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Katie: Good morning. My name is Katie, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Fourth Quarter 2025 Earnings Conference Call. On behalf of The Goldman Sachs Group, Inc., I will begin the call with the following disclaimer. The earnings presentation can be found on the Investor Relations page of The Goldman Sachs Group, Inc. website and contains information on forward-looking statements and non-GAAP measures. This audiocast is copyrighted material of The Goldman Sachs Group, Inc. and may not be duplicated, reproduced, or rebroadcast without consent. This call is being recorded today, 01/15/2026. I will now turn the call over to Chairman and Chief Executive Officer, David Solomon, and Chief Financial Officer, Dennis Coleman. Thank you. Mr. Solomon, you may begin your conference. David Solomon: Thank you, operator. Good morning, everyone. Thank you all for joining us. I am very pleased with our strong performance in the fourth quarter. We generated earnings per share of $14.1, an ROE of 16%, and an RoTE of 17.1%. For the full year, we delivered earnings per share of $51.32, a 27% increase versus last year, and ROE of 15% and ROTE of 16%. Before we review our financials in detail, I want to discuss our longer-term performance and provide an update to you on our strategy. Beginning on Page one, in 2020, we held the firm's first investor day and laid out a clear and comprehensive strategy to grow and strengthen the firm. We also set a number of targets so we would be held accountable for our progress. Since then, guided by our purpose to be the most exceptional financial institution in the world, supported by our four values of client service, integrity, partnership, and excellence, we continue to successfully execute on this strategy. We increased firm-wide revenues by roughly 60%. We grew EPS by 144%. We improved our returns by 500 basis points. And we delivered a total shareholder return of over 340%, the most of our peer group over this time frame. As you can see on page two, we achieved this while also materially improving the risk profile of the firm and enhancing the resilience of our earnings. We have doubled our more durable revenues. We have reduced historical principal investments by over 90% from roughly $64 billion down to $6 billion. The results of these multiyear efforts to scale capital-light businesses and reduce our capital intensity were reflected in our most recent CCAR stress test, where we've driven a 320 basis point improvement in our stress capital buffer. Overall, we have strengthened and grown the firm through relentless focus on delivering excellence to our clients. Turning to page three, I want to highlight our strong execution in 2025. Our success is fueled by our world-class interconnected franchises that deliver one Goldman Sachs to our clients around the globe. In global banking and markets, we maintained our position as the number one M&A adviser in investment banking and number one equities franchise alongside our leading position in FICC. We improved our standing with the top 150 clients in these businesses, which has contributed to 350 basis points of wallet share gain in GBM since 2019. We significantly increased our more durable FICC and equity financing revenues, which grew to a new record of $11.4 billion for the year and generated returns in excess of 16% in the segment. In asset wealth management, we are a top-five active asset manager, a leading alternatives franchise, and a premier ultra-high-net-worth wealth manager. We've consistently grown more durable management, other fees, and private banking and lending revenues, which were both records in 2025. And also raised a record $115 billion in alternatives. Our strong execution has led to improvement in both the margins and the returns in this segment. Importantly, we're taking the final steps needed to narrow our strategic focus. In addition to completing the transition of the General Motors credit card program last August, last week, we announced an agreement to transition the Apple Card portfolio. Let's turn to Page four for a deeper dive on our franchises, starting with investment banking, where we have been the number one M&A adviser for twenty-three consecutive years. Very few, if any, service businesses of our size can claim long-standing leadership to this degree. This is a reflection of the strength of our client relationships as well as the quality of our people and the advice and execution capabilities they bring to our clients. Since 2020, we've generated an incremental $5 billion in advisory revenues versus the number two competitor. And in 2025 alone, we've advised on more than $1.6 trillion of announced M&A transaction volumes, over $250 billion ahead of the next closest peer. Over the last year, we've seen high levels of client engagement across our investment banking franchise. And we expect activity to accelerate in 2026. Our outlook is supported by a number of catalysts: corporate focus on strategically positioning scale and innovation, the tremendous public and private capital fueling growth in AI, as well as a strong pickup in sponsor activity. Given our best-in-class sponsor franchise, we're especially well-positioned to help sponsors deploy the $1 trillion of dry powder they hold and monetize the roughly $4 trillion of value across their portfolio companies. Increased levels of engagement are reflected in our backlog, which stands at its highest level in four years. M&A transactions often kick off a flywheel of activity across our entire franchise. Whether it's acquisition financing, hedging activity, secondary market making, or investing opportunities for our AWM clients, it is unquestionable that there is a significant multiplier effect. And as the number one advisor for over two decades, we are uniquely positioned to capture the significant forward opportunity. Moving to Page five, another growth engine for GBM has been our leading origination and financing businesses. Last year, we announced the creation of the Capital Solutions Group, formalizing a hub to provide our clients a comprehensive suite of financing origination, structuring, and risk management offerings across both public and private markets. On the public side, we are optimistic about the outlook for equity and debt underwriting, particularly amid the resurgence in the IPO market and higher acquisition finance-related activity. We have a long-standing track record and leading market positions. On the private side, our ability to structure holistic solutions has led to a number of asset-backed financings across infrastructure, transportation, and data centers. Supported by strong origination and structuring that feed opportunities across our client franchise and our asset management platform. These capabilities have supported our deliberate strategy to grow our more durable financing revenues, providing a ballast to our results and comprising 37% of total FICC and equity revenues in 2025. Since 2021, these have increased at a 17% CAGR. And with risk management always top of mind, we still expect to prudently drive growth from here. On page six, we illustrate the strength and resilience of the FICC and equities intermediation businesses. We have a demonstrated ability to deliver strong results in a broad array of market environments. While client activity levels in different asset classes ebb and flow in any given quarter, our overall results have been remarkably consistent over time. This reflects the breadth and diversification of these businesses, which have been bolstered by our share gains. We see even more opportunities to further strengthen our client franchise. This includes investing to improve our market-making capabilities and broaden offerings for active and passive ETF issuers. In addition, we are working to close share gaps with key client segments, including insurers, wealth managers, and RIAs, as well as in certain product areas like corporate derivatives. Geographically, we are looking to close the share gap in Asia, in part by focusing on these areas. Turning to page seven, our scaled asset and wealth management business has $3.6 trillion in assets under supervision, with global breadth and depth across products and solutions. We've grown more durable revenues across management and other fees in private banking and lending at a 12% CAGR, ahead of our target, and we continue to see significant opportunities across wealth management, alternatives, and solutions. We have also improved our AWM margins and returns. And given our growth outlook across these businesses, we are setting new targets. We are increasing our pretax margin target to 30%, which will help drive high-teen returns in AWM over the medium term. Let's dive deeper into our key growth opportunities, starting with wealth management on page eight. Over the last fifty years, we have built a premier franchise with $1.9 trillion in client assets that is centered around meeting the distinct investing, planning, and borrowing needs of ultra-high-net-worth individuals, family offices, endowments, and foundations. Over the last five years, we drove long-term fee-based inflows at an annual pace of 6% and grew wealth management revenues at a CAGR of 11%. And we expect further growth from here. Specifically, we are broadening our client base by increasing the number of advisers and content specialists globally. We're expanding our loan product offerings in line with client demand. We are enhancing alternatives investment offerings to facilitate clients moving closer to their optimal target allocation. And we are continuing to elevate the overall client experience, including via enhanced digital offerings and more expansive thought leadership engagements that leverage the convening power of Goldman Sachs. To sharpen our focus on future growth in wealth management, we are introducing a new target of 5% long-term fee-based net inflows annually from the platform. On Page nine, we highlight our other key growth opportunities in asset wealth management, alternatives, and solutions. We have a leading alternatives platform where we've raised $438 billion since our 2020 investor day. And we have grown alternatives management and other fees to a record $2.4 billion. We continue to scale our flagship fund programs while concurrently developing new strategies. Given our success in strengthening and growing our alternative platforms, we believe we can raise between $75 billion and $100 billion annually on a sustainable basis. As these funds continue to be deployed, we expect double-digit growth in alternative management and other fees. We expect fee-paying alternative assets under supervision to reach $750 billion by 2030. This further supports our existing target of generating $1 billion in incentive fees annually. We're also pleased with the progress across our solutions business, where we see secular growth in demand for our products and services. We are the number one outsourced CIO manager in the US, providing clients a one-stop shop for their investment needs: advice, portfolio construction, risk management, and hedging. And we've won significant global mandates this year from firms, including Eli Lilly and Shell. We are also the number one separately managed account and the second-largest insurance solutions provider. Looking forward, we see continued opportunities for growth, including in third-party wealth, in the context of alternatives offering, ETFs, and customized solutions like direct indexing. In addition, we are expanding our capabilities in the retirement channel via partnerships, further deepening our strong relationships with insurers, and enhancing our offerings for institutional clients, including sovereign wealth funds. Turning to page 10, building on our strong organic growth, we are accelerating our growth trajectory in asset wealth management through our recent strategic partnerships and acquisitions. Our collaboration with T. Rowe Price delivers a range of public and private market solutions for retirement and wealth investors. Last month, we announced the launch of co-branded model portfolios, the first of four planned product offerings. We recently closed the acquisition of Industry Ventures, a venture capital platform that adds an attractive technology investment capability to our market-leading secondaries investing franchise, XIG, where we now have over $500 billion in assets under supervision. Most recently, we announced the acquisition of Innovator, which significantly scales our businesses to be in the top 10 of active ETF providers globally, particularly in the fast-growing outcome-based ETF segment. While the bar for transformational M&A remains very high, we will continue to look for ways to accelerate growth in asset wealth management. Turning to Page 11, we have a long history of prudent and dynamic capital management, and our philosophy remains unchanged. We prioritize investing across our client franchises at attractive returns, sustainably growing our dividend, and returning excess capital to shareholders in the form of buybacks. We see meaningful opportunities to deploy capital across our franchise. This includes leaning into acquisition financing as M&A activity accelerates, supporting growth in equities and fixed financing, and increasing lending to our ultra-high-net-worth clients. That said, given our strong earnings generation capability and excess capital positions, we also have the capacity to return more capital to shareholders. Today, we are announcing a $0.50 increase in our quarterly dividend to $4.5, representing a 50% increase from a year ago. In addition, we have $32 billion of remaining buyback capacity under our current share repurchase authorization. And while we are mindful of our current stock price, we will remain dynamic in executing repurchases. Turning to Page 12, as we continue to grow the firm and strategically deploy our balance sheet to support client activity, our unwavering focus remains on maintaining a disciplined risk management framework and robust standards. We've been on a multiyear journey to diversify our funding footprint, including building strategic deposit-raising channels such as private banking, markets, and transaction banking. This has significantly improved our funding structure. Our deposits have grown to $501 billion and now represent roughly 40% of our total funding. We continue to optimize activity in our bank, which held 35% of firm-wide assets at year-end, versus 25% at the time of our first Investor Day. Overall, this progress underscores our commitment to the diversification and resiliency of our funding profile, which has improved our funding costs and our financial flexibility. All in, our robust capital position, diversified funding mix, dynamic liquidity management, and strong risk discipline are foundational to the strength and stability of our balance sheet, allowing us to meet the evolving demands of our clients. Moving to Page 13, last quarter, we announced the launch of One Goldman Sachs 3.0, our new operating model propelled by Ella AI. We are excited to embark on this effort, starting with six work streams we identified as ripe for disruption. Our people have begun thorough assessments of opportunities for efficiency, and we will then invest to reengineer these processes from the ground up. We will be measuring and driving accountability, and we will update you over the coming year with additional details regarding these metrics. Let's turn to page 14. The exceptional service we provide our clients is a direct result of our people, who are our most important asset. Our client franchise is powered by our best-in-class talent and culture. And it is critical that we continue to invest in Goldman Sachs as an aspirational brand around the globe, which allows us to attract quality talent at all levels. As an example, in 2025, we had over 1.1 million experienced hire applications, a 33% increase from last year. And in our summer internship program, we maintained a selection rate of less than 1%. Many of these individuals will have long careers at the firm, exemplified by the fact that roughly 45% of our partners started as campus hires. And while some leave for opportunities elsewhere, these firms often become important clients to Goldman Sachs. Today, more than 650 of our alumni are in C-suite roles at companies with either a market cap greater than $1 billion or assets under management greater than $5 billion. On page 15, we outline our firm-wide through-the-cycle targets. Given the successful execution against our strategic priorities, we are confident that we will continue to deliver on these. And in the near term, we believe that our catalysts position us to exceed our return target. We have the number one M&A advisor within our leading global banking and markets franchise that is poised to capitalize on a cyclical upswing in investment banking activity. A scaled asset wealth management business with higher margin and return targets and clear opportunities for future growth. And tailwinds from a more balanced regulatory regime. In closing, I am incredibly proud of what we have delivered, and I am confident that we will continue to serve our clients with excellence and drive strong returns for our shareholders. Let me now turn it over to Dennis to cover our financial results in more detail. Dennis Coleman: Thank you, David. And good morning. Let's start with our results on page 16 of the presentation. In the fourth quarter, we generated revenues of $13.5 billion, earnings per share of $14.01, an ROE of 16%, and an RoTE of 17.1%. For the full year, we delivered earnings per share of $51.32, a 27% increase versus last year. An ROE of 15% and an RoTE of 16%, improving 230 and 250 basis points, respectively, compared to 2024. As David mentioned, we announced an agreement to transition the Apple Card portfolio. For the quarter, the transition had a net positive impact of $0.46 to EPS and 50 basis points to ROE, as a $2.3 billion revenue reduction was more than offset by a $2.5 billion reserve release upon moving the portfolio to held for sale. Given that we are taking our final steps to narrow our strategic focus, you will have seen we implemented minor organizational changes and made corresponding updates to our segments, which are incorporated in our earnings presentation today. Turning to results by segment, starting on Page 18, Global Banking and Markets produced record revenues of $41.5 billion for the year, up 18% amid broad-based strength versus last year. In the fourth quarter, investment banking fees of $2.6 billion rose 25% year over year, driven by increases in each of advisory, debt underwriting, and equity. For 2025, we maintained our number one in the league tables for announced and completed M&A, and also ranked first in leveraged lending. We ranked third in equity underwriting and second in common stock offerings, convertibles, and high-yield offerings. Even with very strong accruals in the fourth quarter, our investment banking backlog rose for a seventh consecutive quarter to a four-year high, primarily driven by advisory. As David mentioned, we are optimistic about the investment banking outlook for 2026 and the multiplier effect this activity has across our franchise. FICC net revenues were $3.1 billion for the quarter, up 12% year over year. In intermediation, the 15% year-over-year increase was driven by rates and commodities, and in financing, revenues rose 7% to a new record on better results within mortgages and structured lending. Equities net revenues were $4.3 billion in the quarter. Equities intermediation revenues were $2.2 billion, up 11% year over year on better performance in derivatives. Equities financing results hit a quarterly record of $2.1 billion, up 42% versus the prior year amid record average balances in prime. For the full year, total equities net revenues were a record $16.5 billion, surpassing last year's record by over $3 billion, helped by the multiyear investments we've made in this business. Moving to asset wealth management on page 20, for 2025, revenues