility that's very flexible that allows us to pay that back quite quickly without too many penalties and costs. And look, we've been innovated with term sheets for funding of Doropo because of the attractiveness of the project and where it's located in the world. But again, similar to what Dave said, we're working through these. So we're not in a rush because we have quite a -- look, everything is going on track as we expected, and we'll probably look to put something in place towards the end of H1, maybe into early H2 because in any case, we'll be using our cash to fund the front end of the project. Operator: [Operator Instructions] Our next question comes from the line of Richard Knights with Barrenjoey. Richard Knights: Just one on ABC. It feels like it's a bit of a sleeper in the portfolio. You mentioned there's a scoping study that you're targeting to get out in H2. How quickly do you think you could turn that around into a DFS and ultimately an FID decision? Christopher Eger: Look, I think realistically, that would be towards the back end of '27. And look, and I agree with you, it is a bit of a sleeper in the group. It's a fantastic asset, and it's a very large footprint that we have. So look, depending on the economics of the scoping study, we can try and fast track it, but there is infill drilling that needs to be done. And because there's various deposits on the permit, we would need to think about where we would start and how we would kind of build that line because it's a good problem to have, but they are different -- the ore bodies are quite different in each of the different zones that we have. So we just need to understand that a bit better. But we see significant strategic value in ABC and how it's continuous with other deposits in the area. So there's definitely a mine at ABC that will be built at some point in time. Richard Knights: Yes. Okay. And maybe -- sorry, just one more on Doropo. The $170 million to $190 million of CapEx you're targeting for this year. I'm assuming all of that comes out of the $516 million total CapEx bill for the project? Christopher Eger: That's correct. Operator: At this time, we have no further questions. This concludes today's call. We would like to thank everyone for their participation. You may now disconnect your lines. Have a nice day.
Operator: Good day, and thank you for standing by. Welcome to the Eagle Bancorp, Inc., fourth quarter and year-end 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Eric Newell, Chief Financial Officer of Eagle Bancorp, Inc. Please go ahead. Eric Newell: Good morning. This is Eric Newell, Chief Financial Officer of Eagle Bancorp. Before we begin the presentation, I would like to remind everyone that some of the comments made during this call are forward-looking statements. We cannot make any promises about future performance and we caution you not to place undue reliance on these forward-looking statements. Our Form 10-K for the fiscal year 2024, Form 10-Q and current reports on Form 8-K including our earnings presentation slides identify important factors that could cause the company's actual results to differ materially from any forward-looking statements made this morning, which speak only as of today. Eagle Bancorp does not undertake to update any forward-looking statements as a result of new information, future events or developments unless required by law. This morning's commentary will include non-GAAP financial information. The earnings release, which is posted in the Investor Relations section of our website and filed with the SEC, contains reconciliations of this information to the most directly comparable GAAP information. Our periodic reports are available from the company, online at our website or on the SEC's website. With me today is our President and CEO, Susan Riel; and our Chief Lending Officer for Commercial Real Estate, Ryan Riel. I'll now turn it over to Susan. Susan Riel: Thank you, Eric. Good morning, and thank you for joining us. The fourth quarter marked an important inflection point for Eagle Bank. Over the course of the year, we took actions to diversify our balance sheet, reduce risk and strengthen the overall quality of the franchise. These efforts became clearly visible in the fourth quarter as asset quality metrics improved meaningfully and our balance sheet mix moved closer to the profile we believe is necessary to sustainably support durable earnings. Importantly, these improvements were the results of intentional decisions, disciplined balance sheet management and a continued focus on reducing concentration risk. While these steps created near-term expense pressure, they significantly improve the underlying risk profile of the company and enhance our flexibility going forward. As we enter the new year, our focus shifts from remediation to execution, we are operating with a stronger foundation, improved asset quality and a more disciplined funding approach. This will position us to drive more consistent earnings and improve returns. I'll now turn the call over to Eric to walk through the quarter's results in more detail. Eric Newell: We reported net income of $7.6 million or $0.25 per diluted share compared with a $67.5 million loss or $2.22 per share last quarter. Let's start with asset quality. The fourth quarter results reflected the trade-offs we discussed on our prior call. Credit stability supported book value, while planned held for sale loan dispositions created some pressure on fourth quarter earnings. In the quarter, $14.7 million was recognized relating to higher expenses associated with the disposition of held for sale loans as well as mark-to-market expenses. At December 31, we had $90.7 million of loans held for sale, a decline of $45.9 million from the prior period, which includes $8.4 million of mark-to-market adjustments due to updated valuations informed by proposed or under contract disposition activities. We recognized $1.1 million of loss on the $77.9 million of loans sold during the quarter. At December 31, 2025, nonperforming loans declined to $106.8 million, down $12 million from the prior quarter and represented 1.47% of total loans. Slide 23 of our earnings deck shows the walk between linked quarters for inflows and outflows of nonaccrual loans. Total nonperforming assets declined $24 million to $108.9 million, representing 1.04% of total assets as compared to 1.23% in the prior quarter. The land loan transferred to OREO in the third quarter was sold during the fourth quarter with a gain of $900,000. Special mention and substandard loans totaled $783.4 million at year-end declining $175.1 million from the prior quarter. This represents 10.6% of total loans at year-end, declining from 13.1% at September 30. Provision for credit losses declined $97.7 million in the fourth quarter and totaled $15.5 million. Our allowance for credit losses ended the quarter at $159.6 million or 2.19% of total loans. Of that total, we have $73 million of reserves associated with income-producing office loans representing 13% of the $577.1 million outstanding at year-end. Net charge-offs declined $128.6 million from the third quarter and totaled $12.3 million in the most recent quarter. Loans 30 to 89 days past due totaled $50 million at December 31, up $20.8 million from last quarter primarily due to a participation loan, which was in the process of being renewed and was booked yesterday for closure. Office loans totaled $577.1 million, and of that total, $469.2 million are pass rated. Loans that exceed $5 million in our pass rated are undergoing quarterly reviews. Smaller office loans have stronger credit enhancements than the larger office loans that we've worked through cycle to date. The fourth quarter saw dramatic reductions in our CRE and ADC concentrations as expected payoffs, resolutions and the completion of construction projects drove down our CRE concentration ratio, which is a measure of CRE loans to total risk-based capital and reserves. That ratio declined to 322% and the ADC concentration ratio, which measures acquisitions, development and construction loans over the same denominator declined to 88% for the company as of year-end. From an earnings standpoint, pre-provision net revenue was $20.7 million. Included in that is $8.4 million in held for sale, mark-to-market expenses and the $6.3 million in disposition costs related to loan sales. Net interest income grew $144,000 to $68.3 million as the decline in deposit and borrowing costs outpaced a modest reduction in income on earning assets. NIM declined 5 basis points to 2.38% primarily driven by a mix shift between loans and cash partially offset by improved time deposit costs from reduced brokered time deposit usage. Noninterest income totaled $12.2 million compared to $2.5 million last quarter. The increase was primarily due to losses that did not reoccur in the fourth quarter and other income as a result of FDIC investments and the gain on the sale of OREO. Noninterest expense increased $17.9 million to $59.8 million due to the $6.3 million in costs associated with the disposition of certain held-for-sale loans, and $8.4 million in valuation adjustments on proposed transactions for the remaining held-for-sale loan portfolio. Our capital remains strong. Tangible common equity to tangible assets is 10.87% Tier 1 leverage ratio is 10.17% and CET1 is 13.83%. Tangible book value per share increased $0.59 to $37.59 as earnings added to capital. Continued deposit growth and a rising proportion of insured balances underscore the resilience of our funding base. With $4.7 billion in available liquidity, we maintained 2x coverage of uninsured deposits. During 2025, our teams have reduced brokered deposits by $602 million while increasing core deposits, $692 million, and we expect continued progress in 2026. The improvement reflects coordinated efforts among our C&I teams, branch network and digital platform. Finally, turning to 2026. We are optimistic about our ability to expand pre-provision net revenue, as outlined in our updated 2026 forecast on Slide 11 of our earnings deck. While we expect average deposits, loans and earning assets to decline on a year-over-year basis, this reflects deliberate balance sheet repositioning rather than operating pressure and reflects prioritization of shareholder returns and profitability. Loan balances entering 2026 begin from a lower level due to paydowns and resolutions that occurred throughout 2025, and the investment portfolio runoff in 2025 further reduces average earning assets. On the funding side, lower average deposits in 2026 primarily reflect the continued runoff of brokered funding as we prioritize building core deposit relationships. This shift in funding mix is expected to improve profitability. As a result, we're forecasting a meaningful expansion in net interest margin with NIM expected to range between 2.6% and 2.8% for the year. This improvement is driven largely by a reduction in higher-cost brokered deposits. Noninterest income is expected to increase by approximately 15% to 25% while noninterest expense is expected to decline between flat and 4%. Importantly, this reflects normalization following elevated expense levels in the fourth quarter of 2025, which was previously discussed and we do not expect to reoccur. Taken together, these trends support our confidence in expanding pre-provision net revenue in 2026 despite a smaller average balance sheet. I'll turn it back over to Susan for final comments ahead of the Q&A. Susan Riel: The fourth quarter tangibly demonstrates the progress we've made at Eagle Bank executing on our strategic plan. The actions we took throughout 2025 to address credit risk, reduce loan concentrations and improved balance sheet quality are now clearly reflected in our results. We exited the year with an improved risk profile, higher core deposits allowing for reduced use of wholesale funding and improved visibility into the sustainability and trend of our earnings. As we look ahead, our focus will transition from foundational initiatives to consistent performance. While we are not yet where we want to be in terms of bottom line performance, we're optimistic about the franchises direction. Before we conclude, I want to thank our employees for their continued dedication and professionalism. Their commitment has been instrumental in navigating a challenging period and positioning the company for the future. With that, we'll be happy to take any questions. Operator: [Operator Instructions] And our first question comes from Justin Crowley of Piper Sandler. Justin Crowley: Good morning, everyone. I wanted to start off on the asset dispositions, of course. Really encouraging progress, and it's obviously great to see not whole lot in additional loss through the sales that got done. I was wondering if you could talk just a little more on what's left in held for sale in terms of the expected timing. I know you mentioned some agreements in place, and you took the additional mark through the expense line. So maybe just the confidence level in the current carrying value, what's left there? Eric Newell: Justin, this is Eric. At year-end, we had $90.7 million of loans held for sale and they are carried at the lower of cost or fair value. We did have that mark that ran through noninterest expense at year-end to take into consideration fair value, which is informed by under contract or negotiating to a contract on disposition of approximately 2/3 of that portfolio. Right now, 2/3 of that portfolio is scheduled for resolution and disposition in the first quarter, but it's not done until it's done. So it could bleed into the second quarter. Justin Crowley: Okay. Got it. And then, of course, you have the wide-ranging third-party review, but what's the thinking or expectation on the potential, if there is any for any further moves into held for sale. Could this be it? Or is there a possibility that as we get through the year and credits with maturities a bit further out, perhaps get a closer look that you could see additional inflow into that bucket. What's kind of the thought there? Eric Newell: And looking at the total criticized and classified portfolio, which is $783 million at year-end, down from $960 million. There certainly could be situations, Justin, where we might decide that selling the loan is the best strategy to maximize value to the shareholders. So I don't want to say that we're done there. There certainly could be situations that arise, I don't suspect you're going to see that at the pace of what you saw in 2025. And it's a case-by-case assessment. Justin Crowley: Got it. And then I guess outside of office and maybe one for you, Ryan, but it's certainly good to see some what I thought was stabilization and actually some signs of improvement in multifamily. It looks like a handful of some of these larger watch-list loans, got some updated appraisals that show some breathing room. I was just wondering if you could talk a little bit about the trends you're seeing there. And at this point, we can maybe expect to see things continue to look better in that area? Ryan Riel: I think that we'll continue to be proactive in the problem on identification on -- and looking at the portfolio on a regular basis as we have been. So what's in there you've seen, to your point, Justin, there's been some migration positively and negatively in that criticized and classified population. Valuation, again, continues to be strong relative to the office market, where we saw significant losses, obviously, right? The multifamily market, the valuations have held up. Cap rates in our region are still sub-6% when compared to the national average of just over 6%. So where we feel good about that and where our exposure is we're monitoring the income performance. Some of these are in lease-up, recently delivered properties. So my prognostication is that you will continue to see stabilization and improvement within that multifamily portfolio. Justin Crowley: Okay. And then just for the total loan portfolio, just as far as where the reserves shook out this quarter with the movement a bit higher, including the increase in the office ACL. Just like bigger picture, how are you thinking about eventually seeing that number move lower and maybe using it to absorb just any further charge-offs without the provisioning to match it. Eric Newell: The office overlay or the portion of the ACL that's attributed to a performing office did increase, even though that's a qualitative aspect to the calculation, it's driven quantitatively by experience that we've incurred throughout the prior 12 months in office. And so when you quantitatively put that together, it's driving approximately 45% of reserves in our substandard loans about 50% of that in our special mention loans and 50% of that for launch. So when you put that all together, that's what comprises of the $73 million of reserves associated with the $577 million of performing office. So as we move forward and we have less loss content in our look back period, you'll see that ease off. Justin Crowley: Okay. So the idea would be lower from here if all goes according to plan as you see it today? Eric Newell: That is the way the calculation works. Justin Crowley: Okay. And then maybe just 1 last one. I know it's 1 quarter here and there's still some work to do. But obviously, a lot of positive signs. And so when you think about capital planning over maybe the more medium term, how do you think about the levels you're at with maybe a clearer picture on loss content? And I don't know if it's a bit premature, but when do you think you could start entertaining a more offensive stance on capital management when you think about things like buybacks or the dividends. Again, I know it's kind of early days here, but just thinking a little bit more medium or long term. Eric Newell: We are going to continue to be prudent and use caution in terms of capital management. I would point to the criticized and classified loan level and where we're at. We need to continue to see continued migration down. So a favorable trend. The 1 quarter is not a trend. So we need to see 2 or 3 more quarters. And we also need to see a more absolute level that's acceptable before management would consider talking further to our Board about additional changes in our capital management approach. By the way, Justin, you asked how we would characterize the level of capital, and I would say it's strong. Operator: And our next question comes from David Chiaverini of Jefferies. David Chiaverini: So I just wanted to follow up on credit quality. Clearly, a good update here. Can you talk about your confidence level that credit issues are behind you. Are you seeing any signs of lingering potential deterioration? Eric Newell: David, I mean again, I'd point back to the criticized, classified portfolio of $783 million. There's a lot of prudent credit management process that we're putting around that. Finance, credit, special assets teams are looking at that portfolio. We also spend time looking at the watch portfolio to understand any trends that could cause negative migration into the criticized classified so given the level of review on this portfolio every quarter as well as pass rated multifamily and office loans that are greater than $5 million. They're undergoing a quarterly review as well. We're not seeing any developing new trends based on what we see today. And what we know today. Susan Riel: I would just simply add to that. We have given problem loans and just loans in general, high attention that we're constantly looking at them. That will not change. We will not slow down on that. So we'll continue to focus on reviewing and monitoring our loans. Eric Newell: Our expectation, David, will be that the criticized classified loan portfolio continues to decline throughout the year. David Chiaverini: Great. And in terms of the dispositions, you mentioned 2/3 scheduled for the first quarter. It sounds like the level of buyer interest is high. Can you talk about what you're seeing in the secondary market? Are these private credit funds, are they other banks? And is that a fair characterization that the buyer interest is high for these loans? Ryan Riel: So David, this is Ryan Riel. The buyers are a range of types of folks. The 2/3 that you're referencing that Eric referenced in his comments, there's a range in that population, too. There's investors that are supporting local developers to convert to an alternate use, some of the historic office properties. There's existing ownership that is looking at their situation and evaluating the go-forward plan and in some cases, being willing to come in and purchase their own debt. In each and every case, we've said this for a number of quarters now. We are looking at every possible outcome in every possible path in determining on a case-by-case basis what the best path forward is to optimize the results for the bank and its shareholders. That continues to be the game plan in each and every case. David Chiaverini: Great. And then on the loan loss provision on a go-forward basis, Eric, you mentioned back in October that you're hopeful to get to a normalized level in early 2026, how should we think about it from here? Are we kind of at that point of getting to a normalized level? And how would you kind of define that normalized level? Are we talking kind of where we were in the second, third and fourth quarter of 2024 kind of in that $10 million range. Any comments there? Eric Newell: Yes, David, looking at the criticized classified portfolio level where it's at, I think that, that would inform a provision expense level that's a little bit greater than what you were indicating from 2024, just given that portfolio was smaller at that point. But we're not -- I'm going to speak to obvious here, but we're not going to see provision like levels that we saw in 2025. But I think that there could be some provisioning expenses that are more heightened than 2024, given the level of where criticized and classified, but it's also important to say what I said last quarter, that capital will continue to -- or credit is not going to cause further degradation of book value. Operator: And our next question comes from Catherine Mealor of Keefe, Bruyette, & Woods. Catherine Mealor: One follow-up on credit. Just 1 follow-up on the credit on the special mention. It was great to see that decline. I know it looked like you had maybe an upgrade from substandard and then a new credit, but then you had some come off. And so I was just curious if you could give us a bit more discussion on the credits that were upgraded or came out of special mention, just some stories or color around what those credits were, what caused them to move out and just so we can kind of understand some of the puts and takes within that category. Ryan Riel: Sure. So Catherine, this is Ryan. Big categories that help the positive migration there are improved performance at the property level. And then in certain cases, there are structural enhancements to that loan that may have been under considered, if you will, in the past with updated information and proof of the willingness and capability of those sponsors to stand behind their credits, we made some of those upgrade decisions as well. Catherine Mealor: Got it. Great. And then I guess I'm going to maybe drag in on the provisioning piece. I think that's -- that's the biggest question we all have is where do we put our provision expense for '26. And I guess that's the magic number. But as I look at the reserve, I mean, it should be fair that we should see the -- I guess the question is how much of current expectations of losses you think are in the reserve? And is it fair as you continue to work through this level of classified, which to your point, Eric, is still very high, right, still 10%. We still have a lot to work through, but your reserve is also very high over 2%. So as you kind of keep working through that, at what point should we see the reserves start to decline? And where do you -- where is the fair number or maybe a range of where that kind of trends to towards the end of the year? Eric Newell: Given our 1 quarter of improvement. I think it's prudent for management to be cautious about where we think the provision expense and telling you all what we think provision expenses, we certainly have our views on it given what we've worked on. And I can tell you that we do expect the ACL coverage to decline this year. We do expect that there is potentially lost content in that $783 million, some of which we've identified and have reserved for through specific reserves, so it is sitting in ACL. But we also have some unidentified migration, portfolio migration that are things that we don't know about yet. So I guess, Catherine, I probably I'm going to punt a little bit and try not to answer your questions with specificity until I think next quarter, if we have another continued trend, then I think we could be a little more focused in answering that question for you. Catherine Mealor: Yes, that makes sense. That makes sense. Fair enough. And then maybe my last question is just it was nice to see the inflows of new credits flow dramatically this quarter, which we would have expected just given the portfolio review we saw last quarter. But just there were a couple of -- like you had a couple of inflows, new credits that kind of came into special mention, for example, that $43 million multifamily credit. So for the new credits that came in this quarter, what happened this quarter that your loan review did not catch? And is there anything within that, that we should kind of be thinking about that would be a risk of new migration in the next couple of quarters? Eric Newell: Yes. So with specificity on that $43 million loan, Catherine, that's a newly built multifamily property in a particular submarket of Washington, D.C. that's an inflow or influx of supply. So while this property was nearing stabilization, there is a sort of hiccup in that stabilization process because of that inflow of supply, reintroducing concessions in that submarket. Reacting to that, we worked with the sponsor to put in place a go-forward plan that has cash flow sweeps and other mechanisms in it to protect the bank. The reality is that the supply -- the new supply under construction in our region is very, very small. It's less than half of what it's been historically. So with the passage of time, those units will be absorbed, those concessions will burn off and the stabilization will occur and we'll have enhanced credit structure on that particular loan through that stabilization period. So that's what happened in that quarter was just that, right? The information came through on the pickup in supply and the plateauing frankly, of that stabilization process. Operator: Our next question comes from James Abbott of Diligence Capital Management. James Abbott: I wanted to see if we could get some additional color on the C&I loan growth, it was about $120 million. That's about a 40% annualized rate. Could you provide a little context as to whether the loans are coming through SNCs? Are they bilaterals, maybe some yields, that kind of thing, just so that we can understand the color around those -- that type of production? And secondly, is it sustainable? Eric Newell: So the growth of our C&I platform is a sustainable expectation that we should all have. The growth levels seen in the fourth quarter at that enhanced growth level is probably not a sustainable figure. Speaking to the diversity question, James, the portfolio -- the C&I portfolio does not have great concentration really in any industry. There are some syndications and participations in that number. That is not an ongoing strategy that we're going to employ. Evelyn and her team have done an excellent job of bringing in relationships with debt and deposit balances on the other side of the balance sheet. So that's where you see it, and the numbers are reflective of that. You see actually greater in the fourth quarter deposit growth in the C&I book than you do loan growth. James Abbott: Sorry, Ryan, could you just give us some sort of sense for maybe the typical size of those deals that were coming in during the quarter? Are they typically $5 million and $10 million or more $20 million and $30 million sort of relationships? Ryan Riel: There's a range of it. I'd say the more on the higher end of the range that you just cited, probably 15 to 30. That's an off-the-cuff number. I'm not looking at the portfolio to justify it. But I'd say probably on average, it's in that $15 million to $30 million range. James Abbott: Okay. And then also I had a question probably for Eric. Could you maybe give us some context for the cash level that you're holding and then the broker deposit level? And I suspect it's probably a negative spread at this point and you're probably working to address that. But could you give us a sense for what the broker deposit level is today? And then how much you anticipate bringing that down? Can you use cash to pay that down, et cetera? Eric Newell: Yes. A couple of things. There was -- when you look at average cash in the fourth quarter, it was definitely higher than normal, and it was in anticipation of paying down a material level of broker deposits that were coming up for stated maturity. So we are holding that cash in anticipation of paying down those broker deposits. We have, on an average basis, we do have a third-party payment processor that does hold some deposits with us in the middle of the month that can cause the averages to increase at a high level, but it generally isn't a period and it doesn't impact period-end cash that much. In terms of brokered deposits at year-end, we have, excluding 2-way deposits, we have $1.56 billion with a weighted rate of 4%. And we're going to continue to work that down through 2026. James Abbott: And Eric, are there maturity dates on those that you could give us some sense for? Is it pretty spread out throughout the year? Is it -- and how much do you think you can attack? Do you think you can get rid of half of that in 2026? Or just any sort of context on that? Eric Newell: Yes. Of the $1.56 billion in brokered, $715 million of that is a brokered CD. So there's -- I would say it's probably spread throughout the year. And our goal is to reduce a lot of those CDs down to close to 0. Operator: And our next question comes from Christopher Marinac of Janney Research. Christopher Marinac: I think that Ryan addressed a little bit of this question in the last few callers, but I was curious about sort of the surprises on the -- for past loans going bad in the future. It would seem that you have smaller loans, if that indeed is the case. And I just want to sort of talk through sort of where would there be larger loans that could surprise us that are passed now, but that could surprise if they were downgraded in the future? Ryan Riel: The top 25 list shows where they are, shows the type of exposure there is. Again, these -- to Eric's earlier point, multifamily loans that are pass rated in size greater than $5 million, we're looking at on a quarterly basis. Office properties are there. There's not an asset -- there's some slight headwinds in the multifamily space, which is what we've talked about, again, with the back end valuation issue not there relative to what we've seen in office. The surprises coming into the substandard category, there was 1 particular land loan that we found out, had some characteristics in it that came to light during the last quarter, and they were material and impactful. That's still -- we're working through that situation and coming up with the determination of where it is. The other transaction that came in the mixed-use residential into the substandard category. That is a multifamily construction loan that we're a participant and a 50% participant in that had some challenges relative to the agency takeout that is committed to on that. The workout plan has already been addressed. And in fact, we anticipate a full payoff of that by the end of this month. So that's a material thing. It's also notable that 2 of the top 11 loans that are listed in the top 25 loan list in multifamily have been refinanced, and the aggregate balance there is about $130 million. So it's -- there's good and positive migration from a balance perspective, and we don't anticipate any fundamental issues like we've seen in office and therefore, the surprises should be limited with all the risk mitigation structures and processes we've put in place. Eric Newell: And just to build off what Ryan is saying. The theme here is that the proactive credit risk management characteristic or the behaviors that the management team with credit and align have deployed this year to reduce the amount of surprises that we may have seen in earlier years and periods and be very thoughtful about and having a high level of attention in identifying the primary source of repayment and if there's weaknesses or issues there, we will appropriately internal or risk rate that loan so we can monitor it and it allows us to intervene much earlier in the process which will maximize our options to maximize shareholder value in the event that there is some disposition that needs to occur. Christopher Marinac: Great. I appreciate the additional color. And then, Eric, I know that the guide for '26 is to have shrinkage of the balance sheet. And I'm just curious if there's a point where you may get to where it's stable and grow slightly before year-end? Or do you think you'll be shrinking for the entire calendar year? Eric Newell: I actually don't believe we're going to shrink for the entire calendar year. I suspect we'll see CRE that continue to decline in the first half of the year, and then there will be some stabilization in the back half of the year, which will then support growth, period end growth in the second half of 2026. Christopher Marinac: Great. And the last question on -- sorry, go ahead. Eric Newell: I was just going to add. The period end is a little different given that we're making money on the averages, and we're comparing the average -- the period end of 2026 compared to the average of last year. So that's why you're seeing that forecast in terms of declines on average earning assets. Christopher Marinac: Got it. Great. And then just a last question. I know the C&I balances grew quarter-on-quarter. Are you still hiring producers in that part of the operation? Susan Riel: We absolutely are still looking for strong producers in that area. Evelyn has her hand out there constantly reviewing and there are some candidates that we are exploring. Operator: I'm showing no further questions at this time. I'd like to turn it back to Susan Riel, President and CEO, for closing remarks. Susan Riel: Thank you very much for your participation and questions during the call, and we look forward to seeing you again next quarter. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Jacob Lund: Good morning, and welcome to Investor's Q4 and year-end results for 2025. I'm joined here in the studio in Stockholm by our CFO, Jenny Ashman Haquinius; and our CEO, Christian Cederholm and both will soon be giving their presentations. After that, as usual, we'll be opening up for questions, both on the call via our operator and online. And with that, over to you, Christian. Christian Cederholm: Thank you, Jacob, and hello, everyone. As we look back on the past year, it's clear that 2025 was anything but straightforward. The world remains impacted by significant geopolitical uncertainty. Now despite these headwinds, the global economy delivered decent growth. And in this environment, our companies are doing a good job balancing profitable growth here and now, including focus on efficiency and cost out whilst continuously investing to future-proof their businesses. Let's take a closer look at how we performed over the last year. So 2025 turned out a strong year for Investor. Adjusted net asset value grew by 14%, and our TSR, total shareholder return, was 15%. Listed companies total return amounted to 22%, and we strengthened our ownership in Ericsson and Atlas Copco for a total investment of about SEK 2.3 billion. Patricia Industries total return was minus 9% with considerable headwind from the weaker U.S. dollar. Operationally, it was a good year in total for the major subsidiaries. And in addition to organic growth of 4%, the companies made add-on acquisitions for a total of SEK 24 billion, of which Patricia funded about SEK 16 billion with the rest funded by the portfolio companies themselves. The biggest one by far, of course, being the acquisition of Nova Biomedical. Investments in EQT generated a total return of 15%. And here, we also made our first co-investment, Fortnox, alongside EQT X, exploring another way to create value together with EQT. Lastly, supported by a strong balance sheet and cash flow generation, Investor's Board of Directors proposes a dividend of SEK 5.60 per share for fiscal year 2025. This represents an increase of SEK 0.40 or 8% over last year. At the end of the year, adjusted net asset value stood at SEK 1,087 billion. Now let me briefly go through the 3 business areas. Starting with Listed that represents about 70% of our assets. Listed Companies generated a total return of 6% in the fourth quarter. Investor received proceeds of close to SEK 900 million or SEB shares divested in Q3, so the last quarter to maintain our ownership level as the bank continued to buy back shares. Portfolio companies continued activities focused on future-proofing their businesses. So as an example, Sobi announced its acquisition of Arthrosi, expanding its portfolio within gout with a promising Phase III drug. Wärtsilä announced the divestment of its gas solution business, further focusing the Wärtsilä portfolio. Now over to Patricia Industries, which represents about 20% of our portfolio. Total return in the fourth quarter was 1%, driven by earnings growth and multiple expansion, offset by significant negative currency impact. While reported sales declined by 5%, our major subsidiaries grew sales 5% organically. Adjusted EBITDA declined by 6%, heavily impacted by the same negative currency effects I mentioned and with some costs relating to restructuring initiatives in a couple of the companies. We saw continued high activity in Patricia. For example, Laborie announced the acquisition of the JADA system, expanding its offering within obstetrics for a potential maximum value of USD 465 million. Sarnova completed 2 add-on acquisitions for a total of $165 million, strengthening Sarnova's software offering for revenue cycle management. Also, we contributed SEK 200 million to Atlas Antibodies to strengthen the balance sheet after a period of weak demand and performance. Mölnlycke and BraunAbility distributed a total of SEK 4.1 billion to Patricia Industries in the fourth quarter. All the major subsidiaries and our 40% in 3 Scandinavia in aggregate, including the combined Nova Biomedical from Q3 and onwards, reported last 12-month sales stood at SEK 68.4 billion, and EBITDA was SEK 17.2 billion. We should note here that this is in Swedish krona, so of course, rather sensitive to FX. And finally then, investments in EQT, our third business area, which represents about 10% of the portfolio. In Q4, total return for investments in EQT was 8%, driven by strong share price development in EQT AB. Net cash flow to Investor was SEK 1.2 billion with approximately SEK 0.9 billion net inflow from EQT funds, driven by continued healthy exit activity in the funds. During the quarter, we also completed the very last part of our SEK 4.5 billion investment in Fortnox. So it was a strong quarter and a strong year. But as always, our focus is on the future. I'm confident in our strong platform. Investor has a clear purpose and a focused strategy, a portfolio of high-quality companies, an ownership and governance model that is well proven and great people, both at Investor and in our network and in the companies. And we have financial flexibility with low leverage and strong underlying cash flow. Our strategy towards 2030 is clearly defined and well aligned with our purpose with the ultimate target, of course, of generating an attractive shareholder return. Our objectives are to grow net asset value, to pay a steadily rising dividend and to operate efficiently and sustainably. We will remain focused on our 3 strategic pillars: Performance, portfolio and people. And let me say a few words about each of these. Performance first. While it varies between industry segments and geographies, overall demand remains lukewarm. In addition, the U.S. dollar is down significantly and tariffs need to be managed and the geopolitical situation remain profoundly unpredictable. Against this backdrop, companies need to focus on efficiency here and now to drive profitable growth. At the same time, focus on future-proofing initiatives is critical to ensure long-term competitiveness. This includes, for example, R&D, other investments for innovation, expansion of sales, including to new geographies and investments to leverage the potential of AI and other new technologies. So moving to portfolio then. Based on our financial strength and strong cash flow generation, we continue to seek attractive investment opportunities across all 3 business areas. This includes additional investments in our listed companies, add-on investments and potential new platform companies within Patricia Industries and continued investments, of course, in and together with EQT. Ultimately, the allocation will depend on where we find the best opportunities. And finally, people. Given the rapid transition pace in all industries, we have to ensure that the right people are driving our companies. With 24 portfolio companies and around 200 board seats across the portfolio, talent sourcing and succession planning is a top priority for us. So near-term priorities are clear, and we have a lot of work cut out for ourselves. With that, I'd like to leave the word to Jenny to talk more about our financials. Please, Jenny. Jenny Haquinius: Thank you, Christian. Yes, so let me take you through the financials for the quarter. So in Q4 2025, adjusted net asset value was SEK 1,087 billion, and this implies an increase of 6% compared to Q3. For the quarter, all business areas contributed positively. Investments in EQT increased with 8%, Listed Companies with 6% and Patricia Industries with 1%. So this implies a total return of 6% for the quarter and 14% for the full year. And now double-clicking on each of the business areas, and I will start with Listed Companies. So within Listed Companies, share price performance was mixed, but with positive share price development in almost all companies, particularly strong quarter for the Electrolux share, followed by AstraZeneca, Wärtsilä, Ericsson and Sobi. Saab and Husqvarna, however, had a tougher quarter looking at total return. Total return for the Listed Companies portfolio was 6% and largely in line with SIXRX. And as for absolute contribution, it paints a similar picture, but with AstraZeneca and Atlas Copco in the top due to the weight in our portfolio. All in all, a solid quarter for the Listed Companies portfolio. And then moving on to Patricia Industries. For the quarter, the Patricia Industries portfolio, so the major subsidiaries, grew 5% organically, while the adjusted EBITA declined by 6%. For the full year, organic growth was 4% and the adjusted EBITA declined by 1%. And as a reminder, we are restrictive when it comes to EBITA adjustments. So in the 6% drop in EBITA for the quarter, we have only adjusted for transaction costs related to M&A and one-off costs related to CEO transitions. Other than that, and of course, then not adjusted for and hence, still weighing on the adjusted EBITA margin, we have negative impact from FX, so the stronger SEK and also tariffs as well as restructuring costs to unlock efficiencies in several of the companies, and we deem this as part of ongoing operations. And now double-clicking on performance across the companies in Patricia Industries. And first to highlight a few positives. We saw a second strong quarter for BraunAbility, in part explained by a relatively weak comparison quarter, but also due to strong demand. Profitability improved, but coming from a depressed level in Q4 2024. Nova Biomedical had a solid quarter in terms of growth and profitability. Growth was partly helped by recovery following the cyber incident in Q3. Integration is progressing according to plan, and this includes initiatives such as merging the organizations and implementing a common ERP system. And this, as we mentioned last quarter, may have an impact on sales and earnings near term. We also do know that Q1 last year was a particularly strong quarter for the acquired part of the business. Laborie continued to see solid growth, driven by a large extent the Optilume urethral strictures product. Reported profitability for Laborie was down as it includes USD 11 million in cost for the JADA acquisition and the CEO transition. If we were to adjust for this, profitability was still down, but only slightly on the back of commercial investments. Permobil and Piab had a more challenging quarter. Permobil is experiencing muted growth, and that's primarily explained by negative impact from the voluntary product recall of the Power Assist device announced in Q3. But positive to see good cost containment and a slight increase in EBITA margin, and this is despite SEK 32 million in restructuring costs. Piab had a quarter with negative organic growth, and that's on the back of weaker customer demand, particularly in the semiconductor market. Generally, Piab's end markets have been more choppy following the introduction of tariffs and increased geopolitical disruption. Lower sales impacts margins together with negative FX and tariffs as well as SEK 37 million in restructuring costs to drive efficiencies. And finally, on to Atlas Antibodies, we contributed SEK 200 million to strengthen the balance sheet. And this is to give room to the relatively new management to execute on the plan. And we do see that roughly 70% of the business is recovering, but we still see challenges in terms of soft market and competition for the evitria part of the business. And over to Mölnlycke. So Mölnlycke had a solid quarter with 3% organic growth, and this was primarily driven by Wound Care. So Wound Care grew 5% organically and Gloves 3% organically, and this was somewhat offset by a contracting ORS. On a general basis, we see continued good momentum in U.S. and China, while softer markets in Europe and the Middle East. In Europe, as mentioned before, there are pressures on health care budgets and that's specifically in Germany and France. And in the Middle East, we see customers with relatively high inventory levels. Profitability for Mölnlycke improved, and this is despite negative impact from FX and tariffs, and this is driven by positive product mix, but also lower cost on the back of continuous work with efficiency improvements. And Mölnlycke distributed EUR 200 million to Patricia Industries in Q4. We saw a 1% increase in estimated market values compared to Q3, so from SEK 223 billion to SEK 225 million. And this increase was explained by earnings growth in the portfolio companies as well as cash flow generation and, to a lesser extent, also expansion in valuation multiples. However, the increase was essentially offset by a negative impact from currency. And looking at value development across the companies, we can say that the main contributors for Q4 were Nova Biomedical and Laborie, while Sarnova and Piab was a drag on total value. For Sarnova, mainly due to multiples and for Piab, mainly lower earnings. Also worth highlighting is the distribution, so roughly SEK 2 billion from Mölnlycke and BraunAbility, respectively as well as the already mentioned equity contribution to Atlas Antibodies of SEK 200 million to strengthen the balance sheet. And now moving on to investments in EQT. So total value change was 8% in the quarter, and that's primarily driven by EQT AB, which was up 14%. Fund investments were essentially flat. And as a reminder, we report EQT fund investments with 1 quarter lag. So the 0% is based on EQT's Q3 report. On the right-hand side, we illustrate the net cash flow from EQT to Investor, which was roughly SEK 1 billion in the quarter, and this is driven by exit proceeds as well as dividend from EQT AB. And here, we have an illustration of the net cash flow from investments in EQT over time. While it's quite lumpy on a quarterly basis, over the past 10 years, we've received a net cash inflow of SEK 1.6 billion on average per year. And the LTM net cash flow is a negative SEK 2.4 billion. However, this includes SEK 800 million in acquisition for EQT AB shares and also SEK 4.5 billion in investment in Fortnox. If we were to adjust for this, net cash flow on an LTM basis is a positive SEK 3 billion. Our balance sheet remains strong. Our leverage as of Q4 is 2.1%. So it remains in the lower end of our policy range despite significant investments. And we closed the year with SEK 27 billion in cash at hand. All of our 3 business areas generate cash flow to support investments and a steadily rising dividend to shareholders. And as you know, from Listed Companies, we receive ordinary dividends as well as extraordinary dividend. In Patricia Industries, the portfolio companies generate cash flow, which can be reinvested in the companies or paid in distribution. And for investments in EQT, we have an ownership in EQT AB, which yields an annual dividend as well as fund investments where cash flow is, by definition, lumpy because it's dependent on drawdowns and exits, but it remains a strong contributor to cash flow over time. Since 2015, we have received total funds from all of these 3 business areas of SEK 216 billion, and note here that EQT is net cash flow in the pie chart to the left. The use of proceeds is illustrated on the right of more than 50% has been distributed to shareholders, roughly 30% has been reinvested in Patricia Industries and north of 10% in Listed Companies. So this platform with 3 strong business areas provides a broad-based cash flow that supports continued growth and distributions. The incoming funds provide strong investment capacity and have been deployed across all of our 3 business areas. 2025 was a record year in terms of investments, and this has been executed on while maintaining a strong balance sheet going into 2026. While sustaining this high level of investment activity, as mentioned, more than 50% of incoming funds have been distributed to our shareholders. We have continuously delivered on our commitment to pay a steadily rising dividend, and we continue to do so also in 2025. So the dividend proposal for 2025, as Christian has already mentioned, is SEK 5.6 per share, which is an increase of SEK 0.4 per share compared to 2024. And this applies an average annual growth of 8% over the last 10 years. And then on to my final slide. So looking at the longer-term perspective, the performance of the Investor ABB share truly illustrates the strength and the resilience of our portfolio and strategy. So with that, I will leave the word back to Jacob. Jacob Lund: Thank you, Jenny. Thank you, Christian as well. We are now ready to take your questions, and we will start with the questions through our operator, Sharon. Sharon, please. Operator: [Operator Instructions] And your first phone question comes from the line of Linus Sigurdson from DNB Carnegie. Linus Sigurdson: Starting off with a question on Mölnlycke and Mölnlycke growth. Is there any visibility on these France and Germany headwinds subsiding? Or should we expect this effect to persist in the foreseeable future? Jenny Haquinius: I can start. Thank you for the question, Linus. It's quite hard to say. We are seeing muted growth across many sectors at the moment, given what we're seeing globally. And specifically for Mölnlycke in Europe, there's weakness in France and Germany, and that is because there's a lot of pressure on health care budgets. But it's really hard to say if that would look any different in the next quarter, but really good to see continued momentum in the U.S. and China. Christian Cederholm: And maybe just to add, I think it's fair to say that this started somewhere during the first half of last year. But to Jenny's point, we don't really have visibility on the future development. Linus Sigurdson: That's fair. And then on the margin in Mölnlycke, is it fair to assume that the sort of tariff and currency impacts on profitability there are in line with previous quarters? And I mean, with 30-plus EBITDA margin, have we sort of already reached the potential for the efficiency program? Jenny Haquinius: Well, I can start. I would say that for the companies impacted by the tariffs, on a general basis, they're doing a really good job to mitigate, but it's roughly 1 percentage point or so still impacting margins. In terms of FX for Mölnlycke for this quarter, it's roughly 3 to 4 percentage points in negative FX. And Mölnlycke is doing a really good job working with efficiencies and really demonstrated that in this quarter. Then, of course, that's ongoing work because it's a mix of travel restrictions, using less consultants and also finding more sustainable efficiencies. So I think that work will continue also through 2026. Linus Sigurdson: Okay. And then my final question is a more general one. When you talk about solid cash flow in the coming years and this ambition to accelerate investments, could we view this as a comment on, say, EQT exit markets and the potential for, for example, Nova Biomedical start generating dividends to investors after the integration? Christian Cederholm: Sorry, can you repeat the question? You were asking about our comment on accelerated investments and the cash flow, and then I didn't quite follow. Linus Sigurdson: Yes. I mean, implicit in that statement is accelerating cash flows to fund those investments. So just -- is there anything you can comment on in terms of where those cash flows will come from? Christian Cederholm: Okay. I can take a first crack. So thanks, and it's a good question. And really, the way we think about it is we look at the cash generation from the 3 business areas. And when it comes to Patricia and you were asking about Nova, the way we think about it there is that really the cash flow generated and the debt capacity generated in the subsidiaries is all a potential funding source for acquisition and/or distribution. And really, cash is sort of a corporate asset. So whether it's distributed or not is maybe not the key point, but rather that the underlying cash generation in these businesses is solid. Does that answer your question? Linus Sigurdson: Yes. Operator: And your next question comes from the line of Derek Laliberte from ABG Sundal Collier. Derek Laliberte: I wanted to ask on Mölnlycke. You say the prevention and post-op were strong product segments in the U.S. I was wondering if you could give some more insight on why these areas are performing so strongly now and which product areas perhaps aren't doing as well. Also, I'm wondering if the product mix is similar in Europe in terms of performance right now. Christian Cederholm: I can start on that. I think the main difference we see is relating to the different geographies, as Jenny mentioned. And when it comes to product mix and channel mix, maybe the one thing to say there is that in the U.S., we're more heavily leaning on acute and hospital, while in Europe, including in France, for example, we have more towards post-acute and even some home care. Jenny Haquinius: And I could also add to that maybe that the Prevention segment is larger in the U.S. because of the reimbursement structure. So there's a clear market for that in the U.S., which is very different compared to Europe as well. Derek Laliberte: Okay. Great. That's very helpful. And on Laborie, what's the status on this BPH product, is it reasonable to expect any meaningful contributions from that during '26? Jenny Haquinius: Well, we don't really provide guidance, but what we can do say is that for this quarter, as we mentioned, the growth is a lot driven by the urethral strictures product. But as of now, we do have an active reimbursement in the U.S. for the BPH product. So we continue investing behind that launch. And of course, it will also depend on the reception in the market, et cetera. But the launch is very much ongoing, and we are very optimistic about the long-term runway with both of these products. Derek Laliberte: All right. And regarding Nova Biomedical, looking at the combined company now, I was wondering how the geographical split looks like, how high is the share of U.S. sales, for example? Christian Cederholm: We provided that in the last quarter. Let us come back to that. Derek Laliberte: Yes, absolutely. That's fair. And on Three Scandinavia, I was wondering generally here, the background, I think the growth looked pretty strong here in Q4 and actually over the year. What's driving this growth? Is it mainly continued market share gains or also some price increases involved here as a contributing factor? Christian Cederholm: Well, yes, we agree. Three has been continuing to gain market share, as you can also tell from the subscriber growth numbers. And then with regards to price, I mean, it remains a fiercely competitive market, of course, but at least they have been good at holding prices. That's what I would say on that. Derek Laliberte: Okay. Great. And finally, if I recall correctly, on Sarnova, you have this high inventory situation with distributors affecting market demand and so on. Is it fair to say that this has subsided now? Christian Cederholm: Thank you. Yes, this is primarily relating to the AED or cardiac response business. And really, what we see there is it is continuing to be a tough market. However, on a sequential basis, it has been more stable recently. And then, of course, inventory could be one part in that. Operator: We will now take the next question. And the question comes from the line of Jakob Hesslevik from SEB. Jacob Hesslevik: First, on demand navigation. So several businesses face weak demand and cautious demand in their segment. How do you differentiate between cyclical weakness that require patience versus structural challenges requiring strategic pivots? Christian Cederholm: I can start there. Well, so really, what we try to track, if I start there is, one, of course, total market development, but also we're benchmarking with a certain cadence so as to make sure that we understand whether we're gaining, holding or potentially losing market share. And there, I think it's fair to say that for the majority of the portfolio, we're confident that we're holding or increasing market share. And then the other part of your question was whether -- to what extent we see structural weaknesses in markets. And that's, of course, something we continuously evaluate. And generally, when it comes to investments, we're quite keen and that's one of our top criteria to make sure that we are in industries where we see, call it, GDP plus rather than GDP or GDP minus growth. And of course, sometimes that changes over time. And then we make sure we keep track of that. Jacob Hesslevik: Great. And then double-clicking on the currency exposure management. So FX headwinds significantly impacted Patricia Industries performance during this year. It should have affected your Listed portfolio as well given its large exposure towards exports. But beyond the operational efficiency improvements mentioned, what strategic actions are you considering in order to manage your FX exposure across the portfolio more efficiently, especially to hedge the Patricia portfolio that seems to be more sensitive to USD weakening while not having a professional treasury department helping out, which you can maybe found in most of your listed portfolio. Is this something you're looking into how you can help out Patricia more in managing their exposure? Christian Cederholm: Thank you for the question. Well, as you allude to, our main way of, let's say, balancing FX exposure is by way of operational hedging, i.e., to try to have the costs where we have the revenues and the income. Now despite that, we do have a significant earnings stream in U.S. dollar, thanks to our presence and strong market positions in the U.S. When it comes to sort of further hedging within the companies, we typically don't engage much in that. But rather, we want the FX effect to be seen immediately and then addressed and dealt with. So with a long-term perspective, the changes and the FX environment will be a reality and will hit. So we'd rather just see it upfront and then try to deal with it. The only additional hedging we do is we try to match our debt currency with what our underlying cash flow is per currency. So for example, if you have a company with a lot of earnings in U.S. dollars, it's appropriate to have some level of U.S. debt there as well. Jacob Hesslevik: Okay. And then just finally on Atlas Antibodies. Following the goodwill impairment and now equity contribution, what strategic options are you evaluating for Atlas Antibodies? I mean it's a holding from back in the days when it was called investor growth capital. It is still a very small investment and contribute limited to NAV. Why are you not looking into divesting this holding? Jenny Haquinius: Yes. Well, thank you for the question. First and foremost, so we are contributing the SEK 200 million, and that is to give management some room to execute on the plan. And we have a clear plan. I think we also mentioned in the presentation that roughly 70% of the business is doing well, while we have the 30% evitria business, which is struggling, and that's on the base of weaker market demand. But we have belief in management and also the plan to continue to build on Atlas Antibodies. So that's what we are focusing on here and now. I don't know if you want to add something. Christian Cederholm: No. As alluded to previously, I mean, you have 2 out of 3 business areas that are performing well. And the struggle we see is within evitria. Jacob Hesslevik: Yes. Fair enough. I'm just thinking about the time it takes versus the size of the company relative to the rest of your portfolio, maybe we can come back to Atlas in the future? Christian Cederholm: No, but I think the one thing to say there is maybe that, of course, with Atlas Antibodies as with the other companies, our ambition is to grow it bigger over time, for sure. Jacob Hesslevik: No, I agree. It should -- it's just it hasn't really grown over the past 15 years. It's not that much larger than it was when it came out of Investor Growth Capital. But it's clear. Thank you for the elaboration at least on the business performance in the name. That makes a lot of sense. Christian Cederholm: May I just, before we take the next question, come back to the question on the geographic split on the combined Nova Biomedical business. And then the numbers are roughly 60% North America and then the other 40% is roughly equally divided between Europe and rest of the world. Operator: [Operator Instructions] And your next question comes from the line of Johan Sjöberg from Kepler Cheuvreux. Johan Sjöberg: I hope you can hear me. My question is, if you start off with the Wound Care business and looking at the growth rates over the last year, it seems like you continue to be in the high single-digit growth area. And my question here, going forward here, I heard your comments on especially what's going on in Europe here. But do you see any change to that or any -- I mean, over the next, say, like 3 years, whatever, is that the sort of -- do you see any change to the market that would sort of change that picture, if you take some sort of a helicopter view on that one, please? Jenny Haquinius: Yes, I can start. And I think the short answer is, not really. So no clear change. I think looking at the full year, Wound Care specifically grew 7% organically and was 5% in the last quarter. And that is, as we've talked about before, in a market that's growing low to mid-single digit. So Mölnlycke has continued to take market share within Wound Care on the back of a strong product offering, very much focused on the customer. And we, of course, have the absolute aim to continue to do so by continuing to investing in innovation and also go-to-market. And then in addition to that, we also have new geographies. So we are investing in China, where we now have local production. And there we, of course, are seeing potential for higher growth. And then also the investments and the building presence in the post-acute channel, which is also an addition because Mölnlycke has historically had the strong position in acute, and that will also add potential avenues for higher growth. So we're not seeing anything differently now. But of course, in the more short-term perspective, we will always have markets that can be under pressure like we're seeing now in Europe. Johan Sjöberg: That's great. And also, Jenny, can I ask you on EQT funds, EQT reported today also and sort of you -- given a quarter lag on your -- the reported value of EQT funds. Should we expect any shift -- or put it like this, is there any material change if you were to use the Q4 numbers compared with the Q3 numbers? Jenny Haquinius: No, the short answer is that there will not be a material change, at least not for this quarter. Johan Sjöberg: No, good. Then also FX is all over the place right now or rather going in the wrong way, you can say, to some extent. How -- what -- could you sort of give some sort of indication? We know about the domicile of all the companies, but just to get a feeling for what is sort of the -- what is the most important currency to look at? Is it Euro-Dollar, is it the Euro-SEK or the U.S. dollar-SEK, just to see sort of the flows within the company, so to speak here, because it is a little bit big movements, to put it mildly. Christian Cederholm: I assume you're referring to the Patricia portfolio? Johan Sjöberg: Yes. Christian Cederholm: So this is what I would say. First of all, the #1 exposure is, of course, to the U.S. dollar, just given our big presence there with some U.S. domiciled companies, but also for a company like Mölnlycke and Permobil, I mean, the U.S., clearly the single biggest market for many companies. And then in Swedish krona, for most of the Swedish domiciled companies or the global, I should say, Swedish domicile companies, you would typically look at SEK exposure that is or krona exposure, where we sort of short the krona because we have headquarters here, R&D, et cetera. But of course, sales in Swedish krona is typically quite limited. And then thirdly, just to comment on the euro, I think from Mölnlycke, in particular, it's worth to highlight that we do have manufacturing for Wound Care, for example, in the U.S., in Maine. That said, we are still net exporting from Mikkeli in Finland and so from euro into U.S. dollar. So that's another one to keep track of. Johan Sjöberg: Okay. Cool. My last question, it's really about -- I mean, some of your portfolio companies are talking about also the hesitance among customers to place orders due to tariff uncertainty, geopolitical stuff and everything like that. I would like to hear your thoughts upon, especially when you're looking at -- or you are looking for a platform acquisition or if your companies are doing an add-on acquisition, do you see that being impacting, well, sellers and buyers also here in terms of hesitance. I know one thing is the sort of valuation, but that's always a thing you can say. But this geopolitical stuff here, is that something which is also sort of hindering your M&A ambitions in both platform and add-on? Christian Cederholm: Thanks for the question. I would not say that it's sort of the major obstacle. But of course, all the factors that you point to just add to the general sort of uncertainty in terms of deciding what's the underlying earnings, et cetera. That said, on a lot of things that we're looking at, for example, in the health care and life science market, tariffs, for example, is sort of not the biggest factor driving that. So it certainly adds to the unpredictability and uncertainty, but it's not a -- I would not call it out as a major obstacle for doing transactions as proven also in the recent year where we've done lots of add-on acquisitions, for example. Operator: Thank you. There are currently no further phone questions. I will now hand the call back to Jacob for webcast questions. Jacob Lund: Thank you very much, Sharon, and let's take the questions from the web. We can start with one from [ Tommy Falk ] around the dividend for 2025. Maybe add some flavor to that, Jenny. Jenny Haquinius: Yes. Well, thank you for the question. Well, I think, first of all, the dividend proposal is the Board's proposal to the AGM and for the AGM to decide. But maybe some flavor commenting on the SEK 0.40 increase. It seems balanced looking at our robust balance sheet and also view on cash flow generation and investments. And I think the SEK 0.40 is also really a testament to the fact that we have 3 business areas generating cash flow that really supports continued growth, also investments and delivering on our dividend policy to pay a steadily rising dividend. Jacob Lund: Next question, [indiscernible]. Please, how Investor AB is engaged in rearm Europe programs or other defense investments globally? Would you like to pick that up, Christian? Christian Cederholm: Yes, I'll take a crack at it. So Investor AB as such is not particularly involved in this. But of course, the build-out of the defense of Europe means business opportunities for Saab quite obviously, but also for other companies. And as an example, Ericsson do see a potential from the rebuilding of the European defense. Jacob Lund: Next question comes from Oskar Lindstrom, Danske. On Mölnlycke, are there opportunities to growth, more through acquisitions in the Wound Care or adjacent segments given weak main markets? That's the first one. And then on Patricia acquisitions, for some time now, you've been talking on and off about adding a new major leg in Patricia, mentioning industrial automation as a segment of interest. Is that still the case? What does the pipeline look like? And what is your thinking on valuations? Jenny Haquinius: Yes, I can start with Mölnlycke. Yes, well, add-ons is a priority for all of our subsidiaries and Mölnlycke included. So there is a lot of time spent to, of course, understand the different segments within Wound Care, but also adjacencies. And I think so far, there has not been any major available targets that have made sense because Mölnlycke has been able to grow so strongly organically. What Mölnlycke has done and is, of course, also continuing doing is add-ons that are smaller and more focused on innovation. So early-stage research, for example. And I think a recent example of that is a product for potential debridement of wounds, which would be a good addition to the Mölnlycke portfolio. But as for the other subsidiaries, it's also an important focus for Mölnlycke, of course. Christian Cederholm: And then the question on new platforms. And just to recap, our capital allocation priorities are quite clear in that we always put development and growth of our existing companies first. So that's our top priority. And as we've said, we are also open for and actively looking to add new platform companies, not the least in Patricia. And yes, industrial automation or industrial technology has been pointed to as one area that we're looking in, but we are also looking more broadly than that. And as for the pipeline, I think all I can say there is the work with identifying, scouting and potentially executing on acquisitions is a continuous process. And then when it comes to sort of closings and actual execution, that is inherently volatile and will remain so. Jacob Lund: Then the next one is from [indiscernible]. Will you organize another Capital Markets Day in 2026 for us, long-term shareholders? This is helpful to gauge the development of nonlisted companies. I think I can answer that briefly. It's been a while since we had the last Capital Markets update, and we'll be getting back with more information on that in due course. Next question and the final question I can see is from Jens [indiscernible]. From a strategic perspective on China, how do you assess the competitive risks and opportunities, the latter in terms of growth, investment and cooperation? Christian Cederholm: So as we comment on in the CEO statement in this report, we do see China as a very important region and for several reasons. I mean, one is that for many of our companies, both on the listed side and in Patricia, China is a large and growing market. So that's one thing, the market potential. But also, it's increasingly clear that competition in China or from China is evolving and evolving quite fast. So as we comment on, it's important for many of our companies to be in China, not just for the market opportunity, but also to be where and to compete where some of our toughest competitors are. And it's quite clear to me that comparing China today to a number of years ago, they're not just leading on low cost, but also on implementation of new technology, on fast innovation cycles, et cetera. So even more reasons to be there. Jacob Lund: Thank you very much. There are no further questions on the web. That means it's time to wrap up. Thanks to both of you. Our next scheduled call is the Q1 results for 2026 scheduled for April 21. And until then, thank you, and goodbye.
