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Jacques Sanche: So very good. We're still 1 minute early. So as a good Swiss company, we'll still wait for a minute, maybe less. There we are. It is 2:00. Thank you very much for joining us here in the room, first of all, and for those of you who are at the screen, thank you very much for joining us at least online. I know the weather outside is very, very tempting, but I hope we have some good news that will be interesting for you as well. It is a hybrid presentation. So in other words, we have people watching us, and it is being recorded, and it will be available on our website later. If you have questions, I will first address the questions that are here in the room. And then afterwards, I will address the questions which are online. You will have to raise your electronic hand so that we can see who has a question but that we do during the Q&A session. Today, with me are -- let me see if I can work out the electronics here. There we are. So as usual, Manuela is going to join the presentation later and explain some financials. And then it's Matthias job as the future CEO, the CEO as of the General Assembly in April to give an outlook. If I try to summarize last year's results, what we can see is that the markets where we are active have stabilized overall. There is some recovery visible, especially in Europe. We see more demand also in the agricultural sector, which is good. We have 2 divisions that managed to grow their order intake, which is basically Kuhn Group and Bucher Hydraulics. Then the sales still fell if we compare it to 2024 based on the lower volume or lower order book that we had at the beginning of the year. And it was only Bucher Municipal as a division that managed to increase their sales year-over-year. The EBIT margin reflected the lower activity that we had in our facilities, the reduced volume, and we profited from the sale of a property here in Switzerland. So that compensated somewhat the situation, which is what is a very nice highlight is the strong cash flow that we generated last year, and that will then result into nice requests to the general assembly. And also a good result is the fact that we managed to reduce the CO2 emissions once again. So we look for the long term, then we can see that we have a very solid financial position. We are holding about CHF 500 million in net cash positions, and we have a high equity ratio of 66%. And we are proposing also for that reason, the continued dividend of CHF 11 at the general assembly despite the share buyback, which is almost accomplished now. And then finally, the last point, which is important, we have established a new management team, a new management team with Matthias being my successor, but also within the divisions with Bucher Municipal and Bucher Emhart Glass, we have 2 good, very capable successors. If I come to the numbers, then you can see that, that order intake I spoke before was a stronger focus on the European market that increased by about 7% year-over-year. And if I show you these numbers now, they're always corrected for exchange rate and for acquisitions. So these are really like-for-like numbers. So 7% on the order intake that went up. It was mainly Kuhn Group and Bucher Hydraulics that increased there, whereas the glass forming machinery business suffered most, but in aggregate, 7% up. The sales, however, still based on the lower order intake at the beginning of the year, declined by about 6% last year. It was only Bucher Municipal that managed to increase their sales. The good news, though, is that especially with the fourth quarter of last year, finally, we reached a stage where we were showing positive sales for the whole group again. If we look at profitability, then you can see the group's EBIT margin reached 9.7%. That is a bit higher than the 9% we had in 2024, but we did benefit from the sales of a property that we had here in Switzerland. We cleared that property and now we got it into the market, and that netted in a profit of CHF 43 million. Profitability otherwise was, of course, impacted by the lower volume that we had. And if we look at the cost elements, then we see that our personnel costs in percentage of sales had a tendency to go up despite measures that we took to reorganize or adjust capacities, especially in the United States. FTEs declined by about 4% year-over-year. In some areas, we had to reduce them, but there are other factories where we are already building our employee base again so that we can prepare to produce a higher output. Then we continue with some key elements, and that is, of course, the R&D cost. The R&D cost did not go down. We basically maintained almost CHF 140 million, not quite CHF 134 million in percentage of sales. It's where it should be, in my opinion, somewhere between 4% and 5%. The 4.6%, I think, is a good value. And we did continue to also invest into buildings, IT and of course, modern machinery. As you can see here, the CapEx did get reduced from about CHF 150 million, which was a high level, down to about not quite CHF 120 million. I can show you some examples. For the R&D side, what I'd like to show you is in the middle picture, the new tine cultivator that we introduced, especially for the European market. The tine cultivator is a tool that you use after the harvest. It really has the job of putting the residue or mixing the residue with the soil so that the decay can start happening. It's a natural way of kind of reducing the residue and getting back some fertilizer or some nutritions actually into the ground. We were very successful with that. That's one element. And we have a lot of other products that we, of course, introduced into the market. And what you can see is, of course, that tine cultivator, it's called the Highlander that is towed by a green tractor, the John Deere tractor. We -- it's a bit in the dark, but you would see otherwise hydraulic components and these components are from Bucher Hydraulics usually. And that is one of the reasons why we expanded our buildings in Frutigen, and that is the picture on the right side, where we are going to be delivering into a new generation of John Deere tractors, and we have created that capacity to do so. Another achievement that we made is we reduced our CO2 footprint by another 13% year-over-year. So we're down to 60,000 tonnes or 61,000 tonnes. When I started, it was 93,000 tonnes in 2021. So I think we are on a nice path to continuously bring it down. We invested into renewable energy that we brought. So the energy mix was better, but we also invested in solar cells. And then, of course, lower activity does help also to reduce the CO2. But all in all, in the last 4 years, we reduced 35%. I think that's a very good achievement. Every year, when you look at the annual report, we have kind of a topic. This year, our topic of the annual report was where do we create value for the society. And we just brought some examples that I would like to explain to you. I mean the first question would be, could you imagine a life without milk? Maybe the milk, yes, but can you imagine a life without cheese? The pizza without cheese? I mean, at Swiss, of course, we cannot imagine at all or the chocolate without milk or milk powder or a toast without butter? That is, of course, one of the elements where you suddenly notice how important milk is to our society, at least to the diet that we know. And that is this part of the story. And producing milk is very labor-intensive. So you need to take care of your cows on a regular basis every day. If you don't do that, of course, milk production goes down and eventually, they'll start complaining. So finding the labor that wants to work in the stable is the next challenge that the farmer has, especially in the milk industry or dairy industry. And we have developed this robot that goes out to fetch the silage, puts some other ingredients into the food stuff, then it mixes it. There's a mixer inside that robot and then it has a belt that feeds that food mix basically to the cows. And then on top of it, it has a brush because the cows start sweeping out the food mix too far away, they can reach it. The robot will then sweep it back right in front of the cow. And that machine does it all day long, just drives back and forth and keeps feeding the cows very, very regularly, like this the milk production is just optimum. And that is a machine that is pretty successful. It's getting installed in more and more places into dairy farms. We take another example that is probably very prominent today. As you can see, I mean, obviously, first of all, our sweepers have the job of cleaning the streets again when there's gravel on the road, maybe from the winter time or so old leaves. That is one job that has to do with safety. But of course, a clean city is something where people like to be. It attracts a good society. And then I think sweeping goes right beyond just having a clean road, but also providing comfort to the inhabitants of a city, such a sweeper can do about 25,000 square meters per hour. So it has to be high performing continuously. What we see more and more through these cities, we have electric buses. I think it makes a lot of sense. There's a lot less noise for electric buses. It's easy to kind of run them, and we had invested into a company about 5 years ago that produces these inverters. So with an electric bus basically have the battery available, now you have all kind of systems that need to be powered by electricity. That can be the steering that needs power steering, that can be the compressors that drive the dampening or the tilting of the bus for the -- when the passengers are entering. It can be something simple like air conditioning or the USB power plug that is available in the buses today. And we have these inverters that go into these buses. It is a successful business as such. So whenever you sit in electric bus, enjoy the quietness somewhere in the background, there are our inverters working. There is no doubt for us -- and it's also, I think, well depicted on the right side that glass is one of the best containers for liquids and for drinks. It is just the purest form about PET, a lot has been written, even aluminum cans, they have a plastic liner inside. It's not really aluminum that touches and it is just not quite as healthy as what glass can offer. So there, we are proud of producing almost -- or more than every second bottle in this world is produced on one of our machines, and that's really globally. So a lot of people sitting together enjoying the bottle of beer or eventually wine, they will be profiting from our glass machine. And then finally, apple juice is another beverage that people like very, very much. We have invested into a facility in Poland. About 3 years ago, they produced the containers where all this apple juice or the concentrate can be stored. We have the filters that go right in front of it, and we have the presses that is our origin that we sell to go with it. So basically, we have the full chain for apple juice production. And again, we see people enjoying it. Just some examples how Bucher is creating comfort and a better life for people in this world. I would like to continue now with some details on the divisions, and I'll start off with Kuhn Group. And of course, we have another nice product, which I cannot refrain from praising because we did get a medal for that at the Agritechnica show in Germany last year, and that is the GMD 15030 that's a disc mower and it has a reach of 14.5 meters. So it's driving along with some 20 kilometers an hour. It's cutting at 14.5 meters. It's highly efficient. But the specialty about it, of course, because you have such wings, you have to have them flexible because they have to adapt basically to the terrain. Otherwise, you would not be cutting the grass nicely. And then the other part that is interesting because at the end, he has to drive home. So we have to fold this together from 14.5 down to 3 meters in width and 4 meters in height. That's the allowable size that is available in European regulations, and it does so very, very well. If we look at farming last year, it's kind of a mixed picture. The picture that was a bit more pessimistic is on the left side, where you can see the grain prices. Down below it is more corn and wheat. And if you compare it year-over-year, you can see we were at a very low level for the farmers, particularly in the United States, and they were suffering. Income for farming was bad last year. You can also see the green line, that's the upper one on the left chart. And you can also see that dip, which is most likely the dip that happened when China decided not to buy any soybeans anymore from United States. That happened right around midyear because of the tariffs and then after a while, Trump renegotiated and then they started buying again. And these are all these elements that happened. But there's no doubt, crop production last year was a very difficult task and hardly profitable for the farmers and they're suffering. The milk price was better, dairy was actually a good business last year. In the United States, it started coming down. It continues, but it's still at a fair level in Europe, milk price is still at a good level. And one element that we don't depict here is meat price, livestock. That was at a very, very high level, and it remains there. And so these farmers are doing well, but the crop producers have problems. Here, you can see the farm income as it is projected by the USDA. And you can see 2025 wasn't really an improvement over 2024 and 2026 is expected to remain about the same. And these levels here are just not sustainable for farmers. Now the United States government has noticed it, and obviously, farmers are Trump fans. So they expect more subsidies to happen in 2026 or more to come, and they were more promised. Now 2025, there were some promise as well, but the problem is at the moment they had promised it, they had the government shutdown, so they didn't pay. So that delayed as well. So a challenging year for these crop producers overall, a bit less challenging in Europe. If we remember a year ago, we said that one of the biggest challenges that we had was that the dealers were overstocked. They had too much in their inventory. They were not selling quick enough, and it took a while for them to reduce that inventory to the level where they would start ordering again. And we have reached the level now. The dealers in Europe are at normal levels. They are ordering again the material that they need. The ones in the U.S. are getting there. They were -- that happened a bit slower over there. So that was one element why we see more revival in Europe happening. If I take some other areas, I mentioned the United States being challenging, Brazil, there, what we see is the subsidized credits that farmers can get from the Brazilian government are at interest rates that are not attractive for the farmers. So it is available the money, but they don't really want to use it because the interest rates are high. And at that moment, they're holding back with investments. That is basically the part. So all in all, Kuhn Group's order intake rose by impressive 20%, albeit from a rather low level. The order book reached 6 months of sales, which I think is a fair level. And sales, of course, still reflected the low order book of the beginning of the year and it fell by 7% year-over-year. So the lower utilization of our factories and sites led to an EBIT margin, which was on the low side for Kuhn at 7.1%. They were also having to pay tariffs. They were most impacted by the tariffs overall from our divisions. And then we had capacity adjustments also in the United States that needed to be done so that we can face the lower level of demand, at least over there. If I change over to Bucher Municipal, this is our latest baby in the line of compact sweepers. It's the smallest one, too, the VR17e is fully electric, 4-wheel steering, very, very maneuverable, is ideal, of course, for more pedestrian areas. What is interesting, it has actually a full drive-by-wire setting or electronics. And that is what we need. We want to do autonomous sweeping. So we need to have the controls and they will have to have a digital control or digital access to all these elements of the sweeper. And a matter of fact, it's in Duisburg, where we are testing the sweeper fully autonomous, no driver in it for now testing purposes, obviously, but with the intention eventually to come out with a product that can fulfill this requirement. Then if we look at Bucher Municipal, which I think is a very nice story. So the order intake, we had mentioned it came down a bit. Compact sweepers like the one before went pretty, pretty well. There was also momentum for the sewage cleaning side. Then the truck-mounted sweepers had a bit more trouble selling. Likewise, the winter equipment or refuse collections, they were a bit more under pressure. All in all, the order intake declined somewhat by 3.4% year-over-year, but at a solid level. The reach of our order book is 5 months, so that's still good. The sales remained high at about 3.4% above previous year, mainly driven by United States and Europe and less by Australia and Asia. So as a result of very solid sales, but also as a result of the restructuring and the continuous organization, the EBIT margin almost finally reached 9.4%, I think a very good value. I would continue to the next division, which is Bucher Hydraulics. This is a system integrator that we bought in Finland. There's quite some machinery being built in Finland. Forestry is one good example and then also defense or offshore marine. And this company was a good system integrator for all these applications. We're very happy that we could buy this team that produces solutions for these applications as mentioned, and it is doing actually pretty well. So I mentioned that we saw a little bit of a revival was hydraulics. It's a good sign. There were different applications, different regions that helped to do so, construction and started picking up again, agricultural machinery, also our tractor manufacturers are starting to come back to life, but there was also industrial hydraulics that was going upwards. There was mainly one application that was on its way down still, and that was material handling. That is the facility that we have over in the United States that was suffering. Then we look at the order book altogether, it decreased by 4%. And the sales, of course, were still an effect of that lower order book that we had at the beginning of the year, and that also decreased by about 4% altogether. So the lower capacity utilization did challenge us here and there. Then we also had some acquisition costs for -- also the new system integrator that I mentioned before. And we had to also open up a new facility in Mexico or in Malaysia, just to be closer to customers. And for that reason, our EBIT margin kind of sank by about not quite 1 percentage point to 10.1%. I will continue to the next division, which is Emhart Glass. There, we acquired a company that is active in the engineering of glass manufacturing plants, a complete specialist, but it is the first company that a glass customer would address when he has a new project in his mind, and that is one of the reasons why we like to have them. So they do all the engineering and the specification for the machinery that is required in the glass manufacturing plant. And of course, they will then also specify our machines in the future. It's good, but it also gives us an opportunity to sell more of the infrastructure that is needed to run our machines. So we will eventually expand that business beyond just glass forming. And then another side effect, which was very pleasant with the acquisition of this company, we also found a new member of our management team, and the successor for Matthias Kummerle. If we look at the overall results, then it is clear that our customers were suffering substantially last year. Glass consumption was still lower. Energy prices was a challenge for them. They were adjusting their capacities, closing older plants. And what we also see is alcoholic beverages, which is a driver for glass is coming down. The consumption of alcoholic beverages is coming down. So overall, there was less demand from our customers. Order intake went down as well for forming machines, but as well also for inspection machinery and altogether by 15.4%. The one element that stayed stable was, of course, service and spare parts that continues. There we continued with solid success. Sales were significantly lower also based on the order intake by 18%. The operating profit margin despite that reduction remained at very respectable 12.6%. We did adjust our production planning to that lower demand, and we did some activities as well. One of them is to shift the production from -- of inspection machinery from the United States over to Germany. That is Bucher Emhart Glass coming to Bucher Specials. There you can see presses. These presses are normally used to press apples and then produce apple juice. But there is a side application that we have been serving only halfway successful in the past that is pressing of sludge and the sludge, which comes basically from water purification plants. And we received a big order at the end of the year from Hong Kong. Hong Kong is reshuffling their sewage system, and they want to have these presses so that they can dry the sludge better than with current technologies. And we're going to be building them this year and then delivering them in 2017. They will be installed in caverns for Hong Kong sewage system. So maybe a breakthrough of a new technology. But Bucher Specials overall was challenged last year, especially the wine production was a very difficult topic. We see clearly that wine consumption is going down. That is one element. And then the markets where we are very strong in France suffered particularly because there were tariffs on their French wine. So there was less consumption in the United States. And almost everywhere in the world, they're reducing the vineyards, the surface of vineyards. European Union is actually paying money if you start reducing your vineyards. So that is going on, and that was very challenging for one of the units, which is called Bucher Vaslin. The other unit that does mainly juice production, which is Bucher Unipektin, apple juice, orange juice and also beer filtration, that was doing very well last year. And then we have the trading business for tractors here in Switzerland, Bucher Landtechnik that remained at the low prior year level but was solid. And then finally, the last unit of this Bucher Specials, which is the automation side, which has a high degree of internal customers, Emhart Glass being one of them and then Bucher Hydraulics being the other. That unit was also challenged just by lower demand and had to go through some restructuring. All in all, the order intake was stable, as you can see, but the sales did fall 9%. The profit margin improved somewhat from 2.3% to up to 3%, but still at a low level. That, in short, is the explanations to our divisions, and I'll hand over to Manuela to explain the very positive financial data. Manuela Suter: Thank you, Jacques, and good afternoon from my side. We talked a lot about the operating results. So now let's come to the net profit of the year. And in between, we have the net financial result and the income taxes. Net financial result, in our case, a positive number. The net financial result was driven by interest income and the result of short-term investments, mainly in Brazil. As a reminder, we have a substantial high net financial liquidity, and we are almost debt-free. The effective tax rate was slightly below 20%, slightly lower than expected, mainly due to special effects, the property gain was with a lower tax rate, and then we also benefited from R&D impact or R&D credits. So midterm, we still expect the tax rate to be in the range of 21%, 23%. The net working capital, it was a highlight. We could reduce net working capital significantly by CHF 180 million, mainly due to a reduction of inventory and higher customer prepayments at Kuhn Group from Europe or in Europe. Net working capital in percentage of net sales of 18.5% compared to 22.8% last year. This is a meaningful improvement year-on-year and shows our focus on the cash conversion. There is still some way to go. Over the last couple of years, our average was between 17% and 18%, and that's a number that we also would like to achieve over the next 2, 3 years. The reduction in average net operating assets is mainly attributable to the net working capital reduction. As we continue to invest in our production facilities, modernization, digitalization is a key topic and also ensures our long-term organic growth. The return as a result with 16.2% is still above our cost of capital of around 8%, but below our target over a cycle of 20% and includes the effect from the property gain is roughly 2.5 percentage points. Here on this graph, I would like to start right in the middle with our operating free cash flow, and it was clearly a highlight of 2025. The operating free cash flow of CHF 365 million exceeded the already high prior year, mainly due to the substantial reduction of net working capital here on this chart with CHF 130 million. And even without this impact, it's the highest operating free cash flow over the last 20 years of Bucher Industries. As a result, on the bottom, the free cash flow slightly above CHF 100 million. And in between, Jacques mentioned the acquisition that we did over the years. And then we have the dividend and treasury shares or the share buyback program with CHF 234 million. The impact is roughly half-half. So dividend payment around CHF 112 million and the rest is applied to the share buyback program. As a result of this strong free cash flow, we achieved a net cash position close to CHF 500 million in the middle. And we still have a comfortable equity ratio of 66%. And this solid financial position ensures our flexibility, but also our stability for the whole group and creates optimal conditions for our -- for the future growth. And when it comes to our capital allocation priorities, first, it's organic growth, investing in CapEx, innovation. So R&D is key also in the future. Second, is scan the market for acquisition opportunities to complement our businesses to generate future growth. And last, with such a strong balance sheet, it also allow us to continue to pursue a consistent dividend policy. And another nice chart over the years, over the last 10 years, we were able to increase our dividend per share. And the Board for the year 2025, the Board of Directors will propose a dividend of CHF 11 per share. This takes into account our results of 2025, including the property gain, the outlook 2026, future investments and also further the dividend policy or consistent dividend policy. Overall, we are also in the final stage of our share buyback program. Yesterday evening, we achieved close to 4%. We paid around CHF 150 million over the last year. It's a bit earlier than expected. So our Board will propose at the next AGM, the capital reduction this year. And before I hand over to Matthias, some nonfinancial numbers. The heart of our company is the people, and it's right in the middle, the employees. We still have around 14,000 employees of headcount around 400 trainees worldwide, 100 in Switzerland. So it's also key to further invest in skillful employees and in our training. So the average hours of training per regular employee also increased by 14%, has mainly to do with also the introduction of ERP programs and additional trainings. And other key target is to reduce the number of occupational accidents on the bottom. Here, we were able to reduce it by 13%. And within the group and the group management, we have a commitment to further reduce this number with a new target that we also introduced during 2025 to reduce our lost workday rate. So to summarize, for a sustainable value creation, it's important to work on both sides. On one hand, on the profitability. Our focus is to remain on actively managing the cost within business units with still lower capacity utilization. And at the same time, we are also well positioned to capitalize on those where we are seeing signs of market recovery. So profitability, managing costs. And on the other hand, our invested capital, it's our aim to return the net working capital as a percentage of sales to the long-term average, this 17%, 18%. And at the same time, we remain committed to investing thoughtfully in future growth, guided by our capital allocation priorities, as I just mentioned before. And with that, I would like to hand over to Matthias with an outlook. Matthias Kummerle: Thank you, Manuela. Good afternoon also from my side. It's a pleasure to be here, and thank you very much for coming this afternoon and for joining us. I haven't had the pleasure yet to speak with all of you. So please allow me to briefly introduce myself before we go into the outlook. So my name is Matthias Kummerle. The name comes from Germany, born in Germany, grown up in Switzerland. I have a technical background, studied at ETH Zurich mechanical engineering, then ended up in Lausanne at EPFL for a PhD, finally complemented my studies a few years later with an MBA, had a number of years with Hilti in Liechtenstein first and then a couple of years in China, a country which I'm still following with a great interest. And since 15 years now, I've been with Bucher Industries. I have headed the R&D effort at Emhart Glass for 10 years. And the last 5 years, I had the pleasure of heading the division. And now from April on, as it has been mentioned before, I have the pleasure to take over from Jacques as CEO at the next general assembly. And I'm looking forward a lot, of course, to continue building on what Jacques and the team have built in the last years and to working with the management team. As you know, Bucher Industries has a very long history of entrepreneurship of decentralized responsibilities and management and I think also a very disciplined capital allocation process, as Manuela has mentioned. And I want to continue that culture and basically continue driving with the teams along those lines. Now coming to the outlook. I have to admit looking into the future has already been easier in the past with all the uncertainties that we have going on at the moment. The whole planning cycle is challenging. The most recent events in the Middle East are not really making it easier. Nevertheless, I will walk you through the assumptions that we are applying at the moment and what that means for the expectations for this year. So overall, we expect that the recovery in demand that we have seen in the second half of last year will continue. This will be most pronounced with the Kuhn Group and also with Bucher Hydraulics. But again, the uncertainties are still quite large and elevated, and we have to also live with the possibility of headwinds, which might have an adverse impact on the investment mood of our customers and also on the cost side. Walking through the divisions -- this one here. And starting with the Kuhn Group, we can say that based on the higher order book with Kuhn Group, we expect an increase in sales. And when I speak about sales, I always mean comparable basis compared to last year. And in addition, also the operating margin is expected to be higher than the prior year. The improvement in volumes and also the high discipline that we enjoy with Kuhn Group on the operational side will support the profitability as the demand continues to normalize. With Bucher Municipal, we expect a slight decrease in sales on a comparable basis once again and also a slight decrease in the operating margin compared to '25. Overall, the demand should stay intact. We are not worried about the demand. And we also expect the continuation of the benefit from efficiency measures that have been going on. However, the order book going into the new year is substantially lower than what we had a year ago, and this limits a bit the near-term visibility and also weighs on the year-on-year comparison. Bucher Hydraulics. There, we anticipate a slight increase in sales. And correspondingly, we also expect a slightly higher operating margin. As mentioned, the order intake has improved, especially in Europe. And while we remain cautious about the overall situation, the trend is clearly more supportive than in the prior years. Bucher Emhart Glass, obviously, I know that division the best at this moment. There we expect on a comparable basis a significantly lower sales and also a significantly lower operating profit margin. And that has to be put in light with a strong increase in sales that we saw in the last year -- towards end of the last year, which supported in the previous year, the profit margin and the sales. And because of that, we really start the year now with a lower order book, and that will weigh on the Emhart. But we are hopeful that we'll see during the course of this year a trend to the positive again. But the visibility is not the best yet. Finally, Bucher Specials. There, we anticipate a slight sales growth and also the operating profit margin is expected to improve again. And that is supported by the higher capacity utilization that we expect. And also some ongoing efficiency measures. If we put all that together, we can say that Kuhn Group and Bucher Hydraulics and to some extent Bucher Specials they have to compensate in '26 for the shortcomings of Bucher Emhart Glass. And overall, we expect a comparable sales compared to '25 and also a similar operating profit and that is excluding the property gain that we had in the last year. We believe that this picture contains a quite balanced view of the risks that still are there and of the upside potential. So the risks, as I have mentioned before, there are still uncertainties with the trade situation with tariffs and so on. The cost side is difficult to anticipate. On the other hand, on the upside, it could be that agriculture in Europe or also in the U.S. might pick up a little bit faster than we believe at the moment. So overall, the picture, we believe, is quite balanced. And with that, we approach '26, I would say, with a cautious optimism. Before we go into the Q&A, I would like to mention a couple of words about the management team. I'm in a very fortunate situation that I can start working with an extremely experienced management team, which has also -- which is fully aligned also with the culture and the values of Bucher Industries. There is Manuela Suter, responsible for finance as our CFO, whom you know very well. We have Thierry Krier responsible for the Kuhn Group. We have Frank Muhlon driving Bucher Hydraulics. And we have Stefan During responsible for corporate development and for Bucher Specials. I have known these colleagues since a very long time from my term on the management team, and I'm super happy to be working together with them in the future and to have their experience on board. And then as Jacques has briefly mentioned, we have for Bucher Municipal, Martin Starkey, an internal successor who took over from Aurelio Lemos beginning of this year. Martin has been heading the truck-mounted sweeper divisions during the last years, has an automotive background and is a huge asset on our management team. And last but not least, Daniel Schippan, who took over from me at the beginning of the year running now Bucher Emhart Glass. I have known Daniel since many years from the glass industry. He has a very strong entrepreneurial spirit, is strategically quite visionary and I'm convinced that he is the right person to take Emhart Glass through these still difficult times and also bring it back to a growth path. Last but not least, an announcement that you saw as part of the communication packages this morning. We have a change on our Board. It is Urs [indiscernible] our Chairman of the Board, who for personal reasons, has decided not to stand for reelection at the next general assembly. Urs has been on our Board since '23. He has been Chairman of the Board since 2024. And again, for personal reasons, he's not available anymore. And it is Stefan Scheiber, who is being proposed by the Board to be elected as our Chairman. Urs, you know him most likely from Buhler, has had a career there as CEO served for a very long time, a very seasoned international manager. And Stefan has been on the Bucher Board since '22. He knows our company very well. He is in line with the culture. So we are happy that also here, we have a very good solution that will guarantee a seamless continuation. And with that, I would like to hand to Jacques, who will open the Q&A. Jacques Sanche: We'll, of course, do that as a team. I'll try to answer more 2025 questions together with Manuela and then outlook will be a bit more the topic of Matthias. So who's going to break the ice here in the room? Any questions concerning the past year? [indiscernible] please? Unknown Analyst: Yes, I have one question. It's all about capital allocation because you -- the dividend remains unchanged, CHF 11. And you said number 1 is organic growth; number 2 is acquisition. Number 3 is giving back. As you don't give back more money to investor despite the 20 years record operating cash flow, I'm wondering whether you are growing much more organically? Or are you investing much more into M&A? Or did you treat the shareholders badly? Jacques Sanche: The money is still there. It won't be lost. So I don't know if it's -- we're not trying to -- I think one element is if we start growing, then we will need more cash. That is known. So one part will eventually go back into that element. I know we're still conservative, but eventually, we will need it over time. Unknown Analyst: But you guided flat sales growth, so you don't need more money. Jacques Sanche: Let's see what happens. Manuela Suter: In a downturn, we were always able to manage or to reduce the net working capital. I would say we are now quite on a high level of net cash. For next year, we expect an operating free cash flow between CHF 100 million and CHF 150 million. So again, a positive number, but clearly below this year. But yes, you're right. But there are future growth. So we have R&D CapEx, we expect around CHF 150 million next year, also slightly higher than this year. And last acquisition was always on our agenda for the last 10 years. Matthias Kummerle: I can just build on that. It is very clear that with the situation, acquisitions will play a role as we go forward. So we will be obviously continuing to look out for acquisitions that make sense. So that is going to be part of the strategy also in the future. Jacques Sanche: Next question, please. Unknown Analyst: How do you see net working capital, for example, as a percentage of change developing for the next 2 years? Manuela Suter: Right now, we are around 18.5% of sales. Over the last years, it was more 17%, 18%. So I think that's a number that we would like to go again, means for next year or for 2026, we will see a slight reduction, obviously, not to the extent that we had during 2025. I would say, around 0 depends a bit on the movement to CHF 30 million, something like that, but it's hard to say. It depends also a bit on the growth that we will see during 2026 or how it develops depending on the businesses. Unknown Analyst: I have also another question. Can you remind me of your CapEx plans for the next 2 years? Manuela Suter: The CapEx plans. As mentioned before, for 2026, we expect around CHF 150 million, but overall and a good number is always around 4%, 4.5% of sales when it comes to capital expenditure. Unknown Analyst: I have one, maybe to continue on M&A. It sounded, Mr. Kummerle, that you might want to be doing more acquisition in terms of numbers and maybe also in terms of size? And if yes, can you give an indication what would be your ambitions in which areas and geographies? Matthias Kummerle: I mean I can make a couple of general comments, maybe not as specific as you might expect. But in general, I see -- well, the strategy overall is not going to change. So we continue investing in organic growth, and that will be complemented with M&A. And I think it's clear if M&A shall be a growth driver also in the future of our business, the size of the acquisitions needs to be on a certain level. So obviously, we will be building a pipeline and working on a funnel to also have objects which would serve a growth target. And we are in the fortunate situation that with the current balance sheet, we are able to propose those type of propositions to our Board. I would say the type of acquisitions, I mean, that is an ongoing discussion. I personally believe that in areas where we already have a relevant position in fragmented markets, we have a very good chance to further strengthen our position. That is going to be a high priority, but we will be also considering pushing a bit more into geographies where we may not have such a strong position yet or in businesses with a very strong position already to also consider adjacent activities. So I would say that's in a nutshell, what we expect, but it's a bit too early here to go into more details. Unknown Analyst: Okay. Can I ask a question on Kuhn maybe. When I look at the charts that you have presented, Jacques, it seems that the rebound in farmer income or -- farmer income is really driven by the subsidies. So is that coming, first of all? And can you give a bit of an indication about the geographies, if they are coming or not? And then maybe related to that, how is the mood because in the U.S. has been very volatile in the last months. Once up, once down, once up, one down, you never -- you don't know where they are standing. Maybe they don't know themselves either, actually. Jacques Sanche: Well, I think, I mean, the main drivers for farm income are, first of all, of course, weather and yield. The second element then is price of whatever they sell, the commodity that they sell. Then you have the costs for input and finally, subsidies. So there are multiple elements, not just subsidies as such. It's true in the United States where crop production is not very profitable at the moment. The biggest impact on a better income would be subsidies at this time. That's for sure. Now the mood in farming in the United States is no good, at least I'm talking about crop production. Dairy livestock is not a problem, but the mood in farming in crop production is not good at the moment. And I don't really see that it has been up and down. It basically has been down for a while. So that's the part. But that's talking about the United States. And then there are other areas where you might see either maybe a relaxed agricultural policy or less regulations that helps a bit for the self-confidence of the farmer and then the investment attitudes. That's one element, and that is different from country to country. European Unions, although they have been protesting, they're a bit worried about regulations as well. But overall, it is improving the situation, and they're seeming to buy more. Unknown Analyst: Can I ask you a last one maybe here on -- always on agriculture. I don't know if it's relevant. But in Switzerland, we have seen the farmers throwing away milk. Is this something that happens also outside Switzerland? And if yes, how can the milk prices stay high? This is something I don't understand. Jacques Sanche: I would not at all overrate that media coverage that is one action that is not relevant. Unknown Analyst: Yes. But it was not only the throwing away the milk. It was also a lot of additional cheese production because there was just too much milk available. Jacques Sanche: Yes. But that's Switzerland and I mean we're looking at the global scale here. I mean... Unknown Analyst: It's only Switzerland. Jacques Sanche: Yes sometimes. The dairy farmer overall has been doing pretty well. And of course, the milk prices are getting a bit more under pressure now, but it had not very much to do with the milk. Mr. Bamert, you were in action -- somewhere else. Walter Bamert: Walter Bamert from Zurcher Kantonalbank. I have a question regarding the component for John Deere that you mentioned. John Deere has an ambitious growth program for excavators in the U.S. There are 2 questions I have. One is, can you benefit from those new factories and the new offering there? And the second one is when I see what John Deere is doing with closing the gaps, I ask myself, is it also a risk that they would get into implement. I don't know what John Deere already produces in terms of implements and if that would be an attractive business for them to produce on their own. Jacques Sanche: I'll maybe answer the first question, and you can take the implement question at that moment. So the first question is we are -- the John Deere business that we have is agriculture. It's not the building construction side. There might be some small applications, but it's -- the main part is tractors that we're supplying to. So the excavator is not a very important topic for us at this moment. Are they competing with us in implements? That's yes. Matthias Kummerle: I mean the answer is yes and no. I mean they already have implements. So it's not that they're only focusing on tractors, even though that is the biggest part of their business. And on the implement, it's typically more the big, big and few flagship products, which are also the brand shapers. And the big gorillas like John Deere are typically not the ones who have the breadth of the offering like Kuhn, also going into the midsize and the smaller ones. And that's, I think, where companies like Kuhn can really make the difference and can bring a very strong position with the dealers. and the big companies like John Deere, they are struggling to have the complete offering. So it's a yes and no answer. Unknown Analyst: I have a question regarding Emhart Glass. I'm wondering how long are these investment cycles, if I may say. I mean you were mentioning that there's a lot of investments being done, maybe overcapacities around consumption going down, efficiency going up. So it looks like a kind of a textile machinery business almost. Just give us a feeling what's the fair assumption to say, well, at a certain point, all these fillers or glass... Matthias Kummerle: Yes. So in the past, I would say a typical cycle was 3 to 4 years, 3 years, a typical one for a longer one. This one here is a bit longer and a bit deeper to what we have seen. And we believe that it's still to a large part due to an extreme amount of overinvestment that happened after COVID. And so we are still seeing -- we are still in that downswing and it's going to come back up. There is no doubt about that. The only thing that is on top of that is that in the last 2 years, there has been a little bit a shift from glass into aluminum cans. So that adds a bit of an additional element, which we have not seen in the past. But looking globally, we have no concern that we will be back on a typical growth trajectory that we have seen in the past, which is typically 1% to 2% or 2% more in the long run. And with the global footprint that Emhart has being also present in China, in India and emerging markets, we are not concerned. So it's a question of -- it's a question of... Unknown Analyst: You don't think that you're not as good positioned as in the past. Matthias Kummerle: We don't believe that it will shoot back to the post-COVID level anytime soon, but it will be back on a stable trajectory. That's the assumption. Unknown Analyst: And the product extension you did or the acquisition you did, I can't remember the sales. So is that something that helps at least to dampen the cycle? Or is that not -- in that case, because the investment is the same, it's plant. It's like the equipment you put into these plants. So does it accelerate the cycle going forward? Matthias Kummerle: The additional sales from that acquisition is relatively small. was around CHF 7 million to CHF 8 million, the sales on top. The bigger impact that we expect is that we can offer a more complete product to the industry. And there, we expect an amplification of the effect that we get a bigger scope in the different projects and that we get a bigger share of the cake inside the glass plant. Unknown Analyst: Okay. Maybe last question coming back to Kuhn. You had good order intake in Europe, if I may say. So I'm wondering whether we kind of are a little bit on top of the investment cycle in Europe? Or what's the risk that we will see next 12, 18 months? Lower order intake or lower demand from Europe? Matthias Kummerle: I mean the indications that we have at the moment with the level of the dealer stocks, which are on a normal level at the moment, but not on the other side of the curve yet. We don't see an immediate risk yet that we're already overshooting. So we are working with the assumptions that we have mentioned before. Jacques Sanche: Maybe if you look into the past, the downturn of agriculture started mid of 2023. And since then, we had a quarter-over-quarter reduction of demand until basically Q3 of last year. And it's pretty clear, I think it looks like now it's stabilizing. And if anything, I would more assume it's a pent-up demand that will eventually drive the business. But of course, for me, it's easier to say than for Matthias. Any other question? Mr. [indiscernible], once more and then I'll start looking at the online numbers here or the... Unknown Analyst: How do you see the demand backdrop in hydraulics over the next few quarters? Are there any observations in the key end markets that support this view? Matthias Kummerle: I mean we play in different segments. So what has been -- or what is supporting the statements that we made is developments in agriculture, in construction and in general industry, there also in Europe, we have seen a positive momentum again. What is not working yet is on the -- in the U.S., particularly on the transportation side. So those are leveling docks in logistics centers and so on. That segment has been still relatively weak. So that's, I would say, if you go into the applications and the segments, the picture that we have. Manuela Suter: The Material Handling segment is more exposed to U.S. I think that has also a reason why it's still lagging and then we have agriculture and construction. And we are still coming from a very, very low base. I think that's also need to take into account. However, over the last couple of months, it was really a steady improvement also in order intake that we could see in particularly in construction and agricultural segment. Matthias Kummerle: But again, the signs are not super strong, as I said. So it's -- I also cautious optimism that it continues like that. Jacques Sanche: If there are no more questions here, then I would address [indiscernible]. Unknown Analyst: So my question is about Emhart Glasses. Could you give us more details on the competitive landscape in this division? And do you have a different strategy versus your competitor? And do you think you might have a stronger recovery than your competitor? Jacques Sanche: I didn't quite get which... Matthias Kummerle: Yes, okay, glass. I'm happy to take that. So the -- I would say the industry within this glass business is relatively consolidated. So suppliers of those forming machines, there you have 4 players, which are relevant, of which Emhart is the largest one. And then you have the other big segment, which is inspection machines. There Emhart Glass is #2 and our competitor is leading the pack, even though the size of that segment is substantially smaller. And I would say the competitive advantage that Emhart has had is that we have a lot of credibility with our history, with the R&D, with the technology. And also I can say with Bucher Industries behind. It's a very long-term oriented business. It's very much relationship driven, and that's what has helped Emhart Glass in the last, I would say, 15 years to continuously build the market share and to be perceived as the clear #1. And typically, if somebody does not work with Emhart Glass it's because of pure price. So what Jacques said, I think is true. It is on a global scale, every other bottle that we drink of will have been produced at an Emhart Glass machine. Now will the recovery come faster for Emhart Glass? I think what we will see is that the service and the parts side that's typically reacting earlier, that will pick up again. So we hope to see these signals during this year. And then I think with this combined business of this acquisition that we had, we have our foot in those projects probably earlier than anyone else. I think we have a very good chance to benefit of an upswing also when they start investing in CapEx again. Jacques Sanche: I think we can say over the last 10 years and the cycles that we have been living through Emhart Glass has always emerged even stronger than before. Market shares over time have been rising. That story could continue. Thank you, Mr. [indiscernible]. And any other questions from the online participants? I don't see any hand raised. And at that moment, it was my 19th presentation, half of them more or less for BELIMO and then the other half for Bucher. And a lot of the faces I see here have been continuously showing up. I appreciate that very, very much. I had an incredible amount of time. And I'm also very proud that I can hand over a very, very solid company with a lot of potential to the team that deserves it. So thank you very much for showing up. And of course, we'll still be around sharing a glass of wine with you. And at that moment, we will close the session and also turn off the online recording. Thank you very much also for those who joined us online. Thank you very much. Manuela Suter: Thank you.
Russell Loubser: Afternoon, everyone. I really feel that I'm privileged to welcome you to -- it sounds like I've got a little bit of an echo here. okay? Thank you. Well, it's really a great afternoon in the sense that I believe we have a management team that's going to present some sterling results on the one hand. On the other hand, it's really a sad day, which is why I'm standing here because it's Leila, our well versed CEO, forthcoming and last set of results. Leila has obviously had a number of stints at the JSE in different capacities with the final one being as the CEO over a period of almost 7 years. It feels like you came in yesterday, but it's been almost 7 years. And during that period, I have had the privilege and the honor to work with Leila. And I think it would be an understatement to say it's been a period full of cross-pollination, incredible amounts of energy and passion. And as a result, so much was achieved. I will have the opportunity to say more this afternoon, so I don't want to make this a long speech. But suffice to say that on this very last swansong, on your results, Leila has made an incredible contribution to the JSE. Whatever matrices you may want to look at, and I don't want to bore you with a lot of data, we have achieved a lot, firstly, in her leading the modernization of the stock exchange, leading to increased diversification of revenues and operating income in the company, not to mention a whole range of initiatives where she took center stage, some of them really in partnership with government, looking at financing SOEs, Project Phumelela, which really had a very significant role in really looking at the financial architecture and ease of the financial services in this country playing a very, very optimum role. It's a long list. But it's really just to say, Leila will discuss this a little bit more this afternoon. On behalf of the Board, -- and I have no doubt, I'm also speaking on behalf of 600 staff at JSE and the other subsidiaries. You're going to leave an enormous void. And that void is not merely one of strength of leadership, intellect and so on, but also the human aspect of it. which I think is absolutely fundamental. And in fact, without it, we would not have achieved most of what we've achieved. So as I said, it's not to make a long speech. It's just to say it is your final results. You may even have a forthcoming, so we don't want to be too clairvoyant about the future. But thank you very much. Thank you very much. We'll say more later on this afternoon. I think it's the opportunity now with Fawzia to really have your place in the sun quite rightfully given what you're just about to present. So thank you very much. And maybe I should also say a minute to say, Valdene, welcome. And you seem like you're sitting in the hot seat, but I'm sure you do justice. So thank you very much. Leila Fourie: Thank you very much, Chair, for your very generous and kind words, and welcome, everybody, both online and in the room. In fact, we've had a fantastic turnout. I think I should be bowing out more often. It's absolutely wonderful to have my predecessor and a stalwart in the industry, Russell Loubser joining us in person today and Erica, who's been the backbone of the broker community for many years, even Selvan, who is the backbone of BDA and worked alongside me for many, many years. I'm going to -- I see my notes okay. So welcome to the JSE's Full Year 2025 Financial Results Presentation. The JSE enters 2026 with improved performance and sustained strategic momentum. This reflects both an improved operating environment and the cumulative impact of disciplined execution over the recent years. Today, I'm going to begin with an overview of the group's performance and the key drivers behind our results. Our CFO, Fawzia Suliman, will then provide a detailed breakdown of our financial results, and I will conclude by reflecting on the strategic progress made since 2029, what it means for the positioning of the exchange today and how it shapes priorities going forward. We'll then open the floor for questions. The JSE delivered record results for the year. Operating income increased 14.2% year-on-year, driven by growth across all of our core segments and sustained equity market activity. Importantly, 35% of our operating income is now coming from nontrading sources. This structural shift improves the stability and the predictability of our revenue base, allowing the exchange to perform more consistently through market cycles. NPAT was up 16.7%, and it crossed the ZAR 1 billion mark for the first time, reaching an all-time high, while we continued with cost discipline and operational efficiency, and our efforts have resulted in an operating leverage, which we're very pleased with the end of the year of 5.9%. Headline earnings per share for the period were ZAR 13.29, up 17.7% year-on-year, while our ROE increased to 22% from 20.2% the year prior. Reflecting our improved profitability and cash generation, we increased the total dividend to ZAR 10.61 per share, up 28.1% compared to 2024. Operational resilience remains a core asset of the exchange with market availability of 99.96% and only 3 priority 1 incidents during a year of elevated trading volumes. In fact, we haven't had an outage in the equity market, and I'm sure Russell will remember our outages in 3 years, which is quite a record. Overall, the group has delivered a robust financial outcome characterized not only by growth, but by continued improvement in the quality, durability and diversity of our earnings, alongside sustained progress against our long-term strategic agenda. Turning to the macroeconomic and market context of this year's performance. South Africa's capital markets experienced a meaningful re-rating through 2025 and into early 2026. This reflects a combination of improved domestic reform momentum, renewed institutional credibility, supportive commodity dynamics and heightened global capital rotation towards emerging markets. These developments have contributed to the reassessment of South Africa's risk premium and supported renewed international appetite for South African assets. This re-rating was reinforced by several milestones during the period, including South Africa's exit from the FATF grey list, a sovereign rating upgrade, continued fiscal consolidation and progress across key economic reform programs. South Africa's equity markets responded accordingly, delivering outperformance relative to global peers on the back of increased prices for precious metals, a weaker U.S. dollar and as markets reassessed South Africa's risk premium. Between the 1st of January 2025 and the 31st of December 2025, the All Share has grown by 57% in dollar terms, outperforming almost all of global market equity indices, supported, of course, by a combination of strong overall market performance, commodity-led gains in major sectors, improved macroeconomic sentiment and structural enhancements to the market infrastructure and listings that support investor interest. As you can see in the graph next to that, this trend continues this year. Market activity increased materially with average daily value traded growth of 41% and 30% in quarter 3 and quarter 4, so a much stronger second half than first half, ending on 32% for the full year. This momentum was supported by robust performance across key large cap and resource counters, reflecting improved earnings expectations and renewed investor confidence. Notable gains were recorded across several of the heavyweight constituents, including from mining Sibanye, which was up 304%; AngloGold Ashanti, which was up 240%; MTN Group up 84% and Prosus, which was up 37%. Market participation was particularly active during peak trading periods between April and September. While our nontrading -- our nonresident participation increased materially with foreign investors now accounting for 32% of our holdings, up from 29.3% in the prior year, reflecting, of course, international investor confidence in South African equities. Consistent outperformance in 2025 has supported South Africa's increasing prominence within our global emerging market allocations with pleasingly, the country's weighting in the FTSE Emerging Market Index rising to 4.29% from 3.16% at the end of December 2024. As of early 2026, the JSE is the 18th largest market by market capitalization in the world, and that's up from 20th in 2029. Taken together, these developments reflect a broader structural reengagement with South African capital markets. Turning now to Slide 6. We've seen a high correlation between index valuation and value traded. This is an interesting long-run graph, which indicates that market activity has surged since early 2024 with strong growth in indices, market cap and value traded. And this echoes time when Russell was at the helm in the mid-2000s during the commodity-driven boom. Although recent gains signal improved sentiment, it is too early to determine whether these gains are cyclical, structural or a combination of both. Given the risk of a reduction in trading activity or an external shock as we're experiencing as we speak, we assess the downside scenarios and stress test impact of lower value traded. This will guide our cost management responses and also our diversification efforts. ADV growth in -- between 2025 and 2026 marks the strongest momentum since the 2006, 2007 period, following which we had periods of stagnation. While history indicates a precedent for this multiyear growth trajectory, the JSE remains vulnerable to potential global and domestic shocks that could rapidly affect volumes and confidence. Strengthening resilience, preparing for potential reversals in sentiment and accelerating diversification into nontrading revenues remains a key strategic focus in improving the quality and durability of earnings. Turning now to Slide 7. The market momentum created a supportive environment for the exchange, which entered a period of higher quality earnings in terms of our model. Over the last 6 years, we've deliberately diversified revenues, and we've increased our nontrading base. Non-trading income has grown materially over the period. You can see 92% nominal growth. And the model now carries a larger annuity style component alongside our trading activity. Elevated market participation supported a 14% increase in operating performance, while nontrading income grew by 5%. In the first half of the year, we had a more subdued growth mainly due to the higher base in JIS in the prior period and also the lower interest rates in that period. Nontrading income, which includes market data fees, margin income, colocation and listing activity remains an important part of our business, and it ensures that the JSE continues to perform systematically across all market cycles. Now moving to Slide 8. You'll see that the activity across the JSE accelerated across all areas, reflecting the exchange's role as a systemic anchor in increasingly complex macro and geopolitical environments. Stronger participation across asset classes highlights a deepening investor base and the resilience of South Africa's capital markets. Equities saw the strongest uplift with value traded up 28% year-on-year. Higher billable equity volumes were supported by a global commodity resurgence, a more stable domestic backdrop and a recovery in investor sentiment. This performance underscores the continued relevance of South African corporates to global capital flows. Derivatives markets delivered a resilient outcome, benefiting from elevated volatility and a persistent demand for hedging strategies. Equity derivatives grew 14% as value traded increased 15.4% with index futures dominating activity. Similarly, financial derivatives advanced 15%, supported by solid appetite for bond-related instruments as rate uncertainty remained a key global theme. Bond market activity was buoyant with nominal value traded in repos and standard trades rising 9.7% Net foreign flows reached ZAR 122 billion net inflow, up sharply from the ZAR 82 billion in the prior year, driven largely by attractive SA yields amid global rate volatility and a higher for longer inflation narrative. Despite ongoing geopolitics and domestic macro risks, demand for South African bonds remained stable, supported by foreign and local investors. Currency derivative volumes rose 32%, heightened by the ZAR volatility, which was driven by U.S. tariff developments and uncertainty in the GNU and this increased the need for tactical hedging, as you can imagine. Interest rate derivatives saw modest growth with contracts and value traded up 1.2% and 7.2%, respectively. Commodity derivatives experienced a bit of a divergence. Physical activities increased by 26%, yet contracts traded declined by 7%, reflecting weaker maize export demand, firmer local currency and softer global prices. And you'll see a bit of a recovery from the first half year performance in that asset class. The primary market delivered steady growth with revenue up 4%. The upcoming pipeline includes several significant names across our sectors. Moving now to Slide 9, and I think this is where Selvan wakes up. The broad-based growth in trading activity and asset classes that we've just discussed places increasing demands on the JSE's infrastructure. Ensuring that this infrastructure can support higher volumes, greater product complexity and deeper participation is central to sustaining market resilience and future growth. A key component of this investment is the modernization of our broker-dealer accounting system, or BDA platform, which is a foundational program that underpins the next generation of post-trade infrastructure at the exchange. In 2025, we successfully completed the pilot phase ahead of schedule, validating the quality and stability of the migrated code, and we commenced full-scale modernization. The bulk of the transformation and testing activities will continue through 2026 with implementation targeted for 2027. To date, approximately 2.2 million lines of code have been modernized with no critical defects identified, which is really an encouraging indication of robustness and quality of the transformation. Delivery of the remaining modernized components is scheduled for the end of the first quarter of 2026. This will be followed by extensive integration, verification and mass testing across all functional areas alongside ongoing engagement with market participants to ensure operational readiness ahead of our implementation. Subject to the successful completion of these testing and readiness phases, the modernized Java-based BDA platform for the equity market is targeted to move into production in 2027. Strategically, this transition enables the JSE to support higher trading volumes at lower cost, introduce new functionality more rapidly and enhance reporting and analytics capabilities, enhance operational resilience across the post-trade environment. And with that, I will hand over to Fawzia for the financial review. Thank you, Fawzia. Fawzia Suliman: Thank you, Leila, and good afternoon to everyone. Looking at our financial performance, operating income increased 14.2% year-on-year, reflecting higher market activity and solid performance across core segments, including information services. OpEx increased 8.3% year-on-year. And excluding costs linked to higher trading activity, underlying OpEx growth was within guidance, and the group delivered a positive operating leverage of 5.9% as we continue to adopt a balanced approach between strategic investment and operational efficiency. EBITDA margin improved by 1.2 percentage points with the EBITDA margin improving to 38.7%. Net finance income decreased as expected to around ZAR 197 million as a result of lower interest rates. And overall, our NPAT increased 16.7% and our HEPS increased by 17.7%, reflecting both operational delivery and disciplined cost management. Moving on to cash and capital allocation. The JSE is and has always been a highly cash-generative business. For the period, net cash generated was ZAR 1.23 billion, an increase of 12.3% versus last year. Capital expenditure was ZAR 141 million for the year, below the prior period, reflecting phasing and timing of delivery. Our financial position remains strong with our cash balance increasing year-on-year by 12.7% to ZAR 3.16 billion. This grants us flexibility to continue to fund growth without compromising shareholder returns. And on this, our total dividend per share increased by 28.1% year-on-year to ZAR 10.61. Our cash conversion remains strong at 1.64%, reinforcing the quality of our earnings and the capital-light nature of the model. Our ROE increased to 22%, up 1.8 percentage points from the prior year. This slide reflects higher operating income, disciplined cost growth and stronger profitability. This year, we delivered robust revenue growth while maintaining a disciplined approach to cost management, translating into positive operating leverage of 5.9%. Our 2 biggest operating expenses remain personnel and technology, and we continue to proactively manage these costs in a balanced way, being cognizant of the fact that they are critical to our delivery and transformation. Other income decreased by 80%, and this was primarily due to ForEx losses in 2025 compared to a gain in 2024. The decrease also reflects the fact that prior year included higher issuer regulation fines as well as VAT recovery income. As I mentioned previously, our revenue performance this year was robust. Capital markets performance was strong with revenues up 18% as equity market trading activity remained high. And as such, we also saw significant growth in post-trade services due to higher billable value traded and an increase in the number of trades. JSE Investor Services revenue was down 7%, mainly because of the high base effect and the unfavorable interest rate environment. JSE Tier revenues increased by 10% on the back of higher fees driven by the equity, currency and commodity derivatives markets growth. And finally, Information Services revenue increased by 10%, reflecting growth in index revenue, terminal subscriptions and equity derivatives data. On the next few slides, I will unpack the underlying drivers for each revenue segment, starting with Capital Markets and JIS. Capital Markets performance over the period reflects solid revenue growth across all asset classes. Primary Markets revenue was up 4%, driven by higher listing fees and ETFs. Trading revenue was up 28% as billable equity value traded up 32%, driven by global commodity strength, improved macro stability and reinvigorated investor confidence. Colocation revenue was up 15%, while the colo activity to value traded remained flat, we saw an increase in the number of racks to 58 from 56 in the prior year. Equity derivatives revenue grew by 14% year-on-year, driven by strong hedging appetite. Bonds and financial derivatives revenue increased by 15%. Bond nominal value traded was up 8%, while contracts traded for currency derivatives were up 32% as we saw increased volatility in the rand on the back of the news about the U.S. tariffs and concerns over GNU stability. Commodity Derivatives revenue was up 6%, with physical deliveries up 26% and contracts traded down 7% as we experienced subdued market volatility following the above-average local and regional maize production. JIS revenue was down 7% and mainly because of lower interest rates, high base impact and slow corporate actions activity. These were partially offset by an increase in asset reunification revenue as well as the number of customers. Moving on to post-trade services. Revenue increased by 18% compared to last year. Clearing and settlement revenue was up by 34% due to the increase in billable equity value traded. BDA fees were up 4% year-on-year as the 7% increase in equity transactions was partly offset by a slight reduction in the fee from ZAR 0.73 to ZAR 0.69 per transaction. In 2025, we developed a new BDA fee model. However, implementation was deferred because the market consensus was clear. The operating model and the fee structure must evolve together. As a result, the new fee model remains on hold until we finalize the non-mandated BDA operating model. And in light of this, we introduced a mid-2025 fee reduction. The BDA fee per transaction was lowered from ZAR 0.73 to ZAR 0.69. And this adjustment brought the average fee for 2025 down to ZAR 0.71. For 2026, we have maintained the BDA fee at the 2025 average of ZAR 0.71, ensuring stability and predictability for market participants. Funds under management revenue was up 7%, and this was due to the higher JSE Trustees cash balances. And then finally, JSE Clear revenue was up 10% on the back of higher clearing fees and increased activity in equity, commodity and currency derivatives. Information Services revenue was up 10% -- more specifically, U.S. dollar-denominated revenues accounted for 68% of total information services revenue and translated at an average exchange rate of ZAR 17.95 for the year compared with ZAR 18.39 in 2024. Growth in core market data was driven by indices, terminal subscriptions and equity derivatives data with a mix of once-offs and recurring annuity sales. The core market data franchise continues to be strongly cash generative and delivers healthy margins, although organic growth opportunities are relatively modest. Our modern data platform has now completed its foundational technology build and is moving into a more commercial and product-led phase, currently contributing approximately 1% to the portfolio. We continue to see good underlying performance of our growth strategy, where revenue was up 50%, albeit off a modest base. The JSE delivered positive operating leverage while still investing in strategic priorities. Operating expenses increased by 8.3% year-on-year, 6.5% excluding higher trading activity costs. This means that our OpEx growth is in line with the guidance that we provided at year-end of a 5% to 7% increase. Key cost drivers include personnel costs, which were up 12.5%, but excluding performance-related costs of high LTIP vesting and discretionary bonuses, personnel costs increased 6.5% year-on-year. More specifically, permanent headcount remained flat overall, while salaries increased by an average of 5% year-on-year. Technology costs were up 13% due to the implementation of our growth strategy, the reclassification from CapEx to OpEx of cloud-related spend and inflationary and foreign currency impact on license costs. General operating expenses have remained relatively flat, owing to our continued commitment to disciplined cost management. Our focus remains on driving operational efficiency with a continued emphasis on financial discipline while still directing capital toward our key strategic priorities and investments. On CapEx, spend was focused primarily on maintaining and protecting the business, including modernization programs and regulatory enhancements with a smaller portion allocated to growth initiatives such as information services and the bond CCP development. We came in slightly below the guidance range of ZAR 150 million to ZAR 170 million due to savings in infrastructure spend owing to negotiations and the BDA phasing. For 2026, CapEx guidance increases to reflect delivery phasing on the BDA modernization and the work program across our core initiatives. We expect CapEx to be in the range of ZAR 190 million to ZAR 230 million. Let's now look at our cash position as at the end of December. Over the period, cash generated from operations amounted to ZAR 1.2 billion, and the cash and bonds balance as of 31 December 2025 amounted to ZAR 3.2 billion. This reflects a strong liquidity position, meaning that we do not need additional credit lines or external financing, and it speaks to the quality and reliability of our earnings while supporting consistent shareholder returns. Our healthy cash and bond balance highlights the resilience of the balance sheet and the fact that we have maintained a disciplined capital allocation through targeted investment in technology and infrastructure. This is the breakdown of our cash and bonds balance as at the end of December. Our ZAR 3.2 billion in cash and bonds comprises ZAR 1.25 billion allocated to investor protection and regulatory capital, about ZAR 500 million for CapEx and other expenses and ZAR 920 million for shareholder returns. We aim to keep around ZAR 480 million as a strategic reserve, which includes potential M&A and a share repurchase program in 2026. Let me briefly reemphasize how we are thinking about M&A. Our approach is deliberately strategic and centered on bolt-on opportunities that complement what we already do well. We prioritize transactions that strengthen our core franchise and extend our value proposition with a clear aim to broaden revenue sources, maximize synergies and capture growth in adjacent markets and services. When we assess potential deals, we apply a disciplined framework. We look closely at the expected return relative to our hurdle rates, the stand-alone growth prospects of the target and the degree of alignment with our long-term strategy. Delivering tangible synergies is a key requirement to ensure any transaction has real financial value. Moving on to dividends. In 2025, we announced an ordinary dividend of ZAR 9.61 per share, up 16% year-on-year and a special dividend of ZAR 1.00 per share, which brings the total dividend to ZAR 10.61 in financial year 2025, reflecting an increase of 28.1% year-on-year. This has been an exceptional year given the market conditions and the JSE has benefited from the resulting impact on ADV and revenue. Accordingly, the Board has declared a special dividend given the excess cash on hand. This translates into an ordinary payout ratio of 78% and a total payout ratio of 86% -- we maintain our commitment to our dividend policy of a payout ratio between 67% to 100%. And this policy enables us to have a flexible approach to balancing the cash between the shareholder returns and the investments in the business. The group is considering a share repurchase program when market conditions permit and factoring in strategic investments and capital allocation priorities. The final size, terms and timing of any such program will be contingent upon Board approval. Any share repurchases will be disclosed as required. Now let's move to the guidance for full year 2026. From an operating expense perspective, we continue to guide to cost growth in the 5% to 7% range. This will be dependent on trade-related cost, but the underlying cost mix is expected to remain broadly consistent with investment directed toward our people, technology and key growth initiatives. On CapEx, we expect it to be in the range of ZAR 190 million to ZAR 230 million, reflecting a continued prioritization and disciplined spend. And lastly, our approach to shareholders remains unchanged. We are maintaining our dividend policy, targeting a payout ratio of between 67% and 100%. So overall, our guidance reflects a balance between cost discipline, targeted investment for growth and consistent returns to shareholders. Looking ahead, we are on track to achieve our strategic priorities as we continue to protect the core and to grow. In capital markets, the focus is on broadening our product suite and enhancing the trading experience for clients. This includes further ETP functionality and enhancements to block trading services, all of which are progressing well. We are also working on preparations for the launch of a crypto ETF. Within JSE Investor Services, we are working to scale our client base and to deepen our service offering. In JSE Clear and Post Trade Services, progress continues on the bond CCP and the BDA modernization program, both tracking in line with plan. In Information Services, priorities include building scale on the data marketplace, increasing client uptake of new data products and services, rolling out the SENS replacement for issuers and transitioning GIBA to Zeronia. And from an infrastructure and technology perspective, our attention remains on modernizing core platforms, advancing our AI transformation agenda and progressing key initiatives such as the JSE Network Alliance, AWS Outpost and local zones. Taken together, these initiatives position us well to support future growth while continuing to strengthen the core of the business. And with that, I'll hand back over to Leila for the concluding remarks. Thank you. Leila Fourie: Thank you, Fawzia. To fully understand the position of our 2025 performance, it's important to place it in the context of our multiyear transformation under Vision 2026. When I joined the JSE in 2019, we launched Vision 2026 with clear objectives: protect the core franchise, improve quality and resilience of earnings and modernize the business so that the JSE stays relevant and competitive in an increasingly complex and globalized market environment. The delivery of Vision 2026 has unfolded in 3 connected phases. The first phase focused on fortifying foundations of the exchange. We reset the strategy and operating model around clear pillars of delivery and discipline. we strengthened the operational resilience because trust in the market infrastructure is nonnegotiable for an exchange. And we took deliberate steps to rebalance our earnings base, including the JIS acquisition and to increase -- this was really to increase the annuity style components of the model. The second phase centered on capability expansion. We advanced our data and digital agenda. We expanded connectivity and infrastructure services, and we continue to evolve the product set across markets, including sustainability-related initiatives and reforms that support capital formation. For the third and recent phase, focus has been on converting transformation into measurable operational and financial outcomes. That includes continuing to raise the bar on resilience and service delivery while progressing large-scale infrastructure programs such as the BDA modernization, which is the foundation for the next generation of post-trade capability in South Africa. Taken together, Vision 2026 has fundamentally strengthened the JSE as a franchise and an institution. The exchange is today more resilient operationally more robust and strategically clearer about where it can create long-term value within South Africa's capital markets ecosystem. Shifting now to Slide 28. The financial performance of the JSE since 2019 reflects the deliberate execution of Vision 2026 and the transformation of the exchanges operating model. Operating income has increased to ZAR 3.5 billion in 2025, up 56% versus 2029, reflecting more diversified and resilient earnings model. The quality and durability of earnings have improved nontrading income increased from around 29% to around 35% of operating income, reducing reliance on pure trading volumes. The group's operating profile also improved, moving from negative operating leverage in 2019 to positive operating leverage of 5.9% in 2025. Profitability has increased accordingly with NPAT now just over ZAR 1.07 billion and ROE at 22%, and shareholders have participated in that progress with HEPS up from ZAR 8.14 to around ZAR 13.29 and the total dividend increasing from ZAR 730 million to around ZAR 916 million. Together, these financial results reflect the successful transition of the JSE to a more diversified, more resilient and higher quality earnings model that really positions the exchange effectively for future growth. And then on my final slide, Slide 29, I just want to share a little bit about the JSE entering 2026 from a position of genuine strength and strategic clarity. Today, the exchange operates within a diversified and resilient earnings model, world-class operational reliability and modernizing market infrastructure, which is designed to support the next phase of growth in South Africa's capital markets. Market participation is deepening. Client engagement is entrenching and the investments made under Vision 2026 are now translating into sustained operational and financial performance. The JSE remains well positioned to support capital formation and long-term economic growth. This is my final set of financial results as a CEO. And I would just like to say it's been an immense privilege to lead this organization through one of the most tumultuous and transformative periods in history. Since 2019, we've worked to reinforce the JSE's foundations, modernize its infrastructure and expand its capabilities and improve the quality and resilience of earnings. Importantly, this transition of leadership takes place at a position and a moment of momentum and continuity. I've got great confidence in Valdene Reddy as she assumes the role of Group CEO. Valdene, as many of you know, brings deep market experience and institutional knowledge, and she too has been central to the transformation that we've delivered under Vision 2026. The JSE has long reflected South Africa's economic journey. Today, it stands stronger in its ability not only to mirror the confidence of the economy, but to convert that confidence into capital investment and growth. Thank you very much for your time. We will now open for questions. Thanks. Should we start Romy, with anyone in the room? And we've got a couple of roving mics. Anything from anyone in the room? I know we've got a couple of questions online, I think, queuing up. We've got 2 questions, I believe. Romy, can we hand the mic to you? Romy Foltan: Sure. We've got a question from Catherine Bloesch. She said, what are the proactive cost management measures you mentioned in the introduction? And what initiatives are in place to drive efficiencies in the business? And her second question is, can you tell us a bit more about the AI transformation agenda you mentioned? Leila Fourie: Great. Do you want to take the costs? I'll take AI. Fawzia Suliman: Sure. So from a cost perspective and a cost discipline perspective, we've done a lot of work in terms of embedding this culture of cost discipline in the organization. And that includes improving the transparency of the cost throughout the organization. We also have a lot more proactive monitoring of cost, challenging of cost, and that includes controllable cost as well as new headcounts and really any additional costs that we bring into the business. We've also implemented zero-based budget, and I think that has also improved our thinking and the level of scrutiny that we put on cost. And then lastly, what we're also doing is we're managing our book of work and our CapEx spend with a lens of what the impact is going to be on depreciation in the business. And as we implement new projects depending on the delivery methodology, that sometimes has an impact on our technology costs. So there's a real level of transparency, I think, an acknowledgment throughout the business of the need to manage the cost, and we start to see that bear fruit. Romy Foltan: Leila, we have a second AI question along the similar veins from Mark Horrist, which you can probably answer with the initial question. The second one is where exactly do you plan to start embedding AI in 2026, operations, risk management or products? And what early wins are you targeting? Leila Fourie: Okay. Wonderful. Thank you, Catherine, and thank you, Mark. AI is a very important component in our current strategy and into the future. And we have commenced a number of targeted investments in AI capabilities to enhance operational efficiency and support long-term digital competitiveness. Now the first and most obvious area is the use of AI in the transformation of the BDA initiative. Russell will remember in the early 2000s the tremendous amount of work that went into the transformation of the BDA project. The ASX has been through a very difficult period over the last 3 to 5 years where they had to impair a project similar to the BDA project. And what we are doing in the AI project is to -- in the BDA transformation project is to use artificial intelligence to rewrite the code from COBOL into a more modernized language, which is Java. That project has -- I would estimate having worked deeply in the post-trade area in my history, that project would normally take 5 to 6 years to deliver and probably approximately twice what it is costing us now. We are about to deliver the final batch of code, which is, as I said earlier, 5 million lines of code, and that's been done within just over a year. In addition to the actual writing of the code, we are also using artificial intelligence to test our code with our vendor called Trianz. And that mass modernization testing will begin at the end of February. Many of the large institutions with big mainframe systems are looking with interest at the project. It's worked out very well so far. We have -- we delivered the pilot ahead of schedule, and we are on track on all of our other milestones. And looking forward, the JSE's infrastructure and the services that we provide are very infrastructure and technology heavy to the extent that we're able to continue leveraging AI in our other areas of transformation it will most definitely reduce -- have the potential to reduce costing relating to the number of coders that we have and also the number of testers. We are taking a very comprehensive approach, and I have no doubt that Valdene in her Vision 2031 will give you a lot more detail because we're at the beginning of this journey now. We've got detailed policy frameworks, and we've created an AI center of excellence, which is really focusing on the acceleration of the adoption of AI. We've also established an organization-wide productivity pilot, and that's under the leadership of Alicia, who's sitting in the front here to identify impactful use cases where we can build organizational expertise. And then the question from Mark was really around where are we going to use products, et cetera. there is a wide potential. At this point in time, we have initiated a proof of concept to automate listings requirements, processes where we are leveraging AI tools to automate the end-to-end process for issuer regulation, including the automated compliance analysis of listed company annual reports against compliance of listings requirements, which is a very exciting world. I have no doubt that there is possibility for this to expand into market regulation, insurance area and into a number of the other areas. I think we're also running a productivity pilot with Amazon Q Developer and GitHub Copilot. And that's supporting the accelerated software development and testing workflows. So as you can imagine, the largest or some of the largest costs in our projects that we execute on. And as far back as I can remember, the JSE has always been busy with a large-scale multiyear project. And these tools introduce the opportunity to rightsize and reduce and make those projects much more efficient, and it's really through agent AI capability. Of course, looking further ahead, there is potential to build AI into new products such as in Mark's area, the market data space, contextual AI, which market participants could use with JSE as the golden source. So we are very excited about the possibilities that AI holds, but it's a very nascent and early part of the journey, although less so with the BDA project. Romy Foltan: Leila I have 2 more questions on the chat if no one has in the audience. Leila Fourie: Anyone in the audience? Romy Foltan: Okay. We have a question from Adam. Leila Fourie: We'll take one in the front. Sorry about that -- if we can just ask you to state your name and where you're from and then your question. Mike Brown: Mike Brown from ETFSA. Just looking at the vision for the JSE, have you got any comments on gradually moving the JSE or graduating one way or another to a dollar-based -- U.S. dollar-based market. Significant amount of the trading that's taking place by local asset managers into global assets, being able to do that on the JSE would help as well as, of course, attracting international investors. If you got any comments on that? Leila Fourie: Yes, Mike, and thank you for asking that question. It was a topic that I didn't really cover. As some market participants may be aware, I chair and we convened an SA competitiveness committee with some of the top CEOs in the country. We've got Jannie Durand and Johann Holtzhausen, Michael Katz, Daniel Mminele, a number of very important influential participants on that group, and it's called Project Phumelela. And we, as a private sector have been working with -- under National Treasury's leadership to encourage and open up opportunities to bring dollar-based listing, collateral and various other initiatives into our country. We are very delighted and we strongly endorse and support the announcements made in the budget speech by Enoch Godongwana, where he is -- the National Treasury will be introducing the enabling regulatory. I'm going to call it infrastructure. It's called a synthetic financial center. Now what this does is it enables -- it's an enabling -- it will be an enabling policy or legislation that will enable the capital formation, trading, settling, collateral posting in hard currency. The first step is to set up this infrastructure. And the second -- the immediate first step after that infrastructure or alongside that infrastructure establishment is the enabling of our buy side, which we're very excited about for them to manage dollar-based or hard currency-based funds onshore. Currently, legislation prohibits that. Any dollar-based funds have to have a domicile outside of South Africa, which really compromises some of our buy-side participants. And so Project Phumelela and Valdene will no doubt take over from me as I step down. We have been lobbying and working very hard with the policymakers to try and encourage this -- we are hopeful that in the future, in the not-too-distant future, and I am engaging constantly at the most senior levels and all the way down into the more technical components of National Treasury to encourage this. Just to give you a sense of the scale, I think, and Russell will remember, we introduced the ability of the buy side to invest in dual currency or dual listed counters, which didn't count towards their foreign allowance. That completely transformed the market. That I think Russell was around -- I worked on that project with Srivan around 2004. It was a transformational policy. This will probably be the most transformational policy of the last 20 years. Just to give you a sense of the numbers, we -- research estimates that around ZAR 10 trillion worth of assets held by South Africans are invested offshore. Now if we, at this point in time, can start to attract those assets back into South Africa, it's job creating, buy side, sell side, clearing agents, custodians, all of those participants in the value chain will be able to participate in that flow. We are very excited and we are hopeful that the -- what is initially positioned by the National Treasury and the Minister of Finance as the synthetic financial center will very definitely take us forward. We were dropped from the position # 92 to 94 on the world competitiveness rating. That is behind Kigali, behind Mauritius and we need to do more as a country to attract and repatriate funds back into the country and also to repatriate other investors investing in South Africa. The National Treasury right now, if they issue dollar-based bonds, they go to Luxembourg and list on that exchange. We are very excited about the potential into the future of them listing those dollar bonds on the JSE and enabling flow through our local environment. So we welcome what National Treasury is doing, and it's an open-minded and important step in growing and internationalizing our economy. Romy Foltan: We have 2 questions from Admire Mulvani. He said, can you comment on the competition tribunal -- and is the group going to provision for a potential fine? And then the last question he has here is what is the listings pipeline looking like in 2026? Leila Fourie: Great. Who said that? Was it Admire? Romy Foltan: Admire, both questions. Fawzia Suliman: Thanks for those questions. So I'll take the question just on the Competition Commission and also whether or not we're provisioning for it. So the JSE confirms that it has filed its answering affidavit with the Competition Tribunal in response to the Comp Com's complaint referral arising from A2X's complaint against the JSE. The JSE categorically denies the commission's allegations that it has contravened Section 8C of the Previous Competition Act and Section 8(1)(c) of the Current Competition Act. So the JSE believes that the merits of the case is poor, and this is obviously on the advice of our legal counsel as well. In terms of whether or not we're provisioning, the requirements to raise the contingent liability is dependent on 2 things. And the first is the probability of the outcome of this referral. And then the second is the ability to quantify. Now you've asked the question in terms of which revenue lines we would apply this to. That is completely unclear. So the maximum is 10% and what we've seen from what's been levied before that hasn't happened. There's no clarity in terms of which line items it would be applied to. So it's impossible to quantify it at this stage. And given the low probability, our view in terms of the low probability of success, there is no requirement for us to raise a contingent liability. We've obviously discussed this both at Board level as well as our external auditors, and we haven't raised any provision. We don't believe there's a requirement. Leila Fourie: Thanks, Fawzia. Now coming to the question, Admire on listings. Last year, we saw a couple of notable listings, particularly Boxer and Optasia, both of which were signaling points that market conditions have changed. Listings are very much a function of market confidence and timing. And Optasia was the first fintech which was the largest in the EMEA region over, I think it was the last 5 years, and they chose to list on the JSE rather than on the LSE or the NYSE. And that is a very powerful vote of confidence. Boxer was equally well subscribed and very financially successful in their listing and in the re-rating of Pick n Pay. This year and looking forward to the year ahead of this year, we're very excited about Coca-Cola Hellenic Bottling, which will be the largest bottling company in the world looking to list here. Fidelity Security AME, which is a secondary inward listing. And then, of course, in the more medium term, companies like African Bank, TymeBank and Virgin Active are possibilities. And then, of course, Canal+, which we all know closed in their takeout towards the end of last year, and that would be a second listing. Graham, is this our time is up signal? I think the market is overheating. Romy, anything else? Romy Foltan: We have one final question. It's from Chris Logan. He said well done on the results and particularly to Leila for going out on a high. Lots of welcome talk about competitiveness. Any initiatives to get MST scrapped which penalizes smaller and sophisticated investors and not payable in the likes of NASDAQ? Leila Fourie: We are working with market participants and regulators on a number of initiatives like this. But at this stage, I don't think we've got anything -- any meaningful updates. And thank you, Chris, for your comments. We've thoroughly enjoyed working with you and appreciate your sentiment. Russell? Russell Loubser: Outstanding presentation. Well done, guys. Really -- fantastic to see. referred to a forthcoming. Can you shed any light on that? While I agree with that, your position on the provisioning with the Competition Tribunal, that's nonsense. Leila Fourie: Forthcoming in terms of what's forthcoming with me? Russell Loubser: For you. Leila Fourie: Oh, with me. Sorry, that sounded. Well, I -- firstly, perhaps -- and I think there are no -- are there any more questions? If there are none, I'll close with this. Perhaps if I can just say an incredibly warm thanks and sense of appreciation to all market participants, our shareholders, our regulators, our policymakers and importantly, our traders and back office teams. Without you, we have no market. It's been an immense, immense privilege for me, and I've thoroughly enjoyed every minute. So Russell is asking now what next. I am not -- although I'm stepping down, I won't be completely stepping away. I still intend to sit on a couple of boards, and I will contribute to academia. I have a role at the Global Henley Board, and I will continue in more academic pursuits. And some of you may know that I spend my weekends rock climbing, and I'm probably going to swap solids for liquids, looking to spend a lot more time sailing on the water, but also still very much connected to the country of my birth and then, of course, a couple of global roles. I will be supporting Valdene and Fawzia from the sidelines and watching with great joy as they build on this foundation and continue to take the JSE to even greater heights. So thank you. Thank you, Russell. Thank you very much, and please help yourselves to refreshments outside.
