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Operator: Thank you for standing by. Welcome to the Natuzzi S.p.A Third Quarter 2025 Financial Results Webcast. As a reminder, anyone who would like to dial in please dial +4 -- I'm sorry, +1 (412) 717-9633, then Passcode 39252103#. Once again, if you'd like to be dialed in via the phone, in addition to the link already provided to join via video please dial +1 (412) 717-9633 then Passcode 39252103#. [Operator Instructions] Joining us on today's call are Pasquale Natuzzi, Executive Chairman, Chief Executive Officer, Ad Interim; Carlo Silvestri, Chief Financial Officer; and Piero Direnzo, Investor Relations. As a reminder, today's call is being recorded. It's now my pleasure to turn the call over to Piero. Please go ahead. Piero Direnzo: Thank you very much, Kevin, and good day to everyone. Thank you for joining the Natuzzi's conference call for the 2025 3rd quarter financial results. After a brief introduction, we will give room for the Q&A session. Before proceeding, we would like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States securities laws. Obviously, actual results might differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations and financial condition. Please refer to our most recent annual report on Form 20-F filed with the SEC for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call. And now I would like to turn the call over to the company's Chief Executive Officer. Please, Mr. Natuzzi. Pasquale Natuzzi: Thank you very much. Good morning, everyone. And thank you for taking part in this quarterly call. To what already communicated in our press release, I would like to add some more details and remarks. While the geopolitical situation has not changed and in some respect, is worsening as a result, consumer confidence remain weak. Despite our investment in marketing, foot traffic in our stores, particularly in the United States and Europe continues to lag while in some cases, we are seeing improvement in conversion rates. These gains are not sufficient to offset the decline in overall traffic. Despite the current challenging business environment, we have improved our gross margin this quarter, surpassing the levels recorded in the first 2 quarters of the year, this achievement was made possible by a more favorable sales mix. In fact, sales of Natuzzi Italia, which delivered higher margin than other product lines grew by 18% compared to the third quarter of last year. While sales of unbranded products, which are not core to our business decreased by 20%. We intended to continue in this direction, supporting the branded sales that offer higher margin. The closing of the Shanghai factory last year, which enabled us to realize the cost saving on industrial operations in China. However, it is important to note that the improvements in margin remain limited by labor cost in Italy, following the reshoring process from China to Italy, of the Natuzzi Edition production from the North America market, completed in the second half of 2024. Commercial and administrative costs deserves a separate mention, while wages and transportation expenses decreased this quarter, overall SG&A costs remain higher relative to our current revenue base. Therefore, both myself and the management team remain committed to support the sales while reduced fixed cost at the group level. We certainly continue our discussion with the Italian government, which has recognized the company as an enterprise of strategic relevance for the country. I would like to inform you that next Monday, I will personally be Rome at the relevant Ministry to seek measure aimed to improve quality, reducing transformation costs at our Italian factory and thereby increasing production efficiency. Lastly, we continue to invest the time and resources in participating in international trade events as well as the in-store visual merchandising and external architecture design in order to offer customers an engaging and compelling shopping experience. Recently, we were in India. And just yesterday, we completed a commercial road show in China, meeting with the leading architectural firms to develop a project similar to the Natuzzi Harmony resident presented in Dubai and Jerusalem. I'm sorry, we are really doing not our best, more than that really to satisfy the expectation of our shareholders and our stakeholders, and we will continue to do so. So if there are any questions, I would be pleased to answer together with Carlo, our CFO. Thank you very much for listening. Operator: [Operator Instructions] Our first question today is coming from David Kanen. David Kanen: Are you guys able to hear me? Pasquale Natuzzi: Yes. David Kanen: The first one pertains to your meeting next Monday in Rome with the government. And if you could give us some sense as to the outcome maybe -- sometimes we talk in terms of the bear case scenario, the moderate reasonable scenario and then the bull case. What do you expect to come of the meeting? And then on a go-forward basis, what our cost structure will look like given the concessions that we hope to get from labor and so forth? Pasquale Natuzzi: We are working on restructuring plan and one of the main action that we need to do for that is to rationalize our factory here in Italy. In Italy, we have 6 factories and one logistic center. We plan to reduce the production in 3 factory instead of 6. In order to do that, we need to move people from one city to another city, but in the same region, we are not -- the city -- the plan are not so far one to the other. So -- but we need to move people from one factory to another factory. And that requires, let's say, an agreement from the government and the union also to let us do that, okay? That's one. Number two, as everyone knows that we have today in Italy, 1,350 workers, but we need 750, 800 people. The other people, we need now to -- I don't know exactly the english word, but we need to use some help from the government that provide to use 800 people instead of 1,350. We call [Foreign Language] in Italian. Carlo can you help me with the appropriate word probably? Carlo Silvestri: I start from here. So David, if I can add on top of Mr. Natuzzi, we have like we need to tool different level of measures, what is called a kind of furlough, right, to keep on going. But I will be, let's say, more strategic in this situation. Our target is to have, let's say, when you talk about time frame, it's to have a negotiation based on some terms that need to be deployed within next year and then a more medium-term plan to achieve what we discussed last time in terms of financial sustainability. So it's a double layer negotiation. David Kanen: I see. And is your goal, assuming you can get these concessions and rightsize the workforce, do you anticipate at the current levels of revenue that we would actually be profitable and stop burning cash because obviously, it's unsustainable to continue burning cash. Carlo Silvestri: Let's say that the target is always to have a -- to be profitable around, let's say, what we discussed also in the other call, EUR 28 million, EUR 29 million per month. So -- and it means that's the target. So always going through some different tools because like here, we are discussing about the measures that involve the workforce. Then we are talking about marginality. That means it implies a review of the price list when our strategic positioning allow this and then also to look into our retail network, rationalizing it. So with through all these different measures, David, with those numbers that I mentioned before in terms of monthly turnover, we will not burn cash, but we will create positive cash flow. David Kanen: And as I indicated to you on a go-forward basis, if you can achieve these concessions and we can achieve profitability, we would certainly be interested in putting more money in perhaps through a pipe transaction to support the company and help you grow and thrive well into the future. We believe in the brand and we believe there's a lot of potential given the right conditions. Pasquale Natuzzi: Consumer confidence will make the difference, David. I mean, because unlikely the traffic is -- I mean, it's reducing unbelievable. I mean, unlikely consumers are not getting in the store despite the marketing investment that we are doing and the new product, wonderful new product. Unlikely, I mean, so -- but our -- but anyway, despite that, despite of the consumer confidence, we cannot guarantee what will happen from the geopolitical situation and give, again, confidence to the consumer that the life will improve. We are certainly committed to work on cost reduction, no question about it. We should reduce cost, and we are very much -- and we should improve the margin also. So improve the margin by our price list because our brand has a good recognition. We should reduce the cost, improve the margin and improve the sales a little bit if then the consumer confidence. But we are confident that we can achieve better sales next year compared with 2025. And consequently, if we are -- I mean, if we are lucky and capable to achieve that, we will deliver good profit to our shareholders. So that's our challenge certainly. Operator: [Operator Instructions] We do have a follow-up from David Kane. David Kanen: So if you could give us an update on the commercial division that PJ has been spearheading. There are companies that exclusively in that sector, the commercial sector that is doing more revenues than us as a combined entity, meaning $0.5 billion. So I see this as a huge opportunity, and I think we have the right product and the brand to succeed there. Can you give me a sense as to the progress that we've made since last quarter and you know -- I'm sure you see the pipeline of opportunities that you're bidding on. How big of an opportunity do you think this could be next year 2026. Pasquale Natuzzi: To be honest, it's not easy to forecast, but I can tell you that we are making huge investment in order to increase the trade contract business. Certainly, we signed -- I mean last November, no last November, November 2024, we did -- we launched the first Natuzzi Harmony residence. We designed the building with 50 apartments, we designed the furniture, everything. People are purchasing Natuzzi apartment in Dubai. As far -- we already are in the process to sign the second contract with the same dealer, the same developer in Dubai and we signed another contract already in Jerusalem, where -- and we designed the building, we designed the apartment, we designed common baths everything. Again, Natuzzi residence proves the value of the Natuzzi brand, okay? They are paying just royalty, $1.2 million, $1.3 million, just to use the name. And then obviously, they are going to pay the furniture, the cost of the furniture. Now just because we believe in this new business to leverage our brand awareness. This year, we attended an exhibition in Riyadh, Saudi Arabia, an exhibition in Dubai this year, 2025, 2 times in Mumbai in India, September and November. December -- last December, a few weeks ago, we were in Miami, Miami Design Week another huge event to meet architect designers. And then we just finished last week. My son has done a roadshow in China for 1 week meeting the biggest firm architecture firm to engage them and do a project for them. There is a long list of projects that we are discussing. David Kanen: So I mean I see that you're working very hard and I appreciate that. But if you can give us some sense as to the magnitude of the opportunity. I'm sure you have an internal goal for 2026. Again, kind of the bear case, the base case and the bull case. Can you give us a sense as to what that opportunity is? Carlo Silvestri: David, I'll -- thank you very much for your question. First of all, because I'll allow us to give you more color about what we are doing. So we are treating the Contract Trade Division as a start-up, right? Because in this phase, as Mr. Natuzzi was mentioning, we are doing a lot of bidding, right? But we don't have yet statistics on the success rate, okay? Because we are, let's say, providing and exposing our capabilities in a lot of road show, and we are receiving a lot of positive feedback from the market. And now we are going into the bidding phase that is taking us some time to understand the real potential. In order to play conservative for 2026, we do not have a very aggressive plan because we don't want -- we want -- we are considering it as a cherry on the cake on our numbers. So the magnitude of the business that we forecast for 2026 it will be between EUR 5 million and EUR 10 million. But then it's an exponential business once you start deploying all the projects. So just to be fair, is a cherry on the cake, we are not very aggressive on that, just to close the topic. I hope I do -- I did answer to your question. David Kanen: Yes. No, I appreciate that. And then I guess one more question. You had indicated -- you had implied in the prepared remarks in the press release that you're in the final rounds of a CEO selection, if I'm interpreting correctly. Any additional color you can give there? How many candidates would you say it's been narrowed down to? Do you have -- is it 2? Is it 5? Is it 10? And what do you think the time frame is for a decision to be made? Pasquale Natuzzi: The decision will be made based on the lack of meeting the appropriate person to cover the position. I'm using my weekend time because unlikely to interview people during the working day is very difficult. So I'm using Saturday and Sunday interviewing people. And it's my -- to be honest, absolutely, we are going forward. We hope to give a good news in a very short period of time. David Kanen: That's really all I have. I'd like to wish you and your team, a wonderful holiday and Merry Christmas. I know that you have the real Saint Nicholas is right there in Bari. So I hope you bring some good gifts. Pasquale Natuzzi: Thank you. Carlo Silvestri: Thank you very much and happy holidays. Pasquale Natuzzi: No other question? Operator: At this time, it appears there are no further questions. I'm going to turn the floor back over to management for any further or closing comments. Carlo Silvestri: [Foreign Language] So thank you very much. If there is no other further questions, we are always available to be reached out for any clarification you may need on our results and performance also in the next days. So thank you very much for your kind attention from all of us. Pasquale Natuzzi: Thank you. [Foreign Language] Thank you very much again. Operator: That does conclude today's webcast. You may disconnect your lines, and have a wonderful day. We thank you for your participation today.
Operator: Good day, ladies and gentlemen. Welcome to the Fourth Quarter of Fiscal Year 2025 Financial Results Conference Call for NeuroOne Medical Technologies Corporation. Today's call will be conducted by the company's Chief Executive Officer, Dave Rosa, and Ron McClurg, the company's Chief Financial Officer. Before I turn the call over to Mr. Rosa, I'd like to remind you that this conference call will include forward-looking statements within the meaning of U.S. federal securities laws with respect to future operations, financial results, events, trends and performance, which are based on management's beliefs and assumptions as of today's call. Forward-looking statements may involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. See NeuroOne's financial results press release and SEC filings for information regarding specific risks and uncertainties that could cause actual results to differ. Except as required by law, NeuroOne undertakes no obligation to update such forward-looking statements. With that, I will turn the call over to Mr. Dave Rosa, CEO of NeuroOne. Please go ahead, sir. David Rosa: Thank you, operator, and thank you to everyone for joining us today. I'd like to welcome you to our fourth quarter fiscal 2025 financial results conference call. Fiscal year 2025 was the most successful year in the history of NeuroOne Medical Technologies Corporation and an inflection point for our company. I'd like to start today with a brief overview of the most significant milestones we achieved in fiscal year 2025. Financially, we saw record product sales growth of 163% to $9.1 million, reduced operating expenses, significantly improved our product gross margins to 56.5% and strengthened the balance sheet with an $8.2 million capital raise. Operationally, we received FDA 510(k) clearance for the OneRF trigeminal nerve ablation system, advanced the development of our spinal cord stimulation electrode for lower back pain, initiated a new product development program for basivertebral nerve ablation for lower back pain, reported sales of our first preclinical drug delivery devices to a large pharmaceutical company, strengthened our infrastructure with key senior executive hires, initiated the process to gain ISO 13485 certification for international commercial expansion and lastly, bolstered our intellectual property portfolio. Additionally, we plan on providing financial guidance for fiscal year 2026 once we receive a final forecast from our distribution partner, Zimmer Biomet. Also, as previously disclosed, NASDAQ granted us a 180-day extension until May 4, 2026, to regain compliance with NASDAQ's minimum bid price rule for continued listing on the NASDAQ Capital Market. We will continue to monitor the closing bid price of our common stock and seek to regain compliance with the minimum bid price requirement within the extension period. Moving on to the fourth quarter of fiscal 2025. We continue to make strong financial progress as product revenue increased 907% to $2.7 million and product gross margins increased to 55.8% compared to 51.8% in the fourth quarter of fiscal 2024. This is a direct result of the expansion of commercialization efforts for our OneRF brain ablation system distributed by Zimmer Biomet. What made this most impressive is that we also reduced our operating expenses by 2% versus fiscal Q4 2024. With respect to expanding our product portfolio, we are now pursuing several market opportunities as potential revenue drivers. First, our drug delivery program using our sEEG platform electrode technology has received a great deal of physician interest. In addition, we have been approached by 2 organizations looking to potentially partner with us to use our technology for gene therapy, cell therapy and glioblastoma drug delivery development, and we reported the first sales of other preclinical devices to a large pharmaceutical company for testing purposes. This interest gives us confidence that our technology can offer advantages over competitive devices that both caregivers and pharmaceutical organizations value. You will be hearing more about our progress in fiscal 2026 as well as our comprehensive strategy to offer various sizes of both preclinical and clinical use devices that are appropriate for the drug development cycle through commercialization for human use, which is dependent on FDA approval to market. Based on physician feedback, we also believe we have an opportunity to offer a new platform to treat glioblastomas that provides a better solution for both patients and caregivers. Unfortunately, I am sure most of us know someone who has been affected by a brain tumor. At NeuroOne, our Chief Technology Officer, Steve Mertens, was diagnosed with one 2 years ago. Thankfully, he is doing well, but is also committed to trying to help others by advancing NeuroOne's technology. Drug delivery represents a potentially massive opportunity when you consider the number of patients suffering with brain-related neurological disorders such as glioblastomas, epilepsy and Parkinson's disease, to name a few. In 2026, our goal is to be commercially ready with our preclinical drug delivery offerings as well as to develop a pathway to gain FDA clearance. Regarding our pain management platform, we have 2 active programs in development for treating lower back pain. The first is our percutaneously placed paddle electrode, which can be delivered through a 14-gauge needle in the spine, which then expands to offer broader customizable stimulation, requiring less energy consumption than traditional standard percutaneous electrodes. We are in the process of finishing chronic animal studies to evaluate histology and other product metrics and expect to initiate additional long-term studies in fiscal Q2 2026. We also continue to explore partnership opportunities with strategic organizations. The second technology in our pain management platform is our basivertebral nerve ablation system, which was kicked off in fiscal Q4 2025. This past quarter, we held our first advisory board meeting with leading pain experts that have great experience with performing this procedure. Our strategy is to leverage our existing OneRF generator and sEEG probe to perform this procedure. To that end, we are in early discussions with strategics regarding this product technology and will seek a partnership with an established organization with a presence in the pain management space. Up next are animal studies with continued R&D testing to confirm that the system will perform as required. In August, we received FDA 510(k) clearance for our OneRF trigeminal nerve ablation system to treat facial pain by ablating the trigeminal nerve, further validating our technology platform and providing an alternative to pharmaceutical and other surgical treatments. As discussed previously, we indicated that we would have a limited commercial launch in the fourth quarter of calendar 2025. To that end, I am pleased to report that the first 2 patients were successfully treated at the University Hospitals Cleveland with both patients reporting pain relief from the procedure without any complications. The cases confirm that unlike traditional ablation systems, our probe required only one placement due to the multiple contacts present on the device. This allowed the neurosurgeon to easily locate the area of the nerve, triggering the patient's facial pain. The traditional systems may require multiple probe placements, which can cause additional patient discomfort. As a reminder, this system utilizes the same OneRF brain ablation system, yet also includes additional accessories specific to the procedure. We pursued this indication based on neurosurgeon interest and the fact that this is the same customer performing brain ablations with our system. This additional capability also potentially helps justify a financial case given its multi-use capabilities. We will continue to perform additional cases to obtain post-market clinical performance information. Regarding distribution, we currently have interest from a strategic to potentially license this technology, and we'll provide an update on those discussions when appropriate. Regarding the OneRF brain ablation system currently marketed by Zimmer Biomet, we continue to gain traction with accounts as the product is released to additional sites. Clinical outcomes have also continued to be reportedly positive without any adverse events to date. Our temperature control probe is performing exactly as intended in offering an additional safety mechanism during procedures that ensures excessive temperatures do not occur during the ablation. We also recently met with key personnel from sites participating in the OneRF registry, which is intended to gather a variety of performance data for patients that have had ablations with our system. Hospital institutional review board approvals and site contracts are expected to occur during the course of this year and can vary by center. We attended the following trade shows in fiscal Q4 2025 through today: the Society for Neuroscience, Congress of Neurological Surgeons and the American Epilepsy Society meeting. All meetings included posters and/or presentations on our technology as well as Mayo Clinic physician testimonials on their experience with our technology at the AES at the Zimmer Biomet booth. As we progress our technology platform and enter new markets, we concurrently continue to strengthen our patent portfolio. Recently, we were granted a notice of allowance by the U.S. Patent and Trade Office for both the manufacturing methods used to deposit our contact material onto our electrode and a second notice of allowance that covers our proprietary temperature control probe when used with our sEEG electrode. On the international front, we have also received our first granted European patent for the temperature probe. In total, the company has 17 issued and pending patents, which were all developed and owned in-house with the exception of the initial 3 patents we licensed pertaining to our cortical electrode family. Before I turn the call over to Ron, I wanted to reiterate our confidence in driving increased revenue from our OneRF ablation system, along with initiating preparation for future international sales. I'd also like to note that our anticipated growth will not include trigeminal neuralgia ablation revenue, strategic agreements for pain management technology or drug delivery partnerships or sales. The prospects for current and future growth are bright, and our goal is to continue to execute on this plan. I would now like to turn the call over to Ron McClurg, Chief Financial Officer, to provide a review of our fiscal fourth quarter and full year financial results. Ron? Ronald McClurg: Thanks, Dave. Product revenue increased 907% to $2.7 million in the fourth quarter of fiscal 2025 compared to product revenue of $0.3 million in the fourth quarter of fiscal 2024. For the full fiscal year 2025, product revenue increased 163% to $9.1 million compared to $3.5 million for the full fiscal year 2024. The company also had license revenue of $3 million in fiscal 2025, which is not included in our product revenue compared to no license revenue in fiscal 2024. License revenue in fiscal 2025 was derived from the expanded exclusive distribution agreement with Zimmer Biomet. Product gross profit increased significantly to $1.5 million or 55.8% of revenue in the fourth quarter of fiscal 2025 compared to product gross profit of $0.1 million or 51.8% of revenue in the same quarter of the prior fiscal year. For the full fiscal year 2025, product gross profit increased significantly to $5.1 million or 56.5% of revenue compared to product gross profit of $1.1 million or 31.3% of revenue in the full fiscal year 2024. Total operating expenses decreased 2% to $2.9 million in the fourth quarter of fiscal 2025 compared to $3.0 million in the same quarter of the prior year. R&D expenses in the fourth quarter of fiscal 2025 was $1.1 million, the same as the fourth quarter of fiscal 2024. SG&A expense in the fourth quarter of fiscal 2025 was $1.8 million compared to $1.8 million in the same quarter of the prior year. For the full fiscal year 2025, total operating expenses decreased 5% to $12.4 million compared to $13.0 million for the full fiscal year 2024. R&D expense in the full fiscal year 2025 decreased 2% to $5.0 million compared to $5.1 million in fiscal year 2024. SG&A expense in the full fiscal year 2025 decreased 7% to $7.4 million compared to $7.9 million in the fiscal year 2024. Net loss in the fourth quarter of fiscal 2025 improved by 52% to $1.6 million or $0.03 per share compared to a net loss of $3.4 million or $0.11 per share in the same quarter of the prior year. Net loss for the full fiscal year 2025 improved by 71% to $3.6 million or $0.09 per share compared with a net loss of $12.3 million or $0.46 per share for full fiscal year 2024. As of September 30, 2025, the company had cash and cash equivalents of $6.6 million compared to $1.5 million as of September 30, 2024. Of note, NeuroOne is funded through at least fiscal 2026, potentially longer if key milestones are hit. The company had working capital of $7.9 million as of September 30, 2025, compared to working capital of $2.4 million as of September 30, 2024. We had no debt outstanding as of September 30, 2025. I will now turn the call back over to Dave for his closing remarks. David Rosa: Thank you, Ron. As I stated at the top of the call, fiscal 2025 was the most successful year in the history of the company. From our FDA 510(k) clearance for the OneRF trigeminal nerve ablation system to our expanded partnership with Zimmer Biomet, our first preclinical sales for our drug delivery platform, initiation of a new product development program for basivertebral nerve ablation and strong financial performance and balance sheet, NeuroOne Medical Technologies successfully executed our technical, commercial and financial plan. We also have great momentum leading into fiscal year 2026 with the recent announcement that our first 2 OneRF trigeminal neurology cases were successfully performed. Expect to hear more about advancements with our brain, pain management and drug delivery platforms in the near future. Finally, in January, we will be attending the JPMorgan Healthcare Conference and invite investors and analysts to meet with NeuroOne January 12, 13 or 14 to learn more about our amazing company and its story. Operator, at this time, I think we can open up for questions. Operator: [Operator Instructions] Your first question for today is from Jeff Cohen with Ladenburg. Unknown Analyst: This is Destiny on for Jeff. I'd like to start with face pain, if we could. I know that you had those 2 patients treated earlier this month, so congratulations on that. I'm wondering if we should expect any more procedures prior to year-end. I know we're getting into the thick of the holidays. So I'm just curious. David Rosa: Yes. Thanks for joining the call, Destiny. We do have 3 other centers that have indicated that they have cases that they have planned. The question is more around getting some of the ancillary equipment that they need to do the procedure, not our equipment. And at one of the centers, local centers here, they're also waiting to get the generator installed in the facility. So the cases are there. There's just a few more steps that we have to go through. And we do think that there's a good chance we'll have more cases done this month. Unknown Analyst: Okay. Great. And I know historically, you had said that with this type of procedure, they could be stacked. So the treating physicians could do more. I'm wondering, first of all, were these procedures back-to-back, maybe even not -- maybe if not on the hour, but in terms of the days. And then based on what you heard just from those 2, do you still feel like that's something that is feasible or attainable? David Rosa: Yes. So both of those cases were back to back. I'm not sure they were done within an hour, but they were done back-to-back. And yes, that's one of the nice things, I think, about these trigeminal neurology cases is that the neurosurgeons will schedule them in advance. It makes it a lot more convenient for us to support those cases, too, because we know that the ablation is going to be done in that particular case as opposed to brain ablations where there's usually a waiting period until the [indiscernible] has been identified. So yes, we expect that moving forward. Unknown Analyst: Okay. Great. And I know you mentioned a strategic partner here. At what point do you feel like you would just go forward and do it yourself? David Rosa: Well, if discussions didn't appear to be going in a fruitful direction, we could do that. But I feel confident that we'll be able to reach an agreement with a strategic partner for this. Unknown Analyst: Okay. Okay. And then just a couple on drug delivery, if I may. I'm wondering if there will be more orders from this large pharma player. And I'm not sure how much visibility you have there, but are they going to do additional testing? Is there the opportunity to expand a bit? What are you seeing there? David Rosa: Yes, I do think that somewhere around midyear will be in a situation where we'll be able to ship additional units. These units are all going to be for preclinical testing. But really, the work that we're doing now is to get the devices manufactured to get our processes validated, so that we can be in a position mid-year to ship preclinical devices. Unknown Analyst: Okay. Got it. And then for epilepsy, I missed what you said about the registry. What is the timing on getting that established and opened? David Rosa: Yes. So in terms of like the protocol, we feel very confident that the protocol that we have makes sense. We just met at AES, which was the first week in December with sites that had agreed to participate. They have some comments, offered some suggestions and also each site has its own internal process that it has to go through to be able to participate in these registries and get sign off from administration. Some are a matter of months; some could take longer. So I really think that in terms of when that paperwork is done and the actual sites get signed off, I don't think we'll see that happen until Q2. But it really helped at this meeting in December, getting a better idea of when some of these sites are going to be able to actually start enrolling. Unknown Analyst: Okay. Great. And then last one for me. I know you've mentioned raising patient awareness. And I'm wondering if you've kind of implemented any strategies or initiatives there that we could -- that could maybe help with awareness in 2026, like another Clara story, if you will. David Rosa: Yes. So we have done some work with the Care organization, which is -- sorry, Cure, which is an epilepsy organization. And we're also talking to the Epilepsy Foundation to be able to partner with them to make this therapy more visible to patients. We just recently posted about a recent patient that was a professional pianist in Chicago and was unable to continue his career because of seizures. And we found out this case was done this summer. And there were a couple of articles published in the Chicago newspapers that were sent to us by the neurosurgeon who performed the procedure. We were completely unaware of it. But it's stories like that and getting that information out to other patients, that's really critical. I mean, in this particular gentleman's case, he was able to resume his professional career when he was told there really weren't any other options. And lucky for him, he heard about that the patient Clara that we've reported on in the past went to the same doctor and had a very positive outcome. So we are still continuing to figure out in terms of partnering with these organizations on the best way of getting the message out through their help. Unknown Analyst: Got it. Okay. I appreciate you taking the questions and looking forward to seeing you at JPMorgan. David Rosa: Thanks, Destiny. Operator: Your next question for today is from Anthony Vendetti with Maxim Group. Anthony Vendetti: Dave, I was wondering if you could expand on the distribution agreement that you have with Zimmer Biomet. I mean, I know you said it has expanded, but can you provide a little more color on what that includes? And then just on the lower back pain, you said you advanced the development of that product. Can you talk about what that -- the development program looks like for lower back pain? And then I'll hop back in with one other question. David Rosa: Sure. And thanks for joining the call. So let's talk about back pain first. That's probably the longer of the 2 questions. We actually have 2 programs for lower back pain. One that is the paddle electrode that I spoke about that can be placed percutaneously through a 14-gauge needle. So that program is ongoing. We did some testing last year in a chronic animal model. And we received some biocompatibility, some histology information. We also have some stimulation testing that we still need to do, which is what we'll be initiating in early next year. But that program is strictly the electrode, and the goal here is to really partner with an established company in the space. We've mentioned that we're having discussions with some of the larger companies that are well established in spinal cord stimulation. And the reason for that is twofold. One, we don't have internal resources for developing pulse generators. And I really don't feel like that's a core competency that the company has. The larger companies have this. We have the razor blade, and they have the razor, and we can provide something that they can't, or they haven't been able to at this point, which has advantages over the therapy today. But the real great advantage in my mind is the ability to kind of piggyback onto their PMA. Clearly, they've already gotten FDA clearances for their systems. And if we're able to do that, it's going to shave years off of our time line to get to market. So that's that program. The second one is the BVNA or the Basivertebral Nerve Ablation system and completely different concept, completely different condition that patients experience for this type of lower back pain. And what we're doing is, again, leveraging the generator that we're using for brain ablation, now facial ablation to really utilize that same system with our electrode to be able to go in and ablate the basivertebral nerve. So we've put together an advisory board of leading pain specialists who are very familiar with this procedure. We've had multiple meetings with them. We feel pretty confident that what we have will be able to offer advantages over the existing systems. Our multi-contact device has advantages over existing probes today. And of course, our temperature probe also has -- provides additional safety features when you're doing any of these ablations. But like our other pain management ablation systems, we will have to source other accessories to allow the pain specialists to be able to access the basivertebral nerve. So with respect to that program, we also are having separate discussions with strategics that have established businesses in treating lower back pain. One of the strategics that we're talking to is actually interested in both the basivertebral system as well as the spinal cord stimulation platform. So we still do need to do additional testing on the generator to ensure that we're able to develop the same size lesions for the basivertebral nerve that pain specialists are looking for. And then obviously, the development of the accessories through a third party. So that's the work that's needed on that program, but the goal is to really leverage what we already have, which is really the same strategy that we've employed over the last couple of years with the generator. And then with respect to the agreement, so the expansion really pertains to a year ago when we expanded the agreement beyond just the diagnostic sEEG electrodes with Zimmer to include the brain ablation system. So that was from, I believe, October a year ago. So there's also the potential to expand beyond that. We obviously have the facial pain technology. So there's a potential that the relationship could grow beyond that as well. Anthony Vendetti: Okay. So just to be clear, right now, the OneRF for trigeminal nerve ablation is not part of the Zimmer agreement and as well as the lower back pain, it sounds like you're speaking to strategic about that. It doesn't mean Zimmer Biomet wouldn't be one of the strategics, but you're having discussions with other strategics for those 2 programs, correct? David Rosa: Yes. That's absolutely correct. Today, Zimmer does not have any distribution rights for facial pain. And the strategics that we're talking to for back pain do not include Zimmer Biomet. Zimmer, actually a few years ago, it may have been longer than that, divested their spine business. So this is not an active area that they participate in today. Anthony Vendetti: Okay. Great. And then my last question is on reimbursement, the reimbursement landscape and the challenges that are always present when an emerging growth company comes to market with new technologies. Maybe just talk about a little bit of how you're navigating that? David Rosa: Yes. So -- and that's a big question because the devices that we have in development have all different reimbursement codes. Some are well established. Some are -- some codes are more or less catchall codes in the event that there isn't one in particular for a certain procedure. I think the reimbursement codes for the devices in development are very well established. When you're talking about brain ablation, there is some generic codes that neurosurgeons or hospitals have been using to gain reimbursement, but not a specific code per se. It really hasn't seemed to, I'll say, be a hindrance with any of these neurosurgeons in terms of adoption. There's clearly cost advantages in using our brain ablation system. And the one that is pretty obvious is ablations today done with other competing systems are done in the operating room. And to our knowledge, there hasn't been one brain ablation done in the operating room. They've been done at the patient's bedside. And the cost of tying up an operating room for most of a given day are extreme. So the ability to do this at the patient's bedside without occupying the operating room is a huge cost advantage in the hospital today. But so far, we've been very fortunate. Neurosurgeons see the value of the technology, and it hasn't gotten in our way to date. Anthony Vendetti: Okay. Great. Appreciate it. David Rosa: Thank you. Operator: [Operator Instructions] That appears to be the last question at this time. I would now like to turn the call back to Dave Rosa. David Rosa: Thank you, operator. I would like to first thank everyone again for attending the call, and we look forward to connecting with the investor community throughout the quarter. If we were unable to answer any of your questions today, please reach out to our Investor Relations firm, MZ Group, who would be more than happy to assist. Operator: Thank you. This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.
