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Stuart Togwell: Good morning, everyone. And for those here in person, thank you for joining our Half Year 2026 Results. I'd also like to extend a warm welcome to those joining by webcast and audio. So I'm Stuart Togwell, Chief Executive of Kier Group. And before we begin, I want to take a moment to say our thoughts are with our 9 colleagues and their families based in the Middle East. We are thinking of them at this difficult time and hope they remain safe and well. So turning to our half year results. I would like to start by saying I'm immensely proud and honored and energized to be leading Kier as its Chief Exec and speaking to you today to update you on our half year results and the strategic and operational progress we are making. I'm also delighted to be joined by Tom, our Chief Financial Officer since the 1st of January. Okay. This morning, I'll walk you through our highlights and touch on the strategic progress we've been making. I will then hand you over to Tom to talk through the group and divisional financial performance. I will then come back and take the first opportunity as Kier's new Chief Exec, to offer some color and context around these results and share my perspectives on our operational highlights and where we're leading as a group. We will then finish with a group summary and outlook before opening the floor for any questions you may have. Starting then with the highlights from the last 6 months. The period saw the group deliver a strong first half with good growth in both revenue and profits. The future prospects of the group also remains strong with our order book increasing by 5% in the period to a record GBP 11.6 billion, reflecting contract wins across our business and providing multiyear revenue visibility. Through our order book, we secured 94% of our full year '26 revenue and 78% of full year '27 revenue. And we have seen the momentum continue into the second half with a number of appointments to frameworks in our key sectors. Our Property division remains on track to deliver ROCE target of 15% by '28. We are continuing to convert profit into cash with a net cash position significantly improved to GBP 103 million. Most importantly, we have now delivered an average net cash position of GBP 17 million for the first time in 13 years. Our shareholders have and will continue to benefit from this strong performance. Due to our robust cash generation and in line with our capital allocation framework, we have announced a proposed increase in interim dividend up to 2.6p per share. In addition, I am pleased that we're able today to announce the launch of a new share buyback program, increased to GBP 25 million. This follows the successful completion of our first share buyback program worth GBP 20 million. We have also made a number of operational changes in relation to our new structure and leadership capability. If I may, I'd like to now take a moment to expand on this and reflect on the change we've made in line with the first few months since I became Chief Exec. Over the period, we've taken a number of steps to optimize our structure and leadership capability to maximize the market opportunities that exist for Kier, particularly in response to the government's 10 year infrastructure strategy announced in June 2025. We have strengthened our Executive Committee and be joined by Tom as Chief Financial Officer; Martin as the Group Managing Director for Construction, alongside the creation of new roles for Louisa as Chief Operating Officer; and James as Group Commercial Director. They give us industry-leading functional strength. We also brought together our 2 complementary divisions within infrastructure to form a combined infrastructure powerhouse, to create a more integrated delivery platform to meet our customer needs. The group has also introduced its Naturally Digital program to empower our people and improve productivity through access to the right digital tools and platforms. We are seeing strong operational delivery and opportunities within Kier's divisions, which I'll touch on later. And we're advancing our Kier 360 approach, which leverages the group's capabilities across the whole fund, design, build and maintain project life cycle and enables the most appropriate solutions to be achieved, tailored to meeting customer needs while meeting the environmental, social and digital requirements of national and local frameworks. These positive steps we are taking ensure we are poised for future sustainable growth. With that, I will hand you over to Tom to give our financial highlights for the period up to 31st December. Tom, over to you. Thomas Hinton: Thank you, Stuart. And I should firstly say that I'm delighted to be presenting to you for my first time as Kier's CFO. It's my pleasure to take you through our performance for the first half of FY '26. Let's begin with the financial highlights for the period. Revenue in the period, as you've heard, grew 2.6% and reflects good growth in activity levels, primarily in infrastructure services business, which I'll cover in more detail shortly. We delivered adjusted operating profit of GBP 71 million, up 6.6%, representing a margin of 3.5% and a modest improvement of 10 basis points from that achieved in HY '25. Allowing for our usual second half weighting of earnings, this margin is consistent with our target range of 4% to 4.5% on a full year basis. You'll see that the period end net cash position is materially better than the prior period at GBP 103 million compared to GBP 58 million at December 2024. This is despite increasing shareholder returns via our GBP 20 million share buyback and the increase in dividends paid. As we targeted, the group achieved average net cash over the period of GBP 16.8 million, a significant advance from the prior period average net debt of GBP 37.6 million. This cash and profit performance is all underpinned by our order book and framework positions, which provide us with the visibility over future revenue. Our order book currently stands at a record level of GBP 11.6 billion, having grown by 5% from June 2025. It represents 94% coverage of this year's revenue and substantial coverage of next year's forecast revenue, currently standing at 78%. The order book continues to be underpinned by long-term framework agreements, positions totaling GBP 150 billion. And within this, we have GBP 35 billion pipeline of work visible for this year and the next. You can see from the graph at the bottom of the slide, how our order book, combined with our framework positions provides revenue visibility covering a period of at least 5 years. Stuart will look at our pipeline, order book and long-term opportunities in more detail later. Now focusing on our revenue for the period. We delivered group revenue of GBP 2.029 billion, representing a 2.6% growth versus the comparable period last year. The main element of this growth comes from Infrastructure Services, which was up 4.9% to GBP 1.083 billion. This growth came primarily from the design and delivery of road capital projects, growth in rail work, including HS2 and a ramp-up of water activity under AMP8. Our Construction segment delivered GBP 920 million of revenue in the period, down slightly by 1.3% due to the recent transition to modular construction. Although as the off-site construction comes on-site, we will see these revenues bounce back in the second half of the year to full year growth. Property transactions grew modestly, although again, we expect a busier H2, which is a familiar seasonal feature of this business. In the same fashion, I'll now take you through the adjusted operating profit in the period. The revenue growth that we saw in Infrastructure Services translated into the profit growth of GBP 2.1 million to GBP 48.2 million. We maintained our strong 4.5% margin in this business. The Construction business also maintained its operating margin at 3.9%. The small increase in property volumes resulted in the operating profit growing GBP 1.2 million, and we also saw lower corporate costs in the period. Overall, we delivered adjusted operating profit growth of 6.6% to GBP 71 million. There are some specific costs excluded from our adjusted operating profit figure, which I'd like to take you through. Excluding noncash amortization interest, the adjusted items amounted to GBP 10.7 million in the period and are now solely related to fire and cladding compliance costs. This is an increase on the same period in the prior year, and we expect this to result in a charge of around GBP 30 million for FY '26. We then expect this level of expenditure to continue into FY '27 as we remediate any remaining cladding and internal fire remediation works under the Building Safety Act. These specific remediations are treated as adjusted items and are provisioned gross when the liability is recognized and can be reliably quantified. Further, we recognize insurance or third-party recoveries once they are confirmed, therefore, creating a net provision in adjusting items. We expect the adjusting items to reduce post FY '27 and for these claims to be resolved by the end of FY '28. The interest costs here are recognized under IFRS 16 relating to the exit of leased office space. Turning now to free cash flow. Starting with adjusted EBITDA, which in HY '26 was GBP 101 million. Working capital outflow in the half was GBP 107 million, in line with HY '25, slightly lower in fact. As you'll know, we expect to see our usual working capital inflow in the second half with the higher activity levels of the spring and summer months, combining with government spending and budgeting cycles. CapEx in the period amounted to GBP 24 million, with the majority of this relating to lease payments capitalized under IFRS 16. Net interest and tax paid were just slightly above the prior period, with the group continuing to utilize its significant long-term deferred tax asset. You may remember that the tax asset of GBP 130 million relates to past losses, allowing us to offset half of our tax charge in any given year, which we anticipate to take around 7 years to fully utilize. Altogether, this results in a free cash outflow of GBP 42 million, slightly improved on that of the prior year period in what, as we have said, is a seasonally disadvantaged half of the year. Then taking this free cash flow to the net cash flow, net cash movement in the period. We started the period on the left at the end of June 2025 with GBP 104 million of cash. This free cash outflow of GBP 42 million then reduces our cash balance. The cash impact of the previously mentioned adjusting items equate to GBP 4 million as our insurance recoveries offset a lot of the cash fire and cladding costs in the period. We contributed GBP 3 million in the period to our smaller pension schemes, which remain in deficit, with the schemes we inherited through acquisition around 10 years ago. The net cash bridge neatly shows a significant return to shareholders as well. GBP 23 million of dividends paid in the period and GBP 14 million of share buyback. We also purchased GBP 15 million of shares for the group's employee benefit trust for share-based employee incentives. This resulted in a net cash position of GBP 103 million, lower than at June 2025 due to the seasonal working capital outflow, but importantly, a significant increase over the last 12 months compared to GBP 58 million of cash at December '24. The second half of the financial year has started well from a cash perspective, and we expect this uplift in cash position to roll into the full year net cash. So staying with cash, we consider the average net cash position to be a critical measure. It's been a key target for the business for several years, and I'm delighted to report that we achieved a milestone in this most recent period. We've always defined average net cash as the average month end position. The average net cash is therefore the average over the month ends in the half year. You can see here how over the last 4.5 years, we have steadily reduced average net debt and debt-like items by GBP 600 million, so that we now have GBP 70 million of net cash. It represents a significant mark for the group and provides an excellent foundation for our growth plans. Looking now at our financing arrangements. This slide sets out the structures we have in place to provide flexibility and optionality as we pursue our growth strategy. Last October, we completed out the refinancing of our revolving credit facility with a new 3 year GBP 190 facility. This represented a GBP 40 million increase on the size of the previous facility, including an option to extend for 2 more years as we strengthen further our debt maturity profile. In October, our credit ratings are reviewed with S&P upgrading us to BB+ and Fitch upgraded our outlook from stable to positive, maintaining us BB+. This affords us the optionality as we review the financing requirements for the group. Now to my final slide, I thought I'd remind everyone of our capital allocation framework and its clear priorities. Overall, we are focused on optimizing shareholder returns while maintaining a disciplined approach to capital allocation and an ever-strengthening balance sheet. In short, our capital requirements are minimal. We target dividend cover of around 3x earnings through the cycle. We plan to invest further in our property business to generate consistent returns over time, deploying up to GBP 225 million of capital and targeting a consistent long-term ROCE of 15%. With regards to acquisitions, we will continue to consider value-accretive acquisitions in our core markets. And then lastly, having completed our first share buyback program of GBP 20 million in December, I'm pleased that we're now able to launch a new GBP 25 million buyback program. This, alongside the interim dividend demonstrates that our shareholders will continue to benefit from Kier's significant financial improvement as well as the renewed strength of the group's balance sheet. And now I'll hand back to Stuart for the market update. Stuart Togwell: Okay. Thanks, Tom. What I'm going to do now is give you some insights into how the business is doing and provide the confidence in terms of us do long-term generation of cash to give Tom loads of options in terms of what he's going to do with the money. So many thanks, Tom. Turning now to our operational update. It would be a good opportunity to reintroduce our divisions, particularly in light of the structural changes we have made and to give a sense of their size and scale and how that gives us confidence of our ability to continue to meet our medium-term targets. I will share an update on the breakdown of our order book and the considerable pipeline of opportunities beyond that. And I really want to highlight is our capabilities and to remind you of those. And the way we leverage them together across the group positions us strongly to benefit from the opportunities in front of us. We really do have a resilient order book, a healthy pipeline and a set of complementary strengths that continues to support delivery in our chosen sectors. So let's start with the Infrastructure Services. Infrastructure Services has an order book of GBP 7.1 billion, which is up 6% and provides 92% of secured work for full year '26. The business continues to win work across its chosen sectors. The most recent examples include National Highways Legacy Concrete Framework that's over GBP 900 million, where we're 1 of 3. Project to upgrade Thames Water treatment works at Maple Lodge, that's GBP 280 million. In nuclear, we've also been awarded a 2 year extension on the Hinkley Point C. We've made progress in aviation with an appointment to the British Airways Better Buildings framework. And if you look at the new graphs we provided on the right, which go to explain the gap between the GBP 150 billion framework position and the GBP 11.6 billion order book, you can see the scale of further opportunity. By the way, pipeline includes further material work even within preferred bidder stage and known tender opportunities. I've only included those that cover the next 2 years in terms of work opportunity winning. There is a clearer material pipeline emerging, particularly across water, defense and rail, which gives us real confidence as we move into the later stages of our HS2 delivery. Importantly, our 750 strong in-house design team gives us a fully integrated design-led delivery model. It means we can engage early with customers and shape solutions around what they genuinely need. In addition, our infrastructure division is driving innovation, whether it's around how we manage environmental risks through sustainable drainage techniques or through digital innovations such as our QuikSTATS, which delivers high accuracy digital data at scale, lowering strike risk, delivering measurable efficiency gains across major programs. Given the scale of the pipeline ahead and Kier's geographical footprint, we have robust strategic workforce plans in place to support us to pivot resources as required. Some of these capabilities are genuine differentiators for Kier and strengthen both the value we bring to customers and the quality of work we convert into the order book. But it doesn't stop there. So moving to our Construction business. We have an order book of GBP 4.5 billion, which is up 5% and 96% is secured for full year '26. Construction's approach to building long-term relationships and its track record means we have good visibility of repeat business on key infrastructure frameworks and also within the private sector commercial sector. Recent wins include a place on the GBP 37 billion new hospital program 2.0 Alliance framework, a place on the DfE's new GBP 15 billion CF25 framework for schools, universities further in technical colleges to deliver high-value projects over GBP 12 million in the North and South of the country. Now this is on top of the work we are delivering for the existing Department of Education or CF21 framework, including 8 schools within preconstruction agreements awarded in quarter 2 alone, and they are not yet reflected in our order book. Other notable wins include the construction of the flagship Government Property Agency Hub in Darlington worth GBP 85 million. You can see that there is a strong pipeline visibility ahead with opportunities to convert frameworks to projects in health, education and defense and of course, in the London private sector commercial market. Also part of construction is Kier Places. Now this represents 15% of the '26 revenue. It's an annuity type business providing long-term FM, housing maintenance and specialist critical school works under GBP 10 million, often from existing frameworks and often from direct award. Kier Places also plays a central role in our 360 approach. A recent example is a way their operational footprint and proven delivery of the Heathrow Quieter Neighbourhood scheme directly strengthened our proposition and help secure the BA Better Buildings win in infrastructure. This demonstrates how our integrated model drives differentiated value for our customers. Our construction capability is anchored in our national coverage and regional delivery model and the strength of our long-term supply chain partnerships with delivery projects from GBP 1 million to GBP 683 million, the strength of our dedicated clients and markets team and the access to call-off contracts under 2 stage or direct award. The construction offering is further strengthened by our in-house mechanical and electrical capability, which is supporting projects of circa 40% of the '26 revenue across all regions of the U.K. Using in-house capability allows us to self-deliver complex projects, reducing risk and removing reliance on Tier 1 external subcontractors. It also enables better engagement with customers, coordinated solutions, ensuring a smoother transition from construction to operation and our input to long-term building performance through our digital twinning capability. Finally, our product capability is critical to outcomes-led solutions and ensuring satisfaction and repeat business from our customers. I would draw your attention to our Deyes High School in Liverpool. It's a great example of how we do this. By taking an outcomes-led approach and working in partnership with the customer, Kier has delivered 7 extra minutes of learning time per lesson. And we did this through the design of the school. It's also delivered energy-efficient performance well above target and has driven high levels of customer satisfaction. There is a video that is available on our website and it is well worth watching. Property. Lastly, let's look at our Property business. Invest and develops commercial and residential sites, largely operating through public and private sector joint venture partnerships to deliver urban regeneration projects across the U.K. As you can see from the slide, property has a gross development value of GBP 3 billion. There has been considerable progress made across the portfolio as developments move through their cycles. For example, 60% of sites now have planning permission. 6 sites are in construction and 4 schemes that we are actively marketing for sale. There is considerable capability within the Property division, which drives future opportunity and create synergies with the other business divisions. Kier Property has trusted public sector relationships built on delivering outcomes-led development and regeneration. It also has a deep understanding to what is needed in terms of responding to changing market needs in business and retail that leads to the efficient recycling of funds. An example is the growing need for net zero and energy-efficient office space, for example, our development 19 Cornwall Street in Birmingham. Looking ahead, these long-standing relationships with public and private joint venture partners will leverage funding that can be turned into delivery. Kier Property is also critical to our 360 approach. The historical PFI and urban regeneration expertise will support Kier to influence the early-stage vision and structure long-term investment models set out in the 10 year infrastructure strategy that is moving toward blended finance and PPP type models, particularly in areas like community health care and environmental resilience and from which Kier could create predictable, durable revenue streams. The momentum we currently have and the future opportunities that exist supports our confidence in delivering our target of 15% ROCE by full year '28. I thought it'd be worth just touching on some of the things that I've spoken about in the past. So I would like to just give a more of an explanation around our 360 approach. It's really cool. Simply put, it captures the breadth, depth and scale of Kier and enables us to leverage the group's capabilities across the whole fund, design, build and maintain project life cycle. It enables the most appropriate solutions to meet customer needs while meeting the environmental, social, digital requirements of national and local frameworks. This drives tangible customer benefits because due to the breadth of our national footprint, we can deploy capability consistently wherever it's needed. We combine that breadth with real depth because we can fund, design, build and maintain. We solve customer needs end-to-end. We can offer customers choice of solution, what we call Choice Factory. That focuses on the flexibility needed to deliver true value for money and high-quality outcome-led solutions. One example is MMC. Now Kier doesn't own a manufacturing facility. That means we don't need to keep it full. Instead, we have a broad supply chain, and we can curate a choice of factory-based solutions. This has allowed us to select the optimum system for each project, improving value for money, managing risk and delivering with greater certainty. Harnessing digital is also fundamental for improving customer experience. Digital processes and data-led approaches drive productivity, improving accuracy, program certainty and building performance, e.g. digital twin. And crucially, our work delivers more than just assets. We support customers to generate social and economical benefits such as creating jobs, training, supporting SMEs and creating greater equality. This all reinforces our position as a trusted industry partner, strengthens repeat business and enhances margin certainty. I would also like to expand on the environmental and social benefits as environmental and social performance, they're not an add-on, they're integral to long-term value creation. They are both a key requirement for government contractors and a direct driver of employee engagement. The Kier recent highlights include achieving the first Carbon Disclosure Project A rating for climate disclosure, placing us in the top 4% of companies globally. First in sector in the FTSE Women Leader's review for women in senior leadership positions, strengthen our safety performance through Kier Cares, our new health and safety well-being strategy and through adopting predictive digital tools to help us prevent incidents even before they happen. Average supplier payments down to 32 days, and we achieved 95% of payments within 60 days. We have 532 people engaged in apprenticeship programs, and we were included in the top 100 Apprenticeship Employers list. We are also signatories of the government's Youth Guarantee. For those who are financing within the room, I thank you for your patience of going through that slide. Moving on to drive shareholder value. That all points to how we now continue to drive shareholder value. Before I come to our summary, I thought just to remind everyone of our medium-term financial targets, which are set out here. And actually, there's no reason to change these, they're still applicable today. So we target revenue growth above that of GDP, an adjusted operating margin of between 4% and 4.5% cash flow around circa 90% conversion of operating profit and an average net cash position, a sustainable dividend policy of circa 3x earnings cover through the cycle. And then finally, in summary, the group delivered a strong first half, along with the significant achievement of average net cash for the first time in 13 years and revenue, profit and cash all continue to grow. Our order book stands at a record GBP 11.6 billion, and we have further excellent visibility of future performance. Significant increase in shareholder returns, we're able to announce the launch of a new larger GBP 25 million buyback program and a 30% increase in our interim dividend payment to shareholders. Finally, in terms of outlook, building on our half year '26 performance, we have seen this momentum continue into the second half, and we are trading in line with Board expectations. Full year expectations remain unchanged. We are building and leveraging capabilities through 360 approach, which underpins a 4% to 4.5% margin target range. We are confident in our ability to pivot at scale and pile sustainable growth through delivering social and economical infrastructure that is vital to the U.K. So with that, I'd like to open up the meeting to questions-and-answers. Questions from the room first, please, and then we'll take questions from the call. Thank you. Robert Chantry: Rob Chantry at Berenberg. Just 3 questions. I suppose, firstly, for both of you. Could you just share your views on the optimal balance sheet structure medium-term for Kier, I guess, in the context of the potential bond refinancing this year, the recent cash generation, the move to an average net cash, just how you see that evolving on a 3- to 5-year view? Secondly, just touch on building safety costs. I think it's fair to say that's a step-up versus where the guys thought it was a year ago. I think you're now talking GBP 30 million this year, GBP 30 million next year, a bit of a balance in '28. Can you talk a bit about what's driven that change and happy it goes no higher thereafter? And I suppose, thirdly, really interesting going through the different structural dynamics of your market share. Could you just kind of highlight to us, I guess, where you think you're a genuine market leader in these markets and where you think there is a gap to the top and how you might think about if that's a gap you want to fill with potential M&A or more investment? Stuart Togwell: Do you want to take the first 2? Thomas Hinton: Yes, a couple of questions there. Can everyone hear me okay? So let's start with the balance sheet one. I guess, firstly, let's reflect on where we are. So we're at this average net cash positive position, which I think everyone is very pleased with. It's been an enormous journey to get there. And then if you reflect on our cash flow, here we have strong cash flow, and we expect that to build over time. We've obviously come out there and said, we'd like to continue with the share buyback. So we've continued the share buyback. So the implication there is that if you look at our cash flow, we are kind of returning the dividend. We're doing the share buyback. That does mean we have spare cash. So that does mean it will build. So we expect the cash to build over time, and that's what we'd like it to do. So we would like to continue to build -- we'd like to continue to strengthen our balance sheet in the medium-term. So what I can't say is here's the cash number we're going to aim towards. We haven't got that. What I can say is that we want to keep it positive, and we would like to continue to strengthen the balance sheet. That's our plan. And then the point on the bond, I think you kind of reflected on the bond quickly. So we've got a bond. It's at 9%. Kind of I alluded to it in the slides that there is optionality around that bond, and we will look to potentially go to market on that at the kind of end of the first quarter. So like in the next few weeks, let's see what happens. But ideally, we'd like to come to the market with the bond later on. So that's the bond side, the balance sheet. So fire and cladding. So you saw there in the half year that we've got GBP 10 million adjusting item for fire and cladding. And I also said that we expect that to be around GBP 30 million for the full year. So your question then was, well, how you got comfortable with this? So what we've done is look through every project that's got any exposure on fire and cladding. And each one is bespoke. Everyone is unique, each one is discrete, and it all has different insurance recoverability against it as well. So -- and we have to wait to see if the liability is going to crystallize. So we're going through each one to try and work out, is there a liability? Is it going to crystallize? And then those numbers that I've kind of alluded to are an estimate on how that liability could crystallize over time and an estimate on how we could get recoveries on insurance against them. So that's a kind of net estimate against that. And the challenge, of course, is that you can't take it all today because you don't know the liability is going to crystallize and you don't know the scale of it. So that's the best we can do is estimate what that adjusting item is going to be this year and next year. Stuart Togwell: If I pick up in terms of the market and the sectors, it's a great question. Thank you. If you think about it in terms of Kier stalwarts, that still remains around education, highways and at the moment, MoJ work that's passing through. We are seeing through the slides I put up there, the growth opportunity through the pipeline in defense, the water contracts are starting to come through and working with the water companies in terms of their cycle of funding coming through. Certainly, a huge opportunity in health, particularly off the placement in terms of the new Alliance framework, but there's also other health spend that's going on with the trust that haven't been privileged enough to be one of the 11 hospitals. And we're seeing entry into the nuclear sector, which is a slow burn. It takes time, but we are there and positioned well. In terms of areas in terms of future, rail is an area that I'd like to do more in. There's certainly going to be some spend. Certainly, when the money starts being diverted onto HS2, we're looking about where that's going to go. The London -- the views out here, the London private sector is starting to wake up. And we have a dedicated team in London that is delivering very well at the moment, and I see further opportunity there. And finally, the Places business. I made a point today, I've actually explained a bit more around that business particularly being annuity and the opportunity we have through FM, housing maintenance and also the specialized work we do around small works. As I said, that's often work that's coming through existing frameworks or direct award. It's critical work to the client and often it leads to either repeat business within places or across the group. Longer-term, I've often said around, I felt the opportunity was going to be there for PPP and urban regeneration. And what we're doing about it? Well, we're starting to have conversations. We had a conversation yesterday with NISTA and cabinet office and other CEOs around how the construction industry can feed into the models going forward to make sure that we learn the lessons, the good and bad of previous PFI. But I also look to, at the moment, I've got a Property business that has expertise from the previous PFIs. We certainly have the ability to draw on funding and with the relationships with the public sector. And we have a Places business that is already currently working on 22 contracts under PFI arrangements. So we have all the bases covered. Jonathan William Coubrough: Jonny Coubrough from Deutsche Numis. Can I ask perhaps on the change in mix within Infrastructure Services and it looks like water is clearly expected to be a big growth area also defense. How do you view the contract terms in those markets and also potential margins relative to transportation? The second question would just be on central costs and why they fell in the period. And then third question on Kier 360. Do you think there are opportunities to broaden that out across your markets in terms of increasing your activities at the front end of projects and improving margins there? Stuart Togwell: So if I take 1 and 3 and leave you on 2. Yes, I leave you 2. So the margin risk in terms of these new areas, we've used the word pivot quite a lot. So what we look for is work that is procured on a similar basis through framework that it plays into our strength of having the U.K. coverage, plays in our strength in terms of that we have the local presence that we can bring the environmental and social benefits. Generally, in terms of the frameworks, the risks are going to be proportionate to what we do elsewhere. And it really plays into then us bringing -- being able to bring in the other capabilities we have across the group. So I see those very much in terms of being just same as just a different sector. And that's the strength of the model that we have going forward is that we have the visibility where spend is going to be. We start thinking about those sectors way before they come to market in terms of frameworks. It gives us time to think about the capabilities that we need to understand the customer needs. And we also have a model now that we can really look at our workforce in terms of how we move it around to suit these new streams of work. If I touch on the last point in terms of Kier 360, the answer is actually both. If you think about it in terms of the infrastructure business, our 750 strong designers predominantly are based on the highways business in terms of transportation. Now by combining those 2 organizations together, I've opened up that ability to move it quicker into serving things like water and defense going forward. Now if I look in terms of the construction capability around M&E design, again, I'm looking at 40% of the construction business. But there's no reason why I can't start looking in terms of how do we help that, particularly around the water sector to drive better efficiencies and confidence around that. So both internally and externally. The feedback we had from our one government day when we're talking about the departments about ability to bring, say, environmental understanding into any scheme because most schemes at the moment will have some form of water problem in terms of how they deal with the current water or how they make sure it goes away. Or they're going to have issues in terms of how do they get power in and make sure the energy supply is there sufficient for them. They might be looking for funding solutions because they haven't quite got the funding. And they might need be talking about, well, how do we maintain these buildings in the future? Are you Kier interested in doing the future maintaining? If you're not, can you make sure that the base specification reflects your knowledge of operating these buildings elsewhere? And if you want to put it all together, go and have a look at the Deyes High School. So an outcomes-led design. And you can only do that by bringing all these skills together, look at it in terms of how the building works in terms of energy efficiency, how you actually transfer children more effectively around and teachers around the school classrooms. And that's delivered, as I said before, 7 minutes improvement per lesson. That's [ Kier 360 ] in work. Thomas Hinton: Okay. On the corporation costs, I mean they're relatively flat year-on-year. I think there's a slight improvement. I think the only change is kind of -- I think it comes down to things such as what's the level of bonus accrual you put into the corporate costs, Jonny. I don't think it's much -- there's not much more than that. There hasn't been a deliberate cost drive in the corporate center to date. So it's not different from that. It's more kind of smaller assumptions driving it. Andrew Nussey: Andrew Nussey from Peel Hunt. A couple of questions. Useful disclosure around sort of the pipeline. I did observe that you've got defense sitting in both sectors. How do you sort of draw the line? And does that create some inefficiencies having it sort of sitting in both buckets? And secondly, in construction, modular construction is becoming a feature of the industry and there was an implication of being the revenue sort of slightly lumpy. Is that going to be an ongoing feature as one would imagine your projects get bigger and more modular? And is there any impact on the cash flow from that shift? Stuart Togwell: Okay. I'm happy to say both, and you can then correct me in terms of the second one. Good spot on the defense. The distinction is one is nuclear defense and one is anything else that isn't nuclear defense. Nuclear defense has a particular requirement in terms of your capability, obviously. And it tends to be more large infrastructure complex schemes like Hinkley. So that's why we keep that within that side of the organization. We do, though, share knowledge between the 2 and the relationships and make sure that if there is any joint learning or joint sharing of design or joint sharing of M&E that we do the crossover. But that's the reason we do that. In terms of the MMC, I think you have to remember in terms of the big impact there is in terms of the Glasgow, in terms of the size of it, in terms of timing. I personally don't see it as being -- having a lumpy impact on us. And our approach to MMC really has been embedded in the organization from what we've learned around MoJ in terms of the mill site. And we will continue working through it. Anything else you want to add? Thomas Hinton: No, I think as you said, it does suppress the revenue a little bit on one side versus the other. But what it does do is large construction, you can actually achieve bringing that cash in slightly earlier, if anything. So if anything, it's positive from a cash perspective. So you've got kind of large construction activities, then that can be advantageous for cash actually. Adrian Kearsey: Adrian Kearsey, Panmure Liberum. Three questions, if I may. In terms of water, which kinds of projects have you got in the pipeline and which looking beyond the current AMP do you see sort of coming through? Kier Places 15% currently in terms of revenue of the division, where do you think that can go? And what kind of -- do you think you need to expand your capability within Kier Places in order to grow that? Or is it more about just winning more -- just more of the same kind of work? And then the last one, frameworks, your position within frameworks is not equal across all of the participants within the framework. Which particular frameworks do you think you'll win a greater share? Stuart Togwell: Okay. Again, I'll do my best. Yes, I thought you'd say that. Water, I like the [ time ] there in terms of pipeline. So capital works, we went to the water treatment works. Some of us went to the water treatment works. We're seeing more of that, which is what Maple Lodge is. So more around the capital works. In terms of places, no, we have the capability. It's more of the same. I held back in terms of housing maintenance because that became quite awkward in terms of price per property programs that were in the last 5 or 7 years. But definitely, there is going to be a need to upgrade in terms of housing maintenance properties across the country. And the FM, generally at the moment, we're staying within public sector. I'd like to see if that opens up more opportunities around, particularly around the PPP work going forward. Frameworks, are we equal? There are some that we are more equal than others. That is correct. But generally, the approach with any framework that we go on that we've discussed this morning, we try to have a position in 1 of 3. So if we can get a position in terms of 1 and 3, you have the real opportunity to influence in terms of the customer. You start being able to bring forward your views around outcomes-led design, and it often allows you to work very closely in terms of the alliancing work about what's going forward. Generally, if you look in terms of longevity in the past, education and highways are a stalwart of what we've done. Alongside that, I took a trip down to Bridgewater to look at the environmental work we were doing. We do somewhere between GBP 50 million and GBP 100 million a year on that. Smaller organizations will be talking about it because it will be a larger proportion of their works. But some of the work we do that in terms of our understanding in terms of the environment and how we work with local communities to make sure that we manage water, wildlife, et cetera, is a real strength that we have. And I can see us leveraging that expertise across the other divisions. Maximillian Hayes: Max Hayes from Cavendish. So first, looking at the in-house design consultancy, just looking at the potential to sell these services externally. And then also the improvements in net cash and average net cash balance, has that supported access to any certain frameworks and help develop the pipeline? Stuart Togwell: Okay. In terms of cash, no. But what it has done is reduce the number of questions we've had about net debt with some of the people in the room. But I do see it as a positive sign in terms of where we are. Generally, the turnaround has been accepted. We've closed that off in terms of the frameworks. What this does do, though, is draw people into, okay, Kier, PPP, okay? You get into a position in terms of having surplus cash at some point in the future. We will have conversations with you in terms of how should we be thinking about Kier in those conversations. So, positive. In terms of design, at the moment, we have so much internal. It's a benefit to us. We like to keep it internal. The other benefit we have in terms of the internal model is that when we go to customers, if you like, our outcome is revenue for the other divisions. It's not time on the clock. It brings a different focus in terms of what our design capability do. So I wouldn't want them to move away from that focus and all the work they do for us, moving into an external place where quite often it's time on the clock. So for now, internal. Okay. I think this is the last question. Alastair Stewart: Alastair Stewart from Progressive. A couple of questions. First, following on from Andrew. Defense, very small in terms of the current order book as a percentage, but very big in terms of both pipelines. Have you been getting a sense that, that pipeline is getting more urgent from your clients? And specifically, have you had any incoming calls in the last few months and more particularly -- more particular in the last few days that could move that forward. So that's question one. And question two, GBP 197 million capital employed in property. Given the move to average net cash and the comments on PPP, do you see that GBP 225 million ceiling moving up in the mid-term? Stuart Togwell: Do you want to take that one? Thomas Hinton: Yes, I'll do the last one first. So let's start with the -- you can talk to the defense kind of point, your phone is booming this morning or not. On the property, I said GBP 197 million at the moment. And we were quite clear, we want to get to a 15% ROCE. So we kind of need to prove that. We need to prove it to this room. We need to prove it to ourselves. We need to show that this business can get up to that kind of sustainable return level. And we're confident we can get there, but we need to kind of prove that. I think once we prove that, then you can look to invest further. And to what Stuart said earlier, that doesn't necessarily mean that it's the current kind of design model. It could be slightly pivoted model into other investment areas. It could be a PPP. It could be a specific focus on urban redevelopment. But that's what we're thinking about it. It's about how do we use our cash, let's get the returns, let's prove the returns of the business, and then let's move from there. Stuart Togwell: There's a subtlety that I'm looking for is to make sure it generates revenue across the divisions. So we can actually see it more as in terms of being integrated solution we have. Just going back to defense, I've got to start by saying it's most important that we -- at this time, we think about our people, the 9 employees we have -- employees that we have over in the Middle East. And also, we have -- many of our staff have friends and family of that region. In terms of the urgency, it's been urgent for a while in terms of the need they have, whether it's in terms of providing the nuclear safe havens for submarines or warships, along with improving the living accommodation for -- under the SLA or in making sure that we've got proper safe havens for storage in terms across the country. So there has been an urgency for probably the last couple of years. But what I would say is that Kier saw this as an area of undoubtedly, there was going to be some spend that was going into it, that they were going to start changing their way in terms of the way they approach more to an alliance in way and procuring work through frameworks. So it's a reason why we -- and we needed something to continue the work that we created in terms of the MoJ and defense became a natural place to start moving our resources probably a couple of years ago to be ready for this growth. Alastair Stewart: Specifically, is that urgency getting more urgent? Stuart Togwell: No. Okay. I think we are done. So thank you very much for coming. Thanks for your time. And I'd love to share a coffee with you next door if you've got time. Thank you very much.
Raquel Cardasz: Good afternoon, everyone, and thank you for waiting. I'm Raquel Cardasz from IR, and we would like to welcome everyone to Pampa Energía's Fourth Quarter of 2025 Results Video Conference. We would like to inform you that this event is being recorded. [Operator Instructions] Before continuing, -- before continuing, please read the disclaimer on the second page of our presentation. Let me mention that forward-looking statements are based on Pampa Energía's management beliefs and assumptions and information currently available to the company. They involve risks, uncertainties and assumptions because they are related to future events that may or may not occur. Investors should understand that general economic and industry conditions and other operation factors could also affect the future results of Pampa Energía and could cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the video conference over to Lida. Please go ahead. Lida Wang: Hello, Raquel. Thank you very much. And hello, everyone. Good afternoon. Thank you for joining our call. I will make a really quick summary so we can spend more time on questions with the management today. Q&A, we have our CEO, Mr. Mariani; our CFO, Mr. Zuberbuhler; and our Head of Oil & Gas, Mr. Turri. So let's go ahead with the first slide where we make a quick summary of 2025. November 25, 2025, marked our 20th anniversary of Pampa and the creation of Pampa. Back in 2005, we did not produce any oil or gas or did not generate any single megawatt hour of generation, electricity. So 20 years later, Pampa accounts for 9% of the country's total natural gas production and reached a record daily production of 104,000 barrels of oil equivalent during the winter of 2025. This year also marked a steep change in our upstream profile. Our black flagship shale oil development at Rincón de Aranda began the year producing less than 1,000 barrels of oil per day and now reached a 20,000 barrel goal by December of last year. As a result, total annual average production exceeded 84,000 barrels of oil equivalent per day. This is 8% higher than last year and 73% up since 2017, the year after we acquired Petrobras Argentina, reflecting the sustained organic growth and disciplined capital allocation. In the Power segment, we consolidated a 15% share of Argentina's net electricity output, achieving an outstanding 94% thermal availability rate in 2025, reaffirming our position as the country's leading IPP and demonstrating a reliable, efficient fleet operating under a gradually normalizing market framework. At a consolidated level, EBITDA grew 8% year-on-year, surpassing the $1 billion mark, mostly driven by power, gas and Rincón de Aranda. While oil and gas and power each represent half of the EBITDA, we expect that ongoing growth at Rincón de Aranda will further expand Oil and Gas footprint in the EBITDA. So Pampa and its subsidiaries are deeply committed to the country's energy development. In 2025, we hit a new record high of $1.4 billion in CapEx, of which roughly half was testing to Rincón de Aranda, the largest single project development investment in our 20-year history. In 2026, we expect to set a new record high, allocating $770 million in Rincón de Aranda, very similar to last year to reach production plateau, plus another $400 million for maintenance across our operations and around $600 million for TGS'’ private initiative project. So moving on to the Q4 results. The quarter's adjusted EBITDA amounted to $230 million. This is a 26% year-on-year increase. Power generation was the main contributor, where, since November the new guidelines for the whole electricity market have allowed power producers to operate under a more decentralized scheme, improving price signals and enabling us to capture operational efficiencies and synergies with our E&P gas. Rincón de Aranda was the second key driver with this production ramping up -- ramp-up accounting for 23% of the quarter's EBITDA, supported by 10 active paths as of today. Our capital structure continues to strengthen following the issuance of our 12-year international bond. We closed the year with a net debt-to-EBITDA ratio of 1.1x and average debt life of almost 8 years. Quarter-on-quarter EBITDA decreased due to the gas seasonability -- seasonality, sorry, offset by Rincón de Aranda and steady contributions from our utilities, TGS and Transener. CapEx surged 81% year-on-year to $371 million in the quarter, of which $249 million were invested in the development of Rincón de Aranda. Okay. So moving on, on the Slide 6. The Oil and Gas segment adjusted EBITDA was $77 million in Q4, more than doubling last years, driven by Rincón de Aranda, increased gas exports and industrial demand. Higher transport and treatment costs partially offset these gains. Compared to Q3, EBITDA declined due to the gas seasonality, but was smoothed by Rincón de Aranda. Lifting costs averaged $8 per barrel of oil equivalent, slightly below last year due to higher crude oil output and stronger gas demand, offset by increasing gas treatment costs and the lease of temporary facilities at Rincón de Aranda. Quarter-on-quarter, lifting cost per boe increased due to this gas seasonality. Gas lifting costs remained flat year-on-year at $1.2 per million BTU, an average of $1 during the 2025, but rose quarter-on-quarter, again, because of the gas seasonality, while oil declined sharply to below $11 per barrel from $36 last year's Q4. This is because -- mainly because of Rincón de Aranda's ramp-up and the divestment of mature conventional blocks. Remind you all that last year, Q4, Rincón de Aranda was really a greenfield, produced only from one well. On top of that, we were recording trucking expenses, testing expenses, and we also held a lot of mature blocks that today are divested. Total production averaged more than 81,000 barrels of oil equivalent per day, up 32% year-on-year. This is led by Rincón de Aranda and Sierra Chata, partially offset by decreases at El Mangrullo and in nonoperated blocks as well as the divestment of El Tordillo. Quarter-on-quarter, production dropped 18%, again, explained by the gas seasonality. The production mix continues to evolve with oil rising to 22% of total output, driven entirely by Rincón de Aranda. Crude oil prices averaged nearly $61 per barrel in Q4. This is 10% lower than last year due to the weaker Brent prices. Without the hedging at Rincón de Aranda, our realized price will have been $53 per barrel. So focusing now exclusively on Rincón de Aranda, the ramp-up stays on track. In Q4, we reached the first goal of 20,000 barrels per day after tying two pads -- two new pads with an average quarterly production of 17,100 barrels per day. This is a 19% increase quarter-on-quarter. As of today, 10 pads are online, of which 3 of them are currently undergoing testing -- well testing. And -- plus we have another two pads, DUC pads and two other pads are under fracking. In 2025, Rincón de Aranda, contributed $126 million of EBITDA. Infrastructure build-outs, thanks to the RIGI incentive regime continues in parallel with the field development. Next month, we are installing an additional temporary processing facility with a focus on reaching 28,000 barrels by mid-2026, a key milestone toward the final production target of 45,000 barrels expected in 2027. So moving to Gas. Sales grew 10% year-on-year, but dropped 23% from Q3. This is, again, explained by seasonality. Mangrullo continued to lead the output, though its share shrank to 46%, while Sierra Chata grew to 38% share with production up 39% year-on-year, supported by a new pad that we tied in during the quarter. Together, they accounted for 84% of the total gas production. Gas prices averaged $3 per million BTU, flat year-on-year. Industry sales supported the pricing, offset by lower export prices due to the Brent underperformance and a drop in residential due to the lag tariff pass-through of the devaluation. In Q4 this year, 72% of our gas was sold under the Plan Gas GSA, CAMMESA and Retail, down from the 81% Q4 last year due to the transfer of certain rounds of the Plan Gas volumes to fuel self-procurement in power, which represented 4% of the total sales in Q4 '25. Now in December, we started to formally doing the self-procurement of gas in Genelba and Loma de la Lata. The self-procurement increased to 41% on average in January 2026. So as a result, Plan Gas GSA exposure shrank to 37%. With the new guidelines, in place, we expect 40% of this year's production to supply our own gas -- our own power generation, capturing margins and leveraging synergies between these two core businesses. Before moving from E&P, I want to just do a quick update on reserve. Total proven reserves rose 28% to 296 million boe, driven by our increased activity in Sierra Chata and specifically in Rincón de Aranda. Shale reserves grew by 55% year-on-year to 204 million barrels and with shale oil now accounting for 19% of total reserves. The reserve replacement ratio was 3.2x, extending the average life to 10.2 years. Since 2019, proven reserves have increased 118% with the most significant expansion coming from shale since 2023 when the year when we started to actively develop Vaca Muerta formation. Okay. So moving to power generations. We posted an EBITDA of $111 million in Q4, up 28% year-on-year, mainly driven by stronger spot prices under the new guidelines, especially -- partially offset by power dispatch at Genelba's new CCGT due to the program maintenance. Total availability declined to 91% due to the scheduled maintenance in Genelba and Loma de la Lata and the ongoing outage that we are experiencing in HINISA since January. However, Pampa's’ thermal availability continues to outpace the national grid under the new framework, also Energía Plus B2B contracts were discontinued, though we managed to recontract in the B2B market. So contract capacity remained stable year-on-year. With the new framework also performance balances between contracted capacity and the spot margin. So value creation also can be driven by efficiency and fuel management. Those units with high load factors and self-procure fuel will achieve higher margins. Turning to cash flow on Slide 11. We show the parent company figures because this is aligned with our bond perimeter. Despite the higher CapEx at Rincón de Aranda, we posted a limited $20 million free cash outflow in Q4, offset by strong EBITDA and working capital inflows mostly from winter collections. As a result, cash and cash equivalents stood at $1.1 billion at the quarter end. This is $210 million more than September close. Finally, on the balance sheet, gross debt was nearly $1.9 billion, down 9% since 2024 December. In November last year, we issued a $450 million international bond maturing in 2037 with a record 20-year tenure. This is the first long-dated issuance by an Argentine corporate over a decade and extending our average life to almost 8 years. The proceeds from this issuance and the 2034 notes that we issued in May were used to redeem all the outstanding international bonds, the '26, the '27, the '29 notes and some of the local dollar bonds. As a result, net debt reached to $801 million. This is 1.1 net leverage, maintaining a conservative capital structure while funding growth. Well, so this concludes the presentation. Thank you for hearing me. Now the floor is open for questions. [Operator Instructions] Lida Wang: All right. So we start -- Alejandro Demichelis from Jefferies. How do you see the evolution of production? Please split between oil and gas and of drilling and completion and lifting costs in 2026? Production, drilling -- D&C, lilfting costs. Horacio Jorge Tomas Turri: Okay. Good afternoon, and thank you, everybody, for joining. Regarding production, let's go first to oil. We are, as Lida mentioned, currently in around 19,000 barrels per day. Our target is to reach 25,000 barrels per day by the end of March, beginning of April and then keep on ramping up to 27,000, even 28,000 barrels per day as of the half of the year. All of this is coming out of Rincón de Aranda. In terms of natural gas, we just closed February around 14 million cubic meters per day. We will probably be reaching a peak of around 18 million cubic meters per day during the winter and an average of approximately 13.5 million cubic meters per day compared to 12.5 million cubic meters per day in 2025. In terms of drilling and completion, in Rincón de Aranda, we drilled 20 wells. We're going to be drilling 20 wells and completing 35. And in Sierra Chata, we will be drilling and completing 8 wells each. And I'm missing lifting costs, which are in the range of -- will be in the range of $10 per barrel. Lida Wang: Yes, until we get... Horacio Jorge Tomas Turri: Until we get the CPF. We are talking about 2026 and a little bit less than $1 per million BTU in our gas operations. Lida Wang: Great. So let's go to the next question. Next question comes from [ Guido Visocero from Nalaria ] about the hedging. How are the royalties settled? Are they include in the hedge? Or is that independent and settled at the market? Horacio Jorge Tomas Turri: No, royalties do not have any connection to the hedging. They are set at the market price. Lida Wang: All right. Next question, Alejandro Christensen from Latin Securities. How much impact have you seen so far from Resolution 425-25? And how much additional impact do you expect in 2026? Could you provide some color on the EBITDA growth outlook for this segment next year? Next year, I guess, '27, right? Gustavo Mariani: This year. Good afternoon, everybody. Thank you for joining. The impact of the resolution so far, it's -- I think what we have been saying in previous calls is between 10% and 15% vis-a-vis the EBITDA generation that we had in 2025. More or less. And that is what we expect for the segment as a whole when you compare 2026 vis-a-vis the previous year. Lida Wang: I guess 2027 is too early to say, right? Gustavo Mariani: Say it again. Lida Wang: 2027, it's too early to say. Gustavo Mariani: Too soon to say. Yes. What this resolution brings is also an improvement in our E&P business, and that is thanks to the fact that now we are self-procured. We are selling the gas and our thermal power use is provided by our E&P segment. So that also brings -- and again, we are expecting here, but it's so far what we have seen in January and February, a 10% increase in quantity in the natural gas produced by the segment, and that is thanks to the fact that we are self-procuring in our thermal plants. Lida Wang: We're kind of not putting much number of that profit, right? So we are -- the number you said is only for power generation, but the fact that we are self procuring this vertical integration, we are not putting a number so far ,an effect, right? An impact. Gustavo Mariani: Yes, that's correct. So that's -- in our projections, we expect on the power generation segment around 10% to 15% increase in EBITDA and another increase coming from the fact that the total gas produced by the E&P segment will also go up by around 10%. Lida Wang: That's right. All right. Next question coming from Alejandro. Alejandro as well he says, have you signed any PPAs with private counterparties for energy or capacity? Gustavo Mariani: Yes, we have been very active since November that this new resolution is -- our commercial team has been extremely active. If I remember correctly, I think that we have sold like 70 -- now you can sell energy and capacity. We've been active in both. Signed more than 100-something contract for a total of around 70 megawatts. So yes, we have been very active there. Lida Wang: All right. And then how are you seeing natural gas demand and pricing in the industrial sector, industrial evolving during Q1 '26? Horacio Jorge Tomas Turri: We see the industrial demand is stable. It accounts for less than around 10% of our overall production. And given the changes in the self-procurement it's not a segment that we are very familiar, we are not that interested. So it would have an effect in Pampa Energía. Lida Wang: All right. Next question coming also from Alejandro. What percentage of oil production remains unhedged throughout 2027? Gustavo Mariani: Throughout 2027 means until or until the end of 2027? Lida Wang: Probably it means until 2027 in English, right? But I don't know. Gustavo Mariani: So we are fully -- basically, we are fully hedged 1 year going forward. So until first quarter of next year, we are fully hedged. Lida Wang: All right. Next question coming from Bull Market, Felipe Collazo. Following the deregulation, has Pampa been able to start acquiring gas from its own wells? I think it's all self answer. Can you give a guidance of what the savings in fuel costs will amount during 2026? Savings in fuel costs? I don't see savings. Horacio Jorge Tomas Turri: We're making profit out of it. Lida Wang: We are vertically integrated. Horacio Jorge Tomas Turri: Exactly. Lida Wang: Yes. So we are producing more than before, right? Horacio Jorge Tomas Turri: That's right. Lida Wang: So January, we produced. Horacio Jorge Tomas Turri: We are particularly producing more during 2026 in the winter time. Lida Wang: Yes, it will be more like... Horacio Jorge Tomas Turri: We will have a flat curve. Lida Wang: But Q1 is already higher than Q1... Horacio Jorge Tomas Turri: We already said that February ended up with almost 14 million cubic meters per day. Lida Wang: Well, yes, last year first quarter, it was a little bit different because Q4, it was very bad, and they took -- CAMMESA took more gas. But even that, the production... Horacio Jorge Tomas Turri: Just taking into account that the overall average of '25 was 12.5 million cubic meter, and we're saying that only February is around 14 million cubic meters per day. So we will definitely be -- our estimation is that we will be producing around 13.5 million to 14 million in 2026. Lida Wang: How long do you expect the RIGI approval to take for the Rincón de Aranda treatment plant. We used to think that application has been filed by mid-2025 when it was first announced. But some news articles from about a month ago suggest it was just done last January. Could you clarify that? Gustavo Mariani: Yes. I don't recall when we filed the RIGI for upstream, but it was definitely third -- fourth quarter -- of last year. We haven't been approved yet. But recently, they have -- there was a new decree adding upstream of oil to the RIGI. So we are starting to file for an additional -- yes, an overall RIGI for the full development of Rincón de Aranda. Lida Wang: All right. Do you plan to fund the CapEx by via new debt issuance? Adolfo Zuberbuhler: Hi everyone. The base case scenario, the answer is no. The idea is we have a big cash position that we have been acquiring with our free cash flow and last year debt issuance. So the base case is that we use part of that cash to complete our CapEx investment of this year. That being said, if we decide to embark in new projects or any other new investments, we'll have to revalue that decision, and that base scenario. And of course, there is always-- I am very opportunistic. So if spreads keep tightening, that is something that we will look. But the base case scenario is that we will face the capital investments with our cash position. Lida Wang: Next question comes from Juan Ignacio Lopez from Puente. I think we haven't answered this yet. But what's the guidance about CapEx for 2026, Oil and gas and Power? Gustavo Mariani: Around total CapEx? Lida Wang: Sorry. Before that, we don't give guidance. But I will give you -- we will share with you what our Board approved by the budget -- for the budget, right? Gustavo Mariani: As Lida says, the restricted group only. So it's basically it's around $1.1 billion, basically $1 billion, the E&P segment and it's less than $100 million on power generation because it's only maintenance CapEx. So we don't have any project -- any new project going on, on that -- on the Power Generation segment. That answers? Lida Wang: And oil? Gustavo Mariani: Oil almost around... Horacio Jorge Tomas Turri: $1 billion. Lida Wang: Awesome. So next question, he says specifically, how much of that is maintenance and how much is scheduled for thermal plants this year? It's pretty much... Gustavo Mariani: Yes, it's around $80 million, and it's all -- maintenance CapEx, yes. Lida Wang: And second, guidance regarding free cash flow. Which, again, we don't do guidance, but we can share with you what it's approved by the budget. And what crude realized price are you assuming for your base case scenario? Adolfo Zuberbuhler: So we expect total CapEx, including maintenance CapEx, investment CapEx and the equity that we will deploy to our joint ventures. All that will imply more or less $500 million negative cash flow after all investments. So that is what will bring the cash position from $1.2 billion to $700 million roughly. Lida Wang: All right. What else? And the price of oil. The price of oil assumed for the budget. I think it was less than $58. Gustavo Mariani: Well, that's the one assuming the budget. But I think what is relevant here is the hedge price that is around $66. Lida Wang: Yes, that's correct. A little bit above $66, right? So the hedge is Brent, right? And then after discounts and export duty, which is 8%, it is roughly a little bit lower than -- roughly a little bit above $58 depending on the discount. Horacio Jorge Tomas Turri: Wellhead, you mean? Lida Wang: Wellhead and it's realized FOB. The wellhead, you have to account the transport -- okay. Next question. Cattaruzzi Matías from Adcap. How should we think the quarterly production ramp-up through 2026, particularly toward the -- around 24,000 barrels per day level by second quarter of '26 and around 28,000 by third quarter. Horacio Jorge Tomas Turri: We've been through that. That's exactly he's answering the question. Lida Wang: But then after -- so the [ 828 well ] in the chart, we put like it's like 20 and then sharply goes up to the plateau? Horacio Jorge Tomas Turri: No. It's not going to happen. Lida Wang: What do you think... Horacio Jorge Tomas Turri: It's not financially efficient. So it's going to be -- probably going to be a ramp-up curve going from 28,000 to 45,000 in around 5 to 6 months. Lida Wang: Okay. Matías is asking -- given that Pampa has more gas reserves that it can currently monetize, would you consider monetizing part of our -- of your gas acreage portfolio for farm out or farm downs or asset sales? Gustavo Mariani: We could consider it, but we are not actively seeking to do so. Lida Wang: Could you update us -- another from Matias. Could you update us on Southern Energy FLNG project, specifically timing, expected volumes and potential EBITDA CapEx contribution from Pampa and what the LNG FOB price assumption, it's basically the Coca-Cola, everything. Horacio Jorge Tomas Turri: In terms of timing, we are expecting the first boat by second half of 2027 and the second one by the second half of 2028 for a total demand of 6 million tons per year. That's around -- roughly around 25 million to 26 million cubic meters per day. We have 20% out of that. And the biggest capital or the biggest CapEx involved in the project now is the construction of the dedicated gas pipeline from Cartagena to San Antonio state, which will account for probably around $1.5 billion. Gustavo Mariani: Hopefully less than that. Horacio Jorge Tomas Turri: Hopefully less than that, from $1.3 billion to $1.5 billion. And out of which we could consider that 60% will be financed and maybe 30% to 40% is going to be equity. And out of that, we have 20%. So that's a major CapEx that we'll be facing. Lida Wang: Francisco Cascarón from DON Cap, he is asking what new opportunities do you foresee in the generation segment, if any? Do you expect... Horacio Jorge Tomas Turri: I'm sorry, just to add something that's relevant. We signed our first long-term contract with CFA, the German agency for 2 million tons per year. Lida Wang: It's binding? This is binding? Horacio Jorge Tomas Turri: It's already binding. Yes more than binding. Lida Wang: Great awesome. For sale? Gustavo Mariani: Binding for both. Lida Wang: Great. All right. Shifting to power generation. Francisco Cascarón from DON Cap, is asking, do you foresee any opportunities there? Do you expect to increase installed capacity this year or in the near term? Gustavo Mariani: Increase this year impossible because these projects take several years to be installed. What could be done in the short term could be something like batteries. And today [ Tamesa ] our Secretary of Energy announced a new auctions of batteries similar to the one that was done last year. The one done last year was within the Buenos Aires area, and this one is all around the country, but has been published today. Honestly, I didn't have time to take a look at it. Usually, these are small projects, very competitive. We have colleagues very aggressive on pricing. So not sure whether we are going to be actively in this auction. Lida Wang: That's it. Okay. So [ Houting Pacheco from, Maria ] he's asking, given the improvement in power prices under the new wholesale electricity market framework, are you now seeing higher returns in power generation relative to shale oil? What a question? Gustavo Mariani: Relative to shale oil. We are seeing higher returns on the power generation vis-a-vis previous year relative to shale oil. The power generation margins have improved. I still think that shale oil provides a higher expected returns than power generation. Lida Wang: There are two animal right? Gustavo Mariani: Yes, two different animal, exactly different risk -- exactly. But despite these changes, we are very comfortable with the development that we are doing in Rincón de Aranda and adding the oil segment to pump. That is where the question is... Lida Wang: Talk about, yes. Well, with the recent extension of the, RIGI, are you thinking to apply? I think we answered that. Gustavo Mariani: Yes. We are starting to apply for the upstream part of Rincón de Aranda. Lida Wang: He is asking -- I think it's too early to answer, but expected impact on project economics and timing. So we can give him a quick summary of the relief, if I may. So it's basically after the third year, you get export duties abolished removed, right, the third year. The tax rate goes down from 35% to 25%, accelerated depreciation, so the imposable amount, it's smaller as well. So that helps through the first years of the operation. BAT can be -- BAT credit can be monetized. What else, if I can remember -- pretty much that, right? But it's a 30-year time that they give you, right, the RIGI. And then, of course, free disposal of all the proceeds abroad. If you export, you can keep it. I think that's the key takeaways from RIGI. Gustavo Mariani: Totally. Lida Wang: That's not AI. We produce that. I have to think about it. So he said, well, congratulations from [indiscernible] He's asking the RIGI upstream, how broadens the scope of the Rincón de Aranda project and how could accelerate the development? Gustavo Mariani: He is asking... Lida Wang: The whole impact. Horacio Jorge Tomas Turri: Okay. The RIGI-- the possibility of the RIGI is going to give a significant, let's say, help to develop the northern part of Rincón de Aranda, which will have an impact both in the ramp-up curve and also in the total amount of oil to be recovered from the area. So we think that this is a major change in the overall economics of the project. Lida Wang: He's asking, should we expect any updated production guidance and timing, meaning adding RIGI or drilling capacity or having more capacity contracted? Horacio Jorge Tomas Turri: It will probably happen. It's not going to change the short-term curve, but it's going to have an impact in the medium term, something we're still analyzing and obviously, it's contingent to the RIGI application. Lida Wang: All right. Someone I don't know, like its name, it's Armando, which is very weired. He's asking a question that we will usually answer. Do the company is planning distribute any dividends in the near future? Gustavo Mariani: No. We're not planning to distribute dividends in the near future. As Fito explained, we have a negative free cash flow this year, and we expect still too early to say, but something that even or slightly positive in 2027. But we still see a lot of opportunities to continue growing. So because of this situation, we are not planning dividends in 2026. Lida Wang: From [indiscernible] asking he wants to double click on the CapEx estimates. For Rincón de Aranda $770 million budget for this year, how much is wells versus infrastructure? Horacio Jorge Tomas Turri: Yes, it's approximately $500 million in wells and the difference will be facilities. Lida Wang: How much in maintenance for generation is $80 million that we said. TGS, what we said is considering Perito Moreno expansion and maintenance, yes, it's $600 million of expansion of the Perito Moreno. Gustavo Mariani: This year. Okay. Lida Wang: No, no, no. Total, it's over $700 million. Gustavo Mariani: Okay. But we haven't talked about TGS CapEx. Lida Wang: Very briefly in the evolving chart-- evolution chart. Maintenance on TGS, like $90 million per year, more or less, total, right, the trunk -- the regulated trunk, the liquids and what is left for midstream. That's $90 million per year. What should we expect for next year? Well, for Rincón de Aranda, when we reach plateau, it's just maintenance. Horacio Jorge Tomas Turri: Yes. So I mean it's just drilling and completing for the -- to fill up the decline. Lida Wang: Gas, we are already. Horacio Jorge Tomas Turri: Gas, we already reached our peak, our plateau. Lida Wang: But when we have CISA, we will... Horacio Jorge Tomas Turri: When we have CISA, we need to decide whether we're going to be supplying all of the demand above CISA or we will be replacing some of our demand with CISA, something that we need to. Lida Wang: In power generation, we don't have any projects in the pipeline. So that's it. Next question from Ignacio. It's, what are the conditions of the B2B PPAs that you signed? Which is very, very broad, like we have some in HINISA, some in... Gustavo Mariani: Yes. Just to give you example -- information. But I think the volume is around 70 megawatts prices for energy in the mid-50s. Lida Wang: Yes, we are doing summer winter. We are doing peak, off peak. Gustavo Mariani: They are 1-year contracts. Lida Wang: Yes, 1-year contracts. We have first year -- mostly of that 70 megawatts is first year, which is mainly -- it's mandatory, but we have some second tier. That's it. Gustavo Mariani: Yes. In terms of capacity what the regulation has in order to incentivize the contractualization is that industries pay a higher capacity charge than what we collect. So that incentivize contractualization because we sell our capacity a little bit better than what we sell to CAMMESA and industries get a reduced price from what CAMMESA charge to them. Lida Wang: Yes. Well, Andresi Miliano from Balance. The liberalization of the power market contemplates procure energy by distributors. When do you consider this will be fully implemented? And how do you expect to impact your power segment? I guess the B2C conference is what he's asking, that we haven't done any... Gustavo Mariani: No, we haven't done any yet. Probably some of our colleagues, especially the hydro -- the recently -- the hydro units have that, but have not -- that is not yet a public information. So that is a market that we need to see how it will evolve. I don't have any clarity right now. Lida Wang: Another question comes from Andres Cardona from Citi. Regarding power generation, we already answered. The second question, is there any short to midterm M&A opportunity? Is there more likely to be for upstream or for power generation? Gustavo Mariani: There's nothing in the short term. So there's nothing in the pipeline. That is the question that we are studying neither in E&P or power generation. Harder to see how that is going to evolve going forward, but we are not actively engaged in any M&A opportunity. Lida Wang: This question was answered in previous calls, but well, there is always a new audience. Do you have any information about Rincón de Aranda. Specifically in the type curve, like, for example, with estimated URs, IP30, D&C cost per barrel? Horacio Jorge Tomas Turri: We don't give any guidance... Lida Wang: Very good. I don't know, it's like around 1.5 million. Horacio Jorge Tomas Turri: Okay. It's probably around 1.1 million barrels of EUR. And in terms of cost, we should be hitting $15 million per well approximately. Lida Wang: Well it's fully considered the whole thing. Horacio Jorge Tomas Turri: All of it, all of it. All the way to the collecting pipeline. Lida Wang: Correct. Which sometimes is different from the measure from other players. Horacio Jorge Tomas Turri: Yes, of course, of course. Lida Wang: Another question from someone I don't know is called [indiscernible] . How is Pampa involved in [indiscernible]? Gustavo Mariani: No, we are not involved. Lida Wang: Can you give us from, [ Santiago -- Valeria ] can you give us some color from the next maintenances in power plants program in the power plants? Usually, we do it when it's offpeak, right? Gustavo Mariani: No. Obviously, we do it either in autumn or in fall. I think there are plan -- and this year, I don't have anything in my mind for this fall, probably during -- sorry, Spring or fall. But I don't recall at this moment which plant has significant maintenance. Most probably will be Genelba and Loma de la Lata, those are the two2 relevant ones. Lida Wang: The legacy, right, the legacies. All right. Is there any change in 2026 CapEx considering the oil prices? This is a recent price of appreciation? No, nothing at all. Guido Visocero, his boss, he's asking urea project. Is there any further information to share about this project? Gustavo Mariani: No, not at this point, not at this point. We're still working a lot. But as it usually happens, there are delays. So it will take at least another semester to have more information about this project. Lida Wang: Gustavo Faria from Bank of America. He's asking a little bit different from the hedge, but he said how does the Pampa's oil prices hedge works in this new environment of high oil prices? Gustavo Mariani: I would say that last year, we realized like in average, $7 profit from... Lida Wang: Per barrel, right? Gustavo Mariani: $7 per barrel profit from our hedge strategy. This year and since today, we are probably losing $4 or $5 per barrel in our hedge strategy. But we will see how prices evolve throughout the remaining of the year. Lida Wang: Gustavo is also asking, are you open for new investments outside power and gas -- oil and gas? Within Pampa structure? Gustavo Mariani: As long as within the scope of energy of Pampa, we are open to anything. We are not studying apart from the urea project, we are not studying or not planning any different investment. Lida Wang: Okay. So Jonathan Swart from [indiscernible] is asking, why did you retire production from Plan Gas Round 1 and Round 3? Horacio Jorge Tomas Turri: Reallocated to our power generation. Lida Wang: To vertically integrate. Horacio Jorge Tomas Turri: To vertically integrate. Lida Wang: We still have some from the last round, the 4.2, right? Horacio Jorge Tomas Turri: Yes, we still have that... Lida Wang: Which... Horacio Jorge Tomas Turri: We're still negotiating eventually the handing over of that gas back to Pampa to be able to, say again, decide what to do with that gas rather than sell it to NASA. Lida Wang: Well, he's asking also, could you explain about the $55 million positive impairment, so recovery of impairment in generation? Yes. So Central Piedra Buena, our 620 megawatts in Bahía Blanca, it's a 2 steam turbine that load factor is very low. This -- last year was high because it was a dry year, but usually it's low. So under the legacy scenario under the old regulated remuneration, they have an impairment. Now that we have this new scheme that also recognizes a big -- like a big -- it's a 30% boost in the capacity because Central Piedra Buena can also operate under alternative fuels. This is way better than anybody can pay. Just because of that flexibility, it's cash in more money and cash in more cash flow. That's why we reversed that impairment. I hope that was clear. Okay. Next, news on the fertilizer plant. Does the sale of Profertil to Adecoagro affects your decision? Gustavo Mariani: No, it does not. Lida Wang: Okay. The one-off offtake agreement mentioned by CISA, the German's price maturity? Horacio Jorge Tomas Turri: Okay. It's an 8-year contract until 2036. And the pricing has to do with a formula that takes into account ETF and Brent -- I'm sorry, Henry Hub and Brent. Gustavo Mariani: 50-50. Horacio Jorge Tomas Turri: 50-50. Lida Wang: With certain percentages of discount. I think we did it all, and it's 7:26 I can't believe it. So I will check -- she's pulling for questions. But we are doing this because we have agenda constraints. All the people that asked why the stock was halted in nicely because Argentina closed and we were not allowed to file after 6:00 p.m. Argentina, and that's 4:00 p.m. in New York, and we are not allowed. So it's trading hours in New York. That's why we were halted. No speculations here because people ask me a lot of things. No questions? No more questions. So, Gus, Horacio and Fito would you like to add something else that we didn't talk about? Gustavo Mariani: No. We covered it off. Thank you all for joining. I hope it was useful. Lida Wang: All right. Thank you very much. See you next May. Bye.
