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Kurt Mueffelmann: All right. Great. Well, good morning, everybody. Welcome to archTIS's first half of fiscal '26 update for the period ending December 2025. I'm Kurt Mueffelmann, and I'm joined by our CEO and Managing Director, Daniel Lai. We generally don't have these types of updates on the first half results, however, given the level of excitement around kind of the defense sales pipeline and technology motion, we thought it would be a good opportunity to kind of address the market and really create more excitement about where we see the market opportunity and the business going today. So during today's session, we'll update you on the half year performance, provide an in-depth financial review, update the U.S. DoD opportunity, somewhat of a resurgence that we're seeing in the Australian defense and a big military alliance win. We'll also discuss the go-forward strategy around market focus and growth, surrounding a really exciting topic around AI and the effects in the markets, product and sales opportunities. Why don't I kick it over to Dan for a quick minute or 2 overview on the first half of the year and just kind of overall thoughts? Chun Leung Lai: Yes. Thanks very much, Kurt, and welcome, everybody, to our half year update. Look, it's been a very productive first half of the year. And I think that, obviously, with the acquisition of Spirion has been very active, but I think the most pleasing aspect of all of this is that we've completed that integration. We've identified synergies in terms of savings, and we're seeing the pipeline grow. But most importantly, we're seeing active deals come out of this process and the execution. So the activity in the marketplace has certainly increased as well, which is giving us a lot of confidence. And of course, our execution in that defense and intelligence marketplace is very, very promising for the rest of this year. Kurt Mueffelmann: Great. So why don't we go through -- so the first half of fiscal '26 we really saw scalable changes, obviously, with archTIS with the inclusion of Spirion and its successful completion, as Dan said. ARR reached $16.3 million, while the prior comparative period for revenue grew 120%, to $6.1 million. We've really seen strong gross margins where it's increased 124%, to $4.6 million, which shows the operating leverage we've continued to talk about quarter after quarter, really driving that scalable higher-margin software. Operation expenses was $7.6 million, excluding acquisition-related items. This included, and we'll look at this in the appendix, an additional $2.9 million of nonrecurring transactional expenses from the acquisition. Again, we really detailed that and broke that out below the line from the acquisition costs and where we see the business going. And additionally, as we mentioned at the end of our quarterly 4C, we've created integration synergies that are expected to be close to $4.5 million in cost savings during 2026. So I think we've done a really good job at not only managing where the business goes from an integration standpoint, but also really managing that cost and looking for those synergies across the business. And as we announced yesterday, we also strengthened our balance sheet with another $8 million through a CBA facility, providing nondilutive capital to execute our growth strategy. So these results position us really for that accelerated ARR expansion, improved margins, and continued scalable growth. So Dan, any comments on the actual quarter from a financial standpoint? Chun Leung Lai: No, no. I think that we -- had a strong performance there. And obviously, now it's about accelerating the growth moving forward. Kurt Mueffelmann: Yes. I think -- I'd urge shareholders to really look at that appendix around the $7.6 million of acquisition-related items. I think there's some really strong work that was done there by our CFO, Andrew Burns, and the integration teams and really how we're driving that forward. So we feel like we're really in good shape from a cash as well as from an operating expense standpoint heading into the second half of the year. But at the end of the day, we know expenses don't drive business. I think I've been caught on making a statement or 2 about sales previously. So Dan, why don't we update everybody on a little bit about the sales opportunities that are out there, and really, the exciting one, I think, that we have on the right side of the slide here that's just closed earlier this week? Chun Leung Lai: Yes. Obviously, we've just made the announcement 24 hours ago. But a global military alliance or what we've described in the announcement as the U.S.-European military alliance. I guess, there's not too many of those, so I think we can work it out pretty quickly. But NC Protect, to be able to do the policy enforce data-centric security, and it is with that organization and obviously has a lot of member states, and we see a potential growth opportunity inside that. But it is a strong win. It has followed a life cycle of a proof of concept, engagement, competitive process, of course, which we have announced that we are the winners of. So I think that is -- one of the foundation building blocks of this year moving forward is this conversation about how we become the preferred provider of data-centric security for military alliances across the globe. And we're seeing how important that is with the activity that's going on around us constantly and the amount of money that's being increased in terms of the spending. What I'm happy about seeing now is the urgency from some of these clients to get these things completed. And that's certainly something that's been out of our control. We've been saying to shareholders for a period of time now it's coming, it's coming, believe us. And we're starting to see that action on the defense side now globally. So that's really, really important win. And of course, a massive, massive client to be successful with. So that's good. Obviously, everybody else wants to know about what's going on with this U.S. DoD deal. What's exciting for us is, again, I keep saying this, we are in constant contact with them, and we are confident about this deal coming to completion. Timing, yes, still working through that. Sometimes they get distracted with things like activities in Iran and discussions that are going on there. But that also gives you an indication of where this is really being deployed and being tested. It's at the cutting edge here, and get this right and it's going to definitely explode in terms of growth across that department if it's successful. So we're very excited by that. We know the tranche is still out there for the 125,000 users. We are making progress. It has been deployed, and we're just waiting for feedback on how those activities are going. But I think in the short-term, we will see something happen there. And finally, the Australian government in terms of their Department of Defense, I'm really pleased to say that we've completed a TDI, trusted data integration, which is really the foundation of what we discussed at the last 4C webinar of becoming a platform. This was off the back of that Direktiv acquisition in February. And of course, we've done a trial there. It is the foundation of the NEC deal in Japan as well. So we're seeing real traction with this, and we're really kind of excited about where this is heading and the interest from departments, military organizations on this product as well. Kojensi has also come very active. We've got signed up recently a couple of different resellers, one in the U.K. and one here in Australia that want to attack that defense industrial base and make it an offering to the market. So the activity there is strong. Spirion data protector, that's another defense industrial base, but it's for shipbuilding activities. You can guess there's a couple of major programs being highly invested in Australia currently, one in Adelaide and one in Perth, and they're looking at deployment of this and how do they secure their data across that. So we're very excited about the current opportunities in the pipeline. Again, all of these nuggets promote us as the #1 option for data-centric security across defense and defense industrial base. And I'm very happy that we're seeing that execution across that strategy. Kurt Mueffelmann: Yes. I think one of the highlights I'm personally seeing being on a lot of the calls across the enterprise as well as with the defense coalitions is really the interest in the model that we brought to bear on the kind of Spirion and NC Protect integration where we're going from identifying to labeling to enforcing to governing. That methodology is really catching on. So you see it with the shipbuilding infrastructure. I'm up in D.C. next week talking to Microsoft about that and how our Microsoft message with SDP, which is Spirion data protector. And Purview is a better together story. And we're going to be talking to about half a dozen different devs that are out there currently. That latest global military alliance win, that next step could be Spirion opportunity that we're looking at, because again, everybody needs to identify the data before they can do anything with it. You can't do anything with it unless you know what it is. So we're really seeing that traction out there. So I'm really pleased to see that. And I know, just from a pipeline standpoint, that we continue to have constant demos, consistent pipeline building on it. And I think there's even one or 2 different webinars that may be online if our investors would like to check that out. So really exciting stuff there with Spirion that's going on. So I think one of the things that's really -- we're seeing hard, and we want to spend a little bit of time on this within the markets. We're doing some work with a number of investment bankers in the U.S. And so -- you see what we're doing with the U.S. DoD. You see what we're doing with Spirion. You see the level of investment that we're making in the U.S. itself. So we're getting some really good professional feedbacks from people that have feet on the ground here and have really looked through where the business has gone. And you saw the market take a crash a couple of weeks ago, and it was really around this, hey, can AI replace the whole SaaS ERP, security, what have you. And so it's going that structural reset where software companies based on AI readiness and system-level importance rather than this traditional SaaS growth. And we're seeing the model shifting a little bit to what can AI do across the business? and so when you look at autonomous agents and how they work. So we look at this chart, and I thought this is a really big chart. And it's pretty complicated. So if you're into the quants like I am and into where valuations are about the industry and competitors, really look at this because I think what we're seeing, and my personal belief is you're seeing a decoupling of where traditional SaaS companies go and where AI agents and where AI as a valuation within a business come into play. And that's something -- Dan and I were on a call. Boy, it must have been 2 days ago at my 2:00 a.m. in the morning. It's one of those 2:00 a.m. you can't sleep type things. And we're talking about AI and the strategy that we're bringing to bear. And so we want to talk about this as it relates to the market, but I think it's also more important how we present AI across the business. So Dan, from a strategic standpoint, let's talk about the kind of the 3 stages that we see as a business and then how we bring that into play from a revenue and scalability standpoint? Chun Leung Lai: Yes. Look, AI means different things to different people, and there's a lot of, I guess, hype around it and what it's going to do and people are still feeling their way through it. But in the areas that we target from a market perspective, where it's classified information or sensitive information, there's a real concern about how AI is introduced into those highly regulated industries. So -- but overall, there's also the promise of productivity gains for the archTIS themselves and how -- and also product enhancement. So we've taken a 3-activity approach. These things will run in parallel. So first, of course, is how do we make our teams more productive and deliver product faster to the market? How do we accelerate? What we're doing in every aspect of the business from marketing to finance to product development, to testing, all of those things? That's the first activity. And we have got a strategy of how to implement that. And obviously, we are trialing our own different use cases for AI. Activity 2 is product innovations. How do we embed AI into our product offerings? And a good example of that is, when we have to write policy rules which match against compliance frameworks, can we automate that process, have a lot of those things out of the boxes and have that translated into plain English? Can we test those things before they get deployed and inform the user and make it much more friendly from that perspective? And the activity 3 is, what can our products do to make organizations feel more secure about adopting AI and how it gets implemented across their enterprises? And I think that's really the big, big opportunity. We previously discussed that we're going from best-of-breed to a platform offering. And one of the things that we really saw early on with the Direktiv acquisition and the launching of trusted data integration is its ability to manage AI and where it gets published and what information and services it transacts on. And that ability was -- we identified very early as part of the foundation of building out the platform so that we've got an offering to help highly classified areas or sensitive IP or manufacturing or help understand how they control and adopt AI into their organizations securely and having it governed. Do you want to add anything to that, Kurt? Kurt Mueffelmann: Talking on staff, I think it's -- the fun part is, I think the first one is we're getting people coming into the business, all employees and contractors coming in and saying, how can we help, how can we deploy AI and make us more efficient, more productive, whether it's support being more proactive to customer needs, whether it's sales going through pipeline and looking at each opportunity and really going in and digging, whether it's IT or operations, everybody across the business is looking at that, and we're promoting that very heavily across the business. It's really creating a culture of participation and a culture of real drive to really look at how do you peel the onion back to see how can we create and maybe lower things such as operating costs, how can we become more effective, how can we do more with less, which is something we always see in microcap companies. And that will obviously drip through -- all the way through how we're doing that development. As Dan said, the AI market readiness is where we are today. And we're seeing kind of a number of kind of Open AI issues that not a lot of people are dealing with. And so Dan, we've talked about this. We've talked to, I would say, half a dozen different customers and prospects about their challenges. So why don't we talk a little bit about the challenges that those customers are seeing? Chun Leung Lai: Yes. Look, it's very, very true that it's very easy to talk about the benefits. It's very difficult to implement it and get those benefits, measurable outcomes for the business. So one -- the first one is, obviously, when you have an AI which can make calls for services and to data resources, how do I know I'm getting the right data exposures and I'm not creating data leaks? That's very important to the customer base that we deal with. So uncontrolled data exposure is a big issue, and it's something that they fear a lot. Compliance. How do they make sure that they're adhering to the compliance requirements? Again, defense industrial base, which we deal with, they're regulated a lot by information, trade and arms regulation controls. How do they know that, that information is still being adhered to in terms of the compliance requirements, which have massive penalties for them to do? Data boundaries. They just don't exist anymore. We've talked about this before, about customers operating in hybrid environments. They're using SaaS platforms. They've got information in the cloud. They're using cloud services. They've got legacy systems, this sort of thing as well. And how do I know what the AI and the MCP can actually call in terms of services and data? We've looked at all of these issues. We have to look at this also for ourselves, which is also helping us look at how we design our responses as well. And most importantly, I think when you integrate AI across the organization and start to add agentic agents, it's the nonhuman identities which become so problematic because they expand exponentially. So how do I also identify what services I'm calling? Where this information is going? So it's becoming quite a problem. And obviously, there's a very sweet spot. Therefore, if I can resolve that issue, there's a massive marketplace for products such as TDI. Kurt Mueffelmann: Yes. I mean you look at that, right? We were on with an investor the other day, and they're like, "Oh, you're making a shift from data-centric security over to AI." And I said, "Well, they're really coupled together" because I think as organizations scale towards AI, the requirement is really shifting from that visibility to real-time policy enforcement. So we're going from data-centric or data security policy orchestration and leveraging that into AI. We're ensuring the right data is used by the right user, the right model, the right agent, and we're doing that by design. So I think it's a nice segue into, again, as we talk about valuations within business and we talk about that kind of the chart about decoupling where AI can go and coupling back -- that back into the archTIS message around data-centric or data security policy orchestration and how we leverage across AI. So if we start to look -- sorry, I double hit there by mistake. As we start to look about that, Dan, where do you see that? Because we talked that last time a little bit around the control plane where archTIS enables organizations to scale safely by delivering that single policy? Chun Leung Lai: Well, again, it all comes down to context, and that's the biggest issue that people are trying to solve today. And it comes down to, as I mentioned before, that hybrid environment and having transparency about being able to govern all of those components together. AI cannot work in isolation to the rest of the organization, to the people that have to interface with it, to the other machines that have to interface to it. Having a single place that you can control and govern that information and put your rules in about how that information will be retrieved and in what context it will be released and how it will be released, how it can be used, becomes very much an incentive for all organizations to know that they've got a single point where they can control that. And again, we've talked about this. We're not here to compete against everybody. We're here to enable that to happen through security and governance of those services and of that data. And really, that becomes something where we have an opportunity to do that. And one of the early use cases, I might just add, for when we looked at Direktiv was -- and I think I've mentioned this use case before, was Viasat, which have all the U.S. deployments for satellite contracts. Now a young fellow there at Viasat puts some coding to be checked by ChatGPT and caused a data spill. So how do I use -- get the benefits of that AI and -- but also not publish -- know where that information gets published? I want to control where that information gets published. And in that particular case, Direktiv was used to intercept that and transfer that information to a secure place that it wasn't publicly available or be able to be reused by other users on that ChatGPT tool. And that's really where we're heading. As this gets adopted and Agentic AI really comes into it, we're going to see this -- the environments become more and more complex, which means they need a central place, which can interface into all of those aspects and be controlled through a single policy. That is what the purpose of the control plan is. Kurt Mueffelmann: Yes. I mean we're providing that execution level control, ensuring that every interaction, output, everything that is going through is critically related to the governance guidelines of an organization. So we're not actually being the AI, but we're being that layer above. So we don't have to tie into specific engines. We're actually being that layer across all models and providers, really providing that security across that multimodal AI adoption, which we're really looking to play. So we really become that additional layer from a governance or that control plane that we drive. And that starts to lead us into kind of where we see the strategic differences and next steps where we think we can be that competitive differentiation around preventive control versus post-event, that data level enforcement, not just at the app layer that Dan talked about, become that neutral aspect or become Switzerland of where we can go from that neutrality standpoint. And Dan, talk a little bit about where we see the market opportunity through the growth vectors themselves? Chun Leung Lai: Yes. Look, really, this is part of that land and expand. Customers already have made heavy investments in things like DLP management, data loss prevention, in this case, identities, Microsoft. And it's about connecting those things together so that they get full transparency in a single point of control. Large-scale defense programs out there, they're also trying to integrate and do interoperability. We've seen declarations from -- recently from the Japanese Ministry of Defense about deploying air service missiles on islands and these sort of things, but they can't work in isolation. They have to work with their allies and share that information. NATO is an excellent example of that, what they're trying to achieve and the U.S. DoD through the Five Eyes and AUKUS are 2 other examples of how do they do that. And then, of course, the supply chain for nuclear submarines, et cetera, they're all perfect examples of how we're doing this. But all of them are trying to adopt AI in all of these different areas to, again, increase productivity, do more with less, get more accurate results. And the thing that's stopping them is how do we do that securely. And that's where we see the opportunities really in this space. It's about integration and solving the integration and interoperability problem and playing that layer. And I think that, that's a niche where out of the 4,500 vendors, we are certainly in the lead on, we're certainly getting acknowledged, and we're certainly getting referenceability, and I think that that's what's really exciting. It doesn't change what we have to do today in the short-term. We have to win with the products we've got and win big awards and grow them from expanding to solve that strategic problem with them as we develop the platform out. And that brings us to our 3 horizons of growth, and you can talk through that, Kurt. Kurt Mueffelmann: Yes. [indiscernible] The AI doesn't change the model, right? We still have the strategy that we're going forward with. It just adds another layer of what we believe we can differentiate and bring them to market. And so when we talk about the 3 horizons over the 6 to 18-month time line that we look at, where we have to deliver today. We have to deliver consistent earnings through stronger ARR, controlled operating expenses and what have you, right? And so we've talked already about the left-hand side of [ EU ], where are we updating across the U.S. DoD. We talked about the recent win for 2,500 users, which is just a small component of a major U.S.-European military alliance. That reassurance of -- kind of resurgence, I should say, of Australian DoD that we're seeing with a number of real pipeline opportunities, and we know pipeline opportunities in Australia are generally seasonality, which is Q3, Q4, which is now until June. That's where they've always fallen historically. Again, we're going up to see Microsoft on Monday. And Spirion we're seeing some really strong cross-sell opportunities, not only in defense, but we're actually seeing it the other way where the Spirion enterprises are actually coming to us and saying, "All right, now that we've identified our data for Spirion, how do we push NC Protect and how do we enforce that data?" And so really trying to defend and extend that base across where we are today and drive that. And that carries us into -- Dan, take us through horizons 2 and 3? Chun Leung Lai: Horizon 2 and 3 are really about having that TDI function, all of those other services such as Spirion. When do I go out and do the discovery now? What do I do with it? I'll automate NC Protect coming in and protecting that. I'll take that and I need to set up an instant in Teams where only certain people can access that and I need to validate who's accessing that. It starts to become very automated, very machine-driven. And I might need some AI technology in there that's going to be doing certain services or repositioning captured data and regenerating that into a different view, context. Who can see that? Why can they see that? Where can they see that? And suddenly, you're starting to see that full picture. Finally, when we get all of that integrated completely, and we are building in other people's services such as BigID, Varonis, Microsoft, AWSs, when we can start to link all of those things together, you've got a platform which we're calling DSPO, and that can completely disrupt the market because what we then do is have all of those other providers' customer list is our potential customers. And that's where you get that real hyper growth based off the credibility that you've done in Horizon 1, the expansion of that strategic opportunity through the platform development in Horizon 2 and complete disruption in Horizon 3, where you start to own a particular niche market, which is being supported by all of the big guns out there. So that's really the nuts and bolts of that strategy. And I think you're starting to see now why we've done what we've done in terms of those acquisitions, why we see that data-centric security life cycle is being so important, and how that fits in and that IA isn't a threat. It's a genuine opportunity. Kurt Mueffelmann: Great. Why don't we -- and as we look at a couple of questions, I know that -- a couple of questions already in here are around kind of, with the market consolidating, are you likely to generate takeover offers? And what are your thoughts around that in the business itself? Chun Leung Lai: Great question. We're a publicly listed company. Obviously, if there's takeover offers, we have to consider them all and what's in the best interest of shareholders. Look, there is a huge amount of consolidation activity going on. We're not blind to that. We watch it very carefully. We obviously have plans, and we obviously have models that we look at where we think we're going to maximize shareholder value, but also what we think our potential is in the marketplace. But we need the offers. We will look at that forward to getting those offers, but I think that will be off the back more announcements of success and demonstrating a few more validation points in our strategy that we're executing. And if we do that, I have no doubts that we will be an attractive target to other large providers out there. Is that what's best for the company? We'll make those calls when we actually get those offers, but any offers, we may have to take seriously. Kurt Mueffelmann: Yes. Listen, the market is consolidating out there very aggressively, right? We have to do what's right for the shareholders. But as we've shown through the acquisition of Direktiv as well as Spirion, we're not afraid to go and punch above our weight and go make further acquisitions if it fits what we need to do and it fits in the best interest of the shareholders going forward. Listen, Direktiv has brought us TDI, which we think is going to be really driving where the AI next stage goes. And Spirion is bringing us some fabulous ARR, which is scalability. It's bringing us that U.S. presence. Now that we're tearing the cost through it a little bit and blowing out the operating expenses, it's going to start to drive cash that will drive us into more investment in other areas within the business, whether it's additional product, whether it's additional marketing or what have you. So I think we're pushing the right buttons, and we're not afraid to make those acquisition decisions on both sides of the fence. Dan, so the next question -- I love this one because it's -- we talk about this all the time. With the DoD opportunity -- I'll boil it down -- is the delay technical, budget or bureaucratic? Chun Leung Lai: Technical, budget or bureaucratic. It's a great question. Kurt Mueffelmann: How's D, all of the above? Chun Leung Lai: All of the above. Look, let me put some some of these aside. It's not budget. I think we've confirmed that the budget is there and it's -- that they've already budgeted for this, which is a definite sign of intent, isn't it? It is bureaucratic. It's not so much technical, but we do keep coming across some technical things. And again, that's because the different -- there are different environments where this is being tested. When we talk about co-command is that co-command is very different to the central agency, which we're putting in and there's tweaks and those sorts of things. But I don't think there's any major technical obstacles. In fact, I think we've resolved most of those things through that piece of work that we did in terms of software configuration development and interoperability. It's really now just going through the hoops, getting through the process, and that's what's exciting to us. Kurt Mueffelmann: Great. There's a couple of questions on the CBA credit facility and a little bit of, I guess, confusion around where that relates to the Regal that we announced at the end of last quarter as well and what the relationship between that is? Chun Leung Lai: Obviously, with some of these delays, we want to make sure that we can continue to execute the strategy that we -- and with the momentum and accelerate that momentum. So we need to make sure that the business is well financed. We looked at the share price. We looked at -- we have other options to go-to-market to raise capital. We thought it was in the best interest of shareholders not to do that, that we should look at some debt facilities to get out of those bumps and little hurdles and delays. So we looked at debt facilities instead of going out to the market to raise capital, which was the objective of all of this. We looked at Regal. We already had established fund with CBA. We've got both available to us at this point in time. Now that we've actually completed and signed the CBA, we'll relook at the Regal facility as to whether or not we still need it. But at this point in time, we still have a terms of agreement signed. And if there's any changes to that, we'll make those announcements when they happen. Kurt Mueffelmann: Great. Yes. Why don't we grab one more? How does Varonis on-premise transition impact your bottom line? And how are we dealing with that as we move forward? Chun Leung Lai: Do you want to take that one? Kurt Mueffelmann: Yes, I think so. So we always look at Varonis, right? Varonis, we look at as -- we look at a couple of companies as the North Star companies, want to emulate, fabulous growth, fabulous story. They've done a nice job in the data security posture management. And they are looking to go towards an all-cloud offering. And so that leaves them with the on-premise of a major significant share point market, file shares, on-prem, kind of [indiscernible]. And so we've taken a proactive stance. We've gone and done some competitive positioning against them from a webinar standpoint, going out there, playing the -- these -- the keyword search and really trying to drive SEO and pushing that. So we're seeing some opportunities where people come to us and say, "Hey, we feel abandoned." That's fine. If that's their strategy to go 100% cloud, listen, great companies are going in that direction, and I applaud them for that. But we really look at being the ability to grab all types of data in a hybrid environment, whether it's on-prem, whether it's in Azure, whether it's on AWS, Google or what have you. So we want to really keep that flexibility around those technology formats and bases that we have. So I think we're positioning ourselves well. The NC Protect, the Spirion do really well in those on-prem, off-prem environments and in the cloud. So we feel we can handle all those opportunities that are out there today. So we feel really... Chun Leung Lai: I think it just validates our strategy. As these big companies move to consolidate their cost base and target on their markets with cloud-only solutions, it proves the point that the customers still exist in a hybrid world. And that opens up opportunities for us to do that value-add and extension from Varonis to working with their on-prem problems because they can't get off them quickly. They've got legacy systems. But it proves the point of the strategy that we're taking is a very viable strategy. Kurt Mueffelmann: Yes. Dan, why don't we hit one last question, and then I'll pick you up with some closing comments. Spirion, how is that delivering new opportunities for the business? And where do you see that going in the near and mid-term future? Chun Leung Lai: Yes. Look, Spirion is -- no, we acquired Spirion as a strategic acquisition to reposition the business into the U.S. Let me be frank about that. We see the opportunities with the U.S. DoD. We see that is creating not only accelerated revenue and increase in ARR, but also a reference point to also move into the commercial markets, to extend our relationships with Microsoft into other military alliances partners, et cetera, et cetera. So we need to have a base there which can execute that and is in the U.S. to support that. That's really where the desire for taking on a data-centric security company in the U.S. came from. The software that, that [indiscernible] is an added bonus. We've talked about the discover, classify, enforced life cycle and [ governed ] life cycle of data-centric security. They give us that ability to do that discovery. So that's a beautiful segue. And a good example of that is, one of those opportunities we put up there about the shipbuilding yards is that they've got 44 terabytes of data that they don't know how they should protect it. Spirion is a perfect play to take into that organization and do that data discovery. So it fits in terms of the model of the customer problem that we're solving. The other thing that's really good about Spirion is they can do on-prem as well as in the cloud, and that's something we've just discussed in that Varonis example. So I think they're going to add a lot to us. And of course, the final statement there is they've got 150 customers that are already investing in data-centric security, which we can cross and upsell to. And we are providing incentives to those customers to do that as quickly as possible. And we are discovering opportunities that -- not opportunities that are going to turnover in 6 weeks. So there's a bit of work there to get that machine humming. But I think we can do that, and I think we can successfully do that. We've done the cultural integration. We've done the systems integration. Now we need to get into that sales and really start to drive that pipeline growth. So I'm excited by the opportunity. It's an important acquisition, and I think it will pay its dividends, but it's just a matter of time to make sure that we get it right. Kurt Mueffelmann: Yes. I would just add, I was up in Tampa earlier today meeting with Kevin Coppins and the team from Spirion. And you're starting to really see how it fits in. You're starting to see the adoption by the reps and bringing it into their sales pitch in the way that they can bring a fully integrated solution to market. It's just not a, hey, let's sell NC Protect or hey, let's sell Spirion. It's becoming this more integrated platform, which we talked about before. And you hear it on the sales calls. You hear it on the sales recordings that we listen to, for that. You hear it in the pipeline reports and what we're doing with forecast every week and where it goes. So I think you'll see more and more of that. And we're not going to be able to announce every deal, obviously, from the space we're in, but we're seeing good traction as we build the business through that. And I think it's a really good add of what we're doing. So Dan, with that, why don't we spend 2 or 3 minutes just wrapping up and summarizing up again the quarter? Chun Leung Lai: Yes. Look, to me, I think it's been a exciting half year. I think we're reasonably happy with the results. You can always do better, you can always do worse. But I think we are in a solid position to push the business growth forward over the next 6 months. And I think -- and I often say this, but I'm expecting a good 6 months ahead of us in terms of the business and the execution. There are a number of deals just hanging out there ready to drop. And I think that, that's going to really change the perspective of the company to our investment base. I think there's a lot of people out there waiting and watching. And I think when -- if we can execute a couple of strong deals, which -- more validation points in our strategic direction and our strategic plan, I think people will start to truly believe, and I think that we'll see that reflected in activity in the marketplace supporting the company. Kurt Mueffelmann: Excellent. Great. Well, thank you very much. And I'd like to thank everybody for your time. Enjoy the weekend. If there are further questions as you move forward through the financials and through the half year results, please feel free to hit us up at investor@archtis.com, and we'll do our best to answer as many questions as possibly as we can within the parameters set by the ASX. So enjoy the weekend, and thank you very much for your time. Take care. Chun Leung Lai: Thank you, everyone.
Julia Fernandez: Hello, everyone, and welcome to the VTEX Earnings Conference Call for the quarter ended December 31, 2025. I'm Julia Vater Fernandez, VP of Investor Relations for VTEX. Our senior executives presenting today are Geraldo Thomaz Jr., Founder and Co-CEO; and Ricardo Camatta Sodre, Chief Financial Officer. Additionally, Mariano Gomide de Faria, Founder and Co-CEO; and Andre Spolidoro, Chief Strategy Officer, will be available during today's Q&A session. I would like to remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the current available information, you are cautioned not to place undue reliance on these forward-looking statements. Certain risks and uncertainties are described under Risk Factors and Forward-Looking Statements sections of VTEX's Form 20-F for the year ended December 31, 2025, and other VTEX filings within the U.S. Securities and Exchange Commission, which are available on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we might discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our fourth quarter 2025 earnings press release available on our Investor Relations website. With that, I hand the call over to Geraldo. Geraldo, the floor is yours. Geraldo do Carmo Thomaz: Thank you, Julia, and good afternoon, everyone. Thank you for joining us today. Today's call is primarily about giving shareholder transparency into how we're positioning VTEX to strengthen growth over time. Let me start by acknowledging that our recent growth has been below our long-term ambition. We believe that this is largely cyclical, not structural, driven primarily by 3 external factors: a more challenging macro environment in Brazil and Argentina; and a more promotional marketplace environment in Brazil; and longer decision cycles as enterprises reassess its priorities in a rapidly evolving AI landscape. More broadly, we recognize the market debate around AI and what it means for software. Although the combination of rapid AI innovation with limited tangible commerce applications so far may elongate sales cycle, the consistent view from our conversations with enterprise CIOs is that AI will change how software is built and operated, but it won't eliminate the need for deeply integrated enterprise-grade platforms that run mission-critical processes. And while AI lowers the cost of writing code, it raises the bar for security, complex integrations and reliability, precisely the attributes enterprises rely on VTEX to provide and consistent with broadly stable dollar churn we delivered in 2025. As value shifts from seat-based to outcome-based, VTEX is certainly aligned with this shift. We are not just building AI features. We're building the mission-critical backbone for connected commerce that global brands can rely on to deploy AI safely and effectively. We could dive deeper into each of 3 external factors mentioned. But as we cannot control the environment, let's focus on what we can control, our execution and product road map. Starting on that, we see a clear opportunity to improve growth with a plan anchored in 4 levers: global expansion, B2B, retail media, and AI. While we execute this growth plan, our enterprise focus remains front and center. In 2025, customers generating over $250,000 in ARR reached 158 with revenue from this cohort up 13% year-over-year. And to illustrate the relevance of our plan, in Q4, our 4 growth levers represented roughly 15% of subscription revenue, delivering approximately 20% FX-neutral growth and contributing to nearly half of subscription revenue growth. The addressable market for these levers is materially larger than our core Latin American opportunity, and we believe we are well-positioned competitively. So our focus now is disciplined execution. With that, let me bring our 4 growth levers to life. First, global expansion. We're winning and scaling in markets where complexity is highest. In 2025, global markets delivered 22% subscription revenue growth. For instance, in Europe, our partnership with Manchester City reached its first milestone with the stadium tour store, offering personalized fan experiences and a single high-performance flow. Second, B2B. We're modernizing large enterprises by delivering complex capability that are AI-ready and composable by design, such as contract pricing, curated catalogs, punch out and omnichannel fulfillment. Mondelez launched B2B in Brazil on VTEX, extending a multi-region footprint. While we're still early in the mix, B2B demand in the U.S. and Europe signals a durable shift, one we are now driving to digitalize across Latin America as well. Third, retail media. 2025 was a turning point. We moved from pilots to a core growth engine with clear margin-accretive outcomes. With VTEX ads, customers run on-site, off-site and in-store campaigns and measure them end-to-end through closed-loop attribution anchored in first-party data. The retail media market evolution plays directly to our integrated model. Enterprise retailers monetize traffic they already own, brands gain performance media tied to transactions and both parties see results in a single source of truth. For example, Essity achieved a 39% increase in average conversion rate on average enrollers of above 17x and consistent month-over-month acceleration in sales driven by retail media performance, demonstrating the power of data-driven campaigns to elevate brand performance in digital retail environments. Finally, AI. Our work here spans 2 dimensions. First, our product. We're redesigning VTEX with an AI-first approach. For example, leading Brazilian retailers like Americanas and C&A are using Weni by VTEX to automate high-volume support journeys with deep enterprise integrations such as orders, invoice and CRM, reducing manual ticketing, speeding resolution and improving customer satisfaction. Beyond Weni by VTEX, we see AI reshaping how commerce is built, operated and optimized. We're embedding intelligence across the platform while simultaneously rethinking how we build commerce and run the company. Our multi-tenant architecture and role as a mission-critical commerce data aggregator give us advantages that point solutions, and legacy platforms can't easily replicate. Second, our own operations. AI is already showing up results. Automation and support has expanded gross margins by approximately 3 percentage points. And in December, we implemented a reorganization in sales and marketing that impacted almost 100 headcounts. This move simplified management layers and centralized our global team for greater agility and efficiency. As we embrace an AI-first operating model, we are aligning our organizations to operate with increased speed, consistency and technical depth. In summary, we chose structural transformation over incremental steps. Despite a challenging environment, disciplined execution and already identified productivity gains support continued improvement in profitability and enable increased R&D investments that drive our AI transformation and deepen our value with top-tier customers. We're evolving VTEX from a platform that powers commerce to a multiproduct company, AI-first platform that increasingly automates and orchestrated. We will keep executing behind this plan, expanding with existing customers as they scale on VTEX and adding more enterprises to the mix. So, these 4 growth levers translate into sustained compounding growth. With that and moving to the fourth quarter of 2025, we added new enterprise customers, including Atacado Vila Nova, Lofty Style, Luz da Lua and TCL in Brazil, Mercacentro in Colombia, Pharmacy's and Cruz Azul in Ecuador, Llantas Avante and T-fal in Mexico. We also saw expansion activity within our existing customer base, such as EssilorLuxottica, launched 2 new brands in Brazil, eOtica and E-Lens, adding to its existing portfolio of stores. Impresistem launched their B2B website in Colombia, adding to its B2C operation running on VTEX. Mondelez launched a B2B operation in Brazil, expanding its VTEX footprint ranging from Latin America to Europe. OBI, who expanded to Italy, adding to its operation in Germany and Austria. And Whirlpool launched KitchenAid in Canada, building on its successful store launch in the U.S., while continuing our global relationship in over 20 countries. Even in a softer macro environment, customers continue to choose VTEX to support strategic initiatives involving new channels, new geographies and more complex operating models. Now before I hand over the call to Ricardo, I would like to express my sincere gratitude to our 1,139 VTEX employees whose dedication and adaptability were critical. I also would like to thank you, customers, partners and investors for their trust and support. Ricardo, over to you. Ricardo Sodre: Thank you, Geraldo, and hello, everyone. I will now walk you through our financial performance for the fourth quarter and the full year of 2025. Before going into the details, I'd like to frame the year in context. As mentioned by Geraldo, while the external environment pressured our customers' GMV growth and lengthened enterprise decision cycles, 2025 demonstrated the resilience of our business model and the strengthen of our unit economics. As evidenced, we continue to drive efficiency gains and deliver record profitability even in a slower growth environment. In the fourth quarter of 2025, our GMV reached $6.3 billion, representing a year-over-year growth of 17.2% in U.S. dollars and 10.0% in FX-neutral. For the full year, GMV reached $20.5 billion, up 12.1% in U.S. dollars and 12.9% in FX-neutral. Subscription revenue reached $66.7 million in the fourth quarter, representing a growth of 12.2% year-over-year in U.S. dollars and 5.4% in FX-neutral. For the full year, subscription revenue reached $234.9 million, growing 7.9% in U.S. dollars and 9.5% in FX-neutral. Turning to revenue retention. In 2025, subscription revenue from existing stores reached $194 million, and our net revenue retention was 99.5% in FX-neutral. Annual dollar churn remained broadly stable year-over-year. However, given that roughly 60% of our revenue come from a take rate on our customers' GMV, the decline in net revenue retention compared to 2024 was primarily driven by lower same-store sales growth of 6.8% in FX-neutral in 2025. This lower same-store sales growth reflected continued softness in Argentina and more muted consumer spending in Brazil, which weakened over the course of the year. A key highlight for the year was the continued improvement in the profitability of our existing stores. Existing stores gross margin increased from 80% in 2024 to 82% in 2025, while operating margin reached 44%, representing a 1 percentage point increase year-over-year. This marks the second consecutive year in which this P&L exceeded the Rule of 40, reinforcing our confidence in sustaining a Rule of 40 performance as the business scales. Moving on to subscription revenue addition. In 2025, new stores added $25 million to our base, representing approximately 13% of our 2024 VTEX platform revenue. As discussed in prior quarters, elongated sales cycles throughout the year impacted revenue added from new stores and will carry over some impact in 2026. On the new stores P&L, our focus remains on maintaining a healthy return on the capital allocated to sales and marketing. On that front, LTV over CAC reached approximately 4x in 2025. The year-over-year decline in this metric was primarily driven by longer sales cycles and timing rather than changes in win rates or the underlying attractiveness of the cohort. In fact, our continued enterprise focus drove our number of customers generating over $250,000 in ARR to reach 158 customers in 2025. While this represents only 1.9% increase in customer count, it resulted in 14.5% FX-neutral revenue increase from this cohort. Looking forward, as mentioned by Geraldo, we adjusted our sales and marketing investments, and we are reallocating capital towards R&D investments to enhance key product offerings such as B2B, retail media and AI-powered aftersales support. From a geographic perspective, Brazil subscription revenue grew 12.2% in FX-neutral, supported by the go-live and ramp-up of new stores despite softer same-store sales. Latin America, excluding Brazil, grew 2.1% in FX-neutral. And excluding Argentina, the region grew just slightly below Brazil's pace. Subscription revenue from global markets, formerly reported as Rest of the World grew 19.2% in FX-neutral, demonstrating continued compounding even as the base expands. Additionally, global markets represented 11.1% of our total revenue. Its contribution margin, defined as gross profit minus directly allocated sales and marketing expenses, improved significantly and approached breakeven. Moving down the P&L. We maintained strong cost and expense discipline while continuing to prioritize investments aimed at supporting revenue reacceleration. All figures I will now reference are non-GAAP unless otherwise stated. You can find all GAAP to non-GAAP reconciliations on our Investor Relations website. Subscription gross profit reached $54.6 million in the fourth quarter, resulting in 81.8% subscription gross margin, up from 78.8% in the same period of the prior year. Total gross margin increased to 79.6% compared to 75.0% in the fourth quarter of 2024, driven largely by AI-powered customer support automation and to a smaller extent, a higher mix of subscription revenue. Operating expenses totaled $38 million in the fourth quarter, resulting in income from operations of $16.2 million and an operating margin of 23.8%, up from 19.9% in the same period of last year. During the quarter, we executed a reorganization in the sales and marketing to simplify layers, centralized global teams to better leverage AI as well as align investments with the expected demand. These actions resulted in approximately $2 million severance expense above normalized level. Excluding that one-off impact, operating margin would have been just under 27%. Free cash flow reached $11.1 million in the quarter, representing a 16.3% margin. Adjusted for one-off severance payments above normalized levels, free cash flow margin would have been just over 19%. Considering this level of cash generation and our current cash position as a percentage of our market cap, we are announcing a new $50 million 12-month share repurchase program for Class A shares. Looking ahead into 2026, as Geraldo highlighted at the beginning of the call, we remain focused on our 4 growth levers, global expansion, B2B, retail media and AI. We are executing with discipline. The productivity we have unlocked across cost of revenue, sales and marketing and G&A are expanding profitability while funding higher R&D to accelerate our AI transformation and deepen our value with top-tier customers. While macro headwinds persist, we remain encouraged by the quality of new customer additions, our competitive position among global enterprise customers and the compelling market opportunity across our 4 key long-term growth initiatives. With that, and recognizing that Q1 seasonality is our lowest GMV quarter and faces the toughest year-over-year comparison for Q1 2026, we expect subscription revenue to grow at mid-single-digit percentage rate on an FX-neutral year-over-year basis. Gross profit to grow at a high single-digit percentage rate on an FX-neutral year-over-year basis. Non-GAAP income from operations to be in the mid-teens' percentage margin and free cash flow to be in the high teens percentage margin. For the full year 2026, we are targeting subscription revenue to grow at mid- to high single-digit percentage rate on an FX-neutral year-over-year basis, gross profit to grow at a high single-digit to low teens percentage rate on an FX-neutral year-over-year basis. Non-GAAP income from operations to be in the low 20s percentage margin and free cash flow to be in the low 20s percentage margin. Assuming FX rates remain broadly consistent with January 2026 averages, the FX-neutral growth guidance outlined above would translate into higher reported USD subscription revenue growth, adding approximately 8.4 percentage points in the first quarter and 4.5 percentage points in the full year 2026. Before we open to Q&A, I would like to reiterate, we are executing with discipline, investing behind our 4 growth levers to drive durable growth and shareholder value and expanding profitability while maintaining a strong balance sheet. With that, let's open it up for questions now. Thank you. Operator: [Operator Instructions] Our first question comes from the line of [indiscernible] with JPMorgan. Unknown Analyst: I would like to explore a little bit the point of the sales cycle. So what I would like to understand is mainly if you see a turning point on this elongated sales cycle, I mean, from your conversations with CTOs and the industry players, what is the feedback that you are having regarding this point? And is there any market intelligence that you could share with us to help us understand when this could normalize? And what do you think is necessary to happen in the market to change the scenario? Is there something that you see as a turning point? And the second point that I would like to explore is the gross margin gains in the fourth quarter. Is it all coming from AI? Is there other elements that are helping you to bring this margin level up? Ricardo Sodre: Mariano will take the first question, and I can take the second one. Mariano? Mariano Gomide de Faria: Yes, I can take. So, make no mistake, what we were seeing is not a deterioration in competitiveness, but a clear elongation of sales cycle. 2024 was a record year for bookings. In 2025, we signed fewer new contracts. That's a fact. And RFP processes are taking longer to close. So, enterprise customers are simply taking more time to make platform decisions due to macro scenarios and uncertainty of AI future. The primary driver is what we call the AI wait-and-see effect. There is an enormous amount of discussions around how AI will reshape software. When companies are making a 5 to 10 years infrastructure decision with high switching costs, they want clarity. So, decisions are being delayed, sales cycles are being elongated. Importantly to mention is that our win rates remain stable. Our churns remain in the mid-single digits and is stable. And this is, in my opinion, a market-wide excitation, not a VTEX-specific issue. In response, we streamlined our sales and marketing organization to operate more efficient, leveraging all the new AI paradigm and capabilities. The productivity gains are being redirected into R&D, accelerating our AI road map and positioning VTEX an AI-first native platform for commerce enterprise companies. So yes, momentum is slower, and cycles are longer, but fundamentals remain strong. Sodre? Ricardo Sodre: Thanks, Mariano. On the second question on gross margin. As we mentioned in the prepared remarks, we gained roughly 3 percentage points in subscription gross margin this quarter, from 78.8% to 81.8%. And this is basically all AI-driven. So, just to recap over the past 3 years, we gained a lot of subscription gross margin. Over the first 2 years in this 3-year period was mostly driven by hosting optimizations and gains. Over the last 1 year, so during 2025, it was driven on the support function of our existing customers. And by automating the support using AI tools, we have managed to gain 3 percentage points in margin, and this is sustainable going forward as well. Operator: And our next question comes from the line of Lucca Brendim with Bank of America. Lucca Brendim: I have 2 on my side here. The first one, if you could comment a little bit on what you think are the main risks and also the main opportunities of AI that you see for the company, both in the short term, but also in the long term? And how do you think both sides will pan out in the long run? And also, second, if you could comment a little bit on capital allocation. You guys announced the new buyback program, which is very robust. So, how can we think about what VTEX plans to do with the cash generation that will be coming in the next years? Geraldo do Carmo Thomaz: So, thank you very much, Lucca, for the question. I am Geraldo, I'll answer that. So, first of all, like AI is not a feature that we create. It's a structural shift comparable to the move to the cloud that we did a decade ago and make us viable as a company. Our role in this transition is very clear to be the mission-critical orchestration layer of AI-driven commerce. AI is lowering the cost of writing code. Everybody is talking about it, but it's raising the bar for security integration and reliability. Global enterprise, they don't buy lines of code. They buy future-driven domain knowledge packaged around security and reliability. They need a backbone that propels them for the future with resilience and security. As commerce fragments across AI agents, bots, and new interfaces, the front end becomes increasingly commoditized. But every transaction still needs a centralized system of records to validate inventory, manage price, and trigger fulfillment. That orchestration layer, the single source of true is where VTEX operates. We have a cloud-native multi-tenant architecture that give us access to billions of real-world commerce data points across a lot of verticals. That deterministic data is a strategic asset for training proprietary models, something similar that are on legacy platform that they cannot replicate. In our own operations, Sodre and Mariano talked about this already, we're seeing a lot of tangible impact. So, I would say, Lucca, that the risk is that for us and for any other software company is that we don't embrace and adopt the revolution, the technological revolution. But if we do a software company that goes to this technological shift, they will be stronger, not weaker. And we are working very hard to get there with the strength that we already got from a lot of years from now, which is the credibility, the security, the customer base, the proprietary data, I think there's a lot of room for us to use and leverage the AI revolution. Ricardo Sodre: And on the capital allocation, Lucca, so our capital allocation is guided by a simple principle. We prioritize long-term value creation while maintaining the flexibility to navigate a dynamic macro environment. So, we are operating from a position of significant financial strength. As our year-end 2025, we held roughly $200 million in cash. So, this robust position, combined with our consistent free cash flow generation allow us to announce a new $50 million 12-month share repurchase program that you just mentioned. So, we view buybacks as a disciplined tool to optimize our capital structure and importantly, to mitigate dilution from our share-based compensation program. While organic growth remains our primary focus, and we talked a lot in the prepared remarks about how we plan to reaccelerate the organic growth, and we are investing more in R&D to boost our AI transformation and strengthen our main key growth pillars. We are also strategically active in the M&A market. More recently, our approach has been about acquiring capabilities that accelerates our product road map to enhance the platform differentiation. So, you've seen this recently with the Weni acquisition, which strengthened our Agentic CX product and Newtail, which accelerated our retail media capabilities. So, our capital allocation remains anchored in discipline ROI and long-term view for the shareholders. Operator: And your next question comes from the line of Rafael Oliveira with UBS. Rafael Oliveira: I got 2 questions here on my side. So first, I want to start here by asking what are the main drivers that could drive revenue growth back to double digits in the next few years? If you could disclose any regional breakdown on the current macro backdrop would be very helpful. And the second question would be, how is the B2B pipeline evolving, both in terms of size and quality? And again, any color on the global expansion of B2B will be very helpful. Geraldo do Carmo Thomaz: Good. I'll get that. So to address the path forward, like we know, as I said in the first remarks, we're not satisfied and we think that we have a lot of more bandwidth to deal with more complex problems to reaccelerate the comp to initiate other -- to start other initiatives that will make the company accelerate and go back to the growth we were used to. So, first of all, we need to distinguish between what is cyclical and what is structural. While our Q4 of 2025 subscription revenue growth of 5.4% FX-neutral reflect a cyclical slowdown, mostly driven by macro softness in Brazil and Argentina and also an unusually promotional marketplace environment our structural foundations have never been stronger in my opinion. We have deliberately evolved VTEX into a multiproduct company, AI-driven commerce platform, and we are now seeing double-digit growth momentum across 4 levers that will power our next phase. And I'll try to give some picture on these 4 levers. So, first of all is the global expansion. Our markets in the U.S. and Europe delivered 22% subscription revenue growth in 2025. These operations are now approaching breakeven contribution margins and are becoming largely self-funded. Second is B2B commerce. This is a natural extension of our platform that effectively doubles our addressable market in our opinion, roughly half of our new deals in the U.S. and EMEA are now B2B related as enterprise migrate from outdated 20 years old legacy system to a modern architecture. The third one is retail media. We moved from a pilot to a core engine this year by enabling retailers to monetize their digital traffic, capturing ad revenue that represents 3% to 8% of GMV for marketplaces. We're creating a high-margin accretive revenue streams for our customers and for VTEX. The fourth one is the AI-first approach. AI is already delivering measurable outcomes such as the 3 percentage point expansion on the gross margin that we talked about, but we'll also reinvest these productivity gains back into R&D to lead the transition to our AI workspace and vision products that can be transformational to our customers. For the full year of 2026, as comps ease throughout the year, we anticipate a trajectory of gradual acceleration with the expectation that we will exit the year at a faster pace than we entered. While we recognize there are external factors that we do not control such as the interest rate cycles, the consumption cadence, the broader market volatility, we believe we have the right tools to help our customers reaccelerate their same-store sales and reinvigorate our own sales funnel. So, we're staying the course, executing with discipline and positioning the tax as the backbone for the next era of connected commerce. All of that while delivering record profitability, as you noticed. Mariano Gomide de Faria: Okay. About the B2B, can you -- if I'm not answering correctly, but can you please repeat the B2B question, if I misunderstand. But just an overall perspective on B2B. VTEX is a company that has 3 products and multiple solutions. The products are commerce platform, Retail Media platform and Agentic CX platform. And we do support with those 3 products, multiple solutions, omnichannel B2C, B2B commerce, advertising, retail media for advertisers, retail media for publishers. About B2B, we are seeing that B2B is getting traction. Something that we call an acceleration phase, each in deploys and pipeline generation. Our commerce platform product delivers multiple solutions, specialist in B2B, showing great momentum. So, in fact, something that we can share is roughly half of our deals in the U.S. and EMEA are now B2B related. So that effectively doubles our addressable market within the enterprise tier. If I don't -- if I didn't answer what you wanted about B2B, please let me know. Rafael Oliveira: No, it was super clear. I was just asking about how the B2B pipeline is evolving, but thanks for the color. If I may do just a follow-up here on the AI team. How are you guys seeing the development of these new AI tools from the large tech or LLM providers? Are you guys seeing some competitive pressure? And if you guys could comment about agentic e-commerce and how this should be maybe beneficial for the B2C platforms? Geraldo do Carmo Thomaz: I think every one of us are very impressed with the velocity of this evolution and eventually are getting to conclusions that are maybe faster than we should have. I don't -- I see that this AI company, they are very powerful. They are doing a lot of nice work, a lot of aggregated value, but they're also enabling companies like us to deliver even better software, just like the cloud revolution, they are enabling us to build much better software. And if we embrace that technology, if we embrace the APIs that they provide to us, I believe that companies like us can provide to the retailers and brands, and manufacturers a better solution than they could do it alone. Why? Because these are high-risk workflows. These are problems that are difficult to articulate. These are problems that require more than building software. This requires credibility, as I said, security, compliance, and trust. And I believe we're better positioned as a domain application to provide the solution to our customers than the generic ones. This was always true. We always believed that in every revolution, when open-source code arrived, we believed that when everybody thought open-source code would dominate the world, and we are here selling software, selling subscriptions. When the cloud revolution came, everybody thought that people would internalize their software because now it's so easy to deploy a server and software industry, and VTEX is much bigger because of the cloud revolution, not despite that. And now I believe that the AI revolution will give us even more strength to deliver even more value to our customers. Mariano Gomide de Faria: And just adding up on Geraldo's comments here. If the question on LLMs were about the kind of monopoly on traffic control that can generate the way we see the world of traffic, we used to be controlled by Meta, Google, and a few marketplaces. And now with new entrants like Chinese brands becomes a huge traffic controller, OpenAI, with the LLM like cracking the code of becoming a huge aggregator. Actually, we are seeing more fragmentation in the traffic industry. So, when the traffic layers fragment, the backbone for a multichannel operation increases value. WhatsApp in LatAm, for example, is a huge traffic originator. So, the world is evolving in creating more channels and not more consolidation of channels. We see it as a foundation for strengthening the positioning of anyone in the backbone for the commerce market as we are. Geraldo do Carmo Thomaz: We talk about that in our founder's letter on this annual earnings report. I think it's worth it to take a look at our perspective on how this revolution affects us and the market in general. Operator: And our final question comes from the line of Maddie Schrage with KeyBanc Capital Markets. Madison Schrage: Obviously, you guys called out some macro headwinds, but also we're emphasizing global expansion as a key growth lever. So, how are you thinking about the pace and prioritization of geographic investments? And then, in particular, as you guys move faster internationally, what do you think is the biggest factor in terms of gaining traction? Was it brand awareness, maybe partnerships, or product localization? Is there something we should call out? Mariano Gomide de Faria: Perfect. I can give some color, and Geraldo can give as well. We cannot avoid to understand that a company that will leverage the most of the AI revolution is the company that can group competencies under org charts. So recently, precisely in December, we changed a lot of our regional approaches by having the same competencies of people below different managers in many regions in the world, countries, and regions. We understood that we need to bring them more in specialization, like a functional-oriented org chart. So we announced a big reorg on the growth structure, where now a majority of the sales and marketing organizations are oriented by functions. And with that, we can leverage most of the AI agentic revolution. The agents are unified by knowledge. What we are seeing, VTEX has reached the level of a brand by being recognized on Gartner for 2 consecutive years as the customer choice in the Gartner voice. The brand of VTEX was able to produce clients in all the regions. And now with the globally oriented by function org chart, we can deliver through our ecosystem services and solutions among any kind of regional definition. We believe the company that will crack the code on really using AI in favor of operational gains will be the one with a global readiness by joining human plus agentic labor. And so, the regional approach lost importance for us. This doesn't mean that the regional localization, is less. It's quite the opposite. We reduced our solution architect layer of FTEs, increasing the trust we do have in our ecosystem. That's a sign of the maturity of our ecosystem in the world. We are delivering global projects in Abu Dhabi, in Asia, in EMEA, in Africa, in North America, in LatAm. And now we are doing this through the ecosystem. That is a transition coming from the last 5 years. So, we are not seeing any more the go-to-market of VTEX heavily or kind of exclusively based on regions. Now we are defining our scope to the world that is 3 products commerce platform, a Retail Media platform, and Agentic CX platform with multiple solutions. The 2 the biggest solutions are B2B commerce and omnichannel B2C. Madison Schrage: Super helpful. And if I could just ask 1 follow-up. In your conversations with CIOs and digital leaders, how often are you guys talking about discoverability in the age of agentic commerce and conversion? Mariano Gomide de Faria: The AI, agentic, is a kind of top-notch topic in any RFP today, right? What VTEX is really focused is to deliver the value aggregation of the disruption in technology. Talking about the technology itself doesn't aggregate outcomes to our customers. But with the Agentic CX platform of VTEX, we have already deployed clients that have saved 80% in the customer service costs. This is AI for us. AI is a median to deliver the outcome that our clients need. And our clients all over the world, they trust us to future-proof them in terms of AI. So, the AI bet of VTEX is pretty big. It's all across all our products and solutions. But the one that I would say, that is delivering the most results, it is our solution of agentic customer service based on our product of Agentic CX platform. Operator: There are no further questions at this time. I will now turn the call back over to Geraldo Thomaz for closing remarks. Geraldo? Geraldo do Carmo Thomaz: Before we conclude, I want to step back once more and reflect on where VTEX stands today. 2025 tested the market, our customers, and our industry, but it also reaffirmed the strength of our foundation. We navigated a challenging environment to deliver record profitability while deepening our relevance with enterprise customers. Crucially, we did this while increasing our investment in R&D to accelerate our AI transformation. As we look ahead, our focus is on execution. As discussed, we remain focused on our 4 growth levers, global expansion, B2B, retail media, and AI. We believe VTEX is structurally aligned with where enterprise commerce is going, and that alignment positioned us to improve growth over time as these initiatives scale. Finally, I want to thank our employees, customers, partners, and investors for their continued trust. VTEX has been built over decades by navigating moments of transition, just like [Technical Difficulty]. Our history shows that our willingness to adapt early and invest with discipline creates durable value over time. We entered the next chapter with clarity, resiliency, and confidence in our ability to deliver long-term growth and profitability. Thank you for joining us today, and we look forward to updating you in our progress in the quarters ahead. Operator: That concludes today's call. You may now disconnect.
Operator: Good day, and welcome to the Bubs Australia Limited Half Year '26 Results. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Joe Coote, CEO, to begin the conference. Joe, over to you. Joe Coote: Thank you very much, and good morning, everybody. We're here this morning to talk about our half 1 F'26 results. If we could tab, please. And if we could tab again, please. So just as we get started at Bubs, we acknowledge the traditional custodians of the lands on which we operate. We pay our respects to Elders, past and present. I'm Joe Coote, CEO at Bubs. I've been in my role now just 7 months. So very excited and proud to share with you our half 1 results. I'm joined here this morning by Naomi Verloop, our CFO. Tab, please. So this morning, we will take you through the headlines of our results. We'll update on our trading markets, then Naomi will take over and walk us through our financial results, and then we'll round out with a strategy update. Tab, please. Yes. So as I said, I'm very excited and proud of the team actually to report that we have exceeded our commitments in H1 of F'26. These results have been achieved through setting strategic clarity, focus on growth and then a lot of disciplined execution, particularly in relation to our stock rationing and our air freight. But overall, it's a great result. If I just headline through the main numbers, our revenue was $55.5 million, which was up 14% from prior year. There is a heavy weighting of the U.S. market, which quarter-over-quarter grew -- sorry, half-over-half grew 48%. Our gross profit exceeded our guidance at 48%. Underlying EBITDA pleasingly was $4.4 million positive, which on a comp basis cycles off a negative 0.7%. So we're very happy with that. And then those factors together draw us to today share an upgraded outlook for F'26. So Naomi will share that later. But we're feeling very positive about these results and through the balance of the year. A couple of other highlights just as we get started. We have now moved from strategy development into strategy deployment. And so it's very pleasing to share that we have now got a number of initiatives that are rolling forward, and I'll share some of the outcomes that we've delivered at the back end of this presentation. One of the core things we're focused on is building a high-performing culture. We've done quite a lot of work on this in the half. We've got a group of people now very motivated and committed. We have very clear accountabilities focused around executing in the day and also building a stronger business in the future through deploying strategic initiatives. Over the half, we've made 5 leadership appointments, one of which myself. We've got a new leader from outside the business, leading our commercial business in the U.S.A. We've set up a Global Chief Marketing Officer, also based up in the U.S. We've also secured the gentleman, Chris Lotsaris, who is running the U.S. to come back to Australia, and he is running Australia and rest of world after having delivered great outcomes in his time in the U.S. And finally, we've brought on a leader of our Corporate Services Group. So there's a lot going on at the leadership level, but also more broadly, we have done our inaugural team engagement survey, and we're focused on working with the teams to deliver our high-performance outcomes. Finally, U.S. market access. We continue to make strong progress with the FDA. Interesting to note that overnight, one of our competitors in the U.S. has secured permanent access. And so that's a precedent that we believe stands us in good stead to continue our positive engagement. Tab, please. And then if we tab again, I'll start to talk about the markets. Just as we're getting started on our markets, it's just important to note that we live in a dynamic global environment. I think it's unprecedented in a lot of ways, certainly in the 30 years that I've been in business. And as we look at it, there's really 3 things that we feel are dynamics that are impacting our business. Firstly, the demographic forces. So in the mass market globally in infant formula, there are some negative impacts from declining birth rates. I would call out China as one example where the birth rate was down 17% and then the infant formula dollar sales are down 5%. But pleasingly, our business in China is growing. So we have a strong business model and a strong brand. The other thing to note in terms of demographics is that our consumers, we're very clear who they are. They're a premium, natural consumer. So these cohorts of parents are looking for products similar to the products that we have that are a little differentiated from the mass market. They do tend to attract a higher margin. And so that's the subcategory of the broader category that Bubs participates in. From a regulatory and geopolitical, we are watching with increased interest rate environment, currency with our exposure to the U.S., we have seen a strengthening of the Aussie against the U.S. with the Aussie currently spot rate a little over $70. So we're watching that. Obviously, the tariff environment is interesting to say the least, there's a lot of volatility there. We did watch the recent high court decision in the U.S. and we are working with our advisers in the U.S. to optimize our position in the U.S. in relation to tariffs. Finally, competitors and consumers. There has been globally 2 quality issues in our industry. They're being managed and worked through. We are well aware of those issues, and we're very confident in our quality systems, and we continue to move forward on the basis of the strong quality reputation that we have as Bubs has been obviously from our Australian source. So to summarize, we feel well positioned to navigate the dynamic global environment. We're very happy our brand resonates strongly with our targeted consumers. We operate in diversified markets. So we have some ability to move between those markets. And finally, we have an attractive margin structure given we have the exposure to the premium natural subsegment. Tab, please. Going into the U.S. market, we've seen very strong volume and value growth in the half. We have worked very well with the large retailers. And so if you look at the overall category, we're fortunate to participate in that premium natural category, which is up 44% against the total category only up 3%. We're 8% of that premium natural subcategory. And so in terms of then the retailers that we look to work with, we've done some great work, and we're just cycling through at the moment the annual range review process, where at Target, we'll increase stores. We'll increase the number of products that we have in stores. Amazon gives us the natural coverage, and we're #1 in go on Amazon. Walmart, very pleasingly, we're stepping up very significantly in store count and also the number of products we have in their stores. And then additionally, very pleased to note that we have ranging at Sprouts, which is one of the top premium natural banners in the U.S. And then Sam's Club, which is part of the Walmart Group is the club element of that business, and we have secured ranging at Sam's Club. So if I go straight to the bottom right, you can see the chart there. At the start of February this year, we were a little over 5,500 stores. We're now going into a cycle of growth as these retailers do their annual resets. And so by the end of the year, we are forecasting to be over 8,500 stores with those additional placing. So we're going into a very exciting time where the business will work through the intake of those products, and we believe that that will be a positive for us as we move forward. During the half, we did cycle through some stock rationing. We were rationing the U.S. as authority. We did undertake an airfreight program. I'm very proud that the team executed that very well operationally. We did maintain service level. A lot of that was recognized by the retailers with these additional ranging outcomes that we've secured. With the new marketing focus based up in the U.S., we are very clear who our consumer is. We are moving more and more to some of the next-generation digital platforms like TikTok. We've got exposure to Reddit. AI is becoming a real reality in search. And so our marketing has been rerated to secure those exposures, and we feel really good going forward in relation to our prospects in the U.S. So moving through to China. It's encouraging performance in China. Our growth interestingly in the past period has been concentrated in the second and third tier cities where we are seeing a preference for some of the consumers to move to premium products like Bubs. We're very happy that we're running a very strong business in China, great team against some of the macro headwinds. But because we're in that premium subcategory of imported product because we have a great team, we're doing well. Interestingly, in the half, we did rebalance our stock. So we had a little bit of additional stock sitting in the trade. We've run that down. So our sell-out looks higher than our sell-in, and that sets us up really well for the second half. We're very pleased with the channel performance. The online to offline, the O2O channel is going great guns for us. We've secured an additional 77% of stores and our sell-through in those stores is up 50%. CBEC, which is the imported product, we've maintained our #1 position on Tmall. And we have worked through some of the stock rationing and the stock balancing challenges now. And then coming into the second half, we believe we're well set for sustained growth in China. The chart on the bottom right really shows the story. The 2 channels we play in the O2O and CBEC, both showing strong growth. Tab, please. Australia, we're very focused on investing to reestablish our growth trajectory. Fair to say that while we've maintained our #1 Goat position, we need to do better in Australia. We're working on that. One of the key things we've done, we entered the year with our advertising promotion set at about 8% of net sales in the second half, that's been upgraded to 12%. We've started that. We've seen some positive results. We did do a little bit of price activity, which has been well received by our consumers and retailers. We have started to activate through health care professionals. We have improved on-shelf availability as we work through the stock rationing, and we feel really well set to see a continuation of growth in the Australian market. I would note also that we did discontinue our food portfolio in the half. And so we're very, very focused on our core range of infant formula. And as we go forward, we believe we'll be cycling into stronger performance in our core home market of Australia. Tab, please. So our final segment is our rest of world segment. Again, we were impacted by some stock rationing. Additionally, we did have some regulatory challenges, particularly in the Vietnam market where the health authority has changed some of their requirements. So we've been very diligent to work that through with our distributor partner, Ms. Zhou. So we have resized our distributor relationship. That business has a great capability in health care professionals where we believe we do well in terms of reaching the parents that will be great customers for Bubs. During some of the challenges, we've done a great job to maintain supply. We are active on some of the very modern platforms up there on the right, there's actually a picture of myself on my trip up to Vietnam on TikTok. We do a number of in-store activations. So that other picture is an in-store activation in the modern trade, where we have a very strong following. Japan continues to be a strong market for Bubs. And then Malaysia is an emerging market where we've doubled distribution points in the last 12 months. So it's been resilient against some of the challenges. And again, we feel positive moving forward with our positions in the rest of world markets. Tab. And as we tab, I'll hand over to Naomi Verloop, our CFO, and she'll take us through the financial results. Naomi Verloop: Good morning, everyone, and really pleased to be here today. If we could just have across to the income statement, please. So looking at the P&L, the great takeaway here is our underlying EBITDA result, which came in at $4.4 million versus $0.7 million on the prior corresponding period. The EBITDA reported number came in at $3 million versus $0.6 million in the prior corresponding period. The revenue increase in the U.S.A. was the major driver for these results, increasing by 48%. Overall, revenues were up by 14% versus the prior corresponding period. Gross profit also held up surprisingly well despite the impacts of airfreight and tariffs, but we still managed to come in at 48% and the product mix in terms of more sales being sold through into the U.S.A. allowed us to achieve this result despite the additional tariffs and airfreight we incurred. Operating expenses came in approximately 3% down to $24.5 million versus $25.2 million, and this was primarily due to the completion of the FDA growth studies. So overall, ending the year at $4.4 million on an underlying basis, which was a great result for Bubs. We can move across now to the balance sheet. The key takeaway on the balance sheet is the inventory number. You can see that it has increased from $20.1 million to $28.1 million. We are still progressing through with our inventory rebuild, and that will carry on for the next half. We expect that number to be approximately $8 million to $10 million higher by the time we get to the end of this financial year. You can see trade and other receivables have also increased by $3.7 million. That is in line with the increase in revenues. Trade and other payables also up to $15.7 million from $10.3 million, and that is largely due to extra payments to suppliers for raw materials in particular, goat milk solids and fresh milk supply from Australian farms. You'll also see there that our right-of-use assets have increased up to $6.1 million. This is simply due to the renewal of the lease at our Deloraine dairy facility, which is our manufacturing and head office site in Dandenong South. We'll move across now to cash flow. The main takeaway here on the cash flow is obviously the net cash used in operating activities. So we had a net cash outflow of $5.7 million versus an outflow of $0.5 million at the half last year. This was largely expected and most of it relates to the inventory rebuild process, which we are still currently in the middle of. And as I mentioned earlier, we will continue to invest in inventory in the second half. One of the key takeaways subsequent to December of 2025 is obtaining formal approval from NAB to extend the limit on our working capital facility. So that has actually increased up from $10 million to $20 million and will be very helpful as we go through this inventory rebuild process. Moving across now to margin. We can see that margin has been maintained at 48%. It is down slightly from the 50%, but well above the guidance we were giving of the 40% to 45% range. As I said previously, we have incurred tariffs and air freight, which has been significant. Despite those facts, we've been able to deliver more of our revenues in the U.S.A. market, which are at a higher margin, and that's helped us to achieve a really, really positive result. As we cycle through to the next half, we actually anticipate to incur a higher level of airfreight and tariffs. And so we still expect margins to come in at the 40% to 45% range by the time we get to the end of the year. Moving across to net working capital. We can see net working capital has gone up. We are landing in at $33.4 million for the first half versus $23.2 million. This all relates to the inventory build and the increase in inventories mainly from $20 million to $28 million. You can see, however, that the average net working capital as a percentage of sales has dropped down to 23.9%. It was 25.8% at H2 FY '25 and then at H1, it was 30.7%. That measure really just shows how efficient we are in terms of delivering additional revenues against our working capital, and it just shows that we have the ability to generate more sales on an average basis versus our net working capital. Inventory came in at 28.1%. If you look at the chart just below, we were at 30.3% at the same point last year. So you can see we are quite low given the uplift in revenues. You can see inventory as a percentage of sales is down to 26%. We expect that to pare back up to around 30% by the time we get to the end of the year. Moving now to the FY '26 EBITDA guidance bridge on a full year basis. You can see we landed last year on an underlying number of $0.6 million. We're expecting to come in at $9.5 million on an underlying basis by the end of this year. And our EBITDA reported number is expected to come in at $4.5 million. So the main impacts there are the airfreight and penalty tariff, which we're assuming to come in at around $5.8 million. We also had a one-off payment from Alice & Willis in relation to the legal proceedings, and that was $0.8 million. We do not expect any further funds to be received in relation to this legal proceeding. I'll now just summarize the FY '26 outlook that we've provided. We do anticipate revenues to come in at $120 million to $125 million. It reflects 22% to 27% growth on the prior corresponding period. As I mentioned earlier, we're still targeting that 40% to 45% range on gross profit. That will be lower than what we have delivered for the first half. But as Joe alluded to at the beginning of the call, there's lots of moving pieces there. We have additional airfreight coming in, additional tariffs on non-AU product, and we are living in a very dynamic and changing world with Donald Trump and who knows where the tariffs will land. So those are some of the moving pieces that we're dealing with at the moment. In terms of reported EBITDA, we're going to land at between $4 million and $6 million, and the underlying is going to come in at between $9 million and $11 million. That concludes the financial review. I'll hand back now to Joe for a strategy update. Joe Coote: Thanks, Naomi. And if we could just tab through to the strategy summary page. If we tab again, this is a chart that we will be showing you very regularly as we move forward. As I said at the start of the call, we've moved from strategy development to strategy deployment. So we have active initiatives underway. We are standing up a transformation office as we speak. And so we're excited to share some of that with you at our strategy update later in March, which we will confirm shortly. We will have the new team members in from offshore as well as some of the new roles that we have here in Melbourne. And so we will drill into this strategy at that point in time. But fair to say we feel very comfortable. It's very crisp and clear. It's very focused, as I said, on execution and the delivery of performance improvement initiatives. And I'll say further discussion on that for our strategy update. So if we tab over, I did just want to highlight some of the initiatives that we have underway. Some of these are very substantial. Some will carry on for a number of years and some we have already concluded. So I'll just highlight a couple here. If I start on the left, we have done consumer research in China and the U.S. to confirm our consumer target cohort. And it's very clear who those consumers are, and it's very clear they align to the premium natural subcategory. Moving into the second point, we have upweighted our digital marketing activities to continue our presence on platforms like Meta and Google, but we're moving into some of the new platforms like TikTok and particularly Reddit is driving a lot of the AI search that we're seeing. So our consumers tend to be, we're calling them as seekers and explorers. They tend to be very savvy with the use of digital technology. And so we're really focused on that, and we're very happy with the initial results that we're seeing. Annie, our new Global CMO, will share more of that when she's down with us in March. If we move across to portfolio optimization, we've really had stunning results from the range reviews in the U.S. We're also excited to share that we've ranged in a very premium supermarket banner in China called Ole. We really have great coverage now across those 2 key markets, obviously, as well in our home market with Coles, Willis and Chemist Warehouse. So we are working with the supplier partners. We have great ranging. Now it's about the marketing to step it up and really get the sell-through targeting our consumers. We will share quite a bit on our product development road map in March. We have some exciting things to share there. But we're also very focused on who we are. So there will be some little adjacencies that we'll be looking at that can help us grow our business further faster. Moving across to supply chain, very clear dollar in the bank example where our supply chain team has done a great job. We've done some work in our warehouse where we've got additional capacity, and we're packing containers now. And we've got a run rate underway that will bank $400,000 per annum of cash savings. The next one down there in supply chain that's work in progress that I did want to mention is looking to the U.S. for sourcing of ingredients, the whey proteins that we use as well as the whole milk. Additionally, looking at the supply network, supplying the U.S. from Australia can be challenging. It's a long, thin supply chain. We have tariffs at the border. Geopolitically, it's a good thing as well to be participating within the economy in the U.S. So we're doing a classical buy, build and rent analysis. We're quite progressed through that. And as we grow and outgrow essentially our capacity here in Australia, we have aspiration to look at what a U.S. supply network might be for Bubs. If we move across to enablers, just to round out, we're very focused on culture and high-performing team. We have a great team assembled, very excited to work with such a great group of people. We're also bringing in partners. So we've got a great partner looking at our procurement area through an AI lens. They're a U.S.-based start-up firm called dSilo, they're doing great things for us in that space. Additionally, though, we're very focused on some of the core processes that run a business like Bubs, which is around operations excellence. So just being safe every day, delivering high quality, meeting our promises to our retailers and obviously driving our assets and being efficient in how we spend our cash. And finally, our integrated business planning is another area of focus, particularly the balancing of supply and demand. And as we're a high-growth business, we really need to be looking ahead to see what our growth will be and then convert that back into capacities in terms of shipping, in terms of procurement and in terms of manufacturing. And that's where we've also got a lot of focus, but I'll leave it there. I'm happy to take questions. I'm very excited to showcase the great team that we have when we're together in March. But for today, I'll leave it there and maybe hand back for some questions. Thank you. Operator: [Operator Instructions] And your first question comes from the line of Philip Pepe from Shaw and Partners. Philip Pepe: Well done on a good result. Just looking at your guidance, revenue in particular, you've got a slightly greater second half bias than usual. Is that because you're expecting Australia, and China and some of the other regions to start to grow in the second half to add revenue to what's already a strong U.S. growth? Naomi Verloop: Yes. So we are expecting revenues to normalize in the other regions as well in the second half. So we are expecting a better performance in China due to those selling sell-out rates through to the distributor normalizing. So we should see an uptick in China. In particular, U.S.A. as well will grow further due to that additional ranging of stores that Joe spoke about. So we are expecting a better half for the U.S.A. as well. Philip Pepe: And have we started to see that in February? Naomi Verloop: It depends on when the range reviews start. I'll hand over to Joe to answer that question. Joe Coote: Yes. Phil, we have seen things pick up in China and Australia just in the recent periods. The way the U.S. business works, which I know you understand is there's an annual range review cycle. So we have had confirmation of that range review outcome. And so that massive intake, particularly into Walmart and Target is currently underway. So the product we've been airfreighting up into the U.S. is sitting in the warehouse. It's staged and it's ready to go. The purchase orders are rolling in, and it's really a big pipeline into those stores. And then we wait and see how the consumer offtake goes and then we'll replenish back to those stores. But it's quite a big step-up. So it's exciting at one level, but it's also operationally quite a challenging task to execute, but it will drive a step-up in our sales, absolutely. Operator: Your next question comes from the line of Jonathan Snape from Bell Potter. Jonathan Snape: Just trying to ask a quick one. On the cost you've called out in the U.S. tariffs, airfreight like obviously, one component of that is probably going to be around a little longer than the other. Are you able to kind of split out which element is airfreight as opposed to tariffs? Naomi Verloop: Yes. So we've footnoted that in the P&L slide. So there's $1.8 million in airfreight, and there was about $0.4 million in penalty tariff. So that is tariff over and above the 10% that we incur on non-AU fresh milk supply. So when we purchase goat milk solids from overseas, they might come from the Netherlands or New Zealand or another part of the world, they are actually tariff at a higher rate and it is much higher than the 10%. Jonathan Snape: And how does that flow into your second half thinking? Is the mix kind of the same? Or does it start to move more towards tariffs given, I assume, you probably were selling through some stock that was kind of already there, [ you ] didn't have the tariffs... Naomi Verloop: Yes, we're actually expecting the impact to be larger in the second half, and we're expecting a larger revenue number to come through in the second half. We've got this ranging happening at Walmart that we've been speaking about. So we really have to get the pipe fill there done on that. So that means extra product, and we are going to need to still source from overseas to meet that demand. And some of that is also going to have to be airfreight as well. So we'll also incur additional airfreight, which will be at a higher level than this first half. Jonathan Snape: Yes. Okay. And can I just ask around China? I mean it seems like when I look at all your peers, even some of the bigger ones, there's a massive channel shift that's been going on from China label to English label over the last 6 months, if not last 12 months. And traditionally, Bubs has done pretty well in that environment, not just from CBEC and O2O, but also from Daigou. Are you seeing anything in the Daigou channel at all in terms of resumption of growth at the moment? Interested in your thoughts there. Joe Coote: Yes. We're not seeing a lot in Daigou. We -- as I said, yes, we see that shift to English label, and our team does a great job marketing on platforms. But our O2O growth, as we shared, is very pleasing as well. So we're in that general trade but with the CBEC product. So yes, if that continues, they're favorable to our current positioning, absolutely. So it should be something that we benefit from, I would agree. I can't see that we've seen a lot of it at this point. But we're bullish China more because of the capability of the team that they've [ indiscernible ] in our products. And so yes, that could be another headwind potentially for us. Jonathan Snape: Okay. And if you looked at, I guess, some of these product scarce, most of the, I guess, the recalls have happened from Europe. And I know it's kind of early days because it's been kind of rolling through December and January, more so than anything else. Have you seen any, I guess, benefits start to come maybe from some of that cross-border activity slowing off from Europe and shifting down into regions where you haven't had major product recalls like down here at all? Or is it too early direct to see anything like that? Joe Coote: Yes. Look, it's mixed. I mean the thing as an industry, yes, the families that are impacted by those recalls are where our thoughts go first. And then second, just for our industry, these quality issues are something that we would prefer not to see. You do highlight the recall from Europe. There is also a separate one in the U.S. So it is a dynamic in the U.S. as well. It's a little bit different in the U.S., but it's essentially a quality-related issue. So there is, I'd say, consternation amongst the parents who are formula feeding. So we're working very hard with our customer service and marketing teams to reassure people that the Bubs products remain safe. And we've got a huge focus on our quality. I would say that in pockets, we do see that our sales are responding to some of the gaps that we're seeing. I would also say that in the U.S., some of the ranging outcomes that we've achieved that are so stellar probably somewhat buoyed by the quality issues in some of the people that are participating currently. So -- but with that said, it's a mixed bag. And I would absolutely come back to my opening point, which is yes, we really feel for these parents who are navigating these difficult times in our industry, and we prefer not to see any quality issues anywhere. Operator: [Operator Instructions] Currently, there are no further questions on the phone. So I'd like to hand back. Apologies. You have a question from the line of Mark Topy from Select Equities. Mark Topy: I just want to ask on the production side of things, just how you placed and just give us a bit more insight into how you're ramping up for the inventory build-up. I guess we've got a sense of where you might be producing it, but I'm just wondering about your capability going forward to meet demand. Joe Coote: Yes, Mark, I mean, the way the supply chain works is the physical logistics, which is a fairly long thin supply chain from Australia to predominantly China, U.S. So that's one element. But in the sort of production side, we essentially have a 2-stage production process. We have our own facility in Melbourne in Dandenong, and that facility runs at about 40% to 60% of nameplate capacity. So we run that facility on a 2-shift basis, 6 days a week, and that facility has been operating very well over the past half. And the team that runs that facility do a great job. So we do have capacity there. We work with a network of partners in terms of then turning the milk into powder. So we have a network of supply partners across Victoria. And again, they're doing great work, and we have some capacity there. Where there are some challenges is in the goat milk solids. And so some of that comes off farm here in Victoria. And then we do supplement selectively from some offshore sources that Naomi mentioned, primarily the Netherlands and New Zealand. So you put all that together, the outlook is positive. It takes time, there is a long lead time in each of those steps to secure the goat solids, push it through the dryers and then into the blending and canning lines to get on to a container and across to the U.S. It's a long thin supply chain, as I said at the start. So -- but look, we're very confident that we will rebuild and we will have sufficient safety stock, particularly up in the U.S., and we'll be able to secure the sales that present in these additional range we have in the U.S. retail trade. Mark Topy: Great. Yes, obviously, you meet that demand. And then just secondly, on the kind of what's your read on the goat milk sort of perception in China? There seems to have sort of been a little bit of up and down in terms of the demand. And at one point, goat milk was very strong in terms of some of the other producers in that market. And how are you sort of converting the consumers over even in the U.S. to the goat milk product? Joe Coote: Yes. It ranges like total goat as a percentage of total is one number, and then it tends to be a higher percentage in the subcategory. The premium subcategory has higher participation in goat. In the U.S., it's almost solely in that premium natural subcategory. So the total addressable market, if we can collectively, as an industry, grow goat, that will be very beneficial to Bubs. In the U.S., at the moment, it's about 3% of total market, which is about 6% of the subcategory. So 1 percentage point there because we're about 1/3 of the market. China is a little bit different. China, the participation rate in goat, as you call out, has dropped back a little bit. It's a different sort of proposition in China. It's been more mainstreamed in China over a number of decades and beyond, I would suggest. So we watch that carefully in China. But certainly, with our exposure being a dominant goat player, a tick-up in goat participation in infant formula would be very beneficial. We also have an adult goat product CapriLac in China. So goat in adult is also something we're excited about. And then in Australia, goat, I think, runs at about 6% to 8% of category. So again, we're the #1 in goat. So we do watch those numbers on a total addressable market. And if we can collectively grow the goat participation, we -- naturally rising tide raises all boats. So yes, that's a really good metric to look at, and we look at it carefully. Mark Topy: Yes. And just lastly, just on the Aussie dollar, just touch on FX and any sort of implications there in terms of the sort of nudge up to the Aussie dollar where it is at the moment? Joe Coote: Yes. We don't certainly -- we're an infant formula company, so we don't try and play the currency market. But in terms of our risk management strategy, I'll just hand over to Naomi. Naomi Verloop: Yes. So that uptick that we saw in AUD versus USD only sort of came in around the end of January and up into early Feb. So we're sort of trading around that $0.7 level now. We actually hedge all of our transactional exposure, and we've taken hedges out already through to the end of this year. We'll be going through our budget process for FY '27, and we'll have to obviously rerate what that rate is looking like. So that will have a subsequent effect on the revenues that we report coming through from the U.S.A. But if we do our comparatives in the financials on a constant currency basis, we'll be able to see the true underlying performance. Mark Topy: Right. So if I interpreted that, so there is some crimping of margin then from the higher U.S. dollar-Aussie dollar. Is that the way I'm kind of hearing that? Naomi Verloop: Only on a reported basis, not within the result reported in the U.S.A., so only on consolidation because we are an AUD business. Yes, not transactional because that will be hedged through. But you'll be hedging through at higher rates. So it will have some impact. So there will be an impact. But if it moves higher than $0.7, you're protected against it. If it moves lower and you in at $0.7, then you'll have the opposite effect. Mark Topy: So that implies you're not repatriating cash from the U.S. Is that got some natural hedge over there or from a regulatory view... Naomi Verloop: We are repatriating cash, but there's 2 separate FX impacts. So there's a transactional FX and there is a reported FX, which are 2 different things. Operator: [Operator Instructions] Currently, there are no further questions on the phone lines, so I'd like to hand back. Joe Coote: Well, just to round out, thank you very much for your attendance this morning. And we look forward to having follow-up discussions and see you at the final strategy session in March and the end of the year. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect.
