加载中...
共找到 25,266 条相关资讯
Operator: Ladies and gentlemen, welcome to the publication of the consolidated Annual Report 2025 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Herbert Juranek, CEO. Please go ahead, sir. Herbert Juranek: Good afternoon, ladies and gentlemen. Let me welcome you to the presentation of the results of the business year '25 of Addiko Bank on behalf of my colleagues, Ganesh, Tadej, Edgar and Stefan. We have prepared the following agenda for you. I will start with the key highlights and the related achievements of '25. After that, I will pass on to Ganesh, who will update you on our results on the business side. In the second chapter, Edgar will share insights into our financial performance, while Tadej will outline the progress made in the risk area. At the end, I will present to you the cornerstones of our new midterm specialization program and our updated guidance 2026. After that, we will move on to Q&A. So let's begin with the highlights. I'm confident to inform you that despite negative influences coming from the legislative changes in several countries, we were able to close '25 with a net profit of EUR 44 million. These results includes a net profit for the fourth quarter of '25 of EUR 8.7 million, which is EUR 1 million higher than the result of EUR 7.7 million in the fourth quarter of 2024. Our earnings per share for '25 amount to EUR 2.28 and our return on average tangible equity comes in at 2.5 -- sorry, 5.2%, also influenced by the increased equity base. Overall, 2025 was a challenging year for Addiko because of reasons we will come back later on. Nevertheless, we were successful to achieve a 20% growth rate on new business in consumer lending and finally, to return to a positive trend in SME with an 11% growth rate on new business. Net interest income was with 1.8%, slightly lower year-on-year, driven by the impact of the lower interest environment on our back book and on our national bank deposits. A key positive is that thanks to our strong sales performance and the strategic cooperation agreement in our insurance business, we were able to increase our net commission income by 7.6% year-on-year. Altogether, we managed to slightly improve our net banking income by 30 basis points despite a significantly lower rate environment. Ganesh will give you more insights into the business development during his presentation. Because of our strict cost management, we accomplished to limit the increase of our administrative costs below inflation to only 1.6%. Nonetheless, due to the factors mentioned before, our operating result ended up at EUR 109.8 million compared to EUR 112.3 million in '24. Let's briefly comment on our positive risk performance. We successfully reduced NPE volume further to EUR 125.5 million compared with EUR 144.7 million at the end of 2024. Consequently, our NPE ratio also improved to 2.5%, down from 2.9% in the previous year. On top of that, our coverage ratio continued to improve to 81.7% from 80% at the end of last year. Ultimately, the cost of risk on net loans ended up at 0.96% or EUR 35.2 million compared to EUR 36 million last year. Tadej will give you more details on the risk development later. Our funding situation remained quite solid with EUR 5.3 billion deposits and a loan-to-deposit ratio of 70%. Our liquidity coverage ratio is currently comfortable above 300% at group level. And finally, our capital position gets even a bit stronger with 22.4% total capital ratio, all in CET1 based on Basel IV regulations compared to 22% based on Basel III in the previous year. Next page, please. As mentioned earlier, Addiko faced interventions from regulators and governments that negatively impacted the bank's performance in several of our markets. Croatia introduced a 40% debt-to-income cap for nonhousing loans effective 1st of July '25 and required banks to provide essential banking services free of charge since January '26. Serbia, Republika Srpska and Montenegro introduced interest rate caps, fee restrictions and debt caps. Overall, these measures are having a significant negative impact on our core revenues. Consequently, we have introduced initiatives to counterbalance the income reductions and to develop new income sources. Going forward, all regulatory effects, as known of today, are already reflected in our updated guidance. As reported in our earnings calls last year, we entered the Romanian market via our Slovenian bank through EU passporting, offering a fully automated digital lending solution for consumers. In the second half of '25, we launched several marketing campaigns to build awareness and strengthen our brand positioning. Although we achieved our recognition and recall targets, the conversion rates were below our expectations. Consequently, we refined our marketing approach. The new marketing campaign supported by an Addiko Song with life-size Oskar combined with targeted brand-building initiatives was launched in mid-February. We will keep you updated on the progress and will conduct a results-driven review in the second half of this year. Now with regards to our ESG program, I can confirm that all initiatives remain on schedule and are advancing in line with plan. Additional information is set out in the appendix of this presentation. Let me briefly touch on our regulatory sustainability disclosures. As part of the updated EU taxonomy framework, the commission has introduced a temporary opt-out for financial institution. In our case, this is fully aligned with our business model. Addiko made use of its opt-out as we do not engage in taxonomy-relevant lending activities. This approach avoids unnecessary administrative burden while maintaining full transparency in our ESG reporting. Next page, please. Let me briefly comment on our share performance and the scheduled changes to our listing. Addiko's share price increased noticeably during 2025, closing the year at EUR 22.5 and continued to rise further in 2026 to EUR 27.4 as of yesterday evening. At the same time, trading volumes and overall liquidity has remained persistently very low, making professional market making difficult and not economically viable for providers. As a consequence and in line with the Vienna Stock Exchange rules, our shares will be reclassified from the Prime Market to the Standard Market with effect of 1st of April 2026. This reclassification has no impact on our strategy or operations, but better reflects the liquidity profile of the stock. Let me now address the regulatory concerns regarding our shareholder structure. Following the sanction imposed by the European Central Bank in 2024 for exceeding the 10% ownership threshold without prior approval, certain regulatory uncertainties continue to persist. Although the voting restrictions applicable to a specific shareholder group were lifted in early February 2025, the supervisory authorities continued to identify residual uncertainties concerning the bank's shareholder structure. The bank remains fully committed to maintaining a transparent, cooperative and constructive relationship with all relevant regulatory bodies and we continue to engage actively with them to address the outstanding supervisory considerations. In this context, I need to mention that the current shareholder situation continues to create significant additional efforts and a severe distraction for the bank. Nevertheless, we will carry on to do our best to fulfill the increasing related demands put upon us by our regulators. In line with supervisory expectations and regulatory requirements, the dividend distribution for the financial year 2025 remains suspended, taking into account regulatory considerations related to the shareholder structure. From the perspective of the bank's long-term stability and in the best interest of all stakeholders, the Management Board maintains its position that dividend payments will not be resumed until the share -- until the ownership structure has been conclusively clarified and the related concerns raised by the supervisory authorities have been fully resolved. Now let me briefly outline how we performed against our '25 guidance. The positive message is that despite headwinds, we delivered on our '25 guidance. In income and business, our loan book grew by 7% year-on-year, supported by strong consumer demand and the renewed pickup in SME in the fourth quarter. Our NIM ended up at 3.7% and net banking income held stable. Costs were managed well with OpEx at EUR 195.4 million, coming in below guidance. In risk and liquidity, performance remained fully in line with expectation. We kept the cost of risk below 1%, achieved an NPE reduction to a level of 2.5% and closed the year with a loan-to-deposit ratio of 70%. In profitability, we reached a return on average tangible equity of 2.5% (sic) [ 5.2% ]. Overall, these results reflect our disciplined approach in a demanding environment. Now let me hand over to Ganesh for further insights into the business development. GaneshKumar Krishnamoorthi: Thank you, Herbert, and good afternoon, everyone. Moving to Page 7. As Herbert mentioned, 2025 has been a challenging operating environment. Credit demand remained resilient across our markets. However, interest rates declined rapidly during the year. This intensified competition and created significant pricing pressure. As a result, loan book retention also became more challenging as customers increasingly refinance their loans at the lower rates. At the same time, unexpected regulatory interventions also affected market dynamics. The most notable example is Croatia, where a 40% debt-to-income cap was introduced on July 1. In Serbia, authorities mandated lending rate caps, which led to interest rate reduction. These measures tightened our lending conditions and also affected our pricing in both the markets. Nevertheless, despite these headwinds, our continued focus on digital-savvy customers, the micro SME segment and point-of-sale financing combined our strategy of offering lower-ticket, high-margin loans with speed and convenience while maintaining prudent risk discipline enabled us to deliver strong growth. Consumer new business strongly increased by 20% year-over-year, resulting in 10% growth of our consumer loan book with an attractive new business yield of around 7%. In the SME segment, the new business grew 11% year-over-year with a yield of around 5%. Overall, our focused loan book expanded by 7% year-over-year with a blended yield of 6.4%. As a result, the focus book now represent 92% of our total portfolio, demonstrating the resilience of our specialized strategy, even in a more competitive and regulated environment. Please turn to Page 8 for a more detailed outlook. Looking more closely to our Consumer segment, the strong double-digit growth we delivered was driven by several key factors. First, we benefited with solid market demand across our core geographies. Second, we successfully launched full digital end-to-end lending with zero human interventions in 3 of our core markets, clearly differentiating our offerings from competitors and significantly improving speed and customer convenience. Third, our point-of-sale proposition continues to perform well, delivering 14% year-over-year growth, further supported by the launch in Bosnia and Herzegovina. Fourth, we identified a sweet spot between growth and pricing, allowing us to proactively retain customers and protect the loan book through disciplined repricing actions. In addition, we launched newly redesigned mobile app with the introduction of new card features, including Google Pay and Apple Pay integrations, which contributed to a 12% year-over-year increase in net commission income. Finally, in response to evolving regulatory environment, we are already implementing mitigating measures, including downselling, introducing co-debtor structures and focusing on high-quality customer segments with larger ticket size. We are confident that these initiatives will not only offset regulatory headwinds, but also strengthen the foundation for sustainable quality growth going forward in 2026. Let's turn into SME segment. Our core business model remains unchanged, to be the fastest provider of unsecured lower-ticket loans to underserved micro and small enterprises through our digital agents platform. As mentioned earlier, the market environment remained challenging due to aggressive pricing, which has created some pressure on our loan book retention. However, with improving market demand, we implemented several targeted initiatives to reignite the growth. First, our turnaround plan in Serbia supported by new leadership team delivered strong momentum with 43% year-over-year growth in new business. Second, we placed a strong emphasis on retaining quality clients and protecting the loan book through more targeting pricing, loan prolongations and enhanced service delivery. Third, while maintaining our core focus on unsecured lending, we broadened our product offering by placing also greater focus on slighter larger tickets and secured lending, supported by experienced and high-quality teams to ensure continued risk discipline. This resulted in double-digit year-over-year growth in investment loan volumes. Finally, we launched a new digital SME tool designed to process high ticket loans, faster and with greater simplicity, providing a clear competitive advantage. Overall, we believe these initiatives will position us well to return to sustainable growth in the SME segment going into 2026. Lastly, let me briefly touch on our progress in AI adoption last year. We are actively investing in AI technologies to enhance both operational efficiency and customer experience across the organization. The 2 AI applications are already live, one supporting employees by handling HR-related inquiries and others assisting our call center by analyzing customer inquiries and generating response recommendation. In addition, we are currently exploring further AI use cases across IT, risk and marketing with the aim of strengthening operational efficiency and enabling core data-driven decision-making across the bank. To summarize, while 2025 presented a challenging operating environment, it also pushed us to further refine our specialist business model and adapt our pricing approach. Most importantly, we launched several new propositions that enhance speed, convenience and value for our customers across Consumer and SME segment, positioning us well for continued growth going forward. Looking ahead to 2026, we will continue to focus on profitable growth while implementing measures to mitigate the impact of the recent regulatory restrictions, in particular, we aim to accelerate growth in Romania through a refreshed marketing approach and strengthened broker partnerships, and we will launch our point-of-sale lending business in Croatia. At the same time, we will further enhance our end-to-end digital value proposition and refine our dynamic pricing capabilities to better balance growth and profitability. In parallel, we are developing a new specialized program focused on new lending products aimed at deepening customer engagement and further expanding our fee-driven income streams. Herbert will provide you more details on this later. Please let me hand over to Edgar. Edgar Flaggl: Thank you, Ganesh, and good day, everybody. Let's turn to Page 10 for an overview of our performance for the full year 2025. Despite a challenging interest rate environment and cost pressures, we delivered stable results, supported by a resilient consumer lending, strong fee income and a robust capital position. Now let's take this one by one. Our net interest income came in at EUR 238.4 million, a slight year-on-year decrease of 1.8%. This reflects the lower rate environment, which weighed on income from our variable back book, so circa 13%, 1-3%, of our book and the income on National Bank deposits. At the same time, balanced treasury and liquidity management activities as well as lower funding costs acted as a stabilizer. As a reminder, the rate backdrop shifted materially throughout the year with 4 rate cuts totaling 100 basis points during 2025, which also pressured pricing on new loans and elevated early repayments of higher-priced parts of the back book. On the business side, as Ganesh pointed out already, momentum in our Consumer segment remained quite strong, with interest income up 6.3%, driven by the 10% growth in the Consumer loan book. Overall, the focus book grew 7% year-on-year, showing also a slight improvement during the last quarter of 2025. On the fee side, we delivered solid growth. Net fee and commission income rose 7.6% to EUR 73 million, driven by bancassurance, accounts and packages and card business, which altogether grew 13%, 1-3%, year-on-year, with bancassurance as a key contributor. Looking into the year 2026, those new regulations in Croatia limiting fees on banking products already have an impact on fee generation today and we'll keep having an impact going forward. Putting it together for 2025, net banking income came in at EUR 316.9 million and was broadly stable year-on-year despite a challenging environment. Our general administrative expenses, in short OpEx, increased slightly to EUR 195.4 million, up 1.6% year-on-year, mainly due to wage adjustments, targeted operational investments and general indexation increases. When excluding the EUR 3 million in extraordinary advisory costs related to the takeover offers in the year 2024, operational costs were up just 3.2% year-over-year. Our cost-income ratio came in at 61.7%, which is a tad higher than last year. The operating results landed at EUR 109.8 million, down 2.3% year-on-year. The other result, which includes costs for legal claims as well as for operational banking risks remained manageable for the full year. We have allocated some additional provisions for new legal claims in Slovenia and made a rather small top-up in Croatia as part of the year-end closing also to reflect increased lawyer costs. The main point in Slovenia remains what the higher courts will rule upon regarding the applicable statute of limitation and if that will be in line with the currently dominant legal opinions. When it comes to risk costs, our expected credit loss expenses were EUR 35.2 million, which translates into a cost of risk of just south of 1% on net loans for the full year. Tadej will provide more insights in just about a moment. All in all, we delivered a net profit after tax of EUR 44 million, which translates into a return on average tangible equity of 5.2%. So while operating in a lower rate environment and managing cost pressures and new regulatory constraints, our focus business remained resilient with solid momentum in consumer lending and continued support from fee-generating activities last year, while also SME lending started to pick up again during the fourth quarter last year, specifically also in Serbia. Turning to Page 11 and our capital position which remains a real strength. Our CET1 ratio came in at a very robust 22.4% at year-end 2025. For context, that's slightly up from the 22% at year-end 2024, which, however, was based on Basel III. While as we all know, for 2025, the new Basel IV or call it CRR3 rules apply. This CET1 ratio now includes the audited profit for the year with no dividends being deducted in line with supervisory expectations and taking into account regulatory considerations related to the current shareholder structure. You will also notice that our risk-weighted assets increased and that's mainly driven by changes in risk weighting under Basel IV as well as the new interpretation of EBA guidelines on structural FX, which we discussed in previous earnings calls. Looking ahead, we have already reported on the final SREP for 2026, which includes a small increase of our Pillar 2 requirement, so up by 25 basis points to 3.5%, while the Pillar 2 guidance remains unchanged at 3%. So in short, our capital is strong and our buffers are ample, supporting controlled growth while we navigate the evolving and not often straightforward regulatory landscape. With that, I will hand over to Tadej for more on risk management. Tadej Krašovec: Thank you, Edgar, and good afternoon, everyone. Let me provide an overview of our credit risk performance for the year 2025. As indicated on the chart to the left, one of our key risk management initiatives was reducing of NPE volumes. We achieved this through proactive portfolio management, portfolio and forward flow sales, write-offs, targeted restructuring and collections. The result is clearly visible. We achieved a significant EUR 19 million reduction in NPE volume compared to the end of the previous year. Out of that, as illustrated on the right-hand side of the slide, the NPE portfolio decreased by EUR 14.5 million in the last quarter alone, driven by high NPE outflow and a well contained inflow. Consequently, we concluded 2025 with an NPE volume of EUR 126 million and attained a record low NPE ratio of 2.5%. Throughout the year, we placed significant emphasis on developing statistically driven credit risk steering approaches and enhanced monitoring tools. This allowed us to promptly identify subsegment and channel developments that did not align with our expectations, enabling swift implementation of risk restructures or also relaxations to positively influence the bank's portfolio quality. Particularly in declining interest rate environment, rigorous oversight of our risk profile and optimization of risk return balance remain essential to operate within our risk appetite, mitigate adverse selection and ensure the resilience of the bank's balance sheet. However, not all regions performed entirely in line with our forecasts. The micro segment posted ongoing challenges in Croatia, Serbia and Slovenia. And furthermore, the SME sector in Slovenia exhibited variances from our 2025 outlook, necessitating additional controls within the credit process. We are confident that the refined risk criteria and enhanced controls introduced will help mitigate further adverse selection. Moving to Slide 13. Loan loss provisions totaled at EUR 35.2 million in 2025, resulting in a cost of risk of minus 0.96% on net loans, both figures notably better than anticipated. This positive outcome was largely attributable to exceptional late collections, an area we have improved as part of our acceleration program during '24, which exceeded even our ambitious targets. The segment's breakdown for '25 is as follows: the Consumer segment recorded a negative 0.79% cost of risk; SME segment, minus 1.9%; while the nonfocus segments contributed to provision releases with a positive cost of risk of 1.88%. In the final quarter, that means Consumer provisions were EUR 1.7 million; SME segment, we generated EUR 8.6 million; and in nonfocus segment, we saw a release of provisions in the amount of EUR 1.4 million. The SME segment figures were impacted by a single large case in Slovenia, I elaborated on in previous earnings calls already. The post-model adjustment was slightly reduced from EUR 1.4 million to EUR 1.2 million. To summarize, Addiko's portfolio position remains robust and resilient, supported by strong collection performance and active portfolio management. Our focus remains on decision models, intelligent risk rules, advanced and automated statistical monitoring and rapid response when every critical risk indicators or the risk return balance require attention. Thank you. And with that, I'll go back to Herbert. Herbert Juranek: Thank you, Tadej. Now I would like to present the highlights of our new specialization program to you. The new specialization program has just been launched and is designed as a 3-year program running from 2026 to 2028. It supports the execution of our specialist banking vision and aims to unlock additional value through a focused performance and transformation agenda. The first pillar is business expansion. Here, we will broaden our product stack and strengthen our ecosystem, meaning we will enhance our core offering, add relevant adjacent products and create a more connected experience for our customers. In addition, we will explore selective new market opportunities in a measured and disciplined way, focusing on areas where our digital lending capabilities can be applied effectively, where fee-based revenues can be expanded and where we see sound risk-adjusted potential. The second pillar focuses on our engine and platform. We will upgrade our platforms and decisioning capabilities with AI-enabled tools to further strengthen analytics, risk processes and service excellence, supporting greater efficiency and competitiveness. The third pillar is competencies and people. We'll continue to invest in skills, training and development while ensuring the right capacity and efficiency across our teams to support the next phase of our strategy. We consider this an important investment in order to enable the successful implementation of our ambition on Pillar 1 and Pillar 2. Overall, our approach is to expand our offering, grow fee-based revenues, strengthen customer engagement and continue optimizing costs through automation and AI-assisted processes. This program sets the foundation for scaling our specialist model and supporting sustainable growth in the year ahead. We will present more details of the program in our presentation of our Q1 results on the 13th of May. Now let's move on to the final page. Before I walk you through our updated guidance, let me briefly outline the context behind our assumptions. Despite the fact that the global economic environment has become increasingly unpredictable, our CSEE markets continue to show comparatively resilient performance. We expect our region to deliver higher growth rates over the next 2 years than the European Union average. Nevertheless, the combination of regulatory fee and rate restrictions, aggressive pricing behavior by several competitors and cost pressure driven by governmental-related factors such as increases in minimum wages requires us to further strengthen our operating model. This is precisely why our specialization program will play a key role. It is designed to enhance efficiency, strengthen competitiveness and improve risk-adjusted performance in the coming years. Now let me walk you through our operating guidance, starting with loan growth. We expect our loan book to continue expanding at a healthy pace with a CAGR of more than 6% over the period from '25 to '27. This reflects the momentum in our core segments and the continued scaling of our specialist model. Looking ahead, looking at our interest margin, for the coming years, we anticipate the NIM to remain above 3.6%, taking into account the regulatory environment, interest rate caps and a more moderate rate trajectory. Based on impacts resulting from the latest regulatory-driven measures, we expect NBI to remain broadly flat in 2026, before returning to growth above 5% in 2027 as our business mix evolves and the effects of our specialization program begin to materialize. Operating expenses. Our focus on efficiency continues. We keep our OpEx below EUR 205 million in both '26 and '27, while still investing selectively to support our transformation agenda and competitiveness. Cost of risk and risk -- and asset quality. We expect a cost of risk of around 1.3% going forward, reflecting prudent underwriting and disciplined risk-adjusted growth. At the same time, we aim to keep the NPE ratio below 3%, which remains our guiding principle for portfolio quality. Capital and liquidity. We expect the total capital ratio to remain above 18.8%, subject to the yearly SREP outcome. Our capital strength provides a solid foundation for controlled growth. Accordingly, we plan to gradually increase the loan-to-deposit ratio towards 80%, supporting loan expansion while maintaining a conservative liquidity profile. Based on this assumption and the higher capital base, we expect the return on average tangible equity to be around 4.5% in 2026, rising towards 6% in 2027, supported by growth, efficiency measures and the contribution from the specialization program. Regarding the dividend, I addressed the situation earlier. However, in this context, I would like to stress again that the current shareholder situation continues to create significant additional efforts for the bank, which is a severe distraction. Nevertheless, we will carry on to do our best to cooperate and to fulfill the increasing related requests put upon us by our regulators. The management of the bank is fully focused on protecting the bank and acting in the best interest of all stakeholders. In this spirit, we will continue working with full energy to make Addiko the leading specialist bank in Southeast Europe, creating value for both our clients and our shareholders. With that, I would like to conclude the presentation. Our next events are the Annual General Meeting on the 20th of April 2026 in Vienna and the presentation of our Q1 results on the 13th of May. Thank you very much for your attention. We are now ready for your questions. Operator, back to you. Operator: [Operator Instructions] The first question comes from the line of Dodig, Mladen from Erste Bank. Mladen Dodig: It's not Madlain, it's Mladen. Congratulations on the results, and I particularly congratulate on the revamped growth and movements finally in SME, that where my first question comes. If I look at the guidance and the last year update for '25, '26, it appear a little bit conservative, if I remember correctly. Actually, I'm looking at it, it was more than 7% CAGR, and now it's more than 6%. I mean it's a small tweak, but would you consider that a little bit conservative considering the effect that you have started -- finally started to catch up with the market and competitors? And just for the moment, I will forget now about the whole situation right now, we have geopolitically. Herbert Juranek: So first of all, thank you very much, Mladen. Before I hand over to Ganesh, I would say we looked at it. And I mean, you call it conservative, but we also need to see the restriction put upon us coming from the regulatory front in several markets, which are also influencing the overall growth potential. But Ganesh, you want to comment this? GaneshKumar Krishnamoorthi: Yes. Mladen, so I think we believe the 6% CAGR is a reasonable growth, considering all the restrictions what we have. We do have some challenges also in SME in some other countries, which we need to work on. So yes, I mean, considering all these facts, that's why we revised from 7% to 6% CAGR. Mladen Dodig: And a little tweak on return on average tangible equity, I would say that also comes from the fact that your equity now keeps growing without chance to moderate it, right? Herbert Juranek: That's right. That's right. So I mean, as long as -- as I said, as long as the shareholder situation does not change and the regulatory fuel to that, we will not pay out the dividend. And consequently, the equity base will increase. Mladen Dodig: Of course, yes. And second question or third, 0.96 basis points risk versus 1.3 guidance, do you think that this might still go lower below this 1.3 in '26? GaneshKumar Krishnamoorthi: I think today speaking here, I think, yes, I think it will be below 1.3. This is our expectations also, also driven by coming back to the limitations in each individual country, right? They protect us to play in the subsegments that are a bit more risky, but where we achieve higher interest rate. But of course, cost of risk at the end will also be lower due to that. It will be below 1.3% is expectations, I can estimate, yes. Mladen Dodig: Just looking also on net banking income last year, the guidance, '26, you just molded to '27, the growth more than 5%. And for '26, you expect flattish development. Of course, I would say, as you mentioned in the call, aggressive pricing from the competitors too. But do you expect that there might be some more decreasing interest rate environment, although now it's very difficult to make such a statement as we already these days are seeing the inflationary pressures coming from the Middle East conflict? I mean probably I would like to see in outlook '26 some percentage for the net banking income growth, but as you stated flat, perhaps this is kind of a global explanation, right? Edgar Flaggl: Mladen or Modlin whatever you prefer. This is Edgar speaking. So a straight answer, our rate assumptions are flat. So as you rightfully say, who knows what the reality will be what's going on in the Middle East. But we assume a flat environment, so deposit facility rate 2% throughout our guidance. When you compare also movements in terms of net banking income, please don't forget that all these regulatory and legal restrictions that have been put in place either last year or starting this year, for example, the Croatian topic on free accounts, et cetera, et cetera, this has a full year 2026 impact of EUR 10.5 million on the top line alone. So you will... Mladen Dodig: EUR 10.5 million only in Croatia? Edgar Flaggl: No, no, not only Croatia. Mladen Dodig: No, fee and income, okay. Edgar Flaggl: Yes. Croatia would be roughly 70% if you take the NCI and the DTI restriction. I think we disclosed that in the Q3 earnings call. So you will probably find this in the script as well. Mladen Dodig: Okay. And a final question from my side, again, of course, about dividend. So let's assume that some situation gets resolved and you get a nod from the regulator to pay out something, what do you think how that might look like? And what would be your -- where will you be leaning to paying a lot immediately or some gradual payments, of course, provided that a regulator would agree to that, too? Herbert Juranek: Well, so first of all, we will decide it when this situation is here. I mean our clear ambition as a general comment as a management is to pay a dividend. I mean that's the whole purpose of the thing. And we had this -- our guidance was around about 50% before this was introduced. So I think this is an area we are aiming for. You also know that if you want to pay out a dividend, which is above the yearly profit, you need -- so out of equity, you need the approval of the regulator for that. So what we would do is when the situation is solved, we will look at it. We will look at the state of the bank, what is healthy and what we can do and then we will judge and decide on that. But for the time being, we don't want to comment it. We feel also obliged vis-a-vis our supervisors, and we share with them the view that currently, we will not pay out something. Operator: There are no more questions on the phone at this time. Herbert Juranek: Okay. Do we have any other questions? Edgar Flaggl: We also have no questions on the webcast. Herbert Juranek: Okay. So as there are no further questions, we thank you for your attention and wish you all the best. Thank you for dialing in. Goodbye.
Operator: Good morning, and welcome to the CorMedix Inc. Fourth Quarter and Full Year 2025 Earnings and Corporate Update Conference Call. Today's conference call is being recorded. There will be a question and answer session at the end of today's presentation, and instructions on how to ask a question will be given at that time. At this time, I would like to turn the conference call over to Daniel Ferry from LifeSci Advisors. Please go ahead. Daniel Ferry: Good morning, and welcome to the CorMedix Inc. fourth quarter and full year 2025 Earnings and Corporate Update Conference Call. Leading the call today is Joseph Todisco, Chairman and Chief Executive Officer of CorMedix Inc., and he is joined by Elizabeth Masson-Hurlburt, EVP and Chief Operating Officer, and Susan Blum, EVP and Chief Financial Officer. In addition, Beth Zelnickauffen, EVP and Chief Legal and Compliance Officer, Mike Seckler, EVP and Chief Commercial Officer, and Dr. Matthew T. David, EVP and Chief Business Officer, are also on the line and will be available during the Q&A session. Before we begin, I would like to remind everyone that during the call, management may make what are known as forward-looking statements within the meaning set forth in the Private Securities Litigation Reform Act of 1995. These statements are statements other than statements of historical facts regarding management's expectations, beliefs, goals, and plans about the company's prospects and future financial position. Actual results may differ materially from the estimates and projections on which these statements are based due to a variety of important factors, including the risks and uncertainties described in greater detail in CorMedix Inc.'s filings with the SEC, which are available free of charge at the SEC's website or upon request from CorMedix Inc. CorMedix Inc. may not actually achieve the goals or plans described in these forward-looking statements. Investors should not place undue reliance on these statements. CorMedix Inc. does not intend to update these forward-looking statements except as required by law. During this call, the company will discuss certain non-GAAP measures of its performance. GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in CorMedix Inc.'s earnings release and the current report on Form 8-Ks filed with the SEC. This information is also available on the Investor Relations section of CorMedix Inc.'s site. At this time, it is now my pleasure to turn the call over to Joseph Todisco, Chairman and Chief Executive Officer of CorMedix Inc. Joseph, please go ahead. Joseph Todisco: Thank you, Dan. Good morning, everyone, and thank you for joining us on this call. 2025 was truly a transformational year for CorMedix Inc. While DEFENCATH achieved peak sales of just under $260,000,000, we are excited to have both announced and closed the acquisition of Melinta Therapeutics in the third quarter of the year. In addition, the team worked expeditiously to facilitate integration and achieve our target synergy of $35,000,000 during 2025. This was a monumental achievement and truly a testament to the operational execution capabilities of the CorMedix Inc. leadership team. As we turn our attention to the year ahead, there is much focus on our post TDAPA add-on period strategy for maintaining patient utilization rates for DEFENCATH in outpatient hemodialysis. As a reminder, on July 1, the TDAPA reimbursement for DEFENCATH will transition from a buy-and-bill format to a bundled add-on mechanism. We have had multiple conversations with our top customers and are in the process of finalizing supply pricing for Q3 2026 as well as for 2027. At this time, we are affirming our 2026 DEFENCATH guidance of $150,000,000 to $170,000,000 and 2027 DEFENCATH guidance of $100,000,000 to $125,000,000. With respect to 2026, we expect much of the revenue concentration to be front-loaded in the first half of the year as price erosion related to the post TDAPA add-on occurs in the fourth quarter. Assuming CMS utilizes the same methodology to calculate the 2027 bundle addition, we do expect a meaningful increase in traditional Medicare provider reimbursement in 2027, which we expect to translate into a higher net selling price in 2027 compared to Q3 2026. To that extent, we took the extra step of issuing 2027 DEFENCATH guidance based on existing patient utilization rates as well as our current estimates for the range of net selling prices and it does not include potential upside from new customers or managed care contracting. In addition to DEFENCATH guidance, the company is also affirming full year 2026 financial guidance of revenue of $300,000,000 to $320,000,000 and adjusted EBITDA of $100,000,000 to $125,000,000. That said, we are actively in discussions with multiple Medicare Advantage providers as well as new potential customers for DEFENCATH in both the inpatient and outpatient settings of care, focused on execution of sales and marketing efforts for RIZEAO, Minocin, and Vabomere, and we will evaluate appropriate updates to financial guidance as we progress throughout 2026. This past month, we completed our first analyst R&D Day, which we focused on educating our analysts and investor community on the market opportunity for our antifungal product, RIZEAO, its current approved indication in the treatment of invasive fungal infections, as well as our key pipeline assets of RIZEAO in development for prophylaxis of invasive fungal infections and DEFENCATH in development for prevention of CLABSI in adult patients receiving total parenteral nutrition. Elizabeth will provide an update on the status of these development programs shortly. During the Analyst Day event, stakeholders were given the opportunity to engage with multiple panels of physician thought leaders around key aspects for each of these three growth opportunities for CorMedix Inc. The webcast of the event and associated materials remains available on our website and I encourage all investors to review those materials. The feedback from thought leaders was excellent and underscores our view for the large potential market opportunity for RIZEAO, which we estimate at approximately $2,500,000,000 across both potential indications, and for DEFENCATH in TPN, which we estimate between $500,000,000 and $750,000,000. 2026 is expected to be a transitional year for CorMedix Inc., with a heightened investor focus on new catalysts and value drivers, most notably our Phase III RESPECT data for RIZEAO in prophylaxis which is on track for the second quarter of this year. With the acquisition of Melinta, not only did we acquire what we believe will be an exceptional growth asset in RIZEAO, but also added highly durable institutionally administered products like Minocin and Vabomere, which we expect to provide a stable base of revenue while the company builds toward future growth. I believe CorMedix Inc. has done an exceptional job of maximizing the value of the initial TDAPA period afforded to DEFENCATH in outpatient hemodialysis and parlayed that success into building a pipeline that positions the company for long-term sustainable growth. I would now like to turn the call over to our Chief Operating Officer, Elizabeth Masson-Hurlburt, to provide an update on clinical activities. Elizabeth? Please go ahead. Elizabeth Masson-Hurlburt: Thank you, Joseph, and good morning. The combined clinical development and operations teams, along with field medical affairs, have been working diligently on numerous clinical activities. As we shared last fall, enrollment for the global Phase III RESPECT study evaluating RIZEAO for the prophylaxis of fungal infection in adult allogeneic bone marrow transplant patients completed in September. This pivotal trial is being conducted by our global partner, Mundipharma, who has confirmed that all sites have completed study participation and they are on track for an anticipated database lock later this month. We expect to announce top-line data from the RESPECT study in 2026. Top-line results will include the primary efficacy outcome of fungal-free survival at day 90, discontinuation of study drug due to toxicity or intolerance, all-cause mortality and attributable mortality with invasive fungal disease as determined by the Data Review Committee, and the cumulative incidence of invasive fungal disease at day 90 by the Data Review Committee and by azole choice. Additionally, safety data, overall adverse events, treatment-emergent adverse events, and serious adverse events are expected to be included in top-line results. The team continues to work closely with investigators and clinical experts in the field to deepen our understanding of the evolving clinical practices and the needs of these patients as we prepare to support a potential commercialization in 2027. As Joseph mentioned earlier, our panel of thought leaders provided excellent insights into the market opportunity for a long-acting echinocandin in the prophylaxis of invasive fungal infections and we are looking forward to our Phase III data readout. Turning to DEFENCATH, I am pleased to share that the Phase III NEUTROGUARD clinical study, which is evaluating the impact on central line-associated bloodstream infections, or CLABSI, in adult patients receiving total parenteral nutrition via a central venous catheter, is approximately 30% enrolled toward our minimum patient target of 90 patients. We are working to increase enrollment rates as we progress throughout 2026 with new sites in Turkey. At this time, we are still anticipating study completion in early 2027. The adaptive design is 90 minimum and a maximum of 200 participants based on the incidence rate of CLABSI. An interim assessment will be made by the independent data monitoring committee after 15 participants have experienced a CLABSI event. I would now like to turn the call over to Susan to discuss the company's fourth quarter and full year financial results and financial position. Susan? Susan Blum: Thanks, Elizabeth, and good morning, everyone. We are pleased to share our fourth quarter and full year 2025 financial results, which reflect our ongoing commercial and operational execution. A few things to note on the financial results before I jump in. Following the close of the Melinta acquisition on 08/29/2025, 2025 represents the first full reporting period incorporating Melinta's operations into our consolidated results. Also, the company has filed its annual report on Form 10-K for the year ended 12/31/2025, and I encourage you to review this filing for a more comprehensive discussion of our financial performance and operating results. As Joseph mentioned, we had a strong quarter on the revenue front. For the fourth quarter, revenue of $128.6 million reflected continued growth across our commercial portfolio, driven primarily by DEFENCATH, which contributed $91.2 million, and supplemented by a full-quarter contribution from the Melinta portfolio, which totaled $37.4 million, compared to net revenue of $31.312 million in 2024 which included only results from DEFENCATH. This represents a meaningful year-over-year increase and highlights the company's ability to execute on product launches and business development initiatives. Total revenue on a pro forma basis for 2025, which is full year revenue for both the CorMedix Inc. and Melinta businesses, was $401.3 million, which is in line with our previously established guidance. Of the total, DEFENCATH generated $258.8 million in net sales for the year. Turning to OpEx, fourth quarter operating expenses of $48.2 million increased from $17.1 million in the comparable prior-year period, reflecting the expected expanded cost structure of the combined organization, merger-related costs associated with the Melinta acquisition including severance expenses, and additional investment in expanded indications for DEFENCATH, most notably our Phase III clinical program focused on the prevention of CLABSI in TPN patients. Our operating expenses for the fourth quarter were consistent with our expectations and aligned with our strategic focus on building a platform for long-term sustainable growth, which was supported by the execution and integration of the Melinta acquisition. Our employee base has grown significantly in connection with the merger and scaling of the business. Last year at this time, we had a workforce of approximately 100 people and today have just under 200 employees. The expanded infrastructure serves to support growth and is expected to provide significant operating leverage in the periods to come. Now that we have successfully streamlined the two organizations, we can focus on executing our business growth strategy in preparation for the anticipated new launch opportunities of DEFENCATH in TPN and RIZEAO for prophylaxis. On the bottom line, CorMedix Inc. recognized net income of $14.0 million in 2025. Net income was impacted by tax expense of $42.4 million, the majority of which was non-cash, resulting from the utilization of deferred tax assets that were established in 2025. On a pre-tax basis for the fourth quarter, income was $56.4 million, an increase of $43.0 million from 2024. Turning to non-GAAP results, adjusted EBITDA for the fourth quarter was $77.2 million, which was within our previously established guidance and reflects modest growth quarter over quarter. This metric excludes one-time acquisition-related and reorganization costs, stock-based compensation, and the tax benefit and expenses recognized during the year, and it provides additional insight into the strength of our core operating performance. A reconciliation to GAAP results is included in the press release issued with our earnings announcement. From a liquidity perspective, we ended the quarter with cash and cash equivalents and short-term investments of $148.5 million, driven by strong operating cash flow of almost $100 million during the quarter and ongoing working capital optimization. Where we stand today, given our financial flexibility and commercial momentum, we believe we are well positioned for both organic growth from existing pipeline and promoted assets and potential inorganic growth from new business development opportunities. I am excited to be a part of the journey as we move forward. And now I will turn the call back to Joseph for closing remarks. Joseph Todisco: As I mentioned, 2025 was a transformational year. 2026 will be a transitional year that we believe sets up CorMedix Inc. for long-term sustainable growth in 2027 and beyond. We recently announced the share repurchase program and have been repurchasing shares throughout the first quarter. We intend to continue to be active throughout the year, subject to normal blackout periods, applicable volume restrictions, and other business needs, as we believe our balance sheet has sufficient flexibility to pursue this repurchase while leaving sufficient dry powder for new business development opportunities. The company sits here today with a diversified product portfolio, multiple late-stage pipeline opportunities, financial flexibility, and a capital structure to support future growth. We remain confident in the outlook for this year, our path to future growth, and sustained profitability. I would like to now open up the call for Q&A. Operator: We will now begin the question and answer session. The first question today comes from Roanna Clarissa Ruiz with Leerink. Please go ahead. Roanna Clarissa Ruiz: Hey, good morning everyone. A couple of questions from me. I was thinking in terms of your conversations with dialysis customers and talking about supply and contract pricing for DEFENCATH, could you give a little bit more color on how those are going? You trying to build in certain features to drive DEFENCATH volume in 2026 and beyond? Or how are you thinking about these different levers? Sounds good. And then I had a different question about RIZEAO. It sounds like you are going to share a lot of interesting information with the top line for the Phase III. Could you help frame what in that information you think is most clinically meaningful for physicians? How do you plan to leverage some of this data in potential future discussions with payers, etc., if all goes well and the top line is positive? Joseph Todisco: Hey, thanks, Roanna. So I would say conversations that I believe are going fairly well. The near-term focus is on preserving patient utilization through the back part of 2026 and creating a structure for an increase in selling price in 2027. And that is what we have been working toward negotiating with customers, and that is what we are hopeful we will be finalizing shortly. We are also setting these up with flexibility to allow for changes in the event we are successful with Medicare Advantage contracting as we progress through this year and into next year. So overall, I am happy with the progress that we have made and hopeful in the near term we will have some things finalized for the back part of the year. Thanks. Before I let Elizabeth comment, I will just give you a little bit of my thoughts. And the way I look at the RIZEAO top-line data, I think there are obviously various degrees of success, right? There is meeting the top-line endpoint and then there are going to be different aspects of pathogen data within the top-line data as well as the secondary endpoint around the discontinuation of the standard of care. And I think, obviously, what we are able to show will guide toward the commercial utility and how we are going to think about marketing and promoting the product. But Elizabeth, do you want to add any further? Elizabeth Masson-Hurlburt: Sure. Roanna, I think when it comes to how we are going to use the data, a lot of this is going to be dependent on the data that we see in top line. Obviously, the more, the better. I think if we are successful in the way that RESPECT reads out, there is a lot of opportunity for us to be able to talk to the payers about an option that does not have the drug–drug interactions that the azoles and some of the other therapeutics are presenting right now, and we are hopeful that that will lead to understanding around less hospitalizations, getting patients out quickly, and to, you know, more safely be on their cancer regimen. It will be certainly data dependent, but I am confident that once it comes out, we will be able to take a look at that data and strategically place it with payers and the clinical community. Roanna Clarissa Ruiz: Understood. Thanks. Operator: And the next question comes from Leszek Sulewski with Truist Securities. Please go ahead. Jeevan Larson: This is Jeevan on for Les. Thanks for taking our questions. First, any developments on the bipartisan proposed TDAPA extension bills and if the timing here has changed based on recent global events? And then also any updates on a potential partnership with the other LDO and how post TDAPA dynamics change the odds here? Thank you. Joseph Todisco: Thanks. Look, legislation is always speculative. What I can say is that we have spent a lot of time, we are working closely with the other company that is actively in TDAPA, Akebia. We have been pounding the pavement on the Hill as well as with career staff at CMS and political appointees at CMS. We have a large number of co-sponsors of the bill now. Timing is tricky, right, because this likely needs to be attached to another piece of legislation. There is a war in the Middle East. So we really cannot speculate on whether this can happen before June 30 or December 31. I think if it happens after June 30, I think there is a pathway for potential retroactivity of some aspects of the bill to impact positively on DEFENCATH. That is something we would actively be working on as well behind the scenes. But it is really hard to pinpoint a timing with everything that is going on in Washington right now. With respect to the other LDO, I cannot comment on ongoing discussions with customers. Operator: And your next question comes from Serge D. Belanger with Needham & Company. Please go ahead. John Todaro: Hey, good morning. This is John on for Serge today. One on DEFENCATH and then another one on the Melinta product portfolio. So first, just curious if you have any updates on the inpatient opportunity with DEFENCATH. You know, have the sizes of the current contributions been growing and just curious what growth profile you see from this segment in 2026 and 2027? And then on the Melinta portfolio, you mentioned Minocin and Vabomere being, you know, potential significant contributors along with RIZEAO. Curious if there is anything promotionally sensitive that you could kind of reinforce into these products to see some growth in the future? Joseph Todisco: All right. Thanks, John. And I am not sure I fully understood your DEFENCATH question, but what I will kind of touch on is our guidance and how we constructed our guidance for 2026–2027. So the way we looked at 2026, obviously, the way CMS did the calculation for the bundle adjustment, the $2.37 that goes into the bundle for the third and fourth quarter, it does not fully reimburse providers based on current utilization rates. They used an older period of time to do that calculation that was based on our first year of launch. But we had provisions in our agreements with customers that allow for that type of situation, where there is certain floor pricing under these contracts. What we are working on now is hopefully getting a little bit better than that floor pricing. But our guidance was somewhat based on the floor, and we are working through that process now. Now for 2027, what we wanted to do was give investors comfort that there is at least a base business level of DEFENCATH, which we expect to see price appreciation and hopefully stable volumes based on what we are doing now in the outpatient hemodialysis sector to kind of steady the market with customers. Now we elected not to include in that 2027 guidance potential upside from what we are trying to do with Medicare Advantage contracting with potential new customers both in outpatient hemodialysis and on the inpatient side, because when it comes to guidance, it is very difficult to guide towards something that is still underway in terms of execution. So as we progress throughout the year and should we get a Medicare Advantage contract across the goal line and we have the ability to look and make a forecast around volumes, we would up our guidance accordingly as we progress through the year. John Todaro: On the Melinta portfolio question, Joseph Todisco: look, I think Minocin and Vabomere are two really good durable products that have entrenched utilizations in the hospital inpatient segment for treatments of niche infections, right? I think Minocin is closing in at around $50,000,000 in sales. Vabomere is just under $30,000,000. So we do have a little bit of promotional efforts on there. We do not think that they are usually promotionally sensitive the way a launch product would be. But we think there is a couple of percentage points of growth there that we expect to get this year. John Todaro: That is helpful. Thanks. Operator: And your next question comes from Brandon Richard Folkes with H.C. Wainwright. Please go ahead. Brandon Richard Folkes: Hi, thanks for taking my questions and congrats on the quarter. Maybe just two from me. Firstly, DEFENCATH, can you just talk about the customer mix currently and whether you anticipate any change of that in your 2026 and 2027 guidance? How should we think about the opportunity in the other mid-sized operators for DEFENCATH? And if I just ask one more. I know you mentioned you filed the 10-Ks, sorry, have not been through it. But can you just talk about the operating cash flow in the quarter? It looked very strong. So just anything to consider there? And then also how we should think about it in 2026? Thank you. Joseph Todisco: So right now, I would say we are fairly heavily concentrated volume-wise with one of the LDOs and then two of the three mid-sized players are driving probably 90-something percent of our volume amongst the three of them. There is a third mid-sized provider that is utilizing but not at the scale of others. And then we have a number of small accounts that, even if they are utilizing it fairly broadly, do not represent as large of a market impact, as they may only have 20 clinics or 15 clinics. So that is certainly kind of the mix today. Now, terms of changes we would anticipate in 2026 and 2027 would depend in large extent on our ability to onboard either the other LDO or to get the third mid-sized player to meaningfully increase volume. So those are the only things that would really, I think, change the mix in any meaningful fashion. What we are doing on the inpatient side in terms of promoting DEFENCATH, while that is a good dollar market opportunity, we believe the volumes there would be much lower from a volume distribution standpoint. So I hope that answers the question. Yes. Look, I think roughly, we would like to say that EBITDA could be a proxy for cash flow for the year. I think there are some items that could impact in terms of our need to maybe stockpile some inventory this year as we are working through a few tech transfers. We also have some rebates, large accrued rebates that you will see on the balance sheet, that will get paid out in the early part of this year. So those are kind of really the big items that impact cash flow. Susan, anything you want to add to that? Susan Blum: No, you covered it, Joseph. Brandon Richard Folkes: Great. Thanks very much. Operator: This concludes our question and answer session. This concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings, and welcome to the Seaport Entertainment Group Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jason Wilk, Senior Vice President of Finance. Please go ahead. Jason Wilk: Thank you, operator, and good morning, everyone. With me today is our President and Chief Executive Officer, Matthew Morris Partridge, and our Chief Financial Officer, Lina Eliwat. Before we begin, I would like to remind everyone that many of our comments today are considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-Ks, Form 10-Qs, and other SEC filings. You can find our SEC reports, earnings release, and quarterly supplemental information on our website at seaportentertainment.com. I will now turn the call over to Matthew. Matthew Morris Partridge: Thanks, Jason, and good morning, everyone. As we outlined during our inaugural earnings call last March, our focus in the first full year as a stand-alone public company was to address multiple opportunities for improvement, including outsized priorities within the Seaport, as we work to position the organization as a scalable real estate-centric hospitality and entertainment company. Looking back and taking stock of our accomplishments, we made tremendous progress in 2025 and year to date 2026, addressing these opportunities. Some of our more notable achievements in 2025 include generating a 24% year-over-year improvement in our net loss, a 49% year-over-year improvement in our non-GAAP adjusted net loss, leasing, programming, and finalizing development plans for approximately 153,000 square feet across the Seaport, including signing agreements with Meow Wolf, Planker Kitchen and Sports Bar, Hidden Boots Saloon, Willits NYC, Cork Wine Bar, and other exciting additions I will discuss shortly, internalizing food and beverage operations across many of our company wholly owned and joint venture owned restaurants in the Seaport neighborhood, Las Vegas Aviators winning the 2025 Pacific Coast League championship, the franchise's first PCL title since 1988, and hosting and competing in the Minor League Baseball Triple-A National Championship Game, further establishing the Seaport as a premier event destination by hosting multiple rooftop and neighborhood-wide marquee events, including more than 60 concerts, the Macy’s Fourth of July Fireworks, and the New York City Wine and Food Festival, and putting 250 Water Street under contract to sell, which subsequently closed last month, early February. The process of finalizing the sale of 250 Water Street was longer than anticipated. After completing additional diligence and evaluating market conditions, we believe this transaction represented the best risk-adjusted outcome for the company. The transaction will generate net proceeds of approximately million after we work through some post-closing obligations, which should largely be resolved in 2026. With the sale complete, we have eliminated $7 million of cash burn related to interest expense and carry costs, and we now have additional capital on our balance sheet and a clearer runway to execute against our strategic priorities. In addition to the 250 Water Street sale, the other significant announcement in early 2026 was the closure of the Tin Building in its current form as a culinary experience. We are very appreciative of Chef Jean-Georges, his team, and the Tin Building staff for their partnership, dedication, and effort. Tin Building was an ambitious undertaking and Chef Jean-Georges created a truly beautiful and distinct destination. Our partnership with the Chef and his team remains strong, and we look forward to continuing to work with them both at the Seaport and more broadly as a 25% owner in Jean-Georges Restaurants. Given the historical challenges of the Tin Building, we conducted a comprehensive assessment of the operating model and evaluated a range of alternatives. In the end, we concluded that the asset required a fundamental repositioning of both its use and operating structure to achieve long-term sustainability. As a result, we signed a new lease with Lux Entertainment to bring their highly Balloon Museum experience to the Tin Building, which will serve as their flagship U.S. location. For those of you who are less familiar with the concept, Balloon Museum is an award-winning large-format interactive contemporary art experience. To date, the Balloon Museum exhibitions have toured through 23 major cities across Europe, North America, and Asia, often within historic and landmark buildings and with works from internationally recognized artists. They have welcomed more than 7 million visitors globally, and when set alongside Meow Wolf, the Rooftop at Pier 17 concerts, existing and new restaurant offerings, our recently announced expanded event space, and other retail, cultural, and event-driven initiatives, Balloon Museum further complements the growing set of experiences within the Seaport that we believe will drive broad-based visitation by local residents, New Yorkers, and tourists alike. Under our agreement with Lux Entertainment, the initial lease term is five years with two five-year extension options. The base rent includes annual contractual escalations and a percentage rent component above a contractually established revenue threshold. From a capital standpoint, work is under way at an estimated cost of approximately $5 million with delivery to the tenant expected by the 2026. Lux Entertainment will complete its interior fit-out at its own expense, and they anticipate opening this summer. Strategically, this agreement fundamentally changes the financial profile of the Tin Building, transitioning it from a negative cash-burning operation to a stabilized positive free cash-flowing asset that further complements the broader programming of the neighborhood. When compared to the financial performance of the Tin Building in 2025, the Balloon Museum lease has the opportunity to improve the company's pro forma annual EBITDA by more than $22 million. This progress has positioned us for long-term financial stability, something this collection of assets has not experienced in recent history. In terms of our go-forward focus, we have some very exciting things on the horizon. During the fourth quarter, we signed a ten-year agreement with a renowned Brooklyn-based 11,000 square feet in the historic cobblestones. We plan to announce our partner and the name of the project in the coming months, and we believe this new concept, which is centered around a multifaceted, evolving hospitality and music experience, further expands on the diversified programming we are curating throughout the Seaport neighborhood. Additionally, we will open a new 400-seat, 1,000-person open container district that will be anchored by a new restaurant called Sadie’s. Sadie’s will occupy the first and second floors of a previously vacant restaurant space located at 19 Fulton Street and will include the outdoor garden bar that sits at the center of the historic pedestrian-only cobblestones. The restaurant and bar will feature New American food at an accessible price point, filling a need for a larger format communal and approachable restaurant within the Seaport. Sadie’s will also have a robust programming calendar featuring celebrations for seasonal, sporting, and cultural moments including events centered around music-driven activations, the Kentucky Derby, People World Cup, U.S. Open, America 250, Oktoberfest, and other evergreen programming. And finally, in January, we made the difficult decision to close the Malibu Farm location at Pier 17. We have had preliminary discussions regarding several replacement concepts that we believe could be additive to our overall plan for the Seaport, including replacing some of the culinary gaps that have been created with the closing of the Tin Building. Beyond the incoming entertainment and food and beverage opportunities, we intend to expand the previously announced Pier 17 event space from 17,500 square feet to more than 40,000 square feet across three floors with a focus on premium corporate, not-for-profit, convention, and social events. This will create one of the largest multifaceted event spaces in New York City featuring iconic, expansive views of the East River, Brooklyn Bridge, and Manhattan and Brooklyn skyline. All levels will be accessible via a dedicated ground floor elevator entrance and staircases with connectivity to the Rooftop at Pier 17. The event space will also leverage Pier 17’s other unique attributes including proximity to major transportation hubs, an access-controlled driveway, and adjacency to a dense mix of entertainment and dining options. Furthermore, the expanded event space at Pier 17 provides several strategic benefits to the company including further positioning the Seaport as a destination for large-scale meetings and events through integrated partnerships with third-party planners and caterers, creating a compelling weather contingency option that improves the rooftop’s utilization for non-concert events, diversifying our revenue sources with incremental weekday and off-peak demand, leveraging our existing infrastructure and capabilities—which were on display during our campus-wide activations during the New York City Wine and Food Festival and mid-July 4 fireworks—and improving utilization of space that was previously positioned for office use. While we are still finalizing some of the details for this project, including timing, we currently expect this initiative to generate long-term unlevered cash-on-cash returns above 20% with an estimated payback period under five years. We will provide more information about the event space on our first quarter earnings call. At the Rooftop at Pier 17, which was recently named by the 2026 Rolling Stone Audio Awards as the Best Outdoor Music Venue in the United States, our team is ramping up for the 2026 Seaport Concert Series, which begins May 2. This year builds on a strong 2025 season that delivered our highest ever total attendance and all-time highs in customer experience and staff friendliness scores. From a revenue optimization standpoint, we are focused on expanding premium upsell offerings at the Liberty Club and Patriot. These initiatives are designed to drive incremental high-margin revenue while enhancing the overall guest experience with more customized and differentiated hospitality offerings. Taking a step back and looking at the Seaport overall, as of December 31, the Seaport neighborhood was approximately 90% leased or programmed, leaving roughly 47,000 square feet of vacancy. On a pro forma basis for the Malibu Farm closure, this number is closer to 53,000 square feet. For the remaining vacancy, we are predominantly focused on complementary daily-needs and amenity-oriented tenants and incremental food and beverage opportunities where we have existing restaurant infrastructure. Since we became a stand-alone public company in August 2024, we have leased or programmed more than 220,000 square feet which we anticipate will result in additional stabilized EBITDA of more than $30 million. Lastly, before we shift along to Vegas, I do want to highlight that we are continuing to explore the sale of our 21-unit apartment building at 85 South Street. We will provide further updates on that transaction if or when it is completed. Moving west, the team in Las Vegas is transitioning from the winter activation, Enchant, back to regular season baseball programming. During the fourth quarter, we internalized the day-to-day operations of Enchant to strengthen our customer engagement and introduce new audiences to the ballpark. This process resulted in some transitional costs, but overall better positions us for improved execution and profitability in 2026. In terms of early demand for the baseball season, group and season ticket sales are pacing ahead of last year, including strong momentum for Big League Weekend when the Athletics face the Angels on March, followed by Opening Day for the Las Vegas Aviators, March 27. Additionally, after last year's hiatus, Las Vegas Ballpark will once again host the Savannah Bananas for three games starting April 30 with ticket sales currently outpacing 2024 levels. Overall, we are excited about the support for the team and how it is materializing in ticket sales. And from an operating standpoint, we expect incremental efficiencies in 2026 as we apply the learnings from Enchant and better control certain variable expenses. As a result, we expect continued margin improvement in 2026 across the entire Las Vegas operation. At the corporate level, we recently received Board approval to file a $150 million shelf registration statement and a $50 million stock repurchase program. The shelf gives us flexibility and allows us to access the capital markets efficiently in the future if a strategic opportunity makes sense. At the same time, with a strong balance sheet and our recent momentum, maintaining optionality to buy back stock could be a good long-term capital allocation decision. Both programs are tools for us as a public company that provide the ability to be opportunistic, but neither should be interpreted as an immediate plan to issue or repurchase securities. Finally, before I turn it over to Lina, I want to sincerely thank our team for their resilience and hard work and compassion. Their support of the company and fellow team members, especially through these transitional moments, has been tremendous. I am proud of the progress we have made. I am confident we will continue building on the strong momentum we saw through year-end 2025 and into 2026. With that, I will now turn the call over to Lina. Lina Eliwat: Thanks, Matt. Before I get into the company's fourth quarter and full year financial performance, I would like to remind everyone of some changes made at the start of 2025, including renaming our Sponsorship, Events, and Entertainment segment to Entertainment. In conjunction with this change, we reallocated sponsorship and events revenues and expenses to the respective segments that most appropriately reflect the source of the sponsorship or event. These changes are reflected in both the current and prior-year periods presented on our consolidated and combined statements of operations. Beginning in 2025, and in conjunction with the internalization of our food and beverage operations, we consolidated the Tin Building into our Hospitality segment. In prior years, the Tin Building was accounted for as an unconsolidated joint venture, and our share of net loss was reflected in the equity in earnings or losses from unconsolidated ventures line on our consolidated and combined statements of operations. In an effort to provide more comparable information, we will refer to the 2024 operating results on a pro forma basis reflecting the inclusion of the Tin Building as a consolidated entity during the prior-year period when providing year-over-year comparisons on this call. In addition, we will reference operating EBITDA, which excludes losses on assets held for sale, impairment charges, and other nonrecurring items included in other income or loss related to the segment or on a consolidated basis, to provide more comparable operating results. Fourth quarter and full year 2025 net loss attributable to common stockholders was $36.9 million and $116.7 million, respectively, representing a year-over-year improvement of 11% for Q4 2025 and 24% for the full year 2025. On a per share basis, net loss attributable to common stockholders was $2.89 in Q4 2025 and $9.18 for the full year 2025, representing a 2045% improvement, respectively. Non-GAAP adjusted net loss attributable to common stockholders was $17.5 million for the fourth quarter 2025 and $54.1 million for the full year, representing improvements of 949%, respectively, compared to the same periods in 2024. On a per share basis, non-GAAP adjusted net loss was $1.30 for the fourth quarter 2025 and $4.26 for the full year 2025, representing a year-over-year improvement of 184%, respectively. In the fourth quarter 2025, total consolidated revenues were $29.5 million, a 7% year-over-year increase when compared to pro forma 2024. For the full year 2025, total consolidated revenues were $130.4 million, which is essentially flat to full year 2024 consolidated revenue on a pro forma basis. As a reminder, consolidated revenues exclude the financial results of our unconsolidated ventures, such as the Lawn Club and our investment in Jean-Georges Restaurants, since they are reflected in the equity in earnings or losses from unconsolidated ventures line on our consolidated and combined statements of operations. In Hospitality, fourth quarter revenues declined 23% on a pro forma basis, primarily driven by lower performance at the Tin Building and unfavorable year-over-year comparisons resulting from events and activations in Q4 2024 that did not repeat in 2025. One of those activations was a holiday-themed partnership on the Rooftop at Pier 17 with The Dead Rabbit, a world-renowned Irish cocktail bar in Lower Manhattan. Another was a large-scale private event across multiple venues at Pier 17. Total food and beverage revenues within the Hospitality segment, inclusive of Lawn Club, declined 15% year over year. On a same-store basis, food and beverage revenue declined 20%, the most meaningful difference relating to Gitano, which was not included in the same-store revenues in the fourth quarter due to it being under construction during 2024. In the fourth quarter 2025, Hospitality consolidated adjusted EBITDA, including earnings from unconsolidated ventures, improved by $11 million year over year on a pro forma basis, mainly as a result of the $10 million impairment charge recognized in the prior year relating to warrants of Jean-Georges Restaurants, which were nearing expiration. Excluding this impairment and other items included in other income and loss, Hospitality operating EBITDA improved by 17% year over year on a pro forma basis, driven by better flow-through at the Tin Building, continued growth at the Lawn Club and Gitano—which continues to drive increased revenue as they refine their operations—as well as the cost savings realized from the internalization of food and beverage operations earlier in 2025. During the full year 2025, Hospitality revenue declined by 16% on a pro forma basis. The decline was primarily driven by overall performance at the Tin Building, reflecting both the closure of certain venues within the building and increasing top-line softness, as well as declines from certain legacy stand-alone restaurants. This was partially offset by the continued growth of Gitano and the incremental revenue generated from larger events such as the Macy’s Fourth of July Fireworks event. Total 2025 food and beverage revenue, including Lawn Club, declined 8% year over year. On a same-store basis, food and beverage revenue declined 5%. This more moderate decline reflects the exclusion of the non–Dead Rabbit holiday activation and closure of some of the Tin Building outlets in 2025. For the full year 2025, Hospitality consolidated adjusted EBITDA increased $10.5 million year over year on a pro forma basis, mainly reflective of the $10 million Jean-Georges warrant impairment recorded in 2024. Excluding other income and losses—which was primarily impacted by a one-time favorable Hospitality expense reimbursement in 2024—along with excluding the 2024 warrant impairment charge, Hospitality operating EBITDA increased 25% year over year. The improvement was predominantly driven by the internalization of food and beverage operations, disciplined cost-cutting controls at the Tin Building, more measured marketing spend across the portfolio, and continued strong performance at the Lawn Club and Gitano. Turning to the Entertainment segment, fourth quarter revenues increased 68% year over year, primarily driven by the internalization of Enchant’s operations in Las Vegas. Partially offsetting this initiative was the timing of Las Vegas Aviators sponsorship revenue, the absence of the seasonal holiday activations on the Rooftop at Pier 17 in 2025, and two fewer concerts in New York during the prior year’s comparable quarter. Despite hosting fewer shows during the period, concert series food and beverage revenue increased 3% year over year, driven by increased per-show attendance and higher per-customer spend. With the concert and baseball season ending in October, Q4 2025 Entertainment operating EBITDA increased 18% year over year, mainly from better flow-through achieved by foregoing the seasonal holiday activation on the Rooftop at Pier 17, but partially offset by the lower concert count compared to 2024. Total 2025 year-over-year Entertainment revenues increased 14% due to the internalization of Enchant operations in Las Vegas, increased sponsorship revenue in both New York and Las Vegas, and new revenue from previously referenced larger-format events. On a full-year basis, adjusted EBITDA for the Entertainment segment increased by 124% when compared to the prior year, benefiting from improved collections and reduced bad debt, as well as better flow-through by foregoing the seasonal holiday activation on the Rooftop at Pier 17. Our concert business also benefited from the internalization of food and beverage operations as well as strategic reductions in per-show operating expenses. Within the Landlord segment, fourth quarter rental revenue increased 14% year over year on a pro forma basis. This is mainly from the growth of our private events rental revenue, with large-scale events such as New York City Wine and Food Festival contributing to the current quarter improvements. These gains are partially offset by the termination of the ESPN lease in 2025, resulting in the loss of year-over-year comparable rental revenue in 2025. Landlord consolidated adjusted EBITDA declined by $10.1 million on a pro forma basis, primarily driven by a $7 million write-down of 250 Water Street to its final sales price. It was further impacted by the nonrepeating $2 million legal settlement proceeds recognized in 2024. Excluding these nonrecurring items, Landlord operating EBITDA declined 37% year over year on a pro forma basis as expenses increased relating to the timing of accrual for operating expenses such as cleaning, security, and utilities, along with the effects of the nonrepeating rent reserves placed in 2024. For the full year of 2025, rental revenue increased 21% year over year on a pro forma basis, driving most of the Landlord’s 18% year-over-year revenue growth. The increases to rental revenue were driven by private event rental activity—most notably Jordan Brand’s The One Tournament Global Finals event and the New York City Wine and Food Festival—as well as termination income associated with our Nike office lease, and a decrease in rent reserves compared to prior year. As a reminder, Nike exercised their termination within their lease but remains a tenant of Pier 17 through February 2027. The Landlord segment’s 2025 consolidated adjusted EBITDA declined 55% year over year on a pro forma basis, primarily due to $13.4 million of one-time nonrecurring charges. These include an $11 million loss on the write-down of 250 Water Street in conjunction with its classification as held for sale and a $2 million write-off of capital spent on the rooftop winter structure. Excluding these nonrecurring items, the Landlord segment operating EBITDA for the full year increased 36% year over year on a pro forma basis. The improvement reflects the previously mentioned revenue growth, reduced overhead compared to the pre-spin structure in prior year, and improved operating expense savings year over year. Overall, consolidated segment adjusted EBITDA for the fourth quarter 2025—which reflects segment performance before G&A, interest, depreciation, amortization, and includes results from unconsolidated ventures—improved by $1.3 million year over year on a pro forma basis. Excluding the nonrecurring items discussed earlier, such as the loss on 250 Water Street, the prior-year warrant impairment, and the favorable legal settlement recognized in the prior year, consolidated operating EBITDA increased 5% year over year on a pro forma basis in the fourth quarter. For the full year 2025, consolidated segment adjusted EBITDA improved by $2.8 million on a pro forma basis. Excluding the nonrecurring items—the 250 Water Street for-sale loss, the rooftop winter structure write-off, the prior-year warrant impairment, the favorable Hospitality expense reimbursement and legal settlement recorded in the prior year—consolidated operating EBITDA increased 33%, or more than $13 million, year over year on a pro forma basis. Overall, with total year-over-year revenue relatively stable, this bottom-line improvement was driven by reduced costs as our operating stabilizes in our first full year as a stand-alone public company as well as overall cost optimization initiatives we have implemented across each segment in 2025. During Q4 2025, we incurred general and administrative expenses of $6.8 million, an improvement of 31% when compared to the fourth quarter of prior year. For the full year 2025, G&A expenses were $42.8 million, representing a 32% improvement compared to 2024. Prior-year G&A was higher overall due to our predecessor’s cost structure and transitional expenses related to our separation from Howard Hughes. While there were significant G&A improvements achieved in 2025 through streamlining and optimizing operations, they were partially offset by $12 million in expenses related to our leadership transition. As we continue to stabilize our operating model, we expect to continue to improve upon our cost structure with Q4 2024 as our new benchmark. During the fourth quarter 2025, interest expense increased by $3.3 million compared to the comparable prior-year quarter, primarily due to interest expense capitalized on 250 Water Street in 2024 that did not recur in the current period and a decrease in interest earned on invested cash. As a reminder, we suspended interest capitalization on 250 Water Street midway through Q3 once the asset was classified as held for sale, resulting in higher reported interest expense in the fourth quarter 2025. For the full year, net interest income totaled just under $0.5 million, compared to net interest expense of $6.8 million in the prior year, a $7.2 million year-over-year improvement driven by higher interest income on invested cash, increased interest capitalization earlier in the year prior to the held-for-sale classification of 250 Water Street, and lower amortization of finance costs following our separation. Compared to 2024, equity in earnings or losses from unconsolidated ventures improved by $9.7 million year over year on a pro forma basis, and for the full year improved $11.5 million year over year on a pro forma basis. This is mainly a result of the $10 million impairment of the warrant previously described in 2024. Excluding the warrant impairment, equity in earnings or losses from unconsolidated ventures declined approximately $300,000 in the fourth quarter year over year on a pro forma basis and increased 169%, or $1.5 million, on a pro forma basis for full year. This is reflective of continued strength at the Lawn Club as it scaled through its second full year of operations. Capital expenditures in the fourth quarter 2025 totaled $2.8 million. For the full year, capital expenditures totaled $30.8 million. Excluding capitalized costs associated with 250 Water Street development, the majority of spending was related to Meow Wolf landlord work, rooftop winter structure, completion of Gitano and Riverdeck Bar build-outs, as well as other landlord work and maintenance capital costs across our existing operations. Long-term debt outstanding as of year-end was reduced to $100.4 million, reflecting a $1 million decrease primarily related to the scheduled principal amortization on the Las Vegas Ballpark loan. Net debt to gross sales at year end was approximately 2%. Subsequent to year end, and in conjunction with the sale of 250 Water Street, we paid off the $61.3 million variable-rate loan associated with the property, further strengthening our balance sheet. Our year-end 2025 cash, restricted cash, and cash equivalents balance was just over $87 million, and pro forma to reflect the proceeds from the sale of 250 Water Street, our cash, restricted cash, and cash equivalents balance would be $163 million. As we move through 2026, our cash position provides meaningful liquidity and optionality for the company as we explore various investment and capital allocation opportunities for the long-term benefit of the organization and our shareholders. With the progress made, we have materially improved the company's financial performance, strengthened the company's balance sheet, and laid the groundwork for sustainable long-term growth and value creation. We will now open for questions. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from Matthew Erdner with JonesTrading. Please go ahead. Matthew Erdner: Hey, good morning, guys. Thanks for taking the question, and congrats on all the progress so far. Lina, you just mentioned that you guys have $163 million cash pro forma. How much of that is committed to, you know, current projects and getting them online at the Seaport? And then with whatever is remaining there, you know, what are you guys kind of targeting there for deployment? Lina Eliwat: Hey, Matt. Good morning. So we spent about $30 million in 2025 in capital. With our expectation for everything we have announced plus existing vacancy to get to stabilization is another—we expect around another $70 to $90 million. We had initially said at the onset a range of $100 to $125 million to get to stabilization. So I believe we are still, you know, expecting to target something within that range. Matthew Morris Partridge: Hey, Matt. In terms of capital allocation, you know, we are sort of at the front end of this. Obviously, we have been focused on the existing asset base. I think we are going to look at a lot of different things. Right? We are evaluating or we are starting to evaluate opportunities in the hospitality, entertainment, and event spaces. Obviously, that is core to what we are doing at the Seaport and what we do out in Las Vegas at the ballpark. I think we could potentially look at other assets similar to the Seaport, we could look at companies that operate within those businesses that have scalable intellectual property and brand recognition. But we could also be opportunistic and utilize the buyback program that we announced from a capital allocation standpoint and effectively reinvest into the company, depending on where the stock is trading. So we are going to be opportunistic. And I do not think we have any definitive path yet because we are sort of at the forefront of evaluating the opportunity. So— Matthew Erdner: Got it. That makes sense, and that is helpful. And then you know, you mentioned on the event space, kind of that 20% return there. Are there any internal hurdles that you guys are looking to achieve, you know, as you guys deploy this cash? Matthew Morris Partridge: I think it depends on the business. You know, obviously, the hospitality space is notorious for relatively low margins. I think the events business is a much better margin-oriented business. I think where we see some opportunity potentially is to leverage the existing team. We have a lot of talent in the building, and obviously, they are doing a great job executing on what we have. So if we can find things that complement the existing skill set, that is going to improve the flow-through of whatever we allocate capital to. So it is a moving target. I would not say we have any hard and fast financial targets yet, but, you know, we are obviously focused on growing earnings as efficiently as possible with the best flow-through possible. Matthew Erdner: Yep. Yep. Got it. And then, you know, as it relates to the remaining space at the Seaport, you know, have you had any discussions there? And then, you know, I guess, what additional growth do you think that can drive on top of the—call it, $33 million, $32 million of EBITDA that has been leased. Matthew Morris Partridge: Yeah. So we have, like Lina said—or maybe I said in the prepared remarks—we have got a little over 50,000 square feet left. You know, I would say a third of that is probably restaurant-oriented space, and it also includes the former Malibu Farm space. So we will be looking at some restaurant concepts that are complementary to all the stuff that we have announced and what still exists at the Seaport. I think beyond that, you know, we have got the Balloon Museum coming. We have Meow Wolf coming. We have the event space, and then we have the Rooftop at Pier 17 concert series. That is a great set of anchors. And then the removal of the Tin Building F&B, you know, I think that the anchor—or the amount of people that the anchors will drive—will benefit all the businesses, and then pulling some of the food and beverage supply out with the closure of the Tin Building and positioning it to Balloon Museum is going to help all the other F&B that we have either announced exist down here or that we will look to fill the existing vacancy with. Matthew Erdner: Got it. Got it. And then, you know, as it relates to kind of the special events, you know, you had the Wine and Food Festival last year. You know, do you have anything set up like that so far across the year? Is it, you know, going to be event-driven stuff like you said around the World Cup, you know, people going to the bars, interacting in the cobblestones and whatnot? Matthew Morris Partridge: Yeah. I think Sadie’s is definitely going to be a unique asset for us to program around. The Lawn Club has been very successful doing a lot of corporate events and social event-related business. And so I think those two concepts with the open container that we announced are going to give us a lot of flexibility. We are going to look at everything from doing concerts on the cobblestones or concerts out on the pier—obviously, we do them up on the Rooftop as well. I think FIFA and the World Cup are going to be a unique event this year. It is also America’s 250-year anniversary. So there will be a lot of activity during the summer around that, especially with the Fourth of July fireworks. We are going to do a lot of programming around cultural events and sporting events because I think, you know, whether it is watch parties, whether it is community-oriented events like what we have coming up this weekend around Holi, you know, we are going to do a lot of stuff down here, which I think will bring a lot of people down to the Seaport. It will give them an opportunity to experience everything we have down here, and it will support the businesses that we have got down here. Matthew Erdner: Yeah. Yeah. That is awesome. And then last one for me, and I will step out. Lina, you touched on it a little bit about G&A, but is there anything that we should expect kind of as a run rate throughout the year? Lina Eliwat: We have definitely been trending positively throughout the year on G&A, stabilizing our organizational structure, working through technology initiatives. We hope to continue that trend into 2026. Right now, I think Q4 is our new reference point, and we are continuing to try and refine that. But I would use Q4 as our reference point for right now. Matthew Morris Partridge: Yeah. I think it will be a little up and down, Matt. You know, Q1 is going to have some transitional costs related to the closures that we have announced, plus some other changes to the team. And then I think that will benefit us in the back half of the year. But it will be a little up and down this year. But I think, to Lina’s point, Q4 is a good reference point moving forward, and hopefully we can improve upon it. Matthew Erdner: Got it. Awesome. Thank you, guys. Appreciate it, and look forward to the continued progress. Matthew Morris Partridge: Thanks, Matt. Thanks, Matt. Operator: Next question, Patrick Stedelhofer with Kahn Brothers Group. Please go ahead. Patrick Stedelhofer: Hey, good morning, and congrats on all the recent announcements. Lina Eliwat: Thanks, Patrick. Patrick Stedelhofer: My first question is around the kind of criteria for the buyback. You have this great slide on the deck that shows that, you know, the stock is trading at $0.50 of a dollar or probably less than that. And, obviously, that is a great hurdle rate. And so a lot of companies use buybacks on weakness, but you could argue the stock has—it's been all weakness. So I am just curious what would cause you to pull the trigger on this buyback program, kind of when would you ramp it up? And how do you think about allocating it given what an incredible return on investment you can earn by doing this buyback program, which we are very happy to see. Matthew Morris Partridge: I appreciate the question. You know, for the buyback program, we will not put out any public comments related to parameters or timing. We will report after things are executed on, if and when we use it. Obviously, we think the stock is undervalued, especially given the slide that you are referencing in our supplemental. But we are also cognizant that we are building an organization that can grow over time, and we have relatively limited float. So that is always a consideration when you are using buybacks. This is my fifth public company that I have been part of. We have had buyback programs at all but one of them, and we use them opportunistically. And I think opportunistic is the approach that we will use, but that ultimately will be a Board decision, and we will continue to have those conversations with the Board as we look at the performance of the stock and our relative alternatives from a capital allocation perspective. Patrick Stedelhofer: Got it. And then the new Balloon Museum, just how do you view that as either complementing or competing with the Meow Wolf experience coming a year later? Just how do these two go together? Matthew Morris Partridge: Great question. You know, I think the Balloon Museum is definitely complementary. Both of those teams—the Meow Wolf team and the Balloon Museum—know each other, and there is a lot of mutual respect for one another. We spoke with Meow Wolf before moving forward with the Balloon Museum, and they were very supportive of it. So they are going to be complementary to one another. They are both ticketed experiences. They both have done very well in other markets. The Balloon Museum was here in 2023 and did exceptionally well a little farther up the river on Pier 36. So, you know, I think activity breeds more, and having them both open down here really gives the local population, New Yorkers, visitors—everybody—sort of a full-day opportunity to spend at the Seaport. Right? You can come down here for brunch, you can go to the Balloon Museum, you can have lunch, you can go to the Seaport Museum or do some shopping, stay for dinner and a concert, go out to some bars. So we are really trying to create a district that can support the local community because we have got a growing residential population down here, but that can also be a destination for an entire day for a family, a couple, an individual, or anybody in between. Patrick Stedelhofer: That is great. And on this apartment building you are monetizing or maybe monetizing, could you provide any more details around—kind of is it fully leased? Is it cash flowing? Just anything you can share about what you might be able to achieve by monetizing that asset. Matthew Morris Partridge: It is cash flowing. You know, there is a component of the units that are rent-stabilized. It is almost 100% leased. I think we have one or two vacant units. It has got a lot of interest. Obviously, we launched it at the end of 2025, the marketing process, knowing that it would be sort of a slow process to end the year and start the year, but the interest is definitely ramped up. So, you know, unlike 250 Water Street where we had some disclosure obligations related to the materiality of that sale, we will probably speak more to 85 South Street if and when we sell it rather than providing more real-time updates, just because providing real-time updates can sometimes put us at a competitive disadvantage when we are trying to work through a transaction. Patrick Stedelhofer: Understood. Every bit helps. And then last one from us, just how do you think about Vegas versus New York? Obviously, you have a lot happening at the Seaport and you are kind of local there. How do the Vegas properties still fit into the company given both the geographic remoteness of it and all the—just the less news from there. Thanks a lot. Matthew Morris Partridge: Yeah. I think, look, in Las Vegas, we have got a phenomenal facility with the ballpark. You know, it is at the center of Howard Hughes’s Summerlin community that they continue to add amenities to and grow the population around the ballpark. The fan base of the Aviators is largely a local population, so we would love to see Howard Hughes continuing to invest in that project. That ultimately will inure benefit to the baseball team. I think things like Enchant are where we can add a lot of value—doing 40 days of holiday activation and bringing that in-house and, ultimately, over the long term, being able to implement better cost controls and be a little more creative from a ticketing perspective because we have got a great ticketing team out there. Doing things like that in the off-season is only going to help the profitability of that overall operation out there. So I think we have got some room to create value. That being said, you know, I think live sports is a great business. It is a business that has seen tremendous value appreciation over time. So, you know, if and when somebody has an interest in the team, we will always listen. But I think we would pay some pretty high premium on the team and the ballpark given the quality of the facility and the quality of the operation that we have out there. Patrick Stedelhofer: Wonderful. Thank you so much. Matthew Morris Partridge: Thanks, Patrick. Operator: Thank you. I would like to turn the floor over to Matt for closing remarks. Matthew Morris Partridge: Thanks, everybody. Appreciate the interest and support. We look forward to providing more updates on our first quarter earnings call in early May. Have a great rest of the week. Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Ladies and gentlemen, thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time today, please press 0, and a member of our team will be happy to help you. Please standby; your meeting is about to begin. Good morning, everyone. Welcome to the Janus International Group, Inc. fourth quarter and full year 2025 earnings conference call. Currently, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference today, you may press 0. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Sara Macioch, Senior Director, Investor Relations of Janus International Group, Inc. Please go ahead, ma’am. Sara Macioch: Thank you, operator, and thank you all for joining our earnings conference call. I am joined today by our Chief Executive Officer, Ramey Jackson, and our Chief Financial Officer, Anselm Wong. We hope that you have seen our earnings release issued last night. We have also posted a presentation in support of this call, which can be found in the Investors section of our website at janusintl.com. Before we begin, I would like to remind you that today’s call may include forward-looking statements. Any statements made describing our beliefs, plans, strategies, expectations, projections, and assumptions are forward-looking statements. The company’s actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, including, but not limited to, tariffs, interest rates, and other macroeconomic factors, many of which are beyond our control. Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business, prospects, and future results. We assume no obligation to update publicly any forward-looking statements, and any forward-looking statement made by us during this call is based only on information currently available to us and speaks only as of the date when it is made. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS, and net leverage. Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure. On today’s call, Ramey will provide an overview of our business. Anselm will continue with a discussion of our financial results and 2026 guidance before Ramey shares some closing thoughts and we open up the call for your questions. I will now turn the call over to Ramey. Ramey Jackson: Thank you, Sara, and good morning, everyone. Thank you all for joining our call today. To begin, I would like to express my appreciation for our team at Janus International Group, Inc. for their hard work and dedication. 2025 was a challenging year as our markets remained constrained due to macroeconomic concerns and sustained high interest rates. We focused on execution, operating safely, and serving our customers as we worked to stabilize the business, delivering $884.2 million in revenue and $168.2 million in adjusted EBITDA for the year. Despite an unfavorable backdrop, we realized several key wins in 2025 as we worked to position the business for long-term success. On the self-storage side, Janus International Group, Inc.’s Nokē products were present at five out of six facilities earning Facility of the Year awards from Modern Storage Media. Our Betco business announced a comprehensive expansion of its metal decking product line and received a certification from the Steel Deck Institute, achieving an exceptional score and reinforcing our commitment to quality. We also unveiled a redesigned web portal for our Nokē Smart Entry platform, and in Europe, we launched a new high-security swing door. On the commercial side, our ASTA business rolled out its high-performance product offering and achieved Miami-Dade certifications, further strengthening its portfolio. From a financial standpoint, our strong liquidity and cash generation allowed us flexibility to be opportunistic with regards to capital allocation priorities in 2025. We completed a voluntary prepayment of $40 million on our first lien term loan in 2025 and repurchased 1.9 million shares for $16 million throughout the year under our share repurchase program, which had $80.5 million of remaining authorization at year-end. We were also pleased to receive an upgrade of our credit rating from S&P in October. While we anticipate market conditions will continue to be constrained, principally in new construction in North America, in 2026 we will continue to execute and focus on what we can control. As a diversified solutions provider with a global network of manufacturing and installation capabilities, we are committed to executing our strategy of further penetrating the self-storage market, increasing our share in the commercial market, driving adoption of access control technology, and pursuing strategic accretive acquisitions. I will now expand on each of these priorities. First, in the self-storage market, we have shared our strategy of increasing our content in facilities. Our acquisition of Kiwi II Construction announced in January exemplifies this approach by expanding and strengthening Janus International Group, Inc.’s exterior solutions offering and design-build capabilities. Kiwi II is a premier self-storage buildings provider. It is well respected within the industry for its high-quality service and engineering prowess. They have an established, active base of institutional customers and a solid presence on the West Coast and in Florida. Kiwi’s business is complementary to our design-build business, Betco, which has a stronger geographic presence on the East Coast and primarily serves non-institutional customers. Kiwi also aligns well with our Janus International Group, Inc. core business, which focuses on interior self-storage solutions, including doors and hallways, and this integration will allow Kiwi to offer a full end-to-end solution for self-storage. We are very pleased to welcome Kiwi to the Janus International Group, Inc. family, and our early integration efforts are progressing well. Another key driver of our self-storage market penetration is leveraging our differentiated R3 platform. We estimate that nearly 65% of the facilities in the United States are over 20 years old, supporting sustained renovation activity. Industry consolidation is further accelerating this trend as large operators invest to bring aging assets to modern standards. Janus International Group, Inc. is uniquely positioned to meet these needs as the category creator for self-storage restore, rebuild, and replace services. Our International segment represents another important lever in advancing our self-storage penetration. Over the past several quarters, we have carefully refined our product offering and go-to-market strategy to better serve our customers, which has been a driver of our international revenue growth this past year. We are committed to continuing the momentum we saw in 2025 by focusing on increasing scale in our Nokē product as well as pursuing targeted geographic expansion into new countries that will support strategic growth moving forward. The second priority of our growth strategy is increasing our share in the market for commercial doors. The commercial door market is vast, and as a smaller player in the space, we see plenty of opportunity to drive growth over time. As demand for commercial construction continues to grow, we are working to refine our offering and leverage our manufacturing expertise to provide a robust suite of commercial door solutions. We are seeing positive results from our expanded distribution footprint, as well as our multiyear efforts to secure product specifications. We are pleased to share some of our rolling steel doors are now being specified in data centers, representing a meaningful step forward for Janus International Group, Inc. in a fast-growing segment. Next, on the access control front, adoption of our Nokē Smart Entry system continues to progress. Our industry-leading smart security system improves efficiency for operators by streamlining labor needs, reducing theft, and increasing unit-level security. Nokē also offers operators high-value customer insights such as usage trends and other unit-level data. At the same time, the smart locking solution enhances the customer experience, allowing for a seamless access solution and features such as remote monitoring and digital key sharing that provide a competitive advantage for operators. As of year-end, we had 458,000 installed units, representing an increase of 25.5% year over year. As I shared on our last earnings call, we have seen an increase in interest from large institutional customers for our Nokē products. We are encouraged by this momentum as we continue to enhance our offering and move towards scale and improved margin performance in our Nokē business this year. Finally, we will continue to pursue strategic acquisitions to build on our track record of identifying, executing, and integrating acquisitions to support our growth. As we have stated, M&A is part of our DNA. We will continue to seek value-added opportunities that have a strategic fit within our organization in order to expand our product and solutions offerings. Consistent with the priorities I just outlined, we are initiating our 2026 guidance range. We expect revenue in the range of $940 million to $980 million, which represents an 8.6% increase at the midpoint from 2025. Adjusted EBITDA is expected to be in the range of $165 million to $185 million, a 4% increase at the midpoint from 2025. As I conclude, I would like to emphasize that our strategic priorities remain intact. Despite the near-term challenges, household utilization for self-storage continues to grow. With sustained high occupancy rates in the industry, we believe demand will only increase when the housing market improves. While the market headwinds we are facing, particularly in new construction, may persist, we are committed to focusing on what we can control in the near term. We are the industry leader in self-storage solutions with significant scale, financial discipline, and attractive adjacencies for expansion. As we look ahead, we believe we will be well positioned in the markets we serve when macro conditions improve. I will now turn the call over to Anselm for a further review of our quarterly financial results along with more details on our initial 2026 guidance. Anselm? Anselm Wong: Ramey spoke to our full-year results at a high level, and I will focus my remarks on our financial performance in the fourth quarter followed by a discussion of our initial 2026 guidance. For the fourth quarter, consolidated revenue of $226.3 million declined 1.9% as compared to the prior-year quarter. In total, our self-storage business was down 0.4%. New construction decreased 8.1%, and R3 was up 12.7% for the quarter. The decline in revenues for new construction was driven by weaker demand for development in the Americas from our non-institutional customers, partially offset by strength in our International segment. The increase in R3 revenue was driven by increases in door replacement and renovation activity. In the fourth quarter, our International segment saw total revenues increase to $26 million, up $6.5 million, or 33.3%, compared to the prior year, driven by growth in new construction and market share gains as well as positive foreign exchange rates. For the quarter, revenue in our Commercial and Other segment decreased by 5%. The decline was primarily driven by softness in demand for commercial sheet doors, partially offset by strength in rolling steel and TMC. On a consolidated basis, the impact to revenues for the quarter was roughly 90% price and 10% volume. Fourth quarter adjusted EBITDA of $37.2 million was up 7.5% compared to 2024. This resulted in an adjusted EBITDA margin of 16.4%, an increase of approximately 140 basis points from the prior-year period. The increase in margins year over year is primarily attributable to the prior year being negatively impacted by adjustments to our provision for credit losses and an additional warranty reserve, which was partially offset by volume declines and the impact of geographic segment and sales channel mix. We are seeing benefits from our previously announced cost reduction program, achieving the target of $10 million annual pre-tax cost savings in 2025. We continue to regularly evaluate opportunities to improve our efficiencies. To this end, in early 2026, we successfully completed an expansion of our facility in Surprise, Arizona. With the additional capacity now available at our Arizona facility, we were able to optimize our manufacturing space by combining two of our facilities in Houston. This streamlining of our operational footprint will not affect our product offerings, quality standards, or customer service levels. For the fourth quarter, we produced adjusted net income of $15.6 million, down 15.2% compared to the prior-year period, and adjusted EPS of $0.11. We generated cash from operating activities of $24.8 million and free cash flow of $19.2 million in the quarter. On a trailing twelve-month basis, this represents a free cash flow conversion of adjusted net income of 137%. Capital expenditures in the quarter were $5.6 million. We ended the quarter with $260.5 million in total liquidity, including $194.4 million of cash and equivalents on the balance sheet. Our total outstanding long-term debt at year-end was $551 million, and net leverage was 2.1x. Following the acquisition of Kiwi II Construction, as stated in the press release, our net leverage is expected to remain within our target range of 2.0x to 3.0x. These liquidity levels provide us optionality with regard to capital deployment, and we had $80.5 million remaining on our share repurchase authorization at year-end. In February, we were also pleased to announce a repricing of our first lien term loan, reducing our interest rate by 50 basis points from SOFR plus 250 to SOFR plus 200, significantly lowering our cost of capital and enhancing our financial flexibility. Now moving to our 2026 guidance. As Ramey mentioned, full-year revenue is expected to be in the range of $940 million to $980 million. This includes approximately $90 million to $100 million in inorganic revenue from the Kiwi II Construction acquisition. Our guidance does not include any embedded assumptions of an improvement in market conditions. We expect North American organic self-storage revenues to be down mid-single digits compared to 2025, driven mostly by continued softness in new construction. In our commercial sales channel, we anticipate a return to growth in 2026, driven by our ASTA business. On the International side, we expect high single-digit revenue growth. 2026 adjusted EBITDA is expected to be in the range of $165 million to $185 million. This reflects an adjusted EBITDA margin of 18.2% at the midpoint. Consolidated EBITDA margin will continue to be impacted by both geographic segment and sales channel mix. We expect that Kiwi II’s EBITDA will be a drag on overall margins for 2026, and synergies from the acquisition are expected to be back-end loaded for the year. Cash flow remains robust, and for 2026, we anticipate being around the higher end of the free cash flow conversion of adjusted net income target range of 75% to 100%. Please refer to the presentation we have posted for details on the key planning assumptions for 2026. Thank you for your time. I will now turn the call over to Ramey for his closing remarks. Ramey? Ramey Jackson: Thank you, Anselm. Janus International Group, Inc. has a solid position in a great industry. We are the partner of choice for our customers through the full life cycle of their projects, from design and build-out to maintenance and facility upgrades. While we face a dynamic operating environment, we continue to focus on the factors we can control. Consistent with our growth strategy, we are optimistic about our recent acquisition of Kiwi II Construction, and we are confident in our plan to achieve our 2026 guidance of total revenue in the range of $940 million to $980 million and adjusted EBITDA in the range of $165 million to $185 million, reflecting growth of 8.6% at the midpoints, respectively. As I mentioned, household utilization for self-storage continues to grow. This, coupled with sustained high occupancy rates in the industry, is a positive signal for increased future demand with recovery in the housing market. Our strong balance sheet and cash flow foundation position us to further build upon our industry leadership position, expand into adjacent markets with attractive fundamentals, and support our future growth. Taken together, I remain confident in our strategy and in our ability to deliver long-term value for our stakeholders. In closing, I would like to thank our team, customers, and shareholders for your support. We appreciate your participation on today’s call. Operator, we will now open for questions. Operator: Certainly, Mr. Jackson. Thank you, sir. Ladies and gentlemen, at this time, if you would like to ask a question, please press 1 on your telephone. If you find your question has been addressed, please press 1 again to withdraw. Once again, that is 1 for questions. We will go first this morning to Daniel Moore with CJS Securities. Will Gildea: Good morning. This is Will on for Dan. Ramey Jackson: Hey. Good morning. Good morning. Will Gildea: You have always described the core self-storage business as having two to three quarters of visibility. How does your visibility today compare to historic averages? Anselm Wong: I think we still have similar visibility from what we see in that two to three quarters based on the backlog that we have. It has been similar in terms of visibility, and we reflect that in our guide. Ramey Jackson: In terms of new construction, we are going to continue to see pressure there, but we are certainly optimistic around R3 and some of the initiatives that we are focused on like Nokē, the R3 efforts, and just remaining super competitive and having that dominant strength in new construction and commitment to our customers. It is all reflected in the guide. Will Gildea: Thank you. And just a follow-up: what are the one or two key metrics your REIT customers are looking for that would give them confidence to start to invest and build out new capacity once again? Ramey Jackson: It is 100% interest-rate driven. We have been very consistent in terms of the driver. The number-one driver of self-storage is mobility around housing. That is on the sidelines today. When you look at how operators are performing, there is certainly some noise around pricing, but it is a very stable operating environment, lacking the largest driver, which is mobility around housing. Once people start moving around, you are going to see a different operating environment. Will Gildea: Thank you. Operator: Thank you. We will go next now to Jeff Hammond of KeyBanc Capital Markets. David Tarantino: Good morning, everyone. This is David Tarantino on for Jeff. Ramey Jackson: Hey, David. David Tarantino: Maybe starting with margins, could you give us a bit more color on the degree of headwind from the higher International mix in 4Q and what you have assumed in the guide on the margin line from an organic perspective? And then maybe any thoughts on how long you expect these mix headwinds to last would be helpful. Anselm Wong: Thanks for the question. If you saw what we printed for the quarter, you saw International continue to grow pretty strongly, as it did for the full year. If you look at their EBITDA margins, obviously it has improved year over year, but it is still significantly down versus our North America. Going into next year, as Ramey said in his remarks, we are still seeing softness in our new construction in our Janus International Group, Inc. core Americas business, which is a meaningfully higher margin rate. We cannot predict when that turn is going to be, but as long as we are going to see some of that pressure on the new construction piece in the Americas, we will probably have some margin and mix headwinds from that. David Tarantino: And just to follow up quickly there, is it fair to assume that the guide assumes that these mix headwinds persist through 2026? Ramey Jackson: Yeah. Definitely. David Tarantino: Okay. Great. And then on commercial, it seems like it weakened if you adjust for the TMC catch-up, and you called out some commercial sheet door decline. So could you give us some color on the softness here? And I just want to clarify on the guide: is it high single digits just for ASTA, or what are we thinking for the whole business? Anselm Wong: For commercial, if you include everything together, it is in the high single-digit range, but not if you actually back out the TMC piece. Looking at Kiwi in there and the other pieces balances the number, but if you look at the guide, we are probably mid-single digit for commercial for the full year. Just additional color: a lot of the softness in commercial is coming from commercial sheet. We are actually seeing growth in our ASTA business, which we highlighted. Ramey Jackson: We have been consistent in terms of the messaging around architectural specifications effort, and we have certainly secured some work around the data center space, which is an exciting space to be in, and we have worked really hard to get specced. So we are excited about that and expect growth in the rolling steel business. David Tarantino: Great. Operator: Thank you. We will go next now to Reuben Garner of The Benchmark Company. Reuben Garner: Thanks. Good morning, guys. Morning. Reuben Garner: I think that you are roughly implying low single-digit organic revenue declines if we strip out an assumption for Kiwi. One, is that accurate? And two, can you break down the components of that price and volume? And then you mentioned commercial, but what about your assumptions for new versus R3 on the self-storage side as we sit today? Anselm Wong: That is about right, Reuben. We are looking at an organic decline in the core business. The biggest piece, as we described, is really in that new construction Americas piece. That piece is going to continue to be a drag in terms of what we are seeing in the environment today, and that is what brings down the revenue year over year for the organic piece. Reuben Garner: And in terms of price versus volume? Anselm Wong: Price right now, as we described, we had more price in 2025 that will roll into the first half of this year. So think about a similar type of price impact in the first half, barring anything that happens with steel in the back half. Reuben Garner: Okay. And then can you—you have talked about the margin profile a little bit of Kiwi, but can you break out what gross margin looks like for that business? And then on the synergy front, can you go into detail on the synergies? I assume that there are some top-line potential synergies at some point as well. Just refresh us on the opportunities there. Anselm Wong: We have not disclosed any of the details on the synergies, Reuben. But if you think about EBITDA margins, we have given a range where it would be in that low-teens range to start with because of integration costs and getting that business integrated into Janus International Group, Inc. Longer term, we said that it has potential to get into the high teens as a business. Reuben Garner: Okay. Thanks, guys, and good luck. Ramey Jackson: Just to add to that, Reuben, as a stand-alone—I think you are asking the question as a stand-alone—but part of the acquisition strategy was Kiwi had never gone to market with the full solution, meaning door and hallway. Now they can offer their customers end to end both buildings and interiors, and as you know, the Janus International Group, Inc. core business is higher margin. We expect to see some pickup in the Janus International Group, Inc. core sales by going to market with Kiwi, so we will experience some higher-margin stuff at core with the acquisition. Reuben Garner: Great. Very helpful. Thanks, guys. Operator: Thank you. We will go next now to Phil Ng of Jefferies. Phil Ng: Hey, guys. Hey. Good morning. The outlook—you are not assuming much of an improvement here, which seems more than reasonable. But, Ramey, you talked about what is going to drive volumes perhaps reaccelerating as housing turns—housing mobility. We could look at that from existing home sales and certainly rates coming down. All good. Help us unpack what is the lag if we look at that turnover inflecting. How does that impact your business, whether it is R3 or new construction? The other piece you have teased out in the past on rates is really more for your non-institutional customers. Maybe credit has been more challenged into less mortgage rates, more shorter-term rates, and maybe their ability to pursue more projects. Any color on that front if the credit markets have loosened up a little bit? Ramey Jackson: That is a great question. I do not know that I can answer a lot of that, but from a confidence perspective, when things start to turn and things feel better, you will see increased activity and investment. As we sit today, the mom-and-pops are essentially on the sideline, and that is a big—it is 70% of the market. Any momentum we can get with that segment will certainly have incremental value. When you think about R3, obviously acquisitions matter, and I think we are hearing from the REITs that this should be a good year for acquisitions, which should bode well for R3. I cannot predict the interest rate and what is going to get people moving around. I have no earthly idea—you probably know that better than me. We are focused on being in the right position so when this turns around we can take advantage of it, sticking to our corporate strategy, making sure that we are lean, focused, and able to optimize everything and take advantage of what the market has to offer. Phil Ng: That is great color, Ramey. Then your outlook on R3 sounds a little more upbeat. I may have missed it if you quantified what you are assuming for R3. Is that mostly M&A—that you are talking about big REIT guys doing more renovation work that is driving that—or are you seeing other avenues that give you enthusiasm on that inflection in R3? Certainly you have had some headwinds with the retail side of things that seem to have bottomed out. Give us a little more perspective on what is driving the inflection in R3. Ramey Jackson: You hit it. It has a lot to do with acquisitions. Obviously some of the big names we all know—we kind of track that activity—and that has been a big driver. What we are finding with our Nokē product line is folks that are interested in adopting Nokē are taking advantage of that opportunity to disrupt the unit, disrupt the tenants, and do full door replacement. That is a newer use case that is driving the R3 kind of renovation door replacement. Keep in mind, 60% of the installed base is over 25 years old, so there is still a meaningful replacement cycle that exists, and we just have to continue to put ourselves in position to take advantage of that. Phil Ng: Okay. And, Ramey, since you brought up Nokē—good milestone this past year, up quite a bit. I believe we are not far away from that breakeven threshold of 500,000 units where it swings to a much bigger kicker to your profitability. What are you assuming this year in terms of Nokē contribution, and any big ones you want to call out in terms of some of these bigger REITs that have perhaps adopted or committed to more Nokē units for this year? Ramey Jackson: I will let Anselm talk about the metrics, but we remain super optimistic with Nokē. Nokē is addressing a few industry issues right now. A lot of customers are experiencing increased operating costs; our Nokē customers are watching those operating costs go down. There is an issue in the industry around theft and security; our Nokē customers are addressing that and eliminating that element. It is really resonating and building out additional use cases. I am not going to mention names at this point in terms of the larger folks who are working with the solution, but it continues to increase. We are in a much better place in terms of enterprise-grade software. The team has done a phenomenal job on uptime and stability. We plan on rolling out additional products this year, and we are excited. You hit the nail on the head—we are going to hit 500,000 units this year. Anything past that is going to help improve the bottom line, so I am even more optimistic today than I was in the past. Operator: Thank you. We will go next now to John Lovallo of UBS. Matt Johnson: Thanks, guys. This is Matt Johnson actually on for John. I appreciate the time. First off, sales in the quarter were a bit stronger than we were expecting—I think they were above the top end of the outlook as well—while EBITDA was closer to the midpoint, so margin was a bit lower than we were expecting. I think you mentioned it a little bit in the prepared remarks, but were there any mix impacts to call out, particularly on the gross margin side? How should we think about the trajectory of gross margin as we move into 2026? Anselm Wong: As we said earlier, it is the trend of the mix of the North American business being down a bit more than the other BUs that we have. As you know, the margin is a lot different. You saw International continue to be strong in the quarter, and their margin rate is lower than the Americas. That is the trend we saw, and that is what we indicated is going into 2026 in our guide. Matt Johnson: That makes sense. And within the context of the 2026 outlook, how should we think about sales and EBITDA in the first quarter, and how impactful was adverse weather in January? Anselm Wong: If you look at the trend, the trend we talked about continues into Q1, where new construction in the Americas is a bit softer. There is a little weather impact that we have seen as well, so I would expect a slower start for the year. Matt Johnson: Thanks, guys. Operator: And, gentlemen, it appears we have no further questions today. Mr. Jackson, I would like to turn things back to you, sir, for any closing comments. Ramey Jackson: Thank you all for joining us today. We appreciate your support of Janus International Group, Inc. and look forward to updating you on our progress. Have a great day. Operator: Thank you, Mr. Jackson. Thank you, Mr. Wong. Again, ladies and gentlemen, that will conclude the Janus International Group, Inc. fourth quarter and full year 2025 earnings call. Thanks so much for joining us, everyone. We wish you all a great day. Unknown Speaker: Goodbye.
Operator: Good afternoon. Welcome to the Amprius Technologies, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us for today's presentation are the company's CEO, Thomas Stepien, and CFO, Ricardo Rodriguez. At this time, all participants are in listen-only. Following management's remarks, we will open the call for questions. Please note that this presentation contains forward-looking statements, including, but not limited to, statements regarding our financial and business performance, our business strategy, future product development or commercialization, new customer adoption and new applications, our growth and the growth of the markets in which we operate, and the timing and ability of Amprius Technologies, Inc. to expand its manufacturing capacity, scale its business, and achieve a sustainable cost structure. These statements involve known and unknown risks, uncertainties, and other important factors that may cause Amprius Technologies, Inc.'s results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied in such forward-looking statements. For a more complete discussion of these risks and uncertainties, please refer to Amprius Technologies, Inc.'s filings with the Securities and Exchange Commission. This presentation includes a non-GAAP financial measure, which is adjusted EBITDA. This non-GAAP financial measure does not replace the presentation of Amprius Technologies, Inc.'s GAAP financial results and should only be used as a supplement to, not a substitute for, Amprius Technologies, Inc.'s financial results presented in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies. A reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, is included in our press release, a copy of which is filed with the SEC and posted on our website. Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on the company's Investor Relations website at ir.amprius.com. In addition to the webcast, the company has posted a press release that accompanies these results, which can also be found on the Investor Relations website. I will now turn the call over to Amprius Technologies, Inc.'s CEO, Thomas Stepien, for his comments. Sir, please proceed. Thomas Stepien: Welcome, everyone, and thank you for joining us this morning. Let's start with Slide two. 2025 was a landmark year for Amprius Technologies, Inc. Our second generation SiCore silicon anode batteries gained broad adoption with many unmanned aerial vehicle customers. One recent win I would like to highlight is Nokia Drone Networks, whose commercial drone-in-a-box system is one of the most capable platforms on the market. Amprius Technologies, Inc.'s balanced cells provide Nokia drones with the burst power needed for takeoff and the sustained energy required for extended flight, ensuring obstacle avoidance, return to home, and other safety-critical subsystems remain powered throughout the mission. Our technology enables drones to fly longer, carry more, and operate in conditions once considered impractical, helping customers improve safety, reduce downtime, and increase mission value. In early January, we were honored to receive a Best of Innovation Award at CES. Our silicon anode lithium-ion battery was selected from the thousands of entrants for delivering an industry-leading 520 watt-hours per kilogram. For perspective, that is nearly twice the energy density of conventional graphite-based lithium-ion cells. Our cells are lighter, longer, and stronger. In December 2025, the U.S. updated the National Defense Authorization Act. Under the revised NDAA, batteries used in Department of War UAVs must meet two sourcing requirements. First, final battery assembly must be conducted by a non-foreign entity of concern, typically located in the United States or in an allied nation. Second, functional cell components must not be sourced from or produced by FEOC. For new DOW acquisition programs, both of these requirements must be met by 01/01/2028, approximately 22 months from now. NDAA is important in the context of our contract with the Department of War's Defense Innovation Unit. Awarded in July 2025 through a competitive solicitation from the 2024, the contract was recently increased and now totals $14,800,000. The DIU contract provides prototyping funds for Amprius Technologies, Inc. to accelerate production of NDAA-compliant SiCore pouch cells used in military unmanned autonomous systems. The contract includes milestones for supply chain diversification, pilot line expansion in Fremont, California, and the selection of NDAA-compliant contract manufacturing partners. Amprius Technologies, Inc. is ahead of schedule on NDAA compliance. One of our South Korean contract manufacturing partners has been delivering cells to customers since September 2025. We have expanded the Amprius Technologies, Inc. Korea Battery Alliance to three contract manufacturing partners, and in early January, we announced our first U.S.-based partner, Nanotech Energy, located in Northern California. I am happy to report that our scorecard for the battery component sourcing is 11 out of 11. All internal SiCore components—anode, cathode, electrolyte, separator, and seven additional elements—are now sourced from primary and secondary suppliers in NDAA-compliant countries. We are prepared to supply domestic cells to customers such as L3Harris Technologies, which delivers integrated solutions across space, air, land, sea, and cyber in support of national security. On the financial front, we completed our aftermarket financing facility during the fourth quarter. We also fully exited our Colorado facility and settled the remaining lease and expense obligations. Fourth quarter revenue reached a record $25,200,000, representing an 18% quarter-over-quarter improvement and a 137% year-over-year increase. Gross margin improved to 24%, a nine percentage point increase quarter over quarter and a 45 percentage point increase year over year. Full year 2025 revenue reached $73,000,000, 3x our 2024 level. Gross margin for the year was 11%, up significantly from the minus 76% in 2024. Later in this call, Ricardo will share additional financial details and color. Now turning to Slide three. Amprius Technologies, Inc.'s customers choose our batteries because they materially improve the performance of their products. By replacing standard graphite-based cells with our silicon-based cells, customer drones achieve significantly longer flight times. One way to think about our batteries is through the analogy of espresso. Espresso delivers the same amount of caffeine energy as a standard cup of drip coffee but in a much smaller volume. And if you match the volume and weight of the two, espresso gives you roughly twice the energy. Drone customers tell us this consistently. Amprius Technologies, Inc. batteries extend their flight time. In many cases, flight times double. Amprius Technologies, Inc. Xpresso batteries give customers the extra energy they need to elevate system performance. We elevate without compromise. The Amprius Technologies, Inc. silicon anode platform spans 22 cell designs across multiple chemistries, pouch and cylindrical formats, and a range of sizes. We have tuned and optimized cells for specific customer duty cycles, giving us the precision to deliver ideal solutions for energy-focused missions, the takeoff power required by air taxis, and applications demanding high cycle life. This tunability is a significant differentiator for Amprius Technologies, Inc. Slide four looks at our market segments. We serve five principal end markets. The first is UAVs, including drones used for defense, public safety, security, and logistics. Defense platforms that require high energy density typically support long loiter missions and are primarily ISR—intelligence, surveillance, and reconnaissance. Public safety drones are typically DFR—drone as first responder—systems integrated directly into 911 emergency workflows. In the U.S., more than 1,500 emergency departments now operate DFR programs as a part of real-time response operations. Drones are pre-positioned in fixed launch stations across the city and are dispatched automatically or semi-automatically the moment a 911 call is received. The objective is to get a camera over the scene in under two minutes, well before police, fire, and EMS units can arrive. Market segment number two is satellites and space. Satellite launch providers charge customers by the gram, making our ability to deliver the same energy at roughly half the weight—our espresso advantage—extremely valuable. Alto, a division of Airbus, is a long-standing customer in this segment. Its Zephyr high-altitude pseudo satellite are solar-powered aircraft that operate at 70,000 feet for months at a time. The persistent ISR capability that Zephyr provides is strategically important for both defense and commercial applications. Amprius Technologies, Inc. cells are also gaining strong traction in light electric vehicles—e-motorcycles, scooters, and e-bikes. Wins in this segment typically align with the launch of new models, so revenue tends to be lumpier than in other markets. This category also includes a healthy replacement and range extender sub-segment, an area we are beginning to explore. Robotics is our fourth market segment, and while still early, it is developing quickly. Robot performance is closely tied to battery capability, and Amprius Technologies, Inc.'s tunable cells can deliver both the high power needed for tasks like lifting and the energy required to maximize time between charges. With strong growth rates and expanding use cases, this segment is highly promising. The final segment that depends heavily on our industry-leading energy density is the electric vertical takeoff and landing aircraft, eVTOL, and other advanced air mobility. Customers are developing autonomous, point-to-point regional transport for both passengers and cargo. Several companies are currently testing our cells, and we have a customer-funded joint development program underway with one leading company. In this program, we are tuning our chemistry to meet the specific power and energy requirements of their aircraft. Turning to Slide five. Amprius Technologies, Inc. captures customer interest through our flexibility. We work closely with customers to understand their energy, power, and cycle life requirements, then select internal components that meet those needs while aligning with country of origin constraints. Because SiCore cells are produced on standard lithium-ion equipment, we can secure early design wins from our California pilot line and seamlessly transfer cell recipes and process steps to our contract manufacturing partners as volumes scale. During Q4 2025, we introduced three new cells to our silicon anode platform and retired one. The portfolio now stands at 22 designs spanning energy, power, and balanced cells in both pouch and cylindrical formats. We continue to offer the tunability, speed, and flexibility our customers rely on. Now turning to Slide six. Increasingly, customers care about the country of origin for both battery cells and internal components. Much of this is driven by the NDAA requirements discussed earlier, and the impact now extends to non-defense customers as well. Avoiding foreign entities of concern has become a compliance mandate, not just a marketing detail. Procurement teams are asking detailed questions about where cells are manufactured, where anodes and cathodes are processed, and where critical minerals originate. Fortunately, we anticipated this shift and began executing more than a year ago. In 2025, we announced our first NDAA-compliant contract manufacturer in South Korea, which delivered cells to customers just one quarter later. Last week, I was in South Korea with several of my Amprius Technologies, Inc. colleagues visiting component suppliers, checking in with current contract manufacturing partners, supporting new partners coming online, and meeting customers at our booth at DroneShow Korea. We still have work ahead on the NDAA supply front. With multiple contract manufacturers, 22 cell models, and 11 internal components, aligning every variable is operationally intensive. But we got an early start, we invested wisely, and we consistently share our progress with customers. They understand our roadmap, for both cell manufacturing and for cell content sourcing, and they respect our ability to deliver the right cell from the right location at the right time. On Slide seven, we present our high-level cell roadmap. The Amprius Technologies, Inc. roadmap highlights our industry-leading energy density on the vertical axis over the next 18 months. It organizes our portfolio into three cell types: high energy cells, where long uptime drives range and usability—key segments here include drones, robotics, and LEDs; high power cells, which deliver short, intense power bursts—applications include power tools, data center backup systems, and aviation platforms such as eVTOLs and drones that require power pulses for takeoff and landing; and long-life balanced cells designed for applications that demand both power and energy along with extended cycle life—these include eVTOL, satellite, and bendable device applications. We routinely share this high-level roadmap and the detailed information behind it with customers. We listen closely to their needs, incorporate their feedback, and adjust the roadmap as required. I will now turn the call over to Ricardo Rodriguez, for the financial results. Thank you, Tom, and good morning, everyone. Ricardo Rodriguez: I am very happy to be reporting another record-breaking quarter on behalf of our team, starting on Slide eight. In the 2025, we delivered $25,200,000 of revenue. This translates into 18% growth over the third quarter and is over 2.3x higher than the same quarter last year. I am particularly excited about crossing the $100,000,000 annual revenue run-rate mark, which positions us to deliver over $1,000,000 of revenue per employee, joining a very selective and unique group of companies. Echoing Tom's remarks, clearly the monster role technical edge has continued driving demand for our products as we broadened the portfolio and expanded our capacity in close collaboration with our manufacturing partners. For the year, our revenues were $73,000,000, in line with our expectations and just over three times higher than 2024. Our Q4 cost of goods sold, at $19,300,000, did not increase at the same rate as the revenue, thanks to a favorable product mix and higher volumes. This enabled gross profit margins of 24%, a significant improvement over our Q3 gross margin of 15%. Our lower SiMax line mix was now below percent of revenues, providing a powerful driver of our gross margin improvements. For the year, gross margins were 11%, reflecting a step-change improvement over negative 76% gross margins in 2024 as our revenue from SiCore increased around the world. Our resourceful culture enabled the team to only spend $8,900,000 of OpEx, which excludes a one-time charge of $22,500,000 linked with our decision to not develop a facility in Colorado and the decommissioning of some equipment in Fremont. The quarter-over-quarter increase in OpEx of $900,000 was driven by a targeted investment in our sales and go-to-market efforts along with the reallocation of some R&D expenses from cost of goods sold to OpEx as development services agreements are completed. These expenses, including the one-time charge of $22,500,000 that I mentioned earlier, bring our Q4 operating loss to $25,400,000 compared to an operating loss of $4,700,000 in the prior quarter. Without the one-time charge, our operating loss would have been $2,900,000, which would have reduced our operating loss by 37% quarter over quarter. A similar dynamic applies to our annual operating loss of $46,600,000, which would have been $24,100,000 without the same one-time charge and the 48% reduction of the operating loss of $46,200,000 from 2024. Our GAAP net loss for the third quarter was $24,300,000, or negative $0.18 per share, based on 132,100,000 weighted average shares outstanding. Without the one-time charge, our loss would have been only $1,900,000, or $0.01 per share. In Q4, we recorded adjusted EBITDA of negative $1,800,000 compared to negative $1,400,000 in the prior quarter. With $1,600,000 in operating costs from Colorado, we would have actually had positive adjusted EBITDA of $177,000 in 2025. As a reminder, we define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation, and other items that we do not believe are indicative of our core operating performance. In Q4, these adjustments included $1,200,000 of depreciation, $1,900,000 of stock-based compensation, $1,100,000 of interest and other income, along with $1,600,000 of quarterly operating cost linked to the Colorado facility. If we adjust our EBITDA for the costs that we will now not be incurring in Colorado, our adjusted EBITDA in 2025 would have been negative $5,300,000, reducing our EBITDA loss by 77% year over year and putting us on a path to have positive adjusted EBITDA above our current revenue run-rate. As of the 2025, we had 134,500,000 shares outstanding, which was up by 4,100,000 from the prior quarter. The change includes approximately 2,300,000 shares issued from option exercises and RSU vesting along with 1,800,000 shares issued under our at-the-market offering program. Now turning over to cash flow and the balance sheet. We ended the third quarter with $90,500,000 in cash and no debt. The main drivers of cash flow in the quarter were the following: $13,500,000 used in operating cash flow was mainly driven by a near-term $1,800,000 increase in accounts receivable and a $2,100,000 increase of inventory. $2,240,000 of Q4 investments that are being funded by the Defense Innovation Unit, or DIU, as part of our project to stand up NDAA-compliant pilot and manufacturing lines. This brought our total CapEx in 2025 to $4,400,000. And lastly, $23,100,000 from financing activities consisting of $19,600,000 from the issuance of common stock under our at-the-market sales agreement and $3,500,000 of proceeds from warrants and option exercises. As we announced on January 12, we have now terminated our at-the-market offering program. Before I turn the call back to Tom, I would like to take a moment to frame out our outlook for 2026 and the North Star beyond that using Slide nine as the backdrop. With what we know today, we believe that by leveraging our platform and existing relationships, we can deliver at least $125,000,000 of revenue in 2026, which would enable us to have our first full year of adjusted positive EBITDA of at least $4,000,000. This baseline level of profitability would translate into a net loss of $8,000,000 for the year, or $0.06 per share, assuming 134,500,000 shares. When we say at least, we mean that we believe that while we are positioned to deliver additional upside, we would rather size this incremental opportunity as it happens than commit to delivering it as we work our way through what can be a great year for Amprius Technologies, Inc. Our CapEx for the year will be less than $10,000,000 as we have made a decision to strategically invest in diversifying our supply chain and expanding manufacturing capacity within our Fremont facility to include electrode manufacturing. As noted earlier, we are doing this in collaboration with the U.S. Government Defense Innovation Unit and have secured a contract for $14,800,000. With what we know today, we expect this funding to cover most of our capital over the next several quarters as we work to develop a growing and resilient source of supply in a dynamic trade environment. Last month, alongside the announcement of our agreement to produce cells with Nanotech Energy in the U.S., we also reported that we eliminated a lease and related expense obligation of over $110,000,000 in Colorado by settling it for $20,000,000. As a result, you can expect our cash position in Q1 to decrease by that amount, along with the reduction of $13,400,000 in right-of-use assets and the $33,200,000 reduction in near-term liabilities in our balance sheet. In forecasting our cash burn, we believe that our current revenue level and even slight improvements from these can put us on a path to mainly consuming cash for working capital versus funding operating expenses in the near term. Looking further ahead, we believe that as we work through 2026, it will become increasingly clear that our plans to build an efficiently scaled, multi-market leader that sets the technical pace in high energy and density power cells are realistic. As we close out the decade, we are targeting making the most of over $600,000,000 of contracted capacity by enabling our customers’ most mission-critical duty cycles and positioning us to deliver over 30% gross margins. By maintaining our resourceful culture and low-cost structure, we can then translate that into at least 20% EBITDA margins. Most importantly, the capabilities in go-to-market, product development, quality assurance, and enabling scale that we would have by then would position us for additional growth beyond 2030. That opportunity has our team energized and motivated to work together to meet and hopefully even surpass these goals by improving ourselves and how we work. With that, I am happy to turn the call back to Tom for his closing remarks. Thank you very much for your attention and continued support. Thomas Stepien: 2025 was a very strong year. We delivered consistent quarter-over-quarter revenue growth, expanded our customer base to more than 550, demonstrated state-of-the-art technical performance, and achieved three consecutive quarters of positive and growing gross margin. The lithium-ion battery market is intensely competitive, and we embrace those challenges. In 2026, we remain focused on delivering next-generation silicon anode performance that raises the bar for energy density and sustained power without compromising safety or reliability. We are equally committed to meeting the cell manufacturing and content country of origin requirements our customers expect. We will broaden our product portfolio to unlock new market opportunities and convert a growing number of customer engagements into formal qualifications and deployments, particularly across mobility-centric platforms. We are starting 2026 in a financially clean position, having completed our ATM program, fully exited the Colorado facility, and transitioned all legacy SiMax Generation One customers to our Generation II SiCore platform. We are incredibly bullish about the opportunities in front of us. We look forward to meeting and reconnecting with many of you as we participate in a number of upcoming investor conferences. Thank you for your continued interest and support of Amprius Technologies, Inc. With that, I will turn it back to the operator for questions. Operator: Thank you. We will now open for questions. Ricardo Rodriguez: I ask you please limit yourself to one question and one follow-up. Operator: The first question is coming from the line of Eric Stine with Craig Hallum. Please proceed with your question. Eric Stine: Hi, Tom. Hi, Ricardo. So curious—maybe if we could start just with the selection of the 11 components. I mean, a quite significant step. But just curious, you talked about it a little bit, Tom, but just maybe a little bit more in-depth about what you need to do now, what some of the steps might be in 2026. Obviously, you have got a head start, but those steps as you work towards gaining that full compliance, and I would assume you are trying to do that well in advance of the 01/01/2028 date. Thomas Stepien: Yes, good question. So we have technically selected anode, cathode, electrolyte, separator, and [other elements] that make up the internals of our battery and give us the internal performance that we talked about. We have primary vendors and secondary vendors. It went through a pretty rigorous testing process. This all started with the DIU project back when it started in July '25. So we have had six, eight months to turn the knobs here. So we are happy with the performance of the cells with the different internals. In fact, in some cases, we see slightly improved performance compared to the legacy components. So that is where we are. The work that remains includes productizing and getting all of those new suppliers under multiyear agreements. Part of what I was doing in South Korea last week is talking to some of those suppliers because Korea is, outside of China, probably the second largest country in terms of suppliers. There are ones in Japan. There are suppliers here in the U.S., etc. So we need to put those agreements in place, make sure that we can operationalize it, get them to deliver their components to our contract manufacturer. So there is some operational work. There is some supply chain work that is still on our plate to complete to finally deliver full cells at quantities that our customers are demanding. Eric Stine: Got it. So it sounds like you are really through all the technical or the engineering side of it. It is now more about just making sure that—yes, you have qualified those sources—but can you lock those down and be able to incorporate those in your products for, obviously, larger volumes? Thomas Stepien: That is a good way to summarize it. The heavy lifting on the technical side is done, and now it turns over to our operational teams who need to do exactly that and get the supplies. Eric Stine: Appreciate that. And then just maybe for my follow-up, saw the first Gauntlet Awards under the Drone Dominance Plan, and I know there were 25 awardees. I do not know if you are able to give specifics or any color around this, but of those 25 awardees, just kind of curious how many of those are your customers? How do you view that as an opportunity? And then obviously, just your outlook for the next steps under the executive order? Thomas Stepien: Yes. The gauntlet one of the Drone Dominus program had 25 invitees. We should see here in the next couple of days the results of the actual fly-off that has completed. Our understanding is that it was done last week and there is a down-select going. We are all over that in terms of understanding where is Amprius Technologies, Inc. inside in each of the 25. We are looking forward to understanding the official down-select list that, again as I mentioned, should be [out shortly]. So that is where we are. Stay tuned on specifics. I think as that list is published, we may be able to talk about [more]. Understand there is a second, third, and fourth gauntlet, so this will happen over the next 18 months or so. This is early, but we feel good about where we are today. Operator: Thank you. Our next question is from the line of Austin Volle with Needham and Company. Please proceed with your question. Austin Volle: Hey, guys, thanks for taking my question and congrats on the great results. I just wanted to dive into the new customer wins. Historically, this was a metric you guys were giving. In the deck, it says that you are working with 550 customers. So, my question is, is it fair to assume you guys added over 100 new customers in the quarter? And then just trying to get a sense of where they are in volume production. Are we still kind of in the early design phase for the majority of these? When do we get to those high-volume production levels? Thomas Stepien: It is fair, Austin, to assume that it is more than 100. It was 444 in the last call in November. You said 550. So yes, we continue to add to that. We have both repeat customers, of course, which is an interesting signal that we have earned the trust and can grow that, and we continue to expand the funnel with over 100 new logos. In general, the 100 new ones are new evaluations, right? Some of these are a couple of hundred cells for testing. They come from our Fremont pilot line, which is set up exactly to win these [programs]. So we keep track of those because we are planting seeds first. The average PO—we looked at that just the other day—during Q4 increased relative to Q3. Customers are purchasing larger volumes. But it is still early days here. You can obviously do the math on our revenue; we are at single-digit market share in these markets, and growing. So, it is early. We have a lot of work to do to capture what we believe is our fair share given our tech. Austin Volle: Okay. Thank you for that. And just one quick follow-up. Looking at your guidance and kind of what is baked in from a geographic perspective—historically, Europe or international has been the main driver. Could you talk about what is baked into that and what we should be expecting from a regional perspective? Ricardo Rodriguez: Yes, sure, Austin. We see a continuation of the same trends that we saw especially in Q3 and Q4, and are really waiting to see where the U.S. comes out in terms of enabling us to deliver additional upside. So, frankly, within the guide, we expect our mix to look pretty similar to where we were in Q2, Q3 of last year. Austin Volle: All right. Well, thank you, guys, and best of luck for the rest of the year. Ricardo Rodriguez: Thanks, Austin. Thank you. Operator: Our next question comes from the line of Mark Schubert with William Blair. Please proceed with your question. Mark Schubert: Tom and Ricardo, congrats on the great progress in 2025. Question about some recent geopolitics. The war in Iran—we are starting to see the U.S. drone warfare capabilities. But at the same time, we are starting to see some strain in the munition stockpiles. So I am wondering, in the past six days, have you had any increased urgency from any U.S. military defense contractors? Are they looking for you to ship more batteries yesterday? Thomas Stepien: Yes. Over the weekend, we actually had one customer who themselves have a reconnaissance drone—tends to fly for hours and days at a time—that was a little bit on hold that is getting a pull themselves, which creates a pull for us. And that is where this pilot line we have here where, for Ricardo and I, are in Fremont and quickly do a student body right. Okay, let's make those in this one and eight cells. Deliver them quickly, i.e., in a couple of weeks, to that. So we are seeing some of that. It is hard to talk about more than that, just a single customer, but that is one data point to share. Mark Schubert: The Nanotech partnership we thought was a creative solution to find some capacity. How much demand are you seeing from these super NDAA-compliant customers where they need U.S. manufacturing? And are you looking to find more creative solutions like another Nanotech, or do you think that the pilot line that you are increasing capacity in Fremont with the DIU investment will provide enough capacity later this year? Thomas Stepien: Yes. The pilot line is well named because it is primarily to win initial designs. And once there is volume that is a couple of thousand cells, that is when we transfer to one of our partners. Nanotech helps us on cylindrical cells, and we are getting a really strong pull. I was at [customer meetings in] December. As the NDAA changes [rolled out], they are okay with some of the cells they are getting today from the countries and content today, but they really want to understand the when. We mentioned that earlier. So we share with them the roadmap—here is when we are really going to have volume from either Nanotech or others. And there will be more coming. That is clear. The pull is there. This will balance out in a couple of years. Some of our customers are insensitive to this, and Korea is serving that, as I mentioned. As we know, we have sales from Korea today, and some must have U.S. So it will balance out maybe one-third, one-third, one-third, in a couple of years, grading that transition. Operator: Thanks, Tom. Your next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question. Colin Rusch: Thanks so much, guys. Tom, I would love to get a better understanding of what is happening here within the technology roadmap. Are these fundamental changes in some of the electrolyte and binder technologies or any of those separator technologies as you move towards these higher performance cells? And how mature is the testing process to give you comfort that you will be able to execute on these over the next 18 to 24 months? Thomas Stepien: Yes. We think that—let's go inside the battery a bit. So the anode with our silicon design, which took us a little while to get right, we think is pretty strong. So the big question is, okay, why cannot we go above 450, 500—depending on the cell type—watt-hours per kilogram? Is that some of the other components, as you alluded to? Primarily on the cathode. So there are knobs being turned by our R&D folks. The thinking is that cathode may be slowing down the overall package. So there is some work being done. We had a Board meeting yesterday and shared our goals to the Board on specifics related [to that], and it is very focused on improving that. We are big believers you get what you measure. We are measuring our energy density inside. We are R&D focused on that. On the testing part, we feel pretty good. We have got a pretty robust system here at the small scale, the manual scale P&L, and then as these 30 different tools arrive, funded by the defense unit, that is getting stronger. Colin Rusch: The performance that you are talking about here from a technology perspective is just fundamentally advantaged and looks defensible in a pretty material way. And the target market that you guys are looking at are so much larger than what it looks like the target is for 2030. So can you talk a little bit about the considerations around the pacing of growth, pricing and margin, kind of internal targets as you think about growing this platform and doing it sustainably? How should we think about the key gating items and how we should think about potential acceleration relative to those targets? Ricardo Rodriguez: Yes, Colin. So again, I think this all really just starts with the technical performance that we are able to deliver. So in our view, if we deliver everything that is there on Slide seven, and the markets grow—maybe not even to the full extent, but half of what we have on Slide four—we look at some of the main drivers. And as we were looking at the markets, one element that people forget about: there is a bit of a replacement dynamic within some of these end applications. And then it really comes down to us leveraging the capacity that we have contracted, having that capacity in the right place, so that we can deliver the right cell at the right time from the right place. And, yes, when we look at it, I agree with you. I think that is why we have $600,000,000 plus. We will find out over time what capacity is needed in 2030. But with the way we are looking at the world today, I think this is, as you mentioned, pretty achievable. Colin Rusch: Thanks so much, guys. Thomas Stepien: Thank you, Colin. Operator: The next question comes from the line of Ryan Pfingst with B. Riley Securities. Please proceed with your question. Ryan Pfingst: Hey, good morning, guys. Thanks for taking the questions. Hey, Ricardo. Tom, you mentioned market share earlier. Could you frame how you are thinking about your aviation market share today, maybe for drones globally? Or if you could get more specific within military drones or advanced drones? Thomas Stepien: Yes. Thanks, Ryan. It is, as we have said, single digits. These markets are large and growing. We have updated—and you see that on Slide four—our understanding that also goes into our 10-Ks. We are trying to really double-click on that for some of the specifics. Drone taxonomy is groups one through five. Okay, we know that batteries are used in one, two, and half of three. Not in four and five. How much of that is industrial versus defense? What is going on by region? DFR—drone as [first responder]. We have not yet found a good source for that double-click. We got the first click to understand as we present it, but our goal is to have more definition that we can have both internally and share externally. We have started—we have a good third party who is helping pull that together. But it is so early and it is changing so fast, right? This dominance program, the U.S. has admitted that, hey, we got to catch up. So what we have today is what we can share. We are not holding anything back, but we are certainly trying to get smarter and understand that better. Ricardo Rodriguez: And Ryan, the point that we are trying to drive here is that our share depends on how you subsegment the market. In some cases, our batteries basically enable the duty cycle. By the time you power the drone, a camera, a gimbal, a radar, multiple sensors, you wonder how there is energy left in the battery to still make the drone fly a couple of miles away. And so we are seeing our share be pretty high on those drones that have a lot of other power-draining devices, while those more inexpensive drones—some of them are frankly using remote control car batteries—and therefore that is not a market for us to play in, even though the volumes are pretty high. So we do believe, just through process of elimination of the folks who are not yet customers, that we are positioned to do very, very well in that high power, high energy draw drones—tend to be the larger ones that are used for surveillance or more complex missions. Ryan Pfingst: Got it. Appreciate that detail. And then just a follow-up on guidance. Could you give more detail around what is baked into the baseline revenue estimate, maybe what needs to happen to exceed it? And what your revenue capacity is roughly today? Thomas Stepien: Yes. I will answer it sort of in reverse order. In our assumptions is what we see from current customers and some prospects that we are looking to convert here into customers in Q3 and Q4. Sort of going back to Austin's question, we still see the UAV market accelerating from being pretty well established in Europe. And what is not baked in fully just yet is any [incremental upside] that could come from additional drone production and sourcing here in the U.S. So in our guide, we are still assuming that the mix is meaningfully outside of the U.S. for 2026. And as I said, we will size the upside here as we deliver it because there are some pretty quick decisions being made on the U.S. side around what this demand could be. Alongside some of the calls that we got here this weekend and have been getting this week, we do see this evolving favorably from a demand perspective, but we want to size it with POs, not with some loose idea of what the pipeline is. Ryan Pfingst: Appreciate it, guys. I will turn it back. Thomas Stepien: Thank you. Operator: The next question is from the line of Ted Jackson with Northland Securities. Please proceed with your question. Ted Jackson: Thanks very much. I hope you can hear me—a xylophone band literally set up behind me in the airport while I was on this call. So it is really loud. I have got a lot of really nice ambient music for you. I had a couple of questions. So, a real simple one. You made a comment, if I recall, that your SiMax revenue has fallen about 60% of total—I guess, we are ongoing—and then you have transitioned your Gen One SiMax customers to Gen Two SiCore. So I guess my question is, what was the mix of revenue SiMax or SiCore coming into the year? What was it coming out? Where do you see it at the '26? Ricardo Rodriguez: At the '26, we see it zero. And coming in it was about 25%. Ted Jackson: Okay. Then my next question—with the NDAA compliance success that you have had, in terms of getting all your suppliers in place and your contract manufacturing in place—where do you think you stand in that process vis-à-vis the market as a whole? Do you think that you are on a path with everyone else or perhaps a few lengths ahead? And do you see the ability to get there first as a competitive advantage? Thomas Stepien: Yes. So we think that we are near the front. It is hard to know whether we are at the front. Every battery manufacturer got the memo and is looking to serve. We tend to take “only the paranoid survive,” so we never really want to think of ourselves as being at the front. We are happy with our industry-leading advantage, etc. We are working hard. We have got work to do for sure. As I mentioned, there is more announcing here—work is underway. You can imagine that there is a lot of effort long before things get announced. So we are happy with where we are. We are very focused on making sure that we keep up with [demand] because it is [evolving quickly]. So happy, but work to do. Ted Jackson: Okay. And then my last question—just looking over at Slide four over to the right where you have your OEMs and key market players. You have a lot of corporate logos up here. Have all of these logos in some form or fashion sampled or looked at the Amprius Technologies, Inc. product? Are they customers? How much do you give to someone with this—like, some of them you have clearly announced as customers, some we have not. Are these all people that you actually have kept making your battery in the past for some form or fashion? Thomas Stepien: Yes. You are right. Some are customers. The title of that column on Slide four is appropriate, key market players. So some are customers that we can talk about publicly, some are potential customers where we are in testing, and other ones we have to earn their trust. So that is the mix that we have on that right-hand column. Ricardo Rodriguez: But in general, these are all folks for whom it would be logical to buy cells from us. And they may have bought cells at low volumes for testing as well. Ted Jackson: Okay. I will step out of line. Thanks very much and congrats on the quarter. Operator: Thanks, Ted. Thank you. Our next question is from the line of Derek Soderberg with Cantor Fitzgerald. Please proceed with your question. Derek Soderberg: Yes. Hey, guys. Thanks for taking the questions and my congrats as well on the results. First one on the Nokia—hey, the first question is on the Nokia Drone Networks. Is this sort of a single product win? Is it more of a platform win? Can you talk a bit about the unit volumes and ramp timing for that? And then as we sort of look into exiting the decade, can you sort of talk about how large the opportunity would be with the Nokia piece? Thomas Stepien: We like Nokia, Derek, because it is a communications platform generally, right? Our understanding of this platform is that it is able to beam 5G signals to difficult-to-reach places where you cannot easily install cellular. It is a platform. If you talk to the Nokia guys, there is a lot of work that they have planned in the future, and they have their roadmap, of course. We do not tend to break out specific customer volumes and share those. We do like this because it emphasizes what we say—this espresso advantage. Nokia drones with our batteries can fly 40%, 50% longer, and other customers twice the flight time compared to standard batteries. That is what led them to us. Derek Soderberg: Got it. That is helpful. And Tom, you have got a validated technology, hundreds of customers. You have been commercial for seven, eight years now with Fortune 500s. You really have had a head start, at least in the drone opportunity. How do you think you can best leverage that position to really accelerate the growth of the business? Thomas Stepien: Yes. It is about execution on the operational side for sure—to get the customers what they want, when they want it, and from the right place. We are also investing into the customer-facing side of the house. We have added to our sales team. We have a pack partner program that is embryonic but growing. Some of our cells go directly to the folks who make crafts—products that fly or roll or walk around like robots do. Others go through pack houses, and those packs then go into those end-use products. So we are investing there for sure. We are investing in some of our internal processes. We want to be able to meet and exceed this demand that we see. Derek Soderberg: Super helpful. Thanks, guys. Operator: Thank you. Our next question is from the line of Chip Moore with ROTH Capital. Please proceed with your question. Chip Moore: Hey, good morning. Thanks for taking the question. I want to follow up—actually, you brought up a good point on the replacement dynamic for batteries. Have you done any sort of analysis on what replacement can become as some of these markets mature, understanding that some of them are still pretty nascent? Where do you think that can go over time? Ricardo Rodriguez: I think it can be pretty meaningful depending on the market. In eVTOLs, it could very well be even more than the initial install volume if these things are—almost the same way, if you look at jet engine manufacturers in planes today, the maintenance and the replacement of those parts within those jet engines make the Rolls Royces of the world more money than selling the jet engine the first time. And that is a dynamic that you obviously do not see in EVs because you hopefully do not have to replace the battery—you just replace the whole car. But in UAVs, in robotics, in eVTOLs, we are seeing a little bit of a razor–razor blade dynamic, where the replacement market could be even larger than the initial sale market. And so, of course, depending on what assumptions you have for that, you end up with completely different market sizing. There is also a lot of work that can be done here to develop a standardized battery pack, and so this is something that we think about pretty frequently. We are looking for the right way to frame this out for the industry so that we do not have customers pulling in different directions when the duty cycle and the requirements are pretty clear and where we can drive meaningful convergence. Chip Moore: Yeah. No. That is helpful, Ricardo. And maybe just for my follow-up—appreciate all the new detail in the slides, great job. On the market slide, on Slide four—huge opportunities. What about opportunities outside of those core markets—fast charge and discharge capabilities, data center at the rack level, higher-volume electronics? Just maybe quickly address some of the adjacencies. Thomas Stepien: Yes. We alluded to this in Slide seven. There is a little picture of a data center there for the high power cells. That is an opportunity. Another one that we are looking at are battery packs for military applications. So the average soldier carries over 100 pounds of gear, and the standard battery packs currently use standard lithium-ion cells. If we bring higher energy density, we believe that we can cut the weight of those packs in half, potentially even make them more powerful. And if you combine them with something like a supercap, you can even trim the upper bounds of power peaks that tend to degrade batteries further. So, theoretically, we could cut the weight of those things in half or double their capacity. Then at the same time, almost double the life of those battery packs, therefore reducing the need to replace them as frequently. So, outside of what we have in Slide four, high power cells for data centers are obviously a market. And then anywhere else where you are using a battery pack, particularly in military applications—looking to leverage some of the customers that we already have—those would be other ancillary opportunities. Thomas Stepien: And maybe just to pile on, some of the characteristics that we show on Slide three are inherent with the silicon platform. Fast charge is up—and by the way, we also can charge a lot faster—and we have a wider temperature range. So we lead with our strengths—our only-ness is energy density, or metric density. But some of these other ones really help secure the win and secure the long-term relationships that we are building with customers. Chip Moore: Excellent. Thank you very much. Ricardo Rodriguez: Thanks, Chip. Operator: Thank you. Our last question comes from the line of Amit Dayal with H.C. Wainwright. Proceed with your question. Amit Dayal: Thank you, guys. Good morning. With respect to trying to bring manufacturing costs down or the price of the batteries down, do you have any room as you iterate on your side and how much of that may come from the engineering side from your end versus what the contract manufacturers can support you with? Thomas Stepien: Yes. Certainly design is a big lever for sure. Volume plays a part also. As we get volumes up, there is some pricing that we see with the 11 suppliers we have. And then we are getting into that, as we mentioned, as we go full NDAA with the contracts and the negotiations with suppliers on the 11. So we are in the midst of some of that. But the good news is that volumes are increasing. That is a big lever. And then we will see that. When we do talk to customers and they are insisting on U.S., that is where this interesting dynamic comes in—where they want U.S., but they want pricing. So we tend to have a little bit of an arm-wrestle. But in general, we are happy with the margins we see. And you, of course, understand the guidance. I think we can get [there]. Amit Dayal: Understood. Thank you, Tom. And then just last one for me. In terms of your balance sheet, it looks really solid with over $90,000,000 in cash. It looks like at this point, you really do not need to tap the ATM anymore. Especially going into sort of a capital-light strategy with Colorado out of the picture now, what are the uses of that cash that we can think of that could maybe accelerate sales or product development? Any color on that would be helpful. Ricardo Rodriguez: Yes. I mentioned in my remarks, Amit, with the current balance sheet, we are really only looking to fund working capital. As I mentioned, our CapEx will be funded by the DIU here in Fremont. Any little bit of incremental CapEx that could be needed at the contract manufacturers to accelerate production if demand ramps up even beyond our expectations will also be funded by the balance sheet. We are also looking at putting in place a working capital line with some of our banking partners to further scale the balance sheet. And then, yes, as you mentioned, earlier this year we put out an announcement saying that we are basically done with the ATM. I think the ATM did its job over the last two years. And right now, as you mentioned, the balance sheet is solid. We think our current strategies are more than fully funded. Amit Dayal: Understood. Thank you, guys. That is all I have. Thomas Stepien: Thanks so much. Take care, Amit. Ricardo Rodriguez: Thank you. Operator: This concludes our question and answer session. I will now turn the floor back to management for closing comments. Thomas Stepien: Thank you so much for joining us on the call. Stay tuned. We look forward to meeting some of you on the road here as we attend a couple of Investor Relations events. Be well, and thanks for your support. Ricardo Rodriguez: Absolutely. As we talked about, 2025 was a great year. We think 2026 can be even stronger as we play to our strengths—our energy density—and continue to push new products, expand our portfolio, respond to the country of origin requests. We are in a fortunate position. We are certainly in it to win it, and we appreciate your support. Operator: Ladies and gentlemen, this will conclude today's conference. You may disconnect your lines at this time and have a wonderful day.