Operator: Ladies and gentlemen, good morning, and welcome to the SES Full Year 2025 Results Conference Call. [Operator Instructions] I will now hand the conference over to Christian Kern, Head of Investor Relations. Please go ahead. Christian Kern: Thank you, Gaya. Good morning, everyone, and thank you for joining us today. It is my pleasure to welcome you to SES Full Year 2025 Results Call on behalf of our management team. Before proceeding with the management presentation, we would like to inform you that the financial information contained in this document has been prepared under International Financial Reporting Standards. As usual, this presentation may contain announcements that constitute forward-looking statements, which are no guarantees for future business performance and involves risks as well as uncertainties. Also, certain results may materially differ from those in these forward-looking statements due to several factors. We invite you to read the detailed disclaimer on Page 2 of this presentation. The presentation is also available on our company web page. Today, I'm joined by our CEO, Adel Al-Saleh; and our CFO, Lisa Pataki, who will take you through the presentation, followed by a Q&A session. Adel, without further ado, over to you. Adel Al-Saleh: Great. Good morning, Christian. Good morning, everybody. Thank you. Good morning, good afternoon. Thank you for joining us. Look, I'm going to start our presentation before we get into the results with a little bit of an overview of the direction of travel of our network. You've probably heard us talk about our next-generation MEO in different events, and I thought it would be probably important to talk to you as analysts, investors, colleagues on this call to repeat the message and maybe clarify the direction of travel that we have as a company. So if we go to Slide #3, especially given the latest events over the weekend, I want to emphasize that our largest vertical or market opportunity is the defense sector. And what we've seen over the last several decades, a dramatic shift in the defense and how defense uses SAT communications to enhance their capabilities. So if you rewind back between 2000 and 2010, really the function of SATCOM was basically strategic long-haul pipes, so important communication links between the command center and the theaters of operation. During that period, the dominated technology was GEO, right, with very large terminals, with limited bandwidth and early steps into communication on the move. If you fast forward into 2010 and 2025, space evolved into a contested theater as adversary begin to build counterspace capabilities. So militaries had to adopt a different approach. Specifically, they started thinking about hybrid architectures, combining commercial military capabilities, they started looking at different orbits, looking at different throughput. But predominantly, the networks remain siloed. So the LEO network would be siloed from the MEO, from the GEO, from the different application and so on. But that began to evolve very, very quickly, especially in the last 3, 4 years. Now if you look at 2026 going forward, it is now very clear that space is a war-fighting domain. It is no longer a contested domain. It is a war-fighting domain, requiring superiority across all orbits. This domain is now looked at the same as they look at air, navies, cybersecurity, et cetera, et cetera. So the applications using space have begun to evolve dramatically. So if you look at the complexity of what is being done today, it's dramatically different than the past. I'll give you a couple of examples. So in the past, being able to capture images across earth and deliver them to the right hands to be able to make decisions is changing into continuous observation of earth, real-time image processing on the fleet to be able to issue commands. Missile defense systems, missile tracking like Golden Domes and European Space, Defense Agencies, that's absolutely now a requirement. And not just predicting the launch of the missile, but actually being able to acquire that launch from the beginning all the way to strike in a persistent way. And then sharing that information across multiple domains within the defense and the armies. And the third -- the last example I'll give you is this control center -- the command centers are becoming extremely complicated, extremely diverse, connecting many different aspects of data from space, from the ground to be able to compile it and be able to deliver the right level of intelligence to the folks that are in theaters. These kind of command complications require an integrated network. It requires more sophisticated capabilities in order to deal with it going forward. So if you go to the next slide, that dynamic that I just described is really shaping our direction of travel as a company. And although the slide is a little bit complicated, we're hoping to do it in a build slide, I'm going to try to explain it to you. So the first layer of space continues to be this proliferated LEO capabilities, right? And that will continue to grow. SES is not in proliferated LEO domain. We use partners to access LEOs when we need it in order to provide services to our clients. We will have our own micro LEO capabilities like quantum key distribution when we launch that constellation, but we predominantly use that as a partner network. If you look to the next layer with -- the light green layer, that's our MEO layer. And you got to keep in mind that MEO, although pictorial looks like it's between GEO and LEO, it's actually very close to LEO. It's much further away from GEO than it is from LEO, which gives it that unique capability to cover earth with less satellites, but also have an attractive latency period, which is about 130, 150 milliseconds. Our focus as a company is to continue to build that backbone of the network. And I'll come back to that in a second. And if you think about GEO, our focus in GEO will be on very specific applications where GEO continues to be the superior medium to be able to transfer data or connect people like media distribution or very specific governmental applications. So why do we like MEO? MEO is the backbone for us of this network. The future is going to be connecting all these networks to optical links. That's what we develop. So we'll be able to talk to LEOs. We'll be able to talk to GEOs. We'll be able to talk to earth. We'll be able to talk between our constellations, but also connect to other constellations to move data. It provides a high-speed backbone capability and a very attractive, resilient layer to the network that without it could be weakened. So this mesh network combined with our ground infrastructure, which is one of the largest ground infrastructures in the world, gives us that an edge and a differentiating capability to provide that multi-orbit service to our customers. So if you go to the next page, now I want to talk about what are the design principles as we evolve this meoSphere network. So first of all, when we think about MEO and the new name of the network will be meoSphere, we think big. We don't think small. We think big satellites, we think satellites that could do multiple things, we want more power on these satellites in order to accomplish some of the things that I'll talk about in a second. We also believe it's very critical. We take control over some of the supply chains that are critical for innovation and control of our destiny. So therefore, we will be doing more vertical integration as a company, creating this new layer of resilience and new layer of a backbone in space. This network will be ideal to be able to connect to the different networks to create that backbone that I keep talking about, which just opens up multiple partnerships that we have today to enhance this partnership further, but actually new partnerships for people who want to enhance their networks to drive these capabilities. It enables multi-orbit resilience for sure, right? We will be able to move signals from one layer of the network to the next layer between satellites in order to make sure we avoid jamming and we avoid direct attacks, which is happening, ladies and gentlemen. It also is ideal for the critical -- for the mission-critical applications because the next level of satellites are going to have a combination of commercial and military capabilities requiring security to be built in beyond what we currently have, mixing the military capabilities that we currently have in our military satellites with the commercial capabilities to give us that ability to drive these important missions. And the last point is really important. With the size of the satellite, with the flexibility of the satellite, we will be able to do multi-mission capabilities. The platform will always have the capability of having a communication as the foundation of the capability. But actually, there's the additional missions, the additional capabilities that the satellite will provide is a growth opportunity for us. So what are these missions? So if we go to Slide #6, these are some examples of missions that we can host on our satellites, on our meoSphere capability. Number one, data, space data relay. This is something you remember, we talked about demonstrating when we did a project with NASA and Planet Labs using RF at that point in time with not optical links to be able to move data from Planet Labs' earth observation satellites to meoSphere -- to the MEO layer and then delivering it to our customers wherever they want to deliver real time, which reduced the time of getting the signal to the right people and demonstrating that we can actually move those very, very quickly in real time. The next generation of our meoSphere will have these optical links within the satellites. The other potential hosted missions will be missile warning and missile tracking. I described that being able to build sensors on these satellites to capture capabilities, to capture things that are happening on earth. The third area, an example is being able to slice the network to provide governments a sovereign network slice of the overall network, giving them control and giving them the sovereignty that they're looking for. Of course, military communication channels and all that like X-band, Ka-military bands, UHF, that's something we'll be able to do on these satellites as well. Space situational awareness, again, not just tracking an object, but being able to connect the intelligence across the -- across space and deliver it with AI to decision-making systems to be able to track everything that's happening around us in space and combine that with our partners. Imagine the ability to combine our space situational awareness data with, for example, Starlink situational awareness, which they announced creates an incredible intelligence available for space. And of course, the last one is the AltPNT capabilities that we require in order to have more accurate positions within space and within the earth. So these are some important government missions that we will host on ourselves, and we see incredible demand for these capabilities. Our government customers are excited about this next generation of MEOs that we will be launching very, very soon. So if you go to the next page, obviously, we're working on getting this project off the ground. And we're thinking about it in a very different way compared to the traditional way of a waterfall development of creating requirements and then waiting for 5 to 7 years to be able to launch the constellation. We're going to do it in a different way. So first of all, this is going to be an iterative phased approach as we build up this capability. We're not going to do everything in one go. That's number one. Number two is we're going to use space to actually test the capabilities as they evolve. So instead of waiting and just testing in the labs and on the ground, we'll be launching missions to start testing portions of our design as it becomes available. And I'm happy to deliver, and I think we announced it earlier that our first test flight is going to be Pathfinder 1 at the end of March 2026, so the next couple of weeks, launching our bus as well as some of the payload capabilities already to be able to test it. And we have that scheduled every year until we get to a point where we're comfortable with the production of the final systems. It is also going to be a very disciplined milestone-based investment approach, both based on demand we're getting from our customers as well as the investment we'll continue to be putting in building up and scaling the capability. And all of this is going to be done with a very disciplined approach based on data and our customers' reactions. We're going to be leveraging new space capabilities and our deep experience to drive innovation. SES is well known with many firsts in the industry, many innovations that we have driven. Combining that with new space capability, their agility, their speed and their ways of development is going to be very, very helpful as we go forward. And of course, this investment that we're going to be deploying is contained in our CapEx guidance. We see meoSphere as an important evolution of the company, and we see IRIS2 being the first phase of meoSphere. And we'll talk a little bit more about IRIS2 a little bit later in the deck. So let me just end this section by going to Slide #8. So what we're doing, obviously, is we're sticking to our strategic focus of multi-orbit capability by building this next-generation MEO in a very different way than what we've done in the past, partnering with new space capabilities and leveraging the experience we have across the world. We're taking control of the supply chain to make sure that we capture our IP and our strategic advantage and keep it within the company. And with this approach, we're driving towards our North Star, which is building and evolving the company to advanced space solutions company with defense being a very important vertical within that solution capabilities. We drive solutions beyond communications, while communication continues to be a very important component of the overall portfolio. And of course, controlling supply chain and customer relationships is a very important point that we need to keep driving. So that's what I wanted to share with you before we get into actually our financials and what we're doing. And now let's get into the financials. Let's go to Page #10. So on this slide, we summarize our full year 2025 business highlights and financial performance. With the closure of the Intelsat transaction on July 17 last year, these full year 2025 results are shown on a reported basis, with Intelsat contributing roughly 22 weeks to the combined company. On this reported basis, we delivered 2025 financial performance within our financial targets with lower-than-guided capital expenditures. 2025 revenue of about EUR 2.6 billion was up 34% year-on-year with growth in all verticals. 2025 adjusted EBITDA of close to EUR 1.2 billion was up 19% growth year-on-year with a margin of 45.4%. Capital expenditure of around EUR 560 million were lower than guided, demonstrating faster-than-planned execution of our CapEx synergies. We generated EUR 229 million of adjusted free cash flow, another year of positive cash generation. Over the last 12 months, we have secured EUR 1.8 billion of renewals and new contract -- new customer contracts with the majority coming from our growth segments. This has supported our gross backlog of EUR 6.6 billion, which has been impacted by the weaker U.S. dollar and intercompany eliminations. 2025 is a milestone year for SES, with major progress and a step change in SES' scale, having combined 2 major companies with multiple platforms. We've been working on various scope changes, intercompany eliminations and some different accounting conventions. So this has been a rather complex reporting year. With the financial performance in the second half of 2025 below our initial expectations for the first year of the combined company, we're facing these challenges head on and are building a stable foundation for future growth. In terms of like-for-like financial trends, revenue was down 1.6% year-on-year and adjusted EBITDA declined around 12% year-on-year. These like-for-like trends are due to key business factors that are unchanged from what we've previously discussed. Lisa will cover those in more detail. Let's go to Page #11. Across our businesses, we integrated operations, continued to innovate and supported customers at scale as OneSES. We are a trusted partner to customers worldwide in over 130 countries as evidenced by our strong customer base and notable wins in 2025. Starting with our media business, now operating at greater scale following the Intelsat acquisition. We serve more than 2 billion people around the world and nearly 700 million households with a strong cash generation profile. We're securing long-term renewals well into the next decade. And despite industry headwinds, our strategy is clear: defend and optimize high-value neighborhoods by leveraging our industry-leading reach while expanding in market growth segments like Sports & Events. In 2025, we signed close to EUR 450 million in renewals and new business, including multiyear agreement with Sky, RTL, ORF, Telekom Srbija, Warner Bros. Discovery, Dish Mexico, Arqiva, PGA TOUR and QVC. We're winning new businesses by leveraging our combined satellite and ground network, including major new media customer in North America. We launched our new free-to-air/free-to-view offerings in Mexico and Spain, opening new markets with our compelling channel offerings. Let's now shift to our government business. We continue to see strong and growing demand for our resilient secure communication solutions from government customers around the world. We built a government solutions business of scale on both sides of the Atlantic, being a true space partner to over 60 government organizations, including European and U.S. agencies. We're well positioned to tackle the sovereign capabilities, which governments now demand with multi-orbit networks. I just described it a few slides ago. With space and defense budget increasing both in the U.S. and among NATO allies, we view the government vertical as one of the strongest growth levers over the next few years. For example, the IRIS2 program continues to progress well through Rendez-Vous 1, reinforcing SES as the European Commission's trusted partner for its flagship sovereign connectivity network. IRIS2 will become Europe's multi-orbit network of choice and supports the future expansion of our differentiated multi-orbit architecture, enabling profitable growth from 2030 onwards. Another important milestone was the announcement that SES and Luxembourg government will develop and launch GovSat-2, the second satellite under the LuxGovSat public-private partnership. We also extended a long-term hosted payload contract with Australian Defense Force. The French Navy's aircraft carrier, Charles de Gaulle, utilized SES O3b mPOWER services during the Clemenceau mission. In the U.S., we secured important new contracts, including being selected as 1 of 5 companies on the U.S. Space Force's $4 billion Protected Tactical SATCOM global PTS-G IDIQ contract and a strategic award from the Defense Innovation Unit for secure integrated multi-orbit networking. These strategic wins highlight our commitment to innovation and growth in the government sector. Turning to aviation. Millions of passengers rely on SES multi-orbit multi-band connectivity that delivers reliable, consistent performance in the air and on the ground. We're winning new airline customers around the world who are choosing SES because of our clear differentiators. These include our electronically steered antenna solution we call ESA, which uniquely enables access to GEO and LEO orbits, delivering broad coverage, low latency and unmatched resilience. We also offer multi-band flexibility across both Ku- and Ka-bands and solutions tailored for both narrow-body and wide-body aircraft. Our flexible commercial models further strengthen our value proposition. In 2025, our aviation business was supported by important customer wins and ramp-up in equipment installations. 16 airlines have committed to our multi-orbit ESA solution on more than 1,000 aircraft with many awards secured in recent months, including American Airlines, Air Canada, avianca, JAL, Skymark, Royal Brunei and others. While competitive pressure from LEO providers remains, the market continues to support multi-providers with differentiated offerings. Shifting to maritime. We are the leading provider of connectivity at sea, keeping passengers and cruise connected, informed and competitive in fast-moving world. We're confident in our maritime platforms, which position us well despite facing pressures for some partners moving to LEO solutions. Our strategy is focus, defend and rationalize supported by selective investments. Our direct maritime business remains strong and resilient despite mega LEO's entry into the market. We secured renewals with multiple major cruise lines and continue to serve 5 of the 6 global leaders. In 2025, we supported the largest cruise fleet transition from GEO to SES Cruise mPOWERED and continue to see strong demand, for example, from MSC, Virgin and other major cruise lines. Our FlexMaritime platform performs well and connects over 13,000 vessels across the world. Finally, our fixed data business. Fixed data saw intense competition in 2025. We have taken several actions to transform the business and focus in areas where we have market-leading offerings and the right to win. Our fixed data business serves 8 of the world's top 10 mobile operators and numerous global energy companies. We expanded digital inclusion in Brazil with Telebras and made meaningful progress in Africa, expanding 200 Africa mobile network sites, reaching 500,000 people. We won additional business with Orange across multiple countries and closed our first SES Intelsat combined fixed data deal in Chad. In recognition of our impact in Africa, we're honored with a Changing Lives Award at Africa Tech Fest for connecting schools in South Sudan and Uganda. As you can see, we're creating a stronger, more agile, more competitive SES, one built to lead across orbits, markets and technologies. Let's go to Slide #12. This slide highlights our fast-track synergy progress and integration efforts. We began delivering synergies from day 1. The integration of the 2 businesses is well on track. The organization design and structure is complete. Leadership is in place on all levels of the company and the new operating model across the combined business is established, enabling faster decisions and clear accountability as one company. Leveraging these operational changes, we're progressing well with fast tracking our initial synergy plan. On OpEx, we're crystallizing synergies more rapidly and are taking well -- and tracking well towards the EUR 210 million annual run rate target. Both labor and nonlabor savings are already flowing through with contracts rationalized, office footprints consolidated, automation scaled, procurement efficiencies captured and IT consolidation progressing to plan, always delivering these efficiencies with utmost care and transparency to support our teams as we align on the needs of our scaled business operations. On CapEx, we're also fast tracking the annual synergy run rate of EUR 160 million. We're confident to achieve this target sooner than initially planned to focus on our growth priorities, smarter asset use, non-replacement of certain satellites as well as rationalizing of networks and ground infrastructure. Already in 2025, we're able to save around EUR 100 million in CapEx versus the midpoint of our guidance. Our labor costs were down 7% on a like-for-like basis in 2025, accelerating the decline in fourth quarter. As you can see, we are executing with discipline and precision on our synergy targets. This positions us well to unlock the full value of OneSES. With this, I'll hand over to Lisa, who will share with you more details of our 2025 financial performance. Elisabeth Pataki: All right. Thank you, Adel. Good morning, everyone. Before I begin my remarks on the financial performance of the combined company, I'd like to remind you that our full year 2025 press release, which can be found on our company website, includes supplementary financial information with like-for-like revenue per vertical and adjusted EBITDA at the group level as if the Intelsat transaction had consolidated from the 1st of January 2024. We hope this additional disclosure helps you better understand the underlying performance of the combined business and complements your financial modeling going forward. Let's turn to Page 14 for our financial highlights. Overall, as Adel mentioned, both revenue and adjusted EBITDA were in line with the outlook we provided last quarter. I'll start by walking through our company results on both a reported basis as depicted throughout the presentation as well as on a like-for-like basis at constant foreign exchange rates for comparison purposes. Reported revenue was EUR 884 million for the fourth quarter and EUR 2.6 billion for the full year, resulting in a full year growth rate of 33.9% when compared to the same period last year. On a like-for-like basis, with constant foreign exchange rates, full year 2025 revenue was down 1.6% compared to 2024. We saw lower revenue in our fixed business as well as in media, partially offset with growth in our aviation and government businesses. As previously discussed, the fixed data business has been facing a challenging competitive environment. And within Media, the decline was driven by structural headwinds and the effects of a Brazilian customer bankruptcy. On reported adjusted EBITDA, Q4 was EUR 358 million, resulting in EUR 1.2 billion for the full year 2025, showing growth of 19.1% year-over-year with margins of 40.5% for Q4 and 45.4% for 12 months. On a like-for-like basis, full year 2025 adjusted EBITDA was down 12.1% compared to 2024, consistent with the outlook we provided on our last earnings call. The decline was driven by a few factors in line with what we've previously discussed. First, within our aviation business, we delivered over 450 electronically steered antennas in 2025, which is an important milestone for this business, and it's worth mentioning that we have another 600 ESAs still to be installed. This revenue is initially profitability diluting before enabling higher-margin service revenue after installation. Additionally, as expected, we did see some impact from timing differences between onboarding and decommissioning certain airline customers. Next, the Intelsat IS-33e anomaly, which occurred in the fourth quarter of 2024, resulted in higher third-party capacity costs in 2025 as affected customers were retained. And in Government, we had some timing impact mainly due to the U.S. budget delays at the start of last year, contract rationalization by the U.S. Department of Government Efficiency, otherwise known as DOGE and some postponements of large contracts, in part due to the U.S. government shutdown in late 2025. The good news is these awards are merely timing issues, and several are expected to materialize this year, underpinning our confidence in future growth. Lastly, with structural declines in media and difficult market conditions within the fixed data business, margins are impacted by the change in overall company mix. We expect the decline in Media to improve going forward. And on fixed data, we are focused on restructuring the business by securing the most value-additive deals, supported by disciplined capacity allocation. Moving now to Page 15. I'll discuss in more detail the top line financial performance of our vertical segments. Media's reported full year 2025 revenue was EUR 977 million for the year, up 7.9% over prior year as inorganic growth more than offset anticipated segment contraction in this business. On a like-for-like basis, Media was down 12.6%, driven by structural declines with capacity optimization in mature markets, standard definition channel switch-off and the full Q2 to Q4 impact of a Brazilian customer bankruptcy. Despite the year-over-year decline, the media business ended the year with a solid backlog of EUR 3 billion and serving close to 2.3 billion viewers worldwide. As the company's largest segment, Media carries strong margins, resulting in solid cash flow. In 2025, this business closed on roughly EUR 450 million of new business and long-term renewals, which span into the next decade, reinforcing customer confidence in our solutions. It is important to note that although global TV viewing is evolving and linear consumption is structurally declining, we expect the trend in our media business to improve. Free-to-air, free-to-view and Sports & Events remain resilient, while satellite continues to provide most efficient and reliable access in many remote regions. Moving now to Page 16. Our Networks verticals comprised about 60% of total company revenues for the full year 2025, with reported revenue up 55% year-over-year. On a like-for-like basis, Networks revenue increased by 6.6% versus the prior year, representing the fourth consecutive year of growth for Networks, driven by increases in both the Aviation and Government segments. Within Networks, the government business had revenues of EUR 726 million for the full year, up 47% over 2024. On a like-for-like basis, Government grew 17.3% year-over-year, driven by demand in European global governments and the IRIS2 program. This growth was partially offset by timing impacts and budget cuts within the U.S. government portion of the business, as I mentioned earlier. As we look ahead, we expect growth in both the U.S. and global government segments, driven by rising demand for our secure multi-orbit resilient and sovereign solutions, particularly meoSphere. Geopolitical tensions and shifting defense priorities, especially in Europe, are accelerating government investment in sovereign space capabilities and robust communications infrastructure. With proven multi-orbit solutions and a strong track record serving European, U.S. and allied global governments, SES is well positioned to capture the surge in demand. Our aviation business continues to show solid growth, supporting around 3,000 aircraft tails, thanks to our strong pipeline of ESA antenna installs and subsequent service revenues. For the full year 2025, Aviation revenue on a reported basis stood at EUR 382 million, more than doubling the size of the business. On a like-for-like basis, this segment has seen a 29% growth versus prior year with continued momentum in securing global airline customers and commercial traction around our multi-orbit ESA antenna. This strong commercial momentum supported by new installs and subsequent service revenues underpins our future revenue growth and highlights the strength of our value proposition in a competitive market. And on our fixed and maritime business, reported revenues totaled EUR 530 million for the full year. On a like-for-like basis, revenue declined 15% due to competitive headwinds, primarily in our fixed data business. We continue to navigate these headwinds with a disciplined approach, which includes rationalizing and prioritizing capacity in our growth segments. In our Maritime segment, demand for MEO capacity remains high, evidenced by solid cruise renewals as well as in commercial shipping, where we serve more than 13,000 ships globally with our Flex platform. Finally, Networks combined gross backlog stood at EUR 3.6 billion at the end of 2025, having secured close to EUR 1.4 billion of new business and renewals last year with a strong Aviation and Government pipeline as we look ahead. Our solid backlog and robust pipeline underpin our financial outlook and future growth momentum, reflecting sustained market demand for our multi-orbit solutions globally. Now let's turn to Page 17 for a more detailed view of our capital allocation priorities and our debt maturity profile as of December 2025. Our combined like-for-like adjusted net debt to adjusted EBITDA ratio at the end of 2025 stood at 3.9x. This includes cash and cash equivalents of EUR 674 million, excluding EUR 401 million of restricted cash, which is related to the SES-led consortium's involvement in the IRIS2 program. It's important to note that we remain committed to deleveraging and returning to investment-grade metrics while meeting our near-term debt obligations. We maintain a solid liquidity position supported by prudent planning and stable market access, which provides us with flexibility for future financing decisions. In terms of our debt maturity profile, we have EUR 1.3 billion coming due this year, including EUR 525 million of hybrid notes. The current debt portfolio carries a weighted average cost around 4% with approximately 80% of SES debt at fixed interest rates. Furthermore, the weighted average maturity of our debt facilities stands at approximately 5 years, providing a solid foundation for financial flexibility and long-term planning. In terms of capital allocation priorities, as we've said before, our objective is to pay down debt to 3.0x or below net leverage. We continue to make solid progress in our insurance settlement discussions related to the first 4 mPOWER satellites. In 2025, we successfully collected approximately USD 189 million or EUR 164 million. We'll continue to provide updates as the last settlement negotiations progress. We continue to invest in our MEO capabilities and as Adel mentioned, our next-generation multi-mission MEO network, meoSphere, supported by new space innovators. This is underpinned by strong financial discipline to drive sustainable growth with a focus on new space technologies while transforming our approach to capital deployment. Capital expenditures for 2025 totaled EUR 559 million on a reported basis and EUR 707 million on a like-for-like basis, primarily reflecting milestone achievements in the mPOWER satellite program. The EUR 559 million is below our prior outlook as a result of our continued focus on CapEx synergy delivery as we work towards optimizing our fleet and ground infrastructure. Further, the company has introduced a dedicated CapEx task force at the Board level designed to enhance oversight and ensure disciplined capital allocation aligned with long-term strategic objectives. SES continues to be sector-leading in shareholder returns. We paid the interim 2025 dividend of EUR 0.25 per A share and EUR 0.10 per B share in October of last year. We expect to follow this with the final 2025 dividend of EUR 0.25 per A share and EUR 0.10 per B share to be paid to shareholders in April 2026, subject to shareholder approval at the upcoming Annual General Meeting on April 2. As we've said before, once the company meets its net leverage target, at least the majority of future exceptional cash flows of the combined company will be prioritized for shareholder returns. We remain focused on improving the company's financial metrics as we look ahead. Our priority continues to be deleveraging with a return to investment-grade metrics while being selective and disciplined as we pursue opportunities to drive growth, focusing on investments where returns are clear and accretive. Slide 18 outlines how our disciplined financial management strategy supports long-term value creation for shareholders. 2025 was a pivotal year for us. We began integrating 2 major companies, rolled out best-in-class processes, initiated the consolidation of our ERP systems and strengthened compliance with SEC-aligned controls. These actions accelerate decision-making, improve data quality and help us capture synergies faster. We remain focused on disciplined capital deployment, ensuring every investment aligns with our strategic priorities. We continue to tightly manage discretionary spending through automation, labor arbitration, cost efficiency initiatives and synergy delivery. These actions will structurally lower our cost base and drive margin improvement. Cash flow continues to be a core pillar of our value creation strategy. We have further enhanced our cash discipline with tighter integration of cash metrics into operational decisions. Alongside disciplined capital allocation and focused working capital initiatives, these actions are driving more consistent and sustainable cash generation. Together, these actions reinforce our capacity to invest, drive profitable growth and deliver attractive returns. And finally, I want to thank the entire SES team for their dedication and exceptional execution throughout this complex integration. And with that, I'd like to hand it back to Adel for his closing remarks. Adel Al-Saleh: Thank you, Lisa. I echo your thanks to the team. It's been a heroic effort, right, bringing the 2 companies together and getting the results and getting the financial statements and all that stuff. Okay. Let's go to Page #20. I'd like to present our 2026 financial outlook. After a challenging 2025, we're expecting our business to stabilize in 2026. Some of the headwinds we faced last year are likely to continue into the first half of 2026, but we're executing firmly on our initiatives to offset their impact. This positions us well for the next phase, returning to sustainable growth. In 2026, we will accelerate integration, execute on synergies, grow in key markets and continue innovating across our global multi-orbit architecture. As such, as on a like-for-like basis, with a full year consolidated Intelsat, we expect both revenue and adjusted EBITDA to be stable as compared to 2025 on a constant FX basis. As a reminder, 2025 like-for-like numbers are shown at reported rates of EUR 1.12 per U.S. dollar exchange rate and more recent rates are in the EUR 1.18 to EUR 1.19 range. As we continue to fast track our CapEx synergy delivery, 2026 capital expenditures at the euro-U.S. exchange rate of 1.2 is expected to be around EUR 700 million. This will include IRIS2, which is the first phase of meoSphere. This is around EUR 100 million lower than our prior guidance. Our network of the future, meoSphere, supported by new space innovators and IRIS2 are part of this CapEx guidance. A quick update on IRIS2. SES is currently progressing through Rendez-Vous 1 of the IRIS2 program, working closely with the European Commission and our SpaceRISE partners to validate project costs, technical requirements and delivery time line. SES remains fully committed to the European Union's vision for a sovereign secure and competitive space-based connectivity infrastructure. The project -- I'm sorry, the project must work for both, the European Commission and the SpaceRISE consortium. We have clear objectives on how to make that happen. As the lead member of the SpaceRISE consortium, SES collaborates with all partners to ensure the timely and successful delivery of IRIS2. Let me also give you a quick update on the well-advancing C-band process. The draft notice of proposed rulemaking, also known as NPRM was published by FCC last December and was followed by a round of stakeholder comments. SES filed its comments on January 20 and reply comments on February 18, supporting FCC's proposal for upper C-band clearance. SES remains fully committed to collaborating with FCC and all stakeholders to identify and implement the most effective technical solution that delivers mutual benefits for all parties involved. It is FCC's stated intention to auction up to 180 megahertz of spectrum in the upper C-band. The One Big Beautiful Bill requires the FCC to complete a system of competitive bidding for at least 100 megahertz in the upper C-band no later than July 2027. FCC ruling is expected in the second half of 2026. This process continues moving on an accelerated time line, and we'll keep you updated accordingly. Before moving to Q&A, I would like to conclude today's presentation on Page #21. Our vision is building a leader in space-based solutions. 2025 was a foundational year with the integration of a new company. Our focus was in getting the basics right and building a platform for the future that is scalable. Operationally, we're strengthening the network as we start building and scaling our multi-orbit next-generation network with meoSphere, building on our success of O3b mPOWER constellation and supported by new space innovators. During 2025, O3b mPOWER Satellites 7 and 8 entered service and more recently, Satellites 9 and 10 started providing much needed capacity. The launch of Satellite 11 to 13 is on track and planned for second half of 2026. The year 2026, it's not just the continuation of integration. It is for us, the acceleration of the new SES, building an industry leader. We're looking to stabilize the business and prepare it to grow by reshaping our portfolio to concentrate on the markets where SES has the right to win with customer-driven solutions, relentless focus on operational excellence and financial strength underpinned by synergy delivery. As we enter 2026, we'll move with momentum, accelerating integration, executing on synergies, growing in key markets and continue innovating across our global multi-orbit architecture. Through this momentum, we're positioning SES to operate at a new scale and lead in business performance, innovation and expansion. We're focused on delivering differentiated end-to-end capabilities across our segments as a global space solutions company. Our vision is clear: to lead the next chapter of space solutions industry, driving innovation, sustainable expansion and compelling value creation for both shareholders and our customers. With this, we're now ready to take your questions. Operator: [Operator Instructions] The first question is coming from Aleksander Peterc from Bernstein. Aleksander Peterc: I just have a couple, please. So first one is on the margin outlook for the current year, presumably in '26, you have a lower impact from the IS-33 failure that may have had an impact on Intelsat side of the operations in '25. So I would assume this would be a tailwind also equipment revenue was quite high in '25. Is that coming down? And you also have synergies that are already in play and will accelerate. So I'm just wondering what are the headwinds here to the margin for you to predict a flat year-on-year margin. That will be the first one. And then the second one, just very briefly, if you could tell us anything new on the upper C-band's process in terms of time line and amount of spectrum do you think you -- that could be in play here? Are we still talking about 160 megahertz as being the base case scenario here? Elisabeth Pataki: Yes. So I'll start with the margin outlook for '26 and then hand it over to Adel on the C-band. So EBITDA is stable from '25 into '26 with stable revenue while synergies are on track. So the reason that you don't see all of the synergies drive the growth in 2026 adjusted EBITDA yet is really driven by the company mix across the verticals. So as you noted, we still have strong equipment sales going through the aviation business. Maybe a way to think about it is we've got about 40% of that business is in terms of equipment sales. We ramped the ESA antenna installation significantly in the second half of 2025. And we still have quite a bit of equipment sales going into aviation into 2026. Also, we do have a bit of a mix dynamic when it comes to some of our highly profitable businesses like media, which is in a structural decline, with the fixed business -- fixed data business that is also declining that we've taken active steps to rationalize how we're performing in that business and streamline things, make sure that we're allocating capacity over into the right areas. So if you kind of look at it from a mix perspective, we are offsetting some of that decline with synergies. We're well on track when it comes to synergies, and we're feeling very good about our performance. But overall, given where we're at, we're stable on both revenue and EBITDA in 2026. Adel Al-Saleh: Great. Thank you, Lisa. And Alexander, just to clarify, the IS-33 third-party capacity is still in our numbers. On a compared basis, obviously, it gives us a little bit relief, right, because we didn't have it in 2025 compared to 2024. So that gives us a little bit of a relief. But it's still in there, and we're working hard to move that traffic on fleet, but given the demand for our fleet, it's not so straightforward, right? As soon as we find the capacity to move it, we will do that. And by the way, the equipment -- I mean one thing we need to keep highlighting is this equipment headwind we have from airlines is translating into a service revenue. And we see it. So for example, one of the large airlines that did install over 400 kits in 2025 when we look at their margins in 2025 installation, if you look at their margin in 2026, it is significantly better. But as Lisa said, because of the success of sales, we have a good backlog of more than 600 terminals to install in the year. But so those dynamics continue. Look, on the C-band, I mentioned it already, it's progressing very, very well. The replies to the comments have now closed. We expect now FCC to move in second half of 2026 to issue their ruling. FCC has clearly said they want to go as high as possible up to 180 megahertz, Alexander, you've seen in our comments, we would like them to go up to 160 megahertz leaving some C-band for very specific applications that we think will be beneficial. But as I said, we are working closely with FCC and we will support them with their objectives, ensuring that our customers get the services that they need to have. So it's progressing. It's picking up speed actually. Operator: The next question is coming from Roshan Ranjit from Deutsche Bank. Roshan Ranjit: I've got 2 questions, please, and perhaps following up on the previous around the synergies. Now clearly, Lisa, you're very confident on that progression. I think that's been clear from day 1. Now you're talking about fast tracking. So if I think about what you previously said, I think 70% of the run rate by year 3, I suppose just to give a sense of how fast track this is. And given that the run rate should be achieved faster. Should we be thinking about an NPV higher than the 2.4 or are there kind of associated higher costs and maybe moving a bit faster and extracting those synergies? And the second question is around the midterm. Now I know you did comment at Q3 stage on those midterm targets because of the many moving parts. Is that still the case now? And when can we expect any details around the midterm targets within the integrated group. Elisabeth Pataki: Yes. So sure. So on the synergies, if I take that one first, we did fast track the execution of some of the key labor synergies early in the first 6 months of this integration. Obviously, as you work through those things, they are hard decisions to take. But as Adel mentioned in his prepared remarks, we took those decisions quite quickly. It's very important for us to have been able to stabilize the organization, and that did result in quite a number of our employees exiting the organization. Now at the same time, we've taken a very hard look at optimizing our fleet, and that includes satellites, satellites that we have on order and our ground infrastructure. To make decisions on that, it does take a bit of work. So we've started -- we've accelerated our process in terms of making those decisions. And I think you'll expect to hear some more things from us probably within the first 2 quarters of this particular year. So all in all, we are completely on track with respect to synergies. I don't anticipate that we are going to increase our expectation of what we're going to accomplish for synergies. It's just that we're going to try to execute those things as quickly as we possibly can. And then in terms of midterm guidance, obviously, 2025 was a milestone year for SES. It was a year of major progress, step change in the company's scale, decisive actions while integrating Intelsat, we've been delivering on our synergies since day 1. Some of those things, like I said, are under rigorous scrutiny. We're putting in place some of the ground rules for how we operate a business and who make investment decisions going forward. We are in the middle of the IRIS2 Rendez-Vous 1 process. So we expect to have more clarity as we round out that process. We're also going to host the Capital Markets Day later this year. And at that point in time, we'll be better prepared to give more midterm guidance. Adel Al-Saleh: And we look forward to that, right? Elisabeth Pataki: We look forward to that. We absolutely look forward to that. Operator: The next question is coming from Ben Rickett from New Street Research. Ben Rickett: I had 2 questions, please, if possible. Firstly, just to help with the sort of cash flow modeling for 2026. Can you say what we should be expecting in terms of lease expense? And also, I think there was some noncash EBITDA Intelsat. If you can quantify what that would be in 2026? And then second question, just on the media revenue trends. So in the second half, they were down 16% year-on-year. Is there any one-offs within that? Or I mean, obviously, you're impacted by Brazil. But I mean are you still expecting the midterm trends there to be mid-single-digit decline? Or could that be a bit worse now? Adel Al-Saleh: Then that was on the media. The last part was on the media, right? Ben Rickett: Exactly, on the media revenue. Adel Al-Saleh: Yes, it wasn't decline in 16%, it was about 12%, but we got it. Elisabeth Pataki: Okay. Yes. So cash flow. So 2026 cash flow, fairly from a lease expense perspective, noncash EBITDA perspective, fairly stable from what we've communicated previously, just off the top of my head, and you'll just have to check the press release, but noncash EBITDA is around EUR 200 million. We expect that to decline about EUR 20 million to EUR 30 million each year as we go forward. And then on some of the one-offs, I think as you know, every year, we have a number of one-offs. So I don't expect 2026 to be any different than 2025 at this point. It's fairly stable when we look at one-offs year-over-year. We are going to be quite happy to have the Brazilian activity behind us at this point going into 2026. So while media declined 12.6% from '24 into '25, we do expect that decline to kind of taper off a bit in 2026. Adel Al-Saleh: And just to add to that, Lisa. So Ben, we do expect media to be back to where we talked about, which is kind of a mid-single-digit decline. That's the model, right? And we see it now coming back to normal in 2026 after this bump that we had in 2025 was what Lisa described. Ben Rickett: That's great. Just on the first question, you can't say anything about the lease expense you're expecting for 2026? So I know Intelsat was quite significant lease expense. Elisabeth Pataki: I don't expect any changes between '25 and '26. Adel Al-Saleh: Can we follow up with Ben on it? Ben, we can follow up with you on that. But, we don't see anything abnormal happening in 2026. So what is it? Is it decline? Yes, it's going to -- the team here is saying it's going to be going down. But let the team follow up with you to give you the exact number. Operator: The next question is coming from Nick Dempsey Barclays. Nick Dempsey: I've got 3 left, please. So first of all, where could you see a help to your revenues this year from what has been happening currently in the Middle East this weekend? Of course, the U.S. military always takes capacity with a view to having flex to conduct operations. But are there areas where you could achieve extra services revenues or could this situation help you to fill SES 9 and 10 more rapidly? Second question, you said I think you're expecting a ruling on C-band in the second half '26, just so that I understand what we're talking about, do we mean that in that time frame, the FCC would talk about how much satellite operators would be paid to clear a specific amount of space in the band. Is that exactly what we mean by a ruling? And then on risk weight, you talked about the Rendez-Vous. Is everything on track in terms of timing as you'd hoped a year ago? Are there any risks that this project takes longer and could end up costing more? Adel Al-Saleh: Very good. Well, thank you, Nick. Look, a couple of things. Let me start with the first question, right? So it's very difficult for us to comment on what we're going to be able to do in conflict scenarios, right? However, the demand for our services continues to surge. And we have multiple capabilities and multiple contracts, both with NATO and the U.S. government and the European Commission that is able to use that capacity when they need it. And when they do, and there's a search, there's obviously an opportunity for us to deliver better performance in our government business. It's also important to mention that although the U.S. had headwinds in 2025, the ones that Lisa explained and the one we talked about in November last year, the European business and the global business had a fantastic year with double-digit growth. And that will continue. So we see that happening going forward. So I'm not giving you the exact answer, but the outlook is positive and is accelerated with conflicts, but not even without conflicts, the buildup of sovereign capabilities is now a big priority for many nations and continues to be an important element of Space Force activities. Look, on the C-band ruling, so what we expect when the ruling comes out, is FCC to decide how are they going to handle incentive payments and reimbursement payments for relocation costs. And as you've seen from our filings and filings of many, many others, there is big support to follow the same process that was used with what we call for C-band 1.0 to the final hearing, right, with how the incentive payments are calculated and who is incented as well as the relocation costs that need to be reimbursed. So we expect when the ruling comes out that FCC would clarify those elements of the ruling, right? And they can't really predict exactly what FCC will do, but that is expected to be part of the ruling. And then the final point on Rendez-Vous 1, yes, things are progressing, working very, very hard as we adjust the solution with the technical results and the outputs that we have from all the testing and the costing that we have done. And as I said, look, this is not something we want to rush, right? We want to make sure we do it at the pace that's required to ensure that it's a win-win. We are not going to do a project that's a lose-lose or lose-win. It has to be a win-win. And therefore, we're working diligently with full commitment to the commission and the objective of building a European sovereign capability. And we're excited about, right? Because that whole architecture of IRIS2 is exactly what we've been pitching to the world, a multi-orbit architecture with connections between the satellites and different orbits with resilience. And obviously, it's an enablement for our meoSphere ambition to be the first phase of that project. So that's how it's going, Nick. I hope that answers your questions. Operator: [Operator Instructions] The next question is coming from Paul Sidney from Berenberg. Paul Sidney: Two questions as well, please, if I may. Firstly, just sort of building on the discussion we've been had on the call and I think following on to Nick's question on government. Clearly, very rapidly evolving geopolitical situation we're seeing. But is there also -- are we starting to see a mix shift away from Starlink and towards yourself other non-U.S. satellite networks? I understand obviously government appetite demand is growing very fast. But there also that mix shift that we're seeing, if that's starting to happen? And then just a question, at least on the CapEx guidance. If I understand rightly, it's sort of underlying EUR 500 million now ex IRIS2 components. Is that the sort of run rate we should expect going forward? I know you'll update us later in the year and give us more detail. But again, just building on all the CapEx discussion we've been having on the call so far. Is that EUR 500 million now a bit more realistic than the EUR 600 million to EUR 650 million? Adel Al-Saleh: So Paul, look, the -- keep in mind, look, the conflict that we're seeing today clearly accelerates and drives demand in short term. However, the macro dynamics are such that the requirement and the acceleration of space demand has been happening before these conflicts, and it's happening at scale. And it's because, as I described in the beginning of the presentation, space is now a war domain. It's a war-fighting domain, right? It's no longer a contested domain. There is an acceleration across all nations around the world, especially the United States and European Union to build up these capabilities at scale. And it's part -- of it is being able to build your own sovereign capabilities. Europe is looking at space as part of their NATO objectives and how to reach the NATO levels of spend that is required but also with the objective of making sure that their presence is competitive, right, because it is a war-fighting domain going forward. And we, as a company, are moving ourselves to be more and more exposed to that government opportunity. We feel our architectures, our solutions capabilities with the meoSphere expansion with what we have in GEO assets positions us extremely well, right? And that's what's going to happen. Now I don't believe the mix is going away from Starlink or other American players. I think the overall demand in the market is expanding. You will see Starlink and Amazon and others growing as well in this segment because there is a massive demand requirement across the world, especially in allied nations to keep building that volume and capability out. So don't see it as money moving from one to the other, seeing as a major expansion of the overall opportunity and the European nations deciding that they need to have their sovereign capability as well, right? They will use the other partners, but they need their capability as well, and that works very well for us, especially with the architecture that we're building. Remember that idea that I put on the table, which is no longer an idea, it's design principle, we can give slices of our network as sovereign networks to different nations, where they control the traffic, when they control how it lands in their systems under their security capabilities. And that's a very unique thing that we are doing as a company compared to some of our other players. And look, we are leveraging and expanding our partnership network. So for example, a great company that's called Kratos, who's been an expert in defense capabilities is now a partner. We're working with them on figuring out how do we virtualize the networks that we have. How do we take our capabilities to the next level. And I think the Kratos CEO in their earnings comments mentioned SES, and I want to make sure we mentioned it as well here because those are the type of partnerships that creates this unique solutions in an open collaborative environment versus having closed systems, right, that are specific to what you can deliver. Look, in terms of CapEx guidance, and Christian will help me here for a second. We've always said that our base CapEx for the company going forward is between EUR 600 million and EUR 650 million per year, excluding IRIS2 and excluding meoSphere. And we had given guidance in the past that meoSphere plus IRIS2 would be about EUR 200 million in 2026 and then growing to EUR 400 million in subsequent years. So what are we doing with that? You can see it already in 2026, if you look at our EUR 650 million base CapEx plus EUR 200 million of IRIS2 CapEx adds up to EUR 850 million. Our guidance is EUR 700 million, to be clear. Why is it EUR 700 million and not EUR 850 million, because of the synergies that Lisa talked about, we're accelerating the network synergies. We have decided not to spend money on certain areas. We're optimizing the ground investments. We're looking at ways of moving the money away from legacy into the growth areas, right? And that is what's helping us to contain this CapEx. Now the team is going to give you more guidance in terms of future, especially as Lisa said, when we have our Capital Markets Day in the second half of the year, we are going to show you the profile of how we're going to build meoSphere, how we're going to expand it. But again, I want to reiterate, the way we're going to build meoSphere with IRIS2 being the first phase is an iterated phased approach. We want to get customers on board, want to have customers sign up before we go into larger CapEx spends, right, in a very controlled way. That is what we are going to do as a company. So I hope, Paul, that answers your question. Lisa, do you want to add anything? Elisabeth Pataki: No, I think you hit it. Christian Kern: Can I just add, Paul. Adel has shared online the various visits of the several ambassadors, which have visited us here in Betzdorf and also EU Commissioner Kubilius more recently, right? So that... Adel Al-Saleh: The European Commissioner Kubilius, who is the commissioner of Defense and Space. We had Supreme NATO Commander who was here with us. It's all public information. We had multiple defense ministries that come over. I mean, this just shows you the demand and the importance of SES in the government and defense sector. It's really important to recognize that, right? Because people see that multi-orbit architecture is absolutely a requirement. MEO plays a very important role in the resilience, the ability to move traffic, the ability to create alternatives and the ability to carry traffic for very specific missions. So that's what we're seeing in the marketplace, Paul. Paul Sidney: That's very clear. Could I sneak in a very quick question at the end, please. So we saw reports of Norway joining IRIS2 projects, even the U.K., and I think there were some headlines potentially joining as well. Does that make the project more likely? And does it potentially change economics? Adel Al-Saleh: Look, the project -- Paul, so first of all, when I say win-win, that's what I talk about economics and others, right? It's got to be right for us as a publicly listed company. And I've always been very, very vocal. And the European Commission knows our requirements, right? They know that in order for this to be a success, we have to be successful, right? We cannot have a project that burdens our financial position. So that has always been the case. It will continue to be the case. And I have much confidence that we will be able to figure out the path. And the European Commission is very committed to this project. Where you're seeing the countries joining, I believe that will continue. And I believe that you will see beyond the European Union and the European Union member states, other allied nations joining the project over time, right, given the importance, being the ability to connect to that network and expand it. And outlook, our goal is when we think about meoSphere as an example, right, we have a unique position to build out that backbone of the network with MEO part of the IRIS2 capability. We are not -- our goal is not to stop at the IRIS2 requirement because the demand is expanding. So our goal is to keep building and expanding in a phased approach based on the demand that we see in the market. So what's happening, IRIS2, and by the way, the same thing applies to Eutelsat. It gives us the opportunity as the consortium to develop the new systems, the new capabilities as the first phase and then build on it going forward, and that helps the economics significantly when you start adding incremental capabilities without having to repeat the nonrecurring expenses, if you will, that you incur when you're building a new system. Operator: The next question is coming from Halima Elyas from Goldman Sachs. Halima Elyas: I wanted to follow up again on defense. So growth has been clearly supported by changing global attitudes towards defense spend. But when do you think we will see this translate to more meaningful tailwinds? And how will it manifest? So is it most likely to be reflected in higher capacity demand? Or do you think there's potential to either accelerate or maybe expand the scope of projects like IRIS2? And then on the flip side, has there been any notable change in U.S. attitudes or spend towards European solutions over the past year? Adel Al-Saleh: Halima, thank you for the question. So let's start with the first one, right? So our government business has been growing double digit now for several years, right? And it's accelerating. We had a bump in 2025 with the U.S. government shutdown, the DOGE initiatives, which hurt us in certain areas. And on the same time, we won multiple projects that will drive the future growth. I believe with the system, we're proposing the expansion because what we're trying to do, Halima, is expand beyond communications capabilities. There is a massive demand -- and by the way, I want to make sure, again, everybody understands in the call. The demand is not driven by the current conflict. The demand for space is driven by the fact space has become a war-fighting domain, just like ground, air, sea and cybersecurity. These are the different domains of the defense organizations. Space is the domain to be treated the same exact way. So as forces think about strengthening their ground capabilities, strengthening their air capabilities, they're thinking the same way in space. So before any of these conflicts happen, that's been a decision from an architecture point of view of how to create better deterrence, better defense and better strength. And that's where European Union and other nations have decided they're going to have to significantly increase their spending in space. And that is driving the demand, right? The conflicts obviously drives spikes in demand for a certain period of time because people need the capacity and so on. So our strategy, as I described with meoSphere, is to expand beyond communications because the satellites that we will be introducing part of the next-generation MEO networks, have the real state and the power, Halima. So today, our empower satellites had less than 10 kilowatts power on the satellite. Our future satellites will have 20 kilowatts. We're doubling that. The real state of satellite, which is why I said why we like bigger satellites rather than smaller satellites is enough to have more, what we call hosted payloads to do missions beyond communications. And I described some of these missions, missile defense, missiles tracking, relay between different orders, right, slices of the network, space awareness. Those are all new opportunities for SES to enter over the next few years, and this will drive growth -- significant growth in the government sector that we currently cover today because we are not exposed to that today. With our future platforms and customers signing up will be exposed to that opportunity as well. And that is absolutely required. And I'll give you an example. Golden Dome in the U.S., which is a protective shield against ballistic and other kind of missiles. That is in billions of investments. We believe our MEO capability could be enhancing that beyond the military specific investments that will be made. The same thing, Europe, we'll be building a very similar shield for Europe, and we will be a partner and a player in that capability as well. And we're building the satellites that add this functionality. So we are very excited, right, about the opportunity going forward. And you can't think of it as because there's conflict today that demand is going. It's actually a fundamental shift because space has become a war fighting domain. Now your question second about have we seen notable U.S. spend shifts? No, we have not, right? We believe the U.S. is open to use allied capabilities. SES is positioned in the U.S. very well. We have an established capability that we've been working there for 40 years with specific clearances that's required in order to be able to participate in some of these different opportunities. So we have not seen that yet. We hope not to see it. We're proud to be an allied nation and allied company that works on both sides of the Atlantic to bring capabilities to both, of course, our home nations and European Union and those capabilities, but also in the U.S. as an allied for these forces. Operator: There are no more questions at this time. So I hand the conference back to Christian Kern for any closing remarks. Christian Kern: Thank you so much for joining today's call. I think it was a very clear message that 2025 was bringing -- was about bringing the companies together. 2026 is stabilizing it, and then we take it from there in terms of teeing it up for growth. The overall layer in terms of the defense thing has been very well reflected by our top management team. If you have any follow-up on this, please reach out to the IR team, we are there to help. And again, thank you very much for joining us today. Operator: Thanks for participating to today's call. You may now disconnect.
Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oxford Square Capital Corp. Fourth Quarter 2025 Earnings Release Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to CEO, Jonathan Cohen. Please go ahead. Jonathan Cohen: Good morning, everyone. Welcome to the Oxford Square Capital Corp. Fourth Quarter 2025 Earnings Conference Call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our CFO; and Kevin Yonon, Managing Director and Portfolio Manager. Bruce, could you open the call with a disclosure regarding forward-looking statements? Bruce Rubin: Of course, Jonathan. Today's conference call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was issued this morning. Please note that this call is the property of Oxford Square Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited. At this point, please direct your attention to the customary disclosure in this morning's press release regarding forward-looking information. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, future events and financial performance. We ask that you refer to most recent filings with the SEC for important factors that can cause actual results to differ materially from those indicated in these projections. We do not undertake to update our forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website at www.oxfordsquarecapital.com. With that, I'll turn the presentation back to Jonathan. Jonathan Cohen: Thanks, Bruce. For the quarter ended December, Oxford Square's net investment income was approximately $5.4 million or $0.07 per share compared with approximately $5.6 million or $0.07 per share in the prior quarter. Our net asset value per share stood at $1.69 compared to a net asset value per share of $1.95 for the prior quarter. During the quarter, we distributed $0.105 per share to our common stock shareholders. For the fourth quarter, we recorded total investment income of approximately $10.4 million as compared to approximately $10.2 million in the prior quarter. In the fourth quarter, we recorded combined net unrealized and realized losses on investments of approximately $18.3 million or $0.22 per share compared to combined net unrealized and realized losses on investments of approximately $7.5 million or $0.09 per share in the prior quarter. During the fourth quarter, our investment activity consisted of purchases of approximately $18 million and repayments of approximately $7.4 million. During the quarter ended December, we issued a total of approximately 4.3 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $7.9 million. On February 26, 2026, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending April, May and June of 2026. We note that additional details regarding record and payment date information can be found in our press release that was issued this morning. With that, I'll turn the call over to our Portfolio Manager, Kevin Yonon. Kevin P. Yonon: Thank you, Jonathan. During the quarter ended December 31, the U.S. loan market performance declined versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA U.S. Leveraged Loan Index decreased slightly from 97.06% of par as of September 30 to 96.64% of par as of December 31. According to LCD, during the quarter, there was some pricing dispersion with BB-rated loan prices decreasing 8 basis points, B-rated loan prices increasing 18 basis points and CCC-rated loan prices decreasing 265 basis points on average. According to PitchBook LCD, the 12-month trailing default rate for the loan index decreased to 1.23% by principal amount at the end of the quarter from 1.47% at the end of September. Additionally, the default rate, including various forms of liability management exercises, which are not captured in the cited default rate remained at an elevated level of 3.35%. The distress ratio, defined as a percentage of loans with prices below 80% of par, ended the quarter at 4.34% compared to 2.88% at the end of September. During the quarter ended December 31, 2025, U.S. leveraged loan primary market issuance, excluding amendments and repricing transactions, was $70.7 billion, representing a 27% decrease versus the quarter ended December 31, 2024. This was driven by lower refinancing and LBO activity, partly offset by higher M&A and dividend activity versus the prior year comparable quarter. At the same time, U.S. loan fund outflows, as measured by Lipper, were approximately $3.2 billion for the quarter ended December 31. We continue to focus on portfolio management strategies designed to maximize our long-term total return. As a permanent capital vehicle, we historically have been able to take a longer-term view towards our investment strategy. With that, I will turn the call back over to Jonathan. Jonathan Cohen: Thank you, Kevin. Additional information about Oxford Square's fourth quarter performance has been posted to our website at www.oxfordsquarecapital.com. And with that, operator, we're happy to open the call up for any questions. Operator: [Operator Instructions] And our first question is from the line of Erik Zwick with Lucid Capital Markets. Erik Zwick: I wanted to start with a question. You mentioned the $18 million of new investment purchases during the quarter. Curious if you could just add a little maybe detail into what you bought and what you're currently finding attractive in the market. Kevin P. Yonon: Sure. So broadly, the investments were focused on first lien loans, generally B2B loans. Going forward into this quarter, I mean, obviously, the primary market has certainly slowed down just given the volatility associated with certain things. But I think we're definitely seeing opportunities in the primary and the secondary, just given the way the markets are trading. Erik Zwick: Got it. And maybe kind of the back end of that question, if I dig in a little bit deeper. You mentioned there in the prepared comments, the distressed ratio up to -- I don't have the exact estimate, 4-point-something percent, up from 2-point something. So a market increase there. I'm wondering if, from your perspective, is that reflective of some of the volatility we've seen and concerns in the software market? If not, what else is driving that? And two, has this -- is this creating some of the opportunity for you to maybe find some good investment opportunities at lower prices today? Jonathan Cohen: The answer, I think, Erik, is yes to both questions. Certainly, the state of the software market right now, the software private credit market and the syndicated loan markets in that sector are reflecting real concern, no question about it. There's also, I think, a more general pushback against the growth in the private credit asset class that we've been seeing for the past several years. All of that is manifesting in somewhat more recently wider U.S. syndicated corporate loan spreads and lower pricing for the LSTA index. So the answer certainly from our perspective anyways is yes. Erik Zwick: That's helpful. And last one for me. Wondering if you could just describe a little bit the unrealized depreciation in the quarter, what was the primary driver there? Unknown Executive: Erik, yes, that was -- a good portion of that was the CLO equity portion of the book. As you know, it had a very challenging year-end quarter, and that was mainly a markdown of the CLO equity portion of the book. Jonathan Cohen: Principally unrealized. Operator: And with no further questions in queue, I will now hand the call back over to CEO, Jonathan Cohen. Jonathan Cohen: Thank you very much. I'd like to thank everyone on the call now, listening to this call and also everyone listening to the replay for their interest in Oxford Square, and we look forward to speaking to you again soon. Thanks very much. Operator: Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.
Operator: Ladies and gentlemen, good morning, and welcome to the SES Full Year 2025 Results Conference Call. [Operator Instructions] I will now hand the conference over to Christian Kern, Head of Investor Relations. Please go ahead. Christian Kern: Thank you, Gaya. Good morning, everyone, and thank you for joining us today. It is my pleasure to welcome you to SES Full Year 2025 Results Call on behalf of our management team. Before proceeding with the management presentation, we would like to inform you that the financial information contained in this document has been prepared under International Financial Reporting Standards. As usual, this presentation may contain announcements that constitute forward-looking statements, which are no guarantees for future business performance and involves risks as well as uncertainties. Also, certain results may materially differ from those in these forward-looking statements due to several factors. We invite you to read the detailed disclaimer on Page 2 of this presentation. The presentation is also available on our company web page. Today, I'm joined by our CEO, Adel Al-Saleh; and our CFO, Lisa Pataki, who will take you through the presentation, followed by a Q&A session. Adel, without further ado, over to you. Adel Al-Saleh: Great. Good morning, Christian. Good morning, everybody. Thank you. Good morning, good afternoon. Thank you for joining us. Look, I'm going to start our presentation before we get into the results with a little bit of an overview of the direction of travel of our network. You've probably heard us talk about our next-generation MEO in different events, and I thought it would be probably important to talk to you as analysts, investors, colleagues on this call to repeat the message and maybe clarify the direction of travel that we have as a company. So if we go to Slide #3, especially given the latest events over the weekend, I want to emphasize that our largest vertical or market opportunity is the defense sector. And what we've seen over the last several decades, a dramatic shift in the defense and how defense uses SAT communications to enhance their capabilities. So if you rewind back between 2000 and 2010, really the function of SATCOM was basically strategic long-haul pipes, so important communication links between the command center and the theaters of operation. During that period, the dominated technology was GEO, right, with very large terminals, with limited bandwidth and early steps into communication on the move. If you fast forward into 2010 and 2025, space evolved into a contested theater as adversary begin to build counterspace capabilities. So militaries had to adopt a different approach. Specifically, they started thinking about hybrid architectures, combining commercial military capabilities, they started looking at different orbits, looking at different throughput. But predominantly, the networks remain siloed. So the LEO network would be siloed from the MEO, from the GEO, from the different application and so on. But that began to evolve very, very quickly, especially in the last 3, 4 years. Now if you look at 2026 going forward, it is now very clear that space is a war-fighting domain. It is no longer a contested domain. It is a war-fighting domain, requiring superiority across all orbits. This domain is now looked at the same as they look at air, navies, cybersecurity, et cetera, et cetera. So the applications using space have begun to evolve dramatically. So if you look at the complexity of what is being done today, it's dramatically different than the past. I'll give you a couple of examples. So in the past, being able to capture images across earth and deliver them to the right hands to be able to make decisions is changing into continuous observation of earth, real-time image processing on the fleet to be able to issue commands. Missile defense systems, missile tracking like Golden Domes and European Space, Defense Agencies, that's absolutely now a requirement. And not just predicting the launch of the missile, but actually being able to acquire that launch from the beginning all the way to strike in a persistent way. And then sharing that information across multiple domains within the defense and the armies. And the third -- the last example I'll give you is this control center -- the command centers are becoming extremely complicated, extremely diverse, connecting many different aspects of data from space, from the ground to be able to compile it and be able to deliver the right level of intelligence to the folks that are in theaters. These kind of command complications require an integrated network. It requires more sophisticated capabilities in order to deal with it going forward. So if you go to the next slide, that dynamic that I just described is really shaping our direction of travel as a company. And although the slide is a little bit complicated, we're hoping to do it in a build slide, I'm going to try to explain it to you. So the first layer of space continues to be this proliferated LEO capabilities, right? And that will continue to grow. SES is not in proliferated LEO domain. We use partners to access LEOs when we need it in order to provide services to our clients. We will have our own micro LEO capabilities like quantum key distribution when we launch that constellation, but we predominantly use that as a partner network. If you look to the next layer with -- the light green layer, that's our MEO layer. And you got to keep in mind that MEO, although pictorial looks like it's between GEO and LEO, it's actually very close to LEO. It's much further away from GEO than it is from LEO, which gives it that unique capability to cover earth with less satellites, but also have an attractive latency period, which is about 130, 150 milliseconds. Our focus as a company is to continue to build that backbone of the network. And I'll come back to that in a second. And if you think about GEO, our focus in GEO will be on very specific applications where GEO continues to be the superior medium to be able to transfer data or connect people like media distribution or very specific governmental applications. So why do we like MEO? MEO is the backbone for us of this network. The future is going to be connecting all these networks to optical links. That's what we develop. So we'll be able to talk to LEOs. We'll be able to talk to GEOs. We'll be able to talk to earth. We'll be able to talk between our constellations, but also connect to other constellations to move data. It provides a high-speed backbone capability and a very attractive, resilient layer to the network that without it could be weakened. So this mesh network combined with our ground infrastructure, which is one of the largest ground infrastructures in the world, gives us that an edge and a differentiating capability to provide that multi-orbit service to our customers. So if you go to the next page, now I want to talk about what are the design principles as we evolve this meoSphere network. So first of all, when we think about MEO and the new name of the network will be meoSphere, we think big. We don't think small. We think big satellites, we think satellites that could do multiple things, we want more power on these satellites in order to accomplish some of the things that I'll talk about in a second. We also believe it's very critical. We take control over some of the supply chains that are critical for innovation and control of our destiny. So therefore, we will be doing more vertical integration as a company, creating this new layer of resilience and new layer of a backbone in space. This network will be ideal to be able to connect to the different networks to create that backbone that I keep talking about, which just opens up multiple partnerships that we have today to enhance this partnership further, but actually new partnerships for people who want to enhance their networks to drive these capabilities. It enables multi-orbit resilience for sure, right? We will be able to move signals from one layer of the network to the next layer between satellites in order to make sure we avoid jamming and we avoid direct attacks, which is happening, ladies and gentlemen. It also is ideal for the critical -- for the mission-critical applications because the next level of satellites are going to have a combination of commercial and military capabilities requiring security to be built in beyond what we currently have, mixing the military capabilities that we currently have in our military satellites with the commercial capabilities to give us that ability to drive these important missions. And the last point is really important. With the size of the satellite, with the flexibility of the satellite, we will be able to do multi-mission capabilities. The platform will always have the capability of having a communication as the foundation of the capability. But actually, there's the additional missions, the additional capabilities that the satellite will provide is a growth opportunity for us. So what are these missions? So if we go to Slide #6, these are some examples of missions that we can host on our satellites, on our meoSphere capability. Number one, data, space data relay. This is something you remember, we talked about demonstrating when we did a project with NASA and Planet Labs using RF at that point in time with not optical links to be able to move data from Planet Labs' earth observation satellites to meoSphere -- to the MEO layer and then delivering it to our customers wherever they want to deliver real time, which reduced the time of getting the signal to the right people and demonstrating that we can actually move those very, very quickly in real time. The next generation of our meoSphere will have these optical links within the satellites. The other potential hosted missions will be missile warning and missile tracking. I described that being able to build sensors on these satellites to capture capabilities, to capture things that are happening on earth. The third area, an example is being able to slice the network to provide governments a sovereign network slice of the overall network, giving them control and giving them the sovereignty that they're looking for. Of course, military communication channels and all that like X-band, Ka-military bands, UHF, that's something we'll be able to do on these satellites as well. Space situational awareness, again, not just tracking an object, but being able to connect the intelligence across the -- across space and deliver it with AI to decision-making systems to be able to track everything that's happening around us in space and combine that with our partners. Imagine the ability to combine our space situational awareness data with, for example, Starlink situational awareness, which they announced creates an incredible intelligence available for space. And of course, the last one is the AltPNT capabilities that we require in order to have more accurate positions within space and within the earth. So these are some important government missions that we will host on ourselves, and we see incredible demand for these capabilities. Our government customers are excited about this next generation of MEOs that we will be launching very, very soon. So if you go to the next page, obviously, we're working on getting this project off the ground. And we're thinking about it in a very different way compared to the traditional way of a waterfall development of creating requirements and then waiting for 5 to 7 years to be able to launch the constellation. We're going to do it in a different way. So first of all, this is going to be an iterative phased approach as we build up this capability. We're not going to do everything in one go. That's number one. Number two is we're going to use space to actually test the capabilities as they evolve. So instead of waiting and just testing in the labs and on the ground, we'll be launching missions to start testing portions of our design as it becomes available. And I'm happy to deliver, and I think we announced it earlier that our first test flight is going to be Pathfinder 1 at the end of March 2026, so the next couple of weeks, launching our bus as well as some of the payload capabilities already to be able to test it. And we have that scheduled every year until we get to a point where we're comfortable with the production of the final systems. It is also going to be a very disciplined milestone-based investment approach, both based on demand we're getting from our customers as well as the investment we'll continue to be putting in building up and scaling the capability. And all of this is going to be done with a very disciplined approach based on data and our customers' reactions. We're going to be leveraging new space capabilities and our deep experience to drive innovation. SES is well known with many firsts in the industry, many innovations that we have driven. Combining that with new space capability, their agility, their speed and their ways of development is going to be very, very helpful as we go forward. And of course, this investment that we're going to be deploying is contained in our CapEx guidance. We see meoSphere as an important evolution of the company, and we see IRIS2 being the first phase of meoSphere. And we'll talk a little bit more about IRIS2 a little bit later in the deck. So let me just end this section by going to Slide #8. So what we're doing, obviously, is we're sticking to our strategic focus of multi-orbit capability by building this next-generation MEO in a very different way than what we've done in the past, partnering with new space capabilities and leveraging the experience we have across the world. We're taking control of the supply chain to make sure that we capture our IP and our strategic advantage and keep it within the company. And with this approach, we're driving towards our North Star, which is building and evolving the company to advanced space solutions company with defense being a very important vertical within that solution capabilities. We drive solutions beyond communications, while communication continues to be a very important component of the overall portfolio. And of course, controlling supply chain and customer relationships is a very important point that we need to keep driving. So that's what I wanted to share with you before we get into actually our financials and what we're doing. And now let's get into the financials. Let's go to Page #10. So on this slide, we summarize our full year 2025 business highlights and financial performance. With the closure of the Intelsat transaction on July 17 last year, these full year 2025 results are shown on a reported basis, with Intelsat contributing roughly 22 weeks to the combined company. On this reported basis, we delivered 2025 financial performance within our financial targets with lower-than-guided capital expenditures. 2025 revenue of about EUR 2.6 billion was up 34% year-on-year with growth in all verticals. 2025 adjusted EBITDA of close to EUR 1.2 billion was up 19% growth year-on-year with a margin of 45.4%. Capital expenditure of around EUR 560 million were lower than guided, demonstrating faster-than-planned execution of our CapEx synergies. We generated EUR 229 million of adjusted free cash flow, another year of positive cash generation. Over the last 12 months, we have secured EUR 1.8 billion of renewals and new contract -- new customer contracts with the majority coming from our growth segments. This has supported our gross backlog of EUR 6.6 billion, which has been impacted by the weaker U.S. dollar and intercompany eliminations. 2025 is a milestone year for SES, with major progress and a step change in SES' scale, having combined 2 major companies with multiple platforms. We've been working on various scope changes, intercompany eliminations and some different accounting conventions. So this has been a rather complex reporting year. With the financial performance in the second half of 2025 below our initial expectations for the first year of the combined company, we're facing these challenges head on and are building a stable foundation for future growth. In terms of like-for-like financial trends, revenue was down 1.6% year-on-year and adjusted EBITDA declined around 12% year-on-year. These like-for-like trends are due to key business factors that are unchanged from what we've previously discussed. Lisa will cover those in more detail. Let's go to Page #11. Across our businesses, we integrated operations, continued to innovate and supported customers at scale as OneSES. We are a trusted partner to customers worldwide in over 130 countries as evidenced by our strong customer base and notable wins in 2025. Starting with our media business, now operating at greater scale following the Intelsat acquisition. We serve more than 2 billion people around the world and nearly 700 million households with a strong cash generation profile. We're securing long-term renewals well into the next decade. And despite industry headwinds, our strategy is clear: defend and optimize high-value neighborhoods by leveraging our industry-leading reach while expanding in market growth segments like Sports & Events. In 2025, we signed close to EUR 450 million in renewals and new business, including multiyear agreement with Sky, RTL, ORF, Telekom Srbija, Warner Bros. Discovery, Dish Mexico, Arqiva, PGA TOUR and QVC. We're winning new businesses by leveraging our combined satellite and ground network, including major new media customer in North America. We launched our new free-to-air/free-to-view offerings in Mexico and Spain, opening new markets with our compelling channel offerings. Let's now shift to our government business. We continue to see strong and growing demand for our resilient secure communication solutions from government customers around the world. We built a government solutions business of scale on both sides of the Atlantic, being a true space partner to over 60 government organizations, including European and U.S. agencies. We're well positioned to tackle the sovereign capabilities, which governments now demand with multi-orbit networks. I just described it a few slides ago. With space and defense budget increasing both in the U.S. and among NATO allies, we view the government vertical as one of the strongest growth levers over the next few years. For example, the IRIS2 program continues to progress well through Rendez-Vous 1, reinforcing SES as the European Commission's trusted partner for its flagship sovereign connectivity network. IRIS2 will become Europe's multi-orbit network of choice and supports the future expansion of our differentiated multi-orbit architecture, enabling profitable growth from 2030 onwards. Another important milestone was the announcement that SES and Luxembourg government will develop and launch GovSat-2, the second satellite under the LuxGovSat public-private partnership. We also extended a long-term hosted payload contract with Australian Defense Force. The French Navy's aircraft carrier, Charles de Gaulle, utilized SES O3b mPOWER services during the Clemenceau mission. In the U.S., we secured important new contracts, including being selected as 1 of 5 companies on the U.S. Space Force's $4 billion Protected Tactical SATCOM global PTS-G IDIQ contract and a strategic award from the Defense Innovation Unit for secure integrated multi-orbit networking. These strategic wins highlight our commitment to innovation and growth in the government sector. Turning to aviation. Millions of passengers rely on SES multi-orbit multi-band connectivity that delivers reliable, consistent performance in the air and on the ground. We're winning new airline customers around the world who are choosing SES because of our clear differentiators. These include our electronically steered antenna solution we call ESA, which uniquely enables access to GEO and LEO orbits, delivering broad coverage, low latency and unmatched resilience. We also offer multi-band flexibility across both Ku- and Ka-bands and solutions tailored for both narrow-body and wide-body aircraft. Our flexible commercial models further strengthen our value proposition. In 2025, our aviation business was supported by important customer wins and ramp-up in equipment installations. 16 airlines have committed to our multi-orbit ESA solution on more than 1,000 aircraft with many awards secured in recent months, including American Airlines, Air Canada, avianca, JAL, Skymark, Royal Brunei and others. While competitive pressure from LEO providers remains, the market continues to support multi-providers with differentiated offerings. Shifting to maritime. We are the leading provider of connectivity at sea, keeping passengers and cruise connected, informed and competitive in fast-moving world. We're confident in our maritime platforms, which position us well despite facing pressures for some partners moving to LEO solutions. Our strategy is focus, defend and rationalize supported by selective investments. Our direct maritime business remains strong and resilient despite mega LEO's entry into the market. We secured renewals with multiple major cruise lines and continue to serve 5 of the 6 global leaders. In 2025, we supported the largest cruise fleet transition from GEO to SES Cruise mPOWERED and continue to see strong demand, for example, from MSC, Virgin and other major cruise lines. Our FlexMaritime platform performs well and connects over 13,000 vessels across the world. Finally, our fixed data business. Fixed data saw intense competition in 2025. We have taken several actions to transform the business and focus in areas where we have market-leading offerings and the right to win. Our fixed data business serves 8 of the world's top 10 mobile operators and numerous global energy companies. We expanded digital inclusion in Brazil with Telebras and made meaningful progress in Africa, expanding 200 Africa mobile network sites, reaching 500,000 people. We won additional business with Orange across multiple countries and closed our first SES Intelsat combined fixed data deal in Chad. In recognition of our impact in Africa, we're honored with a Changing Lives Award at Africa Tech Fest for connecting schools in South Sudan and Uganda. As you can see, we're creating a stronger, more agile, more competitive SES, one built to lead across orbits, markets and technologies. Let's go to Slide #12. This slide highlights our fast-track synergy progress and integration efforts. We began delivering synergies from day 1. The integration of the 2 businesses is well on track. The organization design and structure is complete. Leadership is in place on all levels of the company and the new operating model across the combined business is established, enabling faster decisions and clear accountability as one company. Leveraging these operational changes, we're progressing well with fast tracking our initial synergy plan. On OpEx, we're crystallizing synergies more rapidly and are taking well -- and tracking well towards the EUR 210 million annual run rate target. Both labor and nonlabor savings are already flowing through with contracts rationalized, office footprints consolidated, automation scaled, procurement efficiencies captured and IT consolidation progressing to plan, always delivering these efficiencies with utmost care and transparency to support our teams as we align on the needs of our scaled business operations. On CapEx, we're also fast tracking the annual synergy run rate of EUR 160 million. We're confident to achieve this target sooner than initially planned to focus on our growth priorities, smarter asset use, non-replacement of certain satellites as well as rationalizing of networks and ground infrastructure. Already in 2025, we're able to save around EUR 100 million in CapEx versus the midpoint of our guidance. Our labor costs were down 7% on a like-for-like basis in 2025, accelerating the decline in fourth quarter. As you can see, we are executing with discipline and precision on our synergy targets. This positions us well to unlock the full value of OneSES. With this, I'll hand over to Lisa, who will share with you more details of our 2025 financial performance. Elisabeth Pataki: All right. Thank you, Adel. Good morning, everyone. Before I begin my remarks on the financial performance of the combined company, I'd like to remind you that our full year 2025 press release, which can be found on our company website, includes supplementary financial information with like-for-like revenue per vertical and adjusted EBITDA at the group level as if the Intelsat transaction had consolidated from the 1st of January 2024. We hope this additional disclosure helps you better understand the underlying performance of the combined business and complements your financial modeling going forward. Let's turn to Page 14 for our financial highlights. Overall, as Adel mentioned, both revenue and adjusted EBITDA were in line with the outlook we provided last quarter. I'll start by walking through our company results on both a reported basis as depicted throughout the presentation as well as on a like-for-like basis at constant foreign exchange rates for comparison purposes. Reported revenue was EUR 884 million for the fourth quarter and EUR 2.6 billion for the full year, resulting in a full year growth rate of 33.9% when compared to the same period last year. On a like-for-like basis, with constant foreign exchange rates, full year 2025 revenue was down 1.6% compared to 2024. We saw lower revenue in our fixed business as well as in media, partially offset with growth in our aviation and government businesses. As previously discussed, the fixed data business has been facing a challenging competitive environment. And within Media, the decline was driven by structural headwinds and the effects of a Brazilian customer bankruptcy. On reported adjusted EBITDA, Q4 was EUR 358 million, resulting in EUR 1.2 billion for the full year 2025, showing growth of 19.1% year-over-year with margins of 40.5% for Q4 and 45.4% for 12 months. On a like-for-like basis, full year 2025 adjusted EBITDA was down 12.1% compared to 2024, consistent with the outlook we provided on our last earnings call. The decline was driven by a few factors in line with what we've previously discussed. First, within our aviation business, we delivered over 450 electronically steered antennas in 2025, which is an important milestone for this business, and it's worth mentioning that we have another 600 ESAs still to be installed. This revenue is initially profitability diluting before enabling higher-margin service revenue after installation. Additionally, as expected, we did see some impact from timing differences between onboarding and decommissioning certain airline customers. Next, the Intelsat IS-33e anomaly, which occurred in the fourth quarter of 2024, resulted in higher third-party capacity costs in 2025 as affected customers were retained. And in Government, we had some timing impact mainly due to the U.S. budget delays at the start of last year, contract rationalization by the U.S. Department of Government Efficiency, otherwise known as DOGE and some postponements of large contracts, in part due to the U.S. government shutdown in late 2025. The good news is these awards are merely timing issues, and several are expected to materialize this year, underpinning our confidence in future growth. Lastly, with structural declines in media and difficult market conditions within the fixed data business, margins are impacted by the change in overall company mix. We expect the decline in Media to improve going forward. And on fixed data, we are focused on restructuring the business by securing the most value-additive deals, supported by disciplined capacity allocation. Moving now to Page 15. I'll discuss in more detail the top line financial performance of our vertical segments. Media's reported full year 2025 revenue was EUR 977 million for the year, up 7.9% over prior year as inorganic growth more than offset anticipated segment contraction in this business. On a like-for-like basis, Media was down 12.6%, driven by structural declines with capacity optimization in mature markets, standard definition channel switch-off and the full Q2 to Q4 impact of a Brazilian customer bankruptcy. Despite the year-over-year decline, the media business ended the year with a solid backlog of EUR 3 billion and serving close to 2.3 billion viewers worldwide. As the company's largest segment, Media carries strong margins, resulting in solid cash flow. In 2025, this business closed on roughly EUR 450 million of new business and long-term renewals, which span into the next decade, reinforcing customer confidence in our solutions. It is important to note that although global TV viewing is evolving and linear consumption is structurally declining, we expect the trend in our media business to improve. Free-to-air, free-to-view and Sports & Events remain resilient, while satellite continues to provide most efficient and reliable access in many remote regions. Moving now to Page 16. Our Networks verticals comprised about 60% of total company revenues for the full year 2025, with reported revenue up 55% year-over-year. On a like-for-like basis, Networks revenue increased by 6.6% versus the prior year, representing the fourth consecutive year of growth for Networks, driven by increases in both the Aviation and Government segments. Within Networks, the government business had revenues of EUR 726 million for the full year, up 47% over 2024. On a like-for-like basis, Government grew 17.3% year-over-year, driven by demand in European global governments and the IRIS2 program. This growth was partially offset by timing impacts and budget cuts within the U.S. government portion of the business, as I mentioned earlier. As we look ahead, we expect growth in both the U.S. and global government segments, driven by rising demand for our secure multi-orbit resilient and sovereign solutions, particularly meoSphere. Geopolitical tensions and shifting defense priorities, especially in Europe, are accelerating government investment in sovereign space capabilities and robust communications infrastructure. With proven multi-orbit solutions and a strong track record serving European, U.S. and allied global governments, SES is well positioned to capture the surge in demand. Our aviation business continues to show solid growth, supporting around 3,000 aircraft tails, thanks to our strong pipeline of ESA antenna installs and subsequent service revenues. For the full year 2025, Aviation revenue on a reported basis stood at EUR 382 million, more than doubling the size of the business. On a like-for-like basis, this segment has seen a 29% growth versus prior year with continued momentum in securing global airline customers and commercial traction around our multi-orbit ESA antenna. This strong commercial momentum supported by new installs and subsequent service revenues underpins our future revenue growth and highlights the strength of our value proposition in a competitive market. And on our fixed and maritime business, reported revenues totaled EUR 530 million for the full year. On a like-for-like basis, revenue declined 15% due to competitive headwinds, primarily in our fixed data business. We continue to navigate these headwinds with a disciplined approach, which includes rationalizing and prioritizing capacity in our growth segments. In our Maritime segment, demand for MEO capacity remains high, evidenced by solid cruise renewals as well as in commercial shipping, where we serve more than 13,000 ships globally with our Flex platform. Finally, Networks combined gross backlog stood at EUR 3.6 billion at the end of 2025, having secured close to EUR 1.4 billion of new business and renewals last year with a strong Aviation and Government pipeline as we look ahead. Our solid backlog and robust pipeline underpin our financial outlook and future growth momentum, reflecting sustained market demand for our multi-orbit solutions globally. Now let's turn to Page 17 for a more detailed view of our capital allocation priorities and our debt maturity profile as of December 2025. Our combined like-for-like adjusted net debt to adjusted EBITDA ratio at the end of 2025 stood at 3.9x. This includes cash and cash equivalents of EUR 674 million, excluding EUR 401 million of restricted cash, which is related to the SES-led consortium's involvement in the IRIS2 program. It's important to note that we remain committed to deleveraging and returning to investment-grade metrics while meeting our near-term debt obligations. We maintain a solid liquidity position supported by prudent planning and stable market access, which provides us with flexibility for future financing decisions. In terms of our debt maturity profile, we have EUR 1.3 billion coming due this year, including EUR 525 million of hybrid notes. The current debt portfolio carries a weighted average cost around 4% with approximately 80% of SES debt at fixed interest rates. Furthermore, the weighted average maturity of our debt facilities stands at approximately 5 years, providing a solid foundation for financial flexibility and long-term planning. In terms of capital allocation priorities, as we've said before, our objective is to pay down debt to 3.0x or below net leverage. We continue to make solid progress in our insurance settlement discussions related to the first 4 mPOWER satellites. In 2025, we successfully collected approximately USD 189 million or EUR 164 million. We'll continue to provide updates as the last settlement negotiations progress. We continue to invest in our MEO capabilities and as Adel mentioned, our next-generation multi-mission MEO network, meoSphere, supported by new space innovators. This is underpinned by strong financial discipline to drive sustainable growth with a focus on new space technologies while transforming our approach to capital deployment. Capital expenditures for 2025 totaled EUR 559 million on a reported basis and EUR 707 million on a like-for-like basis, primarily reflecting milestone achievements in the mPOWER satellite program. The EUR 559 million is below our prior outlook as a result of our continued focus on CapEx synergy delivery as we work towards optimizing our fleet and ground infrastructure. Further, the company has introduced a dedicated CapEx task force at the Board level designed to enhance oversight and ensure disciplined capital allocation aligned with long-term strategic objectives. SES continues to be sector-leading in shareholder returns. We paid the interim 2025 dividend of EUR 0.25 per A share and EUR 0.10 per B share in October of last year. We expect to follow this with the final 2025 dividend of EUR 0.25 per A share and EUR 0.10 per B share to be paid to shareholders in April 2026, subject to shareholder approval at the upcoming Annual General Meeting on April 2. As we've said before, once the company meets its net leverage target, at least the majority of future exceptional cash flows of the combined company will be prioritized for shareholder returns. We remain focused on improving the company's financial metrics as we look ahead. Our priority continues to be deleveraging with a return to investment-grade metrics while being selective and disciplined as we pursue opportunities to drive growth, focusing on investments where returns are clear and accretive. Slide 18 outlines how our disciplined financial management strategy supports long-term value creation for shareholders. 2025 was a pivotal year for us. We began integrating 2 major companies, rolled out best-in-class processes, initiated the consolidation of our ERP systems and strengthened compliance with SEC-aligned controls. These actions accelerate decision-making, improve data quality and help us capture synergies faster. We remain focused on disciplined capital deployment, ensuring every investment aligns with our strategic priorities. We continue to tightly manage discretionary spending through automation, labor arbitration, cost efficiency initiatives and synergy delivery. These actions will structurally lower our cost base and drive margin improvement. Cash flow continues to be a core pillar of our value creation strategy. We have further enhanced our cash discipline with tighter integration of cash metrics into operational decisions. Alongside disciplined capital allocation and focused working capital initiatives, these actions are driving more consistent and sustainable cash generation. Together, these actions reinforce our capacity to invest, drive profitable growth and deliver attractive returns. And finally, I want to thank the entire SES team for their dedication and exceptional execution throughout this complex integration. And with that, I'd like to hand it back to Adel for his closing remarks. Adel Al-Saleh: Thank you, Lisa. I echo your thanks to the team. It's been a heroic effort, right, bringing the 2 companies together and getting the results and getting the financial statements and all that stuff. Okay. Let's go to Page #20. I'd like to present our 2026 financial outlook. After a challenging 2025, we're expecting our business to stabilize in 2026. Some of the headwinds we faced last year are likely to continue into the first half of 2026, but we're executing firmly on our initiatives to offset their impact. This positions us well for the next phase, returning to sustainable growth. In 2026, we will accelerate integration, execute on synergies, grow in key markets and continue innovating across our global multi-orbit architecture. As such, as on a like-for-like basis, with a full year consolidated Intelsat, we expect both revenue and adjusted EBITDA to be stable as compared to 2025 on a constant FX basis. As a reminder, 2025 like-for-like numbers are shown at reported rates of EUR 1.12 per U.S. dollar exchange rate and more recent rates are in the EUR 1.18 to EUR 1.19 range. As we continue to fast track our CapEx synergy delivery, 2026 capital expenditures at the euro-U.S. exchange rate of 1.2 is expected to be around EUR 700 million. This will include IRIS2, which is the first phase of meoSphere. This is around EUR 100 million lower than our prior guidance. Our network of the future, meoSphere, supported by new space innovators and IRIS2 are part of this CapEx guidance. A quick update on IRIS2. SES is currently progressing through Rendez-Vous 1 of the IRIS2 program, working closely with the European Commission and our SpaceRISE partners to validate project costs, technical requirements and delivery time line. SES remains fully committed to the European Union's vision for a sovereign secure and competitive space-based connectivity infrastructure. The project -- I'm sorry, the project must work for both, the European Commission and the SpaceRISE consortium. We have clear objectives on how to make that happen. As the lead member of the SpaceRISE consortium, SES collaborates with all partners to ensure the timely and successful delivery of IRIS2. Let me also give you a quick update on the well-advancing C-band process. The draft notice of proposed rulemaking, also known as NPRM was published by FCC last December and was followed by a round of stakeholder comments. SES filed its comments on January 20 and reply comments on February 18, supporting FCC's proposal for upper C-band clearance. SES remains fully committed to collaborating with FCC and all stakeholders to identify and implement the most effective technical solution that delivers mutual benefits for all parties involved. It is FCC's stated intention to auction up to 180 megahertz of spectrum in the upper C-band. The One Big Beautiful Bill requires the FCC to complete a system of competitive bidding for at least 100 megahertz in the upper C-band no later than July 2027. FCC ruling is expected in the second half of 2026. This process continues moving on an accelerated time line, and we'll keep you updated accordingly. Before moving to Q&A, I would like to conclude today's presentation on Page #21. Our vision is building a leader in space-based solutions. 2025 was a foundational year with the integration of a new company. Our focus was in getting the basics right and building a platform for the future that is scalable. Operationally, we're strengthening the network as we start building and scaling our multi-orbit next-generation network with meoSphere, building on our success of O3b mPOWER constellation and supported by new space innovators. During 2025, O3b mPOWER Satellites 7 and 8 entered service and more recently, Satellites 9 and 10 started providing much needed capacity. The launch of Satellite 11 to 13 is on track and planned for second half of 2026. The year 2026, it's not just the continuation of integration. It is for us, the acceleration of the new SES, building an industry leader. We're looking to stabilize the business and prepare it to grow by reshaping our portfolio to concentrate on the markets where SES has the right to win with customer-driven solutions, relentless focus on operational excellence and financial strength underpinned by synergy delivery. As we enter 2026, we'll move with momentum, accelerating integration, executing on synergies, growing in key markets and continue innovating across our global multi-orbit architecture. Through this momentum, we're positioning SES to operate at a new scale and lead in business performance, innovation and expansion. We're focused on delivering differentiated end-to-end capabilities across our segments as a global space solutions company. Our vision is clear: to lead the next chapter of space solutions industry, driving innovation, sustainable expansion and compelling value creation for both shareholders and our customers. With this, we're now ready to take your questions. Operator: [Operator Instructions] The first question is coming from Aleksander Peterc from Bernstein. Aleksander Peterc: I just have a couple, please. So first one is on the margin outlook for the current year, presumably in '26, you have a lower impact from the IS-33 failure that may have had an impact on Intelsat side of the operations in '25. So I would assume this would be a tailwind also equipment revenue was quite high in '25. Is that coming down? And you also have synergies that are already in play and will accelerate. So I'm just wondering what are the headwinds here to the margin for you to predict a flat year-on-year margin. That will be the first one. And then the second one, just very briefly, if you could tell us anything new on the upper C-band's process in terms of time line and amount of spectrum do you think you -- that could be in play here? Are we still talking about 160 megahertz as being the base case scenario here? Elisabeth Pataki: Yes. So I'll start with the margin outlook for '26 and then hand it over to Adel on the C-band. So EBITDA is stable from '25 into '26 with stable revenue while synergies are on track. So the reason that you don't see all of the synergies drive the growth in 2026 adjusted EBITDA yet is really driven by the company mix across the verticals. So as you noted, we still have strong equipment sales going through the aviation business. Maybe a way to think about it is we've got about 40% of that business is in terms of equipment sales. We ramped the ESA antenna installation significantly in the second half of 2025. And we still have quite a bit of equipment sales going into aviation into 2026. Also, we do have a bit of a mix dynamic when it comes to some of our highly profitable businesses like media, which is in a structural decline, with the fixed business -- fixed data business that is also declining that we've taken active steps to rationalize how we're performing in that business and streamline things, make sure that we're allocating capacity over into the right areas. So if you kind of look at it from a mix perspective, we are offsetting some of that decline with synergies. We're well on track when it comes to synergies, and we're feeling very good about our performance. But overall, given where we're at, we're stable on both revenue and EBITDA in 2026. Adel Al-Saleh: Great. Thank you, Lisa. And Alexander, just to clarify, the IS-33 third-party capacity is still in our numbers. On a compared basis, obviously, it gives us a little bit relief, right, because we didn't have it in 2025 compared to 2024. So that gives us a little bit of a relief. But it's still in there, and we're working hard to move that traffic on fleet, but given the demand for our fleet, it's not so straightforward, right? As soon as we find the capacity to move it, we will do that. And by the way, the equipment -- I mean one thing we need to keep highlighting is this equipment headwind we have from airlines is translating into a service revenue. And we see it. So for example, one of the large airlines that did install over 400 kits in 2025 when we look at their margins in 2025 installation, if you look at their margin in 2026, it is significantly better. But as Lisa said, because of the success of sales, we have a good backlog of more than 600 terminals to install in the year. But so those dynamics continue. Look, on the C-band, I mentioned it already, it's progressing very, very well. The replies to the comments have now closed. We expect now FCC to move in second half of 2026 to issue their ruling. FCC has clearly said they want to go as high as possible up to 180 megahertz, Alexander, you've seen in our comments, we would like them to go up to 160 megahertz leaving some C-band for very specific applications that we think will be beneficial. But as I said, we are working closely with FCC and we will support them with their objectives, ensuring that our customers get the services that they need to have. So it's progressing. It's picking up speed actually. Operator: The next question is coming from Roshan Ranjit from Deutsche Bank. Roshan Ranjit: I've got 2 questions, please, and perhaps following up on the previous around the synergies. Now clearly, Lisa, you're very confident on that progression. I think that's been clear from day 1. Now you're talking about fast tracking. So if I think about what you previously said, I think 70% of the run rate by year 3, I suppose just to give a sense of how fast track this is. And given that the run rate should be achieved faster. Should we be thinking about an NPV higher than the 2.4 or are there kind of associated higher costs and maybe moving a bit faster and extracting those synergies? And the second question is around the midterm. Now I know you did comment at Q3 stage on those midterm targets because of the many moving parts. Is that still the case now? And when can we expect any details around the midterm targets within the integrated group. Elisabeth Pataki: Yes. So sure. So on the synergies, if I take that one first, we did fast track the execution of some of the key labor synergies early in the first 6 months of this integration. Obviously, as you work through those things, they are hard decisions to take. But as Adel mentioned in his prepared remarks, we took those decisions quite quickly. It's very important for us to have been able to stabilize the organization, and that did result in quite a number of our employees exiting the organization. Now at the same time, we've taken a very hard look at optimizing our fleet, and that includes satellites, satellites that we have on order and our ground infrastructure. To make decisions on that, it does take a bit of work. So we've started -- we've accelerated our process in terms of making those decisions. And I think you'll expect to hear some more things from us probably within the first 2 quarters of this particular year. So all in all, we are completely on track with respect to synergies. I don't anticipate that we are going to increase our expectation of what we're going to accomplish for synergies. It's just that we're going to try to execute those things as quickly as we possibly can. And then in terms of midterm guidance, obviously, 2025 was a milestone year for SES. It was a year of major progress, step change in the company's scale, decisive actions while integrating Intelsat, we've been delivering on our synergies since day 1. Some of those things, like I said, are under rigorous scrutiny. We're putting in place some of the ground rules for how we operate a business and who make investment decisions going forward. We are in the middle of the IRIS2 Rendez-Vous 1 process. So we expect to have more clarity as we round out that process. We're also going to host the Capital Markets Day later this year. And at that point in time, we'll be better prepared to give more midterm guidance. Adel Al-Saleh: And we look forward to that, right? Elisabeth Pataki: We look forward to that. We absolutely look forward to that. Operator: The next question is coming from Ben Rickett from New Street Research. Ben Rickett: I had 2 questions, please, if possible. Firstly, just to help with the sort of cash flow modeling for 2026. Can you say what we should be expecting in terms of lease expense? And also, I think there was some noncash EBITDA Intelsat. If you can quantify what that would be in 2026? And then second question, just on the media revenue trends. So in the second half, they were down 16% year-on-year. Is there any one-offs within that? Or I mean, obviously, you're impacted by Brazil. But I mean are you still expecting the midterm trends there to be mid-single-digit decline? Or could that be a bit worse now? Adel Al-Saleh: Then that was on the media. The last part was on the media, right? Ben Rickett: Exactly, on the media revenue. Adel Al-Saleh: Yes, it wasn't decline in 16%, it was about 12%, but we got it. Elisabeth Pataki: Okay. Yes. So cash flow. So 2026 cash flow, fairly from a lease expense perspective, noncash EBITDA perspective, fairly stable from what we've communicated previously, just off the top of my head, and you'll just have to check the press release, but noncash EBITDA is around EUR 200 million. We expect that to decline about EUR 20 million to EUR 30 million each year as we go forward. And then on some of the one-offs, I think as you know, every year, we have a number of one-offs. So I don't expect 2026 to be any different than 2025 at this point. It's fairly stable when we look at one-offs year-over-year. We are going to be quite happy to have the Brazilian activity behind us at this point going into 2026. So while media declined 12.6% from '24 into '25, we do expect that decline to kind of taper off a bit in 2026. Adel Al-Saleh: And just to add to that, Lisa. So Ben, we do expect media to be back to where we talked about, which is kind of a mid-single-digit decline. That's the model, right? And we see it now coming back to normal in 2026 after this bump that we had in 2025 was what Lisa described. Ben Rickett: That's great. Just on the first question, you can't say anything about the lease expense you're expecting for 2026? So I know Intelsat was quite significant lease expense. Elisabeth Pataki: I don't expect any changes between '25 and '26. Adel Al-Saleh: Can we follow up with Ben on it? Ben, we can follow up with you on that. But, we don't see anything abnormal happening in 2026. So what is it? Is it decline? Yes, it's going to -- the team here is saying it's going to be going down. But let the team follow up with you to give you the exact number. Operator: The next question is coming from Nick Dempsey Barclays. Nick Dempsey: I've got 3 left, please. So first of all, where could you see a help to your revenues this year from what has been happening currently in the Middle East this weekend? Of course, the U.S. military always takes capacity with a view to having flex to conduct operations. But are there areas where you could achieve extra services revenues or could this situation help you to fill SES 9 and 10 more rapidly? Second question, you said I think you're expecting a ruling on C-band in the second half '26, just so that I understand what we're talking about, do we mean that in that time frame, the FCC would talk about how much satellite operators would be paid to clear a specific amount of space in the band. Is that exactly what we mean by a ruling? And then on risk weight, you talked about the Rendez-Vous. Is everything on track in terms of timing as you'd hoped a year ago? Are there any risks that this project takes longer and could end up costing more? Adel Al-Saleh: Very good. Well, thank you, Nick. Look, a couple of things. Let me start with the first question, right? So it's very difficult for us to comment on what we're going to be able to do in conflict scenarios, right? However, the demand for our services continues to surge. And we have multiple capabilities and multiple contracts, both with NATO and the U.S. government and the European Commission that is able to use that capacity when they need it. And when they do, and there's a search, there's obviously an opportunity for us to deliver better performance in our government business. It's also important to mention that although the U.S. had headwinds in 2025, the ones that Lisa explained and the one we talked about in November last year, the European business and the global business had a fantastic year with double-digit growth. And that will continue. So we see that happening going forward. So I'm not giving you the exact answer, but the outlook is positive and is accelerated with conflicts, but not even without conflicts, the buildup of sovereign capabilities is now a big priority for many nations and continues to be an important element of Space Force activities. Look, on the C-band ruling, so what we expect when the ruling comes out, is FCC to decide how are they going to handle incentive payments and reimbursement payments for relocation costs. And as you've seen from our filings and filings of many, many others, there is big support to follow the same process that was used with what we call for C-band 1.0 to the final hearing, right, with how the incentive payments are calculated and who is incented as well as the relocation costs that need to be reimbursed. So we expect when the ruling comes out that FCC would clarify those elements of the ruling, right? And they can't really predict exactly what FCC will do, but that is expected to be part of the ruling. And then the final point on Rendez-Vous 1, yes, things are progressing, working very, very hard as we adjust the solution with the technical results and the outputs that we have from all the testing and the costing that we have done. And as I said, look, this is not something we want to rush, right? We want to make sure we do it at the pace that's required to ensure that it's a win-win. We are not going to do a project that's a lose-lose or lose-win. It has to be a win-win. And therefore, we're working diligently with full commitment to the commission and the objective of building a European sovereign capability. And we're excited about, right? Because that whole architecture of IRIS2 is exactly what we've been pitching to the world, a multi-orbit architecture with connections between the satellites and different orbits with resilience. And obviously, it's an enablement for our meoSphere ambition to be the first phase of that project. So that's how it's going, Nick. I hope that answers your questions. Operator: [Operator Instructions] The next question is coming from Paul Sidney from Berenberg. Paul Sidney: Two questions as well, please, if I may. Firstly, just sort of building on the discussion we've been had on the call and I think following on to Nick's question on government. Clearly, very rapidly evolving geopolitical situation we're seeing. But is there also -- are we starting to see a mix shift away from Starlink and towards yourself other non-U.S. satellite networks? I understand obviously government appetite demand is growing very fast. But there also that mix shift that we're seeing, if that's starting to happen? And then just a question, at least on the CapEx guidance. If I understand rightly, it's sort of underlying EUR 500 million now ex IRIS2 components. Is that the sort of run rate we should expect going forward? I know you'll update us later in the year and give us more detail. But again, just building on all the CapEx discussion we've been having on the call so far. Is that EUR 500 million now a bit more realistic than the EUR 600 million to EUR 650 million? Adel Al-Saleh: So Paul, look, the -- keep in mind, look, the conflict that we're seeing today clearly accelerates and drives demand in short term. However, the macro dynamics are such that the requirement and the acceleration of space demand has been happening before these conflicts, and it's happening at scale. And it's because, as I described in the beginning of the presentation, space is now a war domain. It's a war-fighting domain, right? It's no longer a contested domain. There is an acceleration across all nations around the world, especially the United States and European Union to build up these capabilities at scale. And it's part -- of it is being able to build your own sovereign capabilities. Europe is looking at space as part of their NATO objectives and how to reach the NATO levels of spend that is required but also with the objective of making sure that their presence is competitive, right, because it is a war-fighting domain going forward. And we, as a company, are moving ourselves to be more and more exposed to that government opportunity. We feel our architectures, our solutions capabilities with the meoSphere expansion with what we have in GEO assets positions us extremely well, right? And that's what's going to happen. Now I don't believe the mix is going away from Starlink or other American players. I think the overall demand in the market is expanding. You will see Starlink and Amazon and others growing as well in this segment because there is a massive demand requirement across the world, especially in allied nations to keep building that volume and capability out. So don't see it as money moving from one to the other, seeing as a major expansion of the overall opportunity and the European nations deciding that they need to have their sovereign capability as well, right? They will use the other partners, but they need their capability as well, and that works very well for us, especially with the architecture that we're building. Remember that idea that I put on the table, which is no longer an idea, it's design principle, we can give slices of our network as sovereign networks to different nations, where they control the traffic, when they control how it lands in their systems under their security capabilities. And that's a very unique thing that we are doing as a company compared to some of our other players. And look, we are leveraging and expanding our partnership network. So for example, a great company that's called Kratos, who's been an expert in defense capabilities is now a partner. We're working with them on figuring out how do we virtualize the networks that we have. How do we take our capabilities to the next level. And I think the Kratos CEO in their earnings comments mentioned SES, and I want to make sure we mentioned it as well here because those are the type of partnerships that creates this unique solutions in an open collaborative environment versus having closed systems, right, that are specific to what you can deliver. Look, in terms of CapEx guidance, and Christian will help me here for a second. We've always said that our base CapEx for the company going forward is between EUR 600 million and EUR 650 million per year, excluding IRIS2 and excluding meoSphere. And we had given guidance in the past that meoSphere plus IRIS2 would be about EUR 200 million in 2026 and then growing to EUR 400 million in subsequent years. So what are we doing with that? You can see it already in 2026, if you look at our EUR 650 million base CapEx plus EUR 200 million of IRIS2 CapEx adds up to EUR 850 million. Our guidance is EUR 700 million, to be clear. Why is it EUR 700 million and not EUR 850 million, because of the synergies that Lisa talked about, we're accelerating the network synergies. We have decided not to spend money on certain areas. We're optimizing the ground investments. We're looking at ways of moving the money away from legacy into the growth areas, right? And that is what's helping us to contain this CapEx. Now the team is going to give you more guidance in terms of future, especially as Lisa said, when we have our Capital Markets Day in the second half of the year, we are going to show you the profile of how we're going to build meoSphere, how we're going to expand it. But again, I want to reiterate, the way we're going to build meoSphere with IRIS2 being the first phase is an iterated phased approach. We want to get customers on board, want to have customers sign up before we go into larger CapEx spends, right, in a very controlled way. That is what we are going to do as a company. So I hope, Paul, that answers your question. Lisa, do you want to add anything? Elisabeth Pataki: No, I think you hit it. Christian Kern: Can I just add, Paul. Adel has shared online the various visits of the several ambassadors, which have visited us here in Betzdorf and also EU Commissioner Kubilius more recently, right? So that... Adel Al-Saleh: The European Commissioner Kubilius, who is the commissioner of Defense and Space. We had Supreme NATO Commander who was here with us. It's all public information. We had multiple defense ministries that come over. I mean, this just shows you the demand and the importance of SES in the government and defense sector. It's really important to recognize that, right? Because people see that multi-orbit architecture is absolutely a requirement. MEO plays a very important role in the resilience, the ability to move traffic, the ability to create alternatives and the ability to carry traffic for very specific missions. So that's what we're seeing in the marketplace, Paul. Paul Sidney: That's very clear. Could I sneak in a very quick question at the end, please. So we saw reports of Norway joining IRIS2 projects, even the U.K., and I think there were some headlines potentially joining as well. Does that make the project more likely? And does it potentially change economics? Adel Al-Saleh: Look, the project -- Paul, so first of all, when I say win-win, that's what I talk about economics and others, right? It's got to be right for us as a publicly listed company. And I've always been very, very vocal. And the European Commission knows our requirements, right? They know that in order for this to be a success, we have to be successful, right? We cannot have a project that burdens our financial position. So that has always been the case. It will continue to be the case. And I have much confidence that we will be able to figure out the path. And the European Commission is very committed to this project. Where you're seeing the countries joining, I believe that will continue. And I believe that you will see beyond the European Union and the European Union member states, other allied nations joining the project over time, right, given the importance, being the ability to connect to that network and expand it. And outlook, our goal is when we think about meoSphere as an example, right, we have a unique position to build out that backbone of the network with MEO part of the IRIS2 capability. We are not -- our goal is not to stop at the IRIS2 requirement because the demand is expanding. So our goal is to keep building and expanding in a phased approach based on the demand that we see in the market. So what's happening, IRIS2, and by the way, the same thing applies to Eutelsat. It gives us the opportunity as the consortium to develop the new systems, the new capabilities as the first phase and then build on it going forward, and that helps the economics significantly when you start adding incremental capabilities without having to repeat the nonrecurring expenses, if you will, that you incur when you're building a new system. Operator: The next question is coming from Halima Elyas from Goldman Sachs. Halima Elyas: I wanted to follow up again on defense. So growth has been clearly supported by changing global attitudes towards defense spend. But when do you think we will see this translate to more meaningful tailwinds? And how will it manifest? So is it most likely to be reflected in higher capacity demand? Or do you think there's potential to either accelerate or maybe expand the scope of projects like IRIS2? And then on the flip side, has there been any notable change in U.S. attitudes or spend towards European solutions over the past year? Adel Al-Saleh: Halima, thank you for the question. So let's start with the first one, right? So our government business has been growing double digit now for several years, right? And it's accelerating. We had a bump in 2025 with the U.S. government shutdown, the DOGE initiatives, which hurt us in certain areas. And on the same time, we won multiple projects that will drive the future growth. I believe with the system, we're proposing the expansion because what we're trying to do, Halima, is expand beyond communications capabilities. There is a massive demand -- and by the way, I want to make sure, again, everybody understands in the call. The demand is not driven by the current conflict. The demand for space is driven by the fact space has become a war-fighting domain, just like ground, air, sea and cybersecurity. These are the different domains of the defense organizations. Space is the domain to be treated the same exact way. So as forces think about strengthening their ground capabilities, strengthening their air capabilities, they're thinking the same way in space. So before any of these conflicts happen, that's been a decision from an architecture point of view of how to create better deterrence, better defense and better strength. And that's where European Union and other nations have decided they're going to have to significantly increase their spending in space. And that is driving the demand, right? The conflicts obviously drives spikes in demand for a certain period of time because people need the capacity and so on. So our strategy, as I described with meoSphere, is to expand beyond communications because the satellites that we will be introducing part of the next-generation MEO networks, have the real state and the power, Halima. So today, our empower satellites had less than 10 kilowatts power on the satellite. Our future satellites will have 20 kilowatts. We're doubling that. The real state of satellite, which is why I said why we like bigger satellites rather than smaller satellites is enough to have more, what we call hosted payloads to do missions beyond communications. And I described some of these missions, missile defense, missiles tracking, relay between different orders, right, slices of the network, space awareness. Those are all new opportunities for SES to enter over the next few years, and this will drive growth -- significant growth in the government sector that we currently cover today because we are not exposed to that today. With our future platforms and customers signing up will be exposed to that opportunity as well. And that is absolutely required. And I'll give you an example. Golden Dome in the U.S., which is a protective shield against ballistic and other kind of missiles. That is in billions of investments. We believe our MEO capability could be enhancing that beyond the military specific investments that will be made. The same thing, Europe, we'll be building a very similar shield for Europe, and we will be a partner and a player in that capability as well. And we're building the satellites that add this functionality. So we are very excited, right, about the opportunity going forward. And you can't think of it as because there's conflict today that demand is going. It's actually a fundamental shift because space has become a war fighting domain. Now your question second about have we seen notable U.S. spend shifts? No, we have not, right? We believe the U.S. is open to use allied capabilities. SES is positioned in the U.S. very well. We have an established capability that we've been working there for 40 years with specific clearances that's required in order to be able to participate in some of these different opportunities. So we have not seen that yet. We hope not to see it. We're proud to be an allied nation and allied company that works on both sides of the Atlantic to bring capabilities to both, of course, our home nations and European Union and those capabilities, but also in the U.S. as an allied for these forces. Operator: There are no more questions at this time. So I hand the conference back to Christian Kern for any closing remarks. Christian Kern: Thank you so much for joining today's call. I think it was a very clear message that 2025 was bringing -- was about bringing the companies together. 2026 is stabilizing it, and then we take it from there in terms of teeing it up for growth. The overall layer in terms of the defense thing has been very well reflected by our top management team. If you have any follow-up on this, please reach out to the IR team, we are there to help. And again, thank you very much for joining us today. Operator: Thanks for participating to today's call. You may now disconnect.
