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Operator: Good day. Thank you for standing by. Welcome to Vital Farms, Inc.'s fourth quarter and full year 2025 earnings conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to hand it over to your host, Brian Shipman, Vice President of Investor Relations. Please go ahead. Brian S. Shipman: Good morning, and welcome to Vital Farms, Inc.'s fourth quarter and full year 2025 earnings conference call and webcast. Joining me today are Russell Diez-Canseco, Vital Farms, Inc.'s Executive Chairperson, President, and Chief Executive Officer, and Thilo Wrede, the company's Chief Financial Officer. By now, everyone should have access to the company's fourth quarter and full year 2025 earnings press release issued this morning. During today's call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and do involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release, the company's annual report on Form 10-K for the fiscal year ended December 28, 2025, that was filed with the SEC today, as well as the company's other SEC filings for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please refer to today's press release and presentation, each available on the investor relations section of our website, for a reconciliation of non-GAAP measures referenced in today's call, including Adjusted EBITDA and Adjusted EBITDA margin, to their most directly comparable GAAP measures. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. After our prepared remarks, we'll open the line for questions. As a reminder, please limit yourself to one question plus one follow-up so that we can hear from as many participants as possible. I'll turn the call over to Russell. Russell Diez-Canseco: Thank you, Brian. Good morning, everyone. Before we walk through our record 2025 results, I want to share an important leadership update. After nearly 20 years of visionary leadership, our founder, Matt O'Hayer, has decided to retire as executive chairperson and as a member of our board of directors. Matt founded Vital Farms, Inc. in 2007 with just 20 hens. Beyond building a brand, he pioneered an entirely new category in the grocery aisle based on the belief that we could scale the humane treatment of animals. Equally important, he was determined to operate Vital Farms, Inc. as a truly different company, one galvanized by a common purpose of improving the lives of people, animals, and the planet through food, and with a focus on positive long-term outcomes for all stakeholders. It is an honor for me to build on his legacy of vision and leadership over the last 20 years and continue our journey toward becoming America's most trusted food company. Matt O'Hayer remains our strongest advocate and our single largest shareholder, and I'm thankful to continue to partner with him as an advisor to me and the rest of our board. Effective February 24th, the board appointed me to serve as Executive Chairperson and CEO. This unified leadership structure is the most effective way to maintain our strong momentum, drive our 2026 strategic initiatives, and continue progressing toward the targets we set at the Investor Day in December. I'm also pleased to share that Denny Marie Post will continue to serve as our Lead Independent Director. Denny's extensive experience as a public company CEO and her deep commitment to our stakeholder model provide the oversight and strategic perspective that are vital to our governance structure. Our board remains committed to robust, independent oversight and will continue to maintain high standards of corporate governance as we enter our next phase of growth. I'm grateful to be able to partner with Denny as we look to the future. I want to start our update where I always do, which is by acknowledging our crew. In 2025, it was the resilience and commitment of our team that made that possible. As I reflect on 2025, it's clear that Vital Farms, Inc. has built greater organizational strength while also delivering strong financial results. We didn't just grow. We scaled while staying true to our mission. We're proud to have successfully completed our major 2025 initiatives. We added a third production line at ECS, implemented a robust new ERP system, and transitioned to a new dedicated cold storage facility less than one mile from ECS. We've also rebuilt our inventory and remediated the previous material weakness in our internal controls, which Thilo will discuss shortly. For the full year 2025, net revenue grew more than 25% to $759.4 million, which was the midpoint of the revised revenue outlook we shared at our Investor Day in December. Adjusted EBITDA exceeded $100 million for the first time in company history, growing 31.6% to $114 million. Now let me walk you through several of the milestones that I'm incredibly pleased our team accomplished last year, laying the foundation for our future growth. First, on the operations side, we successfully rebuilt our egg inventory throughout the year and brought our third ECS production line online in October. We can now dedicate the first two lines to longer production runs of our top four SKUs while using the third line for specialty SKUs with lower volumes. This change increases our efficiency, and we're excited to see productivity improve over time with all three lines up and running. We're also building both lines at our Seymour facility concurrently to stay ahead of demand. We believe by building concurrently, we will accomplish better construction economies as we build toward our $2 billion revenue target. This reflects our confidence in future demand and our commitment to staying ahead of growth opportunities rather than chasing them. Second, on the commercial side, this was a record revenue year. As I mentioned, delivering $759.4 million in revenue and $114 million in Adjusted EBITDA is a significant accomplishment for us. Our growth consistently outpaced the broader market. In 2025, we gained 25 basis points of volume share within all outlets of MULO+, according to Circana, making us the top share gainer in premium shell egg brands. According to the same data source, year to date through February 15th, we gained 35 basis points of volume share, again, positioning us as one of the top share gainers in premium shell egg brands. These share gains provide further evidence that we have created a strong and growing business built on improving the lives of people, animals, and the planet, while at the same time delivering world-class financial results. Third, our farm network expanded to more than 600 small farms committed to our pasture-raised standards, where hens roam freely on open pastures with year-round outdoor access. Adding approximately 175 farms in a single year is a testament to the trust we've built in the agricultural community around our unwavering commitment to humane animal care. Farmers want to be a part of what we're building because we offer a path to a sustainable livelihood while being stewards of the land and champions of animal welfare. Fourth, we successfully completed our ERP implementation with zero unplanned shipment interruptions, returning to and then exceeding pre-implementation production levels within a month. Finally, our recent marketing campaigns have driven brand awareness to 34%, an increase of 8 percentage points in 2025, widening the gap between us and our closest competitors. We are now working closely with our retail partners to convert that brand interest into actual purchases through an expanded shelf footprint and optimized promotional cadence. As we move into 2026, we are seeing a dynamic consumer environment, and our focus is on driving high-quality household penetration, resulting in profitable velocity, so that our brand maintains its premium position in the market as we march toward our 2030 targets. While we've successfully transitioned from a state of supply allocation to unconstrained capacity, we're managing this pivot with discipline. We're not interested in buying market share through aggressive discounting just because the commodity market is in a glut. Our current volume pace reflects a deliberate focus on high-quality shelf placements, ensuring that as we fill our expanded capacity, we're doing so with stakeholders that support our long-term goals and uphold our premium brand promise. At our Investor Day in December, we shared our updated long-term target of $2 billion in net revenue by 2030, with Adjusted EBITDA margin between 15% and 17%. These goals are grounded in the operational capabilities we're building and the market opportunity we see ahead of us. Our brand still represents only a fraction of the total shell egg market, giving us substantial runway for growth. We serve nearly 16 million households through approximately 24,000 retail locations, but there's so much more opportunity ahead. The capacity investments we're making, the operational excellence we're demonstrating, and the brand strength we're building create a powerful combination for sustainable growth. The progress we made in 2025 represents meaningful steps toward that goal, and I'm genuinely excited about what lies ahead. With that, I'll turn it over to Thilo to walk through the financials. Thilo Wrede: Thanks, Russell. Hello, everyone. I would also like to share my personal gratitude to Matt. His vision was the catalyst for everything we've built, and I've enjoyed his partnership and constant push to improve in my almost three years at Vital Farms, Inc. Russell, congratulations to you on your new expanded leadership role. I'll now turn to a review of our fourth quarter and full year 2025 performance. I will walk through our outlook and cadence for 2026. Net revenue for the full year 2025 was $759.4 million, up 25.3% year-over-year, and $213.6 million in the fourth quarter. This growth was driven by a balanced contribution from volume and price mix. Benefits from our May price increase and ongoing shift to the Organic portfolio were partially offset by increased promotional activity to drive consumer trial. Gross profit rose to $285.7 million, or 37.6% of net revenue. The modest margin contraction from 37.9% last year was primarily due to higher labor and overhead costs as we scaled our operations. SG&A expenses were $159.4 million, or 21% of net revenue. We demonstrated significant operating leverage here, reducing SG&A as a percentage of sales by over 110 basis points, but still increasing marketing investment by $10.4 million. This discipline, alongside improved shipping efficiencies, which helped offset higher line haul rates, helped to deliver our record profit. Adjusted EBITDA surpassed $100 million for the first time in our history, reaching $114 million for the full year and $29.2 million for the fourth quarter. Net income was $66.3 million, or $1.44 per diluted share. CapEx for the year was $82 million, which aligns with the outlook we shared at our December Investor Day. We ended 2025 with a strong balance sheet. Our cash equivalent, and marketable securities on December 28, 2025, stood at $113.4 million, a decrease of $46.9 million from the end of 2024, reflecting the investments we are making to expand our production capacity. We have no debt outstanding. Finally, before discussing our outlook, I want to highlight that we have successfully remediated our previously disclosed material weakness in our internal controls. We're glad to have this important work behind us as we move into the next fiscal year. Just to remind everybody, the material weakness had not resulted in any restatement of our financials. Looking ahead to fiscal year 2026, we're introducing a new net revenue guidance range of $900 million-$920 million, representing more than 20% growth, mainly volume-driven at the midpoint of the range. The revenue growth has us on track towards our 2030 targets. While this is a more measured start than our December outlook, we are building a rock-solid foundation in 2026 with stable retail inventory, rather than chasing short-term targets that could compromise the quality of our 21% long-term CAGR. It also is acknowledgment of the current macro environment and recent volatile scanner results we've observed so far in January and February. Even though we have already gained healthy volume share year to date, as Russell had mentioned earlier, volume growth so far is lagging our initial expectations. After the previously discussed several weeks of slow shipments following our ERP implementation last year during the lead-up to the peak holiday period, we are still recapturing shelf space. At the same time, we're having fruitful conversations with our retail partners about expanding our shelf space over the course of the year. Retailers are excited about our improved supply this year and the role that we continue to play in the egg set. In addition, the two severe winter storms over the last four weeks make retailer orders additionally challenging to calibrate against what we would consider normal demand. We believe all these fluctuations are more reflective of short-term market disruptions, and we see continued healthy consumer demand, which is supported by our consumer survey data. We continue to prioritize profitable velocity over simply chasing raw volume growth. Consequently, we are setting Adjusted EBITDA guidance to be within a range of $105 million-$115 million this year. This reflects a margin of 12.0% at the midpoint, which is within the range of our previous 2027 long-term targets and puts us strongly on the path to the new 2030 long-term targets we committed to at the Investor Day. With the improved supply dynamics also talked about, I want to spend a moment on how to think about cadence for the year. In the first half of 2026, we anticipate some short-term noise in order patterns from recent winter weather events and as our retail partners normalize their inventory levels following our move out of supply allocation. We view this as healthy stabilization that allows us to enter the back half of the year with a clean runway and high-quality shelf presence. With that, the first quarter of 2026 will likely reflect a more measured growth rate than previously assumed as the retail inventory channel normalizes. From there, we expect growth to reflect the lapping of last year's quarterly performance. As we operate in a more stable supply environment, we anticipate normal promotional spending this year with a heavier concentration in the middle quarters. We're intentionally utilizing the tailwinds from our May 2025 price increase to fund a return to a trial and conversion program. This is not defensive price matching. It is an offensive investment in household acquisition and reinvestment of price into penetration. Our margins reflect the strategic promotional activity, our continued investment in ECS staffing, and the impact of the volatile Q1 ordering environment. We expect CapEx of $140 million-$150 million in 2026. Our CapEx guidance reflects continued investment in long-term capacity and infrastructure, including progress at Vital Crossroads. We remain focused on disciplined capital deployment and free cash flow generation, consistent with our long-term owner-oriented mindset. While we expect to fund our 2026 projects primarily through existing cash and operating cash flow, we're evaluating the most efficient capital structures for our expansion, including the potential use of our revolver or other ways to optimize our balance sheet. To be clear on our capital allocation priorities, our primary commitment is the completion of Seymour. That leaves us with untapped debt capacity. And our board of directors authorized a $100 million 2-year share repurchase program. We're in the unique position of being able to fund our largest ever growth cycle, while simultaneously having the balance sheet flexibility to defend our intrinsic value if market dislocations occur. Looking forward, we anticipate a meaningful pivot to strong, sustainable, free cash flow generation in 2027 and beyond, once the heavy spending on VXR is completed. As mentioned before, we expect each CapEx dollar dedicated to our neutrality to generate more than $5 of annual revenue capacity. As these assets come online, we expect to see significant cash flow accretion as we leverage the infrastructure we are building today. Our long-term guidance remains unchanged. We're targeting $2 billion of net revenue by 2030, with a gross margin of 35% or better, and an EBITDA margin of 15%-17%. This is an exciting time at Vital Farms, Inc. We have highly loyal consumers. We continue to expand and deepen our relationships within our network of more than 600 small farms, we remain focused on driving greater retail penetration and raising brand awareness to deliver our eggs and butter to more and more households with each passing year. Once again, we thank you for the time and interest in Vital Farms, Inc. today, for the confidence that you have placed in us with your investment. Let me turn it back over to Russell. Russell Diez-Canseco: Thank you, Thilo. Before we open the call for questions, I want to circle back to where I started, with gratitude: to Matt for his vision and his leadership, to our crew who executed through our ERP transition and brought our third line at ECS online seamlessly, to our farmers who expanded their capacity alongside us while maintaining the highest standards of animal welfare, and to our retail partners who continue to believe in our mission. Thank you. This foundation of trust and collaboration is what gives us such confidence in the growth potential in the years ahead. The capacity investments we're making are about ensuring that when a consumer reaches for Vital Farms, Inc., we're there every time at full strength. The organization's values are as strong as ever, and our crew continues to raise the standards for the Vital Farms, Inc. brand and to drive the organization forward. Looking ahead, we believe we remain structurally advantaged with significant long-term opportunity. Our brand still represents only a fraction of the total egg market. We enter 2026 with unconstrained supply, giving us substantial runway for growth. Consumer awareness of animal welfare and food sourcing continues to increase. Vital Farms, Inc. has established itself as the trusted leader in this space. Once again, we thank you for your time and your interest in Vital Farms, Inc. With that, we're happy to take your questions. Operator: At this time, I'd like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Please limit your comments to one question and one follow-up. Your first question comes from the line of Scott Marks with Jefferies. Your line is open. Scott Marks: Hey, good morning, all. Thanks so much for taking our questions. Morning. You know, obviously, just wanted to ask a little bit about expectations for the year relative to what was laid out at Investor Day. Obviously, been some volatility with winter storms and some of the order patterns you mentioned. Maybe what was it that gave you the, I guess, confidence to change, to change the outlook now, as opposed to maybe waiting a little bit, you know, until later in the year to see if some of this volatility normalizes? Russell Diez-Canseco: Thanks, Scott. Hey, it's Russell. I'll kick us off, and then we'll ask Thilo to chime in as well. You know, we've run this place with a lot of intentionality for a lot of years, and this isn't the first time that we've seen some kind of volatility in the broader category, and we've seen some noise from things like winter storms. We always wanna make sure that we're setting ourselves up for success and that we're setting ourselves up to meet and exceed the expectations we line out for ourselves and that you all have for us. I think this guide gives us the right amount of room and flexibility to, again, build on all the strengths we're coming into the year with, while still acknowledging that there's a broader macro environment in which we're operating, and there's a lot of short-term noise in sort of what all the various players are doing to make sure that they can sell all the eggs they're producing. Thilo Wrede: Yeah, Scott, I would just add to that. You know, we called it out in the prepared remarks. It is a bit of a volatile environment right now. We are clearly gaining share in the category, so we are outperforming the category. It is a bit of a noisy environment right now, and I think we've built a track record of beating our initial expectations that we set at the beginning of the year, every year since the IPO. We figured rather than going into the year and, you know, clawing our way to the initial outlook that we gave, we just set expectations very clearly at the beginning, and then we keep our pattern of beating expectations that we set at the beginning of the year. Scott Marks: Appreciate the color on that. Next one for me, just relating to the ERP. You know, I think as we think back to, you know, maybe ahead of ERP implementation, you had spoken about shifting some inventory in, you know, ahead of the cutover. And then I think Thilo made a comment in the prepared remarks today about regaining some shelf space that may have been lost during that period. So wondering if you can just kinda help us spur away, you know, what was the actual impact from ERP? You know, whether it was, you know, shelf space or changes in order patterns or anything that can just help us get clarity around what the actual impact was and how we should think about, you know, magnitude of recovery from that? Russell Diez-Canseco: You know, we've talked quite a bit about that short-term dislocation. As we've come back into a very, I think, advantageous supply situation with rebuilt inventories, the conversations with retailers have been, frankly, terrific. We've shifted from, "Hey, can you ship what you're talking about?" to, "How can we grow together?" I'm looking forward to reset cycles this year based on those early conversations, we're really talking about making those long-term plans to grow together. We are clearly a category leader. We're seen as playing that role for our retail partners, I think we're well on our way to kind of recovering and putting that process past us. Scott Marks: Thanks very much. I'll pass it on. Russell Diez-Canseco: Thanks, Scott. Operator: Your next question comes from the line of Brian Holland with D.A. Davidson. Your line is open. Brian Patrick Holland: Thanks. Good morning. I wanted to... about, you know, some of the comments that you made around, the challenging sort of macro environment and squaring that with, you know, your core consumer, and some of the behavioral metrics that you described. Just squaring how or why you would be incrementally concerned over the next, whatever, several months or year about the impact of the macro on your core consumer, just given everything that you've said, and I think historically, sort of, you know, been less concerned about competitive dynamics in the category, widening price gaps, et cetera. How do we square those two things? Russell Diez-Canseco: Sure. First of all, we're not seeing evidence of a big change in sort of the confidence or, sort of economic reality of our core consumers. That's not a primary source of concern or a change in how we view that. That said, I think we've all seen and continue to see a category that's going through some disruption as we've got plenty of players out there with maybe more eggs than they planned to produce or collectively planned to produce, and we're seeing some, you know, more intense action on the shelf as other players, I think, look to move their inventory. While that doesn't mean that we're losing consumers or volume to them, it's certainly competing for attention with retailers and with consumers for ad space and for mind share. In that situation, it doesn't prompt us to change our value equation. It doesn't prompt us to rethink our value proposition to consumers. It might mean that we have to be a little more patient as we continue to add consumers over the course of the year and convert all that great awareness to trial, because we don't want to, you know, frankly, waste a bunch of our time and money trying to compete in the short run for the attention of consumers who are looking for a hot price in an ad. We just have to, I think, set ourselves up to continue to take a really measured approach to adding high-quality households and high-quality new placements and let some of this other noise kind of play itself out. Brian Patrick Holland: Okay, kind of playing this forward, outlook this year, I think is, you know, low 20% range on the top line. That's an algorithm that you would have to hold from here through 2030, I think, to hit that $2 billion of revenue, if I'm not mistaken. The thought coming into this year was, you know, you'd be lapping capacity constraints in 1Q and a little less so in 2Q. 4Q, you would then have the ERP disruption. You know, quote-unquote, "easier compares." Now, we've obviously introduced some volatility, as you referenced, whether that's weather, or some other things in the category. How do we think about the level of confidence, the sources of confidence behind maintaining this level of growth, which really demands almost no deceleration from here through 2030? What are the sources of confidence behind that? Maybe if I could just ask, what flexibility would you have from a capacity standpoint and a build-out standpoint as it pertains to Seymour if the sales decelerated at a greater rate than what you're projecting? Russell Diez-Canseco: Sure. Again, the consumer value proposition is still very much there. You know, I start with all the work we did last year to make sure that we took supply chain constraint off the table in terms of being a constraint to our continued growth. We've got the capacity at ECS. We've got our third line, which gives us the opportunity to lean in both to capacity expansion and efficiency because we can allocate space to the various lines more efficiently. We're gaining volume share, and that's the thing I would point to as a continued proof point that what we're doing is working. As we head into 2026, the setup is we've got a massive gain in awareness, which is the leading indicator for us of trial and ultimately to loyalty. That's there in spades. We're very judiciously, as always, using our marketing and commercial resources to convert that awareness into trial. The capacity's there, the brand awareness is there, the consumer sentiment is there, and it's a question of, I think, operating and executing at a very high level. The thing is, we're built for this environment. We are, I believe we've got the best team in the business, the best brand in the business, the best supply chain in the business, and this is a year in which our ability to execute at a high level will continue to drive our growth. Thilo Wrede: Brian, I would add to that unlike in the previous last few years, growth this year is gonna be pretty much all volume growth. Our volume growth is actually at this guidance, is actually accelerating year-over-year. I think that's an important piece to keep in mind. It's a bit more expensive growth, because obviously, volume comes with costs associated with it, but it's high-quality growth, right? Brian Patrick Holland: Great. Thanks. I'll leave it there. Operator: Your next question comes from the line of Matthew Smith with Stifel. Your line is open. Matthew Smith: Hi, good morning. Thanks for taking the question. A couple of questions on the EBITDA guidance range. The midpoint suggests a couple hundred basis points of margin contraction. Within that, can you talk about gross margin versus middle of the P&L investment? I believe the expectation for revenue growth, Thilo, you just mentioned, is mostly volume-led. Would you expect price mix to be positive for the year with carry-in pricing funding the promotion normalization, or is that part of the margin bridge as well? Thilo Wrede: Price mix, I think we said in the prepared remarks that we are reinvesting the price increase from last year back into promotions. I want to be very clear with that. The promotional comparison, if you look at it year-over-year, even compared to the last few years, we're actually planning for a different environment this time around than the last few years. In the last years, when you had the Avian Influenza or we had our own supply constraints, there were times when every year last year, well, in the last few years, there were times every year where promoting didn't make a whole lot of sense for us because we didn't have the supply to support it. This year, it's a different story. This is not a step up in promotions to drive volume. It's really a return to where we should have been promoting for quite a while and weren't able to. As Russell said before, this is to convert the awareness that we have generated into trial and ultimately into household penetration, and to keep demonstrating to our retail partners that we're a good partner for them. We want to, we want to move the category forward. Obviously, this has an impact on gross margin. We still expect operating expense leverage, and we expect positive price mix benefits, certainly not to the same degree as in previous years. We keep benefiting from a shift towards Organic, it's not going to be the same price mix benefit that we had in prior years. Matthew Smith: Thank you. Just as a follow-up for clarity around first quarter expectations, there was some shipment noise, both in the fourth quarter, then you mentioned, you know, 2 factors in the first quarter. Within the first quarter, do you have a view on if you expect your shipments to be in line with consumption? Just some clarity there would be helpful. Thank you. I'll pass it on. Thilo Wrede: I mean, in general, our shipments are roughly in line with consumption. There's always timing differences. There are differences in how scanner data extrapolates, you know, contribution from different channels. We've always talked about that we have some unmeasured channels, food service and the wholesale channel in particular. There's always going to be a bit of a difference between our reported shipments and what you see in consumption, but directionally, they usually align. Operator: Your next question comes from the line of Robert Moskow with TD Cowen. Your line is open. Jacob Henry: Hey there. This is Jacob Henry on for Rob. Thanks for the question. I think just one from me. I know you've talked before about building confidence with retailers before getting more shelf space. On that topic, I'm just curious if you can provide an update on where you feel you stand in that process. Like, do you have any visibility into any green shoots with retailers, where maybe there are plans in place to get that third or fourth SKU, whatever it may be, or is this kind of more of a long, long-term conversation? Russell Diez-Canseco: Without being specific, the conversations are going very well. We are operating at a very high level. Our service levels have really recovered from a year of being much more constrained in supply, as we've talked about over the last four quarters. Those are very fruitful retail conversations. We're a powerful tool for a retail category manager to grow their category profitably, with our partnership. These are welcome conversations, they're fruitful ones, and we're excited to share more as those resets occur. Operator: Your next question comes from the line of Megan Clapp with Morgan Stanley. Your line is open. Megan Clapp: Hi, good morning. Thanks. Maybe just to follow up on the first quarter on Matt's question, just to put a finer point on it. You know, I think you said relatively in line shipments for scanner. I think, Thilo, in your prepared remarks, you also said just a more measured start versus what you had previously expected. I think you had previously expected the first half would be stronger than the second half, just given some of the easier laps. Is it still fair to assume in one Q, you would expect, and two Q for that matter, you would expect the revenue growth to be above the full year guide? Thilo Wrede: I think at this point, Q1, we're a bit more cautious on it than we were before. I think when we look at Q2 and Q3, there's no change in how we think about them compared to how we thought about them, let's say, 2 months ago. Q4, you know, expectations for Q4 compared to what we had at the Investor Day back in December, haven't changed. Q4, I think we have, if you want, relatively easy lapping because Q4, post the ERP implementation, with a few weeks of slow shipping, there's just a easy lapping that we can catch up on. With that, maybe the second half might be a bit stronger than the first half. That's how I would look at it right now. Megan Clapp: Okay. I guess just to follow up there, just trying to square, you know, why the first quarter is changing and the rest of the year is not, if shipments will be in line with scanner, because that would imply that demand is running a bit weaker than you had expected. As we get into the remainder of the year, are you embedding some sort of recovery in the shelf, in the shelf space? Are you assuming kind of that demand doesn't change in the rest of the year, or the promotional environment from others that you're seeing gets better? Just trying to kind of understand what changes as we get out of 1Q, understanding there has been a lot of volatility. Russell Diez-Canseco: Yeah, I think there are two kind of underlying or maybe spring-loaded drivers of that consistency and that growth. One is the continued benefit of the consistency with which we're showing up on shelf, regaining that space, some of which is a conversation with a retailer, and some of which is simply operational at the store level, when you've now got the product back in your back door, and you need to cut it back in or make sure you're giving it the space that was allocated to it. Then having consumers see us back on the shelf. That's an important part of the process. You know, the other part is that we're having very fruitful conversations with retailers about continuing to expand distribution, expand placements as part of our ongoing long-term strategy for growing with the best retailers in the country. A lot of that has to do with kind of the consistent strategy of expanding those top 4 SKUs and demonstrating the performance that they deliver for our retail partners. We've got the product, and that makes for a great conversation, and that will unfold over the course of the year. Megan Clapp: Okay, thank you. Operator: Your next question comes from the line of Jon Andersen with William Blair. Your line is open. Jon Andersen: Hey, good morning, thanks for the questions. You mentioned in the prepared comments, awareness, brand awareness levels are up, I think, 800 basis points year-over-year, which is a significant leap. I'm wondering if you could talk a little bit about the, you know, what you see as, you know, the key drivers there and that kind of acceleration in brand awareness over the past 12 months. I guess peeling the onion a little bit, you know, there's kind of really positive awareness and maybe more kind of awareness that might come into being for more mixed reasons. I'm just wondering if you could talk a little bit about the equity of the brand and what you're seeing and maybe some of the panel data in terms of loyalty and repeat at present, and if there are any levers or adjustments you think you need to make from a value proposition standpoint. Then if I could just follow up with a second one. You've announced a $100 million share repurchase. I'm not sure if you've had an authorization, share repurchase authorization historically, but maybe you could talk about, you know, the reason for that now and how you might think about utilizing that, you know, going forward, the criteria. Thank you. Russell Diez-Canseco: Thanks, Jon. I'll take the part about kind of brand equity and household awareness. I'll let Thilo talk about share repurchase. You know, a key message here and a key reason why I think we saw such substantial increase in household awareness is that we're pretty consistent in our approach to how we go to market. At a time when, you know, we were constrained on supply last year, we didn't go dark with our marketing because we think about marketing as a way to drive brand awareness over the long term, 12, 18, 24 months out, converting that to demand. This business is designed and built around the consistency of expanding households, expanding trial, and expanding production, and expanding farm count, all very much in line. The net result of which is that we didn't go dark when we might have simply because we didn't, you know, we didn't have as many eggs as we would have liked to sell or as much production capacity as we might have liked. That also means that we're not, you know, hitting the gas or wasting money, on unproductive marketing efforts in a year when we've got more upside. We're very consistent in our marketing approach. It's really a, you know, a playbook and an approach that we've owned over a lot of years to convert that awareness into trial and repeat, and that's what we're setting about to do this year. Thilo Wrede: Yeah, Jon, on the share repurchases, we did not have a share repurchase authorization before. This is the first buyback program that the board has authorized since the IPO. I would say there are two factors at play here. One is, look, we're listening to shareholders. We're listening to the buy side, the sell side. We've gotten a lot of questions over the last 12 months in particular about how we use our balance sheet. We have this unused debt capacity. As you know, we are debt-free. We have over $100 million in cash. We are investing this cash in building out the Seymour facility this year. That still leaves a lot of balance sheet potential there that we've been holding as dry powder. Now is a good time for us to think about what can we do with that dry powder to create shareholder value. That is where this decision to create the share repurchase authorization, so that when there is an opportunity in the market to buy back our stock at attractive levels, that we're able to step into that. That is really the reason behind it. It's I would look at it as a sign that we're maturing as a company a bit. We're doing the things that we think are the right things for creating long-term shareholder value. It's a sign that, you know, we're listening to the shareholder conversations that we're having. Jon Andersen: Makes sense. Thank you, guys. Operator: Your next question comes from the line of Benjamin Theurer with BMO Capital Markets. Your line is open. Benjamin Theurer: Hi. Thank you for taking the questions. My first is related to the aggressive recovery in industry egg supplies. That seems to have coincided with, you know, more volatile order patterns. I'm just wondering, in the past, you have stated that you look forward to supplies recovering because that will give Vital the opportunity to outperform. I was just hoping if you could revisit this view and maybe reaffirm your conviction that this will play out if we were to assume the industry supplies will continue to recover. Russell Diez-Canseco: Yeah. Our conviction is as strong as ever. The number one thing I'd point to is our continued gain in volume share. That's a great indicator of the health of our brand, the health of our supply chain, and the health of our consumer trust and consumer relationship. We are absolutely built for a time and a place where the brand is what's gonna matter. We're being differentiated is what's gonna matter. Where a strong, trusted relationship with a retailer is what's gonna matter. This is a year in which it's not simply enough to have eggs in a market that will take any egg available. That's where I think our strengths will really come to bear. Benjamin Theurer: Great. Thank you. My final question is a bit of a segue. Can you just talk about Amazon's move to add roughly 100 additional Whole Foods units and what the incremental opportunity might be for Vital? Thanks. Russell Diez-Canseco: You know, I think, first of all, it's certainly exciting for us. Amazon and Whole Foods continue to be our largest retail partner, and I don't think it's a coincidence that some of our largest customers are also the ones that are seeing the most success and the most opportunity to expand their footprints. We really look forward to continuing that partnership and to grow with them. There's an exciting opportunity to continue to grow with partners like Amazon and Whole Foods. That is all welcome, almost spring-loaded upside, for sure. Operator: Your next question comes from the line of Eric Des Lauriers with Craig-Hallum. Your line is open. Eric Des Lauriers: Great. Thanks for taking my question. Just wondering if you could provide a bit more color on what you're seeing year to date in the pasture-raised category overall. In terms of the second half stabilization or perhaps even, I guess, Q2 stabilization, do you see category stabilization as sort of a prerequisite to your order pattern stabilizing, or is there something in the conversations you're having with retailers that gives you confidence in that second half stabilization, sort of irrespective of what the category does? Thank you. Russell Diez-Canseco: Thanks for that. The pasture-raised, and I would say more broadly, the outdoor access category continues to be the strength in egg category overall. Gaining volume share, gaining dollar share, against the backdrop of more muted volume growth for eggs overall. Historically, egg consumption has grown about with population growth in volumes....That's been very different for specialty and branded products and offerings like ours, where we've driven a large share of overall category growth and much outsized relative to our share of the category. We're seeing that strength continue. It's pretty exciting because the ability of private label brands to trade up their purchasers of more commodity-type eggs into outdoor access private label is also quite strong. What we're seeing, that, is evidence of a much broader conversation, and a much broader set of households in this country that are becoming conscious of their food choices and are willing to vote with their dollars for something better. It's, it's a real validation of what we've been doing for a lot of years, and we see it as a sign of strength. Operator: Your next question comes from the line of Ben Klieve with Stifel. Your line is open. Ben Klieve: All right, thanks for taking my questions. I'm wondering if you guys can help us understand the magnitude of the promotional increase that you have talked about on the call today. We certainly knew there was gonna be an increase this year, I'm wondering, first of all, if the magnitude of the promotional increase this year is kind of in line with what you had thought it would be historically. Then also the degree to which the EBITDA margin compression this year is kind of in line with what your thoughts would have been around the Investor Day a couple months ago. Russell Diez-Canseco: Sure. Thanks, Ben. I wouldn't characterize our promotional cadence or stance as stronger or deeper than we had originally projected. This is very much a return to a more normal cadence of promotional spend, and that certainly hasn't changed. What's really different for us versus other players in the category is that we're not creating promotions to drive volume in the short run, which we see as maybe a way to rent volume share, but not actually to substantially move the business forward. We're using promotions to drive trial and begin that process of converting a consumer to our brand, and that continues to be the way we think about it. Our focus is on building this thing for the long haul and hitting that $2 billion goal that we set out for 2030, which we believe is still very much in our future. That hasn't changed. It's very consistent with what we had planned when we spoke to you at Investor Day. I'll let Thilo talk a little bit about the evolution of EBITDA over time. Thilo Wrede: Yeah, Ben, just to, you know, put what Russell just said differently, the way we are thinking about promotional spending this year is it won't be different from how we have spent on promotions in the past in specific quarters. The reason why I put it that way is, as I said before, over the last few years, I don't think there's been a single year where we ran promotions for the full year, because there was always some outside event, AI, our own supply constraints that prevented us from running promotions for the full year. This is gonna be a year where currently we're planning to run promotions for the full year. The level of promotions for the full year will mirror what we've done in individual quarters in the past. Unlike in prior years, where we've only hit it for specific quarters, we'll hit it for the full year. That will have an impact on gross margin and on EBITDA margin, and you see that in the guidance. That impact is not different from how we thought about it at the Investor Day. Ben Klieve: Okay, very good. Thanks for taking my question. I'll get back in queue. Operator: Your next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open. John Baumgartner: Good morning. Thanks for the question. I'd like to ask about the composition of Vital buyers. I think at Investor Day, the buy rate for low incomes was up something like 50% over the past 3 years, and that speaks to the breadth of appeal. I'm curious the extent that might now be a drag in 2026, given financial stress in that cohort. As you modeled this year, are there any specific pressure points you're building in, either from low incomes or others? Maybe not so much from trade down, but more just limiting the rate of building additional households this year. Russell Diez-Canseco: Yeah, I, look, I think that the process of adding additional households doesn't change. The kinds of households that we do attract, may change with the benefit of hindsight, and we'll see how that plays out. We're seeing no, you know, we've got no reason to think that our ability to attract and retain new households this year is off algorithm or outside of our normal, sort of, growth formula. John Baumgartner: Okay. I apologize if I missed it, but if we think about, you know, aside from the promotion this year, how do we think about other marketing reinvestment, whether above the line, in the middle of the P&L? Any thoughts on marketing, either magnitude or shifts in delivery versus history? Russell Diez-Canseco: You know, I think in terms of magnitude, as we've consistently discussed, you know, we have a very measured approach to marketing. We continue to explore opportunities to find profitable ways to invest, as we expand into the 5%-6% range on marketing. I don't know that that changes a lot this year. I think that we've always used some portion of that budget on sort of baseline or more tried and true vehicles, and then we've always got some where we're experimenting and trying new things. Historically, we focused almost entirely on top of the funnel and adding households, growing that awareness. We now have the benefit of a lot of awareness built, so we'll have the opportunity to try some things perhaps we haven't focused on as much in the past around driving repeat and loyalty. We'll look forward to seeing how those play out as the year goes on. John Baumgartner: Great. Thanks, Russell. Thilo Wrede: That we're, you know, plan is still to keep increasing our marketing spend in total dollars. We continue to build the brand, to Russell's point. We've built a lot of brand awareness. There's a lot more that we want to do there. This is also a year where we want to convert a lot of that brand awareness into trial, right? If marketing can play a role there, I think that's that's a push that we need to go after as well. Russell Diez-Canseco: Perfect. Thank you. Operator: Your next question comes from the line of Gerald Pascarelli with Needham & Company. Your line is open. Gerald Pascarelli: Great. Thanks very much for taking the question. I just have one. I wanted to go back to one of Brian's previous questions, just on the confidence of the long-term targets, but specifically related to EBITDA. At a 12% expected margin this year, you're 400 basis points below the mid-point of your 2030 targets. I understand that pricing is muted right now, right? Like, given some of the compression we're seeing with private label. If the market remains volatile and gets increasingly competitive, you know, you essentially need to invest more behind your brand, I'm curious if you could just lay out the levers you have to drive operating leverage to achieve those targets. If you could bridge that for us. I guess specifically, does your target embed a certain range of rate increases in a more normalized environment? Any color there would be great. Thank you. Thilo Wrede: Gerald, let me start with the 12% implied margin. When we gave targets, long-term targets back in 2023 at our Investor Day back then, we had said that by 2027, we want to get to a 12%-14% EBITDA margin range. We were above that last year. We'll be in that range this year. Yes, it's a decline year-over-year in margin, but I would say we're still very much on track to where we thought we were a few years ago. We continue to be on track to the target that we set 2 months ago for 2030. I think as we continue to grow, we continue to get benefits of scale, especially in operating expenses. We talked about, and you can see that in our numbers, how our SG&A scaled, last year, will continue to scale this year. This year, because the growth is so much more volume-driven than prior years, there is an impact on gross margin, which flows through. Overall, in operating expenses, every year we're getting scale benefits, just from the growth that we are generating on the top line and not having to grow operating expenses to the same degree. Gerald Pascarelli: Perfect. Thanks. Operator: There are no further questions at this time. I turn the call back over to Brian Shipman. Brian S. Shipman: Great. Thank you for your time and interest today. Please feel free to contact us with any follow-up questions. Have a great day. Operator: This concludes today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the Perimeter Solutions, S.A. Q4 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Seth Barker, Head of Investor Relations. You may begin. Seth Barker: Thank you, operator. Good morning, everyone, and thank you for joining Perimeter Solutions, S.A.'s fourth quarter 2025 earnings call. Speaking on today's call are Haitham Khouri, Chief Executive Officer, and Kyle Sable, Chief Financial Officer. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, February 26, 2026, and these statements have not been, nor will they be updated subsequent to today's call. Today's call may contain forward-looking statements. These statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate, and our actual results may materially differ from those expressed or implied on today's call. Please review our SEC filings, particularly any risk factors included in our filings, for a more complete discussion of factors that could impact our results, expectations, or assumptions. The company would also like to advise you that during the call, we will be referring to non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, LTM adjusted EBITDA, adjusted EPS, and free cash flow. The reconciliation of and other information regarding these items can be found in our earnings, press release and presentation, both of which will be available on our website. With that, I will turn the call over to Haitham Khouri, Chief Executive Officer. Haitham Khouri: Thank you, Seth. Good morning, everyone. I will start on slide 3 with key observations from 2025. First, structural earnings power expansion. Our 2025 results demonstrate the sustainability of our higher earnings power. This higher baseline profitability, first exhibited in 2024, is the direct result of the rigorous application of our operational value drivers. Second, financial consistency. In addition to increasing our structural earnings power, we have transitioned Perimeter Solutions, S.A. towards greater financial consistency. The primary driver is the change in our retardant contract structures, which have shifted from purely volume-based models towards more fixed and recurring structures, significantly reducing our sensitivity to fire season volatility. This greater consistency is further reinforced by the growth and diversification of our international retardant business, growth in our non-retardant businesses, including our suppressants business, and the impact of our operational value drivers on our results, regardless of external conditions. The third observation, M&A. 2025 established our M&A strategy through the acquisitions of IMS and NMT, both of which we feel excellent about and both of which we will discuss later in our remarks. Turning to a summary of our strategy on slide four. Our goal is to fulfill our critical mission by providing our customers with high-quality products and exceptional service, while delivering our investors private equity-like returns with the liquidity of a public market. Our strategy is built on three key operational pillars. First, we own exceptional businesses. These are niche market leaders that play critical roles in solving complex customer problems, qualities that support high returns on invested capital and durable earnings growth. Second, we rigorously apply our three operational value drivers to the businesses we own. We drive profitable new business, achieve continual productivity improvements, and provide increasing value to customers, which we share in through value-based pricing. Third, we operate our businesses in a highly decentralized manner, granting our business unit managers full operating autonomy, paired with the accountability to deliver results with a tightly aligned incentive structure for our managers to think and act like owners. We believe that our operational pillars will optimize our durable, long-term free cash flow. We seek to maximize long-term per share equity value through a clear focus on the allocation of our capital, as well as the management of our capital structure. Turning to our Fire Safety operations on slide five. Fire Safety delivered a strong year, primarily driven by execution on our value drivers. We continue to win profitable new business, including entry into preventative rail-applied retardant in Europe, expansion of our air-based services in multiple geographies, and ongoing penetration of our fluorine-free products globally. We continue to realize productivity benefits, including from our new retardant manufacturing facility outside of Sacramento, and we continually increase our customer value proposition across products. For example, in suppressants with our new multipurpose AD foams and in our Canadian retardant operations with enhanced air-based service and manufacturing capabilities, share in this value creation through value-based pricing. Combined, these actions increase structural earnings power, compound each year, while strengthening our customer relationships. Fire safety's 2025 results also showcased our transition towards greater financial consistency, with higher year-over-year revenue and adjusted EBITDA, despite a notably less severe North American fire season. We renewed substantially all of our key retardant contracts over the past 2 years, culminating in our cornerstone 5-year U.S. Forest Service contract. Our contracts have shifted away from purely volume-based models towards more fixed and recurring structures, notably reducing our sensitivity to fire season variability and increasing our business's consistency. As I mentioned prior, this increased consistency is further reinforced by the growth and diversification of our international retardant business, growth in our non-retardant businesses, including our suppressants business, and the impact of our operational value drivers on our results, regardless of external conditions. Looking forward, we will continue to rigorously apply our value drivers and paired with the secular growth drivers aiding our fire safety business, excuse me, including higher acres burned, an expanding air tanker fleet, continued growth in the wildland-urban interface, new retardant application methods, and the global transition to fluorine-free foams, our fire safety segment is well positioned for profitable growth. Switching to specialty products and starting with our P2S5 business, PDI. The operational and safety challenges at the Sauget Lenore facility, operated by Flexsys, continued in the fourth quarter and into 2026. As we have previously discussed, since the Flexsys assets were acquired by One Rock Capital in 2021, the plant has experienced a sustained deterioration in operating reliability and safety performance relative to its historical levels and relative to our owned and operated P2S5 facility. During the fourth quarter, unplanned downtime once again materially reduced production volumes and negatively impacted PDI's financial results. More troubling are the recurring safety incidents at and around the plant. These are not isolated events. They reflect a pattern of declining operational performance and safety standards under One Rock's ownership. We believe these incidents are likely to continue and may worsen so long as the current ownership and operating structure remain in place. In our view, One Rock, as the controlling owner of Flexsys, is directly responsible for the strategic, financial, and operational decisions that have led to the plant's instability and troubling safety incidents. We believe the decisions made under One Rock's ownership have prioritized short-term financial considerations over sustained investment in operational integrity, reliability, and safety. The result is a facility that is underperforming operationally, financially, and most importantly, from a safety standpoint. This is unacceptable. We believe that the fastest and most responsible path to stabilization is a change in operational control. As previously disclosed, in 2025, we exercised our contractual right to assume operation of the Sauget plant. Flexsys and its owner, One Rock, have refused to permit that transition. Instead, they have engaged in bad faith negotiations and obstructive conduct designed to delay and frustrate the transfer of control. We believe these actions have unnecessarily prolonged operational instability and increased risk exposure for employees, customers, and the surrounding Sauget community. Every month of delay has consequences. We are pursuing every available legal remedy in our ongoing litigation and will continue to press our claims aggressively. We intend to hold Flexsys and One Rock fully accountable for their actions and for the operational and financial damage that has resulted from their refusal to honor the contractual framework governing this facility. In parallel, we are evaluating strategic and legal alternatives available to ensure continuity of supply for our customers, safeguard the employees and communities affected by the plant's performance, and return to prior levels of financial performance with respect to the operations at Sauget. We will not agree to economically unreasonable proposals or coercive tactics. Our commitment to regaining operational control of this facility is absolute. Until this matter is resolved, investors should expect continued variability in our P2S5 business. Our track record of owning and operating P2S5 facilities safely and reliably ourselves is well established. If we assume control of Sauget or a separate P2S5 plant, if that is where this path ends. We are confident we can restore operational discipline, materially improve safety standards, and return the facility to stable, efficient production. Our priority here is clear: serve our customers, protect workers, support the Sauget community, and preserve the long-term value of this asset. Ownership carries responsibility. We intend to ensure that responsibility is met. Moving to IMS. IMS focuses on acquiring proprietary product lines and driving profitable growth through operational value driver implementation. In 2025, we executed on this strategy successfully, closing several product line acquisitions, including one in the fourth quarter. We expect IMS to deploy tens of millions of dollars annually into high IRR product line acquisitions and for IMS to represent an increasingly material portion of our company over time. Finally, I will turn to MMT, which closed in January. MMT manufactures engineered machinery and proprietary aftermarket components used in the production of complex, minimally invasive medical devices, specifically catheters and guidewires. MMT aligns with our operational value driver strategy based on four specific attributes. First, MMT is a leader in a highly-specialized industry where quality and reliability are paramount to customer success. Second, MMT has a track record of high single-digit to low double-digit organic growth, driven by increasing adoption of minimally invasive procedures, increasing device complexity, and a trend towards engineered machinery outsourcing. Third, MMT has a large and growing installed base, which must be serviced with aftermarket consumables, spare parts, and services, which are almost always proprietary. Fourth, MMT has a successful track record of tuck-in M&A, which we expect to continue. MMT recorded approximately $140 million in revenue and $50 million in adjusted EBITDA in 2025. One month into our ownership, initial value driver implementation validates our investment thesis. We expect MMT's 2026 results to reflect meaningful year-over-year growth as these operational changes take effect. With that, I will turn the call over to Kyle for a more detailed review of our financials, earnings power, and capital allocation in the quarter. Kyle Sable: Thanks, Haitham. Our results in 2025 reflect our higher structural earnings power and highlight our improved financial stability. I will start on slide eight, where all growth rates are shown versus the prior year comparable period. Consolidated revenue reached $652.9 million in 2025, up 16%, while adjusted EBITDA increased 18% to $331.7 million. In the fourth quarter, revenue grew 19% to $102.8 million and adjusted EBITDA rose 9% to $36 million. For the full year, this performance translated to a GAAP loss per share of $1.37, compared to a GAAP loss per share of $0.04 in the prior year. Adjusted EPS for 2025 was $1.34, up from $1.11 last year, representing an increase of approximately 21%. In the fourth quarter, GAAP loss per share was $0.94, compared to GAAP EPS of $0.90 in the prior year quarter. Adjusted EPS for both Q4 2025 and Q4 2024 was $0.13. The 2025 results were achieved with minimal contribution from M&A. With the acquisitions of IMS product lines and MMT, we are introducing a new value creation lever that complements and expands our operational value driver strategy that we expect will contribute growth in structural earnings power in 2026 and beyond. Moving into the segment results and starting with Fire Safety. Full year revenue totaled $488.9 million, up 12%, while fourth quarter revenue was $58.1 million, down 4% year-over-year. Adjusted EBITDA was $290.5 million for the full year, representing 21% growth, with the quarter producing $25.5 million, a 6% decline. The full year improvement reflects disciplined execution of our strategy across a broad range of products and geographies. Within suppressants, we expanded sales by winning new sales volume at attractive pricing, resulting in $21.8 million of incremental revenue versus last year. We made strong progress converting airports to our latest products, while also building replacement volume across our installed base. In retardants, performance was particularly strong outside North America, with sales increasing $18.3 million year-over-year. Larger markets such as Australia and France delivered robust results, while we also made progress in penetrating earlier stage markets like Italy, where we focused on new applications, including retardant deployments along rail lines. In North America, retardant revenue increased $12.6 million for the full year, despite a pronounced decline in acres burned in the U.S. This performance underscores both the strength of our operational value drivers model and the reduced sensitivity of our revenue base to fire activity. We saw strong execution across all three operational value drivers, driving new businesses and expanded our footprint to additional bases and faster loading equipment, improving productivity across sourcing and logistics, and applying value-based pricing where we have earned the right to sharing the value created for our customers. We continue to decouple our revenue from fire activity through contract renewals, intentionally shifting sales towards fixed fees and away from more variable revenue. The net effect has been a revenue base that is less sensitive to volume swings, improving overall revenue quality and supporting our strong 2025 performance. Finally, on North America retardants, more aggressive initial attack strategies by our customers, combined with a more even distribution of acres burned across time and geography, largely offset the impact of fewer acres burned in the U.S. Taken together, Fire Safety's adjusted EBITDA growth highlights the structural earnings power created by our operational value drivers and improved contract mix. Turning to Specialty Products. Revenue for the year reached $163.9 million, an increase of 31%, driven by $41.2 million from acquisitions, partially offset by a $2 million decline in our base business, which was impacted by ongoing unplanned downtime at the Flexsys-operated Sauget plant. Fourth quarter revenue was $44.6 million, up 75% year-over-year, driven by an increase of $13.4 million from recent acquisitions and $5.7 million from the base business. Full year adjusted EBITDA for specialty products rose to $41.2 million, an increase of 3%, while the fourth quarter increased to $10.4 million, up 85%. As Haitham discussed, results in our P2S5 businesses continued to be affected by instability at the Sauget. As previously announced, we acquired Medical Manufacturing Technologies LLC in January 2026 for $685 million in cash, funded with a combination of cash on hand and the issuance of $550 million of new senior secured notes. MMT is a high-quality platform with attractive returns and strong aftermarket dynamics. As with the other businesses we own, we see meaningful opportunity to compound value through the application of our operational value drivers. If Perimeter Solutions, S.A. had acquired all of MMT on January 1st, 2025, we estimate that it would have contributed approximately $140 million of revenue and $50 million of adjusted EBITDA. We expect MMT to deliver solid year-over-year growth in 2026 as we implement our operational value driver strategy. Taken together across the portfolio, our results demonstrate continued structural earnings expansion, improved predictability, and the ability to deploy capital into value-creating M&A. We have updated our long-term assumptions, as shown on slide 9, to reflect the business's evolution, the largest impacts being driven by our acquisition of MMT. We now expect annual interest expense to be approximately $75 million, driven by the MMT acquisition funding, which closed in January. Interest expense in Q4 totaled $9.7 million. Tax-deductible depreciation, amortization, and other items are expected to be in the range of $60 million-$75 million in Q4 2025. Capital expenditures are expected to run $30 million-$40 million per year, focused on projects with attractive returns. Capital expenditures for the quarter were $7 million. Our working capital needs fluctuate seasonally, and Q4's working capital levels are consistent with our expectations, given the level of activity in Q4. We expect that the annual change in working capital will be approximately 10%-15% of revenue growth going forward, reflecting the increasing size of our non-wildfire-driven businesses in the portfolio. We paid cash for income tax of $20.6 million in Q4 as compared to $43.1 million in the previous year. Going forward, we expect our cash tax rate to be 20% or better. Turning from operations to capital allocation on slide 10. We deployed approximately $149 million of capital in 2025 across organic reinvestment, bolt-on M&A, and opportunistic repurchases, each evaluated against our minimum targeted equity returns of 15% and underwritten to drive durable value creation. Our objective remains maximizing long-term per-share equity value through disciplined capital allocation and thoughtful capital structure management. We invested $26.5 million in capital expenditures in 2025, focused on initiatives that support our customers' missions while driving profitable new business and productivity. Our project pipeline continues to build, and we view this reinvestment as a core enabler of our long-term organic adjusted EBITDA growth trajectory. In Q4, we invested $7 million, primarily supporting growth and productivity initiatives. We were active in M&A in 2025, having invested $82 million to acquire product lines for our IMS business, as well as select fire safety assets from Compass. In Q4, we acquired our largest set of products yet in a $40 million expansion, validating our belief that we can deploy tens of millions of dollars annually at attractive IRRs for many years to come. Looking forward, our M&A capacity exceeds what we expect to allocate to tuck-in product line acquisitions, and we are actively evaluating additional platform opportunities. The acquisition of MMT is a good example of the type of high-quality businesses we want to own, where we can apply our operational value drivers to drive meaningful post-acquisition improvement, consistent with what you have seen across our portfolio over the past several years. As we have noted before, our acquisition strategy is not industry specific, it is strategy specific. What ties our businesses together is quality and the applicability of our operational value drivers, not whether a company is chemical, fire, or safety by label. As a result, we expect future deals may come from new subverticals within the broader industrials landscape. Let me reiterate what we look for. First, we prefer businesses that provide a small but essential component within a larger solution to a critical, complex customer problem, often serving a niche need where alternatives do not deliver comparable value. That positioning supports our value creation model. We need profitable new business, driving productivity through operational efficiencies, and earning the right to implement value-based pricing. In addition to those core elements, we favor businesses with recurring revenue, secular growth, strong free cash flow generation, and high returns on capital, and the potential for add-on M&A. Finally, earlier this year, we repurchased $40.4 million of shares when we viewed the risk-adjusted return as compelling and believed repurchases would not preclude value creating M&A. As the year progressed, our focus shifted towards pursuing M&A targets. MMT is an important step on that journey, but it is not the endpoint, and we believe we have capacity and momentum to continue building the portfolio via M&A. Turning to slide 11. The second half of our capital strategy is to maintain moderate leverage to enhance equity returns. Our debt profile remains attractive, with no financial maintenance covenants and substantial liquidity. In addition to our existing $675 million of 5% fixed rate notes due in the fourth quarter of 2029, we also closed $550 million of 6.25% notes due 2034 in January of this year. At quarter end, we were levered 1.1 times net debt to adjusted EBITDA, with LTM adjusted EBITDA of $331.7 million. We ended the year with $325.9 million of cash and equivalents and an undrawn $200 million revolver. On a pro forma basis, accounting for the closing of MMT and the $550 million notes offering, we were levered 3 times net debt to adjusted EBITDA. This leverage level remains below our ideal 4 times leverage level, leaving ample financial capacity to pursue value-creating M&A. Lastly, on our capital structure, we amended and extended our revolving credit facility in Q4, doubling the size of the facility to $200 million and keeping in place its attractive spring covenant structure, where we face no maintenance covenants if the facility is less than 40% utilized. The facility has never been used and remains fully available as of today, providing flexibility that supports our goal of deploying capital into value-creating activities while reserving adequate liquidity to support the organic needs of our business. 2025, we advanced our dual objectives of serving our customers and driving shareholder value. We introduced new products that expanded our solution offerings. We grew adjusted EBITDA through the implementation of our value drivers across each of our businesses. We improved the quality and predictability of our earnings stream through contracting and by diversifying the sources of adjusted EBITDA growth. We leveraged our financial strength and value-focused underwriting to deploy over $830 million of capital, including MMT. Looking ahead, our priorities are straightforward: execute on our commitment to our customers, integrate MMT, and apply our operational value drivers with urgency and rigor across the entire portfolio of businesses, and remain disciplined allocators of capital. We are proud of what our teams delivered in 2025. We believe we entered 2026 with stronger and more consistent earnings power, strong acquisition momentum, and a clear set of priorities for the future. With that, I will hand the call back to the operator for Q&A. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today comes from Joshua Spector of UBS. Please proceed with your question. Joshua Spector: Hi, good morning, guys. I guess first I have to say, congrats on a strong 2025, and I certainly hope that P2S5 ownership issue is resolved sometime in the near term. For my first question, I just wanted to ask on, you guys made pretty clear points around fixed versus variable mix, shifting within fire retardants. Obviously, you have the new contracts layering in next year. When you look at earnings in 2025 for the fire retardants business and into 2026, how much of that would you say is now under a fixed type contract or a service type payment versus variable, and how does that compare versus history? Kyle Sable: Hey, Josh. Good morning. Thank you for the questions. We have not broken out and are reluctant to break out a specific fixed variable split. That said, to answer the latter part of your question, the consistency and predictability of the cash flows that come out of each of these contracts, and therefore our retardant fire safety business in general, are dramatically more predictable than they were historically, and should actually get incrementally more predictable in 26 versus 25, given that the most recent U.S. Forest Service contract that has kicked in this year, adds yet more consistency to those contractual cash flows. Joshua Spector: Okay, let me try maybe one other way, I guess, around this, in that if we look at this last year, I mean, you talked about a more spread out fire season, health deployment, I think also, a more aggressive U.S. stance around firefighting also led to more deployments. I guess when you think about the amount of gallons that you sold, clearly we cannot really look at acres burned as the indicator anymore for what would be that variable piece of it. What would you suggest that we look at? Should we be looking at fire starts, or is there something else in terms of how we are deploying fire retardants that we should be looking at to think about what is going to drive volumes up or down year-over-year? Haitham Khouri: It is a good question because it is a very hard one to answer. There is no great metric to accomplish what I believe you are trying to accomplish. The best one of an admittedly not amazing set of metrics, I still think remains U.S. and North American acres burned. I would just say the % change in our revenue and EBITDA relative to the % change in acres burned is just dramatically muted relative to what it was in our historical financials. Joshua Spector: Okay. If maybe I pivot for one last one, the $40 million cash deployment into the electrooptical assets and product lines, how should we think about the accretion of those types of deployment? Is it higher or lower than your typical M&A? I do not know if you can give us an EBITDA multiple or how that kind of flows through so we could think about what that is going to mean as you do more of those. Haitham Khouri: We think the product line acquisitions at IMS are higher returning than our typical M&A. The beauty of the IMS business model is you can buy very attractive, fully proprietary, spec'd in, very aftermarket-heavy, if not exclusively aftermarket product lines at much more attractive multiples and therefore higher IRRs than you can buy whole companies. We did make a whole company acquisition as our platform when we bought the actual IMS business in late 2024. All the acquisitions in 2025, and we expect the majority going forward, are going to be these very attractive product line acquisitions. Josh, if we say that we will not deploy capital without seeing at least a 15% long-term IRR into any form of capital allocation, and we are telling you the IRRs on these product lines are nicely higher than other forms of capital allocation, I think you can safely infer that the IRRs are very attractive on these acquisitions. Joshua Spector: Thanks. That is helpful. I will turn it over and congrats again. Haitham Khouri: Thank you. Operator: The next question is from Dan Jester of Morgan Stanley Investment Management. Please proceed with your question. Dan Jester: Hey, thanks. Good morning. Haitham Khouri: Morning. Dan Jester: I just wanted to ask, as you are thinking through, I guess, kind of the five broad product lines that you have now, and you are thinking through growth drivers and growth prospects across those different business lines, is there any, would it be possible to kind of stack rank, where you see the most long-term growth or where you see relatively more or less long-term growth across the different product lines? Anything you could share to kind of help us think through, I guess the relative growth prospects would be great. Thanks. Haitham Khouri: Hey, Dan. Good morning. We hesitate to stack rank them. That said, we think there is very solid organic growth throughout our portfolio. Suppressants, individually and combined, have very nice long-term secular volumetric growth profiles. The other businesses in our portfolio generally have been acquired by us thereafter, and we are only going to acquire businesses with attractive long-term secular growth profiles. It is one of our target economic criteria. Therefore, our specialty product segment also has, we think excellent, long-term organic growth potential with strong secular drivers. Therefore, we think this is a solid long-term growth portfolio. Dan Jester: Yeah, that is helpful. Fair enough. Maybe on MMT, and you guys have kind of already commented on some of this, but now I guess that the deal is closed and you have been able to look even deeper under the hood for a month or two now. As you think about the opportunities to implement your operational value drivers, where do you see bigger opportunities between the OEM and the aftermarket? Where do you see kind of nearer-term opportunities? I guess maybe could you talk through which of the operational value drivers could potentially be most applicable to MMT? Thank you. Haitham Khouri: As far as the value drivers, we feel very good, Dan, that all three of them are going to be solidly applicable. This is a high innovation, high growth space in which MMT is a clear leader, which is a beautiful setup for aggressive internal reinvestment into R&D, innovation, engineering, which should drive meaningful long-term profitable new business. That lever is particularly attractive here, given the end market. The ability to add value to customers and share in that value through value-based pricing is also clearly present, given the absolute mission criticality and relatively low cost of MMT's products. We just always find productivity opportunities at businesses. All three are applicable. I just emphasize the profitable new business opportunity here. As far as OEM versus aftermarket, value-based pricing opportunities tend to more often exist in the aftermarket. Our experience tells us the aftermarket tends to be underpriced more so than OEM. That said, if you innovate and add value, you earn the right to value. Dan Jester: One last quick one. We are almost 2 months into the quarter. You guys obviously have a lot more visibility and a lot more resources to kind of track wildfire activity globally. Wondering if you could just kind of walk through any trends we are seeing in international retardant quarter to date in the Southern Hemisphere, where they are kind of in the peak wildfire season. Thank you. Kyle Sable: Sure, Dan. As always, we would not comment on intra-quarter, intra-quarter results. We are going to have to wait till March to see what those look like. That said, you are generally right, that there has been a long-term secular trend across the globe of having more fires and more intense firefighting activity. When we look at those secular growth drivers over long term, we continue to think that they are intact, both in the North American markets and in the international markets. Additionally to that, when we think about the international markets, there is a real opportunity for us to expand usage, and we have seen a lot of great applications of that across both geography and application method, where we have tried to branch out from just aerial deployment to broader ways to apply, including rail apply in some of our new emerging geographies. Dan Jester: Great. All really helpful. Thanks a lot. I will turn it back. Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Please stand by for closing comments. Haitham Khouri: Thank you, operator, for the good work. Thank you, Josh and Dan, for the great questions. Thank you to our investors for your support. We will speak again in a couple months. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 FTAI Aviation Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Alan Andreini. Please go ahead. Alan Andreini: Thank you, Kevin. I would like to welcome you all to the FTAI Aviation's Fourth Quarter 2025 Earnings Call. Joining me here today are Joe Adams, our Chief Executive Officer; David Moreno, our President; Stacy Kuperus, our Chief Operating Officer; and Angela Nam, our Chief Financial Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including EBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe. Joseph Adams: Thank you, Alan. 2025 was a defining year, and I'd like to start today by highlighting the major achievements we've accomplished over the past 12 months, positioning FTAI for further success and market leadership in the years ahead. We began the year with the launch of the strategic capital initiative or what we call SCI, raising our first fund focused on acquiring 737NG and A320ceo aircraft. This allowed FTAI to maintain an asset-light business model while the fund acquires narrow-body aircraft at scale. The SCI investors benefit from FTAI's engine maintenance capabilities as well as our decade-plus track record of successfully investing in on-lease narrow-body aircraft. Market demand for the first fund was exceptionally strong, including our own 19% co-investment in just 10 months, we secured $2 billion in equity commitments, making SCI I the largest fund ever dedicated to narrow-body midlife aircraft. Together with the support of our leading financing partners, ATLAS, an affiliate of Apollo and Deutsche Bank, we will invest $6 billion in total capital in Fund I. Deployment for 2025 has been strong with 130 aircraft now closed as of December 31. The portfolio has a large concentration of aircraft with engine maintenance needs, which leverages the fund's agreement with FTAI for engine exchanges and further differentiates our offering to investors. I am also pleased to announce that we have started the fundraising process for SCI II off the back of great success we've had with the first vehicle. David will share additional details around the 2026 plan, but I can also share that we have an anchor equity commitment for SCI II, which positions us to start investing out of SCI II once the first vehicle wraps up its final few investments in the next couple of months. Turning now to results. Aerospace Products finished the year with great momentum, generating $195 million of Q4 adjusted EBITDA at a 35% margin, an increase of approximately 66% year-over-year and up 8% from $180 million in Q3 of last year. For the full year, we delivered $671 million of adjusted EBITDA, in line with our upwardly revised target of $650 million to $700 million and well above our original goal of $600 million to $650 million. This represents 76% growth over the $380 million generated in 2024 and is over 4x the $160 million we reported 2 years ago only in 2023. Our growth is driven by the value we provide to the industry by offering readily available fixed price engines. A flexible and cost-efficient alternative to traditional CFM56 and V2500 shop visits. We save our customers time and money, and our growth reflects the increasing market adoption of our products. The long-term outlook for the aftermarket on these platforms continues to strengthen as airlines increasingly opt to extend the life of their existing fleets rather than retiring aircraft for the newest technology. Shop visits for the LEAP and GTF engines are not expected to surpass the CFM56 and V2500 until at least the middle of the next decade, supporting a long and durable addressable market for many years for us. We're seeing this inflection point in the market today. Total maintenance spend is now expected to grow at a double-digit rate this year to approximately $25 billion per annum, up from $22 billion per annum projected last year. Retirements remain at historically low levels and shop visit demand is shifting towards heavier maintenance overhauls that signal longer economic useful life for these engine types. Altogether, these trends reinforce our confidence that FTAI's differentiated MRE or maintain repair and exchange model and competitive advantages position us to continue to lead the aftermarket. We remain firmly on track to achieve our interim goal of reaching 25% market share through a combination of new and repeat customers as well as an increasing volume of engine exchanges from SCI funds each year. Turning to production. We refurbished 228 CFM56 modules this quarter across our 3 facilities, an increase of 68% compared to Q4 2024, bringing our total for the year to 757 modules. This surpassed our 2025 goal of 750 and was an outstanding collective achievement by our 1,000-plus highly skilled and dedicated employees spread across 13 locations on 3 continents. 2025 was a defining year for our Aerospace business as we continue to widen our competitive moat. Our multiyear materials agreement with CFM provides with OEM replacement parts supply, thrust performance upgrades and component repair, reinforcing our shared priority to extend the life of the CFM56 engines through an open MRO ecosystem. This agreement enhances supply resilience, helps us meet strong demand from our customers and supports the continued scaling of our core module remanufacturing platform. Before I hand it over to David to talk about our key priorities for 2026, I want to take a moment to congratulate him and Stacy Kuperus, who were appointed President and COO of FTAI earlier this month. A well-deserved promotion for both David and Stacy. They've been exceptional leaders for many years at FTAI, and we're very grateful for their commitment to this business. With that, I will pass it over to David. David Moreno: Thanks, Joe. I would now like to talk about our priorities for 2026. First, I'll share an outlook for strategic capital. We are pleased to report that the capital deployment for SCI I is largely complete. As Joe mentioned, we closed 130 aircraft in 2025. As of today, we now have 276 aircraft closed under LOI, representing $5.3 billion of our $6 billion target, and we remain on track to be fully invested by the end of the second quarter. As we complete the deployment of SCI I, we have started the fundraising process for the next fund, and we can share that we have an anchor equity commitment in place for SCI II. We expect to start investing SCI II by June 30 and look forward to continuing to execute on the strategy of combining on-lease aircraft investing and engine maintenance to generate outsized return with greater downside protection. Our ambition is to become the world's largest manager of mid-life narrow-body aircraft, and we believe we're well positioned to achieve this goal over the next few years. Shifting to our aerospace products production outlook. We are revising our 2026 target upward from 1,000 to 1,050 modules, representing a 39% growth compared to 2025. We continue to strengthen the foundation of each shop in our maintenance network, which will support the next phase of growth. In Montreal, throughput continues to improve as our training academy scales and the benefit of specialization and workflow optimization are now visible in daily output. We began integrating Palantir's artificial intelligence platform, providing our teams AI-driven insights and actions to further reduce downtime, optimize our supply chain hub and act as a significant accelerator to productivity. In Rome, since our joint venture began in Q2 of last year, we have almost doubled the employee base from 101 to 185 today, rapidly building the workforce needed to take on greater repair volumes at high levels of productivity. The integration of Rome into the broader MRE network is in its advanced stages and coordinated training in Montreal's Training Academy has accelerated the development of Rome's team's technical capabilities. At the same time, our investment in infrastructure and component repair capacity will support our goal to double production in 2026. In Miami, our integration of last quarter's ATOPS acquisition is progressing well and positions Miami to be a major hub for MRE production. We have added highly experienced engineers and technicians, expanded the floor space and the proximity to our existing facility and test cell drive significant synergies. The ATOPS Portugal facility is also being incorporated into our logistics network and is already making a meaningful contribution to our field service operations in Europe. We've also made significant progress with our 2 component repair investment, Pacific and Prime Engine Accessories, both of which position us for meaningful CFM56 repair cost savings this year. At Pacific, we relocated the business into a new 75,000 square foot facility to support the compressor blade repair volumes required by our own MRE network. At Prime, we've invested heavily in tooling and equipment and are ramping up hiring so the Connecticut facility can become FTAI's global hub for engine accessory repairs. With substantial progress across our facilities and the combined build-out of our broader MRE ecosystem, we are well positioned to achieve further production growth in 2026 and beyond. Strengthening this foundation has been a major focus for us and sets the stage for the next phase of FTAI's evolution. Finally, at the end of last year, we announced the launch of FTAI Power, our new platform dedicated to converting CFM56 engines into aero derivative Power turbines. This business has been in development for over a year and is built on the simple belief that the CFM56 engine, already the most proven and widely deployed engine in commercial aviation history, will play a critical role in meeting the world's accelerating need for electricity. The surge in demand for AI data center has created an unprecedented and long-term need for fast, flexible and scaled Power solutions. Traditional infrastructure was never designed for the scale and speed of demand we're now seeing. With FTAI Power, we're adapting the world's largest and most reliable engine platform to deliver a 25-megawatt unit that offers grid operators greater flexibility and faster deployment. It's the exact same value proposition that has driven our success and scale in aerospace. Before moving on from Power, we'd like to provide an update on our progress across 5 areas: number one, engine feedstock and working capital; number two, facility readiness; number three, our procurement strategy; number four, customer engagement; and number five, production timing. First, feedstock and working capital. As we scale the Power platform, we are targeting approximately $250 million of working capital to support turbine feedstock and a rotable pool of key components, including generators, gearboxes and control systems. In the fourth quarter of 2025, we increased inventory by approximately $150 million to secure additional turbines required to support our expected 2026 production ramp. We are intentionally building inventory ahead of demand to ensure execution certainty as commercialization advances. Second, facility readiness. We have begun retrofitting our Montreal facility to establish a dedicated production line for the Power business. As a reminder, our Aerospace and Power businesses must remain fully separate. Components that transition from Aerospace into Power applications will not return to aerospace service. Maintaining the separation is critical both from a regulatory and asset integrity standpoint. And although the additional space is not required for 2027, we are planning to well ahead for future expansions in Montreal, Miami and Rome to support the growth of the business. From a labor perspective, the core technical skill set required for the CFM56 platform directly translates to our Power application, providing a strong operational foundation. In anticipation of growth across both Aerospace and Power, we scaled our Montreal workforce from approximately 360 employees at the beginning of 2025 to 570 today, representing an increase of roughly 60%. In parallel, since opening our training academy in June, we have enrolled 220 trainees in total and are graduating over 50 per quarter, further strengthening our pipeline of skilled technicians to support sustained production growth. Third, we continue to refine our supply chain strategy for non-engine components and partners. Our approach will be a combination of a multi-vendor sourcing of key components, collaboration with third-party vendors with proven track records and the build-out of in-house capabilities that will allow us to control production from turbine to final assembly. Given the scale we aim to deliver in the market, this multipronged approach will give us the flexibility and the predictability to fulfill our commitments to customers. Fourth, customers. We continue active discussions with hyperscalers and data center operators. While we're not providing specific commercial details at this stage, engagement remains strong and focused on long-term deployment structures. As a reminder, the aero derivative platform is highly versatile asset capable of supporting baseload backup and peaking applications. We are currently seeing particular interest in baseload deployments, which aligns with our objective of establishing a durable foundation for long-term growth and which is consistent with our current theme in the market of bring your own Power. Fifth, timing. We expect the first production units of Mod-1 to be delivered in the fourth quarter of this year. Our confidence continues to increase as we progress through final execution milestones. We continue to target 100 units of production in 2027. We are excited about the opportunity ahead and confident this platform will become a very significant contributor to FTAI's long-term growth. I'll now hand it over to Angela to talk through 2025 numbers in more detail. Eun Nam: Thanks, David. The key metric for us is adjusted EBITDA. We ended the year strongly with adjusted EBITDA of $277.2 million in Q4 2025, which was up 10% compared to $252 million in Q4 of 2024. The $277.2 million EBITDA number was comprised of $195 million from our Aerospace Products segment, $113.2 million from our Leasing segment and negative $31 million from Corporate and Other, including intersegment elimination and start-up expenses associated with our Power initiative. As expected, Aerospace EBITDA continues to exceed and outgrow Aviation Leasing's EBITDA. Now let's look at all of 2025 versus all of 2024. Adjusted EBITDA was $1.2 billion in 2025, up 38% versus $862 million in 2024. Aerospace Products had yet another great quarter with $195 million of EBITDA at an overall margin of 35%, which is up 8% compared to $180.4 million in Q3 of 2025 and up 66% compared to $117.3 million in Q4 2024. Overall, we generated $671 million of adjusted EBITDA for 2025 in Aerospace Products in alignment with the revised higher estimates for the year of $650 million to $700 million. Turning now to Leasing. Leasing continued to deliver strong results, posting approximately $113 million of adjusted EBITDA in Q4. This included $20 million from the SCI through management fees and co-investment returns and $93 million from leasing assets on our balance sheet. We expect the mix of Leasing EBITDA to continue shifting towards the SCI as we launch new SPV partnerships each year on a programmatic basis and pivot away from balance sheet aircraft leasing. For the full year, Aviation Leasing generated $609 million of leasing EBITDA in 2025, just above our target for the year of $600 million, including $54 million from Russian insurance claim recoveries. We also ended the year at 2.6x leverage on the low end of our targeted range of 2.5 to 3x agreed upon with our rating agencies. In addition, we are pleased to see recognition of our improved credit last quarter with 2 notch upgrades from both S&P and Fitch. With these actions, we have now achieved our objective of maintaining a strong BB rating across all 3 agencies, reflecting the continued strengthening of our balance sheet and the durability of our business model. Lastly, in 2025, we generated $724 million of adjusted free cash flow compared to our original guidance of $650 million and revised guidance midyear of $750 million. This figure is further adjusted for 3 key investments we made in the fourth quarter to support our 2026 growth initiatives. First, strategic capital for larger fund size and faster deployment pace increased our co-investment by $52 million. Second, FTAI Power, where, as David mentioned, we proactively invested $150 million in additional turbines to support the 2026 production ramp. And third, we invested an additional $50 million in hot section parts, a critical input for our engine maintenance business in a market where parts access is very tight. And with that, I'll hand it back over to Joe for final remarks. Joseph Adams: Thanks, Angela. As we close out 2025, I want to reiterate how proud we are of what the FTAI team has accomplished. This was a year defined by execution, scale and strategic progress across every part of our business. We launched the SCI platform and completed the fundraise for the inaugural vehicle, launched the fundraising for SCI II, expanded our global MRE footprint and laid the foundation for FTAI Power, all of which strengthens our competitive position and supports durable long-term growth. Our Aerospace Products segment continues to demonstrate the Power of our MRE model, delivering exceptional year-over-year growth and establishing a clear leadership position in the CFM56 and V2500 aftermarket. Our Aviation Leasing business is evolving into a high-quality fee-driven asset management platform with recurring earnings and expanding co-investment opportunities. Following a very strong start to 2026, we're even more confident in achieving the guidance we outlined last October. We're updating our outlook to increase total EBITDA by $100 million, split half attributable to an increase in Aerospace Products and half from leasing coming primarily from insurance settlements tied to Russian asset recoveries. As a result, we now expect total business segment guidance of $1.625 billion, up from $1.525 billion. This includes $1.05 billion from Aerospace Products, up from $1 billion and $575 million from aviation leasing, up from $525 million. 