Operator: Good morning, everyone, and thank you for joining us today for Old Second Bancorp, Inc.'s Fourth Quarter 2025 Earnings Call. On the call today are Jim Eccher, the company's Chairman, President and CEO; Brad Adams, the company's COO and CFO, Darin Campbell, the company's Head of National Specialty Lending; and Gary Collins, the Vice Chairman of our Board. I will start with a reminder that Old Second's comments today will contain forward-looking statements about the company's business, strategies and prospects, which are based on management's existing expectations in the current economic environment. These statements are not a guarantee of future performance and results may differ materially from those projected. Management would ask you to refer to the company's SEC filings for a full discussion of the company's risk factors. The company does not undertake any duty to update such forward-looking statements. On today's call, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in our earnings release, which is available on our website at oldsecond.com on the home page under the Investor Relations tab. Now I will turn it over to Jim Eccher. James Eccher: Good morning, and thank you for joining us, and thanks for your patience as we worked through some technical difficulties there. I have several prepared opening remarks. Give you my overview of the quarter and then turn it over to Brad for additional details. We will then conclude with summary comments and thoughts about the future before we open it up to Q&A. From a GAAP perspective, net income was $28.8 million or $0.54 per diluted share in the fourth quarter, and ROA was 1.64%. Fourth quarter 2025 return on average tangible common equity was 16.15% and the tax equivalent efficiency ratio was 53.98%. Fourth quarter earnings were impacted by a couple of material adjusting items, the first being a $428,000 pretax loss on mortgage servicing rights and a $2.5 million in pretax acquisition-related expenses driven by $1.5 million of computer and data processing related to the core systems conversion, as well as systems related to acquired operations. Excluding those two items, net income for the fourth quarter was $30.8 million or $0.58 per diluted share. Tangible book value per share increased 61 basis points to $14.12. The tangible equity ratio increased 61 basis points from last quarter from 10.41% to 11.02% and is 98 basis points higher than the like period 1 year ago. Common equity Tier 1 was 12.99% in the fourth quarter, increasing from 12.44% last quarter and increasing 17 basis points from 1 year ago. Our financials continue to reflect an exceptionally strong net interest margin at 5.09% for the fourth quarter, which is a 4 basis point improvement from last quarter and 41 basis point increase over the prior year like quarter on a tax-equivalent basis. Pre-provision net revenues decreased from both interest-earning deposits and securities, balance declines, coupled with a decline in rates. The total cost of deposits was 115 basis points for the fourth quarter compared to 133 basis points for the prior linked quarter and 89 basis points from the fourth quarter of 2024. For the fourth quarter 2025 compared to last quarter, tax equivalent income on average earning assets decreased $1.8 million, while interest expense on average interest-bearing liabilities decreased $2 million. Loan-to-deposit ratio now sits at 93.9% as of year-end compared to 91.4% last quarter and 83.5% as of 12/31, 2024. The fourth quarter 2025 experienced a slight increase in total loans -- excuse me, a slight decrease in total loans of $12.4 million from last quarter. Tax equivalent loan yields declined 11 basis points during the fourth quarter of 2025 compared to the linked quarter, but reflected a 48 basis point increase for the quarter year-over-year. The decrease in yield comparison to the prior quarter is primarily a function of Fed rate cuts working through the portfolio. Asset quality trends were relatively unchanged. Nonperforming loans increased $4.8 million and classified assets increased by $10 million. In general, our collateral position is very good on Q4 downgrade credits. We recorded a $6 million of net loan charge-offs in the fourth quarter of 2025 with the majority, where 75% of those stemming from the Powersport portfolio and commercial real estate owner occupied. With regards to Powersports, I would say that losses given default are running a bit higher than we expected. However, yields in that portfolio are much higher than expected, and the contribution margin is both above expectations and improving. Due to the nature of Powersport business, gross charge-offs are anticipated to run at a higher rate than Old Second has historically experienced, especially in a higher interest rate environment. This is the nature of what is a very good business. Investors should know that the contribution margin is now at a multiyear high in this business, and we're very bullish on our 2026 performance. The allowance for credit losses on loans was $72.3 million, as of December 31, 2025, or 1.38% of total loans from $75 million at September 30, 2025, which was 1.43% of total loans. Unemployment and GDP forecasts used in future loss rate assumptions remained fairly static from last quarter with no material changes in the unemployment assumptions on the upper end of the range based on recent Fed projections. The impact of the global tariff volatility continues to be considered within our modeling. Provision levels quarter-over-linked quarter, exclusive of day 2 purchase accounting impacts decreased $3 million and were largely driven by the Powersport portfolio, net charge-off levels with other losses associated with the previously allocated provisions. Noninterest income reflected a slight decrease in the fourth quarter compared to the prior quarter, but continue to perform well compared to the prior year like quarter. Noninterest income in the third quarter of 2025 reflected a $430 death benefits on a BOLI policy which was not experienced in the fourth quarter of 2025. Mortgage banking income was flat compared to the linked quarter and declined $668,000 compared to the like prior year period, primarily due to the volatility of mortgage servicing rights mark-to-market valuations. Excluding the impact of mortgage servicing right mark-to-market adjustments, mortgage banking income increased nominally quarter over linked quarter and from the prior year like period. Other income decreased nominally in the fourth quarter of 2025 compared to the prior linked quarter, but increased $550,000 compared to the prior year like quarter driven largely by Powersports service fees. Noninterest income increased $544,000 compared to the prior year like quarter as wealth management fees increased $238,000 or 7.2% and service charges on deposits increased $198,000 or 7.5%. Total noninterest expenses for the fourth quarter of 2025 declined $10.2 million from the prior linked quarter. Fourth quarter experienced a decrease of $9.3 million in acquisition-related costs. Our efficiency ratio continues to be excellent and the tax equivalent efficiency ratio adjusted to exclude core deposit intangibles, amortization, OREO costs and the adjustments to net income, as noted earlier, was 51.28% for the fourth quarter compared to 52.1% for the third quarter 2025. So our focus continues to be on the optimization of the balance sheet to perform and withstand the variability of the current and future interest rates. We continue to reduce reliance on wholesale funding as we allow the legacy Evergreen Bank broker CDs to run off and reprice higher cost deposits in the falling interest rate environment. With that, I'll turn it over to Brad for additional color. Bradley Adams: Thanks, Jim. I don't have a ton to talk about today. I would say that we're pretty darn excited to close the year like this. Running at a north of a 5% margin and ROA handsomely above 1.5% and ROTCE above 17.5% on an operating basis is pretty exceptional performance that we're proud of. EPS, some 30% over last year. Integration fully done. Integration at the end of last year as well. That's a lot of work. And to close the year like that, this is especially gratifying. This quarter is not a lot of complexity to it. Most of the stuff that we talked about last quarter is still true. So I'll be relatively brief. Net interest income increased nominally this quarter relative to last quarter both around the $83 million level. Loan yields decreased about 11 basis points and securities yields decreased a bit more at 14 basis points. Total yield on interest-earning assets decreased 8 basis points over the linked quarter. Cost of interest-bearing deposits decreased more at 24 basis points, and total interest-bearing liabilities decreased 15 basis points. The end result was a 4 basis point improvement in the tax equivalent NIM, which is obviously pretty awesome. Tax equivalent NIM for the fourth quarter of 2025 increased 41 basis points from 4.68% for the period last year. Average loans increased $60 million or $1.2 million over linked quarter with average deposits declining $200 million, a level we expected. Deposit runoff is largely concentrated in high beta effectively wholesale deposit captions as planned. Loan origination activity in the fourth quarter, you may not know, was actually very good and activity remains robust. Certainly, the market environment, marginal spreads is far more favorable than it was in the first half of the year and certainly at this time last year. Payoffs, especially in the participation book have resulted in relatively flat balance sheet growth in the fourth quarter. This is interesting. Balances in the CRE loan participations acquired with West Suburban declined by $53 million in the fourth quarter of this year, the largest quarter runoff that we have seen to date in that portfolio. This was a significant headwind to growing the balance sheet this quarter. Organic activity remains exceptionally strong. Other than that, everything I said last quarter remains true to the best of my knowledge. Balance sheet is exceptionally well positioned and margin trends feel stable. We may tick down modestly in the first quarter, but I expect to still be above 5%. Loan growth being targeted in the mid-single-digit level for next year. Expense growth will be modest. Pre-inflationary trends in employee benefits and salaries are going to be moderated by the realization of the cost saves associated with Evergreen. Buyback is on the table that we haven't done anything this quarter. It's becoming inevitable. I don't have anything to add about the tax rate other than it was really high this quarter. Please don't ask me about that. There isn't a lot of complicated stuff to go over beyond that. So I'll turn the call back over to Jim. James Eccher: Okay. Thanks, Brad. In closing, we're very proud of the year we just concluded, and we believe the level of performance is reflective of the strength of the bank we are building. We're optimistic about next year or this year and all the opportunities that are in front of Old Second. I would like to thank our team for their hard work and execution in 2025, including integrations and systems conversions and upgrades that have made us a much better Old Second. I could not be more excited about the things we can accomplish next year. That concludes our prepared comments this morning. So I'll turn it over to the moderator, and we can open it up to questions. Operator: [Operator Instructions] Our first question for today is from Jeff Rulis with D.A. Davidson. Jeff Rulis: On the expense side, I just wanted to see if those cost savings, Brad, I could tell you, are those fully captured? Or was that -- is there a tailwind to '26 that leads to that muted expense growth from your perspective? Bradley Adams: There's a tailwind to '26. Employee benefits are up -- are expected to be up solidly in the double digits next year just with inflationary trends that we're seeing in health insurance. We've done a lot of things to restructure to keep those costs contained. But we've got a couple of branch closings that are scheduled and some other expense initiatives. All in all, it's going to look like we're just kind of doing a good job, not as good as flat, but not as bad as it would be just on a pure apples-to-apples basis. So it kind of feels like a 3% type level as we get those final cost saves run through. Jeff Rulis: Got you. And then on the credit front, Jim, I guess the charge-off from the Powersports, and you really outlined that clearly very profitable on the margin front. Just wanted to see on the net charge-off pace. I think we talked about kind of 30 basis point level, a little higher. Is anything that front-end loaded? Or could we expect kind of 30-40 going forward? And then secondly, on the credit side, is that 30- to 89-day bucket, a little bit of an increase? Anything to note on that balance? James Eccher: Yes, good question. I think we need to be accustomed to a little bit higher net charge-off rate due to Powersports. That's just the nature of that business. I think if you look at the $6 million in charge-offs, $4.5 million was Powersport related, so only $1.5 million in the legacy book, which is more in line with our historical trends. But given that, we're in a higher interest rate environment, we expect Powersports to have maybe elevated charge-offs in the next couple of quarters. And I think we have to look at that hand-in-hand with the contribution margin, which I mentioned was at a multiyear high. So obviously, that's flowing through the margin and profitability. As it relates to 3089, we had a couple of larger loans that were just past maturity. We had a couple of loans that obviously migrated into nonaccrual that we're working through. One has a very low loan to value. The other is a mixed-use property in Chicago that has been very slow to lease up and it's going to take another couple of quarters to work through that one. Operator: Your next question for today is from Nathan Race with Piper Sandler. Adam Kroll: This is Adam Kroll on for Nathan Race. So maybe just a question for Brad on the margin. I was curious if you could kind of frame out expectations for the first quarter with the full quarter impact of the December rate cut and just your overall positioning if we were to get another cut or two in the middle part of the year and just where you think the NIM can settle out over the longer term? Bradley Adams: I'd be very surprised if we're not around the 5% level for the full year 2027. I was my machine there. 2027, I have no comment on at this point. Adam Kroll: And I was just curious if you have the purchase accounting accretion number for the quarter? Bradley Adams: It's a few hundred thousand. I've talked about that before. It's down substantially from last quarter. The thing that I would really like people to focus on is that the amount of purchase accounting that we have in our numbers this year in aggregate is less than the amount of purchase accounting that we're getting off the solar loan book. It's nothing. I think there was $150,000. It's not something that I really think is material to anyone's understanding of Volt Second at this point. It was down substantially linked quarter. But the thing to keep in mind here is that the purchase accounting impact on the Powersports portfolio is negative for the next 2 years. So the go-forward business is better than what you're trying to isolate as the unrepeatable portion in the current periods. It's actually a tailwind going forward relative to a headwind. Adam Kroll: Got it. No, that's super helpful. And then maybe just moving to deposits. You've called out letting exception price deposits run off from the acquisition. So I guess I'm curious how much is remaining of those deposits and if you're seeing opportunities to reduce deposit costs on your legacy nonmaturity deposits? Bradley Adams: We talked about this last quarter. The thing to remember is that fixing and returning to an old second like funding profile is a multistage process. Some of it we did prior to bringing on the Evergreen balance sheet and some of it we'll do after. We probably need to replace $300 million to $400 million in deposits with our type of funding in order to complete the process. In terms of the amount of wholesale funding, effective wholesale funding that's on the balance sheet right now, that's part of the reason why the margin is so darn resilient at this point because we do have substantially more funding that benefits from falling rates than we typically otherwise would have. So it's not necessarily a bad thing to focus on, at least at this stage. It's not what I want over the long term. But right now, it's actually a benefit. I would say just the number to keep in mind is that I would like to look $300 million to $400 million different on the liability side. Adam Kroll: Got it. And then maybe just last one for me. Digging into the mid-single-digit loan growth, [ Gary ], I was curious what your expectations are for growth in the Powersports vertical specifically? Unknown Executive: Slightly less than that would be my expectation. Operator: [Operator Instructions] Your next question for today is from Terry McEvoy with Stephens. Terence McEvoy: Maybe could you just remind us of the profile of a typical Powersport borrower? And I ask, I'm just curious, where do they line up in this K-shaped economy? And is there typically -- has there typically been some seasonality in terms of the charge-offs within that portfolio? James Eccher: Sure. Terry. Darin, if you're there and on, do you want to take that one? Darin Campbell: Yes, I can do that. Yes, Terry, the average FICO score for our portfolio in the Powersports and 730 with the biggest percentage of that in your Tier 1 bucket, which has an average FICO score of 776. But from a seasonality perspective, Terry, our busy season starts March 1 through -- it's really the second and the third quarter from an origination perspective where you have most of your business. And you -- from a risk perspective from either delinquency and losses, you have more of that in the other 2 quarters, especially at year-end, like I say, when we compete with Santa Claus at year-end, the numbers elevate a little bit and then stabilize out again as you get into the second quarter. But it's been -- I've been, Terry, I've been doing it for 30 years, and it's been pretty consistent trends for 30 straight years in this portfolio. Terence McEvoy: Great. And then as a follow-up, Brad, just capital management. I think you said share repurchase inevitable. I look back the stock is up 20% from 3 months ago. So the stock is higher. Is that just a comment on where your capital levels are? Or should I read into maybe the M&A market and what you see happening in '26? Bradley Adams: No. M&A market feels good. There's no shortage of discussions happening. The question is what's the right deal for Old Second at the right time and how much capital do we need to do that. Clearly, I got it wrong in that we were basically running a big Christmas plus savings account in order to acquire the capital for an acquisition, and we needed a fraction of what we had saved up. So it's just a function of what we need versus what we have. Obviously, we generated a ton of capital. And I'm not uncomfortable where we are. I just don't really see a need to grow it much from here is the thing. Operator: Your next question is from Brian Martin with Janney. Brian Martin: Can you talk a little bit, Brad, about -- or Jim, you talked about the production being exceptional this quarter versus kind of the payoffs and then the piece from the West Suburban that was running off. Just maybe how much ran off in that West suburban and then how much is left there that may be a headwind going forward. But then just trying to get your take on this kind of mid-single-digit loan growth, but kind of the production being better kind of it's been in a long time. James Eccher: Yes, Brian. The fourth quarter actually, surprisingly, was our best production quarter of the year. And normally, that's a softer quarter along with the first quarter, but it was exceptionally strong along multiple verticals. The challenge, as Brad pointed out, we had some pretty big paydowns. Some of it was welcomed in the syndication portfolio, but we also had early payoffs in multifamily and commercial real estate, a lot of it is stemming from property sales. What I think we get encouraged is the pipeline today or as of the end of the year is the highest it's been in probably 6 to 7 quarters. So that gives us a lot of optimism that we're going to have a pretty good first half of the year in '26. And I think mid-single-digit growth is certainly achievable this year. Brian Martin: Got you. And how big is that -- where is that the syndication book today? How far is that down? And maybe how much more to go there? Is that a headwind going forward? James Eccher: It's -- well, when we -- at the start of -- at the end of 2021, which is when we closed on West Suburban. We had about $772 million in commitments. We've had that as of the end of 2025. From a balance perspective, we got about $285 million left. I would anticipate 1/3 of that will continue to run off, and we'll probably keep the remainder. Bradley Adams: I would tell you that those numbers that Jim is referencing are inclusive of some additions related to Evergreen. So what you're really talking about over a 5-year period is almost an 80% reduction in that loan book. Brian Martin: Yes. Got you. Okay. And Brad, I think you mentioned the stability in the margin, just maybe being down potentially a bit in 1Q. I guess is that -- I guess what's the -- I guess, the modest headwind here in 1Q? And just in terms of that -- the balance sheet, the runoff that you expect, it sounds like there's still a couple of hundred million of exception-based brokered CDs that, like you said, is benefiting now, but that's going to continue to run off. That's what's left to go in terms of what... Bradley Adams: I'm just being really pessimistic, man, because the reality is that the biggest headwind to the margin is probably going to be deciding to buy treasuries, especially if people keep making noise about invading countries that are largely ICE. So the more we see moves like that, I would be comfortable adding assets that largely don't offer, obviously, a 5% spread. So it's just a function of that. I also just don't want to go on here and say that, hey, the margin is going to go up from 5.09. I'm not going to say that. So I'm the biggest headwind, Brian, me personally. Brian Martin: Got you. Okay. And Jim, just going to the criticized or classified for a minute. I guess classifieds are up a little bit. I guess the -- how do you see those trends going forward? And then do you have -- how are the special mention trends? I don't know that you mentioned that, but -- or if you quantify those, were those up or down in the quarter? James Eccher: Yes. We classified, certainly, we had a lot of migration in and migration out. I think where we're seeing a little bit of degradation of that portfolio is in the C&I book and companies just showing weaker performance. By and large, collateral positions are pretty good. We're not seeing a whole lot of loss given default at this point. But it's going to take some time to work through this. I think the positive news from our perspective is the net change in special mention or watch loans was down materially. We had, I think, only a couple of loans migrate in, and we had over $15 million in reduction in that bucket. So those are early-stage indicators for us. So that should help us moving forward. Brian Martin: So the special mention were down on a linked quarter basis? Or did I hear that wrong? James Eccher: Yes, down $15 million in the quarter. Brian Martin: Down $15 million. Okay. Perfect. And the last 1 or 2 for me, and I'll jump off was the -- Brad, you mentioned on the expenses, just to clarify that, your comment, the 3% -- you were talking about 3% growth year-over-year in expenses. So 25% expenses to 263 -- or were you talking about something else there in terms of your comments? Bradley Adams: No, that's what I'm talking about. Brian Martin: Yes. Okay. And then just on the buyback, your general comments are we expected -- can you give any sense on how you're thinking about the buyback, Brad? Or is it just you expect to begin that this quarter and based on pricing, that will be opportunistic? Bradley Adams: I expect it will begin in relatively short order, yes. I'm not price sensitive at this point. Brian Martin: Got you. Okay. And the M&A environment, you said it's good with lots of discussions. What is kind of the optimal target today look like for Old Second if you are looking at M&A? I mean the last one was obviously asset driven Bradley Adams: I'm not sure how much that I can be helpful on an answer there because I can tell you that I wouldn't have described Evergreen, if you'd asked me that 18 months ago. So I think the only thing that investors can be certain of is that, we're not going to do anything unless it makes us a better bank, and that's what we're focused on. James Eccher: Yes. Brian, I would say our priority this year is really fully integrating Evergreen, which we're about there, but really focusing on organically growing the balance sheet and optimizing it. That would be priority one. Brian Martin: Yes. That's what I was getting at. I felt like it was more if there was M&A, it was likely more on the deposit side rather than the... James Eccher: We'll be opportunistic, but it's certainly not in the near term for us. Operator: We have reached the end of the question-and-answer session. And I will now turn the call over to Jim Eccher for closing remarks. James Eccher: Okay. Thanks, everyone, for joining us this morning. Again, I apologize for the technical difficulties. We look forward to speaking with you again next quarter. Goodbye. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Laurie Shepard Goodroe: Good morning, and thank you for joining our 2025 full year earnings call. Financial statements were posted with market authorities early this morning. All materials can also be found on our corporate website. Please refer to disclaimer in the presentation and note that this call is being recorded. And we welcome today our Chief Executive Officer, Gloria Ortiz, and Chief Financial Officer, Jacobo Diaz. Gloria, over to you, please. Gloria Portero: Thank you, Laurie, and thank you all for joining us in this 2025 full year results presentation. Since we are reporting the full year, I believe it's appropriate to start with a brief overview of the environment in which our business has operated to provide context for the figures that we are about to review. 2025 was the year of Donald Trump's return to the White House and even that has set the political tempo of the international calendar. Continuing the trend of previous years, the events in 2025 confirmed that the international landscape is moving towards an increasingly turbulent and fragmented scenario. Long-standing conflicts, such as Ukraine, remain unresolved despite failed attempts to reach an end to the war. In Gaza, the ceasefire came only after months of escalating violence. Meanwhile, the Franco-German Axis, the traditional engine of the European Union, has been weakened by deep domestic political crisis. Without a doubt, tariff has been the most repeated word of the year. The imposition of tariffs on international trade has become the main diplomatic pressure tool of the Trump administration. The European Union, which for years has been a strategic partner of the United States, ultimately considered in trade negotiations and accepted a 15% tariff to maintain access to the U.S. markets. Thus, the balance of 2025 confirms an international landscape that is increasingly fragmented and less predictable, where open conflicts tend to become chronic, and long-lasting political solutions are replaced by fragile truces or unbalanced agreements. And indeed, what we have been observing in these first weeks of 2026, for example, in Venezuela or in the U.S. stance on Greenland, amongst others, confirms that this year will again be marked by geopolitical volatility just as 2025 was. At the same time, technology, led by artificial intelligence, continues to advance at a blistering pace, transforming operating and business models. And the banking sector is undoubtedly no exception. These are global trends shaping the broader environment. But if we focus on the countries in which we operate, it is worth noting that the 3 economies, Spain, Portugal and Ireland, are among the most dynamic in the Eurozone and have become the new growth locomotives of the union. In fact, the Eurozone in 2020 -- in fact, in the Eurozone in 2025 inflation, which had surged sharply after the pandemic and the Ukraine war, moderated. And as a result, the ECB accelerated interest rate cuts, especially during the first half of the year. With inflation under control at the European Central Bank's target level, benchmark rates stabilized at 2%, and no further cuts are expected in the short term. As a result, in 2025, the ECB reference rate averaged 2.2%, that is 1.4 percentage points lower than in 2024, while the 12-month Euribor fell by an average of 1.05%. Turning to financial markets. It's notable that despite escalating conflicts and increased political polarization, market performance remained robust. The IBEX 35 achieved a record increase of 50%. German equities rose by 23%, and the NASDAQ advanced by 19%. In this environment of geopolitical uncertainty and significantly lower interest rates compared to the previous year, we have delivered in 2025, very strong results, once again, record breaking. These results are built on solid foundations and driven by recurring client commercial activity. Moreover, in 2025, we executed major strategic projects that will underpin the bank's future growth such as the integration of EVO Banco and Avant Money, which is now Bankinter Ireland, a branch of Bankinter just like Portugal. Of course, before moving on, I want to express my thanks to all Bankinter Group employees for their dedication, effort and commitment because they are the true architects of the results that we present today. The results we present today are very satisfactory, driven by intense commercial activity that brings us to report a net profit of EUR 1,090 million in 2025, representing 14% growth over the previous year. 2025 was marked by diversified growth, both geographically and by business line. Overall, we grew 9% in total business volume, 5% in lending, 6% in customer funds and delivered a strong double-digit growth, 19%, in off-balance sheet products. Despite the sharp decline in interest rates, we managed to limit the falling interest income to 1.8% in 2025. And on a year-over-year basis, the inflection point was reached in the first quarter. From that point onward, net interest income grew quarter after quarter, thanks to credit growth and margin management. Customer spreads averaged 2.68% for the year with the overall NIM at 1.78%. Fee income from services had an exceptional year, growing 11%, which in nominal terms, almost doubled the reduction in interest income. This allowed us to grow gross margin by 5%, and I think it is important to note that the strong performance in fee income is due to the significant growth in our balance sheet funds and not to any increases in customer fees. All this growth has been achieved while keeping our risk appetite unchanged, improving the asset quality of our balance sheet, reflected in a nonperforming loan ratio below 2%, specifically 1.94%. Another key element of our business model is efficiency at 36%, indeed the best efficiency level across the industry. These 3 pilots, the diversified growth, asset quality and efficiency, are the foundation of our business profitability, which reached ROTE of 20%. As I have been commenting in previous quarters, commercial activity with clients has been very strong. Total customer business volume stands at EUR 241 billion, EUR 20 billion more than in 2024, representing 9% growth in the year or a compound annual growth rate of 8%, an increase of EUR 80 billion since 2020. This volume breaks down into EUR 84 billion in lending, representing 5% growth versus 2024 at year-end. Customer funds reached EUR 88 billion, EUR 5 billion more than a year ago, and we now manage EUR 69 billion in assets under management, 19% more than at the end of 2024. We have more than doubled the balance recorded at the end of 2020 with a compound annual growth rate of 17%. All this growth is organic and diversified with every geography contributing and outperforming the market. Our diversified customer business volume growth is what enables us to consistently strengthen revenue streams. Core revenue fees and interest income reached EUR 3,032 billion, a compound annual growth rate of 12% and a record for the series, exceeding 2024 by 1% despite the headwind of lower interest rates. We achieved this by limiting the decline in interest income to 1.8% through volume and margin management and through the excellent performance of fee income, which with an 11% growth rate more than offset the reduction in net interest income. The drivers of fee income are the strong growth in off-balance sheet funds, the increasing activity of Bankinter investment across all its business lines and the positive performance of the economies in which we operate. Regarding interest income, I would like to highlight its upward trend throughout the year. It bottomed out in the first quarter of 2025. And from that point on, revenues increased quarter after quarter. By the fourth quarter, we already grew on a year-on-year basis by 4%. So the outlook continues to be more positive, especially with the forward rate current scenario for 2024 -- 2026. In summary, sustained growth, asset quality and efficiency are what allows us, once again, to deliver results that surpass our own records, exceeding EUR 1 billion and representing 14% growth versus 2024, tripling our results over a 5-year period. Our ROTE now at 20% is also the highest in the entire series. Before I hand over to Jacobo to review in further detail the financial results, I wanted to quickly showcase one commercial strategy that was quite successful in 2025. In 2025, the 100% digital new client acquisition is what I'm referring to. Since the EVO integration, we have improved our digital customer experience with the use of AI in commercial and marketing processes. Our deposit gathering capabilities are now stronger, more granular and flexible. We increased customer funds in this channel by 64% in the year, now reaching EUR 12 billion, close to 14% of our total customer deposit base. New customer acquisition trends have doubled since 2022, and the digital channel now represents more than half of the new client acquisition in 2025. From an industry perspective, our digital offering is -- not only allows us to compete effectively with new entrants, but gives us a clear competitive advantage. Customers benefit from a full multichannel ecosystem, digital branches, contact center and also private banking network, which enhances loyalty and broadens upsell opportunities. In the second half of 2025, the strong growth of this channel generated some short-term pressure on deposit cost. However, looking ahead, our digital strategy and strengthened deposit gathering capabilities create meaningful upside supported by lower acquisition and servicing costs. Overall, our digital franchise has become a scalable and cost-efficient acquisition engine that strengthens loyalty, supports margin resilience and accelerates fee growth, a competitive moat that becomes more powerful each quarter. Jacobo, now over to you. Jacobo Díaz: Thank you very much, Gloria, and good morning, everybody. 2025 marks yet another year of increased revenues and profitability. In operating income, we have grown by 5% with increased volumes, continued strong fee growth and effective margin management. Operating costs were more balanced this year over the quarters with annual cost growth growing below revenue growth to end the year within guidance, confirming positive operating jaws another year. Cost of risk and related provisions declined by more than 15%, reflecting a continued positive trend in risk management. And net profit increased by 14.4% to well surpass our initial goal of EUR 1 billion in 2025. Onto NII and customer margins on the next page. NII contributed to EUR 2,237 million this year, slightly below our initial target. Asset yields for the year averaged 365 basis points and remained quite stable this quarter at 3.48%, down only 1 basis points from the third quarter given the good volume growth, especially in corporate and uptick in short-term interest rate. This helps soften the impact of a slight increase of 3 bps in quarterly deposit costs due to the same uptick in short-term rates as well as a successful commercial strategy that Gloria just mentioned regarding digital account deposit gathering. Customer margins for the year averaged 268 basis points, very near to our 270 longer-term target. We believe Q4 '25 mark a low point, as the downward repricing of digital account deposit is underway in Q1 '26. Therefore, we expect customer margins to recover moving forward. NIM averaged 178 basis points for the year as the noncustomer interest income improved in the quarter, leading to an increase of NIM of 4 basis points in Q4. Regarding the ALCO portfolio, this has been achieved through increased ALCO balances that you can see on Page 13 as well as reduced wholesale funding costs. Moving on to fees. Fees continued to deliver sequential increases each year, reaching EUR 795 million, up 11% versus 24%, reaching a double-digit compound annual growth rate of 10%. This sustained growth momentum is mainly attributable to the strong growth volume or strong volume growth in asset management, custody and brokerage services. Moving on to Page 15. Equity method and trading dividend income lines also up with an impressive 21% on a year-on-year basis. The diversification of sources of revenue is well represented here as a result of our business investment in the past. For example, Bankinter investment that we will look later in the presentation, insurance JVs as well with our JV in Portugal with Sonae called Universo. We also confirm the banking tax will have no impact in 2025 and expect this to be the case for '26 and '27. Moving into the contribution of gross operating income, there's been a very strong contribution from each geography in gross operating income, demonstrating increased diversification with Portugal and Ireland, growing from an 11% contribution to gross income in '22 up to 16% in '25. Moving to the expenses on page 17. We have contained total operating cost growth to 4%, notably with flat general expenses due to the tangible impact we are achieving through our IT and AI initiatives as well as with the EVO integration. Efficiency ratio improved to 36.1% this year, demonstrating our commitment to delivering positive operating jaws now and in the future. On Page 18, PPP more than doubled over a 5-year period to reach EUR 1,947 million in '25. Moving on, we see improvement in credit and other provisions. Significant decrease in cost of risk down to 33 basis points from 39 basis points in '24 with loan loss provision volumes now below those even of the ones in '23. Other provisions also performing well, down to 8 basis points for the year with no signs of deterioration in the market of -- in our portfolio, and our disciplined approach to risk management, we remain optimistic to maintain current levels for the coming quarters with potentially some upside risk. Next page, net profit reached once again historical levels at EUR 1,090 million, an exceptional increase of 14.4% in the year, maintaining similar growth rates seen in '24 even with the headwinds faced in interest rate during the year. Moving into the credit and asset quality indicators, as you can see, they continue to improve. Risk quality measure in terms of the nonperforming loan ratio has improved significantly this year breaking below 2% to reach 1.94%. The coverage ratio remains very solid at 68%, substantially higher than in the 2020. By geographies, Spain, down to 2.1%; Portugal at 1.4%; and Ireland, stable, 0.3%, all well below sector average consistently over time. Moving into capital. Our CET1 ratio ended the year at 12.72% and well above the minimum requirements of 8.36%, leaving an ample capital buffer of 4.4% as well as adequate MREL and leverage ratios. Main movements in the year related to retained earnings contributing to a total of 111 basis points, capital consumption of 51 basis points in RWAs and 35 basis points in operational and market risk. The implementation of the countercyclical buffer in Spain has resulted in a 41 basis point increase in minimum requirements. Moving into Page 24. Commercial activity, volumes and profit trends remain not only strong, but with a greater diversification each year across geographies. Customer volumes up 8% in Spain, 15% in Portugal and 23% in Ireland. Each region contributed at increasing levels to the profit of the bank as well we see on the following slide. Within Spain, loan growth this year, up 3% with a strong performance in the business lending segment growing 6%. I consider this satisfactory growth rate, especially when considering the intense competitive margin dynamics in Spain as well as our reduced appetite for open market consumer lending in Spain in 2025. Retail deposits continued to demonstrate solid and balanced growth, increasing by 5%, fueled by the successful digital campaigns we mentioned a little bit earlier. Stellar performance in Wealth Management, reflected by an 18% increase in assets under management balances as well as a 19% increase in assets under custody. Profit before tax, up 14%, reflecting solid contribution from our core Spanish business. Moving into Portugal, a continued momentum in lending activity across both business segments, up 9% in total with a strong deposit gathering growing 8% as well as a substantial increase in wealth management and custody balances, rising 28% on a year-on-year basis. Cost-to-income ratio at a very efficient low level of 33% even with increased investment in IT. Profit before tax, up 7% to EUR 210 million or 14% of total contribution to the group. Moving into Ireland. 2025 marked the year for our Irish business to convert into a branch of Bankinter, allowing for increased upside risk in terms of volume potential and efficiencies. We launched deposit in Q4, albeit with volumes still at marginal levels, definitively more to come in this space during 2026, as we begin to scale up deposit campaigns this quarter. Asset market dynamics and our Bankinter style commercial differentiation supported a 27% growth rate in the mortgage book in '25, with improved trends seen in the second half of the year. Consumer finance also growing at 11%. Profit before tax contribution reaching EUR 46 million, up 13% this year with important improvements in the cost-to-income ratio down to 44% from 48% last year. Now moving into the corporate and SME banking business. Business lending continues to deliver a strong performance, up 6% this year, consistently increasing market share year after year. One key growth catalyst continues to be our international business segment that has doubled loan volumes over a 5-year period, now reaching EUR 11 billion, representing 30% of the business lending book currently. This segment is also a strong recurring contributor to fee income from services. We also see increased activity and upside risk from other growth catalysts like our new ESG client solution across loan and servicing income products. For example, the loan advances we provide for energy certificates, where we were the first to launch in the market in 2025. Additionally, we are expanding substantially our Bankinter investment business that I will detail more in the next couple of slides. Bankinter investment has doubled income contribution to the group over the past 5 years with currently 31 alternative investment vehicles and associated vintages well distributed over the year since 2017. More than 15,000 Iberian Bankinter customers now invest in real assets. This franchise has been a key source for the increased fee income to the group, reaching a 12% compound annual growth rate with upside risk potential for the future. On the next page, you can see the strong diversification of the different investment strategy for the vehicles across many sectors and countries with more than 360 different underlying assets in the portfolio. Moving on now to review the Retail Banking business. Retail banking asset and deposit trends remained strong with increased core salary account balances up by 7%. New mortgage origination, up 10% year-on-year, with solid market shares of new production across Spain, Portugal and Ireland. Our mortgage back book is growing steadily at 5% annually despite rising competition in 2025. The Wealth Management business, on Page 32, shows our high-quality affluent client base that continues to drive exceptional incremental wealth volumes, up EUR 21 billion this year, a 16% increase on a year-on-year basis, of which half of it is new money to the bank. When excluding the market effect, the net new money has reached the EUR 10 billion level milestone, well above our historical range between EUR 5 billion to EUR 7 billion. Off-balance sheet, volumes under management and custody on Page 33 ended the year at EUR 156 billion, up EUR 25 billion, or 19%, increasing significantly with the markets and net new inflows in all categories. With the exception of fixed income security, we have provided additional details regarding commercial activity and trends for those key fee income growth catalysts in the annex, no doubt a key driver of continued fee growth for the future. Now, let me just spend a couple of minutes sharing our ambitions and targets for 2026 before I hand back to Gloria. We expect -- the first one, we expect solid macro outlook for all the regions where we are operating. Therefore, we expect growth across all segments and geographies, focus on our targeted type of customer and insurance and ensuring a disciplined risk-return approach for asset origination. Volumes are expected to grow at similar levels than in '25 and previous years. This means that lending volumes at mid-single-digit growth with deposit volumes targeting to keep our liquidity ratio stable, that is above 100% in terms of deposit to loan or below 100% in terms of loan to deposit. All geographies and business segments are expected to grow at similar levels with Portugal and Ireland keeping their successful track record, and Spain, keeping strong volumes in the corporate and retail businesses. Regarding NII, with the current Euribor 12 months rate outlook in '26 stable around current levels or slightly increasing towards the end of the year and next -- and following years, we expect customer average margin to recover 270 bps, our initial target. And therefore, we target in 2026 overall similar levels of client margins and NIM that the ones we saw in 2025. With residual negative repricing for mortgages and a downward repricing of our digital accounts in Q1, we expect minimal margin compression in the first half '26 with an upside bias to possibly reach a stable asset yields by the end of Q1 and beginning of Q2. Given these dynamics, we would expect NII for the entire 2026 to increase in correlation with volume growth. For fee growth, we target high single digit for the year, supported by increasing volumes from assets under management and assets under custody as well as from increased transactionality from each of the geographies, which are strongly correlated with the economic growth of each of them. With our strict cost allocation and management, while keeping strong IT investment around 10% of our gross income, efficiency remains one of our pillar or our main pillars, and we are committed to delivering positive operating jaws, again, in 2026, reducing cost-to-income levels below 35% for the year. In terms of credit quality, we have a stable outlook for cost of risk for the year around current levels of 33 basis points, albeit with a positive bias. And ROTE is expected to stay above 20%, ensuring attractive shareholder value creation. In summary, we expect 2026 to be another year of consistent growth in volumes and profitability reaching new records in volumes, gross income, efficiency, net income, and of course, profitability. Gloria, back to you, please. Gloria Portero: Thank you, Jacobo. Thank you for sharing our financial ambitions. In terms of our management priorities, all of these are well-integrated and will contribute to our financial goals with high-quality volume growth, a greater diversification of income from servicing fees and geographies. We will continue to invest in technology to achieve tangible benefits from our AI initiatives, driving both competitive differentiation and operational efficiencies. The outcome will undoubtedly result in a strong profitability and sustained improvement in shareholder returns. The key driver for this success centers around our clients and our employees. 2025 is a pivotal year for artificial intelligence, and we are committed to embedding AI tools and culture throughout the group. I will oversee project selection to ensure we achieve tangible results. Our program called AI First is designed to enhance our competitive advantage by integrating AI into all our customer-facing acquisition and service applications. We are committed to deploying personal productivity tools company-wide aiming to achieve 5% improvement in productivity over the medium term. Regarding process efficiency, ongoing initiatives across back, middle and front office focused on integrating AI gen applications into our banking operations. Coupled with leveraging AI tools for software development, we anticipate a 10% increase in capacity equivalent to approximately 1 million hours over the next few years. However, AI for Bankinter is not just a plan, it is a reality with substantial progress achieved in 2025. On Page 37, you can see the measurable improvements in productivity and efficiency thanks to the bank's digital transformation and the pragmatic and effective use of artificial intelligence in operational and commercial processes. We remain committed to investing 10% of our gross income in technology. On the lower left-hand side of the page, we have highlighted several examples of our use of AI in 2025, which have contributed to enhanced employee productivity. With EUR 36 million managed per employee, we compare very favorably to our peers with EUR 21 million per employee. And if we measure efficiency in terms of operating cost per billion managed, we also stand out. We allocate EUR 4.6 million of expenses per EUR 1 billion managed for our clients while our competitors require EUR 6.5 million for the same volume. Naturally, this is reflected in the efficiency ratio, which has improved year after year and now stands at 36%. Finally, I would like to highlight that all these gains in efficiency and productivity are not being achieved at the expense of service quality. In fact, service quality, measured in NPS, has improved by nearly 10 points since 2020 and now stands at 51%. Turning to the financial page -- the final page of our presentation. We report a ROTE of 20%, 100 bps above 2024, together with continued value creation for shareholders through both dividends and growth in book value. We are presenting another year of historical results driven by recurring customer activity and the disciplined execution of a long-term strategy that preserves our risk appetite while strengthening the balance sheet as reflected in the ongoing improvement of our NPL ratio. We continue to invest in initiatives that support business growth while at the same time improving efficiency. The drivers behind our performance, diversified growth, disciplined pricing, strong fee income engines and best-in-class efficiency are structural and provide strong visibility into continued profitable growth. In conclusion, 2025 demonstrated the resilience and strength of our business model even in a year of declining rates, geopolitical volatility and intense competition. Bankinter expanded volumes, protected margins and delivered record profitability. It was not just a record year, but a clear demonstration of the strength of our franchise, the quality of our growth and our ability to generate attractive returns and create long-term value for our shareholders. Back to you, Laurie. Laurie Shepard Goodroe: Thank you, Gloria, and thank you, Jacobo. We'll now open up for questions. [Operator Instructions] Our first caller is Maks Mishyn from JB Capital. Maksym Mishyn: Two questions from my side. The first one is on the competitive environment in lending in Spain. Your retail book is growing below the sector, and my question is whether it is intentional, why and when can this change? And the second question is just a clarification on the cost of risk guidance. You mentioned upside risks. What has to happen for them to materialize? And what kind of upside risk are we talking about? Could you please quantify them a bit more? Gloria Portero: I will answer you the first question, regarding competitive environment in Spain. Listen, I actually -- I think I pointed it out last quarter. We are seeing some irrational behaviors, particularly in the mortgage business, although also in other segments, but mainly, I would say, in the mortgage business. And you will understand it very, very quickly. I mean, there are offers, and I'm not talking to private banking clients. I'm talking to very standard clients, where they can get a 30-year mortgage at 2.20% for 30 years fixed, I'm talking. And as you know, the swap curve for the 30-year is over 3%. So basically, it's like selling a mortgage with Euribor minus 80 or even more. That is absolutely rational because even if that rate has a positive margin this year, obviously, you are building a portfolio that is not sustainable. And in 30 years, rates can do many things. So we are not into that world. We are not going to sell mortgages at 2.20% because we want to build a sustainable portfolio in any environment -- well, probably not in any environment, but in most of the environments, and we are not going to enter in that war. So we are producing with our clients, and we are competing in those clients where we think they deserve better rates. But we are not going to enter in that war. Jacobo Díaz: Maks, this is Jacobo. I'm going to answer your second question, and maybe there's a misunderstanding. The cost of risk that we're expecting for 2016 is quite similar to the current levels that we've seen here at the end of the year, which is around 30 bps -- 33 basis points. I think the word upside risk means -- it's meant in a positive way. That means that it could be even a little bit lower, not a little bit higher. So it's the way we can interpret that word. I think we think that we are under a good macro outlook for Spain, Portugal and Ireland. As you know, we are reducing our exposure to the consumer finance business with non-Bankinter client. We are reinforcing of being more prudent in all our activity. So the sense of the sentence that I mentioned of the upside risk doesn't mean this might go up in terms of cost of risk. I was trying to say that it can be even better than the current levels of cost of risk. I hope that I have clarified my point, and I expect that this was your question. Laurie Shepard Goodroe: Our next question comes from Francisco Riquel in Alantra. Francisco, go ahead. Francisco Riquel Correa: Yes. So my first question is I wanted to ask about your guidance of mid-single-digit growth in loans, if you can, please share indications by country. It seems to me that your guidance could be conservative if just the sector in Spain grows 4%, 5% in '26, which is nominal GDP growth. So you have grown a bit less than the sector in Spain. You were commenting that. So I wonder if you are willing to continue losing market share, particularly in retail mortgages in '26 or if you -- we could have upside risk to your volume guidance overall? And then my second question is regarding the guidance for cost inflation. So you have given cost-to-income reducing 1 percentage points, which means 2 percentage points cost inflation below revenue growth, meaning also cost inflation lower than in '25, but you need to invest in Ireland to become a full universal bank, also in Portugal. So that probably means very little cost inflation in Spain. So if you can, please elaborate on the cost guidance, the longer-term ambitions that you have presented for 2030, how do you plan to leverage technology to achieve that? I see other banks are still investing in technology. So if you can please elaborate. Gloria Portero: Thank you, Paco, for your question. I will try to answer the last question and maybe give some indications about the first one, but Jacobo will complete what I say. Okay. With respect to costs, obviously, technology is going to help, but this is not -- it's not a miracle. So we are not going to attain obviously, all that efficiency only with technology. I remind you that last year, we integrated EVO Banco. This year, 2025, we only had synergies for the half of the year. Next year, we will have the synergies of this operation for the full year. On the other hand, we just announced, I think, in December that we were absorbing consumer finance -- Bankinter consumer finance into Bankinter. And obviously, this means a simplification of the corporate structure that also brings some synergies. So it's a question of the traditional cost management technology and also all the simplification that we are undergoing in the corporate structure. And with respect to lending growth, listen, if the competitive dynamics continue to be in the mortgages -- in retail mortgages, the ones that we have seen during 2025, we are happy to be prudent and not to grow at the same pace as the market grows. But I hope because it doesn't make any sense that the market reacts and that we come back to a logic dynamic in pricing. Another thing where we are also reducing our growth rates is in everything that has to do with consumer credit in the open market. This means outside Bankinter clients in Spain because we are seeing already, as you can -- you know, there have been many announcements with regards to -- with regard to the new law, and well, there are a lot of problems in this -- I would say, a lot of compliance risks in this business. Do you want to complement? No? Jacobo Díaz: Yes, yes. Paco, good morning. No, no, I think in addition to -- I mean, basically, what Gloria is trying to say is that we are sticking to the same type of client or target of client that we've been sticking in the past, even with this exclusion of the consumer finance business in the open market activity. So this is one of the reason. We are targeting selective origination of lending. And even though we are able to keep the similar level of growth even if the market might grow a little bit more. But we prefer and we prioritize a good return and risk combination instead of volumes. Ireland is going to grow, again, quite strongly, double digit. Portugal is going to grow again strongly, double digit. And Spain behavior is going to be very positive. But always, we are prioritizing the combination of risk and return. Laurie Shepard Goodroe: Our next question comes from Marta Sánchez from JPMorgan. Marta Sánchez Romero: The first one is a follow-up on cost. So you're mentioning a commitment to positive jaws every year. You're going to be below 35% cost-to-income. What do you think is the right level to run the bank? And do you see a 1% positive progress every year for the next 3 to 5 years? And the second question is on the customer spread. You are committed to that 270 basis points. This quarter, we are a bit far from that level, 261. How are you going to be rebuilding that margin? And what is the outlook for net inflows into your digital account for next year? Jacobo Díaz: Marta, I'm going to start answering your second question about the customer spread. So Gloria has already mentioned that we are updating the cost of the digital accounts. This is going to be a good behavior in the first quarter of this year, and this is going to instantly recover part of the client margin, again, targeting the 270 in average that we've mentioned for the entire year. So for the year -- I mean, the cost of deposits are the ones that we will expect more contribution to this building up the 270. Loan spread that have ended the year at 3.48% last quarter also is intended to recover across the year. We expect or there is expectation of a steepened yield curve that will provide more upside in the second half of the year than in the first one, especially with mortgages. So we do expect that the contribution of the asset yield might be a little bit lower in the -- to recover that position. So maybe a couple of bps in average. But definitely, the cost of deposit is the one that will drive the most -- the majority of the building up of this 270s across the year. And in terms of cost, yes, I think one -- always it's very difficult to tell if it's 1 or 1-point-something point every year. But definitely, the message of Gloria is that we have a strong ambition to reach very low levels of efficiency. We think that we should aim to reach 30% not too far ago. This is where we want to be in terms of efficiency ratio. And this is something that we want to build in the next 3, 4 years, maybe. Laurie Shepard Goodroe: Our next question comes from Ignacio Ulargui from BNP Paribas. Ignacio Ulargui: I have 2 questions. The first one is on fees, looking to insurance fees and distribution fees related to insurance products. I mean, I just wanted to see if there could be any acceleration of that into 2026, if there is chances to rethink about the JVs that you had in the non-life business. What could be the strategy on the insurance business? And the second question is on the capital front in the quarter, that has been like 19 basis points positive effect from intangibles and other adjustments, if you could elaborate a bit what was the driver of that? Gloria Portero: Ignacio, I will try to answer your first question. As you know, we have to -- well, we have a JV with Mapfre that's in life insurance, but also in non-life in all segments but auto and home insurance. In home insurance, we are growing very nicely, actually, and also, in life insurance. But where we think that we could grow more is in all the other segments that are outside life and home insurance. And yes, we are working. We are working with Mapfre to see how we can give a greater push to this business. But we have no plans for the moment to make any changes in the JVs that we have. But as I mentioned, we are working with Mapfre to see how to improve this 7% growth rate. Jacobo Díaz: Ignacio, I'll answer your questions. Yes, I mean, at the end of the year, we reduced the deduction of intangibles just because all the IT assets that have been developed come into production in this fourth quarter. Therefore, we reduced the deduction as intangible, and then, we start the amortization of these IT assets. Laurie Shepard Goodroe: Our next question comes from Pablo de la Torre from RBC. Pablo de la Torre Cuevas: I had a first question on the potential uses of the excess capital that you're expected to generate going forward. So beyond organic growth in existing markets, how do you envision to use this excess capital? And I know Gloria has already commented on this last quarter, but you continue to be linked to a potential transaction in Ireland. What is kind of your latest thinking there? And given the outlook more generally for the bank, have you discussed plans to change the ordinary payout going forward? Then, it's more of a -- my second question is a follow-up on the corporate structure simplification point in consumer finance that you have already discussed. But I wanted to invite you to comment on the revenue opportunity from this change. Payments and collection services is already a large contributor to fee income for the bank, but it seems that the revenue growth there has been decelerating a little bit over recent years. And so can you just please provide a bit more color on how this change can -- how the change you have announced can contribute to revenue growth going forward? Gloria Portero: Thank you, Pablo. With respect to Bankinter consumer finance, and you are talking more about the payments, the new payments area, I suppose, that we announced at the end of the year. We have done this -- well, first, payment income is not growing so strong because the regulation with regard to payments for instant payments, well, is such that has an activity that was fee-generating, what has become an activity where you charge no fees at all. So that has had an impact this year. It won't have an impact next year because, obviously, we are already comparing equal things. But with respect to payments, we have started a strategic thinking about this because this is an area that is really being transformed by technology with everything that has to do with stablecoins, digital euro with request to pay in the transactions between businesses. And we need to have a strategy and a value proposition. We need to understand what will be value-creating in the future, what is just a bluff, as we say, because there is a lot of noise, and we have to take the noise out of the room. I think payments can be -- there is a side of this strategy that is going to be protecting our business and the other one is going to be how can I make my business grow more. For the moment, I cannot tell you anything because we are working on the strategy, as I mentioned, but I'm sure that we will have some news in the next quarter or maybe in June. With respect to capital, well, we are not changing. We are not going to change our dividend policy just because we have 30 basis points more capital than our objective level. And we are not building up capital for any purchase in Ireland. I mean, I've mentioned already we have -- our strategy there is organic growth. We are building a bank from scratch, and that is what we are going to do. We are not looking at PTSB. And -- I don't know, I cannot be any clearer here. So I think I've answered Pablo. Laurie Shepard Goodroe: Our next question comes from Borja Ramirez from Citi. Borja Ramirez Segura: I have 2 questions. Firstly is on Ireland. I would like to ask if -- given the ongoing sale of PTSB, if this is an opportunity for you to gain market share organically in the country? And then my second question would be if you could kindly provide the average cost of your digital accounts, which I think was 1.6% in Q3 and also the average duration of this, please? Gloria Portero: Okay, Borja. I will answer you with regard to Ireland. Well, as I've mentioned, we are not interested in acquiring any operations in Ireland. But obviously, as I have always said, when there is a corporate transaction, there is noise, and this is always an opportunity for the other established banks in the country. We have seen that in the past in Spain. And I'm sure that, that will be the same in Ireland. So yes, this could be obviously an opportunity to acquire clients there. And I pass the second question to Jacobo. Jacobo Díaz: Borja, yes, there is -- the current price is -- the current average cost is 20 bps lower then I think you mentioned the 1.6%. So now we are at 1.4% more or less. Laurie Shepard Goodroe: Our next question comes from Carlos from Caixa, BPI. Carlos Peixoto: So the first one was actually -- first one would actually be on fees. You have -- in this quarter, in the other fees caption, you have a substantial increase quarter-on-quarter and year-on-year. I'm guessing that this relates to the roughly EUR 10 million success fee on a transaction that you had mentioned in the previous quarter. Just wondering whether you see scope for similar fees of this nature in 2026 and whether the high single-digit guidance that you conveyed is with -- on the reported fee income or adjusted for that specific item. Then on -- well, you mentioned you expect ROTE to be above 20%. What type of net profit income growth are you expecting for 2026? Should we think about double digit or below that? Gloria Portero: Carlos, regarding the guidance on fees that we mentioned, it includes -- I mean, we are not -- we are considering the total fees of 2025, and then, we are -- our guidance is on the top of it. So we are not excluding these one-off fees because the volume is not huge, it's not relevant for the entire year. So we are not considering -- I mean, it's like it was usual BAU. And regarding the net income, I think we've provided enough guidance to provide you an idea of this increase. I mean, the level of efficiency is going to improve. Cost of risk is going to stay or even can perform a little bit even better. So yes, as you can imagine, the net income is going to grow. And again, it's going to be a new record year. Laurie Shepard Goodroe: Our following question comes from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: One is a follow-up from Marta's question on the digital account growth. So how much of your mid-single-digit deposit growth is explained this year by digital accounts? And the second one, I think, Jacobo, you mentioned that you're not expecting any impact from the banking tax in '26 and '27. So is that comment constraint to those 2 years? And that means that '28 onwards, you're going to start booking the levy actually in the P&L or you just wanted to constrain the comments actually to the next 2 years? Gloria Portero: Ignacio, I will answer you the second one. Actually, the banking tax is a temporary tax. So it is not expected to go beyond '28. Obviously, that is what I can say today. I don't know if they will again extend this stack. So it is not -- it is temporary. And with the figures we have in hand, we think that it will be 0 or absolutely immaterial because we have a cash tax rate that is very high and that absorbs very comfortably the figure that comes out from the theoretical banking tax. And I'll pass back to Jacobo for the first question. Jacobo Díaz: Yes. Ignacio, I think the digital accounts have played a relevant role in 2025. But again, it's a combination of many things because the level of term deposit has gone down, which is very important. Treasury accounts has also had a very good behavior because our business or the growth in our corporate banking business has also been very, very positive. And of course, digital accounts had a quite relevance, but it's not the only catalyst of the growth of deposits during 2025. We've been able to attract the deposits. Then afterwards, we've been able to convert into 2 assets under management that have brought a lot of fees. Digital accounts are very important in our commercial strategy. That's what can I tell you, but it's not the only thing that we have. We have salary accounts that also have a very good behavior. So it's important, but it's not the only driver of growth in our deposit base. Laurie Shepard Goodroe: Our next question comes from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Sofie from Goldman Sachs. So just going back to the digital accounts, we have seen almost a tenfold increase in digital accounts. Like could you give us the split of the digital client acquisition by country? So how much is coming from Spain, how much from Portugal and how much is coming from Ireland? And then my second question would be on the fee income side. When we look at the fee growth in Q4, which was very strong, we see a lot of the increase actually came from other fees, I believe around EUR 17 million quarter-on-quarter, which is almost a doubling quarter-on-quarter of this fee line. Could you just elaborate what that other fee income line includes? Gloria Portero: Sofie, I will answer the first one. Almost 100% of the client acquisition with digital accounts is Spanish. It comes from Spanish clients. We have actually acquired digitally in Spain around 130,000 new clients, and we have attracted around EUR 5 billion of new money from these clients. This has allowed us to do something, which is actually not be -- not have -- we have made -- changed these deposits with corporate deposits that were even more expensive. So actually, we prefer to pay an acquisition cost to acquire clients where we can cross-sell and make more money than to our corporate clients for the treasury excesses. We won the operative accounts from our corporate clients, which are much lower cost. But just to give you an idea, we have already cross-sell to these clients. It's very, very, very early to say, but we have already cross-sell payroll accounts. We have cross-sell lending, and we have cross-sell investment products. We are at around a 7% cross-sell. But another thing that I want to -- well, to say is that around 10% to 15% of these clients that we have acquired are in the maximum level of the digital account, which is EUR 100,000. And this means they are probably more in the affluent segment or the private banking segment, and we are going to concentrate on those clients where we see potential to develop them. Actually, we are doing some tests to see in which area of the bank, whether it is the branch network, whether it is the telephonic managers or whether it is digitally that we can actually develop these clients. And for the moment, we are having quite good results. I will pass you through to Jacobo to answer you the fee income question. Jacobo Díaz: Good morning, Sofie. Yes, I mean the fee -- we have recorded the EUR 10 million of success fee of alternative investment funds in that line. That's why you see in the other fees that amount. I must say that the alternative investment funds activity is performing very well. You've seen also that in the line of the equity method, we have recorded very good results. And I believe this is something that is going to be sustainable over time. We have 31 vehicles. We have a good average fees. We have quite strong expectations in the future. And as we mentioned during the call, we have brought to the bank around EUR 10 billion of net new money, and some of them flies to the alternative investment fund. So this is a business that is quite relevant for us. It's going to be another priority in coming years. And you should expect more fees to come from this business and more equity method income from this business in the future. Thank you, Sofie. Laurie Shepard Goodroe: Our last question comes from Britta Schmidt from Autonomous Research. Britta Schmidt: I have a question on the digital account. How should we think about the adjustment on the pricing of the stock and versus the flow? So maybe you can give us some sort of indication as to what basis point reduction in deposit cost you expect from this initiative? And on the acquisition cost of these customers, I think given that you just explained that these are mainly affluent, it's probably clear why the acquisition cost will be lower than for other channels, but maybe you can give us some sort of quantification of how much lower these acquisition costs are? Gloria Portero: Well, I will give you, for instance, the campaign where we acquired most was more successful this summer, summer in September, which was also after the acquisition of EVO. So it's really the digital organization. The acquisition cost was EUR 20 per client. So really, the acquisition cost is more the cost of the actual account. What we want to do is -- I mean, as you have seen, we have already reduced by 50 basis points every single account in the digital organization. And we will go on with this trying -- doing trials and reducing the cost. Obviously, the front -- so the front, the new production, the new acquisition, will have to be higher, and we will be always in the order of the reference, ECB reference rate or somewhere around there, obviously, depending on how the competition is behaving. And the second question... Laurie Shepard Goodroe: Thank you very much all for attending today. That has ended our Q&A. And on behalf of the entire Bankinter team, we definitely thank you for your interest and participation. As a reminder, the Investor Relations team will be available after the webcast to answer any questions that you may have. Thank you, and have a wonderful day and start to the new year. Jacobo Díaz: Thank you very much. Goodbye.