were $16.7 billion, and our pretax margin was 25%. Segment ROE for the year was 12.5%, and in the mid-teens when adjusted for the 230 basis point impact from HPI and its related equity as well as the FDIC special assessment fee. In the quarter, management and other fees were a record $3.1 billion, up 5% sequentially and 10% year over year. Private banking and lending revenues rose 5% year over year to $776 million, as higher results from lending and deposits related to wealth management clients were partially offset by NIM compression in the Marcus deposit portfolio. Incentive fees for the quarter were $181 million, bringing our full-year incentive fees to $489 million, up 24% versus the prior year. We expect to make further progress in 2026 towards our annual target of $1 billion. Now moving to page 21, total assets under supervision ended the quarter at a record $3.6 trillion, driven by $66 billion of long-term fee-based net inflows across asset classes and $50 billion of liquidity inflows. In conjunction with our new long-term fee-based inflow target in wealth management, we are providing enhanced disclosures outlining inflows and long-term AUS by channel. Turning to page 22 on alternatives, alternative AUS totaled $420 billion at the end of the fourth quarter, driving $645 million in management and other fees. Gross third-party fundraising was $45 billion in the fourth quarter and $115 billion for the year. Moving to Page 24, our total loan portfolio at quarter-end was $238 billion, up sequentially reflecting higher collateralized lending balances. Provision for credit losses reflected a net benefit of $2.1 billion, including the previously mentioned reserve release associated with the Apple Card portfolio. Let's turn to expenses on page 25. Total operating expenses for the year were $37.5 billion. Compensation expenses were $18.9 billion and included $250 million of severance costs, driving a full-year compensation ratio net of provisions of 31.8%. Full-year non-compensation costs of $18.6 billion were up 9% year over year, driven primarily by higher transaction-based activity. While the operating environment for our businesses continues to improve, we remain committed to our key strategic priority of operating more efficiently and are maintaining a rigorous focus on advancing our productivity and efficiency initiatives as part of One Goldman Sachs 3.0. Our effective tax rate for 2025 was 21.4%. For 2026, we expect a tax rate of approximately 20%. Next, capital on Slide 26. Our common equity Tier one ratio was 14.4% at the end of the fourth quarter under the standardized approach. In the fourth quarter, we returned approximately $4.2 billion to common shareholders, including common stock repurchases of $3 billion and dividends of $1.2 billion. In conclusion, our strong performance this year reflects the strength of our client franchise and our multiyear execution on our strategic priorities. We see a highly constructive setup for 2026 as the improving investment banking environment and our deep client connectivity position us to capture significant opportunities across the entire firm. At the same time, we remain mindful that the operating environment can shift quickly. Economic growth, policy uncertainty, geopolitical developments, and market volatility are factors we continue to monitor closely. And as always, disciplined risk management will remain central to how we serve clients and allocate resources. Even so, with solid momentum and growth opportunities across our businesses, we are optimistic about the forward outlook for Goldman Sachs and remain confident in our ability to deliver for clients and drive strong returns for shareholders. With that, we will now open up the line for questions. Katie: Thank you. Ladies and gentlemen, we will now take a moment to compile the Q&A roster. Press star then one on your telephone keypad if you would like to ask a question. If you would like to withdraw your question, press star then 2 on your telephone keypad. If you're asking a question and you are in a hands-free unit or a speakerphone, we'd like to ask you to use your handset when asking your question. Please limit yourself to one question and one follow-up question. We will take our first question from Glenn Schorr with Evercore. Glenn Schorr: Hi. Thanks very much. Great thoughts and detail in there. One narrow one first. I guess I'll ask it simply. How do you plan to scale wealth from here? And I want to include that if you could. Your aspirations. Meaning, we had a little experiment with United Capital, but, like, you're amazing in ultra-high-net-worth. And I'm curious about the rest of wealth. You've done a couple of things in RIA land, so maybe we could talk about that and then zoom out after that. Thanks. David Solomon: Sure. And appreciate the question, Glenn. I think our ultra-high-net-worth franchise is extraordinary. I think we have a leading position here in the United States. Strong position, but obviously with room for more share and footprint in Europe and in Asia. But I think it's a highly differentiated offering for wealthy individuals and people that have very, very complex needs from a wealth perspective. That business scales with people. You heard in and technology. But you heard in our remarks that we're continuing to invest in broadening the footprint and the coverage available and the resources to expand that ultra-high-net-worth footprint. As you point out, we did do an experiment with United Capital, but we've reached the conclusion that the right way for us, given our manufacturing capability, and asset management, is to really explore broader access to wealth through third-party wealth channels. And so I think you know we're making very significant investments in our third-party wealth capability. That includes partnerships with RIAs and footprint with RIAs. And we have great product manufacturing capability. We can use others' distribution very, very effectively given our brand and our very, very complete diverse product offering. And that will help us continue to scale. But in direct full-service product wealth, we're going to stick with ultra-high-net-worth wealth. And what's interesting is obviously, you've got a bunch of secular things going on that are growing the available people that need these services. You have a huge generational wealth transfer that's going on that's bringing a whole new generation into these services. And it's a very fragmented business, and we think we have a very differentiated offering with lots of upside. And look, you heard what we said about our capabilities and wealth and our target to continue to grow those long-term fee-based wealth assets by 5% as we go forward. Glenn Schorr: I appreciate all that, David. Bigger picture, obviously, really strong results, good backdrop. Middle of the range despite all these strong results because I think there's mixed operating leverage or people always want more operating leverage during big market peaks. So I'm gonna flip the comment around and just ask, what's your level of confidence you've raised the floor with everything that you've laid out and everything you've executed on? Because in the past, when markets pull back off highs, returns for you and others would drift back to the, like, low double digits and sometimes a little bit lower. But, like, I guess I'm curious about how much you think all that progress you've built, how much have you raised the floor? David Solomon: I think we've raised the floor meaningfully. You know, based on the work we've done, the growth that we've done. You know, in particular, the growth of durable revenues, which will be less affected, less affected, not not affected, but less affected if we get into some sort of a downturn or a more challenging environment. If you step back to our Investor Day, the firm's returns in the ten years before our Investor Day averaged nine and change percent. And so I think we now are operating with a global banking and markets franchise that should run mid-teens through the cycle. That doesn't mean you couldn't get a very tough environment where it runs lower, but you can also get environments, and this is part of what we've said about 2026, where it has the potential to run higher. I think we've uplifted the floor very significantly. Now, of course, in very severe downturns, it slows down activity. It impedes confidence. But I just think the firm is bigger, more diversified, much more durable, and better positioned when we have that kind of environment than we've been before. Now I'm not gonna predict the future, and I know it's never a straight line. But I think we've uplifted it very materially. Katie: We'll take our next question from Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: Good morning. I guess maybe just sticking with the true cycle ROE, David, maybe the other end of the spectrum when I talk to investors, given that the stock trading, given the performance you've had, and two structural things seem to be happening at Goldman Sachs. One is obviously, the regulatory backdrop changing is creating more capital flex. And the productivity focus that you had double down with the Goldman Sachs 3.0, is it fair for a shareholder to assume that absent, like, big peaks in falls, that the business is rebasing to maybe something better than mid-teens returns towards closer to high teens? Or is that sort of misplaced and misunderstanding kind of the business dynamics? David Solomon: Well, I appreciate the question, and, look, our goal is gonna continue to be to work very, very hard to do everything we can to continue to take the returns higher. We were very pointed in our comments on the last slide in that presentation that we're reaffirming our mid-teens targets. You know, I certainly remember it. It's not that many quarters ago where many people on this call would ask questions about how we were going to get to the teens. So we've arrived. I think we were pointed in saying, this is an environment where the potential to be positioned to exceed targets in the near term is there, but as the previous set of questions just pointed out, there'll be other environments where there could be headwinds. So I think we're very comfortable that we are operating as a mid-teens firm. We think that we can do things that over time will drive upside to that, but we're not going to set targets until we're very comfortable that we further elevated the firm. I think one of the most important things coming out of the presentation is the next step in our asset wealth management journey to tell you that given the work we've done and the progress we've made, we now have more confidence that we can operate that business at a higher margin, 30%, which drives a higher return. And so we're comfortable putting that target out. And that, of course, elevates the overall performance of the firm. The other thing I just want to highlight that comes out of your comment is people think about the regulatory environment as changing the capital rules and giving us more capital flexibility. But I'd also highlight the regulatory environment in the last five years put costs and burdens on the firm that we now won't have going forward that actually gives us flexibility to invest over time in other things that drive growth. So it's not just the capital stuff, that's important. It's also the fact that we and others in the industry were burdened by additional costs that now can be directed to what I call more productive growth and return for our clients and for our shareholders. Ebrahim Poonawala: That's great. And I guess maybe a second one just on capital deployment. So it's very clear the bar for M&A is high. But when you think about just the stock valuation today, regulatory backdrop, there is a cycle or an environment where there is room to do something transformational. Just give us a sense in terms of do you see this as the right time or if the right opportunity presents itself to do something that would shift the mix, boost the mix of AWM business a lot more, or do you think that's kind of anti-Goldman's DNA to do something that would be too large or transformational? David Solomon: I appreciate the question, Ebrahim, but I'm gonna be very consistent with what I've said multiple times with this question. We feel very good about what we did in 2025, the T. Rowe partnership and the two small acquisitions. They fill in gaps. They accelerate our journey in asset wealth management. But the bar for doing something significant and transformational is very, very high. And it has to be high, one, because there are very few really, really great large businesses. Most of them are not for sale and available. And I think the cultural aspects of Goldman Sachs and what makes Goldman Sachs unique and different, there has to be a tremendous sensitivity to integrating business into it to make sure that Goldman Sachs can continue to be Goldman Sachs. And so I won't say that we don't look at those things and think about those things. But I really my key message is the bar is very high. I do think that we will see other things like the things that we've done that can accelerate our journey and therefore increase the growth trajectory of the asset wealth management business. Katie: We'll take our next question from Erika Najarian with UBS. Erika Najarian: Hi, good morning. I hate framing this question this way, but I can't think of a better way to frame it. In terms of the capital market cycle ahead, what quote inning are we in? And as investors think about the scale of potential upside to Goldman? Maybe compare and contrast the preconditions that you see for the capital markets backdrop in 2026 with 2021. And I'm only asking this question as investors try to think about the EPS potential of your company. And I think 2021 was is sort of seen as a ceiling in terms of what you could produce in this business. David Solomon: I'll give you a couple of things, Erika, to think about, and I appreciate the question. You know, the first thing I'd just say is as a student of these businesses for decades and decades and decades, I would bet you that 2021 is not the ceiling. That doesn't mean that in this cycle, we surpass 2021 because things can change and things can go wrong. But this business, when you go back and you step out and you look over twenty-five, thirty years, there's not a ceiling that hasn't been exceeded at some point down the road as you run through cycles. And I'm sure given the growth in market capital world and activity, the 2021 activity levels will be exceeded again. They might be exceeded in 2026. You know, there was a slide that my team was showing me that shows a range of outcomes, including a conservative outcome for M&A, a base outcome for M&A, and a bull outcome for M&A. And the base outcome is pretty close to 2021, and the bull outcome is ahead of 2021. I think the world is set up at the moment to be incredibly constructive in 2026 for M&A and capital markets activity. And I think the likely scenario is it is a very, very good year for M&A and capital markets activity. What could change that? Something could go on in the world, some sort of an exogenous event or a macro event that changes the sentiment. If you look at 2025, we saw that in April. For a period of time, and things got slowed down. Don't think that's the likely outcome. But it's certainly in the distribution as a possibility. But I do think that we are, you know, not yet in the middle of the potential for a full-on M&A and sponsor cycle. And I think over the next few years, barring some sort of an exogenous event that slows it down, we're gonna have a pretty constructive environment for those activities given the combination of fiscal, monetary, capital investment, deregulatory stimulus. You've got this combination of stimulus activity that I think is pretty constructive for these businesses. Erika, a couple things I'd add on that just to supplement everything David said. If you look at sort of industry-wide volumes of the various categories of investment banking activities compared to, say, the last five years, a number of them have started to trend above the average level. One that's decidedly below the averages remains the IPO business for equity. That's a lucrative business that, you know, we have a very long-standing leadership position in. And it's also the case that while, you know, some of the debt activities have been trending up in terms of overall volumes, we still haven't seen enormous volumes of sponsor capital committed deals or, you know, large-cap capital committed investment-grade activity. So there still remains, you know, other types of transaction activity as we progress through the cycle that is, you know, very strategic to clients, things that Goldman Sachs is very good at executing, you know, that could further propel upside across the capital markets line items. Erika Najarian: Great. And just the follow-up question is, I really appreciate how you laid out your internal opportunities to deploy the capital, excess capital, which is so much. Right? If you take into account the excess, your buffer, and potentially the redefinition of that capital, you know, as we think about, you know, a year where, you know, you talked about the cap markets, your ability to organically generate capital is also, you know, best in class. How do we think about how that buyback fits in? Appreciate your prepared remarks that if you're going to be opportunistic, you did $12 billion in '26, but it seems like you have plenty of room to meet or exceed that and, you know, and check off your wish list. Is that the right way to think about it? David Solomon: Sure, Erika. So, you know, I'll quickly give you our standard on the prioritization of the deployment of capital. And that remains unchanged, as David said. And that's what we'll focus on first. But to get to your buyback question, given the degree of excess capital that we sit with today, and our expectation that we'll continue to generate capital over the course of the next year, you know, buybacks remain an important tool in our toolkit. Over the long term, you will notice that Goldman Sachs has, you know, reduced its share count, you know, quite significantly and quite sustainably. And it gives us leverage to continue to generate EPS growth. So like anyone, we are mindful of the price at which our equity is trading. But we're also trying to take, you know, a strategic long-term approach. The first and foremost fuel the franchise to support client activity, but also, you know, drive returns for shareholders over multiple years. So buybacks continue to feature as an important part of our capital deployment strategy. Katie: Thank you. We'll take our question from Betsy Graseck with Morgan Stanley. Betsy Graseck: Hi, good morning. Just continuing on this theme, I wanted to understand a little bit about how the equities markets, revenues, and the fixed income revenues are aligned with the issuance calendar. Just wondering how much of the issuance that's going on is those two line items as well, or is issuance all within banking? David Solomon: So, thank you for the question, Betsy. I'm not sure I understood the very tail end of your question, but maybe I'll start off answering it, and then you can redirect me. I think across our FIC and equity businesses, we obviously have a very diversified portfolio of activities, both intermediation and financing. Even with intermediation, diversified by asset class, by cash, derivatives, and equities. And I think there are contributions that the primary market activity makes to enhance the overall liquidity provision secondary market making opportunity set. But my own view is that we'll continue to see an increase in the overall level of capital markets activity. And if that pulls through as well as we hope and expect, that should catalyze incremental levels of activity across intermediation activities as investors even more dynamically work to assess their existing secondary market portfolio versus quote unquote making room for primary, etcetera. So I think there remains opportunity on in that front as we move