Operator: Good morning, everyone, and thank you for standing by. Welcome to Pet Valu's Fourth Quarter 2025 Earnings Conference Call. My name is Harry, and I'll be coordinating today's call. [Operator Instructions] I would now like to turn the call over to James Allison, Investor Relations at Pet Valu. Please go ahead, Mr. Allison. James Allison: Good morning, and thank you for joining Pet Valu's call to discuss our fourth quarter 2025 results, which were released earlier this morning and can be found on our website at investors.petvalu.com. With me on the call is Greg Ramier, Chief Executive Officer; and Linda Drysdale, Chief Financial Officer. Before we begin, I would like to remind you that management may make forward-looking statements, which includes guidance and underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties, which could cause actual results to differ materially from those expressed today. For a broader description of risks related to the business, please see our Q4 2025 MD&A, 2025 annual information form and other filings available on SEDAR+. Today's remarks will also be accompanied by an earnings presentation, which can be viewed through our live webcast and is also available on our website. Now I would like to turn the call over to Greg. Greg Ramier: Thank you, James, and good morning, everyone. I'll start by reviewing some of our key highlights from Q4 and 2025 before handing it over to Linda to discuss our financials and outlook for 2026. 2025 marked another dynamic year in Canadian Pet as macroeconomic uncertainties drove an environment, where devoted pet lovers required higher quality and lean more heavily into value. I'm proud of the decisive actions we took to meet this immediate need, providing the highest quality products and everyday value, especially through our proprietary brands. We also continue to invest in our future by strengthening our omnichannel offering through new stores and online delivery platform options, differentiating on quality with exciting new product introductions, enhancing our expertise with investments in culinary, all the while supporting the success and profitability of our franchisees. This comprehensive strategy is helping us grow share by staying focused on winning the monthly shop while we reinvest in our assets so that we and our franchisees can continue to capture profitable growth over the long term. Together with diligent cost control, we were able to adapt well to 2025 dynamics and deliver full year revenue and adjusted EBITDA within our original guidance ranges, while generating compelling free cash flow to fund record returns to shareholders of over $120 million in buybacks and dividends. Looking specifically at the fourth quarter, we saw heightened levels of consumer value-seeking behavior and specific competitor responses chasing value-driven sales. This, alongside with our everyday value and promotional plan weighed on our same-store sales growth. While the end result didn't achieve the bar we had set for ourselves, what this figure doesn't show are the encouraging underlying factors that tell us we've got the right strategy to win in this environment. First, we once again grew share with more devoted pet lovers choosing Pet Valu, especially for their monthly shops. Second, we saw momentum in our units per transaction or UPT reaching a multiyear high, a direct result of our focus on compelling targeted promotions and in-store execution. Third, our consumable sales were once again led by our proprietary brands, driving deeper customer loyalty. And fourth, our supply chain investments continue to yield savings, which together with good cost control, helped partially offset margin pressures and safeguard profitability. These trends show we are responsibly balancing near-term investments to maintain monthly food shops with our most loyal customers while leveraging promotions to add to the basket to drive UPT and get volume leverage through our world-class supply chain. We are strengthening the foundation from which our momentum will build as confidence and spending conviction improve within Canadian Pet over time. Let me share a few of our operational highlights from the quarter and year, which help support our continued resilience in making Pet Valu one of the strongest pockets of growth within Canadian Pet. Further increasing our competitive advantage as Canada's local and everywhere pet specialty retailer, we and our franchisees opened 14 new stores in the quarter, hitting our target of 40 stores in 2025. With 863 sites coast-to-coast, we have almost 4x as many locations as our nearest pet specialty peer, bringing us closer to our customers every day. We resold 8 corporate stores to franchisees in the quarter, showcasing ongoing strong interest in capacity from new and existing franchisees who form a core element of our continuing success. With over 2,200 inquiries last year, our teams are cultivating a robust pipeline of qualified applicants to whom we can sell stores to in the future. And in 2026, we will keep building on this strength by opening approximately 40 new stores across Canada, leveraging our strong balance sheet and deep real estate industry connections to find profitable new growth opportunities while other pet retailers may be retrenching. Momentum in our digital channel continued as we elevate and leverage our capabilities. In the wake of the success we saw in our limited time AutoShip offers for the fall, we thrilled customers with 20% off Click & Collect orders in December, driving a strong response and new customer acquisition. This offer really leaned into our strengths, providing us with a competitive edge online while driving traffic into our already convenience stores. We also successfully onboarded DoorDash and Uber Eats mid-quarter, expanding the reach of our ecosystem. Our third-party market share tracking shows that our online growth continues to outpace the channel, highlighting how our omnichannel model is meeting customers where and when they choose to buy in-store or online. We also advanced our focus to provide the best pet customer experience in Canada. With value at the forefront of consumers' minds, we delivered, leading with our proprietary brands. Following actions taken in the spring in our Performatrin Prime portfolio, we made targeted investments in Q4 across select SKUs in our Performatrin Ultra and Naturals brands to create compelling entry points for customers looking for high-quality alternatives at lower prices. By strengthening our proprietary brand portfolio, we are creating deeper customer loyalty, furthering our advantages in winning the monthly shop. Altogether, we are pleased with the performance in our proprietary brands, which increased roughly 200 basis points in unit penetration in 2025 with more progress to come in 2026. On the promotional front, we executed an exciting agenda with weekly deals, a stronger year-end Seniors' Day offer and the 20% off Click & Collect event mentioned earlier, all of which were supported by our 360-degree activation that helped keep us top of mind during the promotional holiday season. Loyalty sales penetration reached another all-time high of 88% in 2025 as our over 3 million active members responded to our expanded portfolio of brands eligible for our popular frequent buyer program. The data collected through our program provides a fantastic opportunity to deliver more personalized and meaningful value, and we're leaning into this more everyday testing breed-specific and cross-sell opportunities. And finally, we completed our initial rollout of our enhanced culinary experience in the quarter, bringing us to 120 corporate stores, along with an initial group of 13 franchise stores in 2025. Culinary continues to be one of our fastest-growing segments, and these stores are outperforming the company average in both culinary-specific and total sales. We are now beginning this rollout with our franchise network with roughly 40 projects planned in 2026. Turning to how we fortify strong wholesale and retail fundamentals. With the completion of our distribution network transformation, our supply chain teams have now fully shifted from implementation to optimization mode, focused on extracting further benefits from our investments. We continue to grow our wholesale penetration across our franchise network, in particular with our Chico franchisees, which helped sustain revenue growth ahead of system-wide sales again in the quarter. We believe there is still plenty of opportunity here and expect the gap between revenue and system-wide sales growth seen in the latter half of 2025 to be more indicative of what's to come over the medium term. For me, a particular bright spot in the quarter was the leverage we achieved in distribution costs, fueled by productivity and efficiency improvements. These are the benefits we envisioned at the outset of our supply chain transformation and are proving especially powerful in today's environment, enabling us to compete profitably against peers without this tailwind. We have increased our throughput by more than 60% from our pre-transformation baseline on a per labor hour basis, helping drive down variable costs while adapting to changes in an uneven demand environment. Our supply chain team is now turning their attention to opportunities in labor and transportation management processes to be implemented over the coming quarters and years, supporting a long tail of further productivity opportunities ahead. And finally, late in the quarter, we commenced initial steps towards the implementation of our new finance system, which will support our growing and evolving business alongside other systems investments we've made over the last several years. Linda will touch on this shortly. As we begin a new year, 2026 marks an incredible milestone for us, our 50th anniversary. That's half a century serving devoted pet lovers, half a century building Canada's leading omnichannel offering in Canadian pet and half a century of memorable moments. While we celebrate our accomplishments from the last 50 years, we look forward with tremendous excitement and anticipation for what the next 50 have in store for us, and that all starts with our plans for this year. To recap some of the highlights that I have provided above, we will continue to invest in our convenience through approximately 40 new stores and empower our online capabilities to meet or exceed customer expectations through our ever-improving omnichannel tools. We will continue to deliver everyday value through our high-quality proprietary brand products and new programs like our item of the month, while thrilling customers with exciting events like our participation in Tim Hortons iconic Roll Up to Win contest. We will continue to bring greater quality through innovation in both consumables and hardlines, delivering the breadth of products our devoted pet lovers expect to see. We will continue to evolve our in-store model with a phased rollout of our enhanced culinary experience within our franchise network and enrich our expertise through continued investment in our animal care experts. And we will continue to drive increasing productivity and benefits from our supply chain investments as our teams move fully from build to optimize, not only in our distribution centers, but also through further labor and transportation management investments. This will all support what we expect to be an exciting year, contributing towards solid revenue and profit growth. Before I pass the call to Linda, I'd like to note the restructuring charges we took at the end of 2025. Just as our environment has evolved over the last several years, so have the capabilities, plans and needs of our business as we chart our next chapter of growth. Together with Linda and our executive team, we carefully reflected on this and believe these actions will reposition resources and talent to both win in today's competitive marketplace and drive profitable growth over the long term. We're grateful for the work contributed by those that departed, and we are equally excited by the team and capabilities we're putting in place as we move forward. And with that, I'll pass it over to Linda to review our financials and 2026 outlook. Linda? Linda Drysdale: Thank you, Greg. 2025 once again saw evolving macroeconomic factors keep consumer confidence and discretionary demand suppressed in the Canadian pet industry. Despite these market constraints, the flexibility of our business model, together with the actions Greg discussed, helped deliver resilient financial results, all while advancing strategic initiatives that build shareholder value over the long term. For the full year, we grew revenue over 5% on a 52-week comparable basis, maintained healthy adjusted EBITDA margins of 22% and returned a record $121 million in capital to shareholders through share buybacks and dividends. Turning to the fourth quarter. System-wide sales grew 9% to $424 million. Excluding the extra week this year, system-wide sales grew 2%, fueled by our network expansion as we opened 40 new stores over the last 12 months, bringing us to 863 sites to post by year-end. On a same-store basis, sales increased by 0.3%, driven by growth in average basket and in particular, UPT, which is a direct result from the impact of our targeted promotions and strong execution of our in-store ACEs. While we continue to drive growth in needs-based consumables, the pace eased on a dollar basis in the quarter in response to intentional actions taken throughout 2025 to provide everyday value to devoted pet lovers and drive unit growth as well as higher promotion intensity than last year. Performance in hardlines remained relatively consistent with recent trends. Q4 revenue grew 11% to $326 million. Excluding the extra week this year, revenue increased 3%, once again slightly outpacing system-wide sales, fueled by continued growth in wholesale penetration. As we had indicated last call, the gap between revenue and system-wide sales growth was similar to that seen in Q3, and we believe this to be indicative of what to expect in the coming quarters. Gross profit margin, excluding nonrecurring costs related to the supply chain transformation, declined 90 basis points versus Q4 last year. We drove leverage in our distribution costs as a result of our recently completed supply chain transformation, but this was more than offset by actions we took to provide value to both devoted pet lovers and our franchisees. While this created noise in the quarter, we are confident they are the right actions to help position Pet Valu for long-term growth. One of the many ways we are supporting these investments is through responsible and controlled management of our SG&A expenses. Excluding share-based compensation and costs not indicative of business performance, our SG&A expenses were $54 million or 16.5% of revenue, similar to last year. Leverage in our recurring people costs and lower professional fees helped offset expected inflation in technology SaaS fees. Q4 adjusted EBITDA was $75 million, representing 23% of revenue, a sequential improvement from the third quarter and roughly similar to Q4 last year. Net income was $29 million, similar to last year. Excluding share-based compensation and items not indicative of business performance, adjusted net income was $34 million or $0.49 per diluted share compared to $32 million or $0.45 per diluted share last year. Now turning to our balance sheet and cash flow. We ended the year with $186 million of available liquidity, consisting of $36 million in cash and $150 million under our revolver. Factoring in our growth together with debt repaid in the quarter, our leverage now sits at 2.2x, down from 2.4x at the end of Q3. Fourth quarter net capital expenditures were $8 million as we rounded out our planned culinary renovations, reached our new store target and completed other maintenance projects. For the year, net CapEx was $39 million, slightly below guidance due to strong proceeds from corporate resales in the fourth quarter. This year marked a strong step towards more normalized net capital intensity now that we have completed our supply chain transformation. As I'll discuss shortly, we plan to make further progress in 2026, driven by prudent capital allocation decisions to generate shareholder returns. And finally, we generated $37 million in free cash flow in the fourth quarter, bringing us to over $104 million in 2025. We are pleased to once again deliver free cash flow conversion on a trailing 4-quarter basis of 40%, consistent with our framework. We returned $18 million to shareholders through share buybacks and dividends in the quarter. In 2025, we returned a record $121 million to shareholders, almost twice what we returned in 2024, which is a testament to our commitment to delivering value back into the hands of our shareholders. Now to our outlook for 2026. As we shared back in the fall, industry growth in Canadian pet is likely to remain constrained in the near term without a meaningful improvement to the macroeconomic backdrop. This is how conditions unfolded through Q4 and so far into early 2026 and remains our base case assumption for the year, an approach we believe is pragmatic. That said, the results we delivered in 2025 showed how our unmatched retail and wholesale assets, together with our deep customer data and investments in everyday value position Pet Valu as the best investable pocket of growth in Canadian pet. Within this context, our 2026 outlook is anchored in our continued leverage of these strengths today, while reinforcing our points of difference to create further opportunity over the long term. Please note that we will return to a 52-week fiscal calendar in 2026 compared to 53 weeks in fiscal 2025. On a 52-week comparable basis, we expect to deliver the following in fiscal 2026. Revenue growth of between 2% and 4%, supported by approximately 40 new store openings, flat to 2% same-store sales growth and slight increased wholesale penetration. Flat to slight expansion of our adjusted EBITDA margin, supported by leverage in SG&A and supply chain costs while maintaining our competitiveness and compelling value offering, and adjusted net income per diluted share growth in the mid- to high single digits as we move past the prior headwinds from the step-up in fixed DC costs. And finally, with respect to our capital allocation priorities for 2026, we expect to reinvest approximately $35 million into our business, consisting of approximately $20 million in net capital expenditures related to growth and maintenance capital in our physical assets and approximately $15 million in transformation costs expensed through our income statement. These transformation costs mainly relate to implementation of our new finance system, which we expect to complete in 2027. In aggregate, the $35 million we have earmarked for reinvestment in capital and transformation in 2026 represents a significant reduction from the heightened levels over the last 4 years as we move past the supply chain transformation. In turn, we expect this to help drive continued strong free cash flow conversion at or above 40%. We plan to once again return the bulk of our free cash flow to shareholders through a combination of dividends and share buybacks. We are pleased to announce our Board approved an 8% increase to our quarterly dividend to $0.13 per share, marking 5 consecutive years of dividend growth. At the same time, we've already taken action on buybacks under our recently renewed NCIB and plan to continue to do so throughout the year in a balanced way. Before handing the call back to Greg, I want to reiterate our conviction in the long-term resilience and growth potential of the Canadian pet industry. With half a century serving devoted pet lovers, we've learned how to adapt and succeed in slower growth periods like today while knowing these periods are finite as our industry has shown us time and again. Through prudent fiscal management and continued strategic investment, we've never been better positioned for when that time comes. With that, I'll turn it back to Greg for some closing remarks. Greg Ramier: Thanks, Linda. As we celebrate our 50th anniversary serving as a trusted partner and resource to millions of Canadian devoted pet lovers, I reflect back on what has made and continues to make Pet Valu so successful, our people. From our frontline ACEs and franchisees to our supply chain and field staff to our leaders in our corporate offices, each of us share a common desire, to help Canadians with the health and happiness of their pets. This forms the foundation for every decision and every investment we make. As we embark on the next 50 years building our growing legacy, we plan to remain true to that purpose. Thank you to all our people for all that you do. And with that, we'll be happy to take your questions. Operator: [Operator Instructions] Your first question today will be from the line of Irene Nattel with RBC Capital. Irene Nattel: I was wondering if we could just drill down into what's going on at the industry level. You say your share is up and yet you can all see that sort of the underlying performance is sort of -- we've got the headwinds in there. So what's happening to tonnage? What's happening in terms of channels? Are you losing share to other channels? And what's been the magnitude of price investment to date? And do you think you're where you need to be? Greg Ramier: Irene, it's Greg. I'll take that one. And let me start with a few consistent elements that we saw throughout 2025. Devoted pet lovers continue to seek both quality and value in purchasing for their pets in the quarter. We once again saw solid growth in our most premium food tiers, culinary and premium dry kibble. And this underscored the enduring appeal of specialty brands and formulations only found in the pet specialty channel. At the same time, we saw the pursuit for value continued with customers leaning into our events and promotions, leveraging our frequent buyer program and showing increased interest in our proprietary brands. That said, I'd point out a couple of nuances in the quarter, Irene. First, we did see the level of value-seeking behavior intensify. Consumers took more of their dollars and shifted them into periods of events and promotions. And I will say we had a very strong commercial program in the quarter, including the highlights I called out in my prepared remarks around the year-end Seniors Day and the 20% off Click & Collect offer. But this was also amplified by a general uptick in promotional intensity across the industry, particularly from some of our pet specialty peers. And second, throughout 2025, you saw us sharpen our everyday value positioning in consumables, particularly with our proprietary brands. Devoted pet lovers are taking note. It's been central to our share gains, but it also applied increased pressure on our same-store sales growth on a year-over-year basis. And this all said, I want to reiterate some of the encouraging underlying trends we're seeing in the business that set us up well for 2026 and beyond. First, we continue to gain share, primarily from pet specialty peers as we win the monthly shop through a compelling consumables offering and value. Second, our customers are adding more items to their basket, a direct result of our commercial strategy and in-store execution. And third, we're seeing our proprietary brands lead our growth in consumables, which drives better stickiness as these products are only available through us. Irene Nattel: And Greg, just as a follow-up, do you think -- with the investments that you made in pricing in 2025, do you think you're where you need to be? Or should we be expecting more investments in pricing in 2026? Greg Ramier: Irene, we're very happy with where we are from a value and pricing perspective, led with our brands, but also just value and pricing on key national brands. And you'll remember that started with our Performatrin Prime investments at the end of March and then a number of other investments, especially in key national brands through the summer. So very happy with how we show up to the customer and that we're able to meet them where they want us to be right now. Operator: The next question will be from the line of Martin Landry with Stifel. Martin Landry: I would like to dig a little bit more into the assumptions underlying your guidance for same-store sales for '26 of flat to 2% growth. I mean, that is lower than most of the inflation forecast that people have for '26. So further to Irene's question, is the category expected to be deflationary this year? Are you expected to reinvest in pricing? What's the breakdown between traffic and basket for that flat to 2% same-store sales growth? Greg Ramier: Martin, it's Greg. I'll -- let me provide a few high-level comments on 2026, and then I'll pass it over to Linda to go a bit deeper around some of the underlying elements. So when we think of the construct of the market heading into 2026, we're essentially expecting a similar environment to what we expected in 2025, which has proven to be the case year-to-date. Quality and value remain top of mind for devoted pet lovers. And given the persistent inflation in other areas of the household budget and ongoing uncertainty around economic growth and trade negotiations, we're expecting industry growth to remain tepid and the marketplace to remain competitive. In this context, we're entering the year with a strong understanding of what it takes to win in this environment and a solid track record from 2025 to back that up. We've got a strong set of plans and initiatives to support our continued growth. both in transactions and basket while delivering the benefits from our prior investments to deliver solid earnings. Maybe with that, I'll turn it over to Linda to talk about some of the deeper look at the assumptions. Linda Drysdale: Yes. I would just add that when you look at our top line same-store sales and revenue growth guidance, really similar to what we delivered in 2025 on a 52-week comparable basis, built on the expectations that Greg just described. And depending on several factors, including the level of growth, we expect flat to slight expansion in adjusted EBITDA margin, supported by SG&A leverage and supply chain savings. Once you consider the leverage on depreciation and interest expense, now that we've moved past the step-up in fixed DC costs, all that points to solid earnings growth. And I'll just have to finish by saying that with a normalized reinvestment level, we expect our free cash flow conversion to once again meet or exceed 40%, the bulk of which we intend to return to shareholders through buybacks and dividends. Martin Landry: Okay. And then just a follow-up maybe on the EPS growth of mid- to high single digits. Linda, what does that assume in terms of share buybacks? Linda Drysdale: What I would say there is just we intend to, as I said in my prepared remarks, would return a significant portion of our free cash flow to shareholders through share buybacks as well as dividends. Operator: The next question today will be from the line of Michael Van Aelst with TD Cowen. Michael Van Aelst: I just want to go back to your Q3 conference call when at the time you were expecting same-store sales growth to be similar in Q4 than it was in Q3 and Q3 was 2.3%. So let's call it, maybe 2% that you were maybe 1/3 of the way through the quarter at that time, maybe a bit more. So can you talk about the cadence of the same-store sales growth as you went through the quarter? So how it progressed and what changed to make you fall short of that expectation over the final 11 -- or sorry, 8 weeks? Greg Ramier: Thanks, Michael. It's Greg. In the quarter, we saw a few things. The -- if you think of Q4, there are a number of weeks and it builds through the end where both discretionary purchases and the -- and where consumers will be looking for value intensify. We saw both consumers being more value focused, both in picking promotions and then deciding to spend on discretionary through the latter half of the quarter. We also saw competition, especially in pet specialty, increase their efforts around promotions in the back half of the quarter. That was really how the quarter flowed. Michael Van Aelst: So were you running at 2% to start the quarter and then it fell off or you're expecting a stronger finish to the year? Greg Ramier: I'm not going to give you that -- the first part of that from a results perspective, Michael. But we did slow at the end of the year to land at 0.3% same-store sales growth. Still very happy with the units per transaction that we saw, which showed that the traffic that came through the door, we were very good at being able to build a basket around and we are happy with our market share growth through the quarter. It was a relatively tepid quarter for the whole industry. Michael Van Aelst: Okay. Because I mean, if you were anywhere close to 2% in the first 5 weeks, then you would have been probably slightly negative to finish. So I'm not quite -- I'm just trying to figure out whether that -- whether you're starting off the year below like with negative same-store sales trends and having to work back into the 0% to 2%. Greg Ramier: Michael, the way to think about Q1 so far is we're seeing a very similar environment with very similar results to what we saw in Q4. Operator: The next question today will be from the line of Mark Petrie with CIBC. Mark Petrie: I wanted to ask about the CapEx. And can you give us a gross number and then the implied refranchising activity that you have built into your guidance? Linda Drysdale: Sorry, Michael, I just -- Mark, sorry, I just want to understand the question in terms of the CapEx. Mark Petrie: Yes. Linda Drysdale: Well, $20 million of net CapEx was what's in the guidance. And we -- as I shared in my prepared remarks, I just want to highlight that we are looking at that, and we think it's appropriate to look at that, including transformation costs as well as net CapEx together. So we expect to invest approximately $35 million into the business, consisting of $15 million in transformation costs, $20 million in CapEx. And so that $35 million is down significantly from the last several years following, as you know, the completion of our supply chain transformation. And so I just want to call it longer term, while there are some shifts between CapEx and transformation costs year-to-year, we believe the aggregate level of reinvestment this year is a good starting point for how to think about that over the next few years. And I'm going to pass it over to Greg to talk a bit more about the stores. Greg Ramier: Thanks, Mark. Thanks, Linda. So Mark, from stores and a refranchising perspective, we had a very active resale program in Q4, and we had a relatively similar year-on-year resale program in 2025. You should expect something similar in 2026. For us, it's important to keep our franchise network in and around that 70% range. So you should see both a level of new store openings at 40 and that level of franchise penetration with an active resale helping support it through the year. Mark Petrie: Okay. So the franchise -- I guess that was my follow-up. So the right way to think about corporate store or franchise penetration is the percentage, not the absolute number of stores. And we should expect new openings to continue to skew to corporate with some refranchising activity. Is that fair? Greg Ramier: That's correct. Let me reiterate something as part of that question, though, please. So as you know, with our new stores, we have a best site first strategy, and we have the flexibility to lean into either corporate or franchise networks based on the location and making sure that we get the right real estate. What we've done in the last year and what I'd expect this year is we lean a little more heavily into corporate stores because of where we're looking to open. There still will be a mix between corporate and franchise in our openings. And we'll have a strong resale program like you saw in Q4 in order to make sure that we maintain that healthy balance. Ultimately, our franchise network will continue to be a critical part of our growth, both in new and resold. And we're happy with where we are right now on that. Operator: The next question will be from the line of Vishal Shreedhar with National Bank of Canada. Vishal Shreedhar: Just a clarification. Management for the guidance for 2026, you say we should look at it on a 52-week basis when we look at 2026 relative to '25. And you gave us the 2% adjusted figure, so we can multiply the lines by 0.98. But then you say EBITDA margin should be similar year-over-year. But is there any 52 week adjustment that we should apply to the EBITDA margin? Linda Drysdale: No. Greg Ramier: Not on the margin rates, Vishal. Vishal Shreedhar: Okay. With respect to the transaction, the modest transaction pressure that you saw in the quarter, given that the pricing initiatives that Pet has been taking, should we anticipate the results of the pricing initiatives to have benefited in Q4? Or do you anticipate transactions to improve through the year? And yes, I'll pause there. Greg Ramier: Thanks, Vishal. So we believe the transaction trends we saw in the quarter tie back to the promotional environment. And it was really key for us to win the right type of trips in this environment, so the monthly consumables focused trips, which are central to our DPL's habits and provide the best lifetime value. Our loyalty penetration hit another all-time high in the quarter of -- or sorry, in the year-end in the quarter of 88% and we have excellent visibility to this, and we're continuing to grow monthly shoppers. So we are happy with the types of shops that we won in Q4. What we did see from a basket and inflation perspective is, on one hand, you heard me call out the strong trends in -- that we're seeing in units per transaction, which is hitting multiyear highs, and that's a direct outcome, as Linda said, of the sharpened promotional plan around the basket and great in-store execution and draw attention to it. On the other hand, we saw deflation at a level similar to industry tied to our everyday value actions that we've taken through different segments of last year in our consumables portfolio, together with a higher promotional intensity in the quarter. We do expect to grow both transactions and basket through 2026. And you'll see us doing that leaning into the value investments we've already made using our proprietary brands and getting the most out of our promotional plans and loyalty program. Operator: [Operator Instructions] And the next question today will be from the line of Chris Li with Desjardins. Christopher Li: Maybe just first, a clarification question on market share. So based on your AIF, it shows that Pet's share continues to remain stable at around 18%. You said you're gaining share. Is the difference because the mass market is perhaps growing faster than specialty and therefore, on a total basis, your market share remains stable? Greg Ramier: Thanks for the question, Chris. So we did see share gains. It still rounds to the same number without basis points. We were happy with the share gains we saw both in the year and in the quarter, though. And we're really seeing us win that with the monthly consumables-based shop from pet specialty retailers. Certain other online retailers also gained share. And we -- in our view and our reporting, we showed that coming from the mass retail or mass channel. Christopher Li: Got it. Okay. That's helpful. And that was my follow-up. In the same chart, it shows Amazon gaining share. And I was wondering if you can elaborate a little bit on sort of what you're seeing on e-commerce. Obviously, you have a strong omnichannel platform. It seems to be performing better than what you're expecting. But just overall, just from an e-commerce shift perspective, is that something that for this year or in the coming years, you want to fortify so you're capturing your fair share of that market? Greg Ramier: Thanks for the question, Chris. So we were very pleased with what we're seeing in our digital channel and then really excited about what it will do for this year. Our online sales continue to outpace our company average. We continue to gain share in the digital channel, growing at or above what the digital channel is growing. And really, what's even more important is the role these capabilities and the capabilities we've built play in our omnichannel offering. As we've shared in the past, that customer visits our store and websites 5x more than an online-only customer and spends 4x more. So not only are they more engaged, but they're the most valuable, least price-sensitive segment in our customer base. We were happy with how our auto ship offers helped win subscriptions in the quarter, and you're seeing us continue to do that through this year. We are also happy with the start-up of two more delivery platforms -- and that just -- all three of them now provide a nice way for our customers to be able to find us, and they're a good growth engine for us that you'll see through all of this year. Operator: The next question will be from the line of Adrienne Yih, Barclays. Michael Vu: This is Michael Vu on for Adrienne Yih. First, I know you've emphasized growth in your proprietary brands as a sales driver. Would you be able to remind us of the percentage of sales from your proprietary labels now? I know you mentioned it grew 200 basis points in 2025. And then secondly, how those offerings impacted your margins? Greg Ramier: Thanks, Michael. It's Greg. So again, very happy with the growth in our proprietary brands, especially in consumables. The way to think about it is it's 1/4 of our sales to 25%. It is outpacing our unit and customer growth versus the rest of the store. And there is an approximately on average 1,200 basis points benefit in margin. Think of it as lower price for the consumer, better cost for us, therefore, equals better margin that we share jointly with us and our franchisees to make this a really profitable way to lean into growth. Michael Vu: Awesome. That's great to hear. And then I guess as a follow-up to that, do you see further headroom to expand the penetration of the higher margin specifically for the private label products? And maybe even the in-store services. I haven't heard about that in a little bit. So anything from there that contribute to 2026 performance? Greg Ramier: Michael, we do continue -- like I'm quite bullish on our proprietary brands, especially in consumables and winning the monthly shops through this year. So we will be lapping a number of the changes that we made as you go through the year. We're still seeing ongoing benefits from those everyday pricing actions and the store execution of them. We're also very focused in consumables on innovation within our Performatrin brands. So you are seeing us put more time and energy into that. The -- and remind me the second part of your question, Michael? Michael Vu: It was about the in-store services. I know that you're rolling them out more into the stores, and you've talked about in the past, so I just want to touch on that? Greg Ramier: Thank you. The very focused on dog wash is our primary service that we offer. We're still looking at potential other services, but there's nothing to talk or report about there at this point. Dog wash remains an important part of our offering to devoted pet lovers. It's a great way to interact with the customer in a nice service that differentiates us. It's in the vast majority of our stores now, and we've seen good uptake in it. Operator: The next question will be from the line of Irene Nattel with RBC Capital. Irene Nattel: I was just wondering if we could spend a minute talking about the discretionary piece of the business because in the past, it's been -- or at the time of the IPO, it was about 20%. Certainly, it's been under pressure. Can you talk about what you're seeing there? And also, I believe that you had some initiatives around refreshes or newness in the discretionary offering. Can you give us an update on that, please? Greg Ramier: Absolutely. Thanks, Irene. So maybe start off with just how the category is performing versus consumables. So as Linda shared in her remarks, we continue to grow our consumable sales in the quarter and -- but that pace eased a bit versus relative quarters, both because of our everyday value actions and the higher promotional intensity. Hardlines, though, we continue to see softness here. We would have talked about discretionary spend or improvement pausing in Q3. That stayed paused in Q4. So we saw very comparable results to recent trends, no real change in the actual results. What we are focused on in it because we do believe that hardline categories play an important role in our offering and that they should really complement our strength in consumables in a much better way. But with the pullback we've seen in discretionary spending, that space has certainly become more competitive. So as you asked, there are some things that we're changing to be better positioned to win in this environment. We're continually introducing better value, especially in products where devoted pet lovers are looking for that the most. And that's led by our proprietary brands. We're also continually refreshing products to bring in innovation and instill a sense of newness. We're leaning into national brands to do that more and more. And even in this quarter, you're seeing us introduce a number of new things that we're quite excited about what they will do. And thirdly, we're sharpening the promotional program. So that would -- an example of that would be we just launched an item of the month program within hardlines. It's really consumables-based hardlines and giving our stores and customers another reason to add that extra item into the basket and have a program around that, that we execute really consistently. So the work is ongoing. We'll provide more updates as we move through the year, Irene. Operator: With no further questions on the line at this time. I'd now like to leave the floor to Greg Ramier for any closing remarks. Greg Ramier: Thanks, everybody. Looking forward to speaking to you in May. We're excited about the plans for this year. I'll bring you back to -- we are very focused on growing our proprietary brands, our reach with our store network and taking advantage of the everyday pricing investments that we've made last year to win both the monthly shop and build a basket in 2026. So thank you very much. Operator: This concludes the Pet Valu Q4 2025 Earnings Call. Thank you all for joining. You may now disconnect.
Pieter Engelbrecht: Good morning, ladies and gentlemen. It's an absolute pleasure for us that you take some of your valuable time to give us roughly an hour of your time that we can tell you a little bit about what has transpired in H1 of this financial year. I'm going to just do a very quick synopsis, and then I'm going to hand over to Anton, of course. He'll take you through the detail, which is very important for you. I know the detailed numbers. I know you've read the sense and understand all of that, but he'll color it in for you to make sure your models are in place. And then I'm just going to end off by saying a little bit about what we've been doing. Not everything is perfect. So we'll also tell you what is not great. So the sales growth was 7.2%. You have read that. Now almost ZAR 137 billion for the half year, adding ZAR 9.2 billion in sales for the 6 months. The trading profit grown by 5.9% to ZAR 7.7 billion. And probably the most telling number is the fact that the South African supermarkets achieved a trading margin of 6.2%. And for a value trader, I think that is an outstanding number. And I want to, if I may ask, to just think about that number a little bit that it sits with you that, that is the one that we consistently and Anton will talk about it, where we consistently try and achieve. And that is not something that happens because we increase prices and -- it happens because of the efficiencies and how efficient this business is run. And that's my emphasis on the 6.2% margin. The ROIC has increased again. I know a lot of you are interested in that. We can go back in history. We can talk a lot about what if African never happened and all the investments we made there, the ROIC would have been probably much higher. But that's not the point. I think what is important is the fact that we're continuously improving on that number. From last year 17% to now over 19%, I think needs acknowledgment to the team. Thank you very much for that. Headline earnings per share up over 7%. If one thinks about the last decade, how many challenges there have been, macro challenges, et cetera, that Shoprite never failed to pay a dividend to its shareholders. And we are very pleased again to be able to increase our dividend payment by 7.7% this year again. In terms of operationally, what's happening in our business, again, for the sixth year in a row, the Shoprite Group have managed to gain market share to the value of about ZAR 3 billion additional. We're still growing customers. We're still moving volume. And we're serving more than 100 million customers in a month. It's an enormous responsibility. I tend to say that there's probably 2 most difficult businesses to please is airlines and the retailers because you have such a large number of customers to please everyone is almost not possible, but not for a lack of trying. We certainly try to please every single one. That's why we think about things like the ZAR 1 items that I will cover a little bit later on also. The 6 months was really marked by low inflation. And in the month of December, actually, the festive period, we went into deflation. There were like over 14,000 items cheaper than the previous year. And I know there was a lot of reports in the media around a very slow or subdued Black Friday but we certainly didn't experience it. We had a record Black Friday. We had a record festive season, so much so that the Shoprite Group have outgrown the market 5.3x during that period. We remain South Africa's largest employer. Again, I cannot almost remember a year that Shoprite did not increase its employment or number of employees. So it's 1,711. That excludes all the contractors. You must always remember that. There's no security, no cleaning, no trolley collectors. And all the peripheral businesses that benefits as Shoprite grows. Where are we in terms of our strategy. I said this to you for the last 10 years, I think. We don't do knee-jerk. We have a strategy, and we deliver on it as best as we possibly can with the best execution that we can. That makes the difference. Yes, we make small adjustments. Of course, we have to. Market dynamic changes. The one thing you will not hear us saying is trying to make excuses in terms of we never do make excuse, good or bad. We don't praise and we don't complain. We live what we are dealt with, we deal with the markets, and we deliver as best as we possibly can. And that is what 170,000 people of Shoprite does every day. One of the things that I'm extremely proud of was the efficiencies on the supply chain. Now we currently are running an on-shelf availability of stock of over 98%. Obviously, we have to carry a lot of stock in our distribution centers to make good for service levels that are not supporting the kind of volume requirements that we have during promotions. So at store level, I mean, that percentage is closer to 6%, which I think in global context are comparing quite favorably. In the past 6 months, we had our fair share of challenges in our non-RSA business units, well written and publicized around what happened in Mozambique. There are also good things. There's a big improvement on the electricity side in Zambia, which is our largest contributor in that segment. But for the 6 months, we did experience a lower level of return from our non-RSA business. Although we also have continued to rationalize, which Anton will clarify on Malawi and Ghana, but they will come through in his numbers when he explains about continued and discontinued businesses. Then this is what we do. We really live by this that we are uplifting lives every day. And we say that not only because of our customers, yes, that is our primary, primary focus that, yes, we want to improve their lives. And that's why we are thinking every day how we can lower prices, how we can make something cheaper, we change the packaging, the transport, whatever it is to make their lives better, but also our own people. That's the Shoprite people, the people on this side of the line. So at this point, it would be very wrong for me not to thank each and every one of the 170,000 people at Shoprite for what they do every day, uplifting lives. It is an incredibly hard job to do. But the one thing is for sure is that we appreciate it. And I think in most cases, our customers also appreciate that. So thank you to you all. I'm going to hand you over now to Anton, who I'm sure will make the numbers very clear and understandable for your benefit. So thanks, Anton. Anton de Bruyn: Thank you, Pieter, for that introduction. In my section of the presentation, I will focus on the top line drivers, the gross margin and cost dynamics within the business before touching on capital allocation and our outlook for the second half. As part of our enhanced segmental reporting, we introduced additional disclosures for the first time during this year. And here, you can go and look in Note 3 of the financial statements, where we've spoken about the expanded information and notably more about gross margin per segment. It's important to revisit certain factors that forms part of the first half of the 2025 base, which impacted some of our measurements. And here, I'm specifically referring to the impact of the Pingo increase in our shareholding as well as the discontinuation of our furniture business and then the closure of our Ghana and Malawi operations, where we saw the restatement of our 2025 financial year results. Throughout my section of the presentation, I will be referring to the results from continued operations. The Pingo transaction was concluded during the first 3 months of the 2025 financial year. And post the effective date of the acquisition, the revenues earned from Sixty60 delivery fees as well as the subscription income, which we reported previously as part of alt revenue are now classified as part of Supermarkets RSA sales. The associated cost of delivery was shown previously as part of other expenses, but is now classified as part of cost of sales, and you'll see that impact as well coming through in terms of our gross margins. This was a reclassification and on a restatement for accounting treatment. Other significant transactions the group embarked on was the sale of the furniture business to Pepkor, which included the RSA as well as the non-RSA assets, but it didn't include the operations that we had within Angola and Mozambique. These operations were classified as discontinued operations during -- in terms of IFRS 5, and we have subsequently restated our income statement numbers for the comparative period. In terms of timing to conclude on these transactions, especially relating to the RSA assets, following the recent court proceedings and the intervention by a competitor, the transaction is now expected to be heard by the competition tribunal in the coming months. We do not foresee that we will be able to conclude this part of the transaction during the 2026 financial year. When we then look at the non-RSA operations relating to this transaction, that was concluded as part of our H1 results and the proceeds from that transaction equated to ZAR 568 million, which we did receive in January 2026. Regarding the Mozambique and Angola operations, we ceased our trading already within our furniture Mozambique business during the second half of the prior financial year. And the Angola business is we are in the final stages of actually transferring the assets to a new operator. Then referring to our Ghana and Malawi operations, both were classified as discontinued during the second half of the 2025 financial year and this resulted in the restatement in our comparative results. In terms of the sale of assets on our Ghana operations, that's now concluded with the proceeds already as part of our base year or part of first half reporting. In terms of the Malawi assets also concluded on, and I expect that to be the proceeds from that transaction we will receive during the third quarter of our financial year. For a full analysis on the impact of the discontinued operations and the results relating to the discontinued operations, we've done a full analysis in Note 2 and 6 to the financial statements. Now Pieter has spoken to quite a few of these numbers in his opening comments. I would just like to highlight 1 or 2 of these. It's important to note that we did manage to contain our cost growth to around 6.6% on prior year. And that really helped us to achieve and maintain our trading margin of 5.7% for the first half. Adjusted ROIC and return on equity have shown consistent growth over recent reporting periods. And I think we're very happy with the fact that we could exceed our weighted average cost of capital that reported at 12.3% by respectively, 7.2% and 15.5% from a return on equity point of view. Now this would not have been possible if it wasn't for our disciplined approach on -- and our continued investment across our expanding store footprint, which I will touch on a little bit later, as well as our continued investment within our supply chain. And then, of course, our digital platforms, which we see continue driving value for the operations and the business. Very proud to be able to again declare a dividend where we saw an increase of 7.7% to ZAR 3.07, and that is very much in line with our growth, our 7.9% growth within our diluted headline earnings per share from continued operations. If we then turn to sales, Pieter will talk a lot about the sales and what is currently driving especially the sales growth within the Supermarkets RSA basis. Maybe just from an overview and top line point of view, we saw growth of 7.2% on the back of opening of 273 new stores during the last 12 months. with like-for-like sales growth of 2.7%. Within the RSA Supermarkets business, we saw a 7.1% sales growth to ZAR 115 billion, and that was on the back of the opening of 262 new stores over the last 12 months. Within our core brands, we saw a growth of 5.1% in the Shoprite and Usave, including our liquor business. And then Checkers, we saw a very strong performance in terms of that 8.9% growth, including our Liquor business. Important to note is that as part of our Supermarkets RSA segment and especially our Checkers and Checkers Hyper banners, we include our Sixty60 sales growth, where we have reported again a growth of around 34.6% with the number now measuring around ZAR 11.9 billion in turnover. If I turn to the adjacent businesses, and I mean, we've given you the list of all the various brands that are included as a part of that adjacent businesses. We saw a growth of 70.9% to very close to ZAR 1 billion for the first 6 months of the financial year. I think notably, when we also look at the store number growth is the improvement and the growth that we saw, especially in our Petshop Science business. Supermarkets non-RSA, very strong growth in terms of rand cent growth of 12.1% to around ZAR 11.5 billion. It's on the back of a like-for-like growth of 10.4% and then also constant currency growth of 9.5%. Internal food inflation measured across the regions were 3.2%. We opened a net 15 new stores during the 12-month period. We then look at our other operating segments, which includes our franchise business as well as our Medirite and Transpharm business units. Franchise growth was muted at 1.7%. And here, I have to flag, obviously, the lower inflation environment as well as a net decrease of 9 stores during the last 12 months. Turning to our Medirite and Transpharm business. We saw some very positive numbers and growth within that part of our business where we saw a growth of 7.9%. And again, Pieter will unpack that in much more detail as part of his operational segment. Now in the past, we've given guidance around space growth of between 5% to 6%. Our space growth in the current period was reported at 7.3% and that was really driven by the 4 hypers and the increase that we saw within the Checkers Hyper business units, where we now have 42 hypers. If I have to look at our store opening program for the second half of the financial year, where we plan to open 123 stores, I think we will return again to that 5.5% to 6% space growth. We saw a nice growth within our Shoprite, Usave and Liquor business within those banners where we added 133 stores and then also Checkers, we saw some nice growth of 76 stores added to the portfolio now of 714 stores. Within the adjacent businesses, we added 53 stores, of which 45 of those 53 new stores related to our Petshop Science business. Store openings for the second half of the year at this stage is planned for around 123 stores. Turning then to our total income, where we saw growth of 6.5% to ZAR 34.8 billion. Our gross profit increased by 7.1%. And very pleasingly, we saw that increase was in line with our sales growth of 7.2%. As I mentioned in my opening statement, we are now giving our gross profit and gross margin percentages per segment, and I will deal with that on the next slide. If we look at old revenue, we saw a decline of 2.1%, but that was really impacted as a result of the Pingo reclassification in the prior year 3 months. And again, we do that, and I will share a lot more information in more detail in the next 2 slides. We also saw a decrease in our interest revenue of about 9.8% to ZAR 101 million. That decline is mainly attributable to the maturing of ZAR 345 million worth of Angolan government bonds and bills. The positive news is that we did manage to repatriate $12.4 million of these funds to our operations in Mauritius, and it now forms part of our cash and cash equivalents. Important to note that the impact of this interest revenue decline also impacted the trading profit within the non-RSA segment, which I will deal with when we get to the trading profit slide. The majority of the share of profits within our equity accounted investments derive from our Retail Logistics Fund, which is the owner of some of our key distribution centers. And here, I referred to where we add also the Wells Estate distribution center in the last financial year as well as the expansion within our Canelands and Riverfields DCs. As part of our efforts to enhance segmental disclosures, we are, for the first time, providing the market with gross profit information at this level of detail. Supermarkets RSA operations increased gross profit by 6.5% to ZAR 29.2 billion, resulting in a gross margin of 25.3%. Now Pieter spoke about the value retailer in his opening comments. And I think here, I would like to add in terms of if we look at our RSA supermarkets operation from a value retailer point of view, the achievement of a 25.3% gross margin in a low inflation environment is a fantastic result for the group. This outcome would, however, not be possible also without the investments in our digital pricing optimization tools and this additional capital that we supported, the supply chain expansion. Additional to the low inflation environment, the decrease of 20 basis points within the Supermarkets RSA segment was also impacted by the fact that the full delivery cost relating to our Sixty60 operations now form part of cost of sales, where in the previous period, we only had 3 months included as part of that cost. I do, however, expect to see a smaller impact as we progress through the financial year. Gross margins in Supermarkets non-RSA did come under pressure, mainly driven by our business interruptions in Mozambique as well as continued shortages within foreign currency across the region, which limited the availability of imported product ranges. We are, however, pleased with the improved margins that we saw within the pharma operations that forms part of our other operating segments, and this really supports the planned expansion that Pieter spoke about within the previous results presentation within our pharma offering. We then turn to alt revenue. Excluding the impact of the Pingo reclassification we spoke about earlier, growth would have been 4.9%. We look at some of the key items within alt revenue, commissions received from our various financial service business units increased by 9.2% to ZAR 676 million. Despite a growing competition within the financial services market, our money market kiosks in the Checkers and the Shoprite stores have seen an increase in activity within the continued launch of new product offerings and the growth that we saw within the payouts relating to government grants, which obviously benefits the group over that period in the month. Our marketing and media income line and revenue line increased by 15.6% on the back of growth within our Rainmaker Media business as well as our Rex Insight platform. Operating leases and income increased marginally by 1.7%. Over time, we've talked a lot about how we also consolidate our property portfolio, and this was as a result of our continued sale of owned income-generating properties during the period. Franchise fees received decreased by 2%, noting the impact of the subdued current inflation environment on the franchise division sales, which obviously impacted that performance. The sundry revenue decreased by 14%, and that was really on the back of lower dividends received from our insurance sale during the first half, but I do expect that to actually rectify in the second half as our claims history or our claims -- current claims for the year is looking very positive. If we then turn to total expenses, where we saw a growth of 6.6% to ZAR 27 billion. Some of the major lines impacting our expense growth is depreciation and amortization, which increased by 7.9% to ZAR 4.2 billion. The growth that we saw is a combination of the increase in new stores that we opened during the last 12 months, but also our store renewals that's impacted by our right-of-use asset in terms of IFRS 16. Our aim and our target is still to be at a depreciation and amortization rate to sales of around 3%. Our current period, we were sitting at 3.1%. With the lower capital spend expectation, which I will talk about later in the presentation for the full year, I do expect us actually to come in target on that 3% depreciation to sales ratio. Important to note is the PPE that we use in terms of our stores. We saw a growth of depreciation of 8.8% to ZAR 1.9 billion. And then if I look at the IFRS 16 portion of depreciation, we saw a 16.3% to ZAR 2.6 billion. What is positive for me at this stage around depreciation is that we did see a decrease if I compare to the prior year, where our growth was around 17% to 18% to the current 7.9%, which is already showing that some of that expansion within the supply chain that we had to carry last year is now getting into the base. From an employee benefits point of view, our growth was 8.6%, and there were really 3 reasons for that. The main reason is expansion within the business. And again, I'm pleased with the fact that we could slow the growth down from the prior year 10.8% to the current year 8.6%. The group also continued to invest in our staff, where we spent more than ZAR 500 million in training and again contributed more than ZAR 50 million to the government-supported youth employment scheme. ZAR 155 million was also expensed in the current period in favor of our employees that forms part of our Shoprite Employee Trust with equivalent awards also being paid out to our non-RSA beneficiaries. If we then look at other operating expenses, where we saw a growth of 4.5%. Some of the major lines that form part of that growth is water and electricity, where we saw an increase of 17.3%. I've mentioned quite a few times in the past that I would love us to get back to that 2% water and electricity ratio to sales. But currently, we're sitting at 2.2%, and that was on the back of the 12.7% increase in our national energy regulator that obviously now forms part of our cost base. The positive for us is that we did have a reduction in our diesel costs, where we saw a reduction from ZAR 158 million in the prior year to ZAR 139 million in the current year. Other major expenses, we saw advertising costs increasing by 6.6% to ZAR 2.4 billion. And then repairs and maintenance costs increasing at a slower pace this year at 2.4%. Our cost of security increased by 12.3%, again, a result of our store expansion program, but it's still around 1% of revenue, which is our target for that expense line. If we then turn to trading profit, despite a 10 basis point impact or a decrease on gross margin through containing our costs, we did manage to achieve our 5.7% trading margin. A reminder that our trading margins within the first half always trades lower than the full year as a result of the lower gross margin within the first half. If I look at RSA growth, we saw 7.1% and our margins remained intact at 6.2%, which is very pleasing. Non-RSA did come under pressure in terms of profitability. We've spoken about the impact of the gross margin that came under pressure. Also from a cost base and a profitability base, the performance of Mozambique did come under pressure in the first half. And then I did mention earlier the third reason for the non-RSA operations showing a decrease was that impact of the interest revenue decline as a result of the repatriation of the funds and the maturity within the Angolan bonds and bills. Other operating segments saw a decrease of 1.6%, which was mainly as a result of the pressure that we saw within the franchise operations. If we then turn to net finance cost in terms of IFRS 16, that's really driving this cost base, but we saw an increase of 13.4% in the first half. And again, one of the main drivers within the finance cost growth was the 17.2% growth within our IFRS 16 lease base, where we saw the lease liability increasing by 15.5%. We've now seen that growth over the last 3 years within our lease liability, and that is as a result of the program of new store openings, and this year was 282 stores. Also the lease renewals. Now I mean, because of our big store base, we also have a big store renewal program that we do every year, and that unfortunately forms part of this whole lease liability growth rate. And then the third reason for the growth within that has been the DC openings and the supply chain expansion that we've seen during the last 3 years. The positive, obviously, is the impact that we saw in terms of a gross margin and trading profit margin impact as a result of that supply chain investment. On the positive note, the finance costs relating to our borrowings, we saw a decrease of 10.7% and that was as a result of a decrease in the prime lending rates, but also as a result of the lesser demand that we have on our overdraft facilities, especially during month-end periods. And you will see from a cash flow point of view, our cash generation within the business was stronger this year, which basically led to that lesser demand on overdraft facilities. We then turn to our cash and capital allocation. Cash generation within the group remained very strong as in our previous periods as well, with cash generated from our core operations at ZAR 13.3 billion for the first 6 months. Then we settled some debt. Part of that is our IFRS 16 lease liability of ZAR 6.2 billion. And then our capital spend in terms of our expansion as well as our maintenance capital was ZAR 3.9 billion for the first 6 months. The detail behind that, I will unpack in the next slide. We then paid dividends. Our final dividend for the previous financial year equated to about ZAR 2.7 billion, and that was formed part of our shareholder returns. If I then turn to working capital, we did see a positive move in terms of the working capital gains where we had ZAR 5.4 billion of positive move. ZAR 4.3 billion of that was as a result of the cutoff where we made creditor payments post our H1 cutoff date. But secondly, we also had a very positive impact in terms of how we look at our inventory, where our inventory grew and increased at a slower pace than the growth within sales, which also then gave rise to part of the benefits that we realized through our working capital. I did mention the impact of the cutoffs in terms of our creditor and tax, which equated to ZAR 5.8 billion. If we then turn to CapEx and our spend, was 2.9% of our revenue, and we spent ZAR 3.9 billion for the first half. 82% of that spend was allocated on expanding the business, of which the majority of these initiatives was focused on expanding our store base as well as upgrading our existing stores. And I mean, Pieter will talk about his views on how we think about our Shoprite FreshX stores, together with then also our investments into our digital capabilities and supply chain infrastructure. So most of the capital spend remained within South Africa, and that is directed at initiatives supporting our ecosystem. That includes ongoing investment in our information technology infrastructure to keep pace with the growth that we're currently seeing within the business. Management has a clear understanding of the information technology future demand and the associated investment required. And capital allocation will be adjusted accordingly over the medium term if there is a bigger requirement for CapEx from an information technology point of view. And here, I'm referring to various system upgrades or replatforming that needs to be done. If we then turn to inventory, we saw an increase of 3.3% to ZAR 33.7 billion. Excluding the impact of the various restatements that I spoke about in my opening comments, inventory increased by 4.5%, lower than our increase within our sales. The majority of the increase was within our RSA Supermarkets operations, where we saw an increase of ZAR 1.1 billion. The reasons behind this increase was as a result of the 7.3% we saw in space growth or additional 262 new stores. The higher on-shelf availability that we needed to support our Sixty60 business, where we saw that 34.6% growth. And just a reminder, again, our model is that we pick from store, and that's why we have that requirement for that higher on-shelf availability. And then the third reason is around the supply chain investment and the additional stock to obviously have stock availability within our distribution centers. Pleasing to note is that we managed to maintain our inventory to sales within the store portfolio at below 9%. Non-RSA inventory levels remained stable and the increase that we saw within other operating segments was as a result of our pharma expansion. And there, I'm referring to the expansion within our distribution center that we opened in Gauteng earlier this year. In conclusion then, maybe just some considerations in terms of how we look at the second half and what is our expectations in terms of the second half. Supermarkets RSA selling price inflation for January measured 0.7%. If we compare that to prior year, it was at 3.1%. And I think we're all on the same page that we do expect to see lower inflation for a longer period of time. In terms of growth from new business, as mentioned, we plan to open 123 new stores during the second half of the financial year. If I look at the income statement in terms of our trading profit margin, medium term, still a 6% trading margin target. But if I look at the current environment and the low inflation environment, I think more realistically, a 5.7% to 5.9% trading margin would be a good outcome for us. If we then also follow those principles in terms of how we look at gross margin, seeing that the cost of delivery as part of our Sixty60 platform and Sixty60 operations now forms part of our cost of sales. I do expect to see a slight impact for the full year as a result of that. And we're estimating gross margin for the full year to be around 23.9% to 24.2%. From a cost growth point of view, the staff cost growth, and I did mention that we saw that slowdown from the prior year from the 10.8% to the 8.6%, we are currently in negotiations again with the unions around the increases for our store staff. So that we will also communicate and discuss when we have more clarity on that. Depreciation, the lower capital spend for the full year, I do expect to see that we can come back to that 3% as a percentage to sales ratio. And electricity and water, unfortunately, I think that cost is going to continue to increase. And if we can get back to a 2.1% ratio, that will also be a very good outcome for us. From a finance cost point of view, especially the IFRS 16 leases, the Wells Estate distribution center was already part of the second half of the prior financial year, and it didn't form part of the base, which means that we will see a slower growth within finance costs in the second half. So I do expect to see an improved result already on that 17% that we reported in the first half. And then lastly, maybe just around our effective tax rate. I do estimate our effective tax rate to be between 27% and 28%. From an inventory point of view, we saw that improved result already in the first half. And I do expect to see that continuing throughout the full financial year, especially now that we have all the distribution centers in our numbers. And then from a capital allocation point of view, a reminder that we do have a current dividend policy of 1.75x of the full year diluted headline earnings per share from continued operations, and I do not foresee any changes to that strategy. In terms of share buyback mandate, it's still in place by the Board and management will execute on that as we see fit. From a CapEx point of view, if I look at the spend in the first half and I also look at the store opening program for the second half, I do expect us to actually see a slowdown in our spend within CapEx. That is definitely something that management is currently driving, and we're looking at a ZAR 7.5 billion increase for the full year, which will be lower than the 3% target that we set ourselves as well as our previous year spend. Pieter, that then concludes my part of the presentation and looking forward to hear from you around the operations and strategy of the group. Thank you very much. Pieter Engelbrecht: So thank you very much to Anton. As usual, you have given us a very clear explanation to understand the financials of the Shoprite Group, both the balance sheet and also on the cost side as well as the changes that happened in the comparable numbers. And I hope that you all are very clear now in terms of your own models how to look at the Shoprite business this year going forward. So I know we've repeated numbers a couple of times and the 7.2% growth in the revenue amounts to an additional ZAR 9.2 billion that was added in the 6 months. Now for me, I don't know for you, but for me, that's an enormous amount of money. But fantastic performance again from Team Shoprite, gross profit up by 7.1%. And there's a telling number, the gross profit. There is something in here that was quite problematic is service levels from our brand owners that supplies us has a direct impact on gross profit margins also. And we do find it these days because of the size of these numbers, you talk ZAR 136 billion for 6 months in revenue. It's very hard to consistently supply the Shoprite Group to maintain our world standard of over 98% on shelf availability. So the confidential discounts, the rebates, all the things that adds up into gross profit margin, I think an excellent result to come in at a 23.8% gross profit margin for the 6 months. Trading profit up by 5.9% with a trading margin of 5.7%. But then as I said earlier, absolute world-class South African trading margin at 6.2%. I cannot help to think that, that is absolutely a world-class performance. And that is not done by increasing prices. We were talking about deflation and the inflation was only 0.7%. That comes out of running an efficient business from the supply chain right through to deliver the last-mile delivery to our customers. Obviously, we've grown the EBITDA. We know what the effect is of IFRS 16 and the lease payments and that so EBITDA is these days, I find it a little bit different in the old days when it was purely cash flow because if you look at our cash flow that Anton just explained now, the cash flow is very strong. And the EBITDA shows a 6.7% growth. So just something that we have to take note of that things have changed. The CapEx spend, we've been spending ZAR 8 billion basically for the last 3 years. We are very tight on that CapEx spend. A lot of that spend have really put a difference between us and our competitors. Amongst that, if I can give one example, it would be our price optimization tool. And I said 5 years ago, if retailers are not going to invest in that technology, coupled with artificial intelligence agents, you're going to somewhere start to fall guy. The maintenance of the gross profit, the additional contribution of promotional items participation in the basket is testimony of selecting the correct items, the items that people are looking for. So here's a good example of previous investments, earlier CapEx that was spent that is now really starting to pay back, which we're very pleased about. And I told you about over 98% in stock on inventory. So if we, from an operational point, have to mark our own homework, what stands out is more customers, higher volumes, continued market share gains, meaning you're running faster than your competitor. You're gaining customers faster than your competitor. And you're giving the volumes to your brand owners, I like to refer to them as brand owners, not suppliers. That helps them to reduce costs and get efficiencies. So you think about it, 572 million customer visits, up over 5%, 0.5 billion people, 1.2 million additional customers per week. We can work it down by the hours that we trade and how many that is. It's just astounding for me, selling over 4 billion items, and I told you before, gained ZAR 3 billion in market share now for 6 years, uninterrupted every single month. I know we've mentioned the number before, but the 7.1% sales growth was achieved despite a declining internal inflation, and I'm going to get to an explanation, the difference between our internal inflation and official CPI calculation. There is quite a difference in the methodology. We really have been able to maintain the sales momentum, our customers with the selection of products and really the data, I must always come back to the data. It's data-led decisions that make us make better decisions. It's not the gut feel decision. It's fact-based. It's data-based. Also, on top of that, I've mentioned the price optimization tool, the gross margin stayed intact despite the fact that people are buying more into the promotional items. Our promotional contribution to the overall basket have now increased to about 40%. And that is something we will have to watch. But over so many items, you need technology and systems to assist you to make the right decisions in there. Liquor stores have done very well. We will probably have over 1,000 stores by June in both the brands, Shoprite and Checkers Liquor. Sixty60 remains a remarkable story, growing 34% on a very high base. And some people think it's not profitable. It is. There are many reasons why. And over time, we will also explain to you why. This model works so differently in our environment to that of our competitor. Now if we look at the market share on this graph that I'm showing you, there are 2 graphs here. So if one looks at the formal retail market in totality and the base have been elaborated. It now also includes some other competitors. The growth was ZAR 14 billion. And if you think of it that basically Shoprite took more than ZAR 9.2 billion of that and the rest of the market had to share the difference. And you can see it clearly. Graph on the left shows you that for the 6 months, Shoprite have outgrown the market by 2.3x. And then on the right-hand side, you can see every single brand has gained market share. So it's not a one swallow story. Yes, the growth in Checkers is higher than in the rest of the other 2 brands. But it's just because Checkers is the fastest-growing retailer in the premium food segment in South Africa. So I have already mentioned that we had a very good festive period that have continued subsequently. We've outgrown the rest of market during the festive 5.3x and well publicized that the consensus was that it wasn't a fantastic festive or Black Friday for the rest of the market. But for Shoprite, we're not in the same boat. We're very happy with the performance. And I've just spoken earlier about maintaining margin. Our customers win because there's deflation. 14,000 items, I mentioned in December was cheaper than the previous year. Of course, if you look at it in a monetary value, even though we're growing volume, of course, the monetary value is not there. Even though customers continue to buy the same number of items because of the deflation, your rand cent value doesn't support your volume growth, plus the fact that as said we've grown customers by 5.6%. So I just want to, for a minute, explain the difference between official food inflation, which you would read for December was 4.7% versus ours for the 6 months at 0.7%. The difference is that the official food inflation is calculated on a static basket based on 2023 life conditions, which at that time included, of course, our extensive load shedding. So for example, in that basket would be candles. But it is, at the moment, not that relevant anymore. So the way we calculate our internal inflation is we have taken this specific period, 56,000 items bought by customers. And remember, customers buy different things. It's actually a complicated number to calculate because you've got promos, you've got combos, you've got multi-buys. But in theory, to make it simple is we take the 56,000 items that's being bought by customers this year, and we look what was the price last year because that's the true inflation, the customer experiences not what we think they are experiencing because people down buy, people change brands. There's a lot of nuances that go into that number. And I do believe that our number is probably the most accurate true reflection of food inflation for the South African consumer. Now we must remember, there are monetary policies being made on these numbers. And I'm just putting up my hand here to say, we must be careful that we base monetary policy on numbers that are not 100% correct. or, let's say, the most sophisticated that we can do it. So what do we do? We're in the long game. Pricing has always been for us, paramount first. That is why when the customer wakes up and they didn't see an advert or a promo, they don't have to think where they have to go. They know where they will get the best value. That is what we do. But if you look at what I've just put there for you on the screen is the inflation by brand. And you can clearly see, of course, the more affluent customers in the Checkers brand, 1.9% inflation. And then you go down to Usave that goes into a negative. And a lot of that is driven by the prices of commodity type items, basic items because we over-index in a lot of these categories. In other words, we have a higher market share in these specific categories, and I put there some examples for you than our overall market share. So there's in a lot of cases, been double-digit negative or deflation in categories like potatoes and rice and so forth. And even through all of this, and I already mentioned the 14,000 items that was cheaper, Shoprite Group still managed to maintain its gross margin in such a strong deflationary environment in categories where we over-index. I think very good result. As you all are very aware that basically, Shoprite Group runs multiple brands. And on the supermarket business, in particular, we have very deliberately separated the Shoprite brand and the Checkers brand. But there are also other sub-brands, Usave, Liquor, the wholesale or cash and carry as we have today, which was part of the Massmart transaction. What I can say is all of these brands are doing their job. They deliver. Shoprite as a brand have added 5.1% to sales growth, amounting now to over ZAR 62 billion, added an additional ZAR 3 billion in sales in the last 6 months, continue to gain market share. But most telling is probably the 4.8% growth in customers, amounting to 670,000 additional customer visits per week. And I'm deliberately saying it slowly just that we, for a moment, pause and what does that mean for the entire value chain from our brand managers, that's our suppliers right through the supply chain, the service levels we have to give at store to get it on the shelf, the movement of the stock, the cost of that extra movement of stock. So for me, incredible that Shoprite is still able after 6 years to grow its customer base and grow its market share. I'm very pleased about this result. And -- that is what Shoprite does. Price is what we do, value is what we give. So when in doubt, you wake up in the morning, you need to go shopping, you don't have to think. You go Shoprite, you get the best value. No questions asked. And then the cash and carry business, I mentioned earlier, if we can bank percentages, we would be very rich, but one doesn't bank percentages. We bank the ZAR 3 billion extra revenue, but the 24% growth in the cash and carry, that's just a percentage. We can't bank that. But super performance growing. It's a new world for us and a lot of good potential that we see in that business. If we look at the Checkers brand, I just mentioned, remember, we're running basically 2 retailers, absolutely industry-leading sales growth of 8.9%. Checkers is now doing ZAR 52.2 billion in revenue, I want to just add for 6 months, if we compare that to our peers and added ZAR 4.3 billion in revenue in the last 6 months. Also multi-brand, Checkers, Checkers Hyper, Liquor Shop and then, of course, Sixty60. Checkers remains the fastest-growing grocer in the premium market and continue to gain market share. The reason why we picked Jamie Oliver was he is globally known for standing for healthy eating, healthy cooking. And then I often get the question, so how many of what we call the FreshX stores we're still going to do. So we basically 50% through the real estate, 188 stores being done. It doesn't mean all of the stores eventually will be done, but all of the stores will be of acceptable standards. They might just not have orange floor. And then probably the global retailers' dream is that customers start to love your brand. They become your brand advocate. Now I've looked around, you can correct me, but I have not found another country where an FMCG food retailer has achieved the position of being the #1 brand in the country of all businesses. And it stays for us a proud moment, and we will cherish that and try and keep there as long as we can. Our non-RSA segment, I did make mention to the 272 stores now. Sales growth was a very healthy 12%, but the profitability did suffer mostly as a result of what happened in Mozambique, a bit of headwind in Angola, but also some positive turn lately in Zambia, where as the Kariba Dam is starting to fill up that we have less and less load shedding. If we look at the other operating segment, the OK Franchise division had a 1.7% sales growth. If we look at the 9 stores were closed, it basically comes down to a like-for-like sales number. They also had the same as the rest of market had to contend with deflation and so not unpleasing result. There are some changes in the market around personal care, health and beauty. And we can see that also in our Medirite sales, hence, why we have decided to start opening stand-alone pharmacies with front shop, and they are performing exceptionally well. And then Transpharm, although only a 5%-odd growth for the 6 months, accelerated towards the second part. Remember, we went into a new distribution center in July and really done exceptionally well since we moved in there, and it's a much more automated facility. We've added 873 new customers to the overall customer base, which I'm very pleased about. I think I've said it now more than once. We are truly a customer business. This is how we make decisions from the customer backwards. And then we find out how to do it cheaper, not the other way around. So probably my pride and joy would be the slide that I show you now, ZAR 9.7 billion in instant cash savings at till point in the last 6 months. ZAR 9.7 billion we've given back to the South African consumer at till point on the things that they need. It's an enormous number. For me, it's incredible that we can actually afford to do that and still have spoken about all the things that's still intact, like the trading margin, the gross margin, et cetera. There's no question that Shoprite is #1 when it comes to price and value. And then this thing and I think 2 years ago, I told you the story about my visit to a Usave 1 day and this kid that they couldn't buy a sweet. And today, here, I can stand and say, in the 6 months, we sold 9.5 million items at ZAR 1. That is USD 0.06. And can you think like I 9.5 million smiles on a kid's face that bought a little packet of chips or chocolate for ZAR 1. Incredible. Then we even take the next step. 55.6 million items sold at ZAR 5, helping people survive. How else do you survive if you live on a ZAR 370 grant a month. You can with Shoprite ZAR 5 meal solutions. We've got over 30 meal solutions under ZAR 5. That is what we think. That is what we live. That's why Shoprite is what I call not just a retailer, it's an institution. If I just very quickly give you an overview where we currently are in terms of our strategy, I think it's now almost 9 or 10 years that I've been showing you this trolley with its 9 levers. And basically, it's stayed the same. I just want to give you assurance that we have a plan, we stick to our plan. We all understand what it is, and then we execute with excellence. That's what I think sets Shoprite apart. I spoke about that, I think, easily 9 years or so ago. I used the phrase to say, we're going to create a smarter Shoprite with more data to allow us to make better decisions. And today, I can really say to you the amount of decisions that are made on real data and what customers' behavior shows us in terms of price optimization, in terms of healthy eating, in terms of what we advertise is really, really sophisticated. And it learns by the day. I don't have to give you a lesson around artificial intelligence and the use thereof. But I can just tell you that we are using it. As you know, we've said before, we do view ourselves as a high-growth company. At least we try and achieve that. And we look at our data and in our world, we see what is it that the curve that people are on, what are their lifestyles currently. And hence, we've opened some of these adjacent businesses based on the data that we have how people behave, what they buy, what's happening in their lives. And the Petshop Science is a very good example of that. It was a greenfield operation that started, now 173 stores, making a good contribution overall, both in revenue and in profit, where we have noticed that there is a difference in the new generation of how they view pets and kids, et cetera. And very proud about the business, and it's performing very well. Amongst other, we've got Little Me, we've got Outdoor. After COVID, there was this tendency of people to just go more camping and outdoor and spending more time together. So there was just a gap in the market for that. And what we are trying to achieve is to increase our part of people's discretionary spend. The digital commerce really, I mean, I did make mention of Sixty60 already. You know the numbers, 20% growth, 18,000 jobs being created since the inception. We've got 10,000 drivers. And if you look at that fantastic graph on your right-hand side, I mean, it drives you to tears to see that for so many years, consistently, this business have just kept on improving. And a staggering number for me is that over 900 software upgrades, releases, patches is done in a year, improving this product virtually by the day. So we're not standing still. We don't say, oh, we've done it. It's happening. We're working on it every day. And the beauty of it is, and you will remember, I think it's now 2 years ago that I've said, we've set ourselves this task when we had to rationalize the African operations. We set ourselves a task to become really truly omnichannel. And that's exactly what's happening at the moment. So very soon on this one platform, you'll be able to navigate through all the everyday categories like from your groceries into your health and beauty, to your pet, to baby, it's really limited to your imagination. And all of this will be amplified and made very easy with the use of an AI agent just for additional convenience, making shopping really seamless. This graph will be my last. So apologies to my own people for some of the brands that are not on this picture. It's not that we've forgotten about them. It just gets busy. The idea is that you get this picture where this is what we've been doing for the last 10 years. We first laid the foundation with the core systems. We improved our distribution and supply chain. We then added adjacencies and the data. Then we added the extra savings to really embed our decision-making on our customer-driven data and then finally, to deliver all of that in a single omnichannel platform for not only ease of use, but just the convenience, the fact that if we can do all of that together, also the fact that we can bring it to you at a cheaper price, better value, that's what we stand for. That's what we deliver. So just having taken you through the steps, I want to say this is not impossible to replicate or to do. It's just very hard and it costs money. But this is sort of the story why the Shoprite Group can continue to deliver a certain level of customer experience and a value proposition to its consumers and the people that we serve. I really want to thank you for the time that you offered us and that you still feel it valuable to spend an hour to just listen what it is that we do and that we're still of interest to you. So thank you very much. We're going to give you some time now to quickly get your questions. And then Anton and I will take questions and answers. [indiscernible] in the last 6 months. So just very quickly while you're getting your questions and we're getting ready to answer you and you're free to ask whatever you want, is that the momentum from December continued. I think a 7.5% sales growth into January was excellent. If we -- and that's why I made that explanation of the inflation. If the true inflation was 4.8% or 4.7% it was published for December, then Shoprite would have grown 12%, double digit. But it is not the true inflation. We went into deflation in December. So that's why I made that point in the explanation between the difference of the calculations. So just to give you a context. To be able to -- if we theoretically have to say then the Shoprite Group grew double digits in the last 6 months, it is incredible. So once again, thank you to team Shoprite. So we continue to gain the market shares. I did mention, and I'm going to repeat it because I think it was just astounding that in the December and the festive month that the Shoprite Group managed to outgrow rest of market 5.3x. And that continued into January, outgrowing the rest of market 4x. But yes, I have to tell you, the other side is the deflationary or lack of inflation, let me call it that. So we ended up 0.7%, as you've seen on the numbers for the 6 months. Actually, the real inflation in February came down to 0.5% from 0.7% in January. So we don't see in the short term a change in the food inflation basket. And then immediately, I want to emphasize the ability through all of this to maintain the gross profit margins with all the things that I've explained. I'm not going to repeat myself again. So I mean, in the end, we can debate a lot of things about pricing, moving pricing. But we, first and foremost, are for the consumer. So we first look what is the consumer's world, and that determines our pricing, not the other way around. So Anton, I think that's my summary to say that, that drives everything we do. And there's going to be some green shoots there. So I'm very positive, I think, but now yesterday, the weekend, we've got this war going on in Iran and all that stuff. So the oil price quickly went up, and we were banking on a reduced fuel price. I mean, that would have given us a good saving on the cost line and the supply chain, which I'm very proud of. I think Shoprite probably runs the best FMCG supply chain in the world if we look at our service levels. So things are changing, but -- and I also -- I know hope is not a strategy. But if all the money that government have secured for development, et cetera, and if that goes into infrastructure, like ports and roads and water and electricity, all these things, that creates jobs and creates economy. And if that starts to happen, Shoprite usually is the first one to benefit. Small people, I'm a welder. So I get a little job to weld and then I can't do it all and I need a handler and before we know, I need a driver. And before we know we've got 10 people employed having a job. So I'm still positive that these things are going to come through. It does look like that there is an inclination from also government's point of view in terms of really that we have to get this economy going. Okay. So that's our summary, Anton, we can take some questions. Anton de Bruyn: Unfortunately, I'm not going to let you off the hook on GP, gross margin. There's quite a few questions. I'm not going to call out the names. There's quite a few questions around gross margin. So I think, Pieter, the main question, if I summarize all these questions is how do you think about gross margin? How do you think about promotional participation? So if you maybe can just give us color on that for the second half and how you see that play out? Pieter Engelbrecht: If I have to assume what people are thinking in that question is there's so much pressure in the retail market currently Everybody is under pressure. And specifically on margin, of course, you say must the competitors start moving their prices and does it give us opportunity to move prices? I go back. Consumer first. So yes, there may be, but not necessarily. That's the first part. The second part is, yes, we've seen an increase again in the promotional participation of items to the basket. And there is a level where it gets too high and it's not sustainable. You can't just give everything away. But if we go back to the CapEx that you said, we spent over the last 3 years, ZAR 8 billion a year, that's the tools that we've, amongst other, have invested to help us to make more scientific decisions around pricing kind of items, width of promotion. It's a science by itself not to take any credit away from the fantastic buying team that we've got and the people leading that. But the point is if you don't have the tools and you're not investing in AI and you're not using it, then the gap is probably going to widen. And the consumer will decide, you need to be the most relevant. That's why I made that comment. That's how I think. I don't say everybody thinks that way. I'm on the inside. But if I wake up on a Saturday morning, I say, where must I go to get the best deal. I'm going to go to Shoprite or Checker. Usave is actually by far the best deal if I'm on the budget. So that is -- that's my answer to the margin. If you wanted me to say, do we think we can increase the margin even further? I'm going to go back to what I always say is I think we can maintain our margin, but be very careful to increase your margin. I mean, for Shoprite Group to run the highest gross profit margin of all retailers in South Africa and still be the cheapest, that is what we need to protect, first and foremost, not just to drive margin. Anton de Bruyn: So I think, I mean, maybe just to add to what you're saying and that there's also a question around trading margin and the guidance and the medium term, we spoke about that 6%. So I mean, if we really look currently at the trading profit and trading margin per segment, we can see that we've maintained our RSA Supermarket trading margin at 6.2%. So the outlook still for us is how we look at the RSA trading margin, and we're currently maintaining that trading margin. There is some pressure within the non-RSA segment. And then we do expect a better performance in terms of the other segments for the second half. So that's really driving also our medium-term targets around how we think about trading margin. Pieter Engelbrecht: And the non-RSA, I mean Namibia is basically in the same position as Africa around the deflationary environment. The [indiscernible] was thrown under the bus. Malawi -- not Malawi, Mozambique, we all know what's going on. South has got the floods. North has got ISIS. And then as I said, a bit of a headwind in Angola. But I mean, it will come right. Anton de Bruyn: So you did say in your gross margin discussion, you talked about AI. So I mean, Ya'eesh, you had a question around how the group utilizes AI. And so maybe just share some of your thoughts in terms of what we do or are you seeing the impact of AI in the business? Pieter Engelbrecht: Okay. No, I like that one. I'm very excited about AI. We started this year, in particular, actually 4 years ago, we already started to get the right people in place data scientists, people that understand the layers of data because remember, you've got agentic that you compete against, and there will be a consumer agent and there will be a retail agent in our world. And if your data sets are not set up correctly, you may just miss a question. You may not be in the answer. It's very different to -- if you do a Google search today versus speaking to agent. And we have really embraced it. I think it's what we said a couple of years ago. It's not what did I say? It's not a race for space, it's a race for reach. And this is almost the same that I feel about AI. And so we have started this year. So we have -- yesterday, actually, I looked at the first version of the dashboard. We can see exactly who's using it, who's not using it. We have used a couple of agents, Copilot, Gemini. Google looks a little bit strong at this moment. So we are actively embracing AI across the entire business. We're measuring who's using it. I actually, at some point, said, I must be careful because it can become addictive that you keep on asking questions and you need to deliver on something. You can't ask questions all the time. And we might have to limit people's time that they spend on it. But for now, I can tell you that it's definitely something that we take very seriously and will embrace into our business. And yes, it's not that like the Cisco CEO said, AI is not going to take people's jobs, but people that uses and knows how to use AI will take your job. Anton de Bruyn: Strong point to end. If we maybe just come back to inventory. We had quite a strong numbers in terms of inventory, also a better impact in terms of our working capital. Do you see that actually going into the second half as well? Do you see a better performance in terms of our stockholding? Pieter Engelbrecht: You asked me the question yesterday, I would have said yes immediately without thinking. Now today, I have to say 162 containers are stuck in the Suez Canal currently. So I don't know exactly what the impact of that would be. But remember, these are businesses. They make plans. Maersk has already decided to come around Cape Town not going through the Suez because it's closed and they offload. And so I don't think it's a concern. I think the number -- if people think -- but how did we maintain a 98.5% on shelf availability and reduce the inventory basically? It's because of the decisions -- well, the new DCs and the decision to also serve inland from our distribution centers and rather incur the additional fuel cost than compromising the on-shelf availability. And we're seeing a benefit of it. Anton de Bruyn: We see it in our GP as well. Maybe we've quite a few questions on IFRS 16 and what I mean by normalization. So we've already seen an improved growth rate in terms of that IFRS 16 lease liability and costs. The main move for us last year and why we saw such a big growth was as a result of now 2 to 3 years of continued increases in our DC space. So obviously, as soon as a DC comes in, that's got a massive impact in terms of our leasability. Our DC leases are 20-year leases. So you have to acknowledge a 20-year lease, and that's why you see that movement in that lease liability. I think what will bring our total finance costs line down, and we have already seen it in the first half is also the decline in our borrowing costs. I mean our strong cash flows that we generate has made us less dependent on overdraft during month-end period. So we're already seeing that benefit coming through. Like I said, I think we will see a much better -- also a stronger result in the second half in terms of our borrowing cost. So yes, I mean, I hope that answers the question around IFRS 16. Pieter Engelbrecht: You maybe just think of something is that we're even in such a privileged position that we can provide what I call our brand managers, suppliers, sometimes with bridging finance especially over month ends in high promotional periods when cash flow is tight. I mean that's a fantastic position to be in for the retailer. Anton de Bruyn: Pieter, I mean, I think we've answered most of the questions. The one that I'm going to maybe ask you to close out with is there's questions around you've spoken about the profitability within Sixty60. I know you always talk about that omnichannel customer. Maybe you just want to talk about we could see the trading profit and trading margins remain strong. Maybe just talk about that in terms of how you think about the Checkers and the Shoprite banners. Pieter Engelbrecht: Yes. I think the answer goes back to what I said around the omnichannel. I mean we really truly want to be a full omnichannel retailer, which means I think somebody asked a question somewhere around can we provide our Sixty60 service to third parties and other retailers. And so yes, we could, but it's not on our plan currently. We've got too much to do. I mean all the businesses that we have in the group, you know that we are a multi-brand retailer. We still have to add all of those functionalities onto the omnichannel. That process is running flat out. So that's what we have to deliver first. And I made the comment in my part to say that we're trying to increase our part or share of the discretionary income or spend of customers. Now that's exactly what Sixty60 does. And -- I mean, we've added now pet and the rest of the businesses units still has to be added until we've got a full omnichannel. And we're going to -- we said -- we decided rightly or wrongly that we will give you more color at year-end presentation around the adjacent businesses, what we do in financial services, what we do in pharma care. There's a lot of things happening at the moment. But in terms of the omnichannel, the first target, obviously, is to get as quick as we can the entire business unit of the Shoprite Group onto that platform. And there's agentic that needs to be implemented to make it easier, faster. And that's why I mentioned the over 900 software releases. It's an enormous amount of work that goes in there. It's a lot of stuff that I don't even understand, but I know it works. That's more important. So yes, that's the story, Anton. Anton de Bruyn: You can close. Pieter Engelbrecht: Well, then if that is that, all good. Thank you again, everybody, for your time. It is not taken for granted. I know you've got many businesses to look at. You've got many choices of making investments. We hope that we have given you the best clarity of what's happening in these walls every day. And I certainly am very pleased with the result, given the whole market. You know we never make excuses. So I hope that we gave you some clarity. And thanks a lot. Have a fantastic day. We'll make some money.