Operator: Good morning, and welcome to IntegraFin's 2025 Full Year Results Presentation. We're joined today by Alex Scott, Group CEO; and Euan Marshall, Group CFO. Following the presentation, there will be a Q&A session. But for now, I'd like to hand the call over to Alex. Please go ahead. Alexander Scott: Good morning, and welcome to IntegraFin Holdings Full Year Results Presentation for the financial year ended 30th of September 2025. I'm Alex Scott, Group Chief Executive; and joining me today is our Group Chief Financial Officer, Euan Marshall. I'm going to kick off with an overview of the group's performance and our business highlights from FY '25. I'll then hand over to Euan to run through the group's financial performance in the period and the outcomes of the group's cost and efficiency review. Finally, I'll close with an update on the performance of the Transact platform and a look at the good progress we've made on our key work streams throughout the year before moving on to Q&A. FY '25 has been an excellent year for IHP. The group demonstrated continued strong performance, and we delivered on our strategic priorities. We attracted impressive net inflows of GBP 4.4 billion, driven by record gross inflows. Net inflows were up 76% on FY '24, a reflection of the ongoing quality of the Transact platform and the technological enhancements we've made over recent years. On the back of these excellent inflows, the group delivered impressive financial results with good growth in revenue and underlying earnings. Underlying earnings per share increased 7% in FY '25 to 17.4p per share. As we first announced in July, we have undertaken a review of group-wide costs. We have now completed the review, and we've identified clear opportunities to enhance productivity, and these initiatives are now underway. Looking forward, we have a clear focus on driving sustainable future earnings growth. I'm pleased to announce we've raised our total dividends for FY '25 to 11.3p per share, up 9%. Our market-leading Transact platform is built on proprietary technology and supported by exceptional service. This business model is a driving force behind these results. Our strategy has delivered consistent client growth a strong market share of both gross and net flows in the U.K. adviser market and recognition through industry awards. We have invested in our proprietary technology and IT infrastructure to sustain our highly differentiated proposition and extend our market leadership. We now expect that in FY '26 and FY '27, there will be group underlying annual cost growth of around 3%, including ongoing technology investment. Therefore, we will deliver both group-wide cost savings and continued investment in our technology capabilities as we reduce average cost to serve platform client. The business is now in an excellent position to accelerate future earnings growth. Our main priority in the financial year has been enhancing the platform's features and online processes through digitalization as well as broadening our ability to integrate with a wide range of adviser firm software. By streamlining key wealth management tasks, Transact remains the leading platform for financial advice firms. These enhancements drive higher inflows, strengthen client retention and increase the stickiness of assets on the platform. We also commenced our cost and efficiency program, which has been more possible -- made possible through our investment and we'll deliver a more streamlined operating model and greater efficiencies across the business in turn, increasing our operating margin. I'll now hand over to Euan for a more in-depth look at the financials for the period and an explanation of how we'll deliver the cost and efficiency program. Euan Marshall: Thanks, Alex. Good morning, everyone. Firstly, I'm going to share an overview of our KPIs, which demonstrate the ongoing delivery of our strategic priorities is converting into strong operational and financial performance. As shown in the top left graph, average daily FUD has grown 14% year-on-year to GBP 67.9 billion. Aside from the market's movements, this has been driven by record gross inflows of GBP 10.1 billion for the period, whilst growth in gross outflows has slowed. A key driver has been our platform continuing to attract more business from our competitors, strengthening our net transfers. We have achieved an impressive 10% compound annual growth rate in average daily FUD since FY '21. Now looking at the top right graph, the growth in our average FUD has translated into revenues of GBP 156.8 million for FY '25, up 8% on FY '24. I will discuss platform revenue in more detail on the next slide. The bottom left graph shows that this record revenue has driven group underlying profit before tax, up 7% to GBP 75.4 million and equates to an underlying profit margin of 48%. Nonunderlying expenses totaled GBP 9.2 million in FY '25. This included a GBP 7.5 million impairment of goodwill relating to T4A, which was announced at the half year, and GBP 1.1 million of overlapping rental costs for our new head office relocation. We've also recognized a GBP 3.4 million non-underlying gain attributable to policyholder returns as a result of a release of GBP 0.4 million policyholder reserves to the P&L. Moving on to the bottom right graph. The group delivered strong growth in underlying EPS, up 7% on FY '24 to 17.4p per share. For FY '25, we have increased the second interim dividend to 8p per share, taking the total FY '25 dividend to 11.3p per share, a 9% increase on FY '24. Looking in more detail at Transact platform revenue for FY '25, we can see investment platform revenue increased by GBP 11.8 million in the year, representing 97% of group revenue. Growth in average daily FUDs during the year drove increased platform revenue with our annual charge income increasing 10% to GBP 138.1 million. The lower increase in annual charge income in comparison to average FAD is mainly a result of clients benefiting from the natural progression through our tiered pricing structure as the value of their portfolio increases. Wrapper fee income deed slightly year-on-year and reflects the reduction in charges for family-linked portfolios. These 2 recurring revenue streams combined to deliver 99% of total platform revenue. We continue not to retain any interest on client cash. In FY '25, total T4A revenue increased slightly to GBP 5 million. Focusing next on platform revenue margin. The graph highlights how platform revenue margin has moderated steadily in the past, but this attrition is now expected to slow in FY '26. Over time, our revenue margin has seen a measured decline as we've strategically invested in price through targeted fee reductions. These changes contribute to the strength of the overall platform proposition which in turn, have helped to attract new flows and improve the retention of client assets on the platform. Looking forward, we expect the reduction in revenue margin to come primarily as a result from the natural progression of client portfolios through our tiered pricing structure and the annualization of the prior year's targeted price reductions. As an indicative figure, the platform revenue margin for September 2025, the last month of FY '25 was 21.9 basis points. I'll now share more detail on our costs, starting with how we have carefully managed our administrative expenses in FY '25. In line with guidance, total underlying administrative expenses were 9% higher than in FY '24. Employee costs make up the largest proportion of our cost base and rose 11% in the year. This was because of several factors: firstly, a slight increase in average staff head count of 2%; secondly, the impact of investments in broadening the senior management team; and finally, our periodic review of remuneration packages across the business to ensure that we continue to provide competitive salaries to attract and retain high-quality individuals within the business. Before looking in detail at the cost review program announced in July, it's important to contextualize the previous investment we have made in the group. During the heightened investment phase over recent periods, we have enhanced the group's IT infrastructure and technology capabilities to deliver improved platform digitalization and provide a greater number of integrations with third-party software providers. A further key factor has been our investment in people. As I have just mentioned, we have broadened our senior management team over the past 2 years, expanding the expertise and quality of our people to the business. This investment in our technology and people will enable us to deliver future cost efficiencies and reduce our cost to sales per platform clients. Moving on from the cost growth in FY '25. I will now expand on the outcomes of the cost review program, which will help deliver enduring efficiencies in the coming years. We have completed the detailed assessment of our cost drivers and identified 3 key areas for sustainable cost savings that will create a more efficient business. Firstly, the greatest savings identified will come from improved productivity in our internal support functions. We are introducing more third-party technology, which will automate many manual processes for staff across the business. We're also changing the structure of some of those functions to simplify and standardize how we do things improving productivity so that we can maximize the value of the strong foundations that we've already put in place. The second source of savings will come from enhancing procurement and supplier management processes. The final element will be from enhanced platform efficiencies. Our ongoing focus on increasing the level of straight-through processing and automation is reducing manual tasks and processing times which Alex will discuss in more detail later in the presentation. We expect the cost review program to deliver GBP 4 million of annualized savings by FY '27. The strength of this review is in the sustainable ongoing nature of the savings. FY '26 and FY '27, total underlying administrative expenses are expected to grow at around 3% per year. Delivering these changes will not come at the expense of our client service or our technology. Our proprietary technology is a key differentiator in the U.K. adviser platform market. And through focused investment, we will continue to improve our proposition while implementing our cost efficiencies. Note that the anticipated one-off costs required to achieve the savings are included in the investment spend on this slide. Due to the timing of cost savings coming through, we anticipate cost reduction in the speed of cost increases to be weighted towards the second half of this year, meaning that H1 and H2 costs will be broadly similar. These actions put us on a clear path to long-term profitable growth while creating a more focused and resilient business for the future. Moving on to the next slide. I wanted to highlight the 3 core levers on which we are focused to drive earnings growth. Firstly, we've invested significantly in the business over the last few years, we believe this investment has been fundamental to improving our prominent position in a competitive market. This investment has now put us in a position where we can focus on margin delivery. We expect our market-leading platform to continue to drive strong net inflows in a growing U.K. advisor platform market. The second and third levers, our focus on revenue margin and our cost review leave us in a position to accelerate earnings growth and enhance shareholder value in future years. We're focused on the platform revenue margin with attrition in FY '26 being due to the impact of our tier pricing structure and the annualization of prior year price changes. Our group-wide cost review has identified productivity opportunities within the business and will reduce the rate of future underlying cost growth. We're confident in our strategy and business plan moving forward. Returning to our FY '25 financial position. The business continues to be highly cash generative with the majority of profit flowing through into cash. This positions us strongly for the future as we expect our group profit margin to increase. The left-hand table illustrates the group's strong liquidity position. Each of the group's regulated entities maintain a capital and liquidity buffer above the minimum levels required under various regulations. As a reminder, we maintain a liquidity buffer to ensure we have the ability to accommodate ongoing increases to capital requirements in our regulated entities and can continue to invest in the business, all whilst continuing to pay dividends to our shareholders. We remain confident this is the right level to help support the future requirements of the group. I'm pleased to say that we have approved a total dividend for the year of 11.3p per share, a 9% increase on FY '24, representing 65% of the total underlying profit after tax. As mentioned on the last slide, we've approved a dividend of 11.3p per share this year as part of our capital allocation framework. For reference, our capital allocation framework is shown here on the slide. Finally, I'll talk you through the group's guidance for FY '26 and FY '27. We're focused on managing platform revenue margin. We expect the reduction in the platform revenue margin to slow, driven by clients moving through the tiered price of charging structure and the impact of prior year price changes. As I mentioned earlier, our platform revenue margin was 21.9 basis points in September. As I highlighted on our cost slides, we expect total underlying administrative expenses to grow at 3% per year in FY '26 and FY '27. Net interest income is expected to be around 9% per year and the net gain attributable to policyholder returns are expected to be in the region of GBP 2 million per year. That concludes my part of the presentation. I'll now hand back to Alex. Alexander Scott: Thanks, Euan. In this section, I'll provide an update on the Transact proposition enhancements that we've delivered and a more in-depth look at the Transact platform flow performance during the period. We've delivered significant enhancements to the Transact platform, leading to growth of client numbers and inflows and the strengthening of our marketing position. These digital upgrades have streamlined platform operations by reducing manual and paper-based processes, both for us and for advice firms. This has improved operational efficiency and elevated service levels across the platform. The movement of paper forms to online straight-through processing reflects our purpose to make financial planning easier. We have focused the transition on processes with the highest rates of human intervention. With standardized formats and instant data validation, we now receive clean instructions. Digitalization was a key step to further developing Transact platform integrations and APIs. With improved accuracy and greater data validation, advisers can now send instructions directly from their back-office systems, and we can trust the data being supplied. This is particularly important for the future use of AI. For the group, this means faster processing times, greater scalability of the platform and the ability for our client-facing teams to respond quicker to client needs. During FY '25, the Transact platform delivered record gross inflows and impressive net inflows. Total net inflows for the year were GBP 4.4 billion, up 76% on the prior year. Our excellent net inflow performance has been driven by record levels of gross inflows with 7 consecutive quarters above GBP 2 billion. This is a testament to the market-leading service we provide and the digital enhancements we have made to our proposition. We have also improved our net transfer ratio with other platforms as we continue to win more business from competitors with our transfer ratio improving to 2.8 in FY '25. We have also taken an impressive share of net inflows to the U.K. adviser platform market, which I'll cover in more detail on the next slide. And finally, outflows were largely stable during the year and reduced as a percentage of opening FUD to 9% in FY '25. Our impressive net inflows performance in FY '25 means we continue to have a strong market share of the net flows into the U.K. advisor platform market. This is a further reflection of the quality of our proposition as we continue to increase our market share of FUD and maintain an over 20% share of net inflows. We have a 10% share of the U.K. adviser platform market FUD and the external market review company, Fundscape, expects the adviser platform market to continue to grow at an impressive rate of around 12% over the next 5 years. I'm pleased to say the Transact platform continues to win industry awards, picking up the Schroders Best Use of Platform Technology and the Money Marketing Best Platform Award this year. Our market-leading service continues to drive growth in client numbers using the platform, and our long-term track record in client growth is displayed in the middle chart. This growth in client numbers in turn ensures a durable and growing source of inflows to the platform as illustrated on the right-hand side. So to summarize, in FY '25, we've delivered record growth and strong net inflows in the growing U.K. advisor platform market. We're confident of demonstrating good net flows momentum into future years. The award-winning Transact platform continues to enhance its proposition through digital enhancements and an expanding range of APIs. We have begun implementing the initiatives from the group-wide cost review. This will help to enhance business efficiency and drive operating margin growth. And to conclude, we have a very scalable platform and best-in-class proposition centered on our proprietary technology and high levels of client service. We're focused on growing revenue and delivering savings from our cost and efficiency program. Overall, this positions us well to drive sustainable earnings growth in future years. Thank you for your time, and we'll now open to questions. Operator: [Operator Instructions] Our first question today is coming from Michael Sanderson of Barclays. Michael Sanderson: Just a couple of questions, if that's okay. First one, I suppose you set out your capital allocation framework and you have the inorganic element before any sort of thoughts of returning to shareholders. I'd be interested to know what areas you think inorganic development might go at this point, given your sort of strong organic story over many years. And I guess, the second piece I was interested is there's obviously been quite a lot of noise or quite a lot of developing noise around sort of tokenization in the funds market and how that's likely to evolve in the coming years. And I guess, interested to know how you think about sort of preparation investment. That's something that the timing is so unclear and how you -- given that your proprietary technology, how you choose to allocate and approach potential quite sizable change in the market in due course. Euan Marshall: Thanks for those questions, Michael. I'll take the first one, and then I'll hand over to Alex for your second. So on our approach to inorganic opportunities, yes, we predominantly focus on organic growth. That's something that you should take away from the call today. From a platform perspective, we don't necessarily see significant opportunities from inorganic growth through acquisitions, specifically in the platform market. But when it comes to looking at the technology that can enable the -- that can enable our wider proposition. We do continue to scan opportunities through the market. But we don't, at this point in time, see that as being a major driver. But of course, it has to be part of our capital allocation framework and considerations at a Board level. Alexander Scott: Just picking up on tokenization. This is going to be one that I think we'll be talking about for a while to come. I mean it has actually been boating around for quite some time, and we've been talking about this with different companies for several years now. So it's not something that we're just sort of suddenly starting from scratch in terms of how we consider it and what we're doing. So this is something we've had in mind for some time. Obviously, there's lots of issues around how different markets, different regulatory jurisdictions are actually considering the controls they put around this. And obviously, we're having to take all of that into account as well. You'll be aware that the Financial Conduct Authority issued a consultation paper on this as well. So at the moment, we are doing more than nothing, but being very aware that, in many cases, the rules and structures are not formalized. So we'll be feeding into all of those consultations and making sure that our views and opinions are clearly heard and then driving forward from there. Operator: We'll now move to David McCann of Deutsche Bank. David McCann: Three for me, please. So firstly, you've given some guidance that you're expecting a similar Q1 for net flows for Q1 of last year. Obviously, that compares to some of your peers, which you obviously pointed to a weaker period-on-period comparison really driven by pension lump sum outflows in relation to the budget. So I guess, why do you think you haven't quite seen the same impact that some of your peers have been talking about there? That's the first one. And second one on costs. I mean what comfort can we as investors and analysts gain from the comments you made today that the 3% is a rigid ceiling on cost growth, given some of the experience from yourself and the sector in the past where the cost growth obviously been higher than that for a number of years. So should we really be sort of banking on free to have been an absolute upper ceiling there? So any further comfort you can give us there to the comments you've already made. And then finally, sticking with the cost theme, like beyond FY '27, could we see kind of a return to more historically normal levels or sort of mid- to high single-digit growth being more normal here. So if there's really just a 2-year thing and then it sorts of reverts to normal thereafter? Or do you think there can be a lasting effects of sort of lower single-digit growth? Alexander Scott: I'll pick up on the net flows piece. I mean, it's one of those that from where we've set, we've seen not a dissimilar behavior to the patterns that we saw around the sort of October, November period last year with lots of budget speculation. As you rightly say, there's been significant movements in pensions money with people drawing down their PCLS. From our perspective, we have seen significantly heightened flows in both directions. And overall, as we've indicated in our announcement, our overall position, we're expecting to be sort of relatively net neutral from that. So why would we be different from other firms that have actually experienced more of an outflow from it and not seeing the upside on the inflows piece. I mean, I think that comes down to a couple of things. I mean, first and foremost, I'd say it's because when people are taking monies out from other pension arrangements that they have they're bringing that to the Transact platform, and we're seeing that being sort of put into other wrapper types that we have, so use of our investment bond structures and the like. And I think that sort of testament to the quality of Transact and the fact that we're still able to attract those monies in during those periods. Euan Marshall: Cost side, David. So firstly, over the last couple of years, we've been meeting our cost guidance. So I would just like to reiterate that we have a plan in place, which management across the business are fully aligned on. We've really looked at the investment opportunities in the business, both from a platform development perspective, but also put structures in place where we've identified and prioritized the best areas to invest for future productivity improvements. And we are now already executing on that plan given that we're already a couple of months into the financial year. From a medium-term outlook perspective, naturally, as you look more than a couple of years out, there's inherently going to be uncertainty there about what the world may yield to us. But we have some good structures in place now and a budget to continue to invest in those future productivity improvements. So we'll be continuing to demonstrate that we are delivering productivity enhancements over that longer period of time. Hopefully, that answers your questions, David. Operator: Does that answer your questions, Mr. McCann? David McCann: Yes. Operator: We will be moving on now to James Allen of Berenberg. James Allen: Two from me. Just around your point on revenue margin and the attrition now being expected to slow. In terms of the price cuts on the platform during FY '25, what was the in-period revenue impact? And what is the annualized impact of that, i.e., the remaining impact in FY '26? Secondly, the Australian VAT issue, I know it's been a few years since we heard anything on this. Could you just remind me about where we are on this now? From memory, we were waiting for cases to be resolved involving HSBC or Barclays that set a precedent. If you could just remind us where we are on that, that would be helpful. Euan Marshall: Thanks, Allen. On the revenue margin, I think we've disclosed in prior presentations what the annualized impact of those changes are. The biggest of those came through the start of April, I think, so start of H2. However, I think the main thing to look at here is during the presentation, I mentioned the revenue margin at the end for September, which was 21.9 basis points. So that could be useful for you to use. The other thing to keep in mind as well is that as funds under direction grows, broadly, we retain -- well, there's an attrition of around -- for every -- for FUD growth of 10%, we'll retain around 7.5% of that coming through to revenue. So that could be a good way of looking at it for modeling into the future as well. Alexander Scott: Thanks, James. On the VAT issue, just a quick update. So we do continue to be stayed behind Barclays in this situation. We still consider that to be a sensible place to be as do HMRC because in that structure, there's a considerable savings from our perspective on legal fees because we're not having to drive the case forward. So -- and we keep a very close track on the Barclays case to be sure that it is still relevant and consistent with our own case. Aside from that, we do also continue to have ongoing dialogue with HMRC around our own case to better improve their understanding of what we do and where our structure sits. So it is moving forward. I'm afraid it is glacial. And I expect it will still be another 18 months to 2 years at the speed that these things move before we have any certainty on it. But just for everyone's comfort, just to be absolutely clear here, we are actually working on a basis that we pay VAT on everything. And therefore, there is no accruing liability. There is only a potential upside on this for us. Operator: We'll now move to Ben Bathurst of RBC. Benjamin Bathurst: I've got questions in 3 areas, if I may. Starting on one for Alex, probably on pricing. I just wondered, could you provide some market context to the decision to broadly hold charges flat at this point? And sort of specifically, how do you now assess the current pricing differential to be for Transact versus your closest competitors? And do you expect that differential to now change looking forward? And then secondly, on capital, probably for Euan, how should we think about the likely growth in ongoing capital requirements looking forward? Should that grow broadly with the level of funds under direction? Or could that be at a slightly slower rate than that? And then finally, on the flow outlook, obviously, you talked about confidence in growing market share. Are there any customer groups that you could do better with in terms of net flows? And are you intending to target those more specifically looking forward? Alexander Scott: Thanks, Ben. I'll pick up the first and third of those, and then hand over to Euan. So in terms of pricing, we've done quite a lot over the last few years to bring our pricing down to a pretty competitive level across the market areas that we really want to be competitive in. And I think where we are relative to our key competitors, we're in a good position. There are changes in the shape of the market, and there are also changes -- have been changes in the way that competitors have actually extracted revenue from their clients. So it's become ever more tricky to actually review exactly what clients are being charged by any one platform because of the use of taking a share of client interest that is undertaken by several other platforms. So when we actually compare across the total take from clients, we find that we're actually in a pretty strong position in all places. How that shape will evolve is obviously something that regulators have had things to say on, but they seem to have settled down now and see quite on. And we've seen that now predominantly the changes that are being driven are people trying to do deals with sort of consolidating groups to actually try and win blocks of business. We're finding actually that we are not particularly needing to do deals and we're still able to win consolidator business through the delivery of the requirements that they need and the quality of service that they want. And you asked about where there's areas of net flows that we still think that there's more for us to do. I mean I've spoken before about the fact that we've changed one of the parts of our sales team to be more focused on the consolidated part of the market because traditionally, we were very much more in the smaller adviser firm sector. And we've definitely grown out of there and are actually sort of pushing more into actually working with the consolidating firms, understanding better what their needs and requirements are, not just from a pricing perspective, but how they want to work with us and what we can deliver for them. And we've certainly found that we've been doing pretty successfully with adviser groups where they've sort of started to move down routes of delivering their own platform to then actually moving to a more panel structure where Transact has been very successful in being the chosen outside provider to be bought in to work alongside their own platform offering. Euan, if you want to pick up on the capital. Euan Marshall: Yes. On the capital piece, Ben, I think it's -- you probably know this very well already, but we have 3 regulated entities across the group. So when you look at the MIFIDPRU regulated entity, yes, the answer to your question would be, is broadly a good idea to look at growth of FUD through -- coming through as growth in regulatory capital requirements. And there's a few funnies in there, but that's a good broad assumption to make. We then have 2 insurance entities as well where it gets a little bit more complicated. But again, I would anticipate a good rule of thumb is probably to look at increasing capital requirements in line with FUD growth over time. Operator: As we do not appear to have any further questions. Mr. Scott, I'd like to turn the call back over to you for any additional or closing remarks. Thank you. Alexander Scott: Thank you. Well, thank you, everyone, for attending this morning and listening to us. And I wish you all a good day and a happy Christmas.
