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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.
Operator: Ladies and gentlemen, welcome to AIXTRON's Fourth Quarter and Full Year 2025 Results Conference Call. Please note that today's call is being recorded. Let me now hand you over to Mr. Christian Ludwig, Vice President, Investor Relations & Corporate Communications at AIXTRON for opening remarks and introductions. Christian Ludwig: Thank you very much, Anna. A warm welcome to AIXTRON's 2025 results call. My name is Christian Ludwig. I'm the Head of Investor Relations & Corporate Communications at AIXTRON. With me in the room today are our CEO, Dr. Felix Grawert; and our CFO, Dr. Christian Danninger, who will guide you through today's presentation and then take your questions. This call is being recorded by AIXTRON and is considered copyright material. As such, it cannot be recorded or rebroadcast without permission. Your participation in this call implies your consent to this recording. All documents referred to in this call can be accessed via our website in the Investor Relations section. Please take note of the disclaimer that you find on Slide 1 of the presentation document as it applies throughout the conference call. This call is not being immediately presented via webcast or any other medium. However, we intend to place a transcript on our website at some point after the call. I would now like to hand you over to our CEO for his opening remarks. Felix, the floor is yours. Felix Grawert: Thank you, Christian. Let me also welcome you all to our full year '25 results presentation. I will start with an overview of the highlights of the year and then hand over to Christian for more details on our financial figures. Finally, I will give you an update on the development of our business and our new guidance. Let me start by giving you an overview of the highlights of the year on Slide 2. The most important messages of the day from my viewpoint are: in 2025, we have performed well in a soft market environment by achieving revenues of EUR 557 million, a decline of 12% year-over-year. That translates into a CAGR of more than 13% since 2020. We delivered on our adjusted 2025 revenue guidance, meeting the upper end of our guidance given in October '25. Mainly due to the lower utilization in operations, due to one-off restructuring costs, and due to G10 ramp-up adjustments, our gross profit was down 15% to EUR 222 million, and EBIT was slightly down with minus 24% at EUR 100 million as a result of this. Similar to last year, we finished the year with a strong Q4 '25 performance. We achieved 31% EBIT margin, a level comparable to last year's extraordinary Q4. This marks a great achievement of our operations team as we managed to realize all shipments that customers had asked us to deliver in Q4. The highlight of the operating performance is our cash flow generation. Operating cash flow increased by more than EUR 180 million to EUR 208 million. And our free cash flow increased by more than EUR 250 million to EUR 182 million. With that, we concluded the year '25 with a cash level of EUR 225 million, a good step towards rebuilding our strong cash position that we always have desired. Thus, despite the weaker net profit, we have decided to propose a stable dividend of EUR 0.15 per share to our shareholders. Our outlook for the year 2026 is based on an expected continued weaker market environment. We expect revenues to come in at EUR 520 million in a range of plus/minus EUR 30 million with a gross margin between 41% and 42% and an EBIT margin between 16% and 19%. Breaking this down by segment, AI will be the key revenue driver in '26, fueling strong growth in optoelectronics and lasers through rising demand for optical interconnect. In contrast, SiC, silicon carbide power will face a weak year due to overcapacity and slowing EV momentum with LED and microLED and GaN power demand remaining broadly stable. This concludes the short highlights section. I will now hand over to our CFO, Christian Danninger. He will take you through the full year '25 financials. Christian? Christian Danninger: Thanks, Felix, and hello to everyone. Let me start with the highlights of our revenue development on Slide 4. As Felix mentioned, the revenues in 2025 were down 12% to EUR 557 million. Our strategy of serving various uncorrelated end markets with our equipment proved again successful in 2025. We saw strong growth in the optoelectronics area. This compensated to some extent, the weaker demand for equipment for LED and microLED as well as gallium nitride power electronics. The breakdown per application shows that 57% of equipment revenues comes from GaN and SiC power, 23% from optoelectronics, 15% from LED and a 5% contribution from R&D tools. The aftersales business contributed to total revenues with a growth of 1% to EUR 112 million. The aftersales share of revenues grew to 20%, up from 17% a year ago. Now let's take a closer look at the financial KPIs on the income statement on Slide 5. Gross margin decreased by 1 percentage point versus 2024 to 40%, which was primarily due to lower utilization operations, G10 ramp-up adjustment expenses and the one-off restructuring cost. Accordingly, gross profit was down by 15% year-over-year to EUR 222 million. As we had planned, our spending on R&D in the year 2025 decreased to a total of EUR 81 million due to a reduction in external contract work and lower consumables costs. This helped to drive our OpEx down 7% to EUR 122 million. Combined with the lower gross profit, this resulted in an EBIT of EUR 100 million, which is 24% lower year-over-year. Net profit was down 20% year-on-year at EUR 85 million. This results in an effective tax rate of 15% in fiscal year 2025, a clear positive were our Q4 2025 gross and EBIT margins at 46% and 31%, respectively. Despite the 18% lower revenues number at EUR 187 million, we were able to beat the very strong level of Q4 2024 on gross margin level and meet it on EBIT margin level. Orders in the quarter came in at EUR 170 million, an uptick of 8% versus last year's quarter. For the full year, order intake came in at EUR 544 million, slightly weaker than last year. And thus, our backlog at EUR 258 million is down by 11% year-over-year due to the above-mentioned softness in demand. Now to our balance sheet on Slide 6. We ended the year 2025 with a total cash balance, including other financial assets of EUR 225 million, which was well above the EUR 65 million last year. There are a number of factors driving this increase. Firstly, inventory levels at the end of 2025 came down by about EUR 85 million to EUR 284 million compared to EUR 360 million at the end of '24. This is the result of our adjusted supply chain strategy and corresponding measures after initially front-loading the supply chain in 2024 in expectation of stronger revenue growth. We target a further reduction of inventory levels through 2026. Second, we have seen a solid decrease in outstanding receivables compared to the last year and which generated some EUR 60 million in cash. As a result of putting on the brakes in our supply chain early on, the amount of payables have been stable during the course of the year. Advanced payments received from customers, on the other hand, were slightly down year-over-year at EUR 44 million due to the decline in order intake, combined with a shift in the regional customer base and partially impacted by some key date effects. At year-end, down payments represented about 17% of order backlog. As a consequence of all these factors, operating cash flow improved by more than EUR 180 million to EUR 208 million in the financial year 2025. As mentioned already in previous calls, CapEx decreased significantly in 2025 due to no additional investment requirements for the innovation center. As a result of the significantly lower CapEx, free cash flow improved by more than EUR 250 million year-over-year to EUR 182 million from negative EUR 72 million in 2024. We expect further solid free cash flow generation in 2026. Lastly, we are proposing a stable dividend of EUR 0.15 per share. Despite our lower net earnings, we want our shareholders to participate in the improved cash flow generation. Going forward, following an intensive investment phase in the years 2023 and 2024, CapEx alone for the innovation center was EUR 100 million. AIXTRON plans to use the cash flow in 2026 to further build a strong cash position. Also, I want to remind you that AIXTRON expressly does not pursue a fixed dividend policy, but rather adjust the payout ratio to reflect the respective business performance and capital allocation priorities. With that, let me hand you back over to Felix. Felix Grawert: Thank you, Christian. I will continue by giving you a brief summary of the key market trends we saw last year and before I move on to our expectations for '26. I will start with our currently weakest segment, the silicon carbide power business before moving on towards the strongest segment step-by-step. SiC. Throughout the past year, the global silicon carbide market has undergone a significant transition. In Western markets, we are seeing a temporary slowdown driven by weaker electric vehicle demand and substantial idle capacity at several customers. This has even resulted in reduced or scrapped 6-inch capacity in some cases. We expect the digestion period for silicon carbide epi tools to continue throughout 2026 in Western markets. China, by contrast, remained a strong pillar of demand in '25 for AIXTRON with solid order intake and robust shipments in the first half of the year. In the second half of '25, also in China, SiC demand has softened. And in '26, we expect the digestion to continue also in China. Despite this short-term softness, the midterm outlook for SiC beyond '26 remains highly attractive. Substrate prices have dropped significantly, making silicon carbide devices far more competitive versus silicon IGBTs and enabling broad market adoption, both in EVs and across industrial applications. Even more importantly, the technological transition is well underway. The industry is rapidly moving from 6-inch to 8-inch wafers, starting with Western customers, now also in China, with a full shift expected towards '27 and '28. At the same time, the introduction of superjunction silicon carbide MOSFETs, which require multiple thin epitaxial layers instead of a single thick layer will significantly increase epi tool demand. Our batch-based G10 SiC platform is ideally positioned for this new operating model and has already achieved major milestones with the shipment of our 100 system during 2025. In 2026, we expect very strong demand [Technical Difficulty] at the beginning of '25 and have been steadily recovering. AIXTRON maintains a clear market leadership position with more than 85% market share across GaN device classes, and we remain deeply engaged with customers expanding their GaN road map into [Technical Difficulty] coming years. Importantly, GaN is emerging as a central technology for AI-driven power architectures, particularly as hyperscale data centers plan the transition to high-efficiency 800-volt platforms. We expect additional volume from GaN from AI applications at some time in the 2027 and '28 time frame. The exact timing for when this happens is unknown, and we will keep you posted when signs of this are getting clearer. In parallel, we are working with a small set of customers on 300-millimeter GaN. These customers have existing 300-millimeter silicon fab, which they desire to repurpose for GaN. Our 300-millimeter GaN tool is fully operational with our own innovation center, as we call our 300-millimeter team room and collaborations with imec and leading power semiconductor manufacturers are ongoing. Now, let me come to the LED and microLED market. After a period of muted investment, now the market for red, orange and yellow LEDs, we call them ROY LEDs, is showing clear signs of recovery, driven primarily by development in China. This momentum from display makers who are pushing the boundaries of image quality. In fact, several major TV manufacturers are now transitioning to full RGB backlighting architectures, which further boosts demand for ROY LED as tool. This trend underscores a broader shift. Even traditional LED backlighting is being reinvented, establishing miniLEDs as preliminary storage stage towards microLED. Enhanced local dimming, full color backplanes and ultra-high brightness panels are now becoming standard in premium consumer displays. These innovations are breathing new life into an application space that many considered mature. At the same time, exploratory and qualification work of customers towards microLEDs continues with customers in Europe, U.S. and Asia. The focus of this work has shifted away from watch and television now strongly towards AR/VR glass applications. We expect this market is still some time out into the future until a larger revenue contribution. And given the fact that one wafer can serve hundreds of AR glasses, the expected demand will be much, much smaller than what we would have anticipated for television applications. Overall, we can say that for AIXTRON, ROY LEDs and microLEDs together translate into a solid revenue contribution of around 15% of group revenue for both '25 and '26. Now, let's finally come to our strongest segment in '26, the lasers for datacom. The global indium phosphide laser market has entered a new phase of growth. And from Q4 '25 onwards, we have seen an even stronger momentum in this segment. We have served this market for many years with our proven G3 and G4 platforms historically for telecom and datacom applications, supporting the further adoption of high-speed broadband communications. As far as cloud services with a market share we estimate well north of 90%. The demand we see today is linked to a structural up cycle linked to AI data center build-out and the development of data-hungry new generation of GPUs. And this structural shift creates the demand for indium phosphide-based lasers grown by MOCVD with a massive adoption of optical interconnect now also within the data center architecture. As bandwidth requirements move to 800 gig and data 1.6T, the laser content per data center is increasing multifold to enable the required bandwidth. Our customers are subsequently not only ramping their manufacturing, but also rolling out new product generations with higher bandwidth that are also more integrated like photonic integrated circuit, PIC, now in order to be always faster, more compact and more energy efficient. For the majority of our users, their road map now includes a shift away from 3 and 4-inch to 6-inch wafer size. That is an enormous step for a market that has been historically very conservative. It enables them to access the advanced manufacturing technologies for these new types of products. Our G10 ASP product has rapidly established itself as the tool of record, as we say, for this new generation of photonic devices, replacing customer legacy system, producing higher yield and cheaper 150-millimeter indium phosphide epi wafers. We are serving all of the top 10 suppliers to this market. And demand is coming from all regions of the world, from leading suppliers in the U.S., from the ones in Europe, but also from optoelectronic leaders in Japan, in Taiwan and in China. Looking at demand dynamics, we expect the optoelectronics business to more than double year-over-year from 2025 into 2026. With this, it makes up for a large part of the revenue that declined in silicon carbide that I illustrated earlier. Finally, let me now present our full year guidance for 2026 to you on Slide 19. This guidance takes into account all the factors that I just described previously. We expect revenues to come in at EUR 520 million in a range of plus/minus EUR 30 million. We expect a 2026 gross margin of 41% to 42% and an EBIT margin between 16% and 19%. The effects of a personnel reduction we have initiated in the beginning of '26 are already included in this forecast. Now, let me comment on the first quarter of '26. As usual, sales in the first quarter of the financial year will be lower than the annual average first quarters. In Q1 '26, we expect revenues of EUR 65 million in the range of plus/minus EUR 10 million. This is comparatively low figure, fully in line with expectations and with a seasonal pattern of the business. For completeness, we have adjusted our USD to euro budget exchange rate at which we record U.S. dollar-denominated orders and backlog to USD 1.20 per euro. With this outlook, I'll pass it back to Christian. Christian Ludwig: Thank you very much, Felix. Thank you, Christian. Anna, we will now be happy to take the questions. Operator: [Operator Instructions] So the first question is from Ruben Devos of Kepler Cheuvreux. Ruben Devos: I just have one on the guidance basically, pointing to EUR 520 million a year. Obviously, you started the year effects of the seasonality at EUR 65 million, which is about 12% of the total. So just curious about how you see the quarterly cadence at this stage. And what might give you maybe the confidence that orders of, I think you talked about EUR 280 million, whether that will materialize at the pace needed for a strong H2? Felix Grawert: Yes. Thank you very much. So we expect again in '26, the pattern that we have seen in previous years, where we have the year a pretty much back-end loaded towards Q3 and Q4. I think that's a seasonal pattern, which we have already seen in 2024 and 2025. If you recall in '24, in the fourth quarter, we even shipped over EUR 200 million. Now in the fourth quarter, it was around EUR 180 million. So it's not uncommon that we are backend or backwards loaded. I think it will not be as heavy in '26. But the Q1 is very weak. I think in Q2, Q3 onwards, we should be maybe around EUR 110 million, EUR 120 million, EUR 130 million, I don't know, something like this. So north of EUR 100 million, I would say. And then clearly, in the Q4, I think we will be peaking. So nothing to be -- don't expect the Q2 is again another EUR 65 million and I think we would be a little dry. But that's not going to happen. Does that answer your question? Ruben Devos: Yes, certainly. The second one is just around the G10, which is the tool of record at the leading laser customers. When a customer qualifies your tool and locks in, how long does that qualification typically last before it needs to be, let's say, recompeted? I'm just trying to understand a bit the stickiness of your opto business and whether your position today, which is very strong, obviously, whether that's a meaningful barrier already or whether there for each new product generation, that sort of, yes, reopens the door for competition? Felix Grawert: I think in the laser business, you have probably the most sticky and the most difficult to requalify from all the segments. So with many customers, qualification efforts have been going on since 1 or 2 years already. And the complexity comes in the qualification for a laser tool from the fact that it's not just one simple laser, or one simple layer like you have in silicon carbide. In SiC, this is our most simple tool, I would say. You have one single layer, a thick single layer and every customer is doing kind of almost the same. Now in contrast, in the laser domain, typically, each wafer gets not only put into the tool once for one layer, but the laser customers have very advanced structures. And in these modern architectures and high-speed devices that is currently now making up the market, many wafers of our customers see the tool 3, 4, 5 or even 6x from the inside, meaning the customer makes a layer, doing some other steps, the wafer is put into the tool again, makes another layer and so on and so forth. And you can imagine if something changes in the deposition and that is repeated 5 or 6 times, an error or a change is then repeated or taken to the power of 5 or taken to the power of 6 that depends on a very, very precise repeatability. And so with many of these customers, we've been working since multiple tools, multiple years. That's also the reason why the G10 ASP, which we launched already in '21, '22 is only now getting the strong momentum from the laser market because the qualification has taken such a long time. Ruben Devos: Okay. And just a final question is that you're launching the 300-millimeter Hyperion tool commercially in '26. Just curious how many customer qualifications are currently underway? And when would you expect sort of the first repeat orders to come in? Felix Grawert: We work with multiple customers. I think it's important to differentiate. Some customers are, I would say, in an exploratory and research stage. And there's many of these, I don't know, I think probably double-digit or so. However, I think from commercial relevance, 300-millimeter will, as I mentioned in my prepared remarks, only initially only for a relatively small number of customers. And that is those guys who have a very big 300-millimeter silicon fab, which they want to repurpose and convert an existing 300-millimeter silicon line to a 300-millimeter gallium nitride line. I think all the other stuff like microLED and so on is more like playing around, researching, exploring ways. But I think those market segments probably take another, I don't know, 2, 3, maybe 4 years until they really mature. We are engaged. We work on a lot. But I think in terms of revenue and really making numbers, that's still quite some time away. Operator: The next question is from Martin Marandon-Carlhian from ODDO BHF. Martin, unfortunately we cannot hear you anymore. [Operator Instructions] Christian Ludwig: Let us continue with the next question, please. We can take him later. Operator: The next question is from Rohan Bahl of Barclays. Rohan Bahl: I just wanted to touch on that 300-millimeter GaN tool. I mean your peers said overnight that have gotten several orders on 300-millimeter GaN already. So I just wanted to check your progress on getting Hyperion ready for production volume lines rather than sort of your R&D quality tool that you have at the [ minute ]. Felix Grawert: I think we are very well on track with respect to that. We have also multiple orders again from these few customers that I was mentioning. Rohan Bahl: Okay. And maybe just on the 800-volt AI data center opportunity for GaN, everyone is getting excited about this. So just curious on how things are progressing here? What have customers been saying to you and whether you're still sort of expecting orders to ramp up materially in the second half? I've noticed your backlog has been building for 2027. So I wonder if there's any 800-volt business in there? Felix Grawert: So the 800-volt is splitting essentially into multiple types along the architecture. You probably have seen the slides on the 800-volt architecture by NVIDIA and by major suppliers such as Infineon, right? So we are participating in multiple stages on that chain. The one part is coming from the overland line on the silicon carbide, which translates or transfers from over 10 kV down to 1,200 volts, 2 kV, 1 kV. This is the biggest part silicon carbide. Then gallium nitride comes into play at 650 volt at 100 volt and even at lower stages like 20 volts. So this is where we are participating. We are with multiple customers working on 650 and 100-volt devices for exactly this architecture. And to our understanding, the qualification efforts of our customers means either IDMs or foundries, again, with their customers, being the board makers and the power supply makers for these architectures is ongoing. To our understanding, there is no clear time line on when exactly the switch is taking place yet. And that is also the reason why I commented in my prepared remarks that we know that this is coming, and we are pretty sure that this is coming sometime in the time frame, I always say '27 and '28, but we don't know exactly when it is coming. So in the order backlog that you're referring to, I don't think there is still 800-volt orders in. I think this is other topics more like EV silicon carbide related. Of course, general tool for silicon carbide can be used for any segment. That's clear. But I think the button when exactly the 800-volt is getting pushed and the orders are coming in, the timing is still a bit uncertain. I would not be able to give you the point in time at this period of time. Operator: So Martin Marandon from ODDO BHF is back. Martin Marandon-Carlhian: My first one is on photonics and opto, et cetera. Considering that several of your customers are talking about very significant indium phosphide CapEx increase this year. And I understand that the big acceleration in terms of orders was really in Q4 last year. Do you think we are quite early in that CapEx cycle? Or do you think that '26 could be the peak? So how -- basically, how do you think about '27 at the moment? Felix Grawert: Thanks a lot. I think that's a very good question. Yes. Let me try to shine a little more light on it, how we see it. And again, we only have, again, a piece of the puzzle, but let me try to explain what we are aware of and what we believe. And so we see that the cycle really has kicked off towards the end of '25. So you have seen that in the fourth Q4 '25, our photonics orders have significantly increased. Q1 to Q3, they were still on a relatively low level. In Q4 '25, our photonics orders have increased. We still, already now in Q1, we see continued order momentum from our customers. Some orders have already received. Others are in discussion with customers. And we expect -- and this is also, by the way, the reason you may have seen that our coverage of revenues with orders, our backlog is lower than we have seen in many past years because we are at the very beginning of the cycle. I think that explains this topic, so on. However, we have indications from a number of customers like kind of their road map, their forecast, what they need throughout the year. This is baked in our guidance. So our guidance reflects that already. And we expect that the orders are coming in essentially throughout Q1 and continue to come in Q2 and covering then the revenues that we have forecasted for the year. And as you see, it's a quite significant increase. It's more than double year-over-year for the photonics side. And I mean, this is very helpful for us because I think we all are aware, silicon carbide is really dropping almost dead this year, meaning pulling a bit hole in our revenues. This hole is now just nicely getting filled up by the photonics. It's quite helpful. Now I think you've indicated how long this extends into '27. Of course, very difficult to predict the future. My guess is it's not only 1 year, but it's extending beyond that. However, to comment how much or to which extent it's the majority in '26 and is it even the same level in '27 or less in '27 and more in '27, that is too early. I have no indications to qualify that. Martin Marandon-Carlhian: Okay. And just another one for me on GaN adoption in data centers. I think in the past, you said you could expect orders in H2 this year or in '27 for '27 and '28 revenue. But how do you think about how the ramp will happen? What I mean by this is that, it looks like a big ramp. So how it usually happens with your customers? Do you have already some discussion with when and how much you need to be ready? Or do you really see that ramp once the orders start to come in basically? Felix Grawert: That is a very good question. I think both things come together at the same time. Typically, when a ramp for a new segment is happening, we see the first orders for that particular second or that particular application coming in from one customer or typically from 2 or 3 customers at the same period of time because normally then a segment is coming and also the guys who are using the chips are not only relying on one source, but typically on 2 or 3 sources. So typically, we then get the first orders, particularly for a given segment to come in. And along with the orders that are coming in, we sit together with our customers, they share forecast with us, and we jointly sit on the table making a ramping plan, because normally, it's not that the customer needs only 2 tools or only 10 tools, but rather the customer has a plan and say, look here, in the first year, I need 10 and the next year, I need 15 and the year thereafter, I need 15. How do we best do it? How do we best distribute it over time and so on and so forth. This is normally what's happening. And I expect when this 800-volt GaN ramp is really starting, we are not there yet, but then I expect to have these discussions with customers. Operator: The next question is from Oliver Wong of Bank of America. Oliver Wong: My first question is, again, back to 300-millimeter GaN. I understand that the -- we're not expecting huge revenues upfront. But I was wondering -- so my understanding is that whether it's with the 200-millimeter or the 300, usually customers kind of go with one major supplier, one tool of record, so to speak. I was wondering what kind of timing can we expect for the leading 300-mill GaN suppliers to kind of make a decision on that? Felix Grawert: I think Q4, Q3 or Q4 of '26. Oliver Wong: Got it. And my other question is regarding the lead times. I was wondering if we can get an update on currently where the lead times are for the major end markets and kind of where you expect that to trend? Felix Grawert: Excuse me, I didn't understand your question. Oliver Wong: The lead times between orders and revenues for kind of your major end market categories. Felix Grawert: I think we are probably around -- I think it depends by the market, somewhere between 7 and 10 months, I would say, or 6 and 10 months, something like this. But honestly, I don't have it broken down by end market. We are back to normal, right? If you recall, yes, in the post-COVID, our lead times were very long. We are now back to a normal lead time. Operator: Next question is from Madeleine Jenkins. Madeleine Jenkins: I just had one -- another one on GaN. You mentioned utilization rates are improving. Do you have a kind of a broad sense of where they are now? And then also on this data center opportunity, obviously, I know timing is uncertain. But sort of volume or demand-wise versus kind of the consumer business that made up GaN in the past. Do you think it's a similar size? Or do you see it being bigger? Any color on that would be great. Felix Grawert: Utilization rates, that's always very difficult to predict, because we get more like signs from our customers, qualitative signs like: we need new tools, we don't need new tools. I would guess across the market, probably utilization rates are maybe 60% to 80%, I would say. So on a decent level now, I mean, earlier, we were probably around 30% to 50% after the big GaN investment wave where the demand wasn't there yet. So I think it's still taking a little bit of time until the next investment wave is getting triggered. But as we said, somewhere around the '27 time frame, early in '27, end of '27 or maybe even end of this year, we will see some investment trigger. Now as for the size, and I think with GaN, it's important to note that GaN has been penetrating across all market segments. It started off, as you rightfully note, 4, 5 years ago, purely in the consumer market, chargers for smartphones, chargers for notebooks and those kind of applications where the form factor was the driving topic. By now, we have seen GaN penetrate kind of across all the market segments, which is addressed by silicon means motor drives for battery-driven applications. We've seen it in motor drives for things like air conditioners, more like high-power, high-voltage topics. We've seen it in 100-volt and 20-volt point of loads and servers to reduce the energy consumption of servers so kind of all market segments. So I think you cannot split GaN any longer into a consumer or non-consumer segment. I think GaN is really on a trajectory of getting a very widespread application. Madeleine Jenkins: Makes sense. And I know you -- in your release, you flagged that there's a decent chunk of orders for 2027 delivery. Could you just kind of provide some more color on that? Why is it? Kind of is it just lead times or -- is there kind of specific customer capacity additions going on? Felix Grawert: No, no. What we have said is, we expect as we see the utilization rates of the installed base now gradually increasing. And as we see further adoption of GaN, particularly in the 800-volt architecture for AI, we expect that at some point, whether it's the end of '26 or sometime in '27 or at the end of '27, we don't know the exact timing. We expect at some point, utilization rates to be at a level where it triggers new investments, new tool purchases by our customers, and where especially the 800-volt architecture is then switched to GaN. Today, a big part is still on silicon. And once that switch has happened away from silicon to the much more energy-efficient GaN, then this will trigger in our expectations, new tool orders by customers because they need to expand their capacities in order to serve this additional market segment. But when exactly it happening, whether this is end of '26 or early '27 or end of '27, we explicitly say we don't know the timing. Madeleine Jenkins: Sorry, I get it. So I was talking more kind of broad comment on your current backlog. I think over EUR 100 million is for delivery in '27. I just wondered why that was the case? Felix Grawert: Well, this is a mix of applications. It's a mix of applications. A big part is silicon carbide, where customers have ordered and as the market fell down and became slower, customers said, can we have it a little later? Yes, I think the biggest part -- I would guess the #1 application amongst those is silicon carbide. Operator: The next question is from Martin Jungfleisch of BNP. Martin Jungfleisch: First one is a bit of a follow-up on the guidance and the lead times. It looks like that you need around EUR 300 million in new orders in the first half to make the '26 guidance. Is that kind of the right way to think about it with lead times of 7 to 10 months? And then maybe if you can comment if you're on track to meet this kind of EUR 150 million order run rate in Q1 already? That's the first question. Felix Grawert: Yes. We see ourselves fully on track. We sleep very well. We feel very well in covering and securing that. Martin Jungfleisch: Okay. Then maybe another follow-on on the moving parts. I think if I understood you correctly, you mentioned that you expect photonics revenues to double this year. So then what are the moving parts? I think you said also GaN should be up moderately. So is it like the 3D sensing part or the LED part that should be down massively this year then? Felix Grawert: Sorry, I didn't get the last one. I didn't get the last part of your question. Martin Jungfleisch: Yes, I was just asking with photonics doubling, I think that's what you said this year. And what are the moving parts within that revenue guidance? I think you said GaN should also be up moderately, so is 3D sensing, LED, silicon carbide then down quite massively? Is that the right way to think about it? Felix Grawert: Yes, exactly. That's the right way to think about it. I would say LED/microLED roughly is flat. Silicon carbide massively down. This is a big hole that's in there. And this hole, to the largest part, is getting filled up by the doubling of the optoelectronics. And that's why overall, and if you sum it up, we come at those slightly down numbers from the whatever EUR 557 million we had in the past year in '25 and now to the EUR 520 million plus multiple. Martin Jungfleisch: Okay. And maybe if I can, just a small follow-up on the gross margins. Can you just break down the moving