2026 is going to be a year of continued growth and new business launches at FTAI. Our new initiatives are bigger and growing faster than we originally projected, and we will be making larger investments in growth to maximize value and speed to market. While we remain confident in our original target to generate $1 billion of free cash flow after incorporating several positive developments and incremental growth investments, we now expect 2026 free cash flow of approximately $915 million. This reflects $100 million of additional EBITDA, less $85 million of increased SCI investments tied to the launch of SCI II and $100 million of additional Power working capital to support the 100-unit production pipeline for 2027. As a growth business, it's our priority to pursue high-return opportunities, and we are confident that these investments across SCI, Power and Aerospace will drive meaningful value into 2027 and beyond. As a result, redistribution of capital remains a strong consideration. And therefore, for the second consecutive quarter, we're increasing our dividend from $0.35 to $0.40 per share per quarter. The dividend will be paid on March 23 to shareholders of record of March 13, which marks our 43rd dividend as a public company and our 58th consecutive dividend since inception. Overall, we enter 2026 with strong demand, a robust production pipeline and a clear strategy to scale both our engine maintenance and asset management platforms. The investments we've made in our facilities, our people and our broader ecosystem position us to meet rising customer needs and capture the significant opportunities ahead across Aviation Leasing, the aftermarket and now the rapidly growing Power requirements driven by AI. I want to thank our employees around the world for their dedication and hard work, our partners for their continued support and our shareholders for their confidence in our long-term vision. We're excited for the year ahead and look forward to updating you on our progress. With that, I will give it back to Alan. Alan Andreini: Thank you, Joe. Kevin, you may now open the call to Q&A. Operator: [Operator Instructions] Our first question comes from Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: I have two questions, please. The first one would be on AP margins. So when we look at Aerospace Products margins, they've been nice and steady at the mid-30s level throughout most of this year, and you've talked about reaching 40% potentially in '26. Can you talk about how the access to the PMA blades and now CFM, the materials deal supports the margin profile and mix going forward, along with some of the other initiatives you've been taking to support margin upside? Joseph Adams: Sure. Thanks, Sheila. So when we talked about growing our margins from 35% to 40%, we mentioned three parts to that. First was the PMA HPT blade, which has been approved. Second was additional lower-cost parts supplies, which we've now achieved through both buying -- additional used service material, but importantly, with the deal that we did with CFM, which included parts and repairs. And then third was continuing to grow our piece part repair capability, which we -- as David mentioned, we've advanced significantly with Pacific Aerodynamic in California and the Bauer joint venture in Connecticut. And we've also added a lot of piece part repair capability in Montreal, and we continue to add a lot of repair capability. It's been a priority of ours for the last -- as we mentioned, for the last 3 years, and it's critical to sort of maintaining a low-cost position and developing competitive advantages in the overhaul of those engines. So great progress on all of those. So everything we wanted to have in place to achieve that 40% margin is in place, and we are very confident that we have the capability to do that, to grow that in 2026 to 40%. I will say on the further positive development side, the there are a number of the large airlines in the world or largest airlines in the world that are increasingly in the mix for our MRE products, I'd say more so than ever before. And over the last 6 to 12 months, we've increasingly been engaged on bigger deals. And if we have the opportunity to accelerate market adoption and pick up some of the bigger programs, we will prioritize that over adding incremental margin to the business. If we can get more EBITDA from a broader base of customers faster, that we believe is more valuable than simply increasing percentage points of margin. So that's sort of the way I would give the state of affairs today. Sheila Kahyaoglu: Perfect. And then if I could ask another one on FTAI Power. It sounds like through the commentary from David and the slides that you guys feel comfortable you have the right inventory to support the launch of the Power business here. Can you maybe talk about steps from now through 2027 in terms of how you expect to achieve 100 units next year from a labor and equipment perspective? And secondly, how you're thinking about ultimately your ability to service these turbines once they're in the field? David Moreno: Sheila, this is David. I can take that. So just as far as the ramp-up first, right, we've been working on the Power initiative for over a year. So as we mentioned earlier, we've been leveraging the same infrastructure that we have, which includes our Montreal facility, which, as we mentioned, we've been hiring at a rapid pace. We feel very good about production for 2027. And in general, going from 0 to 100 as far as production units for Power is going to go a lot faster than when we started Aerospace going 0 to 100. And that's for the same reason that we're leveraging the infrastructure that we have as well as the feedstock of engines. We see that as very complementary to our Aerospace business. Now the second piece as far as maintenance and the opportunity there, we actually think this is a very important piece of our business model, not only from a revenue standpoint, but from a value prop to our customers. We're not going to provide exact numbers on the revenue opportunity, but just to give you just a general flavor, the engine, the turbine itself is going to have a similar life cycle as it does for Aerospace, which means every 5 to 6 years, it's going to require maintenance. As the business scales, that's going to be the aftermarket servicing and that is going to be a significant opportunity for us. From a customer standpoint, as you know, our ethos as a company is all around 0 downtime for our customers. And we're going to leverage the same exact exchange model that we've had a lot of success with, which is the turbine and module exchange model to offer that as a big differentiator in the market. It's going to set us apart from a lot of competitors. Operator: Our next question comes from Kristine Liwag with Morgan Stanley. Kristine Liwag: I guess like one, with the assets you need to acquire for SCI I, and Joe, you launched like SCI II, that would be my follow-up question, but let me finish this one first. So you've got the assets you've got to acquire for SCI I, the higher 2026 module target from 1,000 to now 1,050 that David called out. And you've got the donor cores for the 100 Power conversions for next year. Can you talk about the sourcing environment? Where are you getting this from? And how has been the pricing in that environment? And are you able to source all this volume? And then the follow-up to that would be, you've got also the launch of SCI II. I mean, how large could be SCI II? Joe, you had previously mentioned that normally, the second fund is larger than the first one. And your first fund is $6 billion. So just wanting to understand how you could support all this growth. Joseph Adams: Sure. So thanks for the question. I mean just going back, as we mentioned, the investment opportunity in current generation narrow-bodies is probably $30-plus billion a year of total investment. So our goal was to achieve $6 billion a year and which is a meaningful part of that, but not a disproportionate amount of those assets. And we've been successful being able to do that largely by focusing on assets that have a high level of shop -- engine shop visit intensity, which as you can expect, is that's where our natural advantage is because we have inventory and we can manufacture engines, whereas other financial buyers typically do not. So we've focused on that part of the market. In sort of a macro sense, a lot of lessors and a lot of airlines took the advantage to keep assets longer coming out of COVID because lease rates are going up and asset prices were going up and every airline needed that lift. So it was a great environment to hold on, but people have reached sort of limits where now they're getting new deliveries, average age of the portfolio has pushed out limits with debt investors. So we're seeing more and more volume coming to market, and we're a great counterparty for everyone for lessors and for airlines because we can solve engine problems, which is usually the biggest problem in the space. So as you mentioned, the $6 billion, we estimate we'll end up with about 350 aircraft in that first fund. That's 700 engines that will be fully committed to FTAI Aviation under the MRA contracts. And by the middle of this year, we'll start investing out of SCI II. I believe that we'll probably launch the size of SCI II around the same size of $6 billion, which, as you remember, was double what we originally launched SCI I at was $3 billion, then we raised to $4 billion and ultimately did $6 billion. So we'll probably launch SCI II at $6 billion. And our total -- our goal as a business, as we stated before, was to grow the asset management business to a $20 billion business, which this puts us in a very nice position to be able to say we're on track to achieving those goals and making it a significant player in that industry and the largest in the world for current generation narrow-bodies. So it's been great. I mean, when we launched it, people were a little bit taken aback by the size, but we've been able to do very good deals, get great returns, generate solutions for airlines. Airlines, in many cases, now recommend to their other lessors that they sell to FTAI because they like the fact that they don't have to do engine shop visits anymore. So it's really a nice flywheel that's in motion now. Kristine Liwag: Great. So it sounds like you're able to source all the volume to feed these businesses, right, Joe? Joseph Adams: Yes. And if you think about -- I mean, the Power business, one of the markets, if you take the total engine universe size of about 20,000 CFM56 engines in the world and the estimated retirement rate from the market is generally between around 2% to 3% per year. So if you take 2%, that's 400 engines a year get parted out every year. So for the Power business, if you just go buy 100 of those and say, don't part them out. They're worth more to us than they're worth in the secondary market for part value, you have -- you could get 25% of the part out market and satisfy your needs for the Power business every year. It's such a huge market. And 2% a year doesn't really estimate. I mean, if 2% a year existed in perpetuity, it would take you 50 years to use up the CFM56 market. So it's going to get bigger. But I just use that as an example. And we have not been an active buyer of engines that were part out candidates previously, but we will be now. Kristine Liwag: Super helpful. And following up on the FTAI Mod-1 that you expect to have ready for the 4Q this year. Can you talk about the technical specs of this derivative so far as you do that conversion? How has been the efficiency of this as a gas turbine? How does it compare with other things in the market? And also, look, to get to the 100 next year, do you have these orders lined up? How firm are your discussions with customers? And what would be the distribution of your customer set for next year, how firm are those? Joseph Adams: So I'll start and then pass it to David. But from a spec point of view, we estimate that the efficiency of the aero derivative will be comparable to other aero derivatives in the market. We are estimating a 25-megawatt output. So it puts us in a nice size range with a 35% to 40% efficiency and a 9,000 heat rate. So very similar to other aero derivative options in the market today, which have been sold for 30 to 40 years. It's not a new product. So we think we're competitive with that. We think, ultimately, the reliability and durability of the CFM56 will prove to be a competitive advantage from an overall total cost basis in that we think that the servicing cost and the maintenance costs will ultimately be lower. But it will take some time for us to prove that out. So that's sort of the first part of the question. You want to take the second? David Moreno: Yes. As far as interest, as I mentioned, we're seeing interest -- significant interest on baseload application. And what's really resonated as far as the Mod-1 with customers is really three things, right? Number one is scale and reliability. So the scale of engine feedstock as well as the reliability of the CFM56. It's the engine that's flown the most amount of hours. It's the most reliable engine ever produced. The second point is speed to Power, right? And everyone wants Power now. So not only just being able to deliver the units, but also actually putting them on site. So being a trailer mounted unit and being deployable very fast in about 2 weeks is really a key advantage for our product. And number three is ultimately flexibility. And we talk about flexibility across the entire business, but this unit is no different. It's 25 megawatts which is a perfect size for stacking for data centers that are growing. And then we talked about the maintenance piece, which is we're going to offer flexible maintenance, which is going to be a key differentiator for the product. So overall, there's a lot of interest for long-term use. As we mentioned, we're trying to set ourselves up for what's best long term. We're going to be updating the market as kind of we progress through that when appropriate for us. Operator: Our next question comes from Giuliano Bologna with Compass Point. Giuliano Anderes-Bologna: Congrats on another great quarter. As a first question, when you look at module production, the production this year was greater than what was originally targeted. I'm curious what the -- what are the things that are driving that production and how that's being impacted. Stacy Kuperus: Sure. Thanks. This is Stacy, and thanks for the question. I'm very proud of the work our team did in 2025 on module production. As a reminder, and as Joe said, in 2024, we had a total -- in Q4 of 2025 with total production of 228 modules, which is approximately a 68% increase from Q4 2024. And this was done -- this was a tremendous accomplishment by the teams and the result of disciplined execution with clear focus on three things for us, which is our people, our parts and process. So first on the people. Our Montreal Training Academy launched in 2025, and as David mentioned, has enrolled over 220 trainees. We've developed our own in-house training program, which includes augmented reality technology and has improved graduation rates and shortened training times. Second, on parts, we've made targeted investments in 2025 to expand our repair capabilities through Pacific Aerodynamics and Prime Engine Accessories. We've also upgraded significant piece part repair capabilities inside our facilities in Montreal and Rome. Combined with our strategic agreement with the OEM, these steps establish a strong foundation for our part strategy that position us for success in 2026. Lastly, on the process, supported by our partnership with Palantir, we've been optimizing our operations across all locations, which includes from asset management to supply chain. Leveraging AI-driven insights has allowed us to unlock additional efficiencies. And building on that digital foundation, we've also strengthened collaboration across the shops, sharing best practices and creating synergies through our MRE network. So I think looking ahead for 2026, our goal is to increase production by approximately 39%. And then -- and we feel very confident in that based on all these things, and this gives us our confidence in our ability to continue to scale. Giuliano Anderes-Bologna: That's very helpful. Maybe a slightly different -- slightly different topic and hopefully, this hasn't come up yet. But sometimes towards the end of the year, some sales could flip around from quarter-to-quarter, especially around year-end. I'm curious if that could have had any impact on the fourth quarter results this year specifically. Joseph Adams: Yes, it did. I mean we the Aerospace Products EBITDA came in a little bit less than what we thought it would be a few months ago, and it was primarily two reasons, one of which was we've added over 100 employees to the business. And there is a slight lag, I would say, not a major lag between costs and productivity. So there's some impact from that. And then secondly, as you point out, there are some customers who preferred to take delivery in Q1 as opposed to Q4. So we did have a few engines that slid from 2025 into 2026. And being a very customer-focused organization, we accommodated those needs. Everybody has budgets. So yes, there's a little bit of that, but I think it was a combination of the two reasons for the difference. Operator: Our next question comes from Josh Sullivan with JonesTrading. Joshua Sullivan: Just on cash flow, given the investments here in Q4, how do we think of '26 and the cadence of investments through '26, just the puts and takes? Joseph Adams: Yes, I'll start. I think it's a great opportunity in 2026 and that we have more cash flow available and more growth opportunities available. So we're very excited about it. I'll pass it over to Angela to give you the details. Eun Nam: Yes, happy to. So for 2026, we do expect to generate $1.2 billion in free cash flow before any new growth initiatives. So as mentioned by Joe, with the revised adjusted EBITDA guidance for 2026, we expect an additional $100 million, $50 million more from cash flow in Aerospace Products with the additional production and another $50 million in Leasing from settlement of Russian claims. What you also saw in our 2025 free cash flow walk was that we called capital on our SCI I earlier by $52 million. So that improves our cash flow in 2026. So that overall is an increase of $152 million to the 2026 free cash flow, getting us to $1.2 billion before the growth initiatives. So as mentioned by Joe, we do expect acceleration of our SCI II investment increase of about $137 million in 2026 as we will call capital earlier for deployment. And then secondly, for the remainder of our $250 million that we expect for Power, so $100 million related to that. So that brings us to the $915 million that we shared with the group. Joshua Sullivan: Got it. And then just one on the continued struggles of the OEM supply chain, Airbus adjusting deliveries here. Can you just comment on any impact on the leasing environment, aircraft engine or leasing duration? Any comments you can make just on the general environment? Joseph Adams: Well, I mean, we continue to be in love with the CFM56 and the V2500, and it just -- it keeps getting better and better. So we didn't expect as much of a tailwind, but the current assets, the existing fleet is so durable, predictable, reliable. And importantly, it just makes money for the operators. And that's what drives retirements. It's not technological, it's economic. So the lower the cost we can drive on the engine maintenance and the better -- and the other newer assets seem to be going in the opposite direction, which just gets better and better for us in terms of longevity. Operator: Our next question comes from Myles Walton with Wolfe Research. Myles Walton: On the Power initiative, is it fair to expect a relatively steep delivery ramp through '26 to get to that 100 for deliveries in '27 -- excuse me, steep delivery ramp through '27 to get to the 100 deliveries in '27. And so what does that mean for the exit rate of production or deliveries into 2028? Joseph Adams: Well, I would say we haven't really mapped all that out yet. We've got 10 months before January of 2027 to gear up and set what we would expect to be a monthly production rate. So we've got ample time. We've got all the material that we need to go into the end products that's required from third parties. We've already got multiple counterparties identified. We've got purchase orders that have already been executed. So we're planning ahead. I don't -- I wouldn't say it's going to be a very steep. Our goal would be to make it not terribly steep in terms of the ramp-up. And given that we have ample time to do that, I think it will just make for a more efficient production. The other thing is we may do multiple locations. We may not just do one location in terms of assembly. So we can have different sort of the diversification of supply and geography that will help also smooth that out. Myles Walton: Got it. And Joe, it sounds like you're not seeing really much of a cannibalistic effect of this Power initiative. You sort of talked to the 25% share on the growing MRO business, which gets you to $6 billion of revenue there at 40% margins. And then this Power business looks like it's another $2 billion to $3 billion of revenue. So you're talking about building an $8 billion to $9 billion business at 40% margins in Aerospace Products. Is that sort of where you're leading us to? Joseph Adams: Sounds good to me. But no, I think -- I mean, we don't see it as being at all cannibalistic. I think it's complementary and that the natural extension of the life after an aerospace life of 30 years is a ground-based operation. So it's a perfect life extender for the CFM56 and V2500 as other aero derivatives have proved out before this. So -- and the supply of both raw material, if it's just not parting out an engine instead of parting it out, that doesn't take away from the existing supply of aerospace engines. The labor force is different. The third-party vendors are different. So it really is an add-on as opposed to detracting in any way from what our current Aerospace business is. Operator: Our next question comes from David Zazula with Barclays. David Zazula: I guess following up on that, could you give any more color on your expectations for margins in the Power business? And specifically, why you think your part of the value chain here in this delivery is going to earn you the type of margins you previously talked about? Joseph Adams: Yes. So what we said on margins to date is that we expect the margins to be as good or better than margins in our Aerospace Products business today. And one of the main reasons why we're very confident of that is that the -- we have assets that are nearly fully depreciated that we can repurpose into a whole another life and add potentially 10 to 20 years of life on to assets that we previously otherwise might have been scrap. So we have a cost of input on the turbine that no one can match and a supply of that, that no one can match that -- and we also have built up repair capabilities, sourcing of used serviceable material parts, PMA, everything available known to mankind. We have already been working on that for the past 7 years. So there's nobody that could come close to us in terms of the input cost of a turbine. And that is the most expensive and complicated and constrained part of the Power business today. If you talk to anybody, I'll tell you what -- the biggest constraint on the Power side right now is getting turbine blades, HPT blades, in particular. So that -- we've solved that by taking an existing asset that is near -- at or near the end of its life and then creating a whole new life for it. David Zazula: And then could you talk about the strategic M&A strategy and how that plays into the Power business? And specifically, do you need to execute on that strategy to get to your margin target? Or is that kind of stand-alone? Joseph Adams: No, it's -- I mean it's stand-alone. We've built FTAI solely really almost exclusively with organic growth to date, and that's always our base case. If we find ways to accelerate it that are available that are at reasonable costs, we will always look at that or take advantage of those opportunities. But we always start with a base plan that we can execute on our own. And then if we can figure out a way that makes it better is something that we can do faster or cheaper, we will look at that. So that's our plan is basically organic and do it ourselves. And if we have an opportunity as we've done with adding some maintenance facilities and repair businesses in the aerospace side, we will look at that as well. Operator: Our next question comes from Shannon Doherty with Deutsche Bank. Shannon Doherty: We were very pleased to see GE Aerospace and CFM's endorsement of the FTAI business model. Maybe Joe or David and David, congratulations on your promotion. Can you provide us more color on the partnership there? Joseph Adams: Sure. So it's something we think was very positive, works well for both parties. The agreement itself is a multiyear deal that covers three things: supply of parts, piece part repairs and component repairs and thrust. And so from an FTAI point of view, it allows us to have more -- access to more parts and volume at good pricing, which means we can scale and grow our business while continuing to drive down costs. And from the CFM perspective, what they've expressed to us is their value proposition to their customer is based on an open aftermarket. And open aftermarket ultimately delivers the best product, the lowest cost, the lowest total cost of ownership and the longest life for that asset, which means if we're working together, what we can do is create bespoke solutions for customers as we've done with SCI and then we've done with many airlines. And we can optimize green time and ultimately save customers time and money, which means the asset flies longer, which means you sell more parts, and so everyone wins. And at the same time, we can provide PMA for customers who like those products. So we have a great portfolio of solutions for the whole market. Shannon Doherty: That's great. And Joe, as a follow-up, did you mention that you're going to do 350 aircraft in SCI I? I think that original target was going to be 375. And is that going to be the same size for SCI II, you're looking at 350? Joseph Adams: It should be about similar. I think the 350, sometimes if you buy slightly younger vintage aircraft, you pay a higher price per aircraft just because you have more life on it. So it's going to swing around. It could vary by the types of deals we end up doing, but 350 is a good number for both. Operator: Our next question comes from Brian McKenna with Citizens. Brian Mckenna: Okay. So you're still clearly in growth mode here and you're leaning into a number of opportunities. This does come with some upfront costs and investment, including hiring. So when you look across the business today, specifically some of the newer initiatives, where are you incrementally adding headcount? How should we think about the pace of hiring into 2026? And then is there a way to think about the related impact to cash comp as well as stock-based comp? David Moreno: Yes. So this is David. As we mentioned in our prepared remarks as well as comments from Stacy, we've been actively growing the workforce. So we're going to continue to do that. In general, in the market, there's a constraint of talent for technicians out there. And we want to make sure that we're always controlling that, and we're able to get ahead of that. So obviously, what was very key to that initiative was the training academy, which allows us to take talent and incubate that within our organization. We're going to continue to do that in 2026, right? Obviously, we're expecting to get to our 25% target on the Aerospace as well as add Power. So I would expect similar ramp-up as far as employee headcount as the shop as well as we're also looking at other opportunities for shops, let's say, east of Rome, right? So we talked about in the past opportunities in the Middle East as well as in Southeast Asia. So those are opportunities to grow headcount, and I don't see us stopping that anytime soon. Brian Mckenna: Okay. That's helpful. And then on SCI II, clearly, a ton of focus on private credit in the market today. Really, the focus has been entirely on corporate direct lending in areas like software. I would actually argue all this volatility is probably a good thing for capital flows into areas like asset-based finance, and there's been increasing demand for hard assets that are more insulated from AI. This is exactly the kind of exposure that sits within SCI. So I'd love to get your thoughts here, what you're seeing from a demand perspective for SCI II? And then has sentiment or conversations shifted at all as fundraising starts to pick up here for the successor fund? Joseph Adams: Yes. So we're seeing that. I think that if investors are looking for asset-based uncorrelated cash -- contracted cash flow, you came to the right place, right? We have that. So we are in a great position, I think, on sort of absolute basis and a relative basis in the market. And all of our capital is locked up. It's private equity self funds. So we feel like we're -- we have a terrific product. I was reading recently about what they call the halo trade, which is heavy assets, low obsolescence, and that's the new theme. And we have -- we certainly qualify for both of those. So we are -- we feel very good about the market and where the private credit opportunities that we can offer people, how they compete with other things in the market. And I don't think that fund -- I mean, I should never say something won't be hard, but it feels like we're in a really good position having fully invested Fund I and launching Fund II into this market. Operator: Our last question comes from Andre Madrid with BTIG. Andre Madrid: I know for competitive reasons, you've decided not to share an anchor customer, and I know somebody kind of pointed to this earlier, but I don't know if it was answered clearly. So I just want to hit a head on. But is there just one customer lined up? Are there several lined up? I mean, can you provide any color on the order book or if a fleshed out order book even exists right now? Really any color to show that there's firm customer demand for Mod-1? Joseph Adams: Yes. We have an anchor investor as we announced, and we have a number of other investors who are currently invested in Fund I that want to re-up. So demand from the existing group of investors is being reflected as quite strong. In terms of deal flow, we have a pipeline of deal opportunities that we've been working on. One of the things that when we started SCI I, we really started into a new business from a cold start. In other words, we had no pipeline and not a lot of deal flow. So we built that up and we're able to invest in 18 months, the $6 billion of capital. And now we have a pipeline of opportunities we've been working on. Some deals can take 6 months, 9 months a year in some cases. So the more that we have been at this, the more developed we have as a pipeline and feel very good about the ability to deploy that money. Andre Madrid: Sorry, Joe, I said Mod-1. I meant FTAI Power, like if there's one or several customers and if the order book exists yet for Mod-1. My apologies. Joseph Adams: No problem. I thought we were still on SCI. David Moreno: Yes. As we mentioned, right, we're being very strategic on how we take on these orders. We're talking to hyperscalers, data center operators. Some of these folks want the entire capacity. But look, our focus is beyond 2027 and the outer years, right? We want something that's going to be 10 to 20 years plus durable. And I think now we understand we have a key asset, which is the turbine, and it's our best job to just do what's best for the company long term. So we're going to provide updates as we progress through those 100 units, right? And just right now, it's not the right time from a commercial standpoint to do so. Andre Madrid: Got it. Got it. And then I know you said in the press release, you say Mod-1 development is on track. But can you provide some more specific updates of what steps remain here on out? I think you might have alluded to some earlier, but maybe if there's like a more step-by-step plan that you could outline. Joseph Adams: Really, what we said is we've done a substantial amount of testing. Everything is designed, parts are ordered, and we will produce the first unit this year. That's kind of the most -- that's really the time -- the highlights that we've given so far. Operator: Ladies and gentlemen, this concludes the Q&A portion of today's presentation. I'd like to turn the call back over to Alan. Alan Andreini: Thank you, Kevin, and thank you all for participating in today's conference call. We look forward to updating you after Q1. Operator: Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the GoodRx Holdings, Inc. fourth quarter and full year 2025 earnings call. As a reminder, today's conference is being recorded. I would like now to introduce your host for today's call, Aubrey Reynolds, Director of Investor Relations. Ms. Reynolds, you may begin. Aubrey Reynolds: Thank you, Operator. Good morning, everyone, and welcome to GoodRx Holdings, Inc.'s earnings conference call for the fourth quarter and full year 2025. Joining me today are Wendy Barnes, our Chief Executive Officer, and Chris McGinnis, our Chief Financial Officer. Before we begin, I would like to remind everyone that this call will contain forward-looking statements. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding management's plans, strategies, goals and objectives, our market opportunity, our anticipated financial performance, underlying trends in our business and industry, including ongoing changes in the pharmacy ecosystem, our value proposition, our long-term growth prospects, our direct and hybrid contracting approach, collaborations and partnerships with third parties, including our point-of-sale cash programs and our Integrated Savings Program, our e-commerce strategy, and our capital allocation priorities. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors. These factors, including the factors discussed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2025, and our other filings with the Securities and Exchange Commission, could cause actual results, performance, or achievements to differ materially from those expressed or implied by the forward-looking statements made on this call. Any such forward-looking statements represent management's estimates as of the date of this call, and we disclaim any obligation to update these statements, even if subsequent events cause our views to change. In addition, we will be referencing certain non-GAAP metrics in today's remarks. We have reconciled each non-GAAP metric to the nearest GAAP metric in the company's earnings press release, which can be found on the overview page of our investor relations website at investors.goodrx.com. I would also like to remind everyone that a replay of this call will become available there shortly as well. With that, I will turn it over to Wendy. Wendy Barnes: Thank you, Aubrey, and thank you to everyone for joining us today. The fourth quarter marked a strong finish to the year and reflected disciplined execution across our strategic priorities. We expanded direct-to-consumer affordability programs with pharmaceutical manufacturers, scaled differentiated subscription offerings, and deepened relationships with retail pharmacies. Those results were shaped by a year of meaningful change across the healthcare landscape. In 2025, affordability pressures intensified, policy dynamics reshaped access and pricing, and consumers increasingly expected healthcare to be more transparent, accessible, and direct. Together, these shifts pushed affordability and access to the center of healthcare decision-making, an environment that plays directly to GoodRx Holdings, Inc.'s strengths. Against that backdrop, we moved quickly to translate market change into clear execution across our platform. We expanded access to high-impact therapies like GLP-1 and supported manufacturers as they leaned further into direct-to-consumer strategies. We launched condition-specific subscriptions that bring pricing, care, and access together in a single seamless experience. We partnered with pharmaceutical manufacturers to integrate pricing into TrumpRx, helping them operationalize self-pay pricing at scale. Taken together, these actions demonstrate how we are evolving GoodRx Holdings, Inc. to meet the needs of consumers, pharmacies, manufacturers, and policymakers in a rapidly changing healthcare environment. While our core marketplace remains foundational, we are increasingly orienting the business around Pharma Manufacturer Solutions as a key growth driver. This reflects the evolving dynamics of prescription access and pharmacy economics, where brands are playing a more significant role in retail performance. Importantly, this strategic evolution builds on a position of strength. With the number one prescription app and nearly 300 million site visits annually, we continue to lead in prescription savings. That scale and consumer reach uniquely position us to deliver value in an environment where affordability and direct-to-consumer access are becoming central to how medications are brought to market. As Pharma Manufacturer Solutions scales, it enhances our core platform by accelerating subscriptions, deepening retail relations, and expanding our ability to engage with employers, all while creating differentiation competitors cannot easily replicate. We believe this positions GoodRx Holdings, Inc. for stronger, more resilient long-term growth, even as we navigate near-term financial impacts from this transition. Diving into key business updates. Starting with Pharma Manufacturer Solutions, which has become a key growth engine for our business, with full-year revenue up more than 40% in 2025 year-over-year. The industry dynamics I just discussed, combined with tighter insurance coverage, are fundamentally changing how prescriptions are accessed. Affordability decisions are moving earlier in the journey, forcing patients to play a more active role in how medications are selected, paid for, and filled. At the same time, the rapid growth of GLP-1 through obesity has accelerated direct-to-consumer models and heightened expectations around transparency and convenience. As a result, consumers increasingly want the prescription experience to reflect the standard set elsewhere in their lives, with digital-first tools, transparent pricing upfront, and a seamless path from decision to fulfillment. The prescription journey has not kept pace at scale, and that gap becomes most visible at the moment consumers are ready to act. This makes direct-to-consumer engagement essential. Pharmaceutical manufacturers are investing more in patient-facing strategies to meet consumers earlier and need partners that can execute those strategies at scale. That is where GoodRx Holdings, Inc. stands apart. With nearly 25 million consumers and more than 1 million healthcare professionals using our platform each year, we operate directly in the flow of patient decision-making, enabling manufacturers to turn pricing strategies into real access and adherence. That momentum sets the stage for the next evolution of Pharma Manufacturer Solutions, which we are now calling GoodRx Pharma Direct. This evolution reflects a clear vision for the role GoodRx Holdings, Inc. plays in modern pharmaceutical commercialization, serving as a proven digital storefront for self-pay and direct-to-consumer strategies that are becoming increasingly central to prescription access. For pharmaceutical manufacturers, Pharma Direct provides the infrastructure to bring affordability programs to market at scale, applying modern e-commerce principles to prescription access. This creates a streamlined, repeatable way to launch self-pay strategies without building new consumer platforms or point solutions. This capability matters because self-pay is increasingly shaping how drugs are brought to market, with manufacturers launching with discounted cash prices as a core access strategy. Earlier this year, Novo Nordisk launched the Wegovy pill, with select doses available for $149 per month. As one of the launch collaborators, GoodRx Holdings, Inc. offered this lowest available self-pay price from day one, giving consumers immediate clarity on cost and access. When paired with a GoodRx Holdings, Inc. for weight loss experience, consumers are able to evaluate their treatment options and, if eligible, move forward without delay. Based on data Novo Nordisk released during the recent earnings call, paired with our own internal data, we believe GoodRx Holdings, Inc. accounted for nearly 20% of all Wegovy pill self-pay fills during a single week in January, demonstrating the scale and reach of our platform. More broadly, this model has the potential to scale across the GoodRx Holdings, Inc. platform. The same self-pay strategies that support launches also strengthen subscriptions and drive savings at the retail counter. Today, we have more than 100 brand self-pay programs live, many of which are integrated into TrumpRx to further expand their reach and visibility. This foundation also enables us to serve as a key integration partner for pharmaceutical companies offering discounted cash prices on TrumpRx. Manufacturers are partnering with us to host their self-pay prices on GoodRx Holdings, Inc. We then integrate those prices into the TrumpRx platform. Our nationwide pharmacy network and home delivery capabilities, when available, mean the programs we are hosting can scale quickly and consumers can access the savings wherever they choose to fill their prescriptions. We are proud to be the integrated pricing source for Pfizer and other leading manufacturers at launch, including over 30 of Pfizer's essential brand medications, spanning women's health, migraine, arthritis, rare disease, and more. This integration underscores GoodRx Holdings, Inc.'s role as critical infrastructure for delivering manufacturer affordability programs at national scale. Pharma Direct reflects how pharmaceutical commercialization is evolving, with self-pay and direct-to-consumer strategies playing a central role, and how GoodRx Holdings, Inc. is enabling that shift. Laura Jensen, our Chief Commercial Officer and President of Pharma Direct, is here with us today and will be available to address questions about Pharma Direct following our prepared remarks. Laura joined GoodRx Holdings, Inc. from Amazon Pharmacy in August to lead our work with pharmaceutical manufacturers, and has been instrumental in shaping and accelerating this strategic evolution. Turning to Rx Marketplace. The fourth quarter marked important progress in stabilizing our prescription marketplace and deepening our partnerships with retail pharmacies, even as the broader retail pharmacy environment remains challenged. We significantly expanded our e-commerce ecosystem, tripling our retail footprint through an accelerated rollout of new partners during the quarter. This expansion allowed us to exit the year with 6 of our top 10 retail pharmacies live on our platform and drove a clear inflection in consumer adoption, with order volume up 83% quarter-over-quarter. At the same time, we strengthened the underlying economics of the marketplace. We now have direct contracts in place with 9 of our top 10 retail pharmacies nationwide, providing a strong foundation for attractive retail margins. We also drove strong RxSmartSaver momentum and continued to scale Community Link, implementing direct contracting at an expanding number of independent pharmacies nationwide. Turning to subscriptions. We continue to execute against our condition-based strategy, focusing on high-intent areas where affordability and access are the primary barriers. In 2025, that included erectile dysfunction, hair loss, and weight loss. While still early, the initial launch and subscriber activations have exceeded our expectations, reinforcing our confidence in this approach. Weight loss, in particular, highlights the unique role GoodRx Holdings, Inc. can play in direct-to-consumer healthcare. GLP-1 treatments for weight management are often not covered by insurance, leaving most consumers paying out of pocket. With GoodRx Holdings, Inc. for weight loss, we simplify the entire journey, from virtual consultation to prescription to fulfillment, at nearly every pharmacy nationwide, using only FDA-approved therapies and pairing them with transparent, industry-leading, discounted cash prices, powered through our direct relationships with pharmaceutical manufacturers. Given the scale of unmet demand in this category, weight loss represents a meaningful long-term opportunity and a clear example of how GoodRx Holdings, Inc. serves as a connective layer across care, pricing, and access. Another important driver of subscription growth is the continued strength of our brand. Consumers recognize and trust GoodRx Holdings, Inc. as a reliable entry point for prescription savings. That brand equity is translating into efficient customer acquisition. We have attracted high-intent users and converted them at customer acquisition costs below industry benchmarks. Given those returns, we plan to continue investing in brand and performance marketing and will increase spend to drive subscription growth where we see strong unit economics. We also just introduced Employer Direct, a new offering designed to help employers address gaps in traditional insurance coverage by pairing their existing benefits with integrated cash pricing. The program is built to work alongside, rather than replace, employer health plans and gives employers practical ways to expand affordability and access without taking on additional plan complexity. There are two ways to engage with Employer Direct. First, employers can work with us to create medication-specific programs to contribute directly to the cost of individual brand medications that are not covered or are inconsistently covered under their health plans. These contributions are applied at the pharmacy counter, effectively buying down the employee's out-of-pocket costs for a specific drug. We launched this approach with our first employers at the start of this year, with an initial focus on GLP-1 medications. Second, employers can partner with us to offer an employer-specific version of GoodRx Holdings, Inc.'s condition-specific telemedicine solutions, including weight loss, erectile dysfunction, and hair loss. We see Employer Direct as a natural extension of the GoodRx Holdings, Inc. platform and a meaningful growth opportunity within our portfolio. I will now turn the call over to Chris to discuss fourth quarter and full year results, as well as 2026 guidance. Chris McGinnis: Thank you, Wendy, and good morning, everyone. For the fourth quarter, revenue came in at $194.8 million, and Adjusted EBITDA was $65 million. This resulted in full-year 2025 revenue of $796.9 million, which was up 1% year-over-year. Full-year Adjusted EBITDA was $270.5 million, which constitutes 4% growth over 2024. Our 2025 financial performance was in line with the company's latest guidance, with Adjusted EBITDA just above the midpoint of our guidance range. Drilling down on full-year revenue, prescription transactions revenue declined 6% year-over-year to $544 million. As we previously discussed, the impact of the Rite Aid bankruptcy and lower volume through one of our Integrated Savings Program partners was approximately $35 million-$40 million for the year and therefore impacted our year-over-year growth rates. Subscription revenue decreased 3% year-over-year to $83.8 million. We have seen strong early adoption related to our condition-specific subscriptions, particularly around weight loss, which started late in 2025. We expect it will contribute more meaningfully to overall subscription revenue in 2026. Revenue from Pharma Direct, previously Pharma Manufacturer Solutions, increased to $151.4 million, up 41% year-over-year, driven by deepening our sell-through at manufacturers and ongoing growth in our consumer direct pricing. Our balance sheet remains strong, ending the year with $261.8 million of cash on hand, with approximately $80 million of unused capacity available under our revolving credit facility. During the year, we repurchased approximately 48.9 million shares of our stock at an average price of $4.45 per share, totaling $217.4 million. We continue to believe that share repurchases are a signal of management's confidence in the company's future and are the most efficient method of returning capital to shareholders. For the full year 2026, we expect revenue to be in the range of $750 million-$780 million and Adjusted EBITDA to be at least $230 million. Our outlook reflects the decisions we are making to ensure the long-term durability of our business. We are making trade-offs to invest more heavily in our Pharma Direct and subscription offerings, which strengthen our ability to deliver value to pharma, improve the economics of our retail relationships, and continue to simplify how consumers engage with prescriptions on our platform. Furthermore, we have made deliberate choices to favor long-term durability and certainty that will negatively impact our near-term unit economics. As a result, and in combination with the lapping impacts from 2025, we expect pressure on prescription transactions revenue in 2026, which is reflected in our guidance. We expect Pharma Direct revenue to grow at least 30% in 2026 year-over-year. While our newly launched condition-specific subscription programs are not material today, the programs accelerated significantly in the fourth quarter of 2025, and we expect that to continue throughout 2026. As Wendy noted, our prescription transaction offering is foundational and enhancing performance remains a top priority. While monthly active consumers fell 14% in 2025 versus the prior year, we expect monthly active consumers to be flattening sequentially from Q4 2025 through Q4 2026. We are encouraged by the continued growth profile of Pharma Direct and subscriptions offering and the robust interest in our Employer Direct offering. We strongly believe the strategy we are executing on will build momentum throughout the year and put us in a position to grow beyond 2026. With that, I will turn the call back over to Wendy. Wendy Barnes: Thanks, Chris. Looking ahead, what stands out to me is how closely our strategy aligns with the realities of today's healthcare environment. The work we have done over the past year positions us squarely against the shifts reshaping access and affordability and strengthens both the relevance and long-term resilience of our platform. Healthcare is becoming more consumer-driven. Manufacturers are playing a more active role in pricing and access. Retail economics continue to evolve. Those dynamics require new models. We have been intentional about building the capabilities and partnerships that allow GoodRx Holdings, Inc. to meet that moment. We have made clear choices about where to focus and how to compete. As Chris mentioned, these choices will impact prescription transaction revenue in the near term as we transition to improve the durability of the offering and bolster the growth of Pharma Direct and subscription revenue in the long term. As we move into 2026, our priority is executing against those choices with discipline and consistency, while continuing to strengthen the foundation of our platform. I am confident in the direction we have set and in our team's ability to deliver. I will now turn the call over to the operator for questions. Operator: Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced, and to withdraw your question, please press star one one again. We ask you to please limit to one question and one follow-up. Our first question is going to come from Michael Cherny with Leerink Partners. Your line is open. Michael Cherny: Good morning. Thanks for taking the questions. Maybe, Chris, if I can dive in a little bit more on the revenue guidance. You talked about the pressure in PTR, yet a stabilizing of the MAC rate. Can you talk a little bit about the unit economics in terms of what it physically looks like? What are some of the recontracting efforts you are taking, and how will it change, or will it not change, your positioning and relationship across pharmacies, PBMs, and members? Chris McGinnis: Thanks, Michael. I appreciate the question. Let me unpack the decline on the PTR side a little bit. I think there are three primary factors that are really driving the decline. First, as I noted in my prepared remarks and as we have talked about previously, we had significant revenue coming from Rite Aid and some of our other partner programs during 2025 that will not recur in 2026. Secondly, we are seeing a shift of claims, particularly around high-cost branded medications, from our core business to Pharma Direct, and that is reflected in the growth profile of our point-of-sale programs within that offering. Finally, as you are calling out, I think the largest contributor is a decline from unit economics. This is a negotiation of lower fees across multiple partners in our ecosystem. We are doing this in exchange for longer-term durability and predictability, as I mentioned in my prepared remarks. That is a significant reset of our unit economics. We factored this into the guidance. I think it is a headwind of, as a percentage of consolidated revenue, an impact in the mid-single digits. We believe this positions us to steady the core over the long term, and I think, as you point out, it reflects our MAC trends. We have modeled MAC. Our exit rate of 2025 was 5.3. We have that number basically flat to slightly declining. Maybe we end the year at about 5.2 and think about it as relatively flat to just a slight decline. We are trying to stabilize the core. There is a simple math question: it is the rates we get times the volume we get. The first order of business is stabilizing the volume. We think working with partners in the ecosystem to ensure that we are limiting getting disintermediated at the counter, and that we are pushing consumers to the right program—whether it be Pharma Direct or the retail counter—optimizes our overall solution. It optimizes our overall relationship with retail partners. We view the overall retail relationship as a two-way street. Brands used to be a loser at retail, and we are ensuring that it no longer is. When we look at that relationship in aggregate, we are trying to mitigate the disintermediation and the competition at the admin fee level. When we can trade off and exchange longer-term predictability on a rate side for near-term pressure, but stabilize the volume, we think that is the first step in a longer-term, more durable, value-add profile. Michael Cherny: It is on the same lines, and I apologize for interrupting, but as you think about that, obviously lower revenue on a high-margin base drives lower drop-down. Is there any way alongside that to bifurcate relative to EBITDA guidance, some of the investments you are making? If we think about the baseline EBITDA bridge from 2025, how much of the reduction year-over-year is, call it, offensive—making investments—versus defensive, absorbing these new economics? Chris McGinnis: We have not guided to any specific line item, but if you think about what we are trying to let you back into, it is the lapping impacts. You can see it last year. We had Rite Aid in for a little bit better than half the year. We talked about the other programs during Q2. You can understand that was a meaningful lap. Then I would say, roughly, the other half is related to some elective decisions to be aggressive to stabilize over the long term. Operator: Thank you. Our next question will come from Jailendra Singh with Truist. Your line is open. Peyton Engdahl: Hi, this is Peyton Engdahl in for Jailendra Singh. I wanted to talk about the pharma budget spending environment. There have been some pharma services and HCIT companies that have talked about their pharma clients' budget deployment increasingly being released in smaller, more phased increments. Have you seen any impact on the size, duration, or ramp time of the new Pharma Direct programs? Is that influencing your visibility? Wendy Barnes: Laura and I will take that one in tandem, Peyton, and good morning. I would start with a broader observation. One notable observation this year has been to the contrary of what you pointed out, which is more of the spending has been pulled forward in our sales cycle, which was a different experience for us historically. Beyond that, let me let Laura jump in with more specific observations, given she has the ongoing relationships with our pharma partners. Laura Jensen: Thank you for the question. We are seeing some of that budget being pulled forward this year, whereas last year there were a few key partners who were booking quarterly. Now they are booking earlier in the year, in fact, 2026. Broadly, I would say pharmaceutical manufacturer budgets, especially on the direct-to-consumer side, are continuing to invest in these types of programs where they are going direct to patients, they are going through partners like us, as well as building their own solutions. We are seeing some trends on the HCP side, where those budgets were a little bit soft earlier in the year, but those are opening up as well. I would say it is a little bit different than the comment that you made, but we are certainly seeing those budgets pretty healthy this year. Peyton Engdahl: Great. Thank you. Wendy Barnes: One other note for you, Peyton, that may be helpful. Our bookings in Pharma Direct as a percentage of our overall plan are up relative to the same point in time last year, again pointing to more being pulled forward. If that gives any more confidence, it certainly has bolstered our confidence in why we continue to lean so heavily into Pharma Direct. Peyton Engdahl: Great. Thank you. Operator: Thank you. Our next question will come from Lisa Gill with JPMorgan. Your line is open. Lisa Gill: Thanks very much. Good morning, Wendy and Chris. Wendy, I want to understand a few things better when I think about the business right now. A lot of your comments today were talking about the manufacturing direct. Are we talking about a specific business model change here? What do you think about the future of your legacy business? At our conference, you talked about the relationship with Surescripts and the opportunity to really capture that patient when they are with the provider. Are you not seeing the benefit that you anticipated? You are talking a lot about direct-to-consumer. I want to think about how you are thinking about the future of this business. I heard you talk about 2026 as a transition year, but how do we think about it longer term and the key elements of what GoodRx Holdings, Inc. will look like? Wendy Barnes: Good morning, Lisa. Thank you for the question. Let me start by saying the core, what we largely refer to as Rx Marketplace, will always be foundational to our business. The manner in which consumers transact at pharmacies I do not see going away. Since this company's inception, that model has evolved vastly from the manner in which we largely contracted with pharmacies through PBM relationships. While many of those still exist, we have had to pivot to direct relationships with pharmacies to ensure that margins were fair for our pharmacy partners and to return a greater degree of control to us. We are also being as intellectually honest as we can about what we see in the broader market. There is no question that as the cash space has become more competitive, that space has become more pressured. I stand behind the notion that we are and will continue to be the number one drug affordability marketplace for consumers. The reality of where we are at this point in time, with consumers wanting more direct experiences, pharma leaning into it, payers supporting that model, and the regulatory environment pointing more toward consumer-direct programs, is that we would be remiss to not take advantage of that opportunity. That margin is also more durable and more appreciated by the public market. We see our ability to be successful there as an inflection point for us as a business. That is why you are hearing me say that, over the longer term, Pharma Direct, coupled with Employer Direct, will continue to feed those retail relationships. Will that core legacy business continue to be part of the flywheel that powers that? Absolutely. We know that the basket of drugs that historically are filled in the U.S. tends to be primarily generic. However, those drugs that tend to hurt your out-of-pocket the most are brands. That is why we have to focus on the smaller subset of drugs, and that does point to an evolution in our model, and that is what you heard us speak of here. That is why we are shifting where we are investing and leaning in more heavily to where we see the market going. Lisa Gill: Thank you. Wendy Barnes: Good to hear from you, Lisa. Operator: Our next question will come from John Ransom with Raymond James. Your line is open. John Ransom: Good morning. Maybe this is for Chris. The way PTR used to work was it was about a $5 take rate on 100 million scripts. You mentioned it is down low, missing a digit on total revenue. Is the difference between the $500 million and what is coming mostly a lower take rate, or is there also some script degradation embedded in that as well? Chris McGinnis: Thanks, John. We are trying to stabilize the underlying volume of scripts, and that is reflected in how we are thinking about the flattening of that curve versus 14% down last year. Sequentially, quarter-over-quarter, relatively flat. If you look back, the PTR per MAC was going up throughout the year, which reflects the power of what we were trying to accomplish. What we are trying to now say over the long term is that could and will continue going into the future. For today, we are trying to renegotiate across our entire supply chain, up to pharma and everywhere, a longer-term, durable approach to economics. We sit in a unique position between pharma's direct-to-consumer strategy. We have a platform where it is paramount that we have a retail footprint that is 70,000 stores, where pharma can deliver its direct-to-consumer strategy across all of those retailers in a powerful way, in ways that brands make sense to be dispensed there. Similarly, the fact that we have Pharma Direct growing as it is and becoming a much more meaningful part of our revenue profile allows us to share brand economics with retailers. There is a much more holistic approach than simply talking about take rate for us. It is a bidirectional flow of funds now that we think about across our ecosystem. John Ransom: Thank you. My follow-up for Wendy is, the company has been publicly saying, "We would love to get to the finish line with Lilly." It looks like this is a perfect model for Lilly, but are they still, do they just like the LillyDirect, and they do not want to have any third-party intermediary, or is there still some hope that maybe that can happen? Wendy Barnes: I will start by saying we probably will not comment on any specific deal, John Ransom, but I would love for Laura Jensen to take that, who joined us with a strong resume filled with relationships with pharma at the top, which we were missing in many instances. It is one of the things that Laura Jensen and her team have done an exemplary job building out. Laura Jensen, please take it. Laura Jensen: Thank you for the question. Broadly, pharmaceutical manufacturers are looking at building their own direct-to-consumer experiences, whether that is through programs like a LillyDirect, AstraZeneca has one as well, Pfizer has one. Very much also looking at where to meet patients where they are on other platforms. I just came over from the Amazon Pharmacy team, and now here at GoodRx Holdings, Inc., where we are building those types of solutions as well, where patients are already shopping for other pharmaceuticals. The idea is that pharmaceutical manufacturers do not have to choose. They can deploy these resources to patients wherever that patient chooses to fill their prescription, and wherever they search for information about that prescription once a treatment decision has been made. They are working with us to get to those patients in a way that is comfortable for those patients, but also to learn about how to go direct. Manufacturers historically are not set up well, from a corporate and strategic perspective, to go direct as a consumer-facing organization. That is not historically how they have gone to market. We are at the early stages of how these companies will move through these direct-to-consumer models, and we are taking our cues from patients, but also investing in this area to be able to grow alongside our pharmaceutical manufacturer partners. John Ransom: Thank you. Wendy Barnes: John, I would also add, part of the dialogue that we continue to have with our pharma partners is one of, "We understand if you have interest in your own direct program, but let us show you the data that we have proven out over and over on what it looks like for the average consumer to come looking for a brand price in our environment versus a broken-out brand.com experience." I do not want to suggest that those direct programs are not effective. They are and can be. The ability for a consumer to look for their entire basket of drugs inside an environment like GoodRx Holdings, Inc. versus four or five different manufacturer programs with a different user experience, the data is irrefutable as to what that delta looks like, and it is meaningful. We share that information with our pharma partners to say, "If you want to have your own direct program, we can support that, too. We can also do that inside of our environment, so the consumer does not have to click out, or in some instances, you might consider loading your brand opportunity just in our environment, and we see a much better outcome as a result." That is what we continue to share with our pharma partners. Slowly but surely, that approach is starting to make more sense for our pharma partners. There is no question that— Chris McGinnis: Even a launch with cash approach is new and novel, and it is something that, historically, pharmaceutical manufacturers had not done much of. John Ransom: Thank you. Operator: Thank you. Our next question will come from Steven Valiquette with Mizuho. Your line is open. Steven Valiquette: Thanks. Good morning. Thinking about the guidance and potential margin pressure year-over-year, back of the envelope, maybe it is 400 basis points year-over-year. Could be higher, could be a little bit lower, but I am trying to get a better sense of how much of that margin pressure may show up in gross margins versus higher SG&A as a percent of revenue or perhaps higher R&D as well. Just trying to think about it from a modeling standpoint. Thanks. Chris McGinnis: Thanks for the question, Steve. The cost of revenue is a little higher when you think about the mix of our business from our condition-specific subscriptions offering. That has an operating cost associated with it, such as clinical visits. Historically, the core business of the PTR line had a higher margin. Pharma Direct is a high grower with a healthy margin profile, but that has diluted the higher core business margins over time. These new offerings have the same impact. They still have healthy margins, but are a little bit dilutive to the historical margins on the core. From an expense profile perspective, the rationale of putting a floor on, versus a range that would tie a margin percentage to the top-line revenue, is that we did not want to be handcuffed to that, so we put a floor on it. There are some elective decisions we want to make. Wendy noted that our subscription offerings are exceeding our expectations. We are rethinking subscriptions overall. We have things we are investing in on the Pharma Direct side. We really wanted the ability to invest further if it makes sense. Wendy also mentioned in her prepared remarks that our CAC is below industry standards. Until we see a diminishing return, we may want to continue to invest there. We raised our EBITDA margin profile throughout last year. If you look at our expense profile, it will be down in absolute dollars. I think it will be relatively consistent, if not down a bit, on a percentage of revenue basis, to your question. We have proven that we will be good stewards of shareholder money and drive efficiency. We will continue to do that, but we will make elective decisions to spend where appropriate. Steven Valiquette: Thank you. Chris McGinnis: Yes. Operator: Thank you. Our next question will come from Stan Berenshteyn with Wells Fargo. Your line is open. Stan Berenshteyn: Good morning. Thanks for taking my questions. Wendy, first on PTR, historically, 50% of MACs have been sourced by the top 10 HCP relationships you have had. Is there still a focus on that to drive the MAC volume, or has your approach evolved? Chris McGinnis: Stan, can you clarify your question again? I am not quite following. Stan Berenshteyn: Historically, I believe 50% of the MACs on your platform have been sourced by the top 10 HCP relationships you have had. Is there still a focus to drive MAC volume through HCPs, or have you changed the strategy? Chris McGinnis: I am going to claim a little ignorance as it pertains to top 10 HCPs. I am not sure what you are referencing there. We have 1.2 or 1.3 million HCPs that typically engage with us in any given fiscal year. We are focused on a broad swath of HCPs, and those are largely driven by our manufacturer relationships and the NPI/prescribers that they have interest in driving volume through. Of course, generics is a much broader swath of HCPs, and we know that HCP recognition of GoodRx Holdings, Inc.—I think we have 85% to 90% HCP recognition of our brand. HCPs will continue to be an area of focus for us, largely, again, in partnership with pharma. Some of our marketing efforts point toward HCPs, but it is more driven by our partnerships with pharma to drive that recognition and utilization. Stan Berenshteyn: Okay, great. Chris, how should we think about your sales and marketing efforts in 2026? You have some pivots in your revenue strategy. Are there any changes in how your sales and marketing is getting deployed? Given the top-line pressures this year, are you able to absorb some of that impact through continued reduction in sales and marketing intensity? Thanks. Chris McGinnis: I appreciate the question. In terms of sales and marketing efforts, as I said on one of the previous questions, we will continue to redirect some of our overall marketing spend toward specific programs. There is a brand halo effect there, but we have a great marketing team led by Ryan Sullivan. We spend a lot of time together talking about key metrics and what we are seeing and how it is driving our overall business. We did bring down spend overall last year. In terms of absolute spend, with the revenue drop, we brought down the dollars, but as a percentage of revenue, it is essentially in line with what we spent last year. Will we raise that? That is one of the reasons we put a floor under EBITDA as opposed to a specific range. We want the ability to spend more as we see that opportunistically. Largely, you will continue to see us push more into the campaigns around our specific offerings. Hopefully, that answers your question. Wendy Barnes: I might add, we do considerable review and discussion on a monthly basis as we examine the optimal ROAS profile of anywhere we are spending marketing dollars. We make shifts accordingly to ensure that we are sending dollars to the highest-ROAS opportunities. Ryan is one of the few CMOs I have worked with over the years who is a truly data-analytically driven individual. That is his background, and he is strong at taking the data to make sure that, objectively, we are making the best decisions and trade-offs. We made decisions to shift dollars, and decrease dollars in certain buckets, to point them towards our highest and most important strategic initiatives coming out of 2025 and into 2026. Strategically, the biggest decision shifts we made were largely coming out of Q4 2025 when we launched our weight loss subscription offering and started seeing the early results, and we have made decisions in early 2026 to keep pushing that vector. Chris McGinnis: Great. Thanks so much. Wendy Barnes: Mm-hmm. Operator: Thank you. The next question is going to come from George Hill with Deutsche Bank. Your line is open. George Hill: Good morning, and thanks for taking the question. Wendy, is there anything that you can do increasingly on the generic side to monetize that opportunity? That is where the vast majority of prescriptions come. Then I will pause before a follow-up. Wendy Barnes: We are never going to abandon the generic focus because, from a volume perspective, that is the overwhelming number of fills that all of us as consumers look to fill, and oftentimes, that margin profile for retailers is favorable. We know that is an important group of drugs for our retail partners. It really comes down to engaging the consumer, because most consumers have a mix of drugs. With that comes a handful of brands and typically more generics. It is less a question of how we optimize the generic component in the mix. It is more about how we engage more consumers, and how we continue to work directly with retailers, such that whoever is standing at their counter is utilizing our program over somebody else's when they have an opportunity to access discounted cash pricing. I do not think about it in terms of how we optimize generics. It is more about how we engage the consumer, and then their basket of drugs follows behind that. George Hill: That is helpful. As a follow-up, it seems like you have made an investment in price or price concessions this year to support volume. How do we get comfortable thinking about the business longer term, that this is not a perpetual downward discussion every year? How do you think about price stability in the business in the medium term? Chris McGinnis: It is the right question. The two primary businesses today are interrelated and support each other. If you look at the history of this company, since its inception, the flow of dollars has been one way. There is a transaction at retail, where they collected an admin fee, and they passed that back to us. The flow of dollars was one directional from retail to us. In the new environment, especially as Pharma Direct becomes a more meaningful part of our business, it allows us to have brand economics to share with retailers to ensure that they are making appropriate profits on the branded side, which they historically have not been able to do. Absent that business, one of the value propositions we have over our competitors is that you would continue to see pressure on generics at the counter. You would continue to see an erosion of admin fee. We are taking a longer-term approach of a total relationship, and a bidirectional flow of dollars between us, so that the counter tools, the disintermediation, and some of the race to the bottom on the admin fees that we have been experiencing—we are putting a floor under it, and we are using total economics from a relationship perspective. The growth of pharma, and the reason we are highlighting and emphasizing it, is because it is the vehicle through which we put the floor under the retail side. Operator: Thank you. The next question is going to come from Brian Tanquilut with Jefferies. Your line is open. Cameron (for Brian Tanquilut): Hi, this is Cameron on for Brian. Thank you for taking the question. This is the second quarter you have called out a volume reduction in Integrated Savings Programs. Can you unpack what is structural versus fixable there? What activity are you seeing from the PBMs that is causing this? Is this a conscious shift away or not, and what behaviors are causing this? Chris McGinnis: Thanks, Cameron. To clarify, we are not calling out a new volume reduction. We were referencing the headwind we faced in 2025 relative to our initial projections, so everyone can understand the lapping impact of that as it relates to 2026. There is no new volume reduction. If you look at the MACs, we said they will be sequentially relatively flat. From a 14% decline year-over-year from 2024 to 2025, this year it is relatively stable. There is a mild decline, going from 5.3 down to 5.2-ish, give or take, which is how we have modeled it throughout the year. Relatively flat from a volume perspective. We are seeing some early signs of positive volumes that are too early to call. We talked a lot last year about the things that were impacting volume. It was not just volume from partner programs, but we were also seeing macroeconomic factors. The cost-plus pricing was raising prices on the consumer. Benefits were really good last year when you looked at the utilization rates the payers were disclosing. People were going on benefit. This year, we are watching very closely. We are seeing unemployment increasing. We are seeing regulatory changes impacting Medicaid eligibility. ACA enrollment looks light by about 1 million lives, and we suspect we will watch closely when those premiums come due without the subsidies whether that results in more people not having insurance. With the benefit profile this year, again, too early to call, I think our volumes are going to look relatively stable to slightly down, and we are going to watch for positive trends. Wendy Barnes: If I could add, specifically as it relates to ISP, while ISP is always going to be a metered product opportunity for us, given the economic drivers inside of any PBM, I still contend that access to more commercial lives opens up additional volume possibilities for us as a discount card cash partner. The more the regulatory environment is pressing on payers to mandate integration of cash pricing, we contend that we are in a great position to take advantage of that, not the least of which is some recent notable comments from larger PBMs that GoodRx Holdings, Inc. is their option to integrate cash pricing. We do not do back handsprings around ISP. It is what it is, but we will continue to add partnerships there and add commercial lives that have an opportunity to avail themselves of an integrated price offer when and if the payer wants to completely open up that pipe. Operator: Thank you. The next question will come from Allen Lutz with Bank of America. Your line is open. Allen Lutz: Good morning, and thanks for taking the questions. One for Wendy. There have been a lot of changes going on in the business. Can you talk about how the web traffic and app usage is evolving as some of the areas you are focusing on are evolving? You talked about getting 20% of Wegovy scripts through GoodRx Holdings, Inc. Maybe talk about what is driving the strong adoption there. More broadly, you are shifting towards adding subscriptions for ED and hair loss. Can you talk about how the composition of your traffic is changing, if it is at all? Thank you. Wendy Barnes: Let me start with GLP-1s in general and specifically the goodness we noted around the Wegovy pill. GLP-1s are a bit unique. I do not think any of us who have been in and around pharmacy benefit for a good portion of our careers have seen trends that follow what is happening with GLP-1s. Given they have low coverage for the indication of weight loss—different scenario as it pertains to diabetes—there is a low coverage threshold. You have a motivated population seeking competitive price points, which lends itself to our marketplace. In the same class, drugs that were largely injectable suddenly have an oral formulation. Those things created an environment in which not only did you have a price point at $149 for that first dose that felt more achievable for the average American, but you also have a bolus of consumers who had been on a compounded alternative, given a more attractive price point, who had a desire to be on an FDA-approved formulation. Our best guess is all of those vectors fed monumental uptake in the use of the Wegovy pill. Even previous to that, before we had that type of price point available on our platform, those drugs have long been some of the top-searched brand price points as consumers were looking for value. Overall, our brand price page views are up year-over-year. A lot of that is driven by GLP-1 interest. I would also give the regulatory environment some credit. The conversation on drug pricing in the news is schooling consumers to spend more time searching and looking for competitive price points in general. Laura, is there anything you would add, given we talk about this a lot with our pharma partners because it is one of the reasons they work with us. Laura Jensen: Absolutely. The power of the launch of the Wegovy pill signaled that manufacturers going forward—specifically GLP-1 manufacturers, of course, but all manufacturers—are considering what an actual direct-to-patient cash offer is. Traditionally, manufacturers would think of this as a bridge to insurance. They were temporary as part of a launch strategy, but not a core part of their ongoing offering. Because, as Wendy said, we have never seen anything like this with the degree of cash mix versus insurance, it is paving the way for how manufacturers will be thinking about their brand strategies going forward. It is also the backbone of how we might be thinking about an employer strategy, where for patients who have gaps in their insurance or for products that may never make their way to a formulary, we can use a manufacturer net price, where an employer can help that patient buy down even more of those dollars. There is more utility for these offerings than just what it means from a cash perspective. Operator: Thank you. Our next question is going to come from Craig Hettenbach with Morgan Stanley. Your line is open. Jay Jin: Hi, this is Jay on for Craig Hettenbach. Thanks for taking my question. On Pharma Direct, how would you describe GoodRx Holdings, Inc.'s penetration of active brands with your current partners? How concentrated is that revenue across top brands, and how would you describe those budgets being durable through the cycle post the initial affordability push? Thank you. Laura Jensen: Thank you for the question. Right now, we have approximately 200 manufacturer partnerships. For the point-of-sale cash programs, we have about 100 of them. A lot of that volume right now, from a dollar perspective, is concentrated on the GLP-1s, but we are seeing growth in other brands as well. For context, about 100 brands in the pharmaceutical industry make up the top 80% or so of most dispensed, highest volume, and the largest spend. We see a pretty typical distribution from that perspective, from a spend perspective as well, both on the media side and on the point-of-sale cash side. Operator: Thank you. Our next question is going to come from Daniel Grosslight with Citi. Your line is open. Daniel Grosslight: Thanks for taking the question. Can you comment more on the uptake you are seeing in your new subscription offerings and how we should think about growth in those offerings in 2026, particularly around weight loss and the introduction of more competition on the weight loss side? Coupled with that, how does this inform your marketing spend, particularly around these new subscription offerings? Thanks. Chris McGinnis: Daniel, thanks for the question. As you know, we launched our condition-specific subscriptions in the back half of last year, with weight loss not launching until late November. I do not think we pushed marketing dollars until late December on that offering. A lot of that was organic. With 285 million-300 million hits on our pages, we get a lot of organic adoption from people naturally visiting. The oral solids that are coming out on the weight loss side are attracting a lot of the previous compounders, because now they can take an FDA-approved drug in pill form. We are seeing great adoption. It is not a material number. If you look at the exit rate, we had less than $1 million of revenue because it launched a month prior. I can see that growing 4x-5x as a run rate by December of 2026. It starts to become, while small today, an increasingly meaningful part of run-rate revenue by the end of 2026. There is some seasonality in weight loss and other things, but there are a lot of new drugs coming to market in this space and a lot of different uses and indications that will increase adoption. There are a lot of tailwinds on that weight loss offering. In terms of marketing dollars, we pushed a lot more of our marketing dollars to the condition-specific subscriptions. It continues to drive a halo effect on our brand generally. As long as we keep monitoring those things, we will continue to support those programs. When you launch a new revenue stream like this and you have invested as we have around some of these offerings, we will continue to support the growth. Wendy Barnes: A big component that will influence what happens with our subscriptions going forward, particularly related to weight loss, is where the pharma price points move. Throughout this year, not only are there competitive molecules coming out, but as prices naturally come down, this particular class of drugs resets itself about every 4-6 weeks as something else comes out, a new formulation, and/or price point change. We have high confidence that as pharma thinks about the average consumer and how they want to access these medications, home delivery is not the only way in which consumers want to get these drugs. What we are offering pharma partners is a broad swath of retail partnerships, which makes it an attractive channel, particularly if you are looking to get it same day. Most people are motivated to go get these drugs. Once they are prescribed a GLP-1, they are anxious to get started. We are seeing high uptake given the natural retail partnerships that we have. Lastly, subscriptions for us goes beyond the condition subscriptions. It also envelops our Gold offering. We are spending considerable time rethinking what that should be in 2026. We look forward to talking more about the reinvention of that aspect of our product offering in subsequent earnings calls. Operator: Thank you. This does conclude the Q&A session and today's conference call. Thank you for participating, and you may now disconnect.
Cindy Rose Quackenbush: Good morning, everyone. Good morning, and warm welcome to our 2025 preliminary results and strategy update. By the way, that's our new brand refresh. I hope you like it, created by Landor AMP and Man versus Machine, WPP agencies, all powered by WPP Open. So look, I'm delighted to welcome you all here to One South Work Bridge to our campus here in London, which in many ways is symbolic of the future of WPP. It's modern, it's adaptive, it's collaborative workspace for our talent, our clients and our partners. So the plan this morning is I'm going to start with some opening remarks, and then I'm going to hand over to Joanne Wilson, our Chief Financial Officer, to share our 2025 preliminary results. Then I'll share our strategy update, and then we'll open up to Q&A. Before we start, I'd like to recommend that you take a moment to read this cautionary statement while I get out of your way. So Joanne and I will be joined on stage later by Brian Lesser, who's CEO of WPP Media. When we get to the media section of the presentation, and most of my senior management team are here in the audience as well. Let me start by saying that WPP is an extraordinary company. We are built on agency brands with remarkable histories going all the way back to the 1800s. Some are still well known today. Others have evolved into new parts of WPP. But together, they have roots in creating iconic work that moves people and shapes culture. We serve some of the biggest, most demanding clients in the world, and we steward and grow some of the most well-known brands on the planet, several of whom you'll hear from and see referenced throughout today's presentation. And our business model is actually very simple. We exist to make our clients successful. We help our clients build brands that matter, drive meaningful engagement with their consumers and drive outcomes for their business. It drives growth for them and growth for us. However, it's really clear that what has made us successful in the past will not make us successful in the future. And as you can see from the numbers that we released this morning, our performance is not where it needs to be. Yes, of course, there are externalities we can point to market volatility, economic headwinds. But really, the results point to the need for us to embrace a single unified growth strategy to execute with increased rigor and evolve as the needs of our clients evolve. After several years on the WPP Board of Directors, I took this role with a clear thesis in mind as to what we need to do differently. We've spent the past 6 months as a team validating this thesis through rigorous analysis and by speaking directly to our clients and actively listening to their feedback. And the good news is we haven't been waiting for today's presentation to take action. We've already made several decisive changes, and you can see the positive results in our recent new business success. In the fourth quarter of 2025, WPP was #1 in JPMorgan's net new business rankings for the first time since 2020 with a series of excellent client wins across media, creative and our integrated offer. These include being appointed the U.K. government's lead media agency, Reckitt and Henkel Media in Europe, Kenvue and Haleon Creative globally, TruGreen Media in the U.S., Norwegian Cruise Line Global Media, Suncor Media, just to name a few. And I'm delighted to say we've maintained this strong momentum into 2026, winning Jaguar Land Rover, Global Media and Integrated Services. In fact, the impact from new business wins in 2026 already exceeds the impact of new business wins for all of 2025 combined, and it's only February. So while the turnaround of our business will take time, our momentum is undeniable, and these wins give me huge confidence that we are firmly on the right path. My team is united, committed and hungry to win. Today's session is the culmination of months of detailed work by our team. We have a bold plan to make WPP a simpler, more integrated company, one that's fit for the future, relentlessly focused on growth and brilliant execution. Personally, I'm very excited to be here at a time of such revolutionary change, and I feel quite privileged to lead WPP as we play a defining role in shaping the future. So I'll come back shortly and talk about our view on the evolving landscape and our growth plan for the new WPMP, which we're calling Elevate28. But first, I'm going to hand over to Joanne to take you through our 2025 results. Joanne? Joanne Wilson: So thank you, Cindy, and good morning, everybody. And can I add my warm welcome to you here today. So let me start by taking you through the main financial headlines for 2025. Our like-for-like revenue less pass-through costs fell 5.4% for the full year due to client assignment losses and spending cuts. Now this is slightly better than our most recent guidance for a decline of 5.5% to 6%, and it reflects a Q4 like-for-like decline of 6.9%, and that's a deterioration from the third quarter decline of 5.9% -- in the context of the weaker top line, we delivered a headline operating margin of 13%, in line with our expectations and down 180 basis points year-on-year on a like-for-like basis. Our fully diluted EPS was 63.2p, a decrease of 28.4% year-on-year, with the impact of reduced headline operating margin and a higher headline effective tax rate, partially offset by lower net finance costs and noncontrolling interests. Turning to cash flow. Our adjusted operating cash flow before working capital was GBP 1.2 billion, down from GBP 1.3 billion in 2024 and at the top of our most recent guidance range and includes GBP 82 million of cash restructuring charges. On my next slide, I provided some color on our net sales performance, both for the fourth quarter and across the full year. And please note that we have included more detail in the appendix to this deck. Now you have some of the detail here on trends by business, by region and by client sector, but I thought it would be more useful to unpack some of those trends by theme to help give a sense of what is WPP specific and what is more market driven. And when we consider what is WPP specific, the major negative impact to call out both for the full year and for the fourth quarter is the impact of gross client losses, which deteriorated through the year. Now this was driven by the impact of incremental losses in year in 2025. And by segment, this particularly weighed on media, by geography on the U.S. and the U.K. and by client sector on CPG and TME. Now against this, we had the positive impact of new business wins in 2024 and '25, which indeed contributed progressively through the year. The aggregate level of in-year wins, however, was lower than we initially expected and significantly below what we have experienced over the past number of years. This was in part because of a lower win rate, but in EMEA, it was because of a lower level of aggregate new business activity. Industry estimates are that global pitch activity was down double digit in the year. While we saw an encouraging new business performance in the fourth quarter with the wins of Reckitt, Henkel, the U.K. government, Pizza Hut, NCL and JLR, the impact on our like-for-like performance is expected to take time to ramp up, and we expect the overall net new business headwind to sustain into the first half of 2026. The final theme to call out is spend by existing clients. We characterize the year as one of more cautious spending from clients with a higher degree of volatility than we would typically expect to see. Now the impact was seen most strongly across the CPG, auto and the tech and digital services sectors. And while many of our businesses were impacted, it weighed most heavily on Ogilvy. The waterfall chart on this next slide bridges our headline operating margin from 15% in 2024 to 13% in 2025, a 1.8 percentage point deterioration on a like-for-like basis. There are a number of moving parts and starting with staff costs, including our severance and incentives on the left. Now these reduced by GBP 576 million on the back of lower permanent headcount, which ended the year down 8.7% and reduced use of freelancers, which was down 14% year-on-year. However, due to that lower revenue, this resulted in 180 basis points drag on our margin. This was amplified by the impact of increased severance and other associated costs, which was up GBP 89 million in the year, taking a further 100 basis points of margin. And we did increase investment levels in WPP Open in AI and data, and this was more than funded by a reduction in back-office costs, leading to a net reduction in tech spend and other costs of GBP 128 million. Again, with the impact from those lower revenues, this translated into a 60 basis point drag on margin. These drags on margin were offset by a 50% reduction in staff incentive payments to GBP 182 million, providing a margin cushion of 140 basis points, which is equivalent to 120 basis points like-for-like if we exclude FGS. And taken together, this resulted on that net margin move of 200 basis points on a reported basis and 180 basis points on a like-for-like basis, which includes 20% of the impact from the disposal of FGS and from FX. Now moving to my next slide, we show our headline income statement. Overall reported revenue less pass-through costs was GBP 10.2 billion, a decrease of 10.4% year-on-year on a reported basis. Our headline operating profit was GBP 1.3 billion, which was down 22.6% year-on-year on a reported basis and is consistent with that 13% operating profit margin. Our net finance costs of GBP 274 million were slightly down year-on-year on lower average net debt and lower interest rates. And our effective tax rate increased to 32% given that lower profit base and the impact of nondeductible fixed elements. By contrast, noncontrolling interest of GBP 43 million was down year-on-year, partially driven by disposals. Our headline diluted EPS, as I said, was 63.2p and down 28.4% on a reported basis. The Board has recommended a final dividend of 7.5p, giving a total dividend of 15p for 2025. Now while this is a reduction year-on-year, it represents a stable dividend from the first half, and it underlines our commitment to maintaining shareholder returns. We include a full reconciliation between our headline and our reported financials in the appendix. And the main items I would call out are the impact of restructuring programs as well as further goodwill impairments of GBP 641 million, which primarily relate to our integrated creative agencies and property impairments of GBP 114 million, both of which are noncash in nature. Now this next slide bridges the year-on-year movement in net debt, which ended 2025 at GBP 2.2 billion versus GBP 1.7 billion in 2024. Our adjusted operating cash flow before working capital was GBP 1.2 billion and reflects a lower level of cash profit, partially offset by a lower level of CapEx and a year-on-year decrease in cash restructuring costs, which came in at GBP 82 million. Our working capital saw an outflow of GBP 334 million, primarily driven by the temporary impact of reduced staff incentives, adverse FX movements and business mix. Within this, our trade working capital, excluding the impact from FX was broadly flat year-on-year. We remain disciplined on our working capital management and saw an improvement in underlying operating metrics year-on-year, including reduced overdues. We saw an outflow of GBP 17 million from earnouts of GBP 65 million and the net impact of dividends to minorities and from associates and earn-outs have decreased year-on-year and are expected to continue to progressively fall in 2026. Our net interest and tax contributed to a total adjusted free cash flow of GBP 202 million and note that the tax payment includes GBP 43 million of one-off taxes related to the disposal of FGS Global. And turning to the uses of cash, M&A spend was GBP 147 million and largely related to the acquisition of Infrum, while cash dividends amounted to GBP 343 million. Adding in the impact of buybacks at GBP 97 million to offset the dilution from incentives and other factors, including FX, our spot net debt was GBP 2.2 billion, up GBP 500 million year-on-year. Now my next slide provides more detail on our overall net debt and our leverage profile. As we've already said, we think it's more prudent to look at average adjusted net debt through the year rather than the year-end level, which typically benefits from a favorable working capital position. Now our average adjusted net debt was slightly down year-on-year at GBP 3.4 billion compared to GBP 3.5 billion in 2024. However, given that lower headline EBITDA, the average adjusted net debt to headline EBITDA ratio for 2025 was 2.2x, which was up from 1.8x in 2024. While our average leverage ratio has increased, our maturity profile stands at 5.8 years and the average coupon on our net debt is 3.5%. We, of course, also completed a successful GBP 1 billion bond issue in December 2025, which more than covers our GBP 650 million bond maturity in September 2026. We have no covenants. And as of December 2025, we had GBP 4.4 billion of liquidity, including an undrawn committed RCF of $2.5 billion, which does not mature until 2031. And furthermore, I'm very pleased to share that today, Fitch Ratings has assigned WPP a BBB rating with a stable outlook, reinforcing our investment-grade balance sheet. And on my final slide for now, I have shared guidance for 2026 across key financial metrics. Now we will talk about the impact of our strategy update later this morning. But for 2026, we're setting the following parameters in terms of our headline guidance. Our like-for-like net revenue growth is the most important metric for judging our business, but it is a lagging indicator with account losses continuing to drag for around 12 months after they first start to impact. And meanwhile, new account wins take time to bed in and move toward a steady state. For the year as a whole, we estimate that gross client losses will represent a 500 to 600 basis point drag, an increase from the 300 to 400 basis points in 2025. At the same time, the positive impact on like-for-like from gross client wins in 2026 already exceeds that for the full year 2025. Now while it is still early in the year to indicate the impact of new business in the full year, we do expect it to be a more significant drag in the first half in 2025. We are encouraged by the new business performance in the fourth quarter and the performance year-to-date and the nature of the pipeline. And as a result, we anticipate a progressively improving impact from net new business through the course of the year. Now reflecting all of this, we are guiding to like-for-like revenue less pass-through costs down mid- to high single digits in the first half of 2026 with an improving trajectory in the second half. And we also anticipate that the first quarter will see the weakest like-for-like for the year. On profit, there are a number of moving parts that will impact our headline operating margin. On the positive side, we will benefit from the annualized impact of cost actions, which were taken in 2025, alongside a part year benefit from the cost initiatives we are implementing as part of our new strategy. We also expect a lower impact from headline severance costs. Against this, we will continue to invest in WPP Open in AI and in data as well as our growth drivers and also expect to rebuild our incentive pools. Cindy and I will share greater detail on both the growth drivers and the cost initiatives as part of our strategy update. Taking all of that into account, we anticipate headline operating profit margin in the range of 12% to 13%. And turning to cash flow, we continue to focus on adjusted operating cash flow before working capital as the most important metric, reflecting the potential for volatility in the year-end working capital position, including both the anticipated costs associated with historical plans as well as the restructuring costs linked to the Elevate28 8 plan, we anticipate adjusted operating cash flow before working capital of GBP 800 million to GBP 900 million. This includes total anticipated cash restructuring charges of around GBP 250 million, of which around GBP 190 million are associated with the Elevate28 plan. Excluding these charges, we would anticipate adjusted operating cash flow before working capital of GBP 1 billion to GBP 1.1 billion. And finally, in terms of leverage, given the expectation of a further moderation in headline EBITDA, we would anticipate our average leverage metrics to move up further in 2026. We do, however, expect average net debt to remain broadly stable, and we note that any proceeds from asset disposals during the year will be used to strengthen our balance sheet, providing a greater degree of financial flexibility. Now you will find more detail on other modeling assumptions for 2026 in our preliminary results press release. And that is it for me for now, and I will hand back to Cindy, who I know is very keen to share our strategic update. Cindy Rose Quackenbush: Thank you, Joanne. Thank you. Look, the first thing I want to say to you is that I fully recognize that recent years have been disappointing from a shareholder perspective. I acknowledge our performance on core metrics like net sales margin, free cash flow. It's disappointing. No one is more determined to turn that around than I am. And as I said in my opening remarks, I took this role with a clear thesis as to what we needed to do differently. We've spent the past 6 months as a team really validating that thesis with rigorous analysis and by actively listening to feedback from our clients. There are plenty of reasons for optimism, and I'm going to get to those in a moment. But first, I thought it's just appropriate to share with you some of the feedback that we have received from clients. It's clear and consistent and not only supports my thesis, but provides us with an excellent blueprint for what we need to do differently going forward. Clients pointed to the fact that our complexity got in the way of true client obsession. We were siloed. We were hard to navigate. We haven't been intentional enough about evolving our integrated proposition to adapt to the changing needs of our clients. It's taken us too long to land our data proposition and our media business has suffered as a result. Now the good news from my perspective is that all of these issues are fixable. And as I said, we've already started to do so. So while it's true that our performance hasn't been where we want it to be, it's also true that WPP is full of potential and has all the ingredients that we need to win. We have incredibly talented, hard-working people with deep domain expertise who do amazing things for our clients, for some of the most demanding clients in the world, I might add, every single day. We have world-class capabilities that span the entire marketing workflow from media to commerce, creative, PR, production, digital experiences, software engineering, data, AI and more. We've made really smart investments over the years in technology that have now enabled us to build WPP Open into a powerful future-facing agentic marketing platform, giving us a real competitive advantage. We have a presence in over 100 countries around the world, which means we can serve the most complex multinational, multi-client brands in the world. We have a scaled media offer and partnerships with every relevant player in the ecosystem. But maybe most importantly of all, we have an ambitious, competitive, high-energy team that is ready to embrace change and hungry to win. So notwithstanding the challenges, which are clear, I stand here with immense optimism because we're at a really pivotal moment in WPP's journey. We're not just adapting to change. We're actively shaping the future. We are building a WPP that is more agile, more connected, more powerful than ever before, a WPP that is simpler to work with, fit for the future and built to win. A WPP that is obsessed with the client -- the success of our clients and as a result, that drives better returns for our shareholders. So our strategy starts with a new mission, to be the trusted partner for the world's leading brands in the era of AI, valued for combining cutting-edge media intelligence, trusted data solutions, world-class creativity, next-generation production and transformative enterprise solutions to help our clients navigate change, capture growth and capture opportunity. Now there's 4 key objectives of our strategy, and we're going to unpack these in some detail. But just to summarize, our objectives are to drive superior growth for our clients, to become a simpler, more integrated company, to leverage our agentic marketing platform, WPP Open for competitive advantage and to create firm financial foundations for the future. As I said earlier, this is going to take time, but we've already made a promising start. And to support our growth strategy, we've built a very detailed execution plan that broadly spans these 3 distinct phases. Our immediate priority is to stabilize the business, make the structural changes needed, strengthen our execution, win and retain clients to sustain our current market momentum. The next phase is about building on these foundations and returning the company to growth sometime during 2027. And the third phase will be about accelerating our growth so we can capture our fair share of the market from 2028 and beyond. And just to summarize what you can expect from this plan in terms of outcomes, you can expect the stabilization of our performance in the near term, a return to growth sometime in 2027, gross cost savings of GBP 500 million over 3 years, a reallocation of investment against our key growth priorities and a more focused portfolio, an investment-grade balance sheet, as Joanne said, and greater financial flexibility. So that's the basic framework, the time line of our growth strategy and what you can expect in terms of outcomes. We're going to unpack all of this in more detail. But before we do, I would like to step back, if I may, and just do a bit of scene setting to offer some perspective on how we see the world changing, the needs of our clients evolving and the opportunity of AI. So for some time now, we've known that our industry is experiencing dramatic transformation. With the rapid diffusion of AI, we're not just seeing incremental shifts in consumer behavior, like this is a complete metamorphosis of the commercial ecosystem. Brands are now discovered in AI-driven conversational search. All the old barriers that protected established brands are gone. creators and influencers have reshaped consumer preference and can launch brands in an instant. Media is everywhere. It's in everything. It's no longer episodic and campaign-driven. It's continuous, always on, a stream where social, search and physical spaces all blend together. Commerce is the new organizing principle. Every action, every interaction is shoppable, and we're rapidly shifting to agented commerce where AI agents do the shopping on our behalf. Trust is scarce, right? It must be earned every day in this world of synthetic content and deep fakes. Brands need to balance hyperpersonalization with personal privacy. And as the world is flooded with AI-generated content, the demand for verifiable human creativity, craft, empathy, taste is increasing as key brand differentiators. These changing dynamics are not fleeting trends. The acceleration of AI is unstoppable. And as I said, it's driving a complete metamorphosis of the commercial ecosystem. And this is the reality our clients are navigating every day. The fragmentation, the complexity, the pace of change is dizzying for our clients and the paths to growth are much harder to find. He's never been more urgent to build compelling trusted brands that endure for generations and provide competitive advantage and long-term enterprise value. To cut through this noise and find new growth audiences in this environment, brands need to embrace new strategies grounded in deep data insights, real-time signals and AI that acts on these signals at the speed of light. In this perpetually changing environment, clients don't need more traditional marketing agencies. What they need is a new playbook for growth and a trusted partner who can help them build it and operationalize it. A partner that operates as an intelligent orchestration layer across creativity, media, commerce, data and tech who fuses technical expertise with breakthrough creative thinking into one cohesive approach to modern brand building. At WPP, we work with some of the most consequential brands and clients on the planet, Coca-Cola, Unilever, Nestle, Kenvue, Ford, so many more. We know how to navigate disruption. We know how to find signal in noise and help clients build new paths to growth. Now for many clients, this new playbook for growth means real transformation at every level. So I spent the last decade delivering large-scale technology transformation to enterprise clients around the world. And I can tell you, it's not easy. Clients need to have AI-ready data foundations and agentic tool and governance in place. They need to be trained and skilled. Processes need to be reimagined. There's really no shortcut when it comes to AI transformation. Every client I meet is going through it, and they all need our help. So for WPP to seize this opportunity, we need to evolve from being a collection of traditional marketing agencies to being a trusted partner for growth and transformation, helping our clients build modern marketing capabilities and move boldly and confidently into the future. A wonderful example of this kind of partnership in action is the Coca-Cola Company. Let's hear from Manolo. [Presentation] Cindy Rose Quackenbush: Commerce and Retail media at 23% and high-velocity content production at 38%. These changes that we're making at WPP to integrate our client proposition will enable us to cross-sell more effectively and grow our share in these fast-growing markets. So that's my perspective on how the world is changing, what it means for our clients and the opportunity of AI. Thanks for indulging me in that. But I'd like to now unpack our growth strategy in a bit more detail. So as I mentioned earlier, we have 4 strategic objectives: to deliver superior growth for our clients by reorienting around an integrated proposition to become a simpler company moving to 4 operating units across 4 regions with common incentives across the company, to leverage the power of our agentic marketing platform, WPP Open for competitive advantage and to create firm financial foundations for the future. We've built a detailed plan that sets out the actions we're taking to deliver on these objectives, and the entire management team worked together to build this plan. This was the ultimate team collaboration. We're all behind it. We're all aligned and committed to its execution. There are 8 core pillars to the plan, which you can see on this slide, but I'm going to double click and I'm going to double-click briefly on each of them, but I do want to start with WPP Open, our pioneering agentic marketing platform because it sits at the center of everything we do. It's where all of our capabilities come together into one integrated end-to-end platform. It's the cornerstone of WPP's own transformation, and it's how we deliver services, transformation and growth to our clients. WPP Open is a platform that we've been investing and building for a few years now. We recognized that we needed an end-to-end orchestration layer to connect workflow inside of WPP. And the platform enables us to scale intelligence and best practice across our group and reimagine business process and client solutions with the agentic capabilities that now live inside Agent Hub, an important recent addition to the platform. But let me show you an example of the power of the platform with a recent example from Google Pixel. Using WPP Open and AI personas, we analyzed millennial conversations from across social media, uncovering a shift towards romantasizing everyday life and reframing mundane moments as cinematic moments. Guided by this insight, our brand agent recommended focusing on Pixel's camera coach feature to help users take control of their story. Thanks to specialized agents, our workflow moved from social listening to creative concepts in just 1 hour. With Google's advanced AI models within WPP Open, campaign assets were approved and live within 24 hours. And this delivered a 3% increase in brand uplift, demonstrating a new marketing flywheel where insight, creativity and production really move at the speed of culture. So recognizing the pace of technology change, we knew that the future of marketing would look very different than in the past. And to anticipate these changes, we've significantly enhanced the platform over the past 12 months. Open Intelligence is our foundational intelligence layer that securely connects trillions of live data points from clients, partners and WPP in a privacy-first way. And it's now integrated and powers the entire WPP platform end-to-end. We consolidated our technology and data solutions into one organization. We have one WPP development team, one integrated product road map and one set of design and portfolio management principles, which dramatically simplifies how we think about evolving this platform in the future. Our people work on WPP Open every day, and it features in every client pitch as the single unified agentic platform that clients need to deliver integrated marketing workflows and a collaborative workspace where humans and agents can work together to deliver a system of growth that clients can trust. There are many, many point solutions available in the market today that address pieces, fragments of the marketing workflow, and they're often tied to specific platforms, leaving clients to manage costly complex tech stacks with fragmented workflows. WPP Open solves this problem in a single end-to-end platform. It's an agnostic system built on a common data model. It gives clients one source of truth to integrate operations, optimize investment and drive growth at scale. It's really hard to explain technology, though. So let me show you how this works. [Presentation] Cindy Rose Quackenbush: Great. So I talked about the importance of partnerships because in today's changing world, like no single company can go it alone. WPP Open, as the name indicates, is open by design. We will continue to enhance our own technology with the very best and latest AI models and agentic tool sets through our groundbreaking strategic technology and data partnerships with Google, Microsoft, TikTok, Meta, Amazon, Stability AI and more. These partnerships don't just give us access to new AI models and tools. They enable us to bring cutting-edge innovation resources to our clients and unlock important new routes to market, particularly important for our Enterprise Solutions business. You might have seen earlier this week, we announced a significantly expanded partnership with Adobe, embedding their industry-leading AI marketing suite directly into WPP Open. This is a powerful integration that delivers effective streamlined marketing operations for our clients, enabling them to scale personalization, optimize media and create on-brand content efficiently with agentic AI workflows. This build, buy and partner approach that ensures that WPP Open remains at the forefront of cutting-edge technology innovation so that our clients always have state-of-the-art capability at their fingertips. WPP Open is a significant source of competitive advantage for WPP. This platform puts AI to work to transform our clients' marketing function and enable new outcome-based commercial models, tying our success directly to client growth. So that's WPP Open. Now let's go back to the strategic plan and briefly step through the actions we're taking to deliver on our growth objectives. Our first key action focuses on media and data and positioning these capabilities at the core of our integrated client proposition. Brian Lesser joined WPP 18 months ago and has done a fantastic job spearheading the transformation of WPP Media. He's implemented structural change and led the acquisition and integration of InfoSum, which now underpins our differentiated data approach. We know there's more work to do, but recent wins in WPP Media that Brian and his team have secured give us full confidence that we're on the right path. So I'd like to invite Brian to the stage now to dive a bit deeper on WPP Media's transformation. Brian? Brian Lesser: Hi, everybody. Good morning. And thank you, Cindy, for the introduction and for leading the way at WPP. 12 months ago, I promised a transformation, and we delivered. We have united WPP Media, placing our clients at the heart of everything we do, ready to unlock limitless growth in a media everywhere future. Our foundation is built on our proprietary open intelligence, driving real-time predictive decision-making. Today, I'll detail how we're now perfectly set up for success with the client always at the core of a truly integrated WPP, powered by a differentiated platform that sets us apart. This is our winning recipe, and I'll share tangible case studies proving this model is designed to win. From the outside, it might seem as if all marketers have the same basic needs. The truth is that every client is unique with vastly different context, growth strategies and audiences. This is why we have restructured the way we work to ensure each client's unique needs sit at the heart of our business. This radical client centrality is allowing us to unlock true integrated marketing across WPP. We have built a single financial and data ecosystem that eliminates siloed operations to bring the full power of WPP's people and tech to life. This empowers us to deliver seamless connected solutions that cut across the traditional ways of doing business like customer experience, commerce and social and influencer that accelerate client growth. Whether it's a media pitch, a creative pitch or a production pitch, more than ever, clients are looking for a single integrated solution. This is what we're now set up to deliver and why clients are choosing us. You can see the power of this integrated approach with Mazda. When creative is as intelligent as you're targeting, you don't just reach people, you move them. Mazda's first to the finish was a groundbreaking branded content series. It spotlighted trailblazing female racecar drivers connecting on a human level beyond motorsport. This innovative program became the first branded content designated a prime video original. It showed how media intelligence fuels powerful storytelling. The series achieved 16 million minutes watched, drove 93% new website visits, increased purchase consideration by 23% and contributed to Mazda's highest sales year ever. This is the type of results the new WPP media generates. Our data approach isn't merely an evolution. It's a fundamental revolution. Traditional marketing with its static definition of identity and commoditized view of audiences is increasingly obsolete and constrained by privacy risks. We ask a different question, what signals truly matter to our audiences. We unlock intelligence from diverse live signals, context, interests and behaviors to find new patterns in the consumer journey. This identifies new growth audiences and predicts their future actions to accelerate business growth. Central to this is our market-leading solution, enhanced by InfoSum, which establishes private data networks directly within our clients' environments. This enables secure multiparty data collaboration without any data ever moving. This decentralized approach breaks down silos, creating comprehensive AI-ready consumer insights from previously inaccessible sources, far surpassing traditional ID matching alone to deliver truly predictive intelligence. For the first time, clients can harness the full potential of their first-party data from any cloud or warehouse environment. including Adobe, AWS, Microsoft Azure, Google Cloud, Salesforce, Databricks and Snowflake. This proprietary intelligence can then be connected and enriched with our comprehensive identity data and robust network of over 350 integrated partners, giving us access to quadrillions of real-time signals. This allows us to produce faster, smarter and more effective marketing across all leading global platforms like Amazon, Google, Meta, LinkedIn, Snapchat and TikTok. By synthesizing this vast data, we build predictive media strategies that deliver deeper engagement and superior client growth, moving beyond just reach and frequency and validating actual outcomes with historical performance data. To bring this to life, consider our work with Heineken. They needed a way to connect their first-party consumer data with ITV's on-demand viewing audience and Tesco shoppers. Powered by InfoSum, Heineken was able to identify relevant audience segments based on age and real-time drinking preferences. Crucially, Tesco provided closed-loop measurement of sales impact, all without moving or sharing any customer data out of Heineken's environment. In