Operator: Good morning, and a warm welcome to the earnings call of Alzchem Group AG. I would like to introduce the company's CEO, Andreas Niedermaier; and CFO, Andreas Losler, who will guide us through the presentation in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Mr. Niedermaier. Andreas Niedermaier: Yes. Thank you for the very warm introduction. Good morning together, and thank you for joining us today, and welcome to our quarter 4 and the year-end analyst call. As always, we will go through the presentation first, and then we are available for questions at the end. Let's skip the first slides and go directly to Page 5. So how do we see the financial year 2025 here? The chemical environment is very challenging, at least here in Europe. There are really difficult conditions in Europe. But nevertheless, 2025 was again the most successful financial year for us. We are broadly positioned. And yes, we also make basic chemicals, which yield little profit, but we urgently need for the supply of... [Technical Difficulty] Operator: We cannot hear you right now, unfortunately. Andreas Niedermaier: Okay. I'm very sorry. Operator: Now it's better. Thank you. You are still gone. We cannot hear you. Sorry. [Technical Difficulty] Andreas Niedermaier: So now we should be back. Operator: Yes, you're back. Thank you so much. Andreas Niedermaier: Yes. Okay. So then I go back a little bit to make sure that we have all information in our broadcast. Yes. So we think that we are really broadly positioned. And yes, we also make basic and intermediates chemicals, which yield little profit, but we really urgently need that for our supply chain and for the raw materials. So this broad market, the product tree and the focus on our niche markets has allowed us to grow against the industry trend. So with consolidated sales of EUR 562 million, the corridor for the sales forecast of approximately EUR 580 million was largely achieved. Group EBITDA increased disproportionately to sales and exceeded the forecast at around EUR 116.5 million. So what else is to report about the year-end? [Technical Difficulty] Sorry, I see that the technic is really bad. Do you hear me? Operator: Yes, we can hear you. Andreas Niedermaier: Okay. So let's go to the next page, which is our page, let's say, 6. I will be here again, yes. So overall, we achieved our growth targets very well with growth in Specialty segment, in particular, leading to disproportionate earnings growth of 11% in EBITDA for the group as a whole. For the first time, we are really proud to present. We have achieved and even slightly exceeded our long-term target of over 20% EBITDA margin, and we reached 20.7%. Our after-tax profit, which is relevant for a dividend, also grew by 17% from which we also derive our dividend proposal of plus 17% to EUR 2.10. A lot has also happened on the stock market with our shares and the free float. In the meantime, we have reached about 74% of free float, and this now puts us to the top of the SDAX or the beginning of the MDAX range already. In 2026, we will now mainly be busy with our investment programs, which will then deliver another real growth potential from 2027 onwards. To this end, we released about EUR 120 million for the expansion of creatine in quarter 4 2025. More on that in a moment. So the nitroguanidine growth project is entering its final phase and the interior work is currently underway with the installation of all the reactors, piping and at least the control system. Our goal is to put everything into operation by the middle of that year and then gradually ramp it up in quarter 3 and quarter 4. So far, we see ourselves absolutely in the schedule here. Our U.S.A. site selection process is almost finished. We have already started to select engineering companies for basic engineering. So you can see that things continue quickly here too as well. In summary, we can proudly report Alzchem has delivered again. But now more about the creatine information and the creatine CapEx project. Creatine is going through the roof right now. The level of awareness of Creapure is growing exponentially. In principle, we have all the prerequisites in-house, but the capacities for supplying the market need to be updated and to be added. In quarter 3, 2025, for example, we put an incremental expansion into operation, which will lead to a further growth in 2026. But that's not all. We decided on a comprehensive investment program at the end of 2025 to secure the growth strategy. In the long term, around EUR 120 million will be invested in the construction of a largely automated production plant for creatine and its precursors as well as in the necessary upstream and downstream infrastructure. Phased commissioning is planned from the second half of 2027. At full capacity, we expect the investment to generate additional annual sales potential in the initial 3-digit million range with correspondingly positive earnings contributions. The focus is on the application areas of sports, nutrition and health, in which we successfully act as a quality leader made in Germany with the premium brands, Creapure and Creavitalis and probably more to come. But let's now analyze the year 2025 a little more and go to the segment reports. Let's start here with Basics & Intermediates segment. The sales amounted to approximately EUR 155 million, which was approximately EUR 19 million below the previous year's level. Unfortunately, this development corresponds to our expectations and assumptions here. The decline in sales is mainly due to the volume effects. The main reasons for this was a weak economy in the European and German steel industries, which led to a noticeable decline in demand in the steel and product area. The decline in revenue also resulted in a reduction in segment EBITDA, and this amounted to approximately to EUR 5.6 million and was thus about half of the previous year's figure. The EBITDA margin fell accordingly by 2.6 percent points to 3.6%. In addition to weak economy in the steel sector, the significantly higher electricity price level, in particular, contributed to the decline in EBITDA compared to the previous year here. Nevertheless, the segment is very important as a supplier of raw materials for the specialties. This makes it all the more important to trim this segment for profitability in order to at least generate the cost of capital in the long term. This requires stable, calculable long-term framework conditions, which we are very much calling for in Berlin and Brussels actually, but we are also working on closer customer relationships and higher volumes in order to be able to ensure the main important utilization of the product plants. So let's now go here where we are already much more successful to our next segment. This is the Specialty Chemicals, and it's much better to report that figures because we have been very successful. So here, we grew sales by 9.2% in the quarter and 8.8% for the year as a whole, reaching almost EUR 380 million in absolute terms. This increase was driven by a combination of positive price and mainly volume effects. This also successfully offset negative effects, as you can see here, from the weak U.S. dollar compared to the previous year. The human nutrition, custom manufacturing and defense product areas, in particular, made a positive contribution to the year-on-year sales development. In Human Nutrition, the high sales level of the previous year was further increased. As already mentioned, the current trends in the global creatine market are providing additional growth influences in all application areas. An example of this is the cooperation with Ehrmann, which is very successful, concluded last year. With Creavitalis from Alzchem at the center of the new high protein creatine product line. We have already presented the further capacity expansions for the creatine case, which will support further growth here as well. In Custom Manufacturing, the positive trend reversal stabilized, and we see a further increase in demand contribution positively to the utilization and therefore, to the segment's results. In the course of the positive development, EBITDA also increased by 13.6% from approximately EUR 94 million here to up to EUR 107 million. What comes next? In 2026, with the commissioning of nitroguanidine, defense capacities will grow and will also develop very positively in 2027 then. And in 2027, creatine capacities will then gradually come online. So we will continue to see nice growth there and here in that segment as well. So much for the specialties. Now a few words about our third segment, which is very small and delivers only services on the sites. So sales were down here by 12% compared to the last year, mainly as a result of reduced regulatory grid fees, which we were allowed to charge to our external customers. And these price reductions also had the same impact on our segment's EBITDA here. The segment EBITDA was additionally impacted by some onetime year-end closing effects in connection with the reduced grid charges. So that was all for our detailed review and detailed view on the segment development. Let's now take a look at the overall group figures. And let's hear some more detailed analysis from my nice colleague here, Andreas Losler. Andreas Losle: Yes. Also good morning from my side, and thank you, Andreas, for the insights in our segment development in 2025. As always, I'll start my analysis with looking at our P&L. Sales amounted to EUR 562 million in '25, an increase of EUR 8 million compared to last year. Compared to our guidance, we have to admit that we ended up at the lower end of our anticipated sales level. The different developments within our segments caused the situation and have been discussed already by my colleague. On a regional basis, the major sales increase could be achieved in the U.S. and Europe and can be allocated to the Specialty Chemicals segment. Our EBITDA grew by almost 11% or EUR 11 million, which means that EBITDA grew more than our sales did. Again, as we sold more within our higher-margin segment, Specialty Chemicals, we could also increase our EBITDA, while the sales decline within the other segments did not have so much impact on our group EBITDA. While reaching EUR 160 million, we slightly exceeded our guidance for '25. Cost-wise, we have to report increased personnel expenses based on increased union tariffs and slightly increased number of employees, which support our growth. Our operating costs increased mainly resulting from much higher FX losses due to the weak U.S. dollar and maintenance cost. All put together, we managed to increase our EBITDA margin to impressive 20.7% after showing 19% last year. The actual margin development also exceeded our guidance, which assumed 19.5% EBITDA margin. With stable depreciations and supported by an improved financial result, we ended up on a group net result of EUR 64 million, representing an increase of 18%. The same applies to our earnings per share. That was the big picture of our P&L. Now let's move on to the balance sheet and cash flow figures. Our balance sheet and cash flows are still very healthy, but further influenced by some special impact. By the end of '25, we showed EUR 134 million more balance sheet total as 1 year before. On the asset side of the balance sheet, this increase was mainly driven by increased CapEx spending for our nitroguanidine expansion in Germany, customer grants received and planned increases in our stock level as preparation for our furnace maintenance shutdown. On the other side of the balance sheet, major impacts came from an increased equity, the initial recognition of contract liabilities as counterpart for our customer payments and receivables for nitroguanidine expansion and such contract liabilities amounted to approximately EUR 90 million at the end of the year. While our equity increased in total by EUR 51 million, our equity ratio dropped slightly to 41.8%. This was also part of our guidance as we anticipated the huge increase in total balance sheet. Operating cash flow was highly above prior year, but was influenced by almost EUR 60 million customer grants and EUR 20 million increased working capital resulting from our scheduled stock level increase. Investing cash flow was highly above prior years and clearly shows the progress we made in our current CapEx programs, especially for the nitroguanidine expansion. Despite this highly increased CapEx activities, we can still report a positive free cash flow. As of our reporting date, by the end of '25, we can again report a positive net cash position of EUR 31 million. And again, we were able to shortly invest our liquidity surplus in order to earn interest, also the reason for our improved financial result. Our financing cash flow shows regular loan repayments and increased dividend payments to our shareholders. Furthermore, we paid out EUR 4.5 million for our share buyback program, but received EUR 3 million from the sale of our treasury stocks to our employees in course of an employee participation program. As you can see, Alzchem is in a very healthy cash position and ready for future growth. Future is a good keyword. Let's now discuss our outlook for financial year '26. From today's perspective, we see a further growth for '26. Sales are expected to grow to approximately EUR 600 million and EBITDA is expected to grow to approximately EUR 126 million. This represents a sales increase of approximately 7%, while EBITDA is expected to grow by approximately 8%. The planned sales growth shall continue to be achieved organically. The fundamental growth drivers are expected to be volume effects within segment Specialty Chemicals. We do expect further volume growth in the area of Human Nutrition and Defense. The increase in our creatine business will be supported by our last incremental capacity expansion back in Q4 '25. Our recently announced major capacity expansion will not add quantities in '26, but in the second half of '27. For our Defense business, we expect volume and revenue growth from our expansion within the second half of '26, but we are not yet assuming a full utilization of the new facilities before '27. For the Basics & Intermediates segment, we expect overall sales to be at the previous year's level. We expect the prices for key raw materials, energy and logistics to remain stable at the level of '25. The sales growth in the Specialty Chemicals segment leads to a further increase in the sales portion of this segment in our total sales. Consequently, the EBITDA of this segment and the EBITDA margin of Alzchem will also grow. EBITDA in '26 will be impacted once due to the 6 months maintenance shutdown of one of our carbide furnaces, and this measure will also result in lower energy cost reimbursement. If we look 1 year ahead, our huge investments in '26 will lay the foundation for our next phase of growth. With the completion of our ongoing and planned investments, we see a significant potential for additional growth in '27 in the lower double-digit percentage rates for our sales and EBITDA. As you can see, we have interesting times ahead of us. At this point, we would like to thank you for your appreciated attention and are now at your disposal for possible questions. Operator: Thank you so much for your presentation. [Operator Instructions] And with that said, we have already received risen hands by Mr. Faitz. Christian Faitz: Yes. Alzchem team, I hope you can hear me. Congrats on the results. Two questions, please, for now. First of all, can you share with us how the refurbishment of the carbide oven in Hart is going given the fact that this is, my understanding, an H1 project, and we are today essentially 1/3 through H1? And the second question would be, which growth assumptions do you have for creatine products for '26? Andreas Niedermaier: Yes. Let's start with the first topic with the carbide, let's say, CapEx or maintenance project. So the oven is already removed and will be built up the next month. The project costs approximately EUR 10 million, between EUR 9 million to EUR 10 million. But what you have to take into consideration is that we can't produce for the first 6 months. And for that, we prepared our balance sheet, as you have already seen that we increased the stock level to a decent level to support all the sales for that year. From today's point of view, we think that oven will come back into production by the half year, approximately in July. But the process is in time and in cost calculation from today's point of view. No surprises. Yes. And what was your second question, sorry? Christian Faitz: So the growth assumptions which you have for creatine products for '26... Andreas Niedermaier: Yes. So as already reported, we will see the additional capacities online, what we ramped up in autumn last year. And from that point of view, we have additional 20% to 25% additional quantities available for that year, and that will really support our growth. But if you look at the overall year, the first half of the year, we expect a little lower in sales than the second half of the year. The one reason is that the carbide kiln is down, but the second reason is that the ramp-up of the nitroguanidine will happen in the second half of the year and then will really support sales side. Yes. Operator: We are now moving on to Mr. Schwarz. Oliver Schwarz: Firstly, let me congratulate you on the good results. A couple of questions remain from my side. Mr. Niedermaier, you stated that you are, let's say, in the finalizing rounds of your U.S. investment. As far as I know, there is a subsidy from the DoD pending in the amount of USD 90 million if you are able to finalize that new production site by the end of 2029, the latest. Can you quickly talk us through whether that USD 90 million will be sufficient to cover your CapEx? Or is there additional CapEx required from your side? And secondly, the timing of the subsidies, will they paid after the production has started? Or is that helping you along the way using milestones? That would be my first two questions. Andreas Niedermaier: Yes. Okay. So in principle, the project is going on very healthy, and there are no interruptions. As you can imagine that there are some interesting communications around between U.S., Europe and China or so on. So as a project, it's really in a healthy situation. It's ongoing. Site selection process is close to the end, and we will start up all the planning with the engineers in the months to come. So we have invoiced the first cost to the DoD as well, and they went through quite well. For sure, there will be a little delay to get the costs back from the DoD. We calculate some months, let's say, what we have to finance by ourselves. But in principle, we are not talking about USD 90 million project costs. We are talking about USD 150 million, and that USD 150 million should cope the overall project and should be sufficient. If not, then we have to do the definitization of the project more with the DoD, and we have to report additional costs to the DoD and then probably we can be reimbursed or can get back that cost as well. Oliver Schwarz: Another question is on Creamino. Maybe I missed it, but I didn't hear anything about the performance of that product. Could you elaborate on Creamino performance in 2025, please, and what do you expect for 2026? Andreas Niedermaier: Yes. Creamino was not the most successful situation, but it was successful as well. So the most successful situation for us was creatine and the multipurpose plants that year and defense business with nitroguanidine as well. Creamino, we saw a small growth effect. [Technical Difficulty] I'm very sorry, it seems to be that we have some technical issues here and technical problems. Can you hear me, Oliver? You do? Operator: Yes, we can hear you perfectly, actually. Andreas Niedermaier: I'm very sorry because I have seen that my mic could be not really in the right order. Yes, Creamino, we saw a small growth, but not as big that we have to elaborate too much on it. Yes. Oliver Schwarz: And your expectations on that product for 2026? Andreas Niedermaier: So we will see additional growth because we have some customers out there, especially in the U.S., they like the product more and more. And from that point of view, we see a good growth in the low single-digit numbers, let's say. Operator: We're moving on to Mr. Hesse. Constantin Hesse: Really great win, congrats. Look, three questions from my side. One would be on the cadence of the ramp of the creatine facility. I'm assuming that based on your commentary that you made around 2027 growth and beyond being in the low teens, we're probably looking at a pretty good utilization of that new creatine facility already in 2028. So if you could confirm that, that could be interesting. Question number two, actually, let's just start with that question, and then we'll go to number two. Andreas Niedermaier: Yes. So for the creatine ramp-up process, we said that we want to do that step by step because we have to ramp up some infrastructure topics as well. But from today's point of view, the additional capacity for creatine itself should be available for the second half of the year. And therefore, we will see a good growth, let's say, for the second half. And then we will be fully available for the full capacity in 2028 then. Constantin Hesse: And from the demand perspective, you're probably looking at a pretty good utilization already in '28? Andreas Niedermaier: Sure, we are completely sold off actually, and we have to take the customers to the year 2027 when we have additional capacities available. Constantin Hesse: Yes. Great. And then just on the furnace maintenance, the shutdown, what is roughly the impact on the profitability in 2026? Andreas Niedermaier: Yes. So the repair and maintenance costs summarize approximately up to EUR 10 million, but it's already included in our forecast for sure. And we can't produce, but the stuff is there. And from that point of view, we calculate with additional approximately EUR 5 million standstill costs. And we try to lower our stock level and to use our stock level, what we have built up for that half year. And from that point of view, we will receive costs from the balance sheet in the P&L for that year. But the overall effect will be approximately EUR 15 million additional cost. So that would have been -- if you add that, but I don't really like that discussions, then we would have been more at the level of EUR 140 million EBITDA than EUR 126 million, yes. Constantin Hesse: That is exactly what I wanted to get to. That's great. And lastly, on the U.S. So you basically said that you're basically going towards the end around the site selection. You already contracted the EPC. What's currently holding off the project from going ahead? Is it -- have you already put in -- I'm assuming you already put in all the applications for the permits. So now it's all about waiting until the state provides you with the final permit. Is that it? Andreas Niedermaier: So to be honest, nothing is holding us off from the project. All things from our point of view are ongoing. So we are talking about the permits. Yes, that's a normal process. We have to elaborate on and we have to manage. And we have already had contacted the engineering companies to translate, let's say, German plants to the Americans. And yes, from our point of view, we are really on line and on stream, and we have no real problems, only the day-to-day business to do. Yes. Operator: We're moving on to Mr. Speck. Patrick Speck: Congrats from my side on the very solid results in 2025. My first question is about the free cash flow development. I mean, is it fair to assume that the free cash flow might turn negative this year? I mean, on the one hand, okay, inventories will come down. But on the other hand, I think also the prepayments from customers will be lower. And with CapEx spendings rising, yes, you could end up with a negative free cash flow. Is that right? Andreas Losle: No, it's actually not right. And it's -- as you mentioned, we still expect some more customer grants for our nitroguanidine expansion in the next year, which will increase our -- or this year, which will increase our operating cash flow. On the other hand, we will have the final payment of the European Union subsidy for our nitroguanidine expansion once we commission the new plant. So those 2 figures will impact our cash flow. So we -- and clearly, we will increase our CapEx again this year, but we expect the cash flow to be maybe, let's say, even at 0, the free cash flow to be at 0 by the end of the year. Patrick Speck: Okay. Good to know. But a follow-up question on that, if I may. What's the overall sum of prepayments that you expect from your nitroguanidine customers? Because I thought it would be EUR 75 million or roughly EUR 75 million, and you already got roughly EUR 70 million -- or EUR 60 million, sorry, EUR 60 million, so what's the overall sum? Andreas Niedermaier: So Patrick, you could calculate that the project costs between EUR 140 million and EUR 150 million. And all that is prepaid on the one hand from customers or on the other hand, from the EU. All that should be covered at the end. Patrick Speck: Secondly, a follow-up on my colleague's question on the outlook for 2027. I mean, in your press release, you mentioned that you see yourself well positioned to achieve growth in the low double-digit percentage range. So what does low mean from your point of view? Is maybe a 20% jump in sales a bit too much? Should we expect a bit less? Or is this still in the range you assume? Andreas Losle: Yes. I would say don't overspeed here. The lower double digit end, in our case, would be between, let's say, 10% to 20% for both KPI figures, which we mentioned. Andreas Niedermaier: But we imagine that we can take another EUR 100 million to our P&L in turnover. That could be a good figure. Andreas Losle: Yes. Patrick Speck: And thirdly, I wonder if your business or your supply chain, at least is in any way affected by the carbon border adjustment mechanism in the EU, which was sharpened since January 1. Is there anything you -- we should expect any financial burden from that instrument? Andreas Niedermaier: Financial burden, let's say, definitely not. At the end, it could help us a little. But actually, we don't really see any additional effects from that point of view. That's the same as for the customs in the U.S. -- for customs duties. We have not really placed any additional burdens on us so far. According to our analysis, this is due to the high importance of our really nice products for the Americans, let's say. Operator: We're having another risen hand by Mr. Hasler. Mr. Hasler, we unfortunately cannot hear you. You have the permission to unmute yourself now. Peter-Thilo Hasler: Yes. Am I not unmuted? Operator: Perfect. Now you are. Now we can hear you. Peter-Thilo Hasler: Okay. So first, my apologies. I'm in train right now, and there's a lot of noise around me. So the first question is about the inventories that you built up in the last year. And I remember that you always spoke about shutting down your ovens if the electricity price is so high. So the question is, has this buildup of the inventory had an impact on your profitability because you did not shut down the oven because you needed that inventory? And the second question would be if you could tell us in which segments the U.S. revenues increased the most. Is it also creatine, in nitroguanidine already? Or is it something else? And finally, an update on Ehrmann. Last time, you mentioned that the quantities are already sold out. We think -- and do you think that -- you think of another extension. Are these thoughts still around extending the cooperation with Ehrmann? Andreas Losle: Yes, in the first -- your first question, Thilo, about the P&L impact of the carbide furnace shutdown. As we increased the stock level, it did not impact so much our flexibility of taking the oven out if the electricity prices are high just because in the period when we increased our stock level the most, the electricity prices were pretty much stable, and there were actually no need to take the oven out of operation due to extremely high electricity costs. Andreas Niedermaier: Let's say that could be more an advantage because what we have seen in the first weeks in that year that the electricity costs have been much higher than in the previous year, and we can use our material from the stock. Yes. Peter-Thilo Hasler: So the electricity prices are already up again? Andreas Niedermaier: Yes. Yes. Andreas Losle: The second question about the sales increase in the U.S., you are right. They were mostly allocated or coming from the creatine business in the U.S. Andreas Niedermaier: And your question, if we have enough material available to fuel the growth of our customers, for sure. So we will grow with creatine that year, for sure, with 20% approximately or hopefully a little more. And therefore, for the existing customers, we can fuel all the growth, hopefully. Peter-Thilo Hasler: And Ehrmann? Andreas Niedermaier: Yes, for Ehrmann as well. No, it's an existing customer, and we have planned the material for them. And from that point of view, it should be no problem to fuel that growth as well. Operator: We have another question by Mr. Schwarz again. Oliver Schwarz: First, a housekeeping question. Mr. Niedermaier stated that sales in the Basics & Intermediates segment were according to plan and expectations. So let's say, the EUR 18 million shortfall between the midpoint of your guidance of EUR 580 million for 2025 and the actual number seems to come from Specialty Chemicals, if I'm not mistaken. Could you elaborate where that shortfall actually happened due to the fact that earnings-wise, you exceeded expectations, but not on the sales side. And as you said, that was not the case in Basics & Intermediates. I'm just wondering about Specialty Chemicals. That will be my first question. Second question, if I may. The U.S. tariffs, you stated that there's hardly any impact on changes in the U.S. tariffs on your company. However, this change in U.S. tariffs also affects your Chinese competitors due to tariffs on China also changing. Do you expect an increase in competition in the U.S. on some of your products, namely Creamino creatine as a result of lowered tariffs on China from the U.S.? That would be my second question. And lastly, if I may, once again, back to nitroguanidine. Sales in 2026, I heard you say that you will be ready with your expansion by mid-2026, but your customers maybe not. And hence, there's only a small -- or small batches will be delivered to the customers. I was under the impression that the, let's say, additional volumes that you are able to produce might go into other products. Is that still the case? Or are you stockpiling? Or are you just, let's say, use a low capacity at your new site to match supply and demand? That would be my third and final question. Andreas Niedermaier: Andreas, do you elaborate a little bit on the Basics? Andreas Losle: Yes, I will take the first question, Oliver. Your thinking is not really correct. On the Specialty Chemical segment, we ended up with the sales, I would say, on the expected level. And the major, let's say, downfall we had in the fourth quarter was in the Basics & Intermediates segment and was allocated again to the steel industry and maybe a bit to the pharmaceutical and agrochemical industry. So the whole segment was a bit less than anticipated. And as you can see, margin-wise or EBITDA-wise, we developed exactly as anticipated. And as I mentioned in my analysis of the P&L, we lost revenues in an area where it did not have so much impact on the EBITDA. So let's summarize, Specialty Chemicals was expected and Basics & Intermediates a bit less. Andreas Niedermaier: Yes. And the U.S. tariff topic is very interesting. So it can change every day as we have seen, and there is no real forecast possible. But what we saw is that we don't have to take any additional burdens. If you go to the situation of creatine, creatine from the Chinese resources already available in the U.S. So we deliver the highest quality, the best product to them, and they like that product much more than the Chinese basis because it's reliable and a reliable basis, and that's the basis of our growth, what we see and what we will see in the future. And from that point of view, we don't have to fear about that issue. And we are talking about humans taking creatine, and they are thinking about qualities more than in the past. If we talk about Creamino, then we are talking about farmers and animals and there, the quality aspect is not as high as in the creatine. From that point of view, yes, the growth of Creamino could be a little lower because of the competition with Chinese material, but we don't fear about that as well. So we are good, prepared. We have good customers there. We are good in sales, and we have our people in the market and our product is well recognized. And from that point of view, it should not be a bigger problem for us. And Q sales for 2026. Yes, we are a little ahead of the wave as we already are used to say. But to be honest, we have to be ahead of the wave because we are completely sold out of our material and every additional ton we want to grow and the market want to receive has to be from the new production plant. And thank God that if I think about my production staff, we don't have the -- yes, let's say, the other way around. We have time to ramp up the production, and we have time to take care about a safe ramp-up of the production from today's point of view. And then we are really prepared for all the big growth in 2027. So then I take one question from the webinar chat. Here is the second question, you benefit from loss carryforwards in your cash flow statement. Where do these loss carryforwards come from and what years and what losses? So Andreas, I would like you to answer that, but I think it's very easy. Andreas Losle: It's actually very easy. We do not have any loss carryforwards and especially not in the cash flow statement. So this is a wrong understanding. Andreas Niedermaier: Yes. So if you see additional information required, then you could precise your question, then we can elaborate on that a little more. Then the second question was, can you walk us through the CapEx phasing of the EUR 120 million creatine program? Do you expect it to fully close the supply-demand gap? And how should we think about pricing dynamics as additional supply comes online? So yes, thank you for that question. That's always very important to think about pricing. But to be honest, we don't see that prices will come down a lot. Probably for some customers could be that if they take more quantities that we have to reduce the prices a little bit. But at the end, the contribution margin will cover that much more from my point of view. How do you expect it to fully close the supply-demand gap? Yes, we think that the market growth is big enough that we can ramp up the capacities quite well, and we can sell that to the market. And to be honest, we should think about additional capacities next year from today's point of view, how the market will demand and how the market will develop, and then we should be prepared for that kind of discussion. Then I have a next webinar chat question. How do you expect evolving antidumping measures in Europe targeting Chinese chemical producers to impact your P&L over the next 12 to 24 months? Which product lines are currently most exposed to China's competition? And what would be the expected financial impact once tariffs are in place? So Andreas, do you have a first idea about that? Andreas Losle: Yes. My first idea would be our customers in the steel industry for our carbide business. We know that authorities are thinking about putting tariffs on Chinese steel imports. So this could help our customers in the steel industry. And as we mentioned, at the moment, we do not expect a lot of growth in the Basics & Intermediates segment for '26. But if our steel customers are recovering a bit coming or resulting from this tariff situation, we can imagine that we could deliver more into the steel industry in '26 than expected at the moment. Andreas Niedermaier: Yes. So then next question is, what is your current level of ETS exposure? Do you have a hedging strategy in place? And how would relaxation of EU commission reduction rules flow through to your cost base? Very interesting question for sure. So we have some points where we have to take into consideration ETS exposures. The first is the raw material lime. So with the raw material lime, we have to purchase ETS here and to run our steam production, we have to purchase ETS as well. I think we have to -- how much ETS do we have to purchase a year? I question my back office here. So approximately 40,000 pieces we have to purchase. We purchase some in advance, but we don't really have a hedging strategy for, let's say, the next 3 to 5 years. So we have enough ETS available for the next, let's say, half year or for the next 6 to 12 months. That's our idea about that. So from that point of view, if there is a lowering prices or something like that, then we would not have any problems. We would have positive effects in the P&L then. Operator: Perfect. Thank you so much for your questions and your answers, of course. Ladies and gentlemen, we have not received any further questions so far. So I guess we're at the end of today's earnings call. So thank you so much for your interest in the Alzchem Group AG. And a big thank you also to you, Mr. Niedermaier and Mr. Losler for your presentation and your time, of course. Should any further questions occur at any given time, please feel free to contact Investor Relations. I wish you all a successful day and hand over to you, Mr. Niedermaier, once more for your final remarks. Andreas Niedermaier: Yes. Thank you. I have additional technical issues, but will be solved. No problem. Yes. Thank you very much for your questions. We can now offer the opportunity, as always, to visit us again virtually or in person at the conferences as shown above, as shown here on the slide. Otherwise, we will be back with our quarterly statement in first quarter 2026 on April 30. Stay safe, stay sound and stay in our good graces and then good bye.
Lars Jensen: Good morning, everyone, and welcome to Royal Unibrew's presentation of our annual report for 2025. My name is Lars Jensen. I'm the CEO of Royal Unibrew, and I'm today joined by our CFO, Lars Vestergaard; and Flemming Nielsen, Investor Relations. We will take you through the highlights of the year, performance across our segments, the financial development and our outlook for 2026. After the presentation, we will open for questions. Now please turn to Slide #2. And before we begin, please note the usual disclaimer regarding forward-looking statements and risk factors that may cause actual results to differ from expectations. And with that, let's move to Slide #3 and the highlights of 2025. On Slide #3 here, we summarize 2025 in a few key points. '25 was a year where disciplined execution really made the difference. We delivered 5% revenue growth in line with our guidance of 5% to 6% and EBIT increased by 12% at the top end of our 8% to 12% guidance range. Our EBIT margin expanded by 90 basis points to 14%, reflecting continued improvement in operational efficiency across the organization. We also made good progress on our sustainability agenda during the year, both within our environmental and climate initiatives and within employee safety, which has been a key priority for us in 2025. At the same time, we continue to strengthen cash generation and the balance sheet enabled shareholder returns, including share buybacks executed in '25 and a new program launched -- just launched and running until mid-August 2026. Importantly, this performance was delivered in a market environment that remained characterized by cautious consumer sentiment and ongoing macroeconomic uncertainty. What makes the results particularly encouraging is that progress was broad-based across all segments and supported by stronger quality of revenue and continued operational efficiency. Based on this solid foundation, we have provided guidance for 2026 of 6% to 10% organic EBIT growth, which we will come back to later in the presentation. Now please turn to Slide #4. If we step back, our performance in '25 rests on 2 key pillars: category focus and operational efficiency. Over the past 5 years, our growth category framework has guided how we allocate capital, management attention and commercial resources. This focus has become increasingly important in a market environment characterized by soft consumer demand and changing consumer preferences. In 2025, approximately 60% of group net revenue was generated within our defined growth categories, no/low sugar CSD, enhanced beverages, RTD and premium beverages. This category exposure supported growth ahead of the market. During '25, we also sharpened revenue quality by exiting certain lower-margin activities. While this reduces top line in isolation, it strengthens the group's earnings profile going forward. From '26, this step will reduce group revenue by around 3.5% with no EBIT impact and with no volume impact. The revenue decline is predominantly related to snacks and will mainly affect the Northern European segment. Operational efficiency remains deeply embedded in our culture. Across production, logistics and back-office functions, we continue to optimize our footprint, simplify processes and capture operating leverage. This is both in our established markets and in our newer markets. The strong EBIT margin development in '25 demonstrates that this mindset is delivering results, not only in our established markets, but also in the newer ones. Finally, our long-term ambitions remained unchanged. We continue to target an organic EBIT growth of 6% to 8% per year, double-digit earnings per share growth and continuous improvement in return on invested capital, which improved to 13% in '25. Please turn to Slide 5. Our growth category framework continues to guide our resource allocation. These are categories with stronger growth, driven by changing consumer trends. Today, around 60% of group net revenue sits in 4 growth categories, and we achieved average growth of 6% across the categories. No/low sugar carbonated soft drinks grew 9% in '25. We continue to see strong growth as consumers prefer drinks with less calories or no calories. Growth is driven by both local brands like Faxe Kondi and our partner brands like Pepsi. Enhanced beverages grew 5% in '25. The category includes energy drinks and beverages with added vitamins and similarly. The growth is mainly driven by our local brands like Faxe Kondi Booster and Sourcy Vitamin Water in the Netherlands. Across markets, we continue to see strong demand for functional propositions. Ready-to-drink with alcohol grew 1% in '25. The category includes ready-made cocktails and also ciders, so in many different shapes and forms. Our portfolio includes both partner brands and local strong propositions, including Original Long Drink in Finland, Shaker in Denmark and [indiscernible] in Norway. Premium grew 4% in '25 and includes beer brands like Ceres in Italy and our premium beer portfolios across markets. The category also includes malt drinks and lemonades and other premium soft drinks. The framework ensures that we concentrate investments where long-term demand trends are the strongest, and that discipline continues to pay off. Now please turn to Slide #6, and let's focus on the regional developments. Northern Europe is our largest segment, accounting for around 2/3 of group net revenue and EBIT. In '25, we delivered a solid performance in what remains a relatively flat market environment. Full year revenue grew by 2%, while EBIT increased by 4% and with the strongest momentum in the second half of the year. In Denmark, we gained value market share across most categories. Faxe Kondi continued to outperform in no/low sugar soft drinks, Booster maintained strong momentum in energy and Shaker delivered solid growth in ready-to-drink. In beer, both Royal and Heineken grew despite an overall declining beer market. Finland remained impacted by cautious consumer behavior across both on and off-trade. Even so, we maintained a slightly improved market position in key categories, including no/low soft drink, premium beverages and enhanced beverages. The acquisition of Minttu and other spirit brands also contributed positively in '25. In Norway, commercial momentum improved through the year, particularly the RTD and beer, but also Faxe Kondi that has been launched in '25 is showing promising rates of sales out of the stores. We completed key integration milestones and production has now been consolidated in Bergen, supporting long-term efficiency. In the Baltics, the market was affected by relatively cold summer and an intense price environment. Despite this, we gained share in premium beer, energy drinks and enhanced waters while maintaining a strong cost discipline. Overall, Northern Europe continues to demonstrate the strength of our multi-beverage model, supported by strong execution from our local teams. Now please turn to Slide #7. Western Europe was our strongest performing segment in '25. Revenue grew by 12% up for the full year. BeLux contributed 9 percentage points to that growth, reflecting that it was not included in the comparable base for the first 9 months. EBIT increased by 55%, driven by operating leverage, efficiency initiatives and strong profitability improvements in Italy and France. In Italy, we continue to gain market share with Ceres and Faxe beer and with Crodo in soft drinks. As previously communicated, we have reduced the private label production to prioritize our own brands. This supported price mix, while higher local production also helped reduce logistic costs. Underlying growth of own brands was about 6% in volume terms. In France, Lorina and Crazy Tiger delivered continued value share gains, supported by focused brand activation and expansion into new consumption occasions. In the Netherlands, margin improved through price pack and promotion optimization. And despite exiting unprofitable promotions, we delivered net revenue growth for the year. With a strengthened sales organization and enhanced production capability, the business is well positioned for continued progress. Finally, in BeLux, execution is progressing in line with the plan, and we estimate that we increased value market share. As expected, BeLux was loss-making in '25, but we remain confident that our strategic initiatives and strong local engagement will drive long-term value creation. Western Europe illustrates the operating leverage in our multi-niche models when scale mix and discipline align. Please turn to Slide #8, and let's have a look at International, where growth accelerated strongly towards the end of the year. Volume grew 33% organically in Q4 and 16% for the year. Net revenue increased by 15% in Q4 and 7% for the year. Full year volume growth was slightly ahead of sell-out as we build in-market inventory to support the higher growth. As a reminder, this business is inherited more volatile with quarterly volumes influenced by shipping timing and distributor inventory movements. U.S. tariff developments drove inventory buildup in late '24 for the first half of -- and for the first half of '25, followed by inventory reductions in the second half. Price and mix in '25 was negatively impacted by strong growth in beer in African markets, most notably in Q4. Africa remains a structurally attractive growth region, but carries lower net revenue per hectoliter due to our distributor-based model. Net revenue in '25 was also impacted by unfavorable currency movements and tariffs. Growth in '25 were driven by Faxe beer, soft drinks, including Crodo and the malt beverages with brands such as Vitamalt. For the full year, EBIT increased by 14% to DKK 239 million with a 100 basis points margin expansion to 15.5%, which reflects a solid underlying performance. EBIT declined in the second half, driven by earnings phasing related to the tariff-driven inventory buildup earlier in the year and subsequently unwinding in the second half. And with that, I will hand over to Lars for the financial review on Slide #9. Lars Vestergaard: Thank you, Lars, and good morning to all. First, I will briefly walk you through the group P&L. Net revenue increased by 6% in Q4 and by 5% for the full year. Growth accelerated into the fourth quarter. And importantly, Q4 was on a fully comparable basis with BeLux also in the comparison number in '24. Gross profit grew faster than revenue, up 9% in Q4 and 6% for the year. This reflects our continued focus on profitable growth with mix improvements and efficiency delivering solid margin expansion. Gross margin increased by 120 basis points in the quarter and by 50 basis points for the year. The cost base developed in a disciplined manner in '25. Cost growth reflects the impact from BeLux and recent acquisitions, while the underlying development demonstrates continued focus on efficiency and cost control. As we have seen during the year, efficiency has mainly been achieved within sales and distribution expenses, while we continue to invest in sales and marketing to support our growth ambitions. We are seeing clear benefits from our improved production footprint and initiatives to streamline logistics and distribution operations. Admin cost is increasing compared to '24 as we are investing in digital and have added BeLux to our footprint. The level in '25 is a good baseline for your modeling. This needs to be looked at on an annual basis as there can be some quarterly differences. EBIT increased by 9% in Q4 and by 12% for the full year. The EBIT margin expanded by 90 basis points to 14%, driven by operating leverage and ongoing optimization initiatives with Western Europe contributing strongly, as discussed earlier. Net financial expenses amounted to DKK 254 million for the full year, fully in line with expectations. Tax rate was 20.7%, impacted by the capitalization of tax loss carryforwards. Our normalized underlying tax rate is 22%. Overall, this delivered a 25% increase in adjusted earnings per share in '25. This excludes the impact from the sale of shareholdings in 2024. Now let's move to Slide #10 and look at the cash flow. Let me start with a few key messages on cash flow and capital discipline. We delivered strong cash conversion in '25. Financial gearing remains in line with our targets and ROIC continues to improve. Cash flow from operating activities increased by 9% to DKK 2.4 billion, driven by higher earnings and continued discipline in our net working capital management. CapEx amounted to DKK 1 billion or 6.4% of net revenue. This was below our expected level, mainly reflecting the delay of certain investments into '26. Free cash flow for the year was DKK 1.4 billion. While this is broadly in line with last year, it is important to know that 2024 benefited from the proceeds of sale of shareholdings in Poland. Adjusted for this, underlying free cash flow increased by 12% in '25. Net interest-bearing debt ended the year at DKK 5.7 billion with leverage at 2x EBITDA, fully in line with our capital structure ambitions. Finally, return on invested capital improved to 13%, supported by higher earnings and improved capital efficiency. As previously communicated, Norway and Benelux remains on track to deliver around 10% cash ROIC by the end of 2026. Overall, the number reflects strong cash generation discipline in our capital allocations and continued progress on return. Now please turn to Slide #11. Our capital allocation priorities have been the same for a number of years. We want to maintain financial flexibility, gearing below 2.4 -- 2.5, investment in organic growth with attractive returns, pursuing value-accretive acquisitions when relevant, and finally, return excess capital through dividends and share buyback. This disciplined approach continues to support both growth and shareholder returns. The last couple of years, we have been running at -- a CapEx program above normal level. For '26, we expect CapEx around 7% of net revenue and some delays into '27 as it looks at this point in time. In other words, the lower CapEx in '25 will impact '26 and '27, same projects, same costs, but a slightly different timing. Proposed dividend per share is DKK 16 per share. And today, we start a share buyback program of DKK 400 million. This runs until mid-August, so this is not a full year number. Please turn to Slide #12. Our growth and value creation formula is unchanged and straightforward. We aim to deliver volume growth ahead of underlying markets, value growth through disciplined mix and price pack management, continued operational efficiency and cost control and disciplined capital allocation, including M&A and share buybacks. Together, these drivers support our long-term organic EBIT growth targets of 6% to 8% and 10% to 14% earnings per share growth. Naturally, each year is different. The relative contribution from volume, value and efficiencies will vary over time depending on market condition. And as always, the timing of M&A is inherently difficult to predict. Please turn to Slide #13. So if we look -- if we should conclude on our performance on organic EBIT growth, then we have delivered solidly since 2022, the year where inflation impacted earnings. The drivers of high organic EBIT growth is, to a large extent, the growth framework that delivers volume growth. The teams have also been good at value management and focusing on the parts of the portfolio with good margins. And finally, cost efficiency is a substantial contributor. These numbers also reflect good progress in acquired companies. Our guidance suggests that our plans for 2026 are solid, and we continue the strong trend we have had in the recent couple of years. ROIC is also on a positive trajectory, and we expect this to continue in the coming years as we harvest the benefits from acquisitions in the past years and solid organic growth in earnings. Please turn to Slide #14 and the 2026 outlook. We continue to expect a challenging consumer environment across our markets, and our guidance reflects a cautious and disciplined approach. For 2026, we expect organic EBIT growth of 6% to 10%. This is ahead of our long-term target of 6% to 8%, building on the strong margin and efficiency improvements delivered in '25. We no longer guide on net revenue, but if you model net revenue for '26 to be broadly in line with 2025, then that would be a fair assumption. This reflects continued underlying growth in our beverage business, offset by the exit of lower-margin activities. As previously communicated, these exits are expected to reduce reported net revenue by around 3.5%, impacting mainly the Northern European segment with no impact on volumes or expected EBIT. Net financial expenses are expected to be around DKK 250 million, excluding currency effects, and the effective tax rate is guided to be around 22%. CapEx is expected to be around 7% of net revenue, including repayments on leasing facilities. We expect limited commodity inflation, which we plan to offset through efficiencies and improved net revenue per hectoliter. Profitability in 2026 may, as always, be influenced by changing consumer sentiment, channel mix, the competitive environment and weather conditions during the peak season. And with that, I'll give you the word back to Lars. Lars Jensen: Thank you, Lars, and let's move to Slide #15 for sustainability, which remains an integrated part of how we run the business. It supports our efficiency, our resilience and long-term value creation. On this slide, we have listed some of the most important targets. We will not go into details with those now, but there's a comprehensive 70 pages in the full year statement for the ones that are interested in the details. Now please turn to Slide #16. Looking ahead to '26, our management agenda is clear and a continuation of '25. We continue executing on growth strategy across our markets. Innovation remains a key priority as we expand and refresh our beverage portfolio to stay closely aligned with the consumer trends. At the same time, we will maintain a strong focus on operational efficiency. Sustainability remains firmly embedded in how we run the business, and we will continue to make progress on our agenda here. And finally, everything we do is geared towards delivering on our long-term financial targets. The picture here shown the Norwegian Uno-X Mobility Cycling team we just announced a partnership with. Looking forward to see the effects for our Faxe Kondi Hero brand on that one. Now please turn to the final slide, which is Slide #17, and let me wrap up with the key takeaways. We delivered a solid financial performance in '25, fully in line with our guidance. Performance was strong across markets, supported by disciplined execution and continued growth in our priority categories. Operational efficiency remains a key driver, and this is clearly reflected in the margin expansion we delivered during the year. At the same time, strong cash flow generation and a robust balance sheet gives us the flexibility to continue investing in the business and returning capital to shareholders at the same time. Looking ahead, we expect organic EBIT growth of 6% to 10% in 2026, reflecting continued focus on profitable growth and efficiency in a still challenging environment. Thanks for your attention, and we are now ready to take your questions. Operator: [Operator Instructions] We will now take the first question from the line of Aron Adamski from Goldman Sachs. Aron Adamski: I have 3 questions. First, on Netherlands. Can you give us an idea of where your EBIT margin stands right now? Is it still around high single digits? And given you're launching new pack formats there, can you give us some color on how the single-serve mix in that country compares to your other Pepsi businesses? My second question is on the efficiency agenda. Could you give us some color on how much EBIT uplift do you expect the new warehouse in Denmark and the site closure in Norway to deliver within the guidance that you announced? And also what other efficiency projects are on the agenda for this year? And how do you expect them to be phased? And third, the last question on M&A in light of the press headlines we've seen yesterday. Can you please give us an update on what type of deals are on top of your M&A agenda? And if you were to add a new country platform, what are you looking for in a potential asset? Lars Jensen: Yes. If I start maybe with the last question, our M&A priorities have not changed at all. So we would always -- if you rank them in terms of optionality, profitability, likelihood of success, it's always the optimal to bolt on to what we already have. And we have previously highlighted a number of countries in that respect where the organization is ready and where our market positions is not so big that it will be difficult for us to put anything on top. So the priorities have not changed. I would say just one thing, and that is that in this environment that we are seeing out there and when the ones that was rumored to be acquired by us, the Brewdog business, when assets like that or other assets locally come up for sale, there's often -- if you can move fast, there's often a relatively big upside to these type of businesses, assuming that you have an organization in place that can turn these businesses around. We have done it to a smaller extent with assets in our multi-beverage markets. So we will continue to be scouting for those, and we have to be very opportunistic with that kind of M&A activity. If we move to Netherlands, I'm not going to give you a specific number on the margins, but the EBIT margin is moving upwards. We have had a strong focus on moving in a direction where we become competitive. The efficiency levels in the acquired business was not at a level where we were competitive in the marketplace. It's a bit of the same exercise as we went through in Finland more than 10 years ago, which was also the case when we bought that business, we were not competitive in the market. So we have put a big focus on the people agenda, on the efficiency agenda. And that is one of the reasons why that we are building the business. And then the other one that we mentioned in the call is obviously our price pack promotion architecture that we build into it. The first layer was to look at the promotional activity and seeing what is value adding, what is not value adding. And then building the capabilities with, in particular, the new canning line so that we can move into the single-serve propositions, as you mentioned. So we are -- and you say in Pepsi businesses, it's not just about Pepsi businesses, it's all the brands, including Pepsi. And there's no doubt about that the Dutch business is under-indexing on single-serve pack formats. And that is one of the potential drivers for the next many years that we see. So the market is behind compared to the most developed markets in terms of the mix between small pack and big pack. And then we are even under-indexing on that one. So that is a key pillar for the future. Now negotiations, some of them are already done. Some of them are being close to being finalized and so on. So for the Dutch business, I think we need to look at the numbers when we report on Q3 and it's through the high season, then we know if our initiatives have really paid off. And then I'll let you, Lars. Lars Vestergaard: On the efficiency piece, the way we look at the market right now is that consumers and customers are looking for affordability, and we have been under pressure for a number of years. This means efficiency is super important across our business, and that is a theme that we have been running. If you look at the guidance we have for '26, if you just look at our normal growth framework, then you would have 1/4 coming from volumes, 1/4 from value management effect and then half of it coming from efficiencies. This year, we are expecting to deliver more than half from efficiency. So there is a substantial number in our bridge that comes from efficiency this year. Of course, it's early in the year. So things can change, and we remain flexible to ensure that we take the opportunity that presents itself. So we are across the business, looking very intensively into ways of working. We have been trimming on people across the business. We have been looking at complexity, how can we do things simpler. So it's an awful lot of initiatives. The 2 major projects you mentioned, so site closure in Norway as well as investments into efficiency in the main site in Norway is a substantial contributor to the 10% cash ROIC in Norway. If you look at the warehouse in Denmark, this will have a substantial impact on EBITDA as a lot of the costs that we used to use on external warehousing and logistics costs from our site, and Faxe 2 other sites that converts into depreciation. So it has a very attractive impact on EBITDA and a very nice impact on EBIT as well. So it is a substantial contributor, but we don't want to give you the numbers. But I would say in terms of the warehousing, it's also a way to make certain that we are in control of the business because with the growth that we have seen in volumes coming out of the Faxe side over recent years, you cannot be in control if you have products standing all over the country. So this is a way to really get our hands around the business and get in control with an extremely streamlined logistics setup in Denmark. Operator: Our next question is coming from the line of -- one moment, please, Thomas Lind Petersen from Nordea. Thomas Lind Petersen: Also 3 questions from my side. So the first one is regarding your EBIT guidance, 6% to 10%. And then maybe just following up on the previous question, I guess. Could you help us with a bit of the EBIT growth driver elements in that 6% to 10%? You're saying a lot about efficiency here, Lars, but more specifically, is it freight costs from Italy? Is it Benelux, Norway? If you could help us quantify some of that, that would be great. And then a question regarding consumer sentiment in, I guess, the Nordics is probably the most relevant. And just your expectations here. You're still seeing a challenging consumer sentiment, but we are getting tax cuts in some countries and various stimuli from governments. So just wondering here if you don't see anything that could sort of at least help a bit with the consumer sentiment in -- at least in the Nordics. And then the final question would be regarding your EBIT margin. I think if everything pans out as you now guide for 6% to 10% EBIT growth and then basically no top line growth, then we are getting close to an EBIT margin around 15%. I think I remember you mentioning that you have previously worked internally with a 15% EBIT margin as a target. So just wondering where we could go from here. I know you obviously previously had a 20% to 21% long-term EBIT margin, and we will probably not go there at least in the short term, but just try and help us a bit how far can we go? Is 18% or 17% is that realistic in a long-term scenario? Lars Jensen: Thank you, Thomas. The sound was a little bit bad. So I hope we got all the details of your questions. When we look at the consumer sentiment, I think it is generally consumers are a bit reluctant still to go out and spend a lot of money and that's the same scenario as we have seen for a number of years. That said, there's a number of categories where the consumers are actually willing to pay, say, an extra money because they see that they get an added benefit to what they buy. And that may be a perceived value or it's a real value. And that goes straight along with our growth category framework. So if you look at a category like energy drinks, consumers are less price sensitive than they are in a category like carbonated soft drink or mainstream beer. So when we're talking about this, it's as an overall assumption because that is what we see in the marketplace. But there is ways around how to play this in the market, both by category but also by price pack and promotion. So we try as much as we can to -- in the environment that we have today, we try to cater for that in many different aspects. And that's the reason why that you would also see that our bottom line is increasing a bit more than our top line. So that is a whole smart thinking and on top of that, of course, the efficiencies. So that's the environment that we see. People are saving more money than spending more money. It's not a catastrophe, but it's a different toolbox that we need to use. So stimuli or not, it's not something that we see immediately convert into to a different consumer behavior. And then on the EBIT margin, before I hand over to Lars, what we have said is that we believe that with the current makeup of our business, with the mix of the segments that we will be able to take to mid-single teens in terms of EBIT margins. And it's always a balance between absolute earnings growth and EBIT growth from a margin point of view. And so it's difficult to give you a clear answer to that. And this is actually not how we manage the business. That is not towards a specific target. We manage the business towards the growth rates of the EBIT bottom line. And at the same time, as we do that, we want to make sure that the quality of our earnings is intact or is improved. So that's the way that we operate. So we do not have an internal or have had an internal target of hitting 15%. Lars Vestergaard: Yes. So I would say in terms of efficiency and where it comes from, it actually starts in a slightly different place. And as Lars mentioned, quality of earnings and how we run the business is where it starts. So we have a number of people. We have a number of assets, and we really want to make certain that people spend their time on something that generates profit. So in terms of the revenue lines, we're not guiding on it and revenue is not the key driver for us. It is really how can we make certain that the time and the assets we have are utilized in the most effective way to drive organic EBIT growth and make certain that we don't overinvest so that we make certain that if you have low-margin business that requires CapEx that we really put very low down on the priority list. So in terms of the theme that we are running, it is really to make certain that we have clear priorities everywhere in the business about initiatives that you spend time on that they are generating high-margin business. We exit promotional activities with no value. And that, of course, have an effect on the whole cost line. So if you don't spend your time on low-margin business, then you can be more efficient in your salary lines and the assets are used in a better way. And that will give us a higher EBIT, so return on capital employed. So it's not -- what you can say, EBIT margin is not our ultimate target. If we can make a lot more money by compromising EBIT margin a little bit and not investing too much, we will do that. The ultimate target is that we have a high return on capital employed and solid cash conversion. Operator: We will now take the next question from the line of Matthew Ford from BNP. Matthew Ford: I've got 2 questions. The first one is just on sales. Obviously, you just touched on it. And clearly, the sales guidance for the year has sort of -- is a bit more informal than in previous years. But if we think about the sort of flat revenue progression in '26, obviously, you have the impact from the exit of the Snacks business. So underlying, it's sort of 3.5% growth. That implies a bit of a step-up versus the momentum we've seen in 2025. So it would be interesting just to get your sense of where across the business would you expect that to be driven from? Are there any areas of the business markets or categories where you would expect a sort of sequential improvement for any reason in '26 to hit that sort of underlying number? And then the follow-up is just on pricing specifically, obviously embedded within your top line growth. But great to get a sense of your expectations for pricing for 2026 and anything that we should be thinking about in terms of the contribution there? Lars Jensen: Yes. On the net revenue side of things, I think if you look at the quarter, we are organically delivering 3.7% organic net revenue growth. So we are flying faster out of the year than the start of the year. And remember that BeLux now is fully comparable when it comes to Q4. So with the guidance of around where we ended the year for '25 is actually a continuation of the flight attitude that we have established going out of the year. So we don't see the discrepancy that you're alluding to here. With the mix of markets and what we have also said during the call, we have a strong underlying momentum in the business in international. We have it in Italy. We are growing beyond the market in France. We are seeing top line growth is strengthened in the Dutch operation during the second half of the year as our changed, I would say, strategic focus is paying its way. Norway is back to growth since June. We are gaining share. We are winning in important categories, and we have launched soft drinks into that market as well. And then you have the old markets, so to speak, the big markets. And that's, as Lars is saying, that's a choice. We are -- in those markets, we are generally around 30% market share by value in those markets. We are big enough. So of course, we want to gain more volume. But if it's a better choice, not to push too hard on volume and get more from a price pack promotion architecture optimization, then that's the choice. And that brings me into your second question around pricing, which I'm not going to give you any details to that. But I think it's fair to say that when you look at the total market for beverages, there has been a period of time, in particular, in alcohol, where prices have probably, I would say, gone too high and where consumers tend to see that it is becoming more and more expensive and affordability is an element that needs to be thought about. Whereas when it comes to the soft drink side of things and the growth categories with enhanced, they will drive the mix in a higher position of net revenue per hectoliter. And then you have a lot of market mix that you need to put on top of that. So when we look at it, we are not in a super inflationary period. We see consumers that are reluctant to spend and have been that for quite some time and is hunting more for offers. And it's in that environment that we will do our best effort to try to massage the average up, and that can be done by hard price increases, smart price increases, changes of price pack and promotion. And we have all in play and in particular, in the multi-beverage markets. Operator: We will now take the next question from the line of Richard Withagen from Kepler Cheuvreux. Richard Withagen: First question on Finland. Yes, maybe -- I mean, you probably assume that, that will continue to be a challenging market in 2026. Are you changing anything in terms of commercial tactics in Finland in 2026? And maybe you could also give some sense of how the sugar tax or the change in the sugar tax will impact your business in Finland in 2026? And then the second question is on a bit longer term, but you obviously have the medium-term 6% to 8% EBIT growth objective. And Lars Vestergaard already talked about some of the M&A that contributed to growth in the last few years. So what are the opportunities you are looking at to at least deliver on the higher end of this 6% to 8% range in the next, say, 3 to 5 years? Lars Jensen: Good. If I take Finland first. Commercial tactics, we are always massaging and changing our commercial tactics as we go along. We are not changing anything, I would say, significantly compared to what we have done in the second half of '26. So that's a lot along the same lines. I think the biggest thing that we see is in the alco space, where first, that's more like 1.5 years ago, we saw the change in legislation. We saw these fermented beverages with less than 8% alcohol or 8% alcohol coming into the retailers. They took a fair chunk of the market. That is now churning, I would say, back again. So growth have gone out. Shelf space is shrinking and that shelf space is moving more into the hard seltzers and alike, cocktails and with less calories and slightly less alcohol. And in that category, we have done a magnificent job, I would say, over the last 6 to 9 months. After one of our competitors came in with a sharp price point and moved the market, we are now close to being market leader in that category. So a magnificent job done by the Finnish organization. So yes, so this is where we see the biggest change, I would say. And then in general, we still see on-trade in Finland being on the soft side. affordability in on-trade is an issue. So this is also where we are working on how together with the outlet owners and how to increase traffic. And when consumers have entered the bar, the restaurant that they stay for longer. So we are working on various initiatives to help our customers in that. And then I would say, finally, on the sugar tax, if you look at our non-alc portfolio, it is skewed much more towards no/low than the general market. So if anything, it is going to be an advantage for us, but too early to do any conclusions on that as it is fairly early. Lars Vestergaard: And the 6% to 8%, I think the recipe is pretty clear. It is -- make certain that we continue to focus on the growth framework, as Lars explained. And this is a key driver across all our business that is to make certain that we move our business more towards categories that are in growth. They typically also have better margin dynamics than the ones that are in decline. An awful lot of work, as Lars mentioned, on value management, make certain we focus on the SKUs that have higher margin, and we are very cognizant of how much deep promotional activity we participate in. Operating leverage is a key thing for us. We are on top of the cost in all markets. And then we try to do a few structural projects again and again that takes structural cost out of our business. We've mentioned a few today with closing a brewery in Norway and optimizing our logistics footprint in Denmark. But we are building a pipeline of these things, and we need to execute a few of these. And then, of course, we have a strategy to do bolt-on acquisitions. So in the markets where we already have an operation, when we buy businesses, these normally generate not only in the first year, but also in the years following that, good opportunities to deliver EBIT margin -- EBIT growth. So bolt-on acquisitions is a key enabler for continued high organic growth. So this is the way we look at it. And I would say, I think we have been given a gift from our predecessors who made certain that we had a portfolio that was skewed towards growing categories. And I think the work that has been done over the last years to really focus on that, that is a very, very strong enabler of our future growth. Operator: We will now take the next question from the line of Nadine Sarwat from Bernstein. Nadine Sarwat: Yes. So just one question from me, circling back on the topic that was discussed earlier is M&A. You spoke about having previously discussed countries that are attractive from your perspective to potentially enter. Could you refresh our memories to your latest thinking on which of those markets are the most attractive and then more specifically, how the U.K. might fit within that? Lars Jensen: Yes. So on the M&A side, we -- I would say, we have seen -- the Italian team, as an example, have done an excellent job on the LemonSoda acquisition. We have changed totally the business from being a one legged beer business to now have multiple legs. We acquired the brewery in San Giorgio that has been also with help from group supply chain have been totally transformed in a fairly short period of time, has taken over the production for the market and is now a stand-alone operation. If the right proposition would come or pass by in Italy, I think we will be very curious. We have an organization that can deal with it, and we have a strong trajectory that can support that. And then bolt-ons, as I also talked about earlier on, those are highly valuable. We have seen recently the bolt-on of the spirits portfolio in Finland. And I think you can see on the inorganic numbers in Q4, how strong that proposition is building up. So it was an asset that was a part of a really worldwide international business where local brands were squeezed. And by getting them into our portfolio, it really enhances the thinking around the brand, enhance the distribution, the quality of implementation and so on, and it immediately delivers results. So those type of acquisitions, we are, of course, super curious on. There's not a lot of them, but we are very curious on them. And then there's a couple of other markets. Take the Dutch market as an example, we have seen a buildup of profitability. We are seeing that the revenue generation is now going up. We bought a business that literally was flat to declining. So the turnaround is -- I wouldn't say almost completed, but at least the trajectory is totally different than what we acquired. At a certain moment of time, we believe that, that business would potentially be ready to be a consolidator in the Dutch market, which is not a very consolidated market. So depending on the maturity in the different markets, the performance in the market, the organizational stability in the market, we evaluate all the time what is doable and what is doable. And at the end of the day, it always relates to an active seller. Are we super keen on moving into new markets as we speak only if it is something that can deliver a high return on invested capital fairly fast and with not too much risk. So that's the way that we look at it. Operator: We will now take the next question on the line of Mitch Collett from Deutsche Bank. Mitchell Collett: Lars, I think you talked about admin expenses stepping up the digital investments. So could you give some color on where those digital investments are being targeted? And I think you mentioned that it might impact -- there might be some phasing impacts of that admin step-up. So can you maybe talk about what those phasing impacts are? And any other thoughts on how we should think about phasing across fiscal '26? Lars Vestergaard: Yes. So actually, when I talked about phasing, it was actually more a comment on the comparison quarter in '24 where admin expenses in Q4 was pretty low. If you look at admin expenses across '25, they are, I would say, fairly stable and at a level that we believe is the level we look at going forward. So that is what you say, the level that we expect into the future. To drive efficiencies, digital investment is super keen because that's really the place where you can drive a lot of efficiency. So we are looking at a number of tools that can help efficiency across the business, and that drives some IT costs, but also IT has been used to integrate some of the acquisitions we've had. So BeLux have been integrated in '25 into our SAP platform, and there was a number of projects in Norway and in Denmark that we have been executing. So we have been investing more into IT programs to deliver on the efficiency agenda. It's not something that's going to be a material step up from here. So it's just to explain why the number is increasing slightly from '24 into '25. '25 is a good baseline for modeling going forward. Operator: We will now take the next question from the line of Andre Thormann from Danske Bank. André Thormann: I just have 2 questions. First, maybe can you elaborate a bit on how this goal of reaching 10% cash ROIC in 2026 for both Benelux and Norway will contribute to EBIT growth in '26? And maybe the second one on your long-term guidance of the 6% to 8%. Now you have delivered 10% in '25 on organic EBIT growth and you can potentially deliver 10% in 2026. So does this target seem maybe a bit conservative to you? That's my questions. Lars Vestergaard: So if we start with the long-term targets, then we've been above for a couple of years. I would say that it is the synergies from acquisitions that are starting to help us. So we are getting good help from Norway, Sweden and from the Netherlands on these numbers. And then, of course, we have a few CapEx investments that are also helping into '26. And on Norway and the Netherlands, we -- the plans are very clear. We have a lot of good initiatives in, and we can see the run rates are improving in both markets. So we are on target to deliver 10% cash ROIC in both Benelux as well as Norwegian plus the Swedish and parts of the Finnish assets because when you look at the cash flow target for Norway, it includes the business in Sweden as well as a small piece in Finland from the Solera acquisition. So all plans are clear, clear building blocks from -- that is already paying off in '25. And then in '26, there are a few big items that really moves the needle in both Norway and Netherlands. André Thormann: Okay. And maybe just a follow-up on BeLux. Do you still expect that will be a positive EBIT in 2026? Lars Jensen: We are assuming with the initiatives that we are taking currently, we will be assuming not that it's going to be positive, but it's going to be quite neutral on EBIT level. So that's the core assumption for the year. Operator: We will now take the next question from the line of Soren Samsoe from SEB. Soren Samsoe: Just a follow-up on Norway and Holland. So if you could update us a bit on the commercial improvements you're seeing in Norway and Holland and how that's progressing? That's the first question. And then an update on the platform and also the cost base in those countries where you have done restructuring during the second half. Where does this leave you in terms of cost base and operational leverage going into 2026 if you see more volume growth in these markets? Lars Jensen: Yes. We -- so I wouldn't call it restructuring. Soren, that's a big word. We are always adjusting our organizations, as the market changes and our performance is changing and we see opportunities in the market, and we are massaging in some areas, we are taking some admin people out and then we are putting more people into the field. So we do that all the time, and that's also why we do not have anything that we call extraordinary costs because what we do is ordinary course of business. It is changing the flight attitude. Lars talked about efficiency initiatives. So it is changing the flight attitude of the fixed cost in relation to net revenue, and thereby, we create the operational leverage. So we're well positioned, assuming that volume will grow a little bit. We are well positioned to take the benefits of that. And that goes across all countries. It's not just relating to the newer markets like Norway and Netherlands, yes. Soren Samsoe: Okay. So it sounds like we could see some improved operational leverage there. But also another -- just a second question on Italy, where you've seen very good progress and also France, I guess. But Italy is, of course, a much bigger market. The exit rates we're seeing there and the flight attitude as you call it, could that continue into '26 as you see now? Lars Jensen: When we look at the Italian business, we are growing both share and beyond the market in volumes, and it is about a 6% growth, which is not what you would see reported because we have less private label. Now private label over time is, of course, less and less of the totality. We will still keep ourselves open-minded in terms of, I would say, sweating the assets. But what we -- so what we are exiting is the glass bottle private label because chillers is growing rapidly. So in that respect, we are taking one in and one out, but with a much, much higher margin. There is, of course, a limit on how much we can take out of private label because then it's not there anymore. What is left now is what we would call strategic private label because this is with customers where we also do business on our branded portfolio. So this is the status of the Italian business. Operator: We will now take the next question from the line of Andrea Pistacchi from Bank of America. Andrea Pistacchi: I have 3 probably quick, quick questions. The first one, going back now to Netherlands and Belgium, the improving top line trajectory that you're starting to see and the commercial initiatives there. Can you just highlight where your main wins are? And then what -- I mean, over the medium term, as you do better revenue management there, you probably gain share, what sort of top line growth would you expect from Benelux? Can it grow, I don't know, 3%, 4% for you? What do you have in mind? Second, probably a very quick one, costs of exiting Snacks. Have there been any -- have you booked anything in Q4 for this? And how much, please? And the third one, in the last 6 months or so, you've alluded to probably more difficult pricing environment in carbs in Denmark, mainly and probably also Finland. Just an update on that. And is this connected in any way? I think your price/mix in Northern Europe was flattish or thereabouts in the quarter. I mean there's clearly lots of mix effects in there, yes, but if you can comment a bit on pricing in those markets. Lars Jensen: Yes. So second question first, exit cost of Snacks. We have had none. So that has been done in a very smooth way, both from us, PepsiCo and the partner that has taken over. So well done for everybody. When it comes to pricing in general, I think what we see is, again, back to what I said earlier on that in the more mainstream parts of the market, we do see from time to time, and it changes from market to market, some activities that is more volume-driven than value driven. What we, of course, do not have insight into from a competitive behavior point of view, is this is driven by the brand owners or the brand implementers or is this is driven by the trade that wants more traffic in the outlets. It's probably a combination. And when you look at the pricing in the fourth quarter, it has, from a consumer point of view, been more attractive. So slightly deeper on promotional pricing than what we have seen. We have -- so our average pricing for our main categories is not very different than it was a year ago, but where we see some of our competitors have been with average pricing out of the stores at a lower level upon their choices or upon the store's choices, we don't know. But it's not something that is new. It's something that happens occasionally in markets and in categories, yes. Lars Vestergaard: Okay. Just on value management, I think one of the things that is a key, what do you say, tool in the -- right Unibrew toolbox is that we have very granular data on how much money we make on individual screws, on promotions, et cetera. And I would say when we have acquired companies, one of the things we often do is to really make certain that we have that data available for the acquired companies and really make certain that we move the focus towards the segments where we do make money. So that's the first step we do when we start to integrate acquisitions. And that is giving us some good wins in Benelux and Norway as we get more granular insights into where we make money. And then we have a team that takes best practice across the markets and work together with the local organizations to ensure that our price pack architecture is strong in each market, and then we are very focused on the segments where there is money to be made, and we deprioritize the segments where profitability is low. So this is very much about the basic financial ways of working that you focus on where money is made. But of course, when you look at some of the markets and the market share gains we've had in some of the Nordics, we have seen reactions from competition in terms of price because our market shares are growing very strongly over a number of years in -- particularly in Denmark and Finland, where we have been very successful. Andrea Pistacchi: And if I may, sorry, my sort of first question on Benelux, would you expect, as you do more of the revenue management as you've got everything in control now, would you expect the top line trajectory to improve there? And what's the sort of growth ambition in these markets? Lars Jensen: Yes. But I also said it a little bit earlier, Andrea. I think we're doing a lot of changes on price pack. That's predominantly in Holland. We are changing our promotional priorities, which we have seen the effect of positively in the second half of the year mostly. And the success of the new strategy, we'll have to rely on seeing what is happening over the summer in the conversion of selling less big pack sizes at low prices, converting into smaller and instant size consumption occasions. We have had, I would say, a really strong reception by the trade. But of course, the next layer is the consumers. So we'll have to be a little bit patient to conclude on that. But our overall idea about BeLux and Holland and for that matter, Norway is that the trajectory that we bought, which was more kind of like flattish and even to declining businesses is something that we can fix, will fix. Some of it we have fixed. And thereby, we should be able with those relatively small market shares that we have in those markets, we should be able to outgrow the market. So that's what we want to achieve. And with that, I would like to thank everybody for participation. As usual, you know where we are, give us a ring, write to us, and we will be available. Thanks a lot, and enjoy the day.