parts a bit on the gross margin guidance for this year? So what is kind of the headwind from lower revenues that you're seeing, what is the better product mix and so on? And maybe if you think about -- if we go back to EUR 600 million revenue next year, what would be the gross margins on a like-for-like basis when you assume all the benefits from the restructuring program, et cetera, should this be like 45% then? Felix Grawert: So great question, but I don't have all the numbers prepared. It sounds like almost I would need an Excel sheet next to me to answer your question. So on a joking note. No, let me try and best to help you explain as much as I can without having a computer next to me, yes? So you see we managed to keep the gross margins around stable compared to last year or improve even a little bit. And what you see here is already we did first a slight amount of headcount reductions early in '25, so last year already. So a part of that benefit already becomes effective in '26. We then, as you have seen, have been able to gain further efficiencies, and we do another slight headcount reduction now or have done in January already. It's completed. We did it very early in the year. And the cost for that is, of course, included in the guidance. And we've been working a bit on our efficiency in operations, streamlining processes and operation shop floor work and all that kind of stuff, right? And all that allows us to keep the gross margin stable. Now the question is, how should you think about it? Well, if you go into next year, into '27 -- again, I just do it on a like-for-like basis. I didn't do it the Excel spreadsheet for your hypothetical EUR 600 million. But you can then take out from the cost this what we said, mid-single-digit million restructuring cost. That's, of course, a onetime cost, and that's onetime in '26 and not again in '27, kind of. So that will help on the gross margins. And honestly, I haven't looked at the details of the product mix, which, of course, also plays a role. I haven't done that. But it will certainly help on the margin. And just to make sure -- maybe one more comment, just to make sure that you get that, as you now probably looking to get some numbers into your model. And if you look at the R&D cost, we had in '24 an R&D cost on the order of EUR 90 million, and we had in '25 an R&D cost on the order of EUR 80 million. In the current year '26, if you do your model, we'd rather put in EUR 90 million of R&D cost. You will come to that if you do the math anyways with gross margin and the EBIT margin, just to make sure that you get the right number so everybody gets the right numbers here because we have quite some new ideas for new products, and that always translates then for us into R&D because at some point, '27, '28, we expect the markets to pick up, and of course, our investors and you guys expect that we have then a fresh portfolio winning and securing our market position again. Now it's down. But when new markets are there, then it's a lot of fun. We want to be prepared and we want to be ready for that. Operator: Next question is from Jarad Abed of mwb research. Christian Ludwig: It doesn't seem to be there. Let's take the next question please, Anna. Operator: Maybe it should work now, Mr. Abed, can you hear us? Abed Jarad: Yes. Can you hear me? Operator: Yes, we can hear you now. Abed Jarad: Okay. Sorry. Yes, I just have a quick question regarding Q4 backlog movement. I mean there is notably an order cancellation of approximately EUR 11 million. Can you provide some color on this? Felix Grawert: Yes. I think that was 2 process modules. I think it was a customer from laser and gallium nitride, if I recall. Abed Jarad: Okay. And my second question, I'm trying to understand the overcapacity in silicon carbide. Is it like structural or cyclical? Felix Grawert: Cyclical. So we get from our customers literally the feedback that they say, look, gradually capacity is now starting to fill. I mean we looked 1 year ago probably at 30% utilization, but the adoption of silicon carbide continues in the market. A big element that helps is that the prices for substrates have dropped significantly. And due to that, the overall -- and substrates make in silicon carbide a major part of the overall cost, probably the #1 cost position is substrate. Those are getting cheaper. With that, and the silicon carbide power devices are getting more affordable. The cost is going down. And as cost is going down, silicon carbide MOSFETs gain relative in attractiveness compared to silicon power devices, silicon IGBTs. And with the gaining attractiveness that design-in is increasing, they're getting more widespread and the demand in terms of units is increasing. And as the units are increasing, the existing capacity gradually gets filled. And at some point -- again, we don't know the timing, but at some point, the overcapacity will be digested and then new orders will be triggered. And again, we expect this sometime in the '27 and '28 time frame. When exactly, we don't know. Abed Jarad: Okay. But you know that like -- I mean, it's -- you mentioned previously that you expect some orders once annual EV production with silicon carbide inverters surpassed 3 million units. Is it still the case? Felix Grawert: I didn't get your question with the numbers that you were just saying. Sorry, I couldn't understand. Abed Jarad: Yes, sure. You mentioned previously that you are expecting like silicon carbide acceleration once annual EV production with silicon carbide inverters surpassed 3 million units. Is it still the case? Felix Grawert: I think we've never given out a number of 3 million units for inverters. I think that's a very specific number, which is probably not from us. Christian Danninger: I think it is referring to a broad assessment of how many cars we would need on the street to see a pickup. That was -- that's where it came from. Christian Ludwig: As a proxy. Christian Danninger: As a proxy, exactly. Felix Grawert: Honestly, we cannot comment on that. Operator: Next question is from Craig McDowell of JPMorgan. Craig Mcdowell: My first one is on pricing. And certainly, on the device side of opto, we're sort of seeing, obviously, a tight market, and it seems like device makers -- laser device makers are able to take price and pretty significant price. I'm wondering whether that changes the value that you offer to your customers on the indium phosphide tool and whether you're able to see price increases and specifically whether that's included in your more than doubling comments for 2026? Felix Grawert: The main driver for the doubling is literally on the number of tools. So it's not a doubling by price, yes, that would be nice. It's literally doubling by the number of tools, by the number of shipments. But historically, optoelectronic tools are on the higher side of the pricing in our portfolio simply due to the fact that those laser tools are of a very high level of complexity. If you compare an LED tool going into China and you take a laser tool and you open them and look at them next to each other, you feel that one tool is filled with twice the number of technology inside than the other tool. And somehow that's, of course, reflected in the price. Craig Mcdowell: But given the tightness in the end market, you're not yet raising the prices of your own tools, to be clear? Felix Grawert: No. We don't. That's never a good idea towards customers. They don't like that. Craig Mcdowell: Understood. Okay. And then just on -- you mentioned that you're still in discussion with opto customers through Q1. Some of those orders might have been written, certainly discussions ongoing. Just wondering whether there's a change in tone with your opto customers, are you talking on a multiyear period now in terms of delivery? Or is it still very much sort of within the next sort of 6, 12 months that conversations are happening? Felix Grawert: It depends customer by customer. We have both types. We have some customers discussing kind of literally the next tool. I need something very, very fast. When can I have 5 tools? Please as fast as possible. I have others more engaged in a structural discussing throughout the year '26 and then others more looking around the multiyear road map. It really depends by customer purchase team or strategic planning team. We have all of it. Operator: The next question comes from Om Bakhda from Jefferies. Om Bakhda: I just had a question on your silicon carbide business. I guess when we look through the course of the year, is there -- I mean is there anything that you see today that could happen, that could mean that the guidance that you've given on SiC could prove to be conservative in the second half of this year? Felix Grawert: Well, that's a very good question with lots of buts and if. Let me think. Honestly, I think for the second half of '26, my gut feeling tells me it would be a bit too early, seriously for silicon carbide and talking about revenue, because I think there still is some capacity in the market, which still needs to be digested as we had discussed earlier. I think if we look into '27, purely the EV demand can be a nice driver, as discussed. We see now that silicon carbide devices more and more get designed into higher voltages. So not only 1 kV, 1,000 volt, 1 kilovolt, but also 2,000 volt, 3,000 volt, 10,000 volt, so 2, 3 10 kV, and notably in the space of grid applications for solid-state transformers and applications like that. But I think this is -- would be too early to expect a tool demand, equipment demand for that in '26. I think we are clearly looking towards '27 and '28 for these new applications and new trends. That's my gut feeling. Maybe I'm wrong. If we can ship more, we are happy to serve the market. We have capacity. We can serve the market, no problem. But I think realistically, and giving you the most realistic estimate, I would not expect an uptick in terms of revenues, maybe orders towards the end of the year, but I don't think there's a big uptick in shipments in '26. Om Bakhda: Got it. And then just a follow-up in terms of your sort of the order momentum you're expecting in the first half of this year. When you sort of look at the discussions you've had year-to-date, how should we think about the mix in your order book? Is it sort of largely opto based in H1? Or could we see some GaN tool orders coming and inflecting in H1 potentially for shipment in the second half of this year? How should we think about that mix in the order book? Felix Grawert: I would expect, if I look at ongoing customer discussions at this point in time, again, there can always be surprises, but I'm just extrapolating what kind of discussions are ongoing. And we know then the discussions take between, I don't know, 1 and 3 or 4 months to materialize, which kind of covers the H1 quite well. I would expect in H1 a significant optoelectronics/LED loaded order intake, whereas then in the second half, I would expect the power electronics gradually to come back. Operator: Moving on to the next question from Michael Kuhn of Deutsche Bank. Michael Kuhn: I'll stick with, let's say, order composition. Of the roughly EUR 260 million order book you currently have, I think you gave some indications already. But could you maybe give some deeper insight into how the composition is by category, power versus non-power and maybe even going into a little more detail? Felix Grawert: Yes. I think if we look at the order backlog of '25, I think opto is around 40%, SiC 30%, GaN 20%, LED 10%. Do you think so, Christian? Christian Danninger: Yes. That makes sense. Approximately. Felix Grawert: Approximately, right? Christian Danninger: Yes. Michael Kuhn: Understood. And then on GaN and let's say, the next upward cycle, you mentioned at some point in the presentation that you expect AI data center power to drive the tool demand by factor 3. What would be the comparison base for that factor 3, just to get a better idea on how big the market could grow? Felix Grawert: I think we look here at the comparison, the total market size is more like around '24, '25. And the factor of 3, which we've illustrated more like an upside scenario comparing '25 versus 2030 kind of a 5-year comparison, one point in time, '25 versus 2030. I think this is what we have looked at right now. Michael Kuhn: Okay. So this is -- '30, this is nothing like 4 in 2 years' time, at least from today's point of view? Felix Grawert: No, no, no, no. I think this is a gradual increase. As we have discussed in this call already, we believe at some point in '27, there could be the first momentum starting and then it's a design in. And as always, in our applications, our markets, it's a ramp. It's a new trend, which is then happening. It's getting designed in. So our customers, our IDMs have now made devices, which is in the qualification with their customers, board makers, GPU makers, rack makers and so on and so forth. The architecture has been set. Now the complete industry is working on it. Hopefully, it's going to be fast. We know the AI industry is a very fast-moving industry. So maybe it's faster than some of the other industries. But then at some point, it's being designed in and then the volume is starting and then gradually over time, it gets penetrating and the adoption rate goes from today 0% then whatever, 10%, 20% in the initial stage and at some point, 2030, 100% adoption rate after the adoption is completed, and then we look at that point in those numbers. So a gradual adoption. Again, still our assumption. You never know how the adoption goes. Sometimes things go very, very fast, would be nice, but that's the assumption which is under. Michael Kuhn: All right. Understood. And then one more question. Obviously, we are not yet there. But let's say, the -- say, cycled as well and you're ramping capacity big time. When would you reach, let's say, your current capacity towards 100%? And when would you consider, let's say, reactivating your Italian capacity that is currently mothballed and what would be the potential cost associated with that? Or is that not even a planning scenario as of now? Felix Grawert: Honestly, it's not relevant for the overall business or profitability. I would say capacity can always be scaled up in one way or another, which way we choose to take, we will decide when we are there. But I think it's nothing that affects the P&L in one way or another. It's not a constraint. It's not a limit to us. It's not a profitability limit or inhibitor or whatever it is, it's just operations. Operator: The next question is from Nigel van Putten from Morgan Stanley. Nigel van Putten: I just wanted to follow up on some of the customer behavior in the optoelectronics end market. I mean, some of them have said that they're currently ramping supply. They see demand ahead of supply, maybe even towards next year. But do you feel that comment is directed at you? When you speak to customers, do you have to disappoint them? Are you shipping to, let's say, 80%, 70% of demand? You've mentioned, as an example, a customer that comes in with a shipment for 5 tools as quickly as possible. Are you still able to serve those type of requests? Or do you have to sort of disappoint them and saying, well, that's going to be quite a bit longer than maybe the 6 to 10 lead time month lead time you've indicated before? Felix Grawert: Well, in this case, good for our optoelectronics customers. The silicon carbide customers are so nice to step to the side for them in this year, leaving a lot of unused capacity, both in our shop floor and within our suppliers. And as you know, we work on a -- how do you say, modular system with our Planetary systems. So all our products are closely related to each other as a family, you can say. That is now a capacity that is not being emptied or not used by silicon carbide customers because that market is currently sleeping. We can use the same supply chain for parts and of course, also the same kind of assembly tools on our own shop floor and the skill set of our people now to do the labor part. In other words, we have free capacity to literally serve all the demand, which is currently coming in. It might be a different game if the silicon carbide would be at the same time in the party now. But silicon carbide, as we have illustrated, is really leaving the gap, and this gap is currently just now being taken by the laser guys. It's good for them. Nigel van Putten: Got it. So when they say we can't ship, it kind of reflects your lead times, you think? Or especially when your customers... Felix Grawert: It should not be us who's the bottleneck. Yes, it should not be us who's the bottleneck. And my team, my operational team, my sales team is handling it. I expect if there would have been a bottleneck, I would know it. I'm not aware of any bottleneck across the entire industry. Nigel van Putten: Perfect. That was my question. But then maybe a broader question. You said larger wafer size and better yield. I think one customer said it's 6 inches is 4x the product of the 3-inch, which -- or yes, the current capacity. So maybe ballpark to give us an idea in terms of the capacity you're shipping this year relative to the installed base, what do you think the increase is you can serve with sort of your view on the revenue you're shipping into '26? Felix Grawert: Well, that's a very, very difficult question. I can only illustrate to you the various factors to that because the installed base is -- first of all, many, many tools, but many of them still on 3-inch and 4-inch wafer size, as you said, which is a much, much smaller capacity in terms of square centimeters or number of chips that you can get out of it in other ways. The other point is, that while the installed base counts many, many tools in the installed base, many times those old tools, they would be dedicated to one product and they would only be qualified for certain products, so with huge inefficiencies. So I think we are currently like the shift in new architecture towards photonic integrated circuits to the PIC on indium phosphide, also much bigger chips, much more functionality is really -- it's a world which is not comparable to the old world I would say. Because it's different chips, different products, a much larger wafer size, much higher productivity. So I think the industry is really seeing a massive momentum. But on the other hand, as illustrated, inside of the data centers, even inside of the racks, we go completely away from electric cables and go completely to optical data connects, which inside of the racks is really new to the industry. So the demand is massively increasing. Operator: The next question is from Adithya Metuku from HSBC. Adithya Metuku: Just firstly, just thinking about the capacity that's coming on board for indium phosphide lasers. From what I understand, the yields are something like 50% and that the continuous wave lasers used in CPOs are about 1/10 of the die size of EML lasers. So I just wanted to hear your thoughts on how you think about the yield improvement, especially if the die sizes go down. That combined with the die sizes going down with the existing capacity that's in place or you will have put in place by the end of 2026. I suppose the question is, it's been asked, but how much does the capacity go up? And will there be enough demand to drive further growth in your optoelectronics business in 2027 if yields go up, die sizes go down 10x because of continuous wave laser adoption. So any thoughts around that would be great. And I've got a follow-up. Felix Grawert: I think you asked the billion-dollar question, but I don't have the answer for you, unfortunately. I think the effect you're alluding to is a typical pattern across the whole semiconductor industry that in a new market segment, you start with a relatively low yield simply because the application is there, the application needs the capacity, the application needs a ramp. But then over time, new generations of products step-by-step come in, which come with a die size shrink and higher yields, means you get more capacity out of your installed base. Typically, such a process, so I cannot -- upfront, I cannot quantify this for you. This is -- I don't know. I think also our customers at this point in time don't know. Typically, this process that you are describing is happening over a 2.5, 3, 3.5, 3, 4-year time horizon because it takes one generation of chips and after the next generation and the next generation, typically, at least you need 1.5 to 2 years for one generation after the next, because your customers are simply not able to digest a faster succession of generations and also to increase the yield takes some time. So what it means is my personal guess, and again, it's only a speculation, but I can share the opinion I have with you is that this is not only a 2026 trend, but at least this trend in this market will extend into 2027, that I think is very, very clear. This does not happen within 1 year. Now to which extent and how large this will extend in '27 and '28? I think that's the billion-dollar question I cannot quantify for you. But I'm very convinced that we are not talking about 1 year, but at least about 2, and I would guess rather a 3- to 4-year time horizon. Adithya Metuku: Got it. So essentially, you are expecting growth in '27, but you don't know the magnitude of the growth at this stage. Would that be a fair way to characterize it? Felix Grawert: That's a fair way. Yes, exactly. That's a fair way. Adithya Metuku: Got it. And then just following up on an earlier question, you talked about the epitaxy machines not being the bottleneck. To my understanding, it's the indium phosphide substrates. Is that right? Or is there some other bottleneck in the system that's preventing your laser customers from ramping capacity and meeting the demand that they're seeing? Felix Grawert: I hear also that indium phosphide substrates is a bottleneck that's currently being addressed by the entire value chain. I know this both on the side of our customers who need the substrates in their factories, and I know it also from substrate manufacturers. And I'm aware that there is a large, very well coordinated and well-orchestrated initiatives by our customers and by the substrate makers together in place to address these bottlenecks. But yes, that's, I think, a topic which is currently being worked on in this value chain and in this industry. Adithya Metuku: Understood. And then maybe just one last clarification. Are you able to give any color on the divisional growth revenue expectations for the first quarter? Felix Grawert: Honestly, I don't have the numbers. Operator: And the last question for today from Malte Schaumann from Warburg Research. Malte Schaumann: My first one is on silicon carbide superjunction technology. So can you maybe share your view on how the time line until adoption might look like? And then associated to that, would your tools in the existing base require an upgrade to incorporate that? Felix Grawert: A very good question. So we are aware that all the leading device makers are currently working on superjunction technologies. To my understanding, the first devices will be launched at the end of '26 by suppliers, means in the second half of '26 or the first half of '27, volume ramps of devices happening in the market. And we think that superjunction technologies in silicon carbide will be strongly embraced by Western players because it's a major way for them to get more dies per wafer and hence, to reduce the cost per chip. So it's a massive trend, which is currently being strongly pushed across the entire industry. As for our tools, there's no further upgrade needed for our tools. They are able to run as is. And one point I would like to illustrate, nevertheless, is that the superjunction technology where essentially you don't take one thick layer, let's say, 10, 12, 14 microns of thickness, but you rather split this into 3 or 4 thinner layers and the wafer gets put into the tools multiple times. Most customers embrace a technology, which is called multi-EP, multi-implant, so you do an epi step to do an implant, you do another epi step, another implant. So the wafer gets several times into our tools, a little bit like what we saw in the indium phosphide just earlier in the discussion. And that means that for one wafer of superjunction devices, you need more epi time. You need more tool time in the epi, and we expect that this will be also one driver at some point, as illustrated in the '27, '28, '29 cycle, which will trigger additional demand from our customers for more tools because they need to expand their epi capacity in order to accommodate all the superjunction MOSFETs. So it's a market trend that we like a lot because it helps our business. Malte Schaumann: Okay. Understood. Secondly, on working capital. With the shift in the product mix away from power to opto this year, can you keep your inventory target? I think it was around EUR 200 million by the end of '26. And then secondly, with respect to the down payments, we have seen quite a significant decline over the past few years relative -- down payments relative to order intake. So what are your thoughts where these levels should normalize going forward? Felix Grawert: Yes, good question. So inventories, yes, we expect inventories to go further down. The shift in product mix, in fact, is an effect which is not helping. So we are still -- but we are still targeting EUR 200 million to EUR 220 million in terms of inventories. So maybe there's 20 more than we initially expected due to the shift of product mix, let's see. But still, we target a significant further reduction of inventories. It's gradually burning down, maybe a little bit slower as you're indicating, but still significant. Christian, maybe you can take the second part. Christian Danninger: On the down payment, it's a little bit more difficult because we don't have complete control on it. It really depends on end market mix, regional mix, customer mix and also cutoff date effect. I mean, the number at the end of the year was really low. We expect it to recover to some degree, but to predict this in detail is quite difficult. And it's also not the major negotiation point with customers, right? It's part of the deal, but not the major part. So it's a little bit difficult to predict. It should increase trend once again. Malte Schaumann: Okay. Okay. Lastly, a quick one on R&D. You indicated an increase in R&D spending this year. Would you expect another increase with the rising business volume generally over the next years and '27? Or would that volume be more or less sufficient to support your programs you have in mind? Felix Grawert: I think we discussed already earlier. So in '24, we had around EUR 90 million. In '25, we had around EUR 80 million. For '26, we expect again around EUR 90 million. Malte Schaumann: And then beyond '26, so the EUR 90 million is sufficient for the next few years... Felix Grawert: It look -- that always depends a little bit on individual cycles of products. At some point in the cycle, the products take a little more money. At some point in the cycle, they take a little less, it depends throughout where the portfolio stands. Honestly, I wouldn't want to predict beyond that. Operator: Thank you very much from my side. With that, there are no more questions in the queue. So I'm closing the Q&A session and handing the floor back over to Ludwig. Christian Ludwig: Well, thank very much. Thank you very much all for your questions. The IR team and part of the management team will be on the road in the next couple of weeks, so we'll see a lot of you, hopefully, in-person. And for those we do not see, we will have our next quarterly call scheduled for April 30, when we will report our Q1 figures. So if we don't see you until then, then have a happy Easter and talk to you end of April. Goodbye, and thank you. Felix Grawert: Bye-bye.
Operator: Good morning and welcome to UMH Properties Fourth Quarter and Year-end 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. It is now my pleasure to introduce your host, Mr. Craig Koster, Executive Vice President and General Counsel. Thank you. Mr. Koster, you may begin. Craig Koster: Thank you very much, operator. In addition to the 10-K that we filed with the SEC yesterday, we have filed an unaudited fourth quarter and year-end supplemental information presentation. This supplemental information presentation, along with our 10-K, are available on the company's website at umh.reit. We would like to remind everyone that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the company's fourth quarter and year-end 2025 earnings release and filings with the Securities and Exchange Commission. The company disclaims any obligation to update its forward-looking statements. In addition, during today's call, we will be discussing non-GAAP financial metrics. Reconciliations of these non-GAAP financial metrics to the comparable GAAP financial metrics as well as the explanatory and cautioning language are included in our earnings release, our supplemental information and our historical SEC filings. Having said that, I would like to introduce management with us today: Eugene Landy, Founder and Chairman; Samuel Landy, President and Chief Executive Officer; Anna Chew, Executive Vice President and Chief Financial Officer; Brett Taft, Executive Vice President and Chief Operating Officer; Jim Lykins, Vice President of Capital Markets; and Daniel Landy, Executive Vice President. It is now my pleasure to turn the call over to UMH's President and Chief Executive Officer, Samuel Landy. Samuel Landy: 2025 was another strong year for UMH Properties, marked by continued operational excellence, strategic growth and solid financial performance. We made significant progress in increasing the value of our portfolio, driving occupancy gains, breaking our sales record, growing the company through external acquisitions and positioning the company for sustained future growth. The affordable housing crisis has gained national attention. Factory-built homes for sale or rent in communities is a solution to that crisis. Normalized FFO was $0.24 per share in the fourth quarter of 2025 compared to $0.24 in the prior year. Normalized FFO for 2025 was $0.95 per share compared to $0.93 in the prior year, representing an increase of 2%. Gross normalized FFO increased 7% for the quarter and increased 15% for the year. We strive for per share earnings growth and anticipate strong earnings growth in 2026. At this time, we are announcing 2026 guidance of $0.97 to $1.05 per share, representing an increase of approximately 2% to 10%. During the year, we strengthened our balance sheet through prudent capital management. We refinanced 17 communities for $193.2 million in total proceeds at a weighted average interest rate of 5.67%, using the proceeds to repay existing debt, fund our rental home program, support capital improvements, pursue acquisitions and repurchase stock. These refinanced communities were appraised at $309 million, representing a 121% increase over our original $140 million investment, underscoring the significant value we've created. Additionally, we issued $80.2 million in 5.85% Series B bonds due 2030 to foreign investors, providing flexible capital for general corporate purposes. Further, in the fourth quarter, we repurchased 320,000 shares of our common stock at an average price of $15.06 per share for an aggregate cost of $4.8 million, reflecting our confidence in the company's undervaluation. We also realized $5.7 million in gross proceeds from the sale of 100,000 shares of Realty Income Corporation from our securities portfolio. Rental and related income, a core driver of our business, grew to $226.7 million for the year, representing a 10% increase over last year. Our total revenue, including home sales, was $261.8 million for the year, representing an increase of 9% over last year. Our same-property results continue to demonstrate the effectiveness of our long-term business plan. We generally purchase properties where we believe we can improve results through increased home rentals, sales income and finance income. Our team and our platform have proven time and time again that we can preserve and increase the supply of affordable housing while delivering solid and sustainable operating results. In 2025, we delivered same-property revenue growth of 8.2% or $16.9 million and same-property NOI growth of 9% or $11.1 million. This growth in same-property revenue and same-property NOI was driven by site rent increases of 5% and increase in occupancy of 354 net units. Our occupancy gains continue to be driven by the successful implementation of our rental home program. During the year, we added and rented 717 new homes across our portfolio, including those in our joint venture communities, bringing our total rental home inventory to approximately 11,000 units with a 93.8% occupancy rate. Our rental home program continues to operate efficiently with a turnover rate of approximately 20%. Our expenses per unit per year are approximately $400. Our capitalized turnover costs vary but we are generally able to increase rents to earn 10% on any additional investments in the rental homes. Our home sales business also performed well, generating gross revenue of $36.4 million for the year, including contributions from our new Honey Ridge community in our joint venture with Nuveen Real Estate, representing a 9% increase from $33.5 million in 2024. In the fourth quarter, gross home sales reached $9.3 million, up 8% from the prior year period, including sales from Honey Ridge. We have acquired and developed communities in strong locations, which should allow us to further increase our gross sales and sales profitability in the coming quarters. On the acquisition front, we completed the acquisition of 5 communities during the year, adding 587 developed homesites for a total purchase price of $41.8 million. The average occupancy in these 5 communities was 78% at acquisition, providing immediate upside through the infill of vacant sites, which should result in value creation through our proven turnaround strategy. On the expansion and development front, we officially opened Honey Ridge, our 113-site greenfield development in Honey Brook, Pennsylvania. Sales at this community are going very well, and we anticipate a rapid infill pace. Additionally, we completed the development of 34 expansion sites and made progress obtaining entitlements, which should allow us to develop 400 or more sites in 2026. Over the past 4 years, we have developed an average of approximately 200 sites per year. Expansions greatly increase the value of our existing communities. A large asset generally operates with better margins as a result of economies of scale. Additionally, these expansion sites are well located and have the potential to greatly increase our sales and sales profits. As we fill our recently developed sites, our earnings will grow. Expansions in development require patient capital but lead to strong returns over time. UMH continues to deliver solid results while growing the company through the infill of our existing communities, acquisitions and development. We have built a best-in-class operating platform that continues to produce results year after year. We invested significant additional funds for long-term growth, which will result in stronger improvements in our operating results over the years to come. Our long-term business plan allows us to acquire communities at a discount to their stabilized value, complete improvements and over time, realize the increases in value through refinancing. Our quality income stream is derived from our 24,000 families that have chosen to make UMH communities their home. This income stream has proven resilient through all economic cycles. Overall, these accomplishments demonstrate the resilience and growth potential of our business model. I'll now turn the call over to Anna, our CFO, to review our financial results in more detail. Anna Chew: Thank you, Sam. Normalized FFO, which excludes amortization and nonrecurring items, was $20.5 million or $0.24 per diluted share for the fourth quarter of 2025 compared to $19.2 million or $0.24 per diluted share for 2024. For the full year 2025, normalized FFO was $80.1 million or $0.95 per diluted share for 2025 compared to $69.5 million or $0.93 per diluted share for 2024, resulting in a 2% per share increase. We were able to obtain this increase in annual normalized FFO despite our operating results being impacted by our investments in growing the company through value-add acquisitions and developments and increased expenses. Rental and related income for the quarter was $58.2 million compared to $53.3 million a year ago, representing an increase of 9%. For the full year, rental and related income increased from $207 million in 2024 to $226.7 million in 2025, an increase of 10%. This increase was primarily due to acquisitions, increases in rental rates, same-property occupancy and additional rental homes. Community operating expenses increased 12% during the quarter and 10% for the year. This increase was mainly due to acquisitions and an increase in payroll costs, real estate taxes, snow removal and water and sewer costs. This increase also includes onetime legal and professional fees of $724,000 for 2025. Despite the increase in community operating expenses, community NOI increased by 7% for the quarter from $31.1 million in 2024 to $33.3 million in 2025 and increased by 9% for the full year from $119.7 million in 2024 to $130.7 million in 2025. Our same-property results continue to meet our expectations. Same-property income increased by 8% for both the quarter and for the year, generating same-property NOI growth of 6% for the quarter and 9% for the year. From a liquidity standpoint, we ended the year with $72 million in cash and cash equivalents and $260 million available on our credit facility with a potential total availability of up to $500 million pursuant to an accordion feature. We also had $129 million available on our revolving lines of credit for the financing of home sales and the purchase of inventory and $55 million available on our lines of credit secured by rental homes and rental home leases. During the year, we issued $80.2 million in 5.85% Series B bonds due 2030 to foreign investors, providing flexible capital for general corporate purposes. As we turn to our capital structure, at year-end, we had approximately $761 million in debt, of which $556 million was community level mortgage debt, $28 million was loans payable and $177 million was our 4.72% Series A bonds and 5.85% Series B bonds. 