a world where measurable outcomes truly matter, the campaign success wasn't measured in brand uplift or impressions, but in real sales data from Tesco stores, which increased by an impressive 189%. Another real-life example of driving business results through our market-leading data and technology solution. Powered by Open Intelligence and enhanced by InfoSum's federated learning infrastructure, WPP Open offers a unique agentic marketing platform. This gives our clients speed, simplicity, scale and AI innovation to modernize marketing, optimize media and accelerate their growth. Our differentiated approach to data is helping move marketing beyond legacy static databases by enabling more connected and intelligent ways of working. For Coca-Cola, this means bringing together creativity, technology and real-time insights to create more integrated marketing experiences. There's no one better than Manolo to share how WPP Open and Open Intelligence are transforming marketing at the Coca-Cola Company. [Presentation] Brian Lesser: Our strong Q4 2025 momentum continued into 2026. with WPP Media achieving its best January in 4 years for net new business wins, leading all media holding companies. We have an inspired, dynamic market-leading team of winners leading this charge. The change in our culture has been palpable. Major integrated wins like JLR and Estee Lauder confirm our strategy works. Our winning client-centric proposition built on this future-proof integrated foundation rapidly meets evolving client demands and delivers truly predictive intelligence. With media at its core, WPP is now exceptionally positioned to drive continued growth, sustain client relationships and deliver significant value for our investors. Thank you, and now I'll hand it back to Cindy. Cindy Rose Quackenbush: Thank you, Brian. Thanks so much. So the next key action we're taking is to establish next-generation production and creative capabilities. And I'm going to start briefly with production. Just last month, we announced the creation of WPP Production, our new production unit led by Richard Glasson. And of course, we marked the occasion with a video. [Presentation] Cindy Rose Quackenbush: So as I think you can see, production is being pretty radically transformed, and we're facing into this head on by fundamentally reimagining how it all works. WPP production, it's a mouthful. It's designed to solve for both volume and performance. We operate an end-to-end content orchestration through WPP Open as one unified content production engine. We're establishing high -velocity studios deeply integrated into WPP Media for real-time measurement and content optimization. And we're centralizing commissioning and supplier management to in-source more work where appropriate and create a more curated roster of external production partners. We're investing. We're investing in cutting-edge capabilities, high-velocity studios, as I mentioned, Gen AI studios, virtual production, video effect of virtual effects and digital twin pipelines. With WPP production, we are well positioned to support our clients as they look to transform and often consolidate their content production activities. And we're confident over time, we will take a greater share of this market. So next, I want to talk about creative. Like we know how critically important creativity is to our clients. I talked a bit earlier about the increasing demand for verifiable human creativity and craft in the era of AI. This is an important source of brand differentiation and value creation for our clients. And while the market for creative service is projecting limited growth over the medium term, creative capabilities are still a vital element of an integrated proposition, and there is significant opportunity for us to unlock white space across our client portfolio through joint propositions and cross-sell. So recognizing these factors, today, we are formally announcing the launch of WPP Creative, led by John Cook, and this organization will be home to our most iconic agency brands, VML, Ogilvy, AKQA, Berson, Landor, Design Bridge and Partners. I want to be very, very clear on this one. We are not merging agency brands. We are not consolidating agency brands. We are not sunsetting agency brands, okay? On the contrary, John and our agency leaders will unite them in new ways and empower them like never before. I've spoken to many clients. They all share with me how much they value choice and the unique perspectives and cultures that our agency brands provide. However, they also want to make it easier for those agencies to collaborate and efficiently access the whole breadth of WPP's capabilities. A simplified structure also removes barriers for our global client leaders, creating a frictionless path to our top talent so we can put the right resource in front of the right client at the right time without the constraints of the past. With WPP Creative, all of our agency brands will have access to the full modern stack of commerce, customer experience, digital platforms, enhancing their client proposition and expanding the go-to-market channel for these services. Much greater alignment with WPP Media and WPP Production will ensure that creative ideas are instantly adaptable and executable across the whole customer funnel. While agency brands remain, WPP Creative will have a more competitive cost base from a simpler, more unified operating model and greater shared infrastructure. I'm excited that WPP Creative will double down on our agency brands and arm them with the capability they need to make them more modern and more united than ever before. And we're already seeing the power of bringing together our portfolio in recent successes securing, for example, the creative mandate for Kenvue, the parent company to well-known brands like Listerine LSTERIN, Sudafed, BAN-AD and more, a strength also recognized by our client there. Next, I'd like to spend a few minutes talking about enterprise solutions. Because today, every global business needs a partner that can help them build, run and evolve their core platforms and systems in a world where AI is part of everyday operations. Businesses are being forced to rethink how they establish competitive advantage and the potential to reinvent workflows has never been greater. For some of our clients, the need is clear and well articulated. For others, the need is completely unarticulated. They know there's a better way, but they don't know what it looks like. To partner most effectively with our clients on their AI transformation, we are elevating our existing enterprise solutions capability into a new externally facing operated unit called WPP Enterprise Solutions, led by Jeff Geheb. Enterprise Solutions provides a complete enterprise transformation offer for clients that spans consulting, content, customer experience, commerce, CRM and platforms. We have a unique ability to fuse these capabilities with media intelligence and world-class creativity to build an AI-powered marketing operation end-to-end for our clients. WPP Enterprise Solutions benefits from multiple routes to market, including via our agency brands and both direct and partner-led go-to-markets as well. These multiple routes to market maximize our coverage and enhance our ability to cross-sell, capture white space, TAM growth opportunity within our installed client base and will drive more direct and partner-influenced revenue. The enterprise transformation market is huge. It's worth $230 billion and projected to grow cumulatively 7% over the next 3 years. Although our share of that market today is small, the opportunity is really significant. And actually, we already have really solid foundations to build on. Today, our Enterprise Solutions business employs around 10,000 people and generates around $1.8 billion of revenue. It's about 13% of our overall group net revenue. This business has quietly built a book of exceptional clients and has already earned notable industry recognition from Gartner, Forrester and IDC. In many ways, as I like to say, Enterprise Solutions is the hidden gem within WPP that we will now elevate to become the crown jewel. And if you ask our clients at Ford, it's already the crown jewel. We have a partnership with Ford that started with J. Walter Thompson 80 years ago, and we've continued supporting them with cross-functional teams as their needs have evolved. Let's hear directly from Ford. [Presentation] Cindy Rose Quackenbush: Great. Okay. So we have talked about how we're going to deliver superior growth for our clients by reorienting around an integrated proposition that brings together media creative, production enterprise solutions, all powered by WPP Open. Now I want to talk about the organizational changes that we're going to make to become a simpler, more integrated company because these are key enablers for our strategy. And as I mentioned earlier, we haven't been waiting for today's update to change how we engage with clients. We know that when we show up as the new WPP, as the best of WPP, we win. But to build on our current momentum and make it sustainable, we need to radically simplify our organization really to unlock true client centricity. So to do that, WPP will no longer be a holding company. We will no longer be a shopping basket full of stand-alone businesses, hundreds of stand-alone businesses. We're going to move to a single company model. with 4 operating units across 4 regions with incentives that closely align to the overall performance of WPP. Being a single company with a simpler structure and common incentives are critical enablers of our strategy. As part of these structural changes, we'll also further simplify corporate functions, particularly in finance and people to reduce duplication, increase our use of shared services and redesign our processes, leveraging AI and Agenta capabilities. Alongside these structural changes, we're also focused on significantly strengthening our execution, both in terms of client service delivery and new business growth. At the heart of WPP's relationship with our largest clients are our global client leaders, our GCLs -- and our GCLs are already masters of creating value. But our existing operating model and our incentives and our internal processes have not always afforded them the agility needed to deliver seamless client-centric services that unlock new avenues for growth. I'm sure my GCLs in the room would agree. But we're transforming our approach. We're going to empower our GCLs with the authority and the resources to function as true leaders for their client portfolios, exercising strategic leadership rather than merely orchestrating a bunch of activities. This is going to include greater control over client P&Ls and the authority to make the best strategic decisions supported by streamlined internal processes designed to eliminate organizational friction and provide access to the right resource at the right time. We're also establishing a new team of client solution architects. This team will apply deep industry expertise to develop winning growth strategies for clients and then architect tailored solutions to deliver on those strategies, unifying technology, media data, all of our marketing capabilities to really drive successful execution. And finally, we're establishing more integrated growth operations, creating a stronger network of growth talent across WPP with a shared hunger to win. These changes will enable us to build on our current momentum, all of our recent wins as we strengthen our new business engine and champion a stronger winning mindset. And speaking of winning mindset, the next core priority for us, perhaps the most important of all, is to embed a high-performance culture to attract and retain the world's best talent, grounded in collaboration, client obsession, humility, accountability and a hunger to win. I know from experience that culture can be the biggest differentiator and competitive advantage of them all. Talented people choose to join companies and stay at companies that have strong cultures where they can thrive in their careers and be their authentic selves. I also know that changing culture takes time and persistence, and it's about both winning hearts and minds. I think winning hearts is about inspiring people with a new mission that feels fresh and relevant and clear. It's also about creating an environment that feels safe and inclusive, where creativity, where intelligent risk-taking are valued, where failure is treated as a path to learning and continuous improvement is celebrated. Now winning minds is about getting the basics right. So that's about clear communication and active listening to people, investments in learning and development. We've got to ensure that our people are building new capabilities with a focus on AI so they can deliver what our clients need from us. It's about common incentives across the company that just unlock collaboration and frictionless resource sharing. It's about performance management and feedback to allow us to build that culture of accountability and greater talent mobility and career progression opportunities. But what I really want is for people to have a world-class employee experience and feel proud to be on a winning team and proud to be part of WPP. Now the final pillar of our Elevate28 execution plan is about creating firm financial foundations for the future. And that's about creating capacity to invest in growth and building a WPP that's fully optimized to deliver for our clients. I'm going to hand over to Joanne now to step through the financial aspects of our plan. Joanne? Joanne Wilson: So thank you, Cindy. And okay, let me share the financial framework, which underpins our Elevate28 8 plan, including our approach to capital allocation. Elevate28 8 is first and foremost about getting WPP back to growth, and our financial priorities underpin that. In the near term, our focus will be on stabilizing the business, and that means improving our net new business performance and our client retention. As I mentioned earlier, net sales like-for-like is a lagging indicator, and that will take time to recover as we cycle through historic client losses. Now as we progress through the 3 years of our plan and we deliver strongly against the core growth building blocks, which I will talk to in a later slide, we anticipate a return to taking our fair share of the market. And in some areas and over time, we will seek to outperform the market. And to support this, we will unlock GBP 500 million of gross annual cost savings between now and 2028, enabling a reallocation of investment towards our growth drivers. And this will, in turn, support a rebuild of margins. And finally, we are setting out to make WPP a simpler and more focused business reducing the perimeter of the group and then still doing strengthening the balance sheet and providing a greater degree of financial flexibility. As you've heard today, we are already implementing many parts of our plan. However, it will take time to deliver and to realize the full benefits in our operational and in our financial outcomes. As Cindy indicated, we see delivery across 3 phases. In 2026, we will stabilize the operational performance of the business, leveraging the improved competitiveness of our media and our data proposition and our production consolidation. We will action our cost saving plans, and we will prioritize investment into the parts of our business, which represent the largest growth opportunities. In parallel, we will take a more proactive approach to our portfolio, unlocking embedded value and operating with a tighter and a more focused perimeter. This will require focused execution and a rigorous reallocation of resources to support our growth plans. Now as a lagging indicator, we expect organic growth to remain subdued in 2026, and we also anticipate margins to remain below historic levels as we reinvest savings to support growth. Alongside this, we expect an elevated average leverage ratio. From 2027, we expect to start to see a progressive ramp-up of the benefits from both our operating model changes and the investments we are making to enhance our new go-to-market, our integrated proposition and from scaling capabilities, including our full service enterprise solutions and production. It is our ambition for the group to return to growth during 2027 for margins to start to rebuild and for our leverage to start to come down. And from 2028, our plan assumes a significantly improved operational performance characterized by accelerating growth and improving margin and strong cash conversion. While we are not providing specific medium-term guidance today, rest assured, we are relentlessly focused on immediate stabilization and disciplined execution of the building blocks to return WPP to growth. And let me spend some time on those building blocks of growth, which we are, of course, aligning our investment priorities against. And I'll start with media. Now the market for Media Services is around $40 billion and is forecast to grow at a 4% CAGR from '24 to '28. And within this, commerce and retail media is a high-growth market, expected to deliver a CAGR of 23%. As you heard from Brian, we have been busy transforming our media and our data proposition and improving our execution. And this not only supports our ambition to improve new business and retention across our media business, but it will also enable us to deliver that improved integrated proposition for our clients with media at the heart. And our recent win with JLR is a great example of that. Now taking back our fair share of the media market is the most significant growth opportunity for WPP at a group level, and it's a core tenet of Elevate28. Now the second area is our next-generation production offer. Now while the overall production market is seeing muted growth, we are seizing the opportunity to take share, internalizing third-party production spend by our agencies, which is estimated at hundreds of millions over the course of Elevate28. We have also identified significant incremental opportunities from new ways of originating creative work, leveraging GenAI and BFX pipelines, which enable us to build next-generation studio capability and make much more of our client work directly. High-velocity content production is a great example of this, which despite being a relatively small proportion of the overall production market today is forecast to grow at a CAGR of 38% over the next 3 years. As the largest production agency globally and with our investment in dedicated capabilities, including content studios, we are well placed to take more than our fair share of this opportunity. We are working with a number of our large clients already in these areas, and we've leveraged innovative content opportunities in some of our recent new business wins. And finally, scaling our enterprise solutions proposition. The enterprise solutions market, as we define it, is forecast to deliver a CAGR of 7%. We play in this space already, but as part of a fragmented offering, existing within agency silos and as such, our current share of the market is low single digit. Now scaling our enterprise solutions across all of our creative brands as well as establishing it as a distinct pillar and investing in direct go-to-market capability, we believe will enable us to significantly grow our market share over the course of Elevate28. The strength of our capability in this area has been recognized by Forrester, amongst others. And with many recent client wins, we are confident we will see an improving growth trajectory. For 2026, the focus will be on consolidating these capabilities under one leader, establishing a strong direct go-to-market team and leveraging partnership opportunities such as the one announced this week with Adobe. Now cumulatively, these opportunities represent a significant white space gross revenue opportunity estimated at up to $900 million over the term of Elevate28 8. And delivering against our growth priorities will, of course, require investment, which will be self-funded from our cost initiatives. Our shift to a new operating model will yield significant efficiencies, building on what we have already done. Since 2024, we have removed GBP 300 million of gross cost savings and our Elevate28 operational plan unlocks a further GBP 500 million of gross annualized cost savings by 2028. Now we expect the associated cash restructuring costs to be around GBP 400 million and for those to be incurred across '26 and '27. It's important to emphasize that our cost actions are targeted at improving our execution and supporting our growth priorities as much as they are about simply removing costs from our business, and they will come from 3 key areas. The first area is that shift to a new operating model. It will drive a more simplified, more integrated way of working. It will enable us to scale our capabilities across the organization and support a stronger and a more effective client proposition. We will consolidate leadership at a global, at regional and at market levels, providing clear roles and responsibilities for our people. We will optimize spans and layers. We will remove duplication across our creative assets, driving a more aligned model, enabling a more effective cross-selling and providing a more holistic view of client success and outcomes. The second bucket focuses on structural cost savings. And as a result of our new operating model, we will deduplicate corporate functions, particularly across our finance and our people teams. We'll further leverage our shared service centers and create centers of excellence. This will set us up to unlock more scaled productivity savings from greater automation and the use of AI across our corporate functions. And the third bucket will come from rationalization opportunities. We will deliver savings from our real estate footprint and from across our long tail of markets and agency operations. In 2026, we expect to realize at least GBP 100 million of in-year P&L savings and GBP 250 million of annualized savings. The estimated restructuring costs associated with these savings in 2026 is around GBP 190 million. Now these targeted actions will improve our execution as well as enable a reallocation of investment into the highest growth opportunities across our business, supporting a rebuild of our margins over time. We will prioritize investment across 3 key areas. Firstly, we are bolstering the main engines of the Elevate28 plan, which you've heard about today. We are directing investments specifically into media and commerce into high-velocity production and enterprise solutions to ensure we capture demand in those high-growth areas. This will include investment in commerce and influencer and analytics talent and in content studios. Second, we are investing to upgrade our go-to-market approach with a focus on our client needs and our new business capabilities. Alongside this, we will rebuild our incentive pool, and we have redesigned our incentive model to align it to our new operating model and with the aim of disincentivizing the past siloed way of working. Third, we are sustaining our commitment to WPP open to data and to AI. To give you a sense of scale, in 2025, we invested more than GBP 300 million in this area, and we will protect this investment to ensure continued enhancements to our technology platform and our AI capability. In 2026, we are expecting to reinvest all of the in-year savings from the cost initiatives into the first 2 priorities, and this is reflected in our margin guidance for the year. Now these investments will be made in a disciplined manner, and we will fully leverage our more integrated approach to benefit from scaled capabilities and a rigorous prioritization in the areas that will drive the highest growth opportunities and returns for WPP. And let me move on to talk about our portfolio review. In recent months, we have conducted this review aimed at assessing opportunities to unlock embedded value and refocus our perimeter. Now this review has covered all assets that we own, whether an operating unit or a minority investment. We've evaluated how each strengthen our proposition and fit our future integrated offer. While we have many great assets within our portfolio, it may not be optimal for us to remain owners either in whole or in part of some of those in the future, and we've applied that best owner assessment to identify the assets where value is potentially maximized outside the group alongside a plan for continuing to rationalize noncore passive investments. Now this has also been an exercise in determining the areas we want to prioritize investment in and being rigorously disciplined in our allocation of capital. And of course, underpinning this is a disciplined approach to M&A with a focus on organic execution in the near term. With the review now complete, we are moving directly to action. And while we don't have specific transactions to announce today, the work is underway, and we will update you in due course. And that leads me to our approach to capital allocation, which is framed across 3 clear priorities. First, we are committed to our investment-grade balance sheet. This is our foundation. Our primary focus here is retaining strong liquidity, reducing our gross debt and improving our leverage ratios over time. As shared earlier, Fitch Ratings has assigned WPP, a BBB rating with a stable outlook, further solidifying our investment-grade balance sheet. Our second priority is funding organic growth. As you heard, we are prioritizing investment in the highest growth and the highest returning areas of the business. And crucially, we are funding this through our cost initiatives I shared today with a strict focus on scaling capabilities that support growth across the entire group rather than in silos. And third, we will share the proceeds of growth. We aim to balance consistent, sustainable shareholder returns over the medium term with inorganic investment. Reflecting this, the Board have proposed a full year dividend of 15p for 2025. We will apply a focused approach to M&A, deploying capital only when an acquisition is clearly more efficient than building that capability internally. And beyond that and as appropriate, any excess capital will be returned to shareholders. And finally, for me, a brief note on how we -- how our reporting is going to evolve to reflect this new structure. Now the current structure is shown here, and our ultimate objective is for our financial reporting to map directly onto our new organizational model. For segmental reporting purposes, the 4 operating units, which are the engines of our business will be included in an enlarged global integrated agencies reportable segment, which will now include public relations and our design agencies. For regional reporting, results will be broken down by North America, EMEA, Latin America and APAC. And over time, we want to give you better visibility into the engines of our business. And therefore, within global integrated agencies, we will provide specific disclosures on net revenue and organic growth for our key capabilities, media, production, creative and enterprise solutions. So that's all for me, and I will hand you back to Cindy to wrap up. Cindy Rose Quackenbush: Amazing. Thank you, Joanne. Home stretch folks. So before we conclude and open up to questions, I just want to spend a minute on how my team and I will hold ourselves accountable and measure success. As Joanne mentioned, our primary focus is to return our business to growth. Organic growth is our most important success metric and getting back to consistent organic growth is our North Star as a management team. But as you know, organic growth is a lag indicator and will take us some time to deliver. So beyond the lag indicators, you can see on the right-hand side of the slide behind me, we've also included on the left a few leading indicators and success metrics that my team and I have as part of our own scorecard. -- that will provide tangible evidence along the way that the actions we're taking are working. I won't read them to you, but you can see there are things like new business wins, client retention, cost savings, asset disposals. These are the types of lead indicators we'll be rigorously managing, and we're confident that these will drive the outcomes that matter the most over time, consistent organic growth, supported by a solid financial foundation. I also want to reassure you that we're not going to just simply disappear and report back on KPIs in a year's time. We really want you to see the execution of the strategy in real time. We want to invite more frequent engagement with our investor community. So over the coming months, we'll be hosting a series of deep dive webinars to take you further under the hood of our key growth engines, specifically in the areas of media, next-gen production and enterprise solutions. So I know we've shared a lot of information with you today, and thank you for listening. But I have to say our mission has never been clearer to be the trusted growth partner to the world's leading brands in the era of AI. Elevate28 is a bold plan for a simpler, more integrated WPP. We will stabilize the business, return to organic growth, create capacity to invest and deliver attractive returns for our shareholders. And we'll do that by delivering growth for our clients by being a simpler, more integrated company by leveraging our agentic marketing platform, WPP Open for competitive advantage and creating firm financial foundations for the future. I am very confident that WPP has a bright future ahead. This is a WPP that is fit for the future and built to win. Now we're going to draw this strategy update to a close. We're going to invite questions from the audience for me, Joanne, Brian or any members of the senior leadership team. And I want to thank you. Thank you very much. Thomas Singlehurst: Thank you very much, Cindy. My name is Tom Singlehurst. I head up Investor Relations for WPP. We're going to go to questions. We'll -- before we dive in, a couple of quick parish notices. For those in the room, we're going to bring a mic to you. So if you can just be patient. If you could state your name and which firm you represent, that would be fantastic. And to make sure we've got enough time for everyone, it would be hugely appreciated if you could ration yourself to maybe 2 questions and a follow-up. [Operator Instructions] But let's start with questions in the room. Laura, maybe start with you. Laura Metayer: Laura Metayer from Morgan Stanley. Three questions today, please. First question on differentiation and competitive advantage. I'm curious, what do you think is the single differentiation of WPP. Obviously, we've heard from peers need to like have an integrated offering, a focus on data, driving leading with AI. So I'm just wondering what do you think is the single differentiating factor of WPP. Second question is when you talked about the JLR win, you said you pitched it as an outcome-based revenue model. Do you mind providing a little bit more details here, like any KPIs that -- and if you can also say maybe like telling us a little bit more generally, like how you think the revenue model will evolve and what sort of KPIs will be used to measure performance? And then lastly, on the Enterprise Solutions business, could you give us an example of a typical project of WPP here and how it differs from leading IT services consultants because obviously, it's part of an agency. Cindy Rose Quackenbush: Sure. Thank you for your questions, Laura. They're great. I'll have a go at the first one and then maybe invite Johnny Horny to talk about JLR. He led the pitch and maybe Jeff Geheb to give an example of an enterprise solution engagement, if that's okay. So I think Brian was incredibly articulate on this. I tried to paint a picture of WPP Open as a very different proposition, right? And it's -- because it's integrated, it's not a point solution. It transforms the entire end-to-end marketing workflow. It's powered by Open Intelligence, which is our foundational data layer. And we've integrated InfoSum's distributed data collaboration capabilities, which means it's built for the future of marketing, not the past. And that is an incredible competitive advantage. Like we have all the ingredients we need to win. And what we really needed to do is pull it all together into an integrated proposition and then power it with this incredible platform that we have. And frankly, when clients see that, they see the power of it and its ability to drive growth without compromising on data ownership. We win in head-to-head competition. That's what you're seeing happen. But I don't know, Brian, do you -- is there anything you want to add? Brian Lesser: I think one of the things I said was that every client is different. And there is no one approach to driving business results for clients. We've built a platform in WPP Open that is flexible that includes our own proprietary technology, but also partners effectively with other companies. So we're always ready for what's next. And we built a data model that similarly doesn't rely on a static data asset that is a legacy CRM solution. Instead, it relies on the ability to connect any and all data sources so that we can be more intelligent and more dynamic in understanding consumer behavior and driving those business results for our clients. So it's different for every client. But as Cindy said, it's really an integrated approach across all parts of our business grounded in that data and technology strategy. Cindy Rose Quackenbush: Thank you. I would just add, we are still contracting with JLR. So there's a limit to what we can share. But Johnny, why don't you say a few words? Johnny Horny: Yes, sure. Yes. Thanks for mentioning that. We haven't officially been appointed by JLR. We pitched throughout last year, went into a period of exclusivity with them through January, and we're now contracting and hoping that by March will be live. But at the core of our pitch to your question, I guess, what's our secret sauce? I think our secret sauce is where you put everything you've seen this morning together. So starting with Open Intelligence to be able to build cohorts and understand audiences in a way that doesn't require us to do simply old-fashioned ID matching, but to keep the data where it is, keep it safe and secure and then put that into a team that we're going to build with JLR, where we and they are all together on the open platform end-to-end. And it's the end-to-end integrated nature of this offer that I think then allows us to make what I think are becoming genuinely competitive offers when it comes to outcomes. So those outcomes aren't do you like the agency you work with, those outcomes are, are we selling more product? And will we get paid on being able to sell more product by being able to build their brands and measurably show that there's greater levels of desire for their products and the crown jewels of brands that they've got. So we haven't finished contracting, but those are the defining and that pitch was against all the major holding companies. I think those are going to be the integrated propositions that will see us win JLR and hopefully many more JLRs pulling these ingredients together. Cindy Rose Quackenbush: Thanks, Johnny. Joanne Wilson: Can I just build on that because Laura, I think stepping back a little bit, your question is around what happens with a time and materials model with AI. And the story is really moving on. Hopefully, you picked it up today. Our clients are using us and it's for the industry really. They need brand safety. They need to know that they have got cultural nuances. They have the best creative and strategy talent, working with them on their brands to really differentiate. And also that they've got the access to the best talent. And navigating through what is an incredibly and ever more complex ecosystem is incredibly challenging for CMOs. It's getting tougher and tougher. And that's what they're paying us for. It's no longer they're paying for us to create 5 ads. In fact, we can create 1,000 ads, but it's how do you get those ads into the right audiences. And that's really what they're paying for, which is really enabling this output-based pricing, it's outcome-based pricing, and it's also shifting more to tech fees and licensing fees as well. So this will be an evolution, but we're making lots of progress in this area. Unknown Executive: To answer your question about enterprise solution scaling. So let's just stay with automotive. This could be JLR. It's certainly true with Ford. So when you begin to solve a marketing problem around content transformation or a customer experience challenge for marketing and you start with the CMO, you quickly evolve that conversation and realize that's an enterprise problem you're solving. Content doesn't live in marketing. It lives as an asset of the entire company. Customer experience lives as an asset of service, brand of product development. And so the nature of our work usually begins with the marketer and then it expands further and further and further. And soon, we're in rooms with IT leaders, procurement leaders, service leaders. And instead of using their silos to define how we work, we're pulling them together. And with AI, that's collapsing at an even more increased rate of change. So AI platforms right now are -- they're collapsing the buying patterns with IT buyers used to buy a platform, implement it for years and then draw the business in. Nowadays, there's a really fast iteration cycle. So we're finding ourselves in rooms now starting with marketing, but really extends to all the stakeholder groups. Thomas Singlehurst: Can we go to Nico. Nicolas Langlet: Nicolas Langlet from BNP Paribas. I've got 3 questions. The first one on the existing business with clients. which was definitely a weak part in the 2025 performance. Can you tell us a bit more about what happened? Is it related to scope reduction, pricing pressure? Or can you give us more detail about that? And what are the concrete actions you have already implemented to stabilize the business with the existing clients? The second question on WPP Open Pro. Can you give us an update regarding the rollout, the first feedback and what sort of opportunity you see in the mid- to long term? And finally, of the GBP 500 million gross cost reduction, have you included any benefit from generative AI tools in that GBP 500 million? And if you can share that? And of the GBP 500 million, how much do you plan to reinvest in the business? Cindy Rose Quackenbush: Yes, why don't you take the first? Joanne Wilson: Okay. So look, Nico, it's absolutely the right question. If you look at our performance in 2025, we talked about a drag from net new business of about 150 basis points. So that points to just under 400 basis points from the underlying business. And the majority of the cuts that we saw really came from the creative part of our business. And as I said in my prepared remarks, it was really an overview, and we did see significant spending cuts, particularly from the start of Q2. Look, we can point to different reasons for it, but there was an awful lot of uncertainty, and we saw heightened volatility across clients. We've talked about the polarization. Many clients, we saw very strong growth during the year, but others cut significantly and at very short notice as well. And effective, we tend to have more project-based spend in our business. And of course, that's often the first places that get cut when we see that volatility. And I would also just add that as you heard from Brian today, Brian and the team have been incredibly busy in the last 18 months really setting up our competitive proposition for the future, redesigning how we deliver for clients. And that undoubtedly has had some disruption in the business and the underlying business. And we've been very deliberate in Elevate28 that Brian and the team have done a lot of the heavy lift and their focus is now on execution. So it sort of brings you on to the second part, what are we doing about it. So if you think about that for media. And then with the creative part of the business, we are building an incredible powerhouse within WPP Creative. We did get in our own way a lot of the time in the past with our silos. WPP Creative will enable scaled capabilities across all of our agencies. WPP Open as well will enable our creative teams to work in a standardized way, and that's everything from big large clients to smaller clients. So it will improve what we're delivering, and that will help both with our larger clients and that tail of clients where we've seen more reductions in spend. And I think that's really important with creative. Sometimes we get very focused on the headline cost saving, but it really is about creating a more agile organization with fewer silos. And just on the GBP 500 million of growth savings and how much we're going to reinvest. I talked about the in-year savings in '26 being GBP 100 million annualized savings will be GBP 250 million. All of that we're going to reinvest in 2026. I talked about this priority to stabilize and invest in the growth drivers, we will do that. Look, it's too early to say how much of the remainder we will invest, but I would assume that we will invest as much as we need of that to support our growth ambitions. Cindy Rose Quackenbush: I'm happy to say a few words about WPP Open Pro. It's early days, right? We only launched a few months ago. But what we did was basically productize or SaaS-ified certain capabilities from within the WPP Open platform. And we did it to target the mid-market SMB kind of end of the client segment. The clients that would largely look to self-service that kind of capability. I'm very encouraged actually. We've got a number of deals with clients. We've got a very healthy pipeline against this, albeit it's small in absolute terms. I think the interesting learning from my perspective is our top 100 clients, say, are looking at WPP Open Pro as a way to software enable the long tail of markets that they service. So rather than having full teams on the ground, you can start to see a world where they can software enable their long tail. And that's kind of interesting. Thomas Singlehurst: Perfect. Maybe we can go to Adrien. Adrien de Saint Hilaire: Cindy, this is Adrien from Bank of America. So I've got maybe 2 questions maybe for Brian and maybe one for you, Cindy. John, I know we're talking this afternoon. So I'll leave the financial questions maybe for later. But maybe, Brian, on -- you talked about all the business wins in Q4 and Q1 and well done on that. Can you tell us like what was the factor or what were the factors behind those wins? And how much of a factor price was behind those wins? And then secondly, I know we've talked about this before, but you put data at the core of your strategy. But how do you solve for the fact that you don't really have, as far as I know, at least a proprietary identity graph compared to competitors? And maybe more for Cindy. So today, we heard a lot about the opportunities. Sorry to come back on the risk. How much like revenue attrition would you expect in maybe in creative because of AI deflation around the revenue per head, for example, how much would you anticipate for the next couple of years? Brian Lesser: Adrien, in terms of the new business wins, everything that I showed in terms of our proposition contributed to those wins. And without going client by client, what I said about every client being different applies to how we pitch business and then how we ultimately service business. So whether that was winning JLR or NCL or the various other wins, each one of those solutions was different. And the great thing about our platform is it allows that and it enables us to go in and do things differently for clients. So selling cars is different than selling cruises is different than various other clients that we have. So I think that contributed to it. The way that we're structured also helps quite a bit. So we're not going into these pitches as Mindshare or Wavemaker or one of our other agencies, we're going to these pitches as WPP media. And increasingly, we're going into these pitches as WPP. So we get a lot of help from our colleagues at VML and Ogilvy and AKQA and from WPP production. And the clients see that, and they know that while we're pitching one thing, we're going to offer a full breadth of services over time. All these pitches are competitive, so price is always a factor, but that wasn't a defining factor in any of these pitches. We have a proprietary identity asset. One of the things that you have to understand is that identity is pretty ubiquitous in the market. So there are lots of companies that provide identity solutions. And it's really an old-fashioned notion of what we need to do to join up disparate data points. So we also have an identity asset called MerLink. We see every adult in the United States and we use that. We also use other partners like Experian when we want to augment that. And because we have a solution that allows us to access any identity asset, it's really not a problem for us. Having identity is such a small part of what you have to do to understand consumer behavior. What we do have is InfoSum, which allows us to connect to hundreds of other data sources. And instead of those being household addresses or e-mail addresses, these are what are people consuming on TikTok? How are they interacting with creators on YouTube. Those signals are much more important than having a traditional identity asset, which again, is a legacy system and fairly ubiquitous and accessible in the market. Cindy Rose Quackenbush: Yes. I would just build -- thanks for your question, Adrien. I would just build on what Brian said. I mean, I've never met a client that doesn't want more for less. That's not a new dynamic. We operate in a very highly competitive market and price pressure is a constant feature, right? But I would say that we probably accept on some level some downward pricing pressure from AI productivity, if you will. But what we're doing here is creating an organization that can cross-sell more effectively to address the white space within our installed client base and be more effective at converting new business. If you take our top 25 clients, for example, we probably capture at best 1/3 of addressable spend. When we unlock this collaboration and cross-sell opportunity for WPP, we have massive opportunity to offset and grow in those areas. Thomas Singlehurst: Why don't you pass it on to Steve, given he's right next to you. Steven Craig Liechti: Steve Liechti from Deutsche Numis. Just on the -- some numbers, sorry. You said 5% to 6% gross hit from losses. Can you quantify the '25 and '26 to date wins to kind of give us some idea of a net number to work off as we stand today? So that's the first question. Second, Brian, in the new setup and the new kind of pitch that you're doing to clients, where you haven't won, why was that? I know things is different, but it would just be useful to hear some insights there. And you also said you had some more work to do as well in your comments. I just wonder from my perspective, how much is the pitch that you're going with the clients now absolutely the right pitch? And what more is there that you do have to do? Brian Lesser: It's a very dynamic business. So it's very rare that the right pitch today is the right pitch a week from now or a month from now. So when I say we have more work to do, it's that we're on a constant quest to meet the needs of our clients in a rapidly evolving world, and that's never going to change. Structurally, we're set up to win, and we have been winning. From a data and technology standpoint, I feel great about where we are. We have the building blocks in place to evolve, not just win today, but evolve as the market evolves. So I feel great about that. In terms of why we didn't win, I say all the time to the team, you can be the best in a pitch, you can be the best on the day and you can still lose a pitch. And there are lots of factors that go into it. Sometimes it's price. Sometimes we don't feel comfortable with where a prospect is taking us in terms of commercial negotiations. Sometimes it's an affinity for one of our competitors between a CMO that knows a certain team. So there are lots of different factors that go into it. And we're not going to win every pitch, but we need to go into every pitch with the right solution for clients. And then I feel great about getting our fair share and actually exceeding our fair share and starting to win back the market share that we've lost. Joanne Wilson: Thanks for the question, Steve. I'm always hesitant at this time of the year to give a net new business because there's a whole year to play for, there's a pipeline, et cetera. But let me share some of the data that we've already shared and you'll be able to kind of broadly figure it out. And then I'll just give you some context around the pipeline. So last year, we said that our gross wins were 300 to 400 basis points of drag, and then we ended up at the top end of that. And we said that the net new business impact was about 150 basis points for 2025. Really encouraging, the gross win impact for 2026 exceeds and that gross win impact in 2025, and that really reflects in recent months, the new business, the better business performance that we've seen, and that's really encouraging. 2025 was a much lower activity year for new business. What we have seen in recent months is the pipeline activity building up again, which is also encouraging. And I would also often get asked, what's defensive and what's offensive? And it's very interesting when you look at the pipeline and the opportunities, it's less black and white than that. It's oftentimes you're defending some scope, but you also have an opportunity to win more. And so it's getting much more nuanced. But as I said, encouraged by the activity, the pickup in the pipeline and of course, the momentum that we've seen in recent months. Thomas Singlehurst: Perfect. I'm just going to do a couple of questions from the webcast, and then I will get back to the room. First one is on the broader strategic shift at WPP to become a more holistic partner to solve challenges for clients. Does this increasingly take WPP into competition with different competitors? And how well do you think you are positioned to win against them? Cindy Rose Quackenbush: Yes, that's for me, right? Look, I think we have all the ingredients we need to win. Like we have, as I said, amazing talent, incredible capabilities, fantastic technology and technology partnerships. We have scale. We have the trust of our clients, which is super important. What we need to do now is pull it all together into an integrated proposition and lead with our agentic marketing platform. And when we do that, I think what you're seeing is we're pretty hard to beat for clients that are ready for that. Like all of our clients are on a journey. Some are really at the very beginning, some are way down the line and most are somewhere in between. But when you see the power of that, turn up in your office and the growth that we can deliver, again, without compromising on data ownership, it's a very strong proposition. So I feel very confident that we're going to be in a great position to deliver this on a repeatable sustained basis. Thomas Singlehurst: Perfect. And one more from the webcast before coming back to the room. It's on a very important topic, which is leverage. So I presume for Joanne. A question here about clarifying the leverage framework. You previously guided to a net leverage target of 1.5 to 1.75x. Has this target been withdrawn? And how do you manage the process with the rating agencies regarding an investment-grade rating? Joanne Wilson: Okay. What we've clearly shared today in our capital allocation framework is our commitment to an investment grade balance sheet and that feels more relevant as we progress through Elevate28 plan feels more relevant than the historic range that we had and we are very committed to that investment-grade balance sheet. And I think, as I said in my remarks, and that's reinforced with the Fitch rating. I want to spend a bit of time on leverage as well. Leverage is really driven by, obviously, EBITDA and net debt. And our net debt -- our average net debt through '25 has actually come down slightly. And so our elevated leverage as a result of that lower EBITDA. And hopefully, as you've heard today, and we presented a plan that is going to get us back to growth. And obviously, with that, we'll follow improved margin, profitability, improved cash generation and we'll help that out. We also talked about the importance of reducing our gross debt. We talked about the role that the portfolio review will play on that. And over the course of Elevate28 we expect our leverage to come down. We do have liquidity at the end of the year of GBP 4.4 billion. Our maturity profile is 5.8 years. We recently refinanced our bond, et cetera. So we're in a very strong position. In terms of the rating agencies, I mean, many of them are here today. And we have a very strong relationship with the rating agencies. We engage with the rating agencies, we listen to what's important from their perspective. And like all stakeholders, we take that into consideration as we ensure that we're making the right decisions and taking the right actions to ultimately deliver long-term returns for all of those stakeholders. Thomas Singlehurst: Let's come back to the room. Can we go to Julien at the back. Sorry, yes, when you get the microphone back. Sorry. Julien Roch: Julien Roch with Barclays. Looking at Page 41, you have a production CAGR over '24, '28 of minus 1% for the industry. I thought it was a growing part of agency services. So why the decline for the industry? And what can WP production can grow at? That's my first question. Then on organic, accelerate organic growth in 2028, previous CEO had a 3% plus organic guidance. So if everything goes according to plan, what's your cruising altitude? What is your ambition? And then lastly, moving from holding company to a single company, does that mean one P&L per country? Or will you still have separate P&L for the new 4 entities? Or will you still have separate P&L per agencies? Cindy Rose Quackenbush: Sorry, Joanne, I think you're on. Joanne Wilson: I might need to repeat your second question, but let me answer the first and the third first, and we can come back to that. Yes, look, on production, and I shared this in my remarks -- prepared remarks that there's subdued growth in production overall. That's not the way to look at what production can mean for our business and how that can contribute to our growth. Hundreds and hundreds of millions of dollars that our clients spend and their production today goes outside of WPP. It goes to a variety of third-party providers. And hopefully, as you saw today as well, production is being completely revolutionized and transformed by AI. We talked about particular parts of production, high-velocity production, which is growing at 38%. That's a very small part of the production market today, but it is a huge opportunity. And as the largest agency globally and with the investment that we're making in content studios and with our team, we're incredibly well placed to take advantage of that. And also with the WPP production consolidation, we are much fit for purpose to really internalize a lot of that client spend, which we can, in an integrated proposition, make it more efficient for our clients. So it's really, really a win-win and our clients are getting the very best of production capability in the market and that AI investment as well. In terms of the P&Ls, so how we will operate and maybe I'll start with WPP Creative and then look at it overall. So the WPP Creative will run on P&Ls. The regional and market models will mirror media. And in certain markets as well, actually, those media and creative and production operations and teams will be even more integrated. But we will have one P&L for WPP Creative for the markets. For the agencies, we will still measure them on their revenues and their contributions, but that will not be the lead P&L. And then across the other 4 areas, of course, they will each have their P&Ls that will roll up to WPP overall. I think the most important thing is as we talk today about the incentives, we have redesigned our incentive model so that it's much more aligned -- everybody is much more aligned on a WPP outcome, and we struck that balance right where it's still incentives that people can really influence as well. So a much simpler P&L structure even if I did. Cindy Rose Quackenbush: Just to build on that because I'm trying to see what's behind your question. Please don't underestimate the enormity of the change that we're making. We're moving from hundreds of stand-alone operating companies to 4 operating units across 4 regions. And this common incentive that is linked to WPP's overall performance is going to change behavior in very dramatic ways. It's going to take all the friction out of the organization. It's going to make us much more client obsessed. It's going to enable us to put the right resource in front of the right client at the right time. So I just wanted to say -- please don't underestimate what's involved in making these changes that we're proposing. Joanne Wilson: And then, Julien, I think your second question was around our ambition on organic growth, if that's right. Julien Roch: That's right. Joanne Wilson: And I said we weren't going to give specific medium-term targets, and that was quite intentional. We talked about the 3 phases. The job that we have to do as a management team in '26 is to stabilize the business, continue to build on that new business momentum and improve our client retention. And that will get us back to growth at some point during 2027, and then we will accelerate from there. So I'm intentionally not putting a number on it, but you can -- that will give you a sense of what we're expecting in terms of the trajectory. Julien Roch: No, I understand that you don't want to give us like a '28 numbers, but it's more -- actually, it's probably more a question for Cindy, right, is what's your ambition in terms of growth rate in 5 years, in 10 years? What would you consider a success for WPP is achieving the previous target of 3% or you actually have more ambition than that? -- without giving us a year or whatever, but what's the... Cindy Rose Quackenbush: I'd like to get to the end of Elevate28 capturing our fair share of the market and then go beyond. But look, we're -- in the short term, I'm absolutely focused on delivering growth for clients, building on our market momentum and stabilizing our performance. And that will remain our short-term focus. Thomas Singlehurst: Can we go with Annick? Annick Maas: Annick Maas from Bernstein. And first question is, as a company which is employing 100,000 people in a world where change is becoming more and more -- it's accelerating basically, how can you stay nimble and keep up with this pace? Or what are the challenges here? The second one is on AI, and this is probably for and it's more conceptually. I guess AI is leading to staff efficiencies in terms of absolute numbers of stuff, but you also have an unprecedented industry structure with one less players. So how do you think conceptually about number of staff and absolute and staff cost inflation in the next years? And then you spoke about the rationalization of the portfolio. I suspect you speak with a few players. Who are these potential buyers? Cindy Rose Quackenbush: Good. Well, look, I'll say in terms of staying nimble, like that's a continuous process, right? We invest in skilling and building new capabilities in our employees on a continuous basis. We have creative technology apprenticeships. We have all kinds of formal AI coaching and training that we put our people through. But I think it also -- it's about also staying close to our partners. We have what we call forward deployed engineers. So we take resources from our technology partners. We put them into our organization. We train them on our platform. And then we send them into clients to co-innovate on new solutions. So I think just being in and around this environment creates a very, as I said, very AI native mindset where we can just continuously build these capabilities. These aren't capabilities you build through formal online training. You have to get your hands on it and actually put it to work for clients. And that's -- that's really how we're staying nimble and in front of things. But do you want to take the question on... Joanne Wilson: Yes. And exactly through the questions, I think. Nico, I think it was you asked me about AI efficiencies and I didn't answer. Look, as we look at the business going forward, undoubtedly, if nothing else changed, we can do more with less. So we can do a lot more with a lot fewer people, but it's never just as simple as that. What we're able to do now for our clients is before we might have created 5 ads and we were managing that. Now it might be 1,000 ads and they're very different how those ads need to be used to target audiences and drive returns. That's requiring different skills and different talent in the organization. Now some of that, we are upskilling our people, some of that we're bringing new talent into the organization. And if you think about the plan that we shared today, we will be reallocating talent around the business. So yes, we will be delivering cost savings. And in people -- in a business where most of our cost savings are people, that will mean a reduction of certain heads, but we will be reinvesting back into talent, different types of talent, commerce talent, influencer talent, much more analytics talent. We already have that at scale today, but really, those are the areas that we will be investing in and with that will come a different profile. In terms of how we measure it, the most important metric will be revenue per head, and that will reflect also our ambition to grow and do more with people, decouple our revenue model from our FTEs. And that's really all around our client delivery. In the back office, there's an opportunity, and we're already doing it in pockets. How do we leverage open, how do we leverage AI to drive productivity savings in our back office. And with the plans over Elevate28, we will do much more of that, much more at scale and on a standardized level. Just in terms of the question, is there AI productivity you asked built into the GBP 500 million. There is on the back office side. But on the front office, the way we think about it is we are creating productivity efficiencies in how we do things, but we're reinvesting that back into delivering even more value, even more outcomes for our clients. And then that feeds into the evolution of our commercial model as well. So that's all built into our plans. But we don't pull out and say we're going to deliver productivity savings from that delivery. We think about it much more holistic. There was a third... Thomas Singlehurst: Portfolio. Joanne Wilson: The buyers. Well, look, as I -- as we shared and particularly in the people business, incredibly sensitive, and we don't -- we're not at a point where we're ready to share externally. What is important is that we've seen an opportunity where we have embedded value of great assets that we have, and that will give us greater degree of financial flexibility and enable us to target our capital allocation more. And for some of these assets, there are many buyers, some of them are attractive assets. Thomas Singlehurst: We go with Ciaran. Ciaran Donnelly: A couple left for me. Joanne, maybe just on your comments on 2027. Can you clarify how we should understand the comments of growth during 2027? Should we think about that as implying a positive exit rate on like-for-likes rather than necessarily positive like-for-like growth for FY '27 in total? And then maybe, Cindy, could you just give us a bit more color on the new incentives? I guess, how do you kind of balance it between individual remit and kind of growth targets? And I guess, just in terms of what they look like versus the legacy incentive structures, how different are they? And then just finally, I mean, on the legacy structures, do they roll off over a period of time? Or what is that phasing period between the new structures and the old structures going at? Joanne Wilson: Very quick answer to your first, it's the latter. So it's during 2027. So you should think about it as a positive exit rate rather than for 2027 as a whole. Cindy Rose Quackenbush: So on the incentives, basically, if you're sitting in an operating unit, your incentives are 50% tied to your operating unit and 50% tied to WPP. If you're in WPP as part of a corporate function, you're 100% WPP. If you're a GCL, you're paid on your client growth. It's that simple. And it's dramatically different from where we are today, where if you're in an agency, you're paid on your agency results primarily. So that is very, very different. And that's why I think it's going to unlock very different behavior, much different collaboration. In the past, our agencies competed with each other. That was the model. Today, when we go into a pitch, we cast the right resource for the right client at the right time and -- it enables that. It enables a much more client-centric approach to the business. Just to add, we're implementing that in 2026. Thomas Singlehurst: I got a couple of people in the wings. I'm going to start with Anna, I think, at the back, and then we'll come to you, sir. Anna Patrice: Anna Patrice from Berenberg. A couple of questions from my side. So you were talking about the evolving remuneration part from time and material to project-based. So maybe how it has evolved in the past over the last couple of years? Like what's the share of time and material overall? And where do you see that going into the future? And what could be the impact on your profitability? That's the first question. The second question on the capital allocation, you were also referring to M&A. So just quickly, maybe what are you looking for? What are the things that are still kind of white spots for you that you would like to enforce within the overall WPP? Joanne Wilson: Shall I take the first one? Cindy Rose Quackenbush: Yes. Joanne Wilson: So just in terms of that evolution, and it's -- that's the way you should think about it. This will be an evolution in our commercial model. And this is an evolution for the industry and for our clients as well. So there's 3 key areas that we look at. One is output-based pricing and where we see more and more of that is in our production business today. We then have performance or outcome based pricing. We've talked a little bit about that. I mean we've always had an element of that in our fee structures with clients, but that's becoming increasingly important, particularly as Brian had shared today how we can measure that outcome more. And the third element is just tech and labor fees as well. That can be through licensing fees, through bundles, through subscriptions, et cetera. And all 3 of those we have in our business today. So with many of our clients for parts of work that we do for them, we're working with our clients to understand what works best, what aligns structures. clients we have going much more major outcome and others, it's more of an evolution of it. So really that's the way to think about it. So -- but very, very much encouraged by the shift that we're seeing. And as we are more and more confident in what we can deliver for our clients, of course, that creates more stickiness with clients. We see a big opportunity to enlarge the scope of what we do for clients. And you asked specific on margin on a per unit basis, we often say, of course, if you just look at it and everything else is the same, it would be deflationary in revenue because we can produce units at a lower cost. But actually what's more important, what clients are paying a premium for is all of that brand safety, the culture strategic input that we're bringing and how we can drive more growth. We're able to do that in a much more efficient way. And so we're looking at this to be ultimately over time, margin enhancing for us. Cindy Rose Quackenbush: Yes. On your question on M&A, again, I would just repeat that Phase 1 of our plan, we are really deeply focused on stabilizing our performance, delivering growth for our clients and building on the current market momentum that we have. As we get into later stage and free up capacity to invest in growth, we certainly will. And I would -- I stand by the statement we have everything we need to win. But as we create capacity to invest, I'll be looking to enhance in those growth areas that we mentioned, media, data, commerce, social influencer and the growth areas. But that's not the short-term focus. Short-term focus is on stabilizing our performance. Thomas Singlehurst: Gentlemen over here has been by patient. Jérôme Bodin: Jerome Bodin from ODDO BHF. Two questions. The first one on the WPP creative. So just to make sure I have properly understood. Will the idea be to pitch from WPP creative or from at the network level? That's my first question. And then also still on WPP Creative. So I have understood that the idea is to improve the mobility in terms of talent between all the networks. So how do you plan to make the improvements from a pure HR perspective in terms of systems and HR architecture? I think it's not so easy. Second question on disposal. So I fully understood that you can't give any names, but could you maybe explain what could be the idea in terms of disposal? Will it be an asset disposal at 100%? Or could you partner with someone with a minority stake? And then linked to that, could we have an update on Kantar on the stake in Kantar, where you are? And what do you plan? Brian Lesser: What was the last question? Joanne Wilson: Kantar. Cindy Rose Quackenbush: John? You want to say a word on WPP Creative, our CEO of WPP Creative. John Seifert: You can see where it came from. Thank you. Yes, first of all, on WPP Trade, it's -- after being at some of these investor meetings in the past, it's nice not to come and talk about a big merger that we're going through in the creative agencies. I've done that before. We all know that game. We've got -- in the analysis we've done in the last 6 months, we've got really powerful agencies. We've done that work in these last 5 years. And I saw that just this week, the drum creative rankings, #1, Ogilvy, #2 VML. It's not a super power we want to walk away from. So that's thing number one. And so I'm really excited about the strategy of not merging things, but getting behind our agencies. So that's a precursor to your first question, which is -- we're not using WPP Creative as a brand or an agency. It's not an agency. It's an operating system lets those great agencies, those very creative agencies operate together because we have a couple of beliefs, and we heard this from our clients. Our clients love our agencies. They love the choice. They love the creativity, they love the diversity, but they found it hard to work with them and found that either the clients or our GCLs, our global client leaders had to do the navigation, and that was difficult. So we're doing what we think is the best of both worlds, build around these great agencies, highly recognized, very creative agencies that make it easier to navigate. So WPP Creative is simply a way to navigate. It's an operating system. It's not an agency with a very light layer of infrastructure between them to make that happen. And if we do that, we will grow better than we ever have before as WPP and as creative agency. So if we unite them in the right way, which we are, -- we have the second part of your question, which is the ability for talent to move around between those agencies or to team up for client assignments. That's something we haven't had as well as we should have in the past. So that mobility, the second part of your question is key, and that's one of the reasons for the group. If we do this, we can also put better capability across all our creative agencies. Cindy talked about enterprise solutions. Jeff talked about it. This will be different than other holding companies creative agency groups, if you will, because of the embedment of everything Jeff and Cindy talked about with Enterprise Solutions. So to your point, WP Creative is not an agency. It's an operating system lets the great agencies. The creative agencies of WPP be great individually and be great together; and two, it allows for talent mobility. Cindy Rose Quackenbush: Jerome, thanks for your question, and I hope you'll forgive me for not answering it. We're not going to name any assets or give any further guidance today. We've carried out a complete strategic review of our group. We've identified assets that we feel we're probably not the best owners for in the long term. We've started a formal process. And as soon as we have anything to report, we will. But thanks for the question. Joanne Wilson: And I'll just follow up with Kantar, which you asked specifically about. I mean, Kantar, obviously, they sold the media part of the business last year. And they now have 2 divisions, Numerator Worldpanel and Kantar Brands. And those 2 divisions, they've done a big lift in terms of those 2 setting them up to operate independently, and that will be completed in the next few months. Obviously, that gives more flexibility in terms of realizing value from that business for both ourselves and BN, and we're very aligned with BN on the time lines for that, but nothing really more to add. I mean I think just specifically to your question on could this look like minority sales? Yes, it could. So there may be some assets that we bring majority owners into as well. Thomas Singlehurst: And Richard. Richard Kramer: I will keep it to 2 questions. Richard Kramer from Arete Research. Cindy, you mentioned productizing WPP Open and Pro and for the mid-market in particular, do you see offerings like Meta, Andromeda and Google Pomelli as fundamentally competing with WPP? Or do you see them as somehow complementary? And my question for Brian, there's been a lot of recent discussion and disclosure around principal trading and rebates. How are you going to address this question of transparency going forward? And is this an opportunity in the market for you to take some more share? Cindy Rose Quackenbush: Thanks for your question, Richard. As I said, there's a lot of point solutions out there. Some are tied to specific platforms. I think when companies start to stack all these up, -- it becomes expensive, complex and you break the workflow. So I don't -- I think what we have is fundamentally different. It's an end-to-end platform. We are agnostic and independent in terms of how we invest our clients' media budgets. And we have relationships with all the major platforms anyway. So I think what's behind your question is, are we going to be disintermediated by the big tech players? I don't think it's that easy to just turn on a solution in a client environment and watch the magic happen. And this involves real transformation and our clients need help. As I suggested, their data is not always ready. Their people aren't always ready. Their systems aren't always ready. So I see a real opportunity in being that intelligent orchestration layer. I don't see -- we're not seeing a disintermediation dynamic play out in any way. Brian Lesser: In terms of principal Trading, building compelling performance-oriented products has always been a part of our business, Richard, as you know. In fact, WPP was really a pioneer in building products that drive value for clients. In many cases, those are part and parcel of the services that we provide our clients. And in other cases, it requires us to invest, invest in technology, invest in our trading partners, invest in sources of data and then pull all of that together on behalf of our clients to drive performance. In a lot of markets for a lot of different channels that we service, we do sell principal media products to our clients. And those products are actually built with our clients. And they are asking us for more, frankly. Both Cindy and Joanne touched on the fact that our clients, in many cases, are CMOs, CMOs are under tremendous pressure to prove the value of marketing and grow their business. And so in many cases, they come to us and they say, how can you help us navigate addressable television? How can you help us navigate social media or commerce or retail media. And with our clients, we design products where, in many cases, we have to invest in those products. So it's a part of our business, and it's a growing part of our business, and I continue -- I expect it to continue to grow over time. In terms of us taking share, I do think that we can take share through our investment in those products. Again, if you come back to our strategy with respect to technology, we're not trying to sell assets that we acquired for billions of dollars. We're trying to work with technology companies, data companies, media companies to connect these things to build products that drive better performance. So in many ways, we are more impartial, more objective in how we construct our principal-based media products, and therefore, they're more compelling to our clients, and I expect they'll buy more of them over time. Thomas Singlehurst: Now we promised to get you out by midday. I've got a couple of questions, 3 from the webcast, and then we'll draw a line under it. But first one for Joanne, once again on leverage and the balance sheet. Could you please let us know if you intend to refinance the September '26 bond out of cash or by issuing another bond? That was the first question. Joanne Wilson: That's easy. We've done that. We refinanced in December, our GBP 1 billion bond, which covers that September maturity and our next maturity after that isn't until May '27. Thomas Singlehurst: Perfect. Second question, we've had a couple of these, and so I'm synthesizing them, but it's -- for you, Cindy, it's about the transition from moving from the Board to being a CEO. Can you talk about the challenges and surprises during that process? Cindy Rose Quackenbush: Gosh, how long do we have? Well, look, I think on balance, it was a strategic advantage because I knew the team, I knew the business, I knew many of the clients. So I think I avoided the 6-month onboarding experience that perhaps an outsider would. And actually, I had -- as I said, I had a thesis even before I arrived in the role. And so I just think it was a strategic advantage and helped me get to where I wanted to get to faster and actually started making changes relatively quickly. So -- but there's always surprises along the way, right? We'll save that for another day. Thomas Singlehurst: Final question. A couple of people have mentioned the Enterprise Solutions capability, the fact that it's 13% of revenue, and that feels high. Where does it come from? Is it -- where are the assets based? And what's their genesis? It might be one for John and Jeff. Cindy Rose Quackenbush: Jeff, do you want to take it? Jeff Geheb: Sure. Cindy Rose Quackenbush: Okay. Go forward. Jeff Geheb: Yes. So the nature of where it came from is 10 years of acquiring companies, 10 years of building capability inside of our creative agencies inside of really every company inside of WPP to be relevant was expanding into new asks. So they were expanding into CRM. They were expanding into technology because their value proposition required them to do it. And so what it happened over the years is that we had distributed capability all over the company. And through the acquisitions, integrations, as John mentioned, specifically when VML and Wunderman Thompson came together, we began to pool all of these assets together, and we could bring them to clients in new ways that didn't require them to, I think Cindy said, shop. They could come together in a holistic offering. So where would you have found it? You would have found it in all the different P&Ls, all the different regions, all the different markets. And so really, what we're doing now is just we're bringing them together, and we're putting under a framework where not every company or a capability is competing on to itself. And so for the first time, you're going to find it seen outside of the context. This isn't a start-up. I mean we've been doing this for a while. We've been competing on this for a while, but you'll just find it under VML. You would find it in Ogilvy, you would find it distributed throughout the network. So that's where it came from. Cindy Rose Quackenbush: So we're strapping rocket boosters to... Jeff Geheb: Yes. That's right. Cindy Rose Quackenbush: WPP Enterprise Solutions. Good. Shall I wrap? Okay. Super. Look, I want to thank you all for joining us today. I mean I've met many of our shareholders individually over the past few months, and I'm genuinely always grateful for your insights and for your support. And thank you. I want to thank you from the bottom of my heart for your trust in us. And we really look forward to sharing our journey as we move forward. So thank you all for coming and for listening. Thank you.
Operator: Good morning, and welcome to Eos Energy Enterprises' Full Year 2025 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to such recording. [Operator Instructions] With that, I would like to turn the call over to Liz Higley, Head of Investor Relations. Thank you. You may begin. Elizabeth Higley: Good morning, everyone, and welcome to Eos' Fourth Quarter and Full Year 2025 Conference Call. Today, I'm joined by Eos' CEO, Joe Mastrangelo; COO, John Mehas; CTO, Francis Richey; and CCO and Interim CFO, Nathan Kroeker. This call may include forward-looking statements, including, but not limited to, current expectations with respect to future results and our outlook for our company. Should any of these risks materialize or should our assumptions prove to be incorrect, our actual results may differ materially from our expectations or those implied by these forward-looking statements. The risks and uncertainties that forward-looking statements are subject to are described in our SEC filings. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update these statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to U.S. GAAP financial information is provided in the press release. Non-GAAP information should be considered as supplemental and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same or as comparable to similar non-GAAP measures presented by other companies. This conference call will be available for replay via webcast through Eos' Investor Relations website at investors.eose.com. Joe, John, Francis and Nathan will walk you through our business outlook and financial results before we proceed to Q&A. With that, I'll now turn the call over to Eos' CEO, Joe Mastrangelo. Joseph Mastrangelo: Thanks, Liz. Good morning, everyone, and thanks for joining us. This quarter, we continue to operate in an energy environment defined by one clear trend, the acceleration of demand for power, combined with constrained grid flexibility and reliability. That creates opportunity for a company like Eos. What we've been talking about over the 5 years that we've been a public company is being able to bring a product that was flexible, reliable and can do multiple discharges in a day or long or short discharges with quick response times. That's exactly what the market is looking for. And although data centers are in the headlines and data centers are changing the way that we think about our grid, and data centers are requiring us to make decisions on faster time horizons than we've ever done before in the energy sector, there are other demand drivers in the industry, things like electrification and transport and also electrification of heating and then the increased domestic production in the United States are creating higher load growth for a grid. That fits in perfectly with our technology. We're moving to in energy storage is moving away from managing volatility to providing reliability. What you need is this buffer resource that allows you to keep the grid balanced but also allows you to adapt to quick changes in load growth. But a vision of a product and a vision of a company only goes so far, execution is what counts. And when you look at our quarter and our year, yes, we set records. Our volume was up. Our margins improved sequentially quarter-over-quarter and year-over-year. We had a great quarter as far as orders being booked, and Nathan will talk about how those orders fit into different use cases that are going to provide growth for the company in the future. But the bottom line is we missed our guidance, and that falls on me as the CEO of the company. What John, Francis and Nathan and I will talk about today is building out the capabilities of our team, of our product and of how we bring that product to market and manufacture and install it to be able to provide reliable performance. And it's reliable performance not just to achieve guidance, which is important, but to achieve the operating requirements of our customer as the grid evolves and demand emerges. We think we have the product that meets those future needs. We've got to continue to build the company and continue to smooth out and deliver predictable performance for our shareholders and our customers. I think we have the team that is able to do that, and we'll show the initial results that are beginning to lay out how we can deliver reliably in the future. When you think about on the bottom, yes, 7% -- 7x year-over-year growth on revenue, combined with our highest cash position that we've had in the company's history, along with closing the gap and moving towards profitability, we've removed the going concern language inside of our 10-K filing, which Nathan will talk about in a moment, which really allows us to really says we're operating the company strategically, which is important for the future. At the same time, we launched Indensity, which Francis will give some more details on. But Indensity is really taking the product that we have and finding a way to package it that's easy to operate, easy to service, easy to manufacture and easy for customers to utilize multiple times in the day. It's not starting over, it's improving upon what we already have. At the same time, we're responsible to get our assets in the field up and running reliably, and Nathan and the projects team are doing just that. As we look at the overall results, I'm proud of what we did and disappointed that we didn't meet the guidance, but we are going to work to make sure that, that doesn't happen again in the future. Moving to the next page. Let's talk about how our installed base is expanding. Today, we cover 20% of the United States. We have 20 projects installed. The company continues to expand its footprint and continues to operate out in the field. Today, our Z3 product has discharged nearly 300 megawatt hours of power. Every cycle is a learning opportunity and every cycle is an opportunity for us to get better and to understand our customer requirements, and that's how we use it. At the same time, we do talk about concentration of revenue with a few large customers. But if you look at the lower right-hand side of this page, we had deliveries to 11 different customers, and we had revenue that came in from 18 different customers. The difference in that 7 is either commissioning and installation revenue or revenue from services on installed equipment that we did earlier. When you look at this map, as we come in, in future quarters, we're going to add more states. We're going to target to get to 25% here over the next few months. And then at the same time, we're going to add in a map of Europe as we ship into Germany and wait for the cap and floor program to close in the U.K. We're excited about what the team is doing here. We want to give a picture of how we operate. We've talked about the operating hours out in the field in the past, and that's really where we learned, and that's where Indensity came from. These customers on this map giving us feedback to enable us to deliver a product that's going to meet the future needs of the industry while working with Nathan and John and the teams to make what we have out in the field more rugged to be able to operate flawlessly and to give customers the performance that they require. Let's move to the next page and talk about some operational metrics. I want to start off in the upper left-hand side where we're looking at our quarterly revenue profile. If you go back to Q4 2024 and forward to Q2 of last year, you're looking at quarters that are basically growing 30%. That's basically taking our line, installing it, improving upon it and getting 30% throughput on the same asset base. Then you come into Q3 of 2025, where we started to bring bipolar manufacturing in, and you see a 2x step function from Q2 of '25 into Q2 -- Q3 of '25. Then we double it again, which is, again, bringing more of the bipolar manufacturing online. And by year-end, John will talk through that we achieved our 2-megawatt hour capacity coming out of the facility in Turtle Creek. On an annualized basis, we're up 7x, and our capacity will support the demand that we see. What's important here as we think about capacity management and as John walks through this and I think about this, and you take what John is going to talk about and combine that with what Nathan is going to talk about commercially is you're not running the factory at full capacity at any one point in time. You're creating capacity to be able to create the opportunity for the company to grow and deliver and building in a buffer to be able to manage and weather through the blips that you're going to see in any factory. So anybody that's worked in an industrial process knows that nothing goes perfect and you got to plan for that. And that's what we're building here to get to the stable production that I talked about earlier. We go to the bottom of the page, you're seeing a narrowing of the gap and improvement in margin. We're not at profitability yet, but we're on track. The company is structurally profitable. What we need to do now and what John will talk about is improve the efficiencies and the processes of how we operate the company. Thornhill and bringing our second line up and running is going to show us the full entitlement of how efficient we can be as a company. At the same time, you bring a lean mindset to what you do every day. That lean mindset tells you, I've got to get better in everything I do. There's waste in these numbers today. We know that. We know we have to get better. And when you take all that in and start thinking about driving cost out of our product, taking and becoming more efficient in how we build it, getting out in the field because productivity and profitability go beyond the factory doors, becoming more efficient in how we operate in the field, and proving out and getting installations up and running faster than what we planned, that's how we deliver on profitability. And we have a clear line of sight on how to do that. This is a profitable business when we execute to our capabilities, and that's what we're building right now. And density is a step function change in that, but Z3 Cube is a profitable product, and we will make that profitable. What Indensity does is it allows us to compete in a new way in the marketplace. It delivers better footprint density to customers. It allows us to build out capability faster. It makes it simpler to manufacture the product and Indensity gives us the ability to compete not only on price, but the ability to drive further cost out to deliver the profitability that we expect. I'm excited about the work that John is doing and Francis is doing, and I'm really excited about what Nathan is seeing out in the marketplace. And I'll turn it over to John now to start that off and then hand it off to Francis and Nathan. John Mehas: Thanks, Joe, and good morning, everyone. Great to be here with you all again this morning. Q4 was my first full quarter at Eos, and I'm going to speak candidly about where we are operationally. First, there's a real progress to acknowledge. We completed our subassembly automation, making our battery line fully automated. We closed 2025 with production records across all operations and delivered our fourth consecutive quarter of record revenue. 26 key suppliers supported this ramp to enable us to achieve our 2 gigawatt hour line capacity. That doesn't happen without a committed team doing a lot of things right. At the same time, we fell short of our operational targets, and that's on me. When we spoke last quarter, I felt confident in our ramp plan. We had strong early results and the excess capacity to deliver what we needed to hit our guidance. Ultimately, 3 very fixable issues prevented us from delivering our commitments. First, we had one isolated supplier nonperformance that cost us a week of production. We addressed it directly, working closely with our supplier to quickly identify root causes and corrective actions. We implemented better controls internally and at our suppliers. That specific issue is behind us. Second, the ability for the automated bipolar production to hit quality targets took longer than expected. That drove rework and lost revenue. We improved tooling, reduced variation in the automation process and tightened material specifications to stabilize bipolar production. We have also added laser detection to give us better visibility and control of any process variation. Third, our battery line downtime ran well above industry norms, the design intent of the line and our internal forecast. Best-in-class operations and our expectation is to run at roughly 10% equipment downtime. That's my expectation, and that's the expectation of our automation partners. As we push utilization higher throughout the year and ran the line for more hours, we were closer to the mid-30% range. Working closely with our automation partners, we addressed issues with our robotics, hardware, controls, maintenance schedules and spare parts. We have also improved our technical capability and strengthened our team to improve time to resolution. Downtime has improved significantly in Q1. This is a controllable lever, and we have a path to world-class performance. None of these were demand issues, none were structural. This was a significant ramp of first-generation automation designs. While the magnitude of the issues was unanticipated by me, the resulting learnings, actions and execution are my responsibility. Look, since I've been brought in, a major focus for me has been identifying single points of failure in the system. This was first-generation automation that was being run at high volumes for the first time. In some cases, you don't fully see those weaknesses until you stress the operation. We've now done that. It has allowed us to identify and address gaps in our automation, organization and operating system. We are systematically hardening the process to make sure these failures do not occur in the future. The results of our efforts have driven higher quality, repeatable and predictable operations in early Q1. The biggest structural risk today is a lack of redundancy. If our primary line goes down, production stops. That changes with Line 2. And as I said on the last call, we're making design changes in that line to further improve our performance. Line 2 is progressing well and is preparing for factory acceptance testing in Wisconsin. We've intentionally built redundancy into critical stations. Once operational, eliminates our single largest point of failure and gives us flexibility that we simply don't have today. We're also addressing efficiency. As I've mentioned before, today, materials travel across 3 floors and 2 buildings, over 2 miles from start to finish. That's not a cost-efficient design. With Line 2 and the Thornhill expansion, we're redesigning the layout around single-piece flow, significantly reducing material handling and complexity. As we work to achieve the entitlement for the line output, we have uncovered inefficiencies that result in longer end-to-end production times and higher labor costs to achieve that goal. We are fixing those challenges, and that will allow us to operate at a higher efficiency with a lower cost structure. We expect equipment to begin arriving in Q2 with fully automated production targeted in Q4. Let me close with this. 2025 was a year of heavy automation implementation, capacity expansion and rapid change. Day 1 is never perfect. My job is to turn new capability into repeatable, disciplined operations. We've identified the gaps. We've addressed the root causes, and we're building the redundancy and process rigor required to scale reliably from here. I'm confident in the path forward and confident in the team's ability to execute it. Let me turn this over to someone who's helped me get up to speed quickly, our CTO, Francis Richey. Francis Richey: Thanks, John. It's great to be joining the call today. I'm the Chief Technology Officer, and I've been with Eos for 11 years. I started at Eos when we were a 15-person company, and it's been a rewarding journey with an incredible team of scientists and engineers, developing the chemistry, battery, system and software over multiple product iterations. I'm a chemical engineer by training, and my passion is scaling and optimizing technology to build profitable products, particularly products utilizing electrochemistry. Throughout my time at Eos, the market environment has evolved significantly, and Eos has evolved along with the market. We started with an aqueous zinc-based battery. As our technology continued to advance, we found more efficient ways to configure our systems and implement better power electronics to control performance, most recently with the Eos Z3 Cube. Early customers simply wanted to buy a DC system of batteries, which they would integrate into larger AC systems. Now many want a full system where Eos provides batteries, software, controls, AC integration and site design, a complete project that can be easily installed and operated. Many of these storage solutions also require installation in an urban or suburban environment. For more than 2 years, we've operated Z3 systems in the field and tested them even longer in our Edison test facility, learning how these systems operate in extreme environments. We've operated in very cold climates and also in hot desert environments with high winds that create sand and dust that can impact system operation. Look, the field is the ultimate proving ground, and this has helped us to improve system resilience and reliability as well as our software and controls, which led to the launch of DawnOS. DawnOS enables customers to manage and optimize system performance with individual battery monitoring and control to provide improved operability. This is then where Indensity comes in. This is a product that we've codeveloped with our customers as we discuss their operating requirements and run load profiles in our Edison test facility. The same chemistry, same battery, same software and controls, different packaging and better performance. We're entering a new phase of growth and opportunity, one that differentiates Eos from any other commercially available battery energy storage solution. When we talk about Indensity as a differentiated product, we focus on 3 key elements: serviceability, cost and site energy density. The Indensity core significantly improves ease of serviceability. We took a page from the aviation industry and thought of an Indensity core like an aircraft engine that won't require on-wing service. Instead of disconnecting the entire system to service one piece of it, Indensity is designed for quick disconnect so that individual units can be safely serviced using a simple forklift, avoiding disruption of the entire system and allowing for uninterrupted operations. This is an industry-wide advantage of our solution as we can now service each 133-kilowat-thour Indensity core without needing a crane, whereas competitors usually require a crane and the loss of multiple megawatt hours of energy during service or site-wide power augmentation. The modular core design allows units to be stacked vertically as many as 12 units high, significantly improving site energy density and allowing us to serve customers in areas incumbent technology simply can't access, such as in densely populated space-constrained locations where safety is often a key element in decision-making. This new solution allows us to easily configure systems to customer energy and space requirements. This is an exciting time, and I've had the opportunity to lead Eos' evolution from cell testing to battery manufacturing to now providing battery energy storage systems integrated with advanced controls and software. I couldn't be more excited about the future and how our product meets the needs of our customers. Thanks, everyone. With that, I'll turn it over to Nathan. Nathan Kroeker: Thanks, Francis, and good morning, everybody. Let me start on the commercial front, where we had a very active fourth quarter. And I want to start by looking at the results. We ended the quarter with just over $701 million in backlog, booking nearly 1.1 gigawatt hours across 8 customers and 9 individual projects, representing a 9% sequential increase. During the quarter, we secured more than $240 million in new orders with a healthy diversification across commercial and industrial, distributed generation and front-of-the-meter utility scale applications. Now let me give you some background on 3 of these orders that highlight the operating flexibility of our technology and how we can work across the energy value chain in different customer use cases. First of all, we signed a 50-megawatt hour master supply agreement with a developer in the Midwest to deliver projects that are supported by Commonwealth Edison's Distributed Generation rebate program. This program provides a $250 per kilowatt hour incentive for new energy storage systems, and we have already executed the first purchase order under this agreement with delivery being scheduled for later this year. Now moving on to the second one I want to highlight and just as important, we signed 2 initial projects for systems to be installed at hotels in Florida with a developer that has a robust pipeline of additional projects, and we expect additional projects to materialize over the next 12 to 18 months. And the last one I want to highlight, we secured an order from a global power company that is a focused renewable and energy storage platform to deliver a Z3 system to be installed at a national lab for integration testing. And we are actively working on large-scale opportunities with this customer, so this is a very meaningful project to show the Z3 performance capabilities. All 3 of these projects highlight how we are building long-term partnerships that will scale into larger, more meaningful growth opportunities in the future. Now turning our attention to the broader pipeline. We ended the quarter with a commercial pipeline of $23.6 billion, representing approximately 99 gigawatt hours of opportunity, up 4% sequentially and 64% year-over-year. Hyperscaler and AI-related projects remain a primary growth driver as we see customers looking for firm dispatchable capacity and behind-the-meter load smoothing solutions. Leads specific to data centers increased by 50% quarter-over-quarter, while our active data center pipeline grew by more than 40%. Many of these opportunities are specifically designed for the Indensity solution. As disclosed in our public filings, Eos has been submitted for a 300-megawatt 8-hour project in the Brooklyn Navy Yard under NYSERDA's Bulk Storage procurement program. We also have another project that was submitted under the same Bulk Storage program in ConEd Zone K with the customer that I highlighted earlier that is testing our product at the National Lab. From an application perspective, we are also seeing more opportunities shift toward colocation with generation assets, including both natural gas and renewables. These applications typically require longer discharge durations. And as a result of this shift, we are now seeing 63% of our pipeline consisting of 8-hour or longer systems. I want to highlight PJM for a moment, where we've seen recent capacity market reforms with sustained elevated clearing prices that are improving the economics for long-duration storage. This aligns very well with our framework agreement that we have in place with Talen. In addition, Bimergen, a long-term partner that is publicly traded on the New York Stock Exchange, announced their technical selection of the Z3 system for the 400-megawatt hour Redbird project in ERCOT. Following this project, there is an additional 2 gigawatts of project development pipeline that spans ERCOT, PJM and MISO that we are currently working on. Overall, we are seeing very strong near-term backlog growth, combined with sustained long-term pipeline expansion, both of which are positioning the company very well as demand for integrated long-duration storage solutions continues to accelerate. Now shifting over to the financials. We have a lot to be proud of. And as Joe and John mentioned earlier, we are focused on the work ahead of us that will deliver profitable growth. Now let's step back and look at 2025. It was a year full of real operational progress. We exited the year having full automated battery module manufacturing. We've implemented continuous process improvements. We launched DawnOS, and we executed multiple product component cutovers, all while scaling production significantly. These foundational moves are now clearly translating into financial performance. We delivered our fourth consecutive quarter of record revenue and an additional consecutive quarter of gross margin improvement as production volumes ramped and subassembly automation went into production. In the fourth quarter, we generated $58 million in revenue, nearly double Q3. We exceeded the combined revenue of the first 3 quarters of 2025 as well as all prior year revenue combined since the company went public. We delivered $114.2 million in full year revenue, more than 7x year-over-year growth. As John highlighted earlier, subassembly automation represents a meaningful inflection point in our manufacturing strategy. It expands available capacity, it improves product consistency and quality, and it enhances labor productivity, ultimately lowering overall unit costs. While this is only beginning to contribute late in Q3, what we saw in Q4 reinforces our confidence in how this business scales. As volumes increase, we are seeing improved fixed cost absorption, driving continued margin improvement. Gross loss for the year was $143.8 million, a 408 percentage point margin improvement year-over-year, driven by significantly higher production volumes and continued product cost out. This quarter, we introduced a new non-GAAP metric, adjusted gross profit. This excludes stock-based compensation and depreciation and amortization, and we believe this provides a clearer view of core operating performance and better aligns us with industry peers. And on that basis, adjusted gross loss for the year was $128.5 million. 