Russell Loubser: Afternoon, everyone. I really feel that I'm privileged to welcome you to -- it sounds like I've got a little bit of an echo here. okay? Thank you. Well, it's really a great afternoon in the sense that I believe we have a management team that's going to present some sterling results on the one hand. On the other hand, it's really a sad day, which is why I'm standing here because it's Leila, our well versed CEO, forthcoming and last set of results. Leila has obviously had a number of stints at the JSE in different capacities with the final one being as the CEO over a period of almost 7 years. It feels like you came in yesterday, but it's been almost 7 years. And during that period, I have had the privilege and the honor to work with Leila. And I think it would be an understatement to say it's been a period full of cross-pollination, incredible amounts of energy and passion. And as a result, so much was achieved. I will have the opportunity to say more this afternoon, so I don't want to make this a long speech. But suffice to say that on this very last swansong, on your results, Leila has made an incredible contribution to the JSE. Whatever matrices you may want to look at, and I don't want to bore you with a lot of data, we have achieved a lot, firstly, in her leading the modernization of the stock exchange, leading to increased diversification of revenues and operating income in the company, not to mention a whole range of initiatives where she took center stage, some of them really in partnership with government, looking at financing SOEs, Project Phumelela, which really had a very significant role in really looking at the financial architecture and ease of the financial services in this country playing a very, very optimum role. It's a long list. But it's really just to say, Leila will discuss this a little bit more this afternoon. On behalf of the Board, -- and I have no doubt, I'm also speaking on behalf of 600 staff at JSE and the other subsidiaries. You're going to leave an enormous void. And that void is not merely one of strength of leadership, intellect and so on, but also the human aspect of it. which I think is absolutely fundamental. And in fact, without it, we would not have achieved most of what we've achieved. So as I said, it's not to make a long speech. It's just to say it is your final results. You may even have a forthcoming, so we don't want to be too clairvoyant about the future. But thank you very much. Thank you very much. We'll say more later on this afternoon. I think it's the opportunity now with Fawzia to really have your place in the sun quite rightfully given what you're just about to present. So thank you very much. And maybe I should also say a minute to say, Valdene, welcome. And you seem like you're sitting in the hot seat, but I'm sure you do justice. So thank you very much. Leila Fourie: Thank you very much, Chair, for your very generous and kind words, and welcome, everybody, both online and in the room. In fact, we've had a fantastic turnout. I think I should be bowing out more often. It's absolutely wonderful to have my predecessor and a stalwart in the industry, Russell Loubser joining us in person today and Erica, who's been the backbone of the broker community for many years, even Selvan, who is the backbone of BDA and worked alongside me for many, many years. I'm going to -- I see my notes okay. So welcome to the JSE's Full Year 2025 Financial Results Presentation. The JSE enters 2026 with improved performance and sustained strategic momentum. This reflects both an improved operating environment and the cumulative impact of disciplined execution over the recent years. Today, I'm going to begin with an overview of the group's performance and the key drivers behind our results. Our CFO, Fawzia Suliman, will then provide a detailed breakdown of our financial results, and I will conclude by reflecting on the strategic progress made since 2029, what it means for the positioning of the exchange today and how it shapes priorities going forward. We'll then open the floor for questions. The JSE delivered record results for the year. Operating income increased 14.2% year-on-year, driven by growth across all of our core segments and sustained equity market activity. Importantly, 35% of our operating income is now coming from nontrading sources. This structural shift improves the stability and the predictability of our revenue base, allowing the exchange to perform more consistently through market cycles. NPAT was up 16.7%, and it crossed the ZAR 1 billion mark for the first time, reaching an all-time high, while we continued with cost discipline and operational efficiency, and our efforts have resulted in an operating leverage, which we're very pleased with the end of the year of 5.9%. Headline earnings per share for the period were ZAR 13.29, up 17.7% year-on-year, while our ROE increased to 22% from 20.2% the year prior. Reflecting our improved profitability and cash generation, we increased the total dividend to ZAR 10.61 per share, up 28.1% compared to 2024. Operational resilience remains a core asset of the exchange with market availability of 99.96% and only 3 priority 1 incidents during a year of elevated trading volumes. In fact, we haven't had an outage in the equity market, and I'm sure Russell will remember our outages in 3 years, which is quite a record. Overall, the group has delivered a robust financial outcome characterized not only by growth, but by continued improvement in the quality, durability and diversity of our earnings, alongside sustained progress against our long-term strategic agenda. Turning to the macroeconomic and market context of this year's performance. South Africa's capital markets experienced a meaningful re-rating through 2025 and into early 2026. This reflects a combination of improved domestic reform momentum, renewed institutional credibility, supportive commodity dynamics and heightened global capital rotation towards emerging markets. These developments have contributed to the reassessment of South Africa's risk premium and supported renewed international appetite for South African assets. This re-rating was reinforced by several milestones during the period, including South Africa's exit from the FATF grey list, a sovereign rating upgrade, continued fiscal consolidation and progress across key economic reform programs. South Africa's equity markets responded accordingly, delivering outperformance relative to global peers on the back of increased prices for precious metals, a weaker U.S. dollar and as markets reassessed South Africa's risk premium. Between the 1st of January 2025 and the 31st of December 2025, the All Share has grown by 57% in dollar terms, outperforming almost all of global market equity indices, supported, of course, by a combination of strong overall market performance, commodity-led gains in major sectors, improved macroeconomic sentiment and structural enhancements to the market infrastructure and listings that support investor interest. As you can see in the graph next to that, this trend continues this year. Market activity increased materially with average daily value traded growth of 41% and 30% in quarter 3 and quarter 4, so a much stronger second half than first half, ending on 32% for the full year. This momentum was supported by robust performance across key large cap and resource counters, reflecting improved earnings expectations and renewed investor confidence. Notable gains were recorded across several of the heavyweight constituents, including from mining Sibanye, which was up 304%; AngloGold Ashanti, which was up 240%; MTN Group up 84% and Prosus, which was up 37%. Market participation was particularly active during peak trading periods between April and September. While our nontrading -- our nonresident participation increased materially with foreign investors now accounting for 32% of our holdings, up from 29.3% in the prior year, reflecting, of course, international investor confidence in South African equities. Consistent outperformance in 2025 has supported South Africa's increasing prominence within our global emerging market allocations with pleasingly, the country's weighting in the FTSE Emerging Market Index rising to 4.29% from 3.16% at the end of December 2024. As of early 2026, the JSE is the 18th largest market by market capitalization in the world, and that's up from 20th in 2029. Taken together, these developments reflect a broader structural reengagement with South African capital markets. Turning now to Slide 6. We've seen a high correlation between index valuation and value traded. This is an interesting long-run graph, which indicates that market activity has surged since early 2024 with strong growth in indices, market cap and value traded. And this echoes time when Russell was at the helm in the mid-2000s during the commodity-driven boom. Although recent gains signal improved sentiment, it is too early to determine whether these gains are cyclical, structural or a combination of both. Given the risk of a reduction in trading activity or an external shock as we're experiencing as we speak, we assess the downside scenarios and stress test impact of lower value traded. This will guide our cost management responses and also our diversification efforts. ADV growth in -- between 2025 and 2026 marks the strongest momentum since the 2006, 2007 period, following which we had periods of stagnation. While history indicates a precedent for this multiyear growth trajectory, the JSE remains vulnerable to potential global and domestic shocks that could rapidly affect volumes and confidence. Strengthening resilience, preparing for potential reversals in sentiment and accelerating diversification into nontrading revenues remains a key strategic focus in improving the quality and durability of earnings. Turning now to Slide 7. The market momentum created a supportive environment for the exchange, which entered a period of higher quality earnings in terms of our model. Over the last 6 years, we've deliberately diversified revenues, and we've increased our nontrading base. Non-trading income has grown materially over the period. You can see 92% nominal growth. And the model now carries a larger annuity style component alongside our trading activity. Elevated market participation supported a 14% increase in operating performance, while nontrading income grew by 5%. In the first half of the year, we had a more subdued growth mainly due to the higher base in JIS in the prior period and also the lower interest rates in that period. Nontrading income, which includes market data fees, margin income, colocation and listing activity remains an important part of our business, and it ensures that the JSE continues to perform systematically across all market cycles. Now moving to Slide 8. You'll see that the activity across the JSE accelerated across all areas, reflecting the exchange's role as a systemic anchor in increasingly complex macro and geopolitical environments. Stronger participation across asset classes highlights a deepening investor base and the resilience of South Africa's capital markets. Equities saw the strongest uplift with value traded up 28% year-on-year. Higher billable equity volumes were supported by a global commodity resurgence, a more stable domestic backdrop and a recovery in investor sentiment. This performance underscores the continued relevance of South African corporates to global capital flows. Derivatives markets delivered a resilient outcome, benefiting from elevated volatility and a persistent demand for hedging strategies. Equity derivatives grew 14% as value traded increased 15.4% with index futures dominating activity. Similarly, financial derivatives advanced 15%, supported by solid appetite for bond-related instruments as rate uncertainty remained a key global theme. Bond market activity was buoyant with nominal value traded in repos and standard trades rising 9.7% Net foreign flows reached ZAR 122 billion net inflow, up sharply from the ZAR 82 billion in the prior year, driven largely by attractive SA yields amid global rate volatility and a higher for longer inflation narrative. Despite ongoing geopolitics and domestic macro risks, demand for South African bonds remained stable, supported by foreign and local investors. Currency derivative volumes rose 32%, heightened by the ZAR volatility, which was driven by U.S. tariff developments and uncertainty in the GNU and this increased the need for tactical hedging, as you can imagine. Interest rate derivatives saw modest growth with contracts and value traded up 1.2% and 7.2%, respectively. Commodity derivatives experienced a bit of a divergence. Physical activities increased by 26%, yet contracts traded declined by 7%, reflecting weaker maize export demand, firmer local currency and softer global prices. And you'll see a bit of a recovery from the first half year performance in that asset class. The primary market delivered steady growth with revenue up 4%. The upcoming pipeline includes several significant names across our sectors. Moving now to Slide 9, and I think this is where Selvan wakes up. The broad-based growth in trading activity and asset classes that we've just discussed places increasing demands on the JSE's infrastructure. Ensuring that this infrastructure can support higher volumes, greater product complexity and deeper participation is central to sustaining market resilience and future growth. A key component of this investment is the modernization of our broker-dealer accounting system, or BDA platform, which is a foundational program that underpins the next generation of post-trade infrastructure at the exchange. In 2025, we successfully completed the pilot phase ahead of schedule, validating the quality and stability of the migrated code, and we commenced full-scale modernization. The bulk of the transformation and testing activities will continue through 2026 with implementation targeted for 2027. To date, approximately 2.2 million lines of code have been modernized with no critical defects identified, which is really an encouraging indication of robustness and quality of the transformation. Delivery of the remaining modernized components is scheduled for the end of the first quarter of 2026. This will be followed by extensive integration, verification and mass testing across all functional areas alongside ongoing engagement with market participants to ensure operational readiness ahead of our implementation. Subject to the successful completion of these testing and readiness phases, the modernized Java-based BDA platform for the equity market is targeted to move into production in 2027. Strategically, this transition enables the JSE to support higher trading volumes at lower cost, introduce new functionality more rapidly and enhance reporting and analytics capabilities, enhance operational resilience across the post-trade environment. And with that, I will hand over to Fawzia for the financial review. Thank you, Fawzia. Fawzia Suliman: Thank you, Leila, and good afternoon to everyone. Looking at our financial performance, operating income increased 14.2% year-on-year, reflecting higher market activity and solid performance across core segments, including information services. OpEx increased 8.3% year-on-year. And excluding costs linked to higher trading activity, underlying OpEx growth was within guidance, and the group delivered a positive operating leverage of 5.9% as we continue to adopt a balanced approach between strategic investment and operational efficiency. EBITDA margin improved by 1.2 percentage points with the EBITDA margin improving to 38.7%. Net finance income decreased as expected to around ZAR 197 million as a result of lower interest rates. And overall, our NPAT increased 16.7% and our HEPS increased by 17.7%, reflecting both operational delivery and disciplined cost management. Moving on to cash and capital allocation. The JSE is and has always been a highly cash-generative business. For the period, net cash generated was ZAR 1.23 billion, an increase of 12.3% versus last year. Capital expenditure was ZAR 141 million for the year, below the prior period, reflecting phasing and timing of delivery. Our financial position remains strong with our cash balance increasing year-on-year by 12.7% to ZAR 3.16 billion. This grants us flexibility to continue to fund growth without compromising shareholder returns. And on this, our total dividend per share increased by 28.1% year-on-year to ZAR 10.61. Our cash conversion remains strong at 1.64%, reinforcing the quality of our earnings and the capital-light nature of the model. Our ROE increased to 22%, up 1.8 percentage points from the prior year. This slide reflects higher operating income, disciplined cost growth and stronger profitability. This year, we delivered robust revenue growth while maintaining a disciplined approach to cost management, translating into positive operating leverage of 5.9%. Our 2 biggest operating expenses remain personnel and technology, and we continue to proactively manage these costs in a balanced way, being cognizant of the fact that they are critical to our delivery and transformation. Other income decreased by 80%, and this was primarily due to ForEx losses in 2025 compared to a gain in 2024. The decrease also reflects the fact that prior year included higher issuer regulation fines as well as VAT recovery income. As I mentioned previously, our revenue performance this year was robust. Capital markets performance was strong with revenues up 18% as equity market trading activity remained high. And as such, we also saw significant growth in post-trade services due to higher billable value traded and an increase in the number of trades. JSE Investor Services revenue was down 7%, mainly because of the high base effect and the unfavorable interest rate environment. JSE Tier revenues increased by 10% on the back of higher fees driven by the equity, currency and commodity derivatives markets growth. And finally, Information Services revenue increased by 10%, reflecting growth in index revenue, terminal subscriptions and equity derivatives data. On the next few slides, I will unpack the underlying drivers for each revenue segment, starting with Capital Markets and JIS. Capital Markets performance over the period reflects solid revenue growth across all asset classes. Primary Markets revenue was up 4%, driven by higher listing fees and ETFs. Trading revenue was up 28% as billable equity value traded up 32%, driven by global commodity strength, improved macro stability and reinvigorated investor confidence. Colocation revenue was up 15%, while the colo activity to value traded remained flat, we saw an increase in the number of racks to 58 from 56 in the prior year. Equity derivatives revenue grew by 14% year-on-year, driven by strong hedging appetite. Bonds and financial derivatives revenue increased by 15%. Bond nominal value traded was up 8%, while contracts traded for currency derivatives were up 32% as we saw increased volatility in the rand on the back of the news about the U.S. tariffs and concerns over GNU stability. Commodity Derivatives revenue was up 6%, with physical deliveries up 26% and contracts traded down 7% as we experienced subdued market volatility following the above-average local and regional maize production. JIS revenue was down 7% and mainly because of lower interest rates, high base impact and slow corporate actions activity. These were partially offset by an increase in asset reunification revenue as well as the number of customers. Moving on to post-trade services. Revenue increased by 18% compared to last year. Clearing and settlement revenue was up by 34% due to the increase in billable equity value traded. BDA fees were up 4% year-on-year as the 7% increase in equity transactions was partly offset by a slight reduction in the fee from ZAR 0.73 to ZAR 0.69 per transaction. In 2025, we developed a new BDA fee model. However, implementation was deferred because the market consensus was clear. The operating model and the fee structure must evolve together. As a result, the new fee model remains on hold until we finalize the non-mandated BDA operating model. And in light of this, we introduced a mid-2025 fee reduction. The BDA fee per transaction was lowered from ZAR 0.73 to ZAR 0.69. And this adjustment brought the average fee for 2025 down to ZAR 0.71. For 2026, we have maintained the BDA fee at the 2025 average of ZAR 0.71, ensuring stability and predictability for market participants. Funds under management revenue was up 7%, and this was due to the higher JSE Trustees cash balances. And then finally, JSE Clear revenue was up 10% on the back of higher clearing fees and increased activity in equity, commodity and currency derivatives. Information Services revenue was up 10% -- more specifically, U.S. dollar-denominated revenues accounted for 68% of total information services revenue and translated at an average exchange rate of ZAR 17.95 for the year compared with ZAR 18.39 in 2024. Growth in core market data was driven by indices, terminal subscriptions and equity derivatives data with a mix of once-offs and recurring annuity sales. The core market data franchise continues to be strongly cash generative and delivers healthy margins, although organic growth opportunities are relatively modest. Our modern data platform has now completed its foundational technology build and is moving into a more commercial and product-led phase, currently contributing approximately 1% to the portfolio. We continue to see good underlying performance of our growth strategy, where revenue was up 50%, albeit off a modest base. The JSE delivered positive operating leverage while still investing in strategic priorities. Operating expenses increased by 8.3% year-on-year, 6.5% excluding higher trading activity costs. This means that our OpEx growth is in line with the guidance that we provided at year-end of a 5% to 7% increase. Key cost drivers include personnel costs, which were up 12.5%, but excluding performance-related costs of high LTIP vesting and discretionary bonuses, personnel costs increased 6.5% year-on-year. More specifically, permanent headcount remained flat overall, while salaries increased by an average of 5% year-on-year. Technology costs were up 13% due to the implementation of our growth strategy, the reclassification from CapEx to OpEx of cloud-related spend and inflationary and foreign currency impact on license costs. General operating expenses have remained relatively flat, owing to our continued commitment to disciplined cost management. Our focus remains on driving operational efficiency with a continued emphasis on financial discipline while still directing capital toward our key strategic priorities and investments. On CapEx, spend was focused primarily on maintaining and protecting the business, including modernization programs and regulatory enhancements with a smaller portion allocated to growth initiatives such as information services and the bond CCP development. We came in slightly below the guidance range of ZAR 150 million to ZAR 170 million due to savings in infrastructure spend owing to negotiations and the BDA phasing. For 2026, CapEx guidance increases to reflect delivery phasing on the BDA modernization and the work program across our core initiatives. We expect CapEx to be in the range of ZAR 190 million to ZAR 230 million. Let's now look at our cash position as at the end of December. Over the period, cash generated from operations amounted to ZAR 1.2 billion, and the cash and bonds balance as of 31 December 2025 amounted to ZAR 3.2 billion. This reflects a strong liquidity position, meaning that we do not need additional credit lines or external financing, and it speaks to the quality and reliability of our earnings while supporting consistent shareholder returns. Our healthy cash and bond balance highlights the resilience of the balance sheet and the fact that we have maintained a disciplined capital allocation through targeted investment in technology and infrastructure. This is the breakdown of our cash and bonds balance as at the end of December. Our ZAR 3.2 billion in cash and bonds comprises ZAR 1.25 billion allocated to investor protection and regulatory capital, about ZAR 500 million for CapEx and other expenses and ZAR 920 million for shareholder returns. We aim to keep around ZAR 480 million as a strategic reserve, which includes potential M&A and a share repurchase program in 2026. Let me briefly reemphasize how we are thinking about M&A. Our approach is deliberately strategic and centered on bolt-on opportunities that complement what we already do well. We prioritize transactions that strengthen our core franchise and extend our value proposition with a clear aim to broaden revenue sources, maximize synergies and capture growth in adjacent markets and services. When we assess potential deals, we apply a disciplined framework. We look closely at the expected return relative to our hurdle rates, the stand-alone growth prospects of the target and the degree of alignment with our long-term strategy. Delivering tangible synergies is a key requirement to ensure any transaction has real financial value. Moving on to dividends. In 2025, we announced an ordinary dividend of ZAR 9.61 per share, up 16% year-on-year and a special dividend of ZAR 1.00 per share, which brings the total dividend to ZAR 10.61 in financial year 2025, reflecting an increase of 28.1% year-on-year. This has been an exceptional year given the market conditions and the JSE has benefited from the resulting impact on ADV and revenue. Accordingly, the Board has declared a special dividend given the excess cash on hand. This translates into an ordinary payout ratio of 78% and a total payout ratio of 86% -- we maintain our commitment to our dividend policy of a payout ratio between 67% to 100%. And this policy enables us to have a flexible approach to balancing the cash between the shareholder returns and the investments in the business. The group is considering a share repurchase program when market conditions permit and factoring in strategic investments and capital allocation priorities. The final size, terms and timing of any such program will be contingent upon Board approval. Any share repurchases will be disclosed as required. Now let's move to the guidance for full year 2026. From an operating expense perspective, we continue to guide to cost growth in the 5% to 7% range. This will be dependent on trade-related cost, but the underlying cost mix is expected to remain broadly consistent with investment directed toward our people, technology and key growth initiatives. On CapEx, we expect it to be in the range of ZAR 190 million to ZAR 230 million, reflecting a continued prioritization and disciplined spend. And lastly, our approach to shareholders remains unchanged. We are maintaining our dividend policy, targeting a payout ratio of between 67% and 100%. So overall, our guidance reflects a balance between cost discipline, targeted investment for growth and consistent returns to shareholders. Looking ahead, we are on track to achieve our strategic priorities as we continue to protect the core and to grow. In capital markets, the focus is on broadening our product suite and enhancing the trading experience for clients. This includes further ETP functionality and enhancements to block trading services, all of which are progressing well. We are also working on preparations for the launch of a crypto ETF. Within JSE Investor Services, we are working to scale our client base and to deepen our service offering. In JSE Clear and Post Trade Services, progress continues on the bond CCP and the BDA modernization program, both tracking in line with plan. In Information Services, priorities include building scale on the data marketplace, increasing client uptake of new data products and services, rolling out the SENS replacement for issuers and transitioning GIBA to Zeronia. And from an infrastructure and technology perspective, our attention remains on modernizing core platforms, advancing our AI transformation agenda and progressing key initiatives such as the JSE Network Alliance, AWS Outpost and local zones. Taken together, these initiatives position us well to support future growth while continuing to strengthen the core of the business. And with that, I'll hand back over to Leila for the concluding remarks. Thank you. Leila Fourie: Thank you, Fawzia. To fully understand the position of our 2025 performance, it's important to place it in the context of our multiyear transformation under Vision 2026. When I joined the JSE in 2019, we launched Vision 2026 with clear objectives: protect the core franchise, improve quality and resilience of earnings and modernize the business so that the JSE stays relevant and competitive in an increasingly complex and globalized market environment. The delivery of Vision 2026 has unfolded in 3 connected phases. The first phase focused on fortifying foundations of the exchange. We reset the strategy and operating model around clear pillars of delivery and discipline. we strengthened the operational resilience because trust in the market infrastructure is nonnegotiable for an exchange. And we took deliberate steps to rebalance our earnings base, including the JIS acquisition and to increase -- this was really to increase the annuity style components of the model. The second phase centered on capability expansion. We advanced our data and digital agenda. We expanded connectivity and infrastructure services, and we continue to evolve the product set across markets, including sustainability-related initiatives and reforms that support capital formation. For the third and recent phase, focus has been on converting transformation into measurable operational and financial outcomes. That includes continuing to raise the bar on resilience and service delivery while progressing large-scale infrastructure programs such as the BDA modernization, which is the foundation for the next generation of post-trade capability in South Africa. Taken together, Vision 2026 has fundamentally strengthened the JSE as a franchise and an institution. The exchange is today more resilient operationally more robust and strategically clearer about where it can create long-term value within South Africa's capital markets ecosystem. Shifting now to Slide 28. The financial performance of the JSE since 2019 reflects the deliberate execution of Vision 2026 and the transformation of the exchanges operating model. Operating income has increased to ZAR 3.5 billion in 2025, up 56% versus 2029, reflecting more diversified and resilient earnings model. The quality and durability of earnings have improved nontrading income increased from around 29% to around 35% of operating income, reducing reliance on pure trading volumes. The group's operating profile also improved, moving from negative operating leverage in 2019 to positive operating leverage of 5.9% in 2025. Profitability has increased accordingly with NPAT now just over ZAR 1.07 billion and ROE at 22%, and shareholders have participated in that progress with HEPS up from ZAR 8.14 to around ZAR 13.29 and the total dividend increasing from ZAR 730 million to around ZAR 916 million. Together, these financial results reflect the successful transition of the JSE to a more diversified, more resilient and higher quality earnings model that really positions the exchange effectively for future growth. And then on my final slide, Slide 29, I just want to share a little bit about the JSE entering 2026 from a position of genuine strength and strategic clarity. Today, the exchange operates within a diversified and resilient earnings model, world-class operational reliability and modernizing market infrastructure, which is designed to support the next phase of growth in South Africa's capital markets. Market participation is deepening. Client engagement is entrenching and the investments made under Vision 2026 are now translating into sustained operational and financial performance. The JSE remains well positioned to support capital formation and long-term economic growth. This is my final set of financial results as a CEO. And I would just like to say it's been an immense privilege to lead this organization through one of the most tumultuous and transformative periods in history. Since 2019, we've worked to reinforce the JSE's foundations, modernize its infrastructure and expand its capabilities and improve the quality and resilience of earnings. Importantly, this transition of leadership takes place at a position and a moment of momentum and continuity. I've got great confidence in Valdene Reddy as she assumes the role of Group CEO. Valdene, as many of you know, brings deep market experience and institutional knowledge, and she too has been central to the transformation that we've delivered under Vision 2026. The JSE has long reflected South Africa's economic journey. Today, it stands stronger in its ability not only to mirror the confidence of the economy, but to convert that confidence into capital investment and growth. Thank you very much for your time. We will now open for questions. Thanks. Should we start Romy, with anyone in the room? And we've got a couple of roving mics. Anything from anyone in the room? I know we've got a couple of questions online, I think, queuing up. We've got 2 questions, I believe. Romy, can we hand the mic to you? Romy Foltan: Sure. We've got a question from Catherine Bloesch. She said, what are the proactive cost management measures you mentioned in the introduction? And what initiatives are in place to drive efficiencies in the business? And her second question is, can you tell us a bit more about the AI transformation agenda you mentioned? Leila Fourie: Great. Do you want to take the costs? I'll take AI. Fawzia Suliman: Sure. So from a cost perspective and a cost discipline perspective, we've done a lot of work in terms of embedding this culture of cost discipline in the organization. And that includes improving the transparency of the cost throughout the organization. We also have a lot more proactive monitoring of cost, challenging of cost, and that includes controllable cost as well as new headcounts and really any additional costs that we bring into the business. We've also implemented zero-based budget, and I think that has also improved our thinking and the level of scrutiny that we put on cost. And then lastly, what we're also doing is we're managing our book of work and our CapEx spend with a lens of what the impact is going to be on depreciation in the business. And as we implement new projects depending on the delivery methodology, that sometimes has an impact on our technology costs. So there's a real level of transparency, I think, an acknowledgment throughout the business of the need to manage the cost, and we start to see that bear fruit. Romy Foltan: Leila, we have a second AI question along the similar veins from Mark Horrist, which you can probably answer with the initial question. The second one is where exactly do you plan to start embedding AI in 2026, operations, risk management or products? And what early wins are you targeting? Leila Fourie: Okay. Wonderful. Thank you, Catherine, and thank you, Mark. AI is a very important component in our current strategy and into the future. And we have commenced a number of targeted investments in AI capabilities to enhance operational efficiency and support long-term digital competitiveness. Now the first and most obvious area is the use of AI in the transformation of the BDA initiative. Russell will remember in the early 2000s the tremendous amount of work that went into the transformation of the BDA project. The ASX has been through a very difficult period over the last 3 to 5 years where they had to impair a project similar to the BDA project. And what we are doing in the AI project is to -- in the BDA transformation project is to use artificial intelligence to rewrite the code from COBOL into a more modernized language, which is Java. That project has -- I would estimate having worked deeply in the post-trade area in my history, that project would normally take 5 to 6 years to deliver and probably approximately twice what it is costing us now. We are about to deliver the final batch of code, which is, as I said earlier, 5 million lines of code, and that's been done within just over a year. In addition to the actual writing of the code, we are also using artificial intelligence to test our code with our vendor called Trianz. And that mass modernization testing will begin at the end of February. Many of the large institutions with big mainframe systems are looking with interest at the project. It's worked out very well so far. We have -- we delivered the pilot ahead of schedule, and we are on track on all of our other milestones. And looking forward, the JSE's infrastructure and the services that we provide are very infrastructure and technology heavy to the extent that we're able to continue leveraging AI in our other areas of transformation it will most definitely reduce -- have the potential to reduce costing relating to the number of coders that we have and also the number of testers. We are taking a very comprehensive approach, and I have no doubt that Valdene in her Vision 2031 will give you a lot more detail because we're at the beginning of this journey now. We've got detailed policy frameworks, and we've created an AI center of excellence, which is really focusing on the acceleration of the adoption of AI. We've also established an organization-wide productivity pilot, and that's under the leadership of Alicia, who's sitting in the front here to identify impactful use cases where we can build organizational expertise. And then the question from Mark was really around where are we going to use products, et cetera. there is a wide potential. At this point in time, we have initiated a proof of concept to automate listings requirements, processes where we are leveraging AI tools to automate the end-to-end process for issuer regulation, including the automated compliance analysis of listed company annual reports against compliance of listings requirements, which is a very exciting world. I have no doubt that there is possibility for this to expand into market regulation, insurance area and into a number of the other areas. I think we're also running a productivity pilot with Amazon Q Developer and GitHub Copilot. And that's supporting the accelerated software development and testing workflows. So as you can imagine, the largest or some of the largest costs in our projects that we execute on. And as far back as I can remember, the JSE has always been busy with a large-scale multiyear project. And these tools introduce the opportunity to rightsize and reduce and make those projects much more efficient, and it's really through agent AI capability. Of course, looking further ahead, there is potential to build AI into new products such as in Mark's area, the market data space, contextual AI, which market participants could use with JSE as the golden source. So we are very excited about the possibilities that AI holds, but it's a very nascent and early part of the journey, although less so with the BDA project. Romy Foltan: Leila I have 2 more questions on the chat if no one has in the audience. Leila Fourie: Anyone in the audience? Romy Foltan: Okay. We have a question from Adam. Leila Fourie: We'll take one in the front. Sorry about that -- if we can just ask you to state your name and where you're from and then your question. Mike Brown: Mike Brown from ETFSA. Just looking at the vision for the JSE, have you got any comments on gradually moving the JSE or graduating one way or another to a dollar-based -- U.S. dollar-based market. Significant amount of the trading that's taking place by local asset managers into global assets, being able to do that on the JSE would help as well as, of course, attracting international investors. If you got any comments on that? Leila Fourie: Yes, Mike, and thank you for asking that question. It was a topic that I didn't really cover. As some market participants may be aware, I chair and we convened an SA competitiveness committee with some of the top CEOs in the country. We've got Jannie Durand and Johann Holtzhausen, Michael Katz, Daniel Mminele, a number of very important influential participants on that group, and it's called Project Phumelela. And we, as a private sector have been working with -- under National Treasury's leadership to encourage and open up opportunities to bring dollar-based listing, collateral and various other initiatives into our country. We are very delighted and we strongly endorse and support the announcements made in the budget speech by Enoch Godongwana, where he is -- the National Treasury will be introducing the enabling regulatory. I'm going to call it infrastructure. It's called a synthetic financial center. Now what this does is it enables -- it's an enabling -- it will be an enabling policy or legislation that will enable the capital formation, trading, settling, collateral posting in hard currency. The first step is to set up this infrastructure. And the second -- the immediate first step after that infrastructure or alongside that infrastructure establishment is the enabling of our buy side, which we're very excited about for them to manage dollar-based or hard currency-based funds onshore. Currently, legislation prohibits that. Any dollar-based funds have to have a domicile outside of South Africa, which really compromises some of our buy-side participants. And so Project Phumelela and Valdene will no doubt take over from me as I step down. We have been lobbying and working very hard with the policymakers to try and encourage this -- we are hopeful that in the future, in the not-too-distant future, and I am engaging constantly at the most senior levels and all the way down into the more technical components of National Treasury to encourage this. Just to give you a sense of the scale, I think, and Russell will remember, we introduced the ability of the buy side to invest in dual currency or dual listed counters, which didn't count towards their foreign allowance. That completely transformed the market. That I think Russell was around -- I worked on that project with Srivan around 2004. It was a transformational policy. This will probably be the most transformational policy of the last 20 years. Just to give you a sense of the numbers, we -- research estimates that around ZAR 10 trillion worth of assets held by South Africans are invested offshore. Now if we, at this point in time, can start to attract those assets back into South Africa, it's job creating, buy side, sell side, clearing agents, custodians, all of those participants in the value chain will be able to participate in that flow. We are very excited and we are hopeful that the -- what is initially positioned by the National Treasury and the Minister of Finance as the synthetic financial center will very definitely take us forward. We were dropped from the position # 92 to 94 on the world competitiveness rating. That is behind Kigali, behind Mauritius and we need to do more as a country to attract and repatriate funds back into the country and also to repatriate other investors investing in South Africa. The National Treasury right now, if they issue dollar-based bonds, they go to Luxembourg and list on that exchange. We are very excited about the potential into the future of them listing those dollar bonds on the JSE and enabling flow through our local environment. So we welcome what National Treasury is doing, and it's an open-minded and important step in growing and internationalizing our economy. Romy Foltan: We have 2 questions from Admire Mulvani. He said, can you comment on the competition tribunal -- and is the group going to provision for a potential fine? And then the last question he has here is what is the listings pipeline looking like in 2026? Leila Fourie: Great. Who said that? Was it Admire? Romy Foltan: Admire, both questions. Fawzia Suliman: Thanks for those questions. So I'll take the question just on the Competition Commission and also whether or not we're provisioning for it. So the JSE confirms that it has filed its answering affidavit with the Competition Tribunal in response to the Comp Com's complaint referral arising from A2X's complaint against the JSE. The JSE categorically denies the commission's allegations that it has contravened Section 8C of the Previous Competition Act and Section 8(1)(c) of the Current Competition Act. So the JSE believes that the merits of the case is poor, and this is obviously on the advice of our legal counsel as well. In terms of whether or not we're provisioning, the requirements to raise the contingent liability is dependent on 2 things. And the first is the probability of the outcome of this referral. And then the second is the ability to quantify. Now you've asked the question in terms of which revenue lines we would apply this to. That is completely unclear. So the maximum is 10% and what we've seen from what's been levied before that hasn't happened. There's no clarity in terms of which line items it would be applied to. So it's impossible to quantify it at this stage. And given the low probability, our view in terms of the low probability of success, there is no requirement for us to raise a contingent liability. We've obviously discussed this both at Board level as well as our external auditors, and we haven't raised any provision. We don't believe there's a requirement. Leila Fourie: Thanks, Fawzia. Now coming to the question, Admire on listings. Last year, we saw a couple of notable listings, particularly Boxer and Optasia, both of which were signaling points that market conditions have changed. Listings are very much a function of market confidence and timing. And Optasia was the first fintech which was the largest in the EMEA region over, I think it was the last 5 years, and they chose to list on the JSE rather than on the LSE or the NYSE. And that is a very powerful vote of confidence. Boxer was equally well subscribed and very financially successful in their listing and in the re-rating of Pick n Pay. This year and looking forward to the year ahead of this year, we're very excited about Coca-Cola Hellenic Bottling, which will be the largest bottling company in the world looking to list here. Fidelity Security AME, which is a secondary inward listing. And then, of course, in the more medium term, companies like African Bank, TymeBank and Virgin Active are possibilities. And then, of course, Canal+, which we all know closed in their takeout towards the end of last year, and that would be a second listing. Graham, is this our time is up signal? I think the market is overheating. Romy, anything else? Romy Foltan: We have one final question. It's from Chris Logan. He said well done on the results and particularly to Leila for going out on a high. Lots of welcome talk about competitiveness. Any initiatives to get MST scrapped which penalizes smaller and sophisticated investors and not payable in the likes of NASDAQ? Leila Fourie: We are working with market participants and regulators on a number of initiatives like this. But at this stage, I don't think we've got anything -- any meaningful updates. And thank you, Chris, for your comments. We've thoroughly enjoyed working with you and appreciate your sentiment. Russell? Russell Loubser: Outstanding presentation. Well done, guys. Really -- fantastic to see. referred to a forthcoming. Can you shed any light on that? While I agree with that, your position on the provisioning with the Competition Tribunal, that's nonsense. Leila Fourie: Forthcoming in terms of what's forthcoming with me? Russell Loubser: For you. Leila Fourie: Oh, with me. Sorry, that sounded. Well, I -- firstly, perhaps -- and I think there are no -- are there any more questions? If there are none, I'll close with this. Perhaps if I can just say an incredibly warm thanks and sense of appreciation to all market participants, our shareholders, our regulators, our policymakers and importantly, our traders and back office teams. Without you, we have no market. It's been an immense, immense privilege for me, and I've thoroughly enjoyed every minute. So Russell is asking now what next. I am not -- although I'm stepping down, I won't be completely stepping away. I still intend to sit on a couple of boards, and I will contribute to academia. I have a role at the Global Henley Board, and I will continue in more academic pursuits. And some of you may know that I spend my weekends rock climbing, and I'm probably going to swap solids for liquids, looking to spend a lot more time sailing on the water, but also still very much connected to the country of my birth and then, of course, a couple of global roles. I will be supporting Valdene and Fawzia from the sidelines and watching with great joy as they build on this foundation and continue to take the JSE to even greater heights. So thank you. Thank you, Russell. Thank you very much, and please help yourselves to refreshments outside.
Operator: Thank you for attending Wajax Corporation's 2025 Fourth Quarter and Year-end Financial Results Webcast. On today's webcast will be Mr. Iggy Domagalski, President and Chief Executive Officer; Ms. Tania Casadinho, Chief Financial Officer. Please be advised that this webcast is being recorded. Please note that this webcast contains forward-looking statements. Actual future results may differ from expected results. I will now turn the call over to Tania Casadinho. Tania Casadinho: Thank you, operator. Good afternoon, and thank you for participating in our fourth quarter results call. This afternoon, we will be following a webcast, which includes a summary presentation of Wajax's Q4 2025 financial results. Presentation can be found on our website under Investor Relations, Events and Presentations. To begin, I would like to draw your attention to our cautionary statement regarding forward-looking information on Slide 2 and non-GAAP and other financial measures on Slide 3. Please turn to Slide 4. And at this point, I'll turn the call over to Iggy. Ignacy Domagalski: Thank you, Tania. To start, I will provide highlights on our fourth quarter before turning it back to Tania to comment on inventory, backlog and the balance sheet. Slide provides an overview of Wajax. The corporation has more than 167 years of Canadian operating history and operates across 105 branches with a team of approximately 2,900 employees. During the quarter, our heavy equipment categories and revenue sources made up approximately 61% of our total revenue, while industrial parts and ERS generated approximately 39%. Turning to Slide 5. This slide provides an overview of our purpose and values. Wajax's purpose statement is empowering people to build a better tomorrow, which we strive to achieve by living our values and delivering an exceptional experience to our shareholders, customers, suppliers, our people and the communities we serve. Our purpose and values guide our decision-making and allow us to execute on our strategic priorities. Turning to Slide 6. This slide provides an overview of our strategic priorities, which were refined for 2026. Management is focused on executing against these priorities as well as optimizing inventory, managing costs and improving margins. Between our purpose and values and these priorities, management believes this will enable Wajax to generate sustainable long-term value and capitalize on future opportunities. Turning to Slide 7. Wajax delivered steady performance in the fourth quarter of 2025, including gross profit margin growth, higher earnings and improved leverage due to management's focus on inventory optimization and cost discipline to drive free cash flow and strengthen the balance sheet. Revenue of $560 million decreased $5.9 million or 1% in the quarter. The decrease resulted primarily from lower product support sales in Western and Eastern Canada, lower industrial parts sales in Central Canada and lower equipment sales in all regions. These decreases were offset partially by higher ERS revenue in all regions, particularly in Eastern Canada. Gross profit margin of 18% increased 100 basis points compared to the same period of 2024, reflecting improved execution. The increase was driven primarily by higher margins realized on industrial parts, product support and equipment revenue, reflecting management's focus on margin improvement initiatives in these areas of the business. The increase in margin was also driven by a higher proportion of ERS sales from a sales mix perspective. We remain focused on these margin improvement initiatives to strengthen our margin profile, mitigate ongoing market pressures and drive continued earnings performance. Excluding the adjustments noted on the slide, selling and administrative expenses as a percentage of revenue decreased to 13.3% in the fourth quarter of 2025 compared to 13.4% in the same period of 2024, primarily due to higher incentive accruals driven by improved financial results compared to the prior year. Adjusted EBITDA of $44 million increased $8.9 million or 25.2% from the fourth quarter of 2024, noting the adjustments recorded on this chart. The increase in adjusted EBITDA resulted primarily from higher gross profit margin and lower finance costs. Adjusted EBITDA margin of 7.9% in the fourth quarter of 2025 improved from 6.2% compared to the same period of 2024 and declined from 9.3% in the third quarter of 2025. Adjusted net earnings of $0.71 per share increased 104.1% or $0.36 per share from the fourth quarter of 2024, noting the adjustments recorded on this chart. At the end of Q4, the TRIF rate was 0.93, a decrease of 1% from the fourth quarter of 2024. Safety continues to be Wajax's #1 priority, and management is committed to continuously improving our safety program to improve on this result. We thank everyone on our team for their ongoing dedication to workplace safety. Turning to Slide 8. Revenue decrease of 1% in the fourth quarter resulted from lower revenue in Western and Central regions, offset partially by higher revenue in Eastern Canada. Western Canada sales of $261 million decreased 4.9% in the quarter due primarily to lower equipment and forestry sales, partially offset by higher equipment sales in the mining category and higher ERS sales. Central Canada sales of $95 million (sic) [ $95.3 million ] decreased 4.4% in the quarter due primarily to lower equipment sales in the material handling category and lower industrial parts sales. These decreases were partially offset by higher equipment sales in the construction and forestry category and higher ERS. Eastern Canada sales of $203 million (sic) [ $203.3 million ] increased 6.2% in the quarter due primarily to higher ERS sales and higher equipment sales in the power systems and construction and forestry categories. These increases were partially offset by lower equipment sales in the material handling category. Please turn to Slide 9. An update on equipment and product support sales and year-over-year variances are shown on this page. Equipment sales of $206 million decreased $2.6 million or 1.2% compared to last year due primarily to lower material handling sales in Central and Eastern Canada and lower construction and forestry sales in Western Canada. These decreases were offset partially by higher power systems sales in Eastern Canada, higher construction and forestry sales in Central and Eastern Canada and higher mining sales in Western Canada. Product support sales of $124 million decreased $8.5 million or 6.4% compared to last year, due primarily to lower Power Systems revenue in Western and Eastern Canada and lower construction and forestry revenue in Western Canada. Please turn to Slide 10. An update on industrial parts and ERS sales and year-over-year variances are shown on this page. Industrial parts sales of approximately $131 million decreased $3 million or 2.3% compared to last year due primarily to lower sales in Central Canada. ERS sales of approximately $88 million increased $9 million or 11% due to higher revenue in all regions, particularly in Eastern Canada, due largely to timing of larger projects. Turning to Slide 11. This slide summarizes sales at a category level for our company's overall groupings of heavy equipments and industrial parts and ERS. In the fourth quarter, the heavy equipment categories decreased $11.8 million or 3.3% due to lower sales in construction and forestry and material handling, offset partially by higher mining sales in Western Canada and higher power systems sales in Canada. The industrial parts and ERS categories increased $5.7 million or 2.7%, driven by higher ERS sales in all regions, offset partially by lower industrial parts sales in Central Canada. I will now turn the call over to Tania for commentary on backlog, inventory and the balance sheet. Tania Casadinho: Thank you, Iggy. Please turn to Slide 12 for my comments on backlog and inventory. Our Q4 backlog of $516.6 million decreased $10.1 million compared to backlog of $506.5 million at Q3. And decreased $47.8 million on a year-over-year basis. The sequential increase was due to an increase in Power Systems backlog driven by the River Class Destroyers (RCD) subcontract entered into with Irving Shipbuilding Inc. During the fourth quarter of 2025, this increase was partially offset by lower backlog in all other categories, most notably in mining, driven largely by the sale of 2 large mining shovels in the quarter, which were in backlog at September 30th, 2025. The year-over-year decrease was due primarily to lower mining backlog driven largely by the sale of 6 large mining shovels since December 31st, 2024, and lower material handling backlog. These decreases were partially offset by an increase in Power Systems backlog, driven by the long-term RCD contracts signed with ISI during the quarter -- during the fourth quarter of 2025 and higher ERS orders. Backlog at December 31st, 2025, included 2 large mining shovels. Inventory decreased $58.2 million compared to Q3 of 2025. Ongoing inventory optimization initiatives have decreased inventory by over $200 million from peak levels at March 31st, 2024. Inventory decreased $126.4 million compared to Q4 of 2024. The year-over-year decline is mainly attributed to lower inventory in all categories, driven largely by management's focus on optimizing inventory levels. Management continues to focus on optimizing inventory levels and mix while matching these with business volumes and maintaining fill rates at appropriate levels. Please turn to Slide 13, where I will provide an update on cash flow, leverage and working capital. Cash flows generated from operating activities in the current quarter of $81.5 million compared to cash generated of $81.4 million in the same quarter of the prior year. Cash flows generated from operating activities for the full year 2025 amounted to $194 million compared to cash generated of $75.1 million in 2024. The increase in cash generated of $118.8 million was mainly attributable to a decrease in inventory and lower rental equipment additions, offset partially by a decrease in accounts payable and accrued liabilities. Our Q4 leverage ratio improved to 1.62x from 2.28x in Q3 due primarily to the lower debt level driven by cash generated from operating activities during the quarter. The corporation's leverage ratio is currently within our target range of 1.5 to 2x at the end of Q4. Also in the quarter, on October 24th, 2025, the corporation amended its bank credit facility, extending the maturity date from October 1st, 2027 to October 24th, 2029. There is no change to the credit limit of the facility. The maturity date extension strengthens the corporation's liquidity profile, providing enhanced financial flexibility and greater certainty of funding for planned strategic initiatives. Our available credit capacity at the end of Q4 was $266.9 million, which is sufficient to meet short-term normal course working capital and maintenance capital requirements and fund our planned strategic initiatives. We continue to focus on working capital efficiency, which is a key component in managing our overall leverage targets. The Q4 working capital efficiency was 25.1%, an improvement in efficiency of 30 basis points from 25.4% at September 30th, 2025, due to the lower trailing 4-quarter average working capital, largely resulting from lower average inventory levels. Inventory turns have improved from Q3 of 2025 and improved to 2.5x from 2.0x in Q4 of 2024 due primarily to lower average inventory levels and our focus on inventory optimization throughout the year. The optimization of inventory, improvement in cash flows from operating activities and meaningful reduction in leverage reflect management's disciplined execution and a more resilient balance sheet as we enter 2026. Finally, the Board has approved our first quarter 2026 dividend of $0.35 per share payable on April 2nd, 2026, to shareholders of record on March 16th, 2026. Please turn to Slide 14. And at this point, I will turn it back to Iggy. Ignacy Domagalski: Thank you, Tania. Our outlook is summarized on Slide 14. During the year, management focused on cost control, inventory optimization and margin improvement to reduce leverage, enhance profitability and increase cash flow from operations. In 2025, Wajax delivered revenue of $2.145 billion compared to $2.097 billion in 2024, adjusted basic earnings per share of $2.90 versus $2.44 in 2024 and cash flow from operating activities of $194 million compared to $75.1 million in 2024. In percentage terms, revenue was up 2.3%, adjusted EPS was up nearly 20% and cash flow was up [ 158 ]. Inventory was reduced by $126.4 million to $547.6 million and leverage improved to 1.62x, returning to management's target leverage range of 1.5 to 2x. These actions represent initial steps in a broader ongoing program of operational improvement. In 2026, management will continue to focus on disciplined cost control, inventory optimization and margin improvement, supported by prudent capital allocation and effective execution to enhance efficiency, strengthen cash flow and support sustainable performance. Looking ahead, Wajax continues to see strong customer demand in the mining and energy sectors with mining demand reflected in a backlog of 2 large mining shovels for delivery over the next 5 quarters. Market conditions in other sectors remain mixed across regions with continued macroeconomic softness and uncertainty related to Canada, U.S. tariffs and trade dynamics. Wajax enters 2026 with a strengthened balance sheet, a solid backlog and improved operating performance. Inventory levels are within a normal operating range. Margin and cost control remains a focus and leverage is within the corporation's target range. While demand visibility varies across end markets, the corporation's diversified exposure and approach to capital allocation and execution supports its ability to manage current conditions. Management believes that continued execution of its priorities underpinned by prudent capital allocation and balance sheet strength will support sustainable long-term value creation. Personally, as I reflect on 17 years with this organization, I'm encouraged by what our teams have accomplished. We have expanded and diversified the business through a mix of acquisitions and organic growth, built a culture that helps our people succeed personally and professionally and established a more resilient foundation to drive long-term value creation. In October, the Board of Directors and I jointly agreed to initiate a CEO succession process. And with that process now complete, I'm excited to welcome George McClean as Wajax's new President and Chief Executive Officer, effective later today, and he will also join the corporation's Board of Directors. George is an experienced, thoughtful, driven and people-focused leader, and I believe he is exceptionally well suited to lead Wajax into its next chapter. We look forward to introducing George to the investor and analyst community in the weeks ahead. Today is my last official day as CEO of Wajax, and I will remain with the company until March 20th to facilitate a smooth and seamless transition. And after that, I will be cheering on the team from the sidelines as a shareholder and wishing them continued success. In closing, I would like to recognize the hard work, resilience and trust of our employees. Your commitment to safety and success of our customers and each other is onspiring. To our leadership team, you are amongst the most talented and hardest working people I've ever met. It has been an honor to work alongside you. To our customers who are critical to our success, thank you for your continued business and trust. We strive every day to exceed your expectations. To our manufacturing partners who continue to innovate, evolve and support solutions that help our customers succeed, we appreciate the opportunity to represent your world-class products in key markets worldwide. I also want to thank our Board for their trust and wise counsel over the years. Their deep experience and strong oversight will remain instrumental in shaping and supporting our broader strategy for years to come. And last but certainly not least, I want to recognize our shareholders, banking partners and analysts for their continued support and recognition of our vision to create and drive long-term value. I firmly believe Wajax is well positioned to thrive in the months and years ahead, and I look forward to cheering the team on as it continues to build momentum. I will now turn it over to the operator to open the line for questions. Operator: [Operator Instructions] First question comes from Patrick Sullivan with TD Cowen. Patrick Sullivan: It's nice to know you over the years. So congratulations on everything. My first question, I guess, is basically on the guidance range for SG&A as a percentage of revenue. In the past, it's been 14.5% to 15.5%, but you guys have been investing that number for some time now. So I guess all the changes you made, are these new levels, lower levels, I guess, the new normal? Do you have an updated range? Tania Casadinho: Patrick, thanks for the question. Yes, we are extremely happy with what we've done so far with SG&A and our cost management strategies. And our full year run rate is at an adjusted of 14%. In terms of forward-looking, I guess, guidance and range, we do aim to operate within that lower end of the range. So the lower end is now 14%, I would say. And we feel that within that lower end of the range, we should be able to continue to operate within that on a full year basis. Now on a quarter-over-quarter basis, that's obviously relative to volume of revenue. Patrick Sullivan: Okay. Great. Yes, I totally understand that. I guess sort of sticking with the margins. Gross margins were up year-over-year, but they did take a bit of a step back sequentially. I know in the commentary of the filings, it said you saw meaningful improvement in product support margins versus the full year 2024 and improved IP and ERS margins in the latter half of 2025. I guess can you just talk us through the margin dynamics at play to end the year? And then how you're feeling about the progression going forward? Tania Casadinho: Sure. Thank you for the question. We continue to be very focused on our margin profile and margin expansion, as we mentioned. We did see a bit of a fall in Q4 relative to a couple of things, including mix. Our expectation, how we're seeing this going forward is we feel relatively good about the full year GP percentage for 2025 and aim to continue to see some of the improvements that we started to see in the latter half of 2025. Operator: The next question comes from Devin Dodge with BMO Capital Markets. Devin Dodge: Iggy, just before I get started with the question, I just wanted to wish you best of luck in your next steps. And if George is in the background there, just good luck in the new role, and congrats on joining Wajax. Ignacy Domagalski: Thanks so much, Devin. Much appreciated. Devin Dodge: I wanted to start with that shipbuilding contract, which I thought was interesting or it looks like an interesting opportunity. Just wondering if you could provide a bit more color on that contract, when those deliveries should start and if there are opportunities for this contract to grow over time. Ignacy Domagalski: Yes. Good question. So it's a big deal for us. We've been chasing this contract for 7 years. And so we're really pleased to land it just recently. There's -- we do think there's quite a bit more runway with the customer. Obviously, it's we still have to bid and win the work, but we think there's a significant more amount that's potentially on the table. And for this specific contract, we expect the majority of the revenue to be recognized between now and 2029. Devin Dodge: Okay. And just wanted to confirm, is the full value of the contract in backlog? Or is it -- did you just embed what's likely to be turned into revenue in the next 2 or 3 years? Ignacy Domagalski: All of it's in backlog. Devin Dodge: Okay. Got it. Okay. Second question, it's probably for Tania but working capital efficiency has meaningfully improved the last couple of years. I know it's been a big focus internally. So congrats on that. Just going forward, is there much more room to reduce inventory further? Or is improvement in efficiency more likely to be driven by increasing turnover? Tania Casadinho: Great question. Thank you. We are quite happy with the range it's at now from a turns perspective. We did increase inventory up to 2.5 turns from 2 at the end of last year. And we generally feel good about that range. We are continuing to look for ways to optimize certain areas of inventory, but the biggest push has probably already been done. I will say that this will fluctuate based on business demand, obviously, in terms of just when we need to stock for proper business expected demands and when we expect to have larger mining shovels in inventory. So it might fluctuate quarter-over-quarter. But overall, we feel good with -- from a turns perspective, where inventory is, and that's really the biggest driver of our working capital. Operator: The next question comes from Jonathan Goldman with Scotiabank. Jonathan Goldman: Maybe we could just talk about product support, another quarter kind of softness there. I was wondering if you can talk about sort of what end market dynamics you're seeing there in terms of demand? And how do we square kind of the lower revenues with the improvement in margins? Is there some sort of strategy or trade-off there that's happening? Ignacy Domagalski: Yes. I'm happy to provide some commentary on -- just on our markets. I think construction, we're seeing some optimism in Quebec and Atlantic, but conditions are definitely more cautious in Ontario and Western Canada. And mining is fairly strong across the country. We had a lot of RFQs in 2025. So we expect hopefully a few more decisions on those RFQs in 2026. And whether it's gold, copper, iron ore, metallurgical coal or nickel, they all remain generally healthy and oil sands is pretty healthy, too. And then oil and gas is decent as well. Forestry is definitely weaker nationally. And as a result, pulp and paper is down as well. Metals continue to be a struggle with tariffs and government utilities are -- those are pretty strong for us right now across the country. There's lots of infrastructure spend. And then industrial and commercial markets, definitely softer, especially in Quebec and Ontario. So I mean, just in terms of all activity, I would say we're continuing to see cautious activity in Q1 and current event overseas are injecting a little bit more uncertainty into things. So that's at least in the very short term, that will be a challenge. So that's just kind of the high-level market commentary. In terms of product support, it was just kind of a regular quarter, nothing to really report one way or the other. But I would say that the improved margins, that's all of our internal margin enhancement activities that we've been working on pretty hard. So we're pleased to see some improvements in those margins and really put in a lot of effort there. Jonathan Goldman: Okay. That's helpful. And it's good to hear. And I guess related, Iggy, recently, I guess, in the past few quarters, you talked about industrial products and ERS kind of customers deferring capital projects, putting a pause on those and really spending only on MRO. Has that dynamic shifted at all? I guess I'm also asking specifically because it looks like a really nice quarter in ERS, the growth year-on-year. Ignacy Domagalski: Yes. I think that's more just timing of some projects. But we're still seeing -- we're definitely seeing caution with industrial and commercial markets, as I mentioned, especially in Quebec and Ontario, which are pretty big. The West is, I would say, moderate, and there's a little bit of strength in Atlantic, but it's a pretty small market for us. But for sure, customers continue to push out capital projects and even still pushing out some maintenance. So I mean that's -- we've talked about it a bit, eventually, that has to stop, but we haven't seen a stop yet. Jonathan Goldman: Okay. And I guess one more nice work on the inventory destocking, the free cash flow generation and leverage back within your target range. How are you thinking about capital allocation priorities coming into the year, understanding kind of this transition period now, but you're kind of in a better position right now to start thinking about some levers to surface value. Ignacy Domagalski: Yes. We're -- I mean, we're very happy to be back in our target range. Just -- we obviously want to maintain flexibility. So operating at the lower end of the range is great, but we have kind of plans to stay within the range. It fluctuates quarter-to-quarter. Of note, the spring is our busy equipment selling season. So we usually have to increase our inventory a little bit there. So that's given us a nice buffer to be able to do that. Normally, on an annual basis, we spend about $15 million on just on maintenance of our facilities. No immediate plans to change any of that. And then we also put about $15 million into our material handling rental fleet. So that happens on an annual basis. And in the past, we had put money into acquisitions. And our Board has publicly said that in their press releases, related to the CEO transition that that's something that they're still very interested. I would say that we are going to be opportunistic on that front. We've got some decent capability inside the company to do acquisitions from the acquisitions that we've done in the past. We still continue to integrate some of those, and we think there's still a little bit more room to squeeze some value out of the companies that we have already acquired. And then we've got a great new CEO in George McLean. And if you've looked at his background, you'll see that he's got a pretty deep M&A experience. So I'll leave it to him to talk about that at the next call and how he's seeing the world, but that certainly is something that I know he will be thinking about for sure. Operator: We have no further questions. I will turn the call back over to Iggy Domagalski for closing comments. Ignacy Domagalski: Wonderful. Thank you for joining us today, and we appreciate your continued interest in Wajax. Have a great day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Jason Paul Quinn: Good afternoon, and welcome, everyone, to the Nedbank Group 2025 Annual Results Presentation. Our presentation today will start with an overview of the Group's performance for the year, a reflection on the operating environment and an update on some key strategic developments. I'm then going to hand over to Mfundo, our COO who will provide an update on the progress we're making on our strategic execution. And Mike, our CFO, will follow with an analysis of the Group's financial performance for the period. I'll then return to close the presentation with an update on the economic outlook, our guidance for 2026 and our prospects for the medium to long term. 2025 was a transformative year from a strategic perspective at Nedbank. The external environment remained volatile and uncertain, as evidenced by continued global geopolitical conflict with concerning recent developments in the Middle East. Despite this, we have seen cautious optimism emerge as markets began pricing in a more supportive macroeconomic environment and the progress South Africa has made on multiple fronts. And I'll unpack some of these shortly. Banking conditions were particularly challenging in the first half, but I'm encouraged by the early green shoots evident in both corporate and consumer activity. From a strategy perspective, we've made a number of bold and swift strategic decisions, including the Group's strategic reorganization, effective July 1, acquiring iKhokha and concluding the sale of our 21% shareholding in ETI. In January this year, we also announced our intention to acquire a controlling interest in a leading East African bank NCBA Group. In addition, we concluded a confidential ZAR 600 million settlement with Transnet, avoiding a costly and protracted legal process, which would have been an ongoing management distraction for years to come. Putting this long-standing matter behind us, we'll clear the path towards our substantial support of South Africa's broader logistics infrastructure investment requirements, which are currently estimated at over ZAR 100 billion. And the settlement represents a full and final closure of the matter with neither party admitting fault. Pleasingly, we see momentum building as evidenced in underlying growth across almost all our businesses and clusters, mostly in the second half. From a financial performance perspective, while our results for the year were slightly ahead of guidance, a 3% growth in diluted HEPS is not a satisfactory outcome for us. Similarly, our return on equity of 15.4% was above the cost of equity of 14.6%, but declined from the 15.8% in the prior year. On the positive side, we maintained a strong balance sheet declared the final dividend of ZAR 11.4 a share, completed a ZAR 2.4 billion share buyback program at attractive share price levels of around ZAR 229 per share, and we ended the year with a CET1 ratio of 12.9%. Reflecting a bit more on the operating environment, financial markets are buoyed with optimism. And we expect GDP growth to have increased by 1.4% from the 0.5% in 2024. Unlike this time last year, we believe that this optimism is not unfounded and is supported by evidence of an improving working relationship with the GNU, solid progress on structural reforms, stabilization of energy, supply and transport networks, enhanced collaboration on public-private partnership initiatives, and continued fiscal discipline as reflected in the recent South African budget. In addition, South Africa's removal from the FATF Greylist and S&P's sovereign upgrade with a positive outlook, which is the first since 2009, also contributed to an improved investor sentiment. The outcomes are evident in the graphs on the left. South Africa's government long bond yields improved to their lowest levels in more than a decade. And CDS spreads narrowed back to investment-grade levels reflecting reduced sovereign risk perceptions. So the combination of all of these items translated into tangible foreign market flows and a stronger rand. Improved operating conditions were also evident in private sector loans and advances growth of 7.8%. On the consumer front, we have seen how higher levels of real disposable income, low and steady inflation at around the newly clarified 3% target range, combined with 150 basis points lower interest rates started to stimulate household credit demands towards the end of the year. On the corporate side, we have seen how the economic recovery, slightly higher levels of business confidence, higher fixed investment and a low 2024 base resulted in corporate credit growth improving to above 10%. Reflecting on infrastructure opportunities, our economic unit's latest capital expenditure project listing, saw a sharp rise in investment plans announced in 2025, particularly in the private sector for the first time in a while, which increased by over 230% when compared to 2024. We are very well positioned to participate in this upside. Turning now to the bold strategic decisions we made and executed on during the year. We successfully restructured our Retail and Business Banking and Nedbank Wealth Clusters into a more focused client-centered organizational design. We created Personal and Private Banking, a cluster solely focused on individual clients, headed up by Ciko Thomas and Business and Commercial banking a juristic-focused cluster, which covers the spectrum of mid-corporate, commercial and SME clients headed up by Andiswa Bata, who joined us in August. This strategic reorganization was aimed at being a catalyst to enhance our focus on clients, drive faster revenue growth and unlock efficiency and productivity enhancements. The reorganization was substantial and impacted more than 16,000 colleagues that was swiftly implemented and it was in place by the July 1. This resulted in various strategic initiatives across our cluster. I'll now highlight a few proof points, which are all evidenced by improving H2 momentum. In CIB, we increased our appetite to deepen participation in larger, high-quality deals. And while drawdowns were slow, client activity was robust and pipelines remain very strong. In BCB, we swiftly filled key leadership positions, including the Managing Executive of a cluster. We accelerated advances growth in the second half of the year, and we made good progress in launching new value propositions. In Personal and Private Bank, where our focus is on addressing scale challenges in certain products and segments. We're pleased with solid progress. We saw improving deposit and loan growth and improving quality ahead of industry. Insurance cross-sell is starting to increase strongly. Transactional revenue growth improved and the cluster continued to unlock efficiencies and productivity gains with further progress expected in '26 and beyond. In NAR, we recorded strong loan growth and client gains, while we look to participate in exciting growth opportunities in Namibia and Mozambique. We also made some bold strategic decisions to strengthen our competitive positioning in fleet management and in the SME payment space, both now part of BCB. In June '24, we acquired Eqstra, and I'm pleased to report that in its first full financial year as part of the group, we've achieved full operational integration. We've realized efficiencies across funding and technology and achieved some early client gains and upsell successes. In December, we completed the acquisition of 100% of iKhokha. This is a strategically important transaction for us as it strengthens and fast tracks our payments and merchant acquiring capabilities, particularly in the fast-growing SME and informal merchant segments where our presence has been low. Annually, iKhokha processes more than ZAR 20 billion in digital payments. And to date, has distributed more than ZAR 3 billion in working capital into the SME sector through its more than 54,000 point-of-sale devices. Looking forward, we seek to grow the SME client base and cross-sell lending, banking and payments as well as business solutions. As noted before, the sale of ETI followed a strategic review, that included an evaluation of the performance against our initial investment case, which did not materialize as expected, with a significant negative impact on our NAV, which Mike will unpack for the last time later in the presentation. Unfortunately, a minority stake limited our ability to drive strategic progress and the quality of the associated accounted earnings stream was low and was not backed up by dividend flows from ETI, increasing risks of continuing to hold on to the investment due to regulatory uncertainty and the probability of increasing capital requirements in certain jurisdictions would have resulted in a scenario where we would have had to inject additional capital to prevent shareholder dilution. I'm best pleased to report that we finalized the disposal of our 21% shareholding in ETI for a purchase consideration of $100 million or ZAR 1.6 billion. Importantly, we've received unencumbered cash proceeds and all regulatory approvals. In January, we announced our intention to make an offer to acquire approximately 66% of the issued share capital of NCBA Group, one of East Africa's leading financial services groups. The offer consists of the issuance of new Nedbank ordinary shares, which contributes 80% and 20% in cash, valuing the transaction at approximately ZAR 13.9 billion based on the Nedbank share price of ZAR 250. In a recent positive development on the February 19, we announced that we received exemption from the Kenyan Capital Markets Authority to make a mandatory offer to acquire 100% of NCBA shares. Upon successful completion, NCBA will become a subsidiary of Nedbank, while the remaining shareholding will continue to trade on the Nairobi Stock Exchange. The transaction remains subject to regulatory approvals and is expected to be concluded by the third quarter of 2026. Many of you will recall that on the back of our strategic refresh last year, we indicated that having disposed of the ETI investment we would focus on Southern and Eastern Africa. We noted that, in particular, our home base of South Africa still presents significant opportunities to improve growth and returns and that we saw further opportunities in Namibia and Mozambique. We also highlighted that we intended to enter East Africa, either through acquisition or on a greenfield approach, playing primarily to our strength in CIB, particularly in structured finance, fixed income, currency trade and trade finance, and in sectors like energy and resources. I also indicated that quality entry points into the Kenyan banking sector were rare and hard to execute and may take time. And we were thus very pleased to be able to execute a unique and compelling opportunity to acquire a leading bank with a great track record and an outstanding Board and Management team. The deal structure is also compelling as it keeps the majority of NCBA investors exposed to the combined Nedbank and NCBA business. Following the lessons learned from the disappointing ETI experience, we've ensured that all of those learnings have been applied to the NCBA acquisition. The strategic rationale for the deal is set out on this slide. At a high level, we see East Africa as a region of significant strategic importance to Nedbank, underpinned by strong macroeconomic fundamentals, a robust and predictable regulatory environment and attractive growth potential. Secondly, NCBA is a top Tier 1 bank, which has an attractive ROE, low-cost income ratio and is well capitalized with a strong track record of regular and consistent dividend distributions in cash. It's got a strong and well-established brand, extensive regional presence, more than 60 million clients and expertise in areas such as digital banking. And lastly, the transaction will bring together 2 highly complementary organizations where Nedbank can benefit from NCBA's modern technology and digital platforms, positioning us to grow and diversify earnings. And NCBA will benefit from Nedbank's CIB expertise and our Group's strong balance sheet. NCBA will retain its brand, local leadership team, independent governance and listing on the Nairobi Stock Exchange. This proposed transaction represents a significant strategic reset for Nedbank's presence on the African continent with a renewed focus on the SADC and East Africa regions, driven through businesses under Nedbank Group's direct ownership and control with high correlation between earnings and dividend accretion. And lastly, before I hand over to Mfundo, a quick assessment of the progress we've made on our strategic value drivers. Starting on the left, in the wholesale space, banking advances growth was modest. Despite the shift in our appetite, improving client activity and encouraging pipelines, drawdowns were slow given ongoing delays in deal closures. We are very well positioned to benefit as infrastructure investment gains momentum, and we have thus far seen a strong start to '26, although it is still early days. On the more positive side, we've recorded good growth in retail advances and gained market share in home loans, vehicle asset finance, overdrafts and retail deposits. We experienced pressure on margins, primarily from lower interest rates. But pleasingly, the decrease in NIM seems to have slowed in the second half of the year, and we continue to build out our hedging program in a commercially appropriate manner. We also saw an increase in client numbers across all segments and strong growth in digital transactions, value-added services and payment volumes. From a productivity perspective, while expenses were well managed, our cost-income ratio was under pressure, mostly on the back of slow revenue growth. I'm pleased to update you that we've identified new productivity initiatives, exceeding ZAR 1.5 billion, which I expect to be realized over the next few years. On the far right, key risk and capital management metrics reflect our strong balance sheet, with our CET1 ratio at 12.9%, above our revised board target range of 11% to 12.5%. Liquidity metrics all significantly exceeded the minimum regulatory requirement of 100%. And I was pleased that we were able to optimize capital management further through the execution of ZAR 2.4 billion of well-timed buybacks at attractive levels of around ZAR 229 per share. From a risk management perspective, we are pleased to have reported a further improvement in impairment outcomes, leading to our credit loss ratio at 68 basis points moving to the bottom half of our target range, supporting capacity to increase our lending appetite. The progress on loan loss rates delivers firmly on our commitment 18 months ago to move back into our target range. With that, let me hand over to Mfundo to reflect on the progress we've made on our strategic value unlock. Mfundo Nkuhlu: Thank you, Jason, and good afternoon, everyone. Starting with digital experience is our first key focus area. In 2025, digital activity and usage grew by double digits as evident in the increases in app transaction volumes and values and active users. By the end of the year, 73% of all sales in PPB were on digital channels. Our juristic businesses also noted steady progress as the adoption rate of the Nedbank Business Hub have increased to 76% in BCB, and 50% in CIB, respectively, both driven by higher levels of self-service and the delivery of enhanced digital features. Digital FX transactions increased to 75% with net FX expected to further enhance our digital capabilities. Our current focus is to leverage AI, machine learning and robotics across the value chain, including credit decisioning, fraud analytics, digital marketing and cross-sell with our dedicated data and analytics capabilities as a key enabler of digital growth and innovation. We also look to unlock productivity benefits linked to the similar use of people and machines in the delivery of our services. To this end, we look forward to the launch of our new app that will deliver a highly personalized and contextual experiences tailored to users' needs, and we expect average app logins per client per month currently at 24.5 to increase further. From the perspective of client experience, we reported good outcomes across key metrics, but acknowledged that there is more to be done, particularly in enhancing digital experiences. In our Consumer business, our Net Promoter Score improved to 77 and ranked #2 among the large South African retail banks. In the Small Business Services segment, we recorded the second half level of NPS in 9 years. And in mid-corporate, the KPI research study noted that Nedbank achieved a client satisfaction score of 87 placing this new business division, first in the SA peer group. In CIB, we achieved a client satisfaction outcome of 80%, in line with the global benchmark. In the Nedbank Africa regions, we achieved good outcomes in Mozambique and Zimbabwe. A key highlight of the period was the value of the Nedbank brand that increased by 24% to ZAR 20 billion and now ranks top 8 among all South African companies. As part of strategy execution, and the strategic portfolio tilt. We are making good progress in building stronger client franchises and enhancing client primacy, which is central to growing revenues. Total Group clients were up 7% and reached 8 million for the first time in the Group's history. This was supported by 9% growth in both PPB to 7.5 million clients and NAR to over 430,000 clients. Main-banked clients in PPB showed a reasonable growth and cross-sell penetration improved to 2.02 products per clients. Importantly, our Greenbacks Loyalty and Rewards program increased its client base by 19% to 2.1 million on the back of a more competitive loyalty and rewards scheme. And for the Amex card users, an additional 100,000 merchants now accept our cards on their devices. Lastly, as shown on the far right, our market share in Commercial Banking segment improved to 24%. From a BA900 perspective, we made good progress in key product lines. In the retail lending, we increased market share across home loans, finance and overdrafts, as highlighted by the green arrows, but still fell short of our desired portfolio mix ambition. Of the historic market share losses in personal loans and credit cards, it was pleasing to see declines halted in the second half of 2025 and with appropriate risk management we expect our performance to continue to improve over time. In our Wholesale businesses, we are disappointed with market share losses in term loans as competition for scarce and good quality assets remained fierce. The closure of large transactions, particularly in energy and infrastructure was delayed into 2026 and planned repayments resulted in slower growth. In Commercial Mortgages, where we have a leading market position, we supported our clients and the market share remains strong around 35%. Looking forward, CIB is well positioned for growth with strong pipelines that are weighted to low risk, including power, renewables and infrastructure. While in BCB, advances are growing off a low base driven by our sector-led expertise and new client value propositions. Retail deposits were up slightly, while commercial deposits decreased marginally. Going forward, we aim to gain further deposit market share with a heightened focus on transactional deposits. As part of our 2024 results, we outlined a number of transformational growth initiatives, designed to leverage our strong foundation and core capabilities to unlock new revenue streams and drive cost optimization. Today, I will not cover all of them, but focus on the progress we have made on payments and insurance. With regard to payments modernization, as shown on the left-hand side, we recognize the enormous potential of digitizing small, fast payments instead of using cash, which has become very expensive to manage. In 2025, we recorded 183% growth in PayShap revenues and very strong growth across contactless payments, value-added services, e-commerce and money app payments when compared to a 6% decline in cash withdrawals. With regard to insurance, as shown on the right-hand side, the opportunity to grow and cross-sell traditional bancassurance and new solutions, such as MyCover suite into the Nedbank line base is accelerating, enabled by the organizational restructure. Insurance offerings are being integrated into client journeys at points of need and provide claims with data-driven personalized offers through enhanced digital experiences. This approach aims to increase client penetration from 19% in 2025 to more than 30% in the medium term and grow gross and premiums by more than 50%. Early signs are evident in the strong growth in end premiums across the MyCover Funeral personal lines and life product lines, and the increases in credit product penetration in card and overdrafts with home loans and vehicle finance enhancements planned for 2026. Lastly, and our fifth strategic value unlock, I will reflect on a few highlights. We continue to provide loans and finance to clients that are aligned to the UN Sustainable Development Goals. At the end of 2025, sustainable development finance exposures amounted to ZAR 207 billion, which represented around 21% of the Group's gross loans and advances. And as a result, achieve our 2025 ambitions of 20%, which we set back in 2021. From a transformation perspective, we maintained our Level 1 Broad-Based Black Economic Empowerment status for the eighth year in a row, supported by ongoing improvements in African colored and Indian employee representation and a 3% increase in African talent representation at both senior and middle management levels. We also provided first-time job opportunities to more than 3,800 U.S. employment service participants, bringing the cumulative opportunities to more than 17,000 since inception. In a year in which we had large-scale changes arising from the organizational restructure, we are pleased to have been announced the #2 ranked SA company on the Forbes World's Best Employers list and top 50 globally. I now hand over to Mike to take us through a review of the Group's financial performance. Michael Davis: Thank you, Mfundo, and good afternoon. Our financial performance for the 2025 year was muted, although slightly ahead of guidance we provided at our pre-close meeting in December and market consensus of an expected decline. Headline earnings increased by 2%, DHEPS by a slightly faster 3% due to buybacks and our ROE was softer at 15.4%, although ahead of cost of equity of 14.6%, excluding the once-off ZAR 600 million Transnet settlement, headline earnings increased by 4%, DHEPS up by 5% and ROE at 15.8% was similar to 2024. Basic earnings per share, however, decreased by 53% as we accounted for the impact of disposing of our ETR shareholding. From a balance sheet perspective, gross banking advances growth was modest at 6%, while deposit balances grew strongly at 11%. Net asset value per share at around ZAR 250 increased by 4% year-on-year, and other balance sheet metrics remain strong, evident in our capital and liquidity ratios. The total dividend for the year was ZAR 21.32 per share, representing an attractive dividend yield of around 7%. Unpacking the numbers, the 2% increase in headline earnings was underpinned by revenue growth of between 3% and 4%. Associate income that declined by 8% as ETI did not contribute to the second half of the year. The impairment charge improved by 18% and expenses increased by 7%. Reflecting on balance sheet growth, advances grew by 6% year-on-year, driven by 6% and 9% growth in home loans and vehicle finance, respectively, on the back of strong front book growth sales as we leverage our existing MFC partnerships and new mortgage originator joint ventures, including with the BetterHome Group, Uber and MultiNet. Modest growth in personal loans of 2% was the outcome of deliberate historic actions taken to derisk the book together with the impact of a change in the write-off policy implemented during 2024. New sales levels have lifted strongly in 2025 and there were no further market share losses in the second half of the year, enabled by specific initiatives focused on originating better quality business. Card and overdrafts increased by 7% off a low base. Term loans reflecting largely the growth in our wholesale businesses, grew by 3%, impacted by delayed deal closures despite improved client activity and robust pipelines. Commercial property finance grew by a modest 2% due to resilient domestic client demand that was offset by a contraction in the African portfolio due to heightened competition, client prepayments and adverse foreign exchange movements. Deposit growth of 11%, as shown on the far right, was underpinned by a 10% increase in franchise call and term deposits, a 23% increase in other deposits as clients extended tenure in response to Nedbank's competitive offerings and NCDs that increased off a low base. Looking at the income statement in a bit more detail. Net interest income increased by 3% as growth in average interest-earning banking assets of 9% was offset by margin compression. The 9% growth was driven by a 6% growth in average banking advances and high levels of high-quality liquid assets. The 24 basis point decline in margin to 381 basis points was primarily driven by a 12 basis point negative endowment mix impact due to capital and transactional deposit balances growing slower than average interest-earning banking assets, and an 11 basis point negative endowment impact from lower rates. The impact of asset mix changes as well as asset and liability pricing pressures reduced margin further by 8 basis points. Pleasingly, the rate of the decline in margin slowed in the second half of the year when compared to the first half. From an interest rate sensitivity perspective, a 1% change in interest rates impacts NII by approximately ZAR 1.5 billion. To date, we have implemented approximately 38% of our endowment hedge as progress depends on interest rate levels. This has reduced our sensitivity from around 18 basis points in 2021 to around 13 basis points when expressed on average interest-earning banking assets. Noninterest revenue growth was 4%, in line with the guidance we provided during the Group's pre-close update of below mid-single digits. Commission and fees increased by 6%, supported by Eqstra that was in for a full 12 months in 2025. Within PPB, we were pleased with transactional NII growth of 8% as our consumer banking business, reflecting good progress in strengthening the franchise and strong growth in value-added services of 36%. Growth in CIB was restrained by delayed deal flow moving to 2026 and a high prior year base. Trading and fair value income decreased by a combined 6%, including a 1% increase in markets. Trading income increased by 10%, driven by strong growth in ForEx and debt securities, offset by slower equity trading income, while fair value income declined. Insurance income increased by 5% due to an improved non-life claims experience and strong growth in premiums and policies within the MyCover suite, as Mfundo highlighted earlier. This was partially offset by a sizable positive actuarial basis changes in the prior period. And when excluding the base effect, insurance income increased by 11%. Turning to impairments. The Group's impairment charge decreased by 18%, and the credit loss ratio improved to 68 basis points, which was better than we had expected. The improvement was primarily the outcome of decisive risk management actions and an improved macroeconomic environment. At a cluster level, CIB reported a recovery of ZAR 718 million and a credit loss ratio at negative 17 basis points, primarily the result of successful workouts and derisking strategies that resulted in provision releases given the decline in Stage 2 and Stage 3 exposures. The BCB credit loss ratio decreased to 21 basis points to well below its through-the-cycle target range of 50 to 70 basis points. The decline was driven by an outstanding performance in recoveries and collections. PPB's credit loss ratio decreased to 163 basis points from 176 basis points in the prior year within its through-the-cycle target range of 130 to 190 basis points as a result of ongoing credit risk and collections initiatives and better quality front book origination. Home loans and vehicle finance, reported improvements, while credit card impairments increased off a low prior year base, and the personal loan credit loss ratio remains elevated, although improving from the first half of the year through better front book origination. Nedbank Africa regions reported a credit loss ratio of 89 basis points, back to within its through-the-cycle target range of 85 to 120 basis points, driven largely by lower impairments due to improved recoveries and stronger asset growth. Within gross loans and advances, Stage 1 loans increased by 10%, while Stage 2 and Stage 3 loans reduced by 5% and 2%, respectively. As a result, the Group's total ECL coverage at 2.96% decreased from 3.32%, mainly driven by the decline in Stage 2 and Stage 3 loans. Shifting our focus to costs. Underlying expense growth was 5%. An 8% increase in salaries, wages and other employee costs reflect the impacts of average annual salary increases of 6% and the additional Eqstra staff costs not fully in the base. Incentives decreased by 2%, aligned with profitability metrics and vesting probabilities relating to corporate performance targets. Computer processing costs increased by 5%, driven by ongoing investments in digital data and cloud solutions as well as higher digital volumes, partially offset by negative growth in the amortization of intangible assets. Fees, insurance, accommodation and marketing were all well managed, increasing by a combined 3%, while the large increase in other operating expenses was due to the inclusion of the Transnet settlement. Turning now to the disposal of our historic ETI associate investment. The graph unpacks the ETI lifetime outcome from the date of the original investment to the date of sale. We show on this slide the on-sale accounting treatment where ZAR 8.6 billion is crystallized through the income statement as a non-headline earnings item. The ZAR 8.6 billion is made up of our share of historic foreign currency translation and other comprehensive income losses to the value of ZAR 7.4 billion and an IFRS 5 adjustment of ZAR 1.2 billion on sale. The sale proceeds of ZAR 1.6 billion represent the $100 million sales price, less transaction costs converted at the December 17 rand-U.S. dollar exchange rate. Moving to capital. The movement in our CET1 ratio this year reflects solid capital generation, the payment of dividends in the calendar year, a 3% increase in RWA and the combined impacts of share buybacks, which was beneficial to ROE, the acquisition of iKhokha, the sale of ETI and the final Basel III reforms. The increase in RWA was mainly due to an increase in credit and operational risk, partially offset by a marked improvement in equity risk, following the adoption of the final reforms. At 12.9%, our CET1 ratio remains above the top end of our revised target range of 11% to 12.5%. Positioning for growth, the execution of the NCBA acquisition and to sustain dividend payments within our target range. I will close with the financial performance of our clusters in their new construct. CIB produced headline earnings growth of 2% and delivered an ROE of 21.4%. Earnings growth and returns were supported by lower impairments and disciplined capital management. NII decreased by 2%, reflecting actual advances growth of 5% and a decline in margin on the back of lower interest rates, competitive pricing and a lower risk loan book mix. NIR decreased by 2% due to negative fair value adjustments and lower commission and fees, given a high 2024 base and deals delayed into 2026 despite solid underlying activity. Trading income and equity investment income, on the other hand, were up strongly, and underlying operating expenses were well managed. The cluster is well placed for future growth given its skills, expertise and strong pipelines. Headline earnings in our new cluster business and commercial banking decreased by 7%, delivering an ROE of 20.8%. NII decreased by 1%, given a slight decline in advances and lower margin on the back of rate cuts. NIR increased by 13%, including the full year impact of Eqstra and underlying NIR growth was driven by higher card acceptance and commercial issuing volumes as well as growth in value-added services. Expenses increased by 12%, but by only 8% when adjusting for Eqstra. BCB is now fully resourced and positioned for growth. Headline earnings in our Personal and Private Banking cluster pleasingly increased by 9%, delivering a higher ROE of 15.6%. Growth was driven by a 7% increase in NIR as a result of strong growth in value-added services and insurance income. NII increased by 1% on the back of 6% growth in advances, diluted by a decrease in margin, mainly due to lower endowment and the advances mix impact. Expenses were very well managed and increased by only 4%. The momentum we are starting to see in PPB is pleasing as it takes to increase its ROE towards 18%. Lastly, in the Nedbank Africa regions, headline earnings decreased by 1%, delivering an ROE of 20.5%. The earnings decline was mainly due to the sale of ETI that resulted in no associate income reported in the second half. Headline earnings in our SADC operations increased by 15%, but its ROE remains low at 9%, which remains a focus. Thank you. I'll now hand back to Jason. Jason Paul Quinn: Great. Thanks, Mike, and Mfundo. Let's start this section by looking at our latest macroeconomic forecast. We expect banking conditions to improve further in the coming years as South Africa's GDP for 2026 to 2028 is around 1.5% to 1.8%. Inflation should remain around the Reserve Bank's target of 3% due to a stable rand, low global oil prices, low inflation expectations and fewer supply side challenges. It's actually too early to call out any changes in this guidance based on recent events in the Middle East. After a cumulative 150 basis points cut in interest rates, including the 25 basis points in November, interest rates are currently forecast to reduce by a further 50 basis points. To my mind, though, this is becoming increasingly unlikely with a plausible scenario of rates flat from here for the foreseeable future. Credit extension is forecast to remain relatively robust around 7% to 8%, supported by the anticipated recovery in the domestic economy and lower interest rates. Although, difficult to forecast due to geopolitics, the rand is expected to average slightly above ZAR 16 to the dollar in the coming years. Turning now to our guidance for 2026. We expect NII growth to increase to around mid-single digits. This is likely to be driven by stronger advances growth across all our clusters. Our NIM is expected to contract slightly given the growing impact of lower interest rates. Our credit loss ratio is expected to be around the mid-70 basis points, which is below the midpoint of our through-the-cycle target range as impairments in CIB and BCB normalize off a very low 2025 base, and PPB will continue to see an improvement in its credit loss ratio. NIR growth is expected to grow at upper single digits, driven by the execution of various growth initiatives across all our clusters. Associate income from ETI will not recur in '26 or beyond. Expenses are expected to be below mid-single digits as our focus on cost management continues. On capital, we expect to operate within our revised board-approved target range of 11% to 12.5% by the end of this year. Dividend subject to Board approval will be declared within our target range of 1.75 to 2.25x cover. So I'm even more excited today about the Group's growth prospects in the medium term than I was a year ago. And this has given our strategic focus and execution that we saw in 2025, which won't necessarily offset the discontinuance of the contribution from ETI in 2026, but will do so from 2027. Tailwinds in 2026 will come from an improving macroeconomic environment, strong underlying business momentum, as we highlighted in our presentation today, the benefits from the organizational restructure and the one-off Transnet settlement that is now in the base. We do, however, face some headwinds. These include endowment pressure from lower interest rates, wholesale impairments normalizing off a low base and no further earnings contribution from ETI. These impacts will be more material in our interim results, given that we had a final ZAR 927 million contribution from ETI in the first half of 2025. Notwithstanding all of this, the focus for 2026 remains on delivering an ROE above 15%, heading towards 2025 levels and improving our cost income ratio. In the medium term, we firstly see benefits from a more constructive macroeconomic environment, including us being well positioned to capitalize on large energy and infrastructure finance opportunities, stronger retail credit growth and a low, but more stable interest rate backdrop with low inflation, particularly from an endowment perspective. Our Transform initiatives are starting to scale, and we should see more meaningful contributions from insurance, payments and other vectors as well as ongoing market share gains in lending and deposits. I'm particularly encouraged by our various productivity initiatives, which I mentioned earlier, including AI projects, which in combination will improve our cost income ratio. We also expect to unlock synergies from our Eqstra and iKhokha acquisitions, while NCBA is expected to contribute once the transaction is finalized. From a capital perspective, we remain committed to be flexible in the management of capital and being good stewards of capital as we demonstrated in 2025. Overall, these initiatives, along with underlying momentum underpin our confidence in progressing to our medium-term targets of an ROE of 17% and a cost to income ratio of 54%. Thanks very much for listening, and we'll now proceed to your questions and answers. Jason Paul Quinn: All right. Sorry, we just had a bit of a glitch there. All right, everybody. I'm going to play a point here and coordinate our responses to your various questions. It probably makes sense for us to firstly take any questions on the telephone. So operator, if you could advise those on the telephone to put the questions to us now. Operator: [Operator Instructions] Jason Paul Quinn: Thank you. We do have a number of questions on the web, so we can go to those if there aren't any questions on the telephone. Let's give it a second just to give anyone the last opportunity. Operator: There are no questions on the conference, sir. Jason Paul Quinn: All right, folks. So if we move to the questions coming through the web. I'll read them out in verbatim, and then we'll deal with answering them together, myself, Mike and Mfundo. First question is from Baron Nkomo from JPMorgan. There's a two-part question here. First one is how our recent developments in the Middle East, impacting the Group's short-term outlook. Baron, I think it's premature for us to revise anything at this point, to be honest, even our short-term outlook. And that's really because it's just totally uncertain as to whether the conflict in the Middle East is short as the previous one was. And if they go back to the negotiating table, potentially the Strait of Hormuz are opened up again. We just don't know. What we know for sure, though, is that over the sort of more medium-term impact on oil price would be something we would observe carefully. I do think that the world has stockpiled a lot of oil over the last while. This is a risk that was well flagged for some time, in fact. I also understand that the UAE came out and said that they've got much more capacity in oil pipelines that could avoid these transformers in the short term. But the truth is, given the uncertainties around this, it's premature for us to change anything at all and we stand by our outlook based on what we know today. The second one would be also from Baron, what are your loan growth expectations for each of the key divisions, Retail, Business Banking, Corporate Banking in the second half of 2026. Just checking with Mike, Baron, I would say that we've given good guidance for the year, we can update that when we're together in August, depending how the first half goes. But we've got pretty strong conviction, as you've heard, around momentum in many of our lending businesses, particularly the annuity ones that are more kind of inflow like mortgages, autos. I think those are kind of in good shape, and we should see the similar or improving growth. BCB similarly, I think we've got good conviction there. CIB, we've said we didn't execute our full pipeline in 2025 and that, that pipeline should be executed into 2026, and we've got conviction on that statement as we stand here today. So I'd say we'll be pretty linear through '26 and with some lumpy trades in CIB that will emerge from a pipeline execution perspective. Tyron Green from Granate Asset Management. Are you able to provide more details on the competitive environment in the corporate credit market, the reason for the lower market share in corporate credits and delays in CIB pipeline impacting NIR? Thanks very much, Tyron. I think we covered some of that in the presentation, but let's just double click on it. Our CIB business can only operate as quickly as our clients, to be honest. We put great capabilities in place. We have great structures in place. We've got appetite, as you've heard, and we've even gone so far as to really express our appetite in a different way in that for our best customers now, we will take full exposure to them. In other words, we're standing by our clients' growth opportunities. We know for sure that the last round of renewables that were awarded weren't executed. We think those do get executed in '26. And we've got pretty good conviction around it, as you've heard, but not necessarily always in our hands, and that's the only reason for the delay as we see it at this point. Ross Krige from Investec. A couple of questions here, which we'll probably share around a bit. First one is on the additional cost optimization plans brackets, I think ZAR 1.5 billion was mentioned. What is driving this and in what time frame? Let me cover that one quickly, and Mike and Mfundo might come in on it. Ross, you'll recall that the company ran a very effective TOM program. I think that took ZAR 6 billion, ZAR 7 billion of cost out of the organization. What we talk about now is a project that deals with productivity. So in other words, ensuring that we have the most efficient organizational designed to serve clients, minimizing any duplications between our enablement functions and our businesses. And ensuring that our technology enablement delivers in the technology enablement part, we're looking at -- we've got a lot of use cases, Mfundo covered some of those in AI to enhance colleagues productivity. So in other words, a loan officer and the number of loan applications they can deal with in any particular time period should be accelerated through AI. That's where that quantification comes from. That is a medium-term aspiration. So we'll deliver that over 3 years. Second question on the delayed deals in CIB, what are the main reasons for the delay? And what is the risk those deals don't happen at all. Ross to be fair, I think we've covered that. I just want to see it Mike or Mfundo want to add anything. I think we've covered it. Third question, on home loan origination proportion going through owned channels reduced to 35%. Could you be more -- could you share more details around the strategy and the trade-offs at play? Ross, I think 18 months ago or thereabouts, we were very clear as part of our strategic refresh that we intended to widen our scope of origination and bring in originators, and we've done that very successfully. And I think that's seen the largest part of the growth in flow coming from the mortgage business. So that's clearly been strategic. And I think we're executing it well. Next one is Harry Botha from Bank of America. How should we think about CLR in the medium-term targets? Can wholesale remain lower supporting CLR below 80. So let me start on that, Mike, you probably come in. So yes, we've got a range, as you know, Harry, which is 60 to 100 basis points. We're probably at the lower end now of where I think we may end up, and we've guided very explicitly for FY '26 to be somewhere in the mid-70s, so from 68 up to 70 mid. And that's on the back, of course, of a non recurrence of the very low or credit kind of write-back in CIB this year and an increase in BCB, which was also pretty low. Mortgage is also pretty low at the moment and might go up a little bit. So that should give you a bit more color, Harry, on where we are with respect to guidance. With respect to medium term, like more further out, we want to be more or less in the middle of the range or thereabouts with good loan growth on the top of that. You never want your loan losses to be so low that you're not taking enough risk in the market, and I think that's something to watch. Michael Davis: Maybe, Jason, just to add to that. So in terms of -- we've given guidance this year, in terms of credit loss ratio in the mid-70s. So you can model that 75, 76 somewhere in that sort of range. And as Jason has indicated, we would see an unwind of the recovery seen in CIB towards the bottom of the target range. And you know that, that plus there's a range of 15 to 45. We've indicated that BCB had a very good credit outcome. And obviously, our focused on growth. I would suggest the 21 basis points, that's going to move up. Jason referred to home loans at 8 basis points at very, very attractive levels. So I would suggest that's going to move up. But then we've got scope and capacity and unsecured lending, both in personal loans and card and VAF, we think will continue to come in. You put all those bits and pieces together, that's where we get the guidance for the group at somewhere in the mid-70s. Jason Paul Quinn: Thanks, Mike. Thanks for that color. Harry, you've got 2 more parts. Can you expand on your strategies to accelerate growth in BCB over the next couple of years? Absolutely, Harry. So firstly, it's been great to see the formation of BCB as a cluster. It's been great to see the leadership team form under Andiswa Bata's leadership. We already saw quick wins in that second half last year and more momentum in our client franchise. So a combination of, I would say, a good hustle, in other words, bankers chasing transactions, service and products. We also need to see collaboration, which is already building out nicely between BCB with PPB on some products and CRB on others, like FX and trade and commercial properties. So really excited about the opportunity strategically in BCB and we can unpack that a bit more when we're together later in the week. All right. Harry's got one more there. What underpins the 18% ROE target in PPB? Is it predicated on high single-digit revenue growth. Harry, of course, it's a revenue-led strategy in PPB, but also, we need to make sure that credit loss ratio covers is well covered, and we get efficiency out of that. I'd also just say that the productivity gains that we expect would probably benefit PPB the most. I think that will be a fair comment, although there will also be benefits in BCB given it's relatively high cost-income ratio. Okay. Harry, thank you. All right. Chris, Chris Steward from Ninety One. Please, could you unpack the NIR growth guidance? How much do you see as organic versus how much from recent acquisitions such as iKhokha? That's a great question, Chris. Of course, iKhokha only landed in December. So it's only had one month of revenues in it. You'll see that in our booklet. In fact, it's around about ZAR 60 million from memory, Mark, or thereabouts on the revenue line. I think we'll unpack that a little bit more later, but I certainly would see that a large portion of our NIR revenue growth would come from organic. And you've seen where that's -- where those lines are, those key lines that we think we should make progress on, including in CIB, especially those deal closures come with fairly large upfront fees attached to them, which I think would make a big difference to our NIR trajectory. Chris, I'm also really pleased if you go through the businesses with PPB, some pretty good momentum there on the fees and commissions lines in the high single digit, which we think we should be able to maintain. Mike, I don't know if we want to say much more about an individual acquisitions contribution in '26 other than what we earned in December. And I don't think that was -- look, seasonally, that would be a relatively high month given transactional volumes in December. So maybe not a run rate of 60 a month, but a little bit less than that, and then you can figure out annualizing that what the -- because that's the only one run that will have a major contribution. The other one will be NCBA, which is much later in the year, and we'll probably guide more explicitly on that when we get closer to executing that transaction. Okay. Charles Russell from SBG. First one, do you anticipate further buybacks given your comments about DHEPS growth greater than HC growth in FY '26. Mike, do you want to take that one? Michael Davis: Yes. So I think when you think about DHEPS and when you think about our capital management and our approach towards capital management, we indicated, certainly during 2025 that we saw significant value in doing buybacks at levels at which the stock price was trading at, at a time when we were short of growth and at a time when effectively, we had no major acquisitions in the pipeline. So we saw an opportunity to certainly execute buybacks at valuable levels to shareholders. If you reflect on where the stock price is trading today, if you reflect on the fact that we've announced to the market, we're looking to close out a 66% acquisition of NCBA. And if you reflect on Jason's comments around front book growth, which certainly in CIB, BCB are going to be much better than 2025 or expect it to be much better than 2025. It's likely that capital is going to be utilized to support growth and to continue to service inside the range. So that would be... Jason Paul Quinn: I think that's right, Mike. Thanks, Charles. Your NII guidance for FY '26 seems to imply continued lower than market loan growth. I guess we'll see Charles how the other banks guide over the coming weeks. Can you unpack the mechanics of shrinking CET1 ratio into FY '26? I think we've covered a bit of that. So we certainly would see loan growth as a first key driver. We certainly have to fund at least part of the NCBA acquisition. And then after all that, if there's opportunity, we would look at buybacks at -- within guardrails of a share price. But those will be the drivers of bringing our CET1 ratio up to the top end of that new target range. Michael Davis: Maybe just one other is that D2 comes into effect, January 1, 2026, and that itself takes about 27 basis points of the CET1 ratio. So you've got -- to Jason's point, you've got NCBA coming in. You've got D2 coming in. You've got an expectation of stronger growth. And hence, our guidance or expectations around CET1. Jason Paul Quinn: But once again, Charles, our commitment to shareholders would be to be good stewards of capital, and we would use those levers appropriately. Okay. Now we've got a question from a colleague at Nedbank, Heathcliff. Are there any plans around internal structure to deal with inefficiencies such as market offsetting in different CIB area to markets? I'd suggest Heath we'll take that up with you internally. I wouldn't suggest that that's a question I can answer here today. Simon Nellis from Citibank. Do you intend to execute further buybacks this year? Simon, I think we've covered that extensively now. So I'm going to assume that one's answered. We went to James Starke from Morgan Stanley. Regarding your home loans distribution strategy, with only 35% origination coming through own channels down from 42%. Please, can you give some color on a few things. How the economics and asset quality characteristics compare between your own channel and mortgage originator channel and how do you secure a position of the MO channel relative to other banks? Well, I'll start off with that one. James, in my experience, a diversified portfolio that originates both from owned channels and mortgage originators takes you well through cycles. I think what mortgage originators price the most is consistency of appetite. So in other words, it gets very difficult for them to do their business if banks are in and out of appetite with them. So I think consistency of appetite is very important, and they will see that from us. I think it's also important that as we build out these partnerships, they are kind of long-term partnerships with sharing of economics right down to the bottom line, including sharing of good credits and not so good credits. In other words, that loan loss is important to both parties. I think that will be the main part of the answer, Mike, I don't know if you want to add anything to it? Michael Davis: You heard me in my slide referred to the partnerships and JVs with the BetterHome Group, Uber and MultiNet. I mean, obviously, the adverse implications of that is obviously, it costs us something to be in those JVs. But certainly, when looking at the quality of the front book and the residual economics in the deal they are favorable joint ventures to the organization. Jason Paul Quinn: Yes, I agree, Mike. And James, the last point I'd make around the mortgage originators is simply that we really have a long-term view of how to work with them. And those relationships are being built out carefully. Simon Nellis from Citibank. What, if any, earnings accretion do you expect from the NCBA transaction? What is the magnitude of any synergies from the transaction you expect? And last, what is the capital impact of the transaction? So Simon, I think with respect to how the transaction is progressing firstly, we announced a week ago that we obtained Capital Markets Authority exemption. So -- and we're busy now with processes of applications to the Central Bank of Kenya, for instance, and the SARB. So we only expect to execute the transaction in the third quarter. As we get closer to that, the economics, I think, will firm up a bit more. And at that point, we'll be able to say a lot more around quantifying some of these magnitudes that you're looking for. But certainly, strategically, we're very excited about the opportunity of bringing these 2 companies together. We certainly think that there are things that Nedbank can add to NCBA and there's things that NCBA can add to Nedbank. So we do see synergies as part of the game plan. Mike, do you want to cover the capital impact? Michael Davis: Yes. So Simon, the best estimate at the moment is based on assumptions that the deal will take 40 basis points out of the CET1 ratio. And obviously, there are a few moving parts in that, but you could model 30 to 40 basis points. Jason Paul Quinn: Thanks, Mike. James, is coming back in. And James, there was one other point I just wanted to make to you on the mortgage originators which really deals with turnaround times. I covered the part around consistency of appetite. But one thing we had to invest in significantly in Nedbank was our turnaround times of approving applications and you need to get to the good credit quickly and first. And I think that's another reason why that channel has grown quite nicely for us. With respect to your final question, James, does the FY '26 guidance include NCBA from Q3? Not at the moment, James. We haven't put that in our thinking for what we guided today. We will update you as we get closer to Q3 on that. I'm just going to refresh, one last time before we move to close. So if anyone has a final question, please put it in now. Otherwise, I think we can move to closing this session. We look forward to seeing most of you in the coming days as we engage in-person on today's presentation. Thank you very much.