99% of our total debt is fixed rate. The weighted average interest rate on our mortgage debt was 4.73% at year-end compared to 4.18% at year-end last year. The weighted average maturity on our mortgage debt was 6.1 years at year-end and 4.4 years at year-end last year. The weighted average interest rate on our short-term borrowings was 6.38% as compared to 6.54% last year. In total, the weighted average interest rate on our total debt was 4.9% at year-end compared to 4.38% at year-end last year. In 2025, we successfully refinanced 17 communities, generating total proceeds of $193.2 million at a weighted average rate of 5.67%. This capital was used to repay existing debt, invest in our rental home program, capital improvements, acquire new communities and buy back our common stock. The appraisals conducted for the refinancing demonstrates the value created by our business plan. Our total investment in these communities was approximately $140 million or $37,000 per site, and they were valued at approximately $309 million or $82,000 per site, generating an increase in value of $169 million, representing an increase of 121% in value, which, as Sam mentioned, underscores the significant value we've created. During 2026, we have 6 mortgages maturing totaling $38.2 million and expect to have the same success in refinancing these communities. At year-end, UMH had a total of $323 million in perpetual preferred equity. Our preferred stock, combined with an equity market capitalization of over $1.3 billion and our $761 million in debt results in total market capitalization of approximately $2.4 billion at year-end as compared to $2.5 billion last year. In the fourth quarter of 2025, we repurchased 320,000 shares of our common stock at a weighted average price of $15.06 per share for a total of $4.8 million, reflecting our confidence in the company's undervaluation. Our common stock repurchase program allows us to repurchase up to $100 million of our common stock, and we will continue to monitor the market to determine the appropriate time to continue using the program. During the year, we issued and sold 2.6 million shares of common stock through our common ATM program, generating net proceeds of approximately $44.1 million. Currently, the common ATM program remains closed. The company also received $9.3 million, including dividends reinvested through the DRIP. In addition, we issued and sold 93,000 shares of our Series D preferred stock during 2025 through the preferred ATM program, generating net proceeds of approximately $2 million. Subsequent to year-end, we issued 66,000 shares of our Series D preferred stock through our preferred ATM program, generating net proceeds of approximately $1.5 million. From a credit standpoint, we ended the year with net debt to total market capitalization of 28.3%, net debt less securities to total market capitalization of 27.3%, net debt to adjusted EBITDA of 5.4x and net debt less securities to adjusted EBITDA of 5.2x. Interest coverage was 3.6x and fixed charge coverage was 2.3x. Additionally, we had $23.8 million in our REIT securities portfolio, most of which is unencumbered. The portfolio represents only approximately 1.1% of our undepreciated assets. We are committed to not increasing our investments in our REIT securities portfolio aside from dividend reinvestment and have, in fact, continued to sell certain positions. During 2025, we realized $5.7 million in gross proceeds from the sale of 100,000 shares of Realty Income Corporation from our securities portfolio. We are well positioned to continue to grow the company internally and externally and are introducing 2026 normalized FFO guidance in a range of $0.97 to $1.05 per share. And now let me turn it over to Gene before we open it up for questions. Eugene Landy: Thank you, Anna. UMH is well positioned as a leader in the manufactured housing industry. We now own 145 communities containing 27,100 developed homesites with approximately 11,000 rental homes on those sites. Every year, we make a considerable amount of progress building an irreplaceable company and best-in-class operating platform. Our business plan has resulted in outstanding operating results, growing earnings per share and an overall larger, more profitable company. We intend to continue growing the company through compelling acquisitions when they are available, developing our vacant land, the investment in rental homes and further increasing the profitability of our sales company. We accomplished all of this while executing on our mission of providing the nation with much needed high-quality affordable housing. Our portfolio of communities has materially grown over the years. We have selectively acquired well-located communities that have benefited from our capital improvements and rental home program. I am proud to say that every community we own is in better condition today than the day we bought it. Our investments in our communities provide the highest quality of living at the most affordable price in just about any market we operate in. These investments generate strong demand, which results in waiting list for rental homes and increased home sales. Our 4,000 acres of land in the Marcellus and Utica Shale areas have considerable unrecognized value that will become more apparent as we continue generating revenue through lease signing bonus and royalty income. Our 2,300 acres of vacant land also carry substantial value as we explore the expansion of our communities or other uses such as single-family home developments, apartments or data centers. In addition, the recent announcement to build a new natural gas generation facility in Portsmouth, Ohio, which will be the largest natural gas generation facility in history, generating 9.2 gigawatts of power, further supports the untapped potential value we have in the 4,000 acres we own within the Marcellus and Utica Shale regions. Our country needs an affordable housing solution. We are working diligently to do more to help provide this housing and position manufactured housing as the preferred solution to the problem. Housing is a bipartisan issue, and we believe that new legislation will encourage new development of manufactured housing communities. Additionally, 2-story and duplex homes will increase the viability of manufactured housing in urban areas and areas with higher land costs. Changes to finance laws could result in lower cost loans for our tenants, which will further improve the fundamentals of our business. We are well positioned to benefit from these legislative changes and are excited about the prospects of each of them. Looking ahead to 2026, we anticipate strong growth prospects supported by positive industry fundamentals. Demand for affordable housing remains high, and our sector benefits from limited new supply and favorable demographics. Our recent acquisitions and ongoing community improvements will further contribute to organic growth, while our joint venture and opportunity zone fund provide additional avenues for long-term growth while limiting the impact on our short-term earnings. We expect these factors to drive continued FFO growth in 2026. Our team is focused on executing our strategy to deliver long-term value for shareholders. Thank you again for joining us today. Operator, we are now ready to take questions. Operator: [Operator Instructions] And the first question will come from Rich Anderson with Cantor Fitzgerald. Richard Anderson: Great year and forward-looking perspective. I want to ask about the rental versus home sale strategy. You sort of focus on rentals as the sort of the driver to the growth story, you're breaking records in selling homes. I know the rental business is a byproduct of the Dodd-Frank legislation and so on. But I'm curious if you guys have an idea in mind and what the ultimate breakout in the portfolio might be between rental and owned homes if there's sort of a sweet spot in your mind? Samuel Landy: Rich, Sam here. We will always use the rentals because there's so many people just looking for short-term housing, 1 year to 3 years. There are so many people who never lived in a manufactured home community, don't really know what to expect, don't understand the houses. So the renting program creates buyers and fill sites so much quicker than selling homes. So we never won't have rentals, and we have 11,000 of them today. But the new changes to the Title I finance laws, right now, there's a limit to how much you can finance approximately $70,000, and they might increase that. And those are government-guaranteed loans that the customer only needs 3% down. That could dramatically increase our sale of the older rental units because somebody can switch their home rent portion of their payment. If they're paying $1,000 a month, $500 lot rent, $500 is the rent for the house, they could convert that $500 rent for the house to a loan payment so that for the future, they're always building equity. It will never increase. It's beneficial to them, and then they own the house, which is beneficial to us. So we could be buying brand-new homes for $75,000, selling old homes for $60,000 and only needing $15,000 cash as to replace them. So we're perfectly happy doing Memphis Blues as 100% rental communities. Rentals work. We consider it horizontal apartments. We take all the efficiencies of factory-built housing and that efficiency is cumulative. Even people in the business don't really understand how much better and more cost-effective our houses get year after year. If you look at a 1970s home and you look at the house of today, there's nothing in common. They're complete different houses. And yet the affordability component is better than ever in comparison to any other type of housing. So we take that fantastic efficiency of the factory-built home plus the efficiency of managing 250 lots on approximately 40 acres and pass that on to the customer and how many people have household income of only $40,000, and they can rent the house from us for $1,000 per month, which is 30% of income, and there's nothing else they could have as good in such a high-quality community. So it works every time and then generate sales because as people live in our communities as they think they might want a bigger house, a multi-section house, they feel comfortable buying it. Richard Anderson: Okay. So would you say like the sweet spot rental versus home owned is just for a lack of a better number, 50-50 as an efficient frontier for UMH? Samuel Landy: I'm going to say yes, and I just want to -- every community is different. So some communities can be 100% rental. You get to New Jersey, you almost have 0 rentals. So every community is different. But as a company, do I think we'll have 50% rentals? Yes. Richard Anderson: Okay. On the same-store performance, you had some elevated expenses in the fourth quarter. I assume that was snow removal and weather related. What would it have been without that if you were to normalize a normal quarter's worth of expenses, would have been approaching a 10%-ish type number, same-store NOI? Brett Taft: Yes, exactly, Rich, and this is Brett here. And just looking at the numbers for the year, we were very happy with the 8.2% revenue growth, the 7% community operating expense number and the overall 9% community NOI increase. So that's pretty close to where we expect it to be. We're always out there saying we anticipate expenses to rise 5% to 7%. We did have elevated snow removal costs. We did have overtime related to snow removal. We also had additional tree removal related to snow removal in the fourth quarter. And then you've got some real estate tax increases and some insurance expenses that also increased that overall number. So looking at a normal quarter without the bad winter we've had, we do expect that we would have been in that 10% range. But looking forward, we anticipate being able to get our 800 new rentals installed and rented. We anticipate to get our annual rent increases and we should be able to control our expenses in that 5% to 7% range, which, again, should result in high single-digit or low double-digit NOI growth, which is where we've been over the past few years. Richard Anderson: Okay. And last for me. Any meaningful change to home prices, supply chain issues, tariffs, blah, blah, blah. Like how is that changing what the wholesale cost is for your homes when you kind of bring them into your community and then either rent or sell them? What has the dynamic been there lately? Samuel Landy: Yes, Sam here, Brett will elaborate. But everything I see is favorable. No dramatic waits for houses. Prices actually, in some cases, coming down. Go ahead, Brett. Brett Taft: Yes. No, prices are in a very similar position to where they were all of this year and last year. We'll keep an eye on that going forward. But we're still able to get our rental homes in the $75,000 to $80,000 range, which positions us well to rent homes at $1,000, $1,200 or $1,400 a month depending on the market. Factory backlogs for the most part, are in good shape in the 6- to 8-week range. There's a few factories that are a little bit further out than that but we're working with those manufacturers to try and either get homes or find a comparable home from another factory. So we don't anticipate any problems getting homes, getting them set up with the one caveat being that it's been a very snowy winter in most of our locations. So that does slow down sets a little bit. But demand is strong for both sales and rentals. We have homes either on site or being delivered to the sites. They're being set up in a timely manner, and we anticipate similar occupancy gains in 2026. Operator: The next question will come from Barry Oxford with Colliers. Barry Oxford: Sam, real quick, if you could kind of walk me through -- I understand some of the headwinds that existed in 2025. But then when I look at what you're doing on a same-store NOI internal growth, very strong numbers, no reason to think, at least at this particular juncture, that you won't be able to put up similar numbers. But yet when I look at the low end of your guidance at $0.97, that's only $0.02 more than what you did this year. Can you help me kind of walk through what's holding back the FFO per share? Samuel Landy: I think you're better suited asking Jim to answer on the guidance. Go ahead, Jim. James Lykins: So that could be a number of things, Barry. Home sales could be worse than what we're anticipating. We could potentially raise capital that we're not anticipating right now. But sitting here right now, we would expect to come in right in the middle of that range. That's kind of a sitting here right now, worst case and best case scenario, we don't consider that number to be either conservative or overly optimistic. We think it's straight down the fairway. Samuel Landy: And the only thing I'll add to that, we really don't know what sales will be. Two -- communities in 2024, between the 2 of them had approximately $8 million in sales that were full in '25. So we couldn't have any sales from them in '25. And they will have available lots in '26. So that there's a potential of all the sales in '25 plus $6 million just from those locations. Additionally, there's other expansions just built, places where you're getting to -- as expansions or new communities become more mature, the sales get easier. So there's a lot of reason to be even more optimistic on sales but you just never know because there's so many factors that come into it. But if everything goes right, sales can really get beyond $40 million in a year. Operator: The next question will come from Gaurav Mehta with Alliance Global Partners. Gaurav Mehta: I wanted to ask you on the rental homes outlook of 700 to 800 homes this year. What's the timing of that? Do you expect that to be evenly split during 4 quarters? Brett Taft: Probably not evenly spread as we are seasonal. And as I just mentioned, the first quarter, we are experiencing some challenges with incredibly cold temperatures and snow, which unfortunately, does slow things down on the home side and in some cases, the move-in. But I am happy to say that sitting here now, we're happy with where sales are. We're happy with the occupancy gains we've seen so far this year. We do have 100 homes in inventory that are fully set up and ready for occupancy at the moment, and we've got another 380 homes being set up. So we should see some occupancy growth in the first quarter. The second and third quarter is where the majority of that occupancy growth will come in and the fourth quarter does tail off a little bit. But we do expect it to be heavily weighted to the spring and summer months, and that's pretty consistent with previous years as well. Gaurav Mehta: Okay. Second question, maybe on the acquisition opportunities. What are you guys seeing in the market as far as acquiring new properties? Brett Taft: Yes. The acquisition market remains competitive, high-quality assets that are well located and stabilized are trading in the sub-5% area in most cases, in some cases, sub-4%. We are looking at several smaller portfolio opportunities and one-off acquisitions that could trade in the 5% to 6% range but we're out there analyzing the opportunities, doing our detailed underwriting and making sure that we fully account for any capital items that may be needed and get the right deals in the right locations to continue our growth and try and put together deals that are accretive to earnings. So nothing to report on the pipeline at the moment. We were very happy to find 5 communities to acquire last year. Those 587 sites for $41.8 million in markets that we like and think we'll do well in for the future. So we're out there looking for those similar opportunities in 2026. Samuel Landy: And I'll just mention the joint venture with Nuveen for newly built communities as well as the opportunity zone fund create incredible opportunity to expand what we've done in new community construction. UMH, the parent company, can only develop so many new sites per year because it's a lost business for 3 to 5 years. But doing it in a joint venture or doing it in the opportunity zone fund, there's almost no limit to how much we can do, and that has incredible potential to allow us to build new communities throughout the country. Operator: The next question will come from John Massocca with B. Riley. John Massocca: So apologies if I missed this earlier in the call but been hopping around between a couple of different earnings calls. But with regards to the guidance provided, any color on what you're expecting in terms of the contribution from new home sales and just the kind of scale of potential new home sales in 2026? Samuel Landy: Jim, you can tell us what you used. Yes. James Lykins: So we -- John, we haven't disclosed what we -- or what the amount will be in anticipated home sales this year or the number. I would just tell you that we assume an improvement. Sam mentioned earlier that we could get to $40 million. So I would keep that in mind but we haven't disclosed an actual dollar amount where we anticipate sales coming in. Samuel Landy: I was just going to -- sales are very difficult to predict, but we have more available expansion sites than we've ever had in the past. We have the turnaround communities such as Oak Tree in New Jersey. We have a lot of locations that could potentially increase sales more than conservative people would expect. John Massocca: Okay. In terms of the in-place portfolio, any changes you're seeing in terms of delinquency or the bad debt outlook? Brett Taft: No, Collections remain incredibly strong in that 98.5% range. It really hasn't fluctuated too much. Every year around the holidays, it goes down a little bit but then picks back right up towards the end of January. So rent continues to be paid. We haven't had any issues passing through our annual rent increases and don't anticipate any changes coming here shortly but constantly monitor it and if anything changes, everybody will know. Anna Chew: And our write-offs are approximately 1% or a little less of our rental and related income. And that has been consistent for the last, I don't know how many years. John Massocca: And then one thing, apologies if this is already addressed in the call, but you sold some shares out of the marketable securities portfolio. Is that something you think you could continue doing going into 2026? Or was that kind of one-off in nature? Eugene Landy: No, no. We have announced that we have a $100 million buyback. And of course, the timing of the buying back shares depends on whether we have any acquisitions, whether we invest in new greenfield developments more than we originally planned. And the whole purpose of the securities program is always to keep liquidity. And so we have about $26 million in liquidity there but we also have unused bank lines of $260 million. We've been conservative, and we plan to keep being conservative but we do eventually intend to carry less cash because it puts a drag on our earnings, and we do plan to eventually take down the securities program to 0. But at the present time, we like having $26 million available for any acquisition or other reason we would need capital. We're a very conservative company, and we intend to continue to do that. But we will be reducing the securities program. John Massocca: Okay. And I guess was the reason for tapping that due to the buyback you had in place, you thought your stock was more attractive than maybe the valuation on some of the assets in the marketable securities portfolio? Eugene Landy: No, the securities portfolio at its present low level, we're very pleased with the securities portfolio, have nothing but admiration for the 3 basic companies that are in it, and we think they're great investments. We just think our own properties are better investment. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Samuel Landy for any closing remarks. Samuel Landy: Thank you, operator. I would like to thank the participants on this call for their continued support and interest in our company. As always, Gene, Anna, Brett and I are available for any follow-up questions. We look forward to reporting back to you in early May with our first quarter 2026 results. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. The teleconference replay will be available in approximately 1 hour. To access this replay, please dial U.S. toll-free 1 (877) 344-7529 or international (412) 317-0088. The conference access code is 1544518. Thank you, and please disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Neinor Homes Full Year 2025 Results Presentation. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, José Cravo. Please go ahead. Jose Cravo: Hi. Good morning, everyone. My name is José Cravo, and I'm the Head of Investor Relations at Neinor Homes. Today, we are going to go over results for the fiscal year 2025. And as usual, we are here with Borja Garcia-Egotxeaga, our CEO; Jordi Argemí, our Deputy CEO and CFO. We will start the presentation with the key highlights in Section 1. Then on Section 2, we will provide an update on the closing of the AEDAS transaction. On Section 3, we will review financial results. And on Section 4, we'll finish with key takeaways. After the presentation, there will be a Q&A session to answer any questions you may have. Now I hand over the presentation to our CEO, Borja Garcia-Egotxeaga. Borja Garcia-Egotxeaga Vergara: Thank you, Jose. Good morning, and thanks, everyone, for joining. Let me be very clear about the most important message we want to convey during this presentation. We are executing today, and we are accelerating tomorrow. That is the story. Let's break it down. First, results. Full year 2025 is the seventh year in a row that we delivered on our operational and financial targets, 7 years, not 1 or 2, 7. In a fragmented market through cycles and through volatility, we have consistently done what we said that we would do. That is the value created by this management team. It's discipline, it's execution and focus. Second, AEDAS. In less than 8 months, we have secured full control, doubled the scale of the platform. This is not incremental. This is transformational. With AEDAS, we created the national champion in a highly fragmented market. We moved from being a strong operator to being the clear consolidation leader. Third, the market. The macro is strong. GDP in Spain is growing fast. Employment is solid. Population is increasing and household leverage remains low. At the same time, supply is structurally tight. And when supply is scarce, price move up. But -- and this is important, affordability for our clients remains healthy. We operate in a market where demand fundamentals are real and sustainable, not speculative. That is what we call HALO, Heavy Assets, Low Obsolescence in a structurally scarce environment. That combination creates resilience and long-term value. And fourth, Grow. We are very well positioned. We have a scale. We have the best land, we have visibility, and we have a proven capital allocation framework. We will continue to grow, but we'll do so the same way we have delivered 7 consecutive years of results with discipline, with focus, and with equity-efficient execution. So again, we are executing today. We are very focused in AEDAS integration, and we are accelerating tomorrow. Now let's move to Slide #5, and let's see the numbers. We have closed the year with a land bank of almost 38,000 units. Around 25,000 of those are currently under production and more than 12,000 are in work-in-progress or already finished. That is production capacity. That's multi-year visibility. Our order book stands at record levels of nearly 9,000 units, representing more than EUR 3 billion of future revenues. And during the year, we have delivered close to 3,000 homes to our clients. On the right side of the slide, you have the financials. Jordi will go through them in detail later, but let me highlight 3 points. First, we reached the high end of our guidance. Second, operating margins remained solid with 27% gross margins. Third, at the bottom line, net income came in 7% above guidance, excluding AEDAS. On the balance sheet, leverage increased versus last year as expected, but it remains fully aligned with our strategy and supported by a strong cash flow visibility. Finally, shareholder value creation has been strong with 25% growth in NAV per share plus dividends distributed. So when we say we are executing today, this is exactly what we mean. Please follow me to the next slide to see how the platform has transformed in just 3 years. Now let's zoom out. The Spanish residential market is highly fragmented. Even the largest players have a very small market share. Neinor's platform today is 2, 3 or 4x larger than most of our peers. And in a fragmented market, a scale wins. Look at the evolution since 2023. Our order book is up by almost 7x. Our units under construction tripled. Our active portfolio is up by 4x, and our total land bank has more than doubled. This is not incremental growth. That is a structural expansion. But let me be clear, this is not growth for the sake of growth. It's rooted in a disciplined strategy. It's grounded on our equity-efficient model, and it is designed to create value for our shareholders. Yes, the scale is important, but quality is even more. Please, let's go to next slide. Now let's turn to the quality because scale with the quality doesn't create value. More than 80% of our GAV is concentrated in 8 regions. These are the areas with the strongest economic growth, the strongest demographics and the tightest supply in Spain. This quality land bank is worth more than EUR 10 billion in future revenues. And more important, it was acquired through a disciplined investment strategy. This provides meaningful downside protection and a clear upside in the current market environment. It is important to highlight also the segment in which we operate. We focus on the mid- to mid-high segment, selling homes at EUR 300,000 to EUR 400,000, more than 90% to Spaniards who are buying a residence where they will live. Around 30% of our clients buy with cash, while those that use leverage do so conservatively with an average loan-to-value of 65%. As a result, our buyers enjoy structurally strong affordability metrics with house-price-to-income 40% below the national average. Moreover, in recent years, when house prices started to accelerate due to the structural imbalance of demand and supply, affordability for Neinor clients remains at the same levels or even is improving a little bit. This combination of premium locations, disciplined land acquisition and resilient demand positioning underpins the quality of our earnings profile. Please follow me to next slide so that we can explain why Spain continues to be one of the safest residential markets worldwide, which further strengthens our current setup. For many years, we have been saying that Spain is one of the safest residential markets worldwide. And we say so for a structural reasons. It is true that most residential markets in developed countries are undersupplied. Spain is not unique in that sense. Their real difference lies on the demand side and in the financing structure. The Spanish economy is performing well. Employment is growing. Population is increasing. But more important, the Spanish housing market is much less leveraged than the others. In Spain, typical loan-to-value ratios are around 70% to 80%. While in many other countries, it is normal for buyers to get 90% of the purchase price. Moreover, the cost of financing is also very different. In Spain, our clients are signing long-term fixed mortgages close to 2%, while in other markets, mortgage rates can easily be double that level. So lower leverage and lower financing costs make the Spanish market more resilient to shocks. So when we think about the housing cycle and evolution of house prices, the key variable is not only supply, it is affordability under stress. In markets with high leverage and higher mortgage rates, affordability can deteriorate quite quickly when interest rates move. In Spain, the impact is much more limited. Buyers use 20% to 30% less leverage when buying. They lock in long-term fixed rates 30 years versus mixed rate to more short term in U.K., for instance. And household balance sheets are stronger than in previous cycles. That is why we believe Spain is structurally more resilient. And that is why we believe this market can sustain moderate price growth without undermining affordability, especially in our segment. Now let me step back and explain why we believe Spain offers structural growth opportunities beyond the economic cycles. Over the last years, Spain has accumulated a housing production deficit of more than 800,000 units. To put that into perspective, this deficit is equivalent to roughly 8 years of current annual housing production. As you can see on the chart, household formation is exceeding year-by-year housing production, especially after '21. The gap keeps increasing, and it is expected to do so in the following years. This tells us something fundamental. Spain simply doesn't build enough homes to meet underlying demographic demand. And as population growth accelerates and household formation continues, this deficit does not correct itself. That's why we believe Spain residential is supported by structural fundamentals, not just macro momentum. For a scaled industrial platform like ours in a quality land bank and embedded execution, this creates a long runway for disciplined growth and value creation. And now let me pass the word to Jordi to see a little bit more of AEDAS transaction and financials. Jordi Argemí García: Thank you, Borja. Let's go through the key milestones of the AEDAS transaction, which we have successfully executed in just 8 months. In December, we acquired almost 80% of AEDAS by purchasing the stake from Castlelake. At the end of January, the CNMV authorized the mandatory tender offer and confirmed the price as equitable. Shortly after, we reorganized the Board of Directors, securing full operational control of the company. And since then, we have already implemented decisive actions. First, we have restructured the corporate debt using the Bolus facility. Second, we signed a management agreement so that we are in charge of the key strategic decisions and have full control of cash management. And third, we canceled AEDAS shareholder remuneration policy to fully align capital allocation with Neinor strategy. As you know, the acceptance period of the mandatory tender offer will finish tomorrow, and the final results will be published next week. Regardless of the final percentage that we will own, the strategic objective of this transaction has already been achieved. We have control, integration is well advanced and synergies are underway. With that said, let's move to Section #3 to review the 2025 financial results. On the left-hand side of the Slide 13, you see 3 columns. First, our original guidance for the