Fabienne Caron: Welcome to the CECONOMY MediaMarkt Full Year Results Webcast. We are live from our headquarters in Düsseldorf in a hybrid setup with participants both on-site and online. I'm joined by our CEO, Dr. Kai-Ulrich Deissner; and our CFO, Remko Rijnders. They will present the highlights of the year, followed by a Q&A session. Today, we meet in a new setup, one joint call for both press and analysts. We are pleased to welcome journalists online from our 11 countries. The presentation will be held in English with live translation. You can switch the language in the live stream. Before we begin, please note that today's discussions will include forward-looking statements. For more information, please refer to our disclaimer. The full presentation is available on our website. With that, I'm delighted to hand over to Dr. Deissner, who will guide you through the highlights of the year. Kai-Ulrich Deissner: Thank you, Fabienne. Good morning, everyone. Thank you for joining us here today. I'm really happy to have you here with us today, now whether you're joining us here at our CECONOMY headquarter in Düsseldorf or participating virtually, as Fabienne said, from 11 countries of our footprint. Today, Remko Rijnders, my trusted CFO, and I will take you through the details of our financial year '24 and '25. Now we had already shared some preliminary numbers with you back in October, but I'm sure you will see some very strong performance across the board today, because we've been on a strategic transformation for some 3 years now from a classical retailer into what we call an omnichannel service platform. And last year's results show very well how that strategic transformation is gaining momentum. It's only the tip of the iceberg, but let me remind you from the very beginning, 11 quarters of EBIT growth. That's a very strong track record. Now there's 2 levels to this. First, for our business model, we are enhancing our Retail Core business model with what we call growth businesses. These are by now substantial in size and they continue to grow. But secondly, and actually much more fundamentally, this transformation is about the customers, about customers that think and feel and go shopping differently now than they did in the past. And all of our teams in the stores, in our logistics centers, in the offices throughout our 11 countries, they do want to put those customers first front and center, to give them what we call experience electronics. Our goal is to create a unique shopping experience that is tailored to their needs. Do we get that right every day? Of course, not. Not yet, but we're moving in that direction and into the right directions. As you will see today's results underline that. We've set, over the past 3 years, a solid foundation for future growth, and we're proud of that. Ladies and gentlemen, we're on the right path, and we will see this consistency pay off in the new financial year again. That's why we will publish a positive outlook for the current financial year '25 and '26. I will get to that later. Now let's first have a look into the details of those results of last year. Let me start with an overview, and you will see that we delivered strong results across all our key metrics. First, sales reached EUR 23.1 billion. That's a growth of 5.7%, and that's more than the moderate growth that we initially guided. And we grew EBIT by 24% to EUR 378 million. That means profitability is growing steadily. Just as a reminder, for 11 quarters in a row now. And finally, a very hard measure. We increased free cash flow by 180%, now reaching EUR 337 million. And as I said initially, fundamentally, our customer satisfaction reached a new record. Our Net Promoter Score improved to 61. That's up 3 points from the previous year. So our focus on customer experience is indeed paying off. Now we want to accelerate even more based on this momentum. We know that we still have a way to go in terms of our transformation. But we are ready for that next step. And we believe we have a really good partner to take this on with JD.com. This partnership will help us accelerate even faster. JD.com brings significant experience, especially in logistics and technology. In teaming up with them, we want to create not just experience Electronics, but the future of European retail. Just so that you know where we stand with this partnership. As you all know, we've signed our investor agreement back in July this year. Now at the end of November, JD.com had secured a total shareholding of 85.2% in CECONOMY. And now we're working on and waiting for the outstanding regulatory approvals to finally close this transaction. We expect that closing still for the first half of the next calendar year. And I'm more convinced than ever that this partnership will make us even stronger and will take us to that next level. But independent of that partnership in the future, let's look at the progress we made in our business, and that's on Slide 4. The performance of our growth area shows we are on the right track with diversifying our business model. Each of our strategic business segments contributes to our success. This diversified growth gives us the ability to adapt to changing market conditions even in the future. And we're adapting to our customer needs. Our all-time high of the Net Promoter Score isn't just a number of 61, it reflects fundamental improvements in how we serve everyone that shops with us across all touch points and every day. In this context, we've made significant progress with what we call personalized service, a specific program to let you design your visit to the store. We've completed that rollout in 4 countries already, and we're currently expanding to 5 additional countries. This, by the way, demonstrates that we scale successful concepts internationally, but of course, we do adapt locally to reflect the different expectations that may exist in different countries. And we also invest in our backbone, our logistics and infrastructure, especially for those omnichannel capabilities. Here's an example. We've rolled out 16 regional fulfillment centers that's across Germany, Spain and Turkey. These centers then help us reduce delivery times and improve reliability of delivery for our customers. On the technology or IT front, we are leveraging data and AI to improve our customer experience. For example, with personalization to help our customers discover products that truly meet their specific needs and to help us with conversion rates and customer satisfaction. Additionally, we're driving our sustainability measures, one of the key pillars of our strategy. Our refurbished sales nearly tripled this year. This also reflects changing consumer behavior. More and more often, customers choose high-quality refurbished products, because it makes sense for them economically and at the same time, it is an active contribution to putting less pressure on the environment. You probably recognize the next slide, #5. We do present it each quarter to give you transparency about the development of the 9 KPIs, which we introduced at our Capital Markets Day back in 2023, because these 9 KPIs represent the essence of our strategic focus. And once a year, we provide you with an update that includes precise figures. That's today. And I'm very proud to show to you that we've reached 3 of those nice strategic KPIs ahead of time. We achieved 53 million loyalty members, we increased our income share of Services & Solutions, and we grew our retail media income, all before the official deadline, September '26. This shows we have made huge strides in becoming more than a retailer. Our growth businesses are now a significant contributor to our business, and they still continue to grow steadily. This will become clear on Slide 6 too. Our growth businesses now represent a total of 36% of our gross profit. That's up from 33% last year, and it's a substantial increase from the 31% in financial year 2022, '23. So we believe we're well on track to reach our target mix for financial year '25-'26 when we expect our growth businesses to contribute even more significantly to our overall profitability. Now for the next few pages, let me walk you through some of the key operational developments last year, first for Retail Core, but then also for those growth businesses that I keep talking about. Let's start with Retail Core. It continues to be our strong foundation. And we're making some progress across all key areas in Retail Core. Let's look at loyalty first. As I said, we already surpassed our midterm target of 50 million loyalty customers, and it's now 53 million. Why is that? We successfully integrated our MediaMarkt and MySaturn programs in Germany for a more customer-centric approach. And our loyalty program is now available in nearly all countries. Why is that important? These 53 million customers come to our stores and to our app and to our website far more frequently than unregistered customers. And we are approaching them with more targeted offers that convince them and they do drive our revenues. As you can see, we also improved another key metric, and that's inventory management further. It's now down to 8.8 weeks of stock reach. And of course, online, our online sales were driven by strong growth, both in visits and in conversion rate. And also our omnichannel approach is paying off. We're successfully linking for customers, store visits and online journeys. It's finally reflected in our pickup rate, the rate of customers that chooses to go into a store, although they ordered online. And that's now 37%. That's a great example of what omnichannel means. Not to forget the app, the percentage of online sales generated through the app has grown to almost 30%. That's very strong growth, and it's mainly driven by Turkey, Spain, the Netherlands and Austria. Final element, store modernization. It remains fully on track. We've promised a target of 90%, and we're on track to achieve that. Last year, we opened, in particular, smaller store formats, 29 new Express stores and 8 new really small smart stores. That brings our innovative formats closer to our customers. Looking ahead into next year, we are preparing for the future through even more small format stores and at the same time, a few more large lighthouses. As in the past, this differentiation, which is untypical for us historically, comes together with a cost focus and better logistics. So it serves our customers better and it is more efficient. All of this together shows our Retail Core is the strong foundation, and it is making steady progress to get even better. Now based on that foundation, next to our growth fields, and let's start with Services & Solutions. Now we did grow all product categories in Services & Solutions, but what stood out last year were insurances and installations and configuration services when customers buy new devices. It's what we internally call power services. Turkey and Spain were the 2 highlight countries for that part of the service business. For this year, we have 2 major objectives. We want to make it easier for customers to buy services online or in the app because, frankly speaking, this is still not as convenient as in our stores, and our attach rate still here has some potential. And we want to focus secondly on growth in the telco segment. We believe that there, there's still a lot of growth for us, potentially even with MVNOs like our own mobile brand, Let's Go Mobile, which we launched in the Netherlands only this year. Second element of Retail Core is what we call Space-as-a-Service, and it also expanded successfully. We're now offering what we call experience zones and entrance statements in over 700 of our 1,000 stores. And we're working with around 25 very special partners. We call them internally non-endemic partners. What that means it's partners that are not our classical industry partners, but where actually we establish a new relationship, and there's also new business potential. Let's move on to Private Label, our own brands. Now to be fair, the progress in Private Label has been slower than progress in other areas. But last year, our Private Label business benefited significantly from our audio line with Peak and there, especially by the Robbie Williams campaign. Strongest product category is still accessories. And why is that? Because we tailor our accessory offers to highlight products. Take the Nintendo Switch 2 launch as an example. When we launched it, cases and many other accessories, cables were also in high demand. And so we used that momentum and posted strong numbers around private label around the Switch launch. Finally, we are improving the usability of our products. We've just recently introduced an AI chatbot that's been really well received by customers, especially with the use of smart manuals. Then after Private Label, let us look at Retail Media business. This grew especially strong in Benelux, Spain and Turkey. And we extended our offer again. We've introduced our first off-site program. In case you're not familiar with that solution, advertisers can reach MediaMarktSaturn shoppers not just on our website or app, but elsewhere. With this, we open new potential for our partners in addition to our own platforms. And that is also very much in focus for this financial year. Secondly, we want to onboard here as well non-endemic partners and thus build new relationships, very similar to what I've just said about Space-as-a-Service. Then Marketplace on Slide 10. With Turkey now active, we are operating our Marketplace in 8 countries now. The GMV, the gross merchandise value, reached EUR 527 million. That's another 90% year-on-year growth. Importantly, our EBIT generation more than doubled in that period. So we've also made strong improvements in our profitability as we scale this business, and we're not done yet. We're preparing to roll out Marketplace next in Hungary and Switzerland for 2026. At the same time, as we roll this out, we will enhance our assortment and add what we call verticals, I would call them topic areas. This is important because these verticals or topics have been very successful in the past. And you will see that they are different than our core assortment. For example, energy, fitness, e-mobility or even gardening. These verticals expand our assortment, and they make us even more attractive for our customers. And as you know, and as I said, sustainability is a core part of our strategy. And again, we doubled down on this last year, as you can see on Slide 11. There's 3 aspects. Let me start with BetterWay. We reached our BetterWay targets ahead of plan. Let me remind you what BetterWay is. BetterWay products are products in our assortment that are more sustainable, for example, by being more energy efficient. And these BetterWay sales now account for 25%, so 1/4 of our total sales. That's already now a lot more than the 20% target, which we had given ourselves for the financial year '25-'26. Second, the number of trade-in products. So when a customer returns a used device, this increased by 11%. At the same time, the average trade-in value also increased, and that helped us make this a very profitable business for us. Finally, refurbished products. So used products, refurbished to be as good as new. This showed exceptional growth and increased by 191%. That's a very clear sign that we really are offering what customers nowadays are looking for. So overall, we do feel encouraged to stay on this path. We will expand our trade-in offers. We will sell even more refurbished devices, and we will continue to focus on reducing the emissions footprint of our products. Now all of this that I've just so proudly presented to you, all of this would not be possible without our great team. I strongly believe that for us as an omnichannel platform, people and the human touch make all the difference. So we consistently invest in our people because we want, as MediaMarktSaturn, to be the best place for them to work. And so we ask them, we ask them twice a year, would you recommend us as an employer. The results, we call that the Net Promoter People. And in our last survey, it was at an all-time high of 42. That's up 4 points year-on-year, or 10%. And of course, we also invest in their development. We now use AI actually as a core tool to empower and to train our employees. And at the same time, strengthening those AI skills across all levels in our organization is a key priority for us in this next phase. We also made progress looking at diversity. Our female share in the top leadership increased by 250 basis points year-on-year and now stands at 16.3%. Come to think of it. Perhaps even more importantly, we have so many different cultures on board in our team. And that's a very important aspect also to me personally of diversity that shapes our company culture. Across Europe, people from over 130 nations work with us. Yes, that's right. More than 130 nationalities at MediaMarktSaturn. I want to take this opportunity not to speak to press and analysts, but to thank all those amazing people, to thank you guys that you work with us. All of this wouldn't have been possible without you. So thank you. From the bottom of my heart, thank you. Before I now hand over to Remko for the financial results, I want to highlight the 3 points that I want you to remember after our presentation today. Number one, the customer is always in the center of everything we do, not always perfect, but better every day. We are convinced that our omnichannel model is the right way to go, and it delivers on their expectations. So we will build on that in the future. Second, we have proven once again that our strategic direction, which has been stable for 3 years, is the right path. We continue to diversify our business, and we do become more than a pure retailer. Our growth business are no longer small. They are a key pillar of our success, and they continue to deliver consistent growth. And thirdly, as I started, we performed strongly despite an arguably challenging economic climate. Our sales grew more than moderate and our profitability improved for the 11th quarter in a row. Let me now hand over to Remko for a closer look at those amazing financials. So Remko, please join me. Remko Rijnders: Thank you. And also a big thanks from my side as well, and a warm welcome once again. As Kai already highlighted, we achieved a strong result this year and delivered slightly ahead of our updated guidance with both a strong sales growth of 5.7% and adjusted EBIT of EUR 378 million, slightly above our updated guidance of around EUR 375 million. This represents a 24% increase year-on-year or EUR 72 million compared to the previous year. In my opinion, these results are visible and measurable success. They are proof that we are making good progress in our transformation, which began just under 3 years ago, as you can see on Slide 16. Our efforts have translated directly into financial strength. We have significantly improved our profitability with our adjusted EBIT growing by an average of 22% year-on-year. That's a performance that speaks for itself, and we are certainly very proud of it. These results come from robust sales growth in our Core Retail business, the increased contribution from our successful growth business and our strict cost discipline. I will go into more detail on all 3 areas shortly. Let me now take a closer look at the full year results. We reported solid sales performance in all our 4 quarters and released very strong 6.9% like-for-like in Q4. Our profitability increase was driven again by our growth business, while we remain focused on cost. For Q4, our gross margin increase of 40 basis points was the main driver behind our profitability improvement. And now per region, the region DACH performed strongly over the year, and Germany reported the highest improvement in the region. This is a strong achievement, continued in a muted market, and we are pleased to report that we held our market share. In Western and Southern Europe, there Spain was the strongest contributor, both in sales and in EBIT growth. Note that the Netherlands had a strong EBIT growth, too. Finally, for Eastern Europe, Turkey continued to perform strongly. While we are still in restructuring mode in Poland, as we said before, it will take a bit more time. Let's now take a look at our sales from Services & Solutions. As a reminder, this includes insurance and warranties, telco and digital products, installation and repair, consumer financing and sustainability services. Overall, sales from Services & Solutions increased by 12.5% for the full year. Regarding the individual service categories, extended warranty and consumer financing achieved strong results for the full year. These figures show once again that our efforts to improve our service offerings are paying off. We have successfully convinced our customers that we are not just product providers, but above all, solution providers. Let's move on to our online business. Over a 12-month period, online sales increased by 13.3% to EUR 5.7 billion. This corresponds to an online share of 26%, including our Marketplace, and this is 240 basis points more than the previous year. Please keep in mind here that our Marketplace is currently active in 8 countries with the recent opening in Turkey. We expect the final 2 countries, Switzerland and Hungary, to go live in 2026. We still see a great deal of potential here as the marketplaces to continue to ramp up. Let me now return to EBIT development. Our gross margin increased by a strong 30 basis points for the full year. This is essentially due to the positive impact of our growth areas. If you look at our operating expenses, you can see that our adjusted OpEx ratio has decreased again, although only slightly by 10 basis points to 17.3% of group sales for the full year. We have improved our location costs as well as the efficiency of our marketing spend. We also place strong emphasis on managing our indirect spend. In simple terms, we are working hard to control all our internal costs that don't directly relate to customer-facing side of our business. Let me walk through from adjusted EBIT to net profit. As explained before, we increased our adjusted EBIT by EUR 72 million this year, which is a strong operating performance. Below the line, our net profit came in at minus EUR 34 million, mainly impacted by nonrecurring items like impairment we made in Poland for EUR 34 million. Remember that we are in restructuring mode over there, as I mentioned before. Second, we recorded a EUR 32 million transaction cost for our coming partnership with JD, and clearly see this as an investment for our future. So it's fair to say that excluding those, we would have reported a positive net profit. Let me finish with cash. Indeed, cash is king, particularly now in retail. While profit is an important measure, cash is the true livelihood of the company. A strong free cash flow demonstrates that our business model is working efficiently. In this case, that gives us the strategic freedom to fund growth, reduce debt and ensure we are resilient and agile in any economical climate. In essence, it's the engine that powers our long-term success. We generated EUR 280 million more cash than last year, which is a fantastic performance in my view. On this positive note, let me now hand back to Kai. Kai-Ulrich Deissner: Thank you, Remko. You see, we are having what I call positive momentum. And this, we want to carry it into this year. So now in conclusion, ladies and gentlemen, I'd like to share our outlook for the financial year '25 and '26. We are confident that we will continue to improve. We very formally expect a moderate increase in currency and portfolio adjusted total sales with all our regions contributing to that sales growth. Secondly, and arguably more importantly, we anticipate an adjusted EBIT of around EUR 500 million. This is also the target for the financial year '25 and '26 that we have communicated our Capital Markets Day back in 2023, and ever since. This improvement will be driven by the DACH region and Western and Southern Europe. And we already started into this new financial year strongly, as you will see on the next slide. As you know, Black November and Christmas are very important times in the year for us. They set the tone for our Q1 performance and our Q1 is usually our strongest quarter. So it's important. And I'm very proud to tell you, we had a successful Black season. Many of our countries delivered strong numbers. Especially [indiscernible] this year, in case you're interested, floor care robots, computer hardware and small domestic appliances like kitchen devices, usually smart kitchen devices. At the same time, our attachment rate for Service & Solutions, one of those growth areas, also was very strong. All of this performance was, of course, made possible by working on the engine by excellent product availability and by our marketing campaigns. Here, you may remember, we turned November into Yovember, because we want to say yes or Yo to offering our customers whatever they need, be it the best product, the best service or the best possible price. I'm very happy to look into more detail here together with you in February when we present our Q1 results. So in wrapping up, what have we presented to you today? First, we delivered strong performance in a challenging market environment, again. Second, our experience electronics strategy translates directly into greater customer satisfaction. Our record NPS underlines this. Third, our growth businesses are no longer small. They are an integral part of our business, and they continue to accelerate. Fourth, our focus remains unwavering on cost management, liquidity and profitability. Fifth, we are ready. We are ready to accelerate our development with our new strategic partner, JD.com. And finally, we maintain, unlike others, a positive outlook as we enter the new financial year. Ladies and gentlemen, as we conclude our presentation, I want to emphasize this positive momentum that CECONOMY has demonstrated throughout the past financial year. We still are not transformed fully, and we have a way to go. But that positive development shows we are on the right way. We're not just developing consumer electronics and experience electronics, we are paving the road to become the experienced champion in consumer electronics in Europe. Our dedicated team of almost 50,000 employees from more than 130 nations is working very hard on this vision. We will continue to stay close to our customers until we become a truly customer-centric omnichannel service platform. Thank you for your attention. We're now ready for your questions. Thank you. Fabienne Caron: So we will now open the Q&A session. So in the room, please raise your hand and wait for the microphone. Online, you have received a QR code with your registration. Otherwise, you can scan the QR code that may appear on screen to submit your questions. [Operator Instructions]. So we've got the first question online from xyz.pl, so from a Polish journalist. The first question is, are you still ready for major capital injection into MediaMarkt Poland? Second, do you plan to keep fighting for market share to become #1 in Poland? And third, how big will the change be after the JD.com transaction? Kai-Ulrich Deissner: Yes, Matthias, thanks for the questions. Remko will take the first 2 questions, and I'll round it off with the third. Remko Rijnders: Yes. Matthias, thank you for the question indeed. And let me highlight a bit how we see Poland at the moment. Poland is extremely important for our portfolio of countries. It's an important market, and it's a growing market. And of course, as we look at the results right now, we are investing in the team. We opened our marketplace in Poland that is now paying off. So we treat Poland as a very important country and a country that is very important also for our growth in Europe and also in a Europe that is at the moment consolidating. So that's foremost. Secondly, basically, how do you keep on plan fighting in Poland. We have mentioned it a couple of times, and it goes for all our country portfolio. For us, it's extremely important to be indeed #1 or the #2 in any country. And that's our ambition that we have together. And that's what we want to achieve in Poland where we go to that direction. But as mentioned already, this will take time in Poland. Poland is a very competitive market, and we are looking at the options as we speak. And let me now hand over to Kai. Kai-Ulrich Deissner: Yes, let's talk about JD. Actually, it's no different for Poland than for any of our other markets. What do we look -- what are the likely first changes that we see from our partnership with JD. And we've talked about it. We are, in particular, looking to their expertise in logistics, in particular, in delivery towards customers and in technology. And those are the 2 areas that will all materialize most likely in all countries, but most certainly also in Poland to help us, as Remko said, to fight back for that important market position, which we are committed to get. Fabienne Caron: Good. So we will show the QR code again for people who didn't have time to register to do so. So the next question is from Javier Garcia Ropero from Spain. He is from Cinco Días, a newspaper. He is asking, Spain showed a significant sales growth last year. What do you expect in the market in terms of sales growth and new store for next year? Remko Rijnders: Yes. So Javier, thanks for the question, and let me take this one. Yes. The Spanish market in 2025 was a very positive market. First of all, from a market perspective, overall, but in that market, we were able also to gain significantly, market share, both offline and online without opening stores. So basically, what we are looking into for next year is still that the Spanish market is going to grow. And in that market, we have still enough potential to grow more than our competitive environment, gaining more market share. So we are very positive about the Spanish market, but we are even more positive about our performance in that market, both on- and off-line. Fabienne Caron: Good. Next questions. We cannot see where it comes from. It's a question regarding if we plan to cut jobs at CECONOMY MediaMarkt. Kai-Ulrich Deissner: So I'll make sure that everybody heard that. So the question was whether we plan to cut jobs. And the answer is no. We do not plan to cut jobs. Very clearly, we do not plan to cut jobs. Let me explain that a bit. The business we're in means we constantly review our performance, as any normal retailer would. We're looking at that store and see whether it's still performing. We are looking at that area and seeing whether it's still performing, or at that area. So there will be changes. And yes, we will, of course, like in regular business, sometimes close 1 store here to reopen it there. And that may also mean that there is 1 or 2 or 3 jobs lost in the process. But that's very different from planning to cut jobs at large scale as a company strategy. That's not our strategy. We invest in people. We expect more stores. We expect to grow. So the answer is no. But of course, in day-to-day business, this may appear. Fabienne Caron: Thank you, Kai. The next question is from Matthias Inverardi from Reuters. Can you outline in detail how logistics will be improved by your partnership with JD.com? Kai-Ulrich Deissner: Let me try to take that, and I'm sure Remko is eager to add some details, but I want to place it first. Without wanting to be too defensive here, no, we cannot outline this in detail yet. Please respect that we're still in a phase where regulatory approvals are outstanding when there is no detailed discussions between the 2 companies, so we cannot give you a detailed answer. What I can tell you is what our ambition is and what we believe JD.com is strong. And I think I hinted at that already. They're very strong in very efficient delivery to customers. More than 90% of the deliveries in China reached their customer the same day or the next day. And just let that sink in. We're talking about China and not just the cities, I mean all of China. So as JD is rolling out these delivery expertise to Europe, it is our expectation and actually our agreement that we will be able to participate in this. This is what I can say in general. But detail is probably difficult to share at this stage. Remko Rijnders: Yes, it's difficult. We acknowledge that logistics is a very, very important part in an omnichannel strategy that we, as CECONOMY MediaMarkt have. And we have made very good progress. Automatization in Germany. Our NPS of delivery is going up. But yes, as Kai said, 1 of the reasons to look into synergy effects to thinking direction is, of course, this enormous strength on that last mile logistics, which accelerate basically our strategy that we have defined together. So I'm very much looking forward to that cooperation. But of course, logistics is going to be a customer-facing logistics topic for all of us. So yes. Fabienne Caron: Thank you, Remko. The next question is from Alexander Zienkowicz from mwb research. Congratulations on the results. You have your focus on the finish line, but could you provide us some glimpse beyond '25, '26. And secondly, with your free cash flow improving significantly, could you elaborate on capital allocation? Kai-Ulrich Deissner: Yes. Thank you, Alexander, and good to hear from you again. Let me give you a perspective where we stand, and then Remko will say something about the numbers. First of all, where we stand. The #1, #2 and #3 priority is making sure that we deliver our promises for the end of the current financial year. So the infamous EUR 500 million EBIT and the EUR 200 million steady cash flow. That is and remains our priority. Now we realize, of course, that we're confident to achieve that. So we are already thinking about the phase afterwards. And what I can anticipate that we expect to invite all of you towards the middle of next year, calendar year, to a strategy update where we will share the outlook on the next phase of our journey. So beyond the 30th of September, 2026. Expect that to appear in your diaries eventually for some time in the middle of next calendar year. And on the financials, Remko, do you want to dare to give an outlook already, or be careful? Remko Rijnders: No, I'm always careful, but very confident, of course. So first of all, thanks for the congratulations, Alexander, and good morning. So yes, we are very proud as well, as you mentioned, and I mentioned already, cash is king, on our achievement on free cash flow. Of course, as I mentioned already in the presentation, is that gives us a bit flexibility also to invest in our future and our future strategy. As Kai already mentioned, we will come back towards the next step. However, 2026 has been clearly defined, above EUR 200 million, EUR 500 million, and also how we want to get there with growth areas. So yes, there will be significant investment also in logistics, but especially also in the growth areas, because as you have seen, this is paying off. But the detailed capital, let's say, allocation, of course, we will come back on that topic later. But it's supporting our current strategy. That's for sure. Fabienne Caron: Thank you, Remko. The next questions come from Javier Mesa at elEconomista in Spain. What stage in the process of modernization in MediaMarkt are you? And will the smart format arrive in Spain in the coming months? Kai-Ulrich Deissner: Yes, Javier, thanks for the question. I'll be slightly evasive about this, but I ask your understanding. Let me be very clear. Each of our store formats, so that's the core format, the classical MediaMarkt, the Smart and the Express and the Lighthouse. Each of those formats is designed for each and every country. This is not country-specific. We expect to have these formats in each and every country. But I'm not able, and frankly, also not willing at this particular moment to share details of the rollout plan in any particular country. I would have given the same answer about Turkey or Italy or so. But yes, you can expect all of our store formats to be available in all of our countries in the future. Fabienne Caron: Thank you, Kai. The next question comes from Carlos Torres, [indiscernible] Spain. You have pointed out our important spend is for the group. Could you specify the company sales for Spain? And what are your forecasts for next year? Remko Rijnders: Yes. So let me take that question, Carlos. Thank you very much. As you, we are very proud of Spain as a country. It's a growing country. As I mentioned, we are doing better in the market in Spain, and that's due to really the team working for us in Spain and basically using all sales channels, B2B, online, off-line and, of course, marketplace. So from that perspective, we are happy. We see the market growing. We see us also growing in that market. We are preparing, also the Spanish team are preparing really some nice new propositions also from a customer perspective. So we are very much looking forward. Do I want to pinpoint a number specifically on the country today? I do not. But we are very positive about Spain and the performance and also about the future for Spain next year, or this year actually. Kai-Ulrich Deissner: We love Spain. Remko Rijnders: Yes, Spain is good. Fabienne Caron: So at this point in time, I see no further questions. Kai-Ulrich Deissner: My personal experience is, we will wait for a moment or so. Sometimes people need a moment to warm up. I'm afraid we haven't got anything planned to bridge the time now. So you'll just have to bear with us for a moment. Remko Rijnders: We made a nice Christmas movie, so maybe. Kai-Ulrich Deissner: Okay. I'm checking with our back-office team here. No questions or more questions? One more coming. Okay. Fabienne Caron: Yes. The question is as well from Frank Meßing of [indiscernible]. He is asking how many stores we're going to modernize next year in Germany? Kai-Ulrich Deissner: Frank, thank you for the question. I will give you the -- I think the answer has already been given. We have a target of modernizing or having modernized 90% of our core formats. Let me just be clear what that is, that's your classical MediaMarkt, right. 90% at the end of next financial year. And so that's also the answer for Germany. As to the numbers, that's roughly 400 stores. I'll give you the number now, 400 stores in Germany. So 90% of that is 360 stores that we will plan to have modernized by the end of next year. Fabienne Caron: The next question comes from Philip [indiscernible]. First, is there any further changes planned on Saturn in 2026? Will the brand continue to exist in Germany on- or off-line? And second, your adjusted EBIT improved, but not your reported EBIT. Could you give a guidance for reported EBIT? Kai-Ulrich Deissner: Yes, Philip, thank you on the Saturn question. I want to be very clear about this because there are so many rumors and often also so many questions around. Look, we have 2 brands. Actually, if you're really picky, we have three. MediaMarkt, MediaWorld in Italy and Saturn here in Germany. And we are proud of every element of that brand architecture. Now there's people out there who tend to buy more with MediaMarkt and there's people who tend to buy more with Saturn. We take that very seriously. That's why whenever we do modernize a store, as we've just talked about, we look at that store in a lot of detail and really come up with a decision that is specific to that store. And in Germany, we have 2 options. It's MediaMarkt and it's Saturn. And it stays like that. What I would want to emphasize is the value of our brands, of our joint brands, yes, MediaMarkt and Saturn. And we've just recently, from Brand Finance, received confirmation that our brand equity increased significantly, including Saturn by EUR 500 million year-over-year increase to EUR 2.5 billion now. So that's a strong argument for that double strategy of our brand. And for the second part of the question, I'll give it to Remko. Remko Rijnders: Yes. Thank you very much, Kai, and thank you very much, Philip. Let me repeat the second part of the question maybe. Your adjusted EBIT improved, but not your EBIT. Can you give a guidance on EBIT? And let me come back to what I said before, so adjusted EBIT indeed improved to a staggering amount of EUR 378 million. What is causing the EBIT to be negative is the investment that we did in our future, in the JD Corporation, accounts for EUR 32 million from nonrecurring items. It had a big impact. And also the Poland restructuring to build for the future, but we already mentioned where we want to be with Poland. So that had the biggest impact. What is our future outlook? Our future outlook is a positive outlook on EBIT and, of course, the around EUR 500 million in adjusted EBIT. Fabienne Caron: Thank you. The next question is from Jerome [indiscernible] from The Telegraph. So we are moving to the Netherlands. Question on data. You leveraged consumer data successfully with the off-site program. We're thinking -- we're talking here Retail Media. Do you expect regulatory scrutiny of this program also with JD.com in the Chinese context. Kai-Ulrich Deissner: Jerome, thanks for the question. Look, we are right in the middle of a regulatory approval process, and perhaps let me outline just where this stands in a bit more detail. There is merger control, there is foreign direct invest, and there is subsidy control by the European Union. Now I'm very happy to say that merger control has already been improved in each and every country where this is relevant for us. On foreign direct invest, the process is ongoing. We're happy to already have received an approval by the Italian authorities. All other processes are ongoing. And I do imagine that, of course, questions of data are always part of that, but none that are particular to these off-site campaigns, as you mentioned. Furthermore, I cannot and it would not be adequate to comment at this particular stage. I would want to close and emphasize again, we remain very confident and expect to close in the first half of 2026. Fabienne Caron: Thank you, Kai. The next question has come from Ulrike Dauer, Dow Jones. First questions. At the 2023 Capital Markets Day, beyond the adjusted EBIT target for '25-'26, you gave out other target for adjusted free cash flow and adjusted EBIT margin, which seems a bit outdated now. Can you update those targets at this point in time? Remko Rijnders: And I'll take that perhaps together with the second question for a dividend because it's also from Ulrike, yes. Now let me say here that we will not comment on numbers in any detail. If we are really picky, we gave an adjusted EBIT target for the end of next year, that's EUR 500 million. We gave that number in our Capital Markets Day, and we have repeated that number precisely to the last decimal since. We have, at the Capital Markets Day in 2023, said that we expect a stable cash flow of EUR 200 million per year, and we're also not changing that number. As for the dividend, we have a standing policy as a company. And that policy, I think we revealed it here last year, exactly a year ago, if I remember correctly. Let me just reiterate that, because that policy is still in place. And it is that between 15% and 25% of the net profit or EPS per year can be distributed as a dividend. That has not changed. We've reviewed it here a year ago, and it is still stable. That policy has not changed and will also be relevant in the future. Fabienne Caron: Thank you. We have an additional question from Alexander Zienkowicz from mwb research. Retail Media trends to grow because marketing budgets are tight as brand shifts spend towards more performance-driven channels. To what extent is your growth benefiting from this dynamic? Remko Rijnders: Yes. So Alexander, thanks for that question because, first of all, as mentioned, we are already extremely proud of our growth when it comes to Retail Media. That being said, we are just at the beginning also when we look at our competitive field. There is a huge possibility to make that even a bigger part of our growth area, our growth business. It's true that basically the SEO, the whole world is changing there. AI comes into play. So yes, there is huge opportunity already in the Retail Media area where we are today, because we are just at the beginning. Yes, we are already better performing than we expected for 2025 fiscal year, and we expect a growth there as well. That being said, it will not be only on paid. We are also working very, very hard on the organic traffic in our organization. It's about brand awareness. So that also plays a role in this partner marketing and Retail Media. But you're right, it will play a significant part in combination to paid search and organic growth of our company, which helps then non-endemic or our suppliers of MediaMarkt to turn as well. Fabienne Caron: Thank you, Remko. I see no further question at this point. Kai-Ulrich Deissner: Still going to give it 30 seconds. Last time, I was successful in tickling out a few more questions. Okay. Look, thank you all for your time and for your questions and all the energy today. I trust that you've seen that Remko and I and Fabienne and the whole team, actually, that 50,000 people here at MediaMarkt and Saturn work very hard to bring what we call experienced electronics to life. And we will continue that journey. And we will continue it also in a partnership with JD.com after that transaction closes in the first half of 2026. We will, of course, keep you posted about this process. And in the meantime, if you would like to engage with us in any of our regular channels, we are very happy to continue those conversations. Please also mark February 11 already in your diaries. That's when we will present our Q1 results and, of course, share much more details about the Christmas and Black piece. Until then, Remko, Fabienne and I and everyone here at MediaMarktSaturn wishes you a very Merry Christmas and a wonderful holiday season. Enjoy your time with your loved ones. And if you don't have all the presents yet, come to our stores or order online, even on the last day before Christmas, because with a 90-minute delivery, we'll make sure that you got something to put underneath the Christmas tree. Thank you very much for today. We are very much looking forward to speaking to you next year. Thank you very much, everyone.