2025 operating expenses came in at $115.4 million, up 26% year-over-year, reflecting the targeted investments to support scaling initiatives and further enhanced product solutions. Throughout the year we've invested in engineering, launched DawnOS and Indensity, we closed multiple financing transactions, all while bringing in high-impact new talent into the organization. Of the $115 million in OpEx, $25 million or 22% was comprised of noncash items, primarily driven by stock-based compensation and depreciation and amortization. The net loss for the year was $969.6 million compared to $685.9 million in the prior year. Importantly, these results included $746.8 million of noncash impacts related to the fair value accounting adjustments, refinancing and other nonoperating items. The largest driver of the loss was from the 135% year-over-year increase in our stock price, which resulted in mark-to-market revaluations of both the warrants and the derivatives. Now as our share price continues to move, this line item will continue to fluctuate, and it is not tied to company operations. And with that, we finished 2025 with an adjusted EBITDA loss of $219.1 million, showing an 812-point margin improvement. While up year-over-year in absolute dollars, the margin improvement and the 632% revenue growth demonstrate improving unit economics and operating leverage as we continue to scale the business. These gains were driven primarily by the operational efficiencies from increased manufacturing capacity and from higher production volumes. Now turning to cash. We ended the year with just under $625 million worth of cash on the balance sheet, the strongest cash position in the company's history. Over the course of the year, we were very intentional about strengthening our balance sheet, and that really culminated with the refinancing that we completed in November, where we retired 80% of our existing 2030 converts, we reduced our interest rate by 500 basis points, and we added $474 million in cash. And we were able to free up an additional $11.5 million in restricted cash. Additionally, with the exercise of our public warrants, we also generated approximately $80 million in gross proceeds. And as a result of all these actions and our current company outlook, we have removed the going concern language that we have had in our filings in prior years. This is a significant milestone that reflects the strength of our cash position and the continued improvements in our underlying operations. Now taken together, 2025 was a foundational year for the business. We expanded customer relationships. We advanced key partnerships. We've scaled our production. We've implemented automation. We've improved our margins, and we've launched both a new software and a product configuration that builds on our existing technology while addressing the evolving market needs. While there's still a lot of work ahead of us, the foundation that we have built positions us well for continued growth, improved profitability and long-term value creation. And with that, I'm going to turn the call over to Joe. Joseph Mastrangelo: Thanks, Nathan. Let me wrap up with our outlook on 2026 as we initiate guidance on revenue. You can see the progression of our guidance from 7x. If you take the midpoint of the guidance range in 2026, it's 3x what we did in 2025. We feel confident about the guidance that we're giving, given what John and Francis have talked about. And when you think about this guidance, think of it this way, the $300 million is coming from backlog. And the range to the $400 million is tied to some of the bigger projects that we talked about as they go through the normal approval processes with the grid operators where our customers will be installing projects. We're excited about the things that you see, the NYSERDA projects that Nathan talked about, working with Talen in PJM, things that we're seeing as far as states like Virginia, ERCOT growth, data center growth. We feel confident that we'll begin shipping Indensity as we get into the second half, later part of this year. And that's how we go from the $300 million to $400 million. As we go through the year, we'll give updates on where we are against that progress. And when you also think about this, one other thing that we've never given official guidance on what we've talked about a few times in earnings, we talked about becoming gross margin positive in Q1. Unfortunately, with where we wound up in volume last year, our material costs pushed out into 1Q. That's going to delay our path to profitability as we get into 2026. But we feel very confident on the projects that Francis is bringing from a technology standpoint that John is driving from a productivity and cost out -- material cost-out standpoint and Nathan delivering better efficiency out in the field that we will be gross margin positive in the second half of 2026. And we feel very confident on the guide that we're giving on the range of $300 million to $400 million. So with that, I want to thank everybody for listening today. Joseph Mastrangelo: And now we'll go to the Q&A portion, where we'll start off with some of our questions that came in over the [ SAE ] tool from our retail shareholder base. Okay. First one, "As part of Project AMAZE's 8 gigawatt hour annual production targets, where does EOS expect to be at the end of 2026 for annualized manufacturing nameplate capacity?" Right now, we're targeting 4 gigawatt hours. That's in line with the customer requirements that we have. We really want to bring -- position Thornhill for rapid expansion. As we think about how we want to do this, the goal here is to be able to bring capacity online within the window of customer demand. And that's what John is trying to do, but it's not just the capacity of the equipment that we're installing, it's other portions of the overall supply chain. I'll turn it over to John here to add some comments. But the target for the year is 4 gigawatt hours of nameplate capacity coming out of 2026. That matches with where we see our backlog. And then from there, we'll be able to add capacity as required. I don't know, John, if you have anything you want to add. John Mehas: Yes. Over the last few months, we've developed multiple automation partners for automation equipment to shrink lead times. We've developed a national building partner that can deliver a building in a short period of time that's in line with our automation commitments from an implementation standpoint. And then we've worked with our suppliers to understand where their inflection points are, where they have to add additional capacity and what their time lines are so that I can stay out ahead of Nathan on from an order standpoint. Joseph Mastrangelo: And I would just add at the end here before we go to the next question. Look, we're not out chasing volume. We're building capability. We're building capability to reliably deliver. When you flip the switch in your home, you want the lights to come on and we want to deliver a product that enables us to do that. So we're going to be very disciplined on how we do that for delivering for customers and also disciplined about how we think about our working capital and cash balances as we also expand. If I move to the second question, "What recent operational metrics and achievements validate achieving your Q1 2026 positive gross margin target? How much of the margin expansion is dependent on the Indensity transition versus efficiency gains on the existing Z3 module automation line?" I think we talked -- I talked about the first part of that question on the last page when we issued guidance. Look, we feel like underlying this is a structurally profitable business that needs to get better at how it executes day by day, and we have a very clear path on how we want to do that. And we've got the leaders and the capability from a team standpoint and the equipment to be able to do that. I think the pages that John talked about and the operational page I had in there shows that structural profitability, we need to just execute to get there. The Z3 Cube is a profitable product. The Indensity core is adding to provide better performance to customers, allowing us to manufacture faster and allowing us to compete on price point head-to-head with any technology out in the market. I don't know, John, if you want to add anything to that as far as how you see profitability evolving? John Mehas: Yes. If I look at it from a lean methodology, all aspects of our operations have waste and opportunity for improvement. So I look at -- I talked earlier about downtime. So reducing downtime and increasing fixed asset utilization and labor utilization. Talked about yields, so improving the yields and reducing scrap. If I look at materials, we've got several projects that are going to reduce material costs, but not only reduce material costs, but also reduce assembly time and manufacturing time. We continue to look at ways to increase run rates, look at ways to increase efficiency. And then as we get into Thornhill, we'll have an optimized cost perspective from a material handling standpoint. We're literally going from 2 miles down to 1,000 feet. So if you consider all the material handling that goes into there, there's a significant opportunity to reduce cost in just that one item. Joseph Mastrangelo: And I think just closing out, like John brings up a great point on Thornhill. Over time, we're going to want to consolidate the footprint into one location to capture all those synergies, and we'll be -- that will be part of the plan as we move forward and think about expanding. With that, we'll wrap up with the SAE questions. And operator, we'll turn it over to our sell side for any Q&A. Operator: [Operator Instructions] Our first question comes from the line of Stephen Gengaro of Stifel. Stephen Gengaro: My first question is on the guidance and maybe 2 parts. One is you, a couple of months ago you had a pretty high expectation for the fourth quarter. And clearly you fell short. And now we're looking at a pretty big ramp in '26. How do you think about the components of guidance and sort of derisking the parameters you put out versus guidance historically? Joseph Mastrangelo: Yes, Stephen, thanks for the question. First, you look at the range, as I talked about when we talked about the guidance in and of itself, we're looking at the improvements that John has implemented coming out of fourth quarter, looking at the backlog of orders that we have to get to the bottom end of the range, then looking at the opportunities that we're working on, the fact that we're bringing a new line in to give us the top end of the range. But we tried to really look at -- we tried to really look at how we can change our discipline as a company to not have happened what happened in 2025. The range is $100 million, the midpoint is $350 million. What hasn't changed about the company is the demand that's out there for the product. We're trying to do in 2026 is better control our scale, get the manufacturing throughput quality and margin expansion that we need and really look at like where we think we can land without going for like a degree of difficulty that's a 10, but coming in with something that we can manage to over time. Stephen Gengaro: Okay. Great. That's helpful. And then just -- I imagine this is correct, but when we think about the quarterly growth, I mean, I would imagine that 1Q would be above 4Q, but the low point and then escalate throughout the year. Is that a reasonable pattern? Joseph Mastrangelo: Yes. Well, look, Stephen, so part of what we have coming in -- and we don't give quarterly guidance, but from a standpoint of coming into the year, we're coming off a high point. We're delivering to customer schedules. I think we'll be around the fourth quarter number as we look at like what we have to deliver to customers, and there's some -- there's also commissioning revenue in there as well and then from there sequentially grow. Operator: Our next question comes from the line of Julien Dumoulin-Smith of Jefferies. Julien Dumoulin-Smith: Quick question. Just going back to the comment about the $300 million to $400 million range. Can you guys comment a little bit about like what exactly those bigger projects that you're talking about are? Like which ones in particular seem particularly right, right, again, just to maybe track against the milestones this year and what would materialize? And also, if you can speak a little bit against, you've got a materially larger backlog in aggregate. What's the duration of that backlog when you think about it, just given that, call it, $300 million of it is burning off this year, if you will? Joseph Mastrangelo: Yes, Julien, great question. Look, I think we go back on the material large stuff. Look, I think we all know the industry needs power, needs power quickly. But at the same time, we still operate in a framework where approvals and queues are long. So we're kind of hedging that. But like Nathan talked about 2 large projects in NYSERDA that when approved by NYSERDA as part of their Bulk Storage buy would go into delivery almost immediately. So like that's 2 of them in there. We've talked about PJM and what we're doing with Talen. There's other projects that we have that we haven't discussed with large hyperscalers that could potentially come in. And then Nathan talked about what appears to be -- when you look on the surface, they look like small projects, but they're small projects with a big pipeline of opportunity that you deliver and grow and continue to deliver. And we just got to work through that. We'll keep everybody updated on that as we move forward from there. Julien Dumoulin-Smith: Got it. And then just if I can follow up there. The defense space seems intriguing here. Can you comment about that end market and the opportunity you see there? What does the project look like in that space, size, duration? And just even elaborate a little bit more about what you guys were talking about a second ago in the timing of seeing some of that come to fruition. Again, how -- what does that look like? Joseph Mastrangelo: So defense, like I think you start off with NDAA, right, which is how the Defense Department of War purchases. In the NDAA, they're being told to buy American products. And I think we have that American product. As we go through that, there's a lot of things we have to go through as far as working with different branches of the government to get approval. I think a big thing that helps accelerate us is the due diligence process that we went through with the Department of Energy to get our loan. But like we're working through across all branches of the military to see what the needs are. And like what we're looking at is what do they need and they also have -- there's also large power growth that they have and how do we meet those needs and then we go through and show them how the product is. But also as you work with the military, there's things that we're doing to make sure that we hit all their requirements because we want to hit the ground running. But that's something that we'll continue to work on, and we are working on, and we do spend a significant amount of time down in Washington walking everyone through what the technology is capable of. Julien Dumoulin-Smith: Got it. Excellent. And then lastly, if I could just ask, just given where you are coming out for '26, how do you think about the ramp of Line 3 and 4, right? So how do you think about when and the timing and scaling of that, right? Obviously, you got Line 1 and now Line 2 here. But 3, 4, it's more of a '27 question, right? Joseph Mastrangelo: Yes. And I think, Julien, like this goes back to disciplined execution, right? It's a great question, right? So John is taking us into a new building. The new building changes the game from a throughput efficiency and cost. Turtle Creek is a fully functioning factory that's up at 2 gigawatt hours of production. It hit its nameplate capacity coming out of 2025. But if you have a lean mindset, you're constantly looking at how to get things better, how to improve on things. That goes with how you operate your manufacturing, but also how you implement capacity expansion. So what we've told John is come up with a plan that we can execute and implement lines within the window of when a customer orders to when they ship. So as things come in, we'll be able to do that. What John has done in his time -- not only did he increase output 80% in the fourth quarter, if you look at quarter-over-quarter sequential manufacturing output, he also went in and revamped our automation partnerships, got us in with Tier 1 automation providers, broke up how we were doing the different pieces of that and positioned those suppliers to be able to come up with a framework agreement approach with them where we can put a signal into them and they can deliver faster than what we're doing on Line 2 today. Line 2 today, part of what's happening there is it's a new building. And there's a lot of work that we got to go through, and we want to make sure that we get that right and we get that ramp right and the transition and balancing between the 2 facilities. Operator: Our next question comes from the line of Mark Strouse of JPMorgan. Mark W. Strouse: Just curious if you can comment on the competitive environment that you're seeing recently. Obviously, you guys are making good progress with your backlog, but there's one of your publicly listed peers that's traditionally in lithium-ion, they have really been talking up their long-duration pipeline in the last couple of quarters. There was a very large project, long-duration project up in Minnesota that just recently got announced. Just kind of broadly speaking, I know those are completely different technologies in both of those cases, but just kind of broadly speaking about the competitive environment would be great. Joseph Mastrangelo: Mark, I think, first off, it points to what we're showing in our backlog about longer duration discharges coming to fruition. I think it's great to have other companies that are doing it because it just goes to show that what we've been talking about for 5 years, the market is now there. I've said this many times, like there's many different use cases, and I always draw the correlation of energy storage is going to look like gas turbine technology over time. You have different types of gas turbines that do different things with different efficiency points. So I think what was announced in Minnesota, delivery in 2028 is a great example of people looking for longer duration energy storage, longer than what we do. At the same time, Nathan showed like our pipeline is up by -- above 40% for longer duration. And we -- and it has now become 40% of our pipeline, sorry, I misspoke, but like it's becoming more and more. And I think like established players, there's a market out there for that product. I think we've come up with the work that Francis has done and the team, we've come up with a solution that delivers in that 4- to 16-hour spot, which is going to be very important. And look, we've been running load profiles here in our test facility in Edison, New Jersey using the load profiles of data centers. And our technology matches up great with that. So we're encouraged by that, but there's a lot of demand out there, and I think it's great. There's other players. It's going to be a competitive marketplace, and I think we have a product that competes. Operator: Our next question comes from the line of Craig Shere of Tuohy Brothers Investment Research. Craig Shere: So first, can you opine on the potential margin deltas, gross margin deltas between U.S. and international orders? Does American Made help in any way internationally to the degree some trading partners want to right-size trade balances on a national level? And can you give some color on the time line for that foreign power company national lab testing and the level of prospective order flow should they deem you're having the most optimal solution? Joseph Mastrangelo: Yes, Craig, just a couple of things inside of that. Like I think where we're seeing interest in our product internationally has less to do with politics and more to do with performance. I think people are looking at what the product delivers and less about trade balances. I think having a product where we go through and talk about the intrinsic value of it is what's attracting our customers, whether that's domestic or international. I think we're starting to plant seeds starting off in Germany. And obviously, we have a big pipeline of opportunity in the U.K. that Nathan talked about. Just on your last point here, like the customer that Nathan talked about is a global utility that's doing testing in the United States at a lab that is tied to a project for the NYSERDA program. So like we're going through that -- and by the way, that testing is great. Like we love doing that because it gives us data to show people about how the product performs and put this through its paces. And that's where doing stuff like this, that's what brings out Indensity and improved performance on the product that we have out in the field. Craig Shere: And would one assume that international sales are going to be slightly lower gross margin? Joseph Mastrangelo: No, I wouldn't assume that. Craig Shere: Okay. And my last question, and I apologize if my quick math is incorrect, but it looks like you burned through maybe $65.75 million in operating cash flow before working capital changes in the quarter. Thoughts about tempering that bleed as you move into positive gross margin in the second half of '26. Joseph Mastrangelo: Yes. Look, look, our goal, as Nathan talked about, like we've capitalized the company. We are focused on being good stewards of that capital. I think as you look at that, one of the reasons why we removed the going concern for the company this quarter is that we see a trajectory to be able to manage the company strategically and for the long term. And then obviously, like there was a ramp into a build plan that then levelizes, but then we'll ramp again. So we manage through that. But like as we look at where the company is, we have cash to be able to grow it over the long term. Operator: Our next question comes from the line of Jeff Osborne of TD Cowen. Jeffrey Osborne: Just a couple of quick ones. I think last quarter you mentioned that the yield on the bipolar line that started, I believe, in July was 98%. I was wondering what the fabrication yields were in the fourth quarter. Joseph Mastrangelo: Go ahead. Yes, John, take that one. John Mehas: So the bipolar yields in the [Audio Gap] growing from there. So we're basically within January hitting the target. We've reduced that significantly, and we'll continue to do so. And we did not anticipate that with the automation. The goal for that automation is 97% first pass yield, and we're well on our way there. Jeffrey Osborne: Perfect. And then can you just touch on -- spend a few seconds on what sort of field performance has been, safety, reliability, commissioning schedules relative to expectations? Operator: We're not hearing a response. [Technical Difficulty] Joseph Mastrangelo: Yes, sorry about that. Don't know what happened. Operator: Okay. Jeff, did you want to repeat your question in case they did not hear that. Jeffrey Osborne: Yes, sure thing. I was asking about, can you just spend a few seconds on sort of field reliability for units that have been shipped over the past 6 to 9 months, what commissioning cadence has been, safety issues, installation timing, et cetera, just as we think about that trend over the past 6 months or so as it relates to the guidance that you've given. I just want to understand what that lag is in reliability and uptime has been. Joseph Mastrangelo: Yes. So Jeff, I don't know if you heard -- I don't know where we dropped off before. Look, we continue to go through and execute on the field, bringing a new product online, operating -- we were doing our operations meeting this morning and continue to see good cycles out in the field, as Francis talked about. We continue to learn on each cycle and incorporate those things back into the installed base from a commissioning cadence standpoint. It's a mix and cadence of things where there's permitting challenges, there's bringing the site up to speed, there's getting our stuff up and running, there's integrating everything, and we work through that with the customer on a customer-by-customer basis. But if you go back to that page I showed, we shipped to 10 customers, recognized revenue on 18 customers, and that ties back to the commissioning that we have. Jeffrey Osborne: Got it. And just very quickly, are you capturing higher price as the duration use case extends out to 6, 8 hours and beyond? Or is pricing consistent with a sub-4 hour relative to longer duration? Joseph Mastrangelo: Well, I mean, Jeff, I think it all depends on how you look at that. I think when you look at the value proposition of Eos and you look at our ASP in the backlog, the ASP in the backlog is higher than what you would expect for a shorter duration product. What we do is we sell on a levelized cost of storage basis, which is a little bit higher on the CapEx side, but a lot lower on the operating cost side, and that's what the customers evaluate to make their purchasing decision. Operator: I am showing no further questions at this time. I would now like to turn it back to CEO, Joe Mastrangelo, for closing remarks. Joseph Mastrangelo: Yes. Thanks, everyone. And again, thanks for the question and the continued engagement. A couple of points I want to close with. First, demand for long duration, domestically sourced energy storage is not a question. The grid is changing. The load growth is real, whether it's AI electrification, industrial reshoring, these are structural changes to the power grid in the United States, and they're not cyclical. The market is moving towards solutions that match what we bring to the market, and that's how we've positioned Eos for the long term. Second, 2025 was building a foundation, strengthening our balance sheet, scaling manufacturing, standardizing our product architecture, improving operational cadence. We delivered great revenue growth. It reflects the progress that we've made. It's not linear yet, but it's directional and it's improving. Third, 2026 is a year where we have to show disciplined execution. Our guidance reflects what we believe we control as we sit here today, and we'll keep everybody updated as we go through the year and where we wind up. I feel good about where the team is positioned. And as execution improves, predictability improves. So we know we've got -- that's what -- that's ultimately where we need to focus on, and that is where the team is focused on a day-to-day basis. And then profitability for the company, look, it's a scaling equation. Automation how we move material, efficiency, bring a lean mindset, finding waste, eliminating waste, resetting it, going back and doing it again and again and again, you see the sequential improvement in margin that we need to continue until we become margin profitable, and that's the goal of the company for -- to deliver long-term value to both shareholders and customers. Look, we strengthened our liquidity. It helps us operate the company more strategically. It gives us runway to be able to execute. Eos is an infrastructure business, right? Infrastructure businesses are built on discipline, consistency and operational trust, that's what we're building, and that's what we have to show and deliver. We appreciate the questions and the focus and really the attention to Eos across the board of all of our stakeholders. And we look forward to demonstrating this continued improvement in progress quarter-over-quarter as we build a great energy infrastructure company. Thanks for listening today. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Heron Therapeutics Q4 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Melissa Jarel, Executive Director of Legal. Please go ahead. Melissa Jarel: Thank you, operator, and hello, everyone. Thank you for joining us on the Heron Therapeutics conference call today to discuss the company's financial results for the fourth quarter and year ended December 31, 2025. With me today from Heron are Craig Collard, Chief Executive Officer; Ira Duarte, Executive Vice President and Chief Financial Officer; Bill Forbes, Executive Vice President and Chief Development Officer; Mark Hensley, Chief Operating Officer; and Kevin Warner, Senior Vice President, Medical Affairs, Strategy and Engagement. For those of you participating via conference call, slides are made available via webcast and can also be accessed via the Investor Relations page of our website following the conclusion of today's call. Before we begin, let me quickly remind you that during the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and future performance, all of which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. These statements are based on judgment and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call and webcast are described in the safe harbor statement in today's press release and in Heron's public periodic filings with the SEC. Except as required by law, Heron assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. And with that, I would now like to turn the call over to Craig Collard, Chief Executive Officer of Heron. Craig Collard: Thanks, Melissa. Hello, everyone, and welcome to the Heron Therapeutics Fourth Quarter and Full Year 2025 Earnings Call. Today, we're thrilled to share our financial results and provide commercial updates on our business. I'd like to begin by highlighting several key accomplishments from the quarter and the full year 2025. One of the most important was the successful completion of our financing. This issue had been an overhang on the company for some time and eliminating it represents a meaningful derisking event. With a solid capital structure now in place, management can concentrate fully on commercial execution, product expansion and delivering sustained growth. Beyond the successful financing, team Heron delivered strong operational and financial performance in the fourth quarter and for the full year 2025. For the full year, we generated approximately $155 million in total net revenues and delivered adjusted EBITDA of $14.7 million, exceeding our previously communicated guidance range of $9 million to $13 million. Gross margin for this year was approximately 73%, reflecting continued improvements in cost discipline and product mix. Turning to our Acute Care portfolio. We executed several strategic initiatives in 2025 that strengthened our commercial foundation and drove meaningful acceleration heading into year-end. These included the launch of the CrossLink IGNITE program, an incentive-based initiative designed to enhance distributor engagement, the introduction of the vial access needle or VAN, and the implementation of a new J-Code for ZYNRELEF, which improves reimbursement clarity and supports broader hospital adoption. For APONVIE, we established a dedicated sales team known as the IBM group focused exclusively on APONVIE and CINVANTI in the hospital setting. Importantly, APONVIE was also included in the newly released Fifth Consensus Guidelines for the management of PONV, further validating its clinical value and bolstering long-term utilization. Throughout 2025, we communicated our expectation for an inflection in Acute Care performance in late Q3 or early Q4. I'm pleased to report that this materialized ahead of our internal expectations. In Q4, ZYNRELEF delivered 48% net revenue growth compared to Q4 of 2024, while APONVIE grew 97% over the same period. Altogether, our Acute Care franchise increased more than 57% year-over-year in the quarter. These results confirm that the strategic actions we implemented in 2025 are driving sustained momentum across the portfolio. With stronger commercial infrastructure, improved reimbursement pathways and rising clinical adoption, we believe we are well positioned to continue this trajectory as we move into 2026. As we continue to see a positive shift in our Acute Care product growth, our strategy beginning in 2026 and beyond is to accelerate the expansion of our commercial team in key markets across the country. These priority geographies offer strong success indicators, robust market access, favorable reimbursement dynamics, established cross-link relationships and market characteristics similar to our highest performing territories. By concentrating our investments in areas where foundational success factors already exist, we can scale more efficiently and maximize near-term commercial productivity. This approach is designed to drive meaningful growth in top line revenue. In light of these opportunities, we are increasing our commercial investments, which may temporarily moderate EBITDA growth. We believe these investments are warranted given the compelling long-term return profile. Expanding coverage in markets where we already have traction allows us to pull forward revenue, accelerate market penetration and unlock a much larger growth trajectory in the out years. For investors, the key takeaway is that disciplined targeted commercial deployment now positions the company for outsized revenue acceleration, enhanced operating leverage and a substantially stronger enterprise value as we capture a greater share of high-opportunity Acute Care markets. On the development front, we continue to advance the prefilled syringe or PFS presentation for ZYNRELEF. Registration batches were placed on stability in Q4 of last year, and we will need to complete 12 months of stability testing before we can file. Assuming a standard 4- to 6-month regulatory review, we anticipate a potential approval in mid- to late 2027. Moving on to Oncology. We continue to deliver solid performance with CINVANTI despite increased competitive pressure. For the full year 2025, the Oncology franchise generated just over $105 million in net revenue, representing a modest 7.8% decline compared to 2024. Importantly, the majority of this decline is attributable to SUSTOL as we continue the planned wind down of that product throughout 2026. CINVANTI itself has remained resilient, demonstrating strong customer loyalty and continued demand even in a more competitive landscape. Before I turn things over to Mark to cover our commercial performance, I want to take a moment to recognize the entire Heron team. The progress we made in 2025 was only possible because of the hard work, commitment and resilience demonstrated across the organization. From our commercial teams driving execution in the field to our manufacturing, R&D, regulatory and corporate functions supporting every aspect of our strategy, your dedication is reflected in the results we delivered this year. Investors often hear about strategy, portfolio decisions and financial performance, but behind all of that is a group of people who show up every day with focus, urgency and a belief in the mission of Heron. I'm incredibly proud of what we accomplished together in 2025, and I'm confident that with this team, we are well positioned to carry that momentum into 2026 and beyond. To everyone at Heron, thank you for your continued effort, your commitment to patients and your unwavering drive to deliver results. Go ahead, Mark. Mark Hensley: Thanks, Craig. I'll start with Acute Care, where we finished the year with clear momentum, and then I'll close with Oncology Supportive Care. Moving now to Slide 6. Acute Care net sales were $16.3 million in the fourth quarter, up from $12.3 million in the third quarter, an increase of about 33%. That quarter-over-quarter increase was driven primarily by ZYNRELEF. ZYNRELEF net sales increased to $12.5 million from $9.3 million in the third quarter. APONVIE net sales also increased to $3.8 million from $3 million. On a year-over-year basis, ZYNRELEF net revenue grew 48% and APONVIE grew 97%. Overall, we're encouraged by the exit rate and the momentum heading into 2026. While we can see normal quarter-to-quarter variability early in the year, we remain focused on execution and expect performance to build as the year progresses. Now let's talk about what's behind ZYNRELEF's quarter-over-quarter momentum. A big driver was sharper distributor execution. We launched the CrossLink IGNITE program in July of 2025, and we saw the benefit of that increased focus in the fourth quarter. Based on that performance, we decided to continue the program into 2026 and expanded the number of target accounts CrossLink is focused on. In parallel, we reduced friction for hospitals and ASCs. We completed the rollout of the vial access needle, which improves preparation and handling, and we have a permanent J-Code, J0668, which helps streamline reimbursement. More broadly, we continue to see reimbursement becoming more straightforward as hospitals and ASCs gain familiarity with coding and the evolving post-op pain reimbursement environment, including the NOPAIN Act. And looking ahead, we continue development of the proposed prefilled syringe presentation. If successful, we are targeting FDA approval in mid- to late 2027. Overall, the story is consistent, more accounts adopting, fewer barriers to continued use and a more repeatable process that supports continued growth over time. Next is APONVIE, where we're building a similar pattern of expanding adoption in hospitals. Demand units grew 101% year-over-year. Ordering accounts continue to expand as well. Operationally, we launched the dedicated APONVIE sales team on July 1, focused on high potential hospital accounts. This quarter, we are also announcing a permanent product-specific J-Code, J8502, which supports reimbursement clarity. And importantly, APONVIE is now included in the newly released Fifth Consensus Guidelines for the management of PONV. The way we think about it is straightforward. Guideline inclusion and permanent coding reduce friction for hospitals. They also support education around multimodal prophylaxis and longer-acting coverage. We expect that to support continued adoption over time. Finally, I'll close with Oncology Supportive Care, which remains an important foundation for the company. Oncology Supportive Care net sales were $24.2 million in the quarter. Year-over-year, Oncology was lower in the quarter, largely reflecting the ongoing decline in SUSTOL. CINVANTI remains the anchor of the franchise. And for CINVANTI, we are focused on driving hospital demand while managing expected pricing dynamics on the clinic side. And APONVIE and CINVANTI increasingly benefit from the same hospital relationships. So as we deepen anesthesia and pharmacy engagement, we often see broader franchise pull-through over time. The overall point is that oncology continues to provide a stable revenue base even as we manage expected pricing and competitive dynamics. To wrap up, we exited 2025 with clear momentum in Acute Care. ZYNRELEF drove the quarter-over-quarter increase, supported by tighter execution, workflow simplification, distributor alignment through the CrossLink IGNITE program and reimbursement clarity. APONVIE continued to expand hospital adoption, and we believe permanent coding and new guideline inclusion support continued progress over time. Oncology Supportive Care remains a stable base as we manage pricing and competitive dynamics. As we look into 2026, our focus is to keep scaling what's working. With the playbook now in place, we plan to begin adding field capacity midyear, targeted to priority geographies where we already see strong access, reimbursement and distributor traction. With that, I'll turn it over to Ira now to walk through the financials. Ira Duarte: Thank you, Mark. Our financial performance in 2025 underscores the meaningful progress Heron continues to make in transforming its commercial trajectory while maintaining strong financial discipline. Total net product sales for 2025 reached $154.9 million, an increase over 2024, driven primarily by the exceptional performance of our lead product, ZYNRELEF, which delivered 48% year-over-year revenue growth in the fourth quarter alone. Even more importantly, we continue to shift our product mix towards our higher-growth assets while maintaining strong and consistent gross margins. This acceleration strengthen our confidence in the underlying demand trends and the expanding adoption curve across our Acute Care franchise. At the same time, we achieved this growth while maintaining EBITDA profitability, delivering full year adjusted EBITDA of $14.7 million, more than doubling the prior year's performance and beating full year 2025 guidance. This marks an important milestone. Heron is demonstrating the ability to grow revenue at a meaningful rate without sacrificing financial discipline. As we move into 2026, we view this as a pivotal year. The commercial inflection we've began to see in Q4 2025 is continuing to build, and we intend to lean into that momentum. Our strategy is to remain EBITDA positive in 2026 while making targeted commercial investments that position ZYNRELEF and the broader portfolio for even stronger growth in the years ahead. These investments may temper near-term EBITDA expansion, but they are deliberate and designed to accelerate our path towards sustained revenue growth and free cash flow generation in 2027. Importantly, last year's refinancing has eliminated the capital structure overhang that previously constrained the business and has provided Heron with the financial flexibility needed to execute this next phase of growth. With a healthy balance sheet and expanding commercial footprint and strong product level momentum, we are entering 2026 with clarity, confidence and a strategic plan that positions the company for long-term value creation. Our 2026 guidance reflects this confidence, net product sales of $173 million to $183 million and adjusted EBITDA of $10 million to $20 million, demonstrating continued profitability through a year of commercial expansions. And now we would like to open the call for any questions. Operator: [Operator Instructions] Our first question comes from the line of Serge Belanger from Needham. Serge Belanger: Regarding the new guidance for 2026, can you just maybe highlight your expectations for the CINV franchise, which I guess now is mostly almost 95% or so CINVANTI? And then regarding the NOPAIN Act, should we still expect that as a tailwind for ZYNRELEF? I noticed that I don't think it was even mentioned on the slides of growth drivers, but is this still something that could help the franchise going forward? Craig Collard: Thanks, Serge. Regarding the CINV franchise, yes, we continue to think that we're going to -- we'll grow in unit volume. Again, with the IBM team now out promoting that as well, we should get some volume growth on the hospital side. But at the same time, we're going to get some price erosion. So -- but sales should stay relatively flat throughout the year. Regarding the NOPAIN Act, I'll turn it over to Mark Hensley. Mark Hensley: Yes. So certainly, I think it's a great question. And we believe the NOPAIN Act will continue to be certainly very beneficial to us. I think most of 2025 was spent educating providers on the NOPAIN Act. So certainly, we believe that to be a strong tailwind as we go forward. That, combined with the permanent J-Code for ZYNRELEF, certainly will remove friction for our institutions. Operator: Our next question comes from the line of Brandon Folkes from H.C. Wainwright. Brandon Folkes: Congrats on all the progress. Maybe just on the VAN to start, can you just tell us where you are in terms of sort of P&T committees in terms of the rollout in the VAN? Is that where you'd like it to be for 2026 and it's really just a sort of sales detail that's driving growth this year? Or should we think about sort of a sales detail as well as access within the hospital or institution as a tailwind there? And then maybe staying on that topic, any learnings from the VAN rollout that may change or sort of may tweak the prefilled syringe potential launch? Or should we think of the prefilled syringe rollout is very similar to the VAN commercial rollout? Mark Hensley: Thank you for the question. Our growth strategy for this year is 2 parts really. The first part is where our Heron employees are overlapping with CrossLink, where we have the proper resources in our primary targets. And that's going deeper into hospitals, right? So many of our accounts, we only have a few providers that are using ZYNRELEF, but we have formulary access in those accounts and the ability to spread go deeper and wider within them. And so you'll see us continue to do that. Certainly, the VAN has been a big part of removing -- the word is friction that I use, but kind of challenges on the preparation side. That's largely been eliminated. And then beyond those accounts, CrossLink is a much larger organization than us and has other targets beyond the Heron employees. And so those are other accounts that we continue to focus on and grow as well. From the -- on the rollout of the VAN, that actually went remarkably well. I think the transition was largely -- there was largely no issues as we moved into that. It was simply kind of winding down the prior supply of the VVS and then rolling into the VAN. And so there's probably not much we would change as we moved into the prefilled syringe launch in terms of strategically how we roll it out. It's just managing inventory on both products as we get closer so that we can move quickly when prefilled syringe is approved and ready. Operator: Our next question comes from the line of Carl Byrnes by Northland Capital Markets. Carl Byrnes: Congratulations on the progress. Yes, I just want to talk a little bit about the Slayback litigation with respect to CINVANTI. If I'm not mistaken, this is the same U.S. District Court of Delaware and the same judge, William Bryson, that ruled in the Fresenius case. And I also believe that it looks like it's the same statutory framework in terms of 505(b)(2) Hatch-Waxman and Orange Book patents along with formulation range, excipient ratios and pH parameters and whatnot. So what are your thoughts with respect to resolution and time frame resolution with respect to this litigation? Melissa Jarel: Carl, this is Melissa Jarel. Thanks for the question. So we're really confident with the case that we made at trial. We finished briefing earlier this month, and it is with Judge Bryson. We await a deeper oral argument, but we expect a decision before the 30-month stay. Carl Byrnes: Excellent. Perfect. Very helpful. And then a follow-up, switching back to the NOPAIN Act. Can you talk a little -- maybe a little bit more about what the company may be doing or what others in the industry are doing in terms of creating awareness given where awareness is relative to the significance of the opioid crisis? Craig Collard: Yes, Carl, thanks for the question. It's interesting. One of the things I think we worked -- we did not anticipate is that as NOPAIN kind of rolled out, we thought that it would be fairly simplistic and everybody to be aware and obviously taking what would be otherwise a cost, right, in a surgical bundle type of scenario to actually something where they actually make money. And so there's incentive there. And so -- but what we've learned is as we've gone through this, some of the coding, just the awareness of that, it's just gone a little bit slower. I think it's now happening much faster, but we were a little bit surprised by that. So we've actually -- we're expanding some of our team that handle that so we can answer questions and help with some of that as well. But that was a bit of a surprise. Mark can kind of chime in on some things specifically we're doing that are creating more awareness and helping us on that side. Mark Hensley: Yes. And I think kind of to your kind of second part of your question on the industry, it's not just us focused on the NOPAIN and education. Obviously, you know that. There are several other large companies that have invested interest in making sure that there's awareness and understanding of how the reimbursement works. It isn't complicated. It's relatively simple. It's just -- it's a lot of -- there are a lot of players here that have to kind of understand it and seek that reimbursement. And so it's more just an awareness issue. But certainly, where we're getting business where we're focused on the targeted, they're aware of the NOPAIN Act and understanding that reimbursement. And we're beginning to see more and more commercial plans also follow suit, which I think early on was some of the kind of lag in adoption, whereas as we turn into the new year, we're starting to see a lot more kind of alignment between commercial and CMS on NOPAIN. Carl Byrnes: Excellent. That's very helpful as well. And then just one real final quick question, and apologies if this is somewhat redundant. But with the inclusion of the Fifth Consensus Guidelines with respect to APONVIE, what's a realistic time frame where you think that takes hold and has a material effect in terms of the APONVIE growth trajectory? Mark Hensley: Yes. I mean we were certainly very excited to see what the new guidelines had to say. And certainly, we're confident that they will be a significant tailwind for APONVIE. The guidelines are certainly a good educational tool for us, especially as you think about when APONVIE gets taken to P&T for potential approval. Those guidelines are what pharmacy will likely reference in many cases. And so prior to that, we had good clinical data. There's certainly a lot behind IV aprepitant and its use in the setting. But the guidelines are robust enough that we believe they'll have a significant impact. Time line to that is probably back half of the year. The cycle of kind of P&T approvals and additions is typically a 6-month cycle. And so I wouldn't expect it to be impacting much today. But as we move and progress through the year, we do believe it will have a significant impact. Kevin Warner: This is Kevin Warner. I'll just add a little bit of color there from Mark's comments in regards to the consensus guidelines. So guidelines really change the paradigm, if you will, is what is accepted in the institutions and what we take a look at. They bring a lot of credibility and validity to the information and the data. And so it goes a long way in changing clinical decision tools, order sets, the protocols and driving that long-term adoption. So right now, when the guidelines are initially released, obviously, you're going to create awareness, education around the clinical impact of PONV and how we should be supporting these patients in the acute phase and the extended phase. But as people adopt it, it will be slow at first to get what I call soft adoption with individual providers recognizing the information, recognizing best practices, but then you get the full implementation. So with the credibility of a guideline, the consensus statement, the level of evidence, the quality of evidence within the guidelines, it brings it to all these P&T tables as a necessity for the best patient outcomes. And so as they go through that, implementing it into order sets protocols so that all high-risk patients receive appropriate therapy, that really changes the trajectory and you get the sustainable long-term adoption. Specifically for APONVIE within the guidelines, we were very happy with the guidelines and how it laid out the NK1 antagonist class really highlighted their long durable efficacy throughout that entire phase of the post-op recovery for the patients, the rapid onset with the IV push of APONVIE and the clinical efficacy of the NK1 class with a great safety profile. So the guidelines are going to go a long ways as far as bringing credibility when we walk into an institution to educate them on best practices for patients, but it's not just product-driven then. This is a consensus statement from 25 societies endorsing this information. So a great driver to the future. And like Mark said, it's probably 6 to 9 months until we roll it out into these order sets and these protocols that really change the trajectory and sustained growth. Operator: This does now conclude the Q&A portion of our conference. I would like to now hand it back to Craig Collard, CEO, for closing remarks. The floor is yours. Craig Collard: Thank you, operator. Thanks, everyone, for joining us on the call today, and we look forward to speaking to everybody next quarter. Thank you. Operator: And thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Hello, everyone, thank you for joining the Butterfly Network, Inc. Q4 and FY 2025 earnings call. My name is Gabrielle, I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2 on your telephone keypad. I will now hand over to your host, John Doherty. Please go ahead. John Doherty: Good morning, thanks to all of you for joining our call today. Earlier, Butterfly released financial results for the fourth quarter and full year ending December 31, 2025. We also provided a business update. The release, which includes a reconciliation of management's use of non-GAAP financial measures compared to the most applicable GAAP measures, are currently available on the Investors section of the company's website at ir.butterflynetwork.com. I, John Doherty, Chief Financial Officer of Butterfly, along with Joseph M. DeVivo, Butterfly's Chairman and Chief Executive Officer, will host the call this morning. During the call, we will be making certain forward-looking statements. These statements may include, among other things, expectations with respect to financial results, future performance, development and commercialization of products and services, potential regulatory approvals, revenue attributable to embedded collaborations through revenue share, chip purchases or otherwise, and the size and potential growth of current or future markets for our products and services. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve a number of known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our filings made with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, and the company disclaims any obligation to update such statements. As a reminder, this call is being webcast live and recorded. To access the webcast, please visit the Events section of our investor website. A replay of the event will also be available on this page following the call. I will now turn the call over to Joe. Joseph M. DeVivo: Thanks, John. Good morning, everyone, and thank you for joining our fourth quarter and full year 2025 conference call. I am pleased to announce that our fourth quarter revenues came in at $31.5 million, growing 41% year-over-year. It is also the first quarter in our history where we realized positive operating cash flow, driven by upfront payments from our Midjourney deal. We are now nearly two years into our strategic growth plan that we introduced in early 2024. The message was clear: execute with focus and financial discipline, strengthen our core franchise, and unlock the full value of our semiconductor ultrasound platform beyond handheld devices. We are doing just that, and we now have material contribution outside of our core POCUS business. Earlier this month, Jim Cramer was asked a question about Butterfly Network on Mad Money, and he said, I quote, "It is a very competitive market, and I do not want to be in that part of the medical device group. Too hard for this guy, just too hard." You know, I am a big fan of Jim Cramer, and like you, watch CNBC every day, and he is right about one thing: traditional medical devices are a tough sector, but Butterfly is not a traditional medical device company. We were never just a handheld company shaking at the knees of big ultrasound. We are David, faithful and committed to our cause, not backing down regardless of how large our opponent is. We are the disruptor. We are playing our own game with our own rules and our own playbook. We are digital eating analog's lunch and plan to revolutionize imaging with digital ultrasound everywhere and images taken. Goliath just does not know it yet. We are changing ultrasound imaging with our differentiated chip platform while deploying secure cloud software, AI tools, and mobile applications, and are the only healthcare company in the world over the last seven years to receive an Apple Design Award. We are not a medical device company alone. We are a transformative semiconductor-based ultrasound company. As you are all aware, the strategy we introduced has three core tenets: accelerate our core POCUS business with an enterprise-ready, cloud-connected imaging solution, execute strategic initiatives to reach new care settings and enable entirely new applications, namely home care and Ultrasound-on-Chip co-development. Lastly, deliver an R&D roadmap that sharpens our technology edge with next-generation chips and new form factors getting more and more powerful and capable. Let me walk you through the progress in each of these. In core POCUS, revenue grew 15% year-over-year on top of a 35% growth in the fourth quarter of last year, which, as you recall, was a record product launch year. We closed a second large system-wide enterprise deal in the fourth quarter of 2025 and continue to deepen medical school and enterprise relationships. I will let John cover the financials in more detail, but we feel much better about macro trends and the deal cycle than earlier in the year and expect to carry that momentum into 2026. The fourth quarter Compass AI launch is a big tailwind for our enterprise strategy. Enhancing our enterprise solution helps refresh existing accounts, continue attracting new customers and drove more than 50% growth in our enterprise pipeline since launch. At the same time, we have been building what we believe is one of the most secure cloud infrastructures in healthcare. In the U.S., we most recently achieved GovRAMP and TXRAMP, and FedRAMP is anticipated in the coming months, meaning we will soon be even more qualified for cloud deployments in now the world's largest government market. Internationally, we see meaningful opportunities in 2026 as we open markets in South America and continue expanding across Middle East and Asia, alongside a renewed momentum in global health. We have surpassed 1,000 NGO partners worldwide, and many expect to increase activity in 2026. We also continue to make progress in our Butterfly Garden partners, and as you know, HeartFocus became the first FDA-cleared app in 2025, and we expected additional partners to reach that clinical milestone in 2026. We announced plans to release our proprietary beam steering API in the first half of this year. The API will open 3D imaging capabilities that have been reserved for Butterfly products only. Because our beam steering is fully digital on a semiconductor chip and not mechanically driven like other legacy systems, we can uniquely extend those capabilities to partners. The goal is to advance what they can build, expand the AI ecosystem, and help accelerate ease of use. We are excited about the new opportunities this welcomes. Moving to the strategic growth engines. We have built a home business determined to accelerate the use of POCUS devices where the patient is, expanding the reach and empowering nurses and other clinicians to perform scans using AI tools. I believe we will reach a commercial agreement in 2026, allowing home care to enter its commercial phase. This is a powerful new channel that reduces hospital readmissions, lowers costs, and expands Butterfly's reach beyond the hospital. Home care is a reality, we think it can be a real growth driver, starting to add revenue in late 2026 and into 2027. We also ventured out to develop a new business to make our core Ultrasound-on-Chip available to companies with large new market opportunities that are not competitive with Butterfly's focus business. That was previously known as Octave. Well, to start the new year, we have officially sunset the Octave name and have centralized our semiconductor platform strategy under Butterfly Embedded, reminiscent of the Intel Inside model. What began as an adjacent effort is now emerging as a foundational business, enabling other category-defining innovators to build entirely new application on Butterfly's Ultrasound-on-Chip technology. The big news for the fourth quarter, though, was signing Midjourney deal in November, and as you can see today, it contributed $6.8 million of revenue in the quarter and was a key driver of our 41% year-over-year growth. Midjourney is an independent research lab pushing the boundaries of generative AI and human imagination. Their scientists have envisioned a breakthrough new application for ultrasound that we believe the world will be learning about very soon. This partnership combines Butterfly's core Ultrasound-on-Chip technology and imaging software with Midjourney's generative AI compute power to do something very special with ultrasound. This deal is more than revenue, it is validation. It is a foundational step towards Butterfly's reinvention into a platform company. The initial partnership and revenue contribution is pre-commercial. Based on the plan that Midjourney has shared with us, once commercial, we believe there is meaningful additional revenue opportunity for Butterfly in the form of chip sales and revenue share on top of the licensing fees that will continue through the deal. We expect this to happen in the outer years of our 5-year plan, and if it occurs, could represent meaningful progress towards our goal of reaching $500 million in annual revenue by 2030. Beyond Midjourney, we signed an additional Butterfly Embedded research share partner this quarter and expect another one shortly, while managing an active pipeline of some of the largest technology and healthcare companies in the world. Before I look ahead to our R&D roadmap initiatives, I will turn it over to John to discuss the financials. John? John Doherty: Thanks, Joe. I am very excited to have joined Joe and the talented team here at Butterfly, which includes Megan Carlson. Megan, who you all know, did a great job in the interim CFO role and has been an awesome partner to work with, along with the rest of the leadership team. With about three months behind me, I want to open with a few comments and my thoughts on Butterfly overall. I joined Butterfly because I was excited by the incredible potential this company has going forward to provide a valuable and meaningful experience to our customers, as well as to create value for our shareholders. I was also impressed by the strength of the leadership team and the passion and commitment demonstrated by employees across the company. This is a company I am proud to be a part of. Butterfly certainly navigated a few challenges in its early years as a public company. However, the company has made the necessary difficult adjustments, including improving its operating efficiency, choosing the markets it can win in, selecting the best ways to leverage its IP and technology advantage, and allocating its resources towards higher ROI opportunities and markets. No doubt, based on these actions, Butterfly is a stronger, more agile company today. With continued steady execution, the company has the potential for significant core growth in an incredibly meaningful domain through its focused and related conscious AI software and Butterfly Garden business, and we are well positioned to gain outsized share in the markets that we compete in. We also have a significant opportunity to leverage our core platform of Ultrasound-on-Chip into other nascent and disruptive markets consistent with our strategy through Butterfly Embedded, as the Midjourney partnership demonstrates. With that, let us move on to a few highlights for the fourth quarter, including a record level of revenue for the quarter and exceeding the high end of our total revenue and adjusted EBITDA guidance ranges, a record level of quarterly probe sales, significant improvement in adjusted EBITDA margin, driven by our revenue performance and continued financial discipline, the lowest annual cash use in the company's history, and we generated positive free cash flow in the quarter, and the execution of the Midjourney contract, which helps to solidify and amplify all of our efforts to drive a new wave of ultrasound-enabled platforms and use cases through Butterfly Embedded. Let me move on to our results. We had a strong fourth quarter of 2025, with revenue of $31.5 million, the highest quarterly result in the company's history. This represents a 41% increase year-over-year for the quarter. The increase is driven by increased revenue from Butterfly Embedded, as well as a 27% increase in year-over-year volume in our core focused business, with continued penetration of the iQ3 in all markets. The 41% year-over-year growth is significantly higher than the at least 17% year-over-year growth that we put out in January. We did better in the core business and realized more revenue from Butterfly Embedded, given the work we had already performed relative to the Midjourney contract. This is the primary reason we used the at least language at the time, as we were still finalizing the accounting treatment. Our results and the guidance I will provide later in the call for first quarter and full year 2026 all include updated financial expectations from this contract. Breaking things down between the U.S. and international channels, during the quarter, U.S. revenue was $26.8 million, which was 55% higher year-over-year, driven by revenue from Embedded, as well as strong demand in the core business, with unit sales up 44%. Total international revenue decreased by 6% year-over-year to $4.7 million in the fourth quarter. While sales of the iQ3 in the quarter were up 42% year-over-year, sales of the iQ+ were down 79%. Breaking our revenue down between product and software and other services, product revenue was $18.1 million, an increase of 23% versus the fourth quarter of 2024. This increase was driven primarily through growth in volume across all channels, with U.S. health systems, e-com, and vet leading the way, as well as higher average selling prices in international markets with the higher mix of iQ3 sales. Software and other services revenue was $13.4 million in the fourth quarter, up 76% year-over-year. Software and other services mix was 43% of revenue, increasing from 34% in Q4 2024. This increase can be attributed to the significant step-up in revenue contribution from Butterfly Embedded in the quarter, related primarily to the Midjourney partnership. I will talk more about this as well when I come to guidance for the first quarter and full year 2026. When looking at the full year 2025 versus 2024, total revenue increased 19% to $97.6 million. This was driven by two areas. First, growth in our core focused business, with both increased volume and a higher average selling price, driven by an increased mix in the sales of the iQ3 and strong performance by U.S. sales, our vet channel, and international distributor channels. Second, growth in our emerging Butterfly Embedded business, primarily from the execution of the Midjourney contract in November of last year. Moving on to gross profit. Gross profit was $21.2 million in Q4 2025, a 55% increase as compared to the prior year adjusted gross profit of $13.7 million. Gross profit margin percentage increased to 67% from 61% in the prior year period. Gross margin percentage was positively impacted by the higher-margin Butterfly Embedded revenue and lower software amortization. Moving to EBITDA and cash. For the fourth quarter of 2025, adjusted EBITDA loss was $3.2 million, compared with a loss of $9.1 million for the same period in 2024, an improvement of 65%. For the full year 2025, adjusted EBITDA loss was $26.5 million, compared to $38.9 million for 2024, an improvement of 32%. The improvement in adjusted EBITDA loss for both the fourth quarter and full year was driven by contribution from higher margin revenue and continued financial discipline reflected in our lower year-over-year payroll costs for the quarter and full year. This improvement in adjusted EBITDA and continued financial discipline has led to a cash and cash equivalent balance, including restricted cash at year-end of $154.5 million, and the use of cash in 2025 of $19.4 million, excluding the funds from our offering last year. This compares to a use of cash of $45.9 million in 2024, an improvement of $26.4 million. We also had positive cash flow of $6.3 million in the fourth quarter. These results demonstrate that we are very well positioned as we move forward to continue to invest in the business areas where we see significant opportunities for additional growth and disruption, including expanding our core POCUS business and penetration of Compass AI as a core operating system for health systems. Continuing to enable third parties to build tailored ultrasound AI solutions in Butterfly Garden to provide deeper and expanded access to our platform. Expanding our home care business following the execution of our anticipated first commercial agreement, which we believe could be finalized in the first half of 2026, as Joe mentioned earlier. Enabling a new wave of Ultrasound-on-Chip-enabled technologies through Butterfly Embedded, and continued AI and semiconductor innovation with the development of our 4th-generation chip. Before turning to guidance, I want to update you on the general macroeconomic environment relative to Butterfly. While there were some concerns in 2025 relative to the government shutdown and impact on the FDA's processing of fee-based submissions, regulatory processing delays, and delays in customer purchasing decisions, we have managed through this, and it is very much behind us. Our fourth quarter results are indicative of that, and we were able to close some of the larger deals in the pipeline and still have a number that are active. I would now like to turn to our outlook for the first quarter of 2026 and for the calendar year ending December 31, 2026. In the first quarter, we expect revenue in the range of $24 million–$28 million, as we ended the fourth quarter somewhat higher than expected, and the first quarter is typically a slower quarter for the company due to seasonality. As is typical for Q1, adjusted EBITDA is impacted from expenses related to payroll tax and 401(k) reset, as well as our national sales meeting and POCUS Innovators Forum, which took place in January. As a result, we expect slightly higher expenses and higher adjusted EBITDA loss in the first quarter relative to the remainder of the year in the range of $8 million–$10 million. For the full year 2026, we expect revenues to be between $117 million and $121 million, an increase of approximately 20%–24%. We expect our adjusted EBITDA loss to be between $21 million and $25 million. Our guidance for adjusted EBITDA includes investment in key areas to support continued innovation, as well as our emerging embedded business, as well as the impact from tariffs initiated in 2025. In summary, we had a great quarter, a record quarter. We closed the year out strong, we exceeded expectations for revenue and adjusted EBITDA, and we are very well positioned going forward. As our 2026 full year guidance indicates, we look forward to continued growth this year and beyond, and our overall outlook on the business is brighter with this past quarter reinforcing our view. In 2025, we believe the company enhanced its position in the core POCUS markets and can continue to gain share in 2026 through deeper penetration of existing customers, new customers, and applications. We also amplify our Ultrasound-on-Chip platform and the potential of Butterfly Embedded with the licensing partnership with Midjourney. We did all of this while continuing our intense focus on driving operating efficiency across the business and ROI. As I said up front, I am excited to have joined Butterfly late last year, and I am excited about what is ahead for the company in 2026 and beyond. Now, let me hand it back to Joe for some closing comments. Joseph M. DeVivo: Thanks, John. It is an exciting time for Butterfly. We are in a strong position and are delivering on all fronts. The future is even brighter. Before closing, I will touch briefly on R&D. We recently spent two days with 60 leading POCUS thought leaders at our annual POCUS Innovators Forum, and the alignment was unmistakable. The goals, needs, and future state vision shared was directly in line with where we are taking our portfolio. That level of synergy only strengthened our conviction that we have a path to enable every doctor and nurse with powerful, affordable, compact imaging and can meaningfully unlock enterprise adoption. As I mentioned on the last call, our fifth generation P5.1 chip was moved to production by year-end. We are excited in achieving harmonics and delivering a new level of imaging for handheld ultrasound. This will open additional subspecialties and support our enterprise selling efforts in 2027 and beyond. Next up on our chip roadmap is Apollo. This new chip architecture is now receiving the full attention of our engineers and will deliver 20 times the current data rate and compute performance, ushering in a new era of digital imaging and AI. We are already working with several Butterfly Embedded partners based on the capabilities of this platform. I would like to close by sharing exactly why I am so excited about Butterfly's current chapter. We are pioneering semiconductor-based digital ultrasound everywhere it is needed. In the traditional ultrasound market, that means continuing to lead in point-of-care solutions that truly meet the demands in and out of the hospital, empowering doctors, nurses, and caregivers, expanding new subspecialties, strengthening our enterprise roadmap, moving imaging to the bedside and beyond it. It is also bigger than that. Ultrasound is being researched and deployed in brain therapy, continuous monitoring, robotics, organ preservation, and the list goes on. If you do a simple search of ultrasound in the magazine Nature, just this month alone shows applications in neuromodulation, ablation, antiviral therapy, and soft robotics. The real inflection point comes when ultrasound in these use cases move to silicon, when it becomes programmable, power efficient, AI native, scalable. That is the common thread. Whether it is a Butterfly handheld in a clinician's pocket, a new form factor on our roadmap driving enterprise or home adoption, or a partner building something novel with our technology that we can never do ourselves, it is the same core technology, the same architectural advantage. We are not just building devices, we are opening markets. We are enabling a new age of digital ultrasound imaging and sensing, all in one strategy. This is Butterfly. We are not just a medical device company. We are a true disruptor building the ultrasonic backbone of the AI era and one of the most exciting technology growth stories in healthcare and technology today. With that, operator, please open it up for questions. Operator: Thank you, Joe. To ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Joshua Thomas Jennings from TD Cowen. Your line is now open. Please go ahead. Joshua Thomas Jennings: Hi, good morning. Thank you. Impressive to see all the progress in so many different channels. Gives us a lot to ask about, challenging to choose one of those lanes, wanted to start with Butterfly Embedded and just, absolutely. Just wanted to better understand, and you may not be able to share, but any details around potential timing of the technology offering that Midjourney is going to put forward, implementing Butterfly's semiconductor and ultrasound chip technology? Any help just thinking about the cadence of revenue contributions from this partnership over the course of 2026 and what is embedded in guidance? Joseph M. DeVivo: Thanks, Josh. Well, I will let John answer the second part of that in a moment. Let me just get to the first. I think we are probably going to see something, you know, in the relative near term from Midjourney. You know, one of the things about a Butterfly Embedded program is we are enablers for our partners. This is not our business, this is their business, and we do everything we can to amplify their business. I do not want to get out ahead of them, and all I want to do is do everything that we possibly can as a partner to support them. That said, I think, you know, they probably want to get this out sooner rather than later. The moment they do, you know, we will do the best to show you how it, you know, translates into Butterfly. John, do you want to take the second part of that? John Doherty: Yeah, sure. Thanks, Joe. Appreciate it. How you doing, Josh? Joshua Thomas Jennings: Good. John Doherty: So— Joshua Thomas Jennings: Thanks a lot. John Doherty: when you look at Embedded, you know, obviously, yeah, as Joe touched on during the opening remarks, Midjourney kind of lit it on fire, if you will, with the contract we signed at the back end of 2025. We are very excited about that contract. There is also, you know, a number of other partners that we are working with in Embedded. While right now, Embedded and our revenue is, you know, there is a big contribution from Midjourney, we do expect, you know, other contributions from other partners that we have in there, and, you know, we are really excited about what that part of our business can be, as we discussed at the back end of 2025. You know, relative to Midjourney, it is a $74 million contract, as we mentioned. There are different components of it. You know, there is the upfront payment, there are annual license fees, and then there is milestone work that we do that ultimately, you know, allows us to, you know, do the, you know, take the revenue, ultimately, you know, quarter by quarter, if you, if you will, year by year. You know, we expect to get a good amount of contribution throughout 2026 into 2027 from the contract. In addition, when they commercialize, ultimately, you know, as Joe mentioned upfront as well, there is an opportunity for chip sales as well as for a revenue share as part of their business. Ultimately, really excited about the overall contribution from Midjourney, but Embedded is not just Midjourney. Joshua Thomas Jennings: No, I appreciate that answer, and kind of leads into my next follow-up is, I mean, our understanding is that the team was focused on the Midjourney partnership and development work and then locking that in in 2025, but there were some other potential partnerships on the periphery that sounds like you guys are engaged and moving forward. Any help thinking about the Butterfly Embedded pipeline that you just referenced? Joseph M. DeVivo: Yeah. I mean, we are talking to a lot of people. As I mentioned, some, you know, very large organizations and also a lot of startup organizations. Kind of the way it works is, you know, we saw a, you saw a contract in the 8-K with Midjourney, in November of 2025. They had been an embedded partner for over a year prior. So the way it kind of works is, you know, people will buy a license to our software, and then they will start buying chips, and they will do some research. They will do research, you know, as far as how does, you know, does a chip meet their performance that they need? How does it integrate with their systems? Then, and they do a bunch of work. You know, whenever they are done and ready, you know, if everything worked out well, then it will turn into a commercial agreement. They will come back and say: "Okay, well, we want to now do, you know, X, Y, and Z." That is kind of how Midjourney happened. There is really no formula. It is just, you know, we have, I think, now, eight or nine embedded partners today, and the pipeline is pretty large. It is also, you know, we are not selling off-the-shelf product. You know, we have to take our product, and we have to do labs and show them how it can fit with their tech and whatnot. It is a bit of a sales process, but, you know, do we have another Midjourney in there? I hope. You know, there are some very big opportunities people are going after, massive opportunities, actually. You know, we are going to continue to add people into the research phase of our relationships and do everything possible to meet their needs and get them, you know, committed to a commercial phase, like Midjourney did. Joshua Thomas Jennings: Excellent. Maybe one question on the home care franchise, and it sounds like you have made progress in this first commercial partnership. I mean, what steps are left before that commercial effort kicks in? Maybe just remind us of the home POCUS market opportunity or the revenue opportunity for Butterfly in this channel. Thank you, guys, for taking all the questions. Joseph M. DeVivo: Hey, thank you, Josh. Appreciate them. Yeah, I think, you know, we are pretty confident that this is going to, you know, get to a commercial conclusion. You know, as John said, in his notes, we think it will probably happen before middle of the year, which will give us the second half of the year to start getting it ramped up. It would probably be nominal revenue in 2026, but start contributing in 2027. Once we get it started, and we have a line of sight, and we are able to give a better shape of what the impact is, we will tell you as far as, you know, and incorporate it into our guidance. You know, in aggregate, I think I have mentioned in the past, you know, if just this one use case we are working on, if it became a national use case, it could be a $40 million–$50 million revenue opportunity if everything went, you know, the way that we saw it. That is. You know, when we think about the amount of chronic care patients are in nursing homes and also the amount of patients that are in the home, who are being cared for by nurses, you know, as they get sicker, they need to be, you know, moved. They need to have an image. You know, they have to go to the hospital, whether it is by ambulance or by some other transport, be brought up into radiology and then have, for example, a cardiac echo or something else. You know, empowering caregivers to be able to take images where they are is efficient, is low cost, and has high impact on being able to quickly give a diagnosis for a patient so their meds can be modified to make them healthier and keep them into the home, or keep them wherever they are. That is literally every facet of healthcare is about being where the patients are, being where people are, and helping them get healthier faster in the lowest cost environments. You know, our home care business is basically an extension of our POCUS business. It is not a third business; it is an amplifier of POCUS. You know, ultimately everyone will figure it out, and they will use our stuff to do all of this using the AI apps, etc. Home is kind of a catalyst for us to, you know, take a lot of the workflow, the logistics, and the ramp-up and the learning curve out. I have mentioned before that we think the home business can be bigger than POCUS, and the opportunities are certainly there. We have, you know, we have to prove it, and we have to get some more... Our pilot was excellent. We need to get, you know, the first few states up. We need to prove what we are doing there. We need to prove we can go to a larger geography. It is a process, but it is a big opportunity, and it will teach, you know, core healthcare providers and payers that point-of-care ultrasound with Butterfly is a significant way to reduce costs at the exact same time of improving quality and care for patients. Operator: Thank you, Josh. Our next question is from Chase Richard Knickerbocker from Craig-Hallum. Your line is now open. Please go ahead. Chase Richard Knickerbocker: Good morning, guys. This is Jake on for Chase. I was wondering if you could, maybe, John, if you could give us any more color on the macro environment, if you guys are seeing any of the same trends that affected 2025 and how they are abating now in 2026? John Doherty: Sure, and I appreciate the question. As I touched on, you know, with the opening comments, I am not going to say everything is behind us, but certainly, you know, we feel, you know, a lot more confident going forward. Irrespective of the Supreme Court's action relative to tariffs, you know, it is still a very mild, say mildly, and an unpredictable area, given what happened post that. You know, we do still expect to have a bit of some downward pressure. Not a lot, but some downward pressure from tariffs. We did sign a number of contracts late in the year, so we see that things have been opening up a bit there. We still have a number of, you know, good-sized deals in the pipeline. I would say, you know, the timing did move out kind of the back half of last year as the company had touched on when they did third quarter results, but we are seeing some improvement there. We are starting to see some things move. Ultimately, as I mentioned, you know, the company, we are managing through it, and we do not expect it to have except for the, you know, the tariff component, we do not expect it to have a lot of impact on the company. Chase Richard Knickerbocker: Great. I appreciate that color. Apologies if I missed this, but is there any more color on the opportunity with medical schools going into the year as well for the one-to-one partnerships? Joseph M. DeVivo: Yeah. Medical schools, I think, should be a pretty, a pretty strong contributor to us this year. You know, the, you know, second quarter of the year is the big medical school quarter when we, when we put them all in. We have a lot of conversations for one-to-one buys, and you know, we did get a bit of a pause last year when the decision to cap student loan debt occurred, and so it caused people to pause. You know, what is so exciting about what we are doing is there is such a strong commitment for new medical students to learn ultrasound. They are actually now starting to choose where they go and the types of programs they get into based upon the commitment of building that competency. You know, kids that are graduating today, and are going into their residency, completely distinguish themselves when they have this capability. Even, you know, even their, you know, their attendings, who are working with them, you know, are kind of, surprised when they see what can be done by a resident with ultrasound skills. There is not a lot of daylight out there. This is not a new thing. Students want Butterfly. They are trained on Butterfly. They want that experience, and then when we build the brand equity with these students, they go into their residency and then into practice with that loyalty, with that understanding, and we are looking to grow with them, especially, you know, with our whole, you know, chip platform improving and getting more and more powerful, and then more apps coming in over the years. You know, we are going to grow with them through their career. We start off with medical schools. Medical schools will be a very positive contributor in 2026. Chase Richard Knickerbocker: Appreciate the answers, guys. Thank you. Joseph M. DeVivo: Thanks, Jake. Operator: Thank you. Our next question is from Andrew Frederick Brackmann, from William Blair. Your line is now open. Please go ahead. Andrew Frederick Brackmann: Hey, guys. Good morning, thanks for taking the questions. I will echo Josh's comments. Certainly a lot of progress here and a lot to dig into. Joe, maybe with that in mind, I would like to start a little bit higher level. I mean, it is sort of hard to miss the underlying transformation going on here, towards Butterfly Embedded. Can you maybe just sort of talk to us about why now for this transition from med devices towards embedded and the semiconductors type of business? Then just as you sort of think about organizational focus, perhaps, are there any sort of changes in terms of your view on focus versus the opportunity with Embedded? Thanks. Joseph M. DeVivo: That is a great question, Andrew, and I actually, I probably should have emailed that to you and planted that in, because it is, that is a very appropriate question. You know, we are not trying to pivot away from focus. You know, we, you know, we want to have every doctor and every nurse in the world, have a device that allows them to help diagnose their patients sooner, easier, low cost, where they are at. We will never, you know, move away from that vision. You know, in accomplishing that vision, Andrew, we solved the problem. We solved a major problem in technology where we can digitize, we can digitally control the ultrasound image. We can control it in a way that is much more than what medical ultrasound uses with, you know, multiple planes and depths. Because we control 9,000 sensors in a rectangle, which allow us to send out information, send out sound a certain way, and listen to sound a certain way. You know, what we solve for ourself for point-of-care ultrasound is a major solution for many other people out in the marketplace. You know, there is this whole concept that AI and the human body are going to merge together. You can Google it. There is a whole sci-fi fantasy out there. You know, there. If you even think of brain-computer interface, you know, Neuralink today is putting wires into the brain. There is this thing in DCI called the butcher factor, which is, you know, how many neurons do I have to kill before I get to the neuron I want to talk to? Well, one of the beautiful things about ultrasound is, and about Butterfly, is we do not have a stagnant beam that sits in a fixed position. You know, normally, ultrasound is like a flashlight. You know, you have to move the beam in order to capture the image. We can actually, in a fixed location, move our beam and scan. If you implant something in the brain, you are going to be able to communicate and see and listen to 25% of the entire brain or the entire lobe. It is being seen today that ultrasound is potentially a portal between AI and the human body. Just read Nature and you will see all these articles about brain-computer interfaces, and you will hear about ultrasound, you will hear about neuromodulation, you will hear about all different types of, you know, even if it is therapeutic, people are going to be looking at the brain signals through vasculature and how vasculature flows through the brain. It ultimately, you know, you can potentially heat it and put energy. This is kind of happening. It is not like we just did a prospect, a randomized study, and we are now pushing the market. The market is calling us. They see our 600 patents, they see the excellent technology that we have, and quite frankly, we have been approached prior to me getting here by companies asking to partner with them, but they were turned away because the company was trying to focus on point-of-care ultrasound. What we have said to ourselves is, "No, we have solved the foundational problem." you know, I would hate to compare ourselves to NVIDIA because there is no way there is a scale or anywhere to draw a line. You know, from 93 to 2005, they were a video game company, and they focused on their core markets of building technologies to be better gamers, that had to be complex. You know, and then with CUDA in 2006, it opened up their platform for developers who could use these incredible chips for other applications. You know, or you look at Amazon, you know, they did not set out to become the leading cloud compute company in the world. They realized that they needed cloud compute. There was not a large enough vendor to take their volume. They built it themselves. When they were done, they had excess capacity, and they said, "Let us go sell that capacity." Now it is the highest profit-generating part of their business. Sometimes in business, you solve problems for your customers that benefit others, and we are just simply now allowing ourselves to work with those partners. The beautiful part about it is that the roadmap that we have set ourselves, so, you know, our Poseidon platform, our P5.1 platform, our Apollo platform, we are now not going off and developing new things for other people and losing our focus on Point-of-Care Ultrasound. What we are actually doing is amplifying our current roadmap, and we are exposing our roadmap to those customers and those and to allow them to meet their needs. It actually is going to make our ability to serve point-of-care ultrasound better, and the roadmap that we have for point-of-care ultrasound and what is going to happen, you know, with our next launch of our platform, with Harmonics and P5.1, and what we are going to do with, you know, some new things that we will unveil in 2007, there is so much synergy here, Andrew. It all ties together. We are not putting something on the shelf and then focusing someplace else. We are pulling our core tech, we are partnering with people who have real interest of building businesses and have technical challenges that we can solve. Instead of having an analog ultrasound device that, you know, yes, you have digital behind the lens, but then once you push the signal through the lens, that lens is cut to do one thing. Our lens can be anything, and developers love the fact that they can see the signal and then change the software, see the signal, change the software. That, you know, kind of infinite iteration cycle is how, you know, we will fit our ultrasound into many different types of devices throughout the world. Andrew Frederick Brackmann: Okay. That is terrific color. Thank you for all that, Joe. Maybe if I could just sort of switching lanes here. You referenced the Compass AI, and sort of the launch there. Can you maybe just expand on sort of what that does in practical terms for your moat within that focused business? What does it give you that competitors do not have today? As you sort of think about, you know, defending against some of these potential, you know, AI disruptors that are out there, how does this sort of expand the moat there? Thank you. Joseph M. DeVivo: Thank you so much, Andrew Brackmann. We were, you know, the prior team before I got here, you know, Todd Fruchterman and the team were very visionary on making sure that if Point-of-Care Ultrasound is going to be adopted enterprise-wide, that we need to manage the data. The systems, you know, the EMRs, the DICOMs, all the current hospital systems were not geared and built to operationalize Point-of-Care Ultrasound. Butterfly became the first ultrasound company that invested in an enterprise SaaS-based software that not only allowed it to collect its own data, push it into the record, push the image into DICOM, and set that record up ready to be submitted for reimbursement with the revenue cycle management software. We have built the most powerful, you know, SaaS-based system out there in order to do this. Now hospitals, when they put our software in place, they now recognize scans that were not getting reimbursed, and they increase their revenue and profitability. It is, it is just good, and good. Now, on the other side, doctors hate new things. They do not like to have to go through new steps. They just want to do everything in their EMR. They do not want to have one software for this, one software for that. Getting to an ease-of-use paradigm is essential, because the doctors are already asked, and nurses, to do so much in their everyday lives. To now go into another platform to go through a whole other set of workflow is just something that they dread, regardless of how good it is for, you know, the patient or the economics, it is just more work. Getting our system to be easier, faster, simpler, more integrated into the, their daily workflow and to use the power of AI to where so we take their dictation. Every doctor dictates. If we can take their dictation and then pull apart the data in that dictation and populate the forms for them, you know, those two or three or four minutes that they save is massive to them as they and that multiplies with each patient that they see. We are very committed to making our workflow now. We have solved the major problem of connecting them and aggregating data. Now we are going to be incessant and passionate about making it easier and easier and easier and easier for them to implement, for them to use on a daily basis, for it to be intuitive, and to let the hospitals continue to have the type of ROI they need of capturing all these images. We are never going to stop making it, and we are going to use every new tool available to us in AI to make it easier for our customers. Andrew Frederick Brackmann: Great. Thanks, guys. Appreciate the questions. Joseph M. DeVivo: Appreciate it. Operator: Thank you, Andrew. Our next question is from Benjamin Charles Haynor from Lake Street Capital Markets. Your line is now open. Please go ahead. Benjamin Charles Haynor: Good morning, folks. Thanks for taking the questions. Joseph M. DeVivo: Hey, Ben. Benjamin Charles Haynor: ... for me on the, yeah, how are you? Excellent. Just on your own internal development, pipeline, new P5.1, you know, when should folks expect you to go to the FDA with that? Anything new on kind of the new form factors, whether that is, you know, iQ Station or, you know, in some of the wearable sort of form factors that you showed at the investor day two years back? Joseph M. DeVivo: Thank you for the question. You know, we are hoping in the beginning of 2027 to have the P5.1 ship into a next program. That is kind of our timing. We think that we just sent it into production. Normally, it would take us some time, you know, late this summer to get them back, and then we start, you know, putting it into the hardware, validating, testing, and then hopefully get our clearance, and then we will be out, you know, sometime early of 2027. That is kind of our schedule. At the same time, you know, we have a vision to bring one-to-one in hospitals and how, you know, we can make a cart-based experience with Butterfly better. iQ Station is actively on our roadmap, and it is probably a later 2027 timeframe for that. We are actively working on that program, and we think that will really codify the one-to-one model on the enterprise side. You know, we are working on making software easier, we are working to make our devices more powerful, we are working to make the workflow in the hospital easier. It is just a fate of it is just inevitable what will happen, and we are on the right path there. You know, on the wearable side, you know, if we wanted to launch a wearable tomorrow, we could, or theoretically, we could, we can put that... Wearables is not an R&D thing, it is more of a what is the use case and what is the market and what is the business? Our philosophy right now is the success of home care will determine, you know, what our wearable use case is. The more that we push ultrasound, alt site, and we push it into nursing homes, we push it into the home, and then the more we will be, "Okay, now this is what it is being used for. This really makes sense. This is sticking, and now let us automate it, and let us make it easier, and let us put a wearable out there." You know, we have there is one of our partners, Forest Neurotech, took our technology and created a wearable. Go on their website, you will actually see it. They put it right there. It is the technology around creating a wearable is not the challenge, it is, hey, what is the business use case? When does it make sense to invest the next several million dollars in hardware to put that out there? Our home care business, in my view, will determine the success and the timing of what is the right use case for wearables. Benjamin Charles Haynor: Got it. That is very helpful. Any more you can share on that POCUS Innovators Forum that you held? That sounds like, quite the interesting event. Joseph M. DeVivo: You know, you probably need to come next year. I probably have to invite our analysts. You know, we— Benjamin Charles Haynor: No problem. Joseph M. DeVivo: private the first year. The second year, we brought our whole management team and commercial team in to listen, which was a great education session. I think, you know, what is fascinating about that forum is it is not all one specialty. You have a cardiologist sitting next to an anesthesiologist, sitting next to an ER doctor, sitting next to a primary care doctor, sitting next to an intensivist, sitting next to a nurse, and sitting next to an administrator. They all have a tremendous passion for the power of being able to do a diagnosis immediately at the point of care. We all heard them present their experiences, but we also gave them a forum to tell us what they need. That is where actually Compass AI came from for the, from the last year's forum, was when they said: "It just takes too long to document each one of these records." We went now from four to five minutes down to 30 seconds. You know, we listened to them, and that is why this forum is so important. I think while we had 60 people, we had about 40 people the first year, 60 people the next year, but we will probably open it up to, you know, 100 or more, and even maybe allow you guys to come, too. We learned a lot, and the biggest thing that we learned is that we are on the right track. If we keep listening to our customers, and being honest with ourselves on what we need to do to improve, we will win. It was a great session, Ben. Benjamin Charles Haynor: Sounds fantastic. Lastly, for me, just with Midjourney, you know, you phrase it as a revenue share potential rather than a royalty. Should folks read into that in any way? I mean, that strikes me more as a service offering rather than a device offering. Joseph M. DeVivo: No, I think you just look into this like a partnership. We are all in with them, and we are doing everything we can to make them successful, and we will do everything we can to make them successful. We do not look at them as someone we are going to sell chips to. We look at them as someone that we are going to invest in, and we are going to do everything to amplify their use case. If all of a sudden we need to do something that was not planned, we are just going to do it because, you know, we both believe in what they are doing, and we are going to be the best partner possible. Benjamin Charles Haynor: Great. Thanks for taking the questions, guys. Joseph M. DeVivo: Awesome, Ben. Thank you. Operator: Thank you, Ben. We currently have no further questions, so I will hand back to Joe for closing remarks. Joseph M. DeVivo: Well, thank you all for being with us this morning. I know that this time of the season is busy for all our investors and analysts. I hope you can see the excitement. You know, I think the most important thing, you know, for me is, you know, we put a plan together, and we are executing to our plan. Everything that you hear on this call, there is not one surprise. Not one. Everything that we are delivering, we have told you we are going to deliver. Everything that we are focusing on are things that we have mentioned, if not recently, you know, a year or two ago. We are executing to our plan because there is a massive opportunity in digital ultrasound. We are digital to film, and we are digital that will take over analog. It is just a fait accompli. We have put a plan in place. We are executing to it. We have an awesome team. We are beyond the time where there was doubt about the company, and the only doubt should be in that, you know, for anyone who is in our way. I appreciate your attention, and I look forward to continuing to deliver results. Thank you. Operator: Thank you, everyone. This concludes today's Butterfly Network, Inc. Q4 and FY 2025 earnings call. Thank you for joining. You may now disconnect your line.
