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Operator: Greetings, and welcome to the Full House Resorts Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Adam Campbell. Thank you. You may begin. Adam Campbell: Thank you, and good afternoon, everyone. Welcome to our fourth quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we're making under the safe harbor provision of federal security laws. I would also like to remind you that the company's actual results could differ materially from the anticipated results in these forward-looking statements. Please see today's press release under the caption forward-looking statements for the discussion of risks that may affect our results. Also, we may reference -- we may make reference to non-GAAP measures such as adjusted EBITDA. For a reconciliation of those measures, please see our website as well as previous press releases that we issued. Lastly, we are also broadcasting this conference at fullhouseresorts.com, where you can find today's earnings release as well as our SEC filings. And with that said, we're ready to go Lewis. Lewis Fanger: Well, good afternoon, everyone. It was a very good fourth quarter, but the comparisons versus last year aren't very straightforward. So we'll take you through those really quick. Revenues rose to $75.4 million, up from $73 million in the fourth quarter of 2024. Keep in mind that the fourth quarter of 2024 included $1.5 million of revenue from Stockman's, which was sold in April of 2025. So revenue growth on an apples-to-apples basis was 5.6%. Adjusted EBITDA in the fourth quarter of 2025 rose to $10.7 million. Adjusted EBITDA for the fourth quarter of 2024 was $10.4 million. That included quite a bit of noise, including the benefit of a $1.2 million recovery settlement and the reversal of about $0.5 million of accruals at corporate. Those 2 figures increased the fourth quarter of 2024's adjusted EBITDA by $1.7 million. Backing those 2 items out of the prior year's fourth quarter, the increase was about 23%. At American Place, our temporary casino continues to show significant growth. Revenues increased by 11% to $32 million in the fourth quarter of 2025. Adjusted property EBITDA rose 29% to $8.7 million. For the full year, revenues and adjusted property EBITDA rose to $124 million and $34.3 million, increases of 13% and 17%, respectively. Interestingly, the pace of growth actually increased as the year progressed. We fully expect adjusted property EBITDA at American Place to continue to climb in 2026 and the year is off to a good start. We have long said that the temporary American Place facility on its own should eventually be able to achieve about $50 million of run rate EBITDA and that it's much larger permanent facility should be able to earn double that amount or about $100 million. We continue to believe that our market remains under-penetrated. Some quick facts. Our permanent casino will not only be nicer, but in terms of square footage, it will be about twice the size of our temporary. We are the closest casino to more than 1 million people. We are located in one of the wealthiest counties in the entire country. Our closest casino competitor is 45 minutes to the south and they make $0.5 billion a year in gaming revenue. Our second-closest casino competitor is about an hour to the north, and they make more than $400 million a year in gaming revenue. And we're sandwiched not just midway between those 2 very successful casinos, but also between 2 of the major north-south traffic arteries in Northern Chicagoland. Those facts, combined with our 3 years of operating experience in the market are what gives us so much conviction in what we think American Place can achieve in the long term. Turning to Chamonix. For the first time in recent memory, we have a fully formed management team. That began with a new General Manager in March of 2025, new Directors of Marketing and Group Sales in July and August of 2025, the promotion of a talented pastry chef to lead the food and beverage department in January of 2026, a new Finance Director last month and a new Assistant General Manager this week. Here's an interesting stat to look at. If you look at just the second half of 2025 under the new management team and compare it to the second half of 2024, revenues increased by $1.2 million or about 5%. Adjusted property EBITDA in those 6 months jumped by $4.2 million. The new team is making great strides and we believe our Colorado operations will be a significant positive contributor to adjusted EBITDA in 2026. Specifically for the fourth quarter of 2025, we had a small, adjusted property EBITDA loss in the seasonally weaker winter season, but that was a significant improvement versus the much larger loss in the fourth quarter of 2024. After several quarters focusing on the cost side, the new team has redoubled its marketing and awareness efforts. If you look at any of our marketing collateral, it has been completely reenergized after transitioning to a new marketing agency during the fourth quarter of 2025. In January and February of 2026, we had a modest amount of construction disruption as we replaced the carpet and installed new ceilings in Bronco Billy's. The incremental spend was extremely modest in the low 6 figures, but the result was outsized. It used to be quite jarring to walk from Chamonix into the Bronco Billy's Casino. Today, while Chamonix is certainly more elevated, the 2 casinos now complement each other quite nicely. We also just opened our Mexican restaurant at Bronco Billy's with an inspired new menu as we prepare to head into the busy summer season. Looking at our database, we've been especially focused on driving loyalty and growth in the top 2 segments of our database. For the first 2 months of 2026, our top segment has seen unique guest counts increase by almost 20% and the total number of visits from that segment is up 36%. For the segment under that, unique guests are up 12%, and total visits are up 24%. Awareness is expanding and loyalty is expanding, which both bode well in our efforts to continue growing revenue and improve profitability. Regarding our group business at Chamonix, that continues to pick up steam. At this point, we have a couple of thousand room nights on the books, with a couple of thousand more that are close to commitment or with decent prospects. As we mentioned last quarter, our ideal group size is between 100 and 150 attendees. Within 500 miles of us, we estimate that there are up to 4,000 conferences that fit that profile. Groups of this size tend to book years ahead of time. When we have a fully ramped group business in a couple of years, we think it will consist of about 55 events per year or about 1 per week. That is the key to improving our midweek occupancy. Among our smaller properties, Silver Slipper and Rising Star declined slightly for the quarter. Similar to Chamonix, we've upgraded most of the management team at Silver Slipper, and they are gearing up for growth in 2026. Grand Lodge, which is a pretty small part of the company at this point, continues to be adversely affected by renovation disruption at the Hyatt Lake Tahoe that houses our casino. The Hyatt Resort will be beautiful when that renovation is complete. But in the meantime, we're trying to manage through the disruption. That includes proactive efforts to find new casino guests in advance of completion of the renovated amenities in 2027. On the balance sheet side, we had about $51 million of liquidity at the end of the quarter, including the undrawn portion of our revolver and we're about to enter that part of the year where we generate meaningful cash flow. We amended our revolving credit facility a few days ago. That was a simple amendment to extend the maturity date of our revolver to August 15, 2027. And we've said this several times, but our Illinois operations alone pay for the interest expense on our current debt. And of course, Illinois continues to ramp, as does Colorado. Lastly, an update on our continuing progress for our permanent American Place Casino. In real time, our architects are putting the finishing touches on our foundation drawings. Those drawings should be done imminently. With those drawings in hand, we'll be able to officially break ground on the casino's foundations. We expect that to occur sometime in the coming weeks. The foundation work does not take a lot of money, but it does take several months to complete. By getting it done now, we can accelerate our time line to construct the permanent facility. Meanwhile, we are making good progress with respect to the financing of the American Place facility. We have received several proposals for the construction of the permanent facility at attractive rates, including proposals that fully fund its construction without the issuance of equity. We're not quite able to provide details just yet, but we hope to do so in the next several weeks. As we have noted previously, we are currently allowed to operate our temporary casino until August of 2027. In conjunction with our anticipated financing, a bill was recently introduced into the Illinois legislature to extend that operations stay by 18 months. Typically, items in the legislature don't get voted on until the end of the session, so we expect it to pass in April or May. Passage of the bill will allow us to transition smoothly from the temporary casino in [ 18 to 20 months ]. Bally's has a similar bill in front of the legislature for the same reason. I covered a lot there, Dan. What did I forget? Daniel Lee: I don't know. I think you got it all. And we'll get to questions. So if we forgot something, it will almost certainly come out in the questions. Lewis Fanger: Very true. Operator: [Operator Instructions] Our first question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Ryan Sigdahl: I want to start with Chamonix, though, for the first question. So appreciate the improvement kind of on a full year basis, especially on the cost side. If I look at revenue, 19% growth in the first half of the year. Year-over-year, 7%. In Q3, 2%. In Q4, flipped to a loss. I get the seasonal aspect of that. But I guess, just walk through, I guess, what's going on there specifically just given kind of a decel from a trend standpoint and considering it's still very subscale or early stage in its maturity? Daniel Lee: Ryan, if you recall, last year, when we reported the third quarter, we pretty bluntly said we had run some marketing programs in I think it was principally September of 2024, which were non-economical. In other words, we induced people to come down, gave them free rooms and they didn't gamble, and it actually cost us at the bottom line quite a bit. But it did puff up the top line. Then in the fourth quarter, we had a big grand opening party, and it was a very expensive party to have, we had Jay Leno, et cetera, et cetera. And remember, looking around and realizing that the people who were there were the same people we'd always had when it was a golden opportunity to try to get new customers and people down from Denver and so on. And it was about that time, I realized that we had the wrong management team, and we had to make a bunch of changes. And we have now. But the prior year numbers were kind of artificially inflated by inefficient marketing in those 2 quarters. And -- but now we have a new advertising agency, we have a Chief Marketing Officer here. We have new marketing people at the property. They've been getting organized and all that stuff is coming into play now, and Lewis gave you some of those numbers. And so I think you'll see revenue growth pick up going forward. But the reason it looks like such a small year-over-year growth was the promotional stuff we did last year that kind of boosted revenue but not income. Ryan Sigdahl: Quick follow-up on that, and then I do have another question. Have you seen any re-acceleration thus far in Q1 of '26? Daniel Lee: We have with the caveat that it was pretty torn up back in January. We renovated the west part of Bronco Billy's and putting down the carpet and ceilings. And frankly, I was surprised it didn't have more disruption than it did because we are showing better revenue numbers. I think if we hadn't had that disruption, we'd be doing even better than that. I mean at the end of the day, this is one of those where you open it, it's not performing as well as you thought it would. And you start looking at it and saying, first, did we make a mistake? And I've gone back several times now and gone through the numbers again of how many people live in Colorado Springs, Denver and competition and everything else, and I'm absolutely convinced we did not make a mistake. And in fact, I can underline that by the fact that Monarch's EBDIT (sic) [ EBITDA ] for the year was $199 million. Now they only have 2 casinos. They don't break out the one from the other. But the smaller one, which is in Reno made $40 million to $50 million a year for a long time before they opened in Black Hawk. And so Black Hawk has only been around 3 years, I think, in their portfolio. So they must be making significantly north of $100 million a year in Black Hawk. And it's a good property and frankly, a well-managed company, and they opened far more smoothly than we did. And I look at it and say, well, they're there with 500 rooms, we are equivalent in quality, we have 300 rooms. There are aspects of ours that are nicer than theirs. Now they are an hour from Denver, we're an hour from Colorado Springs, but from Southern Denver, we're about equal distance. But they also have significant competitors there. I mean they not only make a lot of money, but so does Ameristar, the Horseshoe and the Lodge and then there's a bunch of smaller ones. There's a lot less competition in Cripple Creek and the competitors are not anywhere near as good as the quality of ours. So I think we are in the right place. I think we've built the right product. I think fixing up Bronco Billy's makes it quite a bit nice. So we didn't spend a whole lot of money, but it really made a pretty big difference, just changing the carpet and drop -- putting in a drop ceiling. And now we have the right management team all put together, and there's a lot of blocking and tackling that we need to do. I mean there's simple stuff like the housekeeping department there cleans 9 rooms a day. At our other properties, they clean 14 rooms a day. 9 rooms a day is pretty ridiculous. We have a new Assistant GM, who has a strong background in hospitality, and that's one of the first tasks, he'll try to figure out. And we do it through an outside company and we probably need to adjust that. And that factors in all the way down because if you're only cleaning 9 rooms a day, the cost to turn a room is like $50 or $60 when it should be $30 or $35. In other words, the cost of renting a room that would otherwise sit empty, when I say the cost of turning a room. So that factors into who you're willing to comp a room for. And if we can get the cost of turning the room down, then we could be a little more generous with who we comp rooms for. And so there's a lot of blocking and tackling, which we are doing. We had a Mexican restaurant, for example, that had terrible food, to be honest. And it's been closed for about 6 months. We promoted a very talented chef to be the food and beverage manager, and it was kind of funny to persuade him to take the job because he was hesitant. He came back and said, I really want to promote some people and then get rid of some deadwood. And I said, well, that's exactly why I want you to take the job. I too want to promote good people and get rid of deadwood. And so he stepped up and the quality of the food in the reopened Mexican restaurant is 10x what it used to be. And it was just last weekend it opened. And that's important going into the summer. So there's a lot of little blocking and tackling that we are doing at that property. And if you get into the minutia, just about every parameter is trending the right way. No, I wish it were trending faster, but at least it's going the right way. And I'm convinced it will eventually be a very significant profit generator for us. And even this year, it will be significant, but significant like 10% to 15%, and it might be significantly above that next year and then the year after. I mean we built the rate property. We're there for the long haul. And it's a little more -- it's a different marketing task than we have at American Place. At American Place, we are in the middle of 1 million people, they drive by us all the time, but we're in a strong structure. And so it looks like where the Department of Motor Vehicle store salt for the winter. I mean it has absolutely no curb appeal, but a lot of people driving by. And if you go up to Colorado Springs, we have fantastic curb appeal. The building looks fantastic, but nobody is just driving by. So we have to persuade people from Colorado Springs to drive up there. It's just under an hour, but to come up and see it. And once they do come up and see it, we get very good repeat visitation and that's how you build the business, but it doesn't happen overnight. Lewis Fanger: Yes. I mean the most promising thing that we're seeing behind the scenes is that those upper segments, which this property was built for. And when I say upper segments, I don't mean someone that's gambling $10,000 a day. I'm talking about someone that might go in and gamble a couple of hundred dollars a day. That is a very ripe customer that's an abundance that is our biggest group. It's a customer that's finding the building now for the first time. And as I kind of hinted at, or said actually, didn't hint that, in my opening comments, that group is where we're seeing significant growth in loyalty. Daniel Lee: In my experience, I remember Beau Rivage in Mississippi opened slowly. They went through the same sort of things. And then eventually, it found its stride, and it's led Mississippi now for 20 years. Similar in Las Vegas, Luxor opened slowly and then found its stride, and it's been very successful for a long time now and so on. And thinking back, there's things we should have been smarter about. We should have hired a sales [Technical Difficulty] while we were under construction. We didn't. But we're fixing those things now. So... Ryan Sigdahl: Well worth the visit, I can personally attest to that. For my second question, and maybe I'll try and ask this in a shorter way. Indiana bill, it originally included a fair value payment to you guys if you were not the winning bid for relocation. Now it appears like it's just a new license that you can apply for. Just give us an update there on the future of Rising Sun? If you guys are interested kind of under the current structure. Daniel Lee: Listen, this is a long process and a rapidly evolving one. I mean that bill get changed many times in the last week that it was in the legislature. We'll continue to watch it and see. We make money in Rising Sun. We always have, not a lot of money, but we make money. We're the ones who said to the state, we think we -- the state would be much better off if it relocated to an urban center. When they legalized casinos along the Ohio River, you didn't have casinos in Ohio and Kentucky and you do now. And so the original locations where they legalized were the wrong locations, and the independent study that the legislature called for that was done underneath the Gaming Commission said exactly that, that there would be significantly higher revenues to the state with the casino in Indianapolis and in Fort Wayne. Now they chose to widen it out. It's not just Fort Wayne. It's 3 different counties. They're all going to have a referendum in November. I think it's going to be a challenging referendum because the way they did it, there's 3 different counties that are going to have a referendum. And let's say, all 3 pass it then the Gaming Commission is supposed to choose from the 3 and then run a process to figure out a development. So you actually have like it would be problematic for us or anyone else to try to fund the pro side of any county. And yet there's very clearly well-funded opposition. Just look at the website, savefw.com. It's clearly well-funded by somebody. And I'm guessing it's an Indian tribe in Southern Michigan or something along those lines, somebody who might be hurt by this. So you're going to have 3 referendums where the opposition is probably well funded. And the pro side probably isn't. And so will it pass or not? I don't know. I think normally, these things do pass because it produces jobs and tax revenues and so on. But the way the legislature has set this up, and I think it's inadvertent, but I think the way they've set it up, those are going to be very challenging referendums. And we will watch the process and see what happens. And legislature meets again next year. We know where it meets. Meanwhile, we continue to make money in Rising Sun. And we will continue to do that are good for our shareholders as well as good for the state. And that's about it. Operator: Our next question comes from the line of David Bain with Texas Capital Bank. David Bain: Great. First, congratulations on the progress on the American Place financing. I understand you're not giving a ton of detail, but one, I think you reiterated no equity will be sold. And I'm sure you looked at multiple options from whatever asset sales to high yield to REITs as the financing environment involved. If you could help us process that, balancing your thoughts as you went through that process, that could be very helpful for us. And then does that financing come in tandem or include the refinancing or extension of the existing debt? Daniel Lee: David, as I'm sure you'll appreciate, when you're going through one of these processes, you reach out for a lot of people and you find people who are most interested in working with us. And then there's a point where you say, okay, fine, we want you to invest in the due diligence to start working on the legal documents and we will keep it confidential. And I would argue that's about where we are. And until we have a real deal to announce, I really can't go into any of the details, but we are pretty comfortable that we are going to have a deal that will allow us to be open there in 2 years. And we've always said that we're not going to issue equity at anywhere close to these prices, and we're confident that we could get there. But anything further than that, I can't tell you yet. I wish I could, David. Obviously, it's an all-encompassing. I mean it's -- it does involve refinancing the existing bonds. Lewis Fanger: Yes. We're looking at an all-encompassing solution. And I think the only thing to add to what Dan said is, again, not only no equity, but also, we view the financing cost is attractive as well. So we're excited to give you more details. I guess I wish we could. Just can't quite yet. Daniel Lee: Attractive. I think, I would say, acceptable. Attractive would be 5%. We're not 5%, right? But it's also not 15%. And I think it's acceptable. And just on refinancing the existing bonds, they mature in February '28. They become a current liability on February '27. So you pretty much have to refinance them. I think anybody would look at it and say, of course, you have to do that. And so -- but we're -- we've had some really good proposals and we've kind of zeroed in on one formula that we think works and we're trying to nail that down. David Bain: And then I guess my other question, I got to keep you here. I guess I would go with the Chamonix. You gave some encouraging data points on penetration. I think the last call, you mentioned 15% of Colorado Springs visits Colorado -- Cripple Creek once a year, something you intended to tackle. It sounds like the biggest feeder lever. If you could speak to some of the progress specific to the penetration of that market? I know you have a marketing group, but anything, whether it be buses or new forms of advertising and anything that we can look for in terms of impact that's been fruitful so far would be helpful. Daniel Lee: Yes. Well, you mentioned buses. We've looked at buses. We've looked at working with the one company that's in Cripple Creek. We've looked at working with other bus companies. We've even looked at buying our own buses. But at the end of the day, that's not one of the bigger levers. Most people drive themselves, and that's true even in the markets like Atlantic City that traditionally has had a lot of busing, the bus customers still drive themselves. And so -- but there's -- it's a very complicated algorithm because at the same time, we're trying to figure out how to attack these different markets. The whole world of advertising is changing, right? And so like far more people watch TV shows now through YouTube than on the networks. And ultimately, that's good because we can target it. Like we don't have to be buying ads for all of the Denver metropolitan area. We can target those who live on the south side, which is closer to us. We're much less likely to get somebody from Fort Collins because they're quite a bit closer to Black Hawk than to us. But Castle Rock is pretty much equal distance. And so it's about targeting the people in Castle Rock. And then if you can go further and target those people who might have a proclivity to gamble, and so we're getting -- we've hired a bunch of good people who have experience in this and a new advertising agency that is experienced in this to try to make our dollars be most efficient in different markets. Now in Colorado Springs, you can be in more general advertising, right, because anybody in Colorado Springs is a potential customer. And whereas in Denver, if you bought a Denver-wide ad, probably the people who live on the north side of Denver, half the people whose eyeballs you're paying for are less -- not likely to come to us. Whereas in Colorado Springs, everybody is a potential customer. So there's a lot of that parsing and trying to understand it. And even like trying to reduce direct mail we send and trying to do more e-mails, because it's so much more cost effective. Like we don't send any direct mail anymore out of American Place, and we want to get to that point in Chamonix. And so David, honestly, I've got a chief marketing guy who could spend all afternoon answering this question for you. But I guess from our point of view, it's like we've hired people who we think are very confident in this area, and they are working on it full time, and we're seeing some results, and we're confident we're going to get there. Lewis Fanger: Yes. I mean, look, the penetration in the Colorado Springs is creeping up. The percentage coming out of Denver is still an extremely high number. And ultimately, I think those are -- that's a good setup because I think as more and more people that are closer to us experience our brand, we're finding out they're enjoying it. And -- but to have the reach as far as Denver was never in the original model. It was always viewed as overflow. And so to the extent that, that number continues to flourish, it's all to the better as well. So we're set up well. Daniel Lee: And there's some other little blocking and tackling, like Cripple Creek is in the middle of some of the best fly-fishing in the world. I mean there's fantastic fly-fishing around it. And there's fly-fishing guides, fly-fishing camps and everything. So it's like, okay, we need to have a high roller weekend where everybody gets to go fly-fishing, and we have a fly-fishing tournament and people will gamble in the evening. And in the same way the hotels in Las Vegas have golf tournaments. The fly-fishing around Las Vegas isn't so good. So you have golf tournaments, right? And there's no golf, of course, in Cripple Creek, so we can have fly-fishing tournaments, right? And so there's a lot of stuff like that, that we're looking at. And frankly, for a fly-fishing tournament in, say, July, we can get gamblers to fly in from Texas for that. I mean there are nonstop flights from Dallas and Houston into Colorado Springs. It's a pretty easy trip actually. And so for the right high roller, now we have to find the high roller in Dallas who likes to fly-fish. But there are ways to find those people. Operator: Our next question comes from the line of Jordan Bender with Citizens. Jordan Bender: I think you kind of characterized Chamonix as -- the investment thesis there was to focus more on the higher end customer, the luxury customer. Is there a point maybe this year where if you're not starting to see the revenue start to tick up, that you could start to shift some of your focus into that middle or lower end given that the cost structure is fully baked? Lewis Fanger: And apologies. My -- I didn't mean for you to think that we're not focused on the other tiers. We certainly are. I'm looking at my list for January and February, and I'll tell you, we had meaningful growth across every segment. The most growth is in that top tier, but down the line, we're seeing pretty meaningful growth. If you think of the product that we have, it's certainly -- if you bring an upper tier customer into town, they are extremely likely to go to us and only us. If you bring in a lower tier customer, you have the potential and likelihood of sharing that customer around another place or 2. So all things to keep in mind. But ultimately, we've got half of the room product in town. And so long as we see people adding to the bottom line, we will market to them. What naturally happens in these processes is kind of year 1, year 2, you focus on getting customers in general and finding customers that are additive to the bottom line. And fast forward a year after that, then you start cycling and you say, all right, this customer used to get a Friday, free Friday room. Now he does not. Now we've got more customers in the database. We know what people spend. That person doesn't want a Friday room, but they might get a Wednesday room. And so -- and then a year after that, you continue to cycle that database and just optimize it. So we're early in the optimization process, and we're kind of taking people up and down the line. Jordan Bender: And then just switching to Silver Slipper. It's a property that, I guess, we don't really talk about all that much on these calls anymore. But just curious how you view maybe the '26 outlook there? And then just in general, how does that property maybe fit into the overall portfolio as we move forward? Daniel Lee: Year-over-year, the EBDIT (sic) [ EBITDA ] there was about -- it was off a little bit, almost flat. And it was -- in '24, it's a bit above 12%, and then '25, it was a bit below 12%. It should be in the high teens. I mean if you look at the margins, it did $70 million of revenue, and if you take $70 million and apply a normal regional gaming margin, you'd be in the high teens, maybe even in the low 20s. And so we've made quite a few management changes there as well, including a new GM and a new food and beverage manager, a new table games manager, a new HR Director, new Finance Director and whereas it had the same management team since it opened 15 years ago. And so we've made a lot of changes in the past year. And the intent is to get it up to the sort of income it should be having. Now we're not ignoring revenue either, but this is a pretty saturated market. The people in this part of the country gamble more per capita than most areas, and it's not a particularly wealthy region. So I think the upside will be being more efficient on stuff, and we'll get some revenue upside as well. It's a good property. It's kind of a cash cow for us, but it's a cash cow that should make a little more money than it's making. And I think we'll get there in 2026. Lewis Fanger: Not to the high teens in 2026, but I think... Daniel Lee: I'd be disappointed if we don't get to 15%, but -- that's not 19%, but 19% is not out of the question. When you look at what you should be bringing to the bottom line with $70 million of revenue and in a state where the gaming taxes aren't particularly high. And we're on the same page. Operator: Our next question comes from the line of Chad Beynon with Macquarie Asset Management. Chad Beynon: Wanted to ask about your Sports Wagering business supporting over around $7 million of EBITDA this year. I guess talking about a cash cow, that's certainly a good one with pretty high margins there. Can you talk about how that contract looks, if there's any risk to that in '26 or if we should continue to assume the same amount for the year? Daniel Lee: Most of that is with Circa in Illinois, and I think they're pretty happy with what they have. They also operate the sportsbook in the temporary casino and well in the permanent. Illinois has a big population and a limited number of licenses. So that's by far the most valuable license we have. Now we have other licenses that are available. And one of them was markets who paid us upfront for several years. So there's an amortization of deferred revenue which is why you get a little bigger than $5 million. We did do a little change that got approved by the Gaming Commission last week. We've had a sportsbook in the Grand Lodge Casino up at Tahoe for many years. And it was pretty small and the guys were -- it was leased to an outside operator. And the guys who were running it never really did much, right? And it was pretty insignificant for us. And there's a new start-up company that came to us and said, hey, we'd like to take that over and put some money in and try to make it something meaningful. And it's not material to the whole company, but they're paying us significantly more rent than we were getting. And perhaps more importantly, they're paying attention to it better. So it's one of those -- not material to the company as a whole, but I think it's a step in the right direction of changing that to a different operator. We tend not to operate these ourselves because we're not diverse enough to spread the risk. In other words, I think we have a sportsbook at the Silver Slipper, if the Saints get into the Super Bowl, our customers are all going to be betting on the Saints and we won't have bets on the other side. And so it's better to leave it to somebody who's in that business, and we tend to just get license fees for it. Lewis Fanger: If you're thinking about what the number should be on an ongoing basis because there's always -- there has been a lot of noise in that line over the last year or 2. The right number for EBITDA is roughly 6 -- it's like $5.9 million if you're assuming the minimums on the existing contracts. Daniel Lee: No, there's always risk. I mean if Circa decides to cancel and leave the business, there's some limitations in the contract on their ability to do that. But it's not like a treasury bond, I mean it could happen. Lewis Fanger: Yes. I will say, though, Circa is -- more than most companies, Circa has sports in their DNA. They love that sportsbook in Illinois, you'll see that they really -- I mean look, I'm looking at Adam as I say this. I think there's still the patch on the Chicago hockey team, the Blackhawks. And so they continue to fully embrace the sports side. I'd be surprised if there are any changes anytime soon there. Daniel Lee: And frankly, the permanent casino has a sportsbook that's kind of modeled after the one at Durango Station, and that should be good for both us and Circa. Chad Beynon: And then Lewis, yes, looking forward to some of the financing details, hopefully in the next couple -- in the next several weeks. You talked about an 18- to 24-month construction period for the permanent. If that deal is executed and you do decide to kind of push forward on some of the heavier lifting, heavier spending parts of the project, I mean, will there be a meaningful amount of CapEx in '26? Maybe some of that comes in the fourth quarter? Or is it safe to assume that a lot of the permanent spending, kind of the real outflows will come in '27? Just any parameters around that would be helpful. Daniel Lee: Most of it's '27. Lewis Fanger: '27, yes. Daniel Lee: I mean some may even spill into '28. Some of the construction payments are made in arrears, for example. Lewis Fanger: A big portion will be made in arrears, yes. Daniel Lee: But how much is -- falls in this year depends a lot on exactly when we get going. The foundation isn't a big number, but it does take time. So you literally have a guy moving a bulldozer around and then they dig trenches and pour some concrete, which is the foundations for the building that will go up. If you had the pause after doing that, like let's say, the debt markets just weren't cooperating and we had to pause for several months, it's okay. The concrete doesn't go bad. It's still there, right? And you can come back and finish. Now hopefully, we don't have to. Hopefully, we have the financing arranged. And so by the time we're done with the foundations, we can move into the other stuff. But you don't really want to go into the heavier spending until you know you have the money to finish it. And so we're willing to start on the foundation so that we can speed up the opening date and that we can fund with our existing resources, while we try to nail down the financing. Lewis Fanger: I will say that we talk about -- Dan and I talked about this at lunch day. We talk about an 18- to 24-month build. But one thing to keep in mind is the build itself is on the simpler side. In terms of -- there's nothing subterranean, there's no parking garages. It's kind of a basic -- no high-rise exactly. It's a basic 2-story building. And it's the basic rectangular building. On the inside, the fit-out is quite fanciful, but in terms of getting that actual structure up and close and then starting work on the inside, it's relatively -- it's one of the easier pads that we've seen in our lifetimes. And so... Daniel Lee: Actually, only a small part of it is 2-story. Most of it's 1-story. Lewis Fanger: Exactly right. So we talk about 18 to 24 months, but it's -- we'll keep you in the loop, but we feel good -- it is an easier project to build as maybe the right thing to say. Daniel Lee: We'll go as fast as we can, but we don't want to incur a lot of overtime. Operator: Our next question comes from the line of John DeCree with CBRE. John DeCree: Just one from me on Waukegan. I think if I'm not mistaken, just kind of hit the 3-year anniversary couple of weeks ago and 11% growth in the fourth quarter, so still growing double digits. I know you talked a little bit about it in your prepared remarks, but I don't know, Lewis or Dan, if you could give us a little bit more insight as to kind of what's driving the growth there? Is it bigger database? Are you still growing the database? Or is it more spend per the existing database? I'm guessing that double-digit growth, it's probably a little bit of both. But 3 years in still growing double digits is pretty great. So if you could give us a little more color on what's going on there, that would be helpful. Daniel Lee: Well, actually, I want to give credit to the team we have there. I mean where we kind of stubbed our toe in Colorado and had to put together a new team. We had a great team from day 1 in Illinois and that they've just every month, every quarter, figured out a way to increase our penetration, increase our -- not only our number of customers, but the satisfaction levels of the customers. We have the only casino in the whole region that made the list of the Chicago Tribune's best employers. I mean they list, I think, 50 employers and who are the best employers in the region, there's 50 of them. And 2 years in a row now, we've been the only casino on that list. And that trades into very low turnover, which helps. I mean -- and so the team has done a very good job and every month, they're trying to figure out, okay, how do we do better? How do we do better? And had we had an equivalent team in Colorado, we would be much better in Colorado. And people matter. And we've had a great team in Illinois. And now we also have the right demographics. I mean we're the closest casino to 1 million people. We are easy to see. While the outside of the building looks like Department of Motor Vehicles storage place, once you're inside, it feels like a real casino. And even though we did it without spending a lot of money, when you go in, people are like, wow, we didn't expect this. It's wonderful. And so I think we have the right product and the right market. Year, I mean, it was very fast, but equally important, we had the right team, and they've done a great job. Lewis Fanger: And I think to answer to, it's a little bit of both, John. It's -- the database in terms of adding new names to it, it continues to grow at a pace meaningfully similar to what it was 3, 6, 9 months ago. It really hasn't slowed down in terms of the number of people that go into that database. We've crossed 121,000 names or closing in on 125,000 names in the database and not showing signs of slowing down. So -- but it's a little of both. Daniel Lee: And we've done it without hurting the competition. I mean most of it is increased gambling by people in Lake County, which is what we expected. And I guess I should also give a tip of the hat to Alex who forecasted that this is exactly what would happen, and he's been right. Operator: Thank you. We have reached the end of the question-and-answer session. I would like to turn the floor back over to President and Chief Financial Officer, Lewis Fanger, for closing remarks. Lewis Fanger: I'll turn it over to Dan. Any last words? Daniel Lee: No. Listen, it's been kind of a challenging year fixing Colorado while we try to figure out how to finance the permanent American Place. But I think we now have the team in place, and this stuff is trending the right way in Colorado, and I think we're on the cusp of having the financing arranged for American Place. So it doesn't happen overnight. I mean I think the financing would be in place in May or June, which is approximately when we would also have the extension that we mentioned and the legislature. But hopefully, by the time we're having this call for the next quarter, we have a lot more concrete stuff we can talk about. So thank you very much, everybody. Operator: This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.
Operator: Greetings. Welcome to a.k.a. Brands Holding Corp.'s Fourth Quarter and Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Emily Schwartz, Head of Investor Relations. Thank you, and you may begin. Emily Schwartz: Good afternoon. Thank you for joining a.k.a. Brands to discuss our fourth quarter and fiscal 2025 results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call today is Ciaran Long, Chief Executive Officer; and Kevin Grant, Chief Financial Officer. Before we get started, I'd like to remind you of the company's safe harbor language. Management may make forward-looking statements, which refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward-looking statements. This call will also contain non-GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin and constant currency net sales. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website. With that, I'll turn the call over to Ciaran. Ciaran Long: Good afternoon, everyone. Thanks for joining us today to discuss our fourth quarter and full year 2025 results. I'm pleased to report that we delivered another year of growth, reflecting the continued strength of our brands and the power of our business model. Despite a dynamic environment, we executed on our strategic priorities, strengthened our foundation and entered 2026 positioned for accelerated growth and expanding margins. I want to thank our teams across the business for their focus and disciplined execution throughout the year. Their commitment and hard work were central to the progress we made and the momentum we carry into the year ahead. Let me start with a few highlights from the year. For the full year, we grew net sales 4.4% to $600 million, marking another consecutive year of growth. Our U.S. region, which remains our largest and fastest-growing market, delivered net sales growth of 7% to $394 million. On a 2-year stack, the U.S. is up 25%, further reinforcing our conviction in our U.S. expansion plans, and the U.S. now makes up 66% of the business. Princess Polly continued to deliver strong performance throughout the year, generating double-digit net sales growth and advancing its omnichannel expansion strategy. The brand opened 7 new stores in the U.S. in 2025 and launched its first location in Australia in the fourth quarter, ending the year with 14 stores globally. Wholesale continued to perform well across the portfolio, with our partnership at Nordstrom exceeding expectations with both Princess Polly and Petal & Pup delivering strong results. We also strengthened the leadership team, operations and go-to-market strategy within our streetwear brands. These actions improved merchandising discipline and inventory productivity, positioning Culture Kings and mnml for accelerated growth and stronger margin contribution in 2026. And importantly, we exited the year with inventory down 10% year-over-year, reflecting our continued disciplined approach to inventory management as we improve turns and transition our streetwear business to the test and repeat merchandising approach. In 2025, we also completed an important structural transformation of our supply chain. As discussed in prior quarters, given the rapidly evolving macro environment, we accelerated the diversification of our sourcing strategy to enhance long-term flexibility and resilience. That work is now substantially complete with approximately 50% of our U.S. sourcing from outside of China, in line with our targets, along with our ability to quickly move to different regions as necessary moving forward. Our test and repeat merchandising model and short lead times, while core to our agility and inventory efficiency, meant we couldn't prebuy inventory ahead of our elevated tariffs implemented in 2025. Despite the margin headwinds faced throughout the year as we source product at the higher tariff rates, we delivered 30 basis points of gross margin expansion to 57.3% for the year. We estimate that the tariff headwinds offset by our mitigation efforts negatively impacted fiscal 2025 gross margins by approximately 100 basis points. Looking ahead, we're better positioned to adapt quickly to any future trade policy changes while maintaining our competitive advantages in speed and inventory efficiency. The progress we've made over the past 2 years provides a strong foundation as we look ahead towards 2026 and beyond. In 2024, we stabilized the business and returned to growth. In 2025, we built on that momentum by growing the top line, strengthening our supply chain, expanding our omnichannel presence and continuing to invest in our brands. And as we enter 2026, we have improved operational discipline, stronger inventory health and a clear path to accelerating growth and expanding margins. I'm confident the momentum in our business is picking up with first quarter-to-date net sales growth of mid-single digits, driven by growth in our U.S. online channels. Our 2026 strategy remains focused on 3 core priorities: first, attracting and retaining customers through our direct-to-consumer channels with exclusive trend-driven merchandising and innovative marketing; second, expanding brand awareness and our total addressable market through physical retail and strategic wholesale partnerships; and third, we remain committed to streamlining our operations and strengthening our financial foundation. As part of this, we are actively embedding AI across the organization to enhance the customer experience and drive operational excellence. Our portfolio model and flexible asset-light technology stack enables us to rapidly test and refine solutions at the brand level, scale what works and unlock value across the entire platform. We're already seeing measurable impact in product imagery, marketing productivity and inventory and markdown optimization. These capabilities are already improving conversion, sharpening creative execution and enabling smarter, faster, data-driven decision-making across the business. We expect AI to be a meaningful driver of margin expansion in the coming years, and we're scaling these initiatives with discipline and speed. With that, I'll share highlights from each of our brands and the growth drivers for the coming year. Starting with Princess Polly, our largest brand, which comprises more than half of the portfolio. Princess Polly continues to resonate with next-generation customers through its trend-driven merchandising, authentic customer connections and disciplined social-first marketing approach. And I'm confident that there's tremendous runway ahead for continued global growth. As mentioned, in 2025, Princess Polly delivered double-digit net sales growth, driven by the success in both its direct-to-consumer business and its omnichannel expansion. The team continues to execute its test and repeat model with discipline, delivering consistent weekly newness that supports strong full price sell-through. Importantly, the improvements we made to our supply chain position the brand to operate with stronger in-stock levels and capture demand more efficiently in 2026. From a marketing standpoint, Princess Polly continues to meet its customers where they are, maintaining a presence across more than 20 social and digital platforms, complemented by in-store events and broader brand initiatives. TikTok remains an important demand generation channel. And in 2025, the brand increased its focus on TikTok Live, creator collaborations and search-driven discovery, driving stronger engagement and efficient customer acquisition. Beyond this online performance, Princess Polly continued to expand its retail footprint with results exceeding expectations from both a financial and brand awareness perspective. Princess Polly successfully opened 7 new stores in the U.S. in 2025, ending the year with a total of 13 stores in the U.S. And as mentioned, the brand opened its first store in Australia in Bondi Beach, Sydney in December. The Bondi store has been very well received and reinforces our confidence that Princess Polly's omnichannel strategy resonates well globally. Princess Polly's wholesale business also continued to perform well in the fourth quarter, further expanding brand reach and reinforcing our strategy of meeting customers wherever they choose to shop. Princess Polly will continue to expand and optimize its TikTok Shop and wholesale partnerships, ensuring strong brand presentation across key retail partners. Looking at 2026, Princess Polly has a clear runway for sustained global growth, supported by several strategic initiatives. The brand will continue to fuel e-commerce growth by refining its test and repeat strategy and reinforcing brand and product storytelling. Princess Polly will deliver consistent newness, focusing on proven best-selling party styles while also expanding its casual and basic categories to increase share of wallet. From a marketing perspective, the brand will prioritize influencer-led content and product storytelling across social platforms to drive engagement and full price demand. Princess Polly will continue expanding its U.S. retail footprint with 8 new store leases fully executed and additional locations expected to be announced throughout the year. As shared in our related press release today, store openings in the second half of 2026 include Houston and Frisco in Texas, Orlando, Florida; and Adena, Minnesota, and locations in Jacksonville and Boca Raton in Florida, Nashville, Tennessee; Charlotte, North Carolina planned for early 2027. While the existing fleet continues to meet our profitability and payback expectations, driving solid 4-wall profitability, each new opening provides an opportunity to further refine execution and enhance store productivity. And lastly, Princess Polly is beginning to lay the foundation for international growth to broaden reach and expand its global presence. Later this month, in partnership with a third-party logistics provider, Princess Polly would unlock distribution in the U.K., improving customer lead times and enhancing the overall experience in the region. This establishes the operational foundation for moderate growth in the U.K. in 2026 with further expansion in the coming years. Turning now to our other women's brand, Petal & Pup. The brand continues to resonate with its core customer through a curated assortment of trend-forward feminine occasion-driven styles at accessible price points. In 2025, Petal & Pup delivered solid performance, supported by continued strength in dresses and eventwear, while broadening its assortment to capture more everyday demand and repeat purchases. Brands growing wholesale presence, particularly at Nordstrom, exceeded expectations. Petal & Pup has established a meaningful presence within Nordstrom trend section across all categories, with particular strength in dresses and more casual styles, expanding brand awareness and introducing new customers to the brand. In the fourth quarter, Petal & Pup successfully launched on the rental platform, Nuuly, Nykaa Fashion in India and Australian department store, David Jones, with strong initial results out of the gates and plans to further expand on each of these platforms are already underway. Looking ahead to 2026, the focus remains on deepening product differentiation and strengthening brand equity. Petal & Pup will continue to expand its range with a clear emphasis on outfitting its core customer across every aspect of our life. This includes a stronger push in casual wear and elevated separates, particularly tops and knitwear to complement the brand's established strength in dresses. By building a more balanced and versatile assortment, the brand aims to drive increased repeat rate over time. This strategy will be underpinned by a continued commitment to enhance quality, compelling price points, effortless outfitting and trend-led perspective. Petal & Pup is also elevating its brand storytelling and community engagement, shifting beyond purely product-led campaigns towards more cohesive and authentic brand narratives. The recent refresh of its branding, website and visual identity supports this evolution alongside the launch of an evergreen brand campaign across social channels and key out-of-home placements this month. Omnichannel and international expansion also remains a key growth driver for Petal & Pup. In addition to continued expansion with Nordstrom, newly and existing partners, Petal & Pup will launch with Dillard's, Von Maur and select independent boutiques in 2026, further extending its reach and awareness in the U.S. market. I'm confident that Petal & Pup is well positioned for continued growth in 2026 as it strengthens its assortment and expands its reach. Turning now to our streetwear brands. Culture Kings remains one of the most distinctive experiential retail concepts in the market, blending global streetwear, music, sports and culture into a highly immersive customer experience. In 2025, the focus was on strengthening the fundamentals of the business in both the U.S. and Australia to position the brand for accelerated growth in 2026 and beyond. Culture Kings' exclusively designed in-house brands are a key differentiator and central to its growth strategy. In 2025, the company intensified its focus on this portfolio, including brands such as mnml, Loiter, 73 Studio, Carre, Saint Morta and American Thrift by evolving its merchandising approach, relaunching priority brands and elevating product quality. Investments in Loiter drove double-digit revenue and gross profit dollar growth in 2025, validating the strategy. Building on that momentum, 73 Studio and American Thrift were relaunched in the fourth quarter with a refined design direction and stronger go-to-market execution. Early sell-through and improved new style velocity from the refreshed brands has been encouraging, reinforcing confidence in the owned brand strategy heading into 2026. Owned brand penetration is expected to continue expanding, supported by faster product cycles, tighter assortment and a clear brand point of view. This more focused product strategy is designed to drive stronger full price sell-through and support margin expansion in the year ahead. In addition to the in-house brands, Culture Kings continues to enhance its third-party assortment from leading national headwear and footwear brands such as New Era, ASICS, Adidas and more to complete the streetwear outfit. Beyond its online channel, Culture Kings retail footprint and retailertainment ethos remains central to the model. The stores, including the Las Vegas flagship and 9 locations across Australia and New Zealand, serve as meaningful revenue drivers and powerful marketing engines. Each location delivers a differentiated and immersive experience that builds loyalty, drives customer acquisition and reinforces the brand authority in streetwear. In the fourth quarter, the team relocated the Brisbane store into a newly renovated 5,000 square foot format designed to serve as a more productive and repeatable model. While the store retains high-impact features such as the hot wall and hot basketball court, the format is being tested as a prototype for future U.S. expansion. Early results have been encouraging, and the learnings from Brisbane will directly inform the next phase of U.S. store growth. We're actively pursuing a location for the second U.S. store and we'll provide updates on future calls. Looking ahead to 2026, I'm confident that Culture Kings is set up for success with operational improvements in the rearview, a healthier inventory position, strong and accelerating performance at its in-house brands and more stores on the horizon. I'm encouraged by the progress and excited for the future. Before I turn it over to Kevin, I want to again express my gratitude to our incredible team. The past year acquired agility, resilience and an unwavering focus on execution. Our teams across all functions rose to the challenge, successfully navigating the supply chain transformation while continuing to deliver compelling products and experiences to our customers. I'm confident that we have the right operational foundation, the right team and the right strategic priorities to drive accelerating growth in 2026 and beyond. With that, I'll turn it over to Kevin. Kevin Grant: Thanks, Ciaran. Turning to our financial results for the fourth quarter. Net sales increased 3.1% to $164 million, in line with our guidance. As we noted on our third quarter call, due to the accelerated supply chain transition, we entered October with meaningful out-of-stock positions in key best-selling styles, which limited sales in the early part of the quarter, but inventory levels stabilized as we moved through the quarter, and we ramped up our marketing engine to regain sales momentum. Net sales in Australia were also in line with expectations, increasing 1.6% to $58.1 million. As Ciaran mentioned, we entered 2026 with strong momentum with first quarter to-date net sales growth in the mid-single digits. As a reminder, as we continue expanding across channels, the shape of the P&L will continue to evolve, though we expect overall margin dollars to increase as we pursue the growth opportunity ahead of us. Total orders were $2.2 million, up 6.4% year-over-year. Trailing 12-month active customers, excluding wholesale, were 4.18 million compared to 4.07 million a year ago. And average order value was $76, down 2.6% year-over-year. Turning to our profitability metrics. Gross margin declined 30 basis points to 55.6% compared to 55.9% last year, reflecting the impact of the out-of-stocks and best sellers in October, partially offset by a higher mix of retail stores. Selling expenses were $51 million or 31% of net sales, reflecting the retail footprint expansion and onetime fulfillment charges. Marketing expense was $20.5 million or 12.5% of net sales. General and administrative expenses were $30.3 million or 18.5% of net sales. G&A expenses increased year-over-year primarily due to charges for a nonrecurring legal matter as well as an increase in headcount to support our channel expansion strategy. And we delivered adjusted EBITDA of $2.5 million or 1.5% of net sales. For the full year, net sales increased 4.4% to $600 million, in line with our expectations and compared to $574.7 million a year ago. On a constant currency basis, net sales increased 5%. Adjusted EBITDA for the year was $19.7 million or 3.3% of net sales compared to $23.3 million or 4.1% of net sales a year ago as tariffs and inventory disruptions pressured results. As Ciaran mentioned, the tariff headwinds, partially offset by our mitigation efforts, negatively impacted margin by approximately 100 basis points. Turning to the balance sheet. We ended the year with $20.3 million in cash and cash equivalents compared to $24.2 million at the end of the fourth quarter of 2024. Debt at the end of the quarter was $111.1 million compared to $111.7 million at the end of the fourth quarter of 2024. As a reminder, we successfully refinanced our debt in October and extended the maturity to 2028. As Ciaran mentioned, we're really pleased with the progress we've made improving the quality and quantity of our inventory. We ended the quarter with $86.2 million in inventory, down 10% compared to $95.8 million at the end of the fourth quarter of 2024. Turning now to our outlook. We are entering 2026 with momentum and a stronger operating foundation. Our outlook is based on the tariff rates in place exiting 2025 and does not include the impact of any potential refunds as a result of the Supreme Court's decision to overturn the IEEPA tariffs. For fiscal 2026, we expect net sales to be between $625 million to $635 million, representing growth of 4.2% to 5.8%. We expect adjusted EBITDA of between $27 million and $29 million. For modeling purposes, we anticipate fiscal 2026 stock-based compensation of approximately $6.5 million to $7 million, depreciation and amortization expense of roughly $20 million to $21 million, interest and other expense of approximately $16 million to $18 million an effective tax rate of negative 10%, CapEx between $18 million to $20 million and weighted average diluted share count of approximately 11 million. For the first quarter, as mentioned, quarter-to-date net sales growth is tracking mid-single digits with strength on our online channels in the U.S. As a reminder, in March of last year, Princess Polly and Petal & Pup launched across all Nordstrom stores, creating a more challenging wholesale comparison as we progress through the quarter. For the first quarter, we expect net sales to be between $130 million and $132 million, reflecting a low single-digit growth rate. For modeling purposes, for Q2 through Q4, we expect high single-digit growth on a 2-year stack. Due to the timing of tariff impacts, adjusted EBITDA comparisons will be more challenging in the first quarter before normalizing in the second quarter. We expect adjusted EBITDA between $1.5 million and $2 million in the first quarter. For modeling purposes, for Q2 and Q3, we expect an EBITDA margin expansion of about 100 basis points and a larger expansion in Q4 compared to the same period last year. In closing, entering 2026, the business is operating from a position of greater strength. The progress we made in 2025 across supply chain diversification, inventory discipline and omnichannel expansion has positioned the business to accelerate growth and improve profitability in the year ahead. As a result, we believe 2026 represents an inflection point for the company with clear drivers to support top line growth and margin expansion. With that, we'll open the call for questions. Operator: [Operator Instructions] Our first question comes from Ryan Meyers with Lake Street Capital. Ryan Meyers: First off, just thinking about the EBITDA guide for 2026, obviously, a pretty significant step up here from what you guys reported in 2025. Can you just walk us through kind of the key drivers of that? Is most of that coming from the gross margin side? Are we seeing any operating expense leverage? And then are there any lower nonrecurring costs? Just kind of bridge that gap for us would be helpful. Kevin Grant: Yes. Thanks, Ryan, for the question. Yes, we're coming out of the quarter with good momentum. That strong performance for the year, over 4% growth, 5% on a constant currency basis. We've mentioned we've seen mid-single-digit growth so far in Q1. The guide for the year on the top line is that sort of mid-single digits. And then from a profit perspective, we mentioned EBITDA, we expect over the entire year about 120 basis points of EBITDA expansion. I would say the bulk of that, Ryan, comes from gross margin. We mentioned the headwind of 100 basis points in gross margin in FY '25. So we'll be moving past that in the year. We're finishing inventory in a really strong position, down 10% year-over-year and down 10% sequentially. So we're feeling great about that. We'll have some channel mix impact in the gross margin as well. The balance of the EBITDA improvement will come across the rest of the operating expense lines. As mentioned, we'll continue to see the shape of the P&L move, as the channels change shape of the P&L. But overall, I feel really good about that guidance. And then on the nonrecurring charges, no, not really anything of note for the guide for FY '26. Ryan Meyers: Okay. Got it. And then just switching to the retail business. Can you guys tell us what percentage of the revenue mix now does come from retail? Obviously, pretty significant store openings in 2025, expected again here in 2026. Is that starting to become a more meaningful percentage of the overall revenue mix? And then how should we think about the growth of the stores or the revenue growth at the stores relative to the direct-to-consumer business? Is the growth outpacing that there? Just any more details on that as it's becoming a larger portion of the business? Ciaran Long: Yes, Ryan, this is Ciaran. We are really happy with the store performance. And I think for us, seeing really good productivity on a square foot in the Princess Polly stores also really strong 4-wall profitability and I think really feel good about the opportunity that we have to continue to lean into stores. We've now 13 open in the U.S., which is great progress. As we mentioned, signed 8 more leases. And I would say kind of 4 to 5 of them will open in FY '26. So we're going to continue to lean into the opportunity that we have at the stores. I think tremendous growth. It's also great for us bringing in new customers. We're also seeing a nice halo effect from the online business or to the online business from the stores. So I think just kind of more and more ahead of us. Operator: The next question comes from the line of Dana Telsey with Telsey Group. Dana Telsey: As you think about the Princess Polly business and the opening of the 8 stores, how do you envision the business retail versus wholesale, your direct online? What do you want the complexion to look like? And can you talk about what the gross margin differential is between? Ciaran Long: Yes. Sure, Dana. Look, I think there is tremendous opportunity. And just as a reminder, Princess Polly is about half the revenue for the group at the moment, 13 stores open, also a great presence in Nordstrom across all Nordstrom doors in the U.S., just like the Petal & Pup brand has and seeing really good response rate really across all of the channels for new and existing customers. I think, look, from a long-term perspective, we're going to continue to grow the online business. We think we are -- still have a lot of opportunity there. But obviously, from a wholesale and stores perspective, we are extremely early. I think as it relates to those, I would see the more focus from the Polly team is on opening stores and building out that store footprint. I would say on the Petal team, they're more focused on the wholesale opportunity in front of them. And we mentioned a few of the new partners that they have this year and coming in 2026. From a margin perspective, I would say, look, it's all -- they're all profitable channels. They're all bringing new customers. We do see gross margins a little bit higher in the stores than online as the stores are a little bit less promotional at this stage. Obviously, gross margins lower in the wholesale channel, but very limited selling expenses, marketing in those channels as well. So kind of on a contribution profit basis, pretty similar across the mall and really gives us confidence to kind of our ability to push into the mall and that they'll all be margin accretive. Dana Telsey: Got it. And just lastly, the shaping of the year, how are you thinking of the cadence of top line and adjusted EBITDA given the lapping of tariffs and the supply chain transition that you had? Kevin Grant: Yes, Dana. So from a top line perspective, we've talked about that sort of mid-single-digit growth for the full year and the guide for FY '26. As you alluded to, there's definitely a lot of disruption with the tariffs and supply chain issues in FY '25 that sort of disrupts our normal cadence. So that's why we're guiding from a top line perspective the growth from Q2 through Q4 on a 2-year stack, it's sort of that high single-digit perspective. We mentioned EBITDA over the balance of the year expanding about 120 basis points with that really picking up in Q2. So Q2 and Q3 look very similar and will be about 100 basis points higher than FY '25 with a little bit of a larger impact in Q4. Operator: The next question comes from the line of Eric Beder with SCC Research. Eric Beder: Can you talk a little bit -- I know a little bit about the inventories here. So that's a really nice number, down 10%. I'm assuming given the tariffs and the SKU count, that's down even more. Is that something that -- what we should be thinking about that going forward for this year given the kind of ups and downs in the tariffs last year? Ciaran Long: Yes, Eric, I think really good to see kind of inventory down 10% and doing that in a period where we're growing the overall business up 4.4% for the year and in a period when such progress on diversifying our sourcing last year as well. I would say a big driver of that change in inventory is just the progress we've made at the Culture Kings business and moving them on to test and repeat. It's a slow build to change that and kind of such a transformational difference for the group. But I think the leadership team that's been in there now for 12 months and longer have just made huge progress, and that's a big driver of the inventory change. Look, I think philosophically, we always want to have lower inventory growth and sales growth, and that's how we're looking to go through this year. Eric Beder: Okay. And Australia and New Zealand, 4 quarters of growth here. Is this market back? And how can you leverage that even more now that pretty much the inventories have been cleaned up and some of the other positives have rolled through there? Ciaran Long: Yes. It is great to see 4 quarters in a row of growth in the Australia region. And I think, look, Petal & Pup and Princess Polly have been doing well there because they have been on that test and repeat model. I think now that Culture Kings is and the new leadership and kind of ways of working that the team has there, we're really seeing progress there. We're seeing real improvements in productivity for new products and new SKUs that we're bringing in. So I think back to growth there is great. Also, as we talked about, we opened -- we relocated a store in Brisbane for Culture Kings down at a 5,000 square foot kind of size. It's a new model that we can -- testing there, we can do that quickly and then leverage the rollout in the U.S. I think for us, we are expecting moderate growth in Australia, but I think glad that it's back to growth and will be consistently there. Eric Beder: And just a follow up on that. What is the average size of the Culture Kings stores outside of the Brisbane store in Australia and New Zealand? Ciaran Long: Yes. Traditionally, they were more in that kind of 80,000 square foot size. And as a reminder, the Vegas store in the U.S. bigger again. So for us, really figuring out as we look to scale in the U.S., how do we retain those key aspects of the retail payment that is just core to Culture Kings, sets it apart from anybody else out there and is really the opportunity for us to show off the great 1P brands that we have in that business. So look, we're fortunate that you can test a bit quicker down in Australia from the store side and also being the off-season there does give us a good view into what should be best sellers in the U.S. going forward. Operator: Our last question comes from Ashley Owens with KeyBanc Capital Markets. Ashley Owens: So maybe to start, and correct me if I'm wrong, but I believe I heard that the 1Q quarter-to-date growth has been mid-single digits. Could you just provide more detail as to what's shaping the key assumptions driving deceleration from current trends in the quarter and maybe from a brand perspective, where that moderation is coming from? Or if this is just general conservatism built in? Kevin Grant: Ashley, yes, good observation. Yes, we've seen strong mid-single-digit growth so far in the quarter, and that's largely coming from the U.S. online business, which is great to see. Just as a reminder, we launched in all the Nordstrom doors for both Polly and Petal in March of '25. And that's what's driving kind of that more difficult comp as we move through the quarter and kind of explains where we're guided for Q1. Ashley Owens: Okay. That's super helpful. And then maybe just to follow up, thinking about some of the other drivers of growth in 2026, how we should break this down or balance between order growth and AOV as the primary drivers. I know AOV was declining in through the first half of the year, and then we're also lapping really strong order volume in 2Q and then a little bit in 3Q as well. So just any insight there would be helpful. Kevin Grant: Yes, for sure. From a -- we're pleased really to see in the year that growth in our active customers as well as that strong growth in orders. Q4 order growth was over 6%, and that's really what drove the top line performance. Listen, like with our evolving channel mix, we're going to see some up and down in the AOV, and we've got channels like wholesale will drive the AOV up. We've got other channels like TikTok and new categories that will drive the opposite. We've modeled AOV flat for FY '26 with the top line growth really coming from growth in orders. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's conference as well. Thank you for your participation. Please disconnect your lines, and have a wonderful day.
Roy Nir: Good afternoon, everyone, and welcome to Entravision's Fourth Quarter and Full Year 2025 Earnings Call. I'm Roy Nir, Vice President of Financial Reporting and Investor Relations. Joining me today to discuss our results are Michael Christenson, our Chief Executive Officer; and Mark Boelke, our Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to inform you that this call will contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ. Please refer to Entravision's SEC filings for a list of risks and uncertainties that could impact actual results. The press release is available on the company's Investor Relations page and was filed with the SEC on Form 8-K. Additional information may also be found on our annual report on Form 10-K, which was also filed today. Our call today is using Zoom. If you'd like to ask a question, please use the Q&A function on the screen, during the call, indicate you name and company, and submit your question in writing. We will try to answer any questions that relate to the topics contained in today's call during the Q&A session. I will now turn the call over to Michael Christenson. Michael Christenson: Thanks, Roy, and thank you to those of you joining this call today. We appreciate your interest and your support. As you saw in our press release, on a consolidated basis, Entravision increased revenue 26% to $134 million in 4Q '25 compared to 4Q '24. We had an operating loss of $21 million in 4Q '25 compared to an operating loss of $49 million in 4Q '24. The 4Q '25 operating loss included a $26 million noncash impairment charge. So we would have had an operating profit if we exclude that adjustment. But as we've said on prior calls, we're committed to growing our business and earning a profit. So we acknowledge that we have work to do to improve our operating performance and profitability, especially in our Media business. We report our results for 2 segments: Media and Advertising Technology & Services, what we call ATS. For our Media segment, our revenue declined 32% in 4Q '25 compared to 4Q '24. This decline was primarily due to lower political revenue. Excluding political revenue, our 4Q '25 results included a 4% increase in local advertising revenue and a 5% decrease in national advertising revenue. Our local operations had 3% lower monthly active advertisers, but this was offset by an 8% increase in revenue per monthly active advertiser. In terms of operating expenses and profitability, as we have discussed in the past, we made a number of important investments in our media business in 2025. We added capacity to our local sales teams, more sellers, and we added digital sales specialists and digital sales operations capabilities, more digital. When we analyzed our local markets and our local advertiser base, we saw an opportunity to increase revenue by adding sales capacity. In addition, virtually all our local advertising customers are advertising in digital channels, search, social, streaming video and streaming audio. And we believe we can serve their needs in digital channels as well as our traditional broadcast, video and audio channels. The increase in operating expenses in our Media segment for these investments is about $8 million on an annualized basis. However, we funded these investments in part by improving efficiency and reducing costs in nonrevenue-generating operations. So as you'll see, total operating expenses in our Media segment were actually 6% lower in 4Q '25 compared to 4Q '24. Since revenue was lower because we did not have political revenue, we did have an operating loss of $428,000 in 4Q '25 compared to an operating profit of $18.5 million in 4Q '24. For our Media segment, we have 2 additional initiatives underway to generate incremental revenue. First, in October of last year, we began broadcasting a new network that we call Altavision. Altavision is broadcast on our multicast capacity across all of our markets. We provide the broadcasting infrastructure and sales, and we also provide local news programming. The balance of the programming is provided by Grupo Multimedios of Monterrey, Mexico. And together, we share the revenue. The stations have been on the air since October, and we've been test marketing with local advertisers since the beginning of this year. In addition, on January 1, 2026, we launched new programming on our full power Orlando television station, WOTF-TV, in a partnership with Hemisphere Media. Hemisphere Media owns WAPA TV, the #1 television station in Puerto Rico. And together, we launched WAPA Orlando Channel 26 to serve the growing Puerto Rican, Caribbean, Central and South American Spanish-speaking communities in Central Florida. There are more than 500,000 Puerto Ricans in the Orlando market, and we are very excited about this new -- the new revenue potential for this business. Now for our Advertising Technology & Services segment. ATS revenue more than doubled in 4Q '25 compared to 4Q '24, and we had more customers and higher spend per customer. We've continued to invest in our ATS segment in 4Q '25 to grow revenue and operating profits. We invested in our engineering team to continue to improve our technology and to build more powerful AI capabilities into our platform. And we invested to increase the capacity of our sales organization and customer operations. In addition, our infrastructure costs, primarily cloud computing costs increased in 4Q '25 compared to 4Q '24 as our infrastructure costs will grow as our revenue grows. They're currently growing at about the same pace as revenue. But as the business gets larger, we expect to see some incremental operating leverage so that these costs will grow at a slower pace than revenue. But the combination of our investments, investments in increased operating expenses, that's the direct operating expenses plus selling, general and administrative expenses were $6.5 million higher in 4Q '25 compared to 4Q '24. That's $26 million higher on an annualized basis. The operating profit for ATS was $12 million in 4Q '25 compared to an operating profit of $2 million in 4Q '24. In our ATS segment, this week, we announced an acquisition. We acquired the technology, platform and product IP of Playback Rewards. Playback Rewards is a reward and loyalty platform. For the past year, we have been developing our own reward platform, but this acquisition presented an opportunity to accelerate our entry into this market with a more robust platform. So to summarize, in Media, we're investing to increase our local sales capacity and to expand our digital sales and digital sales operations capabilities. Again, more sellers and more digital. And in ATS, we're investing to add more engineers to advance our technology and to increase our sales capacity, more technology, better technology and more sellers. We believe these investments will help us build a stronger company. So now I'll ask Mark to share with you more details of our financial results for 4Q '25 and the full year 2025. Mark? Mark Boelke: Thank you, Mike. I'll start by reviewing the performance of each of our 2 reporting segments, again, Media and Advertising Technology & Services. In our Media segment, fourth quarter revenue was $45.8 million, which was down 32% compared to fourth quarter 2024. Full year 2025 revenue was $176.7 million, down 20% compared to full year 2024. As we've noted on previous calls, our Media business began slowly in 2025, in part due to advertiser uncertainty in the environment of a new administration and federal immigration enforcement actions. In addition, there was significant political advertising in 2024 that was not present in 2025. However, we've seen sequential quarterly improvements in revenue as we move through 2025, particularly in local ad sales, and we're seeing momentum and progress in the execution of our revenue strategies. One of our goals is to optimize our organizational structure and the expense of support services in order to align them with revenue and to be profitable in each segment as well as on a consolidated basis. Let's look at total operating expense for the Media business, again, meaning the sum of direct operating expense and selling, general and administrative expense, or SG&A, as those 2 line items are reported in our segment results. Media segment total operating expense in the fourth quarter decreased $2.5 million compared to fourth quarter '24, a decrease of 6%. Operating expense was flat for full year 2025 compared to full year 2024. Starting in Q3 '25, we have taken steps under an ongoing organizational design plan intended to support revenue growth and reduce expenses in our Media segment. Key components of this plan included a reduction in Q3 and Q4 of approximately 5% of the Media segment's total workforce, primarily in back-office roles, and we abandoned several leased facilities with impacted employees transitioning to remote work. We expect these changes to reduce media operating expense by approximately $5 million on an annual basis, and we recorded charges during third and fourth quarter totaling $2.8 million for the expenses associated with these moves. And these charges were reported as restructuring costs on our income statement. The Media segment had an operating loss of $0.4 million in Q4 '25 compared to operating profit of $18.5 million in Q4 '24. The decrease was mainly due to political advertising revenue in Q4 '24 that was not present in Q4 '25. We continue to evaluate the organizational structure of our Media business in order to provide compelling content, drive sales, streamline our organization and optimize expense. And the Media segment operating loss improved significantly from third quarter to fourth quarter '25. Now let's turn to our Ad Tech & Services segment, or ATS. Fourth quarter revenue for the ATS business was $88.6 million. This was an increase of 123% compared to fourth quarter '24 and a sequential increase of 16% from third quarter to fourth quarter '25. Full year 2025 revenue was $270.9 million, an increase of 90% year-over-year compared to full year 2024. As the year progressed through the fourth quarter, we had a higher number of monthly active accounts and higher revenue per monthly active account. As discussed on previous calls, we have had success executing our strategies in the ATS business during 2025, including expanding the sales team and geographic sales coverage and strengthening our AI capabilities and platform technology. ATS total operating expenses increased by 48% in the fourth quarter '25 compared to Q4 '24, an increase of $6.5 million. Operating expenses increased by 54% in full year '25 compared to full year '24. The ATS expense increase was primarily related to the increase in revenue. For example, as Mike mentioned, the expense of cloud computing services has increased as a result of processing more transactions and using stronger AI capabilities built into our ad tech platform. There was an increase in sales commissions and performance compensation as a result of the revenue increase and achievement of other performance metrics. And the ATS business has also hired additional sales, engineering and ad operations staff in recent quarters in order to drive ATS growth and expand into new geographic areas. ATS operating profit was $12.3 million in Q4 '25. This was an increase of 464% versus Q4 '24 and a sequential increase of 26% from the prior quarter, Q3 '25. Operating profit for full year 2025 was $33.8 million, an increase of 317% versus full year 2024. Our goal for the ATS business is to continue to grow revenue and generate positive operating leverage and the ATS revenue increase exceeded the expense increase in terms of percentage and absolute dollars. Combining our 2 operating segments, on a consolidated basis, revenue for fourth quarter '25 was $134.4 million, up 26% compared to fourth quarter '24. Full year 2025 revenue was $447.6 million, up 23% compared to full year '24. The 2 segments together generated a consolidated segment operating profit of $11.9 million in Q4 '25 and $27.6 million for full year '25, a decrease of 43% and 41% compared to the respective prior periods. The decrease was a result of decreasing -- I'm sorry, was a result of decreased operating profit in the Media segment, primarily due to political revenue in 2024 that was not present in 2025, partially offset by increased operating profit in the ATS segment. We had a consolidated operating loss of $20.7 million in Q4 '25 compared to a loss of $48.6 million in Q4 '24. Our consolidated operating loss included a noncash impairment charge of $26 million related to certain FCC licenses. Without this noncash impairment charge, we would have had an operating profit of over $5 million in Q4 '25. Full year 2025 operating loss was $83.4 million versus $52 million for full year 2024, with the increase primarily due to a loss on lease abandonment related to our corporate headquarters and restructuring charges related primarily to our Media segment. Again, our goal is to be profitable for each segment and generate a consolidated operating profit. We have additional work to do, particularly in the Media business, and we remain focused on growing revenue and reducing operating expense throughout 2026 and beyond. Looking at corporate expenses, we have taken significant steps to reduce these expenses over the past few years. Corporate expenses in fourth quarter '25 were $6.5 million, a 13% decrease compared to fourth quarter '24 or about $1 million. The decrease was primarily due to expense reductions in rent and professional services. For full year 2025, we reduced corporate expenses by $10.5 million compared to full year '24, a 28% decrease year-over-year. Going back 1 year further for additional context, corporate expense in 2025 was almost half of the amount of corporate expense in 2023. Entravision's balance sheet remains strong with over $63 million in cash and marketable securities at year-end. We're proud of our strong balance sheet, which we believe sets us apart from others in the industry. In 2025, we made total debt payments of $20 million, reducing our credit facility indebtedness to about $168 million as of year-end. We entered into an amendment to our credit facility in Q3 as previously reported. The amendment was a proactive and strategic move to accelerate debt reduction and provide more financial stability and flexibility under our credit agreement. In addition, we paid $4.6 million in dividends to stockholders in the fourth quarter or $0.05 per share and a total of $18 million for full year 2025 or $0.20 per share. For the first quarter of 2026, our Board of Directors has approved a $0.05 dividend per share payable on March 31 to stockholders of record as of March 17 for a total payment of approximately $4.6 million. Our strategy regarding allocation of cash is, first, reduce debt and maintain low leverage; and second, return capital to our shareholders, primarily through dividends. We look at capital allocation on a 2-year basis to take into account cyclical political advertising that occurs every other year. During the past 2 years, 2024 and 2025, we had about $85 million of net cash provided by operating activities. During this 2-year period, we used about $76 million of that $85 million to pay down debt and pay a shareholder dividend. That's $40 million used to reduce debt and $36 million used to pay dividends to shareholders. 2025 was not a political year, so we did not have meaningful political revenue last year, but we have now entered another political advertising election year here in 2026. We'd like to thank you for joining our call today. We welcome our investors to connect with us through the Investor Relations page on our corporate website, entravision.com, where you will have access to a transcript of this call, the press release containing our fourth quarter and full year financial results and a copy of our annual report filed with the SEC on Form 10-K. At this time, Mike and I would like to open the call for questions from the investment community. Roy, I'll turn it back over to you. Roy Nir: Thank you, Mark. [Operator Instructions] The first question is regarding the outlook for political revenue in 2026. Mike, do you want to address that? Michael Christenson: Yes. So as of today, we are 243 days away from election day 2026. And as you can see in the news, primaries are underway across the country. I think we're very well positioned for a strong political spending environment in 2026. As we've said on prior calls, we believe the Latino vote will be critical to the outcome of the congressional elections in all -- in our 6 Southwestern states. The Cook Political Report lists the 35 closest races of the 435 congressional races, and we are fortunate to have 11 of those 35 in our markets. We also have the important Texas U.S. Senate race, which is, again, getting a lot of press. And then finally, we have governors' races in California, Colorado, Nevada, New Mexico and Texas. So we're very well positioned. And what I would say is, which we've also said on past calls, we believe the Latino vote will be critical to the outcome of these elections. Studies have shown that Latinos are the most persuadable segment of the electorate, and we have a powerful channel for reaching that audience. And what we will say to make it very clear, what we say to everyone, we can get to listen to our pitch, you must win the Latino vote to win your election. And if you want to win the Latino vote, you should double or triple your allocation to Spanish language media. So again, we're very optimistic about how we're positioned for 2026. Roy Nir: Thank you, Mike. We received another question related to the status of renewing the affiliation agreement with TU. Can you provide an update on that? Michael Christenson: Sure. Not much to update since our last call, what we said last time, and it's still the case today. The affiliation agreement with TelevisaUnivision runs through December 31, '26. We've been partners for 3 decades, and our plan is to renew this agreement. So we expect to renew this agreement. But that's all I can say at this point. Roy Nir: Thank you, Mike. Please hold as we review additional questions. Thank you, everyone, for joining us today. Mike, I'll turn it back to you for closing remarks. Michael Christenson: At this point, we'll say thanks, Roy, and thank you again to all of you who are joining our call today. We look forward to speaking with you again when we report our 2026 first quarter results. Thank you very much.