year. Second, the reported results, excluding AEDAS, which are fully comparable to our guidance. And third, the actual results, including the impact of AEDAS from the 22nd December onwards. Let's start with deliveries. We neutralized around 1,900 units, out of which 1,565 units correspond to build-to-sell projects with an average selling price of EUR 421,000 and 352 units correspond to build-to-rent projects. As anticipated during the year, the higher average selling price reflects the delivery of Santa Clara development, where units are sold above EUR 1 million each. In addition, the build-to-rent projects divested were for an amount of EUR 70 million. And remember that these are recorded directly as margin in the P&L due to the applicable accounting standards. As you can see, revenues from the asset management business are amounting around EUR 20 million, while construction and other revenues contributed approximately EUR 30 million. In total, revenues reached close to EUR 700 million. And this is basically the higher end of our EUR 600 million to EUR 700 million guidance range. In terms of profitability, gross margin stood at 27%, also above our 24%, 25% objective. EBITDA reached EUR 110 million, also at the high end of guidance. And at the bottom line, net income came in at EUR 70 million, representing a 7% beat versus guidance of EUR 65 million. Regarding leverage, we closed the year with an LTV of 16%, which is below our target of 23% and this already includes the dividend distribution executed earlier this month of EUR 92 million. So overall, solid operational execution and cash flow generation from the underlying business. Now looking at the third column, which includes the impact of the transaction, you can see that AEDAS contributed 26 units at an average selling price of EUR 412,000. Basically, it adds EUR 12 million of revenues and bringing group revenues to EUR 709 million. At EBITDA level, the impact is minimal, around negative EUR 1 million, mainly due to the structural costs and the margins for finished products, which are lower. The most relevant impact is at net income level, I would say, due to the purchase price allocation accounting with a positive contribution net of transaction costs and net of one-offs of EUR 52 million. That implies that the net income increases from EUR 70 million Neinor stand-alone to EUR 122 million at a consolidated basis. Note that this is a non-cash item that was triggered by the badwill arising from the M&A transaction. This extraordinary profit represents an anticipation of the EUR 450 million target net income we announced in June of last year. And if you look at the net debt, it increases to EUR 1.1 billion. This basically implies a loan-to-value of 36%, which again is slightly below to our 37.5%, 40% target, including guidance. So with that said, let's move to the Slide #14. Let' s zoom out for a moment and go back to basics. We operate a highly industrialized and scalable platform in a fragmented market. Our business consists of buying raw land and transform the plots into new homes for our clients. And as you can see, over the last 9 years, we have perfected this model, delivering more than 16,000 homes across Spain. Financially, this translates into more than EUR 5 billion of revenues, industry-leading gross margins of 28%, more than EUR 900 million of EBITDA and more than EUR 600 million of net income. And that profitability has not remained in our balance sheet. It has been returned to shareholders through dividends and share buybacks. If we focus on our strategic plan, we have distributed EUR 450 million with a further EUR 400 million forecasted for the upcoming 2 years. In practical terms, these companies will return approximately 80% of its market cap as of March 2023 to shareholders in only 5 years. And we have done this while doubling the size of the company. Originally, the plan contemplated to reduce the size of the company by 30%, but instead, we are doubling earnings per share. So we have demonstrated that we are disciplined and be sure we will continue being. And now I hand over the presentation back to Borja for the key takeaways. Borja Garcia-Egotxeaga Vergara: Thank you, Jordi. So let me close by summarizing the investment case in 4 clear points. First, our positioning. We operate in heavy tangible assets, land and housing. These are real assets with very low obsolescence risk. In a world increasingly exposed to technological disruption, our business is structurally protected. People will always need homes and the real raw material is the land, not the metaverse. Second, our asset base. We control the largest and highest quality land bank in Spain. Fully permitted land in prime regions is scarce. Scarcity protects value and scarcity embeds margins. When you own the right land in the right locations with permits in place, you control both timing and profitability. This is a structural competitive advantage. Third, the market environment. As we have seen, Spain is structurally undersupplied. At the same time, the housing market is under leveraged with conservative mortgage structures and resilient affordability. That combination makes the Spanish residential market one of the safest globally. And importantly, this structural imbalance does not disappear if GDP moderates. Supply constraints are long term. Demand fundamentals are demographic. This is not a short-cycle story. And fourth, growth. We will continue to grow, but with discipline. Every investment must be equity efficient. Every transaction must be value accretive. Scale is important, but discipline is what creates value. That is why we believe Neinor is positioned not just for this cycle, but for the long term. Thank you very much. Jose Cravo: Operator, we can now start the Q&A session. Operator: [Operator Instructions] We will take our first question. And the question comes from the line from Ignacio Domínguez from JB Capital. Ignacio DomÃnguez Ruiz: I have a question on outlook for the next few years. What gross development margins do you expect to deliver on a consolidated basis, particularly as the combined Neinor, AEDAS platform stabilizes? Jordi Argemí García: Everything regarding the business plan and the future, we prefer to wait because, as you know, we are in the middle of the Mandatory Tender Offer. So results should come -- will come next week. And after it, we try or our intention is to present the business plan and all the guidance at the AGM that will be in April. So a few weeks from that. We don't expect any changes to what we presented in the tender offer in all the guidance for the JVs. But in any case, it's better to wait for the final result of the tender offer to answer. Operator: We will take our next question. The question comes from the line of Fernando Abril-Martorell from Alantra. Fernando Abril-Martorell: I have 3 questions, please. First, on execution. So what is your target for new housing starts in your fully owned portfolio in 2026? And also would like to -- if possible, if you can elaborate a little bit on the constraints you may be facing in launching new developments and whether you see any change in the stance from public authorities regarding permits and approvals. Second, on land purchases. I don't know, you've raised -- you've done another capital increase aiming for new growth opportunities. So I don't know if you can comment a little bit more on this. And if you have any -- I don't know if you have any land acquisition target for this year as well. And third, maybe you will not answer much on this based on what Jordi just said. But if we assume that you paid the remaining EUR 150 million dividends this year, I don't know if you can comment on your year-end net debt target or loan-to-value based on this assumption. Borja Garcia-Egotxeaga Vergara: I will start with the first question that was regarding -- I understood about what we are going to launch in this year for the year '26 which target. As we said during the tender offer, the new size of the company of the whole group between Neinor and AEDAS will lead us into a situation where we will be delivering between 5,000 to 6,000 units per year. So right now, we are just closing, as Jordi was saying, the business plan. And therefore, all the portfolio is being adapted into that metrics that I'm telling you. So more or less, you can consider that during the year, we should launch enough to recover in year '28, '29 those 5,000 to 6,000 units. Regarding the situation with the politics and the permissions, well, you know that in Spain, the situation with the house crisis is getting louder year-by-year. And this is making most of the regions we are seeing in all the regions, in fact, where we are working, how the rules are changing. Basically, what all the regions are trying to do is to do it easier to get the licenses to short times and to try to increase the supply. All of this is good for our business. So we are happy with the situation in terms of the action of the politicians that we have been asking for, for so long. Regarding your second question, the land purchase, I give the word to Mario. Mario Lapiedra Vivanco: Okay. Well, as mentioned, we are closing the investment strategy. And in the coming weeks, we will provide further details. But as of today, we can say that we have a good pipeline of above EUR 500 million in the different living verticals, both in build-to-sell in Senior, in Flex and in strategic land. We will keep discipline. So we know that today, we are the rock stars of the sector, but our main mantra is to keep the discipline that has allowed us in the last years to invest more than EUR 3 billion, but providing IRRs of above 20%. So that's a bit of what we can say today. Jordi Argemí García: I take the last one, the net debt target. As I said before, Fernando, we prefer not to close down mandatory tender offer, and we will come back in a few weeks to explain the business plan in details. In any case, as I was saying before, whatever comes will be aligned with what we presented in June. And remember that the debt target there was 20% to 30% Neinor HoldCo Level on a consolidated basis should be around 40%. Then it will go down because we will deleverage AEDAS. Fernando Abril-Martorell: Okay. Just a quick follow-up on the politics. Are you willing to play via affordable housing or not it's not a priority for the moment? Borja Garcia-Egotxeaga Vergara: Well, Fernando, regarding the affordability houses, we must say that right now, more or less every year, we are delivering around 200 houses of protection. We are delivering, for instance, last year, we did 500 units that we deliver what we call affordable housing that at the end is houses that instead of EUR 300,000 to EUR 400,000 case, as I have said in the presentation, cost between EUR 225,000 to EUR 275,000 and we deliver this type of houses, for instance, near Madrid in the places where we can get to buy land at cheap price. Regarding affordable housing in the rental segment, we have an active program now with Llei de l'Habitatge de Catalunya that we are building for them 4,700 units. We keep looking the different opportunities that we are seeing with Plan Vive Madrid and others in Valencia or in Navarra. Basically, we need to be very sure before we enter into these operations that we have a clear exit when we get in and that the rentability -- the profitability of the transaction is enough for that exit. So being a priority to contribute in the affordable housing solution in Spain, we are also very close to the design of these programs in order to try to make them, I think, more profit -- a little bit more profitable and it's something that, for sure, Neinor will play an important role in the following years. Today, it's not in our business plan, but it's something that we work with. Operator: [Operator Instructions] We will take our next question, and the question comes from the line of Manuel Martin from ODDO BHF. Manuel Martin: Gentlemen, just one follow-up question and then 2 other questions from my side, please. The potential 5,000 to 6,000 units deliveries per annum, more or less. Just to make sure, this is build-to-sell and from your own portfolio as far as I understood. Borja Garcia-Egotxeaga Vergara: Yes. Basically, right now, we are delivering more than just small amounts of affordable housing that are more for the rental segment that both Neinor and AEDAS we are doing, but not too many units. Most of it is build-to-sell product. build-to-rent, private build-to-rent, we are not launching many, many developments because there was a loss of interest in the markets. Manuel Martin: The 2 other questions, one general question. I don't know if you can answer that before your AGM comes. In terms of future growth, would it be able for you to indicate whether you would like to grow through JVs or through other acquisitions in the future? Do you have a preference there, which you can share? Or is it a bit too early? Mario Lapiedra Vivanco: I'll take this one, Manuel. Mario here. Well, we are monitoring always the full on balance investment and the JV co-investment vehicles. We have a queue of investors in our offices. That's the reality because there are less players and the appetite has increased in the last months. So we are selecting very well, which deals we do directly and which ones we prefer to do on that vehicles. So we have flexibility in the budget depending on the best option for our shareholders. Manuel Martin: I see. Okay. And third and last question, actually, maybe a bit technical and for curiosity, the Purchase Price Allocation gain you had for 2025, the EUR 50 million to EUR 60 million roughly. Can you give us an insight how you arrived to that amount? Why is it EUR 50 million? Why not EUR 150 million, just for curiosity? Jordi Argemí García: It's a good curiosity. The only thing that this is -- for us, this is not good because as I said before, this is a non-cash item. We -- this implant anticipate part of the future revenue, accounting revenue that we set in the guidance. So for us, the preference was to be at 0 being honest. But this is impossible because accounting rules do not allow that. So what we have done is working with the auditor to try to minimize as much as possible this level or this amount. It comes from the difference between the valuation from third party, in this case, Savills, non-CBRE and the purchase price finally paid, but also we have included additional structural costs because obviously, one thing is the asset value. Other thing is a corporate company, a corporate that needs to deliver those units. And obviously, we have some structure. So it's a combination. But again, our preference was to be at 0 being honest. Operator: There seems to be no further phone questions, if you wish to proceed with any webcast questions. Jose Cravo: Thank you. So we'll go with the webcast now. We have here only one question. It's with regard to the results of the tender offer, the mandatory tender offer that will come out next week. If we can give some details on what is the strategy if we don't reach the squeeze out. Jordi Argemí García: Okay. I take it. I mean, let's see what happens next week. If we get the squeeze out, fantastic. If we don't get the squeeze out as you are questioning, for us, it's also fantastic. I mean, for us, the deal is completed already independently on the percentage that we finally own by next week. We control the company. We control all the policies that's what matters to us. So once the mandatory tender offer is finished and imagining a scenario in which we don't get the squeeze-out -- our focus day after will be the activity of the company. We will not be there trying to buy again those minority shareholders that want to keep and be in the company, fantastic, we welcome them. But our priority will be completely on activity. That's the reality. Also, that means that the dividend we canceled because we prefer to use the cash to deleverage the company. So dividend distribution is not something relevant today at AEDAS level. This doesn't mean that in Neinor Homes, we will have capacity to reach the guidance we set, and we don't need actually the cash coming from AEDAS to accomplish with these targets for the next 2 years. Remember that AEDAS has around EUR 300 million of corporate debt; that is the bond plus the commercial paper. As I was saying, that's our priority for the coming 1 year or even 2 years. So whoever is there because we don't reach the squeeze-out, should be a medium- to long-term investor together with us. And one last comment from my side is that in a delisting tender offer, normally, the company, the buyer needs to allow during 1 month potential purchases if minority shareholders want to sell 1 month later, the tender offer. In this case, it's not a delisting. So Neinor is not obliged to continue buying once the mandatory tender offer is fully completed. Jose Cravo: Thank you, Jordi. We have no further questions on the webcast. So that concludes the conference call. Thanks, everyone, for joining. Jordi Argemí García: Thank you. Borja Garcia-Egotxeaga Vergara: Thank you. Mario Lapiedra Vivanco: Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to the EPR Properties Q4 and Year-End 2025 Earnings Call. [Operator Instructions]. Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now hand the call over to Brian Moriarty, Senior Vice President of Corporate Communications. Brian Moriarty: Okay. Thank you, Jenny. Thanks for joining us today for our fourth quarter and year-end 2025 earnings call and webcast. Participants on today's call are Greg Silvers, Chairman and CEO; Greg Zimmerman, Executive Vice President and CIO; Mark Peterson, Executive Vice President and CFO; and Ben Fox, Executive Vice President. I will start the call by informing you that this call may include forward-looking statements as defined in the Private Securities Litigation Act of 1995, identified by such words as will be, intend, continue, believe, may, expect, hope, anticipate or other comparable terms. The company's actual financial condition and the results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of those factors that could cause results to differ materially from these forward-looking statements are contained in the company's SEC filings, including the company's reports on Form 10-K and 10-Q. Additionally, this call contains references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If you wish to follow along, today's earnings release, supplemental and earnings call presentation are all available on the Investor Center page of the company's website, www.eprkc.com. Now I'll turn the call over to Greg Silvers. Gregory Silvers: Thank you, Brian. Good morning, everyone, and welcome to our fourth quarter and year-end 2025 earnings call and webcast. The fourth quarter capped a year of solid execution and clear progress toward accelerated growth. Our resilient portfolio benefited from durable tenant performance and steady consumer demand contributing to strong financial performance, including FFO as adjusted per share increase of 5.1% and AFFO per share increase of 6.2%. During the fourth quarter, we announced transactions which significantly expanded our portfolio of championship golf courses along with premier regional water park acquisition, further diversifying our attraction sector. As we move into 2026, we expect to build on our strong industry relationships while substantially increasing our investment spending. We are actively pursuing opportunities across multiple target property types with a flexible approach that encompasses both potential portfolio scale acquisitions and smaller strategic transactions, positioning us to capitalize on attractive opportunities as they arise. Turning to industry and tenant performance. Our portfolio of properties continues to demonstrate broad stability. For the year, North American box office grew 1% and we anticipate further growth in 2026, supported by an increased number of wide release titles. Performance across our other property sectors remained steady, demonstrating the strength and resilience of our diversified portfolio. As we expand the diversity of our experiential portfolio, we're seeing a balancing effect, strength in certain sectors helping to offset periodic softness in others, reinforcing overall portfolio resilience. Our strategic capital recycling program continued to deliver meaningful results in 2025. By executing targeted dispositions, we strengthened portfolio qualities, reduce concentration and unlock capital to deploy into higher returning experiential investments. We will continue to use disciplined opportunistic recycling as a proven lever for driving value creation. Our balance sheet remains one of our most important competitive strengths. During the fourth quarter, we successfully closed a $550 million public debt offering and established a $400 million at-the-market equity program, 2 significant capital market initiatives that bolster our financial flexibility and fund our growing investment pipeline. Reflecting the confidence we have in our earnings trajectory and conservative payout ratio, we are also pleased to announce a 5.1% increase to our monthly dividend to common shareholders. In summary, we built a robust pipeline of high quality experiential investments. Our strong balance sheet and expanded operator relationships now give us access to larger opportunities and our disciplined approach to capital allocation positions us to capitalize on the significant investment opportunities we anticipate in 2026. Now I'll turn the call over to Greg Zimmerman to go over the business in greater detail. Gregory Zimmerman: Thanks, Greg. At the end of the quarter, our total investments were approximately $7 billion with 333 properties that are 99% leased or operated. During the quarter, our investment spending was $147.7 million. 100% of the spending was in our experiential portfolio. Our experiential portfolio comprises 278 properties with 54 operators and accounts for 94% of our total investments or approximately $6.6 billion. And at the end of the quarter was 99% leased or operated. Our education portfolio comprises 55 properties with 5 operators, and at the end of the quarter, was 100% leased. Turning to coverage. The most recent data provided is based on the December trailing 12-month period. Overall portfolio coverage remains strong at 2x. Turning to the operating status of our tenants. 2025 box office was $8.7 billion, a 1% increase over 2024. Q4 box office was $2.2 billion compared to $2.4 billion in Q4 2024. Q4 performance was led by strong results from Zootopia 2 which gross $337 million in Q4 and has exceeded $420 million to date. Wicked: For Good gross $335 million. Avatar: Fire and Ash gross $250 million in Q4 and picked up an additional $147 million after the first of the year. Five Nights at Freddy's 2 also outperformed. The slate for 2026 looks solid with the Super Mario Galaxy Movie, The Mandalorian and Grogu, Toy Story 5, The Minions 3, Moana, The Odyssey, Spider-Man: Brand New Day, Avengers: Doomsday and Dune Messiah. Analysts expect box office to increase in 2026. Going forward, we will be moving away from providing annual estimates for box office performance. We initiated the practice after the pandemic as theaters reopening, box office was recovering, and we were navigating the writers and actor strikes. With all the dislocation, we thought it was helpful to share our perspective. The business is stabilizing, so this is no longer necessary. Additionally, it's important to highlight that the bulk of our theater rent is not tied to fluctuations in box office. The only significant percentage rent component of our theater rent comes from Regal, which is based on a lease year rather than a calendar year, and our estimate of Regal percentage rent is embedded in our percentage rent guidance. A couple of points related to box office. First, higher-margin F&B spending increasingly constitutes a higher percentage of exhibitors overall revenue. As such, it is not necessary to reach 2019 box office levels for us to have comparable coverage. Second, as we have consistently noted the number of major releases directly correlates to box office, an increased number of major releases typically drives increased box office growth. Over time, major releases tend to generate an average performance in the range of $70 million. Turning now to an update on our other major customer groups. Our East Coast ski and Midwest key operators got off to a great start with above-average snow, and that strength continued through the winter. Our Northern California asset opened late because of lack of snow, but conditions have improved significantly with recent snowfall. We will see if snowfall continues to hold throughout the season. Alyeska has had strong demand throughout the season augmented by its membership program and inclusion in the iConnetwork. Our Eat & Play coverage remains strong even with some continuing macro pressures on consumers and expense increases. In Andretti Karting, Kansas City location opened well in mid-November, Schonburg, Illinois is expected to open in the second quarter of 2026. Our second Penn Stack located in Northern Virginia is also expected to open in Q2. Of note, in early January, Topgolf Callaway announced the completion of its sale of a 60% interest in Topgolf to Leonard Green Partners, the transaction value TopGolf at around $1.1 billion. We view this positively because Topgolf now has a focused private equity majority owner. Many of our attractions are closed for the season. The Cartes Outdoor Winter Park and Hotel de Glace opened in December and are benefiting from sustained domestic travel within Canada. We are quite pleased with the performance metrics at Enchanted Forest Water Safari in our operator's first full year of ownership. With the indoor water park and family entertainment center fully opened at Bavarian Inn, we saw significant year-over-year increases in revenue and EBITDARM. We are bullish on the fitness and wellness space. Since 2024, we have invested approximately $150 million in this vertical including golf, Fitness and Hot Springs. All 3 of our Hot Springs assets delivered strong year-over-year performance. Our education portfolio continues to perform well. Our customers' trailing 12-month revenue for Q3 was essentially flat with EBITDARM down due to expense increases. Coverage remains strong. Our investment spending continues to be entirely within our broadening range of experiential asset types. In Q4, we invested $147.7 million, bringing our total for 2025 to $288.5 million. This includes funding for projects that we have closed on but are not yet open. In addition, we have committed approximately $85 million to experiential development and redevelopment projects, which we expect to fund in 2026. Q4 investment spending was anchored by our acquisition of a 5-property portfolio of championship golf courses in the Dallas Metroplex for approximately $90.7 million. The properties will be leased and operated by Advance Golf Partners, a leading golf course operator. This investment follows our extensive research into the golf space and adds to the additional golf investment we made earlier in 2025. Given our deep relationships, the increased focus on fitness and wellness among multiple generations and demographics and the wide range of investment opportunities, including golf, climbing gyms, traditional gyms, hot springs and spas, we are excited about the potential for continued growth in this space. We also acquired the Ocean Breeze Water Park in Virginia Beach, Virginia, in a sale-leaseback transaction for approximately $23.2 million. Ocean Breeze will be leased and operated by an affiliate of Premier Parks, a long-time strategic partner. We kicked off investment spending for 2026 with the first quarter acquisition of the Vital climbing Lower East Side in Essex Crossing for approximately $34 million. As I noted before, we are particularly bullish on the fitness and wellness space and excited to grow our relationship with this outstanding operator by adding a high-quality Manhattan location along with our existing vital climbing location in Williamsburg, Brooklyn. As demonstrated by our investments in Q4 and already in Q1, we are increasing our investment spending cadence. We are seeing high-quality opportunities for both acquisition and build-to-suit development in our targeted experiential categories. Our disciplined deployment strategy has enabled us to expand the depth and breadth of our portfolio of experiential properties over the past several years. Our investment spending throughout 2025 and heading into 2026 reflects our deep relationships and high-quality opportunities. We are announcing investment spending guidance for funds to be deployed in 2026 in the range of $400 million to $500 million. During the quarter, we sold 2 leased theater properties for alternative uses and 2 land parcels for net proceeds of $16.1 million and recognized a gain of $5.3 million. Additionally, as announced on our Q3 call, we received $18.4 million in proceeds from a partial paydown on a mortgage note relating to the Gravity Haus and Steamboat Springs. In the past 5 years, we have sold 33 theaters. We had one remaining vacant theater. Disposition proceeds totaled $168.3 million in 2025. We are announcing 2025 -- 2026 disposition guidance in the range of $25 million to $75 million. I'll now turn it over to Mark for a discussion of the financials. Mark Peterson: Thank you, Greg. Today, I'll discuss our financial performance for the fourth quarter and the year, provide an update on our balance sheet and close with introducing 2026 guidance. FFO as adjusted for the quarter was $1.30 per share versus $1.23 in the prior year, an increase of 5.7%. And AFFO for the quarter was also $1.30 per share compared to $1.22 in the prior year, an increase of 6.6%. Before I walk through the key variances, I want to point out that we had disposition proceeds totaling $34.5 million for the quarter and recognized a gain on sale of $5.3 million, for the year, we had disposition proceeds totaling $168.3 million and recognized a gain on sale of $39.5 million as we continue to make progress reducing our investments in theater and education properties and recycling those proceeds into other experiential assets. Note that these gains are excluded from FFO adjusted and AFFO. Now moving to the key variances. Total revenue for the quarter was $183 million versus $177.2 million in the prior year. Within total revenue, rental revenue increased $7.9 million versus the prior year, mostly due to the impact of investment spending, rent and interest bumps and higher percentage rents and participating interest. Percentage rents and participating interest for the quarter were $7.8 million versus $4.9 million in the prior year, and the increase was due primarily to higher percentage rent recognized from our attraction and cultural properties as well as from one of our early childhood education tenants. We also had higher participating interest related to our Northeast Ski property. Both other income and other expense relate primarily to our consolidated operating properties, including the Kartrite Hotel & Indoor Water Park and our 4 operating theaters. The decrease in other income and other expense versus prior year is due primarily to the sale of 3 operating theater properties in the first half of 2025. On the expense side, G&A expense for the quarter increased to $14.6 million versus $12.2 million in the prior year due primarily to higher payroll and benefit expense, particularly incentive compensation. Equity and loss from joint ventures for the quarter was $2.4 million compared to $3.4 million in the prior year. This better performance is due to our decision to exit our joint venture in Breaux Bridge, Louisiana in late 2024 as well as improved results at our 2 remaining RV Park joint ventures. Shifting to full year results, FFO as adjusted was $5.12 per share at the high end of guidance versus $4.87 in the prior year, an increase of 5.1% and AFFO was $5.14 per share compared to $4.84 in the prior year, an increase of 6.2%. Turning to the next slide, I'll review some of the company's key credit ratios. As you can see, our coverage ratios continue to be very strong with fixed charge coverage at 3.4x and both interest and debt service coverage ratios at 4x. Our net debt to annualized adjusted EBITDAre was 4.9x at year-end, which is below the lower end of our targeted range. Additionally, our net debt to gross assets was 39% on a book basis at year-end, and our common dividend continues to be very well covered with an AFFO payout ratio of 68% for the fourth quarter and the full year. Now let's move on to our capital market activities and balance sheet, which is in great shape to support our expected growth. At year-end, we had consolidated debt of $2.9 billion of which all is either fixed rate debt or debt that has been fixed through interest rate swaps with an overall blended coupon of approximately 4.4%. In November, we closed on $550 million of new 5-year senior unsecured notes at a coupon of 4.75%. And at year-end, we had $90.6 million of cash on hand and no balance drawn on our $1 billion revolver. Additionally, in December, we finalized our new ATM program. While no equity issuance is required to fund our plan for 2026, given that we project to be below the midpoint of our target leverage range at year-end without any such issuance. This program provides us with an additional tool in our toolbox to issue equity opportunistically, including forward sales. We are introducing our 2026 FFO as adjusted per share guidance of $5.28 to $5.48, representing an increase versus the prior year of 5.1% at the midpoint. We expect a similar percentage increase in AFFO per share. Note that due primarily to the timing of expected percentage rents, which are heavily weighted to the last 3 quarters of the year, as well as the fact that the first quarter is off-season for our operating properties, we expect results for the first quarter of '26 to be lower than the full year divided by 4 by about $0.11 per share. We are also providing our 2026 guidance for investment spending of $400 million to $500 million and disposition proceeds of $25 million to $75 million. We expect percentage rent and participating interest of $18.5 million to $22.5 million. As you can see on the slide, I have provided a reconciliation of the prior year amount to the midpoint of this guidance. The changes include out-of-period percentage rents and participating interest of $3.5 million recognized in 2025 that does not repeat lower projected percentage rents in 2026 of $1.1 million related to our Northern California ski property due to delayed snowfall for the season and lower projected percentage rents of $0.4 million related to certain properties having base rent increases in '26, causing the breakpoint for percentage rents to increase. These decreases were offset by a projected net increase of $1 million in percentage rent for other tenants, including Regal. We expect G&A expense of $56 million to $59 million. In addition, guidance for our consolidated operating properties is provided by giving a range for other income and other expense. Guidance details can be found on Page 23 of our supplemental. Finally, based on our expected 2026 performance, we are pleased to announce a 5.1% increase in our monthly dividend, beginning with the dividend payable April 15 to shareholders of record as of March 31. We expect our 2026 dividend to be well covered with an AFFO per share payout continuing to be about 70% based on the midpoint of guidance. Now with that, I'll turn it back over to Greg for his closing remarks. Gregory Silvers: Thank you, Mark. 2025 was a very solid year as we delivered strong per share earnings and our