Operator: Greetings and welcome to the Viemed Healthcare, Inc. Fourth Quarter Year End Quarterly Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trae Fitzgerald, CFO. Thank you. You may begin. Trae Fitzgerald: Thank you, and good morning, everyone. Ryan M. Langston: Please note that our remarks on this conference call may include forward-looking statements under the U.S. federal securities laws or forward-looking information under applicable Canadian securities legislation, which we collectively refer to as forward-looking statements. Such statements reflect the company’s current views and intentions with respect to future results or events and are subject to certain risks and uncertainties, which could cause actual results or events to vary from those indicated in forward-looking statements. Examples of such risks and uncertainties are discussed in our disclosure documents filed with the SEC or the securities regulatory authorities in certain provinces of Canada. Because of these risks and uncertainties, investors should not place undue reliance on forward-looking statements. The forward-looking statements made in this conference call are made as of today, and the company undertakes no obligation to update or revise any forward-looking statements, except as required by law. The fourth quarter financial supplement and financial news release, as well as the related financial statements, are available on the SEC’s website. I will now turn the call over to our CEO, Casey Hoyt. Casey Hoyt: Thank you, Trae, and good morning, everyone. I appreciate you joining us. Today, we will recap our 2025 performance, discuss the progress we achieved strengthening the platform, and outline how we see the business evolving as we enter 2026. 2025 was a milestone year for us. We delivered record revenue and record adjusted EBITDA, generated significantly higher free cash flow, and made real progress diversifying the business in ways you can clearly see in our results. We are building Viemed Healthcare, Inc. into a cash-generating home care platform with multiple growth engines, and we continue to differentiate ourselves through our high-touch clinical model and technology-enabled approach as we scale. As we move into 2026, we are doing it from a position of strength. We continue to execute well. We are seeing good early signals in the business, and we feel great about the long term in front of us. You can see that in the momentum continuing to build in sleep and resupply, the progress we are making in maternal health, and the way our technology investments are helping us operate at a higher and more capable level across the platform. None of it happens without our people. I want to thank our team for the compassion, professionalism, and commitment they bring to patients every day. We continue to build our workforce in a disciplined way, including developing talent pipelines through Viemed Healthcare, Inc. staffing and integrating new team members from acquisitions. We ended the year with 1,382 employees across the country, and I am proud of how consistently they deliver high-quality care and execute with integrity. That level of commitment matters most when caring for chronically ill patients in the home, and it is at the core of our complex respiratory offerings. In-home ventilation drives real and significant outcomes for patients, and we continue to see a meaningful long-term opportunity here given the underserved and underpenetrated population coupled with the increasing clinical demand. During the fourth quarter, we did see some moderation in ventilator patient growth; it is largely what we expected. The industry is continuing to work through the updated national coverage determination, and the changes are twofold. First, there is a natural operational effort when implementing new documentation and process requirements under the NCD. Our team and processes at Viemed Healthcare, Inc. were well ahead of the curve and proactively addressing the new requirements. The Engage patient platform, which is our proprietary technology deployed in the homes of our patients, has played an instrumental role in providing data that helps our therapists manage and report on real-time compliance metrics. We have also spent significant time in the field re-educating our physician referral sources and patients on how these new requirements affect qualification and ongoing care. Second, the updated criteria mean some patients who previously may have qualified under the prior framework may not qualify today. What is critical to understand is that the underlying demand and clinical need remain strong. This is primarily a coverage and execution transition, and throughout 2025, we invested in the infrastructure to navigate it well. That includes strengthening our compliance capabilities, supporting physician education, and tightening our internal workflows to align with the updated requirements so we can serve the right patients the right way under the current criteria. More importantly, the move toward more objective criteria is something we have long supported. Our view is that, over time, the new NCD changes will reduce uncertainty across the system and ultimately put scale providers like Viemed Healthcare, Inc. in a stronger position. We are already seeing progress entering 2026. A number of patients who previously were denied coverage under more subjective Medicare Advantage criteria are now qualifying under the new NCD standards. Under the new NCD, we have had a 100% success rate at the administrative law judge level on the Medicare Advantage denials we have appealed, which reinforces the appropriateness of the patients we serve and the strength of our documentation. We are also seeing denials resolved earlier in the Medicare Advantage appeals process, which improves reimbursement timing and reduces uncertainty. January was one of the strongest new ventilator setup months in our history. That gives us confidence that, as referral partners get more comfortable with the criteria and our execution continues to improve, we will establish a more consistent growth cadence. So, in summary on the NCD, while there has been some short-term friction as the industry adjusts, the work we have completed early positions us well going forward and supports a long runway for growth in our complex respiratory market. More broadly, as we think about the regulatory environment, I also want to briefly address the recent CMS update regarding the next round of competitive bidding. Based on the categories identified by CMS, we do not expect the announced round of competitive bidding to apply to any of our current product offerings, including ventilators, or to have a material impact on our business. That said, the broader compliance and program integrity elements included in the update continue to favor scale providers with strong documentation, operational controls, and national infrastructure—areas where we have been tested for many years and we know we are well positioned. As regulatory clarity continues to improve, it creates a stable foundation for growth across the platform. That stability is allowing us to progressively move into areas that are scaling quickly, particularly sleep and resupply. What started as a complementary service has become a meaningful and accelerated growth driver for Viemed Healthcare, Inc. As of 12/31/2025, our PATH therapy patient count reached 34,528, which represents growth of 62% year over year. During 2025, new sleep patient setups increased 70% compared to the prior year. That growth reflects strong execution by our sales and operational teams and solid demand in the market. It also translates into a strong pipeline for future residual sales. We ended the year serving 36,561 resupply patients, up 49% year over year. As the patient base grows, more patients move into long-term resupply relationships, which creates recurring and predictable revenue over the life of the patient. We are encouraged with the progress, and we still see room to improve conversion rates and deepen patient engagement, which gives us additional runway heading into 2026. We are also experiencing real tailwinds behind this category. Obstructive sleep apnea remains significantly underdiagnosed, clinical awareness continues to increase, and broader conversations around metabolic health and GLP-1 therapies are bringing more patients into screening and treatment. Sleep is and will continue to be an important pillar of our growth strategy. That progress in sleep is a good example of how our platform is evolving. The Lehan’s Medical Equipment acquisition is another strong example of that continued evolution in action as we expand into maternal health. Since closing the acquisition of Lehan’s Medical Equipment on July 1, the business has performed well and integrated smoothly. The transaction has been accretive out of the gate, generating positive net income contribution in both quarters since closing. What excites us going forward is the ability to scale maternal health beyond Lehan’s original footprint. Lehan brought deep expertise in the category and a strong operating team. Viemed Healthcare, Inc. brings a national infrastructure we have built over many years, including payer relationships, clinical operations, intake, billing, and compliance. Together, that allows us to take what Lehan does well and expand it through the Viemed Healthcare, Inc. platform to reach more patients in more places. We began billing our first maternal health claim outside of the Lehan footprint late in the third quarter, and early signs have been very encouraging. In 2025, approximately $9,000,000 of our revenue was associated with maternal health products across existing Lehan markets and new Viemed Healthcare, Inc. markets. Maternal health further strengthens our diversification. It broadens our payer mix, reduces our concentration in Medicare, and adds another recurring DME category, making our overall revenue base more balanced and resilient. As we continue to build payer relationships, referral pathways, and operational capacity, we expect maternal health to become a more meaningful contributor as we expand in 2026. We view maternal health as a scalable extension of our platform and an important long-term growth opportunity for Viemed Healthcare, Inc. As we have scaled the business at a high growth rate, we are pleased with how well our forecasting process has performed. In particular, our adjusted EBITDA performance has consistently tracked in line with our expectations. The key driver has been the reliability of our highest-margin offerings, which have continued to perform to plan and provide a stable earnings foundation. While lower-margin offerings such as staffing can move around from period to period, that variability is inherent in the model and does not change the underlying earnings profile of the business. Overall, we view our track record of delivering against our adjusted EBITDA outlook as a highly valuable strength as we continue to grow Viemed Healthcare, Inc. into an integrated platform. Reflecting on our success, the reason we can grow and diversify the way we have is because of the processes we built over time and the strength of our operations every day. For nearly two decades, we have proudly focused on execution, clinical quality, and doing things the right way. At the center of that execution is our high-touch clinical model. Our respiratory therapists and clinical teams stay closely connected to patients in the home through frequent touch points, education, and monitoring. We support that with our proprietary clinical platform, which connects devices, clinicians, and workflows so we can improve patient adherence, clinical outcomes, and efficiencies as we scale. We also benefit from embedded relationships through our staffing business, which sustains relationships with hospitals and discharge pathways and supports a steady flow of opportunities across our service lines. We have invested heavily in the capabilities that matter in this industry—especially documentation, compliance, and reimbursement—so that we can operate effectively as coverage criteria evolve and scale new categories such as behavioral health with confidence. The other critical piece is our payer platform. We built a nationwide network of payer relationships and reimbursement capabilities over many years, and that foundation is difficult to replicate. It is a big reason we can expand into areas like sleep and maternal health and scale them more efficiently because the contracting relationships, operational processes, and reimbursement expertise are already in place. Put all the pieces together and we have a differentiated in-home-based care platform. That is what gives us extreme confidence we can keep growing, keep diversifying, and keep expanding cash flow over time. I will now turn the call over to William Todd Zehnder to walk through our financial performance and capital allocation priorities in more detail. William Todd Zehnder: Thank you, Casey. I will begin with a review of our financial performance for the quarter and the full year, and then provide additional context around margins, cash flow, and capital allocation. In reviewing the financial results, all figures are in U.S. dollars, and our full results have been filed with the SEC. I will be referencing information available in our quarterly financial supplement, which can also be found on our Investor Relations website. For the fourth quarter, revenue was $76,200,000, an increase of 26% over the prior year. For the full year, revenue totaled $270,300,000, up approximately 21% compared to 2024. The growth was broad-based, reflecting continued organic expansion across our core service lines and the contribution from the Lehan acquisition during the third and fourth quarters. Looking at the components of that growth, equipment and supply sales were the largest contributor, increasing by $19,400,000, or approximately 63% year over year. That growth was driven primarily by continued expansion in sleep resupply and the addition of maternal health following the Lehan acquisition. Ventilator rentals increased $12,200,000, or roughly 10%, reflecting higher patient volumes and solid demand. Our other non-vent HME rentals increased by $9,700,000, or 20%, supported by growth in PATH, oxygen, and airway clearance therapies. Services revenue increased by $4,800,000, or about 24%, driven mainly by continued growth in healthcare staffing. From a mix perspective, the diversification is clear. Ventilation moved from 56% of revenue in 2024 to 51% in 2025 as other categories scaled at a faster rate. Sleep increased from 16% to 20%, and maternal contributed approximately 3% of revenue in 2025. Outside of those areas, mix was relatively stable. So, while ventilation remains a significant component of the business, revenue is becoming more balanced across multiple service lines, consistent with our strategy. For the fourth quarter, adjusted EBITDA totaled $18,200,000. For the full year, adjusted EBITDA was a record $61,400,000, representing a margin of approximately 22.7%, which has remained stable and is expected to remain at a similar level as we move into 2026. Gross margin for the year was just under 58%. We are not seeing structural margin deterioration as the business diversifies. While sleep and maternal health have a different margin characteristic than ventilator rentals, those differences are being offset by operating efficiencies, scale benefits, and disciplined expense management. We continue to see operating leverage within SG&A as revenue scales, even as we invest in technology and platform expansion. Turning to cash flow, performance improved meaningfully in 2025. Net cash provided by operating activities was $51,900,000 for the year. After net CapEx of approximately $23,800,000, free cash flow totaled $28,100,000 compared to $11,600,000 in 2024, more than doubling year over year. In the fourth quarter alone, free cash flow was $10,800,000. Net CapEx represented approximately 10% of revenue for the quarter, and we continue to expect net CapEx to be in the 10%–11.5% range for the full year 2026. As the revenue base continues to diversify, a larger portion of growth is coming from categories that are less capital intensive. Over time, that supports lower capital intensity and continued expansion in free cash flow as we scale. Turning to the balance sheet, we ended the year with $13,500,000 in cash and approximately $46,000,000 available under our existing credit facilities. Long-term debt totaled $11,300,000 at year end. Net of cash on hand, we effectively had no net debt, which provides us with significant financial flexibility. Following the Lehan acquisition, we have already begun reducing the associated debt, supported by ongoing cash generation. The combination of low leverage, strong operating cash flow, and manageable capital intensity provides us with meaningful financial flexibility as we allocate capital across growth initiatives and shareholder returns. This brings me to capital allocation. As announced yesterday, our board has authorized a new share repurchase program for 2026. This authorization reflects our confidence in the durability of our cash flows and our long-term outlook. At current operating levels, we are generating meaningful free cash flow after capital expenditures, and we believe it is appropriate to return a portion of that capital to shareholders while maintaining flexibility for strategic investments. Our approach remains balanced. First, we will continue to prioritize organic growth investments that enhance our competitive position. Second, we will evaluate disciplined, accretive acquisition opportunities that expand our platform and meet our return thresholds. And third, when appropriate, we will return capital to shareholders through share repurchases. We view share repurchases as an opportunistic and value-oriented component of our capital allocation framework. Given our cash generation profile and modest leverage, we believe we can execute this balanced strategy without compromising growth. Current market dynamics present an attractive opportunity to execute on this buyback. Overall, we believe our capital structure and capital allocation priorities position us well to drive long-term shareholder value. Turning to our outlook for 2026, we are guiding to full-year net revenue in the range of $310,000,000 to $320,000,000. At the midpoint, that represents approximately 17% year-over-year growth, excluding any contribution from potential acquisitions. We are guiding adjusted EBITDA in the range of $65,000,000 to $69,000,000. EBITDA growth is expected to trail revenue growth on a percentage basis. That largely reflects the fact that 2025 adjusted EBITDA benefited from non-recurring items, including the $2,200,000 gain from the vent buyback program. On a normalized basis, the 2026 outlook reflects healthy growth in core EBITDA dollars and continued margin stability within our recurring revenue base. As we have discussed, we expect the quarterly cadence to be uneven. We anticipate the first quarter to be relatively flat to slightly down sequentially, reflecting the continued transition in complex respiratory documentation and the normal seasonality of the business. Beginning in the second quarter, we expect to return to a more normalized quarterly growth pattern with sequential growth in the range of approximately 3% to 5% throughout the remainder of the year. Our guidance assumes continued investment in technology, compliance, infrastructure, and platform expansion alongside disciplined expense management. We are not assuming a material change in our margin profile, and we are not building in aggressive operating leverage beyond what is supported by the current cost structure and our operating plan. Overall, our 2026 outlook reflects solid growth, stable margins, continued improvement in free cash flow, and disciplined capital allocation. With low leverage, strong liquidity, and a scalable operating model, we are in a very strong financial position as we enter 2026. While we do not currently guide to a free cash flow amount, we are comfortable saying that we expect to continue to generate a significant amount of free cash flow even after the aggressive growth that we are guiding. Before we open the line up for questions, I will briefly summarize what 2025 represented financially and how we are positioned going forward. We delivered record revenue and record adjusted EBITDA, maintained margin stability through a shifting revenue mix, and more than doubled free cash flow year over year. We ended the year in which we bought back 5% of the outstanding shares at an average price of $6.69 with effectively no net debt and significant liquidity, providing flexibility to invest in organic growth, pursue accretive opportunities, and once again return capital to shareholders. As we look to 2026, the combination of diversified revenue streams, stable profitability, improving free cash flow conversion, regulatory stability, and a strong balance sheet positions us well to continue executing our strategy. With that, operator, please open the line for questions. Operator: Thank you. We will now be conducting a question-and-answer session. The first question is from Dave Storms from Stonegate. Please go ahead. Dave Storms: Good morning. Just wanted to start with the expansion from the Lehan acquisition. Just curious as to what is at the top of your to-do list there. Is that going to be expanded payers? Is that going to be improving the sales force? What do you think is your priority number one to maintain that expansion? Casey Hoyt: I will start that, and, Todd, you can fill in wherever you want to. Basically, all of those initiatives are important to us. I would say the payer initiative is more important. Getting the Lehan network expanded into the Viemed Healthcare, Inc. network of payers is underway. It is not as simple as just turning on each individual payer. There is a lot of research that goes into reimbursement rates for certain states, and we are strategically picking out the correct states to expand into. From there, it is onboarding that into the technology piece, which executes the breast pump sales. The second piece is yes, we are going to train some boots-on-the-ground sales folks. That is the Viemed Healthcare, Inc. way, if you will, and that is already underway. We are cross-training some of our sleep reps that are out and about and have the bandwidth to expand their referral sources. We will look to do that concurrently with building up the payer network. I would say the other thing that we are working on is this is a significant growth area. We are confident, on a percentage basis, it will be the fastest-growing product line for our company. We are making sure the back-office support from fulfillment and onboarding of patients can keep up with the rapid growth that we are putting around the country. There are a few different prongs, and we are proactively working on all of that with the Lehan management team, who are really guiding us around the country. Dave Storms: That is great commentary. I appreciate that. You mentioned in there just expanded boots on the ground and cross-training sleep folks. Just curious, zooming out a little bit, what your thoughts are around your overall sales force and comfortability with training. Are you going to need to expand that, do you think? Any commentary there around your current sales force? Casey Hoyt: That is correct. We have already begun cross-training our sleep reps. Our sales force at Viemed Healthcare, Inc. is somewhat segmented into complex respiratory, in which that sales rep would sell a vest, oxygen, and a combination of therapies, and would typically call on case management and pulmonologists, whereas we have another sales force for sleep calling on cardiologists and family practice, internal medicine—those types of contacts. It is really easy to bolt on OB-GYNs while they are out and about to call on the breast pump leads. Once it is the type of business that is turned on, it does not require much ongoing management. You just have to check in, make sure things are going well, and make sure your customer service is in line, and off you go. To circle back to your question, the training is underway. We have already got some reps out in the field in certain states where we are good to go with our payers. We will continue to expand that. Dave Storms: Understood. Appreciate that. Last one for me. You mentioned that margins are expected to remain stable throughout the year. As your mix diversifies into more diversified revenue streams, how many more levers do you think you have available to pull to keep margins stable? Or do you believe that some of that margin stability is just going to come from increased volumes? William Todd Zehnder: I think, at a net level, we have the continued opportunity to push on scalability in SG&A and the fixed costs there, really probably more than anything from a technology standpoint. Obviously, transactional volumes are going up with the evolution of diversifying this business. They do not have a per-dollar amount like the revenue from a vent patient, but the volumes are going up. So we have to get more efficient from a technological standpoint, and that would really be through the SG&A world. On the gross margin, our intent is to reduce expenses at a labor level that would keep gross margins relatively flat. That is an uphill battle, as vent gross margins carry a higher percentage amount, albeit with a higher CapEx amount that goes with it. At the end of the day, what we are really looking at is EBITDA margins and net income margins, and our goal is to try to keep gross margin as close to flat as possible. Dave Storms: That is great color. Thank you for that, and I will get back in the line. Casey Hoyt: Thanks, David. Operator: The next question is from Ilya Zubkov from Freedom Broker. Please go ahead. Ilya Zubkov: Good morning. Thank you for taking my questions. My first question is related to the guidance. Could you just elaborate on the key assumptions underlying your current revenue guidance across the business segments? William Todd Zehnder: Our overall view is that we are not forecasting rapid growth this year as we are working our way through the NCD. We are not saying that vents are going to grow at the historical level that they have. With that being said, like Casey said in his prepared remarks, we are seeing a significant benefit in the first one to two months of new patient starts, so that is encouraging. But just with the uncertainty of the NCD, we are not forecasting an aggressive amount there. We are forecasting a pretty aggressive amount when it comes to sleep, a notional amount that is probably even larger than we forecasted last year. And then, like I said on the last question, maternal from a percentage standpoint is by far the largest, partially because we have a full year of the Lehan acquisition, so that is naturally going to give you a boost there. We are also modeling pretty significant growth within the Viemed Healthcare, Inc. contracts around the country, like Casey talked about a little while ago. To summarize it, the growth is across all product lines. It is going to be split between organic and a little bit of acquisition just because Lehan is there for the full year. If we get back to our historical growth rates, then that is just upside for us. And this assumes no net new acquisitions. Ilya Zubkov: Thank you. This is helpful. I also noticed a sequential decline in the number of respiratory therapists during 2025. Could you walk us through how you determine when to add or reduce RT capacity and how the reduction in the last quarter may affect service revenue in 2026? William Todd Zehnder: RTs are really driven by patient volumes, and sometimes that number will ebb and flow depending on whether we are going into new areas that do not carry as large of a patient-per-RT value. I do not know the exact sequential decline—it may be off a little bit—but it could be because we had more of our RTs in areas that have significant volumes, our established cities. Vent patients were relatively flat quarter over quarter with the adoption of the NCD. We would expect that number to continue to stay relatively in line on a patient-per-RT basis, and the hope is that those numbers both start growing again in 2026. That is the plan. Ilya Zubkov: Great. Thank you very much. William Todd Zehnder: Thanks, Ilya. Operator: There are no further questions at this time. I would like to turn the floor back over to Casey Hoyt, CEO, for closing comments. Casey Hoyt: Thanks, everyone, for joining us. We appreciate your trust in Viemed Healthcare, Inc. We will continue this positive momentum and look forward to a wonderful 2026. Everyone have a good day. Thank you. Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to the Ring Energy, Inc.'s fourth quarter 2025 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Al Petrie, Investor Relations Coordinator. Please go ahead, sir. Al Petrie: Thank you, Operator, and good morning, everyone. We appreciate your interest in Ring Energy, Inc. We will begin our call with comments from Paul D. McKinney, Chairman of the Board and CEO, who will provide an overview of key matters for the full year. We will then turn the call over to Rocky Kwon, Ring Energy, Inc.'s VP and Chief Accounting Officer, who will review the details of our fourth quarter 2025 and full year financial results. Paul will then return to discuss our 2026 guidance and outlook with closing comments before we open up the call for questions. Joining us on the call today are Sanu Joel, who recently joined Ring Energy, Inc. as its Executive Vice President, Chief Financial Officer, and Treasurer; Alexander Dyes, Executive Vice President and Chief Operations Officer; James Parr, Executive Vice President and Chief Exploration Officer; and Shawn D. Young, Senior Vice President of Operations. During the Q&A session, we ask you to limit your questions to one and a follow-up. You are welcome to reenter the queue later with additional questions. I would also note that we have posted an updated corporate presentation on our site. During the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Ring Energy, Inc. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's press release and in our filings with the Securities and Exchange Commission. These documents can be found in the Investors section of our website located at https://www.ringenergy.com. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference call is being recorded. I will now turn the call over to Paul D. McKinney, our Chairman and CEO. Paul D. McKinney: Thanks, Al, and good morning, everyone. We appreciate you joining us today. Before we begin our discussion, I would like to introduce Executive Vice President, Chief Financial Officer, and Treasurer, Sanu Joel, who joined our senior management team last Friday. Sanu brings more than 20 years of experience across upstream oil and gas investment banking, corporate finance, and strategic advisory roles with deep expertise in mergers and acquisitions, capital markets, valuations, and financial strategy. For the last six years, Sanu was Managing Director and Co-Head of Energy Investment Banking at Raymond James & Associates, Inc., where he advised public and private E&P companies doing business in the Permian Basin as well as other major U.S. onshore basins. We are very pleased to welcome Sanu, who we got to know well while he was at Raymond James. Sanu, welcome aboard. Sanu Joel: Thank you, Paul. I am excited to be here. I want to start by thanking you, the Board, and the entire leadership team for entrusting me with this important role as we begin what I truly believe is an exciting next chapter for Ring Energy, Inc. and for our stockholders. As a banker, I have known the company and many of you in the investment community for quite some time, and I am genuinely thrilled to now be on the inside working alongside you, Paul, and the rest of this leadership team. We have a very exciting future at Ring Energy, Inc. I look forward to contributing as we continue to execute our strategy and create long-term value for our stockholders. Paul D. McKinney: You are welcome, Sanu, and we are equally excited for you to be a member of our executive team. Like I said earlier, welcome aboard. Regarding the task at hand, what a difference a week can make, right? Up until the Iranian crisis began to unfold last weekend, our focus was on raising the floors of our oil hedges to help ensure our future realized prices would be adequate to fund our 2026 capital program. Things certainly look different today. We will talk more about 2026 and the future later in this call, but for now, Rocky and I are going to reflect on what happened last year, the conditions we faced in 2025, and our fourth quarter and full year results. 2025 was a year that demonstrated the strength and resilience of Ring Energy, Inc.'s value-focused, proven strategy. When combining the flexibility afforded by our strategy and the discipline demonstrated by the management team to quickly adjust capital spending in the face of post Liberation Day oil prices, Ring Energy, Inc. delivered strong performance throughout the year 2025 and in the fourth quarter. Perhaps one of the more important successes was that we increased adjusted free cash flow by 15% year-over-year, setting a new company record despite 18% lower realized commodity prices, and we delivered our 25th consecutive quarter of adjusted free cash flow, a track record we are very proud of. We also increased sales volumes by 3% year-over-year, our total proved reserves by 14%, our proved undeveloped inventory by 17%, which pushed our identified total locations to 500 or more, representing over 10 years of drilling inventory. This is significant because we have demonstrated for the third year in a row our ability to organically grow our reserves beyond merely replacing our production. We decreased capital spending by 35% year-over-year, reducing our reinvestment rate by 18% to 53% of our 2025 EBITDA. We improved our drilling capital efficiency by 19% since 2023 and 3% year-over-year to $500 per lateral foot, keeping our capital costs under control. We also reduced our year-over-year per BOE all-in cash cost by 4% and our lease operating expense during the last six months by 18% or $1,400,000 per month over the pro forma run-rate prior to closing the Lime Rock asset acquisition. This is significant because our lease operating cost run-rate per month is less today than it was before the Lime Rock acquisition despite the fact that we are operating more wells and more production. And finally, we reduced our debt by $40,000,000 since the closing of the Lime Rock asset acquisition in addition to making the $10,000,000 deferred payment in December. The $40,000,000 debt reduction represents almost 60% of the debt incurred at closing of the Lime Rock acquisition in only three quarters, and all of that done in a low price environment. Although 2025 will be remembered by Liberation Day and challenging oil prices that followed, Ring Energy, Inc. stepped up to the challenge and delivered strong operational and financial performance. Now, with that, I have completed my intro. I am going to turn it over to Rocky to go over the numbers and the details of the fourth quarter and the full year, and then Sanu, me, and the rest of the team will follow up afterwards to review our outlook and guidance for 2026 and discuss rapidly changing conditions affecting our industry and what they may mean for our stockholders. Rocky? Rocky Kwon: Thanks, Paul. Good morning, everyone. We are pleased with our outcome for the fourth quarter. In addition to the results that met our overall guidance, the fourth quarter capped off another successful full year for Ring Energy, Inc. Similar to past calls, I will take a few minutes to cover some additional color detailing the most significant sequential quarterly results. Starting with production, in the fourth quarter we sold 20,508 BOE per day, down from 20,789 BOE per day in the third quarter, a slight decrease of 1%. A portion of the decrease was attributable to a third-party gas plant being shut in due to a fire, which affected our sales volumes. Our fourth quarter total sales volumes were above the midpoint of our guidance range and contributed to a record full year 2025 sales volume of 20,253 BOE per day. The year benefited from nine months of production from our Lime Rock acquisition, which closed in March 2025. As Paul discussed, another successful drilling campaign across our asset base with a continued focus on our highest rate-of-return inventory also materially contributed to our record full year 2025 sales volumes. Turning to the fourth quarter 2025 pricing, our overall realized price declined 14% to $35.45 per BOE from $41.10 per BOE in the third quarter. The overall sequential decline was driven by 11% lower realized pricing for oil in the fourth quarter 2025. Our fourth quarter average crude oil differential from NYMEX WTI futures pricing was a negative $1.66 per barrel versus a negative $0.61 per barrel for the third quarter. This was mostly due to the Argus WTI-WTS that decreased negative $0.14 per barrel offset by the Argus CMA roll that decreased a negative $0.92 per barrel on average from the third quarter. Our average natural gas price differential from NYMEX futures pricing for the fourth quarter was a negative $6.04 to $7.00 per Mcf compared to a negative $4.22 per Mcf for the third quarter. Our realized NGL price for the fourth quarter averaged 9% of WTI compared to 8% in the third quarter. Oil revenue decreased by $9,500,000 due to a negative $8,300,000 price variance and a negative $1,200,000 reduction. Gas and NGL revenues, on the other hand, increased by $2,200,000 quarter-to-quarter, for a combined total of $2,500,000 in the fourth quarter compared to $300,000 in the third. This resulted in fourth quarter revenue of $66,900,000 compared to $78,600,000 for the third quarter, a 15% decrease. Fourth quarter LOE of $18,900,000 was 8% below third quarter. On a unit basis, fourth quarter LOE was $10.02 per BOE, which was 7% below the low end of our guidance range. Third quarter LOE was $10.73 per BOE. Cash G&A, which excludes share-based compensation and transaction-related costs, was $3.46 per BOE for the fourth quarter versus $3.41 per BOE for the third quarter. Our fourth quarter 2025 results included a gain on derivative contracts of $17,500,000, up from $400,000 for the third quarter, primarily due to lower relative pricing at the end of the fourth quarter. Finally, for Q4, we reported a net loss of $12,800,000, or $0.06 per diluted share, which includes $35,900,000 of non-cash ceiling test impairment charges. Excluding the estimated after-tax impact of pre-tax items, including share-based compensation expense, non-cash ceiling test impairment and non-cash unrealized gains/losses on hedges, our fourth quarter adjusted net income was $3,600,000, or $0.02 per diluted share. This is compared to a third quarter 2025 net loss of $51,600,000, or $0.25 per diluted share, and adjusted net income of $13,100,000, or $0.06 per diluted share. We incurred $24,300,000 in CapEx in the fourth quarter, in line with the midpoint of guidance. We maintained D&C CapEx at $14,000,000 in the fourth quarter compared to the third quarter. We incurred costs of approximately $500,000 for facility upgrades, which contributed to our year-over-year reduction in emissions. Also included in our fourth quarter CapEx was over $400,000 in leasing cost, approximately 23% of our full year leasing, which added to our reserve replacement and organic inventory growth. In 2025, we generated $5,700,000 of adjusted free cash flow and paid down $8,000,000 in debt, resulting in debt reduction of $40,000,000 since completing the Lime Rock acquisition in March 2025. In addition to the paydown, we made a $10,000,000 deferred payment in December 2025 related to the Lime Rock acquisition. For full year 2025, we paid down $35,000,000 of debt and generated $50,100,000 in adjusted free cash flow. We will continue to utilize our free cash flow to improve our long-term financial profile through further debt repayment, which we expect will be fueled primarily by growth in cash flow driven by the successful execution of our targeted 2026 development program. Our primary focus remains the same: utilizing our substantial free cash flow to primarily reduce debt and better position ourselves to ultimately provide a meaningful return of capital to shareholders. At year-end 2025, we had $420,000,000 drawn on our credit facility. With the borrowing base of $585,000,000 that was reaffirmed in December, we had $165,000,000 available net of letters of credit. Combined with cash, we had liquidity of $166,000,000 and a leverage ratio of 2.2 times. Moving to our hedge position, for 2026, we currently have approximately 2,300,000 barrels of oil hedged, or approximately 48% of our estimated oil sales based on the midpoint guidance. We also have 4.7 Bcf of natural gas hedged, or approximately 66% of our estimated natural gas sales based on the midpoint. For a quarterly breakout of our 2026 hedge positions, please see our earnings release and presentation, which includes the average price for each contract type. I will now turn it back to Paul to review the outlook and guidance for 2026. Paul? Paul D. McKinney: Thank you, Rocky. Before turning to our outlook and guidance for 2026, we want to take a moment to directly compliment our field personnel. Once again, a January winter storm brought extremely cold temperatures and icy conditions to our operations. To our pumpers, maintenance crews, contractors, and our field supervisors, your dedication kept our people safe and our assets protected. We know what it takes to operate in those temperatures, and the executive team and board are incredibly grateful for your grit and hard work. Now, looking ahead to 2026, we intend to follow a similar disciplined approach as we have in the past. Our strategy is to invest enough capital to maintain or slightly grow our production and allocate the remaining portion of our cash from operations to reduce debt. Our budget and plans this year are based on $60 per barrel WTI and $3.50 per Mcf Henry Hub. We expect our average annual sales to range between 19,500 to 20,800 barrels of oil equivalent per day, for a midpoint of 20,150 barrels of oil equivalent per day. We expect our average annual oil sales to range between 12,500 and 13,400 barrels of oil per day, with a midpoint of 12,950 barrels of oil per day. Both ranges are essentially flat with 2025 sales volumes after taking into account the recent divestiture of approximately 200 barrels of oil equivalent per day of non-operated production and the impact of the January winter storm that temporarily reduced production by 500 to 540 barrels of oil equivalent per day. Supporting our production estimates, we expect full year capital spending of $100,000,000 to $130,000,000, with a midpoint of $115,000,000. We anticipate drilling, completing, and bringing online approximately 23 to 32 wells during the year. First quarter spending is projected to be between $28,000,000 and $34,000,000, with a midpoint of $31,000,000. This capital program provides optionality and the potential to add new benches to our drilling inventory, offering a compelling avenue to expand our development, deepen our opportunity set, and further demonstrate the strength and longevity of our asset base. Our ongoing advancements in capital efficiency through longer laterals, optimized completions, and continued constant improvements are already generating tangible benefits and are expected to serve as a strong foundation for sustainable free cash flow generation. With our continued focus on capital efficiency, our full year LOE is currently expected to range between $10.15 and $11.50 per BOE, for a midpoint of $10.65 per BOE. I believe it is important to point out that we are projecting an LOE midpoint below what we achieved in 2025, which emphasizes our continued commitment to further cost reductions. This is important because it contributes directly to the bottom line by increasing margins and creates further optionality for the company. In summary, our 2026 program follows the same proven playbook: disciplined capital allocation, relentless focus on reducing our LOE and cash costs, increasing the capital efficiency of our drilling program, which collectively maximizes free cash flow generation and furthers our ability to reduce debt. As mentioned earlier, our 2026 budget and plans assume WTI oil prices of approximately $60 per barrel and Henry Hub natural gas prices of approximately $3.50 per Mcf. Now with that, we have covered the 2026 guidance. I believe we, as a team, should spend a little more time talking about the Iranian crisis, Ring Energy, Inc.'s strategic advantage, our recent stock price performance since last fall, and what all this can mean for our stockholders. Additionally, people want to get to know you, Sanu, and understand why you chose to leave the investment banking world to join Ring Energy, Inc. Sanu? Sanu Joel: Paul, as you know, I spent nearly two decades as a banker advising E&P companies, and what became increasingly obvious to me over that time is that the U.S. shale model is maturing. Core inventory across the industry is being drilled up, decline rates remain steep, and the market today is far more selective about which companies deserve long-term capital. Against that backdrop, Ring Energy, Inc. stands out. What initially caught my attention was the durability of the asset base. Ring Energy, Inc. operates conventional assets with shallow declines, long-life reserves, and high margins, characteristics that are unique to Ring Energy, Inc. and increasingly rare in today's E&P landscape. A 20-plus year R/P ratio and more than 10 years of identified drilling inventory is something I do not think many other companies can say, especially in the small- to mid-cap space. What also truly differentiated Ring Energy, Inc. for me was its consistency of execution. Ring Energy, Inc. has generated resilient free cash flow for 25 consecutive quarters through multiple commodity cycles. Over the last three years, Ring Energy, Inc. has organically grown reserves, not just replaced production. The company has also been active at M&A, successfully integrating multiple accretive acquisitions, all while simultaneously improving capital efficiency, lowering costs, and reducing debt. From a capital allocation standpoint, Ring Energy, Inc. is doing exactly what the public markets are asking for today: living within cash flow, reinvesting prudently, strengthening the company, building towards sustainable returns of capital, and maintaining optionality for growth. There are very few companies, especially at this scale, that can demonstrate this level of discipline and repeatability. Looking ahead, I am excited to be part of the team. My focus as CFO will be straightforward: protect the balance sheet, enhance free cash flow durability, strategically position us for growth, and help position Ring Energy, Inc. to ultimately return capital to stockholders from a position of strength. With our asset quality, inventory depth, and proven operating and financial discipline, I believe Ring Energy, Inc. is exceptionally well positioned for the next phase of this industry. Paul, I hope this gives investors a better sense of why I am so excited to be working at Ring Energy, Inc. Paul D. McKinney: Thank you, Sanu. Yes, I believe it does, and reinforces why we are so excited to have you. Now turning to James. How about you? What do you believe are some of the more important issues our stockholders should know about Ring Energy, Inc. and in light of the current events? James Parr: I am glad you brought that up, Paul. The value of being a Permian-focused company has never been greater given the potential for international supply disruption. Our over 96,000 net acres footprint in the heart of the Permian has been primarily focused on the San Andres, however, we have proven through our vertical drilling program that we have a robust inventory of additional attractive targets, which have been and continue to be de-risked by us and others in our industry horizontally. Ring Energy, Inc.'s exploration mindset has led to organic growth over the last three years. We do not see any reason why we cannot continue this performance in 2026 and beyond. We began testing previous vertical targets last year horizontally with excellent results. We will continue to test these intervals to determine repeatability and are confident that successful outcomes will result in increased inventory, capital efficiency gains, and future organic growth. More to come. Paul D. McKinney: James, that was great. Alex, what do you believe are some of the important issues our stockholders should know about our company, our operations, and also in light of the current events? Alexander Dyes: Thanks, Paul. Let me walk through how our strategy has delivered real, measurable value for our shareholders and set us up for future value creation. First, we have built a clear track record of executing acquisitions that are not only immediately accretive but strategically complementary. These deals added scale to our business, provided operational synergies, and most importantly, expanded our future drilling inventory. What truly differentiates us is our execution after close. In our two most recent acquisitions, Founders and Lime Rock, we have exceeded expectations in the first year across key metrics, including increased production, lowering lift costs, lowering drilling capital per well, and increasing proved reserves. That performance is tangible proof of value creation, as shown in our 2025 performance. Beyond near-term results, these acquisitions, along with the Stronghold in 2022, have meaningfully deepened our inventory across the Central Basin Platform. Second, increased scale and operational control have enabled a more durable cost structure. Over the past three years, we have consistently improved capital efficiency and reduced operating costs, driving approximately a 10% improvement in finding and development costs to $10.40 per BOE since 2023. That improvement is not cyclical; it is structural. They are driven by disciplined capital allocation, technical optimization, and a strong cost control culture, as demonstrated in our three-year track record of improvements. Our LOE reductions are long-term in nature and further enhance the value of our already long-life, low-decline reserves. Our culture is one built to last, not one for just short-term gains. Finally, looking ahead, we are focused on extending this momentum into 2026, investing in infrastructure that supports the next phase of development as we transition from verticals and predominantly one-mile laterals to multi-bench, longer laterals, meaning laterals longer than 1.5 miles, and co-development opportunities where applicable. Proving our shift to horizontals in 2026, our drilling program midpoint increased the horizontal mix to 85%, or 23 horizontals, versus 67% in 2025. By drilling longer laterals, proving up multi-bench inventory and advancing co-development across stacked pay zones, we are unlocking more capital-efficient inventory and positioning the company for a stronger, more durable free cash flow profile over the long term. Paul, I will turn it back to you. Paul D. McKinney: Thanks, these are all great points. Another point worth discussing, though, is that since the exit of our former largest stockholder in August of last year, our stock price has nearly doubled. If you recall, their exit put additional selling pressure on our stock, causing our stock to trade below $1 and disqualifying our Russell 3000. We believe these two events were instrumental in driving our stock price down to $0.72 a share and our trading multiples at the lower end of our peer group. Another point I want to make is associated with our pursuit of growth through acquisitions. Given our current debt and leverage ratio, we are not in the best position to pursue a sizable acquisition. Having said that, though, we are always looking for the next great deal. And this is where it is good to have more ways to win, so to speak, or more growth tools in the toolbox. We do not only depend on M&A for our future growth because we have demonstrated that we can grow organically as well. Having said all that, this brings us to the end of our prepared remarks, so I will sum things up by saying we scaled the business, expanded high-quality inventory, lowered our cost structure, and are investing today to drive sustainable returns and long-term value creation. We are excited about the opportunities ahead in 2026 and believe we can deliver meaningful long-term stock price appreciation now that our overhang on our stock is behind us. Since the new year, our share price has increased 62%, reflecting renewed investor confidence, our stronger operational execution, and a clear alignment between our stock price performance and our valuation. With that, we will turn this call over to the Operator for questions. Operator? Operator: Thank you. We will now begin the question-and-answer session. To ask a question, please follow the instructions provided. If you would like to withdraw your question, please follow the prompts. And the first question will come from Jeffrey Woolf Robertson with Water Tower Research. Please go ahead. Jeffrey Woolf Robertson: Thanks. Good morning. Paul, you talked about the organic growth in inventory set through the 2026 drilling program. Are you testing any new zones in the 2026 program, or is expanding the inventory related to high-grading zones that you may think are, with additional drilling data points, you determine those could be economic targets? Paul D. McKinney: Good morning, Jeff. Yes, it is a good question. Very much so. And so with respect to new zones, you have to remember that we have been drilling what we call inexpensive verticals and completing the stacked pays in Crane County and also in Ector County for quite some time. North of that, we focused on the San Andres. But all these zones have been producing in many of our wells for a long time. What is new is that we have taken a serious look at our inventory across our entire acreage position. We have identified the zones that we believe are commercial or can be commercial horizontally, and we began last year testing a few of those. And so we are not yet ready to come out with which zones that we are specifically targeting and where. But we are very encouraged by the results. And this year's program is designed to test the repeatability of that, and with that, we will come out with a lot more information about which of these zones that we are targeting, how meaningful it will be for our stockholders in terms of the number of sticks that we are adding into our inventory. And so we are really excited for 2026. I think the point that you are driving to right here is the key reason why we are so excited, because we do believe that our capital program this year, even though a modest one, is going to generate a lot more information about the sustainability of our current asset set in terms of developing future horizontal wells, going from verticals to horizontals. And with that, James, is there anything more you would like to add to that? James Parr: Yes. No. Those are all good points. And Jeff, we paused our original budget at the beginning of the year. What it changed this past week has been, but we are going to stay disciplined towards paying down debt and feathering in these additional tests for these other horizons so we can still meet our financial objectives of paying down debt and remaining disciplined, and then get some data behind us. But we view our previous acquisitions setting us up perfectly with a great inventory of deeper potential that we are in the process of testing. So more to come on this, but as Alex mentioned, we are investing a little in infrastructure to be able to capitalize on converting the program into horizontal wells. And the neighbors surrounding us have been testing some of the zones very successfully too. So we are going to have a disciplined approach to doing this, but we are very excited by the potential we have ahead of us. So thanks for asking. Paul D. McKinney: Yes, and like I said a little earlier, Jeff, although we are not planning to grow our production appreciably this year, it is my belief anyway that the results of the work program that the geoscience and engineering teams are pursuing will inventory more horizontal sticks, and we should emerge from 2026 with an inventory that we can actually develop and lead to significant organic growth without the need to pursue M&A. And, of course, you know that we love M&A, and we like pursuing the acquisitions, but we have more than one way to win, so to speak. And this program, although not designed to develop production growth, it is designed to develop, potentially, additional inventory for drilling locations and also reserve growth. Jeffrey Woolf Robertson: To your point on horizontal wells, Paul, do you have a lot of land work to do to get those leases positioned to accommodate the length of lateral that you think will be most efficient as you look at these zones? Paul D. McKinney: Yes. We began those efforts actually as much as two years ago, positioning our land so that we can drill the longer laterals. So this year, we will be drilling our first two-mile well. And we are focused on, just like the rest of the industry, organizing our leases, preparing things so that we could take advantage of the benefits of additional capital efficiency. We have learned now that going to longer laterals, we have also learned that employing some of these newer latest and greatest completion techniques and the evolution of our completion designs, is just leading to more reserves per dollar spent, more production per dollar spent, more capital efficiency. And so this is also another part of what we are doing. Yes, it takes a little bit of capital to invest in some of the infrastructure, like the ability to store enough water so you can complete these longer wells. But these investments are going to pay off in the long term. We will incur some of those costs this year, but they will have benefits in the years to come as we fully develop our acreage down there in Crane County and Ector County and all that kind of stuff. Thank you. Operator: And our next question will come from Charles Kennedy Fratt with Alliance Global Partners. Please go ahead. Charles Kennedy Fratt: Hey, great presentation. Just a quick one. I noticed that you sold some non-op properties, I think earlier this year, after the end of the year. Can you quantify what you are going to bring in there? I am not sure I heard that. And then secondly, are there other opportunities to sell assets or non-core production? Paul D. McKinney: Yes. Good morning, Poe. Yes, that is a very good question. We did close—we began a disposition process last year of some non-operated assets in Yoakum County. And yes, we closed on that in January. It represented about 200 BOE per day net of our non-op production, and that is what we subtracted out of our forecast for this year. And there are a few more details that we can share with that. I mean, Alex, I think maybe you ought to cover all of that for us. Alexander Dyes: Yes. Thank you, Paul. So, Poe, yes, we sold 200 BOE per day, and we sold it at $4.5 million, so about 4.5 times next 12 months cash flow using a December strip price. So that is actually what we sold. Charles Kennedy Fratt: Great. Thank you. Paul D. McKinney: And with respect to the rest of our inventory, we are always looking for ways to accelerate value to help us pay down debt. But as you know, we have been pretty, over the last five years, selling the assets in the portfolio that really do not meet our criteria. And so if the undeveloped opportunities are not competitive with our current portfolio, it is kind of hard to justify keeping those. You can sell those to someone else who is willing to invest in those types of opportunities and bring that value forward, and we have been paying down debt, or primarily allocating those funds to paying down debt. So we will continue to do that in the future. I will say, though, that the cupboard is kind of bare. We probably need to do another acquisition or two because every time you make an acquisition, you will end up picking up assets that do not fit our criteria to stay within our portfolio, and so we tend to monetize those when that occurs. And so right now, I am not sure that we really have an inventory that is meaningful that would be coming to market from us anyway because we have basically already cleaned out the cupboards. Did that answer your question, Poe? Charles Kennedy Fratt: It did. Thank you, Paul. Operator: As there are no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Paul D. McKinney for any closing remarks. Please go ahead. Paul D. McKinney: Thank you, Chuck. On behalf of the management team and the Board of Directors, I want to once again thank you for your interest in joining today's call. We appreciate your continued support of the company, and we look forward to keeping everyone updated on our progress in the future. This ends the conversation. Thank you. Operator: Have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to The Toro Company's first quarter earnings conference call. My name is Daniel, 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. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today's call, Heather Lilly, Vice President, Corporate Affairs and Investor Relations. Please proceed, Ms. Lilly. Heather Lilly: Good morning, everyone, and thank you for joining us for The Toro Company's first quarter 2026 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 first quarter results, which were released earlier this morning, and discuss our priorities and outlook for the remainder of 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 number are included in this morning's press release, along with the first quarter presentation containing supplemental information that is posted in the Investor Information section of our corporate site. With that, I will now turn the call over to Rick. Rick Olson: Thanks, Heather, and good morning, everyone. Throughout 2026, our teams remained diligently focused on executing our strategic priorities. We capitalized on market opportunities and customer demand, drove operational excellence, and leveraged our portfolio of leading brands for profitable growth and competitive advantage. At the same time, we invested in value-creating technology and innovation. As a result, we beat expectations in both segments and increased consolidated net sales by more than 4% to $1.04 billion. Our outperformance was driven by strong execution in both our Professional and Residential segments, which allowed us to capitalize on incremental demand for snow and ice products and continued growth in underground and specialty construction. We reported better-than-expected adjusted earnings per share of $0.74, up from $0.65 a year ago, due to higher earnings in our Professional segment, which represents about 80% of our portfolio. We expanded our hydrovac excavation solutions through our acquisition of Tornado Infrastructure Equipment, further strengthening our capabilities. We continue to implement our multiyear AMP program, which is fueling sustainable productivity improvements and has contributed $95 million in cost savings toward our aggregate goal of $125 million. We generated free cash flow of $14.6 million, resulting in an impressive free cash flow conversion rate of 22% in a quarter where our seasonal preparations typically result in a net use of cash, and we repurchased approximately $95 million of common stock, reflecting our commitment to return value to shareholders. In summary, through strong execution of our strategic priorities throughout the first quarter, we drove favorable sales and earnings growth and further strengthened our financial position. During the first quarter, our teams were prepared to deliver snow and ice products and capitalize on incremental demand as a series of winter storms hit major population areas. This operational agility and strong execution not only contributed to excellent Q1 top-line growth but also positions us well for robust performance in these categories in the back half of this year. Adding to this optimism is our fresh line of BOSS plows with new Cold Front Technology, or CFT, which has been well received by customers. The innovative CFT system integrates plow and spreader functionality and is engineered for effortless connections, smart performance, and maximum efficiency. We also continue to invest in underground and specialty construction, reflecting our expectations of multiyear growth in these businesses. Our efforts underscore our focus on broadening our offering to drive both near- and long-term results. During the first quarter, horizontal directional drills like the innovative JT21, which launched last year, contributed to our sales upside. We expect customer demand to remain strong. We were very excited to welcome Tornado to The Toro Company during the quarter. As a natural adjacency to our existing businesses, its complementary offering enables us to expand our growth opportunities in this market. And this spring, we look forward to showcasing the recently launched Ditch Witch SK 1,000, a compact stand-on skid steer with increased lifting capacity and reduced maintenance, making it ideal for utility work as well as landscaping. To preserve our profit margins and remain price competitive, we continue to pursue deliberate strategies through our AMP program to drive sustainable productivity improvements, cost savings, and net price realization. Through the AMP improvements, we are working to moderate the effect of higher material and manufacturing costs and fully offset the effect of tariffs. We are also carefully managing inventory at all stages of production, as evidenced by our healthy net inventory position at the end of the first quarter. This was a key driver of working capital improvement. While external factors like the economy, geopolitical environment, and weather are ongoing considerations, we are committed to maintaining our discipline and aligning our inventories with expected demand as the year unfolds. These actions are strengthening our operations and driving improved financial results, and our teams and channel partners are highly motivated to build on this momentum. I want to thank them for their ongoing commitment to advancing our product and technology innovations, as well as our cost savings and productivity initiatives. Now Angie will share additional insights on our first quarter results and provide our outlook for the year. Angie Drake: Thank you, Rick, and good morning, everyone. Before getting into the details of our results, I will highlight three key takeaways from our first quarter performance. First, we delivered better-than-expected top-line growth in both our Professional and Residential segments through disciplined execution that enabled us to capitalize on seasonal demand opportunities. Second, we delivered adjusted EPS above expectations and prior year through deliberate productivity improvement initiatives that drove favorable operating leverage. And third, our positive free cash flow and strong balance sheet position underscore our commitment to financial discipline and returning cash to shareholders. In short, our consolidated first quarter results demonstrate the strength of our portfolio and market-leading innovation, our commitment to operational excellence, and our thoughtful strategic and financial stewardship. Now let's dig into some of the details. Consolidated net sales for the first quarter were $1.04 billion, up 4.2% from prior year and better than expected, as sales in both the Professional and Residential segments exceeded our guidance. Professional segment net sales in the first quarter were $824 million, while Residential segment net sales were $216 million. Both segments benefited from higher shipments of snow and ice products and net price realization. Strength in underground construction, including the successful integration of Tornado, and growth in our landscape business also contributed to top-line growth in the Professional segment. We delivered a 9.8% consolidated adjusted operating earnings margin in the first quarter, up from 9.4% a year ago. Both Professional segment earnings of $137.6 million and Residential segment earnings of $13.2 million exceeded our expectations. Year-over-year results in both segments reflect net price realization and the favorable impact of our ongoing productivity improvement and cost savings measures. This was partially offset by higher material and manufacturing costs. Finally, our first quarter adjusted EPS was $0.74, which exceeded both our prior year adjusted EPS of $0.65 and our previous outlook for this period. Now turning to our balance sheet and cash flow results. Our balance sheet continues to afford us meaningful strategic optionality, enabling us to focus our capital investments on initiatives that generate profitable growth. Our current leverage ratio of 1.5 times remains healthy and well within our stated target range. Our free cash flow for the quarter was $14.6 million, a year-over-year increase of more than $80 million, resulting in a free cash flow conversion rate of 22%. We achieved this performance through meaningful inventory improvement driven by our integrated business planning process and seasonal demand for snow products. As a result, our inventory turnover improved to 2.8 times in the quarter. Additionally, we returned $133 million to shareholders in the quarter through dividends and share repurchases, demonstrating continued confidence in our ability to generate cash. Looking ahead, we remain focused on capitalizing on top-line growth opportunities, thoughtfully managing our balance sheet and cash flow, and integrating AMP operating efficiency benefits that support our $125 million run-rate target by 2026. We are raising our sales and earnings outlook for fiscal 2026 based on our strong execution and the strength of our first quarter performance. We are increasing our expectation for total company net sales growth to 3% to 6.5%. This reflects, first, Professional segment net sales that are expected to grow mid-single digits and, second, Residential segment net sales that are expected to be flat to down 3%. This is an increase from our prior Residential segment net sales guidance, reflecting strong Q1 results and an improved outlook for the balance of the year. We are also raising our full-year 2026 adjusted earnings per share guidance to be in the range of $4.40 to $4.60. This outlook assumes a higher total year adjusted gross margin rate, consistent with our prior guidance and underscoring our ability to navigate cost pressure while investing in innovation; higher adjusted operating earnings margin, which reflects annual Professional segment earnings margin between 18.5% and 19.5% and an improved outlook for the Residential segment earnings margin between 6.5% and 8.5%; interest expense of approximately $60 million; an adjusted effective tax rate of about 21%; and capital expenditures of $90 million to $100 million. Furthermore, we now expect an improved free cash flow conversion rate of at least 120%. For the second quarter of 2026, we expect total company net sales to increase mid-single digits from the same period in 2025, with mid-single-digit net sales growth expected in both segments. Professional segment earnings margin in the second quarter is expected to be similar to a year ago, while Residential segment earnings margin is expected to approach double digits. For the total company, we are expecting mid-single-digit adjusted earnings per share growth in Q2. As a reminder, our second quarter is typically the largest of the year. As evidenced by our strong first quarter performance, we are managing our business to take advantage of our strengths as well as market opportunities, while mitigating external pressures. With our team's continued commitment to providing innovative solutions that create value for our customers and drive operational excellence across our business portfolio, I am confident in our ability to deliver sustainable, profitable growth for the long term. With that, I will turn the call over to Edric. Edric Funk: Thank you, Angie, and good morning, everyone. Our results in the first quarter demonstrate our competitive positioning and business resilience, our market-leading innovation, and our team's skillful execution of key initiatives. Together, these factors provide a solid foundation for future success. With our strong balance sheet and free cash flow, we continue to invest in technological innovations and growth markets that provide significant value for customers and The Toro Company. Let me share a few examples. We are actively pursuing opportunities to capitalize on the growing global demand for underground construction equipment, which is being fueled by aging infrastructure, new data centers, and a rise in energy and telecommunications projects. CONEXPO, which is North America's largest construction trade show, is taking place this week. At the show, we are exhibiting our broadest offering ever of underground and specialty construction solutions. With our recent acquisition of Tornado, which is a natural complement to our existing products, we are poised to extend our reach and impact within this category and beyond. In Golf, Grounds, and Irrigation, we are building a pipeline of innovations that help customers maximize workforce productivity and reduce costs. Last November, we introduced our AI-enabled Spatial Adjust software, which is proven to be, in the words of our customers, an absolute game changer. This water management system is simultaneously helping to preserve one of our most precious resources, delivering more consistent playing conditions, and bolstering subscription service offerings that provide incremental recurring revenue for The Toro Company. This spring, we are further expanding our water management suite with the launch of our new RXC irrigation controller. This reliable and contractor-friendly irrigation solution provides modular expandability, advanced flow monitoring, and smart features such as predictive weather-based scheduling, seasonal adjustments, and intuitive programming. Innovations like this enable our customers to better manage costs, conserve water, and maintain the condition of the ground in their care. And finally, by coupling targeted acquisitions and strategic partnerships with years of our own internal development, we are incredibly excited that we now offer the market's broadest range of autonomous turf maintenance solutions. We have accomplished this by leveraging multiple localization and navigation technologies across an array of high-energy and low-energy product platforms. While most of these innovations are still early in their growth life cycle, we are very optimistic about their future potential. At the same time, we are also excited about the near-term opportunities within our core businesses. For example, following the strong performance of our snow categories during Q1, given the current health of the channel, we are confident about the prospects for those product lines in the second half of this year. Finally, the team's commitment to operational excellence and optimization of our global supply chain will continue to help us mitigate increases in materials and manufacturing costs, streamline our supply