Operator: Good morning, ladies and gentlemen, and welcome to Veru Inc. Investors Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference call over to Mr. Sam Fisch, Veru Inc. Executive Director, Investor Relations and Corporate Communications. Please go ahead. Samuel Fisch: The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company's plans, objectives, expectations or intentions regarding its business, operations, regulatory interactions, finances and development of product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in our press releases from time to time. I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc's. Chairman, CEO and President. Mitchell Steiner: Good morning. With me on this morning's call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the Chief Financial Officer and Chief Administrative Officer; Philip Greenberg, General Counsel; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our year end fiscal year 2025 earnings call. Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of 2 new chemical entity small molecules, enobosarm and sabizabulin. First one is enobosarm, an oral selective androgen receptor modulator, SARM, is being developed as a next-generation drug that makes weight reduction by GLP-1 receptor agonist drugs more tissue selected at fat loss with preservation of lean mass. This activity is intended to lead to greater weight loss by improved body composition and physical function compared to a GLP-1 receptor agonist treatment alone with a focus on older patients with obesity. Our second asset is sabizabulin, a microtubule disruptor and is being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression of promoted regression of atherosclerotic cardiovascular disease. This morning, we will focus on the update of our obesity program, and we'll also provide the financial highlights for our year-end fiscal year 2025. Now let's set the stage with the recent FDA guidance on obesity drug development. The FDA defines obesity as a disease of excess body fat and as such, the medical objective to treat obesity should be to reduce excess body fat, not to reduce lean mass. Reduction of fat mass ultimately leads to the improvements in morbidity and mortality associated with obesity. GLP-1 receptor agonist have been shown to produce significant weight loss in patients who are overweight or have obesity. Unfortunately, the weight loss is tissue nonselective with the indiscriminate loss of both significant lean mass and fat. Of the total weight loss up to 50% is attributable to lean mass. Although the GLP-1 receptor agonist treatment results in profound weight loss, the strategy for the next generation of obesity drugs should be a combination therapy with GLP-1 receptor agonist to only lose fat while preserving lean mass in physical function for a quality weight reduction. Now when we started our Phase IIb quality clinical trial evaluating enobosarm as a muscle preserving drug in patients with obesity receiving a GLP-1 receptor agonist for weight reduction about 2 years ago, it was unknown at the time how any muscle anabolic drug would perform in this unique new patient population. The companies that were in Phase II testing stage were Lilly, Versanis, Scholar Rock and Regeneron with injectable agents in the myostatin inhibitor class and Veru with an oral enobosarm from a different class called SARM. Fast forward to today, all these companies, including Veru have reported their Phase II clinical results. In fact, Veru was the first company to report these clinical data in January of 2025. And by September of 2025, Veru also obtained FDA regulatory clarity to advance the clinical development of enobosarm in combination with GLP-1 receptor agonist as a muscle preservation agent in [ augment ] fat loss. Our completed positive Phase IIb quality clinical trial results were critical as they demonstrated that oral enobosarm could be that next-generation drug in combination with GLP-1 receptor agonist to make the weight loss journey more selective by losing fat while preserving lean and physical function in older patients who have obesity with a positive safety profile. Now turning to the results of the Phase IIb clinical trial, this time with a focus on the 3-milligram enobosarm dose that has been selected for the next clinical trial. First, I will highlight the results for the 16-week active weight loss period of the treatment with enobosarm 3-milligrams or placebo in combination with semaglutide. The enobosarm 3-milligram plus semaglutide group met the primary endpoint of the study, preservation of total lean mass with a statistically significant 100% average preservation of total lean mass compared to placebo plus semaglutide treatment group at 16 weeks. The enobosarm semaglutide treatment resulted in a dose-dependent greater loss of fat mass compared to placebo plus semaglutide with the enobosarm 3-milligram group having a 12% greater fat loss at 16 weeks. Even with having preserved lean mass, enobosarm 3 milligrams for semaglutide treatment resulted in a similar mean body weight loss and semaglutide alone at 16 weeks. However, it should be noted in a subset analysis of the subjects receiving enobosarm 3 milligrams who had a baseline BMI of greater than equal to 35, incremental weight loss was observed at 16 weeks. This was weight loss of 4. 7% for semaglutide versus a minus 5.58% for enobosarm 3 milligrams plus semaglutide treatment group. But when you look at the proportion of patients that lost at least 5% of the body weight at 16 weeks, it was 47.4% for semaglutide versus 65.4% for enobosarm 3 milligrams plus semaglutide treatment group. This weight loss occurred even with 84% preservation of lean mass in the subset of patients receiving semaglutide on enobosarm 3 milligrams. Now the tissue composition of the total body weight loss on average was 34% lean mass and 66% fat mass in the placebo semaglutide group, whereas for enobosarm 3 milligrams and semaglutide group, the weight loss was 0% lean and 100% fat mass. Now we measured physical function by the stair climb test. This was a prespecified responder analysis, and this was conducted using greater than 10% decline in stair climb power as a cutoff at 16 weeks, which is a decline that represents approximately 7 to 8 years of loss of stair climb power that naturally occurs with aging, but it occurred in this case in 16 weeks. Semaglutide alone resulted in a loss of physical function as much as 44.8% of the placebo plus semaglutide group had at least a 10% decline in stair climb power at 16 weeks. The Phase IIb QUALITY study is the first to confirm that older patients with obesity receiving a GLP-1 receptor agonist indeed had a significant and relevant physical function decline and picked up as early as 16 weeks on treatment. In contrast, enobosarm 3-milligram treatment reduced the proportion of patients receiving semaglutide to 17.6% who experienced a greater than 10% decline in stair climb power. This represents a 59.8% relative reduction in the proportion of patients receiving enobosarm who experienced a greater than equal 10% decline in stair climb power. Now for the maintenance extension portion of the study, where all patients discontinued semaglutide treatment but continued receiving placebo enobosarm 3 milligrams as monotherapy for 12 weeks, results were: For the placebo monotherapy group, they actually regained 43% of their body weight that was previously lost during the active weight loss period of the Phase IIb QUALITY study, the mean percentage change of 2.57%, basically 5 pounds, they gained back in body weight compared to 1.41% or 2.73 pounds for the 3-milligram enobosarm group. This means that the 3-milligram enobosarm monotherapy significantly reduced body weight regained by 46% after discontinuing the semaglutide. But by the way, the mean tissue composition of the body weight that was actually regained was 100% lean mass, not fat for the enobosarm 3-milligram group compared to 28% fat and 72% lean mass in the placebo group. In fact, by the end of the 28-week study, the enobosarm 3-milligram plus semaglutide arm followed by the enobosarm 3-milligram monotherapy regimen was more effective in preserving 100% lean mass and losing 58% more fat compared to the group receiving placebo plus semaglutide followed by placebo monotherapy alone. As for safety, at the end of the 16-week active weight loss period, enobosarm and semaglutide combination had a positive safety profile and enobosarm did not have any added gastrointestinal adverse events compared to semaglutide alone. For the maintenance extension period of the clinical trial, where semaglutide was stopped for 12 weeks, enobosarm monotherapy also had a positive safety profile. And after discontinuation of semaglutide, there were essentially no gastrointestinal side effects. No evidence of drug-induced liver injury, no increases in obstructive sleep apnea were observed at any dose of enobosarm compared to placebo monotherapy. There were no adverse events related to masculinization in women, and there was no adverse events related to increases in prostate-specific antigen, which is PSA, in men. So in summary, Phase IIb QUALITY clinical trial confirms that by preserving lean mass and physical function with enobosarm plus semaglutide led to greater fat loss during the active weight loss period and after semaglutide was discontinued, enobosarm monotherapy significantly prevented the regain of body weight and fat mass such that by the end of the 28-week study, there was a greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group. Next, I will update you on the enobosarm clinical development plan. Because this field is very new, the regulatory landscape continues to evolve for muscle preservation drugs for the treatment of obesity. According to the FDA feedback on Veru's clinical development program for enobosarm, FDA has guided us that there are at least 2 possible regulatory pathways forward for the development of enobosarm in combination with GLP-1 receptor agonist that are based on incremental weight loss. First, incremental weight loss with at least a 5% placebo-corrected weight loss difference at 52 weeks of maintenance treatment with enobosarm in combination with GLP-1 receptor agonist treatment compared to GLP-1 receptor treatment alone is an acceptable primary endpoint to support efficacy for approval. Second, and alternatively, if the incremental weight loss difference of less than 5% is less than 5%, including similar weight loss is observed at 52 weeks of maintenance treatment, but you have a clinically significant positive benefit such as a clinically beneficial preservation in physical function, enobosarm in combination with a GLP-1 receptor agonist may also be acceptable to support efficacy for approval. Accordingly, with this feedback from the FDA and building on the clinical data from the Phase IIb clinical -- excuse me, Phase IIb QUALITY study, what would be the best patient population with obesity to target with a combination of enobosarm and a GLP-1 receptor agonist. An emerging common and serious clinical and therapeutic challenge with GLP-1 receptor agonist monotherapy is that most patients with obesity by the end of 1 year of GLP-1 receptor agonist maintenance treatment hit a weight loss plateau. The weight loss plateau occurs when the patient with obesity stops losing additional weight while on the GLP-1 receptor agonist. In the SURMOUNT-1 clinical study conducted by Eli Lilly and Company, about 88% of patients with obesity receiving tirzepatide reached a weight loss plateau by 60 to 72 weeks. Unfortunately, 62.6% of these patients still had clinical obesity at the time they reached the weight loss plateau. Further, if they start the GLP-1 treatment with a baseline BMI of greater or equal to 35, then these patients was, on average, still found to have clinical obesity at the time they hit the weight loss plateau. Interestingly, one of the therapeutic interventions being considered for this patient population is bariatric surgery to address the GLP-1 receptor weight loss plateau. To address this growing weight loss plateau population, a novel combination of a GLP-1 receptor agonist, which works by telling the brain to reduce appetite, combined with enobosarm, which is designed to directly burn fat and to directly preserve muscle to increase physical function and burn more calories could break through this weight loss plateau, leading to incremental weight reduction, thereby increasing the number of patients with obesity who actually achieve and maintain a normal BMI and weight. Our next study will target this patient population. The planned Phase IIb PLATEAU clinical trial will measure incremental weight loss in this target population who have more weight to lose with a BMI greater than 35 and more at risk for physical decline in physical limitations, aged greater than equal to 65 to assess the ability of enobosarm treatment to break through the weight loss plateau and help us also to better inform the design of the Phase III development program. Now for the planned Phase IIb PLATEAU clinical trial, we will evaluate the effect of enobosarm 3 milligrams on total body weight, physical function and safety in approximately 200 patients who have obesity, BMI greater than equal to 35 and who are older, age greater than equal to 65 and are initiating a GLP-1 receptor treatment for weight reduction. The primary efficacy endpoint of the study will be the percent change from baseline in total body weight at 72 weeks. An interim analysis will be conducted at 36 weeks to assess the percent change from baseline lean body mass and fat mass as measured by DEXA scan. Since we want to continue to evaluate enobosarm as a muscle preservation and body composition drug, the key secondary endpoints will be function endpoints, physical function stair climb test, mobility disability status, which is functional limitations and patient-reported outcome questionnaires for physical function such as the SF36, PF10 and the IWQOL-lite CT physical function PROs. As well as body composition endpoints, total fat mass, total lean mass and bone mineral density. As for our financial position to fund the Phase IIb program, as of September 30, 2025, our cash and cash equivalents and restricted cash balance was $15.8 million. And subsequent to September 30, 2025. On October 31, 2025, we completed a public offering that resulted in net proceeds to the company of approximately $23.4 million. The clinical study is expected to begin in the first quarter of calendar year 2026. An interim analysis to assess change in lean mass and fat mass as measured by DEXA will be conducted at 36 weeks and is anticipated to be in the first quarter of calendar year 2027. I will now turn the call over to Michele Greco, CFO, CAO, to discuss the financial highlights. Michele? Michele Greco: Thank you, Dr. Steiner. On December 30, 2024, Veru sold the FC2 Female Condom business to Clear Future Inc. The purchase price was $18 million in cash, subject to adjustment as set forth in the purchase agreement for the transaction. Net proceeds from the sale of the FC2 Female Condom business were approximately $16.5 million after selling costs and other purchase price adjustments, but before a change of control payment of $4.2 million owed to SWK Holdings pursuant to a residual royalty agreement for a 2018 financing transaction. The loss on the sale of the FC2 Female Condom business was approximately $4.1 million. The difference between the estimated net proceeds of $16.5 million and the total carrying value of the FC2 business of $20.6 million. On December 30, 2024, the carrying value of the FC2 Female Condom business was comprised primarily of deferred income tax assets of $12.3 million, accounts receivable of $4.6 million and inventory of $3.4 million, partially offset by accrued expenses and other current liabilities of $1.5 million. Liabilities associated with the residual royalty agreement, which totaled $9.9 million at September 30, 2024, were extinguished. The sale of the FC2 Female Condom business represented a change in strategy, allowing the company to focus all its efforts exclusively on drug development and also affects how we present our operations and financial results. In our financial statements, all direct revenues, costs and expenses related to the FC2 Female Condom business are classified within loss from discontinued operations net of tax in the statement of operations. On October 31, 2025, the company completed an underwritten public offering of 1.4 million shares of our common stock, prefunded warrants to purchase up to 7 million shares of our common stock, accompanying Series A warrants to purchase up to 8.4 million shares of our common stock and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per common share of stock and the accompanying Series A and B warrants. Net proceeds to the company from this offering were approximately $23.4 million after deducting underwriting discounts and commissions and costs paid by the company. Now let's review the results for the fiscal year ended September 30, 2025. Research and development costs increased to $15.6 million in fiscal 2025 from $12.8 million in the prior year. The increase is due to an increase in expenses incurred related to the company's Phase IIb QUALITY clinical study for enobosarm as a treatment to augment fat loss and to prevent muscle loss, partially offset by a decrease in expenditures related to the company's other drug development programs that were terminated in previous years and a decrease in personnel costs. Selling, general and administrative expenses were $19.9 million in fiscal 2025 compared to $24.6 million in the prior year. The decrease is primarily due to a decrease in the expense related to share-based compensation. We recognized a gain on sale of ENTADFI assets of $10.8 million in fiscal 2025 compared to a gain of $1.2 million in the prior year, which is based on nonrefundable consideration received related to promissory notes due to Veru. During the year, the company entered into a settlement agreement with Onconetix, whereby the company received a cash payment of $6.3 million in Series D preferred stock and a warrant, which had a combined fair value of $2.5 million. In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the residual royalty agreement. This represents the difference between the change of control payment of $4.2 million and the net carrying amount of the extinguished debt of $12.8 million. which included an embedded derivative for the change of control provision at fair value of $4.7 million. The loss associated with the change in fair value of equity securities in fiscal 2025 was $0.3 million compared with $0.2 million for fiscal 2024. This is due primarily to the change in the fair value of the shares of Onconetix common stock we previously held, which were sold during fiscal 2025. The bottom line result from continuing operations for the fiscal year was a net loss of $15.7 million or $1.07 per diluted common share compared to a net loss of $35.3 million or $2.61 per diluted common share in the prior year. For fiscal 2025, net loss from discontinued operations, net of taxes related to the FC2 business were $7 million or $0.48 per diluted common share, including the $4.1 million loss on the sale of the FC2 business compared to a net loss of $2.5 million or $0.19 per diluted common share in the prior period. The increase in the net loss from discontinued operations of $4.5 million is due to the loss on the sale of the FC2 Female Condom business of $4.1 million, a reduction in gross profit of $4.3 million and an increase in the loss from the change in fair value of the derivative liabilities of $2.9 million, partially offset by a decrease in operating expenses of $5.5 million. Now looking at the balance sheet. As of September 30, 2025, our cash, cash equivalents and restricted cash balance was $15.8 million compared to $24.9 million as of September 30, 2024. The restricted cash as of September 30, 2025, was $54,000 related to the sale of the FC2 Female Condom business. Subsequent to September 30, 2025, we completed a public offering that resulted in net proceeds to the company of approximately $23.4 million. Our net working capital was $11.1 million on September 30, 2025, compared to $23.4 million on September 30, 2024. The company is not profitable and has had negative cash flow from operations. We will need additional capital to support our drug development candidates. Based on the company's current operating plan, our cash as of the issuance date of these financial statements is sufficient for the company to fund operations through the interim analysis in the Phase IIb PLATEAU clinical study to assess percent change from baseline in lean body mass and fat mass as measured by DEXA scan. During the year, we used cash of $30 million for operating activities compared with $21.7 million used for operating activities in the prior year. We generated cash from investing activities of $25.1 million for fiscal 2025 compared with $0.1 million from investing activities in the prior year. The cash generated in the current year relates to net proceeds from the sale of the FC2 Female Condom business of $16.5 million and proceeds of $8.3 million from the sale of the ENTADFI assets. We used cash in financing activities for fiscal 2025 of $4.2 million related to the change of control payment pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 Female Condom business. In the prior year, we generated $36.8 million from financing activities. Now I'd like to turn the call back to Dr. Steiner. Dr. Steiner? Mitchell Steiner: Thank you, Michele. And with that, I'll now open the call to questions. Operator? Operator: [Operator Instructions] The first question today comes from William Wood with B. Riley Securities. William Wood: Congrats on a successful year. I'm just kind of curious, in your press release for PLATEAU, you noted that there's going to be an inclusion of GLP-1 whereas at least in the past, you've spoken of using only tirzepatide, which is highlighted in your most recent deck. During PLATEAU, there's the potential for 2.4 mg sema, 7.2 mg sema 25 mg oral sema and then [ oral ] and then obviously also tirzepatide to all be approved. So I'm just curious, will any GLP-1 be allowed in your Phase IIb? Or will it be limited to just tirzepatide? And curious how we should sort of view the potential to achieve this 5% weight loss bar when placed with various agents. Do you feel that, that remains the same or it sort of lower or higher initial weight loss better to sort of set you up for success. Mitchell Steiner: Great question. Thank you for the question. So basically, the question is, we're seeing GLP-1 receptor agonist. We get -- we're putting tirzepatide. in the placeholder in the study, raise the question, are you going to allow both semaglutide and tirzepatide, which are the 2 approved GLP-1 receptor agonists that are out there right now. And the answer is we have to pick one, because they are different. And the last thing you want to do is add variability to the study by having tirzepatide and semaglutide together. We're in the process of chatting and trying to secure one or the other. And so based on that, we'll determine ultimately which one it will be. At this point, the placehold is tirzepatide, but it could be semaglutide. But in either case, it should be one or the other and not allowing for both. William Wood: Got it. That's helpful. And then also, when thinking about sort of the Phase I to Phase III transition. Do you have any insight on -- I know you said that the FDA would allow for -- if you don't achieve that 5% bar, they would allow to incorporate or to look towards, say, a functional improvement like strength, specifically stair climb. But how does that set up in Phase III? Is that set up a dual endpoint in Phase III where you have to have where it's sort of an and/or dual primary endpoint? Or would they allow just a functional endpoint? How should we be thinking about that? Mitchell Steiner: So I'll tell you exactly how to be thinking about it. It's a great question. So the reason we didn't go to Phase III is because we wanted to answer that question before you move to an expensive Phase III, okay? So the idea is do a Phase IIb and make the primary endpoint incremental weight loss. And so we know exactly how this agents are going to behave just like in a Phase III setting. So they have the titration period, the maintenance period of 52 weeks, same exact criteria that the FDA wants through the Phase III. So it's basically a mini Phase III. And so -- then we'll know exactly what that incremental weight loss over time will be. Then to make sure that it's very clear that we're focusing on body composition and function the second -- key secondary end points, as I mentioned in my comments, are going to be heavily weighted on getting an understanding of what happens at 72 weeks. So basically, your titration period followed by your maintenance period. Again, understand exactly what's going to happen in the Phase III setting in the Phase II -- using the Phase II setting. So we'll know exactly which of these points. Is it going to be stair climb power? Is it going to be the clinical outcome measure? Is it going to be bone mineral density? Is it going to be functional limitations, patients come in with functional limitation, mobility disability question. There's 2 questions. And do they improve and not improve? So we're learning a lot of information in what happens on 16 weeks, but what happens now at 72 weeks. And so based on that, and to be very clear, we found that the FDA's feedback was very positive because it gave us options now that can range from incremental weight loss you hit, and you can bring all the physical function body composition stuff in, if clinically meaningful in the label. And you're different. You're not an incretin within incretin okay? Or it becomes clear incremental weight loss, it could be a challenge. We don't think it will be, but let's say it is, you're not dead in the water. Now you have your physical function endpoints that can serve as your primary endpoint, your primary endpoint in the Phase III. So you can see how we're using our Phase II to guide us in our Phase III program. William Wood: Yes. No, that's helpful. And I guess just actually one quick last one. I know you've mentioned in the past again that you were going to sort of go for all comers but stratify. It looks like you're only targeting the greater than 65 patient population now in PLATEAU, and that's actually sort of up from the greater than 60 years old in QUALITY. So maybe just clarify what population you're targeting? And was that more FDA guidance or Medicare reimbursement dynamics or just sort of the most in-need population kind of [indiscernible]. Mitchell Steiner: So the way to think of it is if we hit our incremental weight loss, okay? Then you feel more comfortable. And if you hit on incremental weight loss in patients over 65, you're going to be finding the incremental weight loss in patients less than 65, okay? But for physical function, which is where we see ourselves benefiting and showing clinical meaningfulness, then the greater than 65 in our Phase IIb QUALITY study with the patients that were most in need, meaning they probably have a touch or more than a touch of sarcopenia and they already have physical limitations. They're the most informative population for physical function. If you go back and say, oh, if I look at STEP 1 or look at SURMOUNT studies, the performance looks better in patients that lose weight. It does because the average age is like 50. But if you go over 65, I haven't seen a single study in which they take out patients that are 65 and older and ask the same question. They don't. And so the purpose of the Phase II is to find the patient population that's most in need. The FDA has guided that if you choose as a primary endpoint, physical function and body composition endpoints, that being older greater than 65 and quite frankly, even being younger than 65, there's no indication. So even if you hit incremental weight loss and you want a secondary endpoint of physical function, you have to say what patient population has to be prespecified. If you read the guidance, it says you have to prespecify it. So in other words, if a 32-year-old linebacker, if you're going to lose weight and not have to get into trouble because they have a lot of muscle reserve, then that will be a bad patient to tell you whether or not you're going to make the functional limitations better. So even in the setting where incremental weight loss you hit and you want your secondary endpoint to be physical function, you can do a prespecified subset and put that into the full Phase III. So you do all comers and then you prespecify a subset, in this case, greater than 65. So by having this Phase IIb PLATEAU study, we'll know exactly how that patient population will behave. And so we hit incremental weight loss, we expanded to all patients, and we prespecify an older patient population that we want to have functional endpoints measured. Again, you read the guidance, that's acceptable. On the other hand, if you don't hit incremental weight loss and you go forward being older than 65 is not a disease. And so therefore, you have to say, older than 65 and functional limitations, older than 65, something in the patient problems with average activity of daily living, problems with functional tests like stair climb. So this Phase IIb really will give us the information that we need to make sure that if we go with a primary endpoint of physical function that we have the right indication in the right patient population. So as you see, we set ourselves up for all the options. And now on the study, take a step back between the Phase IIb QUALITY study and the Phase IIb PLATEAU study. Now you're going to feel pretty good you derisk the program for multiple opportunities -- multiple options going forward. So again, incremental weight loss with a secondary endpoint, physical function in the right patient population or physical function is your primary endpoint, incremental weight loss is not because you're at the same weight loss. But you have the right patient population, sarcopenic obese patient over the age of 65 that is afraid to go on GLP-1s. Can you help that patient population, which by the way, 44 million Americans on Part D of Medicare, of which half can benefit from a weight loss drug. It's a massive market. So we're playing with big numbers. While we're waiting for the next question, I just have a couple of comments to make. So first of all, as we reflect back over the year because this is year-end, maybe some personal comments from me. First of all, we went into a field that was completely unknown. We had data in cancer patients. We had data in older patients, but are these patients with pharmacological induced low-calorie situation different? And guess what, they are different. They are different. And so much so that when you look at these myostatin inhibitors because now these other companies have reported, if not complete Phase II, partial Phase II data, it's hard to hold on to lean mass. It's hard to hold on to lean mass. And you'll see the 6-month data and even the year data. So this is a different patient population. With that said, enobosarm performed very nicely. So we were able to show 100% lean mass, we burn fat, good physical function. And then the statement came back, how about safety because safety took us some more time to get safety because the study was still blinded. Safety came back great. And in fact, we look like we make GI toxicity better for the GLP-1. And so we're very, very excited about that. So from a year -- looking back at the year, we did -- I think we achieved what we needed to do with the trial. Then the competitive landscape, the other companies, Scholar Rock, Regeneron, Versanis, Lilly reported. And that was very, very helpful. Remember, we're oral, they're an injectable. And they have their own unique interesting safety signals. And that's because myostatin inhibitors are very ubiquitous and we're still learning about them. But the point is that we learned from that. What do we learn? One of the things I heard over and over, oh Mitch, if you hold on to muscle, muscle weighs more than fat, that you're going to have people that actually gain weight on your anabolic agent. And forget about incremental weight loss, you may be in a situation where you have to accept less weight loss. It didn't happen. It didn't happen for us, it didn't happen for them. So if you give an anabolic agent, there's not an instance where you loss less weight, in fact, with time and with time and holding on to more lean mass, as shown by the Versanis Lilly data that by 72 weeks, they had a 6.4% incremental weight loss .6.4% incremental weight loss. What that's supporting is that if you hold on to metabolic muscle that burns more calories every day than other tissue that ultimately the turtle wins the race, not the rabbit, the turtle wins the race and you end up with more weight loss. So that was important. Then the statement came back, okay, now we need regulatory clarity. Well, guess what? Yes, it's evolving. Yes, the FDA changed their mind because why would we do a 16-week study if incremental weight loss was the primary endpoint. That makes no sense. But that's because the FDA told us that incremental weight loss by itself would not work in the case of our drug functional endpoints, it function and should be the endpoint. That's what we did. Why did we pick 16 weeks? Because in all the previous 5 other studies in 1,000 patients, 16 weeks will show it. Guess what? It did. And then the FDA changed their thinking and actually gave us an option to -- now that we know incremental weight loss and anabolic agents can happen, and we saw in some of our data that we saw weight loss in some of the cancer patients who are obese. This could be very, very interesting. This is -- sometimes I say the FDA moves to goal posts. In this case, they moved to [ assist ] us because they gave us an opportunity to have multiple ways to get the physical function information into the label. So I'm very happy about that. And so our new trial design, as I just went through with questions from Dr. Wood. You'll see that we've set this up to have multiple opportunities for us to understand what the Phase III program could be from an extreme. Everybody in a subset of physical function to just the patients most in need that need a GLP-1, but can't take it because they have sarcopenic obesity, and that's a big number. And finally, we raised money. We have money. We raised -- we had a public offering. We had money in the bank. We put ourselves in a position to move forward on the trial. So we're very happy that's behind us. Some pushback was the IP. The IP, okay, we're a new chemical entity, our method of use patents, which are now about 5 of them, if issued, will get us to 2043. 2043 is a long time from now. And then to be sure, we made sure we made a new formulation of enobosarm. We've reported that we have that new formulation of enobosarm. We filed patents on that new formulation. That will take it to 2046 expiry. And in the Phase III in commercial, that will be the only formulation that will be used. Enobosarm is a new chemical entity. It doesn't exist out there. It's never been approved. So we put ourselves in a good position. And finally, pharma validation. And so we're working on. And so I think we've checked all the boxes to show that we have a robust program. And this year has been a really pivotal year to put us in a very strong footing to be an oral agent that could be potentially combined with some of the oral agents that are being developed by big pharma, where they're noticing that the oral agents aren't quite matching the injectables in terms of weight loss. So an oral agent, small molecule that's for weight loss incretin in combination with enobosarm could be very interesting. And particularly if you can potentially have similar weight loss with the combination therapy as you do with the injectables. Operator: The next question comes from Rohan Mathur with Oppenheimer. Rohan Mathur: This is Rohan on for Leland. Thanks for the update, just one question for me. As you think about the different outcomes from the PLATEAU study and the obvious benefits of the enobosarm, do you expect there to be any flexibility around regulatory discussions that would follow when it comes to showing a certain degree of weight loss from muscle function? Mitchell Steiner: Yes. So the degree of weight loss, this stake in the ground looks like 5% or greater placebo-corrected gets you the incremental weight loss. And if you have the incremental weight loss and all the secondary stuff will come in based on clinical meaningfulness. And so that gets to the next question, that is for a part of our homework in the Phase IIb PLATEAU study, and you can see we put a lot of options on physical function. We did physical function test, which is stair climb test, function test. They don't like strength tests. We're doing clinical outcomes questionnaires that have been used in many of these STEP 1, SURMOUNT studies as well. So we have data there. And if we can show an older patient population, there's an improvement. And in terms of clinical meaningfulness. And then what's interesting new one is this mobility disability assessment. It turns out that there's an ICD code to diagnose clinicians use to diagnose frailty in older patients and for mobility, disability that contains 2 questions. Question one is, can you walk through city blocks? And question two is, can you climb stairs, something like that. And so to assess patients coming into our Phase IIb PLATEAU study, and show that we can make people with functional limitations coming into study better, that could be interesting. And so there's multiple ways to come back and present our case for the best way to measure physical function. One of those or all of those. Operator: Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the call back over to Dr. Mitchell Steiner for any closing remarks. Mitchell Steiner: Great. Thank you, operator. I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress in the next investors call. Thank you for being with us. Operator: The digital replay of the conference call will be available beginning approximately 12:00 p.m. Eastern Time today, December 17, by dialing 1 (855) 669-9658 in the U.S. and 1 (412) 317-0088 internationally. You will be prompted to enter the replay access code, which will be 2225332. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion. Goodbye.