Pieter Engelbrecht: Good morning, ladies and gentlemen. It's an absolute pleasure for us that you take some of your valuable time to give us roughly an hour of your time that we can tell you a little bit about what has transpired in H1 of this financial year. I'm going to just do a very quick synopsis, and then I'm going to hand over to Anton, of course. He'll take you through the detail, which is very important for you. I know the detailed numbers. I know you've read the sense and understand all of that, but he'll color it in for you to make sure your models are in place. And then I'm just going to end off by saying a little bit about what we've been doing. Not everything is perfect. So we'll also tell you what is not great. So the sales growth was 7.2%. You have read that. Now almost ZAR 137 billion for the half year, adding ZAR 9.2 billion in sales for the 6 months. The trading profit grown by 5.9% to ZAR 7.7 billion. And probably the most telling number is the fact that the South African supermarkets achieved a trading margin of 6.2%. And for a value trader, I think that is an outstanding number. And I want to, if I may ask, to just think about that number a little bit that it sits with you that, that is the one that we consistently and Anton will talk about it, where we consistently try and achieve. And that is not something that happens because we increase prices and -- it happens because of the efficiencies and how efficient this business is run. And that's my emphasis on the 6.2% margin. The ROIC has increased again. I know a lot of you are interested in that. We can go back in history. We can talk a lot about what if African never happened and all the investments we made there, the ROIC would have been probably much higher. But that's not the point. I think what is important is the fact that we're continuously improving on that number. From last year 17% to now over 19%, I think needs acknowledgment to the team. Thank you very much for that. Headline earnings per share up over 7%. If one thinks about the last decade, how many challenges there have been, macro challenges, et cetera, that Shoprite never failed to pay a dividend to its shareholders. And we are very pleased again to be able to increase our dividend payment by 7.7% this year again. In terms of operationally, what's happening in our business, again, for the sixth year in a row, the Shoprite Group have managed to gain market share to the value of about ZAR 3 billion additional. We're still growing customers. We're still moving volume. And we're serving more than 100 million customers in a month. It's an enormous responsibility. I tend to say that there's probably 2 most difficult businesses to please is airlines and the retailers because you have such a large number of customers to please everyone is almost not possible, but not for a lack of trying. We certainly try to please every single one. That's why we think about things like the ZAR 1 items that I will cover a little bit later on also. The 6 months was really marked by low inflation. And in the month of December, actually, the festive period, we went into deflation. There were like over 14,000 items cheaper than the previous year. And I know there was a lot of reports in the media around a very slow or subdued Black Friday but we certainly didn't experience it. We had a record Black Friday. We had a record festive season, so much so that the Shoprite Group have outgrown the market 5.3x during that period. We remain South Africa's largest employer. Again, I cannot almost remember a year that Shoprite did not increase its employment or number of employees. So it's 1,711. That excludes all the contractors. You must always remember that. There's no security, no cleaning, no trolley collectors. And all the peripheral businesses that benefits as Shoprite grows. Where are we in terms of our strategy. I said this to you for the last 10 years, I think. We don't do knee-jerk. We have a strategy, and we deliver on it as best as we possibly can with the best execution that we can. That makes the difference. Yes, we make small adjustments. Of course, we have to. Market dynamic changes. The one thing you will not hear us saying is trying to make excuses in terms of we never do make excuse, good or bad. We don't praise and we don't complain. We live what we are dealt with, we deal with the markets, and we deliver as best as we possibly can. And that is what 170,000 people of Shoprite does every day. One of the things that I'm extremely proud of was the efficiencies on the supply chain. Now we currently are running an on-shelf availability of stock of over 98%. Obviously, we have to carry a lot of stock in our distribution centers to make good for service levels that are not supporting the kind of volume requirements that we have during promotions. So at store level, I mean, that percentage is closer to 6%, which I think in global context are comparing quite favorably. In the past 6 months, we had our fair share of challenges in our non-RSA business units, well written and publicized around what happened in Mozambique. There are also good things. There's a big improvement on the electricity side in Zambia, which is our largest contributor in that segment. But for the 6 months, we did experience a lower level of return from our non-RSA business. Although we also have continued to rationalize, which Anton will clarify on Malawi and Ghana, but they will come through in his numbers when he explains about continued and discontinued businesses. Then this is what we do. We really live by this that we are uplifting lives every day. And we say that not only because of our customers, yes, that is our primary, primary focus that, yes, we want to improve their lives. And that's why we are thinking every day how we can lower prices, how we can make something cheaper, we change the packaging, the transport, whatever it is to make their lives better, but also our own people. That's the Shoprite people, the people on this side of the line. So at this point, it would be very wrong for me not to thank each and every one of the 170,000 people at Shoprite for what they do every day, uplifting lives. It is an incredibly hard job to do. But the one thing is for sure is that we appreciate it. And I think in most cases, our customers also appreciate that. So thank you to you all. I'm going to hand you over now to Anton, who I'm sure will make the numbers very clear and understandable for your benefit. So thanks, Anton. Anton de Bruyn: Thank you, Pieter, for that introduction. In my section of the presentation, I will focus on the top line drivers, the gross margin and cost dynamics within the business before touching on capital allocation and our outlook for the second half. As part of our enhanced segmental reporting, we introduced additional disclosures for the first time during this year. And here, you can go and look in Note 3 of the financial statements, where we've spoken about the expanded information and notably more about gross margin per segment. It's important to revisit certain factors that forms part of the first half of the 2025 base, which impacted some of our measurements. And here, I'm specifically referring to the impact of the Pingo increase in our shareholding as well as the discontinuation of our furniture business and then the closure of our Ghana and Malawi operations, where we saw the restatement of our 2025 financial year results. Throughout my section of the presentation, I will be referring to the results from continued operations. The Pingo transaction was concluded during the first 3 months of the 2025 financial year. And post the effective date of the acquisition, the revenues earned from Sixty60 delivery fees as well as the subscription income, which we reported previously as part of alt revenue are now classified as part of Supermarkets RSA sales. The associated cost of delivery was shown previously as part of other expenses, but is now classified as part of cost of sales, and you'll see that impact as well coming through in terms of our gross margins. This was a reclassification and on a restatement for accounting treatment. Other significant transactions the group embarked on was the sale of the furniture business to Pepkor, which included the RSA as well as the non-RSA assets, but it didn't include the operations that we had within Angola and Mozambique. These operations were classified as discontinued operations during -- in terms of IFRS 5, and we have subsequently restated our income statement numbers for the comparative period. In terms of timing to conclude on these transactions, especially relating to the RSA assets, following the recent court proceedings and the intervention by a competitor, the transaction is now expected to be heard by the competition tribunal in the coming months. We do not foresee that we will be able to conclude this part of the transaction during the 2026 financial year. When we then look at the non-RSA operations relating to this transaction, that was concluded as part of our H1 results and the proceeds from that transaction equated to ZAR 568 million, which we did receive in January 2026. Regarding the Mozambique and Angola operations, we ceased our trading already within our furniture Mozambique business during the second half of the prior financial year. And the Angola business is we are in the final stages of actually transferring the assets to a new operator. Then referring to our Ghana and Malawi operations, both were classified as discontinued during the second half of the 2025 financial year and this resulted in the restatement in our comparative results. In terms of the sale of assets on our Ghana operations, that's now concluded with the proceeds already as part of our base year or part of first half reporting. In terms of the Malawi assets also concluded on, and I expect that to be the proceeds from that transaction we will receive during the third quarter of our financial year. For a full analysis on the impact of the discontinued operations and the results relating to the discontinued operations, we've done a full analysis in Note 2 and 6 to the financial statements. Now Pieter has spoken to quite a few of these numbers in his opening comments. I would just like to highlight 1 or 2 of these. It's important to note that we did manage to contain our cost growth to around 6.6% on prior year. And that really helped us to achieve and maintain our trading margin of 5.7% for the first half. Adjusted ROIC and return on equity have shown consistent growth over recent reporting periods. And I think we're very happy with the fact that we could exceed our weighted average cost of capital that reported at 12.3% by respectively, 7.2% and 15.5% from a return on equity point of view. Now this would not have been possible if it wasn't for our disciplined approach on -- and our continued investment across our expanding store footprint, which I will touch on a little bit later, as well as our continued investment within our supply chain. And then, of course, our digital platforms, which we see continue driving value for the operations and the business. Very proud to be able to again declare a dividend where we saw an increase of 7.7% to ZAR 3.07, and that is very much in line with our growth, our 7.9% growth within our diluted headline earnings per share from continued operations. If we then turn to sales, Pieter will talk a lot about the sales and what is currently driving especially the sales growth within the Supermarkets RSA basis. Maybe just from an overview and top line point of view, we saw growth of 7.2% on the back of opening of 273 new stores during the last 12 months. with like-for-like sales growth of 2.7%. Within the RSA Supermarkets business, we saw a 7.1% sales growth to ZAR 115 billion, and that was on the back of the opening of 262 new stores over the last 12 months. Within our core brands, we saw a growth of 5.1% in the Shoprite and Usave, including our liquor business. And then Checkers, we saw a very strong performance in terms of that 8.9% growth, including our Liquor business. Important to note is that as part of our Supermarkets RSA segment and especially our Checkers and Checkers Hyper banners, we include our Sixty60 sales growth, where we have reported again a growth of around 34.6% with the number now measuring around ZAR 11.9 billion in turnover. If I turn to the adjacent businesses, and I mean, we've given you the list of all the various brands that are included as a part of that adjacent businesses. We saw a growth of 70.9% to very close to ZAR 1 billion for the first 6 months of the financial year. I think notably, when we also look at the store number growth is the improvement and the growth that we saw, especially in our Petshop Science business. Supermarkets non-RSA, very strong growth in terms of rand cent growth of 12.1% to around ZAR 11.5 billion. It's on the back of a like-for-like growth of 10.4% and then also constant currency growth of 9.5%. Internal food inflation measured across the regions were 3.2%. We opened a net 15 new stores during the 12-month period. We then look at our other operating segments, which includes our franchise business as well as our Medirite and Transpharm business units. Franchise growth was muted at 1.7%. And here, I have to flag, obviously, the lower inflation environment as well as a net decrease of 9 stores during the last 12 months. Turning to our Medirite and Transpharm business. We saw some very positive numbers and growth within that part of our business where we saw a growth of 7.9%. And again, Pieter will unpack that in much more detail as part of his operational segment. Now in the past, we've given guidance around space growth of between 5% to 6%. Our space growth in the current period was reported at 7.3% and that was really driven by the 4 hypers and the increase that we saw within the Checkers Hyper business units, where we now have 42 hypers. If I have to look at our store opening program for the second half of the financial year, where we plan to open 123 stores, I think we will return again to that 5.5% to 6% space growth. We saw a nice growth within our Shoprite, Usave and Liquor business within those banners where we added 133 stores and then also Checkers, we saw some nice growth of 76 stores added to the portfolio now of 714 stores. Within the adjacent businesses, we added 53 stores, of which 45 of those 53 new stores related to our Petshop Science business. Store openings for the second half of the year at this stage is planned for around 123 stores. Turning then to our total income, where we saw growth of 6.5% to ZAR 34.8 billion. Our gross profit increased by 7.1%. And very pleasingly, we saw that increase was in line with our sales growth of 7.2%. As I mentioned in my opening statement, we are now giving our gross profit and gross margin percentages per segment, and I will deal with that on the next slide. If we look at old revenue, we saw a decline of 2.1%, but that was really impacted as a result of the Pingo reclassification in the prior year 3 months. And again, we do that, and I will share a lot more information in more detail in the next 2 slides. We also saw a decrease in our interest revenue of about 9.8% to ZAR 101 million. That decline is mainly attributable to the maturing of ZAR 345 million worth of Angolan government bonds and bills. The positive news is that we did manage to repatriate $12.4 million of these funds to our operations in Mauritius, and it now forms part of our cash and cash equivalents. Important to note that the impact of this interest revenue decline also impacted the trading profit within the non-RSA segment, which I will deal with when we get to the trading profit slide. The majority of the share of profits within our equity accounted investments derive from our Retail Logistics Fund, which is the owner of some of our key distribution centers. And here, I referred to where we add also the Wells Estate distribution center in the last financial year as well as the expansion within our Canelands and Riverfields DCs. As part of our efforts to enhance segmental disclosures, we are, for the first time, providing the market with gross profit information at this level of detail. Supermarkets RSA operations increased gross profit by 6.5% to ZAR 29.2 billion, resulting in a gross margin of 25.3%. Now Pieter spoke about the value retailer in his opening comments. And I think here, I would like to add in terms of if we look at our RSA supermarkets operation from a value retailer point of view, the achievement of a 25.3% gross margin in a low inflation environment is a fantastic result for the group. This outcome would, however, not be possible also without the investments in our digital pricing optimization tools and this additional capital that we supported, the supply chain expansion. Additional to the low inflation environment, the decrease of 20 basis points within the Supermarkets RSA segment was also impacted by the fact that the full delivery cost relating to our Sixty60 operations now form part of cost of sales, where in the previous period, we only had 3 months included as part of that cost. I do, however, expect to see a smaller impact as we progress through the financial year. Gross margins in Supermarkets non-RSA did come under pressure, mainly driven by our business interruptions in Mozambique as well as continued shortages within foreign currency across the region, which limited the availability of imported product ranges. We are, however, pleased with the improved margins that we saw within the pharma operations that forms part of our other operating segments, and this really supports the planned expansion that Pieter spoke about within the previous results presentation within our pharma offering. We then turn to alt revenue. Excluding the impact of the Pingo reclassification we spoke about earlier, growth would have been 4.9%. We look at some of the key items within alt revenue, commissions received from our various financial service business units increased by 9.2% to ZAR 676 million. Despite a growing competition within the financial services market, our money market kiosks in the Checkers and the Shoprite stores have seen an increase in activity within the continued launch of new product offerings and the growth that we saw within the payouts relating to government grants, which obviously benefits the group over that period in the month. Our marketing and media income line and revenue line increased by 15.6% on the back of growth within our Rainmaker Media business as well as our Rex Insight platform. Operating leases and income increased marginally by 1.7%. Over time, we've talked a lot about how we also consolidate our property portfolio, and this was as a result of our continued sale of owned income-generating properties during the period. Franchise fees received decreased by 2%, noting the impact of the subdued current inflation environment on the franchise division sales, which obviously impacted that performance. The sundry revenue decreased by 14%, and that was really on the back of lower dividends received from our insurance sale during the first half, but I do expect that to actually rectify in the second half as our claims history or our claims -- current claims for the year is looking very positive. If we then turn to total expenses, where we saw a growth of 6.6% to ZAR 27 billion. Some of the major lines impacting our expense growth is depreciation and amortization, which increased by 7.9% to ZAR 4.2 billion. The growth that we saw is a combination of the increase in new stores that we opened during the last 12 months, but also our store renewals that's impacted by our right-of-use asset in terms of IFRS 16. Our aim and our target is still to be at a depreciation and amortization rate to sales of around 3%. Our current period, we were sitting at 3.1%. With the lower capital spend expectation, which I will talk about later in the presentation for the full year, I do expect us actually to come in target on that 3% depreciation to sales ratio. Important to note is the PPE that we use in terms of our stores. We saw a growth of depreciation of 8.8% to ZAR 1.9 billion. And then if I look at the IFRS 16 portion of depreciation, we saw a 16.3% to ZAR 2.6 billion. What is positive for me at this stage around depreciation is that we did see a decrease if I compare to the prior year, where our growth was around 17% to 18% to the current 7.9%, which is already showing that some of that expansion within the supply chain that we had to carry last year is now getting into the base. From an employee benefits point of view, our growth was 8.6%, and there were really 3 reasons for that. The main reason is expansion within the business. And again, I'm pleased with the fact that we could slow the growth down from the prior year 10.8% to the current year 8.6%. The group also continued to invest in our staff, where we spent more than ZAR 500 million in training and again contributed more than ZAR 50 million to the government-supported youth employment scheme. ZAR 155 million was also expensed in the current period in favor of our employees that forms part of our Shoprite Employee Trust with equivalent awards also being paid out to our non-RSA beneficiaries. If we then look at other operating expenses, where we saw a growth of 4.5%. Some of the major lines that form part of that growth is water and electricity, where we saw an increase of 17.3%. I've mentioned quite a few times in the past that I would love us to get back to that 2% water and electricity ratio to sales. But currently, we're sitting at 2.2%, and that was on the back of the 12.7% increase in our national energy regulator that obviously now forms part of our cost base. The positive for us is that we did have a reduction in our diesel costs, where we saw a reduction from ZAR 158 million in the prior year to ZAR 139 million in the current year. Other major expenses, we saw advertising costs increasing by 6.6% to ZAR 2.4 billion. And then repairs and maintenance costs increasing at a slower pace this year at 2.4%. Our cost of security increased by 12.3%, again, a result of our store expansion program, but it's still around 1% of revenue, which is our target for that expense line. If we then turn to trading profit, despite a 10 basis point impact or a decrease on gross margin through containing our costs, we did manage to achieve our 5.7% trading margin. A reminder that our trading margins within the first half always trades lower than the full year as a result of the lower gross margin within the first half. If I look at RSA growth, we saw 7.1% and our margins remained intact at 6.2%, which is very pleasing. Non-RSA did come under pressure in terms of profitability. We've spoken about the impact of the gross margin that came under pressure. Also from a cost base and a profitability base, the performance of Mozambique did come under pressure in the first half. And then I did mention earlier the third reason for the non-RSA operations showing a decrease was that impact of the interest revenue decline as a result of the repatriation of the funds and the maturity within the Angolan bonds and bills. Other operating segments saw a decrease of 1.6%, which was mainly as a result of the pressure that we saw within the franchise operations. If we then turn to net finance cost in terms of IFRS 16, that's really driving this cost base, but we saw an increase of 13.4% in the first half. And again, one of the main drivers within the finance cost growth was the 17.2% growth within our IFRS 16 lease base, where we saw the lease liability increasing by 15.5%. We've now seen that growth over the last 3 years within our lease liability, and that is as a result of the program of new store openings, and this year was 282 stores. Also the lease renewals. Now I mean, because of our big store base, we also have a big store renewal program that we do every year, and that unfortunately forms part of this whole lease liability growth rate. And then the third reason for the growth within that has been the DC openings and the supply chain expansion that we've seen during the last 3 years. The positive, obviously, is the impact that we saw in terms of a gross margin and trading profit margin impact as a result of that supply chain investment. On the positive note, the finance costs relating to our borrowings, we saw a decrease of 10.7% and that was as a result of a decrease in the prime lending rates, but also as a result of the lesser demand that we have on our overdraft facilities, especially during month-end periods. And you will see from a cash flow point of view, our cash generation within the business was stronger this year, which basically led to that lesser demand on overdraft facilities. We then turn to our cash and capital allocation. Cash generation within the group remained very strong as in our previous periods as well, with cash generated from our core operations at ZAR 13.3 billion for the first 6 months. Then we settled some debt. Part of that is our IFRS 16 lease liability of ZAR 6.2 billion. And then our capital spend in terms of our expansion as well as our maintenance capital was ZAR 3.9 billion for the first 6 months. The detail behind that, I will unpack in the next slide. We then paid dividends. Our final dividend for the previous financial year equated to about ZAR 2.7 billion, and that was formed part of our shareholder returns. If I then turn to working capital, we did see a positive move in terms of the working capital gains where we had ZAR 5.4 billion of positive move. ZAR 4.3 billion of that was as a result of the cutoff where we made creditor payments post our H1 cutoff date. But secondly, we also had a very positive impact in terms of how we look at our inventory, where our inventory grew and increased at a slower pace than the growth within sales, which also then gave rise to part of the benefits that we realized through our working capital. I did mention the impact of the cutoffs in terms of our creditor and tax, which equated to ZAR 5.8 billion. If we then turn to CapEx and our spend, was 2.9% of our revenue, and we spent ZAR 3.9 billion for the first half. 82% of that spend was allocated on expanding the business, of which the majority of these initiatives was focused on expanding our store base as well as upgrading our existing stores. And I mean, Pieter will talk about his views on how we think about our Shoprite FreshX stores, together with then also our investments into our digital capabilities and supply chain infrastructure. So most of the capital spend remained within South Africa, and that is directed at initiatives supporting our ecosystem. That includes ongoing investment in our information technology infrastructure to keep pace with the growth that we're currently seeing within the business. Management has a clear understanding of the information technology future demand and the associated investment required. And capital allocation will be adjusted accordingly over the medium term if there is a bigger requirement for CapEx from an information technology point of view. And here, I'm referring to various system upgrades or replatforming that needs to be done. If we then turn to inventory, we saw an increase of 3.3% to ZAR 33.7 billion. Excluding the impact of the various restatements that I spoke about in my opening comments, inventory increased by 4.5%, lower than our increase within our sales. The majority of the increase was within our RSA Supermarkets operations, where we saw an increase of ZAR 1.1 billion. The reasons behind this increase was as a result of the 7.3% we saw in space growth or additional 262 new stores. The higher on-shelf availability that we needed to support our Sixty60 business, where we saw that 34.6% growth. And just a reminder, again, our model is that we pick from store, and that's why we have that requirement for that higher on-shelf availability. And then the third reason is around the supply chain investment and the additional stock to obviously have stock availability within our distribution centers. Pleasing to note is that we managed to maintain our inventory to sales within the store portfolio at below 9%. Non-RSA inventory levels remained stable and the increase that we saw within other operating segments was as a result of our pharma expansion. And there, I'm referring to the expansion within our distribution center that we opened in Gauteng earlier this year. In conclusion then, maybe just some considerations in terms of how we look at the second half and what is our expectations in terms of the second half. Supermarkets RSA selling price inflation for January measured 0.7%. If we compare that to prior year, it was at 3.1%. And I think we're all on the same page that we do expect to see lower inflation for a longer period of time. In terms of growth from new business, as mentioned, we plan to open 123 new stores during the second half of the financial year. If I look at the income statement in terms of our trading profit margin, medium term, still a 6% trading margin target. But if I look at the current environment and the low inflation environment, I think more realistically, a 5.7% to 5.9% trading margin would be a good outcome for us. If we then also follow those principles in terms of how we look at gross margin, seeing that the cost of delivery as part of our Sixty60 platform and Sixty60 operations now forms part of our cost of sales. I do expect to see a slight impact for the full year as a result of that. And we're estimating gross margin for the full year to be around 23.9% to 24.2%. From a cost growth point of view, the staff cost growth, and I did mention that we saw that slowdown from the prior year from the 10.8% to the 8.6%, we are currently in negotiations again with the unions around the increases for our store staff. So that we will also communicate and discuss when we have more clarity on that. Depreciation, the lower capital spend for the full year, I do expect to see that we can come back to that 3% as a percentage to sales ratio. And electricity and water, unfortunately, I think that cost is going to continue to increase. And if we can get back to a 2.1% ratio, that will also be a very good outcome for us. From a finance cost point of view, especially the IFRS 16 leases, the Wells Estate distribution center was already part of the second half of the prior financial year, and it didn't form part of the base, which means that we will see a slower growth within finance costs in the second half. So I do expect to see an improved result already on that 17% that we reported in the first half. And then lastly, maybe just around our effective tax rate. I do estimate our effective tax rate to be between 27% and 28%. From an inventory point of view, we saw that improved result already in the first half. And I do expect to see that continuing throughout the full financial year, especially now that we have all the distribution centers in our numbers. And then from a capital allocation point of view, a reminder that we do have a current dividend policy of 1.75x of the full year diluted headline earnings per share from continued operations, and I do not foresee any changes to that strategy. In terms of share buyback mandate, it's still in place by the Board and management will execute on that as we see fit. From a CapEx point of view, if I look at the spend in the first half and I also look at the store opening program for the second half, I do expect us to actually see a slowdown in our spend within CapEx. That is definitely something that management is currently driving, and we're looking at a ZAR 7.5 billion increase for the full year, which will be lower than the 3% target that we set ourselves as well as our previous year spend. Pieter, that then concludes my part of the presentation and looking forward to hear from you around the operations and strategy of the group. Thank you very much. Pieter Engelbrecht: So thank you very much to Anton. As usual, you have given us a very clear explanation to understand the financials of the Shoprite Group, both the balance sheet and also on the cost side as well as the changes that happened in the comparable numbers. And I hope that you all are very clear now in terms of your own models how to look at the Shoprite business this year going forward. So I know we've repeated numbers a couple of times and the 7.2% growth in the revenue amounts to an additional ZAR 9.2 billion that was added in the 6 months. Now for me, I don't know for you, but for me, that's an enormous amount of money. But fantastic performance again from Team Shoprite, gross profit up by 7.1%. And there's a telling number, the gross profit. There is something in here that was quite problematic is service levels from our brand owners that supplies us has a direct impact on gross profit margins also. And we do find it these days because of the size of these numbers, you talk ZAR 136 billion for 6 months in revenue. It's very hard to consistently supply the Shoprite Group to maintain our world standard of over 98% on shelf availability. So the confidential discounts, the rebates, all the things that adds up into gross profit margin, I think an excellent result to come in at a 23.8% gross profit margin for the 6 months. Trading profit up by 5.9% with a trading margin of 5.7%. But then as I said earlier, absolute world-class South African trading margin at 6.2%. I cannot help to think that, that is absolutely a world-class performance. And that is not done by increasing prices. We were talking about deflation and the inflation was only 0.7%. That comes out of running an efficient business from the supply chain right through to deliver the last-mile delivery to our customers. Obviously, we've grown the EBITDA. We know what the effect is of IFRS 16 and the lease payments and that so EBITDA is these days, I find it a little bit different in the old days when it was purely cash flow because if you look at our cash flow that Anton just explained now, the cash flow is very strong. And the EBITDA shows a 6.7% growth. So just something that we have to take note of that things have changed. The CapEx spend, we've been spending ZAR 8 billion basically for the last 3 years. We are very tight on that CapEx spend. A lot of that spend have really put a difference between us and our competitors. Amongst that, if I can give one example, it would be our price optimization tool. And I said 5 years ago, if retailers are not going to invest in that technology, coupled with artificial intelligence agents, you're going to somewhere start to fall guy. The maintenance of the gross profit, the additional contribution of promotional items participation in the basket is testimony of selecting the correct items, the items that people are looking for. So here's a good example of previous investments, earlier CapEx that was spent that is now really starting to pay back, which we're very pleased about. And I told you about over 98% in stock on inventory. So if we, from an operational point, have to mark our own homework, what stands out is more customers, higher volumes, continued market share gains, meaning you're running faster than your competitor. You're gaining customers faster than your competitor. And you're giving the volumes to your brand owners, I like to refer to them as brand owners, not suppliers. That helps them to reduce costs and get efficiencies. So you think about it, 572 million customer visits, up over 5%, 0.5 billion people, 1.2 million additional customers per week. We can work it down by the hours that we trade and how many that is. It's just astounding for me, selling over 4 billion items, and I told you before, gained ZAR 3 billion in market share now for 6 years, uninterrupted every single month. I know we've mentioned the number before, but the 7.1% sales growth was achieved despite a declining internal inflation, and I'm going to get to an explanation, the difference between our internal inflation and official CPI calculation. There is quite a difference in the methodology. We really have been able to maintain the sales momentum, our customers with the selection of products and really the data, I must always come back to the data. It's data-led decisions that make us make better decisions. It's not the gut feel decision. It's fact-based. It's data-based. Also, on top of that, I've mentioned the price optimization tool, the gross margin stayed intact despite the fact that people are buying more into the promotional items. Our promotional contribution to the overall basket have now increased to about 40%. And that is something we will have to watch. But over so many items, you need technology and systems to assist you to make the right decisions in there. Liquor stores have done very well. We will probably have over 1,000 stores by June in both the brands, Shoprite and Checkers Liquor. Sixty60 remains a remarkable story, growing 34% on a very high base. And some people think it's not profitable. It is. There are many reasons why. And over time, we will also explain to you why. This model works so differently in our environment to that of our competitor. Now if we look at the market share on this graph that I'm showing you, there are 2 graphs here. So if one looks at the formal retail market in totality and the base have been elaborated. It now also includes some other competitors. The growth was ZAR 14 billion. And if you think of it that basically Shoprite took more than ZAR 9.2 billion of that and the rest of the market had to share the difference. And you can see it clearly. Graph on the left shows you that for the 6 months, Shoprite have outgrown the market by 2.3x. And then on the right-hand side, you can see every single brand has gained market share. So it's not a one swallow story. Yes, the growth in Checkers is higher than in the rest of the other 2 brands. But it's just because Checkers is the fastest-growing retailer in the premium food segment in South Africa. So I have already mentioned that we had a very good festive period that have continued subsequently. We've outgrown the rest of market during the festive 5.3x and well publicized that the consensus was that it wasn't a fantastic festive or Black Friday for the rest of the market. But for Shoprite, we're not in the same boat. We're very happy with the performance. And I've just spoken earlier about maintaining margin. Our customers win because there's deflation. 14,000 items, I mentioned in December was cheaper than the previous year. Of course, if you look at it in a monetary value, even though we're growing volume, of course, the monetary value is not there. Even though customers continue to buy the same number of items because of the deflation, your rand cent value doesn't support your volume growth, plus the fact that as said we've grown customers by 5.6%. So I just want to, for a minute, explain the difference between official food inflation, which you would read for December was 4.7% versus ours for the 6 months at 0.7%. The difference is that the official food inflation is calculated on a static basket based on 2023 life conditions, which at that time included, of course, our extensive load shedding. So for example, in that basket would be candles. But it is, at the moment, not that relevant anymore. So the way we calculate our internal inflation is we have taken this specific period, 56,000 items bought by customers. And remember, customers buy different things. It's actually a complicated number to calculate because you've got promos, you've got combos, you've got multi-buys. But in theory, to make it simple is we take the 56,000 items that's being bought by customers this year, and we look what was the price last year because that's the true inflation, the customer experiences not what we think they are experiencing because people down buy, people change brands. There's a lot of nuances that go into that number. And I do believe that our number is probably the most accurate true reflection of food inflation for the South African consumer. Now we must remember, there are monetary policies being made on these numbers. And I'm just putting up my hand here to say, we must be careful that we base monetary policy on numbers that are not 100% correct. or, let's say, the most sophisticated that we can do it. So what do we do? We're in the long game. Pricing has always been for us, paramount first. That is why when the customer wakes up and they didn't see an advert or a promo, they don't have to think where they have to go. They know where they will get the best value. That is what we do. But if you look at what I've just put there for you on the screen is the inflation by brand. And you can clearly see, of course, the more affluent customers in the Checkers brand, 1.9% inflation. And then you go down to Usave that goes into a negative. And a lot of that is driven by the prices of commodity type items, basic items because we over-index in a lot of these categories. In other words, we have a higher market share in these specific categories, and I put there some examples for you than our overall market share. So there's in a lot of cases, been double-digit negative or deflation in categories like potatoes and rice and so forth. And even through all of this, and I already mentioned the 14,000 items that was cheaper, Shoprite Group still managed to maintain its gross margin in such a strong deflationary environment in categories where we over-index. I think very good result. As you all are very aware that basically, Shoprite Group runs multiple brands. And on the supermarket business, in particular, we have very deliberately separated the Shoprite brand and the Checkers brand. But there are also other sub-brands, Usave, Liquor, the wholesale or cash and carry as we have today, which was part of the Massmart transaction. What I can say is all of these brands are doing their job. They deliver. Shoprite as a brand have added 5.1% to sales growth, amounting now to over ZAR 62 billion, added an additional ZAR 3 billion in sales in the last 6 months, continue to gain market share. But most telling is probably the 4.8% growth in customers, amounting to 670,000 additional customer visits per week. And I'm deliberately saying it slowly just that we, for a moment, pause and what does that mean for the entire value chain from our brand managers, that's our suppliers right through the supply chain, the service levels we have to give at store to get it on the shelf, the movement of the stock, the cost of that extra movement of stock. So for me, incredible that Shoprite is still able after 6 years to grow its customer base and grow its market share. I'm very pleased about this result. And -- that is what Shoprite does. Price is what we do, value is what we give. So when in doubt, you wake up in the morning, you need to go shopping, you don't have to think. You go Shoprite, you get the best value. No questions asked. And then the cash and carry business, I mentioned earlier, if we can bank percentages, we would be very rich, but one doesn't bank percentages. We bank the ZAR 3 billion extra revenue, but the 24% growth in the cash and carry, that's just a percentage. We can't bank that. But super performance growing. It's a new world for us and a lot of good potential that we see in that business. If we look at the Checkers brand, I just mentioned, remember, we're running basically 2 retailers, absolutely industry-leading sales growth of 8.9%. Checkers is now doing ZAR 52.2 billion in revenue, I want to just add for 6 months, if we compare that to our peers and added ZAR 4.3 billion in revenue in the last 6 months. Also multi-brand, Checkers, Checkers Hyper, Liquor Shop and then, of course, Sixty60. Checkers remains the fastest-growing grocer in the premium market and continue to gain market share. The reason why we picked Jamie Oliver was he is globally known for standing for healthy eating, healthy cooking. And then I often get the question, so how many of what we call the FreshX stores we're still going to do. So we basically 50% through the real estate, 188 stores being done. It doesn't mean all of the stores eventually will be done, but all of the stores will be of acceptable standards. They might just not have orange floor. And then probably the global retailers' dream is that customers start to love your brand. They become your brand advocate. Now I've looked around, you can correct me, but I have not found another country where an FMCG food retailer has achieved the position of being the #1 brand in the country of all businesses. And it stays for us a proud moment, and we will cherish that and try and keep there as long as we can. Our non-RSA segment, I did make mention to the 272 stores now. Sales growth was a very healthy 12%, but the profitability did suffer mostly as a result of what happened in Mozambique, a bit of headwind in Angola, but also some positive turn lately in Zambia, where as the Kariba Dam is starting to fill up that we have less and less load shedding. If we look at the other operating segment, the OK Franchise division had a 1.7% sales growth. If we look at the 9 stores were closed, it basically comes down to a like-for-like sales number. They also had the same as the rest of market had to contend with deflation and so not unpleasing result. There are some changes in the market around personal care, health and beauty. And we can see that also in our Medirite sales, hence, why we have decided to start opening stand-alone pharmacies with front shop, and they are performing exceptionally well. And then Transpharm, although only a 5%-odd growth for the 6 months, accelerated towards the second part. Remember, we went into a new distribution center in July and really done exceptionally well since we moved in there, and it's a much more automated facility. We've added 873 new customers to the overall customer base, which I'm very pleased about. I think I've said it now more than once. We are truly a customer business. This is how we make decisions from the customer backwards. And then we find out how to do it cheaper, not the other way around. So probably my pride and joy would be the slide that I show you now, ZAR 9.7 billion in instant cash savings at till point in the last 6 months. ZAR 9.7 billion we've given back to the South African consumer at till point on the things that they need. It's an enormous number. For me, it's incredible that we can actually afford to do that and still have spoken about all the things that's still intact, like the trading margin, the gross margin, et cetera. There's no question that Shoprite is #1 when it comes to price and value. And then this thing and I think 2 years ago, I told you the story about my visit to a Usave 1 day and this kid that they couldn't buy a sweet. And today, here, I can stand and say, in the 6 months, we sold 9.5 million items at ZAR 1. That is USD 0.06. And can you think like I 9.5 million smiles on a kid's face that bought a little packet of chips or chocolate for ZAR 1. Incredible. Then we even take the next step. 55.6 million items sold at ZAR 5, helping people survive. How else do you survive if you live on a ZAR 370 grant a month. You can with Shoprite ZAR 5 meal solutions. We've got over 30 meal solutions under ZAR 5. That is what we think. That is what we live. That's why Shoprite is what I call not just a retailer, it's an institution. If I just very quickly give you an overview where we currently are in terms of our strategy, I think it's now almost 9 or 10 years that I've been showing you this trolley with its 9 levers. And basically, it's stayed the same. I just want to give you assurance that we have a plan, we stick to our plan. We all understand what it is, and then we execute with excellence. That's what I think sets Shoprite apart. I spoke about that, I think, easily 9 years or so ago. I used the phrase to say, we're going to create a smarter Shoprite with more data to allow us to make better decisions. And today, I can really say to you the amount of decisions that are made on real data and what customers' behavior shows us in terms of price optimization, in terms of healthy eating, in terms of what we advertise is really, really sophisticated. And it learns by the day. I don't have to give you a lesson around artificial intelligence and the use thereof. But I can just tell you that we are using it. As you know, we've said before, we do view ourselves as a high-growth company. At least we try and achieve that. And we look at our data and in our world, we see what is it that the curve that people are on, what are their lifestyles currently. And hence, we've opened some of these adjacent businesses based on the data that we have how people behave, what they buy, what's happening in their lives. And the Petshop Science is a very good example of that. It was a greenfield operation that started, now 173 stores, making a good contribution overall, both in revenue and in profit, where we have noticed that there is a difference in the new generation of how they view pets and kids, et cetera. And very proud about the business, and it's performing very well. Amongst other, we've got Little Me, we've got Outdoor. After COVID, there was this tendency of people to just go more camping and outdoor and spending more time together. So there was just a gap in the market for that. And what we are trying to achieve is to increase our part of people's discretionary spend. The digital commerce really, I mean, I did make mention of Sixty60 already. You know the numbers, 20% growth, 18,000 jobs being created since the inception. We've got 10,000 drivers. And if you look at that fantastic graph on your right-hand side, I mean, it drives you to tears to see that for so many years, consistently, this business have just kept on improving. And a staggering number for me is that over 900 software upgrades, releases, patches is done in a year, improving this product virtually by the day. So we're not standing still. We don't say, oh, we've done it. It's happening. We're working on it every day. And the beauty of it is, and you will remember, I think it's now 2 years ago that I've said, we've set ourselves this task when we had to rationalize the African operations. We set ourselves a task to become really truly omnichannel. And that's exactly what's happening at the moment. So very soon on this one platform, you'll be able to navigate through all the everyday categories like from your groceries into your health and beauty, to your pet, to baby, it's really limited to your imagination. And all of this will be amplified and made very easy with the use of an AI agent just for additional convenience, making shopping really seamless. This graph will be my last. So apologies to my own people for some of the brands that are not on this picture. It's not that we've forgotten about them. It just gets busy. The idea is that you get this picture where this is what we've been doing for the last 10 years. We first laid the foundation with the core systems. We improved our distribution and supply chain. We then added adjacencies and the data. Then we added the extra savings to really embed our decision-making on our customer-driven data and then finally, to deliver all of that in a single omnichannel platform for not only ease of use, but just the convenience, the fact that if we can do all of that together, also the fact that we can bring it to you at a cheaper price, better value, that's what we stand for. That's what we deliver. So just having taken you through the steps, I want to say this is not impossible to replicate or to do. It's just very hard and it costs money. But this is sort of the story why the Shoprite Group can continue to deliver a certain level of customer experience and a value proposition to its consumers and the people that we serve. I really want to thank you for the time that you offered us and that you still feel it valuable to spend an hour to just listen what it is that we do and that we're still of interest to you. So thank you very much. We're going to give you some time now to quickly get your questions. And then Anton and I will take questions and answers. [indiscernible] in the last 6 months. So just very quickly while you're getting your questions and we're getting ready to answer you and you're free to ask whatever you want, is that the momentum from December continued. I think a 7.5% sales growth into January was excellent. If we -- and that's why I made that explanation of the inflation. If the true inflation was 4.8% or 4.7% it was published for December, then Shoprite would have grown 12%, double digit. But it is not the true inflation. We went into deflation in December. So that's why I made that point in the explanation between the difference of the calculations. So just to give you a context. To be able to -- if we theoretically have to say then the Shoprite Group grew double digits in the last 6 months, it is incredible. So once again, thank you to team Shoprite. So we continue to gain the market shares. I did mention, and I'm going to repeat it because I think it was just astounding that in the December and the festive month that the Shoprite Group managed to outgrow rest of market 5.3x. And that continued into January, outgrowing the rest of market 4x. But yes, I have to tell you, the other side is the deflationary or lack of inflation, let me call it that. So we ended up 0.7%, as you've seen on the numbers for the 6 months. Actually, the real inflation in February came down to 0.5% from 0.7% in January. So we don't see in the short term a change in the food inflation basket. And then immediately, I want to emphasize the ability through all of this to maintain the gross profit margins with all the things that I've explained. I'm not going to repeat myself again. So I mean, in the end, we can debate a lot of things about pricing, moving pricing. But we, first and foremost, are for the consumer. So we first look what is the consumer's world, and that determines our pricing, not the other way around. So Anton, I think that's my summary to say that, that drives everything we do. And there's going to be some green shoots there. So I'm very positive, I think, but now yesterday, the weekend, we've got this war going on in Iran and all that stuff. So the oil price quickly went up, and we were banking on a reduced fuel price. I mean, that would have given us a good saving on the cost line and the supply chain, which I'm very proud of. I think Shoprite probably runs the best FMCG supply chain in the world if we look at our service levels. So things are changing, but -- and I also -- I know hope is not a strategy. But if all the money that government have secured for development, et cetera, and if that goes into infrastructure, like ports and roads and water and electricity, all these things, that creates jobs and creates economy. And if that starts to happen, Shoprite usually is the first one to benefit. Small people, I'm a welder. So I get a little job to weld and then I can't do it all and I need a handler and before we know, I need a driver. And before we know we've got 10 people employed having a job. So I'm still positive that these things are going to come through. It does look like that there is an inclination from also government's point of view in terms of really that we have to get this economy going. Okay. So that's our summary, Anton, we can take some questions. Anton de Bruyn: Unfortunately, I'm not going to let you off the hook on GP, gross margin. There's quite a few questions. I'm not going to call out the names. There's quite a few questions around gross margin. So I think, Pieter, the main question, if I summarize all these questions is how do you think about gross margin? How do you think about promotional participation? So if you maybe can just give us color on that for the second half and how you see that play out? Pieter Engelbrecht: If I have to assume what people are thinking in that question is there's so much pressure in the retail market currently Everybody is under pressure. And specifically on margin, of course, you say must the competitors start moving their prices and does it give us opportunity to move prices? I go back. Consumer first. So yes, there may be, but not necessarily. That's the first part. The second part is, yes, we've seen an increase again in the promotional participation of items to the basket. And there is a level where it gets too high and it's not sustainable. You can't just give everything away. But if we go back to the CapEx that you said, we spent over the last 3 years, ZAR 8 billion a year, that's the tools that we've, amongst other, have invested to help us to make more scientific decisions around pricing kind of items, width of promotion. It's a science by itself not to take any credit away from the fantastic buying team that we've got and the people leading that. But the point is if you don't have the tools and you're not investing in AI and you're not using it, then the gap is probably going to widen. And the consumer will decide, you need to be the most relevant. That's why I made that comment. That's how I think. I don't say everybody thinks that way. I'm on the inside. But if I wake up on a Saturday morning, I say, where must I go to get the best deal. I'm going to go to Shoprite or Checker. Usave is actually by far the best deal if I'm on the budget. So that is -- that's my answer to the margin. If you wanted me to say, do we think we can increase the margin even further? I'm going to go back to what I always say is I think we can maintain our margin, but be very careful to increase your margin. I mean, for Shoprite Group to run the highest gross profit margin of all retailers in South Africa and still be the cheapest, that is what we need to protect, first and foremost, not just to drive margin. Anton de Bruyn: So I think, I mean, maybe just to add to what you're saying and that there's also a question around trading margin and the guidance and the medium term, we spoke about that 6%. So I mean, if we really look currently at the trading profit and trading margin per segment, we can see that we've maintained our RSA Supermarket trading margin at 6.2%. So the outlook still for us is how we look at the RSA trading margin, and we're currently maintaining that trading margin. There is some pressure within the non-RSA segment. And then we do expect a better performance in terms of the other segments for the second half. So that's really driving also our medium-term targets around how we think about trading margin. Pieter Engelbrecht: And the non-RSA, I mean Namibia is basically in the same position as Africa around the deflationary environment. The [indiscernible] was thrown under the bus. Malawi -- not Malawi, Mozambique, we all know what's going on. South has got the floods. North has got ISIS. And then as I said, a bit of a headwind in Angola. But I mean, it will come right. Anton de Bruyn: So you did say in your gross margin discussion, you talked about AI. So I mean, Ya'eesh, you had a question around how the group utilizes AI. And so maybe just share some of your thoughts in terms of what we do or are you seeing the impact of AI in the business? Pieter Engelbrecht: Okay. No, I like that one. I'm very excited about AI. We started this year, in particular, actually 4 years ago, we already started to get the right people in place data scientists, people that understand the layers of data because remember, you've got agentic that you compete against, and there will be a consumer agent and there will be a retail agent in our world. And if your data sets are not set up correctly, you may just miss a question. You may not be in the answer. It's very different to -- if you do a Google search today versus speaking to agent. And we have really embraced it. I think it's what we said a couple of years ago. It's not what did I say? It's not a race for space, it's a race for reach. And this is almost the same that I feel about AI. And so we have started this year. So we have -- yesterday, actually, I looked at the first version of the dashboard. We can see exactly who's using it, who's not using it. We have used a couple of agents, Copilot, Gemini. Google looks a little bit strong at this moment. So we are actively embracing AI across the entire business. We're measuring who's using it. I actually, at some point, said, I must be careful because it can become addictive that you keep on asking questions and you need to deliver on something. You can't ask questions all the time. And we might have to limit people's time that they spend on it. But for now, I can tell you that it's definitely something that we take very seriously and will embrace into our business. And yes, it's not that like the Cisco CEO said, AI is not going to take people's jobs, but people that uses and knows how to use AI will take your job. Anton de Bruyn: Strong point to end. If we maybe just come back to inventory. We had quite a strong numbers in terms of inventory, also a better impact in terms of our working capital. Do you see that actually going into the second half as well? Do you see a better performance in terms of our stockholding? Pieter Engelbrecht: You asked me the question yesterday, I would have said yes immediately without thinking. Now today, I have to say 162 containers are stuck in the Suez Canal currently. So I don't know exactly what the impact of that would be. But remember, these are businesses. They make plans. Maersk has already decided to come around Cape Town not going through the Suez because it's closed and they offload. And so I don't think it's a concern. I think the number -- if people think -- but how did we maintain a 98.5% on shelf availability and reduce the inventory basically? It's because of the decisions -- well, the new DCs and the decision to also serve inland from our distribution centers and rather incur the additional fuel cost than compromising the on-shelf availability. And we're seeing a benefit of it. Anton de Bruyn: We see it in our GP as well. Maybe we've quite a few questions on IFRS 16 and what I mean by normalization. So we've already seen an improved growth rate in terms of that IFRS 16 lease liability and costs. The main move for us last year and why we saw such a big growth was as a result of now 2 to 3 years of continued increases in our DC space. So obviously, as soon as a DC comes in, that's got a massive impact in terms of our leasability. Our DC leases are 20-year leases. So you have to acknowledge a 20-year lease, and that's why you see that movement in that lease liability. I think what will bring our total finance costs line down, and we have already seen it in the first half is also the decline in our borrowing costs. I mean our strong cash flows that we generate has made us less dependent on overdraft during month-end period. So we're already seeing that benefit coming through. Like I said, I think we will see a much better -- also a stronger result in the second half in terms of our borrowing cost. So yes, I mean, I hope that answers the question around IFRS 16. Pieter Engelbrecht: You maybe just think of something is that we're even in such a privileged position that we can provide what I call our brand managers, suppliers, sometimes with bridging finance especially over month ends in high promotional periods when cash flow is tight. I mean that's a fantastic position to be in for the retailer. Anton de Bruyn: Pieter, I mean, I think we've answered most of the questions. The one that I'm going to maybe ask you to close out with is there's questions around you've spoken about the profitability within Sixty60. I know you always talk about that omnichannel customer. Maybe you just want to talk about we could see the trading profit and trading margins remain strong. Maybe just talk about that in terms of how you think about the Checkers and the Shoprite banners. Pieter Engelbrecht: Yes. I think the answer goes back to what I said around the omnichannel. I mean we really truly want to be a full omnichannel retailer, which means I think somebody asked a question somewhere around can we provide our Sixty60 service to third parties and other retailers. And so yes, we could, but it's not on our plan currently. We've got too much to do. I mean all the businesses that we have in the group, you know that we are a multi-brand retailer. We still have to add all of those functionalities onto the omnichannel. That process is running flat out. So that's what we have to deliver first. And I made the comment in my part to say that we're trying to increase our part or share of the discretionary income or spend of customers. Now that's exactly what Sixty60 does. And -- I mean, we've added now pet and the rest of the businesses units still has to be added until we've got a full omnichannel. And we're going to -- we said -- we decided rightly or wrongly that we will give you more color at year-end presentation around the adjacent businesses, what we do in financial services, what we do in pharma care. There's a lot of things happening at the moment. But in terms of the omnichannel, the first target, obviously, is to get as quick as we can the entire business unit of the Shoprite Group onto that platform. And there's agentic that needs to be implemented to make it easier, faster. And that's why I mentioned the over 900 software releases. It's an enormous amount of work that goes in there. It's a lot of stuff that I don't even understand, but I know it works. That's more important. So yes, that's the story, Anton. Anton de Bruyn: You can close. Pieter Engelbrecht: Well, then if that is that, all good. Thank you again, everybody, for your time. It is not taken for granted. I know you've got many businesses to look at. You've got many choices of making investments. We hope that we have given you the best clarity of what's happening in these walls every day. And I certainly am very pleased with the result, given the whole market. You know we never make excuses. So I hope that we gave you some clarity. And thanks a lot. Have a fantastic day. We'll make some money.