Conversation: Rodrigo Caraca: Good morning, everyone. Welcome to the video conference regarding Iochpe-Maxion's Fourth Quarter 2025 Results. I'm Rodrigo Caraca, Senior Investor Relations Manager at the company, and I will be leading this video conference. Today, we are going to have Mr. Pieter Klinkers, CEO; and Mr. Renato Salum available for the question-and-answer session. Please be advised that this video conference is being recorded and will be made available at the company Investor Relations website along with the presentation. We'll be having Mr. Pieter Klinkers presenting in English. For your convenience, simultaneous interpreting into Portuguese and English will be available. [Operator Instructions] Before proceeding, we would like to clarify that any statements made during this video conference regarding the company's business prospects, projections and operational and financial targets constitute the beliefs and assumptions of Iochpe-Maxion's management as well as information currently available by the company. Future projections is not a guarantee of performance. It involves risks, uncertainties that may or may not occur. Now I would like to give the floor to Mr. Pieter Klinkers, CEO for Iochpe-Maxion. Please proceed. Pieter Klinkers: Bom dia, and good morning to everybody from rainy Sao Paulo, but I hope it's still a good morning for everybody. Let's jump into this presentation. And as usual, we start with having a look on the global markets. If we look at light vehicles, it's different than commercial vehicles that you see on the right side. Light vehicles kind of flattish in 2025 versus 2024, whether you look on including China or excluding China, it doesn't matter too much. We used to look at global production ex China because that's a more relevant market for us, but kind of flattish, and we expect the same to happen in 2026. That doesn't mean that everything is flat. I want to remark here that, for instance, 2 markets, Brazil and India, that are important markets for our company. Those markets show more meaningful growth, we believe, in 2026, and that would be good for our company. If we look on the out years there, there's a little bit more growth, like 2% or 1% to 2% per year, and that would bring the light vehicle market back to a volume of about 95 million to 100 million vehicles in the year 2030. If we look on the commercial vehicle side, it's more dynamic there. And unfortunately, in 2025, as everybody knows, it was negative dynamics primarily, but not only in initially North America, then also South America, but also the European market, especially at the end of the year was not great. And so overall, minus 7% in 2025 versus 2024. That's a meaningful downturn. 2026 looks better, and we take that. And I think it's more or less in all the regions that people foresee, and we concur with that view, markets should be better. Just the year 2026 you look at North America, and we will talk a little bit more about North America during this presentation. Like we did in the last presentation, that market is still down 4% to 5%, people say, but we take it because the market was down so much in the second half of 2025, 30%, 40%, especially in the heavy vehicle market. Some of you may remember, I talked about it in the last call, that is the most important market for us is the heavy vehicles, Class 7, Class 8 that we supply from our structural components unit that was hit the most. And if that market comes back to only being minus 5% compared to 2025, taking into consideration that the first half of '25 is pretty good. That means you need to have a good increase during the year 2026 to get back to more or less the volumes that we had as a whole year 2025. So North America, we take that number. And what we see so far this year, it is confirming that. We don't have an outlook for the second half of the year yet, but the first 3 months of the year are in line with the assumptions that we took for the North American market. We believe Brazil will be better, especially in the first half of 2026. And we also believe Europe will be better. That's what we see happening as well. And Asia for us, most importantly there, India should show solid growth as well. So more optimism from a point of view of the truck market for 2026. And then if you look at '27, '28, a little bit more out, that's pretty significant growth. That's good growth. And so even if that materializes to a good extent, not completely, maybe even more. But if these numbers are more or less true, then our company is very well positioned to benefit from those market trends, because we all know that even in the year 2025, and we'll see that later on, even in the year 2025, there where it was possible, like in Europe or like in Asia, we outperformed the market. And so if the market comes back and we keep our performance, which definitely is the aim, and I think it's going to happen, then we should be very well positioned for those numbers -- to capitalize on those numbers. All right. Enough on the market. Let's look at the numbers on the next slide. Our net revenue in 2025, really a mixed number because the first half was pretty strong and then the second half, initially only because of North America truck and then, let's say, during the third quarter, especially the fourth quarter, the Brazil truck production went down, and that hits us not only in our components division in Brazil, but also in wheels. And so that trended our numbers down in the second half of the year. But overall, in the year 2025, we still came up with BRL 15.3 billion turnover, which is slightly up versus 2024. Our gross profit in the fourth quarter of 2025, despite all the drama in North America and also in Brazil from a commercial vehicle point of view, still at 11.7%, which took us to 12% gross profit margin for the whole year, which we believe is a pretty solid number given the circumstances. Our recurring EBITDA, pretty much the same as on the -- same story as on the gross profit, 9.6% in the fourth quarter and still a double-digit margin in 2025. Again, despite that situation in commercial vehicles in the Americas, which is a very important market for our company, we were able to realize double-digit margin over the year 2025. Leverage, 2.65x in the fourth quarter of 2025. That compares to 2.55x in the third quarter of 2025. But we need to keep in mind here that we lowered our forfaiting of factoring by about BRL 100 million. And so if you neutralize that effect, our leverage would actually be pretty much the same in the fourth quarter 2025 than what it was when we talked to you guys about the third quarter 2025. Okay. Now if we look on the revenue by product, it's obvious that our components unit is hit in North America and South America because of commercial vehicles. Our wheels unit is hit in Brazil -- was hit in Brazil because of that. Not in North America, because from a wheels point of view, we supply also truck wheels to the North American market from Mexico, but we supply the medium truck segment, and that was a very different picture, also slowing down, but much less than what we saw in the heavy truck segment. And therefore, instead of having a split of roughly 75% wheels and 25% components in 2025, that number looks more like 80% wheels and 20% components. If we go to the revenue by customer, it's pretty much the same effect that you see there. Just 2 examples there, you see Traton and Daimler which are big customers for our company for components in North America. Their revenue as a percentage of our total revenue goes down meaningfully, but it's being made up by other customers like Toyota, like Stellantis, like Ford, and those are typical wheel customers, of course, light vehicle customers that we serve through our wheels unit. And we were able to not make up completely, but mitigate to a large extent, those impacts that we saw for components in North America in the second half of 2025. If we go to the next slide and we look a little bit more on the regions. Starting with South America. I think this number shows that we have been outperforming the market. Both light vehicle production and commercial vehicle production ultimately was down in 2025 in Brazil, but our revenue is up. Of course, it was more up in the first half when truck was still okay than it was in the second half. But overall, the revenue is up. And of course, that has to do with us outperforming on the light vehicle side, which is the wheel segment, where primarily we did very well from an aluminum wheel point of view that didn't make up everything in the second half. You see second half, fourth quarter was still down, but less than the market. And so again, a mitigating factor of the headwind that we had in the Brazilian market. So market not so good in the second half, but Maxion at least mitigating partially that market effect. If we look on North America on the next slide, this is the drama that we have been talking about that you can read about everywhere, and it has been hitting us hard in the second half of the year. If you want to hear good news about that market, I can tell you that the fourth quarter was not good, but it was a little bit better than the third quarter. So let's see if that's a trend that will continue into 2026. What we saw in the first 2 months is in line with the targets that we put ourselves. And those targets are mostly based on the data that we showed on the first slide that comes from global data from IHS. And so we don't have a visibility yet for the whole year, but at least the start of the year is in line with the assumptions that we took for this year. And so a big impact in North America, but the fourth quarter, at least being a little bit better ultimately than the third quarter. We go to EMEA, which is Europe, in our case, Europe, Turkey and our plant in South Africa, we clearly outperformed the market. I think you see light vehicles was slightly down over the year. Truck was more or less stable over the whole year in Europe, was down in the fourth quarter, was a little bit up in the beginning of the year, but more or less stable over the whole year. And so us being -- having 18% more revenue on truck is a pretty strong number and us having -- Maxion having 13% more revenue in 2025 than what we had in 2024 shows that we are performing solidly or strong, I would say, in this important market for the company. And that's largely based, not only, but largely based on our position that we have in the truck market there. And so that's not only good for the region. It also has been supporting our global results, which if we would have only been acting in North or South America, those would have been impacted more -- impacting more than what we now see in our overall consolidated results for the company. We go to Asia. I've been saying in the last few presentations that my expectation would be for Asia to start playing a bigger role in our overall revenue and margin situation. And we see that happening. It starts happening in the fourth quarter of 2025 this time in [ pass car ], where the market is good, and I think Maxion is outperforming the market there. And our aim certainly will be to continue that trend and also to complete it with truck. My expectation for truck also both for India and for China next year is this year is positive. And so we saw the start of this region outperforming or supporting our results more significantly happening at the end of last year. And our wish is for that to continue not only in '26, but going forward. India, which is the most important location for us in Asia, I would say, it's a very good place to be nowadays. And we're well positioned there. And as we talked about in other presentations, we have a couple of plans in the drawer to do even a little bit more in India going forward. With that, go back on the next slide to some numbers. And so as we talked before, our margin, I think, both in the fourth quarter of 2025, our gross profit margin as well as for the total year 2025, very much in line with 2024, which I believe based on the sudden reduction that we saw in the North American truck market and then also in the Brazilian truck market, that's a pretty solid result, a result that we would have signed up for when we would have known what happened in the second half of the year in primarily North America. If we go to the next slide, it's pretty much the same story on our EBITDA margin, 9.6% recurring EBITDA margin in the fourth quarter of 2025 with that market situation in the Americas from a truck point of view is, we believe, a solid result. And then the 10.1% margin that we delivered over the whole year, double-digit margin with those sudden drops in the truck market in the Americas is also something that we believe is a good outcome for the company. We look on the next slide, the net income. It's a little bit more depressing story, both for the fourth quarter of the year as well as for the total year. And here, you see the reduced income in CV, of course, which you also see in EBITDA, especially when it's not recurring EBITDA, but you see the higher restructuring cost here as well. And also financial expenses, we were not assuming the SELIC to be at the level where it was during most of last year and where it is today. And so that has been hurting many companies, including our company. And also, we had higher taxes in this quarter, particularly in the quarter 4 of 2025 that hurt our net income. And actually, instead of being slightly positive, now it was a negative net income for the quarter. We go to the next slide, look at our investments. We said we have good discipline in place regarding investments. And I think we delivered on our targets, which was to have a meaningful reduction in 2025 versus what we invested in 2024. A little bit more in the fourth quarter, but that was a managed action. We were pushing out some CapEx from more in the beginning of the year to more towards the end of the year. But the final number for the year, the BRL 554 million that you see on this slide is a meaningful reduction versus what we showed -- what we invested in 2024. Go to next slide. You look at our leverage, I talked about it, went slightly up quarter-over-quarter. But then again, the BRL 100 million less factoring that is included in that number basically brings back the leverage to kind of the same level than what we had in -- sorry, in the third quarter of 2025. We go to the next slide. Look at the gross debt, there's not a lot of change here. I think there's still very manageable amounts of debt for 2026 and '27. And then, of course, we have a little bit more work to do to prepare ourselves for refinancing our bonds in 2028, which we will do. And at the same time, we have a lot of cash liquidity available, BRL 1.6 billion in cash and then on top of that BRL 760 million of undrawn credit lines. So I would say a healthy situation from a debt point of view on this slide, like we explained in prior presentations. We go to the next slide. Usually here, what you see, if you remember, we show a few new business wins regarding wheels. We decided to do different this time. This is a picture of -- the guy in the middle is Giorgio Mariani, and he was in China a couple of weeks ago, picking up an award from Cherry for the good work that we do together with Cherry. And we don't talk a lot about all the new business wins that we have with our customers, primarily because we're not allowed to, unfortunately. But I can tell you here that we are growing rapidly with the Chinese OEMs outside of China primarily. And so just to give you a glance, we now have in place purchase orders or we are already supplying not less than 16 Chinese brands all over the world. This is happening in all the regions that we talked about before Asia, Europe, North America, South America. And so some of you may remember that we talked about believing we're well positioned to have higher market shares with the Chinese OEMs when they go outside of China than what we have currently as market shares for our products in the regions where we operate. And that seems to be materializing. And so we're very happy about that. We are very proud to be able to work with the Chinese OEMs that will continue to grow in Brazil, in Europe, in the Americas, we believe, of course, also in Asia. And we like to work together. They recognize our product portfolio, our innovative products, they jump on it, and they also recognize our global footprint when we work with them in China or when we work with them in Asia or we work with them in Europe. Of course, it's a much smaller step to also work together, for instance, in the Americas. And so a good story here for our company that we were hoping for, and that seems to be materializing. We go to the next slide. Last slide, the business summary. I think the year 2025, of course, it was highlighted, if you want to call it a highlight by all the dynamics that were going on with markets -- truck markets under pressure first in North America, then in South America. But we did a good job, I think, as a company in optimizing our structures. We did a good job in not spending more CapEx than we committed to and lowering our CapEx versus 2024. And we did a good job in adapting pretty quickly. We would have not done that. We would certainly not have been able to do a double-digit margin in this kind of market environment for us. So from a cost and from a flexibility point of view, I think the company did a good job. From a growth point of view, as we talked about in prior presentations, we're not planning to do another big investment, build a new plant on the very short term. But we are planning to grow. And so you can grow through increasing shares. We've been doing some of that in 2025. Of course, we will target to do the same in 2026 as well. We are commercializing innovative products, not only with the Chinese OEMs, but also with the Chinese OEMs they're jumping on it. We like it. We both like it, the customers and we -- and that's also creating some growth. And then we will execute some selective growth initiatives. We did it already in Mercosur with our acquisition of Polimetal in Argentina. We are doing some more in Turkey. We may be doing a little bit more in India. We have a series of good smaller projects in the drawer that we will take out of the drawer piece by piece. And so that will create some growth in a little bit different shape and form than just building a new plant left and right. And so in a nutshell, if people ask me, how is the company doing? I would say when I open the newspaper every morning, and I'm sure you do as well, then you see a lot of dynamics. You read a lot about geopolitics. And then when you read about automotive news, it's a tough world, right? There's a lot of write-offs. There's a lot of pressure on profits. I look at our company and say, maybe we didn't reach all the targets that we put ourselves, which was not possible because of some of the negative -- some of the headwinds that we had in important markets for us. But overall, our company is in a very stable position. And even more important, our company is well positioned to deliver on more solid markets in the truck environment and some growth in regions that is predicted by IHS by Global Data that are important for us like Brazil, like India or in Europe, the truck market coming back on top of market share gains. And so I read the news, I read the automotive news. I look at my own -- at our own company, and I think we're not so bad positioned. With that, I open it for questions and answers. Rodrigo Caraca: [Operator Instructions] First question is from Fernanda Urbano from XP. Fernanda Urbano: I have 2 questions. First, in regard to the United States. I know it's a little bit early to say, but I would like to know your projections for 2026, considering your scenario and considering the tariffs? You released that in the fourth quarter. You were seeing some signs of stability for the market, especially for the end of 2025. But I would like now if you can share what is going to happen for 2026. What do you expect as far as time line is concerned so that these tariff effects are going to actually affect the company's sales in the market? And my second question is in regard to Brazil. I would like to explore a little bit the demand for heavy vehicles in Brazil. We see some news today in regard to the beginning of the [ MOVER ] Brazil program and the release for possibilities within the program, posing for more production, especially starting in February. I would like to know from you if you know about this project for Brazil? And I would like to hear about the U.S. as well. Pieter Klinkers: Thank you very much. Very important questions. Let me start with the first one on the U.S. or let's call it North America. As I said, it's too early to give a prediction for the total year 2026. When we ask our customers, they give us more information, let's say, for the next coming months. They're not yet able to talk about the whole year 2026. But what I can tell you is that our assumptions are in line with IHS with Global Data that during the year 2026, there will be a ramp-up of volumes, which needs to be the case if you want to end the year 2026 slightly below 2025. You started 2025 very high. You ended it at a low. It means the curve needs to go -- needs to swing the other way. And I can -- what I can tell you is that at least in the first months of this year, that's what we see happening. Now a lot more needs to happen for that market to come back to the levels that we saw at the beginning of 2025, and I can't give you any better input right now already. But at least the start of the year is in line with our assumptions. From a tariff point of view, this is changing so much as we know that it's sometimes hard to keep track of what's happening and what are the impacts directly or indirectly on your company. But purely from a North American standpoint, I would say, right now, we believe there is little impact for our company because we were handling under the -- or commercializing our products under Section 232, where there is no change. And of course, there's tariffs under Section 232. But since we are supplying from Mexico, which is getting USMCA exemption, that was the case, and that is still the case. And so from that point of view, for our company right now, based on what we understand and based on where we are today, we believe that there is no meaningful impact from the latest changes regarding the tariffs. When we look on Brazil, we're positive on Brazil. Pass car, we believe, will be positive this year, and we're well positioned to profit from that. Our plants are doing well. Our aluminum plants, we moved some equipment from around the world to Brazil to have a little bit more capacity in Brazil. We acquired a majority stake in Polimetal that will help us to generate more capacity for Mercosur, not just for Argentina, but for Mercosur. And so from a pass car point of view, we're well positioned. And then truck, we do have the capacity, both for components and for wheels. And we believe that at least in the first half of the year, yes, the program you're talking about will be helpful. And so we're looking forward for those projections to materialize. I hope that answers your questions? Gives you a little bit more insight? Rodrigo Caraca: Our next question is from Gabriel Rezende, Itau BBA. Gabriel Rezende: I will ask the question in English so Pieter can understand. So just following up on the answer you gave regarding heavy vehicles here in Brazil, if you could comment how you're perceiving the inventory levels for your customers in Brazil, it could be great. Just to get a sense because we have seen a steep deterioration on production levels in the fourth quarter along the latest months into 2025. So just trying to understand whether there's a catch-up in production to happen in the beginning of 2026 here in the Brazilian market. And also, if you could comment -- provide further details on what we could expect for market share gains throughout 2026. As I understand because you gained market share along 2025, you start 2026 with an already high market share. Just trying to understand whether we should see only a carryover effect or if there's additional projects for you to get additional room for you to get in your customers at this point? Pieter Klinkers: For Brazil, we do not foresee any special effect of too high inventories or too low inventories. And so what we see happening is the market coming back to a certain extent in the beginning of this year. And so we do not see any special effect of having too low inventories and the catch-up of production or having too high inventories and still cooling down even though sales of trucks goes up. So it's in line with our assumptions. And those assumptions are better in the first half of 2026 than what we saw in the second half of 2025. When you talk about market share increase, of course, you talk more about Europe and Asia, where that story is happening, especially on the commercial vehicle side. And you're right, some of those market shares they cannot continue to increase. But I would say, some already happened beginning '25, some happened more towards the end of '25. And so my expectation is still to see a positive effect of that. How big that effect will really be depends a little bit on how the market develops and how quickly we can materialize all of our potential. But I agree with you. The story is not endless. But at the same time, I'm hopeful that we will still see some positive effect from that also in 2026 and not only in 2025. I hope that answers. Rodrigo Caraca: Our next question is from Luiza Mussi from Safra. Luiza Mussi Tanus e Bastos: I have 2 questions. First, could you please give some more details in regard to what happened to CapEx in this quarter? And considering your scenario you described, what could we expect in regard to leveraging of the company for 2026? These are my 2 questions. Renato Salum: Well, thank you for your question. Let me explain to you in regard to what happens to the effective taxing for '24 and '25. It is explained by some recurring points that benefit 2024 and they have not been repeated for '25. Some of the movements are in the fourth quarter '24, we had a positive impact of around BRL 30 million, and this is due to a plant in India. It took us 4 years for the ramp-up. And when we can prove that the plant is in a good situation and profitable, we have the trigger for this acknowledgment of the tax-related losses in the company. So we did have this positive impact, and we are not being impacted by the same in 2025. Another important point is what we call inflation account. Considering Turkey is a hyperinflation country, we have the updates of all those numbers with the inflation accounts, and this update happens with equity. When we have this equity update, we generate a credit in equity, and we generate a debt in the operational expenses because it is included as an expense. With this, the PBT was reduced. And when you apply the nominal tax, you have less tax to pay. The inflation account was being applied in the previous years. And on December '25, the Turkish Parliament approved a measure in which the monetary correction is suspended for 2025. and it leaves 2026 as suspended. So this inflation account also has a negative impact of around BRL 40 million. So these are these 2 impacts that we suffer. Of course, we have other positive impacts that lead us to BRL 32 million, and this is the difference between quarters. Another important thing to highlight is timing. When we look at 2025 against '24, we do see an improvement of around BRL 40 million. So our effective tax is not the accounting tax, it's the actual tax that is paid. It was in around 27%. So this is the explanation of what we saw in the fourth quarter. And unfortunately, this inflation account impact affects our net profit, and this is what happened for '24 December. In regard to the leveraging, as Pieter mentioned, we wrap this year at 2.65-fold. Of course, there is a reduction of around BRL 100 million in our factoring operations. And at the end of the day, we would be close to the same leverage we had in Q3. Obviously, there is some deterioration of this leverage from 2.4x last year to 2.56x adjusted. But we also see cash generation that is strong in the company, even with the scenario that we've explained. We see BRL 328 million of cash generated with cash flow, we say indirectly and a series of investment that was in line with what we had appointed, which was around BRL 500 million. So we closed with BRL 508 million. Of course, there is a reduction in cash because there is some liquidity. But in general context, we do generate cash, BRL 328 million and obviously, worsening the working capital in BRL 100 million because we don't follow with factoring. But in view of this scenario, we have managed to control. Even with the impact, we had around BRL 50 million in expenditures with the restructuring, and it impacts EBITDA and leveraging. But we do not have significant deterioration with this scenario. And looking forward, as Pieter said, we are in line with what the agencies have been forecasting in regard to vehicle light or heavy vehicles production. And we are very close to the situation that we are envisioning today. Rodrigo Caraca: Next question is from Joao Andrade from Bank of America. Joao Andrade: My question is in regard to the antitrust investigation occurring in Germany. If you could share a little bit, if you have any estimates so that this investigation is concluded. The fact that you are collaborating with authorities is good, but I would like to hear from you in this regard. Pieter Klinkers: Yes. Joao, thank you for the question. Of course, we cannot speculate about this matter. As you say, we are fully cooperating with the authorities, and there was a next step through this formal notification. And together with the authorities, we are studying what that means, and we're looking how we can best manage the next steps in this procedure. But at this moment, it's really unclear what it means -- if it means something from a financial point of view. And so we're not in a position at this stage of the investigation to give any further comments regarding amounts of money that could be involved or would be involved if they are involved. Rodrigo Caraca: Our next question is from Keefer Kennedy from Citibank. Keefer, can you hear us. With no further questions, we are now closing the Q&A session. I would now like to give the floor to Pieter Klinkers for his final statements. Pieter Klinkers: Thank you very much for your participation. I can inform you that the rain has stopped in Sao Paulo. I hope you -- the rest of your morning, whatever time zone you're in, will be okay. We will work hard this year to deliver the results that we've put ourselves. And during this year, it's still a long year in February. There will be positives, there will be negatives, but I think we're well positioned to hopefully capitalize on a market that especially from a truck point of view is looking to be in better shape in 2026 than it was in 2025. And so I'm looking forward to come back to all of you with our first quarter earnings call in a few months from now. Thank you for listening to us. Bye-bye. Rodrigo Caraca: Good morning, everyone. Welcome to the video conference regarding Iochpe-Maxion's Fourth Quarter 2025 Results. I'm Rodrigo Caraca, Senior Investor Relations Manager at the company, and I will be leading this video conference. Today, we are going to have Mr. Pieter Klinkers, CEO; and Mr. Renato Salum available for the question-and-answer session. Please be advised that this video conference is being recorded and will be made available at the company Investor Relations website along with the presentation. We'll be having Mr. Pieter Klinkers presenting in English. For your convenience, simultaneous interpreting into Portuguese and English will be available. [Operator Instructions] Before proceeding, we would like to clarify that any statements made during this video conference regarding the company's business prospects, projections and operational and financial targets constitute the beliefs and assumptions of Iochpe-Maxion's management as well as information currently available by the company. Future projections is not a guarantee of performance. It involves risks, uncertainties that may or may not occur. Now I would like to give the floor to Mr. Pieter Klinkers, CEO for Iochpe-Maxion. Please proceed. Pieter Klinkers: Bom dia, and good morning to everybody from rainy Sao Paulo, but I hope it's still a good morning for everybody. Let's jump into this presentation. And as usual, we start with having a look on the global markets. If we look at light vehicles, it's different than commercial vehicles that you see on the right side. Light vehicles kind of flattish in 2025 versus 2024, whether you look on including China or excluding China, it doesn't matter too much. We used to look at global production ex China because that's a more relevant market for us, but kind of flattish, and we expect the same to happen in 2026. That doesn't mean that everything is flat. I want to remark here that, for instance, 2 markets, Brazil and India, that are important markets for our company. Those markets show more meaningful growth, we believe, in 2026, and that would be good for our company. If we look on the out years there, there's a little bit more growth, like 2% or 1% to 2% per year, and that would bring the light vehicle market back to a volume of about 95 million to 100 million vehicles in the year 2030. If we look on the commercial vehicle side, it's more dynamic there. And unfortunately, in 2025, as everybody knows, it was negative dynamics primarily, but not only in initially North America, then also South America, but also the European market, especially at the end of the year was not great. And so overall, minus 7% in 2025 versus 2024. That's a meaningful downturn. 2026 looks better, and we take that. And I think it's more or less in all the regions that people foresee, and we concur with that view, markets should be better. Just the year 2026 you look at North America, and we will talk a little bit more about North America during this presentation. Like we did in the last presentation, that market is still down 4% to 5%, people say, but we take it because the market was down so much in the second half of 2025, 30%, 40%, especially in the heavy vehicle market. Some of you may remember, I talked about it in the last call, that is the most important market for us is the heavy vehicles, Class 7, Class 8 that we supply from our structural components unit that was hit the most. And if that market comes back to only being minus 5% compared to 2025, taking into consideration that the first half of '25 is pretty good. That means you need to have a good increase during the year 2026 to get back to more or less the volumes that we had as a whole year 2025. So North America, we take that number. And what we see so far this year, it is confirming that. We don't have an outlook for the second half of the year yet, but the first 3 months of the year are in line with the assumptions that we took for the North American market. We believe Brazil will be better, especially in the first half of 2026. And we also believe Europe will be better. That's what we see happening as well. And Asia for us, most importantly there, India should show solid growth as well. So more optimism from a point of view of the truck market for 2026. And then if you look at '27, '28, a little bit more out, that's pretty significant growth. That's good growth. And so even if that materializes to a good extent, not completely, maybe even more. But if these numbers are more or less true, then our company is very well positioned to benefit from those market trends, because we all know that even in the year 2025, and we'll see that later on, even in the year 2025, there where it was possible, like in Europe or like in Asia, we outperformed the market. And so if the market comes back and we keep our performance, which definitely is the aim, and I think it's going to happen, then we should be very well positioned for those numbers -- to capitalize on those numbers. All right. Enough on the market. Let's look at the numbers on the next slide. Our net revenue in 2025, really a mixed number because the first half was pretty strong and then the second half, initially only because of North America truck and then, let's say, during the third quarter, especially the fourth quarter, the Brazil truck production went down, and that hits us not only in our components division in Brazil, but also in wheels. And so that trended our numbers down in the second half of the year. But overall, in the year 2025, we still came up with BRL 15.3 billion turnover, which is slightly up versus 2024. Our gross profit in the fourth quarter of 2025, despite all the drama in North America and also in Brazil from a commercial vehicle point of view, still at 11.7%, which took us to 12% gross profit margin for the whole year, which we believe is a pretty solid number given the circumstances. Our recurring EBITDA, pretty much the same as on the -- same story as on the gross profit, 9.6% in the fourth quarter and still a double-digit margin in 2025. Again, despite that situation in commercial vehicles in the Americas, which is a very important market for our company, we were able to realize double-digit margin over the year 2025. Leverage, 2.65x in the fourth quarter of 2025. That compares to 2.55x in the third quarter of 2025. But we need to keep in mind here that we lowered our forfaiting of factoring by about BRL 100 million. And so if you neutralize that effect, our leverage would actually be pretty much the same in the fourth quarter 2025 than what it was when we talked to you guys about the third quarter 2025. Okay. Now if we look on the revenue by product, it's obvious that our components unit is hit in North America and South America because of commercial vehicles. Our wheels unit is hit in Brazil -- was hit in Brazil because of that. Not in North America, because from a wheels point of view, we supply also truck wheels to the North American market from Mexico, but we supply the medium truck segment, and that was a very different picture, also slowing down, but much less than what we saw in the heavy truck segment. And therefore, instead of having a split of roughly 75% wheels and 25% components in 2025, that number looks more like 80% wheels and 20% components. If we go to the revenue by customer, it's pretty much the same effect that you see there. Just 2 examples there, you see Traton and Daimler which are big customers for our company for components in North America. Their revenue as a percentage of our total revenue goes down meaningfully, but it's being made up by other customers like Toyota, like Stellantis, like Ford, and those are typical wheel customers, of course, light vehicle customers that we serve through our wheels unit. And we were able to not make up completely, but mitigate to a large extent, those impacts that we saw for components in North America in the second half of 2025. If we go to the next slide and we look a little bit more on the regions. Starting with South America. I think this number shows that we have been outperforming the market. Both light vehicle production and commercial vehicle production ultimately was down in 2025 in Brazil, but our revenue is up. Of course, it was more up in the first half when truck was still okay than it was in the second half. But overall, the revenue is up. And of course, that has to do with us outperforming on the light vehicle side, which is the wheel segment, where primarily we did very well from an aluminum wheel point of view that didn't make up everything in the second half. You see second half, fourth quarter was still down, but less than the market. And so again, a mitigating factor of the headwind that we had in the Brazilian market. So market not so good in the second half, but Maxion at least mitigating partially that market effect. If we look on North America on the next slide, this is the drama that we have been talking about that you can read about everywhere, and it has been hitting us hard in the second half of the year. If you want to hear good news about that market, I can tell you that the fourth quarter was not good, but it was a little bit better than the third quarter. So let's see if that's a trend that will continue into 2026. What we saw in the first 2 months is in line with the targets that we put ourselves. And those targets are mostly based on the data that we showed on the first slide that comes from global data from IHS. And so we don't have a visibility yet for the whole year, but at least the start of the year is in line with the assumptions that we took for this year. And so a big impact in North America, but the fourth quarter, at least being a little bit better ultimately than the third quarter. We go to EMEA, which is Europe, in our case, Europe, Turkey and our plant in South Africa, we clearly outperformed the market. I think you see light vehicles was slightly down over the year. Truck was more or less stable over the whole year in Europe, was down in the fourth quarter, was a little bit up in the beginning of the year, but more or less stable over the whole year. And so us being -- having 18% more revenue on truck is a pretty strong number and us having -- Maxion having 13% more revenue in 2025 than what we had in 2024 shows that we are performing solidly or strong, I would say, in this important market for the company. And that's largely based, not only, but largely based on our position that we have in the truck market there. And so that's not only good for the region. It also has been supporting our global results, which if we would have only been acting in North or South America, those would have been impacted more -- impacting more than what we now see in our overall consolidated results for the company. We go to Asia. I've been saying in the last few presentations that my expectation would be for Asia to start playing a bigger role in our overall revenue and margin situation. And we see that happening. It starts happening in the fourth quarter of 2025 this time in [ pass car ], where the market is good, and I think Maxion is outperforming the market there. And our aim certainly will be to continue that trend and also to complete it with truck. My expectation for truck also both for India and for China next year is this year is positive. And so we saw the start of this region outperforming or supporting our results more significantly happening at the end of last year. And our wish is for that to continue not only in '26, but going forward. India, which is the most important location for us in Asia, I would say, it's a very good place to be nowadays. And we're well positioned there. And as we talked about in other presentations, we have a couple of plans in the drawer to do even a little bit more in India going forward. With that, go back on the next slide to some numbers. And so as we talked before, our margin, I think, both in the fourth quarter of 2025, our gross profit margin as well as for the total year 2025, very much in line with 2024, which I believe based on the sudden reduction that we saw in the North American truck market and then also in the Brazilian truck market, that's a pretty solid result, a result that we would have signed up for when we would have known what happened in the second half of the year in primarily North America. If we go to the next slide, it's pretty much the same story on our EBITDA margin, 9.6% recurring EBITDA margin in the fourth quarter of 2025 with that market situation in the Americas from a truck point of view is, we believe, a solid result. And then the 10.1% margin that we delivered over the whole year, double-digit margin with those sudden drops in the truck market in the Americas is also something that we believe is a good outcome for the company. We look on the next slide, the net income. It's a little bit more depressing story, both for the fourth quarter of the year as well as for the total year. And here, you see the reduced income in CV, of course, which you also see in EBITDA, especially when it's not recurring EBITDA, but you see the higher restructuring cost here as well. And also financial expenses, we were not assuming the SELIC to be at the level where it was during most of last year and where it is today. And so that has been hurting many companies, including our company. And also, we had higher taxes in this quarter, particularly in the quarter 4 of 2025 that hurt our net income. And actually, instead of being slightly positive, now it was a negative net income for the quarter. We go to the next slide, look at our investments. We said we have good discipline in place regarding investments. And I think we delivered on our targets, which was to have a meaningful reduction in 2025 versus what we invested in 2024. A little bit more in the fourth quarter, but that was a managed action. We were pushing out some CapEx from more in the beginning of the year to more towards the end of the year. But the final number for the year, the BRL 554 million that you see on this slide is a meaningful reduction versus what we showed -- what we invested in 2024. Go to next slide. You look at our leverage, I talked about it, went slightly up quarter-over-quarter. But then again, the BRL 100 million less factoring that is included in that number basically brings back the leverage to kind of the same level than what we had in -- sorry, in the third quarter of 2025. We go to the next slide. Look at the gross debt, there's not a lot of change here. I think there's still very manageable amounts of debt for 2026 and '27. And then, of course, we have a little bit more work to do to prepare ourselves for refinancing our bonds in 2028, which we will do. And at the same time, we have a lot of cash liquidity available, BRL 1.6 billion in cash and then on top of that BRL 760 million of undrawn credit lines. So I would say a healthy situation from a debt point of view on this slide, like we explained in prior presentations. We go to the next slide. Usually here, what you see, if you remember, we show a few new business wins regarding wheels. We decided to do different this time. This is a picture of -- the guy in the middle is Giorgio Mariani, and he was in China a couple of weeks ago, picking up an award from Cherry for the good work that we do together with Cherry. And we don't talk a lot about all the new business wins that we have with our customers, primarily because we're not allowed to, unfortunately. But I can tell you here that we are growing rapidly with the Chinese OEMs outside of China primarily. And so just to give you a glance, we now have in place purchase orders or we are already supplying not less than 16 Chinese brands all over the world. This is happening in all the regions that we talked about before Asia, Europe, North America, South America. And so some of you may remember that we talked about believing we're well positioned to have higher market shares with the Chinese OEMs when they go outside of China than what we have currently as market shares for our products in the regions where we operate. And that seems to be materializing. And so we're very happy about that. We are very proud to be able to work with the Chinese OEMs that will continue to grow in Brazil, in Europe, in the Americas, we believe, of course, also in Asia. And we like to work together. They recognize our product portfolio, our innovative products, they jump on it, and they also recognize our global footprint when we work with them in China or when we work with them in Asia or we work with them in Europe. Of course, it's a much smaller step to also work together, for instance, in the Americas. And so a good story here for our company that we were hoping for, and that seems to be materializing. We go to the next slide. Last slide, the business summary. I think the year 2025, of course, it was highlighted, if you want to call it a highlight by all the dynamics that were going on with markets -- truck markets under pressure first in North America, then in South America. But we did a good job, I think, as a company in optimizing our structures. We did a good job in not spending more CapEx than we committed to and lowering our CapEx versus 2024. And we did a good job in adapting pretty quickly. We would have not done that. We would certainly not have been able to do a double-digit margin in this kind of market environment for us. So from a cost and from a flexibility point of view, I think the company did a good job. From a growth point of view, as we talked about in prior presentations, we're not planning to do another big investment, build a new plant on the very short term. But we are planning to grow. And so you can grow through increasing shares. We've been doing some of that in 2025. Of course, we will target to do the same in 2026 as well. We are commercializing innovative products, not only with the Chinese OEMs, but also with the Chinese OEMs they're jumping on it. We like it. We both like it, the customers and we -- and that's also creating some growth. And then we will execute some selective growth initiatives. We did it already in Mercosur with our acquisition of Polimetal in Argentina. We are doing some more in Turkey. We may be doing a little bit more in India. We have a series of good smaller projects in the drawer that we will take out of the drawer piece by piece. And so that will create some growth in a little bit different shape and form than just building a new plant left and right. And so in a nutshell, if people ask me, how is the company doing? I would say when I open the newspaper every morning, and I'm sure you do as well, then you see a lot of dynamics. You read a lot about geopolitics. And then when you read about automotive news, it's a tough world, right? There's a lot of write-offs. There's a lot of pressure on profits. I look at our company and say, maybe we didn't reach all the targets that we put ourselves, which was not possible because of some of the negative -- some of the headwinds that we had in important markets for us. But overall, our company is in a very stable position. And even more important, our company is well positioned to deliver on more solid markets in the truck environment and some growth in regions that is predicted by IHS by Global Data that are important for us like Brazil, like India or in Europe, the truck market coming back on top of market share gains. And so I read the news, I read the automotive news. I look at my own -- at our own company, and I think we're not so bad positioned. With that, I open it for questions and answers. Rodrigo Caraca: [Operator Instructions] First question is from Fernanda Urbano from XP. Fernanda Urbano: I have 2 questions. First, in regard to the United States. I know it's a little bit early to say, but I would like to know your projections for 2026, considering your scenario and considering the tariffs? You released that in the fourth quarter. You were seeing some signs of stability for the market, especially for the end of 2025. But I would like now if you can share what is going to happen for 2026. What do you expect as far as time line is concerned so that these tariff effects are going to actually affect the company's sales in the market? And my second question is in regard to Brazil. I would like to explore a little bit the demand for heavy vehicles in Brazil. We see some news today in regard to the beginning of the [ MOVER ] Brazil program and the release for possibilities within the program, posing for more production, especially starting in February. I would like to know from you if you know about this project for Brazil? And I would like to hear about the U.S. as well. Pieter Klinkers: Thank you very much. Very important questions. Let me start with the first one on the U.S. or let's call it North America. As I said, it's too early to give a prediction for the total year 2026. When we ask our customers, they give us more information, let's say, for the next coming months. They're not yet able to talk about the whole year 2026. But what I can tell you is that our assumptions are in line with IHS with Global Data that during the year 2026, there will be a ramp-up of volumes, which needs to be the case if you want to end the year 2026 slightly below 2025. You started 2025 very high. You ended it at a low. It means the curve needs to go -- needs to swing the other way. And I can -- what I can tell you is that at least in the first months of this year, that's what we see happening. Now a lot more needs to happen for that market to come back to the levels that we saw at the beginning of 2025, and I can't give you any better input right now already. But at least the start of the year is in line with our assumptions. From a tariff point of view, this is changing so much as we know that it's sometimes hard to keep track of what's happening and what are the impacts directly or indirectly on your company. But purely from a North American standpoint, I would say, right now, we believe there is little impact for our company because we were handling under the -- or commercializing our products under Section 232, where there is no change. And of course, there's tariffs under Section 232. But since we are supplying from Mexico, which is getting USMCA exemption, that was the case, and that is still the case. And so from that point of view, for our company right now, based on what we understand and based on where we are today, we believe that there is no meaningful impact from the latest changes regarding the tariffs. When we look on Brazil, we're positive on Brazil. Pass car, we believe, will be positive this year, and we're well positioned to profit from that. Our plants are doing well. Our aluminum plants, we moved some equipment from around the world to Brazil to have a little bit more capacity in Brazil. We acquired a majority stake in Polimetal that will help us to generate more capacity for Mercosur, not just for Argentina, but for Mercosur. And so from a pass car point of view, we're well positioned. And then truck, we do have the capacity, both for components and for wheels. And we believe that at least in the first half of the year, yes, the program you're talking about will be helpful. And so we're looking forward for those projections to materialize. I hope that answers your questions? Gives you a little bit more insight? Rodrigo Caraca: Our next question is from Gabriel Rezende, Itau BBA. Gabriel Rezende: I will ask the question in English so Pieter can understand. So just following up on the answer you gave regarding heavy vehicles here in Brazil, if you could comment how you're perceiving the inventory levels for your customers in Brazil, it could be great. Just to get a sense because we have seen a steep deterioration on production levels in the fourth quarter along the latest months into 2025. So just trying to understand whether there's a catch-up in production to happen in the beginning of 2026 here in the Brazilian market. And also, if you could comment -- provide further details on what we could expect for market share gains throughout 2026. As I understand because you gained market share along 2025, you start 2026 with an already high market share. Just trying to understand whether we should see only a carryover effect or if there's additional projects for you to get additional room for you to get in your customers at this point? Pieter Klinkers: For Brazil, we do not foresee any special effect of too high inventories or too low inventories. And so what we see happening is the market coming back to a certain extent in the beginning of this year. And so we do not see any special effect of having too low inventories and the catch-up of production or having too high inventories and still cooling down even though sales of trucks goes up. So it's in line with our assumptions. And those assumptions are better in the first half of 2026 than what we saw in the second half of 2025. When you talk about market share increase, of course, you talk more about Europe and Asia, where that story is happening, especially on the commercial vehicle side. And you're right, some of those market shares they cannot continue to increase. But I would say, some already happened beginning '25, some happened more towards the end of '25. And so my expectation is still to see a positive effect of that. How big that effect will really be depends a little bit on how the market develops and how quickly we can materialize all of our potential. But I agree with you. The story is not endless. But at the same time, I'm hopeful that we will still see some positive effect from that also in 2026 and not only in 2025. I hope that answers. Rodrigo Caraca: Our next question is from Luiza Mussi from Safra. Luiza Mussi Tanus e Bastos: I have 2 questions. First, could you please give some more details in regard to what happened to CapEx in this quarter? And considering your scenario you described, what could we expect in regard to leveraging of the company for 2026? These are my 2 questions. Renato Salum: Well, thank you for your question. Let me explain to you in regard to what happens to the effective taxing for '24 and '25. It is explained by some recurring points that benefit 2024 and they have not been repeated for '25. Some of the movements are in the fourth quarter '24, we had a positive impact of around BRL 30 million, and this is due to a plant in India. It took us 4 years for the ramp-up. And when we can prove that the plant is in a good situation and profitable, we have the trigger for this acknowledgment of the tax-related losses in the company. So we did have this positive impact, and we are not being impacted by the same in 2025. Another important point is what we call inflation account. Considering Turkey is a hyperinflation country, we have the updates of all those numbers with the inflation accounts, and this update happens with equity. When we have this equity update, we generate a credit in equity, and we generate a debt in the operational expenses because it is included as an expense. With this, the PBT was reduced. And when you apply the nominal tax, you have less tax to pay. The inflation account was being applied in the previous years. And on December '25, the Turkish Parliament approved a measure in which the monetary correction is suspended for 2025. and it leaves 2026 as suspended. So this inflation account also has a negative impact of around BRL 40 million. So these are these 2 impacts that we suffer. Of course, we have other positive impacts that lead us to BRL 32 million, and this is the difference between quarters. Another important thing to highlight is timing. When we look at 2025 against '24, we do see an improvement of around BRL 40 million. So our effective tax is not the accounting tax, it's the actual tax that is paid. It was in around 27%. So this is the explanation of what we saw in the fourth quarter. And unfortunately, this inflation account impact affects our net profit, and this is what happened for '24 December. In regard to the leveraging, as Pieter mentioned, we wrap this year at 2.65-fold. Of course, there is a reduction of around BRL 100 million in our factoring operations. And at the end of the day, we would be close to the same leverage we had in Q3. Obviously, there is some deterioration of this leverage from 2.4x last year to 2.56x adjusted. But we also see cash generation that is strong in the company, even with the scenario that we've explained. We see BRL 328 million of cash generated with cash flow, we say indirectly and a series of investment that was in line with what we had appointed, which was around BRL 500 million. So we closed with BRL 508 million. Of course, there is a reduction in cash because there is some liquidity. But in general context, we do generate cash, BRL 328 million and obviously, worsening the working capital in BRL 100 million because we don't follow with factoring. But in view of this scenario, we have managed to control. Even with the impact, we had around BRL 50 million in expenditures with the restructuring, and it impacts EBITDA and leveraging. But we do not have significant deterioration with this scenario. And looking forward, as Pieter said, we are in line with what the agencies have been forecasting in regard to vehicle light or heavy vehicles production. And we are very close to the situation that we are envisioning today. Rodrigo Caraca: Next question is from Joao Andrade from Bank of America. Joao Andrade: My question is in regard to the antitrust investigation occurring in Germany. If you could share a little bit, if you have any estimates so that this investigation is concluded. The fact that you are collaborating with authorities is good, but I would like to hear from you in this regard. Pieter Klinkers: Yes. Joao, thank you for the question. Of course, we cannot speculate about this matter. As you say, we are fully cooperating with the authorities, and there was a next step through this formal notification. And together with the authorities, we are studying what that means, and we're looking how we can best manage the next steps in this procedure. But at this moment, it's really unclear what it means -- if it means something from a financial point of view. And so we're not in a position at this stage of the investigation to give any further comments regarding amounts of money that could be involved or would be involved if they are involved. Rodrigo Caraca: Our next question is from Keefer Kennedy from Citibank. Keefer, can you hear us. With no further questions, we are now closing the Q&A session. I would now like to give the floor to Pieter Klinkers for his final statements. Pieter Klinkers: Thank you very much for your participation. I can inform you that the rain has stopped in Sao Paulo. I hope you -- the rest of your morning, whatever time zone you're in, will be okay. We will work hard this year to deliver the results that we've put ourselves. And during this year, it's still a long year in February. There will be positives, there will be negatives, but I think we're well positioned to hopefully capitalize on a market that especially from a truck point of view is looking to be in better shape in 2026 than it was in 2025. And so I'm looking forward to come back to all of you with our first quarter earnings call in a few months from now. Thank you for listening to us. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call]
Operator: Good afternoon. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Amerigo Resources Q4 and Full Year 2025 Earnings Conference Call. [Operator Instructions] Mr. Graham Farrell of North Star Investor Relations, you may begin your conference. Graham Farrell: Thank you, operator. Good afternoon, and welcome, everyone, to Amerigo's quarterly conference call to discuss the company's financial results for the fourth quarter and full year of 2025. We appreciate you joining us today. This call will cover Amerigo's financial and operating results for the fourth quarter and full year ended December 31, 2025. Following our prepared remarks, we will open the conference call to a question-and-answer session. Our call today will be led by Amerigo's President and Chief Executive Officer, Aurora Davidson; along with the company's Chief Financial Officer, Carmen Amezquita. Before we begin our formal remarks, I would like to remind everyone that some of the statements on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested by any forward-looking statements due to a variety of factors, which are discussed in detail in our SEDAR filings. I will now hand the call over to Aurora Davidson. Please go ahead, Aurora. Aurora Davidson: Thank you, Graham. Good morning, and thank you for joining us for Amerigo's 2025 Annual Results Conference Call. With me today is Carmen Amezquita, our Chief Financial Officer, who will present the financial results following my remarks. 2025 was a very good year for Amerigo because our business model performed exactly as designed. We delivered robust operational performance, strong free cash flow, full debt elimination and meaningful capital returns to shareholders. And we did it in a year of high copper price volatility, which validated the durability, resilience and scalability of the Amerigo model. Let me start with operations at Minera Valle Central or MVC, which is the foundation of our company. MVC is one of the lowest risk copper operations globally because we have 2 sources of copper to process. We are not exposed to mining dilution, great uncertainty or large sustaining capital cycles. In 2025, MVC produced 62.2 million pounds of copper, exceeding our revised guidance. We also produced 1.5 million pounds of molybdenum, again outperforming expectations. Plant availability remained above 98%, reflecting continued operational discipline. These results were achieved despite interruptions to the supply of fresh tailings following a fatal accident at El Teniente in July. Our ability to increase processing of historic tailings to maintain production targets speaks directly to the flexibility and resilience of the MVC flow sheet. We did not achieve these operational results by cutting corners. We achieved them through an experienced team of operators, clear targets and focused programs. Hand-in-hand with the operational results, MVC's 2025 safety performance remains strong with continuous focus on awareness and training. We have achieved 4 consecutive years without any of our employees experiencing a lost time accident. This is a remarkable record for any company, let alone one as large as MVC. We also continue to operate with a minimal environmental footprint relative to traditional mining operations. MVC's role as a circular economy operation was further recognized in 2025, including an industry award in Chile for its tailings reprocessing model. Recovering copper from tailings is not just environmentally responsible, it is economically efficient and increasingly relevant in a constrained copper supply environment. Before commenting on our headline annual financial results, I will first mention that our average copper price in 2025 was $4.73 per pound, 14% higher than in 2024. With that 14% change in copper price, Americas revenue increased 18% to $227 million, EBITDA increased 31% to $90 million, reflecting both commodity price leverage and disciplined cost control and free cash flow to equity increased 33% to $37 million. These are the numbers that result from strong operational leverage driven by excellent cost containment. Our 2025 cash cost of $1.93 per pound was below guidance, supported by increased molybdenum byproduct credits, lower treatment and refinery charges and strict cost controls at MVC. Carmen will provide more information on our financial performance, but I will make one additional financial comment. As you know, we fully eliminated all of our debt in 2025. Amerigo is now debt-free. This is a major milestone for the company and the outcome of years of deliberate conservative capital management. Importantly, it also ensures that shareholders, not vendors, capture the majority of value created by MVC. Having no debt and maintaining a healthy cash buffer strongly positions Amerigo to withstand copper price volatility. We can continue to pay dividends through cycles and act opportunistically with share buybacks, performance dividends or both if conditions warrant. Capital allocation is where Amerigo differentiates itself. We operate a low-risk, capital-light copper business that generates predictable free cash flow across cycles. Because we do not need to reinvest heavily to maintain production, we can return excess capital to shareholders in a disciplined, sustainable way. So you see our capital return strategy or CRS, is the logical outcome of our successful business model. Our CRS has 3 distinct tools: quarterly dividends, performance dividends and share buybacks. Each serves a different purpose and the 3 are complementary. In the case of Amerigo CRS, the sum is greater than the parts. Our quarterly dividend is the foundation of Amerigo CRS. It represents the baseline cash-generating capacity we believe can be sustained through copper price cycles. The quarterly dividend is a clear signal of our confidence in the durability of MVC's cash flows. The Board of Directors sets the quarterly dividend at a level that does not rely on peak copper prices, does not compromise balance sheet strength and does not assume perfect operating conditions. In practical terms, the quarterly dividend answers a simple question for shareholders. What can I expect Amerigo to return to me even in an average or difficult market? Debt reliability matters. It anchors share valuation, attracts long-term investors and reinforces internal financial discipline. The second tool is a performance dividend. The performance dividend exists for one reason, to return excess cash when copper prices and operating conditions exceed our base assumptions. Performance dividends are deliberately variable, spontaneous and not embedded in guidance. They are not the same as the quarterly dividend. We don't want shareholders to count on performance dividends. This is critical. Rather than raising the quarterly base dividend during strong copper markets and then risk having to cut the dividend later, we use performance dividends. This tool enables us to quickly pass strong copper prices directly to shareholders while preserving the long-term sustainability of our quarterly dividend. Performance dividends allow us to say this was a strong period. The balance sheet is secure. Here is the excess cash. Performance dividends reflect prudence, not caution. They ensure shareholders participate in upside without weakening the company when conditions normalize. The third tool is the share buyback. This tool is our most surgical capital return tool. Fundamentally, we use share buybacks to ensure shareholders are not diluted year-on-year. We also use them when we think that the share price does not reflect Amerigo's intrinsic value. In this case, we will buy back shares when we assess that buybacks are accretive to net asset value. In other words, reducing the share count increases ownership per share, cash flow per share and dividend capacity per share. Buybacks at Amerigo are not automatic. They are opportunistic and valuation-driven. Importantly, buybacks demonstrate that the company's capital allocation incentives are aligned with shareholders. We think in terms of value per share, not size or scale. I hope this explains how each tool plays a distinct role. Quarterly dividends provide stability and predictability, performance dividends ensure shareholders capture upside and share buybacks enhance long-term per share value. Together, they allow Amerigo to return capital across cycles, remain financially conservative, avoid common capital allocation mistakes in the mining sector and ensure that shareholders are the primary beneficiaries of strong copper markets. This is what makes our capital return strategy successful. It is structural, repeatable and aligned with Amerigo's approach to creating value. I will now provide some comments on the copper market. Generally speaking, opinions and discussions on copper these days are spending less time and energy debating short-term prices and focusing instead on the structural forces that are now firmly in place. We have commented on the emerging forces of secular rising demand and struggling supply for many years. Rising copper prices indicate that the rest of the world is starting to see copper as we do, that copper has likely moved away from being a purely cyclical commodity driven solely by construction cycles. It has become a strategic material tied directly to electrification, energy security and infrastructure resilience. This is a significant shift and will change how supply and demand interact over time. On the demand side, the drivers are clear, durable and increasingly nondiscretionary. Grid expansion, renewable energy, electric vehicles and data center build-outs all require more copper per unit of economic output than the systems they replace. Much of this demand is due to long-term capital programs and is not short-term consumer behavior. The new cumulative demand is layered on top of an already tight market. Even in a scenario where global growth moderates, we think copper demand will remain resilient because much of it is tied to infrastructure that industry governments and utilities cannot easily defer. For example, due to international competitive pressures, the global rollout of artificial intelligence is unlikely to falter even in the event of weak economic growth. The build-out of the energy infrastructure necessary to support that rollout will also stand strong. This is why we think copper demand in 2026 is likely to be less cyclical than ever. On the supply side, increasing global copper production is far more challenging. New copper supply has become more difficult to bring online due to declining ore grades, rising capital intensity, permitting delays, social constraints and longer development time lines. And these are not new constraints. They have been in place and getting worse for decades. Current copper prices are healthy by historical standards, but they are still not high enough to incentivize new low-risk supply to meet projected medium-term demand. And even if copper prices rise to that incentive level, there will be many years of execution risk before an incremental pound of copper is produced. In fact, we can clearly see that the market has very little margin for error -- disruptions, whether operational, geopolitical or environmental have an outsized impact because replacement supply is scarce. This emerging supply gap is not a temporary issue. It is the result of decades of underinvestment and geological inevitability. And a strong incentive copper price will not solve the supply problem for many years. From our perspective, this reinforces the view that long-term copper prices need to be structurally higher than historical averages to balance the market. This means that copper demand must be destroyed through prices even higher than those necessary to incentivize new production. But how high are the copper prices needed to cause demand destruction? The copper demands of today's world differ from those of only a few decades ago. Substitution for aluminum is not feasible in many areas of new demand due to copper's superior electrical performance compared to other metals. Another factor is the sheer size of the new infrastructure projects being built. In a world of 100 billion AI facilities that require power generation equivalent to that of small cities, the impact of rising copper prices is small compared to the overall cost. It won't matter to AI companies whether copper prices double or triple because the contingency embedded in their projects is already in the billions of dollars. The same type of reasoning can be applied to global electrification projects and to national defense efforts that require copper. The price of copper will not be the delaying factor for these projects. Availability will. Given that, the demand destruction necessary to balance the markets will take longer than expected and result in higher copper prices than expected. Against this backdrop, Amerigo is well positioned because with low CapEx requirements and a stable cost base, our cash flow benefits significantly from high copper prices. I just mentioned a 31% increase in EBITDA and a 33% increase in free cash flow to equity in 2025, driven by a 14% rise in the copper price. We do not need higher copper prices to justify new projects. We need them only to generate more cash and return it to shareholders. Now does this mean that we can expect smooth sailing every day? No. No, we believe that volatility will persist and could be high. Copper prices will continue to move in response to macro headlines to interest rate expectations and to short-term sentiment. But we think that if you step back and look at the fundamentals heading into 2026, demand growth and supply constraints, the direction of travel is clear even if the path is uneven. That is why we remain constructive on copper, but disciplined in how we participate. For Amerigo, the copper market in 2026 reinforces our strategy. We do not build our business on optimistic assumptions. Instead, we focus on operating reliability, generating free cash flow and returning capital to shareholders. In a world where copper is increasingly scarce, capital-intensive and politically complex, simplicity, flexibility and discipline are our competitive advantages. That is the lens through which we view the copper market in 2026 and why we believe Amerigo continues to be well positioned to perform regardless of potential near-term noise. Looking ahead to 2026, we have guided copper production of 63.8 million pounds, representing another year of growth. Our molybdenum production is expected to remain stable at 1.5 million pounds. Our cash cost is expected to remain competitive at $1.98 per pound, and our capital expenditure budget of $17.5 million includes $6.4 million in optimization projects that we expect will pay for themselves in the short term. So to recap, our outlook for 2026 assumes continued operational consistency and no heroic assumptions on pricing or costs. In other words, our guidance is deliberately conservative. Our priorities remain unchanged: operate safely and reliably, maximize free cash flow, return capital to shareholders and maintain balance sheet strength. We are not distracted by Empire Building. Our objective is to compound per share value over time, and we believe Amerigo is uniquely positioned to do that. To close my remarks, 2025 demonstrated exactly what Amerigo is designed to do, perform strongly through disruptive events, generate cash across cycles and return that cash to shareholders. We entered 2026 with strong operations, a debt-free balance sheet and clear visibility into cash generation. Thank you for your continued support. With that, I will turn the call over to Carmen, who will talk about the 2025 financial results. Carmen, please go ahead. Carmen Amezquita Hernandez: Thanks, Aurora. I will now present the 2025 annual financial report from Amerigo and its MVC operation in Chile. In 2025, the company had another successful year with net income of $35.4 million, earnings per share of CAD 0.22 or CAD 0.30 and EBITDA of $89.8 million. This was possible due to copper production of 62.2 million pounds and an average MVC copper price of $4.73 per pound. Revenue in 2025 increased 18% to $227.3 million compared to $192.8 million in 2024. Revenue was comprised of gross value of copper toll on behalf of DET of $285.1 million compared to $269 million in the prior year as a result of higher copper prices, less notional items, including DET royalties of $88.8 million, smelting and refining of $14.2 million, transportation of $1.6 million and positive fair value adjustments to settlement receivables of $20.3 million. Revenue also included increased molybdenum revenue of $26.5 million compared to $22.9 million in 2024 due to stronger molybdenum production of 1.5 million pounds in 2025 compared to 1.3 million pounds in the prior year. Tolling and production costs increased 9% from $147.4 million in 2024 to $160.1 million in 2025. Some of the costs that increased year-over-year were power and lime costs driven by higher consumption required for historic tailings processing. Direct labor increased $4.7 million, mostly as a result of $4 million signing bonus that was paid in October 2025 related to a 3-year collective labor agreement with MVC's operators union. Gross profit was $67.2 million, a 48% increase from $45.4 million in 2024. General and administrative expenses were $6 million compared to $5.3 million in 2024, including salaries, management and professional fees of $3.8 million, office and general expenses of $1.3 million and share-based payments of $0.9 million. Then there were other losses of $1.3 million compared with $4.2 million in 2024. This was comprised of $0.7 million in pre-investment studies, $0.1 million in accretion related to the dismantling provision, $0.2 million in foreign exchange gains, and a $0.7 million loss on the disposal of a subsidiary from the reclassification of the cumulative translation adjustment account to profit and loss upon the amalgamation of a dormant Chilean subsidiary, Coliwi Energia into MVC that occurred during the year. The expense related to the derivative to related parties, including changes in fair value, was $0.5 million compared to $1.8 million in the prior year. This was due to both changes in the discount rates used and an adjustment to expected future metal prices. Finance expense decreased from $2.2 million to $1.7 million, primarily due to lower interest charges on the loan as the balance decreased from 2024 and was ultimately fully repaid during the year. Income tax expense of $22.3 million was recognized, consisting of $22.8 million of current income tax expense and a deferred tax recovery of $0.6 million. Before moving on to the statement of financial position, I will mention some non-IFRS measures used by the company, cash cost, total cost and all-in sustaining costs. In 2025, cash cost was $1.93 per pound, up from $1.89 per pound in 2024. This includes $0.06 per pound associated with signing bonuses on MVC's 3-year plant operators collective agreement. Excluding this amount, the normalized cash cost for 2025 was $1.87 per pound. The total cost in 2025 was $3.81 per pound compared to $3.49 per pound in 2024, an increase of $0.32 per pound from 2024 due to an increase of $0.04 in cash costs, $0.27 per pound in DET notional royalties as a result of higher copper prices and $0.01 per pound in depreciation. And in 2025, all-in sustaining costs increased to $4.02 per pound from $3.73 per pound in 2024 due to increases of $0.32 per pound in total cost and $0.02 per pound in corporate G&A expenses, offset by a decrease of $0.05 per pound in sustaining CapEx. Moving on to the balance sheet. On December 31, 2025, the company held cash and cash equivalents of $40.3 million and working capital of $10.9 million. Trade and settlement receivables increased from $10 million to $34.2 million, driven by mark-to-market adjustments, higher value invoices outstanding at year-end and payment timing. Property, plant and equipment decreased from $143.7 million to $132.3 million. This change includes $11 million in additions and $22.4 million in depreciation. DET royalties payable increased from $22.6 million to $34.8 million, driven by higher copper prices. Current income tax liabilities decreased from $8.5 million to $1.3 million. The current income tax liabilities at the end of 2025 were lower than the preceding year due to higher monthly tax installments required throughout the year. You will also note that $5.8 million in dividends is payable at the end of December 2025 related to dividends declared in December and paid in January. And finally, borrowings at the end of December were nil as we finished off the year with no debt outstanding. In terms of cash flows during the year, Amerigo generated cash flow from operations of $60.5 million and net cash flow, which includes changes in working capital, was $43.7 million. In terms of uses of cash, $11.9 million was used in investing activities and $27.4 million was used in financing activities. Within the cash used in financing activities is where the returns to shareholders can be seen. During 2025, Amerigo returned $20.4 million to shareholders. This included $15.2 million in dividends, including quarterly dividend payments of $0.03 per share for the first 3 quarters of the year as well as a quarterly dividend at the new increased rate of $0.04 per share during the fourth quarter. There was also $5.2 million spent on the purchase and cancellation of 4 million common shares under a normal course issuer bid and $11.5 million in repayment on borrowings as the company paid off both the loan and the line of credit in full during the year. This left us with a net increase in cash and cash equivalents of $4.4 million and an ending cash balance of $40.3 million. With a strong cash position in December, a performance dividend of $0.05 per share was declared in the month and paid in January 2026. As a final comment, we reported a provisional copper price of $5.35 per pound on our Q4 2025 sales. The final settlement prices for October, November and December 2025 sales will be the average LME prices for January, February and March 2026, respectively. Each 10% change from the $5.35 per pound provisional price would result in a $10.2 million change in revenue in Q1 2026 regarding Q4 2025 production. We now know the January price, which was $5.94 per pound. We will report Amerigo's Q1 2026 financial results in April 2026 and want to thank you for your continued interest in the company. We will now take questions from call participants. Operator: [Operator Instructions] And your first question will be from Ben Pirie at Atrium Research. Ben Pirie: Congrats on a strong quarter and full year 2025. certainly rewarded shareholders last year and hopefully can do the same in 2026 with these prices. Diving into the 2026 maintenance planned this year, what quarter is that shutdown going to take part in? And then on a similar note, what kind of initiatives, if any, are the company -- is the company working on to further improve recoveries or mill efficiencies this year? Aurora Davidson: So the planned shutdown, we -- it was broken in 2 parts in 2026. We had Part 1 completed in January, and we have a second part of the planned shutdown to be completed in March. So for all intents and purposes, it's going to be all in Q1 of 2026. So -- and I think that going forward, that probably will continue to be the quarter in which we do the maintenance shutdown, which had always been in place on the first quarter, except around the COVID years, but it is Q1 of this year. Regarding the second part of your question, if you look at our guidance for CapEx for this year, we have included optimization CapEx of around $6.4 million. It is a higher number than usual, but for good reason. We have good projects that have very attractive paybacks and that payback was used -- was constructed using a budget copper price of $4.80 per pound. So we're very enthusiastic about what those projects could bring in. And essentially, the projects include improvements to increase our pumping capacity and stability. In general terms, that CapEx has a payback of 1.9 years. We will also continue working on the optimization of the cascade stage at the MVC plant. That project has a payback of 0.7 years. And the third optimization project is to continue working on optimization of the rougher flotation concentrate transport and recovering the cleaning stage, that has a payback of 3 months. We will be evaluating the results of this third project in the year to see whether we roll out a similar install in other sections of the cascade. So they're not step-ups that will provide a dramatic production increase. They build up on the optimization projects that we've been working on for several years now, including the ones that we rolled out in Q3 of 2025. So it's -- they add up to stability and to recovery efficiency, but they're not game changers as most people in the industry see, but they're also not capital intensive. So it's exceptional payback for projects that are -- that have a very realistic rate of success. Ben Pirie: Amazing. Another question quickly, and I know this was sort of spoken about in the last few minutes of the call there. But in terms of the provisional copper price us in Q4, I think maybe if you could just highlight this a little bit more. I believe the dollar number there was $5.35 per pound. and there exists a lot of upside looking at where copper is today. Could you just touch on that and how that potential $10 million per 10% higher than the $5.35 is reflected in the Q1 numbers? And maybe just highlight this a little bit more for myself and investors. Aurora Davidson: Sure. So essentially, what Carmen was referring to is that we have a provisional price of averaging $5.35 in December. This is a mark-to-market. The LME average price for the month of December 2025 was $5.35, but that would have been the price that we used to settle our September sales. So essentially, what we do is we take the LME spot price, as I said, $535. You take the N plus 3 at December, which was $5.34. We do a progression and that averaged out at $535. So it's a mark-to-market number that basically says this is the best estimate of pricing that we had for October, November and December production as of December 31. When we start working through the Q1, we start settling those prices. So the October production was settled already at an average price of $5.94. So the move was essentially realized settlement adjustments of $5.35 moving into $5.94. I think the average price month-to-date for February is $5.87. So you can just capture essentially, we are to assume $5.87. We only have one more day to go in the month. And that would have been, again, a step-up from $5.35 to $5.87. So we're seeing a substantial amount of realized positive settlement adjustments so far in January and February, and we'll see what happens in March. The average LME copper price for 2026 has been very strong at $5.91 as of today. So that's basically the information that we have and the sensitivities can be very easily extrapolated from the commentary that Carmen provided. Ben Pirie: No, that's great. And I guess in a rising copper price environment, which you explained earlier, you guys have strong conviction in the copper price going forward, Amerigo benefits from that if copper prices continue to rise month-over-month. Aurora Davidson: Correct. Ben Pirie: Last quick question I had for you. In terms of 2026 guidance, you mentioned it's quite conservative given the copper price you used for that. At what point this year would you look to update that guidance if copper prices continue to hold in and around $6 per pound? Aurora Davidson: We don't update our guidance in terms of production. We provide our sensitivities to copper price changes to moly price changes and to foreign exchange in our first news release of the year. So that has been spelled out. We maintain a responsibility of updating any changes to our production and cash cost guidance, also CapEx. But normally, our CapEx don't change that much from what we have guided for. But our guidance essentially should be considered the production and the cash cost and CapEx. We also provide the economic outlook using a copper price, which, as we mentioned, was conservatively set up for our budget purposes at $480, but we already provided the guidance -- sorry, the sensitivity to that to changes in copper price within our guidance. And I think when we projected EBITDA using a $4.80 copper price, we said our projected EBITDA is expected at $74.5 million, and we estimate that for every $0.20 increase in copper price, we could have an average impact of $4.2 million on EBITDA. Operator: [Operator Instructions] Next will be John Polcari at Mutual of America Capital Management. John Polcari: Before I ask my question, I just wanted to commend you and management for not only the excellent quarter, but the long-term 5-year journey that it's taken to get where we are today. Well done. Sure. Two questions. First, as the price of copper has escalated and conceivably could escalate further, is there any contemplated adjustment to the royalty structure. I know it varies between fresh and historical tailings. And I think the cap is, what, $480 on fresh tailings, $550 on historical. Is that remaining in place if the price escalates further on the upside? Or can you give me your thoughts on that? Aurora Davidson: Sure. The contractual conditions speak for 2 months of consecutive LME copper prices over the numbers that you provided, $480 for the fresh tailings, $550 for the historic tailings -- which would then require that we sit down with El Teniente to discuss our royalty terms outside of those ranges. We have reached out to them. They have acknowledged that we have to have those discussions. We haven't had them yet. That may be in part because of the holiday season in Chile, their summer and end of summer, but things go back to normal in March for our friends in Chile and also the fact that we've been busy, both MVC and them with the planned shutdowns. I mentioned that we had a first shutdown scheduled maintenance shutdown in January, and we're having the second one in March, and those are priorities, right? Those are things that have to be attended to. And I guess when the water settles, we'll have those discussions with them. They are aware of the fact that we have to have this conversation as are we, but we haven't had those discussions yet. John Polcari: Okay. Would it be safe to say that in the meantime, if prices do escalate that the royalty factors will remain unchanged? Aurora Davidson: The royalty factor remains provisionally unchanged and will have to be adjusted retroactively once the final or the revised terms are known. But for the time being, they -- we're not extrapolating anything. We're basically working with the capped royalty factors. John Polcari: Okay. And my second and last question is simply, do you anticipate or is there an opportunity for any expansion in terms of processing additional tailings as the entire amount of production expands at the parent level? Aurora Davidson: Are you talking within MVC or outside of MVC? John Polcari: No, within MVC. Aurora Davidson: Within MVC, we basically are already in a situation where we process all of the historic tailings. So there's -- the plant capacity allows us to do that and on top of that, layer in the processing of the historic tailings. So we are at full capacity in terms of our own plant and the connecting infrastructure between our plant, the mine and the tailings deposit. That's why we did that expansion at MVC 10 years ago. So we are -- we reached that goal through that expansion years ago. And I think the easiest way of looking at it is, are you able to treat all of the fresh tailings? Yes, we do that. And do you have additional plant capacity to then treat the historic? And yes, we do that. So there is no more room to grow that where there is opportunity and we continue to work on that is in terms of how can we have more efficient operations within our existing infrastructure and capacity constraints to recover more. And those are the optimization projects that we have been working on consistently over the last years, including 2026. Operator: [Operator Instructions] At this time, we have no other questions registered. So I would like to turn the conference back over to President and CEO, Aurora Davidson. Aurora Davidson: Thank you very much. Thank you all for attending today's call. The recording and the script will be available on our website in the next few days. In the meantime, please visit our website regularly for updates and feel free to contact us with any questions at your convenience. And thank you for your continued interest in Amerigo. Operator: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