portfolio delivered the resilience that we anticipated. In 2026, we expect to increase our investment spending materially over the levels we achieved in 2025, which should result in another year of strong per share earnings growth. As we begin the year, we are excited about our investment pipeline, our balance sheet and the team to create value out of this combination. I would also like to take a minute to express my sincere appreciation to Greg Zimmerman, who is participating in his last earnings call as he is retiring from EPR. Greg provided leadership and a steady hand as we navigated COVID and then emerged on the other side. He is my business partner, colleague and friend, and he will be missed. Ben Fox will now officially take over the role of Chief Investment Officer, and we are excited about his leadership and vision for our future. With that, why don't I open it up for questions? Jenny? Operator: [Operator Instructions]. Our first question will come from Michael Goldsmith with UBS. [Operator Instructions]. Michael Goldsmith with UBS, you may ask your question. Michael Goldsmith: Consistent with last quarter, where you pointed to $400 million to $500 million in acquisitions, you put this out formally with your guidance. Can you just talk a little bit about what you're targeting, what you have line of sight in because it represents an acceleration. So just trying to get a sense of what you're looking at, what you have line of sight and just your confidence level of hitting that $400 million to $500 million in acquisitions? Gregory Silvers: Clearly, I think line of sight or anything, while we don't want to comment on specific. We wouldn't put it out there if we didn't have great confidence in it. Again, if you look historically, we've been successful in not only hitting our numbers, but raising those throughout the year. So I think -- and I'll let Greg comment that we feel really good about where we're positioning for the beginning of the year. I think we're looking at opportunities across most, if not all of our sectors. I think, again, we feel like we have particular unique access to the areas that we invest in. But let Greg talk about... Gregory Zimmerman: No, I agree, Greg. And I would also say that developing a pipeline is usually a multiyear process. So we've been building up to this with line of sight to the fact that we turn on investment spending this year. So again, as Greg mentioned, we're very confident about it, and that's why we're... Michael Goldsmith: Got it. And then second question, just Topgolf is one of your top tenants and they've been taken private by private equity. Have you had conversations with Leonard Green and just trying to get an understanding of what they're going to do with the company now that they have their hands on it and just the path and your comfort level with your specific locations that you own? Gregory Silvers: Yes. Michael, and we've had multiple conversations with them. So as you can imagine, both as they were evaluating it as an opportunity and now subsequently I think the thing that we're encouraged is, in fact, what they've told us is they're very much aligned with what we have said that the growth pattern needs to slow down to 3 to 5 units a year where they can hit kind of the demographic and location requirements that we kind of agree with them. As we said all along, our units continue to demonstrate very, very strong coverage I think it's an integral part of the value equation that they saw. I think there are opportunities that they're going to very much look at being -- they have a long history of multi-unit retail and even in the fitness and wellness space. So I think they're very, very focused on kind of the food and beverage and promotional opportunity sets. And you've seen that those early impacts of the second half of last year, where Topgolf was already addressing some of those and saw some very, very positive numbers going into the second half of the year and the fourth quarter. Gregory Zimmerman: And I would also add, Michael, they're going to -- we're very pleased they're going to continue their refresh program, which benefits us greatly. They do a handful of our units every year with a nice refresh to keep them up. Operator: Our next question will come from John Kilichowski with Wells Fargo. [Operator Instructions]. John Kilichowski with Wells Fargo. You may ask your question. John Kilichowski: My first question is just on where you see your cost of capital today. You're trading back close to a range where we were end of the third quarter. When does it start making sense to tap the ATM. Gregory Silvers: Sure, John. Great question. I'll join in and I'll ask Mark. I think we probably see it now in the kind of upper 50s or low 60s at kind of low 7s, low mid-7s. I think that works. We can make that work. we're doing things in the low to mid-8s. So there's 100 basis points of spread. I think it's important for us to let people know that we can execute that way and get back on that flywheel of issuing equity. As Mark talked about in his comments, we don't need to. And in fact, we'll still be not even near the midpoint of our leverage range doing the plan that we have executed. But what it does mean is maybe we can do more, maybe we could even further delever. I think it gives us a lot of options, and we are clearly entering the zone where it makes sense, but Mark? Mark Peterson: I think, as Greg said, I think we'll be kind of opportunistic about it, particularly if we're headed to the higher end of spending, investment spending. As Greg said, I think as you get to the high 50s, low 60s, you're low to mid-7s type of cost of capital. And as Greg said, you get nearly 100 basis points out of the gate. And then, of course, on an IRR basis, it's quite a bit higher than that. when you factor in our rent bumps. So I feel good about that and the opportunity that lies ahead. John Kilichowski: That was very helpful. And maybe just along the same lines, if we could do sort of a sensitivity analysis, let's say, if your cost of capital got 50 bps better from here on a blended basis, where does that take maybe the high end of your investment guide, if this is a better buying opportunity here. I'm just curious how much more you think you could do if you just had a little bit of improvement on that cost of capital? Gregory Silvers: Yes. Clearly, there's -- we think there's opportunity out there, John, I think, again, it's probably not as linear as we're laying it out that it's 50 basis points. It's really about are the right opportunities in the risk and reward. I think overall, you're hearing our excitement about the opportunity set out there. I think there are there continues to be good opportunities. I think we're excited about those. We're excited about where our cost of equity seems to be trending. And so hopefully, that combination will allow us to continue to grow and grow that base. But to speculate on a kind of a sensitivity table would probably be not productive for us right now. Operator: Our next question will come from Smedes Rose with Citi Global Markets. [Operator Instructions]. Smedes Rose from Citi Global Markets, you may ask your question. Bennett Rose: I was just wondering if you had any updates on what's going on in Sullivan County in terms of the ability to sell the ground lease that kind of came up a while ago? That would be my first question. Gregory Silvers: Thanks, Smedes. I would say we've not had really any meaningful conversations with them. I mean, again, this is the -- when I say that, meaning our operator. It's their call on how they want to proceed. It's not built into our plan. Our plan is utilizing our existing kind of cash flow dispositions, things that we've done. But the easiest thing to say, Smedes, is no, we've not had any meaningful conversations with the operator. Bennett Rose: Okay. And then I was just wondering, when we look in a sort of theme park world, there seems to be I guess, a certain amount of disruption going on and some new management changes. I'm just wondering, are they kind of showing up on your radar screen as a possible solution to some of the issues they might be facing? Gregory Silvers: I think that's a very reasonable approach. I mean if you think about the names that are being dropped around we partner with many, if not all, of those names that are being dropped around. So I think it's something -- we think that business is actually very, very -- if you look over time, very stable cash cow kind of business. It needs to be a smart, thoughtful, well-covered kind of thoughtful business. But again, we play in that field. I don't know, Greg, if you want to. Gregory Zimmerman: Well, I agree. And as we announced, we acquired something in the fourth quarter. So yes, we're enthusiastic about the attraction space. Bennett Rose: All right. Thank you. And best wishes to you, Greg, going forward. Operator: Our next question comes from Anthony Paolone with JPMorgan. [Operator Instructions]. Anthony Paolone with JPMorgan. You may ask your question. Anthony Paolone: Just, Greg, going back to the opportunity set that you talked about, can you be a little bit more specific and maybe how much of it is development, redevelopment versus buying existing assets? And maybe kind of the range of cap rates and like what would take you into the 8s versus where you'd probably be maybe in the 7s if something is perhaps a bit higher quality or different? Gregory Silvers: Sure. And I think it's going to gear at least early part of this year, going to be more on the acquisition side. So I would say, and I'm looking at Greg and Ben, probably 70-30 acquisitions. Right now, I think, again, where you would look at most of our stuff has been in the 8s where you would look at something below that potentially would be a much lower advance rate. It's really going to be risk return or if you had a credit, you had a much, much higher credit scenario to where you would think lower 7s, but better growth profile. But I would say most of our stuff are -- right now that we're looking at has at least an initial 8 handle on it. Gregory Zimmerman: And Tony, obviously, development deals are going to carry a higher cap rate because there's more risk adjusted, there's more risk. So that's kind of what we look at... Anthony Paolone: Okay. Got it. And then my only other question, maybe for Mark and just on the spending here. If I look at Page 19 of the supplemental, there's about $63 million of spending outlined there. Is that different than the $85 million that you guys talked about in the presentation? Or do you put those together? Gregory Silvers: The $63 million is only related to those projects that have been started at the end of the year. So and then the difference between that and the $85 million is projects that haven't been started, but that we have commitments and line of sight to. So if you're looking at kind of spending sort of what's spoken for kind of heading into the year, $85 million is the number to use. And then if you add, for example, the VITAL Climbing Gym that we did, we're sort of sitting at around $119 million right now and sort of spoken for spending. And as Greg said, I think the amounts that we will add to get to the midpoint of guidance of $450 million will be mostly acquisition-oriented. Operator: Our next question comes from Michael Carroll with RBC Capital Markets. [Operator Instructions]. Michael Carroll of RBC Capital Markets. You may ask your question. Michael Carroll: I guess, Mark, just sticking with the guidance ranges that you provided in the investment. With that remaining investments to get back up to that $450 million with guidance, when do you assume that gets completed? Is it just kind of ratably throughout the year? Or do you kind of have a back-end weighted? What's kind of implied in that guidance range? Gregory Silvers: Yes, it's actually, frankly, weighted more towards the first half of the year, the way we see things kind of laying out. Michael Carroll: Okay. And then on the Regal percentage rents what you put in guidance, what did you assume would be the box office, at least for the Regal lease year ended July 2026 versus the prior year? Is it kind of a similar box office, so we're expecting percentage rents for Regal to be kind of in line with what it was last year? Gregory Silvers: No, I think it's slightly up, consistent with kind of analysts. But as you can see, it's probably kind of up 2% over where they were last year as our number is up slightly over there. Gregory Zimmerman: Yes. When we lay out that percentage rent slide, you can see once you cut through the prior period and so forth, you get to about $1 million of net growth amongst all our tenants and a good chunk of that is Regal because we do expect box office to be higher next year. And again, Mike, the Regal lease year ends in July. So you're not going to have the advantage of the fall season. Michael Carroll: Yes. And then just last one for me. I know, Greg, you mentioned and talked a little bit about the investment opportunities you have across all your property types. I mean are there any specific property types where you're seeing bigger opportunities or other types of activity that you could pursue? Gregory Silvers: I think as we've talked about, we've hit several things. I would say the top 3 continue to be fitness and wellness attractions and Eat & play. Again, when you look at those, we're still seeing an occasional opportunity in gaming, but not as much. Ski is more opportunistic. So those other 3, I think, are going to be where the anchor part of what our investment is going to come from. Gregory Zimmerman: And Mike, again, I would -- when we say fitness and wellness, that's a very broad category for us. So obviously, we've done a couple of golf deals now. We did a climbing gym deal this quarter. We did a regular fitness deal last quarter, and we have done hot springs deals. So we see a lot of opportunity to expand the aperture in that space. Operator: Our next question comes from Upal Rana with KeyBanc Capital Markets. [Operator Instructions]. Upal Rana with KeyBanc Capital Markets. You may ask your question. Upal Rana: Just curious on how the transaction market looks like in terms of larger deals. Are you seeing more or less out there? Gregory Silvers: Again, I think we're starting to see, as we said, I don't know we're seeing more. We're seeing our ability to participate in larger deals more. And, Upal, I think -- so that's beneficial to us. But I think it feeds into what -- when you look at what we've done, we're talking about 2 years in a row of delivering 5% plus kind of earnings growth. It's getting back into what is our kind of normal trajectory of delivering outsized value for our shareholders. And now we're going to be able, as we, A, one, generated a lot of proceeds from dispositions or, two, getting close to our ability to issue equity through our ATM program, it's going to allow us to participate in some of these deals, which will further that growth so that the idea that we've been done -- we did 5% last year, we're doing 5% this year. Let's get on that track of what we delivered 20 years before COVID. Upal Rana: Great. That was helpful. And then it looks like negotiations start to begin to start up again on SAG-AFTRA with the contracts that were negotiated in '23, expiring in May for writers and in tune for the actors. So the environment is certainly much different today than it was 3 years ago. So I just wanted to get your take on those negotiations and how that could play out? Gregory Silvers: Again, I think we think it's still really early, but I think you're correct. I think the -- it's really early. I think it's going to still be about AI and the ability to do that, but they set a nice framework to deal with that. And everybody, I think, at this point, saw how negatively the market was impacted by a strike. And much like what we've seen in some other areas like baseball, people have tried to avoid strikes because they have long-lasting effects and everybody is saying the right thing about wanting to avoid that. Operator: Our last question comes from Upal Rana -- apologies that is Jana Galan with Bank of America Merrill Lynch. [Operator Instructions]. Jana Galan with Bank of America Merrill Lynch. Jana Galan: I know this is a much smaller part of your portfolio, but curious if you could just provide an update on the education portfolio and kind of any changing trends there between early childhood and the private school. Gregory Silvers: Again, I think if anything, the strength of that portfolio has continued to be demonstrated over the last several years. I think one area that as we think about dispositions this year, maybe an area that we start to think about. I mean last year was all about kind of cleaning up the theater portfolio and getting through that I think the strength of that will allow us to capture good value if we want to do that and could be another lever that we pull to accelerate growth. Jana Galan: Great. And also wanted to congratulate Greg. Operator: There are no more questions. So I will now turn the call back over to Greg Silvers, Chairman and CEO, for any closing remarks. Gregory Silvers: I just want to thank you all. As we said, we're excited about the year. I look forward to talking through the year and look forward to delivering on the guidance that we've set forth. Thanks, everyone. Thank you.
Operator: Good day, everyone. My name is Kahai Illani, and I will be your conference operator today. At this time, I would like to welcome you to the Kymera Therapeutics Fourth Quarter 2025 Results Call. [Operator Instructions] At this time, I would like to turn the call over to Justine Koenigsberg, Vice President, Investor Relations. Justine Koenigsberg: Good morning, and welcome to Kymera Therapeutics Quarterly Update Conference Call. Joining me today are Nello Mainolfi, our Founder, President and Chief Executive Officer; Jared Gollob, our Chief Medical Officer; and Bruce Jacobs, our Chief Financial Officer. Following our prepared remarks, we will open the call for questions from our publishing analysts. [Operator Instructions] Before we begin, I would like to remind you that today's discussion will include forward-looking statements subject to risks and uncertainties described in our most recent Form 10-K filed with the SEC. Please note that any forward-looking statements speak only as of today's date. And with that, I will now turn the call over to Nello. Nello Mainolfi: Thank you, Justine, and thank you, everybody, for joining us this morning. As this is our year-end 2025 call, I wanted to spend a few minutes recapping what was an incredible year for Kymera. Those of you that know us well appreciate the fact that we're always forward-looking, highly focused on what's in front of us. And the bulk of the call would feature just that. But given how important our 2025 accomplishments were, I'm hoping that a quick reflection on the year will provide some context for the foundation we have set for 2026 and beyond. Before we start, I would like to mention that this year, we will celebrate our 10th year anniversary since Kymera's founding in May of 2016. Over the past decade, we've executed on our strategy and have built the capabilities, the platform and the team to deliver on our goal to develop the next-generation breakthrough immunology medicines. We've accomplished so much in our short history, but arguably, 2025 was truly a breakout year. I'll start with the significant progress in our first and best-in-class STAT6 Degrader Program. We shared outstanding results from both our Phase I healthy volunteer study and our Phase Ib study in AD patients. In the healthy volunteer study, KT-621 demonstrated robust STAT6 degradation with excellent safety and tolerability. That was followed by a highly encouraging impact on efficacy endpoints in Phase Ib that supports our view that KT-621 has the potential to deliver robust efficacy in line with pathway biologics with the convenience of oral daily dosing. On the strength of these 2 studies, we launched our first Phase IIb study in atopic dermatitis patients last fall and started the asthma Phase IIb early this year. Jared will talk more about our KT-621 clinical development plans, but both studies are benefiting from the awareness of and appreciation for the data we have recently shared as well as from clear enthusiasm from clinicians and patients around promising oral options. We were busy advancing the rest of our pipeline as well. In May, we unveiled our first-in-class IRF5 program, supported by a compelling preclinical profile and validating human genetics. Last year, we completed IND-enabling studies, and we're excited to announce this morning that after IND clearance from the FDA, we recently initiated dosing in the Phase I healthy volunteer study with KT-579. Finally, we're building on the success of our internal pipeline by advancing our existing collaborations with Sanofi around IRAK4 and by signing a new partnership last year with Gilead around our first-in-class CDK2 molecular glue program. Bruce will provide an update later in the call on the potential upcoming collaboration milestones, which would be incremental to our financial position. Speaking of finances in 2025, we raised almost $1 billion, bringing our year-end cash balance to $1.6 billion. We believe that this amount of capital, which extends our runway into 2029, will enable us to execute on our broad development plans that are designed to realize the full potential of our wholly-owned programs while maintaining the productivity of our discovery engine, which we expect will expand our innovative pipeline. Now with 2025 behind us, our focus is squarely on 2026 and beyond and the multiple milestones we plan to achieve. For KT-621, we expect to complete enrollment in the AD study this year and share data by mid-2027. The first patient was dosed in the asthma trial last month, and we expect to share that data in late 2027. In the meanwhile, we're planning to report scientific publication and presentation to continue to build awareness of this exciting program. This is an important year for KT-579, our lead IRF5 degrader. We expect to complete the recently started Phase I healthy volunteer study and share the data later this year. And the next step will be to advance the program into a patient proof-of-concept study, which we expect to be in lupus soon after that. Our partner, Sanofi, is expected to start the healthy volunteer Phase I trial with KT-485 this year. We also hope to be able to advance our CDK2 program in partnership with Gilead into further development. Finally, our goal continues to be to announce at least one new program annually, and we're targeting the second half of this year to share our new development candidate program. We clearly have a busy 2026 plan, which makes me particularly happy to announce the most recent addition to Kymera's leadership team, Neil Graham, who joined us as Kymera's Chief Development Officer. Neil is a seasoned life sciences executive with more than 30 years' experience in global drug development in both early and late-stage clinical trials across a wide therapeutic spectrum, including dermatology, allergy, rheumatology, virology and pulmonology. Neil has led several groundbreaking programs, including the development of dupilumab at Regeneron. We're thrilled to have him join our team as we enter the next phase of our growth and look forward to his contributions as we continue our efforts to build a fully integrated commercial company. Now before I turn the call over to Jared, I wanted to spend the remainder of my remarks speaking in more details of the unprecedented market opportunity of our STAT6 program. I can't overstate the opportunity we have to significantly increase the number of patients who are treated effectively. We hear overwhelmingly from both physicians and patients that current advanced therapies, including biologics, just aren't sufficient. There is a palpable excitement for the potential of a simple and convenient oral therapy for Type 2 diseases that doesn't compromise on safety or efficacy. We have cited these numbers in the past. We believe there are about 140 million diagnosed Type 2 patients in the U.S., 5 major EU countries and Japan. Of this total, about 50 million patients are estimated to be in the moderate to severe category. Yet despite this significant need, only an estimated 2 million patients are treated with advanced systemic therapies, mostly biologics and overwhelmingly with dupilumab. So the question is why are so many patients not treated with advanced systemic therapies? The gap is clearly not due to lack of need, but it reflects barriers built into the current treatment paradigm. There are many patients who rely on local therapies, most often topical or inhalers depending on the diseases. However, most of these treatments do not address the underlying drivers of Type 2 diseases and as a result, do not deliver adequate treatment for many moderate to severe patients. There are existing oral systemic therapies in both asthma and AD, for example, but those can be limited by efficacy. And certainly, for example, in the case of JAKs, safety concerns, including box warning and the requirements from blood monitoring and initiation and/or during treatment. Finally, injectable biologics have delivered important advances and now account for the majority of systemic therapy use, actually more than 75%. However, they're associated with significant treatment burden, injection site pain, needle fatigue, burdensome loading regimens after often 4 to 5 injections in the first month, cold stain storage requirements and ultimately with high drop-off rates over time. So when we ask why so many moderate to severe patients remain untreated with advanced therapies, the answer lies in the limitation in efficacy for some, safety concerns for others and very real convenience and access hurdles built into the system. The consequence is that millions of patients who would benefit from more effective therapies remain untreated, cycling through suboptimal options and living with inadequately controlled disease. This is the unmet need, and this is the opportunity in front of us. Going from patient numbers and unmet needs to market opportunities, the gap is even larger. As previously mentioned, about 2 million patients are currently receiving advanced systemic therapies for Type 2 diseases. This segment represents an annual market value of about $20 billion with dupilumab serving as the predominant drug. Although this is already a significant figure, the broader market opportunity is much larger. given that there's tens of millions of patients that are not reached by current approved drugs. In fact, I would characterize the current Type 2 market as very early in its development. Historically, the introduction of new products and mechanism has expanded immunology markets by enabling access to additional patient populations. In addition, an oral therapy that overcomes many limitations associated with existing treatments while maintaining safety and efficacy could, for the first time, provide a viable alternative for millions of patients across all age groups. It is reasonable to assume, in my opinion, that the current market for Type 2 diseases is positioned for substantial expansion well beyond the current $20 billion. In fact, a comparable example can be found in the psoriasis market, which has experienced a fivefold growth over the past decade, mostly thanks to new drugs and oral therapies. I think this all comes well together when we consider the limitation of existing therapies and what KT-621 has to offer, a drug that has the potential to deliver biologics-like efficacy and safety without requiring patients to compromise efficacy and safety for convenience, a drug that has the potential to change the way patients are treated around the world. How will it do so? In two important ways: one, expand the existing treatment -- treated patient population, which for us is the #1 goal. Second, provide an easy and convenient alternative to patients currently on injectable biologics, many of whom, based on our market analysis and industry survey data are eagerly waiting to switch to an oral therapy. So then how might this paradigm shift look? And what will it mean for patients with Type 2 diseases. Our goal and the cornerstone of our development plan is to position KT-621 as the product of choice for this large underserved or inadequately [ deserved ] patient population. In many inflammatory diseases, advanced systemic treatments are typically reserved for patients who fail conventional therapies, which in turn are typically biologics. We believe having an effective safe oral medicine, we can fundamentally change the treatment paradigm, making it practical to intervene earlier in the disease course rather than waiting for significant progression or treatment failure. If successful, we believe KT-621 has the potential to shift advanced therapy from being a last resort for a small subset of patients to a mainstream option for millions and improve standard of care. I hope that context around the market opportunity makes it clear why we believe that KT-621 has the potential to be one of the biggest programs in the biotechnology and pharma industry. With that context, let's turn the call over to Jared and discuss clinical progress with KT-621 and KT-579, our IRF5 degrader. Jared? Jared Gollob: Thanks, Nello. As you've heard, we're building significant momentum across our pipeline, driven by the strong scientific, clinical and operational foundation that we've established. This morning, I'll discuss our ongoing KT-621 Phase IIb trials in atopic dermatitis and asthma. I'll then provide additional context on our clinical development strategy for KT-579, our oral IRF5 degrader. I'll begin with KT-621, our oral STAT6 degrader. In December, as many of you are aware, we released the BroADen Phase Ib results, providing the first look at KT-621's impact on patients with atopic dermatitis. The data demonstrated a dupilumab-like profile that strongly supports continued development of KT-621 in both AD and asthma. Across all of the study's objectives, we exceeded expectations. We demonstrated strong fidelity of translation from healthy volunteers to patients with deep STAT6 degradation in blood and skin. We observed a significant reduction in Type 2 biomarkers across blood and skin lesions, including TARC and Eotaxin-3 and importantly, also in lungs as measured using fractional exhaled nitric oxide or FeNO testing. The greatest impact on FeNO was observed in AD patients with comorbid asthma who had the highest baseline FeNO levels. We also achieved robust improvements across all key AD clinical endpoints, including EASI, Pruritus NRS, IGA, SCORAD and patient-reported outcomes or PROs, addressing disease severity and quality of life. For all of these endpoints, KT-621 data were in line with or numerically exceeded published data for dupilumab at 4 weeks, further highlighting the exciting potential patient impact. In addition to these effects on AD, KT-621 had a clinically meaningful impact on patient-reported outcomes, measuring disease control in patients with comorbid asthma as well as on symptoms and quality of life in patients with comorbid allergic rhinitis. And importantly, KT-621 was well-tolerated with a favorable safety profile. I should also note that we recently completed the 6- to 9-month GLP toxicology studies in rat and nonhuman primate and consistent with earlier KT-621 tox studies, we did not observe any adverse findings of any type across all doses and concentrations tested. We now have 2 parallel Phase IIb dose-ranging placebo-controlled trials underway in AD and asthma, supported by the positive biomarker and clinical endpoint results in both AD and comorbid asthma from BroADen. The BROADEN2 trial in approximately 200 adult and adolescent patients with moderate to severe atopic dermatitis has a primary endpoint of percent change from baseline in EASI at 16 weeks. The study continues to progress as planned with completion of enrollment expected by the end of 2026 and announcement of top line results by mid-2027. We will update you all on enrollment later in the year, but we can say now that we are confident in achieving this timeline based on the strong interest from patients and clinicians in a safe and effective oral therapy and given the high level of awareness of and appreciation for the KT-621 data we have generated. Moving on to asthma. Just last month, we announced that we had dosed the first patient in our Phase IIb BREADTH trial in approximately 264 adult patients with moderate to severe eosinophilic asthma. The trial's primary endpoint is change from baseline in pre-bronchodilator FEV1 at 12 weeks. Using pre-bronchodilator FEV1 will allow [indiscernible] effects across dose levels in a smaller, faster study and will inform dose selection and probability of success for subsequent Phase III trials. Data from this trial are expected in late 2027. Taken together, we expect to generate data in close to 500 patients next year from both KT-621 Phase IIb studies while also continuing to build our safety database with long-term treatment in AD patients rolling on to the 52-week open-label extension portion of BROADEN2. Importantly, these trials are designed to support parallel Phase III development beyond atopic dermatitis in asthma and other Type 2 dermatologic, respiratory and gastrointestinal diseases as part of the overarching regulatory strategy for KT-621. Turning now to our novel IRF5 degrader program. We view IRF5 as an exciting new opportunity to address complex autoimmune diseases. We continue to receive positive feedback from KOLs and investigators on the potential of KT-579 to offer an effective oral treatment for diseases such as lupus, IBD and RA. This past fall, we presented additional compelling KT-579 data in lupus and RA preclinical models at the American College of Rheumatology meeting in Chicago. Chronic heterogeneous inflammatory conditions like lupus, RA, IBD and others are driven by broad immune dysregulation across multiple inflammatory pathways, including Type 1 interferons, pro-inflammatory cytokines and B cell-derived autoantibodies. While biologics have clinically validated each of these pathways individually, the current treatment paradigm has been constrained by the reliance on injectable therapies optimized for narrow segments of disease biology and therefore, incapable of addressing the full complexity of the inflammation underlying the various disease manifestations. As a result, many patients experienced incomplete responses or loss of efficacy over time. An oral medicine capable of modulating multiple disease-defining immune pathways simultaneously could enable more effective and durable disease control and potentially expand access to treatment across broader patient populations. IRF5 is a genetically validated transcription factor that functions as a central amplifier of immune responses. In autoimmune diseases, where there is strong genetic association with IRF5, persistent IRF5-mediated immune activation drives skewed inflammatory signaling across Type 1 interferon, pro-inflammatory cytokine and autoantibody pathways. KT-579 is designed to selectively degrade IRF5, enabling modulation of these interconnected inflammatory pathways through targeting of a single master regulator with a goal of rebalancing the immune system while avoiding the infectious adverse events caused by broad immunosuppression. We are encouraged by the strong genetic rationale, our compelling preclinical efficacy and safety data and the potential to deliver a novel oral therapy across multiple serious autoimmune diseases with significant unmet medical need. With that said, we are now focused on