Operator: Hello, and welcome to Nuvation Bio's Fourth Quarter and Full Year 2020 Financial Results and Corporate Update Call. Today's call is being recorded, and a replay will be available. [Operator Instructions] Now I'd like to turn the call over to JR DeVita, Executive Director of Corporate Development and Investor Relations at Nuvation Bio. Please go ahead. Robert DeVita: Thank you, and good afternoon, everyone. Welcome to the Nuvation Bio Fourth Quarter and Full Year 2025 Earnings Conference Call. Earlier today, we released financial results for the quarter and year ending December 31, 2025, and provided a business update. The press release is available on the Investors section of our website at nuvationbio.com and a recording of this conference call will also be available on our website following its completion. I'd like to remind you that today's call includes forward-looking statements, including statements about the therapeutic and commercial potential of IBTROZI and safusidenib, the components of our anticipated product revenue, expected milestone payments and our cash runway. Because such statements deal with future events and are subject to many risks and uncertainties, actual results may differ materially from those in the forward-looking statements. For a full discussion of these risks and uncertainties, please review our annual report on Form 10-K, which we filed with the U.S. Securities and Exchange Commission today. Joining me on today's call are our Founder, President and Chief Executive Officer; Dr. David Hung; our Chief Commercial Officer, Colleen Sjogren, and our Chief Financial Officer, Philippe Sauvage. David will provide an overview of our key achievements in 2025 and other business updates, Colleen will provide details on the commercial launch of IBTROZI and Philippe will discuss our financial, partnering and operating updates. David will then conclude with closing remarks. Now I'll turn the call over to Dr. David Hung. David? David Hung: Thanks, JR. Good afternoon, everyone. Thank you for joining us. 2025 was a pivotal year for Nuvation Bio, and I'm pleased to discuss our full year and fourth quarter results with you today. Our most significant achievement occurred on June 11 with the full U.S. FDA approval of our first therapy IBTROZI, indicated to treat people living with advanced ROS1-positive non-small cell lung cancer, or NSCLC. Since then, we've been working tirelessly to bring IBTROZI to patients with this aggressive disease. And based on the number of patients who have started our therapy, and the confidence we have in this differentiated profile, we believe that IBTROZI is becoming the new standard of care for ROS1-positive NSCLC. By the end of 2025, 432 new patients started IBTROZI, including 216 in the fourth quarter. For IQVIA data, patients are being prescribed IBTROZI at a rate that is approximately 6x faster than the 2 prior ROS1 TKI launches over their first 2 full quarters following approval. Our fourth quarter patient starts also reflect an increase the 204 new patient starts in the third quarter during the time of year that may be impacted by seasonal factors. We continue to see a steady cadence of new patient starts in the first 2 months of 2026 from those who have filled a TKI, those currently on a TKI, who have switched to IBTROZI, and those naive to therapy. This broad patient mix further highlights the strength of our launch and collective belief in our medicine. Feedback from key opinion leaders, daily interactions with health care providers and results from our market research have consistently been overwhelmingly positive. Since launch, we've learned that IBTROZI's efficacy profile resonates strongly with physicians and equally important, its safety profile, especially limited CNS toxicity may allow earlier line patients to remain on therapy for years. An essential factor in a space for long-term duration therapy is paramount. As I mentioned, and consistent with this, we continue to see switches to IBTROZI from all 3 of the other therapies approved for ROS1 positive lung cancer. The reasons for these switches include disease progression, tolerability challenges, brain penetrants and physician confidence in the strength of IBTROZI's clinical data, particularly in the durability of response. I'm thrilled with how our team has executed despite the fact that rare disease launches always provide a variety of challenges. Their efforts have resulted in significant impact and most importantly, patients, but also on how providers choose to treat this disease. Colleen and Philippe will provide more detail on launch dynamics and net product revenue later in the call. Looking ahead, we are focusing on increasing our prescriber base and identifying more newly diagnosed first-line patients to be treated with IBTROZI. We believe that treating these patients will significantly increase the collective time our active patient population stays on therapy while we continue to simultaneously treat patients in the later line setting, who are in urgent need of our medicines. We also plan to present additional long-term IBTROZI data at multiple medical conferences in 2026. As a reminder, on our prior earnings call, we reported that as of August 2025, IBTROZI's median duration of response has now reached 50 months in a pooled analysis of TKI-naive patients in the TRUST-I and TRUST-II pivotal studies, population of which IBTROZI has previously shown an 89% confirmed overall response rate or ORR. We believe these long-term IBTROZI data represent the greatest patient benefit seen to date in ROS1 positive NSCLC. And unlike ongoing studies of other ROS1 TKIs, our pivotal study did not exclude patients with other concomitant oncogenic mutations making the results with IBTROZI, we believe, representative and applicable to real-world patients. We look forward to providing more clinical analyses from the August 2025 data cutoff in the first half of this year. Our scientific updates in 2026 may also further characterize IBTROZI's unique balance of activity against 2 important targets: ROS1 and TRKb. IBTROZI is 11 to 20-fold more selective for ROS1 and over TRKb and remains strikingly potent against ROS1 with picomolar level inhibitory activity. But importantly, IBTROZI also has measured inhibitory activity against TRKb. What is starting to emerge with improved scientific understanding is that the degree to which a lung cancer therapy inhibits TRKb, in addition to its primary oncogenic driver, may play a significant role in not only controlling the growth of the primary tumor, but may also inhibit the ability of that primary tumor to metastasize and grow in distant sites, particularly in the brain. Remember that ROS1-positive lung cancer has a particularly high propensity to spread to the brain, as 36% of newly diagnosed patients present with brain metastases. And in an additional 50% of cases, the first site of disease progression will be in the brain. We believe the ability to control and even prevent brain metastases in ROS1 positive lung cancer may be 1 of the most important determinants of long-term survival and will be reflected in a therapy's durability of benefit. TRKb is an oncogene, meaning that it drives cancer growth and metastasis and the natural ligand for the TRKb receptor is BDNF or brain-derived neurotrophic factor, as the name implies, this factor is expressed at high levels in the brain and can fuel the growth of cancer cells via the TRKb pathway if that pathway is not inhibited sufficiently. However, too much inhibition has been shown to lead to neurological side effects. IBTROZI is far more potent against ROS1 and TRKb, about 20-fold, which may explain why it has such a high response rate and durability in ROS1-driven lung cancer. And yet, while IBTROZI does have adequate activity against TRKb, this inhibition is measured enough that its dizziness rate is similar to that of crizotinib, a drug that doesn't cross the blood-brain barrier. In a recent commentary in publishing the Journal of Thoracic Oncology, renowned thoracic oncologists, Dr. Ross Camidge, Dr. William Phillips, Dr. Rafael Nemanov and Dr. Diana Sitelli, hypothesized that this selectivity could make IBTROZI the best tolerated next-generation ROS1 inhibitor. And we believe IBTROZI's intentional, but well-tolerated TRKb inhibition may contribute meaningfully to intracranial disease control and ultimately survival without introducing the significant CNS toxicity that has limited other agents, to the point Dr. Camidge and team emphasized in their analysis. Separately, published data have linked uninhibited TRKb signaling to larger tumor burden, higher stage disease, increased risk of CNS metastases and poor outcomes across multiple solid tumors, including lung cancer. In our view, IBTROZI strikes a particularly effective balance, deep durable inhibition of ROS1, paired with measured TRKb activity that potentially supports CNS disease control while preserving tolerability. Interestingly, the only other approved TKI to demonstrate longer durability in TKI-naive patients than IBTROZI is lorlatinib in ALK-positive NSCLC, which showed a median progression-free survival, or PFS, of over 5 years in the CROWN study. Lorlatinib has even greater TRKb inhibition than IBTROZI which we believe is likely related to lorlatinib's high rate of CNS events like mood disorders. However, given the high propensity for CNS involvement in ALK-positive disease, Dr. Camidge speculates that it is lorlatinib significant TRKb inhibition that may account for its high intracranial response rate in 5-year duration of response. We do not view the shared prolonged durability of lorlatinib and IBTROZI as coincidental. Taken together, we believe that IBTROZI's ability to strongly suppress ROS1 while modulating TRKb in a tolerable way could help explain durability intracranial activity and safety profile we continue to observe as real-world use increases. We also continue to envision and develop IBTROZI for a broader ROS1 positive lung cancer population. Based on our label, IBTROZI has been prescribed to a significant number of patients in the advanced setting across lines of therapy. And the next step for us is to move to earlier stage of lung cancer. As previously shared, we have dosed the first patient in TRUST-IV, a randomized, placebo-controlled Phase III study evaluating taletrectinib as an adjuvant therapy for patients with resected ROS1-positive, early-stage non-small cell lung cancer. Adjuvant therapy is fundamentally different from treatment in advanced disease and is an area we targeted for study only after garnering support for multiple lung cancer KOLs. These patients have undergone surgery, often feel healthy and are understandably unwilling to remain on our therapy that is difficult to tolerate or interferes with daily life. As a result, only a drug with a manageable and highly tolerable safety profile can realistically be developed in this study. We believe it is particularly meaningful that IBTROZI is the only ROS1 inhibitor currently being studied in the adjuvant setting, and we view this as a further testament to its safety and tolerability profile. Across our clinical database of 337 patients with advanced ROS1-positive non-small cell lung cancer, only 1 patient discontinued treatment due to any of the 6 most common adverse events, including diarrhea, nausea, vomiting, dizziness or liver enzyme elevations. While this does not summarize all adverse events detailed in our prescribing information, this level of tolerability for our most prevalent adverse events is critical when considering use immediately following surgery and why we believe IBTROZI may provide benefit in the adjuvant setting. Lastly, we not only aim to bring IBTROZI to patients across the ROS1 positive disease spectrum, but also the patients and providers around the world. Last year, we received approval for IBTROZI in China and our partners at Innovent Biologics and in Japan with our partners at Nippon Kayaku. In January, we were thrilled to announce a strategic partnership with Eisai to develop IBTROZI in Europe and other ex-U.S. territories outside China and Japan. We are working diligently with Eisai to submit IBTROZI for approval in Europe in the first half of this year. In short, we believe our continued launch performance, the latest updates reconfirming IBTROZI's efficacy and tolerability profile and additional development, regulatory and commercial achievements, all show why we believe IBTROZI is becoming the standard of care for ROS1-positive lung cancer. We also made exciting progress developing our second program, safusidenib. Safusidenib is an inhibitor of mutant IDH1 being developed for IDH1 mutant glioma, a devastating type of brain cancer. Importantly, not only are there very few treatment options available for this disease, but these younger patients are typically diagnosed between the ages of 38 and 45. Clearly, there is an opportunity to make an impact for these patients and their families. IDH1-mutant glioma described using 2 types of terminology, grade and tumor classification. A grade of a glioma indicates the level of risk while the classification describes certain biological features of the tumor. Malignant IDH1 mutant tumors can be defined using grades 2, 3 and 4, and these tumors can be classified as an oligodendroglioma or an astrocytoma. Both descriptors together indicate the level of risk, aggressiveness of disease and estimated time patients may live with their disease. To simplify this, we describe both grade 2 oligodendroglioma and astrocytoma as low-grade IDH1-mutant glioma, while high-grade IDH1-mutant gliomas consists of grade 3 oligodendroglioma, grade 3 astrocytoma and grade 4 astrocytoma. Each year, there are approximately 2,400 new cases of IDH1-mutant glioma in the U.S., split almost evenly between the low-grade and high-grade population. The key difference is that based on published median overall survival data, patients with low-grade IDH1-mutant glioma live approximately 12 to 20 years, while high-grade patients live on average approximately 2 to 12 years. The only targeted treatment option available for patients with IDH1-mutant glioma is vorasidenib, which was approved by the U.S. FDA in August 2024, where only patients with grade 2 oligodendroglioma and grade 2 astrocytoma are the low-grade population. In this pivotal INDIGO study, which included 168 Grade 2 patients with non-enhancing or low-risk disease in the active study arm, vorasidenib demonstrated a median PFS of 27.7 months, a 41% progression rate at 24 months and an ORR of 11%. In a separate Phase I study of 30 patients, vorasidenib showed a confirmed ORR of 0% in a high-grade enhancing population, which is not included in its approved label. In November, results from our Phase II study of safusidenib for low-grade IDH1-mutant glioma were published in neuro-oncology. This patient population was treated with safusidenib following surgery and prior to radiation or chemotherapy. The same types of prior treatment patients received in the INDIGO study. In this study of 27 patients, safusidenib demonstrated a median PFS have not reached a 12% progression rate at 24 months and a confirmed ORR of 44%. As a reminder, in a Phase I study of 35 patients, safusidenib also showed a 17% confirmed ORR including 2 complete responses that lasted multiple years in a high-grade enhancing population. As we've discussed previously, vorasidenib is already approaching a $1 billion U.S. net revenue run rate, less than 2 years after its approval. This rapid commercial uptake underscores both the unmet need and the willingness of physicians to adopt targeted therapies in this setting. While we acknowledge the inherent complexity and limitations of cross-trial comparisons due to differences in study design, patient populations, endpoints and sample size, recently published data in neuro-oncology and data from our Phase I study highlights the encouraging clinical profile of safusidenib and its potential to address significant unmet need in this patient population. In parallel, we continue to learn more about safusidenib's safety profile. While the drug is generally well tolerated, we observed a distinct set of dermatological related adverse events, including alopecia, arthralgia, and skin hyperpigmentation. We believe the presence of these events may be due to a different pharmacological profile of safusidenib, and we continue to investigate if safusidenib may inhibit targets other than IDH1. Importantly, the drug-related discontinuation rate in the Phase II study, which was conducted at the pivotal 250-milligram twice-a-day dose remains low at approximately 8%. The patients, who had discontinued therapy, were able to recover with interruption and appropriate management. Based on data generated to date, we announced in February that we started enrolling our pivotal Phase III study called SIGMA. This global randomized study is evaluating the efficacy and safety of safusidenib versus placebo for the maintenance treatment of high-risk and high-grade IDH1 mutant glioma following standard of care. Specifically, the study population includes 300 patients with grade 2 or grade 3 astrocytoma, who show certain high-risk features in all patients with grade 4 astrocytoma. As an important reminder, these patients have no FDA-approved targeted therapy options. Considering the high unmet need and the exciting profile of safusidenib, we are optimistic about the speed of recruitment in this trial. Due to the sizable population being enrolled to support approval, and the use of PFS as the primary endpoint, we expect this study will read out in 2029. Importantly, we recently announced the initiation of a second nonpivotal cohort evaluating safusidenib in patients with grade 3 oligodendroglioma, a patient population that is considered to be within the lower risk end of the high-grade glioma spectrum. This grade 3 oligodendroglioma study will enroll approximately 40 patients with measurable disease, including patients with residual disease following surgery for those with recurrent disease and will evaluate ORR as the primary end point. Given that we have 31 sites activated in the U.S. already, we estimate that we will be able to provide a full study readout in 2027. Importantly, if we see significant objective response in this study, we will meet with the FDA to discuss the results and potential options for further development, aiming towards an accelerated approval pathway. Patients with grade 3 oligodendroglioma frequently seek alternatives through the cumulative toxicities associated with prolonged radiation and chemotherapy given the relatively young age at diagnosis and median life expectancy of 12 to 14 years. Yet, there are currently no approved targeted therapies for this group either. While there are approximately 400 new grade 3 oligodendroglioma cases diagnosed annually in the U.S., we believe this represents a much larger prevalent population of several thousand patients, who are underserved today and could meaningfully benefit from an effective, well-tolerated targeted therapy. We view safusidenib as an ideal complement to IBTROZI as we now have an approved therapy and a late-stage program that both address a clear unmet need for patients. We look forward to generating updates from our evaluation of safusidenib as quickly as possible. Lastly, our drug-drug conjugate or DDC platform represents a novel modality in targeted cancer therapy designed to conjugate 2 small molecules, a targeting agent and a warhead. While we discontinued development of our first DDC NUV-1511 in the fourth quarter, we were able to gather valuable insights into DDC development and are already applying these learnings to new preclinical candidates in our pipeline. We hope to have updates on the next phase of our DDC program by year-end. We remain confident in our capabilities to successfully execute our program goals, build lasting value and most importantly, serve patients. With that, I'll turn it over to Colleen to provide more color on the launch of IBTROZI. Colleen Sjogren: Thank you, David, and good afternoon, everyone. I'm excited to report that the launches of IBTROZI continues to build what we believe is market defining momentum in a rare disease indication. From our approval in June through the end of 2025, we treated 432 new patients with IBTROZI, which represents a rate that is 6x faster than the 2 most recent TKI launches in ROS1-positive lung cancer. As David mentioned, we continue to see patient starts from 3 distinct populations. Patients who have failed prior ROS1 TKI switches from patients currently treated with ROS1 TKI and newly diagnosed patients who are TKI naive. This momentum underscores that a significant medical need in ROS1-positive non-small cell lung cancer still exists. And it is clear to us that the efforts of our incredible team our tailored strategy and IBTROZI's compelling efficacy and safety profile are well positioned to address this need. By the end of the year, we had engaged all top-tier target accounts and our field-facing interactions reinforce that physicians are quickly gaining comfort prescribing IBTROZI for their patients. Prescriptions have been written in 100% of our 47 sales territories by multiple repeat prescribers and per IQVIA data, we are showing significant growth in market share of new patients treated with a ROS1 TKI. On the market access front, payer engagement continues to be constructive and effective. At this point in our launch, we have achieved broad coverage to label for patients across the country. Finally, our patient support program, Innovation Connect continues to help eligible patients receive support and access to IBTROZI, while reimbursement is secured. Now I'd like to walk you through some of the key dynamics of our launch to further characterize, where we are today and what lies ahead. As we've noted, IBTROZI is being prescribed across both TKI-naive and TKI-pretreated patient populations. With our extremely high response rate in TKI-naive patients, we do expect an overwhelming majority of this population to be treated with IBTROZI for an extended period, which we are now starting to see. Still, it is typical at the beginning of any oncology launch that the majority of patients who start therapy are in need of a third or even fourth medicine and the response and duration of treatment will unfortunately be lower. While we expect IBTROZI to benefit these patients for a relatively shorter duration, meaning most will not remain on therapy for multiple quarters, we view this as an encouraging signal that providers are motivated to offer their patients a differentiated therapeutic option. While we have limited visibility into the characteristics of all IBTROZI patients, we do have some insight into the segment of patients that come through our Innovation Connect support program and specialty pharmacies. Within this group in 2025, we know that about 75% of discontinuations came from later-line populations. We're encouraged that IBTROZI is providing another meaningful option for patients across lines of therapy and the patterns we've observed through this experience have given us 3 important insights. First, discontinuation is strongly correlated with the line of therapy. IBTROZI has been well tolerated by first-line or TKI-naive patients, who have shown extremely high response rates in clinical trials. We also know that median DOR and PFS are much longer in this population than in the TKI pretreated population. Therefore, we expect to see far lower discontinuations as we move IBTROZI upstream in the treatment paradigm. Second, the fact that a significant share of our new patient starts at the beginning of launch were in the third-line plus setting helps explain the gap between an unprecedented number of patients starting IBTROZI and our net product revenue growth from the third to fourth quarter. As I mentioned, this late-line population unfortunately tends to discontinue therapy relatively quickly. And as a result, the majority of these patients are not treated for multiple quarters. which directly impacts near-term revenue trends. By the end of 2026, we expect to see a more direct correlation between growth in new patient starts and growth in our revenue. As a larger portion of active patients treated with IBTROZI shift to those who are newly diagnosed. Lastly, first-line IBTROZI patients are the main driver to our long-term growth. And the reason we are so optimistic about our launch is because we continue to see a meaningful, steady increase in first-line patients starting on IBTROZI in recent months. Our data, including the number of previously treated patients in the market suggest that we are expanding the ROS1 TKI landscape rather than simply competing for a fixed pool of patients. We anticipate this will directly impact the number of active patients on IBTROZI over multiple quarters going forward. And we plan to elaborate further on this trend as we collect more data in 2026. Switching to another key area of our launch dynamics, we continue to see use from providers in both academic and community settings nationwide. As of the end of 2025, approximately 70% of our new patient starts had come from the academic centers or IDNs and 30% from community centers, compared to a 75%, 25% split at the end of the third quarter. It is typical in a rare oncology launch that immediate uptake occurs in the academic setting. That said, this gradual shift towards the community is expected to increase over time, and in turn, will support prescription growth and momentum. This is important because the majority of ROS1 patients will be found and treated in community centers. Looking ahead, we are focused on deepening adoption and continuing to raise awareness of the importance of patient identification. Today, DNA-based testing should identify roughly 3,000 advanced ROS1-positive non-small cell lung cancer patients annually in the U.S. And as the field shifts towards also utilizing RNA-based testing, which publication suggests may help to detect approximately 30% more ROS1 patients, the annual addressable population could potentially expand to roughly 4,000 advanced patients in the U.S. alone. Because of IBTROZI's unprecedented durability, especially in the TKI-naive setting, this small incidence population turns into a substantial prevalence population, generating an opportunity to treat a meaningful number of patients over a period of several years. Finally, I want to commend the efforts of our commercial team. We believe their hard work has positioned IBTROZI as the emerging market leader in this disease. There is still educational work that needs to be done, but I am beyond thrilled we have been able to deliver this therapy to so many patients in need. With that, I will now turn it over to Philippe. Philippe Sauvage: Thanks, Colleen, and good afternoon, everyone. For detailed fourth quarter 2025 financials, please refer to our earnings press release, which is available on our website. Now let's go over some important highlights of the quarter. I'm pleased to inform you that in the fourth quarter, we generated $41.9 million in total revenue, including receipt of the milestone payments, which brings our total revenue for 2025 to $62.9 million. These figures include $15.7 million and $24.7 million in IBTROZI net U.S. product revenue in the fourth quarter and full year 2025, respectively. As Colleen mentioned, we know a significant share of our product revenue was driven by patients, treated with IBTROZI as a third line plus option. And unfortunately, these patients do not remain on therapy for very long. We do expect that over time, the bulk of our sales will be from first-line patients, staying on drug for many years. This trend of more TKI patients benefiting from IBTROZI is what makes us extremely optimistic about our long-term growth. As this occurs, we'll be able to see the true impact of our 50-month median DOR on revenue growth. Still, this dynamic will play out gradually over time, and we will continue to update you on emerging trends. Our channel movements are stabilizing as we expected we would. And today, we believe our specialty pharmacy and distribution partners hold approximately 2 to 4 weeks of inventory on hand. This is standard and shows that our product revenue has been driven by true patient demand for IBTROZI. In addition, our free trial program continues to provide patients with IBTROZI before they are fully reimbursed and this prescription generate full commercial revenue in the patient's second month on therapy at the latest. Our approach to access has been extremely successful and has resulted in broad coverage for patients across the country. As I mentioned on our last call, our level of gross to net will naturally increase as we enter more contracts that allow us to cover more lives. As a result, our gross to net now sits around 25%, and we would expect this to slightly increase before stabilizing long term. This is based on our balance of business with commercial, Medicare, Medicaid and 340B plans and the limited amount of free medicine provided to date. The remaining revenue for 2025 came from our collaboration and license agreements, including milestone payments, royalties, product supply and research and development services. In addition to ongoing royalty revenue from our partner in China, Innovent Biologics, we began receiving royalty revenue from our partner in Japan, Nippon Kayaku following regulatory approval and reimbursement in November, an event for which we received a milestone payment of $25 million. We also continued our mission to bring IBTROZI to as many patients as possible outside of the United States. In January, we announced our strategic partnership with Eisai, covering Europe and select territories outside of China and Japan. As a reminder, commercial rights in China and Japan were previously out-licensed and when those deal values are combined with the Eisai deal, this represents a total deal value of nearly $520 million for most territories outside of the U.S., but still excluding Latin America. Under our agreement with Eisai, we received an upfront payment of approximately $60 million and are eligible for a payment of about $30 million upon European approval. We will also earn up to $140 million in milestone payments upon the achievement of certain sales level, in addition to double-digit tiered royalties up to the high teens on net sales in EIsai's territories. This partnership meaningfully strengthens our cash position, allows us to reinvest in our own programs and allows us to precisely focus on our commercialization efforts in the United States. Looking ahead, we expect to file IBTROZI for approval in Europe with Eisai in the first half of this year. On the expense side, R&D expenses were $34.3 million for the quarter and $115.1 million for 2025. We continue to invest in IBTROZI and importantly, are focused on bringing safusidenib to patients as quickly as possible. SG&A expenses were $40.3 million for the quarter and $151.6 million for 2025, primarily driven by support for commercialization. As discussed in prior quarters, we do not expect material increases in commercial head count going forward. Turning to the balance sheet, we ended at 2025 with $529.2 million in cash, cash equivalents and marketable securities. This cash position has increased by approximately $60 million following the upfront payment we received from Eisai. As a reminder, an additional $50 million remain available to us under our term loan agreement with Sagard Healthcare Partners until June 30, 2026. Our robust capital position gives us a flexibility to invest in our launch and pipeline, while also enabling the evaluation of additional business development opportunities that can create shareholder value, similar to our acquisition of AnHeart. Based on our current operating plan, revenue trajectory and disciplined expense management, we do not anticipate the need for additional external financing to reach profitability. We remain a well-managed and agile organization that is positioned to execute our 2026 objectives. I'll now hand it back to David. David Hung: Thanks, Philippe. When I take a step back and reflect on our 2025, what gives me particular confidence is the foundation we've built for what comes next, an increasingly durable commercial franchise, a pipeline with meaningful long-term potential and a capital position that allows us to execute with discipline and flexibility. I'm incredibly proud of the team and grateful for the support of our investigators, partners, shareholders and most importantly, patients as we continue this journey into 2026. With that, I'll ask the operator to open the line for questions. Operator: [Operator Instructions] The first question comes from the line of Farzin Haque with Jefferies. Farzin Haque: Congrats on the progress. So you're not providing any revenue guidance yet for 2026. But what are you seeing in 1Q in terms of first-line and second-line plus mix that gives you confidence in meeting the consensus mark of $150 million for the year? David Hung: Farzin, thanks for the question. This is David. So we're -- as we said, we feel that the patients are out there. We think that the robustness of the first 2 quarters shows that we are able to capture a lot of -- a significant number of these patients. Just -- if you look at the number of new patient starts, we think the trajectory has been pretty good. As we did say, the majority of our NPS, our new patient starts to date have been later lines, as you would expect. But we are seeing increases in first line news. But we've also made the point previously that we don't have visibility into the majority of these patients. because unless they come to the Nuvation Connect Portal, we don't actually necessarily know -- what we need to know about them to know what line of therapy they are. But what we've seen we do see a majority of our use currently in later lines of therapy. Clearly, those aren't the ultimate price. Those patients, especially in the third-line study, have relatively short durations of response. And so that would lead to a much higher discontinuation rate. In fact, the vast majority of the discontinuations that we have seen are due to these late-line patients. But we are confident that over time, we're going to see growth moving toward to the second line and then to the first-line setting. And so we think that the patients are there and we think that ultimately we will start to see first-line use a much longer durability and then the revenue stack that we've previously talked about. Farzin Haque: Perfect. And then for safusidenib, can you provide an update on the current enrollment trajectory for the Phase III? And do you anticipate any interim analysis before the projected 2029 completion? David Hung: We haven't commented on our enrollment. Those patients are definitely there. As you know, there's absolutely nothing for high-grade disease or vorasidenib approved only in a subset of low-grade disease. So we think that, that trial will enroll well. But it is a PFS study. So it's going to take a while to get the number of events we need to see it -- to see the results. So that's why we've guided to a 2029 readout for that. But I would say that the patients are there. We feel very confident in the capabilities of our clinical operations and clinical development team. So we think that trial will enroll on target. We will not be any later than 2029 in reading that result out. And also -- I'm sorry, we don't have any plans right now for interim analysis. I forgot to mention that. Operator: The next question comes from the line of Leonid Timashev with RBC. Leonid Timashev: I just want to ask a little bit more about the IBTROZI trajectory. I guess, in the fourth quarter, there was potentially some seasonality, maybe changes in diagnosis has also been a historically weaker quarter for some lung cancer drugs. I guess how should we think about the seasonal bounce back we should see in the first part of 2026. Is any of those maybe weather-related seasonality is going to pull through into the first quarter? And any kind of payer dynamics that we should be thinking about in the first quarter as well? David Hung: The data set that we discussed, the seasonality was still based on just ROS1 TKI use in the last 4 years. So while there was a somewhat lower use in the fourth quarter, I would say, it's hard to know if that would necessarily predict about what's going to happen going forward. We feel confident the patients are there. We know -- we know that from -- just from our interactions with all the centers that we're at, these patients are there. We think that with -- while there's always way to improve the amount of genetic testing, we think that new patient diagnosis will happen. We know there's a prevalence pool of over 1,000 patients who are TKI experience. Clearly, those are the ones that are the -- going to be the easiest ones to identify because they've already been on our ROS1 agent. And clearly, we've already captured a significant number of those. But so I don't really know if the seasonality will necessarily result in a bounce back. It could, but I can't tell. And as you know, we just had a significant blizzard recently. So that was a pretty significant weather event. But, I don't, again, know if that will change anything. Operator: The next question comes from the line of Michael Yee with UBS. Unknown Analyst: This is Matt on for Mike. I wanted to ask on your expectations just kind of further trajectory cadence of patient uptake for the year, especially with maybe a competitor entering the market in the second-line setting, later in the year. How do you expect to see kind of the market shake out? I know you guys talked about TRKb as an important factor for you guys? Just kind of speak to the longer-term competitive landscape here would be great. David Hung: Sure. Well, as you've already seen from the first 2 quarters that we're over 200 new patient starts per quarter so far, and we think that's going to continue. And I've already said that the majority of those are later line therapy. So if you talk about second or third line, we've already captured a significant amount of about 1,000 TKI experienced patients that we believe are out there. So -- by the end of the year, we think that we will have probably captured a significant majority of all those patients. And as I said, what we're looking for is growth in the first-line setting. And given our 50-month duration of response, which is unmatched and our tolerability profile, we would expect to claim the majority of that. So that's what we're really looking for. We're not really looking any more at later-line use because that's -- we've been there and we've actually captured much of that. But we're looking towards the first-line growth, and that's what everyone should be focusing on. I think the one of the most compelling features of our drug is its durability. As you know, patients and doctors decide on therapy based on efficacy and by far, the most important metric for efficacy is how long that drug will work. We think that TRKb is an important factor in durability. If you look at the lorlatinib data, there is no TKI with longer median PFS that lorlatinib in the CROWN study, which is over 5 years. And lorlatinib has significant TRKb activity. And if you look at CNS control rate, it's really high. And as you know, for a cancer like ROS1 lung cancer, which is so CNS tropic, where it starts in the brain more than 1/3 of the time and goes to the brain another 50% of the time. It's really important to have as robust control of the CNS as you can. And we think that TRKb will play a significant role there. And as I've discussed previously, if you look at our intracranial response rate and our second line setting at 66%, that's not been matched. There's nothing close to that. So -- we think that the profile of this drug is extremely compelling, tolerability, efficacy, we're looking to move the first line, and we think that's where the unmet need will persist after we've already taken care of the later lines of therapy, which we are capturing. So we feel bullish. We feel we're just where we need to be and things are heading in the right direction. Operator: The next question comes from the line of [ Mary Coleman ] with Clear Street. Unknown Analyst: Congratulations on the progress. For taletrectinib or IBTROZI, just in general, how much adoption of TKIs any -- in the first-line setting? Have you observed following the NCCN guideline changes, especially in the community setting or community practices? And what factors or initiatives could further drive first-line use of IBTROZI there? And I have a couple after that safusidenib. David Hung: Sure. So we did note that if you look at the other TKIs that before we were approved, we actually did see an increase in scripts in the other TKIs after the NCCN guidelines came out. So I think those guidelines were helpful, and they did increase TKI use. Now since the introduction of IBTROZI to the market after our approval, we've seen clear growth from the little glimpse that we see, we have been seeing increasing first line use, but it's -- again, our glimpse into that window is still limited at this point. I don't -- I can't really speak in detail about it, we'll need to wait until we have maybe a quarter or 2 more under our belt. But we feel that things are going in the right direction. We think the NCCN guidelines are going to be a real benefit. Just the amount of IO/chemo use before those new guidelines was significant. And even after the guidelines, we still think that's a challenge. But I think that now that IO is actually contraindicated, I think that's only going to help drive the appropriate therapy. And as I've said earlier, there is no other therapy that can match our metrics on efficacy or even tolerability. So I think that we are well positioned to capture this. And I think the NCCN guidance will be a significant tailwind. But I think the greatest in the tailwind we have is just the strength of our label. Unknown Analyst: All right. That's helpful. And for the Phase III astrocytoma trial, what efficacy outcomes would be considered both clinically meaningful and commercially attractive. And -- what is the kind of estimated market opportunity or value that it can provide? And for the other cohort, what was the rationale for adding the oligodendroglioma patients as a separate cohort? And how might this become a value-generating program? David Hung: Yes. That's a great question. So when I think about glioma, I divide it into a pie about 50-50 low grade on 1 side and about 50% high grade on the other side. But within those subsets, you can divide them again. So each side, both the lower and high grade have a low-risk and high-risk features. Currently, vorasidenib is only approved in 1 of those pieces of that pie. It's only approved in low grade, low risk. That means what remains for an opportunity is high risk, low grade, low risk; high grade and high risk high grade. So the Phase III study that we're doing targets 3 of those parts -- 3 pieces of that pie. Instead of the vorasidenib 1 piece, our Phase III trial targets 3 of those pieces. So we think that's a very significant unmet need for patients. It's clearly a much larger commercial opportunity. And so we -- to get that drug approved in those 3 pieces of that pie, we have to do an overall -- we have to do a progression-free survival study, which is why -- we just need to enroll a certain number of patients. We have to follow them for a certain amount of time, and that's why the readout is 2029. Now that said, we also think that it's important for us to get this drug out to patients as quickly as possible. And there is yet another piece of that pie that isn't currently being adequately addressed, which is -- if you look at all grade 3 oligodendroglioma patients, these patients are a little bit different because unlike the Phase III study patients, which I talked about, those patients have completed surgery and radiotherapy and somewhere between 6 and 12 cycles of temozolomide. So as a result, they don't tend to have measurable disease. When you don't have measurable disease, you have to use PFS. You can't use response rate. Well, clearly, response rates are much faster readout than PFS. So the grade 3 oligodendroglioma study is important because those patients have measurable disease. These are patients who have not had a resection or not a recent one, have, in general, significant measurable disease, and they just can't take because these patients can live 15-plus years, they just can't take chemotherapy or radiotherapy every day for the next 15 years. I mean it would just be impossible to tolerate that. So we think it's a huge unmet need. But because now these patients have measurable disease, we can use overall response rate, unlike the SIGMA Phase III study, which is a PFS readout -- this will be an ORR, an overall response rate readout by RANO 2.0 criteria. So we think that if we can see a significant response rate in that study, and we've guided to reading that study out by 2027. Clearly, that's a much earlier readout. We know there are examples of all the glioma drugs being approved on a very small data set with response rate, we know that day 1 glioma drug was approved on less than 80 patients with an overall response rate. So clearly, we see a really robust response rate. We think that would -- that would justify a discussion with FDA as to what would it take to get this drug approved to get it to patients a lot sooner than a readout in 2029 for the Phase III study. So we think that it's important to do the study because, number one, it's a really important unmet need. These patients just cannot take chemo and radiation for 15 years. That's just not tenable. They need something that's much better tolerated, much more convenient. And secondly, it gives us an opportunity to see the activity of this drug in an area where nothing else works. Vorasidenib has no responses in this highway population. The response was literally 0%. So we think that it will give us an opportunity to look at the response rate of this drug and potentially initiate a discussion with FDA to just figure out how to get this drug to patients even earlier. We also think that generating data in this subset were nothing works and even vorasidenib has a 0% response rate will compel physicians and patients, who think, hey, this is a drug that has activity where nothing else does, should -- is this a better drug. Is this a more powerful drug. Is it to do things that other drugs can't do. And we think that could potentially influence the glioma market and the practice of what position the patients decide to use or attempt for treating a disease that has relatively few treatment options that is still, at the end of the day, an invariably lethal disease. So we think that the second study is a very important study for all of those reasons. Operator: The next question comes from the line of Mayank Mamtani with B. Riley Securities. Mayank Mamtani: Congrats on the progress. I appreciate the level of detail on IBTROZI launch. Just maybe on the metric should we expect for you to provide the new patient start numbers in the coming quarters, like you have and expect to see this 200-patient quarterly run rate to sort of continue in the coming quarters, including perhaps when there's a competitor entrant later in the year? And also, what's the real world discontinuation you're seeing in earlier line? I know you gave the 75% discontinuation rate in later line. But I was just curious if you had something in frontline, I understand the sample size will be small there? Then I have a follow-up. David Hung: So we have said since our very -- since the first quarter that we reported sales that we would continue to look at new patient starts. I think that's an important metric. It's particularly important in the first year where depending on the mix of patients and the duration of response or the rate of discontinuation, your revenues will not necessarily track with your new patient starts, especially as an example of your a third-line patient you just continue in a month or 2, you're not going to have the kind of revenues that you would expect in the first line setting. So we think it's important, and we said this since June 11, when we got approved, that we would focus on new patient starts at least for the first year because I think that's the best metric is our patients using this drug do physicians who want to prescribe it. And over time, what you'll see is that we've said there's only about 1,000 or so TKI-experienced patients. So if you see -- if you continue to see 200 patients per quarter, and we know that at some point, we're going to have captured the majority of that 1,000 patients. That means any growth at all in that 200 number has to be in first-line patients. And while that revenue may not appear immediately because it takes you a year to get stacking. When you start to see that growth in first line, you will see over time revenue stacking. And you will also see a significant increase in revenue. It's just not going to happen immediately because those third-line patients are going to come off, some of them discontinue within a month. And we think those first-line patients will be on for 5 months. So I think that for the next few couple of quarters, we still think NPS is important. But a year into our launch, so by third quarter of this year, we'll have been doing this for a year, and we continue to get 200-plus patients per quarter, and the majority of those are TKI experienced. That means we will have captured the majority of the TKI experience market. So any growth at all in that NPS number has to, by definition, be in first line. So I think that's what you should be looking for. I think the revenues will catch up to NPS with a few more quarters. It's just not going to do it right away, but that's what you would expect. Mayank Mamtani: On the discontinuation on the earlier line. David Hung: Oh, yes, sorry. So 75% of our discontinuations came from late-line patients. So -- so very late. Philippe Sauvage: For the patients that we know, as David said, it's a subset of patients, the one that we're going through the hub or patients going through the hub and discontinuing 75% of them were late line, which gives a lot of confidence to us about the fact that, yes, the main patients will discontinue are clearly late line patients. If you go back to our clinical trial, the rate of discontinuation was very low, as you know, 6.5%, right? So this is really what we're going to see. We're going to see some of those late-line patients, unfortunately, as is expected in oncology, not responding very well to a third or fourth line of therapy. That's true in oncology. And what we've seen in our subset going through the hub is that those are the most discontinuation we see by far. Mayank Mamtani: Understood. And then on the nonpivotal cohort SIGMA study that David, you just touched on, is there a threshold on ORR that you may have quantified or have in mind that would warrant that accelerated approval discussion? Sorry if I missed that. David Hung: I think that we've seen OR anywhere north of 20%. I mean this is a population, as you said, the biggest glioma drug in the world, vorasidenib has a 0% response rate in that population. So couldn't be lower, maybe, but certainly at 20% or higher, I think that would be extremely interesting. Operator: The next question comes from the line of Greg Renza with Truist. Gregory Renza: Congrats on the progress. David, just maybe on your current resource position. As you've commented on the current financial structure and also the path with the IBTROZI launch, maybe providing that path to potential profitability. Just wondering if you could provide a finer point on maybe what that horizon looks like. And related to this, as you've spoken about business development, you've mentioned the complementarity that IBTROZI and safusidenib provide for the pipeline. How are you thinking about adding to that mix especially in light of that focus or that mention of profitability? David Hung: So you might recall that last year before we announced the Sagard Healthcare deal, we had said that at that point, we had enough cash to reach profitability. Well, since we made that statement, we raised $150 million with Sagard with another $50 million in debt. And then since then we've done a deal with Eisai, where we got another $60 million, and we'll have yet another $30 million upon European approval submission or approval next year. So we stand by that statement. We -- we have certainly far more cash than we need to get to profitability. Now if we do a significant business development deal that would certainly take some cash. But -- we're aware of the importance of getting to profitability without having to need additional financing. These are still difficult markets. I think that we, in general, we've been relatively conservative on that front. So we'll carefully weigh the upside of a deal. And certainly, any deal we do would have to be what we consider a good deal as we consider AnHeart, we think that was a great deal for us. So any further business would have to be a great deal for us. So we have to be -- we have to weigh the benefits and cons of using our cash and cutting into our runway to profitability. But we feel very, very confident that we'll get to profitability right now easily with what we have on hand. And we do believe that given what we have, we think that further business development is an important -- it's always been an important part of our company growth historically. And we think we will continue to look for opportunities that we think are particularly compelling for us, especially if they can capture some of the synergies that we already have within our company. Gregory Renza: That's great. I appreciate that color. And maybe just one last one. If you could just comment on the DDC platform. I think I heard you mention maybe some updates into the year. Just maybe just remind us of your conviction on the platform as you invest at that area of the business? David Hung: So we are absolutely convinced that, that platform is real and has real potential. We -- that was a first-in-class compound. It's a first in history compound actually. So we learned a lot with 1511. And it wasn't that we didn't see any responses at all. We did see responses with 1511. It just weren't consistent enough for us to invest $100 million also in a Phase III study. We look at all our all our drug candidates as would this be worth spending $100 million on or should we make it better? And it's something you always have to balance in early-stage programs. So the answer for 1511 was probably not. And we learned enough to figure out how to make it better or to make a DDC better, and we are hard at work doing that. But we feel very confident that our DDC program will yield molecules that will go to the clinic and that we probably will take forward in development and we'll update you all hopefully by year-end this year. Operator: The next question comes from the line of Yaron Werber with TD Securities. Steven Ionov: Thank you very much, team, for the question. This is Steven on for Yaron. On the IBTROZI launch, in terms of trying to get more penetration in the first-line setting, where it seems like crizotinib might still be entrenched, what else can you do in terms of increasing the potential for first line? Have you engaged regulators to try to perhaps get a preference in the 1L setting in the NCCN guidelines? And if so, how is that going? And secondly, any update or perhaps any news on the BET inhibitor NUV-868? And then thirdly, on the approval in Europe, I seem to remember that there was in a head-to-head trial versus XALKORI that was thought to be necessary for approval. It seems like that's no longer the case. Can you maybe update on the thinking there? David Hung: Sure. Let me take the first couple of questions, then I'll hand to Colleen. So -- so crizotinib is -- you still use a significant amount because it is pretty well tolerated. But as you know, crizotinib does not cross the blood-brain barrier. And when there were no options other than crizotinib, that would have been appropriate. Today, I would consider it about practice to use crizotinib in the first-line setting for -- when you don't really know which patient is going to go on to develop the CNS that way. First of all, 36% of them present with a brain met. But even if they don't -- we know that 50% of them will go on to get a brain met. I can't tell which the 1 of 2 is going to do that. And to give a drug that doesn't have any CNS coverage, in my opinion, as an oncologist is malpractice. I think that is inappropriate for patients. So I can't comment on how long crizotinib will be entrenched. I think that KOLs and patients appreciate the importance of CNS coverage. And I think that's part of our job and Colleen's team is -- that's one of our main messages. I think we have to continue to do that. So I can't tell you that crizotinib will go away. But I do think that over time, it is the absolutely wrong drug to use for this disease. In terms of engaging regulators to get preference in the first line setting, we do actually believe that our drug is differentiated. And we are looking at strategies to have that captured within the NCCN guidance. So on that, I would say stay tuned on that. But we are well aware of the difference in performance metrics of our drug against other drugs. So we think that IBTROZI is an extremely compelling choice for patients and physicians. And we think that should be adequately reflected in all the sources that are available for patients and so -- and so and physicians. And so -- that is not lost on us. Colleen? Colleen Sjogren: Steven, I just want to elaborate a little bit more, so David spoke about -- the patients that we're receiving that have been pretreated, and obviously, progression toxicity that you just spoke to, brain-penetrant. So in addition to those patients, we're also looking to expand the market and you ask what else can we do? So I will tell you that it's our personal mission that we take it very personally that these patients that have ROS1-positive non-small cell lung cancer are going through their patient journey in the appropriate way. And 1 of those ways is to ensure that they're being tested before a treatment decision is made. So when we look at educational opportunities, we have several of them in this idea that patients are not only getting tissue, but liquid biopsies and I spoke about also earlier DNA testing being very, very important to understand the actionable mutations before a treatment decision is made. So in addition to us getting patients that are being switched off other TKIs, we are definitely growing the market and helping to educate more on the importance of understanding the entire picture before treatment decision is made. Steven Ionov: Okay. And then on 868 and then the European approval? David Hung: So on the European side, we don't believe that any additional clinical trials will be needed, and we'll give you more details once the MA is submitted. On 868, there's been some interesting -- some interest in that compound. So I think we're looking at all our options. Operator: The next question comes from the line of Silvan Tuerkcan with Citizens. Silvan Tuerkcan: I just wanted to ask is the gross to net for the pricing stabilize at this point? And can you share where that's coming out? And if you have any idea where that will end up? David Hung: Yes. Thanks for your question, Silvan. So I mentioned during my presentation that we were a little bit above 25% for Q4 and that we were still expecting this to grow a little bit beyond that, to say exactly when it's going to stabilize is always a very difficult question because it all depends upon negotiations with payers, obviously. But yes, we think that we are in a very good place in terms of access, which is what we wanted. We really wanted to make sure that all patients that needed that access reported that's what we were. And we think that doing all of that will take us probably a little bit further up, but not so high. I give you much more detail than that. But yes, we're still going to increase that a little bit in the coming quarters. Operator: There are no further questions waiting at this time. That will conclude today's call. I would now like to pass the conference back over to management team for closing. David Hung: Thanks so much. We want to thank you for all your support. Launches can be anxious. I think everyone has been looking at our numbers. We've gotten some feedback that some people might have been disappointed with the gap they perceived between the new patient starts and the revenue number. This is to be expected. As you know, in launches, especially in oncology and as an oncologist, I can tell you that late-line patients get started first. They're the ones that are out of options. The pool is already identified. This is a prevalent population. It's hard to find the new patients. So when you get those late-line patients, they're going to discontinue faster. I would say just be patient. It's all going to happen. We're very confident in this launch. We like the way things are going, and we think that we will get the first-line patients as long as those NPS numbers continue anywhere remotely in that ballpark. We know that we are running out of TKI experienced patients. The growth will be in first line. So I want to thank all of you for your continued support, and we look forward to updating you further on our next call. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Stuart Togwell: Good morning, everyone. And for those here in person, thank you for joining our Half Year 2026 Results. I'd also like to extend a warm welcome to those joining by webcast and audio. So I'm Stuart Togwell, Chief Executive of Kier Group. And before we begin, I want to take a moment to say our thoughts are with our 9 colleagues and their families based in the Middle East. We are thinking of them at this difficult time and hope they remain safe and well. So turning to our half year results. I would like to start by saying I'm immensely proud and honored and energized to be leading Kier as its Chief Exec and speaking to you today to update you on our half year results and the strategic and operational progress we are making. I'm also delighted to be joined by Tom, our Chief Financial Officer since the 1st of January. Okay. This morning, I'll walk you through our highlights and touch on the strategic progress we've been making. I will then hand you over to Tom to talk through the group and divisional financial performance. I will then come back and take the first opportunity as Kier's new Chief Exec, to offer some color and context around these results and share my perspectives on our operational highlights and where we're leading as a group. We will then finish with a group summary and outlook before opening the floor for any questions you may have. Starting then with the highlights from the last 6 months. The period saw the group deliver a strong first half with good growth in both revenue and profits. The future prospects of the group also remains strong with our order book increasing by 5% in the period to a record GBP 11.6 billion, reflecting contract wins across our business and providing multiyear revenue visibility. Through our order book, we secured 94% of our full year '26 revenue and 78% of full year '27 revenue. And we have seen the momentum continue into the second half with a number of appointments to frameworks in our key sectors. Our Property division remains on track to deliver ROCE target of 15% by '28. We are continuing to convert profit into cash with a net cash position significantly improved to GBP 103 million. Most importantly, we have now delivered an average net cash position of GBP 17 million for the first time in 13 years. Our shareholders have and will continue to benefit from this strong performance. Due to our robust cash generation and in line with our capital allocation framework, we have announced a proposed increase in interim dividend up to 2.6p per share. In addition, I am pleased that we're able today to announce the launch of a new share buyback program, increased to GBP 25 million. This follows the successful completion of our first share buyback program worth GBP 20 million. We have also made a number of operational changes in relation to our new structure and leadership capability. If I may, I'd like to now take a moment to expand on this and reflect on the change we've made in line with the first few months since I became Chief Exec. Over the period, we've taken a number of steps to optimize our structure and leadership capability to maximize the market opportunities that exist for Kier, particularly in response to the government's 10 year infrastructure strategy announced in June 2025. We have strengthened our Executive Committee and be joined by Tom as Chief Financial Officer; Martin as the Group Managing Director for Construction, alongside the creation of new roles for Louisa as Chief Operating Officer; and James as Group Commercial Director. They give us industry-leading functional strength. We also brought together our 2 complementary divisions within infrastructure to form a combined infrastructure powerhouse, to create a more integrated delivery platform to meet our customer needs. The group has also introduced its Naturally Digital program to empower our people and improve productivity through access to the right digital tools and platforms. We are seeing strong operational delivery and opportunities within Kier's divisions, which I'll touch on later. And we're advancing our Kier 360 approach, which leverages the group's capabilities across the whole fund, design, build and maintain project life cycle and enables the most appropriate solutions to be achieved, tailored to meeting customer needs while meeting the environmental, social and digital requirements of national and local frameworks. These positive steps we are taking ensure we are poised for future sustainable growth. With that, I will hand you over to Tom to give our financial highlights for the period up to 31st December. Tom, over to you. Thomas Hinton: Thank you, Stuart. And I should firstly say that I'm delighted to be presenting to you for my first time as Kier's CFO. It's my pleasure to take you through our performance for the first half of FY '26. Let's begin with the financial highlights for the period. Revenue in the period, as you've heard, grew 2.6% and reflects good growth in activity levels, primarily in infrastructure services business, which I'll cover in more detail shortly. We delivered adjusted operating profit of GBP 71 million, up 6.6%, representing a margin of 3.5% and a modest improvement of 10 basis points from that achieved in HY '25. Allowing for our usual second half weighting of earnings, this margin is consistent with our target range of 4% to 4.5% on a full year basis. You'll see that the period end net cash position is materially better than the prior period at GBP 103 million compared to GBP 58 million at December 2024. This is despite increasing shareholder returns via our GBP 20 million share buyback and the increase in dividends paid. As we targeted, the group achieved average net cash over the period of GBP 16.8 million, a significant advance from the prior period average net debt of GBP 37.6 million. This cash and profit performance is all underpinned by our order book and framework positions, which provide us with the visibility over future revenue. Our order book currently stands at a record level of GBP 11.6 billion, having grown by 5% from June 2025. It represents 94% coverage of this year's revenue and substantial coverage of next year's forecast revenue, currently standing at 78%. The order book continues to be underpinned by long-term framework agreements, positions totaling GBP 150 billion. And within this, we have GBP 35 billion pipeline of work visible for this year and the next. You can see from the graph at the bottom of the slide, how our order book, combined with our framework positions provides revenue visibility covering a period of at least 5 years. Stuart will look at our pipeline, order book and long-term opportunities in more detail later. Now focusing on our revenue for the period. We delivered group revenue of GBP 2.029 billion, representing a 2.6% growth versus the comparable period last year. The main element of this growth comes from Infrastructure Services, which was up 4.9% to GBP 1.083 billion. This growth came primarily from the design and delivery of road capital projects, growth in rail work, including HS2 and a ramp-up of water activity under AMP8. Our Construction segment delivered GBP 920 million of revenue in the period, down slightly by 1.3% due to the recent transition to modular construction. Although as the off-site construction comes on-site, we will see these revenues bounce back in the second half of the year to full year growth. Property transactions grew modestly, although again, we expect a busier H2, which is a familiar seasonal feature of this business. In the same fashion, I'll now take you through the adjusted operating profit in the period. The revenue growth that we saw in Infrastructure Services translated into the profit growth of GBP 2.1 million to GBP 48.2 million. We maintained our strong 4.5% margin in this business. The Construction business also maintained its operating margin at 3.9%. The small increase in property volumes resulted in the operating profit growing GBP 1.2 million, and we also saw lower corporate costs in the period. Overall, we delivered adjusted operating profit growth of 6.6% to GBP 71 million. There are some specific costs excluded from our adjusted operating profit figure, which I'd like to take you through. Excluding noncash amortization interest, the adjusted items amounted to GBP 10.7 million in the period and are now solely related to fire and cladding compliance costs. This is an increase on the same period in the prior year, and we expect this to result in a charge of around GBP 30 million for FY '26. We then expect this level of expenditure to continue into FY '27 as we remediate any remaining cladding and internal fire remediation works under the Building Safety Act. These specific remediations are treated as adjusted items and are provisioned gross when the liability is recognized and can be reliably quantified. Further, we recognize insurance or third-party recoveries once they are confirmed, therefore, creating a net provision in adjusting items. We expect the adjusting items to reduce post FY '27 and for these claims to be resolved by the end of FY '28. The interest costs here are recognized under IFRS 16 relating to the exit of leased office space. Turning now to free cash flow. Starting with adjusted EBITDA, which in HY '26 was GBP 101 million. Working capital outflow in the half was GBP 107 million, in line with HY '25, slightly lower in fact. As you'll know, we expect to see our usual working capital inflow in the second half with the higher activity levels of the spring and summer months, combining with government spending and budgeting cycles. CapEx in the period amounted to GBP 24 million, with the majority of this relating to lease payments capitalized under IFRS 16. Net interest and tax paid were just slightly above the prior period, with the group continuing to utilize its significant long-term deferred tax asset. You may remember that the tax asset of GBP 130 million relates to past losses, allowing us to offset half of our tax charge in any given year, which we anticipate to take around 7 years to fully utilize. Altogether, this results in a free cash outflow of GBP 42 million, slightly improved on that of the prior year period in what, as we have said, is a seasonally disadvantaged half of the year. Then taking this free cash flow to the net cash flow, net cash movement in the period. We started the period on the left at the end of June 2025 with GBP 104 million of cash. This free cash outflow of GBP 42 million then reduces our cash balance. The cash impact of the previously mentioned adjusting items equate to GBP 4 million as our insurance recoveries offset a lot of the cash fire and cladding costs in the period. We contributed GBP 3 million in the period to our smaller pension schemes, which remain in deficit, with the schemes we inherited through acquisition around 10 years ago. The net cash bridge neatly shows a significant return to shareholders as well. GBP 23 million of dividends paid in the period and GBP 14 million of share buyback. We also purchased GBP 15 million of shares for the group's employee benefit trust for share-based employee incentives. This resulted in a net cash position of GBP 103 million, lower than at June 2025 due to the seasonal working capital outflow, but importantly, a significant increase over the last 12 months compared to GBP 58 million of cash at December '24. The second half of the financial year has started well from a cash perspective, and we expect this uplift in cash position to roll into the full year net cash. So staying with cash, we consider the average net cash position to be a critical measure. It's been a key target for the business for several years, and I'm delighted to report that we achieved a milestone in this most recent period. We've always defined average net cash as the average month end position. The average net cash is therefore the average over the month ends in the half year. You can see here how over the last 4.5 years, we have steadily reduced average net debt and debt-like items by GBP 600 million, so that we now have GBP 70 million of net cash. It represents a significant mark for the group and provides an excellent foundation for our growth plans. Looking now at our financing arrangements. This slide sets out the structures we have in place to provide flexibility and optionality as we pursue our growth strategy. Last October, we completed out the refinancing of our revolving credit facility with a new 3 year GBP 190 facility. This represented a GBP 40 million increase on the size of the previous facility, including an option to extend for 2 more years as we strengthen further our debt maturity profile. In October, our credit ratings are reviewed with S&P upgrading us to BB+ and Fitch upgraded our outlook from stable to positive, maintaining us BB+. This affords us the optionality as we review the financing requirements for the group. Now to my final slide, I thought I'd remind everyone of our capital allocation framework and its clear priorities. Overall, we are focused on optimizing shareholder returns while maintaining a disciplined approach to capital allocation and an ever-strengthening balance sheet. In short, our capital requirements are minimal. We target dividend cover of around 3x earnings through the cycle. We plan to invest further in our property business to generate consistent returns over time, deploying up to GBP 225 million of capital and targeting a consistent long-term ROCE of 15%. With regards to acquisitions, we will continue to consider value-accretive acquisitions in our core markets. And then lastly, having completed our first share buyback program of GBP 20 million in December, I'm pleased that we're now able to launch a new GBP 25 million buyback program. This, alongside the interim dividend demonstrates that our shareholders will continue to benefit from Kier's significant financial improvement as well as the renewed strength of the group's balance sheet. And now I'll hand back to Stuart for the market update. Stuart Togwell: Okay. Thanks, Tom. What I'm going to do now is give you some insights into how the business is doing and provide the confidence in terms of us do long-term generation of cash to give Tom loads of options in terms of what he's going to do with the money. So many thanks, Tom. Turning now to our operational update. It would be a good opportunity to reintroduce our divisions, particularly in light of the structural changes we have made and to give a sense of their size and scale and how that gives us confidence of our ability to continue to meet our medium-term targets. I will share an update on the breakdown of our order book and the considerable pipeline of opportunities beyond that. And I really want to highlight is our capabilities and to remind you of those. And the way we leverage them together across the group positions us strongly to benefit from the opportunities in front of us. We really do have a resilient order book, a healthy pipeline and a set of complementary strengths that continues to support delivery in our chosen sectors. So let's start with the Infrastructure Services. Infrastructure Services has an order book of GBP 7.1 billion, which is up 6% and provides 92% of secured work for full year '26. The business continues to win work across its chosen sectors. The most recent examples include National Highways Legacy Concrete Framework that's over GBP 900 million, where we're 1 of 3. Project to upgrade Thames Water treatment works at Maple Lodge, that's GBP 280 million. In nuclear, we've also been awarded a 2 year extension on the Hinkley Point C. We've made progress in aviation with an appointment to the British Airways Better Buildings framework. And if you look at the new graphs we provided on the right, which go to explain the gap between the GBP 150 billion framework position and the GBP 11.6 billion order book, you can see the scale of further opportunity. By the way, pipeline includes further material work even within preferred bidder stage and known tender opportunities. I've only included those that cover the next 2 years in terms of work opportunity winning. There is a clearer material pipeline emerging, particularly across water, defense and rail, which gives us real confidence as we move into the later stages of our HS2 delivery. Importantly, our 750 strong in-house design team gives us a fully integrated design-led delivery model. It means we can engage early with customers and shape solutions around what they genuinely need. In addition, our infrastructure division is driving innovation, whether it's around how we manage environmental risks through sustainable drainage techniques or through digital innovations such as our QuikSTATS, which delivers high accuracy digital data at scale, lowering strike risk, delivering measurable efficiency gains across major programs. Given the scale of the pipeline ahead and Kier's geographical footprint, we have robust strategic workforce plans in place to support us to pivot resources as required. Some of these capabilities are genuine differentiators for Kier and strengthen both the value we bring to customers and the quality of work we convert into the order book. But it doesn't stop there. So moving to our Construction business. We have an order book of GBP 4.5 billion, which is up 5% and 96% is secured for full year '26. Construction's approach to building long-term relationships and its track record means we have good visibility of repeat business on key infrastructure frameworks and also within the private sector commercial sector. Recent wins include a place on the GBP 37 billion new hospital program 2.0 Alliance framework, a place on the DfE's new GBP 15 billion CF25 framework for schools, universities further in technical colleges to deliver high-value projects over GBP 12 million in the North and South of the country. Now this is on top of the work we are delivering for the existing Department of Education or CF21 framework, including 8 schools within preconstruction agreements awarded in quarter 2 alone, and they are not yet reflected in our order book. Other notable wins include the construction of the flagship Government Property Agency Hub in Darlington worth GBP 85 million. You can see that there is a strong pipeline visibility ahead with opportunities to convert frameworks to projects in health, education and defense and of course, in the London private sector commercial market. Also part of construction is Kier Places. Now this represents 15% of the '26 revenue. It's an annuity type business providing long-term FM, housing maintenance and specialist critical school works under GBP 10 million, often from existing frameworks and often from direct award. Kier Places also plays a central role in our 360 approach. A recent example is a way their operational footprint and proven delivery of the Heathrow Quieter Neighbourhood scheme directly strengthened our proposition and help secure the BA Better Buildings win in infrastructure. This demonstrates how our integrated model drives differentiated value for our customers. Our construction capability is anchored in our national coverage and regional delivery model and the strength of our long-term supply chain partnerships with delivery projects from GBP 1 million to GBP 683 million, the strength of our dedicated clients and markets team and the access to call-off contracts under 2 stage or direct award. The construction offering is further strengthened by our in-house mechanical and electrical capability, which is supporting projects of circa 40% of the '26 revenue across all regions of the U.K. Using in-house capability allows us to self-deliver complex projects, reducing risk and removing reliance on Tier 1 external subcontractors. It also enables better engagement with customers, coordinated solutions, ensuring a smoother transition from construction to operation and our input to long-term building performance through our digital twinning capability. Finally, our product capability is critical to outcomes-led solutions and ensuring satisfaction and repeat business from our customers. I would draw your attention to our Deyes High School in Liverpool. It's a great example of how we do this. By taking an outcomes-led approach and working in partnership with the customer, Kier has delivered 7 extra minutes of learning time per lesson. And we did this through the design of the school. It's also delivered energy-efficient performance well above target and has driven high levels of customer satisfaction. There is a video that is available on our website and it is well worth watching. Property. Lastly, let's look at our Property business. Invest and develops commercial and residential sites, largely operating through public and private sector joint venture partnerships to deliver urban regeneration projects across the U.K. As you can see from the slide, property has a gross development value of GBP 3 billion. There has been considerable progress made across the portfolio as developments move through their cycles. For example, 60% of sites now have planning permission. 6 sites are in construction and 4 schemes that we are actively marketing for sale. There is considerable capability within the Property division, which drives future opportunity and create synergies with the other business divisions. Kier Property has trusted public sector relationships built on delivering outcomes-led development and regeneration. It also has a deep understanding to what is needed in terms of responding to changing market needs in business and retail that leads to the efficient recycling of funds. An example is the growing need for net zero and energy-efficient office space, for example, our development 19 Cornwall Street in Birmingham. Looking ahead, these long-standing relationships with public and private joint venture partners will leverage funding that can be turned into delivery. Kier Property is also critical to our 360 approach. The historical PFI and urban regeneration expertise will support Kier to influence the early-stage vision and structure long-term investment models set out in the 10 year infrastructure strategy that is moving toward blended finance and PPP type models, particularly in areas like community health care and environmental resilience and from which Kier could create predictable, durable revenue streams. The momentum we currently have and the future opportunities that exist supports our confidence in delivering our target of 15% ROCE by full year '28. I thought it'd be worth just touching on some of the things that I've spoken about in the past. So I would like to just give a more of an explanation around our 360 approach. It's really cool. Simply put, it captures the breadth, depth and scale of Kier and enables us to leverage the group's capabilities across the whole fund, design, build and maintain project life cycle. It enables the most appropriate solutions to meet customer needs while meeting the environmental, social, digital requirements of national and local frameworks. This drives tangible customer benefits because due to the breadth of our national footprint, we can deploy capability consistently wherever it's needed. We combine that breadth with real depth because we can fund, design, build and maintain. We solve customer needs end-to-end. We can offer customers choice of solution, what we call Choice Factory. That focuses on the flexibility needed to deliver true value for money and high-quality outcome-led solutions. One example is MMC. Now Kier doesn't own a manufacturing facility. That means we don't need to keep it full. Instead, we have a broad supply chain, and we can curate a choice of factory-based solutions. This has allowed us to select the optimum system for each project, improving value for money, managing risk and delivering with greater certainty. Harnessing digital is also fundamental for improving customer experience. Digital processes and data-led approaches drive productivity, improving accuracy, program certainty and building performance, e.g. digital twin. And crucially, our work delivers more than just assets. We support customers to generate social and economical benefits such as creating jobs, training, supporting SMEs and creating greater equality. This all reinforces our position as a trusted industry partner, strengthens repeat business and enhances margin certainty. I would also like to expand on the environmental and social benefits as environmental and social performance, they're not an add-on, they're integral to long-term value creation. They are both a key requirement for government contractors and a direct driver of employee engagement. The Kier recent highlights include achieving the first Carbon Disclosure Project A rating for climate disclosure, placing us in the top 4% of companies globally. First in sector in the FTSE Women Leader's review for women in senior leadership positions, strengthen our safety performance through Kier Cares, our new health and safety well-being strategy and through adopting predictive digital tools to help us prevent incidents even before they happen. Average supplier payments down to 32 days, and we achieved 95% of payments within 60 days. We have 532 people engaged in apprenticeship programs, and we were included in the top 100 Apprenticeship Employers list. We are also signatories of the government's Youth Guarantee. For those who are financing within the room, I thank you for your patience of going through that slide. Moving on to drive shareholder value. That all points to how we now continue to drive shareholder value. Before I come to our summary, I thought just to remind everyone of our medium-term financial targets, which are set out here. And actually, there's no reason to change these, they're still applicable today. So we target revenue growth above that of GDP, an adjusted operating margin of between 4% and 4.5% cash flow around circa 90% conversion of operating profit and an average net cash position, a sustainable dividend policy of circa 3x earnings cover through the cycle. And then finally, in summary, the group delivered a strong first half, along with the significant achievement of average net cash for the first time in 13 years and revenue, profit and cash all continue to grow. Our order book stands at a record GBP 11.6 billion, and we have further excellent visibility of future performance. Significant increase in shareholder returns, we're able to announce the launch of a new larger GBP 25 million buyback program and a 30% increase in our interim dividend payment to shareholders. Finally, in terms of outlook, building on our half year '26 performance, we have seen this momentum continue into the second half, and we are trading in line with Board expectations. Full year expectations remain unchanged. We are building and leveraging capabilities through 360 approach, which underpins a 4% to 4.5% margin target range. We are confident in our ability to pivot at scale and pile sustainable growth through delivering social and economical infrastructure that is vital to the U.K. So with that, I'd like to open up the meeting to questions-and-answers. Questions from the room first, please, and then we'll take questions from the call. Thank you. Robert Chantry: Rob Chantry at Berenberg. Just 3 questions. I suppose, firstly, for both of you. Could you just share your views on the optimal balance sheet structure medium-term for Kier, I guess, in the context of the potential bond refinancing this year, the recent cash generation, the move to an average net cash, just how you see that evolving on a 3- to 5-year view? Secondly, just touch on building safety costs. I think it's fair to say that's a step-up versus where the guys thought it was a year ago. I think you're now talking GBP 30 million this year, GBP 30 million next year, a bit of a balance in '28. Can you talk a bit about what's driven that change and happy it goes no higher thereafter? And I suppose, thirdly, really interesting going through the different structural dynamics of your market share. Could you just kind of highlight to us, I guess, where you think you're a genuine market leader in these markets and where you think there is a gap to the top and how you might think about if that's a gap you want to fill with potential M&A or more investment? Stuart Togwell: Do you want to take the first 2? Thomas Hinton: Yes, a couple of questions there. Can everyone hear me okay? So let's start with the balance sheet one. I guess, firstly, let's reflect on where we are. So we're at this average net cash positive position, which I think everyone is very pleased with. It's been an enormous journey to get there. And then if you reflect on our cash flow, here we have strong cash flow, and we expect that to build over time. We've obviously come out there and said, we'd like to continue with the share buyback. So we've continued the share buyback. So the implication there is that if you look at our cash flow, we are kind of returning the dividend. We're doing the share buyback. That does mean we have spare cash. So that does mean it will build. So we expect the cash to build over time, and that's what we'd like it to do. So we would like to continue to build -- we'd like to continue to strengthen our balance sheet in the medium-term. So what I can't say is here's the cash number we're going to aim towards. We haven't got that. What I can say is that we want to keep it positive, and we would like to continue to strengthen the balance sheet. That's our plan. And then the point on the bond, I think you kind of reflected on the bond quickly. So we've got a bond. It's at 9%. Kind of I alluded to it in the slides that there is optionality around that bond, and we will look to potentially go to market on that at the kind of end of the first quarter. So like in the next few weeks, let's see what happens. But ideally, we'd like to come to the market with the bond later on. So that's the bond side, the balance sheet. So fire and cladding. So you saw there in the half year that we've got GBP 10 million adjusting item for fire and cladding. And I also said that we expect that to be around GBP 30 million for the full year. So your question then was, well, how you got comfortable with this? So what we've done is look through every project that's got any exposure on fire and cladding. And each one is bespoke. Everyone is unique, each one is discrete, and it all has different insurance recoverability against it as well. So -- and we have to wait to see if the liability is going to crystallize. So we're going through each one to try and work out, is there a liability? Is it going to crystallize? And then those numbers that I've kind of alluded to are an estimate on how that liability could crystallize over time and an estimate on how we could get recoveries on insurance against them. So that's a kind of net estimate against that. And the challenge, of course, is that you can't take it all today because you don't know the liability is going to crystallize and you don't know the scale of it. So that's the best we can do is estimate what that adjusting item is going to be this year and next year. Stuart Togwell: If I pick up in terms of the market and the sectors, it's a great question. Thank you. If you think about it in terms of Kier stalwarts, that still remains around education, highways and at the moment, MoJ work that's passing through. We are seeing through the slides I put up there, the growth opportunity through the pipeline in defense, the water contracts are starting to come through and working with the water companies in terms of their cycle of funding coming through. Certainly, a huge opportunity in health, particularly off the placement in terms of the new Alliance framework, but there's also other health spend that's going on with the trust that haven't been privileged enough to be one of the 11 hospitals. And we're seeing entry into the nuclear sector, which is a slow burn. It takes time, but we are there and positioned well. In terms of areas in terms of future, rail is an area that I'd like to do more in. There's certainly going to be some spend. Certainly, when the money starts being diverted onto HS2, we're looking about where that's going to go. The London -- the views out here, the London private sector is starting to wake up. And we have a dedicated team in London that is delivering very well at the moment, and I see further opportunity there. And finally, the Places business. I made a point today, I've actually explained a bit more around that business particularly being annuity and the opportunity we have through FM, housing maintenance and also the specialized work we do around small works. As I said, that's often work that's coming through existing frameworks or direct award. It's critical work to the client and often it leads to either repeat business within places or across the group. Longer-term, I've often said around, I felt the opportunity was going to be there for PPP and urban regeneration. And what we're doing about it? Well, we're starting to have conversations. We had a conversation yesterday with NISTA and cabinet office and other CEOs around how the construction industry can feed into the models going forward to make sure that we learn the lessons, the good and bad of previous PFI. But I also look to, at the moment, I've got a Property business that has expertise from the previous PFIs. We certainly have the ability to draw on funding and with the relationships with the public sector. And we have a Places business that is already currently working on 22 contracts under PFI arrangements. So we have all the bases covered. Jonathan William Coubrough: Jonny Coubrough from Deutsche Numis. Can I ask perhaps on the change in mix within Infrastructure Services and it looks like water is clearly expected to be a big growth area also defense. How do you view the contract terms in those markets and also potential margins relative to transportation? The second question would just be on central costs and why they fell in the period. And then third question on Kier 360. Do you think there are opportunities to broaden that out across your markets in terms of increasing your activities at the front end of projects and improving margins there? Stuart Togwell: So if I take 1 and 3 and leave you on 2. Yes, I leave you 2. So the margin risk in terms of these new areas, we've used the word pivot quite a lot. So what we look for is work that is procured on a similar basis through framework that it plays into our strength of having the U.K. coverage, plays in our strength in terms of that we have the local presence that we can bring the environmental and social benefits. Generally, in terms of the frameworks, the risks are going to be proportionate to what we do elsewhere. And it really plays into then us bringing -- being able to bring in the other capabilities we have across the group. So I see those very much in terms of being just same as just a different sector. And that's the strength of the model that we have going forward is that we have the visibility where spend is going to be. We start thinking about those sectors way before they come to market in terms of frameworks. It gives us time to think about the capabilities that we need to understand the customer needs. And we also have a model now that we can really look at our workforce in terms of how we move it around to suit these new streams of work. If I touch on the last point in terms of Kier 360, the answer is actually both. If you think about it in terms of the infrastructure business, our 750 strong designers predominantly are based on the highways business in terms of transportation. Now by combining those 2 organizations together, I've opened up that ability to move it quicker into serving things like water and defense going forward. Now if I look in terms of the construction capability around M&E design, again, I'm looking at 40% of the construction business. But there's no reason why I can't start looking in terms of how do we help that, particularly around the water sector to drive better efficiencies and confidence around that. So both internally and externally. The feedback we had from our one government day when we're talking about the departments about ability to bring, say, environmental understanding into any scheme because most schemes at the moment will have some form of water problem in terms of how they deal with the current water or how they make sure it goes away. Or they're going to have issues in terms of how do they get power in and make sure the energy supply is there sufficient for them. They might be looking for funding solutions because they haven't quite got the funding. And they might need be talking about, well, how do we maintain these buildings in the future? Are you Kier interested in doing the future maintaining? If you're not, can you make sure that the base specification reflects your knowledge of operating these buildings elsewhere? And if you want to put it all together, go and have a look at the Deyes High School. So an outcomes-led design. And you can only do that by bringing all these skills together, look at it in terms of how the building works in terms of energy efficiency, how you actually transfer children more effectively around and teachers around the school classrooms. And that's delivered, as I said before, 7 minutes improvement per lesson. That's [ Kier 360 ] in work. Thomas Hinton: Okay. On the corporation costs, I mean they're relatively flat year-on-year. I think there's a slight improvement. I think the only change is kind of -- I think it comes down to things such as what's the level of bonus accrual you put into the corporate costs, Jonny. I don't think it's much -- there's not much more than that. There hasn't been a deliberate cost drive in the corporate center to date. So it's not different from that. It's more kind of smaller assumptions driving it. Andrew Nussey: Andrew Nussey from Peel Hunt. A couple of questions. Useful disclosure around sort of the pipeline. I did observe that you've got defense sitting in both sectors. How do you sort of draw the line? And does that create some inefficiencies having it sort of sitting in both buckets? And secondly, in construction, modular construction is becoming a feature of the industry and there was an implication of being the revenue sort of slightly lumpy. Is that going to be an ongoing feature as one would imagine your projects get bigger and more modular? And is there any impact on the cash flow from that shift? Stuart Togwell: Okay. I'm happy to say both, and you can then correct me in terms of the second one. Good spot on the defense. The distinction is one is nuclear defense and one is anything else that isn't nuclear defense. Nuclear defense has a particular requirement in terms of your capability, obviously. And it tends to be more large infrastructure complex schemes like Hinkley. So that's why we keep that within that side of the organization. We do, though, share knowledge between the 2 and the relationships and make sure that if there is any joint learning or joint sharing of design or joint sharing of M&E that we do the crossover. But that's the reason we do that. In terms of the MMC, I think you have to remember in terms of the big impact there is in terms of the Glasgow, in terms of the size of it, in terms of timing. I personally don't see it as being -- having a lumpy impact on us. And our approach to MMC really has been embedded in the organization from what we've learned around MoJ in terms of the mill site. And we will continue working through it. Anything else you want to add? Thomas Hinton: No, I think as you said, it does suppress the revenue a little bit on one side versus the other. But what it does do is large construction, you can actually achieve bringing that cash in slightly earlier, if anything. So if anything, it's positive from a cash perspective. So you've got kind of large construction activities, then that can be advantageous for cash actually. Adrian Kearsey: Adrian Kearsey, Panmure Liberum. Three questions, if I may. In terms of water, which kinds of projects have you got in the pipeline and which looking beyond the current AMP do you see sort of coming through? Kier Places 15% currently in terms of revenue of the division, where do you think that can go? And what kind of -- do you think you need to expand your capability within Kier Places in order to grow that? Or is it more about just winning more -- just more of the same kind of work? And then the last one, frameworks, your position within frameworks is not equal across all of the participants within the framework. Which particular frameworks do you think you'll win a greater share? Stuart Togwell: Okay. Again, I'll do my best. Yes, I thought you'd say that. Water, I like the [ time ] there in terms of pipeline. So capital works, we went to the water treatment works. Some of us went to the water treatment works. We're seeing more of that, which is what Maple Lodge is. So more around the capital works. In terms of places, no, we have the capability. It's more of the same. I held back in terms of housing maintenance because that became quite awkward in terms of price per property programs that were in the last 5 or 7 years. But definitely, there is going to be a need to upgrade in terms of housing maintenance properties across the country. And the FM, generally at the moment, we're staying within public sector. I'd like to see if that opens up more opportunities around, particularly around the PPP work going forward. Frameworks, are we equal? There are some that we are more equal than others. That is correct. But generally, the approach with any framework that we go on that we've discussed this morning, we try to have a position in 1 of 3. So if we can get a position in terms of 1 and 3, you have the real opportunity to influence in terms of the customer. You start being able to bring forward your views around outcomes-led design, and it often allows you to work very closely in terms of the alliancing work about what's going forward. Generally, if you look in terms of longevity in the past, education and highways are a stalwart of what we've done. Alongside that, I took a trip down to Bridgewater to look at the environmental work we were doing. We do somewhere between GBP 50 million and GBP 100 million a year on that. Smaller organizations will be talking about it because it will be a larger proportion of their works. But some of the work we do that in terms of our understanding in terms of the environment and how we work with local communities to make sure that we manage water, wildlife, et cetera, is a real strength that we have. And I can see us leveraging that expertise across the other divisions. Maximillian Hayes: Max Hayes from Cavendish. So first, looking at the in-house design consultancy, just looking at the potential to sell these services externally. And then also the improvements in net cash and average net cash balance, has that supported access to any certain frameworks and help develop the pipeline? Stuart Togwell: Okay. In terms of cash, no. But what it has done is reduce the number of questions we've had about net debt with some of the people in the room. But I do see it as a positive sign in terms of where we are. Generally, the turnaround has been accepted. We've closed that off in terms of the frameworks. What this does do, though, is draw people into, okay, Kier, PPP, okay? You get into a position in terms of having surplus cash at some point in the future. We will have conversations with you in terms of how should we be thinking about Kier in those conversations. So, positive. In terms of design, at the moment, we have so much internal. It's a benefit to us. We like to keep it internal. The other benefit we have in terms of the internal model is that when we go to customers, if you like, our outcome is revenue for the other divisions. It's not time on the clock. It brings a different focus in terms of what our design capability do. So I wouldn't want them to move away from that focus and all the work they do for us, moving into an external place where quite often it's time on the clock. So for now, internal. Okay. I think this is the last question. Alastair Stewart: Alastair Stewart from Progressive. A couple of questions. First, following on from Andrew. Defense, very small in terms of the current order book as a percentage, but very big in terms of both pipelines. Have you been getting a sense that, that pipeline is getting more urgent from your clients? And specifically, have you had any incoming calls in the last few months and more particularly -- more particular in the last few days that could move that forward. So that's question one. And question two, GBP 197 million capital employed in property. Given the move to average net cash and the comments on PPP, do you see that GBP 225 million ceiling moving up in the mid-term? Stuart Togwell: Do you want to take that one? Thomas Hinton: Yes, I'll do the last one first. So let's start with the -- you can talk to the defense kind of point, your phone is booming this morning or not. On the property, I said GBP 197 million at the moment. And we were quite clear, we want to get to a 15% ROCE. So we kind of need to prove that. We need to prove it to this room. We need to prove it to ourselves. We need to show that this business can get up to that kind of sustainable return level. And we're confident we can get there, but we need to kind of prove that. I think once we prove that, then you can look to invest further. And to what Stuart said earlier, that doesn't necessarily mean that it's the current kind of design model. It could be slightly pivoted model into other investment areas. It could be a PPP. It could be a specific focus on urban redevelopment. But that's what we're thinking about it. It's about how do we use our cash, let's get the returns, let's prove the returns of the business, and then let's move from there. Stuart Togwell: There's a subtlety that I'm looking for is to make sure it generates revenue across the divisions. So we can actually see it more as in terms of being integrated solution we have. Just going back to defense, I've got to start by saying it's most important that we -- at this time, we think about our people, the 9 employees we have -- employees that we have over in the Middle East. And also, we have -- many of our staff have friends and family of that region. In terms of the urgency, it's been urgent for a while in terms of the need they have, whether it's in terms of providing the nuclear safe havens for submarines or warships, along with improving the living accommodation for -- under the SLA or in making sure that we've got proper safe havens for storage in terms across the country. So there has been an urgency for probably the last couple of years. But what I would say is that Kier saw this as an area of undoubtedly, there was going to be some spend that was going into it, that they were going to start changing their way in terms of the way they approach more to an alliance in way and procuring work through frameworks. So it's a reason why we -- and we needed something to continue the work that we created in terms of the MoJ and defense became a natural place to start moving our resources probably a couple of years ago to be ready for this growth. Alastair Stewart: Specifically, is that urgency getting more urgent? Stuart Togwell: No. Okay. I think we are done. So thank you very much for coming. Thanks for your time. And I'd love to share a coffee with you next door if you've got time. Thank you very much.