Operator: Ladies and gentlemen, good afternoon. At this time, I would like to welcome everybody to QuickLogic Corporation's Fourth Quarter and Fiscal 2025 Earnings Results Conference Call. As a reminder, today's call is being recorded. I would now like to turn the conference over to Ms. Alison Ziegler of Darrow Associates. Ms. Ziegler, please go ahead. Alison Ziegler: Thank you, operator, and thanks to all of you for joining us. Our speakers today are Brian Faith, President and Chief Executive Officer; and Elias Nader, Senior Vice President and Chief Financial Officer. As a reminder, some of the comments QuickLogic makes today are forward-looking statements that involve risks and uncertainties, including, but not limited to, statements regarding our future profitability and cash flows, expectations regarding our future business and expected revenue growth and statements regarding the timing, milestones and payments related to our government contracts. Actual results may differ due to a variety of factors, including delays in the market acceptance of company's new products, the ability to convert design opportunities into customer revenue, our ability to replace revenue from end-of-life products, the level and timing of customer design activity, the market acceptance of our customers' products, the risk that new orders may not result in future revenues, our ability to introduce and produce new products based on advanced wafer technology on a timely basis, our ability to adequately market the low power, competitive pricing and short time to market of our new products, intense competition by competitors, our ability to hire and retain qualified personnel, changes in product demand or supply, general economic conditions, political events, international trade disputes, natural disasters and other business interruptions that could disrupt supply or delivery of or demand for the company's products and changes in tax rates and exposure to additional tax liabilities. For more detailed discussions of the risks, uncertainties and assumptions that could result in those differences, please refer to the risk factors discussed in QuickLogic's most recently filed periodic reports with the SEC. QuickLogic assumes no obligation to update any forward-looking statements or information, which speak as of the respective dates of any new information or future events. In today's call, we will be reporting non-GAAP financial measures. You may refer to the earnings release we issued today for a detailed reconciliation of our GAAP to non-GAAP results and other financial statements. We have also posted an updated financial table on our IR web page that provides current and historical non-GAAP data. Please note, QuickLogic uses its website, the company blog, corporate X account, Facebook page and LinkedIn page as channels of distribution of information about its business. Such information may be deemed material information, and QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. A copy of the prepared remarks made on today's call will be posted on QuickLogic's IR web page shortly after the conclusion of today's earnings call. I would now like to turn the call over to Brian. Go ahead, Brian. Brian C. Faith: Thank you, Alison. Good afternoon, everyone, and thank you all for joining our fourth quarter 2025 conference call. While certain contract delays over the course of the year resulted in much lower-than-expected 2025 revenue, we accomplished numerous tangible milestones that set the stage well for 2026 and beyond. Underscoring this is our forecast for nearly 50% sequential revenue growth in Q1, large contracts for very high-density eFPGA Hard IP cores that are in late stages of negotiation and the acceleration of our storefront business model, which we believe will drive a meaningful revenue contribution beginning in 2026. I'll take a few minutes now to update you on these and other accomplishments. In our February 18 press release, we announced QuickLogic was awarded a $13 million tranche for our ongoing contract with the U.S. government that was initiated in 2022. We will begin recognizing revenue from this tranche in Q1. In line with my comments during our last earnings conference call, this tranche funds increased quarterly revenue recognition relative to 2025. In parallel with our U.S. government contract, QuickLogic internally funded the development of an SRH FPGA test chip. Last August, we delivered design files to GlobalFoundries to fabricate our SRH FPGA test chip using its 12LP process. This chip was designed to meet the specific requirements of certain large DIBs that have programs in development today that are good candidates for this device. This investment positions us very well as the only source available today for a U.S. fabricated FPGA that addresses the full spectrum of radiation hardness requirements. We received our SRH FPGA test chip samples earlier in Q1 and announced in a January 14 press release that we have received orders for our SRH FPGA dev kit that enables DIBs to evaluate the test chips. I view this as a strong demand signal and our first tangible step towards what I believe will be hundreds of millions of dollars in potential storefront business for our discrete SRH FPGA during the coming years. Beyond the discrete SRH FPGA market, we are leveraging this test chip to cast a much broader net. In addition to the applications that require strategic radiation hardness that are most likely to design using our storefront discrete SRH FPGA, there are many other applications with less rigorous radiation requirements that may prefer to integrate our SRH eFPGA Hard IP in ASICs. DIBs are already using GlobalFoundries' 12LP fabrication process for various levels of radiation hardness in ASIC designs. By demonstrating our SRH FPGA test chip that is also fabricated on 12LP, we are positioning QuickLogic to address both discrete SRH FPGA requirements as well as provide DIBs with the confidence they need to integrate our SRH eFPGA Hard IP in future ASIC designs. In some cases, these DIBs may also elect to utilize our storefront services for their ASIC designs. The short story here is by leveraging the milestones accomplished in 2025, we believe we are very well positioned to successfully address both discrete and embedded FPGA designs across the full spectrum of radiation hardness requirements. And with the architectural enhancements we implemented last year that are extensible to 12LP, we have significantly expanded our SAM in these markets to include the lucrative applications for very high-density discrete and embedded FPGA. During our last conference call, I stated that a mid-7-figure eFPGA Hard IP contract leveraging Intel 18A was pushed into 2026 due to a delay in government funding. Based on our conversations with this DIB, we remain highly confident we will be awarded this contract once it is funded. While the timing of funding remains uncertain, our discussions with this DIB have expanded to include the potential of QuickLogic providing storefront services for the customer-designed ASIC that will include our eFPGA Hard IP. We expect that we will learn more about the potential expansion to storefront and the timing for this award in the coming months. During this funding delay and the discussions about expanding the scope of our participation, we have worked closely with this DIB on a variety of projects. Through these efforts, we have been awarded 3 smaller Intel 18A contracts that total well over $1 million, and a fourth is pending that will bring the total to nearly $2 million. The first 2 contracts were for Intel 18A test chips. We delivered IP for both in 2025 and expect to receive an allotment of test chips for our internal evaluation next quarter. The third contract was for a 1 million LUT feasibility study that we completed in Q4. A fourth contract, which we anticipate being awarded yet this quarter, leverages the architectural enhancements developed during the 1 million LUT study. In support of this contract, we will deliver Hard IP for a very large Intel 18A eFPGA core, the customer plans to integrate into its ASIC that is targeted for tape-out during the second half of 2026. The architectural enhancements we developed in support of the 1 million LUT study can be leveraged across all advanced fabrication nodes, which we define as 12 nanometers and smaller. These enhancements reduce power consumption, increase performance and reduce the silicon area required for a given size block of our core FPGA technology. In industry terms, the enhancements materially improve our PPA. With these architectural enhancements in place, we can address the lucrative markets that require very high-density eFPGA cores in ASIC designs and very high-density discrete FPGAs. This significantly expands our SAM for eFPGA Hard IP and discrete devices, including our SRH FPGA, chiplets and other storefront opportunities. In addition to these DIB contracts, we are working closely with a large commercial customer on a new Intel 18A contract valued at several million dollars. We originally expected this contract would be awarded in late Q4. However, the customer decided to expand the size of the eFPGA core in their ASIC to provide greater programmable flexibility. While this is a beneficial trend for QuickLogic, it has delayed the contract award. We are currently forecasting this contract will be awarded during Q2. During our November 2025 conference call, I stated that we would soon announce the expansion of our involvement with a DIB that specializes in cybersecurity for strategic and tactical weapon systems. On December 8, we issued a press release announcing Idaho Scientific selected our eFPGA Hard IP for forward-leaning hardware-based cryptographic solutions designed to address mobile, IoT, infrastructure and defense systems. Idaho Scientific has a rich history in leveraging FPGA technology to deliver robust security systems that can adapt quickly to changing external threats without the vulnerabilities that are inherent in software-based solutions. By integrating our eFPGA Hard IP into its secure System on Chip processors, it can further enhance its cryptographic security and address new markets much more quickly and with lower risks and lower costs. Last April, we announced an eFPGA Hard IP contract with a new defense industrial-based customer valued at $1.1 million that will be fabricated on the GF 12LP process. This application utilizes a large block of our eFPGA Hard IP for critical functions, which is a trend we are seeing in designs targeting advanced fabrication nodes. With the cooperation of this DIB and its end customer, we are leveraging the large eFPGA core into a new 7-figure contract that we expect to announce this year. However, due to the fact this contract involves multiple parties, it is taking longer than we expected to finalize. Based on current forecast, we anticipate the contract award later this quarter. In the scope of this new contract, we will be provided with test chips that we will incorporate in an evaluation kit. The evaluation kit, which is currently scheduled for late 2026, will be compatible with common third-party development environments used by both DIBs and commercial customers. This enables these customers to accelerate system-level evaluations and designs that can use either a storefront version of the discrete FPGA or our eFPGA Hard IP in an ASIC. In parallel with these efforts, we're exploring the potential to leverage the FPGA as a chiplet that is co-packaged with one of our partners' microcontrollers. We are already seeing interest from some of our partners on this concept. We completed the initial phase of our digital proof-of-concept chiplet program in 2025 as a strategy to accelerate our storefront chiplet initiative. Internally, we refer to this as POC. With the support of our large strategic partners, we leveraged our existing eFPGA Hard IP and readily available third-party IP to move this program forward rapidly and with minimal investment. With ongoing debates regarding the communications and protocol layers of chiplet interfaces, this POC and our decades of experience in FPGA bridging positions us well as a potential solution to move chiplet designs forward to satisfy what appears to be significant pent-up demand. We were invited to present a paper on our POC at the recent Chiplet Summit and at the Intel Foundry's partners' presentation at the upcoming GOMAC together with Cadence and Trusted Semiconductor solutions. The net takeaway from our presentation at the Chiplet Summit supports our optimism that chiplets will build traction in 2026. The primary hurdles today are interoperability gaps, and we believe a storefront FPGA chiplet is the logical solution for a programmable bridge. Earlier this year, Epson gave us permission to share its case study that supports our claims that using FPGA technology to process algorithms lowers power consumption without sacrificing programmability relative to processing and software. We published the results in a blog post on January 13. Epson's SoC was originally architected to run workloads entirely in software. But as demand for more features and real-time responsiveness grew, power consumption became a limiting factor. Epson's engineering team recognized that moving compute-intensive functions into dedicated hardware could deliver significant efficiency gains, but the hardware solution would need to be capable of adapting to changes in algorithms. This meant the only practical solution would be an eFPGA core integrated inside the SoC. By using our proprietary Australis eFPGA IP Generator, we were able to quickly deliver a customized Hard IP core specifically designed to the SoC application that targeted TSMC's e12n fabrication technology. Adding to our challenge was the fact that this would be our first eFPGA Hard IP for e12n. From design handoff to silicon validation, the IP integrated cleanly into Epson's SoC without the need for re-spins or late-stage design changes. Epson was able to boot, configure and validate the eFPGA subsystem immediately, accelerating its schedule and reducing risk. After final testing, Epson confirmed the resulting design, reduced overall power consumption by 50%. This makes a huge difference for battery-powered systems. Given our success in this design, we believe we are very well positioned for future opportunities with Epson as well as other companies with similar requirements. As I'm sure you noticed in our 8-K, we took a large impairment charge on SensiML. This is due to the standard accounting practice to impair the value of an asset held for sale for a year or longer. During the last year, we have discussed the divestiture of SensiML with microcontroller companies. And in one case, those discussions advanced to due diligence, but were concluded without an agreement. We are in discussions today with a large company where SensiML software potentially presents high value for new AI and drone projects. We cannot provide assurance that this or other discussions will result in a transaction. With that, I will turn the call over to Elias for his presentation of financial data. Elias Nader: Thank you, Brian, and good afternoon, everyone. Total fourth quarter revenue was $3.7 million. This was down 35% from Q4 2024 and up 84% from Q3 2025. New product revenue in Q4 was $2.8 million and mature product revenue was $0.9 million. New product revenue was down 39% from Q4 2024 and up 199% compared to Q3 2025. Mature product revenue was down from $1 million in the fourth quarter of 2024 and $1.1 million in the third quarter of 2025. Non-GAAP gross margin in Q4 was 20.8%. The primary reasons the non-GAAP gross profit margin was below my outlook are $473,000 in inventory reserves and $135,000 in contracted professional services costs attributable to COGS that were not anticipated at the time of our last conference call. The balance is mostly attributable to a higher-than-expected contribution from professional services relative to IP and mature product revenue. Non-GAAP operating expenses in Q4 were approximately $3.5 million. This was $500,000 above the midpoint of our outlook due to the booking of certain executive incentives in Q4. This compares with non-GAAP operating expenses of $2.9 million in the fourth quarter of 2024 and $2.9 million in the third quarter of 2025. Non-GAAP net loss was $2.9 million or $0.17 per share. This compares to a non-GAAP net income of $0.6 million or $0.04 per diluted share in Q4 2024 and a non-GAAP net loss of $3.2 million or $0.19 per share in the third quarter of fiscal 2025. The difference between our GAAP and non-GAAP results is related to noncash stock-based compensation expenses and the noncash impairment charge for SensiML that Brian mentioned. Stock-based compensation for Q4 was $700,000 compared to $900,000 in Q4 2024 and $800,000 in Q3 2025. For the fourth quarter, 3 customers accounted for 10% or more of total revenue. At the close of Q4, total cash was $18.8 million, inclusive of $15 million from our credit facility. This compares with $17.3 million, inclusive of $15 million from our credit facility at the close of Q3 2025. This increase of $1.5 million in net cash is inclusive of $3.2 million raised with our ATM during Q4. Now moving to our guidance and outlook for our fiscal first quarter, which will end on March 29, 2026. Based on backlog and customer forecast, our total revenue guidance for Q1 is $5.5 million, plus or minus 10%. We expect total revenue to be comprised of $4.5 million in new product revenue and $1 million in mature product revenue. For the full year, we anticipate mature product revenue will be approximately $4 million. Based on the anticipated Q1 revenue mix, non-GAAP gross margin for the first quarter is expected to be approximately 45%, plus or minus 5%. For the full year 2026, we are modeling a 57% non-GAAP gross profit margin. However, there are several factors that we believe will weigh on our non-GAAP gross profit margin during the first half of 2026. We are modeling services revenue will be a high percentage of total revenue during the first half. In support of services, we will have costs for software tools that we lease, and we will utilize outside engineering services in addition to our internal resources. A large percentage of these costs are currently being modeled as COGS. We expect some percentage of these costs will be capitalized, but it is unclear at this point the exact percentage. Also during the first half, we will incur certain significant costs associated with large contracts that will be recognized late during the quarter and the offsetting revenue will not be recognized until the following quarter. We're modeling these factors as negatively impacting our non-GAAP gross profit margin during Q1 and Q2. Among the significant costs we are modeling for fiscal 2026 are 3 multi-project wafer or MPW tape-outs. All 3 tape-outs are for products that we intend to sell via our storefront program. The costs associated with 2 of these tape-outs will be fully covered by customer contracts. One of these contracts is already on the books and another is in the very late stages of negotiation. We believe the costs associated with the third tape-out will be covered at least in part by contracts. If contracts are secured in advance of this tape-out, it would be an upside to our full year model. Please note that given the nature of our industry, we may occasionally need to classify certain expenses to COGS versus OpEx or capitalize certain costs. These classifications are related to labor and tooling for IP products -- IP contracts, pardon me. This may cause variability in our quarterly gross margins and operating results that will usually balance out on the operating line. With that in mind, our Q1 non-GAAP operating expense is expected to be approximately $3.2 million, plus or minus 5%. We are expecting full year non-GAAP operating expenses to be approximately $13.5 million. This forecasted growth of 14% in non-GAAP OpEx over 2025 is to support our anticipated revenue growth in 2026. After interest and other income, we are forecasting a Q1 net loss of about $800,000 or a loss of approximately $0.04 per share. The main difference between our GAAP and non-GAAP results is related to noncash stock-based compensation expenses. In Q1, we expect this compensation will be approximately $800,000, which is similar to Q4 2025 and Q1 2025. As a reminder, there will be movements in our stock-based compensation during the year, and it may vary quarter-to-quarter based on the timing of grants. Prior to this conference call, we raised approximately $3.2 million during Q1 using our existing ATM. We anticipate Q1 cash use net of money raised with our ATM will be approximately $1.4 million. Our projected Q1 cash use is negatively impacted by the expected timing of payments attributable to our prime U.S. government contract. The timing of these payments during the year are expected to benefit cash flow during the second half. As a heads up, we are working to secure a new banking partner as we are focused on obtaining more favorable terms that will lower our costs and purposely reduce our line of credit from $20 million to $10 million. Thank you for your time. And with that, I will now turn the call over to Brian for his closing comments. Brian C. Faith: Thank you, Elias. Through hard work, dedication and long hours, the QuickLogic team accomplished numerous strategic milestones in 2025 that has enabled us to enter 2026 on extremely sound footing. Thank you all for what you have accomplished. Our continued performance on our prime U.S. government contract has led to its expansion to a potential $89 million. The addition of GlobalFoundries and its 12LP fabrication process, which is used today by numerous DIBs for a variety of radiation hardness requirements and most recently, the award of a $13 million tranche. Independent of this contract, QuickLogic funded its own strategic radiation hard or SRH discrete FPGA test chip. We now have test chips in hand as well as orders for our SRH FPGA dev kit that will enable DIBs to evaluate our test chip for the full spectrum radiation hardness requirements. This significantly accelerates our ability to win both discrete SRH FPGA designs we can storefront as well as designs that are better suited to embed our SRH eFPGA Hard IP in ASICs. To further accelerate our storefront business model in 2026, we are planning 3 multi-project wafer or MPW tape-outs this year. All 3 tape-outs are for chips that we intend to sell via our storefront program. The cost for 2 of these tape-outs will be fully covered by customer contracts. One of these contracts is already on the books and another is in the very late stages of negotiation. We believe the third tape-out will be covered at least in part by contracts. Through a revenue-generating contract with a customer, we developed architectural enhancements for our core eFPGA technology that enables us to address the lucrative markets for very high density in both discrete and embedded designs. These enhancements were initially developed for Intel 18A and are extensible to all advanced fabrication nodes. Given the sound foundation of the recently awarded U.S. government contract, our outlook for continuing mature business of approximately $4 million in 2026 and the number of pending contracts that are in the late stages of negotiation, we believe we are well positioned to deliver between 50% and 100% revenue growth in 2026. With that, I will turn the call over for questions. Operator: [Operator Instructions] Our first question is from Richard Shannon with Craig-Hallum Capital Group. Richard Shannon: Brian, you kind of saved the best for last year with the outlook for the year here. So I guess I'll start with that topic here and ask for a little bit of help in trying to think about the dollar growth here contributions as we go from '25 to '26 in that 50% to 100% here. I wonder if you could tray that by SFR contribution, defense versus commercial and any other ways you'd like to split that up, please? Brian C. Faith: Sure. So as I said, $4 million of that is going to be our base mature business, which we're very comfortable with at this point for the year. And then, of course, the $13 million tranche for the U.S. government contract, so that's $17 million. If you were to look at the range of 50% to 100%, obviously, we need to get well into the 20s to get to that. And we're expecting that there will be additional contracts that are defense related for either the one of those MPW test ships that I alluded to and/or IP that would be to defense contractors for use in their ASICs. As I mentioned, as we've gone and upgraded our architecture to support higher LUT counts, we're seeing a lot of interest in that type of architecture for some of these process technologies that are tried and true for U.S. defense companies like 18A and 12LP. And then if you go on top of that a little bit further, we see other commercial IP opportunities, one of which I mentioned during the call that we felt was pushed into 2026 from 2025 with that commercial customer specifically because they were looking at making the IP core larger to handle more capability. And so there was a lot of architectural discussions and trade-offs going on that sort of naturally pushed that IP contract into what we're now forecasting to be 2026. But that would be a nondefense customer for that particular IP license. Does that give color to the question, Richard? Richard Shannon: Yes, it does here. So maybe -- I probably should have asked this as a multiple-part question here, but maybe I just want to get a little sense of what are the differences between the high and low end of that range here. I think I heard part of it, but I'd love to hear you put that all together, please. Brian C. Faith: Sure. So the -- if you look at the low end of that range, that would definitely be the base $4 million business, the current tranche that we have for the government contract and I'd say a couple of IP licenses, one of which would be useful for one of these MPW tape-outs. And then the higher end or even exceeding the higher end of that would be as we layer additional IP licenses on top of that and perhaps even further funding on the government contract. Richard Shannon: Okay. That is helpful. Maybe a couple of other questions for me here. So big picture, when we look at strategic rad-hard, both -- I asked this question both as FPGAs as well as the opportunity to storefronts for ASICs to include your IP here. What do we think -- or how do we think about timing of wins with any of these DIBs for, I think, substantial programs that I think was the intention of this program all along here. Help us understand what you're expecting to happen this year versus in the following years. Brian C. Faith: So this year, we're expecting evaluations to take place using our test chips, either ours or the government-funded one and then getting to some sort of architecture understanding with these DIBs by the end of this year, this fiscal year, next year, starting actual development activity with those chips. So to be clear, this year is very much an evaluation year. All of these companies are very risk-averse from a technical perspective. And so they need the time to dig into the test chip and make sure that they understand it and are comfortable with the tools that go along with it, meaning our software tools and the device and the dev kits themselves. So meaning exiting this year with their positive feedback and sort of thumbs up that they want to move forward with architecture insertion next year. Richard Shannon: Okay. That is helpful perspective. Maybe jumping back quickly to the thought process for the year here. You mentioned a sales number and then Elias also gave us some other numbers. I wasn't able to put those together here to understand whether we're going to be net income positive or cash flow positive this year. Maybe you can help us understand your thought process either both at the low and the high end of your sales guidance range. Elias Nader: Well, I'll tell you if it's -- we're expecting cash flow positive on the second half of the year for sure, not the first half, Richard. Richard Shannon: Okay. And how about net income or EPS? What's that looking like on the bottom line? Elias Nader: Same. I think we'll be on the high end in the second half of the year and not the first half as well. But I expect to be both positive on net income in the second half of the year. Richard Shannon: Okay. That is helpful. And one last question for me, and I'll jump out of the line here. Brian, you mentioned targeting 3 MPWs this year. And I think I've lost a couple or some of the details you offered regarding that. But maybe you can help us understand the dynamics here? And is this something that's kind of follow-on to the ones you got on last year? Or are these blossoming opportunities that you expect to continue to do here? Like how should we think about these? And I can't remember also, did you mention the process node or even foundries that those would be on. Brian C. Faith: Yes. We did not mention process technology for these, and I'm not going to. But they are based on process technologies that we already support. So we don't have to do an actual physical port to a new process to execute on these. And I think we're trying to convey that 2 of these will be fully covered by customer contracts and one of them would be partially covered by the contract. The key here being that there's going to be end customers associated with all 3 of them. They are the driving force behind the definition of these. And in some cases, like we mentioned, either partial or fully funding the development of them during the year. Operator: Our next question is from Neil Young with Needham & Company. Neil Young: The first question, I wanted to ask about the high-performance data center win that you talked about in the press release. Maybe if you could dig a little bit deeper on that, share what the application is? Just any other color, I think, would be interesting. Brian C. Faith: Sure. So this is a 12-nanometer design, and it's for an eFPGA IP core. The eFPGA IP core for this particular one is a meaningful percent of the die size, meaning it's not just an insurance policy, it's actually delivering capability that they've architected in from day 1 to be very important for the functionality of this chip. Because it's not a 3- or 4-nanometer chip, obviously, it's not going to be a GPU class device. But there's a lot of peripheral components in these data center printed circuit boards that surround those types of devices. And this would be an example of one of those, let's call it, peripheral chips that are still important and critical for overall functionality, but not at the core of the compute. So we're continuing to execute on that, continuing our engagement with the customer and hopefully supporting their tape-out at some point later this year. The nice thing about it -- I'm glad you brought it up, Neil, because this is sort of the -- probably the largest IP contract we've had in recent times for a nondefense application. And a lot of people have asked us repeatedly, are you going to be beyond just defense? And we said, yes. And I think it's glad that we're able to talk about this particular example because it clearly is a nondefense application, and we believe hopefully the start of other nondefense applications as well. The other one I'll mention is Epson, right? We gave Epson more airtime today in the call based on that blog. That's also an example of a nondefense use. So it's been a while getting to more commercial customers, but I think we're starting to see a little bit more momentum and interest there now that we have these other process technologies supported. Neil Young: That makes sense. The other question I had, I'm just interested in the competitive dynamics. So you talked about the potential storefront business being pretty large for this discrete strategic rad-hard FPGA during the coming year and the year after that. I was curious if the competition differs at all from your traditional eFPGA IP that you've talked about. So just anything different on the competition front would be helpful, just understanding that. Brian C. Faith: Sure. So if we go up to 50,000 feet and we say, what's the programmable logic umbrella in total, there's eFPGA and there's FPGAs. And most people know the FPGA competitors, or I guess, the peers, if you will, some of them not really competitors, would be Xilinx and Altera and the FPGA division of Microchip and Lattice and Efinix and Achronix. Those are sort of the companies that do discrete FPGA devices. Now of those, if we think about what are the ones that are U.S.-based and have a defense focus and [ 2 ] devices that would fall into this category of some level of radiation hardness, you can kind of go and zoom in and say, okay, well, today, Microchip has devices from their Actel acquisition long ago that do this rad-tolerant, to some extent, rad-hard. Xilinx has some rad-tolerant, I think 1 rad-hard device. I think Altera has some, although I admit I haven't looked at their product portfolio recently. And I think Lattice would like to get into defense and doesn't really have anything today in that area. I don't think Achronix has. I think Efinix is mostly focused on Asia. So you already whittle down pretty closely to just a couple of people that do any level of serious radiation hardness or tolerance. But when you compare and you say, okay, well, let me move the bar and say, it has to be manufactured onshore and it's got to meet strategic levels. I would challenge anybody to go to the websites of those companies I just mentioned and point to a device that meets those requirements. I think it's an all set. So I think we're really well positioned in that sense as we continue to execute on this program. Now the other part of the programmable logic umbrella, as I mentioned, is eFPGA IP. And none of those companies that I just mentioned have a real eFPGA IP business. They want to sell new devices because they view IP as undermining device sales, I would imagine. From an IP perspective, there's really just a couple of companies that have done IP in the last few years besides QuickLogic. One is called Flex Logix that was acquired last year by Analog Devices and made captive, so they don't do licensing anymore. And now there is a French start-up company called Menta and they have licensable IP. And then there's a couple of really tiny academically oriented companies that I won't even give airtime to today. So if you compare us against one company, Menta, again, I go back to we're a more established company. We're doing business with all these big companies. We have the spectrum of IP2 devices. We're a U.S. company, products made in the U.S. So we have a lot of, I would say, differentiation at that level compared to Menta. But the more important one is when you dig into the technical details, Menta is a soft IP company. And so soft IP means that when you're licensing IP to a customer, they're not just getting soft IP, they're getting a big boatload of work to make it a hard IP before they put it into their ASIC. And with that boatload of work comes a lot of risk and time and cost. And when you're a hard IP supplier like we are, we take care of all that. They don't have to worry about designing anything. They just need to think about how do I architect and use this IP. And so there's a huge difference in the engagement model between us and Menta. And that's, I think, reflected in the wins that we're announcing, who is using us. It's also reflected in the average selling price of our IP, right? We're not doing soft IP that is a $20,000 IP that comes with it a lot of work. You're licensing something for quite a bit more money, but we're taking care of that work and risk for the customer. And that's the huge difference between us and Menta as far as the eFPGA IP goes. Hopefully, that helps as an update on the competitive [ metrics ]. Operator: Our next question is from Tyler Burmeister with Lake Street Capital Markets. Tyler Burmeister: So first, great to see the next tranche of the U.S. SRH development program, the $13 million you got as well as the announcement that the program had expanded with GlobalFoundries process. Maybe it's a little bit of a follow-on from an earlier question. I think you said potentially in the high end of expectations this year, you could see more funding. But to the extent you're able to, I'm just wondering, could you give any color on what next milestones we should be expecting or looking forward to from that program? Brian C. Faith: Sure. I'm asked this question a lot, Tyler. And unfortunately, I can't give programmatic details out on the program. But what I can say is I'll go back to something I was given permission to say when we first got this contract in 2022, which is that the scope of this whole contract contemplates 2 devices, a test chip and a final chip. And so we were able to say, I think it was in December press release when we announced the contract ceiling expansion to $89 million and adding GlobalFoundries that we had, in fact, taped out a test chip for that contract. So you can sort of check one off the list there of the 2. So you can imagine I think it's a natural extension that with more funding, especially the rate -- the increase in the funding from this year over last year and the fact we've already done 1 but not 2 chips that we're embarking on that second chip development now. And unfortunately, I'm not going to be able to give really specific details on what's in the chip and when we're taping it out and when it's going to come out, but it's all in line with our obligations to the government for this contract. Tyler Burmeister: Yes. That's perfect. I appreciate the extra color there. And then the full year guidance was great, and I appreciate the details around that. Just putting the pieces together, strong Q1 and a number of initiatives kind of coming together at the same time here. Would it be reasonable to potentially expect some lumpiness through the year, maybe Q2 sequentially down? Or do you think you could grow revenue sequentially kind of linearly through the year? Brian C. Faith: So we actually think that Q1 is going to be the low point for the year, right? We'll give that breadcrumb, that the other quarters will be over Q1. There may be some lumpiness. And the reason why I say maybe is that when you're dealing with contracts that are $2 million, $3 million each, especially if it's IP and it's recognized on delivery, then there's some natural lumpiness to when we get the contract and we make the delivery in a particular quarter, right? So there may be lumpiness from that perspective. But I think we're trying to give this outlook that Q1 is actually the low point for the year, that it's going to be up from here. Operator: Our next question is from Gus Richard with Northland Capital Markets. Auguste Richard: Just on Q3, you guys mentioned a $3 million commercial contract that you expected the revenue in Q4, didn't look like you did. Is that part of the guide for Q1? Brian C. Faith: No, it's not. In this call, we said that we're expecting or forecasting that to be contracted in Q2. And so that $3 million is not part of the Q1 guide. The other thing I'll add, Gus, is when we said initially Q3 and then in Q4, we said it may be in there or not, and it clearly got pushed. This is the one where we had said that now what they're looking at is a larger eFPGA core. And because they're looking at larger cores, they want to basically take more time on the technical feasibility side and diligence before we execute a contract. But it's not in the Q1 guide to be very clear. Auguste Richard: Okay. And that contract is upside if I heard you correctly. Brian C. Faith: I'm sorry, could you... Auguste Richard: The value of the contract was increased. Brian C. Faith: Yes. Well, we said the size of the core has increased. We didn't say the value of it has increased, but the amount of eFPGA logic that they want is definitely larger than what they had originally thought of. Auguste Richard: I understand. And then my next question is for the test chip that you guys taped out and have gotten samples back and you're getting orders for the test development boards. When do you expect those to start to ship? And how much revenue do you think you can generate and from how many customers? Brian C. Faith: Several questions in there. Let me unpack that. So -- and for clarity, we've talked about 2 test chip tape-outs now, right, publicly. We've talked about the government-funded one. We've talked about the self-funded one. So because I can't give updates on the government one by my obligations to the government, I can just talk about our self-funded one. So on the self-funded one, we did receive the chips in Q1. I'd say the fab was a little bit later than what we had planned on for that. Our engineering team is working on those chips right now and going through the validation process. And what I've said previously is that as soon as we have those validated, then we'll make sure that we can get those out to fulfill the test chip for the dev kit orders. And I think we've said previously, we'd love to get it out by the end of Q1. If it's into Q2, then that's fine, too, because we intentionally did this test chip tape-out. So we gave ourselves a lot of buffer in terms of time for us to get these into the hands of the DIB for them to do the evaluations that they need to do to get comfortable. And I think your last question, Gus, there was how many customers. So the nature of this type of device being rad-hard means that there aren't a lot of people that you're actually allowed to sell it to, clearly U.S.-based. And the nature of this is really for the strategic defense systems, and there's only a handful of those that actually design for any kind of subsystem in those devices or systems, I should say. So our target is less than 5 because those 5 really, really matter in terms of these major systems. Auguste Richard: Got it. And then my last one is on gross margins. How do we think about the trajectory of gross margins going through the year? Non-GAAP 45% for the first quarter, does that step up at all in the second quarter and -- or is it more of a linear ramp? How do we think about that? Elias Nader: Q1, we said 45%, give or take. Q2 would most likely be around the same flattish. And Q3 and Q4, I see an upside big time on gross margins. I have to say, over the time I've been here, this has been the most difficult piece of the puzzle to gauge and forecast, mainly because of the way we capitalize certain COGS and move certain things into OpEx and otherwise. So it's been a very tough exercise to do, but we're getting there. But overall, I see a decent 57% for the full year in terms of gross margin that I said in the script. Operator: Our next question is from Rick Neaton with Rivershore Investment Research. Richard Neaton: I just had one question about chiplets. And you're talking about your bridging technology that you've used in the past with programmable logic. How do you see these chiplet applications using programmable logic in what end uses are some of these being contemplated? And when you say -- the second part of the question is on bridging, are you talking about bridging on the chiplet or between chiplets? Brian C. Faith: Okay. So 2 questions there. One is really the use case, the end applications for chiplets? And then one is, I guess, how are they partitioned within these packages? Is it all resident in one chiplet? Or is it multiple chiplets to solve the problem, right? Richard Neaton: Right, right. Are you bridging between layers on a chiplet or are you bridging between multilayer chiplets? I'm just curious. Brian C. Faith: I think -- yes. No, I can elaborate on some of this. So on the -- let's start with the end markets and use cases for the chiplets. So I think we've talked about this before, but aerospace and defense is a really big market for chiplets because they don't want to have to do a bunch of custom ASICs if they can avoid it because their volumes are not terribly large, and it costs a lot of money to go off and do these custom ASICs. So to the extent they can make things heterogeneous inside the package, it's going to really help offset their program costs for development. So eFPGA in that case, you can almost look at where are FPGAs used today in those systems and that becoming a chiplet and connecting them with other devices that FPGAs interface with in those systems today. So in those systems today, you generally have some sort of big processor, could be a flight computer. The FPGA technology today is very useful for signals that are coming in from sensors, doing preprocessing on those signals and packetizing them in a way that the actual CPU or SoC can process on without having to redo a lot of that capability that the FPGA is doing. Because remember, FPGAs are very good at real-time, highly parallelized computation. So that's sort of the overall defense use case for these. And again, you can imagine that there's a lot of software that's already been written in the defense industry for certain processor architectures, there's already a lot of FPGAs used. Packaging those die or capabilities inside one package actually saves on the A and PPA, which is area, right? A lot of these systems are going for more miniaturization and they're looking at packaging these things in a single package to do that. So that's the big use case there. I'd say outside of defense, there's a lot of interest for security or things that are sort of protected from this post-quantum era of computing for really just protecting systems from a cyber perspective. And eFPGA or FPGA is good for that because in the event that anything is hacked in the future, if the hardware itself is programmable, then you can reprogram whatever algorithm that you have in those to adapt to that threat at the time. And so there's interest in that as far as making these systems more trusted. And I don't mean trusted from a defense perspective, I mean trusted in the sense that you can trust that it's running what it's supposed to be running and nothing more than that. So that's also an interesting use case that's coming up for eFPGA chiplets. Again, the same idea being they've got a lot of software and infrastructure already. How can they adapt that existing infrastructure by adding a little bit of programmability and not redesigning all the ASICs. So that's a good use for an eFPGA chiplet. Now as far as the bridging goes, you can see from these examples that we're not replacing the whole SoC with this eFPGA. It's basically taking the capability of a discrete FPGA and getting it inside the same package as what the SoC is or the ASIC is in their system architecture. And then as far as the actual bridging goes, chiplets is kind of like if you go back to when USB or PCI was first being broadly adopted in the PC or laptop era of growth, that sort of happened. That was successful because everybody was able to standardize on a common interface, right? PCI is PCI, USB is USB. You design a peripheral with that, you go to the plug fest, everything works, everybody is happy. In chiplets, it's a lot more complicated than that because you have these different flavors of UCIe as an example, and you have a bunch of wires, BOW, and they're incompatible. And so there isn't this notion of like universal compatibility. And then if you dig even further into the details, if you want to, there's a difference between the physical layer and the protocol layer, right? So you can imagine like a physical layer is me writing a note on a piece of paper and passing it to you, right? I pass the paper, you receive it, we're all good. But if I'm writing in a different language than what you understand, it's going to look like gibberish when you try to read that paper. And the same thing is happening with UCIe, where the physical layers may be compatible, right? UCIe cores on both sides, but the protocol that people are putting over UCIe are different. And that's exacerbated by people doing ASICs at different points in time. So one of the things with our eFPGA is we're thinking, well, that hardware is actually programmable. So as long as the physical layers are connecting and as long as you have enough gates in our FPGA, you can probably program them to add some level of compatibility or in my paper analogy like a translator. And so we're hopeful that some of those will actually come to fruition based on that value proposition. And we're starting to get some positive feedback on that idea based on what we heard at the Chiplet Summit last week, and I think what we're going to hear at GOMAC next week in Louisiana when we're there presenting. Does that help the use cases? Richard Neaton: Yes. No, I appreciate the color. Operator: Our final question is a follow-up from Richard Shannon with Craig-Hallum Capital Group. Richard Shannon: Just one last question for me. Brian, again, hitting on the topic of strategic rad-hard and actually probably want to extend this maybe to rad-hard given your comments on the call today here. But how many distinct programs are you bidding on here? I know you're not going to tell us an exact number, but I was hoping you could use language like a couple of few, several over a dozen, that sort of thing here. Just help us get a sense of the number of programs you're bidding on. Brian C. Faith: I would say the immediate ones that are the highest level of radiation hardness, there are less than 5 major programs, but there are several subsystems within each major program that we would like to be inserted into. So I guess you could -- what you hear about there is the total number of socket opportunities in that kind of part of land. And that would be I don't know, 10 to 20 total. And that's for the highest level of radiation, which has been our focus because that's the greatest area of differentiation. If you start relaxing the radiation hardness requirements, obviously, you can get into a lot of new applications around space. And there's going to be tens of applications in space. But the initial focus, especially for these first dev kit orders is going to be the ones that are the higher levels of radiation where we don't have a competition at this point. Richard Shannon: That's great perspective, Brian. Operator: There are no further questions. I would like to turn the conference back over to Brian Faith for closing remarks. Brian C. Faith: Thank you. And we will provide a technical presentation on our chiplet POC at the Intel Foundry's partners' presentation at the upcoming GOMAC, March 10, together with Cadence and Trusted Semiconductor Solutions. In April, we will exhibit at HEART, which is another government radiation effects-oriented conference and also exhibit and present at IP SoC Days in Silicon Valley, again, in April. Thank you for your support and for joining us today, and we'll talk with you next time. Thank you. Goodbye. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Good afternoon, and welcome to ImmunityBio's Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded, and a replay will be available on the Investor Relations section of ImmunityBio's website. Before we begin, I'd like to remind you that this presentation and accompanying discussion will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, are forward-looking statements, including, but not limited to, statements regarding our future financial performance, expected revenues, operating expenses, cash runway, clinical development plans, regulatory submissions and approvals, strategic collaborations, manufacturing capabilities, commercial launch planning and timing, market opportunities, and business strategy. These statements involve risks and uncertainties that could cause actual results to differ materially from those described. For a discussion of risk factors that could cause these differences, please refer to ImmunityBio's most recent filings with the Securities and Exchange Commission, including our Form 10-K filed on February 23, 2026. The company cautions you not to place undue reliance on any forward-looking statements, which speak only as of today's date. The company will not be providing forward financial guidance on today's call. Joining us today are Dr. Patrick Soon-Shiong, Founder, Executive Chairman, and Global Chief Scientific and Medical Officer; and Richard Adcock, President and Chief Executive Officer. I'll now turn the call over to Dr. Patrick Soon-Shiong. Patrick Soon-Shiong: Welcome, everybody, to our conference call, and it's really a seminal moment for the company where on an annual basis, we provide an update. But this year, it's really very special because not only do we have an approval, we have the commercial results that we can show that's operational excellence on execution. We will have Rich Adcock, the CEO, present that. But before we go into the commercial launch of ANKTIVA, I would like to take this opportunity to really give a little context and history of ImmunityBio, its evolution, and more importantly, the strategy that we've embarked on since 2015 when NantKwest went public and then all the way to its merger with NantCell and the public offering of ImmunityBio. I want to indulge in doing so because I think it explains to our audience the platform of the products that make up the BioShield platform. On the one hand, we have ANKTIVA, which is truly the backbone of this entire BioShield platform. And the reason it's a backbone is: one, it is approved; two, its mechanism of action is unique. It's the first time in medical history, quite literally, that there is a cytokine molecule called IL-15 that is now approved that one has been identified by the National Cancer Institute as the #1 molecule to cure cancer as far back as 2007. And by 2024, the FDA affirmed this IL-15 by stating in the package insert, its mechanism of action is to stimulate the NK cells, CD4, CD8 T cells, and memory T cells without upregulating Treg cells. That's a mouthful. But that mouthful as a backbone serves as the foundation to take ANKTIVA and combine it with standard of care or combine it with our natural killer cell therapy and combine it all with the adenovirus. Most importantly, it serves as a backbone to treat this condition, which we will talk about called lymphopenia. So again, welcome to all. I will take the first opportunity to present the evolution and history of ImmunityBio and how through our ambition is to actually truly make a different impact in patients with cancer, patients with infectious disease, and patients with lymphopenia. After my presentation, which I will then turn the call over to Richard Adcock, the CEO, to present the current commercial status of the company, and then we'll open it up for questions. So let me proceed. So let me level set. Some of you may be aware that over the past maybe 3 to 6 months, we've described the mission and vision of ImmunityBio on TV shows or podcasts, including the show at NewsNation on killing cancer and the exciting meeting which we had with the Director of the NIH and Director of the NCI together with our patients. And I think it's very important for me to step back and explain the strategy from the outset. So if you would give me the luxury of going back in history a decade ago from July 2015 to today, I think it is important for us to trace that back to understand both the strategy of the molecules that ImmunityBio develops, the strategy of how we build our own manufacturing facilities and control the master cell banks ourselves so that combinations can occur, the strategy of proving and testing that the immune system is the core root cause and the collapse of such, the immune system, is a core root cause of cancer, and how by addressing the immune system in totality -- and I mean in totality, from the innate and the adaptive immune system -- we can change the course of cancer. So it has taken us a decade from the first IPO of NantKwest. So in July 2015, after having identified NK-92, a natural killer cell that's off the shelf, the company went public and a successful IPO occurred in July 2015. By 2016, we were asked to launch the Cancer Moonshot. I provided a whitepaper, and some of you may have seen this collage drawing that I completed in January 2016, and showed this program to the then Vice President Biden as the Cancer Moonshot that we would pursue. It was my goal and understanding that this would be a collaborative effort on behalf of the nation, in which all Big Pharma, all FDA, all NIH would collaborate to take on this very ambitious task of integrating multiple platforms that all focus on activating the innate and adaptive immune system to allow the human body, your own body, to kill the cancer from within. This proceeded to multiple meetings in which we had with all the thought leaders, all the scientific leaders. But sadly, it became apparent that we would have to go alone. The Biden Cancer Moonshot went separately with regard to Big Pharma and the academic centers, and we pursued this effort on our own, and this has become ImmunityBio. So it is important for our investors to understand that this is not an overnight strategy. This is a strategy that we undertook all the way from 2016 in which this diagram, or what I call the mind map, and the concept of quantum oncotherapeutics. Let me briefly just describe that to you today so that you understand how our thinking and our strategy relates directly to the products and the goal of us towards the cure of cancer. So there were many concepts that I had to challenge when the concept of starving the tumor arose with the development of Avastin. I challenged that, and that was the basis of my developing Abraxane to, in fact, feed the tumor. And very early on in my career, I realized that this anti-angiogenesis Avastin theory was a flawed theory because what you do if you starve the tumor, you would induce micrometastasis, and that was not the answer. But then saying that in the face of a huge company like Genentech and Roche developing Avastin was really going against the thought process of everybody at that point in time. Sadly, when I thought about the biology, I thought that would be completely different. In a sense, what that would do is actually cause micrometastasis because the tumor would shape shift. You start the tumor, it would actually move to different places where you couldn't recognize it until you get metastasis. So contrary to starving the tumor, I think quite the opposite. You should feed the tumor. And since the tumor devoured albumin as a delivery system to feed itself, why not create a nanoparticle of albumin, allow the tumor to feed thinking it's feeding the albumin, and within the core of that albumin have a chemotherapeutic agent called paclitaxel. So that was what I called Abraxane. So rather than starve the tumor, feed the tumor, and it was going against the grain. So we developed Abraxane. So the next question is, what is this tumor microenvironment. That around that time was a complete new concept that the tumor microenvironment consisted of what we call our lymphocytes. I want you to understand that word lymphocytes because lymphocytes and depletion of lymphocytes results in a disease state called lymphopenia. We will come back to lymphopenia. But what are lymphocytes? Lymphocytes are the natural killer cells and the T cells and most importantly, the crosstalk between a CD4 and a CD8 T cell and a natural killer cell to generate a memory T cell. That is the holy grail, the generation of a memory T cell so that your body can remember if this tumor ever comes back and prevent and give you long-term duration. You will hear throughout our conversations in ImmunityBio duration matters. It is a proxy to saying you've generated memory T cells. It's a proxy to say that you're free of cancer, and you are in remission so that cancer is now a chronic disease. We will get to the point where we'll call it a cure. But at this point, we all want to take cancer all the way so that you are free of disease with the highest quality of life over 10 years, which meant you needed to deal with the tumor microenvironment. Well, what was in the tumor microenvironment? And this is where the world quantum came into it. Not only did the tumor shape shift, and we'll get into the tumor how it shapeshifts, how it avoids T cells, or how it exposes itself to [ actually grabbing ] albumin, how it avoids natural killer cells even. But the tumor microenvironment of the killer side and the suppressor side both shapeshift, meaning you have natural killer cells and T cells that are designed in your body to kill abnormal cells. But at the same time, as these cells get activated, you also have in your body to create balance of suppressor cells. So a killer T cell can become -- killer T cells can become a regulatory suppressor cell. A killer macrophage called M1 could become a macrophage suppressor cell called M2. Even a neutrophil that is supposed to kill and participate in killing infection could become a suppressor neutrophil from an N1 to N2. So we need to take this balance into consideration, and therefore, engineer products to not only activate the killers, but to suppress the suppressors. So this quantum war that is happening literally within minutes, hours, days in real time needs to be accommodated and the change and the shapeshifting is dependent on what you're doing or what you're treating on behalf of the patient. That is this paradigm change. That is this complexity that I have tried since 2016 over multiple meetings, which I call breakthroughs in medicine and brought thought leaders along with me, including Dr. Jeffrey Schlom and Dr. James Gulley from the National Cancer Institute, for which we have been collaborating happily and excitingly for the last decade. We instituted what we call a CRADA, a Cooperative Research and Development Agreement. And for the last decade, between ourselves and the National Cancer Institute and academic and community doctors have gone ahead to prove this theory. So what was the seminal moment? Well, the seminal moment was in 2016 -- September 2016. I visited the FDA and was invited by Sean Khozin to present to the entire leadership of the OCE, the Oncology Center for Excellence, that had just been formed to provide this concept of quantum oncotherapeutics and the concept of a QUILT trial, constructed this wording, the QUILT trial, so that people can understand the elements of QUantum Immuno-oncology Lifelong Trial. That was what QUILT stand for. QU is quantum, Immuno-oncology Lifelong Trial. The FDA at that point said, this is exciting. We will allow you to file an IND. That was the changing moment. And by 2017, and I apologize going into this history because you now will see the development from 2017, and you will see maybe a decade from now, 2027, not only the development, but the execution of this incredible paradigm change. And I will go into that further in this call. We will show you how ANKTIVA becomes a backbone to multiple ailments, how ANKTIVA becomes a backbone to current standard of care. For example, ANKTIVA will be the backbone to chemotherapy, but chemotherapy at a lower dose. ANKTIVA could be the backbone to radiation, but radiation at a lower dose. ANKTIVA could be the backbone to BCG, but BCG even in the failure. ANKTIVA could be the backbone to checkpoint inhibitors. That we do not need to abandon the standards of care so that the current learnings of what we've learned, but enhance an adjuvate, or call as an adjuvant of the current standards of care. But we wanted to go beyond that. We want to now step back and say, okay, how do we actually use not just the standard of care, but how do we actually now generate a cancer vaccine, and that's where this becomes exciting. In order to do that, we needed to activate the dendritic cells. And therefore, the opportunity to actually use either an adenovirus or molecules that would activate the dendritic cells with antigens that the tumor would recognize and now train or create educated T lymphocytes. Now there's opportunity to combine ANKTIVA with molecules that would activate the dendritic cells. But there is yet a further opportunity. We could then harvest your NK cells. Imagine if we could harvest your NK cells from you as a person and give it to anybody as allogeneic, but stimulate those NK cells, not only with IL-15 and ANKTIVA, but IL-12 and IL-18 to make them memory-like. And now they're not only sustained, but they're active and supercharged. That combination of ANKTIVA plus m-ceNK is what we will discuss. However, we need to address the suppressors and how do we outsmart the suppressors. So what if we actually then created targeted NK cells such as PD-L1 NK, CAR-NK where we could use that off-the-shelf to go after the suppressors or we could target liquid tumors such as diffuse large B-cell lymphoma or Waldenstrom lymphoma with CD19 and so forth and even PSA. So you begin to see the ambition. So we have taken you through this mind map through January 2016. And that was the thinking as I went to the FDA. And I am forever grateful for the FDA allowing us to file the IND and approving the IND in 2017. So the next discussion is for me to reveal to the public the actual language that I put in front of the FDA as part of the IND to initiate the QUILT trials. And quite literally, I have pulled out the cover letter that I filed with the FDA under the umbrella of NantCell, and I will read to you the cover letter. The cover letter says, dated March 2017, "Initial investigational new drug submission and a request for regenerative medicine advanced therapy designation: as early as 2017, we recognized that this was what we call an RMAT opportunity. This was an opportunity for us to take combination ANKTIVA as a backbone to combine with a cell therapy, whether it be NK, whether it be CAR-T, whether it be CAR-NK, and apply as an RMAT designation." I will read the basis, the one paragraph and the intent. It says, "The Nant Cancer Vaccine is a modern approach to cancer therapy, a regenerative advanced therapy to maximize immunogenic cell death while maintaining and augmenting the patient's antitumor, adaptive, and innate responses to cancers." That's a mouthful. That is not only regulatory speak, but scientific speak on the second paragraph of the submission in 2017 to the FDA. I go on to say, "The Nant Cancer Vaccine makes use of lower metronomic doses of both cytotoxic chemotherapy and radiation therapy, with the aim of causing tumor cell death while minimizing suppression of the immune system." There, in that sentence, I was trying to explain in a very subtle way that the current standard of care maximizes the death of our lymphocytes. It maximizes what I call lymphopenia. The concept of absolute lymphocyte count was unknown, ignored, not taught, and there was a need for us to change that thinking process. The third sentence goes on to say, "These treatments are combined with immunomodulatory agents that serve to augment and stimulate patient's adaptive, innate immune responses." What I was saying there is we can use chemotherapy, for example, Abraxane. But guess what Abraxane does, it would actually go into the tumor microenvironment, it would convert M2s to M1s, it will wake up the tumor by allowing to express on its surface these what we call DAMPs and induce the ability for our T cells and NK cells to recognize it and kill it from the outside in. That is the concept of what is going on here. So if you don't mind indulging me, this is such an important cover letter. I will maybe put this cover letter together with the slides, and I want to show you -- read you the next paragraph. "The intent of the Nant Cancer Vaccine development effort," remember this is 2017 now, "is to employ this novel treatment protocol in a series of clinical trials in which the therapy was investigated across multiple oncology indications." Again, the basis of that simple sentence was to say, T cells don't have a tumor address. They know exactly where a bad cell is, regardless of its anatomy or regardless of its location, same for natural killer cells. So we were trying to indicate to the FDA by activating the immune system, it's a complete paradigm change. It's not indication by indication. If you have cancer, regardless of the location and the type, these natural killer cells and T cells, if activated, will kill them. I go on to say, "Small variations in the chemotherapies and the doses will be based upon past experiences with these therapies in a given indication." And what was I saying here? Well, there were things like FOLFOX, there's things like Gem/Abraxane, there's things like different combinations of chemotherapy. And what we did not realize as chemotherapeutic oncologists trained with a hammer of just wiping out the tumor and seeing a response rate is that these chemotherapeutic agents have novel properties that could modulate the tumor microenvironment. For example, gemcitabine I chose, because it inhibit the suppressors. So there were subtle insights that was not taken into account of generating what I call immunogenic cell death rather than what is called tolerogenic cell death. So that little sentence that says, small variations in the chemotherapies and the doses were based upon experiences, meaning past experiences, with these therapies in a given indication. So we were given the green light to go after patients who have failed all standards of care. Excitingly, this progressed to be given the greenlight to patients who failed all standard of care for lung cancer, for triple-negative breast cancer, and multitude of other cancers, which then said, I was given the greenlight to use ANKTIVA as the backbone and the entire ImmunityBio platform, which I will now show you, as part of the development program that took us a decade to complete all the way until the approval of the first indication in bladder cancer, where ANKTIVA plus BCG was just the beginning. We have already shown data on ANKTIVA plus checkpoint inhibitor, and this now is the status of where we are. And I think it puts into context the event we just had on Friday with NewsNation and Chris Cuomo and the Director of the NIH and Director of the NCI and the audience. What I discussed at that meeting was a workshop report that we just discovered recently that was published in 2007. It was really an exciting workshop report where the NCI, the NIH, the FDA, AACR, all the scientific thought leaders were asked to rank the most important molecules in your body that could cure cancer. #1 ranked was IL-15, i.e., what they called a T cell growth factor. And #2 ranked was a checkpoint inhibitor such as KEYTRUDA that took the brakes off T cells. So the revelation that the scientific community as far back as 2007 had identified, based on the science, that the IL-15s acting as a superagonist, which is today ANKTIVA, was ranked #1, and the checkpoint inhibitor, today known as KEYTRUDA, was ranked #2, was an exciting discovery. I think if you think about the biology, in order to take the brakes off T cells, which is the #2 molecule, you actually need T cells around in the tumor microenvironment, and that's what ANKTIVA provides. If you have lymphopenia induced by chemotherapy and radiation and you have no T cells, you may take the brakes off the T cells that remain and then all of a sudden, the checkpoint inhibitor fails. And that is what's happening. And I will show you another slide in 2024, how at ASCO, desperate oncologists say, "Now that we've failed in lung cancer and any other tumors, all these 40 tumor types, what we call checkpoint inhibitor failures and standard of care failures, we have nothing else to offer other than more chemotherapy, specifically docetaxel. And the docetaxel has been tested in literally thousands of patients as a single arm, again, as a control against multiple cancer trials. And regardless of the trial, it shows a median overall survival of 7 to 9 months." I want you to put that into a little memory box because we'll come back to that when we talk about QUILT-3.055 and why the Saudi FDA approved ANKTIVA for lung cancer for the first time in the world. So before I hand over to Rich Adcock to talk about the commercialization program, let me also highlight a very important discussion that occurred in the presence of the NCI and NIH Directors during that evening show. This concept of the plausible mechanism of action, which is the new policy put forth by Dr. Makary at the -- and published in the New England Journal of Medicine, speaks to a very exciting opportunity that the plausible mechanism of action is a pathway. And obviously, the mechanism of action of checkpoint inhibitors was to take the brakes off T cells. The mechanism of action of ANKTIVA is actually to grow T cells and to grow NK cells. This mechanism of action has been affirmed in 2 tests: one, by the 2007 NCI report, which affirmed that IL-15, which is basically ANKTIVA, is a T cell growth factor and ranked #1 out of over 100 molecules to be the most important molecule to cure cancer. And checkpoint inhibitor was ranked #2. So the important discussion was it is very clear that ANKTIVA falls within the plausible mechanism of action concept. And interestingly enough, as we will proceed, and I'll discuss it more further after Richard Adcock's presentation, is that the mechanism of action, not just of ANKTIVA, but the mechanism of action of the Nant Cancer Vaccine or the therapeutic vaccine, which uses ANKTIVA as a backbone, which we'll discuss later on in this call, also falls within the plausible mechanism of action of inducing both the innate and adaptive immune system for long-term memory. So with that, let me turn this over to Richard so that he can now present the commercial progress, the clinical progress of ImmunityBio with the first approval, not just only in bladder, but the first worldwide approval of ANKTIVA for lung cancer in combination with checkpoint inhibitors. Richard? Richard Adcock: Thank you, Patrick. Good afternoon, everyone. I appreciate you all joining us today, and I'm excited to walk you through what was truly a transformational year for ImmunityBio. Before I get into the numbers, I want to reinforce a point that Patrick made. ImmunityBio is not a single-product company. ANKTIVA is our lead commercial asset and the backbone of our platform. Still, we are a multi-platform, multi-indication immunotherapy company with many trials completed and many more trials in progress across multiple tumor types, a proprietary NK cell and DNA vaccine vector platform, and a growing portfolio of regulatory designations. The commercial and financial results I'm about to walk you through reflect the strong execution of our broader strategy. With that context, I am pleased to report that ImmunityBio delivered a transformational year in 2025. Full year net product revenue for ANKTIVA was $113 million, representing a 700% year-over-year increase. To put that in context, we generated $14.1 million in net product revenue in 2024, the year of our FDA approval. In 2025, with the addition of our billing J-code, that number grew to $113 million. That is a fundamental shift in the company's trajectory and tells you that the commercial opportunity for ANKTIVA is real and growing. We also achieved a 750% increase in unit sales volume over the same period. This is an important metric because it indicates revenue growth is driven by real clinical adoption, not pricing. Clinicians are choosing ANKTIVA for their patients. And with that adoption, it is accelerating. We closed the year with a 20% quarter-over-quarter revenue growth from Q3 to Q4, demonstrating the commercial momentum we built in 2025 has continued and strengthened as we exited the year. That trajectory matters because it tells you we are not just growing off a small base, we are sustaining and accelerating growth as our base scales. Each sequential quarter in 2025 was stronger than the one before it. ANKTIVA is now authorized across 33 countries with 4 major regulatory jurisdictions: the United States, the United Kingdom, the Kingdom of Saudi Arabia, and the entire European Union. All of these were achieved within 2 years from our initial FDA approval. We believe this represents the most rapid international expansion for an immunotherapy in this indication and reflects both the strength of the clinical data and the global unmet need in bladder cancer and beyond. Let me walk you through our commercial performance, then I will cover our financial results and our strategic outlook. Starting with the United States, ANKTIVA continues to see strong and growing uptake among urologists and oncologists treating BCG-unresponsive nonmuscle-invasive bladder cancer, CIC plus and minus papillary disease. The clinical unmet need in this population is well understood. These are patients who have exhausted standard of care BCG therapy and face the prospect of a radical cystectomy, which is the removal of the bladder that is a life-altering surgery with significant morbidity. ANKTIVA offers these patients a treatment that has demonstrated a durable complete response while preserving the bladder, and clinicians are responding to that value proposition. We are seeing adoption across both community urology practice and academic medical centers. The feedback we received from treating physicians consistently highlights the favorable tolerability profile and the durable response they are seeing in their patients. Importantly, we are also seeing repeat prescribing behavior where physicians who treat continue to treat additional patients with ANKTIVA. That repeating prescribing dynamic is a strong indicator of physician confidence in the product and a key driver to the growth trajectory you are seeing in our numbers. We have invested in building our sales force and medical affairs infrastructure throughout 2025 to support this growth. Our commercial team has established strong relationship with key opinion leaders and high-volume treatment centers across the country, and we continue to expand our reach into community practice where most bladder cancer patients are seen and treated today. We are generating real-world evidence strengthening the clinical case for ANKTIVA as a routine practice. The vast majority of our $113 million in net product revenue was driven by U.S. commercial performance, and we are confident in the durability and the continued growth of that demand base as we enter into 2026. The U.S. remains our largest and most mature commercial market, and we see meaningful room for continued penetration as awareness of ANKTIVA grows amongst the broader urology and oncology communities. Turning to Europe. The European Commission granted conditional marketing authorization for ANKTIVA in February of 2026, covering all 27 European Union member states plus Iceland, Norway, and Lichtenstein. This is a major milestone that opens an enormous patient population to this treatment and represents our second largest regulatory jurisdiction after the United States. To ensure we can move rapidly towards commercial launch across this complex and diverse European regulatory landscape, we've partnered with Accord Healthcare. Accord will deploy over 100 dedicated sales, medical, and marketing professionals across 31 countries in the EU, U.K., and the European Free Trade Association member states. Accord brings a proven commercial infrastructure, established payer relationships, and deep experience with oncologists and specifically urologists in this region. This partnership allows us to access a pan-European commercial footprint without the time and capital required to build that infrastructure from scratch. We have also established an Irish subsidiary in Dublin to support European distribution and the commercialization strategy. This structure positions us for efficient coordinated execution across the region as we work through a country-by-country reimbursement and market access process. While market access time lines will vary by country, we are prioritizing the 5 largest European markets: Germany, France, Italy, Spain, and the United Kingdom, where we expect the highest patient volumes and where Accord has particularly strong commercial capabilities. In the Kingdom of Saudi Arabia, we received 2 approvals from the Saudi FDA in January of 2026. The first is the approval of ANKTIVA for BCG-unresponsive nonmuscle-invasive bladder cancer, CIS plus and minus papillary disease. The second is the conditional approval for ANKTIVA in combination with checkpoint inhibitors for metastatic nonsmall cell lung cancer. That nonsmall cell lung cancer approval is significant because it marks Saudi Arabia as first jurisdiction worldwide to authorize ANKTIVA for lung cancer, and it validates ANKTIVA's broader platform beyond bladder cancer. We recognize the ongoing global challenges and especially those affecting the Middle East today, but cancer never pauses and neither does ImmunityBio. We are actively preparing to launch ANKTIVA in Saudi Arabia for both lung and bladder cancers, with product shipments ready to commence. We will work closely with the Kingdom of Saudi Arabia to manage imports amid the current escalating circumstances. The Saudi Arabia market is increasingly important for oncology therapies as the Kingdom continues to invest heavily in health care infrastructure under its Vision 2030 program. We have partnered with Biopharma and Cigalah to expand access across and through the region with ANKTIVA to the broader Middle East and North Africa region. Biopharma and Cigalah bring deep regional expertise and established relationships with oncology centers and regulatory authorities across the Middle East and North African region. We have formed a subsidiary of the Kingdom of Saudi Arabia to support commercial launch operations in country. The Middle East-North Africa region represents a significant and underpenetrated market for advanced immunotherapies, and we believe our early-mover position gives us a meaningful competitive advantage as we build out this commercial territory. Turning now to our financial performance for the full year. 2025 was a year of significant financial progress. And I want to take you through the numbers in detail because they reflect both the commercial momentum we are generating and the discipline with which we are managing the business. As I mentioned, full year net product revenue was $113 million compared to $14.1 million in fiscal year 2024. That growth was driven by accelerating commercial uptake of ANKTIVA following our FDA approval. On a unit basis, we achieved a 750% increase in sales volumes compared to 2024, which underscores that the revenue growth reflects real clinical adoption. In the fourth quarter, net product revenue increased from $31.1 million to $38.3 million. On a sequential basis, Q4 represents a 20% increase over Q3, reflecting sustained commercial momentum through year-end. That sequential acceleration is important as it signals as we head into 2026 that the European and Saudi launches will allow for additional growth. Full year research and development expenses were $218.6 million compared to $190.2 million in 2024. The increase was driven by accelerating clinical trial expenses our programs are rapidly advancing, combined with manufacturing costs for expanding production capabilities in ANKTIVA, our CAR-NK, and DNA vaccine vectors, as well as a normal course $14 million onetime fixed asset write-off for manufacturing equipment. Our full year selling, general, and administrative expenses, or SG&A, decreased to $150 million from $168.8 million in 2024, an $18.8 million reduction. This reflects lower consulting activities as we internally developed and expanded our commercial teams as we scale our sales and expand our marketing operations. Full year net loss attributable to ImmunityBio common stockholders was $351.4 million compared to $413.6 million in 2024. The reduction of approximately $62 million in net loss is meaningful because it reflects the significant progress we have made in converting revenue growth into a narrowing loss profile. Even as we continue to invest aggressively in our clinical programs, commercially globally growing and expanding as well as our manufacturing capabilities expanding, we are on a clear trajectory towards a favorable financial profile as revenue continues to scale. As of December 31, 2025, we had a consolidated cash, cash equivalent, and marketable securities of $242.8 million. Net cash used before operating activities in the full year was $304.9 million. The major liabilities at the year-end include $505 million in related-party convertible notes and approximately $325 million in revenue interest liability on the balance sheet. For full details on the balance sheet and capital structure, I refer you to our 10-K with the SEC filing. Before I hand the call over to Patrick, let me step back and frame our 3-year global clinical and commercial strategy. We have a clear road map for how we intend to grow this company from a commercial-stage immunotherapy business into a diversified oncology platform, and it is built on our 3 platform technologies. First, ANKTIVA, our IL-15 super agonist. ANKTIVA is the backbone of our approach with its application across bladder cancer, lung cancer, colorectal cancer, pancreatic cancer. This platform leverages the approved and authorized indications we have today and the near-term label expansions we are pursuing, including BCG-naive bladder cancer and the international expansion of nonsmall cell lung cancer. The second platform is our off-the-shelf CAR-NK cell therapy programs, including our PD-L1 and CD19 CAR-NK, as well as our memory cytokine enhanced natural killer cells, or m-ceNK. This is where the combination with ANKTIVA becomes a differentiator. We are pursuing the combination of ANKTIVA and our natural killer cells in glioblastoma, non-Hodgkin's lymphoma, pancreatic cancer, triple-negative breast cancer, amongst others. Patrick will take you through the clinical data supporting this platform in detail. The third platform is our DNA vaccine vector technology, which has demonstrated a targeted immune response against specific tumor-associated antigens. We are advancing clinical programs targeting PSA in prostate cancer, HPV in cervical and head and neck cancers, as well as our NCI-NIH sponsored trial in Lynch syndrome. Our DNA vaccine platform, used in combination with ANKTIVA in treatment of Lynch syndrome, we believe represents a potential paradigm shift towards cancer prevention. ANKTIVA activates the immune system. Our natural killer cells provide direct tumor killing, and our DNA vaccine vectors deliver targeted antigen-specific responses. These modalities can be deployed individually or in combination, depending upon the tumor type and clinical setting. This versatility is a strategic advantage because it allows us to pursue multiple high-value indications from a shared manufacturing and commercial infrastructure. ImmunityBio additionally is confronting a prolonged 13-year global shortage of BCG. We have worked directly with the FDA and launched an FDA-authorized expanded access program for our recombinant BCG. This expanded access program has approximately 100 clinical sites that are active or activating, consisting of both academic medical centers and community urology practices. Today, there are more than 500 patients that have received eBCG. As a result, we have delivered several thousand doses in either a monotherapy or in combination with ANKTIVA. Across ImmunityBio's pipeline, the BCG-naive indication represents one of the most immediate commercial catalysts as we have reached 100% of the enrollment. We intend to submit a BLA, or biologics licensing application, for this indication in the fourth quarter of 2026. Approval of this would considerably broaden the addressable market for bladder cancer for ImmunityBio. Last but not least, I am pleased today to introduce you to askIB. This is ImmunityBio's internally developed and hosted artificial intelligence solution. askIB utilizes advanced large language models and parallel agentic frameworks to integrate with our global enterprise application suite directly. This integration will drive AI-powered advancements across all areas of ImmunityBio, from our cutting-edge research and development to our fully robotic manufacturing to predictive analytics that generate real-time operational insights. askIB will transform how ImmunityBio operates and innovates as we prepare for global expansion across our pipeline. In summary, we have a clear commercial franchise that is growing at 700% year-over-year. Our global footprint is now spanning 33 countries, 3 major markets that are underway, a narrowing loss profile, a 3-year platform strategy that positions us for sustained growth across multiple tumor types and modalities, and now askIB powering AI-driven innovation across the enterprise. With that strategic overview, let me hand the call over to Dr. Soon-Shiong, who will take you through the deep science and clinical data and the pipeline priorities for this platform moving forward. Patrick? Patrick Soon-Shiong: Let me take you through the portfolio of the products that we already have, the stages of where they are, the commercialization stages at the bladder cancer level, and the opportunity for us to have a paradigm-changing platform, all housed thankfully in one single company, without any single large pharma control, any single large pharma role, participation, so that this biotech platform could be made available to the country, to the nation, and to the world. So now let me turn my attention to the entire platform under ImmunityBio. I call this platform Immunotherapy 2.0, which combines cytokines, which is ANKTIVA; with vaccines, which is the adenovirus platform; with cell therapy platforms, which is the off-the-shelf NK-92 as well as the Apheresis Leonardo Platform. And this slide spells out this entire platform. And obviously, each of these elements of the platform are under clinical trials. So the focus of clarity will start with ANKTIVA, which is really the backbone of the 4 programs at ImmunityBio. First, ANKTIVA when combined with just standard of care, and we'll get into that; second, ANKTIVA when combined with ImmunityBio's off-the-shelf CAR-NKs, which are either PD-L1 t-haNK or CD19 t-haNK or ANKTIVA combined with ImmunityBio's apheresis program of m-ceNK. So that's ANKTIVA combined with cell therapy. Third is ANKTIVA combined with the vaccine program of adenovirus, and we'll get into that in patients with Lynch syndrome, patients with HPV, patients with colon cancer. And then finally, ANKTIVA in its own right in the treatment of lymphopenia. So these are the 4 pillars of therapies that are all in phases of clinical trials, some already approved, obviously, for bladder cancer, where I would like to take you through not only the scientific rationale, but the exciting data we're already seeing as we do these combinations. So starting with ANKTIVA plus the standard of care. So today's standard of care for bladder cancer is BCG. You have BCG patients with bladder cancer, what you call nonmuscle-invasive bladder cancer with BCG. My first discussion with regard to bladder cancer to describe to the lay public, this is what we call nonmuscle-invasive bladder cancer, which is one of the highest incidence of bladder cancer, where the cancer is still on the mucosa and hasn't invaded the muscle. So that's why it'll be nonmuscle-invasive bladder cancer. Patients who have this type of cancer have 2 types -- 2 subtypes from the same clonal origin called CIS, C-I-S, and the other one is papillary. CIS is bladder cancer where the tumor is flat and papillary where the tumor is raised like that of a grape. So we have initiated a trial called QUILT-2.005 in patients who are first time first-line diagnosis of BCG nonmuscle-invasive bladder cancer with CIS and/or papillary disease. The randomized study called QUILT-2.005, in which 366 patients were randomized between BCG alone versus BCG plus ANKTIVA. Obviously, it was our hypothesis that BCG plus ANKTIVA would stimulate the NK cells and result in prolonged survival. We just announced in February of this year that we are now fully enrolled the 366 patients in this QUILT-2.005 study. Importantly, however, but very early on in the development of this study, the FDA requested us to unblind at their request and perform an interim analysis of the patients that were enrolled at that time. And what we were able to show then was complete response rates of 85% when ANKTIVA was combined with BCG versus 57% when BCG was given alone at 6 months. And at 9 months, it reached statistical significance even further with 84% complete response that was durable versus 52% with BCG alone. So this represents a statistically significant improvement in duration of complete response and is consistent with the hypothesis that ANKTIVA activates the memory cell -- memory T cell and consistent with the package insert for the approval already for BCG-unresponsive nonmuscle-invasive bladder cancer. I would like to report, and we have said, now that we've accrued the patients completely, we've targeted the BLA submission for these naive patients in Q4 2026. I would like to emphasize that these studies that are now relating of the interim analysis to the FDA, and the trial remains blinded for final analysis, and we're not aware of the data yet until we unblind the complete results. Let's move on to the patients who are BCG-unresponsive, and that is what we call QUILT-3.032. What does that mean BCG-unresponsive? So in these patients with nonmuscle-invasive bladder cancer, the FDA, together with the American -- AUA, the urologists -- the consortium of urologists, came up with guidelines to create a definition of BCG unresponsive. It means that these patients have this nonmuscle-invasive bladder cancer, receives BCG, it fails; receives more BCG, it fails; and it becomes what they call unresponsive. And sadly, the only alternative -- there's no approved drug for CIS and papillary beyond that at the time we initiate the trial other than a total radical cystectomy. What does that mean the total radical cystectomy? That means that patients would lose their bladder and have an artificial bladder made. And so devastatingly lifechanging procedure, even associated mortality from the procedure itself and significant morbidity. So patients rightly so and doctors rightly so, urologists rightly so, do anything and everything they can to preserve the bladder. And more importantly, to preserve the opportunity from progressing from nonmuscle-invasive to muscle-invasive, because once the tumor progresses out of the mucosa from nonmuscle-invasive into the muscle, progression then takes a different course, and these patients have a high mortality because of metastasis. So let's give you the history of this approval. So this trial was started a decade ago. And in this pivotal QUILT-3.032 trial, there were 2 cohorts. Cohort A was patients who had CIS with or without papillary, and this is now FDA approved. This indication of CIS with or without papillary is approved with a complete response rate that we've now reported at 71% of the 100 patients that we've added, with the duration of response extending beyond 53 months as we reported at the AUA 2025 meeting in Las Vegas. And that leaves us in the same study with Cohort B. What is Cohort B? Recall, Cohort A is CIS with and without papillary disease. Cohort B is papillary disease in a sense without CIS. So it is, I suppose, the heads and tails of the same BCG-unresponsive nonmuscle-invasive bladder cancer in which CIS with or without papillary is already approved, the concept of papillary is already improved if you happen to have CIS. Cohort B was papillary alone without CIS and the result of that has been published in the Journal of Urology in 2026, in which the papillary cohort met its primary endpoint with a 12-month disease-free status of 58%, and more importantly, a 24-month disease-free status, which is retained basically at 52%. And importantly, the disease-specific survival, meaning patients did not die of bladder cancer, was 96% at 36 months, and the median has not been reached yet, meaning we haven't reached even 50% of patients dying at the time of this report, with roughly 82% of these patients maintaining their bladder at 36 months. So the fact that we've demonstrated over 80% bladder preservation at 3 years and avoiding total radical cystectomy. I think it's important to point out for this Cohort B, papillary alone in which patients have BCG-unresponsive nonmuscle-invasive bladder cancer, that there is no -- zero, no approved therapy to date, other than total radical cystectomy. We have announced that the FDA has requested us to submit additional data. After they refused to file in May 2025, we held a Type B meeting with the FDA in January 2026. And then the FDA asked us for more new data, which we've submitted and announced recently. What else are we doing in bladder cancer? Well, what we're doing in bladder cancer, there's been a BCG shortage for decades. Merck is the only supplier of BCG, and there has been a shortage -- a terrible shortage in the country, which results in many patients not being able to get enough BCG, but we have now a solution to that problem. Let me turn my attention then to our efforts in recombinant BCG. The FDA gave us expanded access to this recombinant BCG and the FDA authorized this expanded access program in February 19, 2025, to address the ongoing TICE BCG shortage in the United States. Our first U.S. dosing occurred in March 2025. And as of February 2026, 580 patients have now been enrolled across the country. And this recombinant BCG is administered intravesically, and we have requested a meeting with the FDA, which is scheduled for this month to discuss the future of this recombinant BCG to address this decade shortage of BCG in the country. So let me switch to lung cancer. So we just talked about bladder cancer. And remember, we're in this phase of ANKTIVA plus standard of care. So in the bladder cancer, the standard of care was BCG. So therefore, it was ANKTIVA plus BCG, and how ANKTIVA rescued BCG. But I think the next evolution of pure immunotherapy, while BCG, in fact, was an immunotherapy, it was one of the earliest immunotherapy, the next evolution of immunotherapy was checkpoint inhibitors. And what the checkpoint inhibitor does or checkpoint blockade does is to actually take the brakes off T cells so that T cells could recognize the tumor and be activated without any restriction. That's called a checkpoint inhibitor. And as you all may know, this is KEYTRUDA and nivo. I know we've spoken about this in terms of the plausible mechanism of action. But in order for T cell to work, a T cell inhibitor to work, it obviously requires a T cell to be able to recognize the tumor. And as I was telling you about the shapeshifting or -- the shapeshifting opportunity of cancers, the moment it actually has a T cell coming at it, one of the amazing things it does to tumor, it pulls in the MHC-I receptor. And now the T cells, even though the brakes are off, can't recognize it. So that is why you get what we call checkpoint failures. The other reason why the checkpoints fail is sometimes these patients already received radiation chemotherapy. And we do know that chemo radiation acts as a lymphopenic activity, meaning removing the T cells from the tumor microenvironment is so effective sadly in generating low lymphocyte count. So if you have no T cells, there's no brakes to take off. So these are the 2 issues that face now the American population because there were 40 approvals of KEYTRUDA by 2025, many of them single-arm trials across all tumor types. So the world has been flooded, rightly so, over the last decade with checkpoint inhibitors. But now the oncologists are flooded by a crisis, which then leaves us with the question is what if this checkpoint inhibitor that's failing could, in fact, be rescued by a natural killer cell. So imagine the state in which you have now failed checkpoint inhibitors in your second line, third line, fourth line lung cancer with a survival possibility anywhere between 6 months and 9 months even with docetaxel and suffering this terrible last 6 months of your life with this chemo. But, in fact, you could change the course of that by combining the molecule ranked #1 with the molecule ranked #2, that is ANKTIVA plus KEYTRUDA and exploring whether that would change the survival. Well, that is QUILT-3.055. That is the trial that we designed as a single-arm trial to prove that when you have this missing cell, the failure of the checkpoint at this point, for which there's no other treatment other than docetaxel that we just add ANKTIVA, no chemo, to the same checkpoint inhibitor on which the patient is progressing. I can't emphasize that more. The eligibility of this trial is you have to be progressing on this checkpoint inhibitor and then we add ANKTIVA. That's all we're giving., ANKTIVA plus a checkpoint inhibitor, and we look at the overall survival. When one looks at the literature of docetaxel in the second-line and even third-line patients with lung cancer, regardless of the literature, you will see 6 to 9 months is the median overall survival. So if we ask the question, if we took these very sick patients, second-line lung cancer patients, third-line lung cancer patients, fourth-line lung cancer patients, and if we could extend the survival of these patients, not by 7 months, but maybe even doubling it to 14 months, would that be a major impact even in these advanced cases? Well, the answer to that is we were able to accomplish that in QUILT-3.055. And on that basis, the Saudi FDA gave us the approval. So time doesn't permit me to go through all the trials and you could go to our press release where you could see the trials where ANKTIVA is combined with our NK cell therapy or m-ceNK therapy and ANKTIVA is also combined with our adenoviruses. And there are multiple trials in which this BioShield platform is being implemented through these single-arm and randomized trials. Let me talk about lymphopenia. What is lymphopenia? Well, lymphopenia is a lower level of NK and T cells in our body. It is measured by a simple test called the absolute lymphocyte count. The absolute lymphocyte count has been available as an ICD-10 code for reimbursement as a diagnostic measure of your immune status since 2015, but has largely been ignored. Why is that? The reason it's been ignored is because it's not been taught. The reason it's not been taught is because until today, there's never been a treatment that can reverse the lymphocyte count, change the ALC levels from what I call a lymphopenic level to a normal level. It's very much like anemia. If you had anemia, we can measure the hemoglobin, and we can change that either with the blood transfusion or EPOGEN. If you're lymphopenic, which means your ALC is within the dangerous range, for the first time, the opportunity to treat lymphopenia. Well, what's the consequence if you don't treat lymphopenia? I will refer you to a paper that was just published by JAMA that shows frighteningly that 1 in 5 Americans suffer from lymphopenia. I am sure that both the patients and the doctors are not aware of the fact that 1 in 5 Americans today, that is 52 million Americans, suffer from lymphopenia, meaning a count below 1,500, and severe lymphopenia, meaning a count below 1,000. What this paper frighteningly showed that if these patients with severe and/or mild lymphopenia are unattended, the hazard ratio, meaning the risk of mortality, and similarly, therefore, the risk of longevity or absence of longevity, increases by 80% if you have severe lymphopenia. So the opportunity to right this newly, I suppose, recognized, it's never been really diagnosed. We've always had the ability through a simple CBC to measure ALC. But this newly recognized danger that lurks and this newly recognized danger that actually may be the basis of aging and the treatment of aging through the treatment of lymphopenia is now possible with ANKTIVA. We have shown, as we showed you in our randomized clinical trials in lung cancer patients and as well in healthy volunteers, that ANKTIVA acts to increase ALC. In fact, the FDA has affirmed in the package insert that ANKTIVA increases the NK and T cell count. So we have several trials in motion to not only show that we can increase ALC, but also show the effect on the outcome. In sepsis, patients with sepsis routinely have a low ALC count. In radiation, patients who have radiation routinely have a low ALC count. And then even in treatment-induced infection, such as patients now in multiple myeloma receiving bispecific antibodies, routinely have a high risk of infection. We will be doing these trials to demonstrate that we can treat the lymphopenia as well as change the outcome in patients with community-acquired pneumonia, patients with radiation-induced lymphopenia and patients with treatment-induced infection over the course of the next year to 2. Finally, the manufacturing of the future. The NANT Leonardo, an AI-driven cellular manufacturing platform is the manufacturing of the future at scale and at low cost for patients requiring cell therapy, whether it be NK cell therapy or CAR T-cell therapy. Our Dunkirk, New York facility awaits this NANT Leonardo platform, and we're also in discussions with the United States officials on a national preparedness for this particular site. I would like to emphasize that this would be the most magnificent site in New York that could take biologics and via U.S. domestic manufacturing and the readiness that has already been invested in the scale of this site, to be ready on behalf of the American public. Thank you for your attention and I know it's been a long call and I appreciate you all listening to both the insights and the progress of the company. We're happy to take questions. And Richard Adcock and I are available here to take some questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Ted Tenthoff with Piper Sandler. Edward Tenthoff: Thank you for that extensive overview. It's been incredible to see the progress of the company. So that really explains a lot of what's going on at ImmunityBio. Dr. Soon-Shiong, thanks for taking time to speak with us today. Perhaps you can tell us a little bit more about this new pathway on plausible mechanism of action. Why would FDA consider accelerated approval of ANKTIVA plus CPI in lung cancer and other indications? Patrick Soon-Shiong: Well, thank you, Ted, for that question. Look, I think this is really one of the most exciting, sort of, I believe, a new policy that was advocated by the FDA Commissioner. And interesting, it was even brought up by Jay Bhattacharya the NIH Head on Friday. The best way for us to understand it is to go directly to the article in the New England Journal of Medicine that was published, and we'll put that out, in December 11th, 2025. So it's very recent. And so what I would like to do is maybe just read it directly from that article. There's obviously just a 2-page article, very short. And so if I may read specifically, he gave an example. He says, "For instance, a single disease with 150 different genetic mutations with the same functional implications may require 150 different therapies and the plausible mechanism pathway would be ideally suited to such therapies." So, obviously, with 150 different mutations, 150 different therapies, one wouldn't be expected to do 150 different trials. He goes on to say and this is important and this is in the article by Commissioner Makary, "An appropriately designed study with a small sample size can support licensure of a product for which pharmacological effect is aligned with biological plausibility." So the pharmacological effect of ANKTIVA is to, through IL-15, stimulate NK and T-cells without immunosuppressive regulatory cells and aligned with biological plausibility. Biological plausibility says that you need NK cells and T-cells to kill cancer. And it goes on to say, and congruent with observed clinical outcomes. So, Ted, if I could repeat that last sentence, an appropriately designed study with a small sample size can support licensure of a product for which pharmacological effect is aligned with biological plausibility and congruent with observed clinical outcomes. He goes on to emphasize this statement by saying, "That philosophy, in essence, embodies the plausible mechanism pathway." So it's been a long answer to the direct question, is ANKTIVA -- does ANKTIVA fall under the plausible mechanism pathway? Its biological effect is aligned with its clinical outcome. Hope that helps you. Operator: Our next question comes from the line of Andres Maldonado with H.C. Wainwright. Andres Maldonado: Congrats on all the amazing progress you guys have done. So maybe one for Dr. Shiong here. As we think about all the ANKTIVA combinations, maybe specifically with your other cellular platforms, could you provide additional color on the implementation of your AI-driven robotic cellular manufacturing capabilities for us today? Patrick Soon-Shiong: Thank you for that question as well. I mean, this is the advance that we're making and it'll be very, very, very quickly being implemented. There's 2 ways of looking at this. We have an NK cell therapy platform, a PD-L1 NK and a CD19 NK. They're called CAR-NKs. And then we have another platform called m-ceNK. Let's go to the m-ceNK platform first because I think that has such amazing scalable potential. In order for you to have an m-ceNK, we can take anybody, a healthy person, a patient with cancer, anybody, any human being and remove or extract these white cells from the patient, just like you're giving a donation at Red Cross. Now we can take these white cells and grow them into billions of activated NK cells and freeze them down. The ability to then freeze them down and make them as a product could then be given to anybody else on the planet. We started to conceive of that, that how would you make this scalable? How would you make this affordable? And with our skill sets internally of machine vision and AI, we started working with a company that was building physically the robots and actually then taught the robot of how to make, from the apheresis sample, these NK cells without a human being involved in that process. Number one, now this could work 24/7, number two, the safety without any human contact with contamination and number three, the auditory profile adds to such an advantage for scalability. So this would be the world's first -- literally the world's first automated system in which AI is used to actually drive the production of these natural killer cells, either in the form of a targeted natural killer cells, what I call CAR-NK, or supercharged natural killer cells, which we call m-ceNK. So we think we're leading not only the nation, we're leading the world now on using AI automation, machine vision and robotics to start a complete new era of automated manufacturing process. Operator: Our next question comes from the line of Jeet Mukherjee with BTIG. Jeet Mukherjee: Congrats on the progress. Just to follow the thread on the plausible mechanism pathway and as it relates to your QUILT-3.055 study. How many patients have you treated, and how does that perhaps compare to the number of patients treated in the single-arm studies run for pembrolizumab across tumor types? Patrick Soon-Shiong: Well, that's a great question as well. And so the question is, could drugs get approved for single-arm studies and there's clear evidence of that. The most, I suppose, appropriate comparator is with Merck's approval for microsatellite instability-high or what they call MSI, across all tumor types. While Merck got this approved, and if you go to the June 2018 label because that's the only place you could find the number of patients, they had single-arm trials and let me give you the numbers of patients. The total number of the 5 single-arm trials, independent single-arm trials, is 149. For patients with -- some patients with a gastric bladder cancer, triple-negative breast cancer, the number of patients in that trial was 6. The number of patients with biliary esophageal endometrial cancer -- the number of patients in that trial was 5. The number of the patients with what they call non-colorectal was 19, et cetera. So the total of these single-arm, what they called uncontrolled open-label trials represented 149 patients for which they were able to get full approval for using KEYTRUDA regardless of the tumor type, as long as they had this MSI high. In our 3.055, we had 147 patients, completely -- basically no different number, of which 86 patients were second, third, fourth and fifth line even non-small cell lung cancer. So the QUILT-3.055 in which we will be discussing with the FDA where we have either PD-L1 high or even PD-L1 low, where we have a much more prolonged survival, for which there is no other treatment available, and that's very important, other than more chemo, it falls directly into this concept of the single-arm trial. Just to emphasize the idea of single-arm trials, this KEYTRUDA, as you recall, I said it was ranked #2 by the NCI in 2007, received approval for a single-arm trial for microsatellite high. It received approval for a single-arm trial for head and neck cancer. It received approval for a single-arm trial for Hodgkin's lymphoma. It received approval of a single-arm trial for urothelial cancer, a single-arm trial for gastric adenocarcinoma, a single-arm trial for cervical cancer and so on. I think you begin to understand that it's with great precedence that the FDA has approved, at least a T-cell, immunotherapy with single-arm trial in which the brakes are taken off and therefore there should be really no -- there should be consistency when you actually grow with T-cell and NK cell as it relates to single-arm trials for which there's no other treatment available. I hope that answers your question. Operator: Our next question comes from the line of Clara Dong with Jefferies. Yuxi Dong: Congrats on all the progress. So you've made a lot of progress recently, both in the U.S. and outside of the U.S. So just curious how you're thinking about the global commercial growth of ANKTIVA and maybe also talk to us about what the market access looks like in different regions as well. Patrick Soon-Shiong: You will take that, Rich? Richard Adcock: Thank you. Thank you, Clara. As you know, we've already launched distribution agreements with Accord, Cigalah and Biopharma. And in each of those, there were very specific reasons that we picked them. Accord is going to collaborate with ImmunityBio for the United Kingdom and all of the European Union. And in the U.K. and EU, each one of those member states have their own reimbursement process you have to go through. So you have to do a country-by-country and that's one of the biggest reasons we selected Accord because they have deep resources that do this regularly through those. So if you look at that, as I indicated, the big 5 is where we'll start with those. Germany is likely to be first just by the nature of how progressed we are and the work that we've already done with that one. And so we're looking forward to that in 2026. Much of the work is really getting it to be accelerated. So we are prepared in ramping up in '26 heading into '27. But for the Middle East regions, we've already secured, as you know, 2 approvals from the Saudi FDA for both bladder and lung. But beyond that, we're already in direct conversations with multiple other health regulatory authorities about approvals in that region as well. And so each of those will represent new growth opportunities. Now, Saudi, as I indicated, we already have product that is literally ready to be delivered as soon as possible. Same way with Germany. So there's no holdup from any supply constraints. It's just us working through the process on those. So if you take a look at that, '26, we'll be working country by country through those and adding new regulatory approvals is what our focus will be. Operator: Our next question comes from the line of Jason Kolbert with D. Boral Capital. Jason Kolbert: Dr. Shiong, thank you so much for describing the paradigm shift. It's very clear to me that ImmunityBio is kind of turning the oncology -- what we know about cancer therapy or the oncology pyramid upside down. So I just want to keep pushing on what you're saying a little bit, which is, what's the mode of failure? How much do we know about the mode of failure around checkpoint inhibitors that suggests the reconstitution of NK cells, restores or allows the suppression or actually the death of the malignant cell? I mean, we're seeing the anecdotal clinical data that you're creating, but I'm just trying to understand how much science and literature is out there that kind of supports this mechanistically. And by the way, thank you so much for the work and the explanation. It's amazing and I understand that you -- this is new ground. You're changing everything. And in many ways, this has to be very exciting and a big threat to Big Pharma based on what you're doing. So we're all really watching and excited. Patrick Soon-Shiong: Thank you. Thank you so much, Jason. So let me step back in terms of while it may -- can be considered new science, excitingly to us, at least, because we've been at this for a decade, I would refer you to, if you go do a PubMed search, either my name, but Jeffrey Schlom, who is the Head of the immuno-oncology program at the National Cancer Institute, people like that, we've been working diligently to understand exactly your core question. What is the mode of failure? Why does checkpoint inhibitors fail? Well, it turns out that the checkpoint inhibitor requires a T cell because the checkpoint inhibitor takes the brakes off the T cell so that the T cell can work. The tumor becomes smart over time and withdraws the receptor for the T cell. So the tumor begins to hide that receptor so the T cell can't even recognize the tumor any longer. And that's the mode of failure, both for BCG as well as for checkpoints, as well as for chemo. There's yet even one more mode of failure. Again, as I said, the checkpoints require T cells. So when you give chemotherapy and when you give radiation, you knock out the T cells, you knock out the NK cells. So there's nothing to take the brakes off. So these fundamental insights has been gleaned now with multiple, multiple both preclinical and clinical studies showing quite conclusively that this is the biology of the system, meaning that the tumor morphs in association with the treatment you give it. You give it chemo, it morphs by making sure that the NK and T cells are gone. You give it radiation, the NK and T cells are gone. You give it T cell activators through checkpoints, it hides itself from the checkpoints. So how do we recover all that? How do we outsmart all of that? Well, it turns out these NK cells look for cells in the tumor that do not have the T cell receptor, what we call the MHC-1 receptor. It turns out as soon as the tumor tries to outsmart the T cell, the NK cell as a backstop is there, has been there for 450 million years to actually kill that particular cell. So imagine then the combination of the NK cell plus the T cell. That's what ANKTIVA does. ANKTIVA proliferates both the NK cell and the T cell and rescues the checkpoint inhibitor. And that's why the 3.055, which is the combination of ANKTIVA plus KEYTRUDA or combination of ANKTIVA plus any checkpoint inhibitor, has such an effective opportunity. That is why ANKTIVA plus BCG works better than just BCG alone. So I think -- thank you for your question, it is a complete paradigm change where we're treating the host rather than the cancer and we're outsmarting this cancer. Jason Kolbert: And Dr. Shiong, one... Patrick Soon-Shiong: Go ahead. Jason Kolbert: One quick follow-up, too, which is when I look at Big Pharma and I look at what Merck and Big Pharma has at stake with checkpoints, it would seem to me that they should be knocking at your door in order to try to lock up their checkpoint in combination with ANKTIVA. And I just wonder, what is the interest level strategically from a business point of view? Do you see Big Pharma coming at you kind of realizing that there's a paradigm shift ahead? Or are they behind the curve on this? Patrick Soon-Shiong: Well, I'm trying to be polite, right? I think -- is Big Pharma behind the curve? I think, look, without my being personal about any Big Pharma organization, the CEOs of Big Pharma really have to look just at what drives the biggest revenue. And as you know, for Merck, it was 50% of the market's sales is $30 billion a year. And there's a lot of -- bunch of me-too copycats and everybody has another checkpoint inhibitor. I don't think anybody has looked at the body as a system. I was very, not just surprised, but impressed by the conversation that Jim Allison and Carl June had, and I'll refer you to either my ex, where I actually cut those 2 conversations just last week that Carl June and Jim Allison had with Michael Milken at the Nixon Conference, where they discussed checkpoint inhibitors or CAR T cells, respectively. And they then brought up the idea that, well, you know what, we have a constellation of other cells surrounding the T cells, like the natural killer cells and the myeloid-derived suppressor cells and we need to think about that. Well, luckily, we've been thinking about that for the last decade. And this composition of all these cells is why ImmunityBio is different. We needed both the ANKTIVA to stimulate and grow the T cells, but you also need to target NK cells that you could infuse off the shelf, but you also need to educate the dendritic cell with our adenovirus and you also have to manufacture supercharged m-ceNK cells. The reason we've not gone with Big Pharma, as you know, I had 2 companies that are sold to Big Pharma because my concern was that if our mission is to cure cancer, you need the combination of all these actors, meaning the ANKTIVA to grow the cells, the dendritic cell, the m-ceNK cells, to all work together in concert in an orchestrated way. So, yes, we have resisted the Big Pharma because our mission is to cure cancer. If you cure cancer, the organic value of a company is very much no different than as you could see what's happening with NVIDIA and Tesla, et cetera. I think you grow an organic value based on change and this is what we plan to do. Just to give you an insight, we're very excited, as we said, about the BCG-naive trial, which we've done the interim analysis. That will change everything with regard to bladder cancer because not just giving BCG alone where you actually will have this failure mode we just discussed, but you give BCG with ANKTIVA, where you have this memory mode, which we now can bring in. And then I think I'll make my final comment as we close this session. I looked into the number of single-arm trials approved by the U.S. FDA from 2005 to 2025. I think many of you will be surprised that according to the AI platforms, 234 -- think about that, 234 single-arm trials have resulted in approvals by the U.S. FDA. So I am very excited by the work we've done in the last decade on our QUILT trials. And then we will be moving forward not only with that, but obviously, confirmatory randomized trials. So I hope, Jason, that answers this question of yours with regard to... Operator: And we have reached the end of the question-and-answer session and this also concludes today's conference call. And as a quick reminder, you can find the recording of the conference in its entirety available on the company's website. We do thank you for your participation and have a great day.