advancing KT-579 in our ongoing Phase I healthy volunteer trial and reporting the first-in-human data in the second half of 2026. In terms of the Phase I specifics, the study is designed to evaluate both single and multiple ascending doses of KT-579 administered orally once daily compared with placebo. The primary aim of the SAD/MAD study is to demonstrate robust degradation of IRF5 in blood, which we define as a reduction of approximately 90% or greater at dose levels that are safe and well-tolerated. Because the IRF5 pathway is not activated in healthy volunteers, we plan to use full blood ex vivo stimulation assays to assess the functional impact of IRF5 degradation on the induction of Type 1 interferons, pro-inflammatory cytokines and inflammatory pathway gene transcripts by TLR7, 8 and 9 agonists. It's our expectation that we should see a 50% to 80% reduction in these biomarkers across the 3 TLR pathways assessed if we're engaging IRF5 effectively, which would increase the probability of IRF5 degradation translating into clinical activity in subsequent patient studies with KT-579. As we did with our STAT6 program, we also expect to conduct a Phase Ib patient study and intend to share more details on the design and patient population later. We have said, however, that we would expect to focus the study on lupus patients, which we believe is the right patient population for our first proof-of-concept study given the strong genetic association of IRF5 with lupus and the robust activity of KT-579 across multiple mouse models of lupus. I'll now turn the call over to Bruce for a review of the fourth quarter results. Bruce? Bruce Jacobs: Thanks, Jared. As I walk through the fourth quarter results, please reference the tables found in today's press release, which was filed this morning. Collaboration revenue in the fourth quarter of 2025 of $2.9 million is attributable to our Gilead partnership. More broadly, with respect to Gilead, we received an upfront payment of $40 million upon signing the licensing and option agreement last year. Under this agreement, we're eligible for up to $750 million in total milestone payments, including $45 million payment payable if and when Gilead exercises its option on the CDK2 program at the declaration of a mutually agreed upon development candidate. In addition, Sanofi is advancing KT-485, our oral IRAK4 degrader, with plans to initiate Phase I testing this year. We expect to share additional updates on this program in the coming months, including the receipt of a milestone upon dosing of the first healthy volunteer. As a reminder, under the structure of the Sanofi agreement, we have the potential to realize nearly $1 billion in total milestones. While these 2 potential near-term milestones are not reflected in our current cash guidance and are not expected to materially impact our runway, they remain important validation points and support a continued advancement of these partnered programs and the downstream value we can realize. We look forward to sharing further progress as these programs move forward. With respect to operating expenses, R&D for the quarter was $83.8 million. Of that, approximately $7.6 million represented noncash stock-based compensation. The adjusted cash R&D spend of $76.2 million which excludes that stock-based comp, reflects a 16% increase from the comparable amount in the third quarter of 2025. On the G&A side, our spending for the quarter was $16.9 million, of which $6.9 million was noncash stock-based comp. The adjusted cash G&A spend of $10 million, again, excluding that stock-based comp, reflects a 1% increase from the comparable amount in the third quarter of 2025. And finally, we are well-capitalized to execute on our goals. As Nello mentioned previously, we ended in December with a cash balance of $1.6 billion, providing a runway into 2029. This allows us to complete both KT-621 Phase IIb trials in AD and asthma and to fund a large part of the first Phase III trial for KT-621. The runway also will allow us to advance KT-579 through initial POC testing and to progress our research pipeline as we scale and grow Kymera. With that, we'll pause while we regroup in our conference room and assemble the queue for your questions. Thank you. Operator: Thank you. [Operator Instructions] Your first question comes from the line of Marc Frahm with TD Cowen. Marc Frahm: Congrats on all the progress. Maybe a high-level one for Nello. Since your Phase I data came out with the STAT6, a handful of other kind of early mid-stage programs in AD have also read out data, and there were some data even ahead of yours. So over the past year, there's just a lot going on in AD. What's your kind of vision for what the treatment of AD looks like and how these therapies all fit together when you roll the clock forward a few years? And then maybe if I can sneak a little bit in for Jared also. Just for IRF5, can you just remind us what really could be learned in the healthy volunteer portion of that trial beyond target engagement and safety or do we really need to learn more and have to wait for that lupus cohort to enroll? Nello Mainolfi: Thanks, Marc. Great question. So I'll start with the first one. So just to remind you, as we shared today, hopefully, even more clearly than before, the AD, I would say the Type 2 diseases market is still very early. Again, there is -- if you look at moderate to severe patients, there is about 40 million to 50 million patients in the 7 major market and only about 2 have been dosed with advanced systemic therapy. So clearly, there is a need of more therapies. And as we mentioned and others have done so, we mentioned if you parallel AD to psoriasis, psoriasis market in the past 10 years has grown fivefold. Maybe it is somewhere around where psoriasis was 5, 10 years ago or so. So we expect this market to increase dramatically. And you can only do that by bringing in new therapies to the market. So first, I want to start by saying that this is obviously a non zero-sum game, right? I think there is a need of new therapies and new therapies would benefit patients first, but also actually companies that develop all the other therapies. I mean, for 2 simple reasons. We need -- especially from our viewpoint, patients need convenient oral options that can increase the probability of patients with moderate to severe disease to access effective therapies. And so I think that that will transform how these diseases are treated. With our mechanism with STAT6, I think the main difference that I could point to without going company by company, which will take us half a day, is that we are targeting an intracellular target of the most validated pathway in Th2 inflammation, which is IL-4 and 13. So we're going after well-validated efficacy and safety. We're going after a well-defined patient population. And so I think we have a level of derisking that I would point to being, I think, superior to many other agents that are still interesting and exciting that are out there. So I think we need more therapy. I think it's great that there are more drugs. And obviously, we need to move into late-stage development to really assess for our drug and many others, what is the risk benefit that we can bring to patients. Jared, do you want to take the IRF5? Jared Gollob: Sure. Yes, Marc. Regarding IRF5, as you mentioned, the primary clinical objective is safety and then our primary translational objective is to show 90% or greater IRF5 knockdown in blood. And showing that knockdown is going to be important, we think, from a derisking standpoint for the subsequent patient studies because of the strong genetic association between IRF5 and lupus and the strong preclinical activity in multiple lupus models that we've seen with that degree of IRF5 knockdown. Now with that being said, yes, it's true that unlike STAT6, where we had circulating biomarkers like TARC and Eotaxin-3 that were useful for us to assess that sort of translation in healthies, with regard to IL-4/IL-13 pathway. Here for IRF5, while we don't have those circulating biomarkers, as we mentioned, we have these ex vivo stimulation assays, which I think will provide very important functional information around IRF5 degradation. These assays are looking at stimulation of toll-like receptor 7, 8 and 9, which are the 3 toll-like receptors driving hyper interferon, pro-inflammatory cytokine and B cell autoantibody production. And to be able to show an impact across those 3 pathways on ex vivo stim, we believe, significantly derisk our probability of success in subsequent patient studies, including the lupus studies. Nello Mainolfi: And maybe just to add a quick thing on top of Jared, like if I think a bit more from my point of view, maybe higher, more simple level, which hopefully still scientifically sound, we know that the strength of this program is the genetic association, right? There is very few programs in the history of drug development that have the strength and the depth of genetics that we have with IRF5. And that's why it's one of the most interesting programs in immunology, I think, in the next 5 to 10 years. So -- but when you have genetic association, you try to figure out, okay, biologically, what does that mean? So we've shown preclinically that actually IRF5 activation leads to, as Jared said, activation of this pro-inflammatory cytokines, Type 1 interferon and B cell activation, autoantibody activation. So even in healthy volunteers, we can prove even ex vivo that we can block these 3 axes of inflammation. I think it's going to tell us that you combine that with the genetics that it should work into patients. Operator: Your next question comes from the line of Geoff Meacham with Citi. Geoffrey Meacham: Can you hear me? Okay. Awesome. So I just had a couple. Thanks for the question, first of all. So on 621, the BROADEN2 and BREADTH studies are probably mature next year. We're used to seeing you guys have Phase I biomarker data and kind of maybe -- a lot of data points along the way. For these Phase IIbs, is it going to be -- let's just wait until the full and final? Are you guys planning on having any kind of biomarker or interim analysis or anything like that for these 2 studies? And then for the IRF5, interesting program for sure. The indications you guys have talked about include some that are very much unmet need, lupus, Sjogren's in particular and definitely not as crowded. Curious how that informs like your priorities when you think about kind of development for this program? Nello Mainolfi: Thanks, Geoff. So on the first one, obviously, we'd love to get data along the way and understand what's going on in the Phase IIb studies. But obviously, these are important studies that are placebo-controlled. And to protect the integrity of the study, we're going to wait until the end of the study to unblind and obviously share the data. For IRF5, yes, so I think I go back to the reasons to believe, and as I said, human genetics, lupus, Sjogren's, myositis, RA, IBD, those are areas that we believe this target is extremely relevant. And so we're letting that combined with the preclinical data guide us. So those -- the reason why we've talked often about some of those indications is because they match so well both the genetics, the preclinical data, the unmet need. I mean if you look at the ones you mentioned, lupus, Sjogren's, these are diseases that don't have effective therapies that are approved or at least some that don't have, maybe I should say, at least oral effective therapies that are approved, which will serve a much broader population than what's being evaluated now in clinical development that I believe are really probably going to be positioned for really late-stage patients. I think another important axis of our development plan will be outside of, let's call it, this interferon-related pathways or pathologies, which could be, again, IBD could potentially be [indiscernible] down the road. And I think we plan to share more data on IBD, which is increasingly becoming an area of focus for this program, at least preclinically, and we hope for it to be clinically as well in the not-so-distant future. Operator: Your next question comes from Charles Ndiaye with Stifel. Charles Ndiaye: Congrats on the quarter. One question from our side. I guess, as you think about starting Phase IIs for 621 outside of asthma or AD, what are sort of some of the gating factors? Nello Mainolfi: Yes. So as we've outlined in the past, I believe it's still on our corporate deck. There is a new one today on our website. Our strategy is to use the ongoing dose-ranging Phase IIb study, the one in AD to support late development in all of the other derm indications, the one in asthma to support late development in the other respiratory indications. So we actually do not plan to start any new Phase II studies. The new studies that you see us starting will be, we believe, all registrational studies. Now obviously, some of this still has to be vetted with the right authorities, but that's our current strategy. And we believe this is a strategy that has been proven to be successful with other drugs in this pathway. So it wouldn't be the first time that this is adopted. Operator: The next question comes from Brad Canino. Bradley Canino: A question from me on the trigger to start the KT-621 Phase IIIs. So to initiate, how far into the Phase IIs do you need to reach and what needs to be collected from those studies? And will this be one study start or multiple at once? Nello Mainolfi: Yes. Thanks, Brad. So unlike what we may be getting everybody used to that we start a study while the previous one was still ongoing as we've done for the healthy and Phase Ib. For starting a Phase III study, we need to complete Phase II. We need to have an FDA meeting post Phase II, and then we can start Phase III. I assure you that we will do our best as we always have, to do that as quickly as possible. But obviously, there are some things that we must do in order to move into Phase III. With regards to how many, as you know, at least the paradigm that companies have adopted in the past 10 years for, let's say, atopic dermatitis registration has been 3 Phase III studies, 2, there are 2 placebo-controlled, mostly placebo-controlled studies and then one on top of topical corticosteroid. So we -- if that will continue to be the paradigm, which is something, obviously, we will explore given the recent news from FDA. But let's say, that continues to be the paradigm, you should expect us to start all studies as much in parallel as possible. Operator: Great. The next question comes from Eli Merle with Barclays. Eliana Merle: Congrats on all the progress. In terms of 621, if you could talk about both the clinical and preclinical data that you've seen, where do you see the most potential room for efficacy improvements over dupilumab? And can you talk about some of the respiratory preclinical model data and compare that to what's been seen preclinically in atopic dermatitis? Nello Mainolfi: Yes. Thanks, Eli. You often asked the tricky question. So we want to make sure like we maintain kind of our credibility when we compare a drug that is -- have been so successful in millions of patients with the drug that has been so far in about a couple of hundred patients or subjects and up to 28 days. So I'm always very thoughtful about how we make comparisons. What I can say is that in our preclinical models, if you look at the asthma models that we both published, KT-621 has performed always at least as well and in many cases, better than dupilumab. We don't know whether that is the result of the model or it's actually real biological differences or drug distribution differences. And that's why we're really excited that we're in a Phase II study, so we can assess the full clinical activity of our drug in a large study with hundreds of patients. With regards to AD, the preclinical AD models are not very robust. We like to talk about the asthma model because it's a highly translatable model. The AD preclinical models, you have this local activation with a pathway activator that is not really, in many cases, a Type 2 discrete pathway activator. So we also show really robust activity. But to be honest, as a scientist myself, I don't like to talk about preclinical AD models that are mostly useless. But if we look at the clinical data, obviously, you've seen the data from last December, we have shown really robust activity. I start from biomarkers. I look at what we've shown even with biomarkers that were either not shown to change much with dupilumab like IL-31 or the ones that we showed comparable if not superior Eotaxin, even FeNO. And then we look at all the clinical endpoints that we measured, we've been consistently at least as good as the injectable biologics. So again, it's hard for me to say it will be equal, slightly inferior, slightly better. But I think we delivered that ballpark scenario that we talked about for last year. And so for us to really know how it looks, we need to wait for the Phase II studies. And to be honest, the only other thing to keep in mind is you can never compare drugs unless you run a head-to-head study. But our goal, again, is to deliver an oral drug with biologics like activity with great safety and the convenience of being an oral pill that one can take once a day, stop and start whenever they want. I think that will transform the treatment paradigm for Type 2 diseases well beyond whether the drug is exactly like dupilumab, slightly less or slightly better. I don't think that will matter if we can deliver the type of drug with the profile that we speak about. Operator: Your next question comes from [ Anna Lee ] from Truist. Unknown Analyst: This is Anna on for Kripa. One quick question on 621. I was just wondering if you could give us kind of an overview on how you're thinking about compliance you're seeing in the Phase IIb trials right now and how the durability of 621 kind of ties into that? Nello Mainolfi: Cool. So that's a great question. So when you -- compliance, you mean patients taking the drug. That's what you mean? Yes. So I think that's obviously -- it's a very important point because when you're in a clinical trial or an injectable biologics, you can actually ensure 100% adherence, right, because patients often, in most cases, actually go on site to receive the injection. When you -- the beauty of oral drugs is actually you give patients freedom, right? That's the beauty of oral drugs. And that obviously plays a role into clinical studies. So we have measures that probably go even beyond what has been done generally to make sure that we understand patients' adherence well. So we are confident that the adherence of patients will be the one that will allow us to have a great integrity of our study. I will also add that the beauty about protein degraders, unlike small molecule inhibitors, if you miss a small molecule inhibitor dose, you actually lose all your activity. If you miss one dose of KT-621, this is not an advertisement to not take the dose every day. But I will say, if you miss a dose of KT-621, if you miss one dose, you will not lose any of pathway degradation. So we have that additional layer of, let's call it, protection against any challenges that might come with humans forgetting one dose during a study or during normal life. Operator: The next question comes from Judah Frommer with Morgan Stanley. Judah Frommer: Congrats on the progress. Just on IRF5, I think we're clear on how you think about STAT6 degradation versus inhibition. Kind of same question for IRF5. I think we'll get a little bit of preclinical data from an inhibitor next month. And then just on the targeted nature of your degrader, any risk of kind of pan-IRF inhibition? I think IRF8 has been a question in degrading IRF5 previously. Nello Mainolfi: Yes. Maybe I'll start and then I'll pass it to Jared to speak even maybe it's an opportunity to talk about how we think about the safety of IRF5. But maybe I'll talk more about the chemistry of it, even that I'm technically still a chemist. So the beauty about this target and the challenges with this target is that it's extremely hard to find a molecule that binds to IRF5 only without binding to all the other IRFs. You mentioned a few. I think there is 11 or 12, sometimes I lose count, but there's more than 10 IRFs. So we need to bind only two IRF5. And there are different -- I like to call them splicing variants, people call them differently. There are different IRF5 splicing variants. They all need to be targeted. So you need to be consistent across the IRF5 family, but do not bind to any other IRF. So we've been able to do that. Our selectivity is pristine because we've been able to find this molecule that is actually not functional. So it does not inhibit anything. It only binds to IRF5, all the IRF5s splicing variants, but not other IRFs. And this allows us to give the utmost selectivity. So we're not worried about any of those things. But Jared, do you want to speak about why we think 5 only is potentially really interesting. Jared Gollob: Yes. I think IRF5, because it is one of multiple different IRFs, there is a certain redundancy there when it comes to the role of IRF in innate immunity. So even getting rid of IRF5 really does not impact overall innate or adaptive immunity. It's also true that IRF5, its expression is very restricted, especially to certain immune cell subtypes like B cells and dendritic cells and monocytes and macrophages. So it's not ubiquitously expressed, which is another reason why one can knock it down and do so safely. And its activation is also very context specific. So here, in the context of pathologic inflammation, that's where you're going to see activation, where you're going to see activation in restricted cell types. And that's the reason why you can really degrade IRF5 strongly and chronically and not get broad immunosuppression and not have infectious adverse events. And in fact, if you look at mouse knockouts for IRF5, you don't see any susceptibility to infections or any phenotype. And in our preclinical animal tox studies, including our 4-week GLP tox studies in nonhuman primates as well as in rats, we don't see any adverse events -- adverse findings. We don't see any susceptibility to infection. So for all those reasons, we believe that this is a safe target for us to degrade deeply and chronically. Operator: The next question comes from Joe Catanzaro with Mizuho. Joseph Catanzaro: Hope you guys can hear me okay. Maybe one on 579 and something kind of maybe related to something you just said, Jared. But I was looking at another healthy volunteer study for another anti-inflammatory drug, and they actually utilize a skin immune challenge model where they injected volunteers with actually a TLR agonist and then looked at cytokines. Wondering if you guys are aware of that model, whether you considered this? And if you did consider why you didn't decide to use it? And then I guess related, what informs the 50% to 80% target reductions in biomarkers? Is that all preclinical or is there some genetic basis for that target reduction? Nello Mainolfi: So maybe I'll take the first one and Jared takes the second one. So yes, we're obviously well aware of there are many type of skin challenge model, sometimes even systemic models, systemic challenge model, people have done LPS, inhaled LPS, local LPS. So there are many models that one could run preclinically for healthy volunteer studies. We philosophically feel like the right context to ask these pathway questions are in patients. And what you do by activating the skin is you artificially activate a pathway and then you look at downstream regulation. You can do that just the same way by taking the blood and ex vivo activating the pathway. So yes, you could do those things. We just don't believe that it's the complexity of it derisks any more or less what we would do with an ex vivo blood stimulation. If you have questions about does your drug reach particular tissues and especially with small molecule inhibitors where you actually cannot measure target engagement, that is a way to do it. But we can measure target engagement directly. So we don't need a surrogate downstream biomarker to make sure our drug gets to the tissue. So that's at least our view. Jared, do you want to speak to the? Jared Gollob: Yes. I mean we know in terms of the amount of knockdown that we think we need or the amount of functional inhibition that we would need for those pathways. One has to keep in mind that here, we're talking about not just one pathway that's controlled by IRF5, but multiple pathways. Here, we're looking at 3 different TLR pathways, for example, 7, 8 and 9. And so whereas you're talking about one pathway and all your activity is dependent on one pathway, you might have a threshold that could be 80%, 90% or more to really have clinical impact. Here, we know that if you're impacting multiple different pathways in parallel at the same time, you don't need necessarily 90-plus percent inhibition, 50% to 80% inhibition from our preclinical data across multiple different pathways can have a synergy that can give you significant activity in preclinical models. So that's the reason why we say that, that's sort of a range, which is really just a range, if you're seeing it across multiple different TLR pathways with these ex vivo stim models would be very encouraging, and we would expect to translate into activity in subsequent patient studies in diseases like lupus. Operator: The next question is from Derek Archila with Wells Fargo. Unknown Analyst: This is [ Hal ]. I'm calling in for Derek. So I guess our question is about the potential oral autoantibody delivery program. Just kind of the timing and what data, what events we can hear more from these assets? Nello Mainolfi: Sorry, I didn't quite get the question. Say that again? Unknown Analyst: The internal oral antibody. Nello Mainolfi: So do you mean the next oral immunology program that we were going to disclose? Yes. So as we said in, I believe it's in the press release and in our remarks earlier, we plan to disclose at least a novel program, most likely an immunology program this year and likely would be in the second half of the year. Operator: The next question comes from Brian Cheng with JPMorgan. Lut Ming Cheng: Just on IRF5, as you mentioned, 50% to 80% reduction across the TLR7, 8, 9 pathways. Just thinking about IRF5 regulates many of the levers in the pathways. Are there any specific downstream cytokines that you can point to today that will be the most impacted, most reliable and perhaps the easiest to monitor from an ex vivo stimulation test setting to best assess the PD of the drug? Nello Mainolfi: Yes, that's a great question. Jared, do you want to take that one? Jared Gollob: Yes. Through the stimulation of these pathways, there are key cytokines that we can look at. So for example, Type 1 interferon psych interferon beta, we can look at interferon beta protein production in these ex vivo stim assays. We can also look at gene transcripts that are part of the type 1 interferon pathways, looking beyond just the interferon itself. You can look at various genes that are part of the type 1 interferon pathways. We can also look for pro-inflammatory cytokines like IL-12 and tumor necrosis factor and even IL-6, which are stimulated by macrophages and dendritic cells. So these are a number of different pro-inflammatory cytokines that are coming off of these TLR pathways that can all be measured either the protein level or the gene transcript level that will be very helpful biomarkers for us. Operator: The next question is from Brian Abrahams with RBC. Unknown Analyst: Can you hear me? This is [ Kevin ] on for Brian. Maybe just on IRF5. How are you guys thinking about degradation in -- I know you mentioned whole blood, but just in PBMCs and maybe potentially skin as well. I think that's something you're looking at in the MAD portion. And I know you talked about IRF5 not being as activated in healthy volunteers. So just maybe curious what our expectations should be there for degradation in those tissues. And just kind of how much do we really know about sort of IRF5 expression in healthy volunteers and how that impacts your expectations for the study? Nello Mainolfi: Yes. I mean in blood, we know that we can measure IRF5 well. And in fact, when we say blood, we obviously then practically need PBMCs because we isolate PBMCs as we measure it using mass spec. The expression of IRF5 in healthy volunteers in the skin is extremely low. And so for that reason, we believe it's going to be -- it would be really hard to measure IRF5 in healthy volunteers. This is something that as we go into patients and especially if we go into lupus with cutaneous manifestation or even CLE, eventually, that's maybe a context where we can look at IRF5 expression. I think in [indiscernible] expectation is to be extremely low, lowest than any other program that we've looked at even preclinically. So hard to measure. Operator: [Operator Instructions] Your next question comes from Sudan Loganathan from Stephens. Sudan Loganathan: I wanted to ask my question around 621's opportunity in asthma. Looking at the current FDA-approved treatment options for AD, not all of them have really panned out that well in asthma as maybe people have expected. STAT6 degradation is a new approach. So curious to hear what theoretical and preclinical data you may have that gives you some conviction here that it also has an opportunity in asthma. Nello Mainolfi: Yes. I think IL-4 and 13, and just I remind everybody that there's only one drug that blocks IL-4 and 13, which is dupilumab. And so that has shown to have really, really robust activity in eosinophilic asthma and actually eosinophilic COPD, chronic rhinositis with nasal polyps. So it's well established to really have huge impact on patients with Type 2 inflammation in respiratory tract. So STAT6 biology, again, we've shown it extensively preclinically and also in the early clinical development that we can mimic the same IL-4 and 13 blockade. And again, I refer you to the asthma studies that we've published preclinical study that we published, showing the robust activity we see both on biomarkers and efficacy endpoint. The pheno reduction that we've seen in patients is actually even more robust than biologics in asthma patients. So we have all the ingredients to have reasons to believe that this drug actually is going to -- has the potential to be extremely effective in asthma. Operator: Next question is from Jeet Mukherjee with BTIG. Jeet Mukherjee: As we just look ahead to the evolving competitive landscape in atopic dermatitis and specifically on the next-gen oral agents that might be coming around the corner, just your thoughts on ITK as a target and some of the recent data we've seen there and how that might compare and contrast to STAT6. Nello Mainolfi: Yes, great question. As I said earlier, I think more mechanisms are great for patients first. I think, obviously, these are very different mechanisms. STAT6 is an IL-4 and 13 drug, as I said, the most validated pathway in the space, both in terms of safety and efficacy. We have shown preclinically that we can mimic biologics, both in terms of efficacy. And I would actually argue in safety, we just shared today that we completed chronic tox, so 6- to 9-month tox in rodents and nonhuman primates, again, without any adverse event. Other targets, ITK is a target that we've looked extensively at Kymera. We decided not to work on it because the human genetics show that because of challenges with clearing ETV, I think all patients end up developing some form of lymphoma. So this is the reason why we decided not to work on that target. That doesn't mean that it could not be a great target. It's just something that we don't believe fulfills the risk-benefit profile of Kymera and how our target selection strategy has been evolved over the years. But again, I think more mechanisms, especially with complementary pathways, whether it's ITK or others, I think are going to be great for patients and expand in this market that we need to do so that more patients get access to more therapies. Operator: Next question is from Faisal Khurshid with Jefferies. Faisal Khurshid: I wanted to ask, as you guys get the sites up and running in the Phase IIb studies, do you expect to provide any kind of color or context around how enrollment is going in those studies? Nello Mainolfi: No. I think what we -- obviously, if we feel we're not on track, obviously, we will share. But as long as we remain on track with the expectation, we don't plan to be providing ongoing updates on enrollment. I don't think it's necessary. But obviously, again, if we deviate from expectation, we will make sure to do so. Operator: Next question is from Biren Amin with Piper Sandler. Biren Amin: Congrats on the quarter and all the progress. For the Phase IIb AD trial, what measures are you taking in the trial to mitigate against placebo response? For example, will you be requiring photographic evidence of AD at baseline to provide evidence of moderate to severe disease on screening? So I guess that's first question. Second question on 579. I know you're enrolling healthy volunteers. However, there are healthy volunteers that may have positive antinuclear antibodies, but do not have autoimmune disease. Would you potentially screen for these types of healthy volunteers and that may potentially provide read-through into your Phase Ib lupus trial? Nello Mainolfi: Great question, Biren. I'll take the second one quickly. Jared, do you mind taking the first one? Yes. So great idea. Sometimes simple is better than complicated. So we're going to actually enroll healthy volunteers that are healthy, move quickly through it, selected dose and go into patients. That doesn't mean your idea is not a good one. It's just not what we're planning to do. Jared, do you want to take that? Jared Gollob: Yes. I think in the Phase IIb, I mean, your question about avoiding high placebo rates is an important one. And while I can't get into all the details at a high level, I can tell you that we're paying a lot of attention to this, both with regards to our eligibility criteria, how we're providing oversight with every patient that comes on and is screened in terms of looking to make sure that patients are truly meeting eligibility criteria, not just in terms of actually having AD, but also having moderate to severe disease. And we've carefully trained the investigators and selected investigators who are more certified dermatologists to make sure that they're fully capable of doing all of the clinical endpoint measurements across the study and that they're doing it consistently from baseline all the way through to the end of the study. And we also have global site selection. So we're not just in the U.S., we're also ex U.S. And in fact, the majority of our sites are ex U.S., whether that be in Europe or in Asia and Australia. And I think that's also important because access to drugs like dupilumab are diminished ex U.S. And so those are patients who are more apt to come in maybe more on the severe end of the spectrum of disease, and that can also be very helpful in helping to mitigate placebo effect, which you tend to see in milder patients compared to more severe patients. So I think all of those steps are being taken, and we're really very actively staying on top of all of that to try to mitigate a high placebo rate on study. Nello Mainolfi: I mean we're doing -- I'm sorry, we're way out of time. But we're doing lots of things, probably more things than anybody has done before to ensure that we do that. Obviously, we can't guarantee the lowest placebo rate, but we're trying our best. Operator: Your final question comes from [ Paurav Desai ] with B. Riley. Unknown Analyst: I'm on for Mayank. On asthma trial, if you could kindly confirm the dose levels are the same as BROADEN2? And how might you be enriching for pheno in your target patient population? And is there a chance your 12-week FEV1 endpoint data could come around the same time as your 16-week BroADen Phase II study? And also it would be helpful to learn competitive trial enrollment dynamics in atopic dermatitis versus asthma. Nello Mainolfi: Yes. Thank you. These are 4 questions in one. But let's see if you guys have to help me remembering. So the first one, the dose levels, yes, they are the same across AD and asthma. So the inclusion criteria for the asthma study is high [ EOS ] more than 300, high pheno more than 25. So that's how we're going to select that patient population. In terms of timing, we said that we expect the Phase IIb AD study data by middle of next year, while the asthma data by the end of next year. So I guess that answers the question. Things would always change one way or the other. And as I said earlier, if they change materially, we will share. And then competitive dynamics, all I can say that we have seen a ton of enthusiasm for our study in both actually, I would say, AD and asthma. And that's for 2 main -- actually, I would say 3 reasons. One, sites and hopefully also patients appreciate the really, really interesting and innovative science of our program. They appreciate that this -- while this is a novel target within a well-established biology and clinical experimentation. It's an oral drug and has some compelling early data. When you put all of that together, we have seen a ton of enthusiasm. So we really hope that this enthusiasm will translate into good enrollment. And that's what we're seeing so far, but we're still a long way to the finish line. Operator: There are no more questions at this time. Yes. There are no more questions at this time and I'd now like to turn the call over to Nello Mainolfi for closing remarks. Nello Mainolfi: Yes. So first, let me apologize. This call has taken the longest that we've ever done. I'm not really sure why. But I want to thank everybody for attending the call. All great questions, so I don't blame our analysts. And you know where to find us. We're very excited about where we are. This is a pivotal time for the company. And so we're excited to engage beyond the call if there are questions, and enjoy the rest of the day.