Operator: Ladies and gentlemen, thank you for standing by. [Operator Instructions] I would now like to turn the conference over to Mr. Dan O'Neil. Please go ahead, sir. Daniel O'Neil: Good afternoon, everyone. Thank you for joining our earnings call for the third quarter of fiscal 2026. Today, I'm joined by Bill Brennan, Credo's Chief Executive Officer; and Dan Fleming, our Chief Financial Officer. During this call, we will make certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties discussed in detail in our documents filed with the SEC, which can be found in the Investor Relations portion of the company's website. It is not possible for the company's management to correct all risks nor can the company assess the impact of all factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks, uncertainties and assumptions, the forward-looking events discussed during this call may not occur, and actual results could differ adversely and materially from those anticipated, implied or inferred. The company undertakes no obligation to publicly update forward-looking statements for any reason after the date of this call to conform these statements to actual results order changes in the company's expectations except as required by law. Also, during this call, we will refer to certain non-GAAP financial measures, which we consider to be important measures of the company's performance. These non-GAAP financial measures are provided in addition to and not as a substitute for or superior to financial performance prepared in accordance with U.S. GAAP. A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, which can be accessed using the Investor Relations portion of our website. I will now turn the call over to our CEO. Bill? William Brennan: Thanks, Dan, and thank you all for joining our third quarter fiscal '26 earnings call. I'll start by walking through our Q3 results, give an update on our business and share our view on our long-term opportunities. After my remarks, Dan Fleming, our Chief Financial Officer, will provide a detailed financial review of the third quarter and our guidance for the fourth quarter. We will then open the call for questions. In the third quarter, we delivered record revenue of $407 million, a sequential increase of 52% and more than 200% from Q3 last year. We delivered non-GAAP gross margin of 68.6% and generated approximately $209 million of non-GAAP net income. Over the past 18 to 24 months, maximizing network reliability and energy efficiency have been our core mandates as we built our road map and brought new products to market. In AI infrastructure, performance without reliability stalls clusters and scale without efficiency, strains both economics and power envelopes. The strategy is clear, accelerate cluster bring up, maximize XPU utilization and reduce total cost of ownership, all while providing our customers the highest reliability in the industry. Our recent performance reflects the most accelerated growth phase in Credo's history. From fiscal '24 to fiscal '25, we more than doubled revenue. And for fiscal '25 to current year fiscal '26, we expect to triple revenue on top of that. That represents greater than 6x growth in just 2 years. Few companies, particularly in semiconductors have scaled at that pace while maintaining consistent execution, healthy margins and product leadership. Our purpose-built SerDes MICs vertically integrated system model and deep hyperscaler partnerships win at scale. We established leadership in high reliability copper connectivity and built strong position in optical DSPs and retimers. Now our strategy is to lead in reliability, power efficiency and signal integrity across the full spectrum of AI and data center connectivity from die-to-die links to chip-to-chip and board-level links to rack and [indiscernible] scale copper to mid-reach optical and to resilient facility-wide optical solutions. By extending both inward towards the silicon and outward across the data center, we're positioning Credo to encompass the entire connectivity fabric of AI infrastructure. Each layer of connectivity is being fundamentally reshaped by demand for higher bandwidth and faster data rates. AI workloads continue to grow in parameter size, model complexity and cluster scale, driving sustained transitions from 100 gig to 200 gig per lane and the 400 gig per lane in the upcoming years. At the same time, architectures are becoming more complex, power envelopes are tightening and reliability requirements are rising. We believe the industry's persistent push towards higher speed and larger clusters continues to expand our long-term opportunity and our ability to win. I'll now discuss our business in more detail. Our AEC product line once again delivered strong growth, driven by existing customers and new wins, including our fifth hyperscaler. Demand is accelerating across both hyperscalers and emerging Neocloud providers. We continue to believe the industry is early in its AEC adoption. As AI clusters scale, reliability and power efficiency have become the primary design constraints. AECs are now the de facto standard for intra-rack and rack-to-rack connectivity up to 7 meters, increasingly displacing laser-based optical modules. Their reliability and power advantages are driving broad adoption. Our ZeroFlap AECs deliver up to 1,000x better reliability than commodity laser-based optics, while consuming roughly half the power. In XPU clusters where downtime can cost millions, network reliability matters. We're supporting large-scale deployments at 100 gig per lane today and expect a long tail deployment at those speeds. We're fully prepared to support strong industry momentum towards 200 gig per lane or 1.6 terabit ports. Our 1.6-terabit AECs will support Ethernet, UALink and ESUN protocols. Additionally, our PCIe Gen6 AECs are sampling now and will be released to mass production in first half fiscal '27. Our vertically integrated system-level model remains a key competitive advantage. We take end-to-end ownership from SerDes leadership in silicon innovation to system design and qualification, beat telemetry and supply chain execution, positioning us for sustained leadership. I'll now turn to our IC business, including our retimers and optical DSPs. Our IC portfolio spans both optical and copper connectivity across 50 gig, 100 gig and 200 gig per lane speeds. We expect strong optical DSP growth in fiscal '26 driven by 100 gig per lane deployments with increasing traction at 200 gig as customers prepare for 1.6T transitions. For Ethernet retimers, we're seeing significant growth with our 100-gig per lane solutions in both traditional switching fabrics and the rapidly expanding AI server segment. Our PCIe Gen6 retimers remain on track with fiscal 26 design wins expected to convert to production revenue in fiscal '27. Customer feedback has been consistently stellar. We're delivering an unequaled combination of industry-leading reach, latency and power efficiency. We're also excited about Blue Heron, our 200 gig per lane retimer that is purpose built for scale of AI. It leverages our SerDes expertise to deliver long reach, energy efficiency and advanced telemetry with support for UALink, Ethernet and ESUN protocols. These IC solutions address a large and growing market opportunity. As the industry transitions to 200 gig per lane, we see substantial growth potential across multiple protocols. I'll now discuss our 3 most recent product families, where we've made meaningful progress since their announcement last year. At a high level, these products significantly expand our total addressable market by extending Credo's reach across the full spectrum of connectivity links inside the data center. I'm pleased to report that our progress with ZeroFlap Optics is ahead of schedule. As noted in our recent press release, we began production shipments with our first Neocloud customer, Tensor Way. In addition, we're in qualification with 3 additional customers, including hyperscalers and Neocloud operators. At a high level, data centers today face major challenges with extended cluster bring up times and uptime degradation created by the inherent link flat instability of commodity laser-based transceivers. Our ZeroFlap optics were designed to address these challenges directly. Through tightly integrated hardware, optics, firmware and our pilot software with switch level SDK integration, ZeroFlap optics delivered continuous like flat telemetry and autonomous detection and mitigation of potential link flat events before they impact the cluster. This enables a step function improvement in network reliability. From a TAM perspective, Zero Flab optics allows us to address optical connectivity spanning any length within the data center. Based on strong customer traction, we now expect to see a significant production ramp beginning in first quarter of fiscal '27 and continuing throughout the year. Next, I'll discuss active LED cables or ALCs. ALCs extend our system-level ADC philosophy into mid-reach optical by combining Credo's connectivity architecture with the micro LED expertise gained in our Hyperloom acquisition. We're creating a new system-level product that delivers the reliability of power profile of an ADC with a thinner gauge optical cable capable of reaching up to 30 meters. This makes ALC's ideal for [indiscernible] AI networks, where copper reach becomes limiting, and traditional pluggable optics introduced reliability, power and cost disadvantages. ALCs expand our TAM outward from short-reach copper into mid-reach optical, bridging the gap between AECs and conventional optical modules. We expect to sample and qualify our first ALC products in fiscal '27,and production ramp in fiscal '28. Finally, our OmniConnect line of products drives our reach inward towards the silicon to further expand our TAM. Omni Connect combines our purpose-built VSR SerDes with a family of gearboxes for XPU connectivity. Our first product, Weaver, enables up to a 10x improvement in memory beachfront I/O density which can reach up to 10 inches. By converting VSR to DDR, Weaver overcomes the physical fan-out constraints of traditional memory to compute interconnects. Our first OmniConnect customer, Pozitron, plans to leverage this architecture to deliver an inference XPU with 2 terabytes of memory capacity, enabling substantial bandwidth gains in memory intensive workloads, such as real-time AI video generation. We expect the production ramp for the first OmniConnect gearbox to be in fiscal '28. We expect to introduce additional gearboxes over time to enable a composable architecture where the same XPU design can be optimized for inference or training workloads and be future enabled as speeds or protocols change. We'll also develop an OmniConnect gearbox targeting near-package optics with micro LED that will address the reliability, serviceability and availability pitfalls of current CPO solutions, while at the same time, reducing power significantly. To wrap up on the business update, we're proud of our record performance and even more energized by the opportunity ahead. With continued growth in AECs and ICs and 3 new multibillion-dollar TAM expansions through ZeroFlap Optics, ALCs and OmniConnect, we've meaningfully broadened our near- to long-term opportunity. We remain confident in our ability to innovate, scale and grow in the expanding AI infrastructure landscape through our focus on delivering solutions with best-in-class network reliability and energy efficiency. I want to take a moment to express strong appreciation for our silicon operations and system product operations teams. They have done an outstanding job managing supply, scaling production and executing flawlessly in the face of significant upside demand from our customers. Their ability to respond quickly and reliably has not only enabled our record performance, but has also become a distinct competitive advantage and truly reason customers choose Credo. In an environment where execution matters as much as innovation, operational excellence is a differentiator. And with that, I'll turn it over to Dan Fleming for a detailed financial review of our Q3 and our Q4 guidance. Daniel Fleming: Thank you, Bill, and good afternoon. I will first review our Q3 results and then discuss our outlook for Q4 of fiscal year '26. In Q3, we reported revenue of $407 million, up 52% sequentially and more than tripling year-over-year and at the high end of our revised guidance range. Notably, our revenue again grew healthy double digits sequentially and RECONNECT to achieve new record revenue levels once again a substantial year-over-year growth across 4 domestic hyperscale customers. Our top 3 end customers were each greater than 10% of revenue in Q3. As a reminder, customer mix will vary from quarter-to-quarter. We continue to expect that 3 to 4 customers will be greater than 10% of revenue in the coming quarters and fiscal year. And we continue to make progress in diversifying our customer base across hyperscalers, Neoclouds and other customers. Note that with product revenue representing the vast majority of total revenue, we will no longer break out product and IP as separate line items in our income statement. Our team delivered Q3 non-GAAP gross margin of 68.6%, above the high end of our guidance range and up 92 basis points sequentially. Total non-GAAP operating expenses in the third quarter were $77.4 million, above the high end of our guidance range due to our strong R&D investment and up 35% sequentially. Our non-GAAP operating income was $201.8 million in Q3 compared to non-GAAP operating income of $124.1 million in Q2, up demonstrably due to the leverage attained by achieving more than 50% sequential top line growth, while OpEx growth was in the mid-30s. Our non-GAAP operating margin was 49.6% in the quarter compared to a non-GAAP operating margin of 46.3% in the prior quarter, a sequential increase of 327 basis points. Our bottom line once again demonstrated the substantial leverage we are delivering in the business. Our non-GAAP net income was $208.8 million in the quarter, a record high and a 63% sequential increase compared to non-GAAP net income of $127.8 million in Q2. Our Q3 non-GAAP net income quadrupled from Q3 of last year, which clearly demonstrates the magnitude of our top line growth, strong gross margins and our disciplined approach to scaling operating expenses. Our non-GAAP net margin was 51.3% in the quarter. Cash flow from operations in the third quarter was a record $166.2 million, up $104.6 million sequentially. CapEx was $26.5 million in the quarter, driven largely by purchases of production mask sets. And free cash flow was $139.7 million, up more than $100 million from the second quarter. We ended the quarter with cash and equivalents of $1.3 billion, an increase of $487.9 million from the second quarter, driven by the proceeds of our ATM offering, which began in October and ended in December and our strong free cash flow. We remain well capitalized to continue investing in our growth opportunities while maintaining a substantial cash buffer. Our Q3 ending inventory was $208 million, up $57.8 million sequentially. Now turning to our guidance. We currently expect revenue in Q4 of fiscal '26 to be between $425 million and $435 million. We expect Q4 non-GAAP gross margin to be within a range of 64% to 66%. We expect Q4 non-GAAP operating expenses to be between $76 million and $80 million, and we expect Q4 diluted weighted average share count to be approximately 197 million shares. These expectations are based on the current tariff regime, which remains fluid. As we look ahead to fiscal '27, we expect sequential revenue growth in the mid-single digits, leading to more than 50% year-over-year growth. And with that, I will open it up for questions. Operator: [Operator Instructions] Our first question comes from Tom O'Malley, Barclays. Thomas O'Malley: Bill, you mentioned that you saw a ZF Optics ramp in the first fiscal quarter of next year. And you talked about substantial size. Maybe you could compare what a ZF customer engagement looks like versus an AEC customer engagement? And then longer term, if you see kind of a similar pattern to what you've seen in AEC with the customers that you're mentioning, I think you mentioned 3 here, all representing some significant size? Or do you think there's more variation in the customer set when it comes to ZF optics? William Brennan: Yes. I think the -- comparing the customer activity with AECs, I think it's a good way to look at it. Now I understand that we've been in development on ZF Optics for going on 2 years. And so we are well along the path towards not only developing the solution, and a reminder to everybody, it's the first time anybody has taken an optical transceiver up the stack to deliver real-time telemetry data, so you can make real-time decisions on identifying and mitigating potential link flat events before they happen. So basically taking network reliability far beyond what you're able to achieve with commodity laser-based optics. And so I highlight that these products have gone through our own qualification internally, where we harden the solution even prior to sending it to customers for qualification. So it's very similar in a sense that we're delivering a solution to our customers for qualification that's fully vetted. And so moving from providing samples to going right into qualification with the customers, what we're seeing. And so that's why we highlighted the fact that although last quarter, we signaled that the ramp would occur in second half fiscal '27, we feel confident now saying that, that ramp is going to start in first quarter, noting that we've already shipped production units. And so we feel great about it. And so we did an announcement with our first customer, Tensor Wave. It was announcement on both AECs as well as ZF Optics. And so it's really great confirmation that the portfolio that we're delivering is really offering kind of next level overall reliability as our customers build out their clusters. Now I mentioned also that we're talking with hyperscalers as well as other neophytes. We are so early in the process of promoting this product that we couldn't be more excited about the fact that we think this is going to be such a strong ramp throughout fiscal '27. Operator: Your next question comes from Tore Svanberg from Stifel. Tore Svanberg: Congratulations on the record results. Bill, maybe you could just level set us a little bit here. You mentioned we're still in very early stages of AECs. Obviously, there's a lot of excitement around CPO. So maybe you could just help us on what's driving some of the use cases for AECs right now. How should we think about those developing, especially in fiscal '27 and fiscal '28? William Brennan: Yes. So I think the narrative on AECs is very similar to what has been played out up to this point. There are several areas within the data center network, where AECs make a really compelling solution and really almost becoming de facto in an intra-rack as well as now more than ever, we're seeing rack-to-rack solutions that are within the reach of 7 meters. What's driving it is it's network reliability and power efficiency. And so I would only say one of our customers were really fully penetrated on all the swim lanes and those being GPU to host connections in the scale-out network, front-end connections within those same racks and then this aggregate in switch rack. Those are really the swim lanes that we've talked about. And so we see there's really great growth opportunity, not only for 100-gig per lane deployments as we see those increasing, but also as we see a shift to 200 gig per lane, it's even a stronger value proposition at those speeds. And so that's going to help us drive more volume as well as there's an uplift in ASPs. And so you mentioned the narrative on CPO. And look, this narrative has been one that's existed in different forms for the last decade, started with MBOM, mid-board, optical modules that have moved on to onboard optics, it's moved on to many different acronyms over time. And the bottom line is, just recently, I think there's been a bit of a signal-to-noise ratio issue in the market. And the noise right now is dominating the signal. So it's not an either/or type of situation. It's about deploying the right technology at the right reach and the right power head below. And we see the industry is evolving even more so to a heterogeneous mix of short-reach copper, pluggable optics, near package optics and eventually CPO. And so the strong interest we've seen in ZeroFlap optical is a kind of a clear indicator that reliability matters more than ever now as AI networks are the bulk of the deployments and as these clusters scale. And so the bottom line is that the way we see it that until NPO and TPO solutions can deliver bulletproof reliability, deployments are going to be somewhat limited, which is why many of the forecasters show low single-digit share in the switching market over the next 3 years. Our investments are heavily focused on reliability. And so when we're talking about technologies that will deliver the higher density reach promised by CPO and NPO, our focus is on delivering the same reliability as AEC and ZF Optics. And so hopefully, that gives you color based on your CPO comment. Operator: Joseph Cardoso from JPMorgan has the next question. Joseph Cardoso: Congrats on the results. Maybe just wanted to get an update on how you're thinking about the composition of the 50%-plus growth heading into next year, as we think about the AEC opportunity continuing to ramp, but also confluencing with the material ramps of other areas of the portfolio like the PCIe solutions, optical products, et cetera. Can this be a year where we start to see a more material contribution from the non-AEC offerings in the portfolio and where they can drive a more material portion of the mix as early as fiscal '27? Or is the expectation really that's more of a fiscal '28 story and beyond? William Brennan: I think that it's fair to say that we'll see a different composition between copper and optical in fiscal '27, specifically as ZF Optics round. That's -- with that, I'll say that we do expect growth in AECs. We expect growth in ICs and then the new wave of growth will come with ZeroFlap optics. And within that, IC and AEC will include the PCIe business that we're earning. In fiscal '28, we expect to layer in our active LED cables or ALCs and in addition, our first gearbox as part of the OmniConnect family. That's really fiscal '28. Operator: Your next question comes from Vivek Arya from Bank of America. Vivek Arya: Just a clarification to Dan first on what drove the upside? Almost $60 million plus upside was there a one-off or anything else right in your projects in the reported quarter? And then, Bill, I wanted to get back to this question of how complementary versus competitive is AEC versus optical solutions because over the last 3 months, we have seen this massive divergence in the performance of stocks of your optical peers and this morning, we saw NVIDIA invest in 2 of your optical peers. So why isn't that a very important right incredible pushback that the market for AEC might be limited? So I just wanted to get your views on where copper versus optical is competitive and where they are more complementary? Daniel Fleming: Vivek, so let me address your first question regarding what drove that strength. And I'll answer a question that wasn't asked as part of my answer. If you look at our top customers for the quarter, we've just continued to see strength across all of our hyperscale customers. In fact, our top 3 customers all grew sequentially from Q2 to Q3. So that really drove that growth. And our largest 3 customers in Q3 were also our largest in Q2, as you would expect but in a different order. Let me just talk briefly about our largest customer. They were 39% of revenue, and they were also the same customer that was our largest customer in Q1. So that was quite a large increase quarter-to-quarter for them. The second largest customer was 32% and they were our largest customer last quarter. And then finally, our third 10% customer was 17% of revenue, and that was the first hyperscaler that we had to ramp. William Brennan: And related to the question about the AECs versus optical or actually how they complement each other. Really nothing has changed in the narrative. I think you mentioned NVIDIA, I think they've been really outspoken that where you can use copper, you will use copper. And so it's -- the reason is very basic why somebody would choose an AEC over, say, a laser-based optical module. And that's really reliability, number one. Power efficiency, number two. And ultimately, total cost of ownership, number three, that equation is not going to change. As we go towards 200 gig per lane 1.6T deployments, there is an effect that as you go faster, the length of connection is going to decrease slightly, we believe, from 7 meters to 5 meters. And so if you look at our investments over the last couple of years, it's been heavily weighted towards optical as we've talked about. There is a tremendous demand in the optical space. And that's in addition to the demand in the AEC space as well. Our approach is fundamentally different, and we think suits us well, which is to focus on delivering bullet-proof reliability, again, by going up the stack with real-time continuous telemetry on each link to be able to identify links that are degrading in single integrity and being able to mitigate by taking those links down in a proactive manner, in an orderly manner. I'll also say that the work that we're doing on active LED cables, ALC -- we're talking about delivering a different class of optical product, one that is at a base technology level as reliable as copper. You get the same reliability profile, the same energy efficiency profile, the same cost profile. But you get reach initially up to 10 meters, and then next step will be 30 meters. And so that's going to be a really unique new product category as we talk about the heterogeneous world between copper and different forms of optical. Operator: The next question comes from Quinn Bolton, Needham & Company. Quinn Bolton: I guess given all the noise in the market around CPO and optical, I was wondering if you could kind of just discuss some further detailed two products: One, your Blue Heron DSP for scale up AEC connections, are you seeing interest in that? And then sort of a similar question on -- Bill, I think in the prepared comments you talked about in OmniConnect gearbox with an ALC-CPO solution somewhere down the road. Can you give us any sense on timing when you would have a ALC-CPO solution potentially coming to market? William Brennan: Sure. So I want to note, first of all, that the bulk of our revenue from AI is really in scale out now. We don't have any revenue for scale up. And in fact, that market is relatively small in comparison today. There's great promise that the scale-up market is growth, especially if it goes from rack scale to [indiscernible] scale, and that's driving a lot of these conversations. The Blue Heron product that we introduced -- announced our first customer, upscale AI. This is a 200 gig per lane retire that supports UALink, ESUN, Ethernet. We will build AECs with this product as well. And so as that scale-out opportunity takes shape, we're going to have a full portfolio of products that we can offer. As it relates to my comments about OmniConnect, yes, it is a very straightforward path to basically extend the OmniConnect architecture to add a gearbox that converts from VSR to micro LED. And so the work we're doing with ALC, that's going to be the proof point. And ultimately, there's going to be a direct line of sight on doing a gearbox that takes that VSR conversion to, say, a pigtail that you can connect micro LED with. And so that is going to give a relatively straightforward lower-risk path to a near package optics solution. And again, that solution is going to be delivered with bulletproof reliability and it's going to be done at a power that's much less than laser-based CPO. Operator: The next question is from Sean O'Loughlin, TD Cowen. Sean O'Loughlin: I will add my congrats on a really incredible set of results. I had a quick clarification. I think last quarter, you mentioned that you expected the fourth hyperscale customer to represent greater than 10% of revenues for the full fiscal '26. Obviously, you mentioned 3% to 10% customers this quarter. Is that still your expectation for the full fiscal year? And then on the OpEx guide, I was a little bit surprised to see that it was almost flat quarter-over-quarter, obviously after a pretty big step up last quarter. But with all the irons in the fire, including the acquisition this morning. Is there just some constraints around I don't know whether it's hiring qualified mixed-signal engineers? Or is there something else going on in OpEx? Or am I just overthinking all of this and you're just executing to your road map? Daniel Fleming: Yes. So let me address the first question first. With regard to our fourth hyperscaler that we talked about, we made those comments last quarter, we've obviously experienced a lot of upside really driven by our largest customer this quarter in the current time frame. So that may make the math, while they're still in line with our expectations from 90 days ago, they may not be a 10% customer for the full quarter, if that makes sense or for the full year. With regard to OpEx, a couple of dynamics there to note. One is there was a large step up this quarter for R&D spend. And one thing to note is that it was off a relatively light spend in Q2. And in addition, I highlighted two things: project-related spend and hiring. The project-related spend was higher than has been typical related to a lot of these things that we're working on. So if that were to come down, you might have some incremental hiring to -- they just happen to kind of offset for the year or for the quarter. So that's kind of the underlying dynamics in our Q3 to Q4 R&D spend if that helps you out. Operator: Vijay Rakesh from Mizuho is up next. Vijay Rakesh: Just a question on the 1.6T ramp. I think as you go to 1.6T, most of the big hyperscalers still seem -- have not talked much about CPO. So is your assumption that as 1.6T ramps into calendar '27, '28 that it will be predominantly copper? And as you mentioned, the ASP bump that should drive a pretty nice upside there between the adoption of copper and ASP? William Brennan: Yes. For the 200-gig lane per market, we very much see that, that market is going to be addressed by AECs. And then a combination of laser-based models, we'll have the ALCs that ramp into that market as well. But that would be what I would consider the new product category. I think CPO is still sometime in the future beyond that. We see our customers ramping 200-gig programs really at very different schedules. Of course, NVIDIA is going to lead the charge with Vera Rubin, but many other customers will follow on a slower time line. So we do expect to see very strong business in all 3 categories that I just mentioned. So we'll have ZF optics that are going to be delivered in that time frame. I will say from an optical DSP standpoint, we're getting a lot of uplift right now for LRO. Power is becoming a much, much more important thing as our customers go to 200 gig per lane. So I think we have a really nice position. You mentioned ASPs, and that's right. There is going to be an uplift from 800 gig to 1.6T across the board, across the entire portfolio. So we feel great about the way we're positioned there. Operator: Your next question is from Quinn Bolton, Needham & Company. Quinn Bolton: The follow-up, I just wanted to ask you guys announced the Chimera acquisition this morning. It looks like that's kind of more layer 2 stuff, right, Mac, TCS, Mastek security, are you buying that just to kind of enhance the IC product that you've done historically? Or is this a move to try to get into more Layer 2 solutions down the road? William Brennan: Yes, I appreciate the question. We didn't have a chance to get it in the prepared remarks, given the fact that it's closed basically right at the same time. But we feel great about the combination of bringing Chimera into Credo. We've been collaborating with Chimera as an IP partner since 2022. And Chimera has a really strong reputation in protocol IP, error correction as well as security IP technologies. So we view this as a strengthening of our ability to deliver complete system level connectivity solutions. And you alluded to maybe going up, yes, absolutely, that's part of the opportunity. And so we're -- we feel great strategically about this and the fact that they'll be dedicated to Credo projects now, it will accelerate our end-to-end connectivity road map and expanding the overall platform. Operator: The next question is from Sebastien Naji from William Blair. Sebastien Cyrus Naji: There's been a lot of focus lately on supply chain constraints, including the high cost of memory. I guess what type of supply chain risks are you seeing for Credo, if any? And is there anything in the supply chain that can emerge as maybe a gating factor to your growth in some of the coming quarters? William Brennan: Yes. So I think we got a little bit out in front on this topic last quarter. I feel great about our supply chain for Credo, and that includes wafers in all of the different product categories that we've talked about. And that encompasses 12-nanometer, 7, 5 and 3. So we did a lot of work over the last quarter to make sure that we are aligned with our supply chain partners, not only on the wafer level but also the packaging level. So I think it's clear that we're going to be able to support our plan as well as upside that we expect. In the market, we are absolutely in kind of uncharted territory where I think supply chain is going to become more and more of a differentiator. And as it relates to the supply chain issues that are outside of our normal IC builds, I would say, from a system level, there's no issues from a supply chain standpoint there. I will say at an industry-wide level, memory, as all of a sudden, been a concern. And if anything, we can look at the first OmniConnect product Weaver as almost a solution to some of the pain points where we enable the use of DDR over HBM, which I think is probably the tightest area within the memory market right now. Outside of that, there's been a lot of conversation about lasers. But from a ZF Optics perspective, we feel that we've more than underpinned our demand for '27 and really beyond. Operator: The next question today comes from Jim Schneider, Goldman Sachs. James Schneider: Bill, it was helpful to hear sort of the -- you lay out the progression of your various product lines, especially the optical products over the next couple of years. I was wondering if you could maybe just give us a sense of how we should be modeling the strength of those optical products, a sense of where we might end fiscal '27 in terms of their contribution, are these something that could be kind of sort of 15% to 20% of total revenues of the company at an exit rate? Or should we be modeling something a lot less than that? Daniel Fleming: Yes, we haven't been too specific in that. But if you just look at where we are this year based on how we've guided Q4, we're just -- you'll end up just north of $1.3 billion. The 50% growth gets you to nearly $2 billion for next year. Bill did kind of mention that we expect AEC to continue to grow fiscal '26 to fiscal '27. So there will be a significant -- we think it will be a material component of our fiscal '27 for specifically ZF optics. But as that progresses and as our customer engagement continues with that product line, we'll give you an update as we enter the new fiscal year next quarter. Operator: Your next question is from Suji Desilva, ROTH Capital. Sujeeva De Silva: Congrats on the progress here. Just quickly, how many customers do you expect to be ramping ZF Optics across in the coming fiscal year? And just a longer-term question on the gearbox. You talked about being able to handle training and inference in the same architecture. I was curious on if you could elaborate on that opportunity. It sounds interesting. William Brennan: Sure. Sure. Absolutely. You got to be confused with the second question. What was the first again? Sujeeva De Silva: ZeroFlap Optics, how many customers you think you'll be ramping it across fiscal '27? William Brennan: My expectation is throughout fiscal '27, we're a bit early talking about fiscal '27. But my strong expectation is that we'll run more than 4. We've got 4 in now. And so I expect to add to that list. And I should reiterate that it's a combination of hyperscalers as well as Neoclouds. And the second part of your question was on OmniConnect. And so if you can imagine, the key enabler for OmniConnect is really our VSR SerDes that sits on the XPU side of the connection. And gearboxes are put together that mirror that VSR SerDes and then gearbox it to something else. And so I think it's pretty clear for memory that a first DDR gearbox would be for 5. And you can imagine as the market shifts to LPDDR 6, that all you have to do, you wouldn't have to retake out an XPU. You could just simply change the gearbox. And then you have that inference capability with that next-generation memory. And so you can also imagine, say, building a scale-up gearbox. And at first -- the first gearbox might be a Gen7 and Gen6 combo to where that XPU has got that same VSR SerDes and the gearbox would take those 100 gig lanes and Gearbox to either Gen7 or Gen6 PCIe. You can imagine when 200 gig per lane is really ready for that given customer you could just simply drop in a new gearbox that would support 200 gig per lane with any of the protocols we've talked about being Ethernet or UAL or ESUN. And you can extend that case to scale out as well. You could have a gearbox that would, say, improve, say, the first one that might be 200 gig per lane. As soon as 400-gig per lane was ready, you could simply drop in a new gearbox, that would gearbox lanes of 100 up to 400 gig per lane. So you're talking about having the ability to build an XPU that becomes composable based on different markets and it becomes composable based on the future enabled aspect of just being able to upgrade the gearbox to either the next speed or different protocol. Operator: The next question comes from Christopher Rolland, Susquehanna. Christopher Rolland: I guess the first one is probably to you, Bill. Just about AEC applications and kind of where this may be moving around, if you could talk about where you think you're being used in terms of front end versus scale out, scale up or like traditional cloud where you're being used today? And what this looks like over the next couple of years in terms of changes? William Brennan: Yes. So I'd say the part of the network that's probably where we're strongest is on scale-out. And so this is where we really see the full benefit of AECs, as we're talking about leading edge speeds, and we're talking about in the part of the network where reliability really means faster time to cluster stability as well as continuous uptime. And so we do very, very well scale out. Front end kind of comes along with it. And then we're also seeing a couple of customers now that are deploying in switch racks or disaggregated chassis. So it's really across the board, but I would say our real strength is in scale-out. Operator: Next up is Karl Ackerman, BNP Paribas. Karl Ackerman: Bill, perhaps a follow-on to that question earlier. You indicated much of your AI revenue for AC products is for scale-out networks, how should we think about the $5 billion TAM for AECs split between front-end versus back-end links between the server NIC networking switches? And Dan, could you speak to why gross margins are guided down roughly 360 basis points at midpoint of your outlook? Is it just conservatism? Is it near-term product mix? Anything around that would be helpful. Daniel Fleming: Yes. Let me address the gross margin question first. So overall, as you mentioned in Q3, gross margin at 68.6%, up 92 basis points sequentially. We've really, over the last, say, 7 to 8 quarters, really seeing a significant benefit to increasing scale. But we've also been very persistent in saying that the gross margin expansion will always be linear as we continue to increase scale. There will always be differences from quarter-to-quarter in product mix and we are conservative in the way we forecast. We believe that we have not changed our long-term expectation in the 63% to 65% range for gross margin. And we've clearly entered this phase where we're at or above that high end of that long-term expectation. So it's really just a function of how we view the world and how we forecast our gross margin, and it's a very conservative forecast. William Brennan: Right. On the -- you asked about the AEC TAM and the $5 billion number. So we're not the group that really focuses too much on the top-down forecast. We leave that to the market forecasters. And -- but I can give you my perspective on the market opportunity. And I think largely, the market opportunity that we see is scale-out networks, I think that will transition into some share of the scale up networks as they become deployed. And then, of course, front end is going to be smaller than scale out probably on the order of -- it will probably be 20% to 25% of the total scale-out market as we see it. And then this aggregate and switch market, that one is yet to be seen, but that could be a significant TAM if we see that kind of architecture deployed broadly, which there's a good case to be made for. Operator: Tore Svanberg from Stifel. Tore Svanberg: I just had a follow-up. So this pull in of the optics business, Bill, I mean is that just mainly because of certain technical milestones that [indiscernible] or are there market dynamics? And the reason I'm asking the question because obviously, there's concerns about the availability of commodity lasers. So just trying to understand exactly what's driving that pull in by a few quarters? William Brennan: Well, the pull-in is being driven by customers pulling it. I mean, this is a real indicator that as we've said many times regarding AECs, that reliability is really critical, again, from the standpoint of the time to bring up a cluster and the uptime that you can expect after that point of stability. And so it's a direct improvement in productivity. And so as AECs have been much more popular as a result of people getting it, right? The minute that we talked to our customers about ZF and we talk about extending that reliability into the optical space, it's very rare that somebody would say, yes, I really don't want that. So it's been really customer pull that's caused us to feel more confident in articulating that we expect the ramp to happen early in '27, early next quarter. And so the -- from a supply chain standpoint, understand, we've been working on this for 2 years. And so we've had the mindset that we would carry the model from AECs into ZF optics. And so we've been out there underpinning supply along the way. We've made firm commitments to supply chain partners, and we feel very confident about our ability to ramp even though we pulled in 6 months. Operator: And everyone, there are no further questions at this time. Mr. Brennan, I'll hand the call back to you for any additional or closing remarks. William Brennan: Yes. Thank you. I really appreciate the ongoing interest and support in Credo. We'll talk to you all very soon. So again, thank you very much. Operator: Once again, ladies and gentlemen, this does conclude today's conference call. You may now disconnect.
Raquel Cardasz: Good afternoon, everyone, and thank you for waiting. I'm Raquel Cardasz from IR, and we would like to welcome everyone to Pampa Energía's Fourth Quarter of 2025 Results Video Conference. We would like to inform you that this event is being recorded. [Operator Instructions] Before continuing, -- before continuing, please read the disclaimer on the second page of our presentation. Let me mention that forward-looking statements are based on Pampa Energía's management beliefs and assumptions and information currently available to the company. They involve risks, uncertainties and assumptions because they are related to future events that may or may not occur. Investors should understand that general economic and industry conditions and other operation factors could also affect the future results of Pampa Energía and could cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the video conference over to Lida. Please go ahead. Lida Wang: Hello, Raquel. Thank you very much. And hello, everyone. Good afternoon. Thank you for joining our call. I will make a really quick summary so we can spend more time on questions with the management today. Q&A, we have our CEO, Mr. Mariani; our CFO, Mr. Zuberbuhler; and our Head of Oil & Gas, Mr. Turri. So let's go ahead with the first slide where we make a quick summary of 2025. November 25, 2025, marked our 20th anniversary of Pampa and the creation of Pampa. Back in 2005, we did not produce any oil or gas or did not generate any single megawatt hour of generation, electricity. So 20 years later, Pampa accounts for 9% of the country's total natural gas production and reached a record daily production of 104,000 barrels of oil equivalent during the winter of 2025. This year also marked a steep change in our upstream profile. Our black flagship shale oil development at Rincón de Aranda began the year producing less than 1,000 barrels of oil per day and now reached a 20,000 barrel goal by December of last year. As a result, total annual average production exceeded 84,000 barrels of oil equivalent per day. This is 8% higher than last year and 73% up since 2017, the year after we acquired Petrobras Argentina, reflecting the sustained organic growth and disciplined capital allocation. In the Power segment, we consolidated a 15% share of Argentina's net electricity output, achieving an outstanding 94% thermal availability rate in 2025, reaffirming our position as the country's leading IPP and demonstrating a reliable, efficient fleet operating under a gradually normalizing market framework. At a consolidated level, EBITDA grew 8% year-on-year, surpassing the $1 billion mark, mostly driven by power, gas and Rincón de Aranda. While oil and gas and power each represent half of the EBITDA, we expect that ongoing growth at Rincón de Aranda will further expand Oil and Gas footprint in the EBITDA. So Pampa and its subsidiaries are deeply committed to the country's energy development. In 2025, we hit a new record high of $1.4 billion in CapEx, of which roughly half was testing to Rincón de Aranda, the largest single project development investment in our 20-year history. In 2026, we expect to set a new record high, allocating $770 million in Rincón de Aranda, very similar to last year to reach production plateau, plus another $400 million for maintenance across our operations and around $600 million for TGS'’ private initiative project. So moving on to the Q4 results. The quarter's adjusted EBITDA amounted to $230 million. This is a 26% year-on-year increase. Power generation was the main contributor, where, since November the new guidelines for the whole electricity market have allowed power producers to operate under a more decentralized scheme, improving price signals and enabling us to capture operational efficiencies and synergies with our E&P gas. Rincón de Aranda was the second key driver with this production ramping up -- ramp-up accounting for 23% of the quarter's EBITDA, supported by 10 active paths as of today. Our capital structure continues to strengthen following the issuance of our 12-year international bond. We closed the year with a net debt-to-EBITDA ratio of 1.1x and average debt life of almost 8 years. Quarter-on-quarter EBITDA decreased due to the gas seasonability -- seasonality, sorry, offset by Rincón de Aranda and steady contributions from our utilities, TGS and Transener. CapEx surged 81% year-on-year to $371 million in the quarter, of which $249 million were invested in the development of Rincón de Aranda. Okay. So moving on, on the Slide 6. The Oil and Gas segment adjusted EBITDA was $77 million in Q4, more than doubling last years, driven by Rincón de Aranda, increased gas exports and industrial demand. Higher transport and treatment costs partially offset these gains. Compared to Q3, EBITDA declined due to the gas seasonality, but was smoothed by Rincón de Aranda. Lifting costs averaged $8 per barrel of oil equivalent, slightly below last year due to higher crude oil output and stronger gas demand, offset by increasing gas treatment costs and the lease of temporary facilities at Rincón de Aranda. Quarter-on-quarter, lifting cost per boe increased due to this gas seasonality. Gas lifting costs remained flat year-on-year at $1.2 per million BTU, an average of $1 during the 2025, but rose quarter-on-quarter, again, because of the gas seasonality, while oil declined sharply to below $11 per barrel from $36 last year's Q4. This is because -- mainly because of Rincón de Aranda's ramp-up and the divestment of mature conventional blocks. Remind you all that last year, Q4, Rincón de Aranda was really a greenfield, produced only from one well. On top of that, we were recording trucking expenses, testing expenses, and we also held a lot of mature blocks that today are divested. Total production averaged more than 81,000 barrels of oil equivalent per day, up 32% year-on-year. This is led by Rincón de Aranda and Sierra Chata, partially offset by decreases at El Mangrullo and in nonoperated blocks as well as the divestment of El Tordillo. Quarter-on-quarter, production dropped 18%, again, explained by the gas seasonality. The production mix continues to evolve with oil rising to 22% of total output, driven entirely by Rincón de Aranda. Crude oil prices averaged nearly $61 per barrel in Q4. This is 10% lower than last year due to the weaker Brent prices. Without the hedging at Rincón de Aranda, our realized price will have been $53 per barrel. So focusing now exclusively on Rincón de Aranda, the ramp-up stays on track. In Q4, we reached the first goal of 20,000 barrels per day after tying two pads -- two new pads with an average quarterly production of 17,100 barrels per day. This is a 19% increase quarter-on-quarter. As of today, 10 pads are online, of which 3 of them are currently undergoing testing -- well testing. And -- plus we have another two pads, DUC pads and two other pads are under fracking. In 2025, Rincón de Aranda, contributed $126 million of EBITDA. Infrastructure build-outs, thanks to the RIGI incentive regime continues in parallel with the field development. Next month, we are installing an additional temporary processing facility with a focus on reaching 28,000 barrels by mid-2026, a key milestone toward the final production target of 45,000 barrels expected in 2027. So moving to Gas. Sales grew 10% year-on-year, but dropped 23% from Q3. This is, again, explained by seasonality. Mangrullo continued to lead the output, though its share shrank to 46%, while Sierra Chata grew to 38% share with production up 39% year-on-year, supported by a new pad that we tied in during the quarter. Together, they accounted for 84% of the total gas production. Gas prices averaged $3 per million BTU, flat year-on-year. Industry sales supported the pricing, offset by lower export prices due to the Brent underperformance and a drop in residential due to the lag tariff pass-through of the devaluation. In Q4 this year, 72% of our gas was sold under the Plan Gas GSA, CAMMESA and Retail, down from the 81% Q4 last year due to the transfer of certain rounds of the Plan Gas volumes to fuel self-procurement in power, which represented 4% of the total sales in Q4 '25. Now in December, we started to formally doing the self-procurement of gas in Genelba and Loma de la Lata. The self-procurement increased to 41% on average in January 2026. So as a result, Plan Gas GSA exposure shrank to 37%. With the new guidelines, in place, we expect 40% of this year's production to supply our own gas -- our own power generation, capturing margins and leveraging synergies between these two core businesses. Before moving from E&P, I want to just do a quick update on reserve. Total proven reserves rose 28% to 296 million boe, driven by our increased activity in Sierra Chata and specifically in Rincón de Aranda. Shale reserves grew by 55% year-on-year to 204 million barrels and with shale oil now accounting for 19% of total reserves. The reserve replacement ratio was 3.2x, extending the average life to 10.2 years. Since 2019, proven reserves have increased 118% with the most significant expansion coming from shale since 2023 when the year when we started to actively develop Vaca Muerta formation. Okay. So moving to power generations. We posted an EBITDA of $111 million in Q4, up 28% year-on-year, mainly driven by stronger spot prices under the new guidelines, especially -- partially offset by power dispatch at Genelba's new CCGT due to the program maintenance. Total availability declined to 91% due to the scheduled maintenance in Genelba and Loma de la Lata and the ongoing outage that we are experiencing in HINISA since January. However, Pampa's’ thermal availability continues to outpace the national grid under the new framework, also Energía Plus B2B contracts were discontinued, though we managed to recontract in the B2B market. So contract capacity remained stable year-on-year. With the new framework also performance balances between contracted capacity and the spot margin. So value creation also can be driven by efficiency and fuel management. Those units with high load factors and self-procure fuel will achieve higher margins. Turning to cash flow on Slide 11. We show the parent company figures because this is aligned with our bond perimeter. Despite the higher CapEx at Rincón de Aranda, we posted a limited $20 million free cash outflow in Q4, offset by strong EBITDA and working capital inflows mostly from winter collections. As a result, cash and cash equivalents stood at $1.1 billion at the quarter end. This is $210 million more than September close. Finally, on the balance sheet, gross debt was nearly $1.9 billion, down 9% since 2024 December. In November last year, we issued a $450 million international bond maturing in 2037 with a record 20-year tenure. This is the first long-dated issuance by an Argentine corporate over a decade and extending our average life to almost 8 years. The proceeds from this issuance and the 2034 notes that we issued in May were used to redeem all the outstanding international bonds, the '26, the '27, the '29 notes and some of the local dollar bonds. As a result, net debt reached to $801 million. This is 1.1 net leverage, maintaining a conservative capital structure while funding growth. Well, so this concludes the presentation. Thank you for hearing me. Now the floor is open for questions. [Operator Instructions] Lida Wang: All right. So we start -- Alejandro Demichelis from Jefferies. How do you see the evolution of production? Please split between oil and gas and of drilling and completion and lifting costs in 2026? Production, drilling -- D&C, lilfting costs. Horacio Jorge Tomas Turri: Okay. Good afternoon, and thank you, everybody, for joining. Regarding production, let's go first to oil. We are, as Lida mentioned, currently in around 19,000 barrels per day. Our target is to reach 25,000 barrels per day by the end of March, beginning of April and then keep on ramping up to 27,000, even 28,000 barrels per day as of the half of the year. All of this is coming out of Rincón de Aranda. In terms of natural gas, we just closed February around 14 million cubic meters per day. We will probably be reaching a peak of around 18 million cubic meters per day during the winter and an average of approximately 13.5 million cubic meters per day compared to 12.5 million cubic meters per day in 2025. In terms of drilling and completion, in Rincón de Aranda, we drilled 20 wells. We're going to be drilling 20 wells and completing 35. And in Sierra Chata, we will be drilling and completing 8 wells each. And I'm missing lifting costs, which are in the range of -- will be in the range of $10 per barrel. Lida Wang: Yes, until we get... Horacio Jorge Tomas Turri: Until we get the CPF. We are talking about 2026 and a little bit less than $1 per million BTU in our gas operations. Lida Wang: Great. So let's go to the next question. Next question comes from [ Guido Visocero from Nalaria ] about the hedging. How are the royalties settled? Are they include in the hedge? Or is that independent and settled at the market? Horacio Jorge Tomas Turri: No, royalties do not have any connection to the hedging. They are set at the market price. Lida Wang: All right. Next question, Alejandro Christensen from Latin Securities. How much impact have you seen so far from Resolution 425-25? And how much additional impact do you expect in 2026? Could you provide some color on the EBITDA growth outlook for this segment next year? Next year, I guess, '27, right? Gustavo Mariani: This year. Good afternoon, everybody. Thank you for joining. The impact of the resolution so far, it's -- I think what we have been saying in previous calls is between 10% and 15% vis-a-vis the EBITDA generation that we had in 2025. More or less. And that is what we expect for the segment as a whole when you compare 2026 vis-a-vis the previous year. Lida Wang: I guess 2027 is too early to say, right? Gustavo Mariani: Say it again. Lida Wang: 2027, it's too early to say. Gustavo Mariani: Too soon to say. Yes. What this resolution brings is also an improvement in our E&P business, and that is thanks to the fact that now we are self-procured. We are selling the gas and our thermal power use is provided by our E&P segment. So that also brings -- and again, we are expecting here, but it's so far what we have seen in January and February, a 10% increase in quantity in the natural gas produced by the segment, and that is thanks to the fact that we are self-procuring in our thermal plants. Lida Wang: We're kind of not putting much number of that profit, right? So we are -- the number you said is only for power generation, but the fact that we are self procuring this vertical integration, we are not putting a number so far ,an effect, right? An impact. Gustavo Mariani: Yes, that's correct. So that's -- in our projections, we expect on the power generation segment around 10% to 15% increase in EBITDA and another increase coming from the fact that the total gas produced by the E&P segment will also go up by around 10%. Lida Wang: That's right. All right. Next question coming from Alejandro. Alejandro as well he says, have you signed any PPAs with private counterparties for energy or capacity? Gustavo Mariani: Yes, we have been very active since November that this new resolution is -- our commercial team has been extremely active. If I remember correctly, I think that we have sold like 70 -- now you can sell energy and capacity. We've been active in both. Signed more than 100-something contract for a total of around 70 megawatts. So yes, we have been very active there. Lida Wang: All right. And then how are you seeing natural gas demand and pricing in the industrial sector, industrial evolving during Q1 '26? Horacio Jorge Tomas Turri: We see the industrial demand is stable. It accounts for less than around 10% of our overall production. And given the changes in the self-procurement it's not a segment that we are very familiar, we are not that interested. So it would have an effect in Pampa Energía. Lida Wang: All right. Next question coming also from Alejandro. What percentage of oil production remains unhedged throughout 2027? Gustavo Mariani: Throughout 2027 means until or until the end of 2027? Lida Wang: Probably it means until 2027 in English, right? But I don't know. Gustavo Mariani: So we are fully -- basically, we are fully hedged 1 year going forward. So until first quarter of next year, we are fully hedged. Lida Wang: All right. Next question coming from Bull Market, Felipe Collazo. Following the deregulation, has Pampa been able to start acquiring gas from its own wells? I think it's all self answer. Can you give a guidance of what the savings in fuel costs will amount during 2026? Savings in fuel costs? I don't see savings. Horacio Jorge Tomas Turri: We're making profit out of it. Lida Wang: We are vertically integrated. Horacio Jorge Tomas Turri: Exactly. Lida Wang: Yes. So we are producing more than before, right? Horacio Jorge Tomas Turri: That's right. Lida Wang: So January, we produced. Horacio Jorge Tomas Turri: We are particularly producing more during 2026 in the winter time. Lida Wang: Yes, it will be more like... Horacio Jorge Tomas Turri: We will have a flat curve. Lida Wang: But Q1 is already higher than Q1... Horacio Jorge Tomas Turri: We already said that February ended up with almost 14 million cubic meters per day. Lida Wang: Well, yes, last year first quarter, it was a little bit different because Q4, it was very bad, and they took -- CAMMESA took more gas. But even that, the production... Horacio Jorge Tomas Turri: Just taking into account that the overall average of '25 was 12.5 million cubic meter, and we're saying that only February is around 14 million cubic meters per day. So we will definitely be -- our estimation is that we will be producing around 13.5 million to 14 million in 2026. Lida Wang: How long do you expect the RIGI approval to take for the Rincón de Aranda treatment plant. We used to think that application has been filed by mid-2025 when it was first announced. But some news articles from about a month ago suggest it was just done last January. Could you clarify that? Gustavo Mariani: Yes. I don't recall when we filed the RIGI for upstream, but it was definitely third -- fourth quarter -- of last year. We haven't been approved yet. But recently, they have -- there was a new decree adding upstream of oil to the RIGI. So we are starting to file for an additional -- yes, an overall RIGI for the full development of Rincón de Aranda. Lida Wang: All right. Do you plan to fund the CapEx by via new debt issuance? Adolfo Zuberbuhler: Hi everyone. The base case scenario, the answer is no. The idea is we have a big cash position that we have been acquiring with our free cash flow and last year debt issuance. So the base case is that we use part of that cash to complete our CapEx investment of this year. That being said, if we decide to embark in new projects or any other new investments, we'll have to revalue that decision, and that base scenario. And of course, there is always-- I am very opportunistic. So if spreads keep tightening, that is something that we will look. But the base case scenario is that we will face the capital investments with our cash position. Lida Wang: Next question comes from Juan Ignacio Lopez from Puente. I think we haven't answered this yet. But what's the guidance about CapEx for 2026, Oil and gas and Power? Gustavo Mariani: Around total CapEx? Lida Wang: Sorry. Before that, we don't give guidance. But I will give you -- we will share with you what our Board approved by the budget -- for the budget, right? Gustavo Mariani: As Lida says, the restricted group only. So it's basically it's around $1.1 billion, basically $1 billion, the E&P segment and it's less than $100 million on power generation because it's only maintenance CapEx. So we don't have any project -- any new project going on, on that -- on the Power Generation segment. That answers? Lida Wang: And oil? Gustavo Mariani: Oil almost around... Horacio Jorge Tomas Turri: $1 billion. Lida Wang: Awesome. So next question, he says specifically, how much of that is maintenance and how much is scheduled for thermal plants this year? It's pretty much... Gustavo Mariani: Yes, it's around $80 million, and it's all -- maintenance CapEx, yes. Lida Wang: And second, guidance regarding free cash flow. Which, again, we don't do guidance, but we can share with you what it's approved by the budget. And what crude realized price are you assuming for your base case scenario? Adolfo Zuberbuhler: So we expect total CapEx, including maintenance CapEx, investment CapEx and the equity that we will deploy to our joint ventures. All that will imply more or less $500 million negative cash flow after all investments. So that is what will bring the cash position from $1.2 billion to $700 million roughly. Lida Wang: All right. What else? And the price of oil. The price of oil assumed for the budget. I think it was less than $58. Gustavo Mariani: Well, that's the one assuming the budget. But I think what is relevant here is the hedge price that is around $66. Lida Wang: Yes, that's correct. A little bit above $66, right? So the hedge is Brent, right? And then after discounts and export duty, which is 8%, it is roughly a little bit lower than -- roughly a little bit above $58 depending on the discount. Horacio Jorge Tomas Turri: Wellhead, you mean? Lida Wang: Wellhead and it's realized FOB. The wellhead, you have to account the transport -- okay. Next question. Cattaruzzi Matías from Adcap. How should we think the quarterly production ramp-up through 2026, particularly toward the -- around 24,000 barrels per day level by second quarter of '26 and around 28,000 by third quarter. Horacio Jorge Tomas Turri: We've been through that. That's exactly he's answering the question. Lida Wang: But then after -- so the [ 828 well ] in the chart, we put like it's like 20 and then sharply goes up to the plateau? Horacio Jorge Tomas Turri: No. It's not going to happen. Lida Wang: What do you think... Horacio Jorge Tomas Turri: It's not financially efficient. So it's going to be -- probably going to be a ramp-up curve going from 28,000 to 45,000 in around 5 to 6 months. Lida Wang: Okay. Matías is asking -- given that Pampa has more gas reserves that it can currently monetize, would you consider monetizing part of our -- of your gas acreage portfolio for farm out or farm downs or asset sales? Gustavo Mariani: We could consider it, but we are not actively seeking to do so. Lida Wang: Could you update us -- another from Matias. Could you update us on Southern Energy FLNG project, specifically timing, expected volumes and potential EBITDA CapEx contribution from Pampa and what the LNG FOB price assumption, it's basically the Coca-Cola, everything. Horacio Jorge Tomas Turri: In terms of timing, we are expecting the first boat by second half of 2027 and the second one by the second half of 2028 for a total demand of 6 million tons per year. That's around -- roughly around 25 million to 26 million cubic meters per day. We have 20% out of that. And the biggest capital or the biggest CapEx involved in the project now is the construction of the dedicated gas pipeline from Cartagena to San Antonio state, which will account for probably around $1.5 billion. Gustavo Mariani: Hopefully less than that. Horacio Jorge Tomas Turri: Hopefully less than that, from $1.3 billion to $1.5 billion. And out of which we could consider that 60% will be financed and maybe 30% to 40% is going to be equity. And out of that, we have 20%. So that's a major CapEx that we'll be facing. Lida Wang: Francisco Cascarón from DON Cap, he is asking what new opportunities do you foresee in the generation segment, if any? Do you expect... Horacio Jorge Tomas Turri: I'm sorry, just to add something that's relevant. We signed our first long-term contract with CFA, the German agency for 2 million tons per year. Lida Wang: It's binding? This is binding? Horacio Jorge Tomas Turri: It's already binding. Yes more than binding. Lida Wang: Great awesome. For sale? Gustavo Mariani: Binding for both. Lida Wang: Great. All right. Shifting to power generation. Francisco Cascarón from DON Cap, is asking, do you foresee any opportunities there? Do you expect to increase installed capacity this year or in the near term? Gustavo Mariani: Increase this year impossible because these projects take several years to be installed. What could be done in the short term could be something like batteries. And today [ Tamesa ] our Secretary of Energy announced a new auctions of batteries similar to the one that was done last year. The one done last year was within the Buenos Aires area, and this one is all around the country, but has been published today. Honestly, I didn't have time to take a look at it. Usually, these are small projects, very competitive. We have colleagues very aggressive on pricing. So not sure whether we are going to be actively in this auction. Lida Wang: That's it. Okay. So [ Houting Pacheco from, Maria ] he's asking, given the improvement in power prices under the new wholesale electricity market framework, are you now seeing higher returns in power generation relative to shale oil? What a question? Gustavo Mariani: Relative to shale oil. We are seeing higher returns on the power generation vis-a-vis previous year relative to shale oil. The power generation margins have improved. I still think that shale oil provides a higher expected returns than power generation. Lida Wang: There are two animal right? Gustavo Mariani: Yes, two different animal, exactly different risk -- exactly. But despite these changes, we are very comfortable with the development that we are doing in Rincón de Aranda and adding the oil segment to pump. That is where the question is... Lida Wang: Talk about, yes. Well, with the recent extension of the, RIGI, are you thinking to apply? I think we answered that. Gustavo Mariani: Yes. We are starting to apply for the upstream part of Rincón de Aranda. Lida Wang: He is asking -- I think it's too early to answer, but expected impact on project economics and timing. So we can give him a quick summary of the relief, if I may. So it's basically after the third year, you get export duties abolished removed, right, the third year. The tax rate goes down from 35% to 25%, accelerated depreciation, so the imposable amount, it's smaller as well. So that helps through the first years of the operation. BAT can be -- BAT credit can be monetized. What else, if I can remember -- pretty much that, right? But it's a 30-year time that they give you, right, the RIGI. And then, of course, free disposal of all the proceeds abroad. If you export, you can keep it. I think that's the key takeaways from RIGI. Gustavo Mariani: Totally. Lida Wang: That's not AI. We produce that. I have to think about it. So he said, well, congratulations from [indiscernible] He's asking the RIGI upstream, how broadens the scope of the Rincón de Aranda project and how could accelerate the development? Gustavo Mariani: He is asking... Lida Wang: The whole impact. Horacio Jorge Tomas Turri: Okay. The RIGI-- the possibility of the RIGI is going to give a significant, let's say, help to develop the northern part of Rincón de Aranda, which will have an impact both in the ramp-up curve and also in the total amount of oil to be recovered from the area. So we think that this is a major change in the overall economics of the project. Lida Wang: He's asking, should we expect any updated production guidance and timing, meaning adding RIGI or drilling capacity or having more capacity contracted? Horacio Jorge Tomas Turri: It will probably happen. It's not going to change the short-term curve, but it's going to have an impact in the medium term, something we're still analyzing and obviously, it's contingent to the RIGI application. Lida Wang: All right. Someone I don't know, like its name, it's Armando, which is very weired. He's asking a question that we will usually answer. Do the company is planning distribute any dividends in the near future? Gustavo Mariani: No. We're not planning to distribute dividends in the near future. As Fito explained, we have a negative free cash flow this year, and we expect still too early to say, but something that even or slightly positive in 2027. But we still see a lot of opportunities to continue growing. So because of this situation, we are not planning dividends in 2026. Lida Wang: From [indiscernible] asking he wants to double click on the CapEx estimates. For Rincón de Aranda $770 million budget for this year, how much is wells versus infrastructure? Horacio Jorge Tomas Turri: Yes, it's approximately $500 million in wells and the difference will be facilities. Lida Wang: How much in maintenance for generation is $80 million that we said. TGS, what we said is considering Perito Moreno expansion and maintenance, yes, it's $600 million of expansion of the Perito Moreno. Gustavo Mariani: This year. Okay. Lida Wang: No, no, no. Total, it's over $700 million. Gustavo Mariani: Okay. But we haven't talked about TGS CapEx. Lida Wang: Very briefly in the evolving chart-- evolution chart. Maintenance on TGS, like $90 million per year, more or less, total, right, the trunk -- the regulated trunk, the liquids and what is left for midstream. That's $90 million per year. What should we expect for next year? Well, for Rincón de Aranda, when we reach plateau, it's just maintenance. Horacio Jorge Tomas Turri: Yes. So I mean it's just drilling and completing for the -- to fill up the decline. Lida Wang: Gas, we are already. Horacio Jorge Tomas Turri: Gas, we already reached our peak, our plateau. Lida Wang: But when we have CISA, we will... Horacio Jorge Tomas Turri: When we have CISA, we need to decide whether we're going to be supplying all of the demand above CISA or we will be replacing some of our demand with CISA, something that we need to. Lida Wang: In power generation, we don't have any projects in the pipeline. So that's it. Next question from Ignacio. It's, what are the conditions of the B2B PPAs that you signed? Which is very, very broad, like we have some in HINISA, some in... Gustavo Mariani: Yes. Just to give you example -- information. But I think the volume is around 70 megawatts prices for energy in the mid-50s. Lida Wang: Yes, we are doing summer winter. We are doing peak, off peak. Gustavo Mariani: They are 1-year contracts. Lida Wang: Yes, 1-year contracts. We have first year -- mostly of that 70 megawatts is first year, which is mainly -- it's mandatory, but we have some second tier. That's it. Gustavo Mariani: Yes. In terms of capacity what the regulation has in order to incentivize the contractualization is that industries pay a higher capacity charge than what we collect. So that incentivize contractualization because we sell our capacity a little bit better than what we sell to CAMMESA and industries get a reduced price from what CAMMESA charge to them. Lida Wang: Yes. Well, Andresi Miliano from Balance. The liberalization of the power market contemplates procure energy by distributors. When do you consider this will be fully implemented? And how do you expect to impact your power segment? I guess the B2C conference is what he's asking, that we haven't done any... Gustavo Mariani: No, we haven't done any yet. Probably some of our colleagues, especially the hydro -- the recently -- the hydro units have that, but have not -- that is not yet a public information. So that is a market that we need to see how it will evolve. I don't have any clarity right now. Lida Wang: Another question comes from Andres Cardona from Citi. Regarding power generation, we already answered. The second question, is there any short to midterm M&A opportunity? Is there more likely to be for upstream or for power generation? Gustavo Mariani: There's nothing in the short term. So there's nothing in the pipeline. That is the question that we are studying neither in E&P or power generation. Harder to see how that is going to evolve going forward, but we are not actively engaged in any M&A opportunity. Lida Wang: This question was answered in previous calls, but well, there is always a new audience. Do you have any information about Rincón de Aranda. Specifically in the type curve, like, for example, with estimated URs, IP30, D&C cost per barrel? Horacio Jorge Tomas Turri: We don't give any guidance... Lida Wang: Very good. I don't know, it's like around 1.5 million. Horacio Jorge Tomas Turri: Okay. It's probably around 1.1 million barrels of EUR. And in terms of cost, we should be hitting $15 million per well approximately. Lida Wang: Well it's fully considered the whole thing. Horacio Jorge Tomas Turri: All of it, all of it. All the way to the collecting pipeline. Lida Wang: Correct. Which sometimes is different from the measure from other players. Horacio Jorge Tomas Turri: Yes, of course, of course. Lida Wang: Another question from someone I don't know is called [indiscernible] . How is Pampa involved in [indiscernible]? Gustavo Mariani: No, we are not involved. Lida Wang: Can you give us from, [ Santiago -- Valeria ] can you give us some color from the next maintenances in power plants program in the power plants? Usually, we do it when it's offpeak, right? Gustavo Mariani: No. Obviously, we do it either in autumn or in fall. I think there are plan -- and this year, I don't have anything in my mind for this fall, probably during -- sorry, Spring or fall. But I don't recall at this moment which plant has significant maintenance. Most probably will be Genelba and Loma de la Lata, those are the two2 relevant ones. Lida Wang: The legacy, right, the legacies. All right. Is there any change in 2026 CapEx considering the oil prices? This is a recent price of appreciation? No, nothing at all. Guido Visocero, his boss, he's asking urea project. Is there any further information to share about this project? Gustavo Mariani: No, not at this point, not at this point. We're still working a lot. But as it usually happens, there are delays. So it will take at least another semester to have more information about this project. Lida Wang: Gustavo Faria from Bank of America. He's asking a little bit different from the hedge, but he said how does the Pampa's oil prices hedge works in this new environment of high oil prices? Gustavo Mariani: I would say that last year, we realized like in average, $7 profit from... Lida Wang: Per barrel, right? Gustavo Mariani: $7 per barrel profit from our hedge strategy. This year and since today, we are probably losing $4 or $5 per barrel in our hedge strategy. But we will see how prices evolve throughout the remaining of the year. Lida Wang: Gustavo is also asking, are you open for new investments outside power and gas -- oil and gas? Within Pampa structure? Gustavo Mariani: As long as within the scope of energy of Pampa, we are open to anything. We are not studying apart from the urea project, we are not studying or not planning any different investment. Lida Wang: Okay. So Jonathan Swart from [indiscernible] is asking, why did you retire production from Plan Gas Round 1 and Round 3? Horacio Jorge Tomas Turri: Reallocated to our power generation. Lida Wang: To vertically integrate. Horacio Jorge Tomas Turri: To vertically integrate. Lida Wang: We still have some from the last round, the 4.2, right? Horacio Jorge Tomas Turri: Yes, we still have that... Lida Wang: Which... Horacio Jorge Tomas Turri: We're still negotiating eventually the handing over of that gas back to Pampa to be able to, say again, decide what to do with that gas rather than sell it to NASA. Lida Wang: Well, he's asking also, could you explain about the $55 million positive impairment, so recovery of impairment in generation? Yes. So Central Piedra Buena, our 620 megawatts in Bahía Blanca, it's a 2 steam turbine that load factor is very low. This -- last year was high because it was a dry year, but usually it's low. So under the legacy scenario under the old regulated remuneration, they have an impairment. Now that we have this new scheme that also recognizes a big -- like a big -- it's a 30% boost in the capacity because Central Piedra Buena can also operate under alternative fuels. This is way better than anybody can pay. Just because of that flexibility, it's cash in more money and cash in more cash flow. That's why we reversed that impairment. I hope that was clear. Okay. Next, news on the fertilizer plant. Does the sale of Profertil to Adecoagro affects your decision? Gustavo Mariani: No, it does not. Lida Wang: Okay. The one-off offtake agreement mentioned by CISA, the German's price maturity? Horacio Jorge Tomas Turri: Okay. It's an 8-year contract until 2036. And the pricing has to do with a formula that takes into account ETF and Brent -- I'm sorry, Henry Hub and Brent. Gustavo Mariani: 50-50. Horacio Jorge Tomas Turri: 50-50. Lida Wang: With certain percentages of discount. I think we did it all, and it's 7:26 I can't believe it. So I will check -- she's pulling for questions. But we are doing this because we have agenda constraints. All the people that asked why the stock was halted in nicely because Argentina closed and we were not allowed to file after 6:00 p.m. Argentina, and that's 4:00 p.m. in New York, and we are not allowed. So it's trading hours in New York. That's why we were halted. No speculations here because people ask me a lot of things. No questions? No more questions. So, Gus, Horacio and Fito would you like to add something else that we didn't talk about? Gustavo Mariani: No. We covered it off. Thank you all for joining. I hope it was useful. Lida Wang: All right. Thank you very much. See you next May. Bye.