Operator: Good morning, and welcome to IntegraFin's 2025 Full Year Results Presentation. We're joined today by Alex Scott, Group CEO; and Euan Marshall, Group CFO. Following the presentation, there will be a Q&A session. But for now, I'd like to hand the call over to Alex. Please go ahead. Alexander Scott: Good morning, and welcome to IntegraFin Holdings Full Year Results Presentation for the financial year ended 30th of September 2025. I'm Alex Scott, Group Chief Executive; and joining me today is our Group Chief Financial Officer, Euan Marshall. I'm going to kick off with an overview of the group's performance and our business highlights from FY '25. I'll then hand over to Euan to run through the group's financial performance in the period and the outcomes of the group's cost and efficiency review. Finally, I'll close with an update on the performance of the Transact platform and a look at the good progress we've made on our key work streams throughout the year before moving on to Q&A. FY '25 has been an excellent year for IHP. The group demonstrated continued strong performance, and we delivered on our strategic priorities. We attracted impressive net inflows of GBP 4.4 billion, driven by record gross inflows. Net inflows were up 76% on FY '24, a reflection of the ongoing quality of the Transact platform and the technological enhancements we've made over recent years. On the back of these excellent inflows, the group delivered impressive financial results with good growth in revenue and underlying earnings. Underlying earnings per share increased 7% in FY '25 to 17.4p per share. As we first announced in July, we have undertaken a review of group-wide costs. We have now completed the review, and we've identified clear opportunities to enhance productivity, and these initiatives are now underway. Looking forward, we have a clear focus on driving sustainable future earnings growth. I'm pleased to announce we've raised our total dividends for FY '25 to 11.3p per share, up 9%. Our market-leading Transact platform is built on proprietary technology and supported by exceptional service. This business model is a driving force behind these results. Our strategy has delivered consistent client growth a strong market share of both gross and net flows in the U.K. adviser market and recognition through industry awards. We have invested in our proprietary technology and IT infrastructure to sustain our highly differentiated proposition and extend our market leadership. We now expect that in FY '26 and FY '27, there will be group underlying annual cost growth of around 3%, including ongoing technology investment. Therefore, we will deliver both group-wide cost savings and continued investment in our technology capabilities as we reduce average cost to serve platform client. The business is now in an excellent position to accelerate future earnings growth. Our main priority in the financial year has been enhancing the platform's features and online processes through digitalization as well as broadening our ability to integrate with a wide range of adviser firm software. By streamlining key wealth management tasks, Transact remains the leading platform for financial advice firms. These enhancements drive higher inflows, strengthen client retention and increase the stickiness of assets on the platform. We also commenced our cost and efficiency program, which has been more possible -- made possible through our investment and we'll deliver a more streamlined operating model and greater efficiencies across the business in turn, increasing our operating margin. I'll now hand over to Euan for a more in-depth look at the financials for the period and an explanation of how we'll deliver the cost and efficiency program. Euan Marshall: Thanks, Alex. Good morning, everyone. Firstly, I'm going to share an overview of our KPIs, which demonstrate the ongoing delivery of our strategic priorities is converting into strong operational and financial performance. As shown in the top left graph, average daily FUD has grown 14% year-on-year to GBP 67.9 billion. Aside from the market's movements, this has been driven by record gross inflows of GBP 10.1 billion for the period, whilst growth in gross outflows has slowed. A key driver has been our platform continuing to attract more business from our competitors, strengthening our net transfers. We have achieved an impressive 10% compound annual growth rate in average daily FUD since FY '21. Now looking at the top right graph, the growth in our average FUD has translated into revenues of GBP 156.8 million for FY '25, up 8% on FY '24. I will discuss platform revenue in more detail on the next slide. The bottom left graph shows that this record revenue has driven group underlying profit before tax, up 7% to GBP 75.4 million and equates to an underlying profit margin of 48%. Nonunderlying expenses totaled GBP 9.2 million in FY '25. This included a GBP 7.5 million impairment of goodwill relating to T4A, which was announced at the half year, and GBP 1.1 million of overlapping rental costs for our new head office relocation. We've also recognized a GBP 3.4 million non-underlying gain attributable to policyholder returns as a result of a release of GBP 0.4 million policyholder reserves to the P&L. Moving on to the bottom right graph. The group delivered strong growth in underlying EPS, up 7% on FY '24 to 17.4p per share. For FY '25, we have increased the second interim dividend to 8p per share, taking the total FY '25 dividend to 11.3p per share, a 9% increase on FY '24. Looking in more detail at Transact platform revenue for FY '25, we can see investment platform revenue increased by GBP 11.8 million in the year, representing 97% of group revenue. Growth in average daily FUDs during the year drove increased platform revenue with our annual charge income increasing 10% to GBP 138.1 million. The lower increase in annual charge income in comparison to average FAD is mainly a result of clients benefiting from the natural progression through our tiered pricing structure as the value of their portfolio increases. Wrapper fee income deed slightly year-on-year and reflects the reduction in charges for family-linked portfolios. These 2 recurring revenue streams combined to deliver 99% of total platform revenue. We continue not to retain any interest on client cash. In FY '25, total T4A revenue increased slightly to GBP 5 million. Focusing next on platform revenue margin. The graph highlights how platform revenue margin has moderated steadily in the past, but this attrition is now expected to slow in FY '26. Over time, our revenue margin has seen a measured decline as we've strategically invested in price through targeted fee reductions. These changes contribute to the strength of the overall platform proposition which in turn, have helped to attract new flows and improve the retention of client assets on the platform. Looking forward, we expect the reduction in revenue margin to come primarily as a result from the natural progression of client portfolios through our tiered pricing structure and the annualization of the prior year's targeted price reductions. As an indicative figure, the platform revenue margin for September 2025, the last month of FY '25 was 21.9 basis points. I'll now share more detail on our costs, starting with how we have carefully managed our administrative expenses in FY '25. In line with guidance, total underlying administrative expenses were 9% higher than in FY '24. Employee costs make up the largest proportion of our cost base and rose 11% in the year. This was because of several factors: firstly, a slight increase in average staff head count of 2%; secondly, the impact of investments in broadening the senior management team; and finally, our periodic review of remuneration packages across the business to ensure that we continue to provide competitive salaries to attract and retain high-quality individuals within the business. Before looking in detail at the cost review program announced in July, it's important to contextualize the previous investment we have made in the group. During the heightened investment phase over recent periods, we have enhanced the group's IT infrastructure and technology capabilities to deliver improved platform digitalization and provide a greater number of integrations with third-party software providers. A further key factor has been our investment in people. As I have just mentioned, we have broadened our senior management team over the past 2 years, expanding the expertise and quality of our people to the business. This investment in our technology and people will enable us to deliver future cost efficiencies and reduce our cost to sales per platform clients. Moving on from the cost growth in FY '25. I will now expand on the outcomes of the cost review program, which will help deliver enduring efficiencies in the coming years. We have completed the detailed assessment of our cost drivers and identified 3 key areas for sustainable cost savings that will create a more efficient business. Firstly, the greatest savings identified will come from improved productivity in our internal support functions. We are introducing more third-party technology, which will automate many manual processes for staff across the business. We're also changing the structure of some of those functions to simplify and standardize how we do things improving productivity so that we can maximize the value of the strong foundations that we've already put in place. The second source of savings will come from enhancing procurement and supplier management processes. The final element will be from enhanced platform efficiencies. Our ongoing focus on increasing the level of straight-through processing and automation is reducing manual tasks and processing times which Alex will discuss in more detail later in the presentation. We expect the cost review program to deliver GBP 4 million of annualized savings by FY '27. The strength of this review is in the sustainable ongoing nature of the savings. FY '26 and FY '27, total underlying administrative expenses are expected to grow at around 3% per year. Delivering these changes will not come at the expense of our client service or our technology. Our proprietary technology is a key differentiator in the U.K. adviser platform market. And through focused investment, we will continue to improve our proposition while implementing our cost efficiencies. Note that the anticipated one-off costs required to achieve the savings are included in the investment spend on this slide. Due to the timing of cost savings coming through, we anticipate cost reduction in the speed of cost increases to be weighted towards the second half of this year, meaning that H1 and H2 costs will be broadly similar. These actions put us on a clear path to long-term profitable growth while creating a more focused and resilient business for the future. Moving on to the next slide. I wanted to highlight the 3 core levers on which we are focused to drive earnings growth. Firstly, we've invested significantly in the business over the last few years, we believe this investment has been fundamental to improving our prominent position in a competitive market. This investment has now put us in a position where we can focus on margin delivery. We expect our market-leading platform to continue to drive strong net inflows in a growing U.K. advisor platform market. The second and third levers, our focus on revenue margin and our cost review leave us in a position to accelerate earnings growth and enhance shareholder value in future years. We're focused on the platform revenue margin with attrition in FY '26 being due to the impact of our tier pricing structure and the annualization of prior year price changes. Our group-wide cost review has identified productivity opportunities within the business and will reduce the rate of future underlying cost growth. We're confident in our strategy and business plan moving forward. Returning to our FY '25 financial position. The business continues to be highly cash generative with the majority of profit flowing through into cash. This positions us strongly for the future as we expect our group profit margin to increase. The left-hand table illustrates the group's strong liquidity position. Each of the group's regulated entities maintain a capital and liquidity buffer above the minimum levels required under various regulations. As a reminder, we maintain a liquidity buffer to ensure we have the ability to accommodate ongoing increases to capital requirements in our regulated entities and can continue to invest in the business, all whilst continuing to pay dividends to our shareholders. We remain confident this is the right level to help support the future requirements of the group. I'm pleased to say that we have approved a total dividend for the year of 11.3p per share, a 9% increase on FY '24, representing 65% of the total underlying profit after tax. As mentioned on the last slide, we've approved a dividend of 11.3p per share this year as part of our capital allocation framework. For reference, our capital allocation framework is shown here on the slide. Finally, I'll talk you through the group's guidance for FY '26 and FY '27. We're focused on managing platform revenue margin. We expect the reduction in the platform revenue margin to slow, driven by clients moving through the tiered price of charging structure and the impact of prior year price changes. As I mentioned earlier, our platform revenue margin was 21.9 basis points in September. As I highlighted on our cost slides, we expect total underlying administrative expenses to grow at 3% per year in FY '26 and FY '27. Net interest income is expected to be around 9% per year and the net gain attributable to policyholder returns are expected to be in the region of GBP 2 million per year. That concludes my part of the presentation. I'll now hand back to Alex. Alexander Scott: Thanks, Euan. In this section, I'll provide an update on the Transact proposition enhancements that we've delivered and a more in-depth look at the Transact platform flow performance during the period. We've delivered significant enhancements to the Transact platform, leading to growth of client numbers and inflows and the strengthening of our marketing position. These digital upgrades have streamlined platform operations by reducing manual and paper-based processes, both for us and for advice firms. This has improved operational efficiency and elevated service levels across the platform. The movement of paper forms to online straight-through processing reflects our purpose to make financial planning easier. We have focused the transition on processes with the highest rates of human intervention. With standardized formats and instant data validation, we now receive clean instructions. Digitalization was a key step to further developing Transact platform integrations and APIs. With improved accuracy and greater data validation, advisers can now send instructions directly from their back-office systems, and we can trust the data being supplied. This is particularly important for the future use of AI. For the group, this means faster processing times, greater scalability of the platform and the ability for our client-facing teams to respond quicker to client needs. During FY '25, the Transact platform delivered record gross inflows and impressive net inflows. Total net inflows for the year were GBP 4.4 billion, up 76% on the prior year. Our excellent net inflow performance has been driven by record levels of gross inflows with 7 consecutive quarters above GBP 2 billion. This is a testament to the market-leading service we provide and the digital enhancements we have made to our proposition. We have also improved our net transfer ratio with other platforms as we continue to win more business from competitors with our transfer ratio improving to 2.8 in FY '25. We have also taken an impressive share of net inflows to the U.K. adviser platform market, which I'll cover in more detail on the next slide. And finally, outflows were largely stable during the year and reduced as a percentage of opening FUD to 9% in FY '25. Our impressive net inflows performance in FY '25 means we continue to have a strong market share of the net flows into the U.K. advisor platform market. This is a further reflection of the quality of our proposition as we continue to increase our market share of FUD and maintain an over 20% share of net inflows. We have a 10% share of the U.K. adviser platform market FUD and the external market review company, Fundscape, expects the adviser platform market to continue to grow at an impressive rate of around 12% over the next 5 years. I'm pleased to say the Transact platform continues to win industry awards, picking up the Schroders Best Use of Platform Technology and the Money Marketing Best Platform Award this year. Our market-leading service continues to drive growth in client numbers using the platform, and our long-term track record in client growth is displayed in the middle chart. This growth in client numbers in turn ensures a durable and growing source of inflows to the platform as illustrated on the right-hand side. So to summarize, in FY '25, we've delivered record growth and strong net inflows in the growing U.K. advisor platform market. We're confident of demonstrating good net flows momentum into future years. The award-winning Transact platform continues to enhance its proposition through digital enhancements and an expanding range of APIs. We have begun implementing the initiatives from the group-wide cost review. This will help to enhance business efficiency and drive operating margin growth. And to conclude, we have a very scalable platform and best-in-class proposition centered on our proprietary technology and high levels of client service. We're focused on growing revenue and delivering savings from our cost and efficiency program. Overall, this positions us well to drive sustainable earnings growth in future years. Thank you for your time, and we'll now open to questions. Operator: [Operator Instructions] Our first question today is coming from Michael Sanderson of Barclays. Michael Sanderson: Just a couple of questions, if that's okay. First one, I suppose you set out your capital allocation framework and you have the inorganic element before any sort of thoughts of returning to shareholders. I'd be interested to know what areas you think inorganic development might go at this point, given your sort of strong organic story over many years. And I guess, the second piece I was interested is there's obviously been quite a lot of noise or quite a lot of developing noise around sort of tokenization in the funds market and how that's likely to evolve in the coming years. And I guess, interested to know how you think about sort of preparation investment. That's something that the timing is so unclear and how you -- given that your proprietary technology, how you choose to allocate and approach potential quite sizable change in the market in due course. Euan Marshall: Thanks for those questions, Michael. I'll take the first one, and then I'll hand over to Alex for your second. So on our approach to inorganic opportunities, yes, we predominantly focus on organic growth. That's something that you should take away from the call today. From a platform perspective, we don't necessarily see significant opportunities from inorganic growth through acquisitions, specifically in the platform market. But when it comes to looking at the technology that can enable the -- that can enable our wider proposition. We do continue to scan opportunities through the market. But we don't, at this point in time, see that as being a major driver. But of course, it has to be part of our capital allocation framework and considerations at a Board level. Alexander Scott: Just picking up on tokenization. This is going to be one that I think we'll be talking about for a while to come. I mean it has actually been boating around for quite some time, and we've been talking about this with different companies for several years now. So it's not something that we're just sort of suddenly starting from scratch in terms of how we consider it and what we're doing. So this is something we've had in mind for some time. Obviously, there's lots of issues around how different markets, different regulatory jurisdictions are actually considering the controls they put around this. And obviously, we're having to take all of that into account as well. You'll be aware that the Financial Conduct Authority issued a consultation paper on this as well. So at the moment, we are doing more than nothing, but being very aware that, in many cases, the rules and structures are not formalized. So we'll be feeding into all of those consultations and making sure that our views and opinions are clearly heard and then driving forward from there. Operator: We'll now move to David McCann of Deutsche Bank. David McCann: Three for me, please. So firstly, you've given some guidance that you're expecting a similar Q1 for net flows for Q1 of last year. Obviously, that compares to some of your peers, which you obviously pointed to a weaker period-on-period comparison really driven by pension lump sum outflows in relation to the budget. So I guess, why do you think you haven't quite seen the same impact that some of your peers have been talking about there? That's the first one. And second one on costs. I mean what comfort can we as investors and analysts gain from the comments you made today that the 3% is a rigid ceiling on cost growth, given some of the experience from yourself and the sector in the past where the cost growth obviously been higher than that for a number of years. So should we really be sort of banking on free to have been an absolute upper ceiling there? So any further comfort you can give us there to the comments you've already made. And then finally, sticking with the cost theme, like beyond FY '27, could we see kind of a return to more historically normal levels or sort of mid- to high single-digit growth being more normal here. So if there's really just a 2-year thing and then it sorts of reverts to normal thereafter? Or do you think there can be a lasting effects of sort of lower single-digit growth? Alexander Scott: I'll pick up on the net flows piece. I mean, it's one of those that from where we've set, we've seen not a dissimilar behavior to the patterns that we saw around the sort of October, November period last year with lots of budget speculation. As you rightly say, there's been significant movements in pensions money with people drawing down their PCLS. From our perspective, we have seen significantly heightened flows in both directions. And overall, as we've indicated in our announcement, our overall position, we're expecting to be sort of relatively net neutral from that. So why would we be different from other firms that have actually experienced more of an outflow from it and not seeing the upside on the inflows piece. I mean, I think that comes down to a couple of things. I mean, first and foremost, I'd say it's because when people are taking monies out from other pension arrangements that they have they're bringing that to the Transact platform, and we're seeing that being sort of put into other wrapper types that we have, so use of our investment bond structures and the like. And I think that sort of testament to the quality of Transact and the fact that we're still able to attract those monies in during those periods. Euan Marshall: Cost side, David. So firstly, over the last couple of years, we've been meeting our cost guidance. So I would just like to reiterate that we have a plan in place, which management across the business are fully aligned on. We've really looked at the investment opportunities in the business, both from a platform development perspective, but also put structures in place where we've identified and prioritized the best areas to invest for future productivity improvements. And we are now already executing on that plan given that we're already a couple of months into the financial year. From a medium-term outlook perspective, naturally, as you look more than a couple of years out, there's inherently going to be uncertainty there about what the world may yield to us. But we have some good structures in place now and a budget to continue to invest in those future productivity improvements. So we'll be continuing to demonstrate that we are delivering productivity enhancements over that longer period of time. Hopefully, that answers your questions, David. Operator: Does that answer your questions, Mr. McCann? David McCann: Yes. Operator: We will be moving on now to James Allen of Berenberg. James Allen: Two from me. Just around your point on revenue margin and the attrition now being expected to slow. In terms of the price cuts on the platform during FY '25, what was the in-period revenue impact? And what is the annualized impact of that, i.e., the remaining impact in FY '26? Secondly, the Australian VAT issue, I know it's been a few years since we heard anything on this. Could you just remind me about where we are on this now? From memory, we were waiting for cases to be resolved involving HSBC or Barclays that set a precedent. If you could just remind us where we are on that, that would be helpful. Euan Marshall: Thanks, Allen. On the revenue margin, I think we've disclosed in prior presentations what the annualized impact of those changes are. The biggest of those came through the start of April, I think, so start of H2. However, I think the main thing to look at here is during the presentation, I mentioned the revenue margin at the end for September, which was 21.9 basis points. So that could be useful for you to use. The other thing to keep in mind as well is that as funds under direction grows, broadly, we retain -- well, there's an attrition of around -- for every -- for FUD growth of 10%, we'll retain around 7.5% of that coming through to revenue. So that could be a good way of looking at it for modeling into the future as well. Alexander Scott: Thanks, James. On the VAT issue, just a quick update. So we do continue to be stayed behind Barclays in this situation. We still consider that to be a sensible place to be as do HMRC because in that structure, there's a considerable savings from our perspective on legal fees because we're not having to drive the case forward. So -- and we keep a very close track on the Barclays case to be sure that it is still relevant and consistent with our own case. Aside from that, we do also continue to have ongoing dialogue with HMRC around our own case to better improve their understanding of what we do and where our structure sits. So it is moving forward. I'm afraid it is glacial. And I expect it will still be another 18 months to 2 years at the speed that these things move before we have any certainty on it. But just for everyone's comfort, just to be absolutely clear here, we are actually working on a basis that we pay VAT on everything. And therefore, there is no accruing liability. There is only a potential upside on this for us. Operator: We'll now move to Ben Bathurst of RBC. Benjamin Bathurst: I've got questions in 3 areas, if I may. Starting on one for Alex, probably on pricing. I just wondered, could you provide some market context to the decision to broadly hold charges flat at this point? And sort of specifically, how do you now assess the current pricing differential to be for Transact versus your closest competitors? And do you expect that differential to now change looking forward? And then secondly, on capital, probably for Euan, how should we think about the likely growth in ongoing capital requirements looking forward? Should that grow broadly with the level of funds under direction? Or could that be at a slightly slower rate than that? And then finally, on the flow outlook, obviously, you talked about confidence in growing market share. Are there any customer groups that you could do better with in terms of net flows? And are you intending to target those more specifically looking forward? Alexander Scott: Thanks, Ben. I'll pick up the first and third of those, and then hand over to Euan. So in terms of pricing, we've done quite a lot over the last few years to bring our pricing down to a pretty competitive level across the market areas that we really want to be competitive in. And I think where we are relative to our key competitors, we're in a good position. There are changes in the shape of the market, and there are also changes -- have been changes in the way that competitors have actually extracted revenue from their clients. So it's become ever more tricky to actually review exactly what clients are being charged by any one platform because of the use of taking a share of client interest that is undertaken by several other platforms. So when we actually compare across the total take from clients, we find that we're actually in a pretty strong position in all places. How that shape will evolve is obviously something that regulators have had things to say on, but they seem to have settled down now and see quite on. And we've seen that now predominantly the changes that are being driven are people trying to do deals with sort of consolidating groups to actually try and win blocks of business. We're finding actually that we are not particularly needing to do deals and we're still able to win consolidator business through the delivery of the requirements that they need and the quality of service that they want. And you asked about where there's areas of net flows that we still think that there's more for us to do. I mean I've spoken before about the fact that we've changed one of the parts of our sales team to be more focused on the consolidated part of the market because traditionally, we were very much more in the smaller adviser firm sector. And we've definitely grown out of there and are actually sort of pushing more into actually working with the consolidating firms, understanding better what their needs and requirements are, not just from a pricing perspective, but how they want to work with us and what we can deliver for them. And we've certainly found that we've been doing pretty successfully with adviser groups where they've sort of started to move down routes of delivering their own platform to then actually moving to a more panel structure where Transact has been very successful in being the chosen outside provider to be bought in to work alongside their own platform offering. Euan, if you want to pick up on the capital. Euan Marshall: Yes. On the capital piece, Ben, I think it's -- you probably know this very well already, but we have 3 regulated entities across the group. So when you look at the MIFIDPRU regulated entity, yes, the answer to your question would be, is broadly a good idea to look at growth of FUD through -- coming through as growth in regulatory capital requirements. And there's a few funnies in there, but that's a good broad assumption to make. We then have 2 insurance entities as well where it gets a little bit more complicated. But again, I would anticipate a good rule of thumb is probably to look at increasing capital requirements in line with FUD growth over time. Operator: As we do not appear to have any further questions. Mr. Scott, I'd like to turn the call back over to you for any additional or closing remarks. Thank you. Alexander Scott: Thank you. Well, thank you, everyone, for attending this morning and listening to us. And I wish you all a good day and a happy Christmas.