chain operations, and manage our inventory with exceptional success. Through the steadfast engagement of our team, we are building strong momentum for future growth. I will now turn the call over to Rick for closing remarks. Rick Olson: Thank you, Edric. In closing, I want to underscore our confidence in The Toro Company's strategy and continued profitable growth. Our actions are enhancing our customers' performance, strengthening our competitive advantage, and increasing our operational efficiency. Through our disciplined approach to capital allocation and balance sheet flexibility, as well as our commitment to strong free cash flow, we are well positioned to deliver significant value to all our stakeholders for many years to come. We will now open for questions. Operator: We will now open for questions. Our first question comes from Samuel Darkatsh with Raymond James. Your line is open. Samuel Darkatsh: Good morning, Rick, Angie, Edric. How are you? Rick Olson: Good morning, Sam. How are you? Samuel Darkatsh: I am well, thank you. A few quick questions if I could. First off, Pro sales were up 7% in the quarter. Can you give us a sense of what that was organically, excluding the Tornado effects? Angie Drake: We also saw improved underground and Pro contractor shipments. And then, of course, you said Tornado. Excluding Tornado, it would be snow and then underground construction and Pro contractor. Samuel Darkatsh: So figure maybe 5% or so is organic and a point or two would be Tornado. Would that be fair? Angie Drake: That is probably close. What I failed to mention, though, is that we did see some of that offset by some softness that we saw in international. But overall, I think 1% to 2% is probably fair. What we had mentioned in Q4 is that Tornado would contribute about 2% growth for sales, so for inorganic growth will be about 2%, and their sales were we were expecting to be about $100 million for the year. So pretty well in line with what our expectations were for Q1. Samuel Darkatsh: Gotcha. And then on an all-in basis, what was snow and ice? I understand it is a relatively attractive margin category in both segments for you. Can you help us contextualize how much snow and ice was up in the quarter? Rick Olson: We did, as Angie said, have strength across our businesses. If you look at the two reporting segments, it was the largest portion of each of those segments. On the Residential portion, it would be the largest, but also offset by some shipments of spring products that will be a little bit later, rolling into the second quarter. So there was some offset there, but it was the largest portion of the increase there. Interestingly, on the Residential side, as we talked about, there was field inventory in place, so retail was even stronger than the shipments that we saw. Shipments, if you look at a ten-year average, were about on average on the Residential side. On the Professional side, a little different story. The shipments were well above the ten-year average, and in both cases, it just puts us in a very positive field inventory position as we go into the second half of the year. That gives us confidence in the preseason fills both for the Professional and the Residential side as we go into the third and the fourth quarter. So the largest portion of each of the segments was snow, but really strength across the businesses, and in the case of Residential, kind of back to a more normal snow shipment year for us. Samuel Darkatsh: Gotcha. Then my last question has to do with the annual guide. The 6.5% high end of your range, I am trying to first off, I am trying to get there with the Professional and Residential guide. Professional up mid-single, high end of the Residential is flat. Obviously, that does not get you to 6.5%. So in order to get to 6.5%, would Pro be closer to high single-digit growth, or would Resi turn positive? I am just trying to get a sense of how to think about the high end of the range, Angie. Angie Drake: Sam, I think what we can talk to are the pieces of that. As we think about the full year, expect to get a little bit more than our average 1% to 2% on net realized price, and then the balance of that will be driven by organic growth, and that will be largely in the Professional segment and in the categories that we talked about earlier: underground, Professional contractor, Golf and Grounds, and a strong second-half snow sell-in. Samuel Darkatsh: Okay. I will ask that offline. It is fine. Thank you all. Appreciate it. Very good stuff. Rick Olson: Thank you. Operator: Our next question comes from Tim Wojs with Baird. Your line is open. Tim Wojs: Nice job. Maybe just to kind of piggyback off Sam's question. I guess, you raised the Residential guide, but you did not raise the Professional guide. Is that just going from one end of the range to the other end of the range, or is there something in Pro that is offsetting some of the upside that you saw in the quarter in Q1? Angie Drake: I would say that for Pro, we probably saw a little more softness in international than we expected, so we are having to offset some of that. But the rest of it is really largely as we expected in the Professional segment for the year. We raised Resi because we did see some upside in snow that was a little higher than we expected in Q1 based on some of the snow events that we saw across the country. Tim Wojs: Great. And then I guess one question: when you look at your snow contractor base and your lawn-and-garden contractor base, do you have any sort of sense as to what the overlap between the two is, and if strong snow does help the Professional landscape business and vice versa? Rick Olson: There is a lot of overlap. I think what you are getting at is if you come into the spring season with contractors that do both snow and summer work, they are going to come in in a healthy position, and we would anticipate that that would be the case for the contractors. One thing to keep in mind is contractors have really been strong throughout the cycle. Where we had some softness was with the homeowners that were buying products. They have been pretty solid throughout. The current strength is also being bolstered by the new products that we are introducing. For example, in the Exmark area, the Lazer that was introduced two years ago and the Radius are both selling very strongly. So that puts those factors together, and it is a very positive position for landscape contractor on the pure Pro side. Tim Wojs: Gotcha. Tim Wojs: That is helpful. And then the last one I had, just as we did our Golf checks this quarter, we got back kind of an abnormally high response rate around autonomous adoption. Could you just review for us where you are in autonomous in Golf, and if there are any KPIs around how big autonomous is, how it is growing, the products that golf courses are adopting? I think that would be really helpful. Thanks. Rick Olson: Great question, Tim. The response you got is not surprising. There is a lot of interest, and that would not surprise any of us knowing that labor represents such a significant portion of golf course budgets, and that for a lot of golf courses, they are finding it difficult to find and attract the labor. That is clearly the driver and has been for some time. We have seen it is kind of difficult to find a golf course that has not at least experimented with some autonomous solutions. I think they are still looking for how that ultimately fits into their business. Some of what we are excited about—we have been investing in this category because of those drivers for a long time. As I mentioned in the prepared remarks, we are pretty excited now that we cover all the bases. So if somebody is looking for that traditional robot style, whether that is for around the clubhouse or smaller areas of the rough, we have that. If they are looking for still low energy but a more productive piece, we now offer that product as well. If they are looking to, rather than mow, collect balls on the range, we have a version of that platform that does that piece. Then we are also now offering products up in the higher-energy range. If they are thinking about mowing that longer turf that, again, you might find in the rough, but they are looking for an even more productive machine and one with the traditional mowing technology, we have a platform for that, and then all the way now to the fairway mower. We are pretty excited there. As we said, it is still early days on people being all-in across the board, but we only expect additional interest and growth in that area. Tim Wojs: Awesome. Thank you. Thanks for the detail, and good luck, guys. Angie Drake: Thank you. Operator: Our next question comes from David MacGregor with Longbow Research. Your line is open. Joe Nolan: Hey, good morning. This is Joe Nolan on for David. I was just wondering, with the bottlenecking investments and other investments you have made in the Ditch Witch business, can you talk about how much improvement you are seeing on margins today in that business and how much more improvement we could see in 2026? Rick Olson: We continue to see, really from the time of the acquisition in 2019, steady growth in our profitability in that business. It is from a number of factors, obviously leveraging across the scale of The Toro Company, but also the continued improvement by that business. We are back soundly in the range of the Professional profitability at this point, and the investments that you mentioned, like the new paint system and others within the facility, are helping us to continue to fuel the growth that we see across a lot of drivers within that business. The business continues to be healthy, we have continued to make solid profit improvements, and we are very optimistic about the outlook for that business going forward with the long runway. Joe Nolan: Got it. That is encouraging. And then on the international business, you mentioned some weakness there. Could you expand on what markets that is in and how that is factoring into your guidance? Rick Olson: Broadly across our businesses, that is the one area that is a little bit behind where we would expect them to be at this point in the year, just through the first quarter. I just looked at that detail this morning, and it is kind of broadly across a number of areas, both in Europe and in Asia across multiple categories. It is more just kind of a general economic environment sort of situation. Our team is still optimistic that they will be on track for the year, but we just see some softness there so far this year that we wanted to pass on as commentary. Joe Nolan: Got it. And then just one last one for me quickly. On M&A, can you talk about what you are seeing in terms of valuations and also update us within the existing where you see the greatest opportunity to build within organic growth? Rick Olson: Our approach to M&A has remained pretty consistent through the years. The activity has always taken place, building opportunities for M&A. We stay pretty focused in areas where we know we can compete and win, so it is close to our existing businesses. If you pick those out, it is going to be likely on the Professional side, and we see opportunities within, as evidenced by the Tornado acquisition, the underground and specialty construction particularly, but also opportunities for technology investments and adjacencies that might be there as well. The key point is the process continues on an ongoing basis. Valuations have been high, but there are some signs of moderating a little bit—just recent data points. Nothing necessarily statistically valid there, but valuations may be moderating a little bit. Joe Nolan: Great. Thank you for answering my questions. I will pass it on. Rick Olson: Thank you. Operator: Our next question comes from Eric Bosshard with Cleveland Research Co. Your line is open. Eric Bosshard: Thanks. A couple of things, if I could. First of all, with leverage at 1.5, I am curious how you are thinking about the next 12 to 18 months, as there have been a handful of tuck-in acquisitions and some bigger ones. As we move forward, what is the strategy with the leverage opportunity? Is it buying more stock, or more acquisitions? If you could just start on that, it would be helpful. Rick Olson: Thanks for the question. Our capital allocation strategy remains the same. We first invest in research and our new products and innovations. We invest in opportunities for productivity improvement and technology within our facilities. We obviously look for opportunities with M&A, and then, of course, we fund our dividends and typically would buy back stock at the end of that list. With regards to M&A, we have the capacity and we have the interest in M&A of all sizes. It is really, for us, the process that we go through and the discipline that we maintain in that process. We are always open to M&A, but it is really the process and the opportunities and the timing for potential sellers that is the gauging factor. Did that answer your question? Eric Bosshard: Yes, that helps. The second question is from a field inventory perspective on both the Pro and Residential side. Curious what that looks like presently and also the appetite for loading in both the Pro and the Residential side from your partners? Rick Olson: We are actually in a very healthy position from a field standpoint. Even in a normal situation, there will be differences by businesses, so some a little high, some a little low, and those businesses are working to adjust those with the normal flow. I would say we are pretty normalized at this point, and with regard to your question about channel, it really, as we mentioned earlier, helps us and gives us confidence in the second half of the year with the snow. In particular, the Professional products would be going into the preseason in the third quarter and the Residential products in the fourth quarter. So it does give us confidence in the second half to derisk some of those factors in the second half. Eric Bosshard: Okay. Thank you. Rick Olson: Thank you. Operator: Our next question comes from Mike Shlisky with D.A. Davidson & Co. Your line is open. Mike Shlisky: Hi, good morning. Thanks for taking my questions. I am not sure if people on your staff track this, but does the heavy snowfall that we saw most of this winter lead to a potential greener spring, assuming temperatures are somewhat normal? Rick Olson: It does, Mike. Snowfall leads to early spring moisture that gets the growth started early in the spring, so it is typically a positive. We have seen solid snowfall in the U.S. Interestingly, on average, a little bit below, just because of the extremes. The West had little snow, if you think about some of the ski locations. The Midwest was kind of mixed relative to normal, and then you experienced on the East Coast a really exceptional winter. That would also influence the effect that you talked about, so less snow in the West would be less positive going into the spring. Mike Shlisky: Got it. Thanks for that. Turning to CONEXPO, I really enjoyed—I checked out the booth the other day at CONEXPO, the Ditch Witch booth. I was curious about something I saw there called the Orange Intel system, which looks like an interesting fleet management, telematics-type system. The other brands that you have have similar systems like the Horizon 360, for example. I was curious how you feel about your offerings compared to the competition—both those and other offerings on shared infrastructure that maybe other people cannot really replicate. Are there any other digital offerings on the way, like getting Tornado added to it or other digital offerings that might have good subscription tailwind here? Rick Olson: Great observation, Mike, and thanks for the question on that as well. We get more excited every day with the progress of those things. In addition to the ones you referenced, Intelli360 would be another one that we are using on the Golf and Grounds side of the business. Some of those grew up in different places. Orange Intel is something that has existed with the Ditch Witch brand and the Charles Machine Works company even prior to the acquisition by The Toro Company. But now all of those teams are working together. We execute something within the company that we call our Technology Forum that brings all of our technology practitioners together to share and continue to co-develop. Going forward, what you hinted at is absolutely likely—that you will see more and more commonality and ability for customers who work across different segments of our product lines to be able to use some common infrastructure. Lots of good stuff going on now and excitement for the future there. Mike Shlisky: Great. Maybe one last one for me on the Golf business. I think last quarter, you said that Grounds would be a little bit more of a growth area than Golf, just with Golf having such tough comps. The Grounds has been a little bit of a—it was harder to meet that demand when Golf was so strong. A quarter later, do you still feel that way? Are golf courses—is Grounds still going to be a bigger driver than it was before? I would also be curious about the outlook for international golf courses versus domestic. Rick Olson: Another good question. I would say we are probably feeling a bit more optimistic on both fronts in Golf and Grounds. Our efforts in Grounds are showing benefits. Remember that was something that we were intending to put more energy toward. On the Golf side, we have done some recent research that is showing actually continued growth in equipment purchase expectations and the budgets to support that. We were prepared for some softening off the incredible growth trajectory that we have been on, seeing that normalize more, and it has. But the incoming orders have been a bit more brisk than we probably anticipated. So I would say we are probably more optimistic than we were three months ago in that regard. Mike Shlisky: I guess just your thoughts on global Golf as opposed to domestic. Any differences there? Rick Olson: Connecting back to my earlier comment, things have not been as strong internationally. Participation internationally has been really good, just as it has been in the U.S. There is still money going into the industry, but we have seen a bit more softness there. Development remains pretty strong. Some of the geopolitical things that are going on in the world—we were prepared that that may slow and defer some of the projects in certain regions. Generally, we think things are just connected back to the macroeconomic environment not being quite as strong and maybe a bit less investment internationally than we are seeing in the U.S. Nothing that we are alarmed about, but something that we are watching closely. Mike Shlisky: Thanks for that. I appreciate it. I will pass it along. Operator: 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 June to discuss our second quarter 2026 results. Operator: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Baytex Energy Corp. fourth quarter 2025 financial and operational operating results conference call. As a reminder, after the presentation, there will be an opportunity for analysts to ask questions. You may also submit questions in writing at any time using the form in the lower section of the webcast frame. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Brian Ector, Senior Vice President, Capital Markets and Investor Relations. Please go ahead. Brian Ector: Thank you, Ashiya. Good morning. Welcome to Baytex Energy Corp.'s fourth quarter and full year 2025 results conference call. Joining me today are Eric Greager, our CEO, Chad Lundberg, our President and COO, and Chad Kalmakoff, our CFO. Before we begin, please note that our discussion today contains forward-looking statements within the meaning of applicable securities laws. I refer you to the advisories regarding forward-looking statements, oil and gas information, and non-GAAP financial and capital management measures in yesterday's press release. On the call today, we will also be discussing the evaluation of our reserves at year-end 2025. These evaluations have been prepared in accordance with Canadian disclosure standards, which are not comparable in all respects to the United States or other disclosure standards. Our remarks regarding reserves are also forward-looking statements. All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified. After our prepared remarks, we will open the call for questions from analysts. Webcast participants can also submit questions online. So, with that, let me turn the call over to Eric. Eric Thomas Greager: Thanks, Brian. Good morning, everyone. 2025 was a defining year for Baytex Energy Corp. With the closing of the Eagle Ford sale in December, we successfully completed the repositioning of this company into a focused, high-return Canadian oil producer. This is our first call since that milestone, and it marks a significant upshift in our trajectory. Baytex Energy Corp. is a technically driven organization with an industry-leading balance sheet. By exiting the year in a net cash position, we have established a premier platform built for disciplined, long-term value creation. We are entering 2026 with a clear strategy and the financial flexibility to navigate any market environment. With this strategic pivot now complete, it is the right time to formalize our leadership transition. As we announced yesterday, Chad Lundberg will succeed me as CEO following our AGM in May. Chad has been a valuable partner to me and to this organization, and his promotion is the result of a deliberate, structured succession process to help ensure our positive momentum remains uninterrupted. I have complete confidence in Chad's leadership and ability to drive our next chapter. I am proud of the foundation we have built together. Baytex Energy Corp. is in excellent shape, and I look forward to its continued success under Chad's leadership. I will now turn the call over to Chad Lundberg for his remarks and a detailed operational overview. Chad E. Lundberg: Thank you, Eric. I appreciate the Board's confidence, and I am excited to lead Baytex Energy Corp. and our team into the next chapter. My focus as we move forward is simple. We remain committed to technical leadership and disciplined capital allocation to create value. We will continue to build our business by prioritizing our heavy oil and Duvernay assets with an enhanced focus on exploration and new play development, all of which is underpinned by a balance sheet that is in great shape. And we will prioritize a competitive return through a combination of organic growth, share buybacks, and dividends. Let's turn to our operational performance. In 2025, our Canadian portfolio delivered annual production of 65,500 BOE per day, which, excluding dispositions, represented 6% organic growth year over year. We invested $548 million in Canada in a highly efficient capital program and delivered solid reserves growth, low F&D costs, and healthy recycle ratios across all reserve categories. Pembina Duvernay and heavy oil development contributed significantly to this performance and continued a strong track record of value creation. This demonstrates the long-term resiliency and sustainability of our business. Importantly, we have significant running room across our portfolio and are excited about our business going forward. First, let's talk about the Duvernay. We have assembled 91,500 net acres and identified approximately 210 drilling locations. 2025 was a breakthrough year. We validated the resource potential, reduced well costs on a per-foot basis, and improved our characterization of the play. We grew production to 10,600 BOE per day in the fourth quarter, a 46% increase over Q4 2024. We are now transitioning to full commercialization with plans to bring 12 wells onstream this year, a 50% increase over 2025. We currently have one rig drilling a four-well pad on our southern acreage. Completion operations are scheduled for the second quarter, with the wells expected to be onstream by midyear and the remaining two pads in the third and fourth quarters. Shifting to heavy oil, we continue to see strong, predictable performance across the portfolio. Our heavy oil assets comprise 750,000 net acres and 1,100 drilling locations, supporting twelve years of drilling at our current pace of development. In total, we expect to bring 91 heavy oil wells onstream in 2026. We are pleased with the expansion of our Northeast Alberta acreage where we are currently targeting seven discrete horizons in the Mannville stack. Recent success includes two multilateral wells in the Sparky and a five-well pad in the Upper Waseca. Our 2026 program will also see increased exploration activity, including stratigraphic tests, step-out wells, and 3D seismic to expand our development inventory and test new play concepts across our extensive heavy oil fairway. In addition, we are advancing two waterflood pilots at Peavine, blending the attractive capital efficiencies of multilateral primary development with the potential for enhanced recovery and moderated decline rates. Thank you to our teams for executing safely through 2025 and into 2026. And with that, I will turn the call over to Chad Kamilcoff to discuss our financial results. Chad L. Kalmakoff: Thank you, Chad, and good morning, everyone. Our 2025 financial results demonstrate the cash-generating power of our Canadian assets and the transformative impact of the Eagle Ford divestiture. For the full year, we generated $1.5 billion in adjusted funds flow and $270 million in free cash flow. In the fourth quarter, we delivered $262 million of adjusted funds flow and $76 million in free cash flow, which included $35 million of nonrecurring expenses related to the Eagle Ford disposition. This was achieved despite a softer commodity backdrop with WTI averaging US $9 per barrel during the quarter. The 2025 net loss of $604 million reflects the nonrecurring loss on the Eagle Ford disposition, a deferred tax expense related to the restructuring from the sale, and a $148 million impairment on our Viking assets. These non-cash adjustments have no impact on our cash flow generation outlook for 2026. Turning to the balance sheet, we exited 2025 with the strongest financial position in Baytex Energy Corp.'s history. We eliminated our net debt and ended the year with $857 million in cash less bonds and our $750 million credit facility fully undrawn. We remain committed to returning a significant portion of the Eagle Ford proceeds to our shareholders and believe the NCIB program is the most efficient approach. Since reinitiating our buyback program in late December, we have repurchased 30 million shares, nearly 4% of the company, for over $141 million. Our current NCIB remains active through June, and we intend to launch a renewed NCIB in July. As we monitor the broader macro environment, we continue to assess the pace and mechanism of our buybacks to ensure we are maximizing long-term value for our shareholders. We have considered an SIB, or substantial issuer bid, but at this time, we believe we can meet our shareholder commitments through our NCIBs in 2026 while maintaining our annual dividend of $0.09 per share. I will now turn the call back to Eric for closing remarks. Eric Thomas Greager: Thanks, Chad. To build on those points, this focused, high-return Canadian company is the next chapter for Baytex Energy Corp. For 2026, our operations are on track, and our annual guidance of 67,000-69,000 BOE per day remains unchanged from December, with the high end of that range representing 5% organic growth year over year. We have significant inventory depth and optionality across our portfolio to support our current plan and potentially accelerate growth beyond these levels. I am proud of the trajectory we have established. We are now positioned to demonstrate the true potential of this Canadian portfolio. Operator, let's open the call for questions. Thank you. Operator: We will now begin the analyst question-and-answer session. You will hear a tone acknowledging your request. To submit your question in writing, please use the form in the lower right section of the webcast frame. If you are using a speakerphone, please pick up your handset before pressing any keys. The first question comes from Menno Hulshof with TD Cowen. Please go ahead. Menno Hulshof: Good morning, everyone, and congrats to the both of you on the transition. I will start with a question on the growth outlook. You are currently guiding 3% to 5% for 2026, but if we assume that oil prices remain elevated for longer than expected, is there a scenario where growth exceeds the top end of the current range? And then has your overall thought process in terms of high-level deliverables for 2027 changed at all within the last several weeks? Chad E. Lundberg: Thanks, Menno. It is Chad. I will take a crack at answering your question. So, on growth, yes, I mean, we have guided to a capital program of $550 million to $625 million delivering 67,000 to 69,000 barrels a day, which represents 3% to 5% production growth. We are actively monitoring the macro picture and situation right now, and we would expect to make any decisions on increased growth at the breakup timeframe. We certainly have the optionality within the portfolio depth and quality to go a little bit harder this year and, to your point, into 2027. As I said, that will come, you know, we will look at it through breakup and make the decisions accordingly. Maybe just a little bit of an example of where we could look to expand the program. So, you know, potentially another pad in the Duvernay that may look like a drill that gets DUCed into next year and completed. Or continued expansion in that Northeast Alberta fairway where we utilize the two drill rigs that are drilling there today and potentially continue with that second rig. We could also pivot, though, just again, an example of the depth of the inventory, pivot up into Peace River where we have some of the exploration work happening and elect to allocate capital up into that region as well. So, lots of optionality currently on our radar. We are not moving it too fast, but those will come as decisions through breakup. Menno Hulshof: Terrific. Thanks for that, Chad. And then maybe, I guess, my second question relates to your opening comments on some of the comments that you made on the Peavine waterflood opportunity. How material could that be? How do you plan to tackle this relative to some of your peers who are already well down that track? And what could that look like over the next, in terms of deliverables, what could that look like over the, call it, twelve to eighteen months? Chad E. Lundberg: So, we are deploying two pilot projects this year. One is into the kind of part of the play that we have been actively drilling to this point. So, you can expect that, you know, we produce barrels out of the well that is going to be converted ultimately into an injector. What we are looking for there is just how fast can we fill it up to then pressure support the entire system around it to ultimately drive a lower decline and more barrels out of the ground. The second pilot is in a new development area where we are actually drilling the producers and the injectors simultaneously with each other, and we will turn them on together at the same time. So, what does all this mean? I mean, certainly, the waterflood has been doing great things for our industry. We are not sure what happens with our rock. That is why we have committed to pilots at this point in time. As a reminder, our primary development is very strong, holding 48 of the top 50 wells in the play, and that is really a part and parcel to the incremental pressure that we have in situ in the rock itself. So, there are various factors that are maybe unique to our situation that are potentially different from others. If you extrapolate that out, though, to the big picture, we are pretty excited for what it could do if it were to work with respect to base declines and driving more oil out of the ground. What does that mean for the future in the next eighteen months? I think, you know, we are going to work very hard to try and understand this through end of the year and into the budget process. And then how does that translate into our program next year? It could mean incremental waterflood injector activity in 2027. It could mean leaving gaps in our drilling program in between primary producers for the future. And we are just going to have to wait and see, Menno, where we go. Menno Hulshof: Can you remind me? I should know this. But when was the last time Baytex Energy Corp. dabbled in waterfloods, if at all? Chad E. Lundberg: Yeah. So, I mean, waterflood is not new to Baytex Energy Corp. at all. We have actually been at it for two decades. Waterflood and then also polymer floods. It just depends on the quality of rock and oil that we are working with. But you could think about it this way, Menno. Approximately 10% of our heavy oil production, so 43,000 barrels a day in 2025, is waterflood-derived production. So, not new to the story, and it is not foreign to us. We have the technical capacity and teams to really, we think, advance this forward. Menno Hulshof: Terrific. I will turn it back. That was very helpful. Thank you. Operator: That is all the questions we have from the phone lines. I would like to turn the conference back over to Brian Ector for any questions received online. Please go ahead. Brian Ector: Great. Thank you. Yes, there are a few questions coming through in the webcast, so I will try and run through those with you here, Chad. Menno spoke to the current WTI price environment, maybe optionality and growth. But another question comes in around, I think it is referencing breakeven prices. Is there a WTI price that we would pause the growth scenario, Chad? Chad E. Lundberg: Well, we set the budget out 3% to 5% centered at $60 oil, guiding to the high side, more than 5%, at $65, and then certainly the flexibility, as we have built the program, to pull that back below $60 oil. I think that is how we think about it, think about our growth. And, again, we are just really observing the macro climate right now. Obviously, it is incredibly dynamic, and we are taking it in and are not going to make any knee-jerk moves. But I would remind that we have the optionality and flexibility to move harder if so desired. Brian Ector: Another question on the operations around our cost of production, and can you speak to the capital efficiencies you see in the business generally, Chad, and steps we can take to continue to work on the cost of production and efficiency of the world. Chad E. Lundberg: Yeah. You know, Brian, I think that gets into how we have laid the budget for 2026. We have started with sustaining capital at $435 million, add the $50 million in growth, $50 million in infrastructure, and then $50 million in exploration. I think when you look into each one of those buckets, they are designed to improve capital efficiency. So, I will just give an example in the Duvernay. The infrastructure spending is at a higher and elevated pace for the next three years and then falls off, you know, post three years to a much lower rate. That flows right through the capital efficiencies and excess free cash flow to the shareholder. If you look in our investor pack, we have done it again centered on the Duvernay, a pretty good job of delineating the asset, improving the characterization, and then also reducing cash costs. Specifically, in 2024, we improved by 11% on the characterization and then equally so dropped their capital cost by 11%. So, both of those flow straight through to capital efficiency. Maybe just a little bit on the heavy oil program, touched on the $50 million that is allocated to exploration. This is absolutely intended to enhance and lengthen our inventory position. And I think, you know, some of the wells that we released through Q4 of last year up in the Sparky in the Suggton area, some of our Upper Waseca wells as we step through that Northeast Alberta area and the seven different layers in the Mannville stack, we are pretty excited about what it is doing for capital efficiency. I would make this motherhood statement, though, to end the conversation. We are not done. This is something that we do as a company. This is something that our teams are tremendously good at, and this is a huge focus and priority of mine as I step into this role and we move forward into the future from here. Brian Ector: Thanks, Chad. Let's shift gears to a couple of questions and conversations around the net cash balance sheet that we have. It is around $800 million and, Chad, just, I know we have talked a little bit about the insight in the prepared remarks, but how do we see allocating that $800 million going forward? Chad E. Lundberg: So, we have been pretty clear that a good portion of that is going to be returned to the shareholders by way of a buyback. Chad, Kamilcoff in his prepared remarks talked about the NCIB as the preferred vehicle over an SIB at this point in time. But we have also been very clear about utilizing some of the proceeds for greenfield tuck-in, land acquisition, bolt-on style activity in our key and core focus areas. We are still committed to that. Brian Ector: Maybe along those lines and just when you look at buybacks, how would we evaluate the market price, the value, and where we see value in the buyback program itself. Chad E. Lundberg: Yeah. So, you know, I would start here that this company is going to be all about value going forward and an intense focus on how we deliver that value. When we evaluate the buyback specifically, I think there are three things we look at. One is the macro commodity environment, and we would like to think about really acting countercyclically and respecting where we are at in the cycle. The second, though, is just how we are trading to our peers. And so, as we evaluate that, it looks like we have good potential to grow with respect to how our peers are trading today. And then lastly, and equally as important, is just the intrinsic value of the business. We are constantly running models at different price scenarios with different enhancements that we can put on top of the plan, speaking to the optionality that we have in the deep portfolio set in front of us. And that would inform us on an intrinsic value that, you know, all three of those combined would anchor the conversation for how we proceed forward with buybacks. I guess when we look at those altogether today, it would still signal that we are focused on the buybacks and continuing forward from here. Brian Ector: Excellent. Okay. One question I will turn over to Chad Kalmacauper, CFO. Chad, can you just talk to our existing hedges in place, maybe WTI and WCS, and what the policy will look like going forward. Chad L. Kalmakoff: Sure. We have hedges in place through the back half of last year, collar structures with a floor at 60. Through the transaction, we maintained those, so we would be roughly, you know, I will call it 60% hedged on WTI in Q1 and about 45%-50% hedged in Q2. Nothing has changed policy-wise. I think we always talked in the past about a strong balance sheet being the best hedge you can have. So, going forward, I think we obviously have a very pristine balance sheet. I would not expect us to be looking to hedge WTI contracts really in the future, given the balance sheet we have today. That being said, I think we can still look at hedging WCS contracts. We are 5% hedged on WCS this year at about $13. We still think that is an important piece of business to keep hedging to prevent any financial impact from major blowouts. So, in summary, WTI, those will be rolling off here at June. I would not expect us to be that active in the hedging market on WTI, maybe in specific circumstances. We will continue to hedge differentials. Brian Ector: Okay. Great. I think that is going to wrap up the large portion of questions coming in from the webcast. I would like to thank everyone for joining us. For those who submitted webcast questions that we did not get to address, please reach out to our Investor Relations team and we will respond directly. Again, thank you for your time today. Have a great day. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Kenny Green: Ladies and gentlemen, thank you for standing by. My name is Kenny Green. I am part of the investor relations team at Ituran Location and Control Ltd. I would like to welcome all of you to Ituran Location and Control Ltd.'s Results Zoom webinar, and I would like to thank Ituran Location and Control Ltd.'s management for hosting this call. All participants other than the presenters are currently muted, and following the formal presentation, I will provide instructions for participating in the live Q&A session. I would like to remind everyone that this conference call is being recorded, and the recording will be available from the link in the earnings press release and on Ituran Location and Control Ltd.'s website from tomorrow. With me today on the call are Mr. Eyal Sheratzky, CEO, Mr. Udi Mizrahi, Deputy CEO and VP Finance, and Mr. Eli Kamer, CFO of Ituran Location and Control Ltd. Eyal will begin with a summary of the quarter's results, followed by Eli with a summary of the financials. We will open the call for the question and answer session. You should have all by now received the company's press release. If not, please view it on the company's website. I would like to remind everyone that the safe harbor statement in today's press release also covers the contents of this conference call and the associated presentation. Now, Eyal, would you like to begin, please? Eyal Sheratzky: Thank you, Kenny. I would like to welcome all of you to our fourth quarter and full year 2025 results call, and thank you for joining us today. Before I begin, I would first like to acknowledge the war between Israel and the United States against Iran. We honor the bravery of both the Israel Defense Forces and U.S. military personnel and their air forces, and we sincerely wish for their swift and safe return home. We hope the war will draw to a quick resolution and lead to lasting peace for all countries in the Middle East. Now to the results. We are very happy with the results of the fourth quarter as well as the full year of 2025, our best ever and record across all key parameters. For the quarter, overall revenue growth was 13% to almost $94 million, a record, with subscriber revenue growth at 15%. EBITDA grew to over $25 million, a record for us and puts our yearly EBITDA run rate in excess of the $100 million milestone for the first time. We generated a significant amount of cash in the quarter at $29.4 million, our highest ever, and as I will discuss later, given our very strong balance sheet, we have decided to share all the rewards of our success in 2025 with our shareholders through a special dividend and increased buyback in addition to the regular dividend. Our growth and success in 2025 continued to be driven by our long-term efforts in bringing new value-adding telematics and connected car products and services to both existing as well as new customers globally. Throughout the year, we were particularly successful at bringing additional new OEM partners to our growing roster. Examples during 2025 were Stellantis, Renault, Yamaha, and BMW. We are in active discussions with others. Beyond our new partnership with Fiat that we announced last week, we hope to bring additional ones in future. Our results show an ongoing expansion in our large subscriber base, reaching at year-end well over 2.6 million subscribers. In the fourth quarter, we added 42,000 net subscribers, adding 221,000 net new subscribers in 2025, a record year for subscriber growth for Ituran Location and Control Ltd. I remind you that in Q1, our new OEM agreement with Stellantis brought their subscribers into Ituran Location and Control Ltd., which gave us a bump in net new subscriber adds in that quarter. Our net adds in recent years have tended to be in the 40,000-plus per quarter range. Looking ahead, while the rate can vary between quarters, we expect to maintain this overall current net subscriber add run rate, which means for 2026, we would expect to add between 160,000–188,000 net during the year. I want to summarize some of our new activities, which we believe will contribute to our growth and success in the midterm over the coming years. These all have the potential to completely transform the company. Our IturanMob smart-mobility platform is a differentiated solution enabling remote vehicle access, real-time telematics, and efficient management for shared mobility, rental fleet, and specialized vehicle application. IturanMob was first launched in Brazil and Israel, where it has gained solid traction among fleet operators and rental companies. Building on this success, we recently introduced the platform to the U.S. market and recently established dedicated IturanMob operations there. We see a clear opportunity among small and mid-sized car rental companies seeking to improve operational efficiency and the end-user rental experience. This is the first time we are coming to the U.S. market, the largest rental market in the world, with over 17,000 small to mid-sized car rental companies, with a solution that is unique, with a real need in the market, and therefore has the potential to gain significant market share. In addition, IturanMob is expanding into new verticals. In the past few weeks, we announced a partnership with leading Israel-based motorsport data analytics company, Griiip. Under this agreement, IturanMob becomes Griiip’s official IoT technology provider, combining Ituran Location and Control Ltd.’s real-time telemetry with Griiip’s AI-powered analytics platform for racing drivers. Based on industry estimates, there are over 60,000 racing events each year, with closer to 1 million participants, representing a large addressable market for our technology. Our goal is that this partnership will already connect thousands of new vehicles in 2026. As you may have seen in the video we published together with the press release, the technology is deployed in some of the most demanding operating environments, professional racing and track day driving, demonstrating the robustness, precision, and scalability of our solution. The higher complexity of this technology allows us to generate a high ARPU for this type of services. IturanMob represents another new long-term growth avenue alongside our core telematics and subscriber-based businesses. Credit Carbon is a new and unique initiative being developed by Ituran Location and Control Ltd. that enables drivers of electric and other zero-emission vehicles to participate economically in the global transition to low carbon transportation, something that has not previously been accessible to individual drivers. Today, while companies that emit carbon dioxide can purchase carbon credits to offset their emissions, there has been no efficient, scalable mechanism for individuals who actively reduce emissions, such as electric vehicle drivers, to generate and monetize verified carbon savings. This solution will create a new incentive for EV adoption while opening an additional revenue stream for Ituran Location and Control Ltd. by providing the platform that connects carbon emitters with carbon savers. It leverages our existing technology, subscriber base, and infrastructure with minimal incremental cost. This initiative has been developed internally over years, leveraging our regulatory, technological, and data expertise. The solution is highly differentiated and is currently undergoing testing and validation. We are in advanced stages and have received encouraging early feedback. We expect initial commercial deployment toward year-end 2026. The timing is favorable right now as global awareness and regulatory pressure to reduce carbon emissions around the world continue to accelerate, expanding the addressable market. Another new initiative is leveraging our big data capabilities. Over many years, Ituran Location and Control Ltd. has built one of the largest and richest vehicle telematics datasets in our markets, encompassing decades of driving behavior, usage patterns, location data, and vehicle performance across millions of connected vehicles. Anonymized and aggregate insights derived from our extensive road use, driver behavior, and transportation dataset with decades of data can support governments, transport ministries, and local authorities in optimizing traffic flow, improving road safety, and informing infrastructure planning. Our data can also support leading vehicle OEMs in advancing driver assistance and autonomous driving capabilities, providing deep understanding of actual road usage and training systems to better reflect real-world driving behavior. We are actively exploring multiple avenues to monetize this significant asset. Overall, our big data capabilities strengthen customer retention, support margin expansion, and provide a highly scalable platform for future growth beyond traditional subscription revenues. Finally, as I discussed earlier, 2025 was the most successful year in Ituran Location and Control Ltd.’s history. As such, given our strong profitability, very strong cash generation, and balance sheet with well over $100 million in cash and no debt, the board declared a total dividend of $30 million for the fourth quarter, consisting of our regular $10 million quarterly dividend and an additional $20 million special dividend. Therefore, for the full year, we will have shared a total of $60 million in dividends, representing approximately 100% of our net income, which amounts to a dividend yield of around 7% based on our year-end share price. This is an excellent dividend yield for a strong, stable, and continually growing company demonstrating record results year in, year out. Beyond all this, and in line with the feedback we hear from many of our investors, we also declared an addition to our buyback of up to $10 million. During 2025, we bought back $3.1 million in shares, or a total of 85,000 Ituran Location and Control Ltd. shares. We believe all this reflects our commitment to creating value and generating capital for our shareholders, while at the same time continuing to develop new products and services and invest in long-term growth at Ituran Location and Control Ltd. We see our ongoing dividend and share buyback as a reward to our shareholders for their loyalty and long-term support of our company. In summary, we remain very pleased with Ituran Location and Control Ltd.’s performance in the fourth quarter, and more generally, Ituran Location and Control Ltd.’s long-term and ongoing performance in 2025. At the same time, we look for more revenues to bring further growth to our business across all our regions, and the recent product launches I spoke about earlier are examples of this. Additionally, we will continue to partner with new OEMs, as we have successfully done throughout 2025, as well as new financing companies and other lending companies. 2025 marked 20 years as a public company and 30 years as a company. We look forward to continued success over the next decades, and I thank our shareholders for their long-term support of our business. With that, I hand over to Eli. Eli, please go ahead. Eli Kamer: Thanks, Eyal. I will provide a short summary of the financial results. You can find the more detailed results that we issued in the press release earlier today. Fourth quarter revenues were $93.5 million, a 13% increase year-over-year. Subscription revenues were $71.1 million, up 15% and representing 76% of total revenues. Product revenues were $22.4 million, up 5% year-over-year. Our subscriber base reached 2,630,000 at the end of 2025, an increase of 42,000 in the fourth quarter and 221,000 year-over-year. The geographic breakdown of revenues in the fourth quarter was as follows: Israel 55%, Brazil 23%, rest of world 22%. EBITDA in the fourth quarter was $25.3 million, representing 27.1% of revenues and a 12% increase year-over-year. Net income for the fourth quarter was $15.3 million, or diluted earnings per share of $0.77, an increase of 10% year-over-year and compared to $13.8 million or diluted earnings per share of $0.70 in the fourth quarter of last year. Cash flow from operations for the fourth quarter of 2025 was $29.4 million. Taking a look at the full year 2025 results. Revenues for 2025 were a record $359 million, a 7% increase over the $336.3 million reported in 2024. 74% of revenues were from location-based services subscription fees and 26% were from product revenues. Revenues from subscription fees were $264.6 million, representing an increase of 9% over 2024. Product revenues were $94.5 million, representing an increase of 1% compared with 2024. EBITDA for 2025 was $96.2 million, 26.8% of revenues, an increase of 5% year-over-year. Net income in 2025 was $58 million, 16.1% of revenues, or fully diluted earnings per share of $2.92, an increase of 8% compared with net income of $53.7 million, 16% of revenues, or fully diluted earnings per share of $2.70 in 2024. Cash flow from operations for the year was $88.6 million. As of December 31, 2025, net cash and marketable securities totaled $107.6 million. This is compared with net cash including marketable securities of $77.2 million as of year-end 2024. The board declared a $30 million dividend for the fourth quarter, including a $20 million special dividend and a $10 million dividend in line with our dividend policy. In addition, during the quarter, we purchased $1.6 million in shares under our buyback program. As of the end of the year, we had around $3.5 million remaining available under this program. Eyal Sheratzky: However, the board today approved a $10 million increase to the existing buyback authorization, which will be funded from available cash and executed in accordance with SEC Rule 10b-18. This means that as of today, there is $13.5 million available under the buyback program. The current dividend and buyback take into account the company's continuing strong profitability, ongoing positive cash flow, and strong balance sheet. With that, I would like to open the call for the question and answer session. Operator. Kenny Green: Thank you. At this time, we will begin the question and answer session. If you have a question, please raise your hand via the Zoom platform. I will introduce you and ask you to unmute, after which you may ask your question. We will now open the call for your questions. We will begin with Chris Reimer of Barclays. Chris, please go ahead. Allen Klee: My question. Kenny Green: Now can you repeat your question? Allen Klee: I am just writing on the chat. Kenny Green: Okay. We will move. The question will be from Sergey Glinyanov of Freedom Capital Markets. Sergey, go ahead. Sergey Glinyanov: Good day, gentlemen. Great results. Could you please add some color on ARPU and the EBITDA dynamics in 2026 and after your initiatives are fully deployed, I mean, carbon credits, et cetera? Eyal Sheratzky: Hi, Sergey. First of all, we are not providing any guidance as you know, but practically and in a general way, I think that the ARPU as it is today should continue. More than 2.6 million subscribers is a big ship of a customer base, so one year is not changing the total ARPU. Looking forward, we really believe that the ARPU is not going to go down because of things that I did not mention today; I said it in the past, we always have additional services to our current subscribers which allow us to provide a kind of upsell of services. This is regarding our traditional services, the fleet management, the stolen vehicle recovery, the UBI, et cetera. Regarding the new technologies and offers that we have, as I mentioned, and it is important to say again, those initiatives are after a few years of putting R&D development and making all the technological and regulatory infrastructure. For us commercially, it will be ready, as I said, mid to the end of 2026. I must say that the financial contribution in 2026 of those initiatives will be very low. The idea to put more color on those items was to show a little bit longer future from 2027, 2028, and of course ahead. We will see because we know some negotiations and we know some customer attractions in the Credit Carbon as well as in the rental solution. The main idea is to show it, to expose it, and the majority of the contribution will be in the next years. I believe that in the second half of 2026, we will be able to talk or discuss some deals and contribution. Sergey Glinyanov: Okay. Thank you. The next question about. Eyal Sheratzky: By the way, Sergey, regarding EBITDA, I did not answer you. We are not providing guidance, but all the things should leverage our EBITDA margins, of course. Sergey Glinyanov: Do you believe that new initiatives could change your margin profile in the long term? Eyal Sheratzky: First of all, if you look backwards, you will see that our margins are growing. We show the operating leverage dynamics happening in the margins. I totally believe that it will continue based on the new services and the upsells that we can do to the current customers. Yes. Sergey Glinyanov: Okay, great. The next question about the motorcycle market in Brazil. How is it going, and did you gain any additional market share in this market? Eyal Sheratzky: Can you repeat? There was some noise here. Can you repeat? Sorry. Sergey Glinyanov: The question about motorcycle. Eyal Sheratzky: Oh, okay. Sergey Glinyanov: And did you gain any additional portion of this market in Brazil? Eyal Sheratzky: First of all, this market in Brazil is very, very big, and we did not touch this segment until about a year ago, until the moment that we understood, or we developed the right device that can be very productive, and we can go then to motorcycles OEM distributors, as well as to insurance companies. As you remember, we already reported about two OEM deals, one with Yamaha Brazil, the second one with BMW Brazil. This year we will see along the year, or we already started, thousands of motorcycles, or maybe even closer to 10,000 subscribers from this segment in 2026. Now we expanded to the retail market after we gained more confidence and we have more to show to the retail market after Yamaha and BMW. As always, I also believe that we will add more motorcycle producers, international producers, during this year and the next year. Sergey Glinyanov: Awesome. Thank you. Thank you for taking my question. That is all from me. Kenny Green: Our next question is from Allen Klee of Maxim Group. Allen, please go ahead. Allen Klee: Hey, guys. Thanks for taking my questions. I know it is still a little early as you expect commercialization towards the end of the year, but I was wondering if you could help walk through what you would expect the economics to look like for the new big data and Credit Carbon products you are rolling out. Maybe in terms of big data, what deal sizing and contract terms could potentially look like. Then on Credit Carbon, maybe the economics for EV drivers in terms of the additional benefits they gain from the product. Eyal Sheratzky: Since we are very optimistic and we see the reaction, I would not come with any guidance because it can be not realistic or not serious that we will do it. It is like new startups among our business. It is a startup that is done by a very big, or the largest telematics company in the world. We will continue to use our connections, our brand, our infrastructure in every country that we work. I must say that, for example, the Credit Carbon, once we start to commercialize it, we are talking about a situation where, for example, taxi drivers or truck drivers or truck companies can get with Ituran Location and Control Ltd.’s solution additional revenues. They have a total interest to come and put our solution because, just as an example, if I can give a truck driver per truck on an average mileage something like €200, €250, €300 a month from emitters through a worldwide or European broker, why should he give up on it? If I am in Brazil, giving a kind of an Uber-type company the ability for the drivers to get additional income, an additional source of revenue that without me they cannot get while they are driving an electric vehicle. I think that the request is going to be tough; there are questions. First of all, it is new to the world. This is the first time, except in some smaller markets in the world where people get money for non-accurate information, not regulatory. The rest of the world requires very tough regulation to approve credit for emitters. In that case, I think that the request should be tough. No one up until now has shown to the world how EV drivers can get money just for driving. For example, take a taxi driver that does not have a client, and he just drives from place to place; he gets money. I think that this is something that can be big, but still it is not yet at a commercialized place, so I do not want just to come and throw numbers. It can be something with a high contribution. Again, it will take time. It will take time to market it, to stabilize it, et cetera. The same is the rental, remote rental company in the U.S. The U.S. is a huge market; we are not, as Ituran Location and Control Ltd., going to be aggressive. We are conservative. We are not starting with tens of millions of dollars of marketing, et cetera. We go step by step with strategic partners in the U.S. I believe that we will do it. Regarding big data, we already started to sell data in Israel, mainly to governmental entities, like road operators, like road accident authorities, et cetera. Up until now, we charge a few hundreds of thousands of dollars for a pilot, only one pilot. I believe that this will continue and will support our results. Again, I do not want anyone to wait for a major contribution in 2026. Allen Klee: Okay. Got it. That is really helpful. Could you quantify the FX impact you saw this year and maybe what you are expecting for next year? Eyal Sheratzky: Yes. I will ask Udi to answer it. He has the pages. Udi? Udi Mizrahi: Yes. Can you repeat the question, please? Allen Klee: Just on the FX impact to the business in 2025, and then maybe expectations in 2026. Udi Mizrahi: I will start with the future. It is really hard to say what will be the FX in 2026 due to all the parameters that can change or affect the FX. Regarding 2025, I would say that if we look on an annual basis, the FX in the EBIT, for example, was about between $1 million to $1.5 million. This is more or less. Allen Klee: Okay. Got it. My last question is, with everything that is going on, with geopolitics and the war, are you expecting any potential disruptions to your business or any supply chain issues, or how do you view the situation? Eyal Sheratzky: Since we, unfortunately, for many years, are used to this situation, I think I will divide my answer to two. First of all, there is a major part of our business revenues and profits that comes out of the Middle East. This has, of course, never been influenced by that. Regarding our operations in Israel, which of course is a major operation, it is not nothing. As you maybe heard from today, the market in Israel also already, I mean not the stock market, I mean the commercial life in Israel also, is back to get authorization to work half a day. Up until now, of course, the last three or four days, the market was shut down. Those were anyway a holiday, a Jewish holiday that in any case was in the diary, a day off for car dealers, insurance, et cetera. Currently, we do not see a damage or anything major. In the past, in June, for example, there were about 12 days in the last war where car dealers in Israel were shut down. After those 12 days, we covered the gap, or those dealers covered the gap in the next month or two. Overall, with our experience in the past, with what is happening in Israel today, and with the situation that we are used to, I do not believe there will be any major influence on the 2026 results. It might move one month or two weeks, from month-to-month kind of volatility, but no more than that, as I expect. Allen Klee: Great. Got it. That is helpful. All right. Well, thanks for taking my questions. Kenny Green: Next question is going to come from Eric Gregg of Foretree Advisory. Eric, please go ahead. I am going to ask you a question now. Are you there? Eric Gregg: I am here. Kenny Green: Oh, great. Okay. Eric Gregg: I am sorry. Do you hear me? Kenny Green: Yeah. Eric Gregg: Okay, great. First of all, tremendous results. We hope you all stay safe through this situation. If you could tease out the big data initiative—it sounds very interesting. Can you tease out a little bit more there beyond just some of the use cases in terms of how you think your data could be used for various different initiatives? I understand the road accident, maybe the road repair, maybe for civic uses. Are there other things you think you could be using the big data for? Eyal Sheratzky: Yes. Eric Gregg: I have another— Eyal Sheratzky: Okay. I will answer first, and then you can ask your second question. First of all, just to illustrate one deal that we already did in Israel. The road authorities want to know where most of the trucks arrive between specific hours along the evening to create parking lots for nights around the country. They wanted to get one month of movement of trucks in the country and find the most trafficked places. They asked to do it for a month, historically, of course. They paid for it, and of course, in less than one second we had this raw data converted into customized data for them. For that only, we charge a few hundreds of thousands of dollars, only for that. We have, for example now, potential fees for entering cities from highways, which is a nationwide project in Israel. For that, they need a lot of data for those movements, those traffic flows from highways to the gates of municipal and central cities. Like today, if you know in London, local British drivers pay money when they get with the car inside London. For that, there is a need for a lot of data, so this is something that we are almost the only one in the country that has such big and such accurate data. Of course, this will lead, I believe, to much larger deals with those governmental offices. This is from a governmental point of view. Let us think about an approach that we have from commercial malls that want to know, for example, at specific hours a day, how many cars valued more than $50,000 are driving in order to customize advertisement and coupons for specific high-end shops. They are willing to pay for that. Everything should be anonymous, of course, because we are according to all the regulation anonymous. The data itself is something that for us exists almost for 30 years. Up until a year ago, we did not do anything with that because the market and the technology and our AI capabilities were not enough to customize it at low cost. Today, that is what we developed, that is what we offer; really the potential customers are across all the segments, as I said, governmental, commercial. Car dealers want to know in which area in the country people sell their car to a second hand and then they buy again. We realized for one of the car dealers in Israel that only a third of the people that sell the car come back to him. He wants to issue to all of his clients a campaign and sales at the specific time that they sell their car; he does not know anymore after they sold it once. There are many aspects. We have a technology; we have today a software that knows how to get the raw data in and bring out customized data upon any request. This is an example for a big data product that we are going to charge for. We talk with everybody today. Eric Gregg: That is tremendous. Thank you. That was very helpful. Second is on capital allocation. If you take consensus estimates that, based on these very strong Q4 results, I think are going to be going higher, net of your cash position, you trade at less than 13 times forward earnings, which is less than what your growth rate of services was in Q4. As your growth keeps on accelerating, it is kind of a PEG of less than 1, which is very inexpensive. The question is, it is great how generous you have been with shareholders in terms of dividends and the special dividend, but why are you not emphasizing stock repurchase more versus the dividends here, given how cheap you seem to be? Thank you. Eyal Sheratzky: Practically, when we do only this, investors ask why not that. You may be right, but Ituran Location and Control Ltd.’s volume, we grew in the last 12–15 months. The volume in the market is low, and we do not want, by going with $30 or $50 million to the market a year, to shrink the volume, because one of the interests for the shareholders is the volume. We find a balance between dividend and share repurchase. As you see in the past and even now, every quarter when we have a board discussion about it, we check it again and we take a new decision. I totally accept what you say, but we have to balance, and this is the current decision of the board. As we did in the past, this might grow. We look at the volume, we get advice with some brokers and bankers on how it can influence, and we do the best that we can at the moment. Kenny Green: Next question will go to Evan Tindell of Byron Capital. Evan, please go ahead. Evan Tindell: Hi. Yes. Thanks for taking my question. Just a quick comment if you do not mind, one second, on the buyback issue and volume. My personal advice as a shareholder is, do not listen to the shareholders or the bankers that tell you that volume is a big problem, because there is research that shows that actually, if you have a buyback in place, it can increase the volume in the stock even though you are shrinking the float. If the price goes up and the valuation is more reasonable, that can actually bring volume and interest into the company. I would just say maybe do not listen to those people and go ahead and buy back the stock if that is what you think is the right thing to do based on the valuation. Sorry for that aside. Sorry for that. Eyal Sheratzky: Okay. No comment. No comment on the buyback. Thank you. Yeah. No comment. Okay. Okay. Okay. Evan Tindell: Yeah, I would say just do based on what you think the value of the stock is in the open market versus the fair value. Okay. Can you talk about competition in both Brazil, and I know in Israel there is not much competition, but can you talk about the state of your competitors in both markets in terms of market share and pricing and competitive positioning? Eyal Sheratzky: Okay. First of all, as you said regarding shares, I will tell you regarding competition. We have a very strong competition also in Israel, but we win it, and this is totally different than no competition. Pointer is in the market more or before Ituran Location and Control Ltd.; this is the main competitor, and along the years we succeeded to gain more and more market share, and that is what we do today. In order to keep and gain this market share more and more, in Israel we have to be the best every day, and this is why we develop more and more technology, why we have to have more recovery rates, a better recovery rate, et cetera. For insurance companies and for car dealers, to change is one day, because they want better results, they want better solutions, they want their customers to be satisfied. We have everyday competition, but for 30 years we have succeeded to win and gain market share. This is regarding Israel. Regarding Brazil, I think that it is almost the same. The market is much bigger. The size of Brazil is much bigger. There are specific geographies in Brazil, in the north, in the Amazonas area, where there are some small companies that might have some subscribers. When you talk about the main commercial area in Brazil, which is São Paulo State, Rio de Janeiro, Brasília, and all the main urban areas, we are also, I think, controlling the telematics market; we are the main provider. What has happened in the last two years, and I believe that we will show it this year and later, is we also see in the B2B market customers like leasing companies, like big fleets, that even if they tried our competitor, now they change their supplier to Ituran Location and Control Ltd. The situation in Brazil is that we are also gaining more and more market share. In the telematics business, I think that we are the largest, and the situation is very close to Israel. The competitive landscape is bigger. There are more competitors than in Israel; the geography is bigger. I think that overall, in the ongoing new subscribers in the telematics industry, we are the one adding the major portion of those subscribers. Evan Tindell: Okay, thanks. I have one more question. On the fleet business, I know you also have a fleet business, where you sell to fleets. It seems like the leaders in that business, whether it is Samsara or Geotab—I am thinking of Geotab mostly—they really have built out their software suite and the integration with other providers and things like that to go with the telematics platform for fleet owners. I am just wondering how much thought and effort you put into trying to match that capability over time to make your product more competitive in the fleet segment, because it seems like that is going to be a really big market over time. Eyal Sheratzky: The main difference, if you mention Samsara and Geotab, is the market that we choose to go to. If I put aside Samsara with their video solution that we are adding from third parties today or in the last two years, Geotab is mainly focused in the European market and other markets, but in Latin America, specifically in Mexico and Brazil, when we consider market share, Ituran Location and Control Ltd. has a larger market share in fleet management. In Israel, this is totally right. I think that the most differentiated issue is that Samsara is mainly in the U.S. Ituran Location and Control Ltd., from the beginning, did not start to go to lion caves to fight with companies that put billions of dollars in order to penetrate markets. We went to the markets where we are strong, where we have brand, where we have relationships. From a technological point of view, if you judge our technology as a fleet manager, I am totally sure that you will see a state-of-the-art solution, not a single point under a Geotab or Samsara. It is only the markets. We did not go to Europe. We did not go to the U.S. We are very focused on Israel and Latin America. Currently, that is what we do. In the future, if we decide to go to other geographies, probably we will do it based on acquisition. We will not start from scratch. Kenny Green: We will now try and go back to Chris Reimer from Barclays. Chris, are you able to talk? Looks like Chris. Chris Reimer: Yeah, I think— Kenny Green: Oh, great. Continue. Chris Reimer: Thank you. Question answered. About larger. Eyal Sheratzky: We cannot hear you, Chris. Kenny Green: We cannot actually hear you. Eyal Sheratzky: Maybe you will approach us not in this platform. I cannot hear you, sorry. Kenny Green: Chris, we will speak to you offline. That ends our question and answer session. The call will be available on Ituran Location and Control Ltd.'s website in the next day for download. Other than that, Eyal, please make your concluding statements. Eyal Sheratzky: Thank you, Kenny. On behalf of the management of Ituran Location and Control Ltd., I would like to thank you, our shareholders, for your continued interest and long-term support for our business. We look forward to continuing our accomplishments over the next decade. If you are interested in meeting or speaking with us, feel free to reach out to our investor relations team. With that, we end our call. Have a good and safe day. Thank you very much.