Operator: Good day, everybody, and welcome to Smith & Wesson Brands, Inc. Third Quarter Fiscal 2026 Financial Release and Conference Call. This call is being recorded. At this time, I would like to turn the call over to Kevin Maxwell, Smith & Wesson's General Counsel, who will give us some information about today's call. Thank you. You may begin. Kevin Maxwell: Thank you, and good afternoon. Our comments today may contain forward-looking statements. Our use of the words anticipate, project, estimate, expect, intend, believe and other similar expressions are intended to identify forward-looking statements. Forward-looking statements may also include statements on topics such as our product development, strategies, market share, demand, consumer preferences, inventory conditions for our products, growth opportunities and trends and industry conditions in general. Forward-looking statements represent our current judgment of the future and are subject to risks and uncertainties that could cause our actual results to differ materially from those expressed or implied by our statements today. These risks and uncertainties are described in our SEC filings, which are available on our website, along with a replay of today's call. We have no obligation to update forward-looking statements. We reference certain non-GAAP financial results. Reconciliations of GAAP financial measures to non-GAAP financial measures can be found in our SEC filings and in today's earnings press release, each of which is available on our website. Also, when we reference EPS, we are always referencing fully diluted EPS and any reference to EBITDA to adjusted EBITDA. Before I hand the call over to our speakers, I would like to remind you that when we discuss NICS results, we are referring to adjusted NICS, a metric published by the National Shooting Sports Foundation based on FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than firearms purchases. Adjusted NICS is generally considered the best available proxy for consumer firearm demand at the retail counter. Because we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers and not to end consumers, NICS generally does not directly correlate to our shipments or market share in any given time period, we believe, mostly due to inventory levels in the channel. Joining us on today's call are Mark Smith, our President and CEO; and Deana McPherson, our CFO. With that, I will turn the call over to Mark. Mark Smith: Thank you, Kevin, and thanks, everyone, for joining us today. We are very pleased with our third quarter results, which demonstrated continued market share growth while simultaneously maintaining resiliency in our pricing power and profitability. This is a direct function of the entire team's discipline in staying focused and executing against our long-term strategy. The strength of the iconic Smith & Wesson brand, along with our laser focus on innovating to keep ahead of market trends. Once again drove impressive average selling prices in the quarter, which, together with increased unit shipments delivered not only solid top line performance, but also translated into both strong profit margins and balance sheet performance. Our Q3 performance exceeded our expectations across the board. Net sales increased over 17% year-over-year to nearly $136 million. EBITDAS of $16.8 million was up nearly 21% and adjusted EPS was $0.08 compared with $0.03 in the prior year period. Importantly, we also delivered another quarter of significant growth in operating cash flow, which is up more than $30 million year-over-year. We believe our purposeful deployment of capital will allow us to continue consistently delivering long-term value for our stockholders. Looking at our performance by category. Our handgun results were exceptional. Our unit shipments of handgun into the sporting goods channel were up 28%, while mix was down 2.2%. With distributor inventory weeks of supply remained flat during the period, this indicates significant market share growth. This outstanding performance was driven by several factors, including strong demand for our newer products, a favorable shift in product mix towards higher price models, robust consumer demand and the benefit of a modest 2% to 3% price increase that we implemented late in the quarter on January 1. Notably, we saw this growth across our entire semi-auto pistol line, indicating that the hard work that the team has been putting in on marketing messaging, targeted promotions and new product development execution across the line is paying dividends. Performance in long guns was consistent with our strategic positioning in the market, and we are pleased with our performance in the categories where we actively compete. For the quarter, our long gun shipments into the sporting good channel were down 25%, while overall mix was down 5.6%. However, we believe this was largely due to channel fill in the prior year period of several new caliber introductions on our higher-end 1854 lever-action rifle products, combined with the relative outperformance in the industry, of the hunting segment versus the self-defense segment, where our product line is more heavily weighted. Diving a little deeper into innovation. New products represented 44% of handgun shipments and 28% of long gun shipments during the quarter. In handguns, while we continue to have success with the BODYGUARD platform, as I just mentioned, the growth we experienced in Q3 was across the entire line of our semi-auto pistols, where we introduced several new models outside the subcompact space, most of which are positioned at higher price points. Once again, I'm incredibly proud of our award-winning product management, engineering, design and production teams who consistently deliver products that resonate with consumers while meeting their expectations of world-class quality and reliability associated with our legendary brand. Driven by this mix NICS shift, and as I mentioned earlier, we were again pleased to continue seeing strong overall average selling prices in the hanging category. with ASPs up 5.2% versus a year ago to over $419 and also above Q2 levels. On the long gun side, ASPs were also strong at $535 although down about 11% versus a year ago. Similarly, NICS was the primary driver here, as I just mentioned, with the year-ago period, including the channel fill of higher-priced new product introduction from the 1854 rifles. For both categories, the strength of the Smith & Wesson brand and our ability to ensure our product assortment is aligned to market trends continues to allow us to maintain healthy pricing and profitability while only participating selectively in promotions. Turning now to our balance sheet. We continue to make significant progress reducing our debt and further strengthening our financial position. We ended Q3 with $75 million in debt versus $90 million at the end of Q2, and we paid down an additional $20 million subsequent to the end of Q3. We were pleased with our internal inventory position of $175 million which was down $23 million versus last Q3, resulting in excellent cash generation in the period of over $20 million. I'd like to once again commend the team for their hard work on our disciplined process for aligning production to sales expectations across the product portfolio, which drove these results. And we're also very pleased with our distributor inventory levels, which remained flat in terms of weeks of supply, maintaining at approximately 9 weeks throughout the quarter, right in line with our target. With our strong sales in the period, this indicates solid sell-through of our products at the retail counter. Before I turn the call over to Deana, I want to touch on a couple of additional points. First, we attended the annual industry SHOT Show in Las Vegas at the end of the quarter, where we were very pleased with customer feedback on our performance, product portfolio and forward strategy. This feedback, combined with our recent results and strong outlook for the remainder of the fiscal year, which Deana will cover in a moment, indicates we are winning in the marketplace. And looking forward, we will continue to be laser-focused on execution across the business and sustaining these gains. Next, the Smith & Western Academy, which launched just 6 months ago, along with our focus on the professional channel is already exceeding our expectations. Thanks to the hard work of our Academy staff and law enforcement sales team and the ongoing success of our purpose-built, rugged and reliable duty weapons, we are not only growing in the consumer channel, but also gaining significant momentum on the law enforcement side. You may have seen that we were awarded a number of large agency orders recently. And as a matter of fact, have shipped to nearly 1,000 separate federal, state and local law enforcement agencies just within the past 18 months. With a strong sales pipeline and growing momentum, we're very pleased with the results to date and beyond proud and humble to be trusted by these men and women with the tools they need to come home safe to their families every day as they put themselves in harm's way to protect and serve our country and our communities. In summary, momentum is strong and building, and our brand and product assortment are driving continued healthy profitability, and we remain confident in the direction and trajectory of our business against the backdrop of a healthy and stable market. We continue to lead with a proven innovation strategy that consistently resonates with consumers backed by the powerful Smith & Wesson brand, along with our commitment to operational excellence and maintaining a strong balance sheet we are well positioned to continue winning in the marketplace and delivering long-term value to our stockholders. As always, I want to thank our entire team of talented Smith & Wesson employees for their tireless dedication and putting their skills to work each and every day to make us successful. With that, I'll turn the call over to Deana to cover the financials. Deana McPherson: Thanks, Mark. Please note that all comparisons are between the third quarter of fiscal 2026 and the third quarter of fiscal 2025, unless stated otherwise. Net sales for our third quarter of $135.7 million were $19.8 million or 17.1% above the prior year on the strength of our new handgun products. During the quarter, distributor inventory in terms of actual units increased by approximately 20% over the end of the prior quarter, but only by about 4% compared with the end of January 2025 with weeks of supply remaining steady at approximately 9 weeks. We believe, based on feedback from our customers, that strong demand for our products will continue in the coming months. Handgun ASPs were up slightly versus Q2 levels due to continued strong demand for certain premium products, but offset by the strength of certain of our lower-priced products. Long gun ASPs decreased by about 11% due to lower overall volume of certain of our higher-priced products, driven by channel fill for new products in the prior year, as Mark covered earlier. Gross margin of 26.2% was up 210 basis points over the prior year on increased production volume combined with lower promotion costs and lower federal excise taxes partially offset by a 160 basis point negative impact from tariffs. Having focused on driving inventory levels down over the last 12 months, we are now turning our focus to increasing production to meet market demand which should continue to have a positive impact on margins. Operating expenses of $28.9 million were $5.7 million higher than the prior year due primarily to a $2.3 million gain on the sale of real estate that was reported last year. Increased profit related and stock-based compensation expense contributed to the remaining increase. Higher revenue and related margin resulted in net income of $3.8 million compared with $2.1 million in the prior year period. GAAP earnings per share in the third quarter was $0.08 compared with $0.05 a year ago. On a non-GAAP basis, earnings per share was $0.08 compared with $0.03 a year ago. Cash generated from operations during the third quarter was $20.5 million compared with cash used from operations of $9.8 million in the prior year quarter. This was due primarily to lower inventory, which decreased $7.9 million during this quarter versus an increase of $2.9 million in the prior year quarter. We spent $3.6 million in capital projects in the third quarter compared with $6.3 million a year ago. We expect our capital spending for the year to be between $25 million and $30 million. We paid $5.8 million in dividends and ended the quarter with $23.5 million in cash and investments and $75 million in borrowings on our line of credit. Subsequent to the end of the quarter, we repaid $20 million on our line, bringing our outstanding borrowings down to $55 million. Finally, our Board has authorized our $0.13 quarterly dividend to be paid to stockholders of record on March 19, with payments to be made on April 2. Looking forward to the fourth quarter, we believe the strength of our brand, product assortment and new product offerings are helping us drive growth and take share in an otherwise stable market. Therefore, we expect our fourth quarter sales will be up 10% to 12% over Q4 2025 sales, with a small reduction in channel inventory as distributors begin to plan for the slower summer months. With 8 additional operating days compared with Q3 and an increase in production to meet demand, we expect Q4 gross margin to increase by several percentage points over Q3 and a point or 2 over last year's fourth quarter. Operating expenses in Q4 will likely be about 10% higher than last year's fourth quarter due to increases in research and development costs, stock compensation, profit sharing and other profit related costs. Additionally, we expect continued healthy cash generation during the fourth quarter. Our effective tax rate is expected to be approximately 29%. With that, operator, can we please open the call to questions from our analysts? Operator: [Operator Instructions] Our first question is from Mark Smith with Lake Street Capital. Mark Smith: I want to ask first about kind of recent pricing changes. Can you talk about any price that's been taken, whether that's been across the board? And anything that you can quantify?. Mark Smith: Sure, Mark. The price increase we put in was effective January 1, as I covered in the prepared remarks. And it was largely across the board. It was -- there were some categories that took a little bit steeper increase and some categories took a little bit, little bit less so just really driven on market demand and our position within each category. But overall, across the board, it was pretty close to 3%. Mark Smith: Okay. Any feedback for as you look at distributors? Or as you think about kind of consumers on that, does it seem like that's gone through well? Or has there been any pushback on the pricing? Mark Smith: No, it's no pushback whatsoever. As you may recall, it's been a little bit since we've taken a price increase and really has gone through smoothly, no impact whatsoever. And I think as you saw from the results, an uptick in demand throughout the quarter. So... Mark Smith: Perfect. And I want to look at just handgun sales, really strong results there, especially as we think about new products. I'm curious, without giving out too much competitive details here, anything that you can expand on, on what's kind of helped drive some of that strength. I'm curious like colorways, some of your ported options? Are these things that have helped or is just having the right product for consumers right now? Mark Smith: Yes. You know we've had great success with BODYGUARD over the last -- really the last couple of years. That category, we kind of own it. On the -- we've done a lot of work and that strategy, I talked about a lot, long-range strategy is let's make sure we're refreshing the entire product line. And I think we're starting to see the results of that. And it's really just it's across the board. It's all of what you just talked about Mark. And obviously, we're not going to give too much detail for the reason you just covered. It's looking at the market trends and having a team that really understands the industry and what is trending out there, where do we need to make some updates and changes. And making those changes, and we've been really happy with the results that are coming out with that. And now that polymer pistol line across the board is really starting to gain a lot of profitable share. And obviously, as we start to move now into one of the -- out of the subcompact into the compact and full-size markets, that's obviously at the higher end of the pricing hierarchy and that is really helping ASPs and the momentum continues. Mark Smith: Perfect. And then just similar question shifting over to long guns. I'm curious, anything that you guys can do today to kind of drive more strength in that long gun market. And I realize there's some things in the comparable that make it this quarter tough. But as we think about the hunting category. Is there interest in entering there? Is there more maybe on SBRs or anything that you can do to drive more long gun business?. Mark Smith: Yes, the SBRs, as you're well aware, the tax changes that occurred on January 1 are helping a little bit there in that category. But at the end of the day, as I covered in the prepared remarks, it really is, it's one is the difficult comp versus last year as we were introducing kind of the last couple of calibers and the lever action rifle, which obviously are at the very high end of our pricing hiearchy on long guns, but also that our product portfolio is kind of more weighted towards that self-defense market and the hunting market, obviously, we're in it with the 1854 and very pleased with the performance there. But there's -- I'll just leave it at this, is there's a lot of white space there for us and we're always looking at long-term opportunities. Mark Smith: Perfect. And I think the last one for me. You called it out a bit in your commentary, just the law enforcement opportunity and improving sales there. I'm curious, just where you're at in that process? It seems like that's a big market and maybe just scratching the surface. Is that something that is a big focus and where you think you can really move the needle on revenue as there's more drive in law enforcement. And then similarly, I'm curious as we think about maybe international within military, if there are similar opportunities. Mark Smith: Yes, it's definitely a focus area as I think you've been around long enough now you know that's a much longer sales cycle than on the consumer side. So what I'm pleased about is the pipeline that we have even with the strong results this quarter, we've got a pretty healthy pipeline coming up behind it. And that is a direct result of all of the intangibles of the academy and being able to service that law enforcement customer in a more meaningful way, purpose-built products, changes to the product, there's innovation happening there as well. And that expands beyond just domestic law enforcement, it moves into federal agencies. state, local and federal and then outside into foreign militaries as well. So a lot of good things happening in that space. Still does remain kind of a smaller section of our business right now, but a lot of momentum there and a pretty healthy pipeline coming up behind it. Operator: Our next question is from Rommel Dionisio with Aegis Capital. Rommel please check for line is muted. I believe he was having some technical difficulties. We do not have any further questions at this time. I would like to turn the conference back over to Mark for closing remarks. Mark Smith: Thank you, operator, and thanks, everyone, for joining us today and your interest in Smith & Wesson. We look forward to speaking with you all again next quarter. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Myers 2025 Fourth Quarter and Full Year Results Call. [Operator Instructions] I will now hand the conference over to Meghan Beringer, Senior Director of Investor Relations. Meghan, please go ahead. Meghan Beringer: Thank you. Good morning, everyone, and welcome to Myers Fourth Quarter 2025 Earnings Review. Joining me today are Aaron Schapper, President and Chief Executive Officer; and Sam Rutty, Executive Vice President and Chief Financial Officer. After the prepared remarks, we will host a question-and-answer session. Earlier this morning, we issued a press release outlining our fourth quarter financial results. In addition, a presentation to accompany today's prepared remarks has been posted. Those documents are available on the Investor Relations section of our website at myersindustries.com. This call is being webcast live on our website and will be archived along with the transcript of the call shortly after this event. Now please turn to Slide 3 of the presentation for our safe harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements. Further, information concerning these risks, uncertainties and other factors is set forth in the company's periodic SEC filings. Also, please be advised that certain non-GAAP financial measures such as adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted earnings per share may be discussed on this call. Now please turn to Slide 4 of our presentation as I turn the call over to Aaron. Aaron Schapper: Thank you, Meghan. Good morning, everyone, and thank you for joining us. I will begin today's call with a review of our fourth quarter, then I will review full year 2025, which was a clear inflection point in Myers' history with both the Focus transformation program and the significant decision to sell Myers Tire Supply. Overall, we believe these actions will unlock substantial value, enhancing the company's long-term growth profile. Following my comments, Sam will provide a detailed review of fourth quarter and full year financials and our outlook for the year. Turning to Slide 5. Fourth quarter sales were essentially flat year-over-year. Excluding the impact from our decision to exit low-margin products with the idling of 2 rotational molding facilities, sales would have been up 3% as infrastructure, industrial and food and beverage growth was partially offset by soft consumer and vehicle demand. We expanded margins in the fourth quarter, demonstrating our ability to improve profitability as we grow the business in high-margin applications and align our operating footprint with customer needs. Both gross and operating margins improved with adjusted operating margins expanding 230 basis points. SG&A was lower as we are benefiting from our focused transformation objectives. As a result, fourth quarter adjusted EPS improved 63% year-over-year. Looking at full year 2025, Material Handling sales increased while distribution demand declined. With Material Handling, growth in industrial and infrastructure markets was offset by lower consumer and vehicle demand. We achieved higher profitability with operating and net income increasing on both a reported and adjusted basis. We're encouraged by the improved earnings as it demonstrates the ability of our team to control what we can control and achieve good results in a challenging demand environment. In addition to improved earnings, we increased cash flow in 2025 with free cash flow up 23%, further strengthening our balance sheet. We invested in growth, reduced debt and returned cash to shareholders, all while increasing our cash balance. This is a testament to the performance of our team and gives me confidence that we are well on our way to achieving our long-term strategic goals. It has been 1 year since my first earnings call as CEO. While I had only been in the role for about 3 months, that initial period confirmed for me the great team and potential at Myers. I was confident that we could create a company that delivers consistent and reliable results by building on our strong foundation. We launched a focused transformation to energize our team and accelerate our progress. After meeting and engaging with our leadership team and many employees, I knew we were up for the challenge. Over the last year, we have taken actions to improve business performance and drive shareholder value. It's still early days, and we have a lot of work to do, but I'm encouraged by the progress we have made. In our first year, our Focus transformation program was formed around 4 objectives shown on Slide 6. Our first objective was to establish a culture of execution and accountability to drive performance. We revised our core values, adding a focus on delivering results and continuous improvement. We aligned our incentive plans to drive business unit performance and create accountability across the organization to ensure we generate long-term shareholder value. We emphasized lean principles to drive clear and efficient processes. These actions are helping us to build a culture that consistently outperforms. Second was to create clear strategies to improve the profitability of our entire portfolio. We engaged with a broad group of employees, including our executive management team to dive deep into each of our businesses, understand their value propositions and create action plans. We developed strategic plans and implemented KPIs to drive organic growth, expand margins, track progress and create accountability. One significant outcome of this activity was the completion of a strategic review of MTS, resulting in the decision to sell the business. Once complete, this will result in a portfolio that is focused on growth platforms that drive improved margin profiles. Our third objective was to deliver consistent and reliable results across the organization by effectively controlling what we can control. In 2025, we delivered annualized cost savings of $20 million, primarily in SG&A, structurally reducing expenses while also optimizing organizational efficiency. We exited low-margin products and idled 2 of our 9 rotational molding facilities to improve utilization and reduce costs. We formalized and launched a strategic deployment tool to drive disciplined planning and empower businesses to convert long-term goals into annual objectives. This tool is being implemented across all levels of the organization, and we are beginning to see results. Finally, we have deployed a disciplined capital allocation framework, allowing us to invest in growth while returning cash to shareholders. We grew free cash flow 23% through improved earnings and prudent cash management, providing additional flexibility to fund our organic investments. We continue to invest in growth, targeting CapEx of 3% of sales, focusing on high-growth opportunities with superior returns, and we returned $23 million to the shareholders to enhance their total return. Sam will expand on our capital allocation framework later in the call. To summarize, in 2025, we moved Myers forward with purpose and urgency, made significant progress on our transformation and deliver results with a continuous improvement mindset, providing a strong catalyst for 2026. Looking ahead, I would now like to discuss how focused transformation approach is shifting in 2026 as our strategy evolves as shown on Slide 7. One thing that remains the same is our resolve and commitment to achieve real transformation. We are continuing our deliberate process to create a transformed organization focused on delivering consistent and reliable, profitable growth. To do this, we are shifting our priorities to reflect the progress and evolution of our strategy. With this new approach, we have established 3 strategic priorities or focus areas that will guide us in 2026. Within each focus area, we have identified transformation objectives to drive performance. Our first priority is to focus on our core markets and the customer value we deliver. We will invest to gain a deeper understanding of our markets and customers, informing our value proposition and positioning us to lead in our categories. This knowledge is gained through commercial excellence skills that strengthen customer relationships and deepen market insight. We are simplifying our portfolio to intentionally focus on serving prioritized markets that align with our competitive advantages as we provide products that protect. Our second priority is to focus on instilling operational excellence and cost leadership across the organization to drive a culture of high performance. We delivered measurable progress against this priority last year. For 2026, we want to make sure that we do not lose ground by standardizing the improvements we made in workflows. We want to work smarter and ensure our processes are repeatable year after year. When needed, we will make changes to refine our organizational structure and optimize our operating footprint. Last year, we put this into practice with the idling of facilities and changes in the organization to ensure that we have the right talent. The culture of continuous improvement will continue to be fostered across the organization. Our third priority is to focus on investments that maximize profitable growth. This is a disciplined capital allocation approach to invest in growth platforms where returns are highest. As we align with markets where we add the greatest value, we can invest in innovation and pursue business development activities that enhance and strengthen our ability to provide differentiated solutions for our customers' challenges. We believe that these focus areas and the related transformation objectives will drive desired strategic outcomes such as deliver revenue growth, EBITDA margin expansion, free cash flow conversion and the acceleration of Myers to a company that achieves world-class performance. This is all built upon our foundational set of core values that dictate how we operate and what unites us. At this time, I'll turn the call over to Sam for a review of our financial results. Samantha Rutty: Thank you, Aaron, and good morning, everyone. Let me start by reviewing our fourth quarter and full year results and then wrap up with the outlook by end market for the year. Please turn to Slide 9. Fourth quarter net sales were $204 million, essentially flat year-over-year due to our decision to exit low-margin products with the idling of 2 rotational molding facilities. Excluding this, sales would have been up 3%. Adjusted gross margin increased 140 basis points to 33.6% due to favorable mix and higher volume, partially offset by unfavorable price. Adjusted operating margin improved 230 basis points to 11% as SG&A was lower year-over-year, driven by focused transformation savings. As Aaron mentioned, we achieved $20 million in annualized cost savings, primarily in SG&A, improving our margins in 2025 and positioning us well for 2026. Going forward, we will continue to focus on cost reductions and operating efficiencies to drive sustainable improvement in profitability. Turning to segment results on Slide 10. Material Handling net sales decreased $0.4 million. Excluding the impact of idling our rotational molding facilities, sales increased 3.4%. By end market, food and beverage, infrastructure and industrial growth was offset by soft consumer and vehicle demand. Adjusted EBITDA margin was 25.6%, expanding 290 basis points with the benefit of our focused transformation savings plus improved mix and higher volume, partially offset by unfavorable pricing. Distribution net sales increased 0.9% and adjusted EBITDA margin improved 160 basis points. Turning to Slide 11. Full year 2025 net sales was $825.7 million, down 1.3% year-over-year. Excluding the impact from idling our 2 rotational molding facilities, sales decreased 0.6%. Material Handling growth was offset by distribution softness. Within Material Handling, sales in Industrial and Infrastructure increased while consumer and vehicle sales were lower. Adjusted gross margin increased 30 basis points to 33.7% due to lower material costs, favorable cost productivity and favorable mix. Adjusted operating margin improved 30 basis points to 10.3% due to benefits from our focused transformation program. Turning to Slide 12. Fourth quarter operating cash flow was $22.6 million and CapEx was $3.6 million, resulting in free cash flow of $18.9 million. For the full year, free cash flow improved 23% to $67.2 million. We reduced net debt by $44.2 million in 2025, resulting in net leverage ratio of 2.4x within our target ratio of 1.5x to 2.5x. We plan to further reduce debt in 2026, bringing our net leverage ratio closer to the midpoint of our target range. We ended the year with a cash balance of $45.1 million and total liquidity at $289.8 million, providing us with ample flexibility to support our capital allocation priorities. Working capital as a percentage of sales increased slightly, primarily due to higher receivables from infrastructure project delivery timing, partially offset by lower inventory. We continue to focus on working capital management as a priority. Please turn to Slide 13. Our capital allocation framework balances investing in growth while returning cash to shareholders. In 2025, we spent $19.6 million in CapEx, approximately 2.4% of sales. In 2026, we expect to be close to our target of 3% of sales as we continue to invest in organic growth platforms. We are also open to opportunistic acquisitions with a disciplined approach to support our growth platforms, now that our leverage ratio is within our target range. We returned $23 million to shareholders in 2025 through the combination of dividends and share repurchases. Returning cash to shareholders is an important element of our objective to create value for our shareholders. Turning to Slide 14. We are providing our market outlook for 2026. Due to the planned divestiture of MTS, we are not providing an outlook for automotive aftermarket. Related to that, MTS is expected to qualify for discontinued operations accounting treatment beginning in the first quarter. We still see both risks and opportunities for our end markets as we continue to monitor geopolitical conditions, including energy markets, tariffs or other factors that may influence demand trends. Also, our market outlook excludes the impact from exiting low-margin products and idling 2 rotational molding facilities in Alliance, Ohio that occurred in Q4. This represents approximately $5 million in revenue per quarter, primarily industrial and consumer markets with a favorable impact to earnings. Let me review our expectations by market. For industrial, we expect moderate growth as we are seeing modest recovery in manufacturing capital expenditure trends from our industrial customers. Militaries around the world are replenishing their inventories and demand for military products continues to increase. In Infrastructure, strong ongoing spend for large construction and utility projects supported by conversion from wood to composite matting should continue to drive strong growth. The current backlog for matting products is now the largest in the history of this business, giving us confidence in our 2026 outlook. We expect the vehicle end market to be stable overall with mixed demand indicators. For RV and marine, we expect flat sales as consumer sentiment is stabilizing. For commercial vehicles, we expect recovery starting in the second half of 2026. For automotive OEMs, the volume of new and updated vehicle program launches over the next 12 to 18 months is expected to drive demand for new component packaging. In consumer, we now anticipate sales to be stable. Strong winter storms across most of the U.S. at the start of 2026 created a sharp increase in demand for fuel containers. While this event drove demand in Q1, it is still early to determine full year storm impact. However, we are planning for the average of 3 landed storms in the Continental U.S. this year. Our food and beverage end market is forecasted to be slightly down for the year, reflecting the agricultural market position at the low end of its cycle. I would now like to turn the call back to Aaron for some closing comments before we take your questions. Aaron? Aaron Schapper: Thank you, Sam. In closing, I'm pleased with the meaningful progress we are making on our focused transformation to become a company that consistently delivers reliable financial results. There is still room for improvement, but our overall trajectory is encouraging. Margins are improving and cash flow is increasing as we begin to see early benefits from focused transformation. Supporting this is our capital allocation framework that balances investment in growth and returning cash to shareholders to create sustainable value. And as we invest, grow and simplify our portfolio, we are aligning our operations with markets that are growing and offer higher returns as we deliver products that protect. With that, I'd like to turn the call over to the operator for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Christian Zyla with KeyBanc Capital Markets. Christian Zyla: Congratulations on the quarter and the full year. My first question is on broader end market sentiment. Industrial production has been strong for the last 14 months. PMI has been strong to start 2026 and sentiment on the industrial side seems to be improving after a few years of weakness. With your opening remarks, it sounds like you're seeing something similar. I know your outlook is moderate growth for your industrial bucket, but can you help break that down between the subcategories like Akro-Mils, Buckhorn sector, et cetera? Just kind of what you're seeing across those lines. Aaron Schapper: Sure. Yes. So in general, if you look at the PMI, it's a broad spectrum, right, across manufacturing here in the U.S. So yes, that helps, right? So if you're looking at some of our products that specifically supply to those larger industrials such as Akro-Mils, then yes, that tracks closely. So as you see that strength, it does translate over. Then there's other product lines that are a little more specific to the end markets in those industries, automotive and what Buckhorn will do for automotive. There's also then if you look at the -- basically construction and a lot of utility and kind of data center mega build-outs, those track strongly to what we do with our ground protection product at Signature. So although PMI gives us kind of a broad based scope, you kind of look at -- we look at each of the end markets and say, okay, well, how is the construction industry, data centers, utility, kind of the AI investing of infrastructure pulls along Signature. Automotive pulls along Buckhorn. Agriculture will pull along of seed box business. And right now, agriculture is still at a cyclical low [indiscernible]. And so those are kind of -- that's where you get some of that mix. So the moderate growth story is there, but you have to look into some of the end markets to understand what our application is in those end markets. Sam, do you have anything to add? Samantha Rutty: Yes. Yes, overall, I think you made the right comments there. I mean, obviously, militaries as well, as we commented earlier in the pre-read is a big driver as well on the industrial side. Aaron Schapper: Yes. I think, Christian, we've talked about that. And obviously, with new geopolitical issues coming out, it's becoming -- I think it has been an important focal point for the last year. It certainly will continue to do so. So as we look at militaries that are looking to rearm and make sure that they have the stockpiles they need to go the distance in any conflict. Christian Zyla: Yes. Got it. That actually goes nicely into my next question. I remember at the Investor Day a few years ago, your team highlighted U.S. qualification for your defense products along with NATO orders. Are you selling to the U.S. Dow now? And are you anticipating or seeing a pickup in demand from your programs given just what's unfortunately happening across the world? It just seems like your product is a great complement of consumables in the end market. So just any broad thoughts there and kind of how you see that shaping up through the year and maybe how you size that full business? Aaron Schapper: Yes. So if we look at kind of the arc of that business, really we split it into kind of 2 sides. So one, we do sell directly to the U.S. military, and that's kind of one of our customer sets. And the other one is the NATO customer set, which is going to obviously be more European-based and more internationally based. So we sell to both sides on that. NATO has made it a more of a strategic priority to have a supply chain that's independent -- more independent of the U.S. in the past. And so as a result, that's given a great opportunity for us. As you know, we have Canadian operations that dovetail well with the needs of NATO. And then we also have operations here in the U.S. for injection molding to meet the needs of the U.S. government. So what we plan on doing is we use both our supply chain in both Canada and the U.S., and we're looking for opportunities globally. As NATO grows, we want to grow with that business. So we're always happy to look for those opportunities internationally. For us, look, the product dovetails very well with what's needed. As you know, we focus on the ammunition side. So as they bring up these complex weapon systems, the ammunition was really shown during the conflict in Europe between Ukraine and Russian war, how quickly ammunitions go -- get consumed in a near-peer conflict. So as a result, that's really helped drive not only business for the last year, business this year, but also real solid plans on growth in the future and making sure -- so from our side, on the Myers side, we just want to make sure that our capital follows those growth vectors and that we make sure that we have great organic growth opportunities, and we have the capital spent to service our customer as they grow. So we're bullish on that business in the future, and we remain confident that we'll do well, and we're positioned well in the future. Christian Zyla: That's great. If I could sneak one last one in. Just a very nice result in Material Handling margins really for the full year, given the changes that you've made throughout 2025. Was there anything unusual in the fourth quarter and then assuming volume absorption benefits and maybe some uptick in your end markets and volume absorption, just given all the changes you've made with your capacity, is there any reason why this new 18% level can't be the new baseline? Just kind of like puts and takes there. Samantha Rutty: Yes. I mean, yes, a really great quarter for Material Handling. A lot of what we've been doing around focused transformation. I mean, we've talked a lot about the idling of the roto facilities, right? But that was when we started to see the real benefit of those actions there. But as said, we're not done around focused transformation. There is more to be done. There's a lot of focus on continuous improvement broadly across our businesses. And so I would say good mix helped some in Q4. That's always a factor, right? We're seeing, as Aaron mentioned, good strong backlog around our matting products as well as some of the good tailwinds at the end of the year, even, I would say, a slight pickup in the fourth quarter for volumes on the roto side as well, which helped after our restructuring activities. And obviously, we continue to see the impact of our SG&A reductions as well, which helped a lot as well, and that continue as we've made that structural change in our cost base. So there's no reason to suggest that it wouldn't continue, although obviously, with recent activities in the world, we'll be continuing to look at risk and material costs as we think about resin prices and things like that, we'll have to continue to adapt. Operator: [Operator Instructions] Your next question comes from the line of Bill Dezellem with Tieton Capital Management. William Dezellem: Congratulations on meeting your $20 million cost reduction goal in '25. How much of that $20 million is going to be incremental to '26 because you did not have it all as of January 1, '25? Samantha Rutty: Yes. I mean there will be some incremental. We've obviously got things that was a factor of some of those savings were within our distribution business and obviously, dependent upon the sale of that business, it's going to impact how much of that carries forward within the RemainCo. But again, as we mentioned, we're not done, and we'll continue to look for more opportunities within Material Handling and build upon those in 2026. William Dezellem: And Sam, would you please put some numbers behind both that incremental that flows through in '26 and the additional target that you're looking at for this year? Samantha Rutty: I don't think we're at a place that we can talk about a specific target for 2026. And we've got actions and work to do depending upon the timing of that sale as we -- as that business splits off. Operator: There are no further questions at this time. I will now turn the call back to Meghan Beringer for closing remarks. Meghan Beringer: Thank you for joining us today. If you'd like to continue the conversation, my contact information can be found on the final slide of this presentation. We look forward to staying in touch. With that, we'll conclude the call. Have a good day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good afternoon, everyone, and thank you for joining OptimizeRx' Fourth Quarter and Fiscal 2025 Earnings Conference Call. With us today is Chief Executive Officer, Steve Silvestro. He is joined by Chief Financial and Strategic Officer, Ed Stelmakh; Chief Legal and Administrative Officer, Marion Odence-Ford; and Chief Business Officer, Andrew D'Silva. At the conclusion of today's call, I will provide some important cautions regarding the forward-looking statements made by management during today's call. The company will also be discussing certain non-GAAP financial measures, which it believes are useful in evaluating the company's operating results. A reconciliation of such non-GAAP financial measures is included in the earnings release the company issued this afternoon as well as in the Investor Relations section of the company's website. I would like to remind everyone that today's call is being recorded and will be made available for replay as an audio recording of this conference call on the Investor Relations section of the company's website. Now I would like to turn the call over to OptimizeRx CEO, Steve Silvestro. Mr. Silvestro, you may begin. Stephen Silvestro: Thank you, operator, and good afternoon to everyone joining us for today's fourth quarter and fiscal year 2025 earnings call. We delivered a strong fourth quarter, exceeding both consensus estimates and our internal expectations. Revenue for the fourth quarter was $32.2 million, and adjusted EBITDA was $12 million. For the full year, revenue totaled $109.4 million with adjusted EBITDA of $24.3 million. Our full year 2025 results clearly demonstrate the strength of our operating model and the significant opportunity within our market. We delivered solid top line performance across both our largest and most established clients and a growing cohort of newer customers, particularly in the mid-tier and long-tail life science companies. We view this segment as highly attractive, providing a meaningful runway to expand our customer base and deepen our relationships over time. At the same time, improvements in our product mix and channel partner strategy contributed to higher gross margins in 2025. When combined with cost optimization initiatives following the Medicx acquisition and the benefits of our largely fixed cost, highly scalable operating model, we more than doubled both adjusted EBITDA and free cash flow year-over-year. While we're pleased with our fourth quarter results, we are seeing softness in our year-to-date contracted revenue numbers as compared to last year. This is mostly driven by a previously communicated market shift away from managed services, which contributed a material portion of our contracted revenue in the first half of 2025. In addition, we believe some of our clients are adopting a more conservative spending tone in the early stages of 2026 as they adjust their portfolios to most favored nation pricing. We feel confident that the latter is a temporary phenomenon that will start to normalize in the course of the coming few months. Given this backdrop, we are updating our 2026 guidance and are taking a more conservative view on revenue while continuing to stay focused on profitability. For 2026, we expect revenue in the range of $109 million to $114 million and adjusted EBITDA between $21 million and $25 million. I also want to be clear, management and our Board believe there is still significant opportunity for value creation, particularly when examining the demand and operating leverage we saw in 2025. Indeed, fiscal 2025 demonstrated the strength of our profitable growth model. We achieved Rule of 40 performance, delivered adjusted EBITDA margins above 20% for the year and generated nearly $19 million in free cash flow from operations. Reflecting our confidence in the long-term value of the business, our Board has authorized a $10 million share repurchase program. We intend to finance the repurchase using our available cash and cash equivalents in open market or privately negotiated transactions. I'd also like to address some of the speculation and questions we received regarding artificial intelligence. Our business has experienced minimal disruption from AI, and we do not expect to be disrupted in the future. We are not a commoditized software solution or a strategic partner to life science companies supported by a proprietary and highly valuable communications network that connects pharmaceutical manufacturers with health care professionals and patients at critical moments of care. In fact, AI may serve as a tailwind. We are hearing from customers that historically up to 50% of marketing budgets were allocated to content creation. As AI drives efficiencies within our client base, that allocation of spend is likely to be redeployed to both expand reach and improve execution of marketing efforts, areas where OptimizeRx is particularly well positioned. We believe we are strongly positioned for long-term outperformance on both the top and bottom line. We address key pain points for our customers, including enhancing brand visibility, reducing script abandonment, improving interoperability between disparate point-of-care platforms and supporting the transition to more complex and specialty medications. A strong example of our impact comes from one of our largest customers, a top 10 pharmaceutical manufacturer that engaged OptimizeRx to support specific oncology initiatives through our point-of-care and point-of-prescribe-based marketing solutions. While early programs were focused on targeted use cases, the results demonstrated measurable impact in reaching prescribers within a clinical workflow and influencing engagement at key decision points. As performance validated the DAAP model, the manufacturer expanded their investment with OptimizeRx in 2025 to support multiple oncology brands across various indications. This expansion across brands and tumor types drove meaningful year-over-year revenue growth, evolving from initial pilot programs into a scaled multi-brand oncology engagement strategy. When we talk about enterprise engagements, this is the momentum we're looking for. We're also seeing strong momentum in the med tech sector. One flagship client first partnered with us post-COVID to expand prescriber reach to our legacy point-of-care marketing solutions. Consistent script lift in 2024 prompted the client to adopt DAAP, our AI-enabled Dynamic Audience Activation Platform, which facilitated precise timely outreach to prescribers, including many previously untapped new prescribers, exactly when it mattered most in the patient journey. This continues to be a major differentiator for the company and for our clients. By activating and leveraging these high-value HCP audiences identified through DAAP, the client rapidly scaled deployment to additional brands and channels. This multi-brand, multichannel scaling is delivering substantial impact in a highly competitive and rapidly growing landscape. The success of this program resulted in the customer drastically increasing its investment in OptimizeRx solutions from pilot dollars in 2022 to several million dollars in 2025. This pattern, starting with targeted POC engagement, progressing to DAAP adoption and then accelerating across the portfolio highlights the repeatable path to accelerated growth and stronger ROI that we see across dozens of similar pharma and med tech companies. OptimizeRx is uniquely positioned to drive sustainable long-term growth and shareholder value. The keyword here is sustainable. With one of the nation's largest point-of-care networks and the only true point of prescribe network, we enable pharmaceutical manufacturers to engage health care providers directly at the moments that matter most when actual decisions are being considered and made. Building on this foundation, we've developed a purpose-built omnichannel platform that integrates advanced patient finding capabilities such as DAAP and micro neighborhood targeting. These tools are redefining how pharmaceutical companies, physicians and patients connect, improving patient outcomes and transforming engagement across the health care ecosystem. Our reach across both point-of-care and direct-to-consumer channels provides a durable competitive advantage. We believe OptimizeRx is the only company with the scale, technology and data integration required to seamlessly engage providers and patients across all channels. This positions us as a comprehensive commercialization partner, supporting customers throughout the full product life cycle, deepening relationships and expanding long-term value capture. As we have discussed on prior calls, a key focus moving forward is to further demonstrate our reach, scalability and value as a trusted strategic partner. Our ability to consistently expand relationships with our largest customers underscores the value we deliver and the impact we have on script lift in the commercialization process. I'm confident that continued focus on execution, notwithstanding some of the near-term headwinds seen in our space, combined with our differentiated platform and strong customer outcomes will translate into meaningful long-term shareholder value. We believe our momentum positions us to capture additional market share and expand our role within the pharma industry's multibillion-dollar digital ecosystem. Our customers remain deeply integrated across our HCP and DTC offerings, and our objective is to support them seamlessly across the full patient care journey. And with that, I'd like to turn the call over to our CFSO, Ed Stelmakh, who will walk us through the financials. Ed? Edward Stelmakh: Thanks, Steve, and good afternoon, everyone. A press release was issued with the financial results for our fourth quarter and fiscal year ended December 31, 2025. A copy is available for viewing and may be downloaded from the Investor Relations section of our website, and additional information can be obtained through our forthcoming Form 10-K. Fourth quarter revenue came in at $32.2 million, and this was largely in line with our previously communicated expectations as we continue to convert more of our DAAP agreements into subscription revenue that spread more evenly over the course of the year. In addition, buys came in at a more moderate level than in 2024. Gross margin increased from 68.1% in the quarter ended December 31, 2024, 74.8% in the quarter ended December 31, 2025. Year-over-year gross margin expansion is tied to a favorable solution and channel partner mix. While the fourth quarter was a record gross margin quarter, we don't anticipate gross margins to be at this level in 2026 and continue to believe we'll be in the mid-60% range as the fourth quarter saw an unusually high amount of specialty messaging in higher-margin channels, which was a favorable but uncommon mix for us. Our operating expenses for the quarter ended December 31, 2025, decreased by $2.9 million year-over-year, largely due to lower cash OpEx as we saw benefits from the post-acquisition cost reduction measures we implemented in 2024. Meanwhile, our net income came in at $5 million or $0.26 on a fully diluted basis for the fourth quarter of 2025 compared to a net loss of $0.1 million during the fourth quarter of 2024. On a non-GAAP basis, our net income for the fourth quarter of 2025 was $9.9 million or $0.51 per diluted share outstanding as compared to a non-GAAP net income of $5.5 million or $0.30 per diluted share outstanding in the same year ago period. Our adjusted EBITDA came in at $12 million for the fourth quarter of 2025 compared to $8.8 million during the fourth quarter of 2024. We ended the year with cash and short-term investments totaling $23.4 million as of December 31, 2025, as compared to $13.4 million on December 31, 2024. We were able to increase our cash balance throughout the year despite paying off $8 million in principal during 2025, including $6 million ahead of our prepayment schedule. Our operating cash flow was $18.7 million for 2025 versus $4.9 million in 2024. As a result, our current debt balance stands at $26.3 million. We continue to believe we're well funded to execute against our strategic and operational goals, and we'll look to utilize free cash flow to pay down debt at an accelerated rate and opportunistically look to repurchase shares. Now I'd like to turn to our KPIs for the 12 months ended December 31, 2025. Average revenue per top 20 pharmaceutical manufacturer was $2.8 million, which declined slightly from $3 million in 2024 and was directly tied to lower buy-ups and data-related revenue that I highlighted earlier. Meanwhile, net revenue retention rate remained strong at 116% and revenue per FTE came in at $839,000, topping the $701,000 we posted during the 12 months ended December 31, 2024. Finally, I'd like to provide additional color around our guidance, which now calls for 2026 revenue to come in between $109 million and $114 million and adjusted EBITDA between $21 million and $25 million. As you may recall, our first half 2025 revenue was positively impacted by managed service revenues, which contributed to approximately $9 million in the first half of 2025. Since we don't expect a similar revenue mix in 2026, our revenue phasing is likely to fall in line with historical 40% to 60% contribution between first and second half of the year. And with that, I'll turn the call back over to Steve. Steve? Stephen Silvestro: Thanks, Ed. Operator, now let's move to Q&A. Operator: We'll now begin the question-and-answer session. [Operator Instructions] The first question comes from Ryan Daniels with William Blair. Ryan Daniels: Curious in your commentary on some of the end market weakness, a few points there. One, are you really just seeing the conservatism with the 17 companies that are in MFN negotiations? Or is it broader across the entire client base? That's number one. Stephen Silvestro: Great. Thanks, Ryan. Good to hear from you. We're seeing a broader pause across all of the clients as they're trying to just digest what it's going to mean for them. So the contracting duration has started to shorten a little bit from maybe 6 to 12 months down to quarter pulses or even half year pulses as they're sort of contemplating how they're going to deploy spend. I think that will normalize over time or we think it's going to normalize over time as they get through it. And outside of those that are -- I think it's really just over conservatism for the first quarter. That's sort of our stance. And that's what we're hearing as people are just being cautious. Ryan Daniels: Okay. And are you seeing any nuances between D2C and HCP marketing? Are you seeing pressure on both of those from your partners? Stephen Silvestro: Yes, it's about the same across the board. They're not being viewed differently at this point by any of the manufacturers. Everybody has got the same view of both DTC and HCP spend as a whole. Ryan Daniels: Okay. Okay. That's helpful. And then maybe one for Ed. You mentioned during the quarter, gross margins were obviously great and drove a lot of upside to the bottom line. I think you said there were some specialty messaging and higher-margin channels. Can you go into a little bit more detail on what that was or what drove that? And then why you don't think that could be sustainable? Is it just something that you don't want to model, but maybe in a given quarter, you might be able to do that again and drive margins through those specialty messages? Edward Stelmakh: Ryan, yes, thanks for the question. Yes. So, I guess, two parts here. First of all, what happened in Q4 2025. So there, we did have a very positive -- very favorable mix of channel partners that we utilize to drive our messages. And as you know, we can pick and choose which channel partners we can drive messages to, but we're clearly going to be running those messages through channel partners where we can reach the best audience under DAAP. So that's what happened there in terms of our ability to drive higher margins for that quarter. As far as 2026 is concerned, we are guiding to mid-60% gross margin range, mainly due to the fact that we don't feel comfortable taking the high end of the equation and running it through the year. We can do it periodically, but I don't see us doing this on a regular basis throughout the year. Ryan Daniels: Okay. I appreciate that. And then maybe last question, I'll go back to Steve. You mentioned you're not seeing any disruption from AI, but would love to hear your purview on how it's actually helping your operations. I know you have used AI in some of your kind of real-time analytics and product deployment in the past. So just curious what AI has meant to you maybe over the last quarter or two and what you're investing in as we look forward over the next few years to enhance your offering or your ROI for clients. Stephen Silvestro: Yes. No problem, Ryan. Happy to talk to it. And it's actually an extension of what Ed just mentioned, which is everyone is pretty hyped up on the Agentic AI deployment across the board. As you know, we've been doing this now for years. So it's not anything new for OptimizeRx. But what it does is creates efficiency and speed within organizations. You still need human input to get things to actually move. But what it will enable us to do is get clients to stop spending money on things like content creation or other stuff where they were just very people heavy and start to deploy AI in a way that enables them to spend more money on commercial execution, and that's where we're particularly strong. And so we're excited about the AI piece. We don't see it as disruptive to us at all. We see us as an enabler of people adopting more AI. And then just to piggyback on Ed's comment around sort of channel partner selection and deployment of messages that impacts the profile, I think that is a great example of what AI could do for OptimizeRx as more people adopt the Agentic and other components of AI that are getting out there. It allows us to be more efficient with channel partner distribution message distribution and physician identification. And so we are welcoming it. I think it's not broad enough yet, Ryan, where we're willing to reset the profile of the business from a margin perspective, but we were able to flash that publicly and show what the potential is within this business as we continue to grow it. So, for me, I'm very excited about it. I'm trying not to overhype it, but it's a positive, net positive for us. I appreciate you calling it out. Operator: The next question is from Eric Martinuzzi with Lake Street. Eric Martinuzzi: Yes. Historically, you've been able to give some color on the percent of revenue that's under contract. I would guess, given the duration color that you gave, Steve, that maybe that number is not in what I would say a 30% number is what you've talked about in the past. Can you give us any color on percent under contract? Stephen Silvestro: Yes, we can give a little bit of color. I mean right now, we're roughly -- if we take out the managed service component, Eric, that we talked about, which is predominantly first half contracted, we're running roughly 15% to 20% off of where we normally would be. And that's mostly due to the timing of the contract, the duration of the contracts. When you take out the managed service component, it's mostly contract duration, meaning shorter-term contracts than we would have seen same time last year or years previous. And we think that's -- we're not panicking about that. We think that's going to adjust over time. And we think as we get to the midyear, we'll start to see that the contracted revenue numbers will take care of themselves and normalize themselves. But Ed, you can feel free to chime in if you want. I know you and Andy are also tracking it very closely. Edward Stelmakh: Yes. I think you got it right, Steve, 15% to 20% behind last year's numbers. We typically don't disclose the exact percentage of revenue that's already under contract, but we will give you a gauge for whether or not we're running ahead or behind. But just to give you a little more color, as Steve said, there was an impact of managed services playing a pretty big material role last year in the first half around the same time. So that's missing from the equation this year to a large extent. And also shorter duration contracts are also hitting us a little bit out of the gates. But we are kind of reading the market, and we are very positive and very optimistic about pharma once they get through the first quarter or two of this year, normalizing their spending within the year and coming back strong in the back half of the year. Eric Martinuzzi: And following up on the managed services comment. I think you said there was -- was it $9 million in the first half? Or was it $9 million for 2025? Edward Stelmakh: So it was $9 million of revenue in the first half of 2025. Eric Martinuzzi: And is there -- have you -- does the guide for 2026, does that include any amount for managed services? Edward Stelmakh: It includes very little. As we said last year, managed services is a very episodic solution for us. It comes and goes. So we're not counting on much of it coming in this year. Operator: The next question is from Constantine Davides with Citizens. Constantine Davides: Great. Steve, you highlighted in your prepared remarks performance from mid-tier and smaller manufacturers. Just wondering what exactly you're doing to attack that portion of the market and what's been driving that success? Stephen Silvestro: Constantine, good to hear from you. Really, what it is, is we have an ability to supplement a lot of what those mid-tier and long-tail clients don't have infrastructurally within their own businesses. So if you think about what OptimizeRx is evolving into as a commercialization partner for a lot of these assets, taking new -- a lot of these companies, taking new assets to market, launching them, trying to drive sales, we can fill a lot of the empty space where they may not have big budgets for big marketing teams, Cadillac budgets for agencies, hundreds of sales reps out on the street. And we're able to fill that gap very seamlessly in a cost-efficient, effective way. And the growth in the mid-tier and the long tail has, I would say, has exceeded our expectations that the uptick there is faster than we were even initially anticipating, which is a really, really good sign. And coming back to one of the questions that Ryan had around the people that are negotiating on the MFN front, all of those are the top 10 manufacturers, right? It's the Lillys of the world and the Pfizers and everybody else that people are familiar with household names. But the volume of specialty pharmaceuticals is actually still coming out of the mid-tier and the long tail, the biotech sector. And so it's a particularly interesting opportunity for our business. So we're honing in on it. I appreciate, it's a great question. Constantine Davides: Great. And then just in terms of capital deployment, I saw you guys announced a share repurchase plan. And just trying to think about or understand how you're thinking about paying down debt versus deploying it towards buybacks, just what we should be expecting there? Stephen Silvestro: Sure. Ed, I'll let you handle that one. Edward Stelmakh: Thanks, Steve. Constant, Yes, so we're going to look at every opportunity as it comes to us. As you know, historically, we've paid down debt with all of our excess cash flow. And the plan is to continue to do that as much as possible this year as well. But also we'll gauge it against the opportunity to come in and buy back our stock at the right price point. So, I guess, the easy answer to your question is it depends. But in most cases, I think you can expect us to spend that money on paying down the debt. Constantine Davides: Got it. And then maybe one last one for you, Ed. What have you contemplated in guidance in terms of approximate NRR for the year? Edward Stelmakh: So, NRR in our case, as I said consistently, we're shooting for anything above 100% as a good marker. So we haven't really unpacked our guidance based on specific NRR numbers. But I think if you look at where we're guiding now, there's probably some room for slight excess above 100%. Operator: [Operator Instructions] The next question is from Jeff Garro with Stephens. Jeffrey Garro: I wanted to ask a few more follow-ups on the end market dynamics. I'll throw a couple out to start, really focused around customer behavior. And curious if any comments you can give on what January and February bookings looked like versus December when those large pharma companies were still in the middle of negotiating those most favored nation pricing agreements. And then as we think about lower spend, early here in 2026. Is that likely to result in increased catch-up spend in the back half of the year? Or is there a possibility that, that piece of the budget is just unlikely to be recaptured this year? Any particular feedback or anecdotes you're hearing from your customers to support what the likely back half behavior is? Stephen Silvestro: Yes. Jeff, good to hear from you. So just the dynamics right now that we're seeing out in the marketplace, which is pretty consistent with everybody in our peer group that I think you guys are all either following or aware of, is exactly what we said, right? Everyone is a little bit distracted with the MFN negotiations, even if they're not directly in those negotiations, they're sort of in a wait-and-see what's going on with it. We do think that, that's disruptive in the first half of the year. That's why we've adjusted the guide to accommodate for that. We do think the business will be back to its 40-60 traditional performance in terms of revenue flow. And so that would tell you that the back half will probably be a little bit stronger than the first half. In terms of how January, February, et cetera, are looking, we've already shared a contracted revenue number and told you that we did $9 million in the first half. So you'd have to pull that out because we know it's not repeatable. And then we told you sort of where we were year-to-date. So that should give you the info that you're looking for. We feel pretty confident in the way that we're going to get to the first half, and we feel more confident in the back half. And the conversations we're currently having with clients, the client satisfaction that we're hearing back from our Chief Commercial Officer, has us feeling bullish on the back half of the year. But again, we've dropped the guide a little bit on the top line just to adjust for some of the things that we've already mentioned. And we've reiterated and raised the guide on EBITDA. So that should be, I think, a pretty good signal on how we feel about the year. Happy to answer more questions around the dynamics, but I think that probably addresses that. Jeffrey Garro: All super helpful. And maybe to just kind of probe a little bit more on visibility and the business shifts to drive more consistent results. Maybe you could update us on converting some of your DAAP arrangements to subscription. I think at one point in 2025, it was greater than 5% of annual revenue, I would assume for 2025. And a later update, you talked about a line of sight into moving that to 10%. So any color you could give on where that subscription mix ended exiting 2025 and how you see that progressing in 2026 would be helpful. Stephen Silvestro: Andy, why don't I have you talk to just the conversion factor, if you'd like. And I don't know if we're going to disclose a number yet, Jeff, but Andy can talk to you about the trend we're seeing, and we feel really good about it is what I would say. Andy, why don't you take that? Andrew D'Silva: Yes. So we got pretty close to 10% as it relates to exiting the year on that run rate, obviously, not for the full year. We were between 5% and 10% for the full year. As you think about it in 2026 and going forward, if we continue to increase DAAP as a percent of our overall business, I believe you'd start to see a continued increase in the subscription side of the business, and DAAP is a key focus area for our growth. Operator: The next question is from David Grossman with Stifel. David Grossman: So just to kind of level set on maybe the macro assumptions underlying the revised guide for '26. Are you thinking that we've kind of stabilized at a level and it should be flat to up from these levels? Are you contemplating incremental degradation? Maybe you could just give us some incremental insight into how you're thinking about that and how that was embedded in the guide -- the revised guidance. Stephen Silvestro: Sure. Ed, do you want to take that one? Edward Stelmakh: Yes, I can take that. Yes. So I would say, yes, definitely a slower start to the year than we had hoped for. Our current thinking is that as the year goes forward, these things will start to improve. hoping Q2, Q3 is when we really see that come to fruition. And those are the signals we're getting back from the market that they're taking a bit of a pause, trying to digest what MFN means to their individual portfolios. So they're signing up for shorter duration contracts out of the gates, but eventually, they'll open up their wallets and continue to market like the kind of industry they've been for many, many years. David Grossman: Is your sense that we'll have more of a fourth -- back-end loaded year than we typically have in the fourth quarter? Or do you expect it will be similar? Edward Stelmakh: It's tough to predict, but I look at it in a similar way we had a few years ago, a slowdown in FDA approvals. And pharma watches certain factors like that very closely. So any time there's any kind of disruption or change in course, they'll usually hit the pause button or pump the brakes a bit, but then come back strong in the back half of the year. David Grossman: Got it. And on the net revenue retention, how much is the decline in the fourth quarter related to managed services? Or was managed services in the fourth quarter similar to what you saw in the fourth quarter last year? Just trying to get a sense because it looks like NRR dipped a little bit in the fourth quarter. And just wondering if that's really tied to the managed service dynamic or if there are other things that play there like the reduced spending. Edward Stelmakh: Yes. I mean it's partially that. Partially also the quarter is the buy-ups and the conversion to a subscription model that happened in 2025. It just smooth out the way revenues are recognized. So those two factors contributed to the drop. David Grossman: Got it. And I guess, Steve, just on kind of your AI commentary. What -- when you're talking to these large pharmaceutical companies, what are they sharing with you in terms of their own internal efforts and where they want you to fill in, in terms of how they're kind of deploying AI on the marketing side of the house? Stephen Silvestro: Yes, sure. Happy to comment on it. And then I know we're looking -- we're looking to see you here next week, so we can chat some more on it. But the large part of what they're trying to do right now is look at it for basically internally the way that they're structuring clinical trials, making that more efficient, large language models, looking to train on those large language models, looking to use data that they've got from places like IQVIA, Surescripts or any of the other providers that they've amassed over the years and start to deploy some of that in a more, I think, a direct way and create some efficiencies around that. So those are the big things that they're looking to do. And I already shared the content creation comment, David, which is a huge one. The amount of content, as everybody knows on the call, that pharma creates is enormous. And if they can leverage some of these tools that are coming out to basically eliminate the manual labor associated with building all of that content and the approval process that is constrained that content from getting deployed in a timely manner, that is going to be an unbelievable unlock for the industry. The biggest frustration for pharmaceutical marketers is going through the medical legal and regulatory process. And one of the areas that they're really looking at is trying to use AI to eliminate the need to go through that entire process the way that it's currently constituted. So you can think about like medical simulations, you could think about legal. Obviously, legal is a huge place that could be disrupted with this, right? And then on the regulatory front, same thing. Those are all places where large language models and AI can absolutely disrupt or replace what's going on in those spaces. And so if pharma is successful in the deployment of what really is being called by McKinsey and others, Agentic AI, they'll be able to speed their time to get things to market. So drugs getting through approval and getting launched and getting deployed and all that will be rapidly to be significantly faster than it currently is. And that will give them way more marketing opportunity and more marketing budget to focus on execution, which is what they really want to spend money on. And that's where we sit. We sit on the execution side. Operator: The next question is a follow-up from Constantine Davides with Citizens. Constantine Davides: Let me ask one more. Steve, at the end of '26, you guys announced a few new partnerships and transitioned -- it looks like transitioned a couple to exclusivity arrangements. So just wondering if you can talk about your ongoing efforts there. I think perception that, that world was pretty well canvassed, but just how much more room to run is there in both the EHR world, but also the stand-alone e-prescribing arena? Stephen Silvestro: Yes. Thanks for the question, Constantine. It's a great one. So it's important for the group to know for everybody to know EHR and e-prescribe are two different animals. And every EHR has an e-prescribe module that's bolted into it. In some cases, the EHR owns the e-prescribe and it's native. In other cases, they've integrated and e-prescribe into it. So those are two different points of connectivity that we have. what we're really focused on is expanding not just our EHR footprint, but what we call our point-of-prescribe footprint as well. And the reason for that is we want to make sure that we are actively engaging in the digital conversation with the prescriber when they are contemplating the diagnosis and prescription therapy selection and subsequently transmitting that prescription to whatever pharmacy it's going to go to after the real-time benefit check and so on and so forth. So it's less about platforms that we don't have. It's more about further integrations into those platforms and making sure that we're consistently embedded in every part of the workflow that we can be. We did sign just on your question around the exclusivity, we were able to peel back a few channel partners from competitors who had signed agreements with these specific channel partners and either failed to pay the channel partner, failed to perform didn't deliver on what they said they were going to deliver. And so those channel partners proactively approached OptimizeRx through our channel lead who's done a phenomenal job of relationships and wanted to become part of the network. And to me, that is a huge positive signal that we are doing good by our partners and striving to be the best partner that we can for them, and that's why we have more people coming. So I'm excited to share more about that. I'm not going to share names on this call, Constantine, but at some point, you're going to see press releases with the names and joint statements from me and those additional channel partners coming in the not-too-distant future. Constantine Davides: Thanks for the additional color. Stephen Silvestro: Yes, you got it. Does that answer the question? I just want to make sure I got it. Constantine Davides: Absolutely. Yes. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Steve Silvestro for any closing remarks. Stephen Silvestro: Thank you, operator. Thank you all for joining us today. I'd like to end by congratulating and thanking the entire OptimizeRx team for a tremendous 2025. We deeply appreciate their dedication and hard work as we navigate an increasingly complex and rapidly evolving digital pharma marketing landscape. Our industry is undergoing significant transformation, and our products and services are uniquely positioned to redefine how pharmaceutical brands, patients and prescribers connect. Our mission-driven culture continues to fuel innovation and execution, enabling us to attract and retain strong partnerships while reinforcing our role as a trusted and long-term technology partner. While we remain in the early stages of what is still a relatively nascent industry, we are confident that our proven business model, solutions and technology platform are directly addressing the evolving needs of our customers. Our synchronized HCP and DTC marketing capabilities powered by real-time brand eligibility signals, combined with expanded functionality such as micro neighborhood targeting allow us to deliver hyperlocal privacy-safe audiences across both patients and prescribers. These differentiated capabilities continue to expand our competitive moat and strengthen our market leadership. For the remainder of the year, our priorities are clear. We are intensely focused on increasing customer utilization of DAAP and building greater revenue predictability by transitioning more customers to a subscription-based model. Establishing a consistent recurring revenue component is a critical step as we advance toward becoming a sustained Rule of 40 company. We believe these initiatives will be transformative and central to driving long-term shareholder value for OptimizeRx. Thank you again for your time today. I look forward to speaking with you on our next earnings call and connecting with many of you at the upcoming industry conferences. Operator, please proceed with OptimizeRx' safe harbor statement. Operator: Thank you, sir. Before we conclude today's call, I would like to provide the company's safe harbor statement that includes important cautions regarding forward-looking statements made during today's call. Statements made by management during today's call may contain forward-looking statements within the definition of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934 as amended. These forward-looking statements should not be used to make investment decisions. The words anticipate, estimate, expect, possible and seeking and similar expressions identify forward-looking statements. They may speak only to the date that such statements were made. Forward-looking statements in this call include statements regarding our plans to drive sustainable long-term growth, plans for shareholder value creation, converting more customers to our reoccurring model. Becoming a sustained Rule of 40 company, strength of our operating model, experiencing minimal disruption from AI, unlocking new opportunities for profitable revenue growth, plans to make our revenue streams more predictable, plans to drive substantial operating leverage, estimated 2026 revenue and adjusted EBITDA ranges, long-term outperformance on both the top and bottom lines, continued strong momentum in the medtech sector, ability to improve patient outcome and to transform engagement across the health care ecosystem, ability to consistently expand relationships with our largest customers, estimation of total addressable market size, ability to capture additional market share and expand our role within the pharma digital ecosystem, market penetration, revenue growth, gross margin, operating expenses, profitability, cash flow, technology, investments, growth opportunities, acquisitions and upcoming announcements. Forward-looking statements also include the management's expectations for the rest of the year. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying these forward-looking statements. The risks and uncertainties to which forward-looking statements are subject to include, but are not limited to, the effects of government regulation, competition, dependence on a concentrated group of customers, cybersecurity incidents that could disrupt operations, the ability to keep pace with growing and evolving technology, the ability to maintain contracts with electronic prescription platforms and electronic health records networks and other material risks. Risks and uncertainties to which forward-looking statements are subject could affect business and financial results are included in the company's annual report on Form 10-K for the year ended December 31, 2023, and in other filings the company has made and may make with the SEC in the future. These filings when made, are available on the company's website and on the SEC website at sec.gov. Before we end today's conference, I would like to remind everyone that an audio recording of this conference call will be available for replay starting later this evening running through for a year on the Investors section of the company's website. Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.