Operator: Good evening, everyone. Thank you for standing by. Welcome to StoneCo's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. By now, everyone should have access to our earnings release. The company also posted a presentation to go along with its call. All material can be found online at investors.stone.co. Before we begin the call, I advise you to review the disclaimer included in the press release and presentation, which outlines important information about forward-looking statements and non-IFRS financial measures. In addition, many of the risks regarding the business are disclosed in the company's Form 20-F filed with the Securities and Exchange Commission which is available at www.sec.gov. [Operator Instructions] Joining the call today is StoneCo's former CEO, Pedro Zinner; the incoming CEO, Mateus Scherer; the CFO and IRO, Diego Salgado; and the Head of IR, Roberta Noronha. I would now like to turn the conference over to Pedro Zinner. Pedro Zinner: Thank you, operator, and good evening, everyone. This call marks the conclusion of my journey as CEO of Stone and the beginning of a new chapter as I transition leadership to Mateus. During my tenure, we chose to fight complexity directly, simplifying the business, sharpening our focus on payments, banking and credit and building a more resilient and scalable platform for long-term growth. In 2025, that meant selling our software assets, Linx to TOTVS for more than BRL 3 billion, not because it was a bad business, but because it set outside the intersection where our competitive advantages live. It also meant expanding our credit book prudently, launching products like TapStone and Payment Links with the 0 (sic) [ T+0 ] settlement, unifying our technology stack and deploying AI where it reduces cost and improves quality. Adjusted EPS grew 34% year-over-year. Return on equity expanded 26% in the fourth quarter of '25, and we closed the year with a robust net cash position. I'm deeply proud of the team and what we have built together. I would also like to sincerely thank our investors for their continued trust, partnership and support throughout this journey. From a new future role as Non-Executive Chairman of the Board, I remain fully committed to supporting Stone's continued evolution and long-term vision, thinking like an owner, protecting what we have built and contributing to what comes next. I have complete confidence in Mateus' leadership. He has been one of the architects of Stone's transformation, helping restore discipline, simplify the business and focus the organization on what truly matters. He brings clarity of direction, analytical rigor and the right sense of urgency to accelerate execution and continue elevating what matters most, delivering value to our clients and building intrinsic value per share. With that, I'll hand it over to Mateus, your new CEO, who will walk you through our fourth quarter and full year 2025 results. Mateus Schwening: Thank you, Pedro, and good evening, everyone. Before getting into the results, I want to thank Pedro for his leadership and commitment to Stone over the past years. It has been a privilege to work alongside him, and I'm honored to step into this role as we continue building Stone as the financial partner for entrepreneurs across Brazil. Now turning to Slide 3. We highlight our full year performance relative to the guidance we provided at the beginning of the year. Despite a challenging macroeconomic environment, we delivered solid results while remaining fully committed to our capital allocation framework and to returning excess capital to shareholders. Our adjusted gross profit reached BRL 6.319 billion, an increase of 13.5% year-over-year. Importantly, when factoring the BRL 1.8 billion in share repurchases executed in the second half of the year, which had an estimated BRL 60 million impact on gross profit, our adjusted gross profit would have reached BRL 6.379 billion, slightly above our guidance of BRL 6.375 billion. Adjusted basic EPS came in at BRL 9.71 per share, representing a 34% year-over-year growth and exceeding the BRL 9.60 per share guidance, reflecting disciplined operational execution and a consistent focus on capital efficiency. On capital allocation, 1 year ago, we identified a position of BRL 3 billion in excess capital. True to our commitment, we distributed the full BRL 3 billion over the course of the year, representing a 15% yield. We remain disciplined in our capital allocation strategy, and we'll continue returning capital to shareholders whenever we do not identify immediate value-accretive opportunities. Moving to Slide 4. We will now examine our consolidated profitability and return on equity. Our fourth quarter adjusted net income increased 10% year-over-year, driven by 12% growth in continuing operations. These results demonstrate the resilience of our model in a macro environment that continues to weigh more meaningfully on smaller merchants alongside a competitive and dynamic market. Adjusted basic EPS was BRL 2.87, up 27% year-over-year, benefiting from both net income growth and the impact of share repurchases. On returns, our consolidated ROE continued to expand, increasing by 6 percentage points year-over-year to 26%, reflecting ongoing improvements in profitability and capital efficiency. Moving to Slide 5. We highlight the top line performance of our continuing operations. Total revenue and income increased 13% year-over-year to BRL 3.7 billion, reflecting mid-single-digit TPV growth, combined with disciplined pricing. Credit continues to scale and is becoming a more meaningful contributor to revenue, further strengthening our position as the financial partner of choice for MSMB clients. In the fourth quarter, adjusted gross profit from continuing operations grew 9% year-over-year to BRL 1.7 billion. Revenue growth was the primary driver, partially offset by higher credit provisions as we continue to scale our loan portfolio. We see this as a natural step in expanding our credit business and further diversifying our revenue streams to build a more resilient earnings profile. We will discuss portfolio performance and credit dynamics in more detail later in the presentation. Turning to Slide 6, we present our key operating metrics, starting with MSMB payments. Our client base increased 15% year-over-year, reaching 4.7 million clients at year-end. Out of those, 41% are classified as heavy users, up from 38% in the previous quarter. This trend reinforces our strategy of deepening client engagement beyond payments as we seek to build a more comprehensive and long-lasting financial relationship with our clients. MSMB TPV growth decelerated to 5.3% year-over-year, driven by 3 factors. First, the macro environment continues to weigh on smaller clients. Second, digital native merchants are performing better than brick-and-mortar businesses, a segment where we have greater exposure. And third, our operational performance in the fourth quarter fell short of our internal expectations with slightly higher churn and softer gross client additions than planned. We're not standing still. We are implementing a series of commercial initiatives and gross additions have already shown a clear improvement. Our focus is now shifting towards churn management by deepening client relationships and ramping up bundled offerings to increase share of wallet and improve retention over time. Turning to Slide 7, we highlight the performance of our banking operations. Our banking active client base increased 21% year-over-year, reaching 3.7 million clients, reflecting continued progress in bundling payments and banking into a more integrated value proposition. Client deposits grew 27% year-over-year and 23% quarter-over-quarter, totaling BRL 11.1 billion at year-end. Notably, deposits expanded significantly faster than MSMB TPV with penetration over MSMB TPV increasing from 6.8% in the fourth quarter of '24 and 7.1% last quarter to 8.2% in the fourth quarter of '25. This outperformance reinforces that we are on the right track with our banking strategy, deepening engagement and capturing a larger share of our clients' financial flows within our ecosystem. Of the BRL 11.1 billion in deposits, 86% were time deposits in the quarter compared to 84% in the previous quarter. This shift reflects higher adoption of our investment products and increases in the portion of deposits eligible for our cash sweep strategy, contributing to lower funding costs and supporting profitability. Turning to Slide 8. We review the evolution of our credit operations. Our portfolio reached BRL 2.8 billion in the quarter, growing 23% sequentially. Of this total, BRL 2.5 billion relates to merchant solutions, primarily our MSMB working capital offering, which also expanded 23% quarter-over-quarter. The remaining BRL 300 million corresponds to our credit card portfolio, which grew 30% sequentially from a smaller base. Credit continues to gain relevance in our results. In the fourth quarter of '25, credit revenues reached BRL 238 million, up 33% sequentially, while provisions totaled BRL 110 million, increasing 27%. As provisions are recognized upfront and revenues are accrued over time, continued portfolio growth should translate into a stronger earnings contribution going forward. Since relaunching our credit operations, we have prioritized disciplined scaling and tight portfolio oversight. Within MSMB working capital, we operate 2 distinct models: a fully digital approach for smaller merchants, resulting in granular and diversified exposures and a more analytical desk-based approach for large SMBs with higher average ticket sizes and a more concentrated position. In terms of asset quality, we remain aligned with our risk appetite. NPL 15 to 90 days increased to 4.43%, primarily reflecting payment delays from a limited number of higher ticket clients within the specialized desk. NPLs above 90 days stood at 5.21% compared to 5.03% in the prior quarter, consistent with normal portfolio seasoning. Our coverage ratio remained stable at 264% and cost of risk was approximately 17% in the quarter. We have also continued refining our pricing framework, balancing client sensitivity with risk-adjusted returns. This has allowed us to improve spreads while maintaining disciplined and sustainable growth. As a result, our average monthly credit yield calculated as credit revenue over the average portfolio reached 3.1% compared to 2.9% in the third quarter of '25, despite mix effects from the specialized desk and noninterest-bearing credit card balances. To wrap up and before I hand over to Diego, I want to thank the team for their resilience and dedication in delivering a solid performance despite a challenging year. I'm truly honored to lead the company into its next chapter, continuing to execute our strategy with energy and passion as we strive to be the leading financial services provider for entrepreneurs in Brazil. With that, I'll hand it over to Diego, our new CFO, who will take you through our financial performance in more detail, along with updates on capital allocation and guidance. Diego? Diego Salgado: Thank you, Mateus, and good evening, everyone. It's a pleasure to speak with you today for the first time as CFO. I'm honored to take this responsibility. You have my commitment to keep elevating our financial discipline and to hold a high bar on execution. Now I'll begin by reviewing our adjusted consolidated P&L for continuing operations for the fourth quarter, as shown on Slide 9. Our cost of services increased 23%, rising 200 bps as a percentage of revenues. This increase was driven by higher loan loss provisions during the quarter, mostly driven by the growth of our credit portfolio. Financial expenses increased 12%, a reduction of 30 basis points as a percentage of revenues. This was primarily driven by the use of low-cost demand deposits as funding source, which helped offset the impact of higher average CDI rate compared to the prior year period. Admin expenses also increased 12%, a small decrease as a percentage of revenues, reflecting ongoing efforts to gain leverage across our support functions. Selling expenses increased 16%, a 40 bps increase as a percentage of revenues. This reflects a more evenly distributed market spending in 2025 compared with 2024 when expenses were weighted towards the first half of the year due to a significant investment in a specific reality show. Other expenses decreased 27% year-over-year or 100 basis points as a percentage of revenues, a result of lower share-based compensation expenses in the quarter. Our effective tax rate was 10.3% in the quarter, down from 13.7% in the fourth quarter of 2024. The year-over-year decrease was driven primarily by higher benefits from Lei do Bem. Moving to Slide 10. Our adjusted net cash position closed the quarter at BRL 2.6 billion, down BRL 930 million sequentially. This reduction stems primarily from the BRL 1.3 billion in share repurchases during the fourth quarter. Excluding these buybacks, adjusted net cash would have increased by nearly BRL 350 million. Now let's review our capital allocation in more details, distinguishing between recurring operational generation and the extraordinary proceeds from the Linx transaction. Starting with operational excess on Slide 11. As you may recall from last year's call, our framework is guided by 3 strict hurdles that define excess capital, maintaining a minimal core equity ratio for the consolidated entity, the maintenance of certain global ratings and maintaining an adjusted net cash position above 0. This year, we have refined our core equity ratio hurdle. First, we have enhanced our methodology to better align it with the Brazilian Central Bank standards for the treatment of all the deferred tax assets that we have, regardless of which legal entity holds it. Consequently, we felt more comfortable to reduce the capital hurdle from 20% to 17%. These adjustments mostly offset each other. Our policy is very straightforward. Upon the approval of our annual budget and financial statements in the absence of additional immediate value-accretive opportunities, excess capital is returned to shareholders. Following our 2025 performance, we have generated excess capital of just over BRL 2 billion, which the Board approved for distribution via share repurchases during 2026. As a reminder, we already have an open repurchase program of the same amount announced on December 22, which will be used for distribution. Now turning to Slide 12. We detail the extraordinary distribution from the Linx sale. On February 27, we received the proceeds from the sale and closed the deal. This divestment releases slightly over BRL 3 billion in capital, which will be returned to shareholders in 2026. However, given the recent closing, we expect to approve this specific distribution during a Board meeting in April with a market announcement to follow. Finally, let's move to Slide 13, where we present our guidance for 2026 and 2027 for continuing operations. Starting with 2026, we expect adjusted gross profit to range between BRL 6.6 billion and BRL 7 billion. Adjusted basic EPS is expected to be between BRL 10.8 and BRL 11.4 per share. The guidance for both KPIs considers the capital distribution that we have already announced of BRL 2 billion to be fully returned through buybacks during 2026, but doesn't include the proceeds from Linx. Regarding 2027, we are no longer providing operational KPI guidance and keeping it consistent to 2026. Therefore, we expect adjusted gross profit to range between BRL 7.2 billion and BRL 8.3 billion. Adjusted basic EPS is projected between BRL 11.8 and BRL 13.4. In those numbers, we are not considering yet any additional capital distribution. We will adjust this in the beginning of 2027 when we disclose 2026 full year earnings. Also important to keep in mind that for the guidance, we assume an effective tax rate in the mid-teens range. To close, we started this journey with a simple belief that Brazilian merchants deserve a better financial partner, and that conviction hasn't changed. For 2026 and 2027, our priorities are clear: continued earnings expansion, a credit business that scales on our terms and capital returned to shareholders, including the extraordinary links distribution. Operator, we are ready for questions. Operator: Now we will begin the Q&A session with Mateus Scherer, CEO; Diego Salgado, CFO; and Roberta Noronha, Head of Investor Relations. [Operator Instructions] Our first question comes from Guilherme Grespan with JPMorgan. Guilherme Grespan: Just one on the guidance itself, clarification plus a follow-up. Share count, if I understood correctly, I should work with 248 million by the end of '25, right, which is the end share count. Then if I assume that you're going to buy back BRL 2 billion in the year and you're going to meet your expectation, assuming current screen price, it means that I should work with roughly 225 million for 2026. Then I should work with a flat share count for '27. I just want to confirm that the rationale makes sense here. Because then my question is, if that's true, your earnings in 2027, it's growing 8% year-over-year, which is almost half of gross profit of 14%. Just wanted to confirm what is driving this delta between gross profit growth and earnings growth? Mateus Schwening: Guilherme Grespan, thanks for the question. Mateus here. So I'll first clarify a few things on the capital distributions because there are indeed a lot of moving pieces. And then I'll hand it over to Diego to clarify the 2026 question. So just to clarify, when we look at the guidance for '26 and '27, the guidance does not include any impact from a potential distribution of Linx, neither on the P&L nor on the share count. So just to make it clear, if Linx were to be distributed via dividends, there would be no impact on our EPS guidance. But if we were to distribute that value through share repurchase instead, there would be potential upside to EPS due to the reduction in share count. Now regarding the ordinary capital distributions, which I think were your question. For 2026, we have decided to execute distributions through buyback, like Diego has said. And this impact is already embedded in the EPS guidance, which means that the guidance assumes that shares are repurchased throughout the year at an estimated average price. For '27, since we have not yet defined the mechanism for capital distribution, the guidance was constructed under the assumption that capital is retained and reinvested in the business. So depending on the eventual allocation decision, particularly if we opt for buybacks, there could be incremental upside to EPS relative to the current guidance. So that's the general overview. I'll hand it over to Diego to address the 2026 part. Diego Salgado: So Guilherme, let me walk you through a bit of the growth numbers for 2026. So basically, we're guiding to a growth on gross profit between 4% and 11%. That has to do with a softer growth of TPV of mid-single digits throughout the year, being compensated in terms of margin expansions and impact on P&L by both banking and credit. But naturally, that comes with the cost from the credit business, which is charged upfront, as you know. Then on EPS, what you're looking at a growth between 17% and 24%, which, as Mateus mentioned, has to do basically with the fact that we are considering only the BRL 2 billion buybacks. If we were to use the Linx distribution to buybacks, that number would have grown significantly on one hand. If not, then EPS doesn't grow between 17% and 24% as we mentioned, but total shareholders' return would be massively impacted. Guilherme Grespan: That's clear. But just the second point of the question, like if we assume, all else equal, no further distributions, earnings would be growing much less than gross profit, right, in '27 specifically? Just want to get your view on why this happens, if there is any headwind that I'm missing here? Mateus Schwening: Guilherme Grespan, I don't think it's massively below. So like Diego said, gross profit would grow between 4% and 11% on the guidance. When you do the assumptions that close to the current market prices for the buybacks throughout the year, what you get is that adjusted net income would grow between 3% and 9%. So it's slightly below. And the reason for that embedded in the guidance is because we continue to invest in selling expenses, which are partly offset by G&A expenses in general, but it's not a massive gap. I think it's a very small gap. Guilherme Grespan: That's clear. Yes, the gap widens a little bit in '27. That's why I ask. It's clear. Diego Salgado: Yes. Naturally, when building a 2027 guidance, we tend to look for a little bit more of a leeway, especially on the bottom of the range, Guilherme. Operator: Our next question comes from Ricardo Buchpiguel with BTG. Ricardo Buchpiguel: I understand that one of the priorities for Stone today is to accelerate the banking and credit initiatives. However, although Stone has been advancing on this front, many of the merchants still see the company more as a payment provider as a POS machine than necessarily as a bank. In this regard, I want to understand how do you plan to change this perception among your merchants? And would the possibility of obtaining a banking license and being able to have a bank in your name will help on this direction? Mateus Schwening: Thanks for the question. Mateus here. So on the license front, I don't think having the license is actually a big constraint on our plans. We already have a full product road map, and we are evolving on the banking and credit features with the license that we have in place. That said, I think you hit the nail on the question, which is when we look back at 2025, I think we had a massive improvement in terms of how many products we have and what we launched. I think there is still a huge effort in terms of how we bundle those products and also, like you mentioned, in how the clients perceive our offering. And when we look into 2026, part of the selling expenses and the marketing investments that we're doing throughout the year is on how we reposition the company to be perceived for the clients as not only a POS provider, but much more than that. And I think we have a plan in place to address that point. Operator: Our next question comes from Antonio Ruette with Bank of America. Antonio Gregorin Ruette: So 2 quick things on my side. So first on the guidance, if you could just explore which Selic rate did you use for that? And the second one on credit. If you could dig a little bit deeper on your operating numbers for the fourth quarter. We saw an increase in write-offs for both working capital and also credit cards, same on NPLs while maintaining an elevated cost of risk. So what you're seeing there and what are your expectations going forward? If you could give a little bit of color since you no longer have the guidance for operating metrics. Diego Salgado: Antonio, this is Diego. So basically, we're assuming Selic at low 12% by the end of 2026 and high 11% for 2027. That's what's behind the guidance number. On the credit side, basically, what you have is the result of a portfolio that keeps growing into different publics and different products, but also getting more mature, especially on the core product for the digital credit offerings that we have. So let me try to walk you through a bit of some of those moving parts. As we expand the public to which we are offering credit, naturally, we tend to extend credit to a little bit more riskier clients. We charge proportionately to that higher risk but that comes with a cost on the risk side, which is what you see in terms of cost of risk on the balance sheet and naturally provisions upfront. Also, as we deploy other short-term capital offerings to those clients, you also have a similar effect. On the other hand, as the core business gets a little bit more mature, we keep on learning with the products. You're going to see additional write-offs. You're going to see growing NPLs just as the natural process of our credit portfolio. Mateus Schwening: Yes. If I may add, Diego, 2 points in the NPLs as well that you mentioned. I think when you look at the trends in NPLs, we have 2 factors in place. So the NPLs 15 to 90 days were impacted by a few cases on the specialized desk, which tends to add some volatility to that number in the short run. And the NPLs 90 days are basically just the process of maturation of the portfolio. So as the growth rate for the portfolio is declining on a percentage basis, it's natural that the NPLs over 90 days will increase over time, and that's something that we already had anticipated in the past. The only point that I would emphasize that Diego mentioned is, again, even though we look closely to the cost of risk metrics and the NPL metrics, it's important to analyze that metric alongside the rates that we're charging. And when you look at the movements of the portfolio over the past quarters, you have a pretty consistent trend of increasing the average yield of the portfolio at the same time where the cost of risk remains in the mid-teens. So that in the long run should increase the contribution of credit to the company, and it's something important to keep in mind. Operator: Our next question comes from Neha Agarwala with HSBC. Neha Agarwala: If we can touch a bit upon the volume growth. I think you mentioned during the remarks, you expect about single-digit TPV growth. And I understand your focus on profitability. But could you break down a bit in terms of what kind of volumes are you giving up? What is behind this expected growth? And is competition playing a role because we see some players among the incumbents like Cielo ramping up their operations, which might have -- which might make it more competitive. And also at the bottom of the pyramid, you have players like Pagar.me who are being more active. So how do you see competition playing out in the volume growth expectations that you have? Mateus Schwening: Yes. Thanks for the question. So around first, the competitive environment, I think overall, the message has not changed. So when we look at the players, the market in general has remained rational from a pricing standpoint. We're not observing behavior that suggests competitors using growth at any cost or engaging in structurally unsustainable pricing. What we did see throughout the second half of last year was some players expanding their offerings and strengthening their sales footprint, but this is a natural movement in the industry. It tends to come in waves. Now in terms of the TPV growth itself, when we look back at our performance, there are clearly 3 trends playing at the same time. The first one is that since the third Q of last year, we've been operating in a more challenging macro environment, which has put pressure on TPV growth. The second one, which we mentioned in the call is that within the market itself, we saw digital merchants performing better than brick-and-mortar recently. And this mix shift creates a temporary headwind for our TPV given our focus on brick-and-mortar and SMBs. And the third one is that in the fourth Q, we experienced higher-than-expected churn and softer new client acquisition, which weighted on TPV growth as we head into this year. These factors, they are more internal than external. It's less about competition and more about execution. And to that end, on the commercial side, we've already made meaningful progress in addressing the onboarding dynamics. And when we look at the new sales productivity recently, it has improved significantly. And now what we're doing is basically turning our attention to deepening engagement with our existing base, both in terms of share of wallet and in terms of retention, where we see clear room to improve and have specific initiatives underway. So when we put that all together, for the first Q of the year, this factor should result in the TPV growth roughly flattish year-over-year. And then as we move through the year, we expect a stronger second half as our bundle and the cross-sell initiatives gain traction. And that's what's composed into the guidance of mid-single-digit TPV growth for the year. Neha Agarwala: If I may ask on that, there's no -- do you see any reason to believe why going forward, the brick-and-mortar sales are going to be -- going to pick up? I mean it could pick up more with the overall economy, but not much more than that. Is there any way that you could participate in a profitable manner on the online side? Or anything that you could do, any optionalities that you see to improve the volume growth as the macro improves? Mateus Schwening: That's a good question, Neha. So on the second part of the question on how we can participate, the digital volumes tends to be more concentrated on marketplace where the economics are smaller than the overall economics for MSMBs. That said, we did launch the new Payment Links product late last year. And it's fairly common for MSMBs in Brazil to sell through WhatsApp, and then they can use our payments links, which improved a lot. So that's one of the initiatives behind the plan. The second question, sorry, if you could repeat? Neha Agarwala: No. I mean I was just asking how in the long term, like you could increase your volume growth more than just mid-single digit? Because I mean one thing you mentioned is participating in digital volumes. So I wanted to understand, without losing focus on profitability, how can you continue to gain volume growth? Or is this a business that we should think -- should grow at mid-single digit? Mateus Schwening: I think a lot is related to execution. So like we said when we talked about the TPV on the second half of last year, the trends that we're seeing now are still weighted by a relatively rough macroeconomic environment, plus a number of initiatives from the operational side that could improve. So I think what we are embedded in this mid-single-digit growth for the year is us solving the operational needs. But I think if the macro improves, it can be a tailwind for TPV growth in the future as well. The only other thing that I would say is that even though there is a space to reaccelerate TPV growth medium term, I think it's also important to keep in mind that the biggest jackpot or the biggest price is also in terms of how we engage in banking and credit within the ecosystem. So on one hand, we have this drag from digital transactions and from the macro. On the other hand, I think when you look at the execution of banking and credit, we're trending well, but the opportunity is very, very big. So that's where the focus is. Operator: Our next question comes from Kaio Prato with UBS. Kaio Penso Da Prato: I have 2 on my side, please. First, on the credit business, just to double check if you are discontinuing your guidance on portfolio for 2027 or not? And if so, what has changed? And second, if I may follow up on your expenses and overall operating leverage. If you can walk us through your investment plans towards 2026 and 2027, what kind of investments are we talking about? What should we expect in terms of leverage, not only for '26, but also '27? Not sure on why we shouldn't see some leverage for '27, especially in a momentum where when we are discussing a lot about potential efficiency gains to come from AI and other tech development. So it would be interesting to hear from you, especially, as probably in this guidance, we are not considering any relevant pickup in TPV for 2027. Diego Salgado: So let's start with your question on operational guidance for credit. Yes, we discontinued the operational guidance metrics that we had basically because it made sense back in 2023 when we launched the 2027 guidance. At the time, you may remember, we had virtually no credit portfolio, a much smaller balance of deposits, and we wanted to build that bridge between 2023 and 2027. Truth is if you look today at the numbers that we have, we are probably ahead of the plan in terms of credit portfolio and deposits behind the plan in terms of TPV. Naturally, we feel comfortable based on the guidance that we're delivering that we will deliver the plan ultimately, but with a different mix. And that's why it didn't make sense any longer to continue providing specific guidance on the operational KPIs. That said, if we switch to expenses, you should expect expenses -- selling expenses -- selling and marketing expenses still growing in 2026 as a percentage of total revenues. A lot of it has to do with this new positioning that we've been talking about and other growth initiatives that we've been putting in place. So the dedicated desk in credit, it's naturally one of the things that it's new in the company. It's bringing portfolio, it's bringing top line and has an impact on 2026. For 2027, what you have on the guidance, it's still a similar trend. That said, I wouldn't be surprised as the overall market develops and especially as AI has been developed, as you just mentioned, that the mix should -- could be potentially different in 2027. There is a lot of new initiatives going on, on the company in terms of gaining efficiency, you should not expect large one-off actions. It should be more of a long-term practice that we will emphasize not only in 2026, but 2027 onwards. And those things are naturally still not reflected in that guidance number because it's -- everything is too new, and we're all learning it. Mateus Schwening: Yes. Diego, if I may complement on one point. I think Kaio mentioned AI in the question. And it's really true that over the past 6 months, we've seen a meaningful acceleration in practical application of AI, not only in the company, but I think in the world as a whole. When I think long term, we do believe that AI agents will meaningfully improve productivity of several processes, including processes that historically in the company required large operational structures. But I think it's too soon to estimate those impacts. So when you look at the guidance for 2027, we're not including huge benefits from AI, even though we're doing all the effort to capture them over time. Operator: Our next question comes from Tito Labarta with Goldman Sachs. Daer Labarta: I guess just going back on the 2027 guidance, kind of just backing into a net income number, assuming that roughly 225 million shares, it's BRL 2.7 billion to BRL 3 billion. And when you initially issued the guidance, and I know it was a different environment then the net income was above BRL 4.3 billion. And I know you -- so Linx, but Linx didn't necessarily contribute that much to earnings. But just -- I guess the question is, what is the big difference today aside from slower TPV, I mean which obviously we can see that. But I think there was always some implied expectation that take rate for payments would come down with maybe the uplift coming from credit. I mean you just said that credit, you can potentially still deliver on that, and we saw very good growth over the last year. But what do you think is the biggest difference from when you initially gave the guidance to what you're seeing now and why it's so much lower? And I guess along those lines, Mateus, congrats on you moving to CEO. What would you say is your biggest priority now as you step into that role? Diego Salgado: So let me try to help you reconcile the numbers. So there are 3 big movements affecting the 2027 guidance. The first 2 effects are Linx divestments and the repurchases executed in 2025 and expected for 2026. These 2 movements combined have an effect of a little bit over BRL 2 billion in gross profit and BRL 1.3 billion in nominal net income. So these 2 effects would adjust our guidance from BRL 15 per share to BRL 13 per share. Therefore, at the top of the range of our new guidance, we are within the previous plan and guidance. On the lower range of the guidance, what you have is the inclusion of a number that reflects the short-term headwinds that we are currently facing. The execution on the newer verticals, particularly in credit and banking, continue to evolve positively, as we've mentioned, but TPV performance has been softer than we initially anticipated. So that's a bit of the dynamic that you see. So the revision is primarily driven by the portfolio changes and the capital allocation decisions, along with a more conservative view on near-term TPV trends rather than a deterioration in the core strategic initiatives. Mateus Schwening: And going to the second part of the question, Tito, around priorities. Let me start by saying the following. So I've been in the company for a while now, what is now, 11 years. And while a lot has evolved over that period, in terms of strategic direction, I think we've always had a pretty clear target, which is we built these very strong distribution channels. We serve our clients with passion, and we want to leverage that relationship to become the primary financial services platform for SMBs in Brazil. So I think in terms of vision, it remains unchanged. What we're doing now is really sharpening our execution to become more agile, and we're doing that by focusing on 3 priorities. The first one around payments. I think we've mentioned this a couple of times throughout the Q&A. But we're now at a stage where we've reached a leadership position in our core segments. And at this scale, the game evolves. So while onboarding new clients remains important, developing the capability to deepen the relationship with them through better engagement through cross-sell and retention is now as important, and that's priority #1. Second, when we think about banking and credit, we've built a solid foundation over the past 3 years. We're seeing encouraging results when you look at the portfolio and the deposit evolution, but we are very early relative to the opportunity ahead of us. So acceleration this execution on credit and banking while preserving the risk discipline that has defined the approach is priority #2. And the third one, I think Diego has touched on this topic as well. But when we look at what is happening in the world recently with the transformation underway in AI, we see substantial room to drive further productivity gains across the organization and to be more efficient in general. So efficiency is priority #3. So when we put that all together, again, I think it's much more about raising the bar on execution and trying to become a more agile organization than it is about shifting the direction of the company. Daer Labarta: Okay. No, that's very helpful. And maybe just to touch on that second point, Mateus, with AI, and this isn't completely comparable, right? But we saw one of the payment peers in the U.S. reduce their employee base almost in half. Just how do you think about your position in terms of -- I'm not asking if you're going to cut employees or not, but just in terms of the employee base that you have, is it like sort of the right level? Do you -- is there more productivity there? I mean do you need to grow more? How do you think about your positioning given these potential efficiencies in AI and sort of what you have today? Mateus Schwening: That's a good question, Tito. So in terms of AI, over the past 6 months, we've seen meaningful acceleration in the application of AI across the company. We touched upon that in the earnings release as well. But when we think about our approach in the topic, it has been very deliberate. So we are really intentionally avoiding the temptation to launch dozens of disconnected pilots with no clear path to scale or without measurable economic impact. And instead, what we're doing is twofold. So first, we're focused on the core. Within the core, we have dedicated teams redesigning how we operate in key areas like customer service, the sales process, the hubs or even in risk. And I think we had a first successful example of this application within customer service, where we implemented AI agents to handle the first level interactions, and we had huge efficiencies there. The second front is really around AI enablement, which is making sure that everyone in the company has the modern AI tools available to use within their day-to-day. And when we democratize the access, we allow the teams to experiment and improve their workflows. And on the other hand, we centrally monitor the usage and then we establish the best practices to capture the efficiencies later. Now it's hard to talk about actual impacts or estimates at this time. I think the one thing that we're certain is that over time, we can massively improve productivity in the company by embedding AI. I think the how and how much is still too early to talk. But for sure, we're going to pursue those things over the medium term. Operator: Our next question comes from Renato Meloni with Autonomous Research. Renato Meloni: I would like to explore the guidance a bit more. And going back to your comments, Mateus, in the last call, you said that you still expected to see some expansion in the gross profit yield. And thinking back in light of lower rates, I was assuming that would be some price maintenance. At the same time, you're getting lower funding costs. But during the call today, I'm left with the impression that you're assuming the entire expansion is going to come from credit. So I'm curious what are your expectations here for the year given this scenario of low TPV growth and more churn, if you expect to pass through lower funding costs and monetize on the credit side? And then also within this, if you could just mention a little bit of the trajectory here of gross profit throughout 2026. Diego Salgado: Yes. So Renato, nothing really changed in terms of the pricing dynamics in payments. We still believe the price levels that we've been putting on the market are healthy. And as Mateus mentioned before, we don't see anything being crazy being done or executed by competitors. That said, what we've always told is that once interest rates start coming down, we should benefit in the short term from tailwinds associated with the reduction on financial expenses and that in time, those reductions should be passed on not only to new sales, but also to the client base. So that's what we currently have in our model, and we don't see that changing in the short term. When talking about the mix between TPV yield, TPV growth and gross profit margins, what I've been telling for quite some time now is really that gross profit margin should continue to expand based on the expansion of the other 2 main products, credit and banking and that the ROE from payments on a stand-alone basis in the long term should continue to decline. Spreads should continue to decline on the long term, but are still super healthy. Renato Meloni: Perfect. So then in terms of trajectory, assuming that we get the first cuts around the second half, you get 1 quarter of expansion there on the payment side? And how long does it take to pass through the benefit to clients? Diego Salgado: Yes. Well, that's a tricky question, Renato. And naturally, that has to do with pace of sales, but also with churn levels. We monitor those 2 things on a daily basis. And based on the performance of those KPIs, we try to hold those spreads for as long as possible, but naturally tend to pass it through as competition enhances. Operator: Our next question comes from Daniel Vaz with Safra. Daniel Vaz: I'll go back to the operating expenses -- sorry, can you hear me? Mateus Schwening: Now we can. Daniel Vaz: Yes. Okay. And I'm trying to connect your higher OpEx or selling expenses to your main strategy to develop a more complete bundle and a more competitive environment in terms of rates or your competitors being more aggressive on taking market shares. So am I looking for your higher OpEx as a defensive strategy? I mean are you trying to maintain your market share or maybe you're looking at increased growth on OpEx and selling expenses for any way to your attacking strategy? Maybe we're looking at here trying to get a sense of are you defending, trying to create a bundle? Are you attacking, trying to look at different opportunities here, trying to figure it out what's the main goal for your '26, '27. I know you already talked about in the past that market share is a consequence, but I'm looking at your -- is it more defensive or attack? It's good to hear from you. Mateus Schwening: Thanks for the question, Daniel. I think we have 2 different dynamics when we look at the short term versus when we look ahead. So short term, when we look at the selling expenses for the fourth quarter, what happened was that we had higher turnover in the third Q. And therefore, we have hired more in the fourth Q to replace that turnover, and that's why selling expenses increased primarily. Now when we look ahead, I think the reason why we're not being vocal about seeking too much efficiency in the short run in selling expenses is because we still think we need to invest heavily in terms of repositioning the company, not only as a payment provider, but as a provider of financial services as a whole. That will require capital, of course. But on the other hand, I think those investments should yield continued growth on the credit and banking operations as we move ahead. So again, I think we have 2 different dynamics. Short term is about hiring salespeople. Longer term, I think it's about this repositioning of the company to offer more bundles. Daniel Vaz: And maybe a follow-up. On these bundles, I guess in the past, we have tried to see the Payments segment as more linked to the U.S. or any developed market software model kind of trying to upsell products for a service kind of revenue. But I don't know, maybe correct me if I'm wrong, but the Brazilian pay point here is working capital, and I think credit is the way how you monetize and how you maybe increase loyalty through your client base. Are you looking again into the service model? Has it changed any way the clients require or any specific needs from them you see? Mateus Schwening: That's a very good question. So I think we're rolling out a lot of features within our banking that we call workflow tools. So it's basically helping our clients to manage their businesses on their day-to-day operations. But I don't think the goal here is really to monetize those tools through service fees, but rather to have more lifetime value because clients become more stickier. In terms of monetization, the reality is that when we look at the country and the market, most of the TAM is around holding deposits and underwriting credit. What I would only complement that you said, you talked about working capital loans. I think there are one specific part of the credit value proposition. There are plenty of other products within credit, which we have launched and that we are developing. They are still very small, but they can be a lot bigger than they currently are, like overdraft, like the credit card operation itself and so on and so forth. So again, we're not giving up in terms of developing those workflow tools, but in terms of monetization, it's around financial services. Operator: Our next question comes from Jamie Friedman. James Friedman: Mateus, in your prepared remarks, you had referenced improving execution, especially on the boarding and the inputs that would go into volume. I was hoping you could elaborate on what some of those execution initiatives may be at [ propo ] volume. Mateus Schwening: Yes, for sure, Jamie. So I think we have 2 different dynamics, one related to new onboardings and the other ones related to churn. In terms of new onboarding, it's basically a full review that we did of our offerings and the go-to-market approach of each distribution channel. I think those initiatives have already been implemented, and we're starting to see the results. In terms of churn, what I would say is that historically, our focus as a company was heavily skewed towards optimizing the sales engine with a lot less emphasis on deepening engagement and systematically nurturing our existing client base. As we have scaled and the competitive landscape has evolved as well. Excellence in terms of retention and client relationship has become pretty important. So what we're doing now, broadly speaking, is basically implementing a new company-wide initiative focused on delivering highly customized bundles at a much more granular level. So again, it's basically about segmentation and personalization of offerings, which has become a lot more important now. James Friedman: Okay. Perfect. And then a question about credit. So in terms of Slide 8, the one that shows the NPL and coverage ratios, and you may have alluded to this or it may be in the footnotes, but can you unpack what you're seeing in terms of credit between the working capital portfolio and the other dimensions of lending? And I apologize if it's in these footnotes, I just -- but that would be my question, how you're -- what you're observing about overall credit performance by product line? Diego Salgado: So Jamie, the more mature product, which is the working capital solution, it's converging well towards expected losses, margins and so forth. That said, we've been seeing the possibility to increase margins on that product, and it's something that we are executing on a monthly basis. On the short-dated products, especially on credit cards, you probably noticed an uptick on the volumes in the fourth quarter. That said, it's probably one of the products in which we probably have a bigger opportunity in 2026 when compared to 2025. There is still a lot to learn in terms of the credit underwriting of that product and also in other short-term facilities to riskier clients, but it is a focus of the firm for 2026. And then on the longer-dated products, we haven't launched anything yet. It's also something that is within our expectations for 2026, and that should provide a bigger support for the dedicated desk. We currently have a medium-term product for the dedicated desk. As you know, the dedicated desk is focused on slightly larger clients, not necessarily credit card businesses. And that's a bit of the portfolio that is slightly more volatile because of the concentration on the portfolio. And as we scale the 3 products and launch these additional features for that client base, you should see the portfolio maturing slowly going forward. Operator: There are no more questions at this time. This concludes the question-and-answer session. I would like to pass the word back to Mateus Scherer for final considerations. Mateus Schwening: Thank you all for your support, and we'll see you in the second Q. Operator: This concludes today's presentation. You may now disconnect.
Lars Reich: Yes. Good morning, ladies and gentlemen, and thank you for joining our media and analyst conference today. Thomas Erne, our CFO, on the table to my right, and I are pleased to present our results for the 2025 financial year and to discuss them with you. Before we move on to the results, I would like to say that it was a great honor for me to take over the management of the Feintool Group as CEO on June 1, 2025. Let's now take a brief look at today's agenda. First, I will provide a short review and outline the most important market developments and their impact on our business areas, followed by some background on our operational highlights in the 2025 fiscal year. Our CFO will then present the financial figures for the 2025 fiscal year. I will conclude with our outlook, key messages and a strategy update before we move on to the Q&A session. Let's start with the review. All the supporting materials will be available on our website. And after the presentation, you will also find a video of the conference call on our website. The Feintool Group's business performance in the 2025 financial year reflects a market environment that remains challenging with differing dynamics across regions and technologies. In this persistently challenging market environment, Feintool delivered a resilient operating performance in the 2025 financial year. Group sales amounted to CHF 661.4 million, despite the lower volume base, Feintool achieved a positive operating results EBIT of CHF 4.7 million. This reflects the effectiveness of the restructuring and efficiency measures implemented across the group, which have significantly reduced the breakeven level. With an equity ratio of 55.6%, Feintool continues to have a robust financial base. Structural shifts towards Asia are continuing and becoming more pronounced. Feintool is strategically well positioned to benefit from this trend, especially with our e-motor core development and production capabilities. While the pace of electrification in the U.S. and Europe has moderated, the long-term transformation towards electric drives remains intact. In the near term, hybrid and combustion engines application continue to play an important role in these regions. Market dynamics differ by country. Hybrid vehicles dominate in Japan, battery electric vehicles in China and combustion engines in India. Across all those markets, e-lamination stamping remains a key enabling technology for electric and hybrid powertrains and a core competence of a wide range of electrified drive systems for industrial applications. Overall, business development in the 2025 financial year was characterized by a broadly saturated demand environment across regions. With this context, Feintool was able to find its position in the core automotive markets, selectively gain market share in industrial and green energy applications. Our core strategy has proven successful. We are strongly positioned in our core technologies, fineblanking, forming and e-lamination and continue to benefit from solid demand across all drive types and regions. At the same time, we are systematically expanding our activities in electric mobility and renewable energy solutions. With our global production network of 18 plants, we ensure close proximity to customers worldwide and follow a local-to-local strategy. The strategic relevance of e-lamination stamping is underlined by the current order intake. Around 60% of new orders relate to e-motor core projects in Europe and Asia. This includes, among others, a major contract for e-motor cores from one of our largest Chinese commercial vehicle manufacturers as well as a significant new project in Europe for e-stamping applications. In Europe, the Feintool generated sales of CHF 383.5 million in the 2025 financial year. This is 12.4% or 10.8% in local currencies below the previous year. The decrease was mainly driven by the sharp drop in demand for laminated components for electric vehicles. Market overcapacity led to the postponement, downsizing or cancellation of vehicle programs. During the course of the year, the focus on stabilizing the business and the restructuring measures in Europe begun to show initial effects. The restructuring of the stamping Europe business unit, including the sites in Sachsenheim, Germany, Tokod, Hungary has also been completed. The full annual earnings contribution from those measures is expected to be realized from the 2026 financial year onwards with the associated annual savings of around CHF 12 million. While sales in the first half year of 2025 were down 17.5% year-over-year, the decline in the second half moderated to 6.1%. Also, the market environment remained challenging, the slower pace of the revenue decline in the second half indicates that the pace of the decline in Europe began to ease in the course of the year. The U.S. accounted for sales of CHF 199.8 million in 2025 compared with CHF 194.3 million in the prior year, corresponding to an increase of 2.8% or 9.6% in local currencies. The reported decline seen in the first half of 2025 was primarily due to lower raw material prices, which account for around half of our product prices as well as the weakness of the U.S. dollar, while volumes sold were significantly higher year-on-year. During the course of the year, the U.S. business showed market improvements. The second half experienced a year-on-year increase of around 15%, reflecting stronger underlying demand, the start-up of new programs and the benefits of Feintool's market-leading position in fineblanking and forming, particularly in application for vehicles with conventional hybrid drives. The picture here shows our plant in Nashville, Tennessee. We just finished the fourth expansion on this plant and have added in the back of the building, and this investment is completed. In Asia, the Feintool Group generated sales of CHF 80.7 million in the 2025 financial year. This is 10.3% or 5.2% in local currencies below the previous year. The decline was driven by intensified competition in the automotive market in China, which led to market share losses at the end customers supplied by Feintool. During the course of the year, the pace of the decline moderated. While sales in the first half year of 2025 were down 12.5% year-on-year, the decline in the second half slowed down to around 8.3%. Although the market environment in Asia remained challenging, this moderation mainly reflects that projects already in the pipeline started to ramp up later and a slower pace than anticipated, leading to a more gradual improvement in volumes in the second half of the year. In India, the timing of the construction of our new production site in Pune is proving favorable. As the opening is scheduled for June 2026, and the group is recording significant interest and quoting activity for production in the new plant. We are on schedule to open our first Indian production plant in Pune on June 24. Due to geopolitical shifts, we see a lot of interest in our newest manufacturing site, especially from Japanese OEM and Tier 1 suppliers. You can see here the opening in September 2024, then an update in October, and now we are nearing completion of the plant. This is a new picture. Roof is on and the sites are on, and as I said, on schedule to open in June 2024. At this time, I would like to hand over to our CFO, Thomas Erne, for the presentation of the financial results of the fiscal year 2025. Thomas? Thank you. Thomas Erne: Thanks a lot. Thank you, Lars. So we start, as you have already heard, I mean, part of that was already mentioned, but we start with the top line. In 2025, you see that we delivered a solid result actually in the market environment that was remaining challenging. Our group net sales came in 8% below prior year. However, on a currency adjusted base, this decline was limited to around 4.5%, demonstrating the underlying resilience of our business. Our performance in the United States was particularly strong, excluding FX effects, as Lars mentioned already, we recorded robust organic growth of 9.6%, highlighting continued demand for our technologies and the strengthened competitive position in this strategically important market. In Europe, the well-known effect in the automotive sector affected our volumes. That said, we took decisive actions to optimize our cost structure, streamlined our footprint and improved operational efficiency, actions that position us well for margin recovery as soon as the market normalize. The diversification strategy remains on prior year's level. Non-automotive sales are around 16% in 2025, which is supporting our strategy to diversify and grow also in markets like industrial application and energy. Overall, we remain confident in our strategy. We're strengthening our geographic balance, expanding into new segments and investing in technologies that will support profitable growth. With this foundation, we expect to benefit from our gradually improving demand environment as we move throughout 2026. Now looking at the EBITDA. In 2025, we delivered CHF 55.6 million of EBITDA compared with CHF 51.9 million in prior year, which is an increase of CHF 4.7 million prior year, excluding the one-off effects that we have done through the restructuring. The improvement came despite lower sales and demonstrates the effectiveness of our cost and product mix management. Also, revenue declined by CHF 58.2 million, we were able to more than offset this through disciplined cost control and a favorable shift in our product portfolio. Our material cost ratio improved to around 47% coming from 52% last year. This reflects a more profitable product mix and targeted sourcing initiatives. Personnel costs decreased by CHF 6.6 million as a result of the structural adjustments, which we have done in 2025 and ongoing efficiency measures across the group. Regionally, the performance was mixed. The U.S. operation showed a stable contribution, while Europe delivered a substantial improvement due to the earlier restructuring efforts that we have done. Asia remained under pressure, but in line with the market environment and our expectation. Overall, the EBITDA development demonstrates that our focus on operational excellence cost discipline and margin quality is paying off. These actions strengthen our resilience and position as well to capture earnings upside as volumes recover. On the EBIT level, you see a similar picture as on the EBITDA. We are reporting CHF 4.7 million EBIT for the group compared to CHF 49.3 million with restructuring costs. And if you take off the one-off effects in 2024, we reported an adjusted EBIT of minus CHF 2.2 million. So if we compare that to the drop in sales, you see the same picture as on EBITDA. We are operationally much, much better in shape with a different cost base, and we see already the effects now on EBIT level. The question, I answered that already so that you don't have to ask it is what kind of one-off effects did we have in 2025? Yes, you will see in our annual report that we have released accruals that we built in 2024 for the restructuring because we didn't use all of them. But we had also a one-off effect due to the ramp-up of business in approximately the same amount. So we can say the CHF 4.7 million that you see here is really an operational result, one-off negative set of one-off positive. Looking at the net income. Net income is at a loss of CHF 8 million. You see the EBIT with CHF 4.7 million. Then we have a financial result of CHF 10.8 million. Last year, the financial result was at CHF 7.9 million. Those are mainly interest effects and overall financing structure impacts. So we report a loss of minus CHF 8 million compared to last year's almost minus CHF 50 million. Our balance sheet assets decreased to CHF 770 million, mainly driven by lower receivables, reduced inventory and a decline in noncurrent assets. These developments reflect our disciplined approach to working capital management and selective capital spendings. On the liability side, our balance sheet remains also very solid. As Lars already mentioned, the equity ratio is at 55.6%, confirming our strong capital structure despite the challenging environment. Net debt increased slightly to CHF 57.7 million, which is still at a comfortable level and reflects our disciplined investment and working capital management. Overall, the group maintains a robust financial position that provides sufficient flexibility to execute our strategy. Equity, as said before, remains at CHF 55.6 million. Equity decreased to [ CHF 430 million, CHF 428.1 million ] mainly driven by CHF 8 million of net result and significant foreign exchange impacts, which were partially offset by IAS 19 valuation effects. So despite these movements, our balance sheet, as I said before, is solid and provides stability and flexibility going forward. Now last slide from my side, turning to cash flow. Operational cash flow was positive with around CHF 27 million, supported by around CHF 28.5 million contribution from working capital management. As planned, we continued our investment program, particularly in the U.S. and Asia, resulting in operative investments of CHF 55.7 million. These investments support future growth and mark the end of our high investment cycle in 2025. Overall, we generate a nearly neutral free cash flow, reflecting disciplined operations and targeted strategic investments. To summarize, 2025, was a year in which we strengthened the fundamentals of the company. We improved profitability with higher EBITDA and returned back to a positive EBIT despite a softer market environment. The net result was impacted mainly by financial and FX effects, but operational performance clearly moved in the right direction. Our balance sheet remains solid, strong equity ratio. We have a disciplined working capital management and the targeted investment are supporting the future growth. Overall, we enter 2026 as a leaner, more efficient and financially resilient organization, well positioned to capture opportunities as market conditions will start to improve. And now for the outlook, I hand over to Lars. Lars Reich: Thank you. I'd like to continue with a brief outlook. The outlook for 2026 remains cautious. Feintool expects an uneven development across its markets with a challenging environment continuing in Europe, while in the U.S. and in Asia, the group aims to build on the positive momentum of the second half of 2025. As a result, Feintool anticipates further improvements in EBIT margins in local currencies with the completed expansion in China and as well in North America, we are anticipating a much reduced capital spending budget for 2026 and as a result, concentrate on free cash flow. Structural shifts towards Asia are expected to continue and intensify the new production site in India scheduled to open in 2026 will therefore strengthen the group's positioning over time. Looking ahead, Feintool remains confident that the global megatrends towards low-carbon energy generation storage and mobility remain intact and continue to offer attractive growth potential for its technologies. Against this backdrop, Feintool reaffirms its midterm target of achieving an EBIT margin of more than 6%. Let me give you a few examples why we are remaining optimistic. Price sensitivity, energy costs and charging accessibility and range concerns are making hybrids from mild hybrids to full hybrids increasingly attractive as a middle ground. These technologies offer quick wins for consumer and fleets alike without demanding major behavioral shifts. An example of a modular transmission architecture that is hybrid capable is the highly successful 8HP transmission from ZF. Globally produced at an annual rate of approximately 3 million transmission, Feintool supplies components in all 3 continents. The newly signed multibillion contract between ZF and BMW ensures a production life of the 8HP transmission well into the late 2030s. With a wide variety of fineblanking and fork components on the 8HP platform in all regions we serve, Feintool is well positioned to profit from extended life cycle for many years to come. The new all-electric EX 60 changes the game in terms of range, charging and price and represents a new beginning for Volvo Cars and our customers says Hakan Samuelsson, CEO of Volvo Car in January of this year. The e-motor core produced by Feintool boosts Feintool proprietary glulock joining technology for e-motor cores, which enables higher motor efficiency, improved performance and more compact designs while offering a scalable and energy-efficient manufacturing solution. The new Volvo EX 60 launches mid-April 2026, and the motor core is produced by Feintool at our Tokod, Hungary location and it also can be seen outside here on our tables. Furthermore, Feintool profits from the RE data center boom that is accelerating rapidly with global capacity projected to double by 2030. The immense energy demand is straining grids. Server use electrical energy to perform calculation and store data with some of that electricity energy lost as heat. This heat must be removed to prevent the equipment from overheating and breaking down. With up to 5,000 high-efficiency fans in each data center, Feintool profits from the need of motor cores for the cooling fans and secured a major order for e-motor cooling fan cores in North America. This is a significant milestone as it marks Feintool's market entry into the North America with e-lamination stamping technology. For 2026, we call it one destination many routes. The global transition toward cleaner propulsion is continuing, but not as a single unified shift. Instead, 2026 reveals a world where each region is taking its own path, shaped by economics, policy and consumer behavior. Feintool follows those trends closely. Three strong and independent regions, 18 production plants uniquely positioned Feintool to adapt and profit from the regional needs and developments. In the U.S., we'll be launching the first motor core production for data center cooling systems. In Europe, we'll supply the latest generation of BEV vehicles with glulock joint motor cores -- and in Asia, we position ourselves in some of the fastest-growing markets with our own plant in Pune, India. What ties all together is the recognition that our business and electrification is not a one-fits-all journey. The destination may be shared, a lower emission future, but the ways we get there will be as varied as the markets we serve. I want to close with a thank you. The Feintool Group's development in a difficult and challenging market environment affects you, our shareholders. We sincerely thank you for your trust you have placed in us and our strategy. We are aware that the adjustments to the European business pose major new challenges for our employees. We would therefore like to thank them for their commitment and dedication. We also thank our customers, worldwide employees and all our business partners for their long-standing and trusting cooperation because we make more than parts, we make commitments. Thank you very much. Lars Reich: At this time, I would like to invite you any questions you might have towards Thomas Erne, our CFO or myself, and we're more than happy to answer the questions as good as we can. Unknown Analyst: [indiscernible] Lars Reich: You will see both products that we have. We have EX 60 motor core brand new, just came off, still warm almost from our production lines in Tokod, Hungary and then as well the motor core for the data center cooling fans is out there. But we also see still a lot of our traditional hybrid capable parts where we really see extended life cycle. I think that helps a lot Feintool maybe I want to continue in that course that we see -- on one side, we see a clear shift towards electrification, but it's much lower than anticipated, especially in Europe and North America, much lower volumes. But at the same time, the strength of Feintool is that we never gave up our traditional business. And we profit from existing programs that will have now extended life cycles of 5 to 10 years that we see already. For example, 9-speed on Mercedes transmission, was scheduled to end by 2028, extended to 2035. You saw an example, with the 8-speed extended to the end of 2030. So I think this is a very strong strategy that we are remaining in the traditional technologies, live on with the extended life cycles and invest heavily in electrification and also in the right markets. I can say personally, I'm in China next week and will be in June in India. We have a lot, a lot of interest in India. India will be the large -- fourth largest automotive market by next year with 5.5 million vehicles. And we see this as a hub for many companies, especially Japanese who want to invest less in China as an alternative as a geopolitical shift. So this is -- I think we have done the right decision and are now ready June to start production by September in India. Time completion is end of June and production equipment will be ready to produce in September 2026. And the plant we have, it can be doubled in size. We do a Phase 1 with about 5 fineblanking machines. So we will start in the automotive sector on seating components mainly and transmission components and then have the possibility to double the size of the plant when we see the growth. Yes, please. Unknown Analyst: One question. You said you're losing market share in Asia. And I was wondering what measures you're taking to kind of. Lars Reich: Yes. This is a very important point because we have not really lost any programs. I was talking about our customers. The difficulty we find to, we don't really have our own products. We are 100% producing components for OEMs, Tier 1. And we, of course, always at the mercy of the development of the programs we are on. And sometimes we are lucky because the same part gets as a platform going to several more vehicles or sometimes it happens something else that they get reduced. And the reduction was really due to effects from our customer side. We have not lost any major programs. But some of our customers have phased out certain or pushed out by a competitive situation. China is very, very competitive. And so it's a very strong market. But there's also one -- the sign of success is in China, if you not sell to European companies or German OEMs, but if you are able to produce and sell to Chinese OEMs and -- we have 4 years ago, we have started the electrification with the e-motor components and will be close to CHF 10 million sales already on e-motor, selling to Chinese OEMs. The big order we got was for a commercial like light delivery trucks like those FedEx or those light delivery trucks, and that's sold to a Chinese OEM. So we are -- we will be growing. We just had some market share loss from our customers. Good. I also would like to thank Joel and his team. For putting the conference -- thank you very much. Joel is our Media Director for the Feintool Group Communications specialist. Thank you very much.
Operator: Good day, everyone, and welcome to The Bidvest Interim Results Presentation FY '26. [Operator Instructions] Please note that this event is being recorded. I would now hand you over to Corporate Affairs Executive, Ilze Roux. Please go ahead, ma'am. Ilze Roux: Thank you, Judith. Good morning and good afternoon, everyone. My name is Ilze Roux, the Corporate Affairs Executive, and I have the pleasure of welcoming you to this call today. Thank you for your interest in Bidvest. These results reflect resilience and our focus on operational excellence and cash generation. As is customary, Mpumi Madisa, Group CEO, will make some high-level remarks before Mark Steyn, our Group CFO, delve deeper into these income numbers. Mpumi will then follow with a detailed review of each division's performance and close with a reflection of progress against our priorities and the outlook. There will be an opportunity to ask questions at the end of the session. Without further delay, I hand over to Mpumi. Thank you. Nompumelelo Madisa: Thank you very much, Ilze, and good morning or good afternoon, depending on which part of the world you're joining us from. Thank you for joining us this morning. We are very pleased to present a resilient set of results for the first half year. Reflecting on progress made since the unbundling of Bidcorp in 2016, it's really pleasing to note the portfolio realignment and the extent to which we have rebuilt our international footprint. Our 130,000 employees are located in 14 countries across approximately 750 branch locations. Our client base remains extremely diversified with about 1 million customers across the group. We serve multiple industries and all geographies with limited concentration risk. 27% of our revenue is generated offshore and of the 25% of our profits that are earned offshore, 55% are from our global hygiene operations. We are proud of the above progress and remain focused on generating sustainable profit growth and returns. In the period under review, we increased revenue by 4% and profitability by 7%. Free cash generation is a highlight of the results. We optimized our debt profile, and Mark will elaborate on this in his presentation. We closed out the remaining acquisitions in the pipeline with the large one being Aquatico, a water testing business in South Africa. Our M&A pipeline is now materially depleted with very small transactions to be finalized in the second half. Adcock has been successfully delisted with synergies being explored. We're nearing closeout time lines for finalization of our terminal operator agreements. And lastly, as communicated in the recent SENS announcement, The Bidvest bank transaction with Access Bank plc has terminated due to Access Bank being unable to secure the required approvals within the last update. Our sales process has already been restarted, and we're confident that we'll be able to accelerate time lines. Moving to the operational overview. Group revenue at ZAR 67 billion is up 4%, with Services International, Services South Africa and Automotive delivering strong revenue growth. The gross margin increased 43 basis points to 28.1% due to an improved sales mix, lower disbursements in our clearing and forwarding operations and improved factory recovery. Operating expenses were well managed, increasing 3.4% and only 1.2%, excluding acquisitions. Trading profit increased by 7% to ZAR 6.7 billion with all divisions making a positive contribution. Our trading margin expanded from 9.8% to 10.1%, reflecting margin improvement in 5 of the 6 divisions. As indicated earlier, the highlight of the results is our cash generated by operations, which is up 36% and free cash, which is ZAR 2 billion higher than prior year. Our balance sheet remains strong, and our gearing levels remain unchanged from the June year-end at 2.2x net debt to EBITDA. ROFE at 37.6% compared to 37.9% in the prior year and ROIC at 13.4% compared to 14.4%. We recognize that returns have tapered due to capital deployed over multiple financial years whilst we were rebuilding our international footprint. We are comfortable with the size and scale of the offshore operations and are now focusing on improving group returns. We have a clear plan, and we'll detail this later in the presentation. Our overall result is HEPS at 5.1% and normalized HEPS at 5.3%. In line with our dividend policy of 2x to 2.5x cover, the group declared an interim dividend of ZAR 4.95 per share, up 5.3% on the prior year. And then just giving an update on our hygiene story, we remain focused on building an international hygiene services business with our hygiene footprint now spanning across 11 countries where we occupy #1 position in 8 of those countries. Structural drivers such as urbanization and growing health and wellness awareness remain intact and will continue to support future growth. As indicated earlier, 55% of profits in Services International are from our Hygiene operations, and this compares to 50% in the prior year. Hygiene profit growth in the first half has been strong, up 20%, whilst margins -- while profit margins have accelerated from the industry norm of around 15% to 18.2%. We remain confident in our ability to take a leading position in the hygiene listed space in the near future. And now I'd like to hand over to Mark for the financial overview. Mark Steyn: Thank you, Mpumi. Good morning, good afternoon, everyone. Just some quick introductory comments before we dive into the detail. The first half saw a resilient and strategically disciplined performance with revenue growth, improved gross and operating margins and good cash generation, and all this despite mixed macroeconomic conditions and some sector-specific challenges. That said, it's very pleasing though to see some South African tailwinds start to come through. It has come off the FATF gray list and S&P have upgraded our sovereign rating. The interest rate cuts are starting to have a meaningful impact, especially in the automotive and property sectors. The energy and logistics sectors are being supported with meaningful government spend on infrastructure, which is evident in both. We are seeing rand strength against a broad basket of hard currencies. And while this may be earnings negative in the short term, a stable rand is good for the country in the longer run. And finally, it's encouraging to see that the SA budget was a bit more expansionary than in previous years, which will hopefully support medium-term growth. In terms of our divisions, they've all shown growth in the half, especially Services SA and Commercial Products performed very well. Our hygiene services, both locally and offshore, continue to show robust growth. Freight was able to turn around a soft top line result with good margin and expense control. And similarly, Branded Products delivered strong margin management, cost control and improved inventory management. The Automotive division benefited from improved new vehicle volumes, although margins are under pressure following the large influx of lower-priced Chinese vehicles. And Adcock had a very strong result of what was a seasonally low base. Generally, while the consumer remains under pressure, we're starting to see pockets of improvement. Our cost control was excellent as evidenced by the improvements in both our gross and net margins. The cash performance was very pleasing with good operating cash generation and significantly reduced seasonal absorption of working capital. Our cash conversion and free cash flow generation is also very solid. Strategically, it's been a very good period, and as promised, much work has been done on the funding structures. We successfully completed our second Eurobond issuance for a $500 million 7-year bond. You'll recall the first one was 5 years. The bond priced at a spread of just 40 bps above the SA sovereign curve at the time, which was a very pleasing outcome. These funds were used to part redeem the existing Eurobond and also pay down a portion of the offshore RCF. We also issued a new GBP 130 million 5-year term facility, which was entered into at very favorable rates produced to further repay the RCF. Domestically in South Africa, we successfully issued 3-, 5- and 7-year bonds, the value of ZAR 2.3 billion. These were issued at record low spreads, and that funding was used to purchase Aquatico and to repay a maturing bond. We also utilized surplus funding to repay 2 preference shares of ZAR 2.1 billion, which was our most expensive net debt in the mix. We have good debt capacity, both internationally and locally, and our net debt to EBITDA has increased slightly as a result of M&A this half, but it still sits comfortably within our covenants. From an acquisition perspective, we closed 3 acquisitions in the quarter. So we're working down our pipeline with Aquatico and environmental monitoring and testing business being the largest of these. And this now forms part of our testing, inspection and compliance TIC offering within Services SA. As Mpumi mentioned already, the disposal of Bidvest Bank continues despite the expiration of the sale agreement with Access Bank and the new process has commenced. In terms of Bidvest Light, we have signed an SBA, which has been concluded and we await regulatory approval for that. Both these 2 entities continue to be disclosed as discontinued operations. And then finally, Adcock Ingram, the scheme of arrangement was approved by shareholders in October '25, and has been finalized. Adcock has now been delisted with just 2 shareholders and Bidvest remains the majority shareholder with substantially the same shareholding. With this as a backdrop, let's look at now the more detailed results. From a revenue perspective, revenue up 3.7% to ZAR 66.7 billion was supported by good acquisitive growth. We've seen good growth in the revenue terms across the mix and specifically in Services SA and International, which was supported by acquisitions. Only 2 divisions, Branded Products and Freight saw top line contraction and both responded well with very positive operating leverage to ensure profit growth. The low GDP growth that is present in most of our jurisdictions is leading to competitive and price-sensitive demand. And I guess, to some extent, this is also exacerbated by lower -- or slower customer decision-making, and these have all put pressure on revenue levels. It will unpack the divisional results in a bit more detail later in the presentation. In terms of gross income, our gross profit is up 5.3% with a 43 bps improvement in the margin to 28.1%. That's very pleasing. Overall margins and margin mix are actively managed across the businesses. And the improved operating leverage and positive business mix was somewhat offset by structural shifts in the auto sector and certain contract rescoping. Our expense performance was very pleasing. Operating expenses up 3.4% in total with organic expense increases of 1.2%. In certain of the services businesses, we are seeing wage inflation in excess of CPI, which is impacting margins. And a number of businesses through the half have completed restructuring and rationalization processes, which should further improve the operating leverage into the second half. Our expense ratio was very similar to last year at 18.1%. And overall, this is an excellent broad-based expense outcome. Trading profit is up 6.9% to ZAR 6.7 billion. Very pleased with that and with an almost equal contribution from organic and acquisitive growth. Services SA and Services International produced excellent results. Commercial Products and Branded products produced good results as trading pressures, particularly on margins persist. Freight overcame a soft revenue line as disbursement level sales fell with good margin mix and excellent expense control. Automotive was stable, supported by a good insurance result and higher new car volumes, but retail margins are being materially impacted by the influx of cheaper Chinese vehicles. And Adcock had a very pleasing result, up 20%, albeit off a slightly lower prior year base. Our effective tax rate of 26.7% is unchanged from last year. And finally, our acquisition costs are pleasingly down 5.7% due to lower M&A activity in the half. The bulk of these costs that we did incur related to the Adcock delisting and the Aquatico acquisition. We expect these costs to lower significantly in the second half. Moving then to our cash generation. Cash flow for the first half was very good. Underlying cash generated by operations before working capital, up 7.2% to ZAR 8.7 billion. We traditionally absorbed working capital in the first half, no different this time around. We absorbed ZAR 2.6 billion in working capital. What was very pleasing though is this number was ZAR 1 billion lower than the outflow of ZAR 3.6 billion last year. In the mix, organic trade payables decreased, which is seasonally consistent. And there's been a very focused or continued focus on reducing inventories, and it's pleasing to see this coming through, particularly in commercial products and automotive. Our cash conversion is at 70% nicely up from 45% last year. And our free cash flow at ZAR 3.8 billion is well up on the ZAR 2 billion from last year. The bulk of the cash generated has been applied to working capital, debt repayment and normal CapEx with very limited M&A through the period. In terms of the cash generation graph, which we presented here, you can see the seasonal cash outflow, which is consistent with the group's normal working capital cycle. I think what's really pleasing, though, you can see how this is getting progressively over the last 4 years. Moving then to our capital structure. And as I said earlier, this has probably been one of the busiest 6 months that we've ever had from a treasury perspective, both from an international issuance perspective and domestically. On the offshore front, we issued the new $500 million 7-year bond that's extended from the initial 5-year bond that we issued in 2022. This bond was issued at 6.2% with the spread just 40 bps above the SA sovereign curve at the time, which was very pleasing, and we've subsequently won an award for this issuance. The funding was used to settle a tender offer on the 2026 Eurobond for $292 million with the balance of $186 million due in September this year, and that will be settled from the RCF. We also raised offshore a GBP 130 million term facility at 5.6%, which was used to further pay down the RCF. On the domestic front, we issued GBP 2.3 billion in bonds over 3-, 5- and 7-year tenures. And these were all issued -- all 3 categories were issued at the lowest spreads we've achieved to date. From a capacity perspective, we have EUR 412 million available offshore by the RCF and a further EUR 12 billion available domestically. We have also reflected on this graph -- sorry, on the graph on the bottom left, the maturity profile, which has been nicely extended with both the pound term facility that we've taken up and the 2033 Eurobond. So there's a very conscious decision about managing the maturities over time. If we then move to our overall debt funding and just how we're looking at optimizing it. We have redeemed the most expensive debt in the mix, which was the ZAR 2.1 billion in preference shares that was redeemed using existing facilities and our weighted average cost of debt has stabilized now at 6.4%. We do, however, continue to retain an overweight position in variable rate debt, 63% variable, which is aligned to expectations of further rate cuts. Our finance costs, excluding IFRS 16 and the hedge accounting adjustments is up -- or up 6.8%, which have been impacted slightly by the higher net debt levels. Our net debt to EBITDA, as Mpumi said earlier, at 2.2x, remains comfortably within our covenant of 2x, although we are targeting a lower level in the near term of below 2x with an internal sweet spot of about 1.5x. We will use the bank proceeds to further reduce costs, and this will also then lower this ratio. We have -- we've included a net debt graph here. And what you can see from this is the accelerated M&A over the last 3 years, particularly from '23 to '25, has grown the base. What you can see is this has stabilized now in this half by -- following the suspension of M&A, while we are reducing gearing levels, and we expect this to reduce further in the second half with a stronger working capital release. Similarly, the growth in our debt cost has also flattened. Our EBITDA interest cover is at 6.4x, comfortably in excess of the covenant of 3.5x. We continue to add new and cheaper funding sources into the mix. Moving now to our returns. As Mpumi said earlier, we're very cognizant of return levels and managing these over time in alignment with our M&A and CapEx investments. As we add investments into the base, these are brought on board with a very clear plan to deliver value over the medium term, and we actively track this. Our base specifically over the last 3 years has expanded materially with the majority of the M&A in services businesses. These investments typically have low funds employed and high goodwill and intangible. This is evidenced by the graph alongside, where you can see the invested capital growing disproportionately over the last 3 years. This will start to normalize with the slowdown in M&A and more specifically, as we start -- as we increase our cash generation and start to pay down debt, you will see that number come down further. We have seen some softer macro conditions in the last 2 years, which have also softened returns. The expectation is that we should see a stronger second half, both from the slowdown in M&A and the increase in -- or the greater release of working capital in the second half, which should aid this ratio. In terms of levers to further build returns, focus of the group is driving organic growth, which has been flattish in the recent past, and we do see growth accelerating in the second half. Traditionally, the second half also produces improved free cash flow generation off the back of the working capital release. We've also added more hygiene and FM businesses into the mix, which structurally are more cash generative. So with the suspension of M&A in the short to medium term, this will allow more free cash flow to be allocated against debt levels. Finally, just moving to the discontinued operations. I think we've largely covered this, but obviously, the disposal process for Bidvest Bank continues. We're working very hard on getting a transaction over the line as soon as possible. From an operating perspective, the bank did experience some top line pressure in the half with interest rates declining and slower capital deployment, but the deposit book continues to remain very stable and all the regulatory ratios are healthy. In terms of Bidvest Life, as I mentioned, the SPA and SPA has been signed. We're waiting for regulatory approvals on that transaction. Both of these entities have been disclosed as discontinued operations in terms of IFRS 5. Also in terms of IFRS, the depreciation and amortization in relation to these 2 disposed entities continues to be suspended, and we have adjusted for that in the normalized headline earnings calculation. Just some final concluding thoughts. It's encouraging to see some tailwinds in South Africa, even when other parts of the world have been adversely impacted by the geopolitics. While the trading environment and broader macros remain challenging, we've positioned the group both operationally and strategically for good growth. We will continue to focus on utilizing free cash flow to further deleverage the group. Margin and cost management as well as cash generation continue to remain core to our DNA. And our international expansion, specifically into hygiene services is gaining proper momentum and making us a force to be [ reckoned ]. Thank you. Nompumelelo Madisa: Thank you very much, Mark. Nice ending. So let's move to the operational overview, starting with Services International. The team delivered a pleasing result, anchored by a strong performance from our global hygiene operations. Revenue at ZAR 22.5 billion is up 5% and trading profit at ZAR 2.2 billion is up 8.3%. Revenue growth was driven by new business wins, contract pool growth and contributions from the Citron and Egroup acquisitions. Our Ireland and South Africa facilities management operations were negatively impacted by contract restructures and lower ad hoc revenue. The gross margin expansion in the division is attributable to a change in mix as the Hygiene operations gross profit contribution increased year-on-year. Cost control was excellent with expenses increasing only 1.7% excluding acquisitions. The gross margin expansion and disciplined expense management resulted in not only profit growth but also an excellent trading margin expansion from 9.3% to 9.8% in the period. Cash generation was excellent. And ROFE at 159% remains a solid return. Turning to the operations. 75% of profits in the division are generated offshore. Our Hygiene operations outperformed, delivering exceptional profit growth. In constant currency, the Singapore, South Africa and U.K. Hygiene businesses delivered strong profit growth, whilst our newly acquired North America operations delivered ahead of business plan. Our Facilities Management operations contracted slightly, primarily due to the revenue pressure referred to earlier and the knock-on margin impact. The South African cleaning business was exceptional, though, delivering a standout double-digit profit result. I'd like to congratulate the Services International team for a commendable performance. Moving to freight. The team delivered a good performance with bulk commodity cyclicality normalizing and volumes improving. Revenue at ZAR 4.5 billion was driven by annual rate increases, increased storage capacity and higher grain volumes. This growth was countered by lower clearing and forwarding volumes in South Africa and Namibia, resulting in a 4.2% decline in revenue. Margin expansion as a result of reduced disbursements, coupled with an excellent 0.8% decline in expenses resulted in a trading profit of ZAR 1.2 billion, up 7% and a trading margin improvement from 23.1% to 26.7%. Due to changes in working capital and growth CapEx deployed in our bulk liquid terminal, ROFE declined to 40% from 46% in the prior year. Looking at the operational results. Our bulk grain volumes increased 7% due to higher maize, rice and wheat volumes, resulting in an exceptional profit increase in this bulk grain terminal. Our bulk liquid operations delivered a good performance, driven by annual rate escalations, higher tank rental and the 8% volume increase that was supported by improved capacity from the new fuel tanks in Richards Bay commissioned in May 2025. The 2% volume decline in our bulk mineral terminal was countered by annual rate increases and a strong increase in chrome volumes, resulting in good profit growth. Our multipurpose terminal delivered a phenomenal result as the volumes of chrome ore exports handled doubled in volume. As indicated earlier, we experienced volume declines in our clearing and forwarding operations in South Africa and Namibia. The volume and margin pressure in these operations is due to lower volumes from key large clients, rate reductions in an effort to retain contracts and reduced oil and gas activity in Namibia. Our Mozambique operations, whilst having delivered an improved result, remain constrained by lower volumes and margin pressure. And then lastly, in freight, we expect to complete the multipurpose and import warehouses in Namibia in the latter part of the fourth quarter. I must congratulate the freight team for a solid result. Moving to Services South Africa. The team delivered an excellent result with most businesses delivering profit growth. Revenue at ZAR 6.9 billion is up 7% with the hospitality and our newly formed testing, inspection and compliance clusters recording the strongest growth. Our newly acquired water testing business, Aquatico, made its maiden contribution to the division. The gross margin deteriorated somewhat due to pricing pressures, change in revenue mix and pressures on cost recovery. Operating expenses increased only 1% and organically only 0.5%, reflecting excellent cost control. Trading profit at ZAR 793 million is up 10%, and the trading margin expanded from 11.2% to 11.5%. ROFE at 92.3% is down on prior year due to increased funds employed in the security cluster and the inclusion of Aquatico. On the operational side, the hospitality and catering cluster delivered phenomenal growth driven by an extraordinary performance from the lounges as passenger volumes reached record levels. The security cluster was slightly down and due to pricing pressures and the loss of high-margin work -- sorry, the security cluster was slightly down due to pricing pressure and the loss of high-margin work. Outside of this contraction, growth and solid performances were reported by the cargo, warehouse management, trucking and payment technology businesses. Our travel cluster experienced contraction in corporate travel volumes, whilst inbound travel volumes remained strong with a robust forward order book. The Allied cluster was down on prior year due to operational and margin challenges in the laundry and amenities businesses. Notwithstanding weather patterns that negatively impacted volumes, good recurring revenue in the water business and contractual sales in indoor and outdoor plants was reported. And lastly, in Services SA, our testing, inspection and compliance cluster, which now comprises WearCheck and Aquatico delivered a phenomenal profit result, driven by solid revenue growth and record samples processed. And I must congratulate this team again for an excellent set of results. Moving to Branded Products. The team delivered a solid result with 3 of the 4 clusters up on prior year. Revenue at ZAR 6.9 billion was down 1.6% due to reduced and delayed spend from large government clients. Increased competition from lower-priced imports and orders in the prior year that did not repeat in the period also impacted revenue. The gross margin improved impressively by 50 basis points to 29.8%, driven by a stronger product mix, production efficiencies and good management of direct costs. Similarly, operating expenses were exceptionally well managed, declining 1.8%. This excellent margin and expense management translated into a trading profit increase of 5.4% to ZAR 748 million and a trading margin expansion from 10.1% to 10.9%. ROCE reduced to 37.3% due to increased investment in working capital. Looking at the operational performance, the Office Products cluster delivered a good result, driven by superb growth in the furniture sector as this business continues to differentiate its product offering. Notwithstanding sales pressure, the Office Automation business grew profits off a high base. The Data, Print and Packaging cluster delivered a good result, driven by resilient demand, improved sales mix, factory efficiencies and outstanding expense control. The Consumer Products cluster contracted year-on-year as sales increases in appliances were offset by materially lower sales in our TV and satellite accessories business. The knock-on margin impact due to mix and higher rebates reduced profitability in the consumer cluster. And lastly, the Office & Leisure cluster delivered a strong profit growth, driven by a good performance from our lounge business -- sorry, our luggage business and a contribution from the outdoor cookware and accessories business. Margin and expense management was excellent in this cluster. I'd like to congratulate the team for a robust set of results. Moving to Commercial Products. The division reported an admirable result, reflecting a good turnaround in performance. Revenue at ZAR 8.6 billion is up 2.5%, reflecting a small uptick in some markets and thankfully stabilization in renewable sales. The gross margin increased slightly to 28.9% and operating expenses increased below inflation by 2.7%. Strong operating leverage translated a 2.5% revenue growth into a 9.7% increase in trading profit to ZAR 594 million. The trading margin also improved to 7% compared to 6.5% in the prior year. Whilst ROFE declined to 17.7%, there is a notable improvement in returns from the 16% reported at June year-end. The significant reduction in inventory resulted in excellent cash generation. Operationally, pedestrian revenue growth in the electrical cluster was offset by excellent margin and expense control. 4 new Voltec stores were opened in the period and renewable sales have stabilized above prior year's volumes. Our Plumbing and Related Products business continues to outperform as volumes and trade sales increased and 3 new stores were opened. Pressure was, however, felt across the packaging, Thai franchise warehousing and DIY and tools businesses due to declines in revenue and margin compression as industrial and manufacturing activity remains muted. Lastly, the Workwear, industrial catering and leisure businesses delivered excellent results as volumes remained robust in certain markets and margins expanded and costs were also well controlled. I must congratulate this team for a very strong set of results. Our last division, Automotive, delivered profit growth amidst an extremely price competitive and evolving retail market. Revenue at ZAR 14.8 billion is up 7%, supported by a 15% increase in new vehicle sales -- volume -- sorry, in our sales volume. This excess supply of new vehicles did, however, contribute to considerable discounting and the substitution effect of the oversupply resulted in reduced demand for used vehicles. Fleet sales were materially up on prior year and our secondhand motor retail business produced excellent top line growth. The gross margin declined by 1%, which in value was quite a big number, and this was due to a 0.6% decline in new vehicle margins and a 0.8% decline in used vehicle margins. Lower margin fleet sales also impacted the gross margin. Expenses remained tightly controlled at an increase of only 0.8% and trading profit was constrained by the margin compression referred to earlier, resulting in a profit increase of 1.8% to ZAR 515 million. The division's ROFE at 23% is down from last year's 26.8% due to higher working capital as we balance between own stock and consignment stock. Operationally, in the franchise model retail cluster, the increase in new vehicle volumes was offset by the decline in used vehicle volumes. And as reported earlier, the margin declines in both categories negatively impacted profit growth. However, on the upside, expense management in the cluster was outstanding, neutralizing the negative margin impact. And in the period, we continue to diversify our representation, onboarding 8 new vehicle brands. Our non-franchise motor retail cluster is gaining momentum. Our goal is to have all our branches nationally at full capacity by the end of the financial year. We've reached a point where units bought match units sold in a month, and this is critical because it talks to asset turn. The planned full year contribution from this business will move the dial for the division. And lastly, in the automotive allied cluster, our vehicle inspection and body building business are holding their own in a competitive landscape, whilst the insurance businesses outperformed, delivering record results. I must congratulate the team for delivering a robust set of results in a very, very difficult operating environment. And then moving to Adcock. Adcock delivered an outstanding improvement from last year's half performance -- half year performance with all business units contributing to growth. Revenue at ZAR 4.8 billion is up 3% and trading profit at ZAR 620 million is up 20%. Revenue was driven by a 3.6% price realization and 2.8% organic volume growth. The 2% increase in gross margin due to an improved sales mix and excellent factory recoveries, coupled with a 4% expense increase resulted in a 20% trading profit growth. Prescription delivered a standout performance with all segments except generics, reaching their growth targets. The OTC and hospital divisions delivered excellent results due to exceptional growth in OTC's top 10 products and solid growth in the renal and medicine delivery portfolio. Consumer reported marginal growth due to lower demand for key large brands, a fantastic result from the Adcock team. Moving to the outlook. I'd like to give some update in relation to progress made on the immediate priorities that we had outlined in the previous reporting period. On cash generation, we are making strong progress with a cash conversion improvement from 45% to 70%. And as Mark indicated earlier, free cash up ZAR 2 billion due to improved inventory management. This is an excellent cash performance, and we expect an even better cash position at year-end. Our deleveraging plan was dependent on receipt of the proceeds from the sale of Bidvest Bank, Bidvest Life and FinGlobal. These proceeds would have reduced our net debt-to-EBITDA by 0.2x. We've, therefore, not yet delivered on this priority, but aim to have the disposal process for Bank and Life finalized with cash in hand before the end of this calendar year. Securing the longevity of our freight operations is a key priority. And as indicated earlier, we are nearing closeout date for contract finalization. Negotiations have progressed materially and our confidence in successfully finalizing these contracts is demonstrated in the approval of 2 growth CapEx valued at ZAR 550 million, which, of course, are subject to signed terminal operator agreements. And lastly, extracting value from the recently concluded acquisitions remains paramount. The U.K. Hygiene integration is complete and the combined business is delivering ahead of expectation. A lot of time has been spent understanding the North American market and required strategy adjustments have been made to align to local nuances. We will be expanding our North America footprint with the opening of our first branch in New York in the fourth quarter of the current financial year. Procurement synergies are yet to be realized in the North America operations as we are currently cycling through existing stock. Our automotive diversification strategy is gaining momentum with cross-selling and collaboration across the various clusters taking shape and contributing to profitability. And the last update is our testing, inspection and compliance cluster is a strong new growth platform and the 2 businesses in that cluster are formulating tactical joint go-to-market strategies. On our last slide and the outlook, we have our eyes set on 3 priorities: firstly, accelerating organic growth; secondly, improving cash generation; and lastly, as Mark elaborated in his presentation, improving returns. Starting with organic growth. In South Africa, we are seeing green shoots in the hospitality sector, inbound tourism and the testing inspection and compliance sector, where we have now more than doubled our scale and service offering. We are seeing an increase in large power-related projects as Eskom's focus on service delivery gains momentum and the export bulk minerals sector remains robust, obviously driven by commodity prices. Various synergies across clusters and across divisions will be explored, and these will contribute to incremental growth. The low 1.5% SET increase in Pharmaceuticals will taper growth momentum in that operation. Offshore, we expect a continued strong performance from all hygiene businesses as contract pool growth continues and synergies and sourcing optimization matures. Whilst new contracts will be mobilized in the second half in our facilities management businesses, we do expect full year growth to be moderated somewhat due to the late start of new contracts and margin pressure explained earlier. Acquisitions concluded locally and offshore will also annualize. On cash generation, both Mark and I have already said a lot, the first half cash result was good. And as is customary, we expect an even stronger cash performance by year-end. The investments in acquisitions over the past years has, as expected, placed pressure on returns. Scaling our facilities and hygiene operations outside of South Africa through acquisitions was a clear strategy, and we've delivered on that. We will now take time to rebuild our return profile as returns have tapered due to cumulative capital investment. Lastly, our focus on delivering a good performance goes hand-in-hand with our focus on contributing to building sustainable communities. We're making good progress with our new 2030 sustainability framework, ensuring that our focus on people, purpose and performance is well integrated. This framework has been aligned with senior and executive management incentive KPIs to ensure that our financial and sustainability aspirations are fully reflected in remuneration. A comprehensive sustainability update will be provided at year-end. As I close, I'd like to remind us all that in Bidvest, we have a platform of businesses with scale, businesses with strong brand equity and a track record of service delivery and customer centricity across 14 countries in over 750 branch locations with 130,000 employees serving more than 1 million clients. We will continue to look after our people because they are what makes Bidvest work. They are our most important asset. On behalf of myself, Mark and Jill, I'd like to thank our management teams across South Africa, Swaziland, Namibia, Mozambique, Mauritius, the United Kingdom, Ireland and Northern Ireland, Spain, Australia, Singapore, Canada and the U.S. I'd like to thank them for their contribution for this half year's performance, their hard work, commitment to excellence, resilience and agility in this ever-changing world. To our shareholders, thank you for your support. We're halfway through this race and aim to finish strong. Thank you very much. Ilze Roux: Thank you, Mpumi. Thank you, Mark, for those prepared comments. I am going to check on the lines. If you have -- if you want to pose any questions, Judith is going to explain to you how to do so. And I have some questions here on the [indiscernible] side. Judith? Operator: [Operator Instructions] At this stage, we have no questions from the telephone lines. I will now hand it over for questions from the webcast. Ilze Roux: Thanks, Judith. Just a quick break. Mark, the first question is for you is the question is, can you please speak of any upcoming debt refinancing requirements or plans? Mark Steyn: Sure. No problem. So there's no maturities that are coming up in the near term. If you look at that maturity graph we included in the pack, you will see there's an FY '26 amount reflected there. That is just normal 366-day general banking facilities that just roll on a continuous basis. So there are no significant maturities. The ones -- the 2 that we are planning for FY '28, we have the RCF term, the [ EUR 750 million ] facility maturing. And we'll start working towards that in the latter part of this year and early next year. But there's nothing else significant that we're worried about. Ilze Roux: Thank you very much for that, Mark. Mpumi, I'm going to combine 2 questions that we have here. The first is do you plan to, in future, list the Global Hygiene business? And then I suppose second sort of linked to that, the comment is that ROFE is a high proportion of KPIs and ROFE is high in the Hygiene businesses. Is this the reason why we are in Hygiene service -- Hygiene services internationally? So really the inverse of the question is, in the absence of high ROFE, would we have been in Hygiene services? Nompumelelo Madisa: All right. So on the first one in terms of listing, I mean, we're not there. We're in the process of creating scale globally. We are chasing the #1 listed and want to take that #1 position. We want to extract as much synergy as we can and really build a big platform from a hygiene perspective. So I mean, I can tell you in our boardroom, we're not having a conversation about a listing of the hygiene businesses, whether in the short term or medium term or long term, that conversation is not taking place at the moment. And then in relation to why we're in hygiene, I mean, returns are important. So it is one factor, but it is not the only thing that drives us. When we announced our strategy around hygiene, we said that we were looking for markets that globally are fragmented, where we had confidence that we would be able to consolidate that market over time. We were looking for a business model that we knew well, a business model where in South Africa, we were a significant player and our market share was large relative and where we're competing with international, so we would be comfortable that we could compete with them in their home territory and win. And hygiene is one of those markets that we really, really understand well. Thirdly, we were looking for structural growth. So you also want to be investing capital in a space where structurally you know that there are other aspects that are supporting growth into the long term. And hygiene is one of those areas, the awareness around hygiene and wellness, it keeps on maturing every single year, and obviously was elevated after COVID, right? Everybody now knew the more increased importance of washing your hands, et cetera. And so structurally, hygiene is supported by a number of factors. And then there are financial KPIs. Returns is one of them, high margins is one of them, high cash generation is one of them. So there's a couple of financial metrics that also support this. So it's a couple of factors and all of those together are really the reason why we're in this hygiene space globally. Ilze Roux: Before I let you go on the hygiene side, just 2 more questions that came in. Let's finish that on the hygiene side. The question is this growth up 20% and the margin, as you pointed out, is higher than industry average. Do you think why is the margin high? And do you think it's sustainable, is the first question around that. And then could you just -- the question is how much of the trading profit is hygiene, if you could just [indiscernible] that. Nompumelelo Madisa: Okay. So yes, so we've done better than market, which I think is excellent. If you followed a lot of what we said when we initially acquired PHS, our margin was slightly below market. And as we've made the additional acquisitions of hygiene businesses in Singapore, in Australia and of course, now in North America, we've obviously now started integrating, but we're also working collectively from a sourcing perspective. So there's a lot of initiatives that we're putting in place, either sourcing or technology or AI, which is a sensor technology that we put in our dispensers. We're sharing all that IP. And it's all those initiatives that are really driving that margin. I would probably say, though, that the biggest impact on margin in this financial year is the integration in the U.K. So the integration in the U.K. between PHS and the Citron North America operations was a big driver, and PHS is our largest hygiene business. So when that business starts picking up in terms of margin, it will pull the entire operations with it. And you'll recall when we used to talk about one of the reasons why we wanted to do Citron is because the integration in the U.K. was almost gross to net. We would close all the branches. We would put all the Citron infrastructure onto the PHS branch -- to the PHS, sorry, branch infrastructure, IT technology, et cetera, and really just continue running those businesses. So the big margin driver has been what we've been able to do in the U.K. And then secondly, the Citron operations in North America are also on a net basis, higher margin than market. And so those 2 things are contributing to that. Ilze Roux: That's just a confirmation of the hygiene... Nompumelelo Madisa: We're looking 5% of Services International. Ilze Roux: Thank you very much for that, Mpumi. Mark, maybe on the automotive side, if you want to answer that question. The investor notes that a material contract lost in the recently acquired Dekra. And the question was, did we identify that element during the DD? And then -- and secondly, investors are asking about a little bit more clarity on the used cars. But Mpumi, you did make those statements in your comments that the GP margins were 0.8% lower on used cars, the volumes were lower. We saw an uptick in new car side. So those were the comments you made about used cars. So Mark, maybe just the Dekra question. Mark Steyn: Yes. Thanks, Ilze. So within -- in the Dekra transaction, specifically in the DD process, we identified that there was a material contract within Dekra that sits with one of our competitors in the used vehicle space. There was a very open discussion with the seller in terms of the likelihood of that contract remaining with Dekra post the transaction. Between us, we landed that there was reasonability that the contract would stay in place for a period of time. We priced the purchase consideration accordingly. As it subsequently turned out, we had that contract a little bit longer than what we anticipated, but it obviously has subsequently gone. But yes, it was appropriately priced in the bidding process. Ilze Roux: Then maybe again sort of combining 2 same vein type of questions here. This is asking for an update on the services operations in Australia and Far East, i.e., Singapore based [indiscernible] that we have some operations and the reversal of work-from-home trend globally. Nompumelelo Madisa: Yes. So I mean, our services operations in Australia is made up of quite a large cleaning business. You'll recall that we acquired BIC initially and then shortly after that acquired consolidated and that doubled our footprint within the cleaning space. And then we acquired a small hygiene business called Pure Hygiene. So we've got a hygiene offering. And then we've also acquired Egroup, which is a security business. So we have an FM business with 3 service lines: cleaning, security and hygiene and all of that, call it, integrated into one business, and that's what we're doing in Australia. From an Asia perspective, that would be rental hygiene services. So we're #1 in Singapore. That's our only Asia footprint through rental hygiene services. And then we added Clean Bio, which is a very, very small business that's just recently been integrated into [ ROA ]. Ilze Roux: Thank you very much for that, Mpumi. And then maybe a question, what is the view around the bank disposal costs now that the offer from Access Bank side, Mpumi? Nompumelelo Madisa: Yes. I mean we're still going to run a process. So I'm like so less to give a view in case people who are in the process -- will hear this. I'm trying to find the right word. So the price that we had on the table is a price from 2 years ago and was a 20% premium to NAV. And obviously, based on the performance of the bank at that point in time, which was better than where we are now. There has been a drag on performance over the past 2 years. And unfortunately, the length that the sale process is taking is also part of the reason that's putting pressure on performance. So I guess it's fair to say that we're probably unlikely to land where we landed with Access Bank. I think that was a rich number. But we certainly are going to push to get the best price that we can and just optimize it as best as we can. We've got a plan to repay debt, right? We know what that number needs to be. So clearly, we're back solving to a number, and we're going to negotiate hard to get there because we are also solving for something else on the other side. Ilze Roux: Thank you for that, Mpumi. Mark, and then just one more question here is you mentioned in passing the organic acquisitive split on trading profit, and investor asks, what would that sort of be on the revenue line? Mark Steyn: Yes. So gross revenue up 3.7%, organic was 2.1%, and acquisitive 1.6%. Ilze Roux: That was a very specific answer that sustain, Mark. Judith, any questions on the telephone lines? Operator: Thank you. At this stage, no questions on the telephone lines. Ilze Roux: All right. We have worked through all the questions on the webcast. Have pressed refresh and there's nothing else that came through. So I suppose that leaves us to say thank you very much for your time this afternoon, this morning. We appreciate it, and we now need to find us for any further questions that you might have. Thanks, Mpumi, Mark and Jill. Nompumelelo Madisa: Thank you very much. Thanks, Ilze. Thanks, bye. Mark Steyn: Thanks. Bye-bye. Operator: Thank you all. Ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.