Jean-Mari Pretorius: Good afternoon, everyone, and welcome to Acomo's Investor Call for the 2025 Full Year Results. Thank you for joining us today. We appreciate your continued interest in Acomo. My name is Jean-Mari Pretorius, and I will be hosting today's call. Joining me is our Acomo Group CEO, Allard Goldschmeding; and CFO, Mirjam van Thiel. During this call, we will walk you through the highlights of our performance for the period, discuss developments across our business segments and provide further context around market conditions and our strategic priorities. The Q&A will take place at the end of the presentation where we will open the floor for questions. [Operator Instructions] Before we begin, I would like to remind everyone that today's discussion may include forward-looking statements. These statements are based on our current expectations and are subject to risks and uncertainties that could cause actual results to differ. Please refer to the disclaimer included in our press release for further details. We will now continue with the 2025 full year results. Firstly, I would like to hand over to our Acomo Group CEO, Allard Goldschmeding. Allard Goldschmeding: Good afternoon, everyone, and thank you for joining us on today's call. In a world that continues to present both challenges and opportunities, today's call will focus on Acomo's strong performance in 2025 and the path forward. While the broader outlook for the global economy, sea freight rates and product availability in 2026 remains uncertain, navigating complexity is not new to our business. Last year, we successfully managed a range of external factors, including tariffs and significant cocoa price volatility. Our resilient business model, combined with the expertise and commitment of our people, has once again enabled Acomo to adapt effectively and deliver solid results. Today's agenda will cover several topics. I will start with the key highlights that characterized our 2025 performance. I will also discuss how our results compare against our midterm strategy and objectives, which we shared during our Capital Markets Day last April. And I will discuss a few examples of the initiatives we took during 2025. Mirjam will then cover in more detail the financial performance of the group and of the individual segments. At the end of the presentation, I will finish with a look ahead to 2026 before we take your questions. 2025 was another record year for Acomo in terms of sales, profitability and earnings per share. We are very happy with this overall performance, and this reflects the drive to perform of our people. Our teams bring unique capabilities that are highly relevant to our suppliers and our customers and enable us to support them effectively. Excellent results in 3 out of 5 segments are proof of the ability and expertise of the Acomo teams in managing volatile market environments and the strong attributes of our business model that offers resilience through diversification. By a volatile environment, I mean mostly in terms of price developments, geopolitical developments and changing regulations. In the Spices & Nuts segment, all our companies delivered record high results. The continued impressive performance and the attractive long-term market outlook make our Spices & Nuts segment a natural area of focus. We have expertise and we have scale, which provides a strong foundation for further expansion. The Organic Ingredients segment showed a very healthy recovery from the negative impact of cocoa hedging in previous years. This recovery started in the second half of 2024 and continued in 2025. The Tradin Organic team was able to manage the price volatility and delivered strong results this year. Besides cocoa, the business also posted positive results for other product groups, reinforcing our confidence in the segment's portfolio. We also made substantial progress in improved alignment of the organizational structure as well as our portfolio investment decisions. Food Solutions also delivered a record year in 2025. Demand for both dry and wet blends remained robust throughout the year, driven by sustained consumer interest in plant-based, clean label and culinary solutions. The business was further supported by the commissioning of the new wet blend facility in Oostende in 2025, which became operational before the summer. The new facility provides a significant increase in capacity and flexibility with the opportunity to triple the output. The year was, however, not without its challenges. In particular, our Edible Seeds segment experienced a difficult year, driven by a mix of challenging market conditions and operational issues. Let me provide a brief overview as Mirjam will address this in greater detail later in this presentation. The challenges that materialized in the first half year and which we spoke about in our H1 call continued into the second half. Tariff uncertainty in the North American market continued and made pricing decisions complicated. Alongside higher input costs, this placed pressure on margins. Next to that, the impact of restrictions on U.S. grown sunflower seeds to export markets continued to have an impact in 2025 as the measures to compensate with new growth avenues do take time. On top of these market effects, our SunButter plant was affected by production issues, which caused a temporary stop in production in the fourth quarter. Production resumed towards the end of January 2026. The result is a more negative overall picture than is warranted based on the fundamentals of the segment, which remains solid. To address this, we have made the necessary strategic and organizational changes in North America, and the business is expected to largely trend back towards normal performance levels. The Edible Seeds business delivered a resilient performance despite market price pressure on key seed categories. The Tea segment faced continuous pressure on sales volumes throughout the year, reflecting ongoing destocking by customers, oversupply and more fragmented buyer landscape. The implementation in 2026 of the new organizational and commercial model that I will explain later in this presentation is designed to respond more flexibly and effectively to changing market circumstances. As discussed during our Capital Markets Day, M&A is a tactical growth lever. We are, therefore, pleased to welcome Manuzzi to the group as of November. This Italian company represents the first foothold of our Spices & Nuts segment in the Mediterranean region, giving us access to an attractive market in terms of consumption patterns. I also want to call out that despite the relatively high level of working capital, our balance sheet remains strong. The characteristics of our business result from time to time in elevated levels of working capital. The unprecedented high prices of cocoa have resulted in higher inventory values. The strength of Acomo is that with our diversified portfolio, we can deal with higher market prices for individual product groups and can continue to make a sensible commercial calls. The 2025 performance resulted in a proposed full year dividend of EUR 1.40 per share, which is another record and an increase of plus 12% versus 2024. At the Capital Markets Day last April, we communicated our midterm targets in the areas of sales, EBITDA margin, balance sheet leverage and dividend distribution. With a total 2025 group sales increase of plus 7% to EUR 1.5 billion and an adjusted EBITDA increase of plus 9% to EUR 180 million, we are on track with these targets. Our current leverage ratio is impacted, as I mentioned, by the higher working capital consumption linked to the increased inventory values due to the high prices for a number of our products, in particular, cocoa. However, based on our current knowledge, we would expect the leverage to go down during 2026. As stated, the full year dividend is an increase of plus 12% versus 2024 and is consistent with our communicated payout ratio policy. The split of the results between the first half year of 2025 and the second half shows that the first half year was relatively strong. Historically, the performance was more or less evenly distributed between the first half and the second half. Since 2023, this has changed, mainly due to the enormous change in cocoa prices that had a material impact. Therefore, the half-year performance in those years was not a reliable indicator for the full year. For 2026, we expect price levels changes to be less extreme, which would result in an EBITDA distribution between H1 and H2 that is closer to historical patterns. The vision we discussed during our Capital Markets Day remains relevant and up to date. And the 2025 results underpin the trajectory towards the ambitions we outlined. Our value creation shows our focus areas and the way in which we address the market dynamics. We continue to execute along the lines presented, and let me highlight some examples, which demonstrate this more clearly. One of the elements of the 3 is scale. We strongly believe that scale is prerequisite to being effective and efficient in our industry and to create long-term value. In Q4 2025, we acquired Manuzzi, a leading Italian nuts and dried fruits company. Through this acquisition, we are expanding the Spices & Nuts segment footprint in Southern Europe. The culture of this family business is a good fit with our Acomo entrepreneurial spirit and through cooperation with the Delinuts in the Netherlands and the Nordics, we will create synergies. These synergies will be focused on growing the top line. By using the available Acomo capabilities and the broad product portfolio we have, Manuzzi will be able to expand its offerings. The company also has its own state-of-the-art facilities, including modern packaging lines with sufficient room for further growth. As part of creating resilient and responsible supply chains, Tradin Organic joined the Nature Positive initiative. These initiatives gather some of the world's largest sustainable business and finance coalitions to broader -- to support broader long-term efforts to deliver nature-positive outcomes. It supports farmers in adopting regenerative and resilient practices, which is aligned with a number of initiatives that Tradin Organic had already begun. The outcome is improved soil health and restored biodiversity, consistent with product quality and supply. Then to increase the benefit from its global reach and have a closer connection with customers, Royal Van Rees Group is transitioning to a centralized business model that consolidates the commercial, trading and strategic functions within a central hub. This enhances customer intimacy and focus and offers our customers improved multi-origin solutions. Our customers will have a single point of contact that covers multiple origins and our local offices will enable efficient physical execution. The new setup will phase in during 2026. Lastly, our value creation 3 is rooted in ESG, and I'm happy to report that for the second year in a row, we obtained limited assurance from our external auditors on the sustainability statement in our annual report. We achieved a substantial reduction in our Scope 1 and 2 CO2 emissions as a result of our efforts to increase the use of renewable energy sources. Other initiatives are an SBTi project at Delinuts and the installation of a lightweight solar panel construction at King Nuts & Raaphorst on the roof that could not carry the usual solar panel construction. Tradin Organic continues their dynamic agroforestry product in Sierra Leone and the farmer livelihood product in Indonesia next to the nature positive initiative that I mentioned. With that, I would like to hand to Mirjam van Thiel to take us through the detailed financial performance. Mirjam Thiel: Thank you, Allard. Let's start with the overall P&L of the Acomo Group. As mentioned by Allard, we achieved record growth this year with an increase in sales of 7.4%. On constant currency, the increase is actually much higher, close to 10% as we had some FX headwinds, in particular, stemming from the U.S. dollar to the euro. Now from a cost management perspective, you will see that our COGS increased at a lower pace in proportion to sales, which in turn led to an expansion of our gross profit margin by 1.8 percentage points. Looking at our G&A expenses, we see an increase of 5.8%, which reflects inflation and some additional costs due to M&A projects and investment in people. This resulted in an increase in our operating income of 43.5%. Looking below the operating income, we benefited from lower financing costs because of lower interest rates. And this, together with the higher operating income, led to an even more significant year-on-year improvement of our net profit by 64% to EUR 74 million. Let's then move over to the key KPIs on an adjusted basis. Adjusted EBITDA grew by 8.7% to EUR 118.2 million. The difference between reported and adjusted is mainly due to the impact of unrealized results on FX and sales hedges and exceptional items related to our Edible Seeds business in the U.S. On the next slide, I will share some further detail on this. You see that there is an increase in the EBITDA margin from 8.0% to 8.1%. As communicated at the CMD, we want to move towards 9%. Excluding some of the exceptional items we had this year, we would have progressed further towards that goal. So overall, we are on track with our ambition. Adjusted earnings per share improved by 8.8% to EUR 2.18, which is a record performance for the company. On the right, for added context, you will see the contribution share for each of the segments in which we are active, and I will discuss those in detail shortly. Moving to Slide 14, where you see the bridge between the reported and adjusted EBITDA. As mentioned just now, the main difference is due to the unrealized noncash results on our CX and FX hedges. That includes the revaluation of outstanding hedges to the market value at the date of reporting. The main impact here comes from the outstanding hedge contracts on cocoa. Last year, due to an increase in the cocoa market price towards the end of the year, the reported results included a negative impact due to the revaluation of outstanding hedges. This year, we saw the opposite. Cocoa prices declined towards the end of the year, which increased the value of the outstanding hedge contracts. We exclude this from the reported numbers. Once we settle the hedge contracts, we book the realized results, which normally we time together with the physical sales. The other impacts specifically related to 2025 are the exceptional items in Edible Seeds. These exceptional items relate to organizational restructuring and the cost related to a production issue in one of our facilities. This relates to the Edible Seeds business in the U.S., which I will cover in a minute. We thought for transparency purposes, it will be clear to outline these items as they are clearly nonrecurring by nature. Let me now take a closer look at the performance per segment. Let me start with Spices & Nuts, one of our key segments. This segment has been growing for several years. And in 2025, it delivered an all-time high performance. And what we are even more proud of is that every company in this segment delivered a record performance. Revenue benefited from sustained demand and higher market prices for most products. To share some examples, one of our key products is desiccated coconut, which is grated and dried coconut. In the last 1 to 2 years, we saw a sharp increase in prices. And also in 2025, prices were elevated globally due to reduced coconut supply and strong export demand. And also for some of the key nuts such as cashews and almonds, we saw high prices in 2025. There is sustained demand despite the high prices, and this is reinforced by the overall megatrend of increasing demand for plant-based products. All in all, we continue to expect this trend of increased demand to persist and hence, a relatively high pricing base. At the same time, how this develops year-on-year is to be seen. Also included in this segment are the 2 bolt-on acquisitions we made recently with Delinuts Nordics in August 2024 and Manuzzi in November 2025. Turning to Edible Seeds, where we have faced a series of challenges due to a mix of market conditions and operational issues. Before I go into the challenges, I want to be clear that we strongly believe in the fundamentals of this business. Let me take a step back. Within this segment, we have a sizable business in the U.S. in which we process sunflower seeds and use them to make various products, including well-known retail brands such as SunButter. In the U.S., we are also seeing an increase in demand for cleaner label, plant-based alternatives and allergen-free options. The attributes of sunflower seeds are perfectly aligned to these trends, and we have developed our leadership position in this market. In addition to the U.S. business, we have a smaller seeds business in Europe. But back to 2025. Let me recap the challenges we flagged to you in our H1 investor call and explain more about what we have faced in the second half. First, we spoke about the impact of the restrictions of U.S. grown sunflower seeds to some export markets. As anticipated, it will take time to offset this lost stream with new business. Second, we saw tariff uncertainty continuing, making pricing decisions complicated. That, together with higher input costs, placed pressure on margins. On top of that, our SunButter plant was affected by a production issue causing a temporary stop in production in the fourth quarter. The issue has been resolved and production resumed towards the end of January. Now how we tackle these challenges and what are the prospects for the segment, turn with me to Slide 17. Consequently, you can see the margin decline in this segment. Our top priority is to restore profitability. The corrective actions we have taken include improvements, including full cleaning of all equipment, improved preventive maintenance and equipment modification. We also implemented organizational changes, including the appointment of a new CEO, and we created center of excellence. Also on this slide, you see some more specific actions by each category, including price increases that have been implemented. Included in exceptional items and excluded from the adjusted EBITDA are items that are exceptional by nature, which include the cost for restructuring the organization and extraordinary cost items and under absorption due to the specific production issue. So remaining in the adjusted EBITDA, but to some extent, temporary are missed sales in SunButter due to the Q4 production issue and lower margin due to misalignment between higher input costs and sales prices. On top of that, we are starting to see the impact of the other corrective actions we have taken. So as I say, we fully believe in the strong fundamentals of this business, the power of the sunflower and a diversified business model. This supports our expectation of a recovery to a normalized performance level over the coming years. Then looking at Organic Ingredients. We have achieved an excellent performance across all categories within this segment. We see in general an increase in demand for organic food and beverages in the market. For example, the Organic Trade Association in the U.S. reported that the organic sector was growing at more than double the pace of the overall food market. Specifically on cocoa, as you all know, the market has been very volatile in recent years with big price swings. After the sharp increase in the first half of 2024, the price remained elevated up until the start of the second half of 2025 when it started to reduce and has reduced even further in the first months in 2026. Within that dynamic market, the team has been able to secure supply and continue to offer the best quality and required specifications to our customers, which is a commendable achievement and has allowed us to continue to excel despite the external turbulence. It had an impact on working capital, which I will cover in a minute. There was also some catch-up effect of delayed volumes from 2024, especially in H1, which contributed further to our strong 2025 performance. Besides cocoa, as I mentioned, we also saw a strong performance in the other categories. The fruit and vegetable business continued to show strong momentum with accelerated growth, while nuts and seeds and oils and fats delivered consistent sales growth with improved margins. Coffee achieved record high sales and succeeded in growing volume when prices were elevated. Then moving on to tea. The tea business is operating in a challenging global environment. Some of the larger branded players are losing share. And as a result, we see a more fragmented customer base. Also, global tea supply remains elevated. Despite these challenges, the business demonstrated gross margin resilience. As Allard already explained, we will strengthen the collaboration across the Van Rees Group by implementing a more customer-centric business model that will drive additional value to our customers. For Food Solutions, we saw a record EBITDA performance, driven by strong volume development for the dry and wet plants, resulting from the sustained demand for plant-based, clean label and culinary solutions. Further commercial development was driven by a strong entrepreneurial spirit in R&D, combined with new long-term partnerships with customers. We are especially proud of these results as at the same time, the new wet plants facility became operational. The new facility is set to support scaled up production for the coming years, as mentioned by Allard. Now over to the cash flow development. Looking at the operating cash flow, excluding working capital, we posted a year-on-year increase of 12%, effectively reflecting our profitability improvement. On the bridge, you can see the main drivers from the EUR 120 million in operating cash flow, excluding working capital to the net cash from operations. The largest swing is obviously driven by EUR 164 million working capital consumption during the period, and I'm going to spend a bit more time on this on the next slide. Next to that, we had a reduced outflow from cash interest expenses due to lower interest rates and a slightly lower effective tax rate. Let me now go back to working capital. Here, you can see the development over the last 4 years with the orange line representing the total working capital and the green line, the investment in inventory. You will see that the increase in working capital is driven by higher inventory value. Based on market prices, availability of stock in the market and the positions we take, the inventory value will move up and down. In 2025, the higher inventory value is mainly coming from 2 parts. One, due to shortages in the previous year, we are holding more cocoa inventory at higher prices. And besides, we saw higher market prices within the Spices & Nuts segment. So here, there is an extra outflow due to the prices of the various inventory we hold, but this is something that is fully embedded in our business model. With everything remaining equal, our trade payables and receivables remain broadly unchanged. We expect working capital to go gradually downward in the course of 2026, mainly a reflection of the pricing dynamics of our commodities. Finally, before handing back to Allard, let me talk briefly about our liquidity and leverage. As we explained at the CMD, we see working capital as a commercial instrument. And we have enough financial headroom to deal with this, which is where the added value of the holding comes into place. The diversification of the portfolio gives us the financial headroom we need. The strength of our balance sheet enables us to deal effectively with increased working capital. We remain committed to our long-term targets. And we have also shown in the past that we could temporarily absorb a higher leverage and have also been able, you see it on the chart, to deleverage, a function of the EBITDA growth we want to achieve and lower working capital requirements as inventory levels will gradually reduce. With that, I would like to hand back to Allard. Allard Goldschmeding: Thank you, Mirjam. As we move to 2026, I would like to share a little more on our views and initiatives for this year. The market dynamic of a positive trend towards plant-based diets is expected to continue, providing a strong fundament for our business. I started this call by referring to the latest geopolitical development. The impact on the global economy and our business cannot be predicted. However, our people and our business model are positioned to deal with this in the most effective way as we have proven in previous years. We will continue to build routes to healthier foods. A specific development for our organic business is the cocoa price development. Prices dropped from USD 6,000 per tonne at the end of 2025 to around $3,000 per tonne today. This level is not far from the historic normal levels. This would indicate that the cocoa market is moving to more regular price levels, although we still see major daily swings. A continued lower cocoa price level should lead to lower working capital levels, as Mirjam already mentioned, and normalized profitability. The actions we have taken in our Edible Seeds business in the U.S. should allow us to progress towards improved profitability levels during 2026, considering that the fundamentals of the business are strong and attractive. Based on our 2025 performance and our expectations for 2026 and beyond, we are committed to the midterm ambitions we communicated during our Capital Markets Day. Finally, I would like to mention that 2 new nonexecutive Board members will be proposed at the AGM in April as communicated in our press release that was issued this Tuesday. Jan Piet Valk and Barbara van Hussen have relevant Board, governance and M&A experience and will be a great addition to our Board. With that, I would like to hand it back to Jean-Mari. Jean-Mari Pretorius: Thank you, Allard, Mirjam. To summarize, today, we have discussed our performance for the period, the key drivers across our segments and the broader developments impacting our business. We now open the lines for the Q&A. Jean-Mari Pretorius: I see we already have one question coming through. The question states, will the trend of H2 2025 continue? And what is your view for 2026? Mirjam Thiel: Thank you, Jeanie. Let me maybe comment on the second half to start with, the second half of 2025. A few things important there is, one is our reported sales improved with 2%, but we had a currency impact, of course, of the dollar to euro. So if you look at it on a constant currency, we actually grew in the second half with 5% and that 5% is against a strong H2 we had in 2024. And what Allard already explained, the phasing has been a bit of, let's say, between H1 and H2, and we expect to go to a more evenly phasing going forward. But this H2, we were comparing versus a high H2 in 2024. And then the last element which impacted the second half was, of course, the slow performance at Edible Seeds. And there really, we saw there the continuing of the market challenges and then compounded really in Q4 with the production issue that we faced. So those elements really impacted our second half performance. So maybe, Allard, you want to talk a little bit about 2026. Allard Goldschmeding: Yes. Thank you, Mirjam. I mean based on, let's say, what Mirjam just said, there are a couple of components that in 2026 will be different than in 2025. So one of them, obviously, is what we mentioned, the edible seeds development. It was impacted, and we expect that during 2026, this will trend back to the normal or the normalized performance levels. So I think that's important. The other thing is that cocoa prices will come down. The question is what is going to happen to other commodity prices or prices in our portfolio. So what the exact sales development will be, that's to be seen. Like we said that the split between H1 and H2 had a major impact in 2025 versus 2024. But also if we look at 2026, we expect it to be more even. And if it would be more balanced and more even, you should expect or you can expect that the EBITDA potentially can be in H1 2026, a little bit below H1 2025 and that we will catch up in the second half of 2026. So it's important to understand that we will look at the full year performance and our objectives and that the split between H1 and H2 in 2026 can be very different than we saw in 2025. So I think that's important to mention. Jean-Mari Pretorius: Okay. Thank you. I see we already have our first caller on the line. It is Reg Watson from ING. Reginald Watson: Allard and Mirjam, I have a number of questions for you both, please. So I'd like to take them in turn. Firstly, the working capital. I think, Allard and Mirjam, you've both highlighted higher cocoa prices and I think, in particular, higher volumes. When I look at the evolution of cocoa prices, '25 is no different from '24. In fact, on average, probably slightly lower. But -- so I'm not sure if that's the reason for the higher working capital. Mirjam, you mentioned higher volumes. And then my question on that then is, if it was higher volumes, why would you take higher volumes in '25 when in '24, you were suffering a demand shock, and you actually had too much volume. So I'd like to understand the dynamics of that. That's the first question. Mirjam Thiel: Yes. Right. We were actually coming from a shortage, right? So in 2024, inventory was actually in volume very low. So we -- there is indeed an impact when you compare '25 volume levels, specifically in cocoa in '24 on higher volumes because '24, the base is very low. So we really build up normal stock levels again. And then on average, of the stock we are holding, the price is higher now in 2025. So there's, of course, a little bit of a lagging impact versus the market price development in the inventory value that we're holding. Allard Goldschmeding: Reg, maybe to build upon that, when we contract the volumes, it's not evenly spread out over the year, right? So we contract the crops. And that is at a specific point in time of the year where the price can be much higher than what you have seen at the end of the year. So I understand you're right, the average price during the year is different, but that's not the price we contracted against. Reginald Watson: Okay. Okay. So that accounts for the variability. And then I'd like to move on to Edible Seeds. It's been a thorn on your side. I think at the time of the Capital Markets Day, correct me if I'm wrong, but there was an expectation that we would have run through the anniversary of the problems by the time we got into the second half of the year. And it seems that the problems continue. Have I misunderstood that, misremembered that? Or have additional problems arisen in the intervening period? Allard Goldschmeding: No, I don't think you misunderstood it. What we've seen is that the consequences were more severe than we anticipated originally. It took longer to get rid of the products that we still had. So the exports issue, which you probably referred to, indeed, we mentioned and at the time, we thought that, that would fade out. But in reality, the aftermath of that was longer and had a bigger impact than we expected. So yes, but we should be through that now. Reginald Watson: And -- okay. But you are confident that, that is now done and dusted? Allard Goldschmeding: Yes, because we still had to clear all inventory and let's say, the price levels against which we could clear that inventory was below what we -- below our expectations. Reginald Watson: Right. Okay. And then just a technical question on the dividend, Allard, I think in your prepared remarks, you mentioned that it was in line with policy. But again, I seem to recall that the dividend policy is 70% payout ratio. And I think unless I'm much mistaken, the ratio is lower than that for this year. Allard Goldschmeding: Yes, the ratio is 65%. So you're right, that's a little bit below the 70% that we communicated. But 70% is an average, right? And we look at different things. So first of all, it's the performance of the company. Secondly, it's available cash or the cash position we have. Thirdly, it's other investment opportunities we see like M&A opportunities. So when you put that all together, we came to this proposed dividend, which we feel is completely in line with our communicated policy. Reginald Watson: And then final question on tea. You very helpfully provided a slide in the presentation pack, which sort of noted some of the changes that you're making. Could you perhaps flesh -- give us some flesh to those bones, perhaps a work example of how things have worked in the past and how they will work in the future and what benefits you expect those changes to bring? Allard Goldschmeding: Yes. No, fair. Now what we've seen is that historically, Van Ree very much operated from a local level. So yes, there was central oversight, and the strategic direction was obviously set at the central level. But the local offices, to a high degree, maintained their own commercial operations and approach themselves the customers they had. What we've seen changing basically in the industry that the customers are looking more for -- are more flexible, let's say, in buying tea and in looking for what I tend to call multi-origin solutions. So for example, if a certain grade or a certain price of tea in Kenya is not competitive to Ceylon or to Indonesia, we can -- they are basically looking at other origins as well. And my belief is that we can be more efficient and more effective by centralizing that approach and to be a sparing partner for our customers to help them actually making the right calls. So the central multi-origin solutions that we can offer to the key customers will be crucial to be closer to customers to better understand them and therefore, be more effective. So it means, in the essence, a little bit of a shift or it means a shift from certain responsibilities that were embedded in the local organizations. And again, whether it's in Africa or in Asia or whatever, to more the central hub where they will make the calls and that will be a change to the organization, which, in our view, will be for the better because, again, the tea market has changed, and tea buyers have changed their behavior. Reginald Watson: Okay. So just so I'm clear, so reading between the lines there, basically the local organizations were more incentivized to promote their local origins rather than helping customers source more efficiently other origins of tea. Is that my understanding, correct? Allard Goldschmeding: Well, the way I would phrase it that they had less visibility on alternatives for the origin. So their knowledge was on their local origin. And they -- it took more time to react to changed consumer or customer behavior and now we centralize that. So we can now proactively offer other origins if we see that the preference of certain customers is changing. So I think we will be faster and more effective. Reginald Watson: And with that centralization, will that come -- will therefore -- will there have to be exceptional costs taken in the local organizations then for this? Allard Goldschmeding: No, no, no. Reginald Watson: Great. Those are all my questions. Sorry to monopolize the performance. Allard Goldschmeding: Thanks, Reg. Jean-Mari Pretorius: Thank you, Reg. We have another question coming through. This question states, what M&A projects is Acomo working on? If you can prioritize on a segment basis, what would have priority and why? Example, consumer preferences and diets, food safety, price development, raw materials, labor cost development. Allard Goldschmeding: As we stated at our Capital Markets Day that M&A, and I think we also included that in the presentation today. The M&A is an important part of our growth trajectory and our ambition towards where we want to be in the midterm. So we are looking at different M&A opportunities. What we've communicated before is that our prime focus will be our Spices & Nuts segment, and that will be in Europe and in the U.S. We will look at Edible Seeds, which will be a little bit more geared towards the U.S. Organic, we are looking at how can we strengthen the portfolio. Tea, like I said, we focus more on changing the organization, and that's our prime priority now. And thirdly, we will look if we can expand our Food Solutions presence, but that will be mainly in Europe. Those are the priorities. Jean-Mari Pretorius: Great. Thank you, Allard. Another question here is this is a question on artificial intelligence, so AI. Is AI also applicable in a company like Acomo? And do you see AI as an opportunity or a threat? Mirjam Thiel: It's an interesting question. I think AI, I think, is in everybody's mind at the moment, and it's impacting, of course, all of us, I think, in a certain way. I think for us, it really is about our processes, right? How can we make it more efficient? And you can imagine that in the trading that we're doing, we're collecting a lot of data. We need to get everything in order for all the certifications for all the quality requirements, et cetera. So there's a lot of data we are processing. So I really see the benefit in more -- making our processes more efficient. So for sure, there is an opportunity for us there. I think really, if you look into the core activities of what we are doing, that is a people business. So in that sense, we are less impacted because really the work of the traders, the knowledge of the traders, making means out of all the different data that is there, yes, we very much believe that, that is really the human capital that we have. And hence, yes, that is less impacted by AI. So it's more about the processes than the core of our business model. Jean-Mari Pretorius: Thank you, Mirjam. Well, this concludes today's call based on our time. Thank you once again for your time and your continued interest in Acomo. We look forward to speaking with you again for the 2026 half year results. Have a good day.
Operator: Good morning, and welcome to the Ranpak Holdings Corp. fourth quarter 2025 earnings call. All participants are in a listen-only mode. After the speakers’ remarks, we will conduct a question-and-answer session. To ask a question, you will need to press star followed by 1 on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Sara Horvath, General Counsel. Please go ahead. Sara Horvath: Thank you, and good morning, everyone. Before we begin, I would like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors, including those discussed in our press release and the risk factors identified in our Form 10-K and our other filings with the SEC. Some of the statements and responses to your questions in this conference call may include forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. Ranpak Holdings Corp. assumes no obligation and does not intend to update any such forward-looking statements. You should not place undue reliance on these forward-looking statements, all of which speak to the company only as of today. The earnings release we issued this morning and the presentation for today’s call are posted on the investor relations section of our website. A copy of the release has been included in a Form 8-K that we submitted to the SEC before this call. We will also make a replay of this conference call available via webcast on the company website. For financial information that is presented on a non-GAAP basis, we have included reconciliations to the comparable GAAP information. Please refer to the table and slide presentation accompanying today’s earnings release. Lastly, we will be filing our 10-K with the SEC for the period ending December 31, 2025. The 10-K will be available through the SEC or on the investor relations section of our website. With me today, I have Omar Asali, our Chairman and CEO, and Bill Drew, our CFO. Omar will summarize our fourth quarter results and issue our outlook for 2026. Bill will provide additional detail on the financial results before we open up the call for questions. With that, I will turn the call over to Omar. Omar Asali: Thank you, Sara, and good morning, everyone. Thank you for joining us today. We finished 2025 on a positive note as all geographies experienced volume growth and automation finished the year with a lot of momentum, positioning us well for 2026. Large enterprise accounts in North America continue to be a key driver of performance, both from a top-line and margin perspective. We experienced a very robust e-commerce-led holiday season in North America, particularly in December, following a brief lull during the government shutdown. The e-commerce strength drove volume growth of 5.5% in the quarter and 14.3% for the year in North America. Excluding the impact from warrants, automation was the other bright spot in the quarter as we achieved nearly 40% growth on a constant currency basis and enter 2026 with a strong order book, giving us visibility to what we believe will be our largest growth year yet in that area. With our fourth quarter performance, we hit the lower end of our Adjusted EBITDA guide but did miss the top line slightly due to a continued challenging environment in Europe and a few automation project milestones getting pushed into Q1. Excluding the impact of warrants, automation achieved the goal of being north of $40 million in revenue for the year, resulting in almost 35% growth. 2025 was an important year for Ranpak Holdings Corp. We strengthened our economic relationships with two of the world’s largest e-commerce and retail leaders. These are partnerships that we believe will fuel substantial growth across both our protective and automation business for years to come. We also elevated our position as a leader in automated box customization through a major collaboration with Medline Industries, the largest provider of medical surgical products and supply chain solutions in the U.S. Together, we are providing automation solutions across some of the highest volume operations in the healthcare sector. These achievements validate the years of work and strategy we have been executing toward and set the stage for Ranpak Holdings Corp.’s next era. The world is evolving at an unprecedented pace. With rapid advances in AI and robotics, capabilities that once felt like science fiction are now becoming operational reality. Ranpak Holdings Corp. is well-positioned to lead in this new landscape, one defined by larger, more sophisticated warehouses and logistics networks that must also meet rising expectations for environmental responsibility. Our internal innovations and customer relationships, combined with strategic relationships with cutting-edge leaders like Pickle Robot, give us a unique advantage. We are not just providing packaging; we are delivering end-to-end solutions for goods movement and AI-driven insights that help our customers operate smarter, faster, and more sustainably. More on our results. We experienced another quarter of volume growth, making it 9 out of the past 10 quarters, growing volumes at 3% over a really strong Q4 in 2024, which experienced 12 points of volume growth. It was encouraging to see sequential volume growth in each region and for Europe to experience volume growth for the first time this year. Consolidated net revenue increased 2.2% on a constant currency basis for the quarter, or 4.4% excluding warrants, driven by e-commerce activity in North America and automation achieving its largest revenue quarter ever. 4.8% volume growth for the year and 34.4% growth in automation drove 2025 full year net revenue to increase 5% on a constant currency basis. Our North America business again was the engine that drove top-line performance with sales up 5.8% for the quarter and 14% for the year, driven by more than 20% growth in void fill and 91.7% growth in automation excluding warrants. In the quarter, the distribution channel was less robust, but we did grow mid-single digit for the year and I believe have some momentum in the channel given our new product releases and focused growth and expansion initiatives. Invigorating this channel is key to helping improve our margin profile in the region, and we believe the setup going into 2026 has us positioned to continue to grow here while enhancing margins. In Europe and Asia Pacific, less favorable mix as well as increased rebate activity offset slightly higher PPS volumes and 30% automation growth in the quarter, resulting in a revenue decrease of 1.5% year-over-year on a constant currency basis. Similar to last year, Europe did not experience the same holiday season strength that we saw in the U.S. The environment in Europe seems to be improving from the negative impacts of tariffs we saw earlier in the year. After several years of recession-like conditions across the region, driven by energy price shocks, elevated inflation, and tariff uncertainty, economic fundamentals are stabilizing and the outlook is improving. We will need to see how the recent events in the Middle East unfold as that could have an impact on sentiment in the region. The input cost environment has remained relatively stable and consistent with the trends we saw in the second half of last year. Europe has been somewhat more favorable, driven largely by softer demand while the U.S. experienced tighter pricing through mid-year. Those pressures eased and ultimately leveled off once the paper market disruptions from early in the year were resolved. In Europe, energy market volatility is the unknown at the moment. There was some volatility to start the year as colder than normal winter weather drove a heavier draw in reserves. Even so, Dutch TTF gas was around €30 per megawatt hour prior to the events of the last few days, resulting in pricing in Q1 in line with what we experienced in the second half of the year. On a constant currency basis, Adjusted EBITDA declined 10.3% for the quarter, or just 1.2% when excluding the impact of warrants. For the full year, Adjusted EBITDA was down 8.5% or 2.4% excluding warrants. Our second half performance allowed us to achieve the low end of the revised guidance we communicated in our Q2 results despite the top-line challenges we faced in EMEA. Overall, 2025 proved to be a more difficult year than we anticipated. Many companies shifted priorities, curtailed activity, and took a more cautious stance in response to a rapidly evolving tariff environment. Europe, in particular, appeared to take a meaningful step back as customers there lacked confidence in their forward outlook. Our sequencing and priorities remain clear. First, drive top-line growth to achieve scale. Leverage that scale to unlock operational efficiencies and enhance purchasing power, which will flow through to Adjusted EBITDA as revenue continues to grow. This, in turn, will support deleveraging and ultimately enable us to generate meaningful cash. With that, here is Bill with more info on the quarter. Bill Drew: Thank you, Omar. In the deck, you will see a summary of some of our key performance indicators. We will also be filing our Form 10-K, which provides further information on Ranpak Holdings Corp.’s operating results. Overall, net revenue for the company in the fourth quarter increased 2.2% year-over-year on a constant currency basis, or an increase of 4.4% excluding the impact of warrants, driven by solid e-commerce volume growth in North America and increased automation sales, bringing full year net revenue up 4.7% on a constant currency basis or 6.1% excluding the $5 million headwind associated with warrants. For the quarter in the Europe and APAC reporting division, combined revenue decreased 1.4% on a constant currency basis as higher PPS volumes and automation sales were offset by higher rebate activity due to the competitive environment in Europe and investment in pricing ahead of local paper source in Asia. On a full year basis, net revenue in the region declined 2.7% on a constant currency basis, primarily due to lower volumes reflecting the choppier operating environment post Liberation Day and higher impact of rebates. Automation grew 14% in the region on an annual basis, exiting the year with good momentum after only being up slightly through the first half of the year. North America lapped 39% volume growth in the prior year and grew volumes 5.5% as relationships with large e-commerce players continued to drive growth. Net revenue for the quarter was up 5.8%, which brought the full year net revenue in the region to growth of 14%. It was another strong year for top-line growth in North America as automation ramps and we continue to grow with e-commerce accounts. Gross profit declined 16% on a constant currency basis in the quarter and would have declined 10.6% excluding the $2.3 million non-cash impact of warrants. Excluding depreciation within COGS and warrants, gross profit would have declined 5% on a constant currency basis due to the mix impact of increased contribution from North America large e-commerce customers and lower industrial activity. For the year, gross profit declined 9% on a constant currency basis and would have declined 5.3% excluding the $5 million non-cash impact of warrants. Excluding depreciation within COGS and the non-cash impact of warrants, gross profit would have declined 4.5% on a constant currency basis due to the mix impact of increased contribution from North America large e-commerce customers and lower industrial activity. We believe gross margins are a real opportunity for us in 2026. With greater scale, we are becoming better buyers of key input costs and have identified a number of key cost-out actions to optimize operations in order to enhance our margin profile. SG&A, excluding RSU expense, was down 2% on a constant currency basis versus prior year. As I shared previously, controlling our spend and leveraging our G&A investments to better absorb our fixed overhead remains a top priority. We have invested more than $20 million in our technology infrastructure since 2022, building a modern cloud-native stack that is AI-ready. We are fast but selective adopters of AI solutions to help us drive productivity and get more efficient in our operations and service. We initially are focused on specific use cases where we can measure the impact and returns, but overall, believe these tools will enable us to extract savings from the business as we grow, helping to improve the overall margin profile of the business in addition to driving more commercial opportunities. At roughly $40 million in sales, automation remained a meaningful drag on our profitability for the year, being a negative $6 million contribution to Adjusted EBITDA. Although we did get to break even on an Adjusted EBITDA basis for the fourth quarter, we are expecting substantial growth in 2026 in automation, which we expect would put us in positive territory for the year on an Adjusted EBITDA basis, which is a critical milestone for us to hit. Although we had PPS volume and automation growth across the organization for the quarter, the gross profit headwinds resulted in an Adjusted EBITDA decline of 10.3% in the quarter on a constant currency basis or down 1.2% excluding the impact of warrants. This brings the full year’s results to down 8.5% on a constant currency basis or down 2.4% excluding the non-cash impact of warrants. Moving to the balance sheet and liquidity. We completed 2025 with a strong liquidity position with a cash balance of $63 million and no drawings in our revolving credit facility, bringing our reported net leverage to 4.4 times on an LTM basis. Our goal remains to achieve between 2.5 times and 3 times leverage, which we believe we can do over the next 18–24 months. Our CapEx for the year was $30.3 million, a reduction of $2.8 million from 2024 and a 45% reduction from the $55 million spent in 2023. We continue to be disciplined in our CapEx spend in order to maximize cash. With that, I will turn it to Omar. Omar Asali: Thank you, Bill. In closing, we believe the structural forces shaping the packaging and fulfillment landscape continue to strengthen, and we believe Ranpak Holdings Corp. is well positioned to benefit from them. First, the largest e-commerce players are growing faster and consolidating share. We are both economically and strategically aligned with the two most important companies in the space, and we are working closely with them on opportunities that have the potential to reshape Ranpak Holdings Corp.’s scale over the next number of years. We continue to expect more than $1 billion in cumulative revenue from these two relationships over the next 8–10 years, and we are pushing to accelerate that timeline. Second, labor shortages in warehouse environments remain persistent and costly. Wage inflation and high turnover are structural realities. In the U.S., immigration and border policies are also amplifying the labor issue. Our automation portfolio is a direct hedge against these pressures, providing customers with greater stability, less cost, and less variability in their operating model. Third, warehouses and factories are becoming smarter. At Ranpak Holdings Corp., we are assembling an unmatched technology stack combining robotics partnerships, internal hardware innovation, advanced vision systems, AI, and data. The bottlenecks in fulfillment are physical, not digital. Our flywheel of technology and data access allows us to solve these physical world constraints in ways that simply were not possible even a few years ago. The technology is finally ready, and we believe our ecosystem gives us a unique advantage in addressing goods movement and labor challenges at scale. Fourth, while AI and LLMs have advanced rapidly, the physical world still needs to create and move goods. Companies that manufacture differentiated products and eliminate physical bottlenecks will be winners in the years ahead. We believe we have spent the past several years positioning Ranpak Holdings Corp. to be one of those winners. The One Big Beautiful Bill Act in the U.S. is presenting a significant opportunity for businesses to automate and modernize their operations, and the tax incentives are providing further savings and improving ROIs for customers deploying our automation equipment. As we look toward 2026, we enter the year with a more stable operating environment in North America than we saw in 2025 and improving economic outlook. We face difficult comparisons in Q1 due to last year’s paper market disruptions where distributors were restocking. Adverse weather in January and February contributed to a choppy start in North America. Feedback from both distributors and end users point to continued strength as the year progresses and an encouraging outlook. We expect North America performance versus prior year to even out in the second quarter, where we saw less distributor demand last year as a result of restocking in Q1. Europe remains more muted relative to the U.S., but the direction is constructive. Inflation has been moderating. Real wage growth has turned positive as wage increases are outpacing inflation. Unemployment remains at historically low levels. Industrial production and manufacturing sentiment remain below long-term averages, but we are seeing early signs of stabilization. Germany’s renewed commitment to defense investment and broader fiscal support are beginning to show up in the data, creating a foundation for gradual improvement. For the first time in a long time, the outlook there for businesses and consumers seems to be improving. That being said, the war in the Middle East makes the outlook for the world economy and Europe more uncertain. The duration of the conflict, impact on trade routes, and impact on energy pricing, particularly in Europe, could play a role in the way this year unfolds. This week, due to the conflict, Dutch TTF gas has been volatile and remains elevated near the €50 area. Within this environment, we are focusing on things that are in our control and building on our momentum through our differentiated solutions. Enhancements to our commercial organization and stronger cross-selling of automation into larger accounts are enabling us to outperform our peers from a growth perspective. We have tailwinds in automation such as Packaging and Packaging Waste Regulation, or PPWR, in Europe, as companies are preparing to adhere to the regulation requiring them to drastically reduce packaging waste and promote a circular economy, namely minimizing unnecessary packaging and reducing packaging weight and volume. We expect automation to deliver another year of meaningful growth in 2026 as we advance toward our goal of surpassing $100 million in automation revenue. Related to our near-term priorities and guidance, our focus is on driving top-line growth to build scale, improving margins through cost-out initiatives and better buying, accelerating automation and advancing our industrial technology platform, and strengthening cash generation and deleveraging towards a net leverage ratio below three-thirds. For 2026, on a constant currency basis at the current spot rate, we expect net revenue growth of 5%–12.7% and Adjusted EBITDA growth of 5.4%–19.9%. Assuming a spot rate of 1.16 EUR to the U.S. dollar, this implies a net revenue range of $415 million–$445 million and Adjusted EBITDA range of $83.5 million–$95 million. We are anticipating automation revenue growth of 30%–50%, potentially reaching more than $60 million and turning positive from an Adjusted EBITDA perspective. This guidance also reflects a non-cash revenue and Adjusted EBITDA reduction of $5 million–$7 million related to warrant expense recognition. Over the past few days, we adjusted our guidance range to reflect what we are currently seeing out of the Middle East. We previously were expecting double-digit growth in Adjusted EBITDA, but believe it is appropriate to be conservative on the margin and top line in this environment. We believe the lower end of the range reflects our optimism of growth in North America and automation and a potentially less robust and more expensive environment in Europe if the war persists. In terms of PPS, we expect low- to high-single-digit volume growth in PPS, building on the momentum of 2025 while recognizing a tough comparison in Q1 of 2025, which we expect to improve throughout the year. Thank you again for your time and continued support. With that, we would like to open the line for questions. Operator? Operator: As a reminder, to ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw any questions, press star 1 again. We will pause for just a moment to compile the Q&A roster. Our first question comes from Ghansham Panjabi from Baird. Please go ahead. Your line is open. Ghansham Panjabi: Hey, guys. Good morning. Omar Asali: Good morning, Ghansham. Ghansham Panjabi: Morning, Omar. First off, can you give us a sense as to the PPS volume outlook that is embedded in your guidance for 2026? If you could also do that by region, Omar. I know there is a lot going on with some of the things you mentioned in Europe and also the political situation, et cetera. Just what do you have embedded at this point? Omar Asali: Sure. Maybe I will just give some high-level color and then have Bill give you a bit more detail. We continue to do really well with enterprise accounts for PPS in North America. We are working hard with our distribution channel as well to really ramp up volume. My expectation is that you will see meaningful growth in the U.S., maybe high single-digit to double-digit, and continue to drive volume around that in North America. Europe, Ghansham, honestly, is a bit harder. If you asked me five, six days ago before the events in the Middle East, we felt we were turning the corner in Q4. We were showing some good signs, we felt we were entering the year with potentially some, let us call it, modest momentum to show volume growth. Right now, that is a bit more unknown, and I think it may depend a little bit on the duration of the conflict. In APAC, we are investing heavily in localization and local sourcing of paper, and we think that is going to drive quite a bit of volume. That is the high level in terms of how we are thinking about PPS volume growth. I will have Bill chime in maybe with more specifics. Bill Drew: Ghansham, I think Omar covered it right. In North America, we think that there is good potential to grow mid-to-high single-digit, maybe a little bit more than that, depending on some of our initiatives with some of our large customers here. In EMEA, we ran a number of different scenarios, and I think with the low end of the guide, we are assuming that will be down slightly, and then on the higher end, up mid-single digits if we get a resolution quicker than we are expecting. I think overall, we are looking at a range of low- to high-single-digit on the PPS business for 2026. Automation, we are expecting some pretty meaningful growth there, call it 3–5 points worth of growth just based on what we are seeing there and also just the order book that we came into the year with. Ghansham Panjabi: Perfect. Then on PPS, as it relates to your assumption, what percent of that is specific to the customer initiatives that you have with Walmart and Amazon? Omar Asali: Both of these accounts, Ghansham, we think are going to drive meaningful growth. Remember, part of the transactions we have include automation equipment, and in 2026 with some of the accounts you mentioned, equipment may drive more of the PPS piece because of just the installment and deployment schedule, if you will. As we put this equipment throughout the year, then that equipment will be consuming the consumables as the year progresses. In terms of just the consumable piece, we think both of these accounts will be double-digit growers for us. We think it is going to be a pretty important driver for us. Frankly, that is part of our excitement, not just for 2026, but as we look for outer years as well. We believe there is tremendous volume activity that we think we can drive with these two relationships. Ghansham Panjabi: Got it. Maybe I will ask my last two questions together. The 30%–50% growth that you are targeting for automation in 2026, just curious as to your backlog specific to that. Just trying to get a sense as to the visibility specific to those numbers. Second, Bill, in terms of free cash flow, how are you thinking about drop-down free cash flow relative to the midpoint of your EBITDA guidance, net of CapEx and interest and so on? Omar Asali: I will take the first one. As Bill said, we enter 2026 with our best backlog ever. We continue to see tremendous activity, frankly, in the U.S. and in Europe around our automation business. Our strategic relationships, again, that you touched on, Ghansham, are driving also a big part of that. Our confidence in surpassing the lower end of that number, the 30%, is pretty high. We believe that we are on our way to hit potentially $60 million or more in revenue in 2026, again, assuming no surprises from a macro environment. Frankly, our pipeline as we speak this year, our backlog is increasing as well, and part of the help we are getting is from some of the tax changes in the U.S., part of it is around labor. Honestly, I feel great about our automation story. I feel great about how it is progressing. I think the $100 million goal is becoming closer and closer in our mind as reality, and I think the team is executing and our products, by the way, are getting great feedback from some of the most demanding customers that we have mentioned, whether it is people like Medline in healthcare or others. We feel really good about that as a growth driver, Ghansham. Ghansham Panjabi: Bill? Bill Drew: Yep. As far as the free cash flow question goes, if you take the midpoint of the guide, Ghansham, at $83.5 million–$95 million, call it $89 million at the midpoint, that is being burdened by a good $6 million–$7 million of warrant expense, which are non-cash; you add that on top. We are expecting to spend roughly, call it, $37.5 million or so in CapEx, could be less. We have been pretty disciplined over the past few years in that. We will continue to be disciplined. Cash interest we expect to be about $34 million. Cash taxes about $3 million–$4 million this year. We are expecting a use of working cap this year, just based on some of the initiatives that we have with larger customers where we carry a little bit more inventory, so call that about $5 million, which, if you take all those together, gets you to about $15 million in free cash for the year. Ghansham Panjabi: Okay. Very helpful. Thanks so much. Omar Asali: Thank you. Operator: Our next question comes from Greg Palm from Craig-Hallum. Please go ahead, your line is open. Greg Palm: Yeah, thanks. Just going back to the Q4 results specifically on revenue. I mean, it seems like the operating environment was fairly stable, and I know you talked about or mentioned better e-com facility around the holiday season. Was the revenue miss mostly due to some automation stuff shifting to the right? I know you mentioned there was, I think, a couple of projects, but maybe just give us a little bit more color. Omar Asali: Yeah. Sure, Greg. I think a couple of things. One, yes, in automation it is very tough to be very precise in terms of which quarter things would happen. Sometimes there is slippage. It has got nothing to do with us; sometimes it has to do with us and our schedule of building and deploying, as you know, just given the nature of the business. Part of it is a few things that slipped from Q4. The other part of it, honestly, Greg, is industrial activity was not at the level that we liked. E-commerce was certainly strong, but e-commerce came in very, very heavy in December, I think in the U.S. in particular. There were some periods in November where we saw a little bit of softness, around government shutdown, et cetera, and then the recovery was very strong. Some of that impacted us, but overall we were very happy with e-commerce activity. I think industrial activity, we would like to see a pickup in that, and I think that could help us both from a volume standpoint as well as frankly a margin standpoint. Greg Palm: Yep. Okay. Your comments on Q1 specifically, I was not sure how to interpret those. Should we assume revenue is more flattish on a year-over-year basis? Versus, call it, the high single-digit growth for the year at the midpoint. I think that would imply double-digit growth for the remainder of the year. It would be great just to get a little bit more color on how you are thinking about the cadence this year. Omar Asali: I think the cadence that you are highlighting is correct. Normally at Ranpak Holdings Corp., as you know, Greg, the second half of the year is stronger than the first half. That is just the nature of our business. As we are building backlog, pipeline, et cetera, and as we are building files in PPS. The second piece, honestly, is typically, again, in normal environment, Q2 is stronger than Q1, Q4 is stronger than Q3. We are expecting the year to play out that way. We have a bit of a tough comp given paper disruptions and some dislocations from 2024. That is the piece that I was just trying to highlight. I think what you highlighted as a cadence is correct. From where we sit, again, honestly, we were going to give a very different guide five, six days ago, but the recent events caused us to just lower some numbers a little bit to be cautious. Not that we have a crystal ball around the war. We do not know where the war is headed. We do not know how long it will last. We do not know when and if the escalation happens. All these things are unknown to us, just like they are unknown to the world. We felt the prudent thing is to be a little bit more conservative in our guidance. What you highlight and the strength that we see and the double-digit growth as the year progresses, that is our base case expectation. The numbers that we highlighted, Greg, reflect some conservatism around the war to the best of our ability, if you will. Greg Palm: Okay. Yep, that makes sense. Specific on what is going on in the Middle East, in terms of the guide, how would you take into account, for instance, natural gas prices and the potential headwind from input costs over there? Omar Asali: Sure. Obviously, as you have seen, Dutch TTF gas has gone up quite a bit in the last few days and continues to be at elevated levels. We have a number of partners and mills that we work with that are not dependent on that. That is the good news, whether it is renewable or other sources. We also have a number of folks that have hedged some of the exposure, but not all of it. I think the exposure that we have is on the recycled piece, the recycled paper that we buy. That is the piece that has the exposure and is less than 50% of our total buy. That is where we have some exposure from a cost standpoint that we are monitoring closely. I do not think the numbers at the end of the day—and Bill and I have looked at them and ran some sensitivities—I do not think they are going to be huge at these levels. They clearly are not going to be positive. They will have a negative impact, but they are not going to be huge. To be honest, Greg, what is on our mind a bit more is what does that do from a demand standpoint in Europe when energy is elevated and when you start seeing CEOs of industrial companies and e-commerce consumers and so on just get a little bit more cautious. That is the piece that we are monitoring. We do not have a great answer on it right now because it just happened in the last few days. I think the demand piece is the piece that could have a bigger impact. I feel from a cost standpoint on the Dutch TTF gas, yes, we have some exposure, but I think it is under control. Greg Palm: Yep. Okay. I guess last one for me, how do you think about unlocking shareholder value? I mean, you think about what happened in 2025. You made a lot of important steps. You won some meaningful business that is just getting started. Given where the stock is, the value of the PPS business, automation, your Pickle ownership, maybe you could just give us some thoughts on how you expect to unlock some of that value over time. Omar Asali: Yeah, sure. Look, I will be the first to say 2025 did not play out the way we expected. We entered 2025 thinking we are going to structure two important transactions for us with two large customers, and that will be the beginning of starting to unlock shareholder value. Obviously, through a whole host of things, including, frankly, tariffs, the year did not play out as expected. I would say the best way I think about unlocking shareholder value from here, Greg, is to the comment I said a few months ago that we believe we can double the top line of this business and really drive significant growth in EBITDA. I think the best way to describe that is what is the bridge to doing that? I think our largest two customers—we have said that they could deliver more than $1 billion in revenue in the next 8–10 years. We think in the next few years, we are working with them on a number of projects to accelerate some of their spend and some of their buying from us. We think these two large relationships are going to drive a very big chunk of the growth toward that bridge to $800 million in total in the next number of years. We think the switch from plastic to paper, in particular in the U.S. with large enterprise accounts, with other accounts that we are working with our distribution channel and some of the efforts there, is going to drive some real volume growth. We think localizing in Asia-Pacific and becoming more competitive from a pricing standpoint is going to drive significant growth there and rerate our business at that level. We have a number of new initiatives that we have been working on the last couple of years that we think will materialize from a revenue standpoint, things like cold chain and things like new product developments that we are working on. Frankly, last but not least, the most important piece. We think automation is a grower of 30%–50% in the next number of years per year. You run basic math, my confidence in now surpassing the $100 million is quite high, and that is going to be a pretty big bridge towards also helping us grow into that $800 million. You put these building blocks together, we think that is what is going to rerate the company. As we execute on these endeavors, Greg, we think that will be driving shareholder value. Greg Palm: By the way, just given Amazon’s—you talked about the plastic to paper switch. Given what Amazon has done, what Walmart is doing, have you noticed any other major behavioral changes in the market in the U.S. specifically? Omar Asali: We are, and this is a big part of our wins in enterprise accounts, and this is a big part of our discussions with accounts in 2026 that we think can drive growth. It is very hard to give you an exact timeline of when that switch is going to happen with some of these accounts. We absolutely feel it like a tailwind that there are more and more large enterprise accounts that want to switch to that substrate. I think the consumer has spoken, and the consumer wants less single-use plastic. I think that is going to play a factor in terms of our growth. Yes, we are seeing that. Obviously, we are not going to talk account by account on those names. Walmart and Amazon are unique. They are unique in their size, they are unique now in their relationship with us. I think that trend is a bit broader. The timing is the piece that is a bit harder. Frankly, Greg, not only is that trend happening and helping us, but the protective packaging space is consolidating. There are different transactions that, some were announced and others that people are working on. The table is changing, and we believe both from a substrate standpoint and a strategic standpoint, we are well-positioned to drive growth and drive shareholder value as you discussed. Greg Palm: Okay. Best of luck. Thanks. Omar Asali: Thank you. Operator: We have no further questions. I would like to turn the call back to Bill Drew for closing remarks. Bill Drew: Thank you, Julianne, and thank you all for joining us today. We look forward to speaking again following Q1. Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the DHL Group conference call. Please note that this call will be recorded. You can find the privacy notice on dhl.com. [Operator Instructions] I would now like to turn the conference call over to Martin Ziegenbalg, Head of Investor Relations. Please go ahead. Martin Ziegenbalg: Thank you, and a very good morning from my end to everyone participating in this call. Thank you for your interest. As the title says, I have with me here our group CEO, Tobias Meyer; and our Group CFO, Melanie Kreis. We will start with the presentation, starting by Tobias and following with the Q&A. And with that, over to you, Tobias. Tobias Meyer: Thank you, Martin. Good morning, everybody. Thank you for your interest in DHL. 2025 turned out to be a bit different from the macro assumptions than many had told us. But despite that, we delivered on guidance, particularly through effective cost and yield management in all of our divisions. So that for the full year, EBIT increased to EUR 6.2 billion, and we have a 8% year-on-year growth in the earnings per share. We continue to generate good cash flow. You will have seen that cash flow, free cash flow, net M&A increased to EUR 3.2 billion and execute our policies -- our finance policy to provide good shareholder returns. As it relates to the outlook, I think 2025 really made us in many aspects, a better company and we have a more solid base to tackle the opportunities that our industry offers that's what we will stay focused on the 1 side, resilience in a volatile world, and we expect 2026 to remain volatile, but execute on our growth initiatives. With that, on the next page, you see some key numbers that you will already have absorbed on EBIT ROIC up 20 basis points, free cash flow I mentioned. We also delivered on the nonfinancial growth that we set ourselves with employee engagement of 82, realized decarbonization factor of 2.1 million tonnes. That's slightly above our target as well. And the cybersecurity rating at really top of the range, top of our peer group with 780. We do remain committed to attractive shareholder returns on Page 4 of the presentation, you see our historical dividend increase. We thought that after waiting through the period of post-COVID normalization, it's now the right time to get back into a gradual increase of the dividend and stay on top of the corridor that we set ourselves in terms of the payout ratio. We also stay committed to our share buyback programs. We have EUR 1.5 billion of remaining to be spent. So also continuity on that side. As it relates to the development of the operating environment, Page 5 gets an indication what we dealt with in the year of 2025, the example of DHL Express, the weight per day development on the destination U.S. lanes stands at minus 26% for the entire year. You obviously see the significant drop after the changes in U.S. tariff policy, the so-called Liberation Day and the impact that, that had. But it's also important to note that the rest of the world has been very resilient. So we do see growth out of several origins in Asia. We are very engaged to also increase our competitiveness on intra-European trade. So that worked out well. But it is a world that is quite heterogeneous as it relates to growth trends and the resulting actions we have to take as it relates to capacity management. We do believe that Strategy 2030 on the next page is still a very fitting answer to the challenges that the world poses to us. Our top line growth accelerators remain extremely relevant from an industry focus, but also from a geographical focus, our geo tailwind 20 set of countries are really those where things are happening in a positive sense. So we remain very committed to that program, but also the profitability accelerators obviously had to be a big focus in 2025 as it relates to the adjustment of capacity, but also our structurally orientated Fit for Growth program really delivered very, very well. We're very happy with that. And also the group set up the alignment of the legal structure is very well underway. To deep dive a little bit into some of those profitability accelerators on the following Page 7, you see a Fit for Growth execution. We were faster, also needed to be faster on some measures, aviation airfreight, particularly significant structural reset in Europe and the U.S. through network redesigns, air to truck, but also structural levers in the optimization of our fleet and aviation setup, which partners we operate with that all made us more efficient. The fleet renewal, obviously, being a part that many of you are familiar with. On the ground side, ground operations, warehouse, sorting and handling Similarly, and more broadly as it relates to the divisional relevance, we executed that very well. P&P in the first half, significant adjustments also, given the flexibility of the new postal law that were executed very swiftly and I think overall very well. And there's the longer-term trend of standardization, automation and robotics, which remains very relevant for us across the divisions and will deliver additional benefits. Support functions, a lot and a deep dive on that a little bit on AI, the digitalization we have been driving for many years provides an excellent basis for that. We continue to be frugal as it relates to discretionary spend and especially overhead. We do this in a very continuous way to really create lasting sustainable impact for us. This is not a short-term exercise. We want to create a better company. And I think that's what we did in 2025. Again, this will continue into this year with some additional benefits to be seen. As it relates to the deployment of technology, AI is also very relevant for us. I think we are very excited by this technology, but we don't get carried away by that excitement, but have I think a very clear focus on where we deploy own resources where we have in-house engineering, these are particularly areas that are bespoke to us or have high opportunity for deeper integration of AI functionality. So we're working on agentic multimodal models. I think the entire industry is excited about the deployment in customs. That is definitely the case for us as well. Customer service as well. What's important to us is efficiency is great. But the opportunity is way beyond that, that we get in customs better compliance, better documentation, a better value proposition for our customers in recruiting similarly great efficiency gains by helping the process, but what we're really looking forward to is hiring more fitting people for the respective roles. In vehicle maintenance and repair, this is an area where we will have double-digit million impact in Germany alone by just having AI know the condition of the vehicle, know what we can bundle when we do repairs with maintenance and execute that in a much more stringent way with the repair shops. So these are those areas which are not so often talked about but really have a significant impact. What is a big program for us into 2026 is the delivery buddy to bring AI onto the hand scanner of the courier and thereby provide better guidance about specific locations, share the experience that we've collectively built up in the organization about the specifics of a premise of a location of a city, that's something that will make our service not only more efficient, but also truly better. And that's the part where we deploy own resources to really deeply reengineer the process and integrate AI into our platform. And number two, we are more opportunistic deploying what is offered to us. We have great partners. Not all partners in this space deliver great value, but we found some, and that's developing very well. And then we also spend a lot of time on people and culture to ensure we have great engineers. We have great managers that know how to make use of this technology, and we have a workforce that is ready to adopt it. We want to have our own value-add in this space. This is why we're ramping up resources as it relates to AI practitioners on use case implementation, as it relates to trained experts in our IT services, shared service functions with also deep technical expertise that can help us to make this part of our journey. So that's what we're looking for to integrate AI deeply in an industrial scale into our processes. And this is why we're looking forward really to a decade of AI-driven improvements across multiple processes where we are very focused from a group perspective on some projects that are of broader relevance for our divisions across. In terms of top line accelerators on the following page or update on the programs that most of you will be familiar with, e-commerce, our focus areas remain the same, which means for Express the top end of the spectrum in terms of value, in terms of urgency, whereas P&P and e-com play in the standard parcel space, which is scale-driven. We had changes in the year of 2025. In our European footprint, we continue to drive that. We want to be part of the consolidation play in Europe and offer a really great pan-European service where there are few that spend, that entire spectrum. Geographic tailwinds, I talked about, it's 20% of group revenue and there are some countries where we really want to further broaden our footprint. Life science & Healthcare, great progress in terms of the setup, you will see significant investments in equipment and infrastructure. This will take time to execute. This is an industry that is rather conservative due to quality reasons but this also makes this a sticky business once it's converted. So that's something that we remain very excited about, but also now it takes time to build this unique offering that we are shooting for. Data center and new energy, more opportunistic in the sense that we have a lot of those capabilities that are needed, significant growth with hyperscalers in 2025 and also with new energy particularly in those specific areas like battery transportation, also battery storage solutions, which have high requirements when it comes to safety and compliance. And those are areas where we particularly grew also in wind energy, which is more in industrial projects type of engagement. That's an area that developed very, very positively in 2025. This is also why we are confident despite the geopolitical turmoil, that 2026 will be a good year for us. On Page 10, you see the guidance for this year. We are shooting for EBIT for the group in excess of EUR 6.2 billion. You see the split up for DHL P&P and group functions, free cash flow in excess and around the EUR 3 billion mark with gross CapEx between 3% and 3.3% and the tax rate as per usual, around 30% and also our midterm outlook unchanged. So overall, a year behind us that surely had its volatility and changes in the macro environment, I think we can say that we adjusted well to that and enter 2026 with a platform and business base that gives us confidence to execute along our strategic priorities. And with that, over to Melanie for some more details on the divisional performance and the financials. Melanie Kreis: Thank you very much Tobias, and good morning, and a very warm welcome to all of you dialing in also from my side. I will start my part with a quick recap of the last quarter, Q4 2025, where we have seen the expected seasonal acceleration. When you look at our biggest EBIT contributing division, DHL Express, we have now seen the sixth consecutive quarter of EBIT growth adjusted for nonrecurring items. So that's a very encouraging development. And for me, that shows the effectiveness of the yield, cost and capacity measures executed by the DHL Express team. Post & Parcel Germany and DHL e-commerce have also achieved another successful peak season locking in the highest operating contribution of the year in the fourth quarter. So for these three network divisions, the strong Q4 performance, hence, reflects the usual seasonal volume increases, but also continued cost focus and our targeted peak season surcharge mechanisms. For DHL Forwarding Freight, the market circumstances, especially in ocean freight, are well known. Beyond that, we clearly see independent of cyclical swings, further structural improvement potential for this division with a similar scope for accelerated digitalization as Oscar De Bok has successfully implemented at DHL supply chain. Speaking of which, DHL Supply Chain has delivered top and bottom line growth in the quarter and for the full year, showing the intact structural tailwinds in the business, both from the demand side with another year of strong new contract signings as well as from automation and digitalization benefits on the cost side. This has also contributed to the 7% operating EBIT increase for the full year '25, as shown on Page 12. As you know, and as we have disclosed transparently, we had a series of nonrecurring items this year, mainly cost of change related to our successful Fit for Growth program, but also net effects from M&A and some other topics. Stripping these items out, we managed to increase group operating profit by 7.1% year-over-year to EUR 6.2 billion. And that has also set the minimum level of EBIT we want to achieve in 2026 as Tobias has just shown on our guidance page. 2025 EBIT was, however, up also year-on-year on a reported basis at 3.7%, as you can see on Page 13. The operating profit increase, together with the benefits of our ongoing share buyback program has driven an 8% increase in reported earnings per share for the full year 2025. So that is only slightly below our 10-year CAGR of 9% for earnings per share growth. Group ROIC increased 20 basis points year-over-year in '25 also reflecting the ongoing investments in our growth initiatives that Tobias explained earlier. And this is also nicely visible in our cash flow summary on Page 14. We again spent close to EUR 3 billion on net CapEx and close to EUR 1 million on net M&A as we invest in those topics that will drive our accelerated growth going forward. At the same time, strong CapEx discipline on any capacity-related investments is one of the main drivers for our once again strong cash generation. Free cash flow, excluding M&A, came in ahead of target at EUR 3.2 billion and has allowed us to also return significant amount of capital back to our shareholders in the form of our regular dividend and our share buyback. Also here, the factual 10-year view speaks for itself, as you see that we achieved a structural step-up in our cash flow conversion. And I would really like to reiterate that point. Quite honestly, also because we still see a lot of valuation models looking back at 10 or even 12-year average valuation multiples. So you see on the left side of Page 15, our 10-year step-up on EBIT and free cash flow. What I think is, however, at least as important as the absolute increase in these numbers, is the structural transformation that our group has accomplished in the last decade. For me, that means that DHL shareholders do not only invest in a company with higher EBIT margin and cash flow, our shareholders are owners of a structurally improved company. In terms of business mix, earnings and cash flow resilience and what is not to be underestimated, and agile, adaptable and international culture that has allowed us to successfully navigate through all external volatility over the last years. Before I finish, a quick reminder regarding the process on One of the last technical steps of this historic group transformation. Our planned alignment of legal structures is progressing fully on schedule subject to the AGM vote on May 5th, we will, hence, this year, also officially renamed the listed group entity into DHL AG, the P&P Germany operations, legally becoming the Deutsche Post AG subsidiary similar to the status of the other divisions. So all on track here and in line with our plans and intentions as previously explained. And that already brings me to three quick conclusions from my side on Page 17. We expect further profit growth in 2026, while the dynamic circumstances required continued close steering of costs, yield and CapEx. This will allow us to keep a good balance between attractive shareholder returns and continued targeted investments into growth. Because in the end, you can't shrink to greatness. We are, therefore, fully focused on leveraging growth opportunities in those countries, trade lines and sectors where our logistics expertise will allow us to drive sustainable, accelerated growth as outlined in our Strategy 2030. And with that, we are looking forward to your questions. Operator: [Operator Instructions] We'll take our first question from Alexia Dogani with JPMorgan. Alexia Dogani: I'll ask three if that's okay. Just firstly, on Express, Clearly, your efforts this year have been focused on improving cost competitiveness to regain market share from airfreight, can you give us a little bit of progress in which verticals you're already managing to do that? Or is this something that we have to look forward to in 2026. Secondly, on your Fit for Growth achievements this year. I believe the structural cost out was around EUR 600 million. That's ahead of what had been indicated before of basically slightly ahead the cost of change charges. Can you discuss what went better and you were able to achieve these savings earlier? And then thirdly, could you give us some comments on the current situation in the Middle East, perhaps kind of the first derivative effects of the market being closed, but also potentially if the duration of that market being closed for longer what are the implications for airfreight capacity globally translation to Express and any kind of other relevant comments there? Tobias Meyer: Yes. Thank you, Alexia, for those three questions. On the first one, indeed, steps to cost competitiveness in Express are very favorable. We would look at the task at hand, so to say, differently. It's not about regaining