Operator: Good afternoon, ladies and gentlemen. I would like to welcome everyone to The Gap Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host, Whitney Notaro, Head of Investor Relations. Whitney Notaro: Good afternoon, everyone. Welcome to Gap Inc.'s Fourth Quarter Fiscal 2025 Earnings Conference Call. Before we begin, I'd like to remind you that the information made available on this conference call contains forward-looking statements that are subject to risks that could cause our actual results to be materially different. For information on factors that could cause our actual results to differ materially from any forward-looking statements, please refer to the cautionary statements contained in our latest earnings release, the risk factors described in the company's annual report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2025, quarterly reports on Form 10-Q filed with the Securities and Exchange Commission on May 30, 2025, August 29, 2025, and November 26, 2025, and other filings with the Securities and Exchange Commission, all of which are available on gapinc.com. These forward-looking statements are based on information as of today, March 5, 2026, and we assume no obligation to publicly update or revise our forward-looking statements. Our latest earnings release and the accompanying materials available on gapinc.com also include descriptions and where available, reconciliations of financial measures not consistent with generally accepted accounting principles. All market share data referenced today will be from Circana's U.S. apparel consumer service for the 12 months ending January 2026, unless otherwise stated. Joining me on the call today are Chief Executive Officer, Richard Dickson; and Chief Financial Officer, Katrina O'Connell. With that, I'll turn the call over to Richard. Richard Dickson: Thanks, Whitney, and good afternoon, everyone. I am pleased to report that we delivered another successful fourth quarter, in line with our expectations and marking another year of meaningful progress for Gap Inc. In the quarter, we achieved comparable sales of 3%, our eighth consecutive quarter of positive comps, while once again winning across all income cohorts. We continue to do what we said we were going to do, underscoring the growing resilience, durability and potential of our portfolio. Reflecting on the full year, 2025 continued to demonstrate our ability to perform while we transform even in a highly dynamic environment as we execute our strategic priorities and deliver consistent performance while fixing the fundamentals. Through the disciplined execution of our brand reinvigoration playbook, we are building a clear track record of reliable growth, proving our 3 largest brands can deliver quarter after quarter. Gap Inc. achieved its second consecutive year of top line growth. Full year net sales grew 2% at the high end of our outlook, fueled by comparable sales of 3%, building on last year's 1% net sales growth and 3% comp. Our playbook continues to fuel our portfolio with Gap brand delivering its third consecutive year of positive comp sales and both Old Navy and Banana Republic reporting their second consecutive year of positive comp sales. We delivered one of our highest gross margins in the last 25 years and generated $1.1 billion in full year operating income, a clear reflection of the strength of our platform and the financial and operational rigor embedded across the organization. Disciplined execution throughout the year further strengthened our balance sheet, enabling us to end 2025 with a cash balance of $3 billion, our highest in nearly 2 decades. Based on our strong financial position and confidence in our continued progress, the Board recently approved an increase in our first quarter dividend and a new $1 billion share repurchase authorization. I am proud of the resilience this team has shown and what we have achieved together. This performance gives me confidence as we continue to move forward. That confidence is rooted in something deeper than any single quarter or year. Since 1969, when the Fishers opened a single store to bridge a generation gap, Gap Inc. has proven that purpose and profit can coexist, taking pride in doing what's right for our company, our customers and our communities and building brands that matter. It's that legacy of bridging gaps and leading with purpose that brings us to today. We have a unique opportunity with the legal settlement received to pledge a $50 million charitable donation to a combination of the Gap Foundation and our donor-advised fund. This marks a true legacy moment, honoring a heritage rooted in shared humanity and ensuring that our commitment to create a better world endures for generations to come. On today's call, I'll discuss our fourth quarter performance by brand and share how we're thinking about 2026 in the context of our strategy. Then Katrina will walk you through our detailed financial results and outlook, after which we will open the call for questions. Starting with Old Navy. As we execute on our reinvigoration playbook, Old Navy is becoming a proven growth engine with consistency and scale that drives meaningful value. Fourth quarter comp sales grew 3%, building on last year's 3% comp growth and reflecting the brand's fifth consecutive quarter of positive comps. Old Navy ranks as a top 3 brand in 9 of the 10 largest apparel categories and gained share in all 5 of the largest categories on a rolling 12 basis. Old Navy continues to win at the intersection of great product, quality and price. The brand's focused pursuit of leadership in active, denim and kids and baby drove strong performance across each of these categories as the brand continued to innovate and excite our customers. Both active and denim continue to grow share and the strong execution of our Disney partnership has positioned Old Navy as Disney's #1 apparel brand direct-to-consumer partner in the United States. The brand has also continued to evolve its media mix model to meet consumers where they are, growing its presence on social media platforms and significantly increasing creator volume with over 15,000 creators in the fourth quarter, almost 3x the number of creators last year. Looking ahead, we believe Old Navy is well positioned, and we're confident in the brand's ability to deliver consistently largely in line with its performance over the past 2 years. Now let's turn to Gap. Gap's momentum accelerated meaningfully in the fourth quarter, delivering comp sales up 7% on top of last year's 7% comp growth, marking its ninth consecutive quarter of positive comps. Returning to its powerful heritage, the brand is once again bridging the generation gap, continuing to attract Gen Z while growing its core customer. And that multigenerational appeal is showing up in the results. Gap at its best is a true original, a pop culture brand that celebrates individuality united through music, genres and collaborations that bridge generations and cultures. We're leaning into that heritage with intention from red carpet moments, most recently dressing Leon Thomas for the Grammys and Claire Danes for the Golden Globes, to co-hosting a star-studded Super Bowl event in San Francisco to spotlighting emerging artists from Tyla and Troye Sivan to KATSEYE and Siena Spiro. Gap is showing up in culture in ways that are authentic and relevant. In the fourth quarter, the team executed our playbook with Fluency, which was demonstrated through their Give Your Gifts Holiday Campaign and culturally relevant collaborations, supported by a highly evolved media mix. We saw particular strength in key categories like fleece, including logo, denim and sleepwear. As brand relevance has increased, we're also proving elasticity. This was our second quarter of meaningfully pulling back discounting driven by on-trend product and strong brand heat. With a focus on elevating the customer shopping experience, new store models continue to outperform the fleet, giving us confidence in the opportunity to accelerate these formats in 2026. I'm proud to say that Gap, our namesake brand of 56 years, is firmly back in growth mode. Banana Republic delivered a 4% comp, building on a 4% comp last year with sharper merchandising and execution. Banana Republic has returned to its roots as a storytelling brand expressed through the lens of the modern explorer. You could see that story coming to life more cohesively and comprehensively through our assortments, merchandising and how we show up in culture and consumers have taken notice. There's greater synergy between men's and women's with head-to-toe wardrobing guided by a clear style guide and design language that's informing design, presentation and storytelling. Leather, suede, cashmere and texture, all synonymous with Banana Republic's design language are reinforcing the brand's distinctive point of view. This is a great example of the differentiation of our portfolio coming alive, and we look forward to getting even sharper with more precision, more narrative-led merchandising and a dialed-up fashion quotient that underscores Banana Republic's unique brand DNA. Shifting to Athleta. While Athleta remains a work in progress, we took decisive action in the second half of 2025, appointing Maggie Gauger to lead its reinvigoration. The active category remains strategically important and resilient. Even amid disruption, customers continue to make fashion choices that are active oriented. Within that landscape, Athleta holds a meaningful position as the #5 women's active brand with distinction as a women's-only brand rooted in quality, performance and design intent exclusively for her. And while Athleta sales trend has been disappointing, we've accumulated critical learnings and are acting on them with intention. We are re-architecting the assortment, building key items into enduring franchises and reorganizing the brand around consumer insights. Maggie is going deep with the team, even meeting with Athleta's founder to reconnect the brand to its original purpose and establish clarity and alignment around the brand's identity. With the strength of our portfolio and our proven playbook, 2026 will be about positioning the brand for sustainable growth in the years ahead. Progress will take time, but I am confident we are attracting the right talent to rebuild Athleta. In 2025, the power of our portfolio became clear as our playbook successfully delivered consistent growth across our 3 largest brands. This was reflected in the metrics that matter, the strength of our product and in the cultural narratives that are resonating with consumers. Moving at the speed of culture takes focus and discipline, and we're working together with clarity and conviction to continue to advance our strategy. As we've shared, we've been very purposeful in the sequential order of our transformation. Over the last 2 years, we have focused on fixing the fundamentals, maintaining financial and operational rigor, reinvigorating our brands, strengthening our platform and energizing our culture. The meaningful progress we've made across these strategic priorities has enabled us to consistently perform while we transform, strengthening our financial model and driving shareholder value. As we move into the next phase of our transformation, building momentum, our primary focus will be growing our core apparel business through continuous improvement, driven by disciplined execution with better product, marketing and storytelling. In parallel, we will be building on the strength of our apparel business by thoughtfully seeding growth accelerators and new capabilities. We are beginning with expansions into adjacent lifestyle categories such as beauty and accessories, 2 categories that are underdeveloped in our portfolio but are meaningful to our consumers and sizable in the industry. We will also continue advancing our Fashiontainment platform and technology capabilities, all with the intent to build scale, relevance and revenue over time. Let me take a moment to share more about each of these, starting with beauty. As discussed in the past, beauty is one of the fastest-growing, most resilient retail categories in the U.S., and our customer insights reinforce strong engagement. Our research suggests that for other fashion apparel businesses that have entered the beauty space, beauty makes up anywhere from 5% to 20% of their business. We believe this is a good indicator of the category's potential in our business over the longer term. In 2025, we introduced the consumer to our expanded beauty assortment at Old Navy and are making refinements based on our customer feedback. In 2026, we'll be deepening this engagement with consumers and look forward to reintroducing a fragrance assortment at Gap this summer. Turning to accessories. Our accessory category performed well in 2025, reinforcing our confidence in this expansion. According to Euromonitor, this category has a $15 billion total addressable market. And today, Gap Inc. represents just 1% of the market share. Consumers are looking for us to be more pronounced in accessories and we see an exciting opportunity to become a destination for wardrobing. We look forward to launching an expanded accessory line for holiday. We believe the beauty and accessory categories have the added benefit of serving as margin and traffic drivers that strengthen our brands, deepen customer connection and build lasting loyalty. We have appointed proven industry experts to lead each of these areas with focus and discipline. Our Fashiontainment platform is another area we will be focusing on in 2026. Today's customers aren't just buying apparel. They're buying brands that tell stories and drive cultural conversations. As we continue to build our brands, we see entertainment as a powerful growth lever. Last month, Pam Kaufman joined Gap Inc. as Chief Entertainment Officer, adding focused leadership, expertise and relationships across entertainment and licensing. The Fashiontainment platform we're building is about amplifying and scaling what is already working, expanding licensing, strengthening strategic partnerships and aligning our assortments more intentionally with the entertainment calendar. One capability we believe can be better monetized is our loyalty program. Gap Inc. has one of the largest programs in U.S. apparel retail with nearly 40 million active members. Last week, we launched Encore, our newly reimagined loyalty program, setting a new standard for loyalty in the apparel space. Encore brings our Fashiontainment platform to life by turning purchases into experiences that give members access to fashion, entertainment and the moments they care about across our portfolio of brands. It represents a shift from a traditional points-based loyalty program to a broader engagement platform. By bringing fashion, entertainment and access together, we are building momentum, deepening relationships and creating long-term value across our portfolio. Technology is another platform capability where we see opportunity, especially with AI. Our AI strategy is focused on 3 areas: enable, optimize and reinvent. Enable is about enterprise-wide adoption, equipping our teams with AI tools that improve day-to-day productivity, streamline workflows and build AI fluency across the organization. Optimize focuses on high-impact process improvements to drive efficiency, accuracy and speed. Reinvent is about reimagining our customer, product and enterprise journeys end-to-end. We are focusing on areas where AI can meaningfully reduce customer friction, increase predictability across product to market and unlock productivity within the enterprise. As we close the first chapter of our transformation and step into the next, we do so with a brand portfolio that is consistently growing, healthy gross margins, disciplined expense management, sustained bottom line performance and strong cash on hand. Looking ahead, we have a focused, energized team that believes in the future we're building. Our aspirations remain high, and we're positioned to deliver. I'm excited about the opportunity ahead and confident in our ability to capture it. I'll now turn the call to Katrina for a closer look at our financials. Katrina O'Connell: Thank you, Richard, and thanks, everyone, for joining us this afternoon. Execution of our strategic priorities continues to drive results, and 2025 was a strong year of financial performance. We grew net sales 2%, gaining market share for the year as we demonstrated relevance to customers of all income levels. It's exciting to see our playbook driving the second consecutive year of top line growth, fueled by positive comp sales across our largest brands, Old Navy, Gap and Banana Republic. The rigor we've developed is delivering reliable profit performance with another historically high gross margin of 40.8%, operating profit of $1.1 billion and an operating margin of 7.3%. These results reflect improved AURs as we capitalize on the growing strength of our brands, combined with SG&A leverage as we continued to optimize our cost structure. Tariff impacts were significant. However, our mitigation strategies have effectively managed these pressures. Our focus on cost optimization and inventory management drove robust cash generation, ending the year with $3 billion in cash, cash equivalents and short-term investments. In 2025, we generated $1.3 billion in net operating cash and $823 million in free cash flow. Our strong balance sheet allowed us to invest in high-returning projects while returning over $400 million to our shareholders through dividends and share repurchases. I'm incredibly proud of what this team has accomplished, and our performance gives us confidence in the 2026 outlook we provided today, which reflects another year of sales growth in addition to operating margin expansion. Before discussing the detailed results for the quarter and the year, it's important to note that changes in global tariff rates in 2025 had a substantial impact on our profits. Specifically, tariffs influenced our fiscal year's gross and operating margins by approximately 120 basis points and affected our fourth quarter gross and operating margins by approximately 200 basis points. Despite these pressures, our reported results today include these factors, showcasing our strong underlying performance, thanks to the effective execution of our strategic priorities. Now let's turn to our fourth quarter results. I'm pleased with our performance, which included a solid holiday season, underscoring the increasing resonance of our brands with consumers. Fourth quarter net sales of $4.2 billion increased 2% year-over-year with comparable sales up 3%, marking our eighth consecutive quarter of positive comps. Results were in line with our plans despite disruption from expansive store closures due to extreme weather at the end of January. By brand, Old Navy net sales were $2.3 billion, up 3% versus last year, with comparable sales up 3%, building on last year's 3% comp growth. The brand's price value equation is resonating with consumers as Old Navy continues to win with strategic categories and across a wide range of income levels. Turning to Gap brand. Net sales of $1.1 billion were up an impressive 8% versus last year, and comparable sales were up 7%. This was on top of last year's 7% comp growth, demonstrating Gap's momentum as it continues to expand its customer base across generations. Banana Republic net sales of $549 million were up 1% year-over-year with comparable sales up 4%. The brand delivered its third consecutive quarter of comp growth, reflecting progress in product elevation and sharper marketing and merchandising. Athleta net sales of $354 million decreased 11% versus last year and comparable sales were down 10%. We remain focused on rebuilding the brand for the long term. Let's continue to the balance of the P&L. Gross margin of 38.1% declined 80 basis points. Lower discounting resulted in another quarter of AUR growth, driven by the consumers' response to our relevant product and storytelling. Compared to last year, merchandise margins were down 90 basis points due to the net impact of tariffs. ROD leveraged 10 basis points in the quarter. SG&A increased to $1.4 billion, primarily due to the quarterly timing of incentive compensation in addition to strategic investments. SG&A as a percentage of net sales was 32.7%, deleveraging 10 basis points versus last year. Fourth quarter operating margin of 5.4% was down 80 basis points compared to last year, primarily due to the approximately 200 basis point headwind from tariffs. Earnings per share in the quarter were $0.45 versus last year's earnings per share of $0.54. Now let's turn to our full year 2025 results. Net sales of $15.4 billion increased 2% year-over-year at the high end of the guidance range we provided with comparable sales up 3%. Our playbook is working and drove strong results across our 3 largest brands, with Old Navy comp sales up 3%, Gap up 6% and Banana Republic up 3%. Comp sales for Athleta were down 9%. Gross margin of 40.8% declined 50 basis points versus last year. Merchandise margin was down 80 basis points due to the impact of tariffs and ROD leveraged 30 basis points. SG&A was $5.2 billion. As a percentage of net sales, SG&A was 33.5%, leveraging 40 basis points versus last year. We achieved our targeted cost efficiencies in 2025 as we rigorously managed our core expenses to fund inflation and begin our investments in growth accelerators. Fiscal 2025 operating income was $1.1 billion, resulting in an operating margin of 7.3%. The 10 basis point decline in operating margin versus last year was due to the estimated 120 basis point impact of tariffs, implying roughly 110 basis points of underlying margin expansion versus last year's 7.4%. Earnings per share for the year were $2.13, down 3% versus last year's EPS of $2.20. Now turning to the balance sheet and cash flow. End of quarter inventory levels were up 7% year-over-year, primarily attributable to increases in tariff-related costs. Our disciplined inventory management resulted in units down year-over-year, and we believe we ended the year with the right inventory composition going into fiscal 2026. We expect our inventory buys in the year ahead to be in line with our principle of unit purchases positioned modestly below sales. As I highlighted earlier, we ended the year with cash, cash equivalents and short-term investments of $3 billion, an increase of over $400 million compared to last year. Full year net cash from operating activities was $1.3 billion, and we generated free cash flow of $823 million for the year. Capital expenditures were $470 million. With regard to returning cash to shareholders during the year, we paid $247 million to shareholders in the form of dividends. Additionally, we repurchased 7 million shares for $155 million, achieving our 2025 goal of offsetting dilution. Before I move on, I want to thank our teams for their hard work and diligence this past year. Our 2025 results reflect significant progress in our transformation journey with the execution of our strategic priorities, driving 2 years of impressive results. We are moving forward from a position of strength, and we'll continue to operate with the same rigor in 2026. Looking ahead, we are energized by our strong business results, which underpin a confident outlook for 2026. Our strong performance at Old Navy, Gap and Banana Republic is expected to drive another year of net sales growth. At the same time, we are committed to rebuilding Athleta for sustainable long-term success. With our brands becoming increasingly relevant to consumers and our stringent inventory management practices, we anticipate continuous improvement in average unit retails, supporting robust gross margins aligned with historically high levels. Successfully navigating the challenges of a second year of tariff dynamics, we are poised to not only maintain but improve our financial health. Our strategy for 2026 includes generating further cost savings by increasing efficiencies in our core operations, enabling us to combat inflationary pressures while reallocating resources into strategic growth investments. This approach is designed to deliver a third consecutive year of profitable sales growth and robust cash flow generation, enabling us to continue capital investments and enhance shareholder returns. I want to note that our guidance today reflects tariff rates under the IEEPA regime and therefore, does not contemplate the recently announced Supreme Court ruling and subsequent Section 122 announcement. These recent events were not contemplated in our original plans for fiscal year 2026. If the Section 122 tariffs stay in place for the year or expire in July, we do believe there could be an incremental benefit to our current plans. With many scenarios still being debated, we are awaiting more clarity before changing our plans. At this time, we expect any benefit to Q1 to be minimal based on the timing of receipts. In the meantime, our teams are continuing to leverage the extensive tariff mitigation strategies we've built out over the past year, which sets us up for the annualization of last year's tariffs to be net neutral to 2026 full year operating income as previously disclosed. As noted in today's earnings press release, our outlook excludes the net estimated gain related to a legal settlement in the first quarter as well as the pledged charitable donation of approximately $50 million to a combination of the Gap Foundation and our donor-advised fund, which we are pleased to make as we look to advance our purpose. Both are included in our reported EPS guidance for fiscal year 2026. As I take you through the details of our 2026 outlook, I'll spend some time unpacking the factors that shape the year as there is some nuance to the quarterly cadence related to the timing of tariffs and investments. Let's jump into the full year. Starting with revenue, we expect net sales growth of approximately 2% to 3% year-over-year. While there are a range of outcomes for each of our brands, we expect continued comp sales growth across our 3 largest brands and negative mid-to-high single-digit sales declines for Athleta in the first half of the year, and the team is hard at work on the second half. Turning to gross margin. We are proud of the underlying gross margin performance achieved in 2025 and expect gross margins to be flat to up slightly year-over-year in 2026 compared to 40.8% last year. This includes a balanced plan of realizing higher AURs through better sell-throughs and lower discounting as well as implementing adjusted sourcing strategies as we offset the tariff impact that annualizes in the base this year. Regarding tariffs specifically, the net tariff impact is expected to be neutral on the full year. Our sourcing strategies build sequentially through the year, resulting in an approximately 150 basis point headwind to the first half gross margin that turns to an approximately 150 basis point tailwind in the second half of the year. Specific to the first half, we expect a 200 basis point headwind to Q1, which improves to approximately a 100 basis point headwind in Q2. Separately, as we conclude our multiyear program of rationalizing our store footprint and begin to reaccelerate our capital expenditures, we expect ROD as a percentage to sales to deleverage slightly. Moving on to SG&A. We expect adjusted SG&A as a percentage of sales to be roughly flat year-over-year. Our focus is on further improving our cost structure, aiming to achieve around $150 million in incremental savings by enhancing efficiency and effectiveness in 2026. These savings will help us manage inflation and reinvest in more valuable initiatives such as expanding into new categories and capabilities like beauty, accessories, Fashiontainment and technology, as Richard mentioned. We initiated our growth accelerator investments in 2025, particularly in the latter half of the year. These will continue into 2026, initially causing some SG&A deleverage in the first half. However, we anticipate SG&A to leverage in the second half as we lap the higher spend in the back half of last year. Taking this all into consideration, we expect an adjusted operating margin of about 7.3% to 7.5% for the full year. Interest income is expected to be approximately $10 million to $15 million, and we expect a tax rate of approximately 27%. Reported EPS is expected to be $2.71 to $2.86, which includes an estimated $0.51 benefit related to a legal settlement in the first quarter, net of the $50 million charitable donation. We expect an adjusted EPS of $2.20 to $2.35, representing growth of 4% to 10% year-over-year. Our healthy balance sheet supports our balanced capital allocation framework with the primary goal of enhancing long-term shareholder value. The framework remains as follows: our first priority is investing in the business through high-returning capital investments. In 2026, we expect to invest approximately $650 million, which relates primarily to our investments in stores, technology and supply chain. Second, we believe in paying an attractive dividend that grows with net income growth. In alignment with that principle, we recently announced that the Board raised the first quarter dividend by approximately 6% to $0.175 per share. And our third priority is focused on share repurchases. Previously, we aimed to simply offset dilution. We are now committed to executing a repurchase program with a goal of driving slight accretion. On that note, the Board has approved a new $1 billion share repurchase authorization that we expect to utilize to meet this goal. Now let me turn to our outlook for first quarter of fiscal 2026. The quarter is off to a good start, and our outlook contemplates our quarter-to-date performance. We expect net sales in Q1 to be up 1% to 2% year-over-year. This includes an approximately 150 basis point spread where comp outpaces net sales largely related to lapping last year's benefit from our credit card agreement, which continues into Q2, but does not impact the back half of the year. We expect first quarter gross margin to be down about 150 to 200 basis points compared to last year's gross margin of 41.8%, including an estimated 200 basis points of net tariff impact. This implies an underlying gross margin of flat to up 50 basis points. And we are planning for adjusted SG&A as a percentage of net sales to be about 35%, which reflects the timing of the growth investments I spoke to earlier. Reflecting on 2025, I'm proud of our accomplishments. Our consistent execution over the past 2 years has laid a solid foundation, driving our confidence as we advance in our transformative journey. As we transition into 2026, we're excited to amplify our core strengths while fostering new opportunities through strategic growth accelerators and innovative capabilities. Our balance sheet is giving us the ability to invest purposely in our business and accelerate cash returns to shareholders. With demonstrated progress and an exciting road map ahead, we are building a high-performing company that stays focused on delivering sustainable, profitable growth and long-term value for our shareholders. With that, we'll open the line for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Mark Altschwager with Baird. Mark Altschwager: Richard, you outlined several growth accelerators with beauty, accessories, fashiontainment, technology. Can you talk about how you're balancing investments to maintain momentum in the core while also seeding growth in these new areas? And how much can these accelerators move the needle in 2026 from a revenue perspective? Richard Dickson: Thank you for that question. Thanks for the question, Mark. First off, it's important to note we delivered a successful fourth quarter, marking another year of meaningful progress for the company. We achieved our second consecutive year of top line growth, and that's the eighth consecutive quarter of positive comparable sales. Now these are really important to acknowledge as we sort of zoom out and look at our transformation road map, which has 3 phases. The first phase was fixing the fundamentals. We're now moving into building momentum, and the third phase is accelerating growth. So over the past 2 years, during our fixing the fundamentals phase, the meaningful progress that we've made across our strategic priorities has really enabled us to consistently perform while we've been transforming, strengthening our financial model and essentially driving shareholder value. It's this performance that's giving me the confidence as we continue to move forward, and that means moving forward into the next phase of our transformation that we call building momentum. Now in this next phase, our primary focus is going to be growing our core apparel business. We've got to do it through continuous improvement. That means driven by disciplined execution, better product, better marketing, better storytelling, better in-store execution. Now in parallel to that, we're going to be thoughtfully seeding our growth accelerators, which you mentioned, and by the way, new capabilities. The first, which we've talked about is expanding our presence in lifestyle categories such as beauty and accessories. Now these are 2 underdeveloped categories in our portfolio that are meaningful to our consumers, but are also sizable in the industry. Second, we're rebuilding our fashion payment platform, and we're advancing our technology capabilities. Now when you combine the context of continuous improvement of our core business, delivering low to mid-single-digit growth with the accelerators, which begin to scale in 2027 and beyond, it really creates an exciting growth proposition. We are obviously very excited about where we are right now, and we'll look to provide updates on how this will evolve, not only from our business perspective, but the economic model in the long term. But overall, the aspirations remain very high, and I'm looking forward to all we can accomplish. And maybe Katrina has more to say on the balance of the question. Katrina O'Connell: Yes. I mean, Mark, I'm happy to talk about how we're thinking about the investments. This is really an exciting time for the company as we're balancing the rigor that we've put into the business that's driving real value with the growth opportunities that are really important to the long-term success of the company. So our guidance today reflect what we think is a very balanced approach where we're continuously improving the cost structure of the company. As I said, we're aiming to drive an incremental $150 million in savings and then we're looking to really repurpose those into making investments in these seed categories that Richard just talked about like beauty, fashiontainment, accessories and technology. And as a result, we think our outlook that we presented today has SG&A as a rate of sales flat year-over-year. I would say this is what it means to be a high-performing company that strives for continuous improvement. And maybe the last thing I'll add, Richard said, this is really early days. We're seeding. We're doing a lot of work to get teams in place and begin to get these in front of customers. But I think the bigger portion of these will start to deliver in '27 and beyond. Richard Dickson: Thanks, Mark. Mark Altschwager: A quick follow-up for Katrina on gross margin. Just with respect to the Q1 guide, you don't seem to be incorporating much in terms of offsets to the 200 basis point tariff headwind, whereas you have been able to offset much of that headwind through the back half of 2025. So I was hoping you could just walk us through some of the other gross margin puts and takes there. Katrina O'Connell: Sure, sure. Yes. Thanks, Mark. So for gross margin, as you say, in Q4, margin decreased 80 basis points year-over-year, and that was inclusive of a 200 basis point tariff impact, which implies that the underlying gross margin was much stronger. That was driven by AUR growth and our customer really responding to our product and our storytelling, which led to lower discounting and ultimately contributed to very strong underlying gross margin expansion. In addition to that, we saw ROD leverage in the quarter of about 10 basis points as a result of higher sales. As we move into Q1, I would say there are 2 things. We gave a guide of margin down 150 to 200 basis points. The outlook does include the net tariff impact of about 200 basis points, so very similar to Q4. I think you heard me say on the call, and we previewed this last time, our sourcing strategies are going to build sequentially throughout the year. So the 200 basis point impact in Q1 becomes about 100 in Q2 and actually flips to a tailwind, all net neutral on the full year. So there's a little bit of a cadencing of the tariff. And then maybe the two other things I'll call attention to in Q1 are that promotions right now are assumed to be relatively flat year-over-year, whereas we did see improvement in Q4. So we'll see. We're taking a balanced approach. And then maybe lastly, we saw leverage on ROD in Q4. And I think you heard in my prepared remarks, we'll see slight deleverage in Q1 on ROD. Operator: Your next question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: So Richard, on the inflection at the Gap brand to growth mode that you cited, what do you see as the next leg or opportunity to accelerate market share in the next strategic phase? And then, Katrina, just to confirm, your 1% to 2% revenue growth forecast for the first quarter, so that embeds a 150 basis point headwind from the credit card adjustment. So underlying revenue growth would be 2.5% to 3.5% is actually an acceleration from 2.1% in the fourth quarter. Can you just break down the areas of underlying sequential acceleration that you're seeing in embedding and maybe elaborate on the strong start to the quarter at the Gap and Old Navy? Richard Dickson: Okay. Matthew, thanks for the question. I'll take the first part, and then Katrina will take the second. First off, thank you for calling out the Gap brand. It has been really exciting to see Gap, of course, our namesake brand, building on the success quarter after quarter. So to your point, we've already begun to comp the comp. I mean, achieving an impressive 7% comp on top of last year's 7%. The fourth quarter also marked the brand's ninth consecutive quarter of positive comps. So when you look at the last 2 years, Gap has consistently gained market share. Now it's through compelling product assortments, better marketing and in-store execution. And it's results like this that also increase our multigenerational appeal. We've seen growth across all income cohorts with more high-income customers choosing Gap. We've had strength in key categories like fleece, including logo. Denim has been outstanding. And of course, sleepwear drove the performance in the fourth quarter. And as brand relevance has increased, we've also meaningfully pulled back on discounting. I also want to add, it was really exciting to see the brand gain share in denim in 2025. We've increased our ranking to #6. Now that's up from #10 just 2 years ago. And overall, the brand's momentum is giving us the confidence to also accelerate the rollouts of our new store formats in the years ahead, which will also continue to just excite consumers. So all in all, Gap is firmly back in the cultural conversation as a true pop culture brand. Its product resonance is showing up on the red carpets to surprising collaborations, and I can guarantee you there's a lot more exciting moments to come in 2026. Katrina O'Connell: And then, Matt, as it relates to Q1 revenue, so yes, the guide was 1% to 2% revenue growth. And then as you say, we have about 150 basis point headwind that makes comps outpace total revenue. And so the implied comp guide is 2.5% to 3.5% for the quarter. The way I think about it is the midpoint of that at 3% is roughly in line with the 3% we just delivered in Q4. So largely a continuation of the trends in the business. As it relates to Q1 quarter-to-date, as I shared, the quarter-to-date comp is off to a good start, and that's built into the outlook that we provided today. This time of year, there's always weather dynamics at play in all this stuff, but we are largely trending in line with the guidance we just gave. And then as I think about the brands in the quarter, I guess to be helpful, I would say this. Old Navy, as Richard said, is proving to be a reliable growth brand and 2 years of delivering positive 3 comps. So we'll see where the quarters land, but I see them as a very consistent driver of value. Gap is firmly in growth mode. And Banana has 3 quarters of comp, and we're really excited to see BR deliver. And then as I said in my remarks, Athleta, we are expecting negative mid-to-high single-digit sales declines in the first half of the year, and the team is really working on the second half. Operator: Your next question comes from the line of Simeon Siegel with Guggenheim. Simeon Siegel: Richard, any color you can share on store sales by brand, how you're thinking about that going forward? I guess, basically, I'm curious if you think the culturally powerful campaigns you guys are running should bring more people into the stores next year. And I guess whether that's even something you're targeting or whether you're channel agnostic. And then I'd be curious to hear -- the beauty sounds really exciting. Curious to hear the learnings and the refinements that you were mentioning about Old Navy Beauty given that comment and whether you think this becomes a visitation driver or more of a UPT add-on. Richard Dickson: Sure. Simeon, thanks for the question. Let me start by saying fashion is entertainment. And today's customers are not just buying apparel, although, of course, our product has to meet and exceed their expectations, but they're buying into brands that tell compelling stories and drive cultural conversation. And as we continue to build our brands, we see this intersection of fashion and entertainment, our Fashiontainment platform as a powerful growth lever. The creative assets that you've been seeing and that we've been developing across our brands have evolved to specifically drive relevance and increase engagement. We've been leveraging music, art, dance, film. These are all forms of entertainment. And whether it's a music video with KATSEYE or a fashion show during the NBA All-Star weekend, these are great examples of Fashiontainment. We're serious about it. We appointed Pam Kaufman as our Chief Entertainment Officer, to lead our Fashiontainment platform as we take it to the next level. We're going to be adding incredible expertise, essentially extending our iconic IP into more experiences and product opportunities that drive relevance and revenue. These campaigns, as you call out, they're designed to drive interest. And the more interesting we become, the more exciting it becomes for consumers and the more traffic we drive each year to our omnichannel experiences. As we look at some of the ways that we think about stores, this is a really important way for consumers to experience our brands. They bring product and storytelling and service to life in ways that digital can't. And I would say we're now at a very pivotal point. The fleet is well positioned. We've been testing new formats and experiences, Gap Flatiron, Chestnut Street here in San Francisco, Banana Republic Soho. Given Gap's brand momentum, we have the confidence to start to accelerate the rollouts of our new store formats in the year ahead, which we believe will also really excite consumers. You asked about beauty. So this is also a really exciting extension. Beauty is one of the fastest-growing, most resilient retail categories in the U.S. and our consumer insights reinforce, strong demand across other fashion apparel retailers with the beauty offering, the category represents anywhere from between 5% to 20% of their sales, highlighting the meaningful potential that this category can represent within our core business over time. It's also important to recognize we have been in this category. We just have an underdeveloped beauty business. And based on the insights that we've learned, we have a lot of potential in this category. So in 2025, we announced our plans for strategic expansion into the category with a phased approach, starting with Old Navy in the fourth quarter, and Gap will be relaunching its fragrance later this year. The beauty collection was piloted in 150 stores in the fourth quarter. We had some select offering in dedicated shop-in-shops. The pilot validated strong consumer interest, confirmed that beauty really enhances the engagement, it's basket building and it's exciting our customers. And you'll hear a lot more about it as we move forward. Operator: Your next question comes from the line of Brooke Roach with Goldman Sachs. Brooke Roach: Richard, Katrina, can you speak to the AUR versus unit growth trends that you're seeing at the Old Navy banner in fourth quarter and your expectations for net pricing growth at Old Navy for 2026? Additionally, Richard, I would be very curious to see if there's any apparel category initiatives that you have in place at that brand that could shift the Old Navy brand further into growth mode in 2026? Katrina O'Connell: Brooke, maybe I'll start off. I won't speak probably specifically to Old Navy, but I'll certainly talk at the corporate level. For both fourth quarter and fiscal year 2025, we saw average unit retail growth, which reflected the consumers continuing to respond to our product and our value and our storytelling. In addition to that, both for fourth quarter and the full year, units were flat to up slightly, and we also saw traffic positive. So exciting to see winning on all of those metrics. Maybe as I talk a little bit more broadly about pricing, we approach pricing as we always do. We consider all the various inputs while maintaining most importantly, the overall value proposition for our consumers. I think we know that we're doing this well as we evaluate the consumers' response to our value equation, which is showing up in 8 consecutive quarters of positive comp sales, continuing to gain share and winning across all income cohorts. So our ability to grow AUR in Q4 and for the full year really gives us confidence that our strategies are working. As I look into 2026, the AUR growth that's embedded in our 2026 plan is roughly in line with how we've been delivering in 2025. So it reflects a balanced plan of realizing higher AURs through better sell-throughs and lower discounting. Richard Dickson: And Brooke, I'll talk a little bit about the question related to the categories and potential growth accelerators. But first, I just want to reiterate, we delivered another strong quarter for Old Navy. And importantly, this has been consistent share gains over the last 2 years. It's a great reflection of the brand's strength and reliability. And we continue to win at the intersection of great product, quality and price, and we're winning across all income cohorts. Now even more specifically, we called out a couple of years ago that we were going to focus on category leadership in certain categories, denim, active and kids and baby. And these have really been driving the strength of the brand. In both denim and active, Old Navy gained share for the second year in a row. We rank as the #3 denim player in the country and the #5 in active. The broad-based selection and relevant denim offerings are really establishing Old Navy as a denim destination, and we believe that we've got a lot more room to grow. Our innovation and price value are really enabling Old Navy to win in the active space, which is already an enormous business, the #5 player in the space and growing share and outpacing the rest of the brand. And you're going to see a lot more excitement from us in this category going forward. And Kids and Baby. Old Navy continues to be the brand leader in kids and baby. We rank as the #2 brand in the country. I think I've shared our partnership with Disney is such a great partnership, but we recently became Disney's #1 apparel direct-to-consumer partner in the U.S. So from a licensing and strategic partnership perspective, there is enormous opportunity for us to continue to go after in relation to the kids and baby market using entertainment and entertainment properties as a lever. We are very well positioned to deliver the consistent performance that you've been seeing, building on the strength demonstrated over the past 2 years. And I think it's a very reliable brand with an aspiration to accelerate our growth longer term. We'll focus on these categories that I mentioned, but by no means are those the only categories that we intend on growing. Operator: Your next question comes from the line of Dana Telsey with Telsey Group. Dana Telsey: One of the interesting things is that with the return to growth this year, the commentary that it will be flat net store closures versus last year, I believe it was just over 30. And you mentioned in the CapEx investments, technology seem to be more front and center than stores. How are you thinking of the store portfolio and growth and the CapEx investments? And how does it differ by brand? Richard Dickson: Thanks, Dana. I'll start, and then Katrina can fill in a little bit. And as I mentioned before, stores are such an important way for our customers to experience our brands. Obviously, they bring great products, storytelling and service to life. It is an omnichannel experience as we connect the digital dialogue with our in-store dialogue. With a company like ours operating a fleet of nearly 2,500 stores, we are always optimizing our retail footprint. We're closing underperforming stores, as you know. We're repositioning some locations that are more relevant to our customers, and we're always evaluating new store openings. To your point, you know this well, we've closed over 350 stores that were unprofitable over the last few years. Last year in full year '25, we had approximately 35 net closures across our portfolio. And we expect net closures to be flat in fiscal '26. The majority, by the way, of those closures were at Banana Republic. Again, as I mentioned before, we're really at a pivotal moment now. Our fleet is really well positioned. We've been experiencing new formats and new experiences with our brands, particularly Gap and Flatiron and Chestnut and a variety of other locations, great success that is giving us the confidence that now we could accelerate these rollouts of new store formats in the year ahead, which we believe will continue to excite our customers and also essentially grow our business. As we've evaluated the store performances that we have tested new formats, we've really got confidence in the revenue and relevance and the strong returns they're driving. We're very much focused on the experience for our customers. And I do believe we're at a really exciting point again, in our transformation of fixing a lot of the fundamentals and now moving into continuous improvement to build momentum and celebrate these stores and new store formats. I'll turn it over to Katrina for the rest. Katrina O'Connell: Yes. And Dana, as it relates to capital, we are looking to increase capital expenditures this year. We're expecting to spend about $650 million this year. As you say, the big areas where we are spending capital are around technology on our stores, as Richard just said, and then also on our supply chain. The increase in capital year-over-year really is much more related to our stores and technology increases. And the store increases are very much related to a lot of these experiential things that we're starting to accelerate where the tech investments are really ratcheting up in some of these new capabilities that are AI-driven as well as RFID. So hopefully, that helps as we think about capital this year. Operator: That concludes our question-and-answer session. I will now turn the call back over to Richard Dickson for closing remarks. Richard Dickson: Thank you, operator. As we close the first chapter of our transformation and step into the next, we do so with a brand portfolio that is consistently growing, healthy gross margins, disciplined expense management, sustained bottom line performance and strong cash on hand. Looking ahead, we have a focused, energized team that believes in the future that we're building. Our aspirations remain high. We're positioned to deliver, and I'm excited about the opportunity ahead and confident in our ability to capture it. I want to thank our entire organization and all our partners for all of their efforts this quarter and throughout the year, and we look forward to our next call. Thank you. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the Guidewire Second Quarter Fiscal 2026 Financial Results Conference Call. As a reminder, this call is being recorded and will be posted on our Investor Relations page later today. I would now like to turn the call over to Alex Hughes, Vice President of Investor Relations. Thank you, Alex. You may begin. Alex Hughes: Thank you, Grace. Hello, everyone. With me today is Mike Rosenbaum, Chief Executive Officer; Jeff Cooper, Chief Financial Officer; as well as John Mullen, President, who will be available for the Q&A portion of today's call. Complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-K furnished to the SEC, both of which are available on the Investor Relations section of our website. Starting this quarter and moving forward, we have also posted a quarterly earnings deck on the IR section of our website. Today's call is being recorded, and a replay will be available following its conclusion. Statements today include forward-looking ones regarding our financial results, products, customer demand, operations, the impact of local, national and geopolitical events on our business and other matters. These statements are subject to risks, uncertainties, and assumptions are based on management's current expectations as of today and should not be relied upon as representing our views as of any subsequent date. Please refer to the press release and the risk factors and documents we file with the SEC, including our most recent annual report on Form 10-K and our prior and forthcoming quarterly reports on Form 10-Q filed and to be filed with the SEC for information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. We will also refer to certain non-GAAP financial measures to provide additional information to investors. All commentary on margins, profitability and expenses are on a non-GAAP basis, unless stated otherwise. A reconciliation of non-GAAP to GAAP measures is provided in our press release. Reconciliations and additional data are also posted at the end of the quarterly earnings deck on our IR website. And with that, I'll now turn the call over to Mike. Mike Rosenbaum: Good afternoon, and thanks, everyone, for joining us today. Q2 was another strong quarter with ARR growing 22%. We continue to see momentum and demand increasing and the results across the board this quarter reflect what we believe makes Guidewire a uniquely durable business. Before I go into the details, I want to take a step back and provide my perspective on the position Guidewire occupies in our industry, the role we play inside an insurance company and why that combination creates long-term durability even in periods of technology disruption and change. Guidewire is the stand-alone leader in delivering mission-critical core systems for the P&C insurance industry. We are now a SaaS company, but understanding what our solutions actually do inside an insurance company is essential to understanding our durability. Insurance is a highly regulated trust-based industry that evolves deliberately and depends on precision, resilience, compliance and accuracy at scale. Guidewire sits at the center of that environment as the operational backbone of the insurer, embedded across the core operating functions of underwriting, claims, finance and regulatory reporting. Our platform supports the complex financial and regulatory framework that underpins the industry, establishing reserves, tracking premiums collected and claims paid and enabling a highly regulated structure that spans hundreds of integrated systems, millions of insureds and trillions of dollars in transactions. At the transactional level, we serve as the system of record for risk when a policy is written, when a loss occurs, when a claim is filed and paid. Those commitments and outcomes are executed through Guidewire. And today, we don't simply provide that software. We operate it as a continuously improving secure, reliable and scalable cloud platform that strengthens over time. The complexity of replacing a core system in the insurance industry means deal cycles and implementation projects are almost always measured in years and require deep partnership. Success on a Guidewire project is the single most important KPI in our company. And you will often hear me say that there is nothing we won't do to ensure a customer is successful with Guidewire. That culture of customer success has produced gross ARR retention rates of over 99% for our InsuranceSuite and InsuranceNow customers. The trust we have earned serving some of the largest and most trusted insurance companies such as State Farm, Liberty Mutual, Zurich, AXA, Aviva, Travelers and USAA reflects decades of deep domain expertise, best-in-class enterprise security and deep productization of complex regulatory requirements. And while we focus on serving this Tier 1 and Tier 2 segment of the market, we can also support smaller insurers. In Q2, for example, we had wins at customers that reflected over $15 billion in direct written premium and under $50 million in direct written premium. It is also important to understand how we price our service. We sell recurring subscriptions to our cloud products and price them as a percentage of the direct written premium managed on Guidewire. We have never been a seat-based model. We align our pricing to the economic value we deliver to an insurer, the premium flowing through their business and not the number of users accessing the system. As insurers grow premium, expand lines of business and modernize their operations and become more efficient, our growth aligns directly with that value creation. There has obviously been a significant discussion across the market about the pace of generative AI advancement and its implications for the overall software category. What we are seeing in practice at Guidewire is increased demand for InsuranceSuite and InsuranceNow. The potential for generative AI in insurance is clear, and this is increasing the urgency for insurers to modernize legacy systems. This is because legacy mainframes were not designed for real-time data access, automation or AI-driven workflows. AI depends on clean data, trusted transactions and reliable systems of record. Generative AI will help us accelerate the value we deliver to our customers. We'll help our customers deploy agents that improve the service they provide to their customers, and it will also help us deploy and configure Guidewire faster and more efficiently. All of this AI-driven potential is increasing the momentum in our business. Q2 results illustrate this clearly. We closed another 15 InsuranceSuite Cloud deals and 2 InsuranceNow deals. And importantly, we are seeing insurers increase their commitment to Guidewire, both in terms of larger, fully ramped ARR outcomes and longer-duration contracts. The deal activity in the quarter included 3 new customer wins and healthy migrations and expansions. On the net new side, we signed one of Canada's largest private insurers who will be modernizing their legacy claims administration system to ClaimCenter. Our dialogue with this insurer dates back to 2008, so we are thrilled to start this program. This deal reflects a little over $8 billion in direct written premium, representing our largest new customer win in the quarter. Large customers are also choosing to expand and consolidate on our platform. Two of these customers will see their ARR grow to over $20 million during the committed period. And now let me turn to some notable deals in the quarter. Aviva U.K., the largest insurer in the United Kingdom, has entered into a long-term agreement with us, committing to move all of its Guidewire estate, including business acquired from DLG in 2025 to the Guidewire Cloud Platform. Aviva recognized that to focus on innovating, serving their customers well and driving material future growth for their business, they needed a modern cloud-based core platform. Similarly, Tokio Marine North America is preparing to migrate major elements of 3 U.S. carrier businesses and has expanded significantly above its previous baseline as it commits to more growth on Guidewire. And Donegal Insurance Group has selected Guidewire Cloud as the next step in its core system modernization strategy, migrating from on-premise InsuranceSuite to the Guidewire Cloud Platform. In addition, Donegal has aligned its strategic AI initiatives with Guidewire's rapidly evolving AI roadmap. Initial collaboration efforts focus on advancing claims capabilities, including intelligent first notice of loss and AI-powered agentic claims handling, which will be seamlessly integrated into ClaimCenter. Large customers are also building on their successful cloud deployments to add other lines of business and significantly step up their direct written premium commitments. For example, a top 20 commercial insurer extended ClaimCenter to more commercial and specialty lines for greater scale and efficiency, significantly increasing its DWP commitment as it works to consolidate the collection of legacy core systems that they currently support. And in Q2, we had another win at Zurich Germany, which is a direct result of the partnership and strategic framework agreement we have with Zurich. We have also worked hard recently to widen the breadth of our core offerings to address more of the insurance life cycle. With the addition of PricingCenter, we have an ability to uniquely address the growing demand for pricing and rating agility in insurance markets. I am encouraged by the high customer engagement for this new integrated offering and pleased to have closed our first PricingCenter deal in the second quarter. We've also worked over a long period of time to embed intelligence into our Guidewire Cloud Platform and InsuranceSuite applications, and it's great to see strong adoption momentum in our data and analytics portfolio. In the second quarter, we closed 25 deals that included one or more of our data and analytics offerings. Our new embedded AI solution, ProNavigator, also got off to an incredible start with 9 deals in the second quarter. Notable deals included Aviva Canada and Gore Mutual who want to leverage this agentic assistant to deliver answers, suggestions and ultimately, actions embedded right in our core UI. ProNavigator leverages InsuranceSuite data and insurance standard operating procedures to increase employee efficiency and minimize claims leakage. These results reflect demand not only for core modernization, but for the expanding application portfolio that surrounds it. Momentum in the quarter was phenomenal. And as I said previously, led to ARR growth of 22% Growth in fully ramped ARR continues to outpace reported ARR growth as it has over the past 3 fiscal years, and we expect that to continue this year. We are seeing larger deals and longer deal terms, reinforcing the durability of our platform and the strategic commitments customers are making. Broadly speaking, AI for us is immensely beneficial and driving an acceleration in our business. It's helping create demand for core system modernization. It's helping us accelerate our development velocity. It's helping us accelerate our implementation velocity and will accelerate everything that customers and partners do with Guidewire. We will incorporate AI-powered agents powered by ProNavigator into our applications and continue to support an open approach to the incredible ecosystem of partners building solutions in and around Guidewire. Guidewire is an indispensable part of a highly regulated global industry. We operate a mission-critical infrastructure with premium aligned pricing, core renewal rates above 99% and a culture built around customer success. That combination has produced 25 years of durability and predictability, and we believe it positions us well for decades to come. With that, I'll turn it over to Jeff to walk through the financial details and our updated outlook. Jeffrey Cooper: Thanks, Mike. Q2 was another tremendous quarter. We surpassed the high end of all of our financial outlook targets, and we are raising our full year targets across the board. Given the market backdrop, we thought it would be helpful to give a few incremental one-time disclosures to help investors understand the durability of our model. First, ARR ended at $1.121 billion and grew 22% year-over-year or 21% on a constant currency basis. Additionally, fully ramped ARR ended Q2 at $1.42 billion and fully ramped ARR growth continues to outpace ARR growth. Our market experience has taught us that we can maximize customer alignment and lifetime value by negotiating ramped subscription fees over a multiyear period. We quantify the impact of these ramps in our metric fully ramped ARR, which only quantifies the first 5 years of a contract. We typically disclose this metric annually, but thought it would be helpful to remind investors of the power of this dynamic this quarter. Second, we continue to see customers lean into longer-duration contracts and larger commitments. This shows up in a number of metrics. For example, the average contract term over the last 12 months for new InsuranceSuite deals is over 6 years if you look at the weighted average duration weighted by fully ramped ARR. We have seen this metric increase over the last 18 months as larger customers push for longer contractual commitments. As a reminder, our standard contract duration for new cloud arrangements is 5 years. This dynamic is further evidenced by RPO growth. RPO finished the quarter at $3.5 billion, representing 63% year-over-year growth. We generally do not talk too much about RPO because we tend to focus on the powerful recurring elements of our model, such as ARR and fully ramped ARR. But in the current environment, we do think RPO is a helpful reminder of the durability of the business. Third, large customers are one of our fastest-growing cohorts. We have seen customers with more than $5 million in fully ramped ARR grow from 35 in 2021 to 96 at the end of Q2. It is gratifying to see the largest insurers trust Guidewire to manage their mission-critical operations at an accelerating pace. Finally, as Mike noted, we see renewal rates at all-time highs. On a trailing 12-month basis, InsuranceSuite ARR retention, including all downsell activity was over 99%. More interestingly, I went back 5 years and I reviewed every customer churn event involving more than $1 million of ARR. It was easy to do because there's a very small number of these. Those churn events fall into three categories: First, customers that experienced financial distress or exited the line of business where they use Guidewire; second, a single instance where an acquisition drove churn; and third, a contract we terminated following our decision to exit Russia after the invasion of Ukraine. Importantly, over the last 5 years, we have not seen a single InsuranceSuite customer with more than $1 million of ARR choose to replace Guidewire with another system, except where that change was effectively mandated by an acquirer. Again, we thought it would be helpful to provide some of these incremental disclosures this quarter given the backdrop. Now let me turn to the results. Total revenue was $359 million, up 24% year-over-year and above the high end of our outlook. Subscription and support revenue finished Q2 at $237 million, reflecting 33% year-over-year growth and our continued InsuranceSuite Cloud momentum. Services revenue finished at $62 million, up 30% year-over-year and ahead of our expectations on strong demand for Guidewire-led services programs. This number includes an increase in field engineering activities delivered through our professional services organization. Now let me turn to profitability for the second quarter, which we will discuss on a non-GAAP basis. Gross profit was $243 million, representing 28% year-over-year growth. Overall gross margin was 68%. Subscription and support gross margin was 75% compared to 69% a year ago and continues to track well ahead of our expectations. Services gross margin was 9% compared to 6% a year ago. We finished Q2 with operating profit of $87 million. This finished ahead of our outlook as both gross profit was higher than expectations and operating expenses finished lower than expectations. We ended the quarter with over $1.35 billion in cash, cash equivalents and investments. Operating cash flow ended the quarter at $112 million. We repurchased $148 million of Guidewire shares in the quarter, and we obtained a new $500 million share repurchase authorization a few days before moving into our quiet period. We have $490 million remaining on this authorization, and we currently expect to complete this repurchase program before the end of our fiscal year. Now let me go through our updated outlook for fiscal year 2026. Starting with top line, given our performance in the first half and our continued healthy pipeline, we are raising our ARR outlook to $1.229 billion to $1.237 billion, which reflects growth of 18% to 19% year-over-year. For total revenue, we now expect between $1.438 billion and $1.448 billion. The midpoint of our revenue growth outlook is 20%, up from 17% growth assumed in our prior outlook. We expect between $962 million and $966 million in subscription and support revenue. This $16 million increase in our guide at its midpoint is attributed to the subscription line and is due to stronger-than-expected first half bookings, healthy direct written premium true-up activity, strong attach of new products and a robust pipeline in the back half of the year. We now expect services revenue to be approximately $255 million given the better-than-expected services revenue in the first half, our higher utilization rate and an uptick in demand for Guidewire-led key programs. Additionally, we are leaning into some field engineering programs where our services personnel are helping customers utilize Guidewire Cloud Platform and leverage newer agentic capabilities to solve business problems. This is an important motion as proximity to the customer has always been a strategic asset for us. Turning to margins. We are increasing our expectations for subscription and support gross margin to be approximately 74% for the year. We expect services gross margins to be approximately 13%. Overall gross margins are now expected to be 67% for the full year as higher subscription and support gross margins improve the overall gross margin. We are also lifting our outlook for operating income. We expect GAAP operating income of between $100 million and $110 million and non-GAAP operating income of between $293 million and $303 million for the fiscal year. This updated profitability outlook recognizes the higher revenue outlook and is partially offset by higher expenses as a result of increasing our annual bonus accrual due to expected outperformance on key financial metrics. We expect stock-based compensation to be approximately $185 million, representing 15% year-over-year growth. We are adjusting our expectations for cash flow from operations for the year to be between $360 million and $375 million. Our CapEx expectations for the year are between $30 million and $35 million, including approximately $18 million in capitalized software development costs. Turning to our outlook for Q3. We expect ARR to finish between $1.144 billion and $1.150 billion. As a reminder, the timing of ARR landing from backlog is more heavily weighted towards Q4 than Q3 this year. Our outlook for total revenue is between $352 million and $358 million. We expect subscription and support revenue to be between $239 million and $243 million and services revenue of approximately $60 million. We expect subscription and support margins of approximately 74%, services margins to be around 12% and total gross margins around 67%. Our outlook for non-GAAP operating income is between $59 million and $65 million. In summary, we had a tremendous Q2. Alex, you can now open the call for questions. Alex Hughes: Our first question is going to come from Adam Hotchkiss at Goldman Sachs. Adam Hotchkiss: I guess to start, Mike, I appreciate all the clarity on the core continuing to accelerate, but it would be great to understand how you think about what Guidewire's position in the broader AI stack looks like over the medium term. We hear a lot about competition outside of the core from forward deployed engineer models and disruptors deploying LLMs on insured data. So just maybe clear up for folks Guidewire's strategy as it relates to owning AI versus enabling AI and then how that impacts your revenue opportunity. Mike Rosenbaum: Great question. I appreciate it. And I would definitely say that it would be quite a bold statement for us to say we're going to own AI in the insurance industry. What we're going to own in the insurance industry is core systems that I am very confident in. We see that momentum, and we see that insurance companies need to modernize. They need these core stacks to work effectively. There's plenty of insurance companies that need Guidewire to own the outcome with respect to AI capabilities. But running an open model where we see other companies that are going to use other components from other AI technologies in and with Guidewire, it's absolutely part of the medium-term outlook. And I think that this is really very, very important to understand. I have had numerous conversations with Tier 1 CTOs and CIOs in our customer base over the past couple of months. And every single one of them stress to me that they expect there to be a mix of how they deploy these solutions in their environments. At the smaller companies and at the smaller divisions, more of this will come from Guidewire; at the larger companies, some of it will come from Guidewire and some of it will come from partners. This is going to -- this is an incredible time in technology. And I absolutely want to stress that where we are one of one, I think, is in the perspective that we're going to be the most trusted, scalable, reliable core system that you can do anything you want with respect to AI and Guidewire. Now like how do we -- how does -- what you say, what parts of this do we want to do very well and maybe someday own, I'll give you a little bit more detail. We're super excited about the momentum we have achieved with ProNavigator in the very first quarter that it's really been part of the company. We highlighted the deal activity. We highlighted the deal activity at pretty significant real customers that are deploying ProNavigator as a mechanism to deploy artificial intelligence-powered solutions directly to the place where people are using the systems. So we can provide this context from what they're accessing inside of Guidewire. We compare it with standard operating procedures and the recommendations that they would make to those end users, and we can use an LLM to serve that to the end user in a way that's helpful, in a way that like makes that person an expert, and we love the momentum that we've achieved there. As we said in the prepared remarks, we are seeing demand for and doing a lot of let's call it, forward-deployed services where we are working with our core customers to look at what's possible with respect to Guidewire technologies and these large language models that are available now and can be applied to insurance outcomes. We're super, super excited about this. But I would definitely stress like the two characteristics or maybe three characteristics of my answer. Number one, we're the right choice for core systems. There's no doubt about that. Number two, we will do more with AI and ProNavigator is a great example. We will do more with our services organization and technologies that come from Guidewire, but we will definitely be part of what I think will ultimately be a relatively complicated enterprise architecture that will be established at each insurance company based on their strategies and their goals. And no matter what, we will be open and we will provide a platform that gives our customers choice. Hopefully, that gives you a sense, Adam, of how we're thinking about this. Adam Hotchkiss: Okay. That's great, Mike. Really, really helpful. I wanted to then pivot to the core. I know we've talked about 25% or so of premium flowing through Guidewire today. And it feels like AI is may be moving customers into the cloud more quickly if your fully ramped ARR is accelerating off of the 22% in fiscal '25. So what's your updated view on the pace that premium moves into cloud and where Guidewire's penetration ultimately gets to over the medium term? Mike Rosenbaum: Thanks for the question. I would say it's definitely improving. And as you heard us talk about with respect to the results so far this year, the results in the quarter, the visibility that we see into the back half of the year, both for new business and expansions and specifically larger deals at large Tier 1 and Tier 2 insurance companies. This is just extremely positive for our business. that's what gives us the confidence to be able to update our outlook. How that relates exactly to the percentage points of global DWP that flow through Guidewire, it's very difficult for us to say or project that. I don't really run the business that way. We look at it more from a net new ARR and net new fully ramped ARR perspective and the specific workloads, the specific lines of business that exist at each of our customers in each of the geographies that we support. And then we look at it in the end of the year, and we report that out, obviously, kind of at a yearly basis, how we've done. But certainly, it's increasing. And certainly, we see demand increasing. And I think demand is increasing because of the potential that everyone sees in generative AI. They see what they can do. Like I think you guys have all heard me say this before. What's so startling, what's so special about this technology is every single person that wants to can see how powerful it is because we can all use it in our consumer lives. Like we can all touch it, we can feel it, we can ask it questions. And then you can just immediately see, "Oh, wow, I can use this in my company." But you can only use it in your company if you're running on a modernized core system. If you're running on a core system from Guidewire with APIs that you need, with the MCP servers you need, with the partnerships that you need, that's what really unlocks this, and that's what's driving the momentum in the business. That's what created the quarter that we saw. That's what's giving us the confidence to raise the guidance for the year. Alex Hughes: Our next question comes from Ken Wong of Oppenheimer. Hoi-Fung Wong: Fantastic. Very clear, very assertive statements on the AI front today, Mike. I think those were fantastic. I won't belabor the point too much since I'm sure my peers will. I wanted to maybe focus on new products. You mentioned good customer feedback on PricingCenter. You signed your first deal. Would love to get some early comments in terms of what you're seeing in those engagement, in those conversations. And then any update on whether or not there's some traction on the underwriting side? Mike Rosenbaum: Yes. Thank you very much for the question. So PricingCenter is super interesting because what we're seeing is people really leaning in and wanting to engage with us to talk about what's the vision and specifically, how is it going to be integrated into PolicyCenter. So for a Guidewire customer that's running PolicyCenter, there's just this obvious connection between the product model, the way that we define the product model and how that relates to what the actuaries are going to use to be able to create the products that they need, how it connects to our data platform and to be able to provide the data they need, to create the models they need, to stay current, to compete, to adjust to what's going on in the market. There's a lot of engagement there. This is a deal cycle that's kind of long, though, right? This is a thoroughly researched, thoroughly studied. Sometimes there's a POC associated with these deals. And so it's kind of more similar to our core sales process where, hopefully, as we said, we closed one deal that was like more than 10 years. Hopefully, those deals won't last 10 years. But it is something that's going to take us a little while to build. We were excited to get that first deal done, but we're also excited about the amount of pipeline and the amount of engagement that we're creating for PricingCenter and for us to start to participate in this segment of the market. It's very, very exciting. And then you asked about underwriting. Like on the underwriting side, we're still in the process of working with a small subset of customers that have expressed interest in really developing with them a solution that maps to what is really just honestly a very, very fast-evolving approach to agentic underwriting, let's call it, is what exactly does that need to do with respect to receiving submissions from brokers and how do we map that to risk appetites, and then how do we ultimately map that to PolicyCenter. Lots of excitement and engagement in the market around this. We're excited about the product. And I expect over the next couple of quarters to be able to start to get this into production with a couple of customers and learning fast and evolving from there. Hoi-Fung Wong: Fantastic. Really appreciate the color. And then, Jeff, just a quick question on the true-up comment, I think you mentioned still seeing some tailwinds from true-up activity. I think we on the outside probably worried a little too much that as DWP normalizes, you really wouldn't see any of that activity anymore. Help us kind of walk through the mechanics of kind of how that continues to be a tailwind for the business. Jeffrey Cooper: Yes. Thanks, Ken. Yes, we did see healthier true-up activity than we initially expected going into the quarter. That was a little bit of a tailwind in Q2. I think as we think about the remainder of this year, it's generally aligned with how we've talked about this over the last few quarters. We saw a very healthy backdrop coming out of the kind of high inflationary period that is tempering a bit, but we continue to see this activity. And the way it works is customers have premium baselines in their contract. And it's always been part of our model that as customers grow, they pass those baselines and then we have the right to effect a true-up order. It's not uncommon for some customers to buy a bit more premium than they initially need. So it may take and in certain cases, a few years to see a true-up order after an initial purchase. But we see pretty regular volume of this. We have enough of this in our model now that we can be pretty precise in our predictions. And this year, we do still expect it to temper a little bit off of the highs that we experienced a few years ago, but saw a bit of a tailwind in Q2 and the back half of the year looks pretty much aligned with how we expected it. Alex Hughes: Our next question comes from Rishi Jaluria from RBC. Rishi Jaluria: All right. Wonderful. Maybe I want to first start by following up on kind of the earlier question around perceived competition from AI. We've obviously seen both OpenAI and Anthropic announced kind of deals with some of the leading insurers. But at least on first glance, it seems like it's very much complementary and maybe even potentially additive to what Guidewire core and even some of the add-ons are doing. So I want to maybe understand how are you thinking about your ability to partner and work with the large LLM vendors and ultimately just drive greater customer success within the insurance industry? And then I've got a follow-up. Mike Rosenbaum: Super, super question. We absolutely see this as additive and helpful for Guidewire overall and the acceleration in the company. We have always run a very open approach to our products and to our ecosystem. We've always invited multiple parties to the ecosystem because we cannot and do not imagine that we're going to do everything for every insurance company everywhere in the world. Now obviously, Anthropic and OpenAI have this access to this incredible technology that has obviously changed and will continue to change the world. But we don't imagine that the work that they're doing is targeted at the deep, deep specific complexities associated with operating a core system in the insurance industry. And we think that leveraging the capabilities that these tools provide these LLMs or even these like desktop applications that sit on top of their LLMs, they're going to be most beneficial when connected to well-structured insurance processes running on modern core systems from Guidewire. And so we're very, very open to working with these companies. We're very open to working with our customers who have partnered with these companies around solutions that connect them to Guidewire. And like I said -- in the script, I said it a second ago, we see this as net beneficial to Guidewire because what you're going to be able to do with the Guidewire core system that's deployed, your operations are modernized, your operations have these connection points that these systems need. This is going to allow these companies to accelerate. This is going to allow these companies to become more efficient. And so we don't see this as competitive. We see this as additive to the overall demand in the industry for what we can provide. I think Rishi, John wants to say something here. John Mullen: Yes, I'll just add a quick point. There's -- tied to your question in all of that context is the fact that insurance carriers and leaders of insurance companies are under a tremendous amount of pressure to drive pace themselves. So the ability to differentiate in the market that they compete in and sustain differentiation is under a tremendous amount of pressure right now. So the ability to work more proximate with them, solve problems with them and increase pace of innovation on top of the service and also increase speed to value in the way that they get to that first cloud implementation and consume products and services that we deploy, and also, to Mike's point, have the open architecture where they can do things over the top of that at the pace that they want to and need to stay differentiated is really driving a conversation with these carriers and leaders in insurance companies that get us every day closer to them, and that's what I'm most excited about is continuing to drive that proximity. Rishi Jaluria: All right. Really helpful. Maybe just a quick follow-up. As we think about your kind of own internal AI development, your own kind of ability to bring AI to your customers, recognize you're dealing with a highly regulated industry where it could take a while to get that meaningful adoption. But the question I'd like to ask is, as you think about -- a lot of the focus is on efficiency, but do you see an opportunity to maybe even drive better revenue outcome and ultimately better customer outcomes for the insurers, leveraging AI? And what would that look like with your current roadmap? Mike Rosenbaum: Sorry, I want to make sure I understand. You mean better revenue outcomes for our customers? Rishi Jaluria: Well, specifically that the insurers can generate better revenue outcomes, right, whether it's being able to have better quotes or service more customers and ultimately, the end people being insured get net benefits as a result. Mike Rosenbaum: 1,000%, yes, okay? The insurance industry is an incredibly complicated thing, right, if you zoom out. It is structurally been sort of hamstrung by the amount of unstructured information and data that needs to be managed in order to effectively and efficiently conduct the art of insurance. And large language models attack this directly. They address this directly. So you can underwrite more efficiently, which means that you can look at more risk. You can evaluate more risk more quickly. You can manage claims, the input of the submission of documents and the conversations that you have to have with all the multiple parties can be analyzed more effectively. And so it's like those two examples are sort of like tiny little bits of why the underwriting process is going to become more effective and the claims management process is going to become more effective. And I think ultimately, the insurance industry, the insurance machine is going to become more efficient, which is beneficial to insurance companies and to the broader society and our economies. Like the insurance industry with generative AI, and I think this is why everyone is so excited about focusing on these kinds of partnerships with these big insurance companies is there is a significant potential to improve its efficiency overall, which, like I said, it will be -- I don't want to say revenue, but I would just say like the efficiency of these companies is going to improve. And we're excited to be a part of that, driving that and making that possible along with a lot of other companies, along with Anthropic, along with OpenAI, like there's going to be a lot of people that are focused on helping the insurance industry do this. Like John said, our customers are excited about the potentials here because for so long, you're sort of limited to the technology capabilities at hand. And now you have this new tool that understands natural language and can be taught to do things like underwriting and claims. It's really significant. So basically, 1,000%, yes. John Mullen: I'll just hit on the daisy chain of kind of product strategy because one part of your question was product strategy. So on top of the core operating system, if you think about the pressure points, our customers need pricing agility, therefore, PricingCenter. That's why we take that step. Product speed to market is the next thing in that daisy chain that drives competitive differentiation for them, therefore, advanced product designer. And broker efficiency and effectiveness is the thing that's probably up for the most amount of transformation and disruption and enablement given LLMs and the models available and therefore, UnderwritingCenter. So it ties very closely. The investments we're making in the product strategy ties very closely to those things that are driving differentiation for our customers that sit on top of the core processing environment. So the fact that the core processing environment has an opportunity to continue to gain market share by line of business specificity and geographic specificity because of the rate at which we can deploy products and the components that we're putting out over the top of it, I think, are really good proof points for our strategic resilience inside of our customers. Alex Hughes: Next up is Joe Vruwink from Baird. Joseph Vruwink: Great to hear about the urgency to modernize. I maybe wanted to ask about the pace around that modernization. And there's been a lot recently even COBOL got its time in the sun a few weeks ago on maybe AI tooling, making it easier to translate. I don't think necessarily the translation of COBOL is the challenging part, but I want to get your take on just modernization timelines more broadly and whether Guidewire has the ability to maybe accelerate time to value because of their AI usage. Mike Rosenbaum: Yes. I'll give you a quick take on this, and I think John is probably going to want to add some -- his perspective on it. Yes, we're definitely working hard to ensure that our teams that are working on these migrations, both from on-prem Guidewire to cloud, but also the modernization projects are more and more efficient. And we're starting to see the early results of this in the actual projects. There's like a whole litany of different steps that are involved in one of these programs, and many of them can be enhanced and potentially even completely automated with generative AI. And so reducing that time line, increasing the pace of that, therefore, reducing the cost of those programs also helps us make an argument about modernization now. This is definitely an exciting component of the story at Guidewire. I would caution, though, that there is a certain amount of, hey, this is running on legacy code and this is running on a system that we can't support anymore. So this like one-for-one translate into something that's more supportable. I think that's an okay step. But it really doesn't get to what is very often a major important part of the modernization, which is rethinking your business process, rethinking your products, rethinking your approach to doing business, which is often part of a modernization. And that's what you really need to engage with companies like Guidewire and our ecosystem of SIs to really help companies work through that and get to a system that's modern, but also an operation, a business workflow, a set of new standards that really kind of set the company up for their go-forward operating model. So it's more than just the conversion of the code, but it's really the modernization of all of the activities inside of an insurance company. John Mullen: Yes, I'll add the -- if we think about where we were maybe 2 quarters ago, and you got to think -- we have to think about this as the investments that Guidewire is making in our professional services team and multiplied by the investments that the SIs are making in their teams. And if we go back 2 quarters, there was a lot of investigation, a lot of discovery, a lot of proofs of concept, a very wide funnel of activity. That is starting to narrow over the last 2 quarters. We're starting to see some green shoots of some really impressive kind of percentage reductions of time to value. And the next step for us is to really continue to increase the velocity of those proofs of concept and early test cases to be rolled out as standard operating procedures in these programs. But there's an important additional step, which is rationalizing that with the SIs because I think, certainly, I've been in conversation with all of our SI partners. And there's no world where we want to be competing tool-based in what it takes to drive speed to value on cloud. So we'll be doing some rationalization with them and making sure that the tools are consumable by the customer base. Joseph Vruwink: That's great. And then, Jeff, one for you. I appreciate the midyear disclosure on fully ramped ARR. I'd have to imagine there's seasonality in that number, just given the deal volumes in 4Q creating some second-half weightedness. Can you maybe frame how much of a given year's net new fully ramped ARR happens in the first half versus the second half? Jeffrey Cooper: Yes. I think there's -- obviously, you guys understand our business. You know that our seasonality is 4Q weighted. 2Q historically is our second strongest quarter, and we saw a very strong 2Q for us, and that flowed through to some healthy additions on the fully ramped side. But you'll have to wait until Q4 to get full gratification on that question. So -- and we'll certainly talk about it in the fourth quarter call. Alex Hughes: Our next question comes from Parker Lane at Stifel. J. Lane: Jeff, I appreciate the disclosure on ARR retention rates and the commentary on how a few million dollar-plus churn events you've had in recent years. Looking at the remainder of this year and more importantly, maybe your midterm targets, what sort of assumptions do you make or cushion do you bake in around ARR churn? Do you anticipate that things remain relatively consistent with historical trends? Or are you accounting for some incremental conservatism there? Jeffrey Cooper: Yes. I appreciate the question. And given our business, this is an area of strength of ours. We -- the assumptions are as we go bottoms up in every single account and have really good visibility into any sort of potential downsell risk that exists in our accounts. And the team flags all of those throughout the year. Usually, when we start the year, we have a good read. And so we kind of do that. And we try to be pretty conservative and cast a wide net on kind of how we think about potential downsell events. And then we usually end up performing better than some of those -- that wide net that we initially cast. But this is not kind of a top-down model assumption exercise for us. This is a very bottoms-up, customer-by-customer, account-by-account exercise for us. J. Lane: Got it. And one quick one on ProNavigator. I believe last quarter, you said you were expecting $4 million of ARR and $2 million of revenue, 9 deals in the quarter. How is that trending relative to those expectations that you outlined last quarter around? Jeffrey Cooper: Trending positive to those expectations. I mean I was not expecting 9 deals in the first quarter. So we're thrilled with that progress. And we can think about how we will disclose that moving forward. But you should think about it as right now trending ahead of expectations. Alex Hughes: Our next question comes from Michael Turrin at Wells Fargo. Michael Turrin: I wanted to spend some time on the commentary on duration increasing. It certainly seems positive in terms of willingness of customers to commit to Guidewire. Maybe just speak more to what's leading to that longer duration. Are you finding core replacements show up as a prerequisite for some of the kind of longer-term AI-focused initiatives insurers might be looking at? Or what drives that? And as a small second part, Jeff, you referenced the backdrop is why you're giving some of the incremental disclosures, which we definitely appreciate. Is that just the software market backdrop you're referencing because your results seem generally unfazed here. So maybe just help frame why the incremental disclosures for us as well. Jeffrey Cooper: So on the first question, yes, this is 100% just because of the software market backdrop. And we felt that in that backdrop, some of the durability elements of our business were being missed. And so we thought it was a good time to lean into some of these disclosures that provide a bit more durability. I think Mike will probably jump in here. But on the contract duration, we always engage -- have always engaged in longer-duration contracts. There was a period of time when we transitioned to ASC 606, where we actually forced shorter contracts on our customers. And as we move to the cloud, our standard has been 5 years. In the early part of the cloud, if you look at duration, it was a little bit lower than 5 years. We saw testing the waters, wanting to explore smaller deals and see how it goes. And now with the maturity of the platform, kind of where we are on this cloud transition side of things, we have seen that willingness to lean in and make longer commitments, that trend has increased. And then if you look at the largest customers, in particular, the ones that are making really big bets on Guidewire, often that impulse is to move even beyond our standard 5-year terms and pursue a longer engagement. And we've seen that activity kind of more recently over the last 18 months increase. Mike Rosenbaum: Nothing to add. I think you got it exactly right, Jeff. Alex Hughes: Alex Sklar from Raymond James. Alexander Sklar: Mike or John, following up on Ken's question on PricingCenter and ProNav and some of the early success there. Can you just reframe how you expect the adoption curve to trend and sales cycles you've seen based on what you've seen to date? Were these particular deals in the pipeline prior to the acquisitions? And maybe, Jeff, how did those initial deals look like in terms of uplift on ARR? John Mullen: So I'll hit the -- I'll go on the first part and then Jeff can pick up the second. If I think about the ProNavigator deals, the adoption curve in claims, we're seeing the pipeline that's accelerated there has really been as that team came into the fold. And I just should say, while I'm on this call, I couldn't be happier with how that team has joined. The culture fit is great. The energy is exceptional. But as we think about our ClaimCenter customers that are on cloud, the receptivity to have the right conversations and start laying down tracks for what that looks like is what's really driving the acceleration there. There are conversations in underwriting as it pertains to ProNavigator, but the acceleration is really coming in the claims space. The PricingCenter piece, Mike mentioned a little bit earlier, which has a lot to do with those that are PolicyCenter customers and the integration of PricingCenter into PolicyCenter is something that drives a tremendous amount of value and a tremendous amount of appetite right now for the conversations. There are a lot of proof points. It is a big decision. Every one of these customers has some variation of pricing and rating inside their environment, whether it's ours or somebody else's. And so really testing the waters on that and pushing through some proofs of concept is important. But those customers that are driving pricing -- that are driving policy admin solutions that sit on Guidewire are really very interested in proving these things out and looking at potentially large and long-term commitments. There is going to be a lot of work to do to make PricingCenter fit all regions, all lines of business. So that's going to be something that we look at a lot of investment in over the next quarters as we go forward. Jeffrey Cooper: Yes. And on the ARR side, we haven't spoken too much on this topic other than to think about PricingCenter as a pretty meaningful ASP product. It's a little bit of a longer sales cycle. These are big investments that customers will make in that product. So we expect that pipeline to kind of build and transact a little bit slower, but be more meaningful and impactful. On the ProNavigator side, those are smaller price points at this point in time. But at this point in time, that tool or that product is primarily looking at standard operating procedures of an insurer. And it is our expectation to evolve that into other content areas that would increase the value of that product over time. So I think the price points that we're seeing today are nice starting points and when we should expect to grow those over time. Alexander Sklar: Jeff, maybe just a quick follow-up on Joe's fully ramped ARR question for you. I appreciate some of the unknowns around seasonality given the larger Tier 1 customer base. But in the first half of this year, was there anything in the fully ramped result outsized contributor either in terms of steeper ramps or larger migrations that kind of is abnormal for a first half for you? Jeffrey Cooper: It was an abnormal first half for us just in the fact that we -- the volume that we saw, some of the large deal volume that we saw was very, very exciting. We hope to continue to build on that. So I wouldn't say there was anything unnatural, but we are continuing to see the momentum build. There are a number of -- in the first half deals that were longer than even the 5 years. And so there's even some backlog that is kind of off of that fully ramped ARR metric. And all of this is just kind of continued momentum that we're seeing in the business. Last year, signing Liberty Mutual was a big event for us. And so that creates a somewhat difficult compare. But as we look at the pipeline for the remainder of this year, we have a lot of really interesting activity out there. So it's always hard to predict exactly when those larger deals will come in, but we're thrilled with the pace and we're thrilled with the traction, and we're thrilled with the pipeline. Alex Hughes: Our next question goes to Allan Verkhovski at BTIG. Allan M. Verkhovski: Mike, given the speed and innovation of what's possible from a coding perspective with AI, you've gone through a lot of investments over the years. You talked about demand for deployed services. Where are you making changes or leaning in more as it relates to your product roadmap? And how are you further adjusting it, if at all, your expected developer count growth over, call it, a multiyear basis? Mike Rosenbaum: Great question. So we're in the process, as you could probably imagine, of rolling out agentic development tools, call it, a harness that works effectively for Guidewire developers. And I should say for the folks in our professional services organization, the folks in our SI ecosystem and all the customer developers, we fully expect that these agentic development tools will be leveraged by our devs and everybody that touches Guidewire from a software development perspective. And -- for sure, we see this increasing pace over time for what we can deliver. We're a little bit early days to that approach, but the anecdotal feedback from the sort of first movers and the people that have really put their hands on these tools and figured out how to use them effectively is extremely positive and gives me a lot of confidence that the development velocity at Guidewire over time will increase, right? So then that brings up logical questions that like I had that you are asking me right now, which is, okay, well, what's our long-term backlog look like? And what are the ideas and things that we need to be putting into this product over time with this increased capacity? We've been in the process for the past few months is just reevaluating those roadmaps based on the assumption that possibly we will see this or likely we will see the throughput increase. I'm excited about the potential to increase this throughput. It's like a side benefit of all of the work we've done to move our customer base to our cloud. It's like now we have this -- we have a vehicle in the cloud-based installed base and the three releases we're doing every year to take the new functionality that we're building and put it in and get it into our customers' hands. It's like this incredible, I don't know, circumstance that this lines up, right, when we've got more than half of our customer base move to cloud. And I think that also provides another reason for the on-prem customers to think about accelerating their time lines to cloud. But the roadmap pretty vast, pretty long. You say, hey, I'm very confident in our position in the market today, but do we have a big BillingCenter roadmap? Yes. Do we have a big PolicyCenter and ClaimCenter roadmap? Yes. Are there a whole bunch of things that we could do to make the products better, to make the products easier to install and easier to configure and easier to integrate to other systems. There is so much more that we can do. And I wouldn't -- so I wouldn't say it's infinite, but I'm very confident that we have a product roadmap around the existing product portfolio that is very sufficient and is going to continue to deliver value to our customers now at a faster pace, but for years to come. And so the question about are we thinking about this from a -- are we thinking about generative AI from a software development perspective? Is it an efficiency play? Or is it a value play? Right now, I'm very much thinking about it as a value play. I think that we can take the developers that we have that know Guidewire, right? They know the technology stack and the cloud technology stack at Guidewire, and they know the insurance industry and they know what to do and we can accelerate. This is going to create more value for Guidewire, and it's going to help us continue the pace or maybe hopefully accelerate the pace that we've established with cloud. And so that's how I'm thinking about it in the short to medium term. Allan M. Verkhovski: Perfect. That's really insightful, Mike. And then, Jeff, just as a quick one for you. Can you just stack rank the areas of outperformance in the quarter as it relates to the ARR beat? Jeffrey Cooper: Yes, it's a good question. I mean I think in general, as I build my ARR model, there are the key elements that I need to see come to fruition. One is new deals in the quarter that then translated to ARR. The next is how much ARR is going to come off of the backlog. And the third is how much attrition events occurred. And we have really good visibility into the ARR that comes off of the backlog. We have really good visibility into those attrition events. And so those both performed largely in line with expectations. And then -- so then it's the new sales activity that we executed and delivered in the quarter is what drove that outperformance. A little bit of that we kind of called out was also some -- a bit higher true-up activity, but most of it was just the deal volume in the quarter, and then how that deal volume translated into year 1 ARR. Now within that, I think we saw a very healthy mix of kind of new customer wins, migrations, expansions into new areas within existing customers. And so that new sales momentum was pretty broad-based. John Mullen: The other dimension to look at is geographical. So geographical line of business. So good spread across personal lines and commercial lines, which we're happy that continues to be a nice balance for us. The team in Europe continues to drive really solid activity and influence in the market showing up every day in the culture and the business of the countries that make up Europe and the U.K. And then our Asia Pac business continues. We were in Sydney last week with a lot of customers, and I'll just go back to the ProNavigator question. The receptivity, so many of those customers have -- are in the process of or already on cloud. Therefore, their appetite for consumption is just really -- it's a really powerful conversation. And so the Asia Pacific team continues to drive, I think, really solid market activity as we build out that leadership team, and we're really seeing that connection get stronger every quarter. Alex Hughes: Okay. Great. We have time for a couple of more questions here. Next is Aaron Kimson from Citizens. Aaron Kimson: First one, there are about 90 Tier 1 P&C insurers today. Guidewire has 96 customers with fully ramped ARR greater than $5 million. How should we think about how many of your customers exceeding $5 million in fully ramped ARR today are Tier 1s? And how far down that TAM pyramid on Slide 5, do you actually have $5 million-plus FR ARR customers today? Jeffrey Cooper: Yes. I mean, I'll be honest, I haven't actually sliced it that particular way, but it is not -- it's very reasonable for us to have a number of Tier 2 and even Tier 3 customers that can cross that threshold. So that opportunity to see customers cross over that threshold is maybe broader than you might think. Aaron Kimson: Okay. That's helpful. Yes. And then, Mike, you mentioned strength with the analytics products. In F 3Q '25, you made your first Industry Intel sale within ClaimCenter. Can you provide an update on what you're seeing with Industry Intel, both from the standpoint of developing and validating models for more types of lines? And then also what John and team are seeing on the distribution side with Industry Intel? Mike Rosenbaum: Yes. We continue to make solid progress there. It's a process for -- and it's a little bit of a -- it's not a straightforward software development process. There's a little bit of have an idea about what we might be able to predict, go make sure that we can pull the data sets and clean the data sets and test whether or not there's appropriate signal that's in the data set and then validate that. And so there's a little -- it's a little bit more R&D and research than straightforward software engineering. But we continue to make great progress and steadily building momentum with that team. And so we're very, very happy. I would say we didn't call it out specifically, but sales momentum in the quarter continues to track as expected for the objectives on that team. And I'm very, very happy with that. So it's steadily building, and we continue to be happy with the progress. John Mullen: Yes, I'll just add from a market coverage and distribution standpoint, the ability to demonstrate what that team has built has really crystallized quite a bit over the last couple of quarters. So it really helps in the deal motion. The other side of it is we continue to invest in our account management motion. And when these -- when the Industry Intel deals aren't necessarily tied to a large deal event, we're getting much better at navigating the right buyers inside of our existing customers and now with the demonstrability of those assets to have the right conversations to trigger a much more healthy pipeline activity into existing customers. Alex Hughes: Our last question comes from Faith Brunner at William Blair. Faith Brunner: I know there's a lot of commentary on the pipeline in the back half of the year. But just wanted to touch on maybe how should we think about the different products flowing through the funnel as customers increasingly want to land larger with longer duration. Has there been any shift to the conversations you guys are having or typical sales cycle timelines as people seem to be more eager to standardize on the platform? Mike Rosenbaum: It's an interesting question. I would say, and I'd love for John to comment on this is what we're seeing that's driving the outperformance is more like broad-based larger deals across the board rather than any sort of product mix shift that you might be thinking about. We're just getting basically much more established and establishing much more confidence in this platform as the logical long-term home for core system operations at insurance companies. The AI story, like we talked about, is driving some urgency there and bringing this to the table. But I would really say like the improvement is about larger, longer-term deals rather than product mix shift. We still -- obviously, we called it out. We still see the product mix shift, but like that's not what -- it's really core system, larger core system wins and commitments that's driving the improved momentum. Anything to add, John? John Mullen: Time and stage is the same as it was, but we're starting now as we build out our portfolio, some of our portfolio will have a very different stage aging profile than the core processing space. Mike Rosenbaum: Okay. Well, thanks, everybody. It was obviously a great quarter. We're incredibly excited about it and look forward to talking to you all over the next few weeks and months. Otherwise, we'll see you at the end of Q3. John Mullen: Thank you.