into 2026. Betsy Graseck: And then you mentioned that your backlog today is the highest in four years. Maybe we could just ask you to unpack a little bit. There's a lot of different backlogs, so, would you mind going through what you're anticipating, getting on unreleased into production, so to speak, as we go through '26? David Solomon: Sure. So the way we report our backlog consistently each and every quarter. So there's no change to the way we're reporting that. It's comprised of our advisory activities, our debt underwriting, our equity underwriting. We're very, very deliberate in our disclosures each and every quarter to highlight if the delta is in the backlog, have particular drivers. In this particular case, we say a couple things. We say it's the seventh consecutive quarter. It's the highest in four years. It's one of the highest levels ever. It is a large level of backlog, and we make that point because, obviously, the results that we just delivered in Q4 and for full year 2025 were very strong. But the indication is that not only we delivered those results, but more than replenished those results. And so that is what's giving us the confidence. And then all of David's comments that he made with respect to the flywheel and the catalyzing of activity, because the growth in the backlog is driven by advisory, we're also trying to give our investors the sense that that could in turn drive other pieces of activity across the firm, other types of activity that doesn't get registered in backlog and doesn't lend itself to that type of reporting metric. So that's sort of our orientation, and that's what I would offer up to help you get, you know, the insight on why we're putting that out there and highlighting it. Katie: Thank you. We'll take our next question from Brennan Hawken with BMO. Brennan Hawken: Good morning. Thanks for taking my question. First of all, sort of great timing on the Apple Card deal. Like, having that announced the week before we get the tweet on the limits. I mean, I couldn't help but juggle about that. I'd love to hear about obviously, you've got a long pathway to close, twenty-four months and then it closes. But could you help us maybe understand the right way we should be thinking about, like, platform's run rate after it closes and then whether or not there's any operating expenses given this is your last card exit. That might be running off? And what are the plans for the deposits, the Apple deposits that may not have been reflected in the announcement? David Solomon: Sure. Brennan, thank you for the question. Thank you for the observation. The same thing occurred to us. So thinking about platform solutions on the forward, it's really comprised, you know, the vast majority of it is the Apple Card business and the savings program. The loans are now obviously in a fair value, standpoint from an accounting perspective. So they're marked to market. The performance contributors will obviously be, you know, NII, charge-offs, operating expenses, etcetera. I think we'd observe from a seasonality perspective and across the balance of the year perspective, the same dynamics we've observed over the last couple of years of the portfolio where the first quarter is typically stronger in terms of reflecting, you know, pay down of balances and things like that, which then, you know, generally speaking, grow over the balance of the year. When you put that all together, our expectation is we'll have a small, you know, pretax loss for the year in the segment, but nothing that's material for Goldman Sachs. You asked, you asked also, Brennan, about savings. Like, you know, I just wanted to comment on this. Yeah. So there currently is no agreement to transition the savings program. We're gonna continue to service and maintain, you know, our existing Apple savings customers, and we're gonna continue to offer them high-yield savings accounts, you know, as Apple Card users. And users should expect that this service will be seamless. It'll be uninterrupted. And they'll continue to earn the same competitive rate they've been getting on their savings. And it's attractive to us. Obviously, we are very focused on the transition of the card, and there's a lot of work to do over the next twenty-four months. The transition of the card. But at some point in the future, we will expect to have additional conversations about the future of Apple savings. As we've mentioned, our deposits are diversified in tenor and channel, and that remains true even if we excluded Apple savings deposits. They're just a small fraction of the deposits. But at this point, there have been no discussions about the savings plan. Brennan Hawken: Got it. Thanks for that, David. And Dennis. I for my so know, one of the sort of debate points this morning with investors was on the efficiency ratio. And how things looked year over year. Now, of course, you have to adjust for the revenue impact of the Apple Card announcement. But and I might be doing the math wrong, but so correct me if that's the case. But when I do make that adjustment, it looks like there's, you know, a negative year-over-year impact on the efficiency ratio, like, it was a the efficiency ratio was stronger last fourth quarter versus this fourth quarter. Is my math right? And if so, could you speak to maybe what some of the factors were that prevented greater operating leverage and how we should think about operating leverage going forward? David Solomon: Sure, Brennan. I'll start with that. So first, thank you for observing correctly that the efficiency ratio is one of those places where based on the accounting for the Apple Card transition, it goes in the opposite direction versus our intention and the trajectory that we've been on. So that does explain why it's going in that direction based on the reduction to revenues. But you need to look at the efficiency ratio on a full-year basis. There have been some other things I've seen where people are looking at quarter, you know, year-over-year, fourth-quarter operating expenses or efficiency, given the way that we manage compensation and non-compensation expenses over the course of the full year, you need to look at that sort of in totality. And in this particular, when you do that, for the year-over-year fourth-quarter look in this particular year, it looks like you have, you know, a significant increase in operating expenses. But when you step back and look at the full-year performance, it's very clear that the firm delivered significant operating leverage. Obviously, we have reported revs at plus 9%. We have pretax at plus 19, and we have EPS at 27%. And so you have to sort of step back, take account of the provision release, and look at the full-year results. The fourth-quarter year-over-year, the only thing I'd add, the fourth-quarter year-over-year was affected by the way we accrued comp last year. And the way we accrued comp this year and the revenues in the quarter. And so it's you can't look at the fourth-quarter year-over-year. To Dennis' point, you have to look at the year. Katie: Thank you. We'll take our next question from Mike Mayo with Wells Fargo Securities. Mike Mayo: Hi. I guess it's an exciting time. This is a new era for Goldman Sachs. Goldman Sachs 3.0. And you're redesigning the whole firm around AI, so that could be very exciting. I'm looking for the output that you're looking for from this. I know it's early days, but whenever I ask about AI, it's always answers at the 10,000-foot level. Like, it's transformational. It's a game changer. It's a superpower. You know, we all get that. But what are you hoping to achieve? So, like, this decade, your revenues are up two-thirds. Your headcount's up one-fourth. So that's one way maybe you could frame the output that you like to achieve. But how much more in revenues? How much more in efficiency? Just you put some meat on the bones? Thank you. David Solomon: I appreciate the question, Mike, and I appreciate the way you frame it. And I understand why there's a strong desire to get more from us. What I promise you is you're going to get more over time as we're in a position to give you metrics, to give you targets, and to really explain it. Wanna step back at a high level. Just the one thing that I'd say, and I'd frame it slightly differently than you'd frame it, this is not a new era for Goldman Sachs. One GS 3.0 is not gonna transform the whole firm with AI. We are focused on our two core businesses, driving growth in our two core businesses, and both, I think, we're incredibly well-positioned and positioned to win. AI and this technology is an opportunity for us to drive productivity and efficiency in the organization. And we are very, very focused on it. Because it will add to our capacity to invest in growth in the business. At a high level, and I think I've talked about this a little bit before, there are two things that I would focus on. One, we have very smart, very productive people. And you can give them these models, these tools, these applications. You can put them in their hands. They're very good at playing with them and figuring out on a day-to-day basis they can use these tools to make themselves more productive, to do more, to affect our clients more. And we're pretty good at that. We put technology in our hands for decades. They're pretty good at taking that technology and figuring out how to use it. And that is going on, and there is progress in that. The thing you're talking about is our ability to, really, in the enterprise, deploy the technology to reimagine operating processes and create real efficiency. And we think there is an ability to do that on a basis that would be meaningful and significant for Goldman Sachs. It's not just to take cost out, but it's also to free up capacity to invest in other areas where we see growth opportunities we've been a little bit constrained. I talked about wealth management because somebody asked a question. And our desire to put more feet on the ground to broaden our footprint and our platform. We would like to do more of that this year than we're doing. But we're constrained because we're also trying to balance and deliver returns. If we can remake processes and create more operating efficiency and flexibility, that will free up more capacity from an efficiency perspective to invest in these growth areas. To change operating processes in the firm, and we've identified six specific processes that we're attacking. Takes an enormous amount of work to bring people along. We started doing this in the fall. We're making good progress. To be honest, I had hoped to give a little bit more transparency at this earnings call, but we don't have the full confidence to put information out publicly. But we are committed to giving you more over the course of the next quarters so you can track with us the efficiency progress and how we're deploying that progress into the business. And so we'll continue to keep you posted as we do it. But I think it's meaningful, but for the moment, it's focused on six distinct processes. Mike Mayo: And just as one follow-up, if we were to look at one metric for progress five years from now, would that be, like, revenues per employee? Would that be efficiency? Would it be headcount or how do you think about that? David Solomon: Well, if you look out five years from now, I think this technology and I think this has to be put in the lens of a journey that a firm like ours has been on for decades. I mean, I joined Goldman Sachs in 1999. On a revenue per employee basis. I mean, you pointed out a revenue per employee metric over the last five years. You go back and you look twenty-five years, you know the same thing. We continue our people continue to get more productive. I think this technology and the work we can do in One GS 3.0 creates an ability for us in the next five years to accelerate the pace of that one to get. And so that is a metric, but I don't think the only metric. Katie: Thank you. We'll take our next question from Steven Chubak with Wolfe Research. Steven Chubak: So David, there have been a number of significant developments in the area of market structure, whether it's tokenization, the recent expansion of prediction markets. You guys are always quite front-footed when it comes to innovation, and I was hoping you could speak to how you're evaluating some of these emerging opportunities within the market structure or tokenization landscape. Where do you see the most compelling opportunities for Goldman? And how are you positioning the firm to participate in a more meaningful way? David Solomon: Yeah. So I appreciate the question, Steven. First, I'll start I mean, you mentioned two things in the both things that we have an enormous number of people on the firm extremely focused on. You know, tokenization, stablecoins, obviously, there's a lot going on in Washington right now. With the Clarity app that was actually in Washington on Tuesday. You know, speaking to people about things that we think are important, you know, to us in the context and framing to that. Obviously, that bill based on the news over the last twenty-four hours, has a long way to go before that bill is gonna progress. But I do think these innovations are important. I don't think we have to be the leader, but it would not surprise you that we have a big team of people spending a lot of time with senior leadership and doing a lot of work so that we can clearly decide where we're investing in playing and how those technologies can expand or accelerate a variety of our existing businesses. And where there are new business opportunities candidly around those technologies. I think the prediction markets are also super interesting. I personally met with two big prediction companies in their leadership in the last two weeks and spent a couple of hours with each, you know, to learn more about that. We have a team of people here that are spending time with them and are looking at it. When you think about some of these activities, particularly when you look at some of the ones that are CFTC regulated, they look like derivative contract activities. And so I can certainly see opportunities where these cross into our business, and we're very focused on understanding that, understanding the regulatory structure, that's going to develop around that, seeing where there are opportunities for us to have capabilities or to partner to serve our clients around these. I think it's early on both. I think sometimes the, you know, the I think there's a lot of reason to be excited and interested in these things, but the pace of change might not be as quick as quick and as immediate as some of the pundits are talking about in both these. But I think they're important, real, and we're spending a lot of time. Steven Chubak: No. Thanks for all that color, David. And just a quick follow-up on the financing opportunity. If I think back five plus years ago ahead of the 2020 Investor Day, when you first started talking about the financing opportunity, you noted it was less than 20% of Goldman's trading revenue. It was 40% at some of your larger money center peers. And that you were planning to narrow that gap. And if I fast forward to today, you're now approaching that 40% threshold. And I was hoping to get your thoughts on how large you think that financing piece can grow over time. And your approach also managing risk against any potential drawdown or deleveraging events within that business. David Solomon: Yeah. No. It's a very good question, Steve. And you're focused on the right thing and so are we. I mean, I think what I would say is over the last five years, we've gone for being underweighted given our market footprint and our market shares and our wallet shares. To be more closely weighted. I think we've got a little bit of room. But it wouldn't surprise you in the formation of the capital solutions group and thinking about the connectivity between our asset management business and our origination capabilities, we see the potential to basically put a lot of this activity over time into our asset management business and allow our clients to have access, you know, to these origination flows. And so we're very conscious from a risk management perspective. We see opportunities to continue to serve our clients. But because of our asset management business, we have the ability to grow this, and not all of it has to be on balance sheet the same way. And so we're keenly focused on the evolution of that in the coming years, and that's something you'll hear us talk more about. Katie: Thank you. We'll take our next question from Dan Fannon with Jefferies. Dan Fannon: Thanks. Good morning. Another one just on expenses and really noncomp and one all you've been doing with the GS 3.0. Was curious as you start 2026, how does the growth for noncomp look versus maybe 2025 in the budgeting process? And maybe what's the difference in terms of some of those metrics? David Solomon: So appreciate the question. You've heard us say, you know, over many, many, many years, we maintain a rigorous focus on managing these expenses as tightly as we possibly can. There are a lot of them, certainly by dollar quantum, that are very linked with the overall level of activity inside of the firm. Notably, transaction-based expenses, and also, to an extent, some of the market development expenses. We're at a point in the cycle where, as an example, it's more important to feed some T and E into the firm to get people front-footed and meeting face-to-face with clients than it is to overly constrain that expenditure. Transaction-based, similarly, as we continue to grow, these activities there are necessarily transaction-based expenses that go alongside those. On the other side of the equation are those types of expenses over which we have more control, and we have a very concerted effort to constrain the growth of fees, which may be inflation-linked, or may be, you know, substitutes for other types of work. And we're focused on sort of grinding those down as much as we possibly can. Dan Fannon: Thanks. And as a follow-up for the private banking and lending, I was hoping to get an updated outlook as you think about 2026 and a backdrop where rates are coming down, how you're thinking about the offsets of revenue from both demand and deposits? David Solomon: Sure. So, you know, there, we've obviously been quite deliberate trying to, you know, make sure you have all the pieces of the puzzle. You know, as we head into 2026, we've dealt with some of the sequential comparisons in that line item based on the one particular loan that had been previously impaired, and then we had, you know, exceptional levels of revenue. We want to understand that as a comparison. That, frankly, still be relevant as we head into 2026. Our focus is continuing to grow lending activities and the lending penetration. We made good progress there. That's a piece of unlocking incremental growth in the wealth channel, remains very important to clients. So we'll expect to grow lending. We'll focus on growing our overall level of deposit activity across the segment. Yeah. But we do expect there could be some NIM compression given our expectations on the rate cycle. And so we just want to flag that as an expectation as we head into 2026. Katie: We'll take our next question from Matt O'Connor with Deutsche Bank. Matt O'Connor: I was hoping to follow-up on the 5% long-term asset flow target within wealth. You were slightly above this in 4Q and just wanted to get more color in terms of how you arrived at that and maybe framing how much is doing more with existing advisers and customers versus the efforts that you have to hire more advisers? And presumably attract new customers? David Solomon: So look, we think, you know, wealth is a big opportunity for the firm. We have a very strong business at the moment. We think there's a good opportunity to grow it. And we are making extra efforts to drive accountability and focus on our execution against that opportunity set. And so this is an external target that we expect you all to hold us to account. And we also think it's an important signal to send to all