Francoise Dixon: And welcome to Mach7 First Half FY '26 Results Briefing. My name is Francoise Debelak, and I'm Head of Investor Relations for Mach7. Today, our CEO, Teri Thomas; and our CFO, Daniel Lee, will provide an overview of the first half results. We will then open it up for questions. [Operator Instructions] I'll now hand over to Teri. Teri Thomas: Thank you, Francoise. And hello, everybody, and thank you for joining us for the first half fiscal year 2026 results. Let me start with something that I think we can all align on. Sales matters. Sales fuels growth. It funds innovation and innovation fuels more growth. And ultimately, sales drives shareholder value. Now I happen to love sales. I've spent more time in sales than any other role in my career, and I believe it makes the business world go around. But more importantly, I know that sustainable, disciplined sales growth is what you want to see from Mach7, and I do too. Good news is we now have an enhanced, growing and focused team driving progress, strengthening pipeline quality, improving conversion discipline and aligning our commercial engine with our strategy. You'll hear more about that shortly, including a guest appearance later in the presentation. So let's begin. On our vision, before getting into performance, I really want to ground us into who Mach7 is and where we're going. Our vision is simple, but it's ambitious, to be the global imaging EMR. We win by completing the patient picture with the patient's pictures, and we do it better than anyone else. We -- health care has done a strong job organizing text-based and numerical clinical data, but imaging remains fragmented. It's locked in silos across departments, different formats, and that fragmentation creates friction for clinicians and inefficiency for health systems. Mach7 exists to solve that. Our move from archive to architecture is about making imaging accessible, usable and a core layer of the patient record, AI-ready and truly vendor neutral. That vision sets the destination, so let's talk about how we're getting there. Now this slide gives you a road map for our next 20 to 30 minutes, and I'll begin with a business overview, what we've done strategically and operationally in the first half. Dan will then walk you through the financial performance in detail. And after that, as I mentioned, we'll have a special guest appearance from our Executive Vice President of Sales, Todd Stallard, who will share his perspective on our commercial reset and how we are turbocharging our revenue engine. I'll then close with our outlook for the second half, and we'll open for questions. So let's move into the business progress. First half reflects a deliberate execution of the reset we outlined late last year. Now I know a slide like this, with the word reset, front and center can feel a bit unsettling. It can sound like disruption because it is. Meaningful progress rarely happens without disruption. And to me, reset spells opportunity. It means we sum in our courage to evaluate ourselves honestly and make the necessary changes to unlock Mach7's full potential. This has been a true top to bottom review. Our people, our structure, our technology, our office locations, our commercial models, our pricing, our cost base and our culture. Nothing has been off the table. We've now sharpened our road map. We've rebuilt the commercial engine. We've disciplined our cost base. We've clarified how we operate. This was comprehensive and it was intentional. We are not here to preserve the status quo. We are here to compete. We're here to win. So when I say we're here to win, well, winning requires follow-through. We are now largely through the reset phase and the scale of change has been significant, evolving leadership team members and roles, refining the product road map, reshaping our organization, intentionally shifting our culture toward performance and accountability. In our industry where sales cycles run 12 to 24 months, commercial impact also takes some time to fully materialize, but that doesn't mean our progress is slow. We secured our first new logo this half in quite a while, and it was a Flamingo customer. We did it quickly, and we did it differently. We listened more deeply. We aligned more directly to the customers' most challenging problems, and we positioned Flamingo exactly as it was designed, not just as another commodity product, but as a smarter way to solve complex imaging challenges. In that case, our image data orchestration on top of another vendor's radiology system. We think this customer may buy more modules from us in the future, and we're delighted to have helped solve their problems with the new product. Now that shift in engagement reflects our development of far stronger commercial muscles. We'll address that in more depth as I give Todd the opportunity to speak to our commercial evolution well underway. Operationally, we've made some difficult but necessary headcount reductions as part of our reset. That said, this isn't contraction for contraction's sake. We fully intend to grow headcount over time, but deliberately and strategically with high standards, leveraging lower-cost innovation hubs to increase our development velocity while maintaining strong cost discipline. On the customer side, our dedicated implementation support and customer success engagement team, our Flight Crew, was initiated in August. We are leaning into a culture of continuous improvement. What was working well in eUnity support as evidenced by our class scores is being extended into deeper and more proactive engagement with our VNA customers as the next phase. We're building institutional knowledge about our customers' environments and their needs, and we're using that knowledge to improve responsiveness, reliability and long-term relationships. And finally, while the slide references continued progress towards CE Mark in the first half, I am proud to share in January, we officially received our CE Mark for medical device eUnity under the EU Medical Device Regulations. That is a meaningful accomplishment. The CE Mark confirms our regulated software meets the EU safety, performance and clinical evaluation as well as post-market surveillance requirements. It is a rigorous and detailed process. And this milestone ensures access to Europe and Middle East and reinforces the strength and the quality of our product. Our execution is in motion. Now as I mentioned earlier, Mach7 completes the patient picture with the patient's pictures, and that is not just a tagline, it's real. Each day, clinicians use our software to access critical diagnostic images, but also patients themselves are logging in to view their own images with our eUnity Viewer. It's powerful. And we're not just supporting workflows, we are enabling improved health care experiences. Now delivering on that requires more than strong products. It requires a strong operating model. So as part of this reset, we're improving how we design our software, how we deliver it, how we sell it and how we support it. And those functions are aligning around a continuous customer-centered loop rather than operating as independent and segregated functions. Customer success generates insight, insight informs our marketing. Marketing strengthens the pipeline and sales conversions. Sales funds innovations and innovation increases our differentiation, including our new Flamingo modules. This creates more opportunity to win and to grow revenue. That loop, it is intentional. We overlay that with a more disciplined ROI-focused cost base, and overhauled commercial engine and a road map that's grounded in real customer needs and market demand, then you have a company positioned to grow and grow with purpose. This is growth by design and designed to be profitable. Now if my last slide described the system, this slide is about the engine. We rebuilt the sales organization with defined ownership across new customer acquisition, expansion within our installed base, strategic partner development, services alignment to support long-term value and that clarity improves speed, discipline and conversion quality. We've streamlined operations, not simply to reduce cost, but to redeploy resources toward growth positive capabilities and improve our communication, coordination and ultimately, our efficiency. We are investing where we see a return, pipeline quality, partner leverage, marketing, execution excellence. It connects directly back to the loop I just described, customer insight, feeding opportunity, opportunity funding innovation, innovation strengthening differentiation. Todd will speak more specifically about how this plays out in the field. But at a high level, the commercial engine is aligned with the strategy and profitable growth. We are no longer operating in different tracks. We are pulling in one direction. Now we have an industry-defined defining VNA and a well-loved zero-footprint viewer. It's fast, and these have been part of Mach7 for years. But I want to talk again about Flamingo. And I'm going to go a bit off-road here and depart from this slide for a minute. Think of where Flamingo fits in by picturing a sandwich. At the top of the sandwich, you might have a beautiful piece of multigrain bread. It's what you see first looking down at it. It's appealing, it's sliced well, really great texture, and there's some immediate value that you can see. Now that's our eUnity. It's our zero-footprint diagnostic quality viewer. At the base of your imaging strategy, you have sturdy bread, holds everything together. That's the foundation, the VNA, necessary, predictable. Think of a thick piece of sour dough bread, reliable. But on its own, maybe not all that exciting. What makes the sandwich compelling is what you add in between. Maybe you got some cheese and it's hot. That's AI enablement. It gives customers a practical path to explore and operationalize AI within their existing ecosystems. It's where the sandwich starts to feel a little different. Maybe you put in a layer of meatballs, our dynamic policy engine, intelligent routing and orchestration. That's what our first Flamingo customer needed, solved a very specific, very real workflow challenge, and it did so elegantly. Maybe you put in some spinach for a customer trying to go healthy, lighter, intelligent cloud migration, reduce infrastructure burden, increase agility, maintain control. Different customers have different appetites, different constraints, different needs, different priorities. And just like we don't all want to eat the same sandwich, our customers don't all need the same solutions. Flamingo is modular by its design. Customers choose the components that solve their specific problems, whether it's layered on our products or on others. And that's the power of our true vendor neutrality. We are not forcing a fixed menu. We are enabling choices. That flexibility creates opportunity and potential for rapid differentiation and opens new revenue pathways, including as a stand-alone entry point. So Flamingo is now available for sales within our customer base as well as to new customers. We signed our first customer in the second quarter and have been in discussions with several others, including addressing EMR integration challenges, AI wants and needs, cloud strategies and how to help customers mitigate risks related to other vendor lock-ins. Driven by real customer needs, we're prioritizing the next Flamingo modules to develop. Our pipeline is progressing, and we're being disciplined about quality over quantity as well as ensuring good product customer fit. We expect Flamingo-related support of growth in our ARR from this half onward. It won't be overnight, but it is strategic for our customer-focused growth strategy. Now RSNA. It was a strong event for Mach7. It added some great momentum to our transformation. Our team had some deep high-quality conversations rather than just quick booth interactions. We engaged with numerous existing customers, strong prospects and numerous partners as well. It was an efficient way to strengthen our pipeline and clearly articulate the Mach7 Flamingo story as we continue our shift from archive to a broader architectural offering. And our message, it resonated. Our booth was often full. Our team engaged in problem-solving discussions about AI, interoperability, workflow orchestration and cloud strategies. We presented in the AWS booth, and we also hosted a customer event that was well attended. It created space for relationship building and deeper exploration of the challenges our customers are facing. RSNA reinforced Mach7 has a credible and differentiated story to tell. And next will be HIMSS and SiiM, 2 relevant conferences to strengthen our market presence as well as our pipeline. Now one of the reasons I took this job is the size and scope of imaging as an industry. It's a big space. It's a growing space. And as a nurse, I love that we have the opportunity to make a positive impact on health care. The total addressable market here is significantly larger than what I worked in previously, and the macro trends support what we are building. Health care is structurally resilient. People keep getting sick and imaging demand does not disappear even in down economic cycles. Diagnostic imaging continues to grow, not just for diagnosing illness, but increasingly for wellness monitoring and even guiding treatment. Imaging volumes are rising and data complexity is rising with the addition of digital pathology, an area of high innovation for Mach7 and also an emerging area for our industry as a whole. And health systems need smarter ways to manage and activate that data, including some very, very large data sets, especially in digital pathology. AI and medical imaging is expanding rapidly, but AI only provides value if it's accessible. So we are positioned well at the intersection of imaging, AI enablement and data independence, helping health systems unlock the value of their broader imaging ecosystems. Now I believe the key to success is focus. You need to speak to someone. And if you try to address everyone, in the end, you speak to no one. Our ideal customer profile centers on academic medical centers, large integrated delivery networks and teleradiology groups. We know these customers. We already serve many of them, including some very well-respected names in our industry. I personally do love to speak to customers, which I try to do weekly, and I even get out and visit customers, real face-to-face interactions. And I'm delighted to have personally visit 2 of the organizations on the screen over the past month, and I heard firsthand how our software is stable, improving access and supporting complex clinical workflows. They value data independence, AI readiness, a lower cost of ownership and fast image access. Smaller sites, veterinary clinics, those kind of non-focused customers, we still serve, but through partnerships versus directly, which then supports our focus and our profitability. Now one of the most important lessons I've learned in sales is this. Knowing your customer is essential, but it is not enough. You must clearly understand your value-add points of difference, defend them and continuously expand them. That's how you avoid commoditization. That's how you protect margin and it's how you win. So for Mach7, differentiation starts with true vendor neutrality. We give customers control over their data without forcing replacement of their existing niche or specialty imaging systems. We layer that with AI enablement and intelligent orchestration, our Flamingo dynamic policy engine, supporting complex routing and workflow automation. Now security is another key advantage for Mach7. Health care is one of the most targeted industries for cyber threats. Our BitSight Security Rating of 750, which is categorized as advanced, sits above industry average. BitSight is an independent third-party cybersecurity rating platform used by large enterprises, government agencies and people like our big target customers. This isn't self-reported marketing language, it's externally measured and validated performance. That credibility strengthens trust and supports enterprise sales conversations. You add subsecond image access speed and strong price to performance value and you have a differentiated rating that resonates. So knowing our differences, step one, extending and defending them through flamingo modules, a solid dedicated customer engagement with the Flight Crew and disciplined execution. That's where things start to hum and it's where focus turns into competitive advantage. So let's turn to execution in the second half and our main priorities. First, sales momentum. We are focused on bringing in new customers, increasing proactive engagement within our installed base and accelerating opportunities in Asia and the Middle East. We're doing this with pipeline discipline by prioritizing quality, conversion and alignment with our ICP, not pursuing revenue at the expense of long-term margin. Second, execution. Our Flight Crew model is now operational, and we've organized our teams into structured pods based on customer archetypes like full suite customers, partner-led accounts, VNA-only customers, allowing us to build deeper expertise and deliver more consistent outcomes. We've also introduced company-wide week plans to increase visibility, accountability and predictability. And execution is becoming measurable and repeatable, not variable and personality driven. Third, leadership and organizational readiness. We've refreshed over half of our leadership team, and we'll be onboarding an experienced CTO to strengthen platform scalability and engineering discipline. And finally, cost discipline and structural leverage. We're investing in growth critical capabilities where the ROI is clear. We are optimizing our location strategy, including transitioning from a large, underutilized headquarters to a smaller, more nimble, cost-efficient, technology-enabled hub that can flex in size and foster collaboration and ongoing innovation. Our objective is disciplined profitable growth, sustainable expansion and execution that compounds. We've taken on some hard actions. We've aligned the organization, and now we begin to drive results. And with that overview, I'll hand over to Dan to walk you through the detailed first half financial results. Daniel Lee: Thank you, Teri. I'm pleased to walk everyone through Mach7's first half fiscal year 2026 results. This half was a period of intentional transformation for the business, strengthening our foundations, sharpening our commercial execution and positioning Mach7 for future growth. The first half reflected lower capital license activity as we undertook a strategic commercial and organizational reset. While this impacted reported revenue, the underlying fundamentals of the business remains strong. Recurring revenue was resilient at 85% of total revenue, representing a strong and stable base. We maintained excellent gross margins of 92%, demonstrating the scalability of our platform and services model. Operating expenses decreased by 6% as our disciplined reset efforts began delivering early efficiencies. And critically, Mach7 remains in a very strong financial position with $18.5 million in cash and 0 debt, giving us the flexibility we need to execute on our strategy. Revenue for the first half was $13.7 million, down 23% on PCP. This reflects lower capital license sales during this reset period. Recurring revenue of $11.6 million declined 8% from PCP and now comprises 85% of total revenue. Total CARR of $26.1 million and ARR run rate of $23 million were down just 8% (sic) [ 12% ] and 2%, respectively, on a constant currency basis. While EBITDA and net profit after tax were impacted by the revenue mix shift, our cost reduction initiatives and high-margin profile support improving operating leverage as activity rebuilds in the second half of fiscal year 2026. Our revenue mix continues to evolve towards subscription and the maintenance and support model. Professional services and capital licenses were lower, which we anticipated during this transformation phase. Our ARR run rate remained stable at $23 million, supported by our installed base and renewal performance. Product revenue remains balanced with a 55-45 split between VNA and the eUnity Viewer. Sales orders for the half came in at $10 million in total contract value. While lower than PCP, we saw a significant shift toward high-quality recurring revenue, which again represented 85% of sales orders. Capital software sales came primarily from expansions within our existing customer base, a positive indication of customer satisfaction and platform value. Professional services orders were lower as expected during this reset, but we anticipate an uptick as new deployments come online. Our foundational book of business remains strong and provides a solid platform for future growth. Despite the revenue decline, gross margin remained strong at 92%, reinforcing the scalability of our model. Operating expenses improved by 6% as our recent initiatives took effect. Adjusted EBITDA tracked lower in line with revenue, but we are seeing early evidence that the cost base realignment will create meaningful leverage as we move forward. Cash receipts were $12.5 million, and we ended the half with $18.5 million in cash and 0 debt. We continue to operate with financial discipline, and our balance sheet provides the capacity to execute our go-to-market and product strategies without compromising stability. We expect improved momentum in the second half as sales execution benefits from our reset, partner alignment continues to strengthen and customers progress into deployment and expansion cycles. Thank you. And back to you, Teri. Teri Thomas: Thank you, Dan. All right. Those financials, they reflect transition. And now let's talk about acceleration. Commercial excellence is about discipline, hard work, rigor and scale. We are modernizing marketing, research-backed messaging, full funnel activation and omnichannel execution. And to lead this next chapter, we appointed Todd Stallard in September. Todd brings deep experience across commercial growth, partnerships, enterprise technology and product-led environments. Todd, I welcome you to introduce yourself and share a little bit about our commercial reset. Todd Stallard: Thanks, Teri. Hello, everyone. I'm Todd Staller. I'm the VP of Sales and Marketing at Mach7. I joined 5 months ago, as Teri just said. When I joined, I was coming on to build an organization, not maintain a revenue organization that had been struggling, if you will, for some time. The ability for me to come in, see this company and take the opportunity is considered by myself as a blessing. My mandate covers the full commercial engine, direct enterprise sales, a global channel partner program, marketing function to reposition Mach7 around what we believe is a category-defining opportunity, and that is the world's first real imaging EMR. Health care imaging infrastructure is where electronic medical records were around 15 years ago, pretty fragmented, siloed by department, locked into proprietary systems. Hospitals running 3, 4, sometimes 5 different PACS systems across radiology and cardiology. It was never supposed to be that way, and it's not unusual today to still see that. That is the problem that exists that we at Mach7 can continue to build our product and our offerings to clear that fragmentation. That fragmentation costs health systems millions in redundant infrastructure. It slows clinical decision-making. It blocks the adoption of AI tools that can transform patient outcomes and assist doctors that are overworked. Mach7 exists to solve that problem, as Teri said earlier. Our platform provides the vendor-neutral data layer, the archive, the routing intelligence, the integration fabric that allows health systems to consolidate all imaging into a single source of truth. And that way, they can also choose the best-of-breed viewer, which is eUnity. With our Flamingo architecture, we're moving beyond storage and routing into more imaging operations, data management and AI analytics. That is something that the customers are demanding. On the commercial side, I'm focused on 3 things. Converting our improving pipeline into closed revenue, building a partner leverage go-to-market that scales with linear headcount growth and driving the brand position that earns us a seat at the table every enterprise imaging decision that comes about. Our net new CARR pipeline for new logos has grown 30% over the last 3 months. We've worked hard. We've cleaned up our pipeline. We're trying to provide clear tracking and information to Teri so that the management organization at the company understands what our opportunities are. We're looking at driving more marketing lead conversions and partner co-sell and co-marketing activities. I base this on basically 3 strategies, and those strategies are pretty simple. Strategy 1 is pipeline discipline. We've got to qualify every opportunity against 6 factors: quantifiable customer outcomes, budget authority, evaluation criteria, buying process, identified paying internal champions. We've done a good job of cleaning the pipeline up. When we first came in, it was a little maligned, stale, not necessarily the sense of truth, and we've moved forward now and we're building those stale leads have been removed. Those true opportunities and the probabilities have been shifted into building a weighted ARR forecast. Those numbers reflect reality. And in the future, that will help us begin to build more trust and belief in what Mach7 delivers. Strategy 2, partner at scale. 4-pillar programs. We need to enable our partners and recruit new partners in by training and onboarding them, getting them into the Mach7 world, understanding the community that we service and understanding how we service them with our technology. We need to engage through joint planning and QBRs with those partners. We will hold their feet to the fire. We're going to be held accountable. We're going to execute through co-sell and co-marketing with them. We will invest with them. We will drive. We will push for leads. We will bring them on to help drive the business. And those types of partners that include hyperscalers, VARs, health care MSPs, a variety of partners that are out there that are chomping at the bit to have a good company like Mach7 offer our opportunities to them. The model scales revenue without scaling headcount necessarily. We will build our sales team out, but we can get a lot more reach by leveraging our partners. Strategy 3, market position. Launching the imaging EMR brand in this coming March across all demand gen, thought leadership and the customer marketing. As Teri mentioned, Mach7 is the picture of the patient's picture -- it's a tongue twister for me. The patient's picture completing the patient's picture, right? We're going to drive on that. And that is where the imaging EMR brand comes across and will be pushed through in our strategy of how we reach out marketing-wise. And we've restarted recently the engine, right? We've put gas back into it. We started launching socially. We've been pushing out a variety of information, and we'll continue to do that as we ramp towards those events that Teri talked about that are revenue generators for us from a standpoint of marketing qualified leads to sales qualified leads, HIMSS, SiiM and RSNA. Underneath all of this sits the revenue operations team. We have an outstanding resource that I call my right brain. She is phenomenal, and she helps drive the pipeline velocity, our partner attribution, our lead conversion and our scenario-based forecasting. We are getting much cleaner on that. And that will show promise down the line that we're converting more of our leads and we're engaging with our customers faster. And hopefully, we'll be able to cut down our time frame for closing, which is right now averaging between 12 to 24 months depending upon what the solution is. There is a market tailwind with us. The shift from proprietary packs to vendor-neutral platforms has been converting over the last couple of years, but it's starting to accelerate. And due to the AI momentum, I will say, that's starting to build up in the medical environment. The Flamingo architecture will allow us to do a lot of things with AI integration as we move down the line, that will offer some specific opportunities for different areas that we haven't necessarily explored before. But I want to reiterate, we're early in this, right, on the sales and marketing side. That doesn't mean things slow down. It doesn't mean that we don't drive hard on the number. It doesn't mean that we don't avoid hitting the goals. We're going for the goals. We are pressing on the goals. My job is to convert everything that comes into this as closed revenue, and that's exactly what we're going to do. But I want you to know it's early in the build. I'm not going to pretend, but the market opportunity is massive. The technology we have is a differentiated component. The team that I have and the team at Mach7 now is executing. That's different than was in the past. So the mission matters to me, and the commercial organization is focused to drive growth and new logo capture. I'm glad to be here. I'm happy to have the opportunity. I look forward to working closely with Teri and Dan as we move forward. Teri Thomas: Thank you so much, Todd. I appreciate that. I love about Todd. He brings a lot of energy to the role. He tells it like it is. He's my BS detector. He's a great partner. So thank you. Now on our outlook, as we move into the second half, we've got a solid strategy. We've got stronger operational foundations. We are improving our commercial momentum. We've got some early Flamingo traction. We've exhibited disciplined cost management, which will be ongoing. We are selectively investing where ROI supports it, sales execution, partnerships, product development, Flamingo, overall platform scalability. It's controlled growth. It's not reckless expansion, and we remain confident in our strategy and focused on our execution. So I want to thank our Board, our employees who've been working hard in this transformation and our shareholders. And we'll now open it up for questions. Francoise Dixon: Thank you, Teri. We received a couple of questions in advance via e-mail from [ Matt Hale ]. So I'll start with those. Can you comment on the customer response to the Flamingo solutions? Teri Thomas: Absolutely. One of my favorite conversations, and this is with a -- in the middle of our bull's eye ideal customer. They came by at RSNA. And I heard that they'd considered us previously and never looked at us. And I requested, come by, you're going to see something different from what you've seen with Mach7 before. And I said, I actually want to test out with you, does this resonate? And I just laid out for him the Flamingo architecture, the different directions, the modularity, the capabilities, the problems that we're solving. And he said, you are speaking directly and taking off almost every single box of what we're trying to do, but more importantly, what we've been struggling to find solutions to fit. And that's key. It's not chase after what everybody else does. It's fill the gaps that nobody else does. That's differentiation, that's power, and that's what Flamingo is all about. So I could not have heard a better validation for a customer to say, am I your ideal customer and you are speaking to me and you are addressing unique challenges. So the biggest challenge for us now, get the word out. Our marketing was underdeveloped, and a lot of people don't know who Mach7 is. So as Todd mentioned, we've done a significant overhaul in our marketing engagement strategy, everything. And our velocity has picked up in marketing messaging starting actually this month in the last few weeks, but there's going to be more and more of that as we launch some changes to our brand and get that word out so that people know there now are solutions to these problems with Flamingo. Francoise Dixon: Thanks, Teri. Matt sent through a second question, which was, can you provide an update on the CTO hire? Teri Thomas: We're so close. I was actually hoping we might be able to say we've hired our CTO by now, but we're in our final discussions. We had a very strong response when we started looking far more strong candidates than I anticipated. I think that does relate in our industry, it's actually a great time for our transformation, whether it's executive roles, support roles, developer roles because a lot of organizations have implemented return to work policies. There are a lot of people on the market and some top skills. So we are very close. I expect that we will have a new CTO committed within the next couple of weeks, likely starting in the next month or 2. Francoise Dixon: Thanks, Teri. I'll now turn to the live chat. And our first question comes from [ Jesse Livermore ] who asks, how long should we expect the reset in brackets declining revenues to continue. Are we back to growth in the first half of '27? Teri Thomas: Our guidance related to revenue is we anticipate to be somewhere around even from what we did last year. Now I've put the caveat. This does rely on some capital deals likely out of Asia. There are also opportunities out of our services part of the organization, which you bring new customers in, you get services. So we expect to stay pretty flat this year. I do expect next year to be a year of growth. That should be when a lot of the commercial momentum starts to really hit. Francoise Dixon: Great. Thank you, Teri. Look, we have now -- we've got now questions come through from Ian Wilkie. How quickly do you expect Flamingo to shift from an early adopter product to a material driver of ARR expansion? And what are the leading indicators that you look for internally that tell you Flamingo is becoming the default architect of choice for new deals? Teri Thomas: It's an interesting question because Flamingo is an umbrella of a lot of modular purchasable options. And it's something that I expect will not have an end, but will continue to grow. So shifting from early adopter product will happen all the time because we'll have new products and new capabilities and new modules that people can add. Now our first Flamingo offering which is what the customer I profiled bought is something that's been around, but wasn't really packaged up in the right way that was meeting customer needs. It was simply a part of our VNA, required the VNA, and we were actually losing that sale because we were telling them they needed to buy more than they needed to buy. So the first thing that we are doing is analyzing how many solutions have we actually built in as niche solutions that are just part of the VNA that don't apply to everyone and could be modularized. So I expect the process of building out Flamingo as a broader architecture and an offering that drives significant revenue to increase roughly on a quarterly basis over the next 2 years. And at that point, we expect our differentiation to be very solid. We expect this to be the key in terms of us owning the imaging EMR. Now leading indicators are very easy when you look at using CRM with any rigor. How many deals do we have Flamingo elements in and what's our win rate? So easy for us to track. The part that's fascinating, though, is so much of Flamingo strategy prioritizing what we're packaging is related to deep customer engagements within our current base. So it's easier to get traction when you have clear alignment with the problems that you're solving and you don't put that into just the hands of the customer support team or the product team or the development team. So we are unifying our teams around deep engagement with our customers and letting them shape priorities and have a say as we're taking some of these components of our VNA and packaging them up to be sold stand-alone as part of Flamingo. So expect it to be ongoing. Francoise Dixon: Thanks, Teri. Our next question comes from [ Max ]. Please talk about the threats and opportunities you are seeing in relation to AI. Teri Thomas: I see very few threats in our industry. It is almost all opportunity from my perspective. There's, of course, operational opportunity that we all see to accelerate our ability to deliver software, but I don't see AI coming in and replacing the software that we deliver. Imaging is extremely complicated. Health care is -- even though imaging is one of the areas of health care that uses AI most with over 1,300 FDA-approved AI algorithms, it's alphabet soup out there. So lots of opportunity for us as a company to provide a platform and help customers determine how to best leverage the huge world of AI opportunities out there to improve diagnosis. We also -- instead of fighting with AI, we open the door and we embrace it internally, but also with our customers and on behalf of our customers. For example, our partnership with Strings enables our customers to better manage their Mach7 archive using AI-enabled tools. So creating those partnerships, opening those doors, embracing and guiding our customers through our Flight Crew and close engagement with them only opens up more opportunities. We have seen nothing that has given us pause or any threats based on AI to our commercial activities thus far. Francoise Dixon: Thanks, Teri. Our next question comes from [ Andrew ]. Have we had any sales of UnityVue? And is that still a focus? Teri Thomas: Yes and no. We haven't sold eUnity View directly ourselves, but we have proceeded in an engagement with a customer that has Nuview and our technology, and we've been working through enabling how that works together in order to ensure that UnityVue is tried and true and available and referenceable. So it is part of our go-forward strategy. However, we, ourselves have not sold it yet. Ask me again in the future, I think the answer will be different. Francoise Dixon: We have no further questions on the chat. I'm just going to pause a minute in case any come through. We have no further questions at this time. Teri, I'll hand back to you for closing remarks. Teri Thomas: All right. Thank you so much. So as those of you who know me would know, I do believe in setting clear expectations, but then delivering on those. So we are driving a meaningful shift in our culture and our operating model and execution and transformations like this take time. Sales cycles are long. We're working to accelerate them, but there's only so far you can go. These relationships have to be built. The architecture can be complex, and our solutions rely on an understanding of a number of different systems in the ecosystem. The class momentum builds steadily and is a lagging indicator. And our revenue acceleration really follows our disciplined execution. That said, the foundation is now really, it's in place. The strategy is clear. The opportunity is significant and our balance sheet is strong. So I know it's about delivery, and we are building Mach7 to realize its full potential. I firmly believe the opportunity ahead of us is greater than our current results reflect. My commitment is to lead with clarity, work with intensity and execute with the discipline required to deliver the growth that I believe this company is well capable of. So I thank you, my Board, the team, our investors for your faith, and I look forward to giving you an update again in a few months.
Peter Taylor: Welcome, everybody, and thank you for joining us today. I have the CEO, Simon Wensley; and the CFO, Mr. Nathan Quinlin, to talk us through the 2025 financial results. And I see the market looks pretty happy about those today already. So, I'm going to hand over to Simon, and we'll have a Q&A session at the end. Thank you, Simon. Simon Wensley: Great. Thanks, Peter. Good afternoon, everyone. Thanks for joining. Really appreciate your support. Yes, look, the really solid set of results for 2025. We really were looking to make a step forward from our implementation of our expansion through 2024. Look, we did that with a 9% increase in production. And I guess that underpinned a lot of what happened from a physical point of view. I might just pull up and share the announcement so people can sort of -- if you haven't had a chance to look at it, it's -- I can sort of cover that off as we go. So hopefully, you can see that. Yes. So as I said, look, the production was an excellent underpinning growth year-on-year. And that, of course, underpinned significant revenue growth as well. We had a reasonably robust market through 2025, and that was largely -- we knew that was coming. It was -- the market was getting tighter and tighter through '23 and '24, and we absolutely were getting the expansion funded and implemented in time for what we could see was going to be a firm price environment. So, we were able to take advantage of that and margins over $30 a tonne in that first half of the year. So look, that was very pleasing to be able to get that year-on-year growth. That's underpinned a record underlying EBITDA of $73 million. That's almost 100% improvement from the prior year. And the net profit obviously is underpinned by a couple of other items. But I would -- before I hand over to Nathan, so this is obviously his baby from a financial results point of view. And I would emphasize a really strong endorsement from the auditors with a clean audit report. But the -- one of the strategic things we've talked about as a company was getting to net cash. We got really, really close. We got to $57.5 million of cash against the debt position of $58.9 million, so just over $1 million away from that after having paid down over $23 million of debt. So, that's really important from a balance sheet perspective and an investor point of view looking to us to secure the company. And then giving us -- we'll talk about in a minute, giving us the opportunity for capital management. That was a really, really critical part of the year. But look, I'll hand over to Nathan to run through some of the other elements in the financials. Nathan Quinlin: Great. Thanks, Simon, and thanks, everyone, for tuning in. Like Simon mentioned, a couple of really pleasing results from a financial perspective there, a very healthy EBITDA number, which is speaking to the quality of earnings coming through at that 6.2 million tonnes amount. And it gives you a sense, I think, of the economies of scale here as well. So particularly around -- and Simon will speak to guidance for 2026 and exactly what we're targeting and it gives you a sense of the economies of scale and the cash generation potential of this asset now with the build capacity in, and confidence around that and our new management operating system that will no doubt deliver those tonnes. So, very pleased to be able to generate that level of EBITDA and free cash flow this year. Like Simon said, we got very, very close to the net cash position, if not for a final shipment, but got very close, leaves us with a little bit of unfinished business, which is not the worst thing as a motivation for a team that's about to get ripping again. So, pleased with that. And then looking forward into some of our other things around like foreign currency, we had a good result with foreign currency this year, much better result than what we had last year, managed to pick our spots fairly well, but most importantly, be able to lock ourselves away up to at least around 75% of our net USD exposure going into 2026 at a very, very healthy around that $0.64, $0.65. So, very pleased to have that locked away. And as you can imagine, particularly as we have this forward outlook and some of the capital management, how important it is to lock some of these things away and control the controllables, and that gives us confidence to be able to be assertive and go out and take the value that's out there. In terms of carryforward losses, also in a good position there, similar to -- and you would have seen this at the half year, not only with the strong results that we had in the half year, but more importantly, the strong outlook that we've got for the business going forward makes us confident and gives us the ability to bring back that previous impairment, bring back that reversal and bring those DTAs or those carryforward losses back onto the books. So, what we have in terms of available carryforward losses is about $184 million in gross terms. So, for the people out there modeling, you would expect to see us start to utilize those all through 2026, and I wouldn't expect us to be in a taxpaying position until probably the second half of 2027. So, a pretty healthy tax shield there for us. Simon will touch on, I'm sure, a little bit more on the buyback. But naturally, particularly with where we see ourselves at the moment, the business outlook that you see also being supported by those impairment reversals and recognition of the carryforward losses makes it pretty clear to us there is a significant undervaluation there, which we're more than happy to invest in Metro at that price. So, I'm very pleased to be able to do that. I'm very pleased to be able to generate some shareholder value through what is otherwise. I'm essentially adding flexibility to the balance sheet through some prudent loan restructuring to make sure that we're balancing out cash flow from a debt servicing perspective and having the opportunity with that flexibility to generate some shareholder value. Thanks, Simon. Simon Wensley: Yes. Great. Thanks, Nathan, and thanks to you and the team for the hard work over the last few months to pull that all together. Very, very good set of results and well presented. Yes. Look, I think Nathan touched on it. The Board -- and we've been pretty clear about this from the start. I mean, we're about -- this is about bringing -- the strategy is about being bringing the Bauxite Hills Mine asset into fruition. The strategy that we outlined early on in second half of 2022 once we stabilized the business and really put an operational and marketing strategy down was to expand the business, gain those economies of scale and get ourselves to the bottom of the cost curve. So, what we said then in the second half of '22 and then when we got -- went to FID and financing in the first quarter of '23 was that by 2026, we're going to be producing at 7 million tonnes and that we were going to have a cost appropriate to be pretty much down at the bottom end of that cost curve. And what that does in commodity terms is provide us with the flexibility to withstand pretty much any market. But it's not in its own right, and Nathan again touched on this. It's all about also derisking the business in every way we possibly can. And that's been allied with just an expansion. It's not been just more of the same. It's been about creating additional resilience. And that's required some change in technology in our business. So in terms of things like increasing the capability of our hauling fleet in terms of speed, in terms of payload, in terms of the roads that they run on. It's been about the wobbler moving away from vibrating screens to roller screens and bringing Ikamba, our offshore floating terminal, which is capable of operating in much more difficult sea conditions. So, these are the sorts of things allied with just an expansion here that have been underpinning this growth. And of course, some of those things don't come quickly or easily, but they're effectively all in place. And that target now of getting to that sort of 7-plus million for 2026 is what this is all about, and the economies of scale will continue to flow towards that cost. But it's also about -- Nathan has touched on derisking the business through the foreign exchange part, and that's obviously well in the money. At the moment, something else that's well in the money is all of our freight contracts. And so the ability to reduce risk for the investor by taking prudent positions in the market to be able to then go about the strategy of implementing these things. So, our freight now is probably AUD 2 to AUD 3 in the money for 2026 versus the prevailing Capesize freight rates, which have been going up pretty much for all of the second half of last year. And of course, in a cost curve, where a cost curve drives industry structure, like it does in most commodities, all that's doing is pushing the cost of delivery of West African bauxite, which is at the margin of our business is pushing that up and up and up. And so we've got -- we're much closer -- even if we were exposed to the spot market for freight, we would still be in a much better position, but we're even in a better position because of the contracted freight, the 2- to 4-year contracts that we've taken out at the beginning of last year to underpin our delivered business. So there's a whole bunch of, I guess, aspects to this that derisk the business. And when we look at that profile with the Board and what we delivered in 2025, but more importantly, what's the outlook for 2026, even the market will be what the market will be, but the ability for us to effectively guarantee that we're going to make margins here moving forward, irrespective of what's happening in the market is an extremely important thing for the Board to consider. And they've been very clear that they're not going to sit on cash. We got to that net cash position. We were able to do some of this other derisking of our cost structure. We put a new team together to be able to drive the improvements that we are making. And so all of that plays into a confidence in the future that has underpinned the buyback here. So we're, of course, working on growth. Growth is, of course, part of our business, but we're not in the mode of -- and certainly not in the game of piling up a war chest. And if we have a growth opportunity, we will bring it to market. It will have to stand on its own 2 feet, and that will be the signal for us to move forward. And whilst Bauxite Hills is producing cash, that will be part of our capital management strategy, and this is just the first step. Nathan, did you just want to touch on any other aspects of the buyback at this point? Nathan Quinlin: Not necessarily, just otherwise setting the context. But in terms of how we'll execute, that will be an on-market buyback, the terms of which have been disclosed in the last release. So, what we're targeting is 5% retirement of shares on issue over a 12-month program. Simon Wensley: Okay. And there'll be more details to follow on that in the very, very near future, so in terms of execution of the buyback. So, look, I think at that point, Peter, we might just pause and see if there's any other -- any questions out there. Peter Taylor: Absolutely, Simon, and thank you as well, Nathan. A couple of questions have come through so far. And with the rerate now occurring, which we see on the screen today and assuming the company is on target tonnes achieved in financial year '26, a strategic acquisition would be good or a dividend? Do you see either occurring? Simon Wensley: Well, look, I guess what I would hope is I see both occurring. And so I've just said -- I've just talked about the cash generated from Bauxite Hills. In the absence of that -- of a very live and current growth option, we will continue to pay that back to shareholders within the risk appetite of the Board. So, that's certainly the case. And like I said, we're absolutely working on some growth options. Look, it wouldn't be prudent to be more specific about that at the moment, but there are -- we're certainly well down the track on a couple of growth options. But like I said, we will bring those to market. We'll be very clear about what they can do for the business and why we're going after them. And indeed, then I suppose, get the feedback from the market. So look, that's certainly the strategy. Peter Taylor: Thanks, Simon. Second question. One for Nathan. Where does the financial assurance paid to the government sit on the balance sheet? Nathan Quinlin: Yes, sure. Sure. So on the balance sheet, the financial assurance amount that is sitting within the financial provisioning scheme will be sitting within the other financial assets that you'll find in the non-current assets on our balance sheet. So that's -- and I think in our previous webinar, we mentioned that, that is a priority over the next couple of months for us to explore how we get that sort of back into our own bank account where we can put that to use rather than sitting there. Som plenty of options for us to look into. Peter Taylor: Thanks, Nathan. Another one for -- actually probably more of an operational and financial one combined. How confident are you that calendar year '26 guidance can be achieved? Have you seen issues from calendar '25 now resolved? Simon Wensley: Yes. So it's a great question. Look, we've gone back and looked in detail at 2024 and '25, so everything since we've been bringing the new flow sheet into action. We've had a look at the things that have pulled us back from delivering higher tonnages. The critical thing here to say is that in terms of the feasibility study, everything -- every part of our flow sheet at the scale that we had set has now delivered on its capacity individually. So, when I look at the clearing and stripping fleet, we had a few issues with that. But we saw at the end of the year that it had -- it was capable of delivering. We just had to plan and execute it better. Our mining and haulage, that has demonstrated the capacity that we need. The screening -- ROM and screening area, that has demonstrated the capacity that we need. The tug and barge -- the barge loader and the tug and barge system, which is basically an integrated system have demonstrated the capacity that we need and the transshippers have certainly demonstrated individually and together the capacity that we need. So the thing now is plugging all of that together, right? And that's where I think outside of a couple of, I might call externality events. And if I look back at '25, for example, the Easter weather event, which caused our channel to collapse on the edges was -- pulled us back certainly by 150,000 tonnes to 200,000 tonnes. And we unfortunately were not able to load the last vessel at the end of December, which was another 170,000 tonnes. So, look, absent those 2 factors, which were largely externally driven, we would have achieved 6.5 million, 6.6 million last year. And then from 6.5 million to 6.6 million to sort of 7 million or 7 million plus, it's really about us not achieving more through each event, any one of our parts of our flow sheet, but actually reducing the variability, plugging them together and allowing them and making them work in a less variable way. So, effectively reducing the bottom quartile performances through that flow sheet. And we have pulled that apart, put it back together again. We've got a different -- I guess, a different structure now in terms of internally about how we're going to go about that, a very strong, I guess, technical and planning group under Nathan, a new short-run operations strategy under Paul Green at the site, who will be effectively looking only forward 2 or 3 ships in terms of where they operate. So, really sort of segmenting that short-run execution, really focusing on that short-run execution and the reduction of variability with the medium-term technical and planning side, so providing that service to the site. So, we're very hopeful, confident that, that is a better way of looking at this. We've spent a lot of time over the last 6 months collecting data from every part of our business. We've been feeding that and analyzing that, and feeding it into a new logistics and operations flow sheet and analysis. That is driving us. Those are coming out with 7-plus million tonne outputs. And so we are certainly driving that. And through the implementation of what we're calling a new management operating system that will be really the processes, the routines, the KPIs that drive that, the ability to sort of look at variants and how that works through. That is how we are about to start our operating season. So, we're expecting to be roughly back around middle of March. As soon as we have some firm [ lakes ] for the first vessels, we'll announce the target for operational restart. We've already got work going on, for example, in the channel. So we can't control the weather, but we can certainly control the impact that the weather has. And so what we've done, as already mentioned, in our processes with the roller screen wobbler. And in Ikamba, we've already reduced the impact that weather has on some parts of our flow sheet. That channel issue already -- we routinely maintain that channel twice a year. So, we had already done that in March of last year before that weather event. In the October maintenance of the channel, we have already widened the channel from 60 to 70 meters. Therefore, if we got an identical event to what happened last year, then the sites slumping into the channel would have minimal effect because we've effectively widened the channel. And this year, we're also going to investigate whether we do have approval to go deeper in that channel with that maintenance work. And so we're going to be looking at trying to create some additional depth or -- which effectively translates into barge capacity, tonnes on barge and in terms of hours per day where we're not affected by tide. So, that's certainly one of the underpinning initiatives this year where we're again trying to go back and look at what affected us last year. And that's been through, for example, the application of a different type of tide with a different type of play with a different approach, and we've had really good results on that in the second channel maintenance activity from last year. So, look, apologies for the very long answer, but I hope that gives an insight to the work that's gone in and the sort of focus that we've got on lifting those bottom quartile shifts, bottom quartile days, bottom quartile weeks up into that level to increase the averages that run through the flow sheet. Peter Taylor: Thank you, Simon. Assuming the wet season holding costs are typically $20 million for the quarter, with the Ikamba dry docking, is that number still about right? And also, can you please let us know when the Ikamba is expected to return to service? Simon Wensley: Nathan, do you want to take that one? Nathan Quinlin: Yes, absolutely. Absolutely. Yes. So in terms of the Ikamba dry docking, so the cost of that dry docking of the cash outlay would be in addition to the typical $20 million cash burn that we see over that period. From a timing perspective, naturally, these costs in a shipyard are driven -- very milestone driven. So, we actually wouldn't expect to see probably 75% of the actual cash burn for that dry docking to actually come through the statements until around sort of April and May and with final payments. So it's fairly spread out. From an overall earnings perspective, our dry docking because most of these work program is statutory in nature, we actually provide for those costs in advance as well. So the full cost of this dry docking is otherwise included in the current set of results that you're seeing. So the impact of that dry docking won't impact our margins. Peter Taylor: Thank you, Nathan. And while you're there, isn't there a strong argument that share buybacks represent better value to shareholders than dividends do until Metro is paying tax, i.e., fully franked dividends? Nathan Quinlin: Yes, I think so. That's certainly our view. With all else being equal, I think that's certainly the more tax-efficient strategy. But even then outside of that, when we're looking at what is ultimately a strong -- what we consider significant undervaluation of the current share price, it makes the buyback all the more obvious strategy, I think. Peter Taylor: Thank you. And Simon, you touched on potential growth options, but how do you view your progression of Metro's EPMs to further support Bauxite Hills? Simon Wensley: Yes. So, optimizing Bauxite Hills continues to be our primary focus, so absolutely the primary focus of the team. The additional resource -- we have about 40-odd million tonnes of resource that is sitting around our current pits. So, that is effectively the easiest resource to get to. We're currently doing more work on that in terms of analyzing the quality of that bauxite. Last year, if you go back and look at our AGM presentation, I talked a little bit about one of the initiatives is that we're looking at screening. We're looking at effectively upgrading -- bauxite upgrading. I mean, this is upgrading of Weipa Star bauxite. It's not a new thing. It's Rio Tinto at Weipa, as I experienced in my career with Rio has been going on effectively for more than 60 years there. So, it's a pretty well-known pathway. However, as we do at Metro, we are not looking at things just as a copy and paste. We're looking very carefully and creatively at the best value way in which to do that. Rio Tinto effectively wash all of their product, which obviously drives a huge amount of additional mining. It drives additional capital, additional cost and they have to manage a massive sort of tailings or fines management program, and they lose about 30%, 35% of the ore. So, we're very, very conscious that, that kind of big bang solution is not probably suitable for Metro. So, we're looking very carefully at individual areas of our resource base of that. And we're also looking at it, what we call a dry screening opportunity where we don't need the use of water. We don't need much lower cost opportunity, obviously, requires the ore to be probably only applicable for about 6 months of our operating season, but we've had some really good initial results from our dry screening trials as well, and we're also looking at selective wet screening. So that not only -- so the first stage of that is the resources that sit around our current sort of pits and reserve. The next stage are resources that sit somewhat distant to that and the nearest ones are north of the river. We've got some exploration tenements, which we started to explore at the end of last year. There's a bit more work to do there. The actual drilling programs are quite straightforward, relatively low cost. We don't have to go down very far to hit bauxite, obviously. So it's then the analysis of that. And particularly if we're looking at the application of screening or so into those leases, obviously, that takes a bit longer again. We've also got existing resources that are not recognized in the resource statement sitting at the old Cape Alumina Pisolite Hills project. So that was -- that is effectively south and east of where we are. So, that -- one of the antecedent companies of Metro is Cape Alumina. They had a project called Pisolite Hills. That was affected by the recognition of a National Park. Those resources are still -- though a proportion of those resources are still on our books and they sit in the same sort of orbit as the Bauxite Hills Mine and just require a kind of access and barging strategy to be able to get to them. And then we've just -- we've been in -- we have some resources very close to the Arakoon, the town of Arakoon down in the southern part of the Weipa bauxite plateau. We've been discussing access to those tenements with [ Manoch ], the local body corporate that represents the traditional owners there. And so we've been progressing access rights to that. And so we do expect subject to agreement to those conduct and compensation agreements to be able to access those tenements there. And one of those tenements was added last year in a deal that we did with Prophet Resources, which is an adjacent tenement to the one that Metro owns. So, we've now sort of doubled the potential size of that exploration opportunity. So, we're still continuing down exploration. Our firm intention is to add resources and reserves to our current resource base. And some of that may be, though, subject to the trials that we're doing this year on the upgrading of dry and wet screening. Peter Taylor: Okay. And finally, Simon, an update on the bauxite market. How do you see things currently, perhaps an outlook? And do you see a return to stability from what was a volatile price market last year? Simon Wensley: Yes. Good question. I mean, I might start at the top level, which is sort of with aluminum. So the -- those following the aluminum value chain will have seen the aluminum price after a dip early in the year, coinciding with the initial, I guess, Trump Liberation Day tariffs. We've seen a very strong recovery of aluminum. And that's being driven by a few things, right? So, there was 74 million tonnes of aluminum produced in the world last year, but it basically wasn't enough to satisfy the demand. And so we're in deficit as China -- China grew by about 2% in its production last year. But again, that wasn't sufficient to put into the market, and they've been importing more aluminum. And the aluminum market at the moment because of these tariffs and also by -- because of the sanctions against some Russian entities is somewhat structurally -- how can I put it? I guess there are structural restrictions in that aluminum market, which are driving outcomes and pricing that is really destined for even further growth. So, you've got pockets of demand that can't be met by local supply. They are then affected by tariffs. So that's the U.S., for example. The price of aluminum in the U.S. is actually almost double that LME price. So if you look at the LME price of over $3,000, it's between $5,000 and $6,000 per tonne because of not only the tariffs, but just the huge deficit that exists in the U.S. market, and they don't have any fast way of getting access to that product. So, there's some fractures and issues in the market. But above all, the demand for aluminum is growing. And so even with this sort of like temporary -- the tariffs clearly caused a dip in demand. And even without a recovery in the China building and construction market, you're still seeing significant 3%, 4% growth in demand for aluminum, and that is just not being able to be supplied out of the industry at the moment. And so China is now very close to its production cap. And so where is that aluminum going to come from? So, predictions are continuing for deficits this year, and that obviously must mean price rises. And the other thing that's driving that growth other than the standard electrification, vehicles, transportation, aerospace, et cetera, is the fact that copper price is going hard as well, and aluminum is a substitute for copper in many applications. So, there's a whole bunch of reasons why. And that's -- so overall, a great environment in the aluminum space, which means that growth in alumina production is required, and that means growth in bauxite -- growth in bauxite demand. Now, when you then break that down, okay, we're in the Asia Pacific. I mean, a lot of that growth is happening in the Asia Pacific. At the moment, though, there is -- as you mentioned, Peter, there's been a bit of a volatile ride. There were some very, very high prices at the end of '24 for bauxite into '23 -- into '25, and then that's come down a bit. Things stabilized a bit, and there's been a bit of a dip, a couple of dollars down again since the end of the year. But the alumina market -- so we supply into that alumina market. It is a bit oversupplied with -- and there is a shake-out occurring, particularly in China, with older plants closing, new plants coming online. But all those new plants are dedicated to imports. So, what's good about that shake-out is you're seeing -- we're seeing alumina plants inland in China looking to curtail and close. And that they've been largely based upon domestic Chinese bauxite and the new plants coming on the coast are 100% dedicated to imports. And so what we're going to see then once this shake-out has sort of worked its way through, we're going to see increased demand for traded bauxite in the Asia Pacific. India is coming along on the rails as well. The Middle East is also planning additional refining capacity. So look, we do see that. And Indonesia has -- is growing its whole chain, the smelting chain, the alumina chain and the bauxite sort of side of things. But I see that largely being contained within the sphere of Indonesia. So Indonesia, I don't think we're going to see a lot of leakage of either alumina or bauxite out of that market. So, look, I think there's a bit of volatility around, but I would just go back to my comment earlier about industry structure, which is as long as the West Africans are supplying into the Asia Pacific and as long as they continue to be 2/3 or 2 months of freight travel away, which I don't think the geography of West Africa is going to change anytime soon, then Metro is in a structurally advantaged position irrespective of whether we have a tight or less tight market to be able to supply into the Asia Pacific at low cost. So, all of the things we've been driving for are going to continue to be relevant in terms of this market structure. Peter Taylor: Thanks. That was a pretty comprehensive coverage of that question. I just got one little one here. We mentioned perhaps in previous webinars discussion of the Kaolin resource or the Kaolin mineralization at Bauxite Hills. Is there any further exploration or interest in that particular mineral there? Simon Wensley: Yes, there is. We've now extracted and tested the product in a few different places in a few different markets. The Kaolin product that we have on a raw basis is of good enough quality to export. Kaolin though, it's a bit more of a fragmented end-use market. So, there's -- Kaolin goes into paints, goes into paper, goes into ceramics, goes into rubber, goes into fiberglass, goes into a whole different -- a huge number of different applications. Each application has a slightly different quality, I guess, specification, has a physical -- the physical state of the kaolin, the fineness of it, et cetera, are very, very different. So it's not a big bulk market that one can understand in a fairly easy brush stroke, but we are continuing to explore that market. I'm not particularly interested in doing a lot of work on Kaolin in terms of upgrading on-site. Skardon River is a great place to run bulk commodities. Whilst we have the bauxite value chain, it does allow us to piggyback the Kaolin on the back of that large-scale value chain and flow sheet, does mean we can then get raw Kaolin to places very, very cheaply. And I guess that's the model that I'm trying to progress. And that does then require, obviously, partners at the other end who are going to take that product and either distribute that or to work on it, whether it's sort of upgrading it through, washing it or by grinding it or by doing something for the particular segments that the Kaolin market needs to drive. But I guess, for us to move the needle there, we'd be look -- we'd be wanting to move 300,000 to 500,000 tonnes of Kaolin to be able to kind of move the needle. I mean, that's quite a lot of Kaolin for the Kaolin market. It's a much, much smaller markets. So the answer is, yes, we've done more work. Yes, we've done more drilling. Yes, we've done some studies on mining. We've done some test work on our flow sheet to be able to prove that it can be dug up. It can be moved. It can be screened. It can be placed on barges and through our transhippers. So, that work has been done. It's really now more market than market side of things and can we see a value proposition for exporting effectively what is a raw bauxite that needs further work done on it. Peter Taylor: Thank you, Simon. Thank you, Nathan. That concludes our questions here today and a good summary of what looks like a pretty positive report and that the market seems to like it, too. So if there are any other further questions, please e-mail them in to Peter@nwrcommunications.com.au. I'll make sure Simon and Nathan get them. And this is being recorded. So, we'll make this available for distribution later on. Thank you, gentlemen. Thank you, everybody, for joining us. Simon Wensley: Thanks, everyone. Nathan Quinlin: Thanks.
Operator: Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to DoubleVerify Q4 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Brinlea Johnson. You may begin. Brinlea Johnson: Good afternoon, and welcome to DoubleVerify's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are Mark Zagorski, CEO; and Nicola Allais, CFO. Today's press release and this call may contain forward-looking statements that are subject to inherent risks, uncertainties and changes and reflect our current expectations and information currently available to us, and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings, including our Form 10-Q and our annual report or Form 10-K. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliation to the most comparable GAAP measures are available in today's earnings press release, which is available on our Investor Relations website at ir.doubleverify.com. Also, during the call today, we'll be referring to the slide deck posted on our website. With that, I'll turn it over to Mark. Mark Zagorski: Thanks, Brinlea, and good afternoon, everyone. Let me start today's call with a quick take on the most recent quarter. In Q4, we delivered a strong 38% adjusted EBITDA margin and 8% year-over-year growth in revenue, demonstrating the strength of our operating model even as revenue came in below expectations. As we mentioned last quarter, while we anticipated some retail softness, our results were impacted by further pullbacks of a customer campaign spend late in the quarter, primarily due to agency-related changes. We saw no broad-based spend decreases or detachment of DV services and noted exceptional strength across multiple sectors in the fourth quarter, including health care and technology. We reported strong customer retention during the quarter with no new deactivations among our Top 100 customers in Q4 and usage across social and streaming TV continues to scale. In addition, our Programmatic business continued to grow, with nearly 2/3 of the impressions that we engage with delivered on mobile, in-app and mobile web environments. Outside of mobile, both programmatic display and video measurement impressions grew at double-digit rates in 2025. The investments we are making in building durable, diversified long-term growth in sectors that continue to thrive alongside the AI revolution, namely social, streaming and AI platforms are becoming core catalyst for our future growth. Social activation accelerated meaningfully growing at approximately 60% year-over-year in Q4 and starting 2026 at an even stronger year-over-year growth rate. And Authentic AdVantage on YouTube is entering the year with $8 million of expected ACV. CTV measurement impression volumes also grew impressively, up 22% for the quarter continuing their cadence of outsized growth. We also saw strong interest in our ABS enabled Do-Not-Air-Lists for Streaming TV, which entered general availability with a strong debut this January with 3 top 15 customers, representing hundreds of millions in CTV spend implementing prebid controls. AI measurement tools like SlopStopper and Agent ID showed meaningful engagement rates and are now being tested by 6 of our largest customers with a broader rollout scheduled for the coming months. Together, the areas which are most important for a durable growth story in the future are setting us up for a strong 2026. Before turning to the full year 2025 results, I want to discuss the continuing evolution of our product-led growth cycle and what is really on everyone's mind, our take on the potential impact of AI on advertising and DV's business. DV's growth cycle and trajectory is foundationally shaped by the timing of product releases, platform enablement and customer adoption. Over the last year, our new product development cycle accelerated across social, CTV and AI platforms with several major releases rolling out in the fourth quarter of 2025. With Social and CTV innovation now broadly available and AI capabilities continue to expand, we've entered 2026 with a more diversified revenue mix driven by a broader product offering. These new solutions fuel 2 main product-led growth engines. First, we have a significant opportunity to expand within our existing customer base. As we elevate product attach rates for our new Social, CTV and AI Platform Verification capabilities, we drive higher wallet share, spur revenue growth and create broader, stickier client relationships as enterprise customers adopt more of our platform. As a result, average revenue per top 100 customers grew by 7% for the year to $4.5 million. Second, our accelerating product cycle is enabling us to win new customers and gain market share with proprietary solutions as entry points to new customer engagements. Our leadership in the fastest-growing areas of digital advertising, Social, CTV and AI-enabled performance optimization is expanding our relevance, increasing our competitiveness and landing us new logos. These differentiated solutions drove a 90% greenfield win ratio in Q4, our highest ever recorded meaning that we are winning deals with solutions in new areas in which there are no competitive incumbents to displace. Ultimately, our product innovation in 2025 harnessed the power of AI to expand TAM, improved solution efficacy and drove stronger margins and also helped deliver solid results that will set the stage for future growth. We grew total full year revenue 14% year-over-year, well exceeding the 10% growth outlook we provided at the start of the year. We also delivered double-digit growth across all 3 revenue lines. We continue to onboard large global enterprise customers, further strengthening our position as a trusted partner to the world's leading brands. This momentum delivered strong profitability and cash generation with a 33% adjusted full year EBITDA margin and $211 million in net cash from operating activities. Now turning to the impact of AI on marketer behavior and more importantly, for this call on DV's business. To put it simply, we see this evolution only in terms of accretive future opportunities for DV. The ad ecosystem has always been one in constant flux, where marketers buy ads, how they buy ads and even how they create those ads changes with each advancement of media and technology. The current AI revolution is just the next evolution of this story. And all of these evolutionary cycles, what has never changed is why marketers buy ads, their need for measurement and their demand for trust and transparency. Whether it was ad networks in 2010, programmatic platforms in 2018, social networks in 2021 or agent-based AI platform buying in 2026 and beyond, DV has been and will be essential in driving transparency and trust. Regardless of changes in media or mode of buying, our customer value proposition lies in the vast amount of data we gather and the trust layer that supports the unbiased independent analytics we provide. In the AI era, the question isn't about who has the best model. It's about who has the best data. DV generates a massive proprietary data set from the hundreds of terabytes of advertising data we process every day across trillions of annual transactions. This isn't generic web data that anyone can access or scrape. These are proprietary signals tied to actual ad delivery, brand suitability, fraud detection and business outcomes based on contracted relationships with leading platforms. LLMs can help us interpret this data faster and more efficiently, but they cannot replace its unique value. DV has never been about the media or the method, but about the data supporting the motive. In addition, OpenAI's introduction of advertising marks the creation of an entirely new digital media environment, and DV is ready for this evolution. According to e-Marketer, ad spend on LLMs is expected to grow to over $25 billion by 2029, cannibalizing over 14% of search spend, which is a $400 billion market that DV has historically not been able to access. We believe advertising within LLM platforms has the potential to create a new search like digital channel where independent verification from companies like DV becomes foundational. Independent metrics in this new environment are critical and several dozen of our current customers who are experimenting in this new space have already indicated that they expect consistent measurement across everywhere they advertise. While AI platform ad models continue to evolve, advertiser demands remain the same, ensuring ad transactions are trusted and transparent and adds are reviewable, brand suitable and delivered to legitimate traffic within authentic content environments. As digital advertising becomes more automated, agentic and opaque, as AI slop becomes the must-avoid content category for advertisers, the need for independent verification, protection and performance measurement has never been greater. Regardless of platform, buying mode or message, DV will be an integral trusted part of this ad equation. Building on our progress in product innovation in 2025, I'll now walk through the updates on our key 3 product cycles. Starting with Social, Streaming TV and closing with AI. As noted on previous calls, our goal is to increase the contribution of social streaming and AI-driven solutions from under 30% of total revenue today to approximately 50%, creating a revenue mix that more closely aligns with global digital ad spend trends. Starting with Social, it remains our fastest-growing environment and a core driver of our next phase of growth. As I mentioned earlier, Social Activation accelerated meaningfully to approximately 60% year-over-year growth in the fourth quarter, up from around 20% growth in Q3. That acceleration was driven by continued scaling of Social Prebid, building upon Meta's specific product enhancements that we upgraded through the year. Expanded content level avoidance across feed and reels nearly doubled filtering coverage and materially improved activation effectiveness. By year-end, 68 advertisers were live on Meta activation, up from 56 in the third quarter. Adoption is being driven by large enterprise advertisers, with 28 coming from our top 100 clients. We exited December with Social Activation at an annualized run rate of approximately $8 million, ahead of our expectations, and it continues to be our fastest-growing area as we start 2026. Adoption of DV Authentic AdVantage on YouTube also expanded during the quarter with estimated ACV of approximately $8 million driven by continued customer adoption. Some of our largest CPG customers has started scaling on the solution, and we are excited about the opportunity to grow this business over the coming quarters. Also driving social growth into 2026, we expanded attention measurement on TikTok during the fourth quarter, becoming the platform's first badged marketing partner to deliver impression-level attention insights. In addition, we expanded our post-bid brand suitability measure on Meta to include Facebook Reel Overlay placements, extending independent transparency across one of the platform's fastest-growing ad formats. Finally, we expanded our integration with Meta through the launch of Rockerbox Relay, which enables Rockerbox customers to send attribution results to Meta as an optimization signal. This launch improves advertisers' ability to drive performance against outcomes. Turning to Streaming TV. 2025 marked an important inflection point in our expanding CTV strategy. Over the course of the year, we launched a series of products to address growing advertiser transparency demands and increasing fraud in streaming environments, including verified Streaming TV measurement and pre-bid controls, automated Do-Not-Air workflows, and enriched program level intelligence through our licensing of IMDb data. We've already begun to see solid early adoption of ABS Do-Not-Air Lists from our largest advertisers as well as strong interest in our Authentic Streaming TV solution, which we launched at CES in January. Expanding our growing CTV footprint, we launched our integration with LinkedIn to deliver measurement for CTV impressions. This expansion extends DV's independent verification and authentication to LinkedIn CTV ads across existing streaming environments, increasing measured CTV coverage and reinforcing DV's leadership in transparent cross-channel media measurement. Together, these innovations helped grow CTV measurement volumes by 33% in full year 2025, reflecting continued advertiser demand for independent transparency in streaming environments. As mentioned previously, the tools that we launched in 2025 to combat the increasing challenge of navigating AI slop are gaining traction with our largest customers. This momentum will be bolstered in the first half of 2026 with the launch of DV SlopStopper for Social, a premium solution to address a content arena rife with issues that advertisers are eager to avoid on platforms that attract the lion's share of advertiser spend. 2025 was a year of product development acceleration, partner expansion, meaningful growth across all of our business lines and continued strong margins and cash flow. Before turning it over to Nicola, I want to briefly address capital allocation. Returning capital to shareholders is a core element of our long-term value creation strategy. And as of today, we have $300 million authorized for share repurchases, the largest amount in DV's history, which we plan to actively deploy in 2026 at increased levels versus prior years. This reflects our confidence in our business, the continued strength of our balance sheet and our commitment to creating long-term shareholder value. With that, let me turn the call over to Nicola. Nicola Allais: Thanks, Mark, and good afternoon, everyone. Let me walk through our fourth quarter and full year 2025 results and then discuss our 2026 outlook, including the key growth drivers and assumptions underlying our guidance. For the fourth quarter, revenue was $206 million, representing 8% year-over-year growth. For the full year, revenue was $748 million, representing 14% year-over-year growth despite variability driven by the retail sector in the second half. In the fourth quarter, activation revenue increased 6% year-over-year and measurement revenue increased 8% year-over-year, both driven primarily by Social. In the fourth quarter, Social Activation and Measurement together represented approximately 19% of total revenue. Supply side revenue increased 17% year-over-year supported by retail media platforms and expanded publisher and platform integrations. In the fourth quarter, total advertiser revenue, which includes activation and measurement grew 7% year-over-year driven by 8% growth in volume or MTM, partially offset by a 3% decline in price or MTF, excluding the impact of an introductory fixed fee arrangement from one large customer onboarding from Moat. Fourth quarter activation revenue grew 6%, with ABS representing 52% of activation revenue in the quarter. As of year-end, 78% of our Top 500 clients were using ABS. Measurement revenue grew 8% year-over-year, with Social measurement revenue increasing 11% and representing 49% of measurement revenue and international revenue increasing 5% and representing 29% of measurement revenue. Excluding the previously disclosed CPG customer suspension at the start of the year, social measurement revenue would have grown 22% in 2025. Finally, revenue from Rockerbox was slightly ahead of expectations. Turning to full year 2025. Revenue grew 14% driven by double-digit growth across each revenue line, including 15% growth in activation, 10% growth in measurement and 25% growth in supply side. Advertising revenue growth remained primarily volume driven, with MTMs increasing 15% year-over-year to $9.5 trillion billable transactions measured, partially offset by a 3% decrease in MTF to $0.07 excluding the impact of an introductory fixed fee arrangement for one large customer onboarded from Moat. We expect volumes to remain the primary driver of growth in 2026, as we continue to verify more digital ad impressions through new product launches and through new channel and geographic expansion. Supply side revenue grew 25% year-over-year by adding new CTV and digital platform partnerships and through continued expansion on retail media networks, with DV tags now accepted across 152 retail media networks, including 18 major platforms and 134 retailers globally. For the full year, we achieved a net revenue retention rate of 109%, and gross revenue retention remained above 95% for the fifth consecutive year. Average revenue for Top 100 customers increased by 7% year-over-year to $4.5 million, and we ended the year with 344 advertisers generating more than $200,000 annually. Our long-term customer relationships remain strong with Top 75, Top 50 and Top 25 customers working with DV for approximately 9 years. Moving to expenses. In the fourth quarter, we delivered 83% revenue less cost of sales and $78 million of adjusted EBITDA, representing a 38% margin. For the full year, we delivered 82% revenue less cost of sales and $246 million of adjusted EBITDA, representing a 33% adjusted EBITDA margin to combine continued revenue growth with solid profitability. We ended 2025 with 1,231 employees slightly down year-over-year, excluding the impact of the Rockerbox acquisition. In 2026, we expect to continue to invest in AI capabilities that will enable us to maintain revenue less cost of sales over 80%, accelerate product development and time to market while also growing with fewer employees through improved productivity across the organization. This will allow us to scale the business more effectively and increase EBITDA margins in 2026. Turning to cash flow. We generated approximately $211 million in net cash from operating activities in 2025. Capital expenditures were approximately $39 million or 5% of total revenue, driven by investments in innovation and platform scalability. This resulted in free cash flow of approximately $173 million, representing a conversion rate of approximately 70%, up from 61% in 2024 and reinforcing the durability of our cash-generating model. Our strong cash generation enabled us to repurchase 8.4 million shares for approximately $132 million in 2025, outpacing stock-based compensation expense and driving a net reduction in shares outstanding of approximately 3%. We ended 2025 with approximately 162 million shares outstanding, approximately $260 million in cash and no long-term debt, providing us with significant flexibility to invest in growth, pursue strategic opportunities and return capital to shareholders. Reflecting continued confidence in our financial strength and long-term growth prospects, we have, as of today, $300 million authorized for share repurchases, which we plan to deploy in 2026 at increased levels versus prior years. Now turning to 2026 guidance. For the first quarter, we expect revenue to range between $177 million and $183 million, representing a year-over-year increase of approximately 9% at the midpoint and adjusted EBITDA to range between $48 million and $52 million represented a 28% adjusted EBITDA margin at the midpoint. To provide context, fourth quarter growth of 8% reflected elevated retail pressure driven by campaign pullback late in the quarter from a couple of large customers. Based on the current momentum we have seen to date, our first quarter guidance is 9% growth despite a 17% growth comparison in the first quarter of last year. This improvement reflects expected higher contributions from our recently launched Social and CTV products, along with continued sector diversification towards health care and technology. For full year 2026, we expect revenue to range between $810 million and $826 million, representing an 8% to 10% year-over-year increase. Our full year revenue outlook is driven by a recurring base of growth of core products to core clients, which is reflected in our net revenue retention of 109% in 2025. Incremental growth in 2026 off the base will be driven by 3 product-led growth engines: first, adoption and scale deployment of the recently launched solutions across Social and Streaming TV; second, incremental revenue growth from existing enterprise clients scaling across our product offering; and third, continued new customer acquisition driven by DV's differentiated MAP product vision, which integrates independent verification with real-time optimization and outcomes measurement. Our 8% to 10% year-over-year revenue growth guidance assumes a measured take on the impact of these product-led growth drivers as they scale in 2026 and doesn't assume an improved macro advertising environment. In terms of quarterly growth cadence, 2026 shapes into a stronger second half growth as we lap 19% growth in the first half of 2025 as compared to 9% growth in the second half of 2025. For full year 2026, we expect adjusted EBITDA margins of approximately 34%. We're guiding to an increased adjusted EBITDA margin of 34% in 2026 as compared to 33% over the last 3 years, reflecting our ability to grow the business more efficiently while improving productivity across the organization. Below the line, we're implementing an updated equity incentive plan that is projected to reduce the annual value of equity grants by over 40% as compared to 2025. As a result, we expect full year stock-based compensation to decline year-on-year and range between $102 million to $107 million. For the first quarter, we expect stock-based compensation of approximately $23 million to $26 million and weighted average fully diluted shares outstanding of approximately 164 million. We expect capital expenditures, including capitalized software to be approximately $46 million in 2026, reflecting continued investment in product innovation, AI-driven automation and platform scalability. With zero debt and approximately $260 million of cash on the balance sheet at the end of 2025, we remain well positioned to invest in growth and execute on our capital return strategy. In closing, 2025 was a year of product evolution for DoubleVerify. We launched the next generation of Social, Streaming TV, and AI products, delivered growth, maintained strong margins, generating meaningful cash flow and returned capital to shareholders. As we move into 2026, we're well positioned with a more diversified business, a clear focus on durable growth and expanding profitability to deliver long-term shareholder value. And with that, we will open up the line for questions. Operator, please go ahead. Operator: [Operator Instructions] Your first question comes from the line of Matt Swanson with RBC Capital Markets. Matthew Swanson: Mark, I really enjoyed all the color you were giving us on the kind of AI opportunities and maybe kind of explained to us why the risks might not be what some of the market participants might think they are. I also loved the name SlopStopper. But if you go a little bit deeper into just kind of what inning you think we are in terms of like this AI revolution, whether it be from the content side or from like your internal products? And just how you think this is going to play out throughout 2026, but also kind of the changes you might be making for the long term. Mark Zagorski: Yes. Thanks for the question, Matt. And I would say for both internal and external opportunities, we're early first inning. Like we're just scratching the surface right now, which makes it so exciting. As we noted, we see AI as nothing but a huge opportunity for DV. Our role in the ecosystem has always been one to provide trust and transparency in buying and whether those are agents buying or DSPs buying or an exec sitting behind a keyboard somewhere 15 years ago, we've always played that role. And when we think about those opportunities internally, they're about efficiency and driving operating margin. And as you saw, we were able to raise our guide this year on our EBITDA expectations. A lot of that is driven by the fact that the things that we do, contextualize content, try to stamp out fraud, driving greater transparency. All those things are done faster, more seamlessly and cheaper through AI. We mentioned before, double the classification volume already 4x the productivity, 2,300x faster labeling of content. All of those things are real lifts for our business and drive better margins. On the outside and the external, we look at not only the universe of challenging content that AI creates as being an opportunity. So as you mentioned, SlopStopper, we'll be expanding that into Social later on this year. and looking at AI as an opportunity for optimization through Authentic AdVantage as well as just this big meatball that's out there is the chatbots, which are now running advertising. And just as the other venues that we've entered, whether it was CTV through Netflix or Social when we added Reddit in the last few years, that new platform is going to need verification. We've got many of our customers already leaning in there and spending money and saying, "You guys need to be here next." So lots of opportunities to be more efficient, lots of opportunities to build new products and lots of opportunities to add new platforms to our mix, all driven by AI. Matthew Swanson: Appreciate that. Are we sticking to the one question? Mark Zagorski: You could ask another, Matt, go ahead. Matthew Swanson: All right. The other one I was going to ask was just on the MAP side and just kind of early responses you've seen from the bundling strategies that you laid out at your Analyst Day. So just anything. I know it's still early, but anything you're hearing from your customers right now? Mark Zagorski: Yes. So it's been a really solid response to our first integrated product, which is Authentic AdVantage. That's for YouTube that is bundling together prebid social filtering plus post-bid measurement plus optimization on YouTube. That helped drive Social Activation to 60% growth year-over-year. And we're seeing an even stronger growth rate coming out of the gate on Social Activation. So that strategy is working. It's also working to introduce new customers to totally new solutions within our realm. We mentioned that really extremely high greenfield win rate for Q4 of 90%. That means 90% of the customers that we won that quarter weren't using a competitive product in that space. That means we're bringing in new customers into total use solutions, bringing them into that MAP system and giving them the ability to upsell over time. So it's been early, but I think we're getting really good results out of the initial solutions we've launched from the MAP strategy. Operator: Your next question comes from the line of Matt Condon with Citizens. Matthew Condon: First question, I just really wanted to ask on what happened at the end of the quarter. Just what are you seeing? It seems like there's some agency partnerships, but maybe there are some pullback in spend. I was just wondering if you could elaborate on that. And just what gives you the confidence that you have in the 1Q and the implied acceleration of revenue growth? Nicola Allais: Yes. So I'll take that. So what happened at the end of the quarter is related to the retail vertical. We had talked about that during the third quarter already and I had already mentioned that as a little challenged in terms of ad spend. And that continued into Q4 as we had expected. What we didn't expect is towards the end of the quarter, additional pullback from specific customers that were going through at agency changes. That was not something that we had anticipated when we had given the Q4 guidance. Now that leads us to an ending growth rate in Q4 of 8%. We're guiding to 9% going into Q1 2026, and that's based on visibility that we have to date into the quarter, uptick from the Social and CTV products that we just launched and generally not seeing a continued degradation around the retail sector. In offsetting the retail sector, I have to say health care and technology did very well for us in 2025. We're entering '26 for more diversified mix across verticals with retail representing less than it used to in prior year. So we feel good about having been able to diversify the mix across the various variables -- the various verticals. Matthew Condon: Great. And maybe just a quick follow-up, Mark, just as we think about social prepaid ramping here, it's good to see the progress continue. But how do we get that to even grow faster in 2026? And how are you planning on just driving further adoption? Mark Zagorski: Yes. So we saw really strong social activation, as we noted, up almost to 70 customers now on Meta prebid and a large number of our Top 10, Top 15, Top 20 customers now engaged in some pretty big brands, right? So folks like Lilly and Inspire Brands and Capital One and even better themselves. So big brands out there spending on the platform. Now it's just about scaling. There's always a testing process. There's always a testing cycle. And the great news is we've launched increasingly accurate, increasingly powerful versions of this solution on a regular basis. As it gets more accurate, as it gets to be a more effective arbiter of eliminating waste and finding challenges on those platforms, it's easier uptake for us. So we see that as a really nice acceleration pace, particularly across Meta. And again, right now, it's outpacing our expectations, and we hope that will continue through the year. Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Alexander Vegliante: This is Alex Vegliante on for Eric Sheridan. I just want to dig into some of the investments you're making this year to support the product development. Any planned investments in go-to-market to support the adoption curve of some of these social prebid products? Or will the investments that you're making and what's implied in your guide just be more concentrated on product development and AI? Mark Zagorski: Yes. As far as kind of headcounts and people investments, we're actually looking to stabilize or decrease those over time. The efficiencies that we're getting out of AI tools have been exceptional and particularly when it comes to classification and our ability to kind of do what we do best, which is identify challenging content and drive greater transparency and trust. We're doing that with fewer people at a faster pace and more accurately. So efficiencies there. As far as go-to-market, I think we have a great team out there. We spent the last few years building out a super engaged global sales team. They've gotten deeper and deeper into brands, 8 of our top 10 relationships are now brand direct. And I think that we've got the right folks in the right place telling the right story with the right products, and that is going to continue to drive growth for us throughout the year. Operator: Your next question comes from the line of Brian Pitz with BMO. Brian Pitz: Mark, maybe a follow-on regarding category comments. I know CPG is been challenging to you in the past few quarters. Has that category recovered? Any comments would be helpful. And then any additional color on specific growth drivers going forward? What are the key success factors? Really how [indiscernible] your guidance range? Nicola Allais: Yes, I'll take the first question, Brian. The -- actually, CPG did well. And as you'll recall, we had one client at the beginning of the year, suspending its service with us. But the category did well because we acquired clients in 2024 that scaled into 2025. So on balance, that category did well. There obviously are pressures that are tied to CPG that also impact retail. We saw it more on the retail side than on the CPG side. But I think CPG has remained strong for us because of the fact that we have large clients that are scaling within the product portfolio that we have. Mark Zagorski: Yes. And then just as far as growth catalysts that we're really focused on, we kind of hammered them in the script, which is our social tools and social solutions. So expanding Authentic AdVantage beyond just YouTube and looking at TikTok as well as Meta. Expanding our SlopStopper solution into social and walled gardens, which I think is going to be a huge hit. And then continuing to invest in CTV and right now our ABS Do-Not-Air List is really live on Trade Desk, but we've got the opportunity to expand that to additional DSPs. So I think for us, it's all about a focus on social, a focus on CTV, and then our AI tools that cover both of those products with an opportunity out there as the AI platform start to scale advertising, looking at that down the road is a big opportunity for us as well. Operator: Your next question comes from the line of Tim Nollen with SSR. Timothy Nollen: I'd like to come back to the CTV topic, if I could. TV has always had its own measurement systems and the TV network groups have never historically relied on their own platforms to provide the measurement and attribution reporting. So I'm curious, what is different about CTV for you guys versus web or mobile? Meaning, is it easier for you to penetrate this medium given your differentiated tools that you can bring to CTV now? Or is it difficult given how TV measurement has always operated under its own terms? Mark Zagorski: Yes, it's a great question. I think the difference in the CTV universe versus kind of the linear universe is the fact that the metrics that advertisers are using to evaluate success go well beyond just reach and frequency, right? They go to driving results, effectiveness of results. But you also have challenges to that. So things like fraud pop up, things like screen is not being on while ads are playing, you've got views which drive viewability issues, which all drive the effectiveness of CTV. So I think our role in CTV is a different role than the measurement companies played in the kind of linear world. And our role is not just to determine whether or not something works, but determine whether or not something is valid. And that's why we see a, more and more advertisers turning us on and our scale growing significantly. In CTV, we saw a 33% year-over-year growth in volume because, again, it's a world that's not as transparent as the linear world has been. We see bigger opportunities there as advertisers demand greater transparency. So getting show level data on a granular basis and being able to expose that. We're already doing some of that, and we're starting to do that at scale with our Authentic Streaming TV solution because, believe it or not, advertisers, in many cases, on a lot of programmatic platforms are buying CTV that's not really CTV. We can ensure that it is -- that it was delivered on a full episode player in a highly branded environment. So those things are starting to become a bigger and bigger deal to advertisers as the billions and billions of dollars, they're scaled quite a bit. So I think we play a unique role in that universe. I think that role continues to expand as we see CTV volumes expand. And the number of tools that we provide to address those problems is going to grow over time. Operator: The next question comes from the line of Alinda Li with William Blair. Alinda Li: Awesome. I wanted to just learn about how have conversations evolved with the driving interest of AI solutions? And have you observed any changes in customer interest in the way that you're looking in approaches? Mark Zagorski: It's a really interesting question. So I think a lot of the stuff that you hear around advertising and agentic-based tools is really -- it's still relatively early days. Vast majority of buying is still being done through programmatic platforms or through platform-enabled tools on the social networks, et cetera. So first and foremost, advertisers still want to ensure that what they're buying is what they think they're buying, and it's going to drive a result that they expect. And that's the role we play on those platforms. It's the role we'll play with agents when that starts to scale. So the dialogue is today with most advertisers is, how are you guys going to play in that new world, right? And what role will you play? And I think the role we play is exactly the same one we play today, which is driving trust and transparency. In those cases, it will be with an agent who's going to search for a buy needs to make sure that, that buy is safe, so it's going to contact us first. The same way a DSP pings us first. And within 200 milliseconds, we return a response that says this is good or bad. We'll just be talking to an agent in the future. So -- and we're ready to do that, which is pretty cool. The other aspect of the kind of the AI discussion has to -- it really has to focus on how are you guys leveraging tools, but with human guidance to make sure that what you're contextualizing, what you're calling brands suitable is going to be relevant and trusted. So beyond the accreditations that we have, which guide us to what we do, RAI and the efficiencies that we're driving from AI and conceptualization are always guided by humans and we always have a human hand in there because we think that's important. And our customers think that's important, too. So that's the second, and I'll just do one more quick one, which is an increasing number of advertisers are just getting frustrated with the fact that a lot of their ads are running against slop, right? And it's a big deal, and you see statistics out there that at some point in the next few years, 90% of all content will be AI generated on the web. Some of that will be okay and some of it won't be. That's part of the role that we're going to play. We did that with made for advertising sites and content and we're doing that now with AI slop. So lots of questions. I think all of them are really interesting and all of them are places we're leaning in, building solutions and providing trust. Operator: Your next question comes from the line of Laura Martin with Needham. Laura Martin: Sure. My first one is on events. So you guys are 2 months in the year, 3-month quarter, and I'm really surprised the guidance for Q1. Is it for more of an acceleration given the social media talking about Bad Buddy and the Super Bowl and all of the sort drama around the Olympics that ended up on social media. So can you remind us like why those big events don't drive higher impression and therefore, faster growth rates for you? Mark Zagorski: I think volumes are still scaling pretty rapidly around social. I mean our products there are still relatively early stage. But as we noted, we exited the year, for example, on Social Activation growing 60%. I think it's starting the year out even faster at a higher growth rate. So we're seeing those numbers grow pretty quickly as well. We're also starting to lap the customer that we had paused services last year, which was a big social customer. So we will see social show meaningful growth in Q1 based on that engagement and that event's activity, which brings up another good point. I mean, look, you have a year ahead of us, which should be really interesting around -- we've got elections. we've had Olympics, we've got World Cup. All of those will be interesting factors to see where that activity and where that activity ends up, whether it will be social or open web or streaming or all of the above. Laura Martin: Okay. Great. And then my other one is on pricing. I'm so sad to revisit this with you, Mark. So when we went public, I think your average price was $0.09, and now it's down to $0.07. And I feel like we've set -- you've set 4 years investing in cool new products, new capabilities, you're bundling and yet we're under pricing pressure here. Pricing down 3%, although it sounds like it was worse because you had a onetime moat customer that gave fixed fee contract scale. So what's going on with pricing here? Why are we gaining pricing pressure given all the value you're adding to the product? Nicola Allais: Yes, Laura, I'll take the first part of the answer, which is what is driving the price down right now, which is really a mix shift between environments where we have a full slate of products that is fully penetrated, and that would be ABS as a premium-priced product, along with measurement for the open web. On the social side, as you know, we are -- we now have the products, and we are increasing penetration of the premium price side of that equation on social versus the measurement side that we've had for a while. And so as impressions are shifting from open web to social until we have fuller penetration of our pre-bid social premium products, that is not a dollar-for-dollar switch. The opportunity, of course, is now that we have the product, we're going to see the benefit of the premium price product. What I can say is on the social side, we are able to charge a premium price the same way as we're able to charge a premium price for ABS versus basic brand safety and measurement. Operator: Our last question comes from the line of Youssef Squali with Truist Securities. Youssef Squali: All right. Maybe, Nicola, if you can just help me reconcile a couple of things you said earlier. So your NRR is about 109%. You're guiding for the year at 8% to 10%, and you said that we should see better performance or faster growth in the second half than the first half, yet you're guiding to Q1 at 9%. So what's -- what am I doing wrong in my math that doesn't make sense? Because that would imply that you should ultimately either grow at least at the high end of the range at 10% or even better? Or is the assumption that maybe NRR's are coming down a little bit? Nicola Allais: So I mean you have the right dynamics. So just -- I'll explain how we're thinking about it. So the base for the view for 2026 is this NRR number of 109%. That is how we're exiting 2025. And we're seeing that as basically the recurring base of growth of core products to core clients, and that's the 109%. And on top of that, of course, what is going to drive our growth is product-led engines, right? So adoption of the new products incremental revenue from enterprise clients that are scaling and then acquisition of new customers. One item that I will mention for the year in '26 is entering the year, we are lapping Q1 growth last year of 17% and Q2 growth of 21%. So the 9% growth that we're guiding to in Q1 is off very high year-on-year comps. And so that creates a year where the better part of the growth will be in the second half. Now your statement around what could lead to growth that is higher than what we're guiding to. It would be faster adoption around the new products. We've taken a measured view of the adoption of these new products. We feel it's the right thing to do in terms of how we're planning for the year. But in order to achieve numbers that are ahead of the guidance, that's what we would have to see. We're entering the year with $8 million of NRR on some products, at least 2 of them that we've mentioned, that's already $50 million of revenue. It's all going to be about the speed of adoption for us to be on the higher end of that number. Youssef Squali: Okay. That's helpful. And maybe just one other one for Mark. More of a high kind of color kind of question. If we kind of zoom out historically, we've talked about growth in digital advertising as being like a base or how fast you guys can grow over time. The market is very large, penetration of measurement and verification remains relatively low across several pockets and you've highlighted, done a great job highlighting many of these. What needs to happen to get you guys back to growth to be at least in line with that of the overall digital ad market, which I don't know, the estimate to be maybe in the low double digits, maybe 12%, 13%. Mark Zagorski: Yes, it's a great take, Youssef. And the data point we have this year, I think we have digital ad growing around 6%. So we're seeing -- we're expecting obviously better than that, which we should because that should be a tailwind to what we do, but new products should help accelerate that. I think the key is that 6% is not all places are equal, right? And you're seeing areas like social continue to eat up dollars. You're going to see streaming eating up more dollars. And then you see other areas, which I think are going to grow considerably lower. So for us, it's all about getting that focus on the areas that are growing faster, so that we can grow faster than the overall digital market. And we noted in the call, we've always been tilted towards open web. And our goal now is to get 50% of our revenue from Social, Streaming and AI platform, so really kind of closed areas. That will get us in a place there where the dollars are going, where they're growing faster and I think gives us a more accelerated view on the future. So that's why we're talking about those areas. That's where our product innovations are, that's where our investments will continue to be, and I think that's where the future growth opportunities lie. Operator: We have a next question from Maria Ripps with Canaccord. Maria Ripps: So as we think about moat customers sort of maturing on the platform and heading into year 2 with you, do you expect growth from this cohort to accelerate and maybe become a larger contributor to your overall growth? And I guess what are you seeing in terms of upsell rate from these customers? And what's factored in your outlook from this cohort? Nicola Allais: Yes. So Maria, you're correct. We are assuming that we will see continued scaling from the moat customers. You will know this, right, we acquired those customers with base product because they were coming from a platform where some of our premium priced product was not available. So -- and we've always said it would take 2 to 3 years before we see the full scale of the moat customers on our platform. It's going very well with some clients. It's slower with others just because it takes time for the client to unlock some of the budgets that are needed for some of the premium priced products that we have. It is going as we planned. And so yes, the answer is it will contribute more in 2026 than it did in 2025. As you know, some of these customers are very large and have a large opportunity to be upsold into our premium priced products. Mark Zagorski: And I'll add one more thing. So I was going to add one more thing. Not specific to moat clients, but an interesting thing to look at is year 3 of our customer engagement actually has the highest growth rate in aggregate of all the years that we're engaged with customers. So on average, in aggregate, it's like 18% growth, year 2 with them and 22% growth year 3 with our top clients. So it's interesting take whereas our upsell cycle that we talk about usually takes several years and that third year of upsell is usually where the biggest is. So just kind of a rule of thumb when we think about all customers. Operator: That concludes our Q&A session. I will now turn the call back over to Mark Zagorski for closing remarks. Mark Zagorski: Thank you all for joining us this evening. As we look ahead, we have confidence in the performance of our business and our priorities are clear: deepen adoption of core products with core customers, accelerate the growth of our solutions for Social, Streaming TV and AI, and drive industry-leading margins by leveraging the power of AI. We appreciate your continued support and look forward to connecting with many of you at the upcoming conferences. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Everyone, have a great day.