Operator: Good afternoon, and welcome to Marvell Technology Inc. Fourth Quarter and Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I will now turn the conference over to Mr. Ashish Saran, Senior Vice President of Investor Relations. Thank you. You may begin. Ashish Saran: Good afternoon, everyone. Welcome to Marvell's Fourth Quarter and Fiscal Year 2026 Earnings Call. Joining me today are Matt Murphy, Marvell's Chairman and CEO; Willem Meintjes, CFO; Chris Koopmans, President and COO; and Sandeep Bharathi, President, Data Center Group. Let me remind everyone that certain comments made today include forward-looking statements, which are subject to significant risks and uncertainties that could cause our actual results to differ materially from management's current expectations. Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today, and posted on our website, as well as our most recent 8-K, 10-K, 10-Q and other documents filed by us from time to time with the SEC. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available on our earnings press release. Let me now turn the call over to Matt for his comments on the quarter. Matt? Matthew Murphy: Thanks, Ashish, and good afternoon, everyone. Let me begin by extending a warm welcome to the Celestial AI and XConn team. We recently closed both acquisitions and the teams are working closely together with joint product road map discussions in full swing with customers. These highly strategic additions further strengthen our technology platform and significantly enhance Marvell's position in the rapidly emerging AI scale-up networking market. I'll provide additional detail on these acquisitions later in today's call. Now turning to our results and business outlook. For the fourth quarter of fiscal 2026, Marvell delivered record revenue of $2.219 billion, reflecting 7% sequential growth. Revenue exceeded the midpoint of guidance, driven by strong demand in our data center end market. As a result, non-GAAP earnings per share of $0.80 exceeded the midpoint of guidance by $0.01. Turning to our full year results. Fiscal 2026 was an exceptional year for Marvell. Revenue grew 42% year-over-year to approximately $8.2 billion as reported, and approximately 45% year-over-year, excluding the divested automotive Ethernet business. Our data center revenue surpassed $6 billion, growing 46% year-over-year. This performance was driven by robust demand for our interconnect, switching and storage products, along with a strong ramp in our custom business, which doubled in fiscal 2026. As we begin fiscal 2027, we are seeing very strong demand across our entire data center portfolio with bookings accelerating at a record pace. This robust demand is reflected in our guidance for the first quarter of fiscal 2027, the total company revenue forecasted now to grow 8% sequentially at the midpoint to $2.4 billion. Looking ahead, we expect to grow revenue every quarter this fiscal year at a similarly strong sequential rate, which would result in Q4 revenue exceeding $3 billion exiting this year. This forecast also implies that our year-over-year revenue growth rate will accelerate each quarter throughout fiscal 2027. As a result, we now expect overall Marvell revenue in fiscal 2027 to grow more than 30% year-over-year, approaching $11 billion. Notably, this outlook is meaningfully higher than what we communicated in our prior updates. Some of you may recall, in September 2025, during an investor call hosted by JPMorgan, we provided a fiscal 2027 revenue outlook of approximately $9.5 billion, which at that time was received positively as it was significantly higher than the market expectations. In our December 2025 earnings call, as CapEx growth forecasts continue to increase, we updated our fiscal 2027 revenue forecast to approximately $10 billion. Today's outlook approaching $11 billion raises our forecast by almost another $1 billion. Importantly, this outlook is driven by Marvell's organic businesses as the recently closed acquisitions are not expected to contribute meaningfully until fiscal 2028. The increase in our overall revenue outlook is all being driven by our data center business. Since December 2025, cloud CapEx expectations have continued to increase, and we have seen our bookings continue to accelerate. As a result, we now see our fiscal 2027 data center revenue growing by 40% year-over-year. We expect all our key product lines in data center to be stronger than our prior outlook. Notably, we expect our interconnect business to more than 50% year-over-year, well above our prior expectation of 30% growth. For our communications and other end market, we expect 10% revenue growth in fiscal 2027. Looking ahead to fiscal 2028, while we assume the rate of CapEx growth moderates from the current fiscal year, we expect continued robust data center revenue growth for Marvell. We expect our interconnect business to significantly outpace cloud CapEx growth, our custom business to at least double year-over-year, and our Ethernet switching business to continue to ramp meaningfully. In addition, we expect Celestial AI and XConn to contribute approximately $250 million in aggregate revenue in fiscal 2028. As a result, we expect data center revenue and fiscal 2028 to grow close to 50% year-over-year. Achievement of our forecast would result in three straight years of data center revenue growth compounding at well over 40%. For our communications end market, we continue to expect low single-digit percentage revenue growth in fiscal 2028, consistent with our prior view. So in aggregate, we expect Marvell's overall revenue in fiscal 2028 to grow close to 40% year-over-year, reaching approximately $15 billion, roughly $2 billion higher than the outlook we provided in our December earnings call, and driving our non-GAAP EPS to well over $5. This outlook is based on demand we are seeing now and designs that are already in execution. As we progress through the fiscal year, we plan on remaining closely aligned with our customers as we expect them to continue to invest in AI infrastructure. With that, I'll provide more context on our numerous growth drivers across our end markets, beginning with data center. In our data center end market, we delivered record fourth quarter revenue of $1.65 billion, representing 9% sequential growth and 21% year-over-year growth. Revenue exceeded our guidance, driven by increased demand across our interconnect portfolio. We achieved sequential growth across all key product lines, including optical interconnects, custom silicon, switching and storage. Looking into the first quarter, we expect our data center revenue to grow approximately 10% sequentially, including a seasonal sequential -- including a seasonal sequential decline in on-premise data center revenue. Let me now highlight the broader trends across both our established data center businesses and our newer growth initiatives, including recent acquisitions. I'll organize the discussion into three categories. Interconnect, switching and custom. I'll begin with Interconnect, where we offer the industry's broadest and comprehensive high-speed connectivity portfolio, addressing scale out, scale across, and scale up networking. In our scale-out PAM franchise, demand remains robust for our 800-gig products. We are also seeing very strong bookings from multiple Tier 1 customers for our 1.6T solutions which entered production in the second half of fiscal 2026. Reflecting this demand in our first-to-market technology leadership, we expect our 1.6T revenue ramp -- to ramp very rapidly in fiscal 2027 with substantial additional growth projected in fiscal 2028. As a result, we expect to continue to maintain leadership in the PAM market at 1.6T just like we have at every PAM generation. Marvell is the first company to productize 200-gigabit per lane technology, enabling the 1.6T transition now underway. While this generation is expected to continue to grow through the end of the decade, Marvell has already demonstrated 400-gig per lane technology. We expect that this will position us to enable the industry's subsequent transition to 3.2T, once 1.6T reaches full maturity. To support campus-wide data centers requiring longer reach than traditional PAM solutions, Marvell has introduced Coherent light, optimized for 2 to 20-kilometer applications within a highly power-efficient outlook. We have already begun shipping first-generation 1.6T Coherent light products and are now introducing a second generation with integrated MACsec security. Turning to scale across interconnects, a technology we pioneered with our 100-gig DCI modules, we continue to lead the market with Coherent 400-gig and newer 800-gig solutions. We are winning new customers and expect to supply DCI modules to all five major U.S. hyperscalers this year. We see significant long-term growth in this market, as the global data center footprint expands and bandwidth requirements between data centers continues to increase. Industry forecasts project that DCI pluggable TAM to grow by more than 5x by calendar 2030, with speeds doubling each generation and feature complexity increasing, including the integration of MACsec. To that end, earlier today, we announced our latest innovations and scale across interconnects, including the industry's first Secure 1.6T ZR and ZR+ DCI modules powered by our new 2-nanometer Coherent DSP. We also introduced a new 2-nanometer 800-gig DSP, which enables second-generation lower-power 800-gig DCI modules. DCI modules powered by these 2-nanometer MACsec-enabled DSPs are expected to begin sampling later this year. This positions Marvell to maintain technology leadership, supported by our proven expertise in large-scale manufacturing of these highly specialized and complex modules. Now let's move to scale-up interconnects, which is an entirely new and rapidly emerging market. We are very excited about what we believe to be a massive opportunity unlocked by Celestial AI's photonic fabric, or PF technology, as well as growing customer traction for our AEC and retimer solutions. As discussed last quarter, Celestial AI's PF technology is expected to enable large-scale commercial deployment of CPO for scale-up connectivity starting next year. Our chiplets will be co-packaged into both custom XPUs and the scale-up which is connecting them together on both sides of the length. With the acquisition now complete, Marvell's engineering and operations teams are fully engaged in bringing Celestial's first generation chiplet into high-volume manufacturing. We remain on track for our forecast for our CPO revenue from Celestial to reach a $500 million annualized run rate in the fourth quarter of fiscal 2028, doubling to a $1 billion annualized run rate by the fourth quarter of fiscal 2029. We have seen strong interest from a broad range of customers in Celestial's photonic fabric technology following the deal announcement. We look forward to updating on our progress in the scale-up interconnect market, which we believe could exceed $10 billion by 2030. In the AEC market, we have secured design wins with 3 Tier 1 U.S. hyperscalers and several additional customers, including model builders and hardware OEMs. We are also seeing strong traction for our retimers. As a result, we expect combined AEC and retimer revenue to more than double year-over-year in fiscal 2027. We continue to innovate through our Golden Cable initiative, a strategic program that delivers a complete solution, including industry-leading software and validated reference designs, enabling ecosystem partners to rapidly design and deploy AEC products at scale. Hyperscale customers benefit from access to multiple high-volume cable OEMs offering fully compatible AECs, both on the same high-performance Marvell DSP and reference design. Turning to data center switching, we delivered strong growth in fiscal 2026 with revenue exceeding $300 million, driven entirely by scale-out applications. Given sustained demand for our current 12.8T products and a strong ramp of next-generation 51.2T products, we now expect data center switch revenue in fiscal 2027 to surpass $600 million, up from the $500 million we had indicated last quarter. We are seeing strong engagement from both existing and new customers for our 51.2T platform, and our upcoming 100T platform, which we begin to -- should we expect to begin sampling in the first half of this fiscal year. Our 100T switch delivers industry-leading power efficiency and lower latency, attributes that are especially critical for AI applications. In scale-up switching, the combination of Marvell and XConn creates a significantly larger team to address rapidly emerging UAL and Ethernet-based opportunities. UA Link builds on decades of PCI ecosystem development and incorporates high-speed interface innovations from Ethernet to meet the bandwidth, latency and reach requirements of next-generation accelerated infrastructure. XConn expands Marvell's switch team with deep PCIe switching expertise, enabling a comprehensive -- enabling comprehensive support to customers building next-generation AI platforms. We are fast tracking our scale-up switch road map by leveraging our extensive experience in developing large reticle size scale-out switch chips, and best-in-class in-house high-performance series. We remain on track to sample our UALink 115T solutions in the second half of this fiscal year with volume production expected in fiscal 2028. In parallel, we continue to advance the Ethernet-based road map with key customers. We're able to further enhance our scale-up road map by enabling integration of our CPO technology from Celestial directly with our switches, delivering a purpose-built, fully optimized end-to-end optical scale-up platform. XConn also adds advanced PCIe and CXL switch solutions, another completely incremental TAM for Marvell. The PCIe Gen 6 and CXL 3.1 solution is based on a monolithic switch architecture supporting up to 256 lanes, delivering the industry's highest ratings and lowest latency. PCIe switching remains foundational in standard compute architectures connecting CPUs to peripherals and increasingly an AI infrastructure to connect CPUs to XPUs. In parallel with next-generation protocols like UALink, PCIe is also adopted for XPU to XPU connectivity, particularly in AI inference systems and small- to medium-sized clusters. CXL is rapidly becoming essential for memory disaggregation in modern data centers. We have been investing in CXL for several years and XConn switching portfolio, combined with Marvell CXL memory expanders create the industry's most comprehensive CXL platform. XConn was already engaged with more than 20 customers prior to the acquisition. As part of Marvell, XConn now benefits from our global sales and marketing reach and strong presence in the data center. As a result, we expect to drive strong growth in both the PCIe and CXL switch markets over the next several years. Turning now to our custom business. This remains one of the most compelling growth drivers for Marvell. In just a few years, we have scaled from zero revenue to $1.5 billion in fiscal 2026. As you may recall, the first meaningful ramp again in the second half of fiscal 2025. Fiscal 2026 marked the first full year of production for those programs. And as a result, we doubled our customer revenue year-over-year. We expect custom revenue to grow more than 20% year-over-year in fiscal 2027, higher than our prior view. We continue to see growth from our Lead XPU program this year, including a transition to its next generation. As I noted last quarter, we have purchased orders covering the entirety of this fiscal year's forecast for this next-generation program and are now ramping production. In addition, we are expecting the growth to continue in fiscal 2028 from this program. We are also deeply engaged on the follow-on generation of this XPU. In addition, several XPU attach programs are ramping in fiscal 2027, including our initial CXL and NIC products. CXL demand is accelerating, partly driven by tight memory supply. Our custom CXL expanders enable customers to reuse prior generation DRAM with new XPUs, GPUs and CPUs, while also supporting near-memory compute operations. A recent white paper from a leading hyperscaler on next-generation LLM inference architectures highlighted, near-memory processing is a key opportunity to improve model performance. They cited Marvell's structure a processor as an example of a CXL-enabled solution that improves programmability and simplify system integration. This all provides a great setup for fiscal 2028, where we continue to expect custom revenue to at least double year-over-year from three primary drivers. First, continued growth from our existing custom programs. Second, multiple XPU attach programs reaching high volume, particularly in custom NIC and CXL applications. As I mentioned last quarter, we have line of sight to revenue exceeding $2 billion by fiscal 2029 from just these two use cases, and we expect to make significant progress towards that outlook through fiscal 2028. Third, our new Tier 1 XPU program ramping into high-volume production. This program has continued to progress well -- very well through development, and we have firm volume requirements for all of next year and are planning for high-volume manufacturing. Beyond programs already won, we are encouraged by strong new design engagements with both existing and new customers. Custom compute is proliferating across the hyperscale ecosystem with inference optimized hardware becoming increasingly important. We are seeing an unprecedented level of activity across multiple new engagements as hyperscalers increased their cadence of custom chip development. We are engaged in deep technical discussions on innovative new architectures, and are seeing a massive opportunity on 2-nanometer and below process technologies. Okay. Turning to our communications and other end markets. We delivered fourth quarter revenue of $567 million, up 2% sequentially and 26% year-over-year. For the first quarter, we expect low single-digit sequential growth on a percentage basis and approximately 30% year-over-year. In summary, we concluded fiscal 2026 on a strong note with revenue growing 42% year-over-year and non-GAAP EPS increasing 81%, roughly twice the rate of revenue growth, demonstrating the strong operating leverage in our business model. Fiscal 2026, we were very active on the M&A front, divesting our automotive Ethernet business for a double-digit revenue multiple, and rapidly redeploying the proceeds into two highly strategic acquisitions. These positioned Marvell at the forefront of the large and incremental AI scale-up networking market. At the same time, we continue to execute our capital return program returning $2.245 billion to stockholders through share repurchases and dividends. So far in fiscal 2027, we are seeing strong bookings across our entire data center portfolio with customers signaling robust demand not only for this year but for the next several years. We believe we are still in the early stages of a strong multiyear growth cycle for Marvell. Our first quarter fiscal 2027 guidance represents 27% year-over-year growth at the midpoint, reaccelerating from 22% in the prior quarter. We expect year-over-year growth to accelerate each quarter throughout fiscal 2027, with revenue exiting the fiscal year at over $3 billion in the fourth quarter. We have raised our fiscal 2027 forecast meaningfully. And in fact, the revenue growth rate we are projecting today for fiscal 2027 is roughly double the outlook we provided just a few months ago in September. This is an exciting moment for Marvell. I want to take a moment to thank our global team for staying focused despite the external noise, and delivering consistent execution, which has enabled record results and positioned us to capitalize on what we expect will be a massive AI opportunity ahead. I look forward to updating you on our progress in the coming quarters. With that, I'll turn the call over to Willem for more detail on our recent results and outlook. Willem Meintjes: Thank you, Matt, and good afternoon, everyone. Let me start by summarizing our full fiscal year 2026 results, which were very robust across the board. In fiscal 2026, Marvell delivered $8.195 billion in revenue, growing 42% year-over-year. This growth was primarily driven by AI demand in our data center end market, as well as the continuing recovery in our communications and other end markets. For the full year, on a GAAP basis, our gross margin was 51%. Operating margin was 16.1%, and earnings per diluted share was $3.07. On a non-GAAP basis, our gross margin was 59.5%. Operating margin was 35.3%, expanding by 640 basis points year-over-year, and earnings per diluted share was $2.84, growing 81% year-over-year. We also significantly increased capital returns to our stockholders, returning $2.245 billion through share purchases and dividends in fiscal 2026, an increase of approximately $1.3 billion from the prior year. Moving on to our financial results for the fourth quarter of fiscal 2026. Revenue in the fourth quarter was $2.219 billion, growing 22% year-over-year and 7% sequentially. Our data center end market was 74% of total revenue, with our communications and other end markets contributing the remaining 26%. GAAP gross margin was 51.7%. Non-GAAP gross margin was 59%. Moving on to operating expenses. GAAP operating expenses were $744 million, including stock-based compensation, amortization of acquired intangible assets, restructuring costs, and acquisition-related costs. Non-GAAP operating expenses came in at $517 million, in line with guidance. Our GAAP operating margin was 18.2%, while our non-GAAP operating margin was 35.7%. For the fourth quarter, GAAP earnings per diluted share was $0.46. Non-GAAP earnings per diluted share was $0.80, above the midpoint of guidance, reflecting year-over-year growth of 33%. Now turning to our cash flow and balance sheet. In the fourth quarter cash flow from operations was $374 million. Our inventory at the end of the fourth quarter was $1.39 billion, growing $374 million from the prior quarter. Our working capital has increased to support the significant revenue growth we are driving. During the quarter, we repurchased $200 million of our stocks through our ongoing capital return program, and returned $51 million to shareholders through cash dividends in the quarter. We expect to continue to return capital through repurchases and dividends. As of the end of the fourth quarter, our total debt was $4.47 billion, with a gross debt-to-EBITDA ratio of 1.38x, and a net debt-to-EBITDA ratio of 0.57x. Our debt ratios have continued to improve as we have driven an increase in our EBITDA. Turning to our guidance for the first quarter of fiscal 2027. We're forecasting revenue to be in the range of $2.4 billion, plus or minus 5%. We expect our GAAP gross margin to be between 51.4% and 52.4%. We expect our non-GAAP gross margin to be between 58.25% and 59.25%. Looking forward, we anticipate that the overall level of revenue and product mix will remain key determinants of our gross margin in every -- in any given quarter. We project our GAAP operating expenses to be approximately $872 million. We anticipate our non-GAAP operating expenses to be approximately $575 million in the first quarter. This is stepping up from the prior quarter due to the typical seasonality in payroll taxes, and employee salary merit increases, as well as the addition of Celestial AI and XConn. The two acquisitions in aggregate are expected to add approximately $75 million to our fiscal 2027 annual non-GAAP operating expenses. We expect our GAAP other income and expense, including interest on our debt, to be an expense of approximately $51 million. We expect our non-GAAP other income and expense, including interest on our debt to be an expense of approximately $48 million. We expect a non-GAAP tax rate of 11%. We expect our basic weighted average shares outstanding to be 876 million, and our diluted weighted average shares outstanding to be $883 million. We anticipate GAAP earnings per diluted share in the range of $0.26 to $0.36. We expect non-GAAP earnings per diluted share in the range of $0.74 to $0.84. As we look ahead to the rest of fiscal 2027, we will continue to invest in growing our business while driving operating leverage. On a sequential basis, we expect non-GAAP OpEx to remain flat in the second quarter and then grow in the low to mid-single digits on a percentage basis in each of the third and fourth quarters, well below the rate of revenue growth Matt provided in his remarks. We are seeing strong growth from our existing franchises and scale out and scale across AI as well as custom, and we are investing to drive new revenue streams from the rapidly emerging AI scale up market. We have entered a robust multiyear growth period and are looking forward to delivering strong earnings growth to our stockholders. With that, we are ready to start our Q&A session. Operator, please open the line and announce Q&A instructions. Thank you. Operator: [Operator Instructions] Your first question comes from Ross Seymore with Deutsche Bank. Ross Seymore: Matt, thanks for all the updates on the out year and well, fiscal year, both this and next. Beyond the magnitude of the revenue growth, can you just talk about the profile of it? Is the customer base broadening? People are always worried especially in your custom business about the concentration of it. So I just wanted to get a little bit more color on the shape of the demand from a customer perspective? Matthew Murphy: Yes. Thanks, Ross. Well, first of all, we're deeply engaged across the entire ecosystem, extremely strong position with the top four U.S. hyperscalers and then the next level. And each of them, we have a different concentration and revenue mix. But just to be super clear, if you look at this year and you look at us driving the company to $11 billion, and then you unpack things like custom, it's not that big a percentage of the total. So that's not what's driving our concentration. I mean by design because of the top four U.S. hyperscalers is spending the bulk of the CapEx, that's where the dollars are going to go. But we're quite diversified across each of them. And some of them we sell a different mix, obviously, of product to. But in the case of all four, within our portfolio, which I just went through the laundry list of all the different types of products that we provide, we're highly diversified within each of these customers. So -- so yes, custom is something that gets a lot of attention. But if you just look at the numbers I gave you and the context as I said, it's a piece of the equation, but not all of it. And then over time, even on the custom business, as you look out through fiscal '28 and fiscal '29, Remember, we've got 20-plus design wins, or products now, sockets that are either in production or going into production, it's going to layer in across all those companies as well. So the diversification is only going to get better over time. But we're very unique in sort of the breadth I think of the products that we offer and the product lines we have to really serve end-to-end the needs of all of our key hyperscalers. And the last two M&As we just did really round that out nicely in terms of adding PCIe, getting -- beefing up the UAL, and then also adding key silicon photonics capabilities. Operator: Your next question comes from Harlan Sur with JPMorgan. Harlan Sur: Congratulations on the strong results and execution. Matt, on your custom XPU and XPU attached subsegment, OpenAI recently inked a partnership with your lead XPU, customer to consume, I think, something like 2 gigawatts worth of your lead customers, next-gen and next-gen XPU. So it feels like the overall demand for AI compute continues to accelerate. Right on top of that, like you said, you're ramping 15 to 20 XPU attached custom programs this year and next year. Within our better outlook for custom this year, and with you already starting to ramp your lead customers next-gen XPU program, do you still anticipate a stronger second half step-up of this XPU program? Or is it more of a linear ramp through the year now? And I think you previously thought that you would exit this year with custom driving about a $2 billion sort of annualized growth rate. What does that exit run rate look like today? Matthew Murphy: Yes. Thanks, Harlan. I think the first part of your question is absolutely seeing strong validation in the market for the AI compute spend, and the fact that a significant portion of that continues to go to companies that are building their own XPUs. So that's a positive trend. We certainly see it. And you're right. Even where we don't necessarily have the XPU, we have XPU attached. So all the XPU attached is going with XPUs in customers where we're not participating. So we're -- we participate across every one of those large companies and more on XPU attached. So that's a very positive trend for us that's driving our positive outlook for sure through this year, which we said custom was going to grow faster than we thought, but more meaningfully into fiscal '28 and '29. And then from a linearity perspective, under the hood, we kind of give you a view of what the sequentials would look like throughout the year. But yes, custom, we have said was going to be a stronger second half due to a program transition. That's still the case. And that -- the type of exit rate you're talking about is certainly still intact and probably has an upward bias to it. If you look at the exit rate we're talking about for the whole company now, we're looking at north of $3 billion. So within that custom continues to have some real upside to it. But that's going to improve meaningfully and the revenue growth is going to continue into fiscal '28 which is basically those programs from the second half now having a full year. So that's going to provide some nice growth. Content increase, then layering in the XPU attach, and then layering in our new program with a new Tier 1 hyperscaler, which is in its early stages, but just even the rough plug we have for them, is significantly lower than actually the wafers that we're planning on starting the material and the production plan we have with our manufacturing supply chain. So I think it's a very reasonable setup for next year with a lot of upward bias depending on if these trends continue. Operator: Your next question comes from Aaron Rakers with Wells Fargo. Aaron Rakers: I guess my first question is on the optics, the electro-optics business. I know Matt, you've talked about in the past that your ability to kind of outgrow the pace of what we're seeing in CapEx spend. So I guess my question is, we've seen some massive upward provisions in CapEx. I think most people look at that and say, "Hey, we're looking at like 60% plus growth this year." Do you think you can grow at that level? And how do you think about the durability of that growth as we move into fiscal '27 -- or fiscal '28? Matthew Murphy: Yes. Aaron, your observation is absolutely correct. And that's why even as we look at the upward momentum we see in the business for this year, a big part of that change is in that electro-optics portfolio. We had been calling it kind of closer to CapEx as we were modeling what we thought we could do this year back in the September call and then even in the -- in my December call. But now it's clearly growing more like -- more like accelerator growth and more like this sort of accelerated CapEx growth. So yes, it's growing like 50% plus this year now. And that momentum is going to continue, okay, into fiscal '28. A couple of things are happening there. The first is that as new XPU, GPU, et cetera, generations are released. There is -- we are seeing some increased concentration on the attach rate of optics. So that's a positive. You get more 1.6T, which has just -- because of its performance, commands higher ASP. So that's going to roll in. And then we have -- yes, we just have some pretty new exciting programs happening in that area. So that business has been growing at like 50% a year-ish. You can give it plus or minus, I get the exact data. But it's been at that rate for some time since we acquired Inphi and the data center stuff really took off. We see that continuing not only through fiscal '28, but that momentum should continue beyond that. Maybe it's not the exact same magnitude, but it's significant. We have a real head of steam on the electro optics business at Marvell. Operator: Your next question comes from Blayne Curtis with Jefferies. Blayne Curtis: Matt, I don't want to ask on the custom business. So I think you feel very confident about the trajectory. I'm just kind of curious, one, can you just help us with '26? Because I mean, you have the big broad swath, but I mean, is that custom business growing 30% this year? I just want to figure out the base that you're going to double. And can you talk about that second major XPU customer? I mean, kind of give this type of guidance, like what kind of confidence do you have in the timing of that program? Matthew Murphy: Sure. Yes. And I think you're talking about -- just to be clear, calendar '26, fiscal '27 set on custom, kind of what numbers are we talking? Is that the first question? The second one is the... Blayne Curtis: Yes, sorry, your fiscal year. But yes, fiscal '27 is at around 30%. And then your confidence level on that second major XPU customer and timing as we try to layer that in to get to that double? Matthew Murphy: Yes, great. And by the way, I don't feel bad. I've been in this job for 10 years, and I still have to translate every day between my fiscal year on my calendar year. So don't feel bad. For fiscal '27 we had been indicating after the double from last year, it would grow 20% this year. So we're just saying that's north of that. So I'm -- I can't give you the exact number now, but it's biased upwards, but it's just -- so just take what I read before that 20%, you can make an estimate but higher, but not significant enough where I would like give you a new number, but just say it's biased higher. So in the ballpark, but higher. So then next year, obviously, gets a little bigger than we thought. And then the reason we're confident is we have line of sight in terms of -- well, first of all, we have history, right? We've built these large scale custom programs before. We've done these ramps before. We have a good sense of when the product is going to go through its key milestones through NPI. We have had very detailed discussions and alignment around the manufacturing plan, and we've aligned up a corridor for fiscal '28 for production on this that would be a lot higher than what I'm indicating to you. I think we're budgeting at the moment for -- is there a delay? Does it take longer, et cetera. And plus, I think at the moment, it seems like a lot of folks aren't really believing it's maybe going to do anything. But I think our plug is very, very reasonable for next year Blayne in terms of what's there. And I think it would bias quite a bit higher if we could just achieve what we're planning on reserving in terms of capacity. So more to come there. But I think we try to call the ball as best we can. And in general, we've done a pretty good job over the years of trying to size and judge things in advance. And then usually, we're pretty good and then they're biased upwards. So we'll see where it lands. But I think it's not a big stretch for this custom business to double next year. Operator: Your next question comes from Ben Reitzes with Melius Research. Benjamin Reitzes: Matt, nice to see the beat and raise. I wanted to ask the question about what got better in a different way? I mean, if you could just unpack since December, the $2 billion, especially the -- how fiscal '28 got $2 billion better since December? What -- if we can unpack that and what exactly got better? And then potentially, I'm going to be a little greedy, what can carry into the next year as well, calendar '28 of those signs that you saw since then? Matthew Murphy: Yes. Thanks, Ben, and great to hear from you a long time. So I think -- one is you just kind of look at it as progression. I mean, it's the first point I'd make is we tried to give a view for investors to be helpful because there's a lot of concern and angst back at the end of last year. So in September, we talked about 9.4-ish for this year. And then that's now -- in December, we said that looks more like 10, and now I'm saying it's more like 11. So some of that is just the progression in terms of time and getting better visibility and more concrete. And then that just ripples into the -- I'll use calendar for a second, calendar '27. But on top of that, I mean, one, we've now got very firm requirements and understand the profile, in particular the interconnect business. And that is, I think we had called it very conservatively, to be frank. And I think even a few analysts last quarter kind of [ dinged ] us saying, well, you're plugging your interconnect business at CapEx, but it really looks more like it should be tied to GPU, XPU. And that's really the case. So I think we're seeing that now in terms of the forecast. So that's come up quite a bit, which then again, the upward revisions we're seeing for this year then ripple into next year. And then I'd say this is all underwritten Ben, by extremely strong bookings and backlog layering in and then the detailed conversations with our customers around supply planning. It's just given us a much more concrete view. And by the way, the other reason I think it's important and why we felt it was important to continue to update on this metric is that we set targets back in April of '24 for calendar '28. We did that around some assumptions around data center market share of 20%. And those numbers looked enormous at the time we talked about it. I think you guys were there. We were doing low billions a quarter in revenue at that time. $1 billion -- I think we had guided $1.1 billion or $1.2 billion when we put out this number that was like $15 billion in data center revenue in four years. And I think everyone thought we were nuts. At our June AI investor event, we said the TAM went up, so that data center revenue bogey kind of moved up to like if you just did the math, moved up to more like $18 billion and change. But now you kind of look at it and you see where we're landing in calendar '26. And now we're sitting here in '27. I mean, it's -- we're very much on track actually to those targets that we had set Ben. And so in a way, yes, it's some upward revisions and that's part of it is just because we have more data, but it actually is also validating, I think, the plan we set actually four years ago about what we thought we could go off and do, which were very lofty ambitions, and we're not there yet, and we have to go execute like crazy me and the whole team. But we're very encouraged by what we're seeing, and the proof is in the pudding that we're getting in terms of the backlog forecast and alignment with our entire supply chain to be ready to go make that happen both this year, next year and in calendar '28. Operator: Your next question comes from Tom O'Malley with Barclays. Thomas O'Malley: I think in the preamble, Matt, you talked about AEC and retimers more than doubling in the fiscal year. Could you maybe give us some perspective on the base there? And then you've been really helpful in the next few years kind of giving the contributing factors of what is a pretty impressive growth profile. Maybe talk a little bit about how much that can contribute in this broader overview? Matthew Murphy: Yes. Tom. Yes, this is still an emerging area for us. So we're -- it's doubling -- over doubling this year, but it's probably in the $200 million range is what I would say. I mean, we actually -- I think based on some of the things we're looking at, maybe that goes higher, but that just gives you a sense of the magnitude. But it's going to keep going from there. I mean this is -- we've seen this in a lot of our emerging product areas when we get into them. Once they start doubling, they kind of keep doubling, and you know this market quite well. There's quite a bit of room, I think, for a bunch of people to participate. So yes, we're very encouraged by what we see based on the traction we have on our products, especially on product leadership. We leverage a lot of our DSP and PAM technology in this area. We inflected when both on the retimer side and AECs move from NRZ to PAM, and that was -- that was our kind of conscious decision to do that. So we're earlier in the cycle because we're coming in, in later generations than some of the existing sockets, but we intend to really invest here in a significant way and participate. Over the long term, we see that as complemented. There's a place in the market for this, and we're going to participate. But obviously, we made the bet when you go back to even the Inphi acquisition five years ago on optics and pluggable optics, in particular, and then now with Celestial also, on CPO on the scale upside. So there's a period of time we're going to participate. I think it's going to be great, and the business is going to do well and it leverages what we have. And I think it's going to be just part of our goal to be the end-to-end provider for our customers of all of these types of solutions. From electrical to optical to silicon photonics various reaches various distances, various form factors. And that's what our customers are looking for, okay? They want to have an interconnect partner that could be the one-stop shop and do it all and have high amounts of leverage on the IP, so they can trust it, because we do it ourselves and also on the firmware and the software, and the system implementations, they also want to make sure that they have reusability. So it's been a virtuous cycle here, just the scale-up part relative to the scale out is smaller but growing rapidly. Operator: Your next question comes from Vivek Arya with Bank of America Securities. Vivek Arya: Matt, I just wanted to first clarify what your XPU attach was last year and what contribution you expect in '27 and '28? And then, kind of, my more strategic question is, when we look at the pattern of your first large XPU program, right, you had a very strong start, followed by competition from another supplier. How would you handicap kind of your exclusivity at the large new XPU customer you plan to start at next year? Matthew Murphy: Yes. Thanks, Vivek. So maybe I'll answer the second one first. So yes, we're -- I think you're asking specifically about our newer program that would ramp next year, and we feel very good about our position. These are very deep engagements we have with our customers. We're two hands on the steering wheel on this. This is multi-generational in nature. Given the rate of innovation and the pace that the technology is moving at, it's really in everybody's best interest to plan, not just one generation out but even farther. And so we've really been able to do that, I think, across the Board with our customers. And so we feel really good about our position there. And the sustainability of that. It still needs to ramp obviously. But certainly, the CapEx envelope is out there to really consume a lot of product, and we're very encouraged by what we see from a road map perspective. And we're investing heavily as a company to be there across the board on all of the key attributes that these big XPU customers care about. So I think more to come on that, as well as future opportunities on XPU for the company. But we feel very good about our position in the next few years in terms of line of sight to hitting the revenue targets that we talked about over the last couple of years and then growing beyond that. And then, yes, I'm sorry, then the -- on the XPU attach, we [ can't ] give the exact numbers, but just maybe big round numbers. And maybe we'll first start with the line of sight just on the NIC and CXL I gave you, which was kind of $2 billion out in '28, and then you layer more on that. So -- and by the way, just -- we had sized for everybody on the call, the XPU attached TAM in the future at about $15 billion in calendar '28. We didn't break it out exactly, but we had a total market share goal of about 20% in that time frame. So I'll just call that $3 billion, we're driving in that area. So let's take a step back now. XPU attached probably in the couple of hundred million ballpark say like this last year, doubling this year, maybe over doubling again the year after. So I think by next year, this thing is probably a $1 billion type business. We'll see how it all shakes out. It's all going to happen under the hood of our custom business with that. But just to give you a sense, it's on a massive trajectory upward, and it's in that category of kind of double plus each year. Operator: Your next question comes from Tore Svanberg with Stifel. Tore Svanberg: Congrats on the record quarter. Matt, I was hoping you could give us a bit of an update on the mix of the opto electronic business. So you talked about 1.6 already shipping. But my understanding is that 800-gig is definitely going to be the bigger volumes this year. So any sense for what the mix is going to look like for fiscal '27 between 1.6, and I guess, 8 and even some 400? Matthew Murphy: Yes. Well, I think you got it right. First of all -- and we've been saying this for a while that 800 was going to be sort of stronger for longer, and I think that was our mantra even last year. And that's still the case for sure. But as I mentioned in the prepared remarks, we had significant shipments actually of 1.6T at the end of last year, and it's going to ramp again pretty hard this year. But 800 will still be the majority. I think it's going to take probably through -- I mean, even next year, 800 is still going to be strong. So I can't give you the exact breakout at the moment, Tore, but part of the -- I think, the uplift as well in terms of just our outlook for interconnect for the year was also based on, kind of, all of our customers revising up in terms of what they were going to need, but maybe a little bit more pronounced in 1.6T and it's really ramping strong with those initial customers we had and more will layer on throughout the year and next year. So yes, maybe more on that later, Tore, but probably not in a position to give you the exact number. And also, I'd say the reason why too, is it's been moving around a lot. I mean, this has been very dynamic in terms of the bookings environment and the demand environment. So I think the mix will have a better view of what that looks like as we progress throughout the year. Operator: Your next question comes from Joe Moore with Morgan Stanley. Joseph Moore: With all the growth that you're looking at here, I wonder if you see anything on the supply chain, that could be challenging for you. My sense is you've come a long way in terms of supply chain management since a couple of years ago, but just any updates there would be great? Matthew Murphy: Yes. Joe, great to hear from you. I'm going to have Chris answer that, our COO. He's been knee deep and had that job for about 5 years, and he's knee-deep in the supply. So Chris, go ahead. Christopher Koopmans: Yes. Thanks, Joe. Look, we've been in a tight supply environment for anything that touches AI, advanced node wafer fabrication, advanced packaging, large body substrate since the launch of ChatGPT. And against that backdrop, to your point, we were still able to grow the company north of 40% in total revenue last year. So we clearly have very, very good relationships with our suppliers. But I would argue that really what helps us we've been forecasting this growth for quite some time. And by giving them multiple years of visibility of what we're going to need and ramping into these numbers is really helping us. And so I'm very confident we've secured the supply that we need for all the growth that Matt outlined this year, next year and beyond. Operator: Your next question comes from Jim Schneider with Goldman Sachs. James Schneider: It's great to hear the increased visibility you have business in the next year, but If I think about the guidance for $15 billion of revenue next year, and $5 of earnings, roughly speaking, that's about 15% to where I see the peak consensus being for next year's revenue, but only about half of that on the earnings side. So can you maybe unpack a bit of what are the moving pieces below the top line? Whether that's gross margin mix, or increased investments to sort of get to that? Or is the $5 number just relatively conservative? Matthew Murphy: Jim, yes, yes, that's like just a floor like it's 5-plus. I mean you can run your own pro forma income statement. But just to give you a sense of how to think about it. So on the top line, we gave you a framework. And then you can also take, basically where we're going to exit this year and you could use whatever number you want to model finally in your model, but we're saying put in 3, or a bit more. And then if you actually just kind of roll through some of the guidance we've given you already for this year on OpEx and the moving pieces on gross margin, we actually start to get to our target operating model, margin model exiting the year. And that probably continues through the next year is a safe assumption. So the number if you put in 15, and you put in that, it probably -- it floats above $5. So that was not a prescriptive number, or a firm number. It was just a 5-plus. People are going to have their own estimates, and you guys will sort of come up with your own view. But yes, no, I'm not making any comment about any kind of margin changes, or dilution, or losing leverage at all. We're going to get leverage -- we're in the mid-30s op margins right now, if you kind of look at where we were last quarter and what we're guiding and that should float up throughout the year. And then not calling it exactly for next year, but it probably would be consistent with our -- certainly our exit rate of this year. And so that's a simple way to think about it. So it's -- that would pop out a number above $5. Operator: And your next question is from Christopher Rolland with Susquehanna International Group. Christopher Rolland: Matt, thanks for answering the question. So mine is around kind of big picture, like the CPO scale-up world. Perhaps if you could describe what it looks like, what it looks like for Marvell? But also in your prepared remarks, you talked about integrating Celestial, it sounds like into the Innovium platform. I was wondering, are there potentially like UALink switch trays that you might be able to integrate this into as well? And just the timing around such products would be cool. Matthew Murphy: Yes. Great. Thanks. So yes, on the initial plan on Celestial -- and where we -- and just by the way, on the big picture side, our view pretty consistently for some time now has been that the deployment of CPO and scale out would be relatively limited relative to the -- especially relative to the amount of pluggable transceivers that we're going to get deployed. And you can go back many, many OFCs ago, and that's been our view. And that's been the case to today, for sure. And then I think on the go forward, relatively wise, it's still the case, although you may see some of the industry. That's not our current plan today, although we could absolutely do that and do that integration with the Celestial technology, and our Innovium CareLink products. And we've done POCs and we've done some work there, but we'll be ready to react to the market there, Chris, when it's needed. On the scale up, and you mentioned UAL, that's a perfect use case where that is where we see that CPO technology inflecting in a pretty big way and Celestial brought us a pretty significant design win and engagement in that area. And that's what we're trying to drive for next year. So when we ramp it next year, at the end of next year, the -- that would be serving the scale-up application and it would be both an integration of the photonic fabric chiplet into the XPU, as well as on the switch side. That's the first one. There will be a whole bunch of shipments on scale up switching that will be copper-based, and that's going to exist for some time, too. But we're seeing very, very strong interest across the board for kind of beyond the next few years of where the CPO for scale-up really starts to inflect. And this has been -- and that's sort of been our recognition over the last year or two, is that's where that's going to happen and that's why we did the M&A and we brought the team on. So to sum it all up, we'll be shipping next year CPO for scale up at one large customer, and then we're working on more for beyond that. And then the rest of those deployments would be still copper-based. I think we'll do one more question and then I'll -- I think we'll wrap it. Operator: Our last question then will come from Mark Lipacis with Evercore ISI. Mark Lipacis: Congrats on the great quarter. Matt, I'm wondering, when you look at these AI systems that your customers are building, it sounds like the way you're talking about it that there's a bigger bottleneck on the connectivity side and the processor side. And so -- but that would be like the part one of the question. And if you agree with that, what's the argument for, why not shift your process or resources to focus more on connectivity? It seems like your lead is a lot more obvious on the connectivity side, it's a higher margin business. That's where the bottleneck is. And seems like there's a higher chance to add more value, to get paid for that value. And by contrast, the processor side sounds like it's quite noisy on the competitive front. And I think you guys probably get dinged on multiple because of that noise. And so what's the kind of -- what's the rationale for not doing something like that? Matthew Murphy: Yes. Thanks, Mark. It's a valid question. So first of all, on the interconnect side -- well, on your first part of your question, I'm not sure what's more of the bottleneck or not? I know for sure, the interconnect is a bottleneck, but you could also argue industry-wide, there's a lot more to do on the processing side. But just to be clear, we are absolutely investing to win on interconnect. Like we're not sort of trading anything off there. I mean we're going all in to make sure that we're the leader here. And that's why you can even see when we did our M&A moves last year, we put all that towards that market. I would say, though, at the same time, we're in the custom business. The -- and you got to break it into two pieces. On the XPU attach side, obviously, that is more margin-rich. And leverages a lot of the Marvell IP, and technology we have, and those typically are our chips that we do. And we've made quite a nice business out of that. And then on the XPU side, we want to be a big time supplier to our customers. We do get strategic advantage, okay, in being in that market though, Mark, which was actually even a reason thinking all the way back to Avera when we acquired it out of IBM -- or sorry, out of GLOBALFOUNDRIES back in 2019. And one of the reasons that I wanted to do that acquisition and get Marvell into custom -- I mean I never envisioned it would be this significant business for us. Okay. Let's be clear, back in 2019, we weren't thinking that we were going to buy an asset for $650 million, and it was going to open up a $50 billion TAM, but it did. And one of the strategic rationales that I had for that deal was that it would put Marvell in a product area where we had to be at the bleeding edge. We had to be at the bleeding edge on nodes, packaging, IP development, and it was a tip of the spear type of product line that I felt would be really good for us to really have a driving force to keep Marvell best-in-class on technology. Because at that time, we were making the move from fast follower to trying to be a technology leader. So now we're in that business. I agree with you. It's got a lot of noise around it, and it's got a lot of controversies over the last year and all the different things that have gone on, and maybe it's affected a multiple. But the fact of the matter is, we're in that business. Our customers are counting on us. We've grown that business from zero to $1.5 billion. It's going to grow again this year. It's going to double the year after. And it's going to be a significant revenue growth driver for Marvell. So I'm not compromising anything on the rest of the portfolio to be in that business. And remember as well, that business also gets significant funding and contribution from our customers who pay us NRE and put their commitment in to make sure that those programs are successful. So we do get underwritten in terms of the support to go do them. And so I'm going to keep -- at this point, I'm in the AI market. I have the full portfolio. I'm going to follow what my customers want me to do. And I'm going to ignore the noise. I mean, if you actually look at last year and all the different things that came out, and all the different noise that was out there, it was all wrong. I mean you actually analysts retracting notes. You had articles that weren't even accurate at all. I mean you had -- honestly, it was all noise. Look at our results that we're guiding, look at our outlook for this year. Look at our outlook for next year. Do you see me blinking? You don't. So yes, we're in the business. We're going to be in the business. Our customers want me to be in this business, and we're going to drive a major significant revenue company at Marvell. I'm very fired up on this topic. Thank you, Mark. All right. Ashish wrap it? Ashish Saran: Go for it. Matthew Murphy: Yes, I got a couple of closing statements. That wasn't it, by the way, everybody. All right. So first, thank you, everybody, for joining the call. I appreciate the interest in the company. It's always fun. Look, our business is on a very strong trajectory, okay? I mentioned on our prepared results. We had record design wins over the past year. Team did a great job. We're seeing record demand. We're on track to grow our data center revenue at or above 40% for the third straight year. And by the way, if I go back 4 years, 5 years, 10 years, this business has been growing at like 35%, 40%, 45% for a very, very long time, and it's going to continue to do that. In fact, for next year, we're looking at that growth accelerating closer to 50% next year, and we're driving the company to try to get this company to $15 billion of revenue next year. It's -- I've been doing this job for 10 years. The team has been incredibly dedicated and we have this massive opportunity in front of us. So as I said to Ben, who asked one of the great questions, we set some very ambitious targets for the company for calendar '28, fiscal '29. Almost 2 years ago, it looked crazy. We're on track. We're on track to achieve the goals that we set. This is the start of it. We're going to continue to update you guys on the progress of the company. And I want to end by just thanking all the Marvell employees for your focus, your commitment, and your commitment to our customers to drive the execution they're looking for, and our goal is to make Marvell one of the big winners in this once-in-a-lifetime episodic AI infrastructure build-out. So thanks, everybody, for your interest in the company. I'll see a bunch of you guys on the East Coast in New York next week. Operator: Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.
Stephanie Luyten: Good morning. Thank you for joining us as we present Elia Group's Full Year Figures and have a look at what 2026 will bring for the Group. I'm joined today with our CEO, Bernard Gustin; and Marco Nix. Bernard Gustin: Good morning. Stephanie Luyten: Good morning, both. Before we start, please take a moment to review the on-screen disclaimer. It contains some important information you should take note of. And as always, the slides will be and the script will be published on our live stream afterwards. Bernard, I'll let you kick off. Bernard Gustin: Thank you, Stephanie. I want to start by saying how proud I am of what we've achieved this year. Three achievements stand out. First, we secured financing for significant growth and reestablished market trust. When I took on this role, there were questions about our capacity to fund ambitious growth and deliver on our promises. Addressing this was my main focus. And I'm pleased to say that we are back on track. Second, we delivered operationally investing EUR 5.2 billion in CapEx this year, more than triple our historical annual average. And third, we are attracting exceptional talent. Despite challenges, people want to join us because they see Elia Group as a place to make a real difference and help build the energy infrastructure of the future. That tells me we have the right people and the right vision. Stephanie Luyten: Thank you, Bernard. Before Marco takes us through the financials, let's have a look together at the major highlights that defined the year. [Presentation] Bernard Gustin: Well, 2025 was indeed a year marked by major milestones, collective achievements and moments that shaped who we are and where we are heading. When it comes to project execution, 2025 was a year of real tangible progress. In Belgium, we continued to advance on several strategic infrastructure projects that form the backbone of the country's future electricity system. Ventilus and the Boucle du Hainaut, both critical missing links in connecting large volumes of offshore wind and reinforcing Belgium's North-South transmission corridor progressed through key regulatory and construction milestones. These projects are essential for integrating the Princess Elisabeth zone, strengthening system reliability and ensuring Belgium can transport renewable energy efficiently across the country. BRABO III also entered its final stretch, further reinforcing the Antwerp region and enhancing cross-border capacity with the Netherlands. The construction of the Princess Elisabeth Island also continued to advance steadily. The installation of the concrete caisson made solid progress with 11 of the 23 caisson already installed at the sea. And the remaining units are ready for deployment as soon as weather conditions allow it. This brings Belgium another step closer to achieving its decarbonization targets. And in Germany, we also saw real progress. On SuedOstLink+, one of the country's most important North-South transmission corridors with permitting moving ahead and technical preparation advancing, the project is now getting much closer to implementation. At the same time, offshore progress stayed on track. We successfully completed the cable laying for Ostwind 3, the link for the next wave of wind projects at the German Baltic Sea, securing future capacity to integrate more renewable energy. And on Bornholm Energy Island, Germany and Denmark signed a landmark agreement for 3 gigawatts of offshore wind connected through new hybrid grid links to both countries. It's a major step forward future toward future cross-border offshore grids in the Baltic Sea and support Germany's vision for a more meshed and resilient offshore system. We also put 2 new high-voltage lines into service, each over 100 kilometers, boosting our transmission capacity and strengthening stability across key parts of the German grid. So overall, it was a year of strong delivery with our teams moving forward the strategic projects, but at the same time, congestion is becoming more visible. As more renewables connect to the system, and that's a good thing, our consumption patterns also evolve and that is putting pressure on our grid. And this isn't just a Belgian or a German challenge, it's a European one. Our recent study on storage shows just how quickly the landscape is changing. Storage and batteries, in particular, will be a cornerstone of the future system. But equally important is the question, how, where and when storage operates. Today, the current wave of connection request isn't always a healthy growth. We are seeing a huge number of speculative projects across Europe. In Germany alone, TSOs are facing requests equivalent to the load of 100 million households. That's not sustainable. It strains the grid, dodge the queue and delays more mature investments that society actually needs. This is why we advocate for a new approach. We need to prioritize system relevant mature projects and move away from a first come, first serve logic that is now being exploited and risk driving up cost for all consumers. This is where the EU grid package helps set the direction. It supports anticipatory investment and clearer rules so that flexibility, renewables and storage can work together as aligned pillars of a sustainable, affordable and secure system. Marco Nix: And another key factor for our long-term investment needs is the right regulatory frameworks. Based on what we know so far about the German regulation, we welcome BSR's ambition and its recognition that the full package matters for investors. However, the draft framework still does not provide the balanced and internationally competitive returns needed to attract the level of capital required for the grid expansion. Key adjustments are still necessary, particularly on return on equity level, debt cost coverage, OpEx predictability and the effectiveness of the incentive schemes to ensure the framework truly supports the unprecedented investment effort ahead. We remain committed to constructive dialogue to help shape the final determination that safeguards investments capability and supports Germany's long-term energy goals. To speak about 50Hertz goals, we will now share a short video from the CEO of 50Hertz, Stefan Kapferer, on the progress made and the milestones still ahead of us. Stefan Kapferer: With a new focus on resilience of the energy infrastructure and affordability of energy transition, it became clear in 2025 that an overarching responsibility for the electricity system is urgently needed. This can only be delivered by companies like Elia Group with 2 national TSOs, ETB in Belgium and 50Hertz in Germany. In 2026, 50Hertz will once again invest a record high amount of money in additional grid infrastructure, substations and new connections for consumers, EUR 5.1 billion. So affordability of the energy transition will be key. We have to harvest efficiency potential, and we have to take care that only those projects are included in the next grid expansion development plan, which are really needed to make the energy transition happen. And to finance these challenges, the current review of the regulatory framework in Germany has to deliver an internationally competitive return on equity to guarantee that the engagement of the investors will be the same also in the upcoming years. Stephanie Luyten: 2026 will be a year in which significant regulatory developments and grid planning milestones emerge in both our countries, giving us much more clarity on the investment landscape and its associated returns. To build on that, I'd like to turn to the CEO of Frederic Dunon. He will walk us through the challenges and opportunities shaping our next steps. Frederic Dunon: Discussions will begin on our regulatory framework for the period '28, '31. Two major objectives are at stake. First, to ensure that market parties have the right incentives to allow safe and efficient system development and operation. And second, to ensure that Elia has a financial and human means to realize the plans approved by the authorities. The design of our '27, '37 federal development plan will be at the center of attention of our authorities. Indeed, it will define the boundaries of possible futures in terms of energy, industrial and economical policies. Whereas development plans were seen in the past as an administrative process, it is now well understood that they are the foundation of our major society for the coming decades. Stephanie Luyten: Now that we've looked at Belgium and Germany, let's shift to what's happening internationally. As you know, we took a minority investment in energyRe Giga at the end of 2023 with a clear understanding that this is a long development cycle model and that progress would not be linear. Since then, the U.S. environment has evolved. At federal level, the current administration has created uncertainty for offshore wind with slower permitting and approvals while at the same time, many states continue to actively push for grid expansion. In parallel, the U.S. power system is facing rapidly rising electricity demand driven by electrification and data centers, which reinforces the structural need for additional transmission capacity. Last year, we also saw the acceleration of the phaseout of the wind and solar tax credits. This puts pressure on the developers to bring the projects forward and required adjustments in project structures and portfolios across the sector. Against this backdrop, we have taken a disciplined approach, prioritizing value protection over speed. As a result, contributions from energyRe Giga to the Group results will come later than initially expected, but we remain supportive of the investment and of its long-term strategic rationale. As we already flagged at our Q3 results, Clean Path New York faced a setback. For SOO Green, the picture is more positive. Permitting is close to completion and land acquisition is largely secured. Finally, the offshore project, Leading Light Wind is, as you know, currently on hold under the present federal administration. Translated in financials, this means the group recognizes an impairment on its U.S. assets of EUR 99.1 million. This consists of 2 elements. On the one hand, a EUR 70.8 million write-off on the energyRe Giga portfolio, an additional provision of EUR 28.3 million, reflecting the group's remaining commitment to invest USD 150 million to reach its 35.1% ownership stake. Let me remind you that this impairment is a noncash and reflects a prudent reassessment of, on the one hand, value and timing, and it's not at all a change in our discipline or our financial strength. Our exposure remains well controlled. Our commitments are fully manageable within our balance sheet, and we retain flexibility on the pace of future capital deployment. Marco Nix: Thank you, Stephanie. Let me now elaborate on some of the headline figures for '25. We delivered strong progress across all fronts in 2025. Our 5-year CapEx plan remains fairly on track. We invested EUR 5.2 billion, EUR 1.4 billion in Belgium and EUR 3.8 billion in Germany. As a result, our regulatory asset base expanded to EUR 22.6 billion. Our hiring drive in '25 was also a success. We welcomed again more than 760 new employees, strengthening our operational capabilities and supporting the growth objectives we laid out during the Capital Markets Day. On the operational side, system performance remained outstanding. Grid reliability reached 99.9% in Belgium and 99.8% in Germany, positioning our TSOs among the most reliable grid operators in Europe. These figures highlight our continued focus on operational excellence and the effectiveness of our investments in technology, infrastructure and talent. In terms of financial results, the group delivered a strong performance with net profit attributable to Elia Group shareholders of EUR 556.6 million. This corresponds to an adjusted return on equity of 7.3% and earnings per share of EUR 5.51 per share. As shown on the slide, we indeed had a busy year on funding as well. We proactively secured the funding needed to support our strategic priorities in Belgium and Germany. We executed a well-diversified financing program across entities and instruments, reflecting the greater flexibility we have embedded into our funding strategy. A key focus early in the year was strengthening the balance sheet. We completed a EUR 2.2 billion equity package, which reinforced our capital base, broadened our strategic partnerships and provided significant financial flexibility. On the debt side, we raised EUR 3.6 billion in green financing through loans and bonds and both Elia and Eurogrid issued their first EU-labeled green bonds, an important milestone that broadened again our investor base and reinforced the central role of sustainable finance within our capital structure. At the start of the year, Standard & Poor's reaffirmed the credit ratings of all entities. We also strengthened liquidity, bringing the total available funds at year-end at EUR 11.9 billion, which underpins our prudent risk profile and supports our investment-grade ratings. Overall, the group's investment plan is backed by a robust financial framework designed to maintain its current ratings, ensuring continued strong access to capital markets and providing funding flexibility. Finally, the group is progressing on the various options of the funding toolkit as outlined to the market. Elia Group delivered strong operational and financial results reflected in a sharp increase in adjusted net profit. These figures excludes material one-offs and reflects the group's underlying performance. Adjusted net profit rose by 39.8% to EUR 716.5 million, driven by CapEx execution, higher equity remuneration and solid operations. Additionally, the third segment benefited from the first time of a tax benefit linked to the application of tax consolidation in Belgium. Germany remained the largest contributor, delivering just over 60% of the group adjusted result. Belgium added around 38%, while nonregulated activities and Nemo Link contributed EUR 5 million, including EUR 33.4 million in one-off adjustments, the reported net profit reached EUR 683 million. After noncontrolling interest and hybrid costs, net profit attributable to Elia Group shareholders increased by 32% to EUR 556.6 million. On this slide, we show that the reported figures include several nonrecurring items, both in Germany and in the nonregulated activities. We adjust for those to show the underlying performance. Starting with Germany, the reported net profit includes a EUR 46.5 million deferred tax impact. This relates to the revaluation of deferred taxes following the planned reduction in the German federal corporate tax rate from 15% down to 10% between the years '28 to '32. Turning to the third segment. There are 2 main adjusted items. As said by Stephanie, the U.S. impairment amounting to EUR 99.1 million negatively. On the positive side, the tax consolidation had a positive impact due to the application of the Belgium tax consolidation mechanism and linked to the tax periods prior to '25. It is there of a one-off effect, not reflected of a recurring tax benefit. After adjusting for all these items, adjusted net profit amounts to EUR 716.5 million at Group level. Stephanie Luyten: The RAB remains the core driver of the group's regulated remuneration. Supported by the execution of our investment program, Elia Group's RAB increased by 22.5% year-on-year, reaching EUR 22.6 billion at the end of '25, up from EUR 18.5 billion in 2024. This increase reflects the acceleration of major infrastructure projects in both Belgium and Germany that are critical to integrating growing volumes of renewable generation, reinforcing cross-border capacity and strengthening the overall system resilience. These investments ensure we can deliver the energy transition at the lowest societal costs, while contributing to Europe's long-term energy autonomy. When we look ahead, we expect an average annual RAB growth of over 20% for the period '24 to 2028, supported by around EUR 21.6 billion of cumulative CapEx over the next 3 years. As we have invested EUR 5.2 billion across our Belgium and German grids, the impact on our funding metrics remains well under control. Net financial debt increased by around EUR 1 billion, bringing the total to EUR 14.1 billion. This limited increase reflects the successful capital increase and the fact that a large share of our investment was funded through operating cash flows. Our average cost of debt rose slightly to 2.9%, and the portfolio remains very well protected from interest rate volatility with 98% of our debt held at fixed rates. Finally, our credit profile remains solid. Standard & Poor's reaffirmed our BBB rating with a stable outlook, underscoring the resilience of our financial structure and the strength of our funding strategy. Marco Nix: As this concludes the group overview, let me guide you through into the segments, starting with Belgium. In '25, adjusted net profit rose by 27% to EUR 272 million. This was mainly driven by a EUR 30 million increase in fair remuneration, reflecting continued RAB growth, higher equity and improved risk-free rate to 3.2% Incentives were up slightly by EUR 1.1 million. Beyond the regulatory result, the outcomes was also influenced by IFRS restatements. These were mainly driven by higher capitalized borrowing costs from the larger portfolio of assets under construction as well as tariff compensation for the costs linked to the capital increase. This compensation is recorded as equity under IFRS, but these costs are fully passed through to the tariffs under the embedded debt principle. In total, the Belgium segment delivered a return on equity of 6.2% for the year. For Germany, the adjusted net profit rose to EUR 439 million, up 42%. This strong performance is the result of several key factors. First, asset growth continues to be the biggest driver of the result, combined with imputed depreciation and cost of debt coverage. This was further supported by a slight increase in the allowed equity remuneration on new investments, reaching 5.7% for the year. On the cost side, the onshore OpEx outperformance declined slightly by EUR 3 million. The inflation index-based year revenues helped to offset most of the operational cost increases, associated with our expanding activity footprint. At the same time, a number of offsetting effects also incurred. Depreciation increased as several major projects were successfully commissioned and brought online. Financial costs rose due to the higher interest expenses from debt financing. This was balanced by capitalized interest during construction, which increased and interest income from a prefinancing agreement. After including a one-off deferred tax revaluation gain of EUR 46.5 million, net profit reached EUR 485 million. Considering the adjusted net profit, 50Hertz achieved a total return on equity of 11.1% for the year. Finally, the nonregulated activities and Nemo Link segment delivered an adjusted net profit of EUR 5.3 million in '25. This performance was mainly driven by the application of group contributions for the '25 financial year, which contributed EUR 24.7 million to the result. This reflects the Belgian tax consolidation mechanism that allows to utilize a tax loss at the group level and Eurogrid International. The positive impact followed a legislative change adopted at year-end, which removed the discriminatory treatment previously applicable when combining the group contribution regime with the dividend received deduction regime. This positive effect was partly offset by several factors, mainly higher holding company costs, a lower contribution of our consultancy business, EGI. Finally, Nemo Link contributed slightly less to the result. After taking into account net adjusted items, the net loss amounts to minus EUR 74.5 million. Stephanie Luyten: Before we move to the final part of the presentation, our financial guidance for 2026, I'd like to briefly touch on the group's dividend policy. Elia Group proposes a dividend of EUR 2.05 per share. This dividend proposal will be submitted for approval at the Annual General Meeting and is expected to be paid in June 2026. Marco Nix: Ending with the outlook for '26, Elia Group expects a net profit at Elia Group share in the range between EUR 690 million and EUR 740 million. In Belgium, we plan to invest around EUR 1.7 billion, delivering an adjusted net profit between EUR 290 million and EUR 320 million. While in Germany, we plan to invest around EUR 5.1 billion and an adjusted net result in the range of EUR 585 million and EUR 625 million. The nonregulated and Nemo Link segment is expected to report an adjusted loss of minus EUR 10 million to EUR 30 million. Bernard Gustin: Well, thank you, Stephanie. Thank you, Marco. Before we move into our Q&A session, let me share some closing remarks with you. Earlier this year, the Hamburg North Sea Summit highlighted the urgency of building an integrated offshore grid with European TSOs presenting a joint framework for hybrid interconnections and shared cost models capable of enabling up to 1,000 terawatt hour of clean energy by 2050. At the same time, the Hamburg declaration committed key North Sea countries to delivering 100 gigawatts of joint offshore wind projects, underscoring that system security and sovereignty will increase, increasingly depend on collaborative offshore development rather than isolated national solutions. Complementing this, Mrs. von der Leyen, underscored at the recent Antwerp Industry Summit that Europe's continued dependence on fossil fuels exposes industry to volatile price swings and highlighted the urgent need to reduce this exposure by accelerating the shift towards stable homegrown clean energy sources. The current war in the Middle East underlines once again how vulnerable Europe remains to external shocks. Strengthening and interconnecting the European grid is, therefore, essential, not only to expand access to affordable clean electricity, but also to reinforce Europe's energy sovereignty and reduce dependence on increasingly unstable fossil fuel supply. In this context, Elia Group stands out as the only international electricity transmission group in Europe, combining a multi-country footprint, deep operational presence in both the North and Baltic Seas and a public-private capital structure capable of aligning public anchors with long-term private investors behind strategic and critical infrastructure. This combination is exceptionally unique in our sector and precisely what Europe needs in these troubled times. Our leadership is most visible in our flagship hybrid interconnector portfolio, the first of its kind in Europe and the foundation of tomorrow's meshed offshore grid. Kriegers, yes, thinks and acts on European scale. Together with Energnet, they already have put the world's first hybrid interconnector Kriegers Flak into operation. Furthermore, together with Denmark, they will realize Bornholm Energy Island, unlocking large-scale offshore wind in the Baltic Sea and connect through hybrid HVDC links. And in Belgium, Princess Elisabeth Island and Nautilus could form one of Europe's earliest true hybrid offshore hubs, pulling up to 3.5 gigawatt of offshore wind, while interconnecting Belgium and the U.K. HansaLink, a key project of our entity WindGrid, expands this logic across new cross-border corridors, drawing private capital into offshore infrastructure at scale. And with Nemo Link operating reliably for years, we have already proven our capability to deliver, operate and maintain complex interconnectors safely and efficiently. This portfolio is unmatched in Europe. No other player combines so many hybrid assets across the 2 strategic European sea basins under one group, not as concept, but as concrete investable projects that show how offshore wind and interconnection can be planned, financed and built together. Thank you for your attention. Stephanie, I think we are now ready to move to the Q&A section. Stephanie Luyten: Yes. Thank you, Bernard. And in the meantime, Yannick Dekoninck, our Head of Corporate Finance, has also joined us. Stephanie Luyten: So let's turn to the screen. I see that our first question comes from UBS, Wanda. Wierzbicka Serwinowska: Congratulations on the results and the CapEx delivery because there were some concerns last year if you will deliver. The first question -- I mean, 2 questions to Marco. The first one is on the capitalized cost at the net income level. I mean, what was it in 2025 for 50Hertz because I couldn't see it disclosed. And what is embedded in your 2026 guidance? And also, if you could give us any rough guidance on the capitalized cost until 2028, that would be much appreciated. It's a very hard to model item. And the second question is on the S&P. As you said, back in September, S&P confirmed the rating, but they also said that the Elia Group consolidated business risk has marginally increased. And they raised the FFO to net debt threshold by 100 bps. And they also assume that your CapEx post-2029 will moderate. So does a higher FFO to net debt requirement worry you when thinking about CapEx plan or funding beyond 2028? Marco Nix: Maybe start with the technical question then on the capitalized borrowing costs. It's indeed something we are mindful of in the figures of '25, which are subject to disclosure finally, with the annual accounts at year-end, there's a part close to EUR 90 million considered in the German figures. So what is a noncash result contribution. So -- and that puts a little bit 11% into a certain perspective as, of course, this is being included in the 11% guidance. For the future growth, it's indeed linked to some degree with the investments to be taken. However, it's not linear simply as we try to limit the impact to some degree, and it's being connected to a relatively short period between 2 milestones of the projects, where I must admit that that's a little bit hard to model in the future. But I assume on one hand, that the IFRS standard is subject of a change, which might help us then in the future to limit that impact. However, it will grow. And as a rule of thumb, potentially, it's good to look into the investments in the year being taken compared with the previous year, how it will be growing in the year '26. Wierzbicka Serwinowska: So what should we -- what is embedded in your guidance because your guidance for 50Hertz was running much, much above consensus? Marco Nix: In the guidance of 50Hertz, it's a similar area, so between EUR 90 million and EUR 100 million. So that's currently what we have embedded there. Bernard Gustin: And then... Marco Nix: So then on the FFO to net debt. So currently, after the capital raise, we feel rather comfortable, in particular, with an eye on the liquidity position the group currently has. So therefore, we are not in a rush. Of course, we are looking into the horizon beyond '29. But as we stated, it's subject of the new CapEx plan, which is still under development as both the grid development plan in Germany and the federal development plan in Belgium is still under construction, if you want to say it like this. And as this is the underlying combined with the regulation of our future capacity in funding and of course, in remuneration, that is a necessary input for our funding plans. And of course, the rating will play a significant role in there as, of course, we don't expect that the growth will stop and taking that into perspective, there's a solid investment-grade position being needed to fund the investments in the future as well. Stephanie Luyten: Thank you, Wanda. Let's go to the next question. I believe it's from Bank of America, Julius. Julius Nickelsen: I have 2. The first one is on German regulation. So in the draft methodology that came out in December, I think the BNetzA for now ruled out the concept of a return on equity adder. But I believe since then, you've and the other TSO have provided some evidence why there should be an adder. So if you have any update, do you still believe that this could come in the final methodology? Any update on the reception that would be quite useful. And then the second question is a little bit more high level. But if I look out to like beyond the summer and towards the end of the year. Correct me if I'm wrong, but I think at that point in time, you should have the new Belgium returns, the final methodology in Germany and a good idea on the grid development plan in both countries. Could there be a point in time where you will upgrade the market -- update the market on your investment plan and maybe roll forward to 2030 with the new CMD? It would be useful to know. Marco Nix: Maybe starting from the last question and then developing to the other ones. Our expectation will be more towards year-end or beginning of next year to have that clarity as there are some specific aspect that you name a few of them in the regulation, but on the CapEx plan as well. To name a few, in Germany, that will be the total amount and the sequence of the offshore grid connections, which will play a big role in our CapEx program, or the question on overhead lines versus cabling in the big DC corridors. And that will, of course, change significantly the means being needed to realize that CapEx program. And this debate, to be fair, is still open. So there, we do not see really a landing zone for the time being. A little bit the same in Belgium with the Princess Elisabeth Island and the DC components or the interconnector there. Even though government will potentially take a position then in the second quarter, you do see kind of delay in that decision-making as this was originally being foreseen in March. So therefore, likely that it's more towards the end of the year where we have that kind of clarity. So on the point you mentioned in regards to the framework, in the conference, BNetzA hosted, they stated a little bit that they are not convinced yet on an adder to the return on equity. That's still a subject of a discussion, at least they opened the door for, and we provided some evidence that this is being needed. But it's fair to say there's an ongoing discussion on that one. What is, first of all, a positive sign that the door has not been closed. But so far, it's not being drafted in any adjustment of the determination of the return rates for the future. Stephanie Luyten: Thank you, Julius. Are there any other questions? I do not see -- Temi. Good morning, Temi, please go ahead. We have you here with us. Temitope Sulaiman: Congrats also on the results presentation this morning. I've got a couple of questions, but I'll keep it to 2. One is just clarity on your 2026 net debt expectations. If you can provide an update on that, that would be very helpful. Clarity on the Belgian regulatory time lines in terms of the consultations, but also the final determinations. And then finally, it seems that you've had strong operational delivery in Belgium and Germany, '24, '25, '26, you've raised the guidance above consensus expectations. And I'm just wondering whether you might consider revisiting your '24 to '28 guidance in terms of returns and when maybe you might consider that? Yannick Dekoninck: Maybe net debt, I will take. So on net debt for '26, we expect to land with the CapEx that we have announced at a net debt of around EUR 19.5 billion. So that's what we are targeting for in '26. Marco Nix: On Belgium regulation, there's a relatively straightforward path being published. So there will be a public consultation on 14th of April, if I'm not -- 17th or mid of April. Bernard Gustin: [indiscernible] Marco Nix: Mid of April. So happy to invite you to comment on that one once it is being out there and a final determination in the course of quarter 2. So end of half year, there is likely a robust visibility how the scheme will look like. Stephanie Luyten: And in terms of guidance? Marco Nix: Guidance, I think we still stick to the guidance which we have given as the growth is still intact with the double-digit percentage growth on the EPS and on the net results to the shareholders and around, as you have seen in the past, the 20% growth on the RAB. So that's quite consistent to each other, even though the guidance for '26 seems to be a little bit higher than the expectation, if you make it linear, but that comes from some of the aspects, which are not that fully linearized as we try to optimize the results, of course, as we can. And in connection with commissioning, for instance, we might have one or the other year an outliner and '26 seems to be one of them as a couple of significant investments come to commissioning, which gives us a favor in particular, in Germany. Stephanie Luyten: The next question will come from Piotr from Citibank. Piotr Dzieciolowski: I have a couple of questions. So the first one I wanted to ask you about this financial result in 50Hertz. So in your disclosures, you also point out apart from increased capitalized interest, you point out to accrued interest from the developer of an offshore platform of EUR 28 million, plus EUR 10 million from discounting effects on long-term provisions. So just wanted to understand, can you please explain on this first item what it really means? And is there any change on these numbers between '25 and '26? So I'm trying to get a bridge between '25 and '26 financial item. Is it just capitalized interest going up and these things disappear? Or how shall we think about these items? And second question, I wanted to ask you about your actual performance. So in your Slide 20, sorry, Slide 19, you said that the net income of ETB increased by EUR 1 million because of incentives. I was under impression that the incentives should grow in line with RAB with the size of the business, but it doesn't seem so. So can you please tell us how do you assume the incentives increment between the '25, '26? And likewise, you don't disclose incentives for the 50Hertz. I think there are some outperformance. So can you also say like operationally, do you improve -- or do you keep like a size of outperformance in line with the business growing with RAB growing or that basically the incentives and outperformance becomes bigger -- smaller relative to the size of RAB and so on. So these were 2 questions. Marco Nix: Okay. Maybe taking the first one on the wind farm contract, which we closed. So there's a nearshore wind farm at the German coast, which is being connected by 50Hertz in an AC technology. And for efficiency reasons, we agreed on to share the platform with the wind farm developer so that not both needs to have a platform being erected, what saves costs for both sides. And it's more or less a 50-50 split there. As the wind farm developer pushed back for some of the costs to some degree, and we had a relatively long-lasting negotiations on that one. We finally agreed on that the funding costs, the financing costs of this chunk, which is related to the final agreement, and which will be borne by the wind farm operator are being out of the regulatory sphere. So that's something the 50Hertz and Elia Group can keep finally. And the number you referred to is the accumulated interest income over the periods once we started that construction. So the effect itself will remain, but the order of magnitude will potentially go down as this is a kind of loan agreement, which is related on one hand to the size and the second to the scheme where there's some flexibility on the wind farm operator side once they are paying us, then, of course, the interest connected to the outstanding exposure will be lower in one of the years. And as this wind farm will likely be -- the connection of the wind farm will likely be finished in '26 and the wind farm operator will potentially commission its assets then beginning of '27, despite the fact that there's a 15 years period on that contract, there might be some changes over time in the payment scheme as the flexibility is on the wind farm operator. So that's a little bit long explanation. It's relatively complex matter, but likely that there will be an interest income over a certain period of time with different kind of order of magnitude. Bernard Gustin: Okay. And maybe, Piotr, on your question on the incentives in Belgium, it's indeed correct that they increased by EUR 1 million compared to last year. And it's indeed correct that they are, to a certain extent, correlated with the RAB, but as well, they are -- they have in the regulation a maximum amount that you can have on certain incentives. So that's one element. And some of the incentives are a bit, I would say, binary between 0 to 1. If you remember last year, we had a cable issue linked to the availability of the MOG in '24. So we had no incentive at that year. This year, we have a full incentive, a full maximum amount. So that gives a little bit why you don't see exactly that linear evolution on the incentives. Nevertheless, I think we had a solid operational results where incentives remain quite important to the overall result in Belgium. Stephanie Luyten: Let's now turn to Deutsche Bank, Olly. Olly Jeffery: Two questions from my side, please, like everyone else. So the first one just is on CapEx. Now I appreciate that you need to wait for the grid development plans to give a precise view on future CapEx for '29 onwards, and that's more likely to impact presumably CapEx in the 2030s. Are you able to give kind of a high-level view in Germany of kind of the broad level of increase you think might be likely given that most of the changes to the grid development plan are probably going to impact in the 2030s. Any insight you can give there would be helpful. And then secondly, just on funding the plan from '29 and onwards. I know obviously, you don't want to be precise about this. But could you say, is there a credible scenario where you think you might be able to fund CapEx in '29 and 2030 without the need for equity using the rest of your equity toolkit with the hybrids and opening up the capital structure of some of the TSOs potentially? Any views on that would be great. Bernard Gustin: Taking the first one, it's still, as we said, a little bit too premature to lay out a number. So if you take the total volume, which is currently as a price tag being seen on a total grid development plan in Germany, you can compare the EUR 320 billion, which was the number in the last grid development plan, which the EUR 340 billion, which is currently the number connected to the most likely scenario. It's not chosen yet, but that gives a little bit the view that likely the outcome will be rather the same with an eye on EUR 345 billion in terms of euros. However, there will be a kind of different allocation on that one. And that what makes it that's hard for the time being really to say the CapEx is further growing or going down at a certain point of time. As, of course, only part of the EUR 340 billion are connected then to 50Hertz to the Elia Group. So as a rule of thumb, it was 20% all the time. But the spread over 20 years is a difference than the spread over 10 years. So that's -- I mean, that's the simple math. And as the former government was quite in a rush to complete or to set very ambitious targets, which partially have been out of reality, the current government is more pragmatic in that view, and that's a little bit what still the debate is on. Stephanie Luyten: And on the funding? Marco Nix: On the funding, I mean, we have full flexibility now. So that's currently what we are going to execute. That's all our options are valid. We are working on further optionalities as well. But please, as we don't have the CapEx numbers currently in place, we do not want to give guess how we are continuing to fund the growth in the future at this moment. Stephanie Luyten: Nor do we have the regulatory framework set in place? Bernard Gustin: Yes, it's a bit early... Stephanie Luyten: So I think it would be a bit too early. But thank you for the questions. I see the next questions will come from ODDO, Thijs. Thijs Berkelder: A couple of questions. Do you still require probably an additional EUR 2 billion of equity? And can you confirm that you still aim to raise this via in principle, EUR 4 billion of hybrids? Second question is on your Energy Island and the DC connectivity there as well as for the U.K. connector. The HVDC cost price was too high. Any reason in your view why HVDC pricing now should be lower? And third is on the North Sea offshore wind projects targeting 15 gigawatts installations by 2031. What can we expect as impact for your CapEx from that plant compared to what we currently are installing on the North Sea? Marco Nix: Yes. Maybe starting with the first one. Our toolkits provide us flexibility, and we stated that it can be both hybrid -- the hybrid capacity potentially being sufficient at this point of time, while another option is to open the capital on one of the subsidiaries and/or finding structural solutions to help us funding the growth. And that's still something we are closely monitoring. And there's a couple of key elements to be considered and criteria's in the decision-making, once is timing. Another one is, of course, cost of capital. Third one is execution to name a few of them. And as we have a strong liquidity position and of course, the credit rating is comfortable as well. So we are carefully looking for the best solutions there. And once this is being decided, it can be both extremes. So both elements of the toolkit would gives us the credit in total, so it has the potential. However, it could be a combination as well depending on the point of time where we make the decision. Bernard Gustin: On the Princess Elisabeth Island, I would say that, first, it was the right decision to postpone the project because, as you know, at the time, we were really in a very heated market on the HVDC component. However, the teams have been working on updated design. We have also some very good discussion between U.K. and Belgium on how to best share the cost and the benefits of the project. And I hope that in the coming weeks, months, we can come with a solution that fits with the original objectives, while being more reasonable from a cost point of view. We see that the HVDC technology remains an expensive technology, but we also see that the heat that we had a few months ago is a little bit lower. On your North Sea approach, which actually the Princess Elisabeth Island is a subpart of. As I explained in my conclusion, I think we are really, as Elia Group extremely well positioned being the only transmission group having a portfolio of assets already in our base today. But of different nature because we have the Belgian port on the North Sea. We have the projects on the Baltic Sea with Windanker's. But we have also with our subsidiary, WindGrid, a project called HansaLink. And the advantage, of course, of this setup is that it's a setup where you can also use financial players who can help the financing of the project. So I'm not going to preempt on the decision of Europe. I think, by the way, we see with what's happening now in the Middle East that it's high time that we reduce our dependency on gas and that offshore wind in the North and the Baltic Sea is a critical element in there. We will see how Europe will evolve in -- and the grid package already goes that direction, but how they translate that into a series of projects. But I think what's interesting is that Elia by its strategic geographic positioning, by its current portfolio of projects, but also by its setup where we can leverage financing capital at different levels is very well placed to play a role in there. And already in our current portfolio of projects and in our current asset base, we have projects on both seas in the North and in the Baltic Sea. Stephanie Luyten: Are there -- yes. I see the next question coming. Unknown Analyst: And also from my side, compliments for the good results and outlook, of course. Yes, on the -- I'm still going to try on the North Sea, and thank you for the answers so far. But looking at the ambitions and with the involvement of TSOs as well in these kind of framework ambitions that were published, a step-up to 15 gigawatts already in 2031 and for a number of years, even a decade. And now looking at your CapEx approaching EUR 7 billion. So let's say, connecting all these gigawatts already upfront or preparing for that upfront and for a number of years to come. Is it fair to say that, yes, maybe previous assumptions on EUR 7 billion being the higher end of forward CapEx. Is that something that we need to reassess to a larger number, higher number? That's my first question. And the second one is on CapEx, and it's a great achievement that, of course, you met the expectation after the -- I think the questions that were raised at the midyear presentation. What should we expect for 2026? Will it be a more balanced picture of the EUR 6.8 billion or also 1/3, 2/3, maybe some guidance there. Bernard Gustin: I will take the first one and let the team go for the second one. I think the guidance remains the same. So we are on EUR 7 billion CapEx because we are talking on a series of projects that we know. Then we will have to see how the developments happen, and we will be looking at it as you do. And according to the developments, of course, Elia Group wants to position itself on these developments. But I think then there will be also another way at looking at it. And I think from the European standpoint, from the political standpoint, we will have also to think of the tools to make sure that we can reach those developments without having always a direct impact on the balance sheet of the TSOs. And that's where I say with some of our tools like WindGrid and so, we are very well placed to test those type of model. We will also have to see what Europe does in terms of SAF funding and other conditions. So just to say, within the current framework, we are in the current guidance, and there is no reason to change. Of course, we remain attentive and opportunist of what it would develop. But I think then there would be other ways of looking at the thing and not directly in the CapEx of a TSO, which will be one of the topic to manage if we want to reach this great ambition, but also needed ambition when you see the situation of Europe. Marco Nix: And maybe to complement, we published recently a paper then which could be a way forward in the future to fund in particular the far offshore wind farm developments and the connection to that one mainly via hybrid interconnectors, where we are facing several constraints to go ahead there, and that could be an element with the so-called WSPV concept, which helps both on one hand to unlock a little bit resistance in one or the other countries. And secondly, combine the forces with giving some securities by public authorities like European investment banks, for instance, and combining with private capital to fund that in the future, as Bernard rightly said, it's questionable whether all TSO can absorb simply these big request of capital in the future. In regards to our CapEx program, it's likely that you will do see a heavy loaded second half year again as this is, on one hand, a little bit in nature as during the summer, most of the construction is being made. And then, of course, we usually account for the progress once a certain milestone has been reached, and that's likely more in autumn than in spring. And the second one is that at least in Germany, gives us a favor to have that backloaded profile. As usually, you get remunerated for the average of the year while -- for the capital cost as well. While, of course, the later you will have it, the bigger the gain could be. And that's something which we have seen in the results as well as, in particular, the difference between the real funding costs and the funding costs, which are being embedded in the grid fees gives us a favor to some degree and contributes to results, too. Stephanie Luyten: And let's go to Wim from KBC. Wim Hoste: Yes. I hope you can hear me. Stephanie Luyten: Very well. Marco Nix: Yes. Wim Hoste: All right. Also congrats from me. Lots of questions have been asked. I just want to throw in some add-ons. If I want to come back to the financing, the equity raise potential, and I understand regulatory framework has to be put in place. Can you give an idea, suppose that if you want to do something like an ABB like in '24, EUR 0.5 billion, if that's possible, what you need to do, whether you would need to have some kind of Board's agreement first, if that's a possibility simply because the share price has rallied quite a lot. It's more than doubled since the last capital raise. So how you feel about that? Then smaller questions on the dividend. I think in the past, you said that, that would go in line with inflation. I think it stays more flat now. Is that also the outlook for the future? I completely would agree that would make sense as well. And then lastly, more like a general question and something that we've seen in the U.S. where the government has asked big tech to -- yes, basically pay via some kind of taxes to upgrade the grid because obviously, we know that, that demands a lot of investments to accommodate all the hyperscale investments. So just your view, is that something that could be possible in Europe? Obviously, things move a little bit slower. But if there's anything that you can say just in order to kind of divert the pressure that we have seen and the pushback from industry and consumers on -- yes, obviously, offloading a lot of the investments via the energy prices. So those are my 3 questions. Stephanie Luyten: Maybe I can tackle the dividends, if you like. We indeed gave a dividend or proposing a dividend of EUR 2.05. But what you need to take is as a basis is actually the EUR 2 because when we did the capital increase, we actually restated the dividend. And if we were to increase the dividend on a restated basis, it would be close to EUR 2, but we did not want to pay less than last year dividend. So we have increased it slightly. That has been our rationale for the EUR 2.05. Marco Nix: And we do see that as a strong signal that the investment in the Elia Group is a value-accretive one and the dividend payment is one of the elements there. So that gives some certainty that our growth path is intact. Stephanie Luyten: Regarding the ABB, what do we need to have in place for that? First of all, yes, we will have to have an authorized capital in order to do such a transaction. But we -- as Marco already highlighted today, we are not looking to use any nondilutive -- we are looking to use nondilutive options. And I think there, we have enough flexibility. The way forward would be towards the future to bring back unauthorized capital, put that in place, and that are the first steps that we need to take. Bernard Gustin: And on the U.S., well, first of all, it reminds us of the potential in the U.S. We have a little bit of a setback at the moment, but we are convinced that over the long run, we know the situation of the grid in the U.S. It's certainly not at level with the AI ambition that the U.S. has and the battle of AI will pass via a strong grid. So I think it's good that we are positioned in there. It will take a little bit more longer than expected, but I'm convinced that the potential is the same because the grid becomes a critical asset in every region of the world that want to electrify. The debate, of course, is who needs to pay, and we see the investments that the hyperscalers are doing and all things relative, the investment in the grids are indeed a fraction of the investments they are generally doing. So the idea to make them contribute is a political decision where it will be difficult for me to take a position, but it's clear that we've seen in our countries that the development of AI and data centers is representing a certain burden on the net, burden on the consumption. And I think at some point, there are 2 positions that need to be taken. The first one is what do we want in terms of industrial development and where do we give the priorities in terms of segments, AI, data centers versus general industry. And then how do we make sure that the general consumer is not hampered by a consumption that is not responsible for. So I think I don't know what is the exact recipe, but the direction is certainly a direction to investigate. Marco Nix: And maybe to complement on that one, on one hand, there are multiple congestions on all these connection requests. So funding is one. So in Germany, for instance, the consumers are not paying for the direct connection. It's indeed then the applicant. On the other side, we do see that the grid is heavily loaded and simply that makes a congestion in connecting a new device to the grid. So as this is something we need to be careful of as well to protect our people in doing the works there. And last but not least, it's not all the time that visible how mature the project is. And our lead time, it's fair to say, are still longer than the ones from this developer. And as they want to go in a staged process usually with extending the devices which are consuming them at the stage, but we are designing the -- yes, the connection only once. So that's all the time a little bit mismatch in the planning horizon. That's something which we need to work on commonly to make sure that we do see how mature the project is that we can give some access being granted and we can rely on that one as well as, of course, we want to prevent that we invest in an area where nothing is going to happen. As we honestly have seen in Germany with the ship industry as Intel canceled the big factory in an area of Magdeburg, and then the TSO was forced to bring down the commitments in that area. However, the land has been already being acquired. So that's a mismatch, which we need to be careful on as, of course, we need to protect then the final consumer, as Bernard rightly says, that we are not socializing cost of the industry, yes. That's a little bit what we are in. Bernard Gustin: But it's clear that AI needs the grid, but the grid also needs AI. And we will also -- and we are really developing an AI strategy and developing -- we are already using a lot of AI, but we want to accelerate there because AI is also a way to solve some of the bottleneck issues that we have today. So it's really a very close relationship, both ends. Stephanie Luyten: Let's now move to Juan from Kepler. Juan Rodriguez: I have 2, which are more of a follow-up, if I may. The first one is on guidance. Can you please confirm that you have no additional hybrids included on your 2026 guidance? And on guidance as well, what is the targeted return on equity that you have on Belgium and Germany within the guidance that you've given, especially on Germany as is substantially above expectations? And the second one is on the U.S. impairments. What are your expectations now in terms of the timing and size of the expected earnings contribution that you expect in the region going forward? If you can give us more clarity on that, that will be helpful. Marco Nix: You take the hybrid? Yannick Dekoninck: I think in the guidance that we have given is a guidance that takes into consideration multiple options that we have in the funding toolkit. So we do not exclude -- to be clear, we do not exclude a hybrid issuance, but the guidance that we have published this morning takes into consideration multiple options. Now in terms of return on equity, as you know, we are not guiding specifically on the return on equity for a specific year. We have guided on the return on equity over the period, over the regulatory period, both in Germany and Belgium. So that's still something that we are targeting for, knowing that you could have certain variability year-over-year due to important one-off effects like we had this year. That's also why we have been very clear on what that one-off effect was in Germany. Marco Nix: So to remind you, the average guidance which we have given was between 7% and 8% in Belgium, while in Germany, it was 8% to 10%. Stephanie Luyten: Yes. And on the impairment? Bernard Gustin: Did we miss one? Stephanie Luyten: Yes. I think on the U.S. impairment on the timing, when we could expect a positive contribution, but that one is a little early to say today because there's still a lot of uncertainty on when those projects and how and when they will materialize, but that's more towards the end of the decade, I would say. Bernard Gustin: Yes. And it's clear that, as you know, we have 3 projects, the project on Clean Path, New York, which is a line in New York, didn't pass some regulatory approval, what we call a priority transmission project, but it doesn't take away that New York needs an extra transmission line. And so we will use the assets to participate to further project development. So there, we believe we are rather facing a delay. You know the uncertainty that exists today in the U.S. about the offshore and things can turn very quickly one way or the other. So our strategy there is to secure the assets that we have in place. We have already the leasing rights on this project, that's Leading Light Wind. And on SOO Green there for the moment, that's a project that, as Stephanie explained in the presentation, continues on its path of the different regulatory hurdles. And so there, for the moment, there is no reason to review the project. So as you say, we are rather delaying in time. But as I said to your colleague just earlier, I'm convinced that the fundamentals stay and at some point, somebody will see that these projects are heavily needed. Marco Nix: So in the '26 guidance, there's no positive contribution being expected to make that clear. Stephanie Luyten: Thank you, Juan. Let's now turn to Alberto from Exane. Alberto de Antonio Gardeta: Congratulations for the results. A couple of follow-ups from my side. The first one is regarding the German regulation. Maybe if you could -- based on the like already published consultation papers, if you could quantify what are your expectations in terms of ROE and WACC based on the current consultation papers and what else is needed? So maybe if you could give us some guidance of what will be your expected level of returns in order to get the competitive returns that you need for being competitive in the equity markets? And the second one will be regarding the potential update to the market, the potential Capital Market Day. You have said that maybe by the end of the year or beginning of 2027. When do you know that we will have more visibility if this is happening or if we can consider as confirmed or it's still pending? Stephanie Luyten: I think maybe I'll start on the Capital Markets Day. That's still very much pending. As Marco clearly said, there are still a lot of moving factors. We don't yet have clarity in Germany. And also in Germany, the final elements will only be defined somewhere in 2027. So that's why we cannot fix to a date somewhere in the future. So next to that, we also have grid development planning that is ongoing in Belgium, in Germany. Those time lines aren't super fixed neither. So this will be something, I think, towards the end of the year, we will have more clarity on. So I do not expect us to really do a CMD still this year. Marco Nix: So to come to the German regulation, if you really look into the paper, even though it's heavy reading, I would say, it's for the time being, for our perception, more a description of a structural approach while the ingredients are not being flagged yet. And even though a WACC model could be something comparable, but the big debate on the cost of debt coverage is not finished yet. So that's still ongoing, but a rating adjustment is being made, which kind of reference rate is being used. These elements are still pending. That's why it's a little bit too early really to say what the outcome could look like, and we previously discussed equity or return adder for the TSOs, what is still in the discussion, which is not in yet. So I would say we are not there yet with that what we assume BSR could deploy. However, our clear target is not being worse than today. And if you take the return on equity, which we disclosed and take off all the accounting items, there's still a return rate above 8.4%, which is, if you want to name it, a kind of cash return. And as BSR already said, the total package matters, that's something we are requesting, and that's something which we are targeting to get out of it. Which elements shall we put in place. There, we have some openness. So if there's an incentive being put in place, which gives us an order of magnitude lending there, we are fine with it as well. We are happy to get challenged in terms of our operations. But so far, it's not really clear. So therefore, we are hesitating to give a guidance what it could give for the time being. Stephanie Luyten: Thank you, Alberto. Let's now -- I see Olly, you have some further follow-up questions? Can you hear us, Olly? Olly Jeffery: Yes. Just one follow-up question, please. Going back to the discussion on the capitalized interest within the guidance for '26 at 50Hertz. Is that -- which is noncash. Is there anything else within that '26 guide 50Hertz that is noncash in addition to the capitalized interest that we should know about? Or is that the only item? Marco Nix: I wouldn't say it material. There is -- now we come a little bit in great territory as we assume commissioning, which gives us a full depreciation in the revenues, there's a cash connected to that one, while the depreciation is lower, the real depreciation, which we are recording in that year. So for us, it's a cash item, which contributes to the results as well. While the capitalized borrowing cost is a noncash item as this is reverted later stage. So -- and therefore, I would keep it on that one, knowing that, of course, the example which I raised could give us a favor in the results of next year as well. And as I said, if you only linearize that, the result would look a little bit outstanding compared to that linearization in line with the CapEx, which you otherwise would compute. Yannick Dekoninck: And maybe if I can complement it, Marco, for those that have been following us for a couple of years, you see that we also have sometimes discounting of interconnecting provisions or interconnected income. As you know, you -- sometimes have spike in the forward rates that has an impact on those long-term provisions. That's not something that we estimate or take into account in the guidance as such, but that's always something that can happen. We were confronted with that a little bit at the end of Q4 of this year, where the interest rates started to move up. But that's not something that we can -- that we have a control on. That's not something that we can steer. So there, we have a neutral approach. But in the actuals, of course, that can have an impact. Olly Jeffery: And what was the impact of that in the '25 results from that movement at the end of Q4? Yannick Dekoninck: I think at the end of Q4, we had a net impact of EUR 22 million that was coming from this discounting of provisions. Stephanie Luyten: Thank you, Olly. If there are no further questions, let's wrap up today's presentation. First of all, a big thank you to all the teams who have contributed. Thank you, Bernard, Marco, Yannick. Marco Nix: Thank you, Stephanie. Stephanie Luyten: And thank you for joining us today. Have a nice day, and see you soon.