Operator: Greetings, and welcome to the Spire Global Third Quarter 2025 Results Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Ben Hackman, Head of Investor Relations. Thank you. You may begin. Benjamin Hackman: Thank you. Hello, everyone, and thank you for joining Spire's Third Quarter 2025 Earnings Conference Call. Our earnings press release and related SEC filings are posted on the company's IR website. A replay of today's call will also be made available. With me on the call today is Theresa Condor, CEO; and Ali Engel, CFO. As a reminder, our commentary today will include non-GAAP items. Reconciliations between our GAAP and non-GAAP results as well as our guidance can be found in our earnings press release, which can be found on our IR website. Some of our comments today contain forward-looking statements that are subject to risks, uncertainties and assumptions. In particular, our expectations around our future results of operations and financial condition are uncertain and subject to change. Should any of these expectations fail to materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties and assumptions and other factors that could affect our financial results is included in our SEC filings. With that, let me hand the call over to Theresa. Theresa Condor: For more than a decade, Spire has been a steadfast champion of safety and security. We protect businesses and people by delivering critical weather intelligence and aviation insights that spot potential navigation hazards before they become problems. We empower nations with radio frequency data, turning raw signals into actionable intelligence. Through our proven scalable space infrastructure, Spire provides global invisible intelligence from orbit, capturing RF signals, atmospheric conditions and operational behavior data. This continuous space-based awareness provides hundreds of organizations and governments a real-time view of activity across Earth's environment, operations and infrastructure, enabling them to act faster, act safer and act with greater confidence. Today, Spire operates a satellite constellation of over 100 payloads. Our antennas cover every spot on earth approximately every 12 minutes. We serve data and analytics applications to hundreds of customers across 45 countries and collect millions of RF signals and atmospheric measurements every day. Spire closed the third quarter on the back of sizable commercial and government contract wins with triple-digit growth on multiple repeat contract awards in our core areas of weather and security. These awards reflect demand translating into signed long-term programs. We head into 2026 buoyed by unmistakable market opportunity even as we have navigated recent timing variability inherent in government procurement and delivery. Heightened security imperatives, larger budget allocations, accelerated procurement cycles and clear expectations for commercial partnerships have created a fertile environment for a well-established company like Spire, one that can deliver operational capability today while iterating rapidly toward tomorrow's needs. Our 2025 satellite manufacturing ramp-up proved we can scale with confidence. Satellite manufacturing throughput doubled per year while remaining flat headcount. Our on-orbit data production is expected to increase tenfold for crucial RFGL products and threefold in our daily RO profiles. This step change in capacity cement Spire's role as a true dual-use solution provider driven by European, especially German demand, we have cost effectively installed a world-class satellite manufacturing facility in Germany which will provide us with backup resilience and additional manufacturing capacity of up to 100 satellites per year once fully qualified and operational in Q1. We have selected KPMG as our new audit partner, and we are confident that Spire is positioned to operate as a regular reporting public company going forward. In September, Spire secured its largest radio application contract from NOAA, an award 3x the size of last year's in annual sounding volume and a greater than 40% improvement in price per sounding versus historical benchmarks. The agency also awarded Spire a contract for ocean surface winds derived from our GNSS-R data, supporting operational forecasting missions. Across Europe, demand for our weather data suite remains robust. We renewed our radio application agreement with EUMETSAT, sold GNSS-R data to the European Space Agency and sold data to a leading European weather agency in support of improved forecast accuracy. As the region advances its process of catching up with the U.S. in terms of commercial data use, Spire is uniquely positioned to continue as the key commercial partner based on its strong European operations. Looking ahead to 2026 we anticipate an even deeper partnership with NOAA across our product categories, buoyed by the agency's ongoing dialogue with commercial providers about their expanding strategic role in satellite-based weather observations. This expectation is supported by the overarching directive of the current U.S. administration towards more commercial partnerships and less government ownership. Spire's momentum is further supported by the upcoming launch of our microwave sounding satellite next month, which addresses a multibillion-dollar global atmospheric sounding need. Microwave sounders are among the most impactful satellite observations for forecasting models worldwide, especially because they can see inside clouds and provide temperature and moisture profiles crucial for accurate forecasting. Microwave soundings currently provide up to 40% of forecast accuracy benefit and are used by all global forecasting agencies around the world. However, the combination of the legacy government instrument retirements, administrative changes in data sharing, and delays in new instruments have sparked global concerns about the consistency and completeness of microwave data sets, particularly for critical applications such as hurricane intensity monitoring. This further opens the door to efficient and effective private sector participation in the multibillion dollar global observing system. As geopolitical dynamics evolve, weather intelligence is also gaining heightened relevance for defense. Germany has recently published space security strategy underscores the strategic value of weather observations alongside traditional intelligence, surveillance and reconnaissance domains. Demonstrating this trend, Spire recently won a contract award for high-resolution weather insights to support military applications. Further illustrating the link between global security and citizen safety, Spire signed a contract to deliver soil moisture data across Ethiopia Somali region, covering hundreds of thousands of square kilometers in partnership with the international organization for migration. We have also won a coveted contract for high-resolution soil moisture insights from a brand named commercial smart ag customer in the U.S. Spire's expanding partnership with Deloitte and the accompanying contract to fill multiple satellite clusters equipped with Deloitte's Silent Shield cyber defense suite, underscores the strategic relevance of our space services platform. While revenue recognition extends beyond 2025, a satellite manufacturing, operational deployment and backlog conversion are proceeding exactly as planned. The program contributes to the company's total deferred revenue backlog of over $200 million, representing multiple years of contracted activity and reinforcing the long-term financial strength of the business. It is also another demonstration of our ability to secure high-profile awards that amplify our go-to-market reach within the U.S. federal ecosystem. Spire was recently selected as an awardee on the U.S. government Missile Defense Agency's multi-award ShIELD IDIQ contract with a shared ceiling of $151 billion. This award positions us to compete for task orders under the Golden Dome initiative, a U.S. missile defense effort expected to award over tens of billions of dollars per year over the next decade. Winning in this highly contested selection process confirms our role as an industrial-based partner capable of delivering defense-grade space-based data, RF intelligence and digital engineering expertise for today and tomorrow's national security requirements. The Secretary of War's rapid procurement guidelines explicitly reward innovative firms that can meet capability needs today. Our Boulder-based manufacturing facility and all U.S. workforce provide the domestic footprint and security posture required to respond quickly. While the U.S. government shutdown shifted a portion of anticipated revenue from 2025 into 2026, the underlying program funding and delivery commitments remain fully intact, and recent awards demonstrate that the U.S. defense market continues to expand. In Europe, urgency for commercial partnerships in defense has increased meaningfully compared to a year ago. Germany has announced a EUR 7 billion per year space defense budget over the next 5 years, totaling approximately $40 billion. Our ISO-ready clean room and fully vertically integrated facilities in Munich, make Spire one of the very few companies local to Germany with end-to-end small satellite capabilities with German nationals as well as German-speaking executives. We are also the only one with deep in-space radio frequency expertise. The German Space Agency DLR, a current Spire partner and customer, will play a key role in procurement, accelerating engagement with commercial suppliers. This relationship will support our ongoing direct engagement with the military on their short-term requirements, capability needs and procurement asks. The European Space Agency Ministerial Council concluded in November with the largest financial commitment in their history. Member states pledged EUR 22 billion in new subscriptions for the next 3 years, with Germany contributing EUR 5 billion, an increase of almost 50%. Under the European Space Agency's geo-return policy, German contributions are reserved for contracts with German companies such as Spire, reinforcing our strategic positioning within Europe's growing space defense ecosystem and European Space Agency's largest contributor. The European Union's Space Shield initiative slated to begin in 2026, an increasing urgency among NATO members further underscore demand for sovereign and commercial space capabilities. Across national security strategies, core requirements such as intelligence, surveillance and reconnaissance are consistently highlighted, reinforcing the relevance of Spire's dual-use satellite data services. NATO countries have pledged to increase their defense budgets to 5% of GDP. Assuming 5% of that amount for space would unlock $17 billion to $32 billion per year in additional contracts. Spire's space reconnaissance portfolio is seeing heightened demand as agencies move beyond traditional telecom and imaging approaches to exploit the radio-frequency domain. Our pipeline includes multiyear sovereign programs with recurring data demand as well as request for immediate data delivery using installed capacity. With government backing, we have begun collecting S-Band and X-Band maritime radar signals and expanding geolocation capabilities to serve our non-U.S. customer base. Spire is advancing technology by utilizing a single satellite and our small form factor LEMUR platform to gain insights that would traditionally take a larger platform or multiple satellites. Even as Spire emerges as a national security technology partner, our commercial business remains an important growth engine. Under new leadership, our weather and aviation businesses are increasingly integrated with commercial revenue growing at a double-digit rate year-over-year and strong customer retention. Spire continues to see interest from our energy and commodity focused clients that are using our short-term high-resolution forecasts and our long-term subseasonal to seasonal forecasts. We are hearing consistent feedback from these customers that Spire's forecasts are ahead of other models, capturing critical weather signs earlier and translating them into real operational and financial impact. During the quarter, we were also awarded a commercial aviation contract in which the customer is utilizing Spire's ADS-B data to track aircraft movements and detect potential discrepancies, which may point to suspicious activities, including route divergence or aircraft operating with ADS-B switched off. Our engineering transformation efforts continue to deliver results, proving that we can deliver operational capabilities at scale. We process nearly twice as many satellites through the clean room this year while maintaining flat head count and stricter quality controls by implementing design for manufacturability and lean manufacturing principles. We are meeting heightened government cybersecurity and [ cyber ] requirements and delivering the accompanying documentation while continuing to invest in this area. On-orbit checkout time has been reduced by roughly 50%, compressing the time between capital investment and revenue realization. We expect this to further improve and positively impact our results as we launch further satellites for our customers in 2026 at an expected cadence of every 3 months on average. While we encountered unexpected timing impacts from the U.S. government shutdown and in actions in the back half of the year, I remain confident in Spire's technology advantage, are expanding capacity and the clear demand for both government and commercial capabilities. I reiterate our commitment to long-term double-digit sustainable revenue growth. 2025 starts as a year of revenue timing normalization, not a change of growth trajectory, setting up 2026 nicely to reflect the full benefit of capacity, backlog and demand already in place. I am excited about what lies ahead and the value we will continue to build for shareholders. I will now turn it over to Ali, who will share our financial results, reflecting some of the mentioned revenue timing and accounting effects and our strong backlog and remaining performance obligations which drive our confident growth outlook for 2026. Alison Engel: Thank you, Theresa. Before walking through the financials, I want to anchor them to the operating momentum Theresa just described. The third quarter reflected strong bookings, growing backlog and expanding on-orbit capacity, offset by revenue timing impacts related to government delays. Importantly, these results do not reflect any change we see in underlying demand, customer commitments or program execution. I will be discussing non-GAAP financial measures unless otherwise stated. A reconciliation of GAAP to non-GAAP results is included in our earnings release available on our Investor Relations website. As a reminder, Spire's third quarter 2024 results include our maritime business which was sold at the end of April 2025 and had contributed about $40 million of revenue in the prior 12 months. All year-over-year comparisons should be viewed in that context. GAAP revenue for the third quarter of 2025 was $12.7 million. Year-over-year, revenue declined primarily due to the absence of approximately $11.5 million of maritime revenue that was present in the third quarter of 2024 and is no longer part of the business. In addition, approximately $6 million to $8 million of revenue shifted out of the quarter due to the timing of milestone-based revenue recognition on an existing multiyear contract and the uncertainty of award for an Earth Observation data contract. First, revenue recognition timing on a multiyear contract reduced third quarter revenue by approximately $4 million to $5 million. This revenue remains fully contracted and is expected to be recognized in 2026 as we continue to execute and deliver program milestones. Second, we saw a third quarter impact from the uncertainty of the NASA Earth Observation data contract renewal with additional smaller short-duration opportunities also deferred. The NASA contract is a contract that Spire has successfully delivered for several years with very high customer satisfaction. Taken together, these timing effects shifted a meaningful portion of revenue out of the third quarter but did not reduce the overall value of contracted programs. Non-GAAP operating loss for the third quarter of 2025 was negative $13.9 million compared to negative $6.1 million in the third quarter of 2024. Adjusted EBITDA was negative $11.8 million compared to negative $3.1 million a year ago. These changes were primarily driven by lower revenue recognized in the quarter, as just mentioned, rather than an increasing cost structure of the business. Excluding the maritime business and certain onetime expenses, operating expenses in the third quarter were down year-over-year and sequentially, reflecting continued cost management. As revenue recognition normalizes, we expect improved absorption of fixed costs and a corresponding improvement in margins. Turning to the balance sheet. Spire utilized $20.4 million of free cash flow in the third quarter and ended the period with $96.8 million of cash, cash equivalents and marketable securities. Cash usage in the quarter reflected revenue timing effects, working capital dynamics related to satellite manufacturing and elevated legal and professional fees. As of the end of the third quarter, our remaining performance obligations are over $200 million which is over 3x trailing-12 months revenue. Of this amount, we expect approximately $70 million to be recognized as revenue in 2026. This backlog reflects multiyear contracted programs, primarily with government and institutional customers and provide substantial revenue visibility as we move into 2026. For the full year 2025, we now expect revenue in the range of $70.5 million to $72.5 million, implying fourth quarter revenue of approximately $14.8 million to $16.8 million. Through November 30, 2025, we have already recognized approximately $10.5 million to $11.5 million of fourth quarter revenue. We anticipate full year non-GAAP operating loss of negative $54.7 million to negative $53.8 million and adjusted EBITDA of negative $42.2 million to negative $41.3 million. For non-GAAP loss per share, we expect a range of negative $1.98 to negative $1.95, assuming a basic weighted average share count of approximately 30.9 million shares. The company is in the process of completing its 2026 budget with a focus on becoming adjusted EBITDA and operating cash flow breakeven to positive by no later than Q4 2026. We are taking a comprehensive look at our cost base to align to our revenue expectations and the sale of the maritime business. More than $10 million of revenue has moved into 2026 due to government delays like the shutdown. This amount relates to programs that remain funded, contracted and operationally underway. With approximately $70 million of this revenue already sitting in remaining performance obligations to be recognized in 2026, our 2026 growth is supported by contracts already secured, expanding backlog and an increase in on-orbit capacity that is already deployed or scheduled to be deployed in the first quarter. Given revenue movement out of 2025, we now expect greater than 30% revenue growth in 2026 for the business, remaining after the maritime divestiture. As in prior years, we plan to provide more comprehensive guidance for 2026 during our earnings call in March. With that, I will turn the call back to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Erik Rasmussen with Stifel. Erik Rasmussen: Theresa, in your prepared remarks, it sounded like there's a lot of opportunities and a lot of development that's happened since our last update. But so far, it just doesn't seem like it's translating into the revenue opportunities. I mean, you're looking at, obviously, this year's has been challenged with some of the timing issues and then government shutdown. But what gives you the confidence that 30% is the right number for next year for growth? And what are some of the puts and takes that get you there? I mean obviously, you have $70 million of RPO covered for next year, but what gets you to even higher than that 30% growth rate? Theresa Condor: Yes, Erik, thanks for that question. And thanks for recognizing that there's over $10 million that really shifted across the calendar year. And that the number that we're giving is in excess of 30%. We did have government shutdown stuff, but at the same time, the U.S. continues to push on things like the SHIELD IDIQ that came out in the U.S., there is great urgency to move fast and move forward with commercial companies. And of course, we talked quite a lot about Europe. As you know, I'm based in Europe, I'm involved directly myself in a lot of these conversations. You heard in the prepared remarks about the very large budgets that are coming out of Germany, both from the national side as well as the contributions to ESA, 2025 was really a resetting year for Spire. And I would say in Europe as well, it was the year that they started to get their budgets in order, understand their priorities, start to look at some of the more obvious ways that they spend their money and 2026 is really where they start to make movement. Everyone we talk to over here has huge urgency and recognizes the importance of partnering with commercial entities. So I feel very good that we have a lot of momentum going into 2026 and that we're well positioned. You mentioned the remaining performance obligations. These are things that are contracted. These are things that are high manufacturing throughput and the really big increase in in-orbit capacity that we have mean that we can meet both all the existing demand as well as the new ones that we're expecting to come from that pipeline backlog that we have. Erik Rasmussen: Great. And then maybe just staying with one of the 2 items. With NASA, the Earth Observation contract that was around $7 million. I think last year, you signed in August timeframe an extension, do you expect that to actually happen? Was it just because of the government shutdown? Or is there something else that's going on that maybe could put that at jeopardy of not being renewed? Theresa Condor: Yes. And I think there's a lot of stuff going on at NASA right now in addition to everything that happened with the U.S. government shutdown. And as you saw from the short-term extensions, that there is a great desire to have access to those data sets with everything that happens in the U.S., it is true that, that did not sign. It doesn't mean that it's not signing, it means that there is a delay while all of this process happens at NASA. And that's really, I think, the only thing that we can say right now. We don't believe that it's lost, it is not yet signed. Erik Rasmussen: Okay. And then maybe just your cash balance. I remember our last update, you were targeting around $100 million exiting this year. Now you you're below that through Q3, how should we think about cash going forward? Is it really just tied to now the revenue and revenue growth and you passed a lot of the impacts of professional fees and everything else that was driving up a lot of more near-term spending? Theresa Condor: Maybe I'll start and then Ali, if you need to jump in. So I'm going to start by saying, I think we will finish the year with a lot of cash on the balance sheet. We have -- a lot of this has to do with billings coming in the door and having some mismatch in the timing of how all this plays out. The other thing I would mention is that we have still had a number of these kind of onetime legal and accounting fees that have been happening throughout the year. So maybe, Ali, I'll pass it to you to answer more comprehensively. Alison Engel: Sure. Thanks, Theresa. Erik, yes, I mean, we definitely finished the balance sheet strong with just under $100 million in cash. We remain debt-free, so we feel very good about our balance sheet. And so I do think we'll end the year with a strong cash balance and take that into 2026. We do have, as Theresa mentioned, timing issues on payment collections for -- in contracts versus when we execute the work as well as some continued need for spending around particularly legal fees. Operator: Our next question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group. Jeff Van Rhee: Several apologies if I repeat here, I got bumped off the call briefly. But if I take a look at the previous guide to the current guide midpoints, we're taking roughly $19 million out of the second half. How does that -- if you had to put some crude sort of numbers to that reduction, just break that down for me? Alison Engel: You want me to take it, Theresa? Theresa Condor: Go ahead. Go ahead. Alison Engel: Yes. Yes. I mean I'd say there's about -- somewhere, I think we said $6 million to $8 million related to a percent complete contract. There's several million related to the Earth Observation contract. And I'd say we probably lost another $6 million to $8 million just due to potential or loss of contracts getting signed due to the government shutdown that was kind of an unprecedented length of time at sort of the critical end of the year time frame for us. Theresa Condor: And the only thing I want to add, if I can, Jeff, just to think about it, is that more than $10 million of this was stuff that has gotten pushed from a timing perspective into 2026. That takes us a bit below the low end of the guidance, just to set the context there. Jeff Van Rhee: Yes. The -- on the -- can you say on the percent completion, I think you said just now $7 million of it is due to that. Just explain that, what happened there? Theresa Condor: And I can take that, Ali. So I think, Jeff, as you know, we work across quite a number of these large programs with government that are on these new accounting rules with the percent completion. And a lot of that requires interaction with our government customers and partners through that process. And of course, we are impacted by the timing of those interactions with those government partners, especially under the way that we do the accounting here. So this is something that it shifted in time across the calendar year. So again, the contracts are in implementation. It's just the timing of it that has moved around. Jeff Van Rhee: Okay. You had the substantial WildFireSat award, and I believe that got a smidge of that maybe in Q2, but that should be ramping in Q3. And then you had the substantial NOAA upsell. Can -- are both of those still tracking as to your expectations 90 days ago? Theresa Condor: They're both still tracking and the team is deeply involved in delivering on both of them. And the WildFireSat one, of course, we've talked about it contributing significantly to revenue in 2026 and in 2027 as we complete implementation. Jeff Van Rhee: Okay. And then I know at least my memory was you had put up, the number [ is 27 ], if I remember right. But you had a lot of satellites going up on the Transporter missions 12, 13, 14 earlier this year. And a lot of that, by my understanding was mechanical in terms of rev rec, namely once they're up and accepted and live, the revenue turns on. Any issues with the satellites put up in those Transporter missions from a functionality performance or client acceptance standpoint? Theresa Condor: Functions are -- satellites are functioning. We're collecting data. Customers are getting the data. We just had another launch that went up when was the last Transporter -- one was like at the end of November, I believe. Our satellite bus and technology is all checked out rapidly. I mentioned in the comment -- the prepared comments, that we have in the second half of the year, even quite dramatically improved the speed at which we are able to check out and pass things on once they go on orbit. So I have to say, I'm very pleased at how that process has gone this year. I think we've done a fantastic job. Alison Engel: But I would add on to that, Theresa, that T15 was postponed by, I want to say, 8 weeks. Part of that was also the government shutdown in terms of their ability to be able to launch. And so there was -- that went up later than we had anticipated. Jeff Van Rhee: Yes. Yes. I was -- okay, I got it. Yes. Okay. And then just 2 other brief ones, if I could, Ali, on the costs. In terms of the expenses that are implied in the Q4 outlook, what exactly would you call unusual in there? I know you've got some lingering issues, congrats. It seems like a light at the end of the tunnel here in terms of being able to just operate the company and not have sort of lingering restate or just delayed financial issues. But can you talk to just the unusual expenses that are still sitting in that Q4 outlook that we should be aware of? Alison Engel: Yes. It's primarily legal fees related to kind of nonoperating matters. Some professional services fees around continuing to utilize EY as a support partner on some of our technical matters and [ some severance ] as we continue to work through certain business realignment post maritime. So those are kind of the categories, Jeff, that we consider for these unusual items. Jeff Van Rhee: And are you able to put a number around that basket? Alison Engel: For the fourth quarter? I don't think it's significantly different than the third quarter. Jeff Van Rhee: Well, I guess what I'm wondering is, I'm just trying to -- obviously, I got to do a '26 model. I'm just wondering what of those are going to recur into the forward year, like into Q1 and beyond versus what you think goes away? Alison Engel: They should definitely decrease in 2026. Jeff Van Rhee: Okay. All right. And then just lastly then on the pipeline. We've seen, especially in some of these space services contracts from some of the sort of the new space names, an incredible flow of massive 8-, 9-figure deals that are out there, sovereigns, et cetera. I think you referenced you've got good relations in Germany. I know you've got them elsewhere. Would you maybe take a second and just talk about what I would call sort of some of the mega deals in the pipeline. Are they there? How many? How late stage? Any qualification quantification would be great when you start thinking about like 8 and 9-figure deals and what you're seeing out there? Theresa Condor: Yes. I think the first comment that I want to make is that you have started to see some of these come out, and they generally focus on the first areas where everyone is familiar when it comes to either talking about telecom or talking about imaging, and that's the first place everyone knows when they start looking at satellites and sovereign capabilities. And then we see all of the RF come next. And we've really seen a big uptick even over the past 6 months in all of these types of government customers being interested in and appreciating the role that RF also has to play. I mean, it's all the things that we've talked about in the other calls and other conversations. So what we are seeing, and I mentioned it briefly in the comments as well, is that there is a lot of interest in those types of sovereign capabilities specifically for RF. And there is interest in direct data acquisition of installed capacity, and they often piggyback on each other. And I expect that we see movement on all of these conversations happening in 2026. They're all gearing up to start making movements and putting money down. Operator: Our next question comes from the line of Andrew Steinhardt with Canaccord Genuity. Andrew Steinhardt: Great. This is Andrew on for Austin. Just my first question here on the MDA SHIELD program selection. Of the 19 work areas mentioned in the RFP, which specifically was Spire selected as a potential provider for? And I guess since the MDA cut over 1,400 companies from the proposal list, can you detail what the selection process was like? Theresa Condor: I have to admit that I am not the expert deep in the details of that IDIQ SHIELD contract win that we have. We have a federal team that is focused on that. And I feel very good that we're in all the right conversations there. But I cannot directly myself detail in which all of the work areas. Ali, do you know that? But I think you would have to come back to you with that type of detail after checking with our federal team. Alison Engel: Yes. Ben and I were just caucusing, we don't have the detail in front of us. Apologies for that, Andrew. Andrew Steinhardt: No, no worries. I guess would you -- would you be able to speak to the SHIELD program at all? I mean like maybe quantifying what portion of the $151 billion total contracting vehicle could be applicable to Spire? Theresa Condor: Honestly, I don't think I'm prepared to do that yet, and I'm not totally sure that anyone fully knows. I think the only thing that I can tell you is that we've already been having conversations with the right people post the award of that IDIQ contract. And I think it is just a testament to our strength and ability to really be a key partner in how this plays out. What we're doing with our Boulder manufacturing facility is really important. I think the investments we're making on the kind of cybersecurity and infrastructure resilience side are important. And I think it can also be some signaling as you start to see the European Space Shield effort that we're going to start to hear about next year as well. Andrew Steinhardt: Got you. I appreciate that. And I guess just a follow-up here. Could you provide an update on the SEC subpoena and how the response is going there? Theresa Condor: There's really not much -- anything much to share other than we're just continuing to work through the process, Andrew. Operator: Our next question comes from the line of Chris Quilty with Quilty space. Christopher Quilty: Just wanted to get a clarification. I think you mentioned the impact of the government shutdown and sort of revenue shifting in '25, in '26, can you give us a sense of what the mix, the contribution mix of governments will be and probably at the end of '26 since a good portion of the growth next year, of the 30% growth that's coming from government on a pro forma basis? Theresa Condor: Ali, maybe you can take that one while I answer in generality. First for you, Chris, is that -- we talked about the Earth Observation contract that is not yet signed and is in a delayed period. And that, as someone already mentioned, is delivery of data, really quick direct revenue as we deliver every month. So that had an impact on us. Normally, that is a $7 million contract for us. We also, as Ali mentioned, did have the delay of that Transporter launch which as those go up and things get out and operational, there is a certain portion of that as we start delivering data that translates into revenue. And then there are other things that just didn't get signed in the quarter during the government shutdown piece. We, overall, talked about more than $10 million that has shifted from 2025 into 2026. And we're not giving direct guidance for 2026 right now that will come in the March period, other than to say that we feel very comfortable saying, in excess of 30% year-on-year revenue growth. And yes, government will continue to be an important portion of that. Ali, I don't know if you have anything that you want to add that is more detailed than that. Alison Engel: No, I think you covered the highlights, Theresa. Christopher Quilty: Okay. And maybe if I could reframe it in a different way. When you think about what types of applications. Which applications are going to be the biggest driver for '26? Is it more on weather programs? Is it on space services business? Is it radio frequency mapping or does some of the aircraft tracking you start to pick up just in terms of raw either revenue or EBITDA contribution? Theresa Condor: Yes. So what I can tell you is all of those areas, I consider incredibly important and contributing to our revenue growth. We talked about the $70 million already that is kind of contracted and then we just deliver on it while we -- and then start to recognize the revenue. Aviation has generally been our smallest business but it continues to be important. It continues to be important as we deliver on the EURIALO program, which generates revenue for us. And on the weather side with NOAA, we continue to build out that relationship and see NOAA leaning in towards commercial partnerships across a variety of areas. So I do think that, that NOAA relationship will continue to be important. So on the civil side of things, I do think that Radio Frequency Geolocation is going to be an important part of that growth. And that can be either delivery of data sets directly from the capacity that we have on orbit. And then when you start to talk about areas where we have a presence, we have the local manufacturing capability, then you start to talk about sovereign capabilities, which might fit more in the space services category. Christopher Quilty: Got you. Also, a question statement you had earlier in the script, you mentioned that you basically double the production on the same headcount. Just generically, was that -- what were the factors driving the efficiency, was is outsourcing, was it vertical integration? Was it AI? [indiscernible]. Theresa Condor: Yes. I mean it was -- we mentioned these phrases design for manufacturability and lean principles. So a lot of it was things like looking at the flow of how we did things, looking at how we did the testing, what was the timing of testing, how did we use the time. Otherwise, when we had some satellites in certain testing facilities, how did we do the timing, then inside the clean room, how did the actual engineers who design things interact with the people doing the manufacturing. So it's a lot about how they better manage and led the whole flow inside the clean room. And I think when we start -- this is a process that has begun, and we had talked about a lot even at the beginning of the year around the scaling and efficiency aspects. And I'm really proud of the team of having done this without adding cost to it. But I don't think we're done in pooling efficiency out of that system. And there are a lot of these other things like you mentioned, that can help us keep doing that in the future. But what we did this year, I would say, is basic lean manufacturing and closer integration between the design teams and the manufacturers. Christopher Quilty: Got you. And when you say operating cash flow positive exiting '26, do you see any change in the CapEx profile of the business? And when should we look at free cash flow? Alison Engel: Definitely, we see lower CapEx needs right now in our preliminary 2026 planning, and that's both Spire funded CapEx as well as customer-funded CapEx. And so we are obviously very focused on becoming operating and free cash flow positive. I think we've got to get over the operating cash flow first and then go from there. But we are seeing a lower level of projected spend right now where we're at in the 2026 planning process. Operator: Thank you. Ladies and gentlemen, this concludes our Q&A session, and we'll conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.