Operator: Hello, and welcome, everyone, joining today's Arcturus Therapeutics Fourth Quarter and Fiscal Year 2025 Earnings Call. [Operator Instructions] Please note this call is being recorded. And it is now my pleasure to turn the meeting over to Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations and Marketing. Please go ahead. Neda Safarzadeh: Thank you, operator. Good afternoon, and welcome to Arcturus Therapeutics Quarterly Financial Update and Pipeline Progress Call. Today's call will be led by Joe Payne, our President and CEO; and Dr. Alan Cohen, our Chief Medical Officer. Dr. Pad Shibkula, our CSO and COO, will join them for the Q&A session. Before we begin, I would like to remind everyone that the statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, performance and achievements to differ materially from those expressed or implied by the statement. Please see the forward-looking statement disclaimer on the company's press release issued earlier today as well as the Risk Factors section in our most recent Form 10-K and in subsequent filings with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements. And with that, I will now turn the call over to Joe. Joseph Payne: Thank you, Neda. It's good to be with you again, everybody. I will begin today with an update on our ARCT-032 and ARCT-810 programs. These are the messenger RNA therapeutic candidates for cystic fibrosis and ornithine transcarbamylase deficiency, respectively. ARCT-032 Phase II trial is progressing with higher dose testing at 15 milligrams in 4 Class I CF adults, which showed no safety concerns. The upcoming multi-month study will enroll patients in the U.S. and internationally and is designed to evaluate safety as well as look for early signs of clinical benefit, including improvements in lung function and quality of life. We are well on track to initiate dosing for this Phase II 12-week study in the first half of this year and look forward to generating potentially meaningful clinical data for our CF program in 2026. ARCT-810 continues to advance toward pivotal development. We plan to study both adults with late-onset OTC deficiency and young children with the most severe forms. Type C regulatory meetings are scheduled during the first half of 2026 and are intended to provide clarity regarding our next steps in clinical development for our flagship rare liver disease program. I will now provide regulatory updates to our partnered COVID-19 vaccine program, also known as Costave, where in January 2026, the U.K. Medicines and Healthcare Products Regulatory Agency, or MHRA, granted approval for Costave, a self-amplifying mRNA COVID-19 vaccine for use in individuals aged 18 and older. Moving to ARCT-2304. This is our next-generation STAR vaccine candidate for pandemic A/H5N1 influenza. This program is contracted with and funded by BARDA. We completed a Phase I study in 212 young adults and 80 older adults. Recent 8-month follow-up data after the initial vaccination showed that all 3 dose levels, 1.5, 5 and 12 micrograms generated a durable immune response. The results also reinforce the STARR® sa-mRNA platform's ability to drive meaningful cell-mediated immunity. Across all tested doses, the vaccine was well tolerated with no safety concerns reported. The data further validates our STARRs mRNA platform. Also briefly, our lawsuit against AbbVie and Capstone Therapeutics filed on September 23, 2025, remains ongoing. With that, I'll now pass the call to Alan. Unknown Executive: Thank you, Joe. It's certainly good to be here with all of you today. I'll begin with an update of our ARCT-032 program. This is our messenger RNA therapeutic candidate for cystic fibrosis or CF pulmonary disease. ARCT-032 utilizes Arcturus' LUNAR lipid-mediated aerosolized platform to deliver CFTR messenger RNA to the lungs. Expression of a functional copy of the CFTR mRNA in the lungs of people with CF has the potential to restore CFTR activity and mitigate the downstream effects responsible for the progressive lung disease and associated morbidity and mortality experienced by people with CF. We remain on track to initiate the dosing phase of our 12-week Phase II clinical study in the first half of 2026. We recently completed once-daily dosing of 15 milligrams of ARCT-032 over 28 days in the third dosing cohort. This cohort included 4 CF adults with Class I MEL mutations. And importantly, we observed no safety or tolerability concerns at this higher dose. Based on these encouraging data, the independent safety review committee permitted us to move forward with a Phase II study that will evaluate ARCT-032 over a 12-week period instead of just 4 weeks. We will include 2 functional pulmonary measures, spirometry as measured by percent predicted FEV1 as well as LCI or lung clearance index as measured by multiple breath washout. We will also include 2 quality of life measures, the CFQRR and the EQ5D5L as well as serial high-resolution CT testing to examine changes in airway wall thickness, air trapping and mucus plugging scores. The 12-week study intends to enroll up to 20 participants with Class I CF mutations from clinical sites in the U.S. and abroad. The goal of this upcoming 12-week study is to establish a clearer picture of longer-term safety, 12 weeks versus 4 weeks and begin to more comprehensively explore early signals of clinical efficacy, including how the CF participants feel and function. Now moving on to the ARCT-810 program. This is our messenger RNA therapeutic candidate for ornithine transcarbamylase or OTC deficiency. We look forward to aligning with regulators on our clinical development strategy for the OTC deficiency program. We are moving to broaden our development strategy to serve both adults and late onset disease and young children with the most severe forms of OTC deficiency. These are the patients who typically rely on liver transplantation for survival beyond early childhood. We continue active regulatory engagement to support pivotal trial designs across these 2 distinct populations. Our Type C regulatory meetings with the health authorities, along with their feedback, remain on track for the first half of 2026, and we expect these interactions to help clarify our clinical development strategy for both adult and pediatric indications. Currently, we are very pleased with the momentum across both the CF and OTC deficiency programs and look forward to updating you as we progress throughout the year. I'll now pass the call back to Joe. Joseph Payne: Thanks, Alan. We indeed look forward to initiating enrollment in our 12-week CF study and gain clarity and alignment with regulatory agencies for the next stages of development for ARCT-810. Now with respect to Arcturus' financial position, we issued a press release earlier today, which includes financial statements for the fourth quarter and fiscal year ending December 31, 2025, and provided a summary and analysis of year-over-year performance. Please also refer to our most recent Form 10-K for more details on financial performance. Year-over-year, annual and quarterly revenue decreased $70.3 million and $15.6 million, respectively. These declines were driven by reductions in revenue from our CSL collaboration, reflecting lower supply agreement activity and a reduced number of development-based milestone achievements as Costave was commercialized. Annual and quarterly research and development expenses also decreased year-over-year by $83.0 million and $19.3 million, respectively, which was primarily driven by lower manufacturing and clinical costs related to the LUNAR-COV19 program, reflecting the program's transition from a development program to the commercial phase. Additional decreases relate to lower manufacturing for our LUNAR-CF and LUNAR-FLU programs as well as lower clinical costs for our LUNAR-OTC program as we wrap up clinical activities. Clinical costs for Phase II of our LUNAR-CF program partially offset these reductions as we remain focused on this clinical study. General and administrative expenses decreased annually year-over-year by $6.7 million due to reduced expenses for payroll and benefits as well as share-based compensation. Quarterly general and administrative expenses increased year-over-year by $1.6 million due to an acceleration of employee stock options. Overall, we expect general and administrative expenses to continue to decrease during the next 12 months, driven by lower share-based compensation expense. Cash, cash equivalents and restricted cash were $232.8 million as of December 31, 2025. and $293.9 million on December 31, 2024. Through disciplined execution and a strategic refocus on existing rare disease clinical programs in fiscal year 2025, Arcturus has extended our cash runway into the second quarter of 2028. In summary, the company remains in a strong financial position and has the cash runway needed to achieve multiple near-term value-creating milestones for both therapeutic programs. With that, let's turn the time over to the operator for questions. Operator: Operator Instructions] Our first question comes from Yasmeen Rahimi with Piper Sandler. Yasmeen Rahimi: Would love to understand as you guys are going to be kicking off the 12-week Phase II study, I know you guys spend a lot of time thinking about optimization for the study from dose selection to baseline measurements to patient selection. So maybe help us walk us through some of the optimizations that were included versus the initial study that was conducted in the fall. That would be really helpful to go through. And then also, I know you work with the CF Foundation. Help us understand if you had a chance to work with them to warehouse a number of patients. So as soon as you kick off the study, you could enroll quickly the patients for it. And with that, I'll jump back into the queue. Joseph Payne: Yes. Thanks, Yas. I appreciate the questions as always. With respect to how the 12-week study that we're initiating here soon is different from the 4-week study, we have Alan on the line. He'll highlight some of those differences so that the investors out there can understand. Unknown Executive: Sure. No problem. Thanks, Joe. Great question. So first things first, one of the main fundamental differences between the study that we've done with dose ranging from Cohorts 1 through 3 is that Cohort 4 is really going to be designed somewhat differently with the intent on it being more reproducible and stable, particularly as it relates to spirometric measures. We're setting parameters. We will not be enrolling a CF patient until they're stable with respect to baseline lung function measures. And this should help us allow us to observe true clinical signals by enhancing the noise to signal ratio. In addition, we are going to be including lung clearance index using MVW, which does not -- which is not subject to variability issues that is sometimes seen in spirometry. And that's why LCI has really been used and preferred in children because of its ability to be reproducible and not patient or performance dependent. In addition, we're going to be looking over a 12-week period instead of just simply 4 weeks with the general thinking that the longer period of time will allow the drug that we're studying to manifest clinical benefits in the airway. Lastly, we are including not just LCI and using MVW and percent predicted FEV1 spirometry, but 2 additional quality of life measures, the CFQRR and the EQ5D5R. So 2 shots on goal for both pulmonary functions and quality of life in addition to the HRCT studies reproducibly that we have used in the past and shown early signals of success. Hopefully, that should be helpful to you. Joseph Payne: Yes. And we do continue to strengthen our relationship with the CF Foundation. They're keenly aware of the modulator nonresponders in their community, both here in the U.S. and abroad. And so we work closely with them -- in fact, the TDN themselves permitted our study to proceed after reviewing the first 3 cohorts of data into this fourth cohort into this 12-week study. So they're closely involved and engaged. Operator: We'll move next to Pete Stavropoulos with Cantor Fitzgerald. Pete Stavropoulos: Nice to see the progress. So you mentioned LCI for CF. Can you talk a little bit about this test, sort of how sensitive is it? I think you mentioned it's not variable. Do you expect multiple readings at baseline? And importantly, does it correlate with other endpoints you plan to use? And is it reliable at all stages of disease, say, early versus late or equally sensitive? And if so, how will that impact your enrollment criteria for the Phase II? Joseph Payne: No, it's a great question, Pete. LCI is definitely another lung function measurement that we're -- data that we're collecting in this 12-week study. It's definitely more sensitive. Alan, perhaps you can discuss about the multiple readings and how well it correlates and how reliable it is. Unknown Executive: Sure. Of course. And a great question. Thank you for asking about this. LCI, as I mentioned, doesn't have the subject variability issues of spirometry. Although as we all know, spirometry has been a more traditional endpoint measure for most pulmonary drugs that have been approved, both in the United States and abroad. And that's really why LCI historically in CF has been used in children who can't always perform spirometry reproducible. It's a much more passive maneuver requiring just normal tidal breathing, so comfortable breathing in and out. And as a result, it [indiscernible] reproducible measure for more importantly, the most early and more subtle changes in the smallest airways. So why we're focusing on LCI in addition to spirometry is not just its ability to be reproducible, but it also is measuring another component of the airway that we believe we can have more discernible benefit for earlier and in a smaller number of subjects. Spirometry measures can change slightly as well in these larger airways, and these are more central airways, but it does require a more active engagement to be sufficiently reproducible. That's why I was alluding earlier to the controls that we're putting into this study as to making sure that a patient has reproducibility in screening and baseline before going into drug dosing so that we have a more accurate reproducible baseline with which to compare subsequent changes over the 12-week course of the study. Pete Stavropoulos: All right. And also just a question on the OTC program. As you're having your discussions with regulatory authorities about a registrational trial, how has their reception been for certain biomarkers and assays like ureogenesis function using the nitrogen 15 isotope or any other biomarker they may be less familiar with? And what's sort of the base case outcome for a study design? Joseph Payne: Well, those are all great questions, and that's currently where we are. We're actively engaged in preparing for these Type C meetings in the next few months. We're going to be in a much better position to answer those with granularity and specificity but that's exactly what we're currently engaged with the FDA on is the future study approaches, the design, the size, the scope of the study, understanding what they would like to see before we can proceed further into the clinical development. So we'll have that regulatory clarity shortly. That's our intent. That's our aim. And they're all good questions, but we'll be in a better position to answer those in a few months. Pete Stavropoulos: Congrats on the quarter and progress. Operator: We'll move next to Seamus Fernandez with Guggenheim Securities. Unknown Analyst: This is [indiscernible] on for Seamus Fernandez. Just a few from us. Looking forward to the start of the 12-week CF study. I just wanted to clarify, so it sounds like dosing is proceeding at the 15 mg dose cohort. Just curious what drove the decision to proceed with the 15 mg dose over 10? Was there any evidence of dose response on any of the lung function measures or CT scan? Second, just in terms of the planned enrollment for CF, you mentioned both U.S. and international recruitment. Just curious how you're thinking about maybe the split between U.S. and abroad. Joseph Payne: A couple of good questions. First of all, a point of clarification, just so it's not misunderstood. We have achieved safety and tolerability data for the 15-milligram level, but we're actually initiating our fourth cohort at the 10-milligram level. We were fortunate to see early efficacy, some early clinical some early clinical signals in our smaller cohorts at 10 milligrams. So we're going to continue that and see if we can see improvements as we extend the study in larger numbers. With respect to the plan to enroll in the U.S. and we are enrolling internationally, including Europe and the Middle East. But Alan can maybe share some of the strategies as to why we're expanding our enrollment in other countries. Unknown Executive: Sure. Thank you, Joe, and a great question. So the plan right now, we've actually expanded our U.S. sites. So we have additional U.S. sites ready to go for the Cohort 4 study, which we will be initiating shortly and have added, as Joe mentioned, European as well as Middle Eastern sites. The intent there is to really go into parts of the world where there is a higher preponderance of null or type 1 CF genetic mutants so that there is a larger percentage within those populations, and it should yield a greater likelihood of identifying, engaging and enrolling patients in a much more timely manner over the course of the calendar year. Seamus Fernandez: Just one follow-up for me then, just between the 15 and 10 mg dose because you mentioned improvements at the 10 mg were anything you can share in terms of the responder rate at the 15 mg relative to the 10 did you see a response on FEV or CT scan there, I guess, in terms of similar benchmark how you presented the earlier data? Joseph Payne: No. Yes, we've completed the dosing phase for the third cohort at 15 milligrams, and we've collected sufficient safety and tolerability data to share with the safety review committee to allow us to permit us to proceed into the 12-week study. With respect to the other data, that data collection process is ongoing, and that's where we are. But what was significant was to allow us to proceed into the fourth cohort. Operator: We'll move next to Lili Nsongo with Leerink Partners. Lili Nsongo: So 2 questions for me. The first one on the CF program. So thinking about, again, moving on to the 12-week study, what was the rationale to stop at 15 milligram given that you haven't seen any safety signal? And would there be enough design flexibility to potentially increase the dosing as you accumulate data? And then I have a follow-up question on the OTC program. Joseph Payne: Yes, we definitely have the flexibility to increase dosing, and we're very happy that we already have the ability to increase to 15 milligrams, if necessary. But just to maybe reiterate that 10 milligram showed early signs of working in the second cohort. So we're simply extending the duration of that treatment in a larger cohort. And we're now pleased that we have the flexibility to increase dosing to 15 milligrams if needed. It's unlikely that we will need to increase dosing even further, but we would have flexibility to do so if needed. We did dose up to 27 milligrams in our early trials in human volunteers. So there is some headroom there to expand further, but we feel confident in the dose that we've selected at 10 to start this fourth cohort. Lili Nsongo: Okay. Maybe just a follow-up. For the OTC program, do you expect a bifurcated regulatory path for both the pediatric and then the more adult patient population? Joseph Payne: Yes. I think that's safe to assume that the younger children will be treated differently than the older stable adult population simply because the need is far more severe in younger children, it's a different population. But anything to add to that, Alan? Unknown Executive: Yes. I mean, in many ways, I think where we are with the program and important to note that since there are survivors with an OTC deficiency into adulthood, even though it's vastly different in terms of the medical complexity and the ability to be functional without needing a liver transplant, we did -- we were able to show up to this point safety, tolerability, and we believe early signs and signals of efficacy. Now in our discussions with the FDA on looking at a younger population where survival tends to be quite bleak beyond preschool and school age. The intent there is to really see if we can leverage the most recent guidances that the FDA has shared about their willingness to look into ultra-rare populations with severe outcomes and their willingness to be more -- give more latitude and flexibility in terms of how one conducts those studies as long as there's sufficient safety and tolerability and obviously, efficacy. So we're encouraged by the early conversations that we're having with the agency right now, and we'll continue to pursue those to the benefit of the OTC deficiency community. Operator: We'll move next to Yanan Zhu with Wells Fargo. Yanan Zhu: Maybe first on the CF program. I think you mentioned one effort in Cohort 4 is to obtain stable baseline. Remind us why that's important? How are you going to go about and do that? And also curious, during the 3-month trial period, could it be possible that patients had a stable baseline, but for some reason, their reading could begin to fluctuate or drift after having had that stable baseline within a 3-month period? Joseph Payne: Thanks, Yanan. Yes, Cohort 4 is definitely different with respect to the first 3 cohorts and that we've designed it with a stronger baseline. Alan, maybe you can comment further there. Unknown Executive: Yes. So what we've done here, and it's a great question. As best as we can, one should realize that because of the complexity of the lung disease and the impact that it has in the various segments of the lung at any given time, what we're looking for at baseline with these adult patients with CF is at least enough reproducibility and as small a possible variability within the period of time that we screen to baseline to get them enrolled that we believe that we have as accurate representation of where they are at that moment in time as far as their lung diseases advancing and progressing. It's not unexpected in the course of a 3- or 6-month period that many of these patients may have an acute pulmonary exacerbation or an acute illness. And we're prepared to handle that. But what we wanted to try to mitigate and deal with was the variability that is seen not uncommonly in patients with COPD, cystic fibrosis, asthma, et cetera, particularly those who are vulnerable and chronically infected with pathogens. So we're really tightening up the enrollment criteria. We're setting parameters. And that's why we believe we're just looking to make sure that it's reproducible and stable at baseline. And we're not going to be enrolling CF patients that may be in the early throes of pulmonary exacerbation or an acute illness. And sometimes just even modest changes can be an early signal for that. We want to enhance the noise to signal ratio. And once again, one more thing to think about, unlike lung clearance index, spirometry really does require a consistent study subject performance. It's not a passive maneuver. So anything that we can do to make sure that a patient coming into our study has a representative baseline is really what we're trying to achieve here. Yanan Zhu: Great. That's super helpful. Two more questions, if I may. On the OTC deficiency regulatory interaction front, could you lay out for us to you and to the principal investigators, what would be considered an exciting outcome with regard to the alignment? And what -- perhaps also what might be the base case scenario for the alignment? And lastly, I wanted to -- wondering if you have any update on the COVID-19 vaccine initiatives between you and CSL. Joseph Payne: Yes, I can take those questions, Yanan. So we're definitely working with the FDA to establish clarity, right? That's the main objective. So as investors are looking at what are we trying to achieve with these Type C meetings, it's clarity. We want a clear path forward to helping both the children in need with high unmet medical need, more severe disease and the stable adults, right? So we're presenting our case. We're presenting our data and basically looking to have clarity in the path forward. Anything to add there before I comment on CSL, Alan? Unknown Executive: No. And obviously, in these patients, the goals and objectives for the children is quite different because of the severity and nature and lay vial nature of the disease in children as opposed to the much more stable adults. Even with current standards of care, the goals and objectives of a pediatric program would be to try to mitigate as best we can the damaging neurological and developmental issues that they contend and deal with on a daily basis just by having OCT deficiency despite the fact that there are now therapies like ammonia binding agents and abilities to control diet. So success for us would be, as Joe said, a clear path forward with agreed endpoints and goals and objectives that are not only attainable but are potable and acceptable to the families and patients as well as the caregivers and their current standards of care. Yes, and the details of that, we'll be able to provide that granularity in a couple of months. But I appreciate the question. With respect to your CSL-related question in Costave, yes, we definitely made some progress for the Costave asset and for the platform in the United Kingdom. It was good to see that we advanced Costave to the point of approval and licensure in the United Kingdom. But the present administration here domestically has made it challenging to progress Costave to licensure or approval in the near term here in the U.S. So because of this and understandably, CSL and Arcturus are in active discussions regarding our collaboration, and we're going to be able to provide more color on that in the coming months. Operator: We'll take our next question from Myles Minter with William Blair. Myles Minter: First one is just on the fact that I think you're deciding between the 10 mg and the 15 mg dose for the 032 Phase II trial. I think you're waiting on 15 mg efficacy data. You've got the safety and tolerability, obviously. I'm trying to understand what the puts and takes are for selecting dose moving forward? Like if you did get this efficacy data in for the 15 mg and it looks fine, but you have more data in 10 mg, like which dose or would you take both doses forward? I'm trying to understand your logic between [indiscernible]. Joseph Payne: So it's relatively straightforward in that 10 milligrams showed early signs of working in the second cohort. So we're simply extending the duration of treatment into a larger cohort and extending that duration. We now have the flexibility to increase the dose. That's what this means. And only if needed, there's many that are suggesting that efficacy is achieved through simple duration by extending the treatment, and we're going to prove that. And at some point, because it's an open-label study, if we feel we need to increase the dose, we can. I also remind folks that it's a fairly pricey product to manufacture. So if we can keep cost of goods down, that's also a good benefit by keeping the dose down around 10 milligrams as well. But it's simply based on data that at 10 milligrams, we saw progress. So we think we're going to extend the duration and the size of the study to see if it works in that context in that new -- in the fourth cohort. And we now have the flexibility to increase the dose if needed. Operator: We'll take our next question from Adam Walsh with ROTH Capital. Adam Walsh: The first on 032, the CF product. You've talked about the first week in your clinical trials or 2 of being an onboarding phase where the drug is sort of getting through the congested airways. So in a 12-week study, you'd have roughly 10 productive weeks versus maybe 2 or 3 in the 28-day study. How should we think about that from an extra exposure time as it relates to FEV1 and mucus clearance versus what we maybe saw at 28 days? Joseph Payne: Yes. Adam, that's a thoughtful question. And you're absolutely right. We view that in our 28-day study, we observed consistently that there was a 1- to 2-week onboarding phase. And so in reality, there's really only a 2-week healing phase for that 28-day study. So as we go to the 12-weeks study, assuming a similar onboarding rate of 1 to 2 weeks, then you have 10 full weeks of potential healing and efficacy reads. So it's a difference between 2 and 10 weeks. So under that -- from that perspective, it is a significant improvement. But if you look at the study as a whole, we're going from 4 weeks to 12 weeks. It's a threefold difference. That's also a significant bump. And -- but your observation is sound, and we agree with you that it's not only threefolding the time of the study, but increasing the duration of potential healing and efficacy with this 12-week study. Adam Walsh: And then if I could, one on 810 for OTC deficiency. Phase II patients fade on standard of care. So to my knowledge, we haven't seen whether patients can actually reduce scavengers or loosen dietary restrictions on 810. Is that something you plan to build into the pivotal? And how important do you think that kind of functional clinical data will be for the approval conversations versus the biomarker package alone? Joseph Payne: That exact question is in the agenda of our Type C meetings this year. So for both the children early onset and also with the stable adult population. So it's the right question. We'll be able to provide the answer to that question in more detail in a couple of months after our Type C meetings are completed, and we've received their feedback. Operator: We'll take our next question from Whitney Ijem with Canaccord. Angela Qian: This is Angela on for Whitney. Maybe just a follow up on the CF program again. So I understand you're progressing with the 10 milligram for the 12-week study, but are you still looking at efficacy in the 15-milligram cohort? I guess like what efficacy endpoints are you looking at? And will you be sharing that data at some point either in a PR or at a medical conference? And then second part is, would it be possible that you would run another 12-week study using the 15 milligrams? Or when you talk about the optionality to dose up, with that part of the current 10-milligram study [indiscernible]. Joseph Payne: Yes, it's unlikely that we'll be sharing any more data from the first 3 cohorts. We are focused on the fourth cohort. This is almost like a Phase IIb type study where we believe that our best shot on goal here is in a 12-week duration end of '20 study, and that's where we're focusing on. So I think that's where the investors should also be focused on. But you've asked, are we collecting data for 15 milligrams? Absolutely. Is there a time and a place to share that data? Yes, very likely. But we remain focused on the 12-week study is the short answer to your question. Angela Qian: Got it. And then will you potentially do dosing up to 15 milligrams in the study? Or would that be a separate study? Joseph Payne: Only if needed. It's an open-label study. We have the flexibility to do it based upon what's happened in the third cohort, which is great. And we still haven't collected all the data, of course, and that additional data could sway our minds either direction. But right now, we're initiating the fourth cohort at the 10-milligram dose level, and we have the flexibility now to increase it if needed. Operator: And we'll take our next question from Yigal Nochomovitz with Citi. Joohwan Kim: This is Joohwan Kim on for Yigal. I kind of have a multipart question, but I believe in the Phase Ib, you had also assessed LCI. But can you remind us what you had seen previously on the LCI? And how should we be thinking about the level of improvement expected in the Phase IIb? And as you were headed into the dose-ranging Phase II, did the FDA get a chance to look at the LCI data by any chance? Joseph Payne: Yes. You're correct that we did look at LCI in the early Phase I studies. And those Phase I was in healthy adults, Phase Ib was in CF participants, and we established safety and tolerability that was sufficient to advance it. So LCI was only after a single administration or 2 administrations in Phase Ib. I would -- I'll defer to Alan in terms of that data from Phase Ib. With respect to LCI as an endpoint, I think I'll also defer to Alwyn. He can talk about what the literature shows or the magnitude of changes in LCI to get approval previously in children, et cetera. Go ahead, Alwyn. Unknown Executive: Sure. No problem at all, and it's a great question. I wasn't around historically when the early experience with our study drug in those first few cohorts going from healthy to CF adults were ongoing, but I have had a chance to review the data. The challenge of it is, once again, it was small numbers of patients. In the way we're constructing things now, the plan is to benefit from that prior experience and perhaps do it in a more refined way. Right now, we also have the support of the CF Foundation, who is doing a natural history study. So being able to align with the CF Foundation and the Therapeutic Development Network on their prospective study that they're doing right now in patients with no mutations and those who are unable to tolerate current modulators allows us to align a study in a way so that when that natural history study becomes available in the coming months and year, that we can have access to that as a comparator group, which was something that was not available just a few years ago. The -- the other piece about this, I think, is that there's increasingly a recognition of not only the sensitivity and the value of LCI measures in adults, but an appreciation for what may be the range and magnitude of change one needs to see in order for there to be an appreciation for a significant meaningful change over time. So right now, I think we're doing the study in a manner that should optimize its utility and value, and we're also doing it in an alignment in a way that should be commensurate with current standards and practices, which was certainly done before, but just not done as robustly and as long term. And really, I think in this case, just like with percent predicted FEV1 and spirometry, we will be benefiting from a cohort of upwards to 20 patients and an examination of data not just over a 4-week period, but a 12-week period. So both of those elements in addition to having more normative data to compare to in this exact population should make interpretation and value of this data much greater than it was previously appreciated. Hopefully, that's helpful to you. Operator: We'll move next to Tom Shrader with BTIG. Thomas Shrader: There have been a lot of questions. I assume you've been looking at a lot of pictures of mucus plugs with your data. Do you have a sense of what fraction of patients show a measurable difference? Is it very all over the place, all over the lung? And do you have any patients where it's possible to calculate that in 12 weeks, the mucus plug should be gone? Do you have that level of data? And I have a quick vaccine follow-up. Joseph Payne: Well, we saw 4 out of 6 subjects in the second cohort, that was a 10-milligram cohort that showed a reduction of mucus plugs after just 28 days. So that was definitely encouraging. There was one subject that attributed the increase in mucus plugs to humidity and the sensitivity to humidity. And whether that's an outlier or whether that's simply a nonresponder, we will learn as we collect more data, especially in this extended study that's larger. But it seems that a majority of these subjects respond with a reduction in mucus plugs, and we feel that, that's important to mention, and that's an early sign of some clinical activity. With respect to your other question, maybe you could restate it, and we can turn that over. Thomas Shrader: You would have had some sense of rates of clearance. Do you have confidence that 12 weeks is enough? Or is that more just the next trial you're allowed to do? Joseph Payne: That's the big question. Clearly, we saw something in 28 days. So there's reason to be confident that we'll see it in an extended study -- larger study. And it's not just a larger extended study, but we're looking at a better study, a study that's designed more tightly with respect to numbers and baseline steadiness. But anything to add? Alan? Unknown Executive: Yes. Yes. So I was going to say the field of using high-resolution CT scanning as a complementary way of assessing progression of disease has been used for some time. I think the technologies, particularly artificial intelligence and an ability to standardize the reads now is vastly different and in many ways, much better than it was as recently as just a few years ago. So I think the field is emerging. I would be -- I just want to make sure that it's understood that the time constant and the damage that occurs in the lungs of people with cystic fibrosis is really quite patchy. And what's remarkable, I'm a former lung transplant physician from Washington University. And I'm one of the few people that have had the chance to actually examine the lungs of people who underwent a lung transplant and sustained significant bronchiectatic damage to the point of needing a lung transplant to survive. What's impressive about the disease is the very patchy nature, both in the upper and lower lobes, and you can have a completely bronchiectatic destroyed segment of lung right next to a completely normal appearing functional segment of a lung. So I believe that a drug that's administered by inhalation over long periods of time will eventually have the ability in large part to reach many, if not all, of the segments that we need to. But I have no delusion as to whether or not there will be a consistent almost a vacuuming of the lungs and an ability to remove and diminish mucus plugging. I think the time constant, the ventilation perfusion matching and just the nature of what's going on actively day-to-day with infections will really always make this challenging, even mucolytic drugs like Palzyme, even in patients who are using those drugs one or more times a day, will still be found to have significant mucus plugging in certain segments of the lung in any given time, and it will change from period to period from x-ray to x-ray. So the goal here is, I think, the long term, it's the totality of what we're able to observe. And the plan is to be able to correlate those improvements with things like lung clearance index, which clearly have, and someone was alluding to this in their question earlier, that's one of the measures that we believe since we've already shown improvements in high-resolution CT scan mucus plug burden, it wouldn't be surprising to see and observe changes in lung clearance index commensurate with that since those 2 measures actually go hand in hand. So hopefully, that's helpful to you. Thomas Shrader: No, that's great. Very useful. And then just a quick follow-up on your pandemic flu vaccines, you haven't said a lot, but is your safety just qualitatively in line with a protein vaccine? Or does it look more like an mRNA vaccine? Do you have any sense how things are going to look. Joseph Payne: Yes, very similar. And with respect to safety and tolerability, the safety and tolerability profile was similar to other vaccine technologies. We are a lower dose technology to conventional mRNA. So what we've seen consistently is any dose-related toxicologies will be beneficial to the self-amplifying mRNA tech from Arcturus. But in general, it's simply -- it's similar to other vaccine technologies from a safety and tolerability. Operator: We'll move next to I-Eh Jen with Laidlaw & Company. Yale Jen: In terms of the CF next 12-week study and you're looking for more stable baseline, would that increase the time and the size for the screening for the study? And also what sort of -- how long duration to define as a stable -- more stable baseline before you -- before the patient will be eligible for the study? And then I have a follow-up. Joseph Payne: Yes. We're definitely not enrolling a patient until they are stable with respect to the baseline lung function measures. The duration of that stability time, do you want to comment on that, Alan? Unknown Executive: Yes. I mean there's -- and this is a great question, and it's not a simple answer. So let me see if I can give as appropriate an answer as possible. The challenge with CF patients is that there's actively chronically something going on in any given day. And I think the biggest challenge in trying to identify and enroll patients into a study like ours, where you're looking for modest improvements over -- in the case of our studies, first 3 cohorts over a 4-week period to now a much larger group of patients over now a 12-week period. We do want to make sure that we're not just identifying the right patients, but we're also patching them at a time in the course of their disease, where they're at least stable enough so that we can introduce our drug and begin the baseline assessment so that when we get to the end, we at least have a comparator that's stable, reasonable and discernible. So right now, it's possible based on the way we've constructed this study, and I've done this in other studies as well, where we may delay the enrollment of a patient by a few weeks or a month just simply because there seems to be something acute going on, whether they're getting acutely ill and we just happen to be catching it during the course of the baseline in the screening or they may be in the late stages of resolving their illness, and we're seeing enough of a difference between 2 measures over a relatively short period of time that it may just speak to the unstable nature of what's going on. We really just are looking to get the best patients at the best period of time so that we have an equivalent baseline with which to work from. And that's really the intention. And it may mean a few weeks or a month longer to enroll a given patient, but it shouldn't add much in terms of the time. I think it's really -- the goal here is to really find the best patient at the best time. Hopefully, that helps you. Yale Jen: Absolutely. That's very helpful. Maybe just a quick one on the OTC. I know it's still early a little bit, but was the company intended at least the desire to potentially starting both the adult and pediatric trial relatively concurrently or there's any priority one before the other? Joseph Payne: I think the intent is always to get into the children with high unmet medical need as fast as possible. But we're going to adhere to the advice and feedback from the FDA from these Type C meetings. So we'll be able to answer that with more granularity in a few months. Yale Jen: Okay. Maybe the last question. Does CSL intended to launch the Costave in U.K.? Or did we know that? Joseph Payne: I would refer to everyone on the call to see what they've said publicly at their recent investor calls and their filings. We don't anticipate anything soon out of the United Kingdom commercially from Costave, but I refer you to their statements that they're saying publicly. We'll see where we are with the CSL agreement and our discussions with them in the coming months. Operator: And this does conclude the question-and-answer portion of today's program. I would now like to hand the call back to Joe Payne for any additional or closing remarks. Joseph Payne: Thank you, operator. I'd just like to thank everyone for attending today's call. If we see you in the bank conference seasons ahead, we look forward to catching up with you there. Have a good afternoon, everybody. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good afternoon, and welcome to the Ross Stores Fourth Quarter and Fiscal 2025 Earnings Release Conference Call. [Operator Instructions] Before we get started, on behalf of Ross Stores, I would like to note that the comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results, including sales and earnings forecasts, new store openings and other matters that are based on the company's current forecast of aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today's press release and the company's fiscal 2024 Form 10-K and fiscal 2025 Form 10-Qs and 8-Ks on file with the SEC. And now I'd like to turn the call over to Jim Conroy, Chief Executive Officer. James Conroy: Thank you, John, and good afternoon, everyone. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer; Bill Sheehan, Executive Vice President and Chief Financial Officer, and Connie Kao, Senior Vice President, Investor Relations. Before I review our performance for the quarter and the year, I wanted to acknowledge all of the associates throughout the Ross organization. The results we achieved in 2025 are a direct reflection of your dedication and hard work throughout the year. The strong collaboration across the company in all functional areas was essential to our success. I want to thank all of you for your great work. Now turning to our quarterly results. As noted in today's press release, we are pleased to report that our business momentum accelerated further in the fourth quarter, with both sales and earnings significantly surpassing our expectations. Throughout the holiday season, we delivered compelling merchandise assortments to our stores, benefited from higher customer engagement through our new marketing campaigns and executed in-store initiatives that enhance the customer experience. These efforts, combined with healthy growth in new stores, contributed to a 12% growth in total sales for the quarter. Turning to comparable store sales growth. We delivered a robust 9% increase despite a 1 percentage point erosion in comps from weather, primarily the January storms that impacted many parts of the country. We were quite pleased with the health of the comp growth as it was driven mainly by an increase in transactions and customers with a modest increase in basket. We saw broad-based strength across both departments and geographies. Every major merchandise category showed solid positive sales growth with shoes and cosmetics performing the best. Similarly, every region of the country was positive, with the Midwest and Mountain regions the strongest. dd's DISCOUNTS also posted healthy sales gains as the chain value and passion offerings continue to resonate with shoppers. Similar to Ross, the growth was broad-based across both merchandise categories and regions. Moving to inventory. Consolidated inventories were up 8% and packaway represented 37% of total inventory compared with 41% last year. We are pleased with our inventory position at year-end. Regarding our store expansion program, 2025 is an exciting year of continued growth as we expanded into new markets while deepening our footprint in existing ones. During the year, we added 80 new Ross Dress for Less stores and 10 dd's DISCOUNTS stores. Importantly, we expanded into several new markets for Ross, including our first stores in the New York Metro area and Puerto Rico. Inclusive of 9 closures, we ended the year with 2,267 stores, consisting of 1,904 Ross Dress for Less and 363 dd's DISCOUNTS locations. Before I turn the call over to Bill, I'd like to briefly review initiatives underway that position us well for incremental sales and profit growth as we enter 2026. First, with merchandising. We are pleased with the strength of our assortments across the store, where we have delivered more brands at the right value for our customers. Our buying organization has done an incredible job navigating through tariffs and strengthening our vendor relationships to deliver merchandise that is resonating with our customers. It is encouraging to see the strength in the Ladies business as well as the solid growth and continued sequential improvement with our home category, which faced heavy pressure from tariffs throughout the year. Looking forward, we are pleased with our inventory levels and are seeing ample availability in the marketplace to support our business trend going forward. On the marketing front, we are pleased with our holiday campaign as we continue to refine our brand messaging and believe it is connecting with today's shopper. We are encouraged by the higher levels of customer awareness and engagement we are seeing. We are also quite pleased with the increase in customer traffic and believe that this positions us well for continued growth as we look ahead. In our stores, we have made meaningful merchandising and operational improvements which we believe also contributed to the outsized sales growth. The stores team did a great job of managing the holiday surge in the business. Additionally, the supply chain organization executed extremely well during the peak season, which enabled us to drive exceptional sales growth through fresh receipts and fast turning inventory. Overall, we are encouraged by the positive impact these initiatives have had on our recent performance, and we see opportunities to build on these learnings to support our growth plans in 2026 and beyond. As we enter the new year, we are seeing a very strong start to the first quarter, which gives us confidence that our focus on improving our connection with the customer is taking hold. Turning to store expansion. Many of the changes we implemented that helped drive comp store sales growth also had a positive impact on new store productivity, which further bolsters our confidence in accelerating our store opening plans going forward. As a result, we are planning to open 110 new locations this year, which represents 5% growth. Part of that growth reflects the reacceleration of dd's DISCOUNTS with plans to open 25 stores in 2026. For Ross, we see an opportunity to open 85 new stores this year, slightly above last year. As we continue to identify attractive real estate opportunities across our markets, we remain confident in the long-term potential to grow Ross and dd's chains to 2,900 and 700 stores, respectively, and expand our reach to even more customers over time. Now Bill will provide further details on our fourth quarter and fiscal year results and additional color on our outlook for fiscal 2026. William Sheehan: Thank you, Jim. Turning to our financial results. Starting with the fourth quarter. Total sales for the quarter grew 12% to $6.6 billion. Comparable store sales grew a robust 9% primarily driven by an increase in the number of transactions. Fourth quarter 2025 operating margin was 12.3% compared to last year's 12.4%, which included a 105 basis point benefit from the sale of a packaway facility. Excluding the benefit last year, operating margin increased 95 basis points. Cost of goods sold was 65 basis points lower in the quarter. Occupancy leveraged by 30 basis points on strong sales results, while distribution and domestic freight costs declined by 20 and 15 basis points, respectively. Merchandise margin improved by 10 basis points. Partially offsetting these benefits were buying costs that rose by 10 basis points mainly due to higher incentives given the earnings outperformance. SG&A for the period rose 75 basis points, primarily due to last year's packaway facility sale. Excluding the sale, SG&A was 30 basis points lower. Fourth quarter net income was $646 million, and earnings per share for the fourth quarter was $2. This compares to net income of $587 million and $1.79 in earnings per share in the prior year, which included the previously mentioned benefit of approximately $0.14 per share related to the sale of a packaway facility. Excluding the benefit, earnings per share for the quarter grew 21%. Now turning to results for the full year. Total sales for the year increased 8% to a record $22.8 billion, up from $21.1 billion last year. Comparable store sales grew 5% on top of a solid 3% gain in fiscal 2024. Net income for fiscal 2025 was $2.1 billion, similar to last year. Earnings per share were $6.61, up from $6.32 in the prior year. Excluding the previously mentioned $0.14 gain from the facility sale last year and the approximate $0.16 per share impact from tariff-related costs this year, earnings per share grew 10%. Now to our shareholder return activity. As noted in today's release, we repurchased 1.5 million shares during the quarter, completing the 2-year $2.1 billion program announced in March 2024, in line with our plans. Our Board of Directors recently approved a new 2-year $2.55 billion stock repurchase authorization or approximately $1.275 billion each year for fiscal year 2026 and 2027. This new plan represents a 21% increase over the recently completed repurchase program. In addition, the Board also approved a 10% increase in our quarterly cash dividend to $0.445 per share. The increase to our stock repurchase and dividend programs reflect our continued commitment to return excess cash to our shareholders after funding growth and other capital needs of our business. Now let's discuss our outlook for fiscal 2026, starting with the first quarter. As Jim noted earlier, we ended the quarter with solid momentum. And while early, we are encouraged by the continued strength in the business as the spring season begins. As a result, we are projecting comparable store sales for the 13 weeks ending May 2, 2026, to be up 7% to 8% and earnings per share of $1.60 to $1.67. The operating statement assumptions that support our first quarter guidance include total sales are projected to increase 10% to 12% versus last year. If same-store sales perform in line with our forecast, operating margin for the first quarter is expected to be in the range of 11.8% to 12.1% compared to 12.2% last year. The expected decrease reflects higher DC costs from the opening of a new distribution center in the second quarter of last year and unfavorable timing of packaway-related expenses. In addition, we project higher incentive costs versus 2025 when we underperformed our plan. Partially offsetting these higher costs is our expectation of an increase in merchandise margin. We plan to add 17 new stores, consisting of 13 Ross and 4 dd's DISCOUNTS during the period. Net interest income is estimated to be $27 million. Our tax rate is expected to be approximately 23% to 24%, and weighted average diluted shares outstanding are forecasted to be about 322 million. Turning to our full year guidance assumptions for 2026. For the 52 weeks ended January 30, 2027, we are forecasting same-store sales to be up 3% to 4%, and earnings per share to be $7.02 to $7.36 compared to $6.61 for fiscal 2025. Total sales are projected to be up 5% to 7% for the year. If same-store sales performed in line with our forecast, operating margin for the full year is expected to be in the range of 12% to 12.3% compared to 11.9% in 2025. This plan reflects higher merchandise margin and lower distribution costs for the year. As Jim mentioned earlier, we expect to grow our store base by 5%, reflecting approximately 110 new locations comprised of about 85 Ross and 25 dd's DISCOUNTS. These openings do not include our plans to close or relocate about 10 to 15 older stores. Net interest income is estimated to be $92 million. Depreciation and amortization expense inclusive of stock-based amortization is forecasted to be about $740 million for the year. The tax rate is projected to be about 24% to 25% and weighted average diluted shares outstanding are expected to be about 319 million. In addition, capital expenditures for 2026 are projected to be approximately $1.1 billion. There are several key investments included in our 2026 plans. First, as previously mentioned, we are reaccelerating our store opening plans. At dd's, we are opening 25 stores this year compared to 10 last year. In addition, we plan to open 85 new Ross stores this year compared to 80 last year. Next, we plan to make further investments in our supply chain, including the continued buildout of our next distribution center as well as the initial outlay for another DC. Lastly, we are investing in our existing store base to drive an improved customer experience. Now I will turn the call back to Jim for closing comments. James Conroy: Thank you, Bill. As I reflect on my first year as CEO, I'm extremely grateful for the support and dedication of the entire team. The year had its early challenges with tariffs and uncertainty in the macro environment, but we remain resilient and focused on executing our strategies. Looking ahead, we are optimistic about the strength of our business and the initiatives planned for 2026. At this point, we would like to open the call and respond to any questions that you might have. John? Operator: [Operator Instructions] And the first question comes from the line of Matthew Boss with JPMorgan. Matthew Boss: Congrats on a great quarter. So Jim, could you elaborate on the inflection to 8% traffic-led comps in the back half of the year? Or I guess, how would you bridge the more than 600 basis points of comp improvements relative to low single digits over the last 4 quarters? And on the 7% to 8% comp guide, you know I had to ask you on this. I mean this comes from a conservative company and a conservative guy historically. Could you elaborate on the further improvement you saw to start the quarter, maybe confirm the moderation that you're embedding for the remainder of the quarter. And did you embed any potential lift from tax refunds or stimulus during the quarter? James Conroy: Sure. Happy to answer both of those questions. In terms of the inflection point, it was really broad-based across essentially all merchandise categories, all regions of the country. You were talking about the sequential improvement from sort of the first half to the second half of the year. And if we look at the second half in total, there's a lot of great things that are coming together. We've had a lot of conversation on past calls about the Ladies business. We mentioned on Q3 that the Ladies business had returned to strength and was slightly stronger than the company. And then on the fourth quarter, the Ladies business continued to be very strong, more in line with the overall business. Men's continues to be strong. We've seen probably the most sequential improvement in the quadrant of the store that we would call center core. So we called out cosmetics and shoes specifically. Those were 2 very nicely growing businesses for us in both Q3 and Q4 and really nice sequential improvement throughout the year. And then finally, not to leave Gurmeet and the home business and the home team out, the home business in the beginning of the year was kind of difficult for us, and it was a business that was most under attack with tariffs, but they have done a really nice job of turning around that business across the board within home. On our last call, we spoke specifically about toys being important and we finished up the holiday quarter with very strong business in toys. In terms of the comp guide, I would turn to Bill or to Michael, I would preface it with -- we, of course, are excited about a 7% to 8% comp guide, but we haven't changed the conservative nature of our guide. So it's not like we're putting out some high-flying number to get headlines, we still feel pretty good about it. I don't know if either of you would like to add to that. Michael Hartshorn: No. Matt, I would say, one, it is a reflection of the initiatives we have in place and the momentum we have coming out of the fourth quarter, the merchants did a tremendous job transitioning into the first quarter that we can see in the business. We're in the inverse position we were last year where we started off very, very weak. So we feel good about how we started the year. You had a question on tax refunds. We haven't built anything in for the tax refunds. It's still early. Obviously, in the tax refund season, the significant refunds just began to flow last week. And from what we can see from the treasury, they're up about 7% thus far. But with roughly 2/3 of the refunds left to come, we'll have to wait and see the impact over the entire quarter. Matthew Boss: And then just one follow-up, Jim, on new stores, productivity that you're seeing in the Northeast, how does that inform your opportunity to expand the unit growth opportunity over time? Michael Hartshorn: Matt, it's Michael again. We wouldn't get into the specifics of the Northeast other than it's been very strong and it gives us a lot of confidence that we can grow there. I would say, but not only in the Northeast and you can see it in the difference between comp and total sales growth. We had one of our best years in a while in terms of new store productivity, which also gives us confidence that we can grow in our existing markets. Operator: And the next question comes from the line of Paul Lejuez with Citigroup. Tracy Kogan: It's Tracy Kogan, filling in for Paul. I had two questions. The first is on your merchandise margin improvements in 4Q, how much of it was driven by better IMU from buying better versus how much was driven by lower markdowns? And what are you expecting in F '26? And then I have a follow-up. William Sheehan: For the merchandise margin, that 10 basis points improvement, I think we feel good about it. It was driven mostly by better buying and our merchants just making good decisions as they always do around how to deliver value at the same time flowing some benefit through to us. Michael Hartshorn: And on '26, it's again, it's mainly driven by the better buying. To some extent, we get some benefit from recapturing some of the tariff pressure early in the year. Tracy Kogan: Great. And then on the flow-through in 1Q, I know you mentioned higher incentive comp and timing of packaway. Can you size either of those headwinds and which one is bigger? William Sheehan: Could you repeat the question for me one more time? Tracy Kogan: Yes, sure. I think on the 7% to 8% comp, we would have expected maybe more flow-through to the EPS line. And I think you mentioned that you had a higher incentive comp in there as well as timing of packaway. And I was just wondering if you could frame how big either of those are in terms of basis points of pressure for the quarter. Michael Hartshorn: Tracy, it's Michael. As you can see on the full year guidance, at a 3% to 4% comp, we leveraged EBIT by 10 to 30. So that's actually above what our normal kind of long-range algorithm, always timing quarter-to-quarter. In the first quarter, we have a couple of things driving the deleverage. The first of which is we haven't yet lapped the distribution center opening from last year. So we'll begin to lap that in the second quarter, but that has a bigger impact in the first quarter. Number two, we have built into our forecast, let's see how it plays out, some pressure on the packaway impact, the packaway expense. And then finally, we had a pretty disappointing first quarter for us last year, which means the incentive comp base will be lower from last year, but pressure this year. Among those, they're pretty evenly split. Operator: And the next question comes from the line of Lorraine Hutchinson with Bank of America. Lorraine Maikis: What are the key factors driving the acceleration in the ladies business? And what's your outlook for the category as we move through the year? James Conroy: The acceleration in the ladies business is rooted back with the brand strategy. The company had put that in place maybe 2 years ago now, and that team has really done a great job of resetting that vendor base and the assortment there, finding a really nice balance of bringing in branded bargains across good, better and best. We've seen some nice strength in the Juniors business specifically. So that's been a part of the growth there. In terms of the outlook going forward, right now, a lot of things are performing quite well. And I would imagine we're going to see continued strength in that business going forward, certainly in the first half of 2026. Did I get all of your questions there, Lorraine? Lorraine Maikis: Yes. It seems like you brought more inventory into the stores during the holiday season. Is this a change in strategy? And would you expect to move more from the distribution centers into the stores as you did for the 4Q? Michael Hartshorn: Lorraine, on inventory, we did mention in our remarks that inventory grew 8%. Obviously, that's 1 point in the quarter, but that's lower than our overall sales growth. We did see opportunities to increase our inventory position in front of the customer. And we believe that supported our growth and ability to chase sales in Q4 while also better transitioning into Q1, all of that while maintaining solid margins and inventory turns. So I think we do have more opportunity, but we feel good about the levels coming into the first quarter. Operator: The next question comes from the line of Chuck Grom with Gordon Haskett. Charles Grom: Jim, you talked a lot about the changes made in marketing and social media campaigns have been highly successful. I guess I'm curious how you continue to evolve the marketing strategy in '26? And do you expect marketing expenses as a percentage of sales to start to move higher over the next couple of years? Or do they stay consistent? James Conroy: Great question. We're really pleased with the marketing team, the new campaigns and the agency that was put in place at the beginning of 2025. Their work started to hit the market, so to speak, for back-to-school. So I would say we're really pleased with -- amongst a number of other factors the change in marketing was one of the things that helped the business have an inflection point positive. So the change in marketing, some in-store changes, of course, the assortments being really great. You put all that together and just make for a really good Q3 and Q4. In terms of marketing spend, we've had questions as to whether we're going to spend or invest more in marketing. We're pretty pleased with the results in Q3 and Q4. And as a rate of sales, we haven't changed our marketing spend. It certainly seems like it could be a lever for us to use going forward. So we might experiment with some slight increase there. But we don't feel like we need to make any major investments in new marketing to drive traffic because the demand generation part of the business right now seems so strong. Charles Grom: That's great. And then just to double click on the second part of your answer on the store experience. Can you dive in there? What's worked? What can you expand? How much is left on the opportunity set within the storage themselves? Because clearly, NSP, to your point earlier, was very strong for the second quarter in a row along with a good comp. Michael Hartshorn: It's Michael. On the store front, similar to marketing, we haven't made major investments there. But we do have a pretty strong test and learn capability in our store organization. And what we did during the back half of the year is we targeted payroll investments to improve both store recovery and registered throughput, really focusing on high-volume activity in the store. And we clearly saw some early successes that we can build on those learnings in 2026. The other thing that you'll see in '26, as we've discussed in the past, we've been piloting self-checkout actually for some time now, and we plan to expand to more stores given the positive results we've seen thus far. Operator: And the next question comes from the line of Brooke Roach with Goldman Sachs. Brooke Roach: Jim, I wanted to follow up on your marketing comments. As you assess the higher piece of traffic that's coming into the store, are you seeing any shifts in the age or household income demographic of your customer base? Is this a reactivation of lapsed customers? Or are these new younger customers coming into the store that can repeat? James Conroy: It's a great question. Starting at the top side, we're very encouraged that we are seeing nice customer count growth, right? And it's hard to determine sometimes whether that's a "brand new customer" or a lapsed customer returning, but it's really exciting for us to have comp sales growth driven not only by transactions, but by customers finding Ross and we're really investing in the Ross brand. In terms of how those customers split by income and age, et cetera, once you push down to that level, the data becomes a little bit more complicated to read. We're very comfortable saying that we've seen growth very broad-based across income demographics, age demographics, including 18- to 34-year-old customers. We're pleased with our Juniors business. We're pleased with our young men's business. So we feel good about the younger portion of the customer base, but overall, we're just quite encouraged to start to see some really nice acceleration in customer count. Brooke Roach: And then as a follow-up, can you share your latest view on the earnings algorithm for Ross on a multiyear basis? Is there anything that's structural preventing you from returning to a 14% operating margin over time? Michael Hartshorn: Sure, Brooke. The algorithm hasn't changed dramatically. New store growth, we have at 5%. And obviously, that would suggest -- this year, we're at 5% that we'd continue to grow both banners, and we think we can do that over time to maintain the new store growth there. Productivity, Jim mentioned that we've seen heightened productivity built into our guidance this year is about 70% to 75% new store productivity of an average store. So that gets you to 3% to 4% growth. The EBIT margin, we've said historically, will get leverage between 3 to 4. Occupancy is about 4%, SG&A is 3% to 4%. And then the stock repurchase is about 2%. It gets you to the about 8% to 10% long-term earnings growth. Operator: And the next question comes from the line of Michael Binetti with Evercore. Michael Binetti: Great quarter. So first quarter has been a source of underperformance on a multiyear basis. You thought there was an opportunity to maybe come out of the holiday, Jim, and transition to a little more aggressively into the transition inventory. Can you help us understand within the context of the 7% to 8% comp then with the margins compressing on some of the biggest comps. Can you just walk us through, is there something unique in the first quarter that you're kind of going forward to get to that 7% to 8% comp that isn't as much of an opportunity as you get out to the rest of the year? And is it something that you have to invest in to get there as we look at the margin? And then on the margins, if I look at 2025, that's coming in at 11.9% for the year, excluding tariffs, that was probably in the low 12s. This year, you're guiding 12.1% to 12.3% on the best comp guidance we've seen in a while and that's lapping some of the duplicative executive costs, the distribution center costs that wrap around for just 1 quarter, and then there's some reticketing last year. Can you just talk about what's conservative there if there's a change to the to the long-term language of 15 basis points of expansion above the 2 to 3 points of comp or anything like that we should think about? Michael Hartshorn: I'm happy to walk through this. So I would separate the EBIT margin. I would separate the EBIT margin in the first quarter from the comp because I think there's distinct things that I walked through with -- we haven't lapped the DC. We have packaway pressure in the first quarter. And also, we had a lousy start last year. So we're working off a lower incentive base from last year. Those are really the things that are impacting EBIT margin in the first quarter. In terms of the 7% to 8% guidance, it's a reflection of certainly the momentum coming out of the fourth quarter, but also we're up against pretty weak compares, not only last year, as you mentioned, but over the last couple of years. And we think the initiatives we have in place, including, as I mentioned earlier, with inventory levels are having an impact in the first quarter and are sustaining. In terms of the back half of the year, nothing has really changed in our earnings algorithm for every point of comp over the guidance, it's worth about 10 to 15 basis points of EBIT margin. James Conroy: And just to add, there's been questions for the last year about are we investing more in marketing or investing more in store labor as a rate of sales, both marketing and for labor are very much in line with last year. We don't intend to sort of buy the comp in Q1 or for the year going forward. I think Michael answered the flow-through question better than I could have. If and when we decide at some point to overinvest in part of the business, hoping for an ROI on it, we will signal that. But at the moment, we're getting some really nice growth without making artificial investments. Operator: And the next question comes from the line of Mark Altschwager with Baird. Mark Altschwager: Could you expand on the higher new store productivity you're seeing? Is that a function of the markets you're entering that are perhaps higher rent, but structurally higher sales per square foot? Is it a reflection of the operational improvements you cited in the prepared remarks? Just what are the key factors there? Michael Hartshorn: First, I'd say overall, it's not just the new markets. We're seeing it across the regions, even some of our tried and true regions in California, Florida and Texas. And I think it is a reflection of some of the things we're doing in existing stores being more aggressive out of the gate in new stores and seeing it pay off. That said, to your point, we are entering more populated higher rent markets, and we're very pleased with our entry and are seeing great performance there. Mark Altschwager: And then following up on the branded strategy and the success in ladies apparel. Can you talk about the road map for replicating that success in other categories? What's the next area of focus? Michael Hartshorn: Well, the brand strategy cuts across the whole store, it's probably most prominent within the ladies business. But as we talked a bit in the prepared remarks, the growth for the quarter, actually for each of the last few quarters was very broad-based. And as I look at comps by merchandise category between men's, ladies, kids, the whole center core set of businesses, cosmetics and shoes, all very strong. Home has really regained its ground. It's slightly comp eroding. But given where it started at the beginning of the year, it's very much in play for helping us drive a very strong fourth quarter comp. So it's not really a sequential rollout between Ladies and the other businesses. And I think it's kind of now in our DNA. Now we're just kind of looking forward as to how we grow our business going forward quarter-to-quarter. But again, nearly every piece of our business, actually, every major merchandising category was solidly positive with a very strong business in outerwear, which was a bigger business for us this quarter than it's been in the past. So it's very broad-based. Operator: The next question comes from the line of Simeon Siegel with Guggenheim. Simeon Siegel: Really nice job. Jim, just following up on the last one. When thinking about the branded effort, any way to frame how AUR has been looking at a category level. So before accounting for any category shifts, just within the categories that you're working after, how AUR looks? And then, did you guys quantify the new store versus maintenance CapEx within next year's guide? James Conroy: On the AUR piece, our AUR increase was pretty modest in the quarter. I think we've called out a modest increase in the basket, but most of the comp coming from transactions. The UPT was flattish versus last year. So you could surmise that AUR was just a modest increase as well. It was a little disproportionate to the part of the business that got hit hardest by tariffs, which was home. So home was up. The other businesses didn't see that much of an AUR increase. I think if we had a learning coming out of the quarter is that we probably have the ability to push for some either higher-priced goods or potentially taking some retails up. But what's made us successful for years and years is having the best bargains in retail and always maintaining our umbrella relative to mainstream retail. So we're going to focus on that for sure. But we probably have gained some confidence in shifting our assortment to, again, slightly higher-priced goods, new goods, not like-for-like in higher prices and maybe in certain targeted places, if we feel like we have merchandise categories that are margin eroding, increasing AUR a little bit to recapture some of that. So we feel just really well positioned as we start 2026. We're excited about the current growth, but they're seemingly another dozen levers that we can pull for additional growth going forward. William Sheehan: And then regarding capital, right, the best way to probably think about it for us is maybe think about 1/3 each for DCs and new stores and maybe 25% for store maintenance and the balance for technology enhancements to merchandising tools and initiatives and other things that are going to support long-term growth. Operator: And the next question comes from the line of Ike Boruchow with Wells Fargo. Juliana Duque: This is Juliana Duque, on for Ike. I wanted to ask if you've seen any changes in the type of consumer shopping you've been seeing across both the brands whether that's between the good, better, best towards branded or any other commentary to get there? James Conroy: The quick answer, I would say is no. The composition of our customer base seems to be very much intact. We've seen growth across essentially all pieces of it in terms of income levels, age, different ethnicities. So to tease out any minor differences, it would be kind of unnecessary. It's been an overarching rising tide, I think, for essentially all customers. Operator: And the next question comes from the line of Dana Telsey with the Telsey Group. Dana Telsey: Congratulations on the very nice results. As you talked about expanding dd's, I believe, going from 10 new store openings in '25 to 25 in '26. Is it the same strategies that give you confidence in dd's and that you're seeing the results on and is there any changes either to cost of stores, size of store in dd's that you're seeing? And the good, better, best strategy, how it is applied to dd's. And just lastly, new store openings cadence this year? How do they flow through? And what percentage of the stores will be in the Northeast this year? James Conroy: Dana, on dd's, what really gives us confidence is the underlying merchandising strategies that we've been working on in the last couple of years and certainly the overall performance of dd's, which has, like Ross has had very, very strong trends. On the reacceleration, no change in store size. Like Ross, we're seeing very strong new store performance, which also gives us confidence. This year's new stores are primarily in some of their older markets. We were able to take advantage of some Rite Aid bankruptcy deal that helped shore up the pipeline for this year. In terms of cadence, I think, it will be more weighted to the summer and fall opening groups. I think those are going to be pretty even with about, I think, we said 17 new stores in the first opening window. Operator: And the next question comes from the line of Marni Shapiro with Retail Tracker. Marni Shapiro: I just want to follow up on Dana's comments on dd's. I was curious, did you see the same trends there as well. It was driven by traffic in our basket. And have you taken over the last year due to tariffs any price increases at dd's? And then just one last follow-up on dd's. Do you have much of a home business there compared to Ross? Or is it smaller? Michael Hartshorn: On the trends for dd's, I'd say they're very similar for us, including basket and modest price increase. James Conroy: And they have a very vibrant home business at dd's in line with the percent of total store that process. The categories are slightly different. The mix of categories within home are slightly different. But it's a very strong part of that business as well. Marni Shapiro: And I remember when you guys were first tinkering with dd's and over the years as you played with dd's, you've had a larger kids business. Is that still true? Or is it more balanced today? Is it more like Ross? James Conroy: I'm not sure I know the answer to that off the top of my head, but they also have a decent kids business, and we tend to not want to disclose sort of with such specificity the size of each of our businesses. Marni Shapiro: Fair enough. Actually, don't disclose it, keep it to yourself. Thank you, guys. Best of luck in the first quarter. I rescind my question. No one needs to know the answers. Good luck with the first quarter. Operator: And the next question comes from the line of Aneesha Sherman with Bernstein. Aneesha Sherman: Great quarter. So you talked about capturing additional market share. Jim, you used the word inflection that you saw during back-to-school. You're obviously guiding for a step down in comp in the second half. You're facing some tougher compares. Can you talk about how you're thinking about how sustainable this accelerated level of comp is. Do you see it as you lap a year and then you go back to algo? Or do you see this as more sustainable as you're winning over new customers who can be a more permanent fixture in the comp growth going forward? James Conroy: I'll take a crack at it, and then my partner will probably give a more conservative view. Look, we came out of a nice third quarter and we feel excited about our fourth quarter. We're clearly exiting Q4 with strength and putting up a -- we think, a nice guide for Q1. I don't think it's overly aggressive given where the business is. There are 2 schools of thought in retail. One is, as soon as you start lapping these numbers, everybody looking at 2-year, you can put great numbers on top of great numbers. I think sometimes that's true. It's much too early as we sit here in the very beginning of March to prognosticate the back half of the year, and we have a guide that we just put out there. But there's another school of thought that says we're inviting new customers into the brand, the assortment and in-store experience is converting them into shoppers. The in-store experience is better, they're returning more quickly, word of mouth begins to spread, bringing even more customers in. As comp store sales increases you naturally get more marketing dollars as we do it as a rate of sales. So you naturally get more labor, so the stores look better and you can start spinning that proverbial flywheel or virtuous cycle or whatever. That's the school of thought that I come from. And the one that we're trying to sort of embed in the culture here, a growth orientation, getting all of the functional areas in alignment. And when we look at the back half of the year, certainly this early, we want to remain conservative, but I see tremendous opportunity for us to continue to grow the business in a somewhat outsized way. Aneesha Sherman: Helpful. Is it fair to say that your guidance encompasses the first school of thought where you're looking at the 2-year stacks or CAGRs and normalizing for that, but then you internally are pushing your bias to the second school of thought, where it's more sustainable? James Conroy: Perhaps that's part of it. The other part of it is it's just so early. And we've had 2 nice quarters, but the 2-quarter part that weren't so great. And clearly, there's a lot going on in the macro environment right now. So we just felt it would have been irresponsible to be more aggressive for the balance of the year. And let's face it, it's I think, one of the stronger full year comps we've put out as a company in a while. So we thought that was -- should have been an indication of positive momentum. Operator: And the next question comes from the line of Jay Sole with UBS. Jay Sole: I want to ask about market share in a different way. Jim, do you think you're taking market share from other off-price retailers? Or do you think it's coming more from traditional retailers? How do you see that? James Conroy: Well, it's a giant retail market out there, of course. And I think the bigger forfeiture of market share is coming from mainstream retail. One of our other off-price competitors just posted a very solid quarter as well and they're a bigger business than us. So it would be foolhardy to say we're taking a lot of share from them. I think the share shift is more from mainstream retail, department stores, and other places like that to off-price in general. And we would just like to get our fair share or of course, more than our fair share from that shift. Operator: The next question comes from the line of Krisztina Katai with Deutsche Bank. Krisztina Katai: Congrats on a great quarter. You credited the branded strategy with sequential comp improvement. Can you just help contextualize for us how it's helping evolve your vendor base and strengthen the existing vendor relationships and then secondly, when thinking about the new cluster acquisition, just how do you see their behavior in terms of spend or frequency of trips that take the existing shoppers? Or just any early reads in terms of how you think about the stickiness of the newer customers that have been coming to you. James Conroy: Yes. On the branded strategy, that's been in place for a while now, and we sort of anniversaried it a couple of quarters ago. So I think that team particularly in Ladies -- maybe across the wholesale, but particularly in Ladies, has really started to build some nice momentum there, and the underpinning of it was the branded strategy. But the rest of the business, though, there's been a whole bunch of different changes made to the assortment, some modest increase in inventory selection in the store. So it's not specifically the branded strategy in every particular business. I would say the sequential improvement in comps was much broader than just the branded strategy and included marketing changes, in-store merchandising and operational changes, bringing the store experience up a couple of levels. So a shopper would feel like the store was tidier and that you get in and out more quickly, et cetera. In terms of the customer count and customer frequency behavior, we simply just don't have enough good data to say are our current customer shopping more frequently? Or is it all new customers? Or is it lapsed customers. In some of the same sets of data that you all receive from the credit card tracking companies. We get some pretty specific data on customer cards and card numbers, and then we have to sort of make sense of all of that. But it's hard to then say, is that the same customer shopping with a different card or is it new customer or a lapsed customer or a different card, et cetera. When you zoom out a little bit and open aperture a little bit, it is clear to us that we're starting to build customer count growth, and that's exciting for us. Did that answer your question? We may have lost her. I think that's the end of the queue. John, are you there? Operator: Yes. Our final question comes from the line of John Carden with William Blair. Dylan Carden: Jim, you alluded to this thought that there was going to be this big or increase in marketing, increase in store investment and you're proving kind of comp acceleration with leverage if you look at kind of the fourth quarter. You mentioned some of the things that are blocking out the first quarter. But I'm curious on what the right way to think about marketing and store investment go forward. Is it that there's a more flexible nature of marketing, more variable nature to marketing that you can kind of be more nimble in any given period and the store investment is just minute or simple in nature and kind of tails off or you'll be more focused on keeping it fresh go forward. Sort of what is the right way to think about this. James Conroy: Happy to answer that. I'm not sure what I said that led you to that conclusion. I thought I said almost the exact opposite of that, which is we have not made investments -- outsized investments in marketing or outsized investments in store labor. And we've gotten the comp growth that we've gotten within the confines of the operating model and coming out of Q4, which is a really nice leverage based on the fact that we haven't made those investments. I do think going forward, we might experiment a little bit, but still within the confines of the operating model of should we pick up marketing slightly, not meaningfully, but slightly. We're always doing targeted investments to -- Michael talks a lot about test and learn. If we do certain things in a store with store labor, either some additional hours or reallocating hours, what's the benefit to the way the store looks or how fast we move through the queue line. So we'll be experimenting going forward. But I would hope that the takeaway from the call is we've been achieving some really nice, I'd say, outsized comp sales growth in Q3, Q4 and our guide for Q1 without having to do any unnecessary or artificial investment in either marketing store labor or CapEx. I think those levers exist out there for us, and we might -- if we can find ROI on them, we might start playing with those, but it was funny. It was on this call last year where we said we're going to look to try to do all of these things expense neutral. And I think we've achieved that 12 months later. As we go forward, I'm in my second year, the team has really come together nicely, the 2 chief merchants that have now been in their roles for a year are both doing unbelievably well. And we're sort of just hitting our stride in building momentum going forward. So for 2026, a lot more opportunities going forward. As Michael teases me all the time, the best is yet to come. Operator: This now concludes the question-and-answer session. I would like to turn the floor back over to Jim Conroy for any closing comments. James Conroy: So thank you, everyone, for joining us on today's call, and we look forward to speaking with you on our next earnings call. Take care. Operator: Thank you, ladies and gentlemen, that does conclude today's conference call. We thank you for your participation. Please disconnect your lines, and have a wonderful day.