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Tel-Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 5, 2026. The Recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO; and Mr. Yehuda Ben-Ezra, CFO. Before I turn the call over to Mr. Ittai Ben-Zeev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements and interim report for the fourth quarter and full year of 2025, in which full and precise information is presented and may contain inter-alia forward-looking statements in accordance with Section 32A of the securities law, 1968. In addition to IFRS reporting, we might mention certain financial measures that do not confirm to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Reconciliations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the Investor Relations portion of our website at ir.tase.co.il/in. Mr. Ben-Zeev, would you like to begin? Ittai Ben-Zeev: Good evening, Israel Time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. The financial statements for 2025 show that TASE ended the year on a high note. Q4 2025 capped another record year for TASE with revenues reaching an all-time high of ILS 149.3 million for Q4 and ILS 563.5 million for the full year 2025. These results represent a record increase of 29% year-over-year and quarter-over-quarter. We also saw a record increase of 58% in adjusted EBITDA, and an increase of 9.5% in the adjusted EBITDA margin as well as an all-time high in TASE net profit with a 79% increase compared to 2024. All this was achieved while continuing to maintain organic growth across all TASE's core activities despite Israel having fought a multi-front work for most of 2025. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. For most of 2025, trading on TASE took place against the backdrop of the ongoing world and elevated volatility. Against this background, the Israeli capital market has exhibited resilience and economic strength during 2024 and 2025. The leading equity indices on TASE broke their historic record on numerous occasions, outperforming the leading global indices. The TA-90 Index and the TA-35 topped the global return table with gains of 46.6% and 51.6%, respectively, compared to 17.9% on the S&P 500 Index and 21% on the NASDAQ-100 Index. In addition, the positive and exceptional trend was also evident in the sectoral indices, particularly in the financial sector. At the end of 2025, TASE equity market cap reached ILS 2 trillion, a 46% increase from year-end 2024 due to the impact of the rise in TASE equity indices. Trading volumes also set new records with the cash equities ADV rising to ILS 3.4 billion in 2025, 57% increase over 2024. The IPO market stagged an impressive resurgence in 2025 with 21 IPOs and an additional 5 companies listing their shares without raising capital, including 1 dual-listed company. Overall, the total capital raised on the equity market sold to ILS 21 billion compared to ILS 8 billion in 2024. In 2025, the TASE bond market displayed increased trends as a major source for debt funding, both for corporate issuers and for the Israeli government. Corporate bond issuances totaled ILS 187 billion in 2025, compared to ILS 124 billion in the previous year. The Ministry of Finance raised ILS 137 billion in Israel during 2025. The strong demand and successful issuances in Israel and abroad, is a powerful sign of confidence in the Israeli economy. Trading volumes in the corporate bond market rose by 9% in 2025, compared to the volume in 2024, while the government bonds ADV, amounting to ILS 3.3 billion similar to 2024. We have continued implementing our strategic plan to strengthen business activity. As part of a significant milestone in strengthening TASE international profile and attracting foreign investors, I'm pleased to update that we have completed transition to a Monday through Friday trading week at the beginning of 2026. In the last 2 months, this move has already led to a substantial influx of foreign investors during Friday trading, exceeding the average recorded on Sundays in 2025. In addition, on February 23, the cyber giant Palo Alto Networks began trading on TASE, officially making it a dual-listed company on the U.S. and Israeli market, which constitutes a profound vote of confidence in Israeli capital market. And we believe this will lead to further breakthrough for the local capital market while strengthening TASE position on the international financial stage. Foreign investors too expressed confidence in the local capital market and purchased equities totaling ILS 4.4 billion in 2025, mainly in the financial and defense sector. This is in marked contrast to the previous year when foreign investors' activity resulted in net sales. It is worth noting that in the first 9 months of 2025, the value of foreign investors holdings in non-dual listed equities grew by 70%, and in September 2025, the value of their holdings reached an historic high of ILS 64 billion, reflecting the deepening presence in the Israeli market. The Israeli retail segment continued to show significant increased interest in the domestic market and the growth in the opening of new trading accounts continued throughout 2025. The retail investors opened approximately 200,000 new trading accounts, 25% more than in 2024. In the trading segment, we continue to invest and develop the indices market in 2025. In total, we launched 10 new equity and bond indices during 2025, of which 7 indices are exclusive and we intend to continue developing new indices to increase and diversify the products as part of our strategic plan to refine and develop more investment products for the investors. At the end of December 2025, the total AUM of all TASE indices amounted to ILS 148 billion compared to ILS 99 billion at the end of 2024. The total AUM of TASE equity indices amounted to ILS 91 billion, compared to ILS 48 billion at the end of 2024. In the derivatives market, we have seen average daily trading volume grow by 14% compared to 2024. In light of the success of the equities market making reform, that I have mentioned in my previous calls, 7 large companies included in the TA-35 Index joined the tailor-made market-making program, resulting in the trading volumes of those companies increasing significantly. I would now like to provide you with an update to what I reported to you in our previous earnings call regarding examination of a partial or full sale of our index activity. We are currently negotiating to enter into a deal to sell the activity and to cooperate strategically with a major international entity. At this stage, there is no certainty as to when, if at all, the negotiation will bear fruit and result in a binding agreement. I would also like to update you regarding the dividend payment to the current shareholders. You will no doubt recall that we previously adopted a dividend distribution policy for the years 2024 to 2026, pursuant to which TASE is to distribute a cash dividend to its shareholders at a rate of 50% of the annual net profit for 2025. The dividend according to the policy amounts to ILS 90.5 million. In addition to this, in light of the substantial growth in TASE profitability in 2025 and the consequent significant increase in the company's liquid reserves, TASE will distribute a special dividend of ILS 54.3 million. In all, TASE will distribute a total dividend of ILS 144.8 million, representing ILS 1.56 per ordinary share that will be paid on March 20, 2026. Furthermore, during the coming year, TASE management will examine drawing up a buyback plan with this being subject to market conditions and other relevant considerations. In conclusion, the 2025 financial statements show that despite all the challenges of the last few years, we are witnessing the growth and resilience of TASE and of the Israeli economy. Our financial statements continue to reflect our investment in developing new and diverse products for the benefit of the public and the investments made for the benefit of technological and innovative developments so that we continue to achieve the goals we have set for ourselves in accordance with our strategic plan for the coming years. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the year results. Yehuda Ben-Ezra: Thank you, Ittai. As Ittai mentioned earlier, TASE outstanding fourth quarter financial results capped off a highly successful 2025 with the company is delivering record revenues across all lines of businesses. Throughout the year, including the fourth quarter, TASE demonstrated remarkable resilience, [ given ] Israel faced an extended multi-front conflict. This will thus highlight the strength of Israel economy and the stability of its capital markets, showcasing best consistent performance under challenging conditions. I will continue with Slide #7, which shows some of the key highlights from our results for the year 2025. Our revenues in 2025 reached a new high of ILS 563.5 million, increasing by a record 29% compared to the previous year. Adjusted EBITDA in 2025 improved significantly by 58% to record of ILS 293.8 million, while the adjusted EBITDA margin also improved from 42.6% to 52.1%. Our net profit displayed substantial growth of 79% and increase to a new record of ILS 181 million. Our basic EPS in 2025 reached a new high of ILS 1.97, increasing by a record 81% compared to the previous year. I will continue with Slide 17, which shows some of the key highlights from our results for the fourth quarter. Revenues amounted to ILS 149.3 million compared to ILS 115.4 million in the same quarter last year, a 29% increase. This is the highestly quarter of the revenue since the TASE IPO and growth was evidenced across all operations. Our revenues from non-transactional services amounted to 63% of total revenues, the same the corresponding quarter last year. Expenses totaled ILS 84.5 million compared to ILS 84.2 million in the same quarter last year, a 0.4% increase. Adjusted EBITDA totaled ILS 80.8 million, compared to ILS 46.8 million in the same quarter last year, a 73% increase. The increase was due to higher revenues. Net profit amounted to ILS 51.6 million compared to ILS 25.4 million in the same quarter last year, a 104% increase. The increase was due mainly to higher average for services. This increase was partially offset by the increase in tax expenses. I will continue with Slide 15, where we can take a deeper look into our revenues in the fourth quarter. Revenues from trading and clearing commission increased by 27% compared to the same quarter last year and totaled ILS 54.7 million. The increase is due mainly to higher trading volumes, particularly in shares and in the volume of trade share reduction of mutual fund units. Revenues from listing fees in annual levies increased by 14% compared to the same quarter last year and totaled ILS 25.4 million. The increase is due mainly to revenue for annual levies as a result of the increase in the numbers of companies and funds that pay an annual levy. In addition, revenues from listing fees and examination fees were also higher due to the increase in the volume of funds raised. Revenue from clearing [ and ] services increased by 58% compared to the same quarter last year and totaled ILS 41.2 million. The increase is mainly due to the completion of regulation measures relating to the OTC transaction. Other factors related to the increase were the higher custodian fees as a result of the increase in the value assets under custody and the updating of the custodian fees price [ lift ]. Revenues from data distribution and connectivity services increased by 19% compared to the same quarter last year and totaled ILS 27.4 million. The increase is due to an increase in revenues from index licensing fees, mainly as a result of the increase in the value and the use of TASE indices and from higher data distribution revenues for businesses and private customers in Israel and abroad. I will continue with Slide 18, which shows some of our fourth quarter expenses. Compensate expenses decreased by 4% compared to the same quarter last year and totaled ILS 43.3 million. The decrease was due to a decrease in variable compensation. Computer and communication expenses increased by 11% and totaled ILS 11.7 million. The increase results mainly from an increase in the maintenance cost of new computer system and licenses and from an increase in man power and projects. Marketing expenses decreased by 40% compared to the same quarter last year and totaled ILS 1.7 million. The decrease is mainly from a decrease in campaigns. Depreciation and amortization expenses increased by 6% compared to the same quarter last year and totaled ILS 15.2 million. The increase in depreciation expenses was due mainly to the upgrading of infrastructure and the launch of new products. Net financing income totaled ILS 2.5 million compared to net financing income of ILS 2.6 million in the same quarter last year, a 1% decrease. Let's now go to Slide 19, where we can review our financial position. At the end of year 2025 [Audio Gap] our adjusted equity includes deferred income from listing fees and excluding open derivatives position balances, represents 77% of the adjusted balance sheet. We held ILS 494 million in cash and investment financial assets. The balance of the bank loan totaled ILS 21 million. The surplus equity, other regulatory requirements at year-end 2025 totaled ILS 550 million compared to ILS 627 million at year-end 2024. The decrease was mainly due to the decrease in the TASE equity resulting from the buyback of TASE shares and a distribution of dividend in 2025. This decrease was partially offset by the net profit in 2025. The surplus liquidity, other regulatory requirements at year-end 2025 totaled ILS 310 million compared to ILS 172 million at year-end 2024. The increase in surplus liquidity is mainly due to the increase in the EBITDA. I will continue with Slide 20, where we can review our fourth quarter cash flow highlights. Cash flow from financing activities resulted in negative cash flows of ILS 13.1 million compared to negative cash flow of ILS 4.9 million in the third quarter last year. The higher negative cash flow are due mainly to proceeds of ILS 10 million from the sale of our arrangement shares in the same quarter last year. Cash flows for investing activities resulted in negative cash flows of ILS 38.5 million compared to negative cash flow of ILS 20 million in the same quarter last year. The increase in negative cash flow is due to -- mainly to the acquisition of financial assets net. TASE free cash flow amounted to ILS 75.4 million compared to 35.9 million in the same quarter [Audio Gap] the increase in the EBITDA. Also, the Board of Directors today approved the payment of a dividend of ILS 144.8 million, representing ILS 1.56 per ordinary shares to be distributed on March 2026. In conclusion, TASE performance in the last quarter and throughout 2025 demonstrates its solid foundation as well as the fundamental resilience and growth potential of the Israeli economy. And with that, I will return the call over to Operator to conduct the Q&A. Operator: [Operator Instructions] The first question is for Hector Erazo from Jefferies. Hector Erazo Pinto: This is Hector Erazo on for Dan Fannon at Jefferies. On expenses, as you think about the budget for 2026, how does that compare to 2025? And what are the areas of spend that are different going into this year? Ittai Ben-Zeev: Hector. So I think looking at this year, in terms of our marketing budget, it will not exceed what we had in the last couple of years. In terms of the compensation of the employees, it should be similar according to the agreement that we have with the employees. And we continue to invest in our IT, and you can estimate the CapEx ILS 55 million to ILS 60 million a year. So shouldn't be any surprises on that front. Operator: [Operator Instructions] There are no further questions at this time. Thank you. This concludes the Tel Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good day, and welcome to the TriSalus Life Sciences Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Jeremy Feffer, Investor Relations. Please go ahead. Jeremy Feffer: Thank you, operator, and thank you all for participating in today's call. Joining me today from TriSalus Life Sciences are Mary Szela, President and Chief Executive Officer; David Patience, Chief Financial Officer; and Dr. Richard Marshak, Medical Director. Ms. Szela will provide an overview of the company's first quarter results and strategy for the balance of the year, and then David will review the financial results for the quarter in detail. Following their prepared remarks, Dr. Marshak will join the call to help address questions from covering analysts. Earlier this afternoon, TriSalus released its financial results for the quarter and year ended December 31, 2025. A copy of this press release is available on TriSalus' website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Any statements contained in this call other than the statements of historical fact are forward-looking statements. All forward-looking statements, including, without limitation, statements relating to our sales and operating trends, business and hiring prospects, financial and revenue expectations and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of macroeconomic conditions and global events that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors sections of our Forms 10-Q and 10-K on file with the SEC and available on EDGAR and in our other reports filed periodically with the SEC. TriSalus disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements with new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 5, 2026. And with that, I'll turn the call over to Mary. Mary Szela: Thank you, Jeremy, and good afternoon, everyone. Thank you for joining us for a review of our 2025 fourth quarter and year-end financial results. I'll begin with a high-level review of our results for the quarter and the year, recap some of the highlights from recent weeks. And then provide an overview of our longer-term strategy and expectations for 2026 and beyond. David will follow my remarks with a more in-depth review of our financial and operational results for the reporting periods. And we'll be happy to open up the call for your questions. Let's begin. I'm pleased to report that our results for both the fourth quarter and the full year were strong. Fourth quarter revenues were $13.2 million, and full year revenues were $45.2 million, representing a 60% and 53% increase, respectively, over the prior year periods. Importantly, we achieved our revenue growth guidance for the 2025 fiscal year. Our strong commercial performance for the year was driven by consistent execution of our commercial strategy, and our expansion of our TriNav product suite and proprietary PEDD platform across a broad range of indications beyond the liver. In recent weeks, we took significant steps to strengthen both our Board and our balance sheet. In February, we announced the appointment of Veteran Health care Investor, Michael Stansky to our Board of Directors. Michael has a strong track record as an investor and board member across the health care landscape with deep experience in capital markets, governance and value creation. We believe he will be a meaningful asset to TriSalus as we continue to execute on our growth objectives. Also in February, we announced the completion of a public offering through which we raised $46 million in gross proceeds from fundamental health care investors. The financing was more than 2x oversubscribed and was supported by experienced health care investors who share in our conviction in the long-term value of the PEDD platform. Importantly, these investors understand that building a category-defining company requires disciplined investment in commercial infrastructure, clinical evidence and product innovation. This capital enables us to lean into our strategic priorities from a position of strength. Our primary strategic priority is to expand our sales and commercial infrastructure which we initiated at the beginning of the year to more effectively drive adoption and long-term success across our portfolio. Second, we are investing aggressively in foundational clinical studies to further demonstrate and validate the value of pressure enabled drug delivery, PEDD. These studies are critical to reinforcing the clinical and economic differentiation of our PEDD platform and will fuel continued growth in 2027 and beyond. And third, we're continuing to enhance and evolve our PEDD technology. to strengthen physician adoption and utilization, not only in liver embolization, but also across our expanding set of new applications. The success of the upside financing and the quality of investors brought into the company through the process are highly validating of our strategy and the growth opportunities before us. Based on our performance in 2025 and our visibility entering 2026, we are reaffirming our revenue guidance of $60 million to $62 million. As is typical for emerging growth companies investing ahead of a steep adoption curve, expanding our commercial footprint requires upfront hiring, onboarding, training and current territory realignment, which will influence revenue cadence in the first half of the year to be approximately 40% and revenue in the back half of the year to be approximately 60%. We believe the significant investment in the sales force virtually doubling our commercial footprint positions us for meaningful stronger productivity exiting 2026 and beyond. The revenue cadence will build meaningfully throughout the year as the realignment is completed. TriNav Advance has launched and the increasing productivity of the significantly expanded sales organization progress. Importantly, this cadence should not be interpreted as a change in underlying demand trends. We continue to see strong physician engagement, utilization and interest in the PEDD platform. The first half weighting is instead a function of timing, specifically the onboarding, training and territory development associated with our commercial expansion as well as the expected timing of new product contribution. We made a conscious decision to lean into these investments early in the year. deploying growth capital to expand our sales infrastructure and accelerate clinical and commercial initiatives affects near-term revenue phasing modestly, but it meaningfully enhances our growth trajectory exiting 2026 and positions us for sustained acceleration beyond our long-range plan. Now turning now to our commercial strategy. We've assembled a comprehensive PEDD portfolio that enables interventional radiologists to address virtually every vascular anatomy that they encounter. With a complete solution set, Physicians now can confidently standardize on PEDD across a broader range of cases, increasing utilization with existing accounts and accelerating adoption in new ones. At the beginning of 2025, we had 2 core commercial products. As we move into 2026, our portfolio will expand to 7 differentiated offerings across the embolization spectrum. This portfolio depth enhances the productivity of our sales organization by allowing each representative to drive more procedures per account, reduce selling complexity and position TriSalus as a single-source partner rather than a point solution provider to fully leverage this opportunity is why we're expanding our sales resources now and why we pursued the growth capital to increase our market coverage, improve our cell penetration and scale the commercial execution in a disciplined, high-return manner. Over the course of 2025, we launched TriNav LV, TriGuide and TriNav FLX, each addressing a particular vascular anatomy challenge that the interventional radiologist encounters. The TriNav FLX improves trackability and access to torturous anatomy. Tortures anatomy is commonly found in tougher to treat complex patients. During our fourth quarter, we launched the TriNav XP infusion system which was engineered specifically for compatibility with larger embolic particles, a more flexible distal tip for improved trackability in multiple linked and vessel sizes. These features were also important to use in low bar liver procedures, mapping our simulation procedures and for application in uterine artery embolization, market reception of TriNav XP thus far has been outstanding. The KOLs we surveyed highlight the exceptional trackability, enhanced visualization for precise targeting and improved procedural efficiency. As I mentioned, our next expansion of the TriNav product suite will be trying to have advance, which we anticipate launching in the first half of 2026. TriNav have Advance is an important addition to our embolization portfolio. This device is designed to facilitate selective therapy delivery to small distal vessels via a standard microcatheter, but still allow for PEDD to enhance therapeutic delivery to the tumor and protect against off-target delivery. The ability for an interventional radiologist to still use the microcatheter of their preference, but also benefit from improved delivery opens up a significant market opportunity for the use of PEDD. We are currently awaiting 510(k) clearance and plan to conduct a rapid market evaluation before fully launching in the second half of the year. With the launch of TriNav Advance, we'll have a complete portfolio of products that support all aspects of liver embolization procedures, which alone represents a total addressable market of approximately $480 million. Additionally, this portfolio of embolization devices supports embolization procedures in thyroid uterine artery embolization, genicular artery embolization or GAE, along with other embolization procedures, collectively representing USD 2.3 billion addressable market. The commercial adoption of the platform was bolstered earlier in 2025 by the introduction of the Centers for Medicare and Medicaid Services, CMS HCPCS code C8004. This code expanded coverage to include simulation or mapping procedures using TriNav, enabling interventional radiologists to utilize TriNav for other treatment planning and delivery using radio embolization. As a result, the reimbursable use of our technology within the radio embolization market has effectively doubled, supporting the broader adoption we are observing. Now interventional radiologists are able to use TriNav across a full spectrum of radio embolization care. Early feedback from key accounts and users highlights the clinical and economic advantages of the expanded reimbursement which we expect to continue driving adoption throughout 2026. In December, we hosted a second in a series of Key Opinion Leader event focused on our platform's potential and new clinical applications. The event featured Dr. Juan Camacho of Florida State University, discuss the unmet need in treatment landscape for multinodular goiter thyroid disease. In 2026, we intend to continue this program further to educate stakeholders on the advantages of the TriNav platform for our multiple indications. They're only continues in our PROTECT registry, a multicenter initiative, evaluating PEDD for patients with thyroid nodules or orders who are not candidates for surgery, radioidine or ablation. This study is designed to assess disease-related quality of life, thyroid function and outcomes following PEDD-based thyroid artery embolization. Preliminary results published in the Journal of the Endocrine Society were highly encouraging, showing 100% technical and clinical success, no neurovascular complications, mild and transient discomfort in 81% of patients all resolved within 2 weeks a 73% reduction in thyroid size and normalization of thyroid function and 71% of participants. These findings reinforce the promise of this minimally invasive alternative to thyroidectomy. In 2025, we also initiated a pilot registry in GAE. This is an emerging field, which offers a novel minimally invasive approach to pain management and mobility preservation for patients with knee osteoarthritis. GAE has the potential to delay or avoid total knee arthroplasty in select patients. In parallel, we're preparing to launch a clinical trial registry evaluating GAE as a treatment option for knee osteoarthritis, a condition affecting more than 30 million adults in the United States. This study aims to determine whether GAE can effectively reduce pain and delay the need for knee replacement surgery. Now turning to our nelitolimod program. Last year, we communicated our intention to release updated clinical data in the fourth quarter of 2025. We did not meet that time line, and I want to address that directly. As the PERIO-03 study progressed towards completion, it became clear that the most responsible and strategically valuable approach would be to consolidate data across all 3 PERIO Phase I studies into a comprehensive update rather than releasing partial data sets sequentially. In addition, we evaluated the potential inclusion of emerging data from an ongoing investigator-initiated study to provide a more complete view of the program's clinical potential. Final database lock and report preparation for PERIO-03 tend to beyond our original expectations, and as a result, we elected to delay disclosure to ensure that data package is thorough, internally validated and passioned appropriately for potential partners. We now anticipate releasing a consolidated clinical update in the second half of 2026. Importantly, this timing shift is not driven by safety concerns, efficacy signals or changes in our strategic priorities. All 3 PERIO Phase I dose escalation studies are complete. Enrollment in PERIO-03 has concluded and clinical study reports are in preparation. The decision to delay reflects our commitment to presenting a complete and cohesive data set that we believe will better support partnership discussions and maximize long-term value. As previously discussed, we have substantially reduced internal development spending related to nelitolimod following study completion. This allows us to preserve the program's optionality while maintaining capital discipline and focusing our resources on the near-term growth opportunities within our PEDD platform. We continue to advance partnership discussions and to support ongoing investigator-initiated studies. Before turning the call over to David, for a review of our financial results, I want to reiterate that TriSalus remains focused on executing on our near-term milestones, including achieving our 2026 annual revenue in the range of $60 million to $62 million, with growth weighted towards the second half of the year, launching TriNav Advance in the first half of 2026, publishing HEOR data on trip use in complex liver patients, delivering differentiated clinical data across the liver, UAE, TAE and GAE indications. As we look ahead to the balance of 2026, our strategy is fully funded, we're executing on our commitments of the recently raised growth capital and are confident in the commercial opportunities before us. We believe TriSalus-PEDD technology represents a transformative opportunity with substantial long-term value across a wide range of solid tumors and interventional treatment approaches. With that, I'll turn the call over to David. David Patience: Thank you, Mary, and good afternoon, everyone. As Mary mentioned earlier, our results for both the fourth quarter and 2025 fiscal year were strong. Turning first to our results for the quarter. revenue was $13.2 million, representing a 60% year-over-year increase over the $8.3 million recorded in the prior period. Gross margin for the quarter was 87% and compared to 85% in the prior year period. The increase in gross margin for the quarter was driven by improving manufacturing efficiency associated with our newly launched products. Research and development expenses were $2.6 million compared to approximately $3 million in the fourth quarter of 2024. The decrease was largely attributable to the completion of the enrollment and closure of our PERIO clinical studies for nelitolimod, as Mary alluded to earlier. Sales and marketing expenses were approximately $8 million compared to $7 million in the prior year period. The increase was primarily due the higher performance-based compensation, reflecting our strong commercial execution. General and administrative expenses were $4.2 million, down from $4.6 million in the prior year period. The reduction is primarily due to improving operational efficiency and tighter cost discipline related to corporate overhead. Net operating loss for the quarter was $3.3 million compared to $7.6 million in the prior year period. The decrease was primarily driven by increases in revenue and margin contribution for the quarter. Adjusted EBITDA loss for the quarter was approximately $950,000, an improvement versus adjusted EBITDA loss of $5.7 million in the prior year period. Turning to the results for the full year. revenue all from the TriNav system was $45 million for the year ended December 31, 2025, an increase of 53% compared to the same period in 2024. We revenue growth was primarily driven by increased TriNav units sold within liver-directed therapies. Gross profit increased by $12.9 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024, while gross margin decreased from 86% and to 85% year-over-year. The increase in gross profit was primarily driven by the increase in TriNav units sold while the year-over-year decline in gross margin was primarily driven by lower manufacturing efficiencies associated with our newly launched product throughout the second and third quarters, a dynamic in which we improved in the fourth quarter. Research and development expenses decreased by $2.7 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The decrease was primarily due to the closeout of clinical trial expenses related to nelitolimod. Sales and marketing expenses increased by $2.9 million for the year ended December 31, 2025. The as compared to the year ended December 31, 2024. The increase was primarily due to an increase in performance-related compensation, driven by the increase in sales during the year ended December 31, 2025, compared to the prior year period. General and administrative expenses increased by $3.5 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to a onetime charge during the third quarter relating to $1.6 million of accelerated noncash stock-based compensation vesting along with the revision of approximately $700,000 of certain patent related expenses from R&D to general and administrative expenses. Operating losses were $26.9 million compared to operating losses of $36.2 million for the same period in the prior year. The decrease was primarily driven by the increase in revenue, and strong margin contribution, highlighting our strong operating leverage. The basic and diluted loss per share was $1.84 compared to $1.31 for the same period in 2024. We increase was primarily due to the conversion of preferred stock to common stock. As of December 31, 2025, cash and cash equivalents totaled $20.4 million. As previously discussed, in February, we raised $46 million in gross proceeds via a public offering we concluded with fundamental health care investors. With that, operator, we are ready to open the line for questions. Operator: [Operator Instructions] And our first question will come from the line of Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: Great. Congrats on finish to the year. I was hoping to start with one on kind of components to growth in 2026. More specifically, how should we think about kind of contribution from liver versus non-liver, Obviously, liver has been the primary growth driver up until recently, and there's obviously a lot of exciting developments occurring in some of the non-liver areas. So curious if you could kind of talk through how much growth contribution could come from some of the non-liver areas? And then as an extension to that, just talk through maybe some of the clinical development you're going to pursue in some of the non-liver areas. Mary Szela: Sure. Frank, are you good to hear everybody. So this year, in 2026, it will still be the majority of our top line revenue will be associated with liver. But we hope to, in the second half, see some meaningful progress on the new applications, and that's really tied to data release. As you know, we have in thyroid, we have over 10 clinical sites that are enrolling patients, and we'll have some data released in the second half. We'll have data releases beginning at SIR around uterine fibroid and then data releases on both other new applications in the latter part of the year. So that's when we'll start to see some uptake in those indications. Frank Takkinen: Got it. That's helpful. And then for my second one, I was hoping to talk a little bit more about EBITDA. A lot of progress made to get the EBITDA that you produced in Q4. Obviously, a lot of exciting things to invest in and new capital on the balance sheet. How should we balance kind of your growth cadence in that EBITDA pathway as you build the foundation for growth. David Patience: Thanks, Frank. This is David. I'll take that one. At this time, we're not providing specific timing or guidance and cash flow breakeven our adjusted EBITDA breakeven as we're just at the early stages of investing in our commercial expansion. We're very focused and excited about the investments that we're making because they're intended to really position us to scale the company in a very meaningful way. And so we're very focused on investing to fit the organization for procedural volume. We anticipate essentially providing more visibility later in the year. It's just a little early for us to give that guidance right now. Operator: And that will come from the line of John Young with Canaccord. Unknown Analyst: Mary. I wanted to start first on the strategy set with the increased financial flexibility. You spoke a lot about the accelerated investment in the commercial footprint. Just more color details there might be helpful. What will the sales organization structure look like after these investments would round -- I heard you say doubling of reps. So would 120 reps be right exiting 2026. And maybe some color on have they all been hired and when and perhaps are you doing like a junior rep, or a senior rep pairing or anything like that would be helpful. Mary Szela: Sure. Tom, it's good to hear you place as well. We're not providing any details on the numbers of reps and clinicians right now, but we are meaningfully doubling the size of the commercial organization and that includes adding a layer of management in just because what was happening with our sales organization, just the ratio of repo manager is getting too high. And that was limiting our opportunities. So we added in a layer of management. We also have expanded into significant more coverage, geographic coverage and we also targeted areas where we really believe some of the new applications are going to add substantial growth. So this is a pretty significant organizational upgrade and change across the organization. I think it's going to meaningfully drive acceleration in sales at the beginning in the second half of the year and forward. And your concept of kind of a junior rep, senior reps, what we found that rely has worked for us is, we have this peering of a clinical specialist with a representative. And what that allows us to do is if a rep pursues a new account and they garner position you as interest, the rep will begin to work with the physician and then the clinical specialist will come in and work in the case with the physician until we get comfortable and we can do it independently. So -- and many of those clinical specialists have become reps. So I guess, in a way, it could be kind of a junior senior rep. But we feel that type of approach allows us to have a lot of depth clinically with the representative. And maybe I'd even have Dr. Marshak talk about that because he's been pretty instrumental with us in terms of how do we define the right architecture for our product. Now that we have a new portfolio the expertise of the rep and the clinical specialist is going to be quite deep in terms of helping the physicians choose the right product for whatever type of vascular situation in that physician may encounter. So Dr. Marshak, do you want to jump in and provide some color on that? I don't know if we can hear you, Dr. Marshall. You're still on mute. Dr. Marshak, you're still unused. So I apologize, he was on and then all of a sudden, he's gone. But he's been very instrumental in helping us design this. The portfolio that we have it's quite broad, and it allows us to address virtually every situation. And that's why we feel like the clinical specialists and the rep is a better model for us right now. Unknown Analyst: Great. And then, David, maybe for the 2026 guidance, it sounds like most of this is predicated on continued use in liver, how much mapping growth is factored into that guidance as you annualize this either the code being rolled out, do you still expect continued mapping growth? And just maybe just walk us through that. David Patience: Yes. No, thank you, and great question. And I thank you again for your help with us achieving a mapping and simulation code yet again. As we look at it, we think XP can make a meaningful impact on our mapping. The larger new interior diameter is going to be extremely helpful. And then with that, we think we can meaningfully bring up growth within XP as well. And then with Advance, which is still pending FDA clearance, we think that could be even more meaningful from an imaging and mapping perspective as well. And so not only we're confident we can grow it just with some studies that will be releasing concorded studies in the first part of the year, but XP in advance will also make a meaningful impact in the growth there as well. Mary Szela: Yes, John, one of the things that we found with Advance and as you know, this is where physicians still gets the benefit of pressure enabled drug delivery, but they can use their own microcatheter. Some of the feedback that we've heard from physicians is it actually allows them to even be more trackable. And the way that we've designed the technology, the visualization is just the per. So we think the thing have advance is going to meaningfully help us in mapping because this is where they really want to interrogate the vascular structure and make sure they don't have any feeder vessels, and they really want to get a lot of clarity around what they're encountering and what they want to deliver the dose on. So between those 2 products as well as TriNav, we now feel once we get advanced EFT cleared, we'll have a portfolio that can penetrate mapping in a very meaningful way. Richard Marshak: Mary, it's Dr. Marshall. I'd like to add that the -- TriNav Advance is going to allow us to capture cases that were previously capturable with TriNav because we can get into much smaller arteries, those are cases that we're going to be able to add to our portfolio that weren't there in 2025. Operator: [Operator Instructions] One moment for our next question. That will come from the line of Justin Walsh with Jones Trading. Justin Walsh: Can you provide any commentary on use patterns for your TriNav product portfolio? Just wondering if you see the same positions and accounts wanting access to the full portfolio to allow clinical flexibility or if some users focus on their favorite TriNav product and don't necessarily order the others? Mary Szela: Yes. Dr. Marshall, do you want to jump in and then I'll comment after you. It's [indiscernible]. Richard Marshak: It is. One trend that we have seen is when users get their hands on our finance Flex, which is a much more flexible tip that has enhanced trackability meaning we can get it into smaller arteries, easier or around turns easier. We've seen a trend where some or some users say, "I want that for every case. And then we still have other sites where they like the different opportunities with different catheters. So yes, it's varied. Justin Walsh: Got it. And maybe one follow-up. You talked a little bit about the kind of expectations on non-liver growth in the near term. I'm just wondering what your thoughts are on kind of the medium long-term opportunities for TriNav in liver versus non-liver if you think it will be more challenging to grow some of these uses than others? And just some thoughts on that longer-term picture. Mary Szela: Yes. So the liver still is going to be a very significant component of our sales for next year and throughout the long-range plan. today, we ran roughly about 10% share. So we have enormous opportunity to penetrate that. And one of the things that we talked about in my opening comments was that we have physicians come to us in the latter part of last year. And this was really one of the reasons why they pushed us and why we went to go pursue the growth capital is we had leading KOLs come to us and say, now it's the time for you to really do those foundational studies to prove the superiority of your technology versus the microcatheter. So we're going to be doing foundational studies in the liver, both with TheraSphere and the SIR tech product to prove how our technology and liver embolization is superior. And we think that's going to be a very important driver of long-term liver penetration. Now in regard to the new applications, each one is a little bit different. So it's hard to put them out collectively. But I think it's going to be driven by the data. This year, you're going to see more publications on the thyroid. I mean this is a thyroid embolization. This is an opportunity that we think just makes sense for the patient in many dimensions. It's an easier procedure for the patient. It preserves fibroid function. It prevents them when we have in taking long-term thyroid medications. It's less costly. So depending on the value proposition, each of these are very significant opportunities that we want to pursue. And I think one of the things that we're starting to see, and I'll let Marshak talk about it is, if the physician begins to use the technology in the liver, we do see them starting to use the technology for other applications. In fact, that's where all these new applications came from. These were physicians who used our product, innovated it in a different procedure and then team to us to collaborate with us on how to develop that further. So Dr. Marshak do you want to make any further comments on that? Richard Marshak: No, I think that captured it. The one thing I'll add is there is a lot of excitement around thyroid at realization. There continues to be. And this is a market that we're building. It's an unmet need for a lot of patients who don't have other options. So I do see that right now, that's a growth that's potentially exploding in 2026. Uterine realization is something that our XP is designed for. That's a market that already exists, and we're seeing adoption with that. And I think that's going to continue to grow. Operator: I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mary Szela for any closing remarks. Mary Szela: Well, just thank you again. Thank you for the phenomenal questions and all the interest in trials appliances I really appreciate it. Thank you. Operator: This concludes today's program. Thank you all for participating. You may now disconnect.
Mary Vilakazi: Good morning, everyone. Welcome to FirstRand's results presentation for the 6 months ended 31st December 2025. I'll start with the -- I'll start the presentation with an overview of the group's operating environment over the last 6 months. In the period under review, the global macroeconomic backdrop continued to be characterized by heightened geopolitical uncertainty, and this is likely to persist for some time. Global growth slowed and inflation and monetary policy continued to play out differently across the world's largest economies. The FirstRand house view is underpinned by an expectation of ongoing geopolitical fracturing and reorientation. Unfortunately, that does imply more frequent global economic shocks, the impact of which is controlled for in our baseline and risk expectations. The current Middle East conflict is an example of one such shock. In South Africa, the combination of structural reform efforts spearheaded by Operation Vulindlela, fiscal discipline and the lowering of the inflation target have started to have a positive impact. South Africa's sovereign rating improved. The country was removed from the FATF gray list, the currency strengthened and inflation registered the lowest average in years. These factors have mitigated the impact of elevated global uncertainty within the SA macro context. The recent bond market impact of the Middle East conflict have seen bond yields lift 40 basis points off their recent lows. Whilst it is still early days, this is a relatively small impact on the overall bond yield reduction of 220 basis points over the last year. We are monitoring the unfolding events and the related impacts closely. Lower inflation allowed the sub to cut the interest rates and affordability pressures on consumers and households are easing. During the period under review, we saw household borrowing tick up marginally in real terms, whilst corporate borrowing continued to grow strongly, potentially signaling an emerging credit and investment cycle. The RMB/BER Business Confidence Index rose from 44 to 47 since the last quarter, an encouraging data point. Barring the post-COVID recovery, this is the highest business confidence level since 2015, giving us confidence about the emergence of credit and investment cycle for South Africa. Several countries in the group's broader Africa portfolio also made good progress on reforms. Nigeria continued to strengthen its macroeconomic position, while Ghana and Zambia have benefited from the post-debt restructuring reforms implemented over the last few years. The 3 countries made difficult and tough decisions and are now reaping the benefits of the reform processes. Certain cyclical factors also provided support with inflation moderating and growth stabilizing on the back of a positive commodity cycle. By the end of 2025, economic activity in the U.K. had slowed. Inflation eased but remained above target, and the Bank of England responded cautiously. Activity was supported by public sector spending. However, private sector demand remained constrained by still elevated borrowing costs and persistent inflation pressures. Moving on to an unpack of the group's operating performance. And just to recap how the group's operational performance in the first 6 months is tracking against the guidance for the full year to June 2026. Pleasingly, all the key line items are trending as expected. NII is up high single digits with a significantly NIM uplift with NIR print materially higher than the previous year. This strong top line performance has resulted in an improved cost-to-income ratio continuing to be in the 40s range. Credit is in line with our expectations with NPLs looking better given the supportive macro environment. As guided, the group's ROE is moving closer to the top of our stated range of 18% to 22%. These metrics clearly demonstrate the strength of the operational performance delivered by the business, which we are very pleased about. This slide unpacks the performance metrics, particular callouts include the strong growth in earnings, economic profits and NAV accretion. We are also pleased to be in a position to grow the dividend faster than earnings as the high ROE means we continue to generate excess capital. This is earnings and ROE over a 5-year period. The only point I'd like to make here is that earnings growth has shown a stronger trajectory over the past 3 years. This demonstrates the group's ability to deliver higher and more sustainable growth in earnings despite one-off contributions in each year's base, testament to the quality of earnings generated by our franchises. This slide demonstrates the group's -- that the group continues to accrete to NAV. The 5-year CAGR of 8% is testament to the group's ability to consistently deliver value for shareholders. Net income after cost of capital or economic profits is the group's key performance measure for shareholder value creation. We saw very strong growth in this period in NIACC. The 5-year CAGR of 14% in economic profit is particularly pleasing given that this was delivered during a period characterized by muted macros and sluggish GDP growth. It demonstrates the group's ability to deliver on its objective to capture the largest share of economic profits available in the system. The group's superior ROE benefited from an ongoing improvement in return on assets, which increased 5 basis points in the period. This was again a result of the quality of our operational performance, particularly the strong growth in investment income, a recovery in trading income and stable impairments. Gearing continued to decrease and the lower cost of equity contributed 10% to the NIACC growth of 26%. The reduction in the SA risk premium is potentially structural given the improved macroeconomic conditions, fiscal discipline as reflected in the recent budget and delivery on the reform agenda. The market pricing indicates a further ratings upgrade is possible in this calendar year, and this could present potential for a sustainable lower cost of equity going forward for South Africa. This is a snapshot of the operational performances delivered by our client-facing franchises. All the domestic franchises performed extremely well, more than holding their own in a fiercely competitive operating environment. FNB performed well, growing earnings by 8% and significantly lifting ROE to 41%. And within this, FNB SA grew earnings by 10%, offset by softer performance in broader Africa. RMB really had a standout 6 months, lifting its margins and ROE on the back of strong top line growth. WesBank again delivered a solid growth and an impressive ROE given how fiercely competitive the market is. The broader Africa portfolio continues to contribute to overall earnings growth. This year, the performance was driven by RMB's cross-border activities. RMB's in-country CIB businesses delivered an impressive increase of 62% in profits before tax. And FNB's in-country -- broader Africa in-country performance was impacted by macro pressures in Botswana and Mozambique, as we previously signaled. Pleasingly, the long-term strategy of growing in-country franchises remains on track. The group is relentless in its pursuit of high-quality earnings growth and superior ROE. And many of the decisions the team makes are anchored to these -- to deliver on these 2 ambitions. From a balance sheet perspective, this is why we are so focused on growing advances at an appropriate risk-adjusted returns and why we have a limitless appetite for deposits. We are working hard to defend and grow our large valuable transactional franchises, given that they provide a significant underpin to our ROE, and we continue to find sources of capital-light income streams. I'll now cover the performance across the 3 themes, similar to how I presented this in the June results. So let me start with the health and quality of our client-facing franchises. As I mentioned in the previous slide, FNB SA franchise performed really well. Turning to FNB Retail first. The business delivered 14% growth in PBT and was the most significant contributor to FNB's overall ROE uplift. The performance was characterized by solid top line growth with NII growth impacted by tough lending markets with muted demand, although we do expect this to pick up in the second half. NII growth improved on the back of higher transaction volumes and customer growth. The retail credit experience was better than we expected and supported retail earnings growth during this period. I just want to call out the turnaround in the customer growth in the personal segment, where competition is really tough. At June 2025, this segment was struggling to grow customers, but this has now reversed significantly on the back of a strong sales effort. Before migrations to the private segment, personal segment grew customers up 3%. In our early engagements with Optasia, we do see exciting opportunities to leverage their capabilities to further grow FNB's offerings in this segment. The private segment grew up -- grew a solid 8%, driven by customer acquisition and migration from personal segment. And overall, we continue to see growth in FNB's main bank clients. This is up 6%, which demonstrates FNB's success in switching customers banked elsewhere with a single FNB product to a full transactional offering, the strength of the FNB franchise. FNB commercial continues to grow off a high base. NII was supported by steady advances and deposit growth. The commercial deposit franchise remains by far the largest in South Africa. Solid customer growth has supported growth in fees and transactional volumes, supporting NII. Merchant Services experienced margin pressure -- margin compression as FNB responds to a competitive environment. In response, FNB has launched new Speedpoints yesterday with enhanced business solution offerings and competitive pricing points. FNB is still leaning in for SMEs that are well positioned to benefit from the early structural reforms and FNB remains the largest lender in South Africa to this sector. FNB's focus on meeting the needs of SMEs is also supporting its strategy to grow in the community economy with advances now at ZAR 17.3 billion and deposits at ZAR 43.3 billion. As I mentioned earlier, FNB continues to grow NIR and the growth is reflective of the different strategies to defend and grow the transactional franchise. The slide shows that the business continues to achieve steady growth across traditional sources of fees and importantly, is scaling new sources of fees supported by its platform strategy. Digital wallet and PayShap volumes are showing very strong growth. And the PayShap volumes also reflecting the strategy to fulfill client needs or the business strategy to ensure that they fulfill client needs and payments needs as client behavior and adoption evolves. The graph on the right-hand side demonstrates ongoing traction in FNB's long-standing strategy to monetize its value-added services. FNB -- the MVNO business, in particular, is scaling well with users increasing to 3 million. West Bank delivered another strong performance, growing advances in a market showing signs of a sustained recovery, driven by new car sales in the industry, which are up 16% and an emerging replacement cycle. There was a slight recalibration of risk appetite to capture the opportunities emerging from these market dynamics. Origination has shifted from only originating in low to medium risk to a higher proportion of medium-risk customers. This has resulted in some front book strain, but remains well within expectations. The insurance business continues to deliver good growth on the group's own licenses as reflected in the new business APE numbers on the slide. The growth in the in-force APE for life and short term demonstrates the quality of these books. The top line growth has not translated into PBT growth in this period as we continue investing for future growth. This investment in distribution capability will set the business up strongly to grow in FNB's customer base as well as the open market. A data point that supports this thesis is the 38% growth in APE that's been generated from the private adviser distribution channel. As I called out earlier, RMB had an excellent first 6 months of the year. Absolute advances growth declined due to the distribution strategy, but production was robust at significantly higher margins. NIR benefited from a private equity realization and a turnaround from the Global Markets business. All these drivers helped lift RMB's ROE. The HSBC transaction has been successfully completed, introducing 260 new large corporates and multinational clients to RMB. And the chart out here goes out to the technology teams who ensured that there was a seamless transition of these clients, building platform capabilities that the group will be able to leverage in future growth strategies. The strategy to build scale in the corporate transactional bank and the introduction of a dedicated executive focus is resulting in good progress on mining the client base, and it is clear that there's a great deal of runway here. I've already mentioned the turnaround in the Global Markets business. This slide demonstrates that the early recovery is emanating from across the portfolio and the business continues to focus on client franchise activities to ensure that the recovery is sustained. I want to cover the point-in-time ROE at the Aldermore Group. We are still -- we are still executing on a clear medium strategy to move this ROE closer to 15%. However, this journey -- the journey to operational efficiency has required a hefty investment into the current offshoring initiatives. This, in time, will increase operational leverage once completed. In addition, the NIM pressure across the industry has also had an impact on Aldermore's performance in 6 months. This will be partly addressed by Aldermore's objective to diversify into higher-margin asset classes as well as accessing other funding sources post the FCA's motor redress process when Aldermore again can go into the capital markets. The excess capital we continue to hold in the U.K. depresses the Aldermore ROE by 1.5%, but we are hopeful that this will be resolved by the end of this year. The performance from our broader Africa portfolio is pleasing, particularly given the macro pressures in Botswana, which is one of our larger jurisdictions. This portfolio is still relatively undiversified, so volatility in 2 markets will have an impact. However, despite these pressures, the overall profitability and ROE held up well, supported by good performances from Zambia, Nigeria and Namibia. There was cost pressure in Ghana due to the platform investment that's required there. RMB's cross-border business and in-country CIB activities performed strongly, as I mentioned earlier. I want to spend a little time on the overall strength and health of our origination franchises, and Markos will cover line-by-line growth in more detail when he takes over the presentation. This slide unpacks the group's long-standing philosophy on origination. One recent adjustment is a slight shift in WesBank's risk appetite, which I covered earlier. A key element of our FRM strategy is to originate to the most appropriate balance sheet and underwriting vehicles. This has created additional capacity for the group, creating additional capital and funding velocity to support further origination. On Slide 28, here, we can see that the lending growth we have achieved across brands, customer segments and product lines, and we are comfortable with these outcomes. Standouts here are WesBank corporate and commercial, where we have seen growth pick up as the economy shows signs of shifting to a more investment-led cycle. Given the macro backdrop, we expect the modest pickup in retail to accelerate in the second half. The pie chart on the right unpacks the results of the sector-specific lending strategies we have been pursuing. Again, this is a high-level unpack of the credit performance, which Markos will cover in much more detail. The point I'd like to make here is that retail is performing better than our initial expectations and the U.K. normalization this year in the CLR is in line with expectations given the base effect from last year's provision releases. And I want to spend a bit more time on the deposit franchises, which deliver our high-quality capital-light NII. It is extremely pleasing to see that all of the group's deposit franchises delivered good growth over this period. RMB's corporate deposit franchise showing good momentum in South Africa and in broader Africa. The steady strategy to build country deposit franchises in the broader Africa portfolio is also gaining traction. SA retail and commercial deposits continue to increase and grow off an already high base. The group once again benefited from the group treasury's active management of interest rate risk and ALM risks, ensuring that the group earns appropriate value from interest rate risk and credit premium. In the current year, this strategy produced an additional ZAR 1.2 billion of NII compared to an opportunity cost in the comparative period. With interest rates forecasted to further reduce, the ALM strategy is expected to yet again have outperformed as shown in the gray shaded area on the graph. The group's margin was up 8 basis points and up 15 basis points, excluding the U.K. operations. Improved asset margins were achieved through the mix of balance sheet growth and deliberate FRM strategies with disciplined segment execution to ensure appropriate risk return margin considering client channel and market conditions. Where quality credits did not meet the balance sheet costs and frictions, these were matched to alternative platforms and investor base as executed through the RMB distribution strategy. The negative impact to the group margin in funding and liquidity of 11 basis points was a consequence of both the levels of higher levels of excess liquidity and lower return on liquid assets. This is a strong margin outcome achieved through active FRM, which the group will continue to use as a central process to deliver shareholder value. A walk-through of the group's CET1 ratio shows a lifting in the capital position following ongoing optimization, FRM initiatives I've highlighted and Basel reforms. RWA consumption up 70 basis points reflects ongoing growth in constant currency as well as investment in strategic initiatives. A CET1 ratio of 14.4% provides the group with sufficient financial resources to deliver on the group's growth ambitions. The strong level of capital and FRM initiatives support a sustainable dividend cover that remains at the bottom end of the range. I will now hand over to Markos, and I will come back to conclude with the prospects and looking forward. Markos Davias: Thank you, Mary, and good morning, everyone. Considering the backdrop of the group's strategic and operational performance, I'm now pleased to present the financial review of the FirstRand Group for the 6 months ended 31 December 2025. Mary has covered the key performance highlights. And as a quick recap, the group delivered 11% normalized earnings growth, coupled with an improving ROE and a resultant 26% growth in NIACC. This performance did not include an adjustment to the U.K. FCA motor redress provision. However, legal and specialist costs of ZAR 333 million pretax and ZAR 244 million post-tax impacted operating expenses and earnings growth by 1%. The group expects the final redress scheme to be published by the end of March, and we'll update shareholders on any potential impact thereafter. NAV is up 7% with the stronger rand impacting the group's foreign currency translation reserve. Excluding this impact, NAV would be up 10% for the period. The final call out is that the group's stronger CET1 position of 14.4% places it in a position that if required, the group can absorb any of the possible negative outcomes from the U.K. FCA motor commission redress scheme, and Mary will touch on this further in the prospects. The group's normalized earnings growth is driven by a strong top line performance with both NII and NIR up 8% and 12%, respectively, creating positive jaws against credit impairments, which are up 6% at a CLR of 86 basis points and cost growth up 9%. I will unpack all of these shortly. As the only additional note to the slide, RMB implemented a debt-to-equity restructure during the period. As a result, a portion of the nonperforming loan was converted to equity with the remaining loan settled. In accordance with IFRS, the group recognized an investment income gain of ZAR 242 million for this conversion with a settled advance resulting in a release of Stage 3 impairments of ZAR 143 million, and the remainder of the loan was written off. The converted equity exposure is then recognized in associate for the group and the cumulative equity accounted losses resulted in a ZAR 377 million loss in associate earnings line, but the net impact to NIR is therefore ZAR 135 million. Netting these impacts results in only a ZAR 8 million gain being recognized, and hence, I will not cover it further in this presentation. Let me now turn to the quality of the financial performance and its key drivers, starting with NII. Turning to advances. Retail mortgage growth continues to be subdued as overall demand and customer affordability do start to show early signs of improvement. Production has picked up in recent months with this improvement expected to drive momentum into the second half of the financial year. WesBank VAF grew 14%, capturing a large proportion of the bounce back in vehicle sales. An important note is that additional retail risk appetite has been allocated. Mary did touch on this. We are using a data-led basis, and we're expanding lending to the quality side of medium-risk customers as the group continues to monitor improvements in retail credit lending conditions and proactively prepares for an improving affordability cycle. Commercial growth of 9% reflects the consistent and focused strategy Mary alluded to earlier with a continued focus on growing the SME customer base and unsecured SME lending is up 11%. Broader Africa continued to service customer needs for credit products in the group's presence countries, up 9% in constant currency. And as a callout, Zambia showed excellent in-country advances growth of 35%. Aldermore delivered 9% growth in advances, primarily driven by its strong origination network in property finance, which was up 15%. Final point on the slide relates to RMB where growth appears subdued at 7% down, but both translation impacts and the deliberate distribution strategy that Mary touched on earlier impacted its balance sheet growth. But what is pleasing about this, we now have a demonstrable financial data point on the underlying hypothesis with RMB's portfolio margin improving by 20 basis points and despite a smaller balance sheet, RMB lending NII is up 15% for the period. On this slide, we reflect the impact of the RMB distribution strategy and the group's currency translation impacts to total advances with each having a 2% negative impact to growth. The group's deposit franchises continue to show momentum across all of the customer segments with overall growth of 6%. This performance, when coupled with RMB distribution strategy enabled a net 2% reduction in total institutional and other funding and in particular, a reduced term debt securities funding cost, which further benefited NII and margins. The group's institutional funding mix and weighted average term continues to be well managed with the right side graph depicting the funding mix change between FI deposits and NCDs. Reflecting the group's balance sheet strategies and an activity view highlights the effective partnership and FRM discipline between the franchises and group treasury. Lending NII benefited from advances growth and mix changes as well as the improved margins in RMB. Despite 107 basis points decline in average interest rates, both transactional NII and capital endowment activities increased 7%, strongly supported by growth in invested balances and the group's ALM strategies and active portfolio management approach. Group Treasury delivered a very good outcome with NII up 61%, driven by the lower funding costs previously mentioned, improved deployment of currency funding and a partial offset in the lower margins on HQLA that Mary mentioned earlier. The U.K. NII is up only 1% with pressure on cost of funding and deposit margins given the continued elevated level of competition for liabilities and a reducing rate cycle, which had some impact on unhedged capital endowment. Mary has already covered the margin outcome earlier. And here, I depicted in the usual waterfall view. In summary, group margins, excluding the U.K., have expanded 15 basis points, 8 basis points to June '25 and then a further 7 basis points to December. Lending asset margins expansion contributed 12 basis points with RMB a significant contributor to the uplift and with continued disciplined pricing across all the other lending portfolios. As mentioned, the ALM strategies reinforced both deposit and capital endowment margins, with Group Treasury reflecting an 11 basis points impact, mainly due to the lower HQLA margins. The U.K. margin compression resulted in an offset of 7 basis points to the group. Moving to the group's impairment charge, which is up 6%. The group's total CLR remains below the midpoint of the TTC range, with a slight improvement of 2 basis points to the CLR excluding the U.K. An important note at this point is that in the comparative period, the U.K. CLR benefited from one-offs relating to various items, including last year cost of living, and these did not repeat in the current period. These supported the prior period outcome for the group CLR, that was 84 basis points. And if you look at the current period, 86 basis points, this is a normalization of these impacts in effect. The overall diversification of the group portfolio continues to support the CLR below the midpoint of the TTC range. The group's impairment charge of ZAR 7.3 billion further reflects the U.K. normalization as well as front-book strain from balance sheet growth, impacting Stage 1 provisions predominantly. I'll give more color to this shortly in the segmental breakdown of the charge. Stage 2 provisions and subsequent coverage are lower as a result of a migration of a few higher coverage watch list assets to Stage 3 in RMB. This then reflects in the slight growth in Stage 3 provisions and coverage of 43.8% and further contributing to the Stage 3 coverage were increases relating to an aging NPL portfolio and higher operational NPL inflows. The group's overall provision stock remains appropriate at ZAR 56 billion, with a performing coverage of 1.43%. The group's NPL formation continues to reflect a slowing 6-month trend across most portfolios, except WesBank VAF and RMB. RMB had a single counterparty in the cross-border portfolio that migrated straight from Stage 1 to Stage 3 and has been appropriately provided for at this point in time. The particular circumstances of this event are isolated and is not pervasive to the portfolio. This new slide depicts the group's segmental composition of its impairment charge. It aims to highlight the diversification of the credit charge as well as period-on-period increases of each segment's charge. What can be seen is that the U.K. impairment growth accounts for ZAR 338 million of the total ZAR 442 million group increase, with Commercial and broader Africa also up significantly for the period. These were then offset by lower impairment outcomes in Retail and CIB. With this backdrop, let me now unpack these individually. Retail CLR, as expected, trended lower into the bottom end of its TTC range, improved forward-looking macros, better collections, coupled with increased customer prepayments and reduced Stage 3 inflows were all key contributors. Strong book growth in VAF drove some front-book strain, which was more than offset by an improved mortgage outcome as house prices in [ Gauteng and KZN ] showed signs of recovery. Increased NPL coverage driven by time in NPL and slowing lower coverage inflows also weighed in. Retail unsecured is benefiting from lower front-book strain and pleasingly, a decline in debt counseling inflows, albeit this portfolio remains structurally higher than in the past. Commercial's impairment outcome continues to lag Retail, but with signs of improvement since June. There has been no new jump to default counters like in the prior period, but the group has proactively raised out-of-model provisions against the larger Commercial watch list, exposures and potential industry concentrations. The 94 basis points CLR is an improved rolling 6-month print compared to the previous 125 basis points, and remains below the midpoint of the TTC range. A significant driver of the increase in charge relates to what I refer to as good CLR in the form of front-book strain, which is as a result of the continued strong advances growth across most of the Commercial lending portfolios. RMB's impairment charge continues to be best described as benign, with a single counter migrating to Stage 2 due to a rating revision triggering SICR. NPLs continue to see some new inflows from the credit watch list, with an offset from migrations out of NPL as RMB's debt restructuring capability continues to successfully assist customers. In addition, the previously mentioned broader Africa exposure that migrated to Stage 3 also impacted RMB's NPL level and provision increases. And finally, the debt to equity restructure I mentioned earlier impacted RMB. But even if you add it back, RMB is below its TTC range of 30 basis points to 50 basis points. I've already covered the core one-off benefits to the U.K.'s 14 basis points charge in the prior period and the primary reason for the more than doubling of the charge to this year. And during this period, in line with the expectations, the U.K. CLR has trended up to the bottom end of the TTC range, with core performance and collections tracking well. Arrears continue to improve, with new origination resulting in some front-book strain. U.K. forward-looking macros have, on average, compared to the prior period, December '24, deteriorated and key call-outs are a weaker house price index, marginally higher inflation forecast and an upward trend in unemployment. This has resulted in an increased modeled FLI requirement for the period and accounts for more than 50% of the U.K. CLR charge to December. Broader Africa's underlying customer portfolio continues to be resilient. The increase in impairment charges mainly from proactive provisioning in Botswana to capture the potential impacts of the visible slowdown in activity, and additional out-of-model provisions have been raised to cater for the increased uncertainty in Mozambique. Moving on to NIR, where the group delivered 12% growth driven by resilient fee income, a robust recovery in global markets and a private equity realization. Pleasingly, fee and commission income continues to show resilience, up 7%, driven by inflationary fee increases, coupled with 4% growth in both FNB customers and volumes. RMB knowledge-based fees also printed good growth off a relatively high base as it continues to offer clients market-leading structuring, arranging and advisory solutions. Mary has already highlighted the key message from the FNB fee and commission outcome, including the 14% growth in value-added services income. What I'd like to do is just give a little more color to the financial impacts of two of the items she referred to earlier. Firstly, FNB defaulted customers real-time payment requests to the cheaper PayShap rail. This resulted in a reduced contribution and reliance on the old rail and associated fees, and it meant -- you would have seen in her chart, there was a graph that showed payment fees down. It meant that those fees are 33% down for the period, and effectively have been replaced by the other fee income lines if you look at the 7% up at the total level. This strategy also was the key driver to the sixfold increase in the values and volumes that Mary highlighted. Secondly, Mary also highlighted the pressure related to merchant services competition, with fees relatively flat for the period. But what I can also note is that billable devices are actually up 10% for the period. And again, the key takeout is that despite these two big impacts, the group has managed to grow its fee and commission 7%. Total insurance income is up 5% and requires further unpacking. Life is up 13%, with underlying performance in underwritten life growing 14%, credit life up 15% and core life growth of 16%. FNB employee benefits were also moved into FNB life from commercial during the period due to the synergies of the group life and employee benefit offerings, and were a slight offset to the other life product performances based on take-on of a large client Mary mentioned earlier. Short-term insurance continues to scale ahead of expectations, with insurance income up 17%. WesBank benefited from the exit of MotoVantage, which resulted in a rundown portfolio being recognized this year, with no base as the investment was classified as held for sale in the prior period. The offset to these good performances relate to a continued reduction in the income from participation agreements. We have previously noted these are winding down and any new business is being written on the group licenses. In addition, broader Africa is down 26% due to additional weather-related claims in Namibia and a lackluster premium growth in credit-linked products in Botswana. And finally, the group continues to invest in its operational and distribution capabilities, which Mary touched on. In the insurance income, the attributable costs get offset against these and reflect in this chart against the growth levels. These investments are expected to result in ongoing support for growth in policy numbers and new business APE. Trading and other fair value income was driven by the strong recovery in RMB global markets, which Mary unpacked in some detail earlier. This graph does, however, reflect the extent of the recovery and highlights that in the prior period, there were also contributions from fair value income from RMB's PI portfolio and other group treasury related benefits, which in the year-to-date have all been replaced by the global markets revenues. Turning to the significant growth of 65% in investment income, which is predominantly driven by a significant realization in the private equity portfolio. But in addition, RMB's associate earnings in the light gray on the chart also remain resilient, especially considering the lost earnings from the prior year realizations that would no longer be in the base. It highlights the quality of the underlying performance of the investee companies. Pleasingly, despite these realizations, the unrealized value of the private equity portfolio has also increased by 12% to ZAR 8.4 billion, driven primarily by an earnings uplift. WesBank's associates, TFS and VWFS, also had improved performances, driven by advances in NII growth and a good impairment print. VWFS also benefited from a large one-off in the current period, which is not expected to repeat next year. Lastly, the improved overall performance in the bond and equity markets resulted in an uplift of ZAR 239 million in investment income related to the assets backing the group post-retirement employee liability portfolio. Turning to operating expenses, which grew 9%. As mentioned earlier, the costs incurred in response to the U.K. FCA consultation paper resulted in a 1% impact to cost growth, and its impact is included in the appropriate cost lines in the pie chart. Going forward, once a redress scheme is announced, any future legal costs would be allocated against the provision raised as opposed to expense through the income statement. The group also continues to invest and allocate resources to its technology platform. The total IT functional spend across all cost category is up 13% to just under ZAR 11 billion. A more detailed breakdown of this is included in the presentation annexures and the booklet. Professional fee growth of 26% is as a result of increased spend related to the implementation of the HSBC transaction, including API integration, as well as some external professional support during the implementation of a core banking platform in Ghana. These costs are not expected to repeat next year. Advertising and marketing costs increased 14% as FNB continued to invest in its brand value proposition and marketing activities. And the increase in the group's depreciation, repairs and maintenance costs are mainly due to increased campus requirements as staff return more regularly to the office. In addition, amortization costs were impacted by the implementation of a new global markets platform, a portion of which was previously capitalized. And then finally, on OpEx, included in other expenses is the increase in the Department of Home Affairs ID verification fee, which had a 6-monthly impact of ZAR 60 million, and is a new ongoing cost of customer onboarding and compliance. Staff cost remains a significant portion of the cost base and increased 7% for the period. Salary increases of 5%, coupled with average head count growth of 1.5% were the key drivers. Head count growth was focused on growing the group's points of presence, particularly in community economies, with 18 new branches opened during the period. In addition, Mary has mentioned the U.K. strategy to offshore some of its enablement head count as part of improving the overall U.K. cost-to-income ratio and ROE. This does, however, result in transition costs with a period of duplicate head count to appropriately manage the offshoring execution. To date, the costs incurred totaled GBP 2 million and is expected to ramp up by June as the execution nears completion. As highlighted earlier, this performance has resulted in positive cost jaws, with an improved cost-to-income ratio anchored below 49%. And in closing, and as an overall summary from my side, solid group performance with strong business execution and financial outcomes that reflect the progress against the group's strategic framework. Thank you. I will now hand you back to Mary to cover the group's full year prospects. Mary Vilakazi: Okay. We are nearing the end. Thanks, Markos, and turning to prospects. Looking forward in terms of macro developments in South Africa, further moderation in inflation creates scope for additional policy rate cuts. This is, of course, barring the events that are taking place at the moment with the oil price from the Middle East conflict. But set aside, combined with structural reform improvements and supportive commodity cycle prices, we believe that this is expected to begin lifting real GDP growth. With regards to broader Africa, despite global uncertainty, economic prospects for most countries in the portfolio are improving, thanks to lower inflation and policy rates and economic reform progress and supportive commodity prices. We expect this to continue. The key exceptions are linked to domestic governance and debt pressures in the case of Mozambique and the need to diversify the economy following the diamond price correction in the case of Botswana. Hopefully, we have provided you with appropriate insights to support our view that FirstRand is on track to deliver another strong operational performance in line with guidance. We expect to deliver high single-digit growth in NII, a strong NIR trajectory and an improving credit outcome. The combination of a growing top line and an increased focus on managing costs will result in positive jaws, something this management team is fully committed to. As the last bullet on this slide points out, this guidance does not include any potential adjustment to the current accounting provision for the FCA process in the U.K. In closing, I want to identify two significant strategic advantages this group has at its disposal to generate an ongoing strong operational performance for the rest of this year and beyond. Our client-facing franchises are healthy, and they are well positioned for growth as they have demonstrated in the last 6 months of this year, delivering top line -- good quality top line growth, growth in earnings and improving returns. Our FRM strategies, which I consider to be a clear differentiator for FirstRand versus our peers, have added significant value in driving balance sheet efficiency, margin uplift, capital strength and ultimately, a superior ROE. Our strong capital position means that under any expected scenario outcomes from the FCA redress scheme, the Board and the management team are confident that the group will be in a position to pay a dividend on normalized earnings pre the motor provision. This brings me to the end of the results presentation. I'd like to thank the employees across the FirstRand Group for your diligent efforts in looking after our businesses and ensuring that the group executes on its vision of delivering shared prosperity to our customers, to each other, to the communities that we serve. You can be proud of what the group has delivered to its shareholders. And lastly, thank you to our customers across the group. Your trust in us inspires us to innovate, to support your current and evolving needs. I will now pause to take questions, if there are any. Thank you. Mary Vilakazi: Okay. There's a question in front. Unknown Analyst: Mary, compliments on the excellent results. I find it very challenging to see you're sustaining this level of growth because you seem to have accelerated your growth tremendously while the economy has not helped you much at all. If I may make a minor comment, on Slide #11 of your earnings, it would have been very helpful if you had included in that slide a line showing the headline earnings per share. And maybe you could consider that in the future. And then on your private equity realizations, every presentation, they're a feature of the results. What fascinates me is the size of the deals that you must be doing and the quantum. And again, I asked the question how sustainable that might be. And on Slide 23, the global markets growth of 62%, again raises the same sustainability question. And I found your comment at the end, quite telling in terms of the dividend in the context of the U.K. provision. Because unless the world falls apart or the U.K. motor market falls apart, that's never going to impact your overall earnings to any extent to affect your dividend. Mary Vilakazi: Okay. I will take some of those questions. And then Emrie, you can prepare for the private equity related one and the global markets one. Let me see if my memory holds well. So we are confident that we can deliver on the full year earnings guidance and the strong growth print. And as I said, I think the quality of our franchises and the diversified portfolio that we have, it means some other businesses are doing well and others are not doing well. We can have an overall good outcome. So -- and I suppose we've had a number of very large one-offs in the past. And I think our commitment is to ensure that we are overall ensuring that -- the portfolio growth. So the last period that we've operated in, in the last couple of years, the macros in South Africa haven't been particularly supportive, and we are constructive on a better operating environment going forward. And I suppose the fact that our business is 80% in South Africa, this is really the market that we are looking to see some recovery. And you can see we are gaining traction in our strategies in broader Africa, where some of those markets are growing. So I think you can take comfort that our earnings growth is sustainable. I'll ask Emrie to comment on the RMB private equity portfolio, which actually has quite a number of investments and then the global markets recovery -- oh, sorry, Markos will make a note of the headline earnings per share disclosure for next time. I'll come back to the U.K. Emrie Brown: Thanks, Mary. Yes, just firstly, private equity portfolio. I think first of all, for us, we have been very focused over all the years to build a diversified portfolio. And as indicated in the booklet, we, I think, now take a much more active portfolio management approach in respect of the portfolio, which ensures that we make continuous investments. I think if you think back about 5 years ago, that was one of the challenges, we didn't regularly invest. And -- so the portfolio management from an investment perspective, but also managing continuous realizations to have the velocity of capital is very much a focus on how we think about our private equity business. So I think where we are at the moment, based on the contribution of private equity to the overall RMB and FirstRand results, this is the level that we're comfortable with, and we manage that part of our business very much with that in mind. On global markets, yes, I would say this year is more a bounce-back from a low in the prior year as well as very deliberate strategies in how we take our global markets products to our full client base. So we feel that this is a more normalized performance. But having said that, the global markets business is exposed to geopolitics and market movements. So it is always a business where there can be fluctuations, but we feel the foundations we've laid in the business set us up for a much more sustainable performance going forward. Mary Vilakazi: And lastly, on the U.K., I mean the reason we make that statement is because the final redress scheme by the FCA is going to be announced end of this month, they have undertaken. And we haven't -- and we are waiting for that final redress scheme to ultimately understand what the financial impact on the group will be. So we don't have the number, but we also know that there are some scenarios that -- where the number is not the amount that we've provided. And hence, we make that comment that as we've worked through all the expected scenarios from the consultation paper, shareholders can be assured that the capital that we sit with should be able to cover any of those scenarios. So still high levels of uncertainty. But hopefully, the end is near with the redress scheme over the next month. Do we have any other questions online? Sorry, James. James Starke: James Starke from RMB Morgan Stanley. Mary and Markos, congratulations on the strong results. Three questions from me. The first, I think maybe we can pass this one to Harry. On the customer gains in FNB, can you perhaps expand on some of the initiatives you've deployed to turn around the growth trends there? Then just pleasing progress on the cost-to- income ratio more generally, I mean, how do you plan to sustain this momentum going forward? And then lastly, just on capital generation, it is very strong. Can you please expand on your plans for the surplus capital generation, particularly with regards to acquisitions? Mary Vilakazi: Okay. So we just take it in that order. Harry? Hetash Kellan: James, thanks for the question. If you look at the customer growth, I mean, if you look at the investments we've done in terms of infrastructure and people, so you've seen growth in our head count, but a lot of that growth is sitting in our branch network. Branches, I mean, if I remember the number right, between December last year to December now, our branches were up 13. So 13 branches new. At the same time, we're investing in what we call AgencyPlus. That went from 63 to just over 170 AgencyPlus in the last 12 months. So we actually got a larger footprint in order to be able to serve customers. And clearly, we've capacitated that with individuals who are able to sell. So I mean, I think that's probably the largest drivers. Mary Vilakazi: Lots of hard work, James. I think on the cost-to-income ratio, Markos will cover the expense piece and the sustainability of the cost trajectory. But James, fair to say that our ambition is for that cost-to-income ratio to have a full handle looking forward. So Markos, maybe on the cost? Markos Davias: Thanks, James. I mean, I guess we've said it a few times, but positive jaws will result in the CTI improving. So that focus is actually what drives it. And during budget periods, I mean, that's kind of the key point that we drive into the teams when they bring budgets. If you have revenue up by a low number, you better find a way to manage the cost there. What I would say on the cost that's important is that we have a high investment base already in the base. And as we deliver projects, we reinvest that from the current cost structure into the base. So we're not doing this at the expense of important investments. And you can see, where there are one-offs to be incurred to increase implementation costs and the likes, we take them. But effectively, it actually is the base, size of the cost base allows us to kind of manage this to the objective we stated. Thanks. Mary Vilakazi: Okay. And then, James, on your question on the surplus capital. So I mean that we acknowledge. I guess the Board's target range for the CET1 is 11.5% to 12.5%. So at 14.4%, we are way over. I guess you have to appreciate the fact that we've been operating in an environment where there's been high levels of uncertainty because if it wasn't that we had to make sure that we are well positioned to deal with any adverse scenarios, I suppose we would have reconsidered those capital levels in the last year. So hopefully, we are close to doing that, and then we can have a bit more clarity on the capital that we require. So I think we have enough capital to fund any of the growth initiatives that we are looking at. We are not holding on to that level of capital because there's something very big pencil-marked, James. I think it's just to get through the U.K. uncertainty soon. You can trust that we will do the right thing when we have better clarity on the way forward. Andries, do you want to comment? Unknown Executive: Mary? Sorry, yes. Unknown Attendee: [indiscernible] from Reuters. Mary, what's your strategy, if any, around East Africa? I mean we're seeing a lot of activity there. We're seeing South African lenders also having a lot of interest there. I mean are you thinking about it? Are you actively looking in that region? Mary Vilakazi: Okay. This one, I can definitely pass on to Andries, who looks after the broader Africa strategies and as well as M&A activities. Andries Du Toit: Thank you. I'll also link to the previous one. When we do expand to M&A, there's two fundamental cornerstones, we underpin our disciplined FRM and we have to add shareholder value. On expansion, we look at capabilities. Can we acquire capabilities, customers? Is it franchise value? And then to your question, geographical expansion. Eastern Africa is a key market we want to enter. We've had discussions. It didn't come to fruition, and we're looking at appropriate vehicle, but it's very important from a FirstRand perspective, we won't [indiscernible] on our FRM discipline and how do we create shareholder value. Mary Vilakazi: Yes. So we keep looking. We've been looking for a while, though. But hopefully, some of the consolidation activities that are taking place in the market will open up some opportunities for us. There's another question, okay. Okay. There's -- yes, you come here. Do we have questions on the webcast? We've got a few. Okay. Unknown Analyst: Mary, if I may. On Slide 60, there's a caption that says share price incentives linked, a negative. Now I follow your share price probably as closely as you do, and I haven't seen it negative. I know it bounces around. I'm just fascinated to understand the basis of that comment. Mary Vilakazi: Okay. Thanks. Markos can take that. Markos Davias: Thanks. That refers to the share scheme -- employee share scheme, which previously vested at a higher level based on the performance in prior periods. And all it means is that currently, that vesting is expected to be lower based on the current performance measures. And when I say high, it was higher than 100% in the prior year. So it's currently accruing at 100%, which is below that. So it's negative year-on-year. That's the main reason. There's not share price -- there's no share price impacts into the employee share scheme. It comes through IFRS 2 charge. Unknown Analyst: Did I hear you correctly that -- I saw your structured aspects of your performance incentives. Is that the key point here? Markos Davias: Yes. So it's just the way the accounting plays out on the long-term incentive scheme, as such. Mary Vilakazi: Okay. Let's go to the line. Maybe what you can just maybe do is just check if some of the questions we've answered already, and maybe we don't repeat them. Operator: We'll do. Thank you, Mary. Some of them have already been partially answered. We'll start with Baron Nkomo from JPMorgan. Given your strong capital ratios, in which segment or region do you see the greatest opportunity to deploy capital over the next 2 years? I think that's been partially answered. The second one is, what is your strategy to deepen and grow broader Africa franchises? Mary Vilakazi: Okay. So I think opportunities that we see for -- in our business, I think the Corporate and Commercial sector, I think we are quite optimistic about the structural economic reforms and activity that will happen in SA. So I guess there, we would say that that's what we've earmarked. Hopefully, the Retail credit expansion as suggested provides more opportunities for further growth of our Retail franchise. So yes, so I think -- we still think that our balance sheet will probably track more the Corporate, Commercial aspects of opportunities. And I guess, broadly, we are looking at making sure that all our franchises are growing and are actively taking advantage of the different various opportunities. So it's not just penciling in those growth aspects for SA. And then how we -- plans to grow broader Africa. I suppose we are executing on organic strategies. We had an opportunity of buying the Standard Charter book in Zambia. So that provided us an opportunity to scale some of our existing markets. The M&A team continues to look if there are other inorganic opportunities that come our way. But I'd say that we are quite small in Ghana and Nigeria. And I think in the various markets, we still think we've got runway in our current existing portfolio. So -- but there's lots of focus to ensure that we are capturing the growth that we are expecting from the rest of the region. Operator: We've got Charles Russell from SBG Securities. He's got three questions. I think one of them has been answered. The first one is, can you take us through key dates and FirstRand's decisions and responses over the coming 12 months relating to the U.K. motor commission issue? The second one is, can you unpack the 37% growth in trading and fair value income? And then the third one, I think we've answered, saying our CET1 looks very full, but I think we've answered how we're going to manage that. Mary Vilakazi: Okay. Markos? Markos Davias: So on the dates, I mean, we've called out that even recently as this week, the FCA have said that by the end of March, they will give an update on the final redress scheme paper. Obviously, our legal teams would need to work through that together with our specialists, and we would have to then regroup on a path of action if we are happy with the paper or if we are not. So that will play out in the next month. Thereafter, we'll update shareholders once we've got a sense of kind of what the impact is. We've got all our models built and ready for the various scenarios that can play out. And in the booklet, we do call out kind of the three criteria, which are the biggest drivers of impact in things that we didn't agree with in the original paper. Mary Vilakazi: And then the trading income question. Unknown Executive: I didn't get it. Mary Vilakazi: Okay. That's basically the global markets recovery that we spoke about. And there is a slide, I don't know which slide that is, that shows where the global market growth came from. I mentioned that slide number. And yes, I suppose Emrie has covered it earlier on that for global markets, it's a recovery because we had a number of years where we went backwards, and I think it's largely reflective of global markets. Operator: Then the last set of questions is from Ross Krige from Investec. He says, just to clarify on the FY '26 guidance. Does unchanged guidance imply an expectation of high mid-teens earnings growth ex U.K. motor provisions and assuming PE realizations as expected? And then the second question, on the U.K. motor commission-related OpEx, how do you expect this to unfold in H2 '26 and beyond? Mary Vilakazi: Okay. I think Markos has covered the last point by saying that depending on just the path that we take forward, any expenses that get incurred will be charged against the provision that we've released. I think it was just to give an indication that, that base, hopefully -- that base should -- hopefully should not have as many legal expenses as we have incurred, and I think that's how they will be dealt with. And the other question, [ Levo ]? Operator: Just on the guidance. Mary Vilakazi: On the guidance, yes. Okay. Let me step through this slowly. So the guidance we gave for the full year, it had the U.K. provision, obviously, in the base. And we said, assuming there's no other provision, earnings growth should be up mid-teens. So that's the guidance that we are confirming today. And private equity, there's uncertainty. There's always uncertainty, but I guess we are not saying we are -- we're not saying that the guidance is subject to that realization taking place, but we note that there can always be changes in the dates. I think my RMB team are still good for their number. Operator: We have additional questions that have come through online. So the first one is from [ Mario Stratum ]. He does say, well done with your strong insurance new business growth and thank you for your improved disclosure on these businesses. Can you please speak to the near-term outlook for operating expenses growth, the rundown profile for other participation agreements and the potential for short-term insurance to double policy count by FY '30. Mary Vilakazi: Okay. Andries, maybe you can take some of that and then I will fill in for the insurance. And [ Mario ], I suppose all these questions are related to insurance, even the expense outlook. Andries Du Toit: Yes. No problem. The strategy was to obviously originate our own licenses. So that will continue. We're quite confident to the numbers that you've alluded to, both as we go in our own channels and also open market on the short term. Our expenses will probably continue to be at high end as we invest in new products and also new distribution and also further into new business lines where we're underrepresented. And maybe... Mary Vilakazi: Yes, but I mean there's a fair chunk of investment in the distribution channel, Andries, which, once we get to a point whereby surely we have -- we are at the levels we want to operate with, I mean it will be rather acquisition cost versus an investment in that. So that I would say is a part of cost that profile should change. Markos Davias: Maybe just a point to add on the other participating agreements. This year, you'll see the 66% decrease means there's a ZAR 50 million 6-monthly base there. So it's a much more manageable base than what it was in the past year. So its impact is reducing. Operator: And then we have the last one, it comes from Harry Botha from BofA Securities. To clarify, is the mid-teens earnings growth potential still intact for 2026? Are you making any technical adjustments to your hedging program for yield curve changes? Mary Vilakazi: Okay. So the first answer is very simple. Harry, no change to the full year earnings guidance that we provided. Hope that helps. [indiscernible] do you want to comment on the hedging strategy? Unknown Executive: So the hedging strategy follows an investment process. So with the volatility we've been experiencing this week. Certainly, there would be tactical adjustments, but that would follow the investment process that's in place. Mary Vilakazi: Okay. I think -- are we at the end? Operator: Yes, we have no further questions. Mary Vilakazi: Okay. All right. No further questions in the room? Okay. Well, thanks, everybody, for joining. Thanks for your time, and we'll see you in 6 months' time.