from airfreight. The way and what we're trying to do is more if you look at the 40-year trend of the integrated industry, the integrated industry has taken share from the general air freight market. We started as document companies then went into different verticals over time, kind of an S-curve transformation, not entirely dissimilar from what happened in e-commerce. And since COVID, the integrated industry is not back on that trend. And that's what we are trying to do with smart industrial growth to focus particularly on B2B verticals to hone the business model of Express with additional features, but also the attention to industry verticals. That has now been initiated and that should lead over the quarters to a gradual increase in the weight per shipment. And some of those elements will definitely take effect this year. Some will take later as it relates to cold chain transport, for instance, in Express. This is something that is yet to come from its effects. As it relates to Fit for Growth, absolutely, we are ahead of the original plan, particularly in Europe for Express, but also for P&P, those adjustments went quicker than we had originally maybe slightly conservatively foreseen. So that's particularly the area also in the United States, the adjustments needed were executed very swiftly. And also on the technology side, some of the programs that we have been driving went indeed very well from an executional point of view. So it's fully in swing especially as it relates to those more tech-dependent programs. That's what's going to support the progress in 2026 and provide us with a very healthy base also for further growth, which obviously is what we intend to do in Express and beyond in 2026 against a still volatile environment, which then also brings me to your third question on the Middle East. Now how those things develop is not easy to see. Definitely, the current situation is heavily constraining air activity in some countries, but also obviously, ocean-going vessels through the Strait of Hormuz are constrained. What happens now operationally is we had some partial opening of airspace and airports to move planes out obviously, Saudi is largely open or open we have, and that helps us a lot on the Express side a very well-established road network in the Middle East, which enables us to bring cargo to those airports that are open. That's very vital at presence to keep the region connected. And I would expect that to continue and further expand if constraints in some countries like Bahrain, Kuwait and UAE, those constraints would remain for longer. On the Ocean side, that will have consequences especially if cargo is offloaded to enable vessels to move on loops that do not include the ports of the Gulf region. Some carriers have started such offload processes. This creates some chaos that needs to be dealt with. As you know, that's also sometimes an opportunity because it creates urgencies for certain cargoes, but it's too early to see how this unfolds. If the constraints would stay longer, there's definitely a lot of work to be done. Alexia Dogani: And when you say offloaded cargo, I mean that cargo, how will it find its way to the region? Is it just a move to potentially air or road to clear the inventory? Tobias Meyer: Well, that might take -- might require different cargo to replace that because those offloads would then happen in a port that is typically not in the region or might be in the region and then you could obviously use road transport offloads more on the Asian side on the Indian subcontinent would then require ultimately to load it on a vessel that has a string into the Gulf, but that would mean significant delays. So that's what we start to see now. I think it's really too early to tell whether that is a phenomenon that takes a broader hold so far, people have more taken a wait-and-see mode, but that can last for another couple of days, not a couple of more weeks. Operator: Our next question comes from Muneeba Kayani with Bank of America. Muneeba Kayani: Melanie and Tobias. So first question around the moving parts on the guidance, please. So the Fit for Growth had kind of over EUR 600 million benefit last year. So is it right to think that your guidance assumes kind of a EUR 400 million benefit from Fit for Growth in 2026. And then related to that, what have you assumed in terms of your cost of change assumption in '26 compared to the EUR 245 million that you had last year on reported EBIT. So that's the first question. And then Secondly, if I could follow up in terms of the Middle East, specifically, we've heard earlier this week that 18% of global capacity in air cargo was impacted. We've heard that come down to something like 8% yesterday. Would you agree with that in terms of market impact. And then specifically for DHL, is your capacity impacted like do you have planes in the Middle East? And how do you see the fuel spike impact on the Express business, please? Melanie Kreis: Yes. Thank you very much. Muneeba, let me start with the guidance question and the moving parts there. Yes, I mean, of course, there are numerous external factors, the whole macro situation. There are some known topics like the fact that in P&P, we have a year without a price increase. So many moving parts. With regard to the Fit for Growth questions, yes, I can follow your math that if we say we finish kind of like the EUR 600 million in '25, there should be something like EUR 400 million left for '26. I think we also have to be conscious of the fact that particularly in the first half of the year, we will still see the annualization of some of the headwinds from '25 on the currency side, the tariffs, the de minimis abolishment. So like in '25, we will also need Fit for Growth benefits to help us compensate for those. With regard to cost of change, I mean, if we come up with new good ideas for further improvements and there is some cost of change attached to it. We will, of course, do it. However, I would expect that to be an order of magnitude which will not warrant a separate flagging the way we did it in '25. So more of a return to this being included in our normal reported figures. Tobias Meyer: Yes. And on the Middle East, I've seen those numbers as well. We will not engage in that discussion because it changes day by day, hour by hour. We had plans in places that were closed. That's been a discussion whether you can move the plane out empty or whether that location reopens. Again, that's very dynamic. It's clearly not yet over. So some impact is going to be there. I think what's more relevant is the question of spillover from ocean freight and what happens on the ocean freight side because some of those countries are highly dependent on essentials. The region is not self-sufficient on food, for instance. So that is something that will be significant if the ocean freight situation does not change over the coming days. Air cargo operations, as I said, for us, we have flexibility. We have a broad footprint in the region. And what happens in each location can change hour by hour. Melanie Kreis: Yes. And I think on the fuel surcharge, as you asked for that specifically. I mean, we have a well-established mechanism. So there are then some time elements in a period of rising fuel price, but by and large, we have well-established mechanisms in place to deal with that. Operator: Next question comes from Jacob Lacks with Wolfe Research. Jacob Lacks: So your slides show U.S. TDI import trends remained weak through December. Has there been any improvement since the start of the year, just given the ruling against IEEPA tariffs and some better readings in the macro indicators? Or has the step down in tariff rates not really been enough to incentivize new demand? And then a follow-up. One of your competitors last month discussed the goal to mix more towards cross-border freight in Europe over the next few years. Have you seen any change in the competitive parcel environment in the European TDI market? Melanie Kreis: Okay. I think on the impact of the Supreme Court ruling, that's too early to see a real impact. I think everybody is now working through the implications. So in terms of what we saw going into the year was more of a continuation of what we had already seen in the fourth quarter. With regard to the European competitive situation, we haven't seen a change on the ground. So we also saw these announcements that in terms of material impact on our daily business, we haven't seen it. Tobias Meyer: And overall, I think the -- particularly in the B2B market, it's a very healthy setup in Europe. As Melanie said, no significant changes. I think we have an excellent offering. If you look also at our presence in secondary markets, the connections via Leipzig are unmatched by any competitor. So the service aspect of that, I think, gives us some confidence on the TDI side and DDI overall, as it has in recent years, outgrown. So the cross-border element has outgrown domestic markets. That's the case in B2B, but also in B2C. And we see those segments very positively also into this year. Operator: Next question comes from Marco Limite with Barclays. Marco Limite: Hello. Hello, can you hear me? Tobias Meyer: Yes. Marco Limite: Okay. I have a follow-up question on Iran. So actually a few questions from Iran. First of all, whether you can disclose what percentage of your group revenues or EBIT is directly exposed to the Middle East? Is the first question. Second question, when we think about disruption, clearly, volumes into the Middle East are going to be disrupted and are going to change. To what extent, the Middle East tensions also affect other trade lanes, for example, I don't know, Europe to China, for instance. Is there any, let's say, transit and offloading reloading of cargo in these regions and so on. So does that affect also Europe to other Asian countries operations. And then when we think, I mean, thinking about the potential disruption coming from the Middle East, again, how do you -- what's your sense about the potential positives coming from better pricing versus headwinds coming from demand? Do you think you are going to be more exposed to positive from disruption or to the negative coming from demand? And just a final question, very quick on cost savings. Clearly, EUR 600 million is above the previous guidance. Just curious whether the step-up versus the previous guidance as to be, let's say, attributed only to Q4? Or you have been running on a higher rate since Q2? And what is the run rate in Q4 in the context of the EUR 1 billion? Tobias Meyer: Yes. Thank you for your questions. So our presence in the Middle East varies by division. We have relative to the GDP size of the region, it's slightly higher in Express. It's lower in supply chain to name the two extremes. As strategic as these conflicts are and as regrettable, given what we do and the segments we are in, we typically benefit from this turmoil than we have exposure to the downside. I think this is just a learning from past situations. The main reason, and I think you already heard that in the answering of previous questions, is that those disruptions spill into the airfreight from ocean or land transport surface transport into Air and Express. And people tend to rely on providers like us and with our significant footprint in the region, we are often the go-to party. That has been the case with the recent floodings in Morocco, which have driven volume massively. Now you're not going to see that in your numbers because Morocco overall is too small. But it's just to make the point around the -- in principle effect this has on supply chains and the need for our services. For ocean, especially the tying up of vessels is reducing supply. There has been some concerns about supply-demand balance with the Red Sea, the Suez route reopen. I think that's off now or at least further shift it into the future that such vessel routings would be accessible for the great majority of ocean liners. So that it has an impact on Europe to China as it relates to lead times and the competitiveness of ocean freight lead terms or the airfreight lead times, but also on the supply-demand balance in the container, the cellular vessel space. So far on the Middle East, any follow-up questions on this are welcome. On our Fit-For-Growth program. Indeed, we have been executing this very well across the year of 2025. Now the measurement of those things is not on a daily basis for all of those initiatives. So it is now with the year-end that we have taken stock and we see that we are significantly ahead of what we had originally planned, and we see this again very positively. It's speed, but it's also the impact that we have in some areas is ahead of what we originally thought. But that has been an outcome of the work throughout the year of 2025. Melanie Kreis: And we had already flagged in Q3 in November that we were ahead of schedule. But of course, also the importance, given the importance of Q4 and the peak season. We then really saw that those structural cost improvements also held during the peak season. And that, of course, then also drove up the overall performance towards the end of the year. Martin Ziegenbalg: Okay, Marco? Marco Limite: And yes, just on the run rate of cost savings because I think there is a bit of confusion this morning out there whether the EUR 600 million is the run rate versus the EUR 1 billion or the EUR 600 million is the achieved cost savings and therefore, that's in the bridge to '26, we just need -- we need to plug EUR 400 million more. So if you could clarify whether EUR 600 million is the run rate in Q4 or the achieved number in so far. Melanie Kreis: Yes. So the EUR 600 million is what we achieved gross in 2025, excluding the cost of change. And so in a very simple calculation that should leave around 400 to come now for '26. Tobias Meyer: And obviously, if it's a little bit more, we won't stop the measures just because we said it's EUR 1 billion. Operator: [Operator Instructions] We'll take our next question from Cedar Ekblom with Morgan Stanley. Cedar Ekblom: I've just got a question on if you could reflect on the volume performance in the Express business, particularly in the context of volume growth in broader airfreight cargo, I understand the points around sort of weight per shipment rather than just shipment count, but this sort of persistent trend of lower express trends or flat at best and air freight -- general air freight cargo growing continues to sort of play out quarter-over-quarter. And I'd just like to sort of hear how you are perceiving the relative trends in those two categories and how we should think about that over '26 and possibly a bit further out. I think sort of the debate around is Express structurally impaired relative to history, remains quite alive in the market. And with the volume positions that we've had, I wonder if you've got a view on how to sort of debate that question or respond to that question. Thank you. Tobias Meyer: Yes. So Cedar, I think a fair question given the market developments that you characterized, I do not think that DHL Express has a share versus our traditional competitors in the Express space. If you look historically, these waves a little bit between Air Freight and Express have happened before. It's particularly now kind of post COVID, the e-commerce normalization that has impacted us, but also the broader industry, which is why the broader integrated industry, I think is the key driver of why we have lost a share or a point of market share also in the broader market. And it is absolutely our objective to get back on to a track to outgrow the broader airfreight market as we have done as an industry for the last 40 years. We target that through specific verticals, but also a broader and engagement more on the B2B side, that has not shown effects yet in the fourth quarter. So that's something which we would only see now in 2026 as that program gets implemented. We had good discussions with the management team with the broader management team around that. I think DHL Express is very in its usual way, a very structured set up to address that, but it will only unfold as we go through the year. In some of the verticals, and we said that also with Strategy 2030, and its execution, some of those verticals, particularly Life Science and Health Care and Cold Chain Express will take some more time until that infrastructure and equipment is ready. So that will not happen this year. This is more for the years to come. Melanie Kreis: And maybe just to add from my side, we have this on Page 5 in the deck, we have talked about it before, where I mean you can see that actually weight per day rest of world was already just flat in 2025. And obviously, our clear focus is to now get rate per day back into growth territory. And we think that weight per day will be the more relevant KPI to look at for Express. A, which also drives a lot of the economics of the division in terms of associated revenue per shipment in terms of weight load factor on the aviation side and so on. But it will then also give a good comparison to the relative performance vis-a-vis the air freight market, and that is what we will focus on in '26. Martin Ziegenbalg: Thank you, Cedar, and we've got another caller waiting. Operator: Our next question comes from Alex Irving with Bernstein. Alexander Irving: Two for me, please. First of all, you've heard from some of your peers about how they're deploying AI in their business and why they in particular, stand to benefit. Own platforms, data, quality and so on. You spoke earlier on about some of your aims during the presentation, but what factors give you the right to win from AI? And what are the main actions you're currently taking here, what's the impact you expect those to have gross and net after any sharing gains with customers. Second question, you're nearing into the simplification project and subject to AGM approval, the carve down of P&P. How committed are you to the ongoing ownership of all 5 divisions? What conditions must these divisions satisfy to remain owned by DHL. Thank you. Tobias Meyer: Yes. Thank you for these questions. Starting with AI, I think for us, what's important we are not in the -- don't have the approach to think that putting a AI sauce source over everything creates great benefit. This is a task that ultimately is technical. This is a major transformation as the induction of the PC into our business world and will have a similar size, if not larger, benefits. Now why we think we have the right to win and we'll have a net benefit. This is a technology where scale will matter to a greater extent. And we have some applications I mentioned what we intend to do and are implementing on the hand scanners, where also across the divisions, we can deploy similar technology and reap those benefits. So we see AI as a driver of scale benefit, increasing scale benefits, but also it will benefit companies more that have a well set up, well structured IT landscape, and we very much believe we have that, especially in Express and Global Forwarding, and in P&P, but also in supply chain, where Oscar in his previous role, has driven a standardization of warehouse management systems and so forth for many years. We have a great track record as it relates to use of data, become a much more data-driven company. So that is a foundation that we can now build on. Now we know that others also claim that. So here, I think as often, it's in the execution that will prove who can really make benefits from that. Again, I think we know very well what we are doing. And we are striving to use this technology at industrial scale for efficiency, but also effectiveness reasons. And that's what we're very much focused on. This will take time to implement for companies. This is always harder than for consumers to adapt to new technology. But we are absolutely sure that we will stand to benefit. As it relates to the commitment to owning the different divisions, we, I think, have addressed this multiple times across the portfolio. We do think that the portfolio does make sense, but we also have a clear success criteria for the different divisions that we operate in. You asked specifically for P&P, where, again, we think we are the right owner for that business. We need to have the right regulatory conditions that enable us to self-fund the division to self-fund the transformation from a letter centric to a parcel-centric company where we have progressed much, much further than many others with our great offering on the parcel side and significant market share that we do have in Germany. So that success factor for us is currently clearly fulfilled. And in the other divisions, we obviously are closely monitoring our performance versus peers. In some areas, we are top of the list. And in other areas, we have more work to do. But with a clear plan to close those -- that gap. So we are committed to the portfolio that we currently own. Martin Ziegenbalg: Okay. Very good. Thank you, Alex. I think we've got a follow-up from Alexia. Operator: Yes. Our next question comes from Alexia Dogani with JPMorgan. Alexia Dogani: Some follow-ups. I actually have again 3 -- 2 very quick ones. Just firstly on Express, can you let us know when you would consider putting emergency surcharge or a war disruption surcharge, if that will be part of the consideration. Then secondly, would you give us some kind of short comments about Q1 kind of notwithstanding the normal seasonality of the business, should we kind of be looking out for anything specific? And then kind of my real follow-up question is Melanie, you discussed a little bit about kind of historic performance, valuation. And obviously, growth is very important for kind of the sector that you are in, I guess, would you consider any other means to accelerate growth? I mean we've discussed your M&A strategy in the past, which is much more kind of bolt-on. Would you consider something a little bit more transformation that you could basically put more capital at risk? Or do you see at the moment kind of the return of cash and kind of levering up the balance sheet slightly as the most prudent kind of capital allocation near term? Tobias Meyer: So I'll start with the first two, then Melanie being specifically addressable comment on the third question. So on the Express, we do implement emergency surcharges depending on the local situation, that is typically country specific, and that's what's also happening in this context. We particularly use that to pass on higher cost, either through insurance or other. So we will handle that also in this, and we're in the process of doing so in this situation that is unfolding in the Middle East. Overall, I think and I tried to express that I think we exited 2025 with really good achievements and at a good momentum. I think also, personally, I feel about 2026 quite positive, knowing that the turmoil is often something that stands to benefit us. It's not always to describe why that is, but that has been historically the case. And that's why even though the macro situation, we are not so optimistic on that the per se, the macro environment is going to be very favorable. I'm quite optimistic about 2026 based on the achievements on the cost side, on the structural improvements, but also what the current environment means for our industry and specifically our portfolio of businesses, and that's how with the mindset that we enter and are engaged here in the year 2026. Melanie Kreis: And to your third question, yes, as I showed in the presentation, we have significantly improved profitability and cash generation and also the composition of where earnings are coming from, where we now want to double down on is how to accelerate also growth. And of course, profitable growth. The focus will remain on organic growth opportunities. We are convinced that there are ample opportunities out there also in the current environment. We are going to double down on those. And we will continue using M&A more as an add-on supplement. So no fundamental change in strategy. Martin Ziegenbalg: Thanks, Alexia. And we have Andy Chu joining the call. Andy Chu: Just one question for me, please. I guess the market always worries for DHL particular around any sort of crisis, and we seem to be lurching from one crisis to another. But I guess, historically, you've shown some really great flexibility, resilience, probably most recently COVID being the best example. So could you just give us a favor maybe just using Express -- could you just give an example, maybe using Express as to how quickly you can make adjustments to your network, just examples of flexibility because it just strikes me that this business is -- has a proven track record of tremendous resilience. Tobias Meyer: Yes, Andy, thank you for that question. Which is more a comment that I would absolutely agree to and especially in the Middle East, I mean, we have a very strong presence there. We have colleagues there that were already in the region during the second Gulf war, where we also still already had a significant presence due to historical reasons. We even had a monopoly in Saudi for some time. Obviously, that's not the case anymore. But our presence there is very strong. Express with its setup also of different airlines has flexibility that others do not have. Now location by location that requires work, traffic rights, aircraft change in registry or this doesn't happen by itself. But over the decades, I think we have built that muscle that capability and I think are somewhat unique in our industry in that setup and capability set. And that's why, indeed, I would echo the confidence that you also expressed in your comment, the confidence that as tragic as this military conflict is and the crisis that it triggers it's not bad historically for our setup and does not harm in any way, our confidence about 2026. Melanie Kreis: Maybe just two quick points to add from my side. I think one thing which is remarkable, our express aviation setup is that we have now shown over the last years, the capability that we can flex up quite rapidly if that is required globally on specific trade lanes that we can likewise also flex down key contributor, of course, also to the fact that we had 6 consecutive quarters of EBIT growth in Express despite the top line headwind. And the complementary element is also going back to Alexia's question, we have also shown that on the pricing side, we are able to smartly price given the circumstances with elevated risk surcharges if and where needed. Martin Ziegenbalg: Andy, thanks for your call. We just passed the 60-minute mark, but we still got time for a follow-up question by Marco. Operator: Marco, please unmute your line. Melanie Kreis: Marco, we can't hear you. Martin Ziegenbalg: Still working on it. Operator: Marco, please go ahead. Marco Limite: I think you can hear me now. Just One more question, which is a bit more longer term. So if we look at your overall OpEx line of EUR 75 billion. I mean clearly, that's fairly big one. And my question to you is whether you see further opportunities in terms of cost savings on top of the EUR 1 billion program you are running at the moment. And in the context of that whether you think that there are cost synergies potential from maybe in the future, better integrating divisions and therefore, achieving extrapolating cost synergies across divisions as one of your big competitor is doing in the U.S. Tobias Meyer: Yes. So thank you for this question, which is obviously not easy to answer across all the spectrum of what we do. I would definitely say that our drive for efficiency will continue. That is basic frugality. We're a logistics company, we're not a bank, and we should look like a logistics company, we should not look like a bank. But more importantly, the obsession with efficiency in processes and having great processes with an adequate amount of technology that in supply chain, supply chain is going to be the first business that has a significant impact with robotics. We are already leading in the deployment of robots. It will change the business. It will add a different revenue stream robotics as a service to what we do, similar to what we did with Real Estate Solutions, which is a great contributor of the successful path that we have taken with supply chain. So those elements are very important next to AI, not to forget that the physical part of AI being manifested in robotics is also very, very relevant for us. In Express, I think we're on a great path to make the best service in the industry more affordable, and that will give us broader access to certain markets and companies and is underpinning our drive for industrial growth. Also, in Europe with the expansion of our road network and that related offering across the continent, that's a driver of growth as well. As it relates to divisional synergies, yes, we will have those on the technology side. We'll be very careful with operational integration that harms our value proposition. Express has a different value proposition than the standard parcel business, and we will not ever damage that value proposition. The spreadsheet might tell you something different. But experience tells us that, that setup that we have, particularly with Express is working very well for us, is working very well for our customers. Collaboration is what's going to happen, but this very cost and efficiency minded synergy, we will remain very careful because we see with our own experience, but also what happens across the industry that the detrimental effects on value proposition are often outweighing the benefits. So on the technology side, yes, on the collaboration side, absolutely, yes, you also see this in Europe between e-commerce, P&P, and also increasing the e-commerce and Express. We often talked about the great collaboration we have on the aviation side between Express and Global Forwarding, the joint plans we have there in terms of Life Science and Health Care. You might have seen the health logistics plan that Express operates, which is also used for DGF for Global Forwarding cargo. So we'll collaborate value proposition and efficiency, but we'll be very careful to integrate with the sole mind of cost synergies. Marco Limite: And what did you mean when you said making Express more affordable? Tobias Meyer: Well, I mean, we have undertaken significant steps to enhance productivity through technology, but also through streamlining processes, especially in Europe and the U.S., and we're also growing in the European road offering, DDI significantly. So that is what I mean. It doesn't harm our value proposition as it relates to the time defined offering, where we will always put quality first, but it gives us access to some segments that we haven't been serving to that extent in the past. Martin Ziegenbalg: Great. Thanks, Marco, for that follow-up, and that concludes our Q&A round. We're looking forward to seeing you over the next couple of days and weeks on roadshows and conferences. And to close off the call, I hand over for closing remarks to Tobias. Tobias Meyer: Well, thank you all for your interest. Again 2025 was not an easy year as it relates to the macro. I think we've managed as well. And I feel this leaves us really in a position where we enter 2026, and we operate in 2026 despite, again, a very volatile environment with great confidence that we will offer great service to our customers during the year of 2026 with the initiatives that we've put forward, and we get back on the track of growth through the measures that we've described and talked about in this call, but also beyond the divisional strategies that we have presented. This is going to be the focus in 2026 to add the growth component through what I believe was a good bottom line management, that's what we are 100% focused to do and confident to achieve. Thank you.
Operator: Good morning. We would like to welcome everyone to Canadian Natural's 2025 Fourth Quarter and Year-End Earnings Conference Call and Webcast. [Operator Instructions] Please note that this call is being recorded today, March 5, 2026, at 9:00 a.m. Mountain Time. I'd now like to turn the conference over to your host for today's call, Lance Casson, Manager of Investor Relations. Lance Casson: Thank you, and good morning, everyone. Thank you for joining Canadian Natural's 2025 Fourth Quarter and Year-end Results Conference Call. As always, I'd like to remind you of our forward-looking statements, and it should be noted that in our reporting disclosures, everything is in Canadian dollars, unless otherwise stated, and we report our reserves and production before royalties. Also, I would suggest to review the advisory section in our financial statements that includes comments on non-GAAP disclosures. Speaking on today's call will be Scott Stauth, our President; Robin Zabek, COO of E&P; and Victor Darel, our Chief Financial Officer. Additionally, in the room with us this morning is Jay Froc, COO of Oil Sands. Scott will first run through our strategic updates and our strong operational performance that once again included numerous production records in the quarter and annually. Next, Robin will provide highlights of our growing high-value reserves that are significant when compared to other major oil and gas companies. And Victor will summarize our strong financial results and our significant return to shareholders in the year, along with details on the enhancement of our free cash flow allocation policy. To close, Scott will summarize prior to open up the line for questions. With that, over to you, Scott. Scott Stauth: Thank you, Lance, and good morning, everyone. 2025 was the best operational year in the company's long history of maximizing value for our shareholders. We set several new production records, lowered operating costs, and capital expenditures came in under our previous forecast. We grew our production organically as well as completed several accretive acquisitions. These include the Palliser Block assets, Southern Alberta, liquid-rich Montney assets in the Grande Prairie area, as well as increasing our ownership in the Albian mines 100% through an asset swap. We achieved record annual production of 1,571,000 BOEs per day in '25, resulting in year-over-year growth of 15% or approximately 207,000 BOEs per day from 2024 levels. We also showed continuous improvement in our safety record with our total recordable injury frequency at the lowest levels ever. Our teams continue to be focused on safe, steady applications with a goal of no harm to people and no safety incidents. Specific to some of the annual operating highlights, record annual total liquids production of approximately 1,146,000 barrels per day, an increase annual liquids production of 141,000 barrels per day or 14% from 2024 levels. 65% are our liquids production at SCO, light crude oil or NGLs. Strong total corporate liquids operating costs of $18.44 per barrel. Record Oil Sands mining and upgrading production of approximately 565,000 barrels per day of zero decline SCO with upgrader utilization of 100%, including the planned turnaround at AOSP. Industry-leading Oil Sands mining and upgrading operating costs of $22.66 per barrel. Record thermal in-situ production of approximately 275,000 barrels per day of long life, low decline production and primary heavy crude oil production growth of approximately 88,000 barrels per day, which is 11% growth from 2024 levels. This reflects strong drilling results from our multilateral well program. Operating costs in our primary heavy crude oil operations averaged $16.68 per barrel in 2025, a decrease of 8% from 2024 levels, primarily reflecting lower operating costs from multilateral production. Record natural gas production of approximately 2.5 Bcf per day, an increase of 400 million per day or 19% from 2024 levels. In December, we received regulatory approval for our Pike 2 70,000 barrel per day SAGD Growth Project opportunity. Shifting to our quarterly results. Q4 2025 was equally impressive with numerous records, including record quarterly production of approximately 1,659,000 BOEs per day. Record total liquids production of approximately 1,215,000 barrels per day, an increase of 125,000 barrels per day or 12% from Q4 2024 levels. Record Oil Sands mining and upgrading production of approximately 620,000 barrels per day of SCO with upgrader utilization of 105%. Industry-leading Oil Sands mining and upgrading operating costs of $21.84 per barrel. Within our thermal areas, production from the first Pike 1 pad came on production ahead of schedule in December. Current production from this pad exceeds our expectation at approximately 27,000 barrels per day with an SOR of approximately 1.8 xas we target to keep the production at the Jackfish facilities at full capacity. Second Pike 1 pad will come on production in the second quarter. Canadian Natural's reserves are significant when compared to other major oil companies, which support long-term growth opportunities. Year-end 2025 total proved reserves and total proved plus probable reserves increased by 4% and 3% respectively from year-end 2024 levels, another strong year of reserve replacement with very strong F&D costs. Robin will provide additional color on our year-end reserve shortly. Strong execution across our large, diverse asset base continues to provide significant opportunities to create shareholder value in 2026 and beyond. This is evident by our increased production, cash flow, and reserves achieved in 2025 through accretive acquisitions and organic growth, which gave the board of directors confidence in their approval of a quarterly dividend increase of 6.4% and the enhancement of our free cash flow allocation policy by adjusting our net debt targets, accelerating direct returns to shareholders. Victor will explain in more detail in this finance section this morning. In addition, we completed a strategic acquisition in Q1 of '26, and as a result, we are increasing the midpoint of our 2026 production guidance by 20,000 BOEs per day with a range of 1,615,000 BOEs per day to 1,665,000 BOEs per day, and we are reducing our '26 capital, operating capital forecast by $310 million to approximately $6 billion. We continue to progress our defined short and medium-term growth strategy development in our conventional EMP assets. Our drill to fill pad additions and FEED capital on both the 70,000 barrel per day Pike 2 Greenfield project and the 30,000 barrel per day Jackfish Brownfield expansion project. As part of our long-term growth strategy, we are deferring FEED capital for the Oil Sands Jackpine Mine expansion opportunity at Albian that was included in our 2026 capital budget. This approximately $8.25 billion project is being deferred due to lack of finalization of government regulatory policies around carbon pricing and methane, which creates uncertainty and economic burden for our long-term growth investment. Once there's more certainty on improved regulatory policy, improved timelines, and additionally egress, we will reassess the economic viability of this project. Complementing the accretive and opportunistic acquisitions completed in 2025 and in Q1 of 2026, we have plenty of organic growth opportunities within our large, diverse asset base. We will leverage our portfolio of opportunities to continue creating long-term shareholder value while maintaining flexibility to manage the pace of these development opportunities and continue to maximize shareholder value. Now I will turn it over to Robin to provide additional details on our year-end 2025 reserves. Robin Zabek: Thank you, Scott. Good morning, everyone. I'll start by reminding everyone that 100% of Canadian Natural's reserves are externally evaluated and reviewed by independent qualified reserve evaluators. Our 2025 reserve disclosure is presented in accordance with Canadian reporting requirements using forecast pricing and escalated costs on a company working interest or royalties basis. As you just heard from Scott, 2025 was another very strong year for Canadian Natural, with that strength including the company's reserves. For December 31st, 2025, total proved reserves are 15.9 billion BOE, representing a 4% increase compared to 2024. Total proved plus probable reserves increased 3% to 20.75 billion. Through a combination of organic growth and accretive acquisitions, Canadian Natural replaced 2025 production by 218% on a total proved basis and 212% on a total proved plus probable basis. To put that in context, that's more than 1.2 billion BOEs of reserves added in each of the proved and proved plus probable categories. As you heard from Scott, we've done that while achieving industry-leading finding, development, and acquisition costs. For 2025, our FD&A, including changes in future development cost, was $3.64 per BOE for total proved and $2.42 per BOE for total proved plus probable, underscoring the strength of our extensive diverse assets. Highlighting one of the attributes that differentiates Canadian Natural, approximately 73% of total proved reserves are from long life, low decline or zero decline assets, resulting in a total proved reserve life index of 31 years and a total proved plus probable RLI of 40 years. Notably, at year-end 2025, approximately 50% of the company's total proved reserves are high-value SCO and mining bitumen reserves with zero decline and a total proved RLI of 39. In summary, our 2025 reserves continue to reflect the strength and depth of Canadian Natural's diverse asset base, the predictability of the company's long life, low decline reserves, and our proven ability to create value through organic growth and accretive acquisitions. I will now hand over to Victor for the financial highlights. Victor Darel: Thanks, Robin, and good morning. The fourth quarter full year 2025 results were excellent, with record operational performance, which also reflected the impact of the acquisitions we did in 2024 and 2025, and which contributed to similarly strong financial performance. The strong execution by our teams in 2025 has resulted in adjusted net earnings of $7.4 billion or $3.56, and adjusted funds flow for the year of $15.5 billion or $7.39. Quarterly performance was equally strong, with adjusted net earnings of $1.7 billion or $0.82 per share and adjusted funds flow of approximately $3.7 billion or $1.82. Net earnings of $5.3 billion this quarter or $2.55 per share was higher than the operational earnings related to the accounting for the AOSP asset swap, which resulted in a non-cash gain of approximately $3.8 billion after tax this quarter. Following the asset swap, where we assumed the entirety of the interest and control of the AOSP mines, we accounted for the transaction in accordance with the relevant requirements and recognized an adjustment from the previous carrying value to its fair value in accordance with GAAP. In doing so, we demonstrated the significant value that has been created in those operations since the acquisition of the initial interest in AOSP in 2017. As Scott mentioned, the accretive acquisitions in late 2024 and throughout 2025, including the AOSP asset swap in November of this past year, have increased reserves, production and cash flow while contributing to net debt reduction of approximately $2.7 billion at year-end 2024, with net debt at approximately $16 billion at the year-end 2025. In 2025, the company returned approximately $9 billion to our shareholders, including direct returns of approximately $4.9 billion in dividends, $1.4 billion in share repurchases, and additionally the $2.7 billion in net debt reduction I just mentioned. As we end 2025, our balance sheet is strong, with quarter-end debt to EBITDA of 0.9 xand debt to book capital coming in at 26%. Liquidity was also strong at over $6.3 billion at year-end, reflecting undrawn revolving bank credit facilities and cash on hand at end of period. Demonstrating the continued performance of and their confidence in our business, the board approved a 6% increase to our quarterly dividend, bringing the annualized dividend to $0.52 per common share. This marks 2026 as the 26th consecutive year of dividend increases by Canadian Natural, with a compound annual growth rate of 20% over that time, demonstrating the sustainability of our business model, our strong balance sheet, and the strength of our diverse, long-life, low-decline reserves and asset base that Robin spoke to. Additionally, the board of directors have, effective January 1st, 2026, adjusted the net debt target level in our free cash flow allocation policy, which results in an acceleration of the next increase to shareholder returns. When net debt is below $16 billion compared to the previous target of $15 billion, we will increase shareholder returns to 75% of free cash flow generated and managed on a forward-looking basis. When net debt levels reach $13 billion compared to the previous target of $12 billion, we will target to increase shareholder returns to 100% of free cash flow generated. Our robust funds flow generation and strong balance sheet demonstrates our industry-leading cost structure, large reserve base, high quality, long-life, low-decline assets, and our commitment to continuous improvement and reliable execution. These factors, along with the company's track record of delivering strong shareholder returns, support significant long-term value creation for Canadian Natural and its shareholders. Our financial flexibility and low maintenance capital requirements demonstrate a track record of execution and allow us the opportunity to provide strong returns to shareholders going forward. With that, Scott, I'll turn it back to you. Scott Stauth: Thanks, Victor. In summary, our strong 2025 results and our growing reserves are supported by safe, reliable and consistent operations. Our commitment to continuous improvement as part of our effective and efficient operations is driven by focusing on cost improvement, margin expansion, and strong execution. This is combined with our increased production guidance and accelerated shareholder returns. We are set up to continue to return real value to our shareholders in the near, medium, and long term. With that, I will turn it over for questions. Operator: [Operator Instructions] Your first question comes from the line of Dennis Fong from CIBC World Markets. Dennis Fong: Congratulations on a strong quarter and year. My first one here is really you guys have shown a track record of applying CQ best practices on kind of new assets you've acquired or taken over operatorship of. And as you alluded to in your prepared comments, really a focus on continuous improvement. Can you talk to some of the opportunities you're looking to chase down or that you're seeing now that you control 100% of the Albian mine? And how does that maybe interact with Horizon on a go-forward basis? Scott Stauth: Yes, Dennis, I think if you recall, we did have a bit of this discussion at the last quarter. We had estimated an instantaneous savings of about $30 million and an annual savings in around $30 million per year, $30 million to $40 million per year. It's just really about the synergies of being able to utilize the equipment and the people resources, the contractors back and forth at the mine sites in a more efficient manner than we would have otherwise been able to do so before. Better utilization of your service providers allows for more efficient practices and ultimately more efficient costs. You know, over time, Dennis Fong, it's fairly evident to be able to see the reduction in operating costs from 2017 going right through to the acquisition of Chevron 2024, and we continue to make improvements in the operating costs from that point going forward here, just through our continuous improvement methodology and also, you know, significant increase in production in the range of 50,000 barrels a day since 2017. You know, we had made some significant gain certainly before the acquisition of Chevron, and at this point in time, we'll be working more on the continuous improvement portions of that where small dollars add up to big dollars. Dennis Fong: Great. . Really appreciate that color. My second question shifts here a little bit. It's obviously great to see the confidence in the board or from the board on the current strength of the balance sheet and the potential acceleration of returning free cash to shareholders. Can you talk towards a little bit around where the discussions may have gone in terms of we'll call it bookends or ensuring kind of key metrics that both management and the board focus on in terms of determining some of these factors, as well as maybe touching on some of the flexibility that you still have in the capital program, obviously either higher or lower, given the volatile commodity price environment that we're in today. Scott Stauth: Yes, Dennis, it's really about the robustness of our balance sheet. On the backs of the synergies created through these recent acquisitions, we've been able to achieve increased cash flow, lowering the operating costs, increasing the production. All of those things combined don't necessarily lead towards bookends per se, Dennis, but what they do is show a continued improvement to the overall strength of our balance sheet, primarily providing additional cash flow. That's resulted in the board taking a look at all of the acquisitions that we've done, combined with the way we've been able to effectively and efficiently manage our capital development programs through organic growth, have really provided that stepping stone to get to change the net debt levels for the free cash flow policy and obviously continue to increase our dividends. Dennis, not really about bookends, but just part of the ongoing continued growth of the company, both organically and through acquisitions that have strengthened the balance sheet and have set us up for continued strength through strong commodity prices, lower commodity prices or any cycle. Operator: Your next question comes from the line of Patrick O'Rourke from ATB Capital Markets. Patrick O'Rourke: Maybe just a little bit more on the capital side of the equation here. Obviously, the bulk of the capital that came out was, it seems like with respect to Jackpine. I just wonder what opportunities there are still remaining for the rest of the year. I think back to years past, we were looking at a sort of a weaker gas tape right now. Are there any opportunities to potentially shift some capital from the liquids rich gas portfolio towards some of the short cycle oil here remaining in 2026? Scott Stauth: We always carry that nimbleness, certainly when we're looking at our capital allocation. Seeing good returns, strong returns with strong liquids pricing on the liquid rich natural gas activity areas that do compete. If you look at it, Patrick, we've got payouts in our multilaterals 12 months or less, very comparable payouts to 12, 13 months or less on the strong liquid rich gas areas. They're very competitive with each other. I think what the way to look at it is we have a very well-balanced rig program across all of the areas. We're working very hard to ensure that we don't sort of apply any self-inflicted inflation in the areas in which we're operating in. We do that by having that balanced rig program. We continue to monitor the commodity prices. We have about 21 rigs working, very well balanced across the entire basin here. Looking at strong returns, we're not spending money on dry gas activity. We're really focused on the value returns. I don't see us making significant changes to that a whole lot. We do have the capacity to be able to increase the heavy oil multilateral potentially to a small percentage. Again, we're running very well balanced. We're not creating inflation. We're making sure we're keeping up with the efficiencies in our drill times. People are very focused, and we wanna keep the momentum going in that direction. Patrick O'Rourke: Okay, great. Just thinking about the operational performance, sort of one thing that really stuck out to me was the 105% upgrade or utilization in the quarter. Just wondering how you think about how repeatable this is, does that open sort of the pathway to a potential rerate on these assets going forward? Scott Stauth: Patrick, we'll see on a go-forward basis here. I think you've seen some strong production in the fourth quarter. That's not unique, in compared to previous years. Strong efficiencies, running into the fourth quarters, coming out of turnarounds and so forth. You know, 105% is certainly very strong. And 620,000 barrels a day is extremely strong production levels. We're happy with, in the range of 600,000 barrels a day is very strong efficiencies and utilization. You know, we certainly strive to continue to work towards maximizing and overutilizing the facilities from a utilization perspective. I doubt it's gonna lead us to a rewrite. We'll look at that some point down the road at Horizon, potentially when we bring on the 6,300 barrels a day of SCO from the NRU project. Until that time, Patrick, I think we're pretty happy with where our capacities are rated at. Operator: Your last question for today comes from the line of Neil Mehta from Goldman Sachs. Neil Mehta: Congrats on a good quarter as always. I had some more macro questions, so I want to get your perspective on the environment that we're in right now, where there's a lot of volatility. There's talk of, obviously, the Venezuela barrels coming to the market. At the same time, we've got some disruptions here in the Middle East in terms of supply. How you are seeing real-time that flowing through into the heavy markets and how that shapes your near-term view around TIWCs? That's a good starting point, and then I have follow-up on gas. Scott Stauth: Yes, Neil, I think if you look back a month or so ago with the potential to increase the volumes into the US Gulf Coast, the differentials to WTI did widen out. We did see increased barrels of Venezuelan barrels coming into the US Gulf Coast for processing. Now as to your point, there has been some tightening in the market with the recent developments in the Middle East. We're seeing differentials swing back down, probably about $1.50 to $1.60 lower than they were. Approximately tighter than they were, excuse me, about a month or so ago. For us, it's all about continued focus on our operating costs and ensuring that we can be competitive in all the markets, and that we also have a diversified portfolio. We've got 256,000 barrels a day, and we've got that well diversified between the U.S. Gulf Coast and the West Coast of Canada here. Continue to focus on those types of opportunities for diversification of our portfolio and continue to focus on our operating cost to ensure that in the long run, rather than just on the short-term thinking, that in the long run, we can manage and excel and be competitive in any market condition. Neil Mehta: And to the extent we are in a firmer market condition as the world is now pulling on heavy barrels maybe a little bit harder, does that change the way you think about your near-term activity, or you kind of have to stay level loaded just given the long-term planning assumptions? Scott Stauth: We have to go by long-term planning assumptions, Neil. You know, there's ebbs and flows that are caused by various different factors. Obviously a major factor going on right now in the Middle East, but also what times in the year, there's factors of turnarounds that happen in the U.S. refining complexes. You know, again, the thinking has to be long-term and ensuring that we're achieving the best net backs that we can with our portfolio. Neil Mehta: And then that's a follow-up is just natural gas. I think a number of us have been waiting for AECO to get firmer, and it just seems like production is ever flowing. Just how do you guys think about this cleaning itself up? As you guys look at the AECO balances, is this a structural issue or is there line of sight to better pricing on the Horizon? Scott Stauth: Well, I think it's evident that you're seeing with LNG Canada, processing in the range of about 1.5 Bcf, not yet approaching full capacity, but not that far away from full capacity. You're seeing the market is suggesting that the system is full. That's likely coming through the development of, a lot of liquids rich gas production and some producers, drilling with potentially, lower liquids, gas production as well. A very strong, supply market. We continue to see on a go-forward basis that those conditions will remain tight, over time. Canada really needs additional LNG export capacity and the projects to be approved in an expeditious matter, so we can take advantage of prosperity for all Canadians by increasing our gas production and our exports, and providing a product the world truly needs. Operator: We have an additional question coming from the line of Greg Pardy from RBC Capital Markets. Greg Pardy: Scott. I was not gonna let you off that easy. Look, just maybe I may have missed this. It's, it's kind of a question for Victor, but effectively, are you at 75% payout now? I.e. post everything in terms of the updated budget, year-end numbers, the acquisition and so forth. Is the debt at a level where it's now triggered that higher payout or is that still to come? Scott Stauth: Yes. So to your point, Greg, at December 31st, we were below 16%. Under the policy, we would have achieved the target for sure. Of course, as a result of that target increase returns here in 2026. As you know, we do that on a forward-looking basis. We model the script and the cash flows for it as we look at the policy over the course of the year. Of course, keep in mind significant volatility in pricing, we're all aware. Under the current policy as just announced, strong pricing we're seeing we'd be very solidly there in Q3 with slightly higher and slightly lower debt over the course of the first and second quarter. Hopefully that helps. Greg Pardy: Yes, yes. No, exactly from a modeling perspective. Operator: There are no further questions at this time. So I'd like to turn the call back to Lance Casson for closing comments. Sir, please go ahead. Lance Casson: Thank you, operator, and thanks to everyone for joining us this morning. If you have any questions, please give us a call. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Good morning. Thank you for holding. Welcome to the earnings release call of Ultrapar to discuss the results referring to the fourth quarter 2025. The presentation will be conducted by Mr. Rodrigo Pizzinatto, CEO of Ultrapar; and by Mr. Alexandre Palhares, CFO of Ultrapar. Our question-and-answer session will follow, and we will have with us Mr. Leonardo Linden, CEO of Ipiranga; Mr. Tabajara Bertelli, CEO of Ultragaz; and Mr. Fulvius Tomelin, CEO of Ultracargo. This call is being recorded and will be accessed later through the website, ri.ultra.com.br. After the initial presentation, we are going to start the Q&A session where further instructions will be provided. [Operator Instructions] Presentation will be provided in Portuguese, and you have the option in English to be downloaded later. Before moving on, we would like to clarify that forward-looking statements that may be made during this conference call with respect to business prospects, forecasts and operation and financial goals of the company are all based on beliefs and assumptions of the Executive Board of Ultra, as well as currently available information. These beliefs and assumptions involve risks and uncertainties since they relate to future events and therefore, depend on circumstances, which may or may not occur. Investors should understand that general economic conditions, market and other operational factors may affect the future performance of the company and lead to results, which may differ materially from those expressed in forward-looking statements. I would like now to hand it over to Mr. Rodrigo Pizzinatto, who will start the presentation. Mr. Pizzinatto, you have the floor. Rodrigo de Almeida Pizzinatto: Good morning, everyone. It is a pleasure to be here once again to share Ultrapar's results. 2025 was another year marked by significant growth at Ultrapar. Clear strategy and disciplined execution are the base for the continuation of good operating results. We ended the year with the highest recurring adjusted EBITDA ever recorded in the fourth quarter. This improvement was directly reflected in cash. Ultrapar had a record operational cash flow generation of BRL 5.500 billion. This allowed us to end the year with a leverage of 1.7x, even after the anticipated payment of BRL 1.1 billion in dividends in December. Without this effect, leverage would have been of 1.5x, a very comfortable level. Considering the anticipated payment and the regular dividends, we paid BRL 1.4 billion in dividends in 2025, equivalent to BRL 1.30 per share and a dividend yield of 7%. I also highlight important progress on the institutional agenda, such as the approval of the persistent debtor and the single-phase taxation for naphtha, which strengthened fair competition and regulatory certainty and the Gás do Povo Provisional Act, which reinforced safety and regulatory framework of the LPG sector. We continue to advance our growth, productivity and value creation agenda with the completion of expansion of the Rondonópolis base of Ultracargo and the acquisition of a 37.5% stake in Virtu GNL, both in January. In February, we completed the migration of Ultracargo's SAP system to the SAP 4HANA platform, a significant step towards increasing our operational efficiency. We also announced our investment plan for 2026, which can reach BRL 2.6 billion intended for the expansion, maintenance, safety and efficiency of our business. And we continue to strengthen our capital structure with raising about BRL 260 million in incentivized credit lines for expansion projects at a weighted average cost equivalent to 87% CDI. We entered 2026 with a global scenario marked by geopolitical tensions and economic volatility. We are prepared to face this context and seize opportunities with an engaged team, strengthened business and a constant focus on operational efficiency, financial discipline, innovation and sustainable growth. Thus, we continue our journey of value creation. Thank you for your attention. I will now hand over to Palhares, who will detail the results for the quarter and the year 2025. Alexandre Palhares: Thank you. Good morning, everyone. I would like to remind you of the reporting criteria and standards used in this presentation, which can be seen on this Slide 3. Now let's move on to the results for the fourth quarter and the year 2025, starting with Ultrapar's consolidated results on Slide 4. Adjusted EBITDA amounted to BRL 1.6 billion in the quarter, a 34% decrease compared to the same period of last year due to the nonrecurring effects highlighted on Page 2 of the release that we disclosed yesterday. For the year, adjusted EBITDA reached BRL 6.8 billion, a 2% increase compared to 2024. Recurring EBITDA was BRL 1.7 billion in the quarter, a 36% increase compared to the fourth quarter of 2024, mainly reflecting the better performance of Ipiranga and Ultragaz in addition to the effect of the consolidation of Hidrovias. For the year, recurring EBITDA totaled BRL 6.2 billion, 15% above 2024, reflecting the results of Ipiranga, Ultragaz and Hidrovias, whose consolidation began in May. Net income for the fourth quarter was BRL 256 million, a 71% decrease compared to the same period of 2024, also impacted by the nonrecurring effects that I mentioned. Without these effects, net income would have been BRL 439 million, a 49% increase in the quarter. In 2025, net income was stable at BRL 2.5 billion, reflecting the record operating result, partially offset by the increase in depreciation and amortization and higher financial expenses resulting from the consolidation of Hidrovias. This result level allowed the distribution of BRL 1.4 billion in dividends in the year, considering the anticipated payment of BRL 1.1 billion made in December. Moving on to the next slide. Let's talk about the cash generation for the year. On the left, operating cash generation reached BRL 5.5 billion, Ultrapar's historical record. This result was mainly due to 3 factors: higher operating result; consolidation of Hidrovias, which contributed BRL 855 million; and lower working capital needs, especially at Ipiranga, partially offset by the effect of settlement of draft discount for suppliers in the amount of BRL 1 billion. Regarding CapEx, we reached BRL 2.5 billion, a 15% increase compared to 2024. This is explained by higher investments of Ipiranga in addition to the effects of the consolidation of Hidrovias of BRL 235 million, which was not included in the initial plan. And at the same time, we had lower investments at Ultracargo. Looking more closely at the capital allocation, we completed some transactions, mainly the capital increase and the increase of our stake in Hidrovias, which totaled BRL 693 million, acquisition of TRRs in the total amount of BRL 103 million, and Virtu's transaction in the amount of BRL 36 million in the year. Throughout the year, the sale of the coastal navigation operation by Hidrovias in the total amount of BRL 715 million was also completed. In addition, we completed Ultrapar's buyback share program and made a relevant distribution of dividends. Moving to the next slide, and talking about debt and leverage. We ended 2025 with net debt of BRL 12.1 billion, an increase compared to September, but still keeping leverage steady at 1.7x, exactly the same level as the previous quarter. This possible stability is explained by the record operating cash generation, which offset the anticipated payment of dividends in December. Excluding the effect of the anticipated payment of dividends, leverage would have ended the year at 1.5x. The increase in net debt when comparing year-end 2025 to year-end 2024 mainly reflects the consolidation of Hidrovias, with an impact of BRL 2.2 billion. It is also worth highlighting the additional effect resulting from the reduction of BRL 1 billion in draft discount over the period, as shown at the bottom of the table. Now let's move to the results of Ipiranga on Slide 7. In the quarter, Ipiranga's volume grew 7% compared to 2024 with an increase of 8% in the Otto cycle and of 6% in diesel with a higher share in the spot market. This is due to the beginning of the market recovery after intensification of measures to combat irregularities in the sector. For the year, sales volume grew 1% with an increase of 2% in the Otto cycle and of 1% in diesel. We ended 2025 with a network of 5,805 service stations, resulting from 271 stations opened and 326 closed. Ipiranga's adjusted EBITDA totaled BRL 1.2 billion in the fourth quarter, 37% lower when compared to last year due to the recognition of nearly BRL 1 billion in extraordinary credits in the fourth quarter of 2024. Recurring adjusted EBITDA reached BRL 1.1 billion in the quarter, a 26% increase compared to 2024. This performance mainly reflects higher sales volume and better margins, partially offset by higher expenses. For the year, adjusted EBITDA totaled BRL 4.3 billion and recurring EBITDA totaled BRL 3.5 billion, a 4% increase compared to 2024. Operating cash generation was once again a highlight and reached BRL 4.3 billion, an increase of 41% in the annual comparison. This result reflects efficient working capital management and operational discipline. The first quarter began with the import arbitrage window open, which led to greater product availability. That window closes at the end of February and with the Middle East conflict, import parity turned much less favorable. In this context, we expect continued growth in volumes and margins. Moving to Ultragaz' results on the next slide. The volume of LPG sold in the fourth quarter was 2% lower than the same period of 2024 with a 5% decrease in the bulk segment, mainly due to the lower demand in the industry segment and with stability in the bottled segment. In 2025, the volume sold was also 2% lower than in 2024, with a decrease of 4% in the bulk segment and of 1% in the bottled segment. This performance is explained by the competitive dynamics of the market, impacted by the pace of pass-through of increased costs of Petrobras auctions throughout the year, in addition to lower business demand mainly in the industry segment. Recurring EBITDA reached BRL 474 million in the quarter, a 7% increase compared to the previous year. The result reflects the pass-through of cost inflation and a favorable sales mix, and on the other hand, the lower volume of LPG sold. For the year, adjusted EBITDA totaled BRL 1.8 billion, 5% increase compared to 2024. This performance reflects the effects of the pass-through of cost inflation, a more favorable sales mix and the contribution from new energies, which offset a lower LPG volume and higher costs and expenses. For first quarter '26, we see continuity of good results and an EBITDA similar to that observed in first quarter '25. On the next slide, we move to Ultracargo's results. The average installed capacity reached 1,131,000 cubic meters in the quarter, a 6% increase compared to the fourth quarter of 2024, resulting from the additions of capacity in Palmeirante, Rondonópolis and Santos. For the year, the average installed capacity was 1,090,000 cubic meters. The cubic meters sold was 5% lower in the quarter and 9% lower in the year compared to 2024. This decrease is mainly due to the lower demand from our customers for tanking services related to fuel imports, an effect partially offset by the increase in handling in Opla. Net revenue totaled BRL 261 million in the quarter, an 8% decrease compared to the previous year, reflecting the cubic meters sold and less favorable sales mix. For the year, net revenue amounted to BRL 1.021 billion, a 5% decrease explained by the lower cubic meters sold, partially offset by higher tariffs in the period. Adjusted EBITDA was BRL 144 million in the quarter, a 15% decrease compared to the fourth quarter of 2024. This performance mainly reflected lower cubic meters sold and higher costs with operations still in the ramp-up phase, partially offset by lower expenses. In 2025, adjusted EBITDA was BRL 585 million, a 12% drop compared to 2024. This result reflects lower cubic meter volume and higher costs associated with new operations, which are still in their ramp-up phase, partly offset by higher tariffs and lower expenses. We continue to see a gradual recovery in demand from customers of terminals at the beginning of the year, challenged by the closed import arbitrage window since mid-February. I also remind you of the negative initial effects of the ramp-up of some expansions. In this context, we expect first quarter volume and recurring EBITDA to be higher than in the last quarter of 2025. Now let's move to Hidrovias results. The total volume handled increased by 65% in the quarter compared to 2024, reflecting better navigation conditions in the North and South in addition to operational improvements. For the year, the volume handled increased by 22%, reflecting the same, more favorable navigation conditions, operational improvements throughout the year and higher volume in Santos, with the beginning and consolidation of the salt operation. Recurring EBITDA amounted to BRL 160 million in the quarter, reverting the negative result recorded in the same period last year, highlighting the positive effects of better navigation conditions and operational improvements. For the year, recurring EBITDA totaled BRL 1.1 billion, a 95% increase compared to 2024. This advance mainly reflects better navigability in the regions served, operational improvements and better average tariffs. I remind you that in November, we completed the sale of the cabotage operation, which contributed to the results of 1Q '25. Looking now at the first quarter, we have seen greater challenges in receiving cargo from the North operation, navigability conditions closer to normal levels in the South, although with some restrictions on iron ore loading. As a result, we expect results to be lower than those of the first quarter of last year. Finally, to conclude the presentation, we will look at the composition of investments made in 2025. We invested BRL 2.5 billion in the year, about half allocated to business expansion and the other half to maintenance and other investments. The total was in line with the announced plan, even considering BRL 235 million in investments at Hidrovias, which were not included in the original plan. Excluding this effect, investments would be 9% below the plan. We announced in the 2026 investment plan of up to BRL 2.6 billion. Of this total, approximately 42% will be allocated to expansion and the remaining to maintenance and business efficiency and safety initiatives. The highlights are in this presentation and in the market announcement. Well, with that, I conclude my part. Thank you all for the participation. Let's move to the Q&A session. To ensure better dynamics of this moment, I would like to reinforce that questions related to Hidrovias will be answered from the perspective of Ultrapar as the controlling shareholder. For specific operational details, the appropriate channel is Hidrovias' IR team. Thank you. Operator: [Operator Instructions] The first question comes from Monique Greco with Itaú BBA. Monique Greco: Great results. I would like to explore further the margins for Ipiranga. You've had very strong margins in the fourth quarter, especially because of strong December. What were the main reasons for these stronger margins obtained in the month of December? I'd also like to understand whether there is some relevance, the fact that you have favorable arbitration for import or some other factors along these lines. And I would also like to ask about the share because in January, you've been subject to some more pressure in terms of market share because of an oversupply in the chain. What can you tell us about that? Do you think that January was just one-off effect? I know it's too early to talk about that, but especially with the perspective of a very short window for import. What can we expect in terms of market share from now on? Leonardo Linden: Linden speaking. Monique, thank you for the question. You are right. The fourth quarter showed this journey of progression. December was stronger, similar to November, October was somewhat weaker. I think this is very much aligned with improved landscape. We've all been seeing what's going on in Brazil in terms of regulatory affairs, fighting the legal market. So throughout the quarter, we've noticed a positive trend. When you talked about market share, January indeed showed an inverted position of the share. It's probably due to the fact that inventory levels went up in the last quarter when inventories go up with open arbitration, there is a lot of speculation, and it applies some additional pressure to the system. In my opinion, it was a one-off effect with a better commercial scenario, Ipiranga might recover the share that it had lost throughout the years. And finally, about what's going on in the Middle East, you are right. It's still too early to talk about that or draw conclusions. But we know that arbitration will be more limited. And if it's significantly closed, it means less speculative supplies, which favors companies which have a substantial supply in Brazil, such as Ipiranga. The whole infrastructure and our capacity would generate positive aspects to our own businesses. Rodrigo de Almeida Pizzinatto: Let me pick back on that and talk about this topic a bit more. Rodrigo speaking here. That window of import affects the whole market, up to February, there was an open window of imports. So levels of inventory of industry have reached very high levels. But as of mid-February, the windows closed. And now they are even more closed because of the Gulf tension. This is going to affect negatively the market and positively depending on being closer or open and favoring companies, which can really supply the market in Brazil. Operator: The next question comes from Rodrigo Almeida with BTG Pactual. Rodrigo Reis de Almeida: My question is more focused on Ultragaz to start. You've talked about the perspective for the first quarter, but I would like to hear about the trend for the year. 2025, there was an increase in volume. But how do you anticipate that, especially for bulk, which had worse performance than we expected last year. Can you see any possibility of gains of volume, new clients or new initiatives? Can you also see an effect of the program of the Brazilian government [Foreign Language]? Is it also impacting the bottled market? And my second question concerns your strategy and the possibilities of growth. What are the main characteristics that you consider when you are trying to lever your businesses or drive further your business? Do you just intend to operate your own assets or maybe go into additional investments? It would be great if you could tell us and share with us the investment strategy you currently have. Tabajara Bertelli: Tabajara speaking, Rodrigo, thank you for the question. I'm going to start with the point concerning Ultragaz. You've asked about volume trends. We don't expect any major changes to our plan. We are still focusing on operational excellence, operation-based initiatives. We have performed quite well last year, and this is what we anticipate for 2026. There were some variations, especially in industrial segment because of characteristics of the segments themselves. And these are fluctuations that we've seen happening before. Our perspective is that everything will go into normal operations as months go by. We focused on segments that we believe are the best and strongest, and we have been delivering all results in them. [Foreign Language], this government program. It has been fully approved, and it's already in its initial implementation stages. It's a very smart program because it direct subsidies to the needy population. It's at the implementation stage. I've been -- we've been really involved in it. And it's something that will come in full operation within the next quarters. But now it's fully approved with a clear definition of pillars really -- which is good for the official players and something really important for all of us as a society. Rodrigo de Almeida Pizzinatto: Pizzinatto speaking. Asking about strategy, we have 3 main pillars that we considered when we are considering any transaction: first of all, industry where the company works, perspective of growth and consolidation; second pillar, is how close is it of what we already do and our management model, really getting synergy and generating value; and thirdly, someone who is willing to sell at interesting price range that would really prove to be good on return on investment. This is what we came across in Hidrovias. And this is the kind of analysis that we take into consideration whenever considering new investments. Operator: The next question comes from Gabriel Barra with Citi. Gabriel Coelho Barra: I have two points to make. The first one about Ipiranga CapEx. It was below what you had planned. The actual number was lower than what had initially planned for 2025. I would like to hear from you the reason behind it. We've seen a very favorable market because of the discussion of fighting illegal practices. So official brands are getting favored. But a lower CapEx at Ipiranga is something that attracted our attention. And I would like to try to understand why did you want to have less investments upfront in your branding -- in branding new stations? Or are you operating in a more competitive market and decided to take a step back and just wait for more aggressive players to set their game. So what were the reasons? If you could shed some light into that, that would be really helpful. So why have you invested less than was initially planned? Secondly, it's about Ipiranga and capital allocation as well, building up on what was asked before. I know we cannot talk about market rumors. But last week, someone talked about -- started hearing the news about the divestment of Ipiranga, sales of Ipiranga. So I'd like to hear from you, not only in terms of acquisition, but also looking inside and considering adjustments. You've been talking about having a more active understanding of the company, revisiting its own thesis and also looking outside because you've been generating a lot of cash. And in our perspective, you are going to have even better cash levels this year and in a very comfortable leverage level. So what is the equation now? Should -- are you going to sell it now? Are you going to sell it later? So if you could please tell us more. So these inside, right? So these are my two points. Rodrigo de Almeida Pizzinatto: Rodrigo speaking. Let me answer those two questions. About CapEx and the other issues. Let me remind you, and we've said that a number of times before that Ipiranga has been through a cycle of CapEx before -- greater than expansion. And there are two points of fluctuation. So investments in infrastructure and technology. And for '26, '27, we are going to replace our technology platform at Ipiranga, very relevant investments. We've talked about that during the Ultra Day. Infrastructure is also closing some terminals and some expansions that we have put in place. These are why there are oscillations between the years. Some postponement of investments were made, especially because of the technology platform. As projects are completed, we are going to return Ipiranga's CapEx to the level of maintenance unless we see new opportunities of branding stations, but then we are going to revisit the plan. But this is what we anticipate for '26. Now concerning the news, the rumors in the market, we have nothing to talk about it. Whenever there is anything relevant, we have a formal communication of the market as the law expects. Cash generation has 2 main purposes, either we're going to find good projects to keep on expanding our company or share dividends. And this is an agnostic economic decision. We are going to keep on doing as is. Operator: The next question comes from Bruno Montanari with Morgan Stanley. Bruno Montanari: Well, let me go back to the topic of import window, especially for diesel, a closed window benefits the well-established players. We know that. I know it's too early. But with the price of diesel in the international market, do you think you can have an average price and really execute it in the Brazilian market? We'd also like to hear from you what are the next steps in the regulatory agenda to fight further against the regular market? What is the time line that you expect it to progress further? And could you please tell us more about the strategy of funding debt versus working capital and also your draft discount, that would be very helpful. Rodrigo de Almeida Pizzinatto: Well, Bruno, concerning the import window, Brazil has a structure dependence on diesel imports. We have a commitment with our clients, and we are going to import and guarantee supply. And the cost in our profile of supply will be just build to customers. Concerning the next steps of the market regulation, we really have to make sure that everything that we've seen in the new legislation is really enforced. For example, persistent debtor and other initiatives have to be enforced, and we have to see the practical result of these changes that were really an important achievement for all of us. Yes, there are a number of things to be done. For example, single-phase taxation for ethanol. Part of the regular market lies in the hands of ethanol. Biodiesel, also a challenge. Not now, of course, because there was a change in the cost of byproducts, but biodiesel tends to cost more, and there are problems of non-mixture. Still a lot to be done in our agenda. It's not something fully resolved, and we really need to focus on improving competitiveness scenario as a whole. The government is very much willing to support these changes. The government of São Paulo increased the taxes because they've been fighting legal practice and now they have more legal players. So especially now when we deal with critical budgeting, all the governments are more than interested in having that in place. Now concerning the strategy of funding, we have access to a marginal cost of debt, which is highly competitive. Throughout last quarter, we've noticed there was an opportunity of anticipating the refunding of the company for the upcoming year. The marginal cost, even carrying over into the cash, it will have a positive carryover, and it's very much comfortable with our position of liquidity to really pay all our needs this year. As we've been emphasizing, funding is an alternative of investment, which is highly competitive in some specific situations, and we are very comfortable in using it more or less depending on the needs and mismatch with our cash levels. It's been so in recent quarters, and we do not expect to have any differences in upcoming quarters, but always considering the cost attractiveness in our analysis. Operator: Next question comes from Tasso Vasconcellos with UBS. Tasso Vasconcellos: I have two questions. First, Ipiranga. Linden, I recall at the end of last year in the Investors Day, you said that you were going to discuss the micro perspective and not the macro perspective. I would like to go back to Ipiranga's expansion plan and try to understand, based on the changes that you started implementing your business in 2022, what is still pending? What do you still see at the operational level, really putting aside all the improvement of the legal framework, but where can you still see value extraction this year and upcoming years in-house? Second question to Palhares or Pizzinatto. Going back to what Rodrigo has talked about in terms of capital allocation. You've had a very strong cash generation in the quarter. But looking at your balance sheet, despite this cash generation, there was still an increase in gross indebtedness, which was compensated by your financial assets, about BRL 2 million, BRL 2.5 million. I would like to hear a bit more about the reconciliation of resources and how all these initiatives are part of your capital allocation strategy at the level of the holding. Leonardo Linden: Well, Tasso, what I said Ultra Day is that I would rather discuss ways of improving Ipiranga and make us sell more rather than discussing irregular market, of course. The agenda of the regular market is always with us. But by having that, we can look closely into our sales, improving our own operations, focusing on things that we really have to fine-tune. We have an expansion plan for 2026. You've seen the CapEx for expansion. We are talking about 300 branding stations, working on our infrastructure plan, technology, which is extremely important. The plan has been maintained. In addition to qualitative issues that we've been working throughout the years, and I'm sure you're all familiarized with them. Considering what's still pending and all the different drivers that I'll be able to list, there are two of them. Logistics, something that we've talked about a lot, the logistic plan. We still need 2 years to complete the journey, and it will mean a lot in terms of value capture. And the migration of ERP, the benefit is not a new operating system, but something that really changes the way we've been operating all our processes and internal elements, which will generate more efficiency. In terms of the main effort lines for 2026, these are the two. Pizzinatto speaking, Tasso. Concerning financial investments, let me make 3 points here: first, we always follow the principle of discipline and prudence; our average cost of debt, excluding bonus, is below 100% CDI. We have no cost of carryover of debt; and thirdly, 1 day of operation in Ipiranga is BRL 300 million, BRL 400 million. We are dealing in a moment of great volatility, and we have BRL 4.5 billion of debt to be paid this year. So what did we do last year? We anticipated somewhat the funding of debt that would mature, so that we wouldn't have to go to the market considering the conditions that we have. And this is why we have an increase in our investment line. Operator: The next question comes from Vicente Falanga with Bradesco BBI. Tasso Vasconcellos: I also have two questions. First, in addition to that open window, Petrobras auctions for fuel, which impacts some of the competitive landscape and the share, do you still see an opportunity to improve profitability in the fourth quarter? And what is the feedback that you get from resellers in relation to your competitors? Secondly, Palhares said that it's going to be an increase in volume and margins as is. Is it year-over-year, quarter-over-quarter? What is your expectation there? Rodrigo de Almeida Pizzinatto: Vicente, having a better commercial landscape is not something just for Ipiranga, it's for our whole industry, of course. So we can see healthier margins in reseller, healthier margins in distribution and the government collecting more taxes. When the whole industry is benefiting, we can see opportunities of improving our own profitability, of course. It's not trying to be more profitable. It's being part of an industry which has been evolving positively. And the margin is still not paying back the invested capital. There is still room for improvement. In terms of volume and margin, we are comparing against the fourth quarter last year. This is our reference when we say we're going to increase it. Operator: Well, our Q&A session is completed now. We would like to hand it over to Alexandre Palhares for his closing remarks. Alexandre Palhares: Well, thank you all very much for your time, for your interest and participation. Our team is here at your disposal for any follow-up or additional questions. Thank you all very much. Operator: The earnings release call of Ultrapar is closed now. Thank you all for your participation. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, ladies and gentlemen, and welcome to the Ferrellgas Partners, L.P. Q2 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Michelle Maggi, Vice President, Corporate Affairs. Please go ahead, Michelle. Michelle Maggi: Thank you, Jonathan. Good day, everyone. Thank you for joining us today for our second quarter 2026 earnings conference call. We released this morning pre-market our earnings. If you haven't seen it yet, you can find it on our website under the Investor Relations tab at ferrellgas.com. With me today is Tamria Zertuche, our President and Chief Executive Officer, and Nick Heimer, Ferrellgas' Vice President and Corporate Controller. Today's call includes prepared remarks where Tamria and Nick will go over our second quarter results for fiscal 2026, concluding with responses to previously submitted questions. Please note that this call may contain forward-looking statements as determined by federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. These statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements except to the extent required by law. In addition, please refer to the Form 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also available for replay via our website. With that, I will turn the call over to Tamria. Tamria Zertuche: Thank you, Michelle. Thank you to you and Nick for representing Ferrellgas at the J.P. Morgan Global Leveraged Finance Conference this week in Miami. We appreciate you. Thank you to all for joining our call today. Let me begin with a discussion of our capital structure. Yesterday, after market, we announced that the board of directors declared a cash distribution to the Class B Units of $82.32 per Class B Unit, or approximately $107 million in aggregate. The distribution is payable on or about March 13, 2026. Upon the payment of this distribution, we will have achieved the Class B Conversion Threshold, which allows us to elect to convert the Class B Units into Class A Units. The board of directors also approved the conversion of all 1.3 million outstanding Class B Units into Class A Units. So we will convert the Class B unit into Class A Units on a 5 to 1 ratio after making the distribution. Our consistent and positive cash flow performance has put us in this position to take this meaningful step in strengthening our capital structure. We are fortunate to have strong strategic partners as key stakeholders in our capital structure, such as [ PGIM and Ares ]. They have supported the company since our restructuring, and they continue to support us as we work to simplify and improve our capital structure. We also appreciate our bank group, including our administrative agent, J.P. Morgan. We are excited for the future of Ferrellgas and the opportunities that this step allows for us. Growth is always on our mind. This step, it truly unlocks our ability to focus on even more growth initiatives. We are excited about our future. But shifting for a second back to our second quarter performance, we are very pleased with the results. We continue to demonstrate disciplined execution, executing on our initiatives to grow our customer base strategically, maintain margin performance, and stay relentlessly focused on efficiency. These efforts translate into consistent profitability. Seasonality is part of this industry. We're prepared regardless of how winter unfolds early, late. As I've said before, propane is an essential energy source that our customers rely on, not only to heat their homes, but to power their businesses. Our strong customer mix helps offset weather inconsistencies. Additionally, the winter readiness that I spoke about last quarter, it really proved to be key to our success this quarter. Winter weather did arrive later than usual this quarter, following unseasonably warm conditions in November and December, especially across the western half of the country. In those warmer areas, we really leaned into tank sets and growth initiatives. Winter Storm Fern brought significant snow and ice, and our drivers encountered downed trees and unplowed roads that made travel unsafe at times. But through it all, we performed and delivered a great quarter. While talking about our core capabilities, I speak to our national footprint. Our national footprint allowed us to reposition drivers and equipment from the west to the east to meet elevated demand effectively. That flexibility, it's a differentiator, and it really shows our ability to scale. The safety of our drivers, our fleet, and the communities we serve, it remains our top priority. We continue to see results from our focus on safety. Our [ OSHA ] recordables improved 10% quarter-over-quarter. What we call slips, trips, and falls are down nearly 4% year-over-year, despite the challenging weather. These gains reflect the investments we continually make in safety. At the same time, our continual progress in telematics and in-cab cameras is driving operational discipline. With improved real-time visibility and stronger integration into Samsara AI, that's the provider of our telematics, we're seeing reductions in safety events, improved driver performance, and measurable gains in fuel efficiency and fleet productivity. You see that in the results this quarter. I will now turn the call over to Nick Heimer, our controller, to review our second quarter financial accomplishments. Nick? Nicholas Heimer: Thanks, Tamria. I'll start by thanking our employee owners for delivering on a great second quarter. In particular, their focus on providing excellent customer service, margin expansion, and improving efficiencies continued to propel us forward. We saw strong performance across both retail and wholesale segments. Turning to the financial results, overall gross profit was up $3 million or about 1% compared to last year. Propane prices at Mont Belvieu were down roughly 22% versus prior year, which led to about a $28 million decline in revenue. Because our product cost came down even more by about $31 million, we more than made up for that revenue pressure. Adjusted EBITDA increased $9.1 million or about 6% to $166.1 million. The preparation work we did last quarter really made a difference. When we were ready, winter demand picked up and that helped drive a $7.1 million improvement in gross profit in our retail business. On the wholesale side, results were softer since we didn't have any of the hurricane-related activity this year to boost volumes. We also improved how we operate day to day. Margin per gallon increased about 6% as we cut down on unproductive deliveries and reduced skipped stops. Those efficiencies translated into roughly a 13% increase in operating income per gallon. At the bottom line, net earnings increased $3.3 million to $102.2 million. That improvement was mainly driven by higher gross profit, it was also supported by tighter cost control. General and administrative expenses were down $4.6 million, largely due to lower personnel and legal costs. Operating lease expense declined by $1.6 million as we refinanced several operating leases into finance leases during the quarter. Overall, it was a quarter where preparation, operational discipline, and cost control all came together nicely, and you see it in our financial results. Winter is not over yet, so we're optimistic about the third quarter. Back to you, Tamria. Tamria Zertuche: Thank you, Nick. Really about the third quarter, I wanna recognize, as you did, our frontline employee owners and the incredible work that they did in February as we approached the close of the heating season. Day in and day out, they navigate winter, snow, ice, rain to make sure that our customers have what they need, all while supporting the communities that they live in, helping families facing food insecurity. Our long-standing partnership with Operation BBQ Relief remains strong as we work together throughout the quarter to provide essential meals. We remain the clear leader in the propane industry for many reasons, and our continued progress on building out our customer base, maintaining margin, and improving efficiencies, as well as taking advantage of our improved capital structure allows us to build on this momentum. The industry has growth opportunities in power generation, autogas, and more. We look forward to leveraging our improved capital structure to take advantage of the growth opportunities in this industry. That is the end of our prepared remarks. Tamria Zertuche: We will now go through some previously submitted questions. Nick, if you don't mind, since you took hundreds of them on Monday and Tuesday at the conference, I'll go ahead and go. We categorized them into five areas. The first was there were questions around the Eddystone litigation and whether it was finalized. I wanna make sure it's clear for everyone, yes, we made the final payment in January. The matter is closed. We are not incurring legal costs any longer. There is no outstanding litigation related to the Bridger transactions. The next set of questions was around the hiring of a new CFO. It is a priority. As we previously stated, we continue our search. We are looking for the right fit and taking our time to find that person. Andy Safran continues to be our advisor, helping us to navigate our capital structure and advising us through our efforts to improve our investor relations program as well. There was a series of questions that we could really categorize as headwinds maybe around the third quarter due to geopolitical items. Obviously, we are watching the conflict in Iran carefully to see what effect these actions might have on our costs. You know, due to the positions that we took in the first and the second quarter to secure favorable pricing, we are optimistic that we will be able to mitigate any potential unfavorable impact. We are also continuing to watch the most recent developments in tariffs. As you can imagine, we received many questions around what's next now that we have announced a conversion of the B Units. Kind of several questions relating into that. Going to just answer that as all those questions at a, at a macro level here. This conversion reduces our cost of capital to match the realities of our business performance today. With this conversion, we strengthen our ability to grow, and we look for ways to expand on our leading capabilities, which I've spoke to today and are the catalyst to not only the results this quarter, but beyond. We are consistently looking for ways to grow our business and take advantage of the necessary and essential industry that we are leaders in. Power generation for businesses such as data centers, as well as our expanding autogas business, which is school buses, it's strategic for us. We believe we are experts at acquisitions, and we have a long history of solid acquisitions with really strong returns. We look to continue our focus on simplifying and improving our capital structure. There was a question around what do we think about the range of capital expenditures from here on out? I think really what the question was asking is, what's going to happen with cash? Let me give you a little bit of a history there. We generate a healthy amount of cash each year. We've been able to continue to invest in the company, maintain our debt, and address key pieces of our capital structure. Over the past four and a half years, the company has paid out $250 million to Class B Units, soon to be $357 million. The company has paid $125 million to Eddystone. That alone is almost a $0.5 billion of cash over the last four and a half years the company has generated. We also remained current with maintenance on our debt, our senior preferred units, our high-yield bonds, and the company also has invested in operations between $70 million and $90 million of CapEx per year. When you think about that, we have been consistent, and we evaluate the needs of the company, and we balance those against our desire to acquire, to maintain our debt, and to tackle key pieces of our capital structure. We appreciate everyone attending the call today. Your support of Ferrellgas now and in the future is more important than ever. We really want to maintain your interest in Ferrellgas, and so our investor relations program will continue on its outreach. For now, I will turn it back over to the operator. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Axel Lober: Good morning, everyone, here in Darmstadt at the Merck Innovation Center and from Darmstadt into the world and a warm welcome to our annual of Merck press conference. My name is Axel Lober, I'm Head of Communications of Merck, and I'm here today with our CEO, Belen Garijo; and our CFO, Helene von Roeder, and both will walk you through our results of 2025 and of course, talk about our outlook for 2026. So as always, -- both Helene and Belen will give some insights first before we dive into our Q&A session a little bit later. And with that, already, I'd like to ask to the stage, Belen Garijo. Belen, the stage is yours. Belén Garijo López: Thank you, Axel, and good morning, everyone. Thank you for taking part in our full year press conference, whether you are here in Darmstadt or following us virtually. As Axel mentioned, Helene and I will provide an overview of our business performance for 2025 as well as an outlook for '26. After this, we look forward to your questions. So let me start by summarizing 2025 in a few messages. First of all, we delivered on our financial guidance. Second, our diversified business and regions was a source of strength. And last but not least, we are positioned in major growth areas such as health and AI, and these will be strong platforms for future growth. Before we dive into the numbers, let me reflect on 2025. We recognize that the ongoing crisis, the geopolitical tensions and rather global challenges have become the new normal, our new reality. The recent developments in the Middle East once again demonstrates how quickly political uncertainties can escalate, this is obviously a very concerning situation. And as you can imagine, the safety of our employees and the safety of our partners in the region is a top priority for us right now. We are in close contact with our teams on the ground. And at this moment, we see no material impact, both at the employee level or in anything that relates to our logistics and distribution. Now let us deep dive now on 2025. Our achievements are made possible by our more than 62,000 dedicated colleagues globally and our recently expanded Executive Board team. I want to take this opportunity to extend my heartfelt gratitude to the entire Merck team for their commitment, for their creativity and for their dedication. Thank you so much, everybody. In 2025, as you know, we strengthened our Executive Board, welcoming Danny Bar-Zohar, Jean-Charles Wirth and Khadija Ben Hammada to the team. We also announced that Kai Beckmann will be my successor as the CEO of Merck. And most recently, Benjamin Hein has been appointed as Kai's successor as the CEO of Electronics. Let me now highlight some of our business sectors in 2025. First, in Life Science, we continued to invest on both capability and capacity. In 2025, we opened our new EUR 100 million facility in Blarney in Ireland. And this site produces critical filtration technologies that are used in advanced therapies and is expected to create over 200 jobs by 2028. We are also strengthening our innovation capabilities, including in the next-generation biology. This is illustrated through the strategic acquisitions that we have announced as HUB Organoids and the JSR chromatography business in Life Science. Those are excellent examples of how we are reinforcing our portfolio leadership strategy. Organoids provide earlier predictive insights into human biology and help researchers identify promising candidates faster and make better informed decisions when it comes to clinical development. And of course, this leads to faster clinical progress and hopefully, to improve outcomes for complex diseases like cancer as well as genetic disorders. You can see an organoid 3D dome as an exhibit here. Now in the health care sector, we are making strategic moves to strengthen our position in high-growth areas. In July 2025, we completed the acquisition of SpringWorks in the U.S., establishing rare diseases as a new strategic growth pillar for Merck. In October, we announced an agreement with the White House to increase access to approved IVF therapies. This will strengthen our presence in this highly attractive market while providing affordable access to innovative fertility treatments on their -- and to families on their journey to parenthood. You will also see Pergoveris Pen, one of our key IVF treatments in today's exhibit. In December, we received an approval for pimicotinib in China for treating symptomatic tenosynovial giant cell tumor, which is a rare tumor that affects joints, tendons or the bursae. This is PV's first global approval and a significant step in strengthening our leadership in rare tumors, which will stay a key growth drivers for us. Now let's look at electronics. In 2025, we seized new opportunities for our electronic business and gain benefit from the growing artificial intelligence demand. In August, we also completed the sale of Surface Solutions, allowing Electronics to become a pure-play business in semiconductor solutions. At the end of 2025, the acquisition of Unity-SC already contributed to our organic growth for the first time since we acquired the company. In December, we also inaugurated a EUR 500 million Semiconductor Solutions megasite in Taiwan. Therefore, Electronics is well positioned to meet the rising demand from artificial intelligence. It is important to note that Merck is involved in 99% -- yes, 99% of chips that are produced worldwide. We supply materials and chemical solutions for many of the critical steps in chip manufacturing process. In our exhibits today, you can see 3 different types of transistors that are essential for chip production. To give you an idea of a scale, the Apple M1 Max chip contains approximately 57 billion transistors, all packed into an area about the size of the chip of an index finger. The technologies and services that we offer to the semiconductor industry are one of Merck's key growth drivers. Let me now give you an example of how Merck delivers on future technologies because as a science and technology company, we drive innovation by bringing technologies together. A great example is our partnership with imec on organ-on-a-chip technology, which combines our expertise in biology with advanced semiconductor chips to simulate human organ functions using living cells. This allows scientists to test medications safely and effectively without using animals. Making also drug development faster and even more reliable. You can see this technology once again among our exhibits today. All these achievements demonstrate what I said at the beginning, and this is our strategy to drive growth through innovation is working. Our diversified businesses and regions is giving us significant resilience and strength. Our in-region for-region approach provides global flexibility while meeting local needs. And we are well positioned in major growth areas also for the future, and those are semiconductors, rare diseases and advanced therapies. Today, Merck stands strong with a clear focus on 3 growth drivers: Process Solutions in Life Science, rare diseases in health care and semiconductor solutions in Electronics. And this is once again a strong platform for future growth. Now let's move on to the financial performance of 2025 that Helene will further detail. We have delivered on our guidance spot on despite a tough 2025 that was marked by significant geopolitical challenges in major markets and importantly, very strong currency headwinds. Net sales were around stable at EUR 21.1 billion. And throughout the year, strong negative foreign exchange effects weighed on net sales and EBITDA pre. These effects largely resulted from the exchange rate development of several ASEAN currencies as well as the U.S. dollar. Overall, the group EBITDA pre was EUR 6.1 billion, up by 5.6% organically. Now let's look briefly at some of the highlights from Q4 of 2025. In Q4 2025, our group organic sales came in at a solid 2.6% growth. We delivered profitable growth, once again supported by all the 3 sectors with group EBITDA pre up 3.1% organically. In Life Science, a strong order intake momentum in Process Solutions fueled the growth in the business sector. The organic sales growth in healthcare was driven by strong growth in our CM&E franchise alongside contributions from Mavenclad and from Fertility. Both Mavenclad and Pergoveris achieved double-digit growth. Although Electronics reported a decline in organic sales due to headwinds from our DS&S business, our semiconductor material business achieved its strongest quarter of the year in Q4. It continued to benefit from strength in artificial intelligence and the advanced nodes markets. Based on this result, we will propose a stable dividend of EUR 2.2 during our general meeting -- Annual General Meeting in April 24. And now let's take a closer look at the numbers for the full year 2025, and it's my pleasure to hand over to Helene, who will walk you through our 2025 financial performance. Helene, welcome on the stage. Helene von Roeder: Thank you very much. And a warm welcome also from my side. So if you look at our net sales in '25, they came in around stable. And our organic sales growth was really dampened by foreign exchange effects of around 4%. Foreign exchange had a significant negative effect across all sectors, mainly driven by the U.S. dollar as well as Asian currency. Our Life Science business, if you look at it, grew organically driven by sustained demand from our Process Solutions customer that drove order momentum. Healthcare delivered solid organic performance despite market pressures. And Electronics recovered towards the end of the year, thanks to AI-driven demand in our semiconductor solutions, although full year organic sales were slightly down. EBITDA pre was EUR 6.1 billion, which actually corresponded to a margin of 28.9% of net sales. And with that, let's take a look at our business sectors, and I'm starting with Life Science. Life Science has returned to growth, delivering organic sales growth of 4%. And as mentioned earlier, this growth was driven primarily by double-digit organic growth of our Process Solutions business that saw the market normalize and move beyond the destocking phase finally this year. EBITDA pre rose 3.9% on an organic basis but due to foreign exchange effects, EBITDA pre remained around stable at EUR 2.6 billion. Now despite the challenging environment, the EBITDA pre margin remained stable at 28.8%. What we have seen is slightly higher R&D expenses as well as ramp-up costs for recent site expansions, which reflect our increased investment in innovation. And this investment is absolutely crucial as it serves as a key driver for our future growth and differentiation in the market. Moving on to Healthcare. Net sales in this sector climbed 3.7% organically. Foreign exchange effects, however, had a negative impact of 4.1%. Growth was primarily driven by our CM&E franchise, which grew a stellar 7% as well as strong contributions from our multiple sclerosis treatment, Mavenclad and Fertility treatment Pergoveris. And as Belen just mentioned, we announced an agreement with the White House in October to enhance access to approved IVF treatment from EMD Serono. Our complete fertility portfolio has been available since beginning of February 2026 on trumprx.gov and the new fertility instant savings website. And of course, in the U.S., we are working towards approval of Pergoveris, a fertility medication already available in 75 countries. All in all, EBITDA pre came in at EUR 3 billion for the business, which is up more than 11% organically. Once again, foreign exchange effects partially offset the strong organic growth. And with that, let's look at the Electronics sector. Now Electronics experienced the slight organic decline of 0.6%, which was mainly driven by our DS&S business caused by prolonged delays to large customer projects. Merck expects DS&S to stabilize in '26 and to return to growth in the medium term. But despite this temporary headwind, our semiconductor materials business remained the main growth driver for Electronics. It delivered strong high single-digit organic sales growth for the year, thanks to increased demand for high-value materials that enable AI chip systems and advanced nodes. Advanced nodes refer to the latest semiconductor manufacturing processes, allowing for smaller feature sizes and the development of the most powerful chips. EBITDA pre was 9% lower, mainly due to onetime adjustments we reported in the second quarter of '25, as you may remember. And with that, let's take a look at our guidance for '26. Before I share the '26 guidance, note that there's 3 key assumptions underlying this guidance. First, regarding portfolio changes, our forecast reflects the SpringWorks acquisitions as well as the Surface Solutions divestment. And both of those will show portfolio effects in the first half. They will contribute to organic performance in the second half. Second, product scope. This guidance assumes no sales in the U.S. of Mavenclad from March '26 onwards amid generic competition. What it also excludes is the positive effects from a potential U.S. launch of Pergoveris. And third, my favorite topic, currencies. We expect a more volatile foreign exchange environment again in '26. And we assume negative FX effects to continue. Of course, the main drivers are U.S. dollar developments, but we also observe various Asian and emerging market currencies extremely volatile. And with the evolution of currencies, please bear in mind that we expect for Q1 a disproportionate headwind coming from currencies relative to our full year FX guidance. Now with these 3 underlying assumptions in mind, we are expecting group net sales of between EUR 20 billion and EUR 21.1 billion, which is based on an organic sales development of minus 1% to 2%. Group EBITDA pre of between EUR 5.5 billion and EUR 6 billion. And with that, let me walk you through the sector breakdown for '26. Starting with Life Science, our largest business, we confirm mid-single-digit organic sales growth. And that is very much in line with our projections from our Capital Markets Day, which was held in last October. We include in our assumption the continuation of the strong performance in our Process Solutions business. And across Advanced and Discovery Solutions, we anticipate gradual improvements in biotech funding and academic research stabilization in -- as well as an evolving market environment in China. With that, moving on to Healthcare. There, a challenging year is ahead of us amid life cycle challenges for key brands, and that is in particularly Mavenclad. On the other hand, we expect growth in the remainder of the portfolio, including CM&E, Fertility and above all, the rare diseases, which will become, as already said earlier, organic in the second half of '26. For Electronics, we anticipate continued strong growth in our semiconductor materials business, while our DS&S business stabilizes going forward. And with that, I would like to hand it back for Belen for closing remarks before we take your questions. Belén Garijo López: Thank you, Helene. So let me first summarize our results and highlights on what 2025 has truly shown us. In the face of a multitude of challenges, we have delivered on our guidance. We also demonstrated our strength of our diversified strategy across businesses and regions, and we believe we are sitting a strong platform and in the right growth areas, semiconductors, artificial intelligence, rare diseases, advanced therapies, which, as I have said before, are a strong platform for growth -- for future growth. And this was not by any chance. It was the result of a strategy built to endure and to build a resilient team that consistently delivers. As many of you mentioned to me at the beginning of the meeting, today is my last conference -- press conference with Merck. When I joined Merck in 2011, the company had just begun an unprecedented period of transformation. You may remember those days, I do. Alongside major acquisitions like Sigma-Aldrich and Versum, I took on the task of transforming our Healthcare business for a new era of patient care. When I became CEO in 2021, none of us could have imagined the volatile world we would have to navigate together. A global pandemic, remember, I call myself a COVID CEO, the artificial intelligence revolution and the geopolitical fragmentation reshaping entire industries. Through it all, Merck just not only survived, but I believe we also thrived. We shifted from growth driven by acquisitions to disciplined capital-efficient growth. And today, our earnings are rising faster than our sales. Our leverage is failing and our -- every euro is working harder. The numbers tell the story. We invested over EUR 7 billion in more than 30 new and expanded sites worldwide. We deployed over EUR 4 billion in strategic acquisition and divestments, and we didn't just weather the storm, we emerged stronger. I am absolutely confident that Merck will continue this successful trajectory under Kai's leadership. And why? Because Merck is very well prepared and have very solid foundation for the next growth cycle. We have proven we can execute with discipline. We bridge the physical and the digital world. We turn science into solutions that matter for patients and customers. And we know that the future belongs to those companies that can navigate complexity and deliver results. And this is exactly what our company does and will continue to do. And I want to use this opportunity as well to say a heartfelt thank you to our teams around the world and of course, to the executive team that has been working with me in recent years. And to you, thank you for covering our story. Thank you for holding us accountable, and thank you for your trust. Overall, thank you for this journey. And with this, Helene and I are ready for your questions. Over to you, Axel. Axel Lober: Thank you, Belen. So we are now transitioning into our Q&A sessions. [Operator Instructions] So we have now 3 chair, I suggest we use them, so Helene, if you would like to join us on stage again for the Q&A session. And I see already -- and I knew it, one hand up from Sonja Wind from Bloomberg. Sonja Wind: I would be curious what you think about some analyst comments who said that Merck gave a deliberately conservative guidance because of the early Mavenclad like that it's not included from March on and also Pergoveris that it's not included in the guidance. Do you agree with that assessment? Is there more upside for earning upgrades if all goes well? And my second question would be on the deal with Trump on the drugs. Can you give a bit more color on how much -- like what is the size of that financial impact on the earnings? How much does it matter because it's only a certain patient group? Belén Garijo López: The agreement -- Sonja, the agreement with the U.S. administration, you mean? What is the impact? So I will take this. Perhaps you want to start with the guidance. Helene von Roeder: I do that. So overall, I mean, what do we guide? We guide the things that we have under our control and that we can actually see and predict properly. And in both of the things, it's like both Pergoveris, we are in discussions, we are talking, but it's unclear exactly how that will shape. I'm sure Belen will say that in a second. Mavenclad, the problem is we don't know how many generics will come when and at what point in time. And as a result, this is a guidance which reflects our current knowledge at this point in time as it should really. Belén Garijo López: So for the agreement of the U.S. administration, we have signed 2 agreements, and we believe that this is a real win-win-win. It's a win first for the patients who are going to have access to IVF at affordable prices. It's a win for the administration because with our agreement, they have been able to also start this novel approach through the -- from Rx to sell directly to patients. And it's a win for the company because we were already offering our treatments through different channels. And financially, there is not a huge impact to -- under the agreement. The second agreement is the one that is going to make us exempt of tariffs for pharmaceuticals during 3 years. So with this, you can imagine that we are extremely satisfied with the agreement, and we are actually hoping that as part of this agreement, we will also get the approval for Pergoveris in the U.S. at some point in time in 2026. Axel Lober: And the next question comes also here from the room from Patricia Weiss from Reuters. Patricia Weiss: Some questions around Mavenclad. The strong effect comes something of a surprise even though the patent loss was known. Why no sales at all in the U.S. instead of fewer? And how much of the EUR 1.2 billion in last year was in North America? And what is the higher burden this year ForEx or Mavenclad? And it's your main product in healthcare. So what does that mean for the division? And which successor candidates are ready to fill this gap? Helene von Roeder: So maybe I'll start with the Mavenclad question and then move -- Belen will take the successor candidates, et cetera. So yes, roughly 50% of the sales in Mavenclad were U.S. with 50% roughly in Europe. At this point in time, when we look at the U.S., we have a number of generics lining up. We -- they could be starting to sell tomorrow. And as a result, this is how we look at our guidance to basically say we don't exactly know when the sales are going to start and how it's going to impact our sales. I think when you look at the guidance, this is basically how we see the world going forward. So I don't think I need to add anything around that. And maybe, Belen, you want to do the successor products. Belén Garijo López: Well, I mentioned already the acquisition of SpringWorks has given us a new growth pillar. SpringWorks will contribute to organic growth, as Helene mentioned, as of the second half of 2026. But if you take the portfolio impact of the SpringWorks acquisition, it's already pretty nice and it's contributing 5% of portfolio growth already. So we are confident that SpringWorks will bring healthcare to the midterm guidance that we have communicated before progressively with 2026 being a year of transition in relation to the Mavenclad loss of exclusivity in the U.S. Axel Lober: Thank you. Patricia, does it answer all your questions? Perfect. So we don't have a question online yet. And here from the room, I see a question over there. Shan Weiyi: I'm Shan Weiyi from XInhua News Agency. And I would like to ask a question about the global investment. And due to the current rising geopolitical tensions, and you have already mentioned about the agreements with the U.S. administration, I would like to ask about whether you are considering a change in any other investments or strategic focus in different -- in any other markets like Europe or China? Belén Garijo López: Absolutely. I mean we have mentioned several times our significant investment in our region-for-region approach. And this includes all the major regions. Keep in mind that our main source of revenue already for the group is coming from Asia Pacific. And of course, this is a very important growth avenue for Merck. And we will continue to operate in this geopolitical context very much as a global company, but with a region-for-region approach. Axel Lober: Thank you. And we have a question from an online participant. So we have [indiscernible] from Handelsblatt. Unknown Attendee: Just a quick one. I'm a bit confused about the issue of U.S. tariffs. Did Merck pay tariffs on imports into the U.S. in 2025? And if so, will you demand a refund and take legal action to get it? Belén Garijo López: We are not thinking about refunds. So I mean, the situation of tariffs in the U.S., as you may know, has recently changed with the Supreme Court decision. But this is not changing or having an impact on the agreement that we have signed with the U.S. administration that I mentioned already. For 2025, you want to comment? Helene von Roeder: Yes, so as you know, pharma tariffs under the Annex II were exempt. So we didn't pay any tariffs in the pharma area. However, there were products in the Life Science area, which were not exempt. So we did pay tariffs in '25 and also small imports that we've seen in electronics, which were subject to tariffs. As Belen just said, I'm not sure how the refund regime will be on the back of the Supreme Court. So definitely nothing to be put in any guidance short term. And then let's see how exactly the world pans out now post the recent announcements, Supreme Court, et cetera. That one at the moment, it's pretty unclear how this will be. Belén Garijo López: But our agreement is basically out of this Supreme Court decision. So it holds. Axel Lober: So I'm looking into the room. Do we have further questions here from the live audience in Darmstadt. And [indiscernible]. Unknown Analyst: Just to bridge the time gap. Just a personal question for you. Belen Garijo, looking back, what's the most important task that you achieved here at Merck? And what would you have liked to see unfold, but now you like the time because you're leaving? Belén Garijo López: I think I have been privileged to work with this company for 15 years. I still remember my times in healthcare, and we need to remember that, as I mentioned, when I came in 2011, we -- we're starting an unprecedented transformation and the turnaround of healthcare. In 2017, we launched 3 products to the market, Mavenclad, Bavencio and Tepmetko. If you look at how will we refocus on pharma to be able to diversify the company, I feel very proud that, that transition that I supported that transition actively from healthcare to find this globally diversified business that I fight in 2021. I feel particularly proud of everything that we have done on culture, talent and people. And of course, the financial performance that we have delivered is stellar because if you look at the period between 2020 and 2025, our business -- revenues grew by 20%. Our earnings grew faster, and our debt has been going down. So of course, there are many other things that we could have done. But if you look at the overall picture, I feel extremely proud of what we have achieved together in the last 15 and even 5 years. Helene von Roeder: And because Belen is very humble. I mean, you're looking at a CEO who has steered the company through unprecedented volatility in a very safe way. And actually, if you look at how we're set up now for the future, especially on the back of our local-for-local strategy, immunizing us from all of these geopolitical changes, that is like a real feat. And I think we're all here at Merck super grateful for everything that Belen has done. Belén Garijo López: Thank you, Helene. Axel Lober: And we have a follow-up question, Sonja from Bloomberg. Sonja Wind: Yes. My question is about the strategic review in the CDMO business. How is that progressing? And what is your plan there? Belén Garijo López: Go ahead. Is future looking -- so I mean, we have looking at -- let me say that we are looking at all the options, and we will communicate once a decision is made. But clearly, this is what we can say today. I don't know if you want to... Helene von Roeder: No, I think it's ongoing. I mean we've announced clearly that we're looking at this. Yes, you'll get news if they're ready to be announced. Axel Lober: And [ Tania ] [indiscernible]. Unknown Analyst: Just one task, it didn't succeed. It was a deal for the Life Science business. Is this a task for your successor, Mr. Beckmann now? Or do you step away from this? Belén Garijo López: I mean you have to have -- you will hear from Kai what is the agenda. I'm confident that the focus on Life Science will stay because, I mean, Life Science is our most important business. So -- but I would really wait to hear directly from Kai because he is the one that will be in charge as of May 2026. Axel Lober: Thank you. Do we have further questions here in the room? Looking left and right. There's a bit of an overweight from questions from that side. If not, also online, we don't have any questions, maybe last call. We have a question from Focus Money from [indiscernible]. Unknown Analyst: I have one question concerning healthcare. So the last few weeks, we have seen very conflicting messages from the FDA, to say the least, especially concerning rare diseases. So first question, how have Merck's interactions with the FDA been through the last month -- months? And second question is more broadly, what does it mean for the healthcare business if somehow goalposts are moving and there are new regulations concerning how a study has to be done or how many studies have to be done? Belén Garijo López: We are very close to the regulatory agencies, not only to the FDA and particularly to the FDA because, of course, as part of that agreement that I mentioned before, we are having discussions on the Fertility franchise and another products. Overall, I see some of the news coming from the FDA as positive, if at the end, confirm that they will be a bit more open to grant approval with less studies or with a lower -- I don't think they will lower the bar anyway for the evaluation of risk benefit of any new drug. But in particular, just to be brief on our orphan drugs, we are confident that this is the environment in which we can expect not only support from the regulatory agencies, but also encouragement to continue to invest and investigate new solutions for patients given that orphan drugs and rare diseases are huge unmet medical needs. Axel Lober: Looking into the room, and we have a question from [ Ralf ] from Darmstadter Echo. Unknown Analyst: First question is the personal question to Belen Garijo. Have you been surprised becoming the next CEO of Sanofi? Then I would like to know your plans for the headquarters in Darmstadt. I think your last big investment program is over or will be over in the next time. I'm not sure what will be next in Darmstadt. And I would like to know your plans for the employees in Germany and in Darmstadt? Belén Garijo López: Look, we are highly committed to Darmstadt. We have been investing in the last decade, a significant amount of EUR 1 billion. Here, this is our hard quarter. We repeat and repeat that because this is very important to us. So we have given good signals of this and our plan for Darmstadt, you will have to further discuss for future years with my successor. I don't know if he want to comment, but is to continue to make sure that becoming a global company, we operate our company from our headquarter. As for my personal question, I always said I keep all my options open. And that's the only thing I can continue to repeat. Helene von Roeder: And maybe I take a little bit on the Darmstadt. I mean we continue to invest. You see the number of construction cranes if you walk around the site. And we're laser-focused on bringing more business into Darmstadt. And now I will do something slightly mean because we also need German politicians and German politics to finally deliver on the simplification agenda. It is very clear that we are frequently faced with the discussion around can we put things here into Germany, which we really want. Belen said, a headquarter. But then if you actually look at the delays around getting permissions at the entire red tape that we have in Germany, it is not helpful. So if you could maybe include a big plea from our side, please deliver on the simplification, that would be great. Axel Lober: Thank you. Looking online, we don't have a question online into the room, further follow-up questions here from the audience. Maybe one last check. See a lot of smiles, but no raised hands, also not online. So I would say this concludes our press conference this year. A big thank you to all of you joining us here in Darmstadt today. Also a big thank you to everyone online for joining us virtually. I'm looking forward to seeing all of you during our Annual General Meeting on April 24, live and in color from Frankfurt from Jahrhunderthalle and of course, to our Q1 webcast on May 13, online as always. So please take care. See you soon and all the best. Thank you. Belén Garijo López: Thank you.
Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the DHL Group conference call. Please note that this call will be recorded. You can find the privacy notice on dhl.com. [Operator Instructions] I would now like to turn the conference call over to Martin Ziegenbalg, Head of Investor Relations. Please go ahead. Martin Ziegenbalg: Thank you, and a very good morning from my end to everyone participating in this call. Thank you for your interest. As the title says, I have with me here our group CEO, Tobias Meyer; and our Group CFO, Melanie Kreis. We will start with the presentation, starting by Tobias and following with the Q&A. And with that, over to you, Tobias. Tobias Meyer: Thank you, Martin. Good morning, everybody. Thank you for your interest in DHL. 2025 turned out to be a bit different from the macro assumptions than many had told us. But despite that, we delivered on guidance, particularly through effective cost and yield management in all of our divisions. So that for the full year, EBIT increased to EUR 6.2 billion, and we have a 8% year-on-year growth in the earnings per share. We continue to generate good cash flow. You will have seen that cash flow, free cash flow, net M&A increased to EUR 3.2 billion and execute our policies -- our finance policy to provide good shareholder returns. As it relates to the outlook, I think 2025 really made us in many aspects, a better company and we have a more solid base to tackle the opportunities that our industry offers that's what we will stay focused on the 1 side, resilience in a volatile world, and we expect 2026 to remain volatile, but execute on our growth initiatives. With that, on the next page, you see some key numbers that you will already have absorbed on EBIT ROIC up 20 basis points, free cash flow I mentioned. We also delivered on the nonfinancial growth that we set ourselves with employee engagement of 82, realized decarbonization factor of 2.1 million tonnes. That's slightly above our target as well. And the cybersecurity rating at really top of the range, top of our peer group with 780. We do remain committed to attractive shareholder returns on Page 4 of the presentation, you see our historical dividend increase. We thought that after waiting through the period of post-COVID normalization, it's now the right time to get back into a gradual increase of the dividend and stay on top of the corridor that we set ourselves in terms of the payout ratio. We also stay committed to our share buyback programs. We have EUR 1.5 billion of remaining to be spent. So also continuity on that side. As it relates to the development of the operating environment, Page 5 gets an indication what we dealt with in the year of 2025, the example of DHL Express, the weight per day development on the destination U.S. lanes stands at minus 26% for the entire year. You obviously see the significant drop after the changes in U.S. tariff policy, the so-called Liberation Day and the impact that, that had. But it's also important to note that the rest of the world has been very resilient. So we do see growth out of several origins in Asia. We are very engaged to also increase our competitiveness on intra-European trade. So that worked out well. But it is a world that is quite heterogeneous as it relates to growth trends and the resulting actions we have to take as it relates to capacity management. We do believe that Strategy 2030 on the next page is still a very fitting answer to the challenges that the world poses to us. Our top line growth accelerators remain extremely relevant from an industry focus, but also from a geographical focus, our geo tailwind 20 set of countries are really those where things are happening in a positive sense. So we remain very committed to that program, but also the profitability accelerators obviously had to be a big focus in 2025 as it relates to the adjustment of capacity, but also our structurally orientated Fit for Growth program really delivered very, very well. We're very happy with that. And also the group set up the alignment of the legal structure is very well underway. To deep dive a little bit into some of those profitability accelerators on the following Page 7, you see a Fit for Growth execution. We were faster, also needed to be faster on some measures, aviation airfreight, particularly significant structural reset in Europe and the U.S. through network redesigns, air to truck, but also structural levers in the optimization of our fleet and aviation setup, which partners we operate with that all made us more efficient. The fleet renewal, obviously, being a part that many of you are familiar with. On the ground side, ground operations, warehouse, sorting and handling Similarly, and more broadly as it relates to the divisional relevance, we executed that very well. P&P in the first half, significant adjustments also, given the flexibility of the new postal law that were executed very swiftly and I think overall very well. And there's the longer-term trend of standardization, automation and robotics, which remains very relevant for us across the divisions and will deliver additional benefits. Support functions, a lot and a deep dive on that a little bit on AI, the digitalization we have been driving for many years provides an excellent basis for that. We continue to be frugal as it relates to discretionary spend and especially overhead. We do this in a very continuous way to really create lasting sustainable impact for us. This is not a short-term exercise. We want to create a better company. And I think that's what we did in 2025. Again, this will continue into this year with some additional benefits to be seen. As it relates to the deployment of technology, AI is also very relevant for us. I think we are very excited by this technology, but we don't get carried away by that excitement, but have I think a very clear focus on where we deploy own resources where we have in-house engineering, these are particularly areas that are bespoke to us or have high opportunity for deeper integration of AI functionality. So we're working on agentic multimodal models. I think the entire industry is excited about the deployment in customs. That is definitely the case for us as well. Customer service as well. What's important to us is efficiency is great. But the opportunity is way beyond that, that we get in customs better compliance, better documentation, a better value proposition for our customers in recruiting similarly great efficiency gains by helping the process, but what we're really looking forward to is hiring more fitting people for the respective roles. In vehicle maintenance and repair, this is an area where we will have double-digit million impact in Germany alone by just having AI know the condition of the vehicle, know what we can bundle when we do repairs with maintenance and execute that in a much more stringent way with the repair shops. So these are those areas which are not so often talked about but really have a significant impact. What is a big program for us into 2026 is the delivery buddy to bring AI onto the hand scanner of the courier and thereby provide better guidance about specific locations, share the experience that we've collectively built up in the organization about the specifics of a premise of a location of a city, that's something that will make our service not only more efficient, but also truly better. And that's the part where we deploy own resources to really deeply reengineer the process and integrate AI into our platform. And number two, we are more opportunistic deploying what is offered to us. We have great partners. Not all partners in this space deliver great value, but we found some, and that's developing very well. And then we also spend a lot of time on people and culture to ensure we have great engineers. We have great managers that know how to make use of this technology, and we have a workforce that is ready to adopt it. We want to have our own value-add in this space. This is why we're ramping up resources as it relates to AI practitioners on use case implementation, as it relates to trained experts in our IT services, shared service functions with also deep technical expertise that can help us to make this part of our journey. So that's what we're looking for to integrate AI deeply in an industrial scale into our processes. And this is why we're looking forward really to a decade of AI-driven improvements across multiple processes where we are very focused from a group perspective on some projects that are of broader relevance for our divisions across. In terms of top line accelerators on the following page or update on the programs that most of you will be familiar with, e-commerce, our focus areas remain the same, which means for Express the top end of the spectrum in terms of value, in terms of urgency, whereas P&P and e-com play in the standard parcel space, which is scale-driven. We had changes in the year of 2025. In our European footprint, we continue to drive that. We want to be part of the consolidation play in Europe and offer a really great pan-European service where there are few that spend, that entire spectrum. Geographic tailwinds, I talked about, it's 20% of group revenue and there are some countries where we really want to further broaden our footprint. Life science & Healthcare, great progress in terms of the setup, you will see significant investments in equipment and infrastructure. This will take time to execute. This is an industry that is rather conservative due to quality reasons but this also makes this a sticky business once it's converted. So that's something that we remain very excited about, but also now it takes time to build this unique offering that we are shooting for. Data center and new energy, more opportunistic in the sense that we have a lot of those capabilities that are needed, significant growth with hyperscalers in 2025 and also with new energy particularly in those specific areas like battery transportation, also battery storage solutions, which have high requirements when it comes to safety and compliance. And those are areas where we particularly grew also in wind energy, which is more in industrial projects type of engagement. That's an area that developed very, very positively in 2025. This is also why we are confident despite the geopolitical turmoil, that 2026 will be a good year for us. On Page 10, you see the guidance for this year. We are shooting for EBIT for the group in excess of EUR 6.2 billion. You see the split up for DHL P&P and group functions, free cash flow in excess and around the EUR 3 billion mark with gross CapEx between 3% and 3.3% and the tax rate as per usual, around 30% and also our midterm outlook unchanged. So overall, a year behind us that surely had its volatility and changes in the macro environment, I think we can say that we adjusted well to that and enter 2026 with a platform and business base that gives us confidence to execute along our strategic priorities. And with that, over to Melanie for some more details on the divisional performance and the financials. Melanie Kreis: Thank you very much Tobias, and good morning, and a very warm welcome to all of you dialing in also from my side. I will start my part with a quick recap of the last quarter, Q4 2025, where we have seen the expected seasonal acceleration. When you look at our biggest EBIT contributing division, DHL Express, we have now seen the sixth consecutive quarter of EBIT growth adjusted for nonrecurring items. So that's a very encouraging development. And for me, that shows the effectiveness of the yield, cost and capacity measures executed by the DHL Express team. Post & Parcel Germany and DHL e-commerce have also achieved another successful peak season locking in the highest operating contribution of the year in the fourth quarter. So for these three network divisions, the strong Q4 performance, hence, reflects the usual seasonal volume increases, but also continued cost focus and our targeted peak season surcharge mechanisms. For DHL Forwarding Freight, the market circumstances, especially in ocean freight, are well known. Beyond that, we clearly see independent of cyclical swings, further structural improvement potential for this division with a similar scope for accelerated digitalization as Oscar De Bok has successfully implemented at DHL supply chain. Speaking of which, DHL Supply Chain has delivered top and bottom line growth in the quarter and for the full year, showing the intact structural tailwinds in the business, both from the demand side with another year of strong new contract signings as well as from automation and digitalization benefits on the cost side. This has also contributed to the 7% operating EBIT increase for the full year '25, as shown on Page 12. As you know, and as we have disclosed transparently, we had a series of nonrecurring items this year, mainly cost of change related to our successful Fit for Growth program, but also net effects from M&A and some other topics. Stripping these items out, we managed to increase group operating profit by 7.1% year-over-year to EUR 6.2 billion. And that has also set the minimum level of EBIT we want to achieve in 2026 as Tobias has just shown on our guidance page. 2025 EBIT was, however, up also year-on-year on a reported basis at 3.7%, as you can see on Page 13. The operating profit increase, together with the benefits of our ongoing share buyback program has driven an 8% increase in reported earnings per share for the full year 2025. So that is only slightly below our 10-year CAGR of 9% for earnings per share growth. Group ROIC increased 20 basis points year-over-year in '25 also reflecting the ongoing investments in our growth initiatives that Tobias explained earlier. And this is also nicely visible in our cash flow summary on Page 14. We again spent close to EUR 3 billion on net CapEx and close to EUR 1 million on net M&A as we invest in those topics that will drive our accelerated growth going forward. At the same time, strong CapEx discipline on any capacity-related investments is one of the main drivers for our once again strong cash generation. Free cash flow, excluding M&A, came in ahead of target at EUR 3.2 billion and has allowed us to also return significant amount of capital back to our shareholders in the form of our regular dividend and our share buyback. Also here, the factual 10-year view speaks for itself, as you see that we achieved a structural step-up in our cash flow conversion. And I would really like to reiterate that point. Quite honestly, also because we still see a lot of valuation models looking back at 10 or even 12-year average valuation multiples. So you see on the left side of Page 15, our 10-year step-up on EBIT and free cash flow. What I think is, however, at least as important as the absolute increase in these numbers, is the structural transformation that our group has accomplished in the last decade. For me, that means that DHL shareholders do not only invest in a company with higher EBIT margin and cash flow, our shareholders are owners of a structurally improved company. In terms of business mix, earnings and cash flow resilience and what is not to be underestimated, and agile, adaptable and international culture that has allowed us to successfully navigate through all external volatility over the last years. Before I finish, a quick reminder regarding the process on One of the last technical steps of this historic group transformation. Our planned alignment of legal structures is progressing fully on schedule subject to the AGM vote on May 5th, we will, hence, this year, also officially renamed the listed group entity into DHL AG, the P&P Germany operations, legally becoming the Deutsche Post AG subsidiary similar to the status of the other divisions. So all on track here and in line with our plans and intentions as previously explained. And that already brings me to three quick conclusions from my side on Page 17. We expect further profit growth in 2026, while the dynamic circumstances required continued close steering of costs, yield and CapEx. This will allow us to keep a good balance between attractive shareholder returns and continued targeted investments into growth. Because in the end, you can't shrink to greatness. We are, therefore, fully focused on leveraging growth opportunities in those countries, trade lines and sectors where our logistics expertise will allow us to drive sustainable, accelerated growth as outlined in our Strategy 2030. And with that, we are looking forward to your questions. Operator: [Operator Instructions] We'll take our first question from Alexia Dogani with JPMorgan. Alexia Dogani: I'll ask three if that's okay. Just firstly, on Express, Clearly, your efforts this year have been focused on improving cost competitiveness to regain market share from airfreight, can you give us a little bit of progress in which verticals you're already managing to do that? Or is this something that we have to look forward to in 2026. Secondly, on your Fit for Growth achievements this year. I believe the structural cost out was around EUR 600 million. That's ahead of what had been indicated before of basically slightly ahead the cost of change charges. Can you discuss what went better and you were able to achieve these savings earlier? And then thirdly, could you give us some comments on the current situation in the Middle East, perhaps kind of the first derivative effects of the market being closed, but also potentially if the duration of that market being closed for longer what are the implications for airfreight capacity globally translation to Express and any kind of other relevant comments there? Tobias Meyer: Yes. Thank you, Alexia, for those three questions. On the first one, indeed, steps to cost competitiveness in Express are very favorable. We would look at the task at hand, so to say, differently. It's not about regaining from airfreight. The way and what we're trying to do is more if you look at the 40-year trend of the integrated industry, the integrated industry has taken share from the general air freight market. We started as document companies then went into different verticals over time, kind of an S-curve transformation, not entirely dissimilar from what happened in e-commerce. And since COVID, the integrated industry is not back on that trend. And that's what we are trying to do with smart industrial growth to focus particularly on B2B verticals to hone the business model of Express with additional features, but also the attention to industry verticals. That has now been initiated and that should lead over the quarters to a gradual increase in the weight per shipment. And some of those elements will definitely take effect this year. Some will take later as it relates to cold chain transport, for instance, in Express. This is something that is yet to come from its effects. As it relates to Fit for Growth, absolutely, we are ahead of the original plan, particularly in Europe for Express, but also for P&P, those adjustments went quicker than we had originally maybe slightly conservatively foreseen. So that's particularly the area also in the United States, the adjustments needed were executed very swiftly. And also on the technology side, some of the programs that we have been driving went indeed very well from an executional point of view. So it's fully in swing especially as it relates to those more tech-dependent programs. That's what's going to support the progress in 2026 and provide us with a very healthy base also for further growth, which obviously is what we intend to do in Express and beyond in 2026 against a still volatile environment, which then also brings me to your third question on the Middle East. Now how those things develop is not easy to see. Definitely, the current situation is heavily constraining air activity in some countries, but also obviously, ocean-going vessels through the Strait of Hormuz are constrained. What happens now operationally is we had some partial opening of airspace and airports to move planes out obviously, Saudi is largely open or open we have, and that helps us a lot on the Express side a very well-established road network in the Middle East, which enables us to bring cargo to those airports that are open. That's very vital at presence to keep the region connected. And I would expect that to continue and further expand if constraints in some countries like Bahrain, Kuwait and UAE, those constraints would remain for longer. On the Ocean side, that will have consequences especially if cargo is offloaded to enable vessels to move on loops that do not include the ports of the Gulf region. Some carriers have started such offload processes. This creates some chaos that needs to be dealt with. As you know, that's also sometimes an opportunity because it creates urgencies for certain cargoes, but it's too early to see how this unfolds. If the constraints would stay longer, there's definitely a lot of work to be done. Alexia Dogani: And when you say offloaded cargo, I mean that cargo, how will it find its way to the region? Is it just a move to potentially air or road to clear the inventory? Tobias Meyer: Well, that might take -- might require different cargo to replace that because those offloads would then happen in a port that is typically not in the region or might be in the region and then you could obviously use road transport offloads more on the Asian side on the Indian subcontinent would then require ultimately to load it on a vessel that has a string into the Gulf, but that would mean significant delays. So that's what we start to see now. I think it's really too early to tell whether that is a phenomenon that takes a broader hold so far, people have more taken a wait-and-see mode, but that can last for another couple of days, not a couple of more weeks. Operator: Our next question comes from Muneeba Kayani with Bank of America. Muneeba Kayani: Melanie and Tobias. So first question around the moving parts on the guidance, please. So the Fit for Growth had kind of over EUR 600 million benefit last year. So is it right to think that your guidance assumes kind of a EUR 400 million benefit from Fit for Growth in 2026. And then related to that, what have you assumed in terms of your cost of change assumption in '26 compared to the EUR 245 million that you had last year on reported EBIT. So that's the first question. And then Secondly, if I could follow up in terms of the Middle East, specifically, we've heard earlier this week that 18% of global capacity in air cargo was impacted. We've heard that come down to something like 8% yesterday. Would you agree with that in terms of market impact. And then specifically for DHL, is your capacity impacted like do you have planes in the Middle East? And how do you see the fuel spike impact on the Express business, please? Melanie Kreis: Yes. Thank you very much. Muneeba, let me start with the guidance question and the moving parts there. Yes, I mean, of course, there are numerous external factors, the whole macro situation. There are some known topics like the fact that in P&P, we have a year without a price increase. So many moving parts. With regard to the Fit for Growth questions, yes, I can follow your math that if we say we finish kind of like the EUR 600 million in '25, there should be something like EUR 400 million left for '26. I think we also have to be conscious of the fact that particularly in the first half of the year, we will still see the annualization of some of the headwinds from '25 on the currency side, the tariffs, the de minimis abolishment. So like in '25, we will also need Fit for Growth benefits to help us compensate for those. With regard to cost of change, I mean, if we come up with new good ideas for further improvements and there is some cost of change attached to it. We will, of course, do it. However, I would expect that to be an order of magnitude which will not warrant a separate flagging the way we did it in '25. So more of a return to this being included in our normal reported figures. Tobias Meyer: Yes. And on the Middle East, I've seen those numbers as well. We will not engage in that discussion because it changes day by day, hour by hour. We had plans in places that were closed. That's been a discussion whether you can move the plane out empty or whether that location reopens. Again, that's very dynamic. It's clearly not yet over. So some impact is going to be there. I think what's more relevant is the question of spillover from ocean freight and what happens on the ocean freight side because some of those countries are highly dependent on essentials. The region is not self-sufficient on food, for instance. So that is something that will be significant if the ocean freight situation does not change over the coming days. Air cargo operations, as I said, for us, we have flexibility. We have a broad footprint in the region. And what happens in each location can change hour by hour. Melanie Kreis: Yes. And I think on the fuel surcharge, as you asked for that specifically. I mean, we have a well-established mechanism. So there are then some time elements in a period of rising fuel price, but by and large, we have well-established mechanisms in place to deal with that. Operator: Next question comes from Jacob Lacks with Wolfe Research. Jacob Lacks: So your slides show U.S. TDI import trends remained weak through December. Has there been any improvement since the start of the year, just given the ruling against IEEPA tariffs and some better readings in the macro indicators? Or has the step down in tariff rates not really been enough to incentivize new demand? And then a follow-up. One of your competitors last month discussed the goal to mix more towards cross-border freight in Europe over the next few years. Have you seen any change in the competitive parcel environment in the European TDI market? Melanie Kreis: Okay. I think on the impact of the Supreme Court ruling, that's too early to see a real impact. I think everybody is now working through the implications. So in terms of what we saw going into the year was more of a continuation of what we had already seen in the fourth quarter. With regard to the European competitive situation, we haven't seen a change on the ground. So we also saw these announcements that in terms of material impact on our daily business, we haven't seen it. Tobias Meyer: And overall, I think the -- particularly in the B2B market, it's a very healthy setup in Europe. As Melanie said, no significant changes. I think we have an excellent offering. If you look also at our presence in secondary markets, the connections via Leipzig are unmatched by any competitor. So the service aspect of that, I think, gives us some confidence on the TDI side and DDI overall, as it has in recent years, outgrown. So the cross-border element has outgrown domestic markets. That's the case in B2B, but also in B2C. And we see those segments very positively also into this year. Operator: Next question comes from Marco Limite with Barclays. Marco Limite: Hello. Hello, can you hear me? Tobias Meyer: Yes. Marco Limite: Okay. I have a follow-up question on Iran. So actually a few questions from Iran. First of all, whether you can disclose what percentage of your group revenues or EBIT is directly exposed to the Middle East? Is the first question. Second question, when we think about disruption, clearly, volumes into the Middle East are going to be disrupted and are going to change. To what extent, the Middle East tensions also affect other trade lanes, for example, I don't know, Europe to China, for instance. Is there any, let's say, transit and offloading reloading of cargo in these regions and so on. So does that affect also Europe to other Asian countries operations. And then when we think, I mean, thinking about the potential disruption coming from the Middle East, again, how do you -- what's your sense about the potential positives coming from better pricing versus headwinds coming from demand? Do you think you are going to be more exposed to positive from disruption or to the negative coming from demand? And just a final question, very quick on cost savings. Clearly, EUR 600 million is above the previous guidance. Just curious whether the step-up versus the previous guidance as to be, let's say, attributed only to Q4? Or you have been running on a higher rate since Q2? And what is the run rate in Q4 in the context of the EUR 1 billion? Tobias Meyer: Yes. Thank you for your questions. So our presence in the Middle East varies by division. We have relative to the GDP size of the region, it's slightly higher in Express. It's lower in supply chain to name the two extremes. As strategic as these conflicts are and as regrettable, given what we do and the segments we are in, we typically benefit from this turmoil than we have exposure to the downside. I think this is just a learning from past situations. The main reason, and I think you already heard that in the answering of previous questions, is that those disruptions spill into the airfreight from ocean or land transport surface transport into Air and Express. And people tend to rely on providers like us and with our significant footprint in the region, we are often the go-to party. That has been the case with the recent floodings in Morocco, which have driven volume massively. Now you're not going to see that in your numbers because Morocco overall is too small. But it's just to make the point around the -- in principle effect this has on supply chains and the need for our services. For ocean, especially the tying up of vessels is reducing supply. There has been some concerns about supply-demand balance with the Red Sea, the Suez route reopen. I think that's off now or at least further shift it into the future that such vessel routings would be accessible for the great majority of ocean liners. So that it has an impact on Europe to China as it relates to lead times and the competitiveness of ocean freight lead terms or the airfreight lead times, but also on the supply-demand balance in the container, the cellular vessel space. So far on the Middle East, any follow-up questions on this are welcome. On our Fit-For-Growth program. Indeed, we have been executing this very well across the year of 2025. Now the measurement of those things is not on a daily basis for all of those initiatives. So it is now with the year-end that we have taken stock and we see that we are significantly ahead of what we had originally planned, and we see this again very positively. It's speed, but it's also the impact that we have in some areas is ahead of what we originally thought. But that has been an outcome of the work throughout the year of 2025. Melanie Kreis: And we had already flagged in Q3 in November that we were ahead of schedule. But of course, also the importance, given the importance of Q4 and the peak season. We then really saw that those structural cost improvements also held during the peak season. And that, of course, then also drove up the overall performance towards the end of the year. Martin Ziegenbalg: Okay, Marco? Marco Limite: And yes, just on the run rate of cost savings because I think there is a bit of confusion this morning out there whether the EUR 600 million is the run rate versus the EUR 1 billion or the EUR 600 million is the achieved cost savings and therefore, that's in the bridge to '26, we just need -- we need to plug EUR 400 million more. So if you could clarify whether EUR 600 million is the run rate in Q4 or the achieved number in so far. Melanie Kreis: Yes. So the EUR 600 million is what we achieved gross in 2025, excluding the cost of change. And so in a very simple calculation that should leave around 400 to come now for '26. Tobias Meyer: And obviously, if it's a little bit more, we won't stop the measures just because we said it's EUR 1 billion. Operator: [Operator Instructions] We'll take our next question from Cedar Ekblom with Morgan Stanley. Cedar Ekblom: I've just got a question on if you could reflect on the volume performance in the Express business, particularly in the context of volume growth in broader airfreight cargo, I understand the points around sort of weight per shipment rather than just shipment count, but this sort of persistent trend of lower express trends or flat at best and air freight -- general air freight cargo growing continues to sort of play out quarter-over-quarter. And I'd just like to sort of hear how you are perceiving the relative trends in those two categories and how we should think about that over '26 and possibly a bit further out. I think sort of the debate around is Express structurally impaired relative to history, remains quite alive in the market. And with the volume positions that we've had, I wonder if you've got a view on how to sort of debate that question or respond to that question. Thank you. Tobias Meyer: Yes. So Cedar, I think a fair question given the market developments that you characterized, I do not think that DHL Express has a share versus our traditional competitors in the Express space. If you look historically, these waves a little bit between Air Freight and Express have happened before. It's particularly now kind of post COVID, the e-commerce normalization that has impacted us, but also the broader industry, which is why the broader integrated industry, I think is the key driver of why we have lost a share or a point of market share also in the broader market. And it is absolutely our objective to get back on to a track to outgrow the broader airfreight market as we have done as an industry for the last 40 years. We target that through specific verticals, but also a broader and engagement more on the B2B side, that has not shown effects yet in the fourth quarter. So that's something which we would only see now in 2026 as that program gets implemented. We had good discussions with the management team with the broader management team around that. I think DHL Express is very in its usual way, a very structured set up to address that, but it will only unfold as we go through the year. In some of the verticals, and we said that also with Strategy 2030, and its execution, some of those verticals, particularly Life Science and Health Care and Cold Chain Express will take some more time until that infrastructure and equipment is ready. So that will not happen this year. This is more for the years to come. Melanie Kreis: And maybe just to add from my side, we have this on Page 5 in the deck, we have talked about it before, where I mean you can see that actually weight per day rest of world was already just flat in 2025. And obviously, our clear focus is to now get rate per day back into growth territory. And we think that weight per day will be the more relevant KPI to look at for Express. A, which also drives a lot of the economics of the division in terms of associated revenue per shipment in terms of weight load factor on the aviation side and so on. But it will then also give a good comparison to the relative performance vis-a-vis the air freight market, and that is what we will focus on in '26. Martin Ziegenbalg: Thank you, Cedar, and we've got another caller waiting. Operator: Our next question comes from Alex Irving with Bernstein. Alexander Irving: Two for me, please. First of all, you've heard from some of your peers about how they're deploying AI in their business and why they in particular, stand to benefit. Own platforms, data, quality and so on. You spoke earlier on about some of your aims during the presentation, but what factors give you the right to win from AI? And what are the main actions you're currently taking here, what's the impact you expect those to have gross and net after any sharing gains with customers. Second question, you're nearing into the simplification project and subject to AGM approval, the carve down of P&P. How committed are you to the ongoing ownership of all 5 divisions? What conditions must these divisions satisfy to remain owned by DHL. Thank you. Tobias Meyer: Yes. Thank you for these questions. Starting with AI, I think for us, what's important we are not in the -- don't have the approach to think that putting a AI sauce source over everything creates great benefit. This is a task that ultimately is technical. This is a major transformation as the induction of the PC into our business world and will have a similar size, if not larger, benefits. Now why we think we have the right to win and we'll have a net benefit. This is a technology where scale will matter to a greater extent. And we have some applications I mentioned what we intend to do and are implementing on the hand scanners, where also across the divisions, we can deploy similar technology and reap those benefits. So we see AI as a driver of scale benefit, increasing scale benefits, but also it will benefit companies more that have a well set up, well structured IT landscape, and we very much believe we have that, especially in Express and Global Forwarding, and in P&P, but also in supply chain, where Oscar in his previous role, has driven a standardization of warehouse management systems and so forth for many years. We have a great track record as it relates to use of data, become a much more data-driven company. So that is a foundation that we can now build on. Now we know that others also claim that. So here, I think as often, it's in the execution that will prove who can really make benefits from that. Again, I think we know very well what we are doing. And we are striving to use this technology at industrial scale for efficiency, but also effectiveness reasons. And that's what we're very much focused on. This will take time to implement for companies. This is always harder than for consumers to adapt to new technology. But we are absolutely sure that we will stand to benefit. As it relates to the commitment to owning the different divisions, we, I think, have addressed this multiple times across the portfolio. We do think that the portfolio does make sense, but we also have a clear success criteria for the different divisions that we operate in. You asked specifically for P&P, where, again, we think we are the right owner for that business. We need to have the right regulatory conditions that enable us to self-fund the division to self-fund the transformation from a letter centric to a parcel-centric company where we have progressed much, much further than many others with our great offering on the parcel side and significant market share that we do have in Germany. So that success factor for us is currently clearly fulfilled. And in the other divisions, we obviously are closely monitoring our performance versus peers. In some areas, we are top of the list. And in other areas, we have more work to do. But with a clear plan to close those -- that gap. So we are committed to the portfolio that we currently own. Martin Ziegenbalg: Okay. Very good. Thank you, Alex. I think we've got a follow-up from Alexia. Operator: Yes. Our next question comes from Alexia Dogani with JPMorgan. Alexia Dogani: Some follow-ups. I actually have again 3 -- 2 very quick ones. Just firstly on Express, can you let us know when you would consider putting emergency surcharge or a war disruption surcharge, if that will be part of the consideration. Then secondly, would you give us some kind of short comments about Q1 kind of notwithstanding the normal seasonality of the business, should we kind of be looking out for anything specific? And then kind of my real follow-up question is Melanie, you discussed a little bit about kind of historic performance, valuation. And obviously, growth is very important for kind of the sector that you are in, I guess, would you consider any other means to accelerate growth? I mean we've discussed your M&A strategy in the past, which is much more kind of bolt-on. Would you consider something a little bit more transformation that you could basically put more capital at risk? Or do you see at the moment kind of the return of cash and kind of levering up the balance sheet slightly as the most prudent kind of capital allocation near term? Tobias Meyer: So I'll start with the first two, then Melanie being specifically addressable comment on the third question. So on the Express, we do implement emergency surcharges depending on the local situation, that is typically country specific, and that's what's also happening in this context. We particularly use that to pass on higher cost, either through insurance or other. So we will handle that also in this, and we're in the process of doing so in this situation that is unfolding in the Middle East. Overall, I think and I tried to express that I think we exited 2025 with really good achievements and at a good momentum. I think also, personally, I feel about 2026 quite positive, knowing that the turmoil is often something that stands to benefit us. It's not always to describe why that is, but that has been historically the case. And that's why even though the macro situation, we are not so optimistic on that the per se, the macro environment is going to be very favorable. I'm quite optimistic about 2026 based on the achievements on the cost side, on the structural improvements, but also what the current environment means for our industry and specifically our portfolio of businesses, and that's how with the mindset that we enter and are engaged here in the year 2026. Melanie Kreis: And to your third question, yes, as I showed in the presentation, we have significantly improved profitability and cash generation and also the composition of where earnings are coming from, where we now want to double down on is how to accelerate also growth. And of course, profitable growth. The focus will remain on organic growth opportunities. We are convinced that there are ample opportunities out there also in the current environment. We are going to double down on those. And we will continue using M&A more as an add-on supplement. So no fundamental change in strategy. Martin Ziegenbalg: Thanks, Alexia. And we have Andy Chu joining the call. Andy Chu: Just one question for me, please. I guess the market always worries for DHL particular around any sort of crisis, and we seem to be lurching from one crisis to another. But I guess, historically, you've shown some really great flexibility, resilience, probably most recently COVID being the best example. So could you just give us a favor maybe just using Express -- could you just give an example, maybe using Express as to how quickly you can make adjustments to your network, just examples of flexibility because it just strikes me that this business is -- has a proven track record of tremendous resilience. Tobias Meyer: Yes, Andy, thank you for that question. Which is more a comment that I would absolutely agree to and especially in the Middle East, I mean, we have a very strong presence there. We have colleagues there that were already in the region during the second Gulf war, where we also still already had a significant presence due to historical reasons. We even had a monopoly in Saudi for some time. Obviously, that's not the case anymore. But our presence there is very strong. Express with its setup also of different airlines has flexibility that others do not have. Now location by location that requires work, traffic rights, aircraft change in registry or this doesn't happen by itself. But over the decades, I think we have built that muscle that capability and I think are somewhat unique in our industry in that setup and capability set. And that's why, indeed, I would echo the confidence that you also expressed in your comment, the confidence that as tragic as this military conflict is and the crisis that it triggers it's not bad historically for our setup and does not harm in any way, our confidence about 2026. Melanie Kreis: Maybe just two quick points to add from my side. I think one thing which is remarkable, our express aviation setup is that we have now shown over the last years, the capability that we can flex up quite rapidly if that is required globally on specific trade lanes that we can likewise also flex down key contributor, of course, also to the fact that we had 6 consecutive quarters of EBIT growth in Express despite the top line headwind. And the complementary element is also going back to Alexia's question, we have also shown that on the pricing side, we are able to smartly price given the circumstances with elevated risk surcharges if and where needed. Martin Ziegenbalg: Andy, thanks for your call. We just passed the 60-minute mark, but we still got time for a follow-up question by Marco. Operator: Marco, please unmute your line. Melanie Kreis: Marco, we can't hear you. Martin Ziegenbalg: Still working on it. Operator: Marco, please go ahead. Marco Limite: I think you can hear me now. Just One more question, which is a bit more longer term. So if we look at your overall OpEx line of EUR 75 billion. I mean clearly, that's fairly big one. And my question to you is whether you see further opportunities in terms of cost savings on top of the EUR 1 billion program you are running at the moment. And in the context of that whether you think that there are cost synergies potential from maybe in the future, better integrating divisions and therefore, achieving extrapolating cost synergies across divisions as one of your big competitor is doing in the U.S. Tobias Meyer: Yes. So thank you for this question, which is obviously not easy to answer across all the spectrum of what we do. I would definitely say that our drive for efficiency will continue. That is basic frugality. We're a logistics company, we're not a bank, and we should look like a logistics company, we should not look like a bank. But more importantly, the obsession with efficiency in processes and having great processes with an adequate amount of technology that in supply chain, supply chain is going to be the first business that has a significant impact with robotics. We are already leading in the deployment of robots. It will change the business. It will add a different revenue stream robotics as a service to what we do, similar to what we did with Real Estate Solutions, which is a great contributor of the successful path that we have taken with supply chain. So those elements are very important next to AI, not to forget that the physical part of AI being manifested in robotics is also very, very relevant for us. In Express, I think we're on a great path to make the best service in the industry more affordable, and that will give us broader access to certain markets and companies and is underpinning our drive for industrial growth. Also, in Europe with the expansion of our road network and that related offering across the continent, that's a driver of growth as well. As it relates to divisional synergies, yes, we will have those on the technology side. We'll be very careful with operational integration that harms our value proposition. Express has a different value proposition than the standard parcel business, and we will not ever damage that value proposition. The spreadsheet might tell you something different. But experience tells us that, that setup that we have, particularly with Express is working very well for us, is working very well for our customers. Collaboration is what's going to happen, but this very cost and efficiency minded synergy, we will remain very careful because we see with our own experience, but also what happens across the industry that the detrimental effects on value proposition are often outweighing the benefits. So on the technology side, yes, on the collaboration side, absolutely, yes, you also see this in Europe between e-commerce, P&P, and also increasing the e-commerce and Express. We often talked about the great collaboration we have on the aviation side between Express and Global Forwarding, the joint plans we have there in terms of Life Science and Health Care. You might have seen the health logistics plan that Express operates, which is also used for DGF for Global Forwarding cargo. So we'll collaborate value proposition and efficiency, but we'll be very careful to integrate with the sole mind of cost synergies. Marco Limite: And what did you mean when you said making Express more affordable? Tobias Meyer: Well, I mean, we have undertaken significant steps to enhance productivity through technology, but also through streamlining processes, especially in Europe and the U.S., and we're also growing in the European road offering, DDI significantly. So that is what I mean. It doesn't harm our value proposition as it relates to the time defined offering, where we will always put quality first, but it gives us access to some segments that we haven't been serving to that extent in the past. Martin Ziegenbalg: Great. Thanks, Marco, for that follow-up, and that concludes our Q&A round. We're looking forward to seeing you over the next couple of days and weeks on roadshows and conferences. And to close off the call, I hand over for closing remarks to Tobias. Tobias Meyer: Well, thank you all for your interest. Again 2025 was not an easy year as it relates to the macro. I think we've managed as well. And I feel this leaves us really in a position where we enter 2026, and we operate in 2026 despite, again, a very volatile environment with great confidence that we will offer great service to our customers during the year of 2026 with the initiatives that we've put forward, and we get back on the track of growth through the measures that we've described and talked about in this call, but also beyond the divisional strategies that we have presented. This is going to be the focus in 2026 to add the growth component through what I believe was a good bottom line management, that's what we are 100% focused to do and confident to achieve. Thank you.