of our people in terms of how laser-focused we are on this opportunity set. As you said, we have a track record of delivering this type of annual growth. So we want to maintain the focus. That is one component of the overall sort of revenue equation and opportunity set in wealth management. But it's an effort for us to just apply incremental amounts of granular focus. This is one of the key underpinnings to the overall revenue trajectory in the wealth business. Matt O'Connor: And any color you want to provide in terms of talked about billing advisers. You've got some planned this year. You said you'd like to do more, but you're mindful of kind of managing the profitability. Just any way of framing whether it's your plan this year or just kind of longer term where you're at now and where you'd like to be? David Solomon: I think the best way, Matt, to frame it is this is a very, very fragmented business. My guess is an ultra-high-net-worth. Our share in the United States, for example, is somewhere mid-single digits. And that's probably leading share. So you think about there are hundreds and hundreds of firms and people that do this in a variety of ways. So with our franchise and our platform, I said before early in the call, it scales with people. There is lots of ability to still grow market share in this business if you've got a leading franchise. By adding advisors, adding footprint, broadening the clients that we touch, so we think we've got good trajectory to do that. And there's real focus on that. And I'd add too, Alts is a component of it. We put out specific targets around sort of Alts opportunity set. And while we obviously have penetration of alts within our clients, given that, you know, the average wealth of a client on our platform is north of $75 million. It's not only appropriate, but you could advise a distribution of exposure to alternatives and there's still probably opportunity to grow that with our clients. In addition to the footprint, the advisers, the mix of their activities, lending remains an opportunity there. And we do as we've mentioned, we see more opportunities to enhance our technology investment, the digital experience for those clients, and ensure that we're, you know, very well positioned with existing clients, and their successors. Katie: We'll take our next question from Gerard Cassidy with RBC Capital. Gerard Cassidy: Good morning, Dennis. Good morning, David. Can you guys share with us, in the past, David, you talked about the IPO market and the sponsors maybe not getting the valuation that they would like as being one of the areas that had to loosen up, and it appears like it is. But when you look at this year, and I think, Dennis, you touched on it in your remarks, that we're still below where's IPO business is still below the long-term averages. Is it market conditions do you think will be a greater influence on the market this year? Or is it still the valuation challenge that you've referenced in the past? David Solomon: I don't think you've got the valuation challenge we've referenced. I think you're gonna see a bunch of the sponsor stuff unlock, and you're gonna see more activity, you know, from sponsors. I also think one of the dynamics that we have, and it's just the reality of market structure and the way the world's evolved, companies are staying private longer, and we've got a lot of big, big companies in the pipe that I think just for a variety of reasons are reaching a moment in time where they're saying, you know what? It's time to go. And I think you're also this year gonna see a bunch of IPOs this year and next year of very, very large companies, which is something we really haven't seen a lot of. So combination of sponsor momentum and more of the big companies that have stayed private longer are now turning toward the public markets. And I think the confluence of that's gonna be constructive. Provided we have the kind of market environment we have now. Gerard Cassidy: Right. Right. Okay. That's helpful. Thank you. And second, and not to really get political on this question, but it seems like the M&A activity as you guys do so well and as your peers in 2025. It seems like this administration is more supportive of consolidation than maybe the prior administration. When you talk to executives about transactions, are they more focused on just, you know, the economic outlook and the opportunities there? Or does the, you know, regulation also factor into their thinking, thinking that the window is open now and they really need to move possibly before the change in administration in 2029? David Solomon: Yeah. Sure. Sure, Gerard. I think a way to frame it, you framed it. We had a very, very different environment from a regulatory perspective for M&A for the last four years. And that doesn't mean that it's just a blank check, you know, no regulatory oversight of large-scale consolidation. But CEOs definitely believe that the art of the deal and scaled consolidation is possible now. And when CEOs see that opportunity, because scale matters so much in business, business is so competitive. CEOs get very front-footed. And so I think CEOs and boards are looking and saying, okay. We've got a window here. Of a handful of years where the opportunity to consider big strategic transformative things is certainly possible. And therefore, you've got a much, much more front-foot forward, you know, across industry group of CEOs really thinking about is there something we should do? Is there something we should dream about? That really advances our competitive position? And that's leading to you see that filtering into our backlog, but I think that's leading to a significant upswing in activity provided we don't have some sort of an exogenous event that changes the current sentiment that we now have. Katie: We'll take our next question from Chris McGratty with KBW. Chris McGratty: Oh, great. Good morning. Lot of discussion on the capital impact from dereg. I think in your earlier remarks, you talked about expenses. I'm wondering if you could quantify that potential pool of money that could be freed and redeployed? I guess, how much of a drag has it been? David Solomon: Appreciate the question. I'll follow on, you know, David's comments. I mean, I don't think we're gonna give you an exact number, but you can imagine that there are a variety of, call it, different human capital consulting professional fee type surge experiences that have been observable across the industry over the last couple of years. And while there will always be work to be done, and each and every institution has a responsibility to still govern and run itself in line with regulatory expectations, the current levels of engagement and focus are on the safety and soundness of the banking system. And there's just a different formulation and mix of expenses required to ensure that most important goal of safety and soundness, and it therefore frees up capacity from some of the secondary or tertiary activities, which can then be redeployed to, you know, driving growth across the franchise and actually, frankly, strengthening the safety of the soundness of the firm in another respect. So I think I wouldn't look at it as much of a bottom-line unlock as much as an opportunity to redeploy towards helping to grow the firm and actually improve its resiliency. David Solomon: The only thing I'd add, Chris, to what Dennis said just to get a little bit more we're not gonna be able to quantify for you. But the things that you should look at, you know, obviously, if you go back over the last ten years, capital in the large banks has grown meaningfully. Over the last ten years. And now it's actually the growth has certainly stopped. And because one of the big things that drove the capital growth was the stress capital buffers for all the firm and the CCAR process, which was very, very opaque, there's now going to be more transparency around the models in the CCAR process. I think you're getting a different result there. So one piece of the quantification comes from doing the analysis to look at how SCBs change from kind of 20, you know, the late part of last decade up to 2025 and where they are now and how they've evolved. That's a quantification. The second one was there was an expectation that Basel III was going to put more capital on top of the stack. That's another way that people thought capital was growing. Now the perception is as a Basel III, is going to be more of a neutral event when it's ultimately closed out. And then the third thing is G SIB was supposed to be calibrated to growth in the world and market cap growth that was put in the statute, but it never followed through. So G SIB, as the world grew, G SIB wasn't supposed to grow as fast as it was growing, but it grew faster. That's now going to be recalibrated. That's another one. So if you wanna kinda calculate those differences, those are three important things I would point you to can look at the different banks and calculate that impact. Chris McGratty: That's very helpful. Thank you for that, David. Second question would be more of a business mix desire rate. If you look at the fourth-quarter revenue mix, trading 50%, IB 20, you know, AWM 25, dominant share, great growth. If you were to fast forward over the next few years, like, what do you think this mix looks like? Maybe do you wanna be viewed by the market? Because there are, I think, implications for the multiple that we all wanna put on your stock. Thank you. David Solomon: Yeah. We're gonna continue to invest in the growth of asset wealth management, and we would like the mix to continue to evolve. I think it can evolve very slowly with the organic growth differential. Because, you know, this is not an unfortunately, but it's a reality. We've been able to grow global banking markets faster than we might have expected. And even though we've grown asset wealth management very nicely, just given the scale of global banking markets, that's made the shift in mix slower than we might have all imagined if we go back five, six years and kind of think about the trajectory that we're on. We will try to find things that accelerate that. In addition to the organic, you know, inorganically. Again, with a real discipline around that, as I've stated over and over again. I do think if you look forward, the mix of the firm will continue because the growth in asset wealth management is faster. It will continue to shift. And we're focused on that. Katie: Thank you. We'll take our next question from Saul Martinez with HSBC. Saul Martinez: Hi, thanks for taking my questions, squeezing me in. I just have one question. And it is a clarification more than anything to Erika's question about where we are in the investment banking cycle. And I think, David, in your response, you said that your people are suggesting that in a base case view, 2026 investment banking fees could be closer to approach where they were in 2021, which was, you know, over $14 billion and, you know, we're running, you know, I think '25 was a bit over 9. The delta really is ECM, obviously, and, you know, advisory and DCM are kind of tracking to those the '21 levels already. But just wanted to clarify that. Were you talking about IV fees as a whole, or were you talking about the individual segments, advisory, DCM? You know, I apologize if it was clear to everybody else but me. But, you know, obviously, an environment where you do $14 billion of investment banking fees would seem like an environment where your ROEs for GBM and the firm as a whole would be, you know, materially above the mid-teen level. But just if you can just clarify that, that would be helpful. David Solomon: Sure. I'm sorry, Saul, if I confused you. What I was referring to was advisory fees only. I was, okay. I'm sorry. What I was referring to was advisory volume. Excuse me. Advisory volumes. Now advisory volumes are very correlated to fees. Okay? But the chart that I was referring to is one that looked at three different cases for advisory volume. Okay? So it wasn't equity capital markets, etcetera. I will tell you that what went on in 2021 with equity capital raising, particularly on the stock phenomenon, that's not going to occur in 2026. So my guess would be that equity capital markets level will still be meaningfully below the 2021 peak in 2026, but they will be higher than they were this year. That would be my estimate based on what we see today. But I was talking specifically about advisory volumes when I made that quote. And look. The advisory, as we've said over and over again, when advisory activity grows, the flywheel creates lots of activity. And we were talking industry-wide, not just GS. Looking just at industry-wide volume. Saul Martinez: Yep. Okay. Got it. No. That's helpful. Thank you for clarifying that. David Solomon: Yep. Katie: Thank you. At this time, there are no additional questions. Ladies and gentlemen, this concludes The Goldman Sachs Group, Inc. Fourth Quarter 2025 Earnings Conference Call. Thank you for your participation. You may now disconnect.
Operator: Good day, and welcome to Cogeco Inc. and Cogeco Communications Inc. Q1 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Patrice Ouimet, Chief Financial Officer of Cogeco Inc. and Cogeco Communications Inc. Please go ahead, Mr. Ouimet. Patrice Ouimet: So good morning, and welcome to our first quarter results conference call. So as usual, before we begin the call, I'd like to remind listeners that today's discussion will include estimates and other forward-looking information. We ask that you review the cautionary language in the press release and MD&A issued yesterday as well as in our annual reports regarding the various risks, assumptions and uncertainties that could cause our actual results to differ. With that, I will pass the line to Fred Perron for opening remarks. Frederic Perron: Mercy, Patrice. Good morning, everyone, and a warm Happy New Year. Our consolidated results for the quarter were in line with our plan as well as what we had mentioned to you last quarter, and we're on track to deliver our guidance for the full year for all KPIs. In the U.S., our turnaround is working. We've materially improved our subscriber trends for a second consecutive quarter, just as we said we would, translating into our best U.S. customer metrics in the past 15 quarters and we're just getting started. Our goal is now to grow our customer base across our entire U.S. operation on a repeatable basis. We had told you that this was the goal for Ohio in the past, and we're now delivering on that. So we're now further raising our ambition in light of our latest plans and progress. We won't be hitting that new ambition next quarter quite yet, but it is within realistic reach in the medium term. It's important to remind everyone of a few key points about our American business. First, in half of our U.S. footprint, our penetration is still below 20%, which gives us ample room to keep growing our customer base in those areas and offset any losses in other regions. Second, we're making great progress at selectively upgrading our network in a capital-efficient manner including the launch of 2.5 gigabit speeds during the quarter, which is helping us protect and grow our business in key areas. Third, we're still in the process of ramping up new sales channels and beefing up important marketing capabilities. We're also launching an oxio-like fully digital second brand next month. Thanks to the above points and more, we're confident about materially improving financial trends for our U.S. business starting in the second half of this year. This was already recognized by Moody's and S&P, who both improved their outlook on our debt in recent weeks, while DBRS reaffirmed its stable outlook. In Canada, our performance remains solid and resilient with positive year-on-year EBITDA trends. We continue to consistently grow our customer base and our wireless subscriber growth is also going well. Wireline competitive intensity got a little heated in some of our markets during Black Friday and through the holidays. So we expect a more modest wireline customer growth in the upcoming Q2, but this remains manageable overall from a revenue perspective. Before turning to our radio operations, I'd like to reflect on yesterday's report released by the commission for complaints for telecom and television services, which ranked Cogeco as the best telecommunications company in Canada in terms of customer complaint reduction when aggregating brands. In a year where complaints within the telecom industry rose by 17%, Cogeco made significant progress in improving its customer service, which has resulted in a leading 15% reduction in customer complaints versus the prior year, a 25% reduction in billing complaints and no reaches to the Internet code. At Cogeco Media, Q1 revenue increased again this quarter on a year-over-year basis, lifted by strength in our digital advertising solutions and continued listener engagement. So in closing, I'd summarize our overall situation by saying that our 3-year transformation is on track, that our Canadian performance is resilient and solid, our U.S. turnaround is working. And last but not least, we continue to have one of the best balance sheets and cash flow profiles in the industry, which positions well -- positions us well to keep increasing shareholder value over time just as we have been. On that, I'll turn it over to Patrice for more details about our results. Patrice Ouimet: So thank you, Fred. So in Canada, Cogeco Connexion's revenue was stable in the first quarter as we had a mix of a higher Internet subscriber base, which added 8,900 Internet subscribers during the quarter, and lower revenue per customer from fewer video and wireline phone subscribers. Adjusted EBITDA grew by 2% in constant currency due to stable revenue and lower operating expenses resulting mainly from cost reduction initiatives and operating efficiencies coming from our 3-year transformation program. We added 1,100 homes passed during the quarter, mainly with fiber-to-the-home under a network expansion program. In the U.S., Breezeline's revenue declined by 9.9% in constant currency due to the cumulative decline in the subscriber base over the past year, a smaller rate increase than in the prior year, along with a competitive pricing environment. The 1,100 Internet subscriber decline represents a significant improvement over the last quarter and last year, while Internet subscriber additions in Ohio recorded its best quarter since we acquired that business 4 years ago with positive growth of 2,600 subscriber additions. Adjusted EBITDA declined by 9.1% in constant currency, mainly due to lower revenue, offset in part by lower operating expenses, driven by cost reduction initiatives and operating efficiencies. Note that last year's comparative Q1 period had the highest adjusted EBITDA level of all quarters in fiscal '25. Turning to our consolidated numbers for Cogeco Communications. At the consolidated level, revenue in constant currency declined by 4.9%, and adjusted EBITDA declined by 3.7%. The adjusted EBITDA decline was driven by a decline in U.S., partially offset by growth in Canada. Diluted earnings per share declined by 12.2%, mainly due to a onetime gain recorded in the prior year that was associated with a sale and leaseback transaction as well as lower adjusted EBITDA. Capital intensity was 22.2%, up from 20.4% last year, although we are on track to hit our CapEx guidance for the year. Free cash flow in constant currency declined by 15.9% in the quarter, mainly due to proceeds from last year's sale and leaseback transaction. Our net debt to EBITDA ratio was 3.2 turns at the end of the quarter, up slightly from the 3.1 turn reported in Q4. We continue to target a net debt to EBITDA ratio in the low 3 turns range. And we've declared a quarterly dividend of $0.987 per share, which is up 7% year-on-year. At Cogeco Inc., revenue in constant currency decreased by 4.5% and adjusted EBITDA declined by 3.1%, largely explained by Cogeco Communications results. Media operations revenue increased by 8.1% year-on-year, driven