Operator: Ladies and gentlemen, thank you for standing by for Autohome's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] If you have any objections, you may disconnect at this time. A live and archived webcast of this earnings conference call will be available on Autohome's IR website. It is now my pleasure to introduce your host, Sterling Song, Autohome's IR Director. Mr. Song, please go ahead. Sterling Song: [Interpreted] Thank you, operator. Hello, everyone, and welcome to Autohome's Fourth Quarter and Full Year 2025 Earnings Conference Call. Earlier today, Autohome distributed its earnings release, which can be found on the company's IR website at ir.autohome.com.cn. Joining me on today's call is our Chief Financial Officer, Ms. Craig Yan Zeng. Management will go through the prepared remarks first, which will be followed by a Q&A session where they will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Autohome doesn't undertake any obligation to update any forward-looking statements, except as required under applicable laws. Please also note that Autohome's earnings press release and this conference call include discussions of certain unaudited non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. I will now turn the call over to Autohome's Chief Financial Officer, Mr. Craig Yan Zeng, for opening remarks. Craig, please go ahead. Yan Zeng: [Interpreted] Thank you, Sterling. Hello, everyone. This is Craig Zeng. Thank you for joining our earnings conference call today. 2025 was a pivotal year in our evolution, transforming from an automotive information platform into an automotive service ecosystem. Facing a dynamic industry landscape, our focus was on driving 2 core initiatives. On the content front, we continue to strengthen the development of high-quality content while enhancing our creator ecosystem and expanding new media distribution capabilities. On the service front, we accelerated the development of fully integrated online to offline services to create a more efficient and convenient end-to-end automotive service ecosystem for users and industry partners. Throughout this transformation, we are using AI as a core engine to drive product innovation and optimize operations and have already achieved substantial progress across multiple business areas. On the user side, by continuously optimizing and iterating our platform tools, we've effectively reduced decision-making costs and significantly enhanced the overall user experience. Taking new energy vehicles as an example, we've launched features such as optional configuration selection and vehicle comparison list further enriching the car selection tool set to help users make faster purchasing decisions. Moreover, by building a traffic alliance and expanding service categories, Autohome now covers a broader range of user scenarios, enabling us to better meet diverse user needs. Our O2O integration initiatives are key to reshaping the automotive consumption process. Throughout 2025, we organized over 5,000 offline automotive exhibition and group purchase events nationwide and collaborated across industries with user-oriented culture IPs such as esports and music festivals. These efforts went beyond the traditional car purchasing model by reaching a broader consumer base and ultimately integrating car-viewing, selection, test-driving and repurchasing and purchasing into an immersive experience. Specifically, within the development of our transaction service ecosystem, we launched the Autohome Mall in the second half of last year, providing users with a smoother digital car purchasing experience. Currently, this business, though still in its initial phase has achieved stable operations and is demonstrating positive momentum, which make us even more confident in the growth prospects of our transactions segment in the coming year. Behind every product and service upgrade, integration and real-world deployment is a strong foundation powered by data and AI technology. In 2025, we introduced our proprietary Cangjie Large Language Model and Tianshu Intelligence Service Platform, integrating Autohome's 2 decades of industry data and service experience with cutting-edge algorithms. This integration helps our ecosystem partners accelerate their smart transformation. Meanwhile, Autohome's full product portfolio has been comprehensively upgraded with AI-powered capabilities from AI smart assistant that supports users throughout the entire car selection and purchase process to AIGC technology that generates and distributes marketing content across platforms and further to AI-driven intelligent advertising placement covering the entire advertising chain and more. So we are advancing Autohome's shift from a traffic gateway into an intelligent engine that improves efficiency across the entire ecosystem. Specifically, over the past year, we continue to make progress in our content ecosystem, strengthening our professional influence and expanding our reach across new media channels. For instance, during the Guangzhou Auto Show last November, we integrated our event coverage with a creator conference centered on the theme of utility-driven coverage. We produced a marathon live stream spanning 2 days and 23 hours. Content was closely tied to real-world user scenarios and the results were distributed simultaneously across 6 major new media platforms, achieving a multidimensional scenario-based content broadcast. In addition, in the fourth quarter, we launched Autohome Wanxiang, a comprehensive one-stop content marketing platform for the automotive industry by building creator matrix centered on 5 key pillars: industry experts, technology, racing, outdoor lifestyle and global markets. We provide automakers with a one-stop automotive content service covering articles, videos, live streaming and more. This allows us to meet the diverse and various marketing needs of automakers. As of the end of 2025, the platform has attracted over 2,500 premier creators from Autohome and various new media channels. At the same time, we achieved significant results in building our MCN system. Autohome Media MCN now covers over 500 high-quality KOLs and KOCs across diverse fields, and our new media platforms have cumulatively reached over 100 million users. According to QuestMobile, Autohome's average mobile DAUs in December 2025 were 77.51 million, remaining stable year-over-year. In the new energy vehicle sector, following a successful pilot in late September 2025, Autohome Mall was officially launched in the fourth quarter, continuously advancing our transaction service upgrade, unlocking resources across the industry chain to expand vehicle offerings and optimize the car purchasing experience for users. Offline, we are focused on low-tier cities by establishing a franchise network, filling gaps in OEMs channel coverage. Autohome Mall's one-stop shopping trading and service ecosystem is still in the exploratory and refinement phase has already secured partners with 23 mainstream automotive brands. Looking ahead, we will continue to refine the automotive transaction ecosystem and work with partners across the entire industry value chain to advance the automotive industry's digital and online transformation. For the full year 2025, Autohome's NEV-related revenues, including the new retail business maintained steady growth, increasing by 30.2% year-over-year. On digitalization, we completed a series of AI-driven upgrades to our products in 2025. Early in the year, the Autohome launched an AI-powered intelligent assistant built on DeepSeek and Autohome's proprietary data, significantly enhancing the Q&A experience in the automotive vertical. In April, we introduced an intelligent used car purchasing assistant that addresses pain points in transaction matching and the purchase decision-making for nonstandard used cars. As a result, we now have achieved full AI assistant coverage across both new car and user scenarios, maintaining industry-leading quality response rates for user Q&A. For partners, we used our unique data resources and industry analytics models to upgrade our digital product line across the entire value chain from marketing outreach to potential customer acquisition to sales conversion and to aftersales services. This has enabled end-to-end efficiency improvements across the process for our clients. To date, we have served over 50 automotive brands. In our Used Car business, we continue to advance the development of a standardized service system. For vehicle pricing, our AI Vehicle Inspector has been successfully deployed across multiple third-party platforms. It allows users to obtain registration services through various inputs, including license plate images and vehicle registrations, while also providing in-depth and analysis of marketing pricing trends. Its pricing accuracy and the user adoption rate both rank among the highest in the industry. On the vehicle supply side, we partnered with 9 authoritative inspection agencies to establish the Vehicle Certification Alliance. Over the year, we completed standardized inspections for more than 500,000 vehicles, offering professional and reliable quality assurance for transactions on our platform and effectively reducing trust-related costs during the transaction process. Overall, in 2025, we remain committed to a user-centric approach, continuously improving the user experience through rich diverse and high-quality content as well as intelligent tools. We also achieved key breakthroughs in the practical application of AI and in building an integrated online to offline transaction ecosystem. Moving forward, we remain committed to improving the user experience, continuously enhancing our service and transaction ecosystem and driving the high-quality and sustainable development of Autohome. With that, let me briefly walk you through the key financials for the fourth quarter and the full year of 2025. Please note that I will reference RMB only in my discussion today, unless otherwise stated. Net revenues for the fourth quarter were RMB 1.46 billion. To break it down further, media services revenues were RMB 334 million. Lead generation services revenue were RMB 68 million. And online marketplace and others revenues contributed RMB 408 million. Cost of revenues in the fourth quarter was RMB 319 million compared to RMB 428 million in the fourth quarter of 2024. Gross margin in the fourth quarter was 78.2% compared to 76% in the same period of 2024. Turning to operating expenses. Sales and marketing expenses in the fourth quarter were RMB 739 million compared to RMB 718 million in the fourth quarter of 2024. Product and development expenses were RMB 258 million compared to RMB 328 million in the same period of 2024. General and administrative expenses were RMB 115 million compared to RMB 131 million during the same period of 2024. Overall, we delivered an operating profit of RMB 92 million in the fourth quarter compared to RMB 232 million for the same period of 2024. Adjusted net income attributable to Autohome was RMB 304 million in the first quarter compared to RMB 487 million in the corresponding period of 2024. Non-GAAP basic and diluted earnings per share in the fourth quarter were both RMB 0.65 compared to RMB 1 for both in the corresponding period of 2024. Non-GAAP basic and diluted earnings per ADS in the fourth quarter were RMB 2.60 and RMB 2.59, respectively, compared to RMB 4.02 and RMB 3.99 respectively, in the corresponding period of 2024. Next, I will briefly summarize our full year 2025 results. Total revenues were RMB 6.45 billion, of which media services revenues were RMB 1.15 billion, lead generation services revenues were RMB 2.71 billion and online marketplace and others revenues were RMB 2.59 billion, representing an increase of 8.8% year-over-year. In addition, we delivered an adjusted net income attributable to Autohome of RMB 1.61 billion with an adjusted net margin of 24.9%. As of December 31, 2025, our balance sheet remains robust. Cash, cash equivalents, short-term investments and long-term financial products totaled RMB 21.36 billion. We generated net operating cash flow of RMB 0.89 billion in 2025. On September 4, 2024, our Board of Directors authorized a share repurchase program under which we are committed to repurchase up to USD 200 million of Autohome's ADS for a period not to exceed 12 months thereafter. On August 14, 2025, the Board approved an extension of the program through December 31, 2025. Under this program, we have repurchased approximately 7.12 million ADS for a total cost of approximately USD 185 million. I'm also pleased to announce that on March 5, 2026, our Board of Directors authorized a new share repurchase program under which we may repurchase up to USD 200 million of Autohome's ADS over the next 18 months. This reflects our strong confidence in our business prospects and the long-term development as well as our consistent commitment to continuously creating and delivering value to our shareholders. So that concludes our financial summary. We are now ready to open up the Q&A session. Operator, please open the line for the Q&A. Operator: [Operator Instructions] Our first question comes from the line of Thomas Chong of Jefferies. Thomas Chong: [Interpreted] My first question is about can management provide more color about your thoughts about the auto industry outlook? My second question is about capital return. We know there are updates on buyback, how should we think about the dividends? Sterling Song: [Interpreted] First, let me share with you some recent market developments and future trends. First, we believe the total vehicle sales in 2026 is expected to increase slightly or modestly with the overall industry profitability still remain under pressure. On the policy side, the purchase tax incentives for NEVs are gradually being phased out. And at the same time, the few new subsidy policy has shifted from a fixed subsidy to a variable subsidy. On the market side, both the China Passenger Car Association, that is CPCA and the China Association of Automobile Manufacturers, CAAM, both of them projected that this year, China's total auto sales will only increase slightly by 1% year-over-year, which is the lowest in the past few years. So we believe the competition in the auto market will shift from the price war to value war. And meanwhile, overall, in the auto sector profitability still remains under pressure. And the profit margin last year for the auto sector is only 4.1%, down from 4.3% compared with the previous year. And so the overall sector is entered into a year of very low profit. So next step, we believe the technological innovation and intelligentization should be the key themes for the competition for auto sector in the next stage. So for ourselves, for Autohome, we believe this represents a rare opportunity to leverage our integrated O2O business model to connect the entire vehicle purchasing life cycle for users. At the same time, we can also help OEMs to acquire more incremental customers and drive additional sales to helping them to capture greater market shares in an increasingly competitive and more mature market environment. Just now, we announced the Board of Directors authorized a new share repurchase program. And also on the cash dividends, we firmly remain committed to distributing no less than RMB 1.5 billion in total in the cash dividend for the full year. And so we can ensure consistent, reliable cash dividends to our shareholders. So over the long run, we have committed to building a comprehensive shareholder return framework centered on sustained dividend plus share repurchase, striving to deliver predictable and sustainable returns to all our shareholders. So in the future, we will continue to uphold the long-term, stable and proactive shareholder return policy. We sincerely appreciate all our shareholders for their long-term strong and continued support to the company. Operator: Our next question comes from [indiscernible] from CICC. Unknown Analyst: [Interpreted] After Haier became the major shareholder, how has the company's business plan been updated? And what's the potential for future collaboration? And my second question is what are the expansion plan for offline stores? Sterling Song: [Interpreted] After Haier becoming our new controlling shareholder, we don't have material change in our overall strategic direction. First, we are strengthening the development of user first, and we are more focused on the user experience as the top priority. Second, as we just mentioned, we will transform from information platform to a transaction platform. So we set up the Autohome Mall, which was established last year. And third, with the continuous upgrade of AI capabilities, which will bring us more -- help us more in our future operation. So in the long run, our target is to -- we will transform from information platform into a one-stop transaction ecosystem platform. And in terms of synergies with Haier, we will leverage Haier's strength in channels, supply chain management and service networks to further optimize our integrated O2O new retail model. We will explore a low-cost, high efficiency and experience-driven channel sales approach to drive our business upgrade from a transaction matchmaking model to a full chain service model. And ultimately, our goal is to provide more convenient, more transparent and trustworthy car purchasing experience covering the entire [process] from the vehicle searching, selecting to purchasing, using and replacing. For the offline stores, we will continue to expand our primary franchise model. So our focus should be covering more cities from Tier 3 to Tier 5 low-tier cities to help OEMs to strengthen their channel networks and find them -- to try to help them to find more incremental users and addressing the OEMs pain points, for example, insufficient channel coverage in low-tier markets, et cetera. Operator: Our next question comes from the line of Richie Sun from HSBC. Ritchie Sun: [Interpreted] Firstly, regarding the NEV business, can you share what will we bring to the partners in 2026? And what are the key indicators we should look for to assess the development progress? Secondly, in terms of the rapid development for AI agents, we are seeing there's some impact to some industry and platforms. So how does management assess the impact of AI agent towards auto verticals? And what would Autohome do to address this risk? And what are the progress made in the AI applications? And finally, in terms of the dealer side, the dealer's related revenue has been falling. So when do management think this decline will actually stop? Sterling Song: [Interpreted] Thank you for your questions. First, let me answer your question about what value can we -- can our NEV transaction business bring to our partners. As I just mentioned, the transaction business was launched in the second half of last year. And this year, we'll continue to further explore this business model. So for EVs, what we provide is far beyond the advertising and lead generation businesses. So we are now delivering a complete end-to-end solution that covers from car searching to transaction conversion process. So this approach differentiates Autohome from other platforms in the market. In terms of metrics to monitor for this progress is quite simple. First is the number of brands, how many brands want to cooperate with us, want to grow our platform. For offline, the metrics should be focused more on the coverage of the channel works. Besides, in addition, transaction volume is another key metric. We are -- what we are looking now to validate this business model and we target to increase the scale of this model gradually. For the how to assess the AI agents impact on the auto media vertical, first from the interaction model level, AI agents are more and more becoming the new hub connecting users and services with conversational interaction replacing the traditional models. And the second is more from the service side, service level. This is just what we just mentioned, we are transitioning to more transaction model, transaction platform. So for Autohome, our response has 2 points. First is, we try to build an Autohome AI agent for the auto sector, for the auto industry, and we try to enhance the 2C user experience. So what we are doing is we try to enable the agent to deliver a complete one-stop personalized concept style service across the entire auto life cycle. So we are -- what we are doing is we try to make AI a trusted intelligent companion throughout the car purchasing to ownership life cycle. The second point is we try to establish an AI-based intelligent service network, which can connect the automakers, dealers, financial institutions and others, stakeholders, et cetera, so to enable the direct service delivery and collaborate ecosystem value creation, and we try to balance the 2C experience and 2B conversion efficiency. From the very beginning, Autohome focus on the AI, and we have made a lot of progress. For example, we developed a proprietary auto vertical large language model, which is called Cangjie. It ranks first in the auto knowledge evaluation among Chinese large models. And for the C-end users, AI pioneered conversational assistant covering the full life cycle of car searching, selection, purchasing and using so we can achieve industry-leading performance evaluation and significantly enhance the users. And in this way, we can shorten the user decision-making cycles. And for the B-end customers, we also leverage AI to make more new content, provide one-stop AIGC capabilities and intelligent operational services. And we will focus on the dealers' business conditions. Last year, our dealerships suffered severe losses. So their survival conditions worsened. And even we find new vehicle prices fell below the prices for used cars. From our data statistics, it showed over 70% of the dealers nationwide in China were in loss-making. Because of the tough environment, some dealers have exited the dealership network last year, which is the most difficult in the last few years. So based on our own data and statistics, at the end of last year, the total number of dealers declined by approximately 5% year-over-year. So under such environment, the decrease in dealer groups budget was anticipated by us already. So this year, our renewal for our dealership member of product has been completed. So the coverage still remains at a solid level. And this year, next -- for the next step, we will work with our dealer customers together to try to find solutions, and we want to get a win-win situation for both sides. So as we just mentioned, we will work with dealer clients together, for example, work on more digital products, increase their traffic, increase their conversion rate and other auto business as well, try to help them to increase their [indiscernible] to help the dealers' operations, and we try to decrease any negative impact on their operations. The above is my answer to your questions. Thank you. Operator: There are no further questions at this time. I'll turn the call back over to management for closing remarks. Sterling Song: [Interpreted] Thank you, everyone. Thank you very much for joining us today. We appreciate your continued support and look forward to updating you on our next quarter's conference call in a few months' time. In the meantime, please feel free to contact us if you have any further questions or comments. Thank you. Goodbye. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Tel-Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 5, 2026. The Recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO; and Mr. Yehuda Ben-Ezra, CFO. Before I turn the call over to Mr. Ittai Ben-Zeev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements and interim report for the fourth quarter and full year of 2025, in which full and precise information is presented and may contain inter-alia forward-looking statements in accordance with Section 32A of the securities law, 1968. In addition to IFRS reporting, we might mention certain financial measures that do not confirm to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Reconciliations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the Investor Relations portion of our website at ir.tase.co.il/in. Mr. Ben-Zeev, would you like to begin? Ittai Ben-Zeev: Good evening, Israel Time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. The financial statements for 2025 show that TASE ended the year on a high note. Q4 2025 capped another record year for TASE with revenues reaching an all-time high of ILS 149.3 million for Q4 and ILS 563.5 million for the full year 2025. These results represent a record increase of 29% year-over-year and quarter-over-quarter. We also saw a record increase of 58% in adjusted EBITDA, and an increase of 9.5% in the adjusted EBITDA margin as well as an all-time high in TASE net profit with a 79% increase compared to 2024. All this was achieved while continuing to maintain organic growth across all TASE's core activities despite Israel having fought a multi-front work for most of 2025. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. For most of 2025, trading on TASE took place against the backdrop of the ongoing world and elevated volatility. Against this background, the Israeli capital market has exhibited resilience and economic strength during 2024 and 2025. The leading equity indices on TASE broke their historic record on numerous occasions, outperforming the leading global indices. The TA-90 Index and the TA-35 topped the global return table with gains of 46.6% and 51.6%, respectively, compared to 17.9% on the S&P 500 Index and 21% on the NASDAQ-100 Index. In addition, the positive and exceptional trend was also evident in the sectoral indices, particularly in the financial sector. At the end of 2025, TASE equity market cap reached ILS 2 trillion, a 46% increase from year-end 2024 due to the impact of the rise in TASE equity indices. Trading volumes also set new records with the cash equities ADV rising to ILS 3.4 billion in 2025, 57% increase over 2024. The IPO market stagged an impressive resurgence in 2025 with 21 IPOs and an additional 5 companies listing their shares without raising capital, including 1 dual-listed company. Overall, the total capital raised on the equity market sold to ILS 21 billion compared to ILS 8 billion in 2024. In 2025, the TASE bond market displayed increased trends as a major source for debt funding, both for corporate issuers and for the Israeli government. Corporate bond issuances totaled ILS 187 billion in 2025, compared to ILS 124 billion in the previous year. The Ministry of Finance raised ILS 137 billion in Israel during 2025. The strong demand and successful issuances in Israel and abroad, is a powerful sign of confidence in the Israeli economy. Trading volumes in the corporate bond market rose by 9% in 2025, compared to the volume in 2024, while the government bonds ADV, amounting to ILS 3.3 billion similar to 2024. We have continued implementing our strategic plan to strengthen business activity. As part of a significant milestone in strengthening TASE international profile and attracting foreign investors, I'm pleased to update that we have completed transition to a Monday through Friday trading week at the beginning of 2026. In the last 2 months, this move has already led to a substantial influx of foreign investors during Friday trading, exceeding the average recorded on Sundays in 2025. In addition, on February 23, the cyber giant Palo Alto Networks began trading on TASE, officially making it a dual-listed company on the U.S. and Israeli market, which constitutes a profound vote of confidence in Israeli capital market. And we believe this will lead to further breakthrough for the local capital market while strengthening TASE position on the international financial stage. Foreign investors too expressed confidence in the local capital market and purchased equities totaling ILS 4.4 billion in 2025, mainly in the financial and defense sector. This is in marked contrast to the previous year when foreign investors' activity resulted in net sales. It is worth noting that in the first 9 months of 2025, the value of foreign investors holdings in non-dual listed equities grew by 70%, and in September 2025, the value of their holdings reached an historic high of ILS 64 billion, reflecting the deepening presence in the Israeli market. The Israeli retail segment continued to show significant increased interest in the domestic market and the growth in the opening of new trading accounts continued throughout 2025. The retail investors opened approximately 200,000 new trading accounts, 25% more than in 2024. In the trading segment, we continue to invest and develop the indices market in 2025. In total, we launched 10 new equity and bond indices during 2025, of which 7 indices are exclusive and we intend to continue developing new indices to increase and diversify the products as part of our strategic plan to refine and develop more investment products for the investors. At the end of December 2025, the total AUM of all TASE indices amounted to ILS 148 billion compared to ILS 99 billion at the end of 2024. The total AUM of TASE equity indices amounted to ILS 91 billion, compared to ILS 48 billion at the end of 2024. In the derivatives market, we have seen average daily trading volume grow by 14% compared to 2024. In light of the success of the equities market making reform, that I have mentioned in my previous calls, 7 large companies included in the TA-35 Index joined the tailor-made market-making program, resulting in the trading volumes of those companies increasing significantly. I would now like to provide you with an update to what I reported to you in our previous earnings call regarding examination of a partial or full sale of our index activity. We are currently negotiating to enter into a deal to sell the activity and to cooperate strategically with a major international entity. At this stage, there is no certainty as to when, if at all, the negotiation will bear fruit and result in a binding agreement. I would also like to update you regarding the dividend payment to the current shareholders. You will no doubt recall that we previously adopted a dividend distribution policy for the years 2024 to 2026, pursuant to which TASE is to distribute a cash dividend to its shareholders at a rate of 50% of the annual net profit for 2025. The dividend according to the policy amounts to ILS 90.5 million. In addition to this, in light of the substantial growth in TASE profitability in 2025 and the consequent significant increase in the company's liquid reserves, TASE will distribute a special dividend of ILS 54.3 million. In all, TASE will distribute a total dividend of ILS 144.8 million, representing ILS 1.56 per ordinary share that will be paid on March 20, 2026. Furthermore, during the coming year, TASE management will examine drawing up a buyback plan with this being subject to market conditions and other relevant considerations. In conclusion, the 2025 financial statements show that despite all the challenges of the last few years, we are witnessing the growth and resilience of TASE and of the Israeli economy. Our financial statements continue to reflect our investment in developing new and diverse products for the benefit of the public and the investments made for the benefit of technological and innovative developments so that we continue to achieve the goals we have set for ourselves in accordance with our strategic plan for the coming years. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the year results. Yehuda Ben-Ezra: Thank you, Ittai. As Ittai mentioned earlier, TASE outstanding fourth quarter financial results capped off a highly successful 2025 with the company is delivering record revenues across all lines of businesses. Throughout the year, including the fourth quarter, TASE demonstrated remarkable resilience, [ given ] Israel faced an extended multi-front conflict. This will thus highlight the strength of Israel economy and the stability of its capital markets, showcasing best consistent performance under challenging conditions. I will continue with Slide #7, which shows some of the key highlights from our results for the year 2025. Our revenues in 2025 reached a new high of ILS 563.5 million, increasing by a record 29% compared to the previous year. Adjusted EBITDA in 2025 improved significantly by 58% to record of ILS 293.8 million, while the adjusted EBITDA margin also improved from 42.6% to 52.1%. Our net profit displayed substantial growth of 79% and increase to a new record of ILS 181 million. Our basic EPS in 2025 reached a new high of ILS 1.97, increasing by a record 81% compared to the previous year. I will continue with Slide 17, which shows some of the key highlights from our results for the fourth quarter. Revenues amounted to ILS 149.3 million compared to ILS 115.4 million in the same quarter last year, a 29% increase. This is the highestly quarter of the revenue since the TASE IPO and growth was evidenced across all operations. Our revenues from non-transactional services amounted to 63% of total revenues, the same the corresponding quarter last year. Expenses totaled ILS 84.5 million compared to ILS 84.2 million in the same quarter last year, a 0.4% increase. Adjusted EBITDA totaled ILS 80.8 million, compared to ILS 46.8 million in the same quarter last year, a 73% increase. The increase was due to higher revenues. Net profit amounted to ILS 51.6 million compared to ILS 25.4 million in the same quarter last year, a 104% increase. The increase was due mainly to higher average for services. This increase was partially offset by the increase in tax expenses. I will continue with Slide 15, where we can take a deeper look into our revenues in the fourth quarter. Revenues from trading and clearing commission increased by 27% compared to the same quarter last year and totaled ILS 54.7 million. The increase is due mainly to higher trading volumes, particularly in shares and in the volume of trade share reduction of mutual fund units. Revenues from listing fees in annual levies increased by 14% compared to the same quarter last year and totaled ILS 25.4 million. The increase is due mainly to revenue for annual levies as a result of the increase in the numbers of companies and funds that pay an annual levy. In addition, revenues from listing fees and examination fees were also higher due to the increase in the volume of funds raised. Revenue from clearing [ and ] services increased by 58% compared to the same quarter last year and totaled ILS 41.2 million. The increase is mainly due to the completion of regulation measures relating to the OTC transaction. Other factors related to the increase were the higher custodian fees as a result of the increase in the value assets under custody and the updating of the custodian fees price [ lift ]. Revenues from data distribution and connectivity services increased by 19% compared to the same quarter last year and totaled ILS 27.4 million. The increase is due to an increase in revenues from index licensing fees, mainly as a result of the increase in the value and the use of TASE indices and from higher data distribution revenues for businesses and private customers in Israel and abroad. I will continue with Slide 18, which shows some of our fourth quarter expenses. Compensate expenses decreased by 4% compared to the same quarter last year and totaled ILS 43.3 million. The decrease was due to a decrease in variable compensation. Computer and communication expenses increased by 11% and totaled ILS 11.7 million. The increase results mainly from an increase in the maintenance cost of new computer system and licenses and from an increase in man power and projects. Marketing expenses decreased by 40% compared to the same quarter last year and totaled ILS 1.7 million. The decrease is mainly from a decrease in campaigns. Depreciation and amortization expenses increased by 6% compared to the same quarter last year and totaled ILS 15.2 million. The increase in depreciation expenses was due mainly to the upgrading of infrastructure and the launch of new products. Net financing income totaled ILS 2.5 million compared to net financing income of ILS 2.6 million in the same quarter last year, a 1% decrease. Let's now go to Slide 19, where we can review our financial position. At the end of year 2025 [Audio Gap] our adjusted equity includes deferred income from listing fees and excluding open derivatives position balances, represents 77% of the adjusted balance sheet. We held ILS 494 million in cash and investment financial assets. The balance of the bank loan totaled ILS 21 million. The surplus equity, other regulatory requirements at year-end 2025 totaled ILS 550 million compared to ILS 627 million at year-end 2024. The decrease was mainly due to the decrease in the TASE equity resulting from the buyback of TASE shares and a distribution of dividend in 2025. This decrease was partially offset by the net profit in 2025. The surplus liquidity, other regulatory requirements at year-end 2025 totaled ILS 310 million compared to ILS 172 million at year-end 2024. The increase in surplus liquidity is mainly due to the increase in the EBITDA. I will continue with Slide 20, where we can review our fourth quarter cash flow highlights. Cash flow from financing activities resulted in negative cash flows of ILS 13.1 million compared to negative cash flow of ILS 4.9 million in the third quarter last year. The higher negative cash flow are due mainly to proceeds of ILS 10 million from the sale of our arrangement shares in the same quarter last year. Cash flows for investing activities resulted in negative cash flows of ILS 38.5 million compared to negative cash flow of ILS 20 million in the same quarter last year. The increase in negative cash flow is due to -- mainly to the acquisition of financial assets net. TASE free cash flow amounted to ILS 75.4 million compared to 35.9 million in the same quarter [Audio Gap] the increase in the EBITDA. Also, the Board of Directors today approved the payment of a dividend of ILS 144.8 million, representing ILS 1.56 per ordinary shares to be distributed on March 2026. In conclusion, TASE performance in the last quarter and throughout 2025 demonstrates its solid foundation as well as the fundamental resilience and growth potential of the Israeli economy. And with that, I will return the call over to Operator to conduct the Q&A. Operator: [Operator Instructions] The first question is for Hector Erazo from Jefferies. Hector Erazo Pinto: This is Hector Erazo on for Dan Fannon at Jefferies. On expenses, as you think about the budget for 2026, how does that compare to 2025? And what are the areas of spend that are different going into this year? Ittai Ben-Zeev: Hector. So I think looking at this year, in terms of our marketing budget, it will not exceed what we had in the last couple of years. In terms of the compensation of the employees, it should be similar according to the agreement that we have with the employees. And we continue to invest in our IT, and you can estimate the CapEx ILS 55 million to ILS 60 million a year. So shouldn't be any surprises on that front. Operator: [Operator Instructions] There are no further questions at this time. Thank you. This concludes the Tel Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Stella David: Good morning, everybody, and welcome to Entain's 2025 Results Presentation. I'm delighted to be here to present a strong set of results. I'm joined this morning on stage by Rob Wood, our CFO and Deputy CFO. And I also have members -- by the way, can you hear me? Good, good. Okay. Always helps in a presentation to be heard, I think. Anyway, I'm also joined by the IR team here in the audience. We also have senior members of the executive team in the audience as well. And we have our new CFO designate, Michael Snape, who's in the front row as well. So welcome to everybody. And now on to the agenda. I'm going to start with the headlines and some of the highlights of our strong progress. After that, Rob will then take you through the financials and provide you with the guidelines for 2026. And then it's going to be back to me to discuss our strategic delivery, how our priorities are evolving to further accelerate our performance and why we have confidence in our pathway to earnings growth, margin expansion and cash generation, including our conviction that we are going to hit at least GBP 500 million of annual adjusted cash flow from 2028. And then finally, I will briefly wrap up before we open everything to your questions. But before I actually do move on to 2025 financial performance, this is the first time that I have spoken publicly since the U.K. budget back in November. The U.K. government's decision to dramatically increase taxes on the gambling sector was extremely disappointing. It opens the door to the illegal black market who pay no tax, do not have a license and offer no player protections. However, during this period of turmoil, we will invest wisely in the U.K., and we will seize the opportunity to gain share from the long tail of subscale operators who, quite frankly, are ill-equipped to withstand this impact. Okay. Now turning to our results. 2025 has been a good year for the group. We delivered against our strategic priorities and achieved a strong financial performance with EBITDA for both Entain and BetMGM ahead of expectations. Importantly, growth was broad-based and underpinned by strong volume growth, which demonstrates the underlying health of the business. Online volumes were up 7% year-on-year in 2025. And impressively, it was up 9% in Q4. Throughout 2025, online business consistently delivered growth, and we now have 7 consecutive quarters of revenue growth online, and that is despite starting to lap some tough comps. The U.K. continues to be a standout performance, but also there are markets like Spain, Canada, Greece, Georgia, New Zealand, all showing strong double-digit growth. And our joint venture, BetMGM, produced an excellent year of strong and profitable growth. We also enjoyed efficiency improvements. Entain's EBITDA was up 8% year-on-year to GBP 1.16 billion. And including our share of BetMGM, EBITDA was up an impressive 28% to GBP 1.244 billion. The EBITDA outperformance is stronger than expected and -- the EBITDA performance and the stronger-than-expected cash return from BetMGM has driven a meaningful improvement in our adjusted cash flow, again, ahead of expectations. So our improvement journey is working and it is delivering. Our diversified portfolio of podium positions provides resilience and scale advantages that matter more than ever now. Building on this momentum, we have evolved our strategic priorities to further optimize how we work, enhance profitability, drive meaningful cash generation. So in summary, 2025 has been a strong year. The business is in good shape, and we're confident in our ability to not only navigate the challenges, but to emerge stronger. And with that, I'll temporarily hand over to Rob. Rob Wood: Thanks, Stella. Good morning, everyone. So for the eighth and final time, I'm delighted to be delivering the full year results presentation, and it's a pleasure to present strong numbers again before I hand over the baton to Mike. It's a familiar format for me this morning, so let me jump straight in. And as usual, all revenue and EBITDA growth numbers that I quote are in constant currency unless stated otherwise. So starting with revenue, and I'm really pleased with the growth we delivered across the whole group. Total revenue, including 50% of BetMGM, was up by nearly GBP 0.5 billion to GBP 6.4 billion or up 8% year-on-year. Within that, online NGR ex U.S. was up -- was GBP 3.9 billion, up 6% year-on-year. And barring adverse sports results in Q4, that growth number would have been 7%, in line with volume growth for the year. On to EBITDA, which came in ahead of expectations for both BetMGM and Entain. Ex U.S. EBITDA of GBP 1.16 billion beat our guidance and was up 8% year-on-year despite digesting new taxes from Brazil following their new regulatory regime. Online EBITDA margin also beat guidance, and I'm delighted to say it was up 0.4 percentage points year-on-year despite a 1.4 percentage point drag from Brazil taxes. So that means that our scaled growth and improving operational execution drove an underlying 1.8 percentage point margin improvement, which is a key highlight of the year. So with EBITDA beats from both Entain and BetMGM, total group EBITDA was GBP 1.24 billion, which was up a very strong 28% on the prior year. And that EBITDA growth led to equally impressive EPS growth, which more than doubled to 62p. Moving on to adjusted cash flow, which is a key measure for us, and I'm delighted to report a strong year-on-year improvement from an outflow in 2024 to an inflow of GBP 151 million in 2025. GBP 151 million is comfortably ahead of expectations and was driven by both the Entain EBITDA beats and higher-than-expected cash from BetMGM. On to dividends, we've declared a final dividend of 9.8p per share, up 5% year-on-year, which is consistent with the half year and our progressive dividend policy. Finally, leverage. We've added a look-through leverage metric, which better reflects the group's leverage position. What do we mean by look-through? On the debt side of the equation, we include the outstanding DPA payments and the balance sheet value of the CEE minority. And on the EBITDA side, we include our 50% share of BetMGM. And as the slide shows, look-through leverage at year-end was 3.6x, which is down significantly from 4.3x at the end of 2024 due to both EBITDA growth, but also paying down the DPA. On a reported basis, leverage has come in at 3.1x, flat year-on-year as expected, and available cash remains strong at over GBP 900 million. Let's turn now to our online revenue performance ex U.S. over recent quarters. And this chart shows 2 lines: one for NGR growth, which includes volatility from sports margin and one for volume growth, which adjusts NGR to remove any impact from sports margin and is therefore a clear measure of underlying growth. Two particularly satisfying callouts. Firstly, we've now delivered 7 consecutive quarters of growth, all on an organic basis, evidencing the structural growth in our business model. And secondly, we maintained strong volume growth into the second half of the year despite lapping the voluntary code in the U.K. in the summer. No doubt there'll be some recycling benefit to volumes in H2, given margin was below expectation in both Q3 and Q4, but volumes were consistently strong and grew 7% across the year. So that means we're growing at least in line with our markets, and we enter 2026 with continued momentum. Now for the eagle eyed amongst you, you'll note this chart is not quite the same as we've shown previously. The prior version normalized for Euro 2024 and it adjusted the current year margin to a normalized margin, meaning that volatility from the prior year margin still impacts the picture, but that version is included in the appendix. Now to our usual market breakdown. And again, it's a strong picture with growth coming from across the portfolio. Our largest market, UK&I, continues to be a standout performer, delivering growth of 15% in online, well in excess of market growth as we continue to regain market share. We also saw sustained double-digit volume growth in the U.K. throughout every quarter of 2025. And U.K. Retail also saw market share gains as we were flat like-for-like across the year in a market which declined by mid-single digits. International online NGR grew 2%, slightly behind volume growth of 4% due to soft margins, especially in Brazil and also Australia. Importantly, the second half saw an acceleration in volumes from 1% in H1 to 7% in H2, helped by lapping the regulatory changes in 2024 from Belgium and Netherlands. If we look now by market within international, Brazil had a tough sport margin in H2, falling 3 percentage points year-on-year. So consequently, NGR declined in H2 and brought growth for the year down to flat. However, on the plus side, volumes were up 13% over the year. Market share was maintained over H2, so we know other operators were hit by a poor margin, too. And we delivered a positive contribution to EBITDA despite the new regulation and high competition. Australia next, where customer-friendly results at several tentpole events suppressed NGR, particularly in the second half of the year. Volume growth fared better with 3% growth in H2 as our refreshed management team have been a catalyst for improving performance and improving profitability. Italy online was up 5%, growing NGR consistently by mid-single digits in every quarter of the year. And Italy retail also fared well with 7% NGR growth over the year. Other large markets in International continued to see double-digit growth, including New Zealand, Georgia and Spain on this page, but also Canada, Greece and parts of the Baltics and Nordics as well. CEE next and both Croatia and Poland delivered growth in both NGR and EBITDA and retained their market leadership positions in those markets. And finally, BetMGM also reported an outstanding performance with 34% growth in online revenue. The key takeaway from this slide should be the unrivaled broad-based growth that Entain enjoys across the diversified portfolio. Looking forward, we're targeting growth across every one of these online markets in 2026, which positions us very well for '26 and beyond. Moving on now to EBITDA, which came in ahead of expectations for both Entain and BetMGM. This slide shows our year-on-year bridge with EBITDA excluding BetMGM on the left and then EBITDA including BetMGM on the right. Starting on the left, Entain's EBITDA grew 7% or up GBP 71 million on a reported basis, that 7% becomes 8% on a constant currency basis, and it would be 14% excluding the new Brazil taxes. As usual, as the left-hand side chart shows, our online business is the main growth engine, adding GBP 136 million year-on-year. Where did that come from? Three things. Firstly, NGR growth, as we've looked at on the prior slides. Two, efficiency savings, particularly within cost of sales as our online gross profit margin increased a whole percentage point before Brazil tax. And thirdly, improved marketing returns, enabling us to hold spend broadly flat year-on-year in absolute terms, thereby improving margin. Retail now, and we saw EBITDA up GBP 16 million year-on-year, helped by a favorable margin versus our expectations. Then in addition to Entain's GBP 71 million year-on-year increase from the left-hand side, the right-hand chart adds our share of BetMGM's significant EBITDA improvement of GBP 178 million year-on-year as it inflected to profitability, which gives an all-in total group EBITDA of GBP 1.244 billion, up almost GBP 250 million year-on-year. That's an impressive 25% growth on a reported basis and a touch higher at 28% in constant currency, and that's all organic growth. And as I mentioned earlier, that EBITDA growth is the primary driver of why EPS more than doubled last year. Let's now take a closer look at cash flow and leverage. And as always, there's a detailed cash flow provided in the appendix. As a reminder, adjusted cash flow is effectively our distributable cash, i.e., cash flow pre-equity dividends, and we also exclude working capital noise and strip out M&A and debt movements. In 2025, we delivered adjusted cash flow of GBP 151 million, which is meaningfully ahead of expectations. You'll remember a year ago, I had guided adjusted cash flow to be broadly neutral. And then by Q3, we were ahead of plan, particularly thanks to BetMGM. And so guidance effectively moved from neutral to GBP 75 million, and then we beat that too. So what drove the outperformance? Firstly, Entain's EBITDA beat guidance. And secondly, BetMGM returned more cash to parents than guided, $270 million in total for 2025, which far exceeded expectation. And finally, a net favorable movement across other cash items, including lower interest costs following our debt refinancing efforts last year. Net debt ended the year at GBP 3.6 billion, with the improvement in adjusted cash flow offset by an FX translation bad guy of over GBP 100 million and the working capital outflow that was as expected. So overall, reported leverage of 3.1x is in line with where we expected it to be, but more insightfully, look-through leverage of 3.6x saw a meaningful improvement, down from 4.3x in the prior year, reflecting EBITDA growth, improved cash flow and a reduction in the remaining DPA balance. So our cash flow and look-through leverage improved significantly. Our available cash remains strong at over GBP 900 million, and we have a healthy debt maturity profile with our next significant maturity of around 20% of the debt not falling due until 2028. A few quick comments on BetMGM now. It won't be new news, but it's still important given its significance to the group's priorities, particularly cash generation. BetMGM had a fantastic year and delivered ahead of its upgraded expectations with total revenues up 33% and EBITDA up over $460 million year-on-year as it moved into profitability. This inflection triggered the start of cash returns to parents with $270 million distributed in 2025, including excess cash from the 2024 year-end. The strong performance last year was driven by BetMGM's disciplined execution, underpinned by a leading iGaming offering and BetMGM remains on track to deliver approximately $500 million of adjusted EBITDA in 2027. Since we created BetMGM around 8 years ago, total net investment between parents now sits at almost exactly $1 billion. So with approximately $500 million of EBITDA next year, it's easy to see that the ROI on that investment has been excellent. Now last slide from me, the outlook for 2026. And remember, the appendix includes a detailed guidance slide for modeling purposes as well as a slide on the BetMGM parent fee mechanics. To be consistent with prior years, when I refer to Entain EBITDA, this is before parent fee income, which does start in 2026. So for 2026, we expect online NGR growth of 5% to 7% on a constant currency basis with broad-based growth across the portfolio. Online EBITDA margin is expected to drop to 23% to 24% in 2026 following the increase in U.K. gaming taxes, including our expectation of mitigating approximately 25% of that cost in 2026. Stella will talk about it more shortly, but our upgraded mitigation expectation today is to improve cost mitigation to over 50% of the U.K. tax impact from 2027 onwards. The efficiency plans, which Stella will take you through, will support an upward trajectory for both EBITDA and EBITDA margin from 2027. So with 5% to 7% online NGR growth and 23% to 24% online EBITDA margin, we're comfortable with current market expectations for 2026 Entain EBITDA, which represents a small decline year-on-year. However, when combined with growth in the U.S., EBITDA, including the U.S., will be broadly stable year-on-year. And broadly stable, of course, represents significant underlying growth before absorbing the U.K. gambling tax rises. Another consequence of the U.K. tax rise is that we lose a year on a deleveraging profile because now look-through leverage will be broadly stable in 2026 before resuming deleveraging thereafter. Two more bits of guidance to touch on. Firstly, marketing phasing because 2026 is a World Cup year, we expect approximately 55% of marketing spend to be in the first half, consistent with previous tournament years. And then secondly, now that BetMGM is sustainably profitable, our ETR guidance going forward is on an including U.S. basis. And the new ETR, so effective tax rate, the new number is 30%. This is higher than 2025 due to the U.K. tax increase as we'll now have less profits in the U.K., which are taxed at a below average ETR. And so that adverse change in geographical mix pushes up the group's blended ETR. In addition, there's a slide in the appendix, which takes you through expected tax accounting treatment of our share of the $1 billion of available brought forward losses in BetMGM. In short, a deferred tax asset is expected to be recognized in 2026, which will give a boost to EPS in 2026, but then available losses are no longer benefiting EPS in the following 2 to 3 years. Cash tax is not impacted. So in summary from my section, we expect 2026 total group EBITDA, including BetMGM, to be stable year-on-year despite digesting the significant increase in U.K. taxes. How do we achieve that? We operate in growth markets where we have the most diverse set of podium positions globally. So we have structural sustained growth built into our model. We also have a gaming-led business in the U.S. without material exposure to prediction markets. So those combined give us confidence that underlying growth will continue into 2026 and beyond. And on a final note, I'm proud to say that our EBITDA of just under GBP 1.25 billion is now twice the size of the first EBITDA number that I reported 7 years ago and is many multiples bigger than my early days at Gala Coral. It's been quite a journey. It's been hugely eventful. It's been highly rewarding, and I'm delighted to be leaving the business with great momentum across an outstanding global footprint, yet still with so many growth opportunities ahead. And it's also clear that in Mike, we have -- I'll be handing over the CFO reins to a hugely capable replacement. With that, I'll hand back to Stella. Stella David: Thank you, Rob. It's difficult to beat that because he's got all the numbers, and I've got all the fluffy stuff. So -- and this is the audience for fluffy stuff. You like numbers. So I'll do my best, okay? So look, Entain in 2025 did deliver strategically and financially. So that is a really good starting point. But now our priorities have to evolve because we have to reflect the next stage in our journey, and it's an improvement journey. And we have to build on some of those achievements, but we also have to be bolder in our mindsets. We have to address the significant challenges from the dramatic tax increases in the U.K. So what are we doing about it? Well, we're intensifying our focus on cash generation and disciplined capital allocation. And importantly, today, we reiterated our confidence in delivering at least GBP 500 million in annual adjusted cash flow from 2028. Cash generation being a key component of long-term value creation. And as you can see from this slide -- yes, good, you see from this slide, it is now an explicit strategic priority, called out in our bonusing for our people, called out in our long-term incentive plans, it's a very important part of where we're trying to go. But before discussing our achievements and progress during '25 in detail, these next 2 slides are an important reminder of Entain's foundations. We are a global leader in an industry that is in long-term growth, and we are well positioned. This slide is a powerful visual representation of the breadth and the quality of our business. In Entain's 16 largest online markets, we have a podium position in 13 of them. And we're in the top 4 in all 16. And excitingly, many of these positions have the opportunity for significant growth. So for example, if you take New Zealand, where we are the partner with the New Zealand government for sports betting. We now have a great opportunity in iGaming when it becomes regulated at the end of '26 beginning of '27. And in Spain, we have a great revitalization of our beautiful bwin brand. And we're really hopeful that by the end of 2026, it will also have a podium position. And this next slide is also going to be familiar. I'm a bit boring. I keep showing the same slides, but that's consistency for you. Consistency is good. The left-hand bar chart shows that over 98% of our NGR is locally licensed. And 97% of our online revenue is from markets estimated to grow at least by mid-single-digit CAGR. That is a truly impressive statistic, 97% of revenue coming from markets in good, sustained long-term growth. And the pie charts on the right showcase the diversity of the portfolio by both geography and by product. And it's the combination of all of these things that gives our business the resilience that it needs, underpinning our ability to deliver long-term shareholder value. And now I'm going to share a few of the highlights from across our portfolio in 2025. In the U.K., one of our many initiatives was refining our bonusing, using real-time player data to increase segmentation, reduce bonusing as a percentage of GGR while increasing player value. This bonus optimization on our central platform is also driving benefits in markets like Brazil, Spain, Portugal and Canada. Our U.K. retail team continued to raise the bar with a state-wide rollout of our group bet stations. And this has driven an increase in our market share as well as an increase in our Bet Builder staking. In Australia, our new leadership team adopted a disciplined and returns-led approach, retiring some of the inefficient legacy marketing initiatives whilst also leaning into AI to produce high-quality creative assets more quickly and at a fraction of the cost. Across the group, we've also reduced nonworking marketing spend, centralized performance marketing and improved our allocation of investment. Our strong performance in Spain reflects that reawakening of the bwin brand and also markets like Canada, Brazil, Georgia, all benefiting from refining how our brands engage with our customers. And also some things on product and tech. In Poland, STS migrated onto our Croatia Sportsbook, rebuilt its mobile app and now has a slicker, faster user experience. And in Brazil, we launched Sporting bot for the Club World Cup, an AI personalized assistance to help our customers enjoy the product more. And it's proved to be such a success that it's being rolled out across more markets and more sports this year. So that's just a flavor of the strategy in action. We're seeing improvements to the portfolio because we have shared learnings that generate a powerful multiplier effect, supporting our momentum and our operational efficiency. Moving on now to customer acquisition and retention. And again, this slide will be familiar. Net revenue retention is holding strong. It's above the 85% benchmark, and it has been north of 90% for the entirety of 2025. And this reflects the work that has been done to close product gaps and improve our customer journeys. You'll see there's a slight drop-off in Q4, but that is due to customer-friendly sports results, and it's nothing structural. Customer acquisition also remains comfortably above the 15% level. So if you get the combination of strong net revenue retention and healthy acquisition, that underpins our sustainable growth. And these metrics remain strong as we enter into 2026. As I mentioned with our strategic priorities, Entain is now in the next phase of its improvement journey to accelerate forward. Project Romer delivered over GBP 100 million in savings annually. But we can and we have to do more by continuing to improve on our cost of sales, by optimizing marketing rates as a percentage of NGR and a continued focus on operating efficiencies. We already have multiple work streams identified to deliver against these 3 key levers. And we're also excited by the opportunities that our continued AI enablement program will have for improving the customer experience, the colleague experience and importantly, for increasing our bandwidth, whether that's resolving legacy issues with old -- can't say that, old code. You know what I mean. I hope you know what I mean. Speeding up development cycles to improve the user experience, improving our customer care handling, automating low-quality contracts and legal work or dramatically cutting the cost of asset generation in our marketing areas. So delivery of these type of group-wide initiatives support our expectations to now offset over 50% of the U.K. tax increases from 2027, up from our previous estimate of 25%. I just want to do a slight call out on that. When the tax rates went up, we said immediately, we would mitigate 25%. That was the right thing to say because we haven't done the work at that stage. You need to take the time to add up the numbers and go through the figures to have the confidence. So we didn't come out of the block shouting it's going to be 50% or 60% because that would have been quite frankly, a made-up number. Now we've done the work, and we've got increasing confidence in our ability to deliver against that. And that is the right way to do these things, engage into the business, build the confidence and start to solidify those initiatives. So I just wanted to give that flavor. We're not being dramatic and changing our minds. We're just building on what we started to do immediately after the tax increases, really important points. So let's bring this all together. Despite the jump in those taxes in the U.K., we now remain comfortable with the market expectations for 2026. And when you combine BetMGM and Entain, that means we are delivering a stable set of numbers in '26 versus '25. From '27 onwards, organic growth and those optimization initiatives means that we're going to grow both EBITDA and cash flow and both on a year-on-year basis and importantly, versus 2025. And by 2028, we've got the building blocks in place to achieve at least GBP 500 million in annual adjusted cash flow. And therefore, that will support our journey to getting our leverage back to our target range of 2 to 3x. So let me briefly wrap up before we go into Q&A. 2025 was definitely a strong year. We delivered growth across the portfolio, and that is a highly attractive portfolio that is well diversified. And our relative scale means that we will be winners in the U.K. because we will gain meaningful share from the regulated market. So execution is definitely improving. There's definitely a lot more to do. There always is. That's how you keep being competitive. And we have a clear pathway ahead. So we are confident in it. We are getting more disciplined, and we are accelerating forward. And on that note, I would like to open the floor to your questions, and I will return back over here. Operator: [Operator Instructions]. Monique Pollard: It's Monique Pollard here from Citi. So 2 questions from me. Firstly, on the UK&I, obviously, you've delivered a pretty amazing performance today. You're now materially outperforming, let's say, your main competitor and largest competitor in the market, both on iGaming and sports and even including the comp, so on a 2-year stack, outperforming on both those metrics and taking material market share. Just wanted to get a sense from you of whether you think that can continue as we go into 2026, given some of the initiatives that you've taken on. Second question I had was when we think about the Q4 win margin and that was down 1.4 percentage points in the fourth quarter online sports margin and year-on-year. But obviously, the online EBITDA has come in really good. So what are the sort of measures you've taken to protect that online EBITDA margin despite the unfavorable sports results in the quarter? Stella David: Okay. Great. Well, I think that's 2 questions. So I'll answer one, and Rob will answer the other one. Which one should I do? Okay. I'll take the U.K. and Ireland one because it's been great actually, the revitalization that we've seen in the U.K. And I actually have the U.K. team here. So they are in the audience, so I have to be nice to them. But they genuinely have done a great job. We've done lots of things, improved customer journeys, innovated, more innovation yet to come. We're putting a whole new Ladbrokes experience together before the start of the World Cup. We innovated with the first Bet Builder in horse racing. So there's a lot of focus and there's a lot of energy. And it's energy is really important in these journeys, that belief and that willing to lean in and get it done. So we think there are lots of opportunities, both online where we definitely think we will win share once the new taxes come in place. But let's not forget, we have the best retail estate in the U.K. It's 2,400 shops, great shop colleagues. You would be amazed about their motivation. When we do our global employment engagement survey, they score amazingly. And you think about -- they're not high paid people, but their motivation and their customer care is just outstanding. And those things make a difference to how you perform and how you are relative winners in a marketplace that is going through change. So we're very optimistic. And I can say this because it's true, the U.K. has got off to a great start in 2026. Rob Wood: And then on to the online question. So yes, as you say, win margins below expectations. So in the end, NGR only plus 3%, but volumes plus 9%. How did we still get there on the EBITDA delivery? The main answer is within that gross profit margin point that I made earlier. We've seen great success, particularly this year sort of the continuation of Project Romer. Hugo sat in front of me, his team working on things like payment service providers where we've generated material savings. I referenced it earlier, if you take out Brazil tax, gross profit margin was up about a percentage point. And actually, there were some other tax rises at Netherlands and others that meant that it was even more on an underlying basis. So 1 point across the whole online revenue base, that's GBP 40 million, and actually, it's more like GBP 50 million, GBP 60 million. So that's the primary answer. It wasn't marketing. We spent exactly as we intended to in the second half of the year. We spent GBP 20 million more than we did in the first half, which is what we guided to last summer. So it's really the cost of sales margin or gross profit margin that delivered the catch-up against the NGR miss. Benjamin Shelley: It's Ben Shelley from UBS. Two for me, if I may. One, could you talk about the growth outlook for the U.K. iGaming business, specifically amid the tax changes in that market? And then secondly, on New Zealand, can we expand a bit more on that opportunity? I appreciate it's very early, but what kind of upside do you think that can present to medium-term revenue guidance? Stella David: Okay. Well, we'll try and do them sort of -- I say a bit, you say a bit. Rob Wood: Okay. Stella David: So growth in iGaming, I mean, clearly, there is a market share opportunity here when the taxes go up. If you look at the shape of the business, the bottom 25% share of the iGaming market is through competitors, which are very subscale, 1% percentage share -- 1% share of the market. And they're just ill-equipped to ride the storm with this. So we feel very confident that we will gain share during that journey of the regulated market. Clearly, the black market is going to grow. At the moment, there aren't enough barriers in the way of the black market. And there are still 4 black market operators advertising on the front of football shirts on the Premier League. I spent a letter expressing my concern about that. There is a consultation that's taking place with government. But quite frankly, that should be dealt with now because for all the reasons, the level of interest in the black market is going to go up. But we are in a very strong position. We're very strong in gaming. We have the scale to significantly increase share, which I think we will do. And we factored that partly into our numbers. Anything else on the U.K. before I go into New Zealand? Rob Wood: I mean we also extended the coin economies to Gala and Foxy. So it's not just about Ladbrokes and Coral driving growth in gaming in the U.K. So those brands are responding well, too. Stella David: Yes, that's great. And then on to New Zealand, just as a kind of a bit of background for everybody in case everybody isn't fully up to speed. We are the partner of government in New Zealand. We are the only licensed sports betting operator, and we have that long-term license agreement. Going forward, towards the end of '26, maybe the beginning of '27, there will be licensed operators for iGaming. They're going to be giving out 15 licenses. We are confident that we'll probably get 3 of those licenses. And I think the opportunity for us is significant because we'll be the only player who will be able to do cross-sell, yes. And so therefore, it's too early to say. We haven't explicitly factored it into our numbers, but we have put it forward as one of those opportunity areas that could be significant for us as we go forward. So really exciting. And what's great about the team over in Australia and New Zealand under the leadership of Andrew Boris is they're really leaning into this that they're working very closely with our partners over there. We have 2 brands. Actually, we do under our licensing agreement. We have the TAB brand, but we also have betcha. Betcha is more focused on sports in general, whereas the TAB brand is more focused on horse racing. So we have lots of opportunities going forward. Rob Wood: And maybe put some numbers on it. Andrew probably won't appreciate this, but the opportunity is big. And we estimate that there's around a GBP 600 million marketplace. And currently, we're less than GBP 200 million. So if we have all of sports and a reasonable share of gaming, why can't that below GBP 200 million number go to, say, GBP 300 million. So an opportunity for significant growth over a number of years. Estelle Weingrod: Estelle Weingrod from JPMorgan. I've got 2 questions as well. The first one on your online organic growth revenue guidance. Could you perhaps provide more granularity, more color on the different geographies, what you're baking in like between U.K. and IAC and international? And the second one on the Netherlands. I know it's a small market for you now. But just to understand a bit better how is your -- how was the exit rate and maybe what you're seeing right now in the market because you -- I think you're now lapping some of the affordability check comps that were implemented last year in February. Just to see if you're seeing an inflection in the market now. Stella David: You go and then I'll chip in. Rob Wood: Okay. We'll do it the other way around. So first question, the 5% to 7% guidance, where does it come from? I mean, unusually, I think it's going to be pretty uniform across our segments. So I mentioned it earlier, but international, for example, was below in 2025, but it had the drag from Netherlands and Belgium. I'll come back to Netherlands. So that's now washed through and it exited with 7% volume growth in the second half of the year. And U.K. incredible in '25 with 15% growth. Of course, it won't be 15% in 2026. And so I'd expect those segments to be much more uniform. Plus I mentioned earlier, if you look at the negatives, I'll come back to Netherlands in a moment. But Australia, we do expect Australia to return to growth in '26. And Brazil, when we annualize against those poor margins in the second half of the year, you'd expect growth in Brazil as well. So I think you'll see a more uniform picture. And then the second part of the question, Netherlands. So as at Q3, we were minus 30% at the end of Q3. Then Q4, I think I'm right saying was minus 2%, so you can see a massive difference in performance. So the objective now is to get back into a little bit of growth. But even if we don't, the key thing is we've washed out that minus 30% that we were carrying for 4 quarters. Stella David: Yes. And just one thing to add on Netherlands. It's a kind of -- it's a terrible combination as a market because not only have the gambling taxes gone up significantly, but there's huge amounts of friction for players with very low thresholds in terms of deposit limits, et cetera. And I think I'm right that there's just another tweak up that's going to go on in duty rates, I think from January. Is that right? Yes. I think it's going from 34% to 37.5%, which is, again, a little bit more friction for players there. Richard Stuber: Richard Stuber from Deutsche Bank. Can I ask just a couple of questions on the optimization plan. You talked about it's going to be effective from 2027. I was just wondering whether there are any opportunities to accelerate that? Why don't you sort of start those plans now? And the second question on that as well is, I guess, the initial guidance you gave in terms of U.K. tax mitigation was looking at the U.K. market. So how much of the optimization plan do you think is related to the U.K. and how much is sort of more of a global initiatives? Stella David: Thanks very much. I'll take the first, you take the second. Rob Wood: Yes. Stella David: So I hope I haven't miscommunicated. Optimization plans take place every single day. So it's an ongoing journey. And I think the way that I would describe it is prior to the U.K. taxes going up, we had areas that we were continually thinking about what are the next areas we can improve, whether that's payment service providers, whether it's automation, removing the processes, whether it's using AI to cut down our marketing production costs. So it's an ongoing journey. And if you think about the hit in 2026, we take the big hit from gaming, which is the big increase from 21% to 40% bang first of April. And so without mitigation, we'd obviously have a lower run rate. So we are mitigating and optimizing in 2026 to get to the numbers we have. But some of these other initiatives, they organically happen sequentially over time. And so it will continue to build as we go forward. So it isn't a wait and see. I think everybody is very active in the company looking for those improvements in run rate that come from multiple activities. There isn't one big silver bullet. And I think if I were you, I'd be horrified if there was a silver bullet because why haven't we shot it. So therefore, it is literally multiple activities that go into how we improve the customer experience, how we improve the colleague experience, so we get more efficiency out of them, how we generally cut costs using the tools that are available to us and how we use AI, which is a huge game changer if it's done in the right way, to increase our bandwidth and our capability. A lot of people say AI is about this or that. AI is about enabling us to do more with the resources that we have to help protect us in the future. Rob Wood: And perhaps the only thing I'd add from a modeling perspective, put it through in '27. We're happy with where the market sits for '26 as it stands. And in terms of where is it coming from, where is that initial 25% that we announced last November, that was U.K. focused. The second 25% is a global view for all the reasons Stella has just said, primarily all online, but you can assume it's uniform or proportionate with the segments. There will be a little bit of corporate benefit as well, but the lion's share would be online across all the segments. I think that was the question. Adrien de Saint Hilaire: Adrien de Saint Hilaire from Bank of America, please. A couple of questions. First of all, can you talk about the risk in your view of prediction market platforms coming into your markets and I say your markets beyond the U.S., obviously. And then, Rob, maybe an easy one as the last question. I can see your cash flow Slide 21. You have it down in '26, and I'm not too sure why because you've got stable EBITDA, declining CapEx, declining interest and so on and so forth. So what's the moving part? Stella David: Okay. I'll take the first question on prediction markets outside the U.S. I might even comment on it in the U.S. as well. So in the U.S., there is a unique set of circumstances. It doesn't get taxed like sports betting, and it is not approved by the state regulators. which means that there is a huge amount of prediction markets goes through nonregulated states, particularly California and Texas. I think the percentage going through those 2 states is it's -- I don't know, it's something like 80% of the total volume. There's also a huge amount of play of underage players. So in the U.S., you're going to be 21 to play. So 18- to 21-year olds are playing prediction markets, and they're playing prediction markets in non Luno regulated states. It doesn't touch us that much in the U.S. because we are very much stronger in iGaming, and we never had a business to protect in those nonregulated states. So it is a bit of an anomaly in the U.S. And let me be clear. When people play the prediction markets in sports, it looks like a sports bet, it sounds like a sports bet, and it acts like a sports bet. So I don't think anybody should be any doubt it's sports betting. Now what happens to that legally in the U.S. and have a strong relationship with the regulators. We are in Nevada. Other sports players are not in Nevada. It is a key part of our offering. It's just what I wanted to say that. If you look outside the U.S., equivalents to prediction markets, effectively like betting exchanges with Betfair in the U.K. have existed for decades, and it takes a small single-digit share of the market. There are not the structural reasons for prediction markets to be the hot topic, the flavor of the month in other markets. And indeed, in some countries, they've already come out and said, it's illegal. I think the Netherlands have said, polymarket you're out, otherwise, it's going to cost you $450,000 a week in fines. France has come out against it. So it is a much smaller threat than I think it is -- than people perceive it to be in the U.S. But in the U.S., we're quite comfortable with our position, if that helps. Sorry for the long answer, but I thought it was going to come up at some time. Do you want to take the easy question? Rob Wood: I'll take the easy one. It's easy if I keep it simple. There is more complexity to it. But the simple part of it is Entain EBITDA does go backwards a little bit, as we referenced earlier. So consensus right now is GBP 1,126 million. We delivered GBP 1,160 million in 2025. So there's a little bit of a drop there. The second part of the answer is BetMGM. Even though BetMGM EBITDA does grow, remember, in 2025, we had an outsized cash distribution, including the 2024 surplus. So from a cash perspective, BetMGM is broadly neutral, whereas Entain EBITDA is down a little bit. That's the bulk of the answer. There are some other puts and takes. CapEx is down a bit, interest is down a bit. But that ETR point that I mentioned earlier, that's an offset against that. So the 2 primary drivers, Entain EBITDA down a little bit and BetMGM cash not up, just flat because of the 2024 credit that came through in '25. Luis Chinchilla: I'm Ricardo Chinchilla from Deutsche Bank. I was hoping if you could give us a little bit more of a breakdown of the different buckets for the mitigation strategy for 2026 and 2027. Is it going to be mostly marketing reductions? Do you guys anticipate operational efficiencies from the use of AI? And if you could also comment on how you anticipate the promotional environment to be in the U.K., given that all of the large players have actually referenced the fact that 25% of the market is not going to be able to compete. So we anticipate that there is going to be competition to take that share back. Stella David: Okay. So let me just talk a little bit about mitigation. There are many initiatives. The way we try and sort of bundle them up in the business, we probably put them into probably 8 key buckets of opportunity. It ranges from optimizing our marketing expenditure. It ranges to looking at our cost structure to make sure we're more efficient. It ranges to looking at procurement, lots of opportunity in the very large amount of third-party spend we have. So third-party spend is a very interesting area because we get lots and lots of feeds externally. We have lots of licenses externally. We have lots of external legal fees. I'm just adding them up, giving you a flavor of the different areas that we have. And then the devil's in the detail going down to specific line-by-line item activities. We also see that there is opportunities in terms of hopefully increasing our trading margin sequentially over time. But it takes -- it's a long-run thing, reducing fraud, taking the opportunity to get rid of bonus abusers. There's lots of things that build those buckets up to where they need to be. But I think the thing that I was trying to say is we have a detailed road map. We have sponsors behind that. We have targets that are being set. And we also have specific targets for how we increase the bandwidth from AI, which means that if you think about it, everybody who works in a corporate role or an in-market role or a finance role, they all have to become competent with AI so we can increase efficiency and make those people actually highly employable for the future. But again, efficiencies flow out of doing those kind of things. So there are just many, many initiatives that build up to the total number, yes. Promotional costs, do you want to have a stab at that? Rob Wood: Yes, sure. I'll have a go. So I think you're right. I think the 2 obvious large competitors in the U.K. will lean in as well as ourselves. The fourth largest probably not so much. But then there is such a long tail, as we've touched on earlier. And when you look at one of these staggering numbers as a consequence of these U.K. gambling tax increases, when you look at the tax that we'll now pay in the U.K. as a percentage of profit before tax, it's over 80%. So in how many sectors and how many parts of the world you operate in an environment where your income tax rate is over 80%. That's an astonishing number, which essentially means how can subscale operators possibly want to do business and spend money here. So I think with the exception of the 3 larger operators who I fully expect to want to, just like us, capitalize on it and seize the moment to take market share, I think you will see a lot less promos from mid- to smaller firms. The sort of the unknown dynamic is the black market. Of course, they'll be aggressive, why wouldn't they be? And quite what the impact of that is, we'll see from April onwards. Operator: We're just coming up to time. I'm going to -- just one last question on Italy from Andrew Tam from Rothschild. It wasn't touched on a huge amount in the presentation. Obviously, it remains a key market. So a bit of color on the performance this year and then actually opportunities and actually how you're thinking about going forward. Stella David: Well, I'm happy to just talk about some of the opportunities, and I'll let Robbie okay, just talk about some of the performance at the moment. So we are a distant #3 in Italy, but we do have some exciting plans coming up in 2026. I don't want to share the confidential information. But if you watch this space in the next few weeks, I think we'll be announcing some nice initiatives that will give some more high-profile presence for our business in Italy. There is quite a detailed plan that has been developed to help optimize our position, recognizing that we are disadvantaged in terms of our footprint because we don't do retail gaming. And that is something that is not available to us because we don't have the license and the license isn't open for that. But there are some other things that we can definitely do, but I don't want to spoil the surprise. So, talk about the numbers. Rob Wood: Can I just clarify, these are organic plans in Italy. Stella David: Sorry, definitely organic plans, yes. Rob Wood: So in terms of performance of the business, the way we look at it, we grew online 5% last year, mid-single digits. Retail grew 7%. EBITDA grew 8%. It's a healthy business that's growing nicely year after year after year. That's very well run, tight ship. And so yes, there's a gap to the top 2 operators, but we have a great healthy business in the #3, particularly with Eurobet, which is a very strong brand. Stella David: Are we -- any more questions? Or are we having to wrap now? There was one there. Unless it's a hard one. Pravin Gondhale: I'm Pravin from Barclays. Firstly, on the marketing expense, you sort of mostly answered that, but 45% in second half, given -- I appreciate its mitigation in U.K. seems a bit low given it's World Cup year. So do you think is there any scope in your guidance to sort of raise that if the market demands that, if competitors sort of market hard in second half? And then secondly, on regulation, is the worst behind us or you are still hearing anything in any of your markets there? Stella David: So on the marketing expense, we're investing well throughout the year. We're just shifting it forward because it's World Cup year. So World Cup, even though it's sort of June, July, it goes over 39 days, which is the longest World Cup there's ever been and there's more teams than there's ever been, means that the activity for acquisition, which is one of the things you really want to do in the World Cup comes quite a lot before then. So you're doing -- you do a buildup in terms of marketing. So it does pull investment through into H1. But hopefully, that acquisition then rolls through into H2. But I'm a marketeer by training. If we have any spare money, I'll always put more money into marketing. But we have to deliver the numbers, too. I realize that. So that's obviously an area that we'd always look at going forward. But I think World Cup is a great opportunity. I think it's going to be a bit of a roller coaster ride because there's so many teams playing. In the early days, the margins may be volatile. But hopefully, net-net, the whole thing is going to be an amazing thing, particularly for some of our markets. So given it's in the Americas, our business in Brazil will be really engaged in it. Our business in Canada -- by the way, Canadians, they love betting on soccer. Yes, absolutely love betting on soccer. And also, we've got quite a lot of our markets have teams already in the World Cup final. So we have a high overlap. So I think it will be good for us. And of course, and BetMGM, that small company in the U.S., BetMGM, yes. Regulation. Look, I think it is -- it's our duty to flag the challenges of the increase in taxes and the increase in regulation that it does fuel the black market. I think we talked about the Netherlands earlier. I mean that is the perfectly worst mix. You have highly frictionful regulation and high taxes and their own government or the regulator says that over 50% of their market is black. That is a place that no sensible government would want to go into, in my view, because actually, it's just fueling profits in a different part of the world. And so I think it is the job of people like ourselves to flag the dangers of the black market to try and dissuade other places going like where the Netherlands has gone. Rob Wood: Yes. Can I just make one point of clarification on marketing. So we do expect marketing to increase in absolute terms. You can probably model broadly in line with revenue. So the marketing rate holding firm. It's just the weighting that's H1 related. Yes. And then on regulation, aside from the U.K., then everything else looks a lot more of a balanced picture, which is nice. I know the Republic of Ireland, we have to do a wallet decoupling, which is a small adverse move there. But in Germany, it looks like touchwood, this might be the year that we get an increase in the slots cap, which, as you'll know, has driven the slots market to be 70%, 80% black. So that could be significant for us. We have New Zealand iGaming and other examples of clamping down on the black market as well. So aside from the U.K., and that's a big an aside, but aside from the U.K., it's a more balanced regulatory outlook, I would say. Operator: I draw your attention to the 2 slides that started about the podium positions and our quality of our foundations of our portfolio, which gives us that resilience and the ballast to absorb any regulatory changes. Stella David: I think we're going to have to wrap it up now. But before we do, I just wanted to say a huge thanks to Rob for his huge dedication and passion for this business. He's been in it for 13 years, I think. And I do think if I chopped his arm off, it would actually say Entain. Rob Wood: Glad. Stella David: Should try. No, no. But genuinely, thank you so much, Rob. I really, really appreciate it. And I'm sure everybody in the room, along with all your Entain colleagues, is wishing you the very best in your new ventures when you eventually start them. But he's not going anywhere just yet. He's helping us out on some things until the end of June, but Mike takes over formally as the CFO tomorrow. But Rob is still with us, and we just say thank you so much. Rob Wood: Thank you. Stella David: I'm just going to say something. Rob soak that in. You never get clapped at one of these events ever. This will be the first and last time you get a round of applause. Rob Wood: Thank you very much, everyone. I do really appreciate it. As I said earlier, it's been quite a ride. And you can tell I've been here a long time and also I don't wear suits very often because I looked this morning, and I've got GVC business card. Yes. Thanks, everyone. Stella David: That's funny. Thank you very much. Thank you.