Operator: Welcome to the GURU Organic Energy Fourth Quarter and Fiscal Year 2025 Results Conference Call and Webcast being recorded today, January 22, 2026 at 10:00 a.m. Eastern Time. [Operator Instructions] GURU's press release, MD&A and financial statements are available in the Investor section of its website and on SEDAR+. During the call, the company may refer to certain non-GAAP measures, Reconciliations are available in its MD&A. Also note that all financial figures are expressed in Canadian dollars unless otherwise indicated. I would also like to remind you that today's presentation may contain forward-looking statements about GURU's current and future plans, expectations and intentions, results, level of activity, performance, goals or achievements or other future events or developments. Please take a moment to read the disclaimer on forward-looking statements on Slide 2 of the presentation. I will now turn the call over to Carl Goyette, GURU's Chief Executive Officer. Carl Goyette: Thank you, operator. [ Foreign language ] Good morning, everyone, and welcome to GURU's Fiscal 2025 Fourth Quarter and Annual Results Conference Call. Joining me this morning is our CFO, Ingy Sarraf. Let's turn to Slide 5. Fiscal 2025 marks a defining turning point for GURU. It reflects successful execution and strengthens fundamentals across profitability margin and cash flow. We delivered record net revenue of $34.7 million, reduced net loss by 85% from $9.4 million to $1.4 million and drastically improved adjusted EBITDA loss to nearly breakeven. We also generated $3.3 million in operating cash flow, a major turnaround from the $9.3 million outflow in fiscal 2024. We ended the year with $28.5 million in cash, cash equivalents and short-term investments. as well as $10 million in unused credit facilities. Taken together, these outcomes demonstrate the strength of our repositioned commercial model and our ability to deliver disciplined, profitable growth. Turning to Slide 6. The second half of the year marked a clear inflection point for GURU. We delivered two consecutive profitable quarters for the first time as a public company, finishing the year near breakeven. Over the past few years, we made a clear commitment to return to profitability and executed with discipline, protecting margins, managing costs and continuing to grow. Alongside operational discipline, we applied a thoughtful approach to capital allocation, repurchasing approximately 2.4 million shares since 2022 under our NCIB at an average cost of $2.20 per share. This reduces our outstanding share count and enhances our per share financial metrics as we continue our path to profitable growth. Turning to Slide 7. In Q3, we delivered a record $10.4 million in net revenue and our first profitable quarter since going public with $1.3 million in net income and a 12.4% net margin. We kept that momentum going into Q4, delivering another record performance with $10.1 million in net revenue, up 41.5% and securing our second consecutive profitable quarter. Q4 also delivered several key commercial milestones. Record Amazon performance in Canada and in the U.S., driven by a solid momentum during October's Prime day and even stronger results during Black Friday. We expanded our nationwide presence at a leading wholesale club with 2 new 18-can variety packs, further strengthening our retail footprint in Canada and solid results from the launch of our innovations. Both quarters delivered industry-leading gross margins above 65%. Retail performance also strengthened across key accounts in Canada reflecting improved control over pricing, promotions and inventory. What gives us confidence is that this momentum is supported by strengthening underlying fundamentals across channels. Let me walk you through the key drivers. Turning to Slide 8. Our fiscal 2025 transformation was driven by 4 key elements: First, our successful transition back to a direct distribution in Canada, improving improved execution focus and deepened retailer relationships. Second, we delivered sustained revenue growth with net revenue increasing 14.9%. Third, we expanded structural margins with gross margins improving by 940 basis points to 64.7%. And fourth, disciplined cost management, reduced SG&A expenses as we continue to significantly improve our marketing efficiency. Together, these drivers brought us to near breakeven and position us well for fiscal 2026. We are encouraged by the progress and remain focused on maintaining the same discipline and execution going forward. Let me walk you through performance by geography, starting with Canada. Turning to Slide 9. Our Canadian distribution performed exceptionally well. Full year sales grew 16.9%, with Q4 up 45.1%. We launched 2 new 18-can variety packs in Costco. Innovation remains a key differentiator. GURU ranked as Quebec's #1 innovation performer for the fourth consecutive year, led by ZERO Wild Ice pop. Direct distribution fundamentally changed our business. We now control our destiny at retail through deeper partnerships, stronger activations, better inventory management and a direct line of sight to our consumer. Turning to Slide 10. The U.S. delivered consistent growth throughout fiscal 2025. Full year sales increased 8.6%, with momentum building into Q4 as sales rose 29.3%. In the natural retail channel and Whole Foods combined, consumer scanned dollar sales grew 22%, reflecting strong momentum across our U.S. retail footprint. On Amazon, we delivered record results during Black Friday. Earlier in the year, Prime day also contributed significantly to momentum, including GURU reaching the #2 brand position in Canada during the October event. Turning to Slide 11. Innovation continues to be a major growth engine for GURU. Our ZERO Sugar line, Wild Berry, Ruby Red, Ice Pop and Strawberry Watermelon expanded across both countries, meeting fast-growing demand for better-for-you zero sugar options. Island Breeze Punch launched in Q4 is showing strong early sell-through. And early in fiscal 2026, we introduced Dragon Fruit Cherry Sorbet with an additional ZERO Sugar innovations planned throughout the year. With that, I'll now turn the call over to Ingy for a deeper look at our financial performance. Ingy, over to you. Ingy Sarraf: Thank you, Carl, and good morning, everyone. Turning to Slide 13. Let me walk you through the key financial highlights. Fiscal 2025 net revenue was $34.7 million, up 14.9% or 20.4% excluding last year's U.S. wholesale club rotation. Q4 set a new record at $10.1 million, up 41.5%. Gross margin for the year expanded 940 basis points to 64.7%, with Q4 at 65.1%. This reflects benefits of our direct distribution transition improved pricing, disciplined promotions, efficiencies and the onetime adjustments disclosed in Q3. Our 65% gross margin gives us real runway. We can invest selectively in high-return growth initiatives without compromising our progress towards sustained profitability. It's no longer an either/or, we now have the flexibility to do both. SG&A expenses decreased 10% to $24.6 million in fiscal 2025, down from $27.3 million last year, reflecting continued improvement in marketing efficiency and operating discipline. In Q4 2025, total SG&A as a percentage of net revenue decreased to 65.9% from 94.4% a year ago. We expect to maintain disciplined SG&A allocation, prioritizing the highest return opportunities across markets. In fiscal 2025, we reduced our net loss by $8 million to $1.4 million and improved adjusted EBITDA loss by 97.2% to near breakeven. Q4 marked our second consecutive profitable quarter. Finally, we generated positive operating cash flow of $3.3 million versus $9.3 million outflow last year, strengthening our financial position to $28.5 million in cash and short-term investments, no debt and $10 million in our new credit facilities. Our strong financial position provides us with the flexibility to invest in high-return growth initiatives while maintaining disciplined financial management. Overall, we're really pleased with the progress we've made and confident in the levers we have in place to drive further efficiency and growth. With that, I'll turn the call back over to you, Carl, for closing remarks. Carl Goyette: Thanks, Ingy. Let's turn to Slide 15. As we enter fiscal 2026, GURU has real momentum, strong capabilities and a solid foundation to build on. We achieved profitability, we now operate with a structural margin profile built for sustained profitable growth. We have the financial strength to invest in growth, and we're seeing pure momentum across retail, wholesale club and e-commerce. Our priorities are clear: expand distribution across Canada and in the U.S., scale e-commerce and digital acquisition, advance our ZERO Sugar innovation pipeline, reinforce brand presence in health-oriented retail channels. The better-for-you energy drink category keeps growing and GURU is uniquely positioned to capture share through our organic plant-based energy platform and robust innovation pipeline. I want to thank our team for their exceptional execution throughout 2025, and our retail partners and customers whose commitment and energy made these results possible. This transformation is truly a team effort. [Foreign language] Thank you. We are proud of the progress made energized by the momentum we are carrying into fiscal 2026 and committed to executing with the same discipline and focus in the year ahead. Operator, we'll now open the call to questions. Operator: [Operator Instructions] Our first question comes from Martin Landry with Stifel. Martin Landry: Congrats on your great results. I would like to just dig in into the revenue growth on a year-over-year basis for Q4. Just trying to compare apples-to-apples. So I was wondering if maybe you can discuss your performance at retail in Canada. You gave in your MD&A, the scanned dollar sales for the last 52 weeks, I think you're up 22% year-over-year. Wondering if you could break the performance for Q4, that would be greatly helpful. Carl Goyette: Yes, absolutely, Martin. I'll start with the U.S. because the U.S. is -- I guess, the U.S. is easier because most of our business is tracked in the U.S., right? So I gave, in my remarks, I also spoke about it. In the U.S., when you look at spins, which is really tracked, and we add all foods to this, as we get to plus 22%, right? So when I combine spins, wholefoods and other untracked, they're really in the range of like 20% in the U.S. So that's kind of the growth we're seeing, the real growth we're seeing in the U.S. and Q4 would be around 20%. And for Canada, it's a little bit more complex because as we discussed, right, there's a lot of growth that's happening in untracked channel. We're seeing online, Costco, some discount, independents growing faster than some of the track, right? So we need to do a little bit more of a calculation to get to give you a good number on this, right, so we look -- so what we do is we look at track channels and then we add back the shipments for whatever is on track. And the number is exactly the same, right, in Q4, we're seeing also plus 20% in consumer offtake when combining tracked and untracked for Canada. So overall, growing at 20% in U.S. and Canada is the short answer. Martin Landry: Super clear, and it's easy to understand, and that's an apples-to-apples. So that's helpful. Okay. And then you do say in your opening remarks that you have momentum and you're entering fiscal '26, with momentum. Looking at Q1, it's almost done now. So any color you can give us on your performance at retail for Q1? Carl Goyette: Yes. As you know, Martin, we don't give formal guidance. I know it's almost done, but it's not done. I can tell you, the sales team is pushing as hard as they can. So there's always a little bit of timing which large orders are going to be delivered when and all this. I can't give you an exact number, but I can tell you -- the few things I'll give you to help you answer this question. The first is the industry is doing really, really well, right? The industry is growing healthy, both in Canada and in the U.S. at around 10%. And there are strong tailwinds for anything that's better for you, ZERO sugar and innovations. So obviously, we want to -- the discussion that we almost want to have with you is to look at, let's say, a longer-term horizon, let's say, Q1 and Q2 to say we expect to outgrow the industry significantly, right? So if the industry is growing at 10%, expect us to outgrow this and keep growing market share. That's one thing that I think is fair for us to tell you in terms of outlook without giving you an exact number. From a margin point of view, we also are very proud in our margins. Our margins are industry-leading, they've always been part of our recipe. These margins are key for us to be profitable. So we will protect and defend this. And there's obviously pressure in margins like everybody else, but this is something that we're proud of and we will defend, right? So don't expect big movements from a gross margin point of view, except from some pressures that are cost related, right? And then from a profitability point of view, which obviously everybody is interested in this as we gain scale, we've said for a number of years that we were going to get back to profitability. Not everybody believed us. I think we've just proved that we can be profitable two quarters in a row. That's the intent, right? So when we look at the future of this business, this business will be a profitable business. It doesn't mean we will be profitable every quarter, right? We want to be -- I think we've been clear last quarter. And I want to be clear again that we are still very much focused on growth, right? And we will attack some opportunities, and we will make investments if we think there's going to be a great return for our future. So some quarters, we may not be profitable. Some quarters, we may be more profitable. I think the one thing that I would want to commit with you, with Ingy as well, like we said last quarter, is that whenever there's a loss, we'll -- if there is a loss in the future, we'll point to exactly the investments we're making, obviously, as much as we can without disclosing our strategy. But we'll be able to tell you, "Hey, here's the -- an example of investments we're making this quarter. Here's why maybe we're seeing a small loss, but this is going to pay back in the future." right? And the beauty is we have $28 million in cash in the bank account, and we have money to invest, and we still really much believe in the potential of this brand and we will want to continue investing in this brand in the future. Martin Landry: Okay. That's helpful. Just a point of clarification, when you say you intend to be profitable, are you talking at the EBITDA line or at the net income line? Carl Goyette: The EBITDA, yes. Martin Landry: Positive EBITDA. Okay. Okay. I mean it does answer most of my questions, I just wanted to maybe have a little bit of a long-term picture. And I think you've answered it a little bit. I'm trying to grasp a little bit what's your growth algorithm from a revenue standpoint longer term. You talked about growing faster than the industry. Is that a little bit how we should think about your long-term growth algorithm? Carl Goyette: Yes, we'll give you a similar answer to the one that's given. Because the mindset is the same, right? Obviously, longer term, we obviously think that this brand and our organization can outgrow the industry. In fact, our mission is to transform and clean up this industry. We think that there is a place in this very large industry for a product that is much healthier that has a much cleaner list of ingredients that provide the same benefits. So obviously, we think that the product and a brand like GURU can outgrow the industry significantly, right? The protection of our margins still stands, right? There's no reason why we would complement on this. I think the big thing that changes over a longer term is with scale, profitability becomes much easier. We're still a fairly small company. If you look at our cost base, the cost of being public and there's some costs in there that are fixed costs that are part of our structure in SG&A that, over time with scale, are not as significant, right? So you can't -- in the future, you should start seeing much better EBITDA margins on a more consistent basis. Operator: And the next question comes from Sean McGowan with ROTH Capital Partners. Sean McGowan: A couple of questions specifically about the quarter, maybe this might be more for Ingy and then some bigger picture questions. At both the gross margin level and the operating expense level, the performance was kind of better than I had modeled. Was there anything in those numbers that was like an unusual benefit that would make us maybe not expect this kind of performance in the future? Can any -- unusual offsets to expenses? Ingy Sarraf: No. It was a very regular quarter. Of course, we're in the new structure, right, in the new business model. So no, it was very regular in terms of SG&A and even in terms of gross profit. Nothing that was one-off. Sean McGowan: Yes. Well it looks like you're generating more gross margin than you had even before the -- going back 5 years or so. So you're coming in at a higher margin level than you had even before Pepsi, right? Ingy Sarraf: Yes, we had a very good gross margin from a pricing standpoint. We had, of course, the benefit of the transition back to the new model. And we also have some continued impact from our pricing discipline and a tighter control over our promotional activities. Sean McGowan: Okay. That's helpful. And then looking at -- I hear that you're not going to get into the guidance business, at least not yet. But given the kind of some unusual things that happened over the course of the last fiscal year, can you give us some help on what we should expect in the cadence of growth in 2026, given the comparisons up against some unusual quarters last year? Carl Goyette: Yes. Well, obviously, the aspiration remains the same, the aspiration like as I said, I think this is a growth company, and we will do everything we can to be a high-growth company, outpace the industry, Q1 and Q2, we have more visibility on, obviously. We also -- so we have the benefit of the new model in Q1 and Q2. I think Q3 and Q4 will be comparing direct distribution quarters with direct distribution quarters. So we will not have that benefit. So most of the growth will come from the volume, right? Right now, we're benefiting from volume growth and from margin improvement, right? So as you model this down the road, then it's -- we will be focused on generating pure volume growth to generate revenue, right? Because we don't think there's not much pricing that we're going to take this year, right? So it's more of a volume growth just Q3 and Q4, but we have a very aggressive year in front of us with great innovations that are coming, momentum from a distribution point of view, momentum with a lot of retailers and e-commerce. So we're very confident for this year, obviously, in remaining a growth company. I'm not sure if that answers your question. I think I gave a lot of color on Q1 and 2. Beyond that is a little bit still far, but I think the momentum, there's no reason why momentum would stop, right? Unless something really -- that we don't control happens, right? Sean McGowan: Right. Okay. The working capital figures were also, I think, a positive surprise in terms of actually getting a source of cash in the fourth quarter. Not something you typically see with this kind of revenue growth. So given your aspirations for growth, should we expect the company will need to invest in working capital in 2026? So should we expect it to kind of revert to being a use of... Ingy Sarraf: Yes, I think it will be much more neutral in 2026 versus you saw the shift in receivables, the timing of receivables and payables in 2025. So I think it will be much more neutral like we saw in previous years of working capital because we're at the right levels of inventory, the right levels of investments there. Sean McGowan: Okay. That's helpful. And some bigger picture questions. You mentioned cost as a potential headwind. Is there anything specific that you can point to it? And the reason I ask is there's been some chatter on some of the other company conference calls about aluminum costs, are you seeing anything in input costs that give you any concern or that might offset some of your pricing? Ingy Sarraf: Yes, of course. Like the rest of the industry, we're feeling the pressure really aluminum related, and we see it, of course, to our co-packing costs, of course. For the rest, the other inputs whether freight or the raw materials where -- it's broadly stable within the normal CPI index increases. So it's really aluminum that's putting a pressure, of course. Sean McGowan: Okay. Maybe for Carl. Carl, are you seeing any new entrants into the category that you think are worthy to keep your eye on? I mean, some of the big guys are doing pretty well, but some new entrants also not doing so badly. Are there any companies that you would look at? Carl Goyette: Well, there is always a lot of action in this industry, and there's always been. Like we've been around 25 years, and there's not a year where there's not a ton of new entrants and I guess the industry doing so well, the industry having so much momentum consumers consumers' appetite for innovations, better-for-you, ZERO sugar. Obviously, it makes this space attractive for a lot of new entrants. So there's nothing specific I would point to in terms of -- I think, what we need to look at is, yes, this is an attractive industry. Yes, this is an extremely competitive industry, right? So we need to be very focused, very methodical about our strategy knowing exactly where our brand can play and what type of consumers we're going after. If we're trying to please everybody, we're not going to please anybody, but we know that there is a real consumer base for products that are like GURU, and we're very focused on that, not being distracted by all the other new entrants that come and go. The reality is a lot of people come, a lot of brands come and go. That's kind of the high level, what I would give you. We don't see that many new entrants, to be honest, in this exact same space, from an ingredients, clean ingredients list point of view with no sucralose, no aspartame, natural caffeine and the benefits we offer from a boost and focus point of view. We don't see that many new entrants. So in that sense, we're lucky and we're very well established in that positioning. So when we see -- when we look at all these new entrants, as much as we wish them good luck, we know that having -- being around since 1999 and being so established in the natural channel, in e-comm channels, on Amazon, having the relationships we have with retailers, is really a meaningful advantage over the new entrants that come in right? It doesn't mean that it's impossible for new entrants to be successful. We've seen some new entrants come in and be very successful. But we're not -- we don't get distracted by this. We're very much focused on our own strategy while obviously taking lessons from anybody who is successful in this industry is our way is something that we look at and say, "Hey, wow, these guys have done really well", especially if they're in the better-for-you space, right? Because we think Obviously, this is fundamental to our mission. We think that this industry needs -- I said this earlier, but this industry desperately needs a transformation for the better. It's really an industry that's full of chemicals, and we think that, that should not be the case. It should be an industry that's providing consumers with healthy products. Sean McGowan: Thank you. Then another competitive question. So Monster and Coke have had a relationship for a long time, Celsius and Pepsi have a relationship for a long time. KDP is jumping on some of these new entrants aggressively. Does this make it harder, you think, for new entrants? Because the core businesses of some of these bigger consumer products companies are not that strong, and carbonated soft drinks, not a growth category. Does it make it harder or easier for new companies to kind of get in, establish some share and then sell out? It seems to be the game plan for these guys. Carl Goyette: I don't know. It is always like you see -- I think what's important is to be innovative and to find your own way. And we spoke about channel shifts, the opportunities and on track. There are so many new channels. Consumers are not shopping in the same way. E-commerce levels, the playing field very much on brands, right? So there are so many other ways to grow than only in the traditional channels. Obviously, traditional retail channels play a big role. This is where the bulk of the industry is being sold. But this is a over $26 billion industry growing so fast. The reality is there's so many other ways to win in this industry without necessarily going into the massive systems, the large DSD players, right? When you get to $1 billion, I guess at some point like you have no choice. But at the size we are and we look at the opportunities or at the size of whenever a new entrant coming in, new entrants have plenty of opportunities to grow outside of these big distribution giants. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Carl Goyette for any closing remarks. Carl Goyette: I simply want to thank everybody for joining, and thanks for choosing Good Energy. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, everyone, and welcome to the Southern Missouri Bancorp Earnings Call. My name is James, and I will be your operator for today. [Operator Instructions] The conference call will now start, and I'll hand it over to our host, Chief Financial Officer of Southern Missouri Bancorp. Stefan, please go ahead. Stefan Chkautovich: Thank you, James. Good morning, everyone. This is Stefan Chkautovich, CFO with Southern Missouri Bancorp. Thank you for joining us. The purpose of this call is to review the information and data presented in our quarterly earnings release dated Wednesday, January 21, 2026, and to take your questions. We may make certain forward-looking statements during today's call, and we refer you to our cautionary statement regarding forward-looking statements contained in the press release. I'm joined on the call today by Greg Steffens, our Chairman and CEO; and Matt Funke, President and Chief Administrative Officer. Matt will lead off our conversation today with some highlights from our most recent quarter. Matthew Funke: Thank you, Stefan, and good morning, everyone. This is Matt Funke. Thanks for joining us. I'll start off with some highlights on our financial results for the December quarter, the second quarter of our fiscal year. Quarter-over-quarter, our earnings and profitability improved due to a lower provision for credit losses, a larger earning asset base, which drove an increase in net interest income as well as an increase in noninterest income. With the earnings and profitability improvement we've seen in the first half of our fiscal year, we feel we have good momentum and see positive trends continuing into the second half. We earned $1.62 per share diluted in the December quarter. That's up $0.24 or 17.4% from the linked September quarter and up $0.32 or 24.6% from the December 2024 quarter. Provision for credit loss expense was about $1.7 million, a decrease of $2.8 million when compared to the linked September quarter. As we stated on the last earnings call, we expected the provision to decrease this quarter as we had some positive movement with the workout of the specialty CRE loans we've discussed in prior quarters. Greg will give some more details on that next. On the balance sheet, gross loan balances increased by $35 million during the second quarter. Compared to December 31 of the prior year, our gross loan balances are up almost $200 million or 5%. Growth in the quarter was led by 1-4 family residential, C&I and construction and loan development loans. We experienced strong growth in our East region, followed by good growth in our West region. We had a great quarter for loan originations generating almost $312 million, our strongest quarter over the last several years, but growth was slowed by seasonal ag paydowns and some larger loan payoffs. With the strong production and as we enter a slower season for ag and real estate lending, our loan pipeline for the next 90 days decreased somewhat but remains healthy at $159 million at December 31. Due to normal seasonality, we would expect limited net loan growth in the March quarter, but having grown just above 3% in our fiscal year-to-date and expecting a typical pickup of growth in our fourth quarter, we're still in a good position to achieve mid-single-digit growth for the fiscal year of '26. Deposit balances increased by about $28 million in the second quarter and by $98 million or 2.3% compared to December 31 of the prior year. Over the last 12 months, we've had a reduction of $72 million in brokered deposits. So we put our core deposit growth at about $170 million or 4.3% over that 12-month period. Net interest margin for the quarter was 3.57%, unchanged from the linked September quarter and as compared to 3.34% reported for the year ago period. Net interest income was up just over 1% quarter-over-quarter and up 12.4% year-over-year. Stefan will get into the details on the NIM in a bit, but I wanted to point out that with 50 basis points of FOMC cuts in the December quarter, we have seen some positive underlying improvement in the NIM, although that was hampered this quarter by 2 credit relationships that were placed on nonaccrual. Adjusting for $678,000 of this reversed interest income related to these credits, the NIM would have been 3.63% in the December quarter. Tangible book value per share was $44.65 an increased by $5.74 or almost 15% during the last 12 months. Lastly, in the second quarter, we repurchased 148,000 shares at an average price of $54.32 per share for a total of $8.1 million. The average purchase price was 122% of our tangible book value as of December 31, '25. I'll now hand it over to Greg for some discussion on credit. Greg Steffens: Thank you, Matt, and good morning, everyone. Starting with credit quality. Overall problem asset levels have increased slightly since last quarter but remain at modest levels with adversely classified loans totaling $59 million or 1.4% of gross loans, up $4 million or 8 basis points as a percentage of gross loans since last quarter. Non-performing loans were about $30 million at 12/31 and totaled 0.7% of gross loans, an increase of $3.6 million compared to last quarter. Non-performing assets were about $31 million and increased $4 million quarter-over-quarter, with most of the increase due to the increase in NPLs. Both the increase in classified and nonaccrual loans were primarily attributed to 2 borrowing relationships, one consisting of multiple loans collateralized by commercial real estate and equipment and separately, 2 related agricultural production loans secured by crops and equipment, all of which were placed on nonaccrual status during the second quarter and accounted for the $678,000 interest reversal Matt noted earlier. The CRE and equipment loan relationship totals $5.8 million. The borrower operates a seasonal business, and we expect increased cash flows during the spring and summer operating periods and we are also working with the borrower to add additional collateral support. The total relationship currently has a 23% specific reserve. The ag-related relationship totals $2.2 million, and we're working through formal resolution processes with the assistance of counsel with the goal of achieving repayment, no refinancing and limited potential losses. Despite the modest increase in nonperforming assets this quarter, we continue to see positive progress in our specialty CRE relationship that we've discussed the last several quarters. During the second quarter, we received a $2 million recovery on this overall relationship, which contributed to an overall net recovery for the quarter of $704,000. One of the properties has a new tenant in place with a strong 1-year letter of credit guaranteeing rental payments and the related loan has returned to accrual status and is no longer classified. The other loan is in the foreclosure process and was materially charged down during the prior quarter, so we do not expect any significant additional impact from that relationship. The combined carrying value of the 2 loans is $2.7 million. Loans past due 30 to 89 days were $12 million, down $692,000 from September and 28 basis points on gross loans, a decrease of 2 basis points compared to the linked quarter. Total delinquent loans were $32 million, up $2.7 million from the September quarter. The increase in total delinquent loans was mostly due to the CRE and equipment loan relationship discussed earlier. While nonperforming assets and nonaccrual loans were up modestly this quarter, overall problem assets remain at manageable levels and our earnings are sufficient to cover potential reserves while maintaining above-average profitability. Importantly, we made meaningful progress on the specialty CRE relationship we have discussed in prior quarters, meaningfully reducing our exposure and the resulting net recovery for the quarter. In combination with our underwriting standards and reserve position, we remain comfortable with our ability to work through existing credits and manage any broader pressures that could emerge from economic conditions. That said, we are not complacent with recent trends and remain focused on improving credit quality, and we feel good about progress being made across several problem credits as workout strategies continue to move forward. As compared to the prior quarter end September 30, ag real estate balances were up about $6 million, and they were up $21 million compared to December 31 a year ago. Ag production and equipment loan balances were down $26 million during the quarter following our normal seasonal pattern, but are up close to $15 million year-over-year. Our agricultural customers have completed harvest, and we are now in the process of underwriting their '26 operating lines. While weather conditions and heat stress affected yields in certain areas of crops, most producers reported average to above average production across the majority of our acres. Corn and soybean yields were generally solid, while rice and cotton experienced more variability and in some cases, lower yield and quality. Overall, our crop mix remains diversified, led by soybeans and corn with smaller concentrations in cotton, rice and specialty crops. Looking ahead in '26, we expect some acreage to shift away from higher cost crops such as cotton and rice more towards corn and soybeans, given current future prices and input cost dynamics. From a financial standpoint, lower commodity prices and elevated production costs are expected to result in operating shortfalls for a portion of our farm customers from the '25 crop year, with projected shortfalls concentrated among a relatively small number of larger producers. Most borrowers continue to have meaningful equity in land and equipment, and we are utilizing a combination of restructurings, government guarantee programs and conservative underwriting assumptions as we move into our renewal season. Our '26 cash flow projections using pricing that is generally consistent with current futures and FSA assumptions and includes stress testing of borrower cash flow to assess downside risk. Based on our stringent underwriting, including stress commodity pricing and assumed higher operating costs, we anticipate that our borrowers will generally be able to navigate another challenging year and expect satisfactory performance of these credits over the near term. Also this quarter, our ag borrowers will generally be eligible for new Farmer bridge assistance program and later in '26, our borrowers should benefit from higher payments under the ag risk coverage, our price loss coverage programs based on changes to those programs adopted in the One Beautiful Bill in '25. All that said, reflecting our continued prudence given the prolonged weakness in the agricultural segment, we began increasing reserves for watch list agricultural borrowers in the March '25 quarter as part of our ACL calculation. Stefan, would you update us on our financial performance? Stefan Chkautovich: Thanks, Greg. Matt hit some of the key financial items already, but I'll note a few additional details. This quarter's net interest margin of 3.57% was flat compared to the linked September quarter. The NIM included about 5 basis points of fair value discount accretion on acquired loan portfolios and premium amortization on assumed deposits compared to 7 in the linked September quarter and down from the prior year's December quarter addition of 9 basis points. As Matt mentioned earlier, excluding the interest income reversed from the 2 nonaccrual loans, we see the December quarter's run rate net interest margin at 3.63%, which is a 6 basis point increase quarter-over-quarter. This was primarily due to a 16 basis point decrease in the cost of funds as we benefited from our indexed non maturity deposit accounts repricing down through the quarter. These index deposits account for about 27% of total deposits at December 31. Looking ahead to the March quarter, declining interest rates are beginning to pressure loan yields as loans mature with approximately $619 million of fixed rate loans maturing over the next 12 months at rates closer to current origination levels of around $650 million. That said, we continue to see an opportunity for further improvement in funding costs as roughly $1.2 billion of CDs will mature over that same period with an average rate near 4% compared to current originations at approximately 3.6%, which should help support overall spreads. In addition, we are carrying lower levels of excess liquidity, which is somewhat atypical for this time of year when public unit balances and agricultural deposits are usually at seasonal highs. Those inflows have been partially offset by reductions in broker deposits, reflecting our continued focus on optimizing our funding mix rather than building liquidity through higher cost wholesale sources. Year-to-date, broker deposits have declined $53 million, of which $38 million was reduced this quarter. Non-interest income was up 3.1% compared to the linked quarter due to higher wealth management fees as we have benefited from market appreciation of AUM and net new inflows, increased interchange income as the bank benefited from lower issuer expenses, which are netted in this line and deposit account charges, primarily from increased income from non sufficient fund charges and check order fees. Non-interest expense was up less than 1% quarter-over-quarter, primarily due to higher compensation expense, other noninterest expense and data processing expenses. Compensation expense was up in the quarter, primarily due to less deferred loan origination expense and a seasonal increase in paid time off realized. Other noninterest expense increased quarter-over-quarter, primarily due to increased employee travel and training as well as other smaller costs and higher data processing expenses from an increase in transaction volumes and software licensing costs. This was partially offset by a decrease in legal and professional expenses, which were elevated in the September quarter due to $572,000 associated with the use of a consultant to assist in renegotiating a significant contract with a card processor. Looking forward, we would expect to see a quarterly increase in the compensation expense run rate in the March quarter as annual merit increases and cost of living adjustments take effect for which we awarded a mid-single-digit percentage increase, including the cost of benefits. The allowance for credit losses at December 31, 2025, totaled $54.5 million, representing 1.29% of gross loans and 184% of non-performing loans as compared to an ACL of $52.1 million, representing 1.24% of gross loans and 200% of NPLs at September 30, 2025. The increase in the ACL was primarily attributable to additions to individually reviewed loans and net recoveries, which was partially offset by a small decrease in required reserve for pooled loans. As a percentage of average loans outstanding, the company recorded net recoveries of 7 basis points annualized during the current quarter as compared to net charge-offs of 36 basis points during the linked quarter. As Greg mentioned previously, the current quarter's net recoveries and the linked September quarter's net charge-offs were primarily impacted by the specialty CRE relationship we have discussed over the last couple of quarters and accounts for the $2.8 million decrease in provision for credit loss quarter-over-quarter. Our nonowner-occupied CRE concentration at the bank level was approximately 289% of Tier 1 capital and allowance at December 31, 2025, down by about 6 percentage points as compared to September 30 due to growth in Tier 1 capital and ACL outpacing owner-occupied CRE growth. On a consolidated basis, our CRE ratio was 282% at December 31. To conclude, we remain focused on resolving problem loans and further reducing nonperforming assets. This quarter's results with a more normalized provision for credit losses better reflects the company's underlying earnings power, generating a return on assets of just over 1.4%. We are pleased with the strength and quality of this performance. And absent any unexpected deterioration in credit, we believe the operating trends we are seeing today support continued solid profitability as we move into the second half of the year. Greg, any closing thoughts? Greg Steffens: Thanks, Stefan. I would echo those comments and say we are very pleased with the level and quality of our earnings this quarter. The results we delivered reflect the strength of our franchise, the consistency of our operating performance and the discipline of our teams bring to both growth and risk management. While we remain vigilant on credit, we believe our current profitability levels are sustainable, and we are encouraged by the trajectory of the business as we move forward. Importantly, this level of performance continues to build capital, which gives us flexibility to return capital to shareholders while also preserving capacity to fund future growth. Over the last quarter, that allowed us to repurchase shares at attractive levels while still maintaining excess capital to deploy accretively through acquisitions as opportunities arise. With the near completion of our prior share repurchase authorization, our Board approved a new program to repurchase up to 550,000 shares or approximately 5% of shares outstanding. As with past programs, we intend to remain disciplined and opportunistic, deploying capital when our stock meets our internal investment and return thresholds. In addition, since last quarter, we have continued M&A discussions as market conditions have stabilized and general M&A activity has picked up in the industry. We remain optimistic about the potential for attractive opportunities and with our strong capital position and proven financial performance, we believe we are well positioned to act when the right partner is ready. Notably, there are about 75 banks headquartered in our footprint with assets between $500 million and $2 billion, along with a meaningful number of additional institutions in adjacent markets, which provides a broad and active landscape for potential partnerships. In closing, we are proud of this quarter's performance and confident in the long-term fundamentals of our company. Our focus remains focused on disciplined execution, prudent risk management and thoughtful capital deployment, all with the objective of continuing to deliver consistent attractive returns for our shareholders. Stefan Chkautovich: Thanks, Greg. At this time, James, we're ready to take questions from our participants. So if you would, please remind the callers queue for questions. Operator: [Operator Instructions] And we will now have our first question from Matt Olney from Stephens. Matt Olney: I wanted to start off on loan growth. A 2-part question. I heard Matt mention that the loan paydowns this past quarter were higher and part of it was the ag paydowns that were expected. But I also heard Matt mention additional paydowns beyond the ag. So just trying to appreciate if that was a surprise or if that was expected, the other paydowns. And then part 2, I would just love to appreciate any general commentary on loan pricing competition in your marketplace. Greg Steffens: In regard to paydowns, we had several unexpected paydowns that we were not really fully anticipating, but we weren't disappointed to see several of those. One of them was a larger C&I relationship that really had outgrown us that contributed and they moved to a larger bank for their operating lines. But overall, loan prepayment rates have been higher than what we've historically seen. And we should -- basically, we anticipate prepayment rates to be a little higher than historically. Matthew Funke: But we wouldn't say that what we've had in this quarter that was a little unexpected was rate driven necessarily. It was just kind of a mixed bag. Matt Olney: Yes. Matthew Funke: And Matt, as far as competition, treasuries have been bouncing quite a bit here lately. We were seeing some talk in the low 6s, high 5s, expect that to kind of move back a little bit higher for your top flight credit quality. But definitely, there still is some aggressive competition out there. Greg Steffens: We do still feel good about our mid-single-digit loan growth projections for our fiscal year. Matt Olney: Okay. That's great. I appreciate the color there. And then as far as the outlook on the net interest margin, I think I heard Stefan say that, that 3.63% level in December is probably the better run rate to start with. Any more color on where you see the margin in the March quarter? I know we usually see the seasonal headwinds in the March quarter, but I was unclear on the commentary if we should anticipate additional headwinds in the March quarter. Stefan Chkautovich: Thanks for the question, Matt. So we don't give specific guidance on the NIM. But underlying, we do still see potential for increased spread to pick up in the March quarter due to decrease in deposit costs. So right now, on the loan side, they're sort of at breakeven from what we're seeing maturing off versus where we're seeing new origination rates. Matt Olney: Okay. And Stefan, just to follow up there. Does that imply the liquidity build that we usually see will not happen this year or will happen less? Stefan Chkautovich: Yes. We're seeing less impact there. Basically, the inflows that we see seasonally have been partially offset by the decrease in broker deposits. Matt Olney: Okay. That's helpful. And then just one more follow-up on the margin, Stefan. Just big picture, the next several quarters on the margin, it sounds like you still see additional tailwinds to support the margin from current levels, but it sounds like it's going to be much more driven on the deposit cost side and much less driven on the loan repricing side compared to the last year or so. Is that right? Stefan Chkautovich: Yes, sir. That's correct. Operator: Next up, we have Nathan Race from Piper Sandler. Nathan Race: Stefan, I think you mentioned you're expecting to see an increase in personnel costs in the March quarter just in light of the increases that you alluded to. I wonder if you could just put some kind of guidepost around the run rate that you're expecting over the next couple of quarters overall. Stefan Chkautovich: Yes. So I guess just this is just a seasonal adjustment for annual merit increases. So that's in the ballpark of mid-single-digit increase there. Nathan Race: Okay. But otherwise, expecting any major deviations in the run rates? Stefan Chkautovich: Nothing material at this point, just general trend. Okay. Great. And then... Greg Steffens: Historically, we've had annual merit increases in that 4% to 5% range. Nathan Race: Understood. That's helpful. And I appreciate the updated refresh buyback authorization. Can you guys just maybe touch on what the appetite is over the next quarter or so to remain active? Obviously, activity on the buyback stepped up in the second quarter, but I imagine there's a balance there between building capital for additional acquisition opportunities, which hopefully, it sounds like there's some opportunities that could emerge there later this calendar year. Matthew Funke: Yes, we are hopeful that some of those do emerge. As far as buyback activity, we're going to be somewhat price dependent, thinking about how useful it is to deploy the capital there versus retaining it, waiting for a better opportunity. We always look at that as similar to an outside acquisition and what our earn back is on the premium that we're paying there. So we'll be -- we'll continue to be disciplined on that. Nathan Race: Okay. Great. And then just lastly, curious if there's any additional tail to the charge-offs on the commercial real estate loan that we saw in the December quarter here. And just absent maybe any additional recoveries, just how you're thinking about kind of a more normalized charge-off range over the next several quarters? Greg Steffens: We would anticipate being more to historical averages over the upcoming quarters would not anticipate any much of the way of a tailwind behind us. But I think just historical results would be how we did in prior years, not the last 6, 9 months. Matthew Funke: And Nathan, specific to the one relationship, if that's what you were asking about, we don't anticipate anything material further on it. Operator: [Operator Instructions] Moving on, we have Charlie Driscoll from KBW. Charles Driscoll: This is Charlie on for Kelly Motta. Just digging into the margin, wondering your expectations for terminal betas for deposits. I'm not sure if you look at total deposits or interest-bearing, but any updated thoughts on the downward repricing from here, like maybe sizing the impact of cuts. You mentioned the CDs and the index deposits trending downward, which are nice tailwinds. Maybe if you could help piece it together in general. Stefan Chkautovich: Yes. So overall, on the deposit side, we've seen betas around the 40% level. That would probably be something good to use for modeling purposes. Charles Driscoll: Great. Appreciate it. And then you seem optimistic about M&A. You mentioned plenty of banks in your footprint. If you could maybe narrow in on any preference you have for any sort of size and if you're looking for something within your footprint or adjacent, any additional color there would be great. Greg Steffens: We would prefer M&A within our footprint, but if something is right adjacent to us, I mean, that's something we definitely would look at. We look at each one individually as far as what's the underlying performance of the bank, what do we think we can do with it to grow and we look at each opportunity individually and how well does it contribute to our overall shareholder return looking forward. So we will consider either in our footprint or adjacent. It just really depends upon each deal and what they bring to the table on who we more aggressively pursue. Operator: Our questions queue are now clear. I'll hand it back to Matt Funke for final remarks. Matt? Matthew Funke: Thank you, James, and thank you, everyone, for participating. We appreciate your interest in the company. Happy to report on a good quarter for the company, and we'll talk to you again in 3 months. Have a good day. Greg Steffens: Thank you, everyone. Operator: And this concludes today's call. Thank you all for joining. You may now disconnect your lines, and have a great day.