by solid market positioning and growth in digital advertising solutions. And we've also declared a quarterly dividend of $0.987 per share at Cogeco Inc., which is also up 7% year-on-year. Now turning to financial guidelines. We are maintaining our annual guidelines for Cogeco Communications fiscal 2026 year, which we first provided to investors in October. As it relates to the upcoming Q2, we are expecting consolidated revenue and EBITDA in constant currency to decline in the low to mid-single digits compared to last year. The declines are explained by the U.S. business. We are, however, expecting much stronger financial performance in the U.S. in the second half of the year, as we'll benefit from improving customer trends and a new wave of in-flight cost and revenue initiatives. We expect both financial expense and acquisition integration and restructuring costs to be similar to Q1, while our depreciation expense should be slightly lower than in Q1. At Cogeco Inc., we are maintaining the financial guidelines as well. And now, Fred and I will be happy to take your questions. Operator: [Operator Instructions] And your first question comes from the line of Aravinda Galappatthige from Canaccord Genuity. Aravinda Galappatthige: Maybe just to clarify on the Q2 guide, Patrice, is it fair to suggest that the U.S. numbers you don't expect like any sort of variance to what we saw in Q1 and Q4, sort of high single-digit declines? And then maybe just to build on that, can you also talk to the sort of the degree of improvement that you expect in the second half? I mean is it within the realm of possibility that you sort of get even towards breakeven as you exit fiscal '26? Maybe I'll just stop there. Patrice Ouimet: Yes, Aravinda. So as part of Q2 with the information we provided at a consolidated level, I think it's a fair assumption to assume that the U.S. business will be in a similar position than in Q1, obviously, plus or minus some changes there. But definitely, where we expect the change is in the second half. And when we think about the second half of the year, we've been losing some customers historically in the U.S. But when you look at the past 2 reported quarters, the situation has improved quite a bit. So that will play into it. We do have some price increases that kick in, in a different periods in January. So that will play a role into -- especially in Q3 and Q4. And we have a number of other elements in terms of cost improvements and some other revenue measures that are going to kick in during the second half of the year. So that's what explains basically the change. Frederic Perron: Yes. And Aravinda, it's Fred. Those initiatives that Patrice is alluding to that will kick in, in the second half. They're all quantified. They're all on track. They're all in delivery right now. So we feel pretty solid. I know the other part of your question was, can we expect a positive year-on-year EBITDA exit rate in the U.S. by the end of the year? Patrice, I don't know if you want to... Patrice Ouimet: Yes. I think it's still a bit early days to think about individual quarters, but definitely trending towards a neutral position is -- for those quarters is a good assumption, what I said the last quarter, but again, it's still a bit early days to talk about just one particular quarter. Aravinda Galappatthige: And then for Canada, Fred, I think you alluded to the prospect of maybe just a slightly muted broadband trends in Q2. We obviously did see some activity even from your end. Maybe just sort of characterize for us what -- where you're seeing that pressure? Is it more on the legacy side? Or is it -- are you perhaps not seeing as much tailwind from the other sources, oxio and your broadband -- your rural expansions? Maybe a little bit more context there. . Frederic Perron: Sure. Oxio is still going very strong, mostly in our current footprint at good margins. And that gives us a lot of optimism about launching an oxio-like brand in the U.S. as well, and we can talk about that later. So that's still strong. Network expansion is still early days. Our Ontario programs are being dragged a little bit over time due to permitting things. So that will take some time before it kicks in. As it relates to the legacy business, the way I would characterize it is the end of our Q1 and the Q2 that we're in right now appears to be a period of experimentation by the different players, whether it's dabbling into resale or some promotional activity during Black Friday. So it's been a little up and down. The past couple of weeks have been better but -- and therefore, we're calling for a more muted growth in Q2, but I wouldn't see it as the new normal. Aravinda Galappatthige: And just lastly, maybe just on the take-up on the wireless side of the business in Canada, again, very early days, but you ran a fairly attractive promotion for a while. Any kind of feedback that you care to share would be useful. Frederic Perron: Yes. Wireless Canada is going really well. Our baseline pricing is in line with the rest of the market, where we have promotions, it was an introductory promotion because we were launching the product in the fall. But it was a promotion for one year on the first line only. And the sales are going so well right now that we've already done 2 pullbacks on that introductory offer. So we don't offer a free line for a year anymore. So we're already in the process of pulling back on those introductory promotions because the sales are going so well. Operator: And your next question comes from the line of Vince Valentini from TD Securities. Vince Valentini: First, let's stick with that wireless. Can you give us any color of what strong means to you? Like are you over 20,000 subscribers in wireless in Canada? I mean I think we're all grasping with what your definition of strong is? Frederic Perron: Vince, the -- we don't disclose our wireless numbers. It's relative to our internal targets. It will take a couple of years before our wireless customer base to be material and really benefit our bottom line. But when you look at what some of the U.S. cables are doing after a few years of being into wireless, it's really a needle mover to their EBITDA positively. But I would not expect much of an impact in the short term, but we're not yet at a place of disclosing the customer base. Vince Valentini: Okay. And on the competition in Canada, you were just talking about, can you unpack it all? Is it a fixed wireless aggression problem or you mentioned TPIA? Is it more the TPIA or just traditional Bell competition? And a sub-question on that. If it -- to the extent you're seeing TPIA experimentation, are you seeing that of somebody reselling your networks or you're at least getting the wholesale fee? Or are you seeing that on the telco fiber network? Frederic Perron: Sure. Happy to answer the question. If you unpack FWA resell and just normal promotional activity, FWA is not having an impact on us. We track churn reasons. And I know some of the advertised prices can be eye-popping on FWA, but we're really not feeling it. On resale, yes, it does seem to be a phase of experimentation. As I said, the past couple of weeks have been a bit better. Hopefully, people will realize that it's not good for anybody. But to your other question, yes, a big chunk of that resale activity shows back up in wholesale revenue for us. So while the subscriber metrics may be more muted, that's why I was saying that in my introductory comments that it's manageable from a revenue perspective. And then in terms of normal promotional activity, yes, it popped up during Black Friday and the holidays. But let's see how it evolves. It may just be a point in time thing. Vince Valentini: Switching to the improving trend in the U.S. Internet subs. You say you won't get back to positive sub adds in the second quarter, but you're still trending well. Can you frame this at all? Like should we be thinking about another quarter with only losing 1,000 or 2,000 Internet subs? Or was there something unusually strong in the first quarter that can't be replicated and maybe you slip back to 4,000 or 5,000 sub losses? Frederic Perron: Without going too precise because we're still in the quarter, right? But the second quarter, I do expect some losses maybe a little bit more than the current quarter, but it's yet to be seen. But no, it was not an unusual phenomenon in the first quarter. The trends are sustainable. And in fact, after the second quarter, we see a clear line of sight to the improvement trend resuming. We have enough quantified measures in place to believe that, that will be the case and turning positive in totality in the U.S. on HSI subs on a repeatable basis is now something we believe is realistic and is our goal in the medium term. Vince Valentini: Excellent. And last one, if I could. Very nice to see the rating warnings, whatever you call them, removed from Moody's and S&P. Does that now free you up to consider using your free cash flow and balance sheet strength for share buybacks? I mean, as I'm sure you appreciate, if you're still on track for $600 million or more in free cash flow in fiscal 2027, that's an incredible free cash flow yield and a lot of excess cash after paying your dividend. Do you think about starting to use that as opportunistically to buy back shares? Patrice Ouimet: Yes. So as we go through fiscal '26, we're still going to concentrate on reducing debt. We're still slightly higher than the 3x target. When you look also at the ratings on the debt, there is an expectation as well of continued decrease in leverage. That being said, as we get to next fiscal year, to your point, which starts in September, then we do expect to have hit that target and also have visibility on strong free cash flow next year. And that's a discussion we'll have definitely at that point internally on what do we do with the excess cash? Do we resume a buyback program that we've run for many years in the past. So that's a possibility for sure. Do we repay more debt. We do a mix of both. But I would say it's not something in the shorter term, but it's going to come -- that discussion will come soon enough. Vince Valentini: Okay. I appreciate that, Patrice. Just to state the obvious, hopefully, it's obvious. I mean your dividend yield is higher than your cost of debt. So buying back shares still has a cash-on-cash benefit, which hopefully, the rating agencies would appreciate. And certainly, I know the equity market would appreciate, but I leave it to you guys and I will pass the line. Operator: And your next question comes from the line of Maher Yaghi from Scotiabank. Maher Yaghi: [Foreign Language] I just wanted to ask you first on your oxio strategy. I know there's probably a lot more to say when you actually launch it in the U.S., but it's been quite successful for you as a brand in Canada. And the idea to replicate that in the U.S., obviously makes sense. I just wanted to ask you, is the goal for the oxio-like brand in the U.S. is to sell a service in territory only or also out of territory like you are doing in Canada? Frederic Perron: [Foreign Language] Maher, it's Fred. Thank you for the question. We are indeed super excited about the launch of an oxio-like brand in the U.S. The short answer to your question is it's in territory only in the U.S. But when you look at the upside potential, oxio in territory is already doing so well for us in Canada. We've reported our best subscriber performance in Canada in the past 13 years. Last quarter and this quarter was solid as well and oxio is a big part of that. Now if you contrast Canada and the U.S., the opportunity is even bigger in the U.S. because in Canada, our penetration on Cogeco is already in the low 40s percent. But in the U.S. in totality, we're in the low 30s. And in half of our footprint, we're below 20% penetration. So you just start thinking about the possible upside from such a second brand, and it gets pretty exciting. Maher Yaghi: Okay. Okay. My second question is on the improving trends in the U.S. on the subscriber side. Obviously, it was quite noticeable in Q1 compared to a year ago. But I just wanted to understand what you are giving up to improve those subs because you're kind of doing pretty much the same strategy that Charter and Comcast are doing in the U.S., which is repricing your base or repricing the offers in the marketplace for your Internet service. For example, I can see you're selling 1 gig for $45 a month in Ohio right now and the first month is free. That service used to be $75 a couple of months ago. So in -- when I think about the objective here, how should we think about ARPU progression or the ARPU negative impact in the U.S. as you reprice your product to improve subs. And when we come out of this transition, where do you expect revenue growth to land at? Frederic Perron: Okay. Maher, it's Fred again. I'll start answering and maybe Patrice will want to add a little bit on this one. First of all, when you look at our year-on-year decline in ARPU, it's not because of a massive drop in acquisition prices for new customers. It's because mainly of cord cutting. So we're cutting -- some customers are cutting the cord on TV, and TV itself has a higher ARPU than our Internet product, but it comes with very little margins. So I would say that's the main driver. There is a bit of promotional activity for sure. And it is a fact, to your point, that new customers come in at a lower ARPU than existing customer, that's true in Canada as well. But our improvement in our PSU trends that we're reporting this quarter is not because of any massive change on that front. We just stay along with the market, and there has not been a massive change in pricing. Our improvement comes from execution. It comes from beefing up some sales channels that were previously underexploited, especially in those areas where our penetration is below 20%. And it comes from simplifying our pricing as opposed to reducing it. So that's how I'd characterize it. Patrice? Patrice Ouimet: No, I think you summed it well. Happy to take other questions, but I think these were the main points. Maher Yaghi: Yes. So I did look into the mix of PSUs that you have in the U.S. And when I look at Q1 '25, about 25% of your PSUs were on video. And in Q1 this year, it's 24%. So -- and then on home phone, it was 12% last year and 12% this year. So obviously, there's slightly less video as a percent of the overall PSU base in this quarter versus last year's Q1, but it hasn't moved that much. So I'm trying to figure out what's driving the 4% price decline per PSU in the U.S.? And when should we expect that to improve? Frederic Perron: Yes. So the -- what this analysis doesn't show, Maher, is which segments of TV customers are losing versus those that we're adding. So in many cases, we're losing the higher ARPU TV customers, and we're adding lower ARPU ones. So it would get into a pretty detailed analysis, and I'm sure you can talk about it with Patrice on the follow-up calls, but we've analyzed this in and out and cord cutting is the main driver of the ARPU decline. Of course, to your point, new customers also do come in on promotional rates, at a lower rate, and that's also a factor. But our point is simply that the improvement in Q1 is not due to any material change in that trend. Maher Yaghi: Okay. One last question. In terms of the growth that we're seeing in Canada, obviously, quite noticeable as well. How should we think about these net adds on broadband in Canada as -- from a sustainability point of view? And can you maybe tell us what's giving you the advantage to load as many customers as you are? Is it oxio or the Cogeco brand is also successful in the marketplace these days? Frederic Perron: In prior quarters, including this one, it was a combination of both. It depends quarter-by-quarter. Sometimes network expansion helped, less so in more recent quarters. The Cogeco brand has held its own over time. And then it's really oxio that's helped generated, I would say, differentiated growth in Canada versus some of our peers. And that's why we're so excited about an oxio brand in the U.S. As it relates to moving forward, as we've said, Q2 PSU growth in Canada will be more muted, but we're recovering a lot of that in wholesale revenue. Is that the new normal? Not necessarily. It's still a stage where people are experimenting. And as I said, the past couple of weeks have been a bit better. Operator: And your next question comes from the line of Matthew Griffiths from Bank of America. Matthew Griffiths: So just going back to the U.S. broadband sub picture that you're providing. Is there a way to kind of share with us whether the improvements that you're expecting are going to be coming from reduced churn? Or you've mentioned sales channels as something that you've been working on improving. So is it a gross add difference going forward that we should be expecting as the driver? And then secondly, I think you mentioned medium term as the time period for U.S. broadband subs turning positive. Should we -- should I read medium term as like 2027? Or is it slightly further out than that? Is the next year too soon? Is that still near term? And maybe just finally on the transformation efforts, as you're progressing through this working through the second year kind of checklist for lack of a better word, like what have you -- what kind of details can you give us on what you've completed and what you're moving on to in that program? Frederic Perron: Sure. Matt, it's Fred. On your first question, the improvement in the U.S. coming from churn versus gross new sales. We have initiatives in flight to keep improving our churn management and our retention blocking and tackling. But most of the improvement will come from gross new sales. And that's the simple math of what I was saying before, which is in half of our footprint, our penetration is below 20%. So there is a real opportunity to deploy new sales channels in that footprint plus our soon to be launched second brand to materially grow our penetration in that footprint. On the definition of medium term, a handful of quarters is what we're shooting for right now. But -- so it's not past calendar 2027, but -- or even fiscal 2027, it's not beyond that. Our goal is shorter term than that. But please just give us a bit of grace on that one, and we'll get there. But it has to be -- we have to see how the competitive environment evolves and give or take a couple of quarters, but we'll get there. That's our goal. Patrice Ouimet: And on the transformation -- yes, sorry, go ahead. Matthew Griffiths: No, no, I was just -- the transformation. Patrice Ouimet: Yes. Yes. So on the transformation, I would say, to your point, we're in year 2 of the 3-year program. The first year was more focused on cost optimization, which included the reorganization of Canadian and U.S. businesses initially and a number of other elements after. We had more to do on the cost front as well, optimizing the way we operate our chatbots, IVR systems and there's a lot going on as well in the number of basically proactive maintenance and making sure we tackle issues in the systems before they become a customer-facing issue, which reduces truck rolls. So there's a lot of these things still on the map for year 2 and year 3. But I would say what's a bit newer in year 2 and 3 is more focused on revenue generation. We've talked about this before, but this was not the focus of year 1. And that has to do with the way we sell our products, the way we segment the market, the way we have contacts with the market as well, churn reduction is an element as well. As part of that as well, launching the second brand is -- the idea is to be able to tackle basically different segments of the market. It's more difficult to do with only one brand. So I would say this is -- there's a lot going on. And the last piece I would say is, as we started this a while ago, the opportunity to use AI to do some of this work was not there at that point, but it is today. So we have a heavy emphasis on actually using AI and the latest and greatest to make this happen