Stephanie Luyten: Good morning. Thank you for joining us as we present Elia Group's Full Year Figures and have a look at what 2026 will bring for the Group. I'm joined today with our CEO, Bernard Gustin; and Marco Nix. Bernard Gustin: Good morning. Stephanie Luyten: Good morning, both. Before we start, please take a moment to review the on-screen disclaimer. It contains some important information you should take note of. And as always, the slides will be and the script will be published on our live stream afterwards. Bernard, I'll let you kick off. Bernard Gustin: Thank you, Stephanie. I want to start by saying how proud I am of what we've achieved this year. Three achievements stand out. First, we secured financing for significant growth and reestablished market trust. When I took on this role, there were questions about our capacity to fund ambitious growth and deliver on our promises. Addressing this was my main focus. And I'm pleased to say that we are back on track. Second, we delivered operationally investing EUR 5.2 billion in CapEx this year, more than triple our historical annual average. And third, we are attracting exceptional talent. Despite challenges, people want to join us because they see Elia Group as a place to make a real difference and help build the energy infrastructure of the future. That tells me we have the right people and the right vision. Stephanie Luyten: Thank you, Bernard. Before Marco takes us through the financials, let's have a look together at the major highlights that defined the year. [Presentation] Bernard Gustin: Well, 2025 was indeed a year marked by major milestones, collective achievements and moments that shaped who we are and where we are heading. When it comes to project execution, 2025 was a year of real tangible progress. In Belgium, we continued to advance on several strategic infrastructure projects that form the backbone of the country's future electricity system. Ventilus and the Boucle du Hainaut, both critical missing links in connecting large volumes of offshore wind and reinforcing Belgium's North-South transmission corridor progressed through key regulatory and construction milestones. These projects are essential for integrating the Princess Elisabeth zone, strengthening system reliability and ensuring Belgium can transport renewable energy efficiently across the country. BRABO III also entered its final stretch, further reinforcing the Antwerp region and enhancing cross-border capacity with the Netherlands. The construction of the Princess Elisabeth Island also continued to advance steadily. The installation of the concrete caisson made solid progress with 11 of the 23 caisson already installed at the sea. And the remaining units are ready for deployment as soon as weather conditions allow it. This brings Belgium another step closer to achieving its decarbonization targets. And in Germany, we also saw real progress. On SuedOstLink+, one of the country's most important North-South transmission corridors with permitting moving ahead and technical preparation advancing, the project is now getting much closer to implementation. At the same time, offshore progress stayed on track. We successfully completed the cable laying for Ostwind 3, the link for the next wave of wind projects at the German Baltic Sea, securing future capacity to integrate more renewable energy. And on Bornholm Energy Island, Germany and Denmark signed a landmark agreement for 3 gigawatts of offshore wind connected through new hybrid grid links to both countries. It's a major step forward future toward future cross-border offshore grids in the Baltic Sea and support Germany's vision for a more meshed and resilient offshore system. We also put 2 new high-voltage lines into service, each over 100 kilometers, boosting our transmission capacity and strengthening stability across key parts of the German grid. So overall, it was a year of strong delivery with our teams moving forward the strategic projects, but at the same time, congestion is becoming more visible. As more renewables connect to the system, and that's a good thing, our consumption patterns also evolve and that is putting pressure on our grid. And this isn't just a Belgian or a German challenge, it's a European one. Our recent study on storage shows just how quickly the landscape is changing. Storage and batteries, in particular, will be a cornerstone of the future system. But equally important is the question, how, where and when storage operates. Today, the current wave of connection request isn't always a healthy growth. We are seeing a huge number of speculative projects across Europe. In Germany alone, TSOs are facing requests equivalent to the load of 100 million households. That's not sustainable. It strains the grid, dodge the queue and delays more mature investments that society actually needs. This is why we advocate for a new approach. We need to prioritize system relevant mature projects and move away from a first come, first serve logic that is now being exploited and risk driving up cost for all consumers. This is where the EU grid package helps set the direction. It supports anticipatory investment and clearer rules so that flexibility, renewables and storage can work together as aligned pillars of a sustainable, affordable and secure system. Marco Nix: And another key factor for our long-term investment needs is the right regulatory frameworks. Based on what we know so far about the German regulation, we welcome BSR's ambition and its recognition that the full package matters for investors. However, the draft framework still does not provide the balanced and internationally competitive returns needed to attract the level of capital required for the grid expansion. Key adjustments are still necessary, particularly on return on equity level, debt cost coverage, OpEx predictability and the effectiveness of the incentive schemes to ensure the framework truly supports the unprecedented investment effort ahead. We remain committed to constructive dialogue to help shape the final determination that safeguards investments capability and supports Germany's long-term energy goals. To speak about 50Hertz goals, we will now share a short video from the CEO of 50Hertz, Stefan Kapferer, on the progress made and the milestones still ahead of us. Stefan Kapferer: With a new focus on resilience of the energy infrastructure and affordability of energy transition, it became clear in 2025 that an overarching responsibility for the electricity system is urgently needed. This can only be delivered by companies like Elia Group with 2 national TSOs, ETB in Belgium and 50Hertz in Germany. In 2026, 50Hertz will once again invest a record high amount of money in additional grid infrastructure, substations and new connections for consumers, EUR 5.1 billion. So affordability of the energy transition will be key. We have to harvest efficiency potential, and we have to take care that only those projects are included in the next grid expansion development plan, which are really needed to make the energy transition happen. And to finance these challenges, the current review of the regulatory framework in Germany has to deliver an internationally competitive return on equity to guarantee that the engagement of the investors will be the same also in the upcoming years. Stephanie Luyten: 2026 will be a year in which significant regulatory developments and grid planning milestones emerge in both our countries, giving us much more clarity on the investment landscape and its associated returns. To build on that, I'd like to turn to the CEO of Frederic Dunon. He will walk us through the challenges and opportunities shaping our next steps. Frederic Dunon: Discussions will begin on our regulatory framework for the period '28, '31. Two major objectives are at stake. First, to ensure that market parties have the right incentives to allow safe and efficient system development and operation. And second, to ensure that Elia has a financial and human means to realize the plans approved by the authorities. The design of our '27, '37 federal development plan will be at the center of attention of our authorities. Indeed, it will define the boundaries of possible futures in terms of energy, industrial and economical policies. Whereas development plans were seen in the past as an administrative process, it is now well understood that they are the foundation of our major society for the coming decades. Stephanie Luyten: Now that we've looked at Belgium and Germany, let's shift to what's happening internationally. As you know, we took a minority investment in energyRe Giga at the end of 2023 with a clear understanding that this is a long development cycle model and that progress would not be linear. Since then, the U.S. environment has evolved. At federal level, the current administration has created uncertainty for offshore wind with slower permitting and approvals while at the same time, many states continue to actively push for grid expansion. In parallel, the U.S. power system is facing rapidly rising electricity demand driven by electrification and data centers, which reinforces the structural need for additional transmission capacity. Last year, we also saw the acceleration of the phaseout of the wind and solar tax credits. This puts pressure on the developers to bring the projects forward and required adjustments in project structures and portfolios across the sector. Against this backdrop, we have taken a disciplined approach, prioritizing value protection over speed. As a result, contributions from energyRe Giga to the Group results will come later than initially expected, but we remain supportive of the investment and of its long-term strategic rationale. As we already flagged at our Q3 results, Clean Path New York faced a setback. For SOO Green, the picture is more positive. Permitting is close to completion and land acquisition is largely secured. Finally, the offshore project, Leading Light Wind is, as you know, currently on hold under the present federal administration. Translated in financials, this means the group recognizes an impairment on its U.S. assets of EUR 99.1 million. This consists of 2 elements. On the one hand, a EUR 70.8 million write-off on the energyRe Giga portfolio, an additional provision of EUR 28.3 million, reflecting the group's remaining commitment to invest USD 150 million to reach its 35.1% ownership stake. Let me remind you that this impairment is a noncash and reflects a prudent reassessment of, on the one hand, value and timing, and it's not at all a change in our discipline or our financial strength. Our exposure remains well controlled. Our commitments are fully manageable within our balance sheet, and we retain flexibility on the pace of future capital deployment. Marco Nix: Thank you, Stephanie. Let me now elaborate on some of the headline figures for '25. We delivered strong progress across all fronts in 2025. Our 5-year CapEx plan remains fairly on track. We invested EUR 5.2 billion, EUR 1.4 billion in Belgium and EUR 3.8 billion in Germany. As a result, our regulatory asset base expanded to EUR 22.6 billion. Our hiring drive in '25 was also a success. We welcomed again more than 760 new employees, strengthening our operational capabilities and supporting the growth objectives we laid out during the Capital Markets Day. On the operational side, system performance remained outstanding. Grid reliability reached 99.9% in Belgium and 99.8% in Germany, positioning our TSOs among the most reliable grid operators in Europe. These figures highlight our continued focus on operational excellence and the effectiveness of our investments in technology, infrastructure and talent. In terms of financial results, the group delivered a strong performance with net profit attributable to Elia Group shareholders of EUR 556.6 million. This corresponds to an adjusted return on equity of 7.3% and earnings per share of EUR 5.51 per share. As shown on the slide, we indeed had a busy year on funding as well. We proactively secured the funding needed to support our strategic priorities in Belgium and Germany. We executed a well-diversified financing program across entities and instruments, reflecting the greater flexibility we have embedded into our funding strategy. A key focus early in the year was strengthening the balance sheet. We completed a EUR 2.2 billion equity package, which reinforced our capital base, broadened our strategic partnerships and provided significant financial flexibility. On the debt side, we raised EUR 3.6 billion in green financing through loans and bonds and both Elia and Eurogrid issued their first EU-labeled green bonds, an important milestone that broadened again our investor base and reinforced the central role of sustainable finance within our capital structure. At the start of the year, Standard & Poor's reaffirmed the credit ratings of all entities. We also strengthened liquidity, bringing the total available funds at year-end at EUR 11.9 billion, which underpins our prudent risk profile and supports our investment-grade ratings. Overall, the group's investment plan is backed by a robust financial framework designed to maintain its current ratings, ensuring continued strong access to capital markets and providing funding flexibility. Finally, the group is progressing on the various options of the funding toolkit as outlined to the market. Elia Group delivered strong operational and financial results reflected in a sharp increase in adjusted net profit. These figures excludes material one-offs and reflects the group's underlying performance. Adjusted net profit rose by 39.8% to EUR 716.5 million, driven by CapEx execution, higher equity remuneration and solid operations. Additionally, the third segment benefited from the first time of a tax benefit linked to the application of tax consolidation in Belgium. Germany remained the largest contributor, delivering just over 60% of the group adjusted result. Belgium added around 38%, while nonregulated activities and Nemo Link contributed EUR 5 million, including EUR 33.4 million in one-off adjustments, the reported net profit reached EUR 683 million. After noncontrolling interest and hybrid costs, net profit attributable to Elia Group shareholders increased by 32% to EUR 556.6 million. On this slide, we show that the reported figures include several nonrecurring items, both in Germany and in the nonregulated activities. We adjust for those to show the underlying performance. Starting with Germany, the reported net profit includes a EUR 46.5 million deferred tax impact. This relates to the revaluation of deferred taxes following the planned reduction in the German federal corporate tax rate from 15% down to 10% between the years '28 to '32. Turning to the third segment. There are 2 main adjusted items. As said by Stephanie, the U.S. impairment amounting to EUR 99.1 million negatively. On the positive side, the tax consolidation had a positive impact due to the application of the Belgium tax consolidation mechanism and linked to the tax periods prior to '25. It is there of a one-off effect, not reflected of a recurring tax benefit. After adjusting for all these items, adjusted net profit amounts to EUR 716.5 million at Group level. Stephanie Luyten: The RAB remains the core driver of the group's regulated remuneration. Supported by the execution of our investment program, Elia Group's RAB increased by 22.5% year-on-year, reaching EUR 22.6 billion at the end of '25, up from EUR 18.5 billion in 2024. This increase reflects the acceleration of major infrastructure projects in both Belgium and Germany that are critical to integrating growing volumes of renewable generation, reinforcing cross-border capacity and strengthening the overall system resilience. These investments ensure we can deliver the energy transition at the lowest societal costs, while contributing to Europe's long-term energy autonomy. When we look ahead, we expect an average annual RAB growth of over 20% for the period '24 to 2028, supported by around EUR 21.6 billion of cumulative CapEx over the next 3 years. As we have invested EUR 5.2 billion across our Belgium and German grids, the impact on our funding metrics remains well under control. Net financial debt increased by around EUR 1 billion, bringing the total to EUR 14.1 billion. This limited increase reflects the successful capital increase and the fact that a large share of our investment was funded through operating cash flows. Our average cost of debt rose slightly to 2.9%, and the portfolio remains very well protected from interest rate volatility with 98% of our debt held at fixed rates. Finally, our credit profile remains solid. Standard & Poor's reaffirmed our BBB rating with a stable outlook, underscoring the resilience of our financial structure and the strength of our funding strategy. Marco Nix: As this concludes the group overview, let me guide you through into the segments, starting with Belgium. In '25, adjusted net profit rose by 27% to EUR 272 million. This was mainly driven by a EUR 30 million increase in fair remuneration, reflecting continued RAB growth, higher equity and improved risk-free rate to 3.2% Incentives were up slightly by EUR 1.1 million. Beyond the regulatory result, the outcomes was also influenced by IFRS restatements. These were mainly driven by higher capitalized borrowing costs from the larger portfolio of assets under construction as well as tariff compensation for the costs linked to the capital increase. This compensation is recorded as equity under IFRS, but these costs are fully passed through to the tariffs under the embedded debt principle. In total, the Belgium segment delivered a return on equity of 6.2% for the year. For Germany, the adjusted net profit rose to EUR 439 million, up 42%. This strong performance is the result of several key factors. First, asset growth continues to be the biggest driver of the result, combined with imputed depreciation and cost of debt coverage. This was further supported by a slight increase in the allowed equity remuneration on new investments, reaching 5.7% for the year. On the cost side, the onshore OpEx outperformance declined slightly by EUR 3 million. The inflation index-based year revenues helped to offset most of the operational cost increases, associated with our expanding activity footprint. At the same time, a number of offsetting effects also incurred. Depreciation increased as several major projects were successfully commissioned and brought online. Financial costs rose due to the higher interest expenses from debt financing. This was balanced by capitalized interest during construction, which increased and interest income from a prefinancing agreement. After including a one-off deferred tax revaluation gain of EUR 46.5 million, net profit reached EUR 485 million. Considering the adjusted net profit, 50Hertz achieved a total return on equity of 11.1% for the year. Finally, the nonregulated activities and Nemo Link segment delivered an adjusted net profit of EUR 5.3 million in '25. This performance was mainly driven by the application of group contributions for the '25 financial year, which contributed EUR 24.7 million to the result. This reflects the Belgian tax consolidation mechanism that allows to utilize a tax loss at the group level and Eurogrid International. The positive impact followed a legislative change adopted at year-end, which removed the discriminatory treatment previously applicable when combining the group contribution regime with the dividend received deduction regime. This positive effect was partly offset by several factors, mainly higher holding company costs, a lower contribution of our consultancy business, EGI. Finally, Nemo Link contributed slightly less to the result. After taking into account net adjusted items, the net loss amounts to minus EUR 74.5 million. Stephanie Luyten: Before we move to the final part of the presentation, our financial guidance for 2026, I'd like to briefly touch on the group's dividend policy. Elia Group proposes a dividend of EUR 2.05 per share. This dividend proposal will be submitted for approval at the Annual General Meeting and is expected to be paid in June 2026. Marco Nix: Ending with the outlook for '26, Elia Group expects a net profit at Elia Group share in the range between EUR 690 million and EUR 740 million. In Belgium, we plan to invest around EUR 1.7 billion, delivering an adjusted net profit between EUR 290 million and EUR 320 million. While in Germany, we plan to invest around EUR 5.1 billion and an adjusted net result in the range of EUR 585 million and EUR 625 million. The nonregulated and Nemo Link segment is expected to report an adjusted loss of minus EUR 10 million to EUR 30 million. Bernard Gustin: Well, thank you, Stephanie. Thank you, Marco. Before we move into our Q&A session, let me share some closing remarks with you. Earlier this year, the Hamburg North Sea Summit highlighted the urgency of building an integrated offshore grid with European TSOs presenting a joint framework for hybrid interconnections and shared cost models capable of enabling up to 1,000 terawatt hour of clean energy by 2050. At the same time, the Hamburg declaration committed key North Sea countries to delivering 100 gigawatts of joint offshore wind projects, underscoring that system security and sovereignty will increase, increasingly depend on collaborative offshore development rather than isolated national solutions. Complementing this, Mrs. von der Leyen, underscored at the recent Antwerp Industry Summit that Europe's continued dependence on fossil fuels exposes industry to volatile price swings and highlighted the urgent need to reduce this exposure by accelerating the shift towards stable homegrown clean energy sources. The current war in the Middle East underlines once again how vulnerable Europe remains to external shocks. Strengthening and interconnecting the European grid is, therefore, essential, not only to expand access to affordable clean electricity, but also to reinforce Europe's energy sovereignty and reduce dependence on increasingly unstable fossil fuel supply. In this context, Elia Group stands out as the only international electricity transmission group in Europe, combining a multi-country footprint, deep operational presence in both the North and Baltic Seas and a public-private capital structure capable of aligning public anchors with long-term private investors behind strategic and critical infrastructure. This combination is exceptionally unique in our sector and precisely what Europe needs in these troubled times. Our leadership is most visible in our flagship hybrid interconnector portfolio, the first of its kind in Europe and the foundation of tomorrow's meshed offshore grid. Kriegers, yes, thinks and acts on European scale. Together with Energnet, they already have put the world's first hybrid interconnector Kriegers Flak into operation. Furthermore, together with Denmark, they will realize Bornholm Energy Island, unlocking large-scale offshore wind in the Baltic Sea and connect through hybrid HVDC links. And in Belgium, Princess Elisabeth Island and Nautilus could form one of Europe's earliest true hybrid offshore hubs, pulling up to 3.5 gigawatt of offshore wind, while interconnecting Belgium and the U.K. HansaLink, a key project of our entity WindGrid, expands this logic across new cross-border corridors, drawing private capital into offshore infrastructure at scale. And with Nemo Link operating reliably for years, we have already proven our capability to deliver, operate and maintain complex interconnectors safely and efficiently. This portfolio is unmatched in Europe. No other player combines so many hybrid assets across the 2 strategic European sea basins under one group, not as concept, but as concrete investable projects that show how offshore wind and interconnection can be planned, financed and built together. Thank you for your attention. Stephanie, I think we are now ready to move to the Q&A section. Stephanie Luyten: Yes. Thank you, Bernard. And in the meantime, Yannick Dekoninck, our Head of Corporate Finance, has also joined us. Stephanie Luyten: So let's turn to the screen. I see that our first question comes from UBS, Wanda. Wierzbicka Serwinowska: Congratulations on the results and the CapEx delivery because there were some concerns last year if you will deliver. The first question -- I mean, 2 questions to Marco. The first one is on the capitalized cost at the net income level. I mean, what was it in 2025 for 50Hertz because I couldn't see it disclosed. And what is embedded in your 2026 guidance? And also, if you could give us any rough guidance on the capitalized cost until 2028, that would be much appreciated. It's a very hard to model item. And the second question is on the S&P. As you said, back in September, S&P confirmed the rating, but they also said that the Elia Group consolidated business risk has marginally increased. And they raised the FFO to net debt threshold by 100 bps. And they also assume that your CapEx post-2029 will moderate. So does a higher FFO to net debt requirement worry you when thinking about CapEx plan or funding beyond 2028? Marco Nix: Maybe start with the technical question then on the capitalized borrowing costs. It's indeed something we are mindful of in the figures of '25, which are subject to disclosure finally, with the annual accounts at year-end, there's a part close to EUR 90 million considered in the German figures. So what is a noncash result contribution. So -- and that puts a little bit 11% into a certain perspective as, of course, this is being included in the 11% guidance. For the future growth, it's indeed linked to some degree with the investments to be taken. However, it's not linear simply as we try to limit the impact to some degree, and it's being connected to a relatively short period between 2 milestones of the projects, where I must admit that that's a little bit hard to model in the future. But I assume on one hand, that the IFRS standard is subject of a change, which might help us then in the future to limit that impact. However, it will grow. And as a rule of thumb, potentially, it's good to look into the investments in the year being taken compared with the previous year, how it will be growing in the year '26. Wierzbicka Serwinowska: So what should we -- what is embedded in your guidance because your guidance for 50Hertz was running much, much above consensus? Marco Nix: In the guidance of 50Hertz, it's a similar area, so between EUR 90 million and EUR 100 million. So that's currently what we have embedded there. Bernard Gustin: And then... Marco Nix: So then on the FFO to net debt. So currently, after the capital raise, we feel rather comfortable, in particular, with an eye on the liquidity position the group currently has. So therefore, we are not in a rush. Of course, we are looking into the horizon beyond '29. But as we stated, it's subject of the new CapEx plan, which is still under development as both the grid development plan in Germany and the federal development plan in Belgium is still under construction, if you want to say it like this. And as this is the underlying combined with the regulation of our future capacity in funding and of course, in remuneration, that is a necessary input for our funding plans. And of course, the rating will play a significant role in there as, of course, we don't expect that the growth will stop and taking that into perspective, there's a solid investment-grade position being needed to fund the investments in the future as well. Stephanie Luyten: Thank you, Wanda. Let's go to the next question. I believe it's from Bank of America, Julius. Julius Nickelsen: I have 2. The first one is on German regulation. So in the draft methodology that came out in December, I think the BNetzA for now ruled out the concept of a return on equity adder. But I believe since then, you've and the other TSO have provided some evidence why there should be an adder. So if you have any update, do you still believe that this could come in the final methodology? Any update on the reception that would be quite useful. And then the second question is a little bit more high level. But if I look out to like beyond the summer and towards the end of the year. Correct me if I'm wrong, but I think at that point in time, you should have the new Belgium returns, the final methodology in Germany and a good idea on the grid development plan in both countries. Could there be a point in time where you will upgrade the market -- update the market on your investment plan and maybe roll forward to 2030 with the new CMD? It would be useful to know. Marco Nix: Maybe starting from the last question and then developing to the other ones. Our expectation will be more towards year-end or beginning of next year to have that clarity as there are some specific aspect that you name a few of them in the regulation, but on the CapEx plan as well. To name a few, in Germany, that will be the total amount and the sequence of the offshore grid connections, which will play a big role in our CapEx program, or the question on overhead lines versus cabling in the big DC corridors. And that will, of course, change significantly the means being needed to realize that CapEx program. And this debate, to be fair, is still open. So there, we do not see really a landing zone for the time being. A little bit the same in Belgium with the Princess Elisabeth Island and the DC components or the interconnector there. Even though government will potentially take a position then in the second quarter, you do see kind of delay in that decision-making as this was originally being foreseen in March. So therefore, likely that it's more towards the end of the year where we have that kind of clarity. So on the point you mentioned in regards to the framework, in the conference, BNetzA hosted, they stated a little bit that they are not convinced yet on an adder to the return on equity. That's still a subject of a discussion, at least they opened the door for, and we provided some evidence that this is being needed. But it's fair to say there's an ongoing discussion on that one. What is, first of all, a positive sign that the door has not been closed. But so far, it's not being drafted in any adjustment of the determination of the return rates for the future. Stephanie Luyten: Thank you, Julius. Are there any other questions? I do not see -- Temi. Good morning, Temi, please go ahead. We have you here with us. Temitope Sulaiman: Congrats also on the results presentation this morning. I've got a couple of questions, but I'll keep it to 2. One is just clarity on your 2026 net debt expectations. If you can provide an update on that, that would be very helpful. Clarity on the Belgian regulatory time lines in terms of the consultations, but also the final determinations. And then finally, it seems that you've had strong operational delivery in Belgium and Germany, '24, '25, '26, you've raised the guidance above consensus expectations. And I'm just wondering whether you might consider revisiting your '24 to '28 guidance in terms of returns and when maybe you might consider that? Yannick Dekoninck: Maybe net debt, I will take. So on net debt for '26, we expect to land with the CapEx that we have announced at a net debt of around EUR 19.5 billion. So that's what we are targeting for in '26. Marco Nix: On Belgium regulation, there's a relatively straightforward path being published. So there will be a public consultation on 14th of April, if I'm not -- 17th or mid of April. Bernard Gustin: [indiscernible] Marco Nix: Mid of April. So happy to invite you to comment on that one once it is being out there and a final determination in the course of quarter 2. So end of half year, there is likely a robust visibility how the scheme will look like. Stephanie Luyten: And in terms of guidance? Marco Nix: Guidance, I think we still stick to the guidance which we have given as the growth is still intact with the double-digit percentage growth on the EPS and on the net results to the shareholders and around, as you have seen in the past, the 20% growth on the RAB. So that's quite consistent to each other, even though the guidance for '26 seems to be a little bit higher than the expectation, if you make it linear, but that comes from some of the aspects, which are not that fully linearized as we try to optimize the results, of course, as we can. And in connection with commissioning, for instance, we might have one or the other year an outliner and '26 seems to be one of them as a couple of significant investments come to commissioning, which gives us a favor in particular, in Germany. Stephanie Luyten: The next question will come from Piotr from Citibank. Piotr Dzieciolowski: I have a couple of questions. So the first one I wanted to ask you about this financial result in 50Hertz. So in your disclosures, you also point out apart from increased capitalized interest, you point out to accrued interest from the developer of an offshore platform of EUR 28 million, plus EUR 10 million from discounting effects on long-term provisions. So just wanted to understand, can you please explain on this first item what it really means? And is there any change on these numbers between '25 and '26? So I'm trying to get a bridge between '25 and '26 financial item. Is it just capitalized interest going up and these things disappear? Or how shall we think about these items? And second question, I wanted to ask you about your actual performance. So in your Slide 20, sorry, Slide 19, you said that the net income of ETB increased by EUR 1 million because of incentives. I was under impression that the incentives should grow in line with RAB with the size of the business, but it doesn't seem so. So can you please tell us how do you assume the incentives increment between the '25, '26? And likewise, you don't disclose incentives for the 50Hertz. I think there are some outperformance. So can you also say like operationally, do you improve -- or do you keep like a size of outperformance in line with the business growing with RAB growing or that basically the incentives and outperformance becomes bigger -- smaller relative to the size of RAB and so on. So these were 2 questions. Marco Nix: Okay. Maybe taking the first one on the wind farm contract, which we closed. So there's a nearshore wind farm at the German coast, which is being connected by 50Hertz in an AC technology. And for efficiency reasons, we agreed on to share the platform with the wind farm developer so that not both needs to have a platform being erected, what saves costs for both sides. And it's more or less a 50-50 split there. As the wind farm developer pushed back for some of the costs to some degree, and we had a relatively long-lasting negotiations on that one. We finally agreed on that the funding costs, the financing costs of this chunk, which is related to the final agreement, and which will be borne by the wind farm operator are being out of the regulatory sphere. So that's something the 50Hertz and Elia Group can keep finally. And the number you referred to is the accumulated interest income over the periods once we started that construction. So the effect itself will remain, but the order of magnitude will potentially go down as this is a kind of loan agreement, which is related on one hand to the size and the second to the scheme where there's some flexibility on the wind farm operator side once they are paying us, then, of course, the interest connected to the outstanding exposure will be lower in one of the years. And as this wind farm will likely be -- the connection of the wind farm will likely be finished in '26 and the wind farm operator will potentially commission its assets then beginning of '27, despite the fact that there's a 15 years period on that contract, there might be some changes over time in the payment scheme as the flexibility is on the wind farm operator. So that's a little bit long explanation. It's relatively complex matter, but likely that there will be an interest income over a certain period of time with different kind of order of magnitude. Bernard Gustin: Okay. And maybe, Piotr, on your question on the incentives in Belgium, it's indeed correct that they increased by EUR 1 million compared to last year. And it's indeed correct that they are, to a certain extent, correlated with the RAB, but as well, they are -- they have in the regulation a maximum amount that you can have on certain incentives. So that's one element. And some of the incentives are a bit, I would say, binary between 0 to 1. If you remember last year, we had a cable issue linked to the availability of the MOG in '24. So we had no incentive at that year. This year, we have a full incentive, a full maximum amount. So that gives a little bit why you don't see exactly that linear evolution on the incentives. Nevertheless, I think we had a solid operational results where incentives remain quite important to the overall result in Belgium. Stephanie Luyten: Let's now turn to Deutsche Bank, Olly. Olly Jeffery: Two questions from my side, please, like everyone else. So the first one just is on CapEx. Now I appreciate that you need to wait for the grid development plans to give a precise view on future CapEx for '29 onwards, and that's more likely to impact presumably CapEx in the 2030s. Are you able to give kind of a high-level view in Germany of kind of the broad level of increase you think might be likely given that most of the changes to the grid development plan are probably going to impact in the 2030s. Any insight you can give there would be helpful. And then secondly, just on funding the plan from '29 and onwards. I know obviously, you don't want to be precise about this. But could you say, is there a credible scenario where you think you might be able to fund CapEx in '29 and 2030 without the need for equity using the rest of your equity toolkit with the hybrids and opening up the capital structure of some of the TSOs potentially? Any views on that would be great. Bernard Gustin: Taking the first one, it's still, as we said, a little bit too premature to lay out a number. So if you take the total volume, which is currently as a price tag being seen on a total grid development plan in Germany, you can compare the EUR 320 billion, which was the number in the last grid development plan, which the EUR 340 billion, which is currently the number connected to the most likely scenario. It's not chosen yet, but that gives a little bit the view that likely the outcome will be rather the same with an eye on EUR 345 billion in terms of euros. However, there will be a kind of different allocation on that one. And that what makes it that's hard for the time being really to say the CapEx is further growing or going down at a certain point of time. As, of course, only part of the EUR 340 billion are connected then to 50Hertz to the Elia Group. So as a rule of thumb, it was 20% all the time. But the spread over 20 years is a difference than the spread over 10 years. So that's -- I mean, that's the simple math. And as the former government was quite in a rush to complete or to set very ambitious targets, which partially have been out of reality, the current government is more pragmatic in that view, and that's a little bit what still the debate is on. Stephanie Luyten: And on the funding? Marco Nix: On the funding, I mean, we have full flexibility now. So that's currently what we are going to execute. That's all our options are valid. We are working on further optionalities as well. But please, as we don't have the CapEx numbers currently in place, we do not want to give guess how we are continuing to fund the growth in the future at this moment. Stephanie Luyten: Nor do we have the regulatory framework set in place? Bernard Gustin: Yes, it's a bit early... Stephanie Luyten: So I think it would be a bit too early. But thank you for the questions. I see the next questions will come from ODDO, Thijs. Thijs Berkelder: A couple of questions. Do you still require probably an additional EUR 2 billion of equity? And can you confirm that you still aim to raise this via in principle, EUR 4 billion of hybrids? Second question is on your Energy Island and the DC connectivity there as well as for the U.K. connector. The HVDC cost price was too high. Any reason in your view why HVDC pricing now should be lower? And third is on the North Sea offshore wind projects targeting 15 gigawatts installations by 2031. What can we expect as impact for your CapEx from that plant compared to what we currently are installing on the North Sea? Marco Nix: Yes. Maybe starting with the first one. Our toolkits provide us flexibility, and we stated that it can be both hybrid -- the hybrid capacity potentially being sufficient at this point of time, while another option is to open the capital on one of the subsidiaries and/or finding structural solutions to help us funding the growth. And that's still something we are closely monitoring. And there's a couple of key elements to be considered and criteria's in the decision-making, once is timing. Another one is, of course, cost of capital. Third one is execution to name a few of them. And as we have a strong liquidity position and of course, the credit rating is comfortable as well. So we are carefully looking for the best solutions there. And once this is being decided, it can be both extremes. So both elements of the toolkit would gives us the credit in total, so it has the potential. However, it could be a combination as well depending on the point of time where we make the decision. Bernard Gustin: On the Princess Elisabeth Island, I would say that, first, it was the right decision to postpone the project because, as you know, at the time, we were really in a very heated market on the HVDC component. However, the teams have been working on updated design. We have also some very good discussion between U.K. and Belgium on how to best share the cost and the benefits of the project. And I hope that in the coming weeks, months, we can come with a solution that fits with the original objectives, while being more reasonable from a cost point of view. We see that the HVDC technology remains an expensive technology, but we also see that the heat that we had a few months ago is a little bit lower. On your North Sea approach, which actually the Princess Elisabeth Island is a subpart of. As I explained in my conclusion, I think we are really, as Elia Group extremely well positioned being the only transmission group having a portfolio of assets already in our base today. But of different nature because we have the Belgian port on the North Sea. We have the projects on the Baltic Sea with Windanker's. But we have also with our subsidiary, WindGrid, a project called HansaLink. And the advantage, of course, of this setup is that it's a setup where you can also use financial players who can help the financing of the project. So I'm not going to preempt on the decision of Europe. I think, by the way, we see with what's happening now in the Middle East that it's high time that we reduce our dependency on gas and that offshore wind in the North and the Baltic Sea is a critical element in there. We will see how Europe will evolve in -- and the grid package already goes that direction, but how they translate that into a series of projects. But I think what's interesting is that Elia by its strategic geographic positioning, by its current portfolio of projects, but also by its setup where we can leverage financing capital at different levels is very well placed to play a role in there. And already in our current portfolio of projects and in our current asset base, we have projects on both seas in the North and in the Baltic Sea. Stephanie Luyten: Are there -- yes. I see the next question coming. Unknown Analyst: And also from my side, compliments for the good results and outlook, of course. Yes, on the -- I'm still going to try on the North Sea, and thank you for the answers so far. But looking at the ambitions and with the involvement of TSOs as well in these kind of framework ambitions that were published, a step-up to 15 gigawatts already in 2031 and for a number of years, even a decade. And now looking at your CapEx approaching EUR 7 billion. So let's say, connecting all these gigawatts already upfront or preparing for that upfront and for a number of years to come. Is it fair to say that, yes, maybe previous assumptions on EUR 7 billion being the higher end of forward CapEx. Is that something that we need to reassess to a larger number, higher number? That's my first question. And the second one is on CapEx, and it's a great achievement that, of course, you met the expectation after the -- I think the questions that were raised at the midyear presentation. What should we expect for 2026? Will it be a more balanced picture of the EUR 6.8 billion or also 1/3, 2/3, maybe some guidance there. Bernard Gustin: I will take the first one and let the team go for the second one. I think the guidance remains the same. So we are on EUR 7 billion CapEx because we are talking on a series of projects that we know. Then we will have to see how the developments happen, and we will be looking at it as you do. And according to the developments, of course, Elia Group wants to position itself on these developments. But I think then there will be also another way at looking at it. And I think from the European standpoint, from the political standpoint, we will have also to think of the tools to make sure that we can reach those developments without having always a direct impact on the balance sheet of the TSOs. And that's where I say with some of our tools like WindGrid and so, we are very well placed to test those type of model. We will also have to see what Europe does in terms of SAF funding and other conditions. So just to say, within the current framework, we are in the current guidance, and there is no reason to change. Of course, we remain attentive and opportunist of what it would develop. But I think then there would be other ways of looking at the thing and not directly in the CapEx of a TSO, which will be one of the topic to manage if we want to reach this great ambition, but also needed ambition when you see the situation of Europe. Marco Nix: And maybe to complement, we published recently a paper then which could be a way forward in the future to fund in particular the far offshore wind farm developments and the connection to that one mainly via hybrid interconnectors, where we are facing several constraints to go ahead there, and that could be an element with the so-called WSPV concept, which helps both on one hand to unlock a little bit resistance in one or the other countries. And secondly, combine the forces with giving some securities by public authorities like European investment banks, for instance, and combining with private capital to fund that in the future, as Bernard rightly said, it's questionable whether all TSO can absorb simply these big request of capital in the future. In regards to our CapEx program, it's likely that you will do see a heavy loaded second half year again as this is, on one hand, a little bit in nature as during the summer, most of the construction is being made. And then, of course, we usually account for the progress once a certain milestone has been reached, and that's likely more in autumn than in spring. And the second one is that at least in Germany, gives us a favor to have that backloaded profile. As usually, you get remunerated for the average of the year while -- for the capital cost as well. While, of course, the later you will have it, the bigger the gain could be. And that's something which we have seen in the results as well as, in particular, the difference between the real funding costs and the funding costs, which are being embedded in the grid fees gives us a favor to some degree and contributes to results, too. Stephanie Luyten: And let's go to Wim from KBC. Wim Hoste: Yes. I hope you can hear me. Stephanie Luyten: Very well. Marco Nix: Yes. Wim Hoste: All right. Also congrats from me. Lots of questions have been asked. I just want to throw in some add-ons. If I want to come back to the financing, the equity raise potential, and I understand regulatory framework has to be put in place. Can you give an idea, suppose that if you want to do something like an ABB like in '24, EUR 0.5 billion, if that's possible, what you need to do, whether you would need to have some kind of Board's agreement first, if that's a possibility simply because the share price has rallied quite a lot. It's more than doubled since the last capital raise. So how you feel about that? Then smaller questions on the dividend. I think in the past, you said that, that would go in line with inflation. I think it stays more flat now. Is that also the outlook for the future? I completely would agree that would make sense as well. And then lastly, more like a general question and something that we've seen in the U.S. where the government has asked big tech to -- yes, basically pay via some kind of taxes to upgrade the grid because obviously, we know that, that demands a lot of investments to accommodate all the hyperscale investments. So just your view, is that something that could be possible in Europe? Obviously, things move a little bit slower. But if there's anything that you can say just in order to kind of divert the pressure that we have seen and the pushback from industry and consumers on -- yes, obviously, offloading a lot of the investments via the energy prices. So those are my 3 questions. Stephanie Luyten: Maybe I can tackle the dividends, if you like. We indeed gave a dividend or proposing a dividend of EUR 2.05. But what you need to take is as a basis is actually the EUR 2 because when we did the capital increase, we actually restated the dividend. And if we were to increase the dividend on a restated basis, it would be close to EUR 2, but we did not want to pay less than last year dividend. So we have increased it slightly. That has been our rationale for the EUR 2.05. Marco Nix: And we do see that as a strong signal that the investment in the Elia Group is a value-accretive one and the dividend payment is one of the elements there. So that gives some certainty that our growth path is intact. Stephanie Luyten: Regarding the ABB, what do we need to have in place for that? First of all, yes, we will have to have an authorized capital in order to do such a transaction. But we -- as Marco already highlighted today, we are not looking to use any nondilutive -- we are looking to use nondilutive options. And I think there, we have enough flexibility. The way forward would be towards the future to bring back unauthorized capital, put that in place, and that are the first steps that we need to take. Bernard Gustin: And on the U.S., well, first of all, it reminds us of the potential in the U.S. We have a little bit of a setback at the moment, but we are convinced that over the long run, we know the situation of the grid in the U.S. It's certainly not at level with the AI ambition that the U.S. has and the battle of AI will pass via a strong grid. So I think it's good that we are positioned in there. It will take a little bit more longer than expected, but I'm convinced that the potential is the same because the grid becomes a critical asset in every region of the world that want to electrify. The debate, of course, is who needs to pay, and we see the investments that the hyperscalers are doing and all things relative, the investment in the grids are indeed a fraction of the investments they are generally doing. So the idea to make them contribute is a political decision where it will be difficult for me to take a position, but it's clear that we've seen in our countries that the development of AI and data centers is representing a certain burden on the net, burden on the consumption. And I think at some point, there are 2 positions that need to be taken. The first one is what do we want in terms of industrial development and where do we give the priorities in terms of segments, AI, data centers versus general industry. And then how do we make sure that the general consumer is not hampered by a consumption that is not responsible for. So I think I don't know what is the exact recipe, but the direction is certainly a direction to investigate. Marco Nix: And maybe to complement on that one, on one hand, there are multiple congestions on all these connection requests. So funding is one. So in Germany, for instance, the consumers are not paying for the direct connection. It's indeed then the applicant. On the other side, we do see that the grid is heavily loaded and simply that makes a congestion in connecting a new device to the grid. So as this is something we need to be careful of as well to protect our people in doing the works there. And last but not least, it's not all the time that visible how mature the project is. And our lead time, it's fair to say, are still longer than the ones from this developer. And as they want to go in a staged process usually with extending the devices which are consuming them at the stage, but we are designing the -- yes, the connection only once. So that's all the time a little bit mismatch in the planning horizon. That's something which we need to work on commonly to make sure that we do see how mature the project is that we can give some access being granted and we can rely on that one as well as, of course, we want to prevent that we invest in an area where nothing is going to happen. As we honestly have seen in Germany with the ship industry as Intel canceled the big factory in an area of Magdeburg, and then the TSO was forced to bring down the commitments in that area. However, the land has been already being acquired. So that's a mismatch, which we need to be careful on as, of course, we need to protect then the final consumer, as Bernard rightly says, that we are not socializing cost of the industry, yes. That's a little bit what we are in. Bernard Gustin: But it's clear that AI needs the grid, but the grid also needs AI. And we will also -- and we are really developing an AI strategy and developing -- we are already using a lot of AI, but we want to accelerate there because AI is also a way to solve some of the bottleneck issues that we have today. So it's really a very close relationship, both ends. Stephanie Luyten: Let's now move to Juan from Kepler. Juan Rodriguez: I have 2, which are more of a follow-up, if I may. The first one is on guidance. Can you please confirm that you have no additional hybrids included on your 2026 guidance? And on guidance as well, what is the targeted return on equity that you have on Belgium and Germany within the guidance that you've given, especially on Germany as is substantially above expectations? And the second one is on the U.S. impairments. What are your expectations now in terms of the timing and size of the expected earnings contribution that you expect in the region going forward? If you can give us more clarity on that, that will be helpful. Marco Nix: You take the hybrid? Yannick Dekoninck: I think in the guidance that we have given is a guidance that takes into consideration multiple options that we have in the funding toolkit. So we do not exclude -- to be clear, we do not exclude a hybrid issuance, but the guidance that we have published this morning takes into consideration multiple options. Now in terms of return on equity, as you know, we are not guiding specifically on the return on equity for a specific year. We have guided on the return on equity over the period, over the regulatory period, both in Germany and Belgium. So that's still something that we are targeting for, knowing that you could have certain variability year-over-year due to important one-off effects like we had this year. That's also why we have been very clear on what that one-off effect was in Germany. Marco Nix: So to remind you, the average guidance which we have given was between 7% and 8% in Belgium, while in Germany, it was 8% to 10%. Stephanie Luyten: Yes. And on the impairment? Bernard Gustin: Did we miss one? Stephanie Luyten: Yes. I think on the U.S. impairment on the timing, when we could expect a positive contribution, but that one is a little early to say today because there's still a lot of uncertainty on when those projects and how and when they will materialize, but that's more towards the end of the decade, I would say. Bernard Gustin: Yes. And it's clear that, as you know, we have 3 projects, the project on Clean Path, New York, which is a line in New York, didn't pass some regulatory approval, what we call a priority transmission project, but it doesn't take away that New York needs an extra transmission line. And so we will use the assets to participate to further project development. So there, we believe we are rather facing a delay. You know the uncertainty that exists today in the U.S. about the offshore and things can turn very quickly one way or the other. So our strategy there is to secure the assets that we have in place. We have already the leasing rights on this project, that's Leading Light Wind. And on SOO Green there for the moment, that's a project that, as Stephanie explained in the presentation, continues on its path of the different regulatory hurdles. And so there, for the moment, there is no reason to review the project. So as you say, we are rather delaying in time. But as I said to your colleague just earlier, I'm convinced that the fundamentals stay and at some point, somebody will see that these projects are heavily needed. Marco Nix: So in the '26 guidance, there's no positive contribution being expected to make that clear. Stephanie Luyten: Thank you, Juan. Let's now turn to Alberto from Exane. Alberto de Antonio Gardeta: Congratulations for the results. A couple of follow-ups from my side. The first one is regarding the German regulation. Maybe if you could -- based on the like already published consultation papers, if you could quantify what are your expectations in terms of ROE and WACC based on the current consultation papers and what else is needed? So maybe if you could give us some guidance of what will be your expected level of returns in order to get the competitive returns that you need for being competitive in the equity markets? And the second one will be regarding the potential update to the market, the potential Capital Market Day. You have said that maybe by the end of the year or beginning of 2027. When do you know that we will have more visibility if this is happening or if we can consider as confirmed or it's still pending? Stephanie Luyten: I think maybe I'll start on the Capital Markets Day. That's still very much pending. As Marco clearly said, there are still a lot of moving factors. We don't yet have clarity in Germany. And also in Germany, the final elements will only be defined somewhere in 2027. So that's why we cannot fix to a date somewhere in the future. So next to that, we also have grid development planning that is ongoing in Belgium, in Germany. Those time lines aren't super fixed neither. So this will be something, I think, towards the end of the year, we will have more clarity on. So I do not expect us to really do a CMD still this year. Marco Nix: So to come to the German regulation, if you really look into the paper, even though it's heavy reading, I would say, it's for the time being, for our perception, more a description of a structural approach while the ingredients are not being flagged yet. And even though a WACC model could be something comparable, but the big debate on the cost of debt coverage is not finished yet. So that's still ongoing, but a rating adjustment is being made, which kind of reference rate is being used. These elements are still pending. That's why it's a little bit too early really to say what the outcome could look like, and we previously discussed equity or return adder for the TSOs, what is still in the discussion, which is not in yet. So I would say we are not there yet with that what we assume BSR could deploy. However, our clear target is not being worse than today. And if you take the return on equity, which we disclosed and take off all the accounting items, there's still a return rate above 8.4%, which is, if you want to name it, a kind of cash return. And as BSR already said, the total package matters, that's something we are requesting, and that's something which we are targeting to get out of it. Which elements shall we put in place. There, we have some openness. So if there's an incentive being put in place, which gives us an order of magnitude lending there, we are fine with it as well. We are happy to get challenged in terms of our operations. But so far, it's not really clear. So therefore, we are hesitating to give a guidance what it could give for the time being. Stephanie Luyten: Thank you, Alberto. Let's now -- I see Olly, you have some further follow-up questions? Can you hear us, Olly? Olly Jeffery: Yes. Just one follow-up question, please. Going back to the discussion on the capitalized interest within the guidance for '26 at 50Hertz. Is that -- which is noncash. Is there anything else within that '26 guide 50Hertz that is noncash in addition to the capitalized interest that we should know about? Or is that the only item? Marco Nix: I wouldn't say it material. There is -- now we come a little bit in great territory as we assume commissioning, which gives us a full depreciation in the revenues, there's a cash connected to that one, while the depreciation is lower, the real depreciation, which we are recording in that year. So for us, it's a cash item, which contributes to the results as well. While the capitalized borrowing cost is a noncash item as this is reverted later stage. So -- and therefore, I would keep it on that one, knowing that, of course, the example which I raised could give us a favor in the results of next year as well. And as I said, if you only linearize that, the result would look a little bit outstanding compared to that linearization in line with the CapEx, which you otherwise would compute. Yannick Dekoninck: And maybe if I can complement it, Marco, for those that have been following us for a couple of years, you see that we also have sometimes discounting of interconnecting provisions or interconnected income. As you know, you -- sometimes have spike in the forward rates that has an impact on those long-term provisions. That's not something that we estimate or take into account in the guidance as such, but that's always something that can happen. We were confronted with that a little bit at the end of Q4 of this year, where the interest rates started to move up. But that's not something that we can -- that we have a control on. That's not something that we can steer. So there, we have a neutral approach. But in the actuals, of course, that can have an impact. Olly Jeffery: And what was the impact of that in the '25 results from that movement at the end of Q4? Yannick Dekoninck: I think at the end of Q4, we had a net impact of EUR 22 million that was coming from this discounting of provisions. Stephanie Luyten: Thank you, Olly. If there are no further questions, let's wrap up today's presentation. First of all, a big thank you to all the teams who have contributed. Thank you, Bernard, Marco, Yannick. Marco Nix: Thank you, Stephanie. Stephanie Luyten: And thank you for joining us today. Have a nice day, and see you soon.
Operator: Good afternoon, and welcome to AudioEye's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us for today's call are AudioEye CEO; Mr. David Moradi; and CFO, Ms. Kelly Georgevich. Following their remarks, we will open the call for questions from the company's publishing analysts. I'd like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company's website at www.audioeye.com. Before I turn the call over to AudioEye's Chief Executive Officer, the company would like to remind all participants that statements made by AudioEye management during the course of this conference call that are not historical facts are considered to be forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, confident, will and other similar statements of expectation identify forward-looking statements. These statements are predictions, projections or other statements about future events, and are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in today's press release and the comments made during this conference call and in the Risk Factors section of the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and in its other reports and filings with the Securities and Exchange Commission. Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which reflect management's beliefs only as of the date hereof. AudioEye does not undertake any duty to update or correct any forward-looking statements. Further, management's remarks today will include certain non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures to these non-GAAP financial measures is available in the company's earnings release or otherwise posted in the Investor Relations section of the website at www.audioeye.com. Now I'd like to turn the call over to AudioEye's Chief Executive Officer, Mr. David Moradi. Sir, please proceed. David Moradi: Thank you, operator, and good afternoon, everyone. I'm pleased to report our results for 2025, highlighted by our 40th consecutive quarter of record revenue growth, a remarkable achievement. We are not aware of any other SaaS company in the public markets, which have grown sequentially for 40 straight quarters or more. In addition to 40 sequential quarters of revenue growth, we also demonstrated strong operating cash flow in recent years. In 2025, adjusted EBITDA grew by approximately 35% to a record $9.1 million with a record margin of 22%. For the full year 2025, AudioEye achieved record revenue which was even more impressive given that our performance includes our previously noted accelerated customer migrations last year. I'm happy to report that the integration of these acquired customers is now substantially complete, which should drive meaningful ARR acceleration in 2026 with business momentum in the U.S. and EU. In 2026, we expect adjusted EBITDA to grow by at least 30%, implying adjusted EBITDA of at least $11.8 million for the year. Looking at a couple of quarters ahead, we expect to generate a run rate adjusted EBITDA of $15 million by year-end, driven by AI efficiency across our products and operations. This implies an accelerating rate of cash flow growth into 2027, potentially higher than the 30% we are guiding for this year. As we survey today's technology landscape, while AI coding has been top of mind in 2026, the tangible impacts on people with disabilities are largely being overlooked. AI is accelerating how businesses build digital experiences, but it is also accelerating the pace at which accessibility failures compound. Since LLM's draw data that is not accessible to begin with, digital accessibility on the Internet is not improving and may even be getting worse. With this backdrop, we are seeing increased rates of litigation utilizing AI to detect accessibility issues. We believe 2026 will be the highest year of digital accessibility lawsuit on record. Yesterday, we released our next-generation platform to address these market needs. The next-gen platform unifies AI detection, expert audits and custom fixes in a single platform that delivers unmatched transparency, ease of use and 3 to 4 times of legal protection and other solutions. The platform also utilizes years of proprietary data from detecting and fixing accessibility issues across hundreds of thousands of sites and billions of unique visits. Additionally, we are unaware of any other accessibility solution that delivers custom fixes directly within the platform, which gives customers a complete picture of their accessibility compliance. Other solutions may make claims of custom fixes, but cannot back them up. In prior years, on these conference calls, we called out similar claims from the same vendors that automation couldn't fix 100% of accessibility issues, which proved accurate. The next-gen platform use our proprietary data engine to power its results. In February, an independent study conducted by audience found that AudioEye detected between 89% and 253% more WCAG issues than competitive products. AudioEye was the only solution that identified issues at all WCAG levels, including single A, AA, AAA across every website analyzed. Combining our proprietary data set, with newly released agentic models, creates opportunities to solve digital accessibility in ways that were not possible before. Our pace of innovation, which is leveraging our proprietary data is rapidly accelerating, and we look forward to sharing more updates with you soon. As we enter 2026, we see meaningful opportunities ahead. The EAA is expanding the market globally. The DOJ rule under Title II is increasing regulatory requirements. Record litigation is driving demand. And businesses increasingly recognize that accessibility is not just about compliance, it's about reaching the broadest possible audience, including AI agents that scan a website's accessibility tree instead of the [indiscernible]. Based on our momentum and the market dynamics we're seeing, we are providing the following guidance for 2026: For the first quarter of 2026, we expect revenue of between $10.5 million to $10.6 million, adjusted EBITDA of $2.2 million to $2.3 million and adjusted EPS of $0.17 to $0.18. We typically see lower cash flow in the first quarter as we pay social security taxes and legal and administrative fees associated with the proxy. And this year, we are attending an industry event during the quarter. For the full year 2026, we expect revenue of between $43 million and $44.5 million, and we expect the rate of ARR growth to outpace the rate of revenue growth as we focus less on nonrecurring revenue. We expect adjusted EBITDA will grow by at least 30%, reaching $11.8 million representing a 27% margin at the revenue midpoint. I'll now turn the call over to AudioEye's CFO, Kelly, to review our results in detail. Kelly? Kelly Georgevich: Thank you, David, and good afternoon, everyone. Revenue again reached record levels with Q4 2025 revenue at $10.5 million, an 8% increase from Q4 2024 and a 10% annualized increase sequentially from Q3 2025. On a full year basis, our revenue grew 15% to $40.3 million from $35.2 million in 2024. Breaking this down by channel, our partner and marketplace channel includes all revenue from our SMB-focused marketplace products and revenues from partners who deploy these same products for their SMB customers. For the fourth quarter of 2025, this channel grew 8% year-over-year and represented approximately 59% of ARR. For the full year 2025, this channel's revenue grew 10% from $20.2 million in 2024 to $22.2 million. We continue to see expansion of existing customers and new partners engaging with AudioEye contributing to this channel's group. AudioEye's enterprise channel consists of our larger customers and organizations, including those with non-platform custom websites who generally engage directly with AudioEye sales personnel for pricing and solutions. In Q4 2025, the enterprise channel grew 8% from the comparable period of the prior year. And for the full year 2025, it grew 21% to $18.1 million from $15 million. This growth was driven in part by our expansion into the EU in 2025, which we expect to continue to grow in future periods. The enterprise channel represents approximately 41% of ARR as of December 31, 2025. Annual recurring revenue, or ARR, at the end of the fourth quarter of 2025 was $40 million, a 9% increase over ARR at the end of the fourth quarter of 2024 and an increase of $1.3 million sequentially. Gross profit for the fourth quarter was $8.3 million or approximately 79% of revenue compared to $7.8 million or 80% of revenue in Q4 of 2024. For the full year 2025, our gross margin was approximately 78% with gross profit increasing from $27.9 million in 2024 to $31.6 million in 2025. Going forward, we will be reporting adjusted gross margin, a SaaS industry non-GAAP metric that provides insights in the underlying profitability of our core operations by excluding stock-based compensation and depreciation and amortization included in our cost of revenue. Adjusted gross margin was 85% in Q4 2025 compared to 86% in the prior comparable period. Adjusted gross margin was 84% for the full year 2025 compared to 85% in the prior year comparable period. Even with an 8% increase in revenue, operating expenses in the fourth quarter of 2025 remain consistent with the same quarter last year. On a full year basis, with revenue increasing 15% over the prior year, operating expenses increased 7% or approximately $2 million to $33.4 million, driven primarily by increases in sales and marketing expense. Increase in items such as stock compensation expense, depreciation and amortization and litigation expense were mostly offset by savings in noncash valuation adjustments to liabilities and lower business combination expenses year-over-year. Our total R&D spend in Q4 was approximately $1.6 million, with approximately $450,000 reflected the software development costs in the investing section of the cash flow statement, a decrease from $1.8 million in the fourth quarter of 2024. Total R&D spend was around 15% in Q4 2025 revenue versus 18% in Q4 2024. For the full year, R&D spend was 16% of 2025 revenue versus 19% in 2024 and 29% for 2023, demonstrating our continued progress in operating leverage. Net loss in the fourth quarter of 2025 was $1.1 million or $0.08 per share compared to a net loss of $1.5 million or $0.12 per share in the same year ago period. On a full year basis, net loss for 2025 was $3.1 million or $0.25 per share compared to a net loss of $4.3 million or $0.36 per share in 2024, an improvement of $1.2 million. In the fourth quarter of 2025, we achieved adjusted EBITDA of approximately $2.8 million or $0.22 per share compared to an adjusted EBITDA of $2.3 million or $0.18 per share in the same year ago period. On a full year basis, we produced adjusted EBITDA of approximately $9.1 million or $0.72 per share compared to $6.7 million or $0.55 per share in 2024. This 35% increase in adjusted EBITDA was driven by $5.1 million of revenue growth, a $3.9 million increase in adjusted gross profit and approximately $1 million in savings in adjusted R&D and G&A expenses, partially offset by additional investments in sales and marketing. In the fourth quarter, we repurchased approximately $1 million worth of shares. During the full year 2025, we repurchased approximately $4.6 million worth of shares. The successful refinancing of our debt facility with Western Alliance Bank in Q1 2025 strengthened our balance sheet and reduce our interest expense, positioning us for continued growth with greater financial flexibility. Our balance sheet remains well capitalized with $5.3 million in cash as of December 31, 2025, and an additional $6.6 million in debt facilities available. As of December 31, 2025, our net debt, defined as total debt less cash was $8.1 million, and our net debt to adjusted EBITDA ratio was approximately 0.7x. In the fourth quarter, we generated $2.3 million of free cash flow, calculated as adjusted EBITDA of $2.8 million less $500,000 of software development costs, an improvement of $400,000 from the fourth quarter of 2024. For the full year 2025, adjusted free cash flow was $7.2 million versus $4.9 million in 2024. With that, I'll turn the call back to the operator to open the line for questions. Operator? Operator: [Operator Instructions] Our first question today is coming from Joshua Reilly from Needham & Company. Joshua Reilly: All right. Great. Maybe just starting off, just kind of on the platform updates here. A big piece of what you've done historically is the custom human fixes combined with the automated fixes. And I guess I'm just curious, how much human involvement do you see going forward in the custom fixes relative to what AI can do and how that might drive greater automation in the platform and efficiencies for you. David Moradi: Yes, the tools aren't really that good at accessible content because the internet wasn't coded with accessibility in mind. And as you know, the amount of sites and content are exploding on the Internet. We're seeing an all-time high in litigation. We think lawyers are using AI to the tech issues and draft all these complaints with more websites even to choose from. So I'm not sure when it's going to get there. It's very far away from that now. It's actually getting worse. And the problem hasn't been solved in 25 years. The issue is when you push code, even if the code was coded with accessibility, someone else touches it and it's not accessible anymore. And this is especially true for sites like e-com that are constantly changing. So it's very far off to answer your question in my opinion. Joshua Reilly: Got it. And then -- so along with that, how does the changes you made to the platform along with that concept that you do need to keep the human involvement going, maybe further your differentiation versus some of the competitors. David Moradi: No one has it right in the platform for the custom fixes. So that's the difference and we're using more and more agents with that as well to streamline it further. Joshua Reilly: Got you. Okay. That's helpful. And then if we look at the initial revenue guidance for 2026, maybe you can just kind of help us understand what are the puts and takes investors should be considering including visibility to that revenue guidance relative to the ARR exit rate of about $40 million for Q4 and kind of the growth trends that you saw in 2025 relative to what you're assuming in 2026. David Moradi: Yes. We're being pretty conservative. The major factor is we expect less nonrecurring revenue as we focus more on ARR and some of the acquired customers initially have nonrecurring revenue that we phased out. Kelly can get into this, what this means from a financial standpoint, but we're very bullish about the opportunities in front of us more than ever. We're in a unique position with massive amounts of data from 10 years of these custom and automated fixes and seen all these edge cases over the years. It's a treasure trove of information to drive the agents in the future. But I'll let Kelly answer the rest of that question. Kelly Georgevich: Yes. Just getting into a little bit further. If you look at the guidance for the year, it implies revenue growth of nearly 10%, and that's assuming lower nonrecurring revenue. We do anticipate higher ARR growth in this, so kind of low to mid-teens on the ARR side. Nonrecurring is a small percent of our revenue, about 5% overall, but we're aiming to reduce this even further to focus on ARR this year, and that's impacting that guidance somewhat. Operator: Next question is from George Sutton from Craig-Hallum. George Sutton: So relative to EAA. I'm just wondering if you could give us an update on the investments you're making there, some of the opportunities that you're seeing, for example, we have been seeing some hires in Netherlands as an example. But I know you've signed some nice partners. Just any update on Europe and sort of the opportunity you're seeing there? David Moradi: Yes, sure. As expected, the EU tends to move a bit slower than the U.S. It's a bit bureaucratic, as you know. GDPR took a while to force and then the adoption followed over the next few years, but we are seeing pipeline building nicely, big deals in the pipeline, closed the big one in the fourth quarter and we expect to continue ramping up the EU as the year goes on. But if enforcement happens, which it will at some point, all bets are off. Demand is going to ramp very, very quickly. George Sutton: Got you. And just as my follow-up on the AI side, I was intrigued by your thought that the failures are more pronounced when AI is involved relative to disability. You mentioned internet wasn't necessarily built with disability involved, and I'm going to assume AI hasn't been either. Can you just walk through what would potential partnerships be relative to AI. Could you ultimately be partnering with some of the LLMs, for example, or folks that are building out agents? Just curious your thoughts there. David Moradi: No, we have very unique data. You can do a lot with that. I don't want to give away strategies on this call, but this data unlocks a lot of potential. Those with data own the gold. Operator: Our next question is coming from Zach Cummins from B. Riley. Zach Cummins: David, can you give us an update on potentially a ramp-up in enforcement on the DOJ Title II side. I mean we have the initial compliance date that's coming up here in a little over a month. So just curious, any update on that and progress you're seeing with some of your major partners on the federal side. David Moradi: Yes, the DOJ's requirements are going to go into effect next month, as you said. We haven't heard anything to the contrary. We continue to see momentum on the reseller and even direct channels from states. We're seeing strong momentum from both partners, Finalsite, CivicPlus, and I think there's a huge opportunity to unlock those and really penetrate the customer bases over the next 2, 3 years. Zach Cummins: Understood. And one follow-up question is for Kelly. How should we be thinking about gross margin on, I guess, an adjusted basis now that you're giving out that metric? I know a little bit of a headwind as you did the final migration work with some of those customers to the new platform. But how are you thinking about gross margin as we go through 2026? Kelly Georgevich: Yes. The gross margin and adjusted gross margin, I think we expect to see relatively consistent to what we've seen. So on a gross margin basis, kind of mid- to high 70s as we pay for more AI compute, but we could see higher margins over the next couple of quarters and then adjusted gross margin, we did want to introduce because I think a lot of other SaaS companies use it, and it just is a little bit lucky with stock compensation and depreciation and amortization in there. But I think we expect both to kind of be at similar levels and with opportunities to see further growth in both of those different levers. Zach Cummins: Best of luck with the rest of the quarter. Operator: [Operator Instructions] Our next question is coming from Richard Baldry from ROTH Capital Partners. Richard Baldry: Not sure if I missed this, but the 8,000 customer adds looks to me like the strongest in about 2 years. Sort of curious what do you think the drivers were under -- underneath that, whether they look sustainable or extensible heading forward? David Moradi: Yes. That was a large reseller in the EU, the deal we signed in the fourth quarter that made up a lot of that. We're still in the early innings in the EU, as you know and expect to see a lot more momentum. Richard Baldry: And then if I look at the spending side, the G&A and R&D has been basically flattish for about 2 years, but the sales and marketing has been rising. So could you maybe talk about how you view your current level of sales productivity, how much more do you think you want to invest in that going ahead in fiscal '26 in particular? Kelly Georgevich: Yes. We're always pretty strategic with investments in sales and marketing. I think we'll continue to invest in sales and marketing as long as we keep seeing that ROI, and we do expect to continue to invest in the EU as well. David Moradi: And we're looking for 30% growth in cash flow this year. So tons of leverage dropping to the bottom line. Operator: Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. David Moradi: I'd like to thank our employees, customers and investors for their support. We look forward to providing an update on the next quarter. Thank you. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Eric Born: All right. Good morning, everyone, and welcome to the Grafton Full Year Results Presentation. A few operational highlights from me before I hand over to David, who will guide you through the financial numbers in more detail. Good morning. A resilient Group performance in 2025 with pleasingly a return to revenue and to profit growth. So revenue was up for the full year, 10.4%. Adjusted operating profit was up 7.1%, and our adjusted return on capital employed was up 60 basis points at 10.9%, comfortably exceeding our cost of capital. We made continued progress on our development activities to further strengthen the group, enhanced leadership teams and the talent pool in general across the Group, including bringing in -- for Iberia to really focus on our growth aspiration in that relatively new market for us. We successfully integrated the first platform acquisition we did, Salvador Escoda, which I'm pleased to say delivered the profit growth in line with our plan, and we made good work to prepare that business to be ready to accelerate growth going forward. We also strengthened our market position in the Republic of Ireland with the bolt-on acquisition of HSS Hire into the Chadwicks Group to further extend our hire proposition to our customers. And in general, we delivered a strong cash conversion and preserved a strong balance sheet to continue to support the future development of the Group. So I shall now hand over to David, who goes into more detail. David Arnold: Thank you, Eric, and good morning, everyone. As Eric has already covered off some of the headline details of our performance in 2025, I'll talk you through some of the financial details now starting with the income statement. Revenue of GBP 2.52 billion was 10.4% higher than last year. Thanks to the hard work of our teams across the group, we delivered a resilient adjusted operating margin pre-property profit of 7.3%, only 30 basis points below last year. This reflects a continued focus on margin management with the group achieving a 50 basis point improvement in gross margin, together with a proactive management of our cost base to mitigate the ongoing inflationary environment on operating costs. It's pleasing to report that we saw a return to profit growth for the first time in 3 years, with the group's adjusted operating profit before property profit of GBP 184.3 million, 6.2% ahead of 2024. Adjusted operating profit, including property profit of GBP 5.9 million was 7.1% up to GBP 190.2 million. The net finance cost of GBP 10.1 million was higher and reflected 3 elements: lower interest income on deposits following interest rate cuts, lower cash balances due to acquisitions and share buybacks; and finally, a foreign exchange movement. The effective tax rate was 18.2%. That's lower than the 19.5% indicated at the half year and reflected the geographic mix of group's profits and a credit relating to updated estimates of liabilities relating to prior years. Adjusted earnings per share was 75.4p, 5.1% higher than 2024 and which benefited from our share buyback program. Since we first started our share buybacks in 2022, we've reduced our share count by over 20%, and I'm delighted that we're announcing a new GBP 25 million share buyback today. For more technical guidance on 2026, I've included some information in the appendices, which you may find helpful. As noted in our January trading update, the Group has adopted a new reporting structure that better reflects our strategy and management focus. The Group is now organized into 4 geographical areas, the Island of Ireland, Great Britain, Northern Europe and Iberia. And I've set out on this slide where the various brands now sit. For clarity, all results presented today follow the new reporting structure with comparatives restated. And we've included a couple of slides again in the appendices to help you track through the new segments. Let's look now at movements in revenue for the year in comparison to 2024. The organic movement, which I'll cover in more detail on the next slide, saw revenue increase by GBP 30 million. Acquisitions contributed GBP 195 million of incremental revenue in total, largely due to the full year impact of Salvador Escoda, which reflects the benefit of an additional 10 months of trading compared to 2024. The divestment of the noncore MFP piping business in the Republic of Ireland at the end of May reduced revenue by GBP 5 million. As MFP mostly supplied internal customers, the revenue effect is limited here, but you'll see a larger impact later when we discuss the operating profit impact. Finally, the strengthening of the euro against sterling accounted for an exchange gain of GBP 18 million in the year. This slide analyzes the net increase of GBP 30 million in organic revenue. It should be noted that revenue in the year was supported by modest levels of product price inflation, and that's in contrast to 2024 when product price deflation, particularly in our distribution businesses in Ireland and Great Britain, adversely impacted sales. The Island of Ireland segment, where all businesses delivered year-on-year growth was a key driver of organic growth with revenue up GBP 34 million. In a difficult market, organic revenue in Great Britain was broadly flat year-on-year, which we felt was a creditable performance. Revenue in Northern Europe declined by GBP 6 million, largely due to lower trading activity in Finland. Organic growth in Iberia relates only to the last 2 months of the year as the business was acquired on the 30th of October 2024. Turning now to the movement in reported adjusted operating profit. We'll look at the movement in the profitability of the like-for-like business in a moment. The net impact of new and closed branches had a small positive impact on profits, while the impact of the MFP divestment, which I talked about earlier and is shown separately here, resulted in GBP 2.6 million reduction in profitability. Acquisitions added a total of GBP 13.2 million, mostly driven by Salvador Escoda in Spain with GBP 1.4 million coming from 7 months of trading from the bolt-on acquisition of HSS Hire Ireland. Property profit was up GBP 1.9 million in the year, while the stronger euro had a positive impact on reported sterling profitability. Looking at the movement in adjusted operating profit in our like-for-like business, you can see that all operating segments, except Northern Europe reported an increase in adjusted operating profit. Our businesses in the Island of Ireland delivered a strong profit growth as strong sales performance underpinned gross margin expansion. And in Great Britain, even in a very challenging market and with sales broadly flat, profits were higher, thanks to a 120 basis point improvement in gross margin. Northern Europe experienced a reduction in profits, driven by -- primarily by lower sales in Finland and ongoing operating cost pressures in both the Netherlands and Finland, which I'll cover in more detail in a few minutes. Finally, central costs were higher in the year, partly due to the planned investment made towards the end of 2024 and into 2025 to strengthen capabilities to support the group's strategic priorities. Moving on now to look at each segment in a little bit more detail. Our Island of Ireland segment delivered a strong performance during the year, supported by favorable economic conditions in the Republic of Ireland. Revenue of GBP 1.07 billion increased by 4.3% on a constant currency basis. Average daily like-for-like sales were up by 3.5%, with all businesses reporting year-on-year growth. Woodie's delivered another year of strong growth, supported by a particularly strong performance in plants and garden products with growth driven predominantly by increased transaction volumes alongside modest increases in average transaction values. Chadwicks saw good growth across the hardware, heating and plumbing categories. The gross margin increased by 20 basis points in the year, driven primarily by the strong performance of Chadwicks. Overheads increased due to inflationary pressure, while all our businesses continue to mitigate these impacts through productivity gains, better use of technology and more efficient rostering. Adjusted operating profit of GBP 111 million was 1.8% ahead on a constant currency basis, but the operating margin was slightly down by 20 basis points to 10.4%, largely due to operating cost pressures. The integration of HSS Hire Ireland into Chadwicks continues to progress well with a short-term focus on systems integration. The outlook for the construction market in Ireland remains positive with a focus on accelerating new housing supply expected to continue for at least the next decade. In Northern Ireland, market conditions were and remain more challenging with the construction sector delivering modest growth in 2025, primarily due to an increase in new housing, albeit from a low base. Moving next to the Great Britain. We were especially pleased that our targeted commercial actions delivered a 120 basis point improvement in the gross margin despite a very competitive market backdrop with subdued volumes. Around 60% of our sales in Great Britain are generated from London and the Southeast, and this market has been particularly affected by a weak housing market with London seeing the lowest level of housing starts in 40 years. After a positive start to the year, overall construction activity softened from late quarter 2 and remained that way into the second half with the U.K. government's autumn budget further weighing on consumer sentiment. Revenue in Great Britain of GBP 765 million was broadly unchanged in comparison to prior year. Average daily like-for-like sales were up 0.4% with strong growth in our manufacturing businesses, helped by softer comparators from 2024, largely offset by a modest decline in our distribution businesses, which represent a greater share of sales. Notwithstanding inflationary pressure on costs, especially with respect to labor and property, overheads were tightly controlled across our businesses with the increase in like-for-like overheads contained to 1.8%, well below general inflation levels. Adjusted operating profit of GBP 49.2 million increased by 6.2%, supported by that gross margin expansion. In our Northern Europe segment, performance in the year was below our expectations. Revenue of GBP 469.7 million declined by 1.1% on a constant currency basis. Average daily like-for-like sales increased -- decreased by 0.5% in 2025, with moderate growth in the Netherlands more than offset by a pronounced decline in Finland. Sales increased in the Netherlands, driven primarily by strong branch sales and growth in national key accounts, in addition to increases in project-related sales and modest product price inflation. After a strong start to the year, momentum in the Netherlands eased as several major construction projects reached completion and the start of new projects was delayed. Sales in Finland fell sharply due to difficult market conditions, unfavorably mild weather at the start of the year and temporary operational issues that disrupted our internal supply chain. Challenges have gradually eased in the second half as management took decisive actions. Gross margin increased by 90 basis points in the year, reflecting strong performances in both geographies. In the Netherlands, active commercial management actions more than offset the adverse mix effects of large construction projects and key accounts, which accounted for a higher proportion of sales, whilst gross margin in Finland improved primarily through optimization of rebates and procurement efficiencies. Overheads remained under pressure in the year, reflecting general inflationary pressures, the high settlement agreement under the industry-wide collective labor agreements in the Netherlands and strategic investments which we made to strengthen the Finnish business. Adjusted operating profit of GBP 29.6 million was 17.2% below prior year on a constant currency basis. The operating margin was 120 basis points lower at 6.3%, reflecting the impact of lower sales in Finland and the inflationary pressure on overheads across both geographies. Salvador Escoda is one of Spain's leading distributors of HVAC, water and renewable products, which we acquired at the end of October 2024. We're very pleased with how the integration of the business has progressed and its trading performance in its first full year under Grafton ownership was in line with our pre-acquisition expectations. We've strengthened the business further during 2025, adding resources and support to its experienced management team to create a strong foundation for Salvador Escoda to accelerate organic and inorganic growth in the coming years. Salvador Escoda reported revenue of GBP 212.9 million and delivered an adjusted operating profit of GBP 13.6 million, representing an adjusted operating profit margin of 6.4%. The year-on-year increase reflects the benefit of an additional 10 months of trading in 2025. On a pro forma basis, in comparison to prior year, average daily like-for-like revenue was 6.1% higher, driven by strong growth in the air conditioning, ventilation and refrigeration categories as well as favorable market backdrop. The Spanish economy continues to be one of the fastest-growing economies in Europe with GDP expected to have grown by approximately 3% in 2025. The Spanish construction market is forecast to grow slightly faster by around 3% to 4% in 2026, supported by sustained housing demand, substantial investment in renewable energy and transport infrastructure and the accelerating shift towards energy-efficient and sustainable building practices. Within the construction sector, the HVAC segment is well positioned for strong growth, driven by tighter energy efficiency rules, rising consumer focus on efficiency and higher temperatures across the Iberian Peninsula. Despite navigating significant change in 2025, the business delivered a strong trading performance, outperforming the prior year on both a reported and pro forma basis. The group continues to support the local management team in driving organic growth. New business -- new branches opened in Vic in Catalonia and Plasencia in Extremadura, enhancing our existing market positions in these regions. We continue to assess further growth opportunities in the attractive Iberian market with a strong pipeline of potential new branch locations in hand. Now this slide analyzes our cash flow in the year. As you can see, the group generated strong free cash flow of GBP 168 million in 2025, representing an 88% conversion of adjusted operating profit into cash and contributing to more than GBP 700 million of free cash flow generated over the last 4 years. And some key highlights to note. We were pleased to see a reduction in net working capital of GBP 12 million in the year despite higher sales. Optimizing our investment in net working capital, whilst not compromising our customer proposition continues to be a key focus across the group. We continue to reinvest to strengthen our businesses, notwithstanding current market weakness in certain geographies with a net GBP 41 million invested in replacement and development CapEx. There was a GBP 14.3 million investment in net M&A activity, being the acquisition of HSS Hire Island, partially offset by proceeds from the divestment of our MFP piping business in the Republic of Ireland. And finally, we returned GBP 128 million of capital, net of issued shares under the LTIP and SAYE schemes to shareholders in the year. Of that, GBP 72.6 million was paid in dividends. And you'll have seen from today's results that we propose to increase the full year dividend by 2% to 37.75p per share. Dividend cover for the year was 2x, and it is our intention to restore dividend cover more firmly within the 2 to 3x dividend cover ratio as we move forward. The cash-generative nature of businesses continues to support both shareholder returns and a strong balance sheet, providing significant firepower for the group to capitalize on organic and inorganic development opportunities. At the end of December, our net debt was GBP 123 million, representing a lease-adjusted net debt-to-EBITDA ratio of just under 0.4x, slightly better than at the end of 2024. And finally, just turning to the balance sheet. I'd just note the net working capital increase, which you see there of GBP 8.8 million in comparison to the end of 2024, and that's largely due to the recognition of the deferred consideration related to the divestment of MFP. Adjusted return on capital employed was 10.9%, almost 2 percentage points higher than our estimated weighted average cost of capital and 60 basis points higher than 2024. And I'll now hand back to Eric to talk about current trading trends, our strategy and outlook. Eric Born: Thank you, David. On the left, you can see the average daily like-for-like revenue change in constant currency for Q1 '25 and for the first couple of months in 2026. It's early in the year and the important trading months are still to come. So if you go to the Island of Ireland, wet weather impacted the trading on the Island of Ireland and in Great Britain. However, Ireland delivered some growth, supported by the softer comparators following the storm Eowyn in the prior year during that period. In GB, in Great Britain, the market environment remains challenging, as you can see on the like-for-like numbers. We had modest growth in Northern Europe with a strong Finnish performance, offset by some softer trading in the Netherlands, which was impacted by a change of holidays. In other words, they had the Carnival period in the like-for-like period, which will not deliver the sales you would hope during the period. But ongoing strong momentum in Iberia. From an outlook point of view, Island of Ireland, the construction outlook remains positive in the Island of Ireland with the retail consumer slightly more cautious than previously, but we have a positive outlook overall for the Island of Ireland. In terms of Northern Ireland, we don't expect any significant uplift during 2026. Moving to GB, a slow start, as I mentioned. However, the important months are yet to come and January, February was certainly impacted by bad weather conditions in Great Britain. We would expect a modest market growth in the second half of the year. Northern Europe, the Netherlands construction market is expected to gradually recover during the year. And in terms of Finland, we don't expect any meaningful improvement of the construction market until the second half of the year. Iberia, as David already mentioned, the construction market is expected to grow 3% to 4% during 2026, and we would expect our product segments to do well within that market environment. In terms of medium-term outlook, positive across all geographies because they all are supported by the structural growth drivers of not enough housing and aged housing stock. So the long-term drivers are very positive, and we have strong position in all of those markets. The recovery potential is especially great in Great Britain and Northern Europe, where we have a lot of operating leverage and the business has not cut into the muscle. So whilst we are lean in those businesses, we are ready to take advantage of increasing volumes when they will arrive. Tight cost control really gives us the benefit of the operating leverage as volumes return. So let me say a few words about our strategy. So how do we intend to drive growth and create value going forward. As you know, we focus on European markets with long-term growth characteristics. And within each geographic market, we build strong positions to distribute construction-related products and solutions to our predominantly trade customers. In terms of operating model, we have a federated operating model with local execution, supported by strong group capabilities, how we help the businesses to improve and drive results across the geographies. So what sets us apart are really strong and experienced leaders in each market supported by the group, but the accountability really sits in the market and the ownership. That drives very high colleague engagement and a relentless focus on providing customer service and a real sense of ownership. And I think that's something which really sets us apart because our businesses really care. We also have a very resilient model based on the geographic diversification we have. And you can see this again in this year's results where 2 of our markets are challenged, let's say, in 2 of our markets are in a more positive macro environment, which overall still leads to a very, very strong generative -- cash-generative business, which is a real underlying strength. And as David mentioned earlier, we are very disciplined in terms of our financial discipline. So we will maintain our credit grade rating, and we have a very clear structured approach to capital allocation, which you can see on the right of the slide. So it's really around, first, fund organic growth and keep our existing estate fresh and make sure we have sufficiently invested into the existing estate, pay a dividend in the range of a dividend cover of 2 to 3x with an ambition to move closer to 3x over time than we are at the moment. Third priority, inorganic growth. We have a very strong pipeline, and we are focused on driving growth at this moment in time in our already existing markets. So it's not about planting a flag in another country at this moment in time, focused on the existing markets and then to return surplus capital to our shareholders, which we did again with the announcement this morning of a further GBP 25 million share buyback. And I think the next slide nicely illustrates this in practice when you look around the capital allocation between 2022 and 2025. We started in '22 with a net cash position. We generated over GBP 700 million of free cash flow after replacement CapEx. We then allocated a good chunk, namely GBP 721 million to pay dividends and execute share buybacks and return that money to shareholders, whilst we also invested roughly GBP 100 million in development CapEx and over GBP 160 million in acquisitions. So I think that's a very nice illustration around the cash generation of the business and how we allocate the capital mindfully. But of course, we want to tell you more about all of that and how we drive future growth with a Capital Markets Event, which will be held on May 20 here in London. And the event will focus on the group's strategy and growth ambitions over the medium term and you will have the opportunity to not just meet David and me, but of course, many other senior leaders and see more about the bench strength of the management team we have from all the different geographies. So shall we move over to Q&A. Shane Carberry: Shane Carberry, Goodbody. Two, if I can, please. The first one, just in terms of the gross margin in the U.K., really impressive 120 bps increase year-over-year. Could you talk a little bit about the dynamics behind that and some of the levers that you had to pull to achieve that outturn? And then the second was just to get a little bit more color around Iberia. It's been kind of 14, 15 months now since you bought Salvador Escoda. So how has that process been? Has it integrated as well as you thought it would to date? And just thinking looking forward, now that you've hired a CEO, how should we think about how things are going to evolve from here from an organic and inorganic growth perspective relative to what you might have thought 14, 15 months ago? Eric Born: Okay. So let's start with GB and the margin improvement. I think in general, given we have, as you know, a federated structure, we have people in the businesses who are focused on the bottom line. This is a performance-led culture. And as -- for example, as demand was soft, we saw in some of the activities we did early in the year when we drove promotions that even with support of suppliers, the incremental volume you generate on the promotion activities actually led to a lower gross profit than in absolute pound sterling numbers than if you wouldn't have run a promotion. So the businesses will have been very tactical picking their battles, if you want, and more making sure we deliver an overall attractive basket for our customers rather than drive aggressive price promotions into a market where you will not have the incremental revenue and will be net-net out of pocket. So those were some of the levers. Of course, others were working hard on some of our exclusive and own brands and how are they positioned and what's the share of those and all sorts of commercial activities and collaboration with the suppliers to manage the gross margin overall. But I think that is really something where you have to be nimble and you have -- and I really attribute the strength of the federated structure and that operating model for the businesses to take the right decisions because it will be impossible for us to legislate if you want from a Group point of view, how they have to react to daily trading. So that's the bit on GB. If you look at Iberia, I think that has been a great success so far, right? So we have -- we are absolutely in line with where we expect to be. This is a business we acquired and in year 1 of acquisitions had a higher ROCE than our cost of capital. So we buy a platform which already in year 1, ROCE is greater than our cost of capital. So that's a good thing. Secondly, we had an experienced management team in a family setup, which had to learn a lot about how we do things in a PC environment. So we had to strengthen, for example, the finance function, the HR functions, the health and safety function, property, right? We have growth ambitions, but we wouldn't have had the infrastructure at the moment we acquired the business to accelerate growth beyond 2 or 3 branches a year, even if the opportunities come up, we just didn't have the infrastructure. Nobody have had the backbone and the infrastructure to absorb a bolt-on acquisition and integrate it, right? So that's really the work we have done during this year to create that, if you want the engine room within Salvador Escoda. And now we are ready to accelerate growth organically, but also to absorb bolt-on acquisitions as they might present themselves to execute. So that's within Salvador Escoda. So we strengthened the management team. We still have the same CEO or Managing Director for that operating business, which is Marta Escoda, the daughter of the founder, who already run the business when we bought it. The plan was always -- we singled out Spain or the European Peninsula as a very, very attractive market for 2 reasons. One, it's a growing market. Secondly, it's highly, highly fragmented, right? So it kind of really gives opportunities for M&A as well as organic growth across multiple verticals. So with Marta, we have an excellent person to run Salvador Escoda, but you need a different animal in the local geography to drive our growth ambitions, to help us to get the position we would want to have by 2030. So -- and that was the backdrop why very early on, we made the decision to go out and bring a CEO in for the Iberian Peninsula. And I'm very pleased, Mario has started in January. And I'm convinced we will have more to report over time from how we will successfully grow across Iberia. Charlie Campbell: Charlie Campbell from Stifel. A couple of questions following on from both of those really. So Spain margin 6.4% in the year. It was more like 7% before you bought it. I guess that comes from putting in more infrastructure to support the business and make growth more sustainable. But how should we think about margins longer term in Spain? Should we think about that 7% as achievable and perhaps more as volumes drop through? And secondly, on the GB and on the gross margin, did you change the incentive structure there at all? Are people perhaps more focused on growth than they were before because that really is an extraordinary performance. Eric Born: Look, in Iberia, we do believe there is room to enhance the margins in Salvador Escoda over time. But if I look at Iberia in general, we would expect for this business to substantially grow, so in Iberia and have somewhere a margin corridor between 7% and 10%, would be kind of the margin corridor we would expect to be throughout the cycle in Spain. So I hope that answers that bit. In terms of incentive structure, no, we haven't changed the incentive structure in the business in GB. We have enhanced the management capabilities within GB. So we have a long-serving colleague, which has kind of oversight over CPI, EuroMix and StairBox. And then we have Frank Elkins, who joined us in 2024, right? Time flies when you have fun, in 2024. And he has been really, really focused with the team and enhancing, as I said, the bench strength, which is an ongoing process, right? I always compare this to like a football coach that you -- whenever you have the opportunity, you strengthen your team. It's a team sport, right? And that's exactly what we have done. So the focus or the achievement has been by targeted activities and focus. But people are bonused on delivering the outcome on the bottom line, right? So in a sense, that incentive has always been there. So the incentive hasn't changed. David Arnold: And I suppose just on that financial piece around Spain, as Eric alluded to, the business is exceeding our cost of capital in its first full year and really very much return on capital employed is our sort of foremost guiding financial metric, I suppose. Operating margin is sort of -- is a good metric for quality. But really, it's about driving return on capital employed and cash. Samuel Cullen: Sam Cullen from Peel Hunt. I've got 3, if possible. Coming back on the Selco gross margins, I guess, how do you -- let's say, volumes do pick up second half of the year and they grow again next year. What's the sensitivity around kind of unwinding some of that gross margin increase to take more volume? And how do the guys on the ground judge if, when, how to do that? That's the first one. David Arnold: Should we just pick them off as we've got another couple coming. I mean, look, I think on gross margin, yes, you've got to play the game that's in front of you. And I think in 2025, it was a game of weaker margins. And therefore, what do we do focusing on that bottom line. And I think that mantra continues going forward. So we just need to be nimble and responsive to how the volume and the strength of the market demand sits overall in GB in the same way that we're not focused on market share as a particular metric and are led by what's the impact on the bottom line. I just think we'll be nimble and the gross margin may come down if we see that strength in volume that we know that we can more than recover that by seeding some margin. So it's that flexibility and nimbleness that we need really. Samuel Cullen: Second one is on central costs. I think you highlighted there was a step-up in investment this year. Do we expect that to be at the end of that step-up and it to be kind of inflationary from here? Or do you envisage... David Arnold: No, I think it's a modest amount. I mean, for example, to give a bit of color on some of the areas that we focused on, it was more support on transaction services so that, again, we were better placed to be able to pursue a broad pipeline of acquisitions. It was elements like cybersecurity and support for a number of the ERP implementations that we've got going on around the group. Some of it was bringing sensible things, for example, like payroll into the center and taking it out of the businesses and saving some of the costs in the businesses. So there were sort of a variety of tactical things. Do we think that there will be major moves or significant more increases in central costs? I don't think it will be significantly more in terms of the investment in additional functions or roles. Samuel Cullen: And the last one is back on the U.K. If we don't see a pickup in overall market volumes, do you see wider consolidation in the sector over the medium term, may not be from yourselves but from other players? Eric Born: It's a good question, right? So we have private equity active in the U.K., right? Do I think they -- if there is no recovery, that was your question, do I think there will be a lot of appetite of those ICs to invest more money in the sector? I'm not sure, right? In terms of the listed players -- in theory, there should be more consolidation. If you look at how many general builders merchants there are in the U.K., you would expect there to be more consolidation. Whether that will play out like that is yet to be seen, right? So we -- again, and I'm clear on that, we are -- from our own investment point of view, we believe in the businesses which we have in the U.K. irrespective of where we now sit in the cycle, and we will continue to support those businesses. And if the right organic growth locations come up, whether that's for a Selco or for TG Lynes or for a Leyland or anything, we will invest the money into it if we believe in the case. You have to look throughout the cycle. You can't just sit and think, now it's bad, it will always be bad because the fundamental growth drivers are there in the U.K. The question is when. But if you then come to M&A capital, do we deploy M&A capital in the U.K. Well, for GB, I'm not saying no. But as you will have seen, we look at capital allocation in a framework, which says, do we actually believe this is the right allocation of capital. Do we get a return on capital and the cash generation out of this business, which we think is really accretive for our shareholders and the business over time. And if the answer is, yes, we do and we find a market like that in GB, well, we will allocate capital. But if it's in Spain or in Ireland or somewhere else within our existing markets, we will allocate it. Florence O'Donoghue: Flor O'Donoghue, Davy. Just 2 for me. One is just on OpEx for this year, just your sense of rents, rates, labor, what they're looking like. Second one then is just on selling prices. What's the current state of play in relation to them? David Arnold: So I think on OpEx, I mean, if we look last year, there were a number of high areas of inflation. You take the Netherlands, for example, where there's a collective labor agreement, and we saw salary increases of 6% in 2025. That under the collective labor agreement for 2026 will be more like 4%. So we're definitely seeing it reduce. But I would still think that we'll be working really hard to contain it in that 3% to 3.5% level because of what we see in terms of some of the statutory increases, national insurance effectively for a full year. We've got what's happening on national living wage, for example, either in Ireland or in the U.K. Those pressures are still there. Pressures on property rents in terms of the inflation that we're seeing where you've got 5-year rents that are refixing this year that we've got the catch-up from a few years ago as well. So yes, we'll work really hard, but I would still say it still feels 3%, 3.5% we'll be doing well to contain it to that, I think. And we'll have to work really hard around efficiencies and cost control to mitigate some of the softness in the market. As regards overall, what we're sort of seeing across the piece on selling prices, I would say probably not a too dissimilar picture in '26 to what we saw in '25. Depending upon geography, Netherlands was probably closer to 1%. Ireland on the distribution side was more like 1.5% to 2%. I think we're still in that sort of zone, certainly talking to manufacturers and suppliers. It felt at the start of the year that we were in that sort of zone. Of course, we're slightly in the lap of the gods in terms of exactly what happens to the evolution of inflation in the year. But yes, we started thinking 1%, 1.5%. Christen Hjorth: Christen Hjorth from Deutsche Bank. Just 2 for me. First of all, on the GB like-for-like at the start of the year, just trying to unpick some of the one-offs in there and I suppose the extent to which the first 2 months is a read for the first half and maybe how you exited those first 2 months because obviously, the number was a bit standout on GB. And the second one, sort of maybe a bit similar to Sam's question, but looking at Europe, I mean, there's a few players out there looking to consolidate European distribution. So in the context of that, what really sets Grafton apart, particularly, I'd say, in terms of being the acquirer of choice for some of the businesses that you're looking for? David Arnold: Do you want to pick Europe and I'll come back to GB? Eric Born: Look, many of the consolidator -- not all of them, but many of the consolidators are across Europe are private equity backed, right? So if you look at what we bring to the table is we -- if you think about the family-owned business, we will be a home for the family-owned business and not a transitionary home for family-owned business. And I think that's a major competitive advantage we have. We can have owners talk to people who work for Grafton, who sold their business to Grafton and they can talk about how that experience was for them. And by the way, we do this frequently, right? We have people coming and visit Sitetech or other businesses and which are part of the Chadwicks Group now, and they can really talk about that firsthand experience. We also have that experience with Salvador Escoda, right? How was it for them. And I think that's a major, major benefit. What was the second part of the question? Christen Hjorth: GB like-for-like. David Arnold: Yes, GB like-for-like. I mean, look, the year has started off weakly. There's no doubt in GB. To some extent, it was -- has been influenced by the wet weather. But I think that's an element of it. I think market is -- remains tough at the moment. The good news is that the year is not won or lost in the months of January and February. So there's a lot to play for in the year ahead. There's some really great stuff that we're doing in the GB businesses. So I think confident about that. The underlying market, there's a lot of really good fundamentals that should start to see -- we should start to see some volume growth coming through during the course of this year. The biggest point is really around confidence. That's the thing. And over the last 5 days, that confidence has probably taken a bit of a not more generally. We just need to see how the next sort of few weeks pan out really. But I think if confidence can come back, there's a whole bunch of reasons to feel optimistic about volume growth, I think, in GB. Okay. So I think that looks like it from the room. We haven't got any questions online. Thank you very much, everybody. Enjoy the sunny day. Eric Born: Thank you all. David Arnold: Thanks.