Operator: Good morning, everyone, and welcome to the CareRx's Fourth Quarter 2025 Financial Results Conference Call. Please note that this call is being broadcast live over the Internet, and the webcast will be available for replay beginning approximately 1 hour following the completion of the call. Details of how to access the webcast replay are available in today's news release announcing the company's financial results as well as on the company's website at www.carerx.ca. Today's call is accompanied by a slide presentation. Those listening on their phones can access the slide presentation from the company's website in the Investors section under Events and Presentations. Certain statements made during today's call, including the answers that may be given to questions, may include forward-looking information, including information consulting -- excuse me, including information constituting a financial outlook under applicable Canadian securities laws. Apologies, everyone. Forward-looking information, including financial outlook information, includes statements regarding forward -- regarding future events, conditions or results, including the company's future plans, strategies, objectives and expectations. Forward-looking information and financial outlooks are based on information available to management as well as their assumptions and expectations as of the date of this presentation. Forward-looking statements and financial outlook information is given as of the date of this presentation, and the company assumes no obligation to update any forward-looking information as a result of new information or future events, except as required under applicable laws. Forward-looking information is subject to risks and uncertainties, some of which may be unknown to management or beyond the control of the company, which could cause actual results to differ materially from those contemplated by the forward-looking statements or financial outlook provided today. Given these risks and uncertainties, investors are cautioned not to place undue reliance on the company's forward-looking information. For additional information on the risk factors that could cause actual results to differ materially from those contemplated by the forward-looking information and the factors and assumptions associated with such forward-looking information, please refer to the company's MD&A for the 3- and 12-month periods ended December 31, 2025 and 2024, and other documents filed on the company's profile on www.sedarplus.ca. I would now like to turn the conference over to Puneet Khanna, President and CEO of CareRx Corporation. Please go ahead, Mr. Khanna. Puneet Khanna: Thank you, and good morning, everyone. Welcome to our fourth quarter 2025 earnings call. With me this morning is our Chief Financial Officer, Suzanne Brand. In the fourth quarter, for the 3-month period ending December 31, 2025, we delivered strong financial and operating performance. We generated revenue of $96.1 million and adjusted EBITDA of $8.8 million, representing an adjusted EBITDA margin of 9.2%. We also delivered net income of $1 million in the quarter after adjusting to remove the effect of a deferred income tax recovery. Average beds serviced increased to 92,250 in Q4. For the year, we delivered revenue of $370.2 million and adjusted EBITDA of $32.9 million. Adjusted EBITDA margin for the year was 8.9%, and we delivered net income of $3.3 million after adjusting to remove the effect of an income tax recovery. We are proud of the financial results of the company as 2025 marks the first full year of positive net income. Our financial performance also reflects the contribution from new beds onboarded throughout the year, combined with the ongoing benefits of our cost savings and efficiency initiatives. I'm very proud of the entire CareRx team from coast to coast, those in our pharmacies, our office-based locations and the team supporting on-site within the homes we service. It is the dedication and hard work of the collective team that has enabled us to deliver these results while continuing to provide high-quality pharmacy services and programs to our residents and home partners. Turning to our full year highlights. In 2025, we added over 4,500 new beds across our network, and we are well positioned to continue to leverage our operating platform. We grew adjusted EBITDA by 8.7% compared to prior year and expanded our adjusted EBITDA margin by 63 basis points. We also reduced net debt by approximately 24% year-over-year, reflecting our strong cash generation and disciplined approach to capital allocation. In line with our commitment to returning capital to shareholders, we initiated a quarterly dividend during the year. We also renewed our normal course issuer bid, reinforcing our view that our share price does not fully reflect the fundamental value and long-term growth potential of our business. 2025 was also a year of important strategic milestones. We hosted Natalia Kusendova-Bashta, Ontario's Minister of Long-Term Care at our Oakville pharmacy location, where we showcased the innovative pharmacy services and technologies we use to deliver integrated pharmacy services and programs across the seniors housing spectrum. We also fully transitioned all regional beds in the BC Lower Mainland to our new Burnaby pharmacy, and we were pleased to host members of the BC legislative assembly for a tour of this new facility. This site is a strategic component of our high-volume operating platform and further enhances our ability to support growth while maintaining a high standard of service for our home operator partners and residents. Taken together, these achievements highlight the momentum in our business and the strength of our platform as we look ahead. I will now turn the call over to Suzanne, who will discuss our fourth quarter financial results in more detail. Suzanne Brand: Thank you, Puneet, and good morning, everyone. As Puneet outlined, we delivered solid growth in our key financial metrics in the fourth quarter of 2025. Average beds serviced in the fourth quarter increased to 92,250 from 87,658 in the same period of 2024. Revenue in the fourth quarter grew to $96.1 million compared to $92.2 million in the fourth quarter of 2024. The year-over-year increase in revenue was driven primarily by the increase in the number of average beds serviced. Fourth quarter adjusted EBITDA increased to $8.8 million from $7.6 million in the fourth quarter of 2024, and adjusted EBITDA margin improved to 9.2% from 8.2% a year ago. The increase in adjusted EBITDA and adjusted EBITDA margin was driven by the onboarding of new beds and continued realization of cost savings and efficiency initiatives across our operations. After removing the effects of income tax recoveries, we reported net income of $1 million in the fourth quarter compared to a net loss of $2.2 million in the fourth quarter of 2024. The improvement in net income reflects the higher average number of beds serviced, the impact of our cost savings initiatives and reduction in finance costs. We are proud to report our first full year of positive net income as CareRx and specifically positive net income in every quarter of 2025. Cash from operations in the quarter was $9.6 million compared to $8.4 million in the fourth quarter of 2024. Cash from operations was influenced primarily by the contribution from the new onboarding and our ongoing cost-saving initiatives. Turning to our balance sheet. As of December 31, 2025, we had cash of $13.9 million compared to $15.5 million at the end of the third quarter of 2025. Net debt was $27.1 million at quarter end compared to $28.8 million at the end of the third quarter of 2025. The quarter-over-quarter improvement in net debt was driven primarily by repayments to our term loan. Net debt to adjusted EBITDA improved to 0.8x at the end of the fourth quarter compared to 0.9x at the end of the third quarter of 2025. This improvement reflects both the decrease in net debt and the increase in our run rate of adjusted EBITDA. During the quarter, we also paid dividends in the aggregate amount of $1.3 million, consistent with our balanced approach to capital allocation, which prioritizes growth, growth investments, balance sheet strength and returning capital to shareholders. Overall, our financial position remains very strong, and we believe we are well positioned to support continued growth while maintaining conservative leverage profile. And with that, I'll turn the call back over to Puneet. Puneet Khanna: Thank you, Suzanne. Across CareRx, teams have strengthened relationships with home partners as well as with industry and government stakeholders. We have also delivered improvements in the care we provide to residents, enhanced the clinical support offered to homes and advanced key initiatives throughout a year of growth and momentum. During the fourth quarter, CareRx pharmacists administered over 40,000 flu shots. This is an important contribution to protecting residents in long-term care while preventing hospitalization and underscores the critical role our teams play in preventative care and immunization programs. We were also proud to have a diabetes management study co-led by CareRx pharmacists published in JMIR Diabetes. This work reflects our ongoing focus on clinical excellence, medication management and supporting evidence-based practice research to shape the future of senior care. We continued our support for the Senior Living CaRES Fund, which provides assistance to employees working in the senior living sector, supporting the people who care for seniors every day is core to our mission and values. In addition, our teams remained active in community initiatives, including participating in Lace Up to End Diabetes, writing holiday cards for seniors and sponsoring and attending other community events. These activities allow us to give back to the communities where we live and work, strengthen our relationships with residents and families and reinforce our commitment to being a trusted partner across the continuum of care. We have built a scalable, operationally efficient organization that we believe is exceptionally well positioned to capitalize on the significant long-term growth opportunities we see in the industry. Importantly, our business is built to handle significant growth, and we remain confident in our pipeline and our strategic positioning so that when our home partners are ready to move, we are ready. With that, I would now like to open the call to questions. Operator? Operator: [Operator Instructions] And today's first question comes from Gary Ho at Desjardins Capital Markets. Gary Ho: Puneet, can you maybe give us an update on bed count growth pipeline this year? What are your sales team working on behind the scenes? And also maybe on the flip side, any notable customer that's up for renewal in 2026, we should be watching for? Puneet Khanna: So on growth, as I said in my prepared comments, we are optimistic and bullish on growth. I think we've publicly stated 6,000 to 8,000 net new organic beds is what we are targeting. Our sales team has hit the ground running this year in both prospecting and pushing those initiatives through the pipeline. So we feel good about that. With respect to large customers, we don't have any significant or large customers that are expiring this year. Gary Ho: Okay. Great. And then second, wondering if you can provide a progress update on your hub-and-spoke strategy trial. What do you hope to accomplish this year? And any plans to build out new mega facilities over the next 12 to 18 months? Puneet Khanna: Yes. So our hub and spoke continues -- we continue to feel good about where that's going. We now -- out of the pilot site that we do have in Oakville, we now have 2 of our other pharmacies being packaged out of the Oakville location. The -- and we're seeing that volume handled nicely with further capacity. And so we'll continue to expand that throughout the year. We're also looking to take that into BC. We are in the Lower Mainland location, we are servicing outside of our own geography in the Lower Mainland. And so we'll continue to leverage and expand that as well. So -- and then with your second part of your question, yes, we've got -- I think we would like to get 2 more hubs built time lines within the next 24 months, but nothing confirmed at this point, Gary. Gary Ho: Okay. Perfect. And then if I can just sneak one more in, maybe for Suzanne. I know there's a new deferred tax amount on the balance sheet, $23 million. I don't think it was there in Q3. What drove that? And does that impact future income tax rate looking out? Suzanne Brand: Yes. Thanks, Gary, for the question. The analysis was not complete. The analysis in Q3, we actually did the full analysis in Q4 on our tax position. You did see within the results that we posted a full year of positive net income. And with our future forecast in terms of profitability, it allowed us to recognize the deferred tax asset that we'll be able to offset some capital losses against. So it is a very good news story. It's a positive net income story. And we do have the noncapital losses that we'll be able to utilize. So hence, the deferred tax asset was recognized. Gary Ho: Okay. So maybe I can just clarify to see if I understand this correct. So in previous years, tax years where you had net losses, I guess those weren't recognized on the balance sheet. And as a result, now you have better visibility of having positive net income. And as a result, you can book these deferred taxes. Is that the right way to look at it? Suzanne Brand: That's exactly right. Yes, that's right. We did not have that profitability in the past. Gary Ho: So does that mean there's no current taxes we should look for in the near term? Suzanne Brand: In the near term, we will be able to utilize our noncapital losses with respect to being noncash tax positive. Operator: And our next question today comes from Gireesh Seesankar with Bloom Burton. Gireesh Seesankar: Now as your partners acquire beds, could you provide some detail on the onboarding economics, specifically incremental margin that gets added as you add in new beds and the lag time from a partner closing an acquisition to the beds coming online? Puneet Khanna: So with respect to the lag time, it's one of the -- the answer is it depends. So we've seen somewhere if they are long-term care and licenses need to be transferred from the ministries, like we've seen that take as long as a year in some cases. And then in others, just depending on closing or if it's going to Competition Bureau, what we're seeing on the retirement home operator side as that side of the business or our customers continue to consolidate, it seems that it's triggering comp bureau review more and more. And so -- especially with the larger operators. And so a little bit of that is uncertain that we know we've won it, we're going to get it. Timing is not necessarily in our control. And then sort of with your first part of your question on margin profile, because of the way we've built our network, when we do add beds, we do it at very little additional labor. So it is much more incrementally accretive to us than our run rate. Suzanne Brand: If I can just add to that. Of course, it's dependent on the volume of the bed adds. It is marginally accretive, as Puneet said, with respect to minimal labor required. So with a large add, it's very, very supportive with respect to accretion, with small bed adds, it's a minimal impact. But we do get to absorb the labor. Gireesh Seesankar: And would it be possible to quantify the bed count threshold required to break into that double-digit margins? And then beyond just pure scale, what other levers could you pull to further drive margin expansion? Puneet Khanna: Yes. So I think what we've demonstrated over the last 2 years is that commitment to operational excellence. And when we started on that journey, it was really -- we committed to lean methodology, which is sort of a dedicated daily focus on rooting out waste and wasteful activities in the business and driving efficiencies. And so we'll continue to find opportunities throughout the business. And I think from what we've seen when we went to Europe and the partnerships we've created with best-in-class pharmacies across the EU is that there are still learnings that we are sharing back and forth and driving further efficiencies in our business that way. And so we will continue to drive those throughout the year. And then to Gary's earlier question, even with hub and spoke, as we continue to drive towards that model, there will be a significant upside for us on that part as well. Gireesh Seesankar: Just on the -- with the 6,000 to 8,000 beds potentially being added this year, do you think you'll be able to break double-digit margins with those adds? Suzanne Brand: We're optimistic. Sorry, Gireesh, I apologize, for a little bit of throat there. Optimistic with respect to breaking through to the double digit with the 6,000 to 8,000 as the target. Operator: [Operator Instructions] Our next question today comes from Max Czmielewski with Stifel. Max Czmielewski: Just firstly, I'd like to ask, you're at historically low leverage. You guys have done a great job in sorting out the balance sheet, and it's in great health now. I guess just with respect to that, can you provide a little bit of color on firm capital allocation plans? I know the dividend is now in place and the buyback continues. But is that the plan? You do expect to invest a little bit more into existing facilities, building out any capacity? I understand Ontario is well positioned to add new beds with its current capacity, but maybe provide a little detail on what you think about using your balance sheet for? Suzanne Brand: Max, with respect to capital allocation, you are correct. We will continue in terms of our -- the -- we focus on the dividend. We focus on the NCIB in terms of the buyback. But of course, we'll continue with capital allocation between the $8 million and $10 million with respect to pure capital. And then secondarily to that, we'll also look for opportunities from an M&A perspective and how that might obviously impact our business positively. But because we are so -- positioned very effectively on our balance sheet, we'll be able to maneuver that within our current structure. Max Czmielewski: That's great. And maybe just broadly, with regards to M&A, are you in discussions to any degree? Or does the pipeline looks a little bit more active than it is historically? Just what does that look like? Puneet Khanna: Yes. It's still early innings on that, Max. So nothing -- we haven't -- we're not bearing any fruit yet. But again, I think we're pretty optimistic on using our cash effectively to fuel growth. Max Czmielewski: Great. And maybe just on what's over the horizon this year. And I think we've spoken about it in the past, but with the genericization of semaglutide in Canada, maybe lay out your expectations or refreshed expectations and if this will translate into any gross margin expansion in the back half of the year? Suzanne Brand: So with respect to Ozempic/semaglutide molecule, there is an expectation. Word is, is that it would likely go generic late in the year. So we are watching that, never any guarantees with respect to getting through all the regulatory hurdles. It will -- again, as you know, it's a pass-through from both revenue and cost of sales, but we will be able to push a little bit of upside with respect to our wholesale terms. But at the end of the day, it's just still a little bit of a wait and see on semaglutide to see that it actually does get into the generic space. Max Czmielewski: Great. Maybe one more question. This is a bit of a shot in the dark. Have there been any discussions with Quebec officials yet on expanding services into the province or even in the maritime provinces for maybe a broader geographic reach? And how are those advancing? Puneet Khanna: Yes. So we operate in Moncton, New Brunswick already. With the legislation there, we could service into Nova Scotia from that location. And just with the limited geography, that would most probably make the most sense out of the gate for us. So we continue to look for opportunity to expand into that market. And then with Quebec, it's one of those. We are continuing to have ongoing conversations with a number of different individuals. But again, nothing to report back at this point. Operator: And that concludes our question-and-answer session. I'd like to turn the conference back over to Puneet Khanna for any closing remarks. Puneet Khanna: Thank you, everyone, for participating in today's call and for your continued interest in CareRx. We look forward to reporting on our continued progress next quarter. Operator: Thank you, sir. This brings to a close today's conference call. You may now disconnect your lines. We thank you for participating, and have a pleasant day.
Operator: Good morning, ladies and gentlemen. Welcome to the Spin Master Fourth Quarter 2025 Results Conference Call. [Operator Instructions] This call is being recorded today, Thursday, March 5, 2026. I would now like to turn the conference over to Tim Foran, VP of Investor Relations. Please go ahead. Tim Foran: Thank you. Good morning, everyone, and thank you for joining our call. With me here today are our CEO, Christina Miller; and our CFO, Jonathan Roiter. For your convenience, the press release, MD&A and consolidated financial statements are available on the Investor Relations section of our website at spinmaster.com and on SEDAR+. Before we begin, please note that remarks on this conference call may contain forward-looking statements about Spin Master's current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements and any other future events or developments. Forward-looking statements are based on currently available information and assumptions that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such assumptions will prove to be correct and many factors could cause actual results to differ materially from those expected or implied by the forward-looking statements. As a result, you are cautioned not to place undue reliance on these forward-looking statements. For additional information on these assumptions and risks, please consult the cautionary statements regarding forward-looking information in our earnings release dated March 5, 2026. Except as may be required by law, Spin Master disclaims any intention to update or revise any forward-looking statements, whether because of new information, future events or otherwise. Please note that Spin Master reports in U.S. dollars, and all dollar amounts today are expressed in U.S. currency, unless otherwise noted. Also, all industry data that we referenced related to toys is from Circana LLC retail tracking service and relates to data from our G11 markets, which are specified in our Q4 2025 supplementary presentation. And unless noted otherwise, all percentage growth rates refer to the period ending December 31, 2025, relative to the same period in 2024. In terms of an agenda for the call, Christina will start with a review of the year 2025 and then an overview of our strategy and priorities for 2026 and beyond. Jonathan will then provide a financial review of the year, Q4 and our financial outlook for 2026. I would now like to turn the conference call over to Christina. Christina Miller: Thank you, Tim, and good morning to everyone who is joining us today. 2025 was a challenging year for our U.S. toy sales as we navigated a difficult tariff macro environment. And while we achieved many of our goals, our results did not meet our expectations we wet at the beginning of the year. However, I'm pleased with how the team responded and made adjustments to set us up for a return to profitable growth in 2026. Most notably, we focused on execution, investing where it matters most and making clear choices to drive growth. In Digital Games, we focused our investments on improvements to our 2 core platforms, Toca Boca World and Piknik by optimizing the user experience and increasing content releases. We also expanded the reach of our brands through exposure on third-party platforms. This strategy led to more than 20% growth in revenues and adjusted operating income in 2025. In entertainment, expanding the reach of PAW Patrol was our top priority. We introduced new tent-pole specials to build towards the summer release of the third PAW Patrol movie, and we invested in a broader content slate and new IP development. In Toys, we increased our POS driven by consumer demand across our key categories, products and licenses. We invested in strengthening our core brands, driving innovation and expanding into higher growth categories. And we have diversified our supply chain responding to the evolving tariffs. At the corporate level, we've been investing in material IT improvements to enable efficient, scalable and future-ready business operations. It has been a significant amount of change, and I'm proud of the team's commitment and resilience. Now in terms of specific results for our creative centers. In Toys, we started 2025 strong with a solid first quarter, reflecting momentum in our core brands, innovation and licensed brands. However, driven by economic uncertainty following the introduction of tariffs, the remainder of 2025 was challenging, notably in the U.S. As I noted, our POS was up in 2025. However, our sales to retailers were negatively impacted as they reduced their inventory levels. But this does set us up well for 2026. Melissa & Doug was the most impacted by these shifts, given almost all of the sales entering 2025 were in the U.S. and manufacturing for the brand was primarily in China. As I outlined on our last call, we are executing on a plan to stabilize M&D and return it to growth. We had a solid start to the international expansion and the team successfully optimized inventory levels for 2026, a year in which we aim to gain more retail space in the U.S. and in Europe. In 2025, we deepened our position with partners. Jurassic World Primal Hatch was the top selling in youth electronics, Ms. Rachel was the #1 absolute growth license in infant, toddler and preschool category and Monster Jam continued to take market share in vehicles, remaining the #2 property in the category. Quality innovation also helped drive growth in our core brands, Hex Bots Wall Crawler was the #1 item in remote control vehicles. Cool Maker Heishi Bracelet was a top-selling new item in arts and crafts in the U.S. and Europe and our new Melissa & Doug WOW products helped the brand become #1 in craft kits. We remain a preschool leader and gained market [indiscernible] which moved us up to the #1 manufacturer in our infant, toddler, preschool and plush category. PAW Patrol was #1 here. Looking ahead to 2026. We've had very positive feedback from retailers on our toy line. Our PAW Patrol movie line is filled with exciting new transformation for preschoolers. Grounded in our mission of purposeful play with Melissa & Doug, we are introducing new pretend play experiences and adding infant and play sets. Primal Hatch won the Toy of the Year and Action Figures Toy of the Year in 2025. Now we are extending the line with new iterations across multiple price points. We continue to launch new innovation-driven concepts, including Magic Jellykins and [indiscernible]. Gund had strong POS growth in 2025. And in 2026, we will continue to broaden its appeal with great new licenses and a unique brand promise Forever Friends, plush that can last the lifetime. And we have a portfolio of exciting new products for popular licenses, including Monster Jam, Ms. Rachel, Gabby's Dollhouse, as well as KPop Demon Hunter, Hello Kitty and a key item for the upcoming Super Mario Brothers movie with Hatchin' Yoshi. We also recently announced our expansion into strategic trading card games, a category that nearly doubled in size in 2025. We are taking a two-pronged approach here. The first is a distribution partnership in North America, Australia and other markets with Italian brainrot, a series of collectible trading cards that has successfully tapped into this wonderfully weird viral trend. And this fall, we are launching Hellbreak, a fast, competitive and highly collectible game for an older demographic. This is a multiyear initiative to build out a one-of-a-kind horror crossover universe that will include characters from across the horror genre from Universal and other major studios. In summary, our focus on toy going forward is to expand our leadership position in our major categories, create new categories from white space through our innovation and enter and compete in high-growth categories where we have the right to win with compelling products. Moving to Entertainment. We have an exciting year ahead with the global release of the PAW Patrol movie in August and we are investing ahead of that. We continue to build the PAW Patrol universe with new content and expanded distribution to ensure the pups remain a global preschool leader with the next generation of children and their parents. We've been reaching new audiences by adding previous seasons and movies on Netflix, which have driven strong engagement. In 2025, hours viewed on Netflix of PAW Patrol increased by 10% to almost 1 billion hours, a testament to the relevance of the brand. In 2026, we have new seasons of PAW Patrol and Rubble & Crew being released on Nickelodeon and Paramount+ and other global channels with future seasons in development. In addition to PAW, we are continuing to create new IP including the development of our animated 4-quadrant movie. The release of the new season of Unicorn Academy also begins globally on Netflix this month. In Digital Games, our focus on Toca Boca and Sago Mini Piknik subscription bundle is paying off. We have created value in the Toca Boca community by increasing the frequency of free and paid features, content releases and collabs, including Universal's Wicked: For Good and Hello Kitty, enhanced our Piknik subscription offering, including through the addition of Crayon Club and extended the reach of our brands by licensing to third-party platforms. In 2026, we plan to put the Toca Boca user experience first by continuing to invest in improving the tech platform to support faster production, more content and live service and we will be bringing this playful world to fans with Miniso this summer, and we have a pipeline of other partnerships coming. With Piknik, our strategy is to drive growth in subscribers and increase retention by showcasing the value proposition of the deep bundle of titles included. As part of this, we have a content pipeline to fuel subscriptions, including the first quarter release of the new reading app Superfonik. We also have a new UX launch planned in the coming months that will make it easier for parents to access the full Piknik offering within their subscription, a key driver of higher retention. And we are continuing to expand our partnerships. In the first quarter, we launched Jinja's Garden, Sago Mini's first-ever immersive 3D game on Apple Arcade. Finally, the integration of Lylli s going well, and it is an example of how we can drive value across our creative centers. We are utilizing Lylli as a platform to make reading part of our brands, including PAW Patrol and Melissa & Doug. In summary, we have clear priorities for 2026, as I outlined in detail on our last call. The first is capturing the movie moment for PAW Patrol across all creative centers. The second is fully realizing the potential of Toca Boca digitally in the physical world and through content. And the third is returning Melissa & Doug to growth. Beyond 2026, we are setting the stage to reignite a new growth cycle by investing in innovation in our toy portfolio and digital platforms, expanding into high-growth categories and accelerating collaboration across our creative centers to unlock the full potential of our portfolio and brands. With that, I turn it over to Jonathan. Jonathan Roiter: Thank you, Christina, and good morning, everyone. As Christina noted, the 8% decline in our Toy gross product sales in 2025 and was driven by an approximate 12% reduction in retailer inventory levels. And because we don't expect significant more reductions, we believe we have a healthy setup going into 2026. We have successfully reduced our own inventory levels in the year by about 20% due to our sell-through efforts with Melissa & Doug successfully reducing its age inventory as well as a reduction within Spin Master of licensed products that we are exiting. Our improved days inventory outstanding, combined with improved payable management, help us decrease our consolidated cash conversion cycle by 7 days. During the year, we generated $308 million in operating cash flow despite the headwinds in the U.S., illustrating the cash generating power within our model. CapEx was approximately $185 million, which included certain projects that I outlined on our third call. Specifically, approximately $24 million related to our IT investments to upgrade our enterprise software across our global organization and approximately $33 million, which was attributed to our new [ Lylli ] office and showroom of which about $15 million was funded by our landlord. After CapEx and lease payments, our free cash generated was used to purchase Lylli in the fourth quarter. We also returned about $80 million of capital to shareholders through our quarterly dividends and by maximizing our share buyback program for the second year in a row. We have now reduced our TSX listed shares outstanding by approximately 7% over the past 3 years through our buyback programs. Net debt, excluding lease liabilities, was held flat year-over-year as we prioritize return of capital. We ended the year with one turn of net leverage, including leases. Now digging into our fourth quarter results by segment. Toy GPS declined by 5%. This was a significant improvement over the 20% decline we experienced in the third quarter, which was driven by the delayed timing of retail orders as many had moved from direct import to domestic replenishment. In the fourth quarter, we lapped much of that timing issue as domestic replenishment sales surged in December by 50%, making up for some of the reduced import sales that we experienced in prior months. A special thank you to our sales, supply chain management and fulfillment teams for navigating us through such an abrupt tariff-driven change in retail order patterns in 2025. In the fourth quarter, we support our retail partners and invest in sell-through to optimize our inventory, which resulted in Toy revenues and gross profits declining faster than GPS. The quantum, however, was not unusual and sales allowance percentage and gross margins were in line with levels we have seen in the fourth quarter of 2024 and 2023. As much of our promotional efforts in Toy were above gross profit, we reduced our marketing expense and OpEx, which helped protect EBITDA. As we noted on our last call, Melissa & Doug was negatively impacted in 2025 due to the tariff-driven environment and increased competition. While we are executing our plan to stabilize and return the brand to growth, the change in dynamics led us to take a noncash goodwill impairment charge. Turning to Entertainment. Revenues increased 3% driven by higher distribution revenues stemming from deliveries of content. However, adjusted operating income declined due to a $12 million increase in amortization of content development within cost of sales, reflecting the in-period dilutive impact from content delivery. Within Digital Games, revenues increased 16%, driven by increased partnership revenues, increased engagement and monetization on Toca Boca World and improved retention and higher ARPU in Piknik. The revenue increase drove a 24% increase in adjusted operating income. So now turning to our outlook for 2026. We are guiding for a stable to low single-digit growth in revenues and a mid- to upper single-digit growth in adjusted EBITDA. The top end of our range reflects growth drivers with a downside reflecting conservatism due to the uncertain economy and its impact on the U.S. consumer demand. In terms of drivers, we expect healthy growth in Entertainment, through the release of PAW Patrol movie and more modest growth in Digital Games as it faces a challenging comp in '25 when it grew by more than 20% and benefited from significant partnership revenues. As it relates to Toy, we expect drivers to include the third PAW Patrol movie, M&D improvements, continued innovation through the portfolio, exciting new licenses as well as the potential to recapture some shipping revenue that we lost in the prior year. Headwinds to growth will be the lapping movie years for DreamWorks Dragons, Gabby's Dollhouse as well as exiting certain licenses, notably D.C. In terms of top line cadence throughout the year, we anticipate year-over-year results in Entertainment to be relatively stable in the first half, with growth in the second half following the release of the PAW Patrol movie. This would be a combination of revenues of approximately $20 million, followed by additional distribution revenues thereafter. Within Digital Games, we're aiming for modest growth in each quarter with rates increasing in the second half partially driven by the launch of our new PAW Patrol digital game and improvements we are making to our platforms. And in Toy, we anticipate an approximately 30-70 split in Toy revenues between the first and second half of the year with the first quarter anticipated to be in the low double digits and the second quarter high teens. Year-over-year results through the quarters in Toy are anticipated to be volatile to a significant shift in retail order patterns last year. Retailers pull forward orders in the first quarter last year in anticipation of the introduction of tariffs, which makes it a challenging comp. Therefore, in the first quarter, we are expecting a significant year-over-year decline in Toy, which in turn is anticipated to result in a double-digit decrease on a consolidated basis. For the same reason, of course, we should have easier comps in Toy in the following quarters, notably in the third quarter. In terms of gross profit, I'll note that the current geopolitical climate may result in certain higher cost of sales such as freight. It is too soon to quantify these. We do expect approximately $22 million of increase in depreciation and amortization within cost of sales, primarily related to amortization of entertainment content development. In the first quarter specifically, we expect a year-over-year decline in gross margin due to a $12 million increase in entertainment amortization. In terms of operating expenses, we anticipate efficiencies in certain areas to help us pay for increased technology investments. The increased adjusted EBITDA margin implicit in our guidance is consistent with the 50 to 100 basis point general target, I outlined on previous calls. As it relates to adjusted EBITDA cadence, we expect seasonality to be similar to last year and '24, with the second half representing more than 85% of our full year results. In the first quarter specifically, we anticipate negligible EBITDA due to the anticipated decrease in gross profit. Below adjusted EBITDA, we are anticipating depreciation and amortization in 2026 to be approximately $160 million, with the increase driven by entertainment, as I previously noted. Finance costs are anticipated to be similar to 2025. Now turning to our cash flows. Lease payments are anticipated to be just under $40 million annually and our CapEx is anticipated to be approximately $150 million in 2026. Now about $25 million of this relates to investments we are making to upgrade our enterprise software, which we expect to launch by the end of the year. This includes leveraging the latest technology to prove and automate our data quality and processes and facilitate tighter integration within our creative centers. The remainder is primarily investments in 3 areas: first, new entertainment content of which 70% is earmarked to continue to expand the PAW Patrol universe, where we generate strong cash-on-cash returns with much of the remainder on our new animated original IP film. Secondly, [ tooling within toy ]. Apple intensity in toy continues to remain in the low single digits. And thirdly, digital game projects. Specifically, the majority will be spent on Toca Boca with a focus on driving growth through next-generation game development, additional content, features and platform upgrades. The remainder will be spent on driving retention in Piknik by investing in new game launches, content expansion and live service development, and we'll be completing our new PAW Patrol digital game. In terms of capital allocation, we remain focused on first investing and driving growth, both in OpEx and CapEx. With the free cash we generate after CapEx and lease payments, we expect to continue to look for M&A to further our strategies. We are maintaining our dividend. We are also renewing our share buyback program. So in summary, we'll look to maintain a balanced capital allocation approach with prudently [indiscernible] conservative leverage. With that, operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from Adam Shine from National Bank Financial. Adam Shine: And of course, thanks for the outlook and a lot of details, Jonathan. If I could go back, one item that I didn't hear was on the sales allowance front. And maybe you can talk a little bit more in terms of the nature of promotional activity that you think might transpire during the course of this year, let alone perhaps still in Q1. Jonathan Roiter: Thank you for the question. I'm glad that you appreciate the details on the guidance, return to guidance. In terms of sales allowances, we finished this year I didn't -- sales allowance in Q4, I'd point out that those are similar to levels that we had in '23, '24. And so really, when you look at the overall year of '25, it's not necessarily an anomaly. And so heading into 2026, I think we're expecting similar levels. We're really early in the year. Sales allowances really are determinant of your products. And when we look coming out of New York Toy Fair, there's a lot of excitement around our core new products. And so ultimately, sales allowances, we are expecting it to be similar to 2025. Adam Shine: As you reflect on some of the latest dynamics around the tariffs, I think we were moving from 10% into 15% perhaps other changes are afoot. How do you read the landscape. Is this another year where you effectively pass pricing on to the consumer to wash the tariff impact? One part to the question. And then secondarily, are there other benefits to be extracted by virtue of some of the supply chain management issues you pursued last year? Jonathan Roiter: Yes. Thanks, Adam. It certainly is a dynamic environment. You're right, we're currently at 10%. I think there's some expectation from the Treasury Secretary that next week we'll move up to 15%. Bear in mind, those are lower than the previous years. If we just step backward for a moment in 2025, tariffs themselves were not -- the actual dollars that we paid were not material. The net dollars that we paid versus price was not material. Really tariffs, the element that was material was how the consumer ended up showing up and how the retailer bought throughout the year. So we don't expect a movement from 10% to 15% or thereabouts to have a material impact on the net dollars going out. Obviously, the bigger question mark is, does that impact the consumer? And does that impact the retailers? So far, as we began Q1 and 2 months in, we have not seen changes in the retailer purchasing behaviors with the change in the tariff environment. Adam Shine: And just one last one, and I'll queue up again. Just to confirm and clarify with respect to the PAW Patrol movie expected distribution, I think you said $20 million. And is that something that hits the Q3? Or is that $20 million figure the -- a figure for all of 2026? Jonathan Roiter: No. So when we release the theater -- release the move, there's contractual responsibilities. And of those, we received $20 million, and that will be a Q3. How the movie performs, then there's additional funds that we would receive. Adam Shine: Perfect and this is as per the last 2 movies. Operator: Your next question comes from Kylie Cohu from Jefferies. Kylie Cohu: First, just thinking about the industry as a whole, what are you expecting from preschool infant and toddler category? And then also just like the broader toy industry as a whole for 2026 in terms of sales growth? Christina Miller: I think that what we -- just looking at the category overall for us, we see that the consumer sentiment like towards the end of last year was a little bit softer, but improved by the time we got into December slightly. And that toys continue to -- people still continue to shop for toys, even if it's on a promotional basis, right, that they're looking for discount or otherwise. So our approach going forward and even towards the end of last year is to make sure that we have a balanced mix on pricing that across all of our brands that we're bringing value to the consumer. So more than 50% of our products are still priced below $19.99. So I think we have that kind of mix between driving innovation, helping grow that category and then also making sure that we have price points that work. And on top of that, I would add that we have some of the stronger brands in the space as well. So whether it's PAW Patrol being in a movie year or continuing to see growth in Ms. Rachel or Gabby's Dollhouse had a good year coming off the movie. So I think when we move into next year, it's about what else can we bring into that category, given our strength in that category and creating products for that category and then how do we continue to drive the products that we -- brands we have. Kylie Cohu: Super helpful color. And then I guess last one for me is just kind of what needs to go right in order for the results to end up at the high end of your EBITDA guide? Jonathan Roiter: Thanks, Kylie. Well, if we go back to kind of our prepared comments, there are really 3 focuses that we have, right? The first is capture the PAW Movie moment. And so ultimately, not just success at the theater, but also the toys that we have launched that are associated with the movie. We've had really strong response coming out of New York. And so we're really feeling bullish and positive about those products. The second is realizing the full moment of Toca and fully realizing the Toca's potential. So that is a multiyear journey. And we're going to start seeing over the course of this year, increased content, increased features, increased Toca being outside of the digital realm. That is a multiyear journey and executing on that will certainly help on the high end. And then lastly, we talked about for a number of quarters now, returning M&D to growth, and that is a focus of the team. We have -- we brought back innovation to the pretend play category. There's some new areas that we're launching products around and the feedback that we received, again, from the Toy Fair was positive. And so ultimately, those are the 3 elements that would bring us to the top end, plus the consumer showing up and plus stability with how retailers are ordering throughout the year. Operator: Your next question comes from Gerrick Johnson from Seaport Research Partners. Gerrick Johnson: Given the Supreme Court tariff ruling, has that changed conversations with dealers? And just in general, how are they wanting this to be fulfilled in the first half? Are they shifting back to FOB or still pretty much domestic fulfillment? Christina Miller: It's still too early to tell, right? The changes are coming daily at this point. So being able to react to them before the next one comes, I think people are just taking a wait-and-see approach at the moment. So we're not seeing any drastic changes. Gerrick Johnson: Okay. And how are they wanting to be fulfilled? Last year that we talked a lot about that shift from FOB to domestic and have we shifted back to normal shipping patterns? Or are we still in that domestic preferred over FOB? Christina Miller: Domestic continues to be about at the same rate as it was. We don't see a big swing back immediately. Jonathan Roiter: . Yes. I think it will take a number of years for that change. And if anything, there may be more domestic than FOB over the course of the year. Gerrick Johnson: And then on channel inventory, I heard a couple of numbers. Was it down 12%, down 20%? What was the channel inventory number? Jonathan Roiter: Sure. So the channel is down 12%. So that certainly positions us well kicking off the year. And we were down 20% year-over-year. And so from a working capital perspective and again, also positioning us well for next year with the quality of our inventory on hand. Gerrick Johnson: Okay. Is there still any excess out there in the channel that needs to be cleared or inhibiting first quarter -- first half shipments? Jonathan Roiter: I think there's always going to be some level of access. I would just revert back to we're starting the year in a great position, both from our own inventory position, down 20% and the market -- the retailers down 12% that is a strong position to start from. Operator: Your next question comes from Jaime Katz from Morningstar. Jaime Katz: I hope you guys can give us some insight. Maybe I missed it in the prepared remarks, but do you have any insight to the POS momentum coming out of the quarter? We're in March already. So hoping to get a little bit more recent visibility. Christina Miller: I mean I think right now, at this moment, it's slightly up is what we're seeing for the POS getting into the first 8 weeks of the year. Jaime Katz: Okay. And then we haven't really talked too much about this trading card market. But for horror specifically, I'm not very in the weeds in the space. I think there are some other brands in this space. So can you talk a little bit about what the total addressable market there is for you guys to tap into? How you expect the rollout of that to go and sort of when you expect it to start contributing to the P&L? Christina Miller: Sure. A couple of pieces there. I think in the prepared remarks, you would have heard us talk about a two-pronged approach, right? So we have a distribution partnership with Italian brainrot, which is a trading card brand out of Italy. And that will be the first one to go to market and that will be more of a mass trading card play. And then when you look at Hellbreak, which is the strategic trading card game that we're putting into the market later this year, and that's a multiyear growth initiative. So it will start at specialty and really look to permeate that channel and grow with the fan base that older demo. Right now, there's a big show going on in the trade show market called GAMA in Kentucky. And that's like one of the first legs of really revealing it to the specialty channel and to building fandom for the game. The game is there this week. It's doing really, really well. That's that first leg. So I think that really, at this point, it will be about -- we will not see huge growth from this category in 2026. It will start to grow more for us in '27 and '28. Operator: Your next question comes from Brian Morrison from TD Cowan. Brian Morrison: Maybe just you mentioned the key to returning M&D to growth. In New York, we saw the expanded product line beyond [ wood ], the expanded addressable market and your international expansion opportunity. But what's the strategy to gain market share following the tariff heightened impact last year? Is it product differentiation? Will you have to use price? How do we gain more market share back? Christina Miller: There's a couple of paths to returning M&D to growth, right? It's never going to be one thing. I think it is regaining retail space right across the channels, doing that through both category expansion into things like infant as well as continuing to grow our space with WOW products and driving some of the innovation you saw, also really digging into the pricing of our products as well and really making sure that the value is there for both our consumer and our retail partners. And then last but not least, of course, is international expansion. You saw us track towards model at the end of last year with growth into our international channels and growing further there will help us really expand the brand. And then beyond that, I think anyone that was able to spend time with us at Toy Fair will see the way that there's definitely other adjacencies that Melissa & Doug can grow into from an experiential standpoint and really looking at seeing how else we can make sure that the people that love Melissa & Doug can spend time with Melissa & Doug beyond just having a toy in their hands. Brian Morrison: Okay. And then maybe, Jonathan, can you clarify? I mean, obviously, growing Toca digital content is a priority next year or this year, pardon me. Maybe just reconcile the monthly active users in Slide 19, it appears that the ending MAU is down, but the average MAU is up. Can you just clarify how that works? Jonathan Roiter: Sure, Brian. I mean the simple answer is the -- 2 numbers are different. One is an ending number and the second as an average for the period. And so what you see is the trend, I guess, ultimately, in terms of what is transpiring. When we look at Toca, they really -- you really do have to look at it across the 3 core metrics: monthly active users, the conversion of those users and then ultimately, what people are paying. And we are not managing just for 1 of those metrics. We are managing across all 3, and we're comfortable to have some variability in our MAU, in our monthly active users as we try different ways to increase our conversion and increase our, what we call, our ARPU. So we're very comfortable with the trend that you're seeing there. And we're really trying to focus on all 3 of the variables at play. Brian Morrison: So is it safe to say it's a bigger basket from a more concentrated base of users? Christina Miller: Yes, Brian, I think what you're seeing is that it's both, right? And same thing that Jonathan was saying about the difference of its MAUs. It is there. Yes, we're trying to grow the top of the funnel and you see lots of releases -- content releases, both free and premium. And we are converting at the bottom of the funnel well. And I think that's one of the differences for Toca Boca versus competitors, right, is that the markets that we're going to and our ability to convert at the bottom of the funnel. So it's a little bit of both. Operator: Your next question comes from Martin Landry from Stifel. Martin Landry: Jonathan, I just want to talk about the impairment charge you took on Melissa & Doug, it's pretty large. I just want to understand when you did your cash flow analysis to write down the goodwill, was the write-down driven by a lower revenue profile? Or is it more from a lower profitability profile? Jonathan Roiter: Yes. Thank you, Martin. The math on any time you're looking at your CGUs and ultimately, the goodwill associated with it is driven first by your top line. And then what -- how does that translate into cash? Clearly, in 2025, we talked about a number of times. M&D was a brand that was disproportionately impacted by the tariff environment as the vast, vast majority of its production was coming out of China and the vast majority of the sales were to the U.S. And so it had a disproportionate impact. So when you take that in consideration, you rerun your model, ultimately, the baseline of where you're starting from is lower, and that's what drives the impairment. What's important is what we're doing going forward. And I think Christina walked through the growth drivers quite clearly. We're really excited to see a path to having more doors and more shelf space in 2026 than we had in 2025. And couple that with the innovation, the right pricing and continued international expansion. We think that we're -- our aspiration and our goal to bring back Melissa -- M&D back to growth, we're well underway on that. Martin Landry: Okay. And switching gears, I mean, in the past, there were lots of discussions and efforts and resources dedicated to the development of IP internally like Unicorn Academy, for instance. But we don't hear you talk about or maybe I've missed it, but is this a strategy that you're still pushing to develop IP internally? And what's the pipeline of the IP developed internally, if there is any? Christina Miller: Thanks, Martin. I think that we did discuss it a little bit in the prepared remarks around, one, obviously, we are continuing to invest in PAW Patrol, and we talk a lot about that. I think that's definitely one of the things you're noticing. And then other than that, we do have a pipeline of content, whether it's the 4 quadrant movie that's in development. Whether it's relooking at [ Bakugan ] which is an internal property talking about how we're going to develop Toca Boca. Again, when we look at driving and unlocking value for our portfolio, it's about getting it to its full potential. So I think one of the things you're noticing is the pipeline is filled with some of our very core brands that we have the ability to pull through across all of our creative centers. And then we always have a robust development slate where we're looking at what are the new content we can create. And as we get further along with that, we will obviously share it. Martin Landry: Okay. So is it fair to say that there's more focus on your core brand and trying to develop new stuff at the moment? [indiscernible] Christina Miller: No. I think that, again, I'm going to take a chance of just sort of repeating myself. But I think that, obviously, the core brands inside our portfolio are the brands that we are focused on giving and unlocking -- giving attention to and resources and unlocking their potential. Not in -- it's not binary. It's not just doing that. I think the development brands are just that. The same way we're developing over 500 toy products that we will bring far less of those to market. So we have a strong development pipeline. We're constantly looking at what else we can bring to market and when. But as you're probably aware, it's a pretty long process between when we start to develop the property and when we bring it to market. So no less development currently, what's closer in sight is the development or the shows that we're talking about. Jonathan Roiter: Yes. And there's a healthy -- 30% of our entertainment CapEx budget is outside of PAW. So there's a healthy amount of dollars that are being placed on those items that Christina just walked through. Christina Miller: Yes, we will always be a company that's in the active creation, right, that we're always looking at building and adding to our portfolio, and developing franchises across the business, whether they come from digital or they come from toy or they come immediately from content. So I think it's about looking left and right around us to bring what can we pull into content and then where are there those new content ideas. So we are, in fact, doing both. We are committed to doing both. Operator: Your next question comes from Luke Hannan from Canaccord. Luke Hannan: I wanted to follow up on the PAW movie contribution. I think I heard you correctly, it should be $20 million that's going to be recognized in Q3. Is the accounting for that similar as in the past where it will show up -- 100% of that revenue shows up in the EBITDA line and then there's the associated charges against that? And then if so, so just a clarification, so that $20 million then is included in the adjusted EBITDA guidance. And then if we break that out, it's more like flat to up low single digits on the year rather than mid- to high single digits? Jonathan Roiter: I missed the second part. But on the first part, I think it was muffled when I mentioned before. So similar to historical practices when we release content, if we're within a partnership, there's contractual -- we've met some contractual responsibilities and therefore, there is -- we can tell you the number that we're going to receive. And so we're going to receive $20 million of revenue. There will be amortization associated with that against that $20 million as we release content. I didn't get the second part of your question. I apologize. Luke Hannan: Maybe -- so I'll just clarify that. So in the past, like in 2023, for example, the number was in and around $15 million, and that showed up -- 100% of that revenue showed up in the adjusted EBITDA line as well. So in effect, it's almost like the margin on adjusted EBITDA was a little bit higher relative to where it should be because you have the amortization showing up below the EBITDA line. So I guess I'm just trying to think of, if we're thinking about it on a like-for-like basis, we're thinking of the margin expansion in '26 versus '25, should we be then excluding that $20 million of contribution from 2026 EBITDA? Jonathan Roiter: Yes. So it's -- I mean, I thought I addressed it, sorry. It's no different than in the past. So the $20 million, there's amortization associated with it. So therefore, EBITDA, you do see a flow through, through the EBITDA, where you won't see it flow through, excuse me, fully is to the [ EBITDA ]. Luke Hannan: Yes. Got it. Okay. Appreciate that. And then just as a follow-up, you talked about there are certain dynamics, obviously, geopolitical dynamics going on right now that make it very difficult to figure out what the impact is of higher freight costs on what your COGS is going to be going forward. Can you just give us an idea of what it is that you're seeing as far as changes in freight rates currently? Jonathan Roiter: Well, I mean, currently none. But I mean we're 4 days into the spike in oil. And so ultimately, I think it will come down to how high does oil go and how long does it stay at those rates. We're 4 days into the increase in prices. So right now, there's, what I'll say, no material impact. Of course, if this continues for an extended period of time, you will -- we will start seeing that. And there's probably a 3- or 4-month lag in terms of our freight costs and then ultimately hitting our P&L through our COGS. Operator: Your next question comes from Drew McReynolds from RBC. Drew McReynolds: Two for me. First, on the Digital Games side, just in terms of profitability. Obviously, we saw a little bit of a margin lift here in Q4 on pretty good performance. I think margin is stable overall in 2025. Just as you continue to grow the top line here, and invest in the platforms, how do you see margins unfolding going forward? And then second question on the M&A environment. Just maybe for you, Jonathan, just what areas of focus at a 30,000-foot view, are you looking at, at the moment? Jonathan Roiter: I'll start on the first one on the margins on Digital. There's really -- like when you think about Digital, there's 3 revenue streams ultimately that are in that business, there's the Toca stream, the Piknik stream and the partnership stream. Partnerships are very accretive. And so that's why you sometimes see some variability, upward variability on our margins is when we get to -- when we recognize partnership revenue. Some deals, we get to recognize all at once. Some deals are over, of course, a number of years. And if they're material, we do on the call, I'd like to point out the accounting treatment associated with it. Then when you look at Toca and Piknik, they're both in very different stages of their journey. Toca has hit what I'll call scale, and so it's a very accretive business. And our focus is to continue to manage all 3 of those metrics that I talked about before and bring -- and further bring Toca to life outside of the Digital realm. Piknik, we're scaling that business, and so there are certainly more investments associated with the Piknik business. And so the accretion around Piknik is smaller than you would see at Toca. So those are the 3 variables at play when you look at the Digital business. And then in terms of M&A, we're -- I would say the current management team continues to have the same focus as the previous management team around the importance of M&A to our growth platform. Areas that we continue to be looking at are areas that can boost up our core competencies within Toy, areas that we're not necessarily playing in and are high growth in Toy, regions that we can benefit from as well. And then we continue to be actively looking and you saw our last acquisition was in the digital space in the digital realm where we can add more content and more capabilities. Operator: [Operator Instructions] Your next question comes from Ty Collin from CIBC. Ty Collin: I just want to circle back to the discussion around margins. So the 2026 guidance implies probably somewhere between 50 and 100 bps of EBITDA margin improvement. As discussed in a previous question, it sounds like a fair bit of that is going to be coming from Entertainment and Digital rather than the Toy business. So I guess my question is just what's it going to take to kind of get core Toy profitability back to 2024 levels? What does that pathway look like? And are there any other sort of self-help levers available to the company to get there? Jonathan Roiter: Thanks, Ty. It's a great question. The challenge when you have kind of these high-level numbers, you don't see kind of all the different pluses and minuses underneath each. What I can tell you is that there is accretion and there is margin improvement within the Toy business. It's the biggest part of our business, right? It's 80-ish percent of our overall business. We are -- and we've talked about in the past, ensuring that we are setting up this company to have a new growth cycle and a sustained growth cycle and a profitable growth cycle. So there are investments that we're making on the increased margin because we are getting -- from a portfolio approach, we are getting accretion on entertainment. So this is a year where we could certainly put dollars back to work to set ourselves up for success, '27, '28 and '29 on that journey of continuing to grow the top line and expanding our margins. I've talked in the past that I see this business being able to consistently add 50 to 100 basis points a year for a number of years, and we're doing it. And so we're making sure we can do it this year, and we're going to make sure we can keep on doing it going forward. Operator: And there are no further questions at this time. I will turn the call back over to Christina for closing remarks. Christina Miller: Thank you all for being with us today. We look forward to talking to you on our Q1 call on April 30th. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.