Operator: Good morning, ladies and gentlemen, and welcome to the Resolute Mining Fourth Quarter 2025 Activities and 2026 guidance. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to the Chief Executive Officer, Chris Eger, to open the presentation. Please go ahead. Christopher Eger: Good afternoon, and good morning to all. Welcome to Resolute Mining's Q4 2025 Activity Report in addition to providing some color on our 2025 annual results as well as our guidance for 2026. Today, I'm joined on our call by Gavin Harris, our Chief Operating Officer, who's actually sitting at our Syama operations in Mali as well as our CFO, Dave Jackson, in addition to our Head of Corporate Development and Investor Relations, Matty O'Toole-Howes. So let's dive into it. When looking at our Q4 performance across the business, I'm very proud to say that we achieved all of our targets and have very much stabilized the operations, setting up a very strong foundation for 2026. But when looking at the details, our gold produced was 66,000 ounces, an increase of 6,000 ounces over our Q3 results. A lot of this additional work came from our activities in both Senegal and Mali. Specifically in Mali, we have stabilized the supply chain issues that we talked about at the beginning of last year and throughout 2025, whereby now we've now stabilized our explosive situations and are hitting our targets through the end of the year and into 2026. Mako continues to perform extremely well, and we had a very strong quarter in the last quarter of the year. As a result of the good production across the business, our all-in sustaining costs came in at $1,877, again, a decrease versus our Q3 AISC of just about $2,200. So the difference between the 2 AISCs really results in the fact that we are really managing our costs across the business as extremely and efficiently as possible, but most importantly, with the increase in the production levels. Very also positively, we reduced our TRIFR to 1.87x versus 1.95x in the previous quarter. CapEx came in line at $18 million. But ultimately, what we're most proud of is the fact that we generated close to $86 million of operating cash flows in Q4 relative to $70 million in Q3. So what does this mean from a net cash position for the year is that we ended the year at $209 million of net cash, which is roughly $140 million increase in cash from the beginning of the year. But Q4 was also very exciting for us and the fact that we had some significant developments in Côte d'Ivoire. Specifically, on December 15, we provided an update of the Doropo DFS to the market, which shows the incredible robustness of this project, whereby the NP of the project at $4,000 is just about $2.5 billion. We'll go into more details on the specific activities for Doropo in the upcoming slides, but I'm very pleased to say that this project remains on track, on budget for construction in the first half of this year. In addition, we continue to progress across the portfolio in our exploration assets. And most notably, we introduced a Le Debo MRE at 643,000 ounces at 1.14 grams per tonne. In addition, we started really drilling at the ABC deposit in Western Côte d'Ivoire, achieving very strong exploration results, which I'll go into detail in the coming slides. Across the business, we also are continuing to execute our other strategic projects, most notably in Mali, we're very much on track and on budget with our SSCP project, again, which we'll talk about in the upcoming slides, and we continue to progress in Senegal on the life extension projects. 2025 was an incredibly pivotal year for Resolute as well as a very transformational year for the business. I'm very proud to say that we were able to achieve gold production in line with our guidance of 275,000 ounces to 285,000 ounces with final gold forward of 277,000 ounces. So very much on track to guidance, on production, also on all-in sustaining costs, whereby we ended the year at an all-in sustaining cost of $1,843, which is in line with our revised guidance. Additionally, CapEx came in on guidance at $118 million, and we achieved very strong operational and financial results with EBITDA coming in at $383 million. It is worth noting though that at the end of the year, we finished with quite a lot of gold bullion that we did not sell. So we roughly had 31,000 ounces of gold in inventory that we sold in January, which impacted the EBITDA profile for 2025. With regards to cash flow generation and as it relates to the previous slide, we ended the year with $209 million of net cash, but our overall available liquidity was just over $320 million between our gross cash and access to working capital facilities. So when looking at the business from a qualitative perspective, we're very pleased with all the activities that occurred in 2025 to position the business for continued success in 2026. Most notably, in 2025, we substantially augmented the skill sets of the executive team. We brought new people into the business, specifically a project team in Côte d'Ivoire for the construction of the Doropo project. We also restructured a lot of the principal activities in Mali as a result to some of the challenges that we encountered in 2024. We spent quite a bit of time with different government bodies across the business, and we've been augmenting the relationships that we have with the people in all the different jurisdictions that we operate. We also completed the acquisition of the Doropo and ABC projects in Côte d'Ivoire in May of 2025. This acquisition has set the business up for continued success by becoming a multi-producer West African gold company. We also made significant achievements in continuing the projects that we have in both Mali and Senegal as it relates to the SSCP and [indiscernible] programs, which we'll go into more detail. The other key activity for the business in 2025 was continued focus on exploration as I see this as a pivotal leg to creating shareholder value in the long term. But I'll spend a bit more time in the exploration section as it relates to some of the key activities that we see in 2026. Here's a recap of the organic growth profile for the next coming years. As you can see, in 2025, we achieved 277,000 ounces but as you look to the future, we'll be achieving between 250,000 to 275,000 ounces for the next couple of years as we continue our stockpile processing at Mako, where we start the construction of the Doropo project. So I'm very confident by 2028, we will be on a run rate to achieve 500,000 ounces for the foreseeable future across the business. And beyond that, with the work that we're doing on exploration, I'm very confident that we'll be able to grow the production profile organically through some of the success that we're seeing in the exploration side of the business. So as you can see on the page, we're guiding gold production from 250,000 to 275,000 ounces across the group. That's split between Syama and Mako of 195,000 to 210,000 ounces of gold production out of Syama and 55,000 to 65,000 ounces of gold production out of Mako. Mako is quite straightforward as we're continuing to process stockpiles all through '26 and into '27. However, at Syama, Syama is going to have an interesting year as we will be commissioning the SSCP program, whereby we are going to start processing the majority of the ores to be sulfides as opposed to in the past, a split between sulfides and oxides. But Gavin will go into very specific details about how this transition will occur in 2026. As a result of the high gold price environment, we are seeing our all-in sustaining costs increasing. And so we are guiding our all-in sustaining costs across the group between $2,000 to $2,200, but a significant reason for the increase from 2025 is due to the fact that the royalty expense at today's gold price environment at $4,000-plus is adding quite a bit of expense to our all-in sustaining costs. Capital expenditure for 2026 is substantially higher versus 2025. And as you can see on the page, is between $310 million to $360. Going through the different line items, we will provide some context to the increase in CapEx. So let's start with Syama. Syama is being guided between $110 million to $125 million. But of this number, approximately $40 million relates to the finalization of the SSCP program relative to 2025. In addition, waste stripping is also about $40 million, which is an increase versus 2025 of about $20 million. And that additional waste stripping capital is required in order to further develop the Syama North deposit in order to access higher-grade zones for the future. At Mako, we anticipate that the CapEx will be between $15 million to $20 million with the vast majority of that capital being spent on capital projects at the Tombo and Bantaco projects. Doropo is projected to be between $170 million to $190 million, subject to permitting an FID approval. And most of that CapEx is scheduled to be spent in the second half of the year. But again, we'll go into more detail how we see Doropo being built and expensed in the upcoming slides. And finally, we continue to spend quite a bit of money on exploration as this is a key value driver for the business. And so we expect to spend at least $15 million to $25 million on exploration, predominantly in Côte d'Ivoire, but we are looking to expand our activities in both Guinea and also in Senegal. So with that, let me turn it over to Gavin Harris to walk you through the specifics of each of our assets and our activities in 2026. Gavin Harris: Okay. Thanks, Chris, and good morning and good afternoon to everybody on the call. Starting in Ivory Coast. We've made major progress on Doropo and ABC projects, which we acquired in May last year from AngloGold Ashanti. Doropo is a transformational project for Resolute, one that I was already familiar with as it was originally developed during my time with Centamin. Throughout the second half of 2025, we built out the project team, appointing key positions; the Project Director, the Project Manager and the Project Services Manager. The Project Director, Rob Cicchini, leads this team, which has nearly 100 years of experience building projects in West Africa, Asia and Australia, predominantly with Lycopodium in the past. The long list of projects this team have worked on in West Africa include Ity, Agbaou and Sissingué in Côte d'Ivoire; Houndé, Bissa and Bouly in Burkina Faso; Fekola in Mali, Obotan and Nzema in Ghana and of course, our very Mako mine in Senegal. Moving on to key achievements for Doropo last year. These include the updated mineral resource estimate, which increased by 28%. The release of the updated definitive feasibility study, or DFS, that outlined a larger and longer life operation than the previous DFS by Centamin in 2024. The appointment of Lycopodium Engineering to complete the front-end engineering design or FEED and the issuance of the tender for engineering, procurement, construction management or EPCM, with site visits taking place next week. Progression of permitting saw increased governmental interactions, including multiple visits from the Resolute executive team and a meeting with the Prime Minister. We are waiting for approval for the mining permit. At the end of last year, the permitting process slowed due to elections. With these now over and ministers being appointed this week, we expect the last 2 stages of permitting to progress over the coming months. These stages are, firstly, approval in the Interministerial Commission followed by signature of the presidential decree. The updated DFS released on the 15th of December outlines a significantly larger project compared to the previous version of the DFS with a 55% increase in gold reserves and an extension of the mine life. An updated gold price of $1,950 per ounce has increased total life of mine gold production to 2.2 million ounces over 13 years. Current spot gold price is significantly higher than this, but to manage the time line and permitting, which was submitted using $2,000 pit shells, the updated DFS remains within these confines. Further gold production is anticipated at higher gold prices, which underpins the confidence that the Doropo life of mine could be extended beyond 13 years. We believe additional exploration targets between the main Souwa hub and Kilosegui could add even further mine life. [indiscernible] front capital costs have increased to an estimated $516 million, which reflects updated pricing with a significant inflationary aspect compared to the previous version completed during the first half of 2024. A 25% increase in processing capacity, future-proofing the project, which allows for further modular expansion, an 80% increase to the water storage capacity, a 55% increase in the capacity of the tailings storage facility to meet the additional process tonnages, increased land and livelihood restoration and resettlement costs and the inclusion of some previously admitted items. Financial highlights from the updated DFS at a base case gold price of $3,000 an ounce include all-in sustaining cash cost of $1,406 an ounce, a post-tax net present value of $1.46 billion at a 5% discount rate and internal rate of return of 49%. A payback period of 1.7 years, the payback drops to under a year of $4,000 gold price, and obviously, the gold price is much higher than that right now. Very strong free cash flows averaging over $260 million per year over the first 5 years of production. As I mentioned a moment ago, we see a lot of upside potential at Doropo, and I believe it's going to be one of those mines that simply keeps producing well beyond initial expectations. So the key work streams for Doropo in 2026, which are already underway are focused on maintaining project time lines whilst permitting and the final investment decision or FID takes place. FEED work undertaken by Lycopodium will mean equipment and construction tender packages can be prepared and issued in the first half of 2026. This work will enable procurement of key long lead items to start as soon as FID is approved. EPCM tenders have been issued with a site visit taking place next week. We initiated a competitive bid process with strong interest from world-class engineering firms with proven track records building gold mines in West Africa. The EPCM submission and adjudication will continue throughout the early part of the year, and we plan to award this towards the end of Q2. Site earthworks will start before the wet season to establish access roads and advance the early stages of the water storage and water harvesting tasks, which are key to retaining and providing water during the project construction phase. To facilitate the early work schedule, work will start on the construction of the camp and permanent village to provide messing and accommodation for the construction teams. If we assume that FID is completed by the end of Q1, the project time line has construction starting from midway through Q2 of 2026 with commissioning starting early 2028. The first gold pool is expected to be towards the end of the first half of 2028. Again, assuming the FID is reached by the end of Q1, capital expenditure on the project in 2026 is expected to be between $170 million to $190 million with approximately 75% or $135 million of expenditure during the second half of the year. Expenditure in the first half of the year will include land acquisition and crop compensation for the villages affected by the project. So now we'll move across over to Mali and the Syama operation. Syama delivered 47.2 kilo ounces during Q4, the momentum shift after 2 successive lower quarters, largely due to supply chain issues encountered from the end of Q1. The strong quarter resulted in Syama achieving the lower end of guidance with 176.3 kilo ounces of gold produced at $2,008 all-in sustaining cost, again, within the guidance range. Of note during Q4 was a new ore production record from the underground mine, achieving over 250,000 tonnes of ore in a single month. This underpinned the strong quarter as we use alternative explosive products and supplies to address issues encountered over the previous 9 months. On joining Resolute, I traveled to Mali on the evening of my first day with the company. During this visit, which lasted 3 weeks, it was clear the team on site needed strategic leadership to help with decision-making of the complex operation. We made great progress in this area, and we see further areas of improvement in 2026. Additionally, I spent considerable time reviewing contractor and supplier arrangements to make sure we're receiving the most competitive rates. To address some of the challenges, I carried out a restructuring of the management team in the second half of 2025. This started with the General Manager of the operation. While this restructure took place, I spent 3 months on site at Syama overseeing the operation and implementing a reset to remove historical inefficiencies, also whilst taking advantage of many opportunities that were immediately visible. The team at Syama were bolstered with experienced and seasoned professionals bringing first-hand experience of turning around distressed assets. We conducted an operational review starting during Q3, focused on optimization of the underground assets and cost reduction programs across the whole site. It resulted in a significant drop quarter-on-quarter as these benefits began to hit the bottom line in Q4. You can see this reflected in the all-in sustaining cost of $1,779 an ounce. This review continues today with the new leadership team and with even more opportunities under evaluation that are expected to deliver shareholder value throughout 2026 and into the future. These ongoing measures as a minimum are expected to assist in offsetting inflationary pressures. Full year capital expenditure was just below the guidance range, largely due to the Syama Sulphide Conversion Project or SSCP as we call it, deferring some $5 million of costs with the revised schedule for sulphide processing. This was while we were completing Tabakoroni oxide reserves in Q4. The key supply chain issues revolved around transport of products internally through Mali. The largest effects were on explosive products and fuel that needed government escorts. Currently, fuel levels are stable and to combat the explosive transportation issues we faced, we followed our in-country peers and will construct an explosive manufacturing plant at Syama in 2026. This is expected to increase operational stability and explosive availability across the operation. Whilst I've been on site as Syama stabilized in the operations. Chris, the CEO has been busy working to improve dialogue and build a relationship with the government leasing with the value in Prime Minister [indiscernible] during Q4. During Q4, we completed oxide mining at the Tabakoroni deposit, which lies about 40 kilometers southeast of the Syama processing plant. With nearly all economic high-grade oxide deposits local to Syama exhausted, open pit ore production will focus on the Syama North 821 district for fresh sulphide ore over the coming years. Syama today has a processing capacity of 4 million tonnes per annum. This is split between 2 processing plants. First of which is the 2.4 million tonne per annum sulphide plant which treats the underground sulphide ore. The second, the 1.6 million tonne per annum oxide plant processes open pit oxide ore. The Syama sulphide conversion project started in 2023 as key infrastructure to allow sulphide ore to be processed through the existing oxide plant. The project includes the installation of a secondary crusher after the primary crusher to reduce the harder sulphide which material and transitional or prior to feeding the existing SAG mill, a pebble crusher to deal with scats, which is the oversight of discharges from the existing SAG, a close circuit secondary ball mill to treat cyclone rejects and deliver the correct grind size of flotation. The column flotation cells to recover the sulphide material prior to roasting, 2 additional CIL tanks and a roaster upgrade with a new electrostatic precipitator or ESP, which will increase concentrate throughput by over 15%. All of this will allow for the plant to process sulphide feed whilst maintaining flexibility to still be able to process oxide ore. The SSCP is currently on time and on budget. Stage 1, the oversized pebble crusher and sulphide flotation plant scheduled to be commissioned in Q2 2026. The SSCP will then be able to run at 50% capacity, approximately 110 tonnes per hour during Stage 1. As we move to Stage 2, this focuses on the secondary crusher, ball mill construction and the roaster upgrade. This is scheduled to be commissioned and fully operational in Q3. Once fully commissioned, the throughput capacity is expected to increase to 215 tonnes per hour. Syama production will increase in 2026 compared to 2025, and will deliver between 195,000 to 210,000 ounces of gold at an all-in sustaining cost of between $1,950 to $2,150 per ounce. The gold production is weighted heavily towards the second half of the year, with H1 and H2 representing 42% and 58% of gold produced, respectively. This split is due to the ongoing review and optimization of open pit mining, which will conclude during Q1. As such, mining will be limited to the Syama North A21 waste stripping with the existing appointed contractor. During this time, existing oxide stockpiles will be processed and sulphide ore will be stockpiled ready for SSCP commissioning in Q2. The Syama North A21 open pit is expected to mine 1 million tonnes of sulphide ore averaging 2.3 grams per tonne. H1 will be focused on waste and low-grade oxide stripping before ramping into full-scale sulphide ore production in H2. The underground operation is expected to build on the optimization work completed in the second half of 2025 and deliver over 2.6 million tonnes of ore to the surface. The underground production includes 300,000 tonnes of development ore with total development increasing by 74% compared to 2025 and 8.2 kilometers of underground development plan. The highest grades from the underground will be processed, resulting in an average head grade of 2.4 grams per tonne. The lower grade material will be stockpiled, rebuilding the stockpiles that we've depleted during 2025. On completion of the open pit optimization review, oxide mining will take place during Q2 at the [indiscernible] open pit, completing the oxide high-grade reserves of this ore body ahead of the rainy season. This oxide will be stockpiled whilst SSCP Stage 1 commissioning takes place and will be processed later in the year. The second and third quarters focused solely on sulphide processing and the ramp-up of SSCP during Stage 2. By the middle of Q4, sulphide concentrate stocks will be sufficient to meet the process throughput. And as such, any further sulphide processing in the SSCP will defer ounces to be poured in 2027. As a result, there's an excess capacity on the SSCP to revert back to oxide and add additional ounces while stockpiled concentrate feeds the roaster. Hence, the heavy weighting of ounces in H2 with 12,000 ounces of oxide gold production expected during Q4. The current sulphide plant, which receives ore from the underground mine will process over 2.2 million tonnes in 2026, slightly down from 2025 as a 3-week essential maintenance work program takes place in the second quarter on the primary ball mills and the roaster. Once fully commissioned, the SSCP is expected to lift overall gold production by 5% to 10% from 2026 levels. As oxide resources deplete, oxide production is expected to decrease over the next 2 years with operations transitioning to 100% sulphide processing from 2028. CapEx at Syama this year is expected to be in the region of $120 million. And this is split into 3 main areas: approximately $40 million to complete the SSCP and roaster upgrades, another $40 million of waste stripping in Syama North A21 pit and the underground development and around $40 million comprising of equipment replacements and maintenance within the processing plant and the underground mine and additional tailings storage facility studies and construction. A full life of mine review commissioned in H2 2025 is progressing to increase production in subsequent years. We'll report on this in H2 of this year. So we move across to Senegal now on our Mako operations. The Mako operation in Senegal delivered an outstanding 2025, achieving an upward revised guidance target of 123 kilo ounces at a lower all-in sustaining cost of $1,270 per ounce. The fourth quarter gold production of 18,755 ounces was enhanced by higher than forecast stockpile grades. This strong performance was achieved despite open pit mining activities ending in H1 and transitioning to stockpile material in H2. Naturally, the cessation of mining and processing of stockpiles has seen the overall feed grade decrease over the second half of the year. Processing throughput of 604 kilo tonnes has improved year-on-year, but also quarter-on-quarter with continuous improvement. This means that recovery above 91% is maintained despite a reduction of feed grade to 1.04 grams per tonne and higher throughput rates. This has been achieved primarily by metallurgical testing on course grind sizes and optimization of the gravity gold circuit. All-in sustaining costs have increased in the second half of the year with Q4 all-in sustaining cost of $1,666 per ounce as overall gold production reduces with no higher grade run of mine ore to process, increased royalty payments and noncash stockpile movements of approximately $143 per ounce. Capital expenditure was limited to $0.3 million in the fourth quarter and a total of $2.9 million for the full year. As part of our ongoing commitment to build strong relationships with the governments of the countries in which we operate, Chris also met with the President of Senegal in Q4. The Mako Life Extension Project or MLEP, has the potential to extend the current Mako mine life up to 10 years. The MLEP encompasses 2 main areas, the Tomboronkoto and Bantaco deposits. The exciting discovery of the Tomboronkoto deposit, approximately 20,000 from the Mako mine has a current resource of 377 kilo ounces with average grade of 1.7 grams per tonne. The Tomboronkoto ESIA has been pre-validated by the Senegalese technical agencies and is pending ministerial approval. Importantly, this has been supported and approved by the Tomboronkoto village and surrounding communities. The resettlement action plan or RAP and the DFS is nearing completion and the cutoff date, the point at which no further compensation can be claimed, has passed. A full survey of the affected houses and livelihoods has been completed and is now crystallized for the purposes of this project. The overall process has been completed with detailed approach to stakeholder engagement, underscoring our commitment to regulatory compliance, transparent community consultation and responsible project execution. The application for the Tomboronkoto mining permit will follow the issuance of the environmental permit with all permitting anticipated to be received by the end of 2026, assuming no major revisions are required. When we receive the mining permit, we will have the authority we need to implement the RAP and initiate the village relocation work. We expect detailed engineering to start during Q2 with long lead items procured before the end of 2026. That means mining at Tomboronkoto is scheduled to start in the second quarter of 2028. Two additional deposits are currently being explored at Bantaco. The Bantaco South and Bantaco West deposits have recently published resources totaling 266,000 ounces at 1.1 gram per tonne. During 2025, infill drilling, technical studies and metallurgical analysis work streams were progressed with $4.1 million of capital expenditure on this part of the project. This included progressing the ESIA submission and community engagement activities, which are far less onerous than at Tomboronkoto. 2026 work streams for Bantaco are related to technical studies, additional infill drilling is required and progressing the permitting process. Subject to full economic analysis, Bantaco ore delivery is scheduled to commence in Q4 2027 to bridge the gap between the completion of Mako stockpile processing and the start of ore delivery from Tomboronkoto. Total capital expenditure on the MLEP is expected to be between $10 million to $15 million during 2026. Mako production will decrease compared to 2025 as stockpile material is processed in 2026 and deliver a guidance of between 55,000 and 65,000 ounces of gold at an all-in sustaining cost of between $1,600 to $1,800 per ounce. The all-in sustaining cost increase is a reflection of the lower stockpile grades processed within an inflationary environment, including higher royalties due to the higher average gold prices expected in 2026 and compared to H2 2025. Gold production is slightly weighted to the first half of the year with H1 and H2 representing 52% and 48% of gold production, respectively, although it's important to note that the potential variability when processing stockpiles. 2.2 million tonnes of ore to be processed at an average grade of 0.9 grams per tonne with gold recoveries above 90%. Mako currently has sufficient stockpile low-grade ore to continue processing to the end of 2027, albeit grades will decrease as processing moves through low grade to mineralized waste stockpile. And with that, I'll hand you back to Chris to talk through the exploration activities. Christopher Eger: Thank you, Gavin. And now let's move to talking about exploration. Exploration continues to be very important to the business strategic priorities moving forward. As you can see on Slide 21, in 2025, we spent just shy of $25 million on exploration activities with considerable success. Of that $25 million, roughly $15 million was spent in Senegal, $5 million in Côte d'Ivoire and $5 million in Mali. Some of the key achievements in 2025 was an initial MRE at Bantaco as well as continued exploration activities at La Debo and Doropo. But however, when we look at 2026, we will plan to continue to spend around the same amount of money but to focus more on Côte d'Ivoire versus Senegal as the bulk of the drilling in Senegal has been completed. We will continue, though, in Senegal to spend some money at Bantaco and Tombo with regards to infill exploration drilling, like I said, the bulk of the cash expenditures for this year is going to be focused at Côte d'Ivoire because we see real value at the ABC and La Debo projects. But I'll go to that in more detail in the upcoming slides. The other key area of focus for the business, which has been forgotten about is in Guinea. We do have a number of permits in Guinea, but we have been looking to apply for new permits, and I will be very proud to say that we did receive first reconnaissance authorizations for a number of permits in the Siguiri Basin, which we'll start spending time and effort in 2026. So when I look at the triangle on the right side of the page, this shows that we are developing a proper pipeline to developing the fourth asset within the Resolute business. So again, exploration is core to our success, and we are spending quite a bit of time and effort in developing additional projects within the portfolio. Moving to Page 22. I want to spend a bit more time on our ABC exploration project in the West side of Côte d'Ivoire. When you look at the map, ABC actually is comprised of 4 key deposits. There is a Farako-Nafana permit, which you can see in the very north part of the deposit; the Kona permit, the Windou permit and most recently, the Gbemanzo permit. The bulk of this initial resource is all situated on Kona. That's where you see the $2.2 million of inferred ounces at 0.9 grams per tonne. In Q4 of 2025, we started an excessive drill program across all 4 of those deposits, where we're seeing very exciting results. So the Farako-Nafana permit, which is in the north part, we've got some very exciting drill results support by we saw 1 hole at 31 meters at 2.4 grams per tonne from 13 meters from surface. We also started drilling in Kona to expand that deposits with very strong drill results and this year, the focus will be to drill at least 20,000 meters across the 4 different areas in order to expand this footprint. We are, though, looking to put economics on this project, and we've commissioned a scoping study which we hope will be released towards the end of H1 2026, but possibly to H2 of 2026. So once those numbers are completed, we'll release those to the market. Similar to the ABC project in Côte d'Ivoire, we're also very excited about the La Debo project in Côte d'Ivoire. This is a project that's about 400 kilometers into the northwest of Abidjan, which we acquired in 2024. So we spent quite a bit of time and effort in 2025 drilling out this deposit, and we had a very successful MRE of about 643,000 ounces at 1.14 grams per tonne that was issued in Q4, and that was after 16,000 meters of drilling completed in 2025. When you look at the map on the right side, the resource is focused on the Northeast area of the deposit in the G3S and in G3N zones. Those zones show gold that continue at depth and at strike. And so in 2026, we will start doing a bit more drilling to prove out the size of that deposit and continue to expand. We also see some interesting anomalies at the G1 area, which is kind of in the middle. And so we're going to be spending time drilling that deposit out as well. So the goal is to try and make us to at least 1 million ounces but also is very similar to ABC, we will be looking to implement a scoping study report towards the end of H1 2026, possibly into H2, which will demonstrate the economics of this asset. So look, in summary, I do believe that between Le Debo and ABC, we have been making for a fourth asset -- fourth producing asset, I should say, within the Resolute portfolio. So with that, I'll turn it over to Dave Jackson to go through the financial summary. Dave Jackson: Thanks, Chris. Today, I will walk you through the Q4 and full year headline financial results highlighted in the key performance metrics. Overall, we ended the year strong, and our Q4 metrics were in line with expectations. We continue to strengthen our balance sheet and build cash in the business. Looking at the financial highlights. Our year-to-date EBITDA was an impressive $383 million, which was a substantial increase from the $319 million reported in 2024. This performance was underpinned by revenue of $863 million generated from the sale of 259,000 ounces of gold at an average realized price of $3,338 per ounce. As previously noted, Resolute remains fully unhedged and continues to sell all of its gold at spot prices. At quarter end, net cash stood at $209 million, marking a $72 million increase from Q3. Included in the net cash figure is $135 million of unsold bullion, representing nearly 31,000 ounces of gold that were sold shortly after the quarter closed. We had $57 million drawn on overdraft facilities at quarter end. These facilities continue to be used locally to optimize working capital. Currently, the group has in-country overdraft facilities of approximately $113 million available as we continue to maintain financial flexibility for the group. The group all-in sustaining cost for Q4 was $1,877 per ounce, which represents a $328 per ounce decrease from Q3. This decrease was primarily driven by the expected increase in gold production at Syama. At Syama, specifically, the all-in sustaining cost was lower than Q3 due to higher production and lower sustaining capital expenditure. As already mentioned, we have successfully navigated the supply chain disruptions in Mali, which resulted in Q4 being Syama's second strongest production quarter in 2025. Let me now walk you through the key components of our cash flow summary that led to the net cash position of $209 million at the end of Q4 on our next slide. We generated a solid $86 million operating cash flow during the quarter and $314 million for the full year. This was a substantial increase from the comparable periods in 2024 and is mainly attributed to the increase in gold price throughout the year. CapEx totaled $118 million for year-to-date. This includes $24 million spent on exploration, $70 million in project capital across Syama and Mako and $24 million spent on the SSCP. Overall, CapEx and exploration spend were within guidance. As previously noted, we made the initial $25 million payment for the acquisition of the Doropo and ABC projects during Q2. These projects represent exciting growth opportunities for the company and are expected to deliver meaningful long-term value for our stakeholders. VAT outflows in 2025 totaled $66 million across Mali and Senegal. We are pleased to say we obtained $34 million of VAT mandates in Senegal in 2025, which were used to offset government payables However, VAT remains a source of cash leakage in Mali, and we continue to engage actively with the local government to recover these amounts. Our recent discussions have been positive, and we remain encouraged by the progress being made. Moving to working capital. We recorded a $29 million inflow for the year-to-date. This was driven by a $6 million reduction in consumable inventory across the group, a $10 million reduction in stockpile balances at both Syama and Mako and a $13 million change in supplier payments, which are settled in the normal course of business. Our ending cash in bullion was $266 million and marks a $165 million increase from the beginning of the year. This leaves us with ample available liquidity of over $322 million at the end of December. As noted on our last call, we have a stake in Loncor gold worth approximately $31 million, which is currently being sold. We expect to receive these funds in Q1 this year, and we expect no tax impact on the proceeds once received. Supported by a strong cash position and ample liquidity, the company is well placed to fully fund its 2026 capital expenditure requirements, including Doropo, through existing cash balances and the anticipated strong cash flows in 2026. We are currently in discussion with debt providers to secure additional capital for the Doropo project, which we are expecting to be finalized in 2026. The timing to secure any financing will not impact the Doropo time line as we expect to begin construction as soon as the permits and FID are obtained. In summary, we're in a very solid financial position and are excited about the growth potential of the business. With that, I'll hand it back to Chris. Christopher Eger: Thanks, Dave. And look, just a couple of more slides to wrap up the story. First, let's start on Page 28, which has qualitatively highlights some of the key milestones we're expecting in the next few years. Let me just focus on 2026. So going first and starting in Cote d'Ivoire, the most important is we expect to get the mining permits and FID for the Doropo projects in the coming months. And that will then obviously formalize and kick off the construction period for Doropo. But I think as provided by Gavin, we're not slowing this down, and we believe we have the financial resources to execute the construction of the project without missing a beat and initiating full construction and initial commissioning in the beginning of 2028. In addition, we're going to provide economic studies on both Doropo and at ABC. Moving to Mali, we will be commissioning the SSCP and transitioning to almost 100% sulfide production and completing an optimization study. And then when looking at Senegal, the key activities revolve around permitting of both Bantaco and Tombo projects. So we anticipate that we'll kick off those permitting applications in 2026, and we'll keep the market updated. So we have a lot on our place. We're very excited about what we're doing. We also see tremendous opportunities to continue to drive cost reductions across the business and continue to develop and build our relationships with the governments where we operate. So in summary, again, very proud of what the business achieved in 2025. We achieved our production guidance. We managed our costs across the business. We generate a substantial amount of cash flow in the business although with the support of the rising gold price environment. But most importantly, we executed our strategy of becoming a geographically diversified producer through the acquisition of the Doropo project in Cote d'Ivoire. We also made substantial improvements in exploration by focusing this as a key strategic priority for the business. I made a number of executive changes and augmented the skill set of people within the business, which is incredibly important to any mining operation. So with all the pieces that we put in place, I'm very confident that we'll have a very successful 2026. But most importantly, we're well on track to becoming a 0.5 million ounce producer from 2028. So with that, I will turn over to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Justin Chan with SCP. Justin Chan: My first one is just maybe just clarifying the explosive situation in Mali. I read that you're planning to put it in an emulsion plant and that the explosives are no longer an issue. And I was just wondering, I mean, a bit more detail. Do you have a stockpile now? And then what's the timing on the plants? And can you just give us a bit more color on that situation and I guess, how it evolves through the year? Christopher Eger: Thanks for the question. Maybe just easier, I'll just turn over to Gavin, and he can probably give a bit more color than I would. Gavin Harris: Yes. Thanks for the question. So basically, our strategy at the moment is the explosives that are coming into site has to be escorted in by the Mali and government forces, obviously, given the security situation in Mali. What's been happening is the government have been in talks with our team in country to effectively set up a grade to support the mining operations. So we're seeing a lot -- we're getting a lot more exports into the site now. So currently, the stocks on site are good enough for us to continue production and obviously be a little bit more relaxed in terms of the issues that we have had previously. But further to that, we have been in discussion with different suppliers to effectively build their own plants on site to be able to produce the products we need going forward. So we have had a successful discussion with two suppliers on that, and we're waiting for final proposals to come in ahead of building these, but we expect these to be constructed within 2026. And obviously, bringing in raw materials that are precursors to explosives will not be subject to the scores from the government, which makes things a lot easier. So that really should solve that issue that we've had with explosives throughout 2025. Justin Chan: Got you. So perhaps to paraphrase, so the near-term issue is resolved because you have these convoys that are more frequent and the supply frequencies increased and then the emotion plant is more of a longer-term solution, but timing on that in 2026 is to be determined. Gavin Harris: Yes, exactly. That's a good summary. Justin Chan: Okay. Perfect. And then maybe just on Mali more broadly, I mean, there's been a couple of major developments, the Barrick coming to an agreement with the government on Loulo-Gounkoto. And then I mean, there was a lot of press on the fuel blockades, et cetera, around November last year. It seems like that situation has improved quite a lot. It sounds like. And I'm curious on the situation with Barrick coming to an agreement with the government. I think four companies are having a hard time implementing their already agreed terms just because the government was preoccupied. Maybe could you give us an update on what you're seeing in the country on both those fronts? Christopher Eger: Yes. So Justin, I think, look, what we see is similar to the others that the mood has changed dramatically versus 2024 and a lot more positive and constructive. We do believe the situation with Bayer coming to resolution is good for the industry and good for Mali. I think the government understands what has happened and why and are trying to work with the remaining operators to try and keep it more stabilized. There was obviously a bit more noise on security at the beginning of Q4 that we've seen kind of reverse. So it's -- unfortunately, it's a bit more of the same. We are continuing open dialogue and constructive dialogue with the government and trying to educate them on how we can work together for future investments. That's why we're doing the Phase II studies that we work with the government. Demonstrate that I know if we can work together, we think that there's growth in our business. But unfortunately, a bit similar to 2025, I'm still cautiously optimistic. We're still very cautious that we need to see a bit more signs of reversals. One of the key activities that we have not been receiving or VAT refunds back. And I think that's a key milestone that needs to be achieved for future investments. But generally, the mood is much more positive and continues to head in that direction, but it's still delicate. So look, I would say, just a summary, security is probably in good shape. And as fuel hasn't been an issue because we're working very closely again with the government to get the convoys and for our mines to be fed, which has been not impacted, but it's still delicate. Justin Chan: Got you. I appreciate that. That's really helpful color. And just one last one, I'll free up the line. Just clarifying with regards to the CapEx and exploration at Mako this year. So the $10 million to $15 million quoted in CapEx, that's for studies and that's independent of the exploration budget for Mako this year? Christopher Eger: That's correct. The bulk of that is study work. We will do, like I said, a bit more drilling on Bantaco, less on Tombo because we've pretty much completed that. And look, we'll spend more -- if we find more areas to explore and to expand on. But the key is to get the studies completed so that we can file for mining applications. And then depending on how we see our cash needs in '27 and '28, we may open up a bit. We're going to also look -- we have two other deposits in Senegal, Sangola and Laminia, and we're going to do some work there. But with the resources we have, we're going to focus more in Cote d'Ivoire. Justin Chan: Okay. Got you. And that will be primarily studies, it's not for, say, early site works or relocation. Christopher Eger: There is some capital towards the back end of this year, depending on the timing of -- if we receive the mining applications towards the end of the year, we'll start doing some, we'll call it, early site works and mostly it's around the wrap the relocation process at Tombo. So there's probably about $3 million to $4 million anticipated in Q4 assuming we get exploitation permits coming in as expected, but that may change and get pushed into '27. Operator: Our next question comes from the line of Casper [indiscernible] from Berenberg. Unknown Analyst: I just had two quick questions. At on the CapEx at Syama this year. I just wanted to ask how we should think about that CapEx going forward after this year's $170 million to $190 million spend? Christopher Eger: Yes. So it's a good question because I know it's higher this year because we have decided to put a bit more capital into effectively into the plant because look, the plan is 30-plus years, and obviously, we need to do a new TSF. So that's why there's additional, call it, $40 million of what we call capital projects that is probably more of a one-off. I would say next year, 2027 will be probably closer to $30 million. And then look, we have, like I said, more than $40 million this year on waste stripping with a lot of that, half of it being new stripping at the 21 Syama North Zone. So I'd say, look, moving forward, the run rate CapEx is closer to $30 million to $50 million. So probably a bit on the higher end for '27 and then it will start to stabilize in that $30 million to $40 million thereafter. Unknown Analyst: Okay. Great. And just as a follow-up, why -- I just wanted to ask why sales at Syama lagged production volumes in Q4? And did they get sold in early Q1? Christopher Eger: Again. So look, in summary, we had just about 30,000 ounces of gold volume, 31,000 to be specific at the end of the year. It has to do with the fact that the 31st of December was on Wednesday, and we tend to ship our gold on Fridays. And so we have built up stock around 2 weeks' worth of stock. So all of that gold was then shipped effectively in the first 10 days of January. So look, we'll have -- that was a key impact to the lower EBITDA versus overall guidance. It's just that some of those gold sales were pushed into January, which will impact the '26 numbers. Operator: Our next question comes from the line of William Jones with Canaccord Genuity. William Jones: And congratulations on a pretty good quarter. Most of my questions have been answered. But maybe just one on trying to understand the grades going through the plant at Syama post '26. So I know you quote sort of a 5% to 10% step-up. I gather that is grades are going to be impacted just by oxide feed. So just if you could provide some color on those -- the grade of those oxide stocks going into the plant over the 2 years and if that will step up towards the reserve grades once those stockpiles are used, probably firstly. And then secondly, just a bit of the strategy around utilizing those stockpiles. Christopher Eger: Thanks. Maybe, Gavin, over to you on that one. just obviously as we're reviewing the mine plans... Gavin Harris: Yes. Thanks for the questions. Look, on the Syama grades, obviously, the sulfides that we're seeing are reasonably good grades coming out of that Syama North A21 district, and we expect those to improve as we go forward. They're sitting around sort of 2.3 at the moment for this year. There will be ups and downs in that as we go through the mine life, but we think reasonably around 2 grams per tonne is acceptable for what we'd be looking at, at the moment. And then the underground, realistically, the grades will drop off towards the end of the mine life. But certainly, over the next few years, they're sitting around that sort of 2.4 gram per tonne as we go forward. William Jones: Okay. And then just interested on -- look, I appreciate how much you can say on this, but how you're thinking about the funding or capital stack for Doropo? And is there any target leverage perhaps that you're thinking of? Christopher Eger: No, it's a good question, and it's an evolving question, to be honest, because of the cash flow generation that we're generating in the business. So as you saw from Dave, we have today over $300 million of liquidity. At today's gold price environment, we're generating anywhere from $30 million to $50 million of fresh cash every quarter. So that puts us in a very strong position to actually fund the bulk of the CapEx with our own resources. But we think it's prudent to put in some debt and because we will need some cash in the future for the MLEP program. I would say we're looking at kind of a 50-50 target split between equity and debt, but it may be a bit more equity depending when I say equity or cash versus debt. It all comes down to the cost of capital net debt. But what's really important to us because of the cash flow generation of the business, and we're not a developer is that we put in a debt facility that's very flexible that allows us to pay that back quite quickly without too many penalties and costs. And look, we've been innovated with term sheets for funding of Doropo because of the attractiveness of the project and where it's located in the world. But again, similar to what Dave said, we're working through these. So we're not in a rush because we have quite a -- look, everything is going on track as we expected, and we'll probably look to put something in place towards the end of H1, maybe into early H2 because in any case, we'll be using our cash to fund the front end of the project. Operator: [Operator Instructions] Our next question comes from the line of Richard Knights with Barrenjoey. Richard Knights: Just one on ABC. It feels like it's a bit of a sleeper in the portfolio. You mentioned there's a scoping study that you're targeting to get out in H2. How quickly do you think you could turn that around into a DFS and ultimately an FID decision? Christopher Eger: Look, I think realistically, that would be towards the back end of '27. And look, and I agree with you, it is a bit of a sleeper in the group. It's a fantastic asset, and it's a very large footprint that we have. So look, depending on the economics of the scoping study, we can try and fast track it, but there is infill drilling that needs to be done. And because there's various deposits on the permit, we would need to think about where we would start and how we would kind of build that line because it's a good problem to have, but they are different -- the ore bodies are quite different in each of the different zones that we have. So we just need to understand that a bit better. But we see significant strategic value in ABC and how it's continuous with other deposits in the area. So there's definitely a mine at ABC that will be built at some point in time. Richard Knights: Yes. Okay. And maybe -- sorry, just one more on Doropo. The $170 million to $190 million of CapEx you're targeting for this year. I'm assuming all of that comes out of the $516 million total CapEx bill for the project? Christopher Eger: That's correct. Operator: At this time, we have no further questions. This concludes today's call. We would like to thank everyone for their participation. You may now disconnect your lines. Have a nice day.
Operator: Good morning, ladies and gentlemen, and welcome to the Currency Exchange International Q4 Year-end 2025 Financial Results. [Operator Instructions] Also note that this call is being recorded on Thursday, January 22, 2026. And I would like to turn the conference over to Bill Mitoulas, Investor Relations. Please go ahead, sir. Bill Mitoulas: Thank you, Sylvie. Good morning, everyone. Welcome to the Currency Exchange International conference call to discuss the financial results for the fourth quarter and 2025 fiscal year. Thanks for joining us. With us today are President and CEO, Randolph Pinna; and Group CFO, Gerhard Barnard. Gerhard will provide an overview of CXI's financial results, his latest perspective on the company's operations and Randolph will then provide his commentary on CXI's strategic initiatives, sales efforts and business activities, after which we'll open it up for your questions. Today's conference call is open to shareholders, prospective shareholders, members of the investment community, including the media. For those of you who may happen to leave the call before its conclusion, please be advised that this conference call will be recorded and then uploaded to CXI's Investor Relations website page, along with financial statements and the MD&A. Please note that this conference call will include forward-looking information, which is based on a number of assumptions, and actual results could differ materially. Please refer to our financial statements and MD&A reports for more information about the factors that could cause these different results and the assumptions that we have made. With that, I'll turn the call over to Gerhard. Gerhard, please go ahead. Gerhard Barnard: Good morning, Bill, and thank you, everyone, for joining today's call. My overview of the company's performance, CXI will also include the results of the discontinued operations of Exchange Bank of Canada, or EBC. These results are presented in U.S. dollars. As a reminder, on February 18, 2025, the group announced its decision to discontinue the operations of it's wholly owned subsidiary, Exchange Bank of Canada. Now EBC ceased operations as of October 31, 2025. And on December 19, EBC issued its year-end audited financial statements to its regulators. EBC has formally applied to OSFI to recommend approval from the Minister of Finance for the discontinuance from the Bank Act. Following final regulatory approval, management and the directors will liquidate the remaining assets and liabilities and distribute EBC's net assets to CXI, its sole shareholder. Management anticipates that all required regulatory approvals for discontinuance will be granted during the second quarter -- second fiscal quarter of 2026. Now starting the second quarter of 2025 and following the Board's decision to discontinue the bank's operations, the group updated its financial statements presentation to present continuing and discontinuing operations separately in accordance with IFRS accounting standards. Therefore, included in the group's financial statements are the results of the U.S. or United States operations, that's CXI, which is under continuing operations and the results of Exchange Bank of Canada, EBC under discontinued operations. Before we go into the detail of the various results, I'd like to note that the group measures and evaluates its performance using several financial metrics and measures, some of which do not have standardized meanings under general accepted accounting principles or GAAP and may not be comparable to other companies. We call these measures non-GAAP financial measures and/or adjusted results. Management believes that these measures are more reflective of its operating results and provide a better understanding of management's perspective on the performance of the company. These measures enhance the comparability of our financial performance for the current period with the corresponding period in 2024. Management included a full reconciliation of the key performance and non-GAAP financial measures in the MD&A. I think it's Page 24, 25. When we refer to reported results, we refer to results as reported in the financial statement based on IFRS, the audited results. Whether we refer to adjusted results such as adjusted net income, we refer to performance non-GAAP measures. Now the group reported net income of $10.3 million for the year ended October 31, 2025, an increase of $7.8 million or 317% over the prior year with yearly revenue growth of 5%. This 2025 reported net income reflected $14 million of net income from continuing operations at CXI and a net loss of roughly $3.7 million from discontinued operations, Exchange Bank of Canada. Reported unadjusted results for the continuing operations included nonrecurring items restructuring charges, roughly $300,000, $400,000 related to the closure of CXI's Miami vault and about $200,000 related to the discontinued operations in Canada. Now it is important to note that the reported results of the prior year 2024 included nonrecurring items related to the discontinued operations and represented impairment losses, regulatory compliance charges, other tax items, and that totaled $7.7 million. Now excluding restructuring and nonrecurring charges, adjusted net income from continuing operations increased to $14.5 million, a 10% increase, and the group's adjusted net income increased to $10.8 million, an increase of 6% -- the group's adjusted diluted earnings per share increased to $1.77 or $1.77, which is a 14% increase over the prior year. Now certain operating expenses and personnel costs previously shared with EDC were fully assumed by CXI during the year. The annualized estimate of these costs, we call the stranded costs, was initially approximately $3 million after tax. However, it is now expected that the actual figure will be closer to 90% of this original estimate once the full 12-month period has been completed. With that, here is a summary of our current fourth quarter's results compared to the same quarter in 2024. Revenue grew to $19.8 million, up by $1.4 million or 8%. Operating expenses increased to roughly $13 million, up by $743,000 or 6%. So revenue up 8%, expenses up 6%. Reported EBITDA grew to $6.4 million, roughly 4% and adjusted EBITDA grew to $6.8 million by close to $0.75 million or 10% over last year. Adjusted group net income grew to $3.3 million or by close to $0.5 million or 19% as a result of restructuring charges related to the closure of the Miami vault and charges related to EBC discontinued, which were partially offset by a recovery related to the judgment by the Federal Court of Canada, which reduced EBC's administrative monetary penalty by $1 million or CAD 1.4 million as agreed by both parties. Revenue growth was driven by 31% growth in the payments product line, 17% of CXI's total revenue is now from payments and a 4% growth -- in the banknotes revenue, 83% of CSI's total revenue is in the banknotes product line, primarily through direct-to-consumer channels. Now payments grew $800,000 or 31% of -- and it's roughly 17% of the total revenue. This growth was supported by a 40% increase in business trading volume and almost $2.1 billion due to the increased activity from existing financial institution customers and the onboarding of new customers. So that trading volume literally up 40% in this quarter. Wholesale banknotes revenue remained fairly flat year-over-year, presented roughly 40% of our revenue. Trading volumes declined slightly due to the impact of the U.S. federal government shutdown in October 2025, impacting several airports across the nation as well as a slowdown in inbound international travelers, especially from Canada. This slowdown of inbound international travelers has been substantially offset by an increase in outbound travel by U.S. citizens to Europe and Asia. Now let's look at direct-to-consumer banknotes revenue growth of roughly $600,000 or 8% and DTC represents 43% of our total revenue, with growth mainly in the online FX platform due to the increased demand for exotic foreign currencies. During the current quarter, CXI added South Carolina to the states in which CXI's online FX platform operates. Added more than 51 new non-airport agents in several locations and opened a new company-owned branch in New York. Now the following is a highlight of the operating expenses from continuing operations for the fourth quarter of 2025 compared to the prior year's fourth quarter. As I mentioned, CXI's operating expenses increased by roughly $0.75 million or 6%. Variable cost, postage shipping, bank charges, sales commission and incentive compensation totaled $3.4 million, an 8% increase, mostly attributable to shipping costs and bank service charges, partially offset by a decrease in variable compensation costs. Salaries and benefits remained fairly flat compared to the previous quarter, primarily due to general inflationary adjustments. This increase was partially offset by a reduction in headcount resulting from the closure of the Miami vault. Now bank service charges are related to processing payments and banknote transactions with the majority arising from the payments product line, where we realized 40% increase in volume. During the current quarter, CXI fully transitioned its check clearing and payment processing activities away from EBC, eliminating the use of EBC's correspondent bank for such transactions. As a result, 100% of CXI's bank fees for the current quarter were reported in continuing operations. Now in the same period last year, bank charges incurred through EBC's correspondent banking relations were reported under discontinued operations. So you can see a bit of a change there and where we reported it. This transition accounted for roughly $150,000 of the variance reported above, and you'll see the variance in the financial statements and the growth in that cost. The remaining difference was primarily attributed to the 40% significant increase in payment transaction volume and the associated processing costs compared to the prior year. Marketing and publicity efforts grew mainly, and there, we spend a lot of money on growing this marketing and publicity mainly because of CXI's strategic emphasis on target marketing initiatives, comprehensive campaigns, retail investments and the development of our customer referral programs. To align with our corporate objectives, partially supporting the growth of the direct-to-consumer business line. Online FX, DTC marketing campaigns were on Instagram, and social media, really making sure we get the word out. Restructuring impairment charges represented the closure of CXI's Miami vault, and that was roughly $400,000 and impairment charges of assets related to some of our company-owned branches of close to $270,000. Now interest revenue generated from excess cash holdings is noteworthy at the end of October 31, 2025. CXI maintained nearly $25 million in AAA-rated money market funds compared to 0 in the prior year. This was supplemented by interest earned on other investment-bearing bank accounts in the ordinary course of business. The increase in interest income reflects a substantial rise in available excess cash attributable to the decreased working capital requirements as a result of EBC's discontinuance and a well-executed exit plan. Income tax expense in the current quarter reflected an effective tax rate of roughly 18%, where the majority of the decrease below the statutory rate was reflected -- related to the tax benefit from a large amount of stock options exercised during the current quarter and accounted for roughly 9% of this effective tax rate. Now let's look at the year. Summarizing the results of the group for the year 12 months ended October 31, 2025, compared to 2024. Revenue grew to $72.5 million, up by about $3.5 million or 5% and expenses only grew by 3% or $1.2 million to a total of $48.5 million. That gave us net income from continuing operations that grew to $14 million or close to $1 million, $800,000 or 6%. Now reported EBITDA grew to $23.3 million, up $1.6million or 7% and adjusted EBITDA grew 10% to $24 million compared to the previous year, up by $2.2 million. Now it's important to note that adjusted reported group net income, as I said, grew to $10.8 million. That's an increase of $600,000 or 6% as CXI's restructuring charges related to the closure of Miami as well as some legal and advisory fees were adjusted as nonrecurring items. This is for the year now. Now looking at the group's results, EDC's adjusted adjustments almost netted out with recovery from the Canadian Federal Court's judgment reducing EDC's administrative monetary penalty, resulting in a benefit of USD 1 million, together with a net gain related to the lease terminations of roughly $360,000. These benefits were partially offset by severance costs, nonrecurring legal and advisory charges of $650,000 as reported in net discontinued operation results. Now let's look at continued operations consolidated performance for the year compared to the prior year. For the year, the revenue growth was driven by 19% growth in payments product line and a 3% growth in banknotes revenue, primarily through, as mentioned, for the quarter as well, the DTC channels that we have. Now payments revenue grew an impressive 19% or $2 million. As I mentioned, it's now 17% of our total revenue. The growth was supported on a yearly basis by a 31% increase in trading volumes. For the quarter, that was 40%. For the year, we're at 31% increase in trading volumes, primarily from new customers and a slight increase in volume from existing customers to almost $6.7 billion, up from $5.1 billion a year ago. Very proud of the team there. Wholesale banknotes revenue maintained relatively flat year-over-year, representing 42% of the total yearly revenue. Revenue growth came from both existing and new domestic financial institution customers with declining volume from monetary services businesses and international financial institutions. Our international travel levels were generally lower than last year, offset by an increase, as mentioned in the outbound U.S. travel to popular destinations in Europe, Asia and Mexico. Consumer demand for euros and Mexican pesos drove growth, while the Canadian dollar volumes remained lower. DTC direct-to-consumer banknotes revenue grew by $1.1 million or 4%, and that represents 41% of our yearly revenue with growth mainly from our online FX platform due to the increased demand for exotic currencies and the addition of 3 new states during the year. At October 31, 2025, CXI had 39 company-owned branch locations and operated in 50 airport agents, 3 more locations compared to last year, and we had 468 non-airport agent locations, almost 245 more locations than the prior year. The following is a highlight of our operating expenses for the continuing operations for the year. CXI operating expenses increased by $1.2 million or 3% year-over-year. Now that's an important number because variable costs posted shipping, bank charges, sales commission and incentive compensation totaled $11.8 million, only a 1% decrease due to a slight decline in variable compensation cost. The ratio comparing total operating expenses to revenue for the current year improved to 67% compared to 69% last year. Now stock-based compensation declined due to a 5% decline in share price throughout the year in comparison to last year where the share price grew roughly 25%, which in turn reflected the increase in debt expense last year. Foreign exchange gains for the current year were primarily driven by the U.S. dollars depreciation against major currencies during the second quarter and the first half of the third quarter. The euro and British pound strengthened notably against the dollar, while the Mexican peso recovered from early year weakness, contributing to the favorable revaluation of banknotes holdings. Gains on euro and a basket of unhedged currencies exceeded losses on Mexican peso inventory for the year. Foreign exchange losses in the same period in the prior year were largely driven by the weakening of the Mexican peso against the U.S. dollar compounded by higher overall hedging costs. Now let's look at discontinued operations related to Exchange Bank of Canada, where the bank had a net loss of $1.1 million in the fourth quarter of 2025 compared to a loss of roughly $6.1 million in the same period last year. For the year, the bank added a net loss -- the bank had a net loss of $3.7 million compared to a net loss of $10.7 million for the same period in the prior year. That's where all those adjustments and write-offs happens. Diluted loss per share from discontinued operations was a loss of $0.18 for the fourth quarter and a loss of $0.61 for the year compared to $0.97 and $1.70 for the same 3- and 12-month periods in the prior year. Once final regulatory approval has been obtained, the Board of Directors, as I said, plan to liquidate the remaining assets and liabilities of EBC and distribute those net assets to CXI, its sole shareholder. As of October 31, the net assets directly associated with the disposal group, EBC, were approximately USD 5 million. Now let's review the balance sheet at year-end. Due to the company's business being subjected to seasonality, CXI uses a 12-month trailing net income amount to calculate ROE, which has been relatively consistent at 13% over the last 12 months and includes the discontinued operations results. CXI had net working capital of $73 million and a total equity of $85 million and 100% available unused line of credit amounting to $40 million. As indicated on Page 22 of the year-end financial statements, CXI reported a cash balance of $95.5 million. Additionally, approximately $5 million, as I mentioned, is held in EBC, resulting in a total cash position slightly exceeding $100 million. Now it is important to note that cash serves as CXI's primary product. It is our widgets, primarily used for transactional activities within the banknote segment. CXI had $53.2 million cash held in the form of banknote inventory in transit in vaults, tolls and on consignment locations at year-end. CXI maintains cyclical banknote inventories with optimal levels ranging from $50 million to $70 million, depending on the travel season. Now cash deposited in bank accounts totaled $42.2 million. This total $42.2 million includes the $25 million of excess cash designated for investment purposes. So that's the $25 million that we had at the end of the year in AAA-rated money market funds. The remaining balance of this $42 million is comprised of minimum cash reserves maintained by CXI in bank accounts with select banking partners to support our banknote settlement operations as well as operating cash balances corresponding with customer holding accounts. Maximizing shareholder returns through share buybacks under the normal course issuer bid, NCIB or share buyback continues to be a primary objective. Over the past year, CXI acquired or acquired and canceled 312,300 common shares at prevailing market prices on the TSX totaling $4.75 million. On November 26, 2025, the TSX accepted CXI's notice of intention to make another NCIB and an automatic share purchase plan to purchase for cancellation, a maximum of 360,000 common shares, representing 10% of the company's public float as of November 18, 2025. As of yesterday, CXI purchased for cancellation approximately 170,000 common shares. Now at this time, I will turn the call over to Randolph Pinna, our CEO, to provide his perspective. Thank you, Randolph. Randolph Pinna: Thank you, Gerhard, for the detailed review. And thank you, everybody, for joining, especially those out West since I know it's quite early there. To give you guys time to ask questions, I'm going to try to keep this as short as possible, but I do want to highlight the main things from my perspective, please. So to begin with, as usual and top of mind is Exchange Bank of Canada's discontinuance. As you know, we executed on a discontinuance plan to the point where we are now, which is we have closed all operations last fiscal year. We took care of all the employees. So there -- most of them have all found new homes. All of our customers have been referred to the 2 referral relationships we have and the feedback has been good that the customers have switched and they are trading with those new providers. So therefore, in layman's term, I would say we're pretty much done. and we're just now waiting on the paperwork final process. But all dealings with regulators, employees, customers has all been satisfied, and it is just now in the final approval process for full discontinuance and our complete exit from Canada, which is expected in this second quarter that we're now just starting. Turning and my focus has been now 100% on CXI. And by the way, on Exchange Bank, I do want to just do a hats off to Katie Davis, our CFO of the bank and our Group Treasurer, who led the execution of that detailed discontinuance plan to a key. And I want to thank all of the parties, both regulators, employees, legal advisers, everyone involved for their contribution to sticking to the plan so that we can discontinue as expected. So back to CXI. The main business, as we all know, is banknotes. And I will address that at a high level after I just covered the consumer unit and the wholesale unit and what we're doing. The consumer unit is what has shown continued growth primarily because of our e-commerce channel. We now have the ability to deliver currency to homes or businesses in 46 states, representing over 93% of the entire U.S. population. We see tremendous growth in this. In fact, we've done a survey -- a qualified survey confirming that there is a huge upside potential to continue to be able to sell currencies across America, and this will remain a focus. We are also continuing to have brick-and-mortar stores. Some of our stores are very good, and we've identified new stores like in New York, Carolina and others to be announced. We will continue to invest in our direct-to-consumer business by adding agent locations. As you saw and Gerhard pointed out, we've grown our agents -- non-airport agents from 225 to 468, and we see a tremendous amount of opportunity going to existing retailers across the country and adding a significant value service like currency exchange to complement their current offerings. So we do see upside potential in all of the consumer area. While the wholesale banknote business was flat, this was primarily due to a reduction of a few customers and overall inbound travel being affected. We see upside potential in wholesale because our pipeline is full. We do have other financial institutions in the pipeline, both credit unions as well as banks, and we do have a renewed focus on banknote sales as a company. Before I go to payments, I do just want to talk about what some have called the melting iceberg. Reality is, if you look around the whole world, 5 of the major countries, America, Canada, Australia, Germany and England have all shown for the last 3 years that cash usage is slightly going up. Looking at cash providers such as the ATMs, Euronet, the largest operator of ATMs in the world continues to show growth in ATM output, cash output. So cash will be still king. Just as I'm looking at my notes on paper, people thought we would be paperless by now. Cash is here to stay. Central banks wanted to have digital currency. The U.S. abandoned its digital dollar project that was being led by the Federal Reserve and realized that cash is king. On a marketing front, I had verbal commitment from many of our customers as well as even competitors, banks, currency exchanges in Europe, Canada and America, including CXI, have already all verbally committed to putting marketing dollars towards educating younger consumers about cash as well as pushing for legal legislation to ban the stores that are going cashless. Not only are the currency exchanges and select banks willing to participate, there's been good support from the armored car companies who move this cash around the world as well as the manufacturers of note acceptance machines and cash processing machines. So there will be a unification soon of all of these -- a coalition, if you will, of all of these people that have a pro cash interest. And we feel that you will see an improvement in cash usage, and we will be a part of that trying to drive the cash is king movement because cash is freedom. So moving over to payments. We will continue to diversify our revenue sources in payments. You can see that our focus in the last few years in growing our payments business is compounding. We are continuing to see incredible demand for our payment offerings. While our investment with Jack Henry and Fiserv and the other core bank software providers is working well. We will continue to grow those relationships doing our service of international payments as well as U.S. dollar payments internationally and even potentially domestically. We will continue to invest into this business. We are now, as you know, EDC closed, so we gave up our Swift membership there. CXI is now fully a Swift member using the full services of Swift and that capabilities integrated with our technology has enhanced banks and credit unions' ability to offer international payments to their clients. We are also current with the new stablecoin movement. We have -- are in the final stages of onboarding with a major stablecoin operator to test a USDC capability for moving domestic dollars in America. So our focus is going to continue to invest into payments. And we are -- as I said, our pipeline is full, and we will continue to quickly grow this business as we focus our overall growth efforts for financial institutions credit unions and nonbank customers. Well, that turns us to the M&A area. We have a lot of cash. We are looking to do a strategic accretive type of transaction in the payment spaces, the prices are too high. We will not overpay for an asset, but that looking for strategic opportunities is a main focus of myself, the management team as well as the Board of Directors. Lastly, I just want to remind everyone in March is our Annual Shareholder Meeting since we're no longer really in Canada, even though we're on the TSX for now, we will be having our Annual Shareholder Meeting at our head office, our headquarters in Orlando. And so we really hope you can come in person. We are working on the technology capability so that you can video in should you not be able to physically attend, but I look forward to seeing you in person ideally in March. So I'll end it there and open it up for questions. Thank you. Operator: [Operator Instructions] And your first question will be from Robin Cornwell at Catalyst Research. Robin Cornwell: It's nice to see these results are perking up very well. My first question is with Gerhard. Gerhard, the $3 million expenses that we're talking about, are they now kind of fully reflected in the expenses? Gerhard Barnard: Robert, a lot of them are in there. Obviously, as we exited EBC, it moved from discontinued operations into continued operations. Bank charges are fully there in the fourth quarter, salaries and wages for the people that transferred are fully incorporated in the fourth quarter, not on the yearly numbers. As you know, we exited EBC during the 2025 financial year. But in our Q1 '26, it will be fully incorporated. Robin Cornwell: Okay. And Randolph, when you were looking for your future -- discussing your future growth, what about the software for as a service? I think I've asked this before, but where do you see that now because you've sort of got a new lease on life here going forward. And that's a very important part of your structure, your software. What are your thoughts on that? Randolph Pinna: We -- before we roll out nationally, we have done a pilot with 4 financial institutions in the U.S. utilizing our relationship with the Federal Reserve, part of what's called the Fed Direct program. And so we do have a direct connection to the Federal Reserve, and we are receiving monthly fee income for the usage of our software. Again, the domestic processing in America is not CXI actually touching the U.S. dollar moving from, let's say, a Florida bank to a California bank. We are actually using the connection, which is our software that is often in these 4 cases, we're already in the bank because they use us for either international wires and cash services. And they will -- it connects that bank to their own account at the Federal Reserve by using this one platform and us as the one provider. And so we do see that revenue from Software as a Service for this service will grow. At this point, it is not a material item to have a separate line item on it, but that is another way of growing our payments business. So we do, as I said, see that these growth rates in payments is sustainable this year and hopefully even larger based on the success of our previous investments and integrations that we've done. Does that answer your question, Robin? Robin Cornwell: Yes. Thank you. And the payments to grow that payments business, are you continually adding more people to drive that? Randolph Pinna: Well, we have been conservative on our hiring. We -- controlling our costs is critical, especially in this last year where there's been a lot of layoffs. We are, again, just using the existing integrations we have. So if you're familiar with how that works is the software providers that provide core banking systems have a whole variety of banks and credit unions using their software, and we have continued to grow that. So it's just a matter of working these lists, and we have a sales team of about 10, and we feel that's sufficient. We are adding one more person dedicated for banknote sales. But as far as payment sales, we are -- our pipeline is good, and we are executing on adding new clients every week doing new payments. And so therefore, I'm comfortable with the current team and our marketing to the existing customers we have that haven't switched to the wires to us yet or the new clients that are on these lists because of the integrations with these core software providers. Operator: [Operator Instructions] The next question will be from Jim Byrne at Acumen Capital. Jim Byrne: Randolph, maybe just on the online FX and direct-to-consumer, just thinking you're pretty much in all 50 states now. You mentioned some agency adds and some new stores as well. But I mean, when you go into a new state, can you talk about kind of the ramp-up of revenue and profitability on a new state versus something that's been operating for a couple of years? I mean is it -- you kind of see an immediate impact and then profitability grows after a certain level of revenue? Maybe just talk about that ramp up. Randolph Pinna: Yes. I'm not -- at least in my connection, your question was a bit faint. So hopefully, I got it. Basically, I think it is what do we expect when we go into a new state that we didn't have a license in. And so I've required that we have a business case to support why we're going to get a license in a certain state. For example, to take an extreme one, we don't have yet the business case to support having a license in Alaska. There are several states that we are still applying to because we do have a business case, and that is driven not just by the online home delivery service. So a business case that supports a new state license is usually a combination of the online home delivery, so the population of that state, but also the opportunity for agents. As you know, we are probably the primary provider to the largest automobile club in America, AAA. And they have what they call their AAA clubs in each of these states. And so that between the home delivery and the agent possibilities support us going in through the state. As far as the dollars and cents, each state is different, and Gerhard is probably closer to the numbers to answer it fuller if you need that. But basically, we do enter a state based on the projected expectation we see in a state, which will cover your administrative costs, the fees and all of that to do it. So did that answer your question, Jim? Jim Byrne: Yes. Sorry about that. I was kind of just thinking, as I said, you're kind of maxing out the number of states you're going to penetrate here. You still expect growth on the online platform as newer states kind of ramp up? Like have you got mature states that have kind of plateaued in terms of growth rates? Randolph Pinna: No. So that's -- okay. And one, I hear you much better now. Thank you. The online is where we see the most growth in the consumer unit. New stores will add growth as well. But the online, we spent a pretty penny doing a qualified survey of well over -- I think, over 1,000 proven international travelers -- and it shows that there's still about a 50% increase in capability of our home delivery, and we are refining our group marketing plan. The Cash and King campaign is a piece of that. But yes, we do see that there is still upside in every state we're in, and there's still 1 or 2 states that we are applying to now to have that. Eventually, we will probably be licensed in all 50 states. But again, I won't approve a new state approach until we have enough reason, financial incentive to do so. But I think overall, the consumer unit as well as the wholesale unit will show increased growth this year. And that's contrary to this perception of a melting iceberg. Gerhard Barnard: Nevada right now has allowed us an exemption. So we are operating in Nevada. Tennessee requires GAAP financial statements, which means we're reporting under IFRS. So that one will have to sit out until we get the approval to send them IFRS statements. And as Randolph said, Alaska and North Dakota, we are currently deferring just due to that, we call it that management case of determining what the return would be. And as Randolph mentioned, online FX is the scalability of that product is significant. If you think of we've doubled our marketing spend in the last year on driving that revenue growth. And in our planning, that is a very important product line, online FX payments. Jim Byrne: Okay. That's great. And then maybe just lastly, you mentioned the NCIB and the capital allocation priorities through M&A. You are sitting on quite a bit of cash and potentially more cash coming in the door here with the EBC closure. Any thoughts on maybe an SIB or a special distribution or anything like that? Randolph Pinna: Yes, that is a topic that has to be considered every quarter by the Board. Again, we have some -- our eyes set on 1 or 2 opportunities strategic, but because the owners of that business are incredibly large, that process is a very long and slow process. We've even got a focused team to help us try to carve out an asset. However, I can't say it's imminent. Nothing has been signed. As soon as it is, we would tell you, but we are continuing to look for the best use. And right now, the best use is to acquire our stock and retire it. There are restrictions. So an SIB is a next step of that. But as of this quarter, we have not chosen to do that. We do feel that cash -- capital allocation is critical and dividend or an SIB is definitely a good use of cash as well. However, the best use will be to continue to grow our payment and banknote business. But I do not have anything that I can announce today. Operator: The next question will be from Robin Cornwell at Catalyst Research. Robin Cornwell: I just have one quick follow-up. And have you considered changing your year-end back to December 31? Randolph Pinna: That's a good one, Robin. We have discussed that among the accounting team, we would really like to just finish this year-end at October. And then we'll revisit that because we've also, as you'll understand, just want to get through the discontinued operations, make sure we get our focus on the operating entity, CXI. And yes, that's a good point. I'm laughing because it came up in the last week in one of our discussions and say it would allow us to have a better Christmas than dealing with auditors. Operator: Next question will be from Peter Rabover of Artko Capital. Peter Rabover: Congratulations on a nice quarter. Randolph, I wouldn't be doing my job if I didn't ask you on the little thing that I caught when you were describing your listing on the Toronto Stock Exchange as for now. Any comment that you would like to share on your future listing plans? Randolph Pinna: We have been happy with the Toronto Stock Exchange and the Ontario Securities Commission. However, our exit from Canada does invite us to consider NASDAQ. Ironically, one of our employees that worked for me for several years is working there. So we have been in talks with them in sizing up that move. But as Gerhard just said, our focus right now is to really fully exit Canada, get -- which we are 100% focused on America and get some nice clean quarters going forward. But in like a '27, you could see a potential move of our listing from the TSX to NASDAQ. But as of right now, we are not -- just like the SIB, these are all topics that the Board do discuss each quarter, but we have not chosen to hurry up to do that. We don't think anything is on fire. And therefore, running our business as efficiently as we can, generating the highest return for our shareholders and having that cash in our business and growing the value of our business is our #1 priority. Peter Rabover: Great. I appreciate the color. And maybe my second follow-up is on the color for the payments business. I know you guys had a great quarter, 31% and I know it's now 17% of the business because you've exited Canada. Any I guess, how should we think about that 31% in terms of run rate? Is there -- I know you added a state and et cetera. But what do you think the natural growth rate of the market is and what your share is in that market? Maybe that's the way to ask that without asking for future growth guidance. Randolph Pinna: Thank you, Peter. And I do want to highlight which another shareholder told me that the foreign exchange market is probably one of the largest markets in the world because automotive, Toyota, there's a lot of foreign exchange, et cetera. So the payment business as well as cash the foreign exchange market is the largest market. And as I told you, our pipeline for the payments business is tremendous. And there was a good question from Jim saying, or Robin, whoever asked about, am I hiring more people? Right now, we have a sufficient team. We have improved our internal automation and onboarding. Our -- what we call our implementation team is geared up and ready to continue to add customers each week. And so while the new state helps us, it's really a matter of just getting through contract approval with the financial institution, training them, doing the testing and then going rollout, and that is underway. So that 31%, I'm confident to say is sustainable, if not even increasing because now that we're getting bigger, we have more reputation in the payment industry, and we can get even larger financial institutions than what we currently have. And so I feel that our payment business will continue to grow nicely each quarter. And our banknote business will continue -- will get back to growing like it used to do as we did just recently sign a very large financial institution for wholesale banknotes, which is going to be onboarded hopefully in this current quarter and start trading soon thereafter. So we are really doubling down on our sales and implementation of new clients across the United States. Peter Rabover: That's great. So maybe I'll sneak in one more. I know you mentioned Jack Henry and the Fiserv relationship. Any color out of that 31% or I guess maybe as part of your business. How big is that part of the distribution channel, I guess, or part of the growth and as part of the business? Randolph Pinna: So to broaden it than those 2, I named, we have about 5 or 6 integrations and the integrated relationship is well over the 50% mark for sure. So that is the significant component to our payments because, again, we do one provider, one product where we provide all the foreign exchange. And therefore, that allows a bank to use its platform that the tellers are already on and get all the benefits of our enhancements using the common denominator, their core banking system as we've integrated into it. So all the bells and whistles, the Swift lookup, the IBAN validation tool, all the functions that our -- the SWIFT gpi, all of the bells and whistles, if you want to use that term, are available to banks that are already using a core from a Jack Henry or Fiserv as an example. And therefore, that's where that pipeline is and the list of banks that say, yes, I'm already using them. And luckily, a lot of our -- some of these banks are using us for currency. So they're already familiar with us. So yes, that will continue to drive our payment growth. And then as Robin brought up that we soon will be having new opportunities with domestic payments as well, enabling the bank to use our software to do their own wires with the Fed. So we don't have the compliance cost of moving and touching the actual dollars. They will just use it and pay for the service by each login that they have, and that will generate new fee income to the business that's not dependent on international. And so that is an exciting expansion of our payment business this year. Peter Rabover: That's great. And then maybe -- sorry, I'll keep on. So what percent of the business -- or sorry, of your, I guess, distributor business, what you call the Jack Henry and the Fiserv relationships, what percent of that is penetrated relative to what's available? Randolph Pinna: What's available, every bank uses a core. So the entire market upside is there. We are still a very small provider. As you know, there's several large fintechs that have been acquiring other payment businesses and so forth. And so they're there. But the natural competitor are the 3 or 4 mega money banks up in New York example type that are correspondents for the smaller banks, and we are trying to pick those off because those banks are using a software like Jack Henry, and we are needing to convince them to switch to us as a boutique provider as opposed to being just using 1 of the 3 or 4 top largest banks in the country. So there's tremendous upside. And yes, to reiterate, it is because of that integration into these core software providers. Peter Rabover: Okay. Great. And I just want to say thanks for providing the really good color on the excess cash and the return on capital really good to see that as a shareholder. And have a great day. Gerhard Barnard: Thank you for always asking us to do a better job of that. As you see, we listen to our shareholders. Peter Rabover: Not unnoticed. Operator: Thank you. And at this time, gentlemen, it appears we have no other questions registered. Please proceed. Randolph Pinna: Okay. Thank you again for your support, for all the questions. We feel this year we just closed is a successful year. We're continuing to be strongly profitable as a business, all while executing on our strategic vision to focus on America and grow our core of banknotes as well as our payments business. So thank you for your support, and I look forward to hopefully seeing you at our Annual Shareholder Meeting in March. Operator: Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.