Milena Mondini: Good morning, everyone, and welcome, and thank you for joining us as we review Admiral 2025 year-end results. Today, we'll be announcing another remarkable year of financial results and strategic progress. So I will start with the key highlights before handing over to Geraint on the financials and to Alistair on U.K. Insurance and Costi on Europe. I will then come back to reflect on what we have achieved over the last 5 years and finally explain how the evolution of our strategy position us to create even more value in the years ahead. So let's start with the main achievement for 2025. We delivered a record profit of GBP 958 million. This was up 16% year-on-year, reflecting disciplined execution and growth across the group. 2025 also marked exciting progress across data, technology and AI and the evolution of our motor proposition, including the acquisition of Flock subject to regulatory approval. Today, we'll also outline the evolution of our group strategy. This strategy builds on a very strong platform, but more diversified customer base and the competitive advantage we already have to deliver higher long-term value for all our stakeholders. We will also cover our new capital distribution framework, including share buybacks. Geraint will take you through that later. So more in detail. As already mentioned, 2025 was a year of record. Our customer base increased 7%, while we continue delivering strong customer outcomes with the group Net Promoter Score over 50. Group profit reached a new high, driven by record U.K. Motor profit, passing now the bar of GBP 1 billion, following another record year in 2024. This was achieved in a challenging market environment, thanks to positive evolution of recent years and continued underwriting discipline across the cycle. Importantly, this was not just a U.K. Motor story. All parts of the group contributed. In the U.K., Other Personal Lines, Admiral Money combined delivered a profit of GBP 88 million. Europe also performed strongly with a fast return to profitability in Italy and great results in France, which Costi will cover shortly. 2025 was also a year of strong shareholder returns, supported by a 7% increase in dividend per share, a very strong capital position with a solvency ratio of 193% and another stellar return on equity of 53%. Beyond the financial results, 2025 marked an acceleration in our strategic progress. We are pleased with our rapid advancement on artificial intelligence, particularly with the value delivered by machine learning models and the new gen AI center of excellence to scale priority use case, train our people and provide them with the right tools. We are managing more than 150 gen AI initiatives across the group, including support to over 4,000 colleagues, some agentic models with promising initial results and more potential to come. Selling more product to our existing customers remains a key growth driver with our multi-risk customers now exceeding GBP 1.6 million. Across Europe, we continue to evolve our broker propositions with stronger segmentation and more customized offering, driving better margin, as Costi will explain later. We also continue to innovate in Motor. An example is our partnership with Octopus that positions us well in the fast-growing salary-sacrifice scheme for electric vehicles with a tailored risk-based proposition aligned with our ambition to support customers in making greener choices. And in Admiral Money, completing our first forward flow deal was an important milestone as it opened up a more capital-efficient growth path and support higher returns and lower volatility. On M&A, the integration of More Than is now fully completed and contributed positively. Elephant disposal is also completed. And finally, early this year, we announced our intention to acquire Flock, a company we had invested in since 2024. Flock offers a telemetry-based fleet proposition with an effective feedback loop to improve safety and performance. It's an excellent strategic fit with our U.K. Motor expertise with promising underwriting and claim synergies and it's closely aligned with our joint ambition to improve safety on the roads. And by combining Admiral data ambition to Admiral's strength with Flock technology, we see an opportunity to develop a differentiated fleet business in an underserved market. So in summary, 2025 was a record year for Admiral with strong profits, customer growth and progress in technology and strategy. Now before handing over to Geraint, I want to take a moment because this will be the last time that you joined me on stage to present results. And I think it's fair to say that the strength and discipline of the performance for about 2 years are a good reflection of his leadership, his judgment and his consistency over the last 12 years as CFO, a period during which Admiral tripled its turnover and grew profit from GBP 350 million to almost GBP 1 billion. And please join me to congratulate Rachel who is here with us today and will succeed to Geraint, bringing deep knowledge of Admiral, a strong track record within the group and a great skill set for the role. So thank you, Geraint, and congratulations, Rachel. Geraint Jones: Thank you. Good morning, everyone. 12 years of not being conduct. One last time, let me talk you through the main drivers of an excellent 2025 result. Lots of positives, lots of good milestones. I'll cover the U.K. Motor loss ratios, the dividend, strong capital position. And as Milena mentioned, I'll talk you through the change in the approach to capital return that we've announced today. To start with though, let's look at the component parts of the group profits and the main ratios. The group combined ratio was very positive again at 80%. That was 3 points higher than 2024, though the impact of Ogden accounted for around 2 points of that difference. So in reality, only a very small change. And that, in turn, has made up of a slightly improved expense ratio and a slightly higher loss ratio. The latter as expected, due to the higher loss ratio 2025, underwriting year in the U.K. Motor having an impact. On to the results then. In U.K. Insurance, overall profit was GBP 1.1 billion. That's GBP 110 million higher than 2024, including Ogden, or GBP 180 million higher if Ogden is excluded, very big increase. The U.K. Motor results, I'll cover shortly, but the result there was a record profit, just over GBP 1 billion. And we're very pleased with a really strong year for the U.K. Other Personal Lines, Home insurance, Travel and Pet insurance, all profitable, strong growth. And the combined profit there was GBP 62 million, was nearly triple of 2024's result. In Europe, we're reporting a much better results, improving by nearly GBP 30 million versus 2024. We see growth in higher profits in France, small loss in Spain, impacted by new reinsurance arrangements and a recovery to profit in Italy. Good to see that happen so swiftly. And worth reminding that we continue to hold prudent booked reserves in Europe in the upper end of our range and the best estimates are also conservative. Admiral Money had a great year. Profit was double 2024's, benefiting firstly from good growth in the balance sheet. But also, as we talked about at the 2025 half year from profit generated from selling some back book loans in the first half and selling newly originated loans, which don't hit Admiral's balance sheet. That will be a continuing, we think, attractive feature of the Admiral Money business model. We continue to see good margins on the unsecured loans business, which makes up the big majority of the balances, but the results from car finance, which was relaunched in late 2024, are also encouraging. Credit loss experience remains very solid, and we hold an appropriately prudent provision for losses. There are some other comments on the page, which cover the movement in the share scheme costs and the other line, and you've got the usual extra information in the back of the pack. All in all, group profit was up 16% or 28% if you exclude the impact of Ogden on both years. Let's take a look at the very impressive U.K. Motor results. So this is a summarized income statement plus some of the key ratios and some commentary. Both years include the impact of the Ogden discount rate change. And so some of those year-on-year comparisons, you see look a little less stronger than they really are. We show the pounds and the percentage impact of Ogden in the table and starting with the top line. Customer numbers increased by 2% year-on-year, 50,000 added in the first half and around 80,000 in the second half, so 1% increases half-on-half. As Alistair will talk a bit more about later, we reduced our prices in H1 last year, and hence, average premiums have fallen. And so despite our bigger portfolio, turnover was down by 7% as the team took a disciplined approach in the competitive U.K. market and reflecting the claims trends that we were seeing. As a result of the reduced premiums and continued claims inflation, the current year loss ratio for '25 is 3 points higher than '24. And of course, we also don't see quite the same positive impact of Ogden in '25 than we did last year. And those 2 items are the main drivers of the higher combined ratio you see at the bottom, which is as we expected. The underwriting results improved by around GBP 40 million with higher earned premiums and a much lower reinsurance charge offsetting the higher net claims cost. You'll remember that we had much more limited quota share recovery assets coming into 2025, and we see a similar picture as we exit 2025 too. Net investment income was higher, up to a record level due mainly to higher invested assets at a similar rate of return. Profit commission was notably higher as we started now to recognize income on the high profitability 2024 underwriting year, though we still haven't yet recognized income on '21 to '23 or on 2025. We do expect to see revenue coming through on '21 and '25 very soon. I already mentioned the main drivers of the higher combined ratio we see at the bottom. But within that mix, reserve releases were 10% year-on-year, basically the same like-for-like. Next up, we'll take a quick look at the main U.K. Motor loss ratios, which, as always, are a key driver of this result. The chart shows the U.K. Motor discounted book loss ratios and there are generally positive and consistent messages to report here. We can see -- we see continued strong improvements in '23 and especially on '24 over the last year. 2024 is clearly a very good margin year on a very large premium base. In 2025, we see burn cost inflation around mid-single digits level and that's a small improvement in H2 versus where we saw things at the half year point. The first discounted booked loss ratio for '25 is at 78%. That's 7 points up versus '24 at its equivalent point. And that's again basically in line with our expectation. On an undiscounted basis, 2025 is 85% compared to 77% for '24. Now we expect '25 will be a good profitable year. You can see it looks healthy on the chart at the 12-month point, and it should develop positively from here, though obviously won't end as profitably as 2024. We maintained very high reserve strength. It's very close to the maximum percentile, and we expect that will reduce a bit further in 2026 towards the middle of our range. Overall, on claims, positive experience in line with our expectations, usual trends and there's more information in the back of the document. Moving now to look at the capital position. So this is the bridge of the solvency ratio from half year to full year '25. There's a couple of observations. Firstly, the capital generation in the second half is largely offset by the final dividend. And secondly, due mainly to pretty flat revenue in '25 versus '24, we see a much smaller change in the capital requirement in '25 than we did in '24 and particularly in the second half. And then the change in the capital requirements and the other items in the middle almost cancel each other out, leaving the group with a healthy -- very healthy, almost flat ratio of 193%. Short update on the internal model. Lots of hard work by our team, as usual, over the past few months since we last updated you. We now expect to make our application for approval shortly. Post approval, we'll target solvency coverage in the 150% to 170% range, probably at the upper end, in part to give us flexibility for smaller M&A opportunities. We'll give more information on the post-model approval capital position at the appropriate time. Speaking of M&A briefly, Milena mentioned earlier, the Flock acquisition. As we said in the press release, if that gets regulatory approval and completes in the second quarter, we estimate the impact on solvency will be a bit less than 10 percentage points and is, therefore, largely absorbed by the strong position. Next up is the dividend. So these are the details of the dividends, split between interim and final. And for 2024, we call out the impact of the Ogden change, which was obviously significant on the dividend for last year. The proposed final dividend is 90p per share. That brings the total for the year to 205p, over GBP 620 million, and that's 7% higher than 2024. The difference in the payout ratios year-on-year is due to us starting to use capital to purchase shares for the share schemes, which we said back in August would start in the second half of '25. You'll remember that historically, we issued new shares each year for those share schemes rather than purchased in the market, but we haven't done that since 2023. In the fourth quarter last year, the trust bought about 1 million shares for just over GBP 30 million. And the capital that we use for dividend and the share scheme purchases equated to basically the same percentage of earnings across both years, close to the 90% level. And in 2026, we expect the trust will buy around 3 million shares. Next up, we'll cover the change in the capital return approach. On the left, we show a summary of our capital allocation framework. Milena will talk a bit more about Point 1 later, which covers how we allocate capital to our businesses. And we're generally comfortable that around 10% of earnings is a fair guide of what we need to retain to fund and invest in growth. And that's meant an average dividend payout over the last 5 or 6 years of 90%. Step 2, we know the importance of strong cash returns to our shareholders. So the ordinary dividend remains at 65% of earnings. Step 3, as just mentioned, we purchased shares for the share plans. And final -- and Step 4, not finally, using some surplus capital is an option for funding M&A. And then that leaves the surplus capital and that's what's changing today. Historically, as you know, we've returned this to shareholders in the form of special dividends. But from the interim 2026 dividend, we'll change that Step 5 to be either buyback and cancel shares or pay a special dividend depending on what the Board believes is the best option. For 2026, subject to regulatory approval, we expect to buy shares at the interim and final dividend dates. The 90% guidance we've given out over the past few years to cover the ordinary plus the special or buyback plus the share schemes purchase should generally hold moving forward. And then one final slide for me to sum up. Looking back on 2025, clearly, it was a really strong year, record profits, record returns to shareholders, lots of positive results and developments across the group. For U.K., the Personal Lines and Admiral Money, great results, strong and swift turnaround in Europe, progress on the internal model, very pleasing stuff. And looking ahead, a few comments on what we might expect in 2026. On growth, in summary, we plan to grow everywhere. That's obviously subject to how the markets develop, in particular, when prices in U.K. Motor start to increase. For turnover, I'd expect a bit more growth in '26 than we saw in '25. And in general, of course, we expect faster growth from the newer businesses, U.K., the Personal Lines, Admiral Money and Europe. And then a few comments in respect to the group profit. Firstly, obviously, we will see more of an impact of the less profitable '25 underwriting year feeding into the 2026 results, but we will still benefit from good releases and profit commission coming through on 2024 and '23 and some of the earlier years too. Secondly, we project continued improvements in the results in aggregate for the newer businesses that we talked about. And finally, we expect group profit in '26 to be quite flat versus '25 after a really very strong last couple of years where profits have more than doubled. And all those comments, of course, subject to the usual caveats on markets, geopolitics, war and weather. That's it from me. I will hand you to Alistair now to talk to us about U.K. Insurance. Alistair Hargreaves: Thank you, Geraint. Good morning. I'm very pleased to take you through an excellent set of U.K. Insurance results. 2025 has been a record year across all our lines of business, underpinned by disciplined execution, customer centricity and strong operational delivery. Starting with the headlines. Customer numbers reached 9.6 million, up 9% year-on-year, with strong contributions from Motor, Household, Travel and Pet. We delivered GBP 5 billion of turnover and GBP 1.1 billion of profit, passing the GBP 1 billion profit milestone for the first time. We continue to deliver competitive prices, great service and good customer outcomes, which is recognized in customer feedback. We remain #1 in Trustpilot and achieve an NPS over 55. Importantly, 1.6 million customers now hold 2 or more products with us, a 14% increase year-on-year. Customers buying more products gives us better data to improve risk selection for all products. is a driver of our retention advantage in Motor and growth in new lines of business. Overall, an efficient source of growth that contributes to improved expense ratios. Recent announcements are leading to a more predictable regulatory landscape. Outcomes from the Motor insurance task force and premium finance review were in line with expectations, and the Home and Travel claims handling review is now complete, and we have no significant concerns. Let's turn to the Motor market. Starting with claims trends, frequency was largely flat following the marked decline we saw in 2024, and severity has returned to more normal mid-single-digit levels. Our expectation is that these trends continue, but the current macro environment introduces some uncertainty. The graph on the left shows a dark line for claims burn costs. Claims burn costs increased steeply through 2022 and then continue to increase but more modestly. The light line for market average premiums shows a lagging response to claims costs, increasing rapidly in 2023, outpacing claims costs and then declining. Both lines are indexed to 2021, and you see they cross in 2025 as increases in claims costs now exceed increases in premiums over the period. Let's focus on recent market prices. On the right, you see prices continue to decline through the second half of 2025, though at a slower rate than in the first half. We estimate average premiums declined by around 10% in 2025, broadly in line with movements reflected in ABI data. Since the start of '26, market prices are relatively flat with some differences in strategy between market participants. Market prices need to increase imminently. EY forecasts a Motor market combined ratio of 111% for 2026. This is on an earned basis, and EY assumed price increases through 2026. So delays in market price increases will put more pressure on this 2026 market combined ratio. Turning to Admiral U.K. Motor. In 2025, we focused on disciplined cycle management and maintaining our strong advantage in pricing, claims and customer retention. In 2025, we reduced rates by around half as much as the market. All the decreases were in H1. In H2, our prices were broadly flat. The left-hand graph shows that this led to a decline in new business market share in the second half of '25. Lower new business was more than offset by strong retention, resulting in modest policy growth, though lower average premiums resulted in a drop in turnover. In '26, we started increasing premiums with low single-digit increases at the start of the year to reflect the claims outlook and maintain good written margins. Taking a longer view, our disciplined approach results in varying growth through the cycle, but maximizes value and growth over the medium term. The graph on the right shows our year-on-year vehicle growth rate in blue, in yellow is our written loss ratio. Our loss ratio is consistently better than the market, but still fluctuates within a range due to the cycle. We respond quickly to claims trends, even if it results in slower growth in the short term. It then enables us to grow quickly when loss ratios are low, for example, by 15% in 2024. Since the start of 2020, our vehicles covered has grown at a CAGR of 5% and with an average combined ratio advantage of around 20% versus the market. We continue to invest in strengthening our pricing, claims and claims capabilities, including embracing predictive AI and gen AI, which Milena will talk more about. Electric vehicles is a great example of our pricing and claims focus. We lead in this growing segment. We're very competitive whilst delivering comparable loss ratios to high levels of reparability. Our overall approach is to be disciplined and grow when the time is right, whilst focusing on driving advantage in pricing, claims and customer retention. We're confident this will result in growth and maximizing value over the medium term. Let's move to our other U.K. Insurance lines where we've had an outstanding year. We welcomed 650,000 new customers, year-on-year growth of 21% and tripled profits across Household, Travel and Pet. In Household, market premiums softened further and subsidence claims were elevated in the second half of the year. Our own pricing remained more disciplined than the market and weather-adjusted loss ratios improved by about 2 percentage points. This, combined with top line growth meant that although prior year reserve releases normalize from the 2024 exceptional levels, we still delivered a record Household profit. The More Than integration is complete with around 380,000 Home and Pet customers transferred successfully. This has accelerated growth and enhanced capability, particularly in Pet. Travel grew customers by 29% and continued its positive profit trajectory. Pet grew even faster and reached breakeven just 3 years after launch. All 3 lines are now profitable with clear momentum and strong positions across their markets. So -- I'm going on too fast. So in summary, in 2025, we've delivered record profits. But in addition, Motor remains disciplined and well positioned ahead of the market. Pricing increases expected in 2026. Household, Travel and Pet are performing extremely well with growing scale and margin and customer satisfaction and retention are excellent with more customers choosing to buy more products from us. We enter 2026 with confidence that we'll continue to deliver sustainable profitable growth over the medium term. Milena will talk more about this shortly. Now I'll hand over to Costi for Europe. Costantino Moretti: Thank you, Al, and good morning, everyone. For our European operations, 2025 has been a year of consolidation. We have directed our efforts towards strengthening the operational core across our 3 markets, focusing on the fundamentals of discipline and optimization. It has been a positive period where we have made good progress on our strategy, providing a positive contribution to the group's ongoing diversification efforts. Moving to the financial results. The headline for the year is a return to combined profitability across the region. The business delivered GBP 39 million Motor profit on a wall account basis, of which GBP 11 million is the Admiral's share. Going back to the business performance, we closed 2025 with a good combined ratio of 94%. While this represents a significant year-on-year improvement of over 10 points, it is important to look at the individual market dynamics. In Italy, with ConTe, we have reached a small profit which is a GBP 30 million recovery from the previous year. This significant recovery was driven by strong actions taken on the expenses and a deliberate and disciplined pruning of the portfolio. We made the conscious decision to prioritize technical margins over volumes, leading to an expected vehicle in force reduction. With the business now on a more stable footing, we are in a position to look towards growth, always keeping the focus on its underwriting quality. Moving to Spain, where Admiral Seguros' reported results includes about GBP 8 million of one-off accounting impact related to a change in the reinsurance structure. Going forward, we have established new multiyear and large reinsurance arrangements at the European level with our historical partners. Effective from 2026, these agreements aim to improve capital efficiency and provide greater stability to our results. Excluding this specific item, the Spanish business is nearly breakeven. This is supported by the direct business, which provides a positive contribution to the results. While our diversification initiatives with ING Bank and brokers are showing very encouraging improvements while scaling up. Closing with France, where L'olivier has had a very strong year. We achieved double-digit growth in both turnover and profit with results reaching GBP 16 million profit and we surpassed 0.5 million customers. This performance demonstrates that L'olivier is successfully applying the Admiral model, maintaining a strong combined ratio advantage versus the market while driving growth through digital channels. Let's move to review our strategic progress, starting from the shift in distribution. We have focused heavily on our new brokers proposition in Italy and Spain. As the business mix indicates, we have moved away from an initial test and learn proposition towards this new one, which focuses on building long-term relationships with the intermediaries and also targets better risk segments and higher-margin business in line with our expectations. The early metrics from this shift are positive and provide a solid foundation. We are seeing solid improvement compared to our order book across all the key metrics like higher income per policy, lower frequency and lower cost per claim. And these improved fundamentals have contributed to a 9-point reduction in the overall loss ratio. While there is still more work to do, we expect these benefits to continue as more growth will come and the new proposition mature. In France, we are continuing to diversify through our household insurance product. We now cover over 100,000 risks, a 25% increase versus last year, which provides a meaningful second pillar to our French operation. Regarding efficiency, we have managed to steadily reduce the European motor expense ratio by 7 points since 2022. This has been a necessary step to remain competitive. And even in Italy, despite the reduction in turnover, we improved the expense ratio by 1 point through automation and more streamlined digital customer experience. These operational improvements are also supported by our new common data platform, which is now operational across the 3 countries. This asset allows us to deploy data futures and machine learning models across border with greater technical agility and quality, which is essential for maintaining our edge in a rapidly evolving market. To wrap up, we're very pleased by the progress made this year. Our European operations have reached combined profitability, giving us confidence in their future contribution to group's broader diversification strategy. Our objective moving forward is to leverage this stability to increase our scale and enhance our earnings. We have the right expertise, a solid data and technological framework and a disciplined path ahead. Thank you. I'll now hand over to Milena to talk more about the group strategy. Milena Mondini: Thank you, Costi. So as you just heard, 2025 was an excellent year across the group. Now I would like to take a moment and step back with you and see what we have accomplished over the last 5 years. In 2020, we announced our 5-year group strategy based on 3 pillars: business diversification, Admiral 2.0 and Motor evolution. And today, we're extremely proud of what we achieved in this time frame. First, remarkable growth with turnover up nearly 90% and group risk and profit almost 60%. We returned overall GBP 3.2 billion to our shareholders. Second, we diversified the group with more than 50% of customers now coming from other lines of business or geographies and contributing close to GBP 100 million of profit. In addition, we developed new business such as Pet insurance in the U.K., Commercial insurance in the U.K. also, Household insurance in France and we extend our addressable target market with U.K. Commercial Insurance as just mentioned in B2B2C, in B2B and B2B2C in Europe by opening up the broker distribution channel. Third, we refocus our portfolio. We exit all of our price comparison sites and the U.S. insurance business to concentrate on the growth great opportunities we have in U.K. and in Continental Europe. The acquisition of More Than and of Flock are instrumental to strengthen our product diversification in the U.K. Fourth, we overachieved our Admiral 2.0 ambition. With cloud migration, new data platform, tech stack renewal, hybrid working, scaled agile delivery, predictive AI excellence at scale and the announcement of our multiproduct offer. Fifth, we made further progress in our Motor proposition, including market leadership in EV, as Alistair mentioned, growing telematic product, fast-growing subscription model and short-term insurance with our brand for the youngest Veygo. Last but most important, throughout this period, we maintained our historical and quite unique strength. More than 20-point combined ratio advantage versus market in our core business, a unique 30-point delta return on equity versus market, a group NPS above 50 and the legendary Great Place to Work status. So back to nowadays where this leave us. Our current market presents very significant growth opportunities. They are large, attractive, growing with a combined size of around GBP 130 billion. And today, our market share across many of these markets remains relatively modest, and this leaves us substantial headroom to grow. We're continuing evolving our offering to unlock further opportunity in lending with the first forward flow deal and a new car finance product in Europe, extending our distribution and product lines. Commercial Insurance and SME are also good opportunity to provide strong proposition to a large underserved market, experiencing similar trends to Personal Lines 20 years ago with more digitalization, pricing sophistication and automation, where we can deploy our competitive advantage. Organic growth in all these segments will be driven by market-leading expertise in price comparison site and digital distribution, channels that are growing faster than the rest of the market. Cross-selling and higher retention and increasing economies of scale; and fourth, automation and synergies across the group. Our plan is based on organic growth, but we will consider opportunities for selective accretive acquisitions to accelerate diversification. Importantly, the diversification also reduced over time our exposure to any single market cycle, making Admiral more resilient in time. So having delivered on our strategy, we now look forward starting with the market context that is fast evolving, but also presenting very interesting opportunities and tailwinds. The U.K. market cycle in Motor is expected to turn and the regulatory environment is expected to be more predictable as Alistair commented before. Market consolidation could create more rational dynamics overall. More importantly, the rapid evolution of AI and gen AI represents a major opportunity for us. Predictive AI is becoming the key driver of underwriting differentiation. And we already have 12 points of loss ratio advantage versus market and this is a big driver of it. Gen AI and automation offer efficiency potential of up to 30% in the long term for customer service area and may also disrupt distribution and proposition in the long run. What is interesting to us is also the potential to accelerate the transition to direct distribution in markets where direct has more room to grow. Another major trend is the advancement of car technology, another key pillar of our strategy since 2020 Motor evolution. In the short to medium term, the most impactful change will be the shift to electric vehicles, expected to reach around 80% of new car sales by 2030, where we already have underwriting and market share leadership, as Alistair commented before. This is followed by an increased penetration of advanced safety systems. These technologies have a positive impact on collision frequency, but this has been so far more than offset by an increase in severity. As for EV, our scale and sophisticated prices approach results in a competitive advantage. In the long run, we expect autonomous vehicles, now in their infancy, to grow in share and reach a point where frequency decrease will not be anymore offset by severity. For this to happen, we need to see technology, customer appetite, regulation, infrastructure, all to further develop across countries. It will take anyhow long time to scale with higher level autonomy expected to represent around 4% of the car park by 2035, and the overall market premiums expected to be continuing to grow for at least 20 years, supported by number of cars on the road and the mix. We remain very close to this evolution, having, for example, underwritten Wayve, an autonomous vehicles player in the U.K. since 2018. As AI and mobility trends evolve, our view is that the key winning factor will remain sophisticated data-driven decision-making, scale and a lot of good quality data at scale, an entrepreneurial mindset consistently looking for opportunity to innovate and cost efficiency. And those are all areas where Admiral has a structural advantage, including 8-point expense ratio delta versus market. So overall, we are strongly positioned to leverage those key trends. Now let me introduce our evolved strategy framework. First of all, this is not a discontinuity in our strategy. It's an inflection point where we start compounding what we have already built, a more diversified business, stronger platforms and proven competitive advantage. The focus is now making those trends to reinforce each other and more deliberately over time. I think about this strategy with a set of reinforcing layers, each layer supports the next and within each layer, the benefit compound as the business grows. The other layer of our strategy is where we compound performance. Our first pillar is scaled selectively and profitably. And this is about translating diversification into sustainable growth and accelerate margin in our newer lines of business as they mature. The middle layer is where we compound capabilities. Our second pillar is future-proof our competitive advantage and it is about leveraging on the strong capability we have built in data and technology and the multiproduct benefits to improve customer lifetime value and our structural edge. At the core, at the center, we are compounding our foundations. Our third pillar is amplify the Admiral DNA, and this is to ensure that our culture, our talent, the innovation and the impact continue to evolve, providing stability and long-term direction and resilience as we grow. So the pillars are interconnected. Stronger foundation are a driver of stronger capability and in turn, these are enabler of stronger performance. Let me now walk you through each of these pillars in more detail and explain what we intend to prioritize and what we aim to deliver for each. So first pillar, scaling selectively and profitably. We have a clear ambition to continue to scale all our business while increasing margins in our newer lines. In U.K. Motor, we'll continue to grow as we have done in every cycle since Admiral was founded with discipline and at the right time, as Alistair illustrated earlier. We'll continue to invest to maintain our market-leading margins. In other lines of business, U.K. Personal Lines, Admiral Money and Europe, we will continue to grow and at a faster pace of Motor on average, generating greater economy of scale and higher margins. A key focus will be transferring our underwriting and claims trends from U.K. Motor into other products and geography as well as creating more cost synergies across the group and leverage the benefit of multi-risk ownership. Overall, we expect to deliver strong revenue growth everywhere, including reaching top 3 position in Other Insurance Personal Lines in the U.K. and substantially higher margin for those business combined, more than doubling profit by 2028 and more profitable growth thereafter. Finally, we will continue to develop our new and still small U.K. Commercial Insurance business, building a stronger SME proposition and growing commercial motor starting with the integration of Flock. Now let's move to the capabilities that are the key enabler of the growth ambition that we just discussed. It's a virtuous circle that starts from our structural strength in data, customer focus and speed with the objective to increase customer lifetime value. And with higher customer lifetime value, we create optionality, the flexibility to reinvest in these capabilities or to invest and grow or to retain margins. On the left side of the slide, we see how this focus translate into better underwriting results and efficiency. We'll continue to extend our advanced predictive AI capability, increasing both the quality and the velocity of pricing across all the lines of business and geography beyond motor. We'll also increasingly leverage on connected vehicle data and predictive AI beyond underwriting into customer-based management. This model -- this predictive AI model already delivered over GBP 100 million of incremental loss ratio value, and we expect this to continue over time. At the same time, we see good potential from generative AI to improve customer engagement, to increase productivity in technology and service area, and in particular, to improve speed of settlement that is great for customer and in addition, correlates with lower cost of claims. It's a win-win. Combined with further automation and continued cost discipline, we expect more than GBP 100 million of annual efficiency benefit by 2028. That as I said before, we may decide to reinvest in existing capability. On the right side of the slide, we look at our customers. We are strengthening a mobile-first digital end-to-end experience, multiproduct ownership and retention, which is already above market and will further benefit from multiproduct customers retaining around 5 points better than the rest. Lower expense ratio, higher retention and multiproduct ownership are key driver of higher customer lifetime value. As mentioned, this creates optionality, but also a more resilience to long-term market trends, margin pressures and volatility. So moving to the third pillar, amplifying Admiral DNA. This is what makes Admiral Admiral and different. It's our culture, it's our approach and it's something we are deeply proud of. As the environment evolves, we are focused on ensuring that our DNA evolves too, starting with our people through reskilling, developing internal talent and strengthening diversity and mobility across the group. We had this year so many examples of senior leader moving across different area and geography, including the new CEO of Veygo and new Head of Claims, new Group Data Officer, new Head of Data and Tech in Europe. And this internal mobility allow us to get different perspective and cross-fertilization from one side, but also continuity and cultural fit from the other. Another strong feature of Admiral culture is relentless curiosity and innovation, and we'll continue to evolve our products and innovate for our customers. We focus on offering competitive price, inclusive product, affordable product, including for nonstandard risks. Safety and sustainability are central in our product proposition, whether through fleet safety proposition like Flock or through EV electric vehicle leadership or initiatives around flood prevention. We also want to increase our positive impact on communities, investing around 1% of profit into community initiatives with focus on employability and climate resilience. We are proud of the 45,000 volunteering hours delivered by our colleague in 2025 and remain committed to our net zero ambition by 2040. So that was the third pillar of our strategy. Our strategy is also supported by a simple and disciplined capital management framework that is designed to increase value over time. So how we allocate capital to our operation? In U.K. Insurance, we focus on optimizing returns over the medium term. As we've always done, targeting consistently high return on equity with no structural capital constraints. In other lines, we invest to support growth and margin expansions where financial orders are met or expected to be met in the near term. In newer hires, like commercial, for example, we allocate capital to R&D and early-stage investment while requiring a clear right to win and scalability in the medium to long term. A key structural advantage is our capital-efficient reinsurance model and this is a competitive advantage that is quite difficult to replicate as it stands as it is built over more than 20 years of strong track record. Geraint already talked you through the other steps of our framework, including the introduction of buyback as additional way to return surplus to our shareholders. Selective M&A remains an opportunistic tool to accelerate growth, especially on Other Personal Lines in the U.K. and in Europe, only where our financial hurdles are met. So in this slide, next slide, we bring all of it together. Our strategy and capital management framework designed to deliver strong value for our customers and shareholders. We already delivered strong earnings growth, exceptional return and resilience through the cycle with a 7.6% EPS CAGR over the last 5 years. Looking forward, our ambition is to sustain and build on that performance by scaling what already works, disciplined growing U.K. Motor, faster growth and margin expansions in other lines and continued optionality from capability improvements. Our model is quite unique in the sector, delivering at the same time, strong returns, growth and exceptional capital efficiency. Importantly, this is about quality of growth as much as quantity, retaining our competitive advantage, our capital discipline and our culture that underpins them. In short, we believe we can continue to deliver higher returns sustainably while staying true to what makes Admiral different. So conclusion, to sum up, 2025 was a record year for Admiral, record profits, record dividends and strong customer growth delivered through discipline in U.K. Motor and increasingly diversified contribution across the group. Second, we have fully delivered our 2020-2025 strategy. Admiral today is resilient and more diversified with proven competitive advantage that are difficult to replicate. Third, looking ahead to 2026, while U.K. Motor market remains competitive, we expect price to increase. Admiral is well positioned to perform strongly and remain disciplined and resilient through the cycle. Fourth, we have evolved our strategy to compound those trends, not change direction, but raising ambition while staying disciplined. We have strengthened our capital management framework, adding buybacks alongside dividends while maintaining a very strong balance sheet and flexibility to invest. We remain confident on our trajectory, on our ability to leverage market trends and continue to deliver even greater value to our customers and to our shareholders for the long term. Thank you very much for listening. And now we're ready to take questions. Milena Mondini: [Operator Instructions] I think, first one, I saw it. Darius Satkauskas: Darius Satkauskas with KBW. The first question is sort of a statement and a question. I appreciate the update to the capital return policy introduction of opportunistic buyback. I think one of the challenges with having an opportunistic buyback rather than the program is that when you do it, it's great. When you don't, it sort of signals in the market that management is saying the shares may be expensive. How are you going to deal with that challenge? And are there any hurdle rates you'd like to point for us to sort of gauge how you think about when we should expect buyback and when not? And the second question is, your Flock acquisition, where do you think you are in positioning for the potential liability shift to Commercial from Personal among your competitors? And who do you think is going to determine the win in the future? Is there a risk that a company like Allianz with a huge balance sheet simply takes the entire market in Commercial Insurance? Or do you think Admiral can appropriately compete 10 years down the line, 20 years down the line? Milena Mondini: Geraint, do you want to take the first one, I'll take the second? Geraint Jones: Yes. So buybacks, it will be based on what the Board assesses is the right thing to do to try and deliver the max return for shareholders over the medium to long term. I don't, certainly for the foreseeable future, expect it to be dip in, dip out. We'd expect to be doing it for 2026, and we'll give -- we -- the company will give an update on that at least annually, I suspect, as we move forward. But yes, I hear your point on opportunistic versus steady. Milena Mondini: So your second question is about Flock and Commercial Insurance. So there are a few reasons why we're interested in this market. It's attractive as stand-alone market, but it's also a market where we see we can deploy a lot of our strength. And the fleet market is very competitive. So you do need to be a very good underwriter. Our claims and pricing strength can be transferred across nicely. But we also think it's a market that is -- it will be disrupted. And that's why we didn't want to really enter in the traditional way, but just focus on a proposition that we think is fit for the future, is the type of business that's going to grow in the future. So it's telemetry based. There's a lot of data from -- a lot of driving data, a sector in which we already have developed strong components to very large and growing telematic portfolio in Personal Lines. It's an interesting proposition because there is a strong feedback loop to driver to increase safety, to increase performance. And I would say it's also a building block for car of the future. The more the car become -- embed safety features and become autonomous, the more this type of skill set, data-driven pricing and underwriting and the feedback loop is important. So for us, it's a very interesting way to create and to develop a business that is interesting per se, but is also a way into the future. And I think it's a competitive market. We need to do it in the right way and with a proposition that is future fit. That's our ambition there. And we think the mix of Flock skill, technology and proposition, an Admiral amount of data, strength in pricing, data-driven pricing sophisticated telematic and also very strong claims management really can create something unique. Sorry, I'm going to go in order one. Ivan Bokhmat: It's Ivan Bokhmat from Barclays. My first question would be on the strategy into 2030. I just want to clarify, perhaps, did I interpret it correctly. So the slide that shows your 8% CAGR in the past 5 years, you're saying that you're trying to achieve that same growth into 2030. So as a statement, maybe you could just confirm that. And secondly, on the trajectory of those earnings, as far as I understand, for 2026, you're talking about flattish numbers and then it would imply more of a hockey stick trajectory in later years. So perhaps you could just talk a little bit about how this trajectory might look like, where the acceleration will come and maybe specifically on the U.K. Motor, that cyclical target where you would grow 5% through the cycle over time, when will that time frame apply in this particular case? And maybe one final small question. The partial internal model, the -- if you apply imminently, do you think you will get the regulatory approval by year-end? And what does it mean for some extra capital decisions? Milena Mondini: Yes. So I think what we're seeing here is 3 things. As you know, we normally don't give very precise guidance on long-term or medium-term earnings. But what we're saying is that there are 2 very clear revenue for growth and profitable growth in the future. Our core market, that is U.K. Motor, is a market where we have a market-leading business, we expect to continue to grow across the cycle. We'll continue to do at the right time and with the right choice and the discipline around pricing. But we'll continue, as we've done in every single cycle since Admiral was founded. We'll continue to grow our U.K. business from a larger base and retaining very, very strong margin. We also have another leg that is our other lines of business, Personal Lines and U.K. Insurance, Europe and Money, and we're planning to grow across all of them indistinctively and also increase margin for those business combined. So if you take those 2 things together, we expect to increase shareholders' returns over time without having necessarily put a specific date because there will still be some cyclicality. But the other preservation is with increased contribution from other lines, although there will still be market model cyclically to impact our results. We think we are gradually, over time, reducing the dependence on a single cycle. So that's the key message. Geraint Jones: Internal model? On the internal model, we do expect to submit our application for approval very soon. The time line for review of that is not fixed. And as you can imagine, it's not a short read. So I think we'd update on the outcome of that at the appropriate time rather than comment on how long we expect it to take. If and when it's approved, you can be sure we'll be trying to use it around the business to optimize and things like that. And again, we'll talk about that at the right time. Milena Mondini: Sorry, you mentioned something also about the shape. And as I was saying, there is still crack in the market. So as Geraint suggested, we do see a different path across the next few years. So we'll grow through the cycle. But next year may have a different impact on our growth ambition than the year after that. So that's -- but that's very normal. That's what we have done in the past, as you've seen in the slide that Alistair projected. We tend to grow when it's the right time when underwriting margin are healthier and will continue to do so. Sorry... Benjamin Cohen: Ben Cohen at RBC. I just wanted to ask a few things on the U.K. Motor business. Firstly, would your central assumption be that you would be able to match claims inflation through the course of '26? And could you make a comment as to what you've seen in the market reaction as you've tried to put through or you have put through some price increases at the beginning of the year? And the third element, could you just remind us what happened to claims inflation in Motor kind of post the Ukraine, Russia invasion, just to maybe give some sort of comparison with maybe where we are now in terms of the situation in the Middle East? Milena Mondini: Al, take it the first and I'll, sorry... Alistair Hargreaves: Yes, sure. So in terms of managing through the cycle in 2026, we're expecting claims inflation, as I mentioned, to be towards more normal levels, so mid-single digits. We'll be looking at that. We'll be looking at elasticity within the market. We'll be thinking about average premiums and continuing to price with discipline. As you saw in 2025, we did that and we've -- as Geraint said, we're very happy with the profitability on that yet. It's not as strong as '24, but it's still strong. So that will be the same approach that we'll take to 2026. As Milena said, reiterated, we think that's the right approach to optimizing both value and growth over the medium term. So far, in terms of market at the start of this year, we're seeing different strategies from different players. But broadly speaking, I'd say that market premiums have been relatively flat. But as I say, we've started to increase our prices at the start of the year. In terms of claims inflation post the Russia invasion, there was a lot of disruption to the supply chain and that was one of the impacts that caused higher parts, vehicle inflation as well as supply chain constraints. We don't think it's a direct parallel to what we're seeing at the moment. In terms of the disruption that we're seeing at the moment is more about oil and fuel prices not directly related. But I think as you're inferring, it increases supply chain or the geopolitical instability increases the risk of that. So that's something we'll be watching very carefully through our supply chain. William Hardcastle: Will Hardcastle, UBS. First of all, I'm going to embarrass you, Geraint. Thanks very much for your help over the years. There's been some journey in the current role. I've always really enjoyed our interactions, some of them quite lively. But you've always been really helpful. So good luck for future endeavors, including the Admiral roles. Next, on to the questions, I'll ask you the tough ones now. You booked 2025 under -- undiscounted booked loss ratio at the 78% or 85% undiscounted. That's an average number. So I'm assuming the exit was slightly worse, given the shape of the pricing last year. I guess prepricing in excess of inflation, pre-percentile shifts, how roughly, where is the starting point essentially for that '26? How much worse than the 85% should we be thinking? And then moving on to something a bit bigger picture, doubling of the non-U.K. Motor business. It's quite non-Admiral to give a target like this. I'm sort of intrigued as to the logic, the thinking behind being -- it must imply a lot of confidence behind it. Does it imply any slowdown at all of top line and sort of extraction of the benefits you put through? Or is this just a better hope and a direction of Travel from here? Alistair Hargreaves: I'll take the first one. So the first one was about the exit loss ratio. So as you pointed out, the undiscounted booked loss ratio is at 85%. It's not -- it's higher, obviously, than '24 that was an exceptional year, but it's not unusual if you look back at previous years, hence, the comments about good profitability. As I said, we managed rates through the year, paying very close eye on claims trends. And in the second half, we were flat. And I think that means that the exit loss ratio was slightly higher than the overall, but not significantly so. And as I also mentioned, as we started in '26, we made some adjustments to price to make sure that our starting point in '26 was in the right place. Milena Mondini: The second point is about confidence about the other line of business. It's a mix of 2 things. First of all, is the momentum. If you look at where we are, momentum and maturity, if you want, of some of our other lines of business, we have fantastic 2025, doubling profit in Admiral Money, strong recovery in Europe and return to profitability with confidence in the prospect and the future. And other lines of insurance in the U.K. also deliver a stellar year. I think we are reaching a maturity in those areas that allow us to continue to grow and increase margin over time. And it's also, I would say, a reflection of our strategy because the strategy is also very much about compounding. And so what I mean is that we have a few things -- we're focusing a lot on is our proposition to multi customers, very important because customers with more risk have better retention, have better loss ratio and better NPS, tend to be happier and stick longer with better results and also better experience for them. So I think there is momentum in terms of the multi -- our journey to multi-products are probably later than some other player in the market because historically, we were very much a U.K. Motor story. But as this business grow, there's a lot of potential there. That's a very interesting opportunity, but also transferring some of the strength in Predictive AI, for example, across all the business is also another big driver of value. And so if you merge those 2 things, plus economy of scale, plus potential benefit, we do see a momentum that will allow us to both continue growing and deliver more profit. And so I think it's really very much a reflection of our strategy and a bit of the switch of focus from growing individual business that are stand-alone interesting to really compound the benefit. So it's just meant to be that over time. We'll continue to be disciplined. So we follow cyclicality. There's cyclicality in the U.K. Household market that will take into account, but we do think we can achieve both growth and higher margins. Thomas Bateman: Thomas Bateman from Mediobanca. Just a quick question on the reserving. I was surprised to see the PYD quite low, but then the risk adjustment percentile come down. Could you just explain now how that's working? And the second question is actually a follow-up to Will's on -- I guess, on Europe. I take your comment of Spain is breakeven now, but I guess you have been working on that for a while and there is more confidence there. And you alluded to AI platforms, et cetera. Have you been able to launch on any of those AI platforms, either in the U.K. or in Europe yet? Milena Mondini: So do you want to take the risk adjustment? Costi maybe briefly comment on the confidence in Europe and Spain, and I will pick up maybe on the AI. Geraint Jones: Actually, Tom, if you split out the Ogden impact on last year and compare year-on-year, you get the same percentage. So a fairly strong level of releases coming through year-on-year. The percentile was really ever so slightly down. I wouldn't say that we'd notably dropped the risk adjustment strength. So it's a very strong set of reserves and continued pretty consistent releases coming through basically in line, I think, with what we've guided in that kind of 10-ish range over the past couple of years. Costantino Moretti: So on Europe and then on the AI point, so basically, yes, as Milena mentioned, there is a good level of confidence. It's a large opportunity where we are making very good progress on several fronts. And what is giving to us the confidence is that we are keep trading at very good margins on the direct business and we are seeing very good progress coming from the distribution-diversification initiatives, which will help us to target much larger opportunities. And so once also those initiatives will turn into profitable ones in the medium term, we expect our overall margins to expand. In addition to that, we expect a more efficient reinsurance agreements to provide benefit in the medium to longer term. Clearly, there is also an element about the competitiveness on the expense side on the efficiency. And we're also there making good progress, and we are testing also some more advanced gen AI tools and models. On this front, it's more early days, but early signs are very promising. Milena Mondini: I think more in general on AI, there is a lot of opportunities. And a lot of that is focused on improving efficiency internally. It's about improving automation, increasing speed of servicing the customer and so forth. I guess your question was more referred to the distribution element. So how customers interact and choose insurance. And if you think about Admiral from very early stage, we've always been a bit of a forefront of disruption and distribution, and we were among the first direct player in the market in the U.K. We were the first to have an Internet-only brand, Elephant, let's call it in U.K. We're the first one to embed price comparison site with confused.com and so forth. So it's obviously something that, as you may imagine, we're very close -- we're working very close to price comparison site as they may embed more gen AI technology in their way of interacting to customer and distribution and adapting our website. We also have interesting pilot in part of the business, like gen AI embed chatbot in Veygo and other initiative across the group. So something we're very, very close. Now if you ask me, do you think this is going to be a very big disruption in U.K. Motor in the short term? I personally don't think is the case. I think there will be a different way of interacting with the customer. But the value proposition to a customer, how much you can save by shopping on price comparison site on Motor insurance is huge. It's hundreds of pounds sometimes. So I don't think it's going to be the first market where we see a lot of change. I think it's early to say. Everything is very nascent at this stage, but I think there are markets where this could be an acceleration to direct and that could be the one where customers are more used to speak with an intermediary, for example. So it can be commercial lines, it can be Europe where direct is not picked. But at this stage, it's very early to say. As for us, we try to be close to everything and work and progress on all the fronts at the same time. I think we had 1, 2 and 3, yes. Carl Lofthagen: Carl Lofthagen from Berenberg. Just the first one on the U.K. Home book. I think we've seen kind of continued expense ratio improvement as you've gained scale and you're now running the business at a combined ratio in sort of the mid-80s. Is that sort of the level that you're sort of happy with? Or are you willing to trade some margin to take market share as you've kind of said you want to be a top 3 player? And then the second question is just a clarification on the share count development. I think if I just look at the basic share count, which decreased by GBP 5 million from GBP 306 million to GBP 301 million in H2, but diluted went up GBP 1 million. Presumably, the shares you're buying back for the share scheme shouldn't impact the share count. Just I guess for modeling purposes, I mean, how should we kind of think about that, excluding sort of any sort of additional buybacks, et cetera? Milena Mondini: Sorry, Al, you take the first. Geraint will take the second. Alistair Hargreaves: So on the Household expense ratio, we've had an advantage in terms of expense ratio for Household for some time. But as you highlight, it's an area of focus. As the book grows and we get more renewals to customers, that helps in terms of expense ratio, but we're also focused on driving improvements. For example, Milena talked about how we can use gen AI for both customer experience and efficiency. So those are areas of focus. In terms of the combined ratio range, we think about Household similar to Motor, where it's about optimizing for value over the medium term. But as you're alluding to, we're a bit more biased towards growth on Household than margin. But we -- I think the 80% is good. I think we talked a bit about a range when we did the deep dive, so we're not sort of sticking to a specific target. But we'll do that in optimizing for value and growth over the medium term. Geraint Jones: On share count, Carl, if you look at the -- in the back of our accounts on Note 12, you got the update the number of shares that were in issue every year. It's been GBP 306 million odd for a couple of years since we stopped diluting for the share plans. The GBP 301 million is actually the number that's used in the EPS, and that excludes some of those shares that are held in the trust. The share purchases per share plans won't adjust the number of shares that were an issue, obviously. They will go to employees. The share buyback and cancel, obviously, that will reduce the number of shares in issue. So the purchase for the share plans doesn't change the number of shares. Buybacks obviously will. Derald Goh: It's Derald Goh from Jefferies. Two big picture questions, if I may, please. So the 4% sort of EV -- sorry, AV penetration rate by 2035, that's an interesting number. I'm just keen to hear what are the main variables that might sway that number. Essentially how prudent is that 4%? And maybe if you could also say what were your projections 10 years ago? How does that compare to what you had 10 years ago, let's say? And then secondly, going back to distribution, you mentioned there's potential to disrupt there. Maybe could you speak to your past experiences? I know you've been trying to push PCWs outside the U.K. Some places are more successful than others. What might be different this time that would allow you to be more successful with whether it's AI or changes in customer behaviors and what not? Milena Mondini: Sure. I think I'll take the first and second, but Costi, if you want to add anything on distribution outside U.K., it would be great. So EV, this is referred to this is referred to relatively common forecasts that have been out like the World Economic Forum and a lot of other organization. And I think the number is quite aligned. You may look at car sales in terms of car park is 4% because there is quite a lag time from new sales to fit into car park. The average -- the median age of a car in U.K. is 16 and probably the average is 11 years. So it takes time as the new model gets released. I think you're absolutely right. So it's still very much of an estimate, and there are a lot of influencing factors. You need to get, first of all, regulation in place, infrastructure in place, technology and investment in place and customer appetite in place. So there are a lot of things that can contribute and can go both direction. If we don't see the simultaneous development of all these 4 areas, it's difficult to imagine a world in which people will really freely just use autonomous vehicles car on the roads. So I cannot tell if it's prudent or not. But I would say this is really the majority of the -- I think everybody agrees that it takes some time, both because there are some hurdles and because there is time for the car park to evolve. And I think also take the chance to remind that this is about L3+. L3 basically means when the driver can take the highs off of the wheel, but still need to get in, in 10 seconds. So it's not really full benefit of EV in terms of, for example, liability shift and so forth. Anyway, it's very nascent now. So you asked me how this was versus 10 years ago? I think this is a story that we see in all the technology disruption. If I go back 10 years, this was supposed to be earlier. And so what happened is that this projection tend to shift. If you ask me how it was compared to a few years back, like maybe 3, 4? What I would say is not very different, but we see a slightly later adoption, but probably faster. It very often happen with every technology now that it takes longer, longer, longer, but then it can be more. So it's difficult to say, honestly. It's very, very early stage, and the U.K. is a bit behind the U.S. in terms of regulation and so forth. Second question was on distribution. I don't know, Costi, do you want to kick it off on? Costantino Moretti: Yes. On distribution, the -- well, the European markets, as you know, are very different. When we started our businesses a few years ago, I think direct was about 5%. Now on average, it's getting closer to 20% -- between 15% and 20%, so direct is still growing. And therefore, if a more AI-driven disruption would happen, we could say that being a leading player in those markets that will put us in a nice place. At the same time, price comparisons, you're right. We try to educate the market and to push more digital growth to accelerate. It didn't happen at the speed we expected. And at the moment, as I said, direct is still growing, price comparisons are doing nicely, but not at a supe- fast speed. At the same time, traditional are still a very important channel, which predominantly is the main channel, which is linked why we decided a while ago to start to diversify the distribution and on how to win and how we can be confident basically because the right to wins are exactly the same of direct. So risk selection, customer experience and lean operations. And the moment you demonstrate that you can replicate those, then you can win in that market and our results that are coming through are making us confident more and more that we can achieve this. Andreas de Groot van Embden: Andreas van Embden, Peel Hunt. Two questions, please. First one is on ancillary sales. I saw that the average sort of revenue per vehicle in the U.K. has come down from GBP 76 to GBP 71. Just wondered what your outlook is for this in '26 and '27, particularly not only on the installment income because I assume you've lowered your APRs, which has brought down the average premium per policy there or per vehicle there. But also on the other ancillary sales, whether you're seeing any pressure on those fees and commissions? And on -- the second question is on price velocity. I think you mentioned that. I just wondered what would you exactly meant by that in the U.K. and whether extending it means changing pricing more. I don't know whether you do intraday pricing or not in the U.K. But whether -- with that velocity, by how much could you extend it? And how important is that to maintain your competitive position, particularly through PCWs in the U.K. as the market becomes more competitive? Alistair Hargreaves: So it's Al. I'll take the first one. As you mentioned, the main driver of the change in the revenue is premium finance. It's worth noting that there's 2 impacts there. So we did reduce our APR through 2025, in line with the cost of funds. But also, we saw our average premiums coming down through the year. So that also impacts on the other revenue per vehicle. So in terms of our APRs, they're very competitive at the moment, not necessarily anticipating any changes, but we'll continue to assess for fair value on that product. In terms of average premiums, as we've said, we're expecting the market to turn and that will lead to -- and we're increasing our premium, so that will flow through as well. I don't think there's anything else of significant note to call out on other revenue. Milena Mondini: So on the price velocity, I think if we step back just a few years back, a lot of the pricing was done through SaaS or XL, and we could put price change in production overnight, we can have a meeting. If you all ask me, I'll let Geraint decide and make change almost overnight. That is still the case. And I think it's an advantage. And I think it's really rooted in the culture and the closeness of the management team to price into claims trend and that relevance that we give to loss ratio all around Admiral. But our pricing is more and more based on machine learning and predictive AI models. And this, of course, is not something that you change overnight because it's more complex, require more technology, the process to upgrade and renew the model just takes longer. And we've done a fantastic -- like a lot of work in the last year or 2 to really bring this time from ideation to change in production much shorter and shorter. I think there is still a bit we can go for. And so we're very close and we have a strong capability, more than 120 models in place, GBP 100 million of loss ratio incremental value. So we start from a good point. But I think there is more we can go to increase this even more. But the biggest opportunity in my mind is to extend this also more and to extend these trends more into other lines of business. So that's where I see the excitement. And to do that, we appointed this year a new group CDO. She did a great job in Europe to set up a new data platform. She just -- she's coming over and she came over actually a couple of months ago, and she's going to help to increase even more this ability. So I think we're really in a very strong position, but want to go. We're very keen to be as fast as we can. Operator: [Operator Instructions] We will now go to the question. And the question comes from the line of Vash Gosalia from Goldman Sachs. Vash Gosalia: Hopefully you can hear me. First of all, apologies for not being there in person. I have 2 questions, please. The first one is just on something you mentioned on your 2026 profitability. So if I heard you correctly, you said you plan to move to the middle of your confidence interval through 2026. And you've obviously also said you expect flattish profitability. So can I read that as your earnings in 2026 actually being supported by PYD just to offset some of the weakness in U.K. Motor? And any sort of color as to how or why that might be different would be really helpful. And the second question, a slightly longer term or big picture question. So you've obviously sort of alluded to you having a lot of sort of advantage on the cost ratio front. And you can obviously leverage AI and gen AI to improve that. But I'm just trying to think if the technology essentially democratizes the use of AI, wouldn't that allow your competitors to actually gain advantage quicker and narrow the gap to you? So any sort of color or comment on that would be helpful as well. Milena Mondini: Will you take the first? Geraint Jones: Yes. So we would expect to start to release our -- reduce our risk adjustment percentile from its current near max level towards the middle of the range during 2026. I would reject your assertion of weak U.K. Motor. I think U.K. Motor profitability for '25 is strong, but slightly less strong than the extremely strong 2024. So we think there's good profitability to come on 2025. And obviously, that starts to feed into the accounts in 2026. PYD and reserve releases are a constant feature of our income statement and profitability. But you are right to expect as we reduce the risk adjustment to some extent, obviously, that contributes to profitability in 2026 versus 2025. And if you do the mix, flat profitability, but higher profits from other lines of business means slightly lower profits from U.K. Motor, but from a very high start point. So I think -- Vash, I think that was the nature of the question, right? Vash Gosalia: Yes. I mean -- and apologies if I said like weak profitability. I meant more direction-wise. But yes, you've answered my question. Geraint Jones: No offense taken. Milena Mondini: On the second point, it's a very good question. It's a very good question. I think every technological evolution, data evolution and if you think about digitalization, automation, migration to cloud, more and more like technology, it becomes more and more a commodity itself, but the way technology is implemented is very differentiating and it becomes more so as we move along. And so a big decision on AI is how you do it. A big driver are how much this is adopted. So you can deploy gen AI tool to have all the organization, but how much is adopted, how is adopted is a massive driver of how much efficiency benefit you can drive. I think we start in a great situation because we tend to have a very strong culture, very transparent and people with good expertise that are really, really keen to do what is right for the business. Governance is another differentiating factor, how you govern what you put in place and how you make sure that it's solid, is stable, how make sure that the model learn over time. I think an appetite for innovation, bottom up as well as top-down is also very important. So I think a lot of the element that plays here are a culture and also the ability to do it faster, better and cheaper than others. And it's still early to say, but I think we are well positioned to achieve that. We have a last question. Shanti Kang: It's Shanti from Bank of America. You just touched a bit earlier when we talked about the internal model and how that could give you a bit of flexion for M&A. Historically, I guess, you guys have partnered with names via Pioneer or you've had a relationship with the existing names before you would kind of move forward with an M&A transaction. What kind of skill sets or regions, if you were looking at that, would you be thinking of? Milena Mondini: It's the last question. Do you want to take it? Geraint Jones: It sounds like I've explained this badly. I wasn't really referring to the internal model coming in, giving us more firepower for M&A necessarily. I understand the point of the question, but I think funding small M&A to retain profitability is one of the options I would talk about. I know you should cover where M&A might play a part of it. Milena Mondini: Yes. So as I said, our plan -- our history of successful organic growth, and we're excited about the plan we have on growing organically. We will look into opportunity mainly to accelerate diversification, I would say. So as we've done with Flock as we've done with More Than, we'll look at accelerated diversification in other lines of business in insurance in the U.K. or in Europe where we need more scale. But we stay open, look and see, but also very, very focused on our organic growth plan and consider different option on how to eventually tackle the challenge. Thank you very much. Thank you for your question, and thank you for your time. And we'll be around a few minutes if that can help. Thanks a lot.