Peter Taylor: Welcome, everybody, and thank you for joining us today. I have the CEO, Simon Wensley; and the CFO, Mr. Nathan Quinlin, to talk us through the 2025 financial results. And I see the market looks pretty happy about those today already. So, I'm going to hand over to Simon, and we'll have a Q&A session at the end. Thank you, Simon. Simon Wensley: Great. Thanks, Peter. Good afternoon, everyone. Thanks for joining. Really appreciate your support. Yes, look, the really solid set of results for 2025. We really were looking to make a step forward from our implementation of our expansion through 2024. Look, we did that with a 9% increase in production. And I guess that underpinned a lot of what happened from a physical point of view. I might just pull up and share the announcement so people can sort of -- if you haven't had a chance to look at it, it's -- I can sort of cover that off as we go. So hopefully, you can see that. Yes. So as I said, look, the production was an excellent underpinning growth year-on-year. And that, of course, underpinned significant revenue growth as well. We had a reasonably robust market through 2025, and that was largely -- we knew that was coming. It was -- the market was getting tighter and tighter through '23 and '24, and we absolutely were getting the expansion funded and implemented in time for what we could see was going to be a firm price environment. So, we were able to take advantage of that and margins over $30 a tonne in that first half of the year. So look, that was very pleasing to be able to get that year-on-year growth. That's underpinned a record underlying EBITDA of $73 million. That's almost 100% improvement from the prior year. And the net profit obviously is underpinned by a couple of other items. But I would -- before I hand over to Nathan, so this is obviously his baby from a financial results point of view. And I would emphasize a really strong endorsement from the auditors with a clean audit report. But the -- one of the strategic things we've talked about as a company was getting to net cash. We got really, really close. We got to $57.5 million of cash against the debt position of $58.9 million, so just over $1 million away from that after having paid down over $23 million of debt. So, that's really important from a balance sheet perspective and an investor point of view looking to us to secure the company. And then giving us -- we'll talk about in a minute, giving us the opportunity for capital management. That was a really, really critical part of the year. But look, I'll hand over to Nathan to run through some of the other elements in the financials. Nathan Quinlin: Great. Thanks, Simon, and thanks, everyone, for tuning in. Like Simon mentioned, a couple of really pleasing results from a financial perspective there, a very healthy EBITDA number, which is speaking to the quality of earnings coming through at that 6.2 million tonnes amount. And it gives you a sense, I think, of the economies of scale here as well. So particularly around -- and Simon will speak to guidance for 2026 and exactly what we're targeting and it gives you a sense of the economies of scale and the cash generation potential of this asset now with the build capacity in, and confidence around that and our new management operating system that will no doubt deliver those tonnes. So, very pleased to be able to generate that level of EBITDA and free cash flow this year. Like Simon said, we got very, very close to the net cash position, if not for a final shipment, but got very close, leaves us with a little bit of unfinished business, which is not the worst thing as a motivation for a team that's about to get ripping again. So, pleased with that. And then looking forward into some of our other things around like foreign currency, we had a good result with foreign currency this year, much better result than what we had last year, managed to pick our spots fairly well, but most importantly, be able to lock ourselves away up to at least around 75% of our net USD exposure going into 2026 at a very, very healthy around that $0.64, $0.65. So, very pleased to have that locked away. And as you can imagine, particularly as we have this forward outlook and some of the capital management, how important it is to lock some of these things away and control the controllables, and that gives us confidence to be able to be assertive and go out and take the value that's out there. In terms of carryforward losses, also in a good position there, similar to -- and you would have seen this at the half year, not only with the strong results that we had in the half year, but more importantly, the strong outlook that we've got for the business going forward makes us confident and gives us the ability to bring back that previous impairment, bring back that reversal and bring those DTAs or those carryforward losses back onto the books. So, what we have in terms of available carryforward losses is about $184 million in gross terms. So, for the people out there modeling, you would expect to see us start to utilize those all through 2026, and I wouldn't expect us to be in a taxpaying position until probably the second half of 2027. So, a pretty healthy tax shield there for us. Simon will touch on, I'm sure, a little bit more on the buyback. But naturally, particularly with where we see ourselves at the moment, the business outlook that you see also being supported by those impairment reversals and recognition of the carryforward losses makes it pretty clear to us there is a significant undervaluation there, which we're more than happy to invest in Metro at that price. So, I'm very pleased to be able to do that. I'm very pleased to be able to generate some shareholder value through what is otherwise. I'm essentially adding flexibility to the balance sheet through some prudent loan restructuring to make sure that we're balancing out cash flow from a debt servicing perspective and having the opportunity with that flexibility to generate some shareholder value. Thanks, Simon. Simon Wensley: Yes. Great. Thanks, Nathan, and thanks to you and the team for the hard work over the last few months to pull that all together. Very, very good set of results and well presented. Yes. Look, I think Nathan touched on it. The Board -- and we've been pretty clear about this from the start. I mean, we're about -- this is about bringing -- the strategy is about being bringing the Bauxite Hills Mine asset into fruition. The strategy that we outlined early on in second half of 2022 once we stabilized the business and really put an operational and marketing strategy down was to expand the business, gain those economies of scale and get ourselves to the bottom of the cost curve. So, what we said then in the second half of '22 and then when we got -- went to FID and financing in the first quarter of '23 was that by 2026, we're going to be producing at 7 million tonnes and that we were going to have a cost appropriate to be pretty much down at the bottom end of that cost curve. And what that does in commodity terms is provide us with the flexibility to withstand pretty much any market. But it's not in its own right, and Nathan again touched on this. It's all about also derisking the business in every way we possibly can. And that's been allied with just an expansion. It's not been just more of the same. It's been about creating additional resilience. And that's required some change in technology in our business. So in terms of things like increasing the capability of our hauling fleet in terms of speed, in terms of payload, in terms of the roads that they run on. It's been about the wobbler moving away from vibrating screens to roller screens and bringing Ikamba, our offshore floating terminal, which is capable of operating in much more difficult sea conditions. So, these are the sorts of things allied with just an expansion here that have been underpinning this growth. And of course, some of those things don't come quickly or easily, but they're effectively all in place. And that target now of getting to that sort of 7-plus million for 2026 is what this is all about, and the economies of scale will continue to flow towards that cost. But it's also about -- Nathan has touched on derisking the business through the foreign exchange part, and that's obviously well in the money. At the moment, something else that's well in the money is all of our freight contracts. And so the ability to reduce risk for the investor by taking prudent positions in the market to be able to then go about the strategy of implementing these things. So, our freight now is probably AUD 2 to AUD 3 in the money for 2026 versus the prevailing Capesize freight rates, which have been going up pretty much for all of the second half of last year. And of course, in a cost curve, where a cost curve drives industry structure, like it does in most commodities, all that's doing is pushing the cost of delivery of West African bauxite, which is at the margin of our business is pushing that up and up and up. And so we've got -- we're much closer -- even if we were exposed to the spot market for freight, we would still be in a much better position, but we're even in a better position because of the contracted freight, the 2- to 4-year contracts that we've taken out at the beginning of last year to underpin our delivered business. So there's a whole bunch of, I guess, aspects to this that derisk the business. And when we look at that profile with the Board and what we delivered in 2025, but more importantly, what's the outlook for 2026, even the market will be what the market will be, but the ability for us to effectively guarantee that we're going to make margins here moving forward, irrespective of what's happening in the market is an extremely important thing for the Board to consider. And they've been very clear that they're not going to sit on cash. We got to that net cash position. We were able to do some of this other derisking of our cost structure. We put a new team together to be able to drive the improvements that we are making. And so all of that plays into a confidence in the future that has underpinned the buyback here. So we're, of course, working on growth. Growth is, of course, part of our business, but we're not in the mode of -- and certainly not in the game of piling up a war chest. And if we have a growth opportunity, we will bring it to market. It will have to stand on its own 2 feet, and that will be the signal for us to move forward. And whilst Bauxite Hills is producing cash, that will be part of our capital management strategy, and this is just the first step. Nathan, did you just want to touch on any other aspects of the buyback at this point? Nathan Quinlin: Not necessarily, just otherwise setting the context. But in terms of how we'll execute, that will be an on-market buyback, the terms of which have been disclosed in the last release. So, what we're targeting is 5% retirement of shares on issue over a 12-month program. Simon Wensley: Okay. And there'll be more details to follow on that in the very, very near future, so in terms of execution of the buyback. So, look, I think at that point, Peter, we might just pause and see if there's any other -- any questions out there. Peter Taylor: Absolutely, Simon, and thank you as well, Nathan. A couple of questions have come through so far. And with the rerate now occurring, which we see on the screen today and assuming the company is on target tonnes achieved in financial year '26, a strategic acquisition would be good or a dividend? Do you see either occurring? Simon Wensley: Well, look, I guess what I would hope is I see both occurring. And so I've just said -- I've just talked about the cash generated from Bauxite Hills. In the absence of that -- of a very live and current growth option, we will continue to pay that back to shareholders within the risk appetite of the Board. So, that's certainly the case. And like I said, we're absolutely working on some growth options. Look, it wouldn't be prudent to be more specific about that at the moment, but there are -- we're certainly well down the track on a couple of growth options. But like I said, we will bring those to market. We'll be very clear about what they can do for the business and why we're going after them. And indeed, then I suppose, get the feedback from the market. So look, that's certainly the strategy. Peter Taylor: Thanks, Simon. Second question. One for Nathan. Where does the financial assurance paid to the government sit on the balance sheet? Nathan Quinlin: Yes, sure. Sure. So on the balance sheet, the financial assurance amount that is sitting within the financial provisioning scheme will be sitting within the other financial assets that you'll find in the non-current assets on our balance sheet. So that's -- and I think in our previous webinar, we mentioned that, that is a priority over the next couple of months for us to explore how we get that sort of back into our own bank account where we can put that to use rather than sitting there. Som plenty of options for us to look into. Peter Taylor: Thanks, Nathan. Another one for -- actually probably more of an operational and financial one combined. How confident are you that calendar year '26 guidance can be achieved? Have you seen issues from calendar '25 now resolved? Simon Wensley: Yes. So it's a great question. Look, we've gone back and looked in detail at 2024 and '25, so everything since we've been bringing the new flow sheet into action. We've had a look at the things that have pulled us back from delivering higher tonnages. The critical thing here to say is that in terms of the feasibility study, everything -- every part of our flow sheet at the scale that we had set has now delivered on its capacity individually. So, when I look at the clearing and stripping fleet, we had a few issues with that. But we saw at the end of the year that it had -- it was capable of delivering. We just had to plan and execute it better. Our mining and haulage, that has demonstrated the capacity that we need. The screening -- ROM and screening area, that has demonstrated the capacity that we need. The tug and barge -- the barge loader and the tug and barge system, which is basically an integrated system have demonstrated the capacity that we need and the transshippers have certainly demonstrated individually and together the capacity that we need. So the thing now is plugging all of that together, right? And that's where I think outside of a couple of, I might call externality events. And if I look back at '25, for example, the Easter weather event, which caused our channel to collapse on the edges was -- pulled us back certainly by 150,000 tonnes to 200,000 tonnes. And we unfortunately were not able to load the last vessel at the end of December, which was another 170,000 tonnes. So, look, absent those 2 factors, which were largely externally driven, we would have achieved 6.5 million, 6.6 million last year. And then from 6.5 million to 6.6 million to sort of 7 million or 7 million plus, it's really about us not achieving more through each event, any one of our parts of our flow sheet, but actually reducing the variability, plugging them together and allowing them and making them work in a less variable way. So, effectively reducing the bottom quartile performances through that flow sheet. And we have pulled that apart, put it back together again. We've got a different -- I guess, a different structure now in terms of internally about how we're going to go about that, a very strong, I guess, technical and planning group under Nathan, a new short-run operations strategy under Paul Green at the site, who will be effectively looking only forward 2 or 3 ships in terms of where they operate. So, really sort of segmenting that short-run execution, really focusing on that short-run execution and the reduction of variability with the medium-term technical and planning side, so providing that service to the site. So, we're very hopeful, confident that, that is a better way of looking at this. We've spent a lot of time over the last 6 months collecting data from every part of our business. We've been feeding that and analyzing that, and feeding it into a new logistics and operations flow sheet and analysis. That is driving us. Those are coming out with 7-plus million tonne outputs. And so we are certainly driving that. And through the implementation of what we're calling a new management operating system that will be really the processes, the routines, the KPIs that drive that, the ability to sort of look at variants and how that works through. That is how we are about to start our operating season. So, we're expecting to be roughly back around middle of March. As soon as we have some firm [ lakes ] for the first vessels, we'll announce the target for operational restart. We've already got work going on, for example, in the channel. So we can't control the weather, but we can certainly control the impact that the weather has. And so what we've done, as already mentioned, in our processes with the roller screen wobbler. And in Ikamba, we've already reduced the impact that weather has on some parts of our flow sheet. That channel issue already -- we routinely maintain that channel twice a year. So, we had already done that in March of last year before that weather event. In the October maintenance of the channel, we have already widened the channel from 60 to 70 meters. Therefore, if we got an identical event to what happened last year, then the sites slumping into the channel would have minimal effect because we've effectively widened the channel. And this year, we're also going to investigate whether we do have approval to go deeper in that channel with that maintenance work. And so we're going to be looking at trying to create some additional depth or -- which effectively translates into barge capacity, tonnes on barge and in terms of hours per day where we're not affected by tide. So, that's certainly one of the underpinning initiatives this year where we're again trying to go back and look at what affected us last year. And that's been through, for example, the application of a different type of tide with a different type of play with a different approach, and we've had really good results on that in the second channel maintenance activity from last year. So, look, apologies for the very long answer, but I hope that gives an insight to the work that's gone in and the sort of focus that we've got on lifting those bottom quartile shifts, bottom quartile days, bottom quartile weeks up into that level to increase the averages that run through the flow sheet. Peter Taylor: Thank you, Simon. Assuming the wet season holding costs are typically $20 million for the quarter, with the Ikamba dry docking, is that number still about right? And also, can you please let us know when the Ikamba is expected to return to service? Simon Wensley: Nathan, do you want to take that one? Nathan Quinlin: Yes, absolutely. Absolutely. Yes. So in terms of the Ikamba dry docking, so the cost of that dry docking of the cash outlay would be in addition to the typical $20 million cash burn that we see over that period. From a timing perspective, naturally, these costs in a shipyard are driven -- very milestone driven. So, we actually wouldn't expect to see probably 75% of the actual cash burn for that dry docking to actually come through the statements until around sort of April and May and with final payments. So it's fairly spread out. From an overall earnings perspective, our dry docking because most of these work program is statutory in nature, we actually provide for those costs in advance as well. So the full cost of this dry docking is otherwise included in the current set of results that you're seeing. So the impact of that dry docking won't impact our margins. Peter Taylor: Thank you, Nathan. And while you're there, isn't there a strong argument that share buybacks represent better value to shareholders than dividends do until Metro is paying tax, i.e., fully franked dividends? Nathan Quinlin: Yes, I think so. That's certainly our view. With all else being equal, I think that's certainly the more tax-efficient strategy. But even then outside of that, when we're looking at what is ultimately a strong -- what we consider significant undervaluation of the current share price, it makes the buyback all the more obvious strategy, I think. Peter Taylor: Thank you. And Simon, you touched on potential growth options, but how do you view your progression of Metro's EPMs to further support Bauxite Hills? Simon Wensley: Yes. So, optimizing Bauxite Hills continues to be our primary focus, so absolutely the primary focus of the team. The additional resource -- we have about 40-odd million tonnes of resource that is sitting around our current pits. So, that is effectively the easiest resource to get to. We're currently doing more work on that in terms of analyzing the quality of that bauxite. Last year, if you go back and look at our AGM presentation, I talked a little bit about one of the initiatives is that we're looking at screening. We're looking at effectively upgrading -- bauxite upgrading. I mean, this is upgrading of Weipa Star bauxite. It's not a new thing. It's Rio Tinto at Weipa, as I experienced in my career with Rio has been going on effectively for more than 60 years there. So, it's a pretty well-known pathway. However, as we do at Metro, we are not looking at things just as a copy and paste. We're looking very carefully and creatively at the best value way in which to do that. Rio Tinto effectively wash all of their product, which obviously drives a huge amount of additional mining. It drives additional capital, additional cost and they have to manage a massive sort of tailings or fines management program, and they lose about 30%, 35% of the ore. So, we're very, very conscious that, that kind of big bang solution is not probably suitable for Metro. So, we're looking very carefully at individual areas of our resource base of that. And we're also looking at it, what we call a dry screening opportunity where we don't need the use of water. We don't need much lower cost opportunity, obviously, requires the ore to be probably only applicable for about 6 months of our operating season, but we've had some really good initial results from our dry screening trials as well, and we're also looking at selective wet screening. So that not only -- so the first stage of that is the resources that sit around our current sort of pits and reserve. The next stage are resources that sit somewhat distant to that and the nearest ones are north of the river. We've got some exploration tenements, which we started to explore at the end of last year. There's a bit more work to do there. The actual drilling programs are quite straightforward, relatively low cost. We don't have to go down very far to hit bauxite, obviously. So it's then the analysis of that. And particularly if we're looking at the application of screening or so into those leases, obviously, that takes a bit longer again. We've also got existing resources that are not recognized in the resource statement sitting at the old Cape Alumina Pisolite Hills project. So that was -- that is effectively south and east of where we are. So, that -- one of the antecedent companies of Metro is Cape Alumina. They had a project called Pisolite Hills. That was affected by the recognition of a National Park. Those resources are still -- though a proportion of those resources are still on our books and they sit in the same sort of orbit as the Bauxite Hills Mine and just require a kind of access and barging strategy to be able to get to them. And then we've just -- we've been in -- we have some resources very close to the Arakoon, the town of Arakoon down in the southern part of the Weipa bauxite plateau. We've been discussing access to those tenements with [ Manoch ], the local body corporate that represents the traditional owners there. And so we've been progressing access rights to that. And so we do expect subject to agreement to those conduct and compensation agreements to be able to access those tenements there. And one of those tenements was added last year in a deal that we did with Prophet Resources, which is an adjacent tenement to the one that Metro owns. So, we've now sort of doubled the potential size of that exploration opportunity. So, we're still continuing down exploration. Our firm intention is to add resources and reserves to our current resource base. And some of that may be, though, subject to the trials that we're doing this year on the upgrading of dry and wet screening. Peter Taylor: Okay. And finally, Simon, an update on the bauxite market. How do you see things currently, perhaps an outlook? And do you see a return to stability from what was a volatile price market last year? Simon Wensley: Yes. Good question. I mean, I might start at the top level, which is sort of with aluminum. So the -- those following the aluminum value chain will have seen the aluminum price after a dip early in the year, coinciding with the initial, I guess, Trump Liberation Day tariffs. We've seen a very strong recovery of aluminum. And that's being driven by a few things, right? So, there was 74 million tonnes of aluminum produced in the world last year, but it basically wasn't enough to satisfy the demand. And so we're in deficit as China -- China grew by about 2% in its production last year. But again, that wasn't sufficient to put into the market, and they've been importing more aluminum. And the aluminum market at the moment because of these tariffs and also by -- because of the sanctions against some Russian entities is somewhat structurally -- how can I put it? I guess there are structural restrictions in that aluminum market, which are driving outcomes and pricing that is really destined for even further growth. So, you've got pockets of demand that can't be met by local supply. They are then affected by tariffs. So that's the U.S., for example. The price of aluminum in the U.S. is actually almost double that LME price. So if you look at the LME price of over $3,000, it's between $5,000 and $6,000 per tonne because of not only the tariffs, but just the huge deficit that exists in the U.S. market, and they don't have any fast way of getting access to that product. So, there's some fractures and issues in the market. But above all, the demand for aluminum is growing. And so even with this sort of like temporary -- the tariffs clearly caused a dip in demand. And even without a recovery in the China building and construction market, you're still seeing significant 3%, 4% growth in demand for aluminum, and that is just not being able to be supplied out of the industry at the moment. And so China is now very close to its production cap. And so where is that aluminum going to come from? So, predictions are continuing for deficits this year, and that obviously must mean price rises. And the other thing that's driving that growth other than the standard electrification, vehicles, transportation, aerospace, et cetera, is the fact that copper price is going hard as well, and aluminum is a substitute for copper in many applications. So, there's a whole bunch of reasons why. And that's -- so overall, a great environment in the aluminum space, which means that growth in alumina production is required, and that means growth in bauxite -- growth in bauxite demand. Now, when you then break that down, okay, we're in the Asia Pacific. I mean, a lot of that growth is happening in the Asia Pacific. At the moment, though, there is -- as you mentioned, Peter, there's been a bit of a volatile ride. There were some very, very high prices at the end of '24 for bauxite into '23 -- into '25, and then that's come down a bit. Things stabilized a bit, and there's been a bit of a dip, a couple of dollars down again since the end of the year. But the alumina market -- so we supply into that alumina market. It is a bit oversupplied with -- and there is a shake-out occurring, particularly in China, with older plants closing, new plants coming online. But all those new plants are dedicated to imports. So, what's good about that shake-out is you're seeing -- we're seeing alumina plants inland in China looking to curtail and close. And that they've been largely based upon domestic Chinese bauxite and the new plants coming on the coast are 100% dedicated to imports. And so what we're going to see then once this shake-out has sort of worked its way through, we're going to see increased demand for traded bauxite in the Asia Pacific. India is coming along on the rails as well. The Middle East is also planning additional refining capacity. So look, we do see that. And Indonesia has -- is growing its whole chain, the smelting chain, the alumina chain and the bauxite sort of side of things. But I see that largely being contained within the sphere of Indonesia. So Indonesia, I don't think we're going to see a lot of leakage of either alumina or bauxite out of that market. So, look, I think there's a bit of volatility around, but I would just go back to my comment earlier about industry structure, which is as long as the West Africans are supplying into the Asia Pacific and as long as they continue to be 2/3 or 2 months of freight travel away, which I don't think the geography of West Africa is going to change anytime soon, then Metro is in a structurally advantaged position irrespective of whether we have a tight or less tight market to be able to supply into the Asia Pacific at low cost. So, all of the things we've been driving for are going to continue to be relevant in terms of this market structure. Peter Taylor: Thanks. That was a pretty comprehensive coverage of that question. I just got one little one here. We mentioned perhaps in previous webinars discussion of the Kaolin resource or the Kaolin mineralization at Bauxite Hills. Is there any further exploration or interest in that particular mineral there? Simon Wensley: Yes, there is. We've now extracted and tested the product in a few different places in a few different markets. The Kaolin product that we have on a raw basis is of good enough quality to export. Kaolin though, it's a bit more of a fragmented end-use market. So, there's -- Kaolin goes into paints, goes into paper, goes into ceramics, goes into rubber, goes into fiberglass, goes into a whole different -- a huge number of different applications. Each application has a slightly different quality, I guess, specification, has a physical -- the physical state of the kaolin, the fineness of it, et cetera, are very, very different. So it's not a big bulk market that one can understand in a fairly easy brush stroke, but we are continuing to explore that market. I'm not particularly interested in doing a lot of work on Kaolin in terms of upgrading on-site. Skardon River is a great place to run bulk commodities. Whilst we have the bauxite value chain, it does allow us to piggyback the Kaolin on the back of that large-scale value chain and flow sheet, does mean we can then get raw Kaolin to places very, very cheaply. And I guess that's the model that I'm trying to progress. And that does then require, obviously, partners at the other end who are going to take that product and either distribute that or to work on it, whether it's sort of upgrading it through, washing it or by grinding it or by doing something for the particular segments that the Kaolin market needs to drive. But I guess, for us to move the needle there, we'd be look -- we'd be wanting to move 300,000 to 500,000 tonnes of Kaolin to be able to kind of move the needle. I mean, that's quite a lot of Kaolin for the Kaolin market. It's a much, much smaller markets. So the answer is, yes, we've done more work. Yes, we've done more drilling. Yes, we've done some studies on mining. We've done some test work on our flow sheet to be able to prove that it can be dug up. It can be moved. It can be screened. It can be placed on barges and through our transhippers. So, that work has been done. It's really now more market than market side of things and can we see a value proposition for exporting effectively what is a raw bauxite that needs further work done on it. Peter Taylor: Thank you, Simon. Thank you, Nathan. That concludes our questions here today and a good summary of what looks like a pretty positive report and that the market seems to like it, too. So if there are any other further questions, please e-mail them in to Peter@nwrcommunications.com.au. I'll make sure Simon and Nathan get them. And this is being recorded. So, we'll make this available for distribution later on. Thank you, gentlemen. Thank you, everybody, for joining us. Simon Wensley: Thanks, everyone. Nathan Quinlin: Thanks.
Operator: Hello, and welcome to the Mesoblast financial results for the half year ended December 31, 2025. An announcement and presentation have been lodged with the ASX and are also available on the Home and Investor pages at www.mesoblast.com. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin, let me remind you that during today's conference call, the company will be making forward-looking statements that represent the company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's announcement and the company's filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. In addition, any forward-looking statements represent the company's views only at the date of this webcast and should not be relied upon as representing the company's views of any subsequent date. The company specifically disclaims any obligations to update such statements. With that, I would like to turn the call over to Paul Hughes. Paul Hughes: Thank you. Welcome, everyone, to the Mesoblast financial results call for the period ending 31 December 2025. My name is Paul Hughes. I'm Head of Corporate Finance and Investor Relations. In the room with me today is our CEO, Silviu Itescu; our CFO, Jim O'Brien; and our CCO, Marcelo Santoro. We have a presentation to run through highlighting the financial results and the operations for the period, and then we'll have some time for questions at the end. So now I'll hand over to Silviu to begin. Silviu Itescu: Thank you, Paul. We could go to Slide 4, please. This slide highlights the corporate priorities for 2026. We intend to continue to show strong growth in Ryoncil sales driven by market adoption. We will build a strong cash flow with judicious use of funds for operations and an optimal capital structure. Cultural transition is critical so that we can move to an efficient commercial organization. We will expand Ryoncil label indications and obtain approval -- seek to obtain approval for remestemcel-L products, our second-generation platform. Our manufacturing focus will seek to increase diversification, capacity and cost efficiency for our platforms, and we will continue to focus on appropriate commercial partnering backed by demonstrable value drivers, including FDA approvals, strong revenues and advanced clinical programs. Next slide, please. This year was marked by a very successful product launch. We initially received FDA approval for Ryoncil in December 2024. Ryoncil is the first and only FDA-approved allogeneic mesenchymal stromal cell product. The product was launched in April of 2025 with revenues growing quarter-on-quarter. There is significant unmet need for continued uptake and increasing market adoption. And our net revenue from Ryoncil was USD 49 million in the first half of FY '26. Next slide, please. Paul Hughes: Thanks, Silviu. Jim will take us through the financial slides. Thanks, Jim. James O’Brien: Thank you, Paul. Hi, everybody. I'd like to now review our first half fiscal 2026 operating results. And I should mention that all figures are in U.S. dollars. Total revenues for the period were $51.3 million, driven by the successful launch of Ryoncil. Our net product revenues, as Silviu mentioned, were $49 million, and we had a gross margin of a strong 93%. Our R&D expenses for the period were $46.1 million (sic) [ $46.2 million ] compared to what we reported last year of $5.1 million. Now last year's numbers were a bit skewed because we had a $23 million reversal of the inventory provision once we got approval of Ryoncil. Without that adjustment, the prior year number would have been about $18.1 million. So -- I'm sorry, we would have grown about $18.1 million over the prior year. And again, the spending in the period really related to our adult GVHD trials, back pain and also our LVAD program as well as getting ready for the BLA and some manufacturing work. Our sales and general and administrative expenses were $28.5 million compared to $18 million in the prior year. And that increase really related to the sales and marketing effort that Marcelo and the sales team did in terms of driving sales growth. The loss during the period this year was $40.2 million compared to $48 million in the prior year period. Again, as I mentioned a few moments ago, that prior year loss was impacted by the $23 million worth of reversal on inventory. And -- but for not those items, we were down -- we were up about -- we were down on a net loss of about $30 million year-over-year. Just in terms of our operating spend and our cash flows for the first fiscal quarter -- first fiscal half of the year, excuse me, we were at $30.3 million. As we look to the second half of the year, we expect our operating cash flow usage to decline when compared to the first half of fiscal '26 based upon our projected cash receipts from revenues as well as maintaining disciplined cost control measures and efficiencies in the operation. And on the next slide, just to point out our profitability and growth pipeline from Ryoncil. As I mentioned, we had strong revenues for the period. Gross margin, excluding amortization expense would have been about $44.2 million. Our direct selling costs were $7.7 million. And again, we have strong operating performance that allows us to invest in our R&D programs and our life cycle extensions. And we do have a very robust pipeline, and we continue to invest in our manufacturing footprint as well as building inventory where needed and getting our second-generation products to market. On Page 9, next slide, please. We had $130 million worth of cash at the end of December of this year, which you can also note that the reduction in our net spend over the year, as I said, will decline over the second half of this year. On December 30, 2025, we entered into a $125 million nondilutive credit line facility. The first tranche of which is $75 million was drawn at closing and enabled Mesoblast to replay in full its prior senior secured loan. We also partially repaid the subordinated royalty facility, which will continue to be reduced from ongoing revenue and will be fully repaid by the middle of 2026. The second tranche of $50 million is available to be drawn on our option through June of 2026. The new facility has a lower cost of capital for the company, freed up its major assets to provide flexibility for strategic partnerships and commercialization. In addition, the new facility can be repaid at any time without incurring early prepayment or make-whole fees. It does not include any exit fees and does not cover any of Mesoblast assets, which is a very strong point for the reason why we did this. This is terrific for the company. And we have no restrictions on doing additional unsecured debt or any licensing activities. We're very pleased with this line of credit and believe it will strengthen our balance sheet to support an exciting growth period for Mesoblast. On the next slide, looking ahead to the second half of 2026, we anticipate full year Ryoncil net revenues to range between $110 million and $120 million on a full year basis. With that, I'll turn the call back to Silviu for additional comments. Silviu Itescu: Thanks, Jim. If we can go to Slide 12, I'd like to bring Marcelo Santoro, our Chief Commercial Officer, please. Marcelo Santoro: Thank you very much. Next slide, please. So good afternoon, good morning, everyone. We are extremely pleased with the performance of the launch to date, and I couldn't be proud of the work, the commitment and the passion that our colleagues at Mesoblast demonstrate every single day towards these children. We have treated numerous patients since we launched and Ryoncil is having a transformational impact in the treatment of these children according to the feedback we received from treatment centers and treatment teams. In fact, we are on track to achieve 20% market share by the end of year 1 in the market. The commercial performance to date has been exceptional. This holds true not only against our initial expectations, but also when benchmarked against other successful rare disease launches. We have been laser-focused on building the infrastructure needed to ensure Ryoncil reaches its full potential. I am very happy to report that we have onboarded 49 treatment centers to date. In addition, Ryoncil is now listed on the formulary of 30 of those centers, a number that continues to grow steadily as more P&T committees review and approve its use. Formulary inclusion is critical, as you know, as it streamlines the adoption and use of Ryoncil when it's selected for a patient. Having these many formulary approvals in less than 1 year demonstrates the outstanding value of the product and the tireless commitment of the team to build the appropriate infrastructure to expand utilization. In addition, 13 hospitals have opted to use Optum Frontier, our specialty pharmacy partner, virtually eliminating their financial responsibilities with the product. On the payer side, we have also made exceptional progress. Ryoncil is now covered by insurance plans, representing over 280 million lives across both commercial and government payers. Medicaid coverage is in place in all states and a specific J-Code for Ryoncil, J3402 went into effect on October 1, allowing for more efficient billing and reimbursement for both sites of care and payers, along with CMS published rates. Commercial payer support has also been very strong. All major payers, including Aetna, Cigna, UnitedHealthcare, Anthem, Humana and Prime Therapeutics covering all Blue Cross plans have issued favorable coverage policies for Ryoncil. Notably, these policies do not require step therapy, which simplifies patient access significantly. All of this has occurred within the first 6 months post launch. Next slide, please. From a strategic priority standpoint, the Ryoncil team is 100% focused on 3 key strategic pillars. The first is to proactively identify and prioritize appropriate patients who may benefit from Ryoncil therapy. The second to reinforce our superior patient outcomes in first-line treatment right after steroids. And the third is to empower caregivers to demand Ryoncil for their children. We have been working with several advocacy groups and will soon launch a comprehensive campaign dedicated to supporting both caregivers and patients. With that, let me turn back to Paul. Paul Hughes: Thanks, Marcelo. I'll hand over to Silviu, who's going to take us through the rest of the deck before we open it up to Q&A. Thanks. Silviu Itescu: Thank you. If we could move to Slide 14. This slide summarizes our plans for label expansion of Ryoncil into adults. A pivotal study of Ryoncil as part of second-line treatment regimen in adults with severe steroid-refractory graft versus host disease is underway with our partners at the NIH-funded Bone Marrow Transplant Clinical Trials Network. The basis for this trial is that 50% of adults who have severe GVHD fail existing second-line treatment, including predominantly ruxolitinib. These patients who fail have a 25% abysmal survival at 100 days. We have previously used Ryoncil under expanded access in patients aged 12 and older, in many adults as well, 18 and older who have failed ruxolitinib or other second-line agents and use of our product in this patient population was associated with 76% survival at day 100, a remarkable result. As a result of these results, the final protocol design for the registrational study in adults has been locked down and has been worked through with the FDA recently in a meeting with the FDA agency. We expect that following Central Institutional Review Board approval coming up in March, site initiation and patient enrollment will commence. Next slide, please. Further extension strategy for Ryoncil is focused on various opportunities in pediatric and adult inflammatory diseases. The team is currently evaluating multiple indications to unlock value, including in the inflammatory bowel, neurodegenerative and respiratory conditions. Our portfolio will be prioritized to maximize shareholder return by utilizing either internal investment strategies versus external partnership initiatives. Next slide, Slide 16. Now I'll be updating you on our second-generation platform, rexlemestrocel-L currently being developed for discogenic chronic low back pain and chronic ischemic heart failure. Slide 17, our Phase III chronic low back pain program, a first 404-patient randomized controlled Phase III trial has already completed, and that included about 40% of patients who are opioid dependent. We met with the FDA recently and received positive feedback on potential filing of a BLA based on achieving a clinically meaningful reduction in pain intensity at 12 months between the treatment arm and placebo arm. The robust result in opioid reduction from at least one adequate and well-controlled trial could be included according to our meeting with the agency as part of product labeling, which is a very, very, very important outcome. We, in fact, do already have an RMAT, Regenerative Medicine Advanced Therapy designation for rexlemestrocel-L as a potential opioid-sparing therapy in chronic lower back pain. Next slide. The confirmatory Phase III trial is recruiting currently 300 patients across 40 sites in the U.S. with a primary endpoint, 12-month reduction in pain. As I've mentioned on multiple occasions, FDA has confirmed that, that is an approvable endpoint. The enrollment of these 300 patients is expected to be completed in March or April. Data readout and BLA filing are expected in calendar year 2027. We have, at the same time, undergoing commercial manufacturing in order to leverage our existing capacity and cost efficiencies. I will reinforce that there are many patients who are suffering from this terrible disease. Over 7 million patients across each of the U.S. and EU5 are due to generative this disease, patients who are otherwise have run out of options other than surgery. This is a large unmet need for a potential blockbuster opportunity. Next slide, Slide 19. Now I'd like to update you on Revascor, our product based on our rexlemestrocel-L platform that is being developed for chronic heart failure with reduced ejection fraction and persistent inflammation in either patients with Class II/III heart failure or very end-stage heart failure patients who are being kept alive with a ventricular assist device in the left ventricle. We can go to Slide 20. LVAD implantation improves overall survival in these end-stage patients, and that's well established. However, the underlying causes of heart failure in these patients, notably inflammation, persists. And whilst the left ventricle improving the left side -- the LVAD is improving on the left side of the heart, the right ventricular pump function remains vulnerable and continues to deteriorate. Therefore, progressive right heart failure continues to occur in up to 30% of patients and is the primary cause of multi-organ failure and death in this group of patients, mortality occurring within the first 12 months. In addition, life-threatening major mucosal bleeding due to progressive right heart failure and portal hypertension occur in about 30% of patients and is the major morbidity in this group, the main cause of recurrent hospitalization. Next slide. Now we performed 2 randomized controlled studies in this patient population. The more recent study was called LVAD Study II, and that randomized 159 patients in a 2:1 randomization to provide primary evidence of Revascor's efficacy in reducing major bleeding events. A second study, LVAD Study I, an earlier study, is a supportive study for LVAD II, randomized 30 patients in a 2:1 fashion and provided supportive evidence also of Revascor's efficacy in reducing major bleeding events. Intramyocardial injections in both of these studies of either Revascor or control were performed at the time of LVAD implantation. Importantly, both trials, both randomized controlled trials showed the Revascor reduced cumulative incidence of major bleeding events, life-threatening GI bleeding, the trial's primary efficacy and safety endpoint and related hospitalizations through 6 months, both were significant. We go to the next slide, Slide 22. This provides you with some new data that we have not previously presented. This slide demonstrates the total number of major bleeding events resulting in hospitalizations over 6 months on the left-hand side and over 12 months compared to controls in the entire study LVAD II. As you can see both on the left-hand side and the panel B on the right-hand side, Revascor reduced major bleeding events and hospitalizations by about fivefold, a very significant reduction throughout a 12-month period compared to MPC treatment compared to control treatment. Next slide, please. Now moreover, particularly in the ischemic group of patients, what you can see is that on the left-hand side, in controls, in red, the ischemic controls had approximately a three to fourfold increase in hospitalizations due to right heart failure. The non-ischemics had a very low incidence and risk of heart failure hospitalization. In contrast, on the right-hand side, by 12 months, you can see that the MPC treatment reduced the right heart failure hospitalization events in ischemic patients back to background levels, the same levels as I see in non-ischemic controls. And again, those reductions of hospitalization from right heart failure were significant. Next slide, please. This slide focuses on the risk of death from right heart failure in controls on the left, and in Revascor-treated patients on the right. As you can see in Panel A on the left, amongst patient controls who have at least one hospitalization from right heart failure, the presence of -- sorry, amongst controls, the presence of right heart failure hospitalization, at least 1 right heart failure hospitalization in red was associated with a mortality risk and a hazard ratio of 7 or more than 7 compared to patients who did not have right heart failure. So in controls, particularly early within the first 4 months after LVAD implantation, the presence of a right heart failure hospitalization was a very strong predictor of death. In contrast, what you can see on the right-hand side, amongst Revascor-treated patients, the risk of death, particularly in that early period 4-month period is almost completely abolish. And you can see that the overall survival over a 12-month period in Revascor-treated patient was the same, irrespective of whether they had a right heart failure hospitalization or not. So what this means is that Revascor not only reduces the incidence of hospitalization rates, but protects these patients against death from right heart failure. If you go to the next slide, please. So the summary of these new data, data that I haven't shown you here, but we have also observed is that Revascor reduces the inflammatory cytokines and through inflammation reduction protects the at-risk right ventricle in these patients, the same right ventricle that continues to fail despite the fact that there's an LVAD in the left ventricle. The strengthened right ventricle reduces hospitalization rates in the intensive care unit due to right heart failure and improves survival. The strengthened right ventricle decreases the risk of portal hypertension and therefore, decreases GI bleeding events. This leads us to think very carefully about how Revascor beyond its potential use in patients with left heart failure problems, also has the potential to be used to improve right heart failure function in patients not only with ischemic heart disease, but other causes of right heart failure, including primary pulmonary hypertension and chronic lung diseases. Next slide, please, Slide 26. So let me give you an update on our CHF program, particularly our plans to file for approval. With these new data and our existing orphan drug designation for treating this group of high-risk patients with high mortality as well as FDA's stated preference for randomized controlled trials, Mesoblast is moving from filing for an accelerated approval to filing for a full approval. Unlike an accelerated approval, full approval does not require a confirmatory study. Aligned with FDA on items required for filing the BLA regarding CMC potency assays for product release and commercial manufacturing, we now have these activities well and truly underway, and we expect to file our BLA for full approval for this indication in the next quarter. Let me summarize our highlights and our upcoming milestones. Ryoncil is the first and only FDA-approved MSC product. It delivered net revenues of USD 49 million in the first half of FY '26. As you heard, 49 centers have been onboarded, 64 centers account for 94% of the entire pediatric bone marrow transplant population, so well underway to achieve that in record time. We're initiating label expansion to adult acute GVHD, a market that is 3x larger than the pediatric market. We are currently prioritizing our portfolio, which includes the potential to go into the inflammatory bowel disease, neurodegenerative diseases and respiratory conditions, and we will update the market as we focus on certain areas in priority over others. Our second-generation rexlemestrocel-L is enrolling the second trial in back pain with full enrollment expected to complete by the end of March or end of April. BLA filing next quarter is in line for full approval for patients with right heart failure and end-stage heart failure with LVAD. And we're actively optimizing manufacturing logistics to support commercialization, both of the rexlemestrocel-L pipeline and obviously, to have further inventory for the projected growth in Ryoncil sales. With $130 million in cash on hand as of December 31 and the new credit line that you heard about, which still has the potential for $50 million available to draw down, we're in a very strong financial position. And as you heard earlier, we are projecting full year fiscal 2026 Ryoncil net revenue to range between USD 110 million and USD 120 million. And I think I'll stop there. And hopefully, there are some questions that we can all address. Thank you. Paul Hughes: Operator, if you could please open the lines for questions. Thank you. Operator: [Operator Instructions] Your first question comes from Edward Tenthoff with Piper Sandler. Edward Tenthoff: Congrats on all the great progress across the board. Could you just repeat the guidance you broke up a little bit for this coming year? James O’Brien: Yes. Yes. What we're projecting for the full fiscal year are net revenues ranging from $110 million to $120 million again, on a full year fiscal basis 2026 hitting June 2026. Operator: Your next question comes from Olivia Brayer with Cantor Fitzgerald. Olivia Brayer: I have a few, if you don't mind. Maybe just first on Ryoncil in peds. You all mentioned potentially hitting 20% penetration of that pediatric population by the -- I think it was by the end of your fiscal year, if I heard that correctly. So can you maybe just run through what those assumptions include to get to that 20%? And how high of penetration do you think you can realistically reach in this specifically peds population over time? And then I've got a couple more on your pipeline programs. Marcelo Santoro: Yes. So thank you. So let me start with the second one and then go to the first, right? So the second one, we assume a 40% peak share. And you have to understand, we believe it should be 100%. This is a product that should be used by everyone. But let's be responsible and realistic, a 40% share is reasonable, right? So if you assume a range of patients, and obviously, that's dynamic of 375 patients, that's what the 20% is based on. It's 20% until the end of our fiscal year. That's what we aim on achieving at that point. Olivia Brayer: And is that specifically for the fourth quarter of your fiscal year? Like if I'm kind of doing the math. Silviu Itescu: Yes. Olivia Brayer: Okay. That's helpful. And then for your Revascor BLA next quarter, how is the FDA viewing the ischemic versus non-ischemic phenotypes? And have they given any input on to or around potential labeling language around the ischemic etiology or inflammation biomarkers? Silviu Itescu: Well, so I think it's important to note that in the 159-patient trial, we achieved the principal endpoint of -- in overall in the full patient population without having to go to any subgroups in terms of the cumulative incidence of major bleeding events over 6 months. Also, we achieved a significant reduction in hospitalizations for major bleeding events across the entire patient population without having to go to subgroup. So our position is that we will be seeking a label for the entire patient population, especially given that the confirmatory study, LVAD I, also achieved the same endpoint across all patients. There's no question that the patients at greatest risk are those with ischemic etiology. And those patients have a higher level of inflammation, they have a higher risk for bleeding, right heart failure and death. And interestingly, we saw the very same sort of thing in the larger trial in Class II/III heart failure, where, again, we saw patients with ischemic heart disease as an etiology had high levels of inflammation, greater risk of 3-point MACE and greater treatment benefit. So we will be providing the FDA with the totality of the data that confirm the supportive trials, demonstration that ischemic patients are at greater risk and treatment with our cells is even more effective in that subgroup, but we've achieved the endpoint around the prespecified bleeding endpoint and hospitalization endpoint across the entire population. So that remains to be negotiated. Olivia Brayer: That's helpful. Understood. And then last question is just on the chronic back pain. Can you just clarify what data you're submitting to the FDA? Is it just a new analysis of the pre-existing data? And is your ongoing Phase III not actually going to be part of that submission package? Maybe just some clarity around that update because I do think that is a new disclosure. Silviu Itescu: No, no, no. I didn't mean to say that we wouldn't be submitting the data from the new trial. The new trial, the second trial, which completes enrollment by over the next month to 6 weeks is the plan to complete enrollment. That trial becomes the primary data set and the previous trial becomes a supportive data set. That's certainly our intention. We have spoken with the FDA about looking at the subgroup of patients who are opioid dependent and that's a discussion that is ongoing with the agency. But with respect to the primary endpoint in all comers of pain reduction, we will be using the 2 trials to present full data sets. Olivia Brayer: Okay. But that additional Phase III readout is coming in 2027, correct? Silviu Itescu: That's correct. Olivia Brayer: So will you -- you're kicking off filing before actually having that data? Silviu Itescu: No. The objective is to complete that trial, get the readout and move to a filing with those data in the primary file. Operator: Your next question comes from Madeleine Williams with Canaccord. Madeleine Williams: Just in regards -- just going back to the pediatric Ryoncil and just the FY '26 guidance. Can you speak a little bit to sort of how you're seeing repeat utilization among centers or just how that kind of shakes out over the remaining of the year and sort of just trying to dig into more. Marcelo Santoro: Yes. No, we'd be happy to do that. Yes. So we see the continuous growth in the centers, continuous adoption, not only by more centers, but also repeated use by the current centers we already have, which shows that they are finding utility in the products and repeating the treatment in other children, right? So that's one component. The second component, we're also seeing very big, very large centers coming on board, which will substantially increase our confidence in this guidance. And it's a reality that is happening every day. Silviu Itescu: And I would add to that, I think a major additional components moving forward is continued physician education. We've shown both in our previous Phase III trials and in the real-world data that the earlier this product is used, the greater the survival. it's unquestionable. And so a lot of the effort by the team will be to educate physicians. Physicians have their own practice habits. And they all believe that their particular way of doing things is standard. Nothing is standard in this disease, especially given that only Ryoncil is approved by FDA for treatment of children. So I think a major focus and an area of growth is to educate the majority to use the product as early as possible after steroid failure. Do you agree, Marcelo? Marcelo Santoro: For sure. And I would add 1 more, right? So as a father, unfortunately, my child had something like this horrible disease, I would like to know that this option is available. So it's our obligation to empower them to empower the caregivers, make sure that they understand that this product is available and it's the only FDA-approved product so that they can talk to their treatment teams and ask for this as a potential therapeutic option for their child. Madeleine Williams: That's helpful. And just maybe 1 more for me. Just in regards to Revascor and the full approval -- filing for full approval rather than accelerated. I'm just interested, you've obviously discussed the additional data, but I'm assuming there's sort of been some sort of constructive discussions with the FDA. And just sort of if you can provide more color about what your confidence is in receiving that full approval? Silviu Itescu: Well, we've had multiple discussions with the agency. We understand what they wanted to see and the data that I've highlighted to you today, particularly as it relates to mortality is the #1 area of focus. And the recent guidance by the agency to focus on randomized controlled trials rather than single-arm trials where major endpoints are being targeted like mortality give us the sort of confidence that particularly in an orphan disease indication where a single trial should be viewed as sufficient for approval, full approval. Operator: [Operator Instructions] Your next question comes from Michael Okunewitch with Maxim Group. Michael Okunewitch: Congrats on all the progress. I guess just to kick things off, there's obviously been a lot of changes at the FDA since you first launched the Phase III in chronic lower back pain. So I wanted to see if you've received confirmation from the current FDA administration that the 12-month pain-only endpoint is sufficient for approval? Silviu Itescu: Yes, we have. Absolutely. That's exactly why we had the meeting recently to gain confirmation from the current administration that, that endpoint is an approvable endpoint, and that's exactly what we received. Moreover, the recent guidance from the FDA that a single well-conducted randomized controlled trial is sufficient for approvals in various indications also gives us great confidence that if we achieve that endpoint, this is an approvable trial and approval endpoint. Michael Okunewitch: And then just 1 more for me, and I'll hop back in the queue. I wanted to ask when it comes to the upcoming filing in the Class IV heart failure programs, are there any outstanding items that FDA has requested that you need to finalize before you can submit that next quarter? Silviu Itescu: Well, commercial manufacturing is always a very important component of this. And that is something that we are heavily engaged in. The product rexlemestrocel-L and its Phase III trials was all made at Lonza in the same facility where Ryoncil was made and which was approved for Ryoncil. And we believe that the vast majority of the manufacturing process is quite similar to the Ryoncil process. So I think that will be an advantage in our filing, but that remains -- we need to get some more confirmation from the agency. Nonetheless, we expect that the long history of manufactured product for back pain trials, cardiac trials will hold us in good stead. Operator: That brings us to the end of today's call. I'll hand back to Paul, please. Paul Hughes: Thank you. As you heard today, we're in a strong position with a number of significant milestones in this current second half through the period. We look forward to keeping you updated on the progress and the achievements. I'd like to thank everyone for their interest in Mesoblast and participation in the call today. Thank you, and have a great day. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Jarle Dragvik: Good morning, and welcome to HydrogenPro's Fourth Quarter Presentation. Today, I'm as usual, accompanied by CFO, Martin Holtet, who will present the financial results; and our still new CCO, Michael Caspersen, who has been with us for 3 months and will give us a market update. And I will take you through the highlights of our recent developments. As we always start with, for new viewers, HydrogenPro is an original equipment manufacturer company, focusing on the core technology, which is well suited for renewable energy. It's a pressurized alkaline electrolyzer and a gas separation unit. I noticed other OEMs are bringing pressurized electrolyzers to the market now. Well, we have delivered 220 megawatts and are on our way with the next 100 megawatts of pressurized electrolyzers. We address markets for decarbonization of selected large-scale industry segments already using gray hydrogen or where decarbonization is hard to achieve through electrification. Of the recent highlights, in 2025, we saw several projects being canceled or postponed. During the latter part of the year, however, several projects were activated and new ones even added. We see now a maturation of the pipeline and projects where we are in negotiations. Of these, we expect FIDs of projects to be taken at a value of around NOK 1 billion. Michael will address this and our position to further in this market update. We are both pleased and proud of one of the world's largest hydrogen projects, the ACES project, now coming to finalization and start-up. Our electrode manufacturing in Aarhus continued during the fourth quarter, its production ramp-up delivering to Salzgitter. Organization was streamlined with reduced costs. We completed the transaction of acquiring the 25% minority share in our Tianjin factory. And Michael was engaged as new CCO as of December 1, and I'm happy to present him here today. The ACES project is now coming to completion. It has taken time, but this is technologically groundbreaking work and very complex and thus, a long commissioning period. It is 40 electrolyzers and 20 gas separation units working together and producing gas as they should. Compressors have started filling caverns. And due to the long distance and preparedness, we have also delivered 4 additional electrolyzers. And there are no exchanges or replacement of electrolyzers or gas separation units. The ACES 1 project will be capable of storing hundreds of gigawatt hours of energy in its 2 hydrogen salt caverns. The current project is using 30% hydrogen in the gas turbine power generation. And now the Los Angeles Department of Water and Power and Intermountain Power project have started the preparation for next stages going to first 67% and then later 100% hydrogen. After concluding the commissioning phase, it's now open for selected customers to visit the plant as reference, seeing 220-megawatt plant operating. For customers, it's all about having references for capability to deliver on large-scale projects, seeing them in operation and have documented performance. For the Salzgitter project, the construction of the hydrogen building is in good progress. For HydrogenPro, all components have been delivered to Erfurt, where we are assembling. 10 electrolyzers are now assembled, and we are currently delivering our Gen 3 electrodes to be included in the remaining of the electrolyzers. We see now a lot of initiatives and policies for incentivizing use of hydrogen in Europe. That is good and will contribute to low cost. See what happened in the solar industry development, how it was driving down production costs. Bridging the cost gap versus fossil energy remains the main hurdle for green hydrogen market scale up. And cost competitiveness is key to decarbonize Europe. But at the same time, we are also seeing initiatives from manufacturers, which are supposed to limit competition, but protectionism will slow industry pace by driving up levelized cost of hydrogen. Over the last year, we have seen projects in Europe being postponed or even canceled due to cost increases. HydrogenPro's answer is being a European OEM with cost competitive position. That is with high efficiency in the electrolyzer and the electrodes, which is also why we are focusing on R&D and engineering. But we diversify our supply chain through flexibility and cost competitive manufacturing by producing certain elements in China and through partnerships for manufacturing in Europe and India. a partnership model in the market for a full scope offering and maintaining a lean cost and efficient organization. And I will now hand over the presentation to Martin. Martin Holtet: So in the quarter, HydrogenPro generated revenues of NOK 17 million. The EBITDA came in at minus NOK 49 million, and the net loss was NOK 44 million. So important to note, the quarter is negatively impacted by costs on the ACES project. But as Jarle now mentioned, the commissioning is now close to completion. We are continuing to deliver on the SALCOS order and also doing some on-site work at the ACES project, and those are the 2 main drivers of the revenue in the fourth quarter. Personnel expenses was down with NOK 6 million compared to Q3 and other OpEx was down by NOK 12 million compared to Q3. So this is driven by continued cost reduction measures mainly. Then let's look at the development in the liquidity position in the quarter. So the cash balance at the start of the fourth quarter was NOK 121 million and ended at NOK 102 million. So looking at the changes, the EBITDA, as mentioned, came in at minus NOK 49 million. We had changes in net working capital of NOK 37 million, a positive impact, mainly then driven by a reduction of trade receivables. We invested NOK 5 million during the quarter, mainly then in the production line in Denmark. And then we had the financing mainly leasing of NOK 2 million, so ending then at NOK 102 million. The total budget of the manufacturing of the electrodes, the manufacturing line there is still sort of unchanged at NOK 60 million. Where we, as of end of 2025 have invested some NOK 47 million, meaning that there is NOK 13 million left to invest. But the manufacturing line is fully operational. So those remaining investments are related to further improvements. And as of the end of the year, the backlog stood at NOK 275 million. Then let me give an update on the cost savings program. So at the start of the year, meaning -- or actually late 2024, we set a target to reduce our cost base with some NOK 40 million, equating to approximately 20% of the fixed cost base. And please note that the cost program then excludes all the project-related expenses. So we completed that cost-saving measure program already in the third quarter last year, and we have now made even further measures in the fourth quarter, bringing then the total cost savings on an annual basis to in excess of NOK 50 million or 24% of the starting point. So we have a very lean cost base with our strategic partners, and that is enabling us to win contracts on a global scale. So we combine that then with keeping a lean organization. But still, we need to keep sort of the core competence in the company in order to have the delivery capacity on large-scale orders. So with that, I will give the word to Michael to give an update on the market side. Michael Caspersen: Thank you, Martin. As said, I'm Michael Caspersen, and I was recently announced as Chief Commercial Officer for HydrogenPro. I will share today a snapshot of how I see the hydrogen industry today and moving forward, what we see in the field and share our latest commercial update. First, I'll share just a brief on my background and what got me here to HydrogenPro. I'm what you can probably call a bit of an incumbent from the hydrogen industry. Since the start of my career, I worked in this industry and around it. My background is technical. I come with a master in material science and a PhD in hydrogen technology specifically. So since the very start, I worked hands-on with components, with stack technology maturation, scaling, industrializing alkaline technology. Since then, I've worked practically nonstop more or less with hydrogen in various capacities, the latest with Boston Consulting Group coming from a handful of years, we had the responsibility for everything that was Greentech offers, which means basically electrolyzers and fuel cells. So I've seen ups and downs in this industry. I've worked up and down the value stream and firsthand experienced a lot of, let's say, beliefs and discussion and frankly, also misconceptions that surround this industry. Now joining HydrogenPro, it feels to me like a coming full circle. So I'm happy to be here and happy to be in a company that basically have already great achievements and help pushing this forward. But let's look at the market now and get into the commercial side of it. I'll kick it off with a little bit of backdrop. So looking back just a few years. is probably not lost in anyone that hydrogen has taken longer time to cement the true potential for decarbonization that it holds. The reasons are many. But at the essence, establishing a whole new and complex value chain takes time, more so than was expected. The industry is now reorganizing following these recent years of slowdown. Projects have been rolled back or put on hold, and we see that and everyone see that. We're not out of the woods yet, but we do see definite and concrete positive trends. And I'll come back to this just in a minute. But moving forward, there is a large consensus on market expectations that have been communicating broadly and widely, more so than before, just even a few years back. It seems now that everyone is looking at the same market and the same picture, which is actually different from before and very positive. What is communicated around these 5 million to 7 million, 5 million to 10 million of tons of clean hydrogen, of which some will be green, some will be other -- follow other production paths. It also comes with a higher certainty than previously. These are more rigid, solid numbers. And importantly, this is to be considered more of a floor than an actual ceiling. A reason for this is a change in focus on delivery capability rather than the technical potential of hydrogen for various applications. There has been some turmoil and has been discussion back and forth where to use hydrogen, where to use it more efficiently and where it actually belongs. I truly believe now that this is for the better for our industry, and it's a welcome chance for stabilization. But -- so let's look at just a bit into what these numbers actually contain underlying here. For the last handful of years, the hydrogen industry is, for me, a tale of 2 opposite directed tails. One is broadening out the technical potential across a wide range of applications and use cases, potential, some high, some low. And the other side, undeniable project cancellations and rollback due to high cost and length of certain bankability. Looking into the underlying dynamics, there has been both headwinds on a project level, but also tailwinds on industry level, which is why some things are experienced as moving forward, while some are experienced as moving backwards. It's been a bit of a chicken and egg situation. And all actors across the supply chain has basically been shouting for steadiness, for transparency and for predictability in order to make sound business decisions that last into the future. This is all the way from technology providers as ourselves, project developers, financiers and so on and so on. And they are starting to get that now. The noise that has been surrounding us from these 2 dual tails is fading away and business fundamentals can then take over. So despite of what is being conveyed from opposing lobbyist and trying to convey that everything is just bad and glooming, there is real progress, and we see it in the numbers. policy support is growing in the key markets, and it's moving forward and it has been year-by-year. We see an increasing volume of investments. It's actually quite steady and moving forward. We also see innovation on technology. And we do see, as also highlighted here, that these project rollbacks is actually part of a weeding out of less profitable projects that do not belong and never really had a fighting chance. This is not a sign of illness, but of increasing health. The result at the very end is higher certainty on industry level for HydrogenPro as well as an electrolyzer OEM and to our shareholders. When the noise -- this noise and the uncertainty is fading away, the industry can then focus on where it's needed the most, and that's driving down cost. And cost is coming down. As an electrolyzer manufacturer, HydrogenPro plays part of this, but we also recognize the great efforts that are made when we look outside the window and see our partners and our customers down the value chain also fighting hard to lower the levelized cost of hydrogen. And we see and we meet a wide range of projects with very different circumstances with quite different characteristics. And it's more clear than ever which ones are effectful. And hence, these examples goes a little to -- a little bit on archetype level on some of the ones where it works and where it doesn't work. And this is maybe a little bit sketched up. That's true. But the recipe for addressing both the CapEx and the OpEx side to the contributions of the levelized cost of hydrogen are clear. We need lower cost of the hardware, and we need efficient systems. And then we need, of course, further the externalities to play its part on infrastructure development, on policymaking and so on. So these decision-makers are working with us. These are indeed archetypical in nature, I'd admit that, but we can have a look at where the latter one of these plays out in reality and where it reaches even the very low end of the green bar you see here for green hydrogen. And this is -- keep in mind that the 2030 bar, the estimate for 4 to 5 years from now. So if we keep that in mind, that these estimates is somewhat around $3 to $8 per kilo in 2030. We can see that can be beaten because even while unhealthy projects have been rolled back, we're seeing the emergence of new projects. They appear in new locations. They're also growing in size. And if we go 3, 4, 5 years back, only a few select OEMs could claim to actually deliver electrolyzer systems in a 3-digit megawatt scale. HydrogenPro is one of them. Now there's a growing number of projects in this size range. They're big, they're significant as well as there is in the double-digit range, and they're more healthy. And we owe that to the industry itself, but equally to these decision-makers in the political landscape. So we list here a few examples from our key regions of where clean hydrogen is actually moving towards. And they are observing and experiencing favorable terms on political and regulatory level. And that's a big part of it because it is clear and it is communicated from policymakers that hydrogen is needed for decarbonization in the energy mix. The European hydrogen mechanism is just one example, brought it here because it highlights one of the very critical aspects that needs to be fixed in the industry, basically connecting supply and demand. It's a very, very important part of securing offtake for the future. We will see the efficiency of this kicking. But we do see already industry in turn responding to this. We're seeing recent bids falling down to or even below the $3 per kilo of produced hydrogen in India that's observed in the start of this year. And granted, these examples here are the best conceivable circumstances, pointed out here for now, but they won't continue to be. This will be moving. And it's a testament to the progress that is happening in our industry. And many industry professionals would likely have struggled with the likelihood of reaching $5 per kilo around Europe by 2030 or before this. These numbers that we collect here are from 2024. We definitely see progress. And this progress that we also meet it out in the field. It's converting into practical opportunities for HydrogenPro. And what is probably clear is that we're working in an industry with big capital projects, sales cycles are long, and that gives a natural latency period for refilling the pipeline. And it is no secret that with the rollback in the global hydrogen pipeline, a chunk of our previous opportunities roll back to. But we do see great potential moving forward, both from existing and from new opportunities. This is across a wide range of interesting segments where the hydrogen business case is now coming into fruition and actually being competitive. We see that across the entire pipeline in the geographies that we are present and we're opening in. So we have believed in our model during the last couple of years, we've stayed consistent in our mission to deliver low-cost and efficient electrolyzers. And by staying true to this, we've been able to manifest an attractive pipeline across hydrogen relevant markets. It's in North America, EU, the Middle East and Asia with this range of attractive applications. So we believe that we are as good as we can set up for success. So more specifically, for the most mature opportunities, we see very promising signs moving towards realization on the short term. These 4 projects marked here are entering a final contract stage. So it's advanced now. And together, they hold a potential around NOK 1 billion. It's significant. We're confident that these projects are moving ahead, and we are in the pole position to take a good portion of this value. So we feel good about that and 2026 will be an interesting year for HydrogenPro. As a final mark on this, what makes us positive that we will stay in pole position for more opportunities to come is positive feedback that we received from market when we do sounding and ask for feedback from our clients, from customers and other professionals. And these testimonies, they convince us that we are on track. We're perceived from their side with their eyes to be strongly positioned, which means we get feedback on being cost competitive, being high on performance, having a real-life track record. Jarle mentioned the 220-megawatt project. That's a real-life asset that we can showcase and that we have delivered, and we will also take learnings from. And besides this, on the more softer side of things, we are a flexible partner and with our partners, optimizing for the layout and delivery of full scope that we can deliver together with them across regions. So the flexibility in this partnership is something that we also get as good feedback. So I repeat, 2026 will be an interesting year for the industry and for HydrogenPro. Thanks for now. That concludes our presentation. So I will welcome Jarle and Martin back on stage now for a brief Q&A session. Operator: Yes. So audience has come up with some questions. The first one is your order backlog is NOK 275 million. Which profit margin do you expect from this backlog? Martin Holtet: Yes. So just firstly, the backlog then mainly consists of a service and support contract on the ACES project, mainly related to overhaul some years down the road and some remaining revenues on the SALCOS order. So those are the 2 main elements of that. And with regards to margin, unfortunately, we're not guiding on margin. So I'm not able to give exact figures on that. Operator: And do you expect any projects in India to be started in 2026? Jarle Dragvik: Maybe I can go first on that. We are very active in India now in process with several projects in the pipeline. Exactly when the projects will start, it might be a little bit harder to predict. But there are definitely a mix of projects that we are in discussions with on a shorter-term horizon and then obviously, of the larger one, which we have seen in the press being further out on the time line. Operator: And next one. Can you elaborate the service agreements on ACES and Salzgitter? And what can we expect of the income? Jarle Dragvik: Maybe Martin. Martin Holtet: Yes, I think that was more or less the question I replied to before. But again, yes, so the majority of the backlog is related to the ACES service agreement and then a larger overhaul after some years of operation. So that again, out of the NOK 275 million, that is the majority of the backlog. Operator: Another financial related question. Do you have enough liquidity to take you through 2026? Martin Holtet: Yes. So as you will also see in our quarterly report in Note 10, where we have done sort of a going concern consideration, we have concluded that we have sort of the adequate liquidity resources given the market uptick we see now and sort of the high probability of FIDs during the year. So that's our conclusion on that based on today's assessment. Operator: Regarding the market dynamics, could you comment on the current competitive dynamics? Specifically, have competitors secured projects that you were involved in? And if so, what do you believe are the key differentiating factors in those awards? Michael Caspersen: Yes. Well, we're not claiming the entire market. So I'm sure there will be competitors that grab projects that we are either in or have not been in. So that's a very broad picture there. The dynamics are very different per region. And I think they are developing across regions. So we actually see in general across the market, a lot of competition moving across regions, which used to be maybe more regional, more local, is becoming more of a global competitive business and competitive situation. And in some markets, it's pushed harder than in others. And some markets are just more advanced than others, probably a result of the first point. So I think what sets us apart is nothing unusual, and it's the business fundamentals. So it's helping to drive down the cost for our customers in the end. The end result is the cost of produced hydrogen, and we play a part in that. And we do that by delivering our cost-efficient electrolyzers, integrating them with our partners and making them efficient so that once in actual operational mode, they also deliver the lowest possible LC rates for our customers. And then, of course, there's how do we make these projects come through, come alive and operate under more and more advanced situations and circumstances. But that's pushing the envelope on innovation all the time. But there's no secret sauce to it. It's hard work and it's business fundamentals. Operator: Let's say, if one of the hot leads ending a order, does the company have capital to execute and deliver the order without the need for a capital raise? Jarle Dragvik: I don't think we can answer specifically on that. The base position is that, yes. Obviously, contract is structured with a certain prepayment and then payment milestones throughout the delivery period. But as you can appreciate, we cannot go into the details of the contracts in that way. Martin Holtet: And further to that, of course, with our sort of partnership strategy, offering sort of the full scope and on the EPC side and also bankability, it's, of course, very important for us in order to be able then to deliver on the contracts. And as a sort of a principle, we typically then enter into contracts where we seek a net positive sort of working capital through the project. Operator: The expected FIDs in 2026, are they typically more back-end loaded in the second half of the year or are expected to spread out throughout the year? And what are the main risks for these projects? Jarle Dragvik: I think we come back to that question when we get to a point, obviously, of announcement and refer to it at that time. Michael Caspersen: Yes, they are spread across the year, but more specifics on that is we are waiting for further notice on the contracting side. Jarle Dragvik: And to the risk element, there's always a risk. And the clue is, of course, for the customers to take the final investment decisions. And offtake has been the key constraint up to now, but we see that is coming more and more to reality. Offtake contracts are coming in place. We see it being signed in Europe. We see that being signed also in other parts of the world. India was mentioned. Operator: And could you elaborate a little bit on any developments around the strategic partnership with Longi and specifically around the use of the next-generation electrodes? Jarle Dragvik: I'm not sure the -- should we say, connection here in terms of the electrodes and the partnership with LONGi. LONGi is a good equity partner for us. We act independently in the market. We are exploring all the possibilities of streamlining the manufacturing structure in China, most of all. And obviously, we are also looking at other areas of cooperation. Operator: And given the current cost structure and prices of equipment, how much megawatts of capacity do you have to secure or deliver per year to go EBITDA breakeven? Martin Holtet: Again, we don't guide on that. Yes, there are some equity analysts covering us. So I think it's more of a question to raise to them. But I think what's fair to say is that we are in the industry with at least with a headquarter in Europe or the Western Hemisphere, the lowest sort of breakeven player in this industry. Operator: And so one audience says, first, thanks for a very good presentation, and welcome to Michael. And any news that you would like to say about H2 Giga projects in Denmark? Jarle Dragvik: H2-GIGA is still in a study phase. I think I'll repeat what we have said all along that investment will be taken when we see that the delivery schedule and the order situation allows for it. Operator: All right. So thank you for all your questions and for joining today's session. If you have further follow-up questions or inquiries, please feel free to reach out to us, and we appreciate your time, and this concludes our webcast.