rather than do it the traditional way. So hopefully, that gives you some hints on what we're doing today. Matthew Griffiths: That's super helpful. And maybe -- sorry, if I could ask one other thing. On the 20% share in some markets, has there been any -- I'm sure you've looked into why that is? And maybe can you share with us like why is it so low in some markets? And what in your plan addresses that why and fixes it? Frederic Perron: Okay. It comes from 3 places: first, Ohio, is the main part of that. You may remember that we bought the Ohio business 4 years ago or so. And it was already an overbuilder. So by definition, the share there was already lower and there was a loss of share, unfortunately, through the integration at the time. The second is in newly built footprint, I think it's a newly built footprint over the past few years where we see an opportunity to execute better from a sales perspective there. We're not building those new network expansions anymore. We've stopped them shortly after I was named CEO a couple of years ago, but they do under-index in terms of sales, and we're now ramping that up. And the last area is Florida, where Florida was typically focused on bulk sales, but we have a residential footprint there where we think we can deploy more sales force. So you add all those 3 things together, and that's how we get there. But Ohio is the main one. Operator: Your next question comes from the line of Drew McReynolds from RBC. Drew McReynolds: Yes. Fred, thanks for clarifying that last question. That's super helpful. Two others for me. Number one, on the Canadian broadband margins and, I guess, more importantly, the trajectory. I know revenue mix is certainly -- will drive cable margins for the industry going forward. But just would love to get your sense, really good margin performance. We see Rogers at kind of stable revenues to almost 58%. And obviously, that's a little bit of a bigger scale. But what do you see as upside kind of medium term here on Canadian margin? And then just secondly, with respect to commercial revenues, I guess, business revenues, both in Canada and the U.S., it generally looks kind of flattish. And just wondering if there's anything to flag in that segment from the perspective of cablecos in general being underpenetrated in the business market, particularly SMB. Just would like to get an update just what your growth expectations are for that segment? Patrice Ouimet: It's great. So in terms of margins, well, we've been increasing margins over the years in Canada, as you know. It comes from different elements. There's a portion that's mix, but a portion of that comes through the cost reductions that we've been able to do. So it depends on the years. But typically, like 0.5 point to 1 point has been something we've been able to do. When you throw in acquisitions, obviously, it can change the mix, but we haven't done meaningful ones recently. So when you look at this full year, I would say versus where we are in Q1, it's -- we're probably going to be in a similar place. So we've had a good increase versus last year. But I would say, yes, that's probably it. And if your question is longer term, we do think as we continue to invest in automation and improvement in our operations. I gave a few examples on the call earlier. These typically produce increasing margins as we're a lot more efficient in the way we operate. So we'll keep on working on this in the future. Frederic Perron: Business segments? Patrice Ouimet: Yes. And for the business segment, yes, it's been more flattish. This is actually an area -- I would say business for us is about 10%-ish of our business and residential is the balance. So obviously, our focus has been more on residential. We do have some focus -- I would say, a bit newer focus on commercial. So we're going to be putting some efforts there. That being said, we also don't want to go into too many products on the commercial side. Given the size of the business, it's often not worthwhile doing. So for now, I would say, yes, it's more neutral-ish, but we do feel that there is some upside in that business in both countries going forward. It will be less material than what we do in residential, though. Operator: And your next question comes from the line of Stephanie Price from CIBC. Stephanie Price: I just wanted to circle back on Ohio. So net adds in the high region improved sequentially again this quarter. Just curious about what you've done in that region to move it back to growth and your ability to use the same playbook to move to growth in the rest of the U.S.? Frederic Perron: Sure. Stephanie, without giving the entire playbook to our competitors, what I would say is we've deployed new sales channels in that footprint and we're not done doing that. That's number one. Number two, we've simplified our pricing. Customers were telling us that our pricing was too complicated before. So we've made it more transparent, more simple. And then there's other blocking and tackling around analytics, customer base management, more refined targeting both of new customers and existing customers for upsell and retention. And then, of course, last but not least, that's the obvious place to start with our second brand. That's not in the results yet, but that's going to be in the future results. Stephanie Price: And then you mentioned in the U.S. penetration below 20%. One of the reasons was newly built out footprint. It looks like you added about 3,000 homes passed in the quarter in the U.S. Maybe you can talk a little bit about the opportunity there. Frederic Perron: Yes. I wouldn't say -- we're not building much any more new footprint, Stephanie, in the U.S. That's something that we've stopped just because of the nature of the market. Any numbers that you see such as that 3,000 is more the residual impact of either prior long-standing projects being completed or residual commitments to some local government but we're not starting many new projects on that front. The opportunity is on filling the pipe, so to speak, and deploying some of the same tactics that I was talking about in your Ohio question in that footprint as well. Operator: [Operator Instructions] And your next question comes from the line of Jerome Dubreuil from Desjardins. Jerome Dubreuil: First one, another one on the subscriber trends in the U.S. going forward. You seem quite confident on that front. I'm wondering if on top of the operational efficiencies that you're planning to roll out, is there any change on the pace of fiber building in your footprint that you have noticed maybe that leads you to this forecast? Frederic Perron: The forecast goes mostly from the execution things, Jerome, that we've been talking about on this call. I would describe the competitive environment as steady with some puts and takes. But it's true that fiber penetration used to be nowhere in the U.S., and we're getting closer over time to what would be a stability point, the same way we've experienced that in Canada in the past and navigated it quite well. But I would say, by and large, it's the different measures that we've been explaining on this call. Jerome Dubreuil: Okay. Great. Second one for me. Consolidated CapEx in the quarter was pretty much where we expected it to be. But there was quite a shift out of the U.S. and into Canada. I'm wondering if there's something to unpack there or if it's more of a timing thing? Patrice Ouimet: Yes, it's more of a timing thing. The CapEx by quarter can be more volatile, but there was more CPE spend in Canada this quarter, which we won't have in the next few quarters. So I would say, overall, we're on track for the full year, but I would not take the trend of the Q1 and apply it to the full year. It's going to revert back to more normal numbers over the full year. Operator: And there are no further questions at this time. I will now hand the call back to Mr. Ouimet for any closing remarks. Patrice Ouimet: Okay. Great. So thanks for being on the call today and happy to take any other questions you have in the future. So have a good day. Operator: And this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Velan Inc. Q3 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, January 15, 2026. I would now like to turn the conference over to Rishi Sharma, Chief Financial Officer. Please go ahead. Rishi Sharma: Thank you, operator. Good morning. [Foreign Language] Thank you for joining us for our conference call. Let's start by discussing the disclaimer from our related IR presentation, which is available on our website in the Investor Relations section. As usual, the first paragraph mentions that the presentation provides an analysis of our consolidated results for the third quarter ended November 30, 2025. The Board of Directors approved these results yesterday, January 14, 2026. The second paragraph refers to non-IFRS and supplementary financial measures, which are defined and reconciled at the end of the presentation. The last paragraph addresses forward-looking information, which is subject to risks and uncertainties that are not guaranteed to occur. Forward-looking statements contained in this presentation are expressly qualified by this cautionary statement. Finally, unless indicated otherwise, all amounts are expressed in U.S. dollars, and all financial metrics discussed are from continuing operations. I'll now turn the call over to Mr. Jim Mannebach, Chairman of the Board and CEO of Velan. James Mannebach: Thank you, Rishi. And good morning, afternoon and evening, everyone. Please turn to Slide 4 for general overview of the third quarter of fiscal 2026. Velan delivered healthy adjusted EBITDA of $9.5 million on sales of $71.7 million, driven by the execution of high-margin projects and continued tight management of operating expenses. With respect to sales, let me point out that as expected, most rescheduled orders from the previous quarter recaptured in Q3 2026. A similar customer dynamic occurred in certain complex projects in the third quarter, leaving us again with orders worth a few million dollars still pushed out to later periods. Now let's turn to Slide 5. Our order backlog reached $296.8 million at the end of the third quarter, up 8% from the beginning of the year. At quarter end, 80.4% of the backlog, representing orders of $238.5 million, were deliverable within 12 months compared to 83.4% at the end of Q3 last year. Bookings amounted to $77.9 million in the third quarter of fiscal 2026, a year-over-year increase of 32%, further driving momentum in our backlog. The strong growth reflects higher bookings by our North American operations in the nuclear and oil and gas sectors, along with increased bookings by our Italian and Chinese units. These factors were partially offset by reduced orders from the German operations. In North America, Velan secured a valve order of more than CAD 20 million from Ontario Power Generation, or OPG, for reactors being refurbished at the Pickering Nuclear Generation Station, confirming our leadership position in this fast-growing nuclear sector. First shipment is scheduled for January 2027 with subsequent deliveries to be completed by the end of January '28. Note that Velan supported the original valves more than 45 years ago and has continuously supported the Pickering complex throughout its construction and refurbishing program. Turning to Slide 6. I'd now like to address the recent announcement regarding the proposed sale of Velan Holding's controlling interest in the company to Toronto-based Birch Hill Equity Partners Management, Inc. Velan Holding, which is held by certain Velan family members, has agreed to sell its 15.6 million multiple voting shares, representing approximately 72% of Velan's outstanding shares and 93% of its aggregate voting rights to Birch Hill at a price of CAD 13.10 per share for aggregate gross proceeds of CAD 203.9 million. This is a private transaction and is expected to close in the first half of calendar 2026, subject to receipt of required regulatory approvals and other customary closing conditions. The transaction is not subject to any financing conditions or approval by our shareholders. Velan's Special Committee of Independent Directors recommended to the Board of Directors that it's in the best interest of the company to facilitate the consummation of this transaction. And while the company is not a party to the private transaction, it has entered into a cooperation agreement with the parties, which will ensure a smooth transition with Birch Hill, as we jointly secure regulatory approvals and complete other customary closing conditions. The company continues to draw its inspiration from our founder, A.K. Velan, and the tireless efforts of the Velan family since our founding more than 75 years ago. We are extremely proud of our heritage and look forward to growing on our legacy as a world-leading Canadian valve company. Birch Hill has a proven track record of partnering with Canadian industrial leaders and accelerating performance. Their broad business experience and deep access to capital will enable Velan to speed advancement of our business plan, which is focused on value creation for all stakeholders, including customers, employees and of course, shareholders. We look forward to partnering with Birch Hill as we accelerate the execution of our strategic plan. Before turning the call back over to Rishi, I want to reiterate on Slide 7. Velan is well positioned in its main markets through its trustworthy brand, high-quality products and proven expertise in developing solutions for the most critical applications. Nuclear energy is enjoying a strong resurgence driven by massive power requirements and rising demand for clean energy sources. Our recent contract win with OPG is a clear example of government's refurbishing existing reactors to meet their energy requirements well into many future years. New deployment of small modular reactors, or SMRs, are also expected to be part of the overall solution. As a reminder, Velan is a key supplier to the first SMR initiative in North America at OPG's Darlington site. On the oil and gas front, we've recently witnessed geopolitical pressures in key strategic areas, highlighting the global need for this fossil fuel. Of course, Velan remains impartial, but we stand to benefit since the company supplies the most reliable engineered valves to the majority of refineries in North America, along with a growing presence overseas, especially in the Middle East through our announced joint venture in the Kingdom of Saudi Arabia. These 2 sectors, nuclear and oil and gas were the driving force behind a remarkable 32% bookings growth in the third quarter. If we add our important presence in other areas such as defense, liquefied natural gas and mining, the underlying theme is that Velan is well positioned to leverage strengths across a wide range of industrial sectors throughout the world. Rishi, I turn the call back over to you. Rishi Sharma: Thank you, Jim. Turning to our third quarter results on Slide 9. Sales totaled USD 71.7 million, down 2.4% from $73.4 million 1 year ago. The decline reflects lower shipments from our Italian operations, following strong sales in last year's third quarter and as Jim mentioned, customer dynamic resulted in orders totaling a few million dollars being pushed out to later periods. These factors were partially offset by higher sales in India and Germany, along with a positive foreign exchange impact. By customer geographic location, North America represented 48% of total sales in the quarter compared to 55% last year. Asia Pacific accounted for 33% of total revenues versus 44% a year ago. For its part, Europe represented 8% of sales this year with Africa, the Middle East as well as South and Central America, rounding off our quarterly sales. Moving to Slide 10. Gross profit reached $27.2 million in Q3 2026 compared to $28.3 million last year. As a percentage of sales, gross profit remained relatively steady, reaching 37.9% compared to 38.6% last year. This stability was driven by higher-margin projects though offset by lower absorption due to reduced volume and tariff impacts. Currency movements had a slight positive effect on gross profit for the period. Administration costs decreased to $16.5 million or 23% of sales in the third quarter of fiscal 2026 from $17 million or 23.2% of sales 1 year ago. The year-over-year reduction can be attributed to cost-reduction initiatives. We also incurred restructuring expenses of $1.3 million in Q3 2026, which consisted of transaction-related costs. Excluding nonrecurring elements, adjusted EBITDA amounted to $9.5 million in the third quarter of fiscal 2026 versus $14.3 million last year. The year-over-year variation can be attributed to a lower gross profit and to a slight increase in other expenses mainly caused by unfavorable currency movements on unrealized variations. These factors were partially offset by the favorable effect of a provision reversal. Net income totaled $3 million or $0.14 per share in Q3 2026 compared to a net loss of $47.8 million or $2.22 per share last year. Excluding nonrecurring elements, adjusted net income amounted to $4 million versus $8.5 million a year ago. On Slide 11, for the first 9 months of fiscal 2026, sales were relatively stable year-over-year and were up more than 2%, excluding last year's nonrecurring revenue contribution. Gross profit, meanwhile, was marginally down both in dollars and as a percentage of sales. Turning to Slide 12. Cash flow from operating activities before net changes in provisions used $6.7 million in the third quarter of fiscal 2026 compared to $0.6 million used a year ago. The unfavorable movement in cash was mainly due to negative changes in noncash working capital items versus last year. More specifically, a temporary increase in accounts receivable and late-stage work in process inventory related to changes in customer delivery schedules were largely responsible for the year-over-year variation. Once this customer dynamic normalizes, cash inflows are expected to follow. During the quarter, we also paid $1.5 million in dividends, representing regular payments for dividends declared. It should be noted that the company has agreed to suspend the payment of dividends until the closing of the transaction between Velan Holding and Birch Hill. Ordinary course dividends are planned to resume thereafter as if and when declared by the Board of Directors. Finally, our balance sheet remains strong at quarter end with $36.3 million in cash and cash equivalents and short-term investments of $0.4 million. Bank indebtness stood at $16.1 million, while long-term debt, including the current portion, was $17.7 million. Considering our credit facility, working capital financing, letters of credit and guarantees, we have access to multiple sources of additional funds. Altogether, Velan has approximately $86 million readily available to execute its strategy and finance its expansion to sustain long-term profitable growth. I'll now turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] Your first question comes from [ Sebastian Sharlin ] with Agave Capital. Unknown Analyst: My first question, actually, it's quite personal and maybe it's too early to ask, but are you staying, both of you? James Mannebach: Well, I appreciate the interest in that. Yes, it's business as usual for us at Velan. Birch Hill has a long history of partnering and participating with management, and we don't see any change in that in the immediate future. So I look forward to working with them. In fact, they have a very unique, I think, data-driven decision-making process that I think will be very, very helpful to us. And yes, so business as usual, no expected changes in the foreseeable future with management in place driving our strategic plan going forward. Unknown Analyst: Great. And can we know a little more -- or should we expect more announcements in coming months as this transaction closes? I respect that there are Canadian buyers, so it should alleviate some of the problems we may have seen or foreseen with, let's say, foreign buyers in a strategic