Operator: Good day, everyone, and welcome to The Bidvest Interim Results Presentation FY '26. [Operator Instructions] Please note that this event is being recorded. I would now hand you over to Corporate Affairs Executive, Ilze Roux. Please go ahead, ma'am. Ilze Roux: Thank you, Judith. Good morning and good afternoon, everyone. My name is Ilze Roux, the Corporate Affairs Executive, and I have the pleasure of welcoming you to this call today. Thank you for your interest in Bidvest. These results reflect resilience and our focus on operational excellence and cash generation. As is customary, Mpumi Madisa, Group CEO, will make some high-level remarks before Mark Steyn, our Group CFO, delve deeper into these income numbers. Mpumi will then follow with a detailed review of each division's performance and close with a reflection of progress against our priorities and the outlook. There will be an opportunity to ask questions at the end of the session. Without further delay, I hand over to Mpumi. Thank you. Nompumelelo Madisa: Thank you very much, Ilze, and good morning or good afternoon, depending on which part of the world you're joining us from. Thank you for joining us this morning. We are very pleased to present a resilient set of results for the first half year. Reflecting on progress made since the unbundling of Bidcorp in 2016, it's really pleasing to note the portfolio realignment and the extent to which we have rebuilt our international footprint. Our 130,000 employees are located in 14 countries across approximately 750 branch locations. Our client base remains extremely diversified with about 1 million customers across the group. We serve multiple industries and all geographies with limited concentration risk. 27% of our revenue is generated offshore and of the 25% of our profits that are earned offshore, 55% are from our global hygiene operations. We are proud of the above progress and remain focused on generating sustainable profit growth and returns. In the period under review, we increased revenue by 4% and profitability by 7%. Free cash generation is a highlight of the results. We optimized our debt profile, and Mark will elaborate on this in his presentation. We closed out the remaining acquisitions in the pipeline with the large one being Aquatico, a water testing business in South Africa. Our M&A pipeline is now materially depleted with very small transactions to be finalized in the second half. Adcock has been successfully delisted with synergies being explored. We're nearing closeout time lines for finalization of our terminal operator agreements. And lastly, as communicated in the recent SENS announcement, The Bidvest bank transaction with Access Bank plc has terminated due to Access Bank being unable to secure the required approvals within the last update. Our sales process has already been restarted, and we're confident that we'll be able to accelerate time lines. Moving to the operational overview. Group revenue at ZAR 67 billion is up 4%, with Services International, Services South Africa and Automotive delivering strong revenue growth. The gross margin increased 43 basis points to 28.1% due to an improved sales mix, lower disbursements in our clearing and forwarding operations and improved factory recovery. Operating expenses were well managed, increasing 3.4% and only 1.2%, excluding acquisitions. Trading profit increased by 7% to ZAR 6.7 billion with all divisions making a positive contribution. Our trading margin expanded from 9.8% to 10.1%, reflecting margin improvement in 5 of the 6 divisions. As indicated earlier, the highlight of the results is our cash generated by operations, which is up 36% and free cash, which is ZAR 2 billion higher than prior year. Our balance sheet remains strong, and our gearing levels remain unchanged from the June year-end at 2.2x net debt to EBITDA. ROFE at 37.6% compared to 37.9% in the prior year and ROIC at 13.4% compared to 14.4%. We recognize that returns have tapered due to capital deployed over multiple financial years whilst we were rebuilding our international footprint. We are comfortable with the size and scale of the offshore operations and are now focusing on improving group returns. We have a clear plan, and we'll detail this later in the presentation. Our overall result is HEPS at 5.1% and normalized HEPS at 5.3%. In line with our dividend policy of 2x to 2.5x cover, the group declared an interim dividend of ZAR 4.95 per share, up 5.3% on the prior year. And then just giving an update on our hygiene story, we remain focused on building an international hygiene services business with our hygiene footprint now spanning across 11 countries where we occupy #1 position in 8 of those countries. Structural drivers such as urbanization and growing health and wellness awareness remain intact and will continue to support future growth. As indicated earlier, 55% of profits in Services International are from our Hygiene operations, and this compares to 50% in the prior year. Hygiene profit growth in the first half has been strong, up 20%, whilst margins -- while profit margins have accelerated from the industry norm of around 15% to 18.2%. We remain confident in our ability to take a leading position in the hygiene listed space in the near future. And now I'd like to hand over to Mark for the financial overview. Mark Steyn: Thank you, Mpumi. Good morning, good afternoon, everyone. Just some quick introductory comments before we dive into the detail. The first half saw a resilient and strategically disciplined performance with revenue growth, improved gross and operating margins and good cash generation, and all this despite mixed macroeconomic conditions and some sector-specific challenges. That said, it's very pleasing though to see some South African tailwinds start to come through. It has come off the FATF gray list and S&P have upgraded our sovereign rating. The interest rate cuts are starting to have a meaningful impact, especially in the automotive and property sectors. The energy and logistics sectors are being supported with meaningful government spend on infrastructure, which is evident in both. We are seeing rand strength against a broad basket of hard currencies. And while this may be earnings negative in the short term, a stable rand is good for the country in the longer run. And finally, it's encouraging to see that the SA budget was a bit more expansionary than in previous years, which will hopefully support medium-term growth. In terms of our divisions, they've all shown growth in the half, especially Services SA and Commercial Products performed very well. Our hygiene services, both locally and offshore, continue to show robust growth. Freight was able to turn around a soft top line result with good margin and expense control. And similarly, Branded Products delivered strong margin management, cost control and improved inventory management. The Automotive division benefited from improved new vehicle volumes, although margins are under pressure following the large influx of lower-priced Chinese vehicles. And Adcock had a very strong result of what was a seasonally low base. Generally, while the consumer remains under pressure, we're starting to see pockets of improvement. Our cost control was excellent as evidenced by the improvements in both our gross and net margins. The cash performance was very pleasing with good operating cash generation and significantly reduced seasonal absorption of working capital. Our cash conversion and free cash flow generation is also very solid. Strategically, it's been a very good period, and as promised, much work has been done on the funding structures. We successfully completed our second Eurobond issuance for a $500 million 7-year bond. You'll recall the first one was 5 years. The bond priced at a spread of just 40 bps above the SA sovereign curve at the time, which was a very pleasing outcome. These funds were used to part redeem the existing Eurobond and also pay down a portion of the offshore RCF. We also issued a new GBP 130 million 5-year term facility, which was entered into at very favorable rates produced to further repay the RCF. Domestically in South Africa, we successfully issued 3-, 5- and 7-year bonds, the value of ZAR 2.3 billion. These were issued at record low spreads, and that funding was used to purchase Aquatico and to repay a maturing bond. We also utilized surplus funding to repay 2 preference shares of ZAR 2.1 billion, which was our most expensive net debt in the mix. We have good debt capacity, both internationally and locally, and our net debt to EBITDA has increased slightly as a result of M&A this half, but it still sits comfortably within our covenants. From an acquisition perspective, we closed 3 acquisitions in the quarter. So we're working down our pipeline with Aquatico and environmental monitoring and testing business being the largest of these. And this now forms part of our testing, inspection and compliance TIC offering within Services SA. As Mpumi mentioned already, the disposal of Bidvest Bank continues despite the expiration of the sale agreement with Access Bank and the new process has commenced. In terms of Bidvest Light, we have signed an SBA, which has been concluded and we await regulatory approval for that. Both these 2 entities continue to be disclosed as discontinued operations. And then finally, Adcock Ingram, the scheme of arrangement was approved by shareholders in October '25, and has been finalized. Adcock has now been delisted with just 2 shareholders and Bidvest remains the majority shareholder with substantially the same shareholding. With this as a backdrop, let's look at now the more detailed results. From a revenue perspective, revenue up 3.7% to ZAR 66.7 billion was supported by good acquisitive growth. We've seen good growth in the revenue terms across the mix and specifically in Services SA and International, which was supported by acquisitions. Only 2 divisions, Branded Products and Freight saw top line contraction and both responded well with very positive operating leverage to ensure profit growth. The low GDP growth that is present in most of our jurisdictions is leading to competitive and price-sensitive demand. And I guess, to some extent, this is also exacerbated by lower -- or slower customer decision-making, and these have all put pressure on revenue levels. It will unpack the divisional results in a bit more detail later in the presentation. In terms of gross income, our gross profit is up 5.3% with a 43 bps improvement in the margin to 28.1%. That's very pleasing. Overall margins and margin mix are actively managed across the businesses. And the improved operating leverage and positive business mix was somewhat offset by structural shifts in the auto sector and certain contract rescoping. Our expense performance was very pleasing. Operating expenses up 3.4% in total with organic expense increases of 1.2%. In certain of the services businesses, we are seeing wage inflation in excess of CPI, which is impacting margins. And a number of businesses through the half have completed restructuring and rationalization processes, which should further improve the operating leverage into the second half. Our expense ratio was very similar to last year at 18.1%. And overall, this is an excellent broad-based expense outcome. Trading profit is up 6.9% to ZAR 6.7 billion. Very pleased with that and with an almost equal contribution from organic and acquisitive growth. Services SA and Services International produced excellent results. Commercial Products and Branded products produced good results as trading pressures, particularly on margins persist. Freight overcame a soft revenue line as disbursement level sales fell with good margin mix and excellent expense control. Automotive was stable, supported by a good insurance result and higher new car volumes, but retail margins are being materially impacted by the influx of cheaper Chinese vehicles. And Adcock had a very pleasing result, up 20%, albeit off a slightly lower prior year base. Our effective tax rate of 26.7% is unchanged from last year. And finally, our acquisition costs are pleasingly down 5.7% due to lower M&A activity in the half. The bulk of these costs that we did incur related to the Adcock delisting and the Aquatico acquisition. We expect these costs to lower significantly in the second half. Moving then to our cash generation. Cash flow for the first half was very good. Underlying cash generated by operations before working capital, up 7.2% to ZAR 8.7 billion. We traditionally absorbed working capital in the first half, no different this time around. We absorbed ZAR 2.6 billion in working capital. What was very pleasing though is this number was ZAR 1 billion lower than the outflow of ZAR 3.6 billion last year. In the mix, organic trade payables decreased, which is seasonally consistent. And there's been a very focused or continued focus on reducing inventories, and it's pleasing to see this coming through, particularly in commercial products and automotive. Our cash conversion is at 70% nicely up from 45% last year. And our free cash flow at ZAR 3.8 billion is well up on the ZAR 2 billion from last year. The bulk of the cash generated has been applied to working capital, debt repayment and normal CapEx with very limited M&A through the period. In terms of the cash generation graph, which we presented here, you can see the seasonal cash outflow, which is consistent with the group's normal working capital cycle. I think what's really pleasing, though, you can see how this is getting progressively over the last 4 years. Moving then to our capital structure. And as I said earlier, this has probably been one of the busiest 6 months that we've ever had from a treasury perspective, both from an international issuance perspective and domestically. On the offshore front, we issued the new $500 million 7-year bond that's extended from the initial 5-year bond that we issued in 2022. This bond was issued at 6.2% with the spread just 40 bps above the SA sovereign curve at the time, which was very pleasing, and we've subsequently won an award for this issuance. The funding was used to settle a tender offer on the 2026 Eurobond for $292 million with the balance of $186 million due in September this year, and that will be settled from the RCF. We also raised offshore a GBP 130 million term facility at 5.6%, which was used to further pay down the RCF. On the domestic front, we issued GBP 2.3 billion in bonds over 3-, 5- and 7-year tenures. And these were all issued -- all 3 categories were issued at the lowest spreads we've achieved to date. From a capacity perspective, we have EUR 412 million available offshore by the RCF and a further EUR 12 billion available domestically. We have also reflected on this graph -- sorry, on the graph on the bottom left, the maturity profile, which has been nicely extended with both the pound term facility that we've taken up and the 2033 Eurobond. So there's a very conscious decision about managing the maturities over time. If we then move to our overall debt funding and just how we're looking at optimizing it. We have redeemed the most expensive debt in the mix, which was the ZAR 2.1 billion in preference shares that was redeemed using existing facilities and our weighted average cost of debt has stabilized now at 6.4%. We do, however, continue to retain an overweight position in variable rate debt, 63% variable, which is aligned to expectations of further rate cuts. Our finance costs, excluding IFRS 16 and the hedge accounting adjustments is up -- or up 6.8%, which have been impacted slightly by the higher net debt levels. Our net debt to EBITDA, as Mpumi said earlier, at 2.2x, remains comfortably within our covenant of 2x, although we are targeting a lower level in the near term of below 2x with an internal sweet spot of about 1.5x. We will use the bank proceeds to further reduce costs, and this will also then lower this ratio. We have -- we've included a net debt graph here. And what you can see from this is the accelerated M&A over the last 3 years, particularly from '23 to '25, has grown the base. What you can see is this has stabilized now in this half by -- following the suspension of M&A, while we are reducing gearing levels, and we expect this to reduce further in the second half with a stronger working capital release. Similarly, the growth in our debt cost has also flattened. Our EBITDA interest cover is at 6.4x, comfortably in excess of the covenant of 3.5x. We continue to add new and cheaper funding sources into the mix. Moving now to our returns. As Mpumi said earlier, we're very cognizant of return levels and managing these over time in alignment with our M&A and CapEx investments. As we add investments into the base, these are brought on board with a very clear plan to deliver value over the medium term, and we actively track this. Our base specifically over the last 3 years has expanded materially with the majority of the M&A in services businesses. These investments typically have low funds employed and high goodwill and intangible. This is evidenced by the graph alongside, where you can see the invested capital growing disproportionately over the last 3 years. This will start to normalize with the slowdown in M&A and more specifically, as we start -- as we increase our cash generation and start to pay down debt, you will see that number come down further. We have seen some softer macro conditions in the last 2 years, which have also softened returns. The expectation is that we should see a stronger second half, both from the slowdown in M&A and the increase in -- or the greater release of working capital in the second half, which should aid this ratio. In terms of levers to further build returns, focus of the group is driving organic growth, which has been flattish in the recent past, and we do see growth accelerating in the second half. Traditionally, the second half also produces improved free cash flow generation off the back of the working capital release. We've also added more hygiene and FM businesses into the mix, which structurally are more cash generative. So with the suspension of M&A in the short to medium term, this will allow more free cash flow to be allocated against debt levels. Finally, just moving to the discontinued operations. I think we've largely covered this, but obviously, the disposal process for Bidvest Bank continues. We're working very hard on getting a transaction over the line as soon as possible. From an operating perspective, the bank did experience some top line pressure in the half with interest rates declining and slower capital deployment, but the deposit book continues to remain very stable and all the regulatory ratios are healthy. In terms of Bidvest Life, as I mentioned, the SPA and SPA has been signed. We're waiting for regulatory approvals on that transaction. Both of these entities have been disclosed as discontinued operations in terms of IFRS 5. Also in terms of IFRS, the depreciation and amortization in relation to these 2 disposed entities continues to be suspended, and we have adjusted for that in the normalized headline earnings calculation. Just some final concluding thoughts. It's encouraging to see some tailwinds in South Africa, even when other parts of the world have been adversely impacted by the geopolitics. While the trading environment and broader macros remain challenging, we've positioned the group both operationally and strategically for good growth. We will continue to focus on utilizing free cash flow to further deleverage the group. Margin and cost management as well as cash generation continue to remain core to our DNA. And our international expansion, specifically into hygiene services is gaining proper momentum and making us a force to be [ reckoned ]. Thank you. Nompumelelo Madisa: Thank you very much, Mark. Nice ending. So let's move to the operational overview, starting with Services International. The team delivered a pleasing result, anchored by a strong performance from our global hygiene operations. Revenue at ZAR 22.5 billion is up 5% and trading profit at ZAR 2.2 billion is up 8.3%. Revenue growth was driven by new business wins, contract pool growth and contributions from the Citron and Egroup acquisitions. Our Ireland and South Africa facilities management operations were negatively impacted by contract restructures and lower ad hoc revenue. The gross margin expansion in the division is attributable to a change in mix as the Hygiene operations gross profit contribution increased year-on-year. Cost control was excellent with expenses increasing only 1.7% excluding acquisitions. The gross margin expansion and disciplined expense management resulted in not only profit growth but also an excellent trading margin expansion from 9.3% to 9.8% in the period. Cash generation was excellent. And ROFE at 159% remains a solid return. Turning to the operations. 75% of profits in the division are generated offshore. Our Hygiene operations outperformed, delivering exceptional profit growth. In constant currency, the Singapore, South Africa and U.K. Hygiene businesses delivered strong profit growth, whilst our newly acquired North America operations delivered ahead of business plan. Our Facilities Management operations contracted slightly, primarily due to the revenue pressure referred to earlier and the knock-on margin impact. The South African cleaning business was exceptional, though, delivering a standout double-digit profit result. I'd like to congratulate the Services International team for a commendable performance. Moving to freight. The team delivered a good performance with bulk commodity cyclicality normalizing and volumes improving. Revenue at ZAR 4.5 billion was driven by annual rate increases, increased storage capacity and higher grain volumes. This growth was countered by lower clearing and forwarding volumes in South Africa and Namibia, resulting in a 4.2% decline in revenue. Margin expansion as a result of reduced disbursements, coupled with an excellent 0.8% decline in expenses resulted in a trading profit of ZAR 1.2 billion, up 7% and a trading margin improvement from 23.1% to 26.7%. Due to changes in working capital and growth CapEx deployed in our bulk liquid terminal, ROFE declined to 40% from 46% in the prior year. Looking at the operational results. Our bulk grain volumes increased 7% due to higher maize, rice and wheat volumes, resulting in an exceptional profit increase in this bulk grain terminal. Our bulk liquid operations delivered a good performance, driven by annual rate escalations, higher tank rental and the 8% volume increase that was supported by improved capacity from the new fuel tanks in Richards Bay commissioned in May 2025. The 2% volume decline in our bulk mineral terminal was countered by annual rate increases and a strong increase in chrome volumes, resulting in good profit growth. Our multipurpose terminal delivered a phenomenal result as the volumes of chrome ore exports handled doubled in volume. As indicated earlier, we experienced volume declines in our clearing and forwarding operations in South Africa and Namibia. The volume and margin pressure in these operations is due to lower volumes from key large clients, rate reductions in an effort to retain contracts and reduced oil and gas activity in Namibia. Our Mozambique operations, whilst having delivered an improved result, remain constrained by lower volumes and margin pressure. And then lastly, in freight, we expect to complete the multipurpose and import warehouses in Namibia in the latter part of the fourth quarter. I must congratulate the freight team for a solid result. Moving to Services South Africa. The team delivered an excellent result with most businesses delivering profit growth. Revenue at ZAR 6.9 billion is up 7% with the hospitality and our newly formed testing, inspection and compliance clusters recording the strongest growth. Our newly acquired water testing business, Aquatico, made its maiden contribution to the division. The gross margin deteriorated somewhat due to pricing pressures, change in revenue mix and pressures on cost recovery. Operating expenses increased only 1% and organically only 0.5%, reflecting excellent cost control. Trading profit at ZAR 793 million is up 10%, and the trading margin expanded from 11.2% to 11.5%. ROFE at 92.3% is down on prior year due to increased funds employed in the security cluster and the inclusion of Aquatico. On the operational side, the hospitality and catering cluster delivered phenomenal growth driven by an extraordinary performance from the lounges as passenger volumes reached record levels. The security cluster was slightly down and due to pricing pressures and the loss of high-margin work -- sorry, the security cluster was slightly down due to pricing pressure and the loss of high-margin work. Outside of this contraction, growth and solid performances were reported by the cargo, warehouse management, trucking and payment technology businesses. Our travel cluster experienced contraction in corporate travel volumes, whilst inbound travel volumes remained strong with a robust forward order book. The Allied cluster was down on prior year due to operational and margin challenges in the laundry and amenities businesses. Notwithstanding weather patterns that negatively impacted volumes, good recurring revenue in the water business and contractual sales in indoor and outdoor plants was reported. And lastly, in Services SA, our testing, inspection and compliance cluster, which now comprises WearCheck and Aquatico delivered a phenomenal profit result, driven by solid revenue growth and record samples processed. And I must congratulate this team again for an excellent set of results. Moving to Branded Products. The team delivered a solid result with 3 of the 4 clusters up on prior year. Revenue at ZAR 6.9 billion was down 1.6% due to reduced and delayed spend from large government clients. Increased competition from lower-priced imports and orders in the prior year that did not repeat in the period also impacted revenue. The gross margin improved impressively by 50 basis points to 29.8%, driven by a stronger product mix, production efficiencies and good management of direct costs. Similarly, operating expenses were exceptionally well managed, declining 1.8%. This excellent margin and expense management translated into a trading profit increase of 5.4% to ZAR 748 million and a trading margin expansion from 10.1% to 10.9%. ROCE reduced to 37.3% due to increased investment in working capital. Looking at the operational performance, the Office Products cluster delivered a good result, driven by superb growth in the furniture sector as this business continues to differentiate its product offering. Notwithstanding sales pressure, the Office Automation business grew profits off a high base. The Data, Print and Packaging cluster delivered a good result, driven by resilient demand, improved sales mix, factory efficiencies and outstanding expense control. The Consumer Products cluster contracted year-on-year as sales increases in appliances were offset by materially lower sales in our TV and satellite accessories business. The knock-on margin impact due to mix and higher rebates reduced profitability in the consumer cluster. And lastly, the Office & Leisure cluster delivered a strong profit growth, driven by a good performance from our lounge business -- sorry, our luggage business and a contribution from the outdoor cookware and accessories business. Margin and expense management was excellent in this cluster. I'd like to congratulate the team for a robust set of results. Moving to Commercial Products. The division reported an admirable result, reflecting a good turnaround in performance. Revenue at ZAR 8.6 billion is up 2.5%, reflecting a small uptick in some markets and thankfully stabilization in renewable sales. The gross margin increased slightly to 28.9% and operating expenses increased below inflation by 2.7%. Strong operating leverage translated a 2.5% revenue growth into a 9.7% increase in trading profit to ZAR 594 million. The trading margin also improved to 7% compared to 6.5% in the prior year. Whilst ROFE declined to 17.7%, there is a notable improvement in returns from the 16% reported at June year-end. The significant reduction in inventory resulted in excellent cash generation. Operationally, pedestrian revenue growth in the electrical cluster was offset by excellent margin and expense control. 4 new Voltec stores were opened in the period and renewable sales have stabilized above prior year's volumes. Our Plumbing and Related Products business continues to outperform as volumes and trade sales increased and 3 new stores were opened. Pressure was, however, felt across the packaging, Thai franchise warehousing and DIY and tools businesses due to declines in revenue and margin compression as industrial and manufacturing activity remains muted. Lastly, the Workwear, industrial catering and leisure businesses delivered excellent results as volumes remained robust in certain markets and margins expanded and costs were also well controlled. I must congratulate this team for a very strong set of results. Our last division, Automotive, delivered profit growth amidst an extremely price competitive and evolving retail market. Revenue at ZAR 14.8 billion is up 7%, supported by a 15% increase in new vehicle sales -- volume -- sorry, in our sales volume. This excess supply of new vehicles did, however, contribute to considerable discounting and the substitution effect of the oversupply resulted in reduced demand for used vehicles. Fleet sales were materially up on prior year and our secondhand motor retail business produced excellent top line growth. The gross margin declined by 1%, which in value was quite a big number, and this was due to a 0.6% decline in new vehicle margins and a 0.8% decline in used vehicle margins. Lower margin fleet sales also impacted the gross margin. Expenses remained tightly controlled at an increase of only 0.8% and trading profit was constrained by the margin compression referred to earlier, resulting in a profit increase of 1.8% to ZAR 515 million. The division's ROFE at 23% is down from last year's 26.8% due to higher working capital as we balance between own stock and consignment stock. Operationally, in the franchise model retail cluster, the increase in new vehicle volumes was offset by the decline in used vehicle volumes. And as reported earlier, the margin declines in both categories negatively impacted profit growth. However, on the upside, expense management in the cluster was outstanding, neutralizing the negative margin impact. And in the period, we continue to diversify our representation, onboarding 8 new vehicle brands. Our non-franchise motor retail cluster is gaining momentum. Our goal is to have all our branches nationally at full capacity by the end of the financial year. We've reached a point where units bought match units sold in a month, and this is critical because it talks to asset turn. The planned full year contribution from this business will move the dial for the division. And lastly, in the automotive allied cluster, our vehicle inspection and body building business are holding their own in a competitive landscape, whilst the insurance businesses outperformed, delivering record results. I must congratulate the team for delivering a robust set of results in a very, very difficult operating environment. And then moving to Adcock. Adcock delivered an outstanding improvement from last year's half performance -- half year performance with all business units contributing to growth. Revenue at ZAR 4.8 billion is up 3% and trading profit at ZAR 620 million is up 20%. Revenue was driven by a 3.6% price realization and 2.8% organic volume growth. The 2% increase in gross margin due to an improved sales mix and excellent factory recoveries, coupled with a 4% expense increase resulted in a 20% trading profit growth. Prescription delivered a standout performance with all segments except generics, reaching their growth targets. The OTC and hospital divisions delivered excellent results due to exceptional growth in OTC's top 10 products and solid growth in the renal and medicine delivery portfolio. Consumer reported marginal growth due to lower demand for key large brands, a fantastic result from the Adcock team. Moving to the outlook. I'd like to give some update in relation to progress made on the immediate priorities that we had outlined in the previous reporting period. On cash generation, we are making strong progress with a cash conversion improvement from 45% to 70%. And as Mark indicated earlier, free cash up ZAR 2 billion due to improved inventory management. This is an excellent cash performance, and we expect an even better cash position at year-end. Our deleveraging plan was dependent on receipt of the proceeds from the sale of Bidvest Bank, Bidvest Life and FinGlobal. These proceeds would have reduced our net debt-to-EBITDA by 0.2x. We've, therefore, not yet delivered on this priority, but aim to have the disposal process for Bank and Life finalized with cash in hand before the end of this calendar year. Securing the longevity of our freight operations is a key priority. And as indicated earlier, we are nearing closeout date for contract finalization. Negotiations have progressed materially and our confidence in successfully finalizing these contracts is demonstrated in the approval of 2 growth CapEx valued at ZAR 550 million, which, of course, are subject to signed terminal operator agreements. And lastly, extracting value from the recently concluded acquisitions remains paramount. The U.K. Hygiene integration is complete and the combined business is delivering ahead of expectation. A lot of time has been spent understanding the North American market and required strategy adjustments have been made to align to local nuances. We will be expanding our North America footprint with the opening of our first branch in New York in the fourth quarter of the current financial year. Procurement synergies are yet to be realized in the North America operations as we are currently cycling through existing stock. Our automotive diversification strategy is gaining momentum with cross-selling and collaboration across the various clusters taking shape and contributing to profitability. And the last update is our testing, inspection and compliance cluster is a strong new growth platform and the 2 businesses in that cluster are formulating tactical joint go-to-market strategies. On our last slide and the outlook, we have our eyes set on 3 priorities: firstly, accelerating organic growth; secondly, improving cash generation; and lastly, as Mark elaborated in his presentation, improving returns. Starting with organic growth. In South Africa, we are seeing green shoots in the hospitality sector, inbound tourism and the testing inspection and compliance sector, where we have now more than doubled our scale and service offering. We are seeing an increase in large power-related projects as Eskom's focus on service delivery gains momentum and the export bulk minerals sector remains robust, obviously driven by commodity prices. Various synergies across clusters and across divisions will be explored, and these will contribute to incremental growth. The low 1.5% SET increase in Pharmaceuticals will taper growth momentum in that operation. Offshore, we expect a continued strong performance from all hygiene businesses as contract pool growth continues and synergies and sourcing optimization matures. Whilst new contracts will be mobilized in the second half in our facilities management businesses, we do expect full year growth to be moderated somewhat due to the late start of new contracts and margin pressure explained earlier. Acquisitions concluded locally and offshore will also annualize. On cash generation, both Mark and I have already said a lot, the first half cash result was good. And as is customary, we expect an even stronger cash performance by year-end. The investments in acquisitions over the past years has, as expected, placed pressure on returns. Scaling our facilities and hygiene operations outside of South Africa through acquisitions was a clear strategy, and we've delivered on that. We will now take time to rebuild our return profile as returns have tapered due to cumulative capital investment. Lastly, our focus on delivering a good performance goes hand-in-hand with our focus on contributing to building sustainable communities. We're making good progress with our new 2030 sustainability framework, ensuring that our focus on people, purpose and performance is well integrated. This framework has been aligned with senior and executive management incentive KPIs to ensure that our financial and sustainability aspirations are fully reflected in remuneration. A comprehensive sustainability update will be provided at year-end. As I close, I'd like to remind us all that in Bidvest, we have a platform of businesses with scale, businesses with strong brand equity and a track record of service delivery and customer centricity across 14 countries in over 750 branch locations with 130,000 employees serving more than 1 million clients. We will continue to look after our people because they are what makes Bidvest work. They are our most important asset. On behalf of myself, Mark and Jill, I'd like to thank our management teams across South Africa, Swaziland, Namibia, Mozambique, Mauritius, the United Kingdom, Ireland and Northern Ireland, Spain, Australia, Singapore, Canada and the U.S. I'd like to thank them for their contribution for this half year's performance, their hard work, commitment to excellence, resilience and agility in this ever-changing world. To our shareholders, thank you for your support. We're halfway through this race and aim to finish strong. Thank you very much. Ilze Roux: Thank you, Mpumi. Thank you, Mark, for those prepared comments. I am going to check on the lines. If you have -- if you want to pose any questions, Judith is going to explain to you how to do so. And I have some questions here on the [indiscernible] side. Judith? Operator: [Operator Instructions] At this stage, we have no questions from the telephone lines. I will now hand it over for questions from the webcast. Ilze Roux: Thanks, Judith. Just a quick break. Mark, the first question is for you is the question is, can you please speak of any upcoming debt refinancing requirements or plans? Mark Steyn: Sure. No problem. So there's no maturities that are coming up in the near term. If you look at that maturity graph we included in the pack, you will see there's an FY '26 amount reflected there. That is just normal 366-day general banking facilities that just roll on a continuous basis. So there are no significant maturities. The ones -- the 2 that we are planning for FY '28, we have the RCF term, the [ EUR 750 million ] facility maturing. And we'll start working towards that in the latter part of this year and early next year. But there's nothing else significant that we're worried about. Ilze Roux: Thank you very much for that, Mark. Mpumi, I'm going to combine 2 questions that we have here. The first is do you plan to, in future, list the Global Hygiene business? And then I suppose second sort of linked to that, the comment is that ROFE is a high proportion of KPIs and ROFE is high in the Hygiene businesses. Is this the reason why we are in Hygiene service -- Hygiene services internationally? So really the inverse of the question is, in the absence of high ROFE, would we have been in Hygiene services? Nompumelelo Madisa: All right. So on the first one in terms of listing, I mean, we're not there. We're in the process of creating scale globally. We are chasing the #1 listed and want to take that #1 position. We want to extract as much synergy as we can and really build a big platform from a hygiene perspective. So I mean, I can tell you in our boardroom, we're not having a conversation about a listing of the hygiene businesses, whether in the short term or medium term or long term, that conversation is not taking place at the moment. And then in relation to why we're in hygiene, I mean, returns are important. So it is one factor, but it is not the only thing that drives us. When we announced our strategy around hygiene, we said that we were looking for markets that globally are fragmented, where we had confidence that we would be able to consolidate that market over time. We were looking for a business model that we knew well, a business model where in South Africa, we were a significant player and our market share was large relative and where we're competing with international, so we would be comfortable that we could compete with them in their home territory and win. And hygiene is one of those markets that we really, really understand well. Thirdly, we were looking for structural growth. So you also want to be investing capital in a space where structurally you know that there are other aspects that are supporting growth into the long term. And hygiene is one of those areas, the awareness around hygiene and wellness, it keeps on maturing every single year, and obviously was elevated after COVID, right? Everybody now knew the more increased importance of washing your hands, et cetera. And so structurally, hygiene is supported by a number of factors. And then there are financial KPIs. Returns is one of them, high margins is one of them, high cash generation is one of them. So there's a couple of financial metrics that also support this. So it's a couple of factors and all of those together are really the reason why we're in this hygiene space globally. Ilze Roux: Before I let you go on the hygiene side, just 2 more questions that came in. Let's finish that on the hygiene side. The question is this growth up 20% and the margin, as you pointed out, is higher than industry average. Do you think why is the margin high? And do you think it's sustainable, is the first question around that. And then could you just -- the question is how much of the trading profit is hygiene, if you could just [indiscernible] that. Nompumelelo Madisa: Okay. So yes, so we've done better than market, which I think is excellent. If you followed a lot of what we said when we initially acquired PHS, our margin was slightly below market. And as we've made the additional acquisitions of hygiene businesses in Singapore, in Australia and of course, now in North America, we've obviously now started integrating, but we're also working collectively from a sourcing perspective. So there's a lot of initiatives that we're putting in place, either sourcing or technology or AI, which is a sensor technology that we put in our dispensers. We're sharing all that IP. And it's all those initiatives that are really driving that margin. I would probably say, though, that the biggest impact on margin in this financial year is the integration in the U.K. So the integration in the U.K. between PHS and the Citron North America operations was a big driver, and PHS is our largest hygiene business. So when that business starts picking up in terms of margin, it will pull the entire operations with it. And you'll recall when we used to talk about one of the reasons why we wanted to do Citron is because the integration in the U.K. was almost gross to net. We would close all the branches. We would put all the Citron infrastructure onto the PHS branch -- to the PHS, sorry, branch infrastructure, IT technology, et cetera, and really just continue running those businesses. So the big margin driver has been what we've been able to do in the U.K. And then secondly, the Citron operations in North America are also on a net basis, higher margin than market. And so those 2 things are contributing to that. Ilze Roux: That's just a confirmation of the hygiene... Nompumelelo Madisa: We're looking 5% of Services International. Ilze Roux: Thank you very much for that, Mpumi. Mark, maybe on the automotive side, if you want to answer that question. The investor notes that a material contract lost in the recently acquired Dekra. And the question was, did we identify that element during the DD? And then -- and secondly, investors are asking about a little bit more clarity on the used cars. But Mpumi, you did make those statements in your comments that the GP margins were 0.8% lower on used cars, the volumes were lower. We saw an uptick in new car side. So those were the comments you made about used cars. So Mark, maybe just the Dekra question. Mark Steyn: Yes. Thanks, Ilze. So within -- in the Dekra transaction, specifically in the DD process, we identified that there was a material contract within Dekra that sits with one of our competitors in the used vehicle space. There was a very open discussion with the seller in terms of the likelihood of that contract remaining with Dekra post the transaction. Between us, we landed that there was reasonability that the contract would stay in place for a period of time. We priced the purchase consideration accordingly. As it subsequently turned out, we had that contract a little bit longer than what we anticipated, but it obviously has subsequently gone. But yes, it was appropriately priced in the bidding process. Ilze Roux: Then maybe again sort of combining 2 same vein type of questions here. This is asking for an update on the services operations in Australia and Far East, i.e., Singapore based [indiscernible] that we have some operations and the reversal of work-from-home trend globally. Nompumelelo Madisa: Yes. So I mean, our services operations in Australia is made up of quite a large cleaning business. You'll recall that we acquired BIC initially and then shortly after that acquired consolidated and that doubled our footprint within the cleaning space. And then we acquired a small hygiene business called Pure Hygiene. So we've got a hygiene offering. And then we've also acquired Egroup, which is a security business. So we have an FM business with 3 service lines: cleaning, security and hygiene and all of that, call it, integrated into one business, and that's what we're doing in Australia. From an Asia perspective, that would be rental hygiene services. So we're #1 in Singapore. That's our only Asia footprint through rental hygiene services. And then we added Clean Bio, which is a very, very small business that's just recently been integrated into [ ROA ]. Ilze Roux: Thank you very much for that, Mpumi. And then maybe a question, what is the view around the bank disposal costs now that the offer from Access Bank side, Mpumi? Nompumelelo Madisa: Yes. I mean we're still going to run a process. So I'm like so less to give a view in case people who are in the process -- will hear this. I'm trying to find the right word. So the price that we had on the table is a price from 2 years ago and was a 20% premium to NAV. And obviously, based on the performance of the bank at that point in time, which was better than where we are now. There has been a drag on performance over the past 2 years. And unfortunately, the length that the sale process is taking is also part of the reason that's putting pressure on performance. So I guess it's fair to say that we're probably unlikely to land where we landed with Access Bank. I think that was a rich number. But we certainly are going to push to get the best price that we can and just optimize it as best as we can. We've got a plan to repay debt, right? We know what that number needs to be. So clearly, we're back solving to a number, and we're going to negotiate hard to get there because we are also solving for something else on the other side. Ilze Roux: Thank you for that, Mpumi. Mark, and then just one more question here is you mentioned in passing the organic acquisitive split on trading profit, and investor asks, what would that sort of be on the revenue line? Mark Steyn: Yes. So gross revenue up 3.7%, organic was 2.1%, and acquisitive 1.6%. Ilze Roux: That was a very specific answer that sustain, Mark. Judith, any questions on the telephone lines? Operator: Thank you. At this stage, no questions on the telephone lines. Ilze Roux: All right. We have worked through all the questions on the webcast. Have pressed refresh and there's nothing else that came through. So I suppose that leaves us to say thank you very much for your time this afternoon, this morning. We appreciate it, and we now need to find us for any further questions that you might have. Thanks, Mpumi, Mark and Jill. Nompumelelo Madisa: Thank you very much. Thanks, Ilze. Thanks, bye. Mark Steyn: Thanks. Bye-bye. Operator: Thank you all. Ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.
Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to Ameresco Inc.'s Q4 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Leila Dillon, Chief Marketing Officer. Please go ahead. Leila Dillon: Thank you, Kelvin, and good afternoon, everyone. We appreciate you joining us for today's call. Our speakers on the call today will be George Sakellaris, Ameresco's Chairman and Chief Executive Officer; and Mark Chiplock, Chief Financial Officer. In addition, Josh Baribeau, our Chief Investment Officer, will be available during Q&A to help answer questions. Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the safe harbor language on Slide 2 of our supplemental information and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations of these measures and additional information in our supplemental slides that were posted to our website. Please note that all comparisons that we will be discussing today are on a year-over-year basis, unless otherwise noted. I will now turn the call over to George. George? George Sakellaris: Thank you, Leila, and good afternoon, everyone. I am pleased to report that our fourth quarter results represented a great finish to a year of strong performance with annual results reaching the mid- to high end of our revenue and profit guidance. Excellent execution by the Ameresco team, together with the recurring revenue contributions from our energy asset and O&M businesses were key drivers to our success. And this success was achieved even amid concerns surrounding potential Department of Government efficiency actions early in the year and the 6-week federal government shutdown in the fourth quarter. Importantly, our results were broad-based with growth across all 3 of our core business lines, including strong growth from our European operations. And while our team continues to be laser-focused on contract execution, converting a record $1.5 billion of project backlog into revenue this year, we also saw excellent new business activity, including meaningful project scope increases in our federal backlog. This helped to drive our total awarded backlog to over $2.5 billion, up 13% from last year. Also, Europe was a strong contributor this year and represents a real success story. We first entered Europe over 10 years ago with a small acquisition of a U.K.-based energy consulting firm. But more recently, we have focused on expanding our business in Continental Europe. As doing business in Europe requires a localized presence, our European growth strategy has been driven by opportunistic acquisitions such as Italy-based Enerqos and partnerships in various target countries. We focus on smaller opportunities and then use the power of Ameresco, our technology and process know-how and financial resources to accelerate and drive growth. Geographically, we have focused on Southern and Eastern Europe, areas which are experiencing higher rates of growth with fewer large domestic entrenched competitors. Our 51% owned joint venture with the Greek-based SUNEL Group is an excellent example of this approach. The joint venture was created on April of 2023 to pursue utility-scale PV and battery energy storage opportunities. After great success in Greece, the joint venture has since expanded this business, including a few recent large wins in Romania. We expect to continue to grow in Europe organically and through opportunistic acquisitions and partnerships. Europe not only represents an excellent growth market, but it also provides important diversification as demand drivers in Europe are not subject to the same U.S. political and policy variables. We look forward to providing additional updates on this important aspect of our company's future growth. Before I hand the call over to Mark to cover our results and outlook, I would like to briefly highlight a number of key industry growth drivers and how we believe Ameresco can benefit from them for years to come. The first key driver is a rapidly growing demand for electricity. This has been driven by the electrification of built-in and transportation, the power needs for many high-technology industries and the growth in industrial manufacturing. Overall, electricity demand is expected to increase by 78% by 2050 needing 80 gigawatts of capacity added every year for the next 20 years. Meeting this demand will be a significant challenge to our aging system of centralized generation and the associated transmission infrastructure. As a result, many of our customers are choosing to install on-site behind-the-meter generation and storage solutions. Ameresco has been providing the portfolio of these solutions since the founding of the company, including not only solar but also battery energy storage systems, natural gas engines, gas turbines, fuel cells and microgrids. We are also exploring the next generation of energy infrastructure technologies like micro and small modular nuclear reactors. This power and storage solutions will be a key element to supporting ongoing global energy demand needs. Second, increasing energy costs is another key industry driver for which Ameresco is well positioned to benefit from, particularly through our built-in efficiency solutions. As electricity prices rise, energy efficiency investments made by our customers deliver faster payback and stronger returns. Energy efficiency is often the most economical solution for existing buildings. According to Frost & Sullivan, Ameresco is the nation's largest provider of energy efficiency services, which represent nearly half of our current project backlog. Third, the increasing stress on the country's aging energy infrastructure from high demand and the critical nature of an interruptible power is quickly driving a growing demand for resilient energy solutions. High nice power is not only a must-have for critical high-technology industries such as data centers, but also for industrial customers where even limited downtime can have significant cost of production consequences. Advancements in lithium battery technologies as well as rapidly declining costs have driven tremendous growth in the use of battery energy storage solutions over the last 5 years. Ameresco has a very long track record of providing resilient solutions at military bases across the country, keeping their mission critical functions running in case of grid power interruptions and thus making us a go-to provider across all end markets. As you can see, we believe Ameresco is very well positioned to benefit from these long-term trends that should help drive profitable growth for many more years to come. Now I would like to turn the call over to Mark to provide financial commentary on this quarter's excellent results as well as provide our outlook for 2026. Mark? Mark Chiplock: Thank you, George. This was another strong quarter for Ameresco in a year defined by consistent execution. Despite the Q4 government shutdown, we delivered record quarterly revenue of $581 million, up 9% year-over-year with growth across all of our 4 business lines. These results underscore the durability of our diversified business model and the disciplined execution of our team. Projects revenue grew 11%, driven by strong backlog conversion and continued solid performance from our European joint venture with SUNEL. While we converted a significant amount of backlog in the quarter, we still maintained our total project backlog above $5 billion, reflecting sustained demand for our comprehensive energy infrastructure solutions. Energy asset revenue increased 5%, driven by the growth of our operating asset portfolio. We placed 87 megawatts into operation during the quarter, including our ninth RNG facility, a large military solar plus storage installation and the Nucor BESS system. For the year, we exceeded our guidance, placing 121 megawatts of energy assets into operations, bringing our total operating assets to 838 megawatts. We also added 30 megawatts to our energy assets in development, continuing to balance backfilling our energy asset pipeline with our disciplined financial approach to new asset opportunities. Our recurring O&M revenue increased 11%, reflecting continued attachment of long-term service agreements to our completed project work. Our long-term O&M revenue backlog now stands at approximately $1.5 billion. When you combine our project backlog and the future revenue streams from our recurring O&M business and portfolio of operating energy assets, we have over $10 billion in long-term revenue visibility. We believe that level of visibility is a real strength in this challenging environment. And finally, our other line of business, excluding the sale of our AEG business at the end of 2024, delivered solid year-over-year results. Gross margin was 16.2%, up both sequentially and year-over-year. This reflects continued improvement in project mix, higher quality backlog and disciplined cost management. Operating expenses in the fourth quarter were $50.9 million compared to $47.8 million last year. The increase reflects targeted investments in people, project development and execution support as we manage revenue growth, more complex infrastructure projects and continue replenishing backlog. Importantly, operating expenses are growing materially slower than gross profit, so we're still preserving operating leverage in the business. As we move into 2026, we expect to continue investing prudently to support demand and drive growth, which is reflected in our guidance. Net income attributable to common shareholders was $18.4 million with GAAP EPS of $0.34 and non-GAAP EPS at $0.39. Adjusted EBITDA was $70 million, resulting in a margin of 12%. As a reminder, last year's fourth quarter adjusted EBITDA results included the $38 million gain on the sale of AEG. Turning to our balance sheet. We ended the quarter with approximately $72 million in cash and corporate debt of approximately $300 million. Leverage under our senior secured facility was 2.7x, comfortably below the covenant level of 3.5x. During the quarter, we secured approximately $175 million in new project financing commitments. Adjusted cash flow from operations was approximately $36 million, including proceeds from ITC sales. On a longer-term basis, our 8-quarter rolling average adjusted cash from operations was approximately $54 million. Now let me move on to our 2026 guidance. We entered the year with strong business momentum and visibility, supported by continued strength across our end markets. Increased industry demand, combined with the recurring revenue from our growing energy asset and O&M businesses provides clear visibility into another year of strong growth. As detailed in our press release, for 2026, we are guiding to approximately $2.1 billion of revenue and $283 million of adjusted EBITDA at the midpoint of our ranges, representing growth of 9% and 19%, respectively. We expect to place approximately 100 to 120 megawatts of energy assets into service, including 2 RNG plants. For some quarterly shaping, the cadence of the year should follow our historical seasonal pattern with a heavier weighting towards the second half. We expect revenues in the second half of the year to represent approximately 60% of our total revenue for 2026. This is consistent with our performance from the past couple of years. As we look to the first quarter, which is seasonally our lowest revenue quarter, we expect revenue and adjusted EBITDA to be generally consistent with Q1 of last year. The quarter reflects normal project timing and the recent severe weather that has impacted execution across several regions. As noted in the earnings release, Q1 EPS is expected to be lower year-over-year, primarily reflecting higher interest and depreciation expenses from our growing energy asset portfolio as well as continued investment as we scale the business. Before closing on guidance, I want to briefly clarify how certain structural items impact both adjusted EBITDA and EPS. As George mentioned, we operate certain parts of our business through joint venture structures, including our SUNEL JV in Europe. Where we have control, we consolidate 100% of revenue and expenses. However, a portion of both adjusted EBITDA and net income is attributable to our JV partners and reflected as noncontrolling interest. As a result, the adjusted EBITDA and EPS we report reflect only Ameresco's ownership share of those consolidated entities. Given these factors have a significant impact on our results, we've provided estimated ranges for income attributable to noncontrolling interest in our 2026 guidance as detailed in our press release. In summary, 2025 demonstrated the durability of our model. We delivered consistent growth, expanded backlog, improved margins and maintained financial discipline. 2026 is shaping up to be another year of sustained profitable growth for the company as we believe we can continue to benefit from the many positive secular trends driving demand for our energy solutions. Now I'd like to turn the call back to George for closing comments. George Sakellaris: Thank you, Mark. As Mark mentioned, during 2026, we will be building on our excellent momentum from 2025 to deliver another year of strong profitable growth. Our highly differentiated portfolio of energy infrastructure and built-in efficiency solutions are well aligned with customer demand. Over our 26-year history, Ameresco has proven to be one of the most consistent providers of these solutions. We are making targeted investments this year as we focus on technical innovation and drive long-term growth. As we have here today, we are very excited about our growth prospects for 2026 and beyond. We look forward to seeing many of you at upcoming meetings and conferences. In closing, I would like to once again thank our employees, customers and stockholders for our great success in 2025 and for their continued support in 2026. Operator, we would like to open the call to questions. Operator: [Operator Instructions] Your first question comes from the line of Noah Kaye of Oppenheimer. Noah Kaye: There was a lot of anticipation there. I guess -- I know you don't formally guide to the segments in the outlook. But maybe just some shaping on energy assets as contemplated in the guide. The 121 megawatts placed in service did exceed. So kind of how do we think about the revenue trajectory there and kind of the margin profile? It seems like it should be a nice step up. George Sakellaris: Noah, so I think as in previous years, the majority of the assets placed in service will kind of be towards the middle to the back half of the year. That's just kind of how things work with interconnection queues and the development cycle, heavy construction in the summer months, et cetera. And so that will generally look like this year. This year was very heavily Q4 weighted, I think 80-plus megawatts placed in service. So it may not look quite like that, but certainly more back half and middle loaded than linear. In terms of the margin contributions, really no reason to believe that the margins are any different per segment, battery, gas or solar as they are historically. And the mix is about the same. We've kind of given you the rough mix of what we expect to place this year. So -- and as you know, most of the assets we placed in service in any given year don't meaningfully contribute that year. It takes sort of a little while to ramp up to get commissioned and then 2. And then the real contribution is the following year. So this year has a lot of the impacts of the assets we placed in service in 2025, especially because it was back half loaded, much like the 2026 assets placed in service will have more of a meaningful impact on our '27 numbers, which we haven't provided yet. Noah Kaye: Yes. Very clear. And then I think you mentioned in the prepared remarks, Mark, around kind of the first quarter shaping. You mentioned weather had an impact. Obviously, we all experienced firsthand, at least most of us that weather. So not a huge surprise, but can you maybe comment on what that meant for just some of the project work and kind of how you think about the sort of sequencing of getting rid of some of the associated labor inefficiencies and the like so that, that flows a little bit better in 2Q and the back half? Mark Chiplock: Yes. I mean the weather, again, as you can imagine, impacted our ability to access certain sites, it impacted our assets. But -- so it's really just impacting the timing, the cadence of conversion. We expect to see certainly on the project side, that revenue to come in, in Q2 as we get kind of on the other side of it. But yes, I mean, it was -- we always try to look at Q1 with the best visibility we have coming out of backlog. This was unusual just given how severe the weather was. But again, we feel pretty good that, that is just timing, and we'll see that revenue come back in as we get outside of Q1 and later into the year. George Sakellaris: If I may add a little bit there, Noah. We had the freeze up on 3 of our assets, the renewable gas assets, and that's correct, and that's not really recoverable. That's gone. But we have taken all that into account for our guidance for the year and the numbers for the first quarter. Operator: Your next question comes from the line of George Gianarikas of Canaccord Genuity. George Gianarikas: I'd like to focus a little bit on Europe and the momentum you're seeing now. In order to scale further, do you expect to do it organically? Or are you looking at maybe adding acquisitions to bolster your scale? George Sakellaris: Like I said in my commentary, we are looking for accretive acquisitions strategically located, and we'll be very opportunistic in that regard and partnerships and expanding the partnership that we have with SUNEL. And as pointed out, we have great, great success up in Romania, and we are looking at a couple of other countries working with them and that be some RFPs that come out, and we're planning to go ahead and go after that particular business with that entity. But as I said, though, the growth in Europe, especially on solar and the next wave that's coming, the battery storage because those countries, they have so much solar and wind installations that -- and we are well positioned to take good advantage of that. So we're looking at very good growth opportunities in Europe. And of course, you don't have to put up with the U.S. political things that are going on over here. It's a great diversity for us, diversification. George Gianarikas: And maybe as a follow-up, just to ask a little bit about recent momentum in data centers. You specifically mentioned momentum in behind the meter. Any update on what you're seeing in the data center market? George Sakellaris: Look, we're getting more requests that we can handle once we announce a little more data center. And of course, we have, I would say, a little bit of strategic advantage from the other competitors, a, we can put the package together and provide high nice power for data centers. Otherwise, they might have gas turbines or might need battery storage and a microgrid, we are a company, we have been doing that for a long time. And we have a great, great pipeline. That's all I can say. But as you know, we're a little bit conservative when we announce a particular project. But we think it's going to be a great, great contributor for us down a little bit this year and much more down the next couple of years. Mark Chiplock: Yes. Maybe what I'll just add to that, when we think about the timing of when those opportunities can start to come into backlog, we're going to really maintain some strong discipline in risk management as we look at those projects. There's a number of gating items that we need to make sure are derisked like engineering, permitting, equipment sourcing, financing, commercial structuring. And so a lot goes into making sure that those opportunities are real, and I think that's the approach we've been taking in bringing these assets or bringing these projects into the backlog. So as George said, pipeline is strong, but conversion timing is going to reflect how well we can derisk some of these gating items. Operator: Your next question comes from the line of Ben Kallo of Baird. Ben Kallo: Just maybe following on, I know that you had -- you put in a very high, if not record number of assets in the service in Q4. Just on timing of adding new projects to the backlog following on George's last question with data center. When should we expect to kind of get some of this stuff in the backlog? And then my second question is just around any kind of tightness in labor equipment or other that you would like to call out that are impacting kind of your speed to market here? Mark Chiplock: Yes. I take the first one. George Sakellaris: I take the second. Mark Chiplock: Yes, I think as George mentioned, the pipeline is really strong for these behind-the-meter data center load opportunities. We're really trying to maintain some strong discipline at how we manage these projects from a risk management perspective. There's a lot of gating items that you need to go through from engineering, permitting, how we source the equipment. We obviously need to work out commercial terms. So it's going to take time, and we want to make sure that these opportunities are grounded in something real before we start to bring them into the backlog. So as we work through derisking those gating items, you'll start to see more of those opportunities come out of the pipeline and into our reported backlog. George Sakellaris: And as far as the supply, we still have some challenges, but it has gotten better than what it used to be. during COVID, but we are not 100% there where we should be. We have challenges. We managed it through, but it has been a little bit better. And I think some of the things that they trip us up besides the tariffs, like, for example, what's happening with the lithium prices and so on. And so far, we have -- we learned to live with them, and we have incorporated into our forecast and our guidance as much as possible. Operator: Your next question comes from the line of Stephen Gengaro of Stifel. Stephen Gengaro: So 2 things for me. The first, just based on your guide, you have kind of a bit of upward momentum on the margin side. Can you just talk about what's driving that? Is it a specific segment? Is it just execution on certain areas? What's the big driver we should be thinking about for margins in '26? Mark Chiplock: Yes. I think it's a great question. I think it's discipline and it's execution. We've been talking about this for the last couple of years, but we've really tightened our discipline in terms of how we select projects, how we price them, how we manage the cost. And so we are starting to see that coming through in some of the margin improvements. I think as we continue to take that approach to bringing new projects through the backlog and converting them as well as bringing more assets online and just growing out those recurring streams, I think that's where we're starting to get confidence in more of the quality of earnings and what we're seeing in this gradual improvement in margins. Stephen Gengaro: Great. And the follow-up to that is, I might have to go back and look historically to get the snapshot exactly. But when you look at your total project backlog that you show in the presentation, are there any subsegments of that pie chart that tend to have higher margins or on the project size at all fairly similar? Mark Chiplock: Yes. I mean I think as we see some of these larger, more complex infrastructure projects come in, I think the margin profile will be somewhat higher. Not -- I don't think it would be a spike in margins, but I think that with those mix of projects coming more into the backlog, they do bring a bit higher of a margin profile. Operator: Your next question comes from the line of Manish Somaiya of Cantor Fitzgerald. Your next question comes from the line of Ryan Pfingst of B. Riley Securities. Ryan Pfingst: Just curious if you can give a broader update on the RNG market in terms of new project opportunities going forward? And if you're considering any larger M&A as part of the strategy there? George Sakellaris: I would say yes to both of them. Our backlog, I think Mark mentioned, we have at least 10 RNG facilities that they are in the backlog right now that will be built over the next few years. And in addition to that, there's no shortage of new projects out there. But it takes a considerable amount of money in order to develop those projects. And we try to be disciplined as to how many we take on at any given time. As far as mergers and acquisitions, we are open to it, and we are looking at some stuff, but nothing that is mature enough to talk about it. But look, we have done 26 acquisitions for this company. We grew it that way as well as organically. And we always look for good opportunities as long as they are accretive, and they add value at the end of the day to the company. Mark Chiplock: Yes. And I would just say, I mean, we're still very excited about the opportunities that we're seeing. I think the compliance -- the demand from the compliance market is still pretty durable, but the voluntary markets are starting to see some growth as well. So the opportunities are there. And I think we're going to continue to be disciplined in how we bring more of those RNG assets into development and into operations to meet the demand that we're seeing. Ryan Pfingst: I appreciate that. And then for my second one, firm generation ticked higher in terms of energy assets in development. Curious if that's going to continue to be the case just based on the type of demand that you guys are seeing going forward. Mark Chiplock: Yes. I think we're going to see the firm generation that comes to some of these behind-the-meter opportunities will absolutely be there. I think from where we will either decide to bring these into our assets in development or turn them into EPC opportunities, I mean that's still a decision that we need to have. The larger these projects are, it's more likely that we'll want to go an EPC path. But yes, I think that, that -- that firm generation will be a large driver of those opportunities and projects coming through our backlog. Operator: Your next question comes from the line of Julien Dumoulin-Smith of Jefferies. Hannah Velásquez: This is Hannah Velasquez on for Julien. Congrats on the strong quarter. I just wanted to ask around the tariff landscape. We've seen some fluctuations in tariff policy following the Supreme Court order and then some commentary from the White House suggesting that there could be different levers to pull across different statutes like Section 301, Section 232, et cetera. Can you just go ahead and maybe outline the general risk in that area, maybe how you are managing that, if it's reflected in PPAs you're negotiating today? Yes, to the extent you see that as a risk? Joshua Baribeau: Yes. I think -- and George and probably Mark's prepared remarks, we both -- we all talked about the challenging environment of 2025, largely driven by policy and things like that. So we're not I would say, overexposed or underexposed than our peers to these sort of global things. And obviously, whatever the President may or may not do and what the Supreme Court may or may not do in response to that, yadi yadi yada is not really where we're prepared to comment. But we have said previously that some of our newer contracts have protections for tariffs. We're building that into the contract where if there are tariffs, there are potential price adjustment mechanisms. And other than that, we're sort of -- we're just playing it by year. We're building contingency into our deals. We're doing some pricing, like I said, some price adjustment potential in contracts. And we're sort of crossing our fingers and just hoping things stabilize, but we're managing through it just as our peers are. George Sakellaris: Well, if I might add there, one thing though about the state of the Union message for the President that he said that the hyperscalers, they should be doing their own power plants in order to provide their capacity. We thought that was a good opening and it will help us in the long term because as many of you know, I've been writing some articles saying that if we wait for the hyperscalers, they wait for the utilities in order to interconnect their power plants, we will lose the AI race. The only way that it can happen is they develop their own power plants at the end of the day, of course, they will get better reliability. And ultimately, it will be less expensive than doing it the other way. Because to get transmission lines, even though you have a large central power plant, it's going to cost you as much to bring that power to the load as it does to build the generation. So ultimately, everybody is going to bear off. So I think it's a great, great sales piece for our business. Hannah Velásquez: Okay. That makes sense. And as a follow-up, just going off of that point, on the hyperscaler front, can you give us a sense of what the general -- if there is a generic mix between resources that some of the conversations you're having with hyperscalers look like? Is it more so biased towards firm power? Are you seeing any surprises, perhaps more of a weighting towards renewables, solar plus storage? But generally, what does the resource mix look like that they're interested in? George Sakellaris: I mean across the board, the energy infrastructure, it's across the board. And right now, everybody is concerned, many of the industrial and commercials that we're talking about resiliency. And the other thing that they concerned a lot, speed to power. And that's why I say if they go, they wait for the utilities and the central power plants to happen and get the right of ways of transmission lines, which might take 5 to 10 years, you will lose the AI race. So speed to power it might be -- and many of them, not only they want gas turbines, but they want some renewable. So you will see that they have gas turbines, we have some solar, some battery storage at the end of the day, high nice power supply. And that's where we come in into -- Ameresco comes into the picture because we've been doing it on a military basis. Take the San Antonio, of course naval shipyard and I keep going on and on Fais Island, all of them. And some of them started in the previous Trump administration because they wanted to have resiliency in every, what I would say, critical base military base, whether it's naval or Army or the Marines [indiscernible] and so on. Operator: Your next question comes from the line of Manish Somaiya of Cantor Fitzgerald. Manish Somaiya: Two questions. One is, if you could just help us understand on the operating cash flow. Just give us a sense as to, I guess, how we should think about working capital in particular as we think about '26. Mark Chiplock: Sure. Yes. I mean, look, we -- if you look at kind of Q4, right, from a cash flow, and I've said this a lot, quarterly cash flow can be lumpy, right? In Q4 cash flow, that really reflected kind of normal project timing and working capital movements. Obviously, that was a very heavy construction period. I think the right way to look at it, the right way to evaluate our cash generation is on a rolling multi-quarter basis. And I think that's why we like to provide that metric. It's a more realistic reflection of our implementation cycle. Like I said, quarterly cash can kind of move around due to construction timing and milestone billings. I think working capital, we've been a bit tighter on working capital because we've got some larger projects, they are coming through unbilled that are tied to milestones. And as we continue to progress those projects and achieve those milestones, we'll start to see unbilled convert through AR and cash, and you'll start to see that come through our cash from operations. So timing can vary kind of quarter-to-quarter, but we would expect our working capital to normalize across the year, and we expect to see kind of the normal, if not growing level of cash generation. Manish Somaiya: Okay. That's super helpful. And then on the guidance, what gets you to the top end of the guidance? What are some of the milestones that we should be kind of looking for? Mark Chiplock: Yes. I mean I think that's going to really come down to just execution, right? I think that the backlog is there, the opportunities are there. When we try to put our guidance together, we need to take a bit of a prudent look at how we think things can progress through the backlog and into the P&L. So I think if we can execute on these projects, we don't have other delays like some of the weather stuff we're seeing early in the year. Yes, I think it always just comes down to our ability to execute and kind of stay disciplined on how we manage costs. And I think that could represent an opportunity. But we feel really good about the midpoints just based on how anchored it is to our visibility coming out of backlog, assets we're bringing on, et cetera. Manish Somaiya: And then maybe last one for George. High level, obviously, you look at the backlog, it's pretty impressive, a lot of opportunities ahead. You talked about growth in Europe. So as I think about the business the next couple of years out, I mean, how does Ameresco evolve as far as... go ahead. Sorry, George. George Sakellaris: I think you will see us doing more and more infrastructure projects and a good chunk of business in Europe. The potential is there. And that's why we made the investment in the last couple of quarters and this quarter, we added a considerable amount of people with the engineering, development people as well as financial and execution, construction managers, especially senior level management, construction management people to execute on these larger projects because I think that you will see us doing more data centers, more storage or resiliency plans for the industrial customers, especially because the industrial sector for a long time, try to move energy efficiency projects that were very difficult. But now because they are concerned about resiliency and the higher cost of electricity, we're getting some good traction. So I think you will see us doing less on some of that much -- the business is there. We'll be doing much work, but the company will become much larger and driven by these larger opportunities, I would say, in the energy infrastructure sector. Operator: [Operator Instructions] There are no appearing questions at this time. And with that, ladies and gentlemen, concludes today's conference call. We thank you for participating. You may now disconnect.
Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the fourth quarter and full year ended December 31, 2025. Joining us today are Dave's CEO, Mr. Jason Wilk; and the company's CFO and COO, Mr. Kyle Beilman. By now, everyone should have access to the fourth quarter and full year 2025 earnings press release, which was issued today after the market closed. The release is available in the Investor Relations section of Dave's website at investors.dave.com. In addition, this call will be available for webcast replay on the company's website. [Operator Instructions] Certain comments made during this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call, except as required by law. The company undertakes no obligation to revise or update any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, non-GAAP gross profit, non-GAAP gross margin, adjusted earnings per share and compensation expense, excluding stock-based compensation as supplement measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation tables and other important information in the earnings press release and Form 8-K furnished to the SEC. I would now like to turn the call over today's CEO, Mr. Jason Wilk. Please, you may begin. Jason Wilk: Good afternoon, and thank you for joining us. 2025 was the strongest year in Dave's history. Revenue grew 60% to $554 million, and adjusted EBITDA reached $227 million at a roughly 41% margin. To put the year in perspective, we entered 2025 with guidance of $415 million to $435 million in revenue and $110 million to $120 million in adjusted EBITDA. We raised guidance every quarter and ultimately exceeded the midpoint of that original revenue guidance by 30% and nearly double the original EBITDA guidance. In dollar terms, we outperformed on revenue by $129 million and EBITDA by $112 million, meaning we had an 86% flow-through rate on our top line outperformance for the year. Full year adjusted EBITDA grew 162%, nearly 3x the revenue growth rate, driven by gross margin expansion and the operating leverage embedded in our business model. I want to thank our incredibly talented and hard-working team for making that possible. The 2 key takeaways in this call are: one, we once again demonstrated the durability of what we will now refer to as our growth algorithm, which is to sustain mid-teens member growth and low double-digit ARPU growth. ARPU spend at 36% year-over-year and multi-transaction members accelerated 19%, which positions us well heading into 2026. Our 2.9 million MTMs are still a small fraction of the overall 185 million customer TAM, and we believe we're still early in our journey to drive incremental ARPU through underwriting enhancements, new ExtraCash features and price optimization, and new credit products. The second takeaway is that credit performance resulting from CashAI v5.5 produced further improvement sequentially. Credit performance remains an input, not an output, to maximize gross profit dollars, which we again displayed in the fourth quarter. Gross profit and net monetization rate were both records in Q4, further demonstrating the improving unit economics underlying our growth. Now let me touch on the key drivers of our growth strategy, starting with efficient member acquisition, our first strategic pillar. In Q4, we acquired 867,000 new members, up 13% year-over-year at a $20 CAC. Our strategy is to deploy marketing spend to maximize gross profit rather than minimize CAC. This approach, combined with our improved unit economics, drove a $48 increase year-over-year in annualized gross profit per MTM, significantly outpacing changes in CAC. Our gross profit payback period improved by nearly 1 month year-over-year to under 4 months, which gives us confidence to continue scaling MTMs throughout 2026. Our second strategic pillar, engaging members with ExtraCash, continued to drive substantial growth. Originations reached a record $2.2 billion, up 50% year-over-year, driven by 19% MTM growth and a 20% increase in average ExtraCash size of $214. CashAI v5.5, which was trained on our new fee structure and leverages nearly twice as many AI-driven features as our prior model, has now delivered a full quarter of performance. Our Q4 28-day past due rate improved 12% sequentially to 1.89%, outperforming our guidance of below 2.1% for the quarter. Leveraging direct visibility from connected bank accounts, CashAI maintains disciplined risk controls while delivering what we believe are the largest average disbursements in the single-pay credit market. This differentiated underwriting capability strengthens our value proposition to support additional customer growth, allowing us to compound more training data for our AI models, creating a powerful flywheel that strengthens our moat. Our third strategic pillar is deepening engagement through Dave Card. Total card spend grew 17% year-over-year to $534 million. High-margin subscription revenue grew 92% year-over-year, benefiting from the full impact of our $3 monthly subscription fee for new members. As a proportion of our MTM base acquired under the new subscription pricing increases, we expect subscription revenue to become a more meaningful contribution to total revenue. Before turning it over to Kyle, I want to provide a few strategic updates. On Coastal Community Bank, we remain on track to begin transitioning ExtraCash receivables to the new off-balance sheet funding structure next quarter, which will begin unlocking meaningful liquidity and reduce our cost of capital. Kyle will provide additional details shortly. Turning to our pay in 4 product, we are well into internal testing and expect to begin customer testing as early as next month. We believe this direct-to-consumer offering, which will not accrue compound interest or charge late fees, will be far superior and differentiated from traditional credit cards offered to our target market, which are optimized for customers who carry large balances at high APRs and incur excessive late fees. Leveraging CashAI, we believe we can meaningfully differentiate our offering through superior underwriting and product experience while enhancing every aspect of our strategic pillars. We don't expect meaningful pay in 4 revenue in 2026 as we remain focused on optimizing unit economics before scaling in 2027. Next, regarding the DOJ matter, the case is currently in the discovery phase, and we have no material updates. We continue to vigorously defend that we believe we were in compliance with applicable law at all times. Lastly, I want to quickly touch on our thoughts on potential AI disruption in the software industry. From a defensibility perspective, we believe Dave has a sizable moat. We've invested significant time and capital in building the necessary regulatory and operational infrastructure and relationships across bank partnerships, payments infrastructure, compliance, capital markets and a large network of customized vendor integrations to operate at scale. Additionally, and most importantly, we have established a massive proprietary data set on credit performance and servicing interactions to refine our models, which is impossible to replicate without significant user scale and capital investment to absorb losses. Second, in a scenario in which AI creates dislocation in the economy, leading to lower incomes or higher unemployment and government-assisted income, while origination per user could potentially decrease slightly, we believe this will be more than offset by the large increase in Americans looking for and for whom we can underwrite for short-term liquidity. Overall, we believe our business will continue to benefit from AI innovation. AI technology allows us to make CashAI more powerful, build to market more valuable products for our members with an efficient team, and support speed and scalability across all aspects of our operations, all of which are expected to lead to more growth opportunities and operating leverage for our business. Looking ahead to 2026, we believe our growth algorithm remains durable. Our momentum combined with disciplined investment and the continued evolution of CashAI to improve ExtraCash credit performance and enable new credit products help position us to deliver the growth and profitability embedded in our full year outlook. With that, I'll turn the call over to Kyle for additional detail. Kyle Beilman: Thanks, Jason, and good afternoon, everyone. Today, I'm going to walk through the core drivers of our fourth quarter and full year performance, a concise overview of credit, our balance sheet and capital allocation updates, and our 2026 outlook. Let's start with the key trends that shaped our results. Our growth algorithm remains incredibly strong. We accelerated MTM growth for the third consecutive quarter, driven by efficient member acquisition, higher conversion and reactivation rates from successful product and marketing initiatives, and continued strong retention. On the ARPU side, underwriting enhancements, including the impact of CashAI v5.5, combined with our updated pricing model and a growing mix of members on our new subscription tier were key drivers of growth. In the fourth quarter, we delivered revenue of $163.7 million, up 62% year-over-year and 9% sequentially. For the full year, revenue reached $554.2 million up 60%, driven by each component of our growth algorithm performing above expectations. As Jason alluded to earlier, our credit performance demonstrated the strong fundamentals underlying our profitable growth. In the fourth quarter, our 28-day delinquency rate improved 14 basis points sequentially to 2.19%. Our 28 days past due or DPD metric, which we introduced last quarter, improved 26 basis points or 12% sequentially to 1.89%, well below the initial guidance we provided last quarter and the preliminary results that we shared last month. The DPD metric more closely aligns with industry standards and removes noise associated with assets with different duration profiles. Note that we will stop reporting on the 28-day delinquency rate in 2026 as we fully transition to 28 DPD as our core delinquency rate metric. Seasonally, the first quarter typically reflects our lowest delinquency and loss rates due to the additional liquidity members receive from tax refunds, and performance to date in Q1 is tracking consistent with that pattern. Given these improvements in credit, alongside the expansion we're seeing on ARPU, our net monetization rate defined as ExtraCash revenue net of 121-day losses as a percentage of origination expanded 29 basis points year-over-year to an all-time high of 4.8%. And average revenue per ExtraCash origination net of losses grew 27% year-over-year. Gross profit reached $121.9 million in Q4, up 68% year-over-year. Gross margin was 74%, up approximately 300 basis points year-over-year and 500 basis points sequentially. The sequential improvement was primarily driven by a lower provision as a percentage of revenue, reflecting continued improvements in credit performance from CashAI v5.5 and a favorable quarter end calendar dynamic as Q4 ended on a Wednesday rather than a Tuesday in Q3. For the full year, gross profit was $401.5 million, up 68% with a gross margin of 72%, up approximately 400 basis points year-over-year. Looking ahead, we expect gross margins in the low 70s range in 2026, up from our previously guided range of upper 60s to low 70s, supported by improving credit performance and growing subscription revenue mix. It's important to note that Q1 ends on a Tuesday, which typically marks the intra-week peak in outstanding receivables and as a result, drives higher provision for credit losses despite favorable underlying credit trends. All else equal, the Tuesday close creates adverse impacts to the provision, both sequentially and year-over-year. To touch on a few other P&L items, advertising and activation costs were $19.7 million in Q4, up 34% year-over-year as we leaned into user acquisition given the significant returns and sub-4-month payback periods we continue to generate on our marketing dollars. As we look to 2026, the first quarter is typically our softest from a marketing efficiency standpoint due to tax refund dynamics. As a result, we are moderating marketing investment in Q1 to offset seasonal softness in ExtraCash demand. While average tax refund amounts appear modestly higher year-over-year, likely reflecting recent tax reform, we are not seeing demand impact outside of normal seasonal patterns. For the remainder of the year, we plan to moderately expand marketing investment above fourth quarter 2025 levels. Turning to fixed costs. Compensation expenses in Q4 declined 7% year-over-year and were roughly flat sequentially. Excluding stock-based compensation, fixed expenses as a percentage of revenue improved to approximately 19%, down roughly 800 basis points year-over-year, highlighting the operating leverage inherent in our platform. Taking all this together, fourth quarter GAAP net income was $66 million compared to $16.8 million in the prior year period. Adjusted EBITDA reached a record $72.3 million, up 118% year-over-year, representing a 45% margin, an expansion of approximately 1,100 basis points. For the full year, adjusted EBITDA was $226.7 million at a 41% margin with a flow-through rate of 86% from gross profit. Regarding our Coastal Community Bank funding arrangement, we remain on track to begin transitioning ExtraCash receivables under the new op balance sheet structure next quarter. Upon full implementation, we expect to unlock over $200 million in incremental liquidity, reduce our cost of capital and enable us to repay our existing credit facility by midyear. We anticipate the fees paid to Coastal under this new arrangement will be recognized as an operating expense. As a result, the associated expense will reduce non-GAAP gross profit, and gross margin will be added back for adjusted EBITDA purposes. When you combine our year-end cash position with the incremental liquidity expected from the Coastal transition and our continued free cash flow generation, our forecasted cash balance at the end of the year represents a meaningful double-digit percentage of our current enterprise value, providing significant flexibility to execute on our capital allocation priorities. To that end, our Board has approved an increase in our share repurchase authorization from $125 million to $300 million. We believe this expanded program reflects our confidence in the intrinsic value of our shares and our firm commitment to returning capital to shareholders while continuing to invest in profitable growth. Given the current market backdrop, we expect to begin executing aggressively against this authorization in the near term. Now let's turn to our outlook. First, as Jason alluded to, we've established a medium-term baseline growth algorithm where we expect MTM and ARPU growth rates to be in the mid-teens and low double digits, respectively. Given the size of our TAM and the additional product expansion opportunities ahead, we believe this algorithm is a sustainable baseline for the next several years while also giving ourselves the ability to outperform. For 2026, we expect revenue to be in the range of $690 million to $710 million, representing year-over-year growth of approximately 25% to 28%. We expect adjusted EBITDA to be in the range of $290 million to $305 million. In addition, for the first time, we are introducing adjusted earnings per share guidance reflecting our focus on driving per share denominated value creation as a result of our focus on opportunistic share repurchases at scale. For 2026, we expect adjusted EPS to be in the range of $14 to $15. This guidance assumes estimated annual effective tax rate of approximately 23% for 2026. Our outlook is built on a continuation of what we proved in 2025, mid-teens MTM growth, continued ARPU expansion driven by origination size, pricing, subscription mix and a disciplined investment posture. We plan to make modest and incremental investments in new product development and go-to-market capabilities that we believe will drive future growth while continuing to expand annual adjusted EBITDA margins. In closing, the execution we demonstrated throughout 2025, raising guidance every quarter, accelerating MTM growth, significantly expanding margins and improving credit performance while scaling originations provide a strong foundation for 2026. We believe our competitive moat continues to strengthen through CashAI, and we have significant opportunities to drive shareholder value with our strong balance sheet and compelling product road map for many years to come. And with that, we'll conclude our prepared remarks. Operator, let's open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Andrew Jeffrey with William Blair. Andrew Jeffrey: Nice results. It's great to see the flywheel, Jason, as you described it, spooling up. I wonder if you could give us a sense sort of how close you think you are to kind of optimizing credit outcomes and gross profit growth, namely driven by average ExtraCash loan size and whether as you approach what you think the limit is under 5.5, whether you start to roll out 6.0 and I guess, how seamless that transition will be. I don't want to get too far ahead of ourselves here, but I'm just trying to think ahead about how the growth algorithm perpetuates over time. Jason Wilk: Yes. Thanks a lot, Andrew. It was a fantastic quarter. Look, I think we plan for this year with our growth algorithm to continue chipping away at average origination size growth. We think there's a lot of room left to run in v5.5, but we will start to be testing v6.0 later this year. And as we rolled out v5.5, you could see that we can test those new models pretty rapidly. We started testing the first versions of v5.5 early in the summer, and we had our first full month rolled out in September. And I think that's just a real testament to how fast the duration is of our ExtraCash portfolio. Our book turns over every 8 to 10 days. And when you combine that with our CashAI algorithm that is able to look at cash flow data, it's just sort of an unparalleled position to sit within short duration consumer credit compared to our peers that are doing longer duration installment lending or open line credit card. Andrew Jeffrey: Okay. I look forward to seeing the progress there. And if I might, one follow-up. To the extent that Dave Card is important for ecosystem monetization, any thoughts on sort of how to perhaps incentivize behavior such as disbursement of ExtraCash balances into Dave Card accounts? Would that be something that's worth investing some CAC on? Or do you think that's sort of a natural maturation process that just takes place but with time? Jason Wilk: We've seen historically about 30% of all ExtraCash dollars flow on to the Dave Debit Card. We see that as a meaningful way for us to drive our third pillar of our strategy, which is to deepen engagement with our members. We do plan on new credit products helping to also deepen that relationship. The debit card is strategic to our longer-term road map, but I'd say our more near-term road map is focused on new short-term credit opportunities like the pay in 4 product, which we're very excited about testing with existing employees right now in-house and expect to start testing with customers sometime in April. So excited to continue to see more products being shipped with CashAI. And I think that's where we really have a lot of differentiation, not a ton of differentiation within debit other than giving customers discounts to adopt the product. And I do suspect that over the many years we do more for our members within credit, the chance we have to win more of their direct deposit will grow over time. Operator: Our next question is from Ryan Tomasello with KBW. Ryan Tomasello: Given the visibility you have into your member spending from the cash flow underwriting, are you able to size how much of your members' monthly spend that Dave is currently capturing? And then with the new pay in 4 product, how do you view that contributing to unlocking more of that wallet share and ultimately, capturing more of everyday spend and moving more up wallet with your members? Jason Wilk: So Ryan, ultimately, the Dave Card is capturing about 30% of our customers' ExtraCash spend. And so if you look at the overall direct deposit adoption of the company, we don't have significant penetration there, so it's hard to say what overall spend penetration we have of our customers' wallet share. But as far as the pay in 4 product, we look to that as another way to drive incremental engagement. We expect the limits of that product to be pretty significantly larger than ExtraCash, roughly 50% to 2x the limit and so with that, tend to grow more within the credit TAM, which we see with our customers using things like other EWA products, other BNPL products or traditional overdraft, which is still our primary competition here. Kyle, anything to add there? Ryan Tomasello: Got it. And -- sorry, go ahead. Kyle Beilman: I think you largely covered it, but I think from an income perspective, we see customers have roughly $3,000 to $4,000 of income coming into their connected accounts with us. And if you look at the average ExtraCash amount today as a proportion of that total income, it's relatively small and see the overall spending potential to increase. If you want to think about just total sort of credit origination and therefore how much wallet share is that capturing as a percentage of income, yes, we're in a very low penetration of that overall equation there and view the flex card to be a meaningful opportunity to capture more of that wallet share, as Jason mentioned. Ryan Tomasello: Got it. Yes, that $3,000 to $4,000, I think, is very helpful to contextualize the opportunity. And then just as a follow-up, within the guidance, can you give any color on the range of 28-day DPD rates that you're baking into the guide for the year for that 25% to 28% growth? Kyle Beilman: Yes. I mean, roughly speaking, where we were at in Q4, we had about 1.89% DPD rate in Q4. So if you extrapolate that out to our 121-day loss metric, it implies about 1.3%. I'd say that's largely where we expect things to fall and that roughly tracks to the low 70s gross margin guidance that we provided. And really, our approach with the loss rates isn't to think about managing them lower from here. It's how can we just continue to increase monthly transacting members with loss rates kind of sustaining in that level. Operator: [Operator Instructions] Our next question is Devin Ryan with Citizens Bank. Neo Eloff: It's Neo Eloff on for Devin. Some quick questions. I guess on the pay in 4, it's great to hear that you see, I guess, kind of on the last question, how the revenue will compare over time relative to ExtraCash. Do you guys have any concern that the product itself will cannibalize a portion of ExtraCash as it begins to roll out? Jason Wilk: We're anticipating some cannibalization but ultimately view those products to be pretty complementary. We do see pretty significant penetration of our customers using online BNPL today, which will be quite differentiated from. And with that, they're still using ExtraCash because the use cases are quite different. ExtraCash primarily used for bills, gas, groceries, and today, we don't view ourselves winning any of the discretionary spending that we do see our competition within BNPL winning. So expect some cannibalization but again, mostly view those to be pretty complementary. We also would expect -- even though the monetization of the pay in 4 product will be slightly less than ExtraCash, because of the heavy demand from our customers and feedback around giving more duration, we do expect longer retention or higher retention of that product. And so would view actually LTV to be higher of pay in 4, and so we actually wouldn't even mind if the -- if there was cannibalization given the higher LTV profile of the business. But importantly, I think with pay in 4, we do expect this to be a meaningful new UA go to market for us. And so it could unlock more incremental marketing scale, is that even if you look at it from that perspective, cannibalization is not as relevant. Neo Eloff: All right. Great. And then I guess my next question, maybe a smaller one, is on the subscription charges for Dave Card. So obviously, new members are now paying $3. Are the grandfathered accounts going to be changing over anytime soon? Or will they remain at $1? Kyle Beilman: The goal remains... Jason Wilk: The current plan right now is... Kyle Beilman: Sorry, go ahead, Jason. Jason Wilk: Yes. The current plan is for us... Kyle Beilman: I was just going to say... Jason Wilk: Go ahead, Kyle. Kyle Beilman: The current plan is for us to keep those folks at $1 per month, though we do see there being optionality around that in the future, but we'd like to compare that if and when we ever made a change with additional product value that we'd be delivering to those customers. So I would say no for now, but we'd reserve that right in the future to make a change there. Operator: Our next question comes from the line of Joseph Vafi with Canaccord Genuity. Joseph Vafi: Great results here once again. Maybe we just kind of double-click on the balance sheet impact we're seeing, obviously, moving off balance sheet for ExtraCash but pay in 4. What does that mean for the balance sheet moving forward if that product is successful? And then maybe just as a follow-up, as you roll out your guide here for 2026, guidance is -- I think it's an important part of the Dave story and investment case. So any changes or updates to the general philosophy around guidance relative to the market opportunity you've seen? Obviously, you've outperformed materially against your guidance and so maybe if you could kind of refresh us on your guidance philosophy and any learnings or updates to that philosophy versus a year ago. Kyle Beilman: Joe, it's Kyle. Thanks for joining and appreciate the question. Maybe just to start off on the balance sheet impact for Coastal with respect to the ExtraCash product, to recap for everyone, we have plan to move all of our receivables or the majority of our receivables to Coastal in an off-balance sheet structure where we maintain full economic exposure of the assets. We're just effectively paying them for utilizing their balance sheet. And so that should free up about $200 million at current levels of cash as those receivables migrate, so it's a really capital efficient structure for us. We will plan to mimic that structure for the BNPL product as well. So it will require us to invest a little bit in the receivables there, but the overwhelming majority of those receivables will also sit at Coastal, so again, a very capital-efficient approach to growing that product. And then with respect to the guidance, as we've talked about in the past, our goal is to put out numbers that we have very high confidence in delivering upon. We think that's a really important part of our approach in building relationships and trust with the Street and we'd largely continue with that same approach for 2026. I will say kind of rewinding back to this time last year, we had just rolled out our new fee model and that we were optimistic around that. We wanted to give ourselves a little bit of flexibility with the guidance and be a little bit maybe more conservative than we would have been otherwise just given the kind of the early innings of the performance data that we've seen to date. So that, I think, allowed us to outperform a bit more than what we had expected because the results of that were, I'd say, beyond expectation. But yes, just to recap, conservative approach to the guide, want to give ourselves the ability to outperform. And I think we've beat and raised every quarter for the last 3-plus years now, and we'd like to be in a position to continue to do that moving forward as well. Jason Wilk: And just to put numbers behind that, we still believe in this growth algorithm we just talked about on the call, which is to sustain mid-teens user growth and mid-double-digit ARPU growth. As you think about last year, our ARPU is 36% as a result of the new fee model, so just significant outperformance as a result of that. And so we expect growth to return more to normalcy this year. Operator: [Operator Instructions] Our next question comes the line of Jacob Stephan with Lake Street Capital Markets. Jacob Stephan: Appreciate you taking the questions. Nice quarter. Nice guide. I just wanted to touch on the MTMs. Obviously, you saw an acceleration in growth here in Q4. Maybe along with the subscription price increase here, maybe you could just talk about kind of do you see customers leaving with the subscription at $3 a month and then coming back more often? Or is there any kind of comparison to the $1 per month subscription? Any color there is helpful? Jason Wilk: I think it's worth noting that we've been -- we're in testing with the higher price point subscription, testing everything from $0, $1, $3 and $5 price points for about 6 months, and we wanted to make sure that we were measuring both conversion and retention impact. We landed on the $3 because we saw no impact to retention or conversion, and so it gave us a lot of conviction to roll it out for new customers. And so I think that helps answer your question there. Importantly, we didn't want to raise the price in existing members because we already increased revenue per user pretty significantly through the new fee model last year and so didn't feel the need, given the improvements in ARPU, that need to increase the subscription price as well. But I would expect that we'd have success there should we want to given the performance of the new customers on that model. Jacob Stephan: That makes sense. And maybe could you kind of help us think, were -- was the acceleration in growth, I mean, was that better marketing strategy? Or do you think it was kind of economic-driven? Any color there? Kyle Beilman: I would say that was more driven by things that we have done from either an underwriting perspective or product improvements or marketing improvements as opposed to anything that we've seen in the macro. I mean, if you just look at the sort of the activity rate of MTM as a percentage of total account holders, we're growing that number faster than what we are, the total account base. And so I think that just speaks to the improvements that we're making in -- from a product perspective and conversion and retention to drive overall MTM growth. So we're excited to continue to invest in just making ExtraCash the #1 product in the market. And as Jason mentioned, we think that the pay in 4 product as well will give us another opportunity to acquire customers at the top of the funnel efficiently and drive additional retention as we're fulfilling more of their credit needs over time. Jacob Stephan: Got it. Maybe just one last one. Impact, kind of tax refund season is upon us here. I know you said Q1 is -- ends on a Tuesday, your guys' least favorite day, but maybe help us think through kind of any impact that you're seeing from kind of the tax refund cycle currently. Kyle Beilman: Jason, do you want to take that one? Jason Wilk: Yes. I think we're ultimately seeing pretty much a normal tax refund season. We are seeing refunds up about 10%. So nothing near what people were worried about seeing that we would potentially see significant refund increases over last year and ultimately through the quarter, seeing no significant business impacts, and that's just business as usual here. Operator: And this concludes our Q&A session. I will pass it back to Jason Wilk for closing remarks. Jason Wilk: Thanks, everyone. We appreciate it. Operator: This concludes our conference. Thank you all for participating, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to MongoDB's Fourth Quarter Fiscal Year 2026 Earnings Conference Call [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jess Lubert, VP of Investor Relations. Please go ahead. Jess Lubert: Thank you, operator. Good afternoon, and thank you for joining us today to review MongoDB's fourth quarter and full year fiscal 2026 financial results, which we announced in our press release issued after the close of market today. Joining me on the call today are CJ Desai, President and CEO of MongoDB; and Mike Berry, CFO of MongoDB. During this call, we will make forward-looking statements, including statements related to our market and future growth opportunities, our opportunity to win new business, our expectations regarding Atlas consumption growth, the impact of non-Atlas business and multiyear license revenue, the long-term opportunity of AI, our financial guidance and underlying assumptions and our investments and growth opportunities in AI. These statements are subject to a variety of risks and uncertainties, including the results of operations and financial conditions that could cause actual results to differ materially from our expectations. For a discussion of material risks and uncertainties that could affect our actual results, please refer to the risks described in our quarterly report on Form 10-Q for the quarter ended October 31, 2025, filed with the SEC on December 2, 2025. Any forward-looking statements made on this call reflect our views only as of today, and we undertake no obligation to update them, except as required by law. Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measures. With that, I'll turn the call over to CJ. Chirantan Desai: Thank you, Jess, and thank you, everyone, for joining us today. To begin, I would like to provide some observations from my first full quarter at MongoDB. Over the last 100 days, I have spoken to more than 200 customers globally, spanning from AI natives to Fortune 500 enterprise customers that are leveraging the MongoDB platform to drive innovation that is critical to their business. Whether it's an AI or digital native looking for a highly performance solution that dynamically scales, a large enterprise looking for multi-cloud resiliency for their modern mission-critical applications or a customer seeking an integrated offering for AI agents with features such as search, vector search and embeddings in a single intelligent data layer, customers are excited about the strength of the MongoDB platform. My key takeaway is that MongoDB's foundation is in great shape, and the company is well on its way to become the generational data platform of choice in the AI and multi-cloud era. Now on to this quarter's results. We generated total revenue of $695 million, up 27% year-over-year, beating the high end of the guidance by 4%. Top line strength was driven by Atlas, which grew 29% year-over-year crossing the $2 billion run rate mark for the first time and generating a record $114 million in net new revenue in the quarter. Non-Atlas grew 20% year-over-year, our best growth quarter in the last 2 years. We signed several large deals in the quarter, including an approximately $90 million transaction with a large tech company that plans to expand both core and AI workloads on Atlas and a greater than $100 million transaction with a large financial institution for Enterprise Advanced referred as EA, representing the largest TCV deal in the history of MongoDB. We delivered a non-GAAP operating margin of 23%, more than 100 basis points above the high end of guidance. We ended the quarter with over 65,200 customers, adding 2,700 customers in Q4, growing both year-over-year and quarter-over-quarter. This brings our full year customer additions to 60% year-over-year increase. While AI is not yet a material driver to our results, we are encouraged by the growth we are seeing with customers leveraging our AI capabilities. The number of customers leveraging vector search has nearly doubled year-over-year and the number of customers using Voyage embedding models has also doubled since the acquisition last February. This growth is across a diverse range of customers, AI natives, digital natives and large enterprises. We finished fiscal 2026 on a high note, with strength in Q4 driven by our continued go-to-market execution and the broad-based demand we have seen across the business. Our teams generated record new ARR in Q4, an acceleration of that metric in fiscal '26, highlighting the strength of both our upmarket and self-service motions. Our EMEA team had an especially strong Q4, generating record new ARR driven by wins at major financial institutions, large retailers and leading tech companies. At the same time, we outperformed on operating margin, achieving above a Rule of 40 performance and demonstrating that we can drive durable revenue growth while simultaneously expanding margin. Through my conversations with customers, a clear theme emerged. Large enterprises are increasingly standardizing on MongoDB to power a wide spectrum of workloads, including both core mission-critical applications and emerging agentic AI applications. Rather than treating AI as a stand-alone initiative, many are expanding their use of us as a strategic data platform that supports both foundational workloads and their next generation of intelligent applications. For example, MongoDB continues to power a wide range of workloads, including high-volume transactional systems, real-time applications and emerging AI workloads across multiple lines of business at JPMorgan Chase, the world's largest financial institution. The scale and breadth of our partnership with them reinforces our ability to serve as a strategic data platform for the most demanding enterprises. We see tremendous opportunity to expand within our existing Fortune 500, Global 2000 and AI native customer base, where I'm actively leveraging my relationships to open new doors, engage the C-suite and drive strategic expansion conversations top-down. MongoDB is increasingly recognized as the architectural foundation powering innovation for frontier model companies, leading digital natives expanding into AI and AI native organizations scaling globally. The database layer has endured through multiple technology shifts over the past 60 years, and it is even more critical in this AI shift. AI and agentic applications require memory, state and high-quality retrieval, capabilities native to our modern OLTP platform, which powers real-time applications without ETL or bolt-on systems through integrated search, vector search and embeddings. In this platform shift, OLTP is the high ground and MongoDB is purpose-built to win. Notably, Emergent Labs, a leading AI wide coding platform in India that just crossed $100 million run rate, selected Atlas over PostgreSQL to power AI agents that build production-ready applications from natural language prompts. They power nearly 6 million applications built across 190 countries and handle applications that average 35,000 lines of code with some reaching $300,000, all made possible with Atlas' flexible document architecture and reliable scale. We are also fueling innovation at AI-native Customer ElevenLabs, which is redefining conversational AI with its new enterprise agent platform. ElevenLabs selected Atlas to power the critical long-term memory and knowledge base for their autonomous agents. By leveraging Atlas Search and vector search, they enable their agents to retain complex context and deliver highly personalized interactions in real time and at global scale, supporting their rapid expansion to $330 million of ARR and $11 billion valuation. Another tailwind is the renewed importance of on-premises deployment in enterprise architectures. Many large customers, particularly in regulated industries such as financial services, telecommunications and government, view EA as mission-critical and are making long-term commitments that reflect the need for operational resilience and support for data that will not move to the public cloud. Consequently, I'm confident in the durability of our EA business. Pursuing feature parity to Atlas and continued go-to-market momentum are key priorities as we move forward. For example, Axon Networks, a global leader in telecom network management serving 32 telcos and over 90 million homes and enterprises selected EA as the foundation for its operator as a Service platform. This platform delivers a real-time digital twin and API-first architecture designed to handle massive data peaks and high-volume time series workloads. EA provides the flexibility to run across mission-critical environments, including hyperscalers and bare metal, along with the enterprise-grade security and operational tooling required to support Axon's AI-first autonomous networking platform at scale. What is truly compelling about our platform is that these tailwinds serve as a powerful force multiplier for one another. The combined power of these capabilities, the flexibility of the document model, the performance and scale of Atlas, the ability to run anywhere and our integrated AI functionality is what really resonates with our customers. A marquee example of the platform in action is Adobe, which expanded its strategic partnership and long-term commitment with us to accelerate AI-driven innovation. MongoDB now underpins a range of Adobe's key initiatives, including agent experiences powered by Atlas Vector Search and soon voyage embeddings. Adobe leverages Atlas to manage large fleets and always-on database deployments at global scale, while also continuing to partner with us for support of self-managed business-critical workloads on EA, highlighting our ability to operate seamlessly across both cloud and on-prem environments. After spending time with 200 customers, partners and our go-to-market teams globally, it has become increasingly clear that we have a massive opportunity ahead of us. The strength of our platform and the depth of our customer relationships is a direct reflection of our exceptional global team, and I'm proud to say we have world-class talent across engineering, go-to-market and G&A functions. During the upcoming year, my focus will be to build upon what's already working by: first, remain relentlessly customer-focused to deepen strategic partnerships and accelerate growth, particularly across large enterprises and AI native customers here in Silicon Valley. Second, accelerate our innovation agenda by empowering product and engineering teams to build the generational multi-cloud data platform for the AI era. Third, thoughtfully scale our self-serve motion to expand adoption across the long tail with a disproportionate focus on AI native companies. Fourth, drive operational excellence across go-to-market, product and G&A to enable our teams to perform at their best while sustaining durable, profitable growth. Finally, I wanted to provide an update on our go-to-market leadership. Effective tomorrow, March 3, 2026, Erica Volini joins MongoDB as our Chief Customer Officer reporting directly to me to accelerate our next phase of growth. Erica brings a rare blend of experience serving large enterprise customers at Deloitte and scaling go-to-market growth at ServiceNow. At MongoDB, she will focus on accelerating our partner growth engine, deepening our enterprise footprint and ensuring a seamless world-class experience across the entire customer life cycle. As noted in our earnings press release, Cedric Pech, President of Field Operations; and Paul Keppambesis, Chief Revenue Officer, are leaving MongoDB. We have been thoughtfully planning this transition for some time, and we believe now is the right moment for this change. I want to extend my sincere gratitude to both Cedric and Paul for their contributions over the last decade. They were truly instrumental in building our go-to-market foundation. Looking ahead, we have a deep bench of go-to-market talent, and the team is well positioned to execute against our objectives without disruption. We are in the latter stages of a search for a new CRO. The caliber of these candidates is a testament to our momentum and the significant opportunity ahead. Paul will remain CRO through Q1 and serve as an adviser through Q2 to ensure a seamless transition to the new CRO. With that, I'll now hand the call over to Mike Berry to discuss the financial results in greater detail. Michael Berry: Thank you, CJ, and good afternoon to everyone on the call. I will begin with a review of our fourth quarter fiscal '26 results and then finish with our outlook for the first quarter and full year fiscal '27. In order to spend more time on the fiscal '27 outlook, I'll be a little more concise on my fourth quarter comments. I will be discussing both GAAP and non-GAAP results. As CJ mentioned, we had another strong quarter as we exceeded all of our guidance ranges and finished our fiscal year on a high note. In the fourth quarter, total revenue was $695 million, up 27% year-over-year and above the high end of our guidance. Our income from operations was $159 million for a 23% operating margin compared to 21% in the year ago period. We achieved positive GAAP operating income in the fourth quarter. We are very pleased with our stronger-than-expected operating margin results, which benefited entirely from our revenue outperformance. Net income in the fourth quarter was $143 million or $1.65 per share based on 86.5 million diluted shares outstanding. This compares to net income of $108 million or $1.28 per share on 84.6 million diluted shares outstanding in the year ago period. Shifting to our product mix. Atlas revenue momentum remained strong with year-over-year growth of 29% in the fourth quarter, which accounted for 72% of total revenue, up from 71% in the year ago period. Atlas growth was driven by continued strength with our largest customers in North America and Europe, where we saw strong momentum with growth of new and existing applications. We believe this strength reflects the growing strategic importance of Atlas to many existing customers and is a positive indicator of future growth. You can see the success with existing customers in our total company net ARR expansion rate, which increased to 121% in the fourth quarter, up from 120% last quarter and 119% a year ago. Turning to non-Atlas. We experienced strong momentum during the fourth quarter, driven by strength with financial services, public sector and technology customers that are choosing to build with MongoDB long term for their most mission-critical applications. This resulted in strong multiyear revenue and non-Atlas ARR, which reflects the underlying revenue growth of this product without the impact of changes in duration. Non-Atlas ARR grew 13% year-over-year, reflecting the momentum we are seeing in the business. The strength in non-Atlas also resulted in a higher-than-expected number of larger deals with bundled Atlas and EA products. This resulted in a greater-than-expected attribution of revenue to EA versus Atlas in the fourth quarter. Adding back this impact, Atlas growth would have been approximately 30%. We are encouraged to see more of our customers growing on both Atlas and EA and believe these deals illustrate the strategic importance of having both cloud and on-prem solutions for many of our largest customers. You can see the strength in the growth of deferred revenue as well as the growth in RPO, which grew from $748 million at the end of fiscal '25 to $1.47 billion at the end of fiscal '26, a year-over-year growth of 97%. We ended the quarter with 2,799 customers with at least $100,000 in ARR and 402 customers with at least $1 million in ARR, representing 17% and 26% year-over-year growth, respectively. For each of these cohorts, ARR is growing even faster, reinforcing the benefit of our upmarket focus. Of our Atlas customers generating at least $100,000 in ARR, 44% are leveraging 2 or more features of our platform, which is up from 36% in the year ago quarter. Average revenue from these platform customers is meaningfully higher on average as compared to the rest of the Atlas space, illustrating the benefit of our platform capabilities. Turning to the balance sheet and cash flow. We ended the fourth quarter with nearly $2.4 billion in cash, cash equivalents, short-term investments and restricted cash. We spent $55 million to repurchase approximately 133,000 shares and used $60 million for the cash settlement of taxes on employee RSUs. Operating cash flow remained strong at $180 million, and free cash flow was $177 million, which compares to $51 million and $23 million, respectively, in the year ago period. Our cash flow results were driven primarily by strong operating profit and improving working capital dynamics, particularly related to higher cash collections, mainly driven by the higher-than-expected multiyear EA deals. Now I'd like to share a few guiding principles and some of the assumptions underlying our outlook for Q1 and fiscal '27. To begin, we continue to believe in the long-term model presented at Investor Day last September and remain committed to growing Atlas by greater than 20% and being a Rule of 40 company. We will achieve this goal through a combination of revenue growth and margin expansion. But to be clear, revenue growth will be the main driver of improved profitability. Our outlook assumes the business environment remains relatively stable, and we operate under similar conditions to what we experienced over the course of the past fiscal year. As I mentioned at our Investor Day in September, we have not changed our guidance philosophy as we will provide an outlook with more upsides than downsides specifically related to the EA business. We are early in the year, and we want to be mindful there could be risk that we do not have line of sight to at this time. Now let's get into the details. Starting with Atlas. We have continued to see strong momentum and experienced relatively consistent consumption growth through the course of the past year. We expect these trends to continue through fiscal '27 and would also note that as Atlas has grown larger, this has helped limit the volatility from specific customer cohorts. Based on our continued confidence in our market positioning, customer feedback and product advantages, we currently expect to see Atlas revenue growth of approximately 26% in Q1 and 21% to 23% in fiscal '27. This outlook reflects our continued confidence in Atlas while taking into account we are a consumption business and visibility is more limited in the back half of the fiscal year. For non-Atlas, we have continued to see healthy ARR trends, and we have been positively surprised by the momentum we experienced with large multiyear deals in fiscal '26. While we remain optimistic regarding our ability to grow this business over the long term, it remains difficult to predict, and we will only include deals in our forecast that have either closed or have a high probability of closing to limit the risk of a negative surprise. At this point, we expect our non-Atlas business to see mid- to upper single-digit growth in Q1 and low to mid-single-digit growth in fiscal '27, which reflects our belief that the impact of duration will neither be a significant headwind or tailwind to growth for the year. In terms of AI, we remain optimistic regarding our opportunity and are seeing encouraging trends with a number of AI natives. While this subset of customers has significant potential, many of them remain early in their MongoDB journey and are not yet meaningful drivers of revenue. Turning to profitability. We remain committed to driving revenue growth and expect to expand operating margin by 100 basis points in fiscal '27. We will achieve this expansion while investing for growth. Some of these investments include enhancing our AI capabilities, further integrating Voyage, bringing feature parity to EA relative to Atlas, building out our presence in Japan as well as strengthening our U.S. federal business. We will also continue to invest in marketing programs, developer awareness and select quota-carrying headcount. With respect to cash flow, we made meaningful progress in cash management during fiscal '26 with our operating cash conversion exceeding 100% and up significantly from the approximately 50% experienced in fiscal '24 and '25. This remains a key area of focus, and we would expect cash flow to remain healthy in fiscal '27. We currently expect cash conversion in the 80% to 100% range during the upcoming year and on a longer-term basis, which is in line with our long-term model. Finally, we will continue to execute our share buyback program to partially offset dilution from employee equity awards and settle the taxes due on the vesting of employee RSUs with cash instead of issuing new shares. In fiscal '27, we currently plan to commit 100% of our free cash flow to these 2 actions and will also benefit from the settlement of over 1 million shares of stock for the cap calls associated with our 2026 notes that matured in January '26. We will continue to manage share count prudently for the long term and demonstrate our commitment to being good stewards of your capital. Now let's shift to guidance for the first quarter and fiscal ' 27. For the first quarter, we expect revenue of $659 million to $664 million, which equates to 20% to 21% year-over-year growth. We expect non-GAAP income from operations to be in the range of $105 million to $109 million for an operating margin of approximately 16.5% at the high end. We expect non-GAAP net income per share to be in the range of $1.15 to $1.19 based on 86.2 million diluted shares outstanding. For fiscal '27, we expect revenue to be in the range of $2.86 billion to $2.9 billion, representing full year revenue growth of 16% to 18%. We expect non-GAAP income from operations of $545 million to $565 million for an operating margin of approximately 19.5% at the high end of guidance. We expect non-GAAP net income per share to be in the range of $5.75 to $5.93 based on 86.7 million diluted shares outstanding. Note that the non-GAAP net income per share guidance for the first quarter and fiscal '27 assumes a non-GAAP tax provision of 20%. To summarize, we had another strong quarter and feel very good about the business heading into fiscal '27. We are pleased with our ability to drive both revenue growth across the business while expanding operating profit and driving meaningful free cash flow. We remain incredibly excited about the opportunity ahead, and we will continue to invest responsibly to drive long-term shareholder value. With that, operator, we would like to open it up for questions. Operator: [Operator Instructions]. And our first question comes from the line of Raimo Lenschow of Barclays. Raimo Lenschow: Congrats great fourth quarter. Two quick questions. One for you, CJ. At your big event in January in San Francisco, what were your impressions about developer buy-in? Part of the reason for the doing is like to increase mind share again, like share a little bit your experiences there? And then one for Mike. On EA, next year had a bigger cohort than this year, I'm just wondering if the strength in the second half of this year, was that earlier renewals for next year? Or is the cohort still in place? Chirantan Desai: Thank you, Raimo. Appreciate it. So January 15 event, our dot local San Francisco, I would consider a great success and I would put that in 2 buckets. Number one, we exceeded even though it was a week day, many, many founders, builders who came to the event, and there was a long line outside for people to get into the conference that give me really, really good feeling that we invested in the right area. Number two, when we looked at the attendees, Raimo, I would say, compared to other typical dot local events where people who are already customers or builders of MongoDB. Here, around 70% had not used MongoDB. And that's what gave me a lot of conviction that it was a successful event where we are increasing the mindshare of the builders in the San Francisco Bay area where a lot of AI native companies are being built. The last thing that I'll touch on is that because of the success of that event, and continue to make sure that we are on top of mind for all these AI native companies, whether they are in security, whether they are in fintech, whether they are in domain-specific AI, we are going to repeat dot local in San Francisco, again, in August this year, which we have not done before based on the success. Mike? Michael Berry: Thank you, CJ. Raimo. Thanks for the question. So on EA, a couple of things. So we're super excited about the year we had fiscal '26 was a very strong year and especially Q4, not only in the run rate business, but obviously, all the multiyear deals. So it's a big business, thankfully. There's always some puts and takes in terms of renewals. I would say there's no material change to the cadence of early renewals. And keep in mind that even if there is one, you won't see it in revenue until that deal comes up. So you shouldn't see any major impact in cohorts next year. Operator: Our next question comes from the line of Matt Martino of Goldman Sachs. Matthew Martino: CJ, maybe to start with you. You noted the transition for Cedric and Paul has been in the works for some time. Given that visibility, can you provide more color on the current status of the CRO search? And specifically, what are the primary attributes you're looking for in a successor that led you to announce Erica's appointment today while the search for a new revenue lead remains ongoing. Chirantan Desai: Absolutely. So Matt, here is how I would describe it. Personally, being here, as you have seen that I've spent a lot of time with not only our customers, but with our go-to-market team. So we are in the final stages, but we want to make sure that we get an excellent candidate for our Chief Revenue Officer. Erica's focus will be as a Chief Customer Officer to ensure that customers who purchase or decide to use MongoDB platform, they get to value by providing all the post sales support functions, whether it's technical success, technical support, many other things like professional services. So one, Erica is going to focus on customers who have already bought MongoDB or expanding with MongoDB, how do they get to value and how do they get to success. In terms of the CRO search, Paul is staying fully through Q1 and help us transition through Q2. And from the attributes perspective, I want somebody who is very focused on high end of the enterprise, understands how things work at MongoDB from a Main Street perspective, but also working with the management team as we expand into both the AI natives as well as enterprises who are building more mission-critical workloads on MongoDB, including AI. So that's the mix, I would say, is somebody who is strategic, who understands consumption-based models on how MongoDB really operates, of course, our Enterprise Advanced business, and has relationships into the high end of the market where we are getting significant traction besides AI native companies, which is hardly. Matthew Martino: Okay. Very clear. And then Mike, maybe for you, just a couple of major EA deals were announced this CJ talked about the renewed importance of on-prem. I guess under that backdrop, should investors be recalibrating expectations around growth for the EA business as we look out over the next couple of years? Michael Berry: Yes. Thanks for the question, Matt. So as we talked about -- so 2 things, I think, of importance in the prepared remarks. One was CJ walked through some very large deals. As you look especially at regulated industries, governments, it is a very important product that we have, and those are some of the largest customers at MongoDB. In addition, we're starting to see more of the bundled deals. The on-prem piece is a huge part of it. So what I would say is yes, it will continue to be of importance. We are actually investing in EA to bring it to parity to Atlas. So certainly, our expectation and hope is that we continue to grow that and can even accelerate it in the future. Chirantan Desai: And Matt, I would say in speaking to customers, because this conviction is over a large set of very important customers that is definitely the trend that I'm speaking from our customers is, number one, that because of a variety of issues related to also AI that for mission-critical application, there is this trend I'm seeing where they do want to keep their critical data estates on-prem. And this is not just only in financial services, we are seeing that in health care and other verticals like government. But when I was in Europe and even in Asia, I'm also seeing there that there is a preference for those industries to also use MongoDB potentially with EA and only certain workloads in the cloud. So this will play out and all we wanted to outline in today's call is to say this is strategically very important as in the product line for our customers, and we need to invest in it because it is strategically very important. Operator: Our next question comes from the line of Jason Ader of William Blair. Jason Ader: For CJ, my main question is, how is your product and go-to-market strategy changing, if at all, ahead of the growing reality that agents are going to be the things that are spinning up most databases and not humans in the future. Chirantan Desai: I would say, Jason, I have a very simple philosophy here. And the philosophy also was validated by one of the AI native companies that has completely built on MongoDB. They had many choices in many clouds and they chose MongoDB. And my initial intuition was the same as you outlined, is that MongoDB's success over the last many years since the company was founded in 2007 was that builders or developers love MongoDB. And if that's the premise, there was a lot of work done in the product to ensure that it's a very natural way, flexible way while keeping the business agile as in the database agile so that it can move with the business. We want to do the exactly same thing for agents. Agents also need to love MongoDB. That requires to ensure that we have all the right integration with the right places, whether it's NCP or whether we are looking at making sure that our APIs in how you manage how we auto scale, how we auto perform during the peaks and valleys. All of that truly needs to be autonomous and driven by machines. And that requires absolutely the focus from the engineering team that how would machines look at this if they want to provision an additional node or if they want to manage cluster because of resiliency across multiple clouds. So that will be the North Star for us that our agents will love MongoDB as much as today, human developers love MongoDB. Jason Ader: Okay. Great. And then just one quick follow-up on that. Just is that -- is that going to come in a future release of the database? Or how should we be thinking about sort of the deliverables on that vision, CJ? Chirantan Desai: Jason, we do have ambitious road map, of course. Today, we are already leveraged by some of the AI-native companies and some of them I outlined this time and also last time. And we are learning a lot from them. So we have ambitious road map in terms of truly machine friendly APIs or making sure that our protocol integration across a variety of protocols that machines demand and how do we Auto Scale, Auto Shard. All of that will be throughout this coming year. And what we are going to do is that our dot local conferences throughout this year, we will use that as an opportunity to announce new innovations that will show you that machines should also love MongoDB. So it will be throughout this year. Operator: Our next question comes from the line of Ryan MacWilliams of Wells Fargo. Ryan MacWilliams: CJ, great to hear about Anthropic as a customer at the MDB local event. I'd love to hear how you think about the opportunity for Mongo to grow within large AI natives from here. And there's also mention at the event that Agentic workflows require heavier storage and memory requirements. Would love to hear why you think MDB architecturally is best suited for these growing types of AI use cases. Chirantan Desai: Absolutely. Ryan, one of the things I would say is Mike and I look at the entire cohort, AI natives, frontier model companies, others, many of them choose MongoDB for performance, scale, security and other things. And I would say that the good news here from my standpoint is that we are not concentrated in any one customer when it comes to AI native cohort. So that's number one. And as they scale, we will scale with them, but we are not concentrated. Even when I look at the growth as a percent of total, we were not concentrated. The thing that I'm seeing, Ryan, very specifically is that People are making initially database decisions in this AI native companies without realizing that they will run into scale issues or potentially there was one of the choices that people could have gone with as an AI native companies founders had a massive security concern over the weekend where a couple of governments blocked them from being used. So what I find is that truly enterprise-class database that can scale. And when I say scale specifically, as for these AI native companies as their weekly active users or monthly active users continue to grow, like the example we had with Emergent or 11 labs and so on, they find that MongoDB scales better with them, right performance as well as query performance really matters, and us being a native JSON with search vector search and embeddings in one rather than multiple moving pieces -- if I have to just simplify that, that is the strength because it's an integrated platform that scales both for read and rights that as you scale your AI native company, they can rely that MongoDB will scale with them. Ryan MacWilliams: Excellent. And then a follow-up for Mike. The Atlas seasonality in the fourth quarter seemed a bit lighter than typical. Were there any holiday impacts to the fourth quarter for Atlas revenue or any other onetime items in the quarter besides the Atlas and EA bundling? Michael Berry: Yes. Thanks, Ryan. So looking back at Q4, the holiday seasonality played out largely as we expected. There were really no surprises or deviation from the historical trends. So it largely played out as we expected. Operator: Our next question comes from the line of Karl Keirstead of UBS. Karl Keirstead: Mike, let's stick to Atlas in the fourth quarter. A couple of questions. One was the 2-point beat roughly the framework you would advise the Street to think about going forward? And then secondly, if you could just perhaps describe the bundling impact that, as you said, nicked a point off of Atlas. Just maybe you could explain why that happened and were you anticipating that? Michael Berry: Sure. So all right, let's take a step back, Karl, on Atlas. So Q4 played out largely as we expected, as Ryan's question was, there were really no big surprises during the holiday season. We feel good about Q4 with 29% growth again with the bundled thing. I'll talk about that in a second, would have been a little bit higher. As Atlas has gotten bigger, we are seeing less variability in the business. And in addition, we're getting better every day at forecasting the Atlas business. So from that perspective, the size as well as customer cohorts don't make as much of a difference in variability has helped. So on the bundling thing, so entering Q4, we certainly have our forecast as it relates to how we think Atlas will do. There's -- we always do bundled deals in a quarter, absolutely. This was a little unique in that we had one large transaction that once it closed, and thank goodness again, it's a really good thing that it did, we had to attribute more of that revenue to EA versus Atlas, and that took a little bit off the growth rate. We did not expect that entering the quarter. So we typically won't walk through those kind of details because we always do bundled deals. This was an exceptionally large transaction, Karl, that did move the needle. Karl Keirstead: Okay. That's helpful. Yes. And then maybe, Mike, as a quick follow-up. You reiterated the medium-term guidance that you gave at the Investor Day. Maybe I missed it. I didn't hear the reiteration of the high teens total revenue growth. Is that still on the table, just to be crystal clear. Michael Berry: Thank you for asking the question. Yes, we have not backed off on that total revenue growth from September. Sorry, we missed it. Operator: Our next question comes from the line of Ittai Kidron of Oppenheimer. Ittai Kidron: Michael, I want to follow up on the last questions here mainly around EA. Clearly, you had a very strong fourth quarter here with 2 very large deals and also the bundle that you mentioned that weighed a little bit more towards EA rather than Atlas. I guess I'm trying to think about your guidance for fiscal '27. It seems like you have a lot of momentum there. You're closing some feature gaps. I'm kind of wondering why low mid is still the target for '27, why we hold this momentum in the fourth quarter and in the bundling and the feature parity you hope to achieve, that number is not higher. Michael Berry: So thank you for the question. So we did have a very strong year in EA and Q4 especially. As we look out to the rest of the year, keep in mind that the product enhancements and bringing EA to parity with Atlas will occur throughout fiscal '27. So we are excited about that. And there was an earlier question about the cohorts. Keep in mind, it is a large business. There's a lot of moving parts here. The biggest variability to the business is not the cohorts, it's what ends up closing as a multiyear deal versus a 1-year deal. That still is difficult to forecast. And as we have said repeatedly, and we'll continue to say it. We will always bake in more upsides than downsides in that number. We sure hope to do better than that, but we don't want a negative surprise because a deal does not close on a multiyear basis, and that has such a big swing factor. So we feel great about the business. We're going to continue, as CJ talked about, a lot of big customers are asking about it. It's a key part of our portfolio, and we certainly hope to do better. Ittai Kidron: Fair enough. And then maybe as a follow-up, just for both of you with the changes in the leadership on the go-to-market side and the CRO and the field, I guess to you, Mike, a, is there any more level of conservatism built in your guide because of this transition? And b, to you CJ year-end, any changes to count structure that you're thinking about also in light of who you're looking for as far as the CRO is concerned? Michael Berry: Yes. So I'll answer it first. So when we do guidance, we obviously take into account a lot of things. The economy all kinds of different things. So we have tried to bake everything in. It's certainly -- while it adds a level of uncertainty, I want to underline what CJ said in his prepared remarks. We've been working on this for a while. We feel very good about the team that's in place, and we don't expect any material disruptions. But certainly, that is a factor that we took into account when we did guidance. Chirantan Desai: And Ittai, what I would tell you is that personally, after joining MongoDB, I have spent disproportionate amount of my time with our go-to-market teams to really understand what is working really well and of course, where we can improve. And I would say that the bench we have -- so our leaders for Americas, our leaders for Europe, Middle East and Africa as well as our leader for now APJ, I have very high confidence in them as we go through this transition. And these are the folks that really, really executed very well in fiscal '26 when you look at the regional performance, and I am really optimistic about their ability to execute as we move forward. In terms of overall go-to-market, how sellers are motivated, what we are looking for in the candidate to work on the main street with all these sellers and serve our customers, what I said to Matt, is just remains the same, that no changes. We want disruption to be minimum. And with these 3 theater leads who exceeded even that number in Q4 greatly from a net new business perspective, I have confidence in them. Operator: Our next question comes from the line of Alex Zukin of Wolfe Search. Aleksandr Zukin: CJ, maybe first for you, given some of the increasing inflection points that we're seeing in kind of the agentic coding space and autonomous coding that's happening. Has that, in any way, changed the dynamic of how fast or how quickly you think that the enterprise modernization could start occurring? And then maybe just a quick follow-up for Mike. To the point about the increased -- maybe some of the surprising bundling, particularly with a large deal in the quarter, is there maybe a little bit less visibility on specifically the Atlas guide for both Q1 and the full year, given that increased potential for variability around bundling. Chirantan Desai: Yes. So Alex, I'll touch on the first one. I -- what I would like to say, so I was talking to a large financial institution in the U.K. And the Head of Transformation, she told me that, hey, CJ, I have 50% of my real estate that I want to modernize, I know that some of the AI tools can get me to some level, but I really, really need your help and your team's help to make sure that for these mission-critical applications, we take help from MongoDB to help us land once you prove this out for the first workload, a very critical workload that is moving to MongoDB. The same thing happened, Alex, with a large customer in Spain when I was there a couple of weeks ago, this individual said, "Hey, we are relying on MongoDB, as we are modernizing. This is extremely critical workload, once you do that, we are going to open up the aperture and I know that AI will help us modernize, but we still need your help because the destination we want is absolutely MongoDB. So what I'm seeing is the feedback is the modernization and the need for modernization is still very much relevant in the high end of the enterprise, whether it's a health care company, financial services or even government for that matter or health care. Number two, they know that AI tools can help you to some extent, but they definitely want to get there on a modern database to get AI ready where they want help from MongoDB to be on MongoDB. And then the last thing I would say is that even with some of the use cases, they try it and they're like, hey, sometimes this is too hard to assure the reliability, security and all of those things for the application we build. So I consider this as an opportunity in early stages, and this is definitely a top-down work that we have to do as MongoDB with the CTOs and Head of Transformation, but the opportunity still exists and it's massive. Michael Berry: Alex, thanks for the question. It's something that we will certainly watch. What I'll reiterate is we always do bundled deals. It's part of what we do. Q4 was unique given the size of that, I'd love to sit here and tell you that there's a whole bunch of those that we'll do every year. I do think right now it's unique, we'll watch it. We get better and better at forecasting the Atlas number every quarter. So at this point, we don't think it adds variability, but it's something we'll watch going forward. Jess Lubert: Operator, we'll take 2 more questions. Operator: And our next question comes from the line of Tyler Radke. Tyler Radke: Just going back to the EA and Atlas bundling. I guess I'm wondering, were these existing workloads that moved from Atlas to EA? Or was this sort of plans for new workloads? Just a higher bias on EA. And just curious like why do you think that customer, in particular, chose to do more on EA as opposed to Atlas? Michael Berry: So it's always going to be customer-specific, Tyler. And a lot of these transactions will have renewal as well as upsell also. So it's very specific to the customer, and it really depends on their internal plans as it relates to how they want to use MongoDB going forward. So there's no pattern there. It's very specific. Chirantan Desai: Yes. And Tyler, what I would say is that with this specific customer is that they have, in the past, moved some of their EA workloads to Atlas. Some of their Atlas workloads are growing incredibly well, and they want to continue to do that. And they are currently also getting ready for some of their workloads, AI-ready where they are using vector search and embeddings in the future. So it is a kind of classic case of truly hybrid infrastructure on how they are dealing with their core product strategy and some is built on EA and some is on Atlas. And from my standpoint, when we look at the numbers and the transaction, which was meaningful, as Mike said, very meaningful, is that what we also saw was the expansion because this customer besides making a long-term commitment continues to grow their data estate with MongoDB. Tyler Radke: Great. And CJ, a follow-up on the go-to-market changes. Clearly, your background at ServiceNow has one of the more successful partner ecosystems out there. I think on the on the database side, particularly for Mongo, the partner ecosystem, I think, has been tried, but certainly it's not nearly as robust. And given that being more of a focus on some of the new go-to-market leaders bringing in, can you just help us understand maybe some of the challenges with the prior approach that didn't lead out to as robust of a partner ecosystem and what makes you and gives you the confidence that this approach is going to be successful? Chirantan Desai: Yes. Tyler, absolutely, and I have been told what he just outlined. So I would put this in 3 buckets, Tyler. First bucket, which is super important is our hyperscaler relationship and how we work with them. And as you know, that we work with them very closely because when we win, they win, whether we are running on GCP or AWS or Azure or others, okay? So one bucket is just continue to still stay focused on hyperscaler. And in today's world, the multi-cloud resiliency, whether it's on-prem and cloud or between multiple public cloud, which is an advantage we have, it is proving out more and more important between the outages that happened last year with some of the hyperscalers and the geopolitical issues that we are seeing being played out. So that's number one. Number two, system integrators, which is where we scale at my previous company, that is definitely -- when you think about the modernization and the real estate on modernization to move to MongoDB, we could definitely benefit by focusing on 2 or 3 of them to start with, and that is something that our teams are saying, we do need help as we think about this 2 or 3 system integrators. And make no mistake, the third bucket is also equally important is this AI native ecosystem that are framework providers. There are other providers like LLM providers, and what can we do with them and truly create partnerships that really matter. Those are the 3 buckets. And that will allow us to scale for a long time. So hyperscalers, a few system integrators who wants to lean in on the modernization and the AI ecosystem where we really need to make strong technology friends is how I look about it, and I think it is extremely essential to do that on -- and this is the inflection point. Operator: And our last question comes from the line of Sanjit Singh of Morgan Stanley. Sanjit Singh: So CJ, I wanted to just get your latest thoughts on a couple of topics. Given that the business has been accelerating, execution has been improving in the past several quarters. As we look forward, do we start to see like the kind of AI part of the story start to play a bigger role in terms of the growth equation you guys have a number of AI customers as sort of we discussed on this call. But in terms of contributing growth, does that become more important as we think about potential upside to this guidance that you laid out? Kind of feel like over the last couple of weeks, we've seen a step-up in terms of agentive momentum, not necessarily in the enterprise, still feel kind of consumer personal productivity. But just wanted to check your thoughts on the importance of the AI app story coming to fruition maybe a little bit earlier than maybe you anticipated? Chirantan Desai: Yes. I would tell you it's not if but when, okay? So right now, we do consider, I mean, Sanjit, one of the advantages that I have in speaking to all these customers, I ask them that simple question, where are you on your Agentic workloads? And I'm talking about Fortune 500, okay, or big retail companies, health care companies pick one and ask them -- where are you on agentic workloads? And are they really scaling? And the answer is still not yet. Yes, they have done a few productive productivity types of apps internally, but nothing of scale that is customer-facing, even including with a large retailer on agentic commerce and so on. So my first thing is, one day, it is going to hit in a positive way where you will have agents making a meaningful difference to the growth of our customers for either new product lines or existing product lines. We are not seeing that today in the large enterprises across pretty much most of the verticals that we speak to because as you know, MongoDB is across every vertical. So my simple answer is it will be someday, not seeing that yet and don't want to predict it because it was supposed to be the 2025 was supposed to be that year. And what we saw in 2025, it was only mainly around coding and some vertical-specific AI, but nothing meaningful in the enterprises. Mike, would you? Sanjit Singh: And just as a follow-up, and maybe Mike, you can hit on this. It sounds like Atlas consumption more or less came in line with your expectations, controlling for this large deal. You mentioned this potentially lower visibility in the second half. And I wanted to assess that comment in context of how the sort of calendar year '25, fiscal year '26 applications and workloads, how are they ramping relative to your expectations? Maybe the -- if you look at the first half of last year and those applications ramping into this year, are you satisfied with the quality of that growth in that cohort of application? Michael Berry: Yes. Thanks for the question. So I think a couple of questions in there. One is, yes, Q4 largely came in as we expected, except for that small thing that we talked about. It was -- there were really no abnormal things in Q4, which is great. On the comment about the second half, that's just more of a general macro comment, Sanjit, and that it is a consumption business. While we -- visibility is always a little bit better earlier. We're also cognizant of, hey, it's harder to forecast the back half of the year. That does not tie directly to any concern around the workloads that we've signed in the last couple of years. And yes, those continue to perform as expected. As we've talked about strength that we've seen is really in the larger customers, especially in the U.S. and Europe. So all that is going as expected. That second half was more of a general comment, not specific to any set of workloads that were signed in the past. Operator: This concludes the question-and-answer session. I'd like to turn it back to management for closing remarks. Chirantan Desai: Thank you, operator. In summary, we delivered an exceptional fourth quarter, highlighted by strong Atlas and non-Atlas growth, robust customer additions and operating margin outperformance. We are issuing strong guidance for Q1 and full year fiscal '27 across Atlas and non-Atlas revenue, and we expect to continue expanding profitability while investing for growth all in line with our long-term financial model. Our results demonstrate MongoDB's foundation is in great shape, and the company is well on its way to become the generational data platform of choice in the AI and multi-cloud era. Thank you very much for everyone joining, and we'll see you soon. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I will be your conference operator today. At this time, I would like to welcome you to the Quanterix Corporation Q4 2025 Earnings Call. [Operator Instructions] I will now turn the call over to Joshua Young. You may begin. Joshua Young: Thank you, Colby, and good afternoon, everybody. With me on today's call are Everett Cunningham, Quanterix President and CEO and Vandana Sriram, Quanterix Chief Financial Officer. Today's call is being recorded, and a replay of the call will be available on the Investor Relations section of our website. During the course of today's presentation, we will make forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act. These forward-looking statements are based on management's beliefs and assumptions as of today, March 2, 2026. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. To supplement our financial results presented on a GAAP basis, we have provided certain non-GAAP financial measures. These non-GAAP measures are used to evaluate our operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business and our competitors. We believe that such measures are important in comparing current results with other periods results in assessing our operating performance within our industry. Non-GAAP financial information presented herein should be considered in conjunction with and not as a substitute for the financial information presented in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures set forth in the presentation posted to our website and in our earnings release issued earlier today. Finally, any percentage changes we discuss will be on a year-over-year basis, unless otherwise noted. Now I'd like to turn the call over to Everett Cunningham. Everett? Everett Cunningham: Thanks, Josh. And I'm so excited to be with you this afternoon. I'm looking forward to meeting many of you over the coming weeks and months. Now for those of you that I have not met, I want to share some information about my background and what brought me here to Quanterix I've spent my entire 3-decade-plus career in health care with a diverse background in pharma, tools and diagnostics from a variety of commercial and enterprise operational roles which is very relevant for where Quanterix is and as we scale our business. Now in my last role as the Chief Commercial Officer at Illumina. I led the commercial strategy and execution for this $20 billion market cap company as we go deeper into sequencing and array-based solutions. During my tenure at Illumina, I work with the team that delivered one of the most transformational technologies in the analytical instruments market. Now my work there built on my experience as a Chief Commercial Officer at Exact Sciences, where my team encompass sales, marketing and customer service in precision oncology diagnostics and screening. Now my prior roles at Quest, GE Healthcare and Pfizer effectively round out my commercial and my operational portfolio and combined, provide you with the insights needed to accelerate Quanterix' overall growth. Now I believe that Quanterix is well positioned to achieve a leadership position in the diagnostics industry. And I'm just very excited to work with my colleagues to achieve our commercial and our financial goals. Now there are several reasons why I'm very excited to be leading Quanterix at this time. First, Quanterix has developed differentiated technologies in disease states that need health care breakthroughs and also need solid business partnerships in neurology, oncology and immunology. Second, we have a compelling base business in the research tool space that exceeded our expectations in the fourth quarter and will drive us to breakeven profitability this year. Now this continued operational rigor will also provide a steady normalized growth path. Third, there's a massive opportunity for growth in the diagnostics market, starting with Alzheimer's disease, and Quanterix' ultrasensitive platforms are uniquely positioned here. Next, we have a strong foundation here at Quanterix, including a talented and dedicated team and a solid balance sheet with more than $100 million of cash and no debt. And lastly, I'm just thrilled to be joining Quanterix at this inflection point. I'm also looking forward to leading this company this year and beyond. Now my immediate focus area will be to spend as much time as possible with my leadership team and the employee base to fully understand Quanterix' potential from an insider's perspective and to ensure that our culture supports our priorities. I also fully need to understand the business and technology from a customer and strategic partner vantage point. So I'll be spending a lot of time with customers and partners, too. Now my objective is to continue to focus on what's working well and to evolve Quanterix into a stronger, more agile and scalable company. Now that entails fully understanding where we are the strongest and have the best opportunities to win, working together with our team and drawing on my years of experience in this field to guide our direction forward. I also want to establish an open and transparent communication process with our analysts and investors. I'm sure that many of you have a range of ideas and insights about our path forward, and I welcome your ideas. We will, of course, keep you updated as we move forward. So now let me turn it over to our Chief Financial Officer, Vandana Sriram. Vandana. Vandana Sriram: Thank you, Everett, and good afternoon. Total revenue for the fourth quarter was $43.9 million, an increase of 25% from the previous year and up 7% sequentially. Organic revenue was a decline of 22%. Revenue from our diagnostics partners was $3.1 million in the quarter. During the quarter, we saw better-than-expected revenues from the release of pent-up demand from our academic customer base. From a product perspective, Simoa contributed $27 million, a 22% organic revenue decline and Spatial reported $17 million, down 23% year-over-year. Spatial revenues include $2.5 million from a diagnostics development agreement that is now terminated. Excluding this agreement, Spatial revenues were down 16% year-over-year. The terminated agreement was dilutive to the company's financial results and will have a minimal impact on our core business in 2026. Instrument revenue was $6.1 million, comprised of $3.2 million of Simoa and $2.9 million Spatial instruments. We placed 21 Simoa and 17 Spatial instruments in the quarter, as compared to 18 Simoa instruments in the fourth quarter of 2024. Consumables revenue was $23 million, up $3.8 million sequentially. This consisted of $15.4 million in Simoa and $7.6 million in Spatial consumables. Accelerator lab revenue was $8.3 million, $5.3 million in Simoa and $3 million in Spatial. Our customer mix was slightly skewed to academia, which represented approximately 55% of the business in Q4. On a pro forma basis, assuming Quanterix and Akoya will combined for the full year, academic revenue for the fourth quarter declined approximately 24%. Pharma revenue declined 21% year-over-year primarily due to lower large accelerator projects versus the prior year. From a diagnostics perspective, we now have 25 partnerships that generated $9.6 million in revenue during 2025, up from $6 million in the prior year. This includes our recently announced partnership with Life Line Screening a national health screening group focused on identifying asymptomatic risks for chronic conditions in a community health setting. We continue to deliver key milestones in our Diagnostics business as we execute our long-term strategy. Our LucentAD complete test, which is a multi-analyte algorithmic blood test for Alzheimer's disease remains a highly differentiated test in the market. We recently achieved 2 significant milestones for LucentAD complete. Firstly, in Q4, the centers for Medicare and Medicaid services approved a reimbursement rate of $897 for the test. This milestone provides a nationally recognized reference price for the test. We are now focused on generating clinical utility data in support of LucentAD complete in various payer conversations. Secondly, in January 2026. We submitted a 510(k) premarket notification to the U.S. Food and Drug Administration for this test. Both these milestones further our mission to provide superior, noninvasive, high-performance diagnostics tools to aid in the evaluation of patients with cognitive symptoms for possible Alzheimer's disease. During 2025, we also launched 13 new assays, including 2 new Simoa Tau assays, pTau-205 and pTau-212. We have seen strong interest in both products during the initial launch period. In the coming year, we expect Tau biomarkers to remain of high interest and plan to launch additional products addressing this growing field. On the Spatial side of the business, we launched 2 new PhenoCode Discovery panels in Q4 25, a metabolism spike in panel and a mouse neurology panel. The mouse neurology panel expands our Spatial biology and neurology offerings into mouse models and complements our previously launched human neurology panel. Moving on to the P&L. Gross profit and margin for the fourth quarter was $20 million or 45.7%. Non-GAAP gross profit was $21.9 million and non-GAAP gross margins 50%. Operating expenses for the quarter were $44.8 million. Included in operating expenses are approximately $6.4 million of costs related to acquisition, integration, restructuring and purchase accounting and $1.4 million of shipping and handling costs. Non-GAAP operating expenses were $37 million a decrease of roughly $1.5 million sequentially as a result of synergies. As Everett mentioned, we've completed major integration activities and are turning our attention to profitable growth and delivering on our commitment to be cash flow breakeven in 2026. We have already implemented $74 million of our $85 million cost synergy target, and we're on track to meet our target by the end of Q1. Additionally, we remediated our material weaknesses related to revenue and inventory. By putting these material weaknesses behind us, we have established a stronger foundation for future growth. Our adjusted EBITDA was a loss of $7.9 million, a sequential improvement of $4 million as compared to a loss of $11.9 million in the third quarter. We ended the quarter with $122 million of cash, cash equivalents, marketable securities and restricted cash. During the quarter, we made a $10 million milestone payment for the EMISSION acquisition and spent $3.5 million related to severance and other nonrecurring expenses. Adjusted cash usage during the quarter was $3 million compared to $16.1 million in Q3, a marked sequential improvement as a result of synergies and improved working capital. I will now turn to our guidance for 2026. We expect to report approximately $169 million to $174 million of revenue, which assumes no underlying improvement in the academic or pharmaceutical end markets. In 2026, we expect a minimal impact to our core business from the terminated diagnostics development agreement, which yielded $5.6 million of revenue for the full year of 2025. Excluding this agreement, we expect pro forma revenue for 2026 to increase by approximately 2% at the midpoint of the guide. We expect GAAP gross margin to be in a range of 45% to 49% and non-GAAP gross margin to be in a range of 49% to 53%. We anticipate achieving cash flow breakeven in the second half of the year and expect to end the year with approximately $100 million of cash and no debt. And finally, in terms of our quarterly cadence, we expect similar seasonal pacing to revenue as in prior years. I will now turn it back over to Everett for closing remarks. Everett Cunningham: Thanks, Vandana. I'm confident in our base business. I'm also confident in our plan for breakeven profitability this year. And lastly, I'm confident in scaling our business into areas of profitable growth. Now I want to turn it back over to Josh. Joshua Young: Thank you, Everett. Colby, please assemble the Q&A roster. Operator: [Operator Instructions] Your first question comes from Kyle Mikson with Canaccord Genuity. Alexander Vukasin: This is Alex Vukasin on the line for Kyle Mikson. Congratulations, Everett on the new role. We look forward to working with you. This one is for Everett. So in your assessment of Quanterix' core high sensitivity proteomics as well as Spatial Biology businesses, what do you see the company has been executing on effectively? And additionally, what are some aspects of the current strategy that you would like to adjust or change with these 2 businesses in the near term? Everett Cunningham: Yes. No, thanks for that question. I'm looking forward to working with you also. As I come on, I've been now with the company for 35-plus days, and I'm taking this opportunity to really assess our diversified strategy, which I love. I'll mention a couple of stats about what Akoya has done in our Spatial business, before Akoya we were, what, 90% neurology, 10% oncology immunology. Now with Akoya and the Spatial technology and expertise we're now more diversified. We're now 60% neurology and plus 40% Spatial and oncology and immunology. So I like that diversification. What I like is that, I like the fact that they have a broad footprint. I like the talent that the business has brought on to Quanterix. I also like the fact that there's been a lot of work around synergy targets and making sure that we can take advantage of that, as you heard from Vandana, we will hit our $85 million target at the end of Q1. Now what that's going to allow us to do, it's going to allow us to really focus on how do we now execute our growth plan in the Simoa space, but also in the Akoya Spatial space. And the footprint, the technology that they bring on, the customer relationship that they have, I think really makes us really appropriate to drive our growth strategy this year and beyond. Alexander Vukasin: Got it. And just one more for me. So you noted earlier on the call that you launched about 13 new assays in 2025 alone. On the pipeline, any new asset or new product launches for 2026? And more specifically, what is the timing for the more general availability of your higher plex Simoa ONE platform? Any feedback from the early access program that gives you confidence this new platform and its capabilities could drive greater proteomics performance in the near term? Everett Cunningham: I'll have Vandana take the first, and I'll take the Samoa ONE question second. Vandana Sriram: Alex, you're right. We did 13 assays in 2025. We did about 20 assays in 2024 before that. This is really an indicator of the fact that our innovation engine is now moving and we expect to have a regular cadence of assay launches every quarter. We have a couple that are already in the pipeline for Q1 that will be coming out shortly, but the intent really is that this is a continuous stream throughout 2026. Everett Cunningham: Yes. And as far as Simoa ONE, we rolled out our early access program for Simoa ONE at the end of last quarter. And right now, what we're doing is we're currently executing the test plans with our customers. So we're going to continue to gather feedback and that feedback will actually steer our decision-making. The benefit of me taking over recently is, I'm also in the process of doing a holistic review of all of our product development and launch initiatives here at Quanterix. I will say this. We have attractive segments on both sides, the Samoa and the Spatial side. The one thing that we will have to do because of that attractive segments, we'll have to make some decisions. And our decision will be based on return on investment and bringing growth back to Quanterix as quickly as possible. Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: First one, Everett for you. You emphasized Alzheimer's diagnostics. Obviously, you're coming with significant experience in sales and commercial side. So I wanted to get a view from you going forward, as you talked about the diagnostics opportunity, how should we think about the overall prioritization or when you look at the diagnostics versus the Simoa proteomics versus the Spatial business that you have? And how are you thinking about those 3 segments and also, if you can provide an expectation for the investments needed to drive growth on the Alzheimer's diagnostic side? Can you still reach the cash flow breakeven expectation by the year-end after the addition of those sales and commercial investments that you are potentially planning here? Everett Cunningham: Yes, Puneet, thanks for the question. I appreciate that. I'll touch on a few things and maybe have Vandana talk about the breakeven piece. I'm excited about the diagnostics opportunity. I spoke about it in my initial remarks. And we're well -- really set up to make an impact in the Alzheimer's diagnostics opportunity. As Vandana said, we had a good price crosswalk from CMS. We had our CMS approved pricing like I said, of $897 per LucentAD. We now have several ongoing clinical utility studies for LucentAD, and we look to work with 3 organizations, 2 in academia and then as we track the results, we're looking for releasing those results in the second half of this year. What that's going to do is that will really guide us with our payer engagement and reimbursement strategies. From my past, I've learned that you really need to get the payers on board, good reimbursement scalable strategies that will allow for our customers to pull this amazing opportunity through. Now that's our Alzheimer's diagnostics opportunity. I also feel that we have an oncology diagnostics opportunity. But again, 35 days into this, give me time to really look into this, focus on it and really invest in how we bring that to market. Now the impact for that will probably be starting in '27, but I'll let Vandana talk about that. Vandana Sriram: Yes. Hey Puneet, in terms of our framework for investment in diagnostics, as you know, over the last couple of years, we've been somewhat pacing the market, but we've been putting in additional investments where needed. We already have a double-digit sales force that's out there that right now has been focused on partnerships, but very quickly is shifting their focus to really bringing LucentAD complete to the market. So in our cash plan for 2026, we have contemplated all of the work that will go into the reimbursement pathway, as well as into building the infrastructure required from an order to cash perspective, et cetera, to be able to support volume in that company. So our plan for now contains all of those relevant investments and still gets us to breakeven in that second half of the year. Now if the market were to move faster or things were to develop faster, those would be good problems to have in a way. And we would welcome speed of adoption in this area. Puneet Souda: Got it. Okay. That's helpful. And then on the FDA submission side, can you just update us on any dialogue with FDA? What they're looking for -- sorry, you have a breakthrough designation earlier on. So I just wanted to get a sense of potential time line and approval of the product. It's good to see that you already have reimbursement, but just wanted to get a sense on feedback that you have received. Everett Cunningham: Yes. Thanks, Puneet. We're working very well with the FDA. Again, we submitted the 501(k) in January. We expect the approval to take anywhere between 6 to 9 months, and then we anticipate securing that same thing by Q4 of this year. But again, 6 to 9 months is what we're looking for. I think the most important thing around that, that Vandana said is working sequentially with waiting for the FDA approval, making sure that we have good order to cash within our own lab. And then I'd tell you that making sure that we have a good payer strategy around when we develop that clinical evidence. So we're excited about our surround sound strategy. Operator: [Operator Instructions] Your next question comes from Tom DeBourcy with Nephron Research. Tom DeBourcy: Sorry about that. Can you hear me? Everett Cunningham: Yes. We got you, Tom. Tom DeBourcy: So I just wanted to understand your Accelerator Lab and lab services. It seems like Q4 was stronger than expected, maybe even particularly in Simoa. And so just in terms of the level of demand from pharma customers? And then as you look out, at least for the next first half of the year, have you seen the rebound in activity and demand for lab services, I guess the pipeline had previously, I guess, maybe run down a little bit there? Vandana Sriram: Yes. Let me take the Q4 question and then Everett and I will tag team on what we're seeing for Q1. So Q4, again, a strong finish to the year. We were generally very pleased with all of our sectors, consumables and lab services in particular. On the Simoa Accelerator side, as we've mentioned before in 2025, the interest for the offerings continue to remain strong. In Q4, we saw a handful of projects come to an end, and we also saw, again, a good diversity of projects that basically helped on the revenue side. Everett Cunningham: Yes. I like our Accelerator business. And I think my first week here, they were talking about how profitable our Accelerator business is. And we have a lot of good partnerships that are out there. Right now, my goal is to really understand our accelerated business. Our projects are about $50,000 on average. My goal is, I want to get bigger projects with pharma. I think there's an opportunity to do that with how important solving this Alzheimer's dilemma is. So we'll continue to invest in our Accelerator business. We'll establish broader partnerships with pharma, and it will be an opportunity for us to continue to grow that segment. Operator: Thank you. With no further questions in queue, that concludes our question-and-answer session. Thank you all for joining. You may now disconnect.