Operator: Good day. Thank you for standing by. Welcome to the Rhythm Pharmaceuticals, Inc. fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dave Connolly. Please go ahead. David Connolly: Thank you, Tanya. I'm David Connolly here at Rhythm Pharmaceuticals, Inc. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section of our website, ir.rhythmtx.com. This morning, we issued our press release that provides the fourth quarter of 2025 and full year of 2025 financial results and a business update. That press release is also available on our website. Our agenda is listed on slide 2. On the call today are David Meeker, our Chairman, Chief Executive Officer, and President, Jennifer Lee, Executive Vice President, Head of North America, Hunter Smith, Chief Financial Officer, and Yann Mazabraud, Executive Vice President, Head of International, is on the line joining us from Europe. On slide 3, I'll remind you that this call contains remarks concerning future expectations, plans, and prospects, which constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent annual or quarterly reports on file with the SEC. In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on slide 5. David Meeker: Thank you, Dave. Good morning. Thank you all for joining. We pre-announced our revenue for the fourth quarter, highlighting the continued strong performance by our commercial teams. The BBS opportunity continues to grow at a steady rate, both in the United States and ex-US markets. Jennifer's North American team, which was fully hired and in place at the start of the fourth quarter, continues to take full advantage of the PDUFA extension to prepare for our expected launch. Our growing early access experience with HO in Europe reinforces our belief in this opportunity, as Yann will highlight. I'm pleased to report we had our end of phase 2 meeting with the FDA for the bivamelagon HO study. We were able to share the nine-month data, which included a minimum of six months on drug for the original placebo patients. I will share these new data that show persistent BMI reductions and consistent safety and tolerability over the next few slides. Our goal will be to present the data, including the full 52-week data, at a medical meeting mid-year. Slide 6 is to remind you of the original bivamelagon phase 2 design. Patients were randomized to either placebo or 1 of 3 dosing cohorts for a period of 14 weeks. Last July, we announced positive top-line results at 14 weeks, with patients in the 400 mg and 600 mg arms achieving a mean BMI reduction of 7.7% and 9.3%, respectively. Similar BMI reductions as achieved by setmelanotide at the same time point. At the end of 14 weeks, the study remained blinded. All patients were then redose escalated to preserve the blind from 200 milligrams to the target dose of 600 milligrams for the balance of the open label extension period. Slide 7 shows the disposition of the 28 patients. As a reminder, one patient discontinued after the first visit due to rectal bleeding, judged unrelated to study drug. One 64-year-old male, who had lost 14.5% at 14 weeks in the 600 milligram cohort, chose not to continue into the open label for personal reasons. One patient has stopped taking the drug but remains in the trial as a retained dropout. In summary, 26 of 28 patients remain active in the trial, including the retained dropout patients. 25 out of 28 remain on active drug. The next 4 slides show individual patient data at 40 weeks. Slide 8 shows the placebo patients whose baseline BMI was calculated from their 14-week clinic visit when they converted to active drug. With the exception of the 12-year-old female, who we believe was not compliant, all patients showed a response to drug after 14 weeks, which included the uptitration period, with further deepening at 26 weeks, the week 40 visit. Of note, one patient did not have her 40-week visit, but she remains in the trial. Similarly, for the original 200 milligram cohort on slide 9, all patients, with the exception of the retained dropout patient who is actively gaining weight and the patient who we believe is not compliant, have had a response at 28 weeks and further deepening at 40 weeks. The modest response on 200 milligrams alone at 14 weeks does suggest that this dose is probably subtherapeutic for many patients. Slides 10 and 11 show the data for the original 400 and 600 milligram cohorts. With the exception of the 2 patients who are not fully compliant, 1 each in the original 400 and 600 milligram cohorts, all patients have had a good response to drug, with 11 of 14 patients decreasing by 10% or more. The mean BMI decrease for the 400 milligram cohort at 40 weeks, including the non-compliant patient, was 10.8%, and the mean BMI decrease for the 600 milligram cohort, including the non-compliant patient who gained 7.5% and the patient who dropped out at 14 weeks, was 14.3%. Of note, the setmelanotide phase 3 data at the 40-week time point in patients not on a concomitant GLP-1 from our phase 3 study was 15%. With regard to safety, the drug is better tolerated when taken with a small amount of food. The side effect profile continues to mimic what we see with setmelanotide. The nausea and vomiting tends to occur early, and then patients tolerize. The episodes of diarrhea tend to be a little more sporadic, are mild in severity, and no patients have discontinued because of diarrhea. In this trial, the compliance issues have been predominantly in the younger teenagers, who we believe have struggled with the size of the pills. As we have indicated, we will have an easier-to-swallow single pill formulation going forward for each of 200, 400, and 600 milligram doses, and we will have a chewable tablet for younger patients. Next steps for this program will include bioequivalent studies comparing the new and old formulations, a drug-drug interaction study, and a hepatic impairment study. We expect to have the majority of this work completed and drug supply for phase 3 studies by the end of the year, with a goal of initiating the phase 3 HO study by year-end 2026. I would characterize our FDA meeting as highly constructive on multiple fronts. They confirmed that bivamelagon is ready to move to phase 3. As many of you know, we were hoping, given the prior setmelanotide data and the placebo cohort data, that we could negotiate a 6-month double-blind period and a smaller number of subjects, given the effect of the drug. They were firm that with a new chemical entity, a full 12-month double-blind, randomized controlled trial would be required, as well as a larger number of patients to build up the safety database. We are awaiting the final minutes from that meeting. Expect that number to be closer to the full 142 patient study in our setmelanotide trial. Our plan will be to run this trial largely in countries where setmelanotide will not be available for acquired HO in the near future, which should facilitate enrollment. There was no discussion of setmelanotide in the upcoming PDUFA date. The FDA is communicating with us on the expected timeline, and we have received the first feedback on the label. I'm not going to make further comments today on that, on that feedback, as it is preliminary and pending the final submission of data on all 142 patients, which will be incorporated into the label. As shown on slide 13, we have multiple upcoming milestones with PDUFA for HO, top-line data from our Japanese HO cohort and the M and A readout all coming in March. For M and A, we are working to get the top-line data with the goal of releasing that data by the end of March. The PWS trial continues on track to get to the full 6-month data by mid-year. At our December release, we indicated that 1 patient had discontinued his trial. Since then, we've had no further dropouts, with all remaining 17 patients continuing on treatment. We have taken no further data cuts and have no further patient updates to provide on this call. The RM-718 weekly formulation continues to enroll in HO, and we are on track to have initial 3-month data by mid-year. With that, I'll turn the call over to Jennifer. Jennifer Lee: Thank you, David. Starting with BBS, we had another steady quarter of growth in prescriptions as our teams continue to focus on educating healthcare providers to expedite patient diagnosis and working with payers to secure approval for reimbursement. Importantly, patients are benefiting from IMCIVREE therapy as it is the only approved therapy that targets the root cause of rare MC4R pathway diseases like BBS. We continue to be inspired by patient success stories. For example, 1 adult male patient with BBS, who is a resident of an assisted living facility, had such severe hyperphagia and preoccupation with food that he could not participate in group outings. After 6 months on IMCIVREE therapy, he not only lost 40 pounds, but his hyperphagia had quieted down meaningfully, and now he's able to socialize with others and participate in group activities. On slide 15. Our teams are continuing to prepare for the Acquired Hypothalamic Obesity launch, pending regulatory approval and our March 20th PDUFA goal date. Acquired HO is a distinct post-injury neuroendocrine disease characterized by impairment of the MC4R pathway, leading to hyperphagia and accelerated and sustained weight gain. With an estimated prevalence of 10,000 in the United States, Acquired HO represents a significant opportunity for Rhythm Pharmaceuticals, Inc. to expand the reach of IMCIVREE and the benefit it brings to patients. If approved, IMCIVREE would be the first therapy for these patients that currently have no approved treatment option. As we've discussed previously, we expanded our sales force from 16 to 42, all highly experienced launching new therapies in rare diseases. With the extra time ahead of launch, our engagement efforts have continued. Claims data helped us identify healthcare providers who we believe are caring for patients with Acquired HO. Our HCP engagement has been focused on disease awareness to help drive suspected cases to formalize diagnoses of acquired HO. We already have engaged with HCPs who care for more than 2,000 patients diagnosed with or suspected to have acquired HO. Let me outline an example of the ongoing dialogue around patients suspected to have HO. Our team engaged with an endocrinologist who treats several patients with sustained hypothalamic injury. During a meeting with a field team member, who outlined that injury in the hypothalamus could cause impairment of the MC4R pathway, leading to acquired hypothalamic obesity, the physician noted that 1 patient, in particular, stood out. This patient experienced severe weight gain following treatment of a brain tumor, subsequently underwent gastric bypass surgery, and later initiated GLP-1 therapy with minimal benefit. Now, with a clear understanding of the clinical diagnosis of acquired hypothalamic obesity and appropriate screening criteria, this physician indicated he suspects additional patients may have acquired HO, and he'll bring them back for evaluation and diagnosis confirmation. Moving on to the next slide. We have also learned more about the management of AHO patients through our territory manager's disease education efforts. In addition to the ongoing engagement of our MSL or Medical Science Liaison team, we have identified approximately 40 priority medical centers throughout the nation based on their significant concentration of AHO patients. Approximately one-third of the potential AHO patients who we have identified via claims data are managed within these centers. The majority of these have pituitary centers, where hypothalamic disorders are managed by multidisciplinary teams. While there are similarities within these organizations relating to which specialty is brought in to manage the tumor and treatment, as well as the hormonal dysfunctions associated with the procedure, there is variability in terms of who manages AHO. In one center, the endocrinologist involved in the treatment of the hormonal dysfunctions would also take on the responsibility to treat the weight gain. In another center, these patients' hormonal dysfunctions would be managed by the endocrinologist, but they would be sent to the community PCP or obesity specialist to be treated for their weight gain. Understanding these differences allows us to better pinpoint who would potentially be the diagnoser of AHO versus the obesity treater and future potential prescriber of IMCIVREE, if approved for AHO. Our team continues their ACP engagement and identification of patients who would benefit from IMCIVREE once approved. On to my last slide. Beyond ACP engagement, we also continue to engage with payers to secure access for patients as soon as possible following approval. Our education and engagement around BBS established a robust base for securing access for AHO, as payers have come to recognize the differentiation of MC4R pathway diseases and the value that IMCIVREE offers patients. For acquired hypothalamic obesity, payer coverage following approval, our expectation is for policy updates to occur within 3 to 9 months. We are excited by the progress we have made and are ready for launch, pending approval in acquired hypothalamic obesity. Let me turn it over to Yann. Yann Mazabraud: Thank you, Jennifer. I will begin on slide 19. We had a strong year in 2025, as our international organization has grown to more than 100 employees across 13 countries. With the ongoing BBS and POMC LEPR cells and the reimbursed early access programs for Acquired Hypothalamic Obesity in France and Italy, IMCIVREE is now available in more than 25 countries outside the United States, including eight countries newly added during the year. Our growth in 2025 was driven by sales in countries with established access and new countries coming online. Our team engages with key experts across Europe to advance education and the understanding of rare MC4R pathway diseases. In 2025, 64 abstracts, both originals and anchors, were accepted for posters or oral presentations at 12 international and national scientific congresses. Next slide. Here I highlight one recent publication entitled, Early Onset of Obesity Model: Impact of Early-Onset Obesity on Comorbidity Risk and Life Expectancy, which was very recently published in Obesity Facts, the European Journal of Obesity. This peer-reviewed early-onset obesity disease model, which we developed in collaboration with leading European experts, integrates data from more than 140 publications to quantify how the age of onset, the severity, and the duration of obesity negatively affect the risk of comorbidities, the health outcomes, and the life expectancy. This reinforces that early-onset obesity is a serious progressive disease and stresses the urgent need for early intervention. This finding supports recent focus on early diagnosis and treatment of obesity, driven by impairment of the MC4R pathway. We are addressing the underlying cause earlier as a potential to reduce long-term disease burden and create meaningful benefits for patients, families, and healthcare systems. Next slide 21. Now moving to acquired hypothalamic obesity. We are planning for multiple opportunities in Europe and Japan, with a higher per capita prevalence of acquired HO than the United States and Europe, and an estimated population of 5,000-8,000 patients. Japan represents a meaningful long-term opportunity for our MC4R agonist franchise. We continue to make significant progress ahead of our anticipated Japanese launch, establishing a strong leadership team focused on engaging with experts and healthcare centers. Earlier this month, our team had a very positive in-person meeting with the Japanese PMDA, and as David said, we anticipate top-line data from the phase 3 cohort of Japanese patients in March. In Europe, our EMA submission for HO is under review. We anticipate the CHMP opinion in Q2 and the EU marketing authorization in the second half of 2026. The steady growth in our reimbursed early access programs for HO in France and Italy is a very positive indicator for success in Europe and helped establish foundational relationships with expert physicians and local authorities. The French regulatory authorities renewed this month the authorization for the IMCIVREE AP1 reimbursed early access program, which clearly illustrates the benefits patients are receiving as part of this program and the high unmet need. Pending marketing authorization from the EMA in the second half of 2026, we will begin to establish reimbursement for acquired HO in Europe on a country-by-country basis, as we have done before for POMC LIPA and BBS. With that, I will turn over to Hunter. Hunter C. Smith: Thank you, Yann. 2025 proved to be a strong year, with solid growth in global sales of IMCIVREE and multiple value-driving milestones achieved across our portfolio of MC4R agonists. We entered 2026 well capitalized, with more promising potential catalysts ahead. I'll begin on slide 23 and walk you through our results for the fourth quarter, which was another solid quarter, as well as the full-year revenue, both of which we pre-announced in January. Revenues from sales of IMCIVREE were $57.3 million for the fourth quarter of 2025, representing a quarter-over-quarter increase of 12% and $194.8 million for the full year, an increase of approximately 50% from 2024. On a sequential quarterly basis, revenue growth was driven by an increase of approximately 10% in the number of patients on reimbursed therapy globally. In the fourth quarter of 2025, $39 million, or 68% of product revenue, was generated in the United States, and $18.3 million, or 32% of product revenue, was generated outside the United States. On slide 24 is the walk from the $51.3 million in global sales in Q3 to the $57.3 million in Q4. In the fourth quarter, the volume of vials shipped to our specialty pharmacy in the United States was approximately 1.7 million greater than the vials dispensed to patients. This compares to an excess of vials shipped over dispense of 3 million in Q3 2025. The net effect produced a negative $1.3 million inventory swing from Q3 to Q4. For the second consecutive quarter, inventory days on hand at the specialty pharmacy increased. You have approximately 20 days versus a normalized level of around 10-15 days. As was the case with year-end 2024, as is common across our industry, this type of growth in days on hand represents a potential pull forward of revenue from the quarter of actual patient demand and can, with all other things being equal, have a dampening effect on the first quarter of the year. U.S. revenue grew by $2.1 million quarter-over-quarter due to increases in product dispensed to patients. Ex-U.S. revenues increased $5.2 million, or 40%, versus the third quarter of 2025. The sequential increase was largely due to the negative impact on the third quarter of a one-time $3.2 million charge related to the final agreement with France on the reimbursed price for IMCIVREE for the treatment of BBS, POMC, and LEPR deficiencies. On slide 25 is the financial snapshot of year-over-year performance, as well as the fourth quarter 2025 results compared to the fourth quarter of 2024. Net product revenues in Q4 2025 increased by $15.4 million, or 37%, over Q4 2024. Gross to net for US sales was approximately 84.6%, generally in line with the gross to net percentage from previous quarters. Cost of goods sold this quarter was 8.5% of product revenue and was mostly attributable to cost of materials and our royalty payment on setmelanotide due to Ipsen. COGS, as a % of product revenue, was down slightly this quarter based on an increase in finished goods inventory. We generally expect cost of goods sold to be between 10% and 12% of net product revenue, with variation due to how our inventory balances change and the corresponding capitalization of labor and overhead costs, as was the case in Q4. Research and development expenses were $42 million for Q4, compared to $41.2 million in the same quarter last year. Sequentially, R&D expenses decreased by approximately $4 million compared to the third quarter of 2025. More than half of that decrease was due to the transition of our area development managers in the United States to sales reps or territory managers, moving their salaries and stock compensation to SG&A, effective October the first. Costs in the fourth quarter from our Phase 3 HO trial with setmelanotide and our Phase 2 trial with bivamelagon decreased from the third quarter. SG&A expenses were $57.5 million for Q4 2025, as compared to $38.1 million in Q4 last year. Sequentially, SG&A expenses increased by $5.1 million, or approximately 10%, compared to the third quarter of 2025. Increased SG&A spend from Q3 to Q4 was due to increased headcount costs and professional fees associated with the anticipated launch in acquired hypothalamic obesity, including the transfer of the field force described previously. For Q4 2025, weighted average common shares outstanding were approximately 67 million. Our GAAP EPS for the fourth quarter of 2025 was a net loss per basic and diluted share of $0.73, which includes $0.02 per share from $1.3 million of accrued dividends on convertible preferred stock. Cash used in operations was approximately $25 million in the fourth quarter and $116 million for the full year. We ended 2025 with approximately $389 million in cash equivalents, and short-term investments, which we expect to be sufficient to fund planned operations for at least 24 months. On slide 26, a few additional items of note. Our GAAP operating expenses for 2025 totaled $362.3 million. That included $66.8 million in stock-based compensation. Non-GAAP operating expenses for the year were $295.5 million. This came in at the lower end of the range that we guided for at this time last year. Our common share count is 68,285,039 shares as of February 24th. This number includes 729,164 shares of common stock, which were converted from preferred shares since the end of the third quarter. Recall, we raised $150 million in gross cash proceeds through the issuance of convertible preferred shares in April 2024. Following this partial conversion, there are 202,395,831 potential common shares that could be converted from the remaining preferred shares. The recent conversions represented almost 25% of the initial preferred shares, hence reducing our liability of dividends payable to preferred shareholders. Lastly, on slide 27, we are offering annual guidance on non-GAAP operating expenses. For 2026, we anticipate approximately $385 million-$415 million, which includes non-GAAP R&D expenses of $197 million-$213 million, and non-GAAP SG&A expenses of $188 million-$202 million. The overall increase in non-GAAP operating expenses for 2026 of approximately $104.5 million at the midpoint, which is about 35% over 2025, is the result of the success of our clinical programs in 2025 and represents future investments drived at driving long-term growth and increasing shareholder value. There are three primary drivers of the growth in anticipated 2026 spending. First, approximately 30% of the year-over-year increase will come from increased spending on formulation development, manufacturing, and clinical supply of our next generation MC4R agonists, bivamelagon and RM-718, as we continue to move both compounds through proof of concept studies and hopefully registrational studies in the coming years. Second, approximately 25% of the increase will be on U.S. commercial operations in support of the HO launch. Third, approximately 15% of the increase will be to build out Rhythm's operations in Japan in anticipation of a potential approval in HO. Overall, this forecasted year-over-year growth in operating expenses is the product of the last few years' clinical, regulatory, and commercial success, and represents a meaningful opportunity to invest in Rhythm's long-term potential to serve patients with MC4R pathway diseases. With that, I'll hand the call back over to David. Thank you. David Meeker: Thank you, Hunter. Tanya, we can open it up for questions. Thank you. Operator: Certainly. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile our Q&A roster. We will now open for questions. Our first question will be coming from Derek Christian Archila of Wells Fargo. Your line is open, Derek. Derek Christian Archila: Good morning, and thanks for taking the questions. Congrats on all the progress here. David, just first on bivamelagon phase 3, your comments suggest that this will largely look like setmelanotide phase 3, so, in terms of sample size and duration, but are there any changes to enrollment criteria that you would, you know, think of or other features of the trial that you can comment on? David Meeker: No. I mean, those are the principal things that we were looking to get feedback on. I think, you know, to your point, the trial will largely mimic our phase three. We continue to look at our patient reported outcome measures, some other things we can do to get better and better at, for example, understanding hyperphagia slash hunger. Some of these patient-reported outcome tools have not been validated, et cetera. That's an area which, as a company, we might modify, but we didn't get specific feedback from the FDA. Derek Christian Archila: Got it. Maybe just to follow up, you know, on the guidelines potentially for HO that could be implemented or, you know, kind of evolve over time, I guess specifically for post-surgical patients, where it seems like physicians want to, you know, intervene early prior to that significant weight gain. Just any comments on how that might evolve over time and what you're hearing? Thanks. David Meeker: Yeah, I mean, it's a good question. You know, we've had 6 months post surgery as a entry criteria to make sure that patients were stable on their hormones. That's very much a developmental issue because you don't know everything, and you wanna have things as, or the minimal number of things that might confound your interpretation of the results. In the real world, which is your question, and we've had this feedback from multiple thought leaders and the like, I mean, earlier is better. Why would you if you know the patient has HO, why would you make them wait 6 months to begin to intervene? You wouldn't do that for their thyroid hormone replacement, for example. I don't think there'll be that kind of guidance in the label. We'll see where, you know, guidelines, quote, unquote, "come out." Those will emerge over time, but I haven't heard that. I think the consensus would be, you know, as soon as you, the treating physician, are comfortable, yeah, you want to intervene. Derek Christian Archila: Got it. Thank you. Operator: Our next question will be coming from the line of Tazeen Ahmad of Bank of America. Tazeen, your line is open. Tazeen Ahmad: Okay, thanks, guys, and good morning. Can you give us an update on where you are with the PWS study? When is the next data update from that? What type of deepening response are you looking for? Are you looking for more weight loss, or are you looking for better hunger control? Or just can you give us a sense of that? Thank you. David Meeker: Yeah. Thanks, Tazeen. As I said in my comments, we're still on track for mid-year, in terms of providing that update for the 17 patients who remain on drug. I think, you know, the one piece of updated data I gave you today was that 17 of 18 patients remain on treatment. I think for a challenging disease, these patients tend not to remain on drug if they don't feel like they're benefiting, so we would take that as encouraging. I don't have an additional cut of the data, so as I said, I don't have further updates there. In terms of what we're looking for, again, we've been very clear and continue to learn, this is a more challenging disease in the sense that there's a lot of other things going on. They have multiple genes affected, not just those potentially impacting the MC4R pathway that are at play in this disease and can confound results. I think our goal remains the same. We'd be looking to clear 5% on the BMI change. We'll see how we do there, and of course, we'll collect hunger. I mean, the hyperphagia scores, HQ-CT, we shared that data in December with the caveat, you know, this is an uncontrolled trial, so those kind of measures, you really need a placebo control group to know exactly how you're performing. We will have that data, and of course, we'll share it. Operator: Our next question will be coming from the line of Unknown Analyst of Morgan Stanley. Your line is open. Unknown Analyst: Good morning. Thanks for taking the question, and congratulations on all the progress as well. Maybe just one question on IMCIVREE trends. You mentioned the potential for dampening of sales in 1Q, given some pull forward in 4Q. Maybe you can give a little bit of color on how to think about the growth. Is it just a slowing of growth, or should we think more flattish? Thanks. Hunter C. Smith: Well, I'm not, I'm not gonna give you comment sort of on where external estimates are. We did see negative growth Q4 to Q1 in 2024 into 2025. The buildup of inventory this year in absolute terms is less. You know, we'll see how that shakes out, you know, but it's just that dynamic in and of itself, that inventory represents a pull forward of sales from 1 quarter into, from Q4 out of Q1 into Q4. I think the only other thing is we have the typical experience that faces us every Q1, where there are a lot of plan renewals and plan changes for individual patients. Some patients rotate on to our bridge program, and then those get resolved, and they rotate off. Unknown Analyst: Understood. Very helpful. Thank you. Operator: Our next question comes from the line of Whitney Ijem of Canaccord Genuity. Your line is open, Whitney. Whitney Ijem: Hey, good morning, guys. I just wanted to follow up on EMANATE. You guys have talked about POMC PCSK1 and the SH2B1 substudies as being higher probability. Can you just talk to us a little bit, remind us, is that just driven by the enrollment and the powering of those substudies, or are there genetic biological considerations there as well? David Meeker: Let me summarize what I've said previously, you know, important to remind. The way we've handicapped this is, yes, we think that the POMC heads are the most likely to be positive, and that's based on the fact that, you know, we did have an assay going into the trial that allowed us to determine which of the variants were most likely to be pathogenic, meaning that they had true loss of function. There's a range of variants there, of course, the assay has its limitations. The bottom line is we felt that in that cohort, we were enrolling predominantly patients who would have true loss of function. That was our best, and we were able to enroll that cohort fully. The leptin receptor, we also had insight into which patients might have true loss of function. It turns out the leptin receptor head group is extremely rare, those that have this potential loss-of-function variant. That cohort was very significantly under-enrolled, and we weren't so optimistic there or not. SRC1, mostly VUS, Variant of Unknown Significance. Variants of Unknown Significance disproportionately tend to be benign. Again, we think there's a high risk that one may not be positive. The reason we remain somewhat hopeful on SH2B1 is that there's two groups there. One is those who have this deletion, 16p11.2 deletion. By definition, with a deletion, they would have loss of function. The other part, group of that, and that's enrolled, the missense mutations associated with SH2B1, you're back in this, you know, how many of those are VUS, and of the VUS, how many are benign versus pathogenic? Long story short, that's how we handicapped it. Again, we're working to, you know, get that data out by the end of the year. The other thing I've said is, you know, you're, you know, we, like I said, we've been, you know, careful and modest in terms of our, you know, projections here and what we think might happen. I think whatever we get, we're gonna learn a lot from these studies, and minimally, you know, they will form the basis for the next round of studies with our next generation studies, molecules, which we would do anyway. When we report out, we'll try to give you some insight into how we think about the future there. Whitney Ijem: Got it. That's helpful. Just one quick follow-up. Should we still be thinking about kind of the 5% weight loss as the kind of bar for success, either based on powering or just how you're thinking about it? David Meeker: Yeah, I mean, 5% is the guidelines. That's why we, you know, Prader-Willi, of course, where we think, you know, it's a really tough disease. I mean, that is the minimal threshold, so that's certainly the threshold here. I think in some of our other indications, you know, you get into, you know, where the world expects more today from a weight loss drug. Yeah, technically, it's 5% plus. I think, you know, what we would look at is, A, is the study positive? Then, B, do we think it's clinically meaningful and would be a meaningful offering, to the, you know, to patients with that, you know, specific genetic defect? Operator: Our next question will be coming from the line of Corinne Johnson of Goldman Sachs. Your line is open, Corinne. Corinne Johnson: Good morning, everyone. Maybe you mentioned this study for BIVA and that the FDA was pretty explicit that new molecules would require a year-long phase three, I guess. How are you thinking about that then, as it relates to the planned development of RM-718 in the same indication? Kind of separately, but in the same vein, how do you think about managing kind of quality control of the phase three program as you think through enrolling patients kind of ex U.S. in order to get that patient population? Okay, thanks. David Meeker: Good question. First on RM-718, yes, the read-through there would, you know, highly likely to be the same. I mean, you know, to be honest, you know, we'd go back, I would look to have another conversation with them. I think part of BIVA is it's a small molecule. I think RM-718's a peptide. It's highly analogous to setmelanotide. I don't know if they would look at that any differently, but, you know, a conservative base case here is, yes, RM-718 will have to do the same thing that we're being guided to for BIVA. Quality control outside the U.S., you know, the world's small. I mean, the sophistication of running trials, outside in these other countries, I mean, there's a number of centers and, you know, one or more centers in many or most countries, which are pretty sophisticated. CROs are structured to run trials globally. I'm not at all worried about quality. I mean, you pay attention to that, and we'll be careful, of course, but I think quality control is not the issue. Our challenge as always is, you know, rare diseases, you wanna find sites that have good access to patients. Operator: Good. Thank you. Operator: Our next question will be coming from Philip M. Nadeau of TD Cowen. Your line is open, Phil. Philip M. Nadeau: Morning. Congrats on progress, and thanks for taking our questions. Two from us. First, in the bivamelagon phase 3 trial, what dose will you be exploring? It seems like you think 200 milligrams is underdosed. 600 did look a little bit more potent, but the patient numbers were small, so we're curious what dosing paradigm you will use. Second, on hypothalamic obesity, I think the last number of identified patients that you gave to us was 2,000. Sounds like, as your sales reps are out there shaking the trees and doing medical education, you're finding more and more patients. Any update to that number? Thanks. David Meeker: Oh, dosing. Sorry. So the dosing will be we’ll dose escalate from 200 up to 600. 600 will be the target dose. You know, we look at the data the same way you did. I think there is a difference between 400 and 600 milligrams. I think we're still on a dose response part of the curve there. The other thing, which has been pretty encouraging, and I will say, you know, we've got, you know, a number of patients out for the full year. What happens, so I have a little insight there. I mean, what happens in HO is many of the patients continue to just gradually deepen over time. I'll remind you back to a patient from our phase 2 study, the most fairly affected oldest individual in that trial, a 24-year-old man who had a starting BMI of 52, 50+, and over a period of 4 years, he just continued to gradually decrease his BMI down to a normal BMI of 24. I think, you know, what we're seeing here is not inconsistent with that, is a gradual, you know, deepening over time. So short answer to your question is yes, the target dose will be 600. There'll be patients who maybe do fine on 400, just as there are patients who do okay on 2 milligrams as opposed to 3 with setmelanotide. I think, you know, we're incredibly encouraged here, and I think, you know, this data gives us high confidence that this pathway is central to HO, and we're correcting, as you might expect, in a hormonal replacement strategy. With regard to patients, you know, we updated in September, and, you know, we've stayed away from sort of giving you monthly or quarterly updates on those patient numbers, 'cause after a while, I'm not sure how helpful that is. You are absolutely correct, and as Jennifer highlighted in her comments, you know, the team's been doing a lot of work. You know, we're continuing to find more patients. Yes, that number's gone up. We're learning a lot about, you know, the nature of this community, you know, how many patients carry a diagnosis of HO and how many patients are, quote, unquote, "in suspected category." You know, this belief in the overall opportunity, the 10,000, is high, and it's higher than it was last September, for example, and we feel really good about the progress we're making. Philip M. Nadeau: That's very helpful. Thank you. Operator: Thank you. Our next question will be coming from the line of Jonathan Wolleben of Citizens. Your line is open, John. Jonathan Wolleben: Hey, thanks for taking the question. Just one on Japan. Hunter, you mentioned the investment you guys will be making there. Just wondering how we should think about the opportunity in Japan and the trajectory of a potential adoption. David Meeker: Yeah. Yann, you want to take that? Yann, are you... Did we lose you? Yann Mazabraud: Yeah, I'm back. Okay, sorry. Yes. Potential first, as I said earlier, we estimate the prevalence between 5,000 and 8,000 patients, and it's a well-documented prevalence, we are quite sure of this number. The second point was your question about our capabilities. We are currently building out our team. We have set up an affiliate. We have a full management team in place, and we already have a field medical team in the ground. From a timeline point of view, David mentioned the data in March, following that, you can count on 12 months of regulatory and market access and pricing aspects, which means that we should have a launch in the next 12 months from now. Jonathan Wolleben: Thank you. Great. Thanks. Operator: Our next question will be coming from the line of Unknown Analyst of Leerink Partners. Your line is open. Unknown Analyst: Hey, guys. Good morning. Thanks for taking the questions. Just on the HO expansion, appreciate the color on the regulatory interactions. It sounds like you're entering labeling negotiations, which is great. As we think through some of the color you're giving here around reimbursement and payer coverage and activating sites and patients, can you just elaborate a little bit on how you think about the launch cadence relative to BBS? Thanks so much. Jennifer Lee: Yeah. From the perspective of HO versus BBS, one, I think there are similarities and some differences. I think from a similarity perspective, you know, there's still a lot of opportunity, as we've outlined, just in terms of getting these patients to an actual diagnosis of Acquired Hypothalamic Obesity, versus just being seen as a patient with obesity for many causes that it may not be the root cause just in terms of what they are going through. There's still opportunity there. I think the other piece is from the perspective of a timeline of care coverage. You know, although we have a great starting point, just in terms of all the dialogue we had with BBS, in terms of the differentiation of, you know, MC4R pathway diseases, versus general obesity, it's still gonna take some time just in terms of going through the process of having specific CNT meetings, so that we get, you know, a specific policy for the expansion of the indication in place. We're similarly, in the meantime, going to be working through the process as we get the RXs in, pair by pair. There are some similarities. I think some of the differences is that in terms of HO, the precision and confidence, just in terms of the data we have to really pinpoint it down to the right physician to educate, to get these patients to a diagnosis, we feel a lot more confident about that. I think in comparison to BBS, you know, those sort of crumbs to lead us to the right physicians is stronger. I think the other aspect is, you know, we know even though, like, our teams are targeted by the data and following where the patients are, it just made sense that we are actually being led to these medical centers that have these pituitary, you know, centers and capabilities. We know where they go once they have the brain tumor, where they're treated, and they stay in that situation for a period of time so that as they start to encounter the symptoms of HO, we have the ability to really target those incident patients to get to a diagnosis that is not missed. That's a bit different than what it was like for BBS, which once again, gives us a bit more confidence just in terms of being able to identify them earlier in their journey. Operator: Next question. Operator: Our next question will be coming from Seamus Fernandez of Guggenheim Securities. Your line is open, Seamus. Evan Wang: Hi, guys. Thanks for the question. This is Evan Wang on for Seamus Fernandez. Just two from us. First, with RM-718, I saw some narrow timelines for Part D. Curious if there's any potential strategies to accelerate timelines there, potentially, like a phase 2, 3, just given some of the feedback and data that's around biva and setmel? Second, curious if you're exploring or planning to explore other areas of MC4R development, maybe in or other kind of avenues to treat obesity. Thanks. David Meeker: Just to clarify on that last part of the question, other indications that we're thinking about, other approaches? Is that what you’re— Evan Wang: Other indications or approaches for, it's mostly, I guess, obesity-related treatment. Thanks. David Meeker: Okay, for RM-718, is there a strategy to accelerate? I mean, we take, I think, a pretty aggressive view in general. I mean, regulators don't always agree with our approach, we end up sometimes in more conservative or conventional approaches. I think RM-718, as I said earlier, is likely to be highly similar to bivamelagon. We'll go with this initial experience and this open label study, and move right to a Phase 3. I don't know if there's an opportunity to accelerate things further there. The other thing is the pressure on the next gen in HO is we want to get it out as soon as possible. It's a little different. From an initial indication opportunity where those patients have no other treatment, and, you know, setmelanotide will be approved and out there, patients will have an option. Again, we'll move as quickly as we can, but it's not quite the same criticality as it might be if there was no treatment available at all. With regard to other indications, I mean, we've talked about, you know, the different kinds of, or the different areas that we're interested. One is genetics, you know, EMANATE being the first, you know, attempt beyond our initial approvals in POMC and LEPR. We have the DAYBREAK study, we will be coming back to specific genes. We will do that development work, as we've said, with next-generation molecules, probably not both molecules in every one of those genetic indications, but we'll come back to you with an updated plan there. With regard to, you know, other approaches to obesity, I mean, yes, we're open to that. We have, you know, early programs where we're thinking about different ways we might complement MC4R. That's all early. We're not at a point where we're prepared to talk about that yet, but we are fully committed to optimizing therapy for these patients with MC4R and deficiencies, and that would include potentially additional approaches. Operator: Our next question will be coming from the line of Unknown Analyst of Needham & Company. Your line is open, Joseph. Unknown Analyst: Good morning, this is Eddie on for Joey. I appreciate you taking our questions. Just a follow-up on MC4R, and the M and A sub-studies, can you remind us again, if you intend to submit these as a combined sNDA, for a broader MC4R pathway, or, just talk about how the regulatory path, might necessitate sort of, mutation-specific approvals, and then how this might change, for these next gen therapies as you kind of move through the trials, in later years? A follow-up. I'm sorry if I misheard. Did you say that in the biva OLE, that you saw moderately better results, patients not on GLP-1? If I heard that right, can you describe why that might be the case? Thank you. David Meeker: Yeah, let me take that last piece first. You know, when we're trying to create an apples to apples comparison, we took the patients in our RM-493-040 Phase 3 setmelanotide trial. If you remember, there was, in the treated group, about 15 patients who were on a GLP-1. That group did have a better result. If you remember, they got in the trial by not having responded to a GLP-1. Once they got setmelanotide, they had a very good response, and if you were just to look at that cohort, you know, their actual % decrease was greater than the group that did not get a GLP-1. Trial was not designed to, you know, prove that that might be a better outcome, but what we've concluded biologically is, yes, once you correct the underlying defect in setmelanotide, restore the hormonal deficiency, then your ability to respond to another anti-obesity medicine might be restored. We gain weight for a different reason if you're a patient who's got incremental weight because they love ice cream and they eat ice cream all the time, you know, then, you know, a GLP-1 in that setting, once you've corrected the hormonal deficiency might make sense. That was an apples and apples change there, and that was the goal there. Your question about EMANATE, in terms of regulatory filing strategy, no, these will be filed individually. Even if all four were positive, you know, we would file four separate sNDAs. They would be, like I said, one at a time evaluations. In the future, I mean, is there an opportunity for a mechanistic kind of approval that wouldn't require a full phase 3 for every genetic indication? I think that's possible. I would say we're definitely not, or the regulators are definitely not there today. That's not an unreasonable question for the future. Operator: Our next question will be coming from the line of Paul Andrew Matteis of Stifel. Your line is open, Paul. Unknown Analyst: Hi, this is Matthew on for Paul. Thanks so much for taking our question. I guess I had one on acquired HO. For the FDA review, we appreciate the pivotal phase 3 was already large, but will you be able to supplement your data package with the Japanese cohort? Does the timing work out such that you'll be able to include this before the PDUFA? Thank you so much. David Meeker: Yeah, Matthew, it's a good clarification. The answer is yes, and that's partly... I mean, when the FDA gave us their extension back in November, they were very aware of the exact timing of the last patient in visits. So they had done the calculation, recognizing that there was a very short period of time between when we would have data from that last patient, a Japanese patient, and being able to get the data in on the full 142 patients, which is what they wanted. So we're on that path, and we will get that data in. Yes, they are prepared to deal with the fact that, yes, it's now we're down to a relatively short period of time between that final data submission and the label or potential approval on March 20th. Unknown Analyst: Thank you. That's super helpful. Operator: Our next question will be coming from the line of Unknown Analyst of Citi. Your line is open, Samantha. Unknown Analyst: Hi, good morning. Thanks very much for taking the question. Just maybe one clarification on the phase 3. You mentioned that you were going to primarily enroll outside in countries where setmelanotide is not available. How does that work necessarily for enrollment in the U.S.? Just on Prader-Willi, can you just talk about your latest thinking on a potential phase 3 trial? Would you plan to take both setmelanotide and semaglutide forward, or is it more likely that you choose one of these drugs to advance? Thanks very much. David Meeker: Yeah. Okay, with regard to the phase 3 for HO, yes, we will run it predominantly outside. I wouldn't exclude having a U.S. site, but, you know, setmelanotide will be approved. Patients here have an option, so, the U.S., for multiple reasons, becomes a little more complicated. We do not need to have a site in the U.S., I mean, we already have U.S. data coming out of our phase 2 study. I'm not, again, I'm not so worried about our ability to execute the trial. I'm not using the U.S., but, you know, you never say never, so I would defer final decisions on that. For Prader-Willi, setmelanotide versus RM-718, I think, you know, this is something, as we've highlighted before, the advantage of going forward with setmelanotide is, you know, we've got data on setmelanotide already. It'd be a supplemental NDA, and so we could, in a sense, roll into that phase three. The advantage of going with RM-718, for example, is that, it's a next gen. We're gonna do a next gen study sooner or later, and that's the end game. If the RM-718 program is at a point where the gap between when we might start with setmelanotide and when we could start with RM-718 is not so great, I think, you know, we would, you know, take that time delay, if you will, and just go right to RM-718 and avoid having to run two studies there. That decision is yet to be made. We'll see how all this plays forward. Operator: Our last question will be coming from the line of Unknown Analyst of RBC. Your line is open, Lisa. Unknown Analyst: Oh, great. Thanks so much for taking our question, and congrats on the progress. I just have one on biva. Wondering if you can expand on your dose selection comments, and I realize this might be a bit early, as the phase three is not yet even started, but long term, is it possible patients could dose down with a maintenance dose if they happen to reach a normal BMI in the real world? Any color here would be helpful. Thanks so much. David Meeker: Yeah, yeah, I'll briefly repeat what I said before in the dose selection. I do think 200 is probably on the border in terms of being therapeutic for most patients. I think 400-600 is more likely in range, 600 does seem to have, you know, a continued dose response, 600 for sure will be our targeted dose, just the way 3 milligrams was our targeted dose in the HO setmelanotide trial. You know, with regard to dosing down, you know, what's interesting here is the biology, pathophysiology, it's a hormonal deficiency. You know, in theory, you take whatever amount you need to restore your hormonal deficiency, but it's not a biologic setting where dosing down makes sense. I think our expectation is most patients will stay at their target dose. That's been true with setmelanotide as we go forward. It's not, you know, you get your weight loss, and then you can kind of go to a low dose to maintain. That's not the pathophysiology. Operator: I'm showing no further questions. I'd now like to turn the call back to David Meeker for closing remarks. David Meeker: Great, thank you. Thanks all for tuning in. Again, we remain really excited about the progress here at Rhythm Pharmaceuticals, Inc. Lots of exciting things coming up. 2025 was a big year. 2026 is gonna be equally big. Look forward to our next update. Thanks, all. Operator: This concludes today's program. Thank you for participating. You may now disconnect.
Operator: Greetings, everyone, and welcome to the Nomad Foods' Fourth Quarter of 2025 Q&A Conference Call. Please be aware that today's event is being recorded. I'd now like to turn the floor over to your host, Jason English, Head of Investor Relations. Please go ahead. Jason English: Thank you. Hello, and welcome to Nomad Foods' Fourth Quarter 2025 Earnings Question-and-answer Session. We have posted the associated press release, prepared remarks and investor presentation on Nomad Foods website at nomadfoods.com. I hope you've all had a chance to review that. I'm Jason English, Head of Investor Relations and Corporate Strategy. I'm joined by Dominic Brisby, our CEO; and Ruben Baldew, our CFO. During this call, we will make forward-looking statements about the performance that are based on our view of the company's prospects, expectations and intentions at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and our investor presentation, which includes cautionary language. We will also discuss non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered a replacement for and should be read together with IFRS results. Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within this presentation represents adjusted figures. All adjusted figures have been adjusted primarily for, when applicable, share-based payment expenses and related employer payroll taxes, exceptional items and foreign currency translation charges and/or gains. Unless otherwise noted, today's comments from here will refer to those adjusted numbers. There it is, the fun part is out of the way. With that, operator, let's open the line to questions. Operator: [Operator Instructions] And our first question comes from Jon Tanwanteng from CJS Securities. Jonathan Tanwanteng: The first one I would ask, if you could, is what are the underlying components of volume and price in your guidance? And if you could go beyond that, perhaps what's your thoughts on net pricing versus inflation after the year? Ruben Baldew: Yes. So we have a guidance. Thanks for the question, first of all, Ruben speaking here. So our overall guidance is a net sales guidance. We're not breaking it down in terms of volumes and in terms of price, but I can give you a bit more context. As you've heard this morning also in our prepared remarks, we are guiding for a negative decline. And the main reason for that is the following. Firstly, we're in the midst of our negotiations, our annual negotiation. And this is normal with -- as it is normal with negotiation, we're seeing some delay and disruption and retaliation. We think that's temporary, but that will have an impact on our guidance. Second bit is that big part of our inflation actually is in Fish. We're seeing cost inflation in Fish. So we will be taking pricing on Fish. We expect competition to follow. But as we've seen in the past, there might be a time lag, and that's actually the biggest contributor to our negative guidance. And thirdly, as Dominic shared, this will be a year where we will be driving change, change to make Nomad the better company in terms of driving opportunities, but with change does come disruption. Now the first 2 points links to your question on volume and price. We do expect price to be a contributor. But also when we talk about price, there's mix in there. We will be continuing to drive potatoes growth. So that will be a bit of an offset there. But we also expect negative volume because of the reasons I mentioned, especially on taking price in Fish and the price lag of our competition. Jonathan Tanwanteng: Understood. Looking beyond '26, how should we expect normalized growth to look like, especially relative to the long-term targets you put out last year, especially if you take all these initiatives to improve your operating structure and efficiency? Dominic Brisby: So this is Dominic. Thanks for the question. So first of all, to be clear, I fully expect us to return to growth in 2027 and 2028, and I see tremendous growth potential for this business. What I'm not going to do right now is to commit to specific numbers or ranges currently. We're currently in the process of putting together multiyear plans in terms of what we're going to deliver and how we're going to deliver them. And I'm excited to have the chance to share these with you at our Analyst Day later this year. At that time, we'll be much more specific in terms of what we're going to do, what our building blocks are and what our multiyear targets are. But just to put this in context, a measure of how much I believe in this business and how much Ruben believes in this business is the fact that over the coming weeks, we're both going to be making substantial share purchases in the company. So 2026 is a transition year. It's a year in which we're enacting a lot of change, but the long-term future in our mind looks very positive. Operator: And our next question comes from John Baumgartner from Mizuho. John Baumgartner: I wanted to ask, Dominic, in the prepared remarks, there was a reference to, I think, strengthening relationships with retailers and doing better at the point of purchase. And I'm curious, some of the commentary over the past 6 to 9 months from some of the larger retailers in Europe, it seems that they're focusing quite a bit more on fresh food. It seems as though they're focusing more on investing in private label quality as opposed to just, I guess, competing on price. How do you think about -- I guess, how do you see the retail environment changing? Are you seeing retailers managing these categories differently? And how do you think about the reinvestment required to get people back to that fresh food case -- the frozen food case, excuse me? Dominic Brisby: Yes. So first of all, thanks for the question. So I think the overall behavior of European retailers hasn't changed dramatically over recent months or even the past couple of years. What we do see, though, is a continuation of an existing trend. There's nothing new about retailers wanting to make sure their private label offerings are high quality. And the focus on fresh has been quite a big theme in Europe as well. Now some of this is retailer driven. Some of this is driven by us as well as a clear leader in frozen. And certainly, we see a few opportunities, a, to strengthen our position at the point of sale and to strengthen our position with retailers, but also to make sure that we're creating excitement and animation at the point of sale. That means making sure that we roll out some of our great innovations, for example, Chicken Shop, which is working well in the U.K. There's no reason why that can't work well across Europe, creating more animation and more excitement. Secondly, making sure we have more disruptive and exciting positions at the point of sale to drive people into the frozen aisle, but also to make sure when they're there, they have something exciting to look at and focus on. And in terms of investments, there are some areas where this will require investment, and we've factored significant investment within our plan for this year to drive greater strength at the point of sale. But there's some where it won't require great investment. They'll just require more smartness from our side. For example, making sure that our packaging is not only much better than private label, but much better than the competitors as well and much better than we've been before. And particularly when you're walking through the frozen food aisle, because of the nature of packaging because it's generally not transparent, we have an opportunity to communicate much more on the packaging than would be the case in other categories. So we see a chance to be much more aggressive there than we have been before. This is something we're working on significantly. But in terms of retailer behavior, we're not seeing any dramatic shift versus where retailer behavior has been over recent years. Jason English: John, this is Jason. I would just add a comment about the opportunity to shift growth back out of fresh into frozen, at least that was my interpretation. I would just note that the frozen category is actually delivering very robust growth for our retailers. Throughout last year, it grew 2.4% across our overall footprint, which continues to track above overall food. So there are still healthy category tailwinds and step into some markets like Italy category growth of 3%; Germany, 4.5%. So we are fortunate to be in a category that is delivering growth for retail partners and that obviously affords us opportunities. John Baumgartner: Okay. Okay. Great. And then just a follow-up on the supply chain side on the fish business. We've seen some reports in Europe about some, I guess, disruptions on the IT platform and some digital systems on illegal fishing catches. Are you seeing any disruptions on the inflow of trade at the ports in Europe at this point? Or is that a nonevent for Nomad? Ruben Baldew: No, that's not an event for us. If you look at our ingredients and main items, we don't see that for our supply. Jason English: There was disruption, John, as you noted, it was reported in the Financial Times. And the programs, the policies that were being put in place that caused those disruptions have been temporarily suspended until they can be resolved. So the disruption was short term in nature and not long enough to impact our business or frankly, we don't believe it impacted the category or any of our competitors either. Operator: Our next question is a follow-up from John Tanwanteng from CJS Securities. Jonathan Tanwanteng: I was just wondering if you could provide more detail on the pricing negotiations and when you expect them to conclude? Number one. And what the -- if that's going to be a rolling thing through the next few quarters or if it's going to be all over before Q2? Dominic Brisby: So in the case of most European retailers, the price negotiations are happening right now. There are certain exceptions in certain markets and with certain customers. But for the most part -- there are a few exceptions, but for the most part, we expect most of that to be included -- to be concluded during the course of Q1. Jonathan Tanwanteng: Got it. And as a follow-on to that, assuming your competitors do follow you, how do you expect share to change throughout the year? Is there a point where you expect volume or value share to start coming back to you guys as the year progresses? Dominic Brisby: I mean, obviously, we have no idea what our competitors are doing in terms of pricing, although we monitor it carefully. The key point from our side, of course, we have a fairly meaningful differential in price versus private label. The key point from our side is to make sure we give consumers strong reasons to pay. There are a few ways that we do that. First is through making sure our products are superior. Our products always have been superior, but actually during the course of this year, they're going to be even more superior, for example, with the new coating on fish fingers, which we're rolling out. Secondly, to make sure that our brands are stronger. Again, our brands have always been stronger if you look at our brand equity metrics, but we see opportunities to be much more effective in terms of how we spend our A&P. And thirdly, it comes back to the point I made a second ago, making sure that at the point of sale, we're noticeably stronger, noticeably more noticeable and noticeably more disruptive than anyone else. And this is what we're going to be focusing on. Jonathan Tanwanteng: Okay. Great. And then last of all, it's good to see you committing to open share repurchases, but I was wondering if there's any change to the corporate capital allocation plan and if repurchases remain the priority for you guys? Dominic Brisby: So our top priority is to invest in the business to maximize our organic growth potential. And so we're very clear about that. Beyond that, our priority is going to depend on the circumstances. So as you know, buybacks have been a priority for us as we believe that our shares are trading well below their intrinsic value. And we continue to have an appetite to repurchase shares at current prices, but we're going to balance that carefully against our leverage ratio and our broader liquidity needs. We're also looking forward, M&A could potentially reemerge in the future if various conditions change, for example, if we're less cheap and deals are less expensive. The one thing I can assure you of and the one thing I want to be very clear about is that either way, we and the Board are absolutely intent on allocating capital in ways that we believe maximizes shareholder returns. Operator: [Operator Instructions] And it's showing no additional questions at this time, I would like to turn the floor back over to Dominic Brisby for any closing comments. Dominic Brisby: So thank you all for joining us today and for your interest in Nomad Foods. I very much look forward to meeting many of you in the days and weeks ahead. Thank you. Operator: And with that, we'll conclude today's question-and-answer session. We do thank you for joining. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Playtika Holding Corp. Q4 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tae Lee, SVP, Corporate Finance and Investor Relations. Please go ahead. Tae Lee: Welcome, everyone, and thank you for joining us today for the fourth quarter of 2025 earnings call for Playtika Holding Corp. Joining me on the call today are Robert Antokol, Co-founder and CEO of Playtika Holding Corp., and Craig Abrahams, Playtika Holding Corp.'s President and Chief Financial Officer. I would like to remind you that today's discussion may contain forward-looking statements, including, but not limited to, the company's anticipated future revenue and operating performance. These statements and other comments are not a guarantee of future performance, but rather are subject to risks and uncertainties, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. We have posted an accompanying slide deck to our investor relations website, which contains information on forward-looking statements and non-GAAP measures. We will also post our prepared remarks immediately following the call. For a more complete discussion of the risks and uncertainties, please see our filings with the SEC. With that, I will now turn the call over to Robert Antokol. Robert Antokol: Good morning, and thank you for joining us. We finished 2025 with a strong fourth quarter that shows our plan is working and the business continues to show bright spots. In Q4, we delivered $678.8 million of revenue and $201.4 million of Adjusted EBITDA, driven by D2C growth, our pivot to casual, and SuperPlay results. Here is the main point: We are building a balanced set of assets. Every year, more revenue comes from long-life casual games with broad reach, and D2C is now core to how we run the business. At the same time, our legacy game still matters. These are still meaningful sources of cash flow, and we are managing them with the focus and care as part of a portfolio, not as a one-game company. This mix is more balanced, less dependent on any single category, and better positioned to deliver durable free cash flow. First, D2C. D2C keeps growing and adds more value for Playtika Holding Corp. In Q4, D2C was 36.8% of our revenue, and we ended the year at about $1 billion in annual D2C revenue. This marks a clear shift in how we engage with players and process transactions. We are building a multi-channel D2C strategy, and we are consistently optimizing those channels to improve unit economics and strengthen our business over time. Second, our casual games. In Q4, casual revenue was about 74% of total revenue. We have evolved our portfolio over the last five years. This broadens the business and supports a steadier path. Third, SuperPlay. SuperPlay delivered record revenue in Q4, with Disney Solitaire up 21.4% quarter-over-quarter, and now our second largest game in the portfolio. We see improvements in Dice Dreams and continuous growth in Domino Dreams. SuperPlay's growth this year is nothing short of amazing. It makes them one of the fastest growing studios in the mobile gaming industry at their scale. We acquired SuperPlay to add top casual games, bring a new growth engine, and widen our base with long-life assets. The performance supports this decision and raises our confidence in SuperPlay. This acquisition highlights a core strength at Playtika Holding Corp., recognizing amazing teams and backing them with the capital and operating discipline. With SuperPlay, we invested behind a talented team with great potential and provided the financial flexibility to scale games. This reflects our disciplined approach to allocating capital when talent, product, and returns align, and the same playbook guides how we run the entire company. We act from a position of strength. We focus on returns, reallocating spend, and generating cash. With that, I will turn the call over to Craig to review our financials, outlook, and capital allocation framework. Craig Abrahams: Thank you, Robert, and good morning. Q4 reflects the strength of our model and a mix shift that is now clear in the results. We came in ahead of our revenue and Adjusted EBITDA guidance, set another D2C record, and saw outstanding momentum from SuperPlay. This is now the third straight year we have met or exceeded our Adjusted EBITDA guidance, reflecting the strength and consistency of our operating model. I also want to reinforce how we run the company. We manage Playtika Holding Corp. as a portfolio. We protect and strengthen leadership positions in our key casual franchises. We scale capabilities like D2C that improve our unit economics across the business, and we maximize the lifetime value of our social casino-themed titles while staying disciplined on returns and costs. On social casino-themed games specifically, these games operate in a tough, crowded market, and the mobile industry has evolved since our IPO. That is not a reason to be defensive; it is a reason to be decisive. Our goal is clear: slow the decline and get full value from these assets. We fund where returns make sense, extend the life of older titles, and step back where the bar is not met. We were pleased to see early signs of stabilization in Slotomania in the quarter. To be clear, we remain focused on stability and value while we build the next phase. To keep resources concentrated on our more attractive opportunities, we streamlined parts of the organization and plan to redeploy investment behind the areas with the strongest returns. The mix is improving, our growth engines are working, and we are building a more resilient Playtika Holding Corp. Turning to the financial results for the year. Revenue was $2.755 billion, up 8.1% year-over-year. We generated a net loss of $206.4 million, adjusted net income of $197.5 million, and Adjusted EBITDA of $753.2 million, down 0.6% year-over-year. Our net loss margin was -7.5%, our adjusted net income margin was 7.2%, and our Adjusted EBITDA margin was 27.3%. We generated record free cash flow of $481.6 million, an increase of 21.4% year-over-year. We are managing CapEx and working capital tightly. We remain focused on delivering strong free cash flow generation over time. Now to the quarter. Revenue was $678.0 million, up 0.6% sequentially and up 4.4% year-over-year. Net loss was $309.3 million, compared to net income of $39.1 million in Q3, and a $16.7 million loss in Q4 of 2024. The net loss was primarily driven by the non-cash impact of remeasuring contingent consideration related to the SuperPlay earn-out, which flows through GAAP results but is excluded from our adjusted net income and Adjusted EBITDA. Adjusted net income was $89 million, compared to adjusted net income of $65.8 million in Q3 and $27 million in Q4 of 2024. Adjusted EBITDA was $201.4 million, down 7.4% sequentially and up 9.5% year-over-year. Our Adjusted EBITDA margin was 29.7%, compared to 32.2% in Q3 and 28.3% in Q4 of 2024. Direct-to-consumer was a key driver of both performance and mix. D2C revenue reached $250.1 million, growing 19.5% sequentially and 43.2% year-over-year, reflecting broad-based contributions across our games. Turning now to our business results for the quarter for our top three revenue games. Bingo Blitz revenue was $158.5 million, down 2.5% sequentially and essentially flat year-over-year. We drove engagement with focused in-game and out-of-game campaigns around the Bingo Blitz and Garfield collaboration, including a new themed bingo room featuring a cooperative mini-game, where players work together to progress through Garfield content. We also introduced a new gameplay mechanic that has players find Garfield within bingo cards, and we closed the quarter with an innovative experience that offers eight bingo cards per session instead of the usual four. Disney Solitaire revenue was $71.6 million, up 21.4% sequentially. By Q4, the title had scaled rapidly and was approaching a $300 million annualized run rate, reflecting its strong momentum since its global launch in April 2025. Results have been driven by product execution and steady tuning, including new feature launches, game economy updates, and continued improvement in unit economics through direct-to-consumer. We have also seen traction internationally, including Japan, which further validates the global appeal of the franchise. For the full year, SuperPlay generated about $573 million of revenue, a 67.5% increase from the $342 million baseline tied to the earn-out. The studio is doing this while staying focused on long-term fundamentals, engagement, retention, and live operations. As we shared previously, we have expanded our collaboration with Disney and Pixar Games and are developing a new title in the SuperPlay pipeline. June's Journey revenue was $70 million, up 2.5% sequentially and down 2% year-over-year. June's Journey continues to maintain its position as the highest-grossing hidden object game worldwide. In Q4, engagement benefited from a strong content cadence and seasonal programming, including the Wicked IP collaboration. Direct-to-consumer is relatively new for June's Journey. We have scaled it quickly across both iOS and Android. We continue to see it as a durable lever to deepen player relationships and improve unit economics over time. Turning now to specific line items in our P&L for the fourth quarter. Cost of revenue increased 4.5% year-over-year, driven by revenue growth, offset by platform mix. Operating expenses increased 100.3% year-over-year, driven primarily by the GAAP impact of contingent consideration related to the SuperPlay earn-out. Excluding the change in contingent consideration, as well as expenses associated with our long-term cash compensation program that expired in 2024, operating expenses increased by 5.4%. R&D expenses increased 13.8% year-over-year, driven primarily by higher headcount following the SuperPlay acquisition and continued investment to support the growth of the SuperPlay studio. Sales and marketing increased 9.6% year-over-year, reflecting higher user acquisition spend due to the full quarter impact of SuperPlay, as well as the sequential step-up in marketing investments that we previewed on last quarter's earnings call. G&A increased 383.5% year-over-year, driven primarily by the $394.1 million contingent consideration expense recorded in the quarter related to the SuperPlay earn-out. Excluding the impact of contingent consideration and expenses associated with our long-term cash compensation program, G&A would have declined by 22% year-over-year. To provide more clarity, a brief word on the earn-out mechanics. The SuperPlay earn-out this year is tied to revenue growth versus a $342 million revenue baseline, with a step-up in multiple above certain thresholds. Changes in fair value of the contingent consideration run through GAAP G&A, but they are excluded from adjusted net income and Adjusted EBITDA and do not change the underlying cash terms of the earn-out. We ended the year with $820.2 million in cash equivalents and short-term bank deposits, and we expect to fund the SuperPlay earn-out from cash on hand. Looking at our operational metrics, average DPU increased 0.8% sequentially and 5.3% year-over-year to 357,000. Average DAU decreased 3.7% sequentially and 1.3% year-over-year to 7.9 million. ARPDAU was $0.93 in the quarter, up 4.5% both sequentially and year-over-year. On to our outlook for 2026. Our guidance reflects a business that has been undergoing a strategic shift. Growth titles led by SuperPlay are driving material revenue. Our industry-leading casual franchises, Bingo Blitz, June's Journey, and Solitaire Grand Harvest, continue to benefit from live ops and rising direct-to-consumer contribution. In social casino, revenue is declining, and our focus is on protecting the economics of those franchises and maximizing cash flow through disciplined management and operating efficiency. We also want to be clear that direct-to-consumer is a core and growing part of our business, and we are executing to expand it. At the same time, we are taking a measured view of any incremental benefit tied to the evolving platform policy landscape, and our guidance does not assume any single policy outcome. With that context, our guidance for full year 2026 is as follows: Revenue of $2.7 billion–$2.8 billion, Adjusted EBITDA of $730 million–$770 million, capital expenditures of $80 million, and an effective tax rate of 30%. We also expect our marketing spend to be weighted toward the first half of the year, particularly the first quarter, which we expect to result in lower Adjusted EBITDA in the first quarter and higher Adjusted EBITDA in subsequent quarters. Finally, capital allocation. When we initiated our dividend, the intent was to provide an attractive return to shareholders while we executed on our strategic priorities, including restarting M&A and repositioning the portfolio. We have made real progress against those priorities. We have scaled D2C to record levels. We have successfully ramped up SuperPlay, and it is performing in line with and in certain areas ahead of the expectations we had at the time of the acquisition. We have also sharpened our operating model and reset our cost basis. At this stage, our capital allocation framework needs to reflect both the opportunities in front of us and the performance-based nature and potential size of the SuperPlay earn-out. To preserve flexibility and direct capital to the highest return uses, we are suspending our quarterly dividend. With respect to share repurchases, we intend to keep buybacks available within our capital allocation framework. We will continue to evaluate our capital structure over time, including opportunities to reduce debt where it makes sense, while maintaining balance sheet capacity to fund potential obligations and invest behind growth. As we take these steps to focus capital on the highest return opportunities, we remain fully committed to enhancing long-term shareholder value. With that, we would be happy to take your questions. Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while I compile the Q&A roster. Our first question comes from Aaron Lee from Macquarie. Please go ahead. Aaron Lee: Hey, guys. Good morning. Thanks for taking the question. Congrats on the quarter. I just wanted to talk on a general level about AI. I know you mentioned this in the letter around workforce reduction. Could you expand on how you view the role of AI within your business? How are you using it today, and what have been the early learnings? Looking forward, where do you see the greatest opportunities? Thanks. Gotcha. Thank you. On capital allocation, I appreciate all the comments there. How should we be thinking about your appetite for M&A at this point? Does that fall under the category of investing behind high-return growth? Thanks. Robert Antokol: Thanks for the question. As we spoke in the last few years, we started investing in AI, I think six to seven years ago. We opened a few labs in Playtika Holding Corp., and we always understood that this will be part of the future growth. Right now, what we see is a revolution happening. For us, this is an amazing opportunity, because when you look at Playtika Holding Corp. today, our asset is the community and the content. This is our asset. We see the AI opportunity as a new platform. We see something that can grow our business. We are very excited. We are following every trend that is happening in the market. I am sure that for us, it is going to be one of our growth engines in the future. Craig Abrahams: Thanks for the question, Aaron. M&A has always been a core part of our growth strategy. SuperPlay has been a tremendous transaction for us, and given the growth and strong growth that we have seen through the year, we plan to continue to invest aggressively in growing that within the constraints of the earn-out. As we look at overall capital allocation, we want to continue to invest in the best ROI opportunities possible, and investing in the SuperPlay earn-out and the SuperPlay platform is definitely the highest priority capital use for us. As we look at other M&A opportunities, we are always going to try to be opportunistic, but we are cognizant of the fact that we want to maximize liquidity and balance sheet flexibility as we move forward. Aaron Lee: Got it. Appreciate the color. Great job with SuperPlay. Craig Abrahams: Thank you. Operator: Thank you. Our next question comes from Eric Handler from Roth Capital. Please go ahead. Eric Handler: Good morning. Thanks for the question. As you look to transition more people to the D2C platform, what type of incentives are you giving people to move off of iOS or the Google or Android platform? I assume some percentage higher of incremental virtual currency or items. I am just trying to get a sense of how that is working. Robert Antokol: Thanks for the question. First, to say again that D2C has become one of our biggest parts of cash flow growth in the last few years. We are on a run rate of $1 billion. I think we are leading the industry; I do not think anyone is even close to us. At the end of the day, we are giving a better experience to the users. We are closer to them; we can provide more support to them. I think the advantage of having such a huge D2C platform is the right connection to the players. It will help with retention; it will help with long-time gameplay. For us, this is one of the most important things. As we started D2C, we always knew that it was going to be one of Playtika Holding Corp.'s strengths and one of Playtika Holding Corp.'s engine growth drivers for cash. This is what we are doing. Eric Handler: Thank you, Robert. Operator: Thank you. Our next question comes from Chris Shull from UBS. Please go ahead. Chris Shull: Great, thank you. Just to follow up on the 2026 guidance, can you frame or quantify what this assumes for Slotomania and the social casino performance as you seek to ramp newer IP in that category? As you think about performance coming in at the higher or lower end of those ranges, what are some of the biggest variables in your mind? Okay, great. Thank you. If I can fit in one more. The D2C mix was clearly well ahead at 37% versus the 40% mix I think you previously talked about reaching in two years. Any updated thoughts on that longer-term target? Where is the natural limit as we try to gauge how high this could ultimately reach? Thank you. Craig Abrahams: Sure. Thanks for the question. As you have seen, we have been undergoing a mix shift. I am proud to say that our business is now 74% casual, and that continues to be the fastest growth part of the business, driven by SuperPlay. As we look and give forward guidance, continued overperformance from the SuperPlay titles is definitely there on the upside case. On the downside case, you would see continued declines in the social casino portfolio. That mix shift obviously impacts margins, but as we look at the guidance and our consistency over the past three years, either meeting or beating expectations on the Adjusted EBITDA side, we have confidence in our ability to execute there and continue to focus on that transition toward a more casual, healthier mix going forward. Sure. Good question. Our previous long-term target was 40% of revenue. We will continue to keep that, given all the various policy changes in the background. Our target does not assume one outcome or the other as it relates to things outside of our control. It is really focused on what we can control and our own execution. Operator: Thank you. Our next question comes from Matthew Cost from Morgan Stanley. Please go ahead. Matthew Cost: Good morning. Thanks for taking the questions. Just first on Disney Solitaire, obviously, that game is on a really great trajectory. Just looking at some of the third-party data out there, it looks like it has shifted upward again year-to-date in 2026. Is that a function of live services in the game? Is it because you have hit a seasonal bump in marketing, which you typically see in the first quarter, and you are allocating a lot of it towards that game? How should we think about the trajectory as you move through 2026 from here? That is question one. Question two for Craig. There was a lot of shift toward D2C in the quarter. It seemed to impact gross margins a little bit less than I would have expected, given the magnitude of impact to revenue mix on D2C. Are there any crosscurrents in gross margins that we should be cognizant of that prevent a sudden increase in gross margin as you see the dollars flowing through D2C? Thank you. Craig Abrahams: Thanks, Matt. I will take the first one on Disney Solitaire; Tae will take the second piece on gross margins. Disney Solitaire is off to a great start to 2026. As we referenced in the prepared materials, there is a meaningful investment in marketing dollars in the first quarter. We anticipate EBITDA will be impacted in Q1 and moderate throughout the year. I think you are going to see that larger investment drive real growth. It is one of the best ROIs we have within the portfolio in terms of deploying marketing dollars. Tae Lee: Matt, on the gross margin point, you are right to call out some of the crosscurrents that you are seeing. You are seeing the benefit in lower platform fees, in terms of revenue from an increased D2C mix, but that is offset by increased amortization coming from past acquisitions that are flowing through our P&L. Matthew Cost: Great. Thank you. Operator: Thank you. Our next question comes from Jason Bazinet from Citi. Please go ahead. Jason Bazinet: Thanks so much. I was just wondering, Craig, if you could unpack that approximately $400 million change in the contingent consideration. Is that composed of, like, $225 million on the 2025 payout that has not gone out the door, plus approximately $180 million on the 2026 payout? If that is true, what, if anything, can you share about the EBITDA margins at SuperPlay to trigger that approximately $180 million on the 2026 payout? There is nothing prospective in those earn-outs for 2026. You are not positing what the earn-out will be in 2026. These are all just earn-outs, backward-looking, if that makes sense? Yep. Okay. Is the trigger—am I right—that the trigger is greater than 5% EBITDA margins? Is that confirmed? Yep. Yep. Is it fair to assume, based on the $400 million, that you are between that 5% and 10% margin on SuperPlay, or is that the wrong implication? Okay. Thank you. Thank you. Craig Abrahams: If you look at the contingent consideration that we have payable, due at the start of Q2, you will see in short-term payables an estimate of the earn-out amount. We have the year one earn-out payable at the start of Q2. Obviously, each year thereafter, years two and three, we will have earn-out payable before. Given the strength of the performance there, you see a higher earn-out payment and therefore higher contingent consideration. The EBITDA is in line with—in order to pay the earn-out in year one, it was less than $10 million. While we cannot say the specific amount, they obviously are eligible for the earn-out and had an EBITDA loss better than -$10 million. No. The contingent consideration amount in total takes into consideration future earn-out payments as part of the Monte Carlo simulation, coming up with the present value of that payment. In terms of what is actually payable, it is in our payables in the balance sheet. In year—year two, which is 2026, it is greater than 5% margin. There is a 0.25x multiple premium on revenue if they get to a 10% margin. No, that is for 2026. For 2025, which is the first year of the performance earn-out, it is just doing better than -$10 million in Adjusted EBITDA. You can assume that. You got it. Operator: Thank you. Our next question comes from Clark Lampen from BTIG. Please go ahead. Clark Lampen: Thanks for taking the question. Craig, I have two on D2C, if I may. You mentioned that you are relatively earlier on with the transition for June's Journey. Could you remind us if there are titles across the portfolio that do not have a meaningful D2C presence or, similar to June's, maybe a more nascent one at this stage? Maybe a naive question on D2C. When we think about that sort of revenue stream for you right now, is that spend solely captured from your players in a browser environment, or have you also set up link-outs for the App Store version or app version of your games for players that might prefer to engage with the titles in that format? Thank you. Okay, if I may, very quickly, a quick follow-up on marketing. Relative to the approximately $761 million that we saw called out in the 10-K, is it possible to give us a sense of what is budgeted for 2026 or maybe even a more directional indicator? Within this question, I am curious if you see in Q1 that the returns are really healthy for Disney Solitaire, do you have the flexibility over the balance of the year to invest behind that title or new ones, if you believe that the returns justify it? Thanks. Craig Abrahams: Thanks, Clark. At this point, we have broad penetration of D2C across the portfolio. Those casual titles that we had flagged previously years ago are now well penetrated in terms of their D2C base and growing. We had broad growth across the portfolio. Based on platform changes, we have seen increases across the platforms, on mobile, with link-outs as a new means of growing D2C. There is a variety of channels that we deploy, and each game has its own roadmap and is out there executing. Unfortunately, we do not break out the guidance on marketing dollars for next year. What I can say is that there are constraints around SuperPlay in that they are under an earn-out, and so, given the previous question, they are targeting a 5% or greater margin. While the foot is on the gas from a marketing perspective there and driving growth, at some point, that will have to moderate to ensure that they are able to drive margins into that 5% or 10% or greater from an EBITDA perspective. That is really the only commentary there. Operator: Thank you. Our next question comes from Doug Creutz from TD Cowen. Please go ahead. Doug Creutz: Thank you. Could you give an update on the status of Jackpot Tour? Is that a game you intend to be putting significant marketing dollars behind in Q1 and the first half? How does that game factor into your guidance? Thank you. Robert Antokol: Thanks for the question. As we said, we launched the game. We are still checking the KPIs. I can say that we are not 100% sure we are going to open it strongly in the coming few weeks. We still need to see the numbers that we are used to, so it is in progress, and it is part of our strategy around the slots game. I want to take this opportunity to say that Slotomania, after many quarters, is going to grow quarter over quarter this quarter. This is big news for us, and this is big news for the social casino industry. As I said in the beginning, the Jackpot Tour is part of our strategy there. Thanks. Doug Creutz: Thank you. Operator: I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Heli Jamsa: Good afternoon, and welcome to Qt Group's Q4 2025 Results Presentation. My name is Heli Jamsa, IR Lead. And with me today are our CEO, Juha Varelius; and Interim CFO, Ann Zetterberg, to present the results. After the presentations, we will have Q&A first in the room. And if there's time left, move on to the questions from the lines. Without further ado, please, Juha, the floor is yours. Juha Varelius: Thank you. Thank you. Good afternoon, everyone. And we have a same agenda, as always. I go a bit through what happened on Q4, and then Ann is going to go through the numbers in more detail. I'll talk a bit about the future outlook and then questions. So the Q4, we had a growth of 12.6% or 18.6% comparable currencies. And of course, IAR acquisition, which we completed -- contributed in this development. And IAR was EUR 8.1 million on Q4, and our organic growth was 6.1%. So it was a -- compared to the very difficult year we had last year, it was a decent quarter, and we were happy on that. Our EBITA margin was 35.6% and the EUR 27.5 million, and that's -- there is a decrease compared to last year, but we did have a one-off cost on the acquisition that were burdening that. I'm going to talk more about the overall market environment. But of course, the -- even the year changed, the market environment hasn't changed that much. So we had quite a bit challenges last year which affected our customers in a way that we had tariffs and whatnot uncertainties. So the selling developer licenses last year was slow, if put it on one word. So the -- on the whole year, we ended up on EUR 216.3 million, which is a increase of 6.6% on comparable currencies. So we went pretty much in the middle of our guidance. The distribution license revenue grew very well last year. There were a lot of new things coming into the market, new programs started, which ended up on the 26.4% growth. And of course, the main growth drivers, industries for distribution licenses is the automotive, medical and industrial manufacturing. The whole year EBITA was EUR 51.8 million, and there was a decrease. EBITA margin was 24%. Our personnel increased end of the year to 1,100 out of which 215 are IAR employees. So -- but we did continue our own hiring as well. The one-off costs for IAR acquisition, EUR 5.8 million. We're going to talk that also a bit later, but the -- of course, we all know that the IAR profitability has been less than the Qt. So that affects the overall profitability of the group going forward this year. We haven't disclosed the ARR before. And on the ARR we had a growth of 8.3%. And there on the small print is that the -- it is Qt and the QA developer license base and it does not include the IAR licenses and distribution licenses. So that ARR is the Qt and QA business. We plan to give that ARR number now in the future also in the half year sequence. So you can see that because one of the questions affecting our revenue has always been the shift from 1 to 3-year licenses. Of course, last year, we did see the cautiousness in our customers. So the -- it was slowness in sales, but it was also people shifting from 3 year to 1 year. So now presenting this ARR, we don't have to -- you don't have to worry about the shift from 1 -- 3 year to 1 year because we can follow the ARR. And our plan is to give that number now next time after second quarter and so on. Obviously, it's a number that doesn't change that much. We might even go on a quarterly basis if that's needed. But the -- like I said, it's much slower moving -- slower moving measurement. Well, here are some of the product-related things we did in 2025. There are always questions about AI. Is AI going to eat our lunch in a way that the -- you know that there are a lot of predictions on AI that the -- no developers are needed and AI is going to do all the code. Well, at least as of now, we don't see that development. We do see that there are a lot of AI assistants being used like we are offering them in Qt and our design studios and on Squish. So on writing test scripts, for example, you can use AI and then the Squish does the actual testing. So they help on that. But do we see that the -- specifically on embedded world that the AI would become and replace the developers, that kind of a development, we don't see as of yet. At the same time, of course, it's good to realize that I think that the U.S. companies are planning to invest EUR 500 billion, EUR 600 billion next year. So obviously, they are expecting to get something out of it. But I have -- I don't see that developers would be going away next year or even in the coming years in that sense. On the partnering side, we -- on Axivion, we do have partnerships with NVIDIA CUDA. So the -- when you're doing CUDA code, you can -- or using CUDA, you can use the Axivion. On the R&D, on the defense sector, we did have the FACE certifications and working with Infineon over there, on the AI consumer power devices. And then we are expanding our ecosystem through the Qt bridges, which will enable more languages over there basically. These are just some of the highlights that we are working on the product development. So in general, our product has -- all our products have always been very good. We get a very good feedback. So this is just to show a few examples that we do continue our R&D and we do -- we are on the forefront of product development all the time, making sure that all the Qt products are very competitive in the market, and that seems to be the case on all the customer surveys from our users. With this, Ann, please. Some numbers. Ann Zetterberg: Yes. I am Ann Zetterberg. I am -- I have been the CFO of IAR for -- I'm on my fifth year now. And with the acquisition of IAR, I had the opportunity then to step up and become the interim CFO for Qt. And I'm going to tell you a little about the numbers then for this quarterly report. So delighted to meet you all. There will be a bit of a P&L first, maybe a little repeat on what Juha just mentioned. But we had -- in Q4, we had a growth of 12.6% and after exchange rate impact, it was 18.6% at comparable currencies and the organic growth with removal of IAR revenue, which was EUR 8.1 million, that was EUR 6.1 million. And we -- in -- for 2025, the growth was 3.5%. Exchange rate impact has been pretty bad, both for Q4 and for the full year, especially the dollar has behaved very, very badly for us. And the growth there for 2025 at comparable currencies was 6.6% and the organic growth was 2.6%. But as Juha also said, we plan to show the ARR as that shows better the yearly underlying growth for the company. It doesn't -- it's not affected from which contract length the customers chooses. As we recognize 95% of the contracts upfront, it depends -- it matters a lot if they choose a 5-year contract or a 1-year contract for revenue, but ARR illustrates the underlying growth very stably, and that is growing good for us. It was 8.3% of growth for the Qt part, excluding IAR during the year. And then looking at expenses, the personnel and year-on-year grew by 267 individuals. That's a growth of 31%. But of course, a lot of that relates to the IAR acquisitions, 215 people worked at IAR at the acquisition. And -- so that increased the headcount to 1,136, both on average for the year, but also at the year-end. And IAR contributed EUR 4.8 million in staff costs in the P&L. Under other OpEx, the IAR acquisition had some extra costs then, EUR 4.1 million in Q4 and EUR 5.8 million during the year. And also, I wanted to highlight, even though it's a very small cost, the capitalized asset as IAR has interpreted IAS 38 a bit differently than Qt has and has capitalized R&D assets in the balance sheet. Presently, there is EUR 5.4 million of capitalized unfinished assets in the balance sheet of IAR and those are expected to be finished under 2026. But this means that we will have a small positive effect on the P&L from these capitalizations, removing costs and putting it into the balance sheet. I don't expect any large amounts from this, but it is still good to understand that this is what it looks like now. Over time, there will be some harmonization within the group, so all companies look at this in the same way. And then, of course, the profitability, like Juha just mentioned, has gone down. The EBITA margins are lower both for Q4 and for the year. IAR has a lower profitability. So that contributes to that and as does the acquisition costs. But of course, when you join 2 companies, there are also opportunities for integration, efficiencies and cost reductions, which we are going to work with on starting this year. And this means that the earnings per share has gone down to EUR 0.73 for the quarter and EUR 1.25 for 2025. So then moving on to the balance sheet. A lot has happened to the balance sheet, obviously, from the acquisition of IAR. The preliminary PPA added EUR 204 million in net assets to the balance sheet. Of that, goodwill was EUR 122 million. And then there were identified other intangible assets of almost EUR 90 million. Those were customer relations, technology and trademarks. And those will be written off over 15 years. So the amortization yearly net of tax would be EUR 4.8 million. And also the PPA added, or the acquisition added other net assets of EUR 11.2 million in IAR. Some of those assets on the asset side of the balance sheet and some on the debt side sort of spread over, but the net of them all are EUR 11.2 million. Some of those assets were trade receivables then, which increased the trade receivable balance to EUR 58.7 million in the balance sheet. And there are also other receivables, which could be good to know, one booking of EUR 5.1 million as we have booked the full value, 100% of the shares to the balance sheet, as there is arbitration going on, and we are obligated to buy the rest of the shares. We are not showing any minorities under equity and so because it's only a matter of time until we own 100% of the shares. But that can also be good to know. And then the ending cash balance was EUR 40 million -- EUR 40.1 million, a little lower than compared to last year as we have made this large acquisition. And as the balance sheet has expanded, the equity ratio has gone down from 81% to 50% and also the interest-bearing debt has increased. The interest-bearing debt is EUR 143.2 million. And of those, EUR 134.4 million are debt relating to the acquisition of IAR. So we have paid off some of the debt already. It was EUR 150 million from -- to begin with. And also on the deferred tax on the debt side relating to those intangible assets that were EUR 90 million on the other side, there is also deferred tax booked on the other side which is EUR 18.5 million. So good to understand that also how the PPA affects the balance sheet. And on the short-term liabilities, there is a debt of EUR 5.1 million, which is the amount we expect to pay for the remaining shares of IAR after the arbitration is finalized. And then I can just, as a final note, say that operating cash flow then had gone down a bit, but mainly because of the profitability going down. So nothing strange about that. And with that, I suppose I'm done with the financials, and we will take questions afterwards, but I will then leave to you, Juha, to take the next of the slides. Juha Varelius: Thank you. So 2026. Well, I think the first big thing is that the -- during the next 3 years, as you know, the IAR has been on a perpetual model. And our -- during the next 3 years, we are -- our target is to shift that into subscription model. That's roughly the -- by the way, the same plan we did have the -- early on with Qt when we did this a few years back. And if this goes as planned, the IAR revenue will be going down this year. So it's going to be decreasing this year. And then depending on how aggressively that goes down this year, then the swing back will be bigger next year. So -- but it's the early phases. So we've started the journey. We have now a couple of months behind us. So it's to make -- exact predictions at this point is there is a bit of a room for that estimate still. The -- well, the -- I think it's -- the market has been uncertain so long, that the uncertainty will definitely continue. As we know, there are a lot of global tensions going on as we speak, and that's what we're looking this year. Some of our customers are in a challenging environment. The -- like in automotive, the Chinese automotive manufacturers are putting a pressure on the European manufacturers. And at the same time, there are tariffs that's obviously going to continue all this year. And so on and so forth. So I think that on the industries, the automotive will be in challenge, Medical will not so, and the industry automation seems to be doing pretty well. Defense is doing really well. So in -- if I now look at the 2 of our biggest industries, they are actually medical and defense at this point of time. So they've grown quite substantially over there where they've been. The long-term growth prospects, well, like I said on the AI, this software really defines the value of the products. Each product will have software going forward and the new versions of it we don't see on embedded, that the AI would be eating all that market away far out from that. But we do see AI improving our own products on many respects, and that's what we are implementing. So before we've given our estimates that -- we've given you a range, but we gave up on that range. So now we're saying that the -- our full year net sales will increase at least 10%. So we're saying that, that's the floor, but we are not giving a range. So we're not giving the upper part guidance. So that's a bit different. And we're saying that our operating profit margin will be at least 15%. So again, we're saying that, that's the floor. We're not giving the upper range. So we've -- we're not giving those ranges anymore. Going forward, we're going to start after Q1 or after Q1, we're going to start giving you more info on the -- on how the -- well, we'll start sharing this ARR, which will give you a better understanding. You don't have to worry about the shift on the 3 to 1-year licenses. And then we're looking at the -- we're going to give you more on the revenue per product, so you get a better understanding on the -- how the licenses -- distribution licenses are coming. So we're looking to open up that a bit. I don't know if it's going to make your life any easier because there is a lot of fluctuations. But at least you can then see that fluctuation. So the -- we've been listening -- what you've been asking and -- so that's the -- but more to come on that later. I think the ARR actually will help you more than seeing the license -- distribution license sales and whatnot, but the -- more than that. So do you have any questions? Okay. Matti Riikonen: It's Matti Riikonen, DNB Carnegie. A couple of questions. They are very simple. Do you expect the legacy Qt business to decline in 2026? Juha Varelius: Simple answer, no. Matti Riikonen: Okay. Do you have a rough estimate of how much IAR's revenue would decline in '26 versus '25, if you give a broad range? You say it's going to decline and you say that you don't know yet, but roughly where is -- where are your thoughts at the moment? Juha Varelius: Well, double-digit. Matti Riikonen: All right. Juha Varelius: Low double-digit. Matti Riikonen: And third question before I give the mic to somebody else. How will IAR's fixed cost base develop in 2026? Juha Varelius: Simple question, longer answer. The -- well, I mean, we're not looking to increase the IAR cost base. So what you're going to see now is that the IAR -- the revenue decline really depends on the -- how well can we go on a subscription, and we try to go as aggressive as possible. So the -- if I say low double-digit revenue decline, somewhere there, right? I don't know yet, but somewhere there. And then 2027, I do expect to see a double-digit -- high double-digit growth on the -- maybe close to 20-something, to give you an idea how it's roughly good work, right? On a cost level, when we see costs, obviously, we're not going to be increasing costs because the prices are increasing, right? But the -- we do have some R&D-related initiatives over there where we think that we're going to be increasing cost, and they are related into the fact that the IAR is very much on a functional safety critical environment in automotives and whatnot. We are looking for a product development that we can broaden that segment roughly, to put on a broad perspective. And then we have few places where we're going to -- mainly on sales, we're going to increase sales costs, but we're talking very modest cost increases on the IAR side. So if you look at the old IAR, I know you have the numbers from there, we're looking very -- we're looking some cost increases, but fairly modest over there. But still, if you model that -- the revenue development on IAR numbers with that revenue dip, you're going to be seeing that the EBITA contribution for the whole group this year is going to be pretty much breakeven or even slightly negative. So we're not looking for -- first of all, on the guidance, we are -- those are the bottom lines. They are the floors. They are not the -- we see that, that's the bottom, bottom, right? So we do expect a bigger numbers. And then the IAR negative contribution will be on this year, but when it swings next year, we don't -- there is no need to increase costs for that because it's basically a price increase. So it will swing the IAR EBITA. Well, it's a license sales. So everything that the revenue will be increasing will go directly to bottom line. So that's the implication. On Qt Group, we are -- well, you call it legacy group. So the time changes. But -- so we'll figure out the better name than legacy. Anyway, the old Qt, we're not expecting organic decline, and we're not expecting that the -- what we saw last year, the bottom line, we're not expecting there to see a declining EBITA that we had last year. So the -- and that's the bottom performance, right? So we expect that the bottom performance be last year level and higher from there. So that's kind of the overall picture. So it's maybe not that gloomy than you were first thinking. I don't know how gloomy you were, but that's my educated guess. But thank you for the simple questions. Matti Riikonen: That's all from me so far. Jaakko Tyrväinen: Jaakko Tyrvainen from SEB. On distribution licenses, what happened in the sales in Q4 since I recall that the commentary after the first 9 months performance was rather moderate also in this revenue stream? So I'm curious whether there were some customers filling up their inventories in terms of distribution licenses? And how should we look at the revenue stream for '26? Juha Varelius: Yes. Thanks. So well, maybe later on the first Q when we open up a more broad distribution, you're going to see -- But the distribution licenses is really hard to predict because the -- it's not like this -- I mean, quarter-on-quarter like last year, it went like -- well, first quarter, second quarter boom and then up again, and that changes every year. So the quarters are not alike. So you can't expect that what was last year and second quarter is going to be the same. And that makes it difficult. And as you know, the distribution licenses go that -- some customers buy them afterwards, telling that how much they [ chipped ] and some people buy a chunk on prebuy. And that's why it's hard to predict. On a general level, we can always see that we know that the -- some big new products, productions are coming into the market, then we know on a yearly level, what's going to happen. So last year was on that sense, very good. So if you look last year numbers and distribution licenses for this year, I would take them slightly down. That's my expectation for this year given the market volatility, given the -- what's the customer demand in Europe and whatnot. So the -- I mean, at the end of the day, our distribution license revenue comes from product, what the consumers are buying, right? So the -- that's in a general terms, it follows. And we do have -- we are in 70 industries. We are both on commercial devices like industrial automation, robots and whatnot, stuff that goes into hospitals, stuff that goes into factories, but also on consumer goods like auto, cars and whatnot. So that's where the fluctuation really comes. So I would not put on my model same growth this year than we had last year. This is going to be substantially lower. So same number or a bit below. That would be my best guess. And -- that's a guess. Jaakko Tyrväinen: Understand very well. And just to confirm, Q4 was strong in distribution license? Juha Varelius: Yes, yes, yes, I was a good. So last year, on distribution licenses, Q2 was very good. Q3 was very weak. Q4 was good. Q2 was, if I remember correctly, the best on distribution licenses last year and does not mean that, that's going to replicate. It really goes like this. Jaakko Tyrväinen: Good. Then on the ARR, thanks for sharing that to us and the growth of 8% there. Could you give some color on how much of this was pricing and how much was coming from the effect that customers changed from 3 year to 1 year, which obviously should have kind of positive pricing impact on the ARR number -- annualized ARR number? Juha Varelius: That -- Very good and detailed question that I -- those numbers I don't have. We can come back later, but those I don't have out of my head. But the -- on general level, I can say that there was some shift from 3 year to 1 year, if I look on a whole year number, but it's slowing down. That shift is slowing down. But definitely, what we saw through all the year was the fact that on renewals, the -- what people used to do is that they had something and then they renewed older licenses. Nowadays, customers are counting that how many developers we really have, how many licenses we really need. And in general, money has been very tight. I mean our customers are very -- they're very tight on money. So they are looking all the costs. And on many R&D budgets are such now that the R&D budgets are not growing, but the -- so if they do something additional, they need to stop doing something old. Jaakko Tyrväinen: Good. And then my final one on the possible AI disruption also in the embedded side, I heard what you said. But could you give us for -- kind of for a dummy explanation why the embedded world, what are the barrier entries for AI native solutions to break in? Juha Varelius: Well, as of today, what we see, first of all, that you have lots of safety critical, you have lots of functional safety type of things like car brakes and whatnot, you need certificates and there are -- there is a very tight regulation what you need in order to have software. So you can't just ask AI that do me a car brake system, thank you and implement it, right? The second is that the -- on embedded, the software goes into products, right? And in products if you need to do a product recall, that is really, really expensive. So you have to be fairly certain that what you're doing. The third is that the embedded is fairly slow moving. There are huge companies building these cars and all these devices, medical devices and whatnot. So the time of the change and how secure they need to be that if I'm building this medical device, that nothing really goes wrong. So they change relatively slowly, right? Whereas if you think that on a website that I want to do a mobile application, I do a mobile application, if it works, great. If it doesn't work, it doesn't matter so much. So the -- it's kind of a different environment. And then if you think about coding, just building the software is -- it's one part of the process. You need to define what you want. You need to discuss with people that what are we building, what this product is doing and on and on and on. And AI is definitely not ready for that yet, right? So the -- where it's really going to end, we'll see, but that's what we see as of today. So there are -- we see AI as assistance and the -- like if you're designing something, you can use AI to give you creative ideas because as people, we tend to start looking one-way street. AI can open up your creativity and whatnot, but yet you're still using tools. So my prediction is that the next phase you're going to see on SaaS environment and the products like ours is yet another pricing change. We're doing this just to mess you up, right? So -- but yet another pricing change. And the pricing change is going to be that -- the pricing, I think, is going to go more towards from that the -- what has been built, how much the tool has been used rather than a deficit, right? So that's where I see the AI is going. And I had a -- one breakfast discussion and the person pointed out that the -- remember a couple of years back -- this person said to me that remember a couple of years back, everybody in Finland were talking that the -- even grandmas need to learn coding because software is in every device and everybody needs to learn how to code so that we can use these products, and they were all kind of coding school starts and whatnot. That was 2 years ago. Now everybody is talking that developers are -- nobody needs developers anymore. So there is a bit of a hype on the speed of the change. I mean, over time, of course, AI is going to -- 10 years from now, AI has changed a lot how we work, but -- and live our lives. But in the near future, I don't see much of effect. Then on the -- and this is the Qt development, right? On the IAR compiler business where you need all the certificates and whatnot, there is no way you can use the AI for a long time. And then on our testing tools, well, whatever you do with AI, you need to test. So I see that there's going to be more and more software that needs to be tested because you can't rely on AI. So the testing business is going to grow substantially as a market. Felix Henriksson: Felix Henriksson, Nordea. Three questions. Firstly, on Q4. The revenue growth organically accelerated a little bit, and we discussed about the distribution licenses being strong, but was there anything else that improved? For example, the lack of large deals that we saw in earlier quarters, did that -- did those sort of come back at all? Juha Varelius: No. no. If I look on the regions, the -- I would say that the -- we're doing well in APAC. We're doing okay in Europe. We have room for improvement in Europe in some markets. And then in general, we have lots of room to improve in the U.S. So the majority of our softness has been in U.S. And then we come to the point that the -- if we talk about the AI or if we talk about that the -- is there a competing product or is there a price change? What I see in the market is that we're doing fine in APAC, we're doing fine in Europe and the main softness we have is in U.S. and even in U.S., we have some teams that are doing okay, but then some teams are really suffering in that respect. So that's why I'm fairly confident that it's not about AI eating our market because if it would be, it would be eating our market everywhere globally, right? And this is more a local softness we are having. Same thing for prices and competition because we have same type of -- in APAC, we have the same industries and same type of customers we have elsewhere. So our softness basically has come last year that we've been a bit soft, been a U.S. related, right? And I'm very confident that we can fix that and get the efficiencies over there on a better shape. Felix Henriksson: Right. And then on the guidance, you mentioned that you're no longer giving those ranges, upper end. Can you expand on that a little bit? What's changed with your guidance philosophy in a way that triggered that change? Juha Varelius: Yes. I wasn't very good at that last year. Felix Henriksson: Okay. So maybe more conservatism in that way? Juha Varelius: Yes, yes, absolutely. Yes. Well, hey, we gave 2 profit warnings was not on my plan. Felix Henriksson: Fair enough. And lastly, on distribution licenses, I mean, we've started to see memory prices going up and there are some supply constraints emerging that potentially are impacting your customers, I presume. Do you think that's a sort of potential headwind when you look ahead and what are your customers saying when it comes to this? Juha Varelius: No, that's a downwind because the -- that's where Qt really signs. The fact that if you use Qt, you can do more with less memory. So that's the -- I mean, that's been the basic promise since the beginning. So the -- with Qt, you can have the same performance with the lower-end hardware, and that's the main selling point we are having as of today. And so higher price is better for us because at the end of the day, our customers will have to build those products anyway. So then it's a question of that how -- what kind of performance they want, what kind of end user experience they want. And that's where we sign. And that's where like Android doesn't sign, right? You use Android and you need a lot more hardware than using Qt and so on and so forth. Same goes with Unity. So most of our competitors, they may be in some use cases like Unity, Unreal, they might be able to do a better 3D visualization or it looks better, but it consumes so much hardware that if we go on a lower-end hardware, we can beat them. And you can get good enough, you can get a fairly good performance and a lot lower hardware using Qt. So that works for our benefit. Antti Luiro: It's Antti Luiro from Inderes. One question. We know that the last year's growth was quite sluggish and there is still uncertainty around this year. So is that affecting your own investment plans? Or are you just keep on going with all the growth investments that you have planned before? Juha Varelius: Yes. I mean, yes, we will continue our investments, yes, for sure. That's the -- no doubt about that. And we do have these few areas where we see the -- well, first of all, I think that we wouldn't be here in the first place if our products wouldn't be so competitive. So we need to keep them in that way. And then, of course, we are exploring the opportunities that the AI is opening up, and we need to do product development to have AI agents in our own products and so on and so forth. And you're going to hear product releases as we go forward this year. So yes, definitely, we're going to do that. Then at the same token, like the -- Ann was saying over here that we just merged 2 companies. And of course, we are going through all the processes, we're going through the -- that where can we be more efficient. So we've grown very fast. We are 1,200 people. And the -- so we do have also the efficiency programs, if you like. But it's -- so it's not all more, more, more. It's also efficiencies at the same time, and that's very much on and stable as well. Waltteri Rossi: Waltteri Rossi from Danske Bank. A few questions about AI. Did I hear correctly that you said that you might change your pricing model in the future due to AI? Juha Varelius: Yes. I said that, that's probably going to be the first change that we see on AI that the SaaS models pricings will start changing more from based on the consume of the tool rather than the deficit. I did not say that we're going to do that change, and I did not say that we're going to do that change this year, but I said that, that's what I see that the -- how AI is going to be affecting SaaS companies in general that the pricing will change going forward. I don't see that AI will be taking over the tools business per se. Waltteri Rossi: Yes. I understand, but no time line for that? Juha Varelius: No, no, no, no, no. Waltteri Rossi: Okay. But that would imply in a way that there is at least a big threat on your developer license sales? Juha Varelius: No. No, I don't see it that way. I see it that the -- that's going to be the effect that the SaaS business will go more towards that, that the people are charged at how much you use the tool rather than the per deficit. I see that development coming. But no time line, definitely not this year, next year or so. No. Waltteri Rossi: Okay. Well, next one is still on AI. What would you say is basically Qt's value proposition for the customers because there's the argument that AI will make developers' work more efficient. So that's kind of eating up your -- one of your value propositions. So what else do you basically offer for the customers? Juha Varelius: Well, we offer a tool that they can build their graphical user interface or applications. And as we are here today, AI is not capable of that. So you need the human and you need the tool. And then it's debatable that when will AI be able to do that, if ever. And then we see that if you need certifications, you need -- like on defense, like in automotive, on many industries, on medical, there's a long list certifications you need to meet. So who's going to train an AI that will meet those certifications and make sure that AI does the things every time in that particular manner and everything is met. I mean, that's years away, if ever. Waltteri Rossi: Yes, yes. I agree. But still on that, actually, a follow-up. We know that programmers are already today using AI assistance. But are you saying that you don't see your customers yet using them? Juha Varelius: No. And you see a lot of developers using AI on the web technologies. So if you want to do a simple mobile application, you can do that or you want to do web pages, you want to do your own homepage, you can use AI for that. But of course, they are so simple that you can -- if you want to do your own web pages, you can have -- they are on a web already. So what AI does is that it takes a web page and then it produces a new web page, right, that you can do. But on embedded building on products, no. Waltteri Rossi: One last on AI. So can you please elaborate how Qt is currently using AI in the framework? Or do you have add-on or something? Juha Varelius: Yes, you can have add-ons. You can have assistance over there that helps you getting started. For example, on the -- on testing, you can use AI, that it helps you doing the testing script and these type of things. So it helps you kind of where you can think that it helps you building a bit of a story or text, but yet still you have to read it and modify it. That's what we see as of today. Waltteri Rossi: All right. Then one last question on the usual 1 to 3-year licenses. So do you have a number on how much that shift from 3-year licenses to 1-year licenses impacted last years? Juha Varelius: No, but we're going to give you the ARR, so you can start following that. Matti Riikonen: Matti Riikonen, Carnegie, a couple of questions more. They are even more simple. First of all, you discussed the capital -- capitalized cost policy so that you would basically go towards Qt's policy, which I read that you would not any longer capitalize some costs that IAR has. Should we expect that there would be none whatsoever on the capitalized costs in '26? Ann Zetterberg: Because we have unfinished assets in the IAR balance sheet, and we need to continue capitalizing on those according to IAS 38. So there will be some capitalization of R&D assets during 2026. But we expect that those will be finished under 2026 assets that are not finished. And after that, we will harmonize between the companies so we can find a common application of IAS 38... Juha Varelius: Because -- I want to come over here, so we have you in the camera as well. Ann Zetterberg: Yes, sorry. I apologize. Yes, about the capitalization since Qt and IAR has handled the IAS 38 application very differently. So IAR has been capitalizing R&D assets into the balance sheet, which increases the profitability and then you write off the assets over time. And after the acquisitions, we kind of cleaned out the balance sheet. But the assets that are not finished, they are still there, and we will have to follow IAS 38. We will have to continue to capitalize on those until they are finished. Otherwise, we don't follow the bookkeeping rules correctly, and we don't want to break them. So that will happen. And in that time, we will evaluate and harmonize between the companies so we can have a common approach to this. And then I expect that we will not capitalize anymore, but I cannot 100% tell you that, that will happen. But we will have to have a common approach anyway within the group on how we handle this adjoiner [indiscernible]. Matti Riikonen: What kind of magnitude of capitalizations do you think there would be in '26? Ann Zetterberg: It will not be a lot. Those assets are almost finished. They're EUR 5.4 million there now. So I don't expect there to be any huge capitalizations. As you saw during Q4 on those assets, we capitalized EUR 200,000. So it wasn't a lot. So you can -- then -- it can go up and it kind of go down a little depending on how much work the R&D department puts into various projects. But I don't expect it to be -- I mean, anything that affects the profitability much, but it can be good for an analyst to understand that this is a difference from how Qt has handled it before. Matti Riikonen: Right. That's helpful. Then second question is about the annual recurring revenue disclosure that you plan, which is an excellent idea. How long into the history will you bring that? So is it possible that you would bring maybe a couple of years' history so that we could start to track it already from there and not just from here on because, of course, in the ARR pattern, the history is what counts and current day is less interesting if you don't know the history? Juha Varelius: We already gave the last year number, right? Matti Riikonen: That's not a very long history. Juha Varelius: Well, it's the last year. Well, we'll look into that. Yes, great question. We didn't think it that way, but we'll look into it. And on capitalization, it's like Ann said, that there are a few projects we need to continue. But of course, in general, going forward, on a longer term, we're not looking to capitalize. So we rather implement the Qt policy going forward and not capitalize the development. Yes. It's a better way. Jaakko Tyrväinen: Jaakko Tyrvainen, SEB. A brief follow-up on the profitability dynamics and IAR part of that. Let's say, the revenue is down double-digit something, like you said, Juha, would this imply that IAR as a stand-alone would be at breakeven or even red numbers in '26? Juha Varelius: Red. Ann Zetterberg: This is... Waltteri Rossi: Sorry, one last one from me. You said you are going to continue... Juha Varelius: You were? Waltteri Rossi: Waltteri Rossi, Danske Bank. You said that you are going to continue recruiting this year. So could you elaborate a bit on where exactly are you going to recruit? Or you said invest, but... Juha Varelius: Regionally or by function. Waltteri Rossi: Say again, I didn't... Juha Varelius: I mean regionally. Well, I mean, I think that the -- we do have a few markets where we're going to be increasing personnel, probably the U.K. is one, and these are small numbers, but then they add up for our Italian business. More or less in Japan, we're going to be increasing the personnel, the China probably. And the -- so in particular markets, I think in the U.S., we're pretty much on a headcount we like to be at this point of time. On R&D, there are these new technologies like the one that interests you a lot, which is the AI. So of course, on these new technology areas, we -- instead of trying to learn them ourselves, we are hiring people. So we do have some of these new technology areas. If I look in general on the R&D, the Qt is very well staffed. The QA business function itself, it's still on the investment mode. So over there, you're going to see pretty much on each and every function. So a bit of marketing, a bit of sales, a bit of product management, a bit of the R&D. On IAR, we are strengthening some of the R&D functions over there. So IAR, I would say that the most personnel additions will be on the product R&D side and then some on sales. But when you have so many different locations, you add up and then you get the personnel increase, that's basically what we're looking for. Heli Jamsa: Thank you so much. I believe that concludes all the questions from the room. And as we are running out of time, I give it back to Juha for closing remarks. Juha Varelius: Okay. That came quick. So thank you very much for being here today. And the -- as we go into this year, like I said, the -- one -- the very big item for us this year is going to be the subscription change on IAR. So going from perpetual to subscription, that's the one of the core things we're doing. And of course, integrating IAR into the Qt family. So we're going to be a bigger, happy family. We are also looking forward this year that, yes, it's going to be a challenging year. I'd like to emphasize that the guidance we gave was not a range. So we just gave a bottom line that what is the floor level where we expect to be this year. Of course, we are expecting to be better on those numbers. And the -- on the profitability side, we're not looking on Q2 decrease on profitability nor on sales, but the IAR subscription change will affect our profitability this year. And so that's why the lower guidance. Where it's going to end up then that how aggressive can we be, remains to be seen. In any case, the 2027 for IAR will be a revenue growth year and a profitability year, then the question is that how steep is that curve over there. It's still very early phases to see that how rapidly we can drive this subscription change. I think with these words, thank you very much.