Operator: Welcome to the Schneider Electric's Full Year 2025 Results with Olivier Blum, Chief Executive Officer; Hilary Maxson, Chief Financial Officer; and Nathan Fast, Head of Investor Relations. [Operator Instructions]. I'd like to inform all parties that today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now hand it over to you, Mr. Nathan Fast. Nathan Fast: Good. Good morning, everyone, and welcome to our full year 2025 results presentation and webcast. I'm joined in Paris today by our CEO, Olivier; and our CFO, Hilary. For the agenda, you already have the slides available. We'll go through them now and then make sure to have enough time for Q&A. As always, I want to remind everyone about the disclaimer on Page 2. And with that, Olivier, I hand it over to you. Olivier Pascal Blum: Thank you very much, Nathan. Extremely happy to be with all of you today. Look, more than 15 months in the job, the first time I'm doing really this earnings call with you for the full year '25. And I'm extremely excited to be with you to report on what happened in '25 and even more important, what we see for the future. As you know, with the management team, we did spend a lot of time in '25 to define the next cycle. We were with many of you during our Capital Market Day. And we launched the new mission of Schneider Electric, which is to be your energy technology partner, to be the company which will be at the convergence of electrification, automation, digitalization in every single industry, to drive efficiency and sustainability for all. That's what we call at Schneider Electric, advancing energy tech to the next level. And of course, I'm going to come back on that. The point I want to make here, it has really received a very, very good feedback. We got a very good feedback from the market, from our business analysts, from our customers, from our employees, from all our partners. So that's really exciting for us to enter '26 with this new positioning, which is giving a lot of inspiration for all our stakeholders. So now let's turn to the most important part, of course, of this call, which are our results. I'm pleased to report a very strong Q4 revenues growth at 10.7%, EUR 11 billion. And even more important for me, it's really the acceleration of the 2 businesses, the acceleration of Energy Management, but the acceleration again in Industrial Automation in Q4 with a growth of 8%. If you go look at the full year results, that's an important milestone for Schneider Electric. For the first time, we have exceeded EUR 40 billion in terms of revenue, with a 9% organic growth. So that's, as you can imagine, an important milestone for a company. And even more important is the acceleration that we have seen in our 2 business. I was just talking about Industrial Automation. We told you with Hilary a year ago that we will turn positive for Industrial Automation in '25. We did it, and we delivered 7% growth in H2, which as a result, has helped us to achieve 3% growth for Industrial Automation. As you know, Energy Management has been really the driving force from a growth standpoint for the past years, and it continue again to be the case in '25 with a growth slightly above 10%. So all in all, again, a great year from a top line standpoint, both businesses driving good contribution to the growth of the company and an important milestone, EUR 40 billion. When you go a bit deeper in all our achievements, we are pleased to report that we have achieved a margin expansion of 50 bps, which is in line with the target we set up for us at the beginning of the year, which translates in an adjusted EBITA growth of 12.3%, which is again within our guidance of 10% to 15%. Extremely important milestone also for Schneider Electric, free cash flow of EUR 4.6 billion with a conversion rate slightly above 110%, which show again the strong financial health of the company overall. We are pleased to report that we are going to distribute a dividend of EUR 4.2 per share, again, in line with our progressive dividend policy, which has been the case for the past 16 years. And our TSR has grown by 89% for the past 3 years. So all those financials show really the solidity of Schneider Electric strategy, but even more the solidity of our execution. And as you know, it's equally important for me and the team that we always look at our digital metrics, which are translated inside the digital flywheel. It has been an important transformation for Schneider Electric in the past cycle. It will continue in the future. And the digital flywheel is giving us really the illustration of the execution of our portfolio strategy transformation. So we reached EUR 25 billion of our turnover with digital flywheel, which represents 62% of our overall revenue. And pleased to report that it has achieved a growth of 15% last year. We continue to grow very fast on all the aspects of the digital flywheel, but very excited to see that we are now close to 20% of our total portfolio in services and software. And last but not the least, it has been an important focus for us in the past year, not only the acquisition of AVEVA, but the transformation of AVEVA, the acquisition of OSI. And last year, we have achieved an outstanding performance with 12% growth in ARR for AVEVA. It's also important to mention that '25 was the last year of our sustainability program, the one we launched 5 years ago. You know that we have this culture at Schneider since 20 years to launch every 3 to 5 years, a new program where we set up an ambition on where we want to take the company. And we are pleased to report that we have achieved overall our goal. I'm not going to go through all the metrics, but that's very, very important, and I'll talk later about -- when we speak about '26. The only thing I'd like to mention is when you look at all these metrics, if I just highlight some of them, extremely pleased to see that with the portfolio of Schneider, we have helped to save and avoid 862 million tonnes of CO2, which is tremendous since we created that initiative in 2018. You will see later that we'll keep going in the next chapter, but that show how the impact of the business of Schneider Electric can support all our customers everywhere in the world. And we have embarked not only our customer, but our partner, our supplier. Our supplier have also achieved their goals. So we divided by 2 the CO2 emission of our suppliers that were part of that program. And we continue to have a very strong focus on access to clean energy to many people who don't have access energy in the world. And we have achieved this milestone, which was super important for us, 50 million plus. Actually, we have exceeded reaching 61 million. And of course, all those achievements have been recognized multiple times in the past year. It's always great to be a leader in that domain. So if we wrap up '25 in short, as I said, a record year in terms of revenue, crossing EUR 40 billion, all-time high level in terms of backlog. We'll come back to that with Hilary. Extremely strong performance in adjusted net income and free cash flow and acceleration of the demand and profitability in H2, which is what we told you with Hilary when we were together in July. What is very important for me, and we told you that during our Capital Market Day, we are accelerating the transformation of the company. We have a plan. We are accelerating the transformation of the portfolio, making Schneider Electric the company which will advance energy tech to the next level. We are going to the next level to -- of our digital portfolio, leveraging AI and bringing energy and industrial intelligence. We have reinforced our multi-hub strategy in a world which is very fragmented. We do believe that our regional model brings a lot of advantage. We have reinforced in particular, in India for the international market with the acquisition of L&T last year, the completion, I should say, of the acquisition. And last but not the least, we spent a lot of time with the team last year to simplify the operating model to make sure we can generate more efficiency and create even faster execution. So now if I turn to '26. I'm not going to talk about the long term today. It was done during the CMD. But if I recap what we told you in London in December: We have 3 megatrends in front of us that have been the main driver of Schneider Electric growth in the past year: The evolution of the new energy landscape, electrification of usage everywhere in the world; digitalization going to next level with AI; and of course, a world which is more and more multipolar, and we don't believe it's going to stop. So for us, what is very important is to make sure we can leverage and accelerate really everything we do at Schneider Electric to make the most of those 3 trends. And of course, what we see, and I'm sure you see it as well, all those 3 trends are accelerating at the same time at a speed which is unprecedented, which impact, of course, all our end markets. But speaking about the end market, it's fairly positive for Schneider Electric. And we like always to go back to those end market growth and to tell you how we see the market. We continue to see a double-digit opportunity plus in data center and network, solid growth on buildings and industry, and we'll say a little bit more with Hilary also on that one. And we continue to see infrastructure growing fairly fast between 5% and 7%. What you see as a result of the past cycle, we continue to be a very, very balanced company in terms of exposure. We'll talk about geography, but balanced in terms of end market, having our 3 largest market contributing all to 1/3 of the revenue of Schneider Electric and infrastructure step-by-step going also to the next level with close to 15% of our revenue. So what's next for '26? We are basically going to execute our plan, our strategic plan, the one we present to you, which is really to advance energy tech to the next level of intelligence. We are going always to follow those 3 important transformation, which we have launched internally. We call that inside Schneider, our company program. This is a vehicle we are using to align all the entities of Schneider Electric everywhere in the world. For me, what is very important is not only to define the North Star, advancing energy tech, defining those strategic priorities but equally and even more important is how we align our teams everywhere in the world to make sure we execute faster the strategy of Schneider Electric. So talking about Energy & Industrial Intelligence, we want to reinforce our energy, our technology leadership. We've presented in detail our strategy in December, but I want to recap what we told you. We have built a huge portfolio in the past, which is extremely differentiated, starting by our legacy product business, but going to the next level of Edge Control, starting to do more and more in digital and software and digital services everywhere in our portfolio. What makes Schneider Electric very, very different at the end of the day? We are combining a unique expertise in different domains. Those domains are the building domain, the power and IT domain and the industrial automation domain. What we want -- we don't want those domains to innovate in parallel universe. We want to create a unified customer experience for our customer. Let's make it simple. Every time we sell solution to our customer, we want to keep it simple for our customers to commission the asset, to be able to leverage all the software, to create a unique user experience. It means that, for instance, you need to have a digital platform, which are the same, and we need to create hub, which are the same. So for us, it's not only about creating the largest portfolio in our industry in those domains, is to make sure we make it simple, easy for our customers to use all those offers of Schneider Electric. And what we want to do even more in the next cycle is to do it through their full life cycle. Schneider was known 10, 15 years ago as a company which was more at the CapEx stage when we built. We've moved big time in the past 5 years to make sure we are also at the design level. We can help our customers to design, to simulate, to create digital twin for their asset. And of course, when we have installed our solution, what we want to do even more through digital is how we can help them to operate efficiently, how we can help them to maintain efficiently, to extract data that will help them to manage the obsolescence of their asset, for instance. So all in all, this is what you see on this slide, which is the strategy of Schneider, I think. And what are we doing differently in the next -- in this cycle? Now we've reached a level where most of our assets are connected. Again, keep in mind the digital flywheel, going step by step to 70% of the digital flywheel. So it's about extracting all those data at all layer of our digital stack, extracting external data, federating, structuring those data in the data cube to make sure, thanks to AI, we can amplify what we give to our customer and deliver more intelligence. So it's about building the foundational model in AI, in energy and industry that will create more value for our customers in the future. And it's not something that we are dreaming to do in 5, 10 years from now. It's something we do already. If you take just one example of the data center, which is a place where we have invested, as you know, a lot in the past years. We are, of course, in the middle, as you can see, present at the build stage historically. We have reinforced our portfolio, for instance, with the acquisition of Motivair in liquid cooling. But what is equally important is being able to work with NVIDIA, with our customer, the large hyperscaler on how you can design and simulate, how you can work in the universe of NVIDIA, on how we'll behave digital and electrical infrastructure in the future based on the next generation of GPU that NVIDIA will launch in the future. And then we can move to a stage where we are working with our customers to design their own AI factory. We can build, we can execute with them. And we can also extract data at the end of the cycle to make sure we give more to those customers. So that's really a typical illustration of what we mean going to the next level of energy intelligence, unique customer experience, leveraging all the portfolio of Schneider and being able to do it through the portfolio of -- through the full life cycle of our customer. Now we have multiple proof points and other example we are doing. We are launching, for instance, EcoStruxure Foresight Operation, which is basically the convergence of power and building management in one software amplify with AI that can give a lot of opportunity for our customers to improve the efficiency of our building. And I'm not going to cover all the examples, but we have also what we presented to you in November -- in December, what we are doing in Industrial Automation with EAE, EcoStruxure Automation Expert, which is taking automation to the next level. So all in all, just as a recap, we are investing a lot in R&D. We are growing progressively to the next level of our journey in R&D with 7% approximately of our turnover. And having always in mind those end targets, which is keeping on increasing the part of our portfolio, which will be more digital, more than 70% by 2030, accelerating everything we do in software and services, so going step by step to 25% of our total revenue. And all of that helping us to multiply by 2 our recurring revenue as part of the turnover of Schneider. The second chapter, which is very, very important for me, and I'm passionate by technology. I strongly believe in innovation. I strongly believe that what will make Schneider Electric very different. But I'm equally passionate on how we are going to differentiate in front of our customer. You know it, but we have decided to go to the next level of the regionalization of Schneider Electric. So it's basically how we structure the company in terms of innovation, in terms of supply, but also in terms of sales and making sure that we are creating 4 regional loop: in North America; Europe; China, East Asia; and Southeast Asia and International to create agility and speed. So what does this mean in simple terms? You identify needs in one of those regions. You can speak to R&D people who are very, very close to you. You can speak to the supply chain people, and you can execute projects very, very, very fast. And you don't need always to go back to the top of the company. Now it doesn't mean that we want to cut Schneider Electric in 4 pieces. All of that is supported by a global governance where we define very clearly where we want to go in terms of R&D. For instance, what are the platform we want to develop, what are the choice we want to make in terms of electronic. Also the way we want to design our supply chain. But when this global framework has been defined, we want to empower our 4 regions to go much faster. And what we are doing also in terms of operating model evolution is how we go to the next level of engagement with our global customer, which, as you know, will represent a growing part of our sales. When we go, for instance, to cloud and service providers to utilities in all the segments, we are going to next level also of engagement with our global customer. So on this slide, you have a couple of, again, of proof points of what we are doing to make it happen. I'm just going to give you a few examples. We want to have 90% of our sales to be manufactured in each region. Manufactured means both what we buy from outside, but also the cost -- the labor cost that we have for manufacturing. So for us, it's important that we keep investing in all the regions. I said it, we've completed the acquisition of Lauritz Knudsen in India, which creates a very, very strong India hub to support the international market. We continue to invest in the U.S., in North America, for North America, especially to support the growth of our data center business, both in low voltage UPS, but also in liquid cooling with the acquisition of Motivair. Talking about Motivair, we have decided to open a new factory in India. Actually, we announced last week to accelerate the expansion of Motivair outside of North America. And we continue to leverage, for instance, China as one very important hub for us in terms of power electronics but also localizing offer like GVXL to make sure we are more competitive in the Chinese market. And we continue also to invest in Europe, new factory we are launching in Macon and taking our joint venture, Schneider eStar to the next level for electrical vehicle. So the last pillar of that transformation is operational excellence. Also extremely important for me. We've been very, very vocal with Hilary and the management team in December that we want to innovate in technology. We want to accelerate the growth of the company, but all of that has to translate in a very strong operating margin, strong return for our shareholders. And that's why we decided we need to accelerate all our plan when it comes to cost competitiveness and scalability. Cost competitiveness on one side because I want to make sure we always stay competitive in everything we do, the design of our product, the cost of our product, the cost of our solution for our customer, how we do a better job to collaborate with our supplier to deliver innovation, cost and time to market, which is very important for me. And having a very strong machine where we deliver strong industrial productivity every year. At the same time, I want Schneider Electric to be extremely scalable. We just said it, EUR 40 billion, huge milestone for a person like me who joined the company no more than 32 million -- 32 years, which was, I think, EUR 5 billion at that point of time. I mean it's just an impressive milestone. But if we want to go to the next level of our ambition, 7%, 10% growth every year, that's super important that we always work on the fundamental of the company, our IT system, our supply chain and so on and so forth. And I do believe we have a huge opportunity to leverage AI to keep really a strong level of scalability but also efficiency at the same time. And I said it, I will go very, very fast. We are also working a lot with the management team on how we keep simplifying Schneider Electric year after year to make it easier for our people to execute. Here again, a certain number of proof points on how we want to collaborate more with partner, supplier, company like Infineon, for instance. I mentioned going to next level of flexibility in capacity also, working strongly with companies like Samsung and Foxconn, for instance, where we believe it will give us an opportunity to accelerate really our capacity everywhere in the world, accelerate our competitiveness and an absolute obsession on at cost by design in order to contribute really to a very strong improvement of our gross margin. So a couple of examples that you have on that slide, but I remind you on the right-hand side of the slide, those operational metrics we've defined with Hilary during the Capital Market Day, which are absolutely essential for us. While we want to grow very fast, we want to stay very, very healthy at the gross margin level, always focus on the efficiency of the company. And last but not the least, always working also on our portfolio to make our portfolio more efficient. So these are really the main chapter that we presented to you on which we will give you an update every year, every half year on how we are progressing. But of course, I would not be complete if I would not speak about what makes Schneider Electric extremely different in the market, a very, very, very people and sustainability-centric company. I said it, we've completed successfully the past cycle when it comes to our sustainability achievement. We've presented that to you already. So I'm not going to go one by one, but we have launched our new program when it comes to what are the next transformation we want to deliver, with a very, very strong belief that as a company, we can have a lot of impact, but we believe that advancing energy tech will bring progress to all everywhere in the world. So there are a couple of metrics that we have kept from the past program. Again, saved and avoided emission, going to the next level. I told you 800 million tonne, plus we want to achieve 1.5 gigaton by the end of 2030. But new metrics we are building right now on how we can build, train more electrician in the world to support that big trend on electrification. And of course, always covering all the aspects of ESG and trying to impact our entire ecosystem, including supplier partner everywhere in the world. When it comes to people, we continue to invest a lot. Super important for me that, one, we keep our employees engaged in the transformation of Schneider. We are moving very, very fast. So we want to keep our employee along with us to keep the management, and we want really to make sure they are motivated and engaged to work with Schneider Electric. And at the same time, what is super important for me, we are moving really to this tech world, which require new competencies. So training our people in digital, in AI, in those new energy landscape technology is extremely important. And last but not the least, the second metric for us in terms of engagement is always offering the possibility of our employees to become shareholder of Schneider Electric and extremely pleased to tell you that 63% of our employees have invested in our worldwide plan last year with some country going above 80% of employee. So you imagine that's a strong demonstration of the commitment of our employees. And we've built this multiyear model, going to the next level of regionalization. We have a unique model of management where we want to have a very decentralized leadership, not only for the regional team, but also for the global people who are managing Schneider Electric. Why? Because I believe that in a world which is going to be more and more fragmented, that will make Schneider Electric much more agile and much faster to make the right decision. So to wrap up on the priority for me as the CEO of the company in '26, definitely, first and foremost, delivering a very strong performance. We'll come back to that with Hilary in a couple of minutes. But again, accelerating everything we do on the technology leadership side, being the absolute leader in the new energy landscape. We are the worldwide leader in electrification. We know the energy landscape is changing. It's bringing even more electrification, more change in our industry. We want to keep and reinforce that leadership. Going to the next level, leveraging AI and creating energy and industrial intelligence for our customers. And of course, with the data center market, which is growing fast, keeping an absolute leadership and making the most of this growth opportunity. Going to the next level of regionalization to satisfy even more our customers, local, regional and global. We see strong demand everywhere in the market. Most of the geography, all key geography will contribute positively in '26. So let's make the most of the growth everywhere in the world. And of course, executing seamlessly, the record high backlog that we delivered last year. Last but not the least, I said it, huge focus on operational excellence, gross margin improvement means strong focus on cost, productivity, pricing, margin obsession. This is very high in my agenda, very high in the agenda of the management team. And of course, we want to continue to build the next level of scalability for Schneider Electric and in particular, leveraging AI. So this is about the -- really what we plan to do in '26. But before going more in detail on how it translates in terms of financial ambition, I would like to hand over to Hilary, our Chief Financial Officer, to tell you more about our '25 financial performance. Over to you. Hilary Maxson: Thanks very much, Olivier, and good morning, everyone. Happy to be here with you all today. I'll start with our key financial highlights for the full year, some of which Olivier has already mentioned. Starting with revenues, and Olivier mentioned a few times, we're excited to show revenues of more than EUR 40 billion for the first time, finishing the year at EUR 40.2 billion in revenues, up 9% organic. In gross margin, as expected, we finished the year slightly negative. Despite this, we did continue to see a step-up in our adjusted EBITDA margin, which improved by 50 basis points organic, supported by strong cost control and the simplification actions we started in 2025. Our free cash flow was above EUR 4 billion for the third year in a row, a bit higher than our expectations, driven by strong operating cash flow and working capital improvements. In terms of net income, we were slightly negative at minus 2% with our adjusted net income up 4% recorded. And lastly, we did see a step-up in our ROCE to greater than 15% for the first time, reflective of our strong operating results. To get into a bit more detail, both businesses contributed to our overall growth in revenues of plus 9% organic with Energy Management up double digit for the fifth year in a row at plus 10% and Industrial Automation back to full year growth at plus 3%. And while it's not on this slide, I'll mention that all 4 of our geographies finished with positive full year organic growth in revenues in both businesses, a reflection of our strong portfolio positioning across our hubs. The positive contribution from scope is from Motivair and Planon, and we did finish the year with a negative impact from FX as anticipated, primarily due to the depreciation of the U.S. dollar and U.S. dollar impacted currencies. Based on current rates in 2026, we'd expect this negative FX impact to continue with minus EUR 850 million to minus EUR 950 million impact on full year revenues and minus 10 basis points impact on adjusted EBITDA margin. Of course, FX rates are not easy to predict. So to support your modeling efforts, we've updated our FX sensitivities to key currencies in the appendix of this presentation tied with the 2026 guidance we're giving today. Olivier already mentioned the 15% growth in our digital flywheel, which we use to track the progress of our transformation towards more digital and more recurring revenues. The only additional point I'll mention here is that you can see we're now at 79% recurring revenues in our agnostic software business. This recurring revenue profile supports greater visibility and margin and cash flow resilience over time, and it remains a central pillar of our value creation strategy. Turning now to our backlog at the end of 2025. We exit full year 2025 with a record backlog of more than EUR 25 billion and a growth of 18%. And just to note, that 18% is not in constant currency, so it reflects a similar drag from FX as we saw in our 2025 revenues. A couple of points I'll make here. First, this strong backlog will obviously support our sales in 2026 and into 2027. And more importantly, it gives us very good visibility, particularly in our data center business for the next 18 to 24 months. Second point, we did see a clear acceleration in orders in the fourth quarter, driven by data center, but not only, we also saw a good pickup in demand in infrastructure and in industry, including process and hybrid in the Q4. Moving now to Q4 revenues, which was a record high quarter for us. All 4 geographies contributed to our strong finish to the year, driving sales to EUR 11 billion, or plus 11% organic, and both businesses also contributed strongly. The positive scope is for Motivair. The first year there was very strong, better than business plan, and we saw a negative impact in FX in Q4, tied to the depreciation of the U.S. dollar and dollar impacted currencies. In terms of business models, we were up plus 4% in products with around half of that due to price as we ramped up our pricing to offset tariffs and inflation, particularly in North America. Our systems business grew very strongly, plus 19%, with growth led by data center with strong growth in Industrial Automation as well. Software and services was back to double-digit growth, plus 10% organic growth for the quarter, driven by double-digit growth in revenues in AVEVA and digital services. Turning to the 2 businesses. Energy Management was up 11% for the quarter, with North America at plus 19%, driven by growth in data center as well as industry and infrastructure. We did still see negative growth in residential in the U.S. and in Canada with some early signs, maybe wishful thinking of stabilization of demand in terms of orders in the U.S. In Western Europe, up 5% organic, the growth was led by data center with solid contribution from residential buildings. Asia Pacific was up 5%, with China up low single digit, driven by continued demand in data center with the building and construction markets still subdued. India was up double digit with strong growth in both products and systems, and Rest of the World was up 9% organic, with continued double-digit growth in Middle East and Africa. Industrial Automation was up 8% for the quarter, with North America turning to growth, up 5% organic, driven by discrete automation in the U.S., supported by the market as well as some investments we've made in the commercial organization there and with double-digit growth in both discrete and Process & Hybrid in Canada. Western Europe was up 8%, with growth led by AVEVA with solid growth in discrete and Process & Hybrid. Asia Pacific was up 7%, supported by sales at AVEVA with solid growth in discrete and Process & Hybrid. China was up low single digit and India was up double digit, both driven by continued growth in discrete. Rest of World was up 14% with strong growth across most of the region. Turning now to our P&L. We finished the year with adjusted EBITA of EUR 7.5 billion, up 12% organic, and we continued with another year of progression in our adjusted EBITA margin, up 50 basis points organic. This was driven by our strong organic revenue growth as well as strong leverage on our operating costs as we focused on cost control and started the implementation of our simplification program. These actions translated into our SFC to sales ratio, which stepped down almost 1 point to 23.3%. At the same time, we continue to support investments for the future in technology leadership and in customer differentiation. And you can see our R&D as a percentage of sales remained flat at close to 6% for the year. Our gross margin was negatively impacted by inflation, tariffs and by mix, partly offset by a strong acceleration in productivity in H2, and I'll speak more to that in a moment. Energy Management finished the year with adjusted EBITDA margin of 21.8%, flat to 2024, impacted by the same negative trends in gross margin as the group, offset by operating leverage. Industrial Automation finished with adjusted EBITDA margin of 14.2%, an improvement of 10 basis points organic, driven by improvements in gross margin, mostly offset by a deleverage in operating costs in the first half of 2025. Gross margin at the group level came in at 42.1%, down 40 basis points organic. And you can see the details quite clearly in the bridge. We did see a pickup in product pricing in H2, but not yet enough to offset headwinds from tariffs and raw materials, as expected. Mix