Operator: Good day. Welcome to the East West Bancorp's Fourth Quarter 2025 Earnings Call. Participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations. Please go ahead. Adrienne Atkinson: Thank you, operator. Good afternoon. Thank you everyone for joining us to review East West Bancorp's Fourth Quarter and full year 2025 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Del Moral-Niles, Chief Financial Officer, and Irene Oh, our Chief Risk Officer. This call is being recorded and will be available on our Investor Relations website. The slide deck referenced during this call is available on our Investor Relations site. Management may make projections or other forward-looking statements which may differ materially from the actual results due to a number of risks and uncertainties. Management may discuss non-GAAP financial measures. For a more detailed description of the risk factors, and the reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-Ks filed today. I will now turn the call over to Dominic. Dominic Ng: Thank you, Adrienne. 2025 was another record-breaking year for East West Bancorp, Inc. Highlights include new full-year record levels for multiple categories including revenue, net interest income, fees, non-interest income, earnings per share, loans, and deposits. Again, every one of the above-mentioned categories reached record levels. The strength of our financial results reflects how our business model is designed to deliver meaningful values to clients, especially during periods of uncertainty when our ability to navigate challenging landscapes matters most. We grew end-of-period deposits by 6% year-over-year with significant traction in both non-interest-bearing and time deposits. We also grew end-of-period loans by 6% with growth in C&I and residential mortgage lending leading the way. 2025 was also another consecutive year of record fee income driven in part by consistent sales execution across all of our fee-based businesses. This balance sheet growth combined with our fee income growth and ability to grow our customer base have collectively strengthened the durability of our business model and delivered substantial returns for shareholders. As a result, in 2025, we reported tangible book value per share growth of 17% and generated a 17% return on tangible common equity. I am also pleased to announce our Board declared a $0.20 increase to the quarterly dividend up to $0.80 per share or 33%. We remain committed to disciplined capital management and delivery of top-tier returns for shareholders via prudent growth, moving efficiency, and robust risk management. Now let me turn it to Chris for more details on the balance sheet and income statement. Christopher Del Moral-Niles: Thank you, Dominic. Let me start with deposits on Slide four. East West Bancorp, Inc. continued to differentiate itself via core deposit growth in 2025. This deposit growth allowed us to fund our full-year loan growth while also bolstering our balance sheet liquidity. In 2025, we prioritized deposit growth through a dedicated business checking campaign that delivered strong results. We plan to maintain this focused strategy in 2026 to further expand our deposit base. During the fourth quarter, DDA levels improved by 1% to 25% of total deposits and inflection points. In 2026, we expect continued strong core customer deposit growth. Turning to loans on Slide five. East West Bancorp, Inc. grew end-of-period loans in line with our prior guidance. And total average loans by 4% for the year. Also within our guidance range led by C&I growth. C&I growth in Q4 was driven primarily by new relationships and with encouraging growth across many sectors. Our pipeline suggests that C&I will continue to lead our growth in lending for 2026. Residential mortgage also had a good quarter in the fourth quarter. And the pipelines there remain full going into the first quarter. We expect residential mortgage to be a consistent contributor to our growth at its current pace. Looking ahead, we expect total loan growth to be in the range of 5% to 7% for the year. Driven by continued strength in C&I and residential mortgage production. Leading to an increasingly diversified and balanced loan portfolio. Switching now to net interest income and margin trends. On Slide six. Fourth quarter net interest income was $658 million reflecting the benefit of our short-term liability sensitivity over the near term, in a quarter with two interest rate cuts, balance sheet growth, and favorable deposit mix shifts. We continue to proactively reduce our deposit costs driving period-end cost of deposits down a further 23 basis points quarter over quarter. Looking back to the start of this cutting cycle, we have lowered our interest-bearing deposit costs by 105 basis points against the backdrop of 175 basis points Fed cuts in their target rates. Achieving a down cycle beta of 0.6 while growing our total deposit base by nearly $4 billion over the course of the year. Looking ahead to 2026, we expect net interest income growth to be in the range of 5% to 7% aligned with and driven by our expected balance sheet growth. Outweighing our modestly otherwise asset-sensitive position. Our outlook assumes three cuts of 75 basis points occurring over the course of 2026, resulting in a gradually steepening yield curve as implied by the year-end forwards. Moving on to fees on Slide seven. In 2025, fee income grew by a robust 12%. As Dominic mentioned, we achieved record fee income levels in 2025. Our performance over the past year was driven by sustained quality execution across wealth management, derivatives, foreign exchange, deposit fees, and lending fees. Our continued investments in our global treasury group have yielded strong traction in treasury management activity. Wealth management fee growth over the past year was supported by the hires of financial consultants and licensed bankers to capitalize on opportunities in the marketplace. Ongoing hiring is further reflected in our 2026 outlooks, along with incremental fees, and some expense growth. East West Bancorp, Inc. has been consistently growing fee income at double digits and we remain focused on driving similar growth as we look into 2026. Now let me turn to expenses on Slide eight. East West Bancorp, Inc. continues to deliver industry-leading efficiency. The fourth quarter efficiency ratio was 34.5%. In 2025, total operating non-expense grew 7.5% as we invested in the expertise, systems, and technology necessary to support our continued and ongoing growth. As we look forward to 2026, we total operating non-interest expense is expected to grow in the range of seven to 9%, as we continue to further our investments in the strategic priorities which continue to develop the pace. With that, let me turn the call over to Irene. Irene Oh: Thank you, Chris, and good afternoon to all on the call. On Slide nine, you can see our asset quality metrics, we continue to broadly outperform the industry. We recorded net charge-offs of eight basis points or $12 million in the fourth quarter and 11 basis points or $60 million for the full year of 2025. We recorded a provision for credit losses of $30 million for the fourth quarter compared with $36 million for the third quarter. Non-performing assets remained broadly stable at 26 basis points of total assets as of 12/31/2025. Criticized loans declined quarter over quarter to 2.01% compared with 2.14% as of 09/30/2025, reflecting declines in criticized loans for really all major loan categories. The absolute level of problem loans continues to remain at low levels that we believe are very manageable. We continue to be vigilant and proactive in managing any credit risk. Currently, we are projecting that full-year 2026 net charge-offs will be in the range of twenty basis to thirty basis points. As seen on Slide 10, we increased the allowance for credit losses during the fourth quarter from RMB791 million to RMB810 million or maintaining the 1.42% we believe our loan portfolio is appropriately reserved as of 12/31/2025. Turning to Slide 11. East West Bancorp, Inc.'s regulatory capital ratios remain well in excess of regulatory requirements for well-capitalized institutions and well above regional bank averages. East West Bancorp, Inc.'s Common Equity Tier one capital ratio stands at a robust 15.1% while our tangible common equity ratio stands at 10.5%. Our Board of Directors has declared a first quarter 2026 common stock dividend of $0.80 per share, a 33% increase to the dividend. The dividend will be payable on February 17, to stockholders of record on February 2. I'll now turn it back to Chris to share a few comments on our outlook for the full year. Chris? Christopher Del Moral-Niles: Thank you, Irene. Respect to our guidance, I previously mentioned, our outlook assumes modest economic growth and about 50 basis points of rate cuts. As implied by the year-end yield curve. We expect end-of-period loan growth to be in the range of 5% to 7% with continued relative strength in both C&I and residential mortgage lending. We expect net interest income to grow in the range of 5% to 7% also. Driven by the above-referenced balance sheet growth. We aspire to grow fee income at a faster pace than the overall balance sheet growth. Total operating expenses are expected to increase in the range of seven to 9% year over year driven primarily by headcount additions, IT-related expenditures, and partially offset by expected lower deposit account costs. We expect full-year net charge-offs, as Irene mentioned, in the range of 20 to 30 basis points and our effective tax rate to land between 22-23%. With that, I'll now open the call up for questions. Operator? Operator: Thank you. We will now begin the question and answer session. For any additional questions you may reenter the queue. And your first question today will come from Ebrahim Poonawala with Bank of America. Please go ahead. Ebrahim Poonawala: Good afternoon, Ebrahim. Good afternoon. So I guess first question just in terms of loan growth, I guess the guidance makes sense. When we look at year over year, I think the expectation is 2026 growth could be better for the economy, for the industry on lending than 2025. We think about East West Bancorp, Inc., I would think you should do much better in terms of loan growth this year versus last. Like is there a reason why I'm missing something? Or are you deliberately trying to manage the pace of growth when you think about just the overall balance sheet? Christopher Del Moral-Niles: Let me take a first stab at that since I see Dominic smiling across the table. I'll let him chime in as well. I think we had a really strong fourth quarter and we saw really great traction in C&I, in particular, in the fourth quarter. The reality is we know that's somewhat seasonal and we saw a really nice fourth quarter last year. Then we saw a soft first half to some extent this year 2025. And so we want to make sure we're thinking about the trends that we're seeing the customer activity that we expect, and that reporting forward numbers that we know we can hit with good reason. So I think there's a bit of recognizing the pattern that we saw last year and men's understanding that might repeat itself in 2026 even though I think you're right, things are set up to be a little more or a little less erratic perhaps in 2026 than they were in 2025. Dominic Ng: Well, let us all reflect back in year 2025. I would think that during the first quarter, not a whole lot of people would expect that this year turn out to be such a pretty good year. Because there was a lot of volatility of what the economy is going to be like and what are the changes that may be happening but it all worked out fine. In 2026, right now it's looking pretty good. You are absolutely right that there should be momentum that makes us even having a stronger loan growth opportunity for the remainder of the year. However, we just never know exactly what's going to happen throughout the year due to whatever changes that may come. My view is very simple. Good time, bad time, East West Bancorp, Inc. always outperformed the others. So if things going really well, you would if you see that maybe the average is actually as a growth percentage higher than our outlook. Then the likelihood East West Bancorp, Inc. actually doing better than what we projected here very high. On the other hand, if the economy turn out to be what we expected, and we probably may not even be able to get to this number. But rest assured we're going to be doing better. Than our peers. So I'm much more focusing on making sure that we stay as a high performing bank and relatively speaking, compared with whether with our peers, or the entire banking industry, And that's something sort of is a given from a East West Bancorp, Inc. position in terms of what we wanted to do and what we want to achieve So but in terms of projecting economy, sometimes hard for us to do. Ebrahim Poonawala: That's helpful and makes sense. I guess maybe another question. Just when you look at the expense growth number, just remind us, I know you're building out sort of the asset management and fee capabilities. But when you think about the top two or three areas where the bank spending today, is it hiring, opening new branches, compliance and tech? Give us a sense of where these investments are going and how we should think about those driving future growth? Christopher Del Moral-Niles: Sure. We are certainly budgeting a higher degree of expense growth in technology writ large. But specifically data processing, software, computer expenses. Along with that, we have a higher level of growth in some consulting costs, and that's the largest growth category. But along with that as you correctly mentioned, we're hiring we're hiring for wealth and we're hiring for commercial banking and we're hiring for technology and we're hiring for risk management. All of those areas will be the second sort of biggest bucket. And of course, comp is our biggest bucket overall. But if I draw your attention to Slide 80, Vadim, and you'll look at the last four years, I think East West Bancorp, Inc. has put up a pretty strong track record over the last four years. And alongside that very strong earnings and balance sheet track record, has come a 10% CAGR in expenses, But I don't think our shareholders mind because all of those expenses have gone to support even stronger total returns. Ebrahim Poonawala: Got it. Thank you. Operator: The next question will come from David Rochester with Cantor Fitzgerald. Please go ahead. David Rochester: Good afternoon, Dave. Yes. How are doing? Just wanted to touch base on the fee income trends for '26. I know you mentioned those would grow faster than that 5% to 7%. For the balance sheet. Last year, you did something around 12% growth. Is there any reason why that should slow this year given the investments in the business you're making? And you're launching the FX platform, you just talked about wealth and other things. It seems like that should all help the growth rate this year, maybe even boost it a little bit versus last year. Just want to get your thoughts on all that. Christopher Del Moral-Niles: Yes. And that's why I think I try to say and maybe I didn't come across clearly, we aspire to continuing the double-digit trajectory. I think if you look at Page seven, the four-year CAGR there has been 10%. And we would like to aspire to continue to deliver that type of revenue growth on the fee income side. David Rochester: Great. And then just on the loan growth, think you mentioned recently seeing some of your CRE customers getting more interested and getting more active and you actually grew that fairly decently this year in mid-single-digit range, is probably stronger than what you thought this time last year. You think there's an opportunity to grow more in CRE this year? I think I'll jump in for Dominic I think what he said on the call about a year a quarter ago, 1.5 ago, was if we saw rates come down into the sort of short end with a low to mid-three handle we would probably start to see traction pick up in commercial real estate. We're approaching that level essentially now and expect hit that lower bound over the course of this year. So our broad expectation is yes, we'll see pickup overall in commercial real estate But with that, what I think Dominic has emphasized to the team is where we are picking our partners is with folks that we have established long-term business relationships with. Where we know they're savvy operators and we know they're looking at the markets with the benefit of years and years of experience. And we think that will be the right place for us to play. Dominic Ng: The market is there for us. And but East West Bancorp, Inc. has a very very strong discipline of our overall asset liability management and also concentration allocation etcetera. So what we looked at it is that at this moment, while we in a very, very comfortable position with our CRE concentration, We're nowhere even remotely close to that level that we need to have high alert. However, we always understand that the ideal situation for the bank to have high-quality growth is have a very balanced growth from multiple categories. Which is C&I, CRE, residential mortgages, all growing in balance. In that standpoint, on one hand, I expect that there's a likely good likelihood the market will be there. For us to originate a lot more CRE loans We tend to be a little bit more selective. In making sure that we put our allocation primary to our long-term sustainable clientele. So with that, we are not out there aggressively chasing just growing loan for the sake of growing loans. David Rochester: Yes. Appreciate that. Maybe just one last one. On the TCE ratio and talked about this a lot just in terms of where it is now, you're at 10.5%. Continues to grow. You had a very nice dividend increase there. So I know that cuts into it a little bit, but it still seems like returns and your expected balance sheet growth could ultimately end up pushing that to 11% and beyond. What are your thoughts on allowing that to continue to grow? And is there any new range that we should look for as to how you're thinking about where that should trend? Thanks. Christopher Del Moral-Niles: As pointed out on our guidance page on slide 12, we remain committed to delivering top quartile returns alongside best-in-class efficiency and we think our capital levels are part of what attracts customers to East West Bancorp, Inc. and allows us to deliver the timely effective service that we offer our clients. In a way that things can't. We think that capital supports that initiative. And we're very proud of having one of the strongest levels of capital of any bank in the industry. Which we think will sustain us particularly if there's continued volatility uncertain times ahead. David Rochester: All right, great. Thanks guys. Operator: The next question will come from Casey Haire with Autonomous Research. Please go ahead. Casey Haire: Hey, Good afternoon. Thanks. Good afternoon, guys. Happy New Year. So I had a question on deposits cost. So the 60% deposit beta just wanted some color on where you think that can trend throughout 2026? Christopher Del Moral-Niles: Well, think we've been very disciplined about reacting very quickly to changes in the market rates, but specifically to Fed rates. So I think we've got that process very well oiled now and moves very efficiently. So we'll continue to make those changes. Obviously, rates continue to grind lower, our incremental ability to do that at higher levels becomes more challenging. So what we've guided is we're very comfortable that we our betas will exceed 0.5 and we're very happy to deliver 0.6 so far. Casey Haire: Got you. Okay. And then Irene, a question for you on the credit. So the the charge off guide for $26 bumped up a little bit. I'm just wondering what's driving that. There was very little migration NPAs very low. It feels pretty good. I'm just wondering why maybe '25 was just a very good year. I'm just wondering what you're seeing to bump up the charge off guide? Irene Oh: For 2017? Yes, great question. So if you look at charge offs for the quarter and then for the full year, the absolute level versus pretty low, right? And even if you compare to last year, we are 26 basis points, 11 basis points, 26 basis points Historically, these are low levels. With the guidance for 2026, although the absolute levels of credit, the metrics are all in great shape. Quite honestly. There are and there are no systemic issues that we see. From time to time, individual credits can turn and the charge off costs guidance simply reflects that. Casey Haire: Got you. Thank you. Operator: The next question comes from David Chiaverini with Jefferies. Please go ahead. David Chiaverini: Afternoon, David. Hi. How's it going, Chris? Thanks for taking the question. So wanted to ask about the net interest margin, the outlook there. You mentioned about how the near-term liability sensitivity has benefited you. How should we think about your positioning as we kind of get into 2026? Christopher Del Moral-Niles: Sure. We broadly remain an overall asset-sensitive bank. That has been said. We've been focused on growing dollar NII and we believe we'll offset the expected downdraft effects of declining rates with balance sheet growth over the course of the year. That should allow us to deliver a growing dollar NII as you look over the course of the year. Great. Quarter number we think will be continued consistent deposit repricing activity. David Chiaverini: Great. Thanks for that. And on the deposit side, you mentioned about and we saw in the numbers the non-interest-bearing deposit growth was strong in the fourth quarter. Can you talk about what drove that and if that could be sustainable in coming quarters? Christopher Del Moral-Niles: Yes. So a shout out to our retail team in particular, but also to our commercial team There was an increased emphasis and focus on driving core commercial DDA balance activity throughout the year, starting really towards the end of the second the first quarter and continuing over subsequent three quarters. With outstanding results here accumulating in the fourth quarter. And so that focus on that driving business checking account relationships continue to build momentum and steam both in our retail channels and our commercial relationship manager channels over the course of the year and drove the result that you're seeing. We have and continue to drive focus on that and that will be a key priority for 2026. And we think it will be something that will deliver additional value particularly a declining rate context. David Chiaverini: Great. Thank you. The next question will come from Bernard Von Gazzicchi with Deutsche Bank. Please go ahead. Bernard Von Gazzicchi: Hi, Bernard. Hi, good afternoon. So just on you've been dynamically hedging for the outlook and rates materially reduced the cash flow hedge headwinds. What was the headwind in full year 2025 and what are you expecting in full year 2026? Christopher Del Moral-Niles: The headwind for the quarter was $2 million Keep in mind rates came down over the course of the year. So we started at was more than $20 million at one point in time per quarter and it came down to $2 million in the fourth quarter. And I think what we have indicated previously was essentially the hedges we have on today are in the money today. And so we are now in a position where we expect to have those be tailwinds as we look forward into the into 2026. Addition to the fact that we expect more rate cuts to come. Bernard Von Gazzicchi: We've got about $1 billion of risk swap at roughly like a $3.7 $3.8 level. And those will be those are in the money today. Bernard Von Gazzicchi: Great. And just as a follow-up, as you get closer to the $100 billion asset threshold for category four, where are you in your progress to fulfill the requirements with processes and expenses needed how does that change in the threshold is increased as regulators have been pointing to? Christopher Del Moral-Niles: Sure. We've been focused on making the investments in the technology and the staffing we need to be successful for our customers today And we always looked at $100 billion as being somewhere down the road. And so the investments that we're making, the expenses that we're talking about, the computer software, the consulting services, the data processing solutions the efforts, those are all to maximize the opportunity we see to work with our clients today and deliver value. And so we don't think there's anything about that that changes over the near term, certainly 2026. But we look forward to what we expect will be some reconsideration of those thresholds. And we look forward to the opportunity to continue to grow and meet the needs of our customers over the long term. Bernard Von Gazzicchi: Great. Thanks for taking my questions. Operator: The next question will come from David Smith with Truist Securities. Please go ahead. David Smith: On fee growth, I know that you all have been opportunistic at times in recent years about pursuing some inorganic tuck in deals. To bolster different parts of the fee growth engine. I'm just wondering, given how strong capital levels are today, are there any areas where you're contemplating some sort of partnership or other kind of inorganic deal to boost the growth? Where might that come from? What areas are of interest for you right now? Thank you. Embedded in our trajectory our projected expense trends, is hiring and organic growth that will support and supplement our fee expectations as it's laid out. But in addition to that, yes, we have looked and continue to look for opportunities that are inorganic to bolster that growth and supplement that so that we have a better reach of either services platforms, geographies or talent to deliver even more value to our customers. And we'll continue to look for those opportunities. As you correctly point out, capital is not the constraint. But as I think for those of you that have been around the story for long, the constraint really is Irene and Dominic sense of where value is. And the relative cost of buy versus build And when you're building and delivering 10% organic, it's a high bar for something that makes sense. That you have to go spend a big premium for. And so I think we'll be very thoughtful about that. But we have the flexibility we have the optionality we have the capital We're attracting the hires and we're growing the fees all at the same time. David Smith: Thank you. And then just specifically then, I wonder if you could give us an update on any plans on how blockchain or cryptocurrency might fit into your business helping clients with cross border money movements or anything along those lines? Dominic Ng: I think at this point in United States, when it comes to blockchain, that clearly can expedite payment, trade and so forth. We really haven't seen from a banks and clients, because it's not like something that we can just do on our own. Without some sort of like collaboration with another corresponding bank and so forth. I think at this point it's still a little bit too early. And we'll continue to watching and the progress on these technology and we'll adjust accordingly. And that's something that what East West Bancorp, Inc. would always do which is while being prudent, but stay agile. David Smith: Thank you. Operator: The next question will come from Gary Tenner with D. A. Davidson. Please go ahead. Emma Hassan: This is Emma Hassan on for Gary. Good afternoon. The strong loan growth across all segments this quarter was really nice to see. What are you seeing in terms of general sentiment out there? Is the are the GDP numbers translating into client sentiments? Or Christopher Del Moral-Niles: I think it's been interesting here seeing the volatility in the marketplace. And recognizing that while the economy obviously impacts everything about banking, What's perhaps very clear about East West Bancorp, Inc. is what impacts East West Bancorp, Inc. is how we work with each of our clients. And so while the economy is a great backdrop for continued positive momentum in some sectors, The credit for our loan growth and the credit for our progress and the credit for our fee growth comes down to RMs working with individual clients, delivering individual solutions to help them nimbly and agilely navigate the landscape that we've seen over the course of the last year. And so to Dominic's earlier comments, while the economy matters, what matters more is that we're working really closely with the clients to stay one step ahead of the competition and meet their needs. Emma Hassan: Alright. That is fair. And I heard you talk about, hiring this year. Is there any sort of numbers you can give around terms of hiring goals this year? Like revenue per users or anything? Christopher Del Moral-Niles: Well, I think I would draw you back to page eight, and I would just note that, you know, year over year, our expense guidance is 7% to 9%. But if you look at year over year 2025, we grew compensation by 12%. Obviously, the focus on our growth is hiring talented people can help drive our business in the right direction. And that continues to be a focus. Emma Hassan: Alright. Thank you for taking my questions. Operator: The next question will come from Janet Leigh with TD Cowen. Please go ahead. Janet Leigh: Hey, good afternoon, Janet. Afternoon. Apologies if this is covered already. In terms of your hiring plans, I guess that's part of the expansion of your business plan. Is there any plan to more aggressively move to other cities or other port cities other than California? Christopher Del Moral-Niles: I think we continuously look at opportunities to diversify our branch network in positive ways. We continue to look for the right people and the right talent to help us drive that. I think we'll be talent driven more than putting pins on a map driven. So far, that's worked really well and allowed us to focus on making sure we concentrate our presence places where people expect us to be with talent that can meet those needs and that will continue to be a driving focus for us. But we see other markets for growth We know there are pockets of opportunity for us. And we are looking at both organic and inorganic ways could tap into those. Dominic Ng: I think on the commercial banking side, we made some in fact, it's not just last year. I think for the last several years, we made quite a few hires in Texas, and New York And so we'll continue to look at these other regions that we already have a presence and to look at opportunities to grow it even further. Janet Leigh: Got it. Thanks for the color. And for your allowance for loan loss, the reserve ratio, does gone up quite a bit over the past three years while you're credit trends have obviously been very resilient and I think credit size levels have also been going down. At what point would you be comfortable kind of environment would that be where you feel more comfortable maybe lowering down reserve levels a bit because it really doesn't look like the underlying credit warrants I will point out that it's completely flat on a percentage basis quarter over quarter. Irene Oh: Got it. As you know, right, with the CECL allowance model, and the methodology that we in other organizations also have to use A lot of it is based on kind of the assumptions and the macroeconomic factors. We use a multi-scenario model and continue to honestly, that's going to be the largest driver of where the allowance is going. Right? Modeling and understanding about what's happening quarter over quarter. There wasn't really that much change. We use Moody's models as those scenarios. And there hasn't been that much change, but I think it is a little bit your comments are fair. Maybe there is a little bit kind of a forward cast of this versus where the charge offs and the credit quality is as you noted, it's continues to be very strong. I would also say the allowance is kind of like capital. Right? It's an extra cushion for us and buffer for us in general. Janet Leigh: Got it. Thank you. Christopher Del Moral-Niles: That hasn't been said as we say it. Allowance is perfectly appropriate at year end. Operator: The next question will come from Jared Shaw with Barclays. Please go ahead. John Rao: Hi, this is John Rao on for Jared. Hey, John. Afternoon. Most of my good afternoon. Most of my questions have been asked and answered. But just thinking about the rate sensitivity positioning, it looks like the floating rate portion of securities has been going down the last few quarters. There any target level for that or has it just been what you've been adding has been more fixed rate lately? Christopher Del Moral-Niles: We've seen more relative value in the fixed rate side and given the anticipation of a few more rate cuts coming. It's seems to be prudent to sort of lean on that side of the securities purchases. It's worked out for us so far. John Rao: Okay, great. Thanks for that. And then just on lending spreads overall, how have those been trending? Know you're pretty selective on the client base that you you work with, but just overall competitive levels and pricing trends in your market? Yes. Broadly speaking, we've seen some compression. And so if you'd asked us where would that be, over the course of the last year, we probably saw things broadly compress. Approaching something on the order of about a quarter of a percentage point. Don't know where that's going from here. But we think we've seen a lot of that competitive pressure come to four and we're working with it. It seems to be holding at least relative to the term sheets we're sending out now. Somewhat comparable to what we saw in the fourth quarter. So I can tell you there's been incremental compression over the last thirty, sixty days. But clearly, it's been compressing relative to what it was a year ago. John Rao: Okay, great. Thank you. Operator: The next question will come from Chris McGratty with KBW. Please go ahead. Chris O'Connell: Good afternoon, Chris. This is Chris O'Connell filling in for Chris McGratty. All right. It's still Chris. It's okay. Yes, exactly. I was just hoping to circle back to the capital discussion. Obviously, you guys remain in a very strong position. And had a big increase in the dividend this quarter. But capital levels continue to grow. And the buyback was a little bit lighter than the last quarter. Just was hoping to get thoughts around kind of the pace of buyback and opportunistically using it going forward? Dominic Ng: Yes. Our buyback will be always opportunistic. So from our perspective is that when the price is right, we do more. And we always been able to do buyback in an opportunistic way that create a lot more value for our shareholders. And we'll continue to do that practice, because there's not 's no urgency for us to have to do anything simply because as you just noticed that we just announced this return of tangible common equity at 17%. And so at this kind of capital level, and we also by the way by making this meaningful size increase of dividend So we are doing what we need to do. But we also always look at the potential opportunity out there whether it's a market that allow a meaningful organic growth or a market that allow some unusual grid fit inorganic growth opportunities And we look at it as that it's just very, very good in that position that we have all these flexibility. That we can pull trigger at the right time in the right way. So that's why we are not in any kind of sort of urgent situation that we have to sort of like announced some big buyback and so forth, because we really are not in kind of position. Like many others. Chris O'Connell: Got it. Thank you. And then I was hoping to just dive into the commentary on the margin. The near-term liability sensitivity versus broader asset-sensitive position. I think you had talked a little bit about last quarter about the near-term liability sensitive position. Just being kind of a timing issue with the pace of deposit rate repricing. Guess, the setup into the early part of the year Does that imply, given the rate movement this quarter, that the margin could head in a similar upward direction kind of early next year? And then of trend down modestly after that? Christopher Del Moral-Niles: I think we've seen some of the benefit already of the December rate cut. The December numbers. Some of it will continue to bleed through into January, but don't think anyone's really expecting much more to happen this quarter. So it will probably balance and wash itself out in Q1. And then when we see the next rig cut, we would assume we'll see an immediate lift in that next thirty to forty-five day period. And then sort of revert back to the broad asset-sensitive profile. So again, we think the reality is over the course of sixty days, lag, probably $2 million a month 25 basis point cut. As a negative impact. But the reality is in that first thirty to forty-five days, it ends up being a short term Chris O'Connell: Great. Very helpful. That's all I had. Thank you. Operator: This concludes our question and answer session. I would like to turn the back over to Dominic Ng for any closing remarks. Dominic Ng: I just want to say thank you for all of you joining our call today and we are looking forward to speaking with you in April. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to Intel Corporation's Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. John Pitzer, Senior Vice President, Investor Relations. Please go ahead, sir. John Pitzer: Thank you, Jonathan, and good afternoon to everyone joining us today. By now, you should have received a copy of the Q4 earnings release and earnings presentation, both of which are available on our investor website, intc.com. For those joining us online today, the earnings presentation is also available in our webcast window. I am joined today by our CEO, Lip-Bu Tan; and our CFO, David Zinsner. Lip-Bu will open with comments on our fourth quarter results as well as provide an update on the progress we are making on our strategic priorities. Dave will then discuss our overall financial results, including first quarter guidance, before we transition to answer your questions. Before we begin, please note that today's discussion does contain forward-looking statements based on the environment as we currently see it, and as such, are subject to various risks and uncertainties. It also contains references to non-GAAP financial measures that we believe provide useful information to our investors. Our earnings release, most recent annual report on Form 10-K and other filings with the SEC provide more information on specific risk factors that could cause actual results to differ materially from our expectations. They also provide additional information on our non-GAAP financial measures including reconciliations where appropriate to our corresponding GAAP financial measures. With that, let me turn things over to Lip-Bu. Lip-Bu Tan: Thank you, John, and thank you all for joining us today. 2025 was a year of solid progress. Over the last 10 months, we established the foundation for new Intel, a more focus and execution-driven company. We simplify our organization and greatly reduce bureaucracy to improve efficiency and accelerate decision-making. We also recruited new leaders from the outside and empower key leaders from within. We strengthened our balance sheet, forged strong new partnership and deepened relationship with existing as well as new customers. I'm encouraged by my conversation with our customers and partners around the world. I'm hearing a clear, consistent message. They see the progress we are making, they want Intel at the table as they navigate their own transformations. The opportunity in front of us is meaningful and significant. The era of artificial intelligence is driving unprecedented demand for semiconductor across the entire compute landscapes from AI accelerated and traditional data centers into the network and enterprise domains all the way out to client and edge devices. Rapid deployment of AI workloads across this diverse environment will require heterogeneous silicon solution, leveraging CPU, embedded NPUs, discrete and integrated GPU, ASICs and XPUs. In addition, we will need to see innovation in the software stack along with new emerging technologies like photonics, memory interfaces, interconnect and quantum to name just a few. The breadth of our IP and know-how across silicon design, system level integration, wafer manufacturing and advanced packaging uniquely position us to capitalize on these AI-driven trends, capture sustainable profitable growth. This will not happen overnight, and our execution needs to continue to improve. While we will stay humble as we address the work ahead and we will never be satisfied. Our Q4 was another positive step forward. Revenue, gross margin and EPS were all above our guidance. We delivered these results despite supply constraints, which meaningfully limited our ability to capture all of the strengths in our underwriting markets. We are working aggressively to address this and better support our customers' needs going forward. Looking ahead for 2026. We will continue to position Intel to capture the significant growth opportunity AI presents across all our businesses. We will do this by strengthening our client franchise, advancing our data center, AI accelerator and ASICs strategies and continue to build trusted U.S. foundry. Let me start with our core x86 franchise, which remains the most widely deployed compute architecture in the world. The deployment of AI is only amplifying the importance of x86 from orchestration and control planes to inference edge workloads and agentic AI. In our Client Computing Group, we strengthened our position in both consumer and enterprise notebooks with our Core Ultra Series 3 lineup, formerly known as Panther Lake. And build on our most advanced Intel 18A manufacturing process. We committed to deliver our first Series 3 SKU by the end of 2025, and we exceeded that commitment by delivering our first 3 SKUs. While we still have work to do, I'm encouraged by the steady progress on our Intel 18A use, and Naga and his team remain laser-focused on additional improvements as they ramp Series 3 into the high volume needed to meet strong customer demand. Our client momentum was on full display at CES earlier this month, where we formally launched Series 3 with our OEM partners, powering over 200 notebook designs Series 3 will be the most broadly adopted and globally available AI PC platform we have ever delivered. Along with our next-generation Nova Lake coming at the end of 2026, we now have a client road map that combines best-in-class performance with cost-optimized solutions giving me confidence that we are on the path to fortify market share and profitability in both notebooks and desktops over the next several years. In addition, PC become an important part of the AI infrastructure. The surge in AI workloads is driving massive demand for data centers, but cloud capacity alone cannot meet the scale of inference needed especially in the power constrained environment. This accelerating the push toward hybrid AI, splitting workloads between cloud and client which offers clear advantages in performance, cost and control. We are working closely with ecosystem partners to seamlessly enable hybrid AI, and we are encouraged by the opportunity to grow the installed base and accelerate the refresh rates over time. Let me now turn to DCAI to support our AI objectives, I believe that our traditional server and accelerated road maps must advance together. To reinforce the alignment, I centralize our data center and AI businesses under Kevork, ensuring tight coordination across CPUs, GPUs and platform strategy. Demand for traditional servers continues to be very strong, and we are focused on ramping available capacity to support the meaningful uptick we are seeing including partnering with key customers to support their needs beyond 2026. The continuing proliferation and diversification of AI workloads is placing significant capacity constraints on traditional and new hardware infrastructure, reinforcing the growing and essential role CPUs play in the AI era. This is and will continue to benefit the ongoing ramp of Granite Rapids as well as our mainstream products, Sapphire and Emerald Rapids. We have also made decisive changes to simplify our server road map focusing resources on the 16-channel Diamond Rapids and areas to accelerate the introduction of Coral Rapids, where we can. With Coral Rapids, we will also reintroduce multi-threading back into our data center road map. We also continue to work closely with NVIDIA to build a custom Xeon fully integrated with their NVLink technology to bring best-in-class x86 performance to AI host nodes. Over the last several quarters, we have been developing a broad AI and accelerated strategy that we plan to refine in the coming months. This will include innovative options to integrate our x86 CPU with fixed function and programmable accelerator IP. Our focus is on the emerging wave of AI workloads, reasoning models, agentic and physical AI and inference at scale, where we believe Intel can truly disrupt and differentiate. Our long-term ambition is clear to rebuild Intel as a compute platform of choice for the next era of AI-driven computing, grounded in world-class engineering and accelerated road map, and a renewed culture of execution. We are also building momentum in ASICs as customers seek purpose-built silicon for AI, networking, cloud workloads. Our combination of design services, IP building blocks, and manufacturing capabilities position Intel well to resolve specialized problems at scale. This is not a new area for us, although this is one that I'm committing significantly more focused resources and investment dollars, including leveraging my own experience at Cadence Design supporting and growing this market. Finally, we remain focused on the long-term objective of building a world-class wafer and advanced packaging foundry anchored in trust, consistency, and execution. As I have said before, building a foundry business will take time and considerable effort and resources. While still early in our journey, we have hit some earlier important milestones worth highlighting. We are now shipping our first products built on Intel 18A, the most advanced semiconductor process developed and manufactured on U.S. soil. As stated earlier, yields continue to improve steadily as we work to ramp the supply needed to meet strong customer demand. In addition, Intel 18AP continue to progress well. and we are engaging with internal and external customers on this note, delivering our 1.0 PDK at the end of the last year. Intel 14A development remains on track. We have taken meaningful steps to simplify our process flow and improve our rate of performance and yield improvement. We are developing a comprehensive IP portfolio on Intel 14A, and we continue to improve our design enablement approach. Importantly, our PDK are now viewed by customers as industry standard. Engagements with potential external customers on Intel 14A are active. We believe customers will begin to make firm supplier decision starting in the second half of this year and extending into the first half of 2027. We also have the opportunity to provide strong differentiation in advanced packaging, particularly with EMIB and EMIB-T. We are focusing on improving quality and yield to support customer desire for ramps beginning in second half of 2026. In closing, as I reflect on 2025, I'm proud of the resilient commitment our team has demonstrated. We exit the year with a stronger foundation and clearer road map for 2026 and beyond. The opportunity ahead is meaningful and significant as AI-driven computing expands all the markets we serve. But I'm also mindful of the challenges ahead of us and transparent about the areas that we are doing well and areas we need to improve. In the short term, I'm disappointed that we are not able to fully meet the demand in our markets. My team and I are working tirelessly to drive efficiency and more output from our fabs. While yields are in line with our internal plans, they are still below what I want them to be. Accelerating yield improvement will be important lever in 2026 as we look to better support our customers. As I said earlier, we are on the multiyear journey. It will take time in resolve, but my team and I are committed to rebuilding this iconic American company and increasing the long-term value for our shareholders. I would like to thank my team for their hard work over the course of the last 10 months. I look forward to updating you on our progress as we continue this journey together, including hosting an Investor Day in the second half of this year at our headquarters in Santa Clara. Let me now turn it over to Dave to walk through our financials and business trends in more detail. David Zinsner: Thank you, Lip-Bu. We remain encouraged by the fundamental drivers of demand across our core markets. Fourth quarter revenue was $13.7 billion at the high end of the range we provided in October. We experienced strong growth across all our businesses, benefiting from the AI infrastructure build-out with AI PC, traditional server and networking revenue, all up double digits sequentially and year-over-year. Q4 marks the fifth consecutive quarter of revenue above our guidance even as we navigate industry-wide supply constraints for our key products. Non-GAAP gross margin came in at 37.9%, approximately 140 basis points ahead of guidance on higher revenue and lower inventory reserves, partially offset by increased mix of outsourced client products and the early ramp of Intel 18A to support the launch of Core Ultra Series 3 codenamed Panther Lake. We delivered fourth quarter non-GAAP earnings per share of $0.15 versus our guidance of $0.08 and driven by higher revenue, stronger gross margins and continued spending discipline. Q4 operating cash flow was $4.3 billion with gross CapEx of $4 billion in the quarter and positive adjusted free cash flow of $2.2 billion. NVIDIA's $5 billion investment closed in Q4 as expected. For the full year, revenue was $52.9 billion, down slightly year-over-year due to constraints across our own manufacturing network and with external suppliers which limited growth, especially in the second half. Full year non-GAAP gross margin was 36.7% up 70 basis points on reduced period charges. Full year non-GAAP EPS was $0.42, up $0.55 year-over-year on lower period charges and improved operating leverage. Specifically, non-GAAP OpEx of $16.5 billion was down 15% versus 2024 as we executed actions to reduce complexity and bureaucracy in the business and drive improved execution. For the full year, we generated $9.7 billion in cash from operations and made $17.7 billion of gross capital investments with capital offsets of approximately $6.5 billion. Although adjusted free cash flow was minus $1.6 billion in 2025, we produced $3.1 billion in the second half as cash from operations more than doubled half-on-half. We exit 2025 with $37.4 billion of cash and short-term investments, bolstered by further monetization of Mobileye, the completion of our stake sale of Altera to Silver Lake, accelerated funding from the U.S. government and investments by the SoftBank Group and NVIDIA. In addition, we repaid $3.7 billion of debt. Looking back, 2025 marked an important year of progress against our key priorities, even as we know we have more work ahead. Internally, we reorganized and rightsized the team to become customer-centric and engineering-focused while shoring up our balance sheet to give us more flexibility to pursue our goals. We've navigated a market that has shifted from tariff-driven uncertainty in the first half to an intense AI-driven demand environment constrained by supply in the second half. 2025 demonstrated the staying power of the x86 ecosystem across client and data center, and the importance of our manufacturing assets as we launched Core Ultra Series 3 on Intel 18A, the most advanced process fully developed and manufactured in the United States. Both create a firm foundation on which to build the new Intel. Moving to segment results. Intel Products' Q4 revenue was $12.9 billion, up 2% sequentially. CCG revenue was down 4% quarter-over-quarter even as AI PC units grew 16%, and DCAI was up 15%, reflecting strong demand for traditional server compute. These results reflect our efforts to balance our constrained supply with strong data center demand while maintaining support for our client OEM partners. Where possible, we're prioritizing our internal wafer supply to data center and leveraging an increased mix of externally sourced wafers in clients. CCG revenue was $8.2 billion and in line with our expectations. We estimate the client consumption TAM was greater than 290 million units in 2025, marking 2 straight years of growth of the post-COVID bottom in 2023 and the fastest TAM growth since 2021. Within the quarter, CCG launched 3 SKUs of Series 3 ahead of our expectations of one. Performance reviews have been extremely favorable, with up to 27 hours of battery life, a 70% gen-on-gen improvement in graphics and performance on industry standard benchmarks that is 50% to 100% better than peers. DCAI revenue was $4.7 billion, up 15% sequentially, above expectations and the fastest sequential growth this decade. Revenue would have been meaningfully higher if we had more supply. While the market continues to benefit from more power-efficient CPUs, stimulating a refresh cycle, all indicators point to the growing and essential role CPUs will play within hyperscale and enterprise AI data centers as inference-driven AI usage expands. The world is shifting from human-prompted requests to persistent and recursive commands driven by computer-to-computer interactions. The CPU central function coordinating this traffic will drive not only traditional server refresh, but new demand that grows the installed base. In addition, due to the networking demand for the AI infrastructure build-out, our custom ASIC business grew more than 50% in 2025, 26% sequentially and reached an annualized revenue run rate greater than $1 billion in Q4. This strength provides our ASIC team a solid base to pursue a $100 billion TAM opportunity. Operating profit for Intel Products was $3.5 billion, 27% of revenue and down approximately $200 million quarter-over-quarter on an increased mix of outsourced products and seasonally higher operating expenses. Intel Foundry delivered revenue of $4.5 billion, up 6.4% sequentially on increased EUV wafer mix. EUV wafer revenue grew from less than 1% of wafers out in 2023 to greater than 10% in 2025. External foundry revenue was $222 million in the quarter driven by projects with the U.S. government and the deconsolidation of Altera. Intel Foundry operating loss in Q4 was $2.5 billion and $188 million worse quarter-over-quarter driven by the early ramp of Intel 18A. Within the quarter, Intel Foundry met key 18A and 14A milestones. With the official launch of Core Ultra Series 3, Intel Foundry is the only semiconductor manufacturer in the world shipping gate-all-around transistors with backside power for revenue. These advanced wafers are rolling off our production lines in Oregon and Arizona here in the United States. Finally, our continued progress on Intel 14A demonstrates our commitment to research and develop the world's most important technology on U.S. soil. Turning to All Other. Revenue came in at $574 million and was down 42% sequentially due to the Q3 25 deconsolidation of Altera. The primary components of All Other in Q4 were Mobileye and IMS. Collectively, the category delivered an operating loss of $8 million. I'm pleased with the early momentum at Altera as an independent company with a new leadership team. Their industry-leading programmable fabric, developer productivity-driven software tools, and a large installed base positions them well to drive long-term value creation. Now turning to guidance. During the second half of 2025, we supported strong demand for our products with intra-quarter wafer production and inventory on hand. As we enter 2026, our buffer inventory is depleted and the mix shift in wafers towards servers, which began in Q3 will not come out of fab until late Q1 '26. As a result, and as we stated last quarter, our internal supply constraints are most acute in Q1. In light of these dynamics, we are forecasting a Q1 revenue range of $11.7 billion to $12.7 billion. The midpoint of $12.2 billion reflects a lower end of seasonal Q1. Within the Intel Products, we forecast a more pronounced revenue decline in CCG than in DCAI as we continue to prioritize internal supply to our server end markets. We expect Intel Foundry revenue up double digits quarter-over-quarter, helped by continued mix shift to EUV wafers and Intel 18A pricing. At the midpoint of $12.2 billion, we forecast a gross margin of approximately 34.5% with a tax rate of 11% and breakeven EPS, all on a non-GAAP basis. Gross margin is down sequentially due to lower revenue, increased 18A volumes and product mix. Let me take a few moments to provide some color for your full year 2026 model. First, from a revenue perspective, we expect our factory network to improve available supply beginning in Q2 and for each of the remaining quarters in 2026. Within the server market, customer feedback and our own market intelligence points to the likelihood of a strong year of growth for DCAI. Finally, client CPU inventory is lean, and there is excitement for Series 3. In contrast, over the last several months, industry-wide supply for key components like DRAM, NAND and substrates has come under increasing pressure due to intense demand to support the rapid expansion of AI infrastructure. Rising component pricing is a dynamic we continue to watch closely, especially relative to the client market and could limit our revenue opportunity this year. For OpEx, we target 2026 operating expenses of $16 billion. We expect noncontrolling interest or NCI to net to approximately $325 million in Q1 and be approximately $1.2 billion for the year on a GAAP basis. NCI is expected to grow meaningfully again in fiscal 2027. Our share count is forecast to be 5.1 billion shares in Q1 and grow in line with our stock-based compensation going forward. As we think about our capital expenditures for 2026, we're working to balance our ability to drive capital efficiencies with our need to respond to the demand signals we're receiving. Previously, we said CapEx would be down, but are now planning for a range of flat to down slightly and for expenditures to be more weighted to the first half. As a reminder, CapEx in 2026 would be to support demand in 2027 and beyond. We expect to generate positive adjusted free cash flow for the full year, and we're planning to retire all $2.5 billion of maturities as they come due this year. I'll wrap up by saying that Q4 was another solid quarter to mark our fifth consecutive quarter of overdelivering to our guide. We exit 2025 increasingly confident in the long-term sustainability of the end markets we serve. We believe our improved balance sheet, thanks in part to the trust of our strategic partners, combined with the strong talent we have will enable us to meaningfully participate in the next wave of computing as the industry pushes for returns on their AI investments. I look forward to providing you, our shareholders, an update on what this future means to you at our Analyst Day later this year. With that, I'll turn it over to John to start the Q&A. John Pitzer: [Operator Instructions] With that, Jonathan, can we please take the first question? Operator: Certainly. And our first question for today comes from the line of Ross Seymore from Deutsche Bank. Ross Seymore: I guess the first one is 2 quick parts. It's both on supply. In the short term, are the yield improvements and the other actions you're taking sufficient to address just typical seasonality throughout the year given that usually the first quarter would be the low point on revenues? And then perhaps more importantly, longer term on the supply side, you guys seem more confident in your 14A, your 18A, the customer engagements, your internal road map, when would you decide to loosen up the reins on the CapEx side of things so that you could address structurally higher demand going forward with more internal supply? David Zinsner: Thanks, Ross, for the question. So on the short-term supply, certainly, improving yields and throughput are a great driver of supply increases. In fact, it's got a great ROI to it because it doesn't require any incremental capital. So that's what Lip-Bu and I are actively working on to improve and we're reasonably confident that there's a good trajectory there. That said, when you look at CapEx, it's a little bit more nuanced than just it's going to be flat to slightly down. It's actually down significantly in space. So we're spending a lot less in space. We think we have a good footprint in terms of cleanroom. And what we're devoting more of our dollars to is tool. So we are ramping up tool spending quite a bit in '26 relative to '25 to address this supply shortfall as well. And in fact, every quarter, we're seeing kind of wafer start increases pretty much across the board across Intel 7, Intel 3 and 18A. So all 3 of them every quarter improve and get better to address the supply. Like I said, we think we -- things will certainly improve in 2Q but we won't be completely out of the woods here. But as we progress through the year, we think things will get better and better. Do you want me to take the 14A thing or? Yes. On 14A, Lip-Bu has been very direct with us on all of this. He does not want to spend on capacity on 14A, only spend on the kind of TD spend or R&D spend associated with 14A even in the fab until we have customers secured. We've talked about, the likelihood is, our customers on 14A their window to secure or for us to secure them will be in the back half of this year and in the first half of next year. And so once visibility improves there, we'll start to unlock the spend on 14A. Lip-Bu Tan: I can just add a little bit more. I think on the yield improvement, which we see in the 7%, 8% yield improvement per month. I think it's more in focus in the variation, make sure that we can be more consistent delivery and also the defect density at the end so that we can ship quality wafer to the customer. So I think all those are very important for our PC client, Panther Lake and then also for the 18A and 14A development. So I think, all in all, I see improvement, but still not quite to the industry-leading standard yet. John Pitzer: Ross, do you have a quick follow-up? Ross Seymore: Yes, I do. The gross margin side, Dave, you gave some puts and takes for the full year on a bunch of different metrics but you didn't mention gross margin. How should we think about that? And forgive me, the 40% to 60% incremental, I know you guys give kind of -- you can drive a truck through. So anything perhaps just a little more precision directionally, it would be helpful. David Zinsner: I'm not even sure the math is that good on this, this time around. When you look at Q1, the gross margin decline in Q1, there's 2 main components. Obviously, revenue coming down with a largely fixed cost business is going to affect gross margins. But the other piece of it is Panther Lake, while the cost structure improves from Q4 to Q1, it's still dilutive to the corporate average, and it's a bigger percentage of the mix. So it actually has a relatively negative impact on gross margin. So that's partly why we're guiding down. There's some mixed things going on as well. I think as we progress through the year, the 2 things should benefit us. One, we improve our supply, ergo, that should improve our revenue picture. On top of that, Panther Lake's cost structure gets better and better. Look, we talked about the incremental improvement every month, we're going to see in yields. We're working on the throughput as well. So those 2 things combined, that should help in terms of cost structure and make this more of an accretive product to us as opposed to a diluted product. And I think that will be a lot of what is the story around gross margins for the year. There's still mix and mix can go in any different direction depending on how things play out. But what we're largely focused on for the kind of the next 12 months is driving the cost structure of these products that we're building to improve the margins. We know that 34.5% is by no means an acceptable level of gross margins. And we're actively working it, first to get it to 40% and then once we get it there, we'll move to a new target. Operator: And our next question comes from the line of Tim Arcuri from UBS. Timothy Arcuri: Dave, I'm wondering in the guidance, you're guiding to $12.2 billion, but I'm wondering if you can kind of pro forma that for us like if you could meet all the demand, what would the kind of unconstrained guidance be for March? David Zinsner: Yes. It's a squishy figure to figure out, Tim, but I would tell you that if you look at kind of that $12.2 billion relative to the $13.7 billion we posted in the fourth quarter, and look at normal seasonality. It's in the range of seasonal but it's at the low end of that range of seasonal. We'd be well above seasonal if we had all the revenue or supply, I should say, to hit the revenue. John Pitzer: Tim, do you have a follow-up? Timothy Arcuri: I do, thanks. Lip-Bu, there's obviously a lot of excitement about your foundry business. It sounds like we might get a few customer announcements maybe in the second half. But I just wanted to ask you, what do you define as like success in that business? I think prior to you arriving, the mantra was sort of to be #2 -- the #2 foundry player by 2030. If you look at most of the forecast for that #2 player at somewhere in the range of like $30 billion and revenue up by that time. Is this still kind of a reasonable bogey that you're shooting for? And like what do you consider as a successful outcome for that? Lip-Bu Tan: Yes. Thanks. Good question. So I think we are determined to commit to drive the world-class foundry business. So I think, first of all, on the 14A, I think we clearly, development is on track. We like what we see. And we simplify the whole process flow. Most important is kind of building up the IP portfolio so that we can serve the customer. Some of the IP is very critical in order to serve the customer. The other part is on the yield and improvement. We see a trend of improvement, and we also see the valuations getting better. I think in the long run, I think clearly, we are kind of anticipating the -- we have heavy engaging in some of the key customers. We think that the second half of this year, they're going to indicate to us what kind of capacity firm commitment so that we can deploy the capacity CapEx to really build that. So I think all in all, I think it's a service business, We really built a trust and the consistency we're able to deliver. And then we have the PDK on the 14A first quarter, 0.5. And then we're starting to engage with customers with the key products that they want to run with us. So I think all in process. I think in the second half of this year, we were able to have the commitment that we can really drive the scale of the