Operator: Good day, everyone, and welcome to today's GitLab Fourth Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Please note, this call is being recorded. It is now my pleasure to turn the conference over to Yaoxian Chew. Yaoxian Chew: Good afternoon. We appreciate you joining us for GitLab's Fourth Quarter and Fiscal Year 2026 Financial Results Conference Call. With me are Bill Staples, our CEO; and Jessica Ross, our CFO. During this afternoon's call, we will provide an overview of the business, commentary on our fourth quarter and full year results and guidance for the first quarter and fiscal year 2027. Before we begin, I'll cover the safe harbor statement. I would like to direct you to the cautionary statement regarding forward-looking statements on Page 2 of our presentation and in our earnings release issued earlier today, both of which are available under the Investor Relations section of our website. The presentation and earnings release include a discussion of certain risks, uncertainties, assumptions and other factors that could cause our results to differ from those expressed in any forward-looking statements within the meaning of the Private Securities Litigation Reform Act. As is customary, the content of today's call and presentation will be governed by this language. In addition, during today's call, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or non-recurring items that management believes impact the comparability of the periods referenced. Please refer to our earnings release and presentation materials for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. I will now turn the call over to Bill. Bill? William Staples: Thank you, Yao, and good afternoon, everyone. Fiscal 2026 was a significant year for GitLab. ARR surpassed $1 billion. We generated $220 million in free cash flow, an increase of over 80% and nearly 7 percentage points of margin expansion year-over-year. FY '26 and Q4 delivered our highest absolute net new ARR year and quarter ever, and we intend to build on that momentum. I'm really proud of the work the team is driving. Given our deep technological and structural advantages and the growing TAM ahead, we believe we can do even better. I believe we have the right team in place to execute the opportunity, and the rest of my remarks will lay out our plan. Jessica will then walk through the financials. Let me address our FY '27 outlook directly. We aren't satisfied with our revenue growth guidance. Like many companies reaching $1 billion in revenue, our focus has been shifting to scaling our growth. We've identified 5 specific strategies where we see the greatest opportunity to improve our growth at scale in FY '27. The 5 are: #1, reaccelerating first orders to fuel long-term expansion; #2, scaling sales capacity with dedicated leadership and investment; #3, expanding product packaging to unlock new monetization vectors; #4, engaging price-sensitive customers with greater value and coverage; and #5, continuing to execute an AI strategy aligned with our core platform strengths. We've already begun acting on all 5. FY '27 is all about execution and proving our hypothesis with results. Let me walk through each one. In FY '26, we reversed a long period of first order deceleration. This is critically important because our customers often land small but extend steadily, a pattern that's held for over a decade. Sales-led first orders began reaccelerating in Q2 FY '26 right after Ian joined. On the product side, Manav has reinvigorated product-led growth. First order logos inflected in October, and we've seen 4 consecutive months of improvement. For FY '27, we now see a clear path to sustained acceleration in first orders, driven by continued sign-up momentum, new product-led on-ramps and a dedicated first order sales team with a new global leader, 4 regional leads in place and rapid hiring underway. In fact, the team has already closed their first deals in Q1. As a proof point, this quarter, we secured a landmark deal with one of the semiconductor industry's most strategic players, a cornerstone supplier in the AI super cycle. After a competitive evaluation against incumbent tooling and AI-powered alternatives, they chose GitLab Premium and Duo Enterprise for over 5,000 users, validating our unified platform and AI capabilities. With regard to sales capacity, we began increasing headcount in FY '26, and we're entering FY '27 with more capacity than we've ever had. And we have a path to even stronger ramped capacity beginning in Q3. With FY '27 kickoff, we've overhauled territory design to also better serve all segments and strengthen enablement. When it comes to innovation, GitLab has a long history of delivering ongoing value with 172 consecutive months of new releases. Customers who've consolidated repos and CI on GitLab consistently want to do more with us but have told us our pricing is too coarse grained. In FY '27, we plan multiple new monetization opportunities each quarter, built-in artifact management, software supply chain security, integrated secrets management and more. These will be opt-in a la carte offerings that provide intermediate options for both Premium and Ultimate customers who've been asking for ways to opt into more value at incremental price. Most of these are anticipated throughout the year. So we expect modest FY '27 contribution, but meaningful impact for FY '28 and beyond. Our 50% Premium price increase a few years ago also coincided with rising AI code experimentation and flattish SaaS budgets. Simultaneously, our upmarket shift reduced technical resources at the lower end of the market. Together, these have slowed Premium growth, particularly among price-sensitive customers, which we estimate at roughly 20% of our ARR, including the SMB weakness that we've been discussing recently. We're responding here on multiple fronts. We now have an AI product and platform in market since mid-January that helps accelerate the full software life cycle. And we're including compelling GitLab DAP promotional credits with Premium and Ultimate users to increase the value they see. We have adjusted coverage models as well for this cohort, and we're investing in onboarding, adoption and self-service experiences that will help all customers get value faster. GitLab sits at the heart of how enterprises build and deliver software. In January, we launched GitLab Duo Agent Platform and repositioned GitLab for the AI era. Our intelligent orchestration platform lets users deploy AI agents across the software life cycle using the same context, permissions and security model that they already have in place today. This platform rests on 3 core pillars: workflows, a unified place where teams and AI agents collaborate on tasks across the software life cycle. Context, rich semantic access to full SDLC data for high-quality and more efficient outcomes. Guardrails, with GitLab, you can deploy anywhere and have security and compliance embedded directly in your software factory. GitLab is positioned where AI systems are best leveraged, the point of execution. We bring together the missing context and take action where the code lives, where it's merged, built, deployed, where compliance is enforced and where corrective actions prevent downstream bugs, technical debt and security issues. Before AI, our platform reduced friction for developers. Now it can unlock step function productivity gains by reducing friction for agents and the humans managing them. Duo Agent Platform also introduces usage-based pricing alongside our seat model. Customers pay for agent work where every engineer can delegate tasks to multiple agents in parallel. As agents automate more across the software life cycle, revenue grows with the value we deliver. Take one of our airline customers with a 3,000-person technology organization. They're deploying Duo Agent Platform to automate vulnerability remediation, dependency updates and cloud migrations. Roughly 90% of their component updates now run autonomously, freeing developers for customer-facing feature work. We have an ambitious road map and plan to deliver new value every single month with focused go-to-market to accelerate adoption. As a reminder, nearly 70% of revenue comes from self-managed customers who require an upgrade to release 18.8 or better, and we typically see it taking 2 quarters for over 50% to adopt the new release. We're investing alongside our partners to accelerate upgrades wherever possible. FY '27 is about converting pilots to production, not significant revenue contribution. We'll share metrics as they become material. The software development market is undergoing a fundamental shift. AI is accelerating. It's increasing code volume, delivery complexity and the stakes of getting it wrong are just higher than ever. Security, compliance and governance aren't optional. They're existential. This is the environment GitLab was built for. The changes I've described, rebuilding our go-to-market capacity, creating new monetization vectors and positioning GitLab at the center of Agentic AI, these aren't separate initiatives. They're one integrated plan to capture a market that's moving in our direction. And our data confirms this. In Q4, we added the most $1 million customers in GitLab's history. Gross retention is consistent with historical trends and churn is at its lowest it's been in 4 years. Ultimate is now 56% of ARR and accounted for 9 of the top 10 deals. We see more than 60% year-over-year growth in Ultimate projects with security scanning and nearly 30% more security projects per seat. Indeed operates the world's #1 job site. They started with GitLab in 2015 for source control, expanded to Premium in 2020 to support CI/CD adoption and upgraded to Ultimate in 2024 for advanced security, compliance and governance capabilities across thousands of GitLab users and saw an 80% increase in pipelines with lower infrastructure costs. This quarter, they're deepening their strategic partnership with a move to GitLab dedicated as part of their infrastructure modernization journey. Mercedes-Benz's expansion this quarter also illustrates our compounding growth potential. Today's vehicles contain more software code than fighter jets, driving companies like Mercedes to hire thousands of engineers. Our relationship began years ago with source code management. Today, GitLab serves as a central platform powering their software-defined vehicle transformation, supporting thousands of developers across regions. Now investor uncertainty is understandably high. When every developer has access to the same models, code generation becomes a commodity. The bottleneck shifts to everything after the code, reviews, security, pipelines, compliance, deployment. That's precisely where we live. And that position gets harder to replicate as AI proliferates. Some of our customers already carry decades of technical debt, thousands of repositories and compliance obligations tied to policies written years ago. GitLab holds all of that context, history, ownership, risk, intent, it's all getting indexed and connected across the software life cycle. In the world of autonomous agents, context is the difference between useful action and a potentially catastrophic one. Every commit, every scan, every deployment makes our graph richer and our agents more accurate. The longer a customer runs on GitLab, the smarter the platform gets. That is a moat that widens over time. And with GitLab Duo Agent Platform, we're not just a tool that agents use, we're the environment where they run, the orchestration layer that governs what they do in what order and within which guardrails. We have the ingredients for a generational company, a growing market, trusted distribution at scale, deep customer relationships and platform capabilities that have been built up over years. We operate from a strong financial position with approximately $1.3 billion in cash and investments and are sustainably generating free cash flow. I'm pleased to share that our Board has authorized GitLab's first share repurchase program at $400 million, reflecting confidence in our fundamentals and the growth plan ahead. We believe GitLab shares represent attractive value and remain committed to disciplined capital allocation. FY '27 is about demonstrating that this foundation can deliver value to customers, momentum through consistent performance and progress quarter-by-quarter. With that, I'd now like to turn it over to Jessica to walk through the financial results. Jessica Ross: Thank you, Bill, and thank you to everyone for joining us today. This is my first earnings call as GitLab's CFO, and I'm excited to be here. I joined GitLab because I see an incredible business at the center of unprecedented industry transformation. The opportunity to help shape how AI transforms software development through intelligent orchestration is compelling. In my first few weeks, I've been impressed by the passionate customers and team members, the platform's technical depth and the leadership team Bill has assembled. My focus is on building the financial discipline and operational rigor to support our next chapter of growth. I look forward to getting to know many of you in the coming weeks. I'll start with our full year and fourth quarter results, then cover our capital allocation framework and FY '27 guidance. Fiscal 2026 was a strong year. Revenue grew 26% to $955 million. Non-GAAP operating margin reached 17%, up approximately 680 basis points year-over-year. Adjusted free cash flow grew 83% to $220 million with over 7 points of margin expansion. We now have 10,682 customers with ARR of at least $5,000, contributing over 95% of total ARR. Our $100,000-plus cohort grew 18% year-over-year to 1,456 customers, representing just over 75% of ARR. And as Bill mentioned, we added the largest number of $1 million-plus customers in GitLab's history in Q4, now more than 155, up 26% year-over-year. Now let me move to our fourth quarter results. Q4 revenue was $260 million, up 23% year-over-year, 3.5 points above guidance. Non-GAAP operating margin reached 20.5%, 5 points above guidance. The revenue beat was in part due to approximately $3 million of onetime items related to favorable foreign exchange and JiHu performance. First order bookings were healthy with particular strength in Asia Pacific. Enterprise win rates improved quarter-over-quarter and sales cycles remained consistent. We did see softer performance in the U.S. More broadly, we experienced a few large deals slipping from customers facing budget constraints and industry challenges. We also saw only a partial recovery in the public sector following the government reopening and continued weakness in the price-sensitive cohort Bill alluded to earlier. Dollar-based net retention was 118%. Gross retention remains well above 90% and consistent with historical trends. Our largest customers continue to expand, though we're seeing pressure in the mid-market and SMB segments that weighed on net retention. Total RPO grew 20% year-over-year to $1.1 billion. Current RPO grew 24% to $719.4 million. Non-GAAP gross margin was 89%. SaaS now represents approximately 32% of total revenue and grew 38% year-over-year, driven by continued strength in GitLab Dedicated and Duo. Q4 non-GAAP operating income was $53.4 million with operating margin of 20.5%, up approximately 280 basis points year-over-year. Q4 adjusted free cash flow was $41.8 million at a 16% margin. We ended the quarter with $1.3 billion in cash and investments. On JiHu, Q4 non-GAAP expenses were $3.9 million compared to $3.2 million in the prior year. Our goal remains to deconsolidate JiHu, though we cannot predict the likelihood or timing of when that may occur. Before turning to guidance, let me briefly cover our capital allocation framework. First, investing in growth. Capital goes first to high-return investments that accelerate our product road map and strengthen our go-to-market motion. scaling sales capacity, building our first order team, accelerating Duo Agent Platform and deepening security innovation. We're reallocating resources to the highest return initiatives while balancing growth with profitability and cash generation. Second, balance sheet resilience. We're maintaining a strong liquidity position with sustainable free cash flow and approximately $1.3 billion in cash, cash equivalents and short-term investments. We have the flexibility to invest in ourselves and inorganic growth through cycles without constraint. Third, share repurchases. Our Board has authorized GitLab's first $400 million share repurchase program, reflecting confidence in our fundamentals and a disciplined approach to capital allocation. We look at repurchases as a meaningful way to drive shareholder value and manage dilution, particularly around periods of share price dislocation. Now moving to our FY '27 guidance, guidance represents our clearest view of the business given the current operating environment. Let me frame the key assumptions before getting into the numbers. First, ratable model dynamics. In a ratable model, revenue reflects the cumulative effect of bookings activity over multiple prior periods. As Bill shared previously, we aren't satisfied with sustaining historical growth rates and are executing all 5 growth opportunities he identified. However, a significant portion of our FY '27 guide acknowledges that the bookings growth rate has not scaled with revenue over the past 3 years and that reality flows through mathematically. Second, nonrecurring FY '26 tailwinds. FY '26 benefited from several items we are not embedding in guidance for FY '27. In aggregate, approximately 300 basis points of growth. In order of magnitude, these include the Premium price increase from 3 years ago, positive FX dynamics and specific clauses in certain customer contracts. Third, segment caution. We expect better public sector performance in FY '27 but are not assuming a bounce back. We expect the price-sensitive cohort, approximately 20% of ARR to remain under pressure given the trends we observed in Q4. And finally, prudent assumptions on newer growth drivers. We are assuming minimal revenue contribution from GitLab Duo Agent Platform in FY '27 we launched 7 weeks ago and need time to convert pilots to production deployments. Additionally, approximately 70% of our revenue comes from self-managed customers, which dictates a measured adoption curve. With that context, for Q1 FY '27, we expect total revenue of $253 million to $255 million representing approximately 18% to 19% year over year growth. We expect non-GAAP operating income of $32 million to $34 million. We expect non-GAAP net income per share of $0.20 to $0.21 assuming a 173 million weighted average diluted shares outstanding. Note that Q4 has 3 more days than Q1, creating a sequential headwind. For full year FY '27, we expect total revenue of $1.099 billion to $1.118 billion, representing approximately 15% to 17% year-over-year growth. We expect non-GAAP operating income of $129 million to $137 million. We expect non-GAAP net income per share of $0.76 to $0.80, assuming 175 million weighted average diluted shares outstanding. A few additional modeling points. We assume stable year-on-year growth rates across Q2 through Q4. Full year gross margin of 85% to 87%, down from 89% in FY '26, reflecting increased mix of SaaS, Dedicated and GitLab Duo Agent Platform, which carry different cost structures. For FY '27 modeling purposes, we forecast approximately $15 million of expenses related to JiHu compared with $13 million last year. We are operating from a position of strength. Our TAM continues to grow. Customer retention remains best-in-class. Our largest customers continue to expand, and first orders have returned to growth. We are building new multi-year-growth drivers with GitLab Duo Agent Platform and hybrid pricing. Our FY '27 guidance reflects where we are today, early in a transformation with clear priorities, scaling sales capacity, stabilizing net retention, addressing the price-sensitive cohort and converting DAP pilots to production. As we make progress, we'll update you. Thank you for joining us. I'll now turn the call over to Yao to moderate Q&A. Yaoxian Chew: [Operator Instructions] Our first question comes from Koji Ikeda at Bank of America, followed by Matt Hedberg from RBC. Koji Ikeda: Jessica, great to meet you on the call. So I have a question on security. And security is a big driver of Ultimate upsells and presumably agentic Duo security usage in the future. And so with Claude Code Security making a lot of noise and with the chance that other foundational model vendors potentially releasing their own code security products, how should we be thinking about the differentiation GitLab brings with its security portfolio and why it should continue to drive Ultimate upsells and agentic usage in the future? William Staples: Thanks, Koji. I've been getting that question a lot. And it really comes down to the difference between suggestions and certification. Claude Code Security helps developers write better code at authoring time, and that's really valuable. But the tool that suggests secure code at authoring time can't be the same tool that certifies it's ready for production. And that's where GitLab comes in. GitLab is that independent system that answers a different question. It answers the question, is this project, is this source code ready to ship? A developer can ignore Claude's recommendations during authoring time. In fact, Anthropic's own page says developers always make the call. But with GitLab, they can't bypass the execution policy for the pipeline. They can't ignore the merge request approval rules. Companies ship what is secure and meets their engineering standards, and GitLab is the platform they rely to uphold those standards. So really, these are complementary. Claude improves source code at authoring time and GitLab governs whether the software is allowed to ship. Yaoxian Chew: Next question, Matt Hedberg from RBC, followed by Rob Owens from Piper Sandler. Matthew Hedberg: Bill, you started the call indicating you're not happy with current growth targets for the year. But I certainly do appreciate the 5 initiatives you outlined. It seems like you guys have a lot to -- that could benefit growth. Kind of thinking about some of the considerations that Jessica outlined around fiscal '27 guidance, I guess the question is, how should we think about timing of acceleration and kind of that path back to 20% or better growth, I'm sure you're aspiring to. William Staples: Yes. Fair question. As I think about those 5 growth initiatives and I think about what has the biggest immediate impact on FY '27, it really starts with the investment we're making in go-to-market, that increased capacity to both cover our existing customers better and win new logos at an accelerated rate. As I mentioned, we're entering the fiscal year with the highest capacity ever, and we expect a step function increase in ramp to capacity starting around Q3. So that's how I think about GitLab for FY '27 but really stepping back and thinking about long-term growth. Let's remind ourselves, we just delivered the highest new net ARR year and quarter ever. The core business is really healthy. Gross retention is at its best in the last 4 years. Every customer cohort since inception continues to expand. Win rates are stable. Engagement is growing. This is a business that's been decelerating based on bookings patterns and lapping mechanics over the last 3 years. It's not losing relevance. In fact, its relevance is only gaining momentum in the AI era. To address the value capture equation, that's why we're pursuing multiple new strategies. In addition to the increased capacity to go after the TAM, we're also introducing those new SKUs to provide additional adjacent value for customers to opt into. It's why we've also now launched Duo Agent Platform with a new hybrid pricing model that allows customers to get value and automate full life cycle tasks, and we get to charge based on work and value delivered, not just based on the seats. It's also why we're adjusting our coverage models and investing in included DAP credits for customers in that price-sensitive cohort to increase their value equation as well and their stickiness and growth. So long term, I believe this company has everything it needs to be a high-growth generational company, and it's ours to execute starting here in FY '27. Yaoxian Chew: Next question, Rob Owens from Piper Sandler, followed by Sanjit Singh from Morgan Stanley. Robbie Owens: Bill, I wanted to build on one of your comments there around gross retention being at its highest levels, but yet your net retention comes down. And I know that you had mentioned some weakness in the mid-market. Maybe on the front of the question, you can unpack that NRR number for us a little bit. And what's driven that overall? Obviously, there's some concern about seats out there and potential seat expansion at customers. So help us understand that dynamic. And I guess, #2, as we look forward and you're guiding to a total revenue less than where your retention rate is now, your expansion rate, I should say. Maybe some guardrails around where NRR could go over the coming year. William Staples: Yes, I'll take the first part, and then maybe Jessica can talk a little bit about where -- how to think about in FY '27. So yes, dollar-based net retention is not something that we guide to or focus on. We think of it as an output of the business. And as we look at the mix of [ dipping ] across segments, we see enterprise is really healthy. Our $100,000 cohort, as I shared, grew by 18% year-over-year, and it represents 75% of our ARR. The $1 million cohort grew even faster at 26% year-over-year. So our largest customers continue to expand, and that signal is really strong and consistent. The pressure that we see is concentrated in that price-sensitive cohort. We estimate it around 20% of ARR, which includes the 8% of the business that we've previously discussed, which is in SMB as well as parts of mid-market and Premium. And we're addressing that in FY '27 with now including DAP credits with every Premium seat. We've adjusted coverage models to give them better connection into GitLab, including technical services to accelerate value adoption and value realization. And we're investing in better time-to-value experiences. Jessica, do you want to talk a little bit about the number itself, where we expect it to go from here? Jessica Ross: Yes. As you indicated, as Bill indicated, it's not a number that we guide to, but I do want to reinforce this is a year of stabilization for GitLab. And so I would expect DBNR to trend down slightly before stabilizing. Yaoxian Chew: Next question, Sanjit Singh from Morgan Stanley, followed by Karl Keirstead from UBS. Sanjit, go ahead please. Sanjit Singh: Jessica, congratulations on the role. Bill, I had a question on essentially pricing. How do you sort of came to the pricing equation for DAP for Duo agents? And I guess the context that I'm thinking about is that the coding agents, the popular coding agents, a lot of them are still kind of seat-based pricing, right, whether it's $20 a month or higher, this is more -DAP seems to be priced more on a consumption-based model. So how you sort of arrived at the pricing mechanism for DAP? And then when you play this forward, how do you think about capturing more value in the GitLab platform? William Staples: Yes. Let me first start with that observation you made around competitors seems to have more of a seat-based price. That's actually not entirely true. They may have a seat-based entry cost, but then they either throttle usage or charge you for overages, which is actually a less efficient model than what GitLab offers, which is we offer customers the ability to start with included credits. Every Premium seat gets $12 in credits, every Ultimate seat gets $24 in credits. And that's because we want to win their hearts and minds with this phase of the platform. They can use it without having to sign new contracts or get new agreements. And if they're finding value, they can then choose to opt in to on-demand credits. And you can think of on-demand credits as effectively pay-as-you-go. We do a monthly bill based on actual usage at around $1 a credit. What this does then is it creates a demand model for our sales force, where they see the signal of customers using and getting value, and they're able to go have a conversation with the customer and offer additional discounts for committed credits as a monthly minimum. That then drives the flywheel of ratable revenue and ARR because those monthly minimum commitments turn into a subscription that we recognize ratably. This is a really powerful model that we think is better value for customers than having to pay on a per-seat basis for throttled usage or overages. It's more efficient. And I'll just offer this. The existing competitive tools are heavily subsidized by a venture capitalist. I don't think that's going to last forever. In fact, I would predict this year, you'll see many of the enterprise tools beginning to move to API-based charges instead of seat-based charges, which could raise bills for enterprises in the years to come. Yaoxian Chew: Next question, Karl Keirstead from UBS, followed by Shrenik Kothari from Baird. Karl Keirstead: Jessica, I wouldn't mind probing a little bit on the initial fiscal '27 non-GAAP margin guide of -- it looks like 12% at the high end, which would be a 5-point decel from the year you just put up. Can you unpack that a little bit and talk through some of the investments? I'm guessing sales capacity and perhaps even some DAP free credits could be weighing on that margin guidance, but I'd love to hear your views. And then just if we zoom out, understanding you're not going to give guidance, but how are you and Bill just conceptually thinking about the margin structure at GitLab? And if you think that this year could be the trough? And how important is it for you and Bill to get those non-GAAP EBIT margins up to, say, 20% plus? Jessica Ross: No, I appreciate the question, Karl. So our FY '27 margin guide reflects 3 discrete well-understood investments, one of which we committed to at the IPO, and we believe we have clear line of sight to expansion from there. At the midpoint, approximately 300 bps of the step down comes directly from the gross margin mix shift that we've discussed. So the SaaS mix transition, which we predisclosed at IPO and then the remaining compression reflects 2 very deliberate investments. First, we're rebuilding go-to-market capacity, as Bill just talked about, that has been underinvested for several years. And so we're scaling sales capacity, building our first order team and continuing to deepen partner coverage. Second, we are accelerating the Duo Agent Platform and deepening security and innovation. So our investment priority is clear. I highlighted in my remarks about the capital allocation framework, R&D first, then sales and marketing, then G&A. None of these are structural and each has a defined time line and a clear return as the business scales. So as we look to the future, this is really a year of investment, and we believe it's the right thing to do for long-term value creation. And we're going to be watching payoffs very closely and empowering the business with the right guardrails. That discipline has not changed. I think one of the reasons that I joined this business that has really demonstrated an ability to grow profitably and responsibly. The evidence is the 1,700 bps of margin expansion that we've delivered over the past 2 years. And in the long run, we're not managing to margin percentage. We're managing to gross profit dollar growth and the durable returns that come from scaling our platform. Yaoxian Chew: Next question, Shrenik Kothari from Baird, followed by Jason Ader from William Blair. Shrenik Kothari: Welcome aboard Jessica, looking forward to working with you. Bill, you mentioned that, of course, fiscal '27 is largely about converting to [Audio Gap] production and the financial contribution still remaining modest. I know you touched upon the time line a little bit in the previous question from the standpoint of scaling the sales and rebuilding go-to-market. But just per some early customer feedback and there's a customer you mentioned about, can you tell a little bit about just at a very high level, what are the potential gating factors on the customer side that you're seeing so far? Is it the trust in these AI-driven workflows? Is it more governance approvals? And what, in your view, helps successfully scale these into production environments? William Staples: Yes. Let me start with the early customer feedback on DAP and then remind investors what it is that will take to convert those early pieces of feedback and trials into revenue. The first is we're getting really clear signal on the feedback that customers appreciate a full life cycle approach to agentic AI. Customers want to use DAP to handle highly repetitive and mundane tasks that engineers do every single day as they manage code, manage builds and deployments and manage the security of their software. So for example, an airline, I think I shared some of this in the prepared remarks, they're using DAP already to automate security vulnerability remediation, dependency updates and cloud migrations. And they now have approximately 90% of component version updates now running autonomously. Think about what that means. Work that used to require a developer to contact switch and understand those component updates are now done completely through agents. Another example is an insurance company that used DAP to run an AI hackathon, and they saw measurable improvements across compliance violations, legacy modernization, developer onboarding time and their security posture. These are just some of the benefits that customers are finding as they evaluate and trial Duo Agent Platform. In order to convert and become a paid customer with committed contracts, our customers have to be running a version of GitLab that supports the Duo Agent Platform. About 70% of our revenue is supporting customers with self-managed deployments. It's not like a cloud-native multi-tenant SaaS service. GitLab is a very diverse portfolio with 70% running their own infrastructure and GitLab on their own premises, including many who have air-gapped environments that can't even connect to the cloud. Those customers typically take about 6 months for up to 50% of them to be running a version like the 18.8 release that we just announced Duo Agent Platform GA with. So that's the first kind of time line to keep in mind. Obviously, the 30% of customers that are running in our multi-tenant cloud can start adopting today, and we're seeing early adoption there, but the bulk of the revenue won't have access to Duo Agent Platform for another couple of quarters. And then secondarily, think about the fact that committed credits is really subscription revenue that we recognize ratably. So even if we are able to start converting the trials to production and committed credits in the back half of the year, that revenue won't be recognized until the following quarters going into FY '28. So that's the reason for -- that's the early feedback that we're hearing from customers, and that's the reason for the conservative projections on Duo Agent Platform revenue for FY '27. Yaoxian Chew: Next one comes from Jason Ader at William Blair, followed by Miller Jump at Truist. Jason Ader: My question for Bill. Has customer decision-making changed at all over the last few quarters in the face of kind of all this massive change? I guess what I'm asking is like have you seen sales cycles shift at all, more focused on the enterprise with this question, but maybe just talk about how customers are navigating all this onslaught of change. William Staples: Yes. In my customer conversations, they're navigating it like most of the rest of us, which is every day, every week, there seems to be new innovation, new and exciting opportunities with AI, and they're excited about the potential and they're trying to navigate the many challenges that come with it, starting with the privacy and security concerns with their business and also the increased costs and expense of investing in AI versus other traditional workloads. What's interesting is I think there's a ton of experimentation going. And obviously, early results are really promising within certain workloads, especially around code generation and software development. And we're excited to take that early promise of building software using agents and turn it into actual software innovation with Duo Agent Platform. I don't see customers' behaviors changing. Our win rates are consistent. As I shared earlier, our gross retention rate just hit the highest level it has in 4 years. Our competitive rates remain strong. And so really, this is about focusing our increased capacity, executing a product strategy with increased pricing and packaging granularity to go after that opportunity in FY '27 even stronger than we did in FY '26. Yaoxian Chew: Next question, Miller Jump from Truist, followed by Kingsley Crane from Canaccord Genuity. William Miller Jump: Bill, I think you mentioned you overhauled territory design. I guess I'm wondering, has the number of accounts per rep changed? And how do you ensure that those handoffs go smoothly? And then just for Jessica, have you baked in any conservatism to guidance for that? William Staples: Yes, it's a fair question. Every year, the territories end up getting re-sliced to some degree, and this year is no exception. But I believe it's going to pay off in the long run. We found we had more accounts than reps could effectively manage and our upmarket shift a few years ago left the lower end of the market underserved. So the overall territory design does reduce the number of customers the rep has to manage, which should result in better customer intimacy, accelerated adoption and value realization by the customer. We're also investing on the technical services side, so with increased overlay support in particular for all segments, but also around 2 areas, especially one around that price-sensitive cohort with additional technical services to support their evaluation adoption and around AI. Many companies are needing help to adapt their workflows to AI with Duo Agent Platform. There's a new set of technology and a new set of techniques to use with your software life cycle. And so our technical teams are getting highly trained on that to help customers unlock the value. And we're also going to begin investing in forward deployed engineers who can go in and support that customer adoption cycle. Jessica Ross: And then the short answer to your question is, yes, we've been very holistic in terms of how we're thinking about prudence as we evolve the go-to-market motion. Yaoxian Chew: Next question, Kingsley Crane from Canaccord, followed by Howard Ma from Guggenheim. William Kingsley Crane: Legacy code monetization has been in focus the past couple of weeks. But when you rewrite millions of lines of COBOL, for example, that's not in a vacuum, it's still going to need to be version controlled, run through CI/CD, reviewed and tested. Bill, you've been a developer for a long time. How much weight do you give to the idea that we're going to rewrite a lot of existing code versus creating that new code? And then how could this be expansionary for GitLab? William Staples: That's a great question, Kingsley. I think in theory, any software can be rewritten, and I see tons of really exciting experiments where developers are taking cogeneration tools, putting them into a closed loop and giving them instructions to iterate until the code emulates another existing piece of software. And I think there are certain places where that can be done. For example, the Discrete library or a simple application. For the scenario you described, for example, a legacy COBOL application, maybe that's running on a mainframe or a piece of enterprise software that integrates with multiple third-party SaaS back ends, maybe Salesforce or Zendesk or other systems, I think it's a lot harder. So much of the context for that code is in people's heads. It's not written down. It's not documented. It's been built up over many, many years. And it's very hard to discover those integrations and assumptions purely through the code. And so the way I look at sort of the future of software engineering, I think of it as kind of 3 modes that we're going to be in for quite a while. And there's parallels here to what we just lived through with the public cloud era. If you remember when we started kind of the public cloud era, there was a big question of are enterprises going to leave their on-premise data centers behind and lift and shift everything to the public cloud? Or are they going to build just new applications in the public cloud and leave everything where it is? Where we've ended is a similar place, I think, to where we're going with software. I think we're going to have 3 modes. The first mode is there will be a set of software that is so mission-critical for the business, maybe especially to financially regulated and public sector companies where agents are just not allowed to touch the code, either for security, privacy or just sensitivity reasons. That's a mode 1. Mode 2 is where we're at today, and that's what Duo Agent Platform supports, which is human and agent collaboration on brownfield code bases. And these are orchestration patterns that are emerging and being used today. And I think that they will continue, especially for brownfield code bases like the one you mentioned for some time to come. And then as we get better at orchestration and enable more closed-loop iteration on code, especially with new greenfield projects, those code bases can become increasingly fully automated through the intelligent orchestration platform that we're delivering. And there will be less involvement from humans in touching and managing that code other than steering agents and orchestrating from above the loop. I hope that answers your question. Yaoxian Chew: Great. Next question, Howard Ma from Guggenheim, followed by Ryan MacWilliams from Wells Fargo. Howard Ma: Bill, I wanted to ask you more about Duo Agent Platform. In some of our conversations with engineering leaders, there seems to be hesitance in adopting too many agents from multiple third-party software vendors out of the gate. And meanwhile, larger enterprises may also be debating between a build versus buy approach to agents. And then on the pricing side, you have the new usage-based pricing for DAP, but you also still have the seat-based pricing for Duo Pro and Duo Enterprise, which could cause some confusion for your customers. So how do you address these potential challenges? And are you exploring a further evolution of the model that combines the current seat-based and usage-based for Duo -- for DAP to make the pricing and packaging more seamless? William Staples: Yes. So to be clear, the Duo Pro and Duo Enterprise capabilities are already part of Duo Agent Platform. And Duo Agent Platform represents a massive superset on top of that. Think of it as like 100x kind of capability beyond what Duo Pro and Enterprise provided. Those packages are still in market mostly for continuity perspective, any customers who have already been planning or in the process of buying those, we didn't want to disrupt and force them to reevaluate the new platform before making their purchase decisions. And we'll be incentivizing both customers and our field to turn those contracts into Duo Agent Platform credits in the coming year ahead. So think of this as a transition period since Duo Agent Platform is just 7 weeks in market. And over the next couple of quarters, it will be clear customers will see Duo Agent Platform as our AI offering going forward. Yaoxian Chew: Next question, Ryan MacWilliams from Wells Fargo, followed by Nick Altmann from BTIG. Ryan MacWilliams: Two-part question. For Jessica, just nice to meet on the earnings call. And I'd just love to hear about how you built up to this guide on the top line side and any changes to the guidance philosophy there? And then for Bill, would love to hear about barriers to entry around CI/CD, why this is a strategic advantage for GitLab and why this will be difficult to replicate for enterprise customers like try to replicate CI/CD with AI. Jessica Ross: All right. Well, maybe I'll start with the guidance philosophy, especially with this being my first quarter here as GitLab's CFO. So I think there's a lot happening this year. In addition to me joining, there's a lot of moving parts. This is an investment and an execution year for GitLab. As we've talked about, we're moving from a seat to hybrid model. We are in a new product cycle with the DAP launch, and we're also scaling our go-to-market motion. So a lot of moving parts. The first thing, I want to be clear, our process has not changed internally, and it's as rigorous as ever. And I've spent my first few weeks getting into the details of the business, specifically so that I could stand behind the numbers with conviction. Additionally, when I joined, I ran an intentional listening campaign with investors, and the feedback was very clear. Investors want more insight and transparency into how we arrive at the numbers. And so we heard you, and I'm hoping that you all see that reflected in our prepared remarks, and I expect to carry that forward with my guidance philosophy. And then finally, I would just reiterate that this business is ratable, which gives us strong board visibility, and we apply that visibility into our approach so that when we give you a number, we have high confidence that we will achieve it. So then as it relates to the revenue guide buildup, I think we gave you all the building blocks within my prepared remarks, but I do want to reiterate, FY '26 and Q4 delivered the highest net new ARR year and quarter ever. And so because our model is ratable, a large part of the step down in our guide is mechanical. So it's not a change in the underlying health of the business. The guide reflects an honest view of where we are today, not where we hope to be. So I will just break down again, what's driving that step down from 26%. First, the mechanics. FY '26 benefited from approximately 300 bps of nonrecurring tailwinds, Premium price, favorable FX dynamics and specific contract clauses that won't repeat. Strip those out and then the comparable growth rate gets you closer to 23%. Beyond that, the ratable model means revenue today reflects bookings decisions made 3 years ago, and bookings growth has not kept pace with revenue growth over the past 3 years. So that mathematical reality flows through for FY '27 regardless of what we do operationally this year. Second, what's embedded in the guide. As we've discussed, our first order team is coming online now, but won't be fully ramped until the back half of the year. We've talked about the fact those investments take time to show up in bookings and bookings take time to show up in revenue. So we've embedded prudence there. And then we've also been very deliberately cautious on both PubSec and mid-market, where we saw softness in Q4 and aren't assuming an immediate bounce back. And then as we've also talked about DAP customer reception has been strong, but we're in the very early stages of the adoption cycle. And on a $1 billion business with a ratable revenue model, we're not embedding any meaningful revenue contribution from something that we just launched 7 weeks ago. William Staples: Thanks, Jessica. Let me try to answer the first part of your question, which I'll paraphrase as how does the core GitLab platform stack up in a world where agents are quickly iterating, growing, getting stronger and better. And I think this is a common confusion with investors. So let me try to use an analogy, and I hope this makes it more clear. You should think of the core DevOps platform that GitLab has as core infrastructure that both humans need to take action as well as agents need. So for example, there are many coding agents that can generate code, but that code needs to be stored. It needs to be version controlled. It needs to be tested. It needs to be reviewed. It needs to be secured and checked against all of the standards, the compliance frameworks and everything else the business is accountable for. That infrastructure is what GitLab has been building for over a decade. It's what businesses rely on to ensure the integrity of their software, and it's not going anywhere. What agents do is offer an artificial intelligence alternative to the human intelligence that's long gone into both writing the code and managing that software complexity. So you can think of Duo Agent Platform as that alternative for GitLab customers. They can now use Duo Agent Platform to automate tasks to do seamless handoffs between humans and agents and between agents and other agents to do all of the tasks that are required to move that software from planning all the way through deployment. Competitors can obviously offer alternative agents, but they don't offer a replacement for the infrastructure that is GitLab. Yaoxian Chew: Great. We're almost up on time. Nick, you're going to be wrapping up the call here with the last question. Go ahead, please. Nicholas Altmann: Awesome. Jessica, just on the net new ARR strength you alluded to in 4Q, it sounds like the public sector improved sequentially. I know you said there was some deal slippage this quarter, but can you just give us a sense as to how much of the strength this quarter was driven from some of the 3Q public sector weakness we saw and that kind of getting across the finish line in Q4? Jessica Ross: No, thanks for the question. Yes, as you alluded to, we delivered the highest net ARR quarter ever, but the reality is results were mixed. First order bookings were healthy with strength in Asia Pacific and enterprise win rates improved quarter-over-quarter and sales cycles held steady. So the softness was really concentrated in 3 areas. First, PubSec, which is about 12% of ARR. And I want to be clear here, the long-term thesis has not changed. We remain the preferred partner to the U.S. Government, and they continue to view us as mission critical. That being said, we only saw a partial recovery following the government reopening. Some business moved into FY '27 and visibility still isn't where we'd like it to be. I think the budget picture has been interesting. We've had increases in certain departments and a lot of uncertainty in others. So again, that's been built into our guide. The second piece is the price-sensitive cohort that Bill talked about. And as we shared, we've sized this at about roughly 20% of ARR. It does include some of the SMB weaknesses that we've been discussing as well as parts of mid-market premium and customers with less budget flexibility. But again, we feel like we sized this right. We're not seeing that in the rest of the business. I think that's been reinforced by our $100,000 customers growing 18% year-over-year and that $1 million cohort growing 26% and enterprise DBNR remains very healthy. And then you get into the U.S. performance and deal slippage that you were referring to, and this is very customer specific. We experienced a few large deals slipping from specific customers facing budget constraints and some industry-specific challenges. For example, there was one retailer that had some Q4 challenges and another large customer that faced some layoffs and restructuring. So these are real issues, and we're continuing to meet our customers where they are, but we found it to be something very specific, and that's all been embedded into our guide going forward. Yaoxian Chew: Great. Thank you. With that, that concludes our Q&A. We will be at the Morgan Stanley TMT Conference this week and look forward to meeting many of you in person. Thank you for attending GitLab's 4Q and fiscal '26 Earnings Call. Have a good evening.
Operator: Good day, everyone, and welcome to Cricut Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. Now, it's my pleasure to turn the call over to the Senior Vice President and Head of Investor Relations, Jim Suva. Please proceed. Jim Suva: Thank you, operator, and good afternoon, everyone. Thank you for joining us on Cricut's Fourth Quarter 2025 Earnings Call. Please note that today's call is being webcast and recorded on the Investor Relations section of the company's website. A replay of the webcast will also be available following today's call. For your reference, accompanying slides used on today's call, along with a supplemental data sheet, have been posted to the Investor Relations section of the company's website, investor.cricut.com. Joining me on the call today are Ashish Arora, Chief Executive Officer; and Kimball Shill, Chief Financial Officer. Today's prepared remarks have been recorded, after which Ashish and Kimball will host live Q&A. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements, and management may make additional forward-looking statements, including statements regarding our strategies, business, expenses, tariffs, capital allocation and results of operations in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties including those identified in the Risk Factors section of Cricut's most recently filed Form 10-K or Form 10-Q that we have filed with the Securities and Exchange Commission. Actual events or results could differ materially. This call also contains time-sensitive information that is accurate only as of the date of this broadcast, March 3, 2026. Cricut assumes no obligation to update any forward-looking projection that may be made in today's release or call. I will now turn the call over to Ashish. Ashish Arora: Thank you, Jim. While we are pleased with the increased profitability and growth in paid subscribers and global machine sell-out units, we are disappointed in the lack of total company sales growth for both Q4 and 2025. We are working with tremendous urgency and focus to drive a mass market experience, accelerate our development cycles and compete better. I would like to look back on 2025 on what went well, what we could do better and our priorities for 2026. Kimball will go through much of the financial details and how we look at 2026. We are pleased with our increased profitability and the over 4% increase in paid subscribers in 2025, along with positive machine sell-out units. This was our ninth consecutive year of positive net income as we generated $76.7 million of net income, which increased 22% or $13.9 million compared to 2024. In 2025, we launched 2 new cutting machines, a new mini heat press, several new materials, including greatly enhancing our Cricut value line and significant improvements in our software platform that includes compelling AI offerings and easy-to-use project guided flows. We are disappointed we did not post positive full year revenue growth. Total company sales decreased less than 1% for the full year and decreased 3% year-over-year in Q4. We believe Cricut is a growth business, and we are intent on proving it. Last year, I mentioned, we were fundamentally simplifying our user experience. We are delivering on this commitment with our new project guided flows, which are in the process of being rolled out to our entire user base. While it is still early, we are pleased with the initial results and feedback. We are relentlessly focused on increasing our speed of execution and are accelerating investments that will help drive future revenue growth. These accelerated investments are in hardware product development, materials and engagement. You can see the early fruits of these efforts from our 2025 launches that I summarized above. Thus far, in 2026, we have already launched 2 next-generation cutting machines, new heat presses, a new Direct-to-Film or DTF service, and I'm excited about our future road map. We will continue a similar cadence of marketing and promotional spend as the prior year. We are focused on 4 main priorities: new user acquisition, user engagement, subscriptions and accessories and materials. We continue to focus on new user acquisition and engagement growth on our platform, which ultimately drives our monetization flywheel. In Q4, we amplified our marketing reach by strengthening our visibility during this key shopping period. We continued with increased marketing investment and activated several high-profile partnerships, alongside new advertising opportunities. These efforts led to increased marketing engagement and an increase in Google searches for "What is Cricut," which we have historically watched as a leading indicator. We believe these efforts will continue to bear fruit in 2026. While we did not grow revenue in the quarter, we did see a continued improvement in sell-out of connected machines, which we believe is a result of our ongoing marketing efforts. Quarter-to-date in 2026, we continue to see positive connected machine sellout. In 2026, we are leaning even more into our bundle first strategy, with a cohesive out-of-box experience that includes tools and materials with the machine, along with a tightly integrated guided software flow. With that, we are excited to announce the introduction of 2 next-generation cutting machines, with all new architectures, Cricut Joy 2 and Cricut Explore 5. The overall consumer experience embedded in these new machine bundles represent the start of a new era at Cricut. Recall last year, I mentioned we would fundamentally simplify our user experience. We delivered on this commitment as we introduced guided project flows for our most popular use cases. These include Vinyl Decals, Iron-On T-Shirts, Folded Cards, Cardstock Cutouts, Insert Cards, and Stickers and Labels. While it is too early to see a material change in engagement from these improvements as they were only recently rolled out, we are pleased with early feedback, especially for onboarders. Engagement erosion continues to moderate as we held active users about flat for the year at just under 5.9 million active users. 90-day engaged users who cut during the quarter declined 3% year-on-year. Our ability to hold active users about flat is a result of multiple efforts. The performance and reliability of our platform continued to increase, which made this holiday making season a more frictionless experience for our users. We've introduced several improvements to the core functionality of our design experience. Our AI-driven features, both user-facing such as Create AI or behind the scenes such as search algorithms continue to drive positive impact. For example, Create AI lets users take their personal images, easily add complementary text and choose an output style to create unique designs ready to cut, draw or print. This dramatically improves the likelihood of user success. Create AI lets users generate ready to make images using credits as part of their subscription plan and is an acquisition driver to attract non-subscribers to sign-up for Cricut Access. We see the use of AI-assisted images and project creation as complementary to our growing image library from a contributing artist program, and our curated guided flows and associated templates for the most common project types. Beyond these continued improvements within our app, we have continued to improve our engagement marketing efforts to drive returning visits to design space. As a result of all our efforts, we have seen our Net Promoter Score improve meaningfully in the past 12 months. Despite the continued pressure on our engagement metrics, we are confident in our efforts to simplify our design experience by assisting users based on their project intent, selling more of our connected machines in bundles configured to work seamlessly with these new guided flows and continuing to grow the number of images, fonts, editable templates and AI features available to users. We look forward to 2026, which will be the first year of our cohesive consumer experience that integrates our bundle for strategy, coupled with our new simplified project workflows that leverage AI throughout the making experience. In Q4, our paid subscribers increased by over 4% year-on-year to just over 3.09 million. Paid subscribers continue to be a big positive for us and increased 132,000 year-on-year in Q4. We are also seeing positive trends on win-backs, where our promotional offers are driving increased sign-ups from prior subscribers. We believe our new platform enhancements, including new project guided flows, templates and Create AI enhancements will continue to provide benefits and value to our subscribers. We have a rich road map to continually increase the value proposition for subscribers. As I previously mentioned, we launched Create AI for our Cricut Access Subscribers, and we will continue to introduce more AI-driven features. Our goal is to make it incredibly compelling to be a subscriber to leverage our content and software tools. Accessories and Materials sales decreased 13% year-on-year in Q4 and declined 9% for the full year. We realized that over the last several years, we have lost ground in competition in material types where there are low barriers to entry. We continue to see competitive pressure increase, manifesting in white label brands and retailers as well as new entrants in online marketplaces and in retail. We have embraced the challenge of providing refreshed and cost-competitive materials and accessories offerings. As these offerings continue to rule out, we intend to reclaim market share and by doing so, enhance the making experience of our users. I'm pleased to report that, we have seen share improvements globally within online channels and at select large retailers across the category. For example, we see our Value line continue to accelerate in online marketplaces. We continue to regain share in heat presses, and we continue to make progress with driving costs out of our supply chain as we fight to counteract tariffs and address affordability for our consumers. In Q4, we launched a new EasyPress Mini LT that addresses affordability concern and is available in 4 attractive colors. During Q1, we launched our new heat press, Cricut EasyPress SE, which comes in 2 sizes and a variety of colors. These machines provide a professional quality heat transfer experience without the complexity or large size of an industrial press. They support a wide range of materials, including iron-on, Infusible Ink, sublimation and DTF. I am also excited to share that in Q1, we launched a DTF service. DTF lets users create in Design Space vibrant, full-color, personalized artwork that is printed onto a special film, coated with adhesive powder, and then pressed onto fabric or other substrates. DTF gives us the opportunity to leverage our Design Space platform and guided flows that we have been investing in over the past year. This is an example of new opportunities we are exploring to monetize our platform and content beyond cutting machines. As you can see, our team has been very busy with R&D, innovation and new products. We are not done, and we have a great line of new products on our future roadmap. We also continue in our relentless focus to drive costs out of this business. We are intensely focused on the overall customer experience. It's our fundamental belief that when we give people more reasons and inspiration to make things easily and affordably, we will see a lift in materials consumption. We are driven to continue to innovate while exhibiting both long-term focus and current discipline. With that, I will turn the call over to Kimball. Kimball Shill: Thank you, Ashish, and welcome everyone. In the fourth quarter, we delivered revenue of $203.6 million, a 3% decline compared to the prior year. Full year 2025 revenue was $708.8 million, less than a 1% decline from 2024. We generated $7.8 million in net income or 3.8% of total sales in Q4, and $76.7 million or 10.8% of total sales for the year. Breaking revenue down further, Q4 2025 revenue from Platform was $83.9 million, up 6% year-on-year. We ended the year with just over 3.09 million paid subscribers, which is up 132,000 or more than 4% year-on-year and up 87,000 or 3% from Q3. For the full year, Platform revenue was up 5% and ARPU increased 5% to $55.77 from $53.12 a year ago. Platform revenue was up slightly more than paid subscribers primarily due to the benefit of foreign exchange. Q4 revenue from Products was $119.7 million, down 8% year-on-year. Connected machines revenue decreased 4% year-on-year in Q4, driven primarily by lower average selling prices as we were more promotional preparing for new product launches in Q1. Accessories and Materials decreased 13% in Q4. For the full year, revenue from Products decreased 5%, driven mostly by the 9% decrease in accessories and materials while connected machines revenue was about flat. As Ashish mentioned, machine sell-out units were positive for the year and continue to be up quarter to date. As a reminder, we don't have perfect coverage for sell-out data in all channels, so treat this as directional. As we shift to our bundle-first strategy, where we will only sell next-generation connected machines bundled with materials, we will no longer provide the supplemental revenue breakdown of Connected Machines and Accessories and materials in our SEC filings and data sheet. We will continue to report Platform and Products revenues and costs as we currently do in our consolidated statement of operations and comprehensive income. In terms of geographic breakdown, international sales were positive at $57.8 million, an increase of 9%, compared to Q4 2024. As a percentage of total revenue, international was 28% in Q4 2025, compared with 25% of total revenue in Q4 2024. For the full year, 2025 international sales increased 8% and represented 24% of total company revenues compared to 22% in 2024. Foreign exchange benefited international sales by 6% for Q4 and by 4% for the full year. Our Australian business stabilized through enhanced pricing and marketing programs in the second half. Europe showed solid growth, thanks to increased marketing investment and store expansion for the peak season. Our emerging markets also demonstrated strong performance, especially in our fledgling Japan and India markets. We continue to make progress in increasing brand awareness in international markets, which we expect to have a positive impact on member acquisition in 2026. We ended the quarter with just over 3.09 million paid subscribers, up over 4% from Q4 2024 and up sequentially. This continues to be a bright spot for us, and Ashish detailed our efforts that are getting traction in this area. But I do want to mention, as discussed in earlier calls, there is some natural subscriber attrition, so subscriber growth may be challenging until we increase the pace of machine sales and new user acquisition. Recall, this could result in a seasonal pattern of quarter-on-quarter paid subscriber growth in Q1 and Q4, but flat to declining quarter-on-quarter subscriber growth rates in Q2 and Q3. Moving to gross margin. Total gross margin in Q4 was 47.4%, an increase from 44.9% in Q4 2024. For the full year, total gross margin was 55.1%, also an increase compared to 49.5% for 2024. The full year improvement reflects higher product gross margins and a higher amount of subscription revenue as a percentage of total revenue. Breaking gross margin down further, gross margin from platform in Q4 was 88.6%, an increase compared to 87.9% a year ago. For the full year, gross margin from platform was 89%, which increased from 88.1% in 2024. The increase in platform gross margin for the quarter and full year was primarily related to lower amortization of software development costs. We are excited about our AI investments. Recall, as we previously mentioned, there may be some gross margin pressure as we continue to ramp our AI features. Gross margin from products was 18.4% compared to 18.7% in Q4 a year ago. For the full year, products gross margin was 26% in 2025, which increased from 19.3% in 2024. The increase in gross margin for the full year was primarily due to selling previously reserved inventory and reduction in inventory impairments. Total operating expenses for the quarter were $82.5 million and included $7 million in stock-based compensation. Total operating expenses increased less than 3% from $80.1 million in Q4 2024. For the full year, total operating expenses in 2025 of $294.4 million increased just over 6% from 2024. As Ashish mentioned, we are focused on increasing our speed of execution and are accelerating investments that will help drive future revenue growth for hardware product development, materials, engagement and marketing. Operating income for the quarter was $13.9 million or 6.8% of revenue compared to $13.9 million or 6.6% of revenue in Q4 last year. For the full year, operating income increased to $96 million, up 26% compared to $76.1 million in 2024. As a percentage of sales, full year operating income was 13.5% in 2025 compared to 10.7% in 2024. Our tax rate in Q4 2025 was 51% due to the full year true-up associated with our higher profitability, bringing the full year tax rate to 28.9%, in line with our expectations. For the quarter, net income was $7.8 million or $0.04 per diluted share compared to $11.9 million or $0.06 per diluted share in Q4 2024. For the full year, we generated $76.7 million of net income and diluted earnings per share of $0.35, up from $62.8 million in net income and $0.29 diluted earnings per share in 2024. Turning now to balance sheet and cash flow. We continue to generate healthy cash flow on an annual basis, which funds inventory needs and investments for long-term growth. In 2025, we generated $200 million in cash from operations compared to $265 million in 2024. We ended 2025 with cash and cash equivalents of $276 million. We remain debt-free. Inventory decreased by $13 million from a year ago to $103 million at the end of the year. During Q4, we used $5.6 million of cash to repurchase 1.1 million shares of our stock. For the full year, we used $24.6 million to repurchase approximately 4.6 million shares. As a result, $41.3 million remain in our approved $50 million stock repurchase program, which the Board replenished in May 2025. During the year, we paid $202.1 million in dividends. After the close of Q4, we paid approximately $21 million for the declared $0.10 per share semiannual dividend on January 20, 2026. Recall, we do not give detailed quarterly or annual guidance, but we do want to offer some color on our outlook for 2026. We are focused on bringing excitement to our category. We are doing this by accelerating our investments in R&D, new product launches and marketing, including international markets and continuing our promotional strategy to drive affordability. Thus far in 2026, we have already launched 2 next-generation cutting machines, 2 new heat presses and a Direct-to-Film service, but these have only been available a short time. We expect to see the benefit in 2026 and beyond. Previously, we talked about the headwinds that tariffs presented to our business. Given the recent Supreme Court ruling overturning IEEPA tariffs and associated dynamics, we are not providing any guidance on margin impact. We expect to be profitable each quarter and generate cash flow from operations for full year 2026. We also expect to continue to be active with our authorized $50 million stock repurchase program, which has $41.3 million remaining. While tariff uncertainty is a reality of today's world, our team continues to be proactive and nimble with how we execute our strategy as we continue our investments to position the company for growth. With that, I'll turn the call over to the operator for questions. Operator: [Operator Instructions] It comes from Erik Woodring with Morgan Stanley. Erik Woodring: I have 2, if I may. Just first, Ashish, if we look back on 2025, if we exclude accessories and materials, the business grew year-over-year, revenue grew year-over-year. And then if I go back to the last time you shared connected machine versus accessories and materials gross margins, they were relatively similar margin rates. And so my question is, strategically, given the challenges that face the accessories and materials market, why do you need that business? I'd just love your thoughts on how it is value enhancing for you and how you see it going forward? And then a quick follow-up, please. Ashish Arora: Erik, thanks for the question. So I think, first of all, as we recently announced, we've launched our bundle strategy, which really simplifies the experience for the user, right, where they have all the materials that they need on day 1 to start the project. We also believe that, while we have competition and some copycats from various brands, including private brands, our machines ultimately have to satisfy the overall holistic experience. So I think it's important from an experience standpoint that we offer these materials, test the compatibility, take control of any -- whenever a customer uses our materials, we see from our research that they have peace of mind. They know it just works. It's high quality. So I think just from an overall experience, it's really important -- it's an important business to us. The second is we believe that as we are successful on our engagement initiatives, while we want to be cost competitive, while we want to compete in this, it's still a very lucrative business. And we believe that with the Value line, with EasyPress, we are on the path of execution, and we think we'll be able to turn this corner and turn the business around. But you're absolutely right. If you look at the high-quality aspects, if you look at connected machines and sell-through, you look at subscriptions, those are the leading indicators, and it's our job to then monetize that flywheel, with accessories and materials and subscriptions. So we think that it's an execution opportunity and an overall opportunity to provide a better experience to our members. Erik Woodring: Okay. Very fair. I appreciate the cadence. And then just as a quick follow-up. Just as we think about either 1Q or 2026, are there any guardrails that you guys can provide behind even directionally user growth, revenue growth, margins, operating expenses, anything that just helps us understand how you're thinking about the year? Is this -- just maybe I'll leave it at that. Would love any color that you can maybe provide and help us with. Kimball Shill: Yes, Erik, this is Kimball. Thanks for the question. We're really optimistic about the year overall, even as we see some challenges in the first half. So let me kind of break that down a little bit. We're very confident in platform growth for the year, even as we expect some seasonal softness in Q2 and Q3 as we highlighted in our prepared remarks and as we've seen in the last couple of years. But overall, we're confident that we'll grow platform for full year. When it comes to products, there are some challenges in first half because remember, last year, we had some opportunity to pull forward some accessories and materials demand, especially in Q2 around uncertainty related to tariffs, and that sets up kind of a difficult comp. We've also launched some new machines this Q1 that are lapping cutting machines that we launched a year ago. But the year ago machines had generally higher prices than the machines that we're launching this Q1. And so that presents a little bit of a challenge. But that said, we're really excited about our road map. We've been investing heavily, and there's more goodness to come in the quarters ahead. And so as we look to the back half of the year, in particular, we think we will hit our stride, and we're really optimistic for full year. Ashish Arora: And Erik, let me just add to that. So I think about a few quarters ago, we talked about how we are accelerating our innovation across the board. So first and foremost, we just launched 2 new machines just a few days ago. We're very pleased with the launches. They are part of our holistic bundle strategy, coupled with the platform. So we will continue to launch new products in our existing category. The second thing I'll mention is that leveraging the platform, we also plan to launch new services in our existing category. And this is where the true benefits of the platform come to life. And finally, new products in new categories. So I think you'll start to see that materialize as we go through the year and into next year, all the engineering and innovation efforts that we've been investing in will come to bear. And I think this is -- underlies what Kimball shared in his comments overall. Operator: Our next question comes from Adrienne Yih with Barclays. Angus Kelleher-Ferguson: This is Angus Kelleher on for Adrienne Yih. With the shift toward bundles, are retailers needing to make any changes to shelf space or in-store merchandising? And I guess just more broadly, how are retailers responding to your bundle offering? Kimball Shill: Angus, thanks for the question. Okay. Angus, thanks for the question. We're really excited about this bundle-first strategy. And it really is, as Ashish mentioned in his prepared remarks, a new era for Cricut users. And it kind of breaks down into 2 pieces. One is let's talk about ease of use for consumers, right? Because with these new bundles, we're going to have a tightly integrated user experience, and that starts with the new guided user flows that we've talked about and that we've spent the last couple of years investing in and creating. And so it makes it simpler, faster, easier for users to make what they want to make. And these new bundles are designed to match those guided flows. So the out-of-box experience, a new user has everything she needs to succeed at the start. And then on the affordability side, we know that affordability has been one of the biggest concerns that someone researching the brand has is what is this activity going to cost them when they take it on. And so as we move into this next generation of machines, everything will come in a bundle. Now, we'll have a range of bundle sizes so that we can have compelling opening price points, but also larger overall bundles that drive more value for consumers, but each of these bundles will provide that much better experience for consumers in a cohesive, integrated way that they haven't had in the past. And so we're really excited about it. Our retail partners understand the strategy, and we get positive feedback from them on it as well. And so -- and the guided flows have only been available for a short time as we've been rolling them out. But initial results that we've seen this year, especially with onboarders, is very positive response. Ashish Arora: And I'll just add specifically just to further embellish what Kimball said from a retailer standpoint. We haven't seen any big impact of our bundles on the placement strategy or whether they've reduced our shelf space or things like that. If anything, as we have shared and demonstrated with our retailers, what -- these are not just like random materials that are thrown into the bundle, right? They're very -- over the last 12 months, we've done a number of user studies, carefully curated and orchestrated these materials to give that out-of-the-box experience. And so I think it's -- I would say, without kind of speaking on their behalf, as they've seen our research, as they've listened to the user feedback, we believe that a good out-of-the-box experience will ultimately drive higher engagement, more trips back to the store and ultimately, people buy more materials. So I think overall, both consumers and retailers have received this positively. We have not seen any impact to their merchandising or shelf strategy. And it's -- as we said, our initial feedback from the guided flows has been positive. And even as we launch these 2 new products, we've gotten a lot of positive feedback on how many things we are including and how well orchestrated those things are. So we're pretty pleased with it overall. Angus Kelleher-Ferguson: Great. Great. And then just one quick follow-up on DTF. It feels like a new monetization lever beyond your kind of classic offering or kind of adjacent to your classic offering. How should we think about its role longer term? Is it primarily incremental usage from existing users? Or is it a way to attract new consumers to the platform? Kimball Shill: Angus, thanks for the follow-up. So we're excited about our directed film offering, and it's really enabled by the infrastructure we've built around the guided flows, as Ashish mentioned in his earlier comments. And it's an example of where we're experimenting with ways to monetize our platform without the need to use a cutting machine. And so today, it's focused on our existing users as we learn and primarily focused in North America to start. And today is only available on desktop. But as we learn, we'll expand the audience and we'll expand the geography over time. And you'll see other things like this where we are looking for opportunities to monetize the platform outside of just our traditional cutting machines. Ashish Arora: Yes. So again, just reinforcing the point that Kimball made, we -- this is -- initially, we've launched this product for our existing members. So as they come into design space, as they want to do these full color fidelity, high fidelity projects, this is a way to monetize that user need. Second, just double-click on what Kimball said, this is a really good example where we have leveraged our T-shirt guided flow that we had already built for our machines to basically provide another use case, right? So the same guided flow that we use for making a T-shirt with a Cricut is the guided flow that was used as a basis to create a T-shirt flow. And you'll see -- you'll continue to see us expand into those types of services. We've just started rolling out. It's still only on desktop. So I think it's too early to tell, but we are pretty excited about it, and we feel that we'll continue to invest in the service. Operator: Our next question comes from the line of Eric Sheridan with Goldman Sachs. Emma Huang: This is Emma Huang on for Eric Sheridan. Just on the topic of your product road map and kind of AI offerings. Can you talk about some of the key learnings so far as you continue to roll out these AI-driven features and products and how they're kind of informing your priorities for go-to-market strategy? Kimball Shill: Yes. So we're really excited about AI. We think it fits very well with our content strategy and is very complementary to it. And just a reminder that one of the primary reasons subscribers subscribe is for the content that it brings to their projects. And so while we have a large image library and we use -- we leverage AI to drive search algorithms to serve that content, we also have a generative AI offering that we call Create AI, which if a user can't find something that she wants to make already in the existing library, she can easily generate an image and then modify it quickly into a project that she wants to make. And so we continue to invest heavily in that over time and expect that to continue. We also expect as we drive adoption over time that, that might introduce some pressure in platform margins. But we also see with the early data that it also is a great acquisition tool for attracting new subscribers. And so we see it as an important aspect of continuing to improve our overall customer experience, but very complementary to what we're doing today. Operator: And this concludes the Q&A session. I will turn it back to Cricut for final comments. Jim Suva: Thank you, operator. We will be meeting with investors at the Morgan Stanley Technology, Media and Telecom Conference tomorrow, Wednesday, March 4, 2026, in San Francisco, California, and we hope to see you there. If you have additional questions, please e-mail me at jsuva@cricut.com. This now concludes this earnings call, and you may now disconnect. Thank you. Operator: This concludes our conference. Thank you for participating. You may now disconnect.