Operator: Welcome to Palmer Square Capital BDC's Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to Jeremy Golf, Managing Director. You may begin. Jeremy Goff: Welcome to Palmer Square Capital BDC's Fourth Quarter and Year-end 2025 Earnings Call. Joining me this afternoon are Chris Long, Chairman and Chief Executive Officer; Angie Long, Chief Investment Officer; Matt Bloomfield, President; and Jeff Fox, Chief Financial Officer and Director. Palmer Square Capital BDC's fourth quarter and fiscal year ended 2025 financial results were released earlier today and can also be accessed on Palmer Square's Investor Relations website at palmersquarebdc.com. We have also arranged for a replay of today's event that can be accessed on our website. During this call, I want to remind you that the forward-looking statements we make are based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements including and without limitation, market conditions caused by uncertainty surrounding interest rates, changing economic conditions and other factors we identified in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements made during this call are made as of the date hereof, and Palmer Square Capital BDC assumes no obligation to update the forward-looking statements unless required by law. To obtain copies of SEC related filings, please visit our website at palmersquarebdc.com. With that, I will turn the call over to Chris Long. Christopher Long: Good afternoon, everyone. Thank you for joining us today for Palmer Square Capital BDC's Fourth Quarter and Year-end 2025 Conference Call. On today's call, I will provide an overview of our fourth quarter results and full year highlights, touch on our market outlook and competitive positioning and then turn the call to the team to discuss the current industry dynamics at play, our portfolio activity and financial results. During the fourth quarter, our team deployed $91.4 million of capital and generated total and net investment income of $29.8 million and $13.1 million, respectively. We delivered net investment income of $0.41 per share, covering our $0.36 per share fourth quarter base dividend and paid a $0.43 per share total dividend, which includes a $0.07 supplemental distribution. As we previously emphasized, we follow a distribution strategy that maximizes cash returns to our investors. In that spirit, we continue to aim to pay out nearly all of our excess earnings in the form of a supplemental dividend. Additionally, we recently announced our January NAV per share of $14.48. As the only publicly traded BDC disclosed NAV on a monthly basis, we believe we provide a unique level of transparency and accountability, giving shareholders regular insight into our performance in the evolving market. Throughout 2025, uncertainty was the norm, shaped by tariff policy, evolving geopolitical dynamics and a heightened focus on the trajectory of rate cuts. We also saw reasons to be optimistic toward the end of the year, including an improvement in deal momentum and increasing sponsor engagement, most notably, the $55 billion take private of Electronic Arts, which will require approximately $20 billion in debt financing and the approximately $18 billion take private of Hologic. Before I hand it over to Angie, I want to spend some time discussing why we feel confident in our software portfolio despite the heightened concerns around AI-driven disruption in recent weeks. For background, our investment preference in software has skewed towards mission-critical enterprise platforms in areas such as cybersecurity, IT infrastructure and ERP systems. Within these subsectors, we are lending to large, highly scaled and deeply embedded providers that have meaningful profitability and cash flow. We found that these large enterprise platforms tend to be backed by large sophisticated private equity sponsors and believe their capital structure provide meaningful equity cushion below our senior secured loans. We are most comfortable with these mission-critical enterprise platforms given they are ingrained across entire organizations have a high cost of failure with tangible failure risk, in many cases, our systems of record and require nearly 100% uptime in accuracy levels. Given there is little room for margin of error in these types of platforms, we believe they have a very large moat surrounding them regardless of the trajectory of AI. Additionally, in our experience, these providers frequently have a higher incumbency advantage and a longer lead time to develop in-house AI solutions and react to market changes, most of which are already in advanced stages. We believe another advantage is the fact that all of the data these software companies have collected across industries will, in theory, make their AI better than their more [ nascent ] peers as data quality underpins all AI inference. Further, as it relates to sector exposure, I'd like to reiterate that PSBD's portfolio is highly diversified by industry and size with 42 different industries represented and our 10 largest investments comprising just 10.9% of the overall portfolio. At present, software comprises less than 11% of our overall portfolio. As we kick off 2026, our investment strategy and approach to portfolio management that has served us well for nearly 2 decades remains unchanged. We believe that active credit management when executed properly, can generate attractive total returns in excess of yield alone and that our focus on credit selection combined with our core competency of locating relative value will drive strong outcomes. With that, I will hand the call over to Angie. Angie Long: Thank you, Chris. We are pleased with PSBD's fourth quarter results and our broader positioning entering the new year. While market activity improved modestly through the end of 2025, January and February of 2026 have served as reminders that volatility and uncertainty remain elevated throughout financial markets. Despite that backdrop, we believe PSBD's portfolio continues to be resilient and deliver strong results across shifting environments. In terms of deal volume, M&A activity is beginning to show signs of the gradual improvement we alluded to last quarter, though the recovery remains uneven. Activity has been much more prevalent at the upper end of the market, while sponsor to sponsor deals and the $1 billion to $5 billion enterprise value range have been slower to reemerge. Spread compression continued through the fourth quarter across many parts of the market. On the private credit side, it appears to be moderating while tightening in the broadly syndicated market has continued. In light of this, we are maintaining our defensive posture while staying invested. However, we believe the recent volatility may present high-quality opportunities at attractive entry points. And in those cases, we would actively look to rotate into those opportunities. As expected, activity slowed entering the first quarter, which is typically the shortest and seasonally weakest period and January has tracked in line with historical patterns. That said, our team's engagement with sponsors and capital market debts continues to increase. And pipelines in both the private credit and broadly syndicated markets feel healthier than earlier in 2025. However, we believe the market is still some distance away from a sustained and meaningful increase in overall transaction volumes. Recent transactions continue to highlight the evolving relationship between the broadly syndicated loan and private credit markets. With the recent Hologic take private serving as a prime example of these dynamics at play. As has been reported, Palmer Square's comprehensive platform participated as a private credit provider in the second lien tranche. Initially committing $100 million and ultimately funding $75 million after the transaction was resized following a strong first lien syndication process. More importantly, the Hologic transaction demonstrates the breadth of our platform. We were able to support the sponsors with early and sizable commitments and ultimately participate across both the private second lien and the syndicated first lien tranches in U.S. dollars and euros. We applied a similar approach with the MacLean Power System transaction. We believe our platform's flexibility will serve as an important competitive advantage for PSBD as we continue to see transactions move between public and private markets, often within the same capital structure. As referenced previously, volatility has returned meaningfully since the beginning of the year. While this has been driven by a number of factors, including macro uncertainty and geopolitical developments, the past few weeks have been defined by renewed concerns around the pace and scope of AI-driven disruption, which has weighed on sentiment across both equity and credit markets. Since there's been scrutiny around BDCs through this lens, we believe it's worth providing some additional context for our investors while reiterating that approximately 11% of PSBD's portfolio was invested in software-related credits as of quarter end, which is substantially lower than the 20% average BDC exposure level reported in the press. Our average position size in software is approximately $4.6 million. And to echo Chris, our exposure is intentionally skewed towards mission-critical enterprise platforms that tend to be backed by very large, sophisticated private equity sponsors and that we believe have meaningful equity cushions below our senior secured loans. We intentionally avoid lending to fast-growing but negative cash flow businesses, or companies in more commoditized subsectors, such as customer marketing automation, for example, which we believe are more vulnerable to disintermediation by AI. Although recent market sentiment has been pronounced, we believe the genesis of the concern is not necessarily that current credit fundamentals are deteriorating or at risk, but rather the underlying question of what the terminal value of some of these software businesses will be 5, 10 or 20 years down the line. There are undoubtedly going to be winners and losers in the software space, which was also the case before AI. As we have seen in past bouts of volatility over the years and decades, tremendous opportunities can arise to invest in great companies at meaningful discounts to their intrinsic value. We believe the current backdrop in certain pockets of loans and high-yield bonds may help our investment team uncover opportunities to generate attractive returns as some credits have traded down 5 to 10 points or more, with no apparent fundamental changes to the underlying business performance. As always, we will continue to be diligent in our deployment as we monitor each corner of the market and leverage our platform's flexibility to rotate into the most appealing risk-adjusted opportunities as they emerge. Turning to our portfolio. Credit performance remains solid across the board. As discussed during our last call, First Brands represented the most notable credit-specific development. Given some uncertainty around the sales process and deteriorating customer sentiment, we reduced most of our exposure in January and chose not to commit any additional capital. We retain a small residual position as option value, should conditions improve. In terms of our balance sheet, we refinanced our private credit facility with Wells Fargo during the fourth quarter, reducing the spread by approximately 55 basis points and increasing the overall capacity of the facility. We will continue to evaluate additional right side balance sheet optimization opportunities in the first half of 2026, including a potential CLO refinancing and other initiatives. As a reminder, we also put in place a new $5 million open market share repurchase authorization during the fourth quarter. While we have not yet utilized this authorization due to blackout restrictions, we continue to believe PSBD's valuation represents an attractive opportunity, and we will judiciously deploy capital to support the stock. Additionally, we expect to continue discussions with the Board regarding future use of the 10b5-1 program following the full utilization of the prior plan. For added context, PSBD shares were yielding 15.7% as of February 2026, a significant premium to the 11.6% on NAV. Given the quality and conservative positioning of PSBD's portfolio, we believe this is a compelling yield, even while taking into consideration the volatile market environment we've experienced as of late. As we look forward to the rest of 2026, we remain discerning, but cautiously optimistic. While near-term sentiment across certain sectors remains fragile, we believe the long-term fundamentals supporting the credit markets remain intact, particularly for platforms with disciplined underwriting and conservative portfolio construction. PSBD's ability to invest across both liquid and private markets allows us to remain flexible and patient as conditions evolve and opportunities arise. With that, I'll turn the call over to Matt to discuss our portfolio and investment activity in more detail. Matthew Bloomfield: Thank you, Angie. Turning to our portfolio and investment activity for the fourth quarter. Our total investment portfolio as of December 31, 2025, had a fair value of approximately $1.2 billion across 42 industries that demonstrate strong credit quality, industry and company-specific tailwinds and a diverse mix of end markets. This compares to a fair value of $1.26 billion at the end of the third quarter of 2025, reflecting a decrease of approximately 4.4%. In the fourth quarter, we invested $91.4 million of capital, which included 24 new investment commitments at an average value of approximately $3.4 million. During the same period, we realized approximately $148.3 million through repayments and sales. As you will notice, we continue to think about diversification as we allocate new capital in the portfolio. To recap key portfolio highlights, at the end of the fourth quarter, our weighted average total yield to maturity of debt and income-producing securities at fair value was 11.30% and our weighted average total yield to maturity of debt and income producing securities at amortized cost was 8.15%. We believe our focus on first lien loans and diversification by industry and size contribute to a strong credit profile, with 42 different industries represented in our investment mix. Further, our 10 largest investments account for just 10.9% of the overall portfolio, and our portfolio is 95% senior secured, with an average hold size of approximately $4.7 million. Again, we believe this position sizing is an important risk management tool for PSBD. On a fair valuated basis, our first lien borrowers have a weighted average EBITDA of $436 million, senior secured leverage of 5.5x and interest coverage of 2.6x. Additionally, new private credit loans comprised 14.7% of overall new investments and were funded at a weighted average spread of 453 basis points over the reference rate. While credit quality is a focus across the sector, non-accruals continue to be low at PSBD. On a fair value basis, it is only 9 basis points and on an at-cost basis, only 134 basis points. Our PIK income as a percentage of total investment income remains well below our largest peers and below the industry at approximately 1.45%. We believe this will give our shareholders greater confidence in the quality of our disclosed investment income. We've maintained an average internal rating of 3.6 on a fair valuated basis for all loan investments. Our ratings derived from a unique relative value-based scoring system. We believe credit performance within the portfolio remains strong. Our non-accruals remain very low by industry standards and the underlying credit metrics of our borrowers appear encouraging. We continue to see stability in both leverage levels and loan-to-value ratios across our portfolio of companies. As both Chris and Angie mentioned, we believe our portfolio is well diversified for the dynamic markets that we participate in. As we've talked about many times in the past, we believe larger borrowers provide for better credit outcomes for myriad reasons. We think this will apply to AI as well and that larger companies may be able to invest in and ultimately benefit from the tools and efficiencies that AI can provide. As previously disclosed, during the quarter, we took further strides in optimizing the right side of our balance sheet by refinancing the Wells Fargo credit facility, tightening the spread by 55 basis points. Additionally, we extended the maturity of the facility to November 2030 and increased the facility amount to $200 million from $175 million. We believe this exemplifies our focus on driving earnings power to the BDC through active balance sheet management, in addition to active portfolio management. Lastly, as discussed on our third quarter earnings call, our Board has approved an additional $5 million of open market share repurchases at PSBD we have not yet utilized the program due to an ongoing lockup period. Given the market level discounts to NAV in the BDC space, we believe this could be an accretive tool to further shareholder return in the future. As we navigate current market dynamics, we remain aligned with the priorities of our shareholders, and we'll continue to provide transparent visibility into our performance. Now I'd like to turn the call over to Jeff, who will review our fourth quarter 2025 financial results. Jeffrey Fox: Thank you, Matt. Total investment income was $29.8 million for the fourth quarter of 2025, down 14.5% from $34.9 million for the comparable prior year period. Income generation during the quarter reflected a mix of contractual interest income, paydown related income and select fee income from the new deal activity. Total net expenses for the fourth quarter were $16.8 million compared to $20.1 million in the prior year period. Net investment income for the fourth quarter of 2025 was $13.1 million or $0.41 per share compared to $14.8 million or $0.45 per share for the comparable period last year. During the fourth quarter of 2025, the company had total net realized and unrealized losses of $18.4 million compared to the total net and unrealized losses of $2.9 million in the fourth quarter of 2024. This consisted of net unrealized depreciation of $20 million related to the existing portfolio investments and net unrealized appreciation of $2 million related to exited portfolio investments. At the end of the fourth quarter, NAV per share was $14.85 compared to $15.39 at the end of the third quarter of 2025. Moving to our balance sheet. Total assets were $1.2 billion and total net assets were $464.1 million as of December 31, 2025. At the end of the fourth quarter, our debt-to-equity ratio was 1.54x, very slightly up from the 1.53x at the end of the third quarter of 2025. Available liquidity, consisting of cash and undrawn capacity on our credit facilities was approximately $311.3 million. This compares to approximately $252.8 million at the end of the third quarter of 2025. Finally, on February 26, the Board of Directors declared a first quarter 2026 base dividend of $0.36 per share, in line with our formalized dividend policy. Furthermore, our policy continues to be distributing excess earnings in the form of a quarterly supplemental distribution. With that, I'd now like to open the call up for questions. Operator: [Operator Instructions] Our first question will come from the line of Rick Shane with JPMorgan. Richard Shane: Look, you've alluded to the purchase. I'm looking at the leverage levels. As you think about capital deployment, and again, you've indicated, hey, we see some marginal -- the margin we see potentially some opportunity. Are you going to keep dry powder or given where the stock is trading, does it just make sense to buy stock given it's probably hard to find something that generates comparable return? Matthew Bloomfield: Rick, it's Matt. Thanks for the question. I think from the management team's perspective and the Board, we're certainly looking at all avenues in front of us. To your point, it's certainly accretive from a stockholder standpoint, given where the discount is trading. Undoubtedly. We also mentioned some of the dislocations in the market that we've seen are likely going to provide some great opportunities in the secondary investing side as well. All that being said, we do think from a new underwriting origination standpoint, spreads should be more conducive than they've been in quite some time. So we're really trying to look across all the avenues of opportunity set in front of us and maybe not just the best near term but obviously the best long-term decision for shareholders. So taking a look at everything that's on the table and there's certainly a lot to investigate at this stage. So I think we'll try to be as prudent as we can across all those facets. But undoubtedly, to your point, the shares look really attractive to us at this level. Richard Shane: Got it. And look, obviously, in the equity markets, we're seeing similar dislocations. In some ways, what we've seen is sectors move from being potentially at the high end of their valuation range potentially into a more normal sort of average range. Generally speaking, things don't just sort of mean revert, they typically overcorrect and we're thinking about that in terms of stocks more broadly. Where do you think we are in the cycle on the credit side? And if we're just sort of moving back to normal pricing as opposed to really, really tight spreads. Is it really the time to weigh in? Or do you actually think we're approaching historically attractive pricing? Matthew Bloomfield: Another really fair point. I think it's certainly -- in credit depends on sector. Undoubtedly, the focus right over the past several weeks has been specifically on software and in AI-related risks across certain industries. I think the credit markets are definitely bifurcated amongst those. And so you haven't really seen much in the way of spread widening outside of AI worried industries. And on the public credit side versus the private credit side, private credit obviously moved slower from a spread reaction. So I don't know that, to your point, that we're going to see this massive opportunity set of much wider spreads just across all credit. I don't think that's going to occur barring some more broad-based macro uncertainty. I don't think anybody would argue that in the software credit space that spreads aren't meaningfully wider. So I think there'll be interesting opportunity sets within there, right? As we look across some of these kind of deeply embedded software companies where I think in the past couple of days, maybe the narrative has changed a little bit as you've seen some of the NVIDIA CEO comments about layering those type of AI products on top of embedded software, which I think is what most people have been trying to communicate on the credit side as of late. So I think we're definitely going to see some opportunities in some of those impacted where things have just gotten to levels that I think a lot of people would agree just don't make sense. And so we want to be prudent about getting over our skis there. But I do think there's some interesting opportunities there. And then outside of those type of sectors. I hope we start to see some more normalized spreads. I think it makes sense with all the -- just macro uncertainty in general. But I think those will move a little bit slower because there's still a lot of dry powder on the sidelines that wants to be deployed. So I think it's going to take a little bit more for spreads to widen holistically at levels where we're kind of through longer-term averages per se. Operator: Our next question will come from the line of Doug Harter with UBS. Douglas Harter: Just kind of piggybacking on Rick's question. How do you weigh kind of the opportunity to maybe buy some of those software loans where you might feel comfortable in it versus, obviously, the perception of increasing risk and the potential volatility that comes with that before kind of markets settle down? Matthew Bloomfield: Yes. It's a balanced process. I think we definitely don't necessarily just want to outright increase exposure holistically to the sector. There's just obviously enough noise going on. And quite frankly, I think we just need to be really fundamentally sound and kind of how we're analyzing these specific businesses on a company-by-company basis. But I think we've done enough work and have had enough conversations with management teams, with sponsors with others in the industry where we do think there's going to be some opportunities. And our whole relative value process within PSBD, being differentiated from just kind of traditional private credit BDCs. We do want to be able to take advantage of those opportunities in the liquid secondary market. It's something we've done really well historically across a lot of different strategies. So we're not going to be scared per se, just because something's labeled software, if we think it exhibits a very strong total return opportunities, but also want to be cognizant of, and I think everybody needs to be somewhat humble in that AI is moving very, very quickly. And there's a lot of unknown, unknowns 3, 5, 10 years down the road. So we want to make the best decisions we can, but definitely I think there's some interesting opportunity sets that we're taking a look at. Douglas Harter: And then if I could get your perspective on -- you talked about deal activity. Do you think that this market volatility and as you just said, the unknown, unknowns, does that have the potential to kind of limit deal activity, lending activity and kind of keep people on the sidelines? Or do you think the market is kind of finding the ability to work through that? Matthew Bloomfield: Yes. I mean, volatility never helps dealmaking in general, whether that's M&A, IPO activity, which obviously all those things felt like they were starting the year off on the right foot finally. And I think we all were kind of thinking the same thing that to start 2025 and then we had the tariff issues. A couple of years back with some of the regional banking issues. So it doesn't take a lot for, I think, at least things to slow down. But I do think we're far enough along in a prolonged M&A drought. We've had 175 basis points of rate cuts over the past 1.5 years. So I think there's still a lot of those reasons why we felt M&A was going to pick up, still exist. And maybe in the software sector, that's probably going to slow down. So I think it will be maybe a near-term slowdown, but we're still having conversations still seeing deals, talked about it early to middle stages. So maybe we don't see an acceleration from here per se, but it definitely feels like there's still appetite for things to get done. And certainly outside of software AI-related issues, other industries are still, I think, pretty ripe for transacting. And just in general, in the sponsor private equity-backed community, I think it's been a dry patch for so long. And I think naturally, you're just going to see transaction activity pick up. All that being said, I would be surprised, too, if we don't see some transactions in the software space, as valuations have rerated immensely in the public markets. I'll be surprised if we don't see some sponsor activity to take advantage of some of these levels that, quite frankly, from evaluation, just haven't been seen in quite some time. So that was a long-winded way of saying we'll see. But I think it will continue, maybe just not at the pace people were anticipating coming out of 2025 and into early 2026. Operator: [Operator Instructions] And our next question will come from the line of Kenneth Lee with RBC Capital Markets. Kenneth Lee: Just given the prepared remarks around spreads, timing within the liquids side versus being a little bit more steep on the private side. How do you view the relative attractiveness between the liquid and the private side? And what's your preference for the marginal investment go forward more in the private or more on the liquid side? Matthew Bloomfield: Ken, it's Matt. Thanks for the question. I think it's more balanced than we've seen. I think there definitely was some of the volatility in the broadly syndicated market. Probably the opportunity set there, specifically on the secondary loan side is more attractive than it has been in quite some time. Our comments around spread tightening in that market, were certainly true through the end of 2025 and to start 2026, I do think just in the past few weeks with the broader volatility in software that that's going to negate any spread tightening on new issue loans coming to the market, at least for a little while. We'll see if that's a meaningful widening or not, but I think there's definitely still a big appetite in capital to deploy in liquid credit. And on the private credit side, I think that activity is a little steadier. I think spreads to our comment earlier, move a little bit slower there. But as you've seen this quarter, we deployed another 14.5-plus percent into private credit transactions. And I think it's been a good way for us to kind of defend spread in the portfolio and a spread tightening environment in general. So I think the opportunity set is going to be good on both sides of the fence, but I definitely think there's more opportunity now in the secondary loan market than we've seen in quite some time. Kenneth Lee: Got you. Very helpful there. And just one follow-up, if I may. In terms of distributions, any updated outlook around the distribution framework and how you think about dividends going forward? Matthew Bloomfield: Yes. Like we have in the past, the Board kind of continues to evaluate, what we're seeing from income generation and other facets of the business, certainly, we've absorbed 175 basis points of base rate reductions, so those have flown through NII here as of late. We'll see where the Fed goes from here. Obviously, we can see what the forward curve is saying, but that tends to move around quite a bit, which is the economic data that comes out. So as of now, we've continued to put out the base dividend that we've had, and we'll continue to reevaluate at the Board level as we move through, through this quarter and beyond. But again, hopeful on our conversations on spread that we've -- that tightening we've seen on the spreads versus base rates, feels a little bit better than it has in some time. Operator: At this time, I'd like to turn the call back to Chris Long for closing remarks. Christopher Long: Thank you, operator. Thank you all for your time and thoughtful questions. We look forward to updating you on our first quarter 2026 financial results in May. Have a good rest of your day. Operator: This concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the WSP Global Fourth Quarter and Fiscal 2025 Results. [Operator Instructions] Please be advised today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Quentin Weber, Investor Relations. Please go ahead. Quentin Weber: Thank you, Sarah, and good day. Thank you for joining our call. Today, we will discuss our Q4 2025 results and performance, followed by a Q&A session. Alexandre L'Heureux, our President and CEO; Alain Michaud, our CFO; and Chadi Habib, our CTO, are joining us this morning. Please note that this call is also accessible via webcast on the website. During the call, we will make forward-looking statements. Actual results could differ from those expressed or implied. We undertake no obligation to update or revise any of these statements. Relevant factors that could cause actual results to differ materially from those forward-looking statements are listed in our MD&A for the quarter ended December 31, 2025, which can be found on SEDAR+ and on our website. In addition, during the call, we may refer to specific non-IFRS measures. These measures are also defined in our MD&A for the year ending December 31, 2025. Our MD&A includes reconciliations of non-IFRS measures to the most directly comparable IFRS measures. Management believes that these non-IFRS measures provide useful information to investors regarding the corporation's financial condition and results of operation as they provide additional critical metrics of its performance. These non-IFRS measures are not recognized under IFRS, do not have any standardized meaning prescribed under IFRS and may differ from similarly measures reported by other issuers and accordingly, may not be comparable. These measures should not be considered as a substitute for the related financial information prepared by IFRS. With that, I will now turn the call over to Alexandre. Alexandre L'Heureux: Thank you, Quentin, and thank you all for joining us today. This quarter marks the end of a year of strong execution for the company. In early 2025, we unveiled a 3-year strategic plan called Pioneering Change for Empowered Growth. We completed strategic acquisitions, including Ricardo and TRC and delivered margin improvements with organic growth and strong cash flow generation. Let me highlight key points relating to our performance for the fourth quarter and the year 2025. First, as outlined on Page 5 of the investor presentation, Net revenue organic growth for the quarter stood at 5.9%, when excluding the impact of much lower volume of emergency response services in the U.S. versus the prior year and revision to significant projects in Canada in 2024. For the year, net revenues reached the high end of our outlook. And referring to Page 5 again, we delivered strong performance with combined mid- to high single-digit organic net revenue growth in Canada, the Americas, EMEIA, while the APAC regions continued to improve throughout 2025. Celebrating the first year of POWER Engineers under WSP, we are also very pleased with the company's performance with organic growth in the mid-teens in 2025. Second, on profitability, adjusted EBITDA for the year exceeded the high end of our revised outlook range for the year. We continue to execute on our margin expansion journey, delivering approximately 40 basis point improvement for the year. Third, I'm especially pleased with our cash performance. We delivered a record high free cash flow of $1.7 billion in 2025, representing 1.8x net earnings attributable to shareholders and significantly exceeding our 100% conversion target. Additionally, DSO at year-end stood at a record low level of 63 days, well below the lower end of our outlook. Before I turn to 2026, let me state how excited I am about welcoming TRC, a premier U.S. power and energy brand founded in 1969, long recognized for technical excellence and one of the most significant players in the U.S. with approximately 8,000 professionals. This combination will supercharge our Power & Energy sector by expanding our offerings across the entire value chain, adding amongst others, significant advisory, digital and program management capabilities and providing unmatched leadership in the U.S. Now turning to 2026. Let me start by saying that we entered the year with more optimism and confidence than when we entered 2025. This statement is supported by a few key factors and our strong outlook for 2026. First, with the closing of TRC and the recent acquisition of POWER Engineers, we have deployed approximately CAD 7 billion over the last 15 months in the high-growth, high profitability Power & Energy sector, making us the leading pure-play firm in that space in the U.S. and globally. Second, the market trends continue to provide a strong tailwind and demand for our services. Governments around the world continue to spend extensively on infrastructure, mass transit, airports, ports, water and environmental services, data centers, health care, power generation, transmission, distribution, and we expect the demand for our services to be robust in 2026. Third, and to complement my comments on market trends, we have finished the year 2025 in better shape than we started. The proposal activity level is strong across the business and our backlog, master service agreement and sub backlog are growing steadily. Let me now give you a few comments on our regions, further supporting our sentiment about 2026. Starting with Canada, we expect the region to remain an important growth driver in 2026, supported by strong market fundamentals and federal strategic investment that will all contribute to an already healthy backlog, which grew by 13.5% in 2025, an equally strong pipeline of opportunity in the year ahead. We are well positioned to execute on the broad mix of mandates with major clients such Hydro-Quebec, Toronto Hydro-Electric, Rio Tinto, Ontario Power, Agnico Eagle Mines while continuing to capitalize on significant transportation assignments, including our role on the Bradford Bypass expressway project and the recent announcement of the federal government and defense. With that foundation, Canada is positioned to deliver solid performance with mid- to high single-digit organic growth expected in 2026. In the Americas, we expect strong growth in 2026, supported by robust activity across the U.S. We are very pleased with the closing of the TRC acquisition on Tuesday this week, which combined with our existing Power & Energy business offers continued high growth, high profitability potential in the sector, which now represent approximately 1/3 of our U.S. presence. Overall, our sentiment towards our U.S. is positive. Our hard backlog stand at approximately 10 months of revenues, and our sub backlog amounts to approximately $8 billion, of which 85% comes from MSAs and framework contracts. Our pipeline of opportunities is also trending positively, up approximately 15%, 1-5, I said, versus last year. We continue to strongly focus on our global client program, which is developing a healthy pipeline of opportunities, up more than 50% versus last year. Of interest, our win rates increased by approximately 10% year-over-year, especially on top opportunities with the highest impact, reflecting a clear focus on securing high-quality needle mover mandates. We also see AI and cloud infrastructure as a durable multiyear tailwind. Here, our global footprint and breadth of services are positioning WSP as a preferred partner, notably for campus master planning, permitting, design and data center delivery. According to the most Engineering News-Record Global, Sourcebook, WSP holds the #1 position globally in data center design. Separately, in Latin America, the mining industry is providing healthy growth opportunities as well. Overall, the Americas is positioned to be a key contributor with mid- to high single-digit organic growth expected in 2026. Moving to EMEIA. We expect the region to continue contributing solid growth in '26. supported by healthy backlog and ongoing demand across priority markets, specifically in the U.K. Our pipeline of opportunities is also growing significantly, representing an increase of more than 25% since the beginning of 2025. Book-to-burn in the U.K. ended above 1, even as the regions delivered robust growth. Our win rate increased by about 25% versus '24 with new work secured in energy, water and defense, in line with our strategic ambitions. Our global client program also demonstrated success in the regions, especially in energy and more specifically, in the transmission space in electric and gas. Our backlog is supported by a steady flow of mandates, including major programs with National Grid in the U.K., recent win with EirGrid and EFG Energy in Europe and a growing backlog in the Nordics. With healthy momentum across the regions, EMEIA is well positioned to deliver continued success in the year with mid-single-digit organic growth expected in '26. Turning to APAC. We continue to see improving market condition in '25 and healthy backlog growth, especially in Australia and New Zealand, and our focus is on a return to growth as we progress through the year. We are entering '26 with tangible catalysts, including the Sydney Metro West Linewide contract, the Anderson precinct infrastructure mandate in Western Australia and momentum in New Zealand under the Roads of National Significance program. Taken together, the pipelines in Australia and New Zealand support a gradual return to organic growth in '26, and we expect APAC to provide an improving contribution to overall performance as the year progresses. In summary, we are confident about '26. And just after the first year of our 2025, 2027 strategic cycle, we are already on track to meet or exceed several of our '27 targets. This early progress reinforces our confidence in the strategy, the strength of our platform and our ability to deliver leading financial performance across the cycle. With that, I will now turn it over to Alain, who will talk you through our financial results and our 2026 outlook in more detail. Alain Michaud: Thank you, Alex, and hello, everyone. I'm pleased to report on our strong financial results marked by several achievements. Let me start with the top line. For the fourth quarter, net revenue displayed a solid performance and healthy underlying fundamentals. As Alex mentioned earlier, the organic growth for the underlying business in 2025 brought us to the high end of our financial outlook range provided in early '25. For the full year, revenue and net revenue increased by 13% and 15%, respectively, compared to 2024, growing to $18 billion and $14 billion, respectively. Canada, the Americas and EMEIA delivered a solid performance, and APAC is showing positive sequential increase in results. Backlog reached a record high of $17 billion, up 10% in the last 12-month period. Our pipeline of opportunities is strong as evidenced by Alex earlier. Moving on to profitability. Adjusted EBITDA for the quarter was $694 million, up approximately 9% compared to Q4 2024. Adjusted EBITDA margin stood at 18.9% from 18.7% in Q4 2024, driven by continued productivity gain. For the full year, adjusted EBITDA grew to $2.5 billion, up 17% compared to $2.2 billion in 2024. Adjusted EBITDA margin increased to 18.3%, up approximately 40 bps from 2024, in line with our strategic ambition. Of interest, we absorbed in our margin rightsizing and restructuring costs incurred to further strengthen our business, which reduced our margin by approximately 40 basis points. Accordingly, our margin growth in 2025 is actually 80 basis points. Adjusted net earnings in the quarter reached approximately $346 million or $2.65 per share, up 14% compared to the fourth quarter of '24. The increase was mainly attributable to higher adjusted EBITDA. And for the full year, adjusted net earnings reached $1.25 billion or $9.58 per share, up 23% and 19% from '24, respectively. As for our cash position, I'm very, very pleased with our cash flow generation in '25. Cash inflow from operating activities increased to $2.25 billion in '25, an improvement of $865 million versus '24. Full year free cash flow totaled $1.7 billion, representing 180% of our net earnings attributable to shareholders. This strong outcome reflects our ongoing focus on working capital management and optimization under our new ERP platform. DSO stood at 63 days as of December 31, 9 days lower than at the same time last year, marking a record low level. Net debt to adjusted EBITDA ratio was at 0.9x, slightly below our target range of 1x to 2x. The decline in our net debt to adjusted EBITDA reflects the higher cash balance from common share issuance, which has been used to fund a portion of the TRC acquisition. And following the closing this week, our pro forma net debt to adjusted EBITDA ratio stands at approximately 2.3x. As part of our ongoing review of our operation, we have disposed of a few non-core businesses in the last 12 months, including an underground storage business in the U.S. and our rail business in Germany. We have also, in the same context, discontinued operation in various areas in Asia and EMEIA notably. These activities represent approximately 1% of our 2025 net revenue. Regarding our ERP deployment, platform adoption continued its upward momentum in 2025 and early '26 with POWER Engineers now onboarded on the platform as of Jan 1, '26. We now have accordingly 80% of our EBITDA on a new platform with key regions to be onboarded in '26, including Australia and New Zealand next week, Sweden, Central Europe and the Ricardo. With a significant portion of our deployment completed, we are gradually increasing our focus on optimization, automation and deep business insights to enhance scalability and financial performance. Turning to our '26 outlook. We expect net revenue to range between $16 billion and $17 billion, which represents a total growth in net revenue of over 18% at midpoint of the guidance, adding $3 billion of net revenue in one single year. Also, as you assess our guidance, please keep in mind the recent disposal we just completed in the U.S. and the annualization impact of our various disposal and discontinued operation of '25, which had an impact of approximately $150 million on net revenue. We also expect EBITDA to range between $3 billion and $3.18 billion, which represented a growth of 21% versus '24 and both calculated at midpoint. Organic net revenue growth is expected to range between 4% and 7%. At midpoint, our EBITDA target range, we expect to deliver 40 basis points of margin improvement in '26. We expect Canada and the Americas to deliver mid- to high single digit, EMEIA to deliver mid-single digit, and APAC to deliver stable net revenue versus '25. For Q1 '26, we expect net revenue to range between $3.575 billion and $3.775 billion and adjusted EBITDA to range from $590 million to $630 million. From a modeling perspective, Q1 '26 is expected to have fewer billable days, which is expected to have an impact of approximately 1.5% on organic growth with offsets taking place in Q2 and Q4 '26. Emergency response services in the Americas reportable segment are expected to be consistent with the historical average level of inspection. And I would like to remind you that this outlook is intended to help analysts and shareholders refine their perspective on our performance, and it's been prepared in light of current foreign exchange rate volatility and our full year assessment, including our hedging posture. And also, our selected financial outlook does not include any acquisition transaction or disposal that may occur after today. The financial outlook includes a contribution from recent acquisitions, notably TRC and Ricardo. And on that, back to you, Alex. Alexandre L'Heureux: Thank you, Alain. To sum it up, we are confident in our 2026 outlook and the opportunities ahead. We entered the year from a position of strength. We run a resilient and diversified platform. We have a healthy backlog and pipeline of opportunities, and we remain focused on quality growth, operational efficiency and disciplined capital allocation. Today, I also wish to take a few moments with you to provide context on the topic that's top of mind for many of our investors and analysts. The rise of AI address the many speculative research reports being published almost daily and specifically its implication for WSP. While we acknowledge market sentiment, we feel clarification and perspectives are needed. In recent months, many actors have painted all professional services firm with the same AI brush, worrying that we are entering an era where advanced AI will replace firms like WSP. WSP recent share price performance was not immune to that sentiment. Artificial intelligence is changing the way we all work, and WSP is proactively embracing it as a productivity enhancer, but more importantly, as a value driver for clients. First, let's contrast WSP's business model with other consultancies and industries. Lumping all industries together is, in our opinion, an inaccurate way of considering the impact of AI. Our 83,000 experts design and manage complex physical projects, including bridges, transit systems, water treatment plants, energy facilities, environmental remediation and so much more. This work inherently involves the real world, physical material, on-site construction supervision, safety critical decisions, regulatory compliance and public stakeholder engagements. It represents service work that blends advanced domain expertise, inherent know-how, technical analysis, field execution, and professional judgment along with massive amounts of proprietary data, knowledge and experience that is not publicly available. In contrast, other industries to which WSP may be compared to largely operate in the virtual sphere. For instance, software-focused companies, organizations specializing in business process management and system integration. Their core activities typically center on programming, configuring systems, handling data and streamlining workflows. Much of their code, operational processes and consulting frameworks are accessible to advanced AI models. These distinctions are crucial when discussing AI impact and exposure. Large language models today are far better at automating digital, virtual and repetitive tasks such as coding, data entry and document generation that are performing deterministic tasks and providing guaranteed correctness in the physical world. In the engineering world, that simply cannot occur. Now let's discuss why scale and domain expertise matter. Our competitive moat is built on profound expertise in the physical sciences and engineering, coupled with decades of proprietary intellectual property and design standards and best practices that are not publicly accessible. Additionally, our professional accreditation, legal standards and obligation foster a high level of trust and establish significant barriers to entry. Projects often require collaboration with public agencies, communities and countless stakeholders while WSP reputation and relationship are crucial. In fact, technology often complement our services. Let me now delve into 3 aspects of our services where our scale and deep domain expertise set us apart and provide significant advantages. First, on the human expertise and the physical world front. Every project WSP tackles is unique. Today, WSP is the largest platform globally in its industry with the highest level of diversification and expertise. WSP works on 250,000 live projects, each different. Whether it's a transit line or coastal erosion protection program, our work is fundamentally rooted in understanding countless local and physical variables, geotechnical constraint, site conditions, materials, vibration, seismic factors, climate, community priorities, safety regulation, even politics and historical context. We must earn social license by engaging with communities and stakeholders, holding town halls, consulting indigenous partners and addressing public concerns. No algorithm can navigate city politics and replace these human dynamics. And AI can negotiate with the city council and a construction permit, and it certainly can take accountability in front of a professional board if something goes wrong. These are unique WSP roles that define our leadership. Second, every site and project is unique. By nature, infrastructure environmental projects don't lend themselves to one-size-fits-all solutions. We can't simply feed a prompt into a computer and get a turnkey design for a new highway interchange or climate adaptation plan, because the answers depends on the specific terrain, traffic patterns, stakeholder inputs, regulatory reviews, river flows and hundreds of other factors that most of the time, AI models do not have access to. In practice, our engineers must continuously adapt, be agile and use judgment. Unlike AI, they do not simply predict the most likely output based on data patterns. If a geotechnical survey reveals unexpected soil condition, something that AI models do not have access to, we redesign the foundation. If stakeholders raise concerns about a heritage site, we adjust the project plan, and if needed, collaborate on a redesign to protect what matters to the communities. Again, this type of information is not accessible in the database. AI can assist and support with scenario analysis, stress testing. For example, scanning through geotechnical data or suggesting design optimization, assuming the quality of the data is reliable, which is often, not the case. What it does not have is the situational awareness or mandate to make judgment calls. WSP does. Our expert combine technical data, sometimes with AI assistance with on-the-ground observation and stakeholder dialogue to get it right. This is why we say AI augments our capabilities, but is not a decision-maker in our field. It's an enabler to our expert, not a replacement. And third, safety and accountability are simply not negotiable in our industry. Our projects often involve public safety in a very direct sense. We must comply with building codes and environmental laws that differ from jurisdiction to jurisdiction. License engineers are those who can certify that a design meets all those specific codes and can be built safely. This is not just a policy, it's the law and the core value of our profession. AI-generated outputs are always subject to rigorous human oversight, thorough quality control and professional accountability. Our clients require us to stand behind our advice and design with substantial professional liability insurance and the financial strength of a strong balance sheet. Our machine in the middle approach means that while AI can support design or reports, our engineers review, validate and take responsibility for every outcome. This approach ensures we harness AI efficiency and applied strict quality management and risk oversight. To make this even more tangible, let's consider a few actual WSP projects and how they illustrate the indispensable human element in our work with AI as an enabler, not a replacement. The Eglinton Crosstown light rail transit in Toronto, Canada is a 19-kilometer light rail line we've been helping deliver through the heart of Canada's largest city. Think of the complexities, coordinating with city officials on permits, relocating utilities, managing traffic disruption, engaging local communities and businesses, ensure safety and dense urban construction and meeting rigorous city building codes. We do use digital twins and simulation models, some with AI components to optimize the design and construction schedule, but all those models are overseen by experienced professionals who know how to interpret the results and make judgment calls. The project has strong curve balls. For instance, unexpected soil condition only discovered on site had to be considered and our team had to quickly redesign support structure. Also, the Interstate Bridge Replacement in Oregon, Washington, U.S.A. is another project worth highlighting. WSP is a program manager for replacing a complex agent highway bridge between 2 states. Here, the challenges include navigating 2 states, regulatory regimes and federal approvals, designing for seismic resilience in a high earthquake zone and conducting extensive stakeholder engagement across multiple cities and transit agencies. We have, again, a digital model of the bridge that uses machine learning to stimulate -- to simulate traffic and structural performance under various scenarios. That's AI at work. But again, the use of that tool is led by our bridge engineers who ensure the design meets all safety margins and serve community needs. Importantly, our roles involve bringing together dozens of stakeholders, including state DOTs, transit authorities, federal regulators, port authorities and local communities to forge consensus on the solution. No AI negotiator is going to do that for WSP. It takes experienced professionals with years of cultivating relationship and fostering trust to work through concerns and requirements. I could go on. The story is similar in projects after projects. Engineers and scientific consulting in the physical world is fundamentally a domain expertise, a human creative and interactive endeavor. Consider the market drivers around us. The world is investing trillions in infrastructure renewal, energy transition and climate resilience. Those drivers are increasing demand for our deep domain expertise and scale. In fact, they often create complex problem that feed into the need for services. Governments are funding massive infrastructure and clean energy programs here in Canada, in the U.S., in Europe and in Australia, and those projects require exactly the kind of high-end consulting WSP provides. We don't see that demand diminishing due to AI. If anything, clients want to know how to incorporate AI and smart technology into their infrastructure, and they turn to us the domain expert for support and assistance. By leveraging digital and AI solution to augment our engineering and science expertise, we help clients achieve significant value through the asset life cycle, beyond the front-end advisory, planning and design phase, which is usually accounts for 5% of our project total cost. Again, it is important to note that for most of our clients, the decision made in the first 5% design phase have a massive impact on the remaining 95% of the cost of their assets, making it an area where investment and innovation continue to grow and be very strategic. The takeaway is clear. We're not complacent about technology impact. Instead, we are embedding digital and technology tools throughout our operation and client solutions. We fully expect that some task in design and consulting will be automated, and that is a very good thing. To the question, can AI design an asset on its own? The answer is no. AI can help with preliminary sizing and drafting, parametric optimization, code lookups, scenario generations, but it cannot guarantee compliance, verify safety, carry legal liability, produce deterministic proofs, ensure physical correctness, explain every step with guaranteed traceability, sign, seal the drawings, engage with the physical world and all stakeholders. As we are suddenly going from AI euphoria to AI hysteria in our space, let me leave you with a few key messages. First, I want to reassure everyone that the fundamentals and the market trends fueling our industry are intact and AI is a fantastic opportunity. We expect more work and we can now, for example, further leverage data through AI and digital enablers and generate more value for clients throughout the full life cycle of an asset. And with more value to our clients, we expect more value to our shareholders. Keep in mind that 1/3 of our platform benefits from the AI tailwind, including in the Power & Energy business, data centers, mining and advisory -- digital advisory that -- and these businesses are growing at double-digit rates right now. Second, our work is inseparable from the physical world. We all remember that. Third, our work relies on domain expertise and knowledge that is not readily available in the public domain, creating a significant barrier to entry. And fourth, scale matters to fully and safely leverage AI in a world of high stakes, complexity and uniqueness. Lastly, AI does not displace our work, it augments it. AI is probabilistic while our clients are expecting engineers and scientific -- scientists to be deterministic. It's a matter of safety and the stake are too high. We are super excited for WSP, its engineers and scientists. We see it as an opportunity because at WSP, we are not writing a single solution and selling it 1 million times. We are solving 1 million unique problems with bespoke solutions for each client, each site across 250,000 live projects. I would now like to open the line for questions. Operator: [Operator Instructions] We'll now take our first question, and this is from Yuri Lynk from Canaccord Genuity. Yuri Lynk: Just a follow-up, Alex, on AI. Can you talk a little bit about the AI, the partnership you launched with Microsoft almost, I guess, exactly a year ago. How that's evolved over the last 12 months? Alexandre L'Heureux: Yes. I think I've been talking a fair bit, Yuri. So I'll take a breather, and I'll turn it to Chadi, but in a nutshell, we're extremely pleased with the headway that we've made. And Chadi, perhaps you can talk about this partnership and the other ecosystem partnership that we have signed in the last 12 months. Chadi Habib: Happy to do that. Thanks, Alex. Good morning, everyone. Let me start off on the Microsoft [ our second ] year into it. We had 3 big objectives: enable one of the largest agentic and AI deployment for our frontline to make sure that they are front and center on how they use this stuff responsibly to deliver to clients, that is exceeding expectations today; number two objective of the partnership, is continue to work with Microsoft as a client in their data center objectives and that is also beyond our target for 2025. We closed out the year really well and are very positive in the pipeline going forward; and last but not least, if you remember, we had an ambition to co-create products, not just with Microsoft, but with what we call client zeros, where we co-create the future with digital and AI with clients to solve tangible problems. Two of our solutions have gone into production now with 4 clients, and we're looking for a general availability release in March. So very, very positive for Microsoft. But let me add, and this is part of our strategy. We talked to you about this about a year ago. Our approach is ecosystem. So beyond Microsoft, we've talked to you about start-ups that are innovating. So I'll give you some names about UrbanLogiq, Fathom. We're also working with other companies at scale. You would have -- you may have heard recently, we announced a very targeted partnership with Google in the transportation space. We're looking at offerings with Schneider in the Property & Building space, and we'll continue to expand. There's about 4 or 5 other discussions that are in progress essentially. Yuri Lynk: Okay. That's helpful. And maybe just expand a little bit on the data center work with Microsoft. I think they're looking at spending tens of billions of dollars on data centers. That's work that -- I guess you're a preferred supplier, you still have to bid on that work, but maybe just expand on how significant or not that is at this point? Chadi Habib: Just to clarify there. Microsoft is not the only hyperscaler that is our clients, right? So the tailwind for us is across all of the major hyperscalers, we're not exclusive with them. Having said that, across the board, every single one of the hyperscalers, as Alex mentioned, we're looking at double-digit growth in the mission-critical space because the demand, frankly, is beyond the capacity of the talent in the market and what's exciting. You'll hear this a lot from me in the coming months. What's exciting by the AI, it allows us to do things we could not do before and have more opportunity to serve the clients. So the -- to answer your question on Microsoft, we have a specific objective in the alliance, and we're tracking to the objective as the contract progresses as one of their preferred supply. Alexandre L'Heureux: And to be more specific, Yuri, there are many instances because of this partnership with Microsoft, where we are sole source and we don't have to bid for the work, obviously, because of our strategic -- being the engineer of choice with them. Operator: Next question today is from Devin Dodge from BMO Capital Markets. Devin Dodge: Yes. Alex, just thanks for the perspectives on AI. It's really helpful. Not surprisingly kind of sticking with the AI theme here. And maybe picking up on the last -- one of the last questions. But look, there's multiple AI start-ups looking to make inroads into the engineering consulting sector. I suspect you actually have dialogue with many of them. But WSP elected to go down the path of developing these tools internally and via those partnerships that Chadi just talked about. Just wondering if you could talk about the decision to build versus buy and why building was the right path for WSP. Alexandre L'Heureux: Before I turn to Chadi, I think it's a very good question. And to us, the AI strategy is part of a broader digital strategy. So for us, AI is only a subset of our overall strategy, and I'm pretty sure over the course of this call, we'll have an opportunity to briefly talk about our digital posture. But I think over time, the answer is it's going to come broadly, again, from organic growth, obviously, and we have been doing that from strategic partnership that we are going to continue to sign. If you recall in February of last year, when I unveiled the plan, I said expect WSP to announce and sign more ecosystem partnership. We think it's a great way to go. But as part of our broader digital strategy, I also said last year that, yes, you should, at some point in time, expect some acquisitions because it's a muscle that we're learning to flex right now and have been over the last 2, 3 years. So perhaps, Chadi, you want to complement what I said. Chadi Habib: Yes, I'd just like to also take a moment to just remind the 3 aspects of the digital posture, what Alex just mentioned. So number one is start with the clients, focus on the value that it creates for clients and proof point it with revenue. So that's our first aspect. The second lever of our digital strategy, and I'm going to answer your question in a second, is put it in the hands of our front line because why is this an exciting time for all of our engineers and scientists. Just like they've seen some massive evolution in the way they work with clients, this is another massive evolution that allows them to drive a lot more value to our clients. This is why we have one of the largest deployments across our industry in terms of putting it in the hands of the front line and investing in our proprietary models. The third aspect is ecosystem partnerships. And yes, they are both with large and smaller firms. I do want to highlight to you that for the small firms, one of the most valuable aspects, Alex touched on this, is domain expertise at scale. I think you all know this. These models compound with knowledge, knowledge across projects, geographies and volume. The start-ups do not have that. We actually get more calls from start-ups because of our access to that domain expertise than we approach them. So we are working with several. We have a non-negotiable, which is protecting our IP. And what you've seen from our announcements like UrbanLogiq and Fathom is we'll work with the ones that are willing to work with us on protecting our domain expertise while driving value to our clients. And in another cases, we're building internally our own proprietary models that are -- that will remain within our parameters so we can retain that IP and the value we bring to our clients. Devin Dodge: Okay. That's excellent color there. Second question, just wondering if the push to develop more AI tools and capabilities. Does that have much or any impact on your strategy for complementary resource centers? I'm just trying to get a sense of leveraging AI puts a bit less stress on the talent pools in your regions such that more work can be done locally. Alexandre L'Heureux: Well, my straight answer straight up answer to this is for as long as we remember. And you will recall all of you on the line today, numerous occasions where we had discussed the fact that there was a war on talent. Sometimes life is done in a certain way and it's natural evolution. I mean, there are many instances and many places in our business where we don't -- we are not in a position to recruit as fast as we would like to do it. Thus enhance the GCC strategic initiatives that we've put in place 10 years ago. But you look at Power & Energy sector right now, we are not in a position to recruit at the pace that we would like to recruit. So in that regard, the assistance of our GCC is paramount and also the assistance of technology is paramount for us to do more with less. So that's why we believe that technology augments our work. It's not displacing it and why we are feeling good about the future prospect of WSP in that regard. Operator: Next question today is from Ian Gillies from Stifel. Ian Gillies: Alex, I was wondering if you could talk about the interplay between revenue per employee, AI and I guess, the revenue model that you currently employ and how you see that evolving over the next 24 to 36 months or maybe not evolving at all because you're clearly comfortable with the way it is. Alexandre L'Heureux: Yes. Let me try to [ rebuke ] a bit of a couple of themes and points that you just mentioned. First and foremost, if you look back -- and I mentioned that in past analyst calls, if you look back the last decade, you look at the fee per employee that we have been generating in the last decade and you go back, whatever, 2015 or '16 and you fast forward today, and this is all publicly available information, you'll find that we have been increasing our fee per employee steadily over the last 10 to 15 years. I don't have the data with me, but it's certainly probably 80%, 70% higher today than it was 10, 15 years ago. So we have changed our model over time, and we have embraced technology. And we are running a tighter boats, and we are taking advantage of technology. So I do see the future to not be significantly different. We are going to continue to change. We are going to continue to embrace what's coming to us as an opportunity, not as a roadblock. And I'm highly confident that we are going to be -- we're going to continue between, as I just mentioned, our main platform, the GCC, the technology and AI to do more with less. Second point, and that may not be known by all of our investors and analysts, more than 60% of our work is fixed price. And for as long as you've known me, I've said we prefer fixed price. I preferred fixed price 10 years ago. I prefer fixed price 5 years ago. and I still prefer fixed price because it's an opportunity for us to provide more value for clients. Although there is place for time and material and there's a need for cost plus and time material in our space, this is not where you can create and innovate. And we see that as a true opportunity. So -- and we have seen fixed price going up over the last 10 years, not going down. Clients more and more are not looking for price. And remember that oftentimes, 80% of our qualification criteria are qualification-based or not price-based. So more and more, our clients are looking for a solution, are looking for an end product rather than a price. So we believe that this is going in the right direction. And if you ask me, I believe that it's just going to continue to evolve in that direction. So in that regard, I think this is not a revolution. This is evolution. And I think we're tracking extremely well. And our clients are looking for solution -- innovative solutions. So I expect to see fixed price going up as we progress in time. Anything else, Chadi, you want to add? Chadi Habib: Yes. Just to reinforce the impact of digital and AI with our clients, what we're actually seeing, think about a scenario where we're doing master planning or scenario planning for the client before we would do 5, 10 scenarios and optimize across that. Now with the technology we're leveraging, we're doing -- clients are asking us to do more scenarios, 1,000 scenarios. You have better impact on the run cost of the assets. You have better impact on optimizing the rest of the life cycle. So the reason we see in our digital posture, double-digit growth is because of these new tools and progressive clients, they're asking for more work to navigate the challenges that they have. So we're seeing a trend where it's driving more effort from our teams. Alexandre L'Heureux: I think the very important point that we all need to -- when we leave the call that we need to remember is this perception that people are not -- because we have not access to more technology that our clients are not asking more. What's happening right now, as Chadi just mentioned, is 10 years ago, with no technology, engineers were in a position for a certain price to do 4 or 5 scenario analysis. Today, for the same price, we can do more work and provide more efficient design and a better service. So they're not asking us to do less work at a lower price. What's happening right now is they want more. They want more data. They want more output. They want more stress test analysis. They want more scenario analysis. So I think what's happening is with the arrival of technology, and that has been happening for the last 20 years, we are in a position to provide better design but our clients are looking for more output, not less in that regard. Ian Gillies: That's very helpful. And maybe another question along different lines. The engineers you're hiring today maybe managers in 5 years' time or managing projects, larger projects 10 years down the road. And how do you manage the risk of making sure you're hiring enough people, embracing AI and balancing those things out? Because it feels like that's probably one of the more serious challenges in implementing all these items because people are a key part of your business. Alain Michaud: Thank you, Chadi (sic) [ Ian ]. Yes. So in the second posture of our digital posture is to make sure, internally, we equip our frontline. This is why I mentioned we have one of the largest deployments in our industry to get into the hands, both of our front line, and you hit a really good point, by the way. Leadership is as important as the front line, equipping them with what these tools can do. And by the way, it's changing extremely fast and keeping them up so that it puts them in the driver's seat on how they impact the future. We can't predict all the unknowns of all the industry evolution around this. But what our posture in terms of frontline professionals and leaders is put it in their hands, get them to innovate, and we're seeing some really exciting stuff with clients. And to continue to invest, so we stay in the driver's seat rather than having to react to these evolutions. So that's our current posture in terms of making sure our folks are there. The second thing I would tell you is we also have a lot of people moving into their well-earned retirement. Alex talked about this last year. We're building our own proprietary models that -- and this is another advantage of this technology. It allows us to take the brilliance of somebody who did a design in Toronto and spread it across the company within hours rather than historically, we would have had to have forums and meetings where they interact together. So I'll give you those two areas where we're leveraging AI to multiply our impact. Ian Gillies: And I must say this has been a nice break from asking about M&A every other question. Operator: Next question today is from Benoit Poirier from Desjardins. Benoit Poirier: Thanks, Alex and Chadi for the very thoughtful discussion on AI. Maybe the question for Alain. When we look at the free cash flow performance in Q4, very solid, driven by record low DSO pushing down leverage to 1.4x. So just looking at 2026, assuming DSO returns to the midpoint of your guidance, would it be fair to assume that free cash flow conversion would still be above 100%? And it looks like that you could be in a position to finish 2026 with a leverage more at the midpoint of the guidance of 1.2x, which could still open the door for M&A if conditions, permits. So just want to understand a little bit more about the potential leverage and free cash flow for 2026. Alain Michaud: That's a neat way to get to M&A, Benoit. Just to clarify, the -- our leverage pro forma now 2.3x, absolutely right with our deleveraging profile. We don't anticipate to decline. We're still targeting far beyond the 100% conversion target. We should be in the range of 1.6x, 1.7x by year-end next year. So the ambitions remain as solid as what we've done this year. ERP is helping us. I remind you, there's a couple of conversions this year, but things are pointing -- all pointing out in the right direction to deliver strong free cash flow still in '26. Benoit Poirier: Perfect. That's my only one and congrats. Operator: Next question today is from Maxim Sytchev, NBCM. Maxim Sytchev: Alex, just continuing on sort of the AI topic. I mean some of your service providers obviously work in a fully digital environment. And I'm wondering how you think about some of the potential cost-saving opportunity from your side when you're interfacing with service providers who deal on kind of like on a per seat basis. I'm wondering if you have any thoughts there. Alexandre L'Heureux: Just to clarify, Max, I mean, provider providing services to us? Maxim Sytchev: Yes, software providers because, I mean, I assume, obviously, you pay quite a bit in terms of the outlays for their services. And again, like if AI sort of gets better from your own sort of modeling perspective, I mean, how much need is required for some of the kind of the legacy software providers if there's an opportunity to extract certain concessions over time, which would be beneficial from a margin perspective. Alexandre L'Heureux: Chadi, you're leading the way on that front. So maybe you have a view on this. Chadi Habib: Yes. Let me kick it off in a couple of areas. First of all, there are sort of providers that are key to delivering the end services. So think about our modeling partners, think about our partners that help us deliver those work products. And we constantly co-innovate with them to figure out how to solve for some of those solutions. There are then more back-office partners, and maybe that's what you're alluding to, where we are seeing massive simplification. We're investing to automate, putting our platform that Alain mentioned in place, harmonizing the way we grab our domain data and protect it allows us to shed some of the costs that previously would have been necessary. Today, we can optimize and automate some of those things internally. And that will happen as we continue to optimize our functions, and there are several programs that are in play today to do that. And as we do that, if there are some software providers or providers that are giving us some services today that are not necessary, we work with them to optimize that cost structure. And that's an ongoing process, by the way, well before AI and post AI. Alain Michaud: And if you recall, Max, when we unveiled our strategy, we talked about the different levers that we have to improve our efficiency and levers we have now in front of us with the ERP with AI coming in more tools, definitely to keep optimizing the back office to deliver better efficiency and simplify the life of our frontline people as well. Maxim Sytchev: Okay. Makes sense. And then one sort of fundamental question. I think IIJA money has to be allocated by September, October time frame. Just wondering if you think actually most of that capital is going to be -- actually going out of the door and any impediments to that potentially not happening and how that could impact kind of 2027, 2028 run rates in the U.S. Any color would be helpful. Alain Michaud: Yes. What we hear, there's more to come on that, Max, but you're right, IIJA expires third quarter of '26. But the Congress and the administration is working hard now on what's called the next surface transportation reauthorization. And what we're hearing through the grapevines there is -- there's lots of focus on the back-to-basic infrastructure program, transportation, public safety, public transit safety and the like. So it doesn't feel like less investment, but certainly more focused investment in more of the basic transportation space, which, frankly, is right in the middle of the alley for us. So more to come, but it feels like there's going to be continuation of investment as we read it right now. Operator: Next question is from Michael Tupholme from TD Cowen. Michael Tupholme: I didn't want to just sort of pivot back to M&A, but in a different fashion than perhaps we're used to talking about it. The question ties into the AI discussion that you provided Alex and Chadi. So I'm just wondering if you can talk about how, if at all, accelerating adoption and use of AI in the engineering services industry may affect WP's M&A strategy and the types of targets you're interested in. Alexandre L'Heureux: Look, it's a very good question. 10 years ago, I was not talking about our digital posture. I was not talking about our digital sector as a P&L. We've done that 2 years ago. And as Chadi expressed and can talk about, we are right now growing at double digit in our digital P&L, our digital sector. I think the way I would characterize what the question that you asked, Michael, and the way I would answer it is as part of my review of potential targets now and as we're entering due diligence, and TRC is a perfect example of that, we are paying way more greater attention to the complementary fit of the target digital offering. I'll give you an example, TRC, which we announced 2 days ago. During due diligence, we spent an enormous amount of time talking about their digital posture, their digital strategy, their digital offering. Today, if I look at the TRC business, they probably have USD 150 million of digital offering in the power space, so intelligence grid solution that Chadi can talk about as an example of that. Well, it's $150 million out of $1.2 billion. So you may say, well, it's only 10% or a bit more than 10%, but we spent an enormous amount of time with the leaders there to see how we can double-digit grow that business. And with our network and the fact that we have a network around the world, how can we leverage this in Australia, in New Zealand and elsewhere. And I can tell you that we're super excited about that. Do you want just to briefly talk about it? Chadi Habib: Yes, I'll just add a couple of things. Again, if you consider Power & Energy, mission-critical, the growth, our digital offerings and the criteria we look at from an M&A point of view, I just want to make sure I come back to this notion, domain expertise at scale is the differentiator. I'm going to say something controversial. The AI models are getting actually commoditized. If you listen to any of their webcast in the recent months, they're all talking about how we integrate domain expertise. We actually get more calls because of our domain expertise in order to create value. These models need that domain expertise. So if we look at the criteria of M&A going forward and what's exciting about what comes with TRC or what came in power is these folks don't master technology, just technology. They master technology in the context of transmission, distribution, generation, renewable energy, and that's where we think we drive massive value to clients. Alexandre L'Heureux: And again, to reinforce the point, Michael, technology player coming in the power sector with no domain expertise or the Big 4 coming in or the major IT consulting firm coming in the power sector with not having the domain expertise, they're missing 75% of the solution. So again, to reinforce Chadi's point, we are getting more calls from technology players than we are making calls. to support them because they don't have what we have and the proprietary knowledge that we have in the power sector, for example. So we honestly see this as a tremendous opportunity in the years to come for WSP. Revenue streams that 5 years ago did not exist for us. So it's a very, very exciting time, and that's why I talked about euphoria and hysteria. We need to be balanced here and compose and let us prove the point to you. Operator: We'll now take the next question. This is from Jonathan Goldman from Scotiabank. Jonathan Goldman: And Alex, thanks for setting the record straight. But maybe if we can do a diversion to maybe some less topical items. Maybe, Alex, if you could just elaborate on what gives you confidence in the U.S. business that we can see a reacceleration of growth this year. And I was also interested in the -- I think it was 10% increase in win rate. I was wondering if you can talk about what's driving that performance? Alexandre L'Heureux: I think what gives me high confidence in the U.S. business and frankly, our business globally at the moment is really the proposal activity level that we see. And to my earlier point, though, the win rate, I think we have a very clear strategy right now on client. That has been the focus of our 3-year plan. We spent most of 2025 setting up the business for future success. We have developed a very, very strong global client program and diamond client program where we see the growth on those high-impact clients growing at a faster rate than the rest of our business, and we see this paying off. So -- and also, we're -- we rarely talk about the brand, but the brand that WSP has developed in the U.S. and elsewhere today compared to where it was 5 years ago. I mean, clients are looking to work with WSP. They're looking for domain expertise. And they're looking for professionals to provide the service, number one. What was the second part of your question, I'm sorry? Jonathan Goldman: I think you addressed both of them, but I do have a second question. Maybe if we switch to capital allocation, Alex, you alluded to kind of the share price at the beginning of the call in your prepared remarks. How does that change your view on capital allocation and whether or not you lean into the buyback more here? Alexandre L'Heureux: It's not changing my view because you cannot lead 83,000 people firm with a short-term view. We've always had a clear vision of who we want to be and what we don't want to be as a company. I've always had a clear strategy of where I want to take this business forward. And you cannot do this if you have -- you navigate and drive the company with a short-term view. I've always had a long-term view. We've seen the downside, the downturn in oil and gas in 2014, having a huge impact on our stock price at the time. At the beginning of COVID, if my memory is not failing me, our stock price was at $94, it went down to $50 and went back up. We have faith that our investor base understand our business model. I have faith that our Board, our management team and our investors understand where we want to take this business forward. And in the last 2 years, we've deployed $7 billion in the high-growth, high profitability Power & Energy sector. I'd like to think we've been more opportunistic and more strategic than anyone else in our space. And I'm saying that very respectfully and very humbly. I'm just proud of what we've done. And I remember the second part of your question, why I'm so confident about our U.S. business. Well, we've transformed our U.S. business in the last 60 months. 2 years ago, we had 350 people in the Power & Energy sector. Today, 30% of our top line in the U.S. alone and more than 20% of our business globally. I think we have deployed capital in high-growth, high profitability sector, and I don't expect that to change. This week, I spent the week with our leader in mining. We are the largest mining consulting firm in the world. And we really think about the need when we talk about the rise of AI, the need for precious metal for copper and how uniquely positioned WSP is to cope and to service clients to deal with the world needs. So overall, I'm very, very pleased. And I think it would be a mistake to react to short-term views. We know where we're going. We're busy dealing and servicing our clients to deliver a backlog. And I feel that if we do a good job with our clients and we create an exciting time for employees, the stock price will take care of itself. So I don't have right now a desire to change our strategy and our view at this time. Operator: Next question is from Sabahat Khan from RBC Capital Markets. Sabahat Khan: Maybe just bringing some of the color sort of together on this sort of topic around customers and how you're engaging with them. Maybe just at a high level, are you able to share some thoughts on when you sort of go into the customers, kind of their -- how is the conversation starting around AI? Is it more you bringing to the table what you can do for them? Is it them asking help with implementation or leveraging AI for projects? Just maybe you can walk through how the conversations at the customer level are going today and sort of the ask that the customers are making. Alexandre L'Heureux: Our clients, and I think we touched base on that in numerous occasions, Saba, this morning. Our clients are looking for domain expertise and to help them support embedding technology in the assets that we design. They are not the expert. Otherwise, they wouldn't be calling us. They're calling us and say, look, we see all that technology coming to market. How should we be thinking about technology? And how do you believe we should be integrating that technology in the assets that we wish to invest in? And perhaps, Chadi, I can turn to you. Chadi Habib: Yes. I'll take the opportunity to make it very tangible. So if you think about the physical world coming with the virtual world, nobody knows more about the physical world than we do. And I'm giving you two examples. We are working with a country as we speak today because I think everybody knows this. AI cannot do what it needs to do if the data is not structured, if it's not understood, if the domain expertise and the context of that data is not put in place. So I'll just give you a tangible project. We just worked on client reached out to us, not any other third parties to structure data that touches 150,000 kilometers of road, 35,000 kilometers of track, trails and 5,000 kilometers of rail. Why would they come to us, is because nobody understands that data and the architecture of that data for this entire country from a transportation point of view because before they can leverage AI to predict CapEx investments to optimize their run costs and so on, they need somebody to take that operational data and who masters that data and that context on those physical assets, and how it intertwines with the physical world around it, whether it's satellite information or geotechnical information better than WSP. And that's an active project. I'm giving you that project as an example, before extracting value from these solutions. Clients are coming to us and saying, okay, how do we extract value? We need somebody who knows the physical environment and the designs that have been done. So that's one example. Another example I'll give you tangibly is one of the premier cities in the world, we're working with them to build a truly live digital twin that allows them to make the right investments in the right places to impact the well-being of millions of people. So whereas historically, we do an environmental twin of physical layouts or 2, 3, 5, 100 variables. Today, we're talking about thousands of variables in 14 AI models that will cover things like air quality, that will cover things like water, biodiversity, marine, climate, putting it all together so that -- this specific city not only can manage in the short term, the outcomes, in this case, citizen well-being or optimizing capital investment, but do it over decades. And they're partnering with us because, once again, beyond the tech that underlines it, the understanding of that physical world and domain expertise is critical to them. So I want to just give you 2 examples to make it very tangible, Saba. Sabahat Khan: Great. And then maybe just sort of revisiting the commentary earlier around the U.S. and the IIJA and potential renewal. I guess just from your vantage point, are you finding particularly in the U.S., a bit more stability relative to last year and sort of these perspectives around either a renewal or some sort of an extension of the infrastructure investment program. Is that sort of based on what you're hearing from the clients either at state level or some of the federal agencies you work with? Alexandre L'Heureux: Saba, the answer is yes. Absolutely. We feel we're operating in a more stable, more -- may sound strange what I'm going to say, but more predictable environment than perhaps a year ago. Operator: We'll now take the next question. This is from Chris Murray from ATB Capital Markets. Chris Murray: And Alex, thanks again for the commentary around AI and the next generation of tools. I guess I want to maybe stay away from AI, and I've got some other questions. More about the guidance, I think, and EBITDA margin. I know it's something we've talked about. But right now, at the midpoint, we're looking at about a 40 basis point improvement. I guess a couple of pieces to this question. I mean if we look at last year, I think, Alain, you noted you really were on track for about 80 basis points year-over-year. 40 basis points seems a little thin. But can you just maybe walk us through any puts and takes that we may see about the high end versus the low end? It feels like between the IT platform, some of the AI tools, what you're seeing in backlog and the mix you would think that, that would be trending higher, but just any thoughts around how to think about the evolution of margin over the next year? Alain Michaud: Yes. Thank you, Chris. Extremely committed to our 30 to 50 bps a year. So some of the moving parts just to keep in mind, for example, recently completed the acquisition of Ricardo. That's -- they have a much lower margin, and that's a good thing. That's an opportunity for us to bring them to our level. But for '26, it is a 15 to 20 bps drag on our margin guidance. So that's to be taken into consideration. And for TRC, they run at a slightly lower margin than us, and we just closed the transaction. So we will now get into work and look at what we could do together better. So there's potential upside opportunity there. But for now, the 40 bps is what we feel is a realistic guide. But keep in mind the Ricardo drag. And keep in mind also, we've been -- if there's one thing that we're very proud of is you look at our margin track record for the last 3 years, it's beyond 500 basis points. So we will continue to push. You could sleep peacefully on that front. We will continue to push on making margin grow and build more efficiency in the business. Chris Murray: Okay. That's great. And then just one other question. And again, it's something that we haven't heard a lot of, but it seemed to come out a lot in different regions is resources. Can you just remind us or kind of maybe give us some more color on what you're seeing in the resource industry and the types of work you're doing right now? Is this sort of pre-feasibility study? Is this development work? So any additional color on how the resources business is evolving and what you expect over the next couple of years would be great. Alexandre L'Heureux: Yes. I just talked briefly about our mining consulting offering. I think we're feeling extremely good about it given the demand that are projected in the years to come. We are seeing and have seen in the U.S., gas, for instance, also increasing. So when we think about mining and resources, we are quite bullish about the future for our sector and for our business internally, but for the industry as a whole. Operator: Thank you. And there are no further questions at this time. So I will now hand the conference back to the speakers for closing comments. Thank you. Alexandre L'Heureux: So again, thank you so much for attending the call. I understand that there were a lot of you attending the call. And so we look forward to updating you on the performance of the company over the course of the next 4 quarters. And again, thank you, and I wish you a great day. Bye-bye. Operator: Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Hello, and welcome to the Excelerate Energy Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand it over to Craig Hicks to begin. Please go ahead. Craig Hicks: Good morning, and thank you for joining Excelerate Energy's Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are Steven Kobos, President and CEO; and Dana Armstrong, Chief Financial Officer. Also joining the call are Oliver Simpson, Chief Commercial Officer; and David Liner, Chief Operating Officer. Our fourth quarter and full year 2025 earnings press release and presentation were published yesterday afternoon and are available on our website at ir.excelerateenergy.com. Before we begin, please note that today's discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially. We undertake no obligation to update these statements. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found at the back of the presentation. With that, it is my pleasure to pass the call over to Steven Kobos. Steven Kobos: Thank you, Craig, and good morning, everyone. Thank you for joining us today. Whether you followed Excelerate Energy for many years or you are new to the story, I want to start by grounding us in who we are and what differentiates our business. At Excelerate, we operate a global LNG and power infrastructure platform. We help countries enhance their energy security by increasing access to global LNG markets. We do this by providing safe and reliable downstream energy infrastructure, particularly in markets where traditional onshore development is impractical or would take too long to deploy. Our business is built around critical assets, long-term contracts and dependable operating performance. That foundation has allowed us to operate through market cycles and deliver consistent results. Turning to 2025. It was a strong year of execution for Excelerate Energy. For the full year, we delivered record adjusted EBITDA of $449 million. This is an increase of about $100 million over the prior year. That performance reflects the contribution from the Jamaica acquisition, continued growth in our other LNG, gas and power activities, along with reduced year-over-year operating expenses. Operationally, we performed exceptionally well. Enterprise-wide reliability exceeded 99.9% for the year, our strongest performance to date. And remember, reliability isn't just an operational measure, it's a financial one. Consistent, reliable performance generates stable, predictable cash flow. We also ended the year with a strong balance sheet, significant liquidity and low leverage. That financial position allows us to enter 2026 from a position of strength. Today, we are introducing full year 2026 adjusted EBITDA guidance of $515 million to $545 million. At the midpoint, this is over an $80 million increase over our full year 2025 results. Our '26 outlook is grounded in assets and contracts that are already operating or moving through execution. This provides a solid and visible foundation for the year ahead. Looking more broadly, global LNG supply is going to increase materially through the end of the decade. As that supply comes to market, we expect demand for LNG regasification infrastructure to grow, particularly across the global South. Many of these markets are seeking reliable, scalable solutions to enhance energy security and reduce dependence on dirtier fuels. At the same time, power demand continues to rise. Population growth, industrial development and expanding digital infrastructure, including AI data centers are placing new demands on energy systems. These dynamics reinforce the need for reliable LNG and power infrastructure, and they align well with the capabilities of our asset portfolio. Turning to Iraq. This remains a strategically important project for Excelerate. For Iraq, the project is mission-critical. It provides a reliable source of nat gas to help with an existing deficit to support growing power generation needs and strengthen the country's energy security by reducing exposure to regional supply disruptions. Construction of Hull 3407, our newest best-in-class FSRU is progressing well. The vessel has completed sea trials and is advancing through final commissioning activities. These include gas trials and cryogenic testing ahead of delivery in early second quarter. In parallel, site mobilization and early construction activities for the integrated LNG import terminal at the Port [ of Vlorë ] are underway. Engineering and procurement activities are progressing. Long lead items have been ordered, and we have executed the lease for the existing Jetty. As the project has advanced into detailed engineering, we refined the structural design of the jetty to ensure it can support safe long-term terminal operations. These refinements required additional scope, including structural reinforcement, which has resulted in higher estimated construction capital. As the project moves forward, we are gaining better visibility and are refining our financial assumptions based on scope and commercial terms. Total estimated capital cost for the Iraq terminal is now expected to range between $520 million and $550 million, inclusive of the cost of the FSRU. The all-in cost of the vessel remains roughly $370 million with about $220 million remaining to be paid for the vessel in the second quarter of this year. From an economic perspective, while total CapEx estimates have increased, we are now expecting annual terminal operating costs to be considerably lower. The Iraq project is expected to achieve an EBITDA build multiple of approximately 5x. This is in line with the economics we outlined on our November earnings call at the minimum contracted offtake of 250 million standard cubic feet per day. Under the contract, deliveries can scale up to 500 million standard cubic feet per day, providing meaningful upside potential. The integrated Iraq terminal remains on track to commence operations in the third quarter of '26. Now I'll turn to Jamaica. In '25, our Jamaica LNG to power platform performed exceptionally well. It delivered safe and reliable energy supply to the country and provided us with stable contracted cash flows. It also demonstrated exceptional resilience during Hurricane Melissa, one of the all-time most powerful hurricanes with minimal operational and financial impacts during the fourth quarter. Hurricane Melissa highlighted the benefits of LNG and floating regasification infrastructure and bolstering the energy security of Jamaica and potentially for other islands throughout the Caribbean. Following the acquisition, our focus has been on integration, operational excellence and maintaining high levels of reliability. We are proud to announce that full integration of the Jamaica platform was completed successfully in Q4. With the integration complete, we are advancing our strategy to optimize the Jamaica platform while pursuing new infrastructure opportunities across the Caribbean. With Jamaica integration complete and the Iraq project progressing as planned, our focus now turns to executing the next set of defined initiatives to extend our earnings growth trajectory. First, we expect the Express FSRU to be redelivered at the expiration of its current contract late in Q3. We have high confidence in redeploying the asset and improved economic terms over the prior contract. This should support incremental EBITDA uplift in 2027. Second, we are moving forward with plans for an FSRU conversion. Under our current planning assumptions, the converted FSRU will be available for commercial deployment in early 2028. Negotiations of the final contracts related to the conversion are ongoing, which is why this project is not yet included in our committed growth capital guidance. We're going to provide more detail once the necessary commercial agreements are finalized. Finally, future growth will be driven by a set of scalable LNG regasification solutions that we know how to execute. These include integrated onshore terminals, floating storage units paired with onshore regasification and small-scale and modular configurations. Together, these solutions provide a disciplined and repeatable way to deploy capital and scale our global asset portfolio. With that, I'll turn the call over to Dana to walk through the financial results in more detail. Dana Armstrong: Thanks, Steven, and good morning, everyone. As Steven outlined, 2025 was a year of exceptional performance for Excelerate Energy. For the full year, we delivered record adjusted EBITDA of $449 million at the high end of our guidance range and an increase of over $100 million or up about 30% compared to the prior year. The growth was primarily due to the contribution from the Jamaica acquisition, which we closed in May 2025 and increased LNG gas and power sales opportunities. Inclusive of Jamaica, we reported adjusted net income of $199 million, an increase of $46 million or up over 30% year-over-year. Adjusted net income increased due to the items noted previously, partially offset by higher interest expense related to our 2030 notes. Turning to the fourth quarter. We delivered $40 million of adjusted net income and $113 million of adjusted EBITDA, both in line with our expectations. Results decreased sequentially from the third quarter primarily due to a full Atlantic Basin cargo delivery in the third quarter compared to a partial delivery in the fourth quarter, along with increased business development expenses and modestly lower LNG gas and power direct margins in Jamaica following Hurricane Melissa. For the full year, maintenance CapEx was $57 million and committed growth capital was $106 million, including $10 million of growth capital invested in the Iraq project in the fourth quarter of last year. Now let's turn to the balance sheet. We ended the year with a strong balance sheet supported by robust cash flow generation and disciplined capital allocation. As of December 31, 2025, total debt, including finance leases, was $1.3 billion with $538 million of cash and cash equivalents on hand. The full $500 million of capacity under our revolving credit facility was available as of December 31. Net debt was $730 million and trailing net leverage was 1.6x. Last week, the Board approved a quarterly dividend of $0.08 per share or $0.32 per share annualized payable on March 26, 2026. As previously communicated, Excelerate is targeting a low double-digit annual dividend growth rate commencing in 2026 and continuing through 2028. We expect the next dividend increase to be approved in the second half of this year. In December 2025, our Board authorized a $75 million share repurchase program. With this authorization, we have the flexibility to repurchase shares in a disciplined manner, balancing shareholder returns with continued investment in our growth priorities. For the full year 2026, we expect adjusted EBITDA to range between $515 million and $545 million. This outlook reflects continued performance of our contracted FSRU portfolio, a full year of contribution from Jamaica, a partial year contribution from Iraq and incremental uplift from the back-to-back QatarEnergy and Petrobangla LNG supply agreements. In 2026, we expect maintenance CapEx to range between $100 million to $110 million. The year-over-year increase in maintenance CapEx is driven mostly by the timing of dry docks. The Express and Exquisite FSRUs are both expected to undergo dry docks during 2026. Under current planning assumptions, the Exquisite is expected to go to dry dock in the second quarter, and our newbuild Hull 3407 will be utilized to substitute for the Exquisite. This will ensure continued operations at the Engro terminal in Pakistan. The Express is expected to go to dry dock early in the fourth quarter. In addition, the dry dock for our vessel to Explorer, which commenced late last year, concluded in the first quarter of this year. The associated first quarter maintenance CapEx for the Explorer dry dock is included in our maintenance CapEx guidance range for 2026. Additionally, our maintenance CapEx range includes long lead time equipment for a dry dock that we anticipate to occur in early 2027. Beyond dry docks, our maintenance CapEx guidance range includes additional strategic spares and other equipment as well as capital spend for expected overhauls and upgrades across the broader asset portfolio. This investment in other non-dry dock-related maintenance capital is part of a deliberate multiyear initiative focused on maintaining high levels of asset reliability, which supports predictable cash generation across the platform. Turning to committed growth capital. We expect that to range between $370 million and $400 million. This range includes roughly $220 million remaining to be paid for Hull 3407, along with an expected $140 million to $170 million for the integrated terminal project in Iraq and another $10 million of additional growth capital for other committed growth projects. This capital positions us to take advantage of the significant wave of LNG supply coming online over the next few years, ensuring that the proper infrastructure is in place to convert that supply into reliable power and gas for end users. In summary, we believe our guidance and capital plans appropriately balance growth, returns and financial discipline while preserving flexibility as we execute on our strategic priorities. With that, we'll now open up the call for questions. Operator: [Operator Instructions] Our first question for today comes from Eli Jossen of JPMorgan. Elias Jossen: I wanted to start on the organic growth across the business more broadly. As we look past Iraq in service this summer, can you help frame what we're most likely to see next from a capital sanctioning perspective and whether that's Jamaica expansions, more integrated deals like we've seen in Iraq, LNG conversions? And then more broadly, can we kind of step back and think about what the EBITDA run rate and growth of this business is headed towards as we look ahead a few years? Steven Kobos: Eli, this is Steven. I don't know if we'll need any more questions after that one, man. That covers the gamut. I'll take a stab. In terms of -- let me take a step back first. We've talked about the LNG wave that's coming to market. Your question has to be viewed in the context of what's coming. And what is coming is that the focus of the entire LNG industry is shifting in the time period that you're talking about from liquefaction to regasification. So you're basically saying where -- with the focus moving to regasification, where are our priorities. And so I've often said it's like asking someone -- a parent which child they love most, like we love all of these. Each one has something unique where they can benefit from this changing dynamic from the wave. I just got back a few weeks ago from India, got to sit with Prime Minister Modi. He was adamant that India is going to move to 15% nat gas consumption by 2030. That's huge. Now they're only at 6% right now of the energy mix for 1.4 billion people. Love that. going to keep focusing there. There are a lot of opportunities South and Southeast Asia in general. But as you've seen with Iraq, they can come up everywhere. They have different market dynamics. What's interesting about Iraq, they just don't have enough nat gas. They were running a massive shortfall and then Iran quit exporting anything. They went from 0.8 Bcf to 0 last summer. They desperately need that project, our project to come online for us to help satisfy an absurd deficit. So that's a unique one. If you think about the past -- since we're talking macro, if you think about the past 4 years of global energy, what's the main lesson? In my mind, the main lesson is cross-border pipelines aren't reliable -- for all kinds of reasons. It could be about the neighbor. It could be about the risk of interference, all kinds of reasons. LNG is a gift to the world. It's a blessing. It allows someone to diversify their supply from a neighbor who they may or may not get along with to the world. Everyone is going to move to that. I mean, thank you for the question because you can see why we're so bullish that Excelerate is the right company at the right moment in time to go after this. What do we expect? I think you've got the building blocks out there for where we have high confidence on EBITDA in 2027. You know we don't guide to it, but we've -- and Dana can speak to that further, but I think the building blocks are there, and it's easy to piece together where we see EBITDA going to in '27. We're telling you we're going to add additional assets. I will say we've seen with Iraq that an integrated deal rewards infrastructure companies like Excelerate who have taken the time and have planned in advance to be able to offer LNG together with infra and link them together. So that is the preferred method moving forward. But we are not hidebound. We believe in selling to a customer what a customer wants to buy. We don't want to say we know more than a customer. We know more about a market that they've lived in forever. So we will continue to be eager to sell the infrastructure products and to build them together with LNG or not as a particular market may think best for themselves. I do think this TAM is global. So don't be surprised if we pop up, I don't know, in LatAm, again, in Middle East or elsewhere, but the focus -- I would say the focus continues to be South and Southeast Asia. Dana Armstrong: And just to add to the building blocks, Eli. So as Steven said, we don't provide multiyear guidance, but I think Steven summarized it really well that you'll have a full year of a rock in 2027. We've spoken to that being about a 5x multiple, so you can do the math there. We previously spoke to Jamaica, which we expect to grow, as we said previously, between $80 million to $110 million on top of the base business over the next 5 years. We obviously have the Petrobangla QE coming online in '26. That's an incremental $15 million for 2 years then going to $18 million. And then now with Express, we expect to get on a new contract in 2027, adding uplift to our margins. So I think you can kind of get to a range for the next few years with those building blocks. Elias Jossen: That's great color. I really appreciate it. But then maybe just pivoting more specifically to the Iraq LNG project. We're seeing some global instability in the region, which seemingly increases the importance of the project. Can you speak to project expansions -- and then maybe just a bit more color on the CapEx revision we saw. I know you touched on in your opening remarks, but just any other color you can provide. Steven Kobos: I think all eyes are on the region. And there's nothing new there, Eli. I mean, all eyes are always on the region. It's one of the reasons why we've known this project was critical. It's just crazy. Iraq, they've got 8 hours to 12 hours of grid electricity in summer. I mean just think about that for a second. I mean imagine if Houston had 8 hours to 12 hours of grid electricity in the summer. It's absurd. It is a massive need. And when you -- Iran was delivering 800 million scf a day of nat gas, and they still were at 8 hours to 12 hours of grid electricity in summer. In terms of a first year market, I cannot imagine the profile of a first year market. We want that Iranian those deliveries were sometimes 50% of their gas needs. So it's hard to go find any market around the world that has a more critical urgent need for LNG. It's why we're moving so quickly. Like frankly, it's -- I'm thinking -- we're thinking long term, we think this can be far more than 5 years, but we're conservative in how we talk to you all. Contract says 5 years, we're talking about 5 years. Contract says a minimum take-or-pay of 250 million scf of gas. So that's what we're talking to you all about. But you should really be taking seriously the contractual upside that exists in that project because the fundamentals they're just -- they're robust. They're the strongest I can imagine for LNG demand globally. That's that component. CapEx number, not to minimize the complexity of any project, but I mean, come on, this is steel piles in concrete. So what you saw in general was just some change in scope after we got into the weeds on the geotechnical, geophysical core samples, all that stuff. But more than that, you saw some horse trading commercially with the Iraqis where we took on some CapEx scope, they gave on some OpEx scope. I don't want to get into the weeds. I think the punchline for that is we're comfortable with the 5x build multiple that Dana and I both mentioned in the remarks. So I think something we're excited about. I think it's something where we can make a difference in the world. And energy security is what it's all about, and there's no better example for that than Iraq. But energy security is important to everyone. When I was in India, Energy Minister Singh Puri said in his opening remarks at an event he said, we view energy security as being survival. That's what it's about to ensure that you have energy for your economy. It's about survival. And regasification, reliable access to regasification is about providing countries with survival. I know that sounds a little over the top, but we believe it. Operator: Our next question comes from Theresa Chen of Barclays. Theresa Chen: Maybe turning to Jamaica for a second. With the assets fully integrated at this point, can you elaborate on the near-term optimization opportunities and the additional growth options as well? From here, what do you think is realistic over the course of the next 12 months to a couple of years? Which infrastructure opportunities do you think are the most compelling? Steven Kobos: Theresa, I'll start off there, and then I'm going to let Oliver weigh in. But thank you. Mic drop moment, integration went flawlessly and was over by Q4. And we managed Hurricane Melissa perfectly. And I forgot there's a quote in the Economist. I don't know if it says it's like the high sustained winds of any hurricane, I don't know, since the old testament or something, that's how I read it. You might look at it and see what it said. But no small thing. And frankly, the Jamaican Prime Minister told me, this has been a proof point of the reliability for thermal power and the sort of floating assets that can avoid harm in terms of resiliency. So I love it. In general, I don't think we're going to come off of the multiyear guide -- I mean we're not going to come off of, but I don't think we're going to provide a different guidance than the multiyear guidance that we have out there for the Caribbean. If you're connecting bread crumbs, you can start to see we're thinking about deploying the same sort of hub-and-spoke smaller scale models in other parts of the world. But I'll let Oliver take it from there, please. Oliver Simpson: So the -- from our perspective in Jamaica, obviously, when we bought these assets, we talked about it, we bought a platform in Jamaica in the region. So I think in Jamaica itself, we have opportunities near term using the existing infrastructure, the existing assets to deliver more LNG to customers. And we've had some success there on the small scale, and we're continuing to look at those solutions. I think on the back of Hurricane Melissa, I think the proof point on the island was the infrastructure we had came out to be extremely resilient. And I think that's going to be a great selling point as we look at new customers on the island. Sor of longer term, a little further out, there are some bigger sort of bigger asset plays, capital plays, both in Jamaica and in the broader Caribbean that we continue to look at. Obviously, that's using the platform in Jamaica as the sort of hub and then those kind of become the spokes. And we've got a number of conversations in the region that are going well and that we expect to progress. Obviously, those will be coming on in '27 and beyond. So I think that is how I would think about it sort of extreme near term is really using the assets in Jamaica. And then next year and beyond is looking at other assets across the Caribbean. Theresa Chen: Happy to know, Steven, that your success in Jamaica is officially a biblical proportion. Operator: Our next question comes from Michael Scialla from Stephens. Michael Scialla: I wanted to see if you could help with the cadence of the capital spend this year. It seems like it's going to be first half weighted. Just want to see if you could provide any information on that. Dana Armstrong: Michael, yes, that would be a good assumption that it's first half weighted because we broke out how much of that was Iraq and we said $140 million to $170 million of that spend is Iraq. So that will be first half weighted as we do expect to go into service in the third quarter. The maintenance CapEx, we said on the call would be -- it's going to be in the second quarter for the Exquisite and then the fourth quarter for the Express. And then the new build is in the second quarter. So most of that growth capital, a good chunk of that will be in the first half of the year. Michael Scialla: Got it. And then, Steven, I wanted to see if you could expand at all on the conversations you had in India. It looks like you signed a JV there. And how should we think about that? Is it a longer-term project kind of beyond this 3-year window where you've got a lot of projects coming together? Or could it fit into the next 3 years? Steven Kobos: Mike, I would -- I mean, it could definitely fit within -- I'm sorry, I'm not pointed at my microphone, Mike. I think it could fit within '28 for sure. In terms of how to think about it, though, I think I would think about it that Excelerate does what we say we will do. We've been talking about the markets that we're interested in for some time. Sometimes there are announcements in those markets, sometimes they're not. It is not a question of whether we are looking for the right opportunities. I do think starting off somewhat smaller scale in India is the right move for us. We want to be in India. There's no doubt about it. I had a great roundtable with Prime Minister Modi, energy CEOs, and I was the only American there. We definitely want to be there. But it's all about getting into the market. That one is called Haldia. It's just south of Calcutta. Pipe is being built out. India is such an enormous market, just the pipe that's going to what they call the 7 sisters provinces north of Haldia, it's 40 million people alone. There are lots of little pockets of demand in India. So what I'd like you to think about, Michael, is that it's our first foray into India, but it won't be our last one. And sometimes when you don't hear what we're up to in the market, we're still working it. And more to come on Haldia. Operator: Our next question comes from Chris Robertson of Deutsche Bank. Christopher Robertson: Just a quick question on the Exquisite. I guess what are your expectations around the redeployment at this point? Do you expect that asset will roll with the same counterparty at the improved terms? Or are there some interesting inbound inquiries from other potential counterparties at this point? And are you seeing any inbounds from any particular region or country? Steven Kobos: Chris, first of all, I think you're speaking to the Express, and that's our fault for horrible naming conventions where they all sound… no, no, they all sound like they've got the same name, and I do it every single day. In terms of Express, what I would say is past 4 years, we've recontracted 4 of our, what I'll term legacy contract assets, and they've all been at uplift to EBITDA. Absolutely confident this will be the same. We are in discussions around the world about it. But again, it's kind of running a sense of what's most appealing to us in terms of start time, duration of contract, EBITDA uplift, can you integrate? Can you not? So we'll evaluate all those factors and get back to you when the time is right. But what I'd leave you with is we're going to do what we've done before. And many of you all, many of the investor meetings, many of the analyst calls in the past 4 years have been about when can you get your hands on the evergreen contracts. And the reason you all have those questions is you know we can get better uplift, and we're going to. Christopher Robertson: Thank you, Steven. Apologies again for the misstatement there. Moving towards -- just if you could provide some commentary about your greater opportunities here. We've talked about regasification infrastructure quite a bit and integrated project as it relates to the LNG supply. But how are you guys thinking at this point now that Jamaica is integrated, you're running power assets there. What are the opportunities looking like on the power side of things in terms of gas turbines, natural gas power plants and how are you thinking about that in terms of an integrated approach? Steven Kobos: I think we're thinking about it the same way many people up to IOCs are thinking about it. If it's going to give you an advantage in terms of pull-through demand, contract duration, all kinds of things, then yes, we're going to evaluate it. We're going to continue to evaluate it. And we are in a better position to sell that because we offer that. We operate that. So we do find ourselves in a better position there. Just as when we got our first LNG positions in our portfolio, it allowed us to credibly offer integrated products there as well. So I can't say when, but it's all about pull-through demand in the rest of the world, and we can happy to get into the growth in air conditioning expected in the Global South. That's going to triple by 2050 up to, I don't know, some crazy number of units, I think 5.6 billion units. Like there's -- when you talk about LNG, you talk about the total addressable market, you talk about the Global South. power is ultimately what's going to drive that. So if it's the right pull-through demand with the right economics, we will absolutely do it. Christopher Robertson: All right. Great. Glad to hear there's a lot of options out there and potential growth. Operator: Our next question comes from Bobby Brooks of Northland Capital Markets. Robert Brooks: I wanted to touch on the maintenance CapEx. You had mentioned that this a part of kind of a multiyear plan sort of enhancing the asset portfolio and ensuring the highest level of -- continuing to ensure the highest level of uptime. I was just curious to hear what some of those vessels might look like or the enhancements? And are those going to be able to uplift kind of current EBITDA generation off the current assets at their contracted rates today? Or is it something that once it's up for recontracting, then you can get a better price? Steven Kobos: Bobby, I'm going to hand it to David, but I'd like to have Mike drop when we can. as I said in my remarks, operational reliability, reliability isn't an operational measure, it's a financial one. And that 99.9% uptime, it's not an accident. You don't trip and fall and get to 99.9%. You plan to do it. We love this asset class, and we're going to do what we need to do to make sure it's reliable for the long haul. But it's not -- you shouldn't view this as run rate. specifics, but we expect this to scale down by '28 for sure. I mean, the program, the longevity programs. But David, any color without giving away the family secrets. David Liner: Yes. A fantastic portfolio of assets, whether it's the fleet, the power generation, the terminals, the small scale, all that, we've got to maintain at a level that we can perform similarly as '24, '25, and we're going to do it in '26 at 99.9% reliability. To do that, we have to -- and we're constantly studying any areas where we may have vulnerability to a single point of failure or some piece of equipment that if it goes down, will have an outsized impact on our reliability. We're constantly looking at those items, and we have a focused initiative in '26 and '27, where we're replenishing and making sure that for any of those pieces of equipment, we've got 1, 2 or 3 on the beach or on board ready to deploy at a moment's notice. It's usually larger pieces of kit. Sometimes it's smaller pieces of equipment. But yes, we want to make sure we've got a full warehouse to maintain that level of performance going forward. Robert Brooks: Awesome. That makes a lot of sense. And I always love a mic drop moment for you, Steven. And then I wanted to kind of shift gears a little bit and a pretty about $4.7 million step-up sequentially in SG&A in the fourth quarter and kind of above the range that you guys have been doing in the past 7. Just wanted to hear a little bit about what drove that. Maybe it was just as simple as one-off onetime bonuses from the record year in '25. And if you could provide any color on how to be thinking about that on a run rate basis going forward, it would be appreciated. Dana Armstrong: Bobby, it's Dana. So yes, good question. If you look at our Q4 over Q3, there was 2 -- really 2 items that drove that. The first was the Hurricane Melissa impact. We had -- all in, we had an EBITDA impact in Q4 of about $6 million. Of that $6 million, about $2 million of that hit our SG&A. And what rolled into the SG&A was our CSR efforts. So we said we spent over $1 million on CSR to support the island. There were some employee assistance, a much smaller amount. and then some other miscellaneous costs related to the Hurricane Ian, that was about $2 million. So that was definitely an anomaly. And then also in SG&A, as you know, we report our business development spend in SG&A. And so for the fourth quarter compared to the third quarter, that was up about $2 million. About half of that increase was a rock. So those were just costs to get ready for the project that we were not able to capitalize yet and then some other business development growth initiatives. And the rest of it was just miscellaneous year-end cleanup. So it's certainly not a run rate. It's more of a -- we do see a little bit of lumpiness in the SG&A number, mostly driven by business development. Operator: Our next question comes from Emma Schwartz of Jefferies. Emma Schwartz: I wanted to ask on the -- so the growth potential of the platform is really impressive. And I wanted to ask on accelerate leaning in further. Could you look to acquire another LNG conversion candidate in 2026? And is there anything preventing you guys from developing multiple FSRUs at the same time? It doesn't seem like leverage is a constraint here. So I just wanted to ask about leaning in further? Steven Kobos: I almost called the conversion in the remarks. I almost named it conversion #1 to try to hint at that. But we will -- we're not going to wait until delivery of conversion # 1 in '28 to get started. So I mean, we do understand that we're -- the next 5 years are an incredibly important moment in time. There is an enormous TAM out there, and we're going to be acting to give us -- to continue this growth trajectory. So I'd like to get back to you after we've got a little more color on this first conversion that we've announced, but it's certainly not the end of it. So look at Express, look at uplift for that, look at the fact that we'll deploy this first conversion in early '28. I'm sure that we'll say consistent things with what we've said before. We look for build multiples of 5 to 7, just like other quality midstream companies. And I doubt that we'll say anything different about conversion number one. And then I hope in the course of this year that we'll be talking about more. Emma Schwartz: Sounds good. My second question is, I want to ask on the small-scale like solutions. What are the like build multiples or returns for these kind of projects? And is this something that you would develop your -- like internally, the capabilities to deliver? Or is M&A an option to scale up this side of the business? Steven Kobos: We never put a blindfold on. We're always looking for the best way to skin a cat. But it's not complex things, but the closer you get downstream, you should look for better returns. I mean that's -- and we don't mind it. It's like I like the fact that we have trucks. I want to have trucks in other markets, too. I mean it's not going to be huge volumes. But by definition, the closer you get of that last mile and get to that last quarter mile and get to that last 100 meters, yes, you should have higher returns associated with small scale. Otherwise, frankly, it wouldn't be worth the candle. It is worth the candle. Operator: Our next question comes from Zack Van Everen of TPH. Zackery Van Everen: Maybe starting on Iraq. Curious if you could swap the Express with the new build just based on the send out of that ship? And what upside opportunity could that provide placing the new build elsewhere? Steven Kobos: Zack, I'll take that one. I don't want to. That was a conscious decision to put 3407 into Iraq. That's about staying there in the best regasification project that I'm aware of and staying in there for a long haul and being part of that. And knowing that it can go north of 500, that's a contractual limitation. It's not a limitation on uptake from that pipe that the Iraqis laid that 40-kilometer pipe they laid. It's not a limitation from what we're going to build. And we want to do more over the long haul, and we want to be as sticky as we possibly are, and that's about offering the Iraqis something better than anyone else on earth would. So it is a very conscious decision on our part to do it. It's part of the long-term plan. But you raised a good point. It sounds like you should be in the BD group kicking around optionality because we've had that discussion over the past year. But I can share with you what our landing point is. Zackery Van Everen: Got it. No, that's super helpful context, and I appreciate that. Maybe one more on Iraq. You guys historically have talked about new EBITDA from the FSRU. Could you maybe break out the split of that 5x multiple between the terminal, the ship and the supply deal, just what maybe percent from each of those contributions for the project? Dana Armstrong: Yes, that's an integrated deal. So that's not something that we're going to talk about on a split basis. We expected to report it. We expect to report all of it in the LNG, gas and power part of our business, and we expect to report on that on a combined basis. So that's not something we intend to split out. Operator: Our next question comes from Wade Suki of Capital One. Wade Suki: Just I think just to dovetail, I think it was off of Emma's question earlier, might push a little bit for a little clarity around that conversion. If I heard you correctly, and please correct me if I'm wrong, it may or may not at least the FSRU conversion may or may not be the Shenandoah, it could be another vessel. Am I reading between the lines here? Or am I just off base if you can. Steven Kobos: Yes. That wasn't what I intended to convey with the lines, but we're never going to be hide bound. We could certainly be doing an FSU concurrently. I tried to say that. It just depends about what of our commercial deals get the most traction and look appealing to us quickly. But Shenandoah is top of mind, but we're going to be bringing a multitude of assets to the forefront because that's what this future point in the LNG industry is going to require. It's going to be a lot of -- not everything -- I mean, Iraq can easily scale to 4 million tons a year. You can figure that out. But there are going to be a lot of 0.5 million to 2.0 million ton deals around the world, and it's going to -- it's not going to be a one size fits all asset that's deployed for it. And we're not going to rule ourselves. We're not going to be hidebound and keep ourselves out of any of those opportunities. So I mean, just don't take anything I'm saying is limiting what we're willing to pursue. I'm trying to convey that from best-in-class FSRUs like 3407 down to trucks, we want to get LNG to people around the world. Wade Suki: Understood. And I guess next question might be on potential new build, kind of where that is in your priority considerations, potential specifications, maybe not something as robust as Hull 3407. Just kind of curious what your thoughts are there as you look at all the opportunities and potential growth avenues for you. Steven Kobos: I don't think sincerely doubt way that 3407 is the last new build. There are a lot of reasons for that. I love what -- we've built up specifications over 20 years. We love being able to control that to that degree. But it's all going to be about what we think particular markets that we're pursuing need. I think in general, you can assume that new buildings, we love them when we think there is ultimately a chance for an enhanced send out. And another thing about new builds, too, like with an integrated deal, you care about boil-off. So you want to make sure you've got great, great tank. That was the other thing I didn't mention with one of the earlier questions like I-3407 into Iraq. I mentioned the sticky nature of it. I didn't mention that it's got fantastic natural boil-off from its tanks. That's our LNG. We care about that. I mean it's going to be adding value for us over the life of that project. So there are a lot of considerations there that factor into it. But as I said, I expect us to use all the tools at our disposal over the coming 5 years. Wade Suki: Understood. And just one last one, if I could, just with clarity just to make sure I heard you correctly. Did I hear you say that the new build could be used temporarily fill in for the Exquisite? Did I hear that correctly in the second quarter? Or did I mishear it? Steven Kobos: Yes. No, you've got very good hearing, Wade. You've got very good hearing. Yes. And for 2 reasons. One, we care about our customers. We want to make sure if our customer wants something during a dry dock, we're going to try to move heaven and earth to accommodate them, first point. Second point is I have high, high confidence in 3407. It's been a pleasure to see it go through sea trials coming up on gas trials. It's always nice to finally flow gas, though. It's nice to regasify before you start up. So you're not messing around with commissioning your regas system at the same time you're bringing a terminal online. So we will both fulfill our customers' desires and needs. And at the same time, it will allow us to commission the regas plant before she arrives and Iraq. So kind of a win-win. Operator: Thank you. At this time, we currently have no further questions. So I'll hand back to CEO, Steven Kobos, for any further remarks. Steven Kobos: Thanks, everyone, for joining us today. I would reiterate one thing I said on the call. The focus of the LNG industry moving forward is regasification, not liquefaction. Excelerate is the prime driver of that, and we look forward to continuing our discussion throughout the year. Thank you. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Operator: Good afternoon. This is the conference operator. Welcome, and thank you for joining the Technip Energies' Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Phillip Lindsay, Head of Investor Relations. Please go ahead, sir. Phillip Lindsay: Thank you, Maria. Hello, and welcome to Technip Energies' financial results for full year 2025. On the call today, our CEO, Arnaud Pieton, who will discuss our full year performance and business highlights. This will be followed by CFO, Bruno Vibert, who will discuss our financials. Arnaud will then return to the outlook and conclusion before opening for questions. Before we start, I encourage you to take note of the forward-looking statements on Slide 3. I'll now pass the call over to Arnaud. Arnaud Pieton: Thank you, Phil, and a very warm welcome to our 2025 full year results presentation. Before discussing the highlights, let me remind you of what truly sets Technip Energies apart. We are focused on delivering controlled quality growth underpinned by our robust selectivity-driven backlog and differentiated market positioning. We are frontrunners in energy and decarbonization, harnessing our distinct strength and driving transformation to unlock superior profitability. Our strong net cash balance sheet gives us real payout, and we consistently convert most of our profits into free cash flow. And as we execute our business strategy, channel capital into dividend growth and value-enhancing investments, we are accelerating value creation for our shareholders. Turning to the highlights. 2025 was a year of successful delivery. We demonstrated strong execution across our global portfolio. We strategically positioned the company for sustained profitable growth. And through some disciplined capital deployment, we enhanced our earnings quality, reinforcing the resilience and stability of our business model. In terms of headline figures, 2025 marks our strongest year yet with revenue and recurring EBITDA both rising by 5% to reach new highs at EUR 7.2 billion and EUR 638 million, respectively. Both our business segments delivered year-over-year growth in EBITDA with a robust performance for project delivery and solid margin expansion in EPS to above 14%. Free cash flow, excluding nonrecurring items, increased by 5%, reaching EUR 578 million. And consistent with our capital allocation framework, we are proposing a dividend of EUR 1 per share, up 18% and a EUR 150 million share buyback program. In summary, a solid 2025 that sets a strong foundation for us to achieve our growth objectives. Let me turn now to our execution, beginning with project delivery. Our portfolio continues to demonstrate the power of replication, modularization, digital tools, and we are executing with disciplined management of scope, cost, and risk. To provide perspective into the scale of our operations, at T.EN, our workforce now exceeds 18,000, yet we take on responsibility and care for more than 100,000 across our sites. In 2025 alone, we surpassed 320 million worked hours with zero fatalities. We strive to be the industry's reference on safety. Operationally, across our major projects, we achieved strong progress on LNG execution, including NFE and NFS in Qatar, advancement towards completion of key downstream and petrochemical assets, and solid early progress on decarbonization projects, including Net Zero Teesside and Blue Point No. 1. This performance reflects the culture of operational discipline that defines Technip Energies. And as you know, excellence in execution is the cornerstone of our value proposition and a prerequisite to our continued commercial success. Staying on the execution theme, but now spotlighting TPS, an important component of our equity story. In 2025, TPS delivered solid EBITDA margins, advancing by 140 basis points year-over-year to more than 14%. This improvement was driven by a strong performance in our product activities, including ethylene furnace deliveries. Furthermore, catalyst supply and strength in project management consultancy also contributed to this margin expansion. What this performance clearly demonstrates is the potential of TPS to drive margin accretion and improved quality of earnings for the group. 2025 was further distinguished with the completion of our first major acquisition. This transaction exemplifies our disciplined capital allocation strategy to enhance our technology and products offering. It extends T.EN's capability across materials science and the catalyst value chain and enhances our ability to deliver high-performance process critical solutions to our clients. With around 70% of its revenues tied to operating expenditure, AM&C materially expands our TPS offering across the asset life cycle. In terms of financial impact, we closed the transaction on December 31, and the cash outlay is reflected in our year-end balance sheet. As a result, TPS will benefit from a full year contribution in 2026, which we anticipate exceeding EUR 200 million in revenue with EBITDA margins of around 25%. In summary, AM&C is immediately accretive and accelerates our TPS growth strategy. It benefits from positive long-term market trends and establishes a strong platform to unlock further value for our stakeholders. Let me now turn to the significant announcement made yesterday, the award of North Field West in Qatar. This major EPC contract builds on our FEED engagement and incumbency in the NFE and NFS projects, which are under execution. As we embark on this next phase for NFW, we will deliver 2 state-of-the-art LNG trains, each of 8 million tonnes per year. The project will benefit from something we like very much, replication and consistency in train design, plus it will leverage construction synergies, ensuring efficiency and excellence in execution. The facility will also be complemented by a fully integrated carbon capture system. With this award, Technip Energies has 82 million tonnes per annum of LNG under construction globally. It further strengthens our medium-term visibility and solidifies our leadership in LNG. Before I hand over to Bruno, let me briefly reflect on our sustainability journey to 2025 and the launch of our new roadmap to 2030. Sustainability at T.EN is a core element of our strategy, our culture, and our value proposition. And 5 years into our journey, we can be proud of our progress on many fronts, including the reduction in our Scope 1 and 2 emissions by 46%, our work on human rights and a material gender diversity improvement in our organization. Looking ahead, our journey is evolving. We have enhanced our strategy and developed our 2030 scorecard. It is more business-oriented and further integrate sustainability as a core driver of value creation. This new scorecard, which features in the appendix of today's presentation, aims, in particular, at delivering impact through continued innovation. With that, let me now hand over to Bruno to walk you through the financial performance in more details. Bruno Vibert: Thanks, Arnaud, and good afternoon, everyone. Technip Energies delivered a year of strong execution and high-quality growth in 2025. Turning to the highlights. We achieved record revenues of EUR 7.2 billion and recurring EBITDA of EUR 638 million, both metrics up about 5% year-over-year. The growth was driven by a notably strong performance from project delivery and robust margin in TPS. For reference, in Q4, in acknowledgment of the strong performance delivered, better than expected really, we recorded a supplemental EUR 20 million expense for bonus payments to our employees, which was pretty much evenly split between business segments. This momentum translated into a 4% year-over-year increase in EPS, excluding nonrecurring items, despite lower net financial income. Our strong operational performance also drove healthy free cash flow generation with more than 91% conversion from EBITDA, excluding nonrecurring items. These results provide a solid foundation for continued shareholder returns, which I will discuss later. After the completion of the AM&C transaction at the end of 2025, we maintain a strong balance sheet with net cash adjusted for project-related cash of approximately EUR 1 billion, providing us with significant flexibility for capital allocation. In summary, our teams continue to execute well and deliver our leading financial performance. Turning to our segment reporting. I'll begin with project delivery, where strong growth continues. Revenues rose by 10% year-over-year to EUR 5.4 billion, fueled by major projects in LNG, decarbonization, and offshore, which are advancing through high activity phases. Execution remains solid as evidenced by EBITDA margins consistently in a tight range. Our backlog remains high quality and our margins best-in-class with medium-term upside potential as we progress on the execution of our portfolio. Finally, with some major awards shifting right in 2025, project delivery backlog has declined by 18% year-over-year to EUR 14.4 billion. However, as Arnaud will elaborate, our near-term award momentum is strong, and we anticipate an inflection that will reinforce our growth outlook. Moving to Technology Products & Services, TPS. The clear highlight for TPS in 2025 was margin strength with EBITDA margins up 140 basis points year-over-year to a new record of 14.3%. This was driven by strong performance in our proprietary product activities as well as favorable mix due to catalyst supply and project management consultancy. These margin gains more than offset a 9% revenue decline, impacted by low cycle for chemical as well as foreign exchange. Finally, TPS achieved a book-to-bill of 0.84 as strength in services awards was more than offset by lower T&P awards. As a result of this and FX, TPS backlog fell to just over EUR 1.5 billion. As a reminder, TPS backlog is typically understated by several hundred millions of euros as PMC work is booked only when called up by the customer. Additionally, the inclusion of AM&C, while not a backlog business, provides predictable recurring revenues and is expected to generate over EUR 200 million for TPS in 2026. In summary, a favorable mix driving strong profitability for TPS, and we continue to advance the strategic shift towards higher-value technology solutions and scalable product platforms that enhance the resiliency and earnings power of the segment over the cycle. Turning to other key performance items, beginning with the income statement. Net financial income totaled EUR 89 million, down EUR 30 million from last year, reflecting the downward global trend in interest rates. The effective tax rate at 29.7% was consistent with the upper end of our guidance. Net profit adjusted for nonrecurring items edged higher year-over-year. Notably, we delivered a robust 19% return on equity, underscoring the strength of our earnings relative to equity. Moving to other balance sheet items. Gross debt rose to EUR 1 billion, mainly as a result of commercial paper issuance to partially finance the AM&C acquisition. Commercial paper market conditions were particularly favorable as we were closing the transaction, offering an attractive arbitrage versus prevailing rates on our cash investments. In December, we fully drew down on the EUR 40 million facility from the European Investment Bank as part of the TechEU initiative. This loan supports our R&D in clean energy technologies, including the development of Reju. Finally, T.EN's economic net cash position adjusted for project associated cash is circa EUR 1 billion, ensuring flexibility to invest in value-accretive opportunities and deliver shareholder returns. Now let's take a closer look at our cash flows. Free cash flow, excluding working capital and provisions reached EUR 497 million, with cash conversion from recurring EBITDA at 78%. However, this is presented inclusive of nonrecurring items. If we adjust for nonrecurring items, which is a basis for our proposed dividend, cash conversion exceeds 90%. This reflects our asset-light business model, operational excellence, and strong financial income generated from our cash position. Working capital was a modest inflow of EUR 22 million for the year. As I've highlighted before, working capital inflows can be uneven, but are broadly neutral over the long-term as we have demonstrated. Capital expenditure represented about 1% of our group revenue, totaling EUR 89 million. Notable investments include the planned expansion of our Dahej facility in India and upgrade to our lab and office infrastructure. The integration of AM&C is not expected to materially change our capital intensity. Other items of note include the EUR 150 million in dividend distributed in the second quarter and the cash outlay associated with the AM&C transaction. We closed the year with more than EUR 3.8 billion gross cash. Before talking about capital allocation, let's review our guidance for 2026. Project delivery revenues are expected to be between EUR 6.3 billion to EUR 6.7 billion, with an EBITDA margin of approximately 8%. For TPS, we anticipate revenues in the range of EUR 2 billion to EUR 2.2 billion with an EBITDA margin of 14.5%. As a reminder, this guidance reflects a full contribution from the AM&C acquisition. Other items, including effective tax rate and corporate costs are consistent with the prior year. In addition, as we did for 2025, we have earmarked up to EUR 50 million to invest into adjacent business models, including Reju. Reju continues to advance on maturing its technology, site selection, and building the full ecosystem, positioning it for a possible FID by year-end 2026. Looking beyond our 2028 financial framework, I'm happy to report that we are trending comfortably ahead in establishing T.EN as an EUR 800 million plus EBITDA company, an ambition we first declared at our 2024 Capital Markets Day. Before passing back to Arnaud, let me address our capital allocation priorities and shareholder returns. With EUR 578 million in recurring free cash flow generation in 2025 and our balance sheet in excellent shape, we remain disciplined and focused on how we allocate capital. Our strategy is clear. First, we are committed to rewarding shareholders through dividend, distributing a minimum of 25% to 35% of recurring free cash flow. The proposed dividend today equates to a payout of circa 30%. Second, we prioritize value-accretive investments. This means actively pursuing M&A to grow our TPS segment and looking at adjacent business models that can enhance our quality of earnings. Additionally, when it make sense, we can and we will supplement these investments with share buyback as an additional means of returning capital to our shareholders. With the EUR 150 million buyback program announced today alongside the proposed dividend, we intend to return approximately EUR 300 million to investors in 2026, equivalent to about 5% of our market cap. And together with our ongoing ability to deliver sustainable earnings growth, this underpins the highly attractive total returns we can offer to our shareholders. With that, I'll pass on to Arnaud to discuss the outlook. Arnaud Pieton: Thank you, Bruno. Turning now to the outlook and how we see our markets evolving. The macro landscape remains complex, shaped by geopolitical shift and policy uncertainty. Yet the underlying fundamentals across our markets are strong and resilient. Energy demand is rising and plastics consumption is set to grow, while the lowering of carbon intensity together with circularity and products end of life responsibility remain central themes. As electrification accelerates, grid stability becomes crucial. Natural gas plays an indispensable role here. No gas, no grid stability and with no grid stability, no renewables scale up. The global energy system demands innovation and technical sophistication, qualities that T.EN delivers. The investment cycle in gas and LNG will continue well into next decade with focus shifting from oversupply concerns to risks of further future undersupply. A pragmatic decarbonization is essential and affordability is needed to drive adoption of carbon capture, cleaner fuels, and other low-carbon solutions. Circularity solves for more sustainable solutions, but also for sovereignty through development of localized ecosystems. And as we prepare this future through Reju and other industrial partnerships, T.EN will selectively target opportunities in adjacent markets, including nuclear. In summary, T.EN's engineering expertise and project execution enable us to deliver sustainable and economically viable solutions at the scale required for today's and tomorrow's markets. Let's turn to our near-term commercial momentum, which is exceptionally strong. Beyond the Qatar NFW win already discussed, our strength in enhanced replication is further illustrated by progression on Coral Norte floating LNG in Mozambique. Also this month, we confirmed a substantial contract to develop a 100 kPa plant to produce sustainable aviation fuel in the Netherlands for Sky Energy. Further cementing our leadership in the sustainable fuels market. For TPS, we have good line of sight for technology licensing and product awards in ethylene, hydrogen, and phosphates and expect to be able to confirm details in the coming months. When we consider awards already confirmed this year in SAF and in LNG, plus prospects anticipated to materialize in the near term, including Commonwealth LNG, this yields an inflection of new awards exceeding EUR 12 billion. This is equivalent to 75% of our year-end backlog. Beyond our near-term award potential, as shown in appendix, our global commercial pipeline remains strong and well balanced, and we anticipate reaching our highest ever annual order intake in 2026. Let me now put this into context with respect to our backlog. An important attribute of Technip Energies' equity story is the clarity and confidence afforded by our multiyear backlog. This is not just our base load. It is the foundation upon which we build sustainable free cash flow and our enablers for effective deployment of capital and the growth of TPS. It's what allows us to look to the future with certainty and ambition. We prioritize quality, not quantity. Through discipline and selectivity, we focus on opportunities where we bring differentiation. Project delivery is not a quarterly business. Lumpiness is inherent to this business and does not hinder our long-term progress. In fact, when we look beyond the quarterly fluctuations, we see a clear pattern of incremental growth in our backlog, reinforcing our long-term resilience. We are in a period of sustained structural demand for our capabilities. And with the strength of our near-term commercial pipeline, we are confident that 2026 will establish new highs with potential to reach EUR 24 billion of backlog. This milestone will provide us with one of the most exciting execution pipelines in our history, firmly underpinning our growth trajectory. So to conclude, 2025 was a successful year of delivery, marked by strong execution and excellent results. We delivered revenue and EBITDA growth. We achieved high free cash flow conversion, and we completed our first major acquisition. We also positioned for important awards that will secure our growth trajectory for the coming years. And we are trending comfortably ahead in establishing Technip Energies as an EUR 800 million-plus EBITDA company. The confidence we have in our outlook is demonstrated through significantly enhanced shareholder returns, and we continue to build for the long-term, supported by our robust net cash balance sheet. And with that, let's open the line for questions. Operator: [Operator Instructions] The first question is from Richard Dawson of Berenberg. Richard Dawson: Firstly, on NFW, and congratulations on getting that award in yesterday. And the timing of that award is maybe slightly earlier than we had expected. So could you provide any color on what brought that forward, and maybe any comments on the actual size of the order intake? And then secondly, on the buyback, should we read anything into the launch of that buyback and maybe your outlook on further value-accretive investments? I appreciate you've just closed AM&C. -- but given your capital allocation priorities of dividends first and accretive M&A, followed by a buyback if there are no M&A options. Is it fair to say that maybe there are a few M&A options out there and hence you're launching this buyback? Arnaud Pieton: Hello, Richard, thanks for the question. So NFW, I'm happy that you're surprised by the timing of it. We are not totally. As you know, we at Technip Energies like to be involved in the early engagement on FEED stage. And so we were engaged there. And NFW, the timing of it, why now? It's -- well, simply because as being the incumbent on NFE and NFS, NFW being somewhat an addition to NFS. There was, I would say, a sweet spot for maximizing synergies with notably site utilization, storage areas, construction resources. So there was really a sweet spot for NFW to kick off, which was presented to our client and the client was aware of that, and we worked jointly with them on converging towards taking advantage of the sweet spot for synergies between NFS and NFW. So this is exactly what has driven the award of NFW. As a reminder, maybe, those 2 additional megatrends of LNG were first announced by Qatar Energy CEO early 2024 at the time when they mentioned that they would -- Qatar would have the ambition to go beyond the -- 140 sorry, MTPA of LNG per year. So that's about NFW. On capital allocation, I would say, no, there is no shortage. You should not read anything into the fact that we have decided to initiate, I would say, a reasonable amount of share buyback. When you look at Technip Energies, you are facing a company that is extremely financially healthy that is capable of returning to shareholders through increased dividends through a little bit of a reasonable amount of share buyback and through further capital allocation. So doing share buyback is not at all affecting our ability to invest nor is it the reflection of a lack of M&A targets for Technip Energies. We have, on the contrary, quite a few on the radar screen. So I can't say much more, as you can imagine, for now. But we're excited about the opportunity set outside, so inorganically, but we also wanted to demonstrate that we are very confident in our future. And hence, why we are combining this time a bit of buyback as well as an increased dividend by 18%. Operator: The next question is from Alejandra Magana of J.P. Morgan. Excuse me, Alejandra Magana withdrew the question. The next question is from Sebastian Erskine, Rothschild & Co. Sebastian Erskine: Congratulations on the announcement of the enhanced distribution. I'd like to start on the AM&C acquisition. So EUR 200 million revenue contribution in FY '26, that would imply kind of TPS at EUR 1.9 billion at the midpoint. So that's kind of in line with the commentary you gave at the third quarter. But on AMC specifically, can you give us -- a few questions. Can you give us an indication of the operational performance of that business in 2025? I think there have been some concern in the market around Catalyst Technologies given the sale of that business under Johnson Matney to Honeywell. There was some concern in that market. And potentially, any detail on the growth outlook? I think, Bruno, you mentioned that the growth of that business should be around a mid-single-digit revenue level per annum going forward. Is that still intact? Any color on that would be great. Bruno Vibert: Hello, Sebastian, I'll take the question. So yes, the deal for AM&C was completed at the end of the year and will start to contribute to our top line in TPS starting Jan 1. I think AM&C closed the year pretty much where we expected. They have 2 main businesses, one on advanced features -- and they are basically addressing hydrocracking and also polyolefins market. Of course, from a quarter, it's more product. So you can have one refill, which may slip by 1 month in 1 year and then it's transferred to the other year. But overall, I think the momentum and market share of this business was absolutely where we expected. And the initial signals we have for the beginning of the year is exactly at this level. Now of course, the teams have started. We started to engage with our joint venture partners on Zeolyst International, which is Shell. So this integration is working very well. We've also started to see how this business of AM&C can create cross-selling synergies with our businesses, because they have advanced materials expertise. So that can complement to our process technology portfolio. And their client proximity, our client proximity are somewhat complementary. So the teams are starting to engage on creating those bridges, which, of course, may take a bit longer than just one month or a couple of months to manifest or evidence in themselves. But we're quite confident that the trajectory we've given through the cycles will be absolutely there. Arnaud Pieton: Sebastian, I will also add something. There is one key attribute to AMNC that one must not forget. It's the quality of the portfolio and I would say the vitality of the portfolio in the sense that about 35% of AM&C's portfolio is less than 5 years old. Therefore, you're talking about solutions that are not solutions of the past, but solutions of today and into the future. So the field of applications for AM&C solutions is one that is actually well into its time and well into what's needed for the years to come. Sebastian Erskine: Super. Thank you very much for that. And if I can squeeze in a question unrelated, but Arnaud, you gave very insightful interview in upstream on the opportunities presented by FLNG and kind of other floating solutions in the E&C market. Can you maybe provide an update on that pipeline and when we might see some kind of related orders on FLNG? And of course, you have that partnership with SBM Offshore. So could we see you involved in some of the FPSOs that are up for tender in the coming years? Arnaud Pieton: Yes. There's an exciting set of opportunities for floating solutions, FPSOs or floating LNG. So first of all, we are -- and we announced a bit more clearly that we are progressing with Coral Norte at the moment for ENI in Mozambique. We very much love a little bit like for NFW, we love the Coral Norte floating LNG because it's a true replicate of Coral South. And I would say, an enhanced replicate to paraphrase our clients because it's not only a replication, but we'll be able to deliver it with a much shorter lead time than the first unit. So we like that. We have indications that there's interest for maybe more than 2 FLNGs in Mozambique. And floating LNG in Africa on the East or the West Coast seems to be gaining momentum. So it is a solution for some markets. And indeed, our presence for delivering floating solutions being gas or into floating LNG or gas FPSOs or oil FPSOs, I think, is enhanced by the associations that we have formed with SBM purely on FPSO and purely for Suriname at the moment. But as we -- this project is progressing really well. And at T.EN, we like replication. So if we are all having good experience, and most importantly, if our customer has a good experience with this JV and this association that we formed, why not replicating it? I think that will be pretty powerful. Operator: The next question is from Henri Patricot of UBS. Henri Patricot: I'll stick to 2 questions, please. The first one, following up on Qatar NFW. You mentioned your synergies with the existing projects. I was just wondering if you have any comment on how the margin on that project compared to the previous ones and the rest of the portfolio. I think you mentioned medium-term upside potential to the margin. Wondering to what extent NFW plays a role here. And then secondly, still on the margin, this time on TPS. So you're guiding to 2026 EBITDA margin, 14.5%, that's compared to last year, there was 14.3%, but you also mentioned AM&C at 25% margin. So that will imply a bit of a decline for the rest of the TPS business. Just wondering what's the driver of the lower TPS margin ex AM&C in '26 and the outlook beyond that? Arnaud Pieton: Okay. Henri, I'll start with Qatar, and then I know Bruno is burning to answer the TPS margin question. So Qatar NFW, right, we -- like I said, we like it very much because it is coming at the right timing, and it provides a lot of synergies with NFE and NFS, mostly NFS. And it is a true replication of the NFS LNG train. So limited engineering, and it's a unique opportunity. And very rarely in this industry, will you see basins or clients ready to invest this way. There's Qatar Energy onshore on LNG, the way they are doing it, you will have ExxonMobil in Guyana with a delivery model that an execution model that is a bit like a conveyor belt and therefore, very successful because there is replication and replica. We always, in our industry, including at Technip Energies, have a tendency to underestimate the power of replication. And so yes, I mean, we are entering into NFW starting the project with a level of margin at the start of the project that is absolutely in line with our margin trajectory at Technip Energies for the long-term. But you can trust us with having expressed a different type of ambition to our project execution team. And in particular, because it is replicate. So let's see what the future will provide. As a reminder, we have a very nonlinear margin recognition at Technip Energies. So the first couple of years are about early works, if I may say, or early part of the project. It's going to be slightly dilutive. You will only see the full breadth of NFW's margin contribution later, so into 2028, and 2030. That's where you will see the full contribution and I would say, the full power of the replication. But again, this is a -- it's a unique opportunity for T.EN, a unique opportunity in the industry, and we are extremely excited to continue with Qatar Energy on this partnership. I think it will yield some very interesting results for us. Bruno on the TPS? Bruno Vibert: Sure. Thanks, Arnaud. Good afternoon, Henri. So on TPS, it's true that we ended the year at 14.3% at a quite high position. Quite high, and we were, of course, very happy about that. Even that, as I said in my prepared remarks, in Q4, we made some provisions because of this very good performance of the year for increased payout and bonuses to our employees, which impacted Q4. So to some extent, Q4 would have been even higher without that. But when we started the year, we were at 13.5% as a guidance for TPS and 14.5% was actually the target for 2028 in our medium-term outlook. What happened in 2025 was really a good performance for tail end project of property equipment like furnaces, furnace islands and the delivery of that with slightly lesser revenues. Now for the organic portfolio, what we expected as new awards will come and some of them were unnamed, but highlighted and flagged by Arnaud in the prepared remarks, we would expect a bit of a normalization of this portfolio, not maybe going back to 13.5% EBITDA, but with somewhat of a normalization before being able to step up again. So you have a bit of a normalization, which was to be expected from the TTS portfolio. That's then you add on the accretive part of AM&C. And basically, that puts us around 14.5% as a guidance. Of course, then we'll want to accelerate and continue to step up as the full of the portfolio will continue to deliver. But at 14.5%, we are already ahead and already had the previously mentioned 2028 kind of target. Operator: The next question is from Victoria McCulloch of RBC. Victoria McCulloch: Can we just focus for a second on the commercial pipeline? Can you give us some color as to -- of that EUR 70 billion, how is decarbonization as a percentage of the commercial pipeline changed maybe over the last 12 months? We've seen calls for EU carbon market to be suspended. The latest of these has been from Italy today, which feels like a stark difference, I guess, to a couple of years ago. How have the conversations with your customers within this decarbonization portion of commercial pipeline, how have they been evolving over the last 6 months as the sentiment in the sector has changed significantly? Arnaud Pieton: Hello, Victoria. It's a very interesting topic. And I would say the past year have been a clear reminder that there will be no whatever, so-called energy transition or no decarbonization that is not an affordable one. And it needs to be a market-driven transition. And unfortunately, there are, I would say, areas and spaces and also domains in terms of being carbon capture, sometimes SAF, sometimes low carbon molecules such as the blue ammonia, et cetera, where things have slowed down for the lack of takers. So it's obviously disappointing that those projects could not find a path forward in the near term, ultimately due to the challenges with offtake and policy. And those projects, they need stable policies. They don't need moving goalposts. They also need a carbon price that is adapted to creating a market. One project alone is not sufficient to create a market. So I think there has been a bit of realization that we've reached the end of the fairy tail when it comes to some of those domains. But I'm going to look at the glass half full rather than half empty. There are areas and there are pockets of opportunities where those projects are viable in Spain, Southern Europe, in India, some in the Middle East. We just signed the SAF project in Netherlands. So we Technip Energies, we invested when we were created 5 years ago, we invested into carbon capture, SAF circularity and other blue molecules. But we also did that and green actually as well on green hydrogen. But we did that in -- without deploying too much capital. And so I am personally not so disappointed about the way the market is -- because we, as T.EN, we are present when those projects are happening. We are executing the large green ammonia project for -- I mean, in India. We are on SAF in Europe and elsewhere. We are on carbon capture in the U.S. and Northern Europe. So the important for us is to be present and to be winning in those spaces, and we are. The only, I would say, space for a slight disappointment is that, yes, we would have loved for the volume to be greater. But where it's happening, you will find Technip Energies, and that's the most important. And all this is happening while the rest of the business, the core business like LNG, like everything around gas continues to thrive and continues to grow and continues to decarbonize because let's not forget that our clients in the more traditional space are looking at solutions to lower the carbon intensity of their products. That's why you see large carbon capture being deployed on all LNG facilities in Qatar. But not only, that's why you see LNG facilities being electrified on Ruwais in UAE by ADNOC powered by nuclear electricity, therefore, decarbonized electricity. Same story for TotalEnergies in Oman for LNG as a shipping fuel, where associated solar plants are being built. So I think the train around towards lowering the carbon intensity of the product has left the station. We are onboard that train and it's fantastic. What is a bit slower than one could have dreamed or dream, sorry, it's really some of the blue molecule and around that space, yes, it's much slower. But the important is that to remember that the rest has not disappeared, it continues to grow and that Technip Energies is present where the blue or the green or the carbon capture or the sustainable aviation fuel is happening. And that plays to the strength of the portfolio. Victoria McCulloch: That's great. Thanks very much for that color. And just as a follow-up, maybe one for Bruno. Could you give us some color on what you expect working capital movements to look like through the year? Bruno Vibert: Sure. Hello, Victoria. So working capital, first, I'll start maybe with year-end because we had a bit of unusual working capital swings, a bit more, if you look at our balance sheet, a bit more accounts receivable because we had EUR 100 million, EUR 150 million plus of invoices, which were supposed to be paid just at the tail end and which were instead were received on the very, very early Jan. So as you know, always the lumpiness of having one invoice and a few days can present and also from an accounts payable side, as we migrated an ERP for our largest operations to be France, Middle East and so on, we decided to anticipate some payments to subcontractors and suppliers so that projects would go ahead despite any issues of ERP migration and as you ramp up. So you should expect this kind of accounts payables or working capital to unwind. Then you will have the more traditional aspect of working capital, which means the new generation of projects, so NFW with the advanced payment and the first milestones being reached plus all the rest of the projects that may constitute the EUR 12 billion plus order intake that Arnaud highlighted in the slide, this will positively contribute in terms of working capital. It will be dilutive from a P&L and bottom line perspective, but it will be accretive from a cash flow and working capital perspective. Then you will have the more tail end projects that which you may have a bit of an unwind. But I think with the momentum of the portfolio, you should expect somewhat of a positive movement on working capital overall because that of the portfolio plus the reversal of the somewhat specific end of the year '25 situation. Operator: The next question is from Jean-Luc Romain of CIC CIB. Jean-Luc Romain: I have 2 questions on LNG. The first is in the NFW contract you announced yesterday. Is there a TPS component, for instance, of part of the carbon capture? And the second is, in your incoming orders, I noticed there's nothing about Rovuma LNG. Is this a decision that ExxonMobil plans to take later in the year or maybe next year? Arnaud Pieton: Thank you, Jean-Luc. So first on NFW, short answer, no, there is no TPS content into NFW. In this case, the carbon capture is pre-combustion and not post combustion. We own and we deploy solutions that are part of TPS in the post-combustion world. That's why that is what is deployed on net zero T side and other applications. So -- but precombustion, we deploy someone else's solution as we have done it for now many years, so we master that one. We know how to scale it up, but it's not Technip Energies, and therefore, it doesn't provide for TPS content through NFW. So Rovuma, as you would have seen in the news flow, there is quite a positive momentum on this one, and that's -- we're very happy about that. We know the lifting of the force majeure on TotalEnergies, Mozambique LNG. This is a positive development. And we see increased momentum on Rovuma prospect from our conversations. So as always, a reminder, we do not control the timing of the FID. That's very much in Exxon's hands. This Rovuma project is absolutely very high on our radar screen, but it is competitive. And it is worth noting that we've been engaged on Rovuma for several years already. As you know, we've done the FEED, and we've been engaged with Exxon, assessing the project from different solutions and development perspectives. And this project will be modular and which is, as you know, our preferred solution. So FID 2026 or 2027, let's see, lots of engagement, lots of interest and a very good momentum, but it is competitive. Therefore, we're going to remain cautious with our comments, but it's a project with attributes and characteristics that are extremely interesting and attractive for us. And yes, we intend to be the fierce competitor on this race. Operator: The next question is from Bertrand Hodee of Kepler Cheuvreux. Bertrand Hodee: Yes. I have 2. The first one is on your prospect in TPS. Regarding either carbon capture or ethylene, especially ethylene in the Middle East. Do you see more momentum here? And then the second question, I was doing some very rough math, EUR 16 billion backlog end of year '25, your projection EUR 24 billion H1 '26. It looks to me that you are -- if you achieve that, you will be already above EUR 12 billion of order intake for H1? Or am I doing any mistake here? Arnaud Pieton: Hello, Bertrand, I mean, you rarely do mistakes. So -- but we like to have a bit of a cautious approach as always. And on our communication, we are providing a -- I would say, a number that is about what has been announced or what is known and what is supposed to be awarded in the very near term. So it's a very short, I would say, window that we are projecting. Of course, then there's the rest of the year, H2 in particular, with some opportunities. So the -- we always -- like I said, lumpiness is part of our life. And whether a project is awarded on the left side or the right side of the 31st of December, it doesn't change much for Technip Energies, except of course, that it does change -- it can change drastically the shape and form of an order intake for a year. But yes, the potential is the one you're describing. Let's see if it realizes. But there is -- it's a realistic scenario. But we've seen last year, a few things pushing to the right. And so -- and it wouldn't be the first time. So that's why we decided to report on, I would say, what is a shorter window. And we don't guide on order intake, as you know. And also just a reminder for everyone on the call, we don't reward on order intake. That's because we want the right orders to make it to our portfolio, we don't want to race to volume. We want to race on quality. In terms of the prospects for TPS, Yes, we do have -- and we -- I believe on the slide, we decided to call them undisclosed prospects, but we are very clear -- if they are on the slide, it's because we have a very clear line of sight for them, in particular, in ethylene and phosphates and others. So there's a bit of a restart on that front, and that should provide for a positive momentum ahead. Bertrand Hodee: Thank you very much. And congrats again for this new win in Qatar that resemble more of partnership than anything else. Arnaud Pieton: It is, thank you. Operator: The next question is from Paul Redman of BNP Paribas Exane. Paul Redman: My first one is just going back to TPS quickly. I just wanted to ask what gives you the confidence to guide to EUR 2 billion to EUR 2.2 billion of revenue in '26? The reason I ask is when I look back at last year, you have EUR 1.3 billion of buyback into backlog in 2025 and you guided to EUR 2 billion to EUR 2.2 billion. This year, it looks like you've only got EUR 1 billion in the backlog at the moment. And then secondly, just to touch on NFE. Just to touch on timing for when you expect start-up, interval between trains, kind of how is that project progressing? Arnaud Pieton: Hello, Paul. I'll start with NFE and then I'll hand over to the -- to our TPS expert, because Bruno has been diving on TPS quite a bit recently. So NFE, I was on site just earlier this month on NFE and on NFS. And I'm just happy to report that the project is progressing well with the first train being in a commissioning and pre-commissioning and commissioning phase. So construction on the first of the 4 NFE LNG trains is actually mostly completed. And we are progressing per plan on the ramp-up of -- when you start up the plant, you need to be -- to put everything under pressure, pressure test everything, everything makes a pre-commissioning and commissioning activity. A reminder as well of the fact that in order to start up the first train on NFE, we needed to have all of the utilities up and running. So the utilities for the totality of the 4 trains, right? So I would say the level of effort to reach Train 1 readiness is much higher than what has to be achieved for Train 2, 3, and 4 readiness. And the fact that we are in pre-commissioning and commissioning mode should signal to you that all the utilities are actually up and running and that we are capable of bringing the gradually the first train on stream. So it's -- and that construction is broadly over there. And I could see it in my own eyes just earlier this month. So I would say, let's not believe everything that we can read in the press. If the client was unhappy, I think we would have heard about it and probably we would not have been awarded NFW. We stay very close to them. And for any commissioning and pre-commissioning of that scale, this is -- it's an activity that is happening hand-in-hand with the client and the client's operations team to bring such a large facility on stream. It's not only with Technip Energies, it's hand-in-hand with the -- it's a teamwork with the clients' team. So there is really no reason to doubt the timing that you have heard from our clients. Bruno Vibert: Yes. So on the TPS momentum and backlog versus the projected revenues. So first, of course, as I said, AM&C will be consolidated from Jan 1. It's not a backlog business, so that will contribute despite that it's not really part of the backlog at the end of the year. So of course, that's the first element. Second, as I also said, you always have some PMC work, which was quite successful over the last couple of years, which are not recognized in backlog. But as the services are called off, then they are delivered. So they are absolutely representing kind of a book and burn element. But third and maybe most importantly, last year, we were having some tail end delivery of property equipment, so more technologies and products backlog, which pretty much have been completed during the year and represented a bit of a boost to the bottom line, as I said before. Now this is a bit of the reverse this year. And as mentioned by Arnaud to Bertrand's question, we have a clear line of sight in more meaningful awards in ethylene, in hydrogen and for instance fossil projects, which were not in the backlog of revenues in the prior years, that should complement. So that should give us some contribution this year, although not in the backlog. So that's why it's not exactly easy to compare last year's momentum with this year's momentum. Arnaud Pieton: Paul, it's good because we will be adding product content into the TPS backlog, and that's like putting more volume and also provides a bit of a longer cycle content into a short-cycle business. Operator: The last question is from Jamie Franklin of Jefferies. Jamie Franklin: So firstly, just on project delivery revenues. I know you typically don't give any quarterly guidance, but given the significant step change in revenues through 2026, could you help us think about the phasing this year? Should we assume kind of a slow ramp-up and more of a back half weighting? Or is it more evenly split than that? And then obviously, projects revenues are very well covered by backlog already, and you talked to the EUR 12 billion near-term order intake potential. In terms of NFW, how should we think about the revenue phasing for that particular contract? Could there be much of a contribution in 2026? Bruno Vibert: Hello, Jamie. So I can start and Arnaud may complement. So yes, in terms of there will be a ramp-up, and you would have -- you could have some cutoff and milestones and so on, but you would expect some ramp-up during the year. Now it's true also to your point, that NFW won't have a major contribution this year because it's early phase. It's going to be this year early phase since it's a replication, the detailed engineering and so on is, to some extent, already done. So that's why you would have a bit of low start for NFW in terms of P&L contribution and then you will ramp up as the orders are placed to the market. So for the ramp-up of revenue for project delivery, I think it would be fair to have a bit of a gradual step-up as we go throughout the year. Operator: Gentlemen, I turn the call back to you for any closing remarks. Phillip Lindsay: That concludes today's call. Please contact the IR team with any follow-up questions. Thank you, and goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Good morning. Welcome to the Aurinia Pharmaceuticals Fourth Quarter and Full Year 2025 Conference Call. Please be advised that a Q&A session will follow Aurinia prepared remarks. [Operator Instructions]. I will now turn the call over to Peter Greenleaf, President and Chief Executive Officer of Aurinia. Peter, please go ahead. Peter Greenleaf: Good morning. We want to thank you all for joining us today to discuss Aurinia's Fourth Quarter and Full Year 2025 Update. Joining me on the call today are Joe Miller, our Chief Financial Officer; and Dr. Greg Keenan, our Chief Medical Officer. On today's call, we will report fourth quarter and full year 2025 financial results and provide an update on recent business progress. During today's call, we may make forward-looking statements based on current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties, and actual results may differ materially. We are pleased to have delivered strong LUPKYNIS sales in 2025, growing at a rate of 25% year-over-year. And for 2026, we expect net product sales of $305 million to $315 million, up 12% to 16% compared to 2025. And with that introduction, I'd like to now turn the call over to Joe to review our financial results. Joe? Joseph Miller: Thank you, Peter. Total revenue for the fourth quarter of 2025 was $77.1 million, up 29% compared to $59.9 million for the same period of 2024. Net product sales of LUPKYNIS for the fourth quarter of 2025 were $74.2 million, up 29% compared to $57.6 million in 2024. Net income for the fourth quarter of 2025 was $210.8 million, up 14,957% from $1.4 million in 2024. In the fourth quarter of 2025, the company recorded an income tax benefit of $175.1 million, primarily due to the release of its valuation allowance on deferred tax assets that the company now expects to realize. Net income before income taxes for the fourth quarter of 2025 was $35.7 million, up 2,875% from $1.2 million in 2024. Diluted earnings per share for the fourth quarter of 2025 was $1.53, up 15,200% from $0.01 in 2024. Lastly, cash flows from operating activities for the fourth quarter of 2025 were $45.7 million, up 52% from $30.1 million in 2024. Total revenue for the year ended December 31, 2025, was $283.1 million, up 20% compared to the $235.1 million for the same period of 2024. As a reminder, the 2024 period included a milestone payment of $10 million associated with LUPKYNIS regulatory approval in Japan. Excluding the onetime milestone, total revenue increased by 26% over the same period in 2024. Net product sales of LUPKYNIS for the year ended December 31, 2025, were $271.3 million, up 25% from $216.2 million in 2024. Net income for the year ended December 31, 2025, was $287.2 million, up 4,852% from $5.8 million in 2024. For the year ended December 31, 2025, the company recorded an income tax benefit of $173 million, primarily due to the release of its valuation allowance on deferred tax assets that the company now expects to realize. Net income before income taxes for the year ended December 31, 2025, was $114.2 million, up 1,443% from $7.4 million in 2024. Diluted earnings per share for the year ended December 31, 2025, was $2.07, up 5,075% from $0.04 in 2024. Lastly, cash flows from operating activities the year ended December 31, 2025, were $135.7 million, up 206% from $44.4 million in 2024. As of December 31, 2025, the company had cash, cash equivalents, restricted cash and investments of $398 million compared to $358.5 million at December 31, 2024. For the year ended December 31, 2025, the company repurchased 12.2 million common shares for $98.2 million and fully diluted shares outstanding were reduced from $149.8 million to $139.7 million. As a result of LUPKYNIS continued momentum, we are pleased to announce our 2026 guidance. We expect total revenue of $315 million to $325 million, up 11% to 15% compared to 2025. We expect net product sales of $305 million to $315 million, up 12% to 16% compared to 2025. Now I would like to turn the call back over to Peter for some business updates. Peter Greenleaf: Thanks, Joe. Turning now to aritinercept. We are very excited about the potential of this novel biologic in the treatment of a wide range of autoimmune diseases. As we've previously discussed, aritinercept is a dual BAFF April inhibitor that was well tolerated at all dose levels tested in the Phase I single ascending dose study. Single doses of aritinercept led to robust and long-lasting reductions in immunoglobulin supportive of once monthly dosing. Aurinia has initiated a clinical study of aritinercept in one autoimmune disease and plans to initiate a clinical study in an additional autoimmune disease in the first half of 2026. So in summary, we continue to drive growth in our commercial LUPKYNIS business, while at the same time advancing the clinical development of aritinercept. We want to thank you for joining us on today's call and we look forward to taking your questions. Now let me ask the operator to open up the line for Q&A. Operator? Operator: [Operator Instructions]. Our first question is coming from Maurice Raycroft from Jefferies. Farzin Haque: This is Farzin on for Maurice. So your issued guidance for 2026 seems somewhat conservative given the 4Q run rate. So what are some of the specifics in forming the commercial outlook? And as it relates to the -- what you're seeing in the first 2 months of this year? Peter Greenleaf: Farzin, on the first part, I don't think I got the first part of your question. Can you repeat it on what you're looking for there? I think you want to understand what's underlying the growth for the company for the year? Farzin Haque: Right. Like what's the underlying assumptions for the 2026 guidance? And then what are you seeing in the first 2 months of the year to inform that? Peter Greenleaf: Well, I think first off, our strategy for the commercial business of LUPKYNIS continues to be similar to what we've done for the last probably 6 to 12 months, and that's to continue to stand on the incredible data that we have in terms of the efficacy of the product and the treatment of lupus nephritis and the reduction of proteinuria as early as 3 and 6 months that we've seen leveraging the expanded data set that we had with the extension study we did with the AURORA trial, which gives longer-term data, the biopsy study. And then last year, the introduction of the ACR and ULAR guidelines that actually did a really nice job, not just promoting novel products like LUPKYNIS, but more importantly, more aggressively using diagnostics to identify proteinuria earlier in patients suffering from lupus to identify lupus nephritis. So our strategy hinges on really trying to change the whole treatment paradigm, the diagnostic paradigm and then the early treatment aggressively of proteinuria, and we believe our drug does that better than not the drugs that have historically been used to treat the disease and what's been seen to date with even the novel newly approved or novel drugs that have produced data. As for the question about the first 2 months of the year, we're not really giving any steer for the quarter, but nothing is out of ordinary for what we've seen historically. We've tried to put emphasis on the best predictor for what we're seeing going forward has been past history. So we would refer you to Q1 of 2025 to look for any friends in the business. Farzin Haque: Got it. Makes sense. And then a follow-up is on the -- you recently dominated the Phase III and the open label studies in the vocal study and the vocal extension, the pediatric study. And it mentioned like part DSMB recommendations. So can you clarify whether DSMB is asking to stop? Or is FDA refocused on the drug in any way? Peter Greenleaf: Do you want to take that, Greg? Greg Keenan: Yes. Thanks for the question. Greg Keenan here. So the local study in its current form was one where due to technical issues working with the clinicians that proved to be very, very difficult to recruit patients for that particular study. So we made a decision based on what we saw at that point that we terminate the study and plan to have negotiations soon with the FDA for further plans for meeting our pediatric commitments in lupus nephritis. Peter Greenleaf: Yes. I think just one thing to add, in addition to that is, we have data from the work that we've done up to this point. We have in-market data that we know from treatment of patients, both on the adolescent and the pediatric side in the current market. So there's data that we can actually provide to the agency, and we look forward to a conversation with the agency about: One meeting commitment that we had to the agency and; two, what that would mean for how physicians should be guided in the treatment of pediatric patients. Last point here, remember that this disease is primarily disease of women in the middle part of their life. It's not really a prominent pediatric condition. So while we had the commitment with the agency, this is not -- the burden of this disease in pediatric patients is quite small and the thereby the business opportunity being probably smaller than that. Operator: Next question questions coming from Joseph Schwartz from Leerink Partners. Will Soghikian: This is Will Soghikian on for Joseph Schwartz. Congrats on the quarter,and thanks for taking our questions. Just to start for us. I think previously you guys guided to a development update for aritinercept in early 2026. But can we still expect this update? And could you please provide some additional context for what this might entail. I understand that's the competitive reasons, you're keeping the indications of focus close to the vest. But what about the overall study design and the size? Just so we can have some visibility to the potential data disclosures? And is this a Phase Ib or Phase II and I have a quick follow up. Peter Greenleaf: Well, thanks for the question. We're -- obviously from the last couple of calls, it should be obvious that we're excited about the therapeutic potential for BAFF April inhibition across a wide range of these B cell-mediated autoimmune diseases. As we mentioned on this call, we initiated a clinical study of aritinercept in one autoimmune disease, and we plan, obviously, as we said, to initiate another on our immune disease in the first half of 2026. At that time, we'll disclose the indications for each study in the second quarter of 2026. So look for more from us end. I can't say whether we're going to get into trial design, et cetera, that -- up until that point, but more to come by the second quarter of 2026. Will Soghikian: Great. That's super helpful, Peter. And then just one on new LUPKYNIS. I guess things have been going pretty well. I think raising guidance twice last year is a great indication that there's still some growing demand and momentum here. So I guess could you qualitatively just talk about what's going better than expected? Are patients staying on therapy longer? Are you adding more patients on commercial drug than expected? Are you seeing a better mix of insurers? I guess, what's the main driver of this continued strong performance as we head into 2026? Peter Greenleaf: While we don't give individual commercial metrics anymore, what I can tell you -- thank you for the question, is we are seeing growth across patients. We are seeing very solid and continued adherence to the product and persistency, and even the mix of our business when looking at the average price per commercial patient per year all continue to perform with a level of consistency, again. Why we've kind of steered to -- if you look at the historical growth pattern of this product over the last 3 years, it's probably the best way to think about its growth pattern going forward. And if you do that, I think you'll see why we landed in the guidance range that we did. Operator: Our next question is coming from Arthur He from H.C. Wainwright. Yu He: Congrats on the quarter. So I just -- kind of follow up with the last question. So given the guidance for the 2026, I'm just curious how much the growth is coming from the rheumatologists versus nephrologist. And given we have the guidance -- the new guidance in hand for a while, do you believe we have reached a steady state of the guidance-driven prescribing? Or it's still too early like for the tails? Peter Greenleaf: So let me break that question just in half. The first half was, are we seeing any break in terms of the trends on rheumatology prescribers as it relates to total revenue contribution versus nephrology? The answer to that is slightly. One of the things that is key to our mid- to longer-term strategy is to get earlier diagnosis and earlier treatment, which, by the way, I don't think is unique to Aurinia. I think for the patients, for physicians and for the future of this disease, we're strong believers that earlier treatment with drugs like LUPKYNIS are only going to have a short- and longer-term patients benefit and probably save more kidneys and more patients, extend more patients' lives over time. So rheumatology is key to that. Since these patients are SLE patients before they ever become diagnosed as lupus nephritis and catching them early and getting more aggressive treatment is going to -- is really going to start in the rheumatologist office. What I can tell you, because we aren't giving the specific metrics anymore, as we continue to see more prescribers in the room space. And while the business is pretty evenly broken between rheumatology and nephrology, it does favor the rheumatologists slightly, and that has been increasing over the last 2 years. The second part of your question was centered on -- why am I blanking now? Can you repeat it for me? Yu He: Yes, I said like which meaning for the -- coming from the ACR guidance, post impact to the prescriber. Peter Greenleaf: Well, I think it's -- for me, it's -- I'd ask Greg to jump in here, too, if I miss anything. The guidelines emphasize earlier diagnosis. And we know there's a long way to go here. They recommend that every time a lupus patient comes in that they get a urinalysis and look for proteinuria as well as other indicators of the disease progression when they visit. What we do know is that doesn't happen every time they visit. And matter of fact, it probably happens less than 50% of the time that a patient visits in office. So if we can see that increase, we believe more proteinuria will be identified when more proteinuria is identified, if -- and this is the second part, it's identified, we see aggressive treatment. The guidelines say when you hit a certain target treatment level that the patients should then be treated. We also know from payer data and database data that's out there that, that doesn't happen either. So more aggressive diagnosis, more aggressive to specific target of proteinuria. Lastly, the target of keeping a patient on drug for 3 to 5 years is clearly written in the guidelines, and we know that not just for LUPKYNIS, but for all drugs included treating this more like a chronic progressive disease than an acute flare up within the disease would all be a major progression for the treatment of the disease. Greg Keenan: Yes. No, I just -- I agree with all the points. I think as clinicians become increasingly comfortable confident in the new agents to include LUPKYNIS more consistently treating for longer periods of time. And so that's something we look forward to continuing to support in rheumatology and nephrology communities. Yu He: Maybe just a quick one for Greg. So speaking of the aritinercept receptor. Greg, could you remind us how the ADA situation for the payer drug when you see in the health form here. Greg Keenan: Right. So we mentioned one of the previous calls that you have seen antidrug antibodies that low titers at doses from 25 milligrams and above. At this point, as I noted previously, we didn't see any impact on association with injection site reactions or changes in the pharmacokinetic profile of those with positive ADAs relative to those that have not. I'll just remind it's -- each ADA assays bespoke antibody. It's not uncommon for drugs to have ADA levels, and we're quite confident as we go into subsequent work in our clinical trial program that we'll be able to understand more of the impact of these things. At this point, we're very encouraged with what we see in our confidence is high in this molecule. Operator: Our next question today is coming from Sahil Dhingra from RBC. Unknown Analyst: This is [ Sahas Badami ]. My question is related to the competitive landscape. So we have seen that Gazyva was recently approved in the LN indication. So first question is, have you seen any impact of the positioning of LUPKYNIS in the treatment landscape following that launch? And the related question is that is the approval of Gazyva incorporated in your guidance? And how do you think it will impact LUPKYNIS going forward? Peter Greenleaf: So your first question about near-term impact from the launch, our answer would be no. We continue to see the business performing consistently as it has historically. The question of how it will perform on a go forward? Is it represented our guidance. I think our guidance represents a lot of factors, including new competition and progression of implementation of the guidelines and a multitude of different factors. As it relates to Gazyva, we actually -- and all new potential competitors, as I mentioned earlier, I do think there's major room that can be made improvement that can be made both in awareness building at the patient level, awareness building on the treatment guidelines and diagnostic guidelines for the treatment of lupus nephritis, identification and more aggressive treatment of the disease. And all of these things will grow the market significantly before you ever get into the question of what's the better treatment option? And there, we believe we have an incredibly competitive profile because the guidelines emphasize rapid reduction in proteinuria as early as 3 to 6 months. And I would challenge those on the call to go back and all these drugs stand on their own merits and will be used by physicians based upon the labels that they get. But if you look closely at the data, in terms of rapid improvement and reduction in proteinuria, generally speaking, the novel competitors that we're seeing in the marketplace appear to not have the ability to reduce proteinuria levels to target treatment guideline levels as quickly as what we've seen with LUPKYNIS. Greg, what would you add? Greg Keenan: Just to put a punctuation on that point. In our pivotal trial, we saw a 50% reduction in proteinuria within 1 month's time from initiation of LUPKYNIS in those that were studied. And we know that for hitting the primary endpoint, our study was designed to show the benefits at 12 months. the goals were achieved for the most part by 6 months' time, I remind you that with Gazyva, the primary endpoint is at week 76, and it took that long to be able to get important clinical responses, complete renal response. It took 1.5 years. So the speed with which works is notable. Also emphasize relative to Peter's point, Gazyva and B-Cell targeted agents are one access of the immune system, LUPKYNIS the only indicated treatment for LN that targets the T-cell and also has a photocyte protection effect. So, these are complementary maxims action, the speed with which LUPKYNIS works is notable. And to Peter's point, the awareness with regard to aggressive treatment that will be created by additional important agents in this area will just improve the likelihood of getting better patient outcomes. Operator: Thank your. Next question today is coming from David Martin from Bloomberg. David Martin: Congratulations on the quarter. I realize LUPKYNIS was launched in the U.S. market first. Do you expect the other global markets will catch up to the U.S. as far as penetration in the lupus nephritis patient population? Peter Greenleaf: While I can't speak directly for Otsuka, our partner in Europe and in Japan, I can give you what we hear through them and what we understand about the market, I think the short answer there, David, is no. Every country has individual pricing and reimbursement and guidelines as to how they implement the global guidelines to the treatment of the disease. Pricing in every market is different and historically has been lower than what we've seen in the U.S. and North America. So at least from our expectation standpoint and contribution to this company, as we've said historically, we don't see it as a major contributor for our balance of the overall LUPKYNIS business. Now that being said, it has been every year a good contributor to our growth and sustaining of the business. Just on a relative basis, it's not a large percentage. And we don't expect that it's going to see the same type of aggressive treatment pricing and/or reimbursement that we see in the United States. David Martin: Okay. And second question, are docs -- are you finding -- are they combining B and T-cell therapies or choosing one or the other? Peter Greenleaf: I think it's a really good question and one that we plan to continue to think about and potentially explore moving forward and welcome Greg's comments here, but just one intro, if you think about it, there's a rationale to potentially combine B-cell and more T cell-mediated therapies that could potentially even reduce proteinuria faster, but -- faster and/or more effectively. But in addition, what we see probably in the market more often is that lupus patients more are being initiated or looked at as potential candidates for B-cell -- novel B-cell therapies earlier in the treatment paradigm. And what needs to be considered as a lupus patient when they have controlled symptoms of their lupus, i.e., maybe fatigue or skin condition or tender and aching joints. If those are controlled, yet they have a breakthrough of proteinuria, we often get the question of how to initiate a drug like LUPKYNIS if they're already on a B-cell and they don't want to take them off of that B-cell. So point being there are two reasons to potentially address this: One is to more effectively manage lupus nephritis; the other is, would you -- could you not stop one therapy to continue another and is there a safe and efficacious reason for that. And we are seeing it, and we are discussing and planning internally to potentially look at how we might address this through research and development work in the combination of the two. Greg? Greg Keenan: Craig? Yes. So thanks, Peter. And the only thing I'd add because it is logical to consider combining these. I'll point out that the targeted approach of specific B-cell and T-cell related targeting makes logical sense relative to nonspecific immunosuppression, think of MMF and higher doses of glucocorticoids. So an additional question we get is what's the possibility of reducing some of those other nonspecific agents. So relative to your question, the science and the academics in the field are very much posing this as a logical way to do much more targeted, efficient treatment of patients with lupus general but lupus nephritis specifically. So more work to be done there. It's a logical question, and we intend to think about that a lot more in the upcoming months. Operator: Our next question today is coming from Olivia Brayer from Cantor Fitzgerald. Olivia Brayer: On aritinercept, what's the cadence of updates that we should expect from that program. I mean it sounds like next quarter, we got some more meat on the bone. But beyond that, when can we start to expect to see more meaningful updates and data behind the program? And then given that you are looking at two indications, is there one that you maybe have higher or feel like your program has a better chance in? Peter Greenleaf: Thanks for the question, Olivia. So I would expect to hear more in second quarter of 2026. I kind of leave it at that because we're not giving any future view as to what we're going to disclose or not disclose for that matter. And I would say we don't have a preferential indication in mind in terms of probability for success or one we feel more committed to. I will say, what we're excited about the most here is the fact that this looks like not just from our work but from the work of everyone working on both BAFF April combination or straight BAFF or straight April that these products can address a multitude of different autoimmune diseases, inflammatory conditions. And that's probably what we're the most excited about. And we're trying to take a very thoughtful methodical approach to where we start, where we create a beachhead. And if we're successful there, we think there's great opportunity to potentially build that -- potentially build from there. And I think that's been proven by those who are doing work here as well. So more to come. A little bit of a nonanswer, I apologize for that, but -- it's not because we don't want to talk more about the details of our plan. We just want to be purposeful about how we roll it out. Olivia Brayer: Okay. Understood. And then a follow-up on Gazyva. What are you guys hearing in terms of what Roche is doing to grow that market? And what's maybe been the initial feedback from physicians just around how they're thinking about sequencing therapies now that there are multiple options available? Peter Greenleaf: Surprisingly, it's been a little bit quiet. I mean, it's much like Benlysta, the -- the focus appears to be on the larger piece of the population. For context purposes, you've got an SLE population that's hundreds of thousands of patients in the U.S. and an LN population, which is a subset of that SLE population that's probably tens of thousands of patients. So if you think about it strategically and from a positioning standpoint, and I think as many are aware, Gazyva has also produced their data in lupus and it looks like they'll have a good regulatory pathway in lupus as well, you probably want to position these products further upstream for earlier treatment in lupus was the potential to, and not that they've done research this way, avoid kidney complications down the road. We know that's how Benlysta is currently positioned in the marketplace, and I would think it highly likely that Gazyva is going to be positioned there as well. We don't have any specifics on marketing materials or how they're positioning it in lupus nephritis specifically. But Greg did give a good articulation earlier of where we see the competitive profile here. And we honestly and truly do believe that a rising tide lifts all boats here. More patients getting identified with nephritis, more patients getting aggressively treated with lupus, awareness building, treatment guideline adoption, all grow this market for patients and for the drugs that are trying to be utilized here for those patients. Operator: Thank you. We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Peter Greenleaf: No. I want to thank everybody for joining us on the call today. We look forward to further updates in the future, and have a great day. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation.