asset as Velan, but should we expect more announcements regarding changes to strategy or appetite M&A? So I really understand there's quite a big difference between the 2 controlling shareholders we'll have now and in the future. Rishi Sharma: Thanks, Sebastian. I think the first course of action and priority is obviously to support through the engagement of the cooperation agreement at the closing and get to the closing of the transaction. So that's the immediate requirement as well as obviously delivering a strong fourth quarter, I think that goes without saying for us and the management team, it's business as usual in terms of orders, bookings, delivery, profitability and cash generation. Beyond that, post-closing, I think we'll see. I think business as usual, there's a strategic plan. There's objectives that we have. I think through the partnership and our new controlling shareholder with Birch Hill, there could be, but I think there will be some time required to kind of reassess the plan going forward. So I don't expect immediate announcements to that effect. But I think post-closing, there will probably be some plans that will be shared. Unknown Analyst: Okay. And did I read correctly that Velan, the company is going to assume the legal cost of the transaction, even though if it's a private one, the $12 million that's highlighted in the press release? Rishi Sharma: Yes. So the special committee recommended that in the best interest of the corporation going forward that those costs be borne by the company. So if you look at the note, the total transaction, direct transaction fees are in the amount of USD 10 million to USD 11 million. There's an additional $5 million, call it, cost that will be incurred relating to change of control triggered items, mostly relating to vesting and accelerated vesting of incentive plans. And against that $16 million, we have about $4 million that's been paid throughout the year or accrued. So it's really a recommendation and support in terms of the best interest of the company going forward that those costs being absorbed by the company. Unknown Analyst: Okay. Yes. And perhaps, I guess the elephant in the room is maybe what do we don't know or do we miss for the discrepancy between the $13 sell price versus the, say, average price of the last 6 months of Velan, which was probably above $17 or $18. Do you agree with that price? If the company is paying for the legal fees for it, it means it agrees the special committees, it agrees that's the valuation that's correct for Velan? James Mannebach: Yes. Well, I think it's important to note, as we've already said, this is a private transaction between Birch Hill and Velan Holding. The company facilitated the secondary trade to ensure it was completed in an organized manner. But we weren't a part of the trade, we weren't involved in the pricing matters. As such, we're really not in a position -- I'm not in a position to comment on valuation and pricing. As you know, also, the minority shareholders will continue to participate in the company's next phase of growth, right, as it executes its strategic plan. And adding to what Rishi said, I look forward to an acceleration of deployment of those strategic plans with the new partner, Birch Hill. So I think we're on a good track, building out the fundamentals of this business to drive value creation over the long term. And I think that's the perspective that needs to be taken. And again, as I said, it's a private transaction between the parties that we weren't involved in the pricing. Rishi Sharma: Yes. And just to add on that, I think the way that Jim and I look at the transaction cost is it's really an investment in bringing on a partner as strategic as Birch Hill that has operational discipline that has the capital that we may have access to in the case of growth and executing on the strategic plan. But beyond that, as Jim mentioned, private transaction between the 2 parties are sole obligation here is the cooperation to ensure that we get to a close. Unknown Analyst: Okay. I mean it's a lot to reconcile in one day. But at the same time, I want to -- yes, I just want to reassess I know, and I appreciate all the work you 2 have been doing and the whole team in the last 3 years, not fixing the problem, but addressing the challenges of the business. So yes, I just want to admit I was disappointed when I saw the release yesterday, but the fact that you're staying that we get that we're not forced into selling at that price. I guess it's a mixed signal, but somewhat reassuring. I just wanted to highlight this point. It seems quite obvious, though, that it deserves to be addressed. Rishi Sharma: Yes, Sebastian, thank you. James Mannebach: Thank you. I appreciate the recognition as well. And as I said, underscoring the point, we really look forward to accelerating execution of our plans. I think we're in a really strong position in nuclear and oil and gas and other demanding applications, as I mentioned in my comments and partnering with Birch Hill, bringing their perspective to the business, I think it's really a win in the long run for everyone. Operator: [Operator Instructions] Your next question comes from Alex Ciarnelli with SM Investors. Alessandro Ciarnelli: Most of my questions have been asked. And I guess the bigger one was the reconciliation of the pricing, which you addressed. I don't know if this was asked, I was on the morning meeting of the company for a few minutes. But I think the press release was talking about the review of strategic alternatives under supervision of the special committee. So were there other options maybe to sell the entire company or maybe if you can talk about this review in general? James Mannebach: Yes. You've been engaged in our calls for quite a while now. And as you know, we've consistently and publicly stated that the company was reviewing options, right, to maximize value for the shareholders. And this process is continuous, right, going back many years, including the special committee's engagement with respect to the asbestos and the French subsidiary divestitures. But given that the offer was made to Velan Holding solely for the multiple shares of Velan Holding, after the special committee reviewed the circumstances and the particulars, as Rishi has already commented on and I as well, concluded that it was in the best interest of the company to facilitate the transaction. Really beyond that, I'm not sure what else I can say about that other than as I said -- I just said a moment ago, we've been quite clear and transparent that we've been considering value-creating opportunities for these years. Alessandro Ciarnelli: I'll change gears. I'll ask just the SMR on the entire power generation project, if I remember correctly, it was approved in May. I don't know if there's any updates, how is that going? I know it's long term, but... James Mannebach: Yes. We're very encouraged by what we're seeing. We see with the owner as well as with the GE Hitachi project that you're referring to specifically continues to progress very nicely. Obviously, this is new technology being developed, and this is right in the wheelhouse of our business to grow off of what we've already done in nuclear over 50 years now and apply it to this new emerging approach to more compact SMR nuclear power generation. So what we've seen so far is very encouraging, very positive. And as I said just a moment ago, really plays to the strength of Velan, the brand and our people, especially at this moment, our engineering people. So we're quite encouraged by what we're seeing to the moment. Long way to go, but encouraging to the moment. Alessandro Ciarnelli: Last one for me. This might be a strange question and some ways to ask it. We saw what happened in Venezuela. Is that actually an opportunity for the oil and gas for you guys? Or too early to say? Rishi Sharma: I don't think it's a strange question. Of course, we don't know what's going to happen. It was sort of an unexpected move, I guess, by the United States anyway. But as you know, the majors that are involved in Venezuelan oil before the nationalization of those assets were all customers of Velan. And what we've seen in the public disclosures about the intentions of the United States going forward is encouraging to us as well because for the parties that President Trump is talking about, we have good relations with and expect to have a good opportunity to provide valuable product to them as they improve the operations of Venezuela. So very early, and strained circumstances you alluded to. But I think it's -- from a commercial market point of view, is positive for us. Alessandro Ciarnelli: Sorry, one more thing. This is for Rishi. I sent you an e-mail about the conference. I don't know if you're interested or not, but if you can answer, I can relay. I can send it again if you want to. Rishi Sharma: It's been a little bit busy last few days, but I'll -- as you can imagine, I'll definitely get back to you on that. Thank you. Operator: There are no further questions at this time. I will now turn the call over to Jim for closing remarks. James Mannebach: Well, thank you, operator. It's been an interesting couple of days, few weeks, months, for sure. The business in the last quarter, I'm very encouraged by the uptake in orders, especially in the nuclear and oil and gas space for us. I think it bodes well for our future. And we'll look forward to chatting with you all at the end of our fiscal year, which is just in a few weeks away. Anyway, we appreciate the support and always the interest of you, the investors and stakeholders. Thank you so much, and have a great day. Rishi Sharma: Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Loop Industries Third Quarter Fiscal 2026 Corporate Update Call. [Operator Instructions] This conference call is being recorded today, Thursday, January 15, 2026. The earnings release accompanying this call was issued after the market close yesterday, Wednesday, January 15, (sic) [ 14 ] 2026. On the call today are Daniel Solomita, Founder and Chief Executive Officer; Spencer Hart, Chief Financial Officer; and Kevin O'Dowd, Head of Investor Relations. I would now like to turn the call over to Kevin O'Dowd to read the company's forward-looking statement disclaimer. Kevin O'Dowd: Thank you, operator. Before we begin, please note that today's discussion will include forward-looking statements within the meaning of U.S. securities laws. These statements relate to our expectations, projections, beliefs, future plans and strategies, anticipated events and other matters regarding future performance. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. For a discussion of these risks and uncertainties, please refer to the Risk Factors and Forward-Looking Statements sections of our most recent annual report on Form 10-K, our quarterly report on Form 10-Q filed with the SEC and the earnings release issued after earlier today. These filings are available on the SEC's website at sec.gov or through our Investor Relations teams. With that, I'll now turn the call over to Daniel Solomita, Founder, and Chief Executive Officer of Loop Industries. Daniel Solomita: Thank you very much, Kevin. Q3 was a busy quarter for Loop as we move towards the construction phase of our Infinite Loop India manufacturing facility and progressing with our partnership with Reed Societe Generale Group for our project in Europe. I'm pleased to report on several positive developments. The Infinite Loop India project is on budget and on schedule. Before getting into the details, I want to officially welcome Spencer Hart, joining Loop as CFO. I've gotten to know Spencer well over the past year since he joined our Board of Directors. His leadership and knowledge of the capital markets and financing structures will be a great asset for Loop moving forward. In Q3, we announced that we have executed a supply contract with Nike, the large American sports apparel company to be an anchor customer for the Infinite Loop India manufacturing facility. The contract is for Loop to supply Nike with a fixed amount of twist, our textile-to-textile polyester resin on an annual basis at a fixed price for multiple years. There's a guaranteed take-or-pay element to the contract as well, which means if Nike does not take the delivery of the material, they still have to pay us a percentage of the sales price. We are currently in discussions with several CPG and apparel brand companies to secure additional offtake agreements. Textile-to-textile is becoming a very important growth driver as European regulations are being put in place to mandate more recycled content in clothing and recycled content from textile to textile, which means starting from a polyester textile waste and producing a new polyester textile with it. We're forcing the apparel companies to find a solution to recycling old clothing at the end of its life. Loop's technology is uniquely suited to recycle post-consumer textile waste. Post-consumer textile waste is difficult to recycle because of the different components that go into making the clothing. You often have polyester mixed with cotton, polyester mixed with nylon, button, zippers, et cetera. And all of these components have different monomers or starting components. And for this reason, it poses a tremendous challenge to recycle. Typical recycling is done at very high pressure, high temperature, where you're either forcing the depolymerization to be done under very extreme conditions or you're simply just melting the plastic down into a new form. And both of those do not work well for the textile industry because of the different components. And where Loop's technology overcomes that is because of our low temperature depolymerization, -- what we do is at very low temperature, we break down the polyester into the DMT and MEG. And because of the low temperature, all of the other components like the cotton, the nylon, the buttons and the zippers, they stay whole and we filter them out after the depolymerization, which gives us a huge advantage. And that's why Loop's Technology is uniquely suited to be able to process this type of clothing waste. Our project in India is also located next to a free trade zone. So we'd be able to import the waste clothing from Europe or from other parts of the world into that free trade zone and then transport that to our facilities to help the brands in Europe be able to recycle the material that once they've collected it. So it's a really huge benefit to Loop. And this government regulation starting in 2026 and is going to start being enforced in 2028, which is exactly the right timing for us. Our plant is scheduled to be completed construction at the end of '27. So 2028 is a perfect timing for us to be able to do this. So because of all of these regulations, we're really seeing an uptick in the demand for the textile-to-textile side. And we were on the phone the other day with a very large textile manufacturing clothing company, and they said textile-to-textile is not a nice to have anymore. It's a must-have because of the European regulation. So that's going to be a big driving force in the future. 66% of all of the PET and polyester manufactured in the world, which I believe is about 85 million tons per year, -- 85 million tons per year is coming from the polyester textile side. So it's this really a huge shift in the marketplace, which we are really uniquely suited to be able to capitalize on. And the Indian facility is perfectly located for that. Besides the low-cost manufacturing, like I said, it's near the textile hub in India, the Gujarat province, a lot of textiles. So the main feedstock we'll be using for the process is textile for the textile-to-textile. So it's really perfect timing for us and perfect timing for this Indian project. On the engineering front, we hired Toyo, the large Japanese engineering and construction company to complete the detailed engineering, which started November 1 and runs through the construction of the plant. Toyo has a very large presence in India and has done tremendous work to date. Our engineering team is now fully deployed on working for this project and generating revenue for Loop from this project from the joint venture. So we really feel that we're in really good hands with Toyo. They're doing an excellent job, and we're excited to be working with them through the construction of the facility. Debt syndication is moving well. We are building a syndicate of lenders for the project debt financing. We've received several term sheets for multilateral development banks, sovereign wealth funds as well as international and local commercial banks. Returns so far are in line with our expectations, and we anticipate closing the debt financing in the coming months, in line with our project schedule. So that's really the update on India. As far as the progress with our partnership with Reed Societe Generale Group, as you know, we've licensed our -- we licensed -- we sold Reed SocGen, a license to our technology to build 1 plant in Europe. SocGen has spent time working on site selection. I believe they started with looking at 20 sites across Europe. They've narrowed it down to 3. There's 1 lead site in Germany that is being negotiated right now. And we think that should finalized very shortly, sometime probably the end of January, beginning of February, at which time we anticipate to begin generating meaningful revenue and profits from providing the engineering for that project. So the engineering and milestone payments will be over the next 3 years for the project. And we believe that, that would cover all of Loop's back-office expenses for the next several years. Cash operating expenses for the quarter were $2.2 million, reflecting a year-over-year decrease of $1.1 million. At the end of the third quarter, we had total liquidity available of $7.7 million. In the coming quarters, this number will continue to decrease. The operating cash expenses will continue to decrease as more expenses are transferred to the joint venture in India and the project in Europe as well as we've seen some meaningful reductions in other areas of our spend -- our annual spend. Our focus is on raising the remaining financing required for our equity contribution to ELITe and for the operating expenses until the start-up of the Indian facility. We are engaged with multiple parties regarding a financing to fund our investments in ELITe. This capital, along with anticipated engineering revenues derived from the India and European projects is expected to fund Loop's ongoing operations until its first facility becomes operational. I'd like to turn it over to Spencer Hart now, our new CFO, and let Spencer say a few words. Spencer Hart: Thanks, Daniel. It's nice to be on the call with you on my -- one of my first days as being CFO. As a brief introduction, I've spent over 30 years in my career in investment banking. And I've followed Loop for many years. About a year ago, I joined the Board of Directors, and I'm a big believer in the company and Daniel and in the whole management team. I think there's an opportunity here to build a great company and create significant value in the process. During my investment banking career, one of my areas of focus was raising equity and debt capital for my clients. And so I'm going to be very focused on supporting Daniel, raising the capital for Loop to bring us to the next stage of our strategic development. For this quarter, Daniel gave you a good update on the business. The detailed quarterly results are [indiscernible] which were filed last night. I would just point out that the company has managed expenses very well in the third quarter, bringing cash operating expenses down over $1 million from last year's third quarter. We have opportunities to reduce that further, and some of those opportunities have already been locked in. With that, I'll pass it back to Daniel for closing remarks. Daniel Solomita: Sorry about that. Thank you very much, Spencer. In conclusion, really pleased with the progress we're making both in India and in Europe, starting to really making