continued negative for the full year, also as expected, due to the higher growth in our systems business. And we did see a strong pickup in productivity in the H2, supporting a stronger gross margin evolution in the second half of the year. Now Olivier will speak to more details in the trends we expect for 2026 in a few minutes, but we do expect a continued pickup in pricing throughout 2026, which, alongside the other drivers of our gross margin that we presented at our Capital Markets Day, should support a positive evolution of our gross margin in full year 2026. However, the timing of that ramp-up in price as well as the timing in RMI and tariffs will likely mean we continue with flat to negative gross margin progression in the first half of 2026 and tariffs being a bit difficult to predict at the moment. I mentioned the strong operating leverage we drove in our operating costs, or what we call our support function costs, in 2025 through both cost control as well as the kickoff of our simplification program. You can see we drove EUR 349 million in cost savings in 2025, more than offsetting inflation and allowing for investments in R&D, in commercial initiatives and in our digital backbone, including AI. Turning now to net income. Including scope and FX, our adjusted EBITDA is up 6%. As I mentioned in December at our Capital Markets Day, our restructuring costs did tick up to close to EUR 300 million tied to the simplification program that we kicked off this year and in support of the additional minus 1.5 to minus 2 points, we expect to drive in our SFC to sales ratio between '26 and 2030, and that excludes R&D. The only other item I would note is we did have an additional around EUR 100 million impairment in H2 tied to some equity method investments in the U.S. Alongside as anticipated increases in financing costs and PPA accounting, we did see a negative evolution of our net income of minus 2% with our adjusted net income, which excludes restructuring and impairments of EUR 4.8 billion, up 4% reported, or plus 14% organic, better reflecting our strong operating results. Free cash flow came in at a strong EUR 4.6 billion, a bit better than we expected, with strong operating cash flows, up 7%, and strong working capital improvements in inventory and days sales outstanding, driving a free cash flow conversion ratio of 106% or 111%, including those noncash impairments. As I mentioned in our Capital Markets Day, we'd anticipate our cash conversion ratio to be around 100% over the next years despite the capital investments we're making to support our growth, bolstered by structural working capital plans. And I'll finish with a slide on our balance sheet and ROCE. We did close the India transaction at the end of 2025, so you can see a small uptick in our net debt to adjusted EBITDA ratio. But overall, our balance sheet remains strong, well supportive of the A-level credit ratings we committed to at our Capital Markets Day. And I'm pleased to see our ROCE surpassed 15% at the end of 2025, reflecting our strong operating results. With that, I'll hand back to Olivier to cover our 2026 expectations. Olivier Pascal Blum: Thank you very much, Hilary. Indeed, let's close the first part of our call with what we see as a key trend in '26. It's going to be a summary because we've covered already a lot. But in short, what we see is a continued strong market demand, which will help us to drive growth and with positive contribution for all our end markets. Obviously, data center end market will lead the growth based on the growth demand -- the strong demand we've seen in '25 and we see that to continue in the future. What is very, very important for me is while we like and we love really taking the most of that opportunity, we will continue to position Schneider Electric strongly in industry and infrastructure, and we see great opportunity to accelerate the growth, and buildings to improve its contribution progressively also aligned with the macroeconomic trends. System will continue to lead our growth, but we see also some improvement on our product business, which will have a positive contribution this year and in particular, but not only in discrete automation, which has also been a very important point of focus last year. We'll keep growing in software and services. This is a translation of our energy intelligence story, with a very, very strong focus at the end of the day to drive more recurring revenues in all part of our business. The good news, all 4 regions will contribute to the growth, from North America, Europe, China, Southeast Asia and International, of course, led still by U.S. first and India probably second. But the good news is all markets will contribute positively. It's very, very important. We said it several times. What makes Schneider Electric very, very different, it's a balanced exposure by end market, by business model, also by geography, and we want really in '26 to continue to have this balanced exposure and to make sure we always make the most of those market opportunity and always building strong muscle for the future in case some part of the market might be less exciting in the future. So as a result of that, we are also putting a lot of action on price. Hilary said it. We want to be net price positive in value to be able to offset raw material impact and tariffs, ramp it up throughout the year. And as Hilary said, bringing and turning our gross margin positive during the year 2026. So the group expects the other driver of adjusted EBITDA margin expansion to be aligned with what we shared with you during the Capital Market Day. As a result of that, we have set up the following target for '26. So an adjusted EBITA growth between 10% and 15% which is supported on one side by a revenue growth of 7% to 10% organic. I insist organic is really an important point for us. We see massive opportunity in the market. And at the same time, we'll keep on increasing our adjusted EBITDA margin between 50 and 80 bps organically in '26. So all of that will translate our adjusted EBITDA in margin -- I mean, margin in a bracket of around 19.1% to 19.4% for the full year '26. So exciting year in front of us. We are ready. We have a plan. And definitely, we plan to accelerate the overall execution of that strategy in '26. So before we hand over to you for Q&A, today is an important also day. We made the announcement this morning that it will be your last earnings call, Hilary. Hilary has been with us for 9 years. She has been the CFO for the past 6 years. She's going to take the next assignment in the United States that will be announced later. And she will be replaced by Nathan Fast, which is actually on my left. So Nathan has been in the company for almost 20 years, have been doing a lot of different job in different part of Schneider Electric, the last one being Investor Relationship. So very pleased to have you Nathan, in this new role, and I'm sure you will build on the strong legacy that has been built by Hilary in the finance, and you will help us to execute that plan very, very fast and to drive strong shareholder return. Hilary, I want to thank you for the partnership. It has been a great journey in the past 10 years, but in particular, in the past 15 months, the 2 of us. You have been a fantastic support for me to become the CEO of Schneider Electric. So I want to thank you on behalf of the team here at Schneider Electric and wishing you all the best in your next chapter. Hilary Maxson: Yes. Thanks, Olivier. Schneider has obviously been a huge piece of my life and my career, and I'm extremely grateful to the Board, to yourself, the CEOs and colleagues with whom I've worked over these past 9 years and for the trust and support they've given me. And in particular, you mentioned I'm excited on the work we've done together over the past 15 months, to put the company on the trajectory we described in our Capital Markets Day and reiterated today. I'm certain I'm leaving at a time when the company is on a great trajectory, and I'm really pleased we've been able to prepare a great successor with Nathan over the past few years. I'm confident that he'll hit the ground running. And then just for those curious, my next role will be announced closer to the date of my departure. So Olivier, back to you. Olivier Pascal Blum: All the best, Hilary, and we will work together, you, Nathan and I in the coming weeks to do a very smooth transition and starting next week, by the way, with all our investor roadshows. So we'll continue to have fun together for a couple of weeks. Nathan, back to you for the next part. Nathan Fast: Okay. Olivier, maybe I can say a couple of words as well. First, I'd really like to thank Hilary, right, first, for her leadership across the finance function, but also the opportunity to have learned many, many things, Hilary, over the last 9 years working extremely closely together. And then I guess, Olivier, also maybe a bit to you. Thank you for the trust. I, of course, take the position with humility and determination to succeed together with you and your leadership team. So thank you for that. Nathan Fast: I'll make the transition then to the Q&A, of course. and thank you both for the presentation. We have around 20, 25 minutes. I'm sure there's a lot of questions, and I want to make sure we get to every analyst with the question. So if you can please just stick to one question, that would be great. And with that, operator, let's go to you for the first question, please. Operator: [Operator Instructions] The first question is from Phil Buller of JPMorgan. Philip Buller: Just to follow up on that CFO transition topic, if I can, to start. And obviously, thanks, Hilary, very best wishes for the next chapter, and congrats, Nathan, of course. The question is on timing. I've had a few investors asking about that today. It obviously sounds very smooth, but it's obviously also been announced shortly after a major CMD. So if you could just share some additional color as to the genesis of this, Olivier, perhaps, is this something that you were envisaging during the CMD buildup as you build those 2030 objectives together as a team? How involved was Nathan, in particular, in that process? And has anything changed? One of the data points offered at the CMD was in relation to the AVEVA margin expansion. And obviously, there's a question at the moment about software more broadly. So just a little bit more color about the genesis and the time line and if anything has changed in terms of the assumptions even in that relatively short period since the CMD, please? Olivier Pascal Blum: Sure, sure, sure. Well, look, as we said, and I'm sure you can feel it today, this is a very smooth transition that we are managing with Hilary. Just want to tell you that Schneider Electric is not one man or two people show. What we've presented to all of you at the CMD, it's the work of the entire executive committee. They have been associated to the building of this next cycle. I told you many, many times in '25 that it was time for Schneider Electric to build this next cycle, inventing what advancing energy tech and with actually more executive last year that we have usually to work all together as a team. And Nathan has been associated in the later part of last year, of course, as a new IR of the company in the building of that plan. So I understand that a change of leadership always raised question. But again, we respect, first of all, the choice of Hilary to take a new role and to have a next chapter in your career life. But what is very, very important at the same time, we are very, very solid team behind this plan. I've been now the CEO for 15 years -- 15 months. Before that, I was in Schneider again for more than 32 years. So I think what is super important and Hilary has helped me a lot to build this very strong plan for the next cycle. Whatever we presented to you in the CMD in terms of assumption, driver and how we want to accelerate the performance of Schneider Electric remain absolutely valid. And as I, Nathan has been associated through this plan from day 1, so I feel confident that we will manage this transition smoothly, and we are fully ready this year to execute our plan extremely fast. Operator: The next question is from Alasdair Leslie of Bernstein. Alasdair Leslie: So a question on pricing. I mean, obviously, if we look at that EBITA bridge, it does look like the gross pricing was still relatively muted in H2, but obviously, you're flagging an acceleration in Q4. I was just wondering if you could talk a little bit more about those kind of pricing exit trends. Any price increases you've already put through year-to-date? And then I was actually wondering if you could comment specifically on the pricing environment in China. Have you seen any stabilization or improvement in the deflationary environment there? It's a market, I think you said recently at the CMD that you were working on pricing as well. So what's the problem is for 2026 and our margins generally in China still holding up at high levels? Olivier Pascal Blum: Yes. Absolutely. Thank you very much for the question. I'll start and hand over to you, Hilary, to complete. Look, we told you last year in H2 with Hilary that definitely, we were ramping up step-by-step more pricing everywhere in the world and in particular, in North America, we know with impact of the tariffs. Last year, as you know, was a complicated year where we had up and down on tariff. It kept changing. So it was not always easy really to plan what would happen. Last year, in Q4, we put a very solid plan to accelerate pricing. What happened since Q4, we have seen also a huge increase of raw material. So there was, on one hand, the need to implement what we decided last year, but also to accelerate everything we plan in pricing to compensate the impact of raw material. We have a lot of silver and copper in all our products. So I think the good news this time we were ready with the initial plan of Q4, and it was just about how we accelerate to add on top of that the compensation of raw material. I'll let you complete maybe on the second part of the question on China [indiscernible]. Hilary Maxson: Yes, sure. Indeed. So we did see an acceleration in 2025 in the Q4 in pricing generally, of course, in particular, in North America, that's where we have the tariff impacts in front of us. China for 2025 definitely remain deflationary. So those low single-digit numbers that we're talking about in China would be higher without that deflationary. They're higher in volume. We would expect China -- it's not always easy to call. The government is trying to combat deflation. But in general, we'd expect China to remain deflationary in 2025. That said, with the uptick of raw material prices, which impacts far more beyond just our industry and our own competitors, we did start to see pricing and price increases, including with all kinds of local competitors across industries in this Q1 in China. So we expect there to be a bit of a turn there as well. And I'll just mention that we did update in the appendix of this presentation, a slide we gave a few years ago with the breakdown of copper and silver for us in terms of raw materials in 2025. So you can see all of the information. And like Olivier mentioned, '26, we expect that we'll continue that ramp-up that we already talked about in the second half of last year. Operator: The next question is from Andre Kukhnin of UBS.. Andre Kukhnin: I'll focus on data centers, please. Historically, you gave us very helpful disclosure on how much of your backlog is from data centers and distributed IT and how much of that sort of pure data centers and hyperscalers within that. Could you please give us those details for 2025? And the bigger question really, I wanted to get your view on how you're positioned for the 800-volt direct current architecture transition and in particular, what are your state of offering at the moment in solid-state transformer and solid-state braking? Olivier Pascal Blum: Absolutely. Well, look, it's a very important question. Maybe I can start by the second part of the question, Hilary, and hand over back to you for the first part on that backlog. Indeed, when you look at the evolution of data center, the type of AI factory you will have to build in the future to support the next generation of GPU of NVIDIA like Rubin Ultra or Feynman, that will require at one point of time, a different type of infrastructure. So that's why there is so much buzz on 800-volt DC. We see that it will be an important trend. It's very difficult to say by 2030, when you look at all the data, we say 200 gigawatts to be built in the world. We estimate all reports in the market estimate 15%, 25% of the demand could be impacted by 2030. What is super important, you are talking about an evolution of the electrical infrastructure, which is, again, where Schneider Electric has a very strong leadership. So we are developing one, what we call, as you know, the sidecar concept, which can be available immediately, which is a minor evolution of the infrastructure. But we are developing those full definitely architecture that could be ready by '28 when the market will start to grow. And we are leveraging here a lot of competency we have in-house, in particular, in China, but also we're working with partners. So again, that's a domain that we know very well because it's touching the core of the electrical infrastructure that creates actually also opportunity for Schneider Electric to stay extremely differentiated in the market in the future. And as I said, we have to get ready for a transition that will be slow, that will take time, but it's super important that as a worldwide leader in electrical distribution, Schneider Electric is the first one really to offer the most innovative solutions. So again, you're absolutely right. That's an important trend. We are extremely well positioned. We have accelerated our investment in '25 to develop concept. A bit too early to say because the demand is just about to start, but we are fully ready to face this new trend, which again will impact our market step by step between probably '28 and 2030. Hilary? Hilary Maxson: Thanks, Olivier. In terms of the backlog, you're right, we didn't give a backlog breakdown by end market. And I don't think we would intend to do that. But what we are doing, and you can see we've updated the exposure in terms of our 2025 orders across our end markets. So now we're doing that annually. I think you can infer generally the orders growth that we've seen there, and you can infer from that probably some component of data center and networks. Of course, out of the energy management piece of the backlog, which we showed, a good portion of that is data center and network, but not only. So we also had good growth in the rest of the end markets. Operator: The next question is from Jonathan Mounsey of BNP Paribas. Jonathan Mounsey: And may I just also say, sorry to see you go, Hilary, but welcome, Nathan. In terms of my question, will you just so -- the intake so far in Q1? I mean, obviously, there was a big step-up in DC intake in Q4, I think probably for all the players, and you've confirmed that again today. Just wondering whether that's really continued into 2026. And also, with the order intake where it is and with your comment around it really gives you visibility through for the next 18 months, are we saying now that kind of revenue growth in data centers is capped this year and what we're booking now is really for 2027? Olivier Pascal Blum: Do you want to start, Hilary? Hilary Maxson: Sure. So in terms of intake in Q1, well, we've said quite a few times before, and we're not quite done with the Q1 yet that we don't consistently look at orders as the right way to look at data center and network. But what I would definitely say is that demand for data center accelerated in the Q4, and we don't see a different change in trend in the Q1, if that's what you mean. That's the first part of your question. Visibility, indeed, we have good visibility. We've talked about it for some time, and you can see it even in orders in the backlog now, 18 to 24 months in terms of data center. In general, those projects now are being planned probably mostly in those later two years. That's what the hyperscalers and the others are doing. So yes, we would have a decent visibility on 2026 revenues associated with data center at this time, exactly. Operator: The next question is from Gael de-Bray of Deutsche Bank. Gael de-Bray: So just a follow-up on this. I mean, you obviously finished the year with a very strong backlog now exceeding EUR 25 billion. So can you help us understand how we should think about the timing of conversion, specifically for 2026 and '27? And what are the potential bottlenecks you may have to solve to convert that backlog into revenues? Olivier Pascal Blum: Yes. Thank you for the question. First of all, I'd like to remind and probably rebound on what Hilary said. In the way we operate in that market and in particular, with the large hyperscaler, we work with them on the design, we freeze the design, we look at the planning they need in terms of capacity, and it help us to adjust our capacity. So the combination of this work we are doing on design agreements we are making with them is helping us really to have a good visibility, as Hilary said, 18, 24 months on what's going to happen. To answer more specifically your question, in the acceleration of Q4, a large part of what we booked in Q4 will be executed more in '27, but that will impact a little bit '26. And the second part is definitely, we see an acceleration in demand of those AI factory everywhere in the world. We see that in North America, but I was just in India last week, for instance, for the AI Summit. We see also that India is accelerating. So that gives us the confidence that we can predict pretty well what's going to happen because we are really very well connected first with hyperscaler. We are operating in those key geography. And for a company like Schneider Electric, if we have a kind of 2 years visibility on the demand, we can react on capacity. We can do it by ourselves by building extra capacity. But we are also working more and more with different partners. I was mentioning Foxconn, the regional partner everywhere in the world to adjust capacity plus/minus if needed. So the only change for a company like us, probably a couple of years ago, we are looking at our overall capacity every 2 to 3 years, and then we move to 1 year. Now it's a very dynamic process where every quarter, we revisit the demand for the next 3 years, and we adjust eventually the capacity we need. Keeping in mind that we want to stay very balanced. So it's not only about building capacity for North America, but also making sure we are building capacity in the other part of the world. That's why I was saying you, for instance, before that we decided last year to invest in a new factory for liquid cooling in India because we see the demand for AI factory in India also coming, and that's why we have accelerated the execution of the plan. So that's how we are managing. There will be up and down. Of course, we'll continue to adjust. But I think we are fairly confident with the visibility that we have in the pipeline, the way we are working with all those key stakeholders and adjusting permanently our capacity. Hilary Maxson: And we do give a breakdown of the backlog between less than 1 year and more than 1 year. We would intend to meet the customer commitments we have. So all that backlog you see in less than 1 year, we'd obviously expect to accomplish in 2026. Operator: The next question is from James Moore of Redburn Atlantic. James Moore: Hilary, thank you for all your help and best of luck. And Nathan chapeau. Could I ask about software and AI and the disruption risk in sort of 3 dimensions. I think we're talking increasingly about software being made up of a kind of UI SaaS application layer that is going to be fully disrupted by agents, but under that a system of record and a database with more of a moat. And I would argue that your AEC business does have some of that top UI layer that could be disintermediated. Have you done any work on what proportion of revenue do you think that is at risk and what proportion you think is safe from AI directly substituting you? And secondly, as customers increasingly use AI to increase their workflow productivity and presumably, if you continue to price on a seat-based monetization model, you're going to see a decline in revenue. How quickly? And are you planning to pivot to tokens or to another form of usage? And how quickly do you think you can do that? And I guess the third dimension is you're going to be trying to increase the degree of AI in your own software products to add compute and value. Are you worried that, that aspect of AI uplift can also be disintermediated by others taking that aspect of the productivity improvement work? This is sort of quite a lot bundled into that. But Olivier, I'd be very interested in your thoughts. Olivier Pascal Blum: Thank you. No, it's an excellent question and indeed, a very complete question. Let me start. Of course, we are doing analysis permanently. And I tell you why, because when we really started to see even end of '24, the acceleration of AI, we discovered that it was a massive opportunity for Schneider. We've been quite vocal with you for the past 2 years on what we do in digital services. Digital services is basically a business where we extract data coming from all the assets that we make more connectable. We've been -- we built this offer that we call EcoCare. AI has helped us to go much faster actually in creating more value for our customer. So obviously, when we realize that it will help us to go much faster, and to deliver more value and you don't need to go through a very complex software in the middle. Immediately, what we've done with Caspar, the CEO of AVEVA, was ready to look at our own portfolio and to check if it could be disrupted. Now I don't want to be too oversimplified, but what AI brings is when you have simple repetitive task, a lot of information that you need to capture. And when you look at the portfolio of AVEVA, I don't want to say that we have 0 risk. But the large part of what we are doing is about leveraging extremely complex data that come from industrial infrastructure, working on very complex and critical installation, where cybersecurity, by the way, on top of that is extremely important. So I see that there is still a space for huge growth for all those complex software because we are solving complex problems for our customers. And here, as you said in one of your question, AI is also an opportunity to amplify what we have been doing with AVEVA with the AI agent to go to the next level. So at that point of time, I don't want to say we are not worried, but we believe a large part of what we are doing in our software portfolio is not impacted negatively, but more positively. I'll just give you a last example maybe before I hand over to Hilary on the pricing side. You take what we have been doing with ETAP. ETAP is about building a software to design electrical infrastructure for the future, where you have to simulate a lot of assets, which are extremely complex assets. That's what we are doing in the Omniverse, for instance, with NVIDIA. We don't see AI at all being able to disrupt that kind of software. Now again, building AI agent on top of our software to make it even easier for our customer to use it, of course, why not? So all in all, we are -- we believe we are in a good place. We will be attentive. And at the same time, wherever we don't have a strong software business, we believe it will help us to accelerate some part of our portfolio for simple implication that we can deliver to our customer. Hilary Maxson: And in terms of your question about the seat-based model or pricing in the software business, as part of the AVEVA transition to subscription, and we did a lot there. It's not just changing contracts and things like that. But you may recall that we've talked about the flex pricing model that we've been invoking at AVEVA more and more tied with Connect, but not only with most of the services of AVEVA and into OSI. That's the pricing model that we've been moving to over the past few years. And that's effectively token-based. So we didn't do that because of foresight on AI -- agentic AI, but that is the model that we've moved -- started to move to and that I feel comfortable will be sort of the model of the future for this type of software. Nathan Fast: Thanks, James. We probably have about 5 minutes left. So if you can make the questions pretty concise, then we can maybe fit in a couple more. Operator, next question? Operator: So the next question is from Ben Uglow of OxCap. Benedict Uglow: I will keep it brief. It's really just on Industrial Automation and the margins. I have to be honest, I am surprised to see your margins still below 15%. And I guess it's two things. One is why aren't we seeing a little bit more operating leverage? And certainly, that's what we have seen in some of your peers. And secondly, just in absolute terms, why are we so low? Is this to do with China and country mix? How much is to do with process? How much is to do with SaaS transition? If you can just give us a sense of what part of the business is keeping the margins so low, that would be helpful? Hilary Maxson: Sure. So with Industrial Automation, indeed, we did finish below 15%. I mentioned that on the positive side, we do start to see that -- those improvements in gross margin in the business, which is exactly what we expected as we moved into the second half. So the big -- the detractor, I would say, in 2025 is that we did continue to have negative operating leverage in the first half. So what's driving -- and I'll talk to that in a second, but what's driving those lower margins, we've mentioned it a couple of times. A big component of it for us has been mix, the mix between Process and Hybrid and Discrete. We saw Discrete start to come back in the second half. That's been a big component of the mix return for us, and we'd expect that to move forward in future. Second, AVEVA and that transition to subscription, we shared in the Capital Markets Day that we're going to be moving our adjusted EBITDA margins up there now more swiftly over the next couple of years. So that's been a bit of a detractor, although it was an improver, obviously, in gross margin in the second half in terms of mix contribution. And then we have had a real drag in terms of operating leverage at the business. We have Gwenaelle, our new leader there in Industrial Automation that spoke about the changes that she's making in not just 2026, but going forward. But we would expect all of that to be operating in the right direction on all cylinders in 2026. So we'll have some more improvement in mix, normal productivity. And AVEVA, we're almost done with that transition to subscription. So we'll start to see more and more contribution at the level of adjusted EBITDA as well. So yes, not where -- exactly where we would have liked to be in 2025, but I think all the levers are there for '26 and beyond. And we gave a little bit of an idea of that margin journey in the Capital Markets Day to 18% and perhaps even a bit better by 2028. Nathan Fast: Thanks, Ben. Maybe one last question, and we can try to go quick on this one. Operator, next question? Operator: The next question is from Martin Wilkie of Citi. Martin Wilkie: First, Hilary, thanks for all the debates and interactions over the years and good luck for the future. My question was just on the seasonality and the implications for the profit uplift in the second half. And I know you've not guided explicitly, but if gross margins are lower in the first half, presumably the organic EBITA margin expansion is sort of clearly less than 50 basis points. As we think about the implication for the second half and at the upper end of the range, it would have to be more than 100 basis points up in H2. Is that all driven by price cost? Or is the leverage from industrial automation coming back and the volume effect from that? Or is the AVEVA timing? What would drive that quite large uplift in profitability in the second half? Hilary Maxson: So in terms of seasonality, we have two pieces of seasonality in my mind. One, something that is completely out of our control, which is raw materials and then the pricing that we do beyond that. The pricing is obviously in our control. That can pull our seasonality one way or another. So we've seen in 2022, 2023, that seasonality going in different directions being pulled by that. And here, when I talked about that negative gross margin potential in the first half, that's a lot driven by that uptick in pricing. And for example, with tariffs, we don't have any baseline of tariffs in the first half, whereas we do in the second half. So there's timing there. The other component of seasonality that we generally always see in our business is just associated with volumes. We have stronger volumes in the second half than the first half. That's been a seasonality for a long time across the business. So we have stronger leverage and we have stronger productivity usually in the first half. So in 2026, in particular, we would have better baseline on RMI and tariffs, the pricing plus productivity and volumes and operating leverage, which is those differences you'll see between the H1 and the H2. Olivier Pascal Blum: And I'd just like to complete indeed, there are a couple of drivers which are very specific to what's going to happen in '26. But as we said multiple times, in the plan we built last year, we have the ambition to work on all the cylinders of the gross margin. So of course, this year, we have a very strong focus on pricing, and we'll keep on going and especially with raw material. It's pricing of product. It's also how we price our services business, how we bring the right level of selectivity in our system business. It's also working on the portfolio. We have historically some activity which are more dilutive than the others. You've seen in the CMD that we want to take out EUR 1.5 billion. So since last year, we built this very strong plan that we call gross margin obsession, making sure we work on all the drivers. But indeed, as Hilary said, there are some specific drivers for this year, but it's a short term and long term because we want really to make sure that we have an extremely solid gross margin, which is for me, the best reflection of the health of the business of Schneider Electric. Nathan Fast: Okay. Thanks, Martin, for the question. Olivier, you have one word, and then we... Olivier Pascal Blum: We are done with the question. I guess... Nathan Fast: Yes, we're done with the Q&A. Olivier Pascal Blum: So again, I want to thank you for spending time with us today. We are closing the chapter of '25. You can feel that we've been excited, EUR 40 billion, EUR 4.6 billion of cash flow generation. It has been the great year, but it's closed. We have a plan. Now our focus is really to make the most on '26 and make sure we can continue to drive a strong shareholder return. So we will be excited, of course, in the coming days, coming weeks to follow up with some of you and especially next week to go more in detail on that presentation. Again, thank you for the time spent with us. Thank you again, Hilary. All the best to you, Nathan, and focus on '26 now. Nathan Fast: All right. Thanks, Olivier. I think we'll stop there. Look forward to meeting you, Olivier, mentioned earlier on some virtual road shows in the coming weeks. And additionally, of course, the IR team is available for you to engage. Thank you very much, and have a good rest of the day. Olivier Pascal Blum: Thank you.