Operator: Good morning, and welcome to the Ormat Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. And I would like to turn the conference over to Josh Carroll with Alpha IR. Please go ahead. Joshua Carroll: Thank you, operator. Hosting the call today are Doron Blachar, Chief Executive Officer; Assi Ginzburg, Chief Financial Officer; and Smadar Lavi, Vice President of Investor Relations and ESG Planning and Reporting. Before beginning, we would like to remind you that the information provided during this call may contain forward-looking statements relating to current expectations, estimates, forecasts and projections about future events that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives and expectations for future operations and are based on management's current estimates and projections, future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in Ormat Technologies annual report on Form 10-K and quarterly reports on Form 10-Q that are filed with the SEC. In addition, during the call, the company will present non-GAAP financial measures such as adjusted EBITDA. Reconciliation to the most directly comparable GAAP measures and management's reason for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on the website. Because these measures are not calculated in accordance with GAAP, they should not be considered in isolation from the financial statements prepared in accordance with GAAP. Before I turn the call over to management, I would like to remind everyone that a slide presentation accompanying this call may be accessed on the company's website at ormat.com under the Presentation link that's found on the Investor Relations tab. With all that said, I would now like to turn the call over to Ormat's CEO, Doron Blachar. Doron? Doron Blachar: Thank you, Josh. Good morning, everyone, and thank you for joining us today. Let me start with a few key highlights from 2025, and then I will touch on several recent developments beginning on Slide 4. 2025 was a strong year for Ormat. Revenue increased 12.5% to approximately $990 million and adjusted EBITDA improved by 5.7% to $582 million. Our results reflect meaningful progress toward our long-term targets. This was supported by improved performance of our Product and Energy Storage segment alongside solid execution in our core electricity segment. Within our Energy Storage segment, we captured higher energy rates in the PJM market and benefited from strong market pricing. In addition, our energy storage facilities operated at higher availability levels, enabling us to fully capitalize on these favorable market conditions. The segment delivered robust gross margin in both the fourth quarter and full year, demonstrating the effectiveness of our strategy to balance contracted pricing with merchant exposure. Recently, we achieved several important new developments. We successfully commissioned Arrowleaf, our first solar and battery energy storage project in California. We completed the acquisition of our second solar plus storage project, Hoku in Hawaii, and we won a geothermal tender in Indonesia. On the PPA front, I know many of you have been awaiting an update. As promised, we have secured over the last few months, approximately 200 megawatts of new PPAs with hyperscalers, data centers, developers and existing utility and municipal customers, all at elevated PPA prices with potential for additional growth. These agreements include a 15-year portfolio PPA for up to 150 megawatts supporting Google's data center through NV Energy, and a 20-year PPA with Switch for approximately 13 megawatts of energy from our Salt Wells plant, which can serve as a platform for future PPA expansions. We also negotiated 2 blend and extend contracts totaling approximately 40 megawatts pending final approval, which will enable us to realize higher energy rates starting as early as 2027 rather than at the original expiration dates. Together, these contracts, along with future contracts provide profitable new revenue streams, enhance visibility into our development pipeline and validate the expansion of our exploration and drilling initiatives over the past several years. We also made strong progress advancing EGS towards commercialization. This is highlighted by our co-lead role in Sage Geosystems Series B financing, supporting the continued development of its geothermal power generation and energy storage solutions. This investment, combined with our commercial agreement with Sage and our SMB partnership broadens our EGS initiatives and positions us to potentially accelerate EGS time to market and expand geothermal deployment globally. I will elaborate on these initiatives in a moment. Before I provide some additional updates on our business, I would now like to turn the call over to Assi to discuss our financial results. Assi? Assaf Ginzburg: Thank you, Doron. Let me start my review of the financial highlights on Slide 6. Total revenues for 2025 were $989.6 million, up 12.5% year-over-year. Fourth quarter revenue was $276 million, up 19.6% versus the prior year period. This top line growth was largely driven by continued strength in our Product and Energy Storage segments. Gross profit for 2025 was $272.7 million, in line with prior year. Fourth quarter gross profit was $78.8 million, up 7.2% from $73.6 million in the fourth quarter of 2024. Gross margin for the full year and the fourth quarter were 27.6% and 28.6%, respectively, compared to 31% and 31.9% in the prior year period. This modest annual comparison was driven by previously disclosed curtailments in our Electricity segment at several U.S. facilities throughout the year and a change in our mix of revenues with higher revenues in our Product segment. Fourth quarter net income attributable to the company's stockholders was $31.4 million or $0.50 per diluted share compared to $40.8 million or $0.67 per diluted share in the prior year period. For the full year, net income attributable to the company's stockholders was $123.9 million or $2.02 per diluted share compared to $123.7 million or $2.04 per diluted share in 2024. The year-over-year decline in the fourth quarter was primarily driven by impairment charges related to our Brawley geothermal assets and one of our Ormat facilities, which we expect now to discontinue operation during 2026. This was partially offset by strong growth in profitability at our Energy Storage segment. Adjusted net income attributable to the company's stockholders for the fourth quarter was $41.8 million or $0.67 per diluted share compared to $43.6 million or $0.72 per diluted share in the fourth quarter of the prior year. For the full year 2025, adjusted net income attributable to the company's stockholders was $137.3 million or $2.24 per diluted share compared to $133.7 million or $2.20 per diluted share last year. Full year adjusted EBITDA was $582 million, an increase of 5.7%. Adjusted EBITDA for the fourth quarter was $158.7 million, a 9.1% increase compared to last year. The year-over-year growth was primarily driven by higher contribution from the Energy Storage segment, reflecting improved PJM pricing and new capacity addition as well as improved performance in our product segment. Slide 7 breaks down the revenue performance at the segment level. Electricity segment revenue for the fourth quarter increased by 3.6% to $186.6 million, primarily due to the recent acquisition of Blue Mountain and the improved performance at our Dixie Valley facility. This expansion to our operating portfolio helped to more than offset $4.3 million reduction at our Puna complex in Hawaii that was mainly driven by lower energy rates. For the full year, electricity revenue decreased by 1.2% to $693.9 million driven by curtailment in the U.S. earlier in the year that reduced segment revenues by $18.6 million as well as a temporary reduction in the generation at our Puna facility and repowering activities at our Stillwater facility. This was partially offset by new generation contribution from our Blue Mountain facility, the Beowawe repowering project and improved performance at Dixie Valley. Product segment revenue increased by 59.1% to $63.1 million during the fourth quarter, and grew by 55.2% to $216.7 million for the full year. The performance was driven by our strong backlog and the timing of progress made in manufacturing and construction. Energy Storage segment revenue increased by 140.5% in the fourth quarter. For the full year, revenue grew by 109.3% to $79 million. As Doron highlighted earlier, the strong performance was mainly fueled by elevated energy rate at our storage facilities in the PJM market, alongside contribution from new operational projects in late 2024 and in 2025, which include the Bottleneck, Montague and Lower Rio facilities. Moving to Slide 8. The gross margin for the Electricity segment decreased to 30.2% in the fourth quarter and 28.5% for the full year. This decline was driven by the curtailment and lower energy rates at Puna that I just touched on. In the Product segment, gross margin for the year came in at 21.2%, an increase of 280 basis points versus last year, in line with our expectation for the year. This performance was driven by the improved project profitability and more favorable geographic and contract mix in 2025. The Energy Storage segment reported gross margin of 51.5% and 36.4% during the fourth quarter and the full year, respectively, making a significant improvement versus the prior year. The increase was driven by the effectiveness of our strategic approach to balancing contracted pricing with merchant exposure. Moving to Slide 9. In the full year 2025, we collected more than $180 million in cash monetization PTCs and ITCs through tax equity transaction and ITC and PTC transfers. This is more than the anticipated $160 million in the year. In 2026, we expect to collect approximately $90 million from ITC tax equity transactions and ITC and PTC transfers. We recorded $20 million in income related to tax benefits in the fourth quarter compared to $18.5 million last year and $66.7 million in the full year 2025 compared to $73.1 million in 2024. In the fourth quarter and full year, we recorded ITC benefits of $10.5 million and $44.2 million, respectively, in the income tax line that drove down the tax rate to a negative 20%. These benefits are related to the energy storage facilities that commenced commercial operation in 2025 and include Arrowleaf and Lower Rio. With the 2 new storage assets expected to start commercial operation in 2026, we expect to record a tax benefits driven by higher ITC levels that will result in a negative tax rate of 15% to 20%. Slide 10 details our use of cash flow over the last 12 months, illustrating Ormat's ability to generate strong cash flow, which allow us to reinvest in our strategic growth while servicing debt obligation and returning capital to shareholders. Cash and cash equivalents and restricted cash and cash equivalents as of December 31, 2025, was approximately $281 million compared to approximately $206 million at the end of 2024. Our total debt as of December 31, 2025, was approximately $2.8 billion, net of deferred financing costs with a cost of debt of 4.8%. Moving to Slide 11. Our net debt as of December 31, 2025, was approximately $2.5 billion, equivalent to 4.4x net debt to EBITDA. During the fourth quarter, we secured $165 million in funding. This includes approximately $100 million in corporate debt raising during the quarter. In addition, we received approximately $59 million in tax equity proceeds, including $30 million from Arrowleaf. As shown on the slide, our total available liquidity is $680 million. We expect our total capital expenditure for 2026 to be $675 million. Following the sale of our Topp 2 plant in New Zealand during the first quarter for approximately $100 million, we expect the net investment to be around $575 million. Our detailed CapEx plan is presented in Slide 33 in the appendix. We plan to invest approximately $465 million in the Electricity segment for construction, exploration, drilling and maintenance in 2026. Additionally, we plan to invest $180 million in the construction of our storage assets and approximately $10 million in the EGS pilot with SLB. On February 24, 2026, our Board of Directors declared, approved and authorized a payment of a quarterly dividend of $0.12 per share payable on March 24, 2026, to shareholders on record as of March 10, 2026. In addition, the company expects to pay quarterly dividends of $0.12 per share in each of the next 3 quarters. Before I conclude my financial review, I would like to highlight that we anticipate a strong start to 2026. We expect first quarter performance to benefit from the approximately $100 million in additional product segment revenues, carrying an estimated gross margin of around 20% related to the sale of Topp 2. I would like now to turn the call over to Doron to discuss some of our recent developments. Doron Blachar: Thank you, Assi. Turning to Slide 13. Our electricity portfolio now stands at approximately 1,340 megawatts globally. We added 72 megawatts in the fourth quarter of 2025. And currently, we have approximately 149 megawatts under construction and development through 2027. Moving to Slide 14 to discuss M&A activity. Subsequent to year-end, we closed an agreement to acquire Hoku, a recently built solar plus storage facility on the Big Island of Hawaii from Energix Renewable Energies for $80.5 million in cash. The acquired assets include a 30-megawatt solar PV facility paired with a 30-megawatt 120-megawatt hour battery energy storage system with a 25-year PPA. This transaction strengthens our growing storage platform and supports our 2028 energy storage growth targets while enhancing the stability and long-term visibility of our revenue profile. The Blue Mountain Power Plant, which we acquired in June, has continued to contribute positively to our results and its capacity recently reached 22 megawatts. We are also making strong progress on planned upgrades to the facility that we expect to complete in the first half of 2027. In addition, we plan to add 12 megawatts of solar PV that will serve the auxiliary needs of the geothermal facility and enable more geothermal power to be sold to the grid. The upgrade and the solar addition will enhance the facility generation capacity and long-term revenue growth potential. Moving to Slide 15. Our Beowawe plant delivered improved performance over the year following the successful completion of its repowering and our Dixie Valley facility demonstrated stronger results during the year as operation normalized after the unplanned outage experienced in 2024. On the international front, we were recently awarded the Telaga Ranu geothermal working area by the government of Indonesia under the Ministry of Energy and Mineral Resources. This concession was awarded following a competitive tender process involving 4 qualified bidders, securing Ormat's long-term rights to explore and develop the geothermal resource. We have strong confidence in Indonesia geothermal potential and believe this site can add up to 40 megawatts to our exploration pipeline. This new award, together with previously announced Songa and Atedai tender wins and other prospects under exploration and development, sum up to 182 megawatts that we are currently developing in Indonesia. Moving to Slide 16 to discuss the 2 significant PPAs I mentioned earlier. In January, we signed a 20-year PPA with Switch, a premier provider of AI, cloud and enterprise data center. This represented Ormat's first direct PPA with a data center operator, highlighting the strategic alignment between our geothermal capabilities and the growing demand for sustainable energy to power data center infrastructure. Under the agreement, which can serve as a platform for future PPAs, Switch will purchase approximately 13 megawatts of clean renewable energy from our Salt Wells geothermal plant. Ormat also has the option to expand output by adding an approximately 7-megawatt solar PV facility to serve the plant's auxiliary power. The combined output will help support the power needs of Switch Nevada data centers, aligning with their commitment to sustainability and carbon reduction. More recently, we entered into a long-term geothermal PPA with Google. The PPA covers a multi-project portfolio enabled by NV Energy Clean Transition Tariff. Under the agreement, Ormat will supply up to 150 megawatts of new geothermal capacity to Google's Nevada AI and data center operations. This is a landmark development for Ormat. The portfolio structure provides long-term profitable revenue growth and visibility into our development plans while solidifying our conviction in our expanded exploration and drilling activities we have undertaken over the past several years. It also establishes a strong framework for similar agreements going forward. The combination of these PPAs attractive terms and the extension of the geothermal tax credit under the OBBBA framework significantly enhances our ability to execute our long-term growth strategy. In addition to these 2 agreements, we have negotiated 2 blend and extend PPAs for existing plants that are currently pending final approval. These agreements are expected to improve revenues at 2 facilities by approximately $20 to $30 per megawatt hour beginning in 2027. Collectively, these new PPAs demonstrate our consistent strategic execution over the past several years and reinforces our ability to secure high-quality long-term contracts that drive sustainable growth. Turning now to Slide 17. Our product segment backlog stands at $352 million, representing a 19% increase on a sequential basis. This growth was primarily driven by the Topp 2 project, which was recently removed from our pipeline due to the customer exercising its option to purchase the facility and our agreement to sell. Topp 2 added approximately $100 million to the backlog that will be recorded as revenues in the first quarter of 2026. Moving to Slide 18. Our Energy Storage segment produced another strong quarter of year-over-year growth with total revenues increasing by 140%. We anticipate that this strong performance in our energy storage business will continue into 2026, driven by higher energy rates in the PJM market. On Slide 20, we continue to remain on track to achieve our portfolio capacity target of between 2.6 gigawatt to 2.8 gigawatt by the end of 2028. This confidence is underpinned by strong momentum in geothermal development and the accelerated exploration efforts. In addition, the efforts that we took throughout 2025 to secure both battery supply and safe harbor status for additional projects helped improve our visibility towards achieving our capacity growth targets. Turning to Slide 21 and 22, which display our geothermal and hybrid solar PV projects currently underway. We anticipate adding 149 megawatts to our generating capacity from these projects by the end of 2028. As you can see from the table, we added a new 30-megawatt greenfield project, first since 2017 that we expect to start operation by the end of 2027. Moving to Slide 23 and 24. We currently have 6 projects under development in our Energy Storage segment, which are expected to add 410 megawatts or 1,540 megawatt hour to our portfolio. These projects, as you can see from the table, include the new 100-megawatt, 400-megawatt hour Griffith facility that we plan to build in California and another 20 megawatts, 100-megawatt hour facility in Israel. Turning to Slide 25 for a discussion on our EGS efforts. In 2025, we made significant progress advancing our efforts to bring new technologies, including EGS towards commercialization. Our partnership with SLB is designed to accelerate the development and commercialization of EGS projects. While still in the early stages, we are confident this collaboration will streamline project deployment from concept through power generation. By combining Ormat's market-leading capabilities in power plant design, development and operations with SLB strength in subsurface reservoir engineering and construction, we believe we can unlock greater efficiencies, reduce execution risk and deliver projects more effectively. We also announced a strategic commercial agreement with Sage Geosystems to pilot its advanced pressure geothermal technology, which extracts heat energy from hot, dry rock at one of our existing power plants. In late January, we further advanced this partnership by serving as co-lead investor in Sage Series B financing, supporting the continued development and commercialization of its geothermal power generation and energy storage solution. This investment is a natural extension of our collaboration and underscores our confidence in Sage technology. Overall, we are encouraged by the meaningful progress achieved across both our external partnership and internal EGS initiatives in recent months, which includes 2 pilots that will be conducted utilizing Ormat facilities. We believe these efforts position Ormat to expand our existing market leadership and accelerate the broader deployment of geothermal energy globally. Importantly, beyond project development within our Electricity segment, we believe our proprietary binary on surface plant technology provides a competitive advantage in the emerging EGS market. Our decades-long operating experience and large installed capacity create a significant learning curve advantage versus new entrants. This positions us not only to develop EGS projects, but also to potentially supply equipment and technology solution to third parties as the market scales. Ormat origins are rooted in technology and innovation. These developments, particularly in EGS will complement our market-leading capabilities in traditional geothermal applications. As these technologies mature, they will represent an additional growth vector at top our long-established core business. Given our expertise and strategic partnership, we believe we are uniquely positioned to bring these technologies to market efficiently and profitably. Please turn to Slide 26 for a discussion of our 2026 guidance. For 2026, we expect revenue to increase by 14.6% year-over-year at the midpoint, ranging between $1,110 million and $1,160 million. Electricity segment revenues are projected to be between $715 million and $730 million. Product segment revenues are expected to range between $300 million and $320 million and Energy Storage revenues are now expected to range between $95 million and $110 million. Adjusted EBITDA is expected to increase by approximately 8.2% at the midpoint, ranging between $615 million and $645 million. I will now conclude our prepared remarks with reference to Slide 27. Looking ahead to 2026, Ormat is well positioned to capitalize on the evolving electricity landscape driven by accelerating AI adoption, rapid data center expansion and supportive market fundamentals, including record high PPA prices and a constructive regulatory environment. This sustained demand reinforces our confidence in delivering on our long-term growth strategy and earnings objectives. We remain committed to delivering reliable, sustainable energy solutions while leveraging our expertise, proven track record and market leadership to drive meaningful growth and create long-term shareholder value. This concludes our prepared remarks. Now, I would like to open the call for questions. Operator, please. Operator: [Operator Instructions] Your first question comes from the line of Justin Clare with ROTH Capital. Justin Clare: And I wanted to start off here just talking about the PPAs. You've obviously signed a lot recently here. You highlighted the 40 megawatts of PPAs signed under a blend and extend strategy. And just wanted to see how should we think about the additional opportunity in terms of the amount of capacity that could be proactively renewed and with PPAs extended ahead of expiration? And then also just wondering if you could provide an update on the amount of capacity that might be coming up for renewal still here in 2026, 2027, 2028? Doron Blachar: As you said, we initiated this blend and extend 40 megawatts that are in the approval phase. And hopefully, in the next few weeks, we will be able to announce once they are fully signed and approved. And we have a few more assets, not too many assets that we can blend and extend, and we have started to work on the next phase that will take a few months to get them updated to the current pricing. Justin Clare: Okay. Got it. So then maybe shifting over just on the curtailments. I think there was an $18.6 million impact in 2025. Wondering if you could quantify what the impact was in Q4. I think things improved in the quarter. Maybe if you could just speak to that improvement. And then your expectations for 2026, what level of curtailments might be assumed in the Electricity segment guidance? Assaf Ginzburg: Justin, this is Assi. I'll start by saying that the curtailment in Q4 did lessen. We saw around [ $3.5 billion ] of curtailment in Q4. I will say that for the full year 2026, we are not expecting more than $4 million to $5 million, maybe slightly higher than that. But at least what we know today from NVE, which is the one that caused most of the curtailment during 2025, we're not expecting too much into it. Also in 2025, if you remember in January, there was some fires in California. Luckily to us this year, we didn't. So we don't expect in Q1 any significant curtailment. So things definitely are coming our way as we look into 2026. Justin Clare: Got it. Okay. And then maybe just one more. Considering those factors, could you share what you anticipate for the gross margin for the Electricity segment in '26 and how that compares to '25 given the factors you mentioned? Assaf Ginzburg: Yes, we do expect anywhere from 1% to 2% increase in gross margin. It's around $14 million, $15 million in total, which is in line with the difference in the curtailment. One thing that we do see this year slightly less than last year is the prices in Puna are lower. But with the tension in the Middle East, this can change very quickly. So right now, the prices in Puna are slightly lower. But again, we took it already into consideration in the guidance. Operator: Your next question comes from the line of Noah Kaye with Oppenheimer. Noah Kaye: Lots going on, lots to talk about. And I want to start with the comments you made in reference to the Google PPA. You talked about this portfolio structure being a model for future activity. And I was just wondering if you could expand on that a little bit in terms of how the structure kind of came to be, why it was the right fit for both you and Google as a counterparty and some of the optionality that it gives you in terms of development. Doron Blachar: Thank you, Noah. So the Google basically, as we all know, is looking continuously for clean renewable energy, and that aligns perfectly with geothermal, it is a baseload. Over the last few years, we've invested quite a lot, and we're continuously investing in exploration and developing greenfields. And we actually released, as you've seen on the presentation, our first greenfield 30-megawatt project, the first time after close to 7 years. And we have a few in the pipeline that are in the final stages of exploration, and I expect to release a few more this year and the next year. And the structure of the PPA basically, which is up to allows us, on one hand, to know that we have a PPA, a very strong and profitable PPA if we are successful on the exploration. And it basically give us the confidence to continue with this investment and exploration effort that we are doing that will grow significantly the company in the coming years. I'm almost sure to say that if we do maximize this PPA, we will be able to add another one. At this stage, it relates to until the end of 2030. And with the exploration efforts we have, this gives us the confidence to continue with this strategy. Noah Kaye: Okay. And then I think on the blend and extend comments that you made in response to Justin's question. So as we understood it, at this point, most of what was expiring through, I think, 2028 has already been recontracted. This blend and extend seems like a pull forward of contracts that were going to expire beyond that. So maybe you could just give us a little bit more insight on the contracts that are being affected here and the amount of kind of post 2028 capacity that you're looking at recontracting right now? Doron Blachar: Yes. The contracts that are being blend and extend are contracts that end, as you said, in the next 3 to 5 years. We have one more contract in this time frame that we are looking to blend and extend. The next wave of contracts actually that are looking for recontracting are mainly in 2032 and 2033, that is Jersey Valley, Don Campbell, McGuinness 1, Tungsten. So we will be looking at this for blend and extend. I don't know to say we'll do it in the next few months because it is longer term. But today, when NV Energy and others that have contracts with us that are set to expire in the range of 5 years plus/minus, they want to secure the recontracting with them. The fact that we did sign with Switch and we did sign with Google PPAs for a similar time frame actually drives their willingness or their desire to sign blend and extend and basically secure the baseload geothermal energy for a longer period of time. Noah Kaye: Makes sense. One quick one to sneak in before I turn it over. Assi, I think you mentioned that the CapEx guide is $675 million, but once the Topp 2 conversion to product revs completes, it will actually be $575 million. Can you just walk us through the mechanics of that and explain the timing on that a little bit, please? Assaf Ginzburg: Sure. So in Q1, we closed the sale of the Topp 2 transaction to our customer after he basically exercised his option to buy the asset. As a result, you will see through the P&L around $100 million of revenue with approximately 20% margin that will boost Q1 results. And what you will see in the financials in addition in the cash flow section, you will see a line item that will be a sale of assets that will offset the CapEx. So when we look at the cash flow for 2026, we will expect to see a CapEx of $675 million. In addition to that, we did made an acquisition in Q1 that was another $80.5 million. So you will see also the M&A of the $80.5 million in Q1. And then you will see a sale of assets of approximately $100 million. So that's what we expect to see on the cash flow. This is just for modeling for you guys to understand the debt and the net debt of the company throughout the year. I want to mention one more thing. You ask us how did Google came about? I do have a recording call with you that you told me, "Assi, if you have to sign with somebody, you have to sign it with Google." So that there, I went to Doron and that's how it all started. So I think you can give yourself some kudos, and we appreciate the support here. Operator: Your next question comes from the line of Julien Dumoulin-Smith with Jefferies. Hannah Velásquez: This is Hannah Velasquez on for Julien. So I'll go ahead and just get started. I wanted to circle back on this curtailment question. So if I'm just using 2024 revenue for the Electricity segment as a baseline, around $700 million, that's also what you did in 2025 for the segment. You brought on -- yes, I mean you brought on over 100 megawatts in the Electricity segment across that time period. And if I do the math there, that would suggest -- that would just suggest about $30 million of incremental revenue from those new assets that came online. And so that gets you to where your guidance currently is. So does that imply that curtailment is not being recovered from 2025? Or I know you talked about $4 million to $5 million recuperating it, but I'm just having a hard time bridging to the new assets or new capacity that you brought online for that segment and then also the curtailment that you expect to recover in the year. Doron Blachar: Hannah, thank you for the question. First, some of the 100 megawatts that you mentioned is solar. So the capacity factor is closer to 22%. So I suggest that you look into it when you model the number. Second, as I mentioned, we do expect $4 million to $5 million curtailment in the year in -- maybe even $6 million in 2026 versus the $18.6 million. So there is around $10 million, $12 million reduction in curtailment. But I think the main difference is that some of the additions are solar. Hannah Velásquez: Right, about 42 megawatts. Yes, I did do the math, and I'm getting about $25 million to $30 million contribution from the new geothermal and then less than $10 million from the new solar. So it still suggests to me not recovering. Doron Blachar: As I mentioned earlier, the prices in Puna are slightly lower. And we're also trying to be quite careful with our guidance for 2026, making sure we can, if possible throughout the year, try to raise the guidance and not be in a position that like we've been in 2025 that we were behind on electricity sales. So it's again also us being proactive here. Hannah Velásquez: Okay. I got it. That's super clear. So you do expect some of the, I guess, segment headwinds that you saw in 2025 to extend over potentially, but you're being cautious in your guidance outlook. Okay. As a follow-up question, just on the EGS front, from what I understand, there are multiple technologies or variations within EGS. It sounds like you're currently betting through Sage Geosystems and also a partnership with SLB. But would you consider any incremental partnerships with other next-gen technologies just because, again, it seems like there's such a wide variance in how different companies are approaching EGS. I'm just trying to get a sense of like the probability of success here. Doron Blachar: Yes. Thank you. That's exactly the way that we are operating, the reason that we have started the joint venture with SLB and also signed a commercial agreement with Sage and invested in Sage, is exactly, as you say, multiple approaches to EGS. There are technological barriers in EGS, mainly the water loss and the economics of it. And we are looking at spreading the risk. We are discussing with other developers in the EGS arena, different cooperations agreement. We believe that EGS, if successful, will turn the industry into something that is much, much bigger because you will be able to generate geothermal energy, baseload energy in many, many places. So we are focused a lot on it. We are looking at the different players, all of them are speaking with us. We are the largest operator of geothermal globally. We are the largest binary seller of supply of products in EPC. And I assume that over the next time you'll see us making additional moves in the EGS in order to make sure that if EGS is successful, Ormat will be able to capture this opportunity. Operator: Your next question comes from the line of Mark Strouse with JPMorgan. Mark W. Strouse: Maybe a follow-up to Hannah's question there on EGS. Instead of kind of looking beyond the existing partnerships, within the partnerships that you have with SLB and Sage, do you think that we could see additional pilot activity announced in 2026, potentially different site selection with different conditions, whatever it might be? And then on that same slide, on Slide 25, you mentioned the equipment sales to third-party developers. Can you talk about what you've embedded in your guide for 2026 from that? And how we should think about the timing of when that could potentially become more material? Doron Blachar: Thank you, Mark. I'll start maybe with the second part of the question. EGS has technological challenges that needs to be solved. I think most of the players that we know are dealing with these challenges. I would expect that during 2026, we will be able to negotiate with some of them, maybe EPC contracts. But revenue from that, first, they will need to demonstrate the technological issue. They will need to drill wells. And then the EPC revenue will come. So we have multiple discussions with different of them, as I said before, both on EPC agreements. But this will be EPC that will impact product segment probably second half of '27, '28, definitely, if it is successful. Regarding additional developments, we are speaking with other companies that are looking at technological ideas that have already invested and raised cash in order to develop them. We are also building internal capabilities to see how we adjust our technology to fit these large-scale power plants. We are speaking with different hyperscalers and data centers on PPAs once the technology is successful. So there's a lot, a lot of work that is being done within Ormat in the different areas. I'm sure that during the coming quarters and discussions, we'll keep on updating you on the various issues. And as I said before, if this is successful, it will take Ormat and the industry into a different level. Mark W. Strouse: Yes. I understand. Okay. That's helpful. And then can I just switch over to the storage side of the business. Just given the initial guidelines that came out recently, just curious for your take on that and how you're approaching potential safe harbor before the July deadline that would give you further visibility out to 2030? Doron Blachar: Ormat, over the last year, have safe harbored over 1 giga of project, and we plan to install and use it over the next few years. I will start by saying that Griffith, which is a 100-megawatt, 400-megawatt hour, which is our largest project was also safe harbor. We have basically for all of our interconnection for 2028, 2029, safe harbor basically the majority of the project. We were able to reiterate our 2028 targets for the storage, taking into consideration the FEOC. All in all, we are in a very good situation to continue and grow. We also see more and more capacity of batteries coming from outside China, which is very favorable. We see also increase in U.S. production. So I believe that the FEOC eventually will not impact us. I think that our position in the queue, especially in California is very good, which should enable us to release over the next year, potentially additional 2 projects, almost similar size to Griffith. So again, all in all, the ability to buy batteries, the extension of the credit and the fact that we safe harbored a sufficient project for the next 3 years really put us in a good place. In addition to the fact, when you look at our pipeline, you see the majority of it is in California, which battery is really, really needed. And those lines that we have in the queue really put us in a position to sign good tolling agreements or good RA contracts. Operator: [Operator Instructions] Your next question comes from Ben Kallo with Baird. Ben Kallo: Just thinking about -- as you think about longer-term targets past the '28 and there's been a lot of changes from the federal level in the United States. When do you think that you're in a position to update us on longer-term targets? And then have you adjusted the operations to the benefit of any of that and specifically just faster permitting or anything like that? And then my second question is -- and thank you for that. You kind of answered this, but just on the EGS front, outside of technology, how do you think about just building the infrastructure around your own development if we look out to 2030, 2031, whether that's employees or its financing or other things there because scale will get bigger if and when you're successful. Doron Blachar: Thank you, Ben. So we are -- I'll start with the second part. We're definitely looking how to prepare ourselves to this transformation event of EGS is successful. We are doing the exploration. We have increased our BD efforts. Obviously, the land position that you need for an EGS project is significantly bigger than what you need for geothermal. So we are looking at much larger land positions in additional states, not just Nevada and California. So the look for EGS is much broader than just Nevada and California. We are looking on our binary technology, how you manufacture so many turbines to a power plant, heat exchangers, how to multiple Ormat's efforts. All of these are things that we are working on in parallel to make sure that once the technology is successful, we are able to utilize it and move forward with it. Regarding the question on the growth target. So one, we've increased significantly over the last few years, the exploration efforts. We see the greenfield, the first one coming to fruition now. We will see additional coming. The change in the permitting helped us a lot and moved that faster than what happened in the past. The fact that there are multiple land options by BLM in different states in the West, again, push us faster. We are planning an Analyst Day in the September time frame. And at that time, we will give longer-term targets for megawatt. Operator: And thank you. And with no further questions in queue, I'd like to turn the conference back over to Doron for closing remarks. Doron Blachar: Thank you all for joining us today. 2025 was a very good year for Ormat. Looking to 2026, we continue to see growth in all our segments and expect significant progress in EGS during 2026. Thank you. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Steven Pelayo, Managing Director of Blueshirt Group. Steven, please go ahead. Steven C. Pelayo: Good day, everyone. Thank you for joining us to discuss fourth quarter and fiscal year 2025 results, which we released before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There is also a supplemental slide deck posted to the Investor Relations section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under the risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and unrealized gain or loss on short-term investments. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website and to Slides 14 and 15. Also, unless otherwise noted, the following figures refer to the fourth quarter and fiscal year 2025, and comparisons are going to be with the fourth quarter and fiscal year 2024. I will now turn the call over to David Wang. David? David Wang: Thanks, Steven. And hello, everyone, and welcome to ACM's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. I'm pleased with our fourth quarter results, which capped off a solid year of execution. Revenue grew 9% in the fourth quarter and 15% for the full year. We continue to execute well across our core business. We made a lot of progress with new product platforms, and we strengthened our position in China and globally. Investment in AI and data center infrastructure is reshaping the global semiconductor demand, shifting capital towards advanced logic, memory and advanced packaging. The industry is looking to key supplier for new technology, many of which have not yet been invented. ACM differentiated technology portfolio has been aligned well with this high-value process steps and the market is how -- now the market is coming for us for solutions. A good demonstration is recent momentum with several key global customers outside the Mainland China market that we announced in today's press release. First, we announced that we have delivered multiple single-wafer cleaning tools to Singapore facility of our Asia-based foundry customer. This marks ACM's first tool installation to Singapore, a key milestone for ACM. Second, we announced that we're receiving multiple orders for our advanced packaging tool from 3 global customers. This included orders for multiple-wafer level advanced packaging system from a leading global OSAT customer based in Singapore with deliveries scheduled for the first quarter of 2026. A panel-level advanced packaging vacuum cleaning tool from a leading global semiconductor packaging manufacturer based outside Mainland China, also scheduled for delivery in the first quarter of 2026 and multiple-wafer level packaging system from a leading North America-based technology customer with delivery scheduled later this year. Now on to our business results. Please turn to Slide 3. For the fourth quarter of 2025, we delivered $244 million in revenue, up 9%. For the year 2025, we delivered $901 million in revenue, up 15%. Top line growth of 15% was better than growth for the overall China WFE market, which third-party estimate as generally flat for 2025. We consider this good result, especially since our 2025 revenue includes very little contribution from our new products. We expect a strong product cycle in 2026 from SPM cleaning and our furnace product as we made a very good technical progress for this new product across our customer base. We also made a good progress with our supercritical CO2 dry, Track, panel-level plating and PECVD, which we expect to contribute some more in 2026, but more in 2027 and beyond. Shipments for 2025 were $854 million versus $973 million. Remember, 2024 shipments increased 63% over the year. So we had a tough compare. We also had some shipment for new product pushed into the 2026. Importantly, we expect 2026 shipment growth to be higher than our 2026 revenue growth. Gross margin was 41% for the fourth quarter and 44.5% for the full year. Q4 gross margin was slightly below our long-term target range of 42% to 48%. We attribute the Q4 level to product mixing, including a few semi-critical products with a lower margin due to the competitive pressure and also higher seasonal inventory provisions. We expect lower gross margin to be temporary. We believe our new product ramp, combined with the product design and supply chain initiative will enable us to deliver the best product at a lower cost. There's no change to our long-term target model range of 42% to 48%. Moving on, we ended the year with a net cash of $845 million versus $259 million at the year-end of 2024. This balance sheet provides the foundation to continue our effort to develop world-class tools for the leading global semiconductor manufacturers. Before I review our product, I will provide our view on competitive dynamics in China and how we will win in this environment. We have recently seen a flood of new local entrants to the China capital equipment industry. In many cases, there are 5 or more players going after a single point product, all with very similar design and performance. We believe we will compete and win in China market because, number one, we have a differentiated technology with many products almost the best in the world. Two, we have a deep portfolio of IP with strong protection in China; and three, our local customer demand the best technology in order to compete in the global market. Now I will provide detail on product. Please turn to Slide 4. Revenue from single-wafer cleaning, Tahoe and semi-critical cleaning tool was $626 million, up 8% in 2025 and represented 69% of total revenue. We now estimate our cleaning portfolio address 95% of the application and process steps, and we are working on developing remaining solution that will bring us to 100% in 2026. We believe ACM now has the widest coverage of cleaning tool, far more extensive as compared to all competitors. The 8% year-over-year growth in 2025 included very little contribution from our newer cleaning line. We expect this new product, including single-wafer SPM, Tahoe and N2 bubbling wet etch to contribute more meaningfully to our 2026 revenue. As the industry moves to more advanced nodes, we expect increased demand for high-performance cleaning tools. The increased adoption of multiple patterning is driving higher layer counts, potentially impact yields and demand more cleaning steps with a higher cleaning efficiency. We believe this plays right into ACM's strength. For example, our proprietary N2 bubbling etching technology is uniquely positioned in the market. We are seeing growth interest for advanced 3D NAND application where larger bubble size and uniformity control will become more critical as the industry moves to 300 layer and above. In SPM cleaning, customers recognize the advantage of our proprietary nozzle and chamber design. We believe our platform outperforming leading competitors in small particle cleaning performance. We made a significant technical progress at the end of 2025 with our new SPM nozzle design. We achieved a 50 nanoparticle size count of under 20, which we believe is the best-in-class performance for the industry. Our unique nozzle design does not require any routine chamber DI water cleaning. This is a big deal for customers because it not only delivers a better cleaning environment for the chamber, but also increased uptime of our equipment. As a result, I'm pleased to report today that we have received a strong repeat order for our SPM cleaning tools from a major customer for delivery to module fab in 2026. We are also seeing very strong interest for our unique SPM technology from numerous global customers because they are not satisfied with the performance of their current plan of the record tool. Our supply -- our supercritical CO2 dry tool integrated ACM proprietary cleaning IP while reducing CO2 consumption by approximately 40% as compared to their competitors. This results in process efficiency with lower operation cost. We made a successful in-house demo for the multiple Logic and memory customer at the end of 2025. We have already received a demo PO for evaluation tools from 2 customers for delivery middle of 2026, and we expect to deliver additional tools to multiple customers later this year. In Mainland China alone, we estimate the incremental market opportunity for this next-generation cleaning product is nearly USD 1 billion. We remain confident in our long-term objective to achieve approximately 60% of the market share in China cleaning market, and we expect the cleaning to outgrow the China WFE this year and in the year ahead. We estimate our market share for ECP in China is now more than 40%, and we remain confident in our long-term goal to achieve 60% or more. Front tool was -- represent about 70% of the mixing for year, including our Map, MAP Plus, ECP 3D, ECP G3 products. ECP back-end tool were about 30% of the mix, including our ECP AP product line. In Q4, we delivered our first Ultra ECP ap-p horizontal panel-level electroplating tool to industry-leading large panel fabrication customer. We -- our customer prefer ACM preferred horizontal plating solution versus competitors' vertical plating approach due to the much better plating film uniformity and much less cross-contamination between multiple plating chemicals. We expect a growing customer interest in our panel-level solution as the industry looks for higher throughput and lower cost to support advanced packaging solution for multiple large die size and HBM AI chips. As discussed earlier, we received order from 3 global customers for both wafer-level and panel-level packaging tools. Our furnace tool are under various stage of evaluation of many customers. Revenue from furnace was relatively small in 2025, and we expect a more meaningful contribution in 2026. We made several technical breakthrough for LPCVD and ALD and PEALD in 2025. We see good demand across multiple applications, including high-temperature neo, especially 1,350-degree version, LPCVD, ALD and PEALD. We believe ACM differential design position us to capture meaningful market share. Revenue from advanced packaging, which exclude ECP, but including service and spare was up 45% in 2025 to $76 million and represents 8% of revenue. This includes coater, developer, etchers, stripper, scrubber and vacuum cleaning tools. We believe ACM is the only company to offer a full portfolio of wet process tool and world-class plating product for the advanced packaging. We think the combination is very powerful. It provides ACM with a valuable insight into the challenging of next-generation packaging as AI drives industry towards 2.5D and 3D integration. We are making solid progress with our new Track and PECVD platforms. Last September, we delivered our high-throughput 300 WPH KrF track tool for evaluation at a key customer. We expect mass production qualification in 2026 for the tool. And we anticipate this will lead to demand from additional customers, including both stand-alone and full integrated system in line with the lithography tool. We believe our high throughput design positions this platform to compete effectively with the current supplier. In Q4, we delivered our first Ultra Lith BK system. This milestone represents the first customer deploy of our Track series following early demonstration and validation. It also marked our entry into the display panel market, a new segment that require high-volume manufacturing and strong performance stability. We anticipate to develop our proprietary PECVD platform. Our design has 3 trucks per chamber, which we believe is the only one in the world. This provides flexibility for a wide range of process with the same hardware. We feel good about our positioning as the team works through the technical detail with a few tool in our Lingang mini lab running wafer test and custom demo wafer. We expect to ship multiple EVA tools in the near term. In summary, we innovation -- our innovation engine contribute to drive differentiated solutions across a broader growing portfolio. As AI drives a more complex semiconductor process, customers are turning into ACM as a trusted partner to help solving their increasing challenges. Next, let me provide an update on our production facility. First, on Lingang, please turn to Slide 8. Our Lingang production and R&D center is now our primary production center. The first building is in volume production and the second provides capacity for the future expansion. Together, the 2 facilities can support up to $3 billion in annual output. During 2025, we made a good progress on our mini line and Lingang. We have enhanced our process development capability and now support the on-site customer evaluation in fab-like conditions. Our mini line, including ACM tools and tools from other players and metrology tools. We believe the mini line will accelerate our internal product validation, shorten R&D and qualification cycle and strengthen collaboration with key customers as we introduce next-generation platforms. Next, our Oregon facility, please turn to Slide 9. We are accelerating investment in Oregon with the operation expected beginning in the second half of 2026. This facility will allow customers to evaluate our technology and to test their wafer locally, and it will serve as our initial base for production in the United States. Our global customers are encouraging by our commitment, which we believe will help them to choose ACM as a key supplier to scale production. We remain very pleased by the success of ACM Shanghai team, which continue to be a key supplier to the semiconductor industry in Asia. ACM Shanghai has also proven to be a great source of capital and financial flexibility for ACM. In September 2025, ACM Shanghai completed a private offering of ordinary share, generating approximately $623 million in net proceeds. In February 2026, we completed the sale of approximately 4.8 million ACM Shanghai shares at RMB 160 per share, generating approximately $111 million in gross proceeds. ACM Shanghai also has been a good source of dividends in 2023, 2024 and 2025. We received dividends net of tax of $19.2 million, $28.5 million and $29 million, respectively. Our major ownership in Shanghai -- ACM Shanghai remain a strategic asset. It enhances our financial flexibility and supporting disciplined execution as we continue expanding globally. Taken together, our expanding product portfolio, increased manufacturing capacity and strengthening capital position give us confidence in our long-term strategy. Now turning to our outlook for the full year 2026. Please turn to Slide 10. In middle January, we introduced our 2026 revenue outlook in the range of $1.08 billion to $1.175 billion. This implies 25% year-over-year growth at the middlepoint. We reiterate this outlook today. Since our founding in California in 1998 and the establish of ACM Shanghai in 2005, we're building a globally competitive semiconductor equipment company grounded in innovation and different technology. Our leadership in cleaning and electroplating created a strong foundation, and we are now expanding across Furnace, Track and PECVD as we broaden our multiple product portfolio. In Asia, we are recognized as a leader in wafer cleaning and plating, and we are engaging with a global customer across U.S. and Europe. With continued progress across SPM, Tahoe, supercritical CO2 dry, Furnace, Track, PECVD and panel-level packaging, we believe we are entering a new phase of a product cycle that are driving sustained growth. We have the customer, the product, the capacity and the capital to execute our global business plan, and we remain committed to our long-term target of $4 billion in revenue. Now let me turn the call over to our CFO, Mark, who will review details of our fourth quarter and full year results. Mark, please. Mark McKechnie: Thank you, David. Good day, everyone. Please turn to Slide 11 and 12. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation, unrealized gain/loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the fourth quarter and full year of 2025 and comparisons are with the fourth quarter and full year of 2024. I will now provide financial highlights. Revenue was $244 million for the fourth quarter, up 9.4%. For the full year, revenue was $901.3 million, up 15.2%. Full year revenue was in line with our original guidance set a year ago and slightly above the updated range announced on January 22. Fourth quarter revenue for single-wafer cleaning, Tahoe and semi-critical cleaning was $159.9 million, up 3%. For the year, this category grew by 8.1%. Fourth quarter revenue for ECP, Frontend Packaging, Furnace and other technologies was $64.1 million, up 23.9%. For the year, this category grew by 32.1%. Fourth quarter revenue for Advanced Packaging, excluding ECP, services and spares was $20.5 million, up 23.8%. For the year, this category grew by 45.3%. I will now provide revenue mix by customer type for 2025. Starting this year, rather than disclosing specific customer names, we are now disclosing revenue by customer type once a year. For each customer type, this includes product, services and spare parts. We've included the mix table on Slide 7 of our presentation. For 2025, our revenue mix by customer type was split among Foundry, Logic and Other, 59%; Memory, 27%; Packaging and Wafer Processing, 14%. In 2025, we had 4 10-plus percent customers, including our top customer was 16.9%, next was 13.5%, then 11.6% and 10.2% for an aggregate total of 4 customers representing 52.2% of total sales. For 2024, we had 4 10% customer also for a total of 52.2%. Total shipments were $228 million for the fourth quarter, down 13.5% and $854 million for the full year of 2025, down 12.2%. David noted, we had a tough compare versus a strong 2024 when shipments increased 63% year-over-year. We also did have some shipments for new products pushed into 2026. We expect 2026 shipment growth rate to be higher than our 2026 revenue growth rate. Gross margin was 41.0% for the fourth quarter and 49.8%. For the full year, gross margin was 44.5% versus 50.4% in 2024. Q4 gross margin was slightly below our long-term target model. Adding to David's earlier remarks, gross margins were down 8.8 percentage points year-over-year on a quarterly basis. This was due to product mix and margin pressure concentrated in a few semi-critical products, which contributed about 5 points of the headwind and a higher level of inventory provisions that contributed about 4 points negative impact. As David noted, we expect the lower gross margins to be temporary. We believe our new product ramp, combined with supply chain initiatives will enable us to deliver the best products at a low cost and there is no change to our long-term target model range of 42% to 48%. For modeling purposes, we expect gross margins to be at the lower end of this longer-term target range for the first half of 2026 with an anticipated lift in the second half due in part to contribution from newer products, which generally have higher gross margins. Operating expenses were $70.6 million for the fourth quarter, up 21%. For the full year, operating expenses were $258.4 million, up 34%. For 2025, R&D was 15.1% of sales, sales and marketing was 7.8% of sales and G&A was 5.8% of sales. For 2026, we plan for R&D in the 16% to 18% range, sales and marketing in the 7% to 8% range and G&A in the 6% range. Operating income was $29.5 million for the fourth quarter versus $52.8 million. Operating margin for Q4 '25 was 12.1% as compared to 23.6%. For the full year, operating margin was 15.9% as compared to 25.6%. Long term, we look to grow our R&D spending in line with revenue, but we expect to show operating level -- operating leverage in SG&A with spending growth below our revenue growth level. Income tax expense was $6.6 million for the fourth quarter versus $17.3 million. For the full year, income tax expense was $13.3 million versus $35 million in 2024. For 2026, we expect our effective tax rate in the 8% to 10% range. Net income attributable to ACM Research was $17.3 million for the fourth quarter versus $37.7 million. For the full year, net income attributable to ACM Research was $110.2 million versus $152.2 million. Net income per diluted share was $0.25 for the fourth quarter versus $0.56. For the full year, net income per diluted share was $1.61 versus $2.26. Our non-GAAP net income excluded $6.4 million of stock-based compensation expense for the fourth quarter and $33.6 million for the full year. I will now review selected balance sheet and cash flow items. Cash, cash equivalents, restricted cash and time deposits were $1.13 billion versus $441 million at year-end 2024. Net cash, which excludes short-term and long-term debt was $845.5 million versus $259.1 million at year-end 2024. $585.4 million increase in net cash for 2025 included $623 million net raised in the private offering by ACM Shanghai in 2025. Total inventory at year-end was $702.6 million versus $676.4 million at the end of the third quarter. Raw materials were $349.7 million, up $23.5 million quarter-over-quarter. We made additional strategic purchases to support production plans and to mitigate any potential supply chain risk. Work in process was $61.4 million, up $1.9 million quarter-over-quarter. Finished goods inventory was $291.6 million, up $0.9 million quarter-over-quarter. Finished goods inventory primarily consists of first tools under evaluation at our customer sites along with finished goods located at ACM's facilities. Cash provided by operations was $33.9 million for the fourth quarter. For the full year cash -- 2025, cash used by operations was about $10 million. Capital expenditures were $58 million for the full year 2025. For the full year 2026, we expect to spend about $200 million in capital expenditures. This continues -- this includes continued investments in Lingang, including the mini line and the second production facility, fixed assets for the business and investments in Oregon, along with other items. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead. Operator: [Operator Instructions] Our first question will come from the line of Charles Shi with Needham & Company. Yu Shi: I believe you gave pretty good color on shipment versus revenue growth this year. So I have a question since you mentioned about new products probably going to be a bigger driver this year for growth. And wonder if you can give us some color, let's say, excluding the new products, what's the growth, either shipment or revenue is expected to be excluding all the new products for the -- maybe -- I think maybe I'm talking about the existing product lines in cleans, plating, et cetera. David Wang: Okay. Okay. Thank you, Charles. And actually, you know that we -- as we said, we made quite a big progress, right, in the SPM process. Generally speaking, SPM, product SPM represent 25%, 30% of the cleaning market. And this market in the last couple of years, were not much touched so much. And as I said, last 2025, we made a very good progress both into the special module design for the high temperature and also Tahoe product. So we're getting to very aggressively into this market. And again, this is a very high-margin product and also a lot of customers, both in the Mainland China, also outside China, they suffered the particle issue with this high-temperature SPM process. And we think with our proprietary design model, we can control a very good environment, so therefore, can be -- will reduce particle size. So that can be really enhanced our market growth in cleaning. Secondly, I want to see that is our N2 bubbling proprietary bubbling wet etch technology is really critical for the 3D NAND silicon nitride etching process, which we believe our proprietary technology not only cover today's demand for 300-layer, we believe as people moving to 400 or even 500 layer will suffer this kind of uniformity on the wear top or wear bottom, right? So we're using large bubble and size. We also with our proprietary technology, we can make a very uniform and large bubble distribution in the tank. That will be really enhance the etching uniformity from the top to the bottom for the wear. So we believe that's not only demand in the market in China, we also see that demand outside in the global market, too. And third one, I also mentioned that is our supercritical CO2 Dry, we also made a lot of progress, right? And which is the past customer demo. We have 2 tools scheduled to be delivered in the first or second quarter of this year. We have additional interest in coming. Again, since the supercritical CO2 with our proprietary design, we got a capacity our CO2 chamber is about 40% smaller. So we believe that we're really providing customers a 40% reduction of the consumable cost. And that really also, again, right, driving this product not in the local, I call it China market, but also getting to outside China market. So with all this cleaning I call it add together, we believe also expansion in the future. This will probably represent even China, over $1 billion market potential for us to get in. So we're still very excited about our continued expanding our cleaning product in the China market, plus also give us really strong differential technology in global market, right? So that's for cleaning. And again, for copper plating, as I mentioned, we have a full set of the cleaning products, front-end, TSV, back-end, advanced packaging, including also this, I call it compound semiconductor. Plus recently, we just announced our panel horizontal plating, which we believe very, very key technology to driving for the panel size plating. This moment, everybody using vertical and copper plating for panel. We are the first one in the world so far doing horizontal plating, right? With our different technology, we believe probably most likely, we're the only one in the market to drive another horizontal copper plating. So this year also, we see the bigger interest, not only in the China market, we see also a lot of interest coming in for us to deliver this tool. So with that, all new products in our existing cleaning, copper plating can drive a lot of revenue this year, including next year, right? And then plus, as I said, our other Furnace and PECVD and also Track business, we are developing for the last 4, 5 years, really made a lot of technology breakthrough, too. So we believe those technology getting this year start getting market, and we're real sustaining our next 3- to 5-year growth. And which you know that last 3, 4 years, our major growth has come from cleaning and copper plating. And next few years, we see this new product coming will definitely strengthen our highgrowth profile in the next few years. So we are very excited, very try to execution our strategy to continue to grow our revenue. Charles? Yu Shi: Maybe a question on profitability. So you reported last year, you gave some color about this year. But I believe if my math is right, your operating margin will compress last year from maybe close to 26% in '24 to 16% in '25. But this year, based on your -- what you guided about gross margin, what you guided about R&D, SG&A, it doesn't look like operating margin can rebound. It feels like operating margin probably more or less the same or even coming down a little bit depending on how the gross margin trends for the remainder of the year. So I wanted to get some sense how -- what's the reason for operating margin being under pressure for almost 2 years? And how do you plan to address this and maybe try to expand the operating margin from here? David Wang: Yes. Actually, that's this way. Looking at gross margin, right, we are the probably top of the equipment company in China, right, for gross margin, right, for the last few years. And as you said, Q4 of -- Q4 last year, we do see our first time gross margin is lower than our range, 40% to 48%, right? As we explaining maybe 3 factors. One is the product mix. We have 1 or 2 products, which is a semi-critical tool, do have pressure from the competitor for pricing there. The next one is really this inventory provision. But we think this year, as we are new product coming, as I mentioned, the 3 products coming will definitely enhance our margin. And also our inventory provision, we believe will be also greatly reduced too. So with that, we still have confidence we're in the 42% to 48% gross margin in this year or beyond. And more than that is, as you said, we put quite a bit of R&D last year, right? It used to be R&D 13%, 14%. This -- last year, we're getting to 16%. We probably will keep that number in a way. Why? The next few years, AI is driving a lot of demand for the new technology. And everybody else, first tier company outside China, all people put a lot of R&D. And so we'll continue to invest that, which we know will impact a little bit our operating margin, but it's worth to spend money now. Why? I said the opportunity is there, right? And a lot of customers real demand for the new technology, which I believe a lot of AI technology today even not invented yet. So it really give ACM a good opportunity with our, I call it our innovation power, our different technology, development capability, we can use this AI trend, we catch a lot of new technology and also catch the customer. This horizontal plate is one good example, for example, right? So again, and it's worth to spend more R&D and even get a few percent of the operation margin lower, which is a real long run, and we're working for the investor interest and also the growth ACM market into the next few years. Mark McKechnie: Yes. David, I might add a few things. I think that was a good overview. But Charlie, I think kind of summarizing it up, we're spending into the $4 billion market opportunity. There's a number of products that -- areas that we've been investing in that haven't scaled yet, but we expect them to scale over the next few years. It's the right thing to do to spend into that. You're right about the operating margin for 2026 kind of comes in at the mid-teen level, similar to what it was here in 2025. You move out a few years, our target is to keep those gross margins at that target range and then grow our top line faster than our OpEx. I think you can see some leverage in the out years. Operator: Our next question will come from the line of Edison Lee with Jefferies. Yu Lee: Congratulations on the results. I just have 2 quick questions. Number one is that for the fourth quarter, the margin is a little bit low and the revenue growth also is a little bit slow and then your shipment, I think, declined on a year-on-year basis. So how much of that is just product mix and seasonality? And when do you think these numbers will actually start improving in 2026? And then the second question is about the USD 111 million you raised by selling down ACMS. Can you shed some light as to how you would actually utilize that proceeds? David Wang: Okay. So let's answer your first question, right? I think that you look in the -- I just mentioned last couple of years, our major growth engine from cleaning and also copper plating, right? Even the cleaning, I said there's one important product, which is SPM process were not touched too much. As I mentioned last year, end of last year, Q4 last year, we made a significant progress with this special nozzle design. We believe our performance is outperforming and top tier as a tool. So we see that growth continuously, right? And so then I would say our cleaning, copper plating and also horizontal panel continue to expand, too. So that keep momentum. Our cleaning market probably today in China about 35% range. We're expanding to 50%, 60% in the next few years. And the copper right now, the 40%, I still say we'll try to catch 60% beyond market in China. More than that is those product -- different products, we see a very high interest from global top-tier customer. So that's what we also reinforce our sales outside China. So that's where I see the impact or boost our revenue for our existing product. But -- and also, I want to see that through the last 5 years, we are really working with differentiated PECVD and Track and also Furnace technology, which we believe a lot of new technology we are putting in and nobody had it before, right? So that's what reinforce our, I call, market position. And plus those tool really with our differential technology, we put a lot of time to develop IP, develop the road map. It costs a little bit long time than the other guys. So -- and now it's come the moment for the market. And plus, I want to see another bigger impact is, I call it improvement is last Q3, we started using Lingang mini line, which we do not have it before. that was really helping our internal demonstration, internal R&D speed. We see the bigger impact already. So that will be helping our tool mature before we ship the customer. So with altogether, I want to say this new growth from the existing and also our new product coming, we're driving ACM is real high growth profile in the year -- this year and in the next few years. So we are very confident. Plus even I say WFE market in China is flat, we can get a higher growth rate because of new product coming. And plus also, as you say, we have made a lot of progress in the global customer, this news announced today. We also see a lot of interest in coming to our different technology from top-tier customer because we have a patent has been locked the technology already. They almost have no choice. They have to come to us. anyway, so that's really exciting for our technology. We're really trying to push in our technology will benefit the international global customer for their AI challenges. Dave, anything you want to add on that? Mark McKechnie: Yes. Let me add on to something before you answer his question about our Shanghai stock sales. So Edison, for Q4, you probably remember last call, we mentioned that Q4 and the year -- the overall year came in at the midpoint of where we started the year, maybe a little bit better. And don't forget, we had 2 things. Our newer products didn't kick in, very little in 2025. And then we did have a customer push out from Q4 into 2026. And so that was kind of -- those 2 things that hit 2024 -- I'm sorry, the Q4. When you look out to 2025, we're expecting linearity pretty similar to -- I'm sorry, 2026, we're expecting our linearity to be pretty similar. So the first half will be about 42%, 43% of revenue. Second half will be 57% to 58%. But I would kind of anticipate Q1 at about 18% to 20% of the full year mix. Maybe, David, if you wanted to take this question, what are we going to do with the cash that we raised in -- or that we sold -- the cash that we sold. Yu Lee: Sorry, Mark, Mark, Mark, can you hear me? Mark McKechnie: Yes. Yes. Yu Lee: Before we move on to the use of proceeds, can you also comment a little bit on what you said about, I think, some products having some pricing pressure, which I think partially account for lower margin in the fourth quarter? Mark McKechnie: Yes. And there's not much to add to what I said there. Or what David and I have both said. There were a couple of semi-critical products that had particularly low margins that hit us in Q3 and Q4. And we -- David mentioned in the prepared remarks, he talked about the competitive situation in China. We are very focused on developing world-class tools. We think that there is also a bigger provision in the back half of the year. So we think that will be -- the overall provision for 2026 probably be smaller than it was in 2025, and it will probably be more balanced throughout the year. Yu Lee: Okay. David Wang: So you want me to touch the how we're using proceeds, right? Yu Lee: Yes. David Wang: Okay. Well, obviously, we have a second offering in China, right? Those money will be really focusing on R&D again, our expansion for their manufacturing. We have a second building will start decoration this year. So with that add together, probably we can manufacture $3 billion annually, which really give us a lot of room for manufacturing. And plus, we're also putting money in the mini line, as I mentioned, this mini line really speed up our internal R&D and debugging tool and also even can do the joint development with the customer process, too. So it's really well spend for those money. And the proceeds we got from the -- so the 1.3% from Shanghai here, definitely the major purpose for that was spending global customer, global marketing sales. So we see that opportunity really big in the global market. As I mentioned, we do have some differential technology might be the only solution for their AI challenging. So those products, we think will be really gather attention from the global customer. So we have spent money and building the international strong sales channel and also where we already had a Korea manufacturer base already. And however, with this geographic tariff going on, we have to really minimize the tariff impact, right? So that's why we started assembly tool in the U.S.A. So that will be real reduce our concern or any dynamic changing for those tariff will impact our revenue. So anyway, that's really what we work on. And our goal is very simple. We try to working with satisfy all regulation and requirement and maximize the investor interest, we're building a global sales, global company. That's our goal. Operator: Our next question comes from the line of Jimmy Huang with JPMorgan. Jimmy Huang: Can you hear me? David Wang: Yes, please. Jimmy Huang: Congrats for the good results. I want to ask about we deliver single-wafer cleaning tools to a Singapore gas foundry. What would be the potential size of shipments in terms of units or dollars this year or next year and next year? This is my first question. David Wang: Yes. Very good question. Actually, we have a few tools, we're in the installation process right now, right? This tool will be qualified and go in production this year. And with that, we definitely will induce more of a cleaning tool. And also, we do have a copper plating and in -- behind. So that really will give us exposure of product in the Asian market. And so this will be real making more of, I call it, confidence and also get a high interest from other players in Asia and the market, too. So we see this will be a bigger milestone and for us, and plus we're not only looking at the customer only in Singapore, and we do have a customer in Korea and also we have a customer potentially in Taiwan. So we have really confidence we should have expanding quickly in the Asia market. And plus, again, we're also very focusing on our U.S. market, too. We do have advanced packaging tool PO and receiving and we should deliver by end of this year. And we see a lot of potential going on in the U.S. market, too. Again, because today, all the memory or logic, they are AI driven for their advanced technology. ACM, I want to say I feel good technology we needed for their production line. We believe that will be beneficial for the customer and also can help expansion of market to global. So it's a great opportunity because, again, innovation is a key and every customer and every key customer, they all demand for innovation technology, which will probably fit our strategy. Jimmy Huang: Yes. Yes. So for Singapore business, how is the chance that we penetrate to Singapore gas memory makers in the next few years? And my second question is for advanced packaging. We are making great process. But for Taiwan, Taiwanese foundries and OSATs are leading the panel-level packaging for AI GPUs . Could we talk about our POP progress with potential Taiwanese players? Do we have any like order forecast or purchase orders in -- from Taiwanese potential customers? David Wang: Yes. Actually, we are talking to a few key customers, right, even the panel large size, 515 x 510. And also, we're talking about their 310 x 310, right, which is a true vision right now, people try to push in. So we have very good exposure to those customers. By the way, April 7, 8, we have -- we're attending the panel conference in Taiwan. In that conference, we do the keynote speaker about the horizontal plating and also our vacuum cleaning technology. So that's really a lot of exciting, I want to say, interest coming. And also, I said -- I heard everybody say panel product or equipment, they're probably satisfy all other products, except plating. So plating become a bottleneck for their production expansion. So with that demand, I said we are the only one supplying horizontal plating. You probably heard that is the one key player in Taiwan, they said they only want horizontal plating. They don't want vertical. So our horizontal plating perfect fit their strategy or their demand. So as I said, really, we see a big opportunity and with our panel product. Actually, we're not only trying to introduce so far 3 products, right, panel plating, vacuum cleaning and also the bevel. We can develop also additional coater, developer, wet etcher, cleaning all kind of wet tool we are putting in. So that's really what we catch this wave of the panel, I call shift, right, for the advanced packaging. So we're in a very good position for those coming panel, advanced packaging expanding. We're very excited about this opportunity, right? Jimmy Huang: Yes. But do you know like in which kind of periods, quarters it will be more clear that whether we will have any order forecast or purchase orders for this POP equipment? David Wang: Well, let's put this way, we announced that we do have also PO from outside Mainland China, right? I mean we said already. So you know what I mean here. So -- and then we're continually expanding more, right? So again, I want to say this year, we have a confidence cash additional PO for our bevel, for our vacuum cleaning and also for the horizontal copper plating, not only in Taiwan market, we also see the opportunity in Korea, also in Singapore, by the way. So it's very exciting. Jimmy Huang: Yes. Maybe I can squeeze in my last question about the investor FAQ that ACM has disposed a small portion of stake in ACM Shanghai. How do we think about more further such disposal in the future? You mentioned that U.S. international capacity builds will require more funding. Will we dispose more stakes of ACM Shanghai in the future? David Wang: Repeat the question again. I'm sorry. Can you repeat again? Mark McKechnie: He's asking, are we going to sell more of our ACM Shanghai? David Wang: I see. I see. Okay. We sold 1.3% already, right? And we got a proceed of about $111 million. And we do have both arms to raise money. We can raise in U.S., we can raise in Shanghai. We're very flexible for what we're choosing, number one. And at this moment, I want to say our Shanghai stock is still -- we think it's still undervalued, okay, with our growth. So we maybe consider what the money demand and the time line, also what's the stock pricing in Shanghai. We decide where or when we should sell additional or not. And plus, as we have silver arm, we can raise the money in U.S.A. So it's quite flexible for us to raise the fund. And at this moment, I want to say, obviously we'll continue investing more in global market, and we have no concern for those money where it come from, right? We are very confident. We also have another , another tool we can get the money anyway. Operator: Thank you. Seeing no more questions in the queue. Let me turn the call back over to Steven Pelayo for closing remarks. Steven C. Pelayo: Okay. Great. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On March 9, we will participate virtually in Loop Capital Markets' Seventh Annual Investor Conference for one-on-one meetings. On March 23 and 24, we will present at the 38th Annual ROTH Conference in Dana Point, California. Attendance at the conference is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with the management team. This concludes the call, and you may now disconnect. Take care. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Ana Fuentes: Good evening, and thank you very much for taking the time to attend Gestamp 2025 Full Year Results Presentation on what I know is a super busy for many of you. I'm Ana Fuentes, M&A and IR Director. Before we begin, let me refer you to the disclaimer on Slide #2 of this presentation, which has been posted on our website and that set out the legal framework, under which this presentation must be considered. The conference call will be led by our Executive Chairman, Mr. Francisco Riberas; and our CFO, Mr. Ignacio Mosquera. As usual, at the end of this conference call, we'll open the floor for Q&A session. Now please let me hand the call over to our Executive Chairman. Francisco Jose Riberas de Mera: So good afternoon, and thanks for attending this call with us in this busy day. So moving forward, overall, 2025 has been a good year for Gestamp by year, which has been marked by a complex context with the global tariff war that is still alive with many regulatory changes in different geographies, but mainly in U.S. and Europe. A year also with the major OEMs realigning their strategies to slower EV adoption and also with a limited growth in terms of volumes everywhere, but in China or India. In this context, Gestamp has focused on delivering a strong set of results in 2025, taking action in order to align our exposure to EV programs in line with our customers and enhancing our balance sheet profile with more -- adding more flexibility and more optionality for us in the future and of course, also delivering in our commitment for North America in the frame of the Phoenix Plan. In terms of the market, in terms of global manufacturing of light vehicles in our footprint has had limited volumes, again, another year, but probably volumes which were better -- which have been better than initially forecasted. In fact, by February 2025, we were expecting volumes in 2025 to be very much in line with 2024. Then when the tariff war started in April, the forecast was reduced. But at the end of the year, final volume has been around 85.5 million. So that meaning around a 4% increase. So a growth, clear growth, but only driven by Asia. In fact, between China mainly and India, the growth has been around 3.5 million units comparing with 2024 and it's been again a decrease in Europe and also in this case, in this year in North America. So moving to Slide 6. And as mentioned, Gestamp has met all the 2025 upgraded targets. In terms of revenues, we have been below the market growth with Gescrap also performing below 2024 due to the lower prices of the scrap. But in this environment, we have been able to increase our auto margin profitability by 78 basis points, generating a very sound free cash flow of EUR 228 million more than guided. and reducing our leverage ratio to 1.4x EBITDA, which is the lowest since the IPO. So basically, a quite solid year, reinforcing our fundamentals. So that means focusing in increasing profitability and increasing our balance sheet strength. With more focus on revenues, some revenues at FX constant have underperformed the market. In fact, the light vehicle manufacturing in our footprint has increased by 4.1% while at the same time, Gestamp sales at FX constant has been reduced by 1.2%. So that means a 5.2% underperformance, only 0.6% underperformance if we exclude in this analysis, the China impact. By regions, in Europe, the overperformance in East Europe has been cash compensated some slight underperformance in Western Europe. Basically, in North America, we are in line with the market. We had some underperforming in Mercosur due to some specific problems of some of our relevant customers in that area. And in Asia, we have a clear underperformance in China, but in the rest of the Asian countries, including India, we have more than a 15% overperformance. In our revenues in a reported basis, we are below 2024 figures by 5.4% from EUR 12 billion reported revenues in 2024, we have this year EUR 11.350 billion in 2025. There is a decrease, which is mainly coming from FX impact versus euro in most of the geographies, but also due to some lower activity and also to some lower scrap prices. If we go to the Slide #9, during 2025, Gestamp has entered into different agreements with certain customers impacting our profit and loss accounts, mainly in the fourth quarter 2025 and around EUR 34 million positive accounting impact at the EBITDA level with an asset write-down totaling EUR 52 million regarding these programs. So overall, these both items generating a net EUR 19 million negative impact at EBIT level. So these are effects, which are linked to the realignment strategies announced by several of our customers, largely driven by a slowdown in their EV rollout plan. And of course, these settlements fall within the framework of Gestamp's ongoing constructive negotiations with customers and always preserving our long-term relationship with them. So moving to Slide #10. So basically, 2025 has been another year of increasing profitability without growth. Our EBITDA margin for the auto business has increased from 11.1% in 2024 to 11.9% in 2025. Even without taking into consideration the extraordinary impact explained before, this increase has been to 11.6%. So again, a very solid recovery of profitability in our auto business activities. And we have been able to increase this profitability because we have a very clear focus in different actions like cost reduction initiatives, trying to introduce all kind of flexibility measures, of course, this constructive customers negotiations and with a clear focus in delivering on the Phoenix Plan. Moving to the Slide 11 about the Phoenix Plan. For the second year of the Phoenix Plan, we have been able clearly to match the target. And in this case, the target was to achieve more than 8% EBITDA margin. And we have done it in a market, which has been much weaker than expected when the Phoenix Plan was launched. At that time, we were forecasting a manufacturing level in North America of around 14.9 million units of light vehicles, but the real figures in 2025 have been EUR 14 million. So that means almost 6% decrease in terms of volumes, in terms of car manufacturing in North America. In this context, in the full year with sales of EUR 2,241 million, we have been able to generate EUR 182 million EBITDA. So that means 8.1%, which means a clear improvement comparing with the 7% EBITDA margin we had in 2024. And that we have been able also to do it with a very solid result in the fourth quarter with more than 11% EBITDA margin. So -- and we have been able to do it with extraordinary Phoenix cost below the plan with EUR 16 million in terms of profit and loss account and EUR 30 million in terms of CapEx cost. And in terms of Gescrap, we had a year which has been the performance of Gescrap has been clearly impacted by the scrap prices evolution. The scrap prices have been going down month after month in Europe with a total decrease of 12% in the scrap prices in Europe, more than 20% decrease in China and a little bit more stable in U.S. So that means that our revenues in terms of sales have been decreasing by 6.8%, even though in terms of tons, we have been able to preserve a very good level of activity. But this continued decrease of the price of the scrap has forced our company to reduce the profitability in terms of EBIT from EUR 42 million EBIT in 2024 to EUR 28.3 million. So -- but we are expecting for 2025 the scrap of the prices to be stabilizing and even growing. So that means that the profitability of the scrap for the future should be able to recover. Apart of that, we have also made an important acquisition. In this case, the company Industrias López Soriano. With this acquisition in scrap basically in the Iberian Peninsula, we have been able to get ourselves introduced in a different sector, the sector of the Shredding and also in the sector that now we are an active player in the recycling of waste of electrical and electronic equipment. Okay. So now with this, now I hand it over to Ignacio Mosquera. Ignacio Vazquez: Thank you very much, Paco, and good evening to everyone. Moving to Slide #14. Let's have a closer look to our financial performance in 2025. We have reached revenues of EUR 11.349 billion, which entails a 5.4% decrease when compared to the EUR 12.01 billion from 2024. As we have seen before, revenue has been strongly impacted by ForEx in most of our geographies. In the auto business, at FX constant, revenues have declined by 1.2% year-on-year. In terms of EBITDA, we have generated EUR 1.307 billion in 2025, meaning an 11.5% margin and a 1% increase year-on-year. Excluding the Phoenix impact, EBITDA in absolute terms would amount to EUR 1.323 billion, therefore, an EBITDA margin of 11.7%. As a result of the one-off impacts mentioned before by Paco and higher amortizations, reported EBIT decreased by 6.2% year-on-year to EUR 546 million with an EBIT margin of 4.8% or 5% excluding Phoenix impact. Phoenix Plan aimed at restructuring our NAFTA operations, has had a EUR 16 million impact in P&L and a EUR 13 million impact in CapEx for the entire year. Net income in the year has been EUR 152 million that compares to the EUR 188 million reported in 2024, mainly due to an increase of depreciation and amortization levels and a higher interest expense due to increased exchange impacts in 2025. Net debt has closed the year at EUR 1.821 billion, therefore, a decrease of EUR 276 million on a reported basis. As for free cash flow, we have reached EUR 278 million in 2025, excluding the extraordinary impact of the Phoenix Plan or EUR 249 million as reported. To sum up, we continue to demonstrate our ability to perform strongly and strengthen our balance sheet in a challenging market environment together with a negative ForEx evolution. If we now move to Slide #15, we can see the performance by region on a year-on-year basis. Looking at each region in detail, revenues in Western Europe have decreased by 4.2% year-on-year in 2025 to around EUR 4 billion. Performance in the region has been strongly affected mainly by volume pressure in the period and to a lesser extent, the fall in raw material prices. In terms of EBITDA, it reached almost EUR 453 million, and EBITDA margin stood at 11.2% in the period, down from the 11.4% reported in 2024. Profitability in the period has been impacted mainly by volume drop with still limited operating leverage despite the flexibility measures, which have been taken. As we mentioned in our previous call, results of these measures will take some time with limited tangible results in the short term. In Eastern Europe, the performance in 2025 has been very solid, proving again our strong market positioning in the region. On a reported basis, during 2025, revenues have grown year-on-year by 1.2%, up to levels of EUR 1.925 billion, and EBITDA levels have increased by 15.4% to EUR 293 million. Eastern Europe region has been strongly impacted by ForEx this year. EBITDA margin of 15.2% is above the 13.3% reported last year. The reported -- the profitability improvement is mainly attributed to a better project mix, highlighting the strong project ramp-up in Turkey and the good evolution of the business in the remaining countries. In Europe, overall, considering both regions as a whole, we have managed to improve our profitability, partly due to the shift in the mix to Eastern Europe. In NAFTA, Phoenix Plan continues to show signs of improvement in the underlying operations with a very good EBITDA margin evolution in 2025 despite the underlying end market conditions and FX impact. Our revenues have decreased by 6.7% year-on-year, while EBITDA has increased by 7.8% if we exclude Phoenix impact of EUR 16 million in full year 2025. This higher EBITDA in absolute terms leads to an EBITDA margin of 8.1%, improving last year's profitability and also slightly surpassing the target we had set of 8% for 2025. As you all know, turning around the operations in NAFTA to improve our market positioning and profitability is at the top of our priorities, and these show results and the profitability achieved in Q4 sets the way to achieve the target of a 10% margin in 2026. In Mercosur, 2025 has been marked by the ForEx evolution in Brazil and Argentina, leading to lower revenues in the period decreasing by 15.7%. Despite the revenue decrease, EBITDA has increased by 4.9% year-on-year, leading to an 11.8% EBITDA margin versus 9.4% last year. We have been able to improve our profitability in 240 basis points, thanks to the flexibility measures and the turnaround of our business in Argentina, where last year, we did some restructuring. In Asia, reported revenues have decreased by 7.7% year-on-year in 2025 to EUR 1.823 billion within a complex and very competitive market environment. Our negative revenue evolution in the period is partially explained by the ForEx evolution in China. However, our performance continues to evolve very positively. Despite negative revenues evolution in the period, we have managed to maintain similar levels of profitability with an EBITDA margin of 14.5% for 2025, which places Asia as the second most profitable region for the group. Our approach continues to be focused on premium products in the region. We keep on working to gain positioning in this region, maintaining strong levels of profitability. Asian region remains a great opportunity for us, not only China, where we continue to develop these high value-added products, but also India, where we have undertaken new projects with a strong performance. Finally, Gescrap has seen revenues decreasing by 6.8% year-on-year to EUR 534 million as a result of the sustained decline in scrap prices, as mentioned before. As a consequence, EBITDA in absolute terms has decreased by 23.5% year-on-year, reaching EUR 39 million in the period. Overall, we have seen that our unique business model and geographic diversification has supported and driven our performance in a year marked by volumes volatility and lack of growth. Turning to Slide 16. We see that we ended 2024 with a net debt of EUR 1.821 billion, which is EUR 276 billion below the EUR 2.97 billion reported in December 2024. This EUR 276 million decrease includes dividend payments of EUR 111 million and cash in of EUR 220 million of minorities acquisitions, so M&A and equity contributions, mainly due to the transaction executed with Banco Santander earlier in the year. During the year, the company has generated a positive free cash flow of EUR 278 million, excluding extraordinary Phoenix costs, surpassing significantly the updated guidance for 2025, partly due to one-off compensations mentioned earlier by Paco, which came in, in Q4. Moving to Slide #17. We ended December 2024 with a net financial debt of EUR 1.821 billion, which implies a net debt-to-EBITDA ratio of 1.4x, driven by free cash flow generation as well as cash inflow from the partial real estate asset sale of EUR 246 million. This is the lowest debt level since the IPO of the company, both on net level and on leverage ratios and complying with our commitment to be between 1 to 1.5x net debt-to-EBITDA target. As we have mentioned, our priority is to preserve our financial strength, and we remain disciplined over leverage in absolute and relative terms. Looking at Slide #18, we are proud to share the actions carried out during 2025 and that have been key to provide a strong balance sheet. Firstly, and as a reminder, in September, we closed our partial real estate sale and leaseback agreement of our assets located in Spain, strengthening our balance sheet. Secondly, in October, we closed the new senior secured bonds issuance that contributed to extend our debt maturity structure at a very attractive cost. As a reminder, Gestamp's new EUR 500 million senior secured bonds represent the tightest price callable bond by an auto parts issuer since September 2021 with a coupon of 4%, 375%, which underpins the debt investor support to the group. Further to that, in January, we executed an amendment to our syndicated facility agreement and our revolving credit facility, extending the maturity from 2027 and 2028 to 2030 and 2031. These 2 transactions have allowed us to increase pro forma average debt life from 2.6 to 4.3 years. We continue actively managing our balance sheet structure to strengthen it and flexibilize our financial profile. Finally, on Slide #19, we present the return on capital employed. We have managed to reach 15.8% return on capital employed in 2025, improving by 80 bps between 2024 and 2025 and by 180 bps since 2022 when we first released our new return on capital employed KPI. As we have made clear, Gestamp aims at remaining disciplined on CapEx investments and improving profitability. Our long-term strategy is focused on generating value for our shareholders. Thank you all. And now I hand over the presentation to Paco for the outlook and closing remarks. Francisco Jose Riberas de Mera: Thank you, Ignacio. So moving to the Slide 21. I would say that in terms of the market, nowadays, we are not expecting any growth for the market in 2026 versus 2025. And for the following years up to 2029 or 2030, we're assuming a limited growth of around 0.9% CAGR. In 2026, even though we are assuming a flat market, we are considering that the volumes in Europe will be stable with some decrease in Western Europe that could be more or less compensated by some increase in Eastern Europe. We see some increase in terms of volumes in areas like Mercosur and India. And probably we are now expecting a slight decrease for the first time in many years in China. In terms of the -- what we can expect for Gestamp in 2026, so basically very similar to what we have in 2025. So we see a market context in 2026, which means with a limited volume growth in our key geographies with, of course, still regulatory changes, especially in Europe, but also in NAFTA to happen with cost pressure expected coming from customers and also coming from the environment. And of course, some slower EV adoption, but probably with a little bit less volatility. So in this context, we will remain executing the same way we have done it in 2025, trying to base ourselves in kind of this execution of this solid backlog, trying also to focus ourselves in increasing profitability, even though we are not expecting any kind of volume increase. The idea is that we need to keep on improving the strength of our balance sheet and also increasing the flexibility of our balance sheet and of course, trying to focus in meeting the guidance for 2026. In terms of the backlog, at the end of 2025, we had EUR 47.5 billion backlog, which is covering more than 85% of the revenues expected by the group in the next 5 years. Solid backlog, but less backlog than we had 1 year ago because this has been impacted in terms of euros due to the negative ForEx and also it has been impacted by the rethinking of some of our customers of some of their EV programs. So basically, now what we have is a kind of a change in the backlog that we have because we have more content of programs, which are carryover with a less capital-intensive profile. And of course, we are using our CapEx in the future in a kind of conservative approach, trying to ensure the profitability and to be able to mitigate risk, but also to preserve some CapEx in order to be able to support the new customers and to support also footprint diversification with the new area. So again, I think, again, the message is the same. We are going to keep on in 2026 being very focused in working on profitability with a clear road map. The idea is to reinforce all kind of actions in order to have a very good control of all levels of cost, whether it's corporate division level or in the plant level trying to increase flexibility, trying to implement all kind of rightsizing of our operation whenever is required and trying to be more flexible and try to do our CapEx more in a steady basis. Of course, trying to be able to keep on moving with constructive negotiation with our customers and all the different regions and of course, also trying to be able to remain very focused in the third year of the Phoenix Plan, which is a very important milestone as I stated 2 years ago and which is going to provide our group to be able to get the profitability levels in NAFTA region equivalent to the rest of the group. In terms of the financial profile, and as Ignacio has already explained in the previous slide, by the end of 2025, we have been able to achieve a very, very solid financial profile, with a leverage of 1.4x net debt to EBITDA, which is the lowest since the IPO and mainly thanks to a very positive free cash flow generation during the last 6 years of more than EUR 1.4 billion. So taking all into account for 2026 in terms of the guidance, what's clear, the focus of the group is going to be to be another year of reinforcing our financial positioning. We are assuming a scenario in terms of market which is going to remain very flat. And in this environment of a flat market, we are guiding in terms of profitability, to be able to increase our EBITDA margin as a reported basis of more than 11.7% EBITDA margin in 2026. That means that we are guiding for an increase of the profitability in our auto market to be above 11.9% and in terms of Gescrap to increase also the profitability of more than 7.4% that we had in 2025. And in terms of our balance sheet, we are, again, looking for a less capital-intensive business profile. And what we are guiding is to have a good group operating cash flow conversion in the range of 35%. So that means that the operating cash flow defined as reported EBITDA minus the net cash CapEx. So again, clear focus in increasing profitability, a commitment to increase profitability in both auto business and Gescrap and improving our financial position by limiting our cash CapEx to the EBITDA that we are going to generate in this year. Moving to Slide 27. In the Phoenix Plan, the last year of the Phoenix Plan, the third year of the Phoenix Plan, we are expecting to complete the plant with a CapEx impact expectation of EUR 21 million and EUR 90 million impact in terms of profit and loss account, so a total of EUR 40 million. And in the total amount if we include the 3 years in the plan of EUR 100 million as guided 3 years ago or 2 years ago. And for 2026, we stress again our commitment to generate an EBITDA of more than 10% in 2026. And of course, a target that is right now very achievable in what we see and of course, a first stage in order to be able to increase the profitability of our North American operations to the level -- average levels of the rest of the group. So that's all with us. So message that full year 2025, we have been able to achieve very solid results in a difficult environment. For 2026, we are not expecting the market to recover, but we commit ourselves to increase our profitability and to increase also our financial profile. And of course, third year of the Phoenix plan, absolutely committed to be able to deliver. So that's all from my side and now open to your questions. Operator: [Operator Instructions]. And our first question came from the line of Francisco Ruiz from BNP Paribas. Francisco Ruiz: I have 3 questions, if I may. The first one is on your guidance for top line. I mean you commented that you do not expect any growth in this year, mainly also with deceleration in Asia. But mainly I still remember the old stamp when we talk about the -- I mean, the increase on growth above the market due to the increase of outsourcing. I mean, what is this driver? I mean it's already over. And on the other hand, I mean, could we think that the flat growth that the market expected and you are also assuming is because you are projecting nonprofitable projects that in the past you used to assume? The second question is a more modeling question. And if you could give us what's the split of the EUR 34 million extraordinaries in the different divisions -- and if this is something what we could expect also in the future or there are more contracts like this to be accounted in 2026 or '27? And last but not least is on the leverage. I mean, you are reaching a level, which is well below, I mean all-time low. What are you going to do with the cash, I mean, from here? Francisco Jose Riberas de Mera: Okay. Thank you very much for your questions. In terms of the revenues, in terms of the top line, it's true that we are not giving a clear guidance for that. It's true also that the market has not been growing in the last years. And also, we have been reporting in Europe, we have been quite impacted by the FX. In fact, we have made the analysis. And if we were to have the revenues in the kind of currency levels that we had in 2022, we are losing more than EUR 1.5 billion just because of FX because we are reporting in euros. For this year, we don't see a growth. As mentioned, the market is not assuming any growth. And of course, we are always planning that we will do our best, but we consider that it is better for us now to assume that we need to focus in profitability and rather just to be waiting for volumes to come back. So we are doing our job. We are assuming that the bad news are going to be there, and we are putting a lot of stress in the operations. As you know well, because you know us for years, we have been growing for many years. We have a very good position in the market. We have this kind of position with the traditional customers and also with the new customers. And that's why I feel very comfortable that our positioning and our market share remains quite intact. In terms of the leverage that you mentioned, I think it is true that we have reached this 1.4x, which is below all the different levels. I think for us, right now, the focus is in the cash flow generation. I think it's very clear for us. And what to do in the future with that is something that is not now our first priority. Of course, as we have already commented, the market that will have some opportunities. There will be some consolidation. There will be opportunities to increase the remuneration to shareholders. But today, it's very early. Today, I think the clear focus for us is to really focus on profitability and focus and generate a very sound free cash flow. You had another question around the claims. I don't -- I prefer not to provide you with data around what kind of customers or programs or regions. But I think I am quite positive surprised that even though customers are suffering, the kind of negotiations that we are having with them are very positive and I think are fair, not easy, but are fair. And I think the kind of this impact at the end of the day is no more than a compensation of the different expenses that we had in these programs and now these programs are canceled and the customers are doing a clear recognition of what we have been doing for them because they also want to preserve our long-term relationship. So I would prefer not to give you much more details, but probably there will be more -- a little bit more in the -- during 2026. Operator: [Operator Instructions]. And our next question comes from the line of Robert Jackson from Banco Santander. Robert Jackson: First question is related to your comments, Francisco, on the footprint diversification. Could you elaborate more on this comment, give us a bit more detail what the thoughts are on this outlook? That was my first question. Francisco Jose Riberas de Mera: Okay. So if I understand well around our footprint diversification, so that means that we are trying to, of course, to try to invest whenever the markets are growing. Even though, of course, we are trying to preserve our strength in terms of balance sheet. Probably in terms of the more clear bets in terms of growth is India. And India is a place that we are growing. We are investing. We are investing in opening new plants over there and also, which is something which was a kind of surprise to me, increasing in some specific high-tech technologies for that market. And we are growing a lot in areas like specific chassis solutions and also a lot in new hot forming lines. So India is a market that we see growth, and we are investing in that growth. Of course, in terms of growth, there could be other opportunities. There are other markets that we have a very good position like Brazil that we see still some room to grow, areas like, for instance, in Morocco that we are growing. But this is what we are expecting to do that. In terms of where we need to reduce in some extent our position, I think clearly, we are doing year after year some kind of downsizing of our operations in Western Europe. Robert Jackson: Okay. Second question is related to the NAFTA improvements. We saw a significant improvement in the rise in the EBITDA margin from the third to the fourth quarter. Is there -- what are the main drivers behind these relevant increases? Or is it just a general improvement? Ignacio Vazquez: Well, Robert, just to confirm, you're asking because we cannot hear you very well. You're asking about EBITDA margin drivers in fourth quarter? Robert Jackson: Yes. Yes. EBITDA margin in NAFTA, more specifically the improvement in NAFTA, in NAFTA, yes. Why is the NAFTA EBITDA margin increased so significantly. Just to get a better understanding looking forward into the next few -- into 2026? Francisco Jose Riberas de Mera: Yes. Well, I think, Robert, as you know, we usually have some kind of increase in the EBITDA margin in the fourth quarter compared with the -- that happened also in 2024. So it's in line with the trend that we have every year because we have -- and we have also this year some kind of agreements by the end of the year, for instance, when we are trying to be paid by the different agreements with customers around tooling and programs. So basically, it's a kind of trend that we have that we try to do this settlement and accounting of these agreements and negotiations with customers by the end of the year. So that's why basically we have this EBITDA margin in the fourth quarter more than the average EBITDA margin of the previous quarter, but this was very similar to the kind of evolution we had in 2024. Robert Jackson: Okay. I was just wondering whether there was any specific changes on an operational level, but you've answered my question. Operator: There are no further questions from the conference call at this time. So I will hand back to the management team. Thank you. Ana Fuentes: Well, thank you for your time today. We hope the call has been useful. And as always, the IR team remains at your disposal for any further questions you may have. Wishing you all a very [ good evening ]. Francisco Jose Riberas de Mera: Okay. Thank you. Ignacio Vazquez: Thank you very much.