Operator: Good morning, and welcome to the Alamo Group Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, after today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Edward T. Rizzuti, Executive Vice President, Corporate Development and Investor Relations. Please go ahead. Edward T. Rizzuti: Thank you. By now, you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact us at (212) 827-3746 and we will send you a release and make sure you are on the company's distribution list. There will be a replay of the call, which will begin one hour after the call and run for one week. The replay can be accessed by dialing +1 (855) 669-9658 with the passcode 4809758. Additionally, the call is being webcast on the company's website at www.alamo-group.com, and a replay will be available for 60 days. On the line with me today are Robert Hureau, President and Chief Executive Officer, and Agnieszka K. Kamps, Executive Vice President and Chief Financial Officer. Management will make some opening remarks and then we will open up the line for your questions. During the call today, management may reference certain non-GAAP numbers in their remarks. Reconciliations of these non-GAAP results to applicable GAAP numbers are included in the attachments to our earnings release. Before turning the call over to Robert, I would like to make a few comments about forward-looking statements. We will be making forward-looking statements today that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties which may cause the company's results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: adverse economic conditions which could lead to a reduction in overall demand, supply chain disruption, labor constraints, competition, weather, seasonality, currency-related issues, geopolitical events, and other risk factors listed from time to time in the company's SEC reports. The company does not undertake any obligation to update the information contained herein which speaks only as of this date. I would now like to introduce Robert Hureau. Robert, please go ahead. Robert Hureau: Thank you, Ed. I would like to thank everyone for joining our fourth quarter earnings conference call. We appreciate your continued interest in Alamo Group Inc. Before we get started, I would like to share a few thoughts. As you know, the fourth quarter was the first full quarter during which I have been at the helm at Alamo Group Inc. During this time, I have had an opportunity to visit some of our manufacturing facilities, speak with our customers, suppliers, partners, investors, and interact with our employees. Input from everyone has been incredibly valuable. In addition, during this period, the leadership team and I have been working together to develop a set of strategic initiatives designed to grow the business and a framework by which we will operate. As I reflect on the Alamo Group Inc. business, its products, markets, financial profile, and all the opportunities in front of us, I can say that I am more confident and excited today about where we expect to take this company over the next three to five years than I was when I joined just a short time ago. I will turn the call over to Agnes to review our financial results in detail. When she is finished, I will come back and discuss the performance for each of our divisions, highlight some of the key initiatives which are underway, and summarize a few of our long-term goals. Agnes? Agnieszka K. Kamps: Thank you, Robert. Net sales for 2025 were $373,700,000, down 3% compared to 2024. Gross profit for 2025 was $85,000,000 compared to $91,800,000 for 2024. Gross margin for 2025 was 22.7%, down 110 basis points compared to 2024. The degradation in gross margin was due to a few reasons, including inverse leverage on the lower Vegetation Management division volumes, charges related to inventory reserves taken during the quarter on certain Vegetation Management division product lines that we intend to divest or discontinue, and the impact from tariff costs, partially offset by pricing and disciplined margin management in our Industrial Equipment division. Selling, general and administrative expense, or SG&A expense, for 2025 was $58,300,000, up 9.3% from 2024. SG&A expense in 2025 included approximately $3,200,000 related to the acquisition and integration costs, restructuring costs, and the addition of Ring-O-Matic. Net interest expense for 2025 was $2,500,000 compared to $2,700,000 in 2024. For the full fiscal year 2025, our effective income tax rate was 25.6%, which was higher than the effective income tax rate for the full year 2024. However, the 2025 effective tax rate is in line with our current and longer-term expectations. During 2025, we recognized expenses related to acquisition and integration activities of $1,600,000. Most of these costs were related to the acquisition of Petersen Industries. In addition, we recognized $7,300,000 in restructuring expenses. Both acquisition and integration expenses and the restructuring expenses are being treated as adjustments for certain non-GAAP measures as shown in the press release. Adjusted EBITDA for 2025 was $44,800,000, or 12% of net sales, compared to adjusted EBITDA of $51,800,000, or 13.4% of net sales, for 2024. Adjusted earnings per share on a fully diluted basis for 2025 was $1.70 compared to $2.39 for 2024. Now, I will share some comments regarding the results for each of the divisions. Net sales in the Industrial Equipment division for 2025 were $234,900,000, an increase of 4.2% compared to 2024. Adjusted EBITDA for the Industrial Equipment division for 2025 was $41,500,000, or 17.7% of net sales, compared to $35,500,000, or 15.7% of net sales, for 2024. We are pleased with the continued strong performance, particularly with the adjusted EBITDA margins in the Industrial Equipment division. The performance in this division demonstrates the attractiveness of our vocational truck-related end markets in which we have great leadership positions. Net sales for the Vegetation Management division for 2025 were $138,700,000, a decrease of 13.2% compared to 2024. The decrease in net sales reflects weakness in certain end markets, particularly tree care and municipal mowing. Adjusted EBITDA for the Vegetation Management division for 2025 was $3,200,000, or 2.3% of net sales, compared to $16,300,000, or 10.2% of net sales, for 2024. The adjusted EBITDA margins in the Vegetation Management division were low this quarter due to inverse leverage on both fixed manufacturing costs and SG&A expenses from the lower volumes. Moving on to the balance sheet and cash flow. Cash provided by operating activities for fiscal year 2025 was $177,500,000 compared to $209,800,000 for fiscal year 2024. The operating cash flow of $177,500,000 reflects disciplined management of accounts receivable and accounts payable, where we made improvements on days sales outstanding and days payables outstanding. The operating cash flow also reflects uses of cash for inventory, which will be our intensified focus in 2026. Our free cash flow conversion for the full fiscal year 2025 was robust at 142% of net income. Cash used in investing activities for fiscal year 2025 was $46,200,000 and reflects cash used for the acquisition of Ring-O-Matic and $30,600,000 used for capital expenditures. The increase in capital expenditures compared to the same period in the prior year was due to expansion of our manufacturing facility in the Industrial Equipment division. We are excited about opening this new facility as it enabled growth and improved operations in Western Europe. Cash used in financing activities for fiscal year 2025 was $30,800,000, reflecting repayments of principal on our long-term debt and dividends paid. As of 12/31/2025, our gross debt was $205,700,000. In addition, as of 12/31/2025, we had $309,700,000 in cash on the balance sheet. In January 2026, we closed on the acquisition of Petersen Industries. We funded this acquisition with a $120,000,000 draw on our revolver and approximately $50,000,000 cash on hand. Subsequent to the closing of the acquisition, total availability under our credit facility was $477,000,000 including Coriant, and pro forma net leverage remains quite low. We are excited about the acquisition of Petersen given its leadership position, attractive margins, and commercial synergies. To conclude, I would like to emphasize our commitment to delivering long-term value to our shareholders. We are pleased that our Board has approved $0.04 per share, or a 13.3% increase, to our quarterly dividend to $0.34 per share. As we move forward, we remain focused on driving growth and optimization of our operations. Thank you. I will turn it back over to Robert. Robert Hureau: Thank you, Agnes. Let me start by providing more color on the operating performance for each of our divisions. First, the Industrial Equipment division. As Agnes mentioned, net sales in the Industrial Equipment division increased by 4% during the quarter. The increase in net sales during the quarter was due to several factors, including favorable pricing, net sales from the acquired Ring-O-Matic business, which closed in the second quarter of the year, and continued market share gains in several of our businesses, partially offset by a decrease in sales in our snow business. The decrease in net sales in our snow business reflects a comparison to an unusually strong fourth quarter of 2024 where we recognized one large single order in the Canadian market. While the snow business can be lumpy from quarter to quarter, there is real positive momentum in many aspects of this business, which we are excited about. Net sales in both our excavator and vacuum business and our sweeper and safety business performed well during the quarter. These businesses continued to deliver double-digit year-over-year net sales growth. In addition, in the Industrial Equipment division, the Industrial Equipment division expanded adjusted EBITDA margins in both the fourth quarter and the full year. The book-to-bill in the Industrial Equipment division for 2025 was 0.85x. Net orders during 2025 were up 21% compared to the prior year. Net orders in the excavator and vacuum business, sweepers and safety business, and snow business were all up year over year. Lead times in all the businesses within the Industrial Equipment division are in a good competitive position. Today, our Industrial Equipment division represents 59% of our total net sales. As a reminder, the products in the Industrial Equipment division serve end markets including public works, utilities, infrastructure, and construction. These are attractive long-cycle markets. As I mentioned during our last call, net sales in this division and its end markets have been very robust over the past few years, fueled in part by various government-driven investments. Looking forward, we expect the rate of growth in these end markets to slow as the near-term effect of those prior external investments slows down. Overall, 2025 was a very strong year for our Industrial division, and we are looking forward to continuing to grow this business both organically and inorganically. Now, the Vegetation Management division. Net sales in the Vegetation Management division declined by 13% due to several factors, including a decline in certain end markets, and not ramping production volumes quickly enough in a few businesses that underwent the manufacturing consolidation activity, partially offset by favorable pricing. The end market weakness was most notable in our tree care and recycling business. Recall that a portion of our tree care and recycling business involves the manufacture and sale of very large and very expensive equipment used in land-clearing operations and is partially tied to housing starts, which remain suppressed. On the other hand, and importantly, net sales in our U.S. Agriculture business increased year over year in the fourth quarter. This was the first quarter in ages where net sales in this business turned positive, a very encouraging sign looking forward. Regarding the production inefficiencies in the two facilities that underwent consolidation, we are making progress. We see the progress in the various underlying KPIs but not yet in the financial results. We currently expect the work to continue through the remainder of the first quarter and into the second quarter before the facilities are running as designed and better aligned to the end market demand. The book-to-bill in the Vegetation Management division for 2025 was 1.1x. Net orders for the total division during 2025 were down 3% compared to the prior year. Net orders in the U.S. and European agriculture businesses were up year over year, while net orders in the other businesses were down year over year. Today, the Vegetation Management division represents 41% of total net sales. As a reminder, the products in the Vegetation Management division serve end markets including tree care and recycling, agriculture, public works, and land maintenance. As I mentioned on our last call, net sales in this division and its end markets have declined over the past few years, rolling over a period of significant growth that occurred between 2021 and 2023. Looking forward, we expect the rate of decline in the end markets to improve and stabilize before returning to growth. In addition, inventory in the channel remains healthy. We are seeing pockets of increased quoting activity in the first quarter in certain businesses within the Vegetation Management division. This is also a positive sign potentially pointing to a more stable 2026. Overall, we have much more work to do in the Vegetation Management division. We are confident we will improve the manufacturing inefficiencies and drive margin improvement as originally planned. I would now like to share some comments regarding the broad framework of our long-term strategy. As mentioned before, there are four pillars of the strategy on which we will focus and devote resources: one, people and culture; two, commercial excellence; three, operational excellence; and four, capital deployment. Examples of the types of steps we are taking related to one or more of these four strategic pillars I just mentioned include the following: First, we finalized construction of our manufacturing facility expansion project in France, nearly doubling the size of the facility. The increase in the manufacturing footprint will allow us to continue to grow sales in Western Europe in the attractive vocational truck space. Net orders, by the way, in France were up 32% year over year in 2025. We completed the consolidation of additional facilities in our snow and sweeper and safety businesses within the Industrial Equipment division. Production is up and running smoothly in both facilities in which the manufacturing lines were consolidated. These consolidations will allow us to continue to remove fixed costs and expand gross margins. We launched our global procurement and supply chain initiative. This initiative will allow us to expand margins and optimize carrying levels of inventories over the next several years. In our tree care and recycling business, within our Vegetation Management division, we signed several new independent dealers in critical parts of the United States where we had longstanding gaps. These commercial efforts will help improve sales and market share. We recruited and elevated several very experienced and talented senior leaders in a few businesses within the Vegetation Management division. We are looking forward to positive outcomes from these industry veterans in 2026. As Agnes mentioned, we signed and recently closed on the acquisition of Peterson Industries, a market leader in the manufacture of equipment serving the bulky waste end market. This acquisition is a great example of the type of tuck-in acquisitions we are targeting. The M&A pipeline is robust, and we are excited to build on this momentum in 2026. We continue to centralize certain functional departments like IT, finance, procurement, and HR. These actions will help unlock previously constrained value and will lay the foundation for a more modern technology-driven organization, all while maintaining that local entrepreneurial brand spirit we love. In terms of product innovation, we are in final stages of testing our next-generation hybrid sweeper, which uses a proprietary electric sweeping architecture compared to third-party hydraulic systems in our competitors' products. This new electric sweeping architecture can run on diesel, CNG, or electric chassis globally and deliver superior efficiency, safety, and performance. This is a great example of how Alamo Group Inc.'s product innovation engine is beginning to shift from fast follower to first mover. Lastly, we performed a review of the portfolio of the businesses we operate. As a result, we identified and aligned around divesting or discontinuing a few product lines that do not fit our go-forward strategy and are not and have not been profitable. These actions will unfold over the course of 2026 and, while small, we expect will also contribute to our margin expansion story. These are all great examples of the key initiatives underway that we believe will help deliver on our long-term goals. Before I conclude, I would like to highlight again a few of our financial targets. It is very important to understand these are long-term through-the-cycle targets. First, sales growth of 10% including the effects of acquisitions. Second, adjusted operating margins of around 15%. Third, adjusted EBITDA margins of around 18% to 20%. And finally, fourth, free cash flow as a percentage of net income of 100%. In summary, as we worked through the transition during the latter part of 2025, I would like to express my thanks and appreciation to our employees who continue to demonstrate a strong passion for helping solve the needs of our customers. I also want to thank our customers and shareholders, many of whom I have had the opportunity to meet. All of you are helping to further shape the future of Alamo Group Inc. and to deliver sustainable superior performance. This concludes our prepared remarks. Operator, please open the lines for questions. Operator: We will now begin the question and answer session. The first question is from Michael Shlisky with D.A. Davidson. Please go ahead. Michael Shlisky: Good morning. Thanks for taking my questions. I want to get a final point on a couple of different details from your prepared remarks there. First of all, on the industrial side, you mentioned that growth rates might slow down, if I caught that correctly. Does that mean you will usually see a decline in top line in 2026 or just maybe perhaps not quite a double-digit growth but still positive in 2026? Robert Hureau: Yes, Mike. Good morning. In short, I would say more the latter. So as we have mentioned, the Industrial division has seen strong end market demand over the last eight quarters, really strong robust double-digit growth. All things being equal, we expect the end markets to slow in 2026. I think as we look out over the course of the year, that likely means something in the order of magnitude of flattish to maybe low- to mid-single-digit end market growth. I think it is important when you think about that and the impact on our business, recall that roughly 25% of that Industrial division business is snow. Something a little bit different going on with snow. Within snow, in the past, we would historically chase every last dollar of sales regardless of the margin profile. We are not going to do that. We are changing direction with snow. With respect to the snow business, it is all about the quality of earnings and the margins. And therefore, on a year-over-year basis, you are likely to see a little bit downward pressure in snow, but the remaining businesses would align with that end market demand that I just talked about. So that was a long-winded answer. But in short, kind of flattish to low- to mid-single-digit end market demand in the majority of those Industrial divisions businesses. Does that get to your question, Mike? Michael Shlisky: Yes. Just to clarify, your comments do or do not include the effect of Peterson and other acquired businesses? Robert Hureau: Excluding Peterson. Michael Shlisky: Okay. Thank you. And then the other fine point I wanted to ask about was actually on Peterson. Just tell us, can you tell us a little bit about whether that is a growing business in 2026? Is it going to be accretive, etcetera? All the usual stuff that we might want to hear about just from a directional standpoint for the next twelve months. Robert Hureau: Yes. So we are really excited about the Peterson acquisition. First thing I would say is it really is a great example of the type of tuck-in deals that we are looking at. It is a business whose end markets, whose sales channels, whose product categories are very similar or close to our core. It is accretive from a margin perspective. We got it at a fair price. We think it is a growth end market. It is a leader in its space. It has a talented management team that is staying with the business. So many, many positive attributes about that business. As we think about it in 2026, I believe in the press release we articulated the purchase price, the multiple, and what the 2025 sales were going to be. One thing to highlight as you think about 2026 is we acquired it in January. So you will see eleven-twelfths of sales in 2026, of course. I think the growth will be a little bit slow in 2026, but overall a good long-term end market to be in. In terms of the margin profile, it is above what the Alamo Group Inc. averages are in terms of adjusted operating margins and adjusted EBITDA margins. We are going to make some investments early in this business to drive some of those synergies, particularly in the area of operations and some commercial folks. So you might see a little bit of degradation in the margin profile early on relative to its history, but nothing that would drive it below the Alamo Group Inc. average. Overall, really, really positive news with respect to Peterson in 2026. Michael Shlisky: Outstanding. Maybe one last one for me. This week is the big CONEXPO show. Of products on display, can you maybe share with us if you have anything new rolling out at the show, expectations for what you think might take place here? Could others you think we could hear placing orders, just checking out the product, etcetera? Just some thoughts around what you have got planned for the show and maybe even for new products across the businesses for 2026? Robert Hureau: Yes. So we are super excited about CONEXPO. For the first time the entire Alamo Group Inc. portfolio, or the majority of the portfolio, will be there in one booth, if you will. So we will be there as a team showcasing a lot of our products. We will have some new things. I do not want to share right now what those are. We have got a lot of new products in the works. I highlighted one in the prepared remarks that we are super excited about. We think in many cases, these product innovations really demonstrate the shift that we are trying to push here at Alamo Group Inc. from fast follower to first mover. That is an important principle that we are adopting here at Alamo Group Inc. We are not going to showcase all of those at the show. Some of them are still in the final stages, but will be rolled out later in 2026. I would expect we would take orders. I would expect the show to drive positive results for us. It will be my first time there, so I am looking forward to meeting folks at the show. Michael Shlisky: Thank you very much. Operator: The next question is from Mitch Dobre with Baird. Please go ahead. Peter Kalamcarian: Hey guys, this is Peter Kalenkaryian on for Mig this morning. Thanks for taking my questions. I have a couple here. Let me start with vegetation margin. I appreciated the color on what happened this quarter. Is there any way to help us get a sense for how you expect margin to progress through '26? What would be an appropriate starting point here in the first quarter? And then just directionally from there, how should we think about margin progression in this segment? Yes. So let me start, maybe provide a little bit more color with respect to the fourth quarter results in the Vegetation division. And then I will go and address maybe the first quarter and beyond there. And Peter, if I go a little long, just remind me in terms of what your specific questions are if I get off track a little bit here. So starting with the fourth quarter, there really were three things that drove the margin compression in the fourth quarter. The first was lower volumes, and the lower volumes had inverse leverage on our fixed manufacturing costs and our SG&A costs, as Agnes said. That was the primary driver of the margin progression in the quarter. The reason the volumes were lower is we saw end market demand slow meaningfully in two of our businesses, in tree care, and in government mowing or municipal mowing. In the tree care business, recall that the majority of this business serves the large industrial sector, which is tied to land-clearing operations, which is tied to housing. And many of these products are very, very expensive. They are north of $1,000,000. And so what we saw was dealers hesitant to place orders in the fourth quarter. That was different from the preceding quarters during 2025. In many ways, similarly, in government mowing, here we are selling through dealers, but many of our end customers are state DOT offices, Department of Transportation offices. In the third and fourth quarter, and more pronounced in the fourth quarter, the DOT offices are wrestling with the impact from the One Big Beautiful Bill. Under the One Big Beautiful Bill, federal government is shifting burdens to the state for certain costs and expenses and actually rescind certain funding tied to highways and access and things of that nature. And so in the fourth quarter, you saw certain large state DOTs that we do business with hesitant to place orders. I do not think either of these things are long term in nature. They are shorter term. But that drove the end markets down, which compressed margins. That is the first thing. In addition, reflecting on that softer end markets, we ended up taking some charges and reserves around some slow-moving inventory in these particular businesses that I just referenced. That is the second thing. And then the third thing was we talked about the consolidation activity in two facilities in the Vegetation division. We made good progress from the third to the fourth in terms of driving those efficiencies. We can see in the underlying KPIs things are getting better. It will take another quarter or thereabouts, but it is improving. But nonetheless, we left a little bit of backlog on the table in the quarter. Those are the three drivers of the margin degradation in the fourth quarter, in order of prominence, if you will. Now as we shift from the fourth to the first, within the Vegetation Management division, we would expect to see top-line improvement. We would expect to see margin improvement, adjusted operating and adjusted EBITDA margin fourth to first improvement. From the fourth to first, if you compare 2026 relative to where we were in the first quarter of 2025, we are likely to get close to that level, maybe a little bit south of that level. But recall, we are coming off of eight quarters of down 13%, 14%, 15%. In terms of profitability in the first quarter in the Vegetation Management division, again, we will see sequential good improvement, but probably not all the way back to the level of first quarter 2025. So good progress. We are encouraged. We are starting to see green shoots in many of these places. Even in tree care, we saw good green shoots in the quoting activity early on in 2026. Longer term, the goal is to get back, at least initially longer term in 2026, back initially to at least where we were in 2020, back in that 8% adjusted operating margin level. Longer term, through the cycle, the goal is to get to that 15% OI, 18% adjusted EBITDA levels. We think we can do that. But the primary thing that needs to happen is we need the end markets and the volumes to stabilize. From there, we can start building, if you will. We think that will start happening in 2026. Does that help? Got it. That was awesome, Robert. Thanks for that color. Last one for me here, just on M&A. I understand that Peterson is still in the early days of being integrated here. But just wondering what your deal pipeline looks like, and is there any detail you could give on which current verticals you might be looking to add to or potential adjacencies that you might be looking to add to your current—you know, that could be M&A targets in the future? Yeah. Robert Hureau: Yes. So M&A is an important lever within our capital deployment framework. Super excited about it. Ed and the team are doing a wonderful job building the pipeline. We are engaged with a number of folks. Nothing is imminent. But we are excited about the trajectory that we are on. As we have said in a couple of instances, we are primarily focused on tuck-in acquisitions. That does not mean we will not do a large deal, but the sweet spot is going to be on tuck-in acquisitions. These are probably $10,000,000 to $20,000,000 of EBITDA, give or take, something in that order of magnitude. We would like to stay close to the core, meaning sales channels that we are familiar with where we can drive commercial synergies, product categories that we are familiar with, end markets that we are familiar with. Again, that does not mean we will not go a little bit to the right or a little bit to the left like we did with Peterson, entering into the waste management and grapple space. But we feel like that is close enough to the core. One thing I would say is probably in the near term, we will probably lean a little bit more industrial in nature, long cycle in nature, rather than shorter cycle in nature. We love both divisions here at Alamo Group Inc., and there are opportunities for M&A in both divisions. But near term, probably leaning just a smidge more towards the industrial space. Does that help? Peter Kalamcarian: Got it. Thanks, Robert. Really appreciate the detail. Operator: The next question is from Christopher Paul Moore with CJS Securities. Please go ahead. Christopher Paul Moore: Hey, good morning, guys. Maybe just one follow-up on the vegetation margins, I will start with. I want to make sure I heard correctly. So in terms of Q1, Robert, did you say that the margins can approach the 8.1% that you did in Q1 2025? I thought there is still some consolidation going on in the Vegetation division. Did I hear that correctly? Robert Hureau: No. And maybe I was not clear or it is getting a little long-winded here. So let me try again. As we move from 2025 into 2026, we should expect to see good progression on the top line and good progression on the adjusted operating and adjusted EBITDA margin from the fourth to the first. And when we compare 2026 to 2025, we will approach where we were a year ago, but we will not get all the way back to that level. But we are making good progress towards it. We think there is good progression. We see the efficiencies. We will not get all the way back to where we were in terms of the margin in 2025. Christopher Paul Moore: Got it. Okay. You will approach the 8.1%. You will not get there. That makes sense. In terms of just the backlog at the end of—book-to-bill was on the industrial, I think, was 0.8-something. The backlog at the end of December was—what was that? Robert Hureau: The backlog in the Industrial division was roughly $400,000,000, and the backlog in the Vegetation division was about $198,000,000. I think, importantly, when we think about that backlog, we are also looking at the order pattern. The order pattern, a couple of things: quite strong in the Industrial division across all three businesses, really, really robust in our snow group. Excited about the things that we can do there. Again, I do think it is important just to stress when we look at the snow business and its impact on the division billing forward, we are going to be a little light on sales as we are not chasing that last dollar at low margins. We are being a little bit more disciplined around the types of business that we go after. But really good order pattern. The backlogs overall, the lead times are in good shape. We do not feel like we are too extended. Snow is probably six to nine months, which is better than our competitors. We are picking up share because of that. In the Vegetation Management division, again, from an order pattern perspective, we saw really good order strength in the first quarter in our U.S. Ag business and our European Ag businesses, which is really remarkable. We think that signals potentially a good, more stable environment in 2026. The other businesses, tree care and government mowing—now municipal mowing—they too were double digits, but down double digits. What I will say is in tree care and government mowing, it feels like that was a fourth quarter, end-of-year hesitance to place orders. Specifically in tree care because we can see in the first quarter the level of quoting activity actually increased. So we are encouraged that it was a temporary pause. Still more to learn there. On the government mowing, we see that weakness continue into the first quarter a little bit in the early days. Overall, I think that is going to be in a good spot as Congress works through their renewal or extension of the Infrastructure Investment Act. But we will see short-term weakness there in government mowing. I think maybe the other thing to add, Chris, is the ending inventories in the channel in both divisions are in a reasonably good spot, particularly within U.S. Ag. They have been depleted over the last several years. So that is not a headwind for us going into 2026. If anything, it might be a little bit of a tailwind. Christopher Paul Moore: Got it. And just in terms of the longer-term 15% operating margin, I know that is initially—I thought it was fiscal 2028—but it is more through the cycle. And you talked about different pieces, lean manufacturing, procurement, supply chain. Are you looking at that—I am trying to envision that. Is that kind of smooth improvement over the next two, three, four years? Is it more kind of back-half loaded when we get some normalization from a volume perspective? Just trying to understand kind of how we get from here to that 15%. Robert Hureau: Yes. I can understand that. The first thing, and it is the most important, is we need end market stability. As I mentioned, we have seen eight quarters now of consecutive down 13%, 14%, 15% in the end markets. That is a really challenging environment to operate in. I think the team has done a nice job taking out cost and adjusting to right-size to that level of demand. We still have more work to do. But the first thing that we need is stabilization in those end markets. And the way we think about that is, obviously, the fourth quarter was not what we all wanted or expect going forward. We have to get back to where we were in 2025 in the Vegetation division, and that is when you look at the average between the first and the second quarter, we were around 8% adjusted operating margin. So that is what we are chasing. We have to get back to there. Stable volumes, right-size the manufacturing facilities to the end market demand level, we get to 8%. From there, we are on our way. With a little bit of tailwind, with a little bit of volume growth, we will then push to 10%. Then we will begin our journey on the 300 basis points that I talked about in the last call: a point from procurement, a point from parts and service, a point from continued manufacturing efficiencies. I expect if the markets stabilize, you will see good progression certainly back half 2025 to full year 2026 in terms of that operating margin, and then it is slow and steady on our way from there. Does that color help? Christopher Paul Moore: It does. It does. I will leave it there. I appreciate it. Robert Hureau: You bet. Thank you. Operator: The next question is from Gregory Burns with Sidoti and Company. Please go ahead. Gregory Burns: Good morning. Did you mention what side of the business or more specifically where the product divestitures were coming from? Robert Hureau: In the Vegetation Management division, and these are product lines. They are not brands or businesses. They are product lines that really do not fit where we are going long term. So we will look to divest those at some point over the course of 2026. Gregory Burns: Okay. And then the orders on the Vegetation Management side of the business in the fourth quarter, I know you mentioned Ag was up and tree care and government mowing were down. Is there any way you could quantify maybe how much Ag was up, how much tree care was down, just to get a sense of where those two businesses are from a demand perspective? Robert Hureau: Yes. Definitely. So the U.S. Ag business and the European Ag business, they were both up double digits. The U.S. Ag business, even a little bit stronger. So good performance. And by the way, we see that continuing into the first quarter. So really positive sign that those end markets are moving in the right direction. Now, again, whether or not in 2026 they get all the way to flat or growth, coming off of eight quarters of down 15%, still to be determined, but it is a very positive sign. In tree care and in government mowing, or now municipal mowing, they too were double digits, but down double digits. What I will say is in tree care and government mowing, it feels like that was a fourth quarter end-of-year hesitance to place orders. Specifically in tree care, because we can see in the first quarter the level of quoting activity actually increased. So we are encouraged that it was a temporary pause. Still more to learn there. On government mowing, we see that weakness continue into the first quarter a little bit in the early days. Overall, I think that is going to be in a good spot as Congress kind of works through their renewal or extension of the Infrastructure Investment Act. But we will see short-term weakness there in government mowing. Does that color help? Gregory Burns: Yep. No. That is great. Thank you. Operator: This concludes our question and answer session. I would also like to turn the conference back over to management for any closing remarks. Robert Hureau: We appreciate the interest in Alamo Group Inc. and look forward to speaking with you again on our next call. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome to Kayne Anderson BDC, Inc. Fourth Quarter 2025 Earnings Call. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to Andy Wedderburn-Maxwell, Senior Vice President. Good morning, and welcome to Kayne Anderson BDC, Inc. Fourth Quarter 2025 Earnings Call. Andy Wedderburn-Maxwell: Today, I am joined by Ken Leonard and Doug Goodwillie, Co-CEOs of Kayne Anderson BDC, Inc., Frank Karl, President, and Terry Hart, CFO. Following our prepared remarks, we will be available to take your questions. Today's call may include forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, and projections about the company, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. Actual results may differ materially from those expressed or forecasted in the forward-looking statements. We ask that you refer to the company's most recent filings with the SEC for important risk factors. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. The company assumes no obligation to update any forward-looking statements at any time. Our earnings release, 10-K, and supplemental earnings presentation are available in the financial section of our website at kanebdc.com. I will now turn the call over to Ken Leonard. Ken Leonard: Good morning, and thank you for joining us today. I will begin by providing an overview of our fourth quarter results, and then share some thoughts on the current direct lending market conditions. I plan to highlight how Kayne Anderson BDC, Inc.'s value lending strategy has created a unique portfolio well positioned to weather any current headwinds associated with the market dislocation related to software and/or tariffs. Frank Karl will then provide a more detailed overview of our portfolio and performance, before Terry Hart concludes with Kayne Anderson BDC, Inc.'s financial results. I am pleased to report another solid quarter for Kayne Anderson BDC, Inc. as we closed out 2025 on a strong note. For the fourth quarter, we generated net investment income of $0.44 per share, representing an increase from $0.43 per share in the third quarter and a premium to the declared dividend. This performance translates to an annualized return on equity of 10.8%, demonstrating our continued ability to generate attractive risk-adjusted returns for shareholders in what has otherwise been a noisy period for the BDC sector. Our net asset value per share was $16.32 at quarter end, down slightly from $16.34 in the prior quarter, reflecting the impact of some marks of the portfolio which was partially offset by new investment originations and our strategic share repurchase activity during the period. Our dividend coverage ratio was 110%, supporting our regular quarterly distribution, and our board of directors has declared a regular dividend of $0.40 per share for the first quarter payable on 04/16/2026 to shareholders of record as of 03/31/2026. I would like to add that based on our current view of the market and our portfolio, we expect to be able to pay the $0.40 dividend for the entirety of 2026. Our portfolio continues to perform well from a credit perspective, with only 1.4% of the investments on nonaccrual status. The portfolio's weighted average yield of approximately 10.3% on our income-producing investments positions us well to continue generating attractive returns in the current interest rate environment. These results underscore the resilience of our investment approach and the quality of our portfolio construction, with 93% of our portfolio structured as senior secured debt. As mentioned in my introduction, our value lending strategy deliberately avoids highly leveraged loans—what we call “deep and cheap”—made to software businesses. While many BDC peers report more than 20% of their portfolios allocated there, our portfolio has approximately 2% to these sectors. Instead, Kayne Anderson private credit has a long track record providing loans to core middle market companies operating in traditional, stable industry sectors such as industrial and business services, distribution, and food products. Our underwriting emphasizes durable cash flows, tangible enterprise value, and disciplined leverage profiles. Our new originations have had average leverage to the borrower between 3.8x and 4.2x for the last 25 years. We believe this approach enhances downside protection and positions the portfolio to perform consistently across market cycles. Turning to our investment activity in the fourth quarter, we maintained our disciplined approach to capital deployment while continuing to successfully source attractive opportunities in the private credit markets. During the quarter, we committed approximately $113 million to new private credit investments. Our total fundings reached $99.3 million, of which $72.3 million represented new investments and $27 million represented existing previously unfunded commitments. The funding activity reflects our selective approach to capital deployment, focusing on high-quality opportunities that meet our stringent underwriting standards. During the fourth quarter, we experienced repayments of $131.7 million, which represents a healthy level of portfolio turnover and activity within our core middle market borrower base. Additionally, we continued our rotation out of broadly syndicated loans with sales of $19.8 million. This repayment activity, combined with $99.3 million in new fundings, resulted in a reduction in net funded investment activity of $52.2 million for the quarter. Excluding one higher-yielding opportunistic investment, the average spread in our new floating rate loans in the fourth quarter was 529 basis points over SOFR. Including that opportunistic investment, the average spread on our new floating rate loans was 593 basis points over SOFR. So we continue to see a reasonably healthy premium in spreads in our core markets relative to the upper middle and broadly syndicated markets, but we have continued to see pressure on spreads overall relative to longer-term historical averages, albeit more or less at these levels for the last year. I would like to provide just a quick reminder on our strategic positioning and some aspects of our investment philosophy that we think differentiate us in the current market landscape. First, our portfolio is highly defensive by nature, with 93% of our investments in first lien senior secured debt positions. We also prioritize control, and we are agent or co-agent in 75% of the investments we make, providing us with higher closing fees, enhanced information rights, and greater control in potential workout situations. Second, we are particularly conservative and selective in our capital deployment, prioritizing transactions where we can emphasize downside protection while capturing appropriate returns for the risk we are taking. This typically manifests itself in lower-than-market leverage levels across our portfolio. Third, 99% of our portfolio companies are backed by private equity sponsors who tend to provide best-in-class governance, operational expertise, and additional capital to these businesses when necessary. Our selective capital deployment philosophy also means we are willing to maintain lower leverage and higher liquidity when we do not see compelling opportunities that meet our risk-adjusted return thresholds. At quarter end, our debt-to-equity ratio was 1.02x. This positions us at the lower end of our target leverage range of 1.0x to 1.25x. With total liquidity of $588.4 million, including $43.4 million in cash and $545 million in undrawn debt capacity, we maintain substantial flexibility for accretive capital deployment. We have worked hard to create a foundation for consistent income generation and capital protection that we believe will continue to serve our shareholders well, regardless of where we are in the credit cycle. Turning to the current environment for private credit and BDCs, in Q4, conditions were characterized by a combination of lower base rates, relatively tight spreads, and somewhat muted M&A activity and continued concerns around credit performance. These factors together have pressured industry returns and reduced sector-wide ROEs compared to recent years. This is before the recent pressure on most of the market for software-related exposure and associated AI risks, regardless of whether one feels those risks are overblown. Despite the combination of headwinds, underlying credit fundamentals across middle market portfolios remain generally stable. Nonaccrual levels remain low in absolute terms across the sector, although managers continue to reference an elevated but manageable level of idiosyncratic credit stress within certain borrowers. I think it is fair to say that we and most of our peers feel that current public BDC valuations are not in line with the continued strong fundamentals we see in our businesses. Looking ahead, we believe the industry is entering a period that will likely be marked by increased dispersion in outcomes for managers across the sector. As the potential for a prolonged AI software dislocation increases, capital will become tougher to raise in private credit. When you add in the perception of undisciplined underwriting causing the potential for increased losses in the upper middle market, we think it is reasonably likely that spreads will widen over the next year or two as investors worry about a credit cycle. We believe that this will actually create a good environment for new originations and an attractive opportunity for Kayne Anderson BDC, Inc. to invest while other BDCs and direct lending platforms are dealing with their software portfolios. On a relative basis, we believe Kayne Anderson BDC, Inc. is very well positioned to continue to be a strong performing BDC delivering attractive risk-adjusted returns to our shareholders. I will now pass the call over to Frank Karl to discuss our portfolio. Frank Karl: Thank you, Ken. I will now provide a comprehensive overview of our portfolio composition and key performance metrics as of 12/31/2025. Our portfolio consists of 107 companies with a total fair market value of $2.2 billion, representing a well-diversified collection of core middle market investments. We maintain unfunded commitments of $287 million across our existing portfolio companies, providing us with additional opportunities to support our borrowers' growth initiatives. Since 12/31/2025, Kayne Anderson BDC, Inc. has closed or is in the final closing process on $50 million of new commitments, and we have seen a steady flow of opportunities so far this year, though it is too early to glean any sort of meaningful insights for total 2026 activity levels. Investments in Kayne Anderson BDC, Inc.'s portfolio, excluding those on the watch list and our opportunistic investments, have a weighted average leverage of 4.5x, interest coverage of 2.4x, and loan-to-enterprise value of approximately 43%. Weighted average EBITDA of our private middle market portfolio companies is $52.7 million, reflecting our focus on established businesses with meaningful scale. For the quarter, the number of companies in our portfolio declined by one, mainly due to our continued rotation out of the broadly syndicated loan portfolio. We continue to have a highly diversified portfolio with an average position size of approximately 0.9% of fair value, and our top 10 investments represent only approximately 20% of our portfolio. This approach allows us to maintain appropriate exposure to our best performing assets while also maintaining prudent diversification across the broader investment base. 95.7% of our debt investments are floating rate, which mirrors our liabilities, where the vast majority of our debt funding utilizes floating rate borrowings as well. The only fixed rate investment that we have is the SG Credit loan that closed in early Q3 2025 and has an 11% fixed coupon. Credit performance across our portfolio remains strong to date, with only 1.4% of total debt investments at fair value on nonaccrual, representing only five positions out of 107. That is flat quarter over quarter. We continue to have financial covenants in all of our core first lien private middle market investments. Lastly, we have built this conservative portfolio with a healthy weighted average yield of approximately 10.3% on fair value of investments, excluding nonaccruals, and this reflects a small decline from 10.6% last quarter. This strong level of yield has been achieved with leverage levels at the borrower level that are considerably lower than many of our peers, and while we continue rotation out of broadly syndicated loans into higher spread private credit investments. Ken discussed the well-publicized software-related headwinds affecting the sector and emphasized that we believe Kayne Anderson BDC, Inc. is well positioned. While AI-related risks are difficult to fully mitigate, we are confident that the businesses in our portfolio are much more likely to benefit from the use of AI than they are to be displaced by the technology. We remain firmly committed to the disciplined lending strategy that our management team has executed and refined successfully across multiple market cycles for more than two decades. Our credit performance metrics continue to demonstrate the strength and quality of our portfolio construction. As mentioned earlier, nonaccruals are flat quarter over quarter at 1.4% of total debt investments. We did see an uptick in PIK in the fourth quarter predominantly due to one investment, where Terry will provide more detail on that situation later. We view this as consistent with normal course credit management in a diversified portfolio. As a quick reminder, our portfolio construction philosophy has always emphasized a conservative approach to borrower-level leverage and capital structure design. As I mentioned earlier, our weighted average borrower net leverage, where we are still seeing 4.5x, compares favorably to the broader market, where we are seeing many transactions with leverage levels of 5x to 6x or higher. We have maintained this disciplined approach as we believe that lending on cash flows, as opposed to just loan-to-value, better positions the portfolio for periods of potential distress or in slower growth environments. Looking ahead to 2026, we expect our near- to medium-term investment activity pipeline to remain solid, supported by a slowly increasing flow of M&A transactions. While we expect market conditions to remain competitive, we believe that recent increases in overall uncertainty favor experienced lenders like us. With that, I will turn it over to Terry Hart to discuss Kayne Anderson BDC, Inc.'s fourth quarter 2025 financial results. Terry Hart: Thanks, Frank. Let us first review results of operations. During the fourth quarter, we earned net income per share of $0.32 and net investment income per share was $0.44, compared to $0.43 in the prior quarter and $0.04 above our dividend. Total investment income for the fourth quarter was $61.9 million as compared to $61.4 million in the prior quarter. The increase to investment income was primarily driven by the full-quarter impact of portfolio rotations out of broadly syndicated loans into middle market loans and an increase in accelerated amortization of OID and prepayments related to realization activity. Our portfolio yield decreased by 30 basis points, mainly related to lower reference rates, and PIK interest for the quarter was elevated from prior quarters as a result of year-to-date interest income from our investment in Regiment being converted to PIK during the fourth quarter. PIK interest represented 7.4% of total interest income during the quarter but continues to be relatively low at 3.9% for the full year. As mentioned, during the fourth quarter, we had approximately $2.6 million of accelerated amortization of OID and prepayment fees related to realization activity. Total expenses for the fourth quarter were $31.8 million compared to $31.3 million for the prior quarter. The increase was primarily the result of higher average borrowings and the issuance of notes during the fourth quarter, partially offset by $500,000 of lower incentive management fees. During the quarter, our incentive management fees were reduced by the 12-quarter lookback incentive fee cap. During the fourth quarter, we had a small realized loss of approximately $600,000 related to the sale of several broadly syndicated loans, and we had net unrealized losses on the portfolio of $7.2 million compared to unrealized losses of $5 million in the prior quarter. The unrealized losses were largely the result of negative fair value changes related to our investments in SCORE Sports, Regiment, and Bell USA, as well as accelerated amortization of OID related to repayment activity. These items were partially offset by positive marks on ArborWorks and Centerline. Additionally, we had deferred income tax expense of $300,000 related to unrealized gains on equity investments held in our taxable subsidiary. As of December 31, total assets were $2.3 billion and net assets were $1.1 billion. As of that date, our net asset value was $16.32 per share. The decrease of $0.02 from $16.34 per share as of September 30 was comprised of $0.12 per share related to net realized and unrealized losses, partially offset by $0.04 of net investment income in excess of our dividend and $0.06 related to accretive share repurchases during the fourth quarter. At the end of the quarter, we had debt outstanding of $1.13 billion and our debt-to-equity ratio was 1.02x, which is a slight increase from 1.01x at the end of the third quarter. On October 15, we funded and issued $200 million of notes that were priced in August at attractive rates. As mentioned earlier, we had share repurchases of $24.9 million pursuant to our $100 million share repurchase program. Year-to-date through February 20, Kayne Anderson BDC, Inc. has repurchased shares valued at approximately $14.5 million at an average price to NAV per share of 87%. Now turning to our distributions. On February 12, our board of directors declared a regular dividend for the first quarter of $0.40 per share to shareholders of record on 03/31/2026. As of December 31, our undistributed net investment income was approximately $0.21 per share. Our positioning to maximize earnings during 2026 centers on several key initiatives. First, we plan to complete the rotation out of our remaining lower-yielding BSL positions, which will provide additional capital to redeploy into higher-yielding direct lending opportunities. Second, we intend to gradually optimize our leverage within our target debt-to-equity range of 1.0x to 1.25x. Our current leverage ratio of 1.02x provides us with substantial capacity to increase earnings through prudent use of additional leverage. Third, we continue to work with our banking partners to reduce our borrowing costs. In fact, yesterday, we announced the term extension of our largest credit facility, led by Wells Fargo, and the reduction of the interest rate on this facility from SOFR plus 215 basis points to SOFR plus 195 basis points. With that, Operator, please open the line for questions. Operator: We will now begin the question and answer session. Our first question comes from the line of Michael Brown with UBS. Please go ahead. Cory Johnson: Hi, this is Cory Johnson on for Mike. I just have a question. So in regards to your NII for this quarter, I am guessing it was a partial impact from Fed rate cuts. How much do you estimate that was in the fourth quarter, and how much would you expect to be the impact in the first quarter of this year? Doug Goodwillie: Thank you for the question. This is Doug Goodwillie. Terry, do you want to handle that? Terry Hart: Yes, sure. For the quarter itself, we can get you the exact details after the call, but I can say that we did not see the full impact of the Fed rate cuts in this quarter. During the first quarter, we would see the full impacts of that, so it was a partial impact during the quarter. Offsetting those cuts during the quarter, we saw an uptick in the full quarter's activity and full investment in SG Credit, and that helped offset some of those Fed cuts. In addition to that, as we mentioned, we did see a full-quarter impact of the rotations out of BSLs during the third quarter, and then also in the fourth quarter we saw additional rotations out of the BSLs, and that offset some of those Fed cuts. Cory Johnson: Great. Thank you. And just one follow-up. You had mentioned about there possibly being opportunity for you to be able to take advantage of as other BDCs went more to software companies or are dealing with their credit issues. Can you maybe just talk a little bit more about what opportunities you expect to be able to see and take advantage of? Doug Goodwillie: Yes, thanks for the question. This is Doug Goodwillie again. I think when we say capitalize on that, it is capitalizing by buying loans from any other stressed BDCs, so to speak. We agree with some of the commentary in terms of probably a bit of an overcorrection in the public markets for the AI risk for some of those software portfolios. But what we are talking about there is when a BDC has 20%, 30%, 40% of their portfolio in software, that becomes time consuming. If you are in any types of restructures or dealing with companies that could potentially be on a watch list, that tends to take up time, and then it also keeps valuations generally under, you know, a price to NAV of one in certain circumstances. So it allows those that are trading at better levels and those that have less stress and have portfolio capacity to put more capital to work in the current market. Operator: Great. Thank you. Our next question will come from the line of Kenneth Lee with RBC Capital Markets. Please go ahead. Kenneth S. Lee: Just one on the target portfolio ramp. Any updated outlook in terms of time frames when you might get to the targeted range within the 1.0x to 1.25x? And given the current environment and what you are seeing, do you think you could be closer to the lower end or the higher end of the range in the near term there? Thanks. Frank Karl: Thanks, Ken. I will start there. Total deployment or net deployment for the quarter was effectively flat. I think we are seeing a decent amount of activity. I alluded to we have got $50 million of commitments sort of in process for Q1. We are still working out of the broadly syndicated book, which you did quarter over quarter and will continue to do in the first part of this year. Our repurchase program has been reasonably active, so there is a decent number of levers that we think will push that leverage ratio up a bit more towards the middle of the range. But putting any specific time frame on it is difficult to do and will depend on market conditions and deployment activity, which, again, I think we are reasonably seeing signs of some increases in activity. It will be a steady sort of progression over the next couple of quarters. Doug Goodwillie: Right. I think, Ken, at the outset of what may be a bit of a dislocation in the credit markets, to be at 1.0x, with $550 million of dry powder, so to speak, or liquidity, we think it is a good position to be in. So we would expect that to increase beyond the 1.02x, I think, where we are as of this quarter, but likely to remain somewhere in the 1.0x to 1.2x range over the next few quarters. Kenneth S. Lee: Gotcha. Very helpful there. And just one follow-up, if I may, and appreciate that the portfolio with only 2% of software exposure. Wondering if you could just talk a little bit more about any investments on the current watch list, any particular areas where you are seeing any kind of stress within the portfolio or otherwise challenges within the companies there? Thanks. Doug Goodwillie: Sure. This is Doug again. I will start. As it relates to software companies, there are no investments in software companies that we have that are on the watch list. As we talked about in Ken's section of the call, it is less than 2% of the portfolio. Less than 10% of the entire portfolio is on the watch list, and I think from our perspective, there are five credits that are on nonaccrual. So we think that is kind of, frankly, a normal course watch list. An amount of nonaccrual kind of in the mid-1% range is fairly low, I think, in respect to our competition. So we are happy with the portfolio. I would say from our perspective, I am not sure that anything that we have seen is all that new in terms of there has been continued pressure on the consumer affecting two or three of the companies on our watch list, and then, frankly, some management missteps that we are working with the sponsors and some management teams to correct. But those are really the two themes that do not really come back to what is going on around AI. I think what we have seen in terms of a theme in terms of stress has been a little bit more on the consumer side over the last 12 to 18 months. Kenneth S. Lee: Gotcha. Super helpful there. Thank you very much. Operator: Our next question comes from the line of Binyan with Wells Fargo. Please go ahead. Binyan: Hi, everyone. Good morning. Just to start, a small follow-up on the preceding topic with Ken there. It looks like you have a pretty good clip of 2026 maturities. Is there a big overlay with that cohort and then the sort of underperformers as you described? Doug Goodwillie: I think that when we think about the repayment outlook, it has been relatively slow in the first quarter and, thus far, I think for the second quarter. We will go through it name by name. It looks like it picks up at a reasonable level into the third and fourth quarter. Frank Karl: There is no concentration of names on the watch list in 2026 maturities. Binyan: Okay. That is helpful. And then we also want to ask about G&A, broadly in the context of the size of your book, the size of your platform. You guys are just off the scatter plot, in a good way, in regards to G&A expense being very low. Can you walk us through as many specifics as you will give as to what are the sort of conventional items that you elect not to expense that, say, your advisers or consultants told you that you could? And then how can we be sure that you will not change your mind one day in the future? Thanks. Doug Goodwillie: Yes, good question. I will turn it over to Terry in terms of policy and what could be expensed, and maybe give some idea of that quantity too, Terry, as you answer the question. Terry Hart: Sure. Our agreements do allow us to pass through, and as you see other managers passing through, the cost of the CFO, in some cases the cost of the Chief Compliance Officer, and then their staff. We have a model where we outsource a lot of our administration and fund accounting, and so we do pass that through, but that tends to be much cheaper than if we had our own staff and then charged back all of that time. In magnitude, if you look at funds that are similar in size or BDCs that are similar in size, our ratio could be twice as high as it is today. From 40 basis points it could be 80 basis points or higher if we were to charge some of those things through. I think we take pride in having a low G&A cost generally, and I think that we do the right thing for our investors. Especially in an environment where coverage is tight, I think that we are going to be very mindful of our G&A expense. As we grow, are we always going to have a zero for any of those costs? That is hard to say, but like I said, we are going to be very mindful of our G&A as it relates to coverage and our dividend policy. Binyan: Very helpful. Thanks so much. Doug Goodwillie: Thanks, Binyan. Operator: Again, to ask a question, press 1. Our next question will come from the line of Paul Johnson with KBW. Please go ahead. Paul Johnson: Yes, good morning. Thanks for taking my questions. Just wondering your thoughts generally: what is the supply chain sort of risk within the portfolio—food companies, distributors, trading companies, those sorts of businesses—given the recent disruption in the shipping market in the Middle East? Doug Goodwillie: Yes. You are right that I think when we talk about our value lending philosophy and the stable industries, our biggest industries are industrial and business services, food products, health care. But the vast majority, and I will let Lee or Frank weigh in as well, of the supply chain is from the U.S. We took a deep dive on this when we were analyzing the prior and, I guess, potential tariff risk on the portfolio, finding it to be fairly minimal. But I will let Frank give some specific stats. Frank Karl: It gets back to—it is not the same analysis as the tariff risk—but there are some downstream effects. Is inflation picking back up, and what does that mean over the near and medium term for our borrowers? We think our book performed very well through a substantially elevated inflationary period. We think our book performed very well through tariffs and tariff uncertainty, and I think we would expect more of the same, admitting that it is hard to see around the corner for all scenarios and downstream effects. Paul Johnson: Got it. Thanks for that. And then in terms of the remaining BSL rotation, you have already obviously taken a fairly measured approach to ramping the portfolio. Loan prices are obviously trading at a more depressed level this quarter. If that kind of sustains itself for the next few quarters or so, for any of the liquid names in the portfolio, how willing are you to be selling out at a small loss to fund new originations as opposed to kind of holding out for the volatility to maturity? Doug Goodwillie: Yes, it is a good question. This is Doug. I will start. We are down to a handful of BSL names at this point. I think it was less than $50 million at the end of the quarter, and it is down from there. I will put Frank on the exact spot, but we have been actively continuing to exit that portfolio in this quarter. I think the good part of where we are at from a leverage perspective is we have still a decent ways to go before we are at the point of needing to make a decision around exiting a position at a loss—albeit very small dollars given the size of this book—versus funding new private credit assets. Paul Johnson: Got it. Thanks. That is all for me. Thank you. Operator: This concludes our question and answer session, and I will hand the call back over to Goodwillie for any closing comments. Doug Goodwillie: I would like to thank everyone who joined our earnings call today for their time and continued interest in Kayne Anderson BDC, Inc. We hope you enjoyed the call and look forward to speaking again in a few months to discuss Q1 2026 performance. Thank you. Operator: This concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to AutoZone, Inc.'s second quarter 2026 earnings release conference call. At this time, all participants are on a listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, and please note this conference is being recorded. At this time, I would like to play the company's safe harbor statement. Before we begin, please note that today's call includes Brian Campbell: forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance. Please refer to this morning's press release and the company's most recent Annual Report on Form 10-Ks and other filings with the Securities and Exchange Commission for a discussion of important risks and uncertainties that could cause actual results to differ materially from expectations. Forward-looking statements speak only as of the date made, and the company has no obligation to update such statements. Today's call will also include certain non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures can be found in our press release. Operator: Thank you. With that, I would like to turn the conference over to your host, Mr. Philip Daniele. Sir, the floor is yours. Thank you. Philip Daniele: Good morning, and thank you for joining us today for AutoZone, Inc.'s 2026 second quarter conference call. With me today are Jamere Jackson, Chief Financial Officer, and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the second quarter, I hope you had an opportunity to read our press release and learn about the quarter's results. If not, the press release along with slides complementing our comments today are available on our website, www.autozone.com, under the Investor Relations link. Please click on Quarterly Earnings Conference Calls to see them. To start out this morning, I want to thank every AutoZoner across the company for their commitment to delivering on the first line of our pledge: AutoZoners always put customers first. Our results would not be possible without us always asking what the customer needs and how we can meet those needs more efficiently day in and day out. It is our AutoZoners across the stores, supply chain, our 8.1% this past quarter. To start this morning, we will address both our sales results and provide an update on our growth initiatives. We will also discuss our domestic and international results and break our sales results down between traffic and ticket growth. To address what inflation has meant to both our ticket growth and our sales growth. We will also share regional disparities where they exist. And finally, our outlook and how we expect the year to unfold as we enter our spring and summer selling season. For the second quarter, our total sales grew 8.1%, and similar to the first quarter sales growth, while earnings per share decreased 2.3%. Similarly to our experience in the first quarter, our gross margin, operating profit, and EPS were negatively impacted by a non-cash $59 million LIFO charge, which had a material impact on our margins and EPS. Excluding this LIFO charge, our EPS would have been up 7.1% versus last year's Q2. We also delivered a positive 3.3 total same store sales on a constant currency basis, with domestic same store sales growth of 3.4%. Our domestic DIY same store sales grew 1.5%, while our domestic commercial sales grew 9.8% versus last year's Q2. I will pause here to reiterate what we said during our last conference call. Q2 is always our most difficult to forecast due to the less predictable winter weather patterns, and this quarter was no exception. While our commercial sales increase was below our expectations, our results were negatively impacted due to the winter storms across much of the country during the last four-week segment of the quarter. To add a little more color around the impact the storms had on our domestic commercial sales, the two weeks the storms really impacted us, weeks 10 and 11, our commercial sales were up just over 1%, while the other 10 weeks of the quarter our commercial sales were up over 12%. International same store sales were up 2.5% on a constant currency basis, and our unadjusted international comp was 17.1% as exchange rates positively impacted our comps by nearly 15 points. Jamere will provide more color for you on the foreign currency impact on our financial results for both this quarter and the upcoming third quarter later on this call. We opened 64 stores globally this past quarter versus 45 in last year's second quarter to finish with 6,709 U.S. stores, 913 Mexico stores, and 152 Brazil stores. We have now opened 342 new stores on a trailing four-quarter basis versus 241 new stores on a trailing four-quarter basis at the end of Q2 last fiscal year. We are now on track to open approximately 350 to 360 stores for the full year versus the 304 stores we opened globally last fiscal year. We continue to be very pleased with the sales productivity we are generating out of our new stores as their sales results are exceeding our models. Next, let me address our sales results in a little more detail. Coming into the quarter, we were optimistic that our domestic store execution would drive sales growth for both retail and commercial. More specifically, we felt we had the momentum we have gained over the last several quarters with our domestic commercial sales would continue throughout the quarter. However, the severe weather experienced across the country significantly impacted our commercial customers, many of whom closed their businesses for several days. Despite this, on a two-year basis, our growth is right in line with last quarter's two-year growth rate. While the winter weather was a short-term drag on sales, I want to stress that we are very excited about our growth initiatives and they are delivering as we would expect. Historically, these types of winter weather patterns have had a positive impact on our summer selling season. As a reminder, extreme weather events drive failure and maintenance events for our customers. Additionally, our domestic retail comp was solid at 1.5%, in line with last quarter's 1.5%. Again, the second quarter is always the most volatile quarter as the impacts of weather and the timing of tax refunds can have an impact on our short-term results. With that said, we are executing as well as we have in many years. I am very excited with what we are seeing in terms of market share gains, and we expect to continue to gain share for the remainder of our fiscal year 2026. Next, I will discuss the quarter's sales cadence. Regarding the 3.4% domestic same store sales, the cadence was 4.1% in our first four weeks, 2.7% in the second four weeks, and 3.5% over the last four-week period in the quarter. Last year, we experienced much colder weather in the middle four-week segment of the quarter, while this year the cold weather came in the last four weeks. As a result, the DIY comparisons were tougher in the middle four-week segment. Regarding our 1.5% DIY comp for the quarter, we experienced a positive 2.3% in the first four-week segment, a negative 0.5% DIY comp in the second segment, and a 2.8% comp during the third segment. Our merchandise categories performed as we would have expected, but the precipitation, especially the ice, that large parts of the country experienced in late January and into early February slowed our business trends. As a reminder, that stretch into the summer months. Cold weather with ice and snow lead to higher failure rates. Regionally, we underperformed the company's overall DIY comp in the Mid-Atlantic and the South Atlantic areas. Also, the West Coast was a little weaker than we would have expected due to milder, wetter, but much less snow than the year before. With regard to inflation's impact on DIY sales, we saw like-for-like same SKU inflation up north of 6% for the quarter, which contributed to our DIY average ticket being up 5.2%. The difference between the like-for-like inflation and ticket growth is attributable to category mix. Based on our inflation expectations, we continue to expect our average ticket to grow sequentially through the third fiscal quarter, which ends in May, and then peak during the fourth quarter as we will begin to lap the increases in inflation we saw price our goods against our weighted in this past year's fourth quarter. I will remind you that we average cost, and we continue to expect those weighted average costs to grow due to the impact from tariffs. We also saw DIY traffic count down 3.6 as traffic in the middle four-week segment was down more than the other eight weeks. As a reminder, our traffic decline was similar in the last quarter's decline. Again, this quarter's difficulty in the middle four-week segment was due to the difficult comparisons with cold weather we experienced last year. I do want to stress here that we expect traffic to improve as ticket growth begins to slow by late summer. We also feel the cold winter and potentially the size of the tax refund season could create upside for us with traffic over the remainder of the fiscal year. Now I will touch on our domestic commercial business. As I mentioned, our commercial sales were up 9.8% for the quarter. The first four weeks grew 10.1%. The second four-week segment grew 12.5, and the third four-week segment grew 7.3. As with DIY, our commercial sales were impacted somewhat during the middle four-week segment due to the weather comparisons we had last year, but we clearly underperformed our expectations the last four weeks of the quarter as the impact from ice and snow accumulation negatively impacted our commercial customers at the end of the quarter as we have already discussed. It was just more pronounced on the commercial side of the business. Our commercial sales results continue to be driven by our improved satellite store inventory availability, significant improvements in hub and Mega Hub coverage, the continued strength of our Duralast brand, and high levels of execution on our initiatives to improve speed of delivery and customer service. We continue to see improvements in delivery times. These initiatives are delivering share gains and give us confidence as we move further into FY 2026. Both the year-over-year inflation on a like-for-like same SKU basis for the commercial business and our average commercial ticket growth were similar to DIY. North of 5% for same SKU inflation and north of 5% per ticket. The weather in the last four weeks of the quarter slowed transaction trends to a slight negative growth over those last four weeks, and that is understandable to us. We continue to be optimistic about reaccelerating transaction growth over the back half of our fiscal year as we remain focused on both growing our customer base and growing share of wallet and sales per customer. Our future sales growth will be driven by share gains and an expectation that like-for-like retail SKU inflation will remain in the mid-single-digit range as we move forward. Now let me take a moment to discuss our international business. Across Mexico and Brazil, we now have 1,065 international stores. As I mentioned, our same store sales grew 2.5% on a constant currency basis behind a continued soft macro environment in Mexico. While we are continuing to gain market share, the economy continues to experience slower economic growth. We expect our sales to reaccelerate as Mexico's economy improves, as we continue to invest in stores and distribution centers. Today, we have almost 14% of our total store base outside of the U.S., and we expect this number to grow as we continue our international store build out. In summary, we have continued to invest capital in driving traffic and sales growth. While there will always be tailwinds and headwinds in any quarter's results, what has been consistent is our focus on driving sustainable, long-term results. We continue to invest in improving product assortments in our stores and improving efficiency in our supply chain, which positions us well for the future. We are investing both CapEx and operating expense to capitalize on these opportunities. This year, we are investing nearly $1.6 billion in CapEx to drive our strategic growth priorities, and we expect to invest a similar amount next year. The majority of these investments will be in accelerated store growth, including hubs and Mega Hubs, placing more inventory closer to our customers. We will continue to invest in our supply chain. Our new Brazil distribution center opened and began servicing stores in Mexico. I am sorry, in December. Our new and much larger DC in Monterrey will be fully operational soon. We will also focus on optimizing our new distribution centers in the U.S. We are in the final stages of our Supply Chain 2030 project, which began in 2019. All while continuing to invest in technology to improve customer service and our AutoZoners' ability to deliver on our promise of Wow customer service. This is the right time to invest in our business, and we believe industry demand will continue to be strong, and we continue to manage our investments with an expectation to achieve strong returns on invested capital. And we will monitor returns carefully to make sure that we are achieving on or exceeding our expectations. Now I will turn the call over to Jamere Jackson. Jamere Jackson: Thanks, Phil. Good morning, everyone. Our operating results remained strong for the quarter and were highlighted by solid top line revenue. Total sales were $4.3 billion and were up 8.1% versus Q2 of last year. Our domestic same store sales grew 3.4%, and our international comp was up 2.5% on a constant currency basis. Total company EBIT was down 1.2%, and our EPS was down 2.3%. As Phil stated earlier, excluding our non-cash $59 million LIFO charge, EBIT would have grown 7.2% and EPS would have been up 7.1%. Foreign exchange rates positively impacted our results for the quarter. For Mexico, the peso strengthened versus last year's Q2 over 12% versus the U.S. dollar, resulting in a $74 million tailwind to sales, a $23 million tailwind to EBIT, and a $0.95 a share benefit to EPS versus the prior year. We continue to be proud of our results as the efforts of our AutoZoners in our stores and distribution centers have enabled us to continue to grow our business. Let me take a few moments to elaborate on the specifics in our P&L for Q2. First, I will start with a little more color on sales and our growth starting with our domestic commercial business for the quarter. Our domestic DIFM sales were $1.2 billion, up 9.8%. Our domestic commercial sales represented just over 32% of our domestic auto parts sales, and 27% of our total company sales. Our average weekly sales per program were $15,400, up 4.8% versus last year. This quarter, we opened 128 net new programs, including nearly 80 programs in existing stores, which dampened our sales per program growth but will accelerate our total growth moving forward. We finished with 6,310 total programs, and we now have our commercial program in 94% of our domestic stores. Our commercial acceleration initiatives continue to deliver strong results as we grow share by winning new business and increasing our share of wallet with existing customers. We are building our business with national, regional, and local accounts, and we plan to aggressively pursue growing our share of wallet with existing customers while also adding new customers. Mega Hub stores remain a key component of our current and future commercial growth. We opened five Mega Hubs and finished the quarter with 142 Mega Hub stores. We continue to expect to open approximately 30 Mega Hub locations over the fiscal year as our pipeline is exceptionally strong. As a reminder, our Mega Hubs typically carry over 100,000 SKUs and drive a tremendous sales lift inside the store box as well as serve as an expanded assortment source for other stores. The expansion of coverage and parts availability continues to deliver a meaningful sales lift to both our commercial and DIY business. These larger stores give our customers access to thousands of additional parts across the market. While I mentioned a moment ago that our average commercial weekly sales per program grew 4.8%, 142 Mega Hubs continue to drive growth at an even faster clip. We continue to target having approximately 300 Mega Hubs at full build-out. Our customers are excited by our commercial offering as we deploy more parts in local markets closer to the customer, improving our service levels for the quarter. On the domestic retail side of our business, our DIY comp was up 1.5%. Our DIY share has remained strong behind our growth initiatives. We are well positioned for future growth. Importantly, the market is experiencing a growing and aging car park and a challenging new and used car sales market for our customers, which continues to provide a tailwind for our business. These dynamics, ticket growth, growth initiatives, and macro car park tailwinds, we believe, continue to drive a resilient DIY business environment for the remainder of FY '26. Now I will say a few words regarding our international business. We continue to be pleased with the progress we are making in our international markets. During the quarter, we opened 18 new stores in Mexico to finish with 913 stores, and three new stores in Brazil, ending with 152. Our same store sales grew 2.5% on a constant currency basis and 17.1% on an unadjusted basis. While sales growth has slowed over the last few quarters in Mexico due to slower economic growth in the country, we have continued to grow share, and we are well positioned when the economy improves. We remain committed to investing in international expansion, and we are pleased with our results in these markets as we accelerate the store opening pace. As we look ahead, we are bullish on international being an attractive and meaningful contributor to AutoZone, Inc.'s future sales and operating profit growth. Now let me spend a few minutes on the rest of the P&L and gross margins. For the quarter, our gross margin was 52.5%, down 137 basis points versus last year. Excluding the LIFO comparison, we were slightly positive year over year on a gross margin basis, which met our expectations as we offset a significant rate headwind from the mix shift to a faster-growing commercial business. We continue to anticipate benefits from merchandise margins next quarter as well that should help offset the rate headwind of accelerated commercial growth. And a year-to-date total of $157 million. As I mentioned, we had a $59 million non-cash LIFO charge in Q2. We are planning a LIFO charge of approximately $60 million each of the remaining two quarters of fiscal 2026 as we are continuing to experience higher costs due to tariffs that are impacting our LIFO layers. $277 million in LIFO charges that we expect this year compared to $64 million last year. Moving on to operating expenses. Our expenses were up 8.7% versus Q2 last year as SG&A as a percentage of sales deleveraged 18 basis points, driven by investments to support our growth initiatives. On a per store basis, our SG&A was up 3.9% compared to the prior quarter's 5.8% increase as we managed our SG&A per store lower as sales softened in the middle of the quarter. We expect to continue to increase our new store opening pace through 2028 when we reach a total of 500 stores opened annually. For Q3, we expect to open 90 to 95 stores globally versus 84 last year. And for the full year, we expect to open 350 to 360 stores versus 304 net new stores opened in FY 2025. We have been purposefully investing in SG&A in order to capitalize on opportunities to grow our business now and in the near future. These investments will also pay dividends in customer experience, speed of delivery, and productivity, all of which will help us grow market share. We remain committed to being disciplined with our SG&A growth, and as the accelerated new stores mature, we will manage expenses in line with sales growth over time. Moving to the rest of the P&L. EBIT for the quarter was $698 million, down 1.2% versus the prior year. As I previously mentioned, a non-cash LIFO charge reduced our EBIT by $59 million. Adjusting for the unfavorable LIFO comparison, our EBIT would have been up 7.2% versus the prior year. Interest expense for the quarter was $107 million, down 1.0% from a year ago, as our debt outstanding at the end of the quarter was approximately $8.9 billion versus $9.1 billion a year ago. We are planning interest in the $112 million range for the third quarter of FY '26 versus $111 million last year. For the quarter, our tax rate was 20.7%, up from last year's second quarter of 18.4%. This quarter's tax rate benefited 213 basis points from stock options exercised, while last year it benefited 239 basis points. For the third quarter of FY '26, we suggest investors model us at approximately 22.9%. Moving to net income and EPS. Net income for the quarter was $469 million, down 3.9% versus last year. Our diluted share count of 17 million was 1.6% lower than last year's second quarter. The combination of lower net income and lower share count drove earnings per share for the quarter to $27.63, down 2.3% versus last year's Q2. As a reminder, LIFO drove our EPS down $2.66 a share. Now let me talk about our free cash flow. For the second quarter, we generated $15 million in free cash flow versus $291 million in Q2 last year. Year to date, we have generated $645 million in free cash flow versus $856 million last year. The lower free cash generated is due to CapEx and payables timing. Going forward, we expect to continue being an incredibly strong cash flow generator, and we remain committed to returning meaningful amounts of cash to our shareholders. Regarding our balance sheet, our liquidity position remains very strong, and our leverage ratio finished at just over 2.5 times EBITDAR. Our inventory per store was up 8.1% versus Q2 last year, while total inventory increased 13.1% over the same period last year, driven by new stores, additional inventory investment to support our growth initiatives, and inflation. Net inventory, defined as merchandise inventories less accounts payable on a per store basis, was a negative $105,000 versus a negative $161,000 last year, and negative $145,000 last quarter. As a result, accounts payable as a percent of inventory finished the quarter at 110.9% versus last year's Q2 at 118.2%. Lastly, I will spend a moment on capital allocation and our share repurchase program. We repurchased $311 million of AutoZone, Inc. stock in the quarter, and at quarter end, we had $1.4 billion remaining under our share buyback authorization. Our ongoing strong earnings, balance sheet, and powerful free cash generation allow us to return a significant amount of cash to our shareholders through our buyback program. We bought back over 100% of the then-outstanding shares of stock since our buyback inception in 1998 while investing in our existing assets and growing our business. We remain committed to this disciplined capital allocation approach that will enable us to invest in the business and return meaningful amounts of cash to shareholders. So to wrap up, we remain committed to driving long-term shareholder value by investing in our growth initiatives, driving robust earnings and cash, and returning excess cash to our shareholders. Our strategy continues to work as we remain focused on gaining market share and improving our competitive positioning in a disciplined way. As we look forward to the back half of our FY '26, we are bullish on our growth prospects behind a resilient DIY business, a solid international business, and a domestic commercial business that is growing share in a meaningful way. We continue to have tremendous confidence in our ability to drive significant and ongoing value for our shareholders. Before handing the call back to Phil, I want to remind you that we report revenue comps on a constant currency basis to reflect our operating performance. We generally do not take on transactional risks, so our results primarily reflect the translation impact for reporting purposes. As mentioned earlier, in the quarter, foreign currency resulted in a tailwind to revenue and EPS. If current spot rates held for Q3, then we expect an approximate $75 million benefit to revenue, a $20 million benefit to EBIT, and a $0.85 a share benefit to EPS. Lastly, in Q3, we expect LIFO to reduce EBIT by approximately $60 million, impact our gross margin rate by approximately 125 basis points, and our EPS by approximately $2.75 a share. Operator: And now I will turn it back to Phil. Philip Daniele: Thank you, Jamere. To wrap up this morning, I want to stress that we are on track for delivering on our objectives for the remainder of fiscal 2026. While we have much more to accomplish this fiscal year, we remain committed to flawless execution and appropriately spending our capital to drive growth and efficiency. We feel we are well positioned to grow both our domestic DIY sales and domestic commercial sales. We also feel that our international same store sales on a constant currency basis will improve, but we remain cautious as the Mexico consumer remains under pressure. We also expect to manage our gross margin effectively while growing our operating expenses in line with our accelerated store opening assumptions. Finally, I want to reiterate that we are putting our capital to work where it will have the biggest impact on sales: our stores, our distribution centers, and investing in technology to build a differentiated and superior customer experience. We will make sure that the capital we deploy produces strong returns. The stores we have opened over the last five years have exceeded the planned sales and earnings we modeled when these sites were approved. The focus areas for FY '26 will remain growing share in our domestic DIY and commercial business and accelerating international top line growth. We do understand that we cannot take things for granted. We must remain laser-focused on customer service, execution, and gaining share in every market in which we operate. We are excited about what we can accomplish over the remainder of the year, and our AutoZoners are motivated to deliver on those commitments. We believe AutoZone, Inc.'s best days are ahead of us. Now we would like to open the call for questions. Operator: Thank you. At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. And we do ask that you try to limit your questions to two in the interest of time. One moment, please. Thank you. Our first question today is coming from Bret Jordan with Jefferies. Hey. Good morning, guys. Good morning. Good morning, Bret. Could you talk a bit more about your same SKU inflation Bret Jordan: expectation? I think you said it would be with you mid-single-digit going forward, so maybe the rest of the fiscal year. But when you think about the second half of the calendar year, do you anticipate continued same SKU price benefit? Philip Daniele: Yeah. We believe that it will continue to increase over the third quarter and through most of the fourth quarter, and then the fourth quarter is when we will start annualizing those higher rates from last year. But we still see same SKU inflation, you know, kind of similar through third, and maybe slightly tailing off through, you know, the back half of what you said, calendar year. Which would be most of our fiscal year, which ends in, you know, late August, as you know. Jamere Jackson: Yeah. I think a couple of drivers there, Bret, is, you know, there are, you know, lots of discussion about what is going to happen with tariffs and, you know, obviously, the IEPA tariffs have been stayed at this point. That was a relatively small portion of our tariff bill, if you will. Most of our tariffs are the 232 tariffs. So we are still expecting to see tariff impact as we move through the back half of the year. I think the other dynamic is that, you know, we have talked about this notion of having, you know, a multipronged strategy here where we would, you know, continue to negotiate with our vendors, we diversify our sources, and then in some cases, we will raise our retails. All of the costs that we have seen so far from tariffs have not made its way through the system, which is why, as Phil mentioned, you know, we are expecting tickets to continue to be elevated through the third and the fourth quarters. Just wanted to give a little bit of color on why that expectation is where it is. Bret Jordan: Okay. Great. And I guess early days here, but a lot of talk about expectations around tax refunds this year. Are you seeing any signs of incremental traction and, I guess, sort of a similar theme, the weather that we have seen here in the last six or eight weeks, I guess what is your near-term outlook on demand creation from that would sort of seem like undercar, some of the seasonal categories might see some benefit? Philip Daniele: Yeah. I think if you kind of look across the Midwest, the, you know, the Mid-Atlantic, and the Northeast, what we have kind of affectionately called the Rust Belt markets for us. This type of weather that we have had in those markets for winter have always indicated a pretty strong category performance on those markets as you move through spring and summer selling season. So exactly those categories you talked about. Undercar will probably have some improved sales in those markets. Chassis, steering, suspension, anything that is open to the bottom of the car to get rust and salt on it. Those are going to drive maintenance and failure events over the summertime. So we are pretty encouraged by that. Tax refunds, I mean, it is, as you said, early on. That tax season is just now beginning. And, you know, as has been stated in the news, we expect those to be slightly bigger, based on no tax on tips and all that sort of stuff that has been talked about pretty widely in the news. So we think that also bodes pretty well for us through the early part of spring and into early summer. Bret Jordan: Great. Thank you very much. Operator: Thank you. Thank you. Our next question is coming from Christopher Horvers with JPMorgan. Your line is live. Thanks. Good morning, guys. So Christopher Horvers: wanted to follow up a bit on Bret's question. So first, distilling through all the noise of the puts and takes of weather, both good and bad, including, you know, that widespread hit in late January and early February, what do you think the right underlying run rate of your domestic businesses is? And can you also talk about that on the commercial side? I think, you know, people are pretty attuned to the deceleration below 10% on a total DIFM basis. Philip Daniele: Yeah. And, you know, as I talked about in our prepared remarks, you know, we were kind of running on the previous 10 weeks or so in the quarter. We were up in that 12% range. And then those last two weeks of the quarter were pretty substantially lower, at a 1% comp. So, you know, the quarter was kind of running along at that better-than-double-digit number, and then the last two weeks were pretty significantly impacted. And, again, it was a pretty wide area that stores got impacted going all the way from Dallas, Little Rock, Oklahoma City, all the way across, you know, here in Memphis, Nashville, Louisville, all the way to D.C. had a pretty big impact, pretty significant ice, you know, initially during that time frame. And as you went a little further south, you ended up, you know, I will give you an anecdotal example, most of the schools in Tennessee and Arkansas were shut down for two weeks. I mean, people were pretty much locked in their house for a time frame. So that was a temporary impact. It was late in the quarter to recover it, but, you know, we see nothing that indicates that we are not going to have pretty strong sales growth on the commercial side of the business. Jamere Jackson: Going forward. Yeah. I mean, you think about it, or think about it. You know, the first quarter results, we expected our second quarter to perform pretty similarly. Excluding sort of the severe weather and the prolonged impacts on both our DIY and commercial business, we would have, you know, printed a number in the second quarter very, very similar to that. I think what is important to us is that our DIY business continues to remain resilient, and our commercial business has sort of snapped back. So the results that we saw in the first quarter, you know, we see us performing somewhere in that ZIP code as we move forward. Christopher Horvers: And then, you know, Phil, to your previous comments about typical lag of a benefit to the business off a cold and snowy winter. As you think about that benefit, historically, does the business accelerate from that recent trend because of that? And as you think about sequential growth of inflation into the third quarter here, what would hold back the business from not accelerating from what sounds like something in the 4% baseline? Thank you. Philip Daniele: Yeah. I do not, again, I think the tailwinds that you get from the tougher winter weather in those markets that are impacted, we believe those would be a net positive in the go forward. Now as we move through summer, there is, you know, the other side of the weather equation that we have to have is a normal to hot summer, which we are expecting to have at least a normal summer at this point. So I think all of those are benefits. And, you know, as we said, we expect a slightly larger tax refund season. It will be, we will have to wait and see how that ultimately pans out, but I think those are positive trends for us as we move forward. Christopher Horvers: Thanks so much. Have a great spring. Jamere Jackson: Thank you. Operator: Is coming from Steven Zaccone with Citi. Your line is live. Hey. Good morning. Thanks very much for taking my question. I wanted to ask a question on Steven Zaccone: pricing on a different way. When we get to peak pricing, how do you think about elasticity of transactions? On the other side? The industry does not typically see deflation, but just help us under your expectations for elasticity of transactions once pricing growth starts to moderate. Philip Daniele: Yeah. I think we kind of think about the business in three different discrete buckets of types of product. You have got, you know, discretionary product. That business has been pretty tough, although it is slightly better than it has been over, since the pandemic, frankly. Slightly better. But those are probably the more elastic or inelastic categories. Maintenance has a tendency to, sometime be in a higher elevated average ticket growth. You will get some delayed maintenance. Typically, the customer understands that if I delay maintenance, I end up with a failure going forward. And if the part is a failure mode, ultimately, you have to replace it. So there is not a whole lot of, it is break-fix. And that has not really changed over a very, very long period of time. So discretionary gets impacted the most. We would expect, you know, as you get further out from inflationary items in the average ticket, that that business probably recovers a little bit. It is a relatively small percentage of our total overall volume. Most of our business is break-fix, failure, and maintenance business, and those will continue to be pretty strong for us, we believe. Steven Zaccone: Okay. Thanks for that. My follow-up question on the topic of investments in general. You have been on this journey to increase your hub count, grow SG&A spending. How would you assess where we are in the investment cycle? What inning are we in? How do we think about the pace of some of these investments as we go through the next couple of quarters? Jamere Jackson: I would say we are in the middle innings. You know, one of the things we highlighted was that we expect to, by FY '28, to grow our domestic store count by 300 stores a year. And, you know, we are going to continue to ramp there. That means an incremental 40 to 50 stores next year, and then the following fiscal year. So we are kind of in the middle innings of that ramp. What I will say is that our pipeline is very strong, and the stores are ahead of our pro forma in terms of our performance. So we like the, you know, we like the progress that we have made. We like the sales growth that we are seeing. We like the market share gains that we are getting from that. It has put some pressure on our SG&A as we have been very transparent about, probably to the tune of 1.5 to 2 points. But, you know, we are managing the rest of the SG&A in a very disciplined way. So, you know, as we move through, you know, I expect this to result in a, you know, a faster-growing top line business and a faster-growing EBIT business as a result of it. Operator: Understood. Thanks for the detail. Jamere Jackson: Thank you. Operator: Thank you. Our next question is coming from Zachary Fadem with Wells Fargo. Your line is live. Zachary Fadem: Hey. Good morning. First, to clarify, it sounds like weather was about a 1 to 1.5 hit to comp in Q2. Just want to make sure that is right. And then second, when you look at DIY traffic or volumes down about 3.5%, similar in Q1 and Q2, how much of this would you categorize as deferred maintenance? And how should we think about the path and time frame towards getting those volumes back? Philip Daniele: Yeah. Great. So I think your estimation on what the impact was is kind of right on target of how it impacted the very end of our Q2. As far as, you know, deferred maintenance and that sort of thing, it is always a little bit hard to tell. But we feel like those will accelerate coming into the second half of our year. You know, on the backs of, like we have already said, some of this tax time should, generally speaking, when you get more tax money, or money in the marketplace, customer will reinvest in the car, and they will tackle some of those bigger failure projects. And we believe that that is going to continue into the second half of the year. Zachary Fadem: Got it. And then, Jamere, it sounds like the SG&A spend is peaking to some extent and should moderate a touch from here. And I think we do, at this point, all have a good sense of what that level spend will be, both in terms of investing in SG&A in new stores. But perhaps you could spend some time talking about the size of the prize in terms of expected returns and payback on these investments? And is it fair to say we would see outsized top line and EBIT growth as soon as 2027. Jamere Jackson: Yeah. That is certainly our expectation that you will start to see these stores mature and that you will see our top line growth accelerate in FY 2027 and FY 2028. So in terms of size of the prize, you know, in addition to seeing a faster-growing business, you know, you are also going to see a business that has very healthy, you know, returns on invested capital. You know, we model these stores in a very disciplined way even though we are very conservative. And they get to sort of the targeted returns on invested capital in a very, very short period of time. I mean, most of these stores will mature in the four- to five-year kind of time frame. What I will suggest is that Mega Hubs have been, you know, improving their performance over time and are actually doing better, significantly better than what we had modeled. So we feel pretty good about it. And, again, we are very disciplined on making sure that we are driving the returns on invested capital associated with this strategy. And so you will have a faster-growing business, you know, that has, you know, faster-growing EBIT growth as a result of that. But very good returns on invested capital. Zachary Fadem: Thanks for the time. Operator: Great. Thank you. Our next question is coming from Simeon Gutman with Morgan Stanley. Your line is live. Simeon Gutman: Good morning, everyone. My question is morning. There was a comment made in the prepared remarks, growing market share in a disciplined manner. There has been talk about growing EBIT faster. Can you phrase it in terms of margins? Can the margins of the business re-expand? Or should we think about it in terms of EBIT dollar growth? Philip Daniele: Yes. Good question. I will say, you know, we kind of think about how we manage margin rate on the two sides of the business. What I would say is I think we can incrementally grow both of them. You know, you start at the highest level of margin, gross margin rate, both on DIY, we have slight margin improvement, and we think we can improve gross margin in the commercial side of the business over time as well. Now we still believe that we are going to grow commercial faster than DIY, so you will end up with some margin mix pressure. But we are okay with that because at the end of the day, that commercial business throws off a pretty good amount of operating profit and EBIT. So there will be a little bit of top line margin pressure because of mix, but overall, to Jamere's point, we will have a faster-growing EBIT business as these stores mature and as we move forward. We believe we are growing share on both DIY and commercial, and in our international markets. So all of those are, we believe, very, very healthy for us. Jamere Jackson: Yeah. I mean, if you think about, you know, the way that we have sort of managed the business historically, I mean, in that 18% to 19% sort of operating margin range, we will operate the business in that ZIP code as we move forward. Again, nothing has changed about the way that we think about the operating margin profile of the business. We will have the mix pressure, but one of the things that we have done pretty consistently, and you have seen it the last couple of quarters, is we continue to manage, you know, gross margins with intensity and, you know, for example, this past quarter, we had about 27 basis points of rate pressure purely from our commercial mix. And our merchants and our supply chain have done a really good job of sort of offsetting that and keeping gross margins flat year over year. So that is the kind of operating discipline we have in the company. And as you think about, you know, the business in the future, it is, you know, similar operating margin rates with a faster top line growth. Simeon Gutman: And I guess to zoom in on the mechanics of that, I realized you do not give a lot of guidance points, but the comp rate of this business that was prevailing that you should grow faster from, is it fair that 3% to 4% is the baseline that you are hoping to grow faster than? I know you have not endorsed a specific number. I do not know if that is a fair baseline to think you are going to grow faster than. It does sound like it is the SG&A tapering will enable EBIT to grow faster, given what Phil said around the margin pressure of mix coming from commercial? Jamere Jackson: Well, I think you have two dynamics, Simeon. One is, you know, we are clearly adding more stores at a faster clip. As those stores mature, you are going to see that, you know, have some lift to the comp rate overall. So that is, you know, part of the calculus there. And then from an SG&A standpoint, I mean, we will be back to, you know, managing SG&A where we have historically. So, you know, that is what gives us the confidence that, you know, even with a faster-growing commercial business, which is, you know, part of that equation for a faster comp rate, you know, we can keep the operating margins, you know, close to where they have been historically. Operator: Our next question is coming from Michael Lasser with UBS. Your line is live. Michael Lasser: Good morning. Thank you so much for taking my question. Given the slowdown in the commercial business attributed to the weather, do not these jobs still get done? And would not that imply the commercial business should have accelerated as meaningfully as the weather improved and if not, does that suggest anything about where AutoZone, Inc. sits on the call list? Meaning, in these times where volumes are more constrained, these commercial customers focus their supplier relationships, outsized volatility on the top call, and that can contribute to in the commercial business for AutoZone, Inc.? Philip Daniele: No. Michael. I do not think so. I think the impact of the slowing at the end of our quarter was just literally that at the very end of our quarter. Those shops were closed for the most part and did not open. And it was, again, right at the very end of the quarter. We have seen a pretty nice snapback. We are very early in our quarter of Q3. I think what has been true over time is we continue to gain share on the commercial side of the business on the backs of our strategies. Putting more assortment closer to the customer through megs and Mega Hubs and hubs, continually improving our same, our satellite store assortments, and working on strategies that make us easier to do business with and getting those hard-to-find parts faster to those customer shops. We think we are executing very well at that. And we think we have a strategy that will continue to only get better, which is, as we drop these hubs and Mega Hubs, we continue to gain market share, and they also help the satellite stores perform better on commercial. Oh, by the way, we do not talk much about it, but those same Mega Hubs and hubs put that same product closer to the DIY customer as well. So we think we gain over that. Again, I think the impact in the last four weeks was just that. And you will see that we have seen that business recover already. As those shops opened up, we think over time, we continue to move up the call list. Again, we are gaining with both new customers and share of wallet in what we call up and down the street, and in traditionals and national accounts. So we are gaining in all of those segments, and we like how healthy that commercial business is. Michael Lasser: Thank you for that. My follow-up question is there was anything unique about the operating expense performance in the second quarter, meaning maybe you anticipated this slowdown in sales, so you pulled back on some operating expenses, such that it is going to significantly accelerate from here. And as part of that, if you do see this potential improvement in comps over the next couple of quarters given all the factors that have been discussed today, would you lean in and accelerate some of your investments such that operating expense growth will revert back to this high double-digit rate that was experienced last quarter? Thank you so much. Jamere Jackson: Yeah. We do not expect to go back to double-digit rates over the back half of the year. Again, the big driver there is we are starting to annualize the accelerated store growth that we had in the back half of last year. So we naturally would have expected the year-over-year growth from an SG&A standpoint to moderate some in the back half. And in terms of the past quarter, there was nothing that we, you know, did that was different from the way that we have always operated the business. We have always sort of, you know, monitored, you know, the way that we manage our payroll with, you know, what we see in terms of transactions. And, obviously, with the severe weather, we had some store closures for, you know, several days, and we had, you know, reduced hours in some instances and fewer transactions. So we just managed the payroll with discipline, but we did not do anything that was outside of the way that we normally operate the business. And then as, you know, as our comps, you know, continue to accelerate, we make sure that we have got the right level of payroll in, and we, you know, continue to manage the business so that we are providing Wow customer service. So we did not toggle anything in terms of investments, and we are not going to toggle any of the investment cadence in the back half of the year. Philip Daniele: And most of these investments that we are talking about, particularly store growth and DCs, and I would say most of the distribution and supply chain investments, we are over the majority of those, you know, the DC openings and that sort of stuff. But the stores, it is hard to accelerate a store. They are going to open when they are going to open. We, you know, we put the staffs in, get those folks trained before those stores opening. It is hard to move them forward by, you know, 60 days or 90 days just because of the construction schedule. So we will continue to monitor that. But I think what was notable about Q2 is as we had some changes in our individual week-on-week comps, our operators are really good at being able to manage that business based on the flow of customers. That discipline, we are very good at it. We have been good at it for a long time, and we continue to be good at it. We do not expect that to change. Operator: Thank you. Thank you. Thank you. Our next question is coming from Scott Ciccarelli with Truist. Your line is live. Scott Ciccarelli: Good morning, guys. Two questions. Morning, Scott. First, still a little bit confused on the cadence differences between DIY and commercial. Like, why was DIY's low point the middle four weeks, if I wrote that down right? And commercial's low point was the last four weeks? And then secondly, as you guys continue to expand Mega Hubs, your Mega Hub strategy and get more experience there, can you help quantify the sales lift you are seeing in stores in a market where you open a Mega Hub? Thanks. Philip Daniele: Yeah. Sure. We will talk a little bit about—let me answer the first question. On the cadence of DIY versus commercial. The middle part of the middle segment of Q2 last year, you had a pretty significant cold weather event in that middle segment. So it created a tougher comp for those four weeks. Last year, you had some pretty extreme cold, which drove a lot of battery sales and cold weather product last year. So that created a bit of a comp differential this year. That cold weather did not happen in the middle four-week segment. It happened in the last four-week segment. Now the mix of those two—so even though the commercial business was a little bit stronger in that second four-week segment, and we capitalized on that. DIY was soft. Commercial was better. The last four-week segment got the cold weather event which helped DIY, but it hurt the commercial business because we had shops that were closed for so long. So I would say we performed kind of as you would expect from a two-year comp basis. But that specific cold weather comp in the Midwest and the Northeast last year created a comp challenge for us, which was slightly negative on DIY. Scott Ciccarelli: Got it. And then the question on the Mega Hub, just kind of what kind of halo effect are you guys seeing when you guys open a Mega Hub? And has that changed as you guys continue to expand that strategy? Thank you. Philip Daniele: Well, yeah, we have never really quantified how much we think those things lift in total. Well, I will tell you this. We have been opening and working on our strategies for hubs and Mega Hubs for quite some time now. And, you know, going back several years, I could go back and tell you we thought we knew how high was high back eight to ten years ago with our strategies. We continue to perform different strategies and execution of tactics around how we deploy inventory to those stores, how we energize the inventory in a given market. You have heard us talk about doing density tests with more Mega Hubs in metro areas. And we continue to optimize and figure out way more ways to make those stores more productive for us. Specifically for commercial, but also on DIY. And we have yet to say we have reached peak performance at our hubs and Mega Hubs. So we like how they perform. They help us, again, on the commercial side, those hard-to-find parts. They help us, our per store four-wall performance, which is how we look at those hubs and Mega Hubs, continues to improve, and they continue to give a halo for the entire satellite network around them that they service. So we like the Mega Hubs and hubs, which is why you hear us keep taking those numbers up. You know, from several years ago from 40 to 100 stores, to 150, to 200, and now we believe we will have more than 300 at full build-out. Scott Ciccarelli: Got it. Thanks, guys. Philip Daniele: Those are great performing assets for us. Thank you for the question. Operator: Thank you. Our next question is coming from Steven Forbes with Guggenheim. Your line is live. Steven Forbes: Good morning, Phil, Jamere. Maybe just a follow-up question on the domestic comp average ticket trends or, I guess, same SKU inflation trends versus the DIY. What explains the difference in the quarter with DIY being six and DIFM being sub five? I guess, specifically, just trying to figure out if there are any pockets of competitive pricing pressure or if it is sort of mix-oriented as it pertains to national versus up and down the street. Philip Daniele: Yeah. It is almost all category mix. You know, in the winter events and things of that nature, it drives battery sales, starters, alternators, etcetera. It is the difference in category mix between the two channels. And even the category mix that you get in terms of timing of year, if that makes sense. So that is really what drives that. Steven Forbes: That is good to hear. And then just a follow-up on DIFM comp transactions. I do not know if you could specifically state what it was during the second quarter. It looks around two, maybe slightly over 2%. And more specifically, like, what was the difference between the first eight weeks from a DIFM comp transaction base versus those latter, those last four weeks? Philip Daniele: Yeah. The last four weeks, I mean, it was literally the last two weeks that drove the vast majority of the change, was the closings of stores and closings of commercial accounts. Many of them were closed for more than two weeks. And, you know, we kind of had a rolling 400 stores, if you will, starting in kind of west as that storm moved across from Texas all the way to D.C. It was kind of a rolling 200 to 400 stores depending on the day that were closed. And then those commercial accounts stayed closed much longer than that. So that was really what drove that change. Again, 10 weeks of the quarter in commercial were, you know, plus 12 or better. Those last two weeks were a 1. And I would tell you that, you know, later in even the last couple of days, that started to recover the quarter, and it has been back to normal as we would have expected in the very early goings of what is our Q3. Steven Forbes: So I guess just to clarify that, if we look at the last sort of the last 12 months before this quarter, domestic traffic comps were sort of 6% or so, 6%, 7%. That is the right way to think about the business on a go-forward basis? There is nothing that sort of changes the view on the building blocks and comp to get to that sort of 4-plus percent domestic comp profile? Philip Daniele: Yeah, I think you are thinking about that right. Steven Forbes: Yes. Operator: Thank you. Philip Daniele: Thank you. Steven Forbes: Okay. Well, Philip Daniele: as we conclude the call, I want to take a moment to reiterate that we believe that our industry remains strong and our strategies for growth are working. We are excited about our growth prospects for the back half of the year, but we will take nothing for granted as we understand that our customers have alternatives. We have exciting plans that will help us succeed in the future, but I want to stress that this is a marathon and not a sprint. We remain focused on delivering flawless execution and striving to optimize shareholder value for the future. We are confident AutoZone, Inc. will be successful. Thank you for participating in today's call. Operator: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.