operation. David Zinsner: Another early indicator, I think, of success in the foundry is going to be advanced packaging. And we'll start to see that revenue come in even before we start to see meaningful wafer revenue. And I think as I was talking to investors over the past kind of 12 to 18 months, I was thinking that those opportunities would be measured in hundreds of millions of dollars and wafer opportunities would be measured in billions. I'd say some of the early customer engagements suggest that we'll be well north of $1 billion on many of these opportunities for advanced packaging. So they're way more exciting than even I had expected. And it's because we have really good technology there that's very differentiated and supports AI in a way that is particularly special. Lip-Bu Tan: I think the EMIB-T, I think, is a very big differentiator for us. And then clearly, we have a couple of customers willing to even prepay the subscript -- because [ subscript ] is very big supply shortage and then they're willing to share with us. That means that show the commitment they are going to be working with us. Operator: And our next question comes from the line of Joe Moore from Morgan Stanley. Joseph Moore: Yes. I wonder if you could talk about server prospects. You sort of talked about some of the challenges of Diamond Rapids not having symmetric multi-threading and Copper Rapids is going to be important. Can you give us a time frame on Copper Rapids and sort of what's your expectation for the potential for market share puts and takes as you wait for that to come? Lip-Bu Tan: Yes, good question. So I think, first of all, I would centralize the data center and AI under Kevork that I hire in to help us to build that. He already built the team and then include some of the -- recruit some of the talent on board. I think the more important right now, we are laser-focused in 16 channels Diamond Rapids and we simplify the product road map. And then the other part is accelerate the introduction of Coral Rapids. And Coral Rapids will have the reintroduced the multi-thread into our data center workforce. So I think overall, we are very positive. The team is in place now. The road map is very clear, and we are very decisive for doing that. and are laser focus on the Diamond Rapids 16-channel and also accelerate the Coral Rapids introduction. John Pitzer: Joe, you have a quick follow-up? Joseph Moore: Yes, sure. And just in terms of the mix for the rest of the year, are you able to move wafers towards data center away from PC? Is that something that you're thinking about and just -- it seems like the constraints are at their worst point in Q1 and get better, but I assume you're still constrained beyond that. Are you able to move the mix towards data center? David Zinsner: We're absolutely constrained, Joe. So what we're doing within client we're focusing on the mid- and high end and not as focused on the low end. And then to the extent we have excess, we're pushing all of that into the data center space to meet that customer demand. And I think you'll see some share adjustments based on that because our primary focus is to our main customers. And obviously, we have important customers in the data center side. We have important OEM customers on both data center and client and that needs to be our priority to get the limited supply we have to those customers. Operator: And our next question comes from the line of Ben Reitzes from Melius. Benjamin Reitzes: My first question is about seasonality throughout the year. So Dave and Lip-Bu. I mean you're subseasonal in the first quarter, you said you'd be well above seasonal if you had the supply. So what does that imply for 2Q to 4Q? Should we model that above seasonal or are the constraints in PC so much that we shouldn't? David Zinsner: Yes, I mean, we would expect to be better than seasonal through the year if we can get the supply to where we think we can as we get into 2Q. So that's correct. John Pitzer: Ben, do you have a follow-up question? Benjamin Reitzes: Sure. I wanted to ask about, with regard to the hyperscaler situation in servers. It's -- in terms of your momentum there, is this mostly driven by hyperscaler? Or do you feel like the shortage is mostly impacting them, making you subseasonal? Or is the enterprise demand also are you seeing it there? Lip-Bu Tan: Yes. I think, let me answer that question. I think the hyperscaler is very important for us to scale the business, and I spent a lot of time with the hyperscalers. I think a couple of thing. One, clearly, message from them is the CPU actually is driving a lot of that business in terms of the different workloads that they're driving. So I think it's very encouraging to see that they are willing to commit long-term agreement. So we really prioritize their CPU deployment. So that something is very positive. And then secondly, I think they are very excited about working with us in terms of decide working on the silicon, the software and the system level engagement, and that something is also very exciting. So all in all, I think they are very strong. The workload they shared with us what they're looking at and what can we helping them. And also the ASIC design also is an opportunity for us. They also want to build some of the purpose-built silicon with the Xeon CPU included. And also, they are very interested about overall, how do you use the advanced packaging and then to make it more complete. I think overall, I think it's a great opportunity for us to work with them. Operator: And our next question comes from the line of Stacy Rasgon from Bernstein Research. Stacy Rasgon: For my first question, I wanted to dig a little bit into the segments. So I mean if I sort of run the math, like Mobileye is going to be up and the Altera foundry revenues maybe close to a couple of hundred million dollars. I mean both DCAI and client to be down pretty meaningfully. And the client's down more -- I mean maybe DCAI is down high single digits and clients' down like mid-teens. But I guess, number one, is that true? And number two, like why should data center be down so much given where the demand is and given where you're prioritizing? Like why would I expect data center units to be down? It seems like they have to be down pretty meaningfully in Q1. David Zinsner: Yes. I mean, both will be down as a function of supply. Obviously, we're shifting as much as we can over the data center to meet the high demand. But we can't completely vacate the client market. So we're trying to support both as best we can and obviously work our way out of this supply issue. I do believe that the first quarter is the trough. We will improve supply in the second quarter. And part of the challenge is that in the third and fourth quarter of '25, we lived off of supply, but we also had a reasonable chunk of fixed finished goods inventory to also work through. Unfortunately, that is now down to kind of 40% of what it was at peak levels. So we don't have that to rely on. So it's just literally hand to mouth, what we can get out of the fab and what we can get to customers is how we're managing it. John Pitzer: Stacy, do you have a follow-up question? Stacy Rasgon: I do. I mean just to push on that a little bit. I mean, you guys have your own factories, like why are you in the inventory situation that you're in? And then -- I mean, even if you look at -- I get the whole idea about finished goods versus other stuff. But I mean like you have $11.6 billion of inventory. And yet, it's not in the right place at the right time. Like how does that happen? David Zinsner: That's largely a win. I'll tell you, Stacy. I think the biggest thing is that we if you go back 6 months or so ago and looked at what the outlook was. Core count was absolutely looking like it would increase, but the units were not expected to increase. And every hyperscaler customer we talked to was signaling that. And obviously, it has rapidly increased over the third and fourth quarter. And in talking to a few of them right before this call, I got the feeling like it was going to be a story we'd feel for several years. And yes, the advantage we have is we do have our own fab so we can squeeze out supply as much as possible, which is what we're working on, but we directionally weren't managing the supply to an expectation that there would be unit increase that significantly in data center. Operator: Our next question comes from the line of Vivek Arya from Bank of America Securities. Vivek Arya: For the first one, Lip-Bu, I'm curious, when do you think Intel should start getting any credit for external foundry efforts because you mentioned that you might hear of awards in the second half of this year. I assume that you start building the capacity for that, right, sometime late this year or next year. So when do you actually start to get a decent amount of revenue from those customers? And I think you mentioned that building this business will take incremental amount of resources. So what level of external foundry revenue does Intel need to call this business a success? And when do you get that? Is it '27? Is it '28? Is it later? Lip-Bu Tan: Yes. Good question. I think first of all, I think the engagement with our potential external customer on the 14A are very active right now, a couple of key customers are working with us. We expect them to really go through the milestone basis on 0.5 PDK and then starting to look at the test chip and look at how is our yield performance. And it's going to be a process to work with them. And then I think the second half of the year, then they're starting to satisfy, then they're going to asking us, okay, now this is the particular product we're going to run with your foundry and the production. And then the indication to us and that's the time my discipline is until they have a commitment to the volume, then starting to really build and the foundry expansion so that we can meet their requirement. And then the other part parallelly, they also give us a list of IP. If it's a mobile related, you have to be low power IP that we need to have. If it is data center related, it clearly will be the performance, the connectivity, all these things that we need to really get it ready so that we can serve the -- service as a customer to meet their requirement. So it's parallelly on the IP readiness and also our yield readiness then is, I think, satisfied. Okay. Now this product. This is a volume we're going to run with you and that's how you're starting to build. So in terms of 14A, realistically in terms of, I call it, the risk production in the later part of 2027 and real production, volume production in 2028. That is similar to the same time frame as a leading foundry. David Zinsner: And I'd just say, we probably will be able to give you a lot more color around all of these things at the Analyst Day that Lip-Bu mentioned will have in the back half of the year. John Pitzer: Vivek, do you have a follow-up question? Vivek Arya: For my follow-up, I'm curious, what do you think is the server CPU TAM in 2026? How much of that is x86? How much of that is ARM? I mean if you are supply constrained, is the entire industry supply constrained? Do you think that whatever you can't supply all that market share is going to go to your x86 competitor and to everyone in the AI community that is building ARM-based servers? So like when do you think your supply -- how much does the market grow? And when do you think your server CPU supply constraints come off? David Zinsner: Okay. Maybe I'll start and you -- so I think this demand, what we're seeing is largely an x86 phenomenon because it's an upgrade cycle in a lot of ways around older networks that have to talk in some way to the AI systems and the performance is not where it needs to be. So I really view this as x86. Of course, we do have another competitor in the space, and we'll be jockeying for position from a market share perspective. I think we will make great strides on the supply as we progress through the year. So I wouldn't envision that to be the fundamental driver ultimately a market share. And it's really about products and Lip-Bu talked about getting to a 16-channel Diamond Rapids out, accelerating the introduction of Coral Rapids. Those will be the things that are most important for us as we look at market share dynamics in the coming years. Lip-Bu Tan: I think from my side, I think clearly, hyperscale and the high-end OEM, ODM is critical for us on the server side. And then we're basically working with them. Their first choice is the CPU from Intel. And that is a very clear message from them. They will try to get as much as we can give them. And then I think that's the key home driver. Operator: Our next question comes from the line of C.J. Muse from Cantor Fitzgerald. Christopher Muse: I guess to follow on Stacy's question around supply. Considering your bullish commentary and AI-led demand and how you're supply-constrained and your peers, TSMC and Samsung Taylor are aggressively slotting for equipment delivery. Do you worry that if you wait for late 2026 to place orders that the lead times then might be longer than you thought? And as part of that, why wouldn't you look to be more aggressive today? David Zinsner: Yes, maybe I don't know if this is the answer to your question, but I mean we are aggressively getting tools on Intel 710, Intel 3 18A, that is happening. And we will be increasing our wafer starts as aggressively as possible on those nodes. What we're holding back on is 14A because 14A is really linked to foundry customers, and it does not make sense to build out significant capacity there until we know that we have the customers that will accept that demand. And so that's just the discipline we're going to have. I'd say the other thing with regard to a lot of this around supply is, Lip-Bu's first focus and our short-term focus is we think we gain a lot of supply just by doing things better with our existing tools and footprint, getting yields improved, getting cycle times improved and we're aggressively working on that. And we think there's lots of opportunity to improve our supply just on those 2 things that don't require CapEx, quite honestly. And that's something that's probably more unique to us right now than to other foundries. John Pitzer: C.J., do you have a follow-up question? Christopher Muse: Yes, John. Just to hit on the press release, you talked about demonstrating technical feasibility on High NA for future HVM. And so just curious, is that something you're still contemplating for 14A? Or is that more of a 10A adoption? David Zinsner: It will be part of our 14A process. Of course, there will be different variants of 14A, but High NA is targeted at 14A. Operator: And our next question comes from the line of Harlan Sur from JPMorgan. Harlan Sur: Lip-Bu, as you look forward to 14A, you talked about engineering engagements with customers. And typically, the largest fabless semiconductor companies in the world want to run their own test chips to assess the new foundry node, and they typically wait for PDK 0.4 or 0.5 before they start their test chip designs, it looks like they can get started now on test chip design with the release of your PDK 0.5. So I guess the question is, have customers commence test chip designs or are they maybe even further along than that and customers are already running their own 14A test chips now? I mean, in order for them to make decisions on 14A in the second half, they need to be running their test chips fairly soon. So if you give us an update there. Lip-Bu Tan: Yes, good question. So I think you're absolutely correct. A couple of customers we are already engaging about the PDK 0.5 and they are looking at the test chip. And also more important is a specific product they're going to run to our fab foundry. And that one, we are working with them. And then, of course, they want to know the capacity, the pricing, those are all in the discussion right now. So that's why I mentioned the second half of this year, they're starting to satisfy, then they can starting to say, okay, now we need this volume and we need particular fab from yours to do it. And then also the other part is, do we have all the right IP to serve them? And so those are the things that we are parallelly process with their supply chain and also their design teams to work with them. So this is a very complex step and that we are very familiar, we are working in the right way. John Pitzer: Harlan, do you have a follow-up question, please? Harlan Sur: Yes. On your server portfolio, I apologize if I missed this earlier, but Clearwater Forest, right, your E-core sort of cloud workload optimized server platform that was targeted to be the first server platform to use your 18A manufacturing and ramp first half of this year. But Lip-Bu, you talked about server road map changes to focus on more performance-focused products. So is the team still supporting Clearwater Forest? Or just focusing now on Diamond Rapids? And has the team taped out or taped in your next-gen Xeon 7 Diamond Rapids products and any preliminary views on ramp timing of Diamond Rapids? Lip-Bu Tan: Yes. So answer to your question is, yes, we continue to do this and support that. And what I mentioned about focus on the 16-channel of Diamond Rapids is kind of focus on the high end of the Diamond Rapids so that we can really laser focus and really providing a differentiating competitive products. And then the other part is, as I mentioned in the past, this multi-threading is very important in terms of driving the performance. And the one that we can really come out with and it takes time to have that and we're going to have that in the Coral Rapids. Now the question mark is how can -- how much can we accelerate that -- pull in earlier, customer is really excited about that, "Lip-Bu, can you pull it up earlier?" That's why I work with Kevork and his team to see how -- what are the way we can really drive that acceleration to bring the market -- to bring the customer earlier. Operator: And our final question for today then comes from the line of Aaron Rakers from Wells Fargo. Aaron Rakers: I have 2, if I can fit them in. But on the memory side and what we're seeing in the market, I'm curious of how you guys are seeing customers react to memory. Is there a potential demand disruption in the PC market? Just any kind of curiosity on what you're seeing in that? And how impactful is memory pricing to the gross margin, given obviously, I think, stronger for longer Lunar Lake demand. Lip-Bu Tan: Yes, good question. So I think industry facing a very big challenge is the memory constraint and also the pricing. So I think we also listen to our customers, some of the bigger players and in the OEM and the bigger player in the hyperscale, they have more access into the memory locations. So we kind of hear from them. And then secondly, I think some of the smaller ones, they are really challenging to scramble to get the memory. So I think that will be very important for us, Dave and I, how to allocate and also our sales great -- in how to allocate to the right customer. We don't want to have a CPU, we sent to them, but they are missing the memory, they cannot complete the products. So we try to do it correctly and then -- that is very important to have that intelligence and then also feedback from the customer to work with us and so that we can fulfill their requirement. Dave? David Zinsner: Yes. I think on the Lunar Lake side, I think we've got what we need based on the current forecast, of course, that could always tick up, and then we would need more memory which would kind of impact gross margins. But we were relatively aggressive in terms of getting the memory early. So I feel like we're in a relatively good place there. Now that said, those margins are low because the memory is in package. So that is an impact to our gross margins as well. But I think we're largely in the place we thought we would be a quarter or 2 ago. John Pitzer: Aaron, do you have a quick follow-up? Aaron Rakers: I do, and I'll be really quick. I'm curious on the custom ASIC side, you talked about hitting $1 billion of run rate business. How do we think about the progression of that? And how broad is the customer base within that opportunity set? Lip-Bu Tan: Good question. I think Dave mentioned earlier, is a $100 billion TAM market opportunity. And we are delighted. We are already in the run rate of $1 billion. It's a robust demand and customers really excited about what we have in terms of the CPU Xeon and also the AI-related momentum. So they're more building a purpose-built silicon for AI and network and cloud. And that part, I think we continue to work on that. And also more important for them is also the advanced packaging, make that more compelling. And that's the advantage of Intel that we can do both to provide the customer delight. And so that, I think, is a good opportunity for us. With that, thank you again for joining us today. As we move forward, I remain focused on disciplined execution and deep collaboration with our customers to seize the meaningful opportunity created by AI era. While we have a lot more to do, we are confident in the foundation that we built and the progress underway. We're looking forward to provide you another update in April. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Desiree: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Business First Bancshares Q4 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, I would now like to turn the conference over to Matt Feeley. You may begin. Matt Feeley: Good afternoon, and thank you all for joining. Earlier today, we issued our fourth quarter 2025 earnings press release, a copy of which is available on our website along with the slide presentation that we will reference during today's call. Please refer to Slide three of our presentation, which includes our Safe Harbor statements regarding forward statements and the use of non-GAAP financial measures. For those of you joining by phone, please note the slide presentation is available on our website at www.b1bank.com. Please also note our Safe Harbor statements are available on Page six of our earnings press release that was filed with the SEC today. All comments made during today's call are subject to the Safe statements in our slide presentation and earnings release. I'm joined this afternoon by Business First Bank's Chairman and CEO, Jude Melville, Chief Financial Officer, Greg Robertson, Chief Banking Officer, Philip Jordan, and President of B1 Bank, Jerry Vasquez. The presentation, we'll be happy to address any questions you may have. And with that, I'll turn the call over to you, Jude. Jude Melville: Okay. Thanks, Matt. Good afternoon, everybody. We thank you all for being with us today. I'd like to begin our conversation with a brief high-level review of the work our team accomplished in 2025, which turned out to be, in my opinion, one of the most meaningful and positive years our franchise has experienced. I'll start with a few of the non-financial highlights. While I don't contribute much to the short-term modeling that this call invariably centers around, they are what enables future opportunity and therefore representative of the most important work that we do. Over the course of 2025, we conducted two major core conversions and implemented a number of software platforms designed to prepare us for managing at this and future scale. We continue to develop multiple internal divisions focused on preventing and mitigating fraud, internal loan review, audit, and various capabilities, contributing to both our ability to operate safely and maintenance of a positive regulatory relationship. Continued our practice of incrementally evolving our footprint, closing three banking centers and opening one. We made big strides developing our correspondent banking initiative into a significant part of the bank, contributing meaningful non-interest income, growing the client base to over 175 community banks. We announced and then at the turn of the year closed the acquisition of Progressive Bank in North Louisiana. And this may sound out of place on the call such as this, but we learned some lessons while working through credit issues for the first time in a number of years. Things that will ultimately make us better providers and managers of credit in the future. And for the fifth year in a row, we were one of the winners of the American Bankers Best Banks to Work For Award, voted on by employees, and therefore one of my favorite awards to win. These non-financial accomplishments are important, and I'm proud of them. But they, of course, aren't alone sufficient. 2025 was also a year of accomplishment from a balance sheet perspective. Over the past twelve months, we bolstered our capital ratios with tangible common equity increasing by 90 basis points and consolidated CET1 capital increasing 50 basis points year over year. We grew tangible book value 17.3%. We have as balanced a balance sheet as we have ever had, with limited concentrations in any lending category and significant geographic diversification. Grew loans and deposits in tandem, particularly in the fourth quarter as we got through the bigger non-financial projects. Returned with more focus to production. We began purchasing shares back for the first time in almost six years and positioned ourselves to have that tool as a viable option in the future. And we increased our common stock dividend for the seventh year in a row. Now we recognize that all this non-financial and balance sheet activity needs to lead up to something else, something tangible. Over the course of 2025, we delivered strong P&L improvement beyond what we or the analysts forecasted. We grew ROA beyond our stated 1% goal to a 1.06 core ROA for the year and a 1.16 core ROA in the fourth quarter. We delivered a 14% increase in EPS over the course of the year, and in the fourth quarter a 20% year-over-year improvement. We grew our full-year core margin beyond our stated goals of 3.5 to 3.63. And we held non-interest expense growth relatively flat while growing revenue, generating positive operating leverage, posting a sub-sixty efficiency ratio in the fourth quarter. In sum, we are turning the investments we've made over the past few years into momentum, which leads me to believe that even though 2025 was a pivotal year for B1, 2026 will be even more fruitful. With our major systems implementations behind us, we will focus more on optimizing the systems, which will lead to greater efficiencies. With a healthy footprint in place, we will focus less on expanding it and more on deepening it. By the way, over the past few weeks, we were pleased to begin to take advantage of some of the in the Houston market by recruiting John Hiney, formerly Veritex, to be our new market leader and he's already been able to add a couple of impressive bankers to the foundational team we have in place. Finally, we will focus less in 2026 on embarking upon new major projects and more on daily execution. We have a good team, we're in good markets, and we're focused on the right things. Sustainable ROA, tangible book value accretion, EPS enhancement, non-interest revenue giving us greater revenue optionality, and non-interest expense discipline leading to continued efficiency ratio improvement. It's an exciting time and we look forward to discussing it further over the course of the call. I thank you all again for your attention, and I'll turn it over to Greg. Greg Robertson: Thank you, Jude, and good afternoon, everyone. As always, I'll spend a few minutes reviewing our results and then discuss our updated outlook before we open up to Q&A. Fourth quarter GAAP net income and EPS available to common shareholders was $21 million, $0.71 per share, and included $2.2 million in merger and core conversion-related expense, $995,000 loss on former bank premises, and a $35,000 gain on sale of securities. Excluding these non-core items, non-GAAP core net income and EPS available to common shareholders was $23.5 million and $0.79 per share. From our perspective, fourth quarter results marked another quarter of strong financial performance, generating, as Jude mentioned, a 1.16% core ROA with our core efficiency ratio falling to 59.7% for the quarter. A notable impact during the fourth quarter included continuing meaningful contribution from our correspondent banking group. Also, as Jude mentioned, we added several new slides to our earnings presentation. I'll start on Slide 24, a new overview slide from our loan portfolio. Total loans held for investment increased $168.4 million or 11.1% annualized on a linked quarter basis. The higher than expected loan growth was driven by overall improved demand and a slowing in pay down and payoffs. Specifically, new and renewed loan production of approximately $500 million during the fourth quarter compares to a slower scheduled and non-scheduled paydowns and payoffs of $332 million. Recall, in the previous quarter, we experienced a slight decrease in net loan production, which was a result of $395 million in paydowns and payoffs only offset by $368 million new and renewed loan dilution during the third quarter. On a linked quarter basis, owner-occupied CRE loans increased $76 million or 28% annualized, while non-owner-occupied CRE loans increased $77 million or 23.9% annualized. Based on unpaid principal balances, Texas-based loans slightly declined from 39% as of 12/31/2025. We expect that percentage of the Texas loans to further decline with the closing of Progressive Bank to approximately 36% in the first quarter. Moving back to Slide 16, total deposits increased $191.7 million, mostly due to a net increase in interest-bearing deposits of $236.2 million on a linked quarter basis, somewhat offset by a net decrease in non-interest-bearing deposits of $44.5 million from the prior quarter. The increase in interest-bearing deposits was largely driven by $105 million in public funds and $60.8 million in commercial money market accounts. We do expect somewhat of an outflow of the public funds markets during the first quarter consistently with prior year's Q1 seasonality. Moving to the margin, our GAAP reported fourth quarter net interest margin increased three basis points linked quarter to 3.71%, while the non-GAAP core net interest margin, excluding purchase accounting accretion, increased one basis point from 3.63% to 3.64% for the quarter ended in December. The margin performance during the quarter was driven by elevated loan discount accretion due to a single large acquired loan paying off sooner than we expected. Loan discount accretion during the quarter was elevated at $1.4 million, including the addition of Progressive, we expect quarterly accretion in 2026 of approximately $1.8 million. On a linked quarter basis, cost of total deposits decreased 15 basis points, while total loan yields decreased 13 basis points. Core loan yields, excluding loan discount accretion for the fourth quarter, was 6.78%, down 15 basis points from the prior quarter. The total cost of deposits for the month ended December was 2.44%, which compared to the weighted average of the fourth quarter of 2.51%. We're pleased with our ability to hold the line of new loan yields during the quarter with a weighted average new and renewed loan yield of 6.97% for the fourth quarter. However, with the interest rate cuts we experienced during the fourth quarter, we did start seeing some pressure from overall loan pricing. I'd like to take a moment to explain some of the movement in the margin during the fourth quarter. We recognized $1 million of interest income reversal for a nonaccrual loan. This translated to about five basis points in the fourth quarter net interest margin. That is to say, had we not recognized this accrual reversal, our Q4 margin would have been five basis points higher. It is of note, until we find resolution on that credit that was primarily responsible for the income adjustment, we would expect this somewhat of a drag to remain. We are pleased with our ability to manage funding costs for the quarter with the weighted average rate of all new interest-bearing deposit accounts during December of 3.51%, down from September's weighted average rate of new interest-bearing deposit accounts of 3.66%. I'd like to make a note of a few takeaways on Slide 22 in our investor deck, as we continue to see 45% to 55% of overall deposit betas achievable regarding any future rate cuts. I would also like to point out the overall core CD balance retention rate was about 83% during the fourth quarter. That statistic reflects our team's continued focus on maintaining and retaining core deposit relationships. Our baseline assumption is that we do not receive any further rate cuts in 2026. We have worked hard to manage our balance sheet to a relatively neutral position, and we believe we can achieve modest margin improvement in a slightly down rate environment. Lastly, on the topic of net interest margin, I'd like to mention a new slide we created and added to the quarterly slide presentation. Slide 20 is a combination of two prior slides and shows our GAAP and core net interest margin in the context of the volatility in the Fed funds rate since 2020. We're proud of our ability over the years to maintain the margin with a relatively tight range. This slide also shows our ability to hold the line on overall loan yields in a declining rate environment while managing funding costs downward. Moving on to the income statement, GAAP non-interest expense was $52.4 million and included $1.4 million acquisition-related expense and $796,000 conversion-related expense. Core net interest expense for the fourth quarter of $50.2 million was up slightly from the prior quarter, but we do expect an increase in Q1 in the Q1 core expense base primarily due to the closing of the Progressive acquisition and timing of various first quarter annual expense resets. As a reminder, we should begin to recognize the impact of Progressive's cost saves post-conversion, which should occur in the third quarter of this year. Fourth quarter GAAP and core non-interest income was about $12.2 million and $13.2 million respectively. GAAP results did include a $35,000 gain on sales securities and a $995,000 loss on former bank premises. Core non-interest income results for the fourth quarter were better than we expected primarily due to swap fee revenue, which was about $1 million higher than expected. Also included in core non-interest income was a $312,000 gain on OREO. We expect near-term quarterly non-interest income to be in the mid to high $13 million range, which includes a $1 million quarterly contribution from the Progressive Bank acquisition closed on January 1. Lastly, I'd like to provide some context to the credit migration during the fourth quarter. Total loans past due thirty days or more excluding non-accruals as a percentage of total loans held for investment increased from 27 basis points to 64 at December 31. The ratio of nonperforming loans compared to loans held for investment increased 42 basis points to 1.24% at December 31, while the ratio of nonperforming assets compared to total assets increased 26 basis points to 1.09 compared to the linked quarter. The increases in the nonperforming loans and assets ratio over the linked quarter were largely attributable to the deterioration of a single $25.8 million commercial real estate relationship. With that, that will conclude my prepared remarks, and I'll hand it back over to Jude so he can wrap up the conversation. Jude Melville: Okay. Thanks, Greg. I just want to take one moment to welcome our new former Progressive Bank shareholders and employees as well as your listening. Excited about that partnership and I feel like everything that we've worked on thus far is ahead of schedule in terms of, you know, from our getting the approvals that we needed to get to close it to all the social integration work that we've already done and enjoyed over the past couple of weeks. Being able to spend time with a number of other employees and the former board members. And really excited about incorporating that into our already existing strong North Louisiana franchise. It's an important part of our footprint, an important part of the state. And I look forward to continuing to make a significant contribution to the economy in our role as a community bank in that area. So with that, I'd be happy to turn it over to the question and answer period. Do our best to answer any questions you might have. Desiree: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and two follow-up questions only. Thank you. And our first question comes from the line of Matthew Olney with Stephens. Your line is open. Matthew Olney: Appreciate you guys taking my question. Wanna start on the loan growth front. Sounds like the paydowns that have been a challenge over the last few quarters weren't as much of a challenge this quarter. Any more color you can add to that? As far as the fourth quarter growth? And then the outlook for organic loan growth from here? Greg Robertson: I think, Matt, this is Greg. You're right. Think we did have a great quarter. I think some of that was just a little bit of pent-up demand that we've been working on for a while. The bankers did a good job of landing it. And then just a little bit of downshift in the payoffs. That we've seen kinda created that really great quarter. Far as going forward, we still feel very comfortable with the mid-single-digit loan growth throughout the balance of 2026. Matthew Olney: And Greg, just to follow-up on that comment, does the mid-single digits, does that imply a more balanced view of the paydowns that have kind of ebbed and flowed throughout '25? Or any commentary kinda what that assumes with the paydowns? Greg Robertson: Yeah, that's a more balanced view, be a good way of putting it. If you think about kinda coming out of the if you roll back the clock to quarters where we were producing extremely high loan growth, double-digit to almost 20% annualized loan growth quarters. Two, three years ago. I think we're unwinding out of that. And so having a more reasonable loan growth expectation might be a little bit easier to achieve without the headwinds from the payoffs. Matthew Olney: Okay. That's helpful, Greg. And then Matt, I would Yeah. Hey, Matt. This is a little more color on the loan growth in fourth quarters. It was nice to see that it was kind of led by Southwest Louisiana and North Louisiana. We've worked hard to build a footprint that's diversified. And you think about that first from a credit perspective, but you also to think about diversification from a production standpoint. It's interesting to track that over time, and certainly wanna give those areas their due for so much to the strong quarter on the production side. And Texas is an important investment for us and will continue to be. And, you know, we're hovering around 40% of our exposure there. Is a good healthy number. But that doesn't mean that there aren't a lot of good things happening in Louisiana as well. A lot of investments up and down the Mississippi River and Meta making the major investment up in North Louisiana and so it's nice to see some of that paying off in terms of increased demand. And we look forward to a balanced production throughout our footprint over the next couple of years. Matthew Olney: Okay. Great. Thank you for that, Jude. And then I guess shifting over to the credit side, any more details you can disclose behind that relationship that went to nonperforming? What drove the downgrade? And it looks like it had pretty decent sized loan. Where does that loan rank among your larger relationships you have with the bank? And then, Jude, I think you mentioned in the prepared remarks, there were some lessons learned when it comes to credits. Didn't know if that was speaking to this specific credit or just more broadly. If you could just expand on that. Thanks. Greg Robertson: Yeah. Matt, the credit that we identified was it's commercial real estate, medical facility in the Houston area. And we've been really dealing it's been we've been dealing with it for the balance of the year. Got real close to resolution on it. We feel like we've marked it down to where the loss from here on out would be immaterial at this point. But we just have moved that forward. And I don't know that there's anything more to say about it than that. We've just been working with it for a while, and thought we had a real resolution in hand, and it kinda kept dragging on. So we decided to do the prudent thing and move it over. Jude Melville: Where does that rank of size wise? Size wise, I would say that's one of our larger if not one of the largest single commercial real estate exposures. I think it's the largest single that's for which we hold the exposure on our books. As you know, we try to actively participate exposures, particularly when they get to the 20, 25 million level, and certainly at this level, at anything above this level. So, yeah. It's one of the larger ones. And yeah, if you think about lessons learned or things to continue to work I do think the biggest lesson banking is just concentration risk and exposure risk. You can do everything right, they're gonna be there's gonna be something that happens to a certain number of credits. And if you look at banks that have failed or just been in serious trouble over the past fifteen years, generally it comes down to a relatively small number of outsized credits. And so one of the reasons that our metrics have moved around a little bit more than we would like, they've been more volatile, is because the loans that we've had something happen on have been slightly bigger. And so not necessarily representative of the entire portfolio. It just feels worse when it hits the when it hits the different stages of the life cycle of a credit that you're working through. So I think a reinforcement of the idea that we wanna even as we continue to grow, we want to keep our individual loan exposures to manageable levels. And then we also wanna make sure that on our concentrations from an industry perspective or a geography perspective, that we don't get too over-reliant upon any one particular type of loan. I think, and these are just generic We've had a long period here where we haven't had to really run many credit issues through any kind of process. And so just as we kind of remember how to do that, if you will, there gonna be lessons learned about how aggressive you are when you see warning signs. How you do from a monitoring standpoint along the way, and not so much with this particular credit as much as just general things that I think whatever stumbles we've had credit wise over the past twelve, fifteen months, we'll will benefit us as we continue to make credit decisions along the way and continue to refine our processes as we continue to get bigger. Matthew Olney: You, guys. Appreciate all the color. I'll step back. Jude Melville: Thank you, Matt. Thanks, Matt. Desiree: Our next question comes from the line of Michael Rose with Raymond James. Your line is open. Michael Rose: Hey, good afternoon, guys. Thanks for taking my questions. Hey, Jude, you mentioned in the prepared remarks that the focus this year is going to be more so on daily execution versus any sort of major projects. I don't want to put any words in your mouth, but I might take that to mean or someone might take that to mean that maybe additional M&A opportunities may not be in the cards. Obviously, you've been fairly acquisitive here lately, but just wanted to get a better sense of, you know, kind of what that comment means. And maybe if you can remind us on some of the projects that you've recently completed and maybe just what that daily execution would mean. I know there's a lot in there, but, hopefully, you can provide some context. Thanks. Jude Melville: Yes, sir. I appreciate you asking that, actually. Know, we had a busy year, busy number of years. But in particular this year, in addition to consummating an act or integrating an acquisition in Dallas and then consummating an acquisition in North Louisiana. We also did a lot of process improvement internally and although and we've talked about on these calls a few times, a number of projects that we took on that are technology-related. So we only did we convert another bank, Oakwood, over the course of the year, we actually converted ourselves to a new platform on Nucor. Platform which is a two-year project and involved pretty much everybody in the bank. So it's a big deal and we also had three or four others, you know, five or six in total implementations, which you know, does take a certain amount of bandwidth and takes a certain amount of energy and the things that we felt like we needed to do to be able to manage and run more effectively at $9 billion in size over two states and a significant geography. Versus what we could manage and run when we knew everybody follow our all the employees and most of the clients. Is that team had the relationships with you? As you scale, you need better processes. So we and you want better visibility into numbers and managing by those things, including pricing software, you know, as we're thinking about credit exposure, thinking in a more sophisticated way about kind of profitability that incremental client adds to the bank's overall profitability is something that we're better at than we were before because of some of these implementations. So what I meant in my comments was we don't really, although we'll always be incrementally upgrading and incrementally adding, we don't have any implementations that in the aggregate will be as substantial as we had last year, and we'll focus more this year on making sure that we're maximizing the output from the implementation process last year. So it's one thing to do it, it's another to then use it in an optimal manner. And so we wanna focus on making sure that we're actually making better decisions because of the data that we have. We want to make sure that we're providing better client service because of the systems that we've invested in. And we wanna make sure that our employees' efficiency and happiness around doing their job is enhanced. And that we believe involves taking a little bit of a breath and just making sure that we're maximizing the investments we've already made. On the M&A front, yet we're not prioritizing seeking another M&A alternative now. We've made a number of really what we believe to be really good investments and partners throughout the years. And we're beginning to see, believe we have the opportunity now to demonstrate why those good partners not only give us greater opportunity over time and diversified our risk, but also have been good financial partners, leading to increased profitability. And sometimes, you know, the way you can really demonstrate that is to pause the M&A for a second and kinda let the good things percolate and catch up with you. So we saw significant improvement in ROA over the course of 2024. Excuse me, 2025. And I shared with you last time that we intended to be over a 1.2 ROA. Last half of this year, 2026. And so that's become more of a focus for us. Than seeking to expand. We wanna deepen the relationships that we have, which will in turn lead to greater profitability. Which leads to greater tangible book value, which should lead to an enhanced share price. And that gives you more optionality for M&A down the road. And so we're kind of at that point where we believe we've made a number of investments over the years. And we to be able to demonstrate what we know, which is that they were good investments that we've done well. And wanna be able to prove that out a little bit through increased financial performance. Before we take on other initiatives. So gonna execute. We're gonna work on the investments that we've made, and we're gonna be good bankers day to day. And that will translate into increased profitability that that'll be sustainable and that will give us more optionality to embark upon future projects down the road. Michael Rose: Appreciate the comprehensive answer. Maybe just following up on one of those aspects on the capital front. It was good to see buyback announcement you guys execute on it. How should we think about that going forward? You guys are trading at about 1.2x. Tangible. The earn back on the buyback is, I would characterize, fairly attractive. Capital is really going to start to appear once the deals are fully integrated and the cost stays realized. Should we think about you guys at least in the near term, as kind of a regular way buyer just given where you are? You know, just trying to frame up the capital discussion. Thanks. Jude Melville: That's a great question. And obviously, something we're talking about at the board level. We'll continue to talk about. We were able to buy back about 150,000 shares in the fourth quarter, and what proved to be attractive prices 24.7 kind of range. And those were more in the $110 to 115 ROA range or tangible book value multiple range. I think we certainly I would certainly agree with your characterization of one hundred twenty. Still being a reasonable and even cheap price. And over the course of the year, we'll we have more optionality on what we do with capital than we did last year. Last year, we had more than we had the year before because we've been building up those capital levels. So we will definitely continue to look for opportunities on a quarterly basis. I don't see us just setting it and letting it go and saying we're gonna buy back this number of shares no matter what. We wanna we do wanna be pick and choose when the right moments are, but certainly, would think over the long run, anything below one and twenty would be an attractive price. You wanna add anything, Greg? Greg Robertson: No. I'm correct. One thing I'd add, Michael, is that when you think about Q1, we're gonna take a little bit of a step back in tangible book on a per share basis with progressive closing. It would be an effective kind of slightly higher multiple right now than just 120. There's something we're thinking about when we evaluate buybacks. Michael Rose: Perfect. Got it. At the outset, they said keep it to two follow-up questions, I'm going to use that one. Just as we kind of think about hiring from here in the opportunity set, just given some of the dislocation, you mentioned John Hiney was hired as new Houston Market President. You just frame up what you see as kind of the opportunity to hire? I think we've heard mixed messages from some banks are being fairly aggressive. Some are saying, like, take a wait and see approach. Just wanted to see how we should think about the opportunity set for you guys. Or is it just more opportunistic? Making a kind of a full court press here. Thanks. Jude Melville: Yes. Think the answer actually is probably similar to the answer I just gave you on stock buybacks. Right? I think it's kind of a we're prepared to hire and would like to hire if they're the right people. We don't feel any need to hit our in order to hit our profitability targets and our growth targets, we don't necessarily have to hire to do that. But we do know that there are good people out there and they're living in a more disruptive world than they were a year ago. And we know we also are a different bank than we were a year, two years, and three years ago in terms of our capabilities, which also means in terms of our attractiveness as an employer. So why not continue to have conversations. I would expect that we will add another two or three in Houston. Over the next couple months as we've got some conversations and would like to bring those to fruition. And beyond that, it'll really be on a case by case basis. We don't have to hire every banker in the world to do what we wanna do in terms of financial performance. Just need to hire the right bankers, and so we'll focus on evaluating that on a case by case basis as the opportunities arise. But I do think there will be opportunities, and we will be thoughtful about the one reason we can't afford to be a little less aggressive on M&A is that we believe that in our footprint, organic growth is going to be possible. And part of that is growing with our current staff, but part of that is incrementally adding some additional team members. Teammates. And so for the near future, we believe that's a more likely and profitable use of our capital than M&A. Michael Rose: Thanks, Mark. Desiree: Next question comes from the line of Feddie Strickland with Hovde Group. Your line is open. Feddie Strickland: Just wanted to start on the DDAs. I understand the public flows have an impact here, but I do still think they're down a little bit year over year. Can you talk through maybe what the opportunity might be kind of grow those on a year over year basis trying to account for some of the seasonality in this public funds flows? Greg Robertson: I think good question. I think what we still see some migration from some of those non-bearing accounts to interest-bearing. So not a huge piece of that business is actual account. We're losing accounts. I think it's more of migration. That has slowed over the course of 2025. With the addition of our Progressive Bank partnership, they have a nice amount of their deposit base is non-interest bearing. So we should get some lift from that in the first quarter. We still have plans to continue to focus on elevating deposit gathering through treasury and non-interest bearing sources. So it's something that we are looking at in 'twenty six as a big part of our plan of operation. But there has been some movement. Feddie Strickland: Got it. That's really helpful. And just wanted to step back into the feed. Appreciate the guidance there. But obviously, the star of the show was the swap fees, and you saw a brokerage commission fees, I think, up a little bit as well. What's kind of the level of opportunity in each of those areas? And I guess, contributions from SSW and the FIG group as well? Greg Robertson: Yes, see opportunity in 2026 for that to continue to expand. I think it's gonna be like we've kind of really messaged for the last few quarters that it will be a bumpy upward sloping trajectory though. Just like this last quarter was with the swap fees being outsized. I think we're excited about is the continued integration and of our SBA group, Waterstone, out of the Houston area. There's some opportunity we feel like in that to continue to grow not only with our bankers becoming more with SBA production, just the rate environment with SBA lending becoming economically more stable with a lower rate environment. So we're excited about that. I think also, we think the SSW group and the brokerage piece of our business. So to speak. We do continue to see it scaling. We've been investing over the last few years in more talent in that area, and I think we'll continue to invest. So we do look at upside for that. So I think noninterest income is a as a whole, we feel like that will be in the mid to upper $13 million per quarter with the addition of Progressive Group. So we're comfortable understanding that it may be rocky going upward, but think the trajectory is still we're excited about that upward slope. Feddie Strickland: And one more, if I could squeeze it in, on the loan growth and the growth in general coming from Southwest and Southeast Louisiana. Jude, I think you touched on that a little bit. Earlier on. But just curious, I mean, is it going to be a more balanced pace of growth you feel like going forward that it's going to be sort of evenly balanced between Southern Louisiana and the Texas markets? Or is it just going to kind of differ from quarter to quarter depending on what's in the pipeline? I'm just curious whether that's a deliberate part of the strategy or that's just kind of how it shook out this quarter? Jude Melville: Well, the deliberate part the strategy was building the footprint that we knew that not every market had to hit every moment in order to move forward. And delivering up building a footprint that didn't rely upon one market to carry the load. All the time. You know, I do think just based on demographics and differentials between economies, that there's more upward growth opportunity in Dallas and Houston, as just they're just faster growing. Cities, and we have enough of a footprint in both. We'll be able to take advantage of that. But we've got a good core consistent growth in most of the Louisiana markets. In a quarter in which one of our larger markets slowed down a little bit for whatever reason that is. Dallas was slower this quarter. Then we'll have our more consistent markets across Louisiana there to give us some more predictability as we try to forecast out from a balance sheet perspective over time. Yes, I guess the answer to your question is, we specifically say we need to grow Southwest Louisiana and North Louisiana faster in the fourth quarter than the other markets? No. But we did specifically, try to build or put show up the footprint in which we could have different parts of the footprint experiencing greater success different times, which hopefully over time leads to a good consistent moderate growth pace for the bank as a whole. Greg Robertson: Yeah, I think if you think about 2025 as a whole, had both North Louisiana and Southwest Louisiana grow over $100 million in loans and deposits each. And, you know, we're excited about Southwest Louisiana now has over $2 billion in deposits. Which is a large part of our deposit base and an important part of that. North Louisiana with that kind of growth as well, a $100 million in deposits. They are now over $1 billion or approaching $1 billion in deposits with the addition of our progressive partners. Will be approaching $2 billion. So we're excited about those areas and as I said, the Southwest Louisiana, Dallas comparison is an intriguing one because one of the thesis behind the construction of our footprint was that not only with different areas produced differently at different times, but that we could be a little more thoughtful about funding generation versus loan generation depending upon what type of market. So as Greg mentioned, the Southwest Louisiana has been able to be more aggressive on deposits over the past two or three years. Probably because we knew we had growth in the Dallas loan environment. And so Dallas is actually our largest market, as measured by loan volume. And in Southwest Louisiana, it might be our largest market based on deposit volume. They've both been able to be slightly more aggressive because the other supports the other. So it's a symbiotic relationship, and I know a lot of banks over time have talked about the rural versus the urban mix of their footprint and trying to get the best of both worlds. I think we have some real world examples of where that's working. Which is again, I think bodes well for the future. Jerry Vasquez: Yeah, I'd like to add one thing. Really pops. This is Jerry, by the way. Yeah. Jerry, I'd ask you to hear your Betty. Just an important part of this is I wanna call out a lot of this growth is coming from adding new clients. It's not just legacy client base. It's tenured strong, bankers in our footprint. New bankers bringing in new clients, is accounting for quite a bit of that growth, which is really nice to see. In these markets that we've got such strength within. Greg Robertson: Yeah. And so this is still to understand also. Obviously, we're excited with the addition of John and the horsepower that he's gonna bring to the Houston market. But in North Louisiana, we're excited, the progressive addition and the opportunity, as Jude talked about, in '26, deepening our existing relationships, Progressive being a deep in those relationships with a bigger balance sheet. Feddie Strickland: Perfect. Thanks for all the additional color, guys. Jude Melville: Thanks, Feddie. Desiree: Next question comes from the line of Gary Tenner with D. A. Davidson. Your line is open. Gary Tenner: Thanks. Good afternoon. So my questions have largely been answered, but I wanted to just ask about the swap business again. As you think about that business, if and when we get to more of a steady state rate environment, how you see that business kind of trending in that sort of environment? Greg Robertson: Yeah. Think one of the things that the rate environment could provide some challenges, but I think as we continue to scale and understand our philosophy around pricing and fixed rate loan pricing with long duration. We would like to and I think our bankers are becoming accustomed to taking some of those rate bets off the table with longer duration deals. So I think as we continue to integrate that process, and it's a very new process within our bank being only a little over a year old. But I think as we integrate that process with our bankers and our new banks and they understand that we would like to manage that rate risk a longer maturity fixed rate loans. Through the swap vehicle. I think that gives us even in a rate environment that may be more challenging than what it has been, more opportunity. Jude Melville: Yeah. So that's a good point. It's not just about the economic opportunity for the seed generation. It's also an opportunity to offer the client more options even while we put ourselves in a better place to manage our interest rate risk. You know, it's important one reason we added that chart that Matt described earlier, believe, or maybe it was Craig that described earlier, chart showing the pretty consistent NIM over time was we don't believe that we should be taking significant interest rate risk, and we manage only the bank's entire balance sheet, but our investment portfolio, in particular, we manage it for cash flow as consistent predictable cash flow as opposed to yield. And think we've had good results, not trying to guess on rates since so this enables us to give the client what they might want in terms of longer-term predictability of rates, but still enables us to have more flexibility in the construction of our alcove posture. I would also say although certainly the lower rates mean that maybe less swap activity, more SBA activity. The other dynamic for us is that we don't just do these things for ourselves. For our own clients, but we also do them for other banks. And so with the swap product, we are just now I think just yesterday in fact, closed one for one of our first ones for the client of another bank. Another institution in our community bank network. Over the end of last year, we actually closed a couple swaps for other banks, not for their clients, but for their own balance sheet sheets. And so as we were able to discuss with and educate our banker partners on the opportunities to provide more optionality to their clients. I would think that we would continue to see success growing the volume of swaps. Even if it ends up faster rate of growth off our balance sheet as opposed to with our direct clients. Gary Tenner: Great, thank you. Jude Melville: I was going to say real quick on the correspondent banking our biggest opportunity, we have about a little over 175, 180 clients. And with most of them, we just do probably just one thing, I mean, for the vast majority. And so part of our biggest opportunity there that we've been working on is having more of a unified sales approach so that we can actually increase the share of wallet. If you will, and have multiple provide multiple opportunities. So most of the folks that we've done SBA with, we haven't done swaps with and vice versa or the other products that we offer our largest one, actually, and our original one was through our affiliate SSW. Manages other banks' investment portfolios. We have a $6 billion to $7 billion in assets under management, and being able to cross sell the different products that we've been working on adding to our tool set. Think it's the biggest opportunity that we have regardless of the demographic or economic changes in the environment. Desiree: And our last question comes from the line of Christopher Marinac with Janney Montgomery Scott. Your line is open. Christopher Marinac: Hey, thanks for taking the questions this afternoon. I wanted to go back to the reserve. What should be the reserve ratio over time? Just looking at kind of annualized losses this quarter, last quarter, and just thinking the three point five, four-year average life, should the reserve be higher over time even if we included the discount you have on the deck. Greg Robertson: Yeah. I think that's a great question, Chris. I think what we talk about internally is continuing to move that reserve to 1% or higher. I think the charge-offs that we had in this quarter took it down a few basis points. But I think internally, we're reserving at a rate of one twenty on every new loan we make. So over time, we would like that to be above 1%. I think that's our intentions as well. And especially when you add the credit marks in there, I think we're currently all in about one zero six like we show in the deck, and that'll continue to move up with the closing of the Progressive transaction. Christopher Marinac: Got it. And should annualized losses be somewhere kind of in the mid-teens or 20 or you have a thought about that? Greg Robertson: Yeah, would think those would be somewhere in the lower teens to mid-teens. Next year. I think, 10 to 12 basis points of annualized losses. Is what we're kinda thinking. We ended up the year at about 19 basis points. And so we've kinda as we work through some of those NPLs, we've identified paths to move those off with minimal to no loss. So it's a matter of time unwinding some of those. Jude Melville: We took some losses on them last year. Yep. And have some specific reserves as well. There could be a bit of a drag in terms of the actual recoveries. So gross, to Greg's point, is maybe in the mid-teens, net kind of lower. To low double digits. Annualized. Chris, I think the days of us operating in the four to five basis points of charge-offs that's going to be tough going forward. Think it's just for the industry as a whole. Christopher Marinac: Sure. Greg Robertson: Yep. Christopher Marinac: Great. And the last question just has to do with kind of efficiency goals over time. If you look at expenses to assets, you've made a little bit of progress in the last year. Obviously, you've got integrating with Progressive, but just in the big picture, do you think we'll see more leverage going through the platform this next twelve to eighteen months? Greg Robertson: Yeah. I think our plan is to continue to improve operating leverage. Think as we as Jude mentioned, we're moving toward being able to have a run rate of fourth quarter of 120 run rate. I think if that's achieved, then I think that thing gets close to 60. On an annualized basis. And then, you'll probably start seeing on a monthly basis, into the fifties post integration of Progressive. Here and there as we continue to prove improve performance and earnings throughout the balance of the second half of the year. As we get into 2027, we would expect that our goal is to have that into the 50s. And I think there's once you kinda achieve those third quarter, fourth quarter twenty six ROA targets that we've been talking about, then there's a pretty natural glide path into the 50s. I think that we feel like it's very achievable. And necessary. Christopher Marinac: Great. You again, guys. Appreciate taking the time. Jude