Operator: Greetings, and welcome to the Willdan Group Fourth Quarter and Fiscal Year 2025 Financial Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Al Kaschalk, Investor Relations. Please go ahead, sir. Al Kaschalk: Thank you, Rochelle. Good afternoon, everyone, and welcome to Willdan Group's Fourth Quarter 2025 Earnings Call. Joining our call today are Mike Bieber, President and Chief Executive Officer; and Kim Early, Executive Vice President and Chief Financial Officer. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and in the presentation slides, all of which are available on our website. Please note that year-over-year commentary or variances on revenue, adjusted EBITDA and adjusted EPS discussed during our prepared remarks are on an actual basis unless otherwise specified. We will make forward-looking statements about our performance. These statements are based on how things we see today. While we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation to do so. As described in our SEC filings, actual results may differ materially due to risks and uncertainties. With that, I'll hand the call over to Mike, who will begin on Slide 2. Michael Bieber: Thanks, Al. We closed 2025 with record financial performance and strong momentum across our business. For 2025, both contract and net revenue grew greater than 20%, led by our energy work. Adjusted EBITDA grew 40%, and yearly margins expanded to above our 20% target for the first time in 2025. Strong EPS growth allowed us to generate $71 million of free cash flow, and we are now in a net cash position. In 2025, organic net revenue growth was 17% and was largely driven by expansion with existing customers. Electric load growth has returned to the United States after about 15 years of stagnation. Artificial intelligence and data centers are accelerating electricity demand at a scale not seen in recent years. To a lesser extent, transportation and building electrification and increased domestic manufacturing are also contributing to electricity demand growth. Our utility customers are confronting a grid that must manage more power, more intermittency and more complexity than ever before. At the same time, affordability has moved to the forefront. As infrastructure investment increases, regulators must balance reliability, decarbonization and cost containment, increasing the need for smarter planning and cost-effective execution. Many studies have shown that energy efficiency usually increases rates slightly but drives down bills for participants because you're using less energy and thus, improves affordability. The dynamic plays directly into where Willdan operates, and the results reflect strong execution, which fuels our positive long-term outlook. On Slide 3. Let me step back for a moment and remind everyone how our business is structured and where we're seeing demand. Willdan delivers a broad range of energy and infrastructure solutions to utilities, state and local governments and commercial customers. On the left side of the slide, approximately 85% of our revenue comes from the Energy segment with the remaining 15% from Engineering and Consulting. On the right side, activity remains healthy across all customer groups. Our utility customers represent about 41% of revenue and continue to perform well. These programs are typically 3- to 5-year contracts funded through rate payer mechanisms, which provide strong visibility and recurring revenue. Importantly, we're seeing program sizes usually grow over time as energy efficiency becomes recognized as a system resource. State and local governments account for approximately 48% of revenue and remains a steady source of growth. Most of this work is supported by user fees and municipal bond funding, both of which remain stable. Commercial customers have rapidly grown to 11% of revenue, with most of that activity tied to power for data centers. AI-driven load growth is creating meaningful infrastructure and energy optimization needs, and we're helping these clients navigate grid constraints, design solutions and meet aggressive power requirements. Commercial customers represent the most fertile business environment we serve, and we plan to continue intentionally increasing our capabilities offered to the commercial sector. Taken together, this mix reflects a diversified, durable business supported by long-term contracts, relatively stable funding sources and growing demand across multiple end markets. On Slide 4. Our upfront policy, forecasting and data analytics work informs our strategy and helps us navigate market change. We operate at the intersection of consulting services, engineering and program management, helping clients plan for new load, design infrastructure upgrades, manage grid complexity and implement cost-effective energy solutions. In our upfront work, we are seeing particular demand for studies on the impacts of electricity load growth, and that work grew more than 50% organically year-over-year. As I mentioned in prior earnings calls, those market changes led us to the APG acquisition. That provides power engineering solutions to commercial customers, including data centers and hyperscalers. We expect that work to more than double in 2026, and we are growing that backlog into 2027 and 2028 now because they're long-term contracts. In other parts of engineering, we saw strong execution and growth with both commercial and municipal customers. In program management, we performed above our plan on utility programs and building energy programs for cities. Demonstrating this model in an example, I'll walk through what we are doing around data centers. First, we work with both hyperscalers and government regulators to optimize the siting and mitigate the electric load impacts of data centers. Our consulting work for Amazon noted in our December press release is an example of this, along with our studies for the states of Virginia, Michigan and California. Next, we work for data center developers to design and manage the construction of substations that power new data centers, which enable AI. I'll provide you some examples of that in a moment. And finally, as Willdan has done for more than 10 years, we provide energy efficiency optimization for data center operators, mostly through long-term master service agreements. On Slide 5. We have a strong pipeline of opportunities that we are converting into contracts, and the pipeline is solid heading into 2026. Importantly, our average contract size has continued to grow, fueling the overall growth of Willdan. Here are just a few examples we converted since our last conference call. For the city of San Diego, we recently signed a $112 million energy efficiency program that will help save electricity at municipal infrastructure owned by the city. This program is about 2 years in duration and addresses a wide range of civic buildings and other infrastructure that uses electricity. This follows a similar $97 million win with Alameda County, California we announced last quarter. For Mt. San Antonio College, we were just awarded an exciting new contract that demonstrates how acquisition integration can provide larger scale and more effective client solutions. This $49 million brand-new project is an integrated microgrid resiliency project. Within Willdan, it will involve the legacy civil engineering group collaborating with several previously acquired energy groups to deliver a comprehensive energy solution to the college over the next 2 years. Next, for Menlo Digital, one of America's largest data center developers and a large customer of ours, we are now breaking ground on a $38 million project to design and manage the construction of an interconnect substation that powers a new data center in Phoenix, Arizona. For SOLV Energy, we signed a $4.5 million integrated distributed energy resource, or DER, project in Utah. And finally, we signed a smaller confidential LoadSEER software license in Q4. LoadSEER is our flagship long-term utility forecasting software. On Slide 6. This slide highlights what we continue to see in the data center market, sustained growth in electricity demand. There is currently an estimated 35 gigawatts of active data center construction in the U.S. While it's unlikely every announced project will ultimately be built, the broader trend is clear. Demand for power from digital infrastructure remains durable and is expected to extend at least through the end of the decade. Importantly, this isn't just about megawatts. It's about complexity. Data center load growth is driving transmission upgrades, distribution system expansion, interconnection challenges and increasing reliability requirements. Virginia and the more rural states of Texas, Georgia, Arizona, Tennessee and Wisconsin are all experiencing rapid growth in energy demand from data centers. This dynamic plays directly to Willdan's strengths from power system engineering and grid modernization to targeting energy efficiency and load optimization solutions. As electricity demand grows, utilities and commercial customers need technically advanced partners to plan, design and optimize the system. That's exactly where we operate. On Slide 7. We continue to see energy efficiency evolve in ways that reinforce its strategic importance within tomorrow's power grid. There is increasing focus on capacity-driven and locational efficiency programs. Targeted efficiency and nonwire solutions are now delivering measurable distribution level value directly supporting grid planning and load management. Next, affordability is now a nationwide concern. Utilities and regulators are attempting to mitigate customer bill impacts, and energy efficiency remains one of the most cost-effective and immediate tools to reduce customer bills while accommodating load growth. Next, grid modernization is accelerating. Advanced metering infrastructure and AI-enabled analytics are improving measurement, targeting and performance optimization, further integrating planning studies and efficiency into core systems operations. Finally, reliability has become more of a year-round concern than just the historical concern of summer peaking. Now winter and summer grid events reinforce the role of efficiency as a dependable system resource. Willdan is well positioned today and plans to further increase our capabilities through key hires and acquisitions. I want to mention that we have a particularly robust acquisition pipeline entering 2026 that will better enable us to serve customers in the future. Kim, over to you. Creighton Early: Thanks, Mike, and good afternoon, everyone. Turning to Slide 11 (sic) [ Slide 9 ]. For the fourth quarter of 2025, contract revenue increased 21% to $174 million, and net revenue grew 13% to $89.5 million for the quarter. Adjusted EBITDA also increased 13% compared to the prior year, totaling $20 million for the quarter, and adjusted earnings per share more than doubled to $1.57, which is $1.23 on a GAAP basis, aided by exceptional tax deductions from energy efficiency incentives under Section 179D. The quarter benefited from broad-based growth across our service lines and contributions from recent acquisitions. Margins remained solid as we maintained strong execution and cost discipline. Fiscal 2025 as a whole reflects the trajectory and strength of our operating model, as noted on Slide 10. Fiscal 2025 was a record year for Willdan. Consolidated contract revenue grew 21% to $682 million, and net revenue grew 23% to $365 million for the year. Again, the growth was broad-based across our segments, service lines and customer base and was aided by contributions from our acquisitions. Of the 23% growth in net revenue, 17% was organic and 6% was from acquisitions. Importantly, our revenue growth translated into meaningful profitability expansion as well. Gross profit increased 26.1% to $256 million, and gross margin expanded to 37.5% from 35.8% in the prior year, reflecting growth and productivity gains in our program management and consulting services in both segments as well as success in reducing direct costs associated with delivering those services. General and administrative expenses increased with the growth, including investments in talent and technology, incentive compensation tied to performance, and acquisition integration. But the resulting operating leverage helped adjusted EBITDA increase 40% year-over-year to $79.5 million. Net interest expense decreased by 26% to $5.7 million for 2025, primarily due to lower debt levels, combined with a lower interest rate spread derived from reduced leverage ratios. We also benefited from the interest income derived from consistently high cash balances. And more significantly, we recorded an income tax benefit of $12.6 million as a result of the 179D deductions and the impact of the higher stock valuation, thereby adding to our bottom line and resulting in an effective tax rate benefit of 31.4% compared to a tax rate expense of 15.4% in 2024. As a result, net income more than doubled to $52.6 million for the year or $3.49 per diluted share on a GAAP basis compared to net income of $22.6 million or $1.58 per share in 2024. Adjusted earnings per share increased to $4.89 per share compared to $2.43 in the prior year. Revenue growth and margin expansion propelled these strong results. Turning to the balance sheet and liquidity on Slide 11. We generated $80 million in cash flow from operations as continued improvements in working capital levels supplemented the strong earnings and $71 million in free cash flow or $4.69 per share in 2025. We invested $9 million in CapEx, primarily for proprietary software development and used $36 million for acquisitions. We also reduced borrowings by $40 million under our credit facility and had only $49 million in outstanding debt at year-end. We ended the year with $66 million of unrestricted cash and a net positive cash position of $17 million, the first time since 2017 and effectively 0 leverage compared to the 0.3x EBITDA at the end of 2024. In addition, we continue to maintain full availability under our $100 million revolving credit facility, resulting in total available liquidity of $216 million at year-end. This provides meaningful financial flexibility as we move into 2026. Our capital allocation priorities remain consistent: reinvest in the business to support organic growth and pursue accretive acquisitions that expand and enhance our capabilities and geographic reach. Turning to Slide 12. Over the past 4 years, our growth profile has been both durable and increasingly profitable. Gross revenue and net revenue grew at compound annual rates of 18% and 16%, respectively, while adjusted EBITDA expanded at a 30% compounded annual rate. And on Slide 13, we've demonstrated the ability to expand margins over time through disciplined execution and productivity improvements, favorable mix and prudent cost management. The 21.8% margin in 2025, for the first time, exceeded our long-term goal of a 20% EBITDA margin. We expect the 2026 margin to also exceed that 20% target. On Slide 14, we provide our financial guidance for 2026. These targets assume no future acquisitions. We expect net revenue in the range of $390 million to $405 million, adjusted EBITDA in the range of $85 million to $90 million and adjusted earnings per share in the range of $4.50 to $4.70 per share. These targets assume a full year effective tax benefit of approximately 10% and 15.8 million diluted shares outstanding. These numbers exclude any future acquisitions, though we expect to make acquisitions during the year, and our guidance will be updated accordingly. In summary on Slide 15, fiscal '25 was a record year marked by continued growth and margin expansion. We entered 2026 with a strong balance sheet and ample liquidity to support strategic growth. We are positioned at the center of growing energy and infrastructure markets with a robust M&A pipeline to enhance scale and capabilities. With that, operator, we are ready to take questions. Operator: [Operator Instructions] And we'll take a question from Craig Irwin with ROTH Capital Partners. Craig Irwin: So I'll start off the top by, I guess, asking about the thing that I think is affecting aftermarket trading, right? Your EPS guide of $4.50 to $4.70 is fantastic, but it is below the $4.93 last year. When I look at the tax rate that you're guiding us to a 10% benefit, that compares to negative 31% last year. So there's obviously quite a difference in the 179D assumption for 2026. This doesn't impact EBITDA. But can you maybe walk us through what your assumptions are for 179D in 2026, how this worked so very well for you last year? And is there a potential for us to see 179D maybe become more favorable for you over the course of the year? Creighton Early: Yes. Thanks, Craig. Well, the first big assumption is that consistent with the One Big Beautiful Bill, the 179D is set to expire at the end of June for this year. So that inability to carry that through to the end of the year means that we can only take advantage of that through projects that are started within the first 6 months of 2026, so that's the single biggest factor there. There's also a little bit of a shift in just the work that we're doing from the Clark County School District. So we have a lot of school buildings within that school district to the shift into work we're doing for Alameda County and San Diego, which will involve fewer buildings, which are really the source of a lot of those 179D deductions that we got. So the main driver is just the assumption that the 179D provision is not being renewed as of the end of June and secondarily, that there's just fewer buildings in some of the projects that we're doing that would qualify. Craig Irwin: Understood. That makes complete sense. So my next question is about the EBITDA growth, right? So for the trailing 4 quarters, your EBITDA growth has been between 67% and 190% year-over-year, really just absolutely crushing it. So when I look at this, I know your markets are helping in a big way, but I kind of have a suspicion that Willdan is humming on all cylinders, that there's certain significant operating improvements that are happening at the company that might be improving the fundamental profitability of the company moving forward. Can you maybe unpack for us any of these operational changes that might be taking place? I know you're conservative in your guide and you give us numbers that you firmly believe in. But how should we look at the potential for your initiatives on profitability and performance as contributors over the course of the next year? Michael Bieber: Yes, Craig. First, we expect margins to continue to be above 20%, that long-term target. We achieved that this year. And in our guidance, midpoint's squarely above 20% again. It's actually a little improvement over this year. So that improvement continues, and the big structural change is -- over the last 5 years, is that we've moved up the value scale and are able to charge more for the work that we do. The second is the back-office cost absorption of the scale itself. As we've grown the company, corporate costs are not growing at nearly the rate of the top line. So we think that's going to continue, and it's reflected in our guidance. You're right. I look back on last year's guidance, and our long-term expectations for investors are overall to grow 15% to 20% top line and bottom line. And I think by the end of the year, we'll be right there, if not better. And that's exactly what we did in '25. We've got the same playbook for '26. We'll come in with appropriately conservative guidance at the beginning of the year. We know that you want us to beat and raise. And we think this positions us well. So I think it looks good for '26. Craig Irwin: Excellent. Last question if I may. So you guys are winning in data center, right? Why? Because you bring the right resources to the customer quickly and they can rely on Willdan to execute the project impeccably. But you've historically done the same thing for utilities and utility demand seems to be going up because of the reserve margins that are falling across the country, right? Load growth is becoming a big problem. Do you see potential for continued request for accelerated project completion that tends to drive margins upward over the next couple of years? I mean is this a theme that you're seeing more predominantly across your utility customer base? Michael Bieber: It is, Craig. You're absolutely right that utilities are being squeezed now. Generation is not necessarily keeping pace with the demand for that electricity. And so yes, energy efficiency is the cost-effective resource. They're trying to get as much out of those programs as they can get. And that's why you've seen those programs grow over time. If you look back over 2025, 17% organic growth, there wasn't any single big win that drove that. It was mostly expansion from those long-term customer relationships, many of which are utilities, as you pointed out. That's exactly what we're seeing, and that trend is continuing. Craig Irwin: Great. Well, congratulations on another really solid quarter, Mike. Impressive. Operator: And next, we'll move to Tim Moore with Clear Street. Timothy Michael Moore: Congratulations just on the hard effort and the great execution throughout the year. You really harnessed the tailwinds and scale benefits. It came through and all beat, raise stocks still have momentum. So one thing I just want to follow up -- actually, 2 questions. If I recall properly from last year, year before actually, the fourth quarter of 2024, that Los Angeles Department of Power and Water contract wasn't, I think, in the 4Q '24 revenue. Did it ramp up meaningfully in this December quarter? I know you were lapping kind of not much contribution from the year ago period. Michael Bieber: On a percentage basis, it ramped up materially, but its contribution was very small in dollars actually for the Q4. That program is ramping up, though. We're not going to see -- we'll see improvement in Q1 over Q4, but the big ramp-up for LADWP is in Q2 of this year, and it's actually right around the corner. We've got the amendments that we needed in place, the changes to the contracts, the contracting community's ready for it. And I think you'll see a material contribution to that contract starting Q2 of this year. And then it goes on for the next 4 years. Timothy Michael Moore: That's good. I think I was modeling $7 million to $8 million maybe a quarter. Maybe it will be higher. I know it was -- it could be higher than the original terms that phased down before renewal. So that's helpful. And Mike, I wanted to check something actually, if I heard correctly in your call, I mean, I'll just look at the transcript. But did you mention that you thought data centers could double in 2026 for revenue? Or was I mishearing the end market? Michael Bieber: No, we were talking specifically about the APG acquisition that does that type of substation design and construction management for those data centers, and we are expecting that to more than double for us this year. A lot of those projects, though, are 2 or more years in duration, so we're actually building backlog into '27 and '28. This is going to be a long-term trend. Timothy Michael Moore: That's great. I mean it seems like it could be about 20% of your revenue by the end of the year from data centers related if it does double. I mean, I imagine it would. Does that make sense, it could be maybe 20%? I mean, I know APG gets some AT&T before that, but it seems like you could get to 20% data centers. Michael Bieber: It will certainly grow from 11% year-over-year. I don't know where we'll end up. We mentioned it's the most robust area we're serving. And in addition, I'll mention, we're looking at acquisitions that specifically expand our capabilities to the commercial customers overall. We want to diversify in that direction. So we'd like to catalyze and drive that number up even further into the 20s. Timothy Michael Moore: Great. Great. And one last question is related to just the thread you just started. You did that Compass Municipal Advisors acquisition that really kind of gets you into the financing side, helps agencies and develop new projects. Is that a little bit different of a business model for you? I mean, is the margin higher because of the financing tie-in for that? Michael Bieber: We have a financial services group, and we have -- for probably 15 or more years at Willdan, we don't talk about it a lot, but it's a legacy activity that we provide primarily for communities in the western half of the U.S. A lot of the work is in California, Texas, a little bit in Florida, so that was a geographic expansion of that group. We currently didn't serve any of the customers in North and South Carolina and Kentucky. So you're right. That can be a higher-margin business, and we see great cross-selling opportunities between that upfront financing work, particularly for school districts and the other things that we provide for those schools like energy efficiency. Operator: Thank you. That will conclude the question-and-answer session. And this does conclude today's teleconference. You may now disconnect your line.
Conversation: Rodrigo Caraca: Good morning, everyone. Welcome to the video conference regarding Iochpe-Maxion's Fourth Quarter 2025 Results. I'm Rodrigo Caraca, Senior Investor Relations Manager at the company, and I will be leading this video conference. Today, we are going to have Mr. Pieter Klinkers, CEO; and Mr. Renato Salum available for the question-and-answer session. Please be advised that this video conference is being recorded and will be made available at the company Investor Relations website along with the presentation. We'll be having Mr. Pieter Klinkers presenting in English. For your convenience, simultaneous interpreting into Portuguese and English will be available. [Operator Instructions] Before proceeding, we would like to clarify that any statements made during this video conference regarding the company's business prospects, projections and operational and financial targets constitute the beliefs and assumptions of Iochpe-Maxion's management as well as information currently available by the company. Future projections is not a guarantee of performance. It involves risks, uncertainties that may or may not occur. Now I would like to give the floor to Mr. Pieter Klinkers, CEO for Iochpe-Maxion. Please proceed. Pieter Klinkers: Bom dia, and good morning to everybody from rainy Sao Paulo, but I hope it's still a good morning for everybody. Let's jump into this presentation. And as usual, we start with having a look on the global markets. If we look at light vehicles, it's different than commercial vehicles that you see on the right side. Light vehicles kind of flattish in 2025 versus 2024, whether you look on including China or excluding China, it doesn't matter too much. We used to look at global production ex China because that's a more relevant market for us, but kind of flattish, and we expect the same to happen in 2026. That doesn't mean that everything is flat. I want to remark here that, for instance, 2 markets, Brazil and India, that are important markets for our company. Those markets show more meaningful growth, we believe, in 2026, and that would be good for our company. If we look on the out years there, there's a little bit more growth, like 2% or 1% to 2% per year, and that would bring the light vehicle market back to a volume of about 95 million to 100 million vehicles in the year 2030. If we look on the commercial vehicle side, it's more dynamic there. And unfortunately, in 2025, as everybody knows, it was negative dynamics primarily, but not only in initially North America, then also South America, but also the European market, especially at the end of the year was not great. And so overall, minus 7% in 2025 versus 2024. That's a meaningful downturn. 2026 looks better, and we take that. And I think it's more or less in all the regions that people foresee, and we concur with that view, markets should be better. Just the year 2026 you look at North America, and we will talk a little bit more about North America during this presentation. Like we did in the last presentation, that market is still down 4% to 5%, people say, but we take it because the market was down so much in the second half of 2025, 30%, 40%, especially in the heavy vehicle market. Some of you may remember, I talked about it in the last call, that is the most important market for us is the heavy vehicles, Class 7, Class 8 that we supply from our structural components unit that was hit the most. And if that market comes back to only being minus 5% compared to 2025, taking into consideration that the first half of '25 is pretty good. That means you need to have a good increase during the year 2026 to get back to more or less the volumes that we had as a whole year 2025. So North America, we take that number. And what we see so far this year, it is confirming that. We don't have an outlook for the second half of the year yet, but the first 3 months of the year are in line with the assumptions that we took for the North American market. We believe Brazil will be better, especially in the first half of 2026. And we also believe Europe will be better. That's what we see happening as well. And Asia for us, most importantly there, India should show solid growth as well. So more optimism from a point of view of the truck market for 2026. And then if you look at '27, '28, a little bit more out, that's pretty significant growth. That's good growth. And so even if that materializes to a good extent, not completely, maybe even more. But if these numbers are more or less true, then our company is very well positioned to benefit from those market trends, because we all know that even in the year 2025, and we'll see that later on, even in the year 2025, there where it was possible, like in Europe or like in Asia, we outperformed the market. And so if the market comes back and we keep our performance, which definitely is the aim, and I think it's going to happen, then we should be very well positioned for those numbers -- to capitalize on those numbers. All right. Enough on the market. Let's look at the numbers on the next slide. Our net revenue in 2025, really a mixed number because the first half was pretty strong and then the second half, initially only because of North America truck and then, let's say, during the third quarter, especially the fourth quarter, the Brazil truck production went down, and that hits us not only in our components division in Brazil, but also in wheels. And so that trended our numbers down in the second half of the year. But overall, in the year 2025, we still came up with BRL 15.3 billion turnover, which is slightly up versus 2024. Our gross profit in the fourth quarter of 2025, despite all the drama in North America and also in Brazil from a commercial vehicle point of view, still at 11.7%, which took us to 12% gross profit margin for the whole year, which we believe is a pretty solid number given the circumstances. Our recurring EBITDA, pretty much the same as on the -- same story as on the gross profit, 9.6% in the fourth quarter and still a double-digit margin in 2025. Again, despite that situation in commercial vehicles in the Americas, which is a very important market for our company, we were able to realize double-digit margin over the year 2025. Leverage, 2.65x in the fourth quarter of 2025. That compares to 2.55x in the third quarter of 2025. But we need to keep in mind here that we lowered our forfaiting of factoring by about BRL 100 million. And so if you neutralize that effect, our leverage would actually be pretty much the same in the fourth quarter 2025 than what it was when we talked to you guys about the third quarter 2025. Okay. Now if we look on the revenue by product, it's obvious that our components unit is hit in North America and South America because of commercial vehicles. Our wheels unit is hit in Brazil -- was hit in Brazil because of that. Not in North America, because from a wheels point of view, we supply also truck wheels to the North American market from Mexico, but we supply the medium truck segment, and that was a very different picture, also slowing down, but much less than what we saw in the heavy truck segment. And therefore, instead of having a split of roughly 75% wheels and 25% components in 2025, that number looks more like 80% wheels and 20% components. If we go to the revenue by customer, it's pretty much the same effect that you see there. Just 2 examples there, you see Traton and Daimler which are big customers for our company for components in North America. Their revenue as a percentage of our total revenue goes down meaningfully, but it's being made up by other customers like Toyota, like Stellantis, like Ford, and those are typical wheel customers, of course, light vehicle customers that we serve through our wheels unit. And we were able to not make up completely, but mitigate to a large extent, those impacts that we saw for components in North America in the second half of 2025. If we go to the next slide and we look a little bit more on the regions. Starting with South America. I think this number shows that we have been outperforming the market. Both light vehicle production and commercial vehicle production ultimately was down in 2025 in Brazil, but our revenue is up. Of course, it was more up in the first half when truck was still okay than it was in the second half. But overall, the revenue is up. And of course, that has to do with us outperforming on the light vehicle side, which is the wheel segment, where primarily we did very well from an aluminum wheel point of view that didn't make up everything in the second half. You see second half, fourth quarter was still down, but less than the market. And so again, a mitigating factor of the headwind that we had in the Brazilian market. So market not so good in the second half, but Maxion at least mitigating partially that market effect. If we look on North America on the next slide, this is the drama that we have been talking about that you can read about everywhere, and it has been hitting us hard in the second half of the year. If you want to hear good news about that market, I can tell you that the fourth quarter was not good, but it was a little bit better than the third quarter. So let's see if that's a trend that will continue into 2026. What we saw in the first 2 months is in line with the targets that we put ourselves. And those targets are mostly based on the data that we showed on the first slide that comes from global data from IHS. And so we don't have a visibility yet for the whole year, but at least the start of the year is in line with the assumptions that we took for this year. And so a big impact in North America, but the fourth quarter, at least being a little bit better ultimately than the third quarter. We go to EMEA, which is Europe, in our case, Europe, Turkey and our plant in South Africa, we clearly outperformed the market. I think you see light vehicles was slightly down over the year. Truck was more or less stable over the whole year in Europe, was down in the fourth quarter, was a little bit up in the beginning of the year, but more or less stable over the whole year. And so us being -- having 18% more revenue on truck is a pretty strong number and us having -- Maxion having 13% more revenue in 2025 than what we had in 2024 shows that we are performing solidly or strong, I would say, in this important market for the company. And that's largely based, not only, but largely based on our position that we have in the truck market there. And so that's not only good for the region. It also has been supporting our global results, which if we would have only been acting in North or South America, those would have been impacted more -- impacting more than what we now see in our overall consolidated results for the company. We go to Asia. I've been saying in the last few presentations that my expectation would be for Asia to start playing a bigger role in our overall revenue and margin situation. And we see that happening. It starts happening in the fourth quarter of 2025 this time in [ pass car ], where the market is good, and I think Maxion is outperforming the market there. And our aim certainly will be to continue that trend and also to complete it with truck. My expectation for truck also both for India and for China next year is this year is positive. And so we saw the start of this region outperforming or supporting our results more significantly happening at the end of last year. And our wish is for that to continue not only in '26, but going forward. India, which is the most important location for us in Asia, I would say, it's a very good place to be nowadays. And we're well positioned there. And as we talked about in other presentations, we have a couple of plans in the drawer to do even a little bit more in India going forward. With that, go back on the next slide to some numbers. And so as we talked before, our margin, I think, both in the fourth quarter of 2025, our gross profit margin as well as for the total year 2025, very much in line with 2024, which I believe based on the sudden reduction that we saw in the North American truck market and then also in the Brazilian truck market, that's a pretty solid result, a result that we would have signed up for when we would have known what happened in the second half of the year in primarily North America. If we go to the next slide, it's pretty much the same story on our EBITDA margin, 9.6% recurring EBITDA margin in the fourth quarter of 2025 with that market situation in the Americas from a truck point of view is, we believe, a solid result. And then the 10.1% margin that we delivered over the whole year, double-digit margin with those sudden drops in the truck market in the Americas is also something that we believe is a good outcome for the company. We look on the next slide, the net income. It's a little bit more depressing story, both for the fourth quarter of the year as well as for the total year. And here, you see the reduced income in CV, of course, which you also see in EBITDA, especially when it's not recurring EBITDA, but you see the higher restructuring cost here as well. And also financial expenses, we were not assuming the SELIC to be at the level where it was during most of last year and where it is today. And so that has been hurting many companies, including our company. And also, we had higher taxes in this quarter, particularly in the quarter 4 of 2025 that hurt our net income. And actually, instead of being slightly positive, now it was a negative net income for the quarter. We go to the next slide, look at our investments. We said we have good discipline in place regarding investments. And I think we delivered on our targets, which was to have a meaningful reduction in 2025 versus what we invested in 2024. A little bit more in the fourth quarter, but that was a managed action. We were pushing out some CapEx from more in the beginning of the year to more towards the end of the year. But the final number for the year, the BRL 554 million that you see on this slide is a meaningful reduction versus what we showed -- what we invested in 2024. Go to next slide. You look at our leverage, I talked about it, went slightly up quarter-over-quarter. But then again, the BRL 100 million less factoring that is included in that number basically brings back the leverage to kind of the same level than what we had in -- sorry, in the third quarter of 2025. We go to the next slide. Look at the gross debt, there's not a lot of change here. I think there's still very manageable amounts of debt for 2026 and '27. And then, of course, we have a little bit more work to do to prepare ourselves for refinancing our bonds in 2028, which we will do. And at the same time, we have a lot of cash liquidity available, BRL 1.6 billion in cash and then on top of that BRL 760 million of undrawn credit lines. So I would say a healthy situation from a debt point of view on this slide, like we explained in prior presentations. We go to the next slide. Usually here, what you see, if you remember, we show a few new business wins regarding wheels. We decided to do different this time. This is a picture of -- the guy in the middle is Giorgio Mariani, and he was in China a couple of weeks ago, picking up an award from Cherry for the good work that we do together with Cherry. And we don't talk a lot about all the new business wins that we have with our customers, primarily because we're not allowed to, unfortunately. But I can tell you here that we are growing rapidly with the Chinese OEMs outside of China primarily. And so just to give you a glance, we now have in place purchase orders or we are already supplying not less than 16 Chinese brands all over the world. This is happening in all the regions that we talked about before Asia, Europe, North America, South America. And so some of you may remember that we talked about believing we're well positioned to have higher market shares with the Chinese OEMs when they go outside of China than what we have currently as market shares for our products in the regions where we operate. And that seems to be materializing. And so we're very happy about that. We are very proud to be able to work with the Chinese OEMs that will continue to grow in Brazil, in Europe, in the Americas, we believe, of course, also in Asia. And we like to work together. They recognize our product portfolio, our innovative products, they jump on it, and they also recognize our global footprint when we work with them in China or when we work with them in Asia or we work with them in Europe. Of course, it's a much smaller step to also work together, for instance, in the Americas. And so a good story here for our company that we were hoping for, and that seems to be materializing. We go to the next slide. Last slide, the business summary. I think the year 2025, of course, it was highlighted, if you want to call it a highlight by all the dynamics that were going on with markets -- truck markets under pressure first in North America, then in South America. But we did a good job, I think, as a company in optimizing our structures. We did a good job in not spending more CapEx than we committed to and lowering our CapEx versus 2024. And we did a good job in adapting pretty quickly. We would have not done that. We would certainly not have been able to do a double-digit margin in this kind of market environment for us. So from a cost and from a flexibility point of view, I think the company did a good job. From a growth point of view, as we talked about in prior presentations, we're not planning to do another big investment, build a new plant on the very short term. But we are planning to grow. And so you can grow through increasing shares. We've been doing some of that in 2025. Of course, we will target to do the same in 2026 as well. We are commercializing innovative products, not only with the Chinese OEMs, but also with the Chinese OEMs they're jumping on it. We like it. We both like it, the customers and we -- and that's also creating some growth. And then we will execute some selective growth initiatives. We did it already in Mercosur with our acquisition of Polimetal in Argentina. We are doing some more in Turkey. We may be doing a little bit more in India. We have a series of good smaller projects in the drawer that we will take out of the drawer piece by piece. And so that will create some growth in a little bit different shape and form than just building a new plant left and right. And so in a nutshell, if people ask me, how is the company doing? I would say when I open the newspaper every morning, and I'm sure you do as well, then you see a lot of dynamics. You read a lot about geopolitics. And then when you read about automotive news, it's a tough world, right? There's a lot of write-offs. There's a lot of pressure on profits. I look at our company and say, maybe we didn't reach all the targets that we put ourselves, which was not possible because of some of the negative -- some of the headwinds that we had in important markets for us. But overall, our company is in a very stable position. And even more important, our company is well positioned to deliver on more solid markets in the truck environment and some growth in regions that is predicted by IHS by Global Data that are important for us like Brazil, like India or in Europe, the truck market coming back on top of market share gains. And so I read the news, I read the automotive news. I look at my own -- at our own company, and I think we're not so bad positioned. With that, I open it for questions and answers. Rodrigo Caraca: [Operator Instructions] First question is from Fernanda Urbano from XP. Fernanda Urbano: I have 2 questions. First, in regard to the United States. I know it's a little bit early to say, but I would like to know your projections for 2026, considering your scenario and considering the tariffs? You released that in the fourth quarter. You were seeing some signs of stability for the market, especially for the end of 2025. But I would like now if you can share what is going to happen for 2026. What do you expect as far as time line is concerned so that these tariff effects are going to actually affect the company's sales in the market? And my second question is in regard to Brazil. I would like to explore a little bit the demand for heavy vehicles in Brazil. We see some news today in regard to the beginning of the [ MOVER ] Brazil program and the release for possibilities within the program, posing for more production, especially starting in February. I would like to know from you if you know about this project for Brazil? And I would like to hear about the U.S. as well. Pieter Klinkers: Thank you very much. Very important questions. Let me start with the first one on the U.S. or let's call it North America. As I said, it's too early to give a prediction for the total year 2026. When we ask our customers, they give us more information, let's say, for the next coming months. They're not yet able to talk about the whole year 2026. But what I can tell you is that our assumptions are in line with IHS with Global Data that during the year 2026, there will be a ramp-up of volumes, which needs to be the case if you want to end the year 2026 slightly below 2025. You started 2025 very high. You ended it at a low. It means the curve needs to go -- needs to swing the other way. And I can -- what I can tell you is that at least in the first months of this year, that's what we see happening. Now a lot more needs to happen for that market to come back to the levels that we saw at the beginning of 2025, and I can't give you any better input right now already. But at least the start of the year is in line with our assumptions. From a tariff point of view, this is changing so much as we know that it's sometimes hard to keep track of what's happening and what are the impacts directly or indirectly on your company. But purely from a North American standpoint, I would say, right now, we believe there is little impact for our company because we were handling under the -- or commercializing our products under Section 232, where there is no change. And of course, there's tariffs under Section 232. But since we are supplying from Mexico, which is getting USMCA exemption, that was the case, and that is still the case. And so from that point of view, for our company right now, based on what we understand and based on where we are today, we believe that there is no meaningful impact from the latest changes regarding the tariffs. When we look on Brazil, we're positive on Brazil. Pass car, we believe, will be positive this year, and we're well positioned to profit from that. Our plants are doing well. Our aluminum plants, we moved some equipment from around the world to Brazil to have a little bit more capacity in Brazil. We acquired a majority stake in Polimetal that will help us to generate more capacity for Mercosur, not just for Argentina, but for Mercosur. And so from a pass car point of view, we're well positioned. And then truck, we do have the capacity, both for components and for wheels. And we believe that at least in the first half of the year, yes, the program you're talking about will be helpful. And so we're looking forward for those projections to materialize. I hope that answers your questions? Gives you a little bit more insight? Rodrigo Caraca: Our next question is from Gabriel Rezende, Itau BBA. Gabriel Rezende: I will ask the question in English so Pieter can understand. So just following up on the answer you gave regarding heavy vehicles here in Brazil, if you could comment how you're perceiving the inventory levels for your customers in Brazil, it could be great. Just to get a sense because we have seen a steep deterioration on production levels in the fourth quarter along the latest months into 2025. So just trying to understand whether there's a catch-up in production to happen in the beginning of 2026 here in the Brazilian market. And also, if you could comment -- provide further details on what we could expect for market share gains throughout 2026. As I understand because you gained market share along 2025, you start 2026 with an already high market share. Just trying to understand whether we should see only a carryover effect or if there's additional projects for you to get additional room for you to get in your customers at this point? Pieter Klinkers: For Brazil, we do not foresee any special effect of too high inventories or too low inventories. And so what we see happening is the market coming back to a certain extent in the beginning of this year. And so we do not see any special effect of having too low inventories and the catch-up of production or having too high inventories and still cooling down even though sales of trucks goes up. So it's in line with our assumptions. And those assumptions are better in the first half of 2026 than what we saw in the second half of 2025. When you talk about market share increase, of course, you talk more about Europe and Asia, where that story is happening, especially on the commercial vehicle side. And you're right, some of those market shares they cannot continue to increase. But I would say, some already happened beginning '25, some happened more towards the end of '25. And so my expectation is still to see a positive effect of that. How big that effect will really be depends a little bit on how the market develops and how quickly we can materialize all of our potential. But I agree with you. The story is not endless. But at the same time, I'm hopeful that we will still see some positive effect from that also in 2026 and not only in 2025. I hope that answers. Rodrigo Caraca: Our next question is from Luiza Mussi from Safra. Luiza Mussi Tanus e Bastos: I have 2 questions. First, could you please give some more details in regard to what happened to CapEx in this quarter? And considering your scenario you described, what could we expect in regard to leveraging of the company for 2026? These are my 2 questions. Renato Salum: Well, thank you for your question. Let me explain to you in regard to what happens to the effective taxing for '24 and '25. It is explained by some recurring points that benefit 2024 and they have not been repeated for '25. Some of the movements are in the fourth quarter '24, we had a positive impact of around BRL 30 million, and this is due to a plant in India. It took us 4 years for the ramp-up. And when we can prove that the plant is in a good situation and profitable, we have the trigger for this acknowledgment of the tax-related losses in the company. So we did have this positive impact, and we are not being impacted by the same in 2025. Another important point is what we call inflation account. Considering Turkey is a hyperinflation country, we have the updates of all those numbers with the inflation accounts, and this update happens with equity. When we have this equity update, we generate a credit in equity, and we generate a debt in the operational expenses because it is included as an expense. With this, the PBT was reduced. And when you apply the nominal tax, you have less tax to pay. The inflation account was being applied in the previous years. And on December '25, the Turkish Parliament approved a measure in which the monetary correction is suspended for 2025. and it leaves 2026 as suspended. So this inflation account also has a negative impact of around BRL 40 million. So these are these 2 impacts that we suffer. Of course, we have other positive impacts that lead us to BRL 32 million, and this is the difference between quarters. Another important thing to highlight is timing. When we look at 2025 against '24, we do see an improvement of around BRL 40 million. So our effective tax is not the accounting tax, it's the actual tax that is paid. It was in around 27%. So this is the explanation of what we saw in the fourth quarter. And unfortunately, this inflation account impact affects our net profit, and this is what happened for '24 December. In regard to the leveraging, as Pieter mentioned, we wrap this year at 2.65-fold. Of course, there is a reduction of around BRL 100 million in our factoring operations. And at the end of the day, we would be close to the same leverage we had in Q3. Obviously, there is some deterioration of this leverage from 2.4x last year to 2.56x adjusted. But we also see cash generation that is strong in the company, even with the scenario that we've explained. We see BRL 328 million of cash generated with cash flow, we say indirectly and a series of investment that was in line with what we had appointed, which was around BRL 500 million. So we closed with BRL 508 million. Of course, there is a reduction in cash because there is some liquidity. But in general context, we do generate cash, BRL 328 million and obviously, worsening the working capital in BRL 100 million because we don't follow with factoring. But in view of this scenario, we have managed to control. Even with the impact, we had around BRL 50 million in expenditures with the restructuring, and it impacts EBITDA and leveraging. But we do not have significant deterioration with this scenario. And looking forward, as Pieter said, we are in line with what the agencies have been forecasting in regard to vehicle light or heavy vehicles production. And we are very close to the situation that we are envisioning today. Rodrigo Caraca: Next question is from Joao Andrade from Bank of America. Joao Andrade: My question is in regard to the antitrust investigation occurring in Germany. If you could share a little bit, if you have any estimates so that this investigation is concluded. The fact that you are collaborating with authorities is good, but I would like to hear from you in this regard. Pieter Klinkers: Yes. Joao, thank you for the question. Of course, we cannot speculate about this matter. As you say, we are fully cooperating with the authorities, and there was a next step through this formal notification. And together with the authorities, we are studying what that means, and we're looking how we can best manage the next steps in this procedure. But at this moment, it's really unclear what it means -- if it means something from a financial point of view. And so we're not in a position at this stage of the investigation to give any further comments regarding amounts of money that could be involved or would be involved if they are involved. Rodrigo Caraca: Our next question is from Keefer Kennedy from Citibank. Keefer, can you hear us. With no further questions, we are now closing the Q&A session. I would now like to give the floor to Pieter Klinkers for his final statements. Pieter Klinkers: Thank you very much for your participation. I can inform you that the rain has stopped in Sao Paulo. I hope you -- the rest of your morning, whatever time zone you're in, will be okay. We will work hard this year to deliver the results that we've put ourselves. And during this year, it's still a long year in February. There will be positives, there will be negatives, but I think we're well positioned to hopefully capitalize on a market that especially from a truck point of view is looking to be in better shape in 2026 than it was in 2025. And so I'm looking forward to come back to all of you with our first quarter earnings call in a few months from now. Thank you for listening to us. Bye-bye. Rodrigo Caraca: Good morning, everyone. Welcome to the video conference regarding Iochpe-Maxion's Fourth Quarter 2025 Results. I'm Rodrigo Caraca, Senior Investor Relations Manager at the company, and I will be leading this video conference. Today, we are going to have Mr. Pieter Klinkers, CEO; and Mr. Renato Salum available for the question-and-answer session. Please be advised that this video conference is being recorded and will be made available at the company Investor Relations website along with the presentation. We'll be having Mr. Pieter Klinkers presenting in English. For your convenience, simultaneous interpreting into Portuguese and English will be available. [Operator Instructions] Before proceeding, we would like to clarify that any statements made during this video conference regarding the company's business prospects, projections and operational and financial targets constitute the beliefs and assumptions of Iochpe-Maxion's management as well as information currently available by the company. Future projections is not a guarantee of performance. It involves risks, uncertainties that may or may not occur. Now I would like to give the floor to Mr. Pieter Klinkers, CEO for Iochpe-Maxion. Please proceed. Pieter Klinkers: Bom dia, and good morning to everybody from rainy Sao Paulo, but I hope it's still a good morning for everybody. Let's jump into this presentation. And as usual, we start with having a look on the global markets. If we look at light vehicles, it's different than commercial vehicles that you see on the right side. Light vehicles kind of flattish in 2025 versus 2024, whether you look on including China or excluding China, it doesn't matter too much. We used to look at global production ex China because that's a more relevant market for us, but kind of flattish, and we expect the same to happen in 2026. That doesn't mean that everything is flat. I want to remark here that, for instance, 2 markets, Brazil and India, that are important markets for our company. Those markets show more meaningful growth, we believe, in 2026, and that would be good for our company. If we look on the out years there, there's a little bit more growth, like 2% or 1% to 2% per year, and that would bring the light vehicle market back to a volume of about 95 million to 100 million vehicles in the year 2030. If we look on the commercial vehicle side, it's more dynamic there. And unfortunately, in 2025, as everybody knows, it was negative dynamics primarily, but not only in initially North America, then also South America, but also the European market, especially at the end of the year was not great. And so overall, minus 7% in 2025 versus 2024. That's a meaningful downturn. 2026 looks better, and we take that. And I think it's more or less in all the regions that people foresee, and we concur with that view, markets should be better. Just the year 2026 you look at North America, and we will talk a little bit more about North America during this presentation. Like we did in the last presentation, that market is still down 4% to 5%, people say, but we take it because the market was down so much in the second half of 2025, 30%, 40%, especially in the heavy vehicle market. Some of you may remember, I talked about it in the last call, that is the most important market for us is the heavy vehicles, Class 7, Class 8 that we supply from our structural components unit that was hit the most. And if that market comes back to only being minus 5% compared to 2025, taking into consideration that the first half of '25 is pretty good. That means you need to have a good increase during the year 2026 to get back to more or less the volumes that we had as a whole year 2025. So North America, we take that number. And what we see so far this year, it is confirming that. We don't have an outlook for the second half of the year yet, but the first 3 months of the year are in line with the assumptions that we took for the North American market. We believe Brazil will be better, especially in the first half of 2026. And we also believe Europe will be better. That's what we see happening as well. And Asia for us, most importantly there, India should show solid growth as well. So more optimism from a point of view of the truck market for 2026. And then if you look at '27, '28, a little bit more out, that's pretty significant growth. That's good growth. And so even if that materializes to a good extent, not completely, maybe even more. But if these numbers are more or less true, then our company is very well positioned to benefit from those market trends, because we all know that even in the year 2025, and we'll see that later on, even in the year 2025, there where it was possible, like in Europe or like in Asia, we outperformed the market. And so if the market comes back and we keep our performance, which definitely is the aim, and I think it's going to happen, then we should be very well positioned for those numbers -- to capitalize on those numbers. All right. Enough on the market. Let's look at the numbers on the next slide. Our net revenue in 2025, really a mixed number because the first half was pretty strong and then the second half, initially only because of North America truck and then, let's say, during the third quarter, especially the fourth quarter, the Brazil truck production went down, and that hits us not only in our components division in Brazil, but also in wheels. And so that trended our numbers down in the second half of the year. But overall, in the year 2025, we still came up with BRL 15.3 billion turnover, which is slightly up versus 2024. Our gross profit in the fourth quarter of 2025, despite all the drama in North America and also in Brazil from a commercial vehicle point of view, still at 11.7%, which took us to 12% gross profit margin for the whole year, which we believe is a pretty solid number given the circumstances. Our recurring EBITDA, pretty much the same as on the -- same story as on the gross profit, 9.6% in the fourth quarter and still a double-digit margin in 2025. Again, despite that situation in commercial vehicles in the Americas, which is a very important market for our company, we were able to realize double-digit margin over the year 2025. Leverage, 2.65x in the fourth quarter of 2025. That compares to 2.55x in the third quarter of 2025. But we need to keep in mind here that we lowered our forfaiting of factoring by about BRL 100 million. And so if you neutralize that effect, our leverage would actually be pretty much the same in the fourth quarter 2025 than what it was when we talked to you guys about the third quarter 2025. Okay. Now if we look on the revenue by product, it's obvious that our components unit is hit in North America and South America because of commercial vehicles. Our wheels unit is hit in Brazil -- was hit in Brazil because of that. Not in North America, because from a wheels point of view, we supply also truck wheels to the North American market from Mexico, but we supply the medium truck segment, and that was a very different picture, also slowing down, but much less than what we saw in the heavy truck segment. And therefore, instead of having a split of roughly 75% wheels and 25% components in 2025, that number looks more like 80% wheels and 20% components. If we go to the revenue by customer, it's pretty much the same effect that you see there. Just 2 examples there, you see Traton and Daimler which are big customers for our company for components in North America. Their revenue as a percentage of our total revenue goes down meaningfully, but it's being made up by other customers like Toyota, like Stellantis, like Ford, and those are typical wheel customers, of course, light vehicle customers that we serve through our wheels unit. And we were able to not make up completely, but mitigate to a large extent, those impacts that we saw for components in North America in the second half of 2025. If we go to the next slide and we look a little bit more on the regions. Starting with South America. I think this number shows that we have been outperforming the market. Both light vehicle production and commercial vehicle production ultimately was down in 2025 in Brazil, but our revenue is up. Of course, it was more up in the first half when truck was still okay than it was in the second half. But overall, the revenue is up. And of course, that has to do with us outperforming on the light vehicle side, which is the wheel segment, where primarily we did very well from an aluminum wheel point of view that didn't make up everything in the second half. You see second half, fourth quarter was still down, but less than the market. And so again, a mitigating factor of the headwind that we had in the Brazilian market. So market not so good in the second half, but Maxion at least mitigating partially that market effect. If we look on North America on the next slide, this is the drama that we have been talking about that you can read about everywhere, and it has been hitting us hard in the second half of the year. If you want to hear good news about that market, I can tell you that the fourth quarter was not good, but it was a little bit better than the third quarter. So let's see if that's a trend that will continue into 2026. What we saw in the first 2 months is in line with the targets that we put ourselves. And those targets are mostly based on the data that we showed on the first slide that comes from global data from IHS. And so we don't have a visibility yet for the whole year, but at least the start of the year is in line with the assumptions that we took for this year. And so a big impact in North America, but the fourth quarter, at least being a little bit better ultimately than the third quarter. We go to EMEA, which is Europe, in our case, Europe, Turkey and our plant in South Africa, we clearly outperformed the market. I think you see light vehicles was slightly down over the year. Truck was more or less stable over the whole year in Europe, was down in the fourth quarter, was a little bit up in the beginning of the year, but more or less stable over the whole year. And so us being -- having 18% more revenue on truck is a pretty strong number and us having -- Maxion having 13% more revenue in 2025 than what we had in 2024 shows that we are performing solidly or strong, I would say, in this important market for the company. And that's largely based, not only, but largely based on our position that we have in the truck market there. And so that's not only good for the region. It also has been supporting our global results, which if we would have only been acting in North or South America, those would have been impacted more -- impacting more than what we now see in our overall consolidated results for the company. We go to Asia. I've been saying in the last few presentations that my expectation would be for Asia to start playing a bigger role in our overall revenue and margin situation. And we see that happening. It starts happening in the fourth quarter of 2025 this time in [ pass car ], where the market is good, and I think Maxion is outperforming the market there. And our aim certainly will be to continue that trend and also to complete it with truck. My expectation for truck also both for India and for China next year is this year is positive. And so we saw the start of this region outperforming or supporting our results more significantly happening at the end of last year. And our wish is for that to continue not only in '26, but going forward. India, which is the most important location for us in Asia, I would say, it's a very good place to be nowadays. And we're well positioned there. And as we talked about in other presentations, we have a couple of plans in the drawer to do even a little bit more in India going forward. With that, go back on the next slide to some numbers. And so as we talked before, our margin, I think, both in the fourth quarter of 2025, our gross profit margin as well as for the total year 2025, very much in line with 2024, which I believe based on the sudden reduction that we saw in the North American truck market and then also in the Brazilian truck market, that's a pretty solid result, a result that we would have signed up for when we would have known what happened in the second half of the year in primarily North America. If we go to the next slide, it's pretty much the same story on our EBITDA margin, 9.6% recurring EBITDA margin in the fourth quarter of 2025 with that market situation in the Americas from a truck point of view is, we believe, a solid result. And then the 10.1% margin that we delivered over the whole year, double-digit margin with those sudden drops in the truck market in the Americas is also something that we believe is a good outcome for the company. We look on the next slide, the net income. It's a little bit more depressing story, both for the fourth quarter of the year as well as for the total year. And here, you see the reduced income in CV, of course, which you also see in EBITDA, especially when it's not recurring EBITDA, but you see the higher restructuring cost here as well. And also financial expenses, we were not assuming the SELIC to be at the level where it was during most of last year and where it is today. And so that has been hurting many companies, including our company. And also, we had higher taxes in this quarter, particularly in the quarter 4 of 2025 that hurt our net income. And actually, instead of being slightly positive, now it was a negative net income for the quarter. We go to the next slide, look at our investments. We said we have good discipline in place regarding investments. And I think we delivered on our targets, which was to have a meaningful reduction in 2025 versus what we invested in 2024. A little bit more in the fourth quarter, but that was a managed action. We were pushing out some CapEx from more in the beginning of the year to more towards the end of the year. But the final number for the year, the BRL 554 million that you see on this slide is a meaningful reduction versus what we showed -- what we invested in 2024. Go to next slide. You look at our leverage, I talked about it, went slightly up quarter-over-quarter. But then again, the BRL 100 million less factoring that is included in that number basically brings back the leverage to kind of the same level than what we had in -- sorry, in the third quarter of 2025. We go to the next slide. Look at the gross debt, there's not a lot of change here. I think there's still very manageable amounts of debt for 2026 and '27. And then, of course, we have a little bit more work to do to prepare ourselves for refinancing our bonds in 2028, which we will do. And at the same time, we have a lot of cash liquidity available, BRL 1.6 billion in cash and then on top of that BRL 760 million of undrawn credit lines. So I would say a healthy situation from a debt point of view on this slide, like we explained in prior presentations. We go to the next slide. Usually here, what you see, if you remember, we show a few new business wins regarding wheels. We decided to do different this time. This is a picture of -- the guy in the middle is Giorgio Mariani, and he was in China a couple of weeks ago, picking up an award from Cherry for the good work that we do together with Cherry. And we don't talk a lot about all the new business wins that we have with our customers, primarily because we're not allowed to, unfortunately. But I can tell you here that we are growing rapidly with the Chinese OEMs outside of China primarily. And so just to give you a glance, we now have in place purchase orders or we are already supplying not less than 16 Chinese brands all over the world. This is happening in all the regions that we talked about before Asia, Europe, North America, South America. And so some of you may remember that we talked about believing we're well positioned to have higher market shares with the Chinese OEMs when they go outside of China than what we have currently as market shares for our products in the regions where we operate. And that seems to be materializing. And so we're very happy about that. We are very proud to be able to work with the Chinese OEMs that will continue to grow in Brazil, in Europe, in the Americas, we believe, of course, also in Asia. And we like to work together. They recognize our product portfolio, our innovative products, they jump on it, and they also recognize our global footprint when we work with them in China or when we work with them in Asia or we work with them in Europe. Of course, it's a much smaller step to also work together, for instance, in the Americas. And so a good story here for our company that we were hoping for, and that seems to be materializing. We go to the next slide. Last slide, the business summary. I think the year 2025, of course, it was highlighted, if you want to call it a highlight by all the dynamics that were going on with markets -- truck markets under pressure first in North America, then in South America. But we did a good job, I think, as a company in optimizing our structures. We did a good job in not spending more CapEx than we committed to and lowering our CapEx versus 2024. And we did a good job in adapting pretty quickly. We would have not done that. We would certainly not have been able to do a double-digit margin in this kind of market environment for us. So from a cost and from a flexibility point of view, I think the company did a good job. From a growth point of view, as we talked about in prior presentations, we're not planning to do another big investment, build a new plant on the very short term. But we are planning to grow. And so you can grow through increasing shares. We've been doing some of that in 2025. Of course, we will target to do the same in 2026 as well. We are commercializing innovative products, not only with the Chinese OEMs, but also with the Chinese OEMs they're jumping on it. We like it. We both like it, the customers and we -- and that's also creating some growth. And then we will execute some selective growth initiatives. We did it already in Mercosur with our acquisition of Polimetal in Argentina. We are doing some more in Turkey. We may be doing a little bit more in India. We have a series of good smaller projects in the drawer that we will take out of the drawer piece by piece. And so that will create some growth in a little bit different shape and form than just building a new plant left and right. And so in a nutshell, if people ask me, how is the company doing? I would say when I open the newspaper every morning, and I'm sure you do as well, then you see a lot of dynamics. You read a lot about geopolitics. And then when you read about automotive news, it's a tough world, right? There's a lot of write-offs. There's a lot of pressure on profits. I look at our company and say, maybe we didn't reach all the targets that we put ourselves, which was not possible because of some of the negative -- some of the headwinds that we had in important markets for us. But overall, our company is in a very stable position. And even more important, our company is well positioned to deliver on more solid markets in the truck environment and some growth in regions that is predicted by IHS by Global Data that are important for us like Brazil, like India or in Europe, the truck market coming back on top of market share gains. And so I read the news, I read the automotive news. I look at my own -- at our own company, and I think we're not so bad positioned. With that, I open it for questions and answers. Rodrigo Caraca: [Operator Instructions] First question is from Fernanda Urbano from XP. Fernanda Urbano: I have 2 questions. First, in regard to the United States. I know it's a little bit early to say, but I would like to know your projections for 2026, considering your scenario and considering the tariffs? You released that in the fourth quarter. You were seeing some signs of stability for the market, especially for the end of 2025. But I would like now if you can share what is going to happen for 2026. What do you expect as far as time line is concerned so that these tariff effects are going to actually affect the company's sales in the market? And my second question is in regard to Brazil. I would like to explore a little bit the demand for heavy vehicles in Brazil. We see some news today in regard to the beginning of the [ MOVER ] Brazil program and the release for possibilities within the program, posing for more production, especially starting in February. I would like to know from you if you know about this project for Brazil? And I would like to hear about the U.S. as well. Pieter Klinkers: Thank you very much. Very important questions. Let me start with the first one on the U.S. or let's call it North America. As I said, it's too early to give a prediction for the total year 2026. When we ask our customers, they give us more information, let's say, for the next coming months. They're not yet able to talk about the whole year 2026. But what I can tell you is that our assumptions are in line with IHS with Global Data that during the year 2026, there will be a ramp-up of volumes, which needs to be the case if you want to end the year 2026 slightly below 2025. You started 2025 very high. You ended it at a low. It means the curve needs to go -- needs to swing the other way. And I can -- what I can tell you is that at least in the first months of this year, that's what we see happening. Now a lot more needs to happen for that market to come back to the levels that we saw at the beginning of 2025, and I can't give you any better input right now already. But at least the start of the year is in line with our assumptions. From a tariff point of view, this is changing so much as we know that it's sometimes hard to keep track of what's happening and what are the impacts directly or indirectly on your company. But purely from a North American standpoint, I would say, right now, we believe there is little impact for our company because we were handling under the -- or commercializing our products under Section 232, where there is no change. And of course, there's tariffs under Section 232. But since we are supplying from Mexico, which is getting USMCA exemption, that was the case, and that is still the case. And so from that point of view, for our company right now, based on what we understand and based on where we are today, we believe that there is no meaningful impact from the latest changes regarding the tariffs. When we look on Brazil, we're positive on Brazil. Pass car, we believe, will be positive this year, and we're well positioned to profit from that. Our plants are doing well. Our aluminum plants, we moved some equipment from around the world to Brazil to have a little bit more capacity in Brazil. We acquired a majority stake in Polimetal that will help us to generate more capacity for Mercosur, not just for Argentina, but for Mercosur. And so from a pass car point of view, we're well positioned. And then truck, we do have the capacity, both for components and for wheels. And we believe that at least in the first half of the year, yes, the program you're talking about will be helpful. And so we're looking forward for those projections to materialize. I hope that answers your questions? Gives you a little bit more insight? Rodrigo Caraca: Our next question is from Gabriel Rezende, Itau BBA. Gabriel Rezende: I will ask the question in English so Pieter can understand. So just following up on the answer you gave regarding heavy vehicles here in Brazil, if you could comment how you're perceiving the inventory levels for your customers in Brazil, it could be great. Just to get a sense because we have seen a steep deterioration on production levels in the fourth quarter along the latest months into 2025. So just trying to understand whether there's a catch-up in production to happen in the beginning of 2026 here in the Brazilian market. And also, if you could comment -- provide further details on what we could expect for market share gains throughout 2026. As I understand because you gained market share along 2025, you start 2026 with an already high market share. Just trying to understand whether we should see only a carryover effect or if there's additional projects for you to get additional room for you to get in your customers at this point? Pieter Klinkers: For Brazil, we do not foresee any special effect of too high inventories or too low inventories. And so what we see happening is the market coming back to a certain extent in the beginning of this year. And so we do not see any special effect of having too low inventories and the catch-up of production or having too high inventories and still cooling down even though sales of trucks goes up. So it's in line with our assumptions. And those assumptions are better in the first half of 2026 than what we saw in the second half of 2025. When you talk about market share increase, of course, you talk more about Europe and Asia, where that story is happening, especially on the commercial vehicle side. And you're right, some of those market shares they cannot continue to increase. But I would say, some already happened beginning '25, some happened more towards the end of '25. And so my expectation is still to see a positive effect of that. How big that effect will really be depends a little bit on how the market develops and how quickly we can materialize all of our potential. But I agree with you. The story is not endless. But at the same time, I'm hopeful that we will still see some positive effect from that also in 2026 and not only in 2025. I hope that answers. Rodrigo Caraca: Our next question is from Luiza Mussi from Safra. Luiza Mussi Tanus e Bastos: I have 2 questions. First, could you please give some more details in regard to what happened to CapEx in this quarter? And considering your scenario you described, what could we expect in regard to leveraging of the company for 2026? These are my 2 questions. Renato Salum: Well, thank you for your question. Let me explain to you in regard to what happens to the effective taxing for '24 and '25. It is explained by some recurring points that benefit 2024 and they have not been repeated for '25. Some of the movements are in the fourth quarter '24, we had a positive impact of around BRL 30 million, and this is due to a plant in India. It took us 4 years for the ramp-up. And when we can prove that the plant is in a good situation and profitable, we have the trigger for this acknowledgment of the tax-related losses in the company. So we did have this positive impact, and we are not being impacted by the same in 2025. Another important point is what we call inflation account. Considering Turkey is a hyperinflation country, we have the updates of all those numbers with the inflation accounts, and this update happens with equity. When we have this equity update, we generate a credit in equity, and we generate a debt in the operational expenses because it is included as an expense. With this, the PBT was reduced. And when you apply the nominal tax, you have less tax to pay. The inflation account was being applied in the previous years. And on December '25, the Turkish Parliament approved a measure in which the monetary correction is suspended for 2025. and it leaves 2026 as suspended. So this inflation account also has a negative impact of around BRL 40 million. So these are these 2 impacts that we suffer. Of course, we have other positive impacts that lead us to BRL 32 million, and this is the difference between quarters. Another important thing to highlight is timing. When we look at 2025 against '24, we do see an improvement of around BRL 40 million. So our effective tax is not the accounting tax, it's the actual tax that is paid. It was in around 27%. So this is the explanation of what we saw in the fourth quarter. And unfortunately, this inflation account impact affects our net profit, and this is what happened for '24 December. In regard to the leveraging, as Pieter mentioned, we wrap this year at 2.65-fold. Of course, there is a reduction of around BRL 100 million in our factoring operations. And at the end of the day, we would be close to the same leverage we had in Q3. Obviously, there is some deterioration of this leverage from 2.4x last year to 2.56x adjusted. But we also see cash generation that is strong in the company, even with the scenario that we've explained. We see BRL 328 million of cash generated with cash flow, we say indirectly and a series of investment that was in line with what we had appointed, which was around BRL 500 million. So we closed with BRL 508 million. Of course, there is a reduction in cash because there is some liquidity. But in general context, we do generate cash, BRL 328 million and obviously, worsening the working capital in BRL 100 million because we don't follow with factoring. But in view of this scenario, we have managed to control. Even with the impact, we had around BRL 50 million in expenditures with the restructuring, and it impacts EBITDA and leveraging. But we do not have significant deterioration with this scenario. And looking forward, as Pieter said, we are in line with what the agencies have been forecasting in regard to vehicle light or heavy vehicles production. And we are very close to the situation that we are envisioning today. Rodrigo Caraca: Next question is from Joao Andrade from Bank of America. Joao Andrade: My question is in regard to the antitrust investigation occurring in Germany. If you could share a little bit, if you have any estimates so that this investigation is concluded. The fact that you are collaborating with authorities is good, but I would like to hear from you in this regard. Pieter Klinkers: Yes. Joao, thank you for the question. Of course, we cannot speculate about this matter. As you say, we are fully cooperating with the authorities, and there was a next step through this formal notification. And together with the authorities, we are studying what that means, and we're looking how we can best manage the next steps in this procedure. But at this moment, it's really unclear what it means -- if it means something from a financial point of view. And so we're not in a position at this stage of the investigation to give any further comments regarding amounts of money that could be involved or would be involved if they are involved. Rodrigo Caraca: Our next question is from Keefer Kennedy from Citibank. Keefer, can you hear us. With no further questions, we are now closing the Q&A session. I would now like to give the floor to Pieter Klinkers for his final statements. Pieter Klinkers: Thank you very much for your participation. I can inform you that the rain has stopped in Sao Paulo. I hope you -- the rest of your morning, whatever time zone you're in, will be okay. We will work hard this year to deliver the results that we've put ourselves. And during this year, it's still a long year in February. There will be positives, there will be negatives, but I think we're well positioned to hopefully capitalize on a market that especially from a truck point of view is looking to be in better shape in 2026 than it was in 2025. And so I'm looking forward to come back to all of you with our first quarter earnings call in a few months from now. Thank you for listening to us. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call]