Operator: Good morning, everyone. Welcome to the Propel Holdings Fourth Quarter and Year-End 2025 Financial Results Conference Call. As a reminder, this conference call is being recorded on March 3, 2026. [Operator Instructions] I will now turn the call over to Devon Ghelani, Propel's Vice President, Capital Markets and Investor Relations. Please go ahead, Devon. Devon Ghelani: Thank you, operator. Good morning, everyone, and thank you for joining us today. Propel's fourth quarter and year-end 2025 financial results were released yesterday after market close. The press release, financial statements and MD&A are available on SEDAR+ as well as on the company's website, propelholdings.com. Before we begin, I would like to remind all participants that our statements and comments today may include forward-looking statements within the meaning of applicable securities laws. The risks and considerations regarding forward-looking statements can be found in our Q4 2025 MD&A and annual information form for the year ended December 31, 2025, both of which are available on SEDAR+. Additionally, during the call, we may refer to non-IFRS measures. Participants are advised to review the section entitled Non-IFRS Financial Measures and Industry Metrics in the company's Q4 2025 MD&A for definitions of our non-IFRS measures and the reconciliation of these measures to the most comparable IFRS measure. Lastly, all dollar amounts referenced during the call are in U.S. dollars unless otherwise noted. I am joined on the call today by Clive Kinross, Chief Executive Officer; Sheldon Saidakovsky, Founder and Chief Financial Officer; and Noah Buchman, Founder, President and Chief Revenue Officer. Clive will provide an overview of our Q4 fiscal year 2025 results and observations on the overall economic environment before Sheldon covers our financials in more detail. Before we open the call up to questions, Clive will provide an overview of Propel's strategy and growth initiatives for the year and discuss our 2026 operating and financial targets. With that, I will pass the call over to Clive. Clive Kinross: Thank you, Devon, and welcome, everybody, to our Q4 and year-end conference call. 2025 was another year of strong disciplined growth for Propel as we continue to expand access to credit for underserved consumers while continuing to enhance our AI-powered platform. Turning specifically to the fourth quarter. We entered Q4 with a tightened underwriting posture following the credit pressure experienced in Q3. That discipline allowed us to navigate through external volatility, including the longest U.S. shutdown, government shutdown in history. As performance trends strengthened during the quarter, we accelerated originations in December, driving approximately $30 million of CLAB growth in that month alone, representing nearly all of the $32 million of sequential growth in Q4 and our strongest month of CLAB growth to date. However, that growth required upfront provisioning and incremental acquisition spend, while the associated revenue will be recognized over subsequent periods. As a result, profitability was pressured, but these investments position the portfolio for strong growth in 2026. Credit metrics have turned, and we exited the year with record ending CLAB and strengthened credit performance, and we are seeing that improvement carry forward into 2026. Even with the challenging macroeconomic conditions, our business showed significant resilience as we continue to maintain profitable growth. Turning to our full 2025 results. In 2025, we achieved record total originations funded of $774 million, up 32% year-over-year, record revenue of $590 million, up 31% and record ending CLAB of $590 million, an increase of 23% from 2024. For the full year, net income increased by 28% to $59.5 million in 2025 and adjusted net income increased by 7% to $66.7 million, both representing record performance. Turning to the macroeconomic backdrop and the performance of our regional business units. In the U.S., 2025 was characterized by a dynamic economic environment. While overall inflation has declined, inflation for essential spending remains elevated and real wage growth for many lower-income households has moderated. These dynamics contributed to credit softness that emerged in Q3 and extended into early Q4. However, as the quarter progressed, we observed improving credit performance. The government shutdown ended, employment remained stable across sectors where many of our customers are employed and access to credit remains constrained. These factors supported the improvements we observed exiting the quarter, and we continue to experience the same trends 2/3 into Q1, and we expect that trajectory to continue throughout 2026. Turning to Lending-as-a-Service. The program achieved record revenue of $5.8 million in Q4, representing 97% growth year-over-year and was approximately $18 million for fiscal 2025, up 191% from 2024. Towards the end of Q4, Propel received increased commitments from existing purchases, supporting higher origination capacity and continued growth heading into 2026. In Canada, macroeconomic conditions remain softer relative to the U.S. with slower GDP growth and higher unemployment levels. Despite this backdrop, the Canadian business grew by 49% in 2025 from 2024, though the market still represents approximately 2% of total revenue. Credit performance was strong and reflects previous refinements to our risk model. Lastly, in the U.K., inflation remains somewhat elevated, but unemployment levels remain historically low with wage growth slightly outpacing inflation, supporting strong credit demand and stable credit performance. Against this backdrop, our U.K. business continued to exceed expectations, delivering record revenue and strong annual growth for 2025 that exceeded 50%. The strength of our U.K. results reflects the scalability of our platform, disciplined underwriting and the successful integration of QuidMarket into Propel's platform. Since the acquisition, we have incorporated our underwriting, marketing, technological and operational best practices. Importantly, performance in the U.K. remained strong in 2025 throughout the more dynamic economic conditions in North America, providing geographic diversification across the business. I will speak more about our recently announced business development initiatives, growth plans and our guidance for 2026. But first, I will pass the call over to Sheldon. Sheldon Saidakovsky: Thank you, Clive, and good morning, everyone. We exited 2025 with strong growth momentum following a period of tighter underwriting in Q3 and through mid-Q4. As credit performance stabilized, originations accelerated meaningfully in the back half of the quarter, especially in December. Consumer demand across our operating brands remained strong. And together with our bank partners, we achieved record originations from both new and existing customers during the quarter. This resulted in record total originations funded of $221 million, an increase of 26% from Q4 of last year. This growth drove ending CLAB to a record $590 million, up 23% year-over-year. Consistent with our disciplined approach, we and our bank partners prioritized a higher proportion of volume from return and existing customers in the U.S. to reinforce portfolio quality. In the U.K., where credit performance remains strong, we emphasized new customer originations. Overall for Propel, new customers represented 43% of total originations funded in Q4, consistent with prior quarters and reflecting our balanced and deliberate approach to growth across all of our markets. Our record ending CLAB drove record revenues of $155.8 million in Q4, representing a 21% increase over Q4 last year. The annualized revenue yield of 109% in Q4 compared to 113% last year primarily reflects the timing impact of stronger originations late in the quarter, particularly in December, which increased ending CLAB with a modest contribution to revenue during the quarter. The majority of revenue from those originations will be earned in subsequent periods. Turning to provisioning and charge-offs. Provision for loan losses and other liabilities was 56% of revenue and net charge-offs was 14% of average CLAB in Q4. These levels reflect the credit dynamics that emerged in Q3 and extended into the early part of the fourth quarter. During the quarter, we observed softness within certain segments of the U.S. portfolio, including lower cure rates and variability in collections performance, partially influenced by macroeconomic factors, including the government shutdown, which affected specific customer cohorts. These factors also had an effect on Q3 vintages, particularly those originated prior to the tightening -- tightened underwriting adjustments. All of this contributed to the higher provisioning and charge-offs in Q4. These trends started to reverse later into the quarter, enabling us to drive higher originations. To further clarify, the charge-offs are primarily related to earlier vintages, particularly from Q3 as they are a lagging indicator of credit performance. As those earlier vintage cohorts have largely worked through the portfolio and with underwriting adjustments implemented in late Q3 and early Q4, credit performance strengthened meaningfully into the back half of Q4. Based on current trends, we believe Q4 is likely to represent the peak in provisioning. Early 2026 indicators continue to be strong, and we're observing credit metrics in line with our expectations. It is also important to highlight the impact of origination timing. Under IFRS accounting, the significant originations funded in December required upfront provisioning, while the associated revenue will be earned over future periods. This timing dynamic further increased the provision rate in Q4 when measured as a percentage of revenue as those originations contributed only modestly to quarterly revenue. Over our 15-year history, we have successfully navigated similar credit cycles before. In Q2 2022, provision expense reached approximately 58% of revenue during a period of macroeconomic disruption driven by accelerating inflation and interest rates. Following underwriting adjustments taken by us and our bank partners, portfolio performance improved and provision rates declined meaningfully in the subsequent quarters. The recovery occurred quickly due to the resiliency of our customer segment and our ability to recalibrate underwriting in real time through our AI-driven feedback loop. Geographic diversification continues to support overall performance. The U.K. delivered strong credit results alongside record originations and Canada's credit performance remained strong following underwriting optimization earlier in the year. With credit performance aligned with expectations at year-end, we're very well positioned to continue accelerating growth in 2026. Turning to profitability. Adjusted net income was $8 million in Q4 or $0.19 per diluted share. For fiscal year 2025, adjusted net income increased to $66.7 million and diluted EPS -- diluted adjusted EPS was $1.58. Fourth quarter profitability was impacted by several dynamics related to origination timing and upfront spend and expenses. As mentioned, the late quarter origination growth, particularly in December, required upfront provisioning under IFRS accounting, while the associated revenue will be recognized over future periods. In addition, acquisition and marketing spend increased in the back half of the quarter to support the higher origination volumes with expenses recognized immediately while revenue will be earned over the life of the loan. We also incurred incremental start-up and infrastructure costs related to the build and launch of Propel Bank and the Column partnership, positioning the company for additional expansion in 2026 and beyond. On a return on equity basis, annualized adjusted ROE was 12% in Q4 and 27% for the full year. While quarterly returns were impacted by the timing and upfront costs discussed, full year results continue to demonstrate strong returns. Given the stabilized credit trends, the record ending balances at year-end and the investments made in 2025, we expect our adjusted ROE to expand on a go-forward basis. Acquisition and data expenses increased by 48% to $23.2 million in Q4, reflecting the record total originations funded and an increase in cost per funded origination. Cost per funded origination increased to $0.105 per dollar funded in Q4 2025, while cost per new customer funded origination increased to $0.245 per dollar funded. Although higher year-over-year, these levels remain aligned within our targeted profitability parameters and reflect deliberate strategic decisions made during the quarter. First, we allocated a higher proportion of marketing dollars to organic and direct marketing investment, particularly in December as credit performance stabilized. These channels require more upfront spend, but historically deliver stronger credit performance and higher lifetime value. Second, we diversified our marketing partnerships and channels, adding new strategic partners and expanding across key digital and direct channels. These investments enhance acquisition resiliency and long-term scalability. Third, we incurred higher underwriting and data costs per dollar -- per funded loan as a result of our tighter underwriting. These incremental costs support portfolio quality and long-term loss performance. And fourth, we continue to experience strong growth from the U.K., which carries higher acquisition cost per loan, but is offset by higher yields and strong credit performance. Overall, the increase reflects intentional investment to support credit quality and scalable profitable growth. Other operating expenses represented 16% of revenue in Q4, consistent with approximately 16% in Q4 last year when excluding onetime transaction costs related to the QuidMarket acquisition. Our operating leverage gains were largely offset by infrastructure investments to support Propel Bank and our partnership with Column, which we expect to contribute meaningfully as they scale. In addition, we've made several investments in AI that will lead to increased productivity and additional operating leverage in the long term, but contributed to additional overhead in the short term. Our profitability benefited from a lower overall cost of debt, which declined to 10.6% in Q4 from 12.7% in the prior year, supported by improved credit facility terms and lower interest. On a go-forward basis, we expect our margins on an IFRS and adjusted basis to expand given the meaningful investments we've outlined, the stabilized credit performance and the operating leverage of the business model. Turning to Propel's capitalization. At the end of Q4, we had approximately $103 million of undrawn capacity across our various credit facilities, and our debt-to-equity ratio was approximately 1.3x, reflecting a well-capitalized balance sheet and continued financial flexibility. In Q4, we increased our quarterly dividend by 8% to $0.21 per share and subsequently increased it an additional 7% to $0.225 per share for the current quarter. This marks our 10th consecutive dividend increase, underscoring the durability of our cash flows and our confidence in the long-term outlook of the business. We believe our strong balance sheet, disciplined capital management and recurring earnings profile position us well to continue investing for growth while delivering increasing returns to shareholders. I'll now turn the call back over to Clive. Clive Kinross: Thank you, Sheldon. 2025 was a year of disciplined execution after intentionally moderating growth and taking a tightened underwriting posture to stabilize credit performance through much of Q3 and Q4, credit performance has turned, and we look forward to robust profitable growth in 2026. Well into Q1, we continue to observe strong credit performance and healthy demand. As we look ahead, two key initiatives announced in Q4 will help us drive growth through the remainder of 2026 and for years to come. These initiatives are spearheaded by my colleague, Co-Founder, President and Chief Revenue Officer, Noah Buchman, who has joined us on this call to speak to these initiatives during our Q&A. First, our partnership with Column, which supports the launch of Freshline in the U.S. and expands our addressable market by serving a new consumer segment and entering additional states. We expect Freshline to become a driver of growth going forward. To support this partnership, we recently announced a forward flow commitment of $60 million for the Freshline product from Mesirow, one of North America's leading private credit investors. The success of our Lending-as-a-Service program has demonstrated our ability to launch, operationalize and scale these types of programs profitably. That execution capability gives us the confidence as we introduce Freshline and continue expanding our U.S. footprint. We expect to add additional commitments in the months ahead. Second, the launch of Propel Bank, an ambitious initiative several years in the making. While we remain a fintech holding company, a banking license gives us immense optionality for the medium and long term as the world embraces digital-first banking. The bank is now officially operational, and we expect it to provide new avenues for growth and expansion in the years to come. Propel Bank enhances our platform by providing potential product and service diversification and optionality and expanding access to both new and existing markets. We have built a fantastic and growing team in Puerto Rico. And together, we are building new opportunities for Propel and for consumers. Supported by these initiatives, our 2026 growth strategy is anchored on four pillars: First, scaling and expanding our core North America business. With approximately 70 million underserved consumers in the U.S. and Canada, we have only served a small fraction of the addressable market. In 2026, we're expanding into additional states, increasing penetration in existing markets and building new marketing and distribution channels to broaden our reach across the credit spectrum. Second, accelerating growth in the U.K. We finished 2025 with over 50% revenue growth in the U.K., reflecting strong demand, disciplined underwriting and successful integration. We expect the U.K. to continue delivering accelerated growth in 2026 supported by new product introductions, expanded distribution channels and further automation across the platform. There is tremendous opportunity in the U.K. that we have only just begun to realize. Third, expanding and optimizing our Lending-as-a-Service program. Following the strong momentum from our existing Lending-as-a-Service program, where we grew by 191% year-over-year. Towards the end of Q4, we saw increased commitments from existing capital partners and demand from new capital partners to participate, including Mesirow. With the launch of Propel Bank and Freshline as well as additional capital commitments to our existing Lending-as-a-Service programs, we expect robust growth for this program in 2026. These initiatives allow us to enter new geographies, serve additional customer segments in the underserved markets and generate high-margin fee-based revenue. Fourth, deepening AI integration across the organization. Our focus is on driving productivity, improving decision accuracy and enhancing the customer experience. We are already observing measurable gains in customer operations, where in December, we supported 42% more loan originations than the previous year with the same number of agents. We have had our highest three consecutive quarters of auto approval applications supported by AI. And in the year ahead, we expect to see these efficiencies expand across the company, including in technology and engineering. As an AI-first company with over a decade of proprietary data that has trained our models, best-in-class team and experience in running an AI platform, we believe Propel is uniquely positioned to lead, not follow in this next phase of AI-driven financial services innovation. Against this backdrop, we are introducing our 2026 operational and financial targets. We are targeting ending CLAB growth of 18% to 24%. Furthermore, we are targeting revenue of $725 million to $775 million and adjusted EBITDA of $152.5 million to $177.5 million. The net income target range of $70 million to $90 million and the adjusted net income target range of $80 million to $100 million represent growth rates of 34% and 35%, respectively, over 2025 based on the midpoint. We are also targeting a return on equity of 24% plus and adjusted return on equity of 28% plus, representing strong returns on shareholders' equity. Lastly, we continue to actively pursue exciting organic and inorganic growth initiatives. These are not included in the operating and financial targets, but form part of our long-term growth strategy. As part of our strategy, I want to spend a moment on capital allocation. Our capital allocation framework remains very consistent with what we've communicated since going public. We expect the dividend to continue growing annually, supported by earnings growth. Importantly, when we went public, we indicated an intention to distribute roughly 50% of adjusted earnings over time. In practice, we've operated well below that level, approximately 32% in 2025, which provides meaningful flexibility. This allows us to simultaneously first, reinvest significant capital into organic growth. Second, maintain balance sheet strength and strategic flexibility so that we can invest through cycles, pursue acquisitions where appropriate and operate from a position of resilience rather than reliance on external capital. And third, deliver a predictable and growing return to shareholders. And fourth, retain excess capital that can be deployed opportunistically, including share repurchases. We believe that combination, disciplined reinvestment, a growing dividend and opportunistic buybacks is the most effective way to compound long-term shareholder value. Our capital allocation framework remains very consistent with what we've communicated since going public. As we move through 2026, our focus remains clear, serving the more than 90 million underserved consumers across our markets who continue to need responsible access to credit. We do that through disciplined growth, credit performance and long-term value creation. Since 2020, we have grown revenue and adjusted net income, both by a CAGR of approximately 50%. That consistency reflects the durability of our platform and the discipline of our execution. Into 2026, the team is aligned and as focused as ever to deliver a strong year of profitable growth. We have made investments in AI that will ensure we continue to drive efficiencies and optimizations across the business. We have large and growing commitments from Lending-as-a-Service purchases and strong consumer demand to power the program's growth in 2026. We are now operational in Puerto Rico, where we are building a banking arm of our business to create more options for the future. We are close to launching Freshline to serve even more U.S. consumers. With 15 years of experience operating through cycles, we believe our AI-powered platform is well positioned for its next phase of profitable growth. As always, we remain committed to building opportunities for our team, consumers, our partners and our shareholders. With that, operator, you may now open the line for questions. Operator: [Operator Instructions] Your first question comes from Matthew Lee with Canaccord Genuity. Matthew Lee: Maybe we can start on credit. Obviously, a tough quarter with the government shutdown. Just maybe -- what gives you confidence that you get back to the 50% level that your guidance sort of suggests? And what sort of early indicators are you seeing that suggests that credit is improving? Clive Kinross: Yes. So Matt, and thanks for joining us this morning. We've certainly seen a significant rebound in credit performance. As you know, our products tend to be short term in nature. And when there is a spike in credit performance, we're able to adjust very quickly. We adjust our underwriting. And invariably, if we're experiencing challenges, it means all of the lenders ahead of us in the credit supply chain, if you will, are doing the same thing. So there was more and more tightening ahead of us that was absolutely evident in Q4 2024, I think the tightest since 2019, which meant there was more high-quality volume dropping into our segment of the market, even while we tightened our underwriting standards and also tightened other terms around the loans that we provided. That's the kind of stuff that we're able to do in the short term given our AI underwriting platform. And as a result of that, the other thing that happens in our market is we have competition that's not as well capitalized as us. And when there is increases in delinquencies, invariably, there's less competition as well. So we see more volume into our segment of the market. Competition tends to get eroded. And because of the short-term nature of our products, the customers that are going to go delinquent go delinquent pretty rapidly, and we're able to turn it around with net new vintages. Obviously, in Q4, the first half of Q4, in particular, there was a prolonged level of delinquency, about as long as we've seen roughly over a 4-month period, driven largely because of the longest U.S. shutdown in history, but not long after that ending, given the underwriting changes that we saw, we saw significant increases in credit performance. Those increases have obviously driven further momentum into 2026. We're now 2/3 of the way through the quarter. We're seeing credit -- very strong credit performance, very much in line with our expectations, also very much in line with the largest tax refunds that consumers have received in many, many years. And the nice cherry on top over and above the strong credit performance is demand has been very robust given some of these developments. That's partially because of the tightening ahead of us and what's discrete to Propel is we really did use that opportunity in Q4 to expand our marketing and distribution relationships, and those are certainly yielding lots of fruits, particularly on the demand side now that we're 2/3 of the way through Q1. Sheldon Saidakovsky: Yes. I just wanted to just add a couple of additional data points to what Clive is saying, and we mentioned this in the remarks. We've seen this before many times. We referenced Q2 2022, where the provision was 58%, so higher than it was over here in Q4. The very next quarter, it dropped to 54% and then dropped towards 50% where we targeted. So as Clive said, it happens relatively quickly. We tightened underwriting appropriately. And just to reemphasize, a lot of the higher provision was related to charge-offs coming from the prior vintages that were originated prior to us tightening. So we're very confident that, that's in the past, those have flushed through. And as Clive said, early this year, we've had very strong credit performance. Matthew Lee: Right. So maybe just on early indicators, I mean, like your customer base, employment rates, the payment rates, the credit scores, are those all kind of trending upwards as you look into Q1? Clive Kinross: Yes. The simple answer to that, Matt, is absolutely. Now bear in mind, from a seasonal perspective, we expect there to be stronger credit performance in Q1. So let me start off by saying that. So to really provide context and answer your question, I need to speak about what that credit performance looks like relative to what we expect will be improving credit performance in any event. And we are really, really pleased with what we're seeing. Not only our first payment default rates and weighted average default rates lower than our expectations, but we're actually seeing excellent collections data as well. Obviously, when some customers do miss payments, we need to rehabilitate them and cure them so that they can continue to draw down on their facilities. And we're seeing very strong performance from our Payment Solutions team as well. So again, 2/3 of the way through the first quarter of the year, we're very pleased with credit performance. We're very pleased with collections. And the other thing that we're very pleased with, obviously, is strong demand, which doesn't always go hand-in-hand with those dynamics. We're also now -- now that we've entered March, we're entering really the biggest month of the year in terms of customer refunds. So if anything, we expect the trajectory that we're seeing on the credit side to continue through the remainder of the quarter. Matthew Lee: Okay. That's super helpful. And then maybe just to add one to sneak one in here. Can you quantify Column and Propel Bank? I think you guys talked about an expanding product suite. But we shouldn't be expecting you guys to be taking deposits and like offering GICs or anything, right? Like what kind of products are you envisioning from Propel Bank? And when might we start seeing them? Clive Kinross: Yes. I've asked Noah to join us on the call over here. So I'm going to hand the call over to him. He's just done -- him and his team have just done the most stellar job on these initiatives. So with that, Noah, it's over to you. Noah Buchman: Thank you, Matt, for that question. A few things. We have to look at this in stages, kind of call it, short, medium and long term. So out of the gate, as we operationalize Propel Bank and as you heard in the opening remarks, we're thrilled that it's live now. It will continue to provide the services that we've listed in the press release to our existing bank partners and then to call them as that program launches on a go-forward basis. We will then expand our current line of business in existing and new geographies throughout the United States. It gives us the optionality globally, which is why it's called Propel Global Bank. And then to your nuance part of the question, we will move into the business of banking. And as we move further into the business of banking, we will have additional revenue streams over and above those core services that we provide to other banks with regulatory approval from our regulator, it gives us those options. So in the future, in longer term, you will see us be able to expand into more traditional banking products over and above the core fintech-related services we will be providing in the short and medium term. Clive Kinross: Let me also add a couple of things over there, Matt, if you don't mind. I mean, really, really delighted to have Mesirow come on last week and commit $60 million. Mesirow or the fund that acquired Bastion, and I think you guys know that we've been with Bastion since 2013. These are folks who are very, very familiar with Propel. They've worked with us for many different credit cycles, and we were delighted to have them as the first forward flow purchaser to commit $60 million. I will tell you that the opportunity, the market opportunity with Freshline and that segment of the market that we're serving is probably larger than any other opportunity that we serve today. On the back of that, you could absolutely expect to see more commitments and more announcements from top-tier institutions, which are going to accelerate the growth of our Lending-as-a-Service program for many, many years to come. We're delighted with how testing is going in that environment. The folks at Column have also been absolutely exceptional and an absolute joy to work with, and we expect to stand that program up this month, launching, obviously, with Mesirow purchasing the initial loans over there with additional announcements to come in the not-too-distant future, and that, again, will continue to accelerate the growth of that program for years to come. Operator: Your next question comes from Stephen Boland with Raymond James. Stephen Boland: Sheldon, I don't know if you can quantify this or maybe you have quantified it. The 56% PCL rate, obviously, you mentioned credit issues and the growth. I'm wondering if it's possible to break that down roughly. You know what I mean, like you've always kind of reported a low 50 PCL rate. Like is it really the growth that drove that up a few basis points or a few percent in the quarter? Sheldon Saidakovsky: Steve, thanks for that. So it's a mix of things. I think, first of all, as we talked about, we had -- last quarter, we had an increase in delinquencies that over the course of Q3. Subsequent to that, we started tightening our underwriting. And -- but however, a lot of those Q3 vintages then ended up flushing through in Q4 through charge-offs. And the reason for that, obviously, those were worse vintages sort of in the rearview. But in addition to that, the government shutdown exacerbated some of the macroeconomic dynamics we were dealing with in Q4. So I would say that there was certainly several million dollars in the PCL that was relating to kind of the Q3 vintages that ended up flushing through in Q4. In addition to that, obviously, as we've mentioned over here, $30 million of our $32 million growth in CLAB all came in December. As you know, we have to provision upfront as soon as we originate. So a lot of that was related to the growth in December. To put it into perspective, you probably also saw that the revenue yield was 109%. That's not the -- that's not really reflective of what the yield is in the portfolio. In reality, it's between the 110% and 115% that we've been reporting on regularly. When you have the back-ended growth in your book, you don't have time to earn the revenues. So just to put it into perspective, if we were to proportionately originate the same amount per month in Q4 rather than originate the vast majority in December, that would have led to probably post about $3 million in additional revenue for the quarter alone. That would boost the yield, that would reduce the PCL percentage just because you're increasing the denominator. So there's a lot of dynamics certainly relating to the growth as well as the credit performance primarily from the Q3 vintages before we tightened all exacerbated by the government shutdown as well in Q4. Clive Kinross: And Steve, maybe let me just jump in as well and just respond to what I'm hearing is the question behind the question. Obviously, you're reacting to an increase in the provisions. You're reacting to a compression of earnings last quarter, and just the delinquency headlines. And there's a question about how long is this going to go on for? I think that's the underlying question over there. We've been doing this for a long time. And here's the irony of the whole thing. The weakest borrowers when you go through something like this, exit the system very, very rapidly. That's the nature of short-term unsecured lending. Pricing improves quickly, largely because of the changes we've made. I've already mentioned competitors pull back in that environment and those ahead of us tighten their underwriting and future vintages strengthen almost immediately. So you're not going to see a protracted period of higher delinquencies over here. That's in the rearview mirror. And as I've stated a couple of times on this call already, expect us to return to normalcy with very profitable growth from the get-go in 2026. Sheldon Saidakovsky: And Steve, one other thing I would add also, just to put it into context as well. Obviously, you're asking about a 56% PCL, a lot of that relating to the kind of back-ended growth in the quarter. This is not completely uncharacteristic of a Q4. Obviously, Q4 and '24 was very strong. If you look at Q4s in prior years going all the way from 2021 to 2023, we probably have a PCL in Q4 close to about 54%. So it's not completely uncharacteristic that in Q4, you do have higher PCL just because it's such a high-growth quarter. But again, I would think about it as 2/3 of that relative increase in the PCL rate is relating to prior vintages prior to tightening. Stephen Boland: Okay. Okay. Great. Second question is on QuidMarket. So when I look at the stages, the book was $29 million at the end, $10 million roughly, I guess, of underperforming and then just under $2 million of nonperforming. So it seems like a very good -- I'm trying to understand the borrower profile or is it the collections that are really not allowing those loans to go into nonperforming. Is there -- again, is it the borrower or it's the -- if people over there just forget for 5 days or 10 days and you make the phone call and they pay the loan off. I'm trying to understand how that Stage 2 to Stage 3 improved so much. Sheldon Saidakovsky: Yes. And this is something we've been saying for a while since the get-go, the credit performance that's being delivered by the team in the U.K. is just outstanding. I think it's a combination of factors, Steve. First of all, we've got excellent operators, very experienced operations team over there that's doing an exceptional job once consumers miss payments and delinquency. So not stopping them from going to Stage 3 and then ultimately to charge-off. The other thing is just the market dynamics in the U.K. There's so much -- such a big market over there that's so vastly underserved that QuidMarket historically is able to cherry pick the very best consumers. on the one hand and secondly, grow in excess of our forecast. We just grew in excess of 50% year-over-year, even though we told the market after acquisition, we'd grow by 40%. So we exceeded those growth expectations, all while maintaining an exceptional default rate. So it's a combination of just our superior or excellent operations as well as just there being a vast market and our ability to cherry pick the best volume. So what this is going to lead to is there's huge runway from a growth perspective. So expect even faster growth in 2026 for QuidMarket. We're very well positioned to do that, and we'll continue growing at probably similar credit metrics that you've seen. Now we do have the opportunity to take on a little bit of a higher PCL in QuidMarket as we grow and still be very profitable. The other side of it is because of the construct of the P&L, the PCL is lower in QuidMarket -- just for comparison purposes, we're able to spend more on the acquisition side, and that's also one of the factors that increased our acquisition costs year-over-year. So the QuidMarket is driving exceptional credit performance, but we're able to increase acquisition costs to acquire more customers over there as a result. Operator: Your next question comes from Rob Goff with Ventum. Rob Goff: My first question would be on the guidance. Is that something that we should look at as back half weighted? Or is it relatively balanced across the quarters? Clive Kinross: Yes. So Rob, it's a great question. And I think you know that our business is cyclical in nature. Q1 tends to be slower growth. And then as you move through the rest of the year, the growth tends to accelerate with Q4 being the high point of the year. And our model absolutely reflects that. I think when we look back at 2025, particularly at Q3 and Q4, where we saw heightened delinquencies, we slowed our growth down in reaction to that. And consequently, the growth in Q3 and Q4, in particular, was lower than we otherwise would have liked it to have been. We obviously ended Q4 with significant growth in our CLAB that wasn't reflected in our revenues because lots of that growth happened in December. But in essence, all of that revenue will now be earned over the course of 2026, all of which is to say you will see a growing revenue from quarter-to-quarter, number one. And number two, the biggest deltas relative to 2025, you'll see in Q3 and Q4, respectively, because of a couple of reasons. First of all, comparing to what happened in 2025. And second of all, that's when we expect some of the new initiatives like Lending-as-a-Service to really start contributing in a more meaningful way. And by the way, I say that about Lending-as-a-Service, which is already starting to move the needle following almost 200% year-over-year growth in 2025. But just wait until you see what 2026 has in store, particularly the back half of the year. Rob Goff: In terms of the visibility, clearly, the provisions is a key point. Am I crazy if I look at your provisions in Q1 being down order of magnitude, 8 to 10 points Q-on-Q, given you have visibility into the quarter? Sheldon Saidakovsky: Yes. Rob, thanks for that. We absolutely have visibility into the quarter. We're 2 months in. As Clive mentioned, credit performance is right in line with expectations. If you look traditionally, just the way the seasonality of our business works, you should probably expect a PCL percentage somewhere in the mid-40% range. That is what we target, and that's certainly what we would expect in the Q1 period. And we've just kind of said that things are running in line with expectations. So if you're doing the math on that, I think that's a reasonable expectation, Rob. Rob Goff: And can I ask you for a bit more color and perspective with respect to your views on capital allocation and the NCIB, given where your current share price is? Clive Kinross: Yes. I try to get ahead of that in the prepared remarks for whatever reason, Rob, this discussion between share buybacks and dividends and reinvestments in other parts of the portfolio seems to be something of increased discussion and people have very strong views on it and different views on it. There's lots of people, lots of folks that like the steady growing discipline of the increasing dividends and the guardrails that, that provides as well. And there's lots of other folks think at attractive levels, we should be considering buybacks more. And I will tell you, we've got a very open mind to these things. First and foremost, we're going to support the organic growth of the business. I've spoken about it a few times on this call between Column Bank and between Propel International Bank. These are new initiatives that have a very high return on equity. So first things first, we need to make sure that there's capital that's allocated to those programs and other initiatives where the ROE, we expect to be quite well north of the guidance that we provided even on this call. We'd also obviously like to keep contingencies, first of all, for a rainy day, but second of all, to be opportunistic. And in this context, I'm talking about acquisitions and other organic opportunities where we constantly are looking for new opportunities and seeing some really interesting ones at the moment as well. Third of all, as I said, we will be increasing the dividend. And that obviously is a function of growing earnings, which we have a tremendous amount of confidence in. So I'm quite comfortable setting that expectation. And then obviously, we will look at share buybacks opportunistically. Operator: Your next question comes from Jeff Fenwick with ATB Cormark. Jeffrey Fenwick: I wanted to start my questions off with respect to acquisition costs. It looks like those climbed up pretty meaningfully in the quarter. Obviously, you were very active on originations. Just wondering if you could speak to some of the dynamics there. What are the expectations? Is there inflation and things like SEO costs and I think the mix of your originations changing around? Like how should we think about that going forward? Sheldon Saidakovsky: Jeff, yes, thanks for that. Maybe -- first of all, just to kind of step back for a second. I mean, we're -- we've done some incredible things on the business development side and the new initiative side for the business. We've put in a number of programs that will grow the business in the U.S. dramatically for many years to come. That includes Propel Bank, Column, all of the other stuff that we're doing, for example, you haven't seen it yet, but on the MoneyKey program, in particular, we've done some work over there that will drive significant growth on a go-forward basis. So in order to support that growth, we need to make investments on the marketing side. And we've deliberately stepped into that. And what that includes is expanding our spend on various organic channels. And we've talked about increasing our spend on organic for several quarters coming into this one. But that's a deliberate step. And I think that, that's kind of what we'll continue doing certainly over the course of 2026, and that includes branded digital marketing, direct mail, et cetera, all these things that are building Propel and its operating subsidiaries brands. So that requires upfront spend, but that also drives exceptional credit quality and opens up additional volume right at the top of the funnel. Secondly, we're -- in order, again, to support all of what we want to do is expanding marketing partnerships and additional channels. So we've started investing into, for example, online videos and social media ads and that sort of stuff that we hadn't done before and standing up additional partnerships, as I mentioned. And all of that, again, requires upfront spend. You don't see the originations flowing from it directly just yet, and you have a higher cost per acquisition on those sources to start with. But certainly, that builds our foundation to enable scalable growth to support all of these new initiatives across the U.S. And then thirdly, as I mentioned in a comment before, is QuidMarket. Again, that -- the cost per acquisition over there just relatively speaking, is higher than what we incur in the U.S., but that's offset by a lower provision. There's no cost of debt in the U.K. as an example, just yet. So we're comfortable increasing the acquisition costs over there to grow at the rates that we're growing. So all of this is deliberate. It's intentional. It's building us for the long term. We're not just managing for a quarter-to-quarter over here. We're building Propel and its operating brands for many years into the future. So what does that mean in 2026? I think the best way to think about it is our cost per acquisition will probably remain in line with where you're seeing it recently and in Q4. And then you'll certainly see a lot of the leverage coming from these investments probably towards the back part of 2026 and certainly into 2027 and beyond. Jeffrey Fenwick: That's helpful. And yes, you're sort of speaking to the overall operating leverage in the business. I know you're carrying a lot of investments in new businesses. So I guess just to clarify though, like some of the spend is already flowing through as I guess you're standing up these new things in that specific acquisition bucket of expense as well. Clive Kinross: Yes, Jeff, that's right. And maybe if I can, I wouldn't mind just taking a step back to say a few things. And I'll tie some of it back to your question and some of it -- maybe we'll touch on some of the other questions that we've gone on the call. I could tell you not me nor any of the team are pleased with Q3 and Q4. Obviously, that was driven largely by external variables, but it shouldn't be lost on anybody that the 5-year CAGR revenue and profitability of this business is in excess of 50%. And when I look at 2025 compared to 2023, we more than doubled revenues and profits over a 2-year period. And if you said to me, what's the driving force behind that growth at the end of the day, first and foremost, it's our people. And I don't say that lightly. When I look at some of the data around that, the four co-founders 15 years later, we are still together at the business, more motivated, more ambitious than we've ever been. We have a 21-person executive team here at Propel that's got an average tenure of about 9 years, which is pretty outrageous for a company that's 15 years old and have not lost a single executive. In addition to that, if you look at some of the insider selling, there's very, very little. Everybody over here is in it for the long term, and that's certainly not me suggesting to anybody nor to the executives that if they want to sell or for whatever reason, want some liquidity, they shouldn't do it. They're absolutely free to do that, but they're not doing that. And one of the reasons they're not doing that is because they're getting access to a steady growing dividend, and they've got lots of incentive amongst other things to continue to grow that dividend. I don't think that, that element should be lost and the impact that it has on developing and building a world-class team that's executing on this business. In 2025, notwithstanding some of those challenges, we stood up probably the two biggest organic initiatives since we've been around from 2011. Between Propel Bank and the Column partnership, I don't exaggerate when I say they're probably the two biggest organic initiatives notwithstanding some of the headwinds last year. And you will see the impact that those have on the business on a go-forward basis. The other thing -- and that was during some headwinds, some macro headwinds that we continue to land and build those relationships. And at the same time, what was incredibly inspiring when we had some of the challenges in 2025 was to see that team rally, to see that team go out and establish new marketing partnerships, new distribution channels that not only drove the growth in 2026, in particular, from the back half of November and into December and certainly has been following through into 2026. But those initiatives are driving profitable growth. And even though you may be seeing a little bit of an uptick in cost per acquisition, I can assure you that the delinquencies that we're seeing from these channels more than offset any increases that we're seeing on a cost per funded basis. I don't think it's prudent to assume that the cost per funded is going to come down in these channels. But I could tell you that myself and the team will be working really, really hard to drive those efficiencies at the same time. Jeffrey Fenwick: I appreciate that color. And maybe just on a different topic here. A lot of the investments are revolving around the Lending-as-a-Service area of the business. I'm just trying to get a sense of how that plays out from here. It was a little under $6 million in revenue in the quarter. Clearly, you're gearing towards being much bigger than that. But what's a realistic expectation for how that plays out this year? Is that a line that can see revenue double or be bigger this year? Or how should we be thinking about that realistically from just sort of the ramp-up of these things that you've been speaking to here? Clive Kinross: Yes, it's really starting to get going now. And obviously, I mentioned on the call that several Lending-as-a-Service purchases increased their commitments towards the end of 2025. We've just announced the commitment from Mesirow for $60 million. And I think I said a few times on the call that there's more to come. So you could see there's lots of capital coming into this program, and the reason that's happening is because we're absolutely delivering for the purchases. As it relates to Propel, we're absolutely comfortable saying that we will be -- there will be triple-digit growth in our Lending-as-a-Service in 2026. And we expect the trajectory as we get closer towards the end of the year, Q4 of 2026, we expect the Lending-as-a-Service component to start moving towards 10% of Propel's overall revenue. And bear in mind, that's moving towards 10% of a revenue number that's growing over the course of 2026. And then we'll obviously be well positioned for exponential growth in 2027 and beyond as well. Jeffrey Fenwick: That's very helpful. And then maybe just one last one that's related here. I mean there's certainly a lot of commentary about concerns about private credit investors and what's happening in that market. You obviously had success with Mesirow, which is great to see. What's your read on what's happening in the space there and the demand for the type of loan assets that you're generating for partners like that? Clive Kinross: I think it's really important, Rob (sic) [Jeff], to look at where these credit funds are investing. I think that Blue Owl, which is obviously a top-tier fund, but a lot of their investments that are leading to some of the perceived challenges are not because of their investments in consumer credit. They have funded a lot of LBOs, a lot of management buyouts of big software companies that are under pressure right now. Rightly or wrongly, they are under pressure right now. And obviously, that puts into question the underlying debt that's used to fund those deals. We're absolutely not seeing that in our segment on the market. I don't think there have been any funds that have come out so far and supported that consumer credit and suggested they are under any pressure. So I would encourage anybody who is seeing any pressure from these private credit funds to really take a look at where they're invested and where the credit is coming from. If anything, and I'm not exaggerating, we all have more and more of these funds contacting us regularly to speak to us about two opportunities. First of all, they'd love to get access to our main credit facilities. And second of all, what we're doing on the forward-flow side is certainly starting to have positive impacts in the broader environment and lots of these funds, not dissimilar to Mesirow are reaching out to us with a view to buying those receivables as well. Operator: Your next question comes from Suthan Sukumar with Stifel. Suthan Sukumar: I'll leave with one question here just on Propel Bank. What does this mean from a go-to-market perspective for you guys in the near term in terms of -- where are you guys able to put fuel on the fire? Is this more of a U.S. expansion lever here? Or could we see more entry into new global markets? Noah Buchman: Yes, it's Noah here, and I appreciate the question. The best way to look at that, at least short term, is this is about growth and new additional revenue streams and opportunity. The initial focus is significant expansion within the U.S. market. We heard Clive on the previous question comment on a lot of growth initiatives within and the vast expansion within the U.S. This is one of the future areas that will underpin that. It provides us a lot of opportunities for additional states, new geographies, customer segments, especially as we onboard current bank lending partners and new bank lending partners, and it will fuel customer expansion and geographic expansion in both the short and medium term. To tie it back to the earlier question that I was asked around more traditional business of banking. The third piece will then be layering on top additional revenue streams over and above what we're able to provide today with our services. So this will be a good, solid, high-margin revenue business for us, both short, medium and long term. Operator: [Operator Instructions] Your next question comes from Andrew Scutt with ROTH Capital. Andrew Scutt: I'll keep it short with one quick question. But in Q1 and Q2, you guys usually see a benefit from a tax refund season. We're still in early days here. But can you guys kind of talk about what you're seeing so far? Clive Kinross: Yes. I think that's what we're seeing and then there's the information that we have access to in terms of what's going on in the broader marketplace. So certainly, what we're seeing is we're seeing strong repayment behavior. We're seeing strong delinquency performance. And that's largely a function of being in the middle of tax season. Andrew, the offset to that or in addition to that, and this is the good part, we're seeing robust demand as well. Those two things don't normally go hand in hand. With that said, we believe that the biggest tax refund days, and consequently, the days that we expect delinquency performance to be the strongest, probably line next week, so -- sorry, this week, the first and the second week of March is where we expect the refunds to really start coming back. So if anything, the incredibly strong results we've seen so far, hopefully, will get even stronger as the quarter continues. From what we know, the refund amounts this year are about 10% higher than they've been in years past. In addition to that, the child care tax refund is only going to start going out in the middle of March. So overall refunds by volumes are actually down a little bit from prior years. The amount of refunds is up a little bit from prior years. That's quarter-to-date, but any shortfalls on the volumes will be made up in Q3. So overall, that's driving obviously very strong delinquency performance. And as I've said a few times, coupled with robust demand, and if you said to me, where is the robust demand coming from in that environment, I think it's coming from two different areas. Number one, there has been continued tightening across the credit spectrum. So we have high-quality volumes that are moving to our segment of the market. And I think some of the challenges, credit challenges in Q3 and Q4 really cleansed the market of some of the competitors that were in the space. So there's been a little bit of a cleansing over there, albeit with the smaller, less well-capitalized lenders and that volume is also now being absorbed by bigger players like ourselves. Operator: There are no further questions at this time. I will now turn the call over to management for closing remarks. Clive Kinross: Thank you, and thank you, everybody, again for attending the call this morning. I'd also like to thank our investors and partners for their continued support and our vision of building a new world of financial opportunity. And as always, I would like to extend a really big thank you to the Propel team in Canada, the U.K. and now Puerto Rico for delivering these outstanding record results and achievements. On that note, have an excellent day. And operator, you may end the call. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good afternoon, and welcome to the Superior Group of Companies' Fourth Quarter 2025 Conference Call. With us today are Michael Benstock, Chief Executive Officer; and Mike Koempel, President and Chief Financial Officer. As a reminder, this conference call is being recorded. This call may contain forward-looking statements regarding the company's plans, initiatives and strategies and the anticipated financial performance of the company, including, but not limited to, sales and profitability. Such statements are based upon management's current expectations, projections, estimates and assumptions. Words such as expect, believe, anticipate, think, outlook, hope and variations of such words and similar expressions identify such forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward-looking statements. Such risks and uncertainties are further disclosed in the company's periodic filings with the Securities and Exchange Commission, including, but not limited to, the company's most recent annual report on Form 10-K and the quarterly reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to update the forward-looking statements, except as required by law. And now I'll turn the call over to Michael Benstock. Michael Benstock: Thank you, operator, and thanks, everyone, for joining our call. I'll begin with an overview of our fourth quarter results, followed by a discussion around market conditions. I'll also cover at a higher level how each of our business segments is performing along with some of our go-forward strategies. Mike will then walk us through a more detailed financial review before we open it up for Q&A, for which we'll be joined by Jake Himelstein, President of our Branded Products business. For the fourth quarter, solid growth in our Branded Products segment helped drive SGC to an overall modest year-over-year increase in revenues, while we also lowered expenses despite this growth. As a result, we generated 19% higher EBITDA than the year ago quarter, and our EPS nearly doubled to $0.23. In addition, as expected, fourth quarter results reflected the back-end weighted nature of our business with revenues up 6% sequentially and diluted earnings per share up more than 28%. Our outlook for SGC for 2026 that Mike will share in a moment reflects solid growth expectations for the year, again, with a back-end weighted cadence due to expected order patterns and anticipated new customer growth in our Contact Centers segment. Turning to market conditions. There remained a degree of economic uncertainty amongst customers and prospects across all of our business lines. Nevertheless, we were able to grow consolidated revenues during the fourth quarter. Again, the progress we've made in driving efficiencies and containing costs, as you see from our bottom-line performance reported today, should prove beneficial once macro conditions normalize and stronger demand returns. Taking a step back, our overarching strategy is to emerge stronger from these currently uncertain economic and geopolitical times, with even greater market share as we have through past complex macro cycles. Our leadership team will accomplish this by continuing to strategically invest in growth while at the same time driving efficiencies and removing unneeded costs from the business. Moving on to our business segments. Branded Products, our largest segment, had 5% year-over-year growth during the quarter or a 14% sequential increase despite the challenging tariff environment's impact on customer order patterns throughout the year. Our pipeline and order backlog remains solid and have already generated some large new wins this year. Looking ahead, we'll be focused on growing our market share further in this attractive, highly fragmented market. Specifically, we anticipate further expanding our sales force as well as leveraging technology to make new and existing reps even more efficient. Turning to Healthcare Apparel. Revenue was off 5% year-over-year in the fourth quarter, which reflects macro uncertainty for both our wholesale-related consumer channels and institutional healthcare apparel. Similar to Branded Products, we're investing to grow demand, in this case, to support our Fashion Seal, Wink and Carhartt brands, while at the same time keeping a watchful eye on expenses. In fact, versus the year ago quarter, despite continued marketing investments, we were able to drive a slight decline in SG&A, resulting in a positive outcome for EBITDA. Going forward, we see opportunities to grow our digital and brick-and-mortar wholesale channels as well as our own direct-to-consumer channel, which continues to have momentum. Our third business segment, Contact Centers represents 15% of consolidated revenues and saw an 8% annual decline in the top line driven by the downsizing and loss of existing customers from earlier in the year that have not yet been outweighed by new customer growth. Prospective customers have been slow to commit given the economic uncertainties, but our pipeline remains solid even after producing customer wins early this year and should translate into further growth, particularly in the back half of 2026. In addition, we're again controlling what we can. We reduced SG&A for Contact Centers by nearly $1 million or 10% versus the prior year quarter, driven by streamlining our cost structure, including the strategic use of AI. In closing, we're cautiously optimistic about the year ahead, and our strong balance sheet that Mike will discuss allows us to intelligently navigate current market conditions, while positioning SGC for long-term success. We also brought back a significant number of shares during the quarter, reflecting our belief that our stock has a compelling long-term value. Mike will now take us through a more detailed review of fourth quarter results, then we'll open it up for Q&A with Mike, Jake and myself. Mike? Michael Koempel: Thank you, Michael, and thank you again, everyone, for joining today's call. During the fourth quarter, we generated consolidated revenue of $147 million, which was up 1% year-over-year and up 6% sequentially from the third quarter, demonstrating the back-end weighted cadence of our revenue as expected. Our largest segment, Branded Products grew revenue 5% over the prior year quarter to $97 million, primarily driven by revenue growth from the 3Point acquisition in December 2024, followed by modest organic growth. Sequentially, Branded Products grew quarterly sales by more than $10 million, fulfilling our back-end weighted expectations. Healthcare Apparel is our next largest segment, which produced revenue of $29 million relative to $30 million a year earlier as the macro uncertainty for wholesale-related consumer and institutional healthcare apparel channels that Michael mentioned continue to weigh on growth. Rounding out our segments, revenue for Contact Centers was $22 million as compared to $24 million in the prior year period as customer losses and reductions with existing customers exceeded gains from new customers, although, we have started 2026 with early momentum driven by a few conversions of our pipeline opportunities, as Michael mentioned. We are cautiously optimistic that additional new opportunities will provide meaningful benefit starting in the latter part of the second quarter and drive year-over-year growth in the back half of the year. Looking at the bigger picture, continued tariff and economic uncertainty notwithstanding, our business pipelines across all our business segments remain solid to end the year. And as mentioned, we have yielded some important new wins in early 2026 thanks to our attractive competitive positioning and the investments that we've made in sales talent and marketing strategies. Assuming macro conditions continue to normalize with some improvement in economic uncertainty ahead, we expect sales growth for all 3 segments in 2026, as I'll speak to in a moment. Moving down the income statement. Our consolidated fourth quarter gross margin of 36.9% was nearly flat with the prior year quarter's 37.1%. On a more granular basis, our Branded Products gross margin came in at 34.4%, up 50 basis points versus the prior year despite higher tariffs. Our Healthcare Apparel gross margin of 33.6% was nearly flat, off just 10 basis points. And for Contact Centers, gross margin was down about 2 percentage points to 52.6% due to higher agent costs and a shift in our revenue mix associated with the July closure of our lower-cost Jamaica center, which was more than offset by SG&A reductions. Overall, SGC made good progress reducing SG&A compared to the year ago quarter by about $1.4 million despite overall positive revenue growth. As a result, SG&A as a percent of sales came in at 33.2% for the fourth quarter, an improvement relative to 34.4% a year earlier. In fact, we were able to reduce SG&A across all 3 business segments. Putting it all together, our fourth quarter EBITDA of $8.6 million was up from $7.3 million in the year earlier period, with our EBITDA margin improving by 90 basis points to 5.9%. Turning to net interest expense. It was $1.3 million for the quarter, an improvement relative to $1.5 million in the fourth quarter of 2024, benefiting from a lower weighted average interest rate. Lastly, our fourth quarter net income of $3.5 million was up from $2.1 million in the prior year period, and this equated to $0.23 of diluted EPS, up from $0.13 in the year ago period. Shifting gears, our balance sheet remains solid with $24 million of cash and cash equivalents at year-end, which was up $5 million versus the start of the year. We generated $20 million in positive operating cash flow during the year, and we remain well within covenant compliance. Our total liquidity, including cash and availability under our revolving credit facility is over $100 million, allowing for the continued execution of our growth initiatives, while also returning significant capital to shareholders. In fact, during the fourth quarter, we paid out $2 million in dividends and another $2 million to repurchase our shares, which we consider a compelling value. We ended the year with approximately $10 million still available under our share repurchase authorization. Turning to our outlook for 2026. We're setting an initial full year revenue range of $572 million to $585 million, which assumes no significant change in macro conditions due to geopolitical or other events and implies 3% growth at the high end. Taking these factors into consideration, we are also expecting full year earnings per diluted share to be in the range of $0.54 to $0.66, suggesting significant improvement over $0.46 in 2025. Consistent with prior year, we expect a back-end weighted cadence to 2026 for both the top and bottom lines. We feel confident in our outlook given our recent momentum, competitive advantages, growing pipelines of new business and the attractive nature of the end markets we serve. And now, operator, if you could please open the lines, Michael, Jake and I will be happy to take questions. Operator: [Operator Instructions] And the first question will come from Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Congratulations on your quarter. A couple of questions. I know that you've been investing in your Wink and Carhartt brands for some time. And I was wondering if there are some green shoots on how those investments have been paying off. And so I was wondering if you can give us an update there. And in addition, can you give us an update on the market environment for the Healthcare Apparel sector overall, both from the standpoint of the direct-to-consumer side and also from the institutional uniform side of the business? Michael Koempel: Michael, this is Mike. I'll take your questions. What we're seeing on our Branded Healthcare Apparel, the Wink brand and then obviously, the license we have with Carhartt is still overall positive. I mean, we're continuing to see growth of those brands in our direct-to-consumer channel. I know at this point, we have not disclosed specifics on that. And at some point, we will down the road as it continues to get bigger. But we continue to see significant growth, again, in both of those product lines, again, largely within direct-to-consumer, but then also with our wholesale-based customers as well. We had a little bit of softness in Q4 with a couple of customers, which is why you saw the comp in Healthcare Apparel down in Q4, but we're seeing more positive momentum with those brands and in the retail environment as we started off for 2026, which is why, as I mentioned in my prepared remarks, our expectation is growth overall in the Healthcare Apparel segment. Michael Kupinski: Great for the color. And then on the Contact Centers side, it appears that the revenue stabilized in the quarter. And I know that you indicated that the pipeline has improved. Is there -- are we still seeing some macro-driven hesitancy there? I was just wondering are we starting to see some of that abate in the first quarter? Can you just kind of give us some sense of how new business is -- the environment is kind of improving there? I know that you're saying that it looks like it's back half weighted there as well, but I was just wondering if you can give us a sense of how the pipeline is improving for that segment. Michael Benstock: Mike, it's Michael Benstock. I'm going to jump in and say something then I'm going to turn it over to Mike, who I think will have a more direct answer. But overall, in all of our businesses, we're still seeing this whole pattern of customers' decisions, ordering, deal closing velocity, just to us seems constrained. I sat in a meeting with other CEOs yesterday, a large group of CEOs, and that was the consensus. Everybody is feeling the same constraints. And the constraints are coming from the geopolitical climate, obviously, and the economic uncertainty. And had I said that a week ago, you would have said, well, it's getting better. But in the last week, a lot has happened to probably elevate that uncertainty for even a longer period of time. I think customers are waiting for clear market signals before making decisions. Now having said that, we're seeing some very positive signs on the Contact Centers business. I'll let Mike get into that a little bit. Michael Koempel: Sure. I would say, Mike, the best way to put it is we're cautiously optimistic. I mean, we certainly don't want to get ahead of ourselves, but I think that we -- as you know, from following us quarter-to-quarter in 2025, there was a significant amount of hesitancy and we weren't seeing that pace of new customer growth that we had seen historically yet, again, as we spoke about in multiple quarters, had a really strong pipeline. So we're encouraged by some of the movement we've seen here at the beginning of the year on the new customer front. We're feeling also, at the same time, right now positive about the status of our existing customer base. Again, you might recall last year, we did have some challenges with respect to bankruptcy, some bankruptcy customers in the Contact Centers space. Again, as of this point, we don't see that type of risk. So we're cautiously optimistic. And as I mentioned in my prepared remarks, we would expect to see some growth in the latter part of Q2, which would then bode well for us to drive a stronger growth in the back half of the year. Michael Kupinski: Got you. One last question. On the Branded Products side, you mentioned about expanding the sales force. And I was wondering, we saw some nice growth in this quarter. I was wondering in terms of the increase in revenue that we saw in the quarter, was that a result of the expanded sales force? Or were there other things at play in the revenue growth that we saw in the quarter? Jake Himelstein: Michael, this is Jake Himelstein. To answer that question, it's a variety of factors. It certainly is part of our recruiting efforts to bring in additional salespeople. We've talked about it before, but we're a very desirable landing spot for salespeople in our industry. There's 100,000 people that sell products -- Branded Products across the country, and we are a very desirable landing spot because of the breadth of capabilities we have. But it was also because of some really good underlying fundamentals. We had great program wins, really strong orders. Our Q4 does tend to be traditionally a very strong quarter in the Branded Products segment because of employee holiday gifts, and this year was no exception. Operator: The next question will come from Jim Sidoti with Sidoti & Co. James Sidoti: I think the most impressive part of the quarter was you were able to basically double your EPS on flat revenue. So it shows you have done a pretty good job adapting to the current business environment. But looking ahead, you expect to grow revenue maybe about 2% or so next year, and you're looking for some pretty healthy EPS growth. Where do you expect the margin expansion to come from on the gross margin or on the SG&A line? Or can you give us a sense? Michael Koempel: Jim, this is Mike. I'll take the question. We'd expect it to see it in 3 areas. We do expect some gross margin improvement. We expect to see some of that improvement really in each of the business segments. So I think gross margin expansion will drive some level of improvement. A little bit of improvement on the SG&A line. I think that, obviously, there are some variables at play there depending upon the level of revenue that we drive and the investments we might need to make in marketing as well as in some human capital. But then I'd say, the third piece is we are expecting lower interest expense as well. We expect to drive, again, some continued improvement in working capital. We know that we can bring inventories down, which we've demonstrated in the past can drive a lot of cash flow. So we're expecting to get a benefit out of lower debt outstanding as well as interest rates versus 2025. James Sidoti: I did notice your accounts receivable ticked up in the fourth quarter. Has that already started to come down? And do you think that will come back to historical levels in Q1 and Q2? Michael Koempel: Yes, there's nothing unusual there, Jim. It's really just the timing of sales. I mean, December was a really strong month for us. And so it's really just the timing of orders year-over-year. And so we'll collect those receivables within our normal pattern and will be cash flow positive for us here in the first half of the year. James Sidoti: And can you comment on what the acquisition environment looks like? Or are there more targets out there than there were 12 months ago or less? Or is it pretty much the same? Michael Benstock: It's a deck a day. It's quite a robust field out there. And Jake, in particular, is fielding a lot of these. Most of them, quite frankly, we have no interest in. They're either too small or they're too broken, and they have no great value to us. But we are always looking. And we -- I can't say we're in really serious discussions right now with anybody on that side or -- and the same thing is true on The Office Gurus' side. We have companies that we like. We have companies that we're talking to. We have companies we're digging into a little bit. And particularly, as we said, with The Office Gurus in the Philippines, we do want a presence there, and we have been looking for a path for that. Absent finding that path, we will open up our own center in the Philippines, but we feel like we can do it faster and cheaper by purchasing another company. But it's a very robust market out there. I think everybody is worried. It's not only the macro environment. It's people worrying about how AI is going to impact their business because they've invested nothing in it. And they see us as a way, a path forward because they know we have and feel like we'll be one of the last men standing in this race in all of our businesses. So it's a good time. It's definitely a buyer's market at this point. James Sidoti: All right. And then last one from me. CapEx has been around $4 million or $5 million the past couple of years. Do you anticipate any big expenditures this year? Do you have to make any big investments? Or do you think that's kind of a good run rate for 2026? Michael Koempel: We're not -- Jim, we're not expecting any major departure from what we've been running. We're planning for something in '26 that's a little bit higher. But again, there's nothing that I would call at this point that's individually significant in nature. I think that we made a big investment a few years ago, which we're able to leverage. And so again, not expecting anything significant next year. Operator: The next question will come from Keegan Cox with D.A. Davidson. Keegan Tierney Cox: I just wanted to ask, you kind of talked about the AI piece of the business, especially helping improve sales and then in your Contact Centers business. So I guess, what kind of AI tools are you guys currently using across the platform? Michael Benstock: We're using many tools, some we wouldn't disclose on this call. We don't necessarily need all of our competition knowing what tools we're using. Some of them are proprietary. But essentially, we're monitoring just about every call that we're taking, which are hundreds of thousands of calls a week, and we're able to score them immediately. We're able to coach the agents on the spot as the call is progressing. We're able to set up all kinds of coaching opportunities afterwards. We're doing accent smoothing. We're doing noise cancellation. I mean we're doing a lot, but some of which I really would prefer not to disclose. I mean, obviously, when we get into customer presentations or prospect presentations, we do disclose it because that's what helps us win the business. But I can tell you, we are not behind the curve at all when it comes to AI and call centers. Most people are talking a good game about what they should do and are having a terrible time trying to implement their -- the different solutions that they found. We, in fact, have become the implementation partner for a couple of AI companies to help them implement it in other places that are not competitors of ours. And that -- and only because we've done it so many times. You can imagine that when we implement an AI solution or a group of AI solutions to our centers, we're doing to 20, 30, 40 customers, and every one of those is unique. Remember, they're all operating on different technologies. They bring their own technology to our center. So our implementation has to integrate with their technologies, and we've been able to do dozens of these. So they see us as a great path to creating a better implementation, which is what most people are struggling with right now. Keegan Tierney Cox: And then a follow-up. I just wanted to talk a little bit about the margin improvement in Branded Products. As I look, it's almost 250 basis points, 300 basis point improvement sequentially, better gross margins on a full year basis than in 2023 despite tariff pressure. I was just kind of wondering if you could parse out how much of the margin improvement you guys are seeing is on pricing versus cost reduction? Jake Himelstein: It's both, right? I don't think you can really split it out between the 2. And it really does come from both. We are aggressively going out and searching for not just the lowest cost, but the best vendors globally. So when the tariff environment changes in one region or another, we'll move production between regions, and we do that better than just about anyone out there on the Branded Products side. So Keegan, we definitely see it as it relates to the cost side, but we're also really purposeful about exploring price ceiling and making sure that we're selling at the highest price we can. And not all business is good business. And the clients that work best for us, the ones that see the value in what we're able to do and ones that appreciate what we do. And so we're not in a race to the bottom. And that's not our business model on the Branded Products side. But yes, it really does come down to both things you said. It's making sure that we're selling at a fair but the highest price that we can offer and then also negotiating the best possible cost globally with our supplier network. Keegan Tierney Cox: Got it. And then the last question is on, if you guys are expecting any margin impact from investing in salespeople in the Branded Products segment. I guess, how do you balance adding salespeople with ongoing cost saving SG&A reductions? Jake Himelstein: Yes. So Keegan, the best way to think about it is there's 2 types of salespeople that we look at. Some are commission only, which means that they only get paid if they sell, and there are some that are salaried. And as we bring on people with salaries, which we have done and will continue to do, there is an investment period. And that investment ramp up can be a year to 18 months until they're actually seeing revenue come in the door. We are constantly bringing on new salespeople, both commission only and salaried to build that base of salespeople, right? The more people we have out there selling our product, the more opportunities we have with large enterprise opportunities. So you hit the nail on the head. We are actively investing in new salespeople and sales management to be able to grow our future sales. And again, that doesn't pay off today. It pays off 12 to 18 months from now. Operator: The next question will come from David Marsh with Singular Research. David Marsh: Congratulations on the quarter. It's really, really good print. So yes, I just wanted to run through each line and a couple of specific questions. On the Branded Products side, I mean, it's a really nice year-over-year number. I mean, could you talk about how that breaks down between like new customer wins and share with existing customers in terms of growth with existing customers? Michael Koempel: We really look at growth across the board. And the reason I say that, is if you get to these large, large companies in our space, we're talking like Fortune 100 companies, a lot of them, we have so much potential to sell more to them that you get to a new department or to a new buyer, and it's almost like bringing on a new client. And so a lot of times, when we're talking to our sales team, we're telling them the best new client is an existing client. We can grow so much with existing, and there's so much opportunity there. But the other side of that is we are actively involved in RFPs to bring on new logos. So we are preaching both. It's expand share of wallet with existing, right, might be selling them uniforms, but we also want to sell them promotional products. We also want to sell them point of purchase and point-of-sale displays. But we also are actively involved in RFPs and trying to bring on new logos. Our pipeline is really, really strong relative to recent periods. Exiting Q4, our RFP pipeline was meaningfully higher than the same period last year. And the good news is that the skew is like -- mix of the skew of it is towards larger enterprise programmatic clients. That's the clients we want, ones that are spending significant money, we're building programs for them. So we've already seen some of these RFPs in the pipeline convert in Q1, and we expect a couple more to convert, which will drive revenue growth through 2026. Michael Benstock: Let me add to that. David Marsh: That's great color. Michael Benstock: Yes. I don't know if you've -- in the last few quarters, we've said that our average order size has actually come down. But we are -- we've actually been able to grow the business. So when you look at that, I mean, the only conclusion you can draw from that, if your average order size is coming down, but somehow you've grown the business, yes, some of that could come from pricing for sure. But most of that is just increased market share. And we should see when things get back to normal, all these customers who are ordering less, ordering less expensive items, ordering fewer items, they get back to normal, we should be cranking on all cylinders. David Marsh: Appreciate that, Michael. That's -- that's great color. Turning to the Healthcare side. Can you just talk about the state of the business? I mean, it just feels like this business at some point needs to show some growth overall. I mean, can you just talk about your assessment of your own market share and kind of the behavior of your competition in the marketplace? And I mean, we have to be adding more nurses and more doctors, I would think. And you think you would see some growth here overall in the market. Just talk about what your expectations are there and the market dynamic? Michael Koempel: Sure. I mean, we're still very positive about the market overall. As you said, there's a shortage of healthcare workers, which is certainly going to be a benefit to this business over time. And we feel there's an opportunity for us to get an additional portion of that market share. What we've seen more recently, as I mentioned, I think with an earlier question, we've seen a little bit of softness on the retail side of the business, with a couple of customers in the digital space in the fourth quarter. We see that actually starting to improve here as we start 2026. So feeling more encouraged by that. And then we have, I think, over the last couple of quarters, seen some pressure on the institutional healthcare side where spending by hospitals has been a little bit constrained just given some of the uncertainty and some of the government actions that have taken place. And so we're hopeful that that improves on that side of the business as we head into 2026. But we're focused on continuing to drive brand awareness for our Wink brand. As I mentioned before, we're very happy with our exclusive license with Carhartt and the growth of that business, and we believe we can continue to grow those brands. And again, as I mentioned before, we're starting to see some of the retail challenges that we experienced in Q4. We're starting to see some, I guess, you would call green shoots in terms of positive change in trend as we're heading here into 2026. David Marsh: Got it. Appreciate that. And then just lastly on the Contact Centers business. In terms of -- just in terms of kind of overall business outlook for that segment, obviously, you guys took a hit with a customer bankruptcy, but it seems like -- I'm guessing that the rest of the portfolio has held up pretty well. But I mean, you just having a tough time backfilling that significant customer loss? And just could you just kind of assess kind of overall competitive dynamic of that marketplace? Michael Koempel: Sure. We have had the challenge with not having the pace of new customer growth that we've historically had to offset some of the losses. There's always going to be a level of churn in the business, as you would expect in any business. And we had 2 challenges. We had a higher level of turnover due in part to the bankruptcies than we've seen before and just the decision-making of prospective customers had just been extremely slow. Two dynamics we had not seen before in that business happening at the same time. Again, as I mentioned in prior remarks, we're seeing that shift. We believe that the base of our customers is more stable. We don't foresee any major bankruptcies or things of that nature based on what we know today. And we've already had some conversions of what we call pipeline opportunities, which, again, we believe will lead to growth starting in the latter part of the second quarter into the second half. So like I said, we're cautiously optimistic. We're encouraged, whichever words, I guess, you prefer. But I think we're happy to see that we're seeing a shift here as we start the year, and we're going to stay focused on converting as many opportunities as we can in that market. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Michael Benstock for any closing remarks. Michael Benstock: Thank you, operator, and thanks, everyone, for joining us today. As always, we appreciate your interest in Superior Group of Companies. You heard today that, we will continue buying back our stock as we believe it is grossly undervalued, and it's in our shareholders' best interest that we do so. I want to thank our hardworking team for their outstanding efforts in a really challenging macro environment. They just have done a wonderful job to continue making the most of what they were able to of 2025 and now into 2026. And of course, we thank our loyal customers for the business they give us and the trust they have in us each and every day. As a firm, we will always try to do what we can do in our attractive businesses to create significant shareholder value. We look forward to seeing many of you during upcoming conferences and road shows. And in the meantime, please don't hesitate to reach out with any additional questions. And thank you again for your interest in SGC and enjoy the evening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, and welcome to Cryoport's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I will now turn the call over to your host, Todd Fromer, from KCSA Strategic Communications. Please go ahead. Todd Fromer: Thank you, operator. Before we begin today, I would like to remind everyone that this conference call contains certain forward-looking statements. All statements that address our operating performance, events or developments that we expect or anticipate occurring in the future are forward-looking statements. These forward-looking statements are based on management's beliefs and assumptions and not on information currently available to our management team. Our management team believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, Risk Factors and elsewhere in our annual report on Form 10-K to be filed with the Securities and Exchange Commission, and those described from time to time in the other reports, which we file with the Securities and Exchange Commission. As a reminder, Cryoport has uploaded their fourth quarter and full year 2025 in review document to the main page of the Cryoport, Inc. website. This document provides a review of Cryoport's financial and operational performance and a general business outlook. Before I turn the call over to Jerry, please note that because of the strategic partnership that has been established with DHL and the related sale of CRYOPDP to DHL, CRYOPDP's financials, which were previously a part of Cryoport's Life Sciences Services reportable segment are now presented as discontinued operations. Cryoport previously provided quarterly historical information on this basis for fiscal year 2024 and our first quarter 2025 in review document, which remains available on the Cryoport, Inc. website. This information is intended to support the financial modeling efforts of those needing this type of information. Please note that unless otherwise indicated, all revenue figures discussed today will refer to continuing operations. This includes Cryoport's fiscal year 2025 revenue guidance. It is now my pleasure to turn the call over to Mr. Jerrell Shelton, Chief Executive Officer of Cryoport. Jerry, the floor is yours. Jerrell Shelton: Thank you, Todd. We have a great report for you today, ladies and gentlemen. But before we begin, with us this afternoon is our Chief Financial Officer, Robert Stefanovich; our Chief Scientific Officer, Dr. Mark Sawicki; and our Vice President of Corporate Development and Investor Relations, Thomas Heinzen. Today, we reported our full year results for 2025, which was a year of strong progress for Cryoport. We delivered full year revenue from continuing operations of $176.2 million, exceeding the high end of our prior guidance and reflecting continued momentum across our core markets. In the fourth quarter, we again achieved double-digit revenue growth driven by expanding commercial cell and gene therapy activity and revenue from the support of commercial cell and gene therapy increasing 29% year-over-year to a record $33.4 million for the year. Commercial cell and gene therapy revenue in the fourth quarter represented 20% of our overall revenue, while clinical trial revenue remained solid, growing 14% year-over-year to $47.1 million. We concluded 2025, supporting a record 760 clinical trials and 20 commercial therapies worldwide. Our clinical trial support showed a net increase of 59 over the previous year and represented approximately 70% of total trials for the cell and gene therapy industry. Looking ahead to 2026, based on the information that we have, we anticipate another 13 BLA or MMA (sic) [ MAA ] application filings, including 2 of which have already been filed, 9 new therapy approvals and an additional 2 approvals for label or geographic expansion. In the near term, Cryoport has 3 customers that are anticipating new therapy approval decisions in March and April of this year. We believe our clinical trial pipeline is spring loaded with 86 clinical trials in Phase III and 361 clinical trials in Phase II. Remember, most of the cell therapies that were approved today were from Phase II. In our opinion, this market-leading base will drive the growth of our commercial revenue in the near and the long-term. We continue to execute on our mission of expanding services to the life sciences by broadening our revenue streams and capturing more revenue per client. For 2025, revenue from our Life Sciences Services segment increased 18% year-over-year, including 22% growth in BioStorage/BioServices revenue. Our performance reflects the expanding scale and scope of the clinical and commercial programs we support and the trust our customers place in our comprehensive end-to-end supply chain solutions. While our primary focus remains on accelerating revenue growth and strengthening our market position, we continue to enhance our operational discipline along -- across the organization, as we advance on our pathway to profitability. In 2025, our cost reduction initiatives contributed to our gross margin of 47%, accompanied by a $12 million year-over-year improvement in adjusted EBITDA. With our progress to date, we anticipate achieving positive adjusted EBITDA in the second half of 2026. Turning to our Life Sciences Products segment. Revenue grew 7% year-over-year in 2025. MVE Biological Solutions focused on execution and innovation and continues to further enhance its position as the global leader in the production of high-quality cryogenic systems. Recently, MVE launched its integrated condition monitoring solutions for its dry vapor shippers. These novel condition monitoring solutions are integrated with each door, combining MVE's trusted cryogenic systems with advanced real-time conditioning monitoring technology supplied by Tec4Med, another Cryoport company. This system communicates with MVE's new Cryoverse, a cloud-based data capture and shipment management system. More recently, MVE launched its Fusion 800 Series, a revolutionary self-sustaining cryogenic freezer that can fit through a single door, which opens up substantial market opportunities. These revolutionary cryogenic freezers eliminate the need for continuous liquid nitrogen supply, delivering exceptional reliability, safety, and sustainability in a compact footprint that is designed for settings where there is limited space and no readily available sources of liquid nitrogen. At Cryoport Systems, we increased our internal investments to support the traction that we are seeing across our broad portfolio of cell and gene therapy clients. These strategic investments include the completion of our Global Supply Chain Center in Paris, France, the expansion of our Belgian operations to accommodate a key commercial client, and continuing the build-out of a Global Supply Chain Center in Santa Ana, California, which consolidates 3 existing facilities into a single expanded campus and enhances our service capabilities. Of course, one topic of the day is AI, and it is certainly a tool we are embracing. As a part of our overall digital strategy, we are actively leveraging generative AI to enhance internal workflows and day-to-day operations. Our focus is on enabling employees to use secure enterprise-approved generative AI tools to reduce manual tasks, accelerate execution, and improve accuracy and consistency of outcomes. These focused efforts emphasize practical adoption through education, hands-on support, and real production use cases tied directly to current business needs. There's no doubt that AI is reshaping our business and will play a significant role in our future. In 2025, we reported a strategic partnership with the DHL Group, which included DHL's acquisition of CRYOPDP. This action was completed in the second quarter of 2025 and provided Cryoport with a substantial capital infusion. Over time, we expect this relationship to enhance our position in APAC and EMEA regions and strengthen our competitive industry profile by leveraging the global scale and capabilities of this key strategic partner. As a part of our continuing strategic initiatives to embed our market-leading solutions in the cell and gene therapy ecosystem and improve our growth trajectory, we expanded our global partnerships by entering into strategic collaborations with Cardinal Health and Parexel. Both companies are leveraging Cryoport Systems' supply chain solutions in support of their complementary offerings in the cell and gene therapy space. These partnerships reinforce our position as a market leader in this space and the industry's drive to standardize. As we enter 2026 and consider global macro puts and takes, we believe that our full year revenue guidance of $190 million to $194 million is an appropriate starting point for the year. On a second point, we anticipate achieving positive adjusted EBITDA in the second half of 2026. There's a lot coming into focus for us, and we are very excited about our prospects for 2026 and intend to capitalize on our current momentum, leadership position as the only pure-play temperature-controlled supply chain integrated platform supporting the life sciences industry's largest portfolio of clinical and commercial cell and gene therapies. This concludes my remarks, and I now will turn the call over to the operator to open the lines for your questions and our discussion. Operator: [Operator Instructions] Your first question comes from the line of Puneet Souda from Leerink Partners. Puneet Souda: So first one, Jerry, or maybe for Robert. The guide that you have high single-digit, nearly 9% at the midpoint for the year -- could you elaborate a bit more on that? And in terms of the segments, how should we think about the growth in biologics and the services and the MVE? And given the commercial momentum, commercial therapy momentum that you're seeing, how should we think about that growth in -- for the full year? And I have a follow-up. Jerrell Shelton: Okay. So there are several questions in that request, Puneet. So I'd like to start to kind of parse those questions. So your question -- the first one is how we feel about -- that was your last point about how we feel about the growth of cell and gene therapy for 2026. Is that correct? Puneet Souda: Yes. Well, on the commercial side, I mean, what's your growth expectation for commercial therapies? And then also, if you can provide more color on the segments, each of the segments, the BioLogistics, BioStorage, and the MVE? Jerrell Shelton: Okay. So I'm going to start with the last question first, and I'm going to turn it over to Mark, okay, because he has a view on this. But we do expect continued progress with our existing customers, and we do expect to be bringing on other commercial therapies during the year. It does take time for them to ramp up, but they will have some impact. And some of those that we've already brought on will have a continuing impact. And Mark can name some of those names perhaps, but we do try to avoid commenting directly on customers' business. So in general -- let me turn it over to Mark and let him answer the rest of that. Mark W. Sawicki: Yes. So Puneet, obviously, we typically don't furnish guidance on composition by type. We did increase our commercial revenue by 29% in 2025, and it's now eclipsing 20% of our overall revenue. Looking at '26, we do expect to have another good year in '26, although we haven't disclosed the percentages associated with the commercial revenue at this point. Jerrell Shelton: Puneet, there's no doubt about it that commercial therapy will be the driver of our future. I mean, it is the fastest-growing market. And as I mentioned earlier, we're forecasting 9 new therapies in 2026, and we're -- furthermore, we're forecasting 11 BLA/MAA filings to take place. As I mentioned in my comments, we think we're spring-loaded. We have 86 trials in Phase III. And then we have that -- I think it was 391 in Phase II. So we're spring-loaded for a brilliant future. And even if half of those in Phase III are approved, it's a fantastic for us. So... Robert Stefanovich: Maybe just to add to it, we've grown in all of our service lines, and we've grown on our product side as well. We expect to continue to see growth really in all of our product lines and service lines. We always talked about services growing double-digit, obviously, commercial therapy being the strong grower within that. And then on the product side, single-digit growth, mid-single-digit growth, potentially high single-digit growth depending on how the demand is coming back. Jerrell Shelton: So on your second part of your question, Puneet, and if I've missed anything or we've missed anything, you can come back. But second part of your question on BioStorage/BioServices. BioStorage/BioServices grew by 22% for this past year. We're very pleased with that. And it will continue to grow. In fact, we think it will pick up growth. I'm certain about that. And of course, it is driven by cell therapy approval. So it's a bright future for BioStorage/BioServices. The third part of the question -- please go ahead, Puneet. Puneet Souda: Yes. On the -- just on the MVE segment too, I mean, you had 2% growth, I believe, in the quarter. And -- correct me if I'm wrong. And how should we think about that? Jerrell Shelton: Yes, we had -- we were up 7% for the year. And MVE is doing well. I mean, it's got -- we try to create these fountains of innovation throughout the company to make sure that we're moving ahead. MVE has introduced its -- the integrated monitoring systems that I mentioned during my comments, but more -- equally important are the things that will be introduced in this next quarter or in this quarter, as a matter of fact. So -- and we've introduced the Cryoverse. So you're going to see MVE also adding some services to the product that is producing. But remember that Fusion 800 opens up a vast new market for us. I mean, vast because there are many facilities on second floors in countries around the world that can't get a large freezer on that second floor that need a large cryogenic freezer. Hospital pharmacies will like this product as we move forward and as allogeneic therapies are developed. Puneet Souda: Super. And then just a quick clarification on Q1. Any color you can provide there would be helpful. Just -- and I wanted to know if there are any flight cancellations disruption from any of the geopolitical flight cancellations that you're expecting in Q1? Jerrell Shelton: There's nothing that we're expecting in terms of cancellations. And today, there's been minimal impact on us. So nothing to report there at this time. Puneet Souda: Got it. And then color on Q1? Robert Stefanovich: Yes, we've had a solid start to Q1, Puneet. We're not expecting a light one like some other life science companies are. Operator: Your next question comes from the line of Anna Snopkowski from KeyBanc Capital Markets. Anna Snopkowski: Congrats on a great quarter and a nice guide for '26. So maybe to start, you mentioned in your prepared remarks that total biopharma funding and CGT funding, in particular, saw the strongest funding month in December in the past 4 years, I believe. So I was wondering what the usual lag is between the funding environment and maybe your customer conversations or orders? And then a quick follow-up. Mark W. Sawicki: Yes. So obviously, funding is dependent on the client. But on average, you'll typically see that kick in after about a half a year time frame. Some may be a little bit quicker, some may be a little bit slower, but it's a good average for you to consider. Anna Snopkowski: Perfect. Then maybe just touching on the margin side of things. You mentioned that you expect positive adjusted EBITDA, I think, in the second half of '26. So could you just outline how you expect to get there and what operational or cost reduction milestones need to happen in order to achieve this? Robert Stefanovich: Yes. It's really less about cost reduction milestones. You may recall in '24, early '25, we did take some initiatives and operational initiatives to drive improvements, and that was quite successful where we improved adjusted EBITDA of about $12 million year-over-year. We are starting to invest in specific growth initiatives, and completing some of the initiatives that we commenced in 2025, in setting up our Global Supply Chain Center in Paris, and setting up our Global Supply Chain Center in California, which we're going to consolidate 3 locations and expand our footprint there to include BioService and IntegriCell. We obviously have a lot of insight with our client base. If you kind of step back and look at how we're positioned, it's really an unmatched positioning. We serve about 70% of clinical trials, have a record 670 clinical trials, and we support 20 commercially approved therapies for which a majority are cell therapies. So we have a lot of insight as to what's to come. We've been very successful in expanding our service offerings into BioServices, where we've seen strong growth. And so that expected growth, together with some of the efficiencies that we've identified will really drive the further margin improvement. Mark W. Sawicki: Yes. I just want to comment on the pushout of the adjusted EBITDA positive numbers out of the end of '25. Just want to -- so one of the key elements here is that we've seen specific client requests to accelerate certain business opportunities. And so our site in Belgium is a very good example of that where we had to build out in a very rapid time frame, GMP-compliant sterile kitting services for one of the very large volume commercial accounts. That is actually up and running. So we were able to do this in record time, commissioned the site in December, and it is now contributing revenue, which will ramp significantly over the next few years. So we do still have to remain a little bit opportunistic on these types of opportunities, because they'll benefit the organization in the long-term. Operator: Your next question comes from the line of Subbu Nambi from Guggenheim Securities. Subhalaxmi Nambi: Within the 2026 guidance, can you speak to what you expect from the macro environment or at the low end and the high end of your revenue guidance range? Robert Stefanovich: In terms of -- I mean, obviously, if you look at the macro environment, it's quite volatile. If you look at specifically the markets that we're addressing, those have been progressing very nicely in spite of some of the challenges within the regulatory agencies and the macro environment. If you look at clinical trials, we had a record increase year-over-year in clinical trials, and we see a lot of interest for the services that we're providing. So I think there's certainly an opportunity to beat the guidance that we're giving if we see some of the acceleration happening sooner. I think the downside risk is really the same thing as for all other companies. It's more of the unknown of what may happen. But we don't really have specific risks identified at this point in time, and we feel quite comfortable with the guidance that we're providing. Subhalaxmi Nambi: As a follow-up, you discussed the outlook for FDA approvals, but what is assumed in the guidance for animal health and reproductive health growth contributions? Mark W. Sawicki: Yes. We don't typically disclose our segmentation by product segment. So I'm not sure -- and that's not something we typically outline. Robert Stefanovich: Yes, it's moderate growth. I think the real growth drivers for us as a business is clearly the cell and gene therapy space on the services side. And then within that, in terms of growth drivers, it's really further advancing the commercial cell therapies. There's a number of activities, some happened in 2025, the removal of the REMS requirement, which really started to -- we started to see our clients accelerating their therapies into the outpatient setting. And that's a significant move, which portends to higher number of patients being treated, and that again translates into additional revenue to us. Operator: Your next question comes from the line of David Saxon from Needham. David Saxon: Just two for me. I wanted to follow-up on some of the comments earlier about product growth. I think last quarter, you were kind of feeling good about high single digits for '26. It sounds like you might be thinking more around mid-single-digit growth for the year. So can you just give an update on MVE, the pipeline, the outlook there? Like was there any incremental softening since last quarter? Is that just kind of conservatism baked in? Jerrell Shelton: David, I think that we pretty much addressed that we thought that we think our guidance is a good starting point for the year. There are a lot of macro risk out there, and we did assess those. And so our starting point for our guidance is that $190 million to $194 million, and we think it's a good starting point. MVE continues to work on a stabilized basis. It's got a great forecast to budget for 2026, and it has innovation coming out of it on a constant basis now. So we think MVE is in good condition, but we're not forecasting growth more than the higher single digits, 7% to 8%. David Saxon: Okay. And then I wanted to follow-up on some of the partnerships. Obviously, DHL, I guess, can you give an update there? Like is everything fully integrated and at a point where you can start to really see the benefits come through? And then you also mentioned Cardinal and Parexel. Can you just double-click there, like frame those and... Jerrell Shelton: Yes. Let me talk about DHL first. If you look, DHL is a lumbering -- big lumbering organization. And I've got -- I want to go back to one of your points, your question a little bit earlier or comment, but after I talk about this. But DHL is a large -- very large organization, 600,000 employees spread all over the world. It takes time for them to mobilize and to -- and they don't act -- they can't operate as agilely as we do. So it's going to take time for that relationship. That's why I said the promise of in terms of EMEA and Asia Pac and that impact. We are doing some things with them already. And we do have some cooperative endeavors underway. But for the full effect, it's going to take a while for that to roll out. I'm going to let Mark comment on Cardinal and Parexel. But before we do that, you were talking about MVE and the 7% growth and all that kind of stuff. Yes, I just want you to remember, the driver for this company is commercialized cell and gene therapies. And that -- as that happens, that will dwarf MVE. MVE is a crucial part of our business. It's a foundational business. It's an important company, and it's healthy and it has great cash flow. It has innovation. It's 70% of the market. It's the world leader. But it is -- it will not be as significant in terms of revenue proportionality in the future as it is today because cell and gene therapy will outgrow it. And now Mark can comment on those partnerships we have with the other 2 programs. Mark W. Sawicki: Yes. So obviously, what we're doing is focused on building out an ecosystem that supports the cell and gene therapy global environment. And one of the key elements of that strategy is to really define very strong partnerships with leading entities in the space that are complementary to what we do, but don't conflict with what we do. And Parexel and Cardinal Health are 2 very good examples of that. So Parexel is a large CRO that really focuses on clinical trial design, FDA advisory services and clinical engagement. And then Cardinal Health is obviously order to cash management, reimbursement, regulatory support and then patient and provider support. And so us working closely with them really allows our mutual client base to have a best-in-class product offering. Folks like Cardinal and Parexel have come to us because we are best-in-class from a supply chain services standpoint. These help drive the industry. And so we're focused on long-term partnerships that help drive standardization and efficiency of the industry over time. Operator: [Operator Instructions] Your next question comes from the line of Mac Etoch from Stephens. Steven Etoch: Maybe just one for me. I think you highlighted on your prepared remarks that a large portion of these therapies are getting approved out of Phase II already. And with the FDA officially moving towards like a default 1 pivotal trial, how do you anticipate this change impacting approvals and investments over the near term? Jerrell Shelton: Tom, why don't you take that question? Thomas Heinzen: I was going to let Mark do it. Jerrell Shelton: I heard you say. Thomas Heinzen: All right. Anything that's going to streamline the process, Mac, is a good thing in our view. It's about more patients getting treated on the commercial side. Commercial revenue is higher than clinical revenue because there's typically more addressable patients for a commercial therapy than a clinical trial, but I'll let Mark opine. Mark W. Sawicki: Yes. So obviously, I mean, if they follow through with a single pivotal and don't require a follow-up, that's beneficial to us. If they come back and require additional follow-up, then obviously, that may slow things down. But if you combine it with some of the other elements, in particular, the REMS requirement changes, that's going to be a huge driver for us because that really allows us to push into the community care setting and our client base. If you recall, the vast majority of the addressable patient population is still in the community care setting. And so it provides a significant opportunity for upside on the already existing commercial products as well as the new ones that are coming to market. Operator: Your last question comes from the line of David Larsen from BTIG. David Larsen: Congratulations on a good quarter. Can you talk about the MVE or product revenue growth in the fourth quarter? It looks like it was up 2% year-over-year. For the year, it was up 7% year-over-year. So it looks like it maybe slowed a little bit in the fourth quarter. Why was that? And what will sort of drive the reacceleration in growth in '26? Jerrell Shelton: David, you can't look at MVE systems on a quarterly basis and make too many judgments. I mean, the decisions for purchase of capital equipment that MVE manufactures is cryogenic systems is planned over a period of time. And many times, it's highly engineered in terms of the setting that it's going into the installation and its purpose. So it's difficult to look at it. You're better off to look at an annual growth rate or a moving 12 months if you want to look at it as moving 12 months. But MVE is solid. It's a solid company and the markets seem to be -- and we certainly are trying to help stabilize those markets and there's nothing more to add there other than if you have some comments, Robert. But I think that's the summary. Robert Stefanovich: Yes. And just to give you maybe a little bit more granular picture of 2025. When we looked at kind of the market growth and MVE starting to come back and demand starting to come back, we've seen that both -- on both sides of the product portfolio, the cryogenic freezers as well as the cryogenic transportation and cryogenic dewar portfolio. So -- and then from a regional perspective as well in the various quarters, we've seen really all 3 regions at certain times starting to see a pickup in demand. So certainly, it's a departure from what we've experienced in '22, '23. And then with that, our guidance does assume some moderate mid-single-digit type of growth rates for '26. Jerrell Shelton: David, I want to remind you of one other thing, and this is just a matter of explanation so that you're aware of it. I mean, MVE furnishes both Cryoport Systems and Cryogene with products, with cryogenic freezers as well as dewars. The number you're seeing, the 7% for the year, for example, is a net number. It doesn't include its sales internally. But -- so I just wanted to point that out. David Larsen: Okay. And then 5 years from now, what percentage of total revenue do you think could be coming from commercial? Jerrell Shelton: You'll have to -- we'll come back and talk with you about that. I can't tell you right off hand right now. And we don't -- I don't have a forecast for that. There's too many uncertainties right now for 5 years out; 5 years is a long time in this business. Mark W. Sawicki: Yes. We do model everything out, right? So -- but as the time frame goes out, there's more uncertainties that creep into the modeling, in particular, around the timing of new product launches and their adoption to the market. There's been products where the consensus from a market standpoint was this would be a very high-growth, high traction product and it disappointed, or vice versa. There have been a couple of sleeper surprises where folks didn't anticipate much out of the product, and then it came in a lot stronger than anticipated. The key here to think about is, again, the portfolio effect, right? And so our focus is around capturing the plurality of the clinical market and then holding it through commercial activity and a commercial launch. So we're currently supporting 20 commercial products. You've seen the positive benefit over the last 12 months of that commercial portfolio, where our commercial revenue has been extremely strong from a growth standpoint. And we have a very strong prognosis on portfolio clients. We've already talked about the potential of another 9 approvals this year as well as additional geographic and market expansions. As you look out further, that continues to expand out. And if you're looking at the support mechanism of those -- of our Phase II and Phase III programs, a significant percentage of those will have a decision from a regulatory standpoint over the next 3 to 4 years, which will really impact those numbers fairly dramatically, assuming that we get a reasonable return on commercial approvals. Then you have to also look at, obviously, the impact of the REMS and the community care engagement, which is going to be a huge factor as it relates to what that growth rate looks like. If our partners are successful in driving into the community care setting and the leader on that is really Janssen and CARVYKTI product where they've published data that shows that they're in the mid-30s now on a community care engagement standpoint. If they push that up to 50%, 60%, 70% and you have others that are doing the same, that's going to have a significant material impact, not only in the existing commercial products, but the new ones coming to market. Jerrell Shelton: David, just a couple of other comments. I mean, while to add to what Mark is saying. I think you can undoubtedly say that in the future that we -- that cell and gene therapy, commercial cell and gene therapy revenues will be the dominant factor. It will be the dominant factor in our revenue. It will be by far and because it drives not only the BioLogistics, it drives the BioStorage/BioServices. You saw in this last quarter, I think it was a quarter we grew about 23%. And what you're going to see over time is you're going to see as cell and gene therapy picks up, that is the commercial therapy approvals happen, you're going to see our growth rate come more in line with the growth of the industry because we -- the lower growth segments, which are foundational to what we do, will be less of a proportion. So it's an interesting question. I just don't -- we don't have a specific answer, but directionally, we know where we're going. You have something else to add, Mark? Mark W. Sawicki: Yes. I just want to point out, if you go to Slide 6 in our presentation deck, that will give you some market data that should give you a reasonable understanding of the opportunity associated with our commercial portfolio at this point. Operator: There are no further questions at this time. So I'm going to turn the call back to the management team for closing comments. Please go ahead. Jerrell Shelton: Okay. One second. I wasn't prepared for that. Okay. Well, thank you for your questions. Very good questions and good discussion, and we appreciate those questions. So in summary, we made some significant strides in 2025 with solid results showing full year revenue performance above guidance. Our Life Science Services business segment grew 18% year-over-year, including 22% increase in BioStorage/BioServices revenue and a 29% increase in revenue from commercial cell and gene therapy we support. We concluded 2025, supporting a record 760 clinical trials and 20 commercially approved cell and gene therapies worldwide. Of the 760 clinical trials we support, 86 are in Phase III and 361 in Phase II, creating what we believe is a spring-loaded position to future commercial cell and gene therapy revenue streams. In addition to our financial performance, we continue to advance targeted strategic initiatives, which are designed to strengthen our growth trajectory in 2026 and beyond. Based on our market position and industry insights, we are encouraged by the opportunities ahead, and we will continue to keep you updated on our progress. Thank you for joining us on today's call. We appreciate your continued interest and support and look forward to speaking with you again when we report our first quarter financial results for 2026. We wish you all a good evening. Operator? Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
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