Melville: Thanks, Chris. Thank you. Desiree: That concludes the question and answer session. I would like to turn the call back over to Jude Melville for closing remarks. Jude Melville: Okay. Well, thanks again, everybody, joining us. I realize you have choices to make on your time and your attention, and I appreciate you spending this hour with us. Very pleased with the quarter and how we ended the year and it matched up well with our expectations of building momentum over the course of the year. And I look forward to seeing that momentum continue in 2026. So thank you all again, and hope you have a great end of the week. Desiree: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to Pathward Financial's First Quarter Fiscal Year 2026 Investor Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Darby Schoenfeld, Senior Vice President, Chief of Staff and Investor Relations. Please go ahead. Darby Schoenfeld: Thank you, operator, and welcome. With me today are Pathward Financial's CEO, Brett Pharr; and CFO, Gregory Sigrist, who will discuss our operating and financial results for the first quarter of fiscal year 2026, after which, we will take your questions. Additional information, including the earnings release, the investor presentation that accompanies our prepared remarks and supplemental slides may be found on our website at pathwardfinancial.com. As a reminder, our comments may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and anticipated results to differ. The company undertakes no obligation to update any forward-looking statements. Please refer to the cautionary language in the earnings release, investor presentation and in the company's filings with the Securities and Exchange Commission, including our most recent filings for additional information covering factors that could cause actual and anticipated results to differ materially from the forward-looking statements. Additionally, today, we will be discussing certain non-GAAP financial measures on this conference call. References to non-GAAP measures are only provided to assist you in understanding the company's results and performance trends, particularly in competitive analysis. Reconciliations for such non-GAAP measures are included in the earnings release and the appendix of the investor presentation. Finally, all time periods referenced are fiscal quarters and fiscal years, and all comparisons are to the prior year period unless otherwise noted. Now let me turn the call over to Brett Pharr, our CEO. Brett Pharr: Thanks, Darby, and welcome, everyone, to our earnings conference call. We kicked off the year in a position of strength. And overall, we are pleased with the financial results the team achieved in the quarter. I want to take a moment to talk about what we do, how we do it and why we believe Pathward is uniquely positioned as a leader in this space. Whether you are an investor, analyst or another member of the financial community, you likely have an understanding of how a traditional bank works. Banks take deposits from individuals or corporations, lend those deposits and move money. In this, Pathward is no different. Where we differ is how we do those things. First of all, we move money. Where we differ is we work with partners and facilitate payments through issuing sponsorship, merchant acquiring sponsorship, independent ATM sponsorship, consumer credit sponsorship and digital payments, assisting them with the moving of significant amounts of money relative to our size across the nation. In issuing sponsorship, we move money and facilitate payments via products such as prepaid cards, gift cards, loyalty cards, payroll cards and general purpose reloadable cards. With over 20 years of experience in payment facilitation, Pathward's value proposition is anchored in 4 principal pillars: Our leadership is seasoned and has deep expertise in payments and sponsorship; second, our combination of people, processes and operating structure delivers a streamline approach to banking and provides reliable and sustainable partner programs; third, we deliver partnership with a commitment that enables our partner success; and lastly, a consultative governance approach rooted in our stable risk and compliance infrastructure that helps partners manage a regulatory framework that is also complex and difficult to manage. Second, we hold deposits. Where we differ is that generally, our issuing partnerships provide Pathward with stable deposits. As one of the most mature and experienced sponsored banks, we work with our partners to help them grow scale and co-create solutions that facilitate innovation. Because of our differences, we are able to generate significant fee income, this leads us to lending. Like other banks, we lend our deposits. However, we specialize in working with businesses that for a multitude of reasons, may not be able to work with or borrow from a traditional bank. We provide lending products that help these businesses access funds they need to launch, operate and grow. In some cases, we are also working through partners to originate commercial finance loans. Pathward strengths help us deliver on our purpose of financial inclusion. Our partnerships offer financial solutions that help individuals and businesses who are underserved, underrepresented or even unbanked. Additionally, as our world grows increasingly dependent and relied upon digital-first or digital-only solutions, Pathward's role in fulfilling the needs of these individuals and companies, both expand and increases. While at a high level, we operate the same as the traditional bank. We believe it is our unique value propositions, partnerships and position in the marketplace that allows us to help a greater variety of consumers and businesses as well as generate results that we believe exceed those of a traditional bank. This is characterized by a disciplined balance sheet optimization and fee income working together to generate positive performance. Last year, our return on average assets was over 2%. Our return on average tangible equity was over 38% and roughly 40% of our revenue came from noninterest income. Our business model optimizes our long-term strategy, being the trusted platform that enables our partners to thrive. Our 2026 goals are off to a great start. As part of our commitment to the client experience, we announced the rollout of an evolved operating model last month. We firmly believe this model better aligns with our partners by supporting their growth and scalability and creating a more seamless experience. Each of the respective leaders have strong, relevant industry background and a solid commitment to Pathward's culture. We believe this decision ultimately positions our clients for greater success and revenue enablement and the company for increased innovation and growth. Building upon the progress we've made over the last few years, we believe revenue growth will come from 3 main areas during the fiscal year. It's important to note that we have prioritized areas that are not dependent on growing our balance sheet in order to grow revenue. First, we have additional capacity to optimize the balance sheet through the continued rotation from securities to loans, increasing net interest income without growing the overall asset size. As we continue to optimize, we are also looking at the yields of each asset, and we intend to continue to favor areas where we believe we have a competitive advantage to deliver a higher risk-adjusted return or optionality. This leads to the second area of revenue growth, fee income from balance sheet velocity. Our business model supports the ability to originate and sell loans, thereby generating additional revenue. By utilizing velocity for both commercial and consumer loans, our balance sheet can remain steady, while generating both interest income and noninterest income for the business. Finally, in 2025, we announced multiple contracts for products such as merchant acquiring sponsorship, which has little impact to the balance sheet that generates noninterest income. Money movement, specifically issuing sponsorship was how Pathward entered into sponsored banking and is still the core of our business. But with our partner searching for a bank that can provide multiple products outside of issuing, offering multi-thread solutions across a breadth of banking needs is an important differentiator. Finally, tax season has begun, and we are 1 step ahead with over 11% more enrolled tax offices than at this point last year. We do look forward to a number of possible benefits. First has to do with the change in tax code for 2025. We believe this change has the potential to drive more consumers into the tax preparation offices that we serve. Second, we exited last year's season with renewed agreements across all of our tax software partners. And finally, we continue to make technology improvements throughout the year for greater efficiencies when compared to years past and look forward to reaping those benefits in 2026. As an industry leader in tax-related financial products, we pride ourselves in offering one of the most comprehensive product mixes in the tax industry including products and services like refund transfers, refund advances, ERO loans and facilitating refunds on prepaid cards. We feel confident that we will be able to deliver on our goals and look forward to providing a more robust tax update next quarter. Now I'd like to turn it over to Greg, who will take you through the financials. Gregory Sigrist: Thank you, Brett. We were pleased with our results in the quarter, which were marked by solid growth in our core business, growing interest income and commercial finance with a lower provision, increasing core card and deposit fee income and flat expenses. Let me start with the sale of the consumer finance portfolio we mentioned on last quarter's call, which had an impact on several income statement line items, including an $11.9 million reduction to net interest income. This amount is largely offset by reduced provision and lower other expenses. So while optically, it appears that these income statement line items are lower year-over-year, the net impact is quite muted. Similarly, net interest margin has been reduced by this gross-up amount, while the offsetting line items were in areas that do not impact NIM. Within net interest income, Contribution from commercial finance increased $9.2 million in the quarter due to higher balances and slightly higher yields given our continued focus on optimization. Provision for credit losses was lower than last year, in part due to a recovery from a commercial finance loan that moved into nonperforming during the first quarter of last year. Given our approach to collateral management and monitoring, we are often able to work out or resolved loans that have moved into nonperforming status, recovering most, if not all, of the funds. It may take us a few quarters but this is why we focus more on annualized net charge-offs than nonperforming loan volumes. I'll highlight this because, as we have mentioned previously, this is the nature of our business and an example of why we are comfortable with our credit trends. We reported solid results and noninterest income, particularly in core card and deposit fees. If you remove the impact of servicing fees on custodial deposits, which decreased as expected by about $1 million, we saw good growth in that line. This reflects some of the new partners we announced in fiscal 2025 beginning to show up in our revenue numbers. Due to the government shutdown, we fell just shy of our goal range for secondary market revenues but we believe this is just a timing impact, and we expect to make that up in subsequent quarters. Finally, we saw a decrease in rental income due to lower balances and operating leases. However, this is largely offset in noninterest expenses in the form of lower operating lease equipment depreciation. Noninterest expenses were well managed during the quarter, coming in slightly better when compared to last year. We saw lower rate-related card processing fees, primarily due to a lower rate environment. This led to net income of $35.2 million and earnings per diluted share of $1.57, showing significant increases of 17% and 28%, respectively, when compared to last year. In addition, annualized performance metrics were also strong for the first quarter. Keeping in mind our normal seasonality with return on average assets of 1.87% and a return on average tangible equity of 26.7%, compared to 1.61% and 25.5%, respectively, during the same quarter last year. Deposits held on the company's balance sheet at December 31 totaled $6.4 billion, which is a $170 million decrease versus a year ago. This was primarily driven by having $200 million more in custodial deposits at the end of the first quarter when compared to last year. Average deposits on the company's balance sheet during the quarter were around $90 million higher than last year's quarter. Average custodial deposits during the quarter decreased slightly when compared to last year. During the quarter, we saw favorable deposit balances at multiple partners due to a strong holiday season and continued partner growth. Loans and leases at December 31 were $5 billion, compared to $4.6 billion last year. The primary driver of the increase was $531 million increase in commercial finance loans, partially offset by a $148 million decrease in consumer finance loans. Additionally, during the quarter, we originated $1.9 billion in loans with $678 million in commercial finance and $1.2 billion in consumer finance. We are quite pleased by the growth in consumer originations, which was driven in part by the new contract we announced last year. This loan production is the engine behind our balance sheet optimization strategy, which includes balance sheet velocity. Our nonperforming loans ticked up slightly when compared to last quarter. We continue to monitor loans we discussed on the prior quarter earnings call. As we indicated then, these loans are in different verticals, and we do not believe represent a systemic portfolio issue. We continue to believe that there is a path forward to resolving these loans in due course over the next several quarters. To reiterate an additional point we made last quarter, when you compare our historic NPLs to NCOs, we do not believe there's a correlation between them. As I mentioned earlier, because we take a collateralized approach to underwriting and credit management, we generally focus on our annualized net charge-offs since we have risk mitigation techniques designed to address past due and nonperforming loans built into our lending process. This quarter is a good example of what we are describing. Our total NCOs as a percentage of average loans when excluding tax services loans was 2 bps on an annualized basis. In commercial finance, our net charge-offs were actually a net recovery for the quarter, and our trailing 12-month net charge-offs are at 39 basis points. Our allowance for credit loss ratio in commercial finance was 116 basis points in the quarter, a slight improvement when compared to 118 basis points for the same quarter last year. Our liquidity remains strong with $3.7 billion available, and we're extremely pleased with our position at this point in the year. During the quarter, we repurchased approximately 652,000 shares at an average price of $72.07. This leaves 4.3 million shares still available for repurchase under the current stock repurchase program. We are increasing our fiscal year 2026 guidance to an EPS range of $8.55 to $9.05, which includes the following assumptions: no additional rate cuts during the year; an effective tax rate of 18% to 22% and expected share repurchases. This concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] The first question comes from Tim Switzer with KBW. Timothy Switzer: The first 1 I have is on the NIM trajectory. A lot of moving parts this quarter, which makes sense. And I think you guys did a good job of laying it out. But if we think about the adjusted NIM, what is the right way to think about the jumping off point for Q2? And then how do we think about the trajectory over the course of the year within your guide, assuming no rate cuts? Gregory Sigrist: Yes. Let me give you a couple of data points first, Tim, that might help frame the conversation. I think what's given it a bit harder to look at this quarter is obviously, the gross uptick we've had on the consumer loans, which are part of that calc, even though they offset someplace else. So if you strip out all of the impact of the net income -- net interest income related to the gross HFI consumer loans, you would have had an adjusted NIM of 5.11% a year ago. Last quarter would have been 5.31%, and this quarter would have been 5.49%. So you can tell, both linked quarter and prior year where the trajectory has been up. As it relates to just interest rate sensitivity in the portfolio, though, the story remains the same, candidly. Every incremental 25 basis point overnight rate cut continues to have a very de minimis impact on us. We are still very sensitive to the middle part of the curve, which means that with the steepening we've seen over the last 4 to 6 weeks and just where the outlook is, the forward curve is on the middle part of the curve. I think that 5.31% is the launch point for the second quarter. And again, as long as the macroeconomic environment stays muted and middle part of the curve is elevated. We still have some tailwinds. So I think we're flat to up from that point. Timothy Switzer: Okay. Got it. Very helpful. And I appreciate all the color you provided on the credit outlook and the charge-offs. Are you able to quantify what that recovery was that you recorded this quarter within net charge-offs? Gregory Sigrist: No, I think you'll see the chart in the earnings release. It just has more of the aggregate number. So it's within that roll forward on the ACL, Tim. Timothy Switzer: Got you. Okay. And then another question I had, maybe a little more philosophical, but there's been a lot of discussion lately about fintechs wanting to obtain their own bank charters. I think there is a few more -- or not fintech, there are ILCs announced earlier today. And most of the discussions about in the [ BaaS ] world has been, how it could be a threat with partners no longer needing a bank sponsor. So could you respond to that? And could you also maybe outline how there might be some opportunities here, if any? Brett Pharr: Yes. So this is Brett. So I think the way you think about this is, yes, we're in a clearly a more relaxed regulatory environment as it relates to getting these charters on. It takes a lot of time to build the scale, to be able to do the kinds of things that we do, even if you've got a lot of dollars behind you. And so yes, there will be some of the happening. But I think sort of the history longer term has been people that have bought bank charters have often given them back because they realized what they had. Now that's not going to happen under current administration, but it will happen under other administrations as we look forward. We have some partners that have gotten those and then came to us and did additional transactions with us and talked about more because there's very narrow things they can do within those charters, and we can do a whole lot more. Don't forget, we have a multi-threaded approach with our partners, and that is to offer many different kinds of products. And some of these charters are not really going to allow that to happen. So a, not seeing it; b, I think it's going to be a long time before it creates any competitive pressure. And I also think these things go in cycles. And so just think about it through the cycle is the way we should think about this kind of competition. Timothy Switzer: Got it. Yes, that all makes sense. And sort of related to this, some of the fintechs going to obtain more often the custody charter are stablecoin or other digital asset companies. And Brett, you gave a great overview of the business earlier and you talked about some of the opportunities. I don't think you mentioned digital assets at all. Is that an area you guys want to play in? And what kind of role do you think part Pathward can play? Brett Pharr: Yes. So there's all kinds of things that we can do. We're already doing some things in the crypto space in terms of onboarding and offboarding the fiat currency, et cetera. To be clear, we don't hold any of those digital assets today. But we're looking at all those things. And my sort of personal view is that this is first a B2B use case and there's a lot of cool things there. And we're talking to partners and other material players about ways we can play in that space. My view right now is it will be an additional rail among many rails and we'll continue to work on that. And as our partners pull forward and as use cases come forward, we'll engage in it because it's definitely part of the future. Operator: Our next question comes from Joe Yanchunis with Raymond James. Joseph Yanchunis: SO in your prepared remarks, you talked about a lot of the new partner announcements in 2025, and it looks like they're really just started to impact the P&L. And I was wondering if you could unpack the amount of kind of embedded growth from this cohort of partners that hasn't yet shown up in your financials. Gregory Sigrist: Yes. I mean I'd be happy to. As you recall from last quarter, I mean, these kind of span the gamut from merchant acquiring, might have been an issuing [ deal or two ] in there, and one up in the credit solution space. And each of those has a different path to time to revenue. And we're obviously onboarding all the entire cohort as rapidly as we can. And then each of those programs need to build, right? But once each of those programs is launched and live, I would expect contribution to a full 12-month run rate on the card fee line to be somewhere in the middle to high single digits, and that's just based on those programs. And I think as we talked about last quarter, we are still actively working on multi-threaded approaches with many of those that we've announced, too. So that cohort alone, again, mid- to high single digits and we're seeing what we -- how we can scale from there. Brett Pharr: Yes. And Joe, this is Brett. I mean we're getting very enthusiastic about the pull-through on these partners and others were talking both existing and future. We went through a period of time where there was some crazy pricing and structures in this particular industry, and we chose to abstain. But that's long been washed out, and these things are picking up. And we've often said to you, it takes a little time for the programs to build. This quarter, you're seeing it. And we're -- there's a reason we're saying what we're saying about guidance. We're seeing it happen. And we'll continue to think about that through the rest of the year as we go on. This is an upbeat time for us, and that's why we're thinking about these partners and others who are talking about. Joseph Yanchunis: Perfect. And I'm going to get to your updated guidance in a moment. I just kind of wanted to pick up something you just said there. So you just talked about the washout of the irrational pricing and you're starting to see some normalization from partners. What does your current partner pipeline look like today? And should we expect a similar number of announcements in the calendar year or fiscal year ahead? Brett Pharr: I mean, the part -- your first part of your question is easy to answer. The pipeline has never been more full. We're very excited about it, et cetera. You don't know until they're done, right? So as we can and we kind of publicly agree to talk about it publicly, we will let you know about those things. But this is -- I mean, these kinds of things are only increasing, not decreasing. And there's been a lot of sense that has been brought into this marketplace. So we're going to get lots of swings at it, and we're winning some of those swings and we're going to keep going. So pipeline is as big as it's ever been. Joseph Yanchunis: That's great to hear. And then kind of going back to your guide, so you raised the midpoint by a pretty substantial amount. Can you help us think of the puts and takes in relation to the updated outlook? And what would need to happen for you to reach the top end versus the bottom end of the new ranges? Brett Pharr: I think part of it is we've talked about these new partners that have come on, and we're seeing the benefits. But as you begin working with a new partner, you kind of learn what's the trajectory. You have sort of a funnel of opportunity and some get to the higher end of it, some get to the lower. We are now confident on that funnel to do what we did. And so as we go through the course of the year, and we continue to monitor those new partners coming on and feel solid that it's actually going to happen is not just a hope. We'll continue to talk about where we are in that funnel. Gregory Sigrist: Yes. And I think the other thing is tax season too, right? I mean as we think about our guide, we clearly think to a multitude of different scenarios across our businesses. And I think Brett kicked through some of the positives on the tax business heading into tax season here and we're really enthusiastic about it. But I agree with Brett. I mean the 2 factors that are going to push us to the higher end of that guide. One is the timing on just the pull-through on those partners we talked about, the ones we've already announced. The other is going to be the success of the tax season. We're really enthusiastic about it. But until you get into tax season, you start to see the numbers, you've got to temper expectations a little bit, but we're really, really enthusiastic heading into it. Brett Pharr: Yes. One other thing, don't miss the secondary market income topic this time, the government shutdown slowed us down a little bit. I think this was in Greg's comments, and we expect that to come right back through because that was a temporary thing. And so we have that to look forward to as well, and that's part of what we're seeing. Gregory Sigrist: Yes. Joseph Yanchunis: So it sounds like the 2 biggest swing factors are somewhat out of your control, depending on partner ramp and the volume that goes through the tax offices. Is that fair to say? Brett Pharr: Yes. I mean I think out of our control would be more like there's a range of possibilities, and we'll continue to manage those and hope for the upper side of it. But you don't know until you know. And what we don't want to do is overcommit. Joseph Yanchunis: That's fair. And then just kind of one last one for me here. So new loan originations increased pretty meaningfully in the quarter. I understand part of that was due to some of the new relationships on the consumer side? Do you have a sense for what new originations will look like in [ 2016 ]? And should we expect kind of held for sale balances to increase in tandem with that? Or with the velocity kind of coming through the balance sheet increase just to kind of mitigate that upward movement? Gregory Sigrist: Let's unpack that a little bit. I mean, in the quarter, we certainly saw the uptick on the consumer side. And as you know, those are, by and large, largely held for sale at this point and turn pretty quick. I'm optimistic that as the existing partners ramp and scale that, that volume is going to continue to certainly on a year-over-year basis, scale versus where it was. And I think scale from what we're seeing in this quarter. So again, that's all balance sheet velocity and that will largely come through as a fee income. There's -- some of those programs do have interest income as part of them, but the majority of the economics come through is on the fee side. We haven't touched it on the commercial finance side. They also had a really good quarter on the production side. And when I think about the balance of the year, that's also a pipeline that's really full, particularly when you think across USDA, SBA, working capital, and with the balance sheet optimization work that we've been doing, for those 3 verticals, in particular, particularly USDA, it's about optionality. So I think we're really enthusiastic about that pipeline, too, and the optionality it provides us either to continue to hold on balance sheet or as we see fit kind of sell into the market and drive some secondary market revenues. But over the balance of the year, I would actually expect commercial finance to start generating numbers that are meaningful enough that we're going to start talking about them. Joseph Yanchunis: I appreciate that. And then just actually one more for me on credit. I understand that you went over in your prepared remarks, NPAs, NPL ratios ticked up, NCOs are basically 0. Is there anything that you currently see in the portfolio that you find incrementally different versus 3 months ago? Brett Pharr: No. I mean, again, these things that we have that are nonperforming loans are in various different sub-asset classes. There's no pattern system or anything like that. And we're serious about our conversation that our historical past and our belief is, there's not going to be a relationship between NCOs and nonperforming loans because we do a different kind of lending that is very much collateral managed. So I -- there's nothing in there systematic. Operator: [Operator Instructions] There are no more questions remaining at this time. I'll pass it back over to the team for closing remarks. Brett Pharr: All right. Well, thank you very much for joining today. Have a good evening. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
Operator: Welcome to the SLM Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the prepared remarks. We ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to Kate deLacy, Senior Director and Head of Investor Relations. Please go ahead. Thank you, Laurie. Kate deLacy: Good evening, and welcome to SLM Corporation's Fourth Quarter and Full Year 2025 Earnings Call. It is my pleasure to be here today with Jonathan Witter, our CEO, Peter Graham, our CFO, and Elizabeth Brinoff, Managing Vice President of Strategic Finance. Operator: After the prepared remarks, we will open the call for questions. Kate deLacy: Before we begin, keep in mind our discussion will contain predictions, expectations, and forward-looking statements. Actual results in the future may be materially different from those discussed here due to a variety of factors. Listeners should refer to the discussion of those factors in the company's forward 10-Q and other filings with the SEC. For SLM Corporation, these factors include, among others, results of operations, financial conditions, and/or cash flows, as well as any potential impacts of various external factors on our business. Additionally, this discussion and the earnings presentation include non-GAAP financial information, including non-GAAP delinquencies, including strategic partnerships and repayments, non-GAAP reserve rates, including strategic partnership warehouse loans, and non-GAAP NCOs as a percentage of average loans in repayment. All non-GAAP financial information should be considered as supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. The company believes that these non-GAAP financial measures provide users of our financial information with useful supplemental information that enables a better comparison of the company's performance across periods. There are many limitations related to the use of these non-GAAP financial measures. And their nearest GAAP equivalent. For example, the company's descriptions of non-GAAP financial measures may differ from the non-measures used by other companies. For descriptions of the non-GAAP financial information included herein and reconciliation to the most directly comparable GAAP measures, please refer to the appendix to the earnings presentation beginning at Slide 13. We undertake no obligation to update or revise any prediction expectations or forward-looking statements including non-GAAP forward-looking statements. To reflect events or circumstances that occur after today Thursday, January 22, 2026. Thank you. And now I'll turn the call over to Jonathan Witter. Thank you, Kate and Chloe. Good evening, everyone. Jonathan Witter: Thank you for joining us to discuss SLM Corporation's fourth quarter and full year 2025 results. I'm pleased to report on a successful year and discuss our strong outlook for 2026. Overall, the private student lending sector remains robust and is positioned for further success. College enrollment and specifically enrollment trends for many of our largest Tier one schools are up. Indicating students and parents continue to see the value of higher education. Our cosigner rates for new originations have also increased. Indicating parents and loved ones are willing to co-invest in the education for their students. Recognizing that some recent graduates are feeling the impact of current economic uncertainty and technological change, unemployment rates for recent graduates are still comparatively low and most are finding gainful employment within six months of graduation. As AI transforms the professional landscape, we believe education will be even more important as students acquire the skills necessary to remain competitive in the future. Undoubtedly, schools and programs will evolve creating new areas of study to meet those needs. We look forward to supporting our school partners and students throughout this evolution. We are excited about the opportunity created by the recent federal student lending reforms. These changes should reduce the likelihood of students and families taking on unsustainable levels of student debt. These reforms also create the opportunity for us to help more students and families. We believe that when fully phased in, PlusReform could contribute an estimated $5 billion in annual originations for SLM Corporation, representing approximately 70% originations growth over 2025. In 2025, SLM Corporation delivered our inaugural private credit strategic partnership. This innovative first-of-its-kind agreement combines the more predictable earnings profile of our bank, with the capital efficiency and risk transfer benefits of our loan sale program. We believe the economic value of this partnership is comparable or superior to other funding models. This arrangement includes no clawbacks, and the supplemental fee which represents the smallest portion of the overall economics, is tied to clear reasonably achievable return thresholds. In addition to the strategic progress, we also delivered well against our guidance for the year. GAAP diluted EPS in the fourth quarter was $1.12 and our full year GAAP diluted EPS was $3.46 compared to $2.68 in 2024. Private education loan originations for the 2025 were $1.02 billion and for the full year, we originated $7.4 billion of private education loans, 6% over 2024 and at the higher end of our revised full year guidance. Net charge-offs for our private education loan portfolio were $98 million in the 2025, $346 million for the full year representing 2.15% of average private education loans in repayment. Which is down four basis points from the full year of 2024. Peter Graham will now take you through some additional highlights. Peter? Peter Graham: Thank you, Jonathan. Good evening, everyone. We continued our capital return strategy in the fourth quarter. Repurchasing 3.8 million shares for $106 million for a total of 12.8 million shares $373 million over the full year 2025. Since January 1, 2020, we've reduced the shares outstanding by over 55% at an average price of $16.93. Our prior share repurchase authorization was nearing completion, and tonight, we are announcing a new two-year $500 million authorization. Our net interest margin was 5.21% for the quarter. 29 basis points higher than the prior year period and 5.24% for the full year. Up five basis points year over year. These results demonstrate the effectiveness of our asset and liability management strategies, which delivered NIM in the low to mid 5% range. In the 2025, we reported a $19 million negative provision for credit losses. Largely driven by the release of reserves tied to the $1 billion seasoned loan portfolio sale, the selection of a portion of the 2025 peak season originations for sale to the KKR strategic partnership. In our investor forum last month, we noted that as our updated strategy begins to scale, key performance metrics would begin to shift. As part of our evolve strategy, we are no longer exclusively selling portions of our seasoned loan portfolio. For the first time, we are also selling newly originated loans. This will change the composition of our bank-owned loan portfolio. Additionally, we are selecting each quarter a representative portion of new originations and warehousing them for sale in the subsequent quarter. As a result, we expect a portion of our new originations each quarter to be designated as held for sale. As many of our credit metrics are calculated using only loans held for investment, or include a portion of newly originated loans as part of their calculation. This change in loan sale strategy has begun to influence a number of reported metrics. To support your analysis and ensure transparency, we have added an appendix beginning on Page 13 of the earnings presentation furnished with our release this evening. Outlining how these metrics have begun to shift. And providing the clarity needed to establish refresh baselines for forward-looking models. Importantly, the shift in these metrics is primarily driven by calculation mechanics rather than a change in the underlying performance of the loans in our portfolio. It's important to note certain information referenced tonight and provided in the earnings presentation includes non-GAAP metrics. We believe we're useful to understanding the comparative performance of our portfolio. A reconciliation of the non-GAAP to GAAP metrics can be found in the appendix to the earnings presentation on Pages 18 and 19. With that foundation in place, we can turn to the discussion of our credit metrics. The total allowance as a percentage of private education loan exposure which we refer to as the reserve rate, was 6% at the 2025. Up from 5.93% in the previous quarter and 5.83% at the 2024. As shown on Page 15 of the earnings presentation, when adjusting for the change in loan sales strategy, the non-GAAP reserve rate would have been 5.92%. Net charge-offs our private education loan portfolio in the 2025 were 2.42% of average loans in repayment. Compared to 2.38% in the year-ago quarter. As shown on Page 16 of our earnings presentation, when adjusting for the change in loan sales strategy, the non-GAAP net charge-off rate would have been 2.4%. Private education loans delinquent thirty days or more represent 4% of loans in repayment as of the end of the year. Unchanged from the third quarter and up from 3.7% at the 2024. Adjusting for the change in loan sales strategy, the non-GAAP delinquency rate would have been 3.88% as shown on Page 17 of the presentation. Over the 2025, we saw an increase in early-stage delinquencies. Prompting questions whether that was a precursor to higher charge-offs. As we noted then and continue to believe now, volatility in early-stage delinquency is not necessarily a reliable indicator of future net charge-offs. As shown on Page 10 of the earnings presentation, an analysis of the relationship between annualized thirty-day plus delinquency and net charge-off rates shows a 12 percentage point improvement in the LINK ratio since 2022. Demonstrating the diminishing connection between the two metrics. We believe this is driven at least in part by improvements in our collections effectiveness. Moreover, late-stage delinquencies and roll rates have remained stable consistent with our expectation that most early-stage delinquencies self-cure. As discussed for several quarters, our expanded loan modification volumes are nearing the point of being fully seasoned. And we will begin to see borrowers whose loans were modified under the expanded loss mitigation programs at the 2023. Exiting these programs throughout 2026. While longer-term performance will become clearer throughout the upcoming year, we continue to be pleased by the results we are seeing from borrowers currently enrolled in these programs. As you can see on Page 11 of the earnings presentation, more than 80% of these borrowers successfully complete their first six payments. Additionally, close to 75% of borrowers who are enrolled in a loan modification during the 2023 are current at the 2025. Representing over twenty-four months of positive payment. This performance is consistent with what we are seeing in other modification cohorts. Non-interest expenses for the full year were $659 million compared to $642 million in 2024, a modest 2.6% increase year over year. And below the midpoint of our guidance. We're pleased with this outcome which reflects our disciplined expense management, continued focus on efficiency. This discipline enabled us to deliver an efficiency ratio of 33.2%. In 2025. And finally, our liquidity and capital positions are solid. We ended the quarter with liquidity of 18.6% of total assets. At the end of the fourth quarter, total risk-based capital was 12.4%, and common equity Tier one capital was 11.1%. We believe we are well-positioned to grow our business and continue to return capital to shareholders. I'll now turn the call back to Jonathan Witter. Jonathan Witter: Thanks, Peter. Let me conclude with a discussion of our 2026 guidance. And provide some additional context on potential future trends. 2026 presents an exciting opportunity for our company to serve more students and families. The second half of the year, we expect that the first wave of students subject to the new plus caps will begin their undergraduate and graduate journeys. This impact will be relatively smaller in the first year of phase-in. Nonetheless, we expect full year 2026 private education loan origination growth of 12% to 14%. We believe this is an incredibly attractive opportunity for our company and we need to invest ahead of the anticipated volume. As such, expected non-interest expenses for the full year of 2026 will be between $750 million and $780 million. Driving this year-over-year increase are three factors. Approximately 20% is growth associated with cost increases tied to normal market conditions. Approximately 40% of the increase reflects one-time investments in product enhancements, refined credit models, and other strategic enablers. And the remainder stems from higher marketing and acquisition costs required to capture the additional Plus-related volume. We do not expect this level of year-over-year expense growth to continue. In 2027, we expect the rate of operating expense growth to be roughly half that of 2026. As the cost of growing volume is offset by efficiency gains and the sunsetting of one-time investments. Assuming our volume estimates are correct, we anticipate that we will improve our efficiency ratio each year with the goal of being back in the low 30s no later than 2030. Given the strategic and financial attractiveness of our private credit partnership business, we expect to grow that business in 2026. As a result, we anticipate private education loan portfolio growth to be flat to slightly negative year over year. Beyond 2026, we expect to maintain an appropriately sized bank that continues to serve as a strategic growth engine, a funding risk mitigant, and a healthy competitive alternative to our private credit partnerships. Accordingly, after 2026, we expect to grow the bank portfolio gradually by roughly one to two percentage points per year until reaching a steady state annual growth rate in the 30% to 40% of our private student lending originations will flow through strategic partnerships with additional balance sheet growth managed through seasoned portfolio loan sales. We expect net charge-offs for our total loan portfolio will be between $345 million and $385 million. As shown on Page 16 of our presentation, we believe this is consistent with a stable credit outlook. Let me conclude with a discussion of full year diluted earnings per common share which we expect to be between $2.7 and $2.8 in 2026. This range reflects the deliberate choices we made to launch the strategic partnership in 2025, and invest aggressively to capture the plus opportunity. While 2026 is a critical year in our strategic journey, I'm even more excited about what comes after. While we cannot predict the future macroeconomics or other changes. If the plus TAM materializes as we have predicted, we would expect to see EPS acceleration beginning in 2027 with high teens to low 20% growth. Beyond 2027, we expect our EPS growth to remain elevated for several years as the Plus opportunity is fully realized, and our strategic partnership business grows. In closing, we are excited about our company's future and the opportunities ahead. We believe students will continue to seek access to higher education to obtain the skills necessary to compete in the future. That plus reform will open the door for SLM Corporation to compete for and win business with an exciting new group of customers. Creating meaningful upside for future originations, And then our private credit strategic partnerships business will give us a capital-efficient and risk-balanced way to fund growth while building more predictable and recurring earnings streams. Taken together, we believe these dynamics should translate to very attractive value creation opportunities for the company, and for our investors. With that, Peter? Go ahead and open up the call for some questions. Operator: The floor is now open for questions. Again, we ask that you pick up your handset when posing your questions. Our first question comes from Caroline Latta with Bank of America. Line is open. Caroline Latta: Hi. Can you talk about how you guys think about the postponement of wage garnishment and treasury offset will impact the performance of in-school and private student loans? Jonathan Witter: Yeah. Sure, Caroline. I'm happy to. First of all, I think it's important to remind folks that while many of our customers have federal loans, most federal loan customers do not have SLM Corporation private student loans. And I think in general and we've talked on past calls about just the difference in performance and impacts that we've been seeing as the federal program has gone through various stages of its evolution. In general, I think for any customers who have federal loans, who are severely delinquent, and I think our estimates suggest that number is quite small. The postponement is obviously a net benefit. I don't think we would expect that to have a significant impact on our business just given the difference in customer basis. Caroline Latta: Okay. Thanks. And then a quick follow-up one. You guys highlighted the $5 billion origination or opportunity from the Grad PLUS. Which is driving some of the origination growth year over year. Given those changes come into effect in July, how should we think about modeling 1H versus 2H growth? Peter Graham: Yes. I think we've talked on prior calls about kind of the staging of this. If you think about it, it is new freshmen in the undergrad class and new to graduate school for graduate programs, you know, beginning in the fall academic period. And so you know, think about that in the context of a four-year program as, like, one-fourth of the volume and you know, grad programs can be some a little shorter and some a little longer than that. So we're expecting the sort of the incremental plus volume this year to be relatively modest and that's included in our guidance on growth for this year. And we expect that to step up measurably as we move through the next two to three years until it gets to kind of a steady state. Caroline Latta: Okay. Thank you. Giuliano Bologna: Mhmm. Operator: We'll take our next question from Giuliano Bologna with Compass Point. Your line is open. Giuliano Bologna: Hi. Peter Graham: Good evening. And a first question perspective, when I think about the partnerships and the loan sales in 2026, is there a rough sense of where the volumes are likely to shake out for both or even some relative context? Jonathan Witter: Obviously, they'll have a pretty big impact on where the number shakes out for the year. I'm just curious how that looks versus the investor forum numbers. Peter Graham: Yes. So recall that the agreement for this first strategic partnership is a commitment a minimum commitment of $2 billion of new originations. Roughly time to the academic year. So we designated a portion of our 2025 peak season originations as held for sale at the December. And we will that will be part of our sale in the first quarter as part of the new originations flow. Portion of that commitment. Going forward, each month we'll be selecting representative sample of originations that occur. And be designating that for sale in the partnership. I think Rough Justice, think about that as like 30% of originations. And so there will be some seasonality as we go through this year in sales of new originations to the partnership just because it's tied to our actual origination pattern. So the highest amount sold of the new originations will be tied to kind of our traditional peak season period. And then in regards to season portfolio sales, I would say that's the approach to that will be similar to what we've employed historically, which is the size and timing of those will be dependent on kind of our capital needs and sort of marketplace conditions. So no real change in that regard. Giuliano Bologna: That is very helpful. Hopefully, not too convoluted a question, but there's a fairly decent impact from the HFS book on balance sheet. And kind of what that balance will look like. Is it fair to assume that at least in 2026, it will probably be similar to where you are now in terms of balance? Or should we expect that to roll up throughout the year as things accelerate? And is there a reference of how big that HFS book will probably be Yes. This year and how big it'll end up being because it drives some decent NIM even while sitting there from an average balance perspective. Peter Graham: Yes. So, you think about it as and I mentioned this in my prepared remarks, we're going to select loans each month we'll warehouse them at the end of a quarter and then have a subsequent takeout transaction for sale into partnership trust. Structure in the subsequent quarters. So that absolute amount of held for sale in the balance sheet will vary each quarter depending on the origination profile in that quarter. For instance, the fourth quarter will be the largest, so there will be a selection of sort of fall peak season originations and the second quarter will be the lowest because that's traditionally our lowest origination quarter of the year. Giuliano Bologna: That is helpful. Then I realize there's obviously, the increased loan sales also changed the portfolio mix. In near term. And you guys have it very well in the appendix slides. Should we expect a little bit of change in just the seasoning of the portfolio because you've had excess sales in '25, you're selling a fair amount in '26 as well. But change the seasoning and kind of roll through repayment? Over the next few years? Or is that not a or should looking down the wrong path in terms of the materiality of that? Peter Graham: Yes. I think at the margins, Will, I think the larger impact will be the fact that a portion of our new originations are going to be going off book. At originations. So that'll tend to cause a slower sort of replenishment of the overall season book and it'll gradually get a little more seasoned than what has been. But I think that's kind of at the margins. I don't think it's going be a dramatic shift. Giuliano Bologna: That's very helpful. I appreciate the time and I will jump back in the queue. Okay. Thank you. Operator: We'll move next to Terry Ma with Barclays. Your line is open. Terry, you may need to check the mute function on your device. Terry Ma: Oh, hey. Sorry about that hopping in between calls. So I appreciate some of the color you gave on non-interest expense. Earlier on the call. But like if I look at the range for this year, it is obviously still quite a step up than what you guys had last year. And then even the post '26 kind of growth rate that you indicated is kind of higher than what you've seen historically. Can you kind of help us think about how you measure, the ROI of those kind of investment dollars? Yes, Terry. Jonathan Witter: Probably a couple of different levels to that conversation. First, I think it is important to start with why we are stepping up the investment opportunity. And we've said it a couple of times, This represents, in our mind, sort of the clearest opportunity to have really significant TAM growth up to 70% over the course of the next couple of years. Again, assuming the analysis and the estimates that we put together are meaningful. So I think it's important to start with this is not to be cliche, but really as close to a once-in-a-lifetime opportunity yeah, to expand a business as I think we're gonna see in our private student lending space. I think if you model through what is the impact when fully realized of a 70% increase in originations. Heck for the sake of conservatorship, cut it to 50% increase. It is a really meaningful increase in earnings potential and market cap. And so I think you have to start there and understand that that is the mental model that we as a management team bring to this investment opportunity. We have and I think have always had and this has been demonstrated I think by our strong efficiency ratio performance over the last couple of years. Really good governance around, for example, how we do return measurement on marketing spend, how we do return measurement on sort of new product innovation and development. And I think investors should rest assured that we are bringing that very same discipline to bear in this opportunity. I think what's important to recognize and maybe one of the source of disconnect is, you know, for a whole myriad of reasons, in particular, we do not expect our marketing to be as effective or as efficient in year one of this sort of opportunity as it will likely be in years two, years three and sort of beyond. And if you think about it, there's a whole myriad of reasons for that. We are phasing in the you know, the eligibility of the new caps. You know, so when we market in year one, depending on whether you're talking in grad or undergrad, there will only be a portion of those students who will be interested in private student loans because many will still be you know, supported by the federal program. In year one in particular, for example, there's no serialization benefit. We know it's a lot less expensive for us to get a serialized loan than a new customer than to acquire a new customer. And I haven't even started, Terry, to talk about just it takes a little bit of time and enrollment season or two to really fully optimize all of your various both digital and traditional marketing channels. And so we don't view that as a permanent impairment to our efficiencies. But I think we do bring a slightly different view to how you stand up a marketing program for, let's say, new medical students than what has been the primary part of our business over the last several years, which has been serving disproportionately undergrads. So we're excited about it. We think it is again in service of a really fabulous market opportunity. We hope you all agree that market opportunity is right in front of us. And we feel like we're bringing great discipline to how we're thinking about that spend. Peter Graham: I think the other thing I would add there is just context around efficiency. Like we have a very good efficiency rate ratio now, even at the midpoint of the range we've guided to for for for 2026. We're kind of still in the high 30s. And I think on a relative basis compared to others in in this space, that's a really efficient operation. And we've said over the coming years, we're going to drive that back down to low 30s. So look, I think that's an additional context. That's important. Terry Ma: Got it. That's helpful color. Terry Ma: And then I guess like maybe just a follow-up on credit. Your percentage of loans in extended grace ticked up meaningfully I think that's pretty consistent with the June wave exiting regular grace. But as we kind of think about credit for 2026 and just the guidance range that you gave, like any color on like your confidence level because I think you also have a way or exiting mod in December. Like as we look out into twenty sixth, I think by all measures, it is still a pretty kind of tough job environment for kind of new grads. So kind of maybe help us think about what's kind of embedded in your charge off assumption range for the year and your level of confidence? Thank you. Peter Graham: Yes, sure. I'll take the mod piece and then then Jonathan, you can maybe recap some of your comments around the overall environment. Sure. On the loan mods, we've been tracking now for some time and talking about successful performance in making payments. And there's an additional slide in the deck that sort of highlights that. I think the from my perspective, thinking about kind of the 2023 cohort of, you know, mod enrollments The fact that 75% of them at the end of the year are current is another really strong indicator of success. And again, we'll see how that sort of moves through the year in terms of people graduating out. And stepping back into their contractual obligations. But we feel good that we've designed a well-functioning program at met a it's met a need of a borrower in stress. And we feel like the positive payment habits that have been demonstrated over now twenty-four months in that cohort are a powerful indicator of their likelihood of success as they come out this year. And all of that's baked into the range that we've given for net charge-offs for 2026. Jonathan Witter: Yes. And Terry, maybe if I step back and give a little bit more context I think there's clearly been a whole series of pretty high catching stories that have come out in the past months about of AI and impact on the job market and so forth. I think the data that we see from a number of different sources tells perhaps a little bit more of a balanced story. And there is no doubt that unemployment rates for new college grads are slightly elevated today. There is no doubt that it is taking a little bit longer for new college grads to find jobs. To put that in context, if you look at the monthly unemployment data for new college grads, you see typically a spike in unemployment over the summer and then a normalization period And we are sitting here today based on December 25 data you know, at effectively the same unemployment rate that we would have seen, again, for new college grads in November '23 or '24. Yes, so it is a slightly slower ramp to sort of full employment normalization But it is measured in sort of a month, month and a half delta if you look at those rates. Not something that is more substantial. I think it's important also to kind of put that in the broader context and I've raised on a couple of calls or said this on a couple of calls. This is a pattern that we are well used to. We know for many years in this business the single greatest point of financial stress on average for our customers is going to be when they're going through this transition from school to full-time employment. It's why we invest disproportionately in the programs that we have to help customers during that time and to give them sort of the flexibility and whether that's programs like you mentioned, Grace, that's potentially loan modifications for the small number who need that or other programs that we may have we feel like we are really well set up to do that. By the way, this is also a time where our 90% plus cosigner rate is critically important. And we know both numerically and we know anecdotally from our surveys, parents, loved ones expect to support their students during this time of transition. And that's a great answer for the student. That's also a great answer for us and for our shareholders. And so when you put all that together, no CEO of a credit-oriented company is ever gonna be dismissive of credit. We take it seriously and watch it like a hawk. But I think what we are seeing in the patterns sort of fits the comments that I've made and is certainly all baked into the that we have just provided you. Giuliano Bologna: Great. Thank you. Yes. Operator: We'll move next to Jon Arfstrom with RBC Capital Markets. Your line is open. Peter Graham: Thanks. Good afternoon. Giuliano Bologna: Good afternoon. Hey, Peter Graham: Question for you, Jonathan. Your comments on the EPS outlook I guess, obviously, the market can be pretty short-term focused and that initial reaction was pretty negative to the new model on your stock. But you framed up the strong EPS growth potential for '27. I think you'd mentioned high teens to low 20s potential for '27. In your prepared comments, Do you feel like you have high visibility on that for 2027? And does the visibility become a little more blurred beyond 2027? Or is it pretty clear to you in terms of what that runway could be? Caroline Latta: Yes, Jon. Jonathan Witter: I think the way that I would answer that is there are really a couple of things that in my mind have a disproportionate impact on our stock. Or on our performance. Obviously, broad macroeconomic environment and the impact that that has on credit you know, I'm not sure I or any other bank or consumer finance CEO is going to feel comfortable looking out more than kind of a twelve-month timeframe. But if you kind of look at the rest of our model I think it really comes down to do we realize the TAM opportunity, you know, that is in front of us? Are we successful at regaining the kind of efficiency ratio that Peter and I have both now talked about. And a little bit a choice we get to make, which is how which do we want to grow our bank balance sheet versus fund that business in other ways. I think we have done more disciplined work than probably many. And as as I can imagine on really understanding the TAM opportunity. And that's not to say that there is not risk there and that there won't be competition. But I think we understand what the market opportunity is going to be. And I think you know, we feel like it is a, you know, it is a real opportunity for us moving forward. I think, you know, I would say our expense management discipline speaks for itself. And I think, again, we get to make the decisions about the right way to business with the growth of our our bank balance sheet. And I think when you put those things together, we can't overlook the other uncertainties in our model, but I think those are all things that one can look at and assign their own sort of likelihood of success to. And I think those are really kind of the major drivers of our confidence in some of the comments that we've made about 2027 and beyond. Peter Graham: Okay, fair enough. Thank you very much. Operator: We'll move next to Melissa Weddle with JPMorgan. Kate deLacy: Melissa on for Richard Shane this today. Operator: Appreciate you taking our questions. First one would be around gain on sale margin. Kate deLacy: That looked like it came down a little bit versus prior sales that we've seen earlier this year. If you transition to sort of more of a combo approach to spot loan and transfer to strategic partners, how should we be thinking about that gain on sale margin and any volatility that we could see quarter to quarter in that Peter Graham: Yeah. I think that it's that's a good question. I think if you look at sort of a longer history of our execution on on these seasoned portfolio sales. Do you see a broader distribution than than what you've seen in the current year. I'd say over a longer period of time, if you kind of throw out the highest the highest ratios and throw out the lowest gain on sale ratios, you'd probably be kind of in a somewhere one zero six, one zero seven ish on average. In that context. I think there's also a timing within the year component to those sales. I think if you go back and look at the sort of quarterly sort of history of our portfolio sales. Those that are done in the first quarter tend to be at a higher premium than those that are done in the fourth quarter. For a variety of a variety of reasons. And so look, the portfolio sale that we did in the fourth quarter here was in the context of a broader strategic partnership but it also was part of a transaction that had a great deal of scrutiny around true sale and things being done at fair value. So it's well supported by sort of statistics on the portfolio itself and the environment in the fourth quarter. Operator: Thanks for that. Kate deLacy: I have one more follow-up question for you. And this is around the share repurchase authorization announced today. Operator: The time period on that was twenty-four months. The question is, given the investment you intend to make in the platform, Kate deLacy: in this next year in 2026, should we be thinking about that repurchase deployment possibly being a little bit back end loaded in 2027? Thank you. Peter Graham: Yeah. I think we've we've demonstrated over the last few years that we're going to be pretty disciplined and programmatic around share buyback. And we intend to operate that way with regard to this new authorization that we've been granted. We've got very strong capital at the bank and a strong earnings profile. We tend to set in place programs that will have kind of a targeted amount of buying and be in the market every day that the market is open. And then a bias towards buying more shares on days when the stock price is trending down and less on days when the stock price is trending up. That served us well in terms of deploying the last you know, authorization that we have and we intend to kind of continue to operate in that manner going forward. Giuliano Bologna: Thanks very much. Operator: And this concludes the Q and A portion of today's call. I would now like to turn the floor over to Mr. Jonathan Witter for closing remarks. Jonathan Witter: Chloe, thank you, and thank you for everyone who joined call tonight. Obviously, Peter and I on behalf of the entire company are proud and happy to talk to you about our 2025 performance. But I think even more importantly, hope you walk away tonight with a real sense of sort of how strongly we feel about our strategic positioning and what that means for 2026 and beyond. As always, the IR team is here to be helpful to you in whatever way they can. And we hope everyone has a great rest of the January and a great weekend. And thank you again for your time this evening. I'll now turn it over to Kate for some concluding business. Kate deLacy: Thanks, Jonathan. Thank you all for your time and questions today. A replay of this call and the presentation will be available on the Investors page at salliemaine.com. If you have any further questions, feel free to contact me directly. This concludes today's call. Operator: Thank you. This concludes today's SLM Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Please disconnect your line at this time, and have a wonderful evening.