Operator: Good day, and welcome to Vallourec's 2025 Full Year Results Presentation hosted by Philippe Guillemot, Chairman of the Board and Chief Executive Officer; and Nathalie Delbreuve, Chief Financial Officer. [Operator Instructions] And now I would like to hand the call over to Daniel Thomson, Director of Investor Relations. Please go ahead, sir. Daniel Thomson: Thank you. Good morning, ladies and gentlemen, and thank you for joining us for Vallourec's Fourth Quarter 2025 Results Presentation. I'm Daniel Thomson, Director of Investor Relations at Vallourec. I'm joined today by Vallourec's Chairman and Chief Executive Officer, Philippe Guillemot and Vallourec's Chief Financial Officer, Nathalie Delbreuve. Before we begin our presentation, I would like to note that this conference call will be recorded. A replay will be available following the call. You can find the audio webcast on our Investor Relations website. The presentation slides referred to during this call are also available for download here. Today's call will contain forward-looking statements. Future results may differ materially from statements or projections made on today's call. The forward-looking statements and risk factors that could affect those statements are referenced on Slide 2 of today's presentation. They are also included in our Universal Registration Document filed with the French Financial Markets regulator, the AMF. This presentation will be followed by a Q&A session. I'll now turn the call over to Philippe Guillemot. Philippe Guillemot: Thank you, Dan. Welcome, ladies and gentlemen, and thank you for joining us to discuss Vallourec's fourth quarter and full year 2025 results. You can see today's agenda on Slide 3. I will move directly to Slide 5, where I will start by discussing the highlights of 2025. 2025 was another transformative year for Vallourec. We progressed several major strategic initiatives and achieved key financial milestones. We continue to drive operational excellence through the organization, including the execution of our cost reduction program in Brazil completed in Q2 ahead of schedule. We significantly narrowed the profitability gap with our primary peers, demonstrating the effectiveness of our strategy and execution. We stayed true to our value-over-volume operating model, securing a new and enhanced long-term agreement with Petrobras, winning major high-value tenders across the Middle East and driving market share and margin growth in the U.S. through our domestic footprint. We continue to streamline our sources and uses of capital, executing the sale of our non-core Serimax welding operations and redeeming 10% of our long-term notes. Importantly, we also positioned the company for profitable growth. We successfully acquired and integrated Thermotite do Brasil, adding to our line pipe coating capabilities. These are increasingly serving as a key differentiator in deepwater projects. In the U.S., we broke ground on a USD 48 million premium threading line investment in Youngstown to increase capacity to thread VAM high-torque connections, which are increasingly used in onshore wells with long laterals. We made further progress on the Phase 2 extension of the mine ahead of expected completion in 2027. As Nathalie will discuss, we built on our growing track record of consistent cash generation with over EUR 400 million of total cash generated in 2025 for the third straight year. These improvements in our profitability and financial resilience were recognized with investment-grade credit ratings across all 3 rating agencies, setting the stage for further optimization of our balance sheet on more favorable terms. Finally, in May, we paid a substantial dividend to shareholders for the first time in a decade, executed a minor buyback and work to enable our much more significant 2026 share buyback. Let's turn to Slide 6 to discuss our results and outlook. In the fourth quarter, we delivered solid results once again with group EBITDA of EUR 214 million, above the midpoint of our guidance. This came with a robust 21% margin. We delivered excellent total cash generation of EUR 177 million, thanks to robust collection and inventory management. In the first quarter, we expect tubes EBITDA per tonne to remain stable sequentially, while volumes will be below the Q4 2025 level due to slower international bookings in H2 2025. In Mine & Forest, production sold is expected to be around 1.4 million tonnes. As a result, we expect Q1 EBITDA to range between EUR 165 million and EUR 195 million. In the U.S., our assets remain highly utilized and recent booking activity remains strong. Industry pricing has softened slightly, but we are encouraged by the downward trend in imports and the resilience of our customers' activity. In international markets, commercial activity remains somehow subdued in H2 2025. But in the Middle East, we are now seeing clear signs of acceleration, especially in markets with higher level of unconventional activity. We see potential for activity to increase in the second semester and beyond as the oil market rebalances, gas-related activity increases and our customers face accelerating decline rates. Turning to capital allocation. We are making good progress with our EUR 200 million buyback announced in January with EUR 150 million remaining under the current program. We have purchased 3 million shares year-to-date. Now let me provide you with an update on 2026 shareholder return on Slide 7. Today, I am pleased to announce Vallourec's expectation to propose in addition to the EUR 200 million share buyback, an interim dividend of approximately EUR 450 million to be distributed in the third quarter this year. This would take the total return to shareholders to approximately EUR 650 million between January and August 2026, representing a year-on-year increase of around EUR 280 million. This distribution represents approximately 90% of our 2025 total cash generation and 100% of the proceeds of the warrants, which are expected to be exercised before the end of June. We have adopted a balanced distribution framework, limiting warrant dilution through buybacks, growing our dividend and maintaining a defensive balance sheet. Based on our current share price, this distribution represents a potential interim dividend of EUR 1.75 per share including the anticipated dilution from the exercise of warrants. This is a healthy increase of EUR 0.25 compared to last year's EUR 1.5 per share. Turning to Slide 8. We show the usual comparison versus our primary public peer. The trend is clearly positive over the past year, and we remain focused on eliminating the gap entirely. We continue to outperform in terms of return on capital, which is a key focus of our medium-term road map. And on that note, let's turn to Slide 10 for an update on our strategic priorities. We have made substantial efforts to streamline our core asset base over the past several years, but there is still work to be done. Our key strategic priorities in 2026 are directed at unlocking this potential. First, we will continue to drive operational excellence throughout the group. This is not a passive process. We are actively implementing a new management system, which is firmly results-driven and embedded in daily operations across all business functions. Bertrand Frischmann, our Chief Operations Officer, is responsible for its implementation. We look forward on sharing more about this program with you in the coming months. Secondly, we will continue to optimize our asset base to drive improved return on capital. And third, we are actively investing to position ourselves for profitable growth. Let me talk about a few examples on the later 2 initiatives now. Let's turn to Slide 11. Here, you can see the targeted set of high-return projects we have executed since the launch of the new Vallourec plan in 2022. You will recall we began with a major downsizing of our rolling capacity in Germany and rightsizing in China and ultimately Brazil. We made the strategic decision to close loss-making capacity and exit low-margin business. More recently, our focus has turned to the upstream and downstream elements of our value chain and is more about enabling profitable growth than shrinking our assets. In our upstream process, we have invested to expand capacity for high-quality iron ore production at our mine in Brazil. Production from the Phase 1 extension started at the end of 2024. We are now working on Phase 2 with completion still scheduled for sometime in 2027. We are now undertaking projects to reconfigure our steelmaking assets in Brazil to reduce complexity and maximize operational flexibility, including the ability to run our steelmaking operations without the use of our blast furnace. In our downstream operations, we are investing heavily in our flaring and coating capabilities where technology barriers and returns on capital are higher. We are adding to our threading line capability in the U.S., adding both large diameter and high torque capabilities. Meanwhile, we see significant opportunities in advanced coating solutions and we'll be investing in both line pipe and OCTG coating line this year. All of these projects will be executed within our expected CapEx envelope of EUR 150 million to EUR 200 million on top of significantly increased spending on safety initiatives as laid out in our capital allocation framework. Let's turn to Slide 12. to discuss one way in which we are positioning for profitable growth. At our Capital Market Day in 2023, we highlighted our favorable positioning in the conventional geothermal market and the upside that could materialize in more advanced technologies. We are now seeing clear signs that these next-generation technologies are moving towards widespread adoption. The momentum is driven by rising demand for low carbon baseload and dispatchable power with AI hyperscalers investing heavily to secure supply. The IEA has recently highlighted a fivefold surge in next-generation geothermal financing over the past 3 years to $2.2 billion in 2025. The increase in financing has been underpinned by rapid technological progress, much of which relates to learnings from the shale industry. With drilling and well costs representing up to 80% of total cost, significant improvements in drilling speeds are dramatically improving geothermal project economics. You can see the high potential of this market in the chart on the right, which comes on top of expected growth in conventional geothermal. We are already experiencing a significant increase in our geothermal bookings as our customers begin to execute on development pipelines that are orders of magnitude above today's installed capacity. We are uniquely positioned to benefit from this growth, thanks to our domestic footprint in the 2 largest markets for geothermal today, the U.S and Indonesia. Our cutting-edge research and development expertise has allowed us to continuously improve our product offering to meet the high demand of geothermal wells placed on tubular products. And we can pair these products with our world-class service offering. Let's look more closely at the next-generation geothermal opportunity. I am on Slide 13. You can see the elements that differentiate traditional geothermal from next-generation applications. On the left, you have conventional geothermal, which has seen steady growth over time but is restricted by the requirements for hot water reservoirs and sufficient subsurface permeability. In the middle, enhanced geothermal mitigates the permeability constraint by using Shell like technology to add subsurface fractures into deeper conventional geothermal systems. In closed loops or advanced geothermal, the only requirement is hot rock with no need for an external water source or permeable rock. Naturally, this opens up the resource potential exponentially. Turning to Slide 14. You can see the typical characteristics for each geothermal development type. Much like the oil and gas industry use rapidly advancing technology to tap into unconventional and ultra-deepwater fields in the early 2000s, the geothermal industry is pushing technological boundaries that open new markets. Vallourec is ideally positioned from its expertise in shale development to serve enhanced geothermal market. Similarly, our unique vacuum insulated tubing solution is ideal for closed-loop system. This is not a fantastic. We are already serving customers across all of these product categories. Clearly, though the growth potential in next-generation solution, coupled with Vallourec's higher revenue opportunity per megawatt makes the growth in advanced and enhanced applications quite compelling. As you may have seen, in January, we announced an exclusive partnership with XGS Energy to support their delivery of a 3 gigawatt pipeline of commercial advanced geothermal projects across the Western U.S. We hope this will be the first of many such fruitful relationships in this industry. Now let's turn to our usual discussion on the OCTG market. I am on Slide 16, where we focus on the U.S. market. On the demand front, the horizontal oil rig count has been stable since mid-2025. Gas-directed drilling activity has increased through 2025 and into 2026. A wave of LNG project start-ups and growing domestic gas demand is supporting market expectations. Rigs drilling for gas now account for 1/4 of the total count, up from 17% a year ago. Looking at the supply side, imports continued to decline for the fourth quarter following the administration's increase in Section 232 steel tariffs in June. Notably, we can see from the chart that the tariff has been more effective in curbing seamless imports compared to welded imports. On the right, seamless spot pricing has moderated slightly since the third quarter, though prices increased in both January and February alongside improving sentiment. Overall, we are encouraged by the improving supply side dynamics and the resilience of our customers' activity. Let's move to the international OCTG market on Slide 17. Demand remained stable in international markets, but was somewhat subdued in 2025 compared to the beginning of 2024. We saw slower tender activity in the second half of 2025 that will cause us to start 2026 at a slower shipment cadence. In most of our core regions in the Middle East, Africa and Latin America, we have continued to perform well, in part due to our strong positions in high-value markets like unconventional gas and deepwater. Looking ahead, in the Middle East, we are seeing some signs of an activity acceleration, especially in markets with higher levels of unconventional activity for which we are supporting customers today with our high top premium connections. Our premium portfolio often allows us to outperform the price indicators we show on the right side of this slide. That said, the latest outlook from Rystad does show an improvement in market pricing in January. I confirm that our average booking prices for international markets have remained at healthy levels due to our ongoing focus on value over volume. I will now hand the call over to Nathalie to comment on our financial results. Nathalie Delbreuve: Thank you, Philippe, and good morning, everyone. So let me now lead you through our key figures and results for Q4 and the full year 2025. So let's turn to Slide 19 to discuss our full year results and the key figures. As you can see, tube volumes were 1,244 kilotons for the full year 2025, so down slightly year-over-year with lower tubes volumes in South America and Eastern Hemisphere, not fully offset by stronger volumes in the U.S. The full year EBITDA was EUR 819 million versus EUR 832 million for the full year 2024. This slight decline includes a significant adverse foreign exchange impact of EUR 47 million. Tubes volume decline was more than offset by positive price/mix effect in tubes, stronger contribution from mine and forest and continued cost reduction initiatives, maintaining a strong 21% margin. Net income was EUR 355 million versus EUR 452 million in 2024. Let's remember that 2024 was impacted by positive one-offs with the sale of the Rath site in Germany, generating a gain of sale of EUR 139 million and with our refinancing last year. Overall, we continue to build on our track record of generating consistent net income. Net cash ended the year at EUR 39 million, slightly higher than end of 2024 and after EUR 370 million having been returned to shareholders. So moving to Slide 20, we can see that we continue to build on our track record in Q4. It has now been 13 quarters that the EBITDA margin has been around 20%, showing the strong resilience of the group, its ability to adjust costs and maintain a strong margin. Since 2022, we have been reducing our working capital requirements in number of days, as you can see on the top right. In Q4 2025, we further improved our working capital requirement with robust collections and inventory management. You can see on the bottom left that we have a track record of healthy positive total cash generation with EUR 177 million total cash generated in Q4 2025, which leads to positive cash at the end of the year, as you can see on the right. Let's turn now to Slide 21 to start discussing our Q4 results and key figures. So revenues were EUR 1.043 billion, down 2% year-over-year, but again, impacted by negative currency effect of minus 6%. So revenues at constant foreign exchange rates are up 4%. Reduction in volumes sold were more than offset by improvement in price/mix and minor positive effect in Mine and Forest. EBITDA was EUR 214 million or 20.5% of revenues, stable compared to Q4 2024. Foreign exchange impact quarter-over-quarter is negative by EUR 10 million. So like for the full year, the positive price/mix effect in tubes across all regions as well as lower costs and cost savings did offset the impact of lower volumes, which I will comment in the next slide. Adjusted free cash flow in Q4 2025 was EUR 204 million to be compared to EUR 178 million in Q4 '24, which I will comment in more details later. And this led, as we saw to a net cash position, it's EUR 39 million achieved at the year-end. We will now look at Tube performance in Q4 on Slide 22 and also 23. So looking at volumes, Page 22, you can see that volumes were stronger quarter-over-quarter as we guided. They were lower year-over-year, mainly due to our U.S. import business in the Gulf of America as expected and certain regions in Eastern Hemisphere. Average selling price was higher year-over-year as mix shifted more to international in Q4. Overall, Q4 Tubes revenue was 2% higher year-over-year and even 8% higher at constant foreign exchange. Revenue mix by geography that you see in the bottom left shows a reduction in North America contribution due to the decrease in imports versus Q4 2024, but also to a strong contribution from Middle East. Slide 23, we can see the Tubes profitability. So Tubes EBITDA was EUR 183 million and 18% of revenue. So as you can see, our margin is very stable and resilient. Tubes EBITDA per tonne at EUR 548 increased by EUR 37 per tonne year-over-year and even EUR 65 if you consider constant foreign exchange rate, confirming again, the positive impact of our value over volume strategy. The decrease versus Q3 2024 EBITDA per tonne is due to a less favorable mix this quarter and a lower proportion of services. So let's move now and look at the Mine and Forest performance on Slide 24. The production sold in Q4 '25 was close to 1.5 million tonnes, outperforming our expectations voiced during our Q3 call, leading to full year volume of 6.2 million tonnes. Mine and Forest EBITDA, as you can see on the right bottom, reached EUR 38 million and 48% of total revenue, increasing sequentially by 10%. This reflects higher iron ore market prices, partially offset by seasonally lower volumes. For the full year, EBITDA reached EUR 171 million, up significantly year-over-year, reflecting higher quality in ore after the start-up of the Phase 1 extension in late 2024. So let's look now on Slide 25 at our net income key drivers and evolution. We continue to deliver a solid bottom line, as you can see on the right. In Q4, net income was EUR 96 million, that is 9% of total revenue, net income group share. You can see that Q4 2024 net result was higher at EUR 163 million. Again, as already explained, in 2024, the group net results had benefited from the one-off book gain on sale of the Rath site in Germany for EUR 139 million. Looking on the left at Q4, you can see that -- and the bridge from EBITDA to net income group share, you can see that depreciation and amortization amount to minus EUR 52 million, very much in line with previous quarters and Q4. Financial result is minus EUR 16 million. In the other pillar of the bridge includes restructuring and some one-off impacts such as in the quarter, a positive reversal of impairment of assets in China for plus EUR 38 million, reflecting the good operational performance and evolution of China. Income tax is minus EUR 35 million. Effective tax rate was 26% in Q4 2025. Let's look now at cash flow analysis on Slide 26. We can see how we convert EBITDA into cash flow for the quarter and for the full year. We had excellent total cash generation in Q4 of EUR 177 million, resulting in over 80% conversion of EBITDA to cash, thanks to robust collection and inventory management, driving the change in working capital that you see on the left. CapEx was minus EUR 55 million, a bit elevated versus prior quarters as work continues on our growth projects. And as you can see on the right, we did remain within the EUR 150 million to EUR 200 million range as disclosed in our CMD in the full year 2025 with total CapEx for the year of EUR 176 million. So for the full year '25, we delivered over EUR 400 million of total cash generation for the third straight year with restructuring costs halving year-over-year and continued structural improvement in our working capital as we optimize our operations. And in the last slide, let's look at our debt and liquidity. So thanks to the excellent net cash generation I just commented, we turned net cash positive in Q4 with plus EUR 39 million on the balance sheet -- of cash on the balance sheet at the end of the year. As you can see on the right, we have significant liquidity above EUR 1.6 billion, of which nearly EUR 1 billion in cash. Philippe Guillemot: Thank you, Nathalie. Let's turn to Slide 29 to discuss our outlook. Starting with our tubes business. In the first quarter, we expect volumes to decrease sequentially. EBITDA per tonne should remain similar to the fourth quarter level. For the full year, we expect our North America tubes business to see sustained strength in volume, thanks to market share gains during 2025. We expect a slight near-term decrease in U.S. market prices with improving industry supply-demand conditions, setting the stage for potential improvement later in the year. In our international tubes business, we expect lower sales volume in H1 2026 due to slower booking in H2 2025. We see activity recovery in the key Middle Eastern markets, setting the stage for higher second half volumes. We expect market pricing to remain broadly stable versus the second half of 2025 with discrete customer contracts driving selective price upside. For Mine and Forest, we expect production sold to be around 1.4 million tonnes in the first quarter. We expect full year production of around 5.5 million tonnes, slightly lower year-over-year due to an improved production process focusing on value over volume. At the group level, we expect our first quarter EBITDA to range between EUR 165 million and EUR 195 million. Let's conclude on Slide 30. We are driving further improvement in return on capital through a relentless push towards operational excellence and asset streamlining. We are positioning for future profitable growth through targeted research and development and capital investments to solve the energy challenges of today and tomorrow. Finally, we are delivering on our commitments to shareholders, targeting a substantial EUR 650 million in shareholder returns in the first 8 months of 2026 while maintaining our crisis-proof balance sheet. Thank you again for your attention. Nathalie and I are now ready to take your questions. Operator: [Operator Instructions] We have a question from Paul Redman from BNP Paribas. Paul Redman: I just wanted to ask 2 questions. Firstly, was about the buyback and the distributions. And you've guided EUR 650 million of payout to shareholder in 2026. I just wanted to ask about the allocation and why you've allocated the -- well, additional cash to dividend rather than to buyback to kind of offset some of the dilution impact of the warrants in 2026? And then my second question was on working capital. You've had a big release this quarter. I want to go into a little bit more detail on what the drivers of that is. And also, how do we think about working capital into 2026? Philippe Guillemot: Okay. First, I will take your first question. As you know, we have launched a share buyback plan for EUR 200 million to be executed by end of June. But given the daily volume credit and obviously, how we can execute share buyback, I think we were a bit capped -- and that's why we only allocated EUR 200 million out of the EUR 650 million to share buyback. Remaining being, as you have seen, the sum of the proceeds of the share buyback -- of the warrants and what was not used for the share buyback from the total cash generation of '25. Second, on the return on capital employed and working cap, you clearly understood that since I joined, my main focus was on deleveraging the balance sheet of Vallourec, and we reached the zero net debt end of '24. And again, end of '25, we have a positive net cash of EUR 39 million but the levers we have used to achieve such performance was obviously to work on every aspect of our capital employed, starting with the working cap. And by the way, there is a nice slide in Nathalie's presentation, where you can see that our working cap in days of sales continue to decrease, and we still see further room for further improvement. And on our asset base, as I have mentioned in my presentation, we continue to question and challenge any asset we have in Vallourec, which is not absolutely needed to generate, obviously, the performance we are contemplating. Operator: We have a question from Matt Smith from BofA. Matthew Smith: I wanted to start on the mine, if I could. You talked to a new strategy, sort of value over volume there. I wonder if you could give us any update in terms of where you might put new guidance perhaps for annual EBITDA for that business versus what you've presented in the past? What is the net-net of that strategy? And I suppose a follow-up would be, does that have any implications for future mine expansion plans that you've talked to before, please? That would be the first one. And then the second one would be -- thank you for the updates as ever around the U.S. sort of OCTG market. I can see those seamless imports coming down. I think the one sort of topic that scratch my head out a bit is domestic supply in the U.S. There was actually a source of a lot of supply growth in 2025, which doesn't seem to get much airtime. And I just wondered if you could talk to the drivers of increased supply, domestic production in '25. And if you saw the picture any differently for '26, your insights there would be really appreciated. Philippe Guillemot: Okay. Thank you. So let's start with the mine. First, we are very consistent with what we said in September 2023 about what we expect from the mine. You remember, Phase 1, now fully executed around EUR 100 million EBITDA. Phase 2 completed EUR 125 million. So there is no deviation versus what we said in 2023. What has changed in the meantime is that we have applied our recipe for success, value over volume to the mine too. So today, we extract less [ ROM, ] but we are able to generate -- to produce more iron ore, more high-quality iron ore and obviously, the EBITDA we are looking for. So that's the logic behind this. So again, I insist no change versus what we said in September '23 about what we expect from the mine. As far as the U.S. -- OCTG U.S. market is concerned, several -- yes, first, imports have declined since the implementation of the 232 import tariff, which obviously led customers to buy more from domestic capacity. So in fact, First effect is a better use of existing domestic capacity, starting with ours. And as I said, we have nice volumes, and we are well loaded with our capacity today. On top, what we see is a better sentiment and as you have seen, Pipe Logic slightly going up in Jan, in Feb again, which obviously give us confidence that at some point, the balance between supply and demand will translate into upward pressure on prices. And this is likely to obviously happen in '26. On top, as we mentioned, we have invested in additional capacity to produce high-torque connection for unconventional drilling. That's a change in the market. And the market is becoming more premium. As you have seen, our customers are able to produce as much oil with less rigs, less wells, thanks to this technology. Obviously, there is a real appetite for this technology that we have developed and for which we have gained market share. And obviously, we intend to continue to gain market share. Operator: [Operator Instructions] We have a question from Kevin Roger from Kepler Cheuvreux. Kevin Roger: I have 2, if I may. The first one is maybe to understand a bit more the Q1 guidance because at the time of the Q3 earnings, we were mentioning some shift in volumes from Q4 '25 to H1 '26. So I was wondering if the lower volumes that you mentioned for Q1 means that those volume has been shifting to Q2 and maybe to understand a bit more the implication that we saw between the 2 quarters. And the second one, you talked about the geothermal activities during the presentation quite a lot. And recently, you signed a deal with XGS. When we make some math with the elements that you shared with us, this framework agreement could represent quite a lot of revenue, maybe something like EUR 1.5 billion. So I was wondering if you can share a bit with us how you do see this XGS partnership impacting the revenue for Vallourec in '26, '27 and '28, please? Philippe Guillemot: Yes. Going back to Q1 volume being lower than Q4, I remind you that our volume in Q4 were much higher than Q3. So obviously, this has to be put in perspective. When oil price started to go down, we have seen last year in H2 customers not canceling investment plans, but taking more time to decide on their investment and placing orders. And that's what's reflected in our bookings and will translate in H1 in our invoicing. But again, as I said, we see clear pickup since the beginning of the year as, by the way, oil price went up $10 since. So that's why I think the profile of this year volume-wise is likely to be similar to the one of '25. As far as geothermal is concerned, thank you for noticing, obviously, to bouncing back on what we said on geothermal. It's a new market which is opening. And again, 3 years ago, obviously, we had -- we decided to obviously invest time and money on research and development on new application for our know-how. And this geothermal and advanced technology was the right bet. And yes, today, and again thanks to the data centers, which are popping everywhere and the huge need for baseload electricity, this technology now have obviously a good prospect. And as I said, there is more project in the pipeline than the existing installed base, and we are positioned on it. We mentioned about XGS for which we provide unique technology with -- we are the only one able to provide the famous VIT technology, vacuum insulated tubes. And when you do the math, yes, I think your conclusion is the right one. I think these wells because geothermal is based on wells require technologies, premium technology we have. And obviously, this will come on top of our technologies to support our customers on unconventional, more gas-directed production. Kevin Roger: But sorry, if I may follow up, how would you, in a way, see the phasing? Would you consider that those opportunities will mostly materialize in '28 because those guys needs to get a lot of financing? Or you do see already a lot of stuff in '27, for example, or even sooner? Philippe Guillemot: Data centers need electricity now and in the next few years. So there is no time to wait and geothermal project can be executed as fast as they can drill. So it's already today. And obviously, it will ramp up nicely over the next years, but it's not something for the future. It's already something for projects which are currently in execution phase. Operator: [Operator Instructions] We have a question from Baptiste Lebacq from ODDO BHF. Baptiste Lebacq: Two questions from my side. First one is, if I look at your slide, Page 11, I see you still have, let's say, a quite tense investment program for 2026. Does it mean that in terms of CapEx, we should be in the upper range of your, let's say, CapEx guidance that you gave into 2025? And second question is on the geothermal market versus hydrogen market. It seems that you are more bullish right now on geothermal than, let's say, on hydrogen market. What is your view on the hydrogen market? Is it, let's say, the next wave after geothermal in terms of sequence for you? Philippe Guillemot: Yes. As far as CapEx is concerned, yes, we gave you on Page 11, a sense of what we have been doing since 2022. Many projects, obviously, are in execution phase in '26. But nevertheless, we will be within the envelope we shared with you between EUR 150 million to EUR 200 million. So no risk to go beyond what we said. So we stay obviously very disciplined on our capital allocation. The good news is that, obviously, the return on investment of all these projects is fairly consistent with our will to increase over time our return on capital employed. As far as hydrogen and geothermal is concerned, it's true that 3 years ago, nobody was talking about Gen AI. Nobody was talking about data centers, hyperscale. Today, that's a fact. There is a lot of investment. There is need for basal electricity and geothermal is one of the solution to provide these huge quantities of basal electricity. So it's clear that it's come now faster than hydrogen and green hydrogen. Nevertheless, on green hydrogen, we are in talks with many customers whose projects are in the FEED phase, so engineering phase, which sooner or later will reach the FID stage, investment decision stage. So that's something to come that will come on top. And as you remember, our Delphy storage solution is the only one available today to store between 1 and 100 tonnes of hydrogen. So more to come. And as you remember, we have decided to manage this business as a turnkey business. So obviously, it could be a nice addition to our revenue and profitability in the future, and it's fully part of our 5-year plan. Operator: Now we have a question from Julien Thomas from TPICAP. Julien Thomas: I have 2, please. The first one would be about maybe your take on your German partners' agreement regarding HKM JVs. Do you have something to share with us or something like that? And the second question about your improvement in EBITDA per tonne. Could you give us what come from downstream investment versus, let's say, historical restructuring of existing capacities? Philippe Guillemot: Well, first on HKM, yes, yes, the agreement between thyssenkrupp and Salzgitter opened the door for us as thyssenkrupp will do to sell our shares to Salzgitter and terminate our shareholding of HKM. Obviously, there will be -- we'll have to provision for all the work Salzgitter will have to do when they will be. But this is fully already covered by our balance sheet provision. So I think we are -- there is -- I think it's -- for us, it's a good news. I think thyssenkrupp and Salzgitter have reached this agreement and that now we can execute this transaction. As far as the EBITDA per tonne is concerned, EBITDA is a result of obviously, average selling price, which is driven by our value over volume strategy. You remember, when I joined Vallourec volume were 1.850 million tonnes. We are now slightly above 1.2 million tonnes. So drastic change with the past, but average selling price has significantly increased. And EBITDA per tonne is a consequence of cost. And we have worked a lot in the last few years, and we continue to do so to continue to lower our cost structure and ensure it's a very highly flexible industrial footprint. So whatever the volume, we protect our margin, thanks to our ability to flex cost whenever we need it to adapt to the sequence of bookings and the cycle of this industry. So that's why we are able to -- we have been able to close the gap with our primary peer on EBITDA per tonne. And you've seen the data on the slide showed earlier. And we will obviously continue to do so, and we have projects in order to continue to improve on that front. Operator: We have a question from Mike Pickup from Barclays Capital. Mick Pickup: It's Mike here from Barclays. Just a quick one. You talked about the international business improving in the second half. Is there anything significant that we should be keeping an eye on something like the big Kuwait orders? Or is it just a general pickup across the regions? Philippe Guillemot: Well, first, 2 things. One, when barrel of Brent is going up USD 10, it's clear that there is an incentive for our customers to go a bit faster on executing their plans. Second, what we see is that there are major unconventional oil field opening, which require many wells using our technologies, starting with iDRAC. So that's something which seems to pick up significantly since the beginning of the year. And we may -- yes, you -- we may communicate more widely in the future. Operator: We have a question from Paul Redman from BNP Paribas. Paul Redman: Am I able to ask one more? Philippe Guillemot: Yes. Paul Redman: I just want to touch on Venezuela quickly. One of your peers spoke in length about opportunity in Venezuela. I kind of wanted to ask about your position in the country and whether this is a market you think you'll be able to sell volumes into in the relatively near future. Philippe Guillemot: So we used to sell to Venezuela years ago. What has changed in the meantime is now thanks to all the investment we did in Brazil, we are able to make the pipe which are needed for Venezuela in Brazil. So obviously, much closer than it was in the past coming from Germany. The onshore oilfield in Brazil are sour. So you need sour service pipes, which we make and which are obviously very premium pipes. So from a product standpoint, I think we are uniquely positioned. And on top, as you know, given our strong presence in the U.S., we are the #2 player on onshore business in the U.S. We have close relationship with the U.S. customers. So today, we have a task force, which is a mix of our U.S. sales team and Brazilian production team in order to seize any opportunities that may come in Venezuela. So more to come, will depend, obviously, how fast our customers go forward with their project. Operator: We have a question from Jean-Luc Romain from CIC CIB. Jean-Luc Romain: My question also relates to geothermal. You mentioned rightfully that the product you will deliver is very specific with kind of pipe in pipe also. What's the limiting -- do you have a limiting factor which will be the capacity to produce those pipes in terms of your growth in sales? Or do you have a strong capacity to do this? Philippe Guillemot: We have available capacity. VIT is a process in itself because we need to weld pipe inside another pipe. So that's a specific industrial setup that we have and for which we have capacity available. So no, obviously, it's clear that if we double our volume, thanks to this new market, at some point, we will reach our capacity limit, but it's not yet the case. And anyway, it's good to know that whatever to be on more than one market and obviously, to mitigate any up and downs on any market, there is the one oil and gas. Jean-Luc Romain: Understood. And from what you said, the EBITDA associated to the growth in geothermal could rapidly become in the tens of millions? Or could it be maybe at a later stage in the hundreds of millions. Philippe Guillemot: In 2022, I said that we were expecting between -- maybe in 2023, that we were expecting between 10% and 15% of our group EBITDA coming from this new energy applications. So it's fully part of it. It's fully part of it. And obviously, we are very strict with our value over volume strategy, and I can guarantee you that it will not be dilutive to our EBITDA per tonne. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Philippe Guillemot: Thank you. Thank you all. I'm very pleased to be in the position we are today. Vallourec is a fully transformed company, evidenced clearly by our investment-grade balance sheet and the robust returns we are delivering to our shareholders again in 2026. Meanwhile, we continue to see opportunities as we drive operational excellence across our organization and position for profitable growth. We are well positioned to serve the energy challenges of today and tomorrow. Operator, you may end the call.
Operator: Thank you for standing by, and welcome to the Coles Group 1H '26 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Leah Weckert, Managing Director and Chief Executive Officer. Please go ahead. Leah Weckert: Good morning, and thank you for joining us for our half year results call this morning. Before I begin, I would like to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri people of the Kulin Nation. We acknowledge their strength and resilience and pay our respects to their elders, past and present. I'm joined in the room today by Charlie Elias, our CFO; Matt Swindells, our Chief Operations and Supply Chain Officer; Anna Croft, our Chief Commercial and Sustainability Officer; Michael Courtney, our Chief Customer Experience Officer; and Claire Lauber, our Chief Executive of Liquor. Moving now to Slide 3. I'm pleased that we've been able to deliver another very strong set of results in what is a competitive operating environment. We delivered strong supermarkets earnings growth with continued sales momentum. E-commerce was a key contributor again with sales growing by 27%. Our automation programs are delivering tangible benefits, and we delivered cost savings of $133 million through our Simplify and Save to Invest program. Of course, what matters most to us is our customers, which is why the improvement in our customer satisfaction scores across the business during the half was a key highlight for me. Finally, we completed our Liquorland banner simplification program. And while there are challenges in the overall liquor market, we are seeing positive growth across our convenience portfolio, which is really pleasing. Moving on to Slide 4 and the financial results. We reported group sales revenue of $23.6 billion, an increase of 2.5%. Excluding significant items, group EBIT increased by 10.2% and NPAT increased by 12.5%. In Supermarkets, adjusted for the competitive industrial action in the PCP and excluding tobacco, sales revenue increased by 6.1%. And Supermarkets EBIT increased by a very strong 14.6%, underpinned by top line growth and EBIT margin expansion of 55 basis points. Charlie will talk more to the financials in his presentation. Moving on to Slide 5. During the half, we maintained a consistent focus on executing against our strategic priorities, which once again underpinned our performance for the period. Let's get into this in some more detail, starting on Slide 6 with our first pillar, destination for food and drink. We know value remains front of mind for consumers and delivering on our value commitment to customers remains a priority for us. During the half, we strengthened our value proposition, expanding our range of everyday value products. We ran a winter and spring value campaign and our Shop Scan Win and European Glassware continuity programs each delivered strong engagement with our customers. Our exclusive to Coles portfolio continues to perform well with sales growth of 5.7%. We launched more than 500 new products, and the range was recognized with 17 Product of the Year awards. We know our own brand portfolio is a unique differentiator for Coles, and these new products and awards underscore the momentum we are building in quality and innovation across the portfolio. We also entered into some really exciting exclusive partnerships during the half. One of these was with Marks & Spencer, where we brought a number of their iconic favorites to Australian homes. This included their well-known Percy Pig and Colin the Caterpillar lollies, which turned out to be our most successful lolly launch ever. Our partnership with Grill'd also proved popular, particularly with the rising takeaway trend for those who want to recreate their restaurant or takeaway dinner in their own home. These collaborations broaden our appeal and help ensure we remain a destination for inspiration and everyday meals. We were also pleased with how we executed over the Christmas period, starting with our Christmas range, which showcased more than 340 own brand Christmas products and exclusive specialty drinks. We worked hard in the lead up to Christmas to ensure value was felt where customers needed it most. Our $1 seasonal produce lines in week before Christmas were a simple but powerful example of that commitment. Operationally, we delivered our highest monthly DIFOT results since December 2020, an important sign of the progress we are continuing to make in availability and overall execution. And this leads me to our customer satisfaction scores on Slide 7. As I said at the start, the improvements in customer satisfaction scores were a real highlight with strong improvement across our key metrics of quality, availability, store look and feel, and price. The big takeaway here is that customers are noticing the changes we are making. Improved availability, sharper value, and better execution in stores are translating directly into stronger satisfaction scores, and that gives us real confidence as we look ahead. There is always more to do, but we are very pleased with the progress we are making. Moving now on to Slide 8 and the next pillar of accelerated by digital. We reported another strong half in our e-commerce business with 27% revenue growth in supermarkets, penetration now over 13% and double-digit growth across all shopping missions, whether that be same-day, next-day, Click & Collect or our immediacy offering. We are focused on making sure we have a great offer across all online channels. We've made a lot of progress in e-commerce over the last few years, and customers are responding to this. We know customers have different shopping missions throughout the week, and the investments we have made allow us to provide them with exceptional service that matches their shopping mission. For example, our CFCs allow us to provide the biggest range, better availability and improved freshness for those customers who are looking to do their weekly shop. And our expanded partnership with Uber and our windowless Click & Collect Rapid offer provides us with a leading immediacy proposition. During the period, we made investments in our digital assets and are seeing particularly strong growth in our app metrics with monthly active visitors to the app growing by 32% and the app share of e-commerce revenue now at 54%. Our CFC volumes increased in the half with sales growth again outpacing total supermarkets e-commerce sales growth. Same-day deliveries commenced in Melbourne in the first quarter and Sydney in the second quarter. And we also had a major catchment extension to Geelong and the Surf Coast in Victoria. In terms of our immediacy offering, as I mentioned, we expanded our partnership with Uber Eats with now up to 17,000 products available to purchase through the Uber Eats app. And the windowless Click & Collect Rapid was also expanded to 255 stores nationally. Overall, our online NPS saw a meaningful uplift driven by improved availability, fulfillment and the overall digital customer experience. So, one of the most important points to make here is that we were able to make all of these investments, grow our business, expand catchments, and our immediacy offering while driving efficiencies through technology, scale, and a strong operational focus. We made further improvements to our picking processes in store, increased orders per van, and installed 2 key automation technology features in the CFC with on-grid robotic pick arms and auto frame loading. So, it's been a very pleasing half in terms of e-commerce. Moving now to Slide 9 and loyalty. Flybuys remains an important driver of customer engagement across Coles as well as a key element of our overall value proposition. During the half, Flybuys exceeded 10 million active members, growing by 6.2%. This highlights the continued relevance of personalized value for our customers. We were also pleased to see strong growth in our Coles Plus subscriptions with customers recognizing the additional benefits they receive by becoming part of Coles Plus family, including free delivery, free rapid Click & Collect, and double Flybuys points. Moving now to Slide 10 and our delivered consistently for the future pillar. Our SSI program remains a core part of our DNA. We know the importance of operational efficiency. Delivering consistent and sustainable cost savings through our SSI program enables us to help offset inflation and reinvest in the customer offer. And we see the benefits of that both in our top line as well as our bottom line. This half, we delivered cost savings of $133 million. This brings us to around $700 million since the beginning of FY '24, and we remain firmly on track to achieve more than $1 billion in benefits over the 4-year program. Consistent with previous years, there were many initiatives across different parts of the business that contributed. And again, a common theme with the use of AI and other technology automation to improve the effectiveness and efficiency of our processes. This leads me to Slide 11. We've been building and deploying AI for over a decade. What has changed recently is the pace of capability and the breadth of where we can apply it. For our customers, we are already scaling AI to drive more relevant offers and engagement through personalization across the shopping journey. AI is helping us deliver more personalized and relevant experiences with tailoring engines is improving relevance, conversion and overall customer satisfaction. In parallel, we're also now moving into the next wave, agentic commerce, conversational AI, and real-time personalization, capabilities that will transform how customers engage with us over time. We are proving the relevance, timing and effectiveness of offers and rewards for customers and helping them to find value whilst improving our promotional effectiveness. In our operations, AI is embedded across operational decision-making with a clear focus on outcomes to improve availability, reduce waste and lift productivity. We're using AI in forecasting, demand planning and ranging to improve accuracy and availability. And in stores and in our e-commerce business, AI is helping optimize rostering, improve workflows, pick efficiencies, and dynamic work. Across our supply chain, AI supports optimization in transport and improved workflows. We're also using AI in stores for computer vision for object recognition and loss technology. Now looking ahead, we're building an end-to-end optimization capability across the supply chain from automated DC pallet flows to transport to replenishment. So, decisions are all made as one system and not in silos. A digital twin also lets us simulate scenarios before we change operations. Then we can apply this to execute the best plan in the rural network. The result is improved availability, lower waste, lower cost to serve and faster response time to any disruptions. And we're also looking to optimize online fulfillment capacity across our stores, CFCs and DCs, helping us to decide where orders should flow, how much capacity to allocate and when to flex resources. And finally, for our team members, we're embedding AI tools that make work easier and more productive. Our knowledge assistant is helping teams quickly access policies and procedures, and we've rolled out AI productivity tools, including ChatGPT Enterprise and Microsoft Copilot, and we're partnering with OpenAI on team training. So, it's fair to say that AI is well and truly entrenched within our business, is delivering strong results and has been for some time. But the pace of change is accelerating, and we are really excited by the opportunities that are emerging, particularly in customer-facing agentic AI, and we will be talking about this more in the future as we start to scale. Moving to the next slide. Alongside our financial performance, we remain committed to the role we play in supporting our team members, suppliers, communities, and the environment. So before I hand over to Charlie, I would like to cover off some of our achievements in this area. I will start with our team members. Through our November team engagement poll survey, we maintained our highest ever team member engagement score, remaining in the top quartile. This is a strong reflection of the culture and leadership across the business. Almost 70,000 team members provided their feedback, and it was pleasing to see that delivering for our customers from one of our strongest areas with 90% of team members recognizing our commitment to meeting our customer needs. We also continue to support the well-being of our team members, including through initiatives such as R U OK? Day, where our stores and distribution centers came together to reinforce our care and courage values. We recently launched Round #14 of the Coles Nurture Fund, continuing our long-standing commitment to supporting innovation, sustainability and growth within the Australian supplier community. And we celebrated excellence across our supply base in the 2025 Supplier Partner Awards, recognizing achievements across each of our key trading categories. Our community partnerships remain a defining part of who we are. This half, we raised more than $1.6 million for November and more than $1.8 million for the second by Christmas appeal, helping to provide over 9 million meals for Australians experiencing food insecurity. And finally, we continue to make progress on our sustainability commitments. 87.7% of eligible packaging is now recyclable or reusable, and we maintained 100% renewable electricity usage across our operations, and we continue to divert more than 85% of solid waste from landfill. And with that, I'm now going to hand over to Charlie, who will take you through the financial results in some detail. Sharbel Elias: Great. Thank you, Leah, and good morning, everyone. I'm now on Slide 14, which details our group results. Excluding significant items, we reported group sales revenue of $23.6 billion, an increase of 2.5%. Group EBITDA of $2.2 billion, an increase of 7.8% and group EBIT of $1.2 billion, an increase of 10.2%. NPAT, excluding significant items, increased by 12.5%. Off the back of these results, the Board declared a fully franked interim dividend of $0.41 per share, an increase of 10.8% compared to the prior corresponding period. This is a consistent progression of shareholder returns over time. Moving on to the segment overview on Slide 15. Let's start with Supermarkets. Sales revenue increased by 3.6% with our value proposition continuing to resonate with customers. We adjust for competitive industrial action and excluding tobacco, sales revenue increased by 6.1% EBIT increased by 14.6%, reflecting the strong top line growth, coupled with EBIT margin expansion of 55 basis points to 5.8%, which was underpinned by a 65-basis point increase in gross profit margin. The strong gross profit result was achieved notwithstanding the significant investments we made in value during the period annualized benefits from our DC program, strategic sourcing, SSI initiatives and the growth of Coles 360. Lower tobacco sales also contributed 37 basis points to GP margin. In Liquor, sales revenue declined by 3.2%. The liquor market remains subdued and competitive intensity increased through the period, particularly at the big box end of the market. During the half, we completed our Simply Liquorland store conversion program and our convenience portfolio, representing around 90% of our store network delivered positive sales growth. We are seeing a shift in customer behaviors towards convenience-led purchases. And pleasingly, our stores are well positioned in this convenience space. There is some work to be done to optimize our Liquorland warehouses now that the conversion is complete. Overall Liquor EBIT was impacted by softer top line and $13 million in one-off costs relating to the Simply Liquorland conversions. In other, revenue relates solely to the product supply agreement we have with Viva Energy. As outlined in the results release, the PSA, which is due to expire in April, has been extended and is now due to expire at the end of November to allow Viva to complete the transition to New South Wales, WA and Queensland. The increase in other EBIT was predominantly due to the higher net property gains in the prior corresponding period. Turning to operating cash flow on Slide 16. Before discussing the numbers, I want to highlight a timing impact. The half year ended on the 4th of January. And similar to last year, this resulted in an additional payment run in the final week, creating an additional cash outflow of approximately $560 million. The timing effect impacted several metrics, including cash realization, working capital and net debt. These metrics will normalize in the second half. Operating flow, excluding interest and tax was $1.5 billion with a cash realization ratio of 69%. Adjusting for this additional payment run, the cash realization ratio was 94%. For the full year, we continue to expect cash realization of 100% with the first half timing impact reversing in the second half. The working capital movement primarily reflects increased inventory to support availability over the Christmas period and lower trade and other payables following the additional payment run. The movement in provisions and other largely reflects the flow provision, which is noncash but recognized in EBITDA. Now I'll now move to capital expenditure on Slide 17. Gross operating capital expenditure on an accrued basis was $476 million, a decrease of $66 million compared to the prior corresponding period. We had a higher weighting towards store renewals and new stores across supermarkets and liquor this half as well as a lower spend in relation to our Victorian ADC, and this was as a result of a milestone payment having been recorded in the prior corresponding period. Pleasingly, our Victorian ADC remains both on time and on budget. We also incurred lower capital expenditure in relation to our investments in loss technology. As you know, CapEx falls into 4 key areas: store renewals, growth initiatives, efficiency initiatives and maintenance. Within renewals, we completed 160 store renewals across our network, consisting of 35 supermarkets and 127 liquor stores. These included 122 Simply Liquorland conversions. Within growth, we opened 6 new supermarkets and 11 new liquor stores. We also contribute -- we continue to invest in our e-comm business. Efficiency initiatives included investments in the Victorian ADC, store front-end service transformation and Liquor ordering. Maintenance capital included our ongoing refrigeration electrical replacement programs and life cycle replacement of store and technology assets. We continue to optimize our property portfolio with net property capital expenditure increasing by $157 million, primarily due to an increase in property acquisitions and developments and lower proceeds from divestments. And to reiterate the guidance we provided at our FY '25 results, we continue to expect capital expenditure of approximately $1.2 billion for the full year as we continue to invest in store renewals, digital and technology and growth initiatives. Turning to funding and dividends on Slide 18. Our funding position remains strong. At the end of the half, our weighted average drawn debt maturity was 4.4 years with undrawn facilities of $1.9 billion. As I said earlier, the Coles Board declared a fully franked interim dividend of $0.41 per share, which is a 10.8% uplift versus first half '25 and shows a consistent progression of shareholder returns over time. We will also have a franking credit balance of approximately $600 million after the payment of our interim dividend. Finally, we retained a headroom within our rating agency credit metrics and a strong balance sheet to support growth initiatives with our current published credit ratings of BBB+ with S&P Global and Baa1 with Moody's. And with that, I'll hand it back to Leah to take us through the outlook and concluding comments. Leah Weckert: Thanks, Charlie. So, turning to the outlook on Slide 26. In the first 7 weeks of the third quarter, supermarket revenue increased by 3.7% or 5.3%, excluding tobacco. We're pleased with this strong sales result as we can see through the market share data that it represents above-market growth, continuing the sales momentum we have had for some time. It indicates that in Victoria, we have retained a portion of the customers that we gained as a result of our negative 2.5% continuing to deliver positive sales growth. As I said at the start, the focus for Liquor this period is on leveraging our unified brand, simplifying our processes and improving the performance of our Liquorland Warehouse stores. So overall, I'd say we have had a strong first half and a good start to the third quarter. And with that, I'll now hand back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from Ben Gilbert from Jarden. Ben Gilbert: Just a question on the trading update. But just on your comments around market growth, just interested if you could give us some color potentially ex Victoria and how within that trading update, you've seen some of the key categories in terms of sort of your health, beauty versus fresh versus sort of the food category? Leah Weckert: Yes. Thanks for the question, Ben. So, as I said, we're quite pleased with the first 7 weeks for 2 reasons really. One is that based on the market share data, we can see that it's above market growth, and that means we have retained a portion of those customers, which means our Victorian sales numbers actually aren't that far off where we are from a national basis. And then we have grown some share on top of that. The data point we received on Wednesday is entirely consistent with the market share data that we have, which is that our major competitor has also performed ahead of market, but that share is not coming from us, and we can see that it's coming from others. I think the second reason that we're pleased with that first 7 weeks is that it just really shows consistency. For those 7 weeks this year, we've got 5.3% ex tobacco. Last year, it was 4.5%. The year before that, it was 6.4%. And that represents really strong sales growth year in, year out. And we are really focused on continuing to drive the flywheel that we talk about, which is strengthen the top line, unlock operating leverage and then reinvest that back into the customer offer. So that's what we're intending to do. In terms of strength of categories, so food continues to be very strong for us. We're seeing good strength across the fresh areas, and you'll see on the customer satisfaction scores that quality is really stepping up. That is actually directly related to our fresh categories. And I would call out meat as one area where we are seeing outperformance in the market in that space. In the nonfood area, that's been a real focus for us. And we would say we're quite encouraged by the emerging trends that we're seeing in that area. We have reconfigured categories in the half to respond to some of the pricing dynamics that we are seeing in the broader market, which means that we have introduced a lot more lines on to EDLP. I mean we know that we're a convenient destination to pick up many of these nonfood products. You think your cleaning products, your paper products, your baby product, it actually makes sense to grab those when you come into the grocery shop. But we're taking very much a category-by-category approach. So, to maybe just give you a bit of color on that. We've invested, for example, into our cup wipes and our Ultra range in cleaning. So, beauty -- sorry, baby and cleaning, private label, and that has driven really strong volume growth for us in that space. We've also taken action on some of the proprietary lines in pet, for example, to be more competitive with some of the players in the market that have recently moved into that space. And on the back of that, we've seen double-digit growth on those lines. So really encouraging in terms of where we're headed there and more to come. Operator: Your next question comes from David Errington from Bank of America. David Errington: Yes, look, I'd like to pick up on that, particularly Slide 7. It's a fantastic looking slide. It's brilliant in terms of customer resonance, and you highlighted as one of your key highlights. But can you bring it to life a little bit, what does it actually mean? Like 330 basis points? Can you put it in context as how big a jump that is availability? I mean they look really impressive, but I don't know what to make of it. And what does shine for me a little bit is price, up only 180 basis points. I don't know if that's good or not, but your gross margin was very powerful, could you have gone a bit harder on price? Can you basically bring Slide 7 to life? Because that looks an incredibly powerful chart, great execution, great improvement in margin. Can you bring to life what drove that? And maybe given that you are higher margin than your competitor, how much firepower that you've got going forward to maintain that sales momentum that you've got? A bit in that question, but if you could have a go at it, that would be really appreciated. Leah Weckert: Thanks, David. We'll try and unpack it. I mean it was a highlight, I think, for all of us as a team because we do have a fundamental belief that if we're increasing customer satisfaction is one of the things that helps us to drive transaction and engagement in store. I think it is a real combination of the execution focus we've had, but also the benefits starting to flow through some of the transformational investments that we've made over a long period of time now. So, I think the benefits we're getting from the ADC, the CFCs, but also the step-up that we've made in terms of the renewal investment. Maybe I might ask Anna and Matt to give us a little bit of color. We'll maybe just work through the slides in order of what the headings are. But we start with quality. Do you want to cover that one? Anna Croft: Yes. David, it's Anna. When it comes to quality, obviously, it's important across the store, but very, very important in fresh, and we've been running a really big fresh transformation program. And that really has seen us take an end-to-end review of quality. So, taking every touch point on where we might aggregate that and how we would look to solve it. And actually, just to give you a bit of a sense of what we've been doing, we've been working through our supplier base to make sure that we have the right suppliers that are fit for the future. And we've gone into deeper end-to-end partnership with that. We've also coupled that with an upweight in our technical resource to really work with those suppliers to really unlock quality and cost. We've really then also focused particularly in meat around our manufacturing network to make sure it's actually closer to stores. So, I think WA to WA. Queensland, we've got a port facility there now, which means that we're faster and we get fresher product to stores and then therefore, give life to customers in store, and we know that's how they measure quality when they see life at home. The other bit we've done is we've invested quite significantly in store team training and also central team training to really focus on quality. coupled with the work that Matt and the team have been doing in supply chain around faster, fresher flows that mean we are flowing product from our supplier base to the stores in a very nuanced way that means we get better life. And on the back of that is probably to hand over to Matt to give a bit of flavor on that because reducing lead times has been a key priority. I might hand to you before we then talk about availability. Matthew Swindells: Sure. Thanks, Anna. David, look, it makes it easier when Anna and the team are super focused upon right supply, right range by store and the right pricing and promo plans. And that does then set us up to leverage the changes that we've made around our supply chain operations and our store operations. And the game we're playing here is speed. So, the faster we can move product, the fresher it will be and importantly, the less waste and markdown we also get. So, our faster fresh flows is essentially a shift away from bringing product in and racking and stacking to then wait to come and pick it later. We really are moving things through the supply chain as fast as possible and measuring in hours as opposed to days. And then similarly tying that in with the store execution where we've got the right display space and the right resourcing to really make sure that the product gets in front of the customer in the least possible time. I would also add, we've now got a couple of years under our belts of our replenishment forecasting system. This was the RELX implementation we did and the final part of our integrated replenishment plans, and so they get better too. So, it's a number of parts that drive the difference in quality. An answer to your question around this 330 basis points a shift, it is a really big shift. And if I think about the 390 basis points, we've then seen improvement in availability, that is at levels that previously we've not really seen. So, they are extremely good results. On availability itself, you probably think about this in 3 areas. So, the first, and I've talked about this again in the past, we're quite focused on foundations. So, this is where we've made the model changes, and we've got the commercial teams really focused upon supply collaboration, the supply chain team focused upon forecast and the logistics of moving product and the store teams super focused on it but it's the consistency with which the teams now work together that's driving the difference. And so we've got a really solid base that we can build on. Importantly, our supplier inbound fulfillment as I thought is at a 6-year high. And through the Christmas period where it traditionally falls away, we saw it maintain a level so we've got stability, not just consistency there. The second part then that enables us to really drive investments as making the difference. That's the ADCs that we have talked to in the CFCs. And we are putting more cars and more products through those ADCs to drive the benefit of not just efficiency but service. And we've also now rolled out our transport management system. which has enabled us to have better control and visibility of our fleet. And that means we are better at picking up from suppliers through Click & Collect, and we're better at delivering to stores as well. So those investments drive a difference. The final part, which I think is probably where we want to see the next level is really a shift from being reactive to being proactive. And this is where we're starting to use data and AI to look for gaps before they occur. So where can we see the problem before it becomes an issue in the store. And we're able to identify at a store SKU level potential out of stocks and target team members to go and manage the inventory closely so that we can then be proactive around availability and prevent any issues before they even occur. And I think that's then the next level, foundations first, technology driving the difference and then the AI and data really becoming proactive rather than reactive, that's setting us up for even further improving availability. So I might -- for the store look and feel, the third part. Leah Weckert: Yes, there's a number of key areas that go into the store look and feel metric. A couple of things I would say, driving this certainly is our renewal program. If I take you back to '22, we would have done 40 renewals. This year, we will complete 70. And actually, what we have done is maintain the blueprint now for some years to get to consistency. What that does is give customer consistency in every store they go into, but it's also enabled us to take the cost per renewal down to do more of those. So certainly a key focus. And we've really started to address what I would call some of the long-term underinvested stores as part of this program, and we're seeing really good progress and customer response there. The other bit that's in this metric is ease of shop, and we focused on the shelf edge through our range program and macro space. We've really stepped on both navigation of space and aisle. And the one big thing here, we've really thought about the integration of our omnichannel to actually remove the friction we see from customers in the store through that. So good progress there. And the big is we fixed up our checkout space through the service transformation program. So that has been a real meaningful step on from a customer satisfaction. So, I'd say there's lots of initiatives driving this. We are certainly focused on how do we continue to elevate this and how do we take it to the next level. So much more to do, but we're pretty pleased with where we are. And then if I come to the final one on price, funny enough actually it is always the hardest metric to move and move the slowest from a customer perspective. So, we are really pleased with 180 basis points. And that's come from all the work that we've talked about before around fewer, deeper, more targeted promotions, removing the noise and making it easier for customers to shop. We're seeing the increase in EDLP in the right categories really driving that price satisfaction -- and again, the work we have done not only on simplifying the range, but also tailoring the range to the store has made it easier for customers to find value and find the products they want shelf. So, a number of key things. Now there's an awful lot more to do in here, and we're really focused around that, but it's pleasing to see that the work we've done over the last 18 months really starting to come to fruition here. So, they would be the big drivers, David, across those. Operator: Your next question comes from Shaun Cousins from UBS. Shaun Cousins: Maybe just a question just on the first seven weeks, sorry, you dropped out Leah when you were talking in your outlook. Do you think you were hurt by the cycling, the Jan '25 period in that Woolworths is now indicating that they got -- that they were hurt in Jan '25. So did Coles benefit there and hence, you're cycling against a period there, which actually means that 37% could be a bit stronger and that you're getting some big industrial action tailwind. And my question is really more around liquor. Just in terms of like-for-like sales are down 2.5% to start the year. Sorry, yes, please, Leah. Sorry, your line is quite -- we're losing you a little bit. Sorry, the team for a second here or there. So, apologies for that. Leah Weckert: Shaun, can you hear me? Shaun Cousins: You're in and out. Leah Weckert: I'm going to go ahead and answer the question. Shaun, are you hearing us okay? Shaun Cousins: Yes, I can hear you now. Leah Weckert: Wonderful. Okay. So, I might reiterate the points I made when Ben asked the question. So, we are definitely still cycling over some disruption from the industrial action last year in the January period. We are pleased, though, with our first seven weeks of sales performance, and there's really two reasons driving that. So based on the market share data, what we have reported today is above-market growth. And that means that we have retained a portion of the customers that came to shop with us last year, and we have grown some share on top of that. What we received on Wednesday is entirely consistent with that market share growth -- with that market share data, I should say. So, our major competitor has also performed ahead of market, but that share is not coming from us, and we can see in the market share data where that is coming from. So, we feel that we have the right pitch in terms of customer at the moment because we are retaining customers, and we are stepping it up. The second thing we're really pleased about on the result is just the consistency, which is something we really prioritize. So, if you look back in prior years, those first 7 weeks, we've reported 5.3% ex-tobacco today. That was 4.5% last year, and it was 6.4% the year before. And so that represents really strong sales growth year in, year out that we are delivering. And we believe that is part of what we're managing to get to work through the strategy of the flywheel of strengthening the top line, unlocking it into the customer offer. Did you get all that. Shaun Cousins: We got most of that. And I think across the 2 answers, I think we've got it. My question is around liquor. Just in terms of your like-for-like to start the year is down 2.5%. Your earnings were down 37% in the first half. You've called out the aggression from Dan Murphy's. As Dan Murphy's remains aggressive on price and really tries to reestablish its sort of price leadership, which is quite existential for them. How does Coles Liquor actually perform, and does your big box just continue to sort of suffer? Just curious around the outlook for earnings. Should we be anticipating earnings to be down another 30% again? I'm just -- you've got a fixed cost base there and a competitor that's quite aggressive. Just curious around the outlook there, please. Leah Weckert: Well, we won't be giving any guidance on where the EBIT will go. But let me make a few comments. So, first of all, we're pleased that we've completed the 222 Liquorland conversions as part of the Simply Liquorland project. And along with that, we have reset range, and we have reset value mechanics in our stores. And ultimately, that entire program of work has really been about how do we attract customers into our offer. And what we're really encouraged by -- and I have to say it's early days. We only finished this process in the middle of December. But early days, we're very encouraged by the NPS uplift that we are seeing. It is a very significant and material uplift that we are seeing in customer satisfaction. And that tells us that those changes are really resonating, which is the first thing you have to achieve with your customers. Now there is no doubt that the backdrop to all of that is the market is very challenging. And we have a subdued market, which is a combination of a structural shift, which is generational around consumption of liquor, but you've also got the impacts in there of cost of living. And certainly, in Q2, we saw an elevation in the competitive intensity in the market. And that disproportionately impacted our large box, so the Liquorland warehouse stores, which is only about 10% of our network. And so, what we were really pleased about is even though those stores were impacted, the 90% of the network, which makes up the convenience formats of Liquorland and Liquorland sellers, that component of our network was in positive growth. And so, you team that up with strong customer scores and positive growth in the heart of our network. We think that, that is actually really positive in terms of setting ourselves up longer term to lean into what we are seeing is quite a few convenience trends coming through in liquor purchasing. Now that being said, we've got work to do on the warehouses, and that's going to be a big focus for us over the next 6 to 12 months. Operator: Your next question comes from Adrian Lemme from Citi. Adrian Lemme: Just want to follow on in terms of the liquor commentary. So, one of the things you talked to there is lower consumption of liquor, a structural shift. I'm just wondering in supermarkets, oral GLP-1s seem to be coming down the pipe and maybe cheaper, which could drive increased uptake in your customer base. How are you thinking about the impacts on demand across the supermarket store, particularly in impulse categories, please? Leah Weckert: Yes. So, it's a great question and one we've been discussing quite a bit as a team. So, I mean, if I come up a level, we're actually seeing a huge trend from customers generally around healthful leaving. And we're seeing that play out in our offer that we have in stores today. So, things like the fact that coconut water is up over 30% on sales. The fact that we're getting the growth out of health powders and supplements. Even things like we've seen a shift even just in the last 6 months in the penetration of fresh produce that is hitting customers' baskets. And you've got items, snacking fresh produce items like baby cucumbers, snacking carrots, salary sticks. They're all in double-digit growth. And so, we are looking at that customer and seeing this behavioral change as there is a shift, again, a bit of a generational shift into healthful eating. We're excited by that. We think that's a really big opportunity and actually plays to many of the strengths that we have in the fresh area of the business, but also the way in which we're leaning into our convenience business. So, if you think about our ready meals, fresh ready meals that we have in the dairy section and frozen meals, our perform meals, in particular, are growing really, really strongly in that space, and they're dietitian designed meals that actually tailor the nutritional content to nutrient-rich and high protein. So, with that as a backdrop, we're already starting to make a shift with a lot of the product development that we're doing and also the ranging work that we do with suppliers to bring in more healthful options in every category. And we look at GLP-1, and we're observing closely what's happening overseas. And what we are seeing from those customers is actually what they are really looking for is solutions. They want to find nutrient-rich food in the supermarket and the supermarket that helps them to navigate that as easily as possible. One of the piece of feedback we hear is it's really hard to navigate supermarket shopping as a GLP-1 user. They have the real potential to be a winner here, and that's what we want to lean into. Operator: Your next question comes from Tom Kierath from Barrenjoey. Thomas Kierath: Just got a question on the gross margin. It's up 65 bps, and I understand you've made some restatements there. But I guess I'm just trying to square away the comment that you're investing in price. Could you maybe just step us through the moving parts on the gross margin? Because it's obviously a pretty big move there. And I guess, quite different to what Woolworths reported a couple of days ago. Sharbel Elias: Great. Thanks, Tom. Firstly, I just want to kind of lead off with the restatement was a prior period restatement. So, we didn't actually restate anything for this half. Look, we're really pleased with the progression in gross profit margin, as you'll note, 65 basis points. And if we look at the drivers, what are the drivers that are actually sort of leading to that sort of growth. Firstly, we're actually seeing the annualized benefits of the investments we're making in the ADCs and specifically this half, Kemps Creek. If you recall, Kemps Creek was in ramp-up last year in FY '25. So, what we're seeing at the moment is both the ADCs at business case in this FY '26 year. And we're definitely seeing benefits in the first half, and we'll continue to see that in the second half. Strategic sourcing and SSI benefits, again, are 2 really important drivers in terms of how we look at gross profit margin. And SSI, you would have seen that we delivered $113 million -- sorry, $133 million this half. And a good portion of that goes into GP. And in fact, I think we're really pleased with that particular program. Coles 360. Coles 360 was actually in double-digit growth for the half, and that is on the back of a number of halves now of double-digit growth. So, we're pleased with how that's sort of tracking. And then we've also called out previously the mix benefits from tobacco. As you know, tobacco sales are lower. That contributes in terms of a gross profit margin benefit, not gross margin dollars, but gross profit margin. So, we're actually really pleased with how they're sort of tracking. And the ADCs, obviously, the implementation costs. So, we successfully removed and unwound those implementation and dual running costs, and that created a benefit for the half. So, look, we're -- at this time, and as we did, we continue to sort of make these targeted investments in value, and therefore, we've been investing in value that's allowed us to do that, which is also driving that top line growth that you're seeing in our results. Thomas Kierath: Just can I just clarify the SSI benefit, like how much came through gross margin versus C0DB of the $133 million. Sharbel Elias: Yes. Well, look, typically, it's been -- yes, as you know, over a longer period of time, it's been 1/3, 2/3, 1/3 in GP and 2/3 in C0DB. This half was a little bit more weighted to CODB, for example. So it's a little bit more weighted to CODB and more like 1/4 in GP and 3/4 in C0DB. Operator: Your next question comes from Michael Simotas from Jefferies. Michael Simotas: Could I just follow on from Tom's question on gross margin? I think the message here is that gross margin would have declined if not for mix, Coles 360, SSI, the ADC benefit, et cetera. Can I just confirm that that is the case? And then you're investing in value for customers, which is great. Do you think you're getting enough support from the supplier base to continue to do that and justify what has been or reward what has been a period of very strong execution from Coles? Leah Weckert: Maybe I'll start that question, and Anna can talk to the supplier piece. But I mean, we haven't done the add up specifically on the gross margin. I mean I think one of the biggest drivers in the gross margin expansion is the tobacco impact, which is the 37 basis points. So that obviously is a very significant mix impact in there. And then you've got the initiatives that we've been doing that Charlie outlined like the ADC with Coles 360, strategic sourcing, et cetera. But we have made investments into value, and so that is definitely an offset in that line. And a big one during the half has been in the red meat space as we've seen costs increase in terms of cost of goods on that. And we know that's really important for customers. So we haven't passed all of that through into retail. But what I would say is it's a core job of ours as management to make sure that we're just managing that GP period to period. And we put in place a plan that works to have a look at what do we think the impact will be and therefore, what initiatives do we need to hit with the right degree of timing to be able to get those benefits coming through. So we're pleased with the overall result that we've been able to get there. Anna, did you want to talk about the relationship with suppliers? Anna Croft: Yes, happy to. What I would say, Michael, is that engaging with our supplier base more broadly to optimize the range and strengthen the customer offer is business as usual for us, and we're incredibly focused on that, and that won't change. I won't go into any specifics on the commercials because that wouldn't be appropriate. But what I would say is that we are incredibly focused on working collaboratively, taking a much longer-term view to drive a real meaningful step change in our offer and our commercials collectively. And it's about getting further ahead together, taking a real end-to-end view of our businesses in a way that accelerates our true differentiation, and that's really where we've been focused on working with our supplier bases on, and that has taken a fully collaborative cross-functional approach, not just a trading approach. We're taking it from a supply chain, from an in-store perspective, and we're really looking credible to grave as to how we think about that going forward. So yes, more work to do, but we're absolutely working with the supplier base on that. Sharbel Elias: And so Michael, what you're actually seeing is actually our 3D strategy actually in action. So that's flywheel effect, right, where we're making very deliberate targeted investments in programs in GP, cost discipline in our CODB, allowing us to reinvest that back into the customer offer, driving top line sales and getting that operational leverage and efficiency because all through that, what you actually saw was also an expansion in our EBIT margin bottom line. So it's really our 3D strategy in action. Operator: Your next question comes from Craig Woolford from MST Marquee. Craig Woolford: I'm interested in the comments about the market share performance. It looks -- it is a great result and interesting how it's played out for both Coles and Woolworths. I assume you're referring to supermarket market share. I'd be interested in how much work you're now doing on other definitions of the market, if we look at results from Chemist Warehouse or Bunnings or the strength in dining out more generally. Maybe the bigger question is how do supermarkets ensure they don't lose share from other retailers as well. Leah Weckert: Yes. Thanks, Craig. It did cut out in the middle, but I think we've probably got the gist of it. So yes, we were talking about supermarket share when we were making those comments around the outlook growth. But obviously, it's a much more competitive and broader competition market than it was 10 years ago. And so the likes of Chemist Warehouse, Bunnings and I think we could probably, based on the comments that you've just made, also talk about things like QSR in that mix. And for us, the approach that we've been taking is to really break that down category by category. And so even within the nonfood space, being very particular about how we think about the different categories in there. And I'll let Anna maybe talk to that one. But certainly, on the food front, we continue to expand our convenience options for customers. And we actually introduced a number of new products into both the meat range, but also into frozen and convenience dairy over the half, which are really leaning into that. And I mentioned the grilled burgers, they're a great example of where we can actually bring share back into the supermarkets channel by giving a product to customers that they feel like it's something that they might eat when they're out, but actually they can prepare it in their own homes. And we've seen fantastic growth in our convenience-based meals out of the freezer section, for example, that's an area that we've expanded significantly. So it is a focus area for us. Those categories that we're talking about there, they are in double-digit growth for us. So they're outperforming the rest of the supermarket. Do you want to talk a bit about nonfood and how we think about the different competitors there, Anna? Anna Croft: Yes, of course. And Craig, I think we've spoken about this quite a lot. It is a clear area of focus for us. What I'm pleased is we're starting to see some real green shoots coming through in both sales performance and market share. And when we look at that, we look at supermarkets market share. But more broadly, we look at kind of health and beauty and our pet business at a total market read because, as you said, our competition is far broader than the supermarket space. And I think what we're pleased about the progress has really been driven by a couple of things. I think sharpening our value and moving to a trusted pricing position through EDLP has made a marked difference. In the quarter, we moved 400 lines in that space, and we made 1,900 value-based in store really emphasize the value we have, and we're starting to see that come through. We've really focused on range where it matters. So in pet and baby and beauty that's really come through. We're using the CFCs very strategically to go deeper on range that really matters as well as a bulk strategy, which really means that we are competing with others outside of the supermarket arena in terms of both neutralizing the value, but making sure that we keep the volume within our business. I think in baby, we've talked about the importance of that. And Leah mentioned, we've been really doubling down on CUB, our own brand. And actually, we've invested in both value and quality, and we're seeing that now being the #1 both volume and value line in those categories. And then on pet, as we said, we've done a lot of work on both value and bulk and that is playing through. We ultimately know, as I said, we are the right convenience spot for customers to buy these categories. So we actually will take a category-by-category approach and make sure that we are being really tailored where we need to put innovation in, where we need to deal with value and where we need to deal with range. So certainly not a one-size-fit approach, and we're taking very much a total market view in these categories rather than the supermarket lens. Operator: Your next question comes from Caleb Wheatley from Macquarie Group. Caleb Wheatley: I wanted to follow up. I know there's been a bit of a discussion so far, but particularly around sort of the forward-looking thoughts on the capacity to reinvest. I mean, as you've spoken about, GP margins are up fairly materially, EBIT margins are up fairly materially. I know there's sort of one-offs and things dropping out that are helping that. But on a sort of go-forward basis, how are you thinking about now the sort of capacity to reinvest from an operational point of view? And I know prices has been a bit of a focus, but just sort of more broadly in the suite of options you have to reinvest from an operational point of view, whether it's kind of service or store ops or loyalty, how are you thinking about sort of your flexibility now? Do you have that margin expansion to reinvest and sort of where the more meaningful opportunities are from here, please? Leah Weckert: Yes. It's a great question. And I think the expansion that we have got in the margin does give us flexibility as we move forward. I think we've been fairly clear in all of our results presentation that we intend to maintain competitiveness. And so we do continue to monitor very closely price and not just from one competitor, but from a full suite of competitors depending on the category that we are talking about, and we will continue to do that. However, we have even just in the last 7 weeks, been what I would say is nuancing our operating model. And that's something that's just BAU for us, which is we look at performance, we look at where we see some opportunities, and we will put money in to help us to capture opportunities. A good example of that would be -- so we've actually seen some real strength in our Sunday trade. And as a result of that, we have made the move to invest more into store remuneration to help us to support that. And from a category perspective in the store, investing into the online space because we can see that there's latent capacity there that we can access. And we're not afraid to put some investment in to really capture that. And particularly through Flybuys, and we will flex on that to get the right outcome that we want. I'm told that you might have missed part of that because we're struggling with clarity today. So I'll just reiterate that one of the things that we've noticed coming into the first 7 weeks of the calendar year has been real strength on Sunday trade in our stores. And we have, as a result of that, made additional investments into store remuneration, so our team to help us to capture the upside of that and in particular, in the online space. Operator: Your next question comes from Bryan Raymond from JPMorgan. Bryan Raymond: Just mine is a bit of a follow-on actually around cost growth. On my numbers, excluding implementation costs, you had 6.6% cash CODB growth in the half. I know there's a lot of moving parts in there. But I just wanted to walk through because it was a bit of a surprise on the upside to me that cash cost growth. I acknowledge you had a pretty big online channel shift. That would be a higher cost channel. You just talked Sunday trading and there's obviously loading there, labor hours in store. But given you had $100 million of SSI benefits, which is the 3/4 of the $133 million in the period in CODB, I'm just surprised that cost growth is running that high. So, if you could help us understand sort of why that is and if that is the path that should continue or if there's some one-offs in there that we need to adjust for? Sharbel Elias: Bryan, thanks for the question. And look, as you know, when we look at CODB and look at cost generally, we look at it as a percentage of sales. And I actually think we are completely tight band over a number of years now in terms of -- as a percentage of sales, particularly if you exclude the sort of the D&A element of that. Cost discipline in our business is very much part of our DNA, right? And you've seen that through our SSI program. Leah mentioned earlier, to date over the last -- since FY'24, we've actually delivered over $700 million of that. That's going to continue. We're going to continue delivering on that, and we're going to continue delivering around that sort of $250 million a year in SSI benefits going forward. Look, we did successfully unwind and the implementation costs, as you did call out, and that was a clear positive. But we have been making very deliberate in strategic investments in our customer offer. So, including our CFCs, which are now fully embedded in our cost base. So, our CFCs are fully embedded in our cost base, they're delivering results and in line with expectations. So, you're seeing that result fall to the bottom line. We're actually making very deliberate investments in data and technology, which is all about improving that customer experience and online growth and omnichannel growth really across the board. So, with these investments, they are driving our top line. And one of the things that I do sort of look at as I look at the -- including GP and including our CODB. And what we're seeing is these investments are driving not only growth but margin growth in our business. Operator: Your next question comes from Richard Barwick from CLSA. Richard Barwick: I've got a question around the CFCs. You do mention that the CFC sales growth was ahead or outpacing your total online or e-commerce growth. Can you put some metrics around that just to give us a sense of how much better your New South Wales and Victoria would be doing online versus the rest of the country. And part of that answer just makes me wonder if you are outpacing online within Victoria, just why -- so it sounds like it wasn't quite enough to get your Victorian sales growth ahead of cycling the industrial action because I think you did call out that Victoria was a little softer than the national rate of growth. So, you sort of put those 2 pieces together for us. Michael Courtney: So Richard, it's Michael here. I did get the first part of the question, which was about CFC growth. And then I missed the second part of the question. So maybe I'll answer the first part first, and then maybe you can follow up and just clarify what the second part of the question was. So, we're not giving specific growth rates for the CFCs. But if I take a step back and talk about proposition types, where we've got Click & Collect, where we've got same-day delivery, where we've got next-day delivery and where we've got immediacy. I think the really pleasing part was that all of those offer types were in double-digit growth throughout the first half. And then next-day delivery, which obviously the CFCs form part of, is still by far and away our largest offer type. So, to be still getting really strong growth through that with the CFCs being a driving factor is really pleasing for us. The proposition continues to ramp up and continues to get really strong customer feedback. And I think that when you look across the positive feedback that we're getting from customers across range, availability and freshness, it's great to see that the customers are seeing the differentiation that is in that offer. So, we're getting really good growth. The operating metrics are in a really good spot in terms of Ocado partners globally where the top performing partner on key operational measures. As Charlie mentioned at the start, we're continuing to invest in that proposition when you look at things like on-grid robotic pick, there's other efficiency measures. So, we're getting really strong growth. It's becoming a really important part of our proposition. The NPS is growing, but an important part also in that as part of being an omnichannel retailer is that we've seen as those volumes have come out of stores and gone into the CFCs, the NPS in store has also improved, which speaks to the benefit of the CFCs, not just as a sales driver, but as a really key part of an omnichannel fulfillment network. Would you mind just clarifying the second part of your question? Richard Barwick: Yes. And the second part was just reconciling that commentary with the comment that Victoria was not growing as quickly as the rest of the country. And I realize that it was in part because of the industrial action but just trying to square those 2 pieces together. And just as a little adjunct to that, at what point are you completely clear of the -- any lingering sort of headwinds from last year's industrial action for Woolworths. So, when are you in sort of clear air there, so we're no longer having to make adjustments for that issue? Leah Weckert: Thanks, Richard. I think that is a million-dollar question. So as we shared, if we go back to when all this was unfolding last year, our big expectation was that there was going to be a cohort of customers that experienced the industrial action where they only came to us because it wasn't convenient to shop somewhere where there was really poor availability, and it's likely that all those customers have just returned back. Then there was a cohort of customers making an active decision between us and our major competitor where the stores are quite closely located. And then there were our online customers that came to us. And it's really the 2 second buckets that we have been working over the course of the last 12 months to put together a plan to say, how do we make sure that now that we've had those customers come and shop with us, that we can retain them. And what we're seeing in the first 7 weeks of data is that we have been successful in retaining a proportion of them, but we are definitely still going over the top of some of the disruption for last year. I think I'm hopeful that we're sort of past it. We aren't spending a lot of time trying to pull it out of the numbers, if I'm honest now. We're just cracking on with continuing to drive sales and do what we need to do. But my expectation would be that Q4, in particular, should be very clean. Richard Barwick: That's an important one because obviously, there's a lot of comparisons with your rate of growth versus Woolworths quarter-by-quarter, and it seems like it's made a difference, obviously, for the first 7 weeks. But if we -- so that's going to impact the third quarter. But if you -- I mean, effectively, your answer is all clear in the fourth quarter, that's what's important. Leah Weckert: That's my expectation. And we definitely -- obviously, we didn't actually receive all the sales that were disrupted as part of the industrial action last year. And I think you're seeing some very interesting reversions going on in the market share data because of that. Operator: Your next question comes from Peter Marks from Goldman Sachs. Peter Marks: My question is just on liquor again. Just wanted to touch on the gross margins. I guess, surprised to see them up in the half. I think you had a 21 basis point headwind from range optimization costs there as well. So I think underlying, they're probably up 40 basis points or so, if that's right. And I think you would have been lapping like a strong period last year as well. So I guess have you managed to drive that improvement in the liquor gross margins in the half? And then just wondering on your trading update, the sales down 2.5%. Are you able to give any indication of whether you're losing share there? Like what's your liquor market data showing in the first 7 weeks? Leah Weckert: Thanks, Peter. The line was a bit garbled. So let me play back what I think we're answering here. The second question you had was around what's our viewpoint on market share. And then the third part was around the expansion of the gross margin, which I might get Claire to answer. Maybe just market share issue though. The data that we have available these days for market share in the liquor market post the changes that were made to the ABS data that's available to us is quite poor these days. So it's actually difficult for us to have a view on that until we see our major competitor come out with their results. So at this stage, we probably couldn't give you a clear view on that one. On the gross margin, Claire, I might ask you maybe to cover that one-off and how we've achieved expansion. Claire Lauber: Thanks, Leah. Yes. So Q2 was obviously a heightened intense competition quarter. We were managing price and promotion intensely through the quarter with a focus to offer compelling offers for our customers. And despite the competitive intensity, we were really pleased that we thought we struck the right balance between driving sales and managing margin, with delivering the gross margin result of 17 basis points improvement. Operator: Your next question comes from Phil Kimber from E&P Capital. Phillip Kimber: My question was just about the online business. Williams has called out that there's been a step-up in competition from all the various players in there. Is that sort of what you're seeing? I mean, your growth rates are very strong. Are you seeing sort of reactions now from a competitive point of view that are maybe higher than they were in the last 3 to 6 months? Matthew Swindells: Yes. Thanks, Phil. So firstly, in terms of our own offer, when we look at whether it's customer acquisition or investment in the customer offer, we haven't increased the investment relative to the prior year. We've obviously had very strong sales growth. So, the level of dollars that we're investing with customers has gone up, but that's a good thing based on the sales growth. Our investment in the customer offer as a percentage of our sales hasn't gone up. So, I wouldn't say that we are investing more. In terms of competition, where I would say that there's been an increase in competition, is probably on the immediacy platforms because, depending on the platform, you've seen more competitors in the grocery space enter, which, a more competitors leads to more competition. But that's why we've taken a really proactive step of expanding our partnership with Uber. So that's something that will allow us to partner more closely with Uber, giving a better offer in terms of range, being able to partner more closely on things like loyalty, and something that's world-first for Uber in terms of the way that we're partnering. We think it's something that's going to allow us to have differentiation in this market as it relates to immediacy and ensure that we have a leading customer offer with strong economics. So, whilst there might be increased competition in certain parts of the market, I think we've taken some really proactive steps to ensure that we've got a winning offer. Operator: Your next question comes from Ben Gilbert from Jarden. Ben Gilbert: Just another one on liquor. It sounds like, obviously, you're probably doing pretty well, given that the pricing competition is more so across 10% of the portfolio. Just interested in how you're seeing the pricing deck across the residual 90 smaller format, where you think you're doing better? Because just anecdotally, your pricing probably seems much sharper than the market there. And I'm wondering if that's where the risk is if your competitors go after the smaller formats, which have probably been left alone a little bit at the moment. Leah Weckert: Yes, it's a great question, Ben. I mean, we're definitely seeing a good uptick in our customer satisfaction around value and price in the small format stores. And we have been very sharp on KPIs there. As we've said, we think that with the shift to convenience, building brand loyalty to Liquorland in that convenience format will be really key going forward. And the value proposition that we have in there is a really important part of that. Operator: Your next question comes from Adrian Lemme from Citi. Adrian Lemme: Just one quick one, please. Just on tobacco. I think we've seen a bit of a crackdown in recent months on illegal tobacco shops. Are you seeing any slight improvement yet coming through in your tobacco performance? It's obviously still a big drag on sales. Leah Weckert: Yes. Sales week-to-week are pretty consistent now for us, and they have been for the last 6 months. We have seen some slight improvements week-to-week when we've seen a couple of the crackdowns, particularly in Queensland and WA, but I'd probably describe it as quite marginal, and it doesn't tend to have longevity around it. So, it can go for a matter of days or a couple of weeks, and then we tend to see it revert back. So that's why, sort of overall, we're still in a sort of a similar position to what we reported at Q1. Operator: Your next question comes from Michael Simotas from Jefferies. Michael Simotas: Charlie, I just wanted to pick up on a comment that you made about the CFCs being embedded in the cost base. Just want to understand exactly what that means. Last year, you called out $40 million of effective start-up costs for the CFC model. How do we think about that going forward? And look, I'm not asking for specific numbers on that, but are there still some costs in the P&L that will come down over time? Or has that flipped to a positive contribution? And then just generally, what's the profitability of your online business look like right now, noting that your competitors disclose margins, and they effectively doubled year-on-year. Sharbel Elias: Yes. So, Michael, let me take that. Great question. So, a couple of things. Firstly, let me go to the CFC side of that equation. We are really pleased with the financial performance of the CFCs. They're absolutely in line with our expectations. And as we said, the CFCs are volume, we're seeing great volume growth, as Michael articulated a little earlier. And what we have seen now in financial performance is that the second half of '25 is better than the first half and certainly an improvement half-on-half and year-on-year in the CFCs. All the one-off implementation, any of those costs, they absolutely go away. So, there are no lingering costs from that perspective. We're really saying, when I mentioned that CFC is, that they're now in the cost base. It's actually part of our business going forward. They're fully embedded there. And I would just encourage, again, as I said earlier, there are elements that go into GP, there are elements that go into CODB, and those changes. From our e-commerce business, generally, again, really pleased with the growth, a positive contributor to earnings. And from that perspective, we're seeing the leverage actually drop to the line. So, you would have seen our e-commerce business has grown at 27% this half. Last half, it was a similar sort of very strong growth rate. And in that time, we've not only grown earnings, but we've absolutely grown our EBIT margin through that perspective. That's the lens which I would look at in terms of the profitability of our business. Operator: Your next question comes from Craig Woolford from MST Marquee. Craig Woolford: Just a follow-up on the inflation path. Without getting bogged down on the technicalities of how Woolworths and Coles measure it, it was surprising to see Coles measure accelerate in 2Q versus Q1, whereas Woolworths measure decelerated in 2Q versus Q1. So perhaps there are some elements in your basket you can talk to that may have added to inflation. And what's your perspective on that inflation outlook over the next 12 months or so? Leah Weckert: Yes. Thanks, Craig. I mean, we did see it accelerate 30 basis points, as you just highlighted quarter-on-quarter. I probably would say that over time, Coles has tracked quite closely to what we see in the CPI data, which gives us some confidence around how the reporting that we do actually aligns to that. The most significant areas of pressure for us from an inflationary perspective have been in the red meat space, so beef and livestock prices are coming in. We haven't passed all of that through to consumers, but it's definitely, some of it has moved through, particularly in the lamb space. We've also seen a bit of inflation in dairy for chilled desserts and milk. Some of that is related to capacity constraints in the market around yogurt. But equally, there have been others on the other side of the ledger. So, eggs have come off now that we're past the avian flu impacts. We've still got deflation in quite a few of the non-food categories where there continues to be very intense price investment across the market. Operator: Your next question comes from Thomas Kierath from Barrenjoey. Thomas Kierath: Just a quick one on depreciation and amortization. I think before you had said it would rise by $115 million this year, and it only went up by $46 million in the first half. How should we kind of think about that for the second half of the full year? Sharbel Elias: Yes. Well, look, thanks, Tom, for that sort of question. Look, we'd expect the second half to be around that sort of $50 million or so increase. So, we're probably expecting -- if you think about the full year, these things are not always a precise science in terms of -- because they do vary on when capital investments and things land. The depreciation is probably more like $100 million or thereabouts for the full year of '26. Operator: Your next question comes from Bryan Raymond from JPMorgan. Bryan Raymond: Might be one for Anna. There's obviously an ACCC case going at the moment. I don't expect you to comment on that specifically. But just wanting to sort of get your thoughts around value perception impacts that might come through from all the press coverage, but particularly how you're thinking about red versus yellow tickets longer-term, like this might be increasing a bit of distrust in some of those red tickets and whether you need to pivot a bit more to high-low. I'm just interested in how you're thinking about the composition of your promotional program going forward. Anna Croft: Thank you, Bryan. I won't comment on the case, but I think that would be appropriate. I think that we remain really focused on how we give our customers great value across the entire basket and making sure we've got the right mechanics in every category. And as we said, in some categories, we've had to move more on to EDLP. The program we've been running around actually doing fewer, bigger, bolder promotions, and that into activity with EDLP seems to be really working for customers, and we can see that through some of those areas. So I think, look, we're just really focused on actually using data and AI to work out how do we get the right promotions to meet the right customer cohorts and how do we do that longer term. And actually, what we are seeing is the work that's done in range is making it simpler for customers to find value. And obviously, our own brand growth in the quarter around really driving quality and value is another lever we have to really simplify that on an ongoing level. So, we're really focused. The outcomes will be the outcomes of where we are on the ACCC, and we'll work through that, whatever that may be. But again, it comes back to making sure that we're doing the right thing across the basket, not in any particular category, but lowering the cost of shopping and giving customers the right value in the right way in the right categories. I don't know whether you want to add anything, Leah? Leah Weckert: I think that's a good answer. Operator: There are no further questions at this time. I'll now hand back to Leah Weckert for closing remarks. Great. Leah Weckert: Thank you for joining us this morning. In summary, we say we're very pleased with the financial results and the strategic achievements that we've delivered over the last half, including strong supermarket sales and EBIT growth, and strength in online. The fact that our automation and operational efficiency programs are now delivering really tangible benefits, including improved customer satisfaction scores and the completion of the Liquorland banner simplification. So, we're seeking to be laser-focused going forward on what really matters to customers, both in the short-term and the long-term. And we know that if we do that, we will continue to move the dial in each period. We know that's what is going to drive our top line, translate to sustainable earnings, and create long-term value for our shareholders. So, thank you for your time this morning, and I look forward to speaking to you again at our third quarter results in April. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good morning, everyone, and welcome to Docebo Inc.'s Q4 2025 earnings call. All participants are currently in listen-only mode. We will open up the lines for a question-and-answer session momentarily. I would now like to turn the call over to Docebo Inc.'s Vice President of Investor Relations, Mike McCarthy. Please go ahead, Mike. Mike McCarthy: Thank you, Julianne. Earlier this morning, Docebo Inc. issued its Q4 2025 results. The press release, which included a link to management's prepared remarks, and our quarterly investor slide deck, were all posted on our Investor Relations website. This morning's call will allow participants to ask questions about our results and the written commentary that management provided this morning. Before we begin this morning's Q&A, Docebo Inc. would like to remind listeners that certain information discussed may be forward-looking in nature. Such forward-looking information reflects the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on the risks, uncertainties, and assumptions relating to forward-looking statements, please refer to Docebo Inc.'s public filings, which are available on SEDAR and EDGAR. During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Please note that unless otherwise stated, all references to any financial figures are in U.S. dollars. Now I would like to turn the call over to Docebo Inc.'s CEO, Alessio Artuffo, and our CFO, Brandon Farber. Julianne, can you open up the Q&A queue? Operator: Certainly. We ask that analysts please limit themselves to two questions and return to the queue for any follow-up. Thank you. Our first question will come from Ryan MacDonald from Needham & Company. Please go ahead. Your line is open. Ryan MacDonald: Congrats on a nice quarter. Alessio, maybe the first one for you. It was really interesting to read in the prepared remarks about the potential power of integrating Harmony Search with 365 Talents, as it seems like, over time, the search data that you can get from Harmony Search and identifying skill gaps, and then integrating that with 365 Talents, could potentially help close those skill gaps. I think, as the products are integrated, could you talk about where the integration efforts stand on 365 Talents? And do you also see a similar potential integration? And then, as we think about 2026, how close are we to that vision state? Is there a sales training to do that cross-sell motion going into place for this year? Thanks. Alessio Artuffo: Good morning, Ryan, and thank you for the question. First, let me tell you I am extremely excited to be able to talk about our acquisition of 365 Talents. It has been an important milestone for us. You are correct in saying that the integration between Docebo Inc. and 365 Talents is strategically relevant for us, if not because, among other reasons, it gives us an incremental data moat which, in the agentic era, is a very critical aspect of our strategy. When it comes to the integration, integration is designed to be a phase one. Let me ground it in the current times. We already have customers that we share. We already have an integration that is in production. We are aligned on our ideal customer profile. 365 Talents operated in the strategic enterprise segment, and their customers are very complex organizations with very complex people workflows. So, when it comes to integrating the data of Docebo Inc. and the data flow and the opportunities, there are many. What I would say is, one of the things that I loved about 365 Talents, and one of the reasons that led us to this acquisition, is also their AI-forward technology and thinking. To give you an example, they already have built agents that allow building entire job architectures—a job that would have required months with consultants even a couple of years ago—be done in an instant. Their agentic experience will accelerate our integration between the two platforms. You asked about our roadmap path and what it means for us. So a couple of examples of integrated work that we envision. Number one, imagine this skill architecture that, again, like I said, gets built via agents. This is available now. It is there. Learning programs execution happens within Docebo Inc. But as skill gaps are identified and detected as part of the regular workforce planning, skills are constantly assessed, and skills remediation happens in an integrated way with Docebo Inc. Imagine an agent that is capable of understanding where the workforce stands against certain business goals and the learning machinery, the agent that creates content to continuously produce the material that remediates and to get better. That is the power of the integration between Docebo Inc. and 365 Talents. Brandon Farber: Ryan, just on the second part of your question of the sales motion and the cross-sell. So, really, on day one, right after the acquisition, we started cross-training our sales staff. Our acquisition thesis remains that there are going to be three motions. We are going to continue to sell 365 Talents on a stand-alone basis. We are going to sell back to our existing customer base and net new customers. We are going to sell a combined Docebo Inc. and 365 Talents suite. We do expect our existing customer base to start attaching on 365 Talents in H2 of this year while we cross-train our staff in H1. Ryan MacDonald: Super helpful color there. And then, maybe, as we think about taking a step back on AI, clearly you have the product vision and roadmap out there. But, obviously, in the markets over the last several months, there have been plenty of fears and concerns about what AI can do in terms of disruption for broader enterprise software. I am curious if you are seeing any signs of market fears and reactions in the field. What are customers saying about AI and their internal initiatives, and how is that affecting the budgetary environment as you look ahead into 2026? Alessio Artuffo: The demand environment has been very strong. The field is constantly helping us better qualify how our customers in the L&D, in the learning management world, think about AI within their organization. There is no doubt we live in a transformation phase. But, in terms of the sensibility of our solution, I have done this for now over 20 years. I would say that there are a few things that I am absolutely clear and sure about. The number one thing that I am sure about is that what we have built at Docebo Inc., now combined with 365 Talents and the evolution of what we are doing, is incredibly hard to build and replicate. You just do not cloud code this stuff overnight. That is pure marketing speak for that type of concept. I will add to that. I do spend nights in cloud code. I stopped sleeping because of that. What I would say is when you go beyond the surface of your first 15% to 20% creation of a productive front end, the enterprise piping required to deliver at scale to hundreds of thousands and millions of users—things like unsettled things like database-specific multi-tenancy, role-based permission—all this stuff is what actually powers an enterprise application. I really like to emphasize that because beyond the surface, there is a lot of hard coding piping that folks do not talk about on LinkedIn. Second, I would say, Ryan, what we are hearing from customers reflects our thought and knowledge of the industry, which is that enterprises effectively are evolutionary and not revolutionary, and particularly in L&D. Radical change is slow to come by. Now we are not standing still. We own the data. We own the compliance data, the skills chart data, and no LLM owns any of that. That data becomes then what? The catalyst for those agents to take action. Agents are not magicians. An agent without data is like a Ferrari with no fuel. What we do is make sure that our data structure and data investments are very strong. On top of that, we build the agentic layer so that now we have the data moat, the agentic moat, and the combination of the two with our enterprise experience becomes the proof that we are going to be winners in this market. Ryan MacDonald: Really helpful color. Thanks again. Operator: The next question comes from George Sutton from Craig-Hallum. Please go ahead. Your line is open. George Sutton: Alessio, I wanted to talk about your DNA. So growing 9% in Q4 and guiding for 10% to 11%. My sense is the DNA of this company is built very differently for much more significant growth. So I wondered if you could discuss that—if anything has changed there. And then I wanted to pair that with your substantial issuer bid and your desire to buy a lot of stock down at these levels. Alessio Artuffo: Love the DNA question. I think your intuition is right in the sense that, over the years, we have continued to operate the company with a few drivers that, when you look at those distinctly, make up what you are seeing reflected in the data. What are those drivers? Number one, staying ahead of the curve in the market in terms of technology advance. That will fuel growth as a result. The investments in AI that we have made, not just now, but over the past few years, are aimed at that. This is not a story of roll-up. This is not a story of building a legacy business. It is a story of continued evolution. Second, disciplined execution. Innovating and building great products and being on the forefront of AI, in our point of view, should not be inconsistent with great financial discipline and focus on profitability. We believe that is something that we have gotten very good at, and we can be even better at. So I do love this nature of a business that has the technology and the fuel to accelerate growth moving forward while adding a rather strong profitability profile. And that is where I would end. Brandon— Brandon Farber: 2026, if we think about how we reaccelerate, how we beat our guide, we really look at our business previously in three ways and now four ways. Firstly, mid-market. Mid-market had a really strong 2025. We called it out for three quarters in a row. We expect that performance to continue, but that is not a real lever to reaccelerate growth. EMEA, again, had two strong quarters in a row. We do expect that to continue. Enterprise, this is the real lever for us to reaccelerate and beat our guide. To be completely transparent, we were not happy with our performance in 2025. Some of it was macro. Some of it was performance. Our guide does assume that we perform similarly in 2026 to 2025. We are seeing early signs that that business is turning. The demand environment is there. Execution is getting better. Really, Q1, it is time for us to just execute. We have the demand. We have the pipe. Alessio Artuffo: And now it comes down to execution. Brandon Farber: The last one—or, sorry, the last two—is government. We are still in the early innings of government. If I could use a hockey reference, the national anthem has not even finished singing. From partnerships to pipeline to RFPs, we are extremely early in this motion. We just became FedRAMP at the May. We are seeing pipeline exceed expectations. We have the pipeline to win some large whale deals in Q3. But when you think about how ARR converts to revenue, our baseline assumption is that ARR comes in September 30, and we really have three months of revenue. So not a significant revenue acceleration for 2026, more 2027. And then March, I would say we already have a fairly aggressive growth target embedded within the guide. So, really, going back, enterprise is the main lever to beat our guide. From an SIB perspective, if you really just take a step back, SIB is designed with all shareholders in mind. It provides every shareholder an equal opportunity to participate. We filed our circular in late January, early February. The view is clear, and it remains unchanged today. We believe the trading price of our shares does not reflect the underlying value of our business and our future prospects. From a mechanics perspective, the SIB is the most efficient path to meaningfully buy back shares. Under NCIB, due to our public float and the amount of shares traded daily, we are actually quite limited. To take out 3,600,000 shares, it would take over two years under NCIB. Brandon Farber: So, and lastly, I would just note that even after the SIB, even after the acquisition, our net leverage remains low. We still have flexibility to allocate capital. George Sutton: Wonderful. Great. Just one quick, more narrow question on your QSR win. Understanding that organization is doing this through franchises, I am curious if your deployment will be mandated by the entire system, or is this a hunting license situation? Brandon Farber: Sorry. Can you repeat that last point? George Sutton: Is this something mandated by the overall company so all the franchisees take it? Or is this a hunting license where you need to go sell individually to the franchisees? Brandon Farber: Nope. It is company-wide, corporate, and all franchisees. George Sutton: Super. Thank you. And you know the sandwich name, or we can see it? Operator: Our next question comes from Josh Baer from Morgan Stanley. Please go ahead. Your line is open. Josh Baer: Great. Thanks for the question. Brandon, you just mentioned not being fully pleased with 2025, but some of those same assumptions around that execution are embedded in 2026. Could you unpack that a little bit more? What exactly are you assuming in the 2026 guidance with regard to converting that pipeline, contribution from new customers, expansion from existing customers? If you could talk about the assumptions embedded in that guidance a little bit more? Alessio Artuffo: I think it is Alessio speaking. Our fundamental point of view is grounded on the observation of the work that our teams have been doing over the past few quarters and the leading indicators that are resulting out of that work. If you recall, a couple of quarters ago, we instituted a new leadership team in the go-to-market team. After Kyle Lacy joining Docebo Inc. as CMO, subsequently, a new CRO was appointed in Mark Kosoglow, and we have effectively reshaped our GTM motion as a result of these leaders coming in. In this new GTM, it brought improvements across the board. I would say that we have focused on a number of different areas where we thought we could do better: process reengineering, people optimization, and, notably, a deliberate strategy to focus on qualitative demand as opposed to quantitative demand. What that means is we have taken steps to be deliberate in the leads that we believe are most suited to win, that belong to our category, and have implemented processes to pass on to certified partners very small business leads that are not necessarily any more in line with the strategy of Docebo Inc. We are a mid-enterprise to strategic enterprise company, and we need to focus there. That exercise is paying off. We are seeing that in the leading indicators about enterprise pipeline. We are seeing that in the execution in the field. The comments from Brandon are the result of that observation. We have data, and that informs our belief that the enterprise segment and government will be catalysts for our reacceleration. Josh Baer: Okay. Thank you, Alessio. Just to follow up there with some of the refocused go-to-market, looking at the ACV for new customers, which was down, is there anything to read into that? Is that a result of the reshaped go-to-market? Or, obviously, just one quarter of that new customer metric can move around a lot. How should we think about that? Brandon Farber: It is really our mid-market team firing on all cylinders. When you look at that metric, it is heavily skewed by the number of customers you sign during a given quarter. Enterprise wins tend to be one unit at a high value; mid-market tends to be many units at a lower value. So the mix overall tends to skew it from quarter to quarter. Generally, we were actually quite pleased with all our segments in Q4. As mentioned in our prepared remarks, it was the strongest gross bookings we have had since 2021. The business performed. As everyone knows, we had some structural headwinds that masked the top-line ARR growth with the wind-down of Dayforce and the loss of AWS coming in effect in Q4. It is just really a matter of go-to-market performing really well in Q4. Operator: Our next question comes from Erin Kyle from CIBC. Please go ahead. Your line is open. Erin Kyle: Hi. Good morning, and thanks for taking the questions. I wanted to ask and dig into the net dollar retention for 2025, down year over year to 99%. I expect a lot of that was largely due to AWS. Can you unpack that number a bit for us? Brandon Farber: You are exactly correct. Excluding AWS, we actually would have been up 1% year over year, so we would have been at 101%. There are a lot of good trends within NRR. We saw sequential three-quarter improvements in net retention, excluding AWS, from Q2 to Q3 to Q4. When we look at 2026, from a retention perspective, we forecast four quarters out. Again, we are seeing strong trends in Q2, Q3, Q4 into 2026 as well. One thing is when we look at Q4, even with record gross bookings, we have talked about how typically our mix of gross bookings is 65% new logo, 35% expansion. In Q4 it was 60% new logo, 40% expansion. Our expansion delivered in Q4. Our ideal mix is 60/40 or even 45/55. As we all know, expansion is much more efficient from a cost perspective. Acquiring new logos is very expensive. We are really focused on the expansion perspective. 365 Talents really helps us accelerate that. We are focused on improving that NRR in 2026. Erin Kyle: Brandon, that is a lot of helpful color there. Maybe one more for you, or Alessio, if you can give us an update on the AI credit pricing model that you talked about last quarter. Is consumption pricing something you have been looking at moving towards more broadly? Or how should we think about that? Mike McCarthy: Hi, Erin. Alessio Artuffo: Yes, it is Alessio. One of my favorite topics. Let us go. AI credit pricing and, more broadly speaking, the topic of monetization are hot topics in the industry right now. We have spent a considerable amount of time lately thinking through this deeply. I will share my thoughts, including credits, but they need to be taken in the context, more broadly, of the overall AI monetization strategy that is becoming a very pervasive narrative these days. First, let me start head-on. We are testing AI credits at Docebo Inc. We have maybe a month and a half worth of data, so it is early days. The results of that work have been a mixed bag, frankly. In some instances, customers, particularly technology-first customers, are receptive to the idea. In other instances, and frankly more, there has been pushback—pushback that is CFO/CIO-led—resulting from their desire for predictability and discomfort with non-strict controls and forecastability. That is where we stand with credits. If that is okay with you, I would like to broaden that question to our point of view on the narrative on pricing because the argument that I am hearing a lot of people bring up is, “In this new AI-first era, per-seat pricing is the legacy model.” That is the general sound of it. We went and dug deep. We looked at over 30 companies. We analyzed AI-native LLMs, etc. What we found out has been really interesting. The number one pattern has been the majority of the companies across AI-native companies are using what we would call a hybrid model, which is what Docebo Inc. has today: a mix of per-seat pricing combined with credit pricing. The second finding was that a lot of AI-native companies actually do not have any concept of credit pricing or outcome pricing; they are per-seat only. We have been analyzing the why, and that is really simple. Customers will not buy it, and their use case and their industry do not lend themselves to a full outcome or a full credit-based model. I am really passionate about this topic. We are going to continue exploring new avenues. I do believe there is room for innovation on the pricing side in AI. I have learned over the past 20 years that the best pricing model is the one that meets the needs of the company with the business process of your customers. What we are not going to do—on the trend basis that everybody wants credits to be the same—is to shove a pricing model down customers' throats. Rather, we would work with customers to understand how their buying trends are, and we listen to the field. We do a lot of audience insights in our customers' calls. Great topic. More to come. We will report back on our findings as we continue to explore credits. Erin Kyle: Thanks, Alessio. That is a lot of helpful detail there. I will pass the line. Thank you. Brandon Farber: Thank you, Erin. Operator: Our next question comes from Robert Young from Genuity. Please go ahead. Your line is open. Robert Young: Hi, good morning. First question for me will be on the force reduction that is after the quarter. It seems both optimization and R&D, but I am trying to get a better idea of what the drivers are there—if that is just duplication after the acquisition of 365 Talents, or if it is a more permanent reduction. Are you preparing for a shift towards hiring up in AI? Maybe if you could talk about what that implies on the strong EBITDA margins you reported this quarter. Should we expect that to continue to grow higher on the back of this force reduction? Alessio Artuffo: Rob, good morning. Robert Young: Good morning. Alessio Artuffo: Our restructuring followed a few specific criteria. First, the most important fundamental is we continue to use performance as a strong mechanism to grade ourselves against our own expectations and against our shareholders' expectations. Our job is to continue to have the best people in season to deliver against those expectations. That is an evergreen rationale that applies here. Second, a more targeted action was taken to accelerate something that is not new, which is moving our product capabilities closer to our customers. As you very well know, over 70% of our customers are in North America, and very few people in product are in North America. That distance, that has accumulated between our customers and our product culture, is one that we believe needs to be remediated and addressed, and so we have taken steps to address that. We have chosen to collocate these teams in hubs like Toronto. Just to be absolutely clear, that does not mean that we are exiting or developing a decreased presence elsewhere; that remains foundational to our products. It does not mean that there is any action that has to do, as a derivative, with the March acquisition. We simply want to give our customers the confidence that we have a product team and organization that is also closer to them. As a result of that, we are not pausing anything to rebuild. We are accelerating. We have retained our core architectural leaders to ensure continuity. This transition will not delay—if nothing, will accelerate—our agentic roadmap. In general, as we tap into new markets and as we have the ability to hire people in new territories, we are also excited about the opportunity to improve our hiring profile and continue to augment the skills of the people at Docebo Inc. I think Brandon wants to add something on the EBITDA question. Brandon Farber: Hey, Rob. On the EBITDA side, as Alessio mentioned, the main goal of the reduction was not for cost-savings. Although we are expanding EBITDA margins, the main reason for that is discipline throughout the business while we grow it. When you look at the guide relative to how we performed on EBITDA in 2025, it is about 2% EBITDA leverage year over year. When I think about that at a really high level, there is going to be 1% leverage gained in G&A year over year. That is just continued discipline that we have talked about for years within G&A. Then roughly half a percent of leverage in sales and marketing and R&D, where we continue to focus on sales efficiencies and gaining leverage in R&D as we continue to use various tools that allow us to become more efficient. Robert Young: Okay. Thanks for all that. Second question, adding on to a previous question around the QSR and the casual dining traction. You have had a lot of traction in that space over the last five-plus years. Can you talk about how much opportunity is left and what the competitive dynamic looks within that specific end market? It seems to be driving a lot of new customer growth over the last couple of years. And, if I can, quick question. In the gross bookings metric you gave, the 12.5% growth, does that include Dayforce and AWS, or is that just Dayforce? And then— Brandon Farber: Alessio, I will let you answer the question. Sorry about that. Alessio Artuffo: I will start with the QSR part of the question, and then I will pass on to Brandon the gross ARR question. You are right. QSR is a relevant market for us, one in which we have continued to win landmark logos. That is really the result of a couple of things: a focused sales strategy and a better defined targeting of the accounts that have a higher likelihood to convert with Docebo Inc., and a deliberate product strategy that addresses some of the peculiar needs that this industry has. Some of those include the way they report the data. Others include the way they organize their personnel across franchisees and corporate offices, and that requires rather complex ways of mapping users across the geos, entities, and so on and so forth. By the way, let me use this example to reference back to the defensibility of a true enterprise-grade system. This stuff is really complex. It is multilayered. It takes years to build. Back to QSR, we believe the opportunity ahead of us is pretty significant. We have in-roadmap capabilities that further make us even more compelling. The QSR space requires a deep usage of adaptive and mobile technology. We are thinking and rethinking our mobile strategy in that regard to have more frontline workers technology readiness available. As part of that offering, let me finish by saying there is a module of Docebo Inc. called AI Virtual Coaching that is, still, rather early days but has the potential to become an absolute killer in use cases for front-end workers and QSR-like. We are very excited about it. We are investing in it. We are going to put more resources and more effort into it to accelerate its development. We believe the QSR opportunity is significant for us. Brandon Farber: Rob, if we think about the top 10 QSRs, we have about four of them as customers. There are still the top four largest QSRs that we do not have. There is still a large market opportunity for us to continue to gain. On your question on gross bookings, the 12.5%, that is actually just our total ARR, so it includes gross and churn. That includes AWS. If you are looking for a metric of our growth excluding both Dayforce and AWS, that was closer to 14.5%. Robert Young: Thanks a lot. Operator: Our next question comes from Richard Tse from National Bank Capital Markets. Please go ahead. Your line is open. Richard Tse: Yes. Thank you. With respect to the environment in general, has this AI narrative impacted your sales cycles at all? Is there a swell building as your prospective customers evaluate what they want to do? The environment is changing so quickly. I wanted to get your perspective on that. Alessio Artuffo: Richard, we really monitor our demand in multiple ways. If the question is, are you seeing headwind relative to this AI-first narrative, the answer is no. As far as our sales cycle and our velocity of execution, one of the metrics that I am keeping an eye on in that area is exactly how long it takes us in different segments to get a deal done—from qualification to close. The recent data is incredibly encouraging. We have shaved off weeks of sales execution, particularly in our mid-market and mid-enterprise space. When you do that, what it effectively means is you are almost gaining a month of selling action in the year. That has been very significant, and we are taking steps to improve that even further. Richard Tse: Okay. Thanks. With respect to capital allocation, with you continuing on the SIB, there is a high degree of conviction. Post that SIB concluding, if the stock does not move higher off the back of that, how are you thinking about capital allocation? Would you consider additional buyback programs? Or are you evaluating acquisitions? Ultimately, what is your comfort on leverage ratio here? Brandon Farber: It is a great question. On the acquisition front, doing an acquisition the size of 365 Talents in 2026 is unlikely. We have a lot of things to focus on for 2026. We want to focus on execution and reaccelerate Docebo Inc. organically, and really perform and execute on our acquisition of 365 Talents. From a buyback perspective, if our shares continue to trade at depressed valuations, we will continue to buy back shares under the SIB, even after the SIB. From a net leverage ratio, when we think about net cash to EBITDA, we certainly get very uncomfortable above 3. Under 3, we are more comfortable. So that is our line in the sand. Richard Tse: Okay. Thank you. Operator: Our next question comes from Ken Wong from Oppenheimer. Please go ahead. Your line is open. Alessio Artuffo: Fantastic. Ken Wong: Alessio, I wanted to touch on 365 Talents. This is the largest M&A at the company. M&A is not exactly a competency or a muscle that you guys have. What is your comfort in your ability to absorb such an acquisition? Any appetite for additional M&A beyond this? Alessio Artuffo: I would say a number of things on this. The discipline of skills intelligence is actually very adjacent relative to the learning space. There are obvious overlaps between the two. You are absolutely right in saying that the use cases and, in some instances, the persona buyer can vary. That is why we have taken a deliberate stance of maintaining, for a period of time, the 365 Talents entity and brand active as we implement both the integration from a product capability standpoint—that is priority number one—and, in parallel, we integrate the commercial motions. The enablement that is necessary to blend the organizations is ongoing and will take time. In the meantime, we have structured our organization at Docebo Inc. with resources that are going to be experts and are going to live within the 365 Talents world to become the translators of the value of 365 Talents in our market. The other thing that I would say about this acquisition is, as Brandon briefly mentioned earlier, that I think is really important: as we have this incredible base of over 3,500 customers active, one of the objectives was also to have an opportunity to differentiate and have another entry point other than LMS in these organizations that may already have an LMS in place. Dismantling an LMS setup from a large enterprise can be years' worth of work. Our opportunity here, with effectively our first true second product, is to knock at the door of organizations and offer a value that integrates with their existing LMS. As we enter that secondary door, we can then consolidate that account under a unified strategy. You can appreciate how the adjacency of the capabilities and the integration strategy—from a product and commercial standpoint—lends itself to what will be a very successful second-product story that will have an impact on our NDRR in the future. Ken Wong: Fantastic. Really appreciate the look into the strategic rationale. Brandon, maybe building on that. As we think about the fiscal 2026 guidance, any change in your philosophy here as you have to think through some of the moving pieces that go along with March? The ability to integrate, obviously operating two teams in parallel—how should we think about what prudence was baked in? Brandon Farber: From a March perspective, I would say we did not take a conservative approach. We had a very tight business case. We are factoring in high growth from that business, and we are expecting to execute on that. When we think about the different aspects of revenue, talking about Dayforce, it is going to be down to roughly 3% to 4% of our total revenues. We publicly disclosed that we will generate roughly $9,000,000 pro rata from 365 Talents. We continue to put no deals greater than $1 million ARR within our guide. We do have a number of those in our pipeline, but it has been over 12 months since we have closed one, so we feel like the prudent aspect is to exclude that from our guide. Just as I mentioned, government—while it is in our guide—it is only there for three months, given the seasonality of the Fed spend geared towards September 30. Those are the main aspects that I think of from a revenue perspective. Ken Wong: Got it. And then just a quick follow-up. Any top-line or bottom-line synergies between the two orgs that are factored in? Brandon Farber: Bottom line, no. Top-line synergies are really just what we talked about: going back to the Docebo Inc. base and selling 365 Talents to our current customer base. Ken Wong: Okay. Fantastic. Thanks a lot, guys. Operator: Our next question comes from Matt Van Vliet from Cantor Fitzgerald. Please go ahead. Your line is open. Matt Van Vliet: Yes. Good morning. Thanks for taking my question. Now that you have the go-to-market team reorganized like you wanted, but with the addition of the federal opportunity maybe being a little bit more wholesome than it was before, where do you feel like you are at in terms of sales headcount? What is the plan baked into the guide for 2026? Longer term, how do you think about headcount additions correlating with top-line growth? Or can you decouple those a little bit using AI tooling and other efficiency mechanisms? Brandon Farber: From a sales headcount perspective, on the government side, we invested in 2025 to get additional quota carriers in seats. We feel like, at the start of 2026, we are well set up from a quota perspective. The focus is to win more business with the same amount of headcount. We are really focused on sales productivity and sales efficiencies, using tools to improve those efficiencies. In 2025, I think we ended the year on a good note from a sales efficiency perspective. We started the year fairly inefficient in 2025. We are continuing to focus on it. We really look at our pipeline to indicate when we need to add quota carriers. While we have a budget, we do not stick to it. We do not hire just to hire. We hire based on pipeline, and we will continue to look at that on a quarterly basis. Matt Van Vliet: Very helpful. On the other side of the AI question, how much demand—or maybe even deals closing—are you finding as customers want to have a more complete platform to train their employees on the usage of those LLMs, how to get value out of them, how to protect the organization's data from not including overly proprietary things in prompts? Is it driving a fair amount of top-of-funnel demand and potentially even deal closing? Alessio Artuffo: I would say among the trends in the audience insights that we have, AI readiness is one of those trends. Specific companies in the tech sector are more concerned with advancing their people's AI capabilities. Conversely, what we are finding is that sectors that are more institutional—like manufacturing, healthcare, and data-sensitive—are, in an anticyclical way, asking us to put in place measures for AI to be deeply controlled, enabled, disabled, toggled off. Those controls capabilities have become an absolute must requirement. We are seeing evidence of that, unsurprisingly, in the government space. It is a very interesting phase in which you have the ones that are on the offense side and want to use our technology to get smarter about AI, and the ones that are on the defense side and are still skeptical of the downsides of AI, asking us for observability, controls, and compliance. We are playing on both fronts. Matt Van Vliet: Alright. Great. Thank you. Alessio Artuffo: Thank you. Operator: Our next question comes from Suthan Sukumar from Stifel. Please go ahead. Your line is open. Suthan Sukumar: Good morning, gents. For my first question, I wanted to touch on the competitive landscape. Aside from Workday buying Sana, I am not sure I am seeing any major moves in the industry. More broadly, how are you seeing competitors respond to AI and executing on this opportunity? Alessio Artuffo: I would say this. First, I will tell you where I stand philosophically on the topic of competition. While we get educated, I like to say to the team we are incredibly self-centric and self-focused. I do not want this company to chase the others. I want us to lead the pack, innovate, and be very focused on ourselves. That is the philosophy I take on competition. When I get education from the team about what they hear about the competitive landscape, I think your reflections are correct. There is not a high degree of innovation happening. Fortunately for us, companies in our state historically have taken more prudent approaches to R&D. I would say the biggest trend that we are seeing, that I am having evidence of, is what I would call AI by marketing. AI by marketing is the art of calling everything “agents” even when they are not. What I see is a bunch of pretty simple copilots defined as revolutionary agents, when they are not. An agent is an agent by definition; it should be studied what that definition is. An agent takes decisions. An agent solves complex business problems. We understand the difference between a copilot and an agent because we are building both. I would say the market is frothy. There is not a ton of real, disrupting value. I would say Sana acquired by Workday was that one startup that had an edge in that area. Certainly, it becomes challenging for a company like that to go at the same speed and pace within a machinery like Workday. None of my business. All I know is that when we go in the market and we introduce AI capabilities, we stand out big time. That is what we are keeping on doing. Suthan Sukumar: Great. For my second question, from more of a bookings and pipeline perspective, can you speak about how contribution has been trending in your pipeline from your SI partners, like Deloitte and Accenture? Any color on how deal sizes and deal scope have been evolving when partners like these are involved? Alessio Artuffo: Yes. Straight to your question, nearly 80% of our enterprise pipeline now has a system integrator attached to it. We work with a number of system integrators from the Deloittes and Accentures of the world to smaller, medium-sized system integrators that are either regional or leaders in their respective market. That work that has happened over the years is certainly paying off. Specific to system integrators, things that I can share: we recently announced that with Deloitte, we have completed a process to enable Deloitte plus Docebo Inc. to become a product that you can purchase through the Amazon AWS Marketplace. That means Deloitte customers that want to implement a learning platform can buy Docebo Inc. in partnership with Deloitte using their AWS credits, which is a very favorable vehicle of purchasing, especially for large enterprises that often have credits to be managed and spent on the AWS side. Everybody wins because Deloitte wins, AWS wins, and, ultimately, Docebo Inc. benefits from what is a very CAC-accretive type of sale. Additionally, we are working with Deloitte and other system integrators on their own academies. What we are finding is that these system integrators are implementing academies using Docebo Inc., which means they power their own customer academy using Docebo Inc. This is becoming a catalyst for very large organizations that are approaching the system integrators. Notably, it is happening with major airlines and major transportation groups that are going to the system integrators and saying, “I would really love to implement your academy.” When they scope out what they really want, this becomes less of a broad academy play and more of a direct deal with the system integrator. It also acts like a lead-gen opportunity for us. The work that our team is doing on system integrators is very good. There is more to be done, and there are more integrators that we are talking to that we plan to sign over the next few quarters. I am pretty excited about it. Suthan Sukumar: Okay. Great. Thank you for the color. I will pass the line. Operator: Our next question comes from Gavin Fairweather from ATB Capital Markets. Please go ahead. Your line is open. Gavin Fairweather: Just on 365 Talents. I am sure you had a base deal or a base understanding about upsell and bundled deals when you did that acquisition. I am curious what market feedback you are getting from clients and prospects and how that is making you feel about the opportunity vis-à-vis your original expectations. Alessio Artuffo: Gavin, relatively early days—we are a month plus in—and I can tell you that we had certain phases of the amount of opportunities that we would generate of companies that want to look at 365 Talents. I recently posted a webinar with Loïc, the CEO of 365 Talents, and close to 1,000 people registered for the webinar. A number showed up, and a big percentage of the people after the webinar asked for a demonstration and declared in the webinar that they were looking for a solution or looking to improve their current solution. The pervasive feedback that we are getting across all calls is that companies do have a skills strategy, but it is fragmented from a system standpoint—meaning, they may have a skills module in their HRIS or HCM system, but it is not connected to the learning execution strategy in the way that we plan to do it. When we tell them a story of this automated cycle across the skill gap—the skilled engine, their workforce planning strategy, their career development, the internal mobility use case—with learning attached to it in a seamless way, we demo that to them, their reaction is incredibly positive. We are a month in. Our integration is still relatively simple, all things considered. Imagine what will happen when we execute on our real vision over the next two to three phases of integration, which will occur within the next 12 months. All of that to say the leading indicators are incredibly positive. I would also say the other thing that excites me the most is it is clear we have an enterprise-first strategy. Complex organizations get the best out of the 1,000 employees and above, which we have set for this product. We are bang on in terms of the pain that is felt from the type of customers that we want. That is product market fit, and now we just need to execute. Operator: Our next question comes from John Chao from TD Cowen. Please go ahead. Your line is open. John Chao: Good morning. Thanks for taking my questions. You mentioned Docebo Inc. has the data moat. Could you break down that data moat to help us understand what data belongs to you versus your customers? Alessio Artuffo: I would say, most simple, compliance-related forms. Then you have data relative to external use cases. You have years of use of the Docebo Inc. platform to prove that, by enabling your customers and/or your partners to do the work that they need to do, or to buy more by educating them, they indeed deliver better experiences if they are partners, or they buy more, or they stick around longer if they are customers. That data is invaluable to any marketing organization, to any revenue organization. On top of all of this, we are adding the data moat of skills. Now we are talking millions of records, as very large companies have knowledge that an individual went from a certain skill set to a new skill set over different levels over the course of years. That data, again, is not available to third-party sources. The reason why all of that data is incredibly important is that, in order to operate automation and decision-making on top of it in the form of agents, agents are not ET aliens. They are fundamentally workflow executors. They execute workflows on clean, well-organized, structured datasets. Whether the agent lives in your LLM and is called via an MCP server, or the agent is a hyper-specialized agent that Docebo Inc. has the knowledge to create and solve the very specific problems in the LMS world, it does not matter. They can live in a number of different places. What they need in order to provide an outcome is the data that resides in our systems. I hope that helps. John Chao: Got it. Thank you. My second question is in terms of the customer spending. I understand that ACV is around $60,000 to $70,000. How does that number compare to your customer's corporate learning budget? Is it around 10%, or is it a much higher number? I am asking this because one of the key arguments for AI disruption is cost savings. Mike McCarthy: It is a very interesting question, but the learning tech stack is much wider than you would expect. Every company has, from HRIS systems to LMS to skills—the tech stack is wide. If you look at a graph of the number of SaaS companies that are in the L&D or CHRO tech stack, it is wide. LMS is not the biggest one. Obviously, HRIS is by far in the lead, and it is materially higher than the cost of an LMS. That is the reality. The average ACV of $60,000 to $70,000—that is really Docebo Inc. continuing to move up and upmarket. We really look at an enterprise ticket now at roughly $250,000. While there is competition in the enterprise space, Docebo Inc. is typically very competitively priced, maybe on the top end, but compared to our competitors, we are within the range. We continue to see enterprise willingness to spend that money. There has been no pushback on price—on renewals, on new prospects. Pricing is holding strong, and companies see the value in an LMS. John Chao: Thank you so much. That is all. Operator: Our last question will come from Kevin Krishnaratne from Scotiabank. Please go ahead. Your line is open. Kevin Krishnaratne: Hey there. Thanks for fitting me in. Just one question, maybe two parts, for Brandon. Brandon, you talked about in the prepared remarks reaccelerating organic growth. I think you did 9.5% subscription growth in Q4. Maybe you can help us on what the organic growth expectation is for Q1 after 365 Talents. It is coming down a little bit, but do you expect that to stabilize and grow in Q2? Or is there anything that we should be thinking about in Q2—whether that is anything from Dayforce churn or any renewals coming up in Q2 that we need to consider? I am wondering how we think about the organic growth trajectory here. Brandon Farber: The reacceleration organic we are modeling Q3, Q4 onwards. There are a number of factors. Number one, you look at Q1 and Q2—our enterprise performance was below expectations. As we lapse some of the quarters that had material impact due to Dayforce wind-down, which was Q3 and Q4, and as we lap AWS, our ability to reaccelerate growth becomes greater and greater. In our internal models, that acceleration starts in Q3 and continues in Q4. Kevin Krishnaratne: That is super helpful. Then last piece—you talked about strength in mid-market. Enterprise is going to be a driver. Can you talk about the SMB or the low end of your base and how much of that is in your ARR? Is there anything to think of there in terms of pressures or churn at those types of companies that are more on the low end of the customer profile? Brandon Farber: ARR below $50,000, which is generally the benchmark we consider commercial or SMB, is down to about 16% of our ARR. At the same time, it is interesting to note that our gross retention in that area actually improved year over year. We were always in the mid-80s, and we actually saw a sequential improvement in the commercial segment. It is an area that we have restructured how we manage it from an account management perspective. We have put a bit more focus, a bit more investment, and we are seeing that investment pay off. That is more from an account management perspective. As Alessio mentioned, from a new leads perspective, we have new benchmarks—some go to partners, some go to us. That existing customer base below $50,000 is actually a much healthier customer base than it has been in prior years. Operator: We have no further questions. I would like to turn the call over to Alessio Artuffo for closing remarks. Alessio Artuffo: Thank you, everyone, for being on the Q4 2025 earnings call. We are very excited about the trajectory of Docebo Inc. A milestone ahead of us is called Docebo Inspire in April in sunny Miami, and we look forward to seeing you there. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Assured Guaranty Ltd. Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Becky, and I will be the operator for the call today. All participants will be in a listen-only mode. Should you need any assistance, signal a conference specialist by pressing star then 0 on your telephone keypad. During today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to our host, Robert S. Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead. Thank you, operator, and thank you all for joining Assured Guaranty Ltd. for our full year and fourth quarter 2025 financial results conference call. Robert S. Tucker: Today's presentation is made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The presentation may contain forward-looking statements about our new business and credit market conditions, credit spreads, financial ratings, loss reserves, financial results, and other items that may affect our future results. These statements are subject to change due to new information or future events. Therefore, you should not place undue reliance on them as we do not undertake any obligation to publicly update or revise them except as required by law. If you are listening to a replay of this call, or if you are reading the transcript of the call, please note that our statements made today may have been updated since this call. Please refer to the Investor Information section of our website for our most recent presentations and SEC filings, most current financial filings, and for the risk factors. The presentation also includes references to non-GAAP financial measures. We present the GAAP financial measures most directly comparable to the non-GAAP financial measures referenced in this presentation along with a reconciliation between such GAAP and non-GAAP financial measures in our current financial supplement and equity investor presentation, which are on our website at assuredguaranty.com. Turning to the presentation, our speakers today are Dominic John Frederico, President and Chief Executive Officer of Assured Guaranty Ltd., Robert Adam Bailenson, our Chief Operating Officer, and Benjamin G. Rosenblum, our Chief Financial Officer. After their remarks, we will open the call to your questions. As the webcast is not enabled for Q&A, please dial into the call if you would like to ask a question. I will now turn the call over to Dominic. Dominic John Frederico: Thank you, Robert, and welcome to everyone joining today's call. We significantly advanced Assured Guaranty Ltd.’s key business strategies in 2025, positioning us for sustainable long-term growth. Among this year's most important accomplishments, we again brought our key shareholder value metrics at year-end 2025 to new per-share highs of $186.43 for adjusted book value, $126.78 for adjusted operating shareholders' equity, and $125.32 for shareholders' equity. We earned adjusted operating income per share of $9.80 compared with $7.10 in 2024 and created significant future earnings from financial guarantee originations. Our present value of new business production, or PVP, totaled $286 million with meaningful contributions from each of our three financial guarantee underwriting groups. We continue to be the leader in the new issue market for U.S. municipal bond insurance. In our strategic efforts to expand our U.S. municipal secondary market business, we saw great success as we more than tripled our secondary market par insured over last year's performance. Rob will provide details on our financial guarantee production in a few minutes. In our capital management program, we repurchased 12% of the common shares that were outstanding on 12/31/2024 while meeting our 2025 target of repurchasing $500 million of our shares. We also distributed $69 million to shareholders through dividends, and last week, we announced that we have increased our current quarterly dividend per share by 12% compared to November 2025, representing fourteen years in a row of dividend growth. Our alternative investments continue to perform well, including funds managed by Sound Point Capital Management and Assured Healthcare Partners. Alternative investments have provided an annualized, inception-to-date internal rate of return of 13% through year-end 2025. As we mentioned on prior calls, we successfully defended our legal rights in litigation with Lehman Brothers International, resulting in a pretax gain of approximately $103 million in 2025. We also reached successful resolutions of several other loss mitigation situations that were accretive to our financial results. Ben will discuss these further in a few minutes. Lastly, during 2025, we completed substantially all the work required to leverage our decades of experience in life insurance securitizations and investment management into a life and annuity reinsurance business. In January 2026, we acquired Warwick Re Limited, which we have renamed Assured Life Reinsurance Limited, or Assured Life Re for short. This acquisition further diversifies our revenue sources and has the potential for significant synergies with our financial guarantee and investment activity. Assured Life Re’s primary business focus will be reinsuring fixed-term annuities, specifically multi-year guaranteed annuities known as MYGAs, and pension risk transfer annuities. The Assured Life Re platform combines Assured Guaranty Ltd.’s core strengths in credit and structured finance, management of our own multibillion-dollar investment portfolio, and our twenty-year track record of providing financial guarantee services to the life insurance sector with the operational infrastructure and experienced life reinsurance professionals of Warwick Re. We believe we are well positioned for growth in 2026 and beyond. Since we commenced operations in 1985, the value and reliability of our guarantee and the resilience of our business model have been repeatedly demonstrated, especially during financial crises, a global pandemic, and during other periods when it was difficult to predict the direction of economic conditions. I will now turn the call over to Rob to provide more details about our financial guaranty production results. Robert Adam Bailenson: Thank you, Dominic. In 2025, we generated $286 million of PVP from transactions that, in aggregate, were of higher credit quality than in recent years. Municipal bond insurance remained in strong demand during 2025, as the U.S. municipal market experienced the second consecutive year of record issuance. In U.S. public finance, we originated $206 million in PVP, finishing the second half of the year strongly with $132 million in PVP, a 19% increase over the second half of 2024. In looking at 2025, PVP was limited by the mix of business that came to market, which resulted in our insuring fewer large transactions in the BBB category than in 2024. As a result, municipal par we insured was weighted more heavily toward higher credit-quality transactions with lower capital charges, and these higher-rated deals produce less premium. Overall, we guaranteed over $27 billion of municipal par, 16% more than in 2024, across more than 1,500 primary and secondary market policies. For insured new-issue municipal par sold in 2025, Assured Guaranty Ltd. achieved a fifteen-year high, wrapping more than $25 billion and leading the bond insurance industry with 58% of new-issue insured par sold. Our new-issue deal count grew 15% year-over-year to more than 900 transactions. Perhaps most notably, we increased our U.S. public finance secondary insured par written more than 240% year-over-year to approximately $2 billion, which generated $44 million of PVP. With over $4 trillion of municipal bonds outstanding, we are excited about the opportunity available in bonds we can insure in the secondary market. We have made several technological and operational process improvements over a multiyear investment period to greatly enhance the secondary market team's ability to source, evaluate, and execute transactions. Modernization of our platforms, including deployment of new market analysis tools and applications and real-time data integration, as well as improved workflows, drove a substantial increase in our underwriting speed and capabilities, enabling faster credit assessments, quote turnaround times, and deal executions. A strong new-issue market demand on larger transactions showed continuing institutional appetite for a guarantee on such transactions. In 2025, Assured Guaranty Ltd. wrapped 51 primary market issues with approximately $100 million or more in insured par, a total of approximately $12.6 billion of insured par sold. This is our highest annual number of $100 million-plus municipal transactions in over a decade. Two of our transactions were honored at the 2025 Bond Buyer’s Deal of the Year ceremony. JFK International Airport's Terminal 6 redevelopment project, for which we insured $920 million of par in November 2024, was recognized as the Green Financing Deal of the Year, and Alaska Railroad Corporation's cruise port revenue bonds, where we insured $108 million in 2025, was named the Far West Region Deal of the Year. Other large deals in 2025 included $1 billion for the Authority of the State of New York, $844 million for the Downtown Revitalization Public Infrastructure District in Utah, $730 million for the Alabama Highway Authority, $650 million for the Massachusetts Development Finance Agency on behalf of Beth Israel Lahey Health, and $600 million for the New York Transportation Development Corporation’s new Terminal 1 at JFK Airport. Also in 2025, we saw an increase in the use of our insurance among underlying AA-rated credits, which are credits rated in the AA category before insurance by S&P or Moody’s. For AA-rated credits, in both the primary and secondary markets, we issued over 160 insurance policies totaling approximately $7 billion of insured par, which year-over-year represents an increase of approximately 60% for both of those metrics. While such step-away transactions produce less premium per dollar of insured par, they require us to hold less capital, generate attractive returns, enhance overall insured portfolio credit quality, and demonstrate market confidence in the strength, reliability, and durability of our guarantee as a backstop against potential issuer downgrades, headline risk, and market value declines. Turning to our other markets, non-U.S. public finance and global finance originations together contributed $80 million in PVP for 2025. We closed $37 million of non-U.S. public finance PVP in 2025, including $18 million in a strong fourth quarter. The year's production results were mainly driven by several primary infrastructure finance transactions in the U.K. and the European Union, as well as secondary market transactions for U.K. sub-sovereign credits. Among the insured credits are a portfolio of general obligation loans to universities in the United Kingdom, a project finance loan for a road construction project in Spain, and a note issue to refinance debt in the French fiber optic sector, our first primary market execution in France since the global financial crisis. In global structured finance, we guaranteed over 40 transactions in 2025, with a total PVP of $43 million, including strong fourth-quarter PVP production totaling $20 million primarily from fund finance facilities, insurance securitizations, the upsize of a transaction providing protection on a core lending portfolio for an Australian bank, and consumer receivable transactions. We have now built fund finance into a high-performance flow business that includes repeatable transactions whose renewals generate future PVP, and since these are shorter-duration transactions, we also benefit because we earn the premiums more rapidly and can recycle the capital more quickly. For example, the transactions we insured this year had a stated maturity within one to four years, and we will earn all the premiums during that period. This fund finance earnings time frame is two to three times faster than a typical structured finance business we insure. Looking toward par and PVP production in 2026, we have a robust transaction pipeline and are expecting strong results from each of our three financial guarantee product lines. Thus far, in 2026, we have already closed several large transactions. We believe we have significant short-term and long-term opportunities for growth across our financial guaranty markets. In the U.S. public finance market, we continue to be the premier insurer of new-issue municipal bonds and have developed more efficient and broader capabilities to serve the enormous secondary municipal market. In structured finance, our fund finance business provides us with a stream of shorter-duration transactions that are repeatable and complement the often larger and longer-duration transactions that have been typical in that sector. We have also seen expanding business opportunities in Europe and Australia across both public and structured finance. Most important of all, we have the financial strength, experienced staff, and improved business model to continue growing and leading the financial guaranty industry. I will now turn the call over to Ben to discuss our detailed financial results. Benjamin G. Rosenblum: I am pleased to report fourth quarter 2025 adjusted operating income of $109 million, or $2.32 per share, representing an increase of 83% on a per-share basis from adjusted operating income of $66 million, or $1.27 per share, in 2024. Our full-year 2025 adjusted operating income was $445 million, or $9.08 per share, representing an increase of 28% on a per-share basis from $389 million, or $7.10 per share, in 2024. The largest drivers of the quarter-over-quarter increase were a $23 million pretax gain associated with a loss mitigation strategy, higher earnings from alternative investments, and lower loss expense. Full-year results in 2025 also benefited from a $103 million gain related to the resolution of the Lehman litigation, $15 million in fees related to workout credits, and a $20 million increase in the pretax contribution from the asset management segment. As you can see, 2025 was a big year for resolving several previously troubled exposures. In addition to the gain on the Lehman resolution, loss mitigation efforts resulted in the paydown of our largest below-investment-grade security, reducing the amount of loss mitigation securities in our investment portfolio by over $400 million. In addition, a commercially leased building that was part of a loss mitigation exposure was sold, removing another troubled asset from our balance sheet. The company was able to fully recover its losses through the negotiated settlements that were finalized in 2025. This further demonstrates the strength of our underwriting, our persistence in defending our rights, and our multifaceted approach to working with issuers and developing innovative solutions. Enhancing our investment returns is another strategy that yielded results this past year. As of December 31, 2025, our alternative investments had a fair value of over $1 billion, up from $884 million as of 12/31/2024. In the fourth quarter of 2025, alternative investments generated $47 million in pretax adjusted operating income and $160 million of pretax adjusted operating income for the full year, representing a year-over-year increase of 33%. Since we commenced the alternative investment strategy, we have consistently reported inception-to-date IRR of approximately 13%. As a point of comparison, our fixed-maturity portfolio average yield over the past three years has been 4.16%. In terms of capital management, we again reached $500 million in share repurchases, buying back 5.8 million shares, or almost 12% of the shares outstanding at the end of 2024, at an average price of $85.92. We are committed to prudent capital management and have continued to repurchase shares in 2026. Our remaining share repurchase authorization as of today is $204 million. As always, we actively assess the various opportunities to deploy our capital effectively and aim to invest in those that we believe provide the most attractive returns. Our holding company liquidity as of today is approximately $130 million, of which $48 million is at AGL. Last week, our board of directors also approved a 12% increase in our quarterly dividend per share from $0.34 to $0.38. Finally, I want to highlight the acquisition of Warwick Re, which launched our annuity reinsurance platform and which we expect to add another source of earnings separate from our financial guaranty business. We are actively progressing several promising opportunities in our pipeline to assume new blocks of annuity business and expect to make investments in this business over the next few years. We are excited to grow this business, which we have renamed Assured Life Reinsurance, and we will have an update for you on the first quarter earnings call. In the meantime, we have an annuity reinsurance presentation on our website. I will now turn the call over to our operator to give you instructions for the Q&A period. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. Our first question comes from Marissa Lobo from UBS. Your line is now open. Please go ahead. Marissa Lobo: Good morning. Thanks for taking my question. Earlier in the quarter, you noted that issuance in BBB credits had come back from prior lower levels. How did this look in the fourth quarter, and what are your thoughts for the mix into 2026? Robert Adam Bailenson: We are seeing that come back, and we saw it in the fourth quarter. We are off to a very good start in the first quarter, so we believe that is going to continue. We have closed a number of transactions already in U.S. public finance as well as infrastructure finance in Europe, and so we continue to see that. We are very excited about 2026. Marissa Lobo: Okay. Thank you. And looking at the big exposures, could you give us an update on your outlook across the U.K. utilities and Brightline as well? Benjamin G. Rosenblum: Sure. I will start with that unless Dominic and Rob want to chime in. We are looking across, obviously, the U.K. utilities. When you look at what happened during the quarter, our U.K. water utility BIG exposure went down as we upgraded Southern Water. We feel pretty good about that upgrade at Southern Water. It was out in the market and had new equity introduced to it, so they raised debt and equity, making it really, in our opinion, an investment-grade credit. So for U.K. water, we are 100% focused now really on just Thames being the only problem exposure there. We are part of the creditors committee, as you know, on Thames, and we are actively looking to work with the U.K. government at a market-based solution, and we are hopeful to have an update on that relatively shortly. Do you want me to cover Brightline, or do you have any questions on that? Marissa Lobo: No. That is helpful. Thank you. Brightline, please. Except for Brightline, we remain confident. Benjamin G. Rosenblum: Our thesis when we went into Brightline was that there is a lot of subordination below us, over $4 billion below us, and that is a really good position to be in a capital stack of a troubled exposure. Their ridership is going up. I think they are on the way to recovery, and we are obviously happy to be part of any solution they have. But we remain committed to them as well as very confident in our position in that exposure. Marissa Lobo: Got it. Thanks for taking my questions. Thank you. Operator: Our next question comes from Thomas Patrick McJoynt-Griffith from KBW. Your line is now open. Please go ahead. Thomas Patrick McJoynt-Griffith: Hey, good morning. A question on your alternative investment portfolio. I tend to remember that it is largely CLOs that are in there, but can you just talk about the exposure there? Is there anything with private credit that we should keep on the radar? Benjamin G. Rosenblum: We do not really take direct, absolute direct exposure to private credit. Obviously, we are investing in the CLO market, and some of the names are in there as well. However, we do mark our portfolio to market, and we believe that any pain that probably has been experienced in the market today, for many of the names that have been in there, we have experienced. But we remain confident, and again, our exposure there is in good shape. We feel pretty good about it. Thomas Patrick McJoynt-Griffith: Okay. Thanks. In switching gears, to the extent that you allocate some capital into the annuity reinsurance market, would that preclude you from sticking with your $500 million annual buyback target, or should we think of those as two independent opportunities? Dominic John Frederico: You have to look at the entire capital stack as interdependent. We have a range of capital management opportunities this year in terms of stock buyback, but that range will be dictated by what other opportunities we see in the market, specifically the life and annuity reinsurance business. As we said when we made the acquisition, we have substantial excess capital there that allows us to write a substantial amount of new business. But as we have seen, we have gotten more inquiries than we were actually expecting, so we are pretty happy with the opportunities we see there. That might allocate some more capital that will dictate exactly where we will land in the range of our stock buyback. We are committed to capital management. We are committed to stock buybacks and repurchasing. We will just manage that throughout the year. Operator: Thank you. This concludes the question and answer session. I would now like to turn the conference back over to our host, Robert S. Tucker, for closing remarks. Robert S. Tucker: Thank you, operator. I would like to thank everyone for joining us on today's call. If you have additional questions, please feel free to give us a call. Thank you very much. Operator: This concludes today's conference call. Thank you all for attending. You may now disconnect your lines. Have a great day.
Operator: Please standby. Your program is about to begin. Welcome to the MBIA Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. I will now turn the call over to Gregory R. Diamond, Managing Director of Investor and Media Relations at MBIA Inc. Sir, please go ahead. Gregory R. Diamond: Thank you, Chelsea. And welcome to our conference call for the full year 2025 MBIA Inc. financial results. Excuse me. Hold on. I have it on here, it just went away. You do not have it yet. We have a copy of it? I do not have it. I have a copy. Oh, that is good? Yes. It is buried underneath this Outlook problem. Apologies. After the market closed yesterday, we issued and posted several items on our websites, including our financial results, 10-Ks, quarterly operating supplement, and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance companies’ insurance portfolios. Regarding today’s call, please note that anything said on the call is qualified by the information provided by the company’s 10-Ks and other SEC filings, as our company’s definitive disclosures are incorporated in those documents. We urge investors to read our 10-K as it contains our most current disclosures about the company, its financial and operating results. The 10-K also contains information that may not be addressed on today’s call. The definitions and reconciliations of the non-GAAP terms included in our remarks today are also included in our 10-Ks as well as our financial results report and our quarterly operating supplement. The recorded replay of today’s call will become available approximately two hours after the end of the call. Now for our safe harbor disclosure statement. Our remarks on today’s conference call may contain forward-looking statements. Important factors such as general market conditions and the competitive environment could cause our actual results to differ materially from the projected results referenced in our forward-looking statements. Risk factors are detailed in our 10-Ks available on our website at mbia.com. The company cautions not to place undue reliance on any such forward-looking statements. The company also undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such statement is no longer accurate. For our call today, William Charles Fallon and Joseph Ralph Schachinger will provide introductory comments, and then a question and answer session will follow. I will now turn the call over to William Charles Fallon. William Charles Fallon: Thanks, Greg. Good morning, everyone. Thank you for being with us today. We had lower net losses for our full year 2025 financial results versus full year 2024 and comparable net losses for the 2025 and 2024. Comparing the two years’ results, National recorded a benefit from losses and loss adjustment expense in 2025 versus incurred losses in 2024. For both years, National’s losses and LAE resulted primarily from changes to loss estimates for its PREPA-related exposure. The 2025 benefit largely resulted from the sale of a custodial receipt associated with National’s PREPA bankruptcy claims at prices better than National’s loss estimates, as well as a favorably revised estimate for losses on National’s remaining $425 million of PREPA gross par outstanding. Our priority continues to be resolving National’s PREPA exposure. In that regard, there has not been much substantive progress since our last conference call in November. Until the legal issues related to the members of the Financial Oversight and Management Board are resolved, it is unlikely that substantive progress will be made. Regarding the balance of National’s insured portfolio, those credits have continued to perform generally consistent with our expectations. The gross par amount outstanding for National’s insured portfolio has declined by approximately $3 billion from year-end 2024 to about $22 billion at the end of 2025. National’s leverage ratio of gross par to statutory capital was 24-to-1 at the end of 2025, down from 28-to-1 at year-end 2024. As of 12/31/2025, National had total claims-paying resources of $1.4 billion and statutory capital and surplus in excess of $900 million. I will now turn the call over to Joseph Ralph Schachinger for additional comments about our financial results. Joseph Ralph Schachinger: Thank you, Bill, and good morning all. I will begin with a review of our fourth quarter and full year 2025 GAAP and non-GAAP results and then provide an overview of our statutory results. The company reported a consolidated GAAP net loss of $51 million, or a negative $1.01 per share, for 2025 compared with a consolidated GAAP net loss of also $51 million, or a negative $1.07 per share, for 2024. When comparing 2025 and 2024, there were a few offsetting items. Lower revenues in our Corporate segment, which were primarily due to a decrease in foreign exchange gains, were offset by lower interest expense on MBIA Insurance Corporation’s floating rate surplus notes and lower operating expenses related to consolidated variable interest entities, or VIEs, at MBIA Insurance Corporation. The company’s adjusted net loss, a non-GAAP measure, was $12 million, or a negative $0.24 per share, for 2025 compared with an adjusted net loss of $22 million, or a negative $0.48 per share, for 2024. The favorable change was primarily due to lower losses and LAE at National, largely related to its PREPA exposure. For full year 2025, the company reported a consolidated GAAP net loss of $177 million, or a negative $3.58 per share, compared with a consolidated net loss of $447 million, or a negative $9.43 per share, for full year 2024. The lower consolidated GAAP net loss for full year 2025 was driven by lower expenses and, to a lesser extent, higher revenues compared with full year 2024. Our lower expenses were primarily driven by a loss and LAE benefit on our PREPA exposure in 2025 compared with an expense in 2024. The benefit in 2025 primarily resulted from our sale of PREPA bankruptcy claims at an amount that exceeded National’s loss recovery estimate and the impacts of adjustments to our PREPA loss scenarios. Contributing to our higher revenues were lower losses related to VIEs at MBIA Insurance Corporation. In 2024, VIE losses resulted from the repurchase of VIE debt and the deconsolidation of a VIE, with no comparable activity in 2025. In addition, we recorded lower fair value losses in 2025 on assets acquired in connection with recoveries of paid claims related to the Zohar CDOs, offset by higher foreign exchange losses as a result of the dollar weakening and lower net investment income. The company’s adjusted net income was $23 million, or $0.46 per share, for full year 2025 compared with an adjusted net loss of $184 million, or a negative $3.90 per share, for full year 2024. The favorable change was primarily due to the loss and LAE benefit at National in 2025 related to its PREPA exposure. MBIA Inc.’s book value per share decreased $3.28 to a negative $44.27 per share as of 12/31/2025. This decrease was primarily due to our consolidated net loss for full year 2025. In addition, included in MBIA Inc.’s book value as of 12/31/2025 is a negative $53.35 per share of MBIA Insurance Corporation’s book value. I will now spend a few minutes on our Corporate segment balance sheet. The Corporate segment, which primarily comprises the activities of the holding company, MBIA Inc., had total assets of approximately $653 million as of 12/31/2025. Within this total are the following material assets. Unencumbered cash and liquid assets held by MBIA Inc. totaled $357 million, compared with $380 million as of 12/31/2024. The decrease was largely due to the repayment of MBIA Inc. 7% debt that matured in December 2025 and the payment of operating expenses, partially offset by a dividend received from National. In December 2025, National declared and paid an as-of-right dividend of $63 million to MBIA Inc. In addition to these unencumbered cash and liquid assets, the Corporate segment’s assets included approximately $183 million of assets at market value pledged to Guaranteed Investment Agreement contract holders, which fully collateralized those contracts. Now I will turn to the insurance companies’ statutory results. National reported statutory net income of $5 million for 2025 compared with a statutory net loss of $10 million for 2024. The favorable variance was driven by lower loss and LAE in 2025 related to National’s PREPA exposure. For full year 2025, National reported statutory net income of $88 million compared with a statutory net loss of $133 million for full year 2024. The favorable change was primarily due to a loss and LAE benefit of $35 million in 2025 compared with an expense of $196 million in 2024. The loss and LAE activity in both years were mostly related to National’s PREPA exposure. National statutory capital as of 12/31/2025 was $937 million, which was up $25 million compared with 12/31/2024. The increase was largely due to National’s statutory net income for full year 2025, partially offset by the $63 million as-of-right dividend paid to MBIA Inc. As of year-end 2025, claims-paying resources were $1.4 billion. Now I will turn to MBIA Insurance Corporation. MBIA Insurance Corporation reported a statutory net loss of $7 million for 2025 compared with statutory net income of $4 million for 2024. The net loss for 2025 was driven by losses reclassified from surplus related to the dissolution of MBIA Insurance Corporation’s Mexican subsidiary and higher losses and LAE compared with 2024. In last year’s fourth quarter, losses and LAE related to RMBS exposure were mostly offset by a benefit related to recovery estimates on the Zohar CDOs. For full year 2025, MBIA Insurance Corporation reported a statutory net loss of $26 million compared with a statutory net loss of $64 million for full year 2024. The lower net loss in 2025 was primarily driven by lower losses and LAE, largely related to estimating recoveries of paid claims associated with the Zohar CDOs. As of 12/31/2025, the statutory capital of MBIA Insurance Corporation was $79 million, down from $88 million at year-end 2024, due to its net loss for full year 2025 partially offset by an increase in the value of investments recorded directly to surplus. As of year-end 2025, claims-paying resources totaled $317 million. MBIA Insurance Corporation insured gross par outstanding was approximately $2 billion as of 12/31/2025, down about 13% from year-end 2024. The decrease in gross par outstanding was primarily driven by regular amortization of the insured portfolio. We will now open for questions. Operator: If you have a question at this time, please press 1 on your telephone keypad. If you wish to remove yourself from the queue, press 2. We ask that when posing your question, you please pick up your handset to allow optimal sound quality. We will take our first question from Thomas Patrick McJoynt-Griffith with KBW. Please go ahead. Thomas Patrick McJoynt-Griffith: Good morning. The fourth quarter often presents a time or an opportunity for a special dividend, and that is based off of the special dividend that we saw out of National in 2023. This most recent fourth quarter, did you explore the potential for a special dividend? Are you having conversations with your regulators about potentially distributing some of the capital beyond just the as-of-right dividend? William Charles Fallon: Tommy, with regard to a special dividend, first of all, there is nothing in particular about the fourth quarter. National, just given its history, has only actually requested and had one special dividend, which happened to be in 2023. It is something that we are looking at all the time, as you know, and can appreciate. As the portfolio runs off, and in particular as our PREPA exposure comes down, which it did substantially in the second half of last year, the likelihood and the amount of a potential special dividend goes up. So it is something that we are looking at all the time. There is no information we have at this point. The information that we would provide is that we have received approval for a special dividend and have distributed to the holding company. But it is something that, again, we are looking at all the time, and I think since the last special dividend, circumstances have improved in terms of the likelihood of a special dividend. Thomas Patrick McJoynt-Griffith: Thanks for that. The other important story that people are focused on surrounds the strategic process potentially including a sale of the company. What are the latest updates there in that process as you explore that opportunity? And I have asked this before, and I will ask it again. Do you think in a scenario where there is a sale, does the company just sell National and then take the proceeds and sort of wind down the rest of the operation? Or would the strategic action be to sell the entire holding company and its subsidiaries included? Thanks. William Charles Fallon: As you know, and as a reminder to other people, we did look at selling the company a few years ago. Based on the feedback during that process, we concluded it would be beneficial for our shareholders for us to go get a special dividend and then distribute money to the shareholders and also to hopefully further resolve or make progress with regard to the PREPA restructuring. We were successful with the dividend, properly reduced our exposure. I cannot say that there has been much real progress in terms of resolving PREPA, but we are optimistic that something will develop this year. With regard to whether to sell the entire company or whether we would sell just National and then, to your point, deal with all the other pieces, whatever is best for the shareholders is what we will do. So in a sense, all options are on the table. To sell the company, in a sense, is the cleanest way to do it. But, again, if there is more value for shareholders by doing it via its components, then that is what we will do. Thanks. Operator: Thank you. Our next question will come from John Adolphus Staley with Staley Capital Advisors. Please go ahead. John Adolphus Staley: Thank you. Bill, I have a couple of quick questions. First of all, with regard to PREPA and the bonds that you sold, is there a bid out there to sell the rest of your exposure, and if so, how would it compare to the price you got the last time? William Charles Fallon: With regard to the PREPA exposure that we sold last year, John, those were fully paid CUSIPs. We are now in a situation where we really do not have much left. In fact, we have a maturity coming up later this year. We have the $425 million of exposure. That is not something that can be sold via the custodial receipt that we did last year in the near term. John Adolphus Staley: Secondly, with some of the political trends that are happening—New York, California, all the nonsense up in Minnesota—are you getting any pressure from your auditors of a higher valuation of reserves related to non–Puerto Rican credits? William Charles Fallon: The short answer is no. As you can appreciate, we look at everything in the portfolio constantly. We are quite comfortable with the way everything is proceeding at this point, and there has been nothing that has been identified. I understand what you are talking about, but nothing has been identified with regard to specific credits that would cause us to take additional reserves because of those activities that you referred to. John Adolphus Staley: And with regard to MBIA Insurance Corporation, it is dwarfed, where its statutory capital is, by its guarantees that are still out there—whatever it was, $2 billion or something like that. What has to happen for you to wrap that up so that it is no longer a part of—You have Puerto Rico, you have that subsidiary in which there is no liability back to MBIA Inc. But why do you not just get rid of it? Wrap it, liquidate it, or whatever you have to do, or is it that regulators will not let you do that? William Charles Fallon: There is some of both of those things. The runoff has occurred sort of as we expected. To your point, there is $2 billion left. There is one major restructuring in there, which is referred to as Zohar, which was a deal that we had wrapped. That one is going to take a little bit of time. Once that is resolved, then, to your point, there is not much left with regard to the remaining runoff of that company, and so there may be ways after that to accelerate the runoff of MBIA Insurance Corporation. John Adolphus Staley: So you are still managing a recovery process related to collateral with Zohar? William Charles Fallon: That is correct. John Adolphus Staley: I know that Judge Swain, as I understand it, is pushing for the private parties to resolve things. What is keeping this thing from being wrapped up? Puerto Rico is still being denied access to the municipal market, and electricity is still going off. It just seems so crazy. They are sitting there with all that money down there. I do not understand what is stopping it. Is it just politics? William Charles Fallon: I think in the near term, as I referred to in my comments, you have the situation with the Oversight Board, which is the one negotiating the PREPA restructuring on behalf of the Commonwealth. There are four board members. As you know, there was the administration action last year to remove six of the board members. Three took it to court and were reinstated. Either the four existing board members need to take the initiative and start negotiating again with the bondholders or, when the administration names people to those open three spots, perhaps then that will be the catalyst to restarting negotiations. That is really what the creditors are waiting for. As soon as that happens, I think you will see some real progress. John Adolphus Staley: Is there political pressure that you are aware of to get those six seats filled? Is there somebody who is an advocate for that in Congress? William Charles Fallon: There are two parts to it. With regard to the three that challenged their termination in court, there are lawsuits ongoing to remove those three still. I think the administration is taking the position that they should be removed and, therefore, those three spots perhaps are a little uncertain for a period of time. With regard to the other three spots, I do not have an answer for you as to when the administration will fill those. Again, we would hope it would be sooner rather than later. John Adolphus Staley: So the issue gets down again to presidential authority. William Charles Fallon: The President needs to approve all appointments to the board. John Adolphus Staley: Yes. But he also required them and said somehow some guys figure out that they still should be on the board. It is amazing to me. It must be driving you nuts. William Charles Fallon: We understand your frustration. Trust me. John Adolphus Staley: Thank you, Bill, very much. Thank you. Operator: Thank you. As a reminder, that is star one to ask a question. Our next question will come from Patrick Stadelhofer with Kahn. Please go ahead. Patrick Stadelhofer: Good morning. Good morning. Just a question on this extraordinary dividend. It has been seven months since the custodial receipts were sold and kind of de-risked the whole PREPA exposure. I am just curious, what is the gating item to actually trying to get one, given that you have said the circumstances have improved and you are looking at it? What is it going to take you from looking at it to acting on it, especially with other progress somewhat stalled in PREPA? Thank you. William Charles Fallon: As I mentioned, with regard to the special dividend, it is something we are looking at all the time. We do not get into where we are in the process, whether we started a process, or feedback from the regulator. Our view is those are discussions between us and our regulator. We talk to our regulator about lots of issues on a regular basis. When we have approval for a special dividend and when it has been distributed, as I mentioned earlier, we will announce that that has taken place. Again, the things to look at are the runoff in the portfolio and, in particular, the reduction in the PREPA exposure. For those people who are familiar, it is a process you go through with the regulator, which does take some time. Operator: Alright. Patrick, your line is still open. Did you— Patrick Stadelhofer: No. Thank you. Operator: Thank you. At this time, I am showing no further questions. I would like to turn the floor back over to Gregory R. Diamond for any additional or closing remarks. Gregory R. Diamond: Thank you, Chelsea. And thanks to those listening to our call today. Please contact us directly if you have any additional questions. We also recommend that you visit our website at mbia.com for additional information about our company. Thank you for your interest in MBIA Inc. Good day and goodbye. Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.