meaningful revenue from -- and profitability from the engineering fees in Europe and in India, or are you going to be able to sustain our back office spend for the many years coming. So that's all really positive development for us. And we're really confident in the financing as well. So looking forward to getting all this done in this quarter. With that, I'll open it up for questions. Operator: [Operator Instructions] Our first question today comes from the line of Gerard Sweeney with ROTH Capital Partners. Gerard Sweeney: So I had a question on Nike. Sorry, you guys can hear me, correct? Daniel Solomita: Yes, can hear you fine, thank you. Gerard Sweeney: Got it. So question on Nike or actually the facility in India, 70,000 metric tons. Nike, obviously, huge global brand, great opportunity for Loop. Just curious, how much of the facility in India is under contract? And you have Nike, and I believe you have a few other people. Maybe you could just delve into where it sits on the output and who's going to -- the offtake for the output? Daniel Solomita: Yes, we expect to have -- thanks for the question, Gerry. We expect to have following 5 to 6 customers total for the facility. Today, we have Taro Plast and we have Nike. We're in negotiations with several other CPG brands on the packaging side for Europe. So some of our customers that we've dealt with, and we've had long-standing relationships that we produce products for before, that we have products on the shelves with them in different geographical regions today. We're finalizing negotiations with them for packaging for the European market. and the textile side as well for a few other textile companies. So I would suspect we'll probably have another 3 to 4 customers to have the entire capacity of the facility under contract. Gerard Sweeney: Got it. So it's going to be a mix of packaging and textile. And on that front, or pricing, I know you don't necessarily want to give pricing but maybe in broad strokes or broad terms, textile and packaging, is it similar pricing and margins? Or is there one area better than another? And if you don't want to go into that right now that's fine. Daniel Solomita: Yes. Yes. I think overall, we have a target average sales price for the facility. And so we're really unique in a technology that we're able to play in both sides, right? We can play on the packaging side, create FDA-approved food-grade plastic for water bottles, and we can also play on the textile side. And so we're agnostic. We can do both, which really positions us uniquely in the marketplace to be able to deliver on, hey, if market -- the bottle market is hotter, then we can produce more bottle. If the fiber market is hotter, we can produce more fiber. So right now, we're gauging the different levels. I would say right now, the textile side is a little -- there are higher premiums being paid on the textile side because of the textile-to-textile, the regulation coming in and a little bit more of the uniqueness on that side, where both sides can get -- so the bottle sides can get mechanical recycling to give them a certain percentage of what they need. But if they want the quality, then they have to come to Loop for the quality that the virgin quality material. So right now, I would say probably textiles, you'll get a little bit of a higher premium there, but it's very comparable. It's really also on the customers' need. It's what does the customer really need and what does the customer's margins look like. Generally, the textile companies or the fashion companies work with a little bit higher margin. And we are the finished product, like we are the textile. So that polyester fiber that we are making is the actual textile. Whereas if you think about the packaging side and the bottle players, we're the container that their drink comes in. So we're not the actual product. We're the packaging around the product. So it's a little bit of a different mentality. But we can play on either market and we're ready to move as needed. Gerard Sweeney: Got you. And another question on that front. This is maybe on the marketing side and probably something that hasn't been brought up in a while. But I know historically, you've always said even on some of the sort of runs you've done for Avion, it's like made with Loop or Loop material. Are you still going to be able to market the textile and packaging with some of that marketing opportunity like Loop -- made with Loop recycled product or Loop inside along those fronts? Daniel Solomita: Yes, we definitely want to continue on the marketing side with that. On the packaging side, we've had that in the past. We expect to continue that in the future. On the textile side, we created a sub-brand for Loops material called twist. And so that's a part of the discussion when we talk about this with the textile companies. And one of the big things that the textile companies need from us is to be able to recycle their waste because now they're going to be responsible for collecting their waste. And that's going to put a huge pressure on the system. So they're going to have to organize the collection. Once the collection is there, they're going to need our technology to be able to recycle that for them. And so those are really great opportunities to do co-marketing and co-branding around those entire circularity of the entire product portfolio. So them sending us the weight, reprocessing and sending it back to them, creating that loop. That's something that we think we can really take advantage of on the marketing side. Gerard Sweeney: Got you. And then finally, just last question, just time line for the India facility. Just if you can remind us groundbreaking and then mechanical and completion then commissioning so. Daniel Solomita: Yes. I mean groundbreaking is a term that it's kind of an outdated term because what is groundbreaking. Our project is -- the project has already been approved. There's not like there's any approval needed. Our project is moving forward. Loop our partner, very dedicated, focused to get this done. We've started all of the detailed engineering, which feeds into the construction. So the project is on schedule and on budget. We are moving forward and having construction completed in Q4 of 2027. So that was always the goal, and we're on that time line as well. So you'll see some meaningful updates on the progress of the facility. We will eventually have some type of a ceremony on the site. But the project is green lit. It's not like the project is not going to be moving forward or there's one event that has to happen. We're just moving forward, methodically getting this done, getting the debt financing in place and then we can move forward with the construction of the project. Operator: Our next question comes from Marvin Wolff with Paradigm Capital. Marvin Wolff: Can you hear me okay? Daniel Solomita: Marvin, Yes, I can hear you fine. Marvin Wolff: I just had a question with respect to the German site selection that's going on now. How big a plan would that be once that comes on board? Daniel Solomita: So it's the same size, it's 70,000 tons capacity, exactly the same size as the Indian facility. Marvin Wolff: Okay. And I guess it's too early to talk about customers for that plant, but I would assume you're in early discussions with people. Daniel Solomita: Yes. So the European plant would mainly be on the packaging side because the supply chain for textiles is mainly in Asia. So -- but there could be some textiles being recycled at the facility. Because of this European regulation that's come in, having the facility in Germany, having these textile companies being able to send us the material in Germany to be able to process is going to be a big advantage for them. So it's going to be the -- our same customers, the same Loop customers that we've always been dealing with are going to be the customers supporting that facility as well. Most of the European packaging and textile brands are going to be customers of the plant. Because of the low-cost nature, we bought -- what we did is we brought the low cost mentality of India into Europe by doing modularization. So being able to build our technology in modules in a low-cost country, shipping them on site allows us to really reduce CapEx, which allows us to offer better pricing to our customers. So we've seen a reduction of CapEx of probably close to 50% by doing it modular versus doing it in stick build. And so that's a big part of our business moving forward. That engineering that I keep on talking about as well, building our -- taking our design from India and now building that into modular fashion to be able to build this in a low-cost country, put together like LEGO blocks, disassemble it, ship it to Europe and reassemble the LEGO blocks to be able to reduce CapEx and offer better pricing to our customers. So we're really competitive on pricing in the European market, and this project in Europe is going to be very competitive as well. Marvin Wolff: And if you could just remind us, what is the size of the debt package you're looking at? Daniel Solomita: For India, the debt package is $130 million. Marvin Wolff: Okay. Daniel Solomita: Which is 70% of... Marvin Wolff: And what is the equity component that Loop is going to have to provide? Daniel Solomita: The equity components that Loop is going to have to provide is approximately $28 million. Marvin Wolff: $28 million. Very good. Well, you're making great progress, and it's good to see it come along with some continued, if you will, intensity. Daniel Solomita: Yes, it's steady progress, doing everything the right way and getting that plant built for the end of 2027. That's the goal. Marvin Wolff: Yes. Okay. Very good. Well, at the end of '27 comes faster than you think, right? It's only less than 24 months away now. Daniel Solomita: Yes, the engineering teams and Toyo and the joint ventures engineering team and our partner, Ester's engineering teams are working full out nonstop. Everyone is fully dedicated to that facility. So the amount of work going on behind the scenes is tremendous. You don't always see that as -- because there's not a lot of press releases or things around that. But the amount of work being done to get this facility done is tremendous. So all hands on deck getting this built. And it all starts... Marvin Wolff: Yes, it's fabulous, very good... Daniel Solomita: The engineering and the technology, right? That's the foundation of all these things. You can build a plant and then it doesn't work. And so that's where we've spent the time, did it the right way. We've had this plant operating in Canada for over 5 years, getting all of the knowledge, all of the learnings, all of the engineering work that's been put into these plants. And so now we've done it the right way. We've done it methodically. It hasn't always been the easiest road, but we're doing it very methodically to get us to where we need to be in 2027 to deliver this product to our customers. Operator: Our next question comes from Varyk Kutnick with Divyde Capital Partners. Varyk Kutnick: So in the past, you've talked about the gross CapEx per pound in India being $0.61 with maybe net around $0.75. Does that same number translate to the European facility, especially when you talk about the modularity of it? Daniel Solomita: So the European facility will be a little bit more expensive. So you could take the module cost, the CapEx that you provided, that would be, let's say, the cost for the modules. So then you have to add the transportation and the reconnection of the module. So there's a little bit more cost involved. The good thing about the European and especially when we go to these site selections, the most important thing and one of the biggest costs in these plants is all of the utilities, the natural gas, the hot oil, the steam generation, the cooling towers. So in a chemical plant, the utilities are the most expensive part of the entire project. And the duty of this project and the beauty of the facility that we have in Germany is that it's a big chemical plant. It's a site that has utilities. And so instead of us having to put in our boilers, putting in our steam generation, putting in the natural gas connection, putting in the cooling towers, the nitrogen, all of those things that go around the utility package, it's already there on site. So that's going to be able to offset some of the increased costs for the transportation and the reconnection of the modules. So we expect the plant to be a little bit more expensive than the Indian project, but not tremendously more expensive because of the offset of the utilities, where in India, it's a pure greenfield. We have to put everything on the site. This is a site that has a lot of utilities. So instead of having to build our own boilers on site, we just connect into the existing boilers that the site already has. And so it's more efficient from a CapEx perspective. And that's a big part of the decision when you choose these sites. If you have utilities on site, it brings down CapEx tremendously. Energy costs are also very, very important and the ability to transport the modules on the site. So that's -- it will be a little bit more expensive, Varyk, but it's still in the -- generally in the same numbers. Varyk Kutnick: Right. I mean, if I look at the rest of the field, you guys are about half the cost on a CapEx per pound basis. Where does that magic come from? Daniel Solomita: The magic comes from the learnings that we -- we really had to reinvent ourselves. So what happened a little bit of -- going back a little bit what happened during COVID is the price of building everything went up. So the price of CapEx went up if you're building a house, you're building a store or you're building a chemical plant, the CapEx went up. And during COVID, that was fine because the CapEx went up, but the price of plastic went up as well. So you had a trade-off. You had plastic at very high prices because of very tight supply chains and you had CapEx going up. So the economics still made sense. What happened right after COVID, once China opened up its factories again and Asia opened up its factory, the price of plastic came down, CapEx didn't continue increasing at the same rate, but they leveled off. They still remain high, but the price of plastic came down. And that's why not only plastic, but all commodities. That's why you saw a lot of projects in this space get canceled during that time because there was just a mixed mass of high CapEx and versus lower commodity prices. And so we had to reinvent ourselves as a company. We had a project that fell into the same path. And that's where we have to reinvent ourselves. So going into India, low-cost manufacturing, lower labor rates, lower labor rates trends translates to lower construction costs, everything from cement, steel, installation cost. Everything that we're doing now is done in a low-cost industry. We don't have any specialized equipment. In a chemical plant, everything is tanks, reactors, agitators, heat exchangers, pumps. Those are all equipment that can be sourced locally. So if I'm building in India, Indian labor is making those parts rather than, let's say, building it in Germany, where German labor, which is significantly higher, builds those projects. And if you look at India right now, India is 80% -- labor costs are 80% cheaper in India than they are in China today. And that's where we can do this low-cost manufacturing, and that's how we can be so successful. Varyk Kutnick: Got you. I appreciate the color on that. And obviously, is it safe to assume that your return on invested capital, obviously, you guys hold this at a JV level, but your payback period would be significantly better. And hopefully, that's the type of cash you could use to fund future growth? Or when we think about more facilities, is it going to come out of cash flow of India? Or is it going to be funded through other means? Daniel Solomita: It's going to be funded through the cash flows in India, 100%. So in India, we have enough space to build a 100,000 ton capacity right after the first one is done. So the total capacity of the site is going to be 170,000 tons. We've done multiple feedstock studies. We've hired different third parties to do the studies, easily identified over 500,000 metric tons of textile waste of it, just textile waste, forget about the packaging, just textile waste available for us to process, just in India, not accounting for imports from Europe or imports from Vietnam, 500,000. So we have 170,000 capacity on the site. Some of it will be packaging waste for the packaging customers. So it won't all be textile waste. But we'll be able to -- all of that is going to be financed through the cash flow. The money that we get the 5% for the royalty fee plus covers all of our back office expenses and more because we're really being cautious with our cash and spending a lot, like I said, a lot of the cost of the R&D and the engineering and everything else is now being paid by the joint venture. So it lightened the amount of cash at the head office that our burn is. And so the licensing fee plus the engineering fees, we're going to be cash flow positive at the corporate level just through those. And so everything else is going to be coming out of the funds from the facility from the joint venture. The payback is less than 3 years in India for the plant. So... Varyk Kutnick: I come over in Europe then Reed [ SGS ] says, they get to partner with you, they design, license, engineer, collect with minimal balance sheet risk. And this hopefully with the payback period under 3 years, this is a scalable project well past India into Europe and other places. Daniel Solomita: Absolutely. So... Varyk Kutnick: The Nike deal, I don't think people have mentioned that and what a big deal that itself. Daniel Solomita: Nike is huge. Obviously, if you could choose -- if I could look back and choose any customer that I wanted to work with, Nike is right up there as one of the top companies that anybody wants to have as a customer, right? Such a great organization, such a great company, such a great brand. And they have all of these different brands within Nike that are so successful. So we were really honored to be able to have Nike as our anchor customer, and it's just tremendous working with a company of that size. And they're true innovators. They need textile to textile and they're really moving quickly to get that done. So we couldn't be happier about having Nike as the anchor customer here. Varyk Kutnick: Yes. I mean it's just on the Internet, so I'm going to throw it in here. But I mean, obviously, Nike produces about 2 billion pounds of plastic and shoes per year, I should say, clothing and shoes per year. I mean, [indiscernible] India, which will do 154 million pounds, I mean, you're about 5% of their total capacity. So I think the scale of this, when you actually think and zoom out, especially when you throw in other apparel players, it's bigger than we could ever dream of. Daniel Solomita: Yes. Like I said, 60 -- so the entire polyester fiber market is 66% of 85 million tons. So it's a huge number. So we have 170,000 tons out of -- we're talking about somewhere 60 million tons. So there's a tremendous amount of growth on the textile side, and Loop's technology is uniquely positioned to handle that because of the low temperature methanolysis. That's the key to all of this to be able to not contaminate your stream with the cotton, with the nylon with the buttons, with the zippers, with all of the different components that go into these textiles, that's the key to Loop's technology, and that's why we're uniquely positioned to be able to do this. Operator: We have not received any further questions. And so I'll hand the call back over to Daniel for any closing comments. Daniel Solomita: Yes, nothing further from me. Thank you very much, everybody, and we'll be speaking again soon. Operator: Thank you. This concludes our call. Thank you all for your participation. You may now disconnect your lines.
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