Operator: Good afternoon, everyone. Welcome to Associated Banc-Corp's Fourth Quarter 2025 Earnings Conference Call. My name is Vaughn, and I will be your operator today. At this time, all participants are in a listen-only mode. We will be conducting a question and answer session at the end of this conference. Copies of the slides that will be referenced during today's call are available on the company's website at investor.associatedbank.com. As a reminder, this conference call is being recorded. As outlined on Slide two, during the course of the discussion today, management may make statements that constitute projections, expectations, beliefs, or similar forward-looking statements. Associated's actual results could differ materially from the results anticipated or projected in any such forward-looking statements. Additional detailed information concerning the important factors that could cause Associated's actual results to differ materially from the information discussed today is readily available on the SEC website in the Risk Factors section of Associated's most recent Form 10-Ks and subsequent SEC filings. These factors are incorporated herein by reference. For a reconciliation of the non-GAAP financial measures to the GAAP financial measures mentioned in this conference call, please refer to Pages 33 and 34 of the slide presentation and to pages 10 and 11 of the press release financial tables. Following today's presentation, instructions will be given for the question and answer session. At this time, I would like to turn the conference over to Andy Harmening, President and CEO, for opening remarks. Please go ahead, sir. Andrew Harmening: Yes. Thank you for the introduction and good afternoon. Welcome to our fourth quarter earnings call. This is Andy Harmening. I am joined once again by our Chief Financial Officer, Derek Meyer, and our Chief Credit Officer, Pat Ahern. I'll start off with some highlights from the fourth quarter and 2025 as a whole. From there, Derek will cover the income statement and capital trends, and Pat will provide an update on credit. 2025 was a pivotal year for Associated Banc-Corp. In March, we marked the completion of all major investments from Phase two of our strategic plan. Those investments gave us strong momentum throughout 2025, and they positioned us for additional momentum in 2026 and beyond. We are growing and deepening our customer base organically and taking share in major metropolitan markets. We delivered our strongest year for organic household growth since we began tracking a decade ago. Net growth in all four quarters of 2025. We're growing and remixing our balance sheet simultaneously. In 2025, we added over $1.2 billion in relationship C&I loan growth, while steadily reducing our low-yielding, low-relationship value resi mortgage loan balances. On the liability side, we added nearly $1 billion in core customer deposits during the year. And we're driving stronger profitability. Over each of the last three quarters, we set a company record for net interest income. We also saw strength in several fee income categories in the back half of the year. This enhanced revenue profile combined with expense discipline and solid credit performance helped us deliver the strongest net income in our company's history in 2025. To further enhance and accelerate our organic growth momentum, we announced an agreement to acquire American National Corporation in December. The transaction is financially attractive, but importantly, it also enables us to expand our organic growth prospects by providing entry into the vibrant Omaha market with the number two market deposit share and strengthening our position in the Twin Cities market where we already have momentum. We believe that Associated and American National are a natural cultural fit, and we look forward to welcoming American National employees and customers to Associated later this year. Further underscoring our commitment to organic growth, we're planning several additional investments in 2026 to accelerate momentum in multiple strategic growth markets, including the Twin Cities, Omaha, Kansas City, and Dallas. Our expectation is to maintain a growth and profitability focus while simultaneously managing our low-risk profile. Credit discipline remains foundational to our strategy, and our growth centers on high-quality commercial relationships and prime super-prime consumer borrowers. We continue to manage our existing portfolios proactively to stay on top of any emerging risks. As we look into 2026, Associated Banc-Corp's momentum continues to build. We're excited about the future of this company and look forward to providing additional updates along the way. With that, I'd like to walk through our financial highlights on Slide four. We reported earnings of $0.80 per share in Q4 and $2.77 per share for the full year. Total loans grew by another 1% versus the prior quarter and 5% versus 2024. C&I has continued to be a primary growth driver for us throughout the year. Grew C&I loans another 2% in Q4 and added $1.2 billion in C&I balances for the year. On the funding side, core deposits grew by nearly $700 million versus Q3 and nearly $1 billion versus Q4 of last year. Point to point, this represented a 3.5% growth rate, but on a quarterly average basis, core customer deposits were 5% higher in 2025, versus 2024. Shifting to the income statement. Q4 net interest income of $310 million set another record for the strongest quarterly NII in company history, and our NII was up 15% for the year. After posting strong quarterly non-interest income of $81 million in Q3, we posted another strong quarter of $79 million in Q4. Capital markets, wealth fees, and card fees all grew in the fourth quarter, and on an adjusted basis, total non-interest income grew by 9% versus 2024. Total non-interest expense of $219 million increased $3 million from the prior quarter. Delivering positive operating leverage remains a primary objective as we execute our plan. On the credit front, we remain pleased with asset quality trends. In Q4, our criticized loans decreased, and our non-accruals dipped to 32 basis points of total loans. Net charge-offs decreased to just three basis points for the quarter and 12 basis points for the full year. And finally, our return on average tangible common equity increased steadily throughout the year, finishing over 15% in Q4. On Slide five, we want to take a moment to highlight how our strategic investments since '21 have transformed our return profile. First, after investing in talented RMs in major metropolitan markets across our footprint, we've grown C&I loans by over 50% since 2020. With pipelines remaining strong, and a few more non-competes set to roll off between now and the end of Q1, we expect our momentum to carry through 2026 in both commercial lending and deposit acquisition. As we continue to add relationship C&I loans to the books, they're replacing lower-yielding non-relationship resi mortgage balances as they roll off. Since 2020, we've worked down our concentration of mortgage loans by over 10 percentage points. This ongoing mix shift is contributing to enhanced profitability. In 2025, we posted three consecutive quarters of record NII, and a NIM north of 3% for the year, 50 basis points higher than 2020. While we've invested significantly to transform the growth profile of the bank, we've remained disciplined on the credit front, and our net charge-off rate has remained below our medium-term target of 35 basis points. We've also managed our expense base in a disciplined way to support revenue expansion, positive operating leverage, and enhanced profitability. As a result, our adjusted efficiency ratio decreased by over 700 basis points from 2020 to 2025, and our ROTCE increased to 13.6% in 2025. In 2025, our ROTCE climbed above 15%. So as you can see, our strategic from Phase one and two are having a meaningful impact on the strength and return profile of our company. We believe the momentum from these investments will carry well into 2026. With that said, we also see additional opportunities to incrementally build on our momentum in 2026. On Slide six, we've already proven through our strategic plan that we can grow in major metro markets like Milwaukee and Chicago. The investments we've made to bolster market leadership, add talented RMs, enhance our value proposition for consumers and small businesses, and amplify our brand presence are having a clear impact. Over the course of the past two years combined, we've driven double-digit deposit growth, double-digit C&I loan growth, and household growth that's outpaced population growth in both markets. Milwaukee and Chicago are great markets for us, and we see plenty of additional growth opportunities in those markets going forward. But we also see opportunities to double down and duplicate our success in several other attractive metropolitan areas with strong growth characteristics. In the Twin Cities, we already have a solid retail presence, and we've built a very strong commercial team under the guidance of our Head of Corporate Banking, Phil Trier, and our new Market President, Mike Labens. We're also planning to move into our new regional headquarters in the heart of Downtown Minneapolis in March. The acquisition of American National is expected to deepen our presence in that market, giving us a top 10 pro forma deposit market share. The American National deal also gives us entry into the attractive market. With stronger population growth and median household characteristics in both the Midwest and national averages. Our number two pro forma deposit market share gives us scale. And our product set and marketing engine provide meaningful opportunities to both deepen and grow relationships post-close. On the commercial side, we've added a small team in Kansas City in March. That's a market our management team knows well. We brought in a talented, experienced group of bankers who had the tools to hit the ground running. In fact, the team is off to such a strong start that we see opportunities to double down and drive additional momentum there. Dallas is also a market our management team knows well. Associated has had a CRE office in the market for roughly a decade. But we now see an opportunity to replicate the success we've had in Kansas City with the addition of C&I presence in the Lone Star State. Moving to Slide seven, we're going to accelerate organic growth in these major metropolitan markets through two categories of investment in 2026. First, we've created a best-in-class value proposition for our customers with a combination of digital and product upgrades. We've had success growing and deepening primary checking households through acquisition-focused marketing. In 2026, we're doubling down on the success to accelerate household growth in major metropolitan markets. Specifically, we're planning to increase acquisition-focused marketing spend in The Twin Cities and Omaha by over 100% between the two markets combined. The total marketing acquisition spend across all markets will increase by 25%. Through these actions, we're confident we can deliver stronger household growth in our major metro markets in 2026 and 2027, which we expect will translate to stronger household growth for the bank overall. As we grow primary checking households across the bank, this drives additional deposit growth. It also brings additional fee income. On the commercial side, we've invested significantly in recent years to hire talented RMs who can gather relationship loans and deposits across our footprint as we look to remix both sides of our balance sheet. This remix is already well underway. Since 2020, C&I loans are up 50%, or over $4 billion. To build on this momentum, we're announcing another wave of selective RM hires in the Twin Cities, Kansas City, and Dallas, where we see attractive growth opportunities. We expect to add approximately five more RMs in the Twin Cities, two in Kansas City, and four in Dallas, which equates to a 10% increase in all overall RMs bank-wide. We expect these actions to help us drive approximately $1.2 billion of relationship C&I growth across the total bank in 2026. In 2027 and beyond, we expect to continue adding talented RMs to drive sustainable, high-quality commercial growth. On Slide eight, we highlight our quarterly loan trends through Q4. Total loans grew by 1% on both an average and a period-end basis in Q4. As expected, C&I led the way with over $200 million in balances during the quarter. Auto balances grew by another $65 million in Q4 as we have continued to selectively add high-quality balances to our book. Total period-end CRE balances dipped by $88 million versus Q3 due to elevated payoff activity. We expect elevated CRE payoff activity to linger in the coming quarters. On Slide nine, we show an annual view of loan trends. In this broader view, you can clearly see the growth and remix story that has been in progress since 2021. We've decreased our concentration of low-yielding non-customer resi mortgages and diversified into higher quality, higher return categories like C&I and auto. We've also grown total loans by nearly 30% over this time without abandoning our disciplined approach to credit. In 2025, total loan growth was once again led by C&I, where we achieved our $1.2 billion growth target for the year. With pipelines remaining strong, additional lift expected as our last few non-competes roll off, we expect continued momentum in C&I into 2026. As such, we expect C&I loan growth of 9% to 10% in 2026. At the top of the house, we expect total bank loan growth of 5% to 6% for the year. Both growth figures are stand on a standalone basis excluding the impact of American National. Shifting to Slide 10, we added nearly $700 million in core customer deposits in Q4 after adding over $600 million in Q3. In Q4, our growth was once again spread across most categories, with customer CDs being the only category that decreased. This core deposit growth enabled us to work down our wholesale funding balances by one in Q4, including a $161 million decrease in brokered CDs. On Slide 11, we show a broader annual view of deposit trends. We've consistently grown our deposit base on an annual basis, and after adding $1.2 billion in core customer deposits in 2024, we added another $1 billion in 2025. On a percentage basis, period-end core customer deposits grew 3.5% relative to 2024. This number was influenced by seasonal flows in a couple larger accounts that impacted balance flows at the tail end of 2025. That being said, core customer deposits still grew by 5% on a quarterly average basis from 2024 to 2025. As we look to 2026, we're bullish on our ability to drive incremental core customer deposit growth thanks to the best-in-class consumer value proposition, household growth momentum supported by increased marketing acquisition spend in growth markets, and significant momentum in our commercial deposit gathering capabilities. As such, we expect core customer deposits to grow by 5% to 6% for the year, excluding the impact of the American National acquisition. With that, I'll pass it to Derek to discuss our income statement and capital trends. Derek Meyer: Thanks, Andy. I'll start with yield trends on Slide 12. Within the major asset categories, the yields of our largely floating rate CRE and commercial books decreased by 24 basis points and 27 basis points respectively. Auto and investment yields also saw slight decreases. These decreases were modestly offset by a slight uptick in the yield for a largely fixed rate resi mortgage book. Total interest-bearing deposit costs decreased by 17 basis points in Q4 and are down 49 basis points since Q4 of last year. In Q4, total earning asset yields decreased 16 basis points to 5.34%, total interest-bearing liabilities decreased one basis point to 2.82%. Moving to Slide 13, third quarter net interest income of $310 million increased $5 million versus the prior quarter and $40 million versus the fourth versus 2024. Our net interest margin increased two basis points to 3.06 for the quarter. As compared to the same period a year ago, our NIM increased 25 basis points. In 2026, we expect to drive net interest income growth between 5.5% and 6.5%. This forecast assumes two Fed rate cuts in 2026 and excludes any impact from the American National acquisition. On Slide 14, we provided a reminder of the steps we've taken to put ourselves in a more neutral interest rate position and protect against rate changes and other external factors. We're maintaining repricing flexibility by keeping our funding obligations short. We'll protect in our variable rate loan portfolio by maintaining received fixed swap balances of approximately $2.45 billion, and we build a $3.1 billion fixed rate auto book with low prepayment risk. While we're still modestly asset sensitive, a down 100 ramp scenario represents less than a 1% impact to our NII as of Q4. We expect to maintain this relatively neutral position going forward. Moving to Slide 15, total investment security balances grew to $9.3 billion in Q4. Our securities plus cash to total assets ratio climbed to 24.3% to the end of the year, but we continue to target a range of 22% to 24% for this ratio. Slide 16 highlights our non-interest income trends for the quarter. After posting $81 million in non-interest income in Q3, we followed that up with another strong quarter in Q4. Total non-interest income of $79 million was down $2 million from the prior quarter but was up $8 million from our adjusted Q4 2024 number. Our strong Q4 was supported by additional growth in wealth management fees, card-based fees, and capital markets. As we continue to grow our customer base and deepen relationships across the bank, those trends are beginning to flow through in our core fee businesses. While quarterly results in an area like capital markets can be lumpy, we're confident in our ability to drive non-interest income higher over time. As such, we expect non-interest income to grow by 4% to 5% in 2026, excluding any potential impacts from the American National acquisition. Moving to slide 17, Q4 expenses came in at $219 million, two percent higher than the prior quarter. The quarterly increase was primarily driven by a $3 million increase in equipment expense along with a $1 million increase in variable comp expense and $1 million of severance as we continue to execute against our strategic plan and set ourselves up for a productive 2026. These increases were partially offset by a $3 million decrease in FDIC assessment expense, following another adjustment to the special assessment and a $1 million decrease in overall personnel expense. Throughout the year, we continue to invest in the growth of our franchise. Delivering positive operating leverage has remained the top priority along the way. After steadily decreasing over the course of the year, the efficiency ratio held at 55% in Q4. In 2026, our expense philosophy remains the same as it has each year since Andy arrived. We're going to invest in the future growth of the company while finding ways to offset these investments with cost reductions in other areas. With this in mind, we expect total non-interest expense growth of 3% in 2026, excluding the impact of the American National acquisition. On Slide 18, capital ratios increased across the board once again in Q4. Our TCE ratio increased to 8.29%, up 11 basis points versus Q3 and 47 basis points versus 2024. Our CET1 ratio increased to 10.49%, a 16 basis point increase relative to the prior quarter and a 48 basis point increase versus the same period a year ago. We've also seen consistent expansion of our tangible book value per share, with Q4 coming in above $22 per share. This represents a $0.65 increase versus Q3 and a $2.3 increase versus the same period a year ago. I'll now turn it over to our Chief Credit Officer, Pat Ahern, to provide an update on credit quality. Patrick Ahern: Thanks, Derek. I'll start with an allowance update on Slide 19. Our CECL forward-looking assumptions utilize the Moody's November 2025 baseline forecast. This forecast remains consistent with a resilient economy despite the higher interest rate environment. It contains continuing rate cuts in early 2026, slower but positive GDP growth rates, a cooling labor market, continued elevated levels of inflation, and continued monitoring of ongoing market developments and tariff negotiations. In Q4, our ACLL increased by $5 million to $419 million. This increase was primarily driven by commercial and business lending, which largely stemmed from a combination of loan growth plus normal movement within risk rating categories. Our ACL ratio remained largely flat throughout the year in 2025. In Q4, the ratio increased one basis point from the prior quarter to 1.35%. On slide 20, we continue to review our portfolios closely amidst ongoing macro uncertainty. But we continue to see solid performance in Q4. Total delinquencies ticked up slightly versus the prior quarter to $61 million but were down $19 million versus 2024. We remain comfortable with the benign delinquency trends we've seen over the past several quarters. Total criticized loans decreased by $165 million versus the prior quarter, with decreases in all three major components of the metric. The decrease in Q4 reflects continued resolutions with some of these stress credits with liquidity present in the market in terms of both payoffs and loan re-margin. We remain confident there hasn't been a material shift in the credit profile of the portfolio that would result in a corresponding risk of loss. Non-accrual balances decreased to $100 million in Q4, down $6 million versus Q2, down $23 million from the same period a year ago. Finally, we booked just $2 million in net charge-offs during the quarter. In total, net charge-offs for the year represented just 12 basis points of average loans. We also added a modest provision of $7 million during the quarter. As we shift our focus to 2026, our team remains vigilant in reviewing our portfolios and staying in regular contact with customers to stay ahead of any emerging risks. We also remain diligent in monitoring credit stressors in the macro economy to ensure current underwriting reflects the impact of ongoing inflation pressures, shifting labor markets, tariffs, and other economic concerns. In addition, we continue to maintain specific attention to the effects of elevated interest rates on the portfolio, including ongoing interest rate sensitivity analysis bank-wide. We expect any future provision adjustments will reflect changes to risk rates, economic conditions, loan volumes, and other indications of credit quality. With that, I will now pass it back to Andy for closing remarks. Andrew Harmening: Thank you, Pat. In summary, we're very pleased with the strong organic growth momentum and the record-setting financial results we delivered as a company in 2025. We're entering 2026 with stronger profitability, better capital generation, and discipline on credit and expenses. With that said, we feel like our growth story is just beginning to emerge at Associated Banc-Corp. In 2026, we expect continued organic growth tailwinds from our prior investments in RMs, products, and marketing, but we also intend to accelerate our momentum through the American National acquisition and another wave of investments to double down in major metropolitan growth markets across the footprint. We look forward to providing additional updates along the way. And with that, we'll open it up for questions. Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from Daniel Tamayo with Raymond James. Please proceed. Daniel Tamayo: Good afternoon, everybody. First thing, I guess on the net interest income guidance given it's excluding American National, I'm just going to try and see what you can say about that on an all-in basis. So just curious if there's anything you can give us in terms of thoughts around how that net interest income line might look including American National, whether it's from a purchase accounting perspective or balance sheet. I know we talked about potential balance sheet actions post-close. Just trying to get to kind of an all-in number there. Andrew Harmening: Yes. Daniel, we don't have a lot of updates on that. On the financial end of that. Obviously, we're going through the approval process, and we're hopeful to close in the second quarter and integrate in the third quarter. What I will tell you is what we've realized very clearly is the franchises are very well aligned. From a strategic standpoint, from a product and go-to-market standpoint. That matters just in trying to validate what our initial payback period was, which was 2.25 years. So we're feeling more bullish, we're on track. With our plan on the integration plan. And what we're seeing is continued opportunity in both of their major metropolitan markets, both in Omaha where we know we can bring some capabilities but they already have a very good presence and very good growth pattern. And in Minneapolis, where there'll be additional additions to customer-based conversations that make us believe that we can grow on top of that. What we haven't done is really projected any of that upside growth we have. So we don't have transaction is pretty logical to us internally, but we don't have an update. From a financial side. We'll have to wait. Till we get approval and get to maybe legal day one and the next quarter to give up. A little clear view there. Daniel Tamayo: Okay. Thanks, Andy. Maybe something that might be a little bit easier to talk about then on the investments that you really clearly laid out there in terms of the four cities where you're going to be investing in 2026, including a couple of new cities. Can you provide any kind of color around the from a quantitative perspective, what that may look like including kind of pace and just trying to think through how this could affect the pace of expense growth as the year moves on? Thanks. Andrew Harmening: Yes. I mean, we've given the expense target, expense growth target at 3% and just as in every other year, we've made some hard decisions on where to cut costs to invest. The expectation is that these investments we get asked sometimes the question is how do you believe that you have sustainability in your earnings? And the way that you get sustainability is you do something on the consumer side and commercial side, but you also you show that you've been able to do that in legacy major metropolitan markets. We have that in Chicago and we have that in Milwaukee and we're able to show that. You get into markets that grow a little faster, it's the same it's the same game plan. And so from an expense standpoint, the significant increase in marketing expense for Omaha is not going to come until we get systems conversion because for logical reasons. In Minneapolis, we have momentum there right now. So we'll start in that market throughout probably end of first quarter, second quarter, third quarter with regards to RMs, we want them on the ground right now. So we have we have outlined where we're going to make our hires there. I expect half of those hires to happen in the first quarter. In fact, two of them started this week. So we're not waiting for that to occur. Really what this does for us, it gives a clear, it gives us a clear path on how we're going to be able to maintain our gross structure, our balance sheet remix, which as you know drives our profitability profile. Daniel Tamayo: Okay, great. And just I guess lastly following up on that, would you say there's at least some benefit in the loan on the loan side and deposit side. In guidance from these hires that are happening in 2026 or is that mostly a '27 and beyond story? Andrew Harmening: Well, what we saw in Kansas City when we did a team lift out is significant loan growth in the first twelve months. So it is in our numbers, it is in our forecast. And we believe that it will lead to additional growth of what we would have had previously. And we've again given the guidance that we believe that we'll grow another $1.2 billion roughly in C&I growth, loan growth in 2026 and the path that we see is really clear. And it's fun to talk about what you might get from the new people, but remember that we have expiring non-solicitations every quarter. And in case you're wondering if we've lost momentum, would tell you our pipeline December 2025 is 43% higher than it was in December 2024. So we think this is a replicable model. And the exciting thing for us is we've proven we can compete in major metropolitan markets. Milwaukee and Chicago. Now we've proven it in Kansas City. And so the idea of getting into Omaha, the idea of expanding again in Kansas City and the idea of moving into Dallas where we had have already begun interviews with some very, very talented commercial lenders. It gives us a bit of confidence heading into the year. Daniel Tamayo: Great. Well, thank you for all that color, Andy. Andrew Harmening: Yes. Thank you. Operator: Our next question comes from Scott Siefers with Piper Sandler. You may proceed with your question. Scott Siefers: Good afternoon, guys. Let's see. So Andy, really great to see that strong C&I growth expected next year. And I think you sort of hit on all the reasons there. Also kind of feels like some of the targeted reductions are beginning to fade a little more as a headwind. I guess just in your view maybe where are we with regard to some of those pieces of portfolio that have been kind of drag dynamics for the last few quarters? Andrew Harmening: Scott, I'm not totally following you. Scott Siefers: Well, you said some of the whether it's residential real estate, these areas that have been sort of headwind, have been net drags, where are we if like, whether you wanna go No. Thank you. Yeah. Yeah. Andrew Harmening: I think the resi will continue to run off at a pretty similar pace. I think it was down just over Derek, I think just over $250 million decrease in 2025. We see that as a good thing. In fact, that pace, if it expanded, wouldn't bother me a bit. And so it's allowing us to do is really get our sea legs under us on the C&I side by having one of the slower amortization markets in recorded history. So it is shrinking by nature and those are low margin and what we think is happening, what we don't think is happening, we know what's happening is, it just allows us to slowly expand our margin each quarter as that's running off. And we're getting the commercial loans, but we're also getting the deposits. So our deposit production is up and heading into 2026 frankly I think the deposit should be a very good story for us. Whether that be because of household growth, the launching of a new vertical in second quarter, the fact that our new RMs are getting deposits at a faster pace, that we've had double-digit HSA growth and we're expanding into higher growth major metropolitan markets. When you take all that together, I see that Scott as the full piece, but the resi will be continue to be a drag for years to come on that. Frankly, we see a path to replace that and still have strong loan growth. And I think probably the story that's really going to merge nicely for us is the deposit growth. In 2026. Scott Siefers: Perfect. Okay. Thank you for that. And then, Derek, I know you had suggested in your prepared remarks, the capital markets line, those revenues can be lumpy. I guess I sort of remember last quarter thinking that it was that line specifically was elevated and might have to come back down. But just looking, it's been over $9 million a quarter for three of the last five quarters. Are you thinking, is this just a new level? I'm mean, I'm guessing from what I can sort of intuit into the guidance, you're thinking maybe comes back down. But is there any specific reason to believe that could come back down or is that just a level of conservatism baked in your guidance? How are you thinking of those things? Andrew Harmening: Scott, I'm going to let Derek ask that because you asked him, but the first answer is yes, it is repeatable. Derek Meyer: Yes, I think the point Scott, you were right last quarter, we were thrilled at how strong capital markets was in our fees overall. When you look at wealth and you look across the board. And I think we're we built the our go forward plan, our growth plan for relationship banking and this should be one of the line items that we benefit from. I think probably before we get very aggressive in guidance on it, we want a more durable pattern that we model into our forecasting. We do see it developing very strongly with the production dynamics we see in the pipeline growth. And we'll be happy to share that and get more and more confident with the level of granularity in those forecasts going forward. But you could hear us last time, we were excited about it and didn't want to get over our skis on it and we're thrilled that it becoming more repeatable. Scott Siefers: Perfect. Okay. And actually just one super quick sticky tack one just to be ultra clear. All the guidance for 2026, that's all based off of GAAP numbers for 2025, right? In other words, reported numbers with no adjustments, right? Derek Meyer: Yes. We're trying to we had a clean year and we're giving clean guidance. Scott Siefers: Perfect. Okay, good. Thank you very much. Operator: Our next question comes from Terry McEvoy with Stephens. You may proceed with your question. Terry McEvoy: Thanks. Good afternoon, everybody. Maybe a question for Derek. When I look at the loan to deposit growth 5% to 6% and then NII up, 5.5% to 6.5% on a kind of core basis that suggests limited core margin expansion and I'm wondering what your thoughts are on the NIM ex the acquisition? And embedded in that, what are you thinking for interest-bearing deposit betas within the NII guide? Derek Meyer: Yeah. So we don't give our as you know, NIM guidance. You are correct. It implies some expansion. We've been in all of our forecast scenarios, I've been saying this for a few quarters, we typically see our NIM trickling up as a natural remix into the portfolio and that's been pretty durable. Our guidance contemplates two cuts, April and July. So then what really comes down to if you think about upside is what and I've said this before, it's still true. Is how our competitors going to behave on the deposit side. And our incremental deposit cost is going to be rational well behaved or are they going to be hot? So far, we've seen in the last two quarters things have been very rational to then a little bit hot and then somewhat rational again. So I think that range is prudent. There is and I think it's balanced. Is some upside potential. If things get really competitive on the deposit side that would put pressure on that. Terry McEvoy: Thanks, Derek. And then as a follow-up, Andy, in your prepared remarks you talked about deepening your customer base, which my impression would be your customers using more products. Could you just share some data points or where you're seeing this among your customers? Andrew Harmening: Yeah. We're seeing it in a few different ways. And I mean, there's nothing fancy to this, which is exciting. The value of a new customer is significantly above and what it was in the past. So we're acquiring more, we're growing more and the quality of the customer is good on the consumer side. On the commercial side, as we see this we see the acceleration in loan production, we're seeing the exact same thing on the deposit side where our deposit production is improving as well. That is a form of deepening. When we see the fee income and the capital markets numbers, this is exciting for us. Now we've seen it a couple quarters in a row and we're getting more confidence that our fee income is tracking to the relationship approach. So between fee income, the deposit side on the acquisition on commercial, the quality of the consumer account that is coming in from a deposit standpoint, and then the deepening on the mass affluent. And then we believe that the upstreaming that we've just launched a new product set for private wealth. That has the early signs and I say early because we launched it in December. But the early signs are that our customers are appreciating kind of the more you bring, more you get and they're bringing more. So we believe that that will continue and when you bring more deposits, then we've seen an uptick in the dollars of investment dollars that we're adding. Year over year. So deepening in darn near every way I would I could go on and on, I won't bore you, but then when you get in a commercial customer, we have one of the top HSA groups in the country, top 15, we have a very high percentage of the time they're doing business with us on HSA which then adds a lot of consumers and guess what when those HSA consumers get to us, start to bank with us. So the cross referral and collaboration is what we've built ourselves for and that's working. So it's not always just deepening commercial within commercial. Sometimes it is commercial into private wealth, sometimes it's commercial to HSA, sometimes it is from the consumer back over to commercial. So that's what I would say, Terry. I know it's a long answer, but it's an exciting sustainable piece for us right now. Terry McEvoy: Thanks. That's great color and thanks for taking my questions. Andrew Harmening: Thank you. Operator: Our next question comes from Chris McGratty with KBW. You may proceed with your question. Andrew Leishner: Hey, how's it going? This is Andrew Leishner on for Chris McGratty. Alrighty. Just on capital, you're towards the higher end of your CET1 range at 10.5 and you're starting to create capital back at a faster clip as your return profile continues to improve. Can you provide your thoughts on the potential consideration of buybacks or should we should we continue to expect capital be reserved for growth? Thanks. Andrew Harmening: Yes, that's a great question. The number one goal for us is to invest in our business and find a way to drive our profitability profile. We've been able to continue to do that. As we continue to grow that capital base, what it does is it gives us options. And so today, what I would say is, and I hope you hear it very, very clearly from us, our number one priority is organic growth. We're in the middle of a deal and our main priority of that is execution and with that then organic growth. So if we execute on those two things, it should open the door on profitability. It should open the door on ROTCE expansion, margin expansion, capital accretion. And really what a great position that puts us in to make decisions at that point. On what to do with the money, the dollars and the capital. But today, I want to be very clear. Our goal is organic growth. Andrew Leishner: Okay, great. Thank you. And then just on credit, metrics were all really strong this quarter, low charge-offs, NPLs and criticized both lower. But can you provide any potential color on any portfolio verticals or geographies that are more stressed or causing more concern right now? Thanks. Patrick Ahern: Yes. Thankfully right now we don't have anything that kind of sticks out. We're continuing to watch what's going on in the economy. We're kind of working through the real estate stuff that started in the pandemic and there really hasn't been any new issues there. So it's just kind of watching everything across the board as it sits right now. Andrew Harmening: In fact, the pay downs in CRE we saw as a good sign. It took projects that have been completed and went to the permanent market. So to us, that actually was more of a sign of a health than a concern. Had those lingered on and not been refinanced, that would have been a growing concern. But the fact that we saw frankly a few $100 million in paydowns in the quarter in CRE, we saw as a big positive. Andrew Leishner: Okay. Thank you. Andrew Harmening: Thank you. Operator: The next question comes from Jon Arfstrom with RBC Capital. You may proceed with your question. Jon Arfstrom: Hey, thanks. Good afternoon. A couple of questions here on deposits. Don't know if it's Slide 11 or Slide 32, but how do you expect the deposit mix to change over time as the RMs gain some traction and I'm assuming treasury is part of this. Just kind of curious more what you think Slide 32 could look like in a year? And then Derek, you referenced some seasonal flows just how material is that so we can kind of understand what flowed out? Derek Meyer: So typically the second half of the year you see much more seasonality flowing into our all of our non-maturity deposit buckets. And so you saw a lot of growth in those. It's similar to last year, some of it's acquisition, but a lot of that is also just seasonal flows. It helps our margin. And with RMs those happen with C&I focus and relationship focus. Those are the same buckets you on the commercial side where you see growth in the long run? So obviously that's not the CD bucket which we have a which has grown over the last few years is mostly comes from the consumer side. So that's how I think about things going forward is more in the non-maturity bucket. And that's also where we see some of the seasonality. I'm not sure if that answers it, that's should give you a sense of it. John, I would say generally speaking I don't have a specific forecasted number because we haven't forecasted this publicly. But part of the strategy was that we were leaking house and customers by 1% to 2% a year for an extremely long period of time. We did that again the first year I got here then we moved towards zero. Then we moved towards 1% growth, then we moved to 1.4% growth. What you're doing is acquiring non-interest bearing and interest-bearing demand accounts. And so we celebrate being at 1.5% roughly 1.4% last year. But if you net that out over the four or five years, it's pretty close to 0% growth. So now we're evolving that trend. We've switched that trend around. And so we're getting we're focusing on getting to 2% and that will have that will all over time have meaningful growth in what our deposit mix is in a positive way. We're doing the same thing on commercial by focusing on RMs and focusing on full relationships. So I'd expect demand deposit accounts on the commercial side to improve as well. And the deposit vertical that we're launching next quarter on title is going to be one that has a pretty positive margin view on it as well. And think that will get started in $100 to $200 million in growth this year and then continue on from there. So our expectation is that by going to market the way we are by growing households both on the consumer small business and commercial side, we'll start to see a shift towards demand deposit accounts, which over time will be a good thing. For the company. Jon Arfstrom: Okay. Good. That's very helpful. That's what I was getting. The other one I wanted to ask about, which is kind of random, but on Slide six, you show your Chicago growth in deposits and C&I. And you don't talk about that very much. I'm just curious. It's a real success story, but I'm curious on your outlook and opportunity in Chicago and maybe if you're willing to size Chicago for us, think that would be helpful as well. Thank you. Andrew Harmening: Size it in terms of what the size of portfolio is in Chicago? Jon Arfstrom: Yep. Yep. Andrew Harmening: Yeah. We haven't gotten into disclosing at that level. We'll think about what is the most helpful way to disclose that in the past in the future. But John, really for us, what we wanted to show here very clearly, because we've heard the question is why is this sustainable? And can you grow in major metropolitan markets. And so, the message is clearly that we can and we are and these are legacy markets and we're doubling down and getting into that are even faster growth and we have talent either in those markets already or adding that. Today, I don't have a breakout for the size of that. We'll talk about getting into more detail. But I think for the purposes of this page, the message was that this is a sustainable model. In fact, we're entering the year in a substantially different situation than we were in 2025. So if you look at what's really happening is we have sustained growth in Chicago and Milwaukee. However, we didn't going into 2025, we didn't exist in Kansas City. Now we've already shown that we can have significant growth there. You can see that in the $1.2 billion in growth that we've had in C&I. We would not have that if we hadn't added on in that market. And so the messages of one of sustained ability to sustain growth in those spaces, but we haven't really broken out specific dollar amounts for those markets. Jon Arfstrom: Yeah. I'm just curious because that was it's a legacy market for you and that's a big growth number. So but I appreciate what you're saying. So thank you. Andrew Harmening: Yes. And John, by the way, just so you're not scared of that growth market because we've all heard the comment of it's growing like a weed or if it looks like it's growing like a weed, it probably is. We just add a bunch of people. And we got really good people. And so for us, the good news on this front and Phil Trier and John Utes have really put a lot of energy into the recruiting path. And it turns out when you hire good folks and they know each other and they bring a friend. And so we've been able to recruit in these markets quite effectively and that's really one of the reasons behind the growth is the increase in quality RMs. In Chicago, in Milwaukee, Twin Cities, Kansas City, soon to be Dallas. So what I think you could take away from that is we've picked the right people and it's leading to growth. Jon Arfstrom: Alright. Thank you very much. Operator: Thank you. At this time, there are no further questions. This now concludes our question and answer session. I would like to turn the floor back over to Andy Harmening for closing comments. Andrew Harmening: Yes. First, I'd just like to thank everyone that joined today. We're really pleased on how we're exiting 2025 and we're even more excited about what's in store for us for 2026. We look forward to sharing that whether that be on the quarterly call or one-on-ones. Thank you. Have a great night. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.
Operator: Hello, and thank you for standing by. Welcome to Columbia Banking System, Inc. Fourth Quarter 2025 Earnings Conference Call. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. At this time, I would like to introduce Jacquelynne Bohlen, Director of Investor Relations, to begin the conference call. You may begin. Jacquelynne Bohlen: Thank you, Towanda. Good afternoon, everyone. Thank you for joining us as we review our fourth quarter results. The earnings release and corresponding presentation are available on our website at columbiabankingsystem.com. During today's call, we will make forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the Safe Harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures and I encourage you to review the non-GAAP reconciliations provided in our earnings materials. I will now hand the call over to Columbia's Chair, CEO, and President, Clint Stein. Clint Stein: Thank you, Jackie. Good afternoon, everyone. The fourth quarter marked a strong end to a tremendous year for Columbia Banking System, Inc. We continued to advance our strategic priorities while delivering solid operating performance and consistent, repeatable financial results. During 2025, we announced and closed our strategic acquisition of Pacific Premier. As I have stated many times, PAC Premier was the missing puzzle piece to complete our Western footprint. The acquisition bolstered our position as the preeminent regional bank in the Northwest and improved our competitive position in other key Western markets, most notably Southern California, where we now hold a top 10 deposit market share position. We remain on track for another seamless systems conversion this quarter, supported by our highly experienced team of associates, meticulous planning, and successful integration activity to date. I am very pleased with the cultural integration I have witnessed over the past several months as well. Our new team members from PAC Premier continue to impress with their unrelenting focus on taking care of customers while adapting to Columbia's products, policies, and processes. We also contributed to our operational momentum through de novo growth, opening new locations in Arizona, Colorado, California, and Oregon during 2025. These investments reflect our commitment to expanding our presence throughout our entire footprint. We have planned for continued targeted de novo activity in 2026, investments funded by resources set aside from our 2024 expense initiative and other efficiency opportunities. Turning to the fourth quarter, Columbia's operating results were once again consistent and repeatable, underscoring our focus on operational enhancement and top quartile and in some cases, decile performance. Fourth quarter operating PPNR was up 27% from the third quarter, as our focus on profitability and balance sheet optimization was enhanced by the full quarter run rate of PAC Premier. We are already seeing that momentum carry into 2026 with the continued realization of deal-related cost savings and healthy customer pipelines across each of our business units and geographies. Our teams remain focused on the activities that drive business with new and existing customers. Our ongoing balance sheet management strategies are enhancing the quality of our earnings and driving strong internal capital generation. Our disciplined approach to balance sheet management encompasses our prudent credit underwriting and proactive portfolio monitoring. Our fourth quarter metrics highlight our strong credit profile, which remains stable throughout 2025 as we were untouched by external events that negatively impacted some of our peer banks. Looking forward to 2026 and beyond, we will continue to prioritize profitability over growth just for the sake of growth. Our priorities have not changed. We remain focused on optimizing performance, driving new business growth, supporting the evolving needs of existing customers, and consistently delivering superior financial results for our shareholders. Our bankers have worked tirelessly to generate consistent, repeatable earnings for eight consecutive quarters. Consistency has long been a historical trend for Columbia, and we expect that trend to continue as we go forward. I want to thank our associates for another incredible year. Your dedication and passion to be the best drive our success. I could not be more excited about the opportunities ahead. Together, we are building a stronger, more dynamic Columbia, one that delivers lasting value for our customers, communities, and shareholders. We will now turn the call over to Ivan. Ivan Seda: Thank you, Clint, and good afternoon, everyone. As Clint highlighted, the fourth quarter completed a strong year for Columbia Banking System, Inc. On an operating basis, which excludes merger expense and other items detailed in our non-GAAP disclosure, fourth quarter pre-provision net revenue and operating net income increased 27% and 19% respectively compared to the prior quarter, while full-year 2025 results rose 23% compared to 2024. These improvements reflect four months of operating as a combined company following our acquisition of PAC Premier, as well as our continued emphasis on balance sheet optimization and disciplined expense management. Focusing on the fourth quarter, we reported EPS of $0.72 and operating EPS of $0.82, increases of 6% and 15%, respectively, from the prior year's fourth quarter. Net interest margin expansion and the corresponding increase in net interest income was a key driver of earnings performance. Net interest margin was 4.06% for the fourth quarter, up from 3.84% for the third quarter and 3.64% for 2024. Slide 19 of our earnings presentation outlines the contributors to the 22 basis points sequential quarter expansion, with improved funding performance serving as a primary factor alongside continued earning asset optimization. Having reduced wholesale funding by nearly $2 billion during the third quarter, the fourth quarter results reflect the full benefit of these actions alongside two additional months of operating as a combined company. Net interest income during the fourth quarter also benefited from $12 million in premium amortization related to acquired time deposits, which we anticipated and highlighted last quarter, and $5 million from an accelerated loan repayment, contributing a combined 11 basis points to the margin. The premium on time deposits was fully amortized as of year-end, and it will not repeat in 2026. Noninterest income was very strong in Q4, with $90 million on a GAAP basis and $88 million on an operating basis as detailed on Slide 21. Of the $16 million sequential quarter increase in operating noninterest income, $13 million reflects two additional months of PAC Premier, and the remaining $3 million was driven by higher customer fee income, most notably in swap and syndication banking revenue, representing a high watermark for those revenue streams. Slide 22 outlines noninterest expense, which was $373 million on an operating basis. Of the $66 million sequential quarter increase, $62 million relates to PAC Premier inclusive of cost savings. As of year-end, we achieved $63 million in annualized deal-related cost savings, or approximately 50% of the targeted $127 million. Although these savings were not fully run-rated in the fourth quarter's result, excluding CDI amortization expense of $42 million, operating noninterest expense of $331 million was at the lower end of our $330 million to $340 million range that we signaled in our last call. Certain investments fell back into 2026 from a timing perspective. Flipping back to slides 16 and 17, provision expense was $23 million for the fourth quarter, reflecting low portfolio loan portfolio runoff, credit migration trends, and changes in the economic forecast used in our credit models. Our credit metrics remain stable and healthy, and our allowance for credit losses was 1.02% of loans at quarter-end and 1.32% of loan balances when the credit discount on acquired loans is factored in. Continuing with the balance sheet, our investment securities portfolio is outlined on slide 11. The portfolio increased by approximately $100 million during the fourth quarter. We purchased $246 million of securities at a weighted average base yield of 4.52%, partially offset by paydowns. Gross loans and leases were $47.8 billion as of December 31, down from $48.5 billion as of September 30, as we continue to allow below-market rate transactional loan balances to decline alongside declines in our CRE construction and development portfolio. Chris will discuss loan portfolio trends in greater detail shortly. Total deposits were $54.2 billion as of December 31, compared to $55.8 billion as of September 30. During the fourth quarter, we intentionally reduced brokered and select public deposits, which collectively declined by over $650 million as alternative funding sources offered more attractive rates. Seasonal customer outflows, which Chris will discuss, also contributed to the decline. To supplement funding, term debt increased to $3.2 billion as of December 31. Slides 20 and 25 review funding flows, our balance sheet sensitivity to interest rate changes, and maturity and repricing schedules. Turning to capital, slide 18 highlights our expanding ratios supported by net capital generation and balance sheet optimization. During the fourth quarter, we increased our common dividend to $0.37 per share from $0.36 per share and repurchased 3.7 million common shares at an average price point of $27.07. Even with the execution of our buyback activity, we saw CET1 and total risk-based capital ratios increase to 11.8% and 13.6%, respectively, as of December 31. Tangible book value increased to $19.11 as of December 31, up 3% from the prior quarter and 11% from the prior year. Looking forward, we expect net interest margin in the first quarter to land in a range from 3.9% to 3.95%, consistent with what we indicated on our last call. This change reflects the absence of the 11 basis point benefit in the fourth quarter from acquired CD premium amortization and the accelerated loan repayment activity that I discussed earlier, as well as higher wholesale balances added to the balance sheet in the latter part of December resulting from seasonal deposit flows. After bottoming out in the first quarter, we expect net interest margin to trend higher each quarter throughout 2026 as customer deposit balances rebound and balance sheet optimization actions continue to improve profitability, ultimately surpassing 4% net interest margin in the second or third quarter of the year. As we saw this past quarter, our continued balance sheet optimization activity may lead to earning asset contraction during the first quarter. We have maintained a conservative level of excess liquidity following the Pacific Premier acquisition, and we may reduce excess cash to further optimize our funding structure by repaying wholesale sources. Following these actions, we expect the balance sheet size to remain relatively stable, with commercial loan growth offsetting contraction in the transactional portfolio. Excluding CDI amortization, we expect noninterest expense to remain in the $335 to $345 million range in the first and second quarters, before declining modestly in the third quarter as we realize all cost savings related to Pacific Premier by the end of Q2. CDI amortization will average around $40 million per quarter. We expect to increase share repurchase activity to a range of $150 million to $200 million per quarter in 2026. $600 million remains authorized under our current plan. We ended the year with over $600 million in excess capital on our most constrained measure. Overall, we are very pleased with the financial results for the fourth quarter, driving over 1.4% ROAA and over 17% return on tangible common equity, and we feel very well positioned to continue to drive strong profitability as we move into 2026. I will now hand the call over to Chris. Christopher McGratty: Thank you, Ivan. Our teams had another strong quarter of business generation. New loan origination volume of $1.4 billion was up 23% from the year-ago quarter, while full-year 2025 volume was up 22% from the previous 2024. As a result of this activity, Columbia's commercial loan portfolio increased 6% on an annualized basis, although the growth was offset by a decline in transactional loan balances and construction and development loans. We also sold $45 million in acquired loans risk-rated special mention as we continually prune our loan portfolio. Slide 24 in our earnings presentation provides additional balance and repricing details related to transactional loans. We continue to expect this portfolio to amortize down until loans reach their repricing date, limiting our net loan portfolio growth but improving our profitability. Turning to customer deposits, the strong growth momentum from the third quarter carried into October, bolstered by our successful small business and retail deposit campaign, which ran from September through mid-November and added $473 million in low-cost deposits. Inclusive of the two campaigns completed earlier in 2025, Columbia generated $1.3 billion in new customer deposits through three successful campaigns. Returning to the fourth quarter, customer deposit balances contracted due to seasonal decreases in customer accounts, driven by company distributions, tax payments, and other typical year-end payouts. We expect modest additional deposit contraction during the first quarter and into April given anticipated customer tax payments, with net growth resuming in the spring as business activity accelerates and seasonal payments end. As Ivan discussed, customer fee income increased for the fourth quarter. This was driven by the addition of PAC Premier and our continued efforts to expand the contribution of core fee income to total revenue. On an operating basis, noninterest income increased 26% in 2025 over the previous year, with exceptional growth in treasury management, international banking, financial services, and trust revenue, along with strength across other core fee businesses. PAC Premier's custodial trust business has been a powerful complement to our existing wealth management platform, and we expect continued fee income momentum as we deepen customer relationships with legacy PAC Premier customers. Our loan, deposit, and core fee income pipelines are healthy, and we remain outwardly focused on generating business in a disciplined manner. I will now hand the call back to Clint. Clint Stein: Thanks, Chris. The past several years have brought significant change to Columbia Banking System, Inc. 2023 was a year of widespread integration following the closing of the Umpqua acquisition, which impacted every associate at each legacy organization. We collectively managed through industry liquidity events that occurred in tandem with the deal's elongated closing and our scheduled systems conversion. 2024 was a year of efficiency initiatives. Our full-scale review resulted in consolidated positions, simplified organizational structures, and an improved profitability outlook. In 2025, we added the missing piece to our Western footprint with the PAC Premier acquisition. We continue to invest a portion of 2024's cost savings into de novo locations in targeted markets. In addition, we added new talent throughout the company, launched new products, and implemented new technology, all with an eye towards improving operational efficiencies and growing revenue. We also made significant progress optimizing our balance sheet as we increased capital return to our shareholders by repurchasing shares. As we look to 2026, we have set the stage for an exciting future. We are now positioned to deliver on the full capabilities of our company with the resources, talent, and vision to excel in every market we serve in the pursuit of long-term shareholder value creation. We expect to continue to generate meaningful excess capital and fully intend to return that excess to our shareholders. This concludes our prepared comments. Chris, Tore, Ivan, and Frank are with me, and we are happy to take your questions. Towanda, please open the call for Q&A. Operator: Thank you. Then wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jon Arfstrom with RBC Capital Markets. Your line is open. Jon Arfstrom: Thanks. Good afternoon, everyone. Hi, Jon. Hey. Congrats on the Chairman role, Clint. First of all. Clint Stein: Thank you. Jon Arfstrom: Yep. I guess, maybe to start this, can you talk a little bit more about PAC Premier? You referenced it in your prepared comments, but it you know, it's showing up everywhere in the P&L and you talked about it as a missing puzzle piece. Can you talk about how it's going so far and what kind of contributions you've seen so far in terms of growth? Clint Stein: Yeah. I'll kick it off and then ask Tory and Chris both to offer their insight as well. You know, I've said on previous calls and in various discussions from the very first week that we announced this, how this one was different and how the folks at PAC Premier showed a level of excitement that typically you don't see initially, or at least not widespread, like what we experienced in the days and weeks following the announcement. And then typically, it's an emotional time for people as change can be hard. And so there can be a little bit of ebb and flow in terms of emotions, and we've seen none of that. Nothing but excitement, embracing the ability to do more with their long-standing and very deep customer relationships. Excitement of being part of this broader company that has a footprint and reach throughout the Western US. So you know, we work really hard at it. We have some great leaders that joined us from PAC Premier that we're working hard every single day to make sure they're taking care of their people, care of their customers, and managing through the change. And, you know, the last hurdle that we have is the systems integration. And you know, we have a very seasoned team as well as PAC Premier. Has had a very seasoned team, both Columbia and PAC Premier. I think on a combined basis over the last fifteen years have done 20 plus systems conversions and integrations. And so that talent has been hard at work, completing mock conversions and all kinds of other detailed work that goes beyond the scope of my knowledge. But I can tell you that the two co-leaders of the integration management office, we were on a call on Tuesday, and they look very calm, rested, and confident in their ability to execute on the task that's at hand. So I'm gonna step back and ask Tory to provide a little more detail on what he's seen as he's been throughout the market and in front of customers more recently than I have. Torran Nixon: Great. Thanks, Clint. And Jon, just to give a slightly a little bit more color, Clint said, I mean, enthusiasm and excitement from the PAC Premier folks has just been amazing. I mean, it's been centered in kind of three different areas. One is the ability to grow with their existing base. So as those customers get bigger, they get to do more stuff with them. Second would be to call on larger customers, I think, than they historically have on the commercial side of the house. They're continuing to do what they've always done, but they're kind of slightly going up market, which has been fun for them and great for the bank. And I think the third is just providing more products and services for the customers based on the capabilities that we have as a new company. I'll give you a couple of examples because we look at these often and they're kind of fun to see. I mean, they have a law firm that they brought into the bank with $22 million in credit and $20 million in deposits. They brought in an environmental remediation company, about $200 million in revenue, much bigger than they would historically call on, with a $10 million credit facility and $10 million in deposits. Got a surgery center, again, something bigger than they would normally call on, with $40 million in deposits and $15 million in credit. And then lastly, they had a construction contractor that they banked for a while that expanded their credit facility and they added $20 million and got up to a $60 million credit facility. So just some great examples I think of the PAC Premier folks embracing our new company and seeing the opportunity in front of them and seizing on it. It's been really fun to be a part of. Christopher McGratty: Hey, Jon. This is Chris. I'll add well, I'll echo the excitement. That has not waned one bit. You know, the quarter was full of training on our relationship strategy and getting people ready. And we've talked previously about the number of referrals that were coming in across all different business lines. Tory gave you some really nice, larger ones there, but it's very granular as well. And I think another piece is we really started digging in and seeing how the deposit portfolio, which we said was similar to ours, has really held up and the customers are behaving in that manner. And so that's a real good indication that everything we thought in that space is playing itself out. And I'll close you with the training's there, getting ready to go. And later this quarter, we'll launch another retail campaign, and I can't wait to see the results of that. So it's pretty exciting. Jon Arfstrom: Okay. Good. Thank you for that. And then, just a small one. Ivan, thanks for the guidance, by the way. What is a modest step down in earning assets mean? Can you help us frame that? Ivan Seda: Yep. Certainly can. So we ended the quarter with earning assets at around $61.3 billion. And as we look out into Q1, our expectation at this point is that HFI loans stay roughly flat to modestly down relative to our ending balance. We just published at $12.31. I mentioned it earlier, we will likely see some modest decline in our cash balance levels as well relative to where we finished up the year. Just in that, we've been holding an excess there for the last few months following the PPBI close. So that will impact earning assets. Obviously, it won't impact net interest income in regard to that. So I would signal a range probably in the $60.5 to $61 billion range for the first quarter of this year. Jon Arfstrom: Okay. Good. Thanks for your help, and good luck for the whole good weekend. Operator: Thank you. Our next question comes from the line of David Feaster with Raymond James. Your line is open. David Feaster: Hi. Good afternoon, everybody. Torran Nixon: Hey, David. David Feaster: I wanted to maybe kind of follow-up kind of on that growth side. I mean, obviously, we had a lot of payoffs and paydowns this quarter. I'm curious maybe how much of that was intentional runoff versus, like, normal payoffs and paydowns just being elevated and then just you know, as you look at those transactional relationships, I mean, we got $2.8 billion. How much of that do you think you can retain, or would you expect a majority of that to exit the bank? Ivan Seda: David. Ivan here. I'll start, and then I'll hand over to Tory for maybe more of the color commentary. When you think about that loan decline at $680 million quarter on quarter, I really break it down into two major buckets. First is what you referenced earlier, which is that transactional portfolio decline. Just under $300 million. And then the second really being very concentrated within the commercial real estate construction and development portfolio. And Tory will speak a little bit more to that aspect of it. Within the transactional book, so far, we're seeing CPRs at kind of an 11, 12, 13% type level. As we've been tracking it over the last quarter. We do believe that'll move a bit quarter on quarter depending on what's coming up for repricing. We've got $4 billion of that book that will be maturing or repricing here over the next twenty-four months. As we've talked about in the past, some of that stuff is likely to reprice and stay on our balance sheet. But if it exits, that's also an opportunity for us to drive strong accretive value from a revenue growth perspective. Whether that's in the form of backfilling with core relationship lending, in the six and a half plus type range is what we're seeing. So a 200 basis point yield improvement on that. Or through elevating our pay downs on the wholesale side of the equation. That's kind of how we're thinking of it at this point, fairly similar to where we were. So, as I look at it quarter on quarter, kind of validation of what we were thinking would likely occur. And what we talked about three months ago. Hand over to Tory just to give more color commentary as well. Torran Nixon: Thanks, Ivan. David, this is Tory. I'll break it down into two different pieces. The first would be the transactional multifamily division, lending that we've talked about a lot. And Ivan mentioned that and I would say this that, roughly 70 or 80% of it today that coming up from, you know, kind of this fixed to floating, period is just rolling into the bank at a six and a half to seven coupon. And then the balance of that just is exiting the balance sheet and going either being paid off or going someplace else. Being financed somewhere else. But we're retaining right now somewhere between 75-80% of it. I don't know if that changes much over the course of this year, but that's kind of what we're seeing today. On the construction side, I mean, essentially, we've got a lot of projects that have gotten to a point where they are seasoned and stable and they're just rolling from the construction facility into permanent financing. And roughly 85% of that that's exiting the bank is being permanently financed by Fannie or Freddie. And the balance is either being done a little bit by us or other banks. Or life companies. So the majority of it's going to the agencies. And just, you know, a little bit of it's kind of rolling into either life money or commercial banks. So that's kind of where we are on those two big asset classes for us. David Feaster: Okay. That's great. And then maybe just following up on Jon's question a little bit on PAC Premier. I know we've got the conversion upcoming. Was hoping we could maybe get a sense of the timeline for the integration of, like, all the systems. And, you know, you got a slide in here that talks about, you know, some of the rollout of all their technologies, in addition to some of the key businesses that you're focused on cross-selling or leveraging. Chris, you mentioned the custodial trust business. I know they're gonna be included in this next small business campaign. Just kind of curious again, the process and the timeline to roll out some of their technologies and then the fee income lines to cross-sell post-conversion. Clint Stein: David, you never disappoint. You packed a lot into that follow-up question. You know, I'll just start by saying, you know, kind of a general guide in terms of the systems component of it is, in Ivan's prepared remarks, he noted that we expect to have the full realization of the cost saves by the end of the second quarter. So that kind of gives you a good sense of, you know, the ancillary systems and shutting down, you know, surplus servers and getting, you know, all of those other things aside from just the core system integrated. I don't think we will ever be done in terms of when we look at technology implementation utilization because it's a moving target. And that's just as an organization. We're always going to be in some form of investing and optimizing the tech stack. You know, in terms of timing of some of the technology that we were excited about, from a proprietary standpoint that PAC Premier brought along. The first mandate was to make sure that the folks from PAC Premier don't lose any of the functionality or the customers lose any of the that they've had for many years. So we don't want anybody going backwards, and we want to use it as a way to springboard the legacy Columbia customer base and employee base forward. So you had a lot in that question, and so I'm gonna step back and let Ivan, Chris, and Tory offer their insights. Christopher McGratty: Go ahead. Hey, David. You mentioned the custodial trust piece of it. I tell you that's an example of where there's a real win from the standpoint of the technology that they use for the core business is something that we're actually looking to adopt into our fiduciary trust business and bring them even closer in line together. They have a deposit portfolio that'll go through the banking conversion HOA goes through that. The rest of the bank goes through it as well. As Clint said in his remarks, we're very comfortable with where we're at. That's upcoming. And, you know, from there, I think you'll see it's pretty stable, and we'll really look at these opportunities where we're taking advantage, not just the things that we bring to the table, but the things that PAC Premier brings to the table. And that custodial trust one has already paid dividends in winning new business because we have that capability now. Or the combined capabilities. Torran Nixon: I'll just add, David, this is Tory, that we're full steam ahead. And they're doing I think they're doing a great job. Chris mentioned earlier, in prepared remarks of a 20, I think, 23% origination growth quarter over quarter. Like, a big chunk of that is Pacific Premier. And, you know, what excites me about that growth is all the growth from Q3 to Q4 is C&I growth. And they're just they're fully locked in on that. Our pipeline for core fee income, you know, TM, commercial card, international banking, and merchant, is up nicely. We're about roughly $10 million pipeline, which is really strong. Big chunk of that is Pacific Premier. So they're out there providing the products and capabilities that we brought to them and doing a great job executing it. David Feaster: That's great. Thanks, everybody. Clint Stein: Yeah, David. And, you know, I'll just add, like, another example of one of the things that we were excited about was, you know, PAC Premier's, you know, they called it their API marketplace and that connectivity to customer systems and everything. And you know, we're not super creative as bankers and so, you know, that is now the Columbia Bank API marketplace and it's been fully implemented and is operational and being utilized across the combined company today. As we sit here. So, you know, every component of what we can do and I'll kind of lean into some of my prepared comments about, you know, how do we get more efficient? How do we get better every day as an organization? And then what kind of activities can we do or what kind of talent can we bring in to drive additional revenue sources and value for all of our stakeholders. And so it's just a what I'll call, a relentless pursuit of those types of activities. David Feaster: Alright. That's awesome. Thanks. Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Jeff Rulis with D. A. Davidson. Your line is open. Jeff Rulis: Ivan, I appreciate the earning asset discussion on for Q1. I wanted to try to get the sense for the full year on the loan balance. Looks like $2.8 billion set to reprice or run off within a year, and that table on '24. Just wanted to see what the offset is on organic growth. So what do you expect the loan portfolio on net for the balance of the year? Ivan Seda: Pretty flat is our current outlook. So we saw a bit of that step down here as you saw during Q4. We are currently, as Tore mentioned earlier, seeing some of that transactional portfolio roll into relationships we've been able to retain. So currently, the outlook for total loans is relatively flat to year-end. That will ebb and flow quarter on quarter. So you'll probably see some plus or minus to that each quarter. But generally, the goal is to offset any of that transactional runoff with core relationship-based lending activities. Jeff Rulis: Alright. Appreciate that. And then the second question on capital. It sounds like on the buyback, I guess, first part of that is you know, your I think your stock's 10% higher than it was on average when you bought back in the fourth quarter. So won a nice trade, but does that diminish your appetite at all? And then the second piece is the alternative use of capital. Beyond buyback and organic growth, if you focus on talent lift-outs a special dividend or M&A? Thanks. Clint Stein: So, Jeff, taking a you're taking a cue from David Feaster and packing a lot of threads into that. And so there's parts of it that probably makes sense for Ivan to respond to and then, obviously, I have some thoughts. And so I'll try to try to hit on between Ivan and myself, we'll try to hit on all your points. But if we miss one, just redirect us. You know, I still think as a company that we're undervalued. The lift in our share price has been nice, but it doesn't change our view on reducing the share count and repurchasing stock. I said on the last quarter's call that I believe that the best investment we can make is in our own company. I still firmly believe that. And so really no interest in M&A. You know, with our increase in our share price, still buybacks make sense for us, from my point of view. You know, we fully expect at some point we may get to a position where the market got us valued appropriately and buybacks may not make sense. And special dividends are tools that we've used in the past when we've been in that position. And, you know, obviously, would take a lot of discussion with our board. And as we approached that, we would signal that to investors and make sure that folks fully understood why we're making that pivot. There are some things that we can do in terms of cleaning up the capital stack and things of that nature, and that's where I'll step back and ask Ivan to give you his thoughts. Ivan Seda: Yeah. No. It's a great question and something we spent a lot of time on. You know, when we talk about capital priorities, really there's four of them, right? Ensuring that we've got the capital necessary to lend to our core clients. Right? So supporting core loan growth opportunities there. Two, obviously, the dividend you saw us take that up 3% quarter on quarter. And we announced that last quarter as well. Number three, we are making investments in the business. Clint referenced some of them earlier in terms of market expansion opportunities. We've heard Chris and Tore talk kind of in the past quarter as well about some of the teams that we're building out and bankers that we're adding in certain markets, which is very exciting. And then fourth, to the extent to which we still have excess capital, we will continue to execute our share buyback program. And we do see that as a programmatic approach to it, likely a multiyear approach. Given the level of excess that we're currently looking at. So that's kind of how we've thought about the capital opportunity there. Jeff Rulis: Appreciate it. Thanks. Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Jared Shaw with Barclays. Your line is open. Jared Shaw: Hey, good afternoon. Torran Nixon: Hey, Jared. Jared Shaw: Maybe starting with the loan sales that you broke out, the $45 million were those considered or were those PCD? And I guess, where did they, where did that sale come through in terms of where they were carried or marked? Is that what that $1 million gain is on gain on sale loans? Christopher McGratty: Those were all PAC Premier adversely rated loans. I will call that. And we had a kind of a unique opportunity to offload some loans with certain accounting, and that's what we did. So there's about a $1 million hit, I believe, to goodwill associated with that loan sale. So it's really a win-win. Jared Shaw: Okay. So, otherwise, so it was basically sold at carrying value. There wasn't a gain or loss associated with that? Torran Nixon: Correct. Jared Shaw: What's the appetite for additional loan sales from here? Or was that I mean, I guess it sounds like that was a little bit of a unique situation. But could we think that there's additional sale opportunities out there? Ivan Seda: You know, we've looked at and every single quarter, we look at component parts of that transactional portfolio in particular. The piece that Frank just talked about was kind of a cleanup execution from the PPBI acquired portfolio. I would not expect anything big from a transaction portfolio, you know, that we would still take a significant capital hit if we were to do a kind of a bulk sale on some of those assets. We will continue to evaluate for kind of more surgical opportunities as we go throughout the year. Jared Shaw: Okay. And then you're shifting to deposits and deposit costs. You know, you thanks for giving us the spot right there $2.06 at 12:31. How should we think about deposit pricing and deposit costs as we sort of move through the first half of the year with some of the moving parts the deposit categories. Ivan Seda: Yeah. And we try to be careful. I'll start and then maybe I'll hand it over to Chris. So quarter over quarter, like you mentioned, we saw interest-bearing deposits flow from about a $2.43 last quarter down to $2.20 when you exclude the CD premium impact. And as you quoted kind of that $2.06 in the closing days of the year, you know, with the rate cuts happening throughout the course of Q4, the full effect of that wasn't reflected within the quarter. We've seen I think since Q2, a beta over 50%. We continue to believe that 50% is a good estimate from a through-the-cycle perspective. On the interest-bearing deposit beta. And really that comes down to execution. And I think we talked in prior quarters around the rates down deposit playbook, and we've now done that three times in the last several months and to great effect. Hand over to Chris to give kind of some business commentary as well. Christopher McGratty: Thanks, Ivan. And Jared, you know, the pricing aspect of it really becomes market-driven. And so we're analyzing that and following our competitors all the time. And when we see opportunities where we can bring it down five basis points, we will. When we see the, when we see renewal rates are maybe a little higher than what we typically anticipate, we might see that there's opportunities to bring down CD rates and things of that nature. And so it's a pretty fluid process throughout the quarter. And looking at those opportunities. And then further, we're really starting to look at because of our footprint now, we're really looking at some regional types of pricing, which may give us the opportunities to be able to recognize markets that aren't quite as competitive versus those that are and keep that more in balance in check. But it's really an active ongoing process. Tory and I have conversations with bankers all the time about the exception portfolio and what we can do in there. And it's really not waiting for just a Fed action to make things happen, although deposit playbook has been fantastic, we're always looking for opportunities to trim there if we can. Jared Shaw: Okay. Thank you. Operator: Please stand by for our next question. Our next question comes from the line of Chris McGratty with KBW. Your line is open. Chris McGratty: Great. How are you doing? For the question. Ivan, on the expense guide, just want to make sure I'm clear. So Q1 $335 to $345, and then add 40. From there. If I'm doing the math on kind of your run rate, half of the run rate expenses are in, I presume Q1 is your seasonally high watermark, and then I guess I'm trying to get after the exit rate once you get all the synergies. Any fourth quarter exit rate would be helpful. Thanks. Ivan Seda: Yep. I think you nailed it. Full year somewhere in the ballpark of $1.5 billion with more of that in the first half than the second half. Second, you know, exit velocity should be south of three seventy all in. And probably in the range of about a three thirty. Excluding the CDI impact. Chris McGratty: Okay. So one that's super helpful. The one five, is that a fully loaded, or is that a that's a fully loaded number. Right? Ivan Seda: Yep. That includes the CDI accretion impact. Chris McGratty: Okay. And then if we think about like, expensive investments in technology have been a big theme this quarter. Once you get to that you know, stripped out number in the fourth quarter, can you just speak about the need to invest, the balancing act between operating leverage as you go into next year? Torran Nixon: This is Tory. I may just I'll just jump in on the investment side quickly. I would tell you that Chris and I are continuously looking for opportunity to bring people into the company. So there's been a you know, over the past probably quarter and a half, we've added five commercial RMs in Utah, a team in Northern Idaho, a team in Eastern Washington, franchise finance team, couple RMs in Phoenix, three new TM I mean, we're continuously looking at and finding really good talent that we're investing in bringing the company. And we watch very closely the de novo locations that we that we've created and every one of them is profitable within twelve months. Most of them a lot earlier than that. They're just really good solid bankers coming in. Bringing customers with them and kind of just off to the races right out of the gate. I think Chris, don't if you have anyone to add to that. But No. I'd just echo it. Christopher McGratty: Same markets. We're finding talent in health care space. They've hit the ground running extremely quickly. We're finding talent in the wealth space. That typically takes a little longer because of the fee-based type of business that they run. But with the we do it at twelve-month look back, and we're very pleased with the folks we brought in last year, and we're continuing to build out that business as well. I think maybe part of your question, Chris, was around the other technology and the things of investing in the bank. That's just always been part of our run rate. I don't know that, you see anything different unless we come across something that's gonna be a real game changer for us. That's really built into a way of life for us. Chris McGratty: Perfect. And then, Ivan, on the tax rate, any thoughts? Right now, we're modeling 25% effective tax rate for 2026. Ivan Seda: Great. Thank you. Operator: Thank you. Please standby for our next question. Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is open. Matthew Clark: Hey. Good afternoon, everyone. Just circling back to the deposit discussion. Can you remind us what your comfort zone is from a loan to deposit ratio? Perspective? Ivan Seda: Yeah. Right now, we're in a very spot. I think we finished the quarter at 88%. Comfortable into kind of the low 90s, certainly 90%, 94%, 90 maybe 95, we'd start to kind of look at other options there. But we've got excess liquidity to work with in regard to that. Matthew Clark: That's great. And then yep. Yep. Then the other one for me, just on with the sale of the special mentioned loans that were acquired from Pacific Premier don't think I saw it in the deck or the release, but can you give us a sense for where your criticized loans or classified loans stood at the end of year relative to last quarter? Ivan Seda: Special mention loans were lower. Substandard loans were a little bit higher. About roughly about a $130 million swing each direction. So basically resulting in some special mention those special mention loans migrating down into substandard. And, you know, not necessarily due to degrading performance, but more of an elongated term of down an elongated downturn, let's call it. Don't really expect anything more negative to come out of that, but we're just reflecting the risk profile at this point. Matthew Clark: Okay. Okay. So net net, relatively flat. Is that what I'm hearing? Or Ivan Seda: Right. Matthew Clark: Yep. Okay. Exactly. Okay. Got it. Thank you. Ivan Seda: Yep. Thank you. Please stand by for our next question. Operator: Our next question comes from the line of Anthony Elian with JPMorgan. Your line is open. Anthony Elian: Hi, everyone. Ivan, appreciate the color you gave us on NIM for this quarter. How are you thinking about NII in 1Q just considering the impact day count, and the absence of the time deposit premium? Ivan Seda: Yeah. I think when you look at so first of all, we put up a obviously, a very banner strong finish to the year. We talked about in Q4 some of the elements including the $12 million impact of the CD accretion side. I'd back that out you know, with earning asset outlook that I talked about earlier. Along with the three ninety, three ninety-five net interest margin for Q1. Would expect NII to dip down just below kind of the $600 million range in the first quarter. Before, yo-yoing back up. Above that in Q2. Anthony Elian: And above that in the second half as well. Correct? Ivan Seda: Yes. Yeah. It should continue to trend up throughout the course of the year. Operator: Ladies and gentlemen, as a reminder to ask a question, please press 11. Please stand by for our next question. Our next question comes from the line of Janet Lee with TD Securities. Your line is open. Janet Lee: Good afternoon. If I were to put together the comments that were provided on earning assets, $60.5 billion and $61 billion for the first quarter, And then NIM surpassing the 4% mark in either second or third quarter. So is it am I fair to describe earning assets staying in that $60.5 billion to $61 billion or modestly trending down throughout 2026, while NIM stays in that 4% in range in the back half of 2026. Is that a fair way to describe the baseline expectations? Ivan Seda: Yes. On the first part regarding earning assets, On the second part regarding NIM, I expect is that we'll dip down to a of three ninety to $3.95 in Q1. And then we'll grow back up each quarter sequentially a net interest margin perspective surpassing 4%. At some point in Q2 or Q3. And we'll continue upward from there. Janet Lee: Oh, continue going upwards. Above that 4%. Each quarter. Got it. Sorry if this was asked already. Do we did you talk about the fee income growth expectations for 2026? Obviously, fourth quarter was a very solid quarter, it appears. How should we think about the growth in fee income? Ivan Seda: Yeah. From a core perspective, I would model core fee income in the low to mid-eighties type range. Q4 was an absolute banner finish to the year. And we talked a bit about swaps, syndications, and some of those items that are we don't have a lot of kind of chunkier fee income elements within our core operating noninterest revenue base, but those elements were high watermarks for the quarter. So modeling somewhere in the low to mid-eighties would be appropriate. Janet Lee: Got it. Thank you. Ivan Seda: Thank you. Please stand by for our next question. Operator: We have a follow-up question from the line of Anthony Elian with JPMorgan. Your line is open. Anthony Elian: Hey, thanks for the follow-up. Clint, for you, just from a strategic perspective, does anything change with you now adding the role of chair? Thank you. Clint Stein: Short answer is no. This is something that from a board perspective, we've anticipated would occur around this time and we began actively discussing and working towards it from a full board perspective and kind of the back half of 2024. You know? And I'll say that one area that has been a focus of conversation and over that time period and will remain a focus for the board and specifically for me with the expanded role is to continue to work with Maria and Louie on what's the right size for our board? What does refreshment look like? So I guess the way to sum it up is our roles are changing but our priorities as a board are not. And, you know, we added three directors from PAC Premier. That was also a component of refreshment as we had three directors that rotated out in 2025. And I think we've quickly seen the impact that fresh thinking and new perspective brings. It's been very healthy. A lot of great dialogue with the board, and so that's just the kind of work that we're gonna be focused on in 2026. Operator: Thank you. Anthony Elian: Thank you. Operator: Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Jacquelynne Bohlen for closing remarks. Jacquelynne Bohlen: Thank you, Towanda. Thank you for joining this afternoon's call. Please contact me if you have any questions or would like to schedule a follow-up discussion with a member of management. Have a good rest of the day. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.