Fabienne Caron: Welcome to the CECONOMY MediaMarkt Full Year Results Webcast. We are live from our headquarters in Düsseldorf in a hybrid setup with participants both on-site and online. I'm joined by our CEO, Dr. Kai-Ulrich Deissner; and our CFO, Remko Rijnders. They will present the highlights of the year, followed by a Q&A session. Today, we meet in a new setup, one joint call for both press and analysts. We are pleased to welcome journalists online from our 11 countries. The presentation will be held in English with live translation. You can switch the language in the live stream. Before we begin, please note that today's discussions will include forward-looking statements. For more information, please refer to our disclaimer. The full presentation is available on our website. With that, I'm delighted to hand over to Dr. Deissner, who will guide you through the highlights of the year. Kai-Ulrich Deissner: Thank you, Fabienne. Good morning, everyone. Thank you for joining us here today. I'm really happy to have you here with us today, now whether you're joining us here at our CECONOMY headquarter in Düsseldorf or participating virtually, as Fabienne said, from 11 countries of our footprint. Today, Remko Rijnders, my trusted CFO, and I will take you through the details of our financial year '24 and '25. Now we had already shared some preliminary numbers with you back in October, but I'm sure you will see some very strong performance across the board today, because we've been on a strategic transformation for some 3 years now from a classical retailer into what we call an omnichannel service platform. And last year's results show very well how that strategic transformation is gaining momentum. It's only the tip of the iceberg, but let me remind you from the very beginning, 11 quarters of EBIT growth. That's a very strong track record. Now there's 2 levels to this. First, for our business model, we are enhancing our Retail Core business model with what we call growth businesses. These are by now substantial in size and they continue to grow. But secondly, and actually much more fundamentally, this transformation is about the customers, about customers that think and feel and go shopping differently now than they did in the past. And all of our teams in the stores, in our logistics centers, in the offices throughout our 11 countries, they do want to put those customers first front and center, to give them what we call experience electronics. Our goal is to create a unique shopping experience that is tailored to their needs. Do we get that right every day? Of course, not. Not yet, but we're moving in that direction and into the right directions. As you will see today's results underline that. We've set, over the past 3 years, a solid foundation for future growth, and we're proud of that. Ladies and gentlemen, we're on the right path, and we will see this consistency pay off in the new financial year again. That's why we will publish a positive outlook for the current financial year '25 and '26. I will get to that later. Now let's first have a look into the details of those results of last year. Let me start with an overview, and you will see that we delivered strong results across all our key metrics. First, sales reached EUR 23.1 billion. That's a growth of 5.7%, and that's more than the moderate growth that we initially guided. And we grew EBIT by 24% to EUR 378 million. That means profitability is growing steadily. Just as a reminder, for 11 quarters in a row now. And finally, a very hard measure. We increased free cash flow by 180%, now reaching EUR 337 million. And as I said initially, fundamentally, our customer satisfaction reached a new record. Our Net Promoter Score improved to 61. That's up 3 points from the previous year. So our focus on customer experience is indeed paying off. Now we want to accelerate even more based on this momentum. We know that we still have a way to go in terms of our transformation. But we are ready for that next step. And we believe we have a really good partner to take this on with JD.com. This partnership will help us accelerate even faster. JD.com brings significant experience, especially in logistics and technology. In teaming up with them, we want to create not just experience Electronics, but the future of European retail. Just so that you know where we stand with this partnership. As you all know, we've signed our investor agreement back in July this year. Now at the end of November, JD.com had secured a total shareholding of 85.2% in CECONOMY. And now we're working on and waiting for the outstanding regulatory approvals to finally close this transaction. We expect that closing still for the first half of the next calendar year. And I'm more convinced than ever that this partnership will make us even stronger and will take us to that next level. But independent of that partnership in the future, let's look at the progress we made in our business, and that's on Slide 4. The performance of our growth area shows we are on the right track with diversifying our business model. Each of our strategic business segments contributes to our success. This diversified growth gives us the ability to adapt to changing market conditions even in the future. And we're adapting to our customer needs. Our all-time high of the Net Promoter Score isn't just a number of 61, it reflects fundamental improvements in how we serve everyone that shops with us across all touch points and every day. In this context, we've made significant progress with what we call personalized service, a specific program to let you design your visit to the store. We've completed that rollout in 4 countries already, and we're currently expanding to 5 additional countries. This, by the way, demonstrates that we scale successful concepts internationally, but of course, we do adapt locally to reflect the different expectations that may exist in different countries. And we also invest in our backbone, our logistics and infrastructure, especially for those omnichannel capabilities. Here's an example. We've rolled out 16 regional fulfillment centers that's across Germany, Spain and Turkey. These centers then help us reduce delivery times and improve reliability of delivery for our customers. On the technology or IT front, we are leveraging data and AI to improve our customer experience. For example, with personalization to help our customers discover products that truly meet their specific needs and to help us with conversion rates and customer satisfaction. Additionally, we're driving our sustainability measures, one of the key pillars of our strategy. Our refurbished sales nearly tripled this year. This also reflects changing consumer behavior. More and more often, customers choose high-quality refurbished products, because it makes sense for them economically and at the same time, it is an active contribution to putting less pressure on the environment. You probably recognize the next slide, #5. We do present it each quarter to give you transparency about the development of the 9 KPIs, which we introduced at our Capital Markets Day back in 2023, because these 9 KPIs represent the essence of our strategic focus. And once a year, we provide you with an update that includes precise figures. That's today. And I'm very proud to show to you that we've reached 3 of those nice strategic KPIs ahead of time. We achieved 53 million loyalty members, we increased our income share of Services & Solutions, and we grew our retail media income, all before the official deadline, September '26. This shows we have made huge strides in becoming more than a retailer. Our growth businesses are now a significant contributor to our business, and they still continue to grow steadily. This will become clear on Slide 6 too. Our growth businesses now represent a total of 36% of our gross profit. That's up from 33% last year, and it's a substantial increase from the 31% in financial year 2022, '23. So we believe we're well on track to reach our target mix for financial year '25-'26 when we expect our growth businesses to contribute even more significantly to our overall profitability. Now for the next few pages, let me walk you through some of the key operational developments last year, first for Retail Core, but then also for those growth businesses that I keep talking about. Let's start with Retail Core. It continues to be our strong foundation. And we're making some progress across all key areas in Retail Core. Let's look at loyalty first. As I said, we already surpassed our midterm target of 50 million loyalty customers, and it's now 53 million. Why is that? We successfully integrated our MediaMarkt and MySaturn programs in Germany for a more customer-centric approach. And our loyalty program is now available in nearly all countries. Why is that important? These 53 million customers come to our stores and to our app and to our website far more frequently than unregistered customers. And we are approaching them with more targeted offers that convince them and they do drive our revenues. As you can see, we also improved another key metric, and that's inventory management further. It's now down to 8.8 weeks of stock reach. And of course, online, our online sales were driven by strong growth, both in visits and in conversion rate. And also our omnichannel approach is paying off. We're successfully linking for customers, store visits and online journeys. It's finally reflected in our pickup rate, the rate of customers that chooses to go into a store, although they ordered online. And that's now 37%. That's a great example of what omnichannel means. Not to forget the app, the percentage of online sales generated through the app has grown to almost 30%. That's very strong growth, and it's mainly driven by Turkey, Spain, the Netherlands and Austria. Final element, store modernization. It remains fully on track. We've promised a target of 90%, and we're on track to achieve that. Last year, we opened, in particular, smaller store formats, 29 new Express stores and 8 new really small smart stores. That brings our innovative formats closer to our customers. Looking ahead into next year, we are preparing for the future through even more small format stores and at the same time, a few more large lighthouses. As in the past, this differentiation, which is untypical for us historically, comes together with a cost focus and better logistics. So it serves our customers better and it is more efficient. All of this together shows our Retail Core is the strong foundation, and it is making steady progress to get even better. Now based on that foundation, next to our growth fields, and let's start with Services & Solutions. Now we did grow all product categories in Services & Solutions, but what stood out last year were insurances and installations and configuration services when customers buy new devices. It's what we internally call power services. Turkey and Spain were the 2 highlight countries for that part of the service business. For this year, we have 2 major objectives. We want to make it easier for customers to buy services online or in the app because, frankly speaking, this is still not as convenient as in our stores, and our attach rate still here has some potential. And we want to focus secondly on growth in the telco segment. We believe that there, there's still a lot of growth for us, potentially even with MVNOs like our own mobile brand, Let's Go Mobile, which we launched in the Netherlands only this year. Second element of Retail Core is what we call Space-as-a-Service, and it also expanded successfully. We're now offering what we call experience zones and entrance statements in over 700 of our 1,000 stores. And we're working with around 25 very special partners. We call them internally non-endemic partners. What that means it's partners that are not our classical industry partners, but where actually we establish a new relationship, and there's also new business potential. Let's move on to Private Label, our own brands. Now to be fair, the progress in Private Label has been slower than progress in other areas. But last year, our Private Label business benefited significantly from our audio line with Peak and there, especially by the Robbie Williams campaign. Strongest product category is still accessories. And why is that? Because we tailor our accessory offers to highlight products. Take the Nintendo Switch 2 launch as an example. When we launched it, cases and many other accessories, cables were also in high demand. And so we used that momentum and posted strong numbers around private label around the Switch launch. Finally, we are improving the usability of our products. We've just recently introduced an AI chatbot that's been really well received by customers, especially with the use of smart manuals. Then after Private Label, let us look at Retail Media business. This grew especially strong in Benelux, Spain and Turkey. And we extended our offer again. We've introduced our first off-site program. In case you're not familiar with that solution, advertisers can reach MediaMarktSaturn shoppers not just on our website or app, but elsewhere. With this, we open new potential for our partners in addition to our own platforms. And that is also very much in focus for this financial year. Secondly, we want to onboard here as well non-endemic partners and thus build new relationships, very similar to what I've just said about Space-as-a-Service. Then Marketplace on Slide 10. With Turkey now active, we are operating our Marketplace in 8 countries now. The GMV, the gross merchandise value, reached EUR 527 million. That's another 90% year-on-year growth. Importantly, our EBIT generation more than doubled in that period. So we've also made strong improvements in our profitability as we scale this business, and we're not done yet. We're preparing to roll out Marketplace next in Hungary and Switzerland for 2026. At the same time, as we roll this out, we will enhance our assortment and add what we call verticals, I would call them topic areas. This is important because these verticals or topics have been very successful in the past. And you will see that they are different than our core assortment. For example, energy, fitness, e-mobility or even gardening. These verticals expand our assortment, and they make us even more attractive for our customers. And as you know, and as I said, sustainability is a core part of our strategy. And again, we doubled down on this last year, as you can see on Slide 11. There's 3 aspects. Let me start with BetterWay. We reached our BetterWay targets ahead of plan. Let me remind you what BetterWay is. BetterWay products are products in our assortment that are more sustainable, for example, by being more energy efficient. And these BetterWay sales now account for 25%, so 1/4 of our total sales. That's already now a lot more than the 20% target, which we had given ourselves for the financial year '25-'26. Second, the number of trade-in products. So when a customer returns a used device, this increased by 11%. At the same time, the average trade-in value also increased, and that helped us make this a very profitable business for us. Finally, refurbished products. So used products, refurbished to be as good as new. This showed exceptional growth and increased by 191%. That's a very clear sign that we really are offering what customers nowadays are looking for. So overall, we do feel encouraged to stay on this path. We will expand our trade-in offers. We will sell even more refurbished devices, and we will continue to focus on reducing the emissions footprint of our products. Now all of this that I've just so proudly presented to you, all of this would not be possible without our great team. I strongly believe that for us as an omnichannel platform, people and the human touch make all the difference. So we consistently invest in our people because we want, as MediaMarktSaturn, to be the best place for them to work. And so we ask them, we ask them twice a year, would you recommend us as an employer. The results, we call that the Net Promoter People. And in our last survey, it was at an all-time high of 42. That's up 4 points year-on-year, or 10%. And of course, we also invest in their development. We now use AI actually as a core tool to empower and to train our employees. And at the same time, strengthening those AI skills across all levels in our organization is a key priority for us in this next phase. We also made progress looking at diversity. Our female share in the top leadership increased by 250 basis points year-on-year and now stands at 16.3%. Come to think of it. Perhaps even more importantly, we have so many different cultures on board in our team. And that's a very important aspect also to me personally of diversity that shapes our company culture. Across Europe, people from over 130 nations work with us. Yes, that's right. More than 130 nationalities at MediaMarktSaturn. I want to take this opportunity not to speak to press and analysts, but to thank all those amazing people, to thank you guys that you work with us. All of this wouldn't have been possible without you. So thank you. From the bottom of my heart, thank you. Before I now hand over to Remko for the financial results, I want to highlight the 3 points that I want you to remember after our presentation today. Number one, the customer is always in the center of everything we do, not always perfect, but better every day. We are convinced that our omnichannel model is the right way to go, and it delivers on their expectations. So we will build on that in the future. Second, we have proven once again that our strategic direction, which has been stable for 3 years, is the right path. We continue to diversify our business, and we do become more than a pure retailer. Our growth business are no longer small. They are a key pillar of our success, and they continue to deliver consistent growth. And thirdly, as I started, we performed strongly despite an arguably challenging economic climate. Our sales grew more than moderate and our profitability improved for the 11th quarter in a row. Let me now hand over to Remko for a closer look at those amazing financials. So Remko, please join me. Remko Rijnders: Thank you. And also a big thanks from my side as well, and a warm welcome once again. As Kai already highlighted, we achieved a strong result this year and delivered slightly ahead of our updated guidance with both a strong sales growth of 5.7% and adjusted EBIT of EUR 378 million, slightly above our updated guidance of around EUR 375 million. This represents a 24% increase year-on-year or EUR 72 million compared to the previous year. In my opinion, these results are visible and measurable success. They are proof that we are making good progress in our transformation, which began just under 3 years ago, as you can see on Slide 16. Our efforts have translated directly into financial strength. We have significantly improved our profitability with our adjusted EBIT growing by an average of 22% year-on-year. That's a performance that speaks for itself, and we are certainly very proud of it. These results come from robust sales growth in our Core Retail business, the increased contribution from our successful growth business and our strict cost discipline. I will go into more detail on all 3 areas shortly. Let me now take a closer look at the full year results. We reported solid sales performance in all our 4 quarters and released very strong 6.9% like-for-like in Q4. Our profitability increase was driven again by our growth business, while we remain focused on cost. For Q4, our gross margin increase of 40 basis points was the main driver behind our profitability improvement. And now per region, the region DACH performed strongly over the year, and Germany reported the highest improvement in the region. This is a strong achievement, continued in a muted market, and we are pleased to report that we held our market share. In Western and Southern Europe, there Spain was the strongest contributor, both in sales and in EBIT growth. Note that the Netherlands had a strong EBIT growth, too. Finally, for Eastern Europe, Turkey continued to perform strongly. While we are still in restructuring mode in Poland, as we said before, it will take a bit more time. Let's now take a look at our sales from Services & Solutions. As a reminder, this includes insurance and warranties, telco and digital products, installation and repair, consumer financing and sustainability services. Overall, sales from Services & Solutions increased by 12.5% for the full year. Regarding the individual service categories, extended warranty and consumer financing achieved strong results for the full year. These figures show once again that our efforts to improve our service offerings are paying off. We have successfully convinced our customers that we are not just product providers, but above all, solution providers. Let's move on to our online business. Over a 12-month period, online sales increased by 13.3% to EUR 5.7 billion. This corresponds to an online share of 26%, including our Marketplace, and this is 240 basis points more than the previous year. Please keep in mind here that our Marketplace is currently active in 8 countries with the recent opening in Turkey. We expect the final 2 countries, Switzerland and Hungary, to go live in 2026. We still see a great deal of potential here as the marketplaces to continue to ramp up. Let me now return to EBIT development. Our gross margin increased by a strong 30 basis points for the full year. This is essentially due to the positive impact of our growth areas. If you look at our operating expenses, you can see that our adjusted OpEx ratio has decreased again, although only slightly by 10 basis points to 17.3% of group sales for the full year. We have improved our location costs as well as the efficiency of our marketing spend. We also place strong emphasis on managing our indirect spend. In simple terms, we are working hard to control all our internal costs that don't directly relate to customer-facing side of our business. Let me walk through from adjusted EBIT to net profit. As explained before, we increased our adjusted EBIT by EUR 72 million this year, which is a strong operating performance. Below the line, our net profit came in at minus EUR 34 million, mainly impacted by nonrecurring items like impairment we made in Poland for EUR 34 million. Remember that we are in restructuring mode over there, as I mentioned before. Second, we recorded a EUR 32 million transaction cost for our coming partnership with JD, and clearly see this as an investment for our future. So it's fair to say that excluding those, we would have reported a positive net profit. Let me finish with cash. Indeed, cash is king, particularly now in retail. While profit is an important measure, cash is the true livelihood of the company. A strong free cash flow demonstrates that our business model is working efficiently. In this case, that gives us the strategic freedom to fund growth, reduce debt and ensure we are resilient and agile in any economical climate. In essence, it's the engine that powers our long-term success. We generated EUR 280 million more cash than last year, which is a fantastic performance in my view. On this positive note, let me now hand back to Kai. Kai-Ulrich Deissner: Thank you, Remko. You see, we are having what I call positive momentum. And this, we want to carry it into this year. So now in conclusion, ladies and gentlemen, I'd like to share our outlook for the financial year '25 and '26. We are confident that we will continue to improve. We very formally expect a moderate increase in currency and portfolio adjusted total sales with all our regions contributing to that sales growth. Secondly, and arguably more importantly, we anticipate an adjusted EBIT of around EUR 500 million. This is also the target for the financial year '25 and '26 that we have communicated our Capital Markets Day back in 2023, and ever since. This improvement will be driven by the DACH region and Western and Southern Europe. And we already started into this new financial year strongly, as you will see on the next slide. As you know, Black November and Christmas are very important times in the year for us. They set the tone for our Q1 performance and our Q1 is usually our strongest quarter. So it's important. And I'm very proud to tell you, we had a successful Black season. Many of our countries delivered strong numbers. Especially [indiscernible] this year, in case you're interested, floor care robots, computer hardware and small domestic appliances like kitchen devices, usually smart kitchen devices. At the same time, our attachment rate for Service & Solutions, one of those growth areas, also was very strong. All of this performance was, of course, made possible by working on the engine by excellent product availability and by our marketing campaigns. Here, you may remember, we turned November into Yovember, because we want to say yes or Yo to offering our customers whatever they need, be it the best product, the best service or the best possible price. I'm very happy to look into more detail here together with you in February when we present our Q1 results. So in wrapping up, what have we presented to you today? First, we delivered strong performance in a challenging market environment, again. Second, our experience electronics strategy translates directly into greater customer satisfaction. Our record NPS underlines this. Third, our growth businesses are no longer small. They are an integral part of our business, and they continue to accelerate. Fourth, our focus remains unwavering on cost management, liquidity and profitability. Fifth, we are ready. We are ready to accelerate our development with our new strategic partner, JD.com. And finally, we maintain, unlike others, a positive outlook as we enter the new financial year. Ladies and gentlemen, as we conclude our presentation, I want to emphasize this positive momentum that CECONOMY has demonstrated throughout the past financial year. We still are not transformed fully, and we have a way to go. But that positive development shows we are on the right way. We're not just developing consumer electronics and experience electronics, we are paving the road to become the experienced champion in consumer electronics in Europe. Our dedicated team of almost 50,000 employees from more than 130 nations is working very hard on this vision. We will continue to stay close to our customers until we become a truly customer-centric omnichannel service platform. Thank you for your attention. We're now ready for your questions. Thank you. Fabienne Caron: So we will now open the Q&A session. So in the room, please raise your hand and wait for the microphone. Online, you have received a QR code with your registration. Otherwise, you can scan the QR code that may appear on screen to submit your questions. [Operator Instructions]. So we've got the first question online from xyz.pl, so from a Polish journalist. The first question is, are you still ready for major capital injection into MediaMarkt Poland? Second, do you plan to keep fighting for market share to become #1 in Poland? And third, how big will the change be after the JD.com transaction? Kai-Ulrich Deissner: Yes, Matthias, thanks for the questions. Remko will take the first 2 questions, and I'll round it off with the third. Remko Rijnders: Yes. Matthias, thank you for the question indeed. And let me highlight a bit how we see Poland at the moment. Poland is extremely important for our portfolio of countries. It's an important market, and it's a growing market. And of course, as we look at the results right now, we are investing in the team. We opened our marketplace in Poland that is now paying off. So we treat Poland as a very important country and a country that is very important also for our growth in Europe and also in a Europe that is at the moment consolidating. So that's foremost. Secondly, basically, how do you keep on plan fighting in Poland. We have mentioned it a couple of times, and it goes for all our country portfolio. For us, it's extremely important to be indeed #1 or the #2 in any country. And that's our ambition that we have together. And that's what we want to achieve in Poland where we go to that direction. But as mentioned already, this will take time in Poland. Poland is a very competitive market, and we are looking at the options as we speak. And let me now hand over to Kai. Kai-Ulrich Deissner: Yes, let's talk about JD. Actually, it's no different for Poland than for any of our other markets. What do we look -- what are the likely first changes that we see from our partnership with JD. And we've talked about it. We are, in particular, looking to their expertise in logistics, in particular, in delivery towards customers and in technology. And those are the 2 areas that will all materialize most likely in all countries, but most certainly also in Poland to help us, as Remko said, to fight back for that important market position, which we are committed to get. Fabienne Caron: Good. So we will show the QR code again for people who didn't have time to register to do so. So the next question is from Javier Garcia Ropero from Spain. He is from Cinco Días, a newspaper. He is asking, Spain showed a significant sales growth last year. What do you expect in the market in terms of sales growth and new store for next year? Remko Rijnders: Yes. So Javier, thanks for the question, and let me take this one. Yes. The Spanish market in 2025 was a very positive market. First of all, from a market perspective, overall, but in that market, we were able also to gain significantly, market share, both offline and online without opening stores. So basically, what we are looking into for next year is still that the Spanish market is going to grow. And in that market, we have still enough potential to grow more than our competitive environment, gaining more market share. So we are very positive about the Spanish market, but we are even more positive about our performance in that market, both on- and off-line. Fabienne Caron: Good. Next questions. We cannot see where it comes from. It's a question regarding if we plan to cut jobs at CECONOMY MediaMarkt. Kai-Ulrich Deissner: So I'll make sure that everybody heard that. So the question was whether we plan to cut jobs. And the answer is no. We do not plan to cut jobs. Very clearly, we do not plan to cut jobs. Let me explain that a bit. The business we're in means we constantly review our performance, as any normal retailer would. We're looking at that store and see whether it's still performing. We are looking at that area and seeing whether it's still performing, or at that area. So there will be changes. And yes, we will, of course, like in regular business, sometimes close 1 store here to reopen it there. And that may also mean that there is 1 or 2 or 3 jobs lost in the process. But that's very different from planning to cut jobs at large scale as a company strategy. That's not our strategy. We invest in people. We expect more stores. We expect to grow. So the answer is no. But of course, in day-to-day business, this may appear. Fabienne Caron: Thank you, Kai. The next question is from Matthias Inverardi from Reuters. Can you outline in detail how logistics will be improved by your partnership with JD.com? Kai-Ulrich Deissner: Let me try to take that, and I'm sure Remko is eager to add some details, but I want to place it first. Without wanting to be too defensive here, no, we cannot outline this in detail yet. Please respect that we're still in a phase where regulatory approvals are outstanding when there is no detailed discussions between the 2 companies, so we cannot give you a detailed answer. What I can tell you is what our ambition is and what we believe JD.com is strong. And I think I hinted at that already. They're very strong in very efficient delivery to customers. More than 90% of the deliveries in China reached their customer the same day or the next day. And just let that sink in. We're talking about China and not just the cities, I mean all of China. So as JD is rolling out these delivery expertise to Europe, it is our expectation and actually our agreement that we will be able to participate in this. This is what I can say in general. But detail is probably difficult to share at this stage. Remko Rijnders: Yes, it's difficult. We acknowledge that logistics is a very, very important part in an omnichannel strategy that we, as CECONOMY MediaMarkt have. And we have made very good progress. Automatization in Germany. Our NPS of delivery is going up. But yes, as Kai said, 1 of the reasons to look into synergy effects to thinking direction is, of course, this enormous strength on that last mile logistics, which accelerate basically our strategy that we have defined together. So I'm very much looking forward to that cooperation. But of course, logistics is going to be a customer-facing logistics topic for all of us. So yes. Fabienne Caron: Thank you, Remko. The next question is from Alexander Zienkowicz from mwb research. Congratulations on the results. You have your focus on the finish line, but could you provide us some glimpse beyond '25, '26. And secondly, with your free cash flow improving significantly, could you elaborate on capital allocation? Kai-Ulrich Deissner: Yes. Thank you, Alexander, and good to hear from you again. Let me give you a perspective where we stand, and then Remko will say something about the numbers. First of all, where we stand. The #1, #2 and #3 priority is making sure that we deliver our promises for the end of the current financial year. So the infamous EUR 500 million EBIT and the EUR 200 million steady cash flow. That is and remains our priority. Now we realize, of course, that we're confident to achieve that. So we are already thinking about the phase afterwards. And what I can anticipate that we expect to invite all of you towards the middle of next year, calendar year, to a strategy update where we will share the outlook on the next phase of our journey. So beyond the 30th of September, 2026. Expect that to appear in your diaries eventually for some time in the middle of next calendar year. And on the financials, Remko, do you want to dare to give an outlook already, or be careful? Remko Rijnders: No, I'm always careful, but very confident, of course. So first of all, thanks for the congratulations, Alexander, and good morning. So yes, we are very proud as well, as you mentioned, and I mentioned already, cash is king, on our achievement on free cash flow. Of course, as I mentioned already in the presentation, is that gives us a bit flexibility also to invest in our future and our future strategy. As Kai already mentioned, we will come back towards the next step. However, 2026 has been clearly defined, above EUR 200 million, EUR 500 million, and also how we want to get there with growth areas. So yes, there will be significant investment also in logistics, but especially also in the growth areas, because as you have seen, this is paying off. But the detailed capital, let's say, allocation, of course, we will come back on that topic later. But it's supporting our current strategy. That's for sure. Fabienne Caron: Thank you, Remko. The next questions come from Javier Mesa at elEconomista in Spain. What stage in the process of modernization in MediaMarkt are you? And will the smart format arrive in Spain in the coming months? Kai-Ulrich Deissner: Yes, Javier, thanks for the question. I'll be slightly evasive about this, but I ask your understanding. Let me be very clear. Each of our store formats, so that's the core format, the classical MediaMarkt, the Smart and the Express and the Lighthouse. Each of those formats is designed for each and every country. This is not country-specific. We expect to have these formats in each and every country. But I'm not able, and frankly, also not willing at this particular moment to share details of the rollout plan in any particular country. I would have given the same answer about Turkey or Italy or so. But yes, you can expect all of our store formats to be available in all of our countries in the future. Fabienne Caron: Thank you, Kai. The next question comes from Carlos Torres, [indiscernible] Spain. You have pointed out our important spend is for the group. Could you specify the company sales for Spain? And what are your forecasts for next year? Remko Rijnders: Yes. So let me take that question, Carlos. Thank you very much. As you, we are very proud of Spain as a country. It's a growing country. As I mentioned, we are doing better in the market in Spain, and that's due to really the team working for us in Spain and basically using all sales channels, B2B, online, off-line and, of course, marketplace. So from that perspective, we are happy. We see the market growing. We see us also growing in that market. We are preparing, also the Spanish team are preparing really some nice new propositions also from a customer perspective. So we are very much looking forward. Do I want to pinpoint a number specifically on the country today? I do not. But we are very positive about Spain and the performance and also about the future for Spain next year, or this year actually. Kai-Ulrich Deissner: We love Spain. Remko Rijnders: Yes, Spain is good. Fabienne Caron: So at this point in time, I see no further questions. Kai-Ulrich Deissner: My personal experience is, we will wait for a moment or so. Sometimes people need a moment to warm up. I'm afraid we haven't got anything planned to bridge the time now. So you'll just have to bear with us for a moment. Remko Rijnders: We made a nice Christmas movie, so maybe. Kai-Ulrich Deissner: Okay. I'm checking with our back-office team here. No questions or more questions? One more coming. Okay. Fabienne Caron: Yes. The question is as well from Frank Meßing of [indiscernible]. He is asking how many stores we're going to modernize next year in Germany? Kai-Ulrich Deissner: Frank, thank you for the question. I will give you the -- I think the answer has already been given. We have a target of modernizing or having modernized 90% of our core formats. Let me just be clear what that is, that's your classical MediaMarkt, right. 90% at the end of next financial year. And so that's also the answer for Germany. As to the numbers, that's roughly 400 stores. I'll give you the number now, 400 stores in Germany. So 90% of that is 360 stores that we will plan to have modernized by the end of next year. Fabienne Caron: The next question comes from Philip [indiscernible]. First, is there any further changes planned on Saturn in 2026? Will the brand continue to exist in Germany on- or off-line? And second, your adjusted EBIT improved, but not your reported EBIT. Could you give a guidance for reported EBIT? Kai-Ulrich Deissner: Yes, Philip, thank you on the Saturn question. I want to be very clear about this because there are so many rumors and often also so many questions around. Look, we have 2 brands. Actually, if you're really picky, we have three. MediaMarkt, MediaWorld in Italy and Saturn here in Germany. And we are proud of every element of that brand architecture. Now there's people out there who tend to buy more with MediaMarkt and there's people who tend to buy more with Saturn. We take that very seriously. That's why whenever we do modernize a store, as we've just talked about, we look at that store in a lot of detail and really come up with a decision that is specific to that store. And in Germany, we have 2 options. It's MediaMarkt and it's Saturn. And it stays like that. What I would want to emphasize is the value of our brands, of our joint brands, yes, MediaMarkt and Saturn. And we've just recently, from Brand Finance, received confirmation that our brand equity increased significantly, including Saturn by EUR 500 million year-over-year increase to EUR 2.5 billion now. So that's a strong argument for that double strategy of our brand. And for the second part of the question, I'll give it to Remko. Remko Rijnders: Yes. Thank you very much, Kai, and thank you very much, Philip. Let me repeat the second part of the question maybe. Your adjusted EBIT improved, but not your EBIT. Can you give a guidance on EBIT? And let me come back to what I said before, so adjusted EBIT indeed improved to a staggering amount of EUR 378 million. What is causing the EBIT to be negative is the investment that we did in our future, in the JD Corporation, accounts for EUR 32 million from nonrecurring items. It had a big impact. And also the Poland restructuring to build for the future, but we already mentioned where we want to be with Poland. So that had the biggest impact. What is our future outlook? Our future outlook is a positive outlook on EBIT and, of course, the around EUR 500 million in adjusted EBIT. Fabienne Caron: Thank you. The next question is from Jerome [indiscernible] from The Telegraph. So we are moving to the Netherlands. Question on data. You leveraged consumer data successfully with the off-site program. We're thinking -- we're talking here Retail Media. Do you expect regulatory scrutiny of this program also with JD.com in the Chinese context. Kai-Ulrich Deissner: Jerome, thanks for the question. Look, we are right in the middle of a regulatory approval process, and perhaps let me outline just where this stands in a bit more detail. There is merger control, there is foreign direct invest, and there is subsidy control by the European Union. Now I'm very happy to say that merger control has already been improved in each and every country where this is relevant for us. On foreign direct invest, the process is ongoing. We're happy to already have received an approval by the Italian authorities. All other processes are ongoing. And I do imagine that, of course, questions of data are always part of that, but none that are particular to these off-site campaigns, as you mentioned. Furthermore, I cannot and it would not be adequate to comment at this particular stage. I would want to close and emphasize again, we remain very confident and expect to close in the first half of 2026. Fabienne Caron: Thank you, Kai. The next question has come from Ulrike Dauer, Dow Jones. First questions. At the 2023 Capital Markets Day, beyond the adjusted EBIT target for '25-'26, you gave out other target for adjusted free cash flow and adjusted EBIT margin, which seems a bit outdated now. Can you update those targets at this point in time? Remko Rijnders: And I'll take that perhaps together with the second question for a dividend because it's also from Ulrike, yes. Now let me say here that we will not comment on numbers in any detail. If we are really picky, we gave an adjusted EBIT target for the end of next year, that's EUR 500 million. We gave that number in our Capital Markets Day, and we have repeated that number precisely to the last decimal since. We have, at the Capital Markets Day in 2023, said that we expect a stable cash flow of EUR 200 million per year, and we're also not changing that number. As for the dividend, we have a standing policy as a company. And that policy, I think we revealed it here last year, exactly a year ago, if I remember correctly. Let me just reiterate that, because that policy is still in place. And it is that between 15% and 25% of the net profit or EPS per year can be distributed as a dividend. That has not changed. We've reviewed it here a year ago, and it is still stable. That policy has not changed and will also be relevant in the future. Fabienne Caron: Thank you. We have an additional question from Alexander Zienkowicz from mwb research. Retail Media trends to grow because marketing budgets are tight as brand shifts spend towards more performance-driven channels. To what extent is your growth benefiting from this dynamic? Remko Rijnders: Yes. So Alexander, thanks for that question because, first of all, as mentioned, we are already extremely proud of our growth when it comes to Retail Media. That being said, we are just at the beginning also when we look at our competitive field. There is a huge possibility to make that even a bigger part of our growth area, our growth business. It's true that basically the SEO, the whole world is changing there. AI comes into play. So yes, there is huge opportunity already in the Retail Media area where we are today, because we are just at the beginning. Yes, we are already better performing than we expected for 2025 fiscal year, and we expect a growth there as well. That being said, it will not be only on paid. We are also working very, very hard on the organic traffic in our organization. It's about brand awareness. So that also plays a role in this partner marketing and Retail Media. But you're right, it will play a significant part in combination to paid search and organic growth of our company, which helps then non-endemic or our suppliers of MediaMarkt to turn as well. Fabienne Caron: Thank you, Remko. I see no further question at this point. Kai-Ulrich Deissner: Still going to give it 30 seconds. Last time, I was successful in tickling out a few more questions. Okay. Look, thank you all for your time and for your questions and all the energy today. I trust that you've seen that Remko and I and Fabienne and the whole team, actually, that 50,000 people here at MediaMarkt and Saturn work very hard to bring what we call experienced electronics to life. And we will continue that journey. And we will continue it also in a partnership with JD.com after that transaction closes in the first half of 2026. We will, of course, keep you posted about this process. And in the meantime, if you would like to engage with us in any of our regular channels, we are very happy to continue those conversations. Please also mark February 11 already in your diaries. That's when we will present our Q1 results and, of course, share much more details about the Christmas and Black piece. Until then, Remko, Fabienne and I and everyone here at MediaMarktSaturn wishes you a very Merry Christmas and a wonderful holiday season. Enjoy your time with your loved ones. And if you don't have all the presents yet, come to our stores or order online, even on the last day before Christmas, because with a 90-minute delivery, we'll make sure that you got something to put underneath the Christmas tree. Thank you very much for today. We are very much looking forward to speaking to you next year. Thank you very much, everyone.
Operator: Good day, ladies and gentlemen, and welcome to The Toro Company's Fourth Quarter Earnings Conference Call. My name is Gigi, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's conference. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's conference, Heather Lilly, Vice President, Corporate Affairs and Relations. Please proceed, Ms. Lilly. Heather Lilly: Good morning, everyone, and thank you for joining us for The Toro Company's Fourth Quarter and Year-End 2025 Earnings Conference Call. I am Heather Lilly, Head of Investor Relations. On the line with me today are Rick Olson, Chairman and Chief Executive Officer, Edric Funk, President and Chief Operating Officer, and Angie Drake, Vice President and Chief Financial Officer. Rick, Edric, and Angie will provide an overview of our fourth quarter and full year results, which were released earlier this morning, and discuss our priorities and outlook for fiscal 2026. Following their remarks, we will open the phone lines for a question and answer session. As a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainties, including those described in today's earnings release, investor presentation, and most recent SEC filings, and may cause actual results to differ materially from those contemplated by these statements. Also, in our remarks, we will refer to certain non-GAAP financial measures, which we believe are important in evaluating the company's performance. Reconciliations of all non-GAAP numbers to the most directly comparable GAAP numbers are included in this morning's press release, which, along with the fourth quarter presentation containing supplemental information, is posted in the Investor Information section of our corporate website. With that, I will turn the call over to Rick. Rick Olson: Thanks, Heather, and good morning, everyone. Our team remains focused on leveraging our diverse portfolio of leading brands, controlling what we can control, and driving operational excellence. In doing so, we delivered fourth quarter sales and adjusted EPS that exceeded our expectations. We achieved a full-year professional segment earnings margin of 19.4%, demonstrating the resilience and quality of our core business that represents about 80% of our portfolio. We generated record free cash flow of $578 million, a conversion rate of 146%, returned $441 million to shareholders through dividends and share repurchases, increased our AMP savings target to $125 million by the end of 2026, and continued investing in technology and innovation that enhance our customer productivity. We beat our sales expectation for the fourth quarter, reporting consolidated net sales of $1.07 billion. Fourth quarter Professional segment margin grew to 19.2%. This increase was driven by sustained momentum in the underground construction business and better-than-anticipated growth in snow and ice management. Adjusted diluted earnings per share for the fourth quarter were $0.91. This reflected year-over-year earnings improvement in both segments, offset by higher expenses related to the restoration of employee incentive compensation. For the full year, we hit the higher end of our net sales guidance, reporting total consolidated net sales of $4.5 billion. That was down 1.6% from fiscal 2024, with a significant portion of this decrease attributable to the strategic divestitures of company-owned dealers and our pulp product line. We delivered adjusted earnings per diluted share of $4.20, beating both our current year EPS guidance of about $4.15 and $4.17 reported last year. These results were incredibly strong, given the challenging environment of the past two years. Through our focus on key growth markets and deliberate efforts to improve productivity, we are strengthening our competitive position and accelerating our performance. Specifically, we continue to invest in our golf and grounds, underground specialty construction businesses, reflecting the multiyear secular growth trajectory we anticipate for those markets. Our acquisition of Tornado Infrastructure Equipment, which closed last week, is a great example of the strategic investments we are making to better serve customers facing complex infrastructure projects. Tornado is a leading manufacturer of vacuum excavation and industrial equipment solutions for the underground construction, power transmission, and energy markets. Their products are designed to safely excavate around critical infrastructure to minimize the risk of damage. We are excited to expand our geographic presence and product portfolio as we welcome Tornado to The Toro Company. Additionally, we continue to protect both our profit margins and market competitiveness through significant productivity improvement and thoughtful net price realization. Our multiyear Amplifying Maximum Productivity, or AMP, program has already delivered annualized run-rate cost savings of $86 million. Some of the actions that are driving these savings include strategic facility closures, reducing our operational footprint by more than 1 million square feet, a reduction in salaried workforce of nearly 15%, and divestitures of non-core businesses and product lines totaling approximately $60 million in revenue. These actions, combined with thoughtful supply chain strategies and selective price increases, enabled us to mitigate the effect of tariffs and maintain strong margins in fiscal 2025. Additionally, we are pleased to announce that we are increasing our AMP run-rate savings target to $125 million or more by 2026, up from our original target of at least $100 million. We are also carefully managing inventory levels across the spectrum, from raw materials to finished goods. As our lead times have recovered to more normal levels, customers are ordering closer to need, positioning us for a clean start as we enter 2026. Largely due to improvements in working capital, our free cash flow for the year was a record $578 million. This resulted in a free cash flow conversion rate of 146%. We continue to launch products at the forefront of innovation in alternative power, smart connected products, and autonomous solutions that differentiate our offerings and drive significant customer value. Our autonomous GeoLink fairway mower is receiving very positive reviews. It is another excellent example of our expanding technology portfolio. In particular, golf course and commercial customers who are facing labor shortages and budget constraints have expressed their excitement about the tremendous efficiencies inherent in the mower's autonomous capabilities. Customers are also enthusiastic about our Toro Grandstand Multiforce, a stand-on mower that allows them to attach a plow, power broom, and bagging system. The result is higher productivity across all seasons. For landscapers and homeowners with acreage, we recently introduced our X Mark Radius, a zero-turn mower with product styling and features that mirror the highly successful Lazer Z. Collectively, our actions are enhancing our customer productivity, strengthening our operations and market-leading position, and sustaining our profitable growth. I want to thank our employees and channel partners for their diligence in advancing our product innovations and technology-driven solutions and supporting our efficiency initiatives. Now, Angie will share additional insights for our fourth quarter and full-year results and provide our outlook for 2026. Angie Drake: Thank you, Rick, and good morning, everyone. We delivered strong fourth quarter results that exceeded our expectations and demonstrated the strength of our diversified portfolio, market-leading innovation, and commitment to operational excellence. As a result, our full-year 2025 sales and earnings also outperformed our guidance. Both the Professional and Residential segments contributed stronger-than-anticipated sales across multiple businesses, which drove favorable year-over-year operating leverage in the fourth quarter. Professional segment net sales in the fourth quarter were $910 million, virtually equal to last year's exceptionally strong performance. Net price realization and higher shipments of underground and snow and ice products nearly offset anticipated lower shipments in golf, ground, and zero-turn mowers, as well as the impact of prior year divestitures. Professional segment earnings for the fourth quarter were $174.7 million, up 2.9% year-over-year. The resulting earnings margin in the quarter was 19.2%, up 60 basis points from last year, primarily due to net price realization and productivity improvements. This was partially offset by higher material and manufacturing costs and lower net sales volume. For the full year, professional segment net sales, which comprise about 80% of the total company, rose 1.9% to $3.62 billion. Full-year Professional segment earnings were $702.5 million, and earnings margin was 19.4%. This was up from $638.9 million and 18% in fiscal 2024, underscoring our commitment to cost improvement and our purpose for cost reduction measures. In our residential segment, fourth quarter net sales were $147 million, which were 5.1% lower than the prior year but exceeded our expectations due to net price realization and higher shipments of snow products, reflecting channel enthusiasm for preseason stocking. Additionally, through our deliberate measures to reduce costs, improve productivity, and achieve pricing, we delivered higher-than-expected fourth quarter residential segment earnings and outperformed prior year results by $13 million. For the full year, residential segment net sales were $858.4 million, down 14% from the prior year. Full-year earnings were $35.8 million, 4.2% of segment net sales. This compares with fiscal 2024 earnings and earnings margin of $78.4 million and 7.9%, respectively. Now turning to our consolidated results for the fourth quarter and full year. Consolidated net sales for the quarter of $1.07 billion were down 0.9% from Q4 last year, due to lower shipments in both segments and prior year divestitures, partially offset by net price realization. For the full year, net sales were $4.51 billion, essentially in line with 2024 net sales, adjusting for the impact of divestitures. Our fourth quarter adjusted gross margin of 34.5% improved from 32.3% in the prior fiscal year, primarily due to net price realization and productivity improvements, partially offset by lower net sales volume, higher material and manufacturing costs, and product mix. Full-year adjusted gross margin was 34.1%, compared to 33.9% in fiscal 2024. This increase was primarily due to net price realization and productivity improvements, partially offset by lower net sales volume, higher material and manufacturing costs, and inventory valuation adjustments. SG&A expense for both the quarter and the year was 22.5% of net sales, a 30 basis point increase from Q4 a year ago and up 80 basis points from full-year 2024. The change for both periods was primarily due to lower net sales volume, partially offset by cost savings. In summary, our fourth quarter adjusted earnings per diluted share were $0.91, compared to $0.95 in the prior year. The change was driven by higher expenses related to restored employee incentives, mostly offset by an increase in both professional and residential segment earnings. For the full year, adjusted earnings per diluted share were $4.20, compared to $4.17 in fiscal 2024. Primary drivers include higher professional segment earnings and share repurchases, partially offset by lower residential segment earnings. Turning to our cash flow and balance sheet. Our free cash flow for the year was a record $587 million, a meaningful year-over-year increase that was largely due to net favorable changes in working capital. This resulted in a free cash flow conversion rate of 146%. Additionally, we returned $441 million to shareholders in fiscal 2025 through dividends and share repurchases, demonstrating continued confidence in our ability to generate cash and our commitment to value creation. Our balance sheet remains strong and continues to provide financial flexibility. Our leverage ratio of 1.3 times is healthy and well within our stated target range. We continue to take a disciplined approach to capital deployment by prioritizing strategic investments to drive profitable growth through both organic opportunities and acquisitions. We have generated strong positive momentum in our return on invested capital. Looking ahead to fiscal 2026, we are thoughtfully balancing the strengths and growth opportunities within our businesses with the ongoing pressures of the macro environment. We are excited about our recent acquisition of Tornado and the longer-term growth trajectory of the vacuum excavation industry. We are poised to execute on the continued strong demand for our underground construction business. This demand is being driven by new infrastructure installation projects and ongoing maintenance of existing networks. We are continuing to leverage our leadership in golf course equipment and irrigation and are being proactive in attracting new customers and opportunities for our grounds business. Recent snowfall in key regions across the country is an encouraging sign, and we are prepared to capitalize on the favorable weather trends. We remain committed to delivering on our new higher AMP target by 2027. At the same time, we remain cautious about macro factors, including inflation and interest rates, that may continue to pressure consumer confidence. However, we believe the steps we have taken position us well to benefit as the environment improves. For fiscal 2026, we expect annual total company net sales to rise 2% to 5%, reflecting professional segment sales that are expected to grow mid-single digits and residential segment sales that are expected to decline low to mid-single digits. We anticipate total company adjusted gross margin to improve in 2026, underscoring the strength of our business model and our ability to navigate cost pressures while continuing to invest in innovation. We expect this adjusted gross margin improvement, combined with our continued focus on productivity and prudent management of tariffs and other inflationary pressures, to drive higher adjusted operating earnings margin for the year. This total company outlook reflects a range of 18.5% to 19.5% professional segment earnings margin in 2026 and a range of 6% to 8% residential segment earnings margin as we build on our 2025 progress. Our guidance also reflects mid-single-digit earnings growth for the near term, with a clear path to higher growth over time as we execute on margin expansion and innovation priorities. As a result, we expect full-year 2026 adjusted earnings per diluted share to be in the range of $4.35 to $4.50. This assumes interest expense of approximately $65 million, an adjusted effective tax rate of about 21%, and capital expenditures of $90 million to $100 million. Furthermore, we remain committed to returning value to shareholders through dividends and share repurchases and are confident in our ability to generate cash. As we announced last week, we have raised our quarterly dividend from $0.38 to $0.39, and our Board of Directors authorized the repurchase of up to an additional 6 million shares of TTC's common stock. We expect to repurchase shares at a rate similar to last year and anticipate a free cash flow conversion rate of greater than 100% in 2026. Our outlook for first-quarter performance reflects the natural seasonality of our business and our current conservative view of economic factors, including homeowner and consumer sentiment. We expect total company net sales in Q1 to be up slightly from the prior year, with professional segment sales up mid-single digits and residential segment sales down high teens. Professional segment earnings margin is expected to be flat in the quarter, and residential segment earnings margin is expected to be lower. For the total company, adjusted earnings per diluted share are expected to be flat to slightly lower than last year's first quarter. As a reminder, from an earnings perspective, our first quarter is typically the smallest of the fiscal year and can carry seasonal cost headwinds. With the growing traction of our AMP initiatives, we expect margin momentum to build as we move through 2026. Though the environment continues to pose some challenges, we are steadfast in our approach to driving operational excellence and thoughtfully managing factors within our control. We are confident this discipline, combined with continued innovations that improve our customers' productivity, will drive sustained profitable growth and deliver meaningful shareholder value. With that, I will turn the call over to Edric. Edric Funk: Thank you, Angie, and good morning, everyone. As evidenced by our better-than-expected results for the year, our decisive actions are enabling us to increase the resilience of our business and to build momentum for future growth. We are strengthening our product portfolio and competitive positioning, strategically investing in technology solutions and markets with strong multiyear growth drivers, like golf, grounds, and underground construction. Our pipeline of new products and features that provide value for our customers is robust, and we are excited by the future potential of several innovations that are still early in their growth life cycle. For example, golf course superintendents will benefit from two new software-as-a-service irrigation products. Our LINX Drive central control system is a mobile version of our industry-leading platform that is changing the way superintendents manage golf course irrigation. It gives users increased flexibility and control, allowing them to address issues in real-time and to improve their efficiency through enhanced communication capabilities while on the move. Our AI-enabled spatial adjust software, which was released in November, integrates with Toro irrigation systems for even more precise water management. It works with turf rad soil moisture sensors to optimize the amount of water used on fairways, automatically recommending daily water application rates to achieve the user-defined target moisture level. Feedback from users who participated in our pilot program was extremely positive, including frequent mention of both improved turf uniformity and playing conditions. Driven by what we expect to be a third consecutive year of record US golf rounds played, we have experienced exceptional growth in golf equipment sales and irrigation projects. In addition to the continued momentum in golf, we are also increasing our focus on grounds opportunities within municipalities, universities, sports fields, and other markets. We are also actively pursuing opportunities to capitalize on the growing demand for underground construction equipment, which is being propelled by aging infrastructure, the growth in data centers, and energy and telecommunications projects. Our Tornado acquisition is an exciting development in this space, building on our existing relationship with Tornado as a strategic supplier to Ditch Witch. It enables us to expand our reach and capitalize on accelerated growth in vacuum excavation. Furthermore, we are executing on our commitment to operational excellence through disciplined implementation of our AMP productivity program and optimization of our global supply chain. Our efforts have helped us mitigate increases in materials and manufacturing costs, streamline our supply chain operations, and better align our production capacity with demand. We also continue to prioritize our relationships with key partners, and we are committed to building on our legacy of engagement to ensure mutual success and customer satisfaction. Last month, we hosted our Toro University hands-on training event for more than 300 members of our distributor partners who span geographies and markets. We equipped them to sell and service our new products so that customers realize the exceptional value we collectively deliver. In addition, we recently celebrated an incredible one hundred-year relationship with a key distributor partner, Smith Turf and Irrigation. This long-tenured partnership is a testament to the importance we place on building and sustaining strong relationships. As we look ahead, the factors that contributed to our growth for one hundred and eleven years continue to be critical drivers of our performance. Investing in growth markets and innovation, maintaining our operational discipline and focus on productivity improvement, and keeping our customers' needs front and center with support from loyal partners. All of these remain key priorities of The Toro Company's strategy and culture, and they are absolutely foundational to our future success. Now Rick has a few closing remarks. Rick Olson: Thank you, Edric. To close, I want to emphasize our confidence in The Toro Company's trajectory. The steps we are taking to enhance our customers' performance and increase our efficiency will strengthen our competitive advantage and drive continued profitable growth. In addition, we are being proactive and purposeful as we maintain a disciplined approach to capital allocation, balance sheet flexibility, and strong cash flow. Together with our strategic focus on key growth markets and operational improvements, these actions give us confidence that The Toro Company is positioned to deliver significant value to all our stakeholders for many years to come. Now, Edric, Angie, and I would be happy to take your questions. Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star, followed by one. If your question has been answered or you wish to withdraw your question, please press star, followed by one again. The first question comes from the line of David MacGregor from Longbow Research. David MacGregor: Yes. Good morning, everyone. Congratulations on the strong quarter. Rick Olson: Thanks, David. Good morning. David MacGregor: Good morning. I wanted to start off by just asking a couple of questions around the guidance. The sales growth, 2% to 5%, Tornado is going to add a couple of hundred basis points. I am guessing you got a couple of hundred basis points of pricing in there as well. The implication for volume is still, I guess, a negative outlook. Can you just kind of walk us through the individual lines of business and just talk about the volume expectations for next year? Even if just anecdotally rather than quantitatively? Rick Olson: Yeah. Sure. I can walk through a few of those. First of all, you did point out a good portion of the growth on the top line is due to the Tornado acquisition. But organically, we also can see continued strength on the pro side with the underground business continuing to be strong. Golf will continue to be strong, as we talked about in the prepared remarks. And really starting last quarter, but again, this quarter, we see the landscape contractor, particularly the true contractors, not as much the homeowner with acreage, but the true contractors through our Exmark brand, for example, really coming back strong and contributing to growth. We expect that to continue. On the residential side, this has been an extraordinary cycle that we have gone through. It started at the beginning of COVID. If you could just draw that sine wave, you know, the cross point where it crossed the midpoint was really the 2023. So that homeowner business has kind of been in recovery since then. And we are at the right side of that curve on the way back, but the rate at which that happens really will be determined by things like consumer confidence, the macroeconomic environment, interest rates, and so forth. So we have built a little bit more muted expectations on that side. So it is really a combination of all of those things. That is what we are looking at for next year. We have built in our best estimates. We have included the strong start to snow, but as that plays out through the rest of the season, that could be a positive for us if that trend continues. But we have worked everything into our guidance at this point. Does that answer your question, David? David MacGregor: Yeah. If I could just maybe drill in on the residential, though, for a moment. You are guiding first quarter down high teens. I am guessing you know, you are factoring in some kind of an improvement here because you are guiding the full year down low single to mid-single digits. So I guess just what do you see improving in residential in 2Q through 4Q? Are you expecting a restock in the channel to help you out there? Just maybe talk about how you are thinking about that guide improvement. Rick Olson: Yeah. Go ahead, Angie. Angie Drake: I was just gonna jump in and say, yes, we are comping to 8% down in the prior year, but we do expect some continued homeowner caution, as Rick mentioned, with the macro environment continuing to be what it is. But we have seen continued progress on productivity and cost savings, which are going to help our margin a little bit. But overall, snow, as Rick mentioned, could be favorable to us in residential as we have seen some, you know, we have got some encouraging signs helping us right now. David MacGregor: Okay. Maybe I could shift and just ask you a couple of questions around the AMP program. You have popped up the guide from $100 million to $125 million, so congratulations on the progress there. I mean, can you just talk about the source of the extra $25 million that was not in the first phase that you now see as being achievable? And do you need volume growth to get to that kind of performance? Angie Drake: Yes, thank you for asking. We continue to be really excited about the AMP initiative that we started in 2024. And did raise that target to have full run-rate savings by '27 to $125 million. We are going to see that savings continue to come from the work streams that we had talked about initially. Those are really supply-based, designed to value, route to market, and then our operational efficiency. We made significant improvement in F25 and we will continue to see, you know, it just achieved better results than we expected to through F25. And so the momentum, we are going to continue to see that go forward. And we do not believe we need increased volume to get that. We have got a lot of engines working in that initiative right now and want to continue on that momentum. David MacGregor: Great. And initially, you had thought you would take 50% of the gains to the bottom line, the other 50% would be reinvested. Could you just update us on where you are with that as of today? And how that target might change, evolve with the increase in the goal to $125 million? Angie Drake: Sure. Yes, we really expect to continue the same and reinvest up to as much as 50% of that. We probably had to over-index a little bit on the investment in the last couple of years, especially in F25, just due to the headwinds that we saw with tariffs, inflation, some transition expenses with some of our product moves and network optimization. But what we did continue to do is also take some of those funds and reinvest in innovation and technology to set ourselves up for future growth. So we would expect to continue to see that savings be somewhat reinvested up to the 50% level. But we have realized $75 million of those savings in F25. And through the program to date, almost $80 million. David MacGregor: Right. Great news there. Last question for me. Just how you are thinking about raw material costs for '26? Thank you. Angie Drake: Yes. So from our raw material costs, we expect to see some inflation early in the year, maybe kind of settling out about midyear. But overall, we have built all of those things to the best of our ability into our guidance. David MacGregor: Thanks very much. Rick Olson: Thanks, David. Operator: One moment for our next question. Our next question comes from the line of Joshua Wilson from Raymond James. Joshua Wilson: Good morning, and thanks for taking my questions. Rick Olson: Good morning, Joshua. Joshua Wilson: First, could you run through the different product categories and give us a sense of where channel inventories currently stand? Rick Olson: We could go through each segment, but just overall, I would say, especially relative to the commentary for the last couple of years, we are in good shape from a channel inventory standpoint. Residential, it is very much tied to the earlier comments about how that flows this year and the rate of recovery. But, really, across the board, we are in good shape from a field standpoint. That helps us. For example, when we talk about snow, the field inventory is in a good place, so we should see the benefit of snow plays out. We really saw the benefit of that in the fourth quarter. Where our especially our commercial contractors, we are seeing the outlook for snow and started to order because field inventory was in a better position that translated into orders for us. On the underground side, we are back closer to a better healthy position there, slightly lower than it should be. And the rest of the rest of the business, I would say, businesses, I would say, are in normal range. If you took an individual model here and there, it would be plus or minus from where you would like to have it, but much closer back to normal operating with the field inventory. So we are in good shape with field inventory. Spend a lot of work by a lot of people to make that happen, but we are in good shape today. Joshua Wilson: That is good to hear. And I know you said your lead times have normalized. Could you give us a quantification of where your backlog was in the year? Angie Drake: Yeah. We actually had backlog improved by $100 million year over year. We typically give those results at the end of the year. And last year, we were sitting at $1.2 billion. So had a $400 million improvement in backlog. So overall, we feel like we are in really good shape. It is, you know, probably even still a little elevated to where we thought we would be at this time last year. But very strong demand continues in golf and ground, underground construction, and in our other businesses. And, you know, one of the key points there, I think, is that our lead times have come in. So folks may not be ordering and putting their orders on as far out as they once were, because just as a reminder, that is really all open order at that point in time. Rick Olson: That really reflects our improvement in lead time. So we are lead times in some categories that were out two years. We are now able to deliver more closer to normal historically, sixty, ninety days type of period. So the confidence, we are gaining back the confidence of our customers to be able to order when they need it. Joshua Wilson: And then looking at the 26 margin guidance for professional, of 18.5 to 19.5 versus the 19.4 you just reported, what are the positives and negatives that are leading you to that range? Year on year? Rick Olson: Yeah. On the positive side, some of the same benefits that we have seen from AMP that we have talked about, some of that will be offset with mix that is not quite as strong in '26 as it was in '25, and that just has a lot to do with which product lines we prioritize in production and ultimately ship to the field. Angie Drake: And then the other thing I would add is just the addition of Tornado. So we will see some top-line growth from Tornado in the professional segment. However, it is not being fully accretive to the operating margin in the first year just due to acquisition costs and transaction costs. However, it is accretive to EBITDA. Joshua Wilson: Got it. Thanks. Operator: Thank you. One moment for our next question. Our next question comes from the line of Ted Jackson from Northland. Ted Jackson: Thanks. I have a couple left. So congrats on the quarter, first of all. Rick Olson: Yeah. Ted Jackson: I mean, I want you to know that I own two Toro snow blowers, and they have been getting heavy use so far this year. Heavy use. Rick Olson: Fantastic. You cannot own enough. Two is not enough. Ted Jackson: So first of all, the performance, you know, you had a step up in incentive comp this year. I mean, that is a good problem to have. When you look at your guidance for '26, what are your assumptions around incentive comp? How does that compare to '25? Angie Drake: Yeah. Great question. That was a change as you look at Q4 year over year. Corporate expenses were a bit higher because of the easy comp that we saw in F24 because of incentives being restored. We have built back in normal incentive plans for our F26 plan. So those coming back in at a normal rate, which they have not been or were not over the past couple of years. Ted Jackson: And what would like, if we were to say, like, a normal rate like, I do not know, some kind of percentage? Like, how would you define that just to kinda give us a baseline? Angie Drake: Well, we typically try to budget those or build those into guidance at 100%. So, that is what, you know, whatever those incentive targets are, that would be 100%. Ted Jackson: Okay. And then I am just shifting over to tariffs. You know, I mean, you provided some good color with regards to your expectations of their impact for this coming fiscal year and then, you know, what you have seen in the last few fiscal years. As you kinda look through those assumptions, maybe give some highlights in terms of what is driving that and, you know, where you might see any kind of, you know, areas that could, you know, you could further mitigate that impact and what that might be. And then just how you know, given how fluid tariffs have been over the year, maybe just the confidence level you feel with regard to that outlook? That is it for me. Thank you. Rick Olson: Yeah. Maybe just overarching. First of all, we have had a very focused team working on tariffs since the latter part of 2024. Anticipating tariffs. And throughout '25, as we mentioned in the remarks, we were able to offset the effect through productivity strategic moves, through, you know, selective price increases to be able to offset. As we look forward, so in 2025, we had a total of about $65 million in tariffs that included $20 to $25 million that were there all the way back to 2018. If we look at the same number for 2026, that number is about $100 million, and it really primarily reflects a full year of the tariffs that we experienced in 2025. Plus a small factor of a few additional tariffs. If you break that down for 2026, it is roughly 50% -ish, a little bit more than that is, February primarily steel and aluminum tariffs. The second largest category would be China-related tariffs, and we have a small exposure to China. We systematically reduced that exposure since 2018. But still, due to the size of the tariff, it is number two, but it is somewhere in the 15%, something like that. The remainder are general tariffs across different countries, the reciprocal tariffs. So that is kind of how it breaks down. With regard to variability of tariffs, we will be making sure that we understand the two thirty-two and some of the details of how those are calculated, make sure that we are accurate and optimized to mitigate those to the best of our ability. And then, you know, part of what you mentioned, Ted, in terms of the unknown of tariffs is built into our guidance. So it is reflected, you know, that there could be variability. We do not have the worst case built in. We do not have a best case built in either, but it is reflected in the way that we have guided for next year. Ted Jackson: Okay. Thanks for the answer, Rick. Congrats again on the quarter. Rick Olson: Thank you. Operator: Thank you. This concludes the question and answer session. Ms. Lilly, please proceed to closing remarks. Heather Lilly: Thank you, everyone, for your questions and interest in The Toro Company. We look forward